Strong Double Digit Growth in Operating
Income and Earnings Per Share
Recurring Revenue Increased to 72% of Total
Revenue
NICE (NASDAQ: NICE) today announced results for the third
quarter and nine months ended September 30, 2018.
Third Quarter 2018 Financial Highlights
GAAP Non-GAAP Revenue of $356
million, growth of 10% year-over-year Revenue
of $356 million, growth of 9% year-over-year Cloud revenue of $117
million, growth of 21% year-over-year Cloud
revenue of $120 million, growth of 20% year-over-year Gross margin
of 65.3% compared to 64.3% last year Gross
margin of 70.7% compared to 71.2% last year
Operating income of $47 million compared
to $33 million last year, 41% growth year-over-year
Operating income of $91 million compared
to $78 million last year, 16% growth year-over-year
Operating margin of 13.1% compared to 10.3% last year
Operating margin of 25.5% compared to 24.0% last year
Diluted EPS of $0.62 versus $0.42 last
year, 48% growth year-over-year
Diluted EPS of $1.12 versus $0.95 last
year, 18% growth year-over-year
The GAAP column of the table contains the financial highlights
of the third quarter 2018 under ASC 606 with the comparison period
under ASC 605.
The non-GAAP column of the table contains the financial
highlights of the third quarter 2018 under ASC 605 with the
comparison period under ASC 605.
“The results reported for the third quarter of 2018 reflect our
continued focus on driving excellent execution around our strategic
pillars of cloud, analytics and artificial intelligence that led to
strong growth on both the top and bottom lines. As we look forward
to ending the year on a high note, we now expect to exit 2018 with
a cloud revenue run rate of $550 million up from our previous
expectation of $500 million, while continuing to drive
profitability,” said Barak Eilam, CEO of NICE.
Mr. Eilam continued, “CXone, our open cloud platform which has
gained tremendous market presence among our customers and high
regard from industry analysts in just a little over one year since
it was introduced, has been our vehicle to deliver our strategic
pillars to the customer engagement market. We are now proceeding on
a similar course with X-Sight, which was announced just a few weeks
ago. X-Sight is the industry’s first financial crime and compliance
platform-as-a-service that combines advanced analytics and AI,
automated data management, and robotics all delivered through the
cloud.
“It is clearly evident that the platform strategy embodies the
present and future for NICE. With X-Sight and CXone, we now have
two significant, market leading, open, cloud platforms to help
further penetrate our large and growing addressable market.”
GAAP Financial Highlights for the Third Quarter Ended
September 30:
The GAAP numbers presented below for the third quarter 2018 are
under ASC 606 and the comparison period GAAP numbers for the third
quarter 2017 are under ASC 605
Revenues: Third quarter 2018 total revenues increased
10.4% to $356.2 million compared to $322.8 million for the third
quarter of 2017.
Gross Profit: Third quarter 2018 gross profit and gross
margin increased to $232.7 million and 65.3%, respectively,
compared to $207.4 million and 64.3%, respectively, for the third
quarter of 2017.
Operating Income: Third quarter 2018 operating income and
operating margin increased to $46.7 million and 13.1%,
respectively, compared to $33.1 million and 10.3%, respectively,
for the third quarter of 2017.
Net Income: Third quarter 2018 net income and net income
margin increased to $39.3 million and 11.0%, respectively, compared
to $26.2 million and 8.1%, respectively, for the third quarter of
2017.
Fully Diluted Earnings Per Share: Fully diluted earnings
per share for the third quarter of 2018 increased to $0.62 compared
to $0.42 in the third quarter of 2017.
Operating Cash Flow and Cash Balance: Third quarter 2018
operating cash flow was $87.0 million. As of September 30, 2018,
total cash and cash equivalents, short term investments and
marketable securities were $656.3 million, and total debt was
$453.9 million.
Non-GAAP Financial Highlights for the Third Quarter Ended
September 30:
The non-GAAP numbers presented below for the third quarter 2018
and for the comparison period non-GAAP numbers for the third
quarter 2017 are both under ASC 605.
Revenues: Third quarter 2018 non-GAAP total revenues
increased to $356.4 million, up 9.1% from $326.8 million for the
third quarter of 2017.
Gross Profit: Third quarter 2018 non-GAAP gross profit
increased to $252.1 compared to $232.5 million for the third
quarter of 2017. Non-GAAP gross margin was 70.7% compared to 71.2%
for the third quarter of 2017.
Operating Income: Third quarter 2018 non-GAAP operating
income and non-GAAP operating margin increased to $90.8 million and
25.5%, respectively, from $78.3 million and 24.0%, respectively,
for the third quarter of 2017.
Net Income: Third quarter 2018 non-GAAP net income and
non-GAAP net income margin increased to $71.6 million and 20.1%,
respectively, from $58.9 million and 18.0%, respectively, for the
third quarter of 2017.
Fully Diluted Earnings Per Share: Third quarter 2018
non-GAAP fully diluted earnings per share increased 17.9% to $1.12,
compared to $0.95 for the third quarter of 2017.
Full Year 2018 Guidance:
Guidance for the full-year 2018 is provided using the accounting
standard ASC 605 in order to provide better transparency and
comparability to 2017 financial data, which was reported under ASC
605.
The Company increased full-year 2018 non-GAAP total revenues to
be in an expected range of $1,450 million to $1,466 million and
increased full-year 2018 non-GAAP fully diluted earnings per share
to be in an expected range of $4.53 to $4.69.
The guidance includes the acquisition of Mattersight. The
Company expects Mattersight to contribute an annual revenue run
rate in a range of $32 million to $38 million.
Adoption of the New Revenue Recognition Standard - ASC
606
NICE adopted the new revenue recognition accounting standard,
Accounting Standards Codification ("ASC") 606, effective January 1,
2018, on a modified retrospective basis. Financial results for
reporting periods during 2018 are presented in compliance with the
ASC 606. Historical financial results for reporting periods prior
to 2018 are presented in conformity with amounts previously
disclosed under the prior revenue recognition standard, ASC 605.
This press release includes additional information to reconcile the
impacts of the adoption of the new revenue recognition standard on
the Company's financial results for the quarter ended September 30,
2018.
Quarterly Results Conference Call
NICE management will host its earnings conference call today,
November 8th, 2018 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)1296-311-600, United Kingdom 0-800-678-1161, Israel
1-809-344-364. The Passcode is 538 470 63. 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 295 658 73.
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,
re-organization expenses, ASC 606 to ASC 605 adjustments 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. 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
(including, with respect to the Company’s acquisition of
Mattersight Corporation), 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 September 30, September 30,
2018 2017 2018 2017 Unaudited Unaudited
Unaudited Unaudited Revenue: Product $ 60,097 $ 66,931 $
170,864 $ 204,124 Services 179,113 159,441 533,458 476,093 Cloud
116,996 96,383 329,368 259,700 Total
revenue 356,206 322,755 1,033,690
939,917 Cost of revenue: Product 7,854 12,944 23,386 39,668
Services 55,046 52,618 170,584 165,892 Cloud 60,559
49,812 166,690 139,152 Total cost of revenue
123,459 115,374 360,660 344,712 Gross
profit 232,747 207,381 673,030 595,205 Operating expenses:
Research and development, net 47,701 45,135 137,023 130,975 Selling
and marketing 90,492 87,363 270,238 254,258 General and
administrative 37,560 31,197 107,048 91,758 Amortization of
acquired intangible assets 10,341 10,566
31,512 31,319 Total operating expenses 186,094
174,261 545,821 508,310 Operating income
46,653 33,120 127,209 86,895 Finance and other expense, net
2,195 4,335 9,100 16,713 Income
before tax 44,458 28,785 118,109 70,182 Taxes on income
5,175 2,612 21,065 6,279 Net income $ 39,283 $
26,173 $ 97,044 $ 63,903 Basic earnings per share $ 0.64 $
0.43 $ 1.58 $ 1.06 Diluted earnings per share $ 0.62 $ 0.42
$ 1.54 $ 1.03 Weighted average number of shares outstanding
used to compute: Basic earnings per share 61,448 60,502
61,239 60,304 Diluted earnings per share 63,660 62,220 63,157
61,979
NICE LTD. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP RESULTS AND ASC 606 TO
NON-GAAP ASC 605 U.S. dollars in thousands (except per share
amounts)
Quarter ended Year to date
September 30, September 30, 2018 2017
2018 2017 GAAP revenues $ 356,206 $ 322,755 $
1,033,690 $ 939,917 Valuation adjustment on acquired deferred
product revenue 12 37 97 302 Valuation adjustment on acquired
deferred services revenue 82 824 588 3,915 Valuation adjustment on
acquired deferred cloud revenue 2,329 3,135 5,631 5,994 ASC 606 to
ASC 605 revenue adjustment (2,183) - 2,775
- Non-GAAP revenues $ 356,446 $ 326,751 $ 1,042,781 $
950,128 GAAP cost of revenue $ 123,459 $ 115,374 $
360,660 $ 344,712 Amortization of acquired intangible assets on
cost of product (1,094) (6,072) (5,019) (18,486) Amortization of
acquired intangible assets on cost of services (1,523) (987)
(3,333) (5,354) Amortization of acquired intangible assets on cost
of cloud (12,937) (11,756) (38,397) (33,706) Valuation adjustment
on acquired deferred cost of cloud 594 371 1,254 1,133 Cost of
product revenue adjustment (1) (59) (158) (247) (494) Cost of
services revenue adjustment (1) (2,113) (1,903) (5,762) (5,625)
Cost of cloud revenue adjustment (1,3) (2,352) (649) (3,766)
(2,132) ASC 606 to ASC 605 cost of revenue adjustment 323
- 650 - Non-GAAP cost of revenue $ 104,298 $
94,220 $ 306,040 $ 280,048 GAAP gross profit $
232,747 $ 207,381 $ 673,030 $ 595,205 Gross profit adjustments
19,401 25,150 63,711 74,875 Non-GAAP
gross profit $ 252,148 $ 232,531 $ 736,741 $ 670,080
GAAP operating expenses $ 186,094 $ 174,261 $ 545,821 $ 508,310
Research and development (1,3) (2,638) (2,204) (6,777) (6,651)
Sales and marketing (1,3) (9,004) (5,651) (22,158) (17,160) General
and administrative (1,2,3) (6,206) (1,640) (15,156) (7,027)
Amortization of acquired intangible assets (10,341) (10,566)
(31,512) (31,319) ASC 606 to ASC 605 operating expenses adjustment
3,459 - 6,543 Non-GAAP operating
expenses $ 161,364 $ 154,200 $ 476,761 $ 446,153 GAAP
finance & other expense, net $ 2,195 $ 4,335 $ 9,100 $ 16,713
Amortization of discount on long-term debt (2,234)
(2,139) (6,491) (11,398) Non-GAAP finance & other
expense (income), net $ (39) $ 2,196 $ 2,609 $ 5,315
GAAP taxes on income $ 5,175 $ 2,612 $ 21,065 $ 6,279 Tax
adjustments re non-GAAP adjustments 15,322 14,611 34,413 42,298 Tax
adjustment re ASC 606 to ASC 605 (1,264) -
(935) - Non-GAAP taxes on income $ 19,233 $ 17,223 $ 54,543
$ 48,577 GAAP net income $ 39,283 $ 26,173 $ 97,044 $
63,903 Valuation adjustment on acquired deferred revenue 2,423
3,996 6,316 10,211 Valuation adjustment on acquired deferred cost
of cloud revenue (594) (371) (1,254) (1,133) Amortization of
acquired intangible assets 25,895 29,381 78,261 88,865 Share-based
compensation (1) 17,258 14,016 48,752 40,900 Re-organization
expenses (2) - (3,067) - (3,067) Acquisition related expenses (3)
5,114 1,256 5,114 1,256 Amortization of discount on long term debt
2,234 2,139 6,491 11,398 Tax adjustments re non-GAAP adjustments
(15,322) (14,611) (34,413) (42,298) ASC 606 to ASC 605 adjustments
(4,701) - (3,483) - Non-GAAP net income
$ 71,590 $ 58,912 $ 202,828 $ 170,035 GAAP diluted earnings
per share $ 0.62 $ 0.42 $ 1.54 $ 1.03 Non-GAAP diluted
earnings per share $ 1.12 $ 0.95 $ 3.21 $ 2.74 Shares used
in computing GAAP diluted earnings per share 63,660 62,220 63,157
61,979 Shares used in computing non-GAAP diluted earnings
per share 63,660 62,220 63,157 61,979
NICE LTD. AND
SUBSIDIARIES RECONCILIATION OF GAAP TO
NON-GAAP RESULTS AND ASC 606 TO NON-GAAP ASC 605 (continued)
U.S. dollars in thousands
(1)
Share-based
Compensation
Quarter ended Year to date September 30,
September 30, 2018 2017
2018 2017 Cost of product revenue $
(59) $ (158) $ (247) $ (494) Cost of services revenue (2,113)
(1,903) (5,762) (5,625) Cost of cloud revenue (718) (649) (2,132)
(2,132) Research and development (1,567) (2,204) (5,706) (6,651)
Sales and marketing (8,930) (5,576) (22,084) (17,085) General and
administrative (3,871) (3,526) (12,821)
(8,913) $ (17,258) $ (14,016) $ (48,752) $ (40,900)
(2)
Re-organization
expenses
Quarter ended Year to date September 30,
September 30, 2018 2017
2018 2017 General and administrative
- $ 3,067 - $ 3,067 $ - $ 3,067 $ - $ 3,067
(3)
Acquisition
related expenses
Quarter ended Year to date September
30, September 30, 2018 2017
2018 2017 Cost of cloud revenue
$ (1,634) $ - $ (1,634) $ - Research and development (1,071) -
(1,071) - Sales and marketing (74) (75) (74) (75) General and
administrative (2,335) (1,181) (2,335)
(1,181) $ (5,114) $ (1,256) $ (5,114) $ (1,256)
NICE LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS U.S. dollars in thousands
September
30, December 31, 2018 2017
Unaudited Audited
ASSETS CURRENT
ASSETS: Cash and cash equivalents $ 276,170 $ 328,302
Short-term investments 172,942 63,951 Trade receivables 219,818
230,729 Prepaid expenses and other current assets 96,745
70,074 Total current assets 765,675
693,056
LONG-TERM ASSETS: Long-term investments
207,234 132,820 Property and equipment, net 132,310 118,275
Deferred tax assets 15,298 11,850 Other intangible assets, net
536,974 551,347 Goodwill 1,368,756 1,318,242 Other long-term assets
68,461 19,496 Total long-term assets
2,329,033 2,152,030
TOTAL ASSETS $ 3,094,708 $
2,845,086
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES: Trade payables $ 23,698 $ 29,438
Deferred revenues and advances from customers 198,210 184,564
Accrued expenses and other liabilities 347,852
309,350 Total current liabilities 569,760
523,352
LONG-TERM LIABILITIES: Deferred revenues and
advances from customers 39,179 37,550 Deferred tax liabilities
48,489 57,796 Long-term debt 453,887 447,642 Other long-term
liabilities 32,486 29,185 Total long-term
liabilities 574,041 572,173
SHAREHOLDERS'
EQUITY 1,950,907 1,749,561
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,094,708 $ 2,845,086
NICE LTD. AND
SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENTS U.S.
dollars in thousands
Quarter ended Year to date
September 30, September 30, 2018 2017
2018 2017 Unaudited Unaudited Unaudited
Unaudited
Operating
Activities
Net income 39,283 26,173 97,044 63,903 Depreciation and
amortization 39,426 39,153 114,283 115,309 Stock based compensation
17,258 14,016 48,752 40,900 Amortization of premium and discount
and accrued interest on marketable securities 137 273 (170) 424
Deferred taxes, net (13,142) (12,646) (33,054) (34,188) Changes in
operating assets and liabilities: Trade Receivables (5,771) 10,930
(3,083) 72,810 Prepaid expenses and other current assets (4,233)
(32,264) (32,461) (40,251) Trade payables (8,940) 7,605 (6,608) 636
Accrued expenses and other current liabilities 34,643 52,829 24,179
17,228 Deferred revenue (15,279) 1,660 71,827 65,176 Long term
liabilities 573 (3,583) (214) (5,189) Amortization of discount on
long term debt 2,234 2,139 6,491 11,398 Other 847 (461) 720 (926)
Net cash provided by operating activities 87,036 105,824 287,706
307,230
Investing
Activities
Purchase of property and equipment (7,957) (7,899) (21,521)
(31,422) Purchase of Investments (96,544) (53,791) (284,467)
(96,017) Proceeds from Investments 40,093 15,610 99,802 51,626
Capitalization of software development costs (7,450) (7,730)
(22,926) (21,046) Payments for business acquisitions, net of cash
acquired (105,046) (37,880) (105,046) (37,880) Net cash used in
investing activities (176,904) (91,690) (334,158) (134,739)
Financing
Activities
Proceeds from issuance of shares upon exercise of share
options 10,533 4,412 17,976 16,787 Purchase of treasury shares -
(4,267) (10,613) (20,314) Dividends paid - - - (9,637) Repayment of
long term debt - - - (260,000) Proceeds from issuance of debt, net
of costs - - - 260,842 Repayment of short-term bank loan (8,436) -
(8,436) - Net cash provided by (used in) financing activities 2,097
145 (1,073) (12,322) Effect of exchange rates on cash and
cash equivalents (875) 2,028 (4,607) 3,734 Net change in
cash and cash equivalents (88,646) 16,307
(52,132) 163,903 Cash and cash equivalents, beginning of period
364,816 304,622 328,302 157,026 Cash and cash equivalents,
end of period 276,170 320,929 276,170 320,929
View source
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NICE
InvestorsMarty Cohen, +1 551 256 5354, ETir@nice.com
Yisca Erez, +972 9 775-3798, CETir@nice.com
Media ContactChris Irwin-Dudek, +1 (551)
256-5140Chris.Irwin-Dudek@nice.com
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