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 14th, 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 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 +44(0)20-7136-9233, 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

UnauditedAudited
 
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