Welcome to NICE Systems Conference Call discussing the Second Quarter 2014 Results and thank you all for holding. All participants are at present on 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 July 30, 2014. I would now like to turn this call over to Mr. Marty Cohen, Vice President, Investor Relations at NICE. Please go ahead.

Thank you, operator. With me on the call today are Barak Eilam, Chief Executive Officer; Dafna Gruber, Chief Financial Officer; and Eran Liron, Executive Vice President, Marketing and Corporate Development. Before we start, I would 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 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 the performance of the company to differ materially is contained in the section entitled Risks Factors in Item 3 of the company’s 2013 Annual Report on Form 20-F as filed with the Securities and Exchange Commission on March 26, 2014. During today’s call, we will present a more detailed discussion of second quarter 2014 results and the company’s guidance for the third quarter and full year 2014. 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 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 difference between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today’s press release. I will now turn the call over to Barak.

Thank you, Marty and welcome everyone. I am glad to be on the call with you today following my first quarter as CEO at NICE. We made good progress during the second quarter. We completed our management transition and continued to move forward on our operational transformation to help streamline the business and to improve profitability. We are centered on product leadership and go to market expansion. I am pleased to report revenues of $239 million for the second quarter, which was at the high end of our guidance range. Earnings per share came at $0.57, bookings were strong. The pipeline is robust and we are on track to meet our plans for the year. We continued to see strong demand for our analytics applications. They represented around 50% of our new business for the second quarter and once again grew double digits. Lot of the strength in our analytics solutions came in the Americas, which reported revenue growth of 16% in the quarter, the growth in our analytics applications coming from both new and existing customers who continued to expand their footprint with NICE. Also in the quarter we continued to focus on our operational model to identify areas for operational efficiencies in both the short and long-term. Earlier today we announced a new platform NICE Engage. It is our next generation interaction platform that is unrivalled in speed and scalability, right at the same time delivering a substantial breakthrough in lowering total cost of ownership to our customers. The vast increase in speed and scale of this new platform also brings a major breakthrough as the market’s first 100% real-time analytics. Every interaction including voice, chat and video in a contact center can now be analyzed for content emotion and biometrics as it happens. This level of innovation…

Thank you, Barak. I am pleased to provide you with an analysis of our financial results and business performance for the second quarter of 2014 and our outlook for the third quarter and full year. Revenues for the second quarter were $239 million, up 6% from $225 million in Q2 last year. Customer interaction revenues were $145 million in the quarter, down 1% from Q2 2013. Financial crime and compliance had a very strong quarter growing 40% year-over-year to $48 million. Security revenue grew 3% year-over-year to $46 million. Moving to the regional breakdown, second quarter revenues in the Americas were $156 million, up 16% from Q2 2013. Revenue in Europe, Middle East and Africa increased 6% from last year to $59 million. Revenue from Asia-Pacific region was $24 million. For the quarter, the Americas accounted for 65% of total revenues, EMEA 25%, and APAC 10%. Looking at revenues by business line, product revenue accounted for 36% of total revenue in Q2, maintenance revenues accounted for 41%, and professional services including cloud accounted for the remaining 23% of revenues. Gross margin in Q2 was 65.2% as a result of product mix. This has an impact on operating margin that came in at 17.2%. The increasing revenue expected in the second half of the year will drive improvement in both gross margin and operating margin. We expect full year 2014 operating margin to be higher compared to 2013. Earnings per share were $0.57 in Q2 compared to $0.61 in Q2 last year. Headcount at the end of June totaled 3,611 people compared to 3,584 people at the end of December 2013. Cash flow from operations in the second quarter was $26 million. Total cash in financial investments were approximately $462 million at the end of June 2014. During the second quarter, we brought back 632,000 shares for total consideration of approximately $25 million as part of our share repurchase plan. During the second quarter, we paid a quarterly dividend of $9.6 million. In line with our dividend plan, NICE’s Board of Directors approved the dividend for Q2 2014 of $0.16 per share, the record date is August 12 and the payment date is August 26, 2014. Turning to guidance, we expect third quarter 2014 total revenues to be in the range of $240 million to $248 million and fully diluted earnings per share to be in the range of $0.59 to $0.67. We expect total revenues for the full year 2014 to be in the range of $995 million to $1.25 billion and fully diluted earnings per share to be in the range of $2.68 to $2.80. That concludes my comments. I will now turn the call over to the operator for questions. Operator?

Thank you. (Operator Instructions) Your first question comes from the line of Shyam Patil with Wedbush Securities. Please go ahead.

Hi, thank you. Good morning. First question is when you look at the ramp that you are expecting in the fourth quarter can you maybe talk just a little bit about what gives you confidence and how we should just think about the segments contributing to that ramp?

Hi, thank you for the questions, Shyam. So, it’s a combination of several things. First of all, as I have mentioned, the booking in the quarter was very strong and give us confident that we will be able to convert that into revenue in the second half. And the other part is obviously the pipeline that also looks very strong, robust and promising for the second half. If you look on our business historically, you see that the business becoming more and more back-end loaded giving the fact that we are leaning much more towards advanced application and analytics, you saw with last year, the year before and we believe it will be even more pronounced this year. With respect to the segment, we see this strength coming from all the different line of businesses.

Great. And Barak, it seems like M&A is going to be maybe a bigger area of focus than it has been previously. Just wondering if maybe you could talk about your kind of where you are with – what your thoughts there and any expectations we should have externally on that front?

We are very active in that field. We continue to develop I would like to call it, a healthy pipeline with respect to – with respect to potential acquisitions. Obviously, it takes two for tango and we will do the right acquisition when applicable. But I believe that something that we push heavily in that area and as soon as something will happen obviously, you will know about it. But definitely, we are very active in that field.

Great, thank you very much.

Thank you for your question. And our next question is coming from the line of Daniel Ives of FBR Capital Markets. Please proceed.

Yes, thanks. Two questions. One, in terms of margins this quarter on the expense side, I mean, whether some unusual expenses that came through, so you are not expecting to come through in 3Q and 4Q just from a margin perspective?

Yes. The major impact on profitability this quarter was actually the gross margin. And more specifically, product mix that affected mainly the gross margin further. And when we look at the composition of deals for the second half of the year, we believe that the gross margin will improve significantly. In terms of the expense as we do see increase in expenses over time, that’s part of our plan to continue to invest in R&D and other areas. And we believe we would see the benefit and the profit coming from out of this investment in the second half of the year.

Yes. And then just maybe a higher level, Barak, I mean, could you obviously keeping over, when you are kind of looking second half of the year into ‘15, I mean, what are sort of the one or two homeowners’ strategic objectives that they need to change or just sort of you are going into next six to nine months from there? Thanks.

So, thanks for the question, Daniel. So, definitely it was a busy quarter as I have mentioned. I stepped into the role, completed the management transition. We continue to move forward with a variety of operational transformation initiative that will started in Q2, but also it will take us through the second half and next year. We are very much focused on executing on our roadmap and you saw it with the launch today of NICE Engage, which is a very significant milestone for us in terms of our product release, which we believe and expect many customers to upgrade to that platform given its benefit. And we are working on a variety of strategic initiatives in the different line of business as of the company. Taking all of that together, we are very busy and very optimistic for the second half of the year and obviously moving forward.

Thanks.

Thank you.

Thank you for your question. Our next question is coming from the line of Hugh Cunningham from Oppenheimer. Please go ahead.

Hi, guys. Thanks for taking my question. Sort of piggybacking on what Daniel just asked, I know you were working on the – I guess it’s called the NICE 2020 Strategic Analysis and out of that analysis are there any sort of big picture takeaways that you are coming out with. And specifically I think the general consensus is that under your leadership Barak it’s reasonable to expect more activity on the M&A side, but are there any other things and I hate to say change is maybe there is no change needed maybe NICE is on the right strategic direction, but is there any takeaway from NICE 2020 that is sort of big picture direction and maybe market driven and sort of aligned to that if you are more active in M&A are there any sort of areas that you are particularly interested in?

So thank you for the question. So we indeed we embarked as I stepped into the role with the strategic planning process for the year which is you named it correctly NICE 2020. And we are in the middle of this process which we are on-schedule and plan to finish towards the end of the year. Obviously, there are many insight some technical and even operational initiatives that we already started internally and there are also as you call it big picture insight. The good news about it is that the market opportunities that we have in the different domains that we operate are very rich, both in our existing markets and also in the adjacent markets. So it’s more decision of which different directions to take, some of those that we can also take in the short-term we executed on already. And some as I mentioned will share towards the end of the plan or when the plan is ready which will be towards the end of the year.

Okay. Thank you. One quick question regarding the – when you talked about analytics you mentioned the cloud, can you remind me where your mix stands for cloud revenue?

So yes, it was – first of all it was another stronger quarter for our cloud business, it grew in a double-digit. With respect to the mix definitely when I referred to the exact mix of the cloud out of the business, I don’t know if (indiscernible).

We are not giving specific number, but can say that overall we are between 5% to 10% in cloud.

Okay. And then one last thing how is the – what sort of impact is NICE seeing from the ongoing military action in Israel?

We will say that on a personal level, I am wishful for peaceful days. On a business level we see no impact, no internal impact or external impact to the business. And in general as a common practice for the company we have business continuity plan in place which was developed actually several years back which guarantee our continuity of the business in any kind of situation whether in Israel in other places.

Thank you very much for taking my questions.

Thank you.

Thank you for your question. Our next question is coming from the line of Tal Grant from UBS. Please go ahead.

Hi, good afternoon. Just three questions for me. Firstly on M&A I see that you spent $220,000 on M&A fees, it looks like, could you comment on that, did the deal flow through or is that just sort of standard going through deals with bankers. Secondly, I see there was $3 million in restructuring expenses and $4 million in reorganization expenses, could you comment on that and whether – what you see for that for the next – for the second half. And finally just looking at your earnings projections for Q4, I calculated to be sort of 17% growth at the bottom end which seems quite high, increase is 6% last year in Q4 just wondering how likely or how confident you are achieving that bottom end?

Okay. So, I will start with restructuring cost, we had quite significant expense this quarter, it has to do mainly with the change in leadership and change – certain changes with management. Mostly all of the changes has been made already and a quarter already, so it’s definitely a one-time phenomenon of Q2. In terms of certain specific costs we did do a very small acquisition of a partner at the beginning of Q2 very, very small. And these expenses are related to that. And your third question was regarding our ability to generate profitability in the – towards the end of the year. This is supported mainly by or solely by our assumption that we would see significant impact in revenues actually in product revenues. And while doing so we believe that with the current expense plateau of the company, we can generate much more profit. But that would happen probably – most of it would happen in the fourth quarter as you have indicated. We are basing this assumption on our operational claims and how we look at the second half of the year that as I mentioned earlier is expected to be very strong.

Thank you.

Thanks.

Thank you for your question. Our next question is coming from the line of Greg McDowell from JMP Securities. Please go ahead.

Great. Thank you very much for everybody. I wanted to first ask about the security business which seems to have recovered a little bit with 8% year-over-year growth, I think it was down 11% in Q1 and you had talked at the Analyst Day a few months ago about splitting the security group into two different areas surveillance and intelligence. I was just wondering if you guys are starting to feel the positive impact of the split of the security group. And is that one of the reason where we saw an acceleration in security growth? Thank you.

Okay. Thank you for the question and the good memory from the Analyst Day. So yes, indeed we did a management split in terms of managing the portfolio to the surveillance and the intelligence. And I referred to them as I reported on the results. And we indeed see better results this quarter in this business. And as I have mentioned also the booking in the pipeline was very positive as we know in this business it takes us longer in this business to convert booking into revenue. But we believe that it will look even better in the second half of the year. And I have a great belief in the new leaders that came to lead this business. And overall the market dynamics in this particular business are also very, very healthy.

Great. Thank you. And one quick follow-up on financial crime and compliance obviously that’s been a real bright spot for you guys with the business growing 40% last quarter, but going back to the Analyst Day one more time I remember Joe talking about the total market growth rate being in the range of 8% to 14%, so I would just love to hear sort of your updated views on whether you feel like market share gains in the financial crime and compliance sector are accelerating and do you feel like they can continue to accelerate? Thanks.

Thank you for the question. Once again thank you for the very good memory of Joe presenting. And indeed it was a very strong quarter for the financial crime and compliance business in all the different segments of these markets, both the anti-money laundering solution, the compliance and fraud. The good dynamics that we see in this business is a result of few things. First, the regulations that continued to be even stronger not just in the U.S. also internationally and outside of the U.S. So, that’s one driver and we continue to see more and more in those and the type of solutions that we have in this market help us very much. The second part is a very large customer base we have in this market being the leading player at the high end of this market. And the second thing is the opportunity that we have in the mid-market and I refer to one of your deals that we won in the quarter, which is a great example of the customer that is actually almost number 100 give or take in the relatively small, if you would like bank in the least of the financial institution in the U.S. However, when you look at the deal and the needs of the customer, we sold over there the entire portfolio in a 7-digit deal. And it give us great confidence in our ability to take our solution, not just expanding it in the high-end of the markets, but also the applicability of the solution to take it down market. And as a result, the total addressable market for our solution is growing significantly.

That’s helpful. Thank you very much.

Thank you.

Thank you for your question. Our next question comes from the line of Saliq Khan from Imperial Capital. Please go ahead.

Hi, good morning. Speaking on behalf of Jeff Kessler, the first question that we had was it looks like the pipeline, the M&A activity looks fairly healthy, but as you look out into the out-quarters and you engage in your customers essentially help you drive the sales to more advanced analytic platforms. What exactly is the bottlenecks that could prevent you from driving your EPS number say above at or above $3 if you look out into 2015?

We will not refer you specifically for 2015 in terms of the EPS. We haven’t discussed the 2015. Obviously, the focus of the company is on analytic-based application in all three businesses that we operate in and we believe that would be the driver for further growth in margin expansion.

Okay, that’s fair. Either one being is it appears a lot of the multi-national firms, particularly those in the United States that have branches globally, the need is similar level of compliance that the counterparts in the United States have. So, how are the conversations evolving with that parent company based out of the United States just the last time you and I spoke?

And Saliq, can you repeat the question? The line is a bit unclear. Yes, can you repeat the question please?

Is this any better? Sorry about that. So, the multi-national firms, particularly those in the United States that have branches globally, they tend to need a similar level of compliance that the counterparts in the United States have. How was that conversation evolving with that particular parent company?

We are moving more and more – we have obviously a lot of multi-national global organization that we sell to. And there are more and more of them that are approaching us in one region usually the America region, but negotiating a global deal, because they are looking at solution that will have to be deployed globally. This is definitely a plan that we have seen in our business and a continuous trend that we see in this industry.

Yes, I will add that definitely the fact that we operate globally as a company and we do our businesses to lot of Fortune 100 companies that are either already global or globalizing their operation having the solution deployed – or our solutions deployed in the U.S. operation helps us very much when they go overseas and either expand or open their operation.

Great. And the last question that we had for you was if we look at about a year ago what happened was the acquisition of Causata, the idea there was twofold, one was that you can certainly increase the customer interaction analytics platform and solutions that you provide for the end user, but at the same time from an investor standpoint, we are envisioning that it would help you drive more just above 65%, 66%. How was that process coming along and what do you think – how do you think we could be thinking about this for the next two or three quarters?

The acquisition of Causata that took place last year, growth to NICE, a lot of technological assets that’s helping us in shaping and further evolving the customer engagements analytics solution that we announced on last year in the effort and theme of providing a solution for organization to overseas and manage the entire customer journey. We brought the assets in the area of web analytics and personalization that we have always integrated into the platform and we are making good process on that front. I don’t believe it has any impact to any side with respect to gross margin. The impact obviously is more with respect to evolving our product portfolio in the analytics arena.

Great, thank you.

Thank you.

Thank you for your question. Our next question comes from the line of Jonathan Ho from William Blair. Please go ahead.

Hello. Just wanted to start out with the contact center business, clearly you guys are looking for improved results in the second half of the year and with the release of Engage, how should we be thinking about sort of the longer term growth rate of the business and just given the sort of the first half performance in your longer term expectations?

Thank you, Jonathan. So, yes, the – we are very optimistic about this business. It represents a big chunk of the company business and we have a very wide set of assets in this business, both the portfolio as well as the customer base. And we are expanding in this market in variety of directions. For the long run, we still believe and optimistic that this business can and should grow in a double-digit. It did have somewhat of a slower start for the year. But the booking of Q2, the pipeline that we have for the second half of the year give us the confidence that we will see in the short-term much better growth in the second half. And we are building upon many opportunities, including the release of the NICE Engage platform to solidify our position and get this business to a double-digit growth in the long run.

Got it. And just in terms of the Engage platform, clearly this is going to be a significant driver, can you maybe talk about the go-to-market strategy sort of penetration rates for the existing analytics solutions and how – maybe this changes either of those two?

Yes. So, we definitely we announced the Engage platform today and we already just from this morning starting to get increased – positive increase from customers. The platform itself is actually the targeted market obviously, the first target is all our customers and we have many of them and there are many benefits in this platform. If the market is first scalable, highly cost efficient platform really unprecedented capabilities of full 100% real-time analytics. If you combine all of those capabilities with the very attractive reduction of total cost of ownership for customers, we believe that many of our existing customers will upgrade to this platform. Our sales teams are already engaged and we will have to educate our customers and will leverage on the existing go-to-market capabilities that we have in order to get as many of our customers to upgrade as they will upgrade to this platform, obviously additional capabilities are open to them to acquire and purchase for NICE.

Great. And any sense of timing in terms of when Engage will become more meaningful to the numbers?

I believe also from historical experience, we will see a certain ramp up. And as we come into next year, it will have much more meaningful impact.

Great, thank you.

Thank you.

Thank you. Ladies and gentlemen, we have no further questions. I would now like to turn the call back over to Barak Eilam for closing remarks.

Thank you very much for joining us today and have a great day. Thank you.