NICE NICE Ltd

Recurring Revenue Increased Significantly to 64% of Total Revenue in First Quarter 2017

Company Increases EPS Guidance

NICE (NASDAQ: NICE) today announced results for the first quarter 2017 ended March 31, 2017.

First Quarter 2017 Financial Highlights

GAAP       Non-GAAP Revenue growth of 35% year-over-year       Revenue growth of 36% year-over-year

Operating income of $28 million compared to $37 million last year

      Operating income of $74 million, up 27% year-over-year Effective tax rate of 8.8% compared to 14.5% last year       Effective tax rate of 23.2% compared to 19.5% last year

Diluted EPS from continuing operations of $0.28 versus $0.58 last year

     

Diluted EPS from continuing operations of $0.89 versus $0.81 last year

Cash flow from operations increased 16% to $133 million        

“We are very pleased with the results for the first quarter of 2017,” said Barak Eilam, CEO of NICE. “Non-GAAP revenue grew 36% and non-GAAP operating income increased 27% compared to the same quarter last year. We were also very pleased to see a substantial increase in recurring revenue. With recurring revenue now representing almost two thirds of our total revenue, it gives us additional confidence and visibility into the business.”

Mr. Eilam continued, “The strong financial performance this quarter is the result of the good progress that we are seeing in our four strategic pillars: cloud, omni channel, analytics and artificial intelligence. As a result, we experienced particular strength for our analytics solutions, where we have seen a high volume of very large deals. Additionally, we are very pleased with progress of the integration of inContact, and we are witnessing accelerated momentum in our cloud business.”

GAAP Financial Highlights for the First Quarter Ended March 31:

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: First quarter 2017 total revenues increased 35.3% to $305.6 million compared to $226.0 million for the first quarter of 2016.

Gross Profit: First quarter 2017 gross profit increased to $189.9 million compared to $151.5 million for the first quarter of 2016, and gross margin was 62.1% compared to 67.0% for the first quarter of 2016.

Operating Income: First quarter 2017 operating income and operating margin were $27.9 million and 9.1%, respectively, compared to $37.5 million and 16.6%, respectively, for the first quarter of 2016.

Net Income from Continuing Operations: First quarter 2017 net income and net margin were $17.3 million and 5.7%, respectively, compared to $35.3 million and 15.6%, respectively, for the first quarter of 2016.

Fully Diluted Earnings Per Share from Continuing Operations: Fully diluted earnings per share for the first quarter of 2017 were $0.28, compared to $0.58 in the first quarter of 2016.

Operating Cash Flow and Cash Balance: First quarter 2017 operating cash flow was $132.7 million. In the first quarter, $8.4 million was used for share repurchases. As of March 31, 2017, total cash and cash equivalents, short term investments and marketable securities were $388.7 million, and total debt was $441.5 million.

Non-GAAP Financial Highlights for the First Quarter Ended March 31:

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: First quarter 2017 non-GAAP total revenues were $308.0 million, up 36.2% from $226.1 million for the first quarter of 2016.

Gross Profit: First quarter 2017 non-GAAP gross profit increased to $215.2 million compared to $159.7, and non-GAAP gross margin was 69.9%, compared to 70.6% for the first quarter of 2016.

Operating Income: First quarter 2017 non-GAAP operating income increased to $73.6 million compared to $57.8 million, and non-GAAP operating margin was 23.9% compared to 25.6% for the first quarter of 2016.

Net Income from Continuing Operations: First quarter 2017 non-GAAP net income increased to $55.1 million compared to $49.6 million, and non-GAAP net income margin was 17.9% compared to 21.9% for the first quarter of 2016.

Fully Diluted Earnings Per Share from Continuing Operations: First quarter 2017 non-GAAP fully diluted earnings per share increased 9.9% to $0.89, compared to $0.81 for the first quarter of 2016.

Second Quarter and Full Year 2017 Guidance:

Second Quarter 2017: Second quarter 2017 non-GAAP total revenues are expected to be in a range of $309 million to $319 million. Second quarter 2017 non-GAAP fully diluted earnings per share are expected to be in a range of $0.84 to $0.90.

Full Year 2017: Full year 2017 non-GAAP total revenues are reiterated to an expected range of $1,330 million to $1,354 million. Full year 2017 non-GAAP fully diluted earnings per share are increased to an expected range of $3.85 to $4.05.

Quarterly Results Conference Call

NICE management will host its earnings conference call today, May 4th, 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 1-809-242-041. The Passcode is 150 329 66. 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 897 068 81.

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, settlement, 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 NICENICE (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 StatementsThis 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 SYSTEMS LTD. AND SUBSIDIARIES     CONSOLIDATED STATEMENTS of INCOME U.S. dollars in thousands (except per share amounts)       Quarter ended March 31, 2017 2016 Unaudited Unaudited   Revenue: Product $ 68,457 $ 65,117 Services 158,416 149,338 Cloud 78,749 11,512 Total revenue 305,622 225,967   Cost of revenue: Product 13,211 13,734 Services 58,716 57,025 Cloud 43,807 3,710 Total cost of revenue 115,734 74,469   Gross profit 189,888 151,498   Operating Expenses: Research and development, net 42,954 32,521 Selling and marketing 79,201 55,783 General and administrative 29,227 23,192 Amortization of acquired intangible assets 10,565 2,507 Total operating expenses 161,947 114,003   Operating income 27,941 37,495   (8,990) 3,765   Income from continuing operations before tax 18,951 41,260 Taxes on income 1,662 6,003 Net income from continuing operations 17,289 35,257   Discontinued operations Loss from discontinued operations - (117) Taxes on income - - Net loss from discontinued operations - (117)   Net income $ 17,289 $ 35,140   Basic earnings per share from continuing operations $ 0.29 $ 0.59 Basic earnings (loss) per share from discontinued operations $ - $ (0.00) Basic earnings per share $ 0.29 $ 0.59   Diluted earnings per share from continuing operations $ 0.28 $ 0.58 Diluted earnings (loss) per share from discontinued operations $ - $ (0.00) Diluted earnings per share $ 0.28 $ 0.58   Weighted average number of shares outstanding used to compute:   Basic earnings (loss) per share 60,127 59,433 Diluted earnings (loss) per share 61,751 60,851     NICE SYSTEMS LTD. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP RESULTS U.S. dollars in thousands (except per share amounts)     Quarter ended March 31, 2017 2016 GAAP revenues $ 305,622 $ 225,967 Valuation adjustment on acquired deferred product revenue 219 84 Valuation adjustment on acquired deferred service revenue 997 58 Valuation adjustment on acquired deferred cloud revenue 1,211 - Non-GAAP revenues $ 308,049 $ 226,109     GAAP cost of revenue $ 115,734 $ 74,469 Amortization of acquired intangible assets on cost of product (6,358) (6,291) Amortization of acquired intangible assets on cost of services (3,208) - Amortization of acquired intangible assets on cost of cloud (10,975) - Valuation adjustment on acquired deferred cost of services 431 - Cost of product revenue adjustment (1) (175) (121) Cost of services revenue adjustment (1,2) (1,875) (1,542) Cost of cloud revenue adjustment (1) (769) (62) Non-GAAP cost of revenue $ 92,805 $ 66,453     GAAP gross profit $ 189,888 $ 151,498 Gross profit adjustments 25,356 8,158 Non-GAAP gross profit $ 215,244 $ 159,656     GAAP operating expenses $ 161,947 $ 114,003 Research and development (1,2,3) (2,211) (1,982) Sales and marketing (1,3) (5,646) (3,346) General and administrative (1,2,3) (1,886) (4,351) Amortization of acquired intangible assets (10,565) (2,507) Non-GAAP operating expenses $ 141,639 $ 101,817     GAAP finance & other income (expense), net $ (8,990) $ 3,765 Amortization of discount on long term debt 7,165 - Non-GAAP finance & other income (expense), net $ (1,825) $ 3,765     GAAP taxes on income $ 1,662 $ 6,003 Tax adjustments re non-GAAP adjustments 14,991 6,009 Non-GAAP taxes on income $ 16,653 $ 12,012     GAAP net income $ 17,289 $ 35,257 Valuation adjustment on acquired deferred revenue 2,427 142 Valuation adjustment on acquired deferred cost of service of revenue (431) - Amortization of acquired intangible assets 31,106 8,798 Share-based compensation (1) 12,562 6,360 Re-organization expenses (2) - 1,308 Acquisition related expenses (3) - 3,736 Amortization of discount on long term debt 7,165 - Tax adjustments re non-GAAP adjustments (14,991) (6,009) Non-GAAP net income $ 55,127 $ 49,592     GAAP diluted earnings per share $ 0.28 $ 0.58   Non-GAAP diluted earnings per share $ 0.89 $ 0.81   Shares used in computing GAAP diluted earnings per share 61,751 60,851   Shares used in computing Non-GAAP diluted earnings per share 61,751 60,851     NICE SYSTEMS LTD. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP RESULTS (continued) U.S. dollars in thousands         (1)

Share-based Compensation

Quarter ended March 31, 2017 2016 Cost of product revenue $ (175) $ (121) Cost of service revenue (1,875) (1,118) Cost of cloud revenue (769) (6,360) Research and development (2,211) (856) Sales and marketing (5,646) (2,859) General and administrative (1,886) (1,118) $ (12,562) $ (12,432)     (2)

Re-organization expenses

Quarter ended March 31, 2017 2016   Cost of service revenue $ - $ (198) Research and development - (1,102) General and administrative - (8) $ - $ (1,308)     (3)

Acquisition related expenses

  Quarter ended March 31, 2017 2016   Research and development $ - $ (24) Sales and marketing - (487) General and administrative - (3,225) $ - $ (3,736)         NICE SYSTEMS LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands   March 31, December 31, 2017 2016 Unaudited Unaudited   ASSETS   CURRENT ASSETS: Cash and cash equivalents $ 266,751 $ 157,026 Short-term investments 42,394 30,287 Trade receivables 205,683 260,220 Prepaid expenses and other current assets 68,964 57,966 Current assets of discontinued operations 2,182 3,734   Total current assets 585,974 509,233   LONG-TERM ASSETS: Long-term investments 79,571 98,726 Other long-term assets 20,338 18,701 Property and equipment, net 97,309 87,678 Deferred tax assets 14,732 14,093 Other intangible assets, net 587,749 618,735 Goodwill 1,284,760 1,284,710   Total long-term assets 2,084,459 2,122,643   TOTAL ASSETS $ 2,670,433 $ 2,631,876   LIABILITIES AND SHAREHOLDERS' EQUITY   CURRENT LIABILITIES: Current maturities of long term loan $ - $ 21,164 Trade payables 25,548 25,634 Current portion of deferred revenues and advances from customers 194,813 149,801 Accrued expenses and other liabilities 246,645 273,134 Current liabilities of discontinued operations 574 3,077   Total current liabilities 467,580 472,810   LONG-TERM LIABILITIES: Deferred revenues and advances from customers 29,117 22,710 Deferred tax liabilities 126,346 146,952 Long-term debt 441,504 444,016 Other long-term liabilities 34,728 34,056   Total long-term liabilities 631,695 647,734   SHAREHOLDERS' EQUITY 1,571,158 1,511,332   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,670,433 $ 2,631,876     NICE LTD. AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENTS U.S. dollars in thousands     Quarter ended March 31, 2017 2016 Unaudited Unaudited  

Operating Activities

  Net income $ 17,289 $ 35,140 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 39,143 12,916 Stock based compensation 12,562 6,431 Amortization of premium and discount and accrued interest on marketable securities 190 969 Deferred taxes, net (11,671) (3,586) Changes in operating assets and liabilities: Trade Receivables 56,299 39,568 Prepaid expenses and other current assets (6,787) 13,036 Trade payables (112) 861 Accrued expenses and other current liabilities (31,299) (26,714) Deferred revenue 50,664 35,688 Long term liabilities (747) 74 Amortization of discount on long term debt 7,165 - Other 49 117   Net cash provided by operating activities 132,745 114,500

 

Investing Activities

  Purchase of property and equipment (10,414) (7,059) Purchase of Investments (24,999) (27,952) Proceeds from Investments 32,016 39,118 Capitalization of software development costs (6,938) (1,061) Payments for business acquisitions, net of cash acquired - (150,453) Net cash used in investing activities (10,335) (147,407)  

Financing Activities

  Proceeds from issuance of shares upon exercise of share options 3,733 7,514 Purchase of treasury shares (8,429) (22,673) Dividends paid (9,637) (9,517) Repayment of long term debt (260,000) - Proceeds from issuance of exchangeable notes 260,842 - Net cash used in financing activities (13,491) (24,676)   Effect of exchange rates on cash and cash equivalents 806 1,365   Net change in cash and cash equivalents 109,725 (56,218) Cash and cash equivalents, beginning of period 157,026 325,931   Cash and cash equivalents, end of period $ 266,751 $ 269,713  

*Certain comparative figures have been reclassified to conform to the current year presentation.

 

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NICEInvestorsMarty Cohen, +1 551 256 5354, ETir@nice.comorYisca Erez, +972 9 775-3798, CETir@nice.comorMedia ContactIlana Hart, +972 9 775-3818ilana.hart@nice.com