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NICE Reports 22% Year-Over-Year Cloud Revenue Growth for the Third Quarter 2023

  • Both Revenue and EPS Exceed the High End of Q3 Guidance Range
  • Company Raises Revenue and EPS Guidance for Full Year 2023 and Provides Initial Outlook for 2024
  • New $300 Million Share Repurchase Program Announced

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

Third Quarter 2023 Financial Highlights

GAAP

Non-GAAP

Total revenue was $601.3 million and increased 8%

Total revenue was $601.3 million and increased 8%

Cloud revenue was $403.3 million and increased 22%

Cloud revenue was $403.3 million and increased 22%

Cloud gross margin was 65.1% compared to 64.1% last year

Cloud gross margin was 70.4% compared to 70.4% last year

Operating income was $113.6 million and increased 26%

Operating income was $183.9 million and increased 15%

Operating margin was 18.9% compared to 16.3% last year

Operating margin was 30.6% compared to 28.7% last year

Diluted EPS was $1.39 and increased 30%

Diluted EPS was $2.27 and increased 18%

Operating cash flow was $120.6 million and increased 28%

 

“We are pleased to report another strong quarter exceeding the high end of our guidance range on both total revenue and earnings per share for the third quarter,” said Barak Eilam, CEO of NICE. “Our record revenue was driven by another outstanding quarter with cloud revenue growth of 22%, which is the fastest growth rate in our industry on the largest cloud revenue base. Our robust top line result was paired with another quarter of industry-leading, unrivaled profitability demonstrated by further strong growth in operating income, operating margin and earnings per share. Our newly announced $300 million share buyback program reinforces our confidence in the strength of the underlying fundamentals of our business and our rock-solid financial profile.”

Mr. Eilam continued, “We are leading the CX market riding the strong forces of cloudification, platformization and AI. With record pipeline driven by digital and AI, we are well positioned to finish the year on a strong note and are pleased to provide our initial financial outlook on both top line and profitability beyond this year, reflecting the strength of our market leading position.”

GAAP Financial Highlights for the Third Quarter Ended September 30:

Revenues: Third quarter 2023 total revenues increased 8% to $601.3 million compared to $554.7 million for the third quarter of 2022.

Gross Profit: Third quarter 2023 gross profit was $410.4 million compared to $383.9 million for the third quarter of 2022. Third quarter 2023 gross margin was 68.2% compared to 69.2% for the third quarter of 2022.

Operating Income: Third quarter 2023 operating income increased 26% to $113.6 million compared to $90.3 million for the third quarter of 2022. Third quarter 2023 operating margin was 18.9% compared to 16.3% for the third quarter of 2022.

Net Income: Third quarter 2023 net income increased 30% to $92.4 million compared to $71.2 million for the third quarter of 2022. Third quarter 2023 net income margin was 15.4% compared to 12.8% for the third quarter of 2022.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the third quarter of 2023 increased 30% to $1.39 compared to $1.07 in the third quarter of 2022.

Operating Cash Flow and Cash Balance: Third quarter 2023 operating cash flow was $120.6 million. In the third quarter of 2023, $89.5 million was used for share repurchases. As of September 30, 2023, total cash and cash equivalents, and short-term investments were $1,651.6 million. Our debt, net of a hedge instrument, was $544.3 million, resulting in net cash and investments of $1,107.3 million.

Non-GAAP Financial Highlights for the Third Quarter Ended September 30:

Revenues: Third quarter 2023 total revenues increased 8% to $601.3 million compared to $554.7 million for the third quarter of 2022.

Gross Profit: Third quarter 2023 Non-GAAP gross profit increased to $434.4 million compared to $408.0 million for the third quarter of 2022. Third quarter 2023 Non-GAAP gross margin was 72.2% compared to 73.5% for the third quarter of 2022.

Operating Income: Third quarter 2023 Non-GAAP operating income increased 15% to $183.9 million compared to $159.3 million for the third quarter of 2022. Third quarter 2023 Non-GAAP operating margin was 30.6% compared to 28.7% for the third quarter of 2022.

Net Income: Third quarter 2023 Non-GAAP net income increased 18% to $150.6 million compared to $127.8 million for the third quarter of 2022. Third quarter 2023 Non-GAAP net income margin totaled 25.0% compared to 23.0% for the third quarter of 2022.

Fully Diluted Earnings Per Share: Third quarter 2023 Non-GAAP fully diluted earnings per share increased 18% to $2.27 compared to $1.92 for the third quarter of 2022.

Full-Year 2023 Guidance:

Raising Full-Year 2023 Guidance:

The Company increased full-year 2023 Non-GAAP total revenues to an expected range of $2,359 million to $2,379 million, representing 9% 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 $8.58 to $8.78, representing 14% growth at the midpoint compared to full-year 2022.

2024 Outlook:

The Company is providing preliminary expectations beyond 2023 as follows:

  • Full-year 2024 cloud revenue growth of at least 18% year over year, exclusive of any contribution from the LiveVox acquisition, which is expected to close in the first half of 2024.
  • On a full year basis for 2024, LiveVox is expected to contribute approximately $142 million of revenue.
  • Including synergies from LiveVox, we expect 2024 EBITDA to be nearly $900 million and to exceed $1 billion in 2025.

Quarterly Results Conference Call

NICE management will host its earnings conference call today November 16, 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 impact of conflicts in the Middle East, 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

 

September 30,

2023

December 31,

2022

Unaudited

Audited

 
ASSETS
 

CURRENT ASSETS:

Cash and cash equivalents

$

713,090

$

529,596

Short-term investments

 

938,500

 

1,041,943

Trade receivables

 

537,951

 

518,517

Debt hedge option

 

93,505

 

122,323

Prepaid expenses and other current assets

 

205,564

 

204,754

 
Total current assets

 

2,488,610

 

2,417,133

 

LONG-TERM ASSETS:

Property and equipment, net

 

170,619

 

159,285

Deferred tax assets

 

145,404

 

116,889

Other intangible assets, net

 

150,708

 

209,605

Operating lease right-of-use assets

 

97,814

 

102,893

Goodwill

 

1,627,186

 

1,617,118

Prepaid expenses and other long-term assets

 

215,650

 

231,496

 

 

Total long-term assets

 

2,407,381

 

2,437,286

 

TOTAL ASSETS

$

4,895,991

$

4,854,419

 
LIABILITIES AND SHAREHOLDERS' EQUITY
 

CURRENT LIABILITIES:

Trade payables

$

56,998

$

56,019

Deferred revenues and advances from customers

 

304,968

 

338,930

Current maturities of operating leases

 

12,569

 

13,525

Debt

 

181,131

 

209,292

Accrued expenses and other liabilities

 

460,910

 

523,451

 
Total current liabilities

 

1,016,576

 

1,141,217

 

LONG-TERM LIABILITIES:

Deferred revenues and advances from customers

 

51,502

 

57,211

Operating leases

 

92,270

 

99,262

Deferred tax liabilities

 

8,760

 

7,336

Debt

 

456,652

 

455,382

Other long-term liabilities

 

38,535

 

38,588

 
Total long-term liabilities

 

647,719

 

657,779

 

SHAREHOLDERS' EQUITY

Nice Ltd's equity

 

3,218,880

 

3,042,085

Non-controlling interests

 

12,816

 

13,338

 
Total shareholders' equity

 

3,231,696

 

3,055,423

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

4,895,991

$

4,854,419

NICE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (except per share amounts)

 

Quarter ended

September 30,

Year to date

September 30,

2023

2022

2023

2022

Unaudited

Unaudited

Unaudited

Unaudited

 

Revenue:

Cloud

$

403,324

$

330,487

$

1,152,839

$

936,472

Services

 

160,220

 

165,202

 

479,022

 

488,909

Product

 

37,800

 

59,035

 

122,455

 

187,353

Total revenue

 

601,344

 

554,724

 

1,754,316

 

1,612,734

 

Cost of revenue:

Cloud

 

140,564

 

118,706

 

407,144

 

345,497

Services

 

45,292

 

45,697

 

140,216

 

137,598

Product

 

5,130

 

6,379

 

19,935

 

19,613

Total cost of revenue

 

190,986

 

170,782

 

567,295

 

502,708

 

Gross profit

 

410,358

 

383,942

 

1,187,021

 

1,110,026

 

Operating expenses:

Research and development, net

 

84,848

 

74,048

 

241,589

 

224,108

Selling and marketing

 

144,171

 

158,608

 

444,614

 

461,636

General and administrative

 

67,713

 

60,991

 

188,256

 

176,933

Total operating expenses

 

296,732

 

293,647

 

874,459

 

862,677

 

Operating income

 

113,626

 

90,295

 

312,562

 

247,349

 

Financial and other income, net

 

(7,037)

 

(596)

 

(25,108)

 

(1,032)

 

Income before tax

 

120,663

 

90,891

 

337,670

 

248,381

Taxes on income

 

28,310

 

19,645

 

81,021

 

53,622

Net income

$

92,353

$

71,246

$

256,649

$

194,759

 
 

Earnings per share:

Basic

$

1.46

$

1.12

$

4.03

$

3.05

Diluted

$

1.39

$

1.07

$

3.86

$

2.93

 

Weighted average shares outstanding:

Basic

 

63,422

 

63,739

 

63,693

 

63,763

Diluted

 

66,223

 

66,446

 

66,438

 

66,524

NICE LTD. AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

U.S. dollars in thousands

Quarter ended

September 30,

Year to date

September 30,

2023

2022

2023

2022

Unaudited

Unaudited

Unaudited

Unaudited

 

Operating Activities

 

Net income

$

92,353

$

71,246

$

256,649

$

194,759

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

Depreciation and amortization

42,269

 

42,594

 

126,148

 

129,077

Share-based compensation

46,213

 

42,396

 

130,488

 

133,689

Amortization of premium and discount and accrued interest on marketable securities

998

 

2,090

 

2,044

 

7,162

Deferred taxes, net

(13,915)

 

(11,582)

 

(30,787)

 

(23,626)

Changes in operating assets and liabilities:

 

Trade Receivables, net

(25,807)

 

(14,780)

 

(17,720)

 

(85,635)

Prepaid expenses and other current assets

(315)

 

137

 

(22,361)

 

(40,273)

Operating lease right-of-use assets

3,182

 

3,494

 

8,685

 

16,814

Trade payables

11,632

 

(22,789)

 

784

 

1,643

Accrued expenses and other current liabilities

20,835

 

24,048

 

(28,691)

 

(10,283)

Deferred revenue

(54,485)

 

(38,963)

 

(39,662)

 

(2,332)

Operating lease liabilities

(4,140)

 

(5,057)

 

(11,541)

 

(22,488)

Amortization of discount on long-term debt

1,166

 

1,143

 

3,449

 

3,431

Loss from extinguishment of debt

-

 

1

 

37

 

1,206

Other

624

 

289

 

3,412

 

(135)

Net cash provided by operating activities

120,610

 

94,267

 

380,934

 

303,009

 

Investing Activities

 

 

Purchase of property and equipment

(5,507)

 

(6,067)

 

(23,126)

 

(20,952)

Purchase of Investments

(9,284)

 

(143,655)

 

(200,643)

 

(365,457)

Proceeds from Investments

134,486

 

140,814

 

307,038

 

322,404

Capitalization of internal use software costs

(12,479)

 

(13,427)

 

(41,106)

 

(37,171)

Payments for business acquisitions, net of cash acquired

(18,405)

 

-

 

(18,405)

 

-

Other

-

 

-

 

-

 

276

Net cash provided by (used in) investing activities

88,811

 

(22,335)

 

23,758

 

(100,900)

 

Financing Activities

 

 

Proceeds from issuance of shares upon exercise of options

43

 

151

 

1,767

 

424

Purchase of treasury shares

(89,506)

 

(22,489)

 

(219,417)

 

(120,401)

Dividends paid to noncontrolling interest

-

 

-

 

(1,480)

 

(376)

Repayment of debt

(23)

 

(18)

 

(1,557)

 

(20,128)

Net cash used in financing activities

(89,486)

 

(22,356)

 

(220,687)

 

(140,481)

 

Effect of exchange rates on cash and cash equivalents

 

(2,824)

 

(5,663)

 

(1,111)

 

(12,302)

 

Net change in cash, cash equivalents and restricted cash

 

117,111

 

43,913

 

182,894

 

49,326

Cash, cash equivalents and restricted cash, beginning of period

$

598,879

$

384,069

$

533,096

$

378,656

 

Cash, cash equivalents and restricted cash, end of period

$

715,990

$

427,982

$

715,990

$

427,982

 

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

Cash and cash equivalents

$

713,090

$

423,032

$

713,090

$

423,032

Restricted cash included in other current assets

$

2,900

$

4,950

$

2,900

$

4,950

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

$

715,990

$

427,982

$

715,990

$

427,982

NICE LTD. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

U.S. dollars in thousands (except per share amounts)

 

Quarter ended

September 30,

Year to date

September 30,

2023

2022

2023

2022

GAAP revenues

$

601,344

$

554,724

$

1,754,316

$

1,612,734

Non-GAAP revenues

$

601,344

$

554,724

$

1,754,316

$

1,612,734

 
 

GAAP cost of revenue

$

190,986

$

170,782

$

567,295

$

502,708

Amortization of acquired intangible assets on cost of cloud

 

(18,967)

 

(18,564)

 

(57,732)

 

(55,851)

Amortization of acquired intangible assets on cost of services

 

-

 

-

 

-

 

(377)

Amortization of acquired intangible assets on cost of product

 

(260)

 

(242)

 

(766)

 

(776)

Valuation adjustment on acquired deferred cost of cloud

 

-

 

13

 

-

 

41

Cost of cloud revenue adjustment (1)

 

(2,160)

 

(2,319)

 

(6,360)

 

(6,389)

Cost of services revenue adjustment (1)

 

(3,016)

 

(2,778)

 

(8,764)

 

(8,264)

Cost of product revenue adjustment (1)

 

384

 

(135)

 

106

 

(401)

Non-GAAP cost of revenue

$

166,967

$

146,757

$

493,779

$

430,691

 
 

GAAP gross profit

$

410,358

$

383,942

$

1,187,021

$

1,110,026

Gross profit adjustments

 

24,019

 

24,025

 

73,516

 

72,017

Non-GAAP gross profit

$

434,377

$

407,967

$

1,260,537

$

1,182,043

 
 

GAAP operating expenses

$

296,732

$

293,647

$

874,459

$

862,677

Research and development (1)

 

(8,224)

 

(7,424)

 

(24,405)

 

(23,825)

Sales and marketing (1,2)

 

(12,376)

 

(13,723)

 

(36,533)

 

(43,121)

General and administrative (1,2)

 

(22,348)

 

(16,505)

 

(57,703)

 

(52,991)

Amortization of acquired intangible assets

 

(3,308)

 

(7,379)

 

(12,251)

 

(23,153)

Valuation adjustment on acquired deferred commission

 

30

 

48

 

106

 

153

Non-GAAP operating expenses

$

250,506

$

248,664

$

743,673

$

719,740

 
 

GAAP financial and other income, net

$

(7,037)

$

(596)

$

(25,108)

$

(1,032)

Amortization of discount and loss of extinguishment on debt

 

(1,166)

 

(1,144)

 

(3,486)

 

(4,637)

Change in fair value of contingent consideration

 

(239)

 

-

 

(817)

 

-

Non-GAAP financial and other income, net

 

(8,442)

 

(1,740)

 

(29,411)

 

(5,669)

 
 

GAAP taxes on income

$

28,310

$

19,645

$

81,021

$

53,622

Tax adjustments re non-GAAP adjustments

 

13,372

 

13,598

 

37,473

 

42,860

Non-GAAP taxes on income

$

41,682

$

33,243

$

118,494

$

96,482

 
 

GAAP net income

$

92,353

$

71,246

$

256,649

$

194,759

Valuation adjustment on acquired deferred cost of cloud revenue

 

-

 

(13)

 

-

 

(41)

Amortization of acquired intangible assets

 

22,535

 

26,185

 

70,749

 

80,157

Valuation adjustment on acquired deferred commission

 

(30)

 

(48)

 

(106)

 

(153)

Share-based compensation (1)

 

47,287

 

42,884

 

133,206

 

134,991

Acquisition related expenses (2)

 

453

 

-

 

453

 

-

Amortization of discount and loss of extinguishment on debt

 

1,166

 

1,144

 

3,486

 

4,637

Change in fair value of contingent consideration

 

239

 

-

 

817

 

-

Tax adjustments re non-GAAP adjustments

 

(13,372)

 

(13,598)

 

(37,473)

 

(42,860)

Non-GAAP net income

$

150,631

$

127,800

$

427,781

$

371,490

 
 

GAAP diluted earnings per share

$

1.39

$

1.07

$

3.86

$

2.93

 

Non-GAAP diluted earnings per share

$

2.27

$

1.92

$

6.44

$

5.58

 

Shares used in computing GAAP diluted earnings per share

 

66,223

 

66,446

 

66,438

 

66,524

 

Shares used in computing non-GAAP diluted earnings per share

 

66,223

 

66,446

 

66,438

 

66,524

NICE LTD. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS (continued)

U.S. dollars in thousands

 
 

(1)

Share-based Compensation

Quarter ended

September 30,

Year to date

September 30,

2023

2022

2023

2022

 

Cost of cloud revenue

$

2,160

$

2,319

$

6,360

$

6,389

Cost of services revenue

 

3,016

 

2,778

 

8,764

 

8,264

Cost of product revenue

 

(384)

 

135

 

(106)

 

401

Research and development

 

8,224

 

7,424

 

24,405

 

23,825

Sales and marketing

 

12,351

 

13,723

 

36,508

 

43,121

General and administrative

 

21,920

 

16,505

 

57,275

 

52,991

$

47,287

$

42,884

$

133,206

$

134,991

 
 

(2)

Acquisition related expenses

Quarter ended

September 30,

Year to date

September 30,

2023

2022

2023

2022

 

Sales and marketing

$

25

$

-

$

25

$

-

General and administrative

 

428

 

-

 

428

 

-

$

453

$

-

$

453

$

-

 

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