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NICE Exceeds Revenue Guidance with 36% Growth Driven by Continued Strong Cloud Momentum for the Third Quarter 2017

Recurring Revenue Accounted for Nearly 70% of Total Revenue

Cash Flow from Operations for the First Three Quarters of 2017 Exceeds $300 Million

HOBOKEN, N.J.--(BUSINESS WIRE)-- NICE (NASDAQ:NICE) today announced results for the third quarter 2017 ended September 30, 2017.

Third Quarter 2017 Financial Highlights

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

Gross profit increased 30% year-over-year to $207
million

Gross profit increased 34% year-over-year to $233
million

Operating income of $33 million, down 8% year-over-
year

Operating income of $78 million, up 22% year-over-year
Operating margin of 10.3% compared to 15.2% last year Operating margin of 24.0% compared to 26.7% last year

Diluted EPS from continuing operations of $0.42 versus
$0.53 last year, down 21% year-over-year

Diluted EPS from continuing operations of $0.95 versus
$0.83 last year, up 14% year-over-year

Cash flow from operations increased 155% year-over-
year to $106 million

“We are pleased to report another excellent quarter as all four of our strategic pillars - omni-channel, cloud, analytics and artificial intelligence - are powering the strong momentum we are seeing in our business. These pillars have given us the ability to address a much larger market, further widen our industry lead and drive a meaningful shift in market share,” said Barak Eilam, CEO of NICE.

Mr. Eilam continued, “In the third quarter, recurring revenue accounted for nearly 70% of total revenue and we saw a double-digit sequential increase in cloud revenue compared to the second quarter of 2017. These solid results were bolstered by CXone, which is the industry’s first fully integrated, open, customer experience cloud platform for companies of all sizes. Since the launch of CXone, which happened just three months ago, we are now addressing cloud opportunities in all market segments, and even more so in the higher end of the market, and our pipeline is rapidly building. Moreover, we have seen strong growth in our CXone DEVone partner ecosystem, now encompassing over 80 partners, providing further evidence of market acceptance of our platform.”

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 2017 and 2016.

Revenues: Third quarter 2017 total revenues increased 36.1% to $322.8 million compared to $237.2 million for the third quarter of 2016.

Gross Profit: Third quarter 2017 gross profit increased to $207.4 million compared to $159.1 million for the third quarter of 2016, and gross margin was 64.3% compared to 67.1% for the third quarter of 2016.

Operating Income: Third quarter 2017 operating income was $33.1 million compared to $36.0 million for the third quarter of 2016, and operating margin was 10.3% compared to 15.2% for the third quarter of 2016.

Net Income from Continuing Operations: Third quarter 2017 net income and net margin were $26.2 million and 8.1%, respectively, compared to $32.4 million and 13.7%, respectively, for the third quarter of 2016.

Fully Diluted Earnings Per Share from Continuing Operations: Fully diluted earnings per share for the third quarter of 2017 were $0.42, compared to $0.53 in the third quarter of 2016.

Operating Cash Flow and Cash Balance: Third quarter 2017 operating cash flow was $105.8 million. In the third quarter, $4.3 million was used for share repurchases. As of September 30, 2017, total cash and cash equivalents, short term investments and marketable securities were $494.1 million, and total debt was $445.6 million net of issuance costs and the equity component associated with our convertible 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 2017 and 2016.

Revenues: Third quarter 2017 non-GAAP total revenues were $326.8 million, up 36.0% from $240.3 million for the third quarter of 2016.

Gross Profit: Third quarter 2017 non-GAAP gross profit increased to $232.5 million compared to $173.6 million for the third quarter of 2016, and non-GAAP gross margin was 71.2%, compared to 72.2% for the third quarter of 2016.

Operating Income: Third quarter 2017 non-GAAP operating income increased to $78.3 million compared to $64.2 million for the third quarter of 2016, and non-GAAP operating margin was 24.0% compared to 26.7% for the third quarter of 2016.

Net Income from Continuing Operations: Third quarter 2017 non-GAAP net income increased to $58.9 million compared to $50.7 million for the third quarter of 2016, and non-GAAP net income margin was 18.0% compared to 21.1% for the third quarter of 2016.

Fully Diluted Earnings Per Share from Continuing Operations: Third quarter 2017 non-GAAP fully diluted earnings per share increased 14.5% to $0.95, compared to $0.83 for the third quarter of 2016.

Full Year 2017 Guidance:

For the full year 2017, due to better visibility, the Company is narrowing the expected ranges and increasing the expected midpoints of non-GAAP revenue and non-GAAP earnings per share guidance.

Full year 2017 non-GAAP revenue guidance is expected to be in a range of $1,338 million to $1,350 million and the expected midpoint of non-GAAP revenue guidance increased to $1,344 million. Full year 2017 non-GAAP earnings per share guidance is expected to be in a range of $4.00 to $4.10 and the expected midpoint of non-GAAP earnings per share guidance increased to $4.05.

Quarterly Results Conference Call

NICE management will host its earnings conference call today, November 2nd, 2017 at 8:30 AM ET, 12:30 GMT, 14:30 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 351 941 47. 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 741 301 21.

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, amortization of discount on long term debt, 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 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. Such forward-looking statements, including the statements by Mr. Eilam, are based on the current beliefs, expectations and assumptions of the management of (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 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,
2017 2016 2017 2016
Unaudited Unaudited Unaudited Unaudited
Revenue:
Product $ 66,931 $ 68,617 $ 204,124 $ 195,277
Services 159,441 155,444 476,093 459,141
Cloud 96,383 13,126 259,700 37,264
Total revenue 322,755 237,187 939,917 691,682
Cost of revenue:
Product 12,944 11,815 39,668 39,786
Services 52,618 61,122 165,892 181,412
Cloud 49,812 5,127 139,152 13,773
Total cost of revenue 115,374 78,064 344,712 234,971
Gross profit 207,381 159,123 595,205 456,711
Operating Expenses:
Research and development, net 45,135 33,606 130,975 100,646
Selling and marketing 87,363 61,878 254,258 176,366
General and administrative 31,197 24,456 91,758 72,227
Amortization of acquired intangible assets 10,566 3,155 31,319 10,412
Total operating expenses 174,261 123,095 508,310 359,651
Operating income 33,120 36,028 86,895 97,060
Finance and other income (expense), net (4,335) 4,968 (16,713) 11,665
Income from continuing operations before tax 28,785 40,996 70,182 108,725
Taxes on income 2,612 8,554 6,279 15,647
Net income from continuing operations 26,173 32,442 63,903 93,078
Discontinued operations
Loss from discontinued operations - (2,143) - (2,259)
Net loss from discontinued operations - (2,143) - (2,259)
Net income $ 26,173 $ 30,299 $ 63,903 $ 90,819
Basic earnings per share from continuing operations $ 0.43 $ 0.54 $ 1.06 $ 1.56
Basic earnings (loss) per share from discontinued operations $ - $ (0.03) $ - $ (0.04)
Basic earnings per share $ 0.43 $ 0.51 $ 1.06 $ 1.52
Diluted earnings per share from continuing operations $ 0.42 $ 0.53 $ 1.03 $ 1.53
Diluted earnings (loss) per share from discontinued operations $ - $ (0.03) $ - $ (0.04)
Diluted earnings per share $ 0.42 $ 0.50 $ 1.03 $ 1.49
Weighted average number of shares
outstanding used to compute:
Basic earnings (loss) per share 60,502 59,765 60,304 59,563
Diluted earnings (loss) per share 62,220 61,119 61,979 60,930
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,
2017 2016 2017 2016
GAAP revenues $ 322,755 $ 237,187 $ 939,917 $ 691,682
Valuation adjustment on acquired deferred product revenue 37 75 302 1,450
Valuation adjustment on acquired deferred service revenue 824 1,572 3,915 4,004
Valuation adjustment on acquired deferred cloud revenue 3,135 1,454 5,994 4,672
Non-GAAP revenues $ 326,751 $ 240,288 $ 950,128 $ 701,808
GAAP cost of revenue $ 115,374 $ 78,064 $ 344,712 $ 234,971
Amortization of acquired intangible assets on cost of product (6,072) (6,285) (18,486) (20,167)
Amortization of acquired intangible assets on cost of services (987) (3,208) (5,354) (6,681)
Amortization of acquired intangible assets on cost of cloud (11,756) - (33,706) -
Valuation adjustment on acquired deferred cost of services 371 - 1,133 -
Cost of product revenue adjustment (1,3) (158) (124) (494) (314)
Cost of services revenue adjustment (1,2,3) (1,903) (1,638) (5,625) (4,847)
Cost of cloud revenue adjustment (1,2) (649) (85) (2,132) (207)
Non-GAAP cost of revenue $ 94,220 $ 66,724 $ 280,048 $ 202,755
GAAP gross profit $ 207,381 $ 159,123 $ 595,205 $ 456,711
Gross profit adjustments 25,150 14,441 74,875 42,342
Non-GAAP gross profit $ 232,531 $ 173,564 $ 670,080 $ 499,053
GAAP operating expenses $ 174,261 $ 123,095 $ 508,310 $ 359,651
Research and development (1,2,3) (2,204) (1,385) (6,651) (4,462)
Sales and marketing (1,2,3) (5,651) (4,069) (17,160) (11,139)
General and administrative (1,2,3) (1,640) (5,153) (7,027) (13,246)
Amortization of acquired intangible assets (10,566) (3,155) (31,319) (10,412)
Non-GAAP operating expenses $ 154,200 $ 109,333 $ 446,153 $ 320,392
GAAP finance & other income (expense), net $ (4,335) $ 4,968 $ (16,713) $ 11,665
Amortization of discount on long term debt 2,139 - 11,398 -
Realized gain from substantial liquidation of marketable securities - (2,711) - (2,711)
Non-GAAP finance & other income (expense), net $ (2,196) $ 2,257 $ (5,315) $ 8,954
GAAP taxes on income $ 2,612 $ 8,554 $ 6,279 $ 15,647
Tax adjustments re non-GAAP adjustments 14,611 7,228 42,298 23,753
Non-GAAP taxes on income $ 17,223 $ 15,782 $ 48,577 $ 39,400
GAAP net income $ 26,173 $ 32,442 $ 63,903 $ 93,078
Valuation adjustment on acquired deferred revenue 3,996 3,101 10,211 10,126
Valuation adjustment on acquired deferred cost of service of revenue (371) - (1,133) -
Amortization of acquired intangible assets 29,381 12,648 88,865 37,260
Share-based compensation (1) 14,016 9,458 40,900 25,714
Re-organization expenses (2) (3,067) 1,523 (3,067) 3,293
Acquisition related expenses (3) 1,256 1,473 1,256 5,208
Amortization of discount on long term debt 2,139 - 11,398 -
Realized gain from substantial liquidation of marketable securities - (2,711) - (2,711)
Tax adjustments re non-GAAP adjustments (14,611) (7,228) (42,298) (23,753)
Non-GAAP net income $ 58,912 $ 50,706 $ 170,035 $ 148,215
GAAP diluted earnings per share $ 0.42 $ 0.53 $ 1.03 $ 1.53
Non-GAAP diluted earnings per share $ 0.95 $ 0.83 $ 2.74 $ 2.43
Shares used in computing GAAP diluted earnings per share 62,220 61,119 61,979 60,930
Shares used in computing Non-GAAP diluted earnings per share 62,220 61,119 61,979 60,930
NICE SYSTEMS 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,
2017 2016 2017 2016
Cost of product revenue $ (158) $ (114) $ (494) $ (304)
Cost of service revenue (1,903) (1,630) (5,625) (4,570)
Cost of cloud revenue (649) (85) (2,132) (231)
Research and development (2,204) (1,383) (6,651) (3,541)
Sales and marketing (5,576) (4,008) (17,085) (10,441)
General and administrative (3,526) (2,238) (8,913) (6,627)
$ (14,016) $ (9,458) $ (40,900) $ (25,714)
(2)

Re-organization expenses

Quarter ended Year to date
September 30, September 30,
2017 2016 2017 2016
Cost of service revenue $ - $ (1) $ - $ (270)
Cost of cloud revenue - - - 24
Research and development - - - (896)
Sales and marketing - - - (150)
General and administrative 3,067 (1,522) 3,067 (2,001)
$ 3,067 $ (1,523) $ 3,067 $ (3,293)
(3)

Acquisition related expenses

Quarter ended Year to date
September 30, September 30,
2017 2016 2017 2016
Cost of product revenue $ - $ (10) $ - $ (10)
Cost of service revenue - (7) - (7)
Research and development - (2) - (25)
Sales and marketing (75) (61) (75) (548)
General and administrative (1,181) (1,393) (1,181) (4,618)
$ (1,256) $ (1,473) $ (1,256) $ (5,208)
NICE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
September 30, December 31,
2017 2016
Unaudited Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 320,929 $ 157,026
Short-term investments 53,675 30,287
Trade receivables 195,346 260,220
Prepaid expenses and other current assets 75,173 57,966
Current assets of discontinued operations 2,009 3,734
Total current assets 647,132 509,233
LONG-TERM ASSETS:
Long-term investments 119,472 98,726
Property and equipment, net 114,654 87,678
Deferred tax assets 15,706 14,093
Other intangible assets, net 557,387 618,735
Goodwill 1,302,756 1,284,710
Other long-term assets 18,845 18,701
Total long-term assets 2,128,820 2,122,643
TOTAL ASSETS $ 2,775,952 $ 2,631,876
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long term loan $ - $ 21,164
Trade payables 27,163 25,634
Current portion of deferred revenues and advances from customers 201,898 149,801
Accrued expenses and other liabilities 275,921 273,134
Current liabilities of discontinued operations 176 3,077
Total current liabilities 505,158 472,810
LONG-TERM LIABILITIES:
Deferred revenues and advances from customers 42,855 22,710
Deferred tax liabilities 98,403 146,952
Long-term debt 445,574 444,016
Other long-term liabilities 28,618 34,056
Total long-term liabilities 615,450 647,734
SHAREHOLDERS' EQUITY 1,655,344 1,511,332
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,775,952 $ 2,631,876
NICE LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands
Quarter ended Year to date
September 30, September 30,
2017 2016 2017 2016
Unaudited Unaudited Unaudited Unaudited

Operating Activities

Net income $ 26,173 $ 30,299 $ 63,903 $ 90,819
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 39,153 16,932 115,309 50,332
Stock based compensation 14,016 9,457 40,900 25,714
Amortization of premium and discount and accrued interest on marketable securities 273 714 424 2,355
Deferred taxes, net (12,646) (4,815) (34,188) (17,512)
Changes in operating assets and liabilities:
Trade Receivables 10,930 (13,691) 72,810 40,678
Prepaid expenses and other current assets (32,264) (1,340) (40,251) 3,428
Trade payables 7,605 (372) 636 4,917
Accrued expenses and other current liabilities 52,829 18,890 17,228 (29,548)
Deferred revenue 1,660 (13,659) 65,176 16,196
Long term liabilities (3,583) 172 (5,189) 101
Gain on sale and loss on disposal of discontinued operations - 1,990 - 1,990
Realized gain on marketable securities - (2,817) - (3,366)
Amortization of discount on long term debt 2,139 - 11,398 -
Other (461) (339) (926) (283)
Net cash provided by operating activities 105,824 41,421 307,230 185,821

Investing Activities

Purchase of property and equipment (7,899) (7,025) (31,422) (18,165)
Purchase of Investments (53,791) - (96,017) (47,221)
Proceeds from Investments 15,610 340,487 51,626 420,965
Capitalization of software development costs (7,730) (1,948) (21,046) (4,706)
Repayment from sale of discontinued operations - (1,990) - (1,990)
Payments for business acquisitions, net of cash acquired (37,880) - (37,880) (151,328)
Net cash provided by (used in) investing activities (91,690) 329,524 (134,739) 197,555

Financing Activities

Proceeds from issuance of shares upon exercise of share options 4,412 8,092 16,787 21,261
Purchase of treasury shares (4,267) (2,924) (20,314) (35,017)
Dividends paid - (9,568) (9,637) (28,604)
Capital Lease payments - (515) - (695)
Repayment of long term debt - - (260,000) -
Proceeds from issuance of exchangeable notes - - 260,842 -
Net cash provided by (used in) financing activities 145 (4,915) (12,322) (43,055)
Effect of exchange rates on cash and cash equivalents 2,028 (912) 3,734 (127)
Net change in cash and cash equivalents 16,307 365,118

163,903 340,194
Cash and cash equivalents, beginning of period 304,622 301,007 157,026 325,931
Cash and cash equivalents, end of period $ 320,929 $ 666,125 $ 320,929 $ 666,125
*Certain comparative figures have been reclassified to conform to the current year presentation.

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NICE Ltd.
Investors
Marty Cohen, +1 551 256 5354, ET
ir@nice.com
Yisca Erez, +972 9 775-3798, CET
ir@nice.com
or
Media Contact
Ilana Hart, +972 9 775-3818
ilana.hart@nice.com

Source: NICE Ltd.