NICE Reports 30% Cloud Growth for Second Quarter 2020

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

HOBOKEN, N.J.–(BUSINESS WIRE)–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 6^th, 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