NICE Reports 35% Record Cloud Growth for Third Quarter 2020

NICE (NASDAQ: NICE) today announced results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights

GAAP		Non-GAAP
Cloud revenue of $202 million, growth of 34% year-over-year		Cloud revenue of $204 million, growth of 35% year-over-year
Total revenue of $410 million, growth of 6% year-over-year		Total revenue of $412 million, growth of 7% year-over-year
Gross margin of 65.8% compared to 65.7% last year		Gross margin of 71.0% compared to 70.9% last year
Cloud gross margin of 56.6% compared to 51.6% last year		Cloud gross margin of 65.6% compared to 61.9% last year
Operating income of $62 million compared to $56 million last year, an increase of 11%		Operating income of $117 million compared to $106 million last year, an increase of 10%
Operating margin of 15.1% compared to 14.4% last year		Operating margin of 28.3% compared to 27.4% last year
Diluted EPS of $0.76 versus $0.69 last year, 10% growth year-over-year		Diluted EPS of $1.41 versus $1.30 last year, 8% growth year-over-year
Operating cash flow of $99 million compared to $82 million last year

“We are pleased to report a very strong third quarter driven by continued rapid acceleration in our cloud business,” said Barak Eilam, CEO, NICE. “Cloud grew a record 35 percent and now represents 50 percent of our total revenue, which is a major milestone for NICE. We achieved 10 percent sequential growth in the cloud compared to the second quarter of this year, and we already surpassed the more than 800 million dollar cloud revenue run rate that we had originally expected by the end of the year.”

Mr. Eilam continued, “The acceleration in our cloud growth is being driven by several factors, including substantial growth in new customers, rapid adoption by large enterprises, new verticals that are embracing remote service and digital transformation that has become front and center for organizations of all sizes. We witnessed an increase of over 50 percent in new customers compared to the same quarter last year. Additionally, we saw a 91 percent sequential increase in digital volumes for CXone, and a 154 percent increase year-over-year, confirming the strength of our leadership in digital.”

GAAP Financial Highlights for the Third Quarter Ended September 30:

Revenues: Third quarter 2020 total revenues increased 6.1% to $409.8 million compared to $386.3 million for the third quarter of 2019.

Gross Profit: Third quarter 2020 gross profit and gross margin increased to $269.7 million and 65.8%, respectively, compared to $253.6 million and 65.7%, respectively, for the third quarter of 2019.

Operating Income: Third quarter 2020 operating income and operating margin increased to $62.0 million and 15.1%, respectively, compared to $55.7 million and 14.4%, respectively, for the third quarter of 2019.

Net Income: Third quarter 2020 net income and net income margin increased to $50.7 million and 12.4%, respectively, compared to $45.0 million and 11.7%, respectively, for the third quarter of 2019.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the third quarter of 2020 increased 10.1% to $0.76, compared to $0.69 in the third quarter of 2019.

Operating Cash Flow and Cash Balance: Third quarter 2020 operating cash flow was $99.0 million. As of September 30, 2020, total cash and cash equivalents, short term investments were $1,542.5 million, and total debt was $891.3 million.

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

Revenues: Third quarter 2020 non-GAAP total revenues increased to $412.4 million, up 6.5% from $387.1 million for the third quarter of 2019.

Gross Profit: Third quarter 2020 non-GAAP gross profit and gross margin increased to $292.9 million and 71.0%, respectively, from $274.4 million and 70.9%, respectively for the third quarter of 2019.

Operating Income: Third quarter 2020 non-GAAP operating income and non-GAAP operating margin increased to $116.8 million and 28.3%, respectively, from $105.9 million and 27.4%, respectively, for the third quarter of 2019.

Net Income: Third quarter 2020 non-GAAP net income and non-GAAP net income margin increased to $93.6 million and 22.7%, respectively, from $84.3 million and 21.8%, respectively, for the third quarter of 2019.

Fully Diluted Earnings Per Share: Third quarter 2020 non-GAAP fully diluted earnings per share increased 8.5% to $1.41, compared to $1.30 for the third quarter of 2019.

Full-Year 2020 Guidance:

Full-year 2020 Non-GAAP total revenues are expected to be in a range of $1,645 million to $1,655 million.
Full-year 2020 Non-GAAP fully diluted earnings per share are expected to be in a range of $5.63 to $5.73.

Quarterly Results Conference Call

NICE management will host its earnings conference call today November 12^th, 2020 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 into 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 308 565 57. 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 783 390 51.

Non-GAAP financial measures are included in this press release. Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude share-based compensation, amortization of acquired intangible assets, acquisition related expenses, amortization of discount on long term debt and the tax effect of the Non-GAAP adjustments. Business combination accounting rules require the recognition of a legal performance obligation related to a revenue arrangement of an acquired entity as a liability. The amount assigned to such liability should be based on its fair value at the date of acquisition. The Non-GAAP adjustment for a revenue arrangement is intended to reflect the full amount of such revenue. The Company believes that these Non-GAAP financial measures, used in conjunction with the corresponding GAAP measures, provide investors with useful supplemental information about the financial performance of our business. We believe Non-GAAP financial measures are useful to investors as a measure of the ongoing performance of our business. Our management regularly uses our supplemental Non-GAAP financial measures internally to understand, manage and evaluate our business and to make financial, strategic and operating decisions. These Non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. 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. 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. The Company provides guidance only on a Non-GAAP basis. A reconciliation of guidance from a GAAP to Non-GAAP basis is not available due to the unpredictability and uncertainty associated with future events that would be reported in GAAP results and would require adjustments between GAAP and Non-GAAP financial measures, including the impact of future possible business acquisitions. Accordingly, a reconciliation of the guidance based on Non-GAAP financial measures to corresponding GAAP financial measures for future periods is not available without unreasonable effort.

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 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 changes in economic and business conditions, competition, successful execution of the Company’s growth strategy, success and growth of the Company’s cloud Software-as-a-Service business, difficulties in making additional acquisitions or effectively integrating acquired operations, products, technologies and personnel, the Company’s dependency on third-party cloud computing platform providers, hosting facilities and service partners, rapidly changing technology, cyber security attacks or other security breaches against the Company, privacy concerns and legislation impacting the Company’s business, changes in currency exchange rates and interest rates, the effects of additional tax liabilities resulting from our global operations and various other factors and uncertainties discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”). In addition, COVID-19 is contributing to a general slowdown in the global economy and may affect the Company’s business, results of operations, financial condition and our future strategic plans. At this time, the extent to which the COVID-19 may impact the Company’s financial condition or results of operations is uncertain. Furthermore, due to our subscription based business model, the effect of the COVID-19 may not be fully reflected in our results of operations until future periods, if at all. 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,
			2020			2019
		Unaudited			Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	753,116		$	228,323
Short-term investments			789,415			210,772
Trade receivables			294,176			319,622
Prepaid expenses and other current assets			128,926			116,972
Total current assets			1,965,633			875,689
LONG-TERM ASSETS:
Long-term investments			-			542,389
Property and equipment, net			140,262			141,647
Deferred tax assets			25,808			30,513
Other intangible assets, net			395,809			411,019
Operating lease right-of-use assets			102,132			106,196
Goodwill			1,496,429			1,378,418
Other long-term assets			145,343			124,034
Total long-term assets			2,305,783			2,734,216
TOTAL ASSETS		$	4,271,416		$	3,609,905
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables		$	33,685		$	30,376
Deferred revenues and advances from customers			260,059			245,792
Current maturities of operating leases			21,846			21,519
Exchangeable senior notes			257,732			251,583
Accrued expenses and other liabilities			366,658			391,685
Total current liabilities			939,980			940,955
LONG-TERM LIABILITIES:
Deferred revenues and advances from customers			35,871			26,045
Operating leases			97,764			103,490
Deferred tax liabilities			44,088			52,509
Long-term debt			633,584			213,313
Other long-term liabilities			17,052			16,327
Total long-term liabilities			828,359			411,684
SHAREHOLDERS' EQUITY
Nice Ltd's equity			2,478,555			2,257,266
Non-controlling interests			24,522			-
Total shareholders' equity			2,503,077			2,257,266
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	4,271,416		$	3,609,905

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,
		2020			2019				2020			2019
	Unaudited			Unaudited				Unaudited			Unaudited
Revenue:
Product	$	38,746		$	56,950			$	141,611		$	188,999
Services		169,358			178,609				513,529			525,947
Cloud		201,723			150,704				558,295			428,758
Total revenue		409,827			386,263				1,213,435			1,143,704
Cost of revenue:
Product		5,434			5,318				16,711			16,850
Services		47,008			54,476				150,558			164,218
Cloud		87,637			72,877				248,628			213,418
Total cost of revenue		140,079			132,671				415,897			394,486
Gross profit		269,748			253,592				797,538			749,218
Operating expenses:
Research and development, net		55,482			48,531				162,019			141,553
Selling and marketing		97,011			96,138				294,332			293,083
General and administrative		45,801			42,438				135,312			121,181
Amortization of acquired intangible assets		9,496			10,780				28,951			32,276
Total operating expenses		207,790			197,887				620,614			588,093
Operating income		61,958			55,705				176,924			161,125
Financial and other expense/(income), net		1,032			(252	)			2,259			3,890
Income before tax		60,926			55,957				174,665			157,235
Taxes on income		10,273			10,918				33,293			33,074
Net income	$	50,653		$	45,039			$	141,372		$	124,161
Less: net loss attributable to non-controlling interests		112			-				378			-
Net income attributable to Nice Ltd.'s shareholders	$	50,765		$	45,039			$	141,750		$	124,161
Earnings per share:
Basic	$	0.81		$	0.72			$	2.26		$	2.00
Diluted	$	0.76		$	0.69			$	2.15		$	1.93
Weighted average shares outstanding:
Basic		62,756			62,160				62,624			62,041
Diluted		66,253			65,066				65,741			64,493

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,
		2020				2019				2020				2019
GAAP revenues	$	409,827			$	386,263			$	1,213,435			$	1,143,704
Valuation adjustment on acquired deferred product revenue		-				-				-				15
Valuation adjustment on acquired deferred services revenue		81				3				81				5
Valuation adjustment on acquired deferred cloud revenue		2,458				867				5,187				2,692
Non-GAAP revenues	$	412,366			$	387,133			$	1,218,703			$	1,146,416
GAAP cost of revenue	$	140,079			$	132,671			$	415,897			$	394,486
Amortization of acquired intangible assets on cost of product		(1,135	)			(1,123	)			(3,394	)			(2,972	)
Amortization of acquired intangible assets on cost of services		(322	)			(1,535	)			(3,341	)			(4,604	)
Amortization of acquired intangible assets on cost of cloud		(16,800	)			(15,270	)			(48,422	)			(45,118	)
Valuation adjustment on acquired deferred cost of cloud		200				575				737				1,893
Cost of product revenue adjustment (1)		(69	)			(97	)			(205	)			(304	)
Cost of services revenue adjustment (1)		(1,677	)			(2,106	)			(4,957	)			(6,251	)
Cost of cloud revenue adjustment (1)		(809	)			(358	)			(2,601	)			(2,142	)
Non-GAAP cost of revenue	$	119,467			$	112,757			$	353,714			$	334,988
GAAP gross profit	$	269,748			$	253,592			$	797,538			$	749,218
Gross profit adjustments		23,151				20,784				67,451				62,210
Non-GAAP gross profit	$	292,899			$	274,376			$	864,989			$	811,428
GAAP operating expenses	$	207,790			$	197,887			$	620,614			$	588,093
Research and development (1,2)		(2,565	)			(2,033	)			(7,553	)			(5,182	)
Sales and marketing (1,2)		(5,561	)			(7,737	)			(19,623	)			(19,211	)
General and administrative (1,2)		(14,065	)			(8,962	)			(38,239	)			(24,378	)
Amortization of acquired intangible assets		(9,496	)			(10,780	)			(28,951	)			(32,276	)
Valuation adjustment on acquired deferred commission		35				76				106				245
Non-GAAP operating expenses	$	176,138			$	168,451			$	526,354			$	507,291
GAAP financial and other expense/(income), net	$	1,032			$	(252	)		$	2,259			$	3,890
Amortization of discount on debt		(3,070	)			(2,377	)			(7,944	)			(6,847	)
Non-GAAP financial and other income, net	$	(2,038	)		$	(2,629	)		$	(5,685	)		$	(2,957	)
GAAP taxes on income	$	10,273			$	10,918			$	33,293			$	33,074
Tax adjustments re non-GAAP adjustments		14,911				13,324				39,701				33,258
Non-GAAP taxes on income	$	25,184			$	24,242			$	72,994			$	66,332
GAAP net income	$	50,653			$	45,039			$	141,372			$	124,161
Valuation adjustment on acquired deferred revenue		2,539				870				5,268				2,712
Valuation adjustment on acquired deferred cost of cloud revenue		(200	)			(575	)			(737	)			(1,893	)
Amortization of acquired intangible assets		27,753				28,708				84,108				84,970
Valuation adjustment on acquired deferred commission		(35	)			(76	)			(106	)			(245	)
Share-based compensation (1)		22,404				21,293				69,255				56,625
Acquisition related expenses (2)		2,342				-				3,923				843
Amortization of discount on long term debt		3,070				2,377				7,944				6,847
Tax adjustments re non-GAAP adjustments		(14,911	)			(13,324	)			(39,701	)			(33,258	)
Non-GAAP net income	$	93,615			$	84,312			$	271,326			$	240,762
GAAP diluted earnings per share	$	0.76			$	0.69			$	2.15			$	1.93
Non-GAAP diluted earnings per share	$	1.41			$	1.30			$	4.13			$	3.73
Shares used in computing GAAP diluted earnings per share		66,253				65,066				65,741				64,493
Shares used in computing non-GAAP diluted earnings per share		66,253				65,066				65,741				64,493
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,
		2020				2019				2020				2019
Cost of product revenue	$	69			$	97			$	205			$	304
Cost of services revenue		1,677				2,106				4,957				6,251
Cost of cloud revenue		809				358				2,601				2,142
Research and development		2,565				2,033				7,553				5,177
Sales and marketing		5,519				7,737				19,493				19,181
General and administrative		11,765				8,962				34,446				23,570
	$	22,404			$	21,293			$	69,255			$	56,625
(2) Acquisition related expenses
	Quarter ended								Year to date
	September 30,								September 30,
		2020				2019				2020				2019
Research and development	$	-			$	-			$	-			$	5
Sales and marketing		42				-				130				30
General and administrative		2,300				-				3,793				808
	$	2,342			$	-			$	3,923			$	843

NICE LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands
	Quarter ended								Year to date
	September 30,								September 30,
		2020				2019				2020				2019
	Unaudited				Unaudited				Unaudited				Unaudited
Operating Activities
Net income	$	50,653			$	45,039			$	141,372			$	124,161
Depreciation and amortization		45,482				43,924				135,133				128,744
Stock based compensation		22,207				21,273				68,839				56,589
Amortization of premium and discount and accrued interest on marketable securities		2,080				387				(790	)			(187	)
Deferred taxes, net		(6,783	)			(12,485	)			(16,653	)			(31,107	)
Changes in operating assets and liabilities:
Trade Receivables		12,795				6,788				27,588				26,900
Prepaid expenses and other assets		3,131				(15,626	)			(31,637	)			(88,157	)
Trade payables		6,036				(8,791	)			5,231				(5,073	)
Accrued expenses and other current liabilities		(15,124	)			44,173				(36,584	)			53,789
Operating lease right-of-use assets, net		4,414				4,346				12,926				11,842
Deferred revenue		(23,481	)			(45,558	)			14,617				13,311
Long term liabilities		-				(20	)			-				(300	)
Operating lease liabilities		(4,608	)			(2,836	)			(14,297	)			(11,995	)
Amortization of discount on long term debt		3,070				2,379				7,945				6,848
Other		(839	)			(672	)			(254	)			(2,656	)
Net cash provided by operating activities		99,033				82,321				313,436				282,709
Investing Activities
Purchase of property and equipment		(4,211	)			(6,545	)			(21,667	)			(21,527	)
Purchase of Investments		(151,589	)			(187,752	)			(306,077	)			(493,894	)
Proceeds from Investments		118,284				113,121				283,149				283,629
Capitalization of software development costs		(9,577	)			(8,549	)			(28,776	)			(25,940	)
Payments for business and asset acquisitions, net of cash acquired		(96,425	)			(184	)			(147,261	)			(25,972	)
Net cash used in investing activities		(143,518	)			(89,909	)			(220,632	)			(283,704	)
Financing Activities
Proceeds from issuance of shares upon exercise of share options		828				1,693				8,177				4,711
Purchase of treasury shares		-				(7,897	)			(27,601	)			(22,612	)
Capital Lease payments		-				(191	)			(177	)			(631	)
Proceeds from issuance of exchangeable notes		451,469				-				451,469				-
Net cash provided by/(used in) financing activities		452,297				(6,395	)			431,868				(18,532	)
Effect of exchange rates on cash and cash equivalents		1,206				(1,489	)			121				(1,733	)
Net change in cash and cash equivalents		409,018				(15,472	)	#		524,793				(21,260	)
Cash and cash equivalents, beginning of period	$	344,098			$	236,311			$	228,323			$	242,099
Cash and cash equivalents, end of period	$	753,116			$	220,839			$	753,116			$	220,839

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005477/en/