Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Nice Systems Ltd. (NASDAQ:NICE)

Q4 2011 Earnings Call

February 15, 2012 8:30 AM ET

Executives

Martin Cohen – VP, IR

Zeevi Bregman – Chairman and CEO

Dafna Gruber – CFO

Analysts

Daniel Meron – RBC Capital Markets

Shyam Patil – Raymond James

Paul Coster – JPMorgan

Jonathan Ho – William Blair

David Kaplan – Barclays Capital

Michael Kim – Imperial Capital

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the NICE Systems Conference Call discussing Fourth Quarter and Full Year 2011 Results. And thank you all for holding. All participants are at present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded, February 15, 2012.

I would now like to turn this call over to Mr. Marty Cohen, VP Investor Relations. Please go ahead.

Martin Cohen

Thank you, operator. With me on the call today are Zeevi Bregman, President and Chief Executive Officer; and Dafna Gruber, Chief Financial Officer.

Before we start, I’d like to point out that some of the statements made on this call will constitute forward-looking statements. In accordance with the Safe Harbor provisions of the Private Securities and Litigation Reform Act of 1995, please be advised that the company’s actual results could differ materially from these forward-looking statements.

Additional information regarding the factors that could cause actual results or performance of the company to differ materially is contained in the section entitled Risk Factors in Item 3 of the company’s 2010 Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on March 31, 2011.

During today’s call, we will present a more detailed discussion of fourth quarter and full year 2011 results and the company’s guidance for the first quarter and full year 2012. Following our comments, there will be an opportunity for questions.

Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations which differ in certain respects from the Generally Accepted Accounting Principles as reflected mainly in accounting for acquisition-related revenues and expenses, amortization of intangible assets and accounting for stock-based compensation. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today’s press release.

With that, I will now turn the call over to Zeevi.

Zeevi Bregman

Thank you, Marty. And welcome everyone to our fourth quarter and full year 2011 earning call. We are pleased to report strong fourth quarter and full year results. Fourth quarter non-GAAP revenue increased 14% compared to the fourth quarter of 2010, reaching a record $214 million. Full year non-GAAP revenues increased 15% to $798 million. Non-GAAP EPS in Q4 increased 17% compared to the fourth quarter of last year, reaching a record $0.60 and breaking full year non-GAAP EPS to $2.10, an increase of 20% compared to 2010.

We had a very strong finish to the year resulting in book-to-bill ratio much greater than 1 in the fourth quarter. For the full year 2011, our book-to-bill ratio was greater than 1 and our backlog as we enter 2012 is at an all-time high.

When we look at the drivers of our strong performance in 2011, the strength came from diverse area of our business. We had particularly strong execution in the Americas and in APAC. Both our enterprise and our security business grow in the mid-teens and we saw in increase in the number of large deals. And importantly, our clear focus ongoing our analytics-based solution resulted in high growth rates for these products.

We expect the solution to continue to fuel our revenue growth going forward. We are also seeing increasing demand for our ability in the cybercrime space which span across our financial crime and compliance solutions and our security solutions.

Moreover, in 2011, we announced four acquisitions, which further strengthened our already strong product portfolio. We enhanced our offering for the small and mid-sized enterprises, strengthened our real-time impact technology, added a real-time feedback solution and are now adding a market-leading, closed-loop performance management solution with last week’s closing of our acquisition of Merced.

This acquisition combined with our continued focus on innovation into advanced application and unstructured data analytics underscore our commitment to provide our customers with a market-leading, best-of-class, analytics-based solution. As our portfolio broadened, we continue to further penetrate our existing customer base and renew customers.

Let us now move to discussing our business in more detail. Let’s start with our enterprise business. In 2011, we generated high-teens growth in the customer interactions business which was fueled by high growth rates of our analytics-based solution. These solutions benefited from increased adoption in geographic expansion.

In the Americas, where we reported strong growth, leading financial institutions and companies with a significant focus on customer care are continuing to increase their adoptions of our analytics-based application, many with sizeable deals. For example in Q4, a top five American brand placed an eight-digit interaction analytics order which is our largest ever analytics deal. Our customers are looking at NICE to provide them with the best of suite solutions and to become the vendor of choice for all analytics and interaction-based solution.

The adoption of analytics is expanding globally. In 2011, we produced our solutions in new languages including Chinese, Japanese, Turkish and Russian and we won our first interaction analytics deal in Poland, Russia, South Africa and Singapore. We extended our presence in countries such as Brazil, Mexico, India and Australia.

In 2011, some analytics industry analyst recognized our leadership such as DMG Consulting, Frost & Sullivan and most recently, Gartner who, again, placed us in the leader’s position of its Magic Quadrant for Contact Center Workforce Optimization. Gartner’s report describes the functionality of our workforce optimization offering as best of breed and our business consulting services as exceeding expectations.

In addition to the success we achieved of organic growth in 2011, we recently made two strategic acquisitions to enhance our analytics-based offering. The addition of Fizzback and Merced solutions to our product portfolio gives our customers the ability to have a complete view of the customers’ experience and to tie it to the employee’s performance.

Furthermore, by enhancing these solutions with NICE analytics, we enable our customers to respond to specific interactions of their customers in real time during and immediately after the interaction. This enhances customer experience, improve profitability, increase the sale, reduce churn and ensure compliance.

We feel that real-time feedback will provide a complete voice-of-the-customer solution. Fizzback adds direct feedback to our already existing indirect and inferred voice-of-the-customer capability. The solution provides a real-time, context-based, flexible dialogue with the customer and yields high response rates, a combination which allows for the use of consumer feedback solutions in ways not possible before.

The feedback is then weaved into our customers’ daily operation. And the operation of Fizzback is going well and we already have deals in the pipeline with NICE existing customers, who are now interested in our customer feedback solution.

In the fourth quarter, among the deals won by Fizzback was a UK-based utility firm. This customer purchased the Fizzback solution to ensure compliance with regulatory oversight of customer satisfaction. Our customer is using the solution to reduce complaints by identifying then resolving underlying issues before consumers call in.

The solution is expected to help our customer reduce operational cost while improving the customers’ experience. The addressable market for our Fizzback solution continue to grow as buyers are starting to shift from tactical local needs fulfilment to an enterprise-wide strategy to help increase overall customer retention and improved operational cost and employee performance.

Merced is a leader in service and in sales performance management solutions. The Merced solution for evaluating agent performance provides one version of the tool, a cost organization and the line coaching and incentive management with organization strategic goal.

Having our capabilities in real-time interaction analytics and real-time customer feedback to the traditional data sources is expected to deliver even more granular and accurate performance measurement and insights. The announcement of this acquisition was received very favorably by our customer and we look forward to the many opportunities for growth that the Merced acquisition will provide.

Turning to financial crime and compliance, which is part of our enterprise business, we expected the fourth quarter to be a very strong quarter for this business, but it came in below our expectations, resulting in low single-digit growth for 2011. We experienced certain execution issues, primarily in our go-to-market organization, which we have been addressing. The market opportunity for this business is significant and we expect to resume double-digit growth for the full year 2012 as we continue to see strong demand for our solutions from the largest financial institutes.

These leading global institutions are turning to NICE because we can support their sophisticated need with enterprise-wide solutions on which they can standardize globally and across the different parts of their businesses. Regulatory changes and the increasing sophistication of fraud attacks, especially in remote banking, are causing many firms to realize that their systems, which are often homegrown, cannot effectively support today’s need.

Therefore, they choose to replace siloed technology with solutions from us, as we are the leading provider offering a comprehensive product-based enterprise-wide solution that can support their needs for leveraging cross-channel information. As we continue to see an even greater focus on regulation and (inaudible) as evidenced by initiatives such as Dodd-Frank, FACTA and new initiatives currently under discussion, we expect to see continued strong demand from these large global financial institutions.

We also see market opportunities in the energy vertical, in the hedge fund industry, in the mid-market and from further geographic expansion. In energy, the opportunity’s around energy trading compliance and in Q4, we signed a contract with another top 10 global energy firm.

In the hedge fund industry, new regulatory pressures are taking place due to the provision of the Dodd-Frank Wall Street Reform and Consumer Protection act. And in Q4, we won our first hedge fund deal with a U.S.-based early adopter of the new requirements. And in the mid-market, especially in North America, we are seeing increasing demand and smaller companies are playing catch-up in implementing compliance and fraud prevention solutions.

Finally, in 2011, our financial crime and compliance solutions continue to win awards and recognitions from experts in this market, such as Gartner for Web fraud detection and Chartis for financial crime risk management.

Most recently, we were pleased to be named for the third consecutive year as the leader in innovation in anti-money laundering category in Financial-i Magazine’s Award. NICE Actimize was selected for its commitments to product and service innovation and the impressive functionality it delivers to a range of financial institutions.

Let me move on to our security business. We are very pleased with the performance of this business, which finished the year very strongly, with good execution. We have strong booking growth in our civilian business, led by our situation management solution which continues to gain interest as an effective solution for collaboration and streamlining security operation.

We see many opportunities in the SafeCity vertical with increasing demand in developing market like Latin America and Eastern Europe along with good momentum in critical facilities vertical. In the past year, we won several seven and eight-digit deals in the SafeCity and critical facilities verticals in Latin America. For example, we won a seven-digit deal with a federal organization with very high security needs where we are providing our situation management and video analytics solution in the first phase and our incident investigation management solution in the next phase.

These solutions would connect to a number of subsystems in the facilities and will allow the customer to manage incidents in real time and also run post incident analysis. Our ability to offer complete incident lifecycle management and our (inaudible) were key to winning this lucrative deal.

We are seeing strong demand for our abilities in the cybercrime space. In this space, our product offering generates cross-selling opportunities and in Q4, we won a large seven-digit deal by applying our financial crime and compliance technology to an existing security customer.

We will continue leveraging our comprehensive portfolio of products and solutions as NICE is the only company to offer complete lifecycle management prevention and prediction in real time and post incident analysis for security and safety operation.

In closing, 2011 was another year of profitable growth for NICE with strong execution and further expansion of our analytics-based solution portfolio for continued innovation. The strong finish to 2011 position us well as we head into 2012 as a rapidly increasing number of our customers are recognizing our cross-channel real-time solution capability.

Customers are proactively looking for advanced capabilities to analyze structured and unstructured data to deliver insight and input. As the leader in delivering advanced analytics-bases application to the market, we have a clear focus on helping them to tap the wells of information created from big data. The energy and morale inside NICE is stronger than ever and we are looking forward to another year of profitable growth.

I would like to thank the NICE team for the strong performance in this quarter and the year. And with that, I will turn the call over to Dafna Gruber, our CFO. Dafna?

Dafna Gruber

Thank you, Zeevi. I’m pleased to provide you with the analysis of our financial results and business performance for the fourth quarter and full year 2011 and our outlook for the first quarter and full year of 2012.

Revenues for the fourth quarter were a record of $214 million, up 14% from $187 million in Q4 last year. For the full year, our revenues were $798 million which was an increase of 15% compared to 2010. We reported year-over-year double-digit growth in both our enterprise and security businesses

Our revenues by businesses were as follows. Enterprise revenues were a record $159 million for the fourth quarter, up 8% from last year’s fourth quarter. For the full year 2011, enterprise revenues were $605 million, up 14% compared to 2010. Security revenues were a record $55 million for the fourth quarter, up 37% from the fourth quarter of last year.

As mentioned in the past, the security business has been lumpy, sometimes resulting in uneven quarter-to-quarter results. For the full year 2011, security revenues were $193 million, up 16% from 2010.

Moving on to the revenues by region, revenues in the America in the fourth quarter increased 17% to $136 million compared to the fourth quarter of 2010. Full year 2011 revenues were $501 million, up 16% from last year. Our fourth quarter 2011 revenues in Europe, Middle East and Africa increased 3% to $52 million compared to Q4 of 2010. For the full year, revenues in EMEA were $199 million, up 8% from 2010.

The Asia Pacific region continued to show the fastest growth with revenues growing 26% to $26 million for Q4 2011. Full year 2011 revenues were $98 million which was an increase of 28% from 2010. For 2011, the America region accounted for 64% of total revenues, EMEA 24% and APAC 12%.

Product revenues accounted for approximately 46% of Q4 total revenues and 45% of the full year total revenues. Maintenance represented 35% of total revenues for the fourth quarter of 2011 and 36% for the full year compared to 34% for the full year 2010. Professional services accounted for 19% of Q4 total revenue as well as 19% for full year 2011 and full year 2010 total revenues. Going forward, we do not expect major changes in our product service mix on a yearly basis.

Fourth quarter 2011 gross margin was 66.3%, slightly ahead of last year, bringing full year gross margin to 65.5% compared to 65% in 2010. In 2012, we expect the annual gross margin to remain relatively unchanged from the gross margin reported in 2011.

Our operating margin for the fourth quarter was 18.6%, unchanged from the fourth quarter of 2010. For Q4, which was the first quarter that Fizzback was included in the consolidated results, we are pleased to have been able to offset the slight reduction in margin through organic growth. And for the full year 2011, the operating margin was 18.7%, compared to 17.8% for 2010. We continued to target at least 25% operating margin on incremental organic growth and expect to see continued operating margin expansion in 2012 and beyond.

Fourth quarter 2011 net income increased 15% to $37.6 million compared to $32.7 million in Q4 of 2010. Full year 2011 net income was up 20% to $134.6 million compared to $112.1 million in 2010.

The tax rate in Q4 was 11% resulting from adjustments for final tax payments made, bringing the full year tax rate to 15.2%. While we continue to see some fluctuations in the tax rate resulting from our international tax structure, we continued to target 17% to 18% as our average tax rate.

Fourth quarter 2011 fully diluted earnings per share was a record $0.60 which was an increase of $0.09 or 17.6% compared to Q4 2010. Full year fully diluted earnings per share was $2.10, up 20% from $1.75 from 2010. Cash flow from operation was very strong at $53 million for the fourth quarter of 2011 and $154 million for the full year. Our cash and financial investment were approximately $563 million at the end of December with no debt.

During the fourth quarter, we paid $78 million for the acquisition of Fizzback. We also used $11 million for our share repurchase plan. As of today and since we began buying back shares, we already used $150 million in our share buyback plan.

Turning to guidance, we are introducing today our guidance for 2012. Please note that both the first quarter and full year guidance take into account the acquisition of Merced which was closed last week as well as the share buyback executed so far but excludes future buybacks that maybe executed during the year.

We expect the first quarter 2012 total revenues to be in the range of $210 million to $218 million and fully diluted earnings per share to be in the range of $0.50 to $0.55. We expect total revenues for the full year 2012 to be in the range of $930 million to $950 million and fully diluted earnings per share to be in the range of $2.28 to $2.48.

That concludes my comments. I will now turn the call over to questions. Operator?

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instruction) The first question is from Daniel Meron of RBC Capital Markets. Please go ahead.

Daniel Meron – RBC Capital Markets

Thank you. Hi, Zeevi and Dafna. Congrats on the ongoing execution. First, Zeevi or Dafna, can you provide us with a little bit more color on the organic revenue growth that you expected to 2012? And also what is the expected growth per business line, be it enterprise, Actimize and the public safety? Thank you.

Dafna Gruber

Okay, so we expect double-digit growth in all our businesses, also going into 2012. And our guidance currently reflects double-digit growth for 2012.

Daniel Meron – RBC Capital Markets

Is one of the businesses supposed to grow faster and what’s the organic growth rates, excluding Merced?

Zeevi Bregman

No, based on our acquisition, we expect the customer interaction business to grow faster than the others because not all the growth is organic. So, we’ll see higher growth in the customer interaction. When we are looking at organic growth, we expect both in the enterprise sector and in the security sector to see double-digit growth.

Daniel Meron – RBC Capital Markets

Okay. And then Zeevi, I might have missed it, but you referred to some issues with Actimize business. Can you elaborate a little bit more on that and what are the steps that you’re taking to address it? Unless I missed it and then I’ll just go back to the replay.

Zeevi Bregman

No, I think you didn’t miss it. We, in Actimize, we have seen a growth of low single-digit during the year. This is the result of execution issues, primarily in our go-to-market. We are – been addressing these issues and we expect that the business will go back to its historic growth rate. As we move forward, we believe that the opportunities are there, the demand from customers are there, and we are listening and hearing the customers that are telling us that they would like to standardize and further expand with us as we move forward.

Daniel Meron – RBC Capital Markets

Not to beat a dead horse, but just a follow-up on that, what exactly – when you’re referring to some execution issues, is it more intense competition? Is it the product? Is it (inaudible)

Zeevi Bregman

No. It’s the shock that it was mostly in the go-to market. Specifically, it was some changes in the sales management team.

Daniel Meron – RBC Capital Markets

Okay. I’ll leave it at that and yield the floor. Thank you.

Operator

The next question is from Shyam Patil of Raymond James. Go ahead.

Shyam Patil – Raymond James

Hi, guys. I’ll add my congrats as well. I guess, to follow up on Actimize, Zeevi, you mentioned that you expect it to return to historical growth rates. Should we be thinking 15% to 20%, greater than 20%? How should we think about Actimize going forward?

Zeevi Bregman

If you look at the quarter by quarter, look Q4 by Q4, it probably will be 20%. If you look at full-year, we’ll have to do a catch-up, so it will be a double-digit, but a low double-digit.

Shyam Patil – Raymond James

Okay, great. And then, you talked about analytics-based solutions becoming more and more important to NICE, and you talked about that for the past several quarters. Could you offer us any details on how much revenue your analytics-based solutions contribute today, and just what you’re expecting, either in terms of revenue or growth from these solutions in 2012?

Zeevi Bregman

Well, we are not breaking what is in the analytics and what is not because in many cases, the analytics solutions we are carrying goes to infrastructure and it’s difficult for us to distinct between the two. So, it’s impossible for us to break, but when we are looking at our own measurement, we are seeing growth which is in an accelerated growth rate, in terms of the uptake in these businesses.

And when we are looking, we are talking about the interaction analytics and solutions that are based on the interaction analytics, we are talking about our real-time impact solutions and we’re also talking about the situation management in the security space.

Shyam Patil – Raymond James

Great. And this is my last question for Dafna. Dafna, around the Merced acquisition, could you just help us understand how to think about the linearity of the revenue throughout the year? I know you guys called out that 4Q is going to be more important than the other three quarters. But just how to think about the progression of revenue for Merced throughout the year?

Dafna Gruber

Yes, what we’ve said in the past that it’s a – the Merced is a typical enterprise software model which, a significant part of the license business a cue the fourth quarter. And because of that, we would see some linearity in the business throughout the year, with the fourth quarter being much significant in revenues than the rest of the year.

Zeevi Bregman

On linearity.

Shyam Patil – Raymond James

Great. Thank you.

Operator

The next question is from Paul Coster of JPMorgan. Please, go ahead.

Paul Coster – JPMorgan

Yes. Thanks for taking my question. Dafna, I think you said 35% of revenues is now coming from maintenance. Can you hazard a guess as to, of the remaining business, how much of it is sort of recurring in some way, shape or form, whether it’s sort of sales to existing customers, upgrades that are fairly predictable now, or similar?

Dafna Gruber

Most of our revenues to every quarter is from existing customers. So even new licenses and professional services, the majority of them are coming from existing customers of NICE. We also have, and I think maybe this is what you also referred to, we have a growing element of recurring revenues in SaaS and hosting model. It’s still, I would say, few percentage out of both – mainly our service, professional service line, but also some term license deals in our license revenues.

As I said, it’s a few percentages, still below 10%, but it’s growing very fast. And hopefully, during 2011, we will be able to – it would reach a critical mass that would require us to report it. There is a great contribution to the recurring revenue model with the acquisition of both Fizzback and Merced. In both these businesses, the portion of recurring business is very high.

Paul Coster – JPMorgan

Very good. And then, what assumptions have you included in your guidance regarding the European outlook and financial services in Europe in particular?

Zeevi Bregman

When we looked at the guidance, we looked at the Europe being more of the same. So we didn’t look for recovery, but we didn’t look for deterioration.

Paul Coster – JPMorgan

Okay. And then my last question actually is on the SaaS front, which you’ve already alluded to, Dafna. Are you seeing any competitive pressure there? As you move forward, are SaaS-based business models the most likely acquisition targets?

Zeevi Bregman

I will take the question, Paul. We are, first of all, seeing competition in all forms, so we always had competition and we also are seeing competition on SaaS. So, we don’t see any particular competitive pressures on our SaaS offering, more than on our perpetual license ones.

Paul Coster – JPMorgan

Okay, thank you.

Operator

The next question is from Jonathan Ho of William Blair. Please go ahead.

Jonathan Ho – William Blair

Good morning. Congratulations on the great quarter. Just in terms of the security business, can you talk about some of the factors that drove the particularly strong growth in the fourth quarter and, just given some of the lumpiness there, how we should think about that as we take a look at the first quarter?

Zeevi Bregman

When we look at security, we had a very strong quarter this quarter. We said that this business tend to be lumpy and we expect that the – while we expect the overall security business to grow in double-digit next year, if you will make the math, you will see that this quarter was a bit exceptional, in terms of the revenue number.

Jonathan Ho – William Blair

Well, was there anything in particular that drove that strength in the quarter, a large deal, or milestones, or anything that you can maybe give us some color on?

Dafna Gruber

As you know, part of the business, or the revenues in security, is coming from longer-term deals, deals that are spread over a few quarters and usually, in order to finish them or finish a milestone, when we finish milestones, we get approvals for the deals. And there was a good combination of deals that were executed and this is why we had high revenues in the quarter.

As we said earlier, because of this type of business, there might be fluctuations, but we feel comfortable to say that this business should grow at double-digit growth going forward as well, if we look over time, not quarter-on-quarter but on, I would say, a rolling four quarters.

Jonathan Ho – William Blair

Great. And then just a high-level question, you guys said in your prepared remarks that you’re looking at some of the financial crimes and cybercrime, potentially, as a growth area. Are you intending to kind of extend your product line into that area, or do you see some new opportunities to move into the cyber security space? Just trying to understand what the strategy is there.

Zeevi Bregman

With the Situator and with the Actimize solutions, we are already active in the cyber security space. And we believe that based on demand, these areas will grow and we will see further growth by introduction of new products in this space.

Jonathan Ho – William Blair

Great, thank you.

Operator

The next question is from David Kaplan of Barclays Capital. Please go ahead.

David Kaplan – Barclays Capital

Hi, everyone. Good afternoon. I also have a very high-level question here. If you look at the trends in tech and on customer CapEx spending to deal with the backend and big data issues that they’re all dealing with, can you talk a little bit about how that’s impacting your R&D profile and your product profile, and what it is that you’re doing in order to help your customers deal with that?

Zeevi Bregman

I mean our entire focus is – and most of our new offerings, if not all, are dealing with the – looking at the analytics-based solution on the structured and unstructured data. And the unique approach of ours, and where we differentiate ourselves, is that our solutions are providing things in real time and we are doing things in a cross channel, so we are looking at information that is coming from these multiple channels. And we are doing it on the individual level. And we have, also, a fairly large capabilities on the unstructured data in areas like voice and video, which we believe are unique.

And this is – most of our focus and most of the opportunity that we have across business line is to deal and to help our customers with the big data, dealing with their big data problem and providing solution which will enable them to improve performance, to ensure compliance, to improve the customer experience, and to safeguard their people and assets.

David Kaplan – Barclays Capital

Okay. So if I were, though, to try and quantify that in some way and I were to think about the number of transactions that your customers are dealing with, are the numbers that they’re dealing with growing and is it, therefore, putting pressure on some of your software solutions or requirements for your software solutions that will require further CapEx or R&D investment on your part in order to help your customers deal with that more efficiently?

Zeevi Bregman

Obviously, we are – if you look at our products and then look at demand of the products, we are seeing growing demands and growing demands for larger scale platforms. And this is, by the way, where we are – our technology excel. And as the demands are increasing, we are developing larger and larger scale solution to meet this need. And therefore, it put pressure on our R&D but this is something that we are happy to have because there is also a large opportunity that comes with that. And therefore, for us, we are seeing it more from the opportunity side than from the pressure side.

David Kaplan – Barclays Capital

Right. I think we’d all like to see organic growth at NICE be a bigger portion of the growth of the business. And I guess if we look at 2011 where there is around 13% of revenues were spent on product development, is that the number you’re looking at going forward or do you think that could increase?

Zeevi Bregman

I think that over time we will see the number on the R&D spending will be about the same. By the way, our R&D spending includes – we exclude things like product management from R&D spending. So, R&D spending, if you take some of the internal product management activity, is a bit higher than the 13%. 13% is pure R&D.

David Kaplan – Barclays Capital

Great. Thanks a lot.

Operator

The next question is from Michael Kim of Imperial Capital. Please go ahead.

Michael Kim – Imperial Capital

Hi, guys. Just to clarify on the guidance, are you continuing to look from Merced revenue somewhere in the range of $55 million and $0.10 increase in this year as well as the $0.02 to $0.03 dilution in the first quarter? Thanks.

Dafna Gruber

Yes.

Michael Kim – Imperial Capital

Okay. And then also with Fizzback, are you also looking at something in the – yeah, I guess the similar range is that you talked about previously in the $20 million for this year?

Dafna Gruber

Yes.

Zeevi Bregman

Yes, but you have to factor in that we already recognize the couple of million dollars of Merced on the year first quarter.

Michael Kim – Imperial Capital

Correct, okay. And are you looking at Fizzback to be slightly dilutive still or have you tried...

Zeevi Bregman

No.

Michael Kim – Imperial Capital

Okay.

Zeevi Bregman

My last sentence was about I said of Merced is from Fizzback. We recognized a couple of millions of Fizzback on the fourth quarter, not Merced. Could you repeat your question please?

Michael Kim – Imperial Capital

Sure. So for Fizzback, I think you guys have previously talked about Fizzback in 2012 being slightly dilutive. Are you tracking a little bit better than that or in line with that previous comment?

Dafna Gruber

We are in line with the previous comments about this business that would be dilutive – be accretive after the fourth quarter from the acquisition.

Michael Kim – Imperial Capital

Okay, great. And then can you clarify or provide a little more color on the backlog mix. It sounds like you have a little stronger visibility or bookings from the enterprise side than security, but any additional color you can provide on the backlog mix?

Dafna Gruber

We have some more backlog coming from acquired companies and since the last two are on the enterprise space, that added a contribution to backlog. But in general, I don’t – there is no major differences between the portion of any business in our backlog.

Michael Kim – Imperial Capital

Okay. And then one last housekeeping question, are you assuming any FX currency headwind or tailwind for the year?

Dafna Gruber

What we see is already embedded in the guidance. We have certain hedging plans in place to keep – to secure the expense level. Obviously, there will be significant differences from current exchange rates in the world. It would have some impact, but what we see now is already embedded in the guidance.

Michael Kim – Imperial Capital

And I’m sorry, what are you assuming in the guidance?

Dafna Gruber

In the guidance we provide for the year, we are assuming the current exchange rate plus the impact of the hedge plans we have in place.

Michael Kim – Imperial Capital

Great. Thank you very much.

Operator

There are no further questions at this time. Before I ask Mr. Bregman to go ahead with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin in two hours. In the U.S., please call 1-888-782-4291. In the UK, please call 0-800-917-4256. In Israel, please call 03-925-5921. And internationally, please call 972-3-925-5921.

Mr. Bregman. Please go ahead with your concluding statement.

Zeevi Bregman

Thank you, everybody, for joining us today and have a nice day.

Operator

Thank you. This concludes the NICE Systems fourth quarter and the full year 2011 results conference call. Thank you for your participation. You may go ahead and disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Nice Systems' CEO Discusses Q4 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts