NICE Systems (NASDAQ:NICE), the global provider of advanced solutions that enable organizations to extract Insight from Interactions and transactions to drive performance, today announced results for the third quarter of 2007.
Third quarter 2007 non-GAAP revenues reached a record $132.9 million, representing an increase of 18.5% from $112.2 million in the third quarter of 2006.
Non-GAAP gross margin in the third quarter 2007 reached 63.4%, up from 60.6% in the third quarter of 2006; and non-GAAP gross profits were a record $84.3 million, up 24.0% from $67.9 million in the third quarter of 2006.
Non-GAAP operating margin in the third quarter 2007 reached 17.1%, up from 15.9% in the third quarter 2006. Operating income on a non-GAAP basis in the third quarter 2007 increased by 27.5% to $22.7 million, from $17.8 million in the third quarter of 2006.
Third quarter 2007 non-GAAP net income reached a record $21.0 million, representing a 30.8% increase from $16.0 million in the third quarter of 2006. Non-GAAP earnings per fully diluted share for the quarter were a record $0.38, up from $0.31 in the third quarter of 2006.
Non-GAAP results for the third quarter 2007 exclude the fair value adjustment on acquired deferred revenues of $0.8 million net of taxes, the amortization of acquired intangible assets and write-off of acquired in-process research and development of $7.3 million, net of taxes and stock based compensation expenses of $3.5 million, net of taxes and acquisition related compensation expenses of $0.2 million.
On a GAAP basis: third quarter 2007 revenue was $131.7 million, up from $107.5 million in the third quarter of 2006. Third quarter 2007 gross margin was 60.6%, compared with 56.2% in the third quarter of 2006; operating profit was $8.4 million, up from an operating loss of $6.9 million, in the third quarter of 2006; and third quarter 2007 net income was $9.2 million, or $0.17 per fully diluted share, compared with net loss of $5.4 million, or $0.11 per share, on a fully diluted basis, for the third quarter of 2006.
Total cash and equivalents as of September 30, 2007 reached $357.8 million, compared with $356.4 million as of June 30, 2007. Third quarter 2007 operating cash flow was $35.7 million.
“The third quarter of 2007 was a record one for NICE, both on the top and bottom line, capping off another quarter of excellent performance,” said Haim Shani, Chief Executive Officer of NICE. ”The quarter was marked by continuing demand for our enterprise sector solutions, a growing pipeline of large-scale security projects and by record revenues in our security business. Looking ahead to 2008, we expect to further increase our revenues and profitability.”
Guidance for fourth quarter and year 2007:
Fourth quarter 2007 non-GAAP revenues are expected to be in the range of $142 - $146 million, and non-GAAP EPS is expected to be in the range of $0.36 – $0.40 per fully diluted share. Updated guidance for year 2007 non-GAAP revenues is at $519-523 million, and non-GAAP EPS to be in the range of $1.41 – $1.45 per fully diluted share.
First time guidance for year 2008:
2008 non-GAAP revenues are expected to be in the range of $615 - $630 million, and non-GAAP EPS is expected to be in the range of $1.65 - $1.75 per fully diluted share.
Conference Call
NICE will host a conference call to discuss the results and its business outlook today at 8:30 a.m. EST (15:30 Israel). Participants may access the conference call by dialing US toll-free +1-888-281-1167 or +1-800-994-4498; international: +972-3-918-0610; Israel: 03-918-0610. The call will also be broadcast live on the internet via NICE's website at www.nice.com. A telephone replay will be available for up to 72 hours, starting from three hours after the call, by dialing one of the following numbers: US Toll-free: + 1-888-326-9310; international: + 972-3-925-5930; Israel: 03-925-5930.
Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, in-process research and development write-off, stock based compensation expenses, as well as certain business combination accounting entries. 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 assigns 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 Statement of Operations.
Reconciliation between the results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statement of Operations (Non-GAAP Basis).
About NICE Systems
NICE Systems (NASDAQ:NICE) is the leading provider of Insight from Interactions solutions and value-added services, powered by the convergence of advanced analytics of unstructured multimedia content and transactional data – from telephony, web, email, radio, video, and other data sources. NICE’s solutions address the needs of the enterprise and security markets, enabling organizations to operate in an insightful and proactive manner, and take immediate action to improve business and operational performance and ensure safety and security. NICE has over 24,000 customers in 100 countries, including over 85 of the Fortune 100 companies. More information is available at http://www.nice.com.
Trademark Note: 360° View, Alpha, ACTIMIZE, Actimize logo, Customer Feedback, Dispatcher Assessment, Encorder, eNiceLink, Executive Connect, Executive Insight, FAST, FAST alpha Blue, FAST alpha Silver, FAST Video Security, Freedom, Freedom Connect, IEX, Interaction Capture Unit, Insight from Interactions, Investigator, Last Message Replay, Mirra, My Universe, NICE, NICE logo, NICE Analyzer, NiceCall, NiceCall Focus, NiceCLS, NICE Inform, NICE Learning, NiceLog, NICE Perform, NiceScreen, NICE SmartCenter, NICE Storage Center, NiceTrack, NiceUniverse, NiceUniverse Compact, NiceVision, NiceVision Alto, NiceVision Analytics, NiceVision ControlCenter, NiceVision Digital, NiceVision Harmony, NiceVision Mobile, NiceVision Net, NiceVision NVSAT, NiceVision Pro, Performix, Playback Organizer, Renaissance, Scenario Replay, ScreenSense, Tienna, TotalNet, TotalView, Universe, Wordnet are trademarks and/or registered trademarks of NICE Systems Ltd. All other trademarks are the property of their respective owners.
This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on the current expectations of the management of NICE Systems Ltd. (the Company) only, and are subject to a number of risk factors and uncertainties, including but not limited to changes in technology and market requirements, decline in demand for the Company's products, inability to timely develop and introduce new technologies, products and applications, difficulties or delays in absorbing and integrating acquired operations, products, technologies and personnel, loss of market share, pressure on pricing resulting from competition, and inability to maintain certain marketing and distribution arrangements, which could cause the actual results or performance of the Company to differ materially from those described therein. We undertake no obligation to update these forward-looking statements. For a more detailed description of the risk factors and uncertainties affecting the company, refer to the Company's reports filed from time to time with the Securities and Exchange Commission.
| NICE SYSTEMS LTD. AND SUBSIDIARIES | |||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
| U.S. dollars in thousands (except per share amounts) | |||||||||||||
| Three months ended | Nine months ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2006 | 2007 | 2006 | 2007 | ||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | ||||||||||
| Revenue | |||||||||||||
| Product | $ | 69,353 | $ | 80,420 | $ | 188,171 | $ | 229,921 | |||||
| Services | 38,126 | 51,242 | 104,925 | 143,875 | |||||||||
| Total revenue | 107,479 | 131,662 | 293,096 | 373,796 | |||||||||
| Cost of revenue | |||||||||||||
| Product | 23,266 | 22,438 | 62,133 | 64,456 | |||||||||
| Services | 23,846 | 29,403 | 66,006 | 84,856 | |||||||||
| Total cost of revenue | 47,112 | 51,841 | 128,139 | 149,312 | |||||||||
| Gross Profit | 60,367 | 79,821 | 164,957 | 224,484 | |||||||||
| Operating Expenses: | |||||||||||||
| Research and development, net | 11,909 | 14,438 | 32,329 | 41,137 | |||||||||
| Selling and marketing | 25,167 | 30,527 | 66,593 | 85,866 | |||||||||
| General and administrative | 15,666 | 20,656 | 41,815 | 61,199 | |||||||||
| Amortization of acquired intangible assets | 1,843 | 2,103 | 3,069 | 5,795 | |||||||||
| In-process research and development | 12,670 | 3,710 | 12,882 | 3,710 | |||||||||
| Total operating expenses | 67,255 | 71,434 | 156,688 | 197,707 | |||||||||
| Operating income | (6,888 | ) | 8,387 | 8,269 | 26,777 | ||||||||
| Financial income, net | 2,138 | 3,920 | 10,069 | 10,606 | |||||||||
| Other income, net | 374 | 3 | 451 | 60 | |||||||||
| Income before taxes on income | (4,376 | ) | 12,310 | 18,789 | 37,443 | ||||||||
| Income tax expense | 1,027 | 3,078 | 6,332 | 8,314 | |||||||||
| Net income | $ | (5,403 | ) | $ | 9,232 | $ | 12,457 | $ | 29,129 | ||||
| Basic income per share | $ | (0.11 | ) | $ | 0.17 | $ | 0.25 | $ | 0.56 | ||||
| Diluted income per share | $ | (0.11 | ) | $ | 0.17 | $ | 0.24 | $ | 0.54 | ||||
Weighted average number of shares outstanding used to compute: | |||||||||||||
| Basic income per share | 49,649 | 53,052 | 49,209 | 52,134 | |||||||||
| Diluted income per share | 49,649 | 54,743 | 51,666 | 54,121 | |||||||||
| NICE SYSTEMS LTD. AND SUBSIDIARIES | ||||||||||||||||
| NON-GAAP NET INCOME AND EARNINGS PER SHARE | ||||||||||||||||
| U.S. dollars in thousands (except per share amounts) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2006 | 2007 | 2006 | 2007 | |||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||
| GAAP net income | $ | (5,403 | ) | $ | 9,232 | $ | 12,457 | $ | 29,129 | |||||||
| Adjustments | ||||||||||||||||
| US GAAP valuation adjustment on acquired deferred revenue | ||||||||||||||||
| Product Revenue | 2,268 | 849 | 2,280 | 1,390 | ||||||||||||
| Service Revenue | 2,406 | 339 | 2,406 | 1,799 | ||||||||||||
| Amortization of acquired intangible assets and acquisition related costs (a) | ||||||||||||||||
| included in cost of product | 2,554 | 2,541 | 4,714 | 7,497 | ||||||||||||
| included in operating expense | 1,843 | 2,103 | 3,069 | 5,795 | ||||||||||||
| included in research and development | - | 96 | - | 96 | ||||||||||||
| included in general and administrative expense | - | 74 | - | 74 | ||||||||||||
| Equity based compensation expense | ||||||||||||||||
| included in cost of product | 80 | 58 | 210 | 378 | ||||||||||||
| included in cost of services | 262 | 665 | 730 | 1,851 | ||||||||||||
| included in research & development | 309 | 682 | 894 | 1,914 | ||||||||||||
| included in sales & marketing | 789 | 1,452 | 2,134 | 4,193 | ||||||||||||
| included in general & administrative | 1,490 | 1,722 | 4,075 | 6,186 | ||||||||||||
| Write-off of acquired in-process research & development | 12,670 | 3,710 | 12,882 | 3,710 | ||||||||||||
| Legal settlement | (350 | ) | - | (350 | ) | - | ||||||||||
Tax benefit associated with amortization of acquired intangible assets, FAS 123R options compensation and acquired deferred revenue | (2,885 | ) | (2,561 | ) | (4,100 | ) | (6,672 | ) | ||||||||
| Non-GAAP net income | $ | 16,033 | $ | 20,962 | $ | 41,401 | $ | 57,340 | ||||||||
| Non-GAAP basic income per share | $ | 0.32 | $ | 0.40 | $ | 0.84 | $ | 1.10 | ||||||||
| Non-GAAP diluted income per share | $ | 0.31 | $ | 0.38 | $ | 0.80 | $ | 1.05 | ||||||||
Weighted average number of shares outstanding used to compute: | ||||||||||||||||
| Non-GAAP basic income per share | 49,649 | 53,052 | 49,209 | 52,134 | ||||||||||||
| Non-GAAP diluted income per share (b) | 52,248 | 55,369 | 52,075 | 54,588 | ||||||||||||
| (a) Includes US$170 compensation expenses related to the acquisitions. | ||||||||||||||||
| (b) For Non-GAAP income per share the diluted weighted average number of shares outstanding were calculated excluding the effects of expensing stock options under Statement 123R | ||||||||||||||||
| NICE SYSTEMS LTD. AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| U.S. dollars in thousands | ||||||
| December 31, | September 30, | |||||
| 2006 | 2007 | |||||
| Unaudited | Unaudited | |||||
| ASSETS | ||||||
| CURRENT ASSETS: | ||||||
| Cash and cash equivalents | $ | 67,365 | $ | 120,456 | ||
| Short-term investments | 92,989 | 94,015 | ||||
| Trade receivables | 81,312 | 95,380 | ||||
| Other receivables and prepaid expenses | 11,399 | 20,100 | ||||
| Inventories | 18,619 | 11,957 | ||||
| Deferred tax assets | 14,478 | 10,929 | ||||
| Total current assets | 286,162 | 352,837 | ||||
| LONG-TERM ASSETS: | ||||||
| Marketable securities | 135,810 | 143,334 | ||||
| Other long-term assets | 12,030 | 17,450 | ||||
| Deferred tax assets | 2,917 | 3,917 | ||||
| Property and equipment, net | 15,813 | 17,297 | ||||
| Other intangible assets, net | 111,182 | 169,936 | ||||
| Goodwill | 220,430 | 441,275 | ||||
| Total long-term assets | 498,182 | 793,209 | ||||
| TOTAL ASSETS | $ | 784,344 | $ | 1,146,046 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Trade payables | $ | 22,845 | $ | 16,822 | ||
| Accrued expenses and other liabilities | 146,990 | 214,134 | ||||
| Total current liabilities | 169,835 | 230,956 | ||||
| LONG-TERM LIABILITIES: | ||||||
| Deferred tax liabilities | 33,130 | 42,648 | ||||
| Other long-term liabilities | 11,805 | 15,923 | ||||
| Total long-term liabilities | 44,935 | 58,571 | ||||
| SHAREHOLDERS' EQUITY | 569,574 | 856,519 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 784,344 | $ | 1,146,046 | ||
| NICE SYSTEMS LTD. AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED CASH FLOW STATEMENTS | ||||||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2006 | 2007 | 2006 | 2007 | |||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | (5,403 | ) | $ | 9,232 | $ | 12,457 | $ | 29,129 | |||||||
Adjustments required to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Depreciation and amortization | 6,871 | 7,105 | 15,047 | 20,630 | ||||||||||||
| Accrued severance pay, net | (83 | ) | 64 | 566 | 904 | |||||||||||
Amortization of discount (premium) and accrued interest on marketable securities | (48 | ) | 100 | 103 | (46 | ) | ||||||||||
| Stock based compensation | 2,930 | 4,579 | 8,043 | 14,522 | ||||||||||||
| Excess tax benefit from share-based payment arrangements | 41 | (482 | ) | (2,495 | ) | (3,968 | ) | |||||||||
| In-process research and development | 12,670 | 3,710 | 12,881 | 3,710 | ||||||||||||
| Increase in trade receivables | (4,724 | ) | (2,793 | ) | (5,798 | ) | (9,290 | ) | ||||||||
| Increase in other receivables and prepaid expenses | (730 | ) | (3,981 | ) | (1,004 | ) | (9,693 | ) | ||||||||
| Decrease in inventories | 4,822 | 1,824 | 9,159 | 7,233 | ||||||||||||
| Decrease in trade payables | (2,811 | ) | (4,899 | ) | (4,420 | ) | (7,887 | ) | ||||||||
| Increase in accrued expenses and other liabilities | 13,272 | 20,191 | 16,363 | 42,825 | ||||||||||||
| Deferred taxes, net | (1,475 | ) | 1,092 | (1,755 | ) | (1,479 | ) | |||||||||
| Other | (38 | ) | (25 | ) | (100 | ) | (60 | ) | ||||||||
| Net cash provided by operating activities from continuing operations | 25,294 | 35,717 | 59,047 | 86,530 | ||||||||||||
| Net cash provided by operating activities from discontinued operation | - | - | - | 476 | ||||||||||||
| Net cash provided by operating activities | 25,294 | 35,717 | 59,047 | 87,006 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchase of property and equipment | (2,010 | ) | (3,036 | ) | (5,675 | ) | (7,209 | ) | ||||||||
| Proceeds from sale of property and equipment | 35 | 6 | 49 | 60 | ||||||||||||
| Investment in short-term bank deposits | (31 | ) | (31 | ) | (65 | ) | (108 | ) | ||||||||
| Proceeds from short-term bank deposits | 17 | 53 | 71 | 108 | ||||||||||||
| Proceeds from maturity of marketable securities | 8,383 | 34,360 | 103,469 | 138,810 | ||||||||||||
| Investment in marketable securities | (2,012 | ) | (1,030 | ) | (130,387 | ) | (161,761 | ) | ||||||||
| Proceeds of call of long-term held-to-maturity marketable securities | - | 14,736 | - | 20,600 | ||||||||||||
| Capitalization of software development costs | (428 | ) | (239 | ) | (955 | ) | (694 | ) | ||||||||
| Final settlement related to the purchase of Dictaphone CRS division | - | - | 2,000 | - | ||||||||||||
| Payment for the acquisition of Actimize Ltd. | - | (195,362 | ) | - | (195,362 | ) | ||||||||||
| Payment for the acquisition of Fast Video Security AG | - | (4,975 | ) | (21,313 | ) | (4,975 | ) | |||||||||
| Payment of earn-out related to the acquisition of Hannamax Hi-Tech Pty. Ltd. | - | - | (500 | ) | (500 | ) | ||||||||||
| Payment for the acquisition of certain assets and liabilities of Performix | (314 | ) | - | (14,484 | ) | - | ||||||||||
| Payment for the acquisition of IEX Corporation | (202,475 | ) | (202,698 | ) | (1,500 | ) | ||||||||||
| Increase (decrease) in accrued acquisition costs | - | 8 | (16 | ) | (80 | ) | ||||||||||
| Other investment activity, net | - | - | 69 | - | ||||||||||||
| Net cash used by investing activities | (198,835 | ) | (155,510 | ) | (270,435 | ) | (212,611 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from issuance of shares upon exercise of share options and ESPP, net | 3,082 | 4,887 | 15,794 | 16,627 | ||||||||||||
| Proceeds from issuance of shares upon public offering, net | - | 157,590 | - | 157,590 | ||||||||||||
| Excess tax benefit from share-based payment arrangements | (41 | ) | 482 | 2,495 | 3,968 | |||||||||||
| Decrease in accrued expenses associated with the 2005 offering | - | - | (273 | ) | - | |||||||||||
| Receipt of short-term bank loan | - | 120,000 | - | 120,000 | ||||||||||||
| Repayment of short-term bank loan | - | (120,000 | ) | - | (120,000 | ) | ||||||||||
| Decrease in short-term bank credit assumed in the acquisition of Fast | - | - | (785 | ) | - | |||||||||||
| Net cash provided by financing activities | 3,041 | 162,959 | 17,231 | 178,185 | ||||||||||||
| Effect of exchange rate changes on cash | (136 | ) | 319 | (26 | ) | 511 | ||||||||||
| Increase (decrease) in cash and cash equivalents | (170,636 | ) | 43,485 | (194,183 | ) | 53,091 | ||||||||||
| Cash and cash equivalents at beginning of period | 231,409 | 76,971 | 254,956 | 67,365 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 60,773 | $ | 120,456 | $ | 60,773 | $ | 120,456 | ||||||||
Contacts:
Galit Belkind, +1-877-245-7448 (Media)
galit.belkind@nice.com
Daphna
Golden, +1-877-245-7449 (Investors)
ir@nice.com
