Ness Technologies Inc. (NASDAQ:NSTC)
Q4 2009 Earnings Call
February 03, 2010; 8:30 am ET
Sachi Gerlitz - President & Chief Executive Officer
Ofer Segev - Executive Vice President & Chief Financial Officer
Drew Wright - Senior Vice President & Investor Relations
Ziv Tal - Oscar Gruss & Son
James Friedman - Susquehanna
Moshe Katri - Cowen & Co.
Good morning. My name is Taylor, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ness Technologies fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)
Mr. Drew Wright, SVP, Investor Relations, you may begin your conference.
Thank you, Taylor. Good morning and welcome to the Ness Technologies fourth quarter 2009 earnings call. In today’s call we’ll review our results for the quarter and year ended December 31, 2009.
First, I’ll read our Safe Harbor statement. Except for historical matters discussed herein, the matters discussed on today’s conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often preceded by words such as believes, expects, may, anticipates, plans, intends, assumes, will or similar expressions.
Forward-looking statements are based on management’s current expectations and beliefs about future events and as of the date of this conference call, and involve certain risks and uncertainties. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and Ness’ actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.
Some of the factors that could cause future results to materially differ from recent results of those projected in forward-looking statements are the risk factors described in Ness’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009.
Ness is under no obligation, and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of such changes, new information, subsequent events or otherwise. The audio from today’s call is being webcast live on the internet. A replay of the call will be available online at the Ness Technologies website at www.investor.ness.com. Also available on the Ness Investor website is today’s press release and the related 8-K filing.
Presenting today are Sachi Gerlitz, President and CEO; and Ofer Segev, Executive Vice President and CFO. Over to you Sachi.
Good day everyone. Thanks for joining us on the call today. The quarter was highlighted with sequential revenue growth in all segments as well as bookings grew, and we believe that the fundamental of the company are on the right track.
As we discussed in our last earnings call, we learned an important lesson in 2009. The small non-strategic business units can be a drain on the company during challenging economic times. In that earnings call, we announced our intent to restructure a number of reviews and we have now executed on that plan as you saw in our earnings press release earlier this morning. The costs of the restructuring have been encouraged and the benefit will start occurring from the second quarter onwards.
We significantly expanded the restructuring compared to what we envisioned at the beginning of the quarter, and we responded to continuing full execution in some of these small business units. Shutting these small less profitable or unprofitable operations, provision us well for our forward growing growth strategy.
The economy is not back to normal of course, but we are seeing improvement in all geographic regions. You can see it in our sequential improvements in the revenue, in our sequential improvement in non-GAAP margin in all segment, and in significant moving, which I’ll mention later the call. Overall we are continuing to see pipe line growth and we are feeling optimistic about the year.
Ofer, would you start with the numbers.
Thanks Sachi. Hello everyone. As usual to help understand the underlying performance of Ness, we disclosed non-GAAP P&L metrics, which excludes one-time gains, one-time expenses and recurring non-cash items. Today’s earnings press release compares the non-GAAP reconciliation table with the details of these calculations.
The items excluded from our non-GAAP results are identified in the press release for both the current and comparable periods. The largest single item excluded from this quarter is our Q4 challenge for restructuring, severance and related project costs of $17.5 million.
Please also note that our results are not comparable to previously provided guidance, as they exclude $7 million of full year revenues and $0.02 of EPS, which were reclassified as discontinued operations following the sale of our operations in the Netherlands, one element of our Q4 restructuring activity. We have reclassified prior results accordingly. Our reported segments income and non-GAAP results are basically on continued operations.
Revenues for the fourth quarter were $136 million, slightly better than our expectation, up 11% sequentially and down 13% year-over-year. The bulk of the drop-off was due to slower flows in our system integration and software distribution segment. While the sequential improvement is due to recover in demand. Full year revenues were $547 million, down 17% year-over-year, about a third of which was due to foreign currency re-measurement effects on non-dollar revenues.
Backlog at the end of the quarter was $650 million, up 1% sequentially in constant currencies offsetting dollar terms and down year-over-year 12% in constant currency. We see the sequential stability of our backlog as a good indicator of future growth. Backlog for around 12 months was 55% of total backlog at December 31, within our normal range of 55% to 60%.
Revenue by customer geographical region was Europe 34% for the quarter and 32% for the year; North America 31% for the quarter and 32% for the year; Israel 31% for the quarter and 32% for the year; and the rest of the world 4% for the quarter and 5% for the year.
Gross profit was $29.9 million for the quarter and $136.6 million for the year, impacted by a portion of our Q4 charge. On a non-GAAP basis, quarterly gross profit was $41.6 million or 28.5% of revenue, up from 27.2% in Q3 when compared to 28.8% in the fourth quarter of ‘08.
The full year gross profit was $150 million or 27.2% of revenue, compared to 29.1% in ‘08. Our Q4 charge led to an operating growth of $16.5 million for the quarter and $9.4 million for the year. On a non-GAAP basis, quarterly operating income was $5.7 million or 3.9% of revenue, compared to 7.1% in Q4 of last year, and full year operating income was $21.8 million or 4% of revenue, compared to 7.5% of revenues in ‘08.
EBITDA was a minus $8.8 million for the quarter and $16.2 million for the year. On a non-GAAP basis, EBITDA for the quarter was $8.7 million or 5.9% of revenue, compared to 8.9% in the fourth quarter of ‘08; and full year EBITDA was $32.7 million or 6% of revenue, compared to 9.2% in ‘08.
Financial expenses were $900,000 in the quarter, down from $2 million in Q4 of last year, and full year financial expenses was $3.4 million, down from $5.7 million in ‘08, due largely to low interest rates on our long term debt and then efficient effect from exchange rate fluctuations.
Our tax rate for the quarter on a non-GAAP basis was 50%, while our non-GAAP tax rate for the year was 26%. On a GAAP basis we had an approximately $4 million of tax expense from the write-off of deferred tax assets.
Due to our Q4 charge rate, the GAAP net loss from continuing operation was $23.4 million for the quarter and $20.4 million for year. On a non-GAAP basis we have a net income of $3.4 million for the quarter, compared to $9.2 million in Q4 of last year, and full year net income of $13.6 million, compared to $36.7 million in ‘08.
It corresponds to a GAAP loss to the income share from continuing operations of $0.61 for the quarter and $0.63 for the year. On a non-GAAP basis, quarterly diluted EPS was $0.09, compared to $0.23 in the fourth quarter of ‘08, and the full year EPS was $0.35, compared to $0.93 in ‘08. Including the discontinued operation, non-GAAP full year EPS was $0.36.
In terms of cash flows we did very well. We delivered fourth quarter operating cash flow of $26 million, an all-time quarterly record, while full year operating cash flows was $60 million, also an all-time record. Our free cash flow for the year was $49 million. Our balance sheet is very healthy. At the end of December, cash, cash equivalent and short term deposits was $72 million, up from $59 million at the end of December ‘08.
We had less than $1 million of short term debt, and about $72 million of long term debt, of which about $21 million is due in the next 12 months. Most of the long term debt is four to five years long, taken during the last two years to fund acquisitions, with weighted average interest rate of about 12%. We remain in our comfort zone regarding liquidity.
Trade receivables were $165 million versus $200 million at the end of December ‘08, while unbilled receivables were $33 million, down $12 million from a year ago. Unbilled receivables as a percentage of total trade receivables were 18%, flat from a year ago. DSOs the at quarter end were 69 days, down from 73 days at September 30. Thanks to solid client relationships and good collections.
Remember that in calculating DSOs we exclude VAT and software vendor pass through from our trade receivables, since these amounts don’t represent revenues for Ness. Our goal is to maintain DSOs in the range of 70 to 80 days. Our total headcounts at December 31 was 7, 855 employees, up sequentially by 75 billable employees; while our headcounts in India increased for the fourth quarter in a row.
In terms of operating segments, in our software product engineering segment, quarterly revenues were up 2% sequentially and up 1% year-over-year and full year revenues were up 5%, and we continue to generate strong non-GAAP operating margins, delivering 14.9% in the quarter, up sequentially from 14.2%, compared to 16.5% a year ago. In the full year non-GAAP operating margin was 15.5%, compared to 11.4% in ‘08.
Our system integration and application development segments started to show some recovery, following a very tough year in sales and operating results that were impacted significantly by the economic slowdown.
The segment delivered a sequential quarterly revenue growth of 4% with a year-over-year revenue decline of 14% or segment revenue was down 17% for the year. Quarterly non-GAAP operating margin was 5%, up sequentially from 3.9%, compared to 6.3% a year ago. For the full year, non-GAAP operating margin was 3.8%, compared to 7.7% in ‘08.
Our software distribution segment delivered a small non-GAAP operating profit in the quarter. They are not the seasonally strong Q4 we had expected, as large license deals continue to differ especially in Italy. Quarterly segment revenues were up 32% sequentially, and down 36% year-over-year, largely a low demand during the recession. The non-GAAP operating margin was 5.3% for Q4 and 7.4% for the year.
To summarize, our overall revenues improved sequentially in Q4, as we start to see sizes flat in some of our market, while our non-GAAP operating margin, net income in EPS were inline with our expectations and operating cash flows were extremely strong.
Back to you Sachi.
Thank you, Ofer. As Ofer mentioned, our software product engineering segment did well in Q4, once again trend in margin at or above this target range, with revenues starting to move upgrade again. I’m very pleased to say that ramp ups are now simply out rating ramp downs, resulting in a headcount increase of almost 100 inventories in India during the quarter.
During Q4, our queen sized lab crossed the 203 mark, the third lab to do so, and two other labs are close to this sign, and we also celebrated three years with this important customer. Our delivery operation in India remains very efficient, despite the slots of the three assignments resulting from the ramp down and the ramp up, we are maintaining a very efficient branch and we have managed to keep average cost per billable hour in-line with our expectation.
Attrition is starting to grow, but it’s still below historical levels, meaning that we’ll have to adjust the raising in India sometime during 2010. We are continue to book favorable expansion in the newer and long existing Ness customers and our equal system playing into the clients and partners of our Ness customer is continuing to drive significant new bookings.
In Q4, we signed four new Ness customer or multimillion dollar deals and the number of it’s opportunities in the pipeline is much higher than just a quarter ago. We continue to expand within our new SEZ facility in Bangalore, which is now up to 150 employees and this will help us moderate our India tax cost in future years. We operate over 50 Software Product Labs in India and Eastern Europe.
Our systems integration and application development segment is starting to see some fairness in the market again. Revenue and profitability in Q4 both increased sequentially, which in very encouraging, though they are still below historical level. Our financial services vertical is starting to see the nine recoveries in Israel and the U.S., while financial services says demand remains below par in the CEE region.
Our defense and homeland security business continues to have strong pipeline of international opportunity. The utility in the publish sector is breaking up nicely, and CEE is doing well in Israel, with some nice swings in Q4 and good pipeline activity. The industrial sector continues to be weak in all geography, while healthcare sector is growing year-over-year and remains the major focus for us.
Let’s go through the details, starting with Europe. Several indicators are moving in the right direction, although the European economy is seeing not a lot of moves. Backlog in this business unit increased in Q4 for the third consecutive quarter and reached Q3, ‘08 level again. We expect the backlog to increase further in Q1.
With a number of nice wins in the quarter, some of which you have read about in recent press releases and others you’ll read the above soon. The strategy of regional cooperation within Central and Eastern Europe proved itself once again with several significant wins in the Cadastral Offices.
A $17 million win in Slovakia at the being of the quarter, which I mentioned in the last earning call, and new $19 million in the Czech Republic which we announced on Monday and its $4 million expansion to the Slovakia deal. In addition, we awarded multimillion dollar contract by favor for the implementation of their Czech and Slovakia EMP projects and we won several of their million dollar plus deals.
We also delivered the third major milestone, a completely unannounced multimillion dollar engagement at telephonica too. Also Drew mentioned it in the last call; we won a strategic deal in Hungarian with Pannon. In Hungary, we closed some new deals with the OTC Bank.
Things are not the same in Romania, where we continue to under perform. The recession there is still very deep as the political change in the election complicated the spending picture. Income in Europe is stable following several quarters of increases as we tighten a bit.
As I mentioned in the start of the call, we will structure the number of small non-strategic business units, and their related projects during Q4. We found that such business units were turning into burden, as the environment becomes tougher requiring the disproportionate amount of management’s attention. When you reorganize, solve, close or a deposit of spending of much of the small system integration entities in which we do not have critical mass, for example in the U.K., the Netherlands and Asia Pacific we will place local management in those units and trade down delivery and SG&A.
In Israel, despite IT services, first triad remaining relatively tight, our commercial and surveillance business have had a number of sizeable new bookings mostly in the public and in the final sectors. You read more about these deals in our press releases.
As the deal included, $11 million multiyear outsourcing contract from CD, the First International Bank of Israel and out there $11 million multiyear outsourcing contracts of the Israel industries of the integration absorption, and multimillion dollar multiyear outsourcing expansion with Thomson Reuters and multimillion dollar implementation for [Makabi] Airstrip services and other demonstration of our strength in the healthcare sector, a $12 million outsourcing contract with Israel Ministry of the Interior and number of additional large and small wins and expansion with the Telenor Group, Israel CommBank in all this.
By the way, our unified reference is that temporary in Israel, for which we provide outsource IT services to over 70,000 end user in Israel and around the world and just credited with the ISO 20,000 Certification, which is effected the company’s ability to use integrated processing to close to deliver effective IT services. Ness is the first IT services provider in Israel receive this accreditation.
In our defense and homeland security vertical, revenue increases sequentially and operating margin continue to be very strong. Long term significant new deals and expansion, including multimillion dollar system for a different government branch of the same Latin American country, whom to we were implementing the large command and control system, which we announced in June.
An expansion with the Western European countries defense force, an initial contract working for European based agency, a contract with Israel security agency and others, and we completed a major milestone for a new government customer in the CIS region. On the human interest note, as you may know that Israeli government sent a team of men to help save lives following the devastating earthquake.
We are proud to say that the team used one of our command and control system to direct its successful search and rescue, navy kind of operation and related operation with. In our North American system integration business, we marked our third quarter of profitably, while revenue inched up sequentially.
Q4 bookings were higher than Q3; we are not yet where we need them to be. We won number of deal mostly in small to medium size range in the acquired keen new financial services clients with [Ness] Group for whom, we developed a client total. We also recorded impressive growth as one of our largest clients for whom we are providing comprehensive deck office outsourcing and technology services including application development.
Finally, the software distribution of first segment improved revenue sequentially in Q4, although, it seem well below historical level and it deliver approximately for the quarter and for the year. While software license sales are being slower, than normal in all geographies are formally shortfall was in Italy. The large pending continued to be the fair quarter-by-quarter. Immediately, after we land that the team will be missed our Q4 expectation, we took measure.
We replaced our softness for management and local management in Italy and we are currently in the process of reducing about 40% of workforce in Italy. This is the costly exercise as the law in Italy are restricted. Having said that, Ness will then performed well in the difficult market and as for Israel, did even better. On the marketing front, Ness was named to Czech 100 best companies and also Czech’s top ten system integration and our defense and homeland security group launched to new system that fight terror and crime in urban areas, at the ISDEF show in October.
Finally, in late November, we held the annual Investor and Analyst Day in New York, with the impressive lineup of Ness Executive of the seven strategic Ness customers. We featured our software product business on next Europe operation and particularly we expected Israel of EU funding into the CEE region in our next Indian operation. Anyone who missed this half day event is welcome to check our webcast replay or slides in our Investor Relations webpage at www.investor.ness.com.
Ofer, would you present our financial guidance now?
Our values for 2010 for revenues of $575 million to $585 million, as non-GAAP diluted earnings per share of $0.43 to $0.47, which goes strong to GAAP earnings of $0.21 to $0.25. Our guidance that feels the tax rate of around 50% and also foreign exchange rates, we remain at average January, 2010 levels.
We are modeling an average diluted share accounted of $49.5 million in 2010. In terms of seasonality we expect sequential quarterly improvements in revenues and margin throughout the year, with the exception of Q3, which we believe will be similar to Q2 due to all holiday and vacation seasonality and due to anticipated rate increase in India.
Back to you, Sachi.
Thanks, Ofer. We are very glad to add 2009 behind us as it was a tough year with difficult economic climate and number of hard decision to make. However, we have made those hard decision and we are well structured to resume growth in 2010 as a liner and meaner player. 2010 will seem to have the challenges, but it’s also stated for a planning for growth and improved margins throughout the year. Thanks to our 78 Congress employees around the world for all your hard work and commitment and thanks to our shareholders for you continuing support.
That concludes our prepared remarks. Taylor, let’s take questions.
(Operator instructions) Your first question comes from Ziv Tal - Oscar Gruss.
Ziv Tal - Oscar Gruss
Can you talk about what’s you are seeing in terms of wide inflation across the region?
Wage inflation across the region; I think that the only place that we see wage inflation is in India, as we indicated earlier in the call. We believe that the labor environment there is starting to heat up, not as it used to be a couple of years ago, but we definitely expect some salary hikes in India. In Central Eastern Europe, we don’t see much of that, and we don’t see the same in Israel, and also the same in North America is quite stable.
Ziv Tal - Oscar Gruss
And just across Eastern Europe, in which countries are you seeing better recoveries?
Just to remind you, the team in Eastern Europe are working in four different countries. I think that the biggest demand and recovery that we see is coming from the Czech Republic and we expect to see this demand growing through 2010. We expect recovery in Slovakia, mainly due to the recovery of the public sector funded by EU funds and some of these deals we’ve already won and we have announced it. So Slovakia is next in line.
Hungary, although the country is in turmoil, our operations there are quite stable and we don’t see much growth coming from Hungary, but we see it’s very stable. The only place that we don’t see the growth coming in 2010 in Central Eastern Europe is Romania. Both economic climate and political climate make the spending picture a little bit more complex, and we believe that this is probably going to take longer than one quarter or two quarters.
Ziv Tal - Oscar Gruss
And finally from me, what are your growth assumptions for the region as a whole for 2010?
For which region?
Ziv Tal - Oscar Gruss
The whole of Eastern Europe.
Somewhere around 5% to 10% when you mix the total four countries.
(Operator Instructions) Your next question comes from James Friedman - Susquehanna.
James Friedman - Susquehanna
So I just wanted to ask a couple of housekeeping things; first for Ofer. I’m just reading the press release and reconciling the commentary. There’s a footnote here that the results exclude $7 million of 2009 revenue, but then on the revenue side you report revenue on a GAAP basis, but you don’t report revenue on a non-GAAP basis. I guess what I’m asking is on a non-GAAP basis; would the fourth quarter in fact have had $7 million more of revenue relative to the $145.9 million that you reported?
The $7 million is for the full year. The fourth quarter is around two. Based on the rules, we have to adjust the prior year number also, so all the numbers that you see reflect the reduction of the Netherlands from the comparable period.
James Friedman – Susquehanna
In terms of the offices that you described, the UK, the Netherlands and Asia, did you get anything for them or were they closed or sold or the leases cancelled? Could you just share a couple of the mechanics of how you discontinued those operations?
Yes, in the Netherlands we sold the operation and we got some money out of it. In the UK, we had to shut down and let the people go and nothing much there to sell. In A-PAC we are in the process of trying to get some money out of it, but it’s in the middle of the process. I cannot really tell you how it’s going to end, but we believe we can get something out of it.
James Friedman – Susquehanna
So when I look at the cash flow for the quarter, which is quite impressive, like would you say the operating cash flow was $25.8 million; would the sale of the Netherlands be in that line item or is that elsewhere, and could you give us a sense of the magnitude?
Yes, the sale of the Netherlands, the deal closed early January, so we got the money, I think in the second week of January. When we report it, it’s going to be reported as part of the investment cash, not operating, but you see the operating as real operating cash flow. So the DSO is down, and a really very good collection and concentrating on making the cash come up.
James Friedman – Susquehanna
And then the next thing is so despite the discontinuations, the headcount actually increased. I think 75; I can’t remember the exact number sequentially. So is that just a timing difference? Will that headcount come down in Q1 or how is it that you closed offices and your headcount went up?
Yes, you’ll see the headcount come down in Q1.
James Friedman – Susquehanna
And then the last thing from me which is more forward looking is, so I haven’t quite settled the numbers yet, but it looks like you did about a 4% operating margin in 2009, but your 2010 operating margin guidance is only up, unless I’m doing this wrong, because it seems like the tax that you’re guiding for is a little higher than you did in ’09, but it’s only up about 10 or 20 basis points; so like 4 to 4.2.
I guess what I’m asking is, what do you see as the trajectory of the operating margin? Can we get back to some of the operating margins that the company had done in prior years, now that some of those weaker businesses have been closed?
I don’t have it in front of me, but I think it should be closer to 5%. The tax rate is higher because the mix of businesses changed a little bit, and the fact that there is no more or we just started to get new tax advantages in India, only on the additional business to generate in the new facility, so most of India is fully taxed.
Then Europe is still lagging; well tax rate is lower, close to 20%. Of course the average tax rate could go a little bit higher, around 30%. So that’s the reason the tax rate is a little bit higher. Otherwise I think the margin should be closer to 5%. I don’t have it in front of me exactly, but that’s about the right number.
Your next question comes from Moshe Katri - Cowen & Co.
Moshe Katri - Cowen & Co.
Going back to the restructuring that you’ve been talking about, can you quantify the headcount reductions that were implemented, and then can you quantify also the cost savings or the expected cost savings from those restructurings, especially in terms of some of those cost savings that will flow through the income statement during 2010?
We expect that by the end of Q1 we’ll be down without taking into effect any growth, but December to March we’ll be down by around 450 to 500 employees, in all the three areas that we mentioned, and we’ll start to see the real savings in Q2. So this effect also will help the margin, as also those operations didn’t make any money, so we save costs. Of course revenue will be down also, but the margins should increase, because the profits will be on lower revenue.
Moshe Katri - Cowen & Co.
That’s understood, but typically when companies go through such aggressive restructuring initiatives, they’re able to quantify the cost savings, do you have that Ofer?
I don’t have it in front of me. I can tell you the revenues, and from this probably the costs are not too far from the revenues. We’re talking about $24 million of revenue for the full year, and I think it’s going to be probably the same amount of expenses, maybe a little bit higher than that.
Moshe Katri - Cowen & Co.
And then, can you be a bit more specific about what should we look for in terms of Q1 on the revenue and the bottom line, and maybe just guidelines; directionally what should we look for?
Historically Q1 is always lower than Q4; that’s the business for the last ten years. So we expect lower revenues than Q4, and a little bit lower income, but we expect Q2 to come back, again as we mentioned and grow sequentially.
Moshe Katri - Cowen & Co.
And then some of your thoughts strategically about the software business; we spoke about this in the past. Do you continue to consider it a strategic piece or strategic component of Ness? Then also on the strategy side, some of your peers actually are in the process of aggressively reinvesting in the business in sales and marketing, kind of anticipating the comeback or the return of IT spending. What are you doing on that front?
Let me start with the latter question and go back to the first question. We are anticipating a kind of stable economic environment, and this economical environment we anticipate in regards to growth, which really means that we are in the process of acquiring market share. For that we need to invest in sales and marketing and that’s what we are doing.
There are good indication, both in North America, as well as in Israel, as well as in Central Eastern Europe, that we are on track to acquire this market share, and of course if the economy would perk up, that’s even better, but rightly you asked, and that’s where we invest our money, in increased sales and marketing.
As to NessPRO; we feel that the shortfall that we have had in NessPRO has got to do to the performance in Italy, and the ability of the Italian team to adopt the evolving model as their colleagues in Israel and Spain were able to do. Spain is suffering even worse than Italy, nevertheless, the team in Spain was able to adapt to the new environment by taking different products and changing the deal size and where they are going, and come up with, I would say not great results, but considering the tough market, good results, and in Israel, we have a very nice performance.
So we believe that the business in NessPRO is limited to the performance of the Italian team. We’ve replaced the head of this business unit, and we have replaced many of the executives of the team in Italy, and we believe that after the restructuring is complete, this business unit will return to its historical performance.
Moshe Katri - Cowen & Co.
Then on the sales side, are you increasing your sales, the size of your sales team? Are you focusing specifically in North America? Maybe you can give us some more details on that.
We are expanding our sales activity actually in all geographies. We expanded our sales team in North America, we’re expanding our sales team in Israel, and we’re expanding our sales team in Europe. We’ve conducted thorough training for sales, and put a lot of effort in IT support systems for sales, CRM systems, and also we’ve put in our 2010 budget funds for other marketing activities.
Your next question comes from Ziv Tal - Oscar Gruss.
Ziv Tal - Oscar Gruss & Son
Hi. Can you please comment on your pipeline geographically?
On our pipeline geographically; I think that what will be of value is to compare the pipeline this time a year ago and how we see it right now. A year ago, January/February ‘09, we did have an issue with visibility, as many projects were not just on the horizon. What we see today is a completely different picture. We see people going back to the expense in the public sector, and this is true, and we have got quite a healthy pipeline in Israel and Central Eastern Europe. As I said, some of this is comes from EU funding; there’s huge programs and we see a lot of focus going there.
We see the pipeline building up also on healthcare, and we see very good pipeline building up in North America on financial services, healthcare, and what we are less seeing is on the industry sector. I think that both in Central Eastern Europe and in Israel, this sector is still very stingy on expenses on IT, and over there we see more expansion in small projects, and less new large projects that could award us with work for multi years.
There are no further questions at this time. I’ll turn the call back over to you Mr. Wright.
Thank you, Tyler. Thank you everybody for joining us on the call today. We’ll speak to you again when we report our first quarter results at the end of April. This concludes our call today. Have a very lovely day. Bye-bye.
This concludes today’s conference call. You may now disconnect.
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