Business Wire | Feb 18, 2021 05:30AM EST

NICE Reports Accelerated Cloud Revenue Growth for The Fourth Quarter and Full Year 2020

Feb. 18, 2021

HOBOKEN, N.J.--(BUSINESS WIRE)--Feb. 18, 2021--NICE (NASDAQ: NICE) today announced results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Financial Highlights

GAAP Non-GAAP

Cloud revenue of $219 million, growth of Cloud revenue of $223 million, growth31% year-over-year of 33% year-over-year

Total revenue of $435 million, growth of Total revenue of $438 million, growth1% year-over-year of 2% year-over-year

Cloud gross margin of 58.3% compared to Cloud gross margin of 67.6% compared54.2% last year to 63.8% last year

Operating income of $65 million compared Operating income of $132 millionto $78 million last year compared to $130 million last year

Operating margin of 15.0% compared to Operating margin of 30.1% compared to18.0% last year 30.2% last year

Diluted EPS of $0.83 compared to $0.95 Diluted EPS of $1.61 compared to $1.58last year last year

Operating cash flow of $167 million compared to $91 million last year

Full Year 2020 Financial Highlights

GAAP Non-GAAP

Cloud revenue of $777 million, growth of Cloud revenue of $786 million,30% year-over-year growth of 31% year-over-year

Total revenue of $1,648 million, growth of Total revenue of $1,657 million,5% year-over-year growth of 5% year-over-year

Cloud gross margin of 56.3% compared to Cloud gross margin of 65.6%51.3% last year compared to 61.8% last year

Operating income of $242 million compared Operating income of $470 millionto $239 million last year compared to $434 million last year

Operating margin of 14.7% compared to 15.2% Operating margin of 28.4% comparedlast year to 27.5% last year

Diluted EPS of $2.98 versus $2.88 last Diluted EPS of $5.73 versus $5.31year, 3% growth year-over-year last year, 8% growth year-over-year

Record cash flow from operations of $480 million compared to $374 million last year

"We are pleased to report another exceptional year at NICE highlighted by groundbreaking innovation and speed of execution in cloud, digital and artificial intelligence. We witnessed accelerated cloud growth, cloud exceeded more than 50% of our total revenue for the second half of the year, and we exited 2020 with more than $900 million in an annualized cloud revenue run rate propelled by the tremendous success of our CXone cloud platform. We saw a 100% year-over-year increase in our customers' digital interactions volume and 50% of our new deals were driven by digital initiatives. Our market leading AI solution, Enlighten, experienced strong demand with many new deals and a fast growing pipeline," said Barak Eilam, CEO of NICE.

Mr. Eilam continued, "2021 is shaping up to be a year of a changed reality, in which the events of 2020 have created a new normal, and at the same time provided new opportunities in cloud and digital. Enterprises are seeking to rapidly accelerate their innovation cycles and leap forward much faster than before while continuously adapting to changes. We are well-positioned to capitalize on this transition with our leading digital cloud platforms together with a large and fast growing total addressable market."

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

Revenues: Fourth quarter 2020 total revenues increased 1.0% to $434.6 million compared to $430.2 million for the fourth quarter of 2019. Full year 2020 total revenues increased 4.7% to $1,648.0 million compared to $1,573.9 million for the full year 2019.

Gross Profit: Fourth quarter 2020 gross profit was $288.5 million compared to $292.9 million for the fourth quarter of 2019. Fourth quarter 2020 gross margin was 66.4% compared to 68.1% for the fourth quarter of 2019. Full year 2020 gross profit increased to $1,086.1 million compared to $1,042.1 million for the full year 2019. Full year 2020 gross margin was 65.9% compared to 66.2% for the full year 2019.

Operating Income: Fourth quarter 2020 operating income was $65.1 million compared to $77.6 million for the fourth quarter of 2019. Fourth quarter 2020 operating margin was 15.0% compared to 18.0% for the fourth quarter of 2019. Full year 2020 operating income increased to $242.0 million compared to $238.7 million for the full year 2019. Full year 2020 operating margin was 14.7% compared to 15.2% for the full year 2019.

Net Income: Fourth quarter 2020 net income was $55.0 million compared to $61.7 million for the fourth quarter of 2019. Fourth quarter 2020 net income margin was 12.6% compared to 14.4% for the fourth quarter of 2019. Full year 2020 net income and net income margin increased to $196.3 million and 11.9%, respectively, compared to $185.9 million and 11.8%, respectively, for the full year 2019.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the fourth quarter of 2020 was $0.83 compared to $0.95 in the fourth quarter of 2019. Fully diluted earnings per share for the full year 2020 increased to $2.98 compared to $2.88 for the full year 2019.

Operating Cash Flow and Cash Balance: Fourth quarter 2020 operating cash flow was $166.9 million and full year operating cash flow reached $480.3 million. In the fourth quarter, $20.7 million was used for share repurchases and $48.3 million was used for share repurchases for the full year of 2020. As of December 31, 2020, total cash and cash equivalents, short and long term investments were $1,463.9 million, and total debt was $681.2 million.

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

Revenues: Fourth quarter 2020 Non-GAAP total revenues increased to $438.4 million, up 1.7% from $431.1 million for the fourth quarter of 2019. Non-GAAP total revenues for the full year 2020 increased 5.0% to $1,657.1 million compared to $1,577.5 million for the full year 2019.

Gross Profit: Fourth quarter 2020 Non-GAAP gross profit increased to $316.7 million compared to $313.8 million for the fourth quarter of 2019. Fourth quarter 2020 Non-GAAP gross margin was 72.2% compared to 72.8% for the fourth quarter of 2019. Full year 2020 Non-GAAP gross profit increased to $1,181.6 million compared to $1,125.3 million and full year 2020 Non-GAAP gross margin was 71.3%, the same as Non-GAAP gross margin for full year 2019.

Operating Income: Fourth quarter 2020 Non-GAAP operating income increased to $131.7 million compared to $130.2 million for the fourth quarter of 2019. Fourth quarter 2020 Non-GAAP operating margin was 30.1% compared to 30.2% for the fourth quarter of 2019. Full year 2020 Non-GAAP operating income and Non-GAAP operating margin increased to $470.4 million and 28.4%, respectively, from $434.3 million and 27.5%, respectively, for the full year 2019.

Net Income: Fourth quarter 2020 Non-GAAP net income and Non-GAAP net income margin increased to $106.9 million and 24.4%, respectively, from $102.6 million and 23.8%, respectively, for the fourth quarter of 2019. Full year 2020 Non-GAAP net income and Non-GAAP net income margin increased to $378.2 million and 22.8%, respectively, from $343.4 million and 21.8%, respectively, for the full year 2019.

Fully Diluted Earnings Per Share: Fourth quarter 2020 Non-GAAP fully diluted earnings per share increased 1.9% to $1.61, compared to $1.58 for the fourth quarter of 2019. Full year 2020 Non-GAAP fully diluted earnings per share increased 7.9% to $5.73 compared to $5.31 for the full year 2019.

First Quarter and Full Year 2021 Guidance:

First Quarter 2021: First quarter 2021 Non-GAAP total revenues are expected to be in a range of $445 million to $455 million. First quarter 2021 Non-GAAP fully diluted earnings per share are expected to be in a range of $1.42 to $1.52.

Full Year 2021: Full year 2021 Non-GAAP total revenues are expected to be in a range of $1,790 million to $1,810 million. Full year 2021 Non-GAAP fully diluted earnings per share are expected to be in a range of $6.12 to $6.32.

Quarterly Results Conference Call

NICE management will host its earnings conference call today February 18th, 2021 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 1-877-407-4018 or +1-201-689-8471, United Kingdom 0-800-756-3429, Israel 1-809-406-247. The call will be webcast live on the Company's website at https://www.nice.com/investor-relations/upcoming-event.

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 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 fourth-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. At this time, the extent and duration of the continued impact of the pandemic is unknown, and therefore we cannot predict how it may affect the Company's future business, results of operations, financial condition and strategic plans. Furthermore, due to our subscription based business model, the effect of 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 SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSU.S. dollars in thousands December 31, December 31, 2020 2019

Audited Audited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 442,267 $ 228,323

Short-term investments 1,021,613 210,772

Trade receivables 303,100 319,622

Prepaid expenses and other current assets 175,340 116,972

Total current assets 1,942,320 875,689

LONG-TERM ASSETS: Long-term investments - 542,389

Property and equipment, net 137,785 141,647

Deferred tax assets 32,735 30,513

Other intangible assets, net 366,003 411,019

Operating lease right-of-use assets 97,162 106,196

Goodwill 1,503,252 1,378,418

Other long-term assets 153,660 124,034

Total long-term assets 2,290,597 2,734,216

TOTAL ASSETS $ 4,232,917 $ 3,609,905

LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables $ 33,132 $ 30,376

Deferred revenues and advances from customers 311,851 245,792

Current maturities of operating leases 22,412 21,519

Exchangeable senior notes 259,881 251,583

Accrued expenses and other liabilities 417,174 391,685

Total current liabilities 1,044,450 940,955

LONG-TERM LIABILITIES: Deferred revenues and advances from customers 36,295 26,045

Operating leases 92,262 103,490

Deferred tax liabilities 32,109 52,509

Long-term debt 421,337 213,313

Other long-term liabilities 17,980 16,327

Total long-term liabilities 599,983 411,684

SHAREHOLDERS' EQUITY NICE Ltd's equity 2,563,910 2,257,266

Non-controlling interests 24,574 -

Total shareholders' equity 2,588,484 2,257,266

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,232,917 $ 3,609,905

NICE LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEU.S. dollars in thousands (except per share amounts)Quarter endedYear endedDecember 31,December 31,2020

2019

2020

2019

AuditedAuditedAuditedAuditedRevenue:Product$

41,542

$

80,101

$

183,153

$

269,100

Services174,003

183,117

687,532

709,064

Cloud219,036

166,990

777,331

595,748

Total revenue434,581

430,208

1,648,016

1,573,912

Cost of revenue:Product5,453

6,076

22,164

22,926

Services49,245

54,772

199,803

218,990

Cloud91,357

76,434

339,985

289,852

Total cost of revenue146,055

137,282

561,952

531,768

Gross profit288,526

292,926

1,086,064

1,042,144

Operating expenses:Research and development, net56,163

52,165

218,182

193,718

Selling and marketing112,104

106,221

406,436

399,304

General and administrative45,421

46,841

180,733

168,022

Amortization of acquired intangible assets9,715

10,107

38,666

42,383

Total operating expenses223,403

215,334

844,017

803,427

Operating income65,123

77,592

242,047

238,717

Financial and other expense, net2,600

554

4,859

4,444

Income before tax62,523

77,038

237,188

234,273

Taxes on income7,549

15,295

40,842

48,369

Net income$

54,974

$

61,743

$

196,346

$

185,904

Less: net income/(loss) attributable to non-controlling interests51

-

(327)

-

Net income attributable to NICE Ltd.'s shareholders$

54,923

#$

61,743

$

196,673

$

185,904

Earnings per share:Basic$

0.87

$

0.99

$

3.13

$

2.99

Diluted$

0.83

$

0.95

$

2.98

$

2.88

Weighted average shares outstanding:Basic62,967

62,357

62,710

62,120

Diluted66,600

65,161

65,956

64,661

NICE LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OFINCOMEU.S. dollars in thousands(except per share amounts) Quarter ended Year ended December 31, December 31, 2020 2019 2020 2019

Audited Audited Audited Audited Revenue: Product $ 41,542 $ 80,101 $ 183,153 $ 269,100

Services 174,003 183,117 687,532 709,064

Cloud 219,036 166,990 777,331 595,748

Total revenue 434,581 430,208 1,648,016 1,573,912

Cost of revenue: Product 5,453 6,076 22,164 22,926

Services 49,245 54,772 199,803 218,990

Cloud 91,357 76,434 339,985 289,852

Total cost of revenue 146,055 137,282 561,952 531,768

Gross profit 288,526 292,926 1,086,064 1,042,144

Operating expenses: Research and development, net 56,163 52,165 218,182 193,718

Selling and marketing 112,104 106,221 406,436 399,304

General and administrative 45,421 46,841 180,733 168,022

Amortization of acquired 9,715 10,107 38,666 42,383 intangible assetsTotal operating expenses 223,403 215,334 844,017 803,427

Operating income 65,123 77,592 242,047 238,717

Financial and other expense, 2,600 554 4,859 4,444net Income before tax 62,523 77,038 237,188 234,273

Taxes on income 7,549 15,295 40,842 48,369

Net income $ 54,974 $ 61,743 $ 196,346 $ 185,904

Less: net income/(loss) 51 - (327) -attributable to non-controllinginterests Net income attributable to NICE $ 54,923 # $ 61,743 $ 196,673 $ 185,904Ltd.'s shareholders Earnings per share: Basic $ 0.87 $ 0.99 $ 3.13 $ 2.99

Diluted $ 0.83 $ 0.95 $ 2.98 $ 2.88

Weighted average sharesoutstanding: Basic 62,967 62,357 62,710 62,120

Diluted 66,600 65,161 65,956 64,661

NICE LTD. AND SUBSIDIARIESCONSOLIDATED CASH FLOW STATEMENTSU.S. dollars in thousandsQuarter endedYear endedDecember 31,December 31,2020

2019

2020

2019

AuditedAuditedAuditedAuditedOperating ActivitiesNet income$

54,974

$

61,743

$

196,346

$

185,904

Depreciation and amortization46,893

44,486

182,026

173,230

Stock based compensation32,828

24,275

101,667

80,864

Amortization of premium and discount and accrued interest on marketable securities157

134

(633)

(53)

Deferred taxes, net(16,588)

18,899

(33,241)

(12,208)

Changes in operating assets and liabilities:Trade Receivables(5,343)

(56,763)

22,245

(29,863)

Prepaid expenses and other assets(49,028)

11,977

(80,665)

(76,180)

Trade payables(1,137)

5,850

4,094

777

Accrued expenses and other current liabilities51,459

(22,059)

14,875

31,730

Operating lease right-of-use assets, net5,241

7,262

18,167

19,104

Deferred revenue48,585

499

63,202

13,810

Long term liabilities-

(11)

-

(311)

Operating lease liabilities(5,272)

(6,844)

(19,569)

(18,839)

Amortization of discount on long term debt5,352

2,388

13,297

9,236

Other(1,251)

(387)

(1,505)

(3,043)

Net cash provided by operating activities166,870

91,449

480,306

374,158

Investing ActivitiesPurchase of property and equipment(2,519)

(5,767)

(24,186)

(27,294)

Purchase of Investments(277,038)

(125,165)

(583,115)

(619,060)

Proceeds from Investments45,444

79,084

328,593

362,713

Capitalization of software development costs(10,322)

(8,739)

(39,098)

(34,679)

Payments for business and asset acquisitions, net of cash acquired-

-

(147,261)

(25,972)

Net cash used in investing activities(244,435)

(60,587)

(465,067)

(344,291)

Financing ActivitiesProceeds from issuance of shares upon exercise of share options688

717

8,865

5,428

Purchase of treasury shares(20,671)

(24,664)

(48,272)

(47,276)

Capital Lease payments-

(185)

(177)

(816)

Repayment of long term debt(215,000)

-

(215,000)

-

Proceeds/(costs) from issuance of exchangeable notes(48)

-

451,421

-

Net cash provided by/(used in) financing activities(235,031)

(24,132)

196,837

(42,664)

Effect of exchange rates on cash and cash equivalents1,747

754

1,868

(979)

Net change in cash and cash equivalents(310,849)

7,484

213,944

(13,776)

Cash and cash equivalents, beginning of period$

753,116

$

220,839

$

228,323

$

242,099

Cash and cash equivalents, end of period$

442,267

$

228,323

$

442,267

$

228,323

NICE LTD. AND SUBSIDIARIESCONSOLIDATED CASH FLOWSTATEMENTSU.S. dollars in thousands Quarter ended Year ended December 31, December 31, 2020 2019 2020 2019

Audited Audited Audited Audited Operating Activities Net income $ 54,974 $ 61,743 $ 196,346 $ 185,904

Depreciation and 46,893 44,486 182,026 173,230 amortization Stock based compensation 32,828 24,275 101,667 80,864

Amortization of premium and discount and accrued 157 134 (633) (53) interest on marketable securities Deferred taxes, net (16,588) 18,899 (33,241) (12,208)

Changes in operating assets and liabilities: Trade Receivables (5,343) (56,763) 22,245 (29,863)

Prepaid expenses and other (49,028) 11,977 (80,665) (76,180) assets Trade payables (1,137) 5,850 4,094 777

Accrued expenses and other 51,459 (22,059) 14,875 31,730 current liabilities Operating lease 5,241 7,262 18,167 19,104 right-of-use assets, net Deferred revenue 48,585 499 63,202 13,810

Long term liabilities - (11) - (311)

Operating lease (5,272) (6,844) (19,569) (18,839) liabilities Amortization of discount on 5,352 2,388 13,297 9,236 long term debt Other (1,251) (387) (1,505) (3,043)

Net cash provided by 166,870 91,449 480,306 374,158 operating activities Investing Activities Purchase of property and (2,519) (5,767) (24,186) (27,294) equipment Purchase of Investments (277,038) (125,165) (583,115) (619,060)

Proceeds from Investments 45,444 79,084 328,593 362,713

Capitalization of software (10,322) (8,739) (39,098) (34,679) development costs Payments for business and - - (147,261) (25,972) asset acquisitions, net of cash acquired Net cash used in investing (244,435) (60,587) (465,067) (344,291) activities Financing Activities Proceeds from issuance of 688 717 8,865 5,428 shares upon exercise of share options Purchase of treasury shares (20,671) (24,664) (48,272) (47,276)

Capital Lease payments - (185) (177) (816)

Repayment of long term debt (215,000) - (215,000) -

Proceeds/(costs) from (48) - 451,421 - issuance of exchangeable notes Net cash provided by/(used (235,031) (24,132) 196,837 (42,664) in) financing activities Effect of exchange rates on 1,747 754 1,868 (979)cash and cash equivalents Net change in cash and cash (310,849) 7,484 213,944 (13,776)equivalentsCash and cash equivalents, $ 753,116 $ 220,839 $ 228,323 $ 242,099beginning of period Cash and cash equivalents, $ 442,267 $ 228,323 $ 442,267 $ 228,323end of period NICE LTD. AND SUBSIDIARIESRECONCILIATION OF GAAP TONON-GAAP RESULTSU.S. dollars in thousands(except per share amounts) Quarter ended Year ended December 31, December 31, 2020 2019 2020 2019

GAAP revenues $ 434,581 $ 430,208 $ 1,648,016 $ 1,573,912

Valuation adjustment on - - - 15acquired deferred productrevenueValuation adjustment on 149 - 230 5acquired deferred servicesrevenueValuation adjustment on 3,679 842 8,866 3,534acquired deferred cloudrevenueNon-GAAP revenues $ 438,409 $ 431,050 $ 1,657,112 $ 1,577,466

GAAP cost of revenue $ 146,055 $ 137,282 $ 561,952 $ 531,768

Amortization of acquired (1,073) (1,134) (4,467) (4,106)intangible assets on costof productAmortization of acquired (1,225) (1,522) (4,566) (6,126)intangible assets on costof servicesAmortization of acquired (18,012) (15,323) (66,434) (60,441)intangible assets on costof cloudValuation adjustment on 194 532 931 2,425acquired deferred cost ofcloudCost of product revenue (131) 131 (336) (173)adjustment (1)Cost of services revenue (2,593) (1,941) (7,550) (8,192)adjustment (1)Cost of cloud revenue (1,457) (813) (4,058) (2,955)adjustment (1)Non-GAAP cost of revenue $ 121,758 $ 117,212 $ 475,472 $ 452,200

GAAP gross profit $ 288,526 $ 292,926 $ 1,086,064 $ 1,042,144

Gross profit adjustments 28,125 20,912 95,576 83,122

Non-GAAP gross profit $ 316,651 $ 313,838 $ 1,181,640 $ 1,125,266

GAAP operating expenses $ 223,403 $ 215,334 $ 844,017 $ 803,427

Research and development (4,324) (2,896) (11,877) (8,078)(1,2)Sales and marketing (1,2) (10,769) (7,468) (30,392) (26,679)

General and administrative (13,775) (11,327) (52,014) (35,705)(1,2)Amortization of acquired (9,719) (10,107) (38,670) (42,383)intangible assetsValuation adjustment on 89 62 195 307acquired deferredcommissionNon-GAAP operating expenses $ 184,905 $ 183,598 $ 711,259 $ 690,889

GAAP financial and other $ 2,600 $ 554 $ 4,859 $ 4,444expense, netAmortization of discount on (5,353) (2,388) (13,297) (9,235)debtNon-GAAP financial and $ (2,753) $ (1,834) $ (8,438) $ (4,791)other income, net GAAP taxes on income $ 7,549 $ 15,295 $ 40,842 $ 48,369

Tax adjustments re non-GAAP 20,056 14,142 59,757 47,400adjustmentsNon-GAAP taxes on income $ 27,605 $ 29,437 $ 100,599 $ 95,769

GAAP net income $ 54,974 $ 61,743 $ 196,346 $ 185,904

Valuation adjustment on 3,828 842 9,096 3,554acquired deferred revenueValuation adjustment on (194) (532) (931) (2,425)acquired deferred cost ofcloud revenueAmortization of acquired 30,029 28,086 114,137 113,056intangible assetsValuation adjustment on (89) (62) (195) (307)acquired deferredcommissionShare-based compensation 33,049 24,314 102,304 80,939(1)Acquisition related - - 3,923 843expenses (2)Amortization of discount on 5,353 2,388 13,297 9,235long term debtTax adjustments re non-GAAP (20,056) (14,142) (59,757) (47,400)adjustmentsNon-GAAP net income $ 106,894 $ 102,637 $ 378,220 $ 343,399

GAAP diluted earnings per $ 0.83 $ 0.95 $ 2.98 $ 2.88share Non-GAAP diluted earnings $ 1.61 $ 1.58 $ 5.73 $ 5.31per share Shares used in computing 66,600 65,161 65,956 64,661GAAP diluted earnings pershare Shares used in computing 66,600 65,161 65,956 64,661non-GAAP diluted earningsper share NICE LTD. AND SUBSIDIARIESRECONCILIATION OF GAAP TONON-GAAP RESULTS(continued)U.S. dollars in thousands (1) Share-based Compensation Quarter ended Year ended December 31, December 31, 2020 2019 2020 2019

Cost of product revenue $ 131 $ (131) $ 336 $ 173

Cost of services 2,593 1,941 7,550 8,192 revenue Cost of cloud revenue 1,457 813 4,058 2,955

Research and 4,324 2,896 11,877 8,073 development Sales and marketing 10,769 7,468 30,262 26,649

General and 13,775 11,327 48,221 34,897 administrative $ 33,049 $ 24,314 $ 102,304 $ 80,939

(2) Acquisition related expenses Quarter ended Year ended December 31, December 31, 2020 2019 2020 2019

Research and $ - $ - $ - $ 5 development Sales and marketing - - 130 30

General and - - 3,793 808 administrative $ - $ - $ 3,923 $ 843

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