NICE Reports 36% Growth in Revenue for the Second Quarter 2017 and Raises Guidance on Continued Business Momentum

Strong Growth in Both Cloud and Product Revenue

HOBOKEN, N.J.--()--Regulatory News:

NICE (NASDAQ:NICE) today announced results for the second quarter 2017 ended June 30, 2017.

Second Quarter 2017 Financial Highlights

GAAP     Non-GAAP
Revenue growth of 36% year-over-year     Revenue growth of 34% year-over-year
Gross profit increased 35% year-over-year to $198 million     Gross profit increased 34% year-over-year to $222 million
Gross margin of 63.5% compared to 63.9% last year     Gross margin of 70.5% compared to 70.4% last year
Operating income of $26 million, up 10% year-over-year     Operating income of $72 million, up 27% year-over-year
Effective tax rate was 8.9% compared to 4.1% last year     Effective tax rate was 20.8% compared to 19.5% last year
Diluted EPS from continuing operations of $0.33 versus $0.42 last year     Diluted EPS from continuing operations of $0.90 versus $0.79 last year
Cash flow from operations increased 131% year-over-year to $69 million      

“Our financial performance over the past few years has been highlighted by consistent growth and improvement in profitability, and Q2 added to that momentum with another strong result on both the top and bottom lines. We were also pleased to see significant growth in cloud revenue along with an increase in profitability. Furthermore, our solid execution translated to over 200 million dollars in net cash flow from operations for the first half of 2017,” said Barak Eilam, CEO of NICE. “The foundation of our strength has been our ability to fully execute on the strategic plans we put in place during this period.

“These strategic plans have led to the development of our four strategic pillars of cloud, omni-channel, analytics and artificial intelligence, which are the underpinning of our growth opportunities going forward. These four pillars are also the basis for our new CXone platform, which represents a giant leap forward for NICE and our industry. CXone, which is a unified, true open cloud foundation, along with a developing ecosystem of customers and partners to build and develop world class customer experience solutions, represents a substantial competitive differentiation for NICE, and exemplifies our expanding market leadership.”

GAAP Financial Highlights for the Second Quarter Ended June 30:

The following GAAP financial data, excluding cash flow and cash balance, are from continuing operations, which exclude the results of the Intelligence and the Physical Security divisions for both 2017 and 2016.

Revenues: Second quarter 2017 total revenues increased 36.3% to $311.5 million compared to $228.5 million for the second quarter of 2016.

Gross Profit: Second quarter 2017 gross profit increased to $197.9 million compared to $146.1 million for the second quarter of 2016, and gross margin was 63.5% compared to 63.9% for the second quarter of 2016.

Operating Income: Second quarter 2017 operating income increased to $25.8 million compared to $23.5 million for the second quarter of 2016, and operating margin was 8.3% compared to 10.3% for the second quarter of 2016.

Net Income from Continuing Operations: Second quarter 2017 net income and net margin were $20.4 million and 6.6%, respectively, compared to $25.4 million and 11.1%, respectively, for the second quarter of 2016.

Fully Diluted Earnings Per Share from Continuing Operations: Fully diluted earnings per share for the second quarter of 2017 were $0.33, compared to $0.42 in the second quarter of 2016.

Operating Cash Flow and Cash Balance: Second quarter 2017 operating cash flow was $68.7 million. In the second quarter, $7.6 million was used for share repurchases. As of June 30, 2017, total cash and cash equivalents, short term investments and marketable securities were $439.9 million, and total debt was $443.5 million net of issuance costs and the equity component associated with our convertible debt.

Non-GAAP Financial Highlights for the Second Quarter Ended June 30:

The following non-GAAP financial data are from continuing operations, which exclude the results of the Intelligence and the Physical Security divisions for both 2017 and 2016.

Revenues: Second quarter 2017 non-GAAP total revenues were $315.3 million, up 33.9% from $235.4 million for the second quarter of 2016.

Gross Profit: Second quarter 2017 non-GAAP gross profit increased to $222.3 million compared to $165.8 million for the second quarter of 2016, and non-GAAP gross margin increased to 70.5%, compared to 70.4% for the second quarter of 2016.

Operating Income: Second quarter 2017 non-GAAP operating income increased to $72.0 million compared to $56.6 million for the second quarter of 2016, and non-GAAP operating margin was 22.8% compared to 24.0% for the second quarter of 2016.

Net Income from Continuing Operations: Second quarter 2017 non-GAAP net income increased to $56.0 million compared to $47.9 million for the second quarter of 2016, and non-GAAP net income margin was 17.8% compared to 20.4% for the second quarter of 2016.

Fully Diluted Earnings Per Share from Continuing Operations: Second quarter 2017 non-GAAP fully diluted earnings per share increased 13.9% to $0.90, compared to $0.79 for the second quarter of 2016.

Third Quarter and Full Year 2017 Guidance:

Third Quarter 2017: Third quarter 2017 non-GAAP total revenues are expected to be in a range of $315 million to $325 million. Third quarter 2017 non-GAAP fully diluted earnings per share are expected to be in a range of $0.89 to $0.95.

Full Year 2017: Full year 2017 non-GAAP total revenues are expected to be in the range of $1,330 million to $1,354 million. Full year 2017 non-GAAP fully diluted earnings per share is increased to an expected range of $3.90 to $4.10.

Quarterly Results Conference Call

NICE management will host its earnings conference call today, August 3rd, 2017 at 8:30 AM ET, 13:30 GMT, 15:30 Israel, to discuss the results and the company's outlook. To participate in the call, please dial in to the following numbers: United States 1-866-804-8688 or +1-718-354-1175, International +44(0)1296-480-100, United Kingdom 0-800-783-0906, Israel 1-809-344-364. The Passcode is 372 736 22. Additional access numbers can be found at http://www.btconferencing.com/globalaccess/?bid=54_attended. The call will be webcast live on the Company’s website at http://www.nice.com/news-and-events/ir-events. An online replay will also be available approximately two hours following the call. A telephone replay of the call will be available for 7 days after the live broadcast, and may be accessed by dialing: United States 1-877-482-6144, International +44(0)20-7136-9233, United Kingdom 0-800-032-9687. The Passcode for the replay is 811 001 49.

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, re-organization expenses, share-based compensation, and certain business combination accounting entries, amortization of discount on long term debt and tax adjustment re non-GAAP adjustments. The purpose of such adjustments is to give an indication of our performance exclusive of non-cash charges and other items that are considered by management to be outside of our core operating results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Business combination accounting rules requires us to recognize a legal performance obligation related to a revenue arrangement of an acquired entity. The amount assigned to that liability should be based on its fair value at the date of acquisition. The non-GAAP adjustment is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business. We believe these non-GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating cash flow performance. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statements of Income.

About NICE
NICE (Nasdaq: NICE) is the worldwide leading provider of both cloud and on-premises enterprise software solutions that empower organizations to make smarter decisions based on advanced analytics of structured and unstructured data. NICE helps organizations of all sizes deliver better customer service, ensure compliance, combat fraud and safeguard citizens. Over 25,000 organizations in more than 150 countries, including over 85 of the Fortune 100 companies, are using NICE solutions. www.nice.com.

Trademark Note: NICE and the NICE logo are trademarks or registered trademarks of NICE. All other marks are trademarks of their respective owners. For a full list of NICE' marks, please see: http://www.nice.com/nice-trademarks.

Forward-Looking Statements
This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including the statements by Mr. Eilam, are based on the current beliefs, expectations and assumptions of the management of NICE Ltd. (the Company). In some cases, such forward-looking statements can be identified by terms such as believe, expect, may, will, intend, project, plan, estimate or similar words. Forward-looking statements are subject to a number of risks and uncertainties that could cause the actual results or performance of the Company to differ materially from those described herein, including but not limited to the impact of the global economic environment on the Company’s customer base (particularly financial services firms) potentially impacting our business and financial condition; competition; changes in technology and market requirements; decline in demand for the Company's products; inability to timely develop and introduce new technologies, products and applications; difficulties or delays in absorbing and integrating acquired operations, products, technologies and personnel; loss of market share; an inability to maintain certain marketing and distribution arrangements; the effect of newly enacted or modified laws, regulation or standards on the Company and our products, and the risk that we will not be able to successfully execute on the Company’s cloud business strategy and generate profitability. For a more detailed description of the risk factors and uncertainties affecting the company, refer to the Company's reports filed from time to time with the Securities and Exchange Commission, including the Company’s Annual Report on Form 20-F. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company undertakes no obligation to update or revise them, except as required by law.

       
NICE LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share amounts)
 
 
Quarter ended Year to date
June 30, June 30,
2017 2016 2017 2016
Unaudited Unaudited Unaudited Unaudited
 
Revenue:
Product $ 68,736 $ 61,544 $ 137,193 $ 126,660
Services 158,236 154,359 316,652 303,697
Cloud   84,568   12,625   163,317   24,138
Total revenue   311,540   228,528   617,162   454,495
 
Cost of revenue:
Product 13,513 14,237 26,724 27,971
Services 54,558 63,265 113,274 120,290
Cloud   45,533   4,936   89,340   8,646
Total cost of revenue   113,604   82,438   229,338   156,907
 
Gross profit 197,936 146,090 387,824 297,588
 
Operating Expenses:
Research and development, net 42,886 34,519 85,840 67,040
Selling and marketing 87,694 58,705 166,895 114,488
General and administrative 31,334 24,579 60,561 47,771
Amortization of acquired intangible assets   10,188   4,750   20,753   7,257
Total operating expenses   172,102   122,553   334,049   236,556
 
Operating income 25,834 23,537 53,775 61,032
 
Finance and other income (expense), net   (3,388)   2,933   (12,378)   6,697
 
Income from continuing operations before tax 22,446 26,470 41,397 67,729
Taxes on income   2,005   1,090   3,667   7,093
Net income from continuing operations 20,441 25,380 37,730 60,636
 
Discontinued operations
Loss from discontinued operations - - - (116)
Taxes on income   -   -   -   -
Net loss from discontinued operations - - - (116)
 
Net income $ 20,441 $ 25,380 $ 37,730 $ 60,520
 
Basic earnings per share from continuing operations $ 0.34 $ 0.43 $ 0.63 $ 1.02
Basic earnings (loss) per share from discontinued operations $ - $ - $ - $ (0.00)
Basic earnings per share $ 0.34 $ 0.43 $ 0.63 $ 1.02
 
Diluted earnings per share from continuing operations $ 0.33 $ 0.42 $ 0.61 $ 1.00
Diluted earnings (loss) per share from discontinued operations $ - $ - $ - $ (0.00)
Diluted earnings per share $ 0.33 $ 0.42 $ 0.61 $ 1.00
 
Weighted average number of shares
outstanding used to compute:
 
Basic earnings (loss) per share 60,277 59,490 60,203 59,461
Diluted earnings (loss) per share 61,962 60,817 61,857 60,834
     
NICE LTD. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
U.S. dollars in thousands (except per share amounts)
 
 
Quarter ended Year to date
June 30, June 30,
  2017   2016   2017   2016
GAAP revenues $ 311,540 $ 228,528 $ 617,162 $ 454,495
Valuation adjustment on acquired deferred product revenue 46 1,291 265 1,375
Valuation adjustment on acquired deferred service revenue 2,094 2,375 3,091 2,432
Valuation adjustment on acquired deferred cloud revenue   1,648   3,218   2,859   3,218
Non-GAAP revenues $ 315,328 $ 235,412 $ 623,377 $ 461,520
 
 
GAAP cost of revenue $ 113,604 $ 82,438 $ 229,338 $ 156,907
Amortization of acquired intangible assets on cost of product (6,056) (7,590) (12,414) (13,882)
Amortization of acquired intangible assets on cost of services (1,159) (3,472) (4,367) (3,472)
Amortization of acquired intangible assets on cost of cloud (10,975) - (21,950) -
Valuation adjustment on acquired deferred cost of services 331 - 762 -
Cost of product revenue adjustment (1) (161) (69) (336) (190)
Cost of services revenue adjustment (1,2) (1,847) (1,666) (3,722) (3,208)
Cost of cloud revenue adjustment (1,2)   (714)   (61)   (1,483)   (123)
Non-GAAP cost of revenue $ 93,023 $ 69,580 $ 185,828 $ 136,032
 
 
GAAP gross profit $ 197,936 $ 146,090 $ 387,824 $ 297,588
Gross profit adjustments   24,369   19,742   49,725   27,900
Non-GAAP gross profit $ 222,305 $ 165,832 $ 437,549 $ 325,488
 
 
GAAP operating expenses $ 172,102 $ 122,553 $ 334,049 $ 236,556
Research and development (1,2,3) (2,236) (1,097) (4,447) (3,078)
Sales and marketing (1,2,3) (5,863) (3,724) (11,509) (7,070)
General and administrative (1,2,3) (3,501) (3,743) (5,387) (8,093)
Amortization of acquired intangible assets   (10,188)   (4,750)   (20,753)   (7,257)
Non-GAAP operating expenses $ 150,314 $ 109,239 $ 291,953 $ 211,058
 
 
GAAP finance & other income (expense), net $ (3,388) $ 2,933 $ (12,378) $ 6,697
Amortization of discount on long term debt   2,094   -   9,259   -
Non-GAAP finance & other income (expense), net $ (1,294) $ 2,933 $ (3,119) $ 6,697
 
 
GAAP taxes on income $ 2,005 $ 1,090 $ 3,667 $ 7,093
Tax adjustments re non-GAAP adjustments   12,696   10,516   27,687   16,525
Non-GAAP taxes on income $ 14,701 $ 11,606 $ 31,354 $ 23,618
 
 
GAAP net income $ 20,441 $ 25,380 $ 37,730 $ 60,636
Valuation adjustment on acquired deferred revenue 3,788 6,884 6,215 7,025
Valuation adjustment on acquired deferred cost of service of revenue (331) - (762) -
Amortization of acquired intangible assets 28,378 15,812 59,484 24,611
Share-based compensation (1) 14,322 9,896 26,884 16,256
Re-organization expenses (2) - 464 - 1,770
Acquisition related expenses (3) - - - 3,736
Amortization of discount on long term debt 2,094 - 9,259 -
Tax adjustments re non-GAAP adjustments   (12,696)   (10,516)   (27,687)   (16,525)
Non-GAAP net income $ 55,996 $ 47,920 $ 111,123 $ 97,509
 
 
GAAP diluted earnings per share $ 0.33 $ 0.42 $ 0.61 $ 1.00
 
Non-GAAP diluted earnings per share $ 0.90 $ 0.79 $ 1.80 $ 1.60
 
Shares used in computing GAAP diluted earnings per share 61,962 60,817 61,857 60,834
 
Shares used in computing Non-GAAP diluted earnings per share 61,962 60,817 61,857 60,834
       
NICE SYSTEMS LTD. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP RESULTS (continued)
U.S. dollars in thousands
 
 
 
 
(1)

Share-based Compensation

Quarter ended Year to date
June 30, June 30,
  2017   2016   2017   2016
Cost of product revenue $ (161) $ (69) $ (336) $ (190)
Cost of service revenue (1,847) (1,595) (3,722) (2,939)
Cost of cloud revenue (714) (85) (1,483) (147)
Research and development (2,236) (1,302) (4,447) (2,158)
Sales and marketing (5,863) (3,574) (11,509) (6,433)
General and administrative   (3,501)   (3,271)   (5,387)   (4,389)
$ (14,322) $ (9,896) $ (26,884) $ (16,256)
 
 
(2)

Re-organization expenses

Quarter ended Year to date
June 30, June 30,
  2017   2016   2017   2016
 
Cost of service revenue $ - $ (71) $ - $ (269)
Cost of cloud revenue - 24 - 24
Research and development - 205 - (896)
Sales and marketing - (150) - (150)
General and administrative   -   (472)   -   (479)
$ - $ (464) $ - $ (1,770)
 
 
(3)

Acquisition related expenses

 
Quarter ended Year to date
June 30, June 30,
  2017   2016   2017   2016
 
Research and development $ - $ - $ - $ (24)
Sales and marketing - - - (487)
General and administrative   -   -   -   (3,225)
$ - $ - $ - $ (3,736)
 
NICE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
 
June 30, December 31,
  2017   2016
Unaudited Unaudited
 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $ 304,622 $ 157,026
Short-term investments 55,556 30,287
Trade receivables 200,963 260,220
Prepaid expenses and other current assets 72,117 57,966
Current assets of discontinued operations   2,569   3,734
 
Total current assets   635,827   509,233
 
LONG-TERM ASSETS:
Long-term investments 79,741 98,726
Property and equipment, net 108,325 87,678
Deferred tax assets 14,841 14,093
Other intangible assets, net 559,619 618,735
Goodwill 1,288,718 1,284,710
Other long-term assets   20,710   18,701
 
Total long-term assets   2,071,954   2,122,643
 
TOTAL ASSETS $ 2,707,781 $ 2,631,876
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Current maturities of long term loan $ - $ 21,164
Trade payables 18,750 25,634
Current portion of deferred revenues and advances from customers 202,608 149,801
Accrued expenses and other liabilities 243,813 273,134
Current liabilities of discontinued operations   647   3,077
 
Total current liabilities   465,818   472,810
 
LONG-TERM LIABILITIES:
Deferred revenues and advances from customers 35,645 22,710
Deferred tax liabilities 116,331 146,952
Long-term debt 443,516 444,016
Other long-term liabilities   34,106   34,056
 
Total long-term liabilities   629,598   647,734
 
SHAREHOLDERS' EQUITY   1,612,365   1,511,332
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,707,781 $ 2,631,876
   
NICE LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands
    Quarter ended Year to date
June 30, June 30,
2017 2016 2017 2016
Unaudited Unaudited Unaudited Unaudited
 

Operating Activities

 
Net income $ 20,441 $ 25,380 $ 37,730 $ 60,520
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 37,013 20,484 76,156 33,400
Stock based compensation 14,322 9,826 26,884 16,257
Amortization of premium and discount and accrued interest on marketable securities (39) 672 151 1,641
Deferred taxes, net (9,871) (9,111) (21,542) (12,697)
Changes in operating assets and liabilities:
Trade Receivables 5,581 14,801 61,880 54,369
Prepaid expenses and other current assets (1,200) (8,268) (7,987) 4,768
Trade payables (6,857) 4,428 (6,969) 5,289
Accrued expenses and other current liabilities (4,302) (21,724) (35,601) (48,438)
Deferred revenue 12,852 (5,833) 63,516 29,855
Long term liabilities (859) (145) (1,606) (71)
Amortization of discount on long term debt 2,094 - 9,259 -
Other   (514)   (790)   (465)   (673)
Net cash provided by operating activities   68,661   29,720   201,406   144,220
 

Investing Activities

 
Purchase of property and equipment (12,332) (4,084) (22,746) (11,143)
Purchase of Investments (17,227) (19,269) (42,226) (47,221)
Proceeds from Investments 4,000 41,360 36,016 80,478
Capitalization of software development costs (7,156) (1,697) (14,094) (2,758)
Payments for business acquisitions, net of cash acquired   -   (872)   -   (151,325)
Net cash provided by (used in) investing activities   (32,715)   15,438   (43,050)   (131,969)
 

Financing Activities

 
Proceeds from issuance of shares upon exercise of share options 8,642 5,655 12,375 13,169
Purchase of treasury shares (7,618) (9,420) (16,047) (32,093)
Dividends paid - (9,519) (9,637) (19,036)
Repayment of long term debt - - (260,000) -
Proceeds from issuance of exchangeable notes   -   -   260,842   -
Net cash provided by (used in) financing activities   1,024   (13,284)   (12,467)   (37,960)
 
Effect of exchange rates on cash and cash equivalents   901   (580)   1,707   785
 
Net change in cash and cash equivalents 37,871 31,294

 

147,596 (24,924)
Cash and cash equivalents, beginning of period   266,751   269,713   157,026   325,931
 
Cash and cash equivalents, end of period $ 304,622 $ 301,007 $ 304,622 $ 301,007
 
 
*Certain comparative figures have been reclassified to conform to the current year presentation.

Contacts

NICE
Investors
Marty Cohen, +1 551 256 5354, ET
ir@nice.com
Yisca Erez, +972 9 775-3798, CET
ir@nice.com
or
Media Contact
Ilana Hart, +972 9 775-3818
ilana.hart@nice.com

Release Summary

NICE Q2 2017 Earnings.

Contacts

NICE
Investors
Marty Cohen, +1 551 256 5354, ET
ir@nice.com
Yisca Erez, +972 9 775-3798, CET
ir@nice.com
or
Media Contact
Ilana Hart, +972 9 775-3818
ilana.hart@nice.com