Welcome to the NICE-Systems Conference Call discussing Second Quarter 2013 results, and thank you for holding. All participants are present in a listen-only mode. Following management's formal presentation instructions, will be given for question-and-answer session. As a reminder, this conference is being recorded, August 7, 2013. I would now like to turn this call over to Mr. Marty Cohen, VP, Investor Relations at NICE. Please go ahead.

Thank you, operator. With me on the call today are Zeevi Bregman, President and Chief Executive Officer; Dafna Gruber, Chief Financial Officer. 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 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 Risks Factors in Item 3 of company's 2012 Annual Report on Form 20-F as filed with the Securities and Exchange Commission on March 25th, 2013. During today's call, we will present a more detailed discussion of second quarter 2013 results and the company's guidance for the third quarter and full year. 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 differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. I'll now turn the call over to Zeevi.

Thank you, Marty, and welcome everyone to our second quarter 2013 earnings call. We delivered solid results for the second quarter. We continue to execute on our strategy, and we are well positioned for a strong second half of 2013. Non-GAAP total revenue for the second quarter was $225 million, up 4% compared to the second quarter of 2012. Non-GAAP EPS for Q2 was $0.61, representing an increase of 7% compared to the second quarter of last year. The highlight of the quarter was the strong growth in new booking of our advanced applications, including some very important deal that we will discuss later in more detail. In the second quarter, new orders of advanced applications grew more than 20% compared with the last year's second quarter, and represented nearly 50% of total new bookings. The strong growth of our advanced applications, is the result of our continued successful efforts to extend our offering to our existing customer base, with our growing portfolio of advanced applications. One of our key assets is our more than 25,000 customers, including some of the largest and leading organizations in each vertical that we serve. We continue to partner with them, as they take on additional NICE solutions to help them ensure compliance, enhance operational efficiency, increase revenues, improve the customer experience, and safeguard [people] and assets. The increase in new bookings of advanced applications was also reflected in the strong growth of our cloud solutions. We will continue to expand and enhance our cloud offering, which reflects our commitment to our customers by offering them additional value and flexibility. The consistent and rapid growth that we have seen in our advanced applications, is the result in the growing demand from our customers to unlock the value of the Big Data being generated by…

Thank you, Zeevi. I am pleased to provide you with an analysis of our financial results and business performance for the second quarter of 2013, and our outlook for the third quarter and full year. Revenue for the second quarter was $225 million, up 4% from $217 million in the second quarter of last year. Customer interactions revenues were $146 million, up 4% compared to $140 million in Q2 last year. Financial crime and compliance revenues were $34 million, up 7% from $32 million in the second quarter of last year. Security revenues were $45 million, up1% from the second quarter of last year. For the second quarter, customer interactions accounted of 65% of total revenue; financial crime and compliance 15%; and security 20%. Looking at the regional breakdown, revenues in the Americas increased 2% to $135 million, compared to the second quarter of last year. Revenues in the EMEA increased 2% to $56 million, and revenues in Asia-Pacific region increased 14% to $34 million compared to the second quarter of last year. For the second quarter, the Americas accounted for 60% of total revenues; EMEA 25%, and APAC 15%. In the second quarter, product revenues accounted for 37% of total revenues, and maintenance represented 39% of total revenues. Professional services, including SaaS and hosting, accounted for the remaining 24%. Gross margin reached 66.9%, compared to 66.1% in Q2 last year. Operating margin reached 19.4%, up 60 basis points from 18.8% in Q2 last year. Earnings per share were $0.61 in Q2, representing an increase of 7%, compared to $0.57 in Q2 2012. Second quarter cash flow from operations was $35 million compared to $12 million in the second quarter of 2012. In the first half of the year, we generated $93 million cash from operations, which is a 14%…

Ladies and gentlemen, your question-and-answer session will now begin. (Operator Instructions). We do have our first question and it comes from the line of Shaul Eyal from Oppenheimer. Please go ahead Shaul.

Thank you, operator. Good afternoon everybody. Zeevi, with all the good news about contract wins and kind of booking levels, I believe that's kind of the company last quarter, I think we talked about booking levels -- of exiting fiscal 2013 with booking levels of around $1 billion or even kind of above that. Are you still kind of holding to that view?

Yeah, we focus to end the year with the more than $1 billion in bookings.

Got it. Thank you for that. Dafna, the product this quarter kind of a little soft, I am kind of looking at my model. What's kind of -- what's behind it? Is that kind of just a product mix, is it just going to be one-off or is it kind of more of a trend that we should be expecting for the second half of this year?

Yeah, it's basically a combination of the two. There is an impact of the business mix on that, specifically on this quarter. But we also need to remember, that because of the complexity of the advanced applications we are selling, via more professional services. And so we see a gradual change in the ratio for the professional services. That's one thing. And also, we have mentioned in the past, the [net] line between booking and revenues is lengthening, due to the growth we are seeing in advanced application, and these deals, because of the complexity, takes longer to recognize, and this is the main reason we are seeing more seasonally weighted second half, and especially Q4; and the impact is mainly and greater on the product revenue element.

Got it. So as we think about the second half, was expected of product lines. Are we still expecting kind of growth for products, let's say second half over first half?

We expect growth in products, second half over first half. But there is at least one additional component which is very positive, and Dafna even mentioned, and this is the uptick in our cloud business. The cloud business is categorized as services and not with products, and there is a certain categorization here.

Got it. Maybe one final question if I can squeeze in Zeevi, with the technology acquisition that you did this morning, can you kind of maybe explain kind of the audience kind of how that kind of goes and sits with your respect to kind of the remains of your -- kind of Big Data strategy so to speak? Thank you.

This is enhancing and expediting some of the implementation deliveries within our Big Data strategy. As we understand from our customers, there are more and more cases, where people are [counting] the contact center, after visiting or browsing the website of an organization. And actually, we are hearing from our customer even that they are doing it while they are browsing the website while calling the contact center. And what the technology of Causata is enabling us, is to really integrate the two worlds and provide a seamless customer experience from the web to the human channel. Whether it's the contact center or a store. And we can look at the customer journey, understand what are the recent activities that the customer has done or is still doing on the web, and [they know] the service, their article to the right agent and improve the overall customer experience and the business results of our customer.

Thank you. That's helpful.

Thank you for your question. The next question comes from the line of Daniel Ives from FBR Capital Markets. Please go ahead.

Hey guys, this is actually Jim for Dan. I guess, could you just talk a little bit about the Actimize business and general trend just in there, in the regulatory environment?

Sure. Actimize is enjoying the wave of the regulations that is coming on. When we are looking at the business, you can see that went back to growth in the this quarter in the first half. We are also seeing the booking is solid, and the growth is coming mainly from around regulations and around understanding that there is a need of (inaudible) activities and make them really an enterprise-wide offering, and enterprise-wide technology. So if we are looking at regulation, Dodd-Frank and operations of Dodd-Frank has a positive impact on our activity, specifically the other regulations like FATCA and these being implemented, AML -- we usually characterize it, but it's basically the regulated event. We are seeing a strong demand there as well, and when we look at the international market, and the regulations in the growth like EFMA in Europe are also impacting areas like [intra-day], where we have a very unique technology. So we are still looking for very strong demand, on these areas. The other area that we are seeing demand is to the enterprise risk case manager. The Enterprise Risk Case Manager is a tool that is deployed enterprise-wide, and enabled to do investigations across the organization, to collect data across organizations. We are seeing more and more enterprise-wide deployment of this too. We have also seen in other areas of Actimize, from a growth in activity, and this is around (inaudible). Managing for the enterprise-wide solution.

Okay. Thanks for that. And just getting back to your acquisition. With respect to M&A, are you guys still interested in looking at other things at this point, and what would be the focus?

We believe that we can complement our innovation and our growth with the growth that is coming inorganically from acquisitions, also innovation that can come from acquisitions. As a result, we continue to look at the companies and businesses that will complement our business. We continue -- there are no major changes in this strategy. We continue to be looking carefully about valuations, looking carefully about strategic fit, a chance of integration, and the overall long term return to the shareholders of this acquisition.

Thanks very much. Good luck going forward.

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

Good morning guys. Just wanted to get a sense of the macro environment, and whether you could talk a little bit about deal closure rates, as far as the pipeline of opportunities?

If you look at the global macro environment, to the extent that we can measure it. Again, we are a small company in a large world. But the way that we can measure it, we are seeing signs of improvement in the U.S., and maybe we are seeing -- Europe is stable, but we have a good business in Europe, and we believe that we will go this year, and APAC is okay. When it comes to specifically, early in the quarter, we saw some softness in the public sector in the U.S., and I think that it has [recurred] in the second half of the quarter.

Got it. Just in terms of the deal closure rates, have you seen sort of customers start to normalize in terms of that, or is still a relatively challenging environment there?

The environment is still challenging. However, there is no deterioration. So it's really already within our model and the focus of our salespeople.

Got it. Just in terms of the analytic side. Are you seeing sort of an uptick there now, in terms of an increase of the percentage of your revenue that's coming directly from these events at [analytics visions], or is there any sort of metric that you can give us, in terms of what that might be looking today in terms of contribution?

We are not measuring contribution, what we are highlighting is percentage of new business that is coming from advanced, from the [critical space] solution. We said that it grew 20% compared to the second quarter of 2012, and it's now representing around 50% of our overall new business.

Great. Thank you.

Thank you for your question, Jonathan. The next question comes from the line of Greg McDowell from JMP Securities. Please go ahead sir.

Great. Thank you very much. I was hoping to drill a little bit into the Causata acquisition that you made, and I was wondering first, do you share any customers with Causata, and could you may be talk a bit about their customer base, and what sort of goals they focus on? Thanks.

They have several customers. I believe that we do not -- we are not sharing customers at the moment. We do share some customers that are in their pipeline. So some of the pipeline customers are existing customer of ours, and this is the -- if you can repeat your second part of your question?

It was the vertical component of Causata. Were they focused or strong in any particular verticals?

I don't think that there is particular sector that's strong. It's more that the strength is there in the web. It's more of -- its (inaudible) offering within the web domain. So it's in the website, and this is something that for us -- we are integrating and this is how we are generating the value.

Great, thank you. One more quick question, and I know you don't like to give the book to bill metric on a quarterly basis anymore, but are you still pretty confident that for the full year, your book-to-bill ratio will be greater than one?

Absolutely.

Great. That's all I have. Thanks.

Thank you for your question Greg. The next question comes from the line of Matt Hedberg from RBC Capital Markets. Please go ahead.

Thanks for taking my questions guys. Just looking at sort of the full year and Q3 guidance, I think if the midpoint of my math is right, it looks like we would assume up 17% sequential growth in 4Q. And it's a little bit above, call it your three year average, maybe closer to 7%, and you have mentioned, whether it's strong bookings and advanced applications cloud solutions, maybe the U.S. government or the U.S. vertical improving. But I guess I am wondering, are there any large deals in your pipeline, maybe 4Q specifically, because you increased confidence in that kind of growth?

Correct. We have a very healthy pipeline for Q4, including the federal large deals.

That's helpful. And I think Zeevi, you mentioned, customers are buying multiple apps today, versus maybe individual products. Is there any way you can help us understand, maybe how many applications the average customer is buying today, versus maybe a year or two ago?

It's really -- if you look at the large deals that we closed this quarters, and we are analyzing them one by one, we can say that each of this deal was, based on a solution of a platform, that is the combination of a federal solutions that are tied together. So -- and the solutions are more holistic in terms of the used case (inaudible). It's difficult to measure it on a percentage, as we see that a lot of small business, that our single product, single solution and within each quarter.

Great. Thank you.

Thank you for your question Matt. We have another question, and it comes from the line of David Kaplan from Barclays. Please go ahead, sir.

Hi everyone. Zeevi, you just touched on, what I guess we would call a bundling of product. Can you talk a little bit about cross verticals there, particular verticals where you see more applications purchased per customer, or are there -- I guess, talk about verticals a little bit. Let me start with that part.

We are -- especially, it's interesting because it's -- the vertical pretty much in line to the different business cases that we are delivering, and we are seeing strength in the telco market, and this is mostly around customer experience, and so the telco is -- solutions in telco for customer experience are -- we are seeing strength. When it goes to the financial sector, we are seeing increased interaction in business, around compliance solution, and also some customer experience initiative. So these are two areas, and key payment is again around customer experience, and sometimes operational efficiency, and I guess, these are the main verticals.

So just to clarify, are you seeing more applications purchased per customer, or is it just the vertical seems to be widening?

No. When we are providing a customer experience -- the way that the -- what we are seeing is we are addressing more and more transformations in the customer, that are led by executives, sometimes CEO, sometimes it’s the COO who leads the initiative. For example, around customer experience. Then what we look for (inaudible) into our business consulting, how can we help them to improve the customer experience in transformational way. So it goes to how we should look at the employee engagement, and making sure that the employee are engaged and working in [measured], and working in this area. We are looking at the employees who are concentrated in this area. We are looking that the entire organization is measured around the KPIs that are required from this transformation, and we are providing the analytics and the decisioning that is required to this transformation to take place. All this together is a combination of people and products that are integrated, and these are creating the transformation within the customer environment. So we are moving more to such transformation, in terms of the value proposition is basically increasing the volume of the size of the (inaudible) environment, and also increasing the number of products that we are tying together, in order to provide a solution to the customer.

Okay. And this is probably going to be for Dafna a little bit, but how does that business change -- first of all, how does it impact renewal rates of contracts, one year, two years if the original contract runs out, so how are those renewal rates, one? And two, how is that going to impact, or will that impact the balance sheet or deferred revenues going forward?

First, in terms of -- some of these solutions are cloud based and some of them on-premise. When we are looking overall in the renewal rate of our -- both on the recurring maintenance and on the (inaudible), it's very high, it's in its 90s. So we have a high renewal rate and the fact that we have -- we are tied more and more into the operations of our customers, means that our solutions are more sticky and we expect -- we are generating also more value, and we don't expect to see any change in the renewal rates.

Okay. And on the balance sheet impact, Dafna, anything?

The balance sheet, the SaaS business has a certain impact on the balance sheet, it depends on the structure of the deal. I don't expect any major impact on the balance sheet.

Okay, great. Thanks.

Thank you for your question David. There are no further questions on the audio platform.

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