NICE Reports Strong Finish to 2018 with 30% Cloud Revenue Growth for the Fourth Quarter

Record Total Revenue and Operating Income for the Fourth Quarter
and Full Year of 2018

HOBOKEN, N.J.–(BUSINESS WIRE)–NICE (NASDAQ: NICE) today announced results for the fourth
quarter and full year ended December 31, 2018.

 

Full Year 2018 Financial Highlights

 
GAAP   Non-GAAP
Record revenue of $1,445 million, growth of 8% year-over-year   Record revenue of $1,463 million, growth of 9% year-over-year
Cloud revenue of $461 million, growth of 28% year-over-year   Cloud revenue of $470 million, growth of 27% year-over-year
Gross margin of 65.6% compared to 64.8% last year   Gross margin of 71.1% compared to 71.6% last year
Record operating income of $198 million compared to $150 million
last year, 32% growth year-over-year
  Record operating income of $379 million compared to $336 million
last year, 13% growth year-over-year
Operating margin of 13.7% compared to 11.3% last year   Operating margin of 25.9% compared to 25.0% last year
Record diluted EPS of $2.52 versus $2.31 last year, 9% growth
year-over-year
  Record diluted EPS of $4.69 versus $4.10 last year, 14% growth
year-over-year
Record cash flow from operations of $397 million    
 

The GAAP column of the table contains the financial highlights
of the full year 2018 under ASC 606 with the comparison period
under ASC 605.

 

The non-GAAP column of the table contains the financial
highlights of the full year 2018 under ASC 605 with the comparison
period under ASC 605.

 
 

Fourth Quarter 2018 Financial Highlights

 
GAAP   Non-GAAP
Record revenue of $411 million, growth of 5% year-over-year   Record revenue of $420 million, growth of 6% year-over-year
Cloud revenue of $132 million, growth of 30% year-over-year   Cloud revenue of $134 million, growth of 29% year-over-year
Gross margin of 66.9% compared to 68.4% last year   Gross margin of 72.4% compared to 74.2% last year
Operating income of $70 million compared to $63 million last year   Record operating income of $119 million compared to $112 million
last year
Operating margin of 17.1% compared to 16.1% last year   Operating margin of 28.3% compared to 28.4% last year
Diluted EPS of $0.98 versus $1.27 last year   Record diluted EPS of $1.47 versus $1.35 last year
Cash flow from operations of $109 million, 26% growth
year-over-year
   
 

The GAAP column of the table contains the financial highlights
of the fourth 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 fourth quarter 2018 under ASC 605 with the
comparison period under ASC 605.

 

“We are pleased to end the year on a high note as 2018 was a year marked
by robust growth and record results,” said Barak Eilam, CEO of NICE.
“For the full-year 2018, we reported strong growth in cloud revenue and
operating income, an increase in recurring revenue, further growth in
the operating margin and a record year for cash flow generation.”

Mr. Eilam continued, “We are stepping into 2019 with great momentum
across all of our businesses fueled by our two market differentiating
platforms – CXone for Customer Engagement and X-Sight for Financial
Crime and Compliance. Our assets, investments and market leadership in
cloud, analytics and artificial intelligence are driving us forward and
providing tremendous future opportunities.

“As we look ahead to the next five years, our strong leadership position
will allow us to quickly expand into a total addressable market of over
$12 billion from $7 billion today, providing us the opportunity to far
exceed the $2 billion revenue mark, to see the majority of our revenue
come from the cloud and to have a greater than 30% operating margin.”

NICE Investor Day

NICE will be hosting its Investor Day on April 16th in conjunction with
its Interactions annual user conference in Las Vegas. The special
program for analysts and investors will include meetings with NICE
executives, presentations from customers, product and technology
sessions, and access to the solutions showcase. If you haven’t
registered, please email NICE at [email protected].

GAAP Financial Highlights for the Fourth Quarter and Full Year
Ended December 31:

The GAAP numbers presented below for the fourth quarter and full year
2018 are under ASC 606 and the comparison period GAAP numbers for the
fourth quarter and full year 2017 are under ASC 605.

Revenues: Fourth quarter 2018 total revenues increased 4.7% to
$410.8 million compared to $392.2 million for the fourth quarter of 2017.
Full
year 2018 total revenues increased 8.4% to $1,444.5 million compared to
$1,332.2 million for the full year 2017.

Gross Profit: Fourth quarter 2018 gross profit increased to
$274.7 million compared to $268.3 million for the fourth quarter of 2017
and fourth quarter 2018 gross margin was 66.9% compared to 68.4% for the
fourth quarter of 2017.
Full year 2018 gross profit and gross
margin increased to $947.7 million and 65.6%, respectively, compared to
$863.5 million and 64.8%, respectively, for the full year 2017.

Operating Income: Fourth quarter 2018 operating income and
operating margin increased to $70.4 million and 17.1%, respectively,
compared to $63.2 million and 16.1%, respectively, for the fourth
quarter of 2017.
Full year 2018 operating income and operating
margin increased to $197.6 million and 13.7%, respectively, compared to
$150.1 million and 11.3%, respectively, for the full year 2017.

Net Income: Fourth quarter 2018 net income and net income margin
were $62.3 million and 15.2%, respectively, compared to $79.4 million
and 20.2%, respectively, for the fourth quarter of 2017.
Full year
2018 net income and net income margin increased to $159.3 million and
11.0%, respectively, compared to $143.3 million and 10.8%, respectively,
for the full year 2017.

Fully Diluted Earnings Per Share: Fully diluted earnings per
share for the fourth quarter of 2018 was $0.98 compared to $1.27 in the
fourth quarter of 2017.
Fully diluted earnings per share for the
full year 2018 increased to $2.52 compared to $2.31 for the full year
2017.

Operating Cash Flow and Cash Balance: Fourth quarter 2018
operating cash flow was $108.9 million and full year operating cash flow
reached $396.6 million. In the fourth quarter, $15.4 million was used
for share repurchases and $26.0 million was used for share repurchases
for the full year of 2018. As of December 31, 2018, total cash and cash
equivalents, short term investments and marketable securities were
$730.8 million, and total debt was $456.0 million.

Non-GAAP Financial Highlights for the Fourth Quarter and Full Year
Ended December 31:

The non-GAAP numbers presented below for the fourth quarter and full
year 2018 and the comparison period non-GAAP numbers for the fourth
quarter and full year 2017 are both under ASC 605.

Revenues: Fourth quarter 2018 non-GAAP total revenues increased
to $419.9 million, up 6.1% from $395.8 million for the fourth quarter of
2017.
Non-GAAP total revenues for the full year 2018 increased 8.7%
to $1,462.7 million compared to $1,345.9 million for the full year 2017.

Gross Profit: Fourth quarter 2018 non-GAAP gross profit increased
to $303.8 million compared to $293.5 million for the fourth quarter of
2017. Fourth quarter 2018 Non-GAAP gross margin was 72.4% compared to
74.2% for the fourth quarter of 2017.
Full year 2018 non-GAAP gross
profit increased to $1,040.6 million compared to $963.5 million and full
year 2018 non-GAAP gross margin was 71.1% compared to 71.6% for the full
year 2017.

Operating Income: Fourth quarter 2018 non-GAAP operating income
increased to $118.7 million compared to $112.4 million for the fourth
quarter of 2017. Fourth quarter 2018 Non-GAAP operating margin was 28.3%
compared to 28.4% for the fourth quarter of 2017.
Full year 2018
non-GAAP operating income and non-GAAP operating margin increased to
$378.6 million and 25.9%, respectively, from $336.3 million and 25.0%,
respectively, for the full year 2017.

Net Income: Fourth quarter 2018 non-GAAP net income and non-GAAP
net income margin increased to $93.9 million and 22.4%, respectively,
from $84.5 million and 21.3%, respectively, for the fourth quarter of
2017.
Full year 2018 non-GAAP net income and non-GAAP net income
margin increased to $296.7 million and 20.3%, respectively, from $254.5
million and 18.9%, respectively, for the full year 2017.

Fully Diluted Earnings Per Share: Fourth quarter 2018 non-GAAP
fully diluted earnings per share increased 8.9% to $1.47, compared to
$1.35 for the fourth quarter of 2017.
Full year 2018 non-GAAP fully
diluted earnings per share increased 14.4% to $4.69 compared to $4.10
for the full year 2017.

First Quarter and Full Year 2019 Guidance:

Effective January 1st, 2018, the company
adopted ASC 606 using the modified retrospective method for GAAP
reporting purposes. Starting in January 2019 the guidance, as well as
our financial results, will be provided using the accounting standard
ASC 606 for all 2019 quarters and the full year 2019. Comparative
results throughout 2019 will be compared to ASC 606 results for 2018.

First Quarter 2019: First quarter 2019 non-GAAP total revenues
are expected to be in a range of $370 million to $380 million (2018
non-GAAP: $337.6 million). First quarter 2019 non-GAAP fully diluted
earnings per share are expected to be in a range of $1.05 to $1.15 (2018
non-GAAP: $0.97).

Full Year 2019: Full year 2019 non-GAAP total revenues are
expected to be in a range of $1,558 million to $1,582 million (2018
non-GAAP: $1,453.4 million). Full year 2019 non-GAAP fully diluted
earnings per share are expected to be in a range of $5.08 to $5.28 (2018
non-GAAP: $4.75).

Quarterly Results Conference Call

NICE management will host its earnings conference call today, February 14th,
2019 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
1-809-344-364. The Passcode is 990 622 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 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 635 176 28.

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,
tax adjustment re non-GAAP adjustments and tax reform and ASC 606 to ASC
605 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. 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 fourth-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, 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 ended
December 31, December 31,
2018 2017 2018 2017
Unaudited Unaudited Audited Audited
 
Revenue:
Product $ 92,941 $ 114,822 $ 263,805 $ 318,946
Services 186,073 175,947 719,531 652,040
Cloud   131,815   101,466     461,183   361,166  
Total revenue   410,829   392,235     1,444,519   1,332,152  
 
Cost of revenue:
Product 7,679 11,397 31,065 51,065
Services 59,087 59,128 229,671 225,020
Cloud   69,389   53,436     236,079   192,588  
Total cost of revenue   136,155   123,961     496,815   468,673  
 
Gross profit 274,674 268,274 947,704 863,479
 
Operating expenses:
Research and development, net 46,807 50,132 183,830 181,107
Selling and marketing 100,421 107,070 370,659 361,328
General and administrative 46,275 37,313 153,323 129,071
Amortization of acquired intangible assets   10,764   10,583     42,276   41,902  
Total operating expenses   204,267   205,098     750,088   713,408  
 
Operating income 70,407 63,176 197,616 150,071
 
Finance and other expense, net   1,829   3,698     10,901   20,411  
 
Income before tax 68,578 59,478 186,715 129,660
Taxes on income (Tax benefits)   6,284   (19,910 )   27,377   (13,631 )
Net income $ 62,294 $ 79,388   $ 159,338 $ 143,291  
 
Basic earnings per share $ 1.01 $ 1.30   $ 2.60 $ 2.37  
Diluted earnings per share $ 0.98 $ 1.27   $ 2.52 $ 2.31  
 
Weighted average number of shares
outstanding used to compute:
 
Basic earnings per share 61,824 60,861 61,387 60,444
Diluted earnings per share 63,760 62,534 63,309 62,119
 
 
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 ended
December 31, December 31,
  2018     2017     2018     2017  
GAAP revenues $ 410,829 $ 392,235 $ 1,444,519 $ 1,332,152
Valuation adjustment on acquired deferred product revenue 15 97 317
Valuation adjustment on acquired deferred services revenue 44 752 632 4,667
Valuation adjustment on acquired deferred cloud revenue 2,550 2,760 8,181 8,754
ASC 606 to ASC 605 revenue adjustment   6,467         9,242      
Non-GAAP revenues $ 419,890   $ 395,762   $ 1,462,671   $ 1,345,890  
 
 
GAAP cost of revenue $ 136,155 $ 123,961 $ 496,815 $ 468,673
Amortization of acquired intangible assets on cost of product (870 ) (5,296 ) (5,889 ) (23,782 )
Amortization of acquired intangible assets on cost of services (1,778 ) (987 ) (5,111 ) (6,341 )
Amortization of acquired intangible assets on cost of cloud (15,504 ) (12,646 ) (53,901 ) (46,352 )
Valuation adjustment on acquired deferred cost of cloud 929 353 2,183 1,486
Cost of product revenue adjustment (1) (113 ) (189 ) (360 ) (683 )
Cost of services revenue adjustment (1,3) (1,867 ) (2,071 ) (7,629 ) (7,696 )
Cost of cloud revenue adjustment (1,3) (888 ) (833 ) (4,654 ) (2,965 )
ASC 606 to ASC 605 cost of revenue adjustment   14         664      
Non-GAAP cost of revenue $ 116,078   $ 102,292   $ 422,118   $ 382,340  
 
 
GAAP gross profit $ 274,674 $ 268,274 $ 947,704 $ 863,479
Gross profit adjustments   29,138     25,196     92,849     100,071  
Non-GAAP gross profit $ 303,812   $ 293,470   $ 1,040,553   $ 963,550  
 
 
GAAP operating expenses $ 204,267 $ 205,098 $ 750,088 $ 713,408
Research and development (1,3) (1,648 ) (2,394 ) (8,425 ) (9,045 )
Sales and marketing (1,3) (5,371 ) (6,083 ) (27,650 ) (23,243 )
General and administrative (1,2,3) (8,584 ) (4,983 ) (23,740 ) (12,010 )
Amortization of acquired intangible assets (10,764 ) (10,583 ) (42,276 ) (41,902 )
Valuation adjustment on acquired deferred commission 322 443
ASC 606 to ASC 605 operating expenses adjustment   6,940         13,483      
Non-GAAP operating expenses $ 185,162   $ 181,055   $ 661,923   $ 627,208  
 
 
GAAP finance & other expense, net $ 1,829 $ 3,698 $ 10,901 $ 20,411
Amortization of discount on long-term debt   (2,179 )   (2,149 )   (8,670 )   (13,547 )
Non-GAAP finance & other expense (income), net $ (350 ) $ 1,549   $ 2,231   $ 6,864  
 
 
GAAP taxes on income $ 6,284 $ (19,910 ) $ 27,377 $ (13,631 )
Tax adjustments re non-GAAP adjustments 18,939 15,373 53,352 57,671
Tax reform adjustment 30,923 30,923
Tax adjustment re ASC 606 to ASC 605   (94 )       (1,029 )    
Non-GAAP taxes on income $ 25,129   $ 26,386   $ 79,700   $ 74,963  
 
 
GAAP net income $ 62,294 $ 79,388 159,338 $ 143,291
Valuation adjustment on acquired deferred revenue 2,594 3,527 8,910 13,738
Valuation adjustment on acquired deferred cost of cloud revenue (929 ) (353 ) (2,183 ) (1,486 )
Amortization of acquired intangible assets 28,916 29,512 107,177 118,377
Valuation adjustment on acquired deferred commission (322 ) (443 )
Share-based compensation (1) 18,471 16,080 67,223 56,980
Re-organization expenses (2) (3,067 )
Acquisition related expenses (3) 473 5,235 1,729
Amortization of discount on long term debt 2,179 2,149 8,670 13,547
Tax adjustments re non-GAAP adjustments and tax reform (18,939 ) (46,296 ) (53,352 ) (88,594 )
ASC 606 to ASC 605 adjustments   (393 )       (3,876 )    
Non-GAAP net income $ 93,871   $ 84,480   $ 296,699   $ 254,515  
 
GAAP diluted earnings per share $ 0.98   $ 1.27   $ 2.52   $ 2.31  
 
Non-GAAP diluted earnings per share $ 1.47   $ 1.35   $ 4.69   $ 4.10  
 
Shares used in computing GAAP diluted earnings per share 63,760 62,534 63,309 62,119
 
Shares used in computing non-GAAP diluted earnings per share 63,760 62,534 63,309 62,119
 
 
 
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 ended
December 31, December 31,
  2018     2017     2018     2017  
 
Cost of product revenue $ (113 ) $ (189 ) $ (360 ) $ (683 )
Cost of services revenue (1,867 ) (2,064 ) (7,629 ) (7,689 )
Cost of cloud revenue (888 ) (833 ) (3,020 ) (2,965 )
Research and development (1,648 ) (2,387 ) (7,354 ) (9,038 )
Sales and marketing (5,371 ) (6,022 ) (27,455 ) (23,107 )
General and administrative   (8,584 )   (4,585 )   (21,405 )   (13,498 )
$ (18,471 ) $ (16,080 ) $ (67,223 ) $ (56,980 )
 
 
(2)

Re-organization expenses

Quarter ended Year ended
December 31, December 31,
  2018     2017     2018     2017  
 
General and administrative $   $   $   $ 3,067  
$   $   $   $ 3,067  
 
 
(3)

Acquisition related expenses

 
Quarter ended Year ended
December 31, December 31,
  2018     2017     2018     2017  
 
Cost of service revenue $ $ (7 ) $ $ (7 )
Cost of cloud revenue (1,634 )
Research and development (7 ) (1,071 ) (7 )
Sales and marketing (61 ) (195 ) (136 )
General and administrative       (398 )   (2,335 )   (1,579 )
$   $ (473 ) $ (5,235 ) $ (1,729 )
 
 
NICE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
     
December 31, December 31,
2018 2017
Audited Audited
 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $ 242,099 $ 328,302
Short-term investments 243,729 63,951
Trade receivables 287,963 230,729
Prepaid expenses and other current assets   87,450   70,074
 
Total current assets   861,241   693,056
 
LONG-TERM ASSETS:
Long-term investments 244,998 132,820
Property and equipment, net 140,338 118,275
Deferred tax assets 12,309 11,850
Other intangible assets, net 508,232 551,347
Goodwill 1,366,206 1,318,242
Other long-term assets   74,042   19,496
 
Total long-term assets   2,346,125   2,152,030
 
TOTAL ASSETS $ 3,207,366 $ 2,845,086
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
CURRENT LIABILITIES:
Trade payables $ 29,617 $ 29,438
Deferred revenues and advances from customers 221,387 184,564
Accrued expenses and other liabilities   373,908   309,350
 
Total current liabilities   624,912   523,352
 
LONG-TERM LIABILITIES:
Deferred revenues and advances from customers 35,112 37,550
Deferred tax liabilities 44,140 57,796
Long-term debt 455,985 447,642
Other long-term liabilities   30,604   29,185
 
Total long-term liabilities   565,841   572,173
 
SHAREHOLDERS’ EQUITY   2,016,613   1,749,561
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,207,366 $ 2,845,086
 

Contacts

Investors
Marty Cohen, +1 551 256 5354, ET, [email protected]
Yisca
Erez, +972 9 775-3798, CET, [email protected]

Media Contact
Chris Irwin-Dudek, +1 (551) 256-5140, [email protected]

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