NICE Reports 31% Increase in Cloud Revenue and 11% Growth in Total Revenue for the Second Quarter 2019

Double-Digit Growth in Operating Income and Earnings Per Share
Company Raises Full Year Revenue and EPS Guidance

HOBOKEN, N.J.--()--NICE (NASDAQ: NICE) today announced results for the second quarter ended June 30, 2019.

Second Quarter 2019 Financial Highlights

GAAP

Non-GAAP

Revenue of $380 million, growth of 11% year-over-year

Revenue of $381 million, growth of 11% year-over-year

Cloud revenue of $142 million, growth of 31% year-over-year

Cloud revenue of $143 million, growth of 30% year-over-year

Gross margin of 65.6% compared to 65.3% last year

Gross margin of 70.9% compared to 70.5% last year

Operating income of $53 million compared to $46 million last year, an increase of 15%

Operating income of $101 million compared to $89 million last year, an increase of 14%

Operating margin of 14.1% compared to 13.6% last year

Operating margin of 26.6% compared to 25.8% last year

Diluted EPS of $0.65 versus $0.54 last year, 20% growth year-over-year

Diluted EPS of $1.25 versus $1.10 last year, 14% growth year-over-year

“We are very pleased with the strong results we reported for the second quarter of 2019, including double digit growth in all key financial metrics,” said Barak Eilam, CEO of NICE. “What continues to stand out is the rapid growth we are seeing in the cloud, driven by the penetration of our two profoundly market differentiating cloud platforms – CXone for Customer Engagement and X-Sight for Financial Crime and Compliance – into all segments of the market, including large enterprises, where we have witnessed robust demand and strong growth.”

Mr. Eilam continued, “Our strong performance has been supported by our partner ecosystem, which continues to expand globally. We now have 135 engaged partners in our CXone DEVone program. The recently announced X-Sight marketplace is gaining rapid traction with more than 20 partners signing in a very short time frame. Furthermore, earlier this week we announced a significant partnership with Atos, in which its large global presence will help bring CXone to new customers around the globe.”

GAAP Financial Highlights for the Second Quarter Ended June 30:

Revenues: Second quarter 2019 total revenues increased 11.2% to $380.4 million compared to $342.0 million for the second quarter of 2018.

Gross Profit: Second quarter 2019 gross profit and gross margin increased to $249.6 million and 65.6%, respectively, from $223.4 million and 65.3%, respectively, for the second quarter of 2018.

Operating Income: Second quarter 2019 operating income and operating margin increased to $53.5 million and 14.1%, respectively, compared to $46.4 million and 13.6%, respectively, for the second quarter of 2018.

Net Income: Second quarter 2019 net income and net income margin increased to $42.1 million and 11.1%, respectively, compared to $34.2 million and 10.0%, respectively, for the second quarter of 2018.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the second quarter of 2019 increased 20.4% to $0.65, compared to $0.54 in the second quarter of 2018.

Operating Cash Flow and Cash Balance: Second quarter 2019 operating cash flow was $18.0 million. In the second quarter $4.6 million was used for share repurchases. As of June 30, 2019, total cash and cash equivalents, short term investments and marketable securities were $867.4 million, and total debt was $460.3 million.

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

Revenues: Second quarter 2019 non-GAAP total revenues increased to $381.4 million, up 10.9% from $343.7 million for the second quarter of 2018.

Gross Profit: Second quarter 2019 non-GAAP gross profit and non-GAAP gross margin increased to $270.5 million and 70.9%, respectively, from $242.3 million and 70.5%, respectively, for the second quarter of 2018.

Operating Income: Second quarter 2019 non-GAAP operating income and non-GAAP operating margin increased to $101.3 million and 26.6%, respectively, from $88.7 million and 25.8%, respectively, for the second quarter of 2018.

Net Income: Second quarter 2019 non-GAAP net income and non-GAAP net income margin increased to $80.9 million and 21.2%, respectively, from $69.3 million and 20.2%, respectively, for the second quarter of 2018.

Fully Diluted Earnings Per Share: Second quarter 2019 non-GAAP fully diluted earnings per share increased 13.6% to $1.25, compared to $1.10 for the second quarter of 2018.

Third Quarter and Full Year 2019 Guidance:

Third Quarter 2019: Third quarter 2019 non-GAAP total revenues are expected to be in a range of $380 million to $390 million (2018 non-GAAP: $358.6 million). Third quarter 2019 non-GAAP fully diluted earnings per share are expected to be in a range of $1.23 to $1.33 (2018 non-GAAP: $1.20).

Full Year 2019: The Company increased full year 2019 non-GAAP total revenues to be in an expected range of $1,563 million to $1,583 million (2018 non-GAAP: $1,453.4 million). The Company increased full year 2019 non-GAAP fully diluted earnings per share to be in an expected range of $5.13 to $5.33 (2018 non-GAAP: $4.75).

Quarterly Results Conference Call

NICE management will host its earnings conference call today, August 8th, 2019 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 850 810 90. 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 https://www.nice.com/investor-relations/upcoming-event. 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 644 715 21.

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, share-based compensation, certain business combination accounting entries, amortization of discount on long term debt, 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. In some cases, forward-looking statements may be identified by words such as “believe,” “expect,” “seek,” “may,” “will,” “intend,” “should,” “project,” “anticipate,” “plan,” and similar expressions. Forward-looking statements are based on the current beliefs, expectations and assumptions of the Company’s management regarding the future of the Company’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Examples of forward-looking statements include guidance regarding the Company’s revenue and earnings and the growth of our cloud, analytics and artificial intelligence business.
Forward looking statements are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. The Company cautions that these statements are not guarantees of future performance, and investors should not place undue reliance on them. There are or will be important known and unknown factors and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These factors, include, but are not limited to, risks associated with competition, success and growth of the Company’s cloud Software-as-a-Service business, cyber security attacks or other security breaches against the Company, privacy concerns and legislation impacting the Company’s business, the Company’s dependency on second-party cloud computing platform providers, hosting facilities and service partners, changes in general economic and business conditions, rapidly changing technology, changes in currency exchange rates and interest rates, difficulties in making additional acquisitions or effectively integrating acquired operations, products, technologies and personnel, successful execution of the Company’s growth strategy, the effects of tax reforms and of newly enacted or modified laws, regulation or standards on the Company and its products, and other factors and uncertainties discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”). You are encouraged to carefully review the section entitled “Risk Factors” in our latest Annual Report on Form 20-F and our other filings with the SEC for additional information regarding these and other factors and uncertainties that could affect our future performance. The forward-looking statements contained in this presentation speak only as of the date hereof, and the Company undertakes no obligation to update or revise them, whether as a result of new information, future developments or otherwise, 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,

 

2019

 

 

2018

 

 

2019

 

 

2018

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 
Revenue:
Product

$

62,018

$

49,397

$

132,049

$

110,767

Services

 

176,420

 

184,128

 

347,338

 

354,345

Cloud

 

141,976

 

108,517

 

278,054

 

212,372

Total revenue

 

380,414

 

342,042

 

757,441

 

677,484

 
Cost of revenue:
Product

 

5,651

 

7,395

 

11,532

 

15,532

Services

 

54,619

 

57,153

 

109,742

 

115,538

Cloud

 

70,495

 

54,138

 

140,541

 

106,131

Total cost of revenue

 

130,765

 

118,686

 

261,815

 

237,201

 
Gross profit

 

249,649

 

223,356

 

495,626

 

440,283

 
Operating expenses:
Research and development, net

 

46,456

 

43,455

 

93,022

 

89,322

Selling and marketing

 

94,878

 

89,820

 

196,945

 

179,746

General and administrative

 

44,029

 

33,116

 

78,743

 

69,488

Amortization of acquired intangible assets

 

10,795

 

10,586

 

21,496

 

21,171

Total operating expenses

 

196,158

 

176,977

 

390,206

 

359,727

 
Operating income

 

53,491

 

46,379

 

105,420

 

80,556

 
Finance and other expense, net

 

724

 

2,937

 

4,142

 

6,905

 
Income before tax

 

52,767

 

43,442

 

101,278

 

73,651

Taxes on income

 

10,709

 

9,207

 

22,156

 

15,890

Net income

$

42,058

$

34,235

$

79,122

$

57,761

 
Earnings per share:
Basic

$

0.68

$

0.56

$

1.28

$

0.94

Diluted

$

0.65

$

0.54

$

1.23

$

0.92

 
Weighted average shares outstanding:
Basic

 

62,116

 

61,212

 

61,980

 

61,133

Diluted

 

64,650

 

63,031

 

64,205

 

62,904

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,

 

2019

 

 

2018

 

 

2019

 

 

2018

GAAP revenues

$

380,414

$

342,042

$

757,441

$

677,484

Valuation adjustment on acquired deferred product revenue

 

-

 

70

 

15

 

85

Valuation adjustment on acquired deferred services revenue

 

-

 

200

 

2

 

506

Valuation adjustment on acquired deferred cloud revenue

 

953

 

1,416

 

1,825

 

3,302

Non-GAAP revenues

$

381,367

$

343,728

$

759,283

$

681,377

 
 
GAAP cost of revenue

$

130,765

$

118,686

$

261,815

$

237,201

Amortization of acquired intangible assets on cost of product

 

(979)

 

(1,336)

 

(1,849)

 

(3,925)

Amortization of acquired intangible assets on cost of services

 

(1,534)

 

(987)

 

(3,069)

 

(1,810)

Amortization of acquired intangible assets on cost of cloud

 

(15,043)

 

(12,705)

 

(29,848)

 

(25,460)

Valuation adjustment on acquired deferred cost of cloud

 

632

 

324

 

1,318

 

660

Cost of product revenue adjustment (1)

 

(102)

 

-

 

(207)

 

(188)

Cost of services revenue adjustment (1)

 

(2,001)

 

(1,896)

 

(4,145)

 

(3,649)

Cost of cloud revenue adjustment (1)

 

(877)

 

(645)

 

(1,784)

 

(1,414)

Non-GAAP cost of revenue

$

110,861

$

101,441

$

222,231

$

201,415

 
 
GAAP gross profit

$

249,649

$

223,356

$

495,626

$

440,283

Gross profit adjustments

 

20,857

 

18,931

 

41,426

 

39,679

Non-GAAP gross profit

$

270,506

$

242,287

$

537,052

$

479,962

 
 
GAAP operating expenses

$

196,158

$

176,977

$

390,206

$

359,727

Research and development (1,2)

 

(1,587)

 

(1,795)

 

(3,149)

 

(4,139)

Sales and marketing (1,2)

 

(5,798)

 

(6,851)

 

(11,474)

 

(13,154)

General and administrative (1,2)

 

(8,806)

 

(4,168)

 

(15,416)

 

(8,950)

Amortization of acquired intangible assets

 

(10,794)

 

(10,586)

 

(21,496)

 

(21,171)

Valuation adjustment on acquired deferred commission

 

76

 

-

 

169

 

-

Non-GAAP operating expenses

$

169,249

$

153,577

$

338,840

$

312,313

 
 
GAAP finance & other expense (income), net

$

724

$

2,937

$

4,142

$

6,905

Amortization of discount on long-term debt

 

(2,162)

 

(2,094)

 

(4,470)

 

(4,257)

Non-GAAP finance & other expense (income), net

$

(1,438)

$

843

$

(328)

$

2,648

 
 
GAAP taxes on income

$

10,709

$

9,207

$

22,156

$

15,890

Tax adjustments re non-GAAP adjustments

 

11,052

 

9,316

 

19,934

 

19,091

Non-GAAP taxes on income

$

21,761

$

18,523

$

42,090

$

34,981

 
 
GAAP net income

$

42,058

$

34,235

$

79,122

$

57,761

Valuation adjustment on acquired deferred revenue

 

953

 

1,686

 

1,842

 

3,893

Valuation adjustment on acquired deferred cost of cloud revenue

 

(632)

 

(324)

 

(1,318)

 

(660)

Amortization of acquired intangible assets

 

28,350

 

25,614

 

56,262

 

52,366

Valuation adjustment on acquired deferred commission

 

(76)

 

-

 

(169)

 

-

Share-based compensation (1)

 

18,328

 

15,355

 

35,332

 

31,494

Acquisition related expenses (2)

 

843

 

-

 

843

 

-

Amortization of discount on long term debt

 

2,162

 

2,094

 

4,470

 

4,257

Tax adjustments re non-GAAP adjustments

 

(11,052)

 

(9,316)

 

(19,934)

 

(19,091)

Non-GAAP net income

$

80,934

$

69,344

$

156,450

$

130,020

 
 
GAAP diluted earnings per share

$

0.65

$

0.54

$

1.23

$

0.92

 
Non-GAAP diluted earnings per share

$

1.25

$

1.10

$

2.44

$

2.07

 
Shares used in computing GAAP diluted earnings per share

 

64,650

 

63,031

 

64,205

 

62,904

 
Shares used in computing non-GAAP diluted earnings per share

 

64,650

 

63,031

 

64,205

 

62,904

NICE 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,

 

2019

 

 

2018

 

 

2019

 

 

2018

 
Cost of product revenue

$

(102)

$

-

$

(207)

$

(188)

Cost of services revenue

 

(2,001)

 

(1,896)

 

(4,145)

 

(3,649)

Cost of cloud revenue

 

(877)

 

(645)

 

(1,784)

 

(1,414)

Research and development

 

(1,582)

 

(1,795)

 

(3,144)

 

(4,139)

Sales and marketing

 

(5,768)

 

(6,851)

 

(11,444)

 

(13,154)

General and administrative

 

(7,998)

 

(4,168)

 

(14,608)

 

(8,950)

$

(18,328)

$

(15,355)

$

(35,332)

$

(31,494)

 
 

(2)

Acquisition related expenses
 

Quarter ended

 

Year to date

June 30,

 

June 30,

 

2019

 

 

2018

 

 

2019

 

 

2018

 
Research and development

$

(5)

$

-

$

(5)

$

-

Sales and marketing

 

(30)

 

-

 

(30)

 

-

General and administrative

 

(808)

 

-

 

(808)

 

-

$

(843)

$

-

$

(843)

$

-

NICE LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands

Quarter ended

 

Year to date

June 30,

 

June 30,

 

2019

 

 

2018

 

 

2019

 

 

2018

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 
Operating Activities
 
Net income

$

42,058

$

34,235

$

79,122

$

57,761

Depreciation and amortization

 

43,012

 

36,920

 

84,820

 

74,857

Stock based compensation

 

18,312

 

15,355

 

35,316

 

31,494

Amortization of premium and discount and accrued interest on marketable securities

 

(233)

 

(9)

 

(574)

 

(307)

Deferred taxes, net

 

(10,764)

 

(10,245)

 

(18,622)

 

(19,912)

Changes in operating assets and liabilities:
Trade Receivables

 

(10,611)

 

18,842

 

20,112

 

2,688

Prepaid expenses and other assets

 

(51,949)

 

(15,809)

 

(72,531)

 

(28,228)

Trade payables

 

4,543

 

7,833

 

3,718

 

2,332

Accrued expenses and other current liabilities

 

(22,822)

 

(6,044)

 

9,616

 

(10,464)

Operating lease right-of-use assets, net

 

3,379

 

-

 

7,496

 

-

Deferred revenue

 

5,462

 

(19,011)

 

58,869

 

87,106

Long term liabilities

 

(403)

 

(404)

 

(280)

 

(787)

Operating lease liabilities

 

(3,654)

 

-

 

(9,159)

 

-

Amortization of discount on long term debt

 

2,162

 

2,094

 

4,469

 

4,257

Other

 

(516)

 

56

 

(1,984)

 

(127)

Net cash provided by operating activities

 

17,976

 

63,813

 

200,388

 

200,670

 
Investing Activities
 
Purchase of property and equipment

 

(6,566)

 

(8,248)

 

(14,982)

 

(13,564)

Purchase of Investments

 

(114,834)

 

(52,278)

 

(306,142)

 

(187,923)

Proceeds from Investments

 

93,558

 

40,692

 

170,508

 

59,709

Capitalization of software development costs

 

(8,897)

 

(7,672)

 

(17,391)

 

(15,476)

Payments for business and asset acquisitions, net of cash acquired

 

(25,788)

 

-

 

(25,788)

 

-

Net cash used in investing activities

 

(62,527)

 

(27,506)

 

(193,795)

 

(157,254)

 
Financing Activities
 
Proceeds from issuance of shares upon exercise of share options

 

1,401

 

4,199

 

3,018

 

7,443

Purchase of treasury shares

 

(4,615)

 

(6,361)

 

(14,715)

 

(10,613)

Capital Lease payments

 

(187)

 

-

 

(440)

 

-

Net cash used in financing activities

 

(3,401)

 

(2,162)

 

(12,137)

 

(3,170)

 
Effect of exchange rates on cash and cash equivalents

 

(433)

 

(3,790)

 

(244)

 

(3,732)

 
Net change in cash and cash equivalents

 

(48,385)

 

30,355

 

(5,788)

 

36,514

Cash and cash equivalents, beginning of period

$

284,696

$

334,461

$

242,099

$

328,302

 
Cash and cash equivalents, end of period

$

236,311

$

364,816

$

236,311

$

364,816

NICE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
 

June 30,

 

December 31,

 

2019

 

 

2018

Unaudited

 

Audited

 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents

$

236,311

$

242,099

Short-term investments

 

272,968

 

243,729

Trade receivables

 

268,993

 

287,963

Prepaid expenses and other current assets

 

121,619

 

87,450

 
Total current assets

 

899,891

 

861,241

 
LONG-TERM ASSETS:
Long-term investments

 

358,151

 

244,998

Property and equipment, net

 

140,957

 

140,338

Deferred tax assets

 

12,532

 

12,309

Other intangible assets, net

 

467,495

 

508,232

Operating lease right-of-use assets

 

117,030

 

-

Goodwill

 

1,380,751

 

1,366,206

Other long-term assets

 

114,317

 

74,042

 
Total long-term assets

 

2,591,233

 

2,346,125

 
TOTAL ASSETS

$

3,491,124

$

3,207,366

 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Trade payables

$

30,862

$

29,617

Deferred revenues and advances from customers

 

280,601

 

221,387

Current maturities of operating leases

 

17,348

 

-

Accrued expenses and other liabilities

 

374,171

 

373,908

 
Total current liabilities

 

702,982

 

624,912

 
LONG-TERM LIABILITIES:
Deferred revenues and advances from customers

 

35,762

 

35,112

Operating leases

 

116,549

 

-

Deferred tax liabilities

 

29,057

 

44,140

Long-term debt

 

460,291

 

455,985

Other long-term liabilities

 

15,974

 

30,604

 
Total long-term liabilities

 

657,633

 

565,841

 
SHAREHOLDERS' EQUITY

 

2,130,509

 

2,016,613

 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

3,491,124

$

3,207,366

 

Contacts

Investors
Marty Cohen, +1 551 256 5354, ET, ir@nice.com
Yisca Erez, +972 9 775-3798, CET, ir@nice.com

Media
Chris Irwin-Dudek, +1 (551) 256-5140, Chris.Irwin-Dudek@nice.com

Release Summary

NICE Q2 2019 earnings release.

Contacts

Investors
Marty Cohen, +1 551 256 5354, ET, ir@nice.com
Yisca Erez, +972 9 775-3798, CET, ir@nice.com

Media
Chris Irwin-Dudek, +1 (551) 256-5140, Chris.Irwin-Dudek@nice.com