NICE Reports Strong Revenue And EPS Growth For The Third Quarter 2016

NICE (NASDAQ:NICE) today announced results for the third quarter ended September 30, 2016.

Third Quarter 2016 Financial Highlights
GAAP     Non-GAAP
Revenue growth of 7% year-over-year     Revenue growth of 9% year-over-year
Gross margin of 67.1% compared to 66.3% last year     Gross margin of 72.2% compared to 69.8% last year
Operating profit of $36 million, down 5% year-over-year     Operating profit of $64 million, up 15% year-over-year
Operating margin of 15.2% compared to 17.1% last year     Operating margin of 26.7% compared to 25.2% last year
Diluted EPS from continuing operations of $0.53 versus $0.48 last year, 10% growth     Diluted EPS from continuing operations of $0.83 versus $0.75 last year, 11% growth

"We are pleased to report another quarter of solid growth and profitability," said Barak Eilam, CEO of NICE. "Excluding the impact of currency exchange rates, we delivered our second consecutive quarter of double digit revenue growth, as well as, another quarter of double digit EPS growth."

Mr. Eilam continued, "The customer service market is evolving due to the need for more sophisticated analytics, the rapid transition to omni-channel and Cloud. The strategic steps that we have taken including our technology and portfolio innovation, Nexidia analytics and the acquisition of inContact, a leader in omni-channel cloud, have positioned us well to capitalize on the significant market opportunities.

"We are encouraged by the very high level of interest among customers and partners since the announcement of the inContact acquisition, and we are extremely pleased by the positive feedback we have received from them, as well as, the positive reviews from industry analysts."

Dividend Declaration

The Company declared a cash dividend for the third quarter of 2016 of $0.16 per share. The record date will be November 22 th, 2016 and the payment date will be December 6 th, 2016. Tax will be withheld at a rate of 15%.

GAAP Financial Highlights for the Third Quarter Ended September 30:

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 2016 and 2015.

Revenues: Third quarter 2016 total revenues increased 7.3% to $237.2 million compared to $221.1 million for the third quarter of 2015.

Gross Profit: Third quarter 2016 gross profit and gross margin increased to $159.1 million and 67.1%, respectively, compared to $146.5 million and 66.3%, respectively, for the third quarter of 2015.

Operating Income: Third quarter 2016 operating income and operating margin were $36.0 million and 15.2%, respectively, compared to $37.8 million and 17.1%, respectively, for the third quarter of 2015.

Net Income from Continuing Operations: Third quarter 2016 net income and net margin increased to $32.4 million and 13.7%, respectively, compared to $29.5 million and 13.3%, respectively, for the third quarter of 2015.

Fully Diluted Earnings Per Share from Continuing Operations: Fully diluted earnings per share for the third quarter of 2016 increased 10.4% to $0.53, compared to $0.48 in the third quarter of 2015.

Operating Cash Flow and Cash Balance: Third quarter 2016 operating cash flow was $39.4 million. In the third quarter, $2.9 million was used for share repurchases and $9.6 million for dividends. As of September 30, 2016, total cash and cash equivalents, short term investments and marketable securities were $798.7 million, with no debt.

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

The following non-GAAP financial data are from continuing operations, which exclude the results of the Intelligence and the Physical Security divisions for both 2016 and 2015.

Revenues: Third quarter 2016 non-GAAP total revenues were $240.3 million, up 8.7% from $221.1 million for the third quarter of 2015.

Gross Profit: Third quarter 2016 non-GAAP gross profit and non-GAAP gross margin increased to $173.6 million and 72.2%, respectively, from $154.3 million and 69.8%, respectively, for the third quarter of 2015.

Operating Income: Third quarter 2016 non-GAAP operating income and non-GAAP operating margin increased to $64.2 million and 26.7%, respectively, from $55.7 million and 25.2%, respectively, for the third quarter of 2015.

Net Income from Continuing Operations: Third quarter 2016 non-GAAP net income and non-GAAP net margin increased to $50.7 million and 21.1%, respectively, from $46.3 million and 21.0%, respectively, for the third quarter of 2015.

Fully Diluted Earnings Per Share from Continuing Operations: Third quarter 2016 non-GAAP fully diluted earnings per share increased 10.7% to $0.83, compared to $0.75 for the third quarter of 2015.

Fourth Quarter and Full Year 2016 Guidance:

The following guidance assumes the closing of the inContact acquisition within two weeks and includes inContact's results for the period from the closing of the acquisition until the end of the year.

Fourth Quarter 2016: Fourth quarter 2016 non-GAAP total revenues are expected to be in a range of $320 million to $334 million. Fourth quarter 2016 non-GAAP fully diluted earnings per share are expected to be in a range of $1.10 to $1.22.

Full Year 2016: Full year 2016 non-GAAP total revenues are expected to be in a range of $1,022 million to $1,036 million. Full year 2016 non-GAAP fully diluted earnings per share are expected to be in a range of $3.53 to $3.65.

Quarterly Results Conference Call

NICE management will host its earnings conference call today, November 10 th, 2016 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 1-809-242-041. The Passcode is 551 268 39. 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 840 330 23.

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, realized gain from substantial liquidation of marketable securities 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 enterprise software solutions that empower organizations to make smarter decisions based on advanced analytics of structured and unstructured data. NICE solutions help the world's largest organizations deliver better customer service, ensure compliance, combat fraud and safeguard citizens. Over 25,000 organizations in more than 150 countries, including over 80 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 the required approvals for the inContact acquisition may not be received on the expected timeline or at all. 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 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,
2016 2015 2016 2015
Unaudited Unaudited Unaudited Unaudited
 
Revenue:
Product

$

68,617

$

68,266

$

195,277

$

207,821
Services 168,570 152,819 496,405 445,488
Total revenue 237,187 221,085 691,682 653,309
 
Cost of revenue:
Product 11,815 15,726 39,786 47,238
Services 66,249 58,853 195,185 174,303
Total cost of revenue 78,064 74,579 234,971 221,541
 
Gross profit 159,123 146,506 456,711 431,768
 
Operating Expenses:
Research and development, net 33,606 32,361 100,646 92,919
Selling and marketing 61,878 51,921 176,366 162,218
General and administrative 24,456 21,331 72,227 64,287
Amortization of acquired intangible assets 3,155 3,091 10,412 9,968
Total operating expenses 123,095 108,704 359,651 329,392
 
Operating income 36,028 37,802 97,060 102,376
 
Finance and other income, net 4,968 1,505 11,665 4,116
 
Income from continuing operations before tax 40,996 39,307 108,725 106,492
Taxes on income (tax benefit) 8,554 9,855 15,647 22,798
Net income from continuing operations 32,442 29,452 93,078 83,694
 
Discontinued operations
Gain on disposal and income (loss) from operations of discontinued operations (2,143) 148,572 (2,259) 154,080
Taxes on income - 35,080 - 36,336
Net income (loss) from discontinued operations (2,143) 113,492 (2,259) 117,744
 
Net income

$

30,299

$

142,944

$

90,819

$

201,438
 
Basic earnings per share from continuing operations

$

0.54

$

0.49

$

1.56

$

1.40
Basic earnings (loss) per share from discontinued operations

$

(0.03)

$

1.91

$

(0.04)

$

1.98
Basic earnings per share

$

0.51

$

2.40

$

1.52

$

3.38
 
Diluted earnings per share from continuing operations

$

0.53

$

0.48

$

1.53

$

1.36
Diluted earnings (loss) per share from discontinued operations

$

(0.03)

$

1.85

$

(0.04)

$

1.92
Diluted earnings per share

$

0.50

$

2.33

$

1.49

$

3.28
 
Weighted average number of shares
outstanding used to compute:
 
Basic earnings (loss) per share 59,765 59,671 59,563 59,519
Diluted earnings (loss) per share 61,119 61,418 60,930 61,344
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,
2016 2015 2016 2015
GAAP revenues

$

237,187

$

221,085

$

691,682

$

653,309
Valuation adjustment on acquired deferred product revenue 75 - 1,450 -
Valuation adjustment on acquired deferred service revenue 3,026 - 8,676 177
Non-GAAP revenues

$

240,288

$

221,085

$

701,808

$

653,486
 
 
GAAP cost of revenue

$

78,064

$

74,579

$

234,971

$

221,541
Amortization of acquired intangible assets on cost of product (6,285) (6,877) (20,167) (20,539)
Amortization of acquired intangible assets on cost of services (3,208) - (6,681) -
Cost of product revenue adjustment (1,3) (124) (100) (314)

 
(371)
Cost of services revenue adjustment (1,2,3) (1,723) (799) (5,054) (2,047)
Non-GAAP cost of revenue

$

66,724

$

66,803

$

202,755

$

198,584
 
 
GAAP gross profit

$

159,123

$

146,506

$

456,711

$

431,768
Gross profit adjustments 14,441 7,776 42,342 23,134
Non-GAAP gross profit

$

173,564

$

154,282

$

499,053

$

454,902
 
 
GAAP operating expenses

$

123,095

$

108,704

$

359,651

$

329,392
Research and development (1,2,3) (1,385) (1,377) (4,462) (2,193)
Sales and marketing (1,2,3) (4,069) (3,094) (11,139) (8,098)
General and administrative (1,2,3) (5,153) (2,560) (13,246) (8,127)
Amortization of acquired intangible assets (3,155) (3,091) (10,412) (9,968)
Settlement and related expenses - - - (390)
Non-GAAP operating expenses

$

109,333

$

98,582

$

320,392

$

300,616
 
 
GAAP finance & other income, net

$

4,968

$

1,505

$

11,665

$

4,116
Realized gain from substantial liquidation of marketable securities (2,711) - (2,711) -
Non-GAAP finance & other income, net

$

2,257

$

1,505

$

8,954

$

4,116
 
 
GAAP taxes on income

$

8,554

$

9,855

$

15,647

$

22,798
Tax adjustments re non-GAAP adjustments 7,228 1,024 23,753 7,431
Non-GAAP taxes on income

$

15,782

$

10,879

$

39,400

$

30,229
 
 
GAAP net income (loss) from continuing operations

$

32,442

$

29,452

$

93,078

$

83,694
Valuation adjustment on acquired deferred revenue 3,101 - 10,126 177
Amortization of acquired intangible assets 12,648 9,968 37,260 30,507
Share-based compensation (1) 9,458 6,948 25,714 19,854
Re-organization expenses (2) 1,523 982 3,293 982
Acquisition related expenses (3) 1,473 - 5,208 -
Realized gain from substantial liquidation of marketable securities (2,711) - (2,711) -
Settlement and related expenses - - - 390
Tax adjustments re non-GAAP adjustments (7,228) (1,024) (23,753)

 
(7,431)
Non-GAAP net income (loss) from continuing operations

$

50,706

$

46,326

$

148,215

$

128,173
 
 
GAAP diluted earnings (loss) per share from continuing operations

$

0.53

$

0.48

$

1.53

$

1.36
 
Non-GAAP diluted earnings per share from continuing operations

$

0.83

$

0.75

$

2.43

$

2.09
 
 
Shares used in computing GAAP diluted earnings (loss) per share 61,119 61,418 60,930 61,344
 
Shares used in computing Non-GAAP diluted earnings per share 61,119 61,418 60,930 61,344
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,
2016 2015 2016 2015
Cost of product revenue

$

(114)

$

(100)

$

(304)

$

(371)
Cost of service revenue (1,715) (755) (4,801) (2,003)
Research and development (1,383) (439) (3,541) (1,255)
Sales and marketing (4,008) (3,094) (10,441) (8,098)
General and administrative (2,238) (2,560) (6,627) (8,127)

$

(9,458)

$

(6,948)

$

(25,714)

$

(19,854)
 
 
(2)

Re-organization expenses
Quarter ended Year to date
September 30, September 30,
2016 2015 2016 2015
Cost of service revenue

$

(1)

$

(44)

$

(246)

$

(44)
Research and development - (938) (896) (938)
Sales and marketing - - (150) -
General and administrative (1,522) - (2,001) -

$

(1,523)

$

(982)

$

(3,293)

$

(982)
 
 
 
(3)

Acquisition related expenses
Quarter ended Year to date
September 30, September 30,
2016 2015 2016 2015
Cost of product revenue

$

(10)

$

-

$

(10)

$

-
Cost of service revenue (7) - (7) -
Research and development (2) - (25) -
Sales and marketing (61) - (548) -
General and administrative (1,393) - (4,618) -

$

(1,473)

$

-

$

(5,208)

$

-
NICE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
     
September 30, December 31,
2016 2015
Unaudited Unaudited
 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents

$

666,125

$

325,931
Short-term investments 22,253 99,195
Trade receivables 149,200 177,323
Prepaid expenses and other current assets 62,100 43,561
Current assets of discontinued operations 2,672 9,142
 
Total current assets 902,350 655,152
 
LONG-TERM ASSETS:
Long-term investments 110,280 403,249
Other long-term assets 17,440 17,175
Property and equipment, net* 53,283 40,593
Deferred tax assets 19,194 14,130
Other intangible assets, net* 102,034 68,202
Goodwill 730,736 651,112
 
Total long-term assets 1,032,967 1,194,461
 
TOTAL ASSETS

$

1,935,317

$

1,849,613
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Trade payables

$

18,928

$

11,719
Deferred revenues and advances from customers 176,858 151,345
Accrued expenses and other liabilities 222,773 223,255
Current liabilities of discontinued operations 3,242 12,744
 
Total current liabilities 421,801 399,063
 
LONG-TERM LIABILITIES:
Deferred tax liabilities 12,913 15,040
Other long-term liabilities 17,700 17,952
Long-term liabilities of discontinued operations 2,409 2,409
 
Total long-term liabilities 33,022 35,401
 
SHAREHOLDERS' EQUITY 1,480,494 1,415,149
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,935,317

$

1,849,613
 
*Certain comparative figures have been reclassified to conform to the current year presentation.
NICE LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands
      Quarter ended Year to date
September 30,   September 30,
2016 2015 2016   2015
Unaudited Unaudited Unaudited Unaudited
 
Operating Activities
 
Net income

$

30,299

$

142,944

$

90,819

$

201,438
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization 16,932 14,339 50,332 44,670
Stock based compensation 9,457 7,402 25,714 20,677
Excess tax benefit from share-based payment arrangements (2,024) (2,028) (3,172) (4,042)
Amortization of premium and discount and accrued interest on marketable securities 714 730 2,355 1,943
Deferred taxes, net (4,815) 2,380 (17,512) (4,028)
Changes in operating assets and liabilities:
Trade Receivables (13,691) (33,465) 40,678 (15,017)
Prepaid expenses and other current assets (1,340) (1,410) 3,428 (3,887)
Trade payables (372) 3,853 4,917 11,644
Accrued expenses and other current liabilities 18,890 62,534 (29,548) 49,926
Deferred revenue (13,659) 669 16,196 53,175
Gain on sale and loss on disposal of discontinued operations 1,990 (148,428) 1,990 (148,428)
Realized gain on marketable securities (2,817) (9) (3,366) 257
Other (167) (9) (182) 2,838
 
Net cash provided by operating activities 39,397 49,502 182,649 211,166
 
Investing Activities
 
Purchase of property and equipment (7,022) (3,006) (18,165) (10,966)
Purchase of Investments - (103,697) (47,221) (227,844)
Proceeds from Investments 340,487 20,612 420,965 63,154
Capitalization of software development costs (1,948) (491) (4,706) (703)
Proceeds (repayment) from sale of discontinued operations (1,990) 167,501 (1,990) 167,501
Payments for business acquisitions, net of cash acquired (3)   - (151,328) (1,500)
Net cash provided by (used in) investing activities 329,524 80,919 197,555 (10,358)
 
Financing Activities
 
Proceeds from issuance of shares upon exercise of share options and ESPP 8,092 5,878 21,261 23,011
Purchase of treasury shares (2,924) (30,000) (35,017) (48,384)
Dividends paid (9,568) (9,566) (28,604) (28,680)
Capital Lease Payments (515) - (695) -
Excess tax benefit from share-based payment arrangements 2,024 2,028 3,172 4,042
Earnout payments related to acquisitions - (24) - (286)
 
Net cash used in financing activities (2,891) (31,684) (39,883) (50,297)
 
Effect of exchange rates on cash and cash equivalents (912) (2,299) (127) (4,764)
 
Net change in cash and cash equivalents 365,118 96,438 340,194 145,747
Cash and cash equivalents, beginning of period 301,007 236,292 325,931 187,497
 
Cash and cash equivalents, end of period

$

666,125

$

332,730

$

666,125

$

333,244

View source version on businesswire.com: http://www.businesswire.com/news/home/20161110005558/en/

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