NICE Reports Strong Third Quarter 2019 Financial Results Driven by Robust Growth in Cloud Revenue

NICE (NASDAQ: NICE) today announced results for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights

GAAP	Non-GAAP
Cloud revenue of $151 million, growth of 29% year-over-year	Cloud revenue of $152 million, growth of 27% year-over-year
Total revenue of $386 million, growth of 8% year-over-year	Total revenue of $387 million, growth of 8% year-over-year
Gross margin of 65.7% compared to 65.3% last year	Gross margin of 70.9% compared to 71.0% last year
Operating income of $56 million compared to $47 million last year, an increase of 19%	Operating income of $106 million compared to $97 million last year, an increase of 9%
Operating margin of 14.4% compared to 13.1% last year	Operating margin of 27.4% compared to 27.0% last year
Diluted EPS of $0.69 versus $0.62 last year, 11% growth year-over-year	Diluted EPS of $1.30 versus $1.20 last year, 8% growth year-over-year

“We are pleased to report another quarter of strong results driven by further robust growth in the cloud,” said Barak Eilam, CEO of NICE. “Our cloud revenue now represents nearly 40% of our total revenue, demonstrating the great success we are experiencing in our cloud business.”

Mr. Eilam continued, “Our growth is being fueled by strong demand for CXone. The number of quarterly deals continue to increase as we win in more market segments and geographies. At the same time, deal sizes are growing rapidly, demonstrating the fast adoption of CXone by very large enterprises, and the attachment rates of our seamlessly integrated workforce optimization and analytics are increasing significantly. CXone gives us front-runner status and a distinct competitive differentiation to capture the many opportunities provided by a market that is quickly transforming to the cloud.”

GAAP Financial Highlights for the Third Quarter Ended September 30:

Revenues: Third quarter 2019 total revenues increased 8.4% to $386.3 million compared to $356.2 million for the third quarter of 2018.

Gross Profit: Third quarter 2019 gross profit and gross margin increased to $253.6 million and 65.7%, respectively, from $232.7 million and 65.3%, respectively, for the third quarter of 2018.

Operating Income: Third quarter 2019 operating income and operating margin increased to $55.7 million and 14.4%, respectively, compared to $46.7 million and 13.1%, respectively, for the third quarter of 2018.

Net Income: Third quarter 2019 net income and net income margin increased to $45.0 million and 11.7%, respectively, compared to $39.3 million and 11.0%, respectively, for the third quarter of 2018.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the third quarter of 2019 increased 11.3% to $0.69, compared to $0.62 in the third quarter of 2018.

Operating Cash Flow and Cash Balance: Third quarter 2019 operating cash flow was $82.3 million. In the third quarter $7.9 million was used for share repurchases. As of September 30, 2019, total cash and cash equivalents, short and long term investments were $927.5 million, and total debt was $462.6 million.

Non-GAAP Financial Highlights for the Third Quarter Ended September 30:

Revenues: Third quarter 2019 non-GAAP total revenues increased to $387.1 million, up 7.9% from $358.6 million for the third quarter of 2018.

Gross Profit: Third quarter 2019 non-GAAP gross profit increased to $274.4 million from $254.7 million. Third quarter 2019 non-GAAP gross margin was 70.9% compared to 71.0% for the third quarter of 2018.

Operating Income: Third quarter 2019 non-GAAP operating income and non-GAAP operating margin increased to $105.9 million and 27.4%, respectively, from $96.7 million and 27.0%, respectively, for the third quarter of 2018.

Net Income: Third quarter 2019 non-GAAP net income and non-GAAP net income margin increased to $84.3 million and 21.8%, respectively, from $76.3 million and 21.3%, respectively, for the third quarter of 2018.

Fully Diluted Earnings Per Share: Third quarter 2019 non-GAAP fully diluted earnings per share increased 8.3% to $1.30, compared to $1.20 for the third quarter of 2018.

Full Year 2019 Guidance:

Full-year 2019 non-GAAP total revenue is expected to be in a 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 $5.15 to $5.35 (2018 non-GAAP: $4.75 per share).

Quarterly Results Conference Call

NICE management will host its earnings conference call today November 14^th, 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 [phone], International [phone], United Kingdom 0-800-783-0906, Israel 1-809-344-364. The Passcode is 662 849 54. 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 [phone], United Kingdom 0-800-032-9687. The Passcode for the replay is 334 744 17.

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 third-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
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
			September 30,			December 31,
				2019			2018
			Unaudited			Audited
	ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	220,839		$	242,099
	Short-term investments			225,975			243,729
	Trade receivables			259,985			287,963
	Prepaid expenses and other current assets			134,966			87,450
	Total current assets			841,765			861,241
LONG-TERM ASSETS:
	Long-term investments			480,669			244,998
	Property and equipment, net			141,336			140,338
	Deferred tax assets			14,603			12,309
	Other intangible assets, net			438,266			508,232
	Operating lease right-of-use assets			111,910			-
	Goodwill			1,371,925			1,366,206
	Other long-term assets			117,294			74,042
	Total long-term assets			2,676,003			2,346,125
TOTAL ASSETS			$	3,517,768		$	3,207,366
	LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
	Trade payables		$	22,569		$	29,617
	Deferred revenues and advances from customers			242,184			221,387
	Current maturities of operating leases			19,022			-
	Accrued expenses and other liabilities			414,466			373,908
	Total current liabilities			698,241			624,912
LONG-TERM LIABILITIES:
	Deferred revenues and advances from customers			26,140			35,112
	Operating leases			111,239			-
	Deferred tax liabilities			16,712			44,140
	Long-term debt			462,588			455,985
	Other long-term liabilities			16,538			30,604
	Total long-term liabilities			633,217			565,841
SHAREHOLDERS' EQUITY				2,186,310			2,016,613
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	3,517,768		$	3,207,366

NICE LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share amounts)
		Quarter ended						Year to date
		September 30,						September 30,
			2019			2018			2019			2018
		Unaudited			Unaudited			Unaudited			Unaudited
Revenue:
	Product	$	56,950		$	60,097		$	188,999		$	170,864
	Services		178,609			179,113			525,947			533,458
	Cloud		150,704			116,996			428,758			329,368
Total revenue			386,263			356,206			1,143,704			1,033,690
Cost of revenue:
	Product		5,318			7,854			16,850			23,386
	Services		54,476			55,046			164,218			170,584
	Cloud		72,877			60,559			213,418			166,690
Total cost of revenue			132,671			123,459			394,486			360,660
Gross profit			253,592			232,747			749,218			673,030
Operating expenses:
	Research and development, net		48,531			47,701			141,553			137,023
	Selling and marketing		96,138			90,492			293,083			270,238
	General and administrative		42,438			37,560			121,181			107,048
	Amortization of acquired intangible assets		10,780			10,341			32,276			31,512
Total operating expenses			197,887			186,094			588,093			545,821
Operating income			55,705			46,653			161,125			127,209
Finance and other expense, net			(252)			2,195			3,890			9,100
Income before tax			55,957			44,458			157,235			118,109
Taxes on income			10,918			5,175			33,074			21,065
Net income		$	45,039		$	39,283		$	124,161		$	97,044
Earnings per share:
	Basic	$	0.72		$	0.64		$	2.00		$	1.58
	Diluted	$	0.69		$	0.62		$	1.93		$	1.54
Weighted average shares outstanding:
	Basic		62,160			61,448			62,041			61,239
	Diluted		65,066			63,660			64,493			63,157

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
		September 30,						September 30,
			2019			2018			2019			2018
GAAP revenues		$	386,263		$	356,206		$	1,143,704		$	1,033,690
Valuation adjustment on acquired deferred product revenue			-			12			15			97
Valuation adjustment on acquired deferred services revenue			3			82			5			588
Valuation adjustment on acquired deferred cloud revenue			867			2,329			2,692			5,631
Non-GAAP revenues		$	387,133		$	358,629		$	1,146,416		$	1,040,006
GAAP cost of revenue		$	132,671		$	123,459		$	394,486		$	360,660
Amortization of acquired intangible assets on cost of product			(1,123)			(1,094)			(2,972)			(5,019)
Amortization of acquired intangible assets on cost of services			(1,535)			(1,523)			(4,604)			(3,333)
Amortization of acquired intangible assets on cost of cloud			(15,270)			(12,937)			(45,118)			(38,397)
Valuation adjustment on acquired deferred cost of cloud			575			594			1,893			1,254
Cost of product revenue adjustment (1)			(97)			(59)			(304)			(247)
Cost of services revenue adjustment (1)			(2,106)			(2,113)			(6,251)			(5,762)
Cost of cloud revenue adjustment (1)			(358)			(2,352)			(2,142)			(3,766)
Non-GAAP cost of revenue		$	112,757		$	103,975		$	334,988		$	305,390
GAAP gross profit		$	253,592		$	232,747		$	749,218		$	673,030
Gross profit adjustments			20,784			21,907			62,210			61,586
Non-GAAP gross profit		$	274,376		$	254,654		$	811,428		$	734,616
GAAP operating expenses		$	197,887		$	186,094		$	588,093		$	545,821
Research and development (1,2)			(2,033)			(2,638)			(5,182)			(6,777)
Sales and marketing (1,2)			(7,737)			(9,004)			(19,211)			(22,158)
General and administrative (1,2)			(8,962)			(6,206)			(24,378)			(15,156)
Amortization of acquired intangible assets			(10,780)			(10,341)			(32,276)			(31,512)
Valuation adjustment on acquired deferred commission			76			-			245			-
Non-GAAP operating expenses		$	168,451		$	157,905		$	507,291		$	470,218
GAAP finance & other expense (income), net		$	(252)		$	2,195		$	3,890		$	9,100
Amortization of discount on long-term debt			(2,377)			(2,234)			(6,847)			(6,491)
Non-GAAP finance & other expense (income), net		$	(2,629)		$	(39)		$	(2,957)		$	2,609
GAAP taxes on income		$	10,918		$	5,175		$	33,074		$	21,065
Tax adjustments re non-GAAP adjustments			13,324			15,322			33,258			34,413
Non-GAAP taxes on income		$	24,242		$	20,497		$	66,332		$	55,478
GAAP net income		$	45,039		$	39,283		$	124,161		$	97,044
Valuation adjustment on acquired deferred revenue			870			2,423			2,712			6,316
Valuation adjustment on acquired deferred cost of cloud revenue			(575)			(594)			(1,893)			(1,254)
Amortization of acquired intangible assets			28,708			25,895			84,970			78,261
Valuation adjustment on acquired deferred commission			(76)			-			(245)			-
Share-based compensation (1)			21,293			17,258			56,625			48,752
Acquisition related expenses (2)			-			5,114			843			5,114
Amortization of discount on long term debt			2,377			2,234			6,847			6,491
Tax adjustments re non-GAAP adjustments			(13,324)			(15,322)			(33,258)			(34,413)
Non-GAAP net income		$	84,312		$	76,291		$	240,762		$	206,311
GAAP diluted earnings per share		$	0.69		$	0.62		$	1.93		$	1.54
Non-GAAP diluted earnings per share		$	1.30		$	1.20		$	3.73		$	3.27
Shares used in computing GAAP diluted earnings per share			65,066			63,660			64,493			63,157
Shares used in computing non-GAAP diluted earnings per share			65,066			63,660			64,493			63,157

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
		September 30,						September 30,
			2019			2018			2019			2018
	Cost of product revenue	$	97		$	59		$	304		$	247
	Cost of services revenue		2,106			2,113			6,251			5,762
	Cost of cloud revenue		358			718			2,142			2,132
	Research and development		2,033			1,567			5,177			5,706
	Sales and marketing		7,737			8,930			19,181			22,084
	General and administrative		8,962			3,871			23,570			12,821
		$	21,293		$	17,258		$	56,625		$	48,752
(2)	Acquisition related expenses
		Quarter ended						Year to date
		September 30,						September 30,
			2019			2018			2019			2018
	Cost of cloud revenue	$	-		$	1,634		$	-		$	1,634
	Research and development		-			1,071			5			1,071
	Sales and marketing		-			74			30			74
	General and administrative		-			2,335			808			2,335
		$	-		$	5,114		$	843		$	5,114

NICE LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands
			Quarter ended						Year to date
			September 30,						September 30,
				2019			2018			2019			2018
			Unaudited			Unaudited			Unaudited			Unaudited
Operating Activities
Net income			$	45,039		$	39,283		$	124,161		$	97,044
	Depreciation and amortization			43,924			39,426			128,744			114,283
	Stock based compensation			21,273			17,258			56,589			48,752
	Amortization of premium and discount and accrued interest on marketable securities			387			137			(187)			(170)
	Deferred taxes, net			(12,485)			(13,142)			(31,107)			(33,054)
	Changes in operating assets and liabilities:
		Trade Receivables		6,788			(5,771)			26,900			(3,083)
		Prepaid expenses and other assets		(15,626)			(4,233)			(88,157)			(32,461)
		Trade payables		(8,791)			(8,940)			(5,073)			(6,608)
		Accrued expenses and other current liabilities		44,173			34,643			53,789			24,179
		Operating lease right-of-use assets, net		4,346			-			11,842			-
		Deferred revenue		(45,558)			(15,279)			13,311			71,827
		Long term liabilities		(20)			573			(300)			(214)
		Operating lease liabilities		(2,836)			-			(11,995)			-
	Amortization of discount on long term debt			2,379			2,234			6,848			6,491
	Other			(672)			847			(2,656)			720
		Net cash provided by operating activities		82,321			87,036			282,709			287,706
Investing Activities
	Purchase of property and equipment			(6,545)			(7,957)			(21,527)			(21,521)
	Purchase of Investments			(187,752)			(96,544)			(493,894)			(284,467)
	Proceeds from Investments			113,121			40,093			283,629			99,802
	Capitalization of software development costs			(8,549)			(7,450)			(25,940)			(22,926)
	Payments for business and asset acquisitions, net of cash acquired			(184)			(105,046)			(25,972)			(105,046)
		Net cash used in investing activities		(89,909)			(176,904)			(283,704)			(334,158)
Financing Activities
	Proceeds from issuance of shares upon exercise of share options			1,693			10,533			4,711			17,976
	Purchase of treasury shares			(7,897)			-			(22,612)			(10,613)
	Repayment of short-term bank loan			-			(8,436)			-			(8,436)
	Capital Lease payments			(191)			-			(631)			-
		Net cash used in financing activities		(6,395)			2,097			(18,532)			(1,073)
Effect of exchange rates on cash and cash equivalents				(1,489)			(875)			(1,733)			(4,607)
Net change in cash and cash equivalents				(15,472)			(88,646)			(21,260)			(52,132)
Cash and cash equivalents, beginning of period			$	236,311		$	364,816		$	242,099		$	328,302
Cash and cash equivalents, end of period			$	220,839		$	276,170		$	220,839		$	276,170

 

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