NICE Reports 30% Cloud Growth for Second Quarter 2020

·19-min read

Strong Growth in Operating Income with Greater Than 200% Year-Over-Year Growth in Cash Flow from Operations

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

Second Quarter 2020 Financial Highlights

GAAP

Non-GAAP

Cloud revenue of $184 million, growth of 30% year-over-year

Cloud revenue of $186 million, growth of 30% year-over-year

Total revenue of $393 million, growth of 3% year-over-year

Total revenue of $395 million, growth of 4% year-over-year

Gross margin of 65.5% compared to 65.6% last year

Gross margin of 71.0% compared to 70.9% last year

Cloud gross margin of 56.2% compared to 50.3% last year

Cloud gross margin of 65.7% compared to 61.4% last year

Operating income of $56 million compared to $53 million last year, an increase of 5%

Operating income of $111 million compared to $101 million last year, an increase of 10%

Operating margin of 14.3% compared to 14.1% last year

Operating margin of 28.2% compared to 26.6% last year

Diluted EPS of $0.68 versus $0.65 last year, 5% growth year-over-year

Diluted EPS of $1.37 versus $1.25 last year, 10% growth year-over-year

Operating cash flow of $60 million compared to $18 million last year

"We are pleased to report another quarter of strong and accelerated cloud growth as cloud revenues grew 30% year-over-year, combined with a continued substantial increase in profitability," said Barak Eilam, CEO of NICE. "The strong cloud performance demonstrates how well we are positioned, as enterprises of all sizes become intensely focused on extreme agility in a constantly changing environment."

Mr. Eilam continued, "Our recent business performance highlights that: 1) our solutions are mission critical now more than ever, 2) our cloud platforms are essential to enable a flexible work-from-home mode of operation, and 3) cloud and digital transformation, which are at the core of our business, are now dramatically accelerating in the enterprise market."

GAAP Financial Highlights for the Second Quarter Ended June 30:

Revenues: Second quarter 2020 total revenues increased 3.4% to $393.2 million compared to $380.4 million for the second quarter of 2019.

Gross Profit: Second quarter 2020 gross profit increased to $257.4 million from $249.6 million. Second quarter 2020 gross margin was 65.5% compared to 65.6% for the second quarter of 2019.

Operating Income: Second quarter 2020 operating income and operating margin increased to $56.1 million and 14.3%, respectively, compared to $53.5 million and 14.1%, respectively, for the second quarter of 2019.

Net Income: Second quarter 2020 net income and net income margin increased to $44.6 million and 11.3%, respectively, compared to $42.1 million and 11.1%, respectively, for the second quarter of 2019.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the second quarter of 2020 increased 4.6% to $0.68, compared to $0.65 in the second quarter of 2019.

Operating Cash Flow and Cash Balance: Second quarter 2020 operating cash flow was $59.6 million. In the second quarter $3.5 million was used for share repurchases. As of June 30, 2020, total cash and cash equivalents, short term investments were $1,103.0 million, and total debt was $469.6 million.

Non-GAAP Financial Highlights for the Second Quarter Ended June 30:

Revenues: Second quarter 2020 non-GAAP total revenues increased to $395.1 million, up 3.6% from $381.4 million for the second quarter of 2019.

Gross Profit: Second quarter 2020 non-GAAP gross profit and gross margin increased to $280.5 million and 71.0%, respectively, from $270.5 million and 70.9%, respectively for the second quarter of 2019.

Operating Income: Second quarter 2020 non-GAAP operating income and non-GAAP operating margin increased to $111.4 million and 28.2%, respectively, from $101.3 million and 26.6%, respectively, for the second quarter of 2019.

Net Income: Second quarter 2020 non-GAAP net income and non-GAAP net income margin increased to $89.9 million and 22.7%, respectively, from $80.9 million and 21.2%, respectively, for the second quarter of 2019.

Fully Diluted Earnings Per Share: Second quarter 2020 non-GAAP fully diluted earnings per share increased 9.6% to $1.37, compared to $1.25 for the second quarter of 2019.

Third Quarter 2020 Guidance:

Third quarter 2020 Non-GAAP total revenues are expected to be in a range of $403 million to $413 million. Third quarter 2020 Non-GAAP fully diluted earnings per share are expected to be in a range of $1.33 to $1.43.

Quarterly Results Conference Call

NICE management will host its earnings conference call today August 6th, 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 +1-718-354-1175, International +44(0)1296-480-100, United Kingdom 0-800-783-0906, Israel 1-809-344-364. The Passcode is 608 059 84. 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 973 031 96.

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

June 30,

December 31,

2020

2019

Unaudited

Audited

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

344,098

$

228,323

Short-term investments

758,918

210,772

Trade receivables

301,951

319,622

Prepaid expenses and other current assets

132,929

116,972

Total current assets

1,537,896

875,689

LONG-TERM ASSETS:

Long-term investments

-

542,389

Property and equipment, net

142,999

141,647

Deferred tax assets

32,451

30,513

Other intangible assets, net

377,355

411,019

Operating lease right-of-use assets

100,891

106,196

Goodwill

1,428,097

1,378,418

Other long-term assets

142,219

124,034

Total long-term assets

2,224,012

2,734,216

TOTAL ASSETS

$

3,761,908

$

3,609,905

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Trade payables

$

27,731

$

30,376

Deferred revenues and advances from customers

276,772

245,792

Current maturities of operating leases

21,128

21,519

Exchangeable senior notes

255,610

251,583

Accrued expenses and other liabilities

372,132

391,685

Total current liabilities

953,373

940,955

LONG-TERM LIABILITIES:

Deferred revenues and advances from customers

29,336

26,045

Operating leases

97,333

103,490

Deferred tax liabilities

48,037

52,509

Loan

213,998

213,313

Other long-term liabilities

16,587

16,327

Total long-term liabilities

405,291

411,684

SHAREHOLDERS' EQUITY

Nice Ltd's equity

2,378,525

2,257,266

Non-controlling interests

24,719

-

Total shareholders' equity

2,403,244

2,257,266

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

3,761,908

$

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

June 30,

June 30,

2020

2019

2020

2019

Unaudited

Unaudited

Unaudited

Audited

Revenue:

Product

$

38,257

$

62,018

$

102,865

$

132,049

Services

170,979

176,420

344,171

347,338

Cloud

183,944

141,976

356,572

278,054

Total revenue

393,180

380,414

803,608

757,441

Cost of revenue:

Product

5,173

5,651

11,277

11,532

Services

50,037

54,619

103,550

109,742

Cloud

80,523

70,495

160,991

140,541

Total cost of revenue

135,733

130,765

275,818

261,815

Gross profit

257,447

249,649

527,790

495,626

Operating expenses:

Research and development, net

53,756

46,456

106,537

93,022

Selling and marketing

97,505

94,878

197,321

196,945

General and administrative

40,398

44,029

89,511

78,743

Amortization of acquired intangible assets

9,650

10,795

19,455

21,496

Total operating expenses

201,309

196,158

412,824

390,206

Operating income

56,138

53,491

114,966

105,420

Financial and other expense/(income), net

(423)

724

1,227

4,142

Income before tax

56,561

52,767

113,739

101,278

Taxes on income

11,956

10,709

23,020

22,156

Net income

44,605

42,058

$

90,719

79,122

Less: net loss attributable to non-controlling interests

182

-

266

-

Net income attributable to Nice Ltd.'s shareholders

44,787

42,058

90,985

79,122

Earnings per share:

Basic

$

0.71

$

0.68

$

1.45

$

1.28

Diluted

$

0.68

$

0.65

$

1.39

$

1.23

Weighted average shares outstanding:

Basic

62,638

62,116

62,557

61,980

Diluted

65,633

64,650

65,484

64,205

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

June 30,

June 30,

2020

2019

2020

2019

GAAP revenues

$

393,180

$

380,414

$

803,608

$

757,441

Valuation adjustment on acquired deferred product revenue

-

-

-

15

Valuation adjustment on acquired deferred services revenue

-

-

-

2

Valuation adjustment on acquired deferred cloud revenue

1,950

953

2,729

1,825

Non-GAAP revenues

$

395,130

$

381,367

$

806,337

$

759,283

GAAP cost of revenue

$

135,733

$

130,765

$

275,818

$

261,815

Amortization of acquired intangible assets on cost of product

(1,125)

(979)

(2,259)

(1,849)

Amortization of acquired intangible assets on cost of services

(1,497)

(1,534)

(3,019)

(3,069)

Amortization of acquired intangible assets on cost of cloud

(16,064)

(15,043)

(31,622)

(29,848)

Valuation adjustment on acquired deferred cost of cloud

244

632

537

1,318

Cost of product revenue adjustment (1)

(68)

(102)

(136)

(207)

Cost of services revenue adjustment (1)

(1,680)

(2,001)

(3,280)

(4,145)

Cost of cloud revenue adjustment (1,2)

(948)

(877)

(1,792)

(1,784)

Non-GAAP cost of revenue

$

114,595

$

110,861

$

234,247

$

222,231

GAAP gross profit

$

257,447

$

249,649

$

527,790

$

495,626

Gross profit adjustments

23,088

20,857

44,300

41,426

Non-GAAP gross profit

$

280,535

$

270,506

$

572,090

$

537,052

GAAP operating expenses

$

201,309

$

196,158

$

412,824

$

390,206

Research and development (1,2)

(2,373)

(1,587)

(4,988)

(3,149)

Sales and marketing (1,2)

(8,797)

(5,798)

(14,062)

(11,474)

General and administrative (1,2)

(11,340)

(8,806)

(24,174)

(15,416)

Amortization of acquired intangible assets

(9,650)

(10,794)

(19,455)

(21,496)

Valuation adjustment on acquired deferred commission

36

76

71

169

Non-GAAP operating expenses

$

169,185

$

169,249

$

350,216

$

338,840

GAAP financial and other expense/(income), net

$

(423)

$

724

$

1,227

$

4,142

Amortization of discount on debt

(2,532)

(2,162)

(4,874)

(4,470)

Non-GAAP financial and other expense, net

$

(2,955)

$

(1,438)

$

(3,647)

$

(328)

GAAP taxes on income

$

11,956

$

10,709

$

23,020

$

22,156

Tax adjustments re non-GAAP adjustments

12,499

11,052

24,790

19,934

Non-GAAP taxes on income

$

24,455

$

21,761

$

47,810

$

42,090

GAAP net income

$

44,605

$

42,058

$

90,719

$

79,122

Valuation adjustment on acquired deferred revenue

1,950

953

2,729

1,842

Valuation adjustment on acquired deferred cost of cloud revenue

(244)

(632)

(537)

(1,318)

Amortization of acquired intangible assets

28,336

28,350

56,355

56,262

Valuation adjustment on acquired deferred commission

(36)

(76)

(71)

(169)

Share-based compensation (1)

25,206

18,328

46,851

35,332

Acquisition related expenses (2)

-

843

1,581

843

Amortization of discount on long term debt

2,532

2,162

4,874

4,470

Tax adjustments re non-GAAP adjustments

(12,499)

(11,052)

(24,790)

(19,934)

Non-GAAP net income

$

89,850

$

80,934

$

177,711

$

156,450

GAAP diluted earnings per share

$

0.68

$

0.65

$

1.39

$

1.23

Non-GAAP diluted earnings per share

$

1.37

$

1.25

$

2.71

$

2.44

Shares used in computing GAAP diluted earnings per share

65,633

64,650

65,484

64,205

Shares used in computing non-GAAP diluted earnings per share

65,633

64,650

65,484

64,205

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

June 30,

June 30,

2020

2019

2020

2019

Cost of product revenue

$

68

$

102

$

136

$

207

Cost of services revenue

1,680

2,001

3,280

4,145

Cost of cloud revenue

948

877

1,792

1,784

Research and development

2,373

1,582

4,988

3,144

Sales and marketing

8,797

5,768

13,974

11,444

General and administrative

11,340

7,998

22,681

14,608

$

25,206

$

18,328

$

46,851

$

35,332

(2)

Acquisition related expenses

Quarter ended

Year to date

June 30,

June 30,

2020

2019

2020

2019

Research and development

$

-

$

5

$

-

$

5

Sales and marketing

-

30

88

30

General and administrative

-

808

1,493

808

$

-

$

843

$

1,581

$

843

NICE LTD. AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

U.S. dollars in thousands

Quarter ended

Year to date

June 30,

June 30,

2020

2019

2020

2019

Unaudited

Unaudited

Unaudited

Audited

Operating Activities

Net income

$

44,605

$

42,058

$

90,719

$

79,122

Depreciation and amortization

45,601

43,012

89,651

84,820

Stock based compensation

25,064

18,312

46,632

35,316

Amortization of premium and discount and accrued interest on marketable securities

(3,618)

(233)

(2,870)

(574)

Deferred taxes, net

(678)

(10,764)

(9,870)

(18,622)

Changes in operating assets and liabilities:

Trade Receivables

14,134

(10,611)

14,793

20,112

Prepaid expenses and other assets

(20,677)

(51,949)

(34,768)

(72,531)

Trade payables

(13,283)

4,543

(805)

3,718

Accrued expenses and other current liabilities

(33,357)

(22,822)

(21,460)

9,616

Operating lease right-of-use assets, net

4,363

3,379

8,512

7,496

Deferred revenue

(415)

5,462

38,098

58,869

Long term liabilities

-

(403)

-

(280)

Operating lease liabilities

(4,132)

(3,654)

(9,689)

(9,159)

Amortization of discount on long term debt

2,532

2,162

4,875

4,469

Other

(558)

(516)

585

(1,984)

Net cash provided by operating activities

59,581

17,976

214,403

200,388

Investing Activities

Purchase of property and equipment

(7,823)

(6,566)

(17,456)

(14,982)

Purchase of Investments

(69,061)

(114,834)

(154,488)

(306,142)

Proceeds from Investments

78,980

93,558

164,865

170,508

Capitalization of software development costs

(9,912)

(8,897)

(19,199)

(17,391)

Payments for business and asset acquisitions, net of cash acquired

-

(25,788)

(50,836)

(25,788)

Net cash used in investing activities

(7,816)

(62,527)

(77,114)

(193,795)

Financing Activities

Proceeds from issuance of shares upon exercise of share options

5,865

1,401

7,349

3,018

Purchase of treasury shares

(3,531)

(4,615)

(27,601)

(14,715)

Capital Lease payments

(15)

(187)

(177)

(440)

Net cash provided by/(used in) financing activities

2,319

(3,401)

(20,429)

(12,137)

Effect of exchange rates on cash and cash equivalents

902

(433)

(1,085)

(244)

Net change in cash and cash equivalents

54,986

(48,385)

#

115,775

(5,788)

Cash and cash equivalents, beginning of period

$

289,112

$

284,696

$

228,323

$

242,099

Cash and cash equivalents, end of period

$

344,098

$

236,311

$

344,098

$

236,311

View source version on businesswire.com: https://www.businesswire.com/news/home/20200806005412/en/

Contacts

NICE Investors
Marty Cohen, +1 551 256 5354, ET, ir@nice.com
Yisca Erez, +972 9 775-3798, CET, ir@nice.com

Media Contact
Chris Irwin-Dudek, +1 (551) 256-5140, Chris.Irwin-Dudek@nice.com