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NICE Reports 23% Year-Over-Year Cloud Revenue Growth in Second Quarter 2023

  • Double Digit Growth in Revenue, Operating Income and EPS
  • Company Raises Full Year 2023 Guidance for Revenue and EPS

NICE (NASDAQ: NICE) today announced results for the second quarter ended June 30, 2023, as compared to the corresponding period of the previous year.

Second Quarter 2023 Financial Highlights

GAAP

Non-GAAP

Total revenue was $581.1 million and increased 10%

Total revenue was $581.1 million and increased 10%

Cloud revenue was $381.9 million and increased 23%

Cloud revenue was $381.9 million and increased 23%

Cloud gross margin was 64.7% compared to 63.6% last year

Cloud gross margin was 70.3% compared to 70.1% last year

Operating income was $105.4 million and increased 24%

Operating income was $169.6 million and increased 10%

Operating margin was 18.1% compared to 16.0% last year

Operating margin was 29.2% compared to 29.0% last year

Diluted EPS was $1.31 and increased 33%

Diluted EPS was $2.13 and increased 15%

Operating cash flow was $65.3 million

 

“Our second quarter results were marked by a strong financial performance across the board with 10% total revenue growth driven by a 23% increase in cloud revenue. Additionally, our industry-leading profitability continued unabated with further expansion in our cloud gross margin along with double-digit growth in operating income and earnings per share,” said Barak Eilam, CEO of NICE.

Mr. Eilam continued, “The market is characterized by a fast-moving transition to the cloud by large enterprises coupled with strong demand to incorporate AI into their customer service organizations. NICE is well positioned to leverage these dynamics as we have been smartly investing over the past several years in both the cloud and AI to deliver the industry-leading, AI powered cloud platform in CXone. Supported by a robust capital structure and industry-best profitability, our investments continue to deliver results highlighted by 70% growth in digital bookings and a record bookings quarter for Enlighten, our AI foundation, that underlies the entire CXone platform.”

GAAP Financial Highlights for the Second Quarter Ended June 30:

Revenues: Second quarter 2023 total revenues increased 10% to $581.1 million compared to $530.6 million for the second quarter of 2022.

Gross Profit: Second quarter 2023 gross profit was $391.4 million compared to $365.7 million for the second quarter of 2022. Second quarter 2023 gross margin was 67.4% compared to 68.9% for the second quarter of 2022.

Operating Income: Second quarter 2023 operating income increased 24% to $105.4 million compared to $84.7 million for the second quarter of 2022. Second quarter 2023 operating margin was 18.1% compared to 16.0% for the second quarter of 2022.

Net Income: Second quarter 2023 net income increased 33% to $87.4 million compared to $65.6 million for the second quarter of 2022. Second quarter 2023 net income margin was 15.0% compared to 12.4% for the second quarter of 2022.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the second quarter of 2023 increased 33% to $1.31 compared to $0.99 in the second quarter of 2022.

Operating Cash Flow and Cash Balance: Second quarter 2023 operating cash flow was $65.3 million. In the second quarter 2023, $65.2 million was used for share repurchases. As of June 30, 2023, total cash and cash equivalents, and short-term investments were $1,662.4 million. Our debt, net of a hedge instrument, was $543.1 million, resulting in net cash and investments of $1,119.3 million.

Non-GAAP Financial Highlights for the Second Quarter Ended June 30:

Revenues: Second quarter 2023 total revenues increased 10% to $581.1 million compared to $530.6 million for the second quarter of 2022.

Gross Profit: Second quarter 2023 Non-GAAP gross profit increased to $416.3 million compared to $388.9 million for the second quarter of 2022. Second quarter 2023 Non-GAAP gross margin was 71.6% compared to 73.3% for the second quarter of 2022.

Operating Income: Second quarter 2023 Non-GAAP operating income increased 10% to $169.6 million compared to $154.0 million for the second quarter of 2022. Second quarter 2023 Non-GAAP operating margin was 29.2% compared to 29.0% for the second quarter of 2022.

Net Income: Second quarter 2023 Non-GAAP net income increased 15% to $141.5 million compared to $123.2 million for the second quarter of 2022. Second quarter 2023 Non-GAAP net income margin totaled 24.4% compared to 23.2% for the second quarter of 2022.

Fully Diluted Earnings Per Share: Second quarter 2023 Non-GAAP fully diluted earnings per share increased 15% to $2.13 compared to $1.86 for the second quarter of 2022.

Third Quarter and Full Year 2023 Guidance:

Third Quarter 2023:

Third quarter 2023 Non-GAAP total revenues are expected to be in a range of $590 million to $600 million, representing 7% growth year over year at the midpoint.

Third quarter 2023 Non-GAAP fully diluted earnings per share are expected to be in a range of $2.10 to $2.20, representing 12% growth year over year at the midpoint.

Raising Full Year 2023 Guidance:

The Company increased full-year 2023 Non-GAAP total revenues to an expected range of $2,353 million to $2,373 million, representing 8% growth at the midpoint compared to full year 2022.

The Company increased full-year 2023 Non-GAAP fully diluted earnings per share to an expected range of $8.40 to $8.60, representing 12% growth at the midpoint compared to full year 2022.

Quarterly Results Conference Call

NICE management will host its earnings conference call today August 17, 2023, 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.

Explanation of Non-GAAP measures

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 loss from extinguishment of debt and the tax effect of the Non-GAAP adjustments.

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, analytics and artificial intelligence business.

Forward looking statements are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. The Company cautions that these statements are not guarantees of future performance, and investors should not place undue reliance on them. There are or will be important known and unknown factors and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These factors, include, but are not limited to, risks associated with 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, the effect of unexpected events or geo-political conditions, such as the COVID-19 pandemic, that may disrupt our business and the global economy and various other factors and uncertainties discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”).

You are encouraged to carefully review the section entitled “Risk Factors” in our latest Annual Report on Form 20-F and our other filings with the SEC for additional information regarding these and other factors and uncertainties that could affect our future performance. The forward-looking statements contained in this press release 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,

2023

2022

Unaudited

Audited

 
ASSETS
 

CURRENT ASSETS:

Cash and cash equivalents

$

598,079

$

529,596

Short-term investments

 

1,064,304

 

1,041,943

Trade receivables

 

513,881

 

518,517

Debt hedge option

 

133,517

 

122,323

Prepaid expenses and other current assets

 

204,080

 

204,754

 
Total current assets

 

2,513,861

 

2,417,133

 

LONG-TERM ASSETS:

Property and equipment, net

 

171,203

 

159,285

Deferred tax assets

 

132,264

 

116,889

Other intangible assets, net

 

162,044

 

209,605

Operating lease right-of-use assets

 

100,022

 

102,893

Goodwill

 

1,623,549

 

1,617,118

Prepaid expenses and other long-term assets

 

226,395

 

231,496

 

 

Total long-term assets

 

2,415,477

 

2,437,286

 

TOTAL ASSETS

$

4,929,338

$

4,854,419

 
LIABILITIES AND SHAREHOLDERS' EQUITY
 

CURRENT LIABILITIES:

Trade payables

$

45,269

$

56,019

Deferred revenues and advances from customers

 

361,764

 

338,930

Current maturities of operating leases

 

12,911

 

13,525

Debt

 

220,427

 

209,292

Accrued expenses and other liabilities

 

446,299

 

523,451

 
Total current liabilities

 

1,086,670

 

1,141,217

 

LONG-TERM LIABILITIES:

Deferred revenues and advances from customers

 

50,946

 

57,211

Operating leases

 

95,100

 

99,262

Deferred tax liabilities

 

6,709

 

7,336

Debt

 

456,223

 

455,382

Other long-term liabilities

 

38,888

 

38,588

 
Total long-term liabilities

 

647,866

 

657,779

 

SHAREHOLDERS' EQUITY

Nice Ltd's equity

 

3,182,461

 

3,042,085

Non-controlling interests

 

12,341

 

13,338

 
Total shareholders' equity

 

3,194,802

 

3,055,423

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

4,929,338

$

4,854,419

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,

2023

2022

2023

2022

Unaudited

Unaudited

Unaudited

Unaudited

 

Revenue:

Cloud

$

381,948

$

311,394

$

749,515

$

605,986

Services

 

158,945

 

166,733

 

318,802

 

323,707

Product

 

40,220

 

52,454

 

84,655

 

128,317

Total revenue

 

581,113

 

530,581

 

1,152,972

 

1,058,010

 

Cost of revenue:

Cloud

 

134,984

 

113,441

 

266,580

 

226,790

Services

 

47,019

 

44,994

 

94,924

 

91,902

Product

 

7,710

 

6,489

 

14,805

 

13,234

Total cost of revenue

 

189,713

 

164,924

 

376,309

 

331,926

 

Gross profit

 

391,400

 

365,657

 

776,663

 

726,084

 

Operating expenses:

Research and development, net

 

78,640

 

73,482

 

156,741

 

150,060

Selling and marketing

 

151,964

 

150,410

 

300,443

 

303,028

General and administrative

 

55,367

 

57,075

 

120,543

 

115,942

Total operating expenses

 

285,971

 

280,967

 

577,727

 

569,030

 

Operating income

 

105,429

 

84,690

 

198,936

 

157,054

 

Financial and other expense/(income), net

 

(9,350)

 

50

 

(18,071)

 

(436)

 

Income before tax

 

114,779

 

84,640

 

217,007

 

157,490

Taxes on income

 

27,424

 

19,068

 

52,711

 

33,977

Net income

$

87,355

$

65,572

$

164,296

$

123,513

 

Earnings per share:

Basic

$

1.37

$

1.03

$

2.57

$

1.94

Diluted

$

1.31

$

0.99

$

2.47

$

1.86

 

Weighted average shares outstanding:

Basic

 

63,723

 

63,806

 

63,831

 

63,775

Diluted

 

66,435

 

66,274

 

66,548

 

66,563

NICE LTD. AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

U.S. dollars in thousands

 

Quarter ended

 

Year to date

June 30,

 

June 30,

2023

 

2022

 

2023

 

2022

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

Operating Activities

Net income

$

87,355

$

65,572

$

164,296

$

123,513

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

42,033

 

42,202

 

83,879

 

86,483

Share-based compensation

 

39,314

 

43,109

 

84,275

 

91,293

Amortization of premium and discount and accrued interest on marketable securities

 

(224)

 

1,254

 

1,046

 

5,072

Deferred taxes, net

 

(8,994)

 

(10,248)

 

(16,872)

 

(12,044)

Changes in operating assets and liabilities:
Trade Receivables, net

 

(8,665)

 

(49,596)

 

8,087

 

(70,855)

Prepaid expenses and other current assets

 

(10,674)

 

(11,479)

 

(22,046)

 

(40,410)

Operating lease right-of-use assets

 

2,435

 

3,941

 

5,503

 

7,883

Trade payables

 

(9,668)

 

15,354

 

(10,848)

 

24,432

Accrued expenses and other current liabilities

 

(48,832)

 

(63,560)

 

(49,526)

 

(34,331)

Deferred revenue

 

(18,424)

 

(15,718)

 

14,823

 

36,631

Operating lease liabilities

 

(3,494)

 

(6,997)

 

(7,401)

 

(11,994)

Amortization of discount on long-term debt

 

1,129

 

1,151

 

2,283

 

2,288

Loss from extinguishment of debt

 

37

 

113

 

37

 

1,205

Other

 

1,926

 

933

 

2,789

 

(424)

Net cash provided by operating activities

 

65,254

 

 

16,031

 

260,325

 

208,742

 

Investing Activities

Purchase of property and equipment

 

(4,513)

 

(5,301)

 

(17,619)

 

(14,885)

Purchase of Investments

 

(121,817)

 

(123,536)

 

(191,359)

 

(221,802)

Proceeds from Investments

 

107,653

 

79,924

 

172,552

 

181,590

Capitalization of internal use software costs

 

(14,491)

 

(13,073)

 

(28,627)

 

(23,744)

Other

 

-

 

276

 

-

 

276

Net cash used in investing activities

 

(33,168)

 

(61,710)

 

(65,053)

 

(78,565)

 

Financing Activities

Proceeds from issuance of shares upon exercise of options

 

765

 

198

 

1,724

 

273

Purchase of treasury shares

 

(65,196)

 

(34,070)

 

(129,911)

 

(97,912)

Dividends paid to noncontrolling interest

 

-

 

(376)

 

(1,480)

 

(376)

Repayment of debt

 

(1,534)

 

(2,017)

 

(1,534)

 

(20,110)

Net cash used in financing activities

 

(65,965)

 

(36,265)

 

(131,201)

 

(118,125)

 

Effect of exchange rates on cash and cash equivalents

 

546

 

(5,702)

 

1,713

 

(6,639)

 

Net change in cash, cash equivalents and restricted cash

 

(33,333)

 

(87,646)

 

65,784

 

5,413

Cash, cash equivalents and restricted cash, beginning of period

$

632,212

$

471,715

$

533,095

$

378,656

 

Cash, cash equivalents and restricted cash, end of period

$

598,879

$

384,069

$

598,879

$

384,069

 

Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheet:

Cash and cash equivalents

$

598,079

$

382,219

$

598,079

$

382,219

Restricted cash included in other current assets

$

800

$

1,850

$

800

$

1,850

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

$

598,879

$

384,069

$

598,879

$

384,069

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,

2023

 

2022

 

2023

 

2022

GAAP revenues

$

581,113

$

530,581

$

1,152,972

$

1,058,010

Non-GAAP revenues

$

581,113

$

530,581

$

1,152,972

$

1,058,010

 
 

GAAP cost of revenue

$

189,713

$

164,924

$

376,309

$

331,926

Amortization of acquired intangible assets on cost of cloud

 

(19,396)

 

(18,623)

 

(38,765)

 

(37,287)

Amortization of acquired intangible assets on cost of services

 

-

 

-

 

-

 

(377)

Amortization of acquired intangible assets on cost of product

 

(257)

 

(258)

 

(506)

 

(534)

Valuation adjustment on acquired deferred cost of cloud

 

-

 

13

 

-

 

28

Cost of cloud revenue adjustment (1)

 

(2,253)

 

(1,741)

 

(4,200)

 

(4,070)

Cost of services revenue adjustment (1)

 

(2,864)

 

(2,519)

 

(5,748)

 

(5,486)

Cost of product revenue adjustment (1)

 

(140)

 

(134)

 

(278)

 

(266)

Non-GAAP cost of revenue

$

164,803

$

141,662

$

326,812

$

283,934

 
 

GAAP gross profit

$

391,400

$

365,657

$

776,663

$

726,084

Gross profit adjustments

 

24,910

 

23,262

 

49,497

 

47,992

Non-GAAP gross profit

$

416,310

$

388,919

$

826,160

$

774,076

 
 

GAAP operating expenses

$

285,971

$

280,967

$

577,727

$

569,030

Research and development (1)

 

(7,783)

 

(7,886)

 

(16,181)

 

(16,401)

Sales and marketing (1)

 

(13,055)

 

(13,129)

 

(24,157)

 

(29,398)

General and administrative (1)

 

(14,059)

 

(18,086)

 

(35,355)

 

(36,486)

Amortization of acquired intangible assets

 

(4,428)

 

(6,963)

 

(8,943)

 

(15,774)

Valuation adjustment on acquired deferred commission

 

36

 

52

 

76

 

105

Non-GAAP operating expenses

$

246,682

$

234,955

$

493,167

$

471,076

 
 

GAAP financial and other income, net

$

(9,350)

$

50

$

(18,071)

$

(436)

Amortization of discount and loss of extinguishment on debt

 

(1,166)

 

(1,264)

 

(2,320)

 

(3,493)

Change in fair value of contingent consideration

 

(578)

 

-

 

(578)

 

-

Non-GAAP financial and other income, net

 

(11,094)

 

(1,214)

 

(20,969)

 

(3,929)

 
 

GAAP taxes on income

$

27,424

$

19,068

$

52,711

$

33,977

Tax adjustments re non-GAAP adjustments

 

11,793

 

12,911

 

24,101

 

29,262

Non-GAAP taxes on income

$

39,217

$

31,979

$

76,812

$

63,239

 
 

GAAP net income

$

87,355

$

65,572

$

164,296

$

123,513

Valuation adjustment on acquired deferred cost of cloud revenue

 

-

 

(13)

 

-

 

(28)

Amortization of acquired intangible assets

 

24,081

 

25,844

 

48,214

 

53,972

Valuation adjustment on acquired deferred commission

 

(36)

 

(52)

 

(76)

 

(105)

Share-based compensation (1)

 

40,154

 

43,495

 

85,919

 

92,109

Amortization of discount and loss of extinguishment on debt

 

1,166

 

1,264

 

2,320

 

3,493

Change in fair value of contingent consideration

 

578

 

-

 

578

 

-

Tax adjustments re non-GAAP adjustments

 

(11,793)

 

(12,911)

 

(24,101)

 

(29,262)

Non-GAAP net income

$

141,505

$

123,199

$

277,150

$

243,692

 
 

GAAP diluted earnings per share

$

1.31

$

0.99

$

2.47

$

1.86

 

Non-GAAP diluted earnings per share

$

2.13

$

1.86

$

4.16

$

3.66

 

Shares used in computing GAAP diluted earnings per share

 

66,435

 

66,274

 

66,548

 

66,563

 

Shares used in computing non-GAAP diluted earnings per share

 

66,435

 

66,274

 

66,548

66,563

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,

2023

2022

2023

2022

 

Cost of cloud revenue

$

2,253

$

1,741

$

4,200

$

4,070

Cost of services revenue

 

2,864

 

2,519

 

5,748

 

5,486

Cost of product revenue

 

140

 

134

 

278

 

266

Research and development

 

7,783

 

7,886

 

16,181

 

16,401

Sales and marketing

 

13,055

 

13,129

 

24,157

 

29,398

General and administrative

 

14,059

 

18,086

 

35,355

 

36,486

$

40,154

$

43,495

$

85,919

$

92,107

 

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