Business Wire | Aug 6, 2020 05:30AM EDT

NICE Reports 30% Cloud Growth for Second Quarter 2020

Aug. 06, 2020

HOBOKEN, N.J.--(BUSINESS WIRE)--Aug. 06, 2020--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, Cloud revenue of $186 million, growthgrowth of 30% year-over-year of 30% year-over-year

Total revenue of $393 million, Total revenue of $395 million, growthgrowth of 3% year-over-year of 4% year-over-year

Gross margin of 65.5% compared to Gross margin of 71.0% compared to65.6% last year 70.9% last year

Cloud gross margin of 56.2% compared Cloud gross margin of 65.7% comparedto 50.3% last year to 61.4% last year

Operating income of $56 million Operating income of $111 millioncompared to $53 million last year, compared to $101 million last year, anan increase of 5% increase of 10%

Operating margin of 14.3% compared Operating margin of 28.2% compared toto 14.1% last year 26.6% last year

Diluted EPS of $0.68 versus $0.65 Diluted EPS of $1.37 versus $1.25 lastlast year, 5% growth year-over-year 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 NICENICE (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.

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NICE LTD. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSU.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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEU.S. dollars in thousands (exceptper 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 9,650 10,795 19,455 21,496 intangible assetsTotal operating expenses 201,309 196,158 412,824 390,206

Operating income 56,138 53,491 114,966 105,420

Financial and other expense/ (423) 724 1,227 4,142(income), net 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 182 - 266 -non-controlling interests Net income attributable to Nice 44,787 42,058 90,985 79,122Ltd.'s shareholders Earnings per share: Basic $ 0.71 $ 0.68 $ 1.45 $ 1.28

Diluted $ 0.68 $ 0.65 $ 1.39 $ 1.23

Weighted average sharesoutstanding: Basic 62,638 62,116 62,557 61,980

Diluted 65,633 64,650 65,484 64,205

NICE LTD. AND SUBSIDIARIESRECONCILIATION OF GAAP TONON-GAAP RESULTSU.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 - - - 15acquired deferred productrevenueValuation adjustment on - - - 2acquired deferred servicesrevenueValuation adjustment on 1,950 953 2,729 1,825acquired deferred cloudrevenueNon-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 (1,125) (979) (2,259) (1,849)intangible assets on cost ofproductAmortization of acquired (1,497) (1,534) (3,019) (3,069)intangible assets on cost ofservicesAmortization of acquired (16,064) (15,043) (31,622) (29,848)intangible assets on cost ofcloudValuation adjustment on 244 632 537 1,318acquired deferred cost ofcloudCost of product revenue (68) (102) (136) (207)adjustment (1)Cost of services revenue (1,680) (2,001) (3,280) (4,145)adjustment (1)Cost of cloud revenue (948) (877) (1,792) (1,784)adjustment (1,2)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 (2,373) (1,587) (4,988) (3,149)(1,2)Sales and marketing (1,2) (8,797) (5,798) (14,062) (11,474)

General and administrative (11,340) (8,806) (24,174) (15,416)(1,2)Amortization of acquired (9,650) (10,794) (19,455) (21,496)intangible assetsValuation adjustment on 36 76 71 169acquired deferred commissionNon-GAAP operating expenses $ 169,185 $ 169,249 $ 350,216 $ 338,840

GAAP financial and other $ (423) $ 724 $ 1,227 $ 4,142expense/(income), netAmortization of discount on (2,532) (2,162) (4,874) (4,470)debtNon-GAAP financial and other $ (2,955) $ (1,438) $ (3,647) $ (328)expense, net GAAP taxes on income $ 11,956 $ 10,709 $ 23,020 $ 22,156

Tax adjustments re non-GAAP 12,499 11,052 24,790 19,934adjustmentsNon-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 1,950 953 2,729 1,842acquired deferred revenueValuation adjustment on (244) (632) (537) (1,318)acquired deferred cost ofcloud revenueAmortization of acquired 28,336 28,350 56,355 56,262intangible assetsValuation adjustment on (36) (76) (71) (169)acquired deferred commissionShare-based compensation (1) 25,206 18,328 46,851 35,332

Acquisition related expenses - 843 1,581 843(2)Amortization of discount on 2,532 2,162 4,874 4,470long term debtTax adjustments re non-GAAP (12,499) (11,052) (24,790) (19,934)adjustmentsNon-GAAP net income $ 89,850 $ 80,934 $ 177,711 $ 156,450

GAAP diluted earnings per $ 0.68 $ 0.65 $ 1.39 $ 1.23share Non-GAAP diluted earnings per $ 1.37 $ 1.25 $ 2.71 $ 2.44share Shares used in computing GAAP 65,633 64,650 65,484 64,205diluted earnings per share Shares used in computing 65,633 64,650 65,484 64,205non-GAAP diluted earnings pershare

NICE LTD. AND SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAPRESULTS (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 SUBSIDIARIESCONSOLIDATED CASH FLOWSTATEMENTSU.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 45,601 43,012 89,651 84,820 amortization Stock based compensation 25,064 18,312 46,632 35,316

Amortization of premium and discount and accrued (3,618) (233) (2,870) (574) interest on marketable securities 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 (20,677) (51,949) (34,768) (72,531) other assets Trade payables (13,283) 4,543 (805) 3,718

Accrued expenses and (33,357) (22,822) (21,460) 9,616 other current liabilities Operating lease 4,363 3,379 8,512 7,496 right-of-use assets, net Deferred revenue (415) 5,462 38,098 58,869

Long term liabilities - (403) - (280)

Operating lease (4,132) (3,654) (9,689) (9,159) liabilities Amortization of discount 2,532 2,162 4,875 4,469 on long term debt Other (558) (516) 585 (1,984)

Net cash provided by 59,581 17,976 214,403 200,388 operating activities Investing Activities Purchase of property and (7,823) (6,566) (17,456) (14,982) equipment Purchase of Investments (69,061) (114,834) (154,488) (306,142)

Proceeds from Investments 78,980 93,558 164,865 170,508

Capitalization of (9,912) (8,897) (19,199) (17,391) software development costs Payments for business and - (25,788) (50,836) (25,788) asset acquisitions, net of cash acquired Net cash used in (7,816) (62,527) (77,114) (193,795) investing activities Financing Activities Proceeds from issuance of 5,865 1,401 7,349 3,018 shares upon exercise of share options Purchase of treasury (3,531) (4,615) (27,601) (14,715) shares Capital Lease payments (15) (187) (177) (440)

Net cash provided by/ 2,319 (3,401) (20,429) (12,137) (used in) financing activities Effect of exchange rates 902 (433) (1,085) (244)on cash and cashequivalents Net change in cash and 54,986 (48,385) # 115,775 (5,788)cash equivalentsCash and cash equivalents, $ 289,112 $ 284,696 $ 228,323 $ 242,099beginning of period Cash and cash equivalents, $ 344,098 $ 236,311 $ 344,098 $ 236,311end of period

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

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