AI assistant
Nice Ltd. — Interim / Quarterly Report 2007
Aug 1, 2007
6950_rns_2007-08-01_4004163a-897f-427b-9012-5f4cfb62dee3.pdf
Interim / Quarterly Report
Open in viewerOpens in your device viewer
> NICE Systems Limited 8 Hapnina Street POB 690 Ra'anana 43107 Israel > T 972 9 775 3777 F 972 9 743 4282 E [email protected] > Insight from Interactions™ NICE
NICE Systems Achieves Record Second Quarter 2007 Results
Non-GAAP highlights for second quarter 2007 include:
- Record results - revenue $127 million and EPS $0.36
- 30% year-over-year increase in revenue; 46% increase in operating income
- Continued growth momentum in the enterprise sector
- Strong bookings in the security sector, including large-scale multi-million dollar projects
- Raising 2007 annual guidance; revenues $511-$520 million, EPS $1.36-$1.44
Ra'anana, Israel, August 01, 2007 - NICE Systems (NASDAQ: NICE), the global provider of advanced solutions that enable organizations to extract Insight from Interactions™ to drive performance, today announced results for the second quarter of 2007.
Second quarter 2007 non-GAAP revenue reached a record $127.1 million, representing a 30% increase from $97.7 million in the second quarter of 2006.
Non-GAAP gross margin in the second quarter 2007 was 63.0%, or $80.1 million, up from 59.8%, or $58.4 million respectively, in the second quarter of 2006.
Non-GAAP operating margin in the second quarter 2007 was 16.8%, up from 14.9% in the second quarter 2006. Operating income in the second quarter 2007 increased by 46% to $21.4 million from $14.6 million in the second quarter of 2006.
Second quarter 2007 non-GAAP net income reached a record $19.7 million, representing a 35% increase from $14.6 million in the second quarter of 2006. Non-GAAP earnings per fully diluted share for the quarter were a record $0.36, up from $0.28 in the second quarter of 2006.
Second quarter 2007 operating cash flow was $17.4 million. Total cash and equivalents as of June 30, 2007 reached $356.4 million, compared with $335.2 million as of March 31, 2007.
Non-GAAP results for the second quarter 2007 exclude the fair value adjustment on acquired deferred revenues of $0.6 million net of taxes, the amortization of acquired intangible assets of $3.3 million, net of taxes and stock based compensation expenses of $4.7 million, net of taxes.
On a GAAP basis: Second quarter 2007 revenue was $126.2 million, up from $97.7 million in the second quarter of 2006. Second quarter 2007 gross margin was 60.3%, compared with 58.2% in the second quarter of 2006; operating profit was $11.2 million, compared with operating profit of $9.8 million, in the second quarter of 2006; and second quarter 2007 net income was $11.2 million, or $0.21 per fully diluted share, compared with net income of $10.8 million, or $0.21 per share, on a fully diluted basis, for the second quarter of 2006.
Commenting on the results, Haim Shani, Chief Executive Officer of NICE said, "NICE continued to generate record results in the second quarter, reflecting the ongoing and strong demand for our Insight from Interactions solutions, both in the enterprise and security sectors, demonstrating the successful execution of our growth strategy."
Mr. Shani continued, "Last month we announced a major milestone in our growth strategy with the acquisition of Actimize. We are pioneering convergence of transaction and interaction analytics and spearheading a paradigm shift in how organizations mitigate risk and drive performance across the enterprise. Looking ahead, we intend to continue complementing NICE's organic growth with acquisitions, to further extend our global reach, expand our technology and solutions, broaden our customer base, and increase our distribution channels in the markets in which we operate."
Guidance for third quarter and year 2007:
Third quarter 2007 non-GAAP revenue is expected to be in the range of $127 - $131 million, and non-GAAP EPS is expected to be in the range of $0.36 – $0.40 per fully diluted share.
The Company is raising previously announced full year guidance for 2007, with non-GAAP revenues in the range of $511 - $520 million, up from $497 - $514 million. The company is also raising annual non-GAAP EPS to the range of $1.36 – $1.44, up from $1.31 – $1.42 per fully diluted share. Guidance for year 2007 assumes consolidation of Actimize's financial results in the fourth quarter of 2007.
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 require 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
NICE Systems (NASDAQ: NICE) is the leading provider of Insight from Interactions™ solutions and value-added services, powered by advanced analytics of unstructured multimedia content – from telephony, web, radio and video communications. 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.
Media
Galit Belkind NICE Systems [email protected] +1 877 245 7448
Investors
Daphna Golden NICE Systems [email protected] +1 877 245 7449
Trademark Note: Insight from Interactions™, 360° View™, Executive Connect®, Executive Insight™*, Freedom®, Investigator®, Mirra®, Universe®, My Universe™, NICE®, NiceCall®, NiceCall Focus™, NiceCLS™, NICE Learning™, eNiceLink™, NiceLog®, Playback Organizer™, Renaissance®, ScreenSense™, NiceScreen™, NICE SmartCenter™, NICE Storage Center™, NiceTrack™, NiceUniverse®, NiceVision®, NiceVision Analytics™, NiceVision ControlCenter™, NiceVision Digital™, NiceVision Harmony™, NiceVision Mobile™, NiceVision Net™,
NiceVision Pro™, NiceVision NVSAT™, NiceVision Alto™, Scenario Replay™, Tienna®, Wordnet®, NICE Perform®, NICE Inform™, NICE Analyzer™, Last Message Replay™, NiceUniverse Compact™, Customer Feedback™, Interaction Capture Unit™, Dispatcher Assessment™, Encoder™, Freedom Connect®, FAST®, FAST Alpha Silver™, FAST Alpha Blue™ and Alpha®, Emvolve Performance Manager™, Performix Technologies™, IEX®, TotalView® and other product names and services mentioned herein are trademarks and registered trademarks of NICE Systems Ltd. All other registered and unregistered trademarks are the property of their respective owners.
*in Australia only
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 June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| 2006 Unaudited | 2007 Unaudited | 2006 Unaudited | 2007 Unaudited | |
| Revenue | ||||
| Product | $ 61,544 | $ 76,299 | $ 118,818 | $ 149,501 |
| Services | 36,158 | 49,892 | 66,799 | 92,632 |
| Total revenue | 97,702 | 126,191 | 185,617 | 242,133 |
| Cost of revenue | ||||
| Product | 19,068 | 21,757 | 38,867 | 42,018 |
| Services | 21,759 | 28,384 | 42,160 | 55,452 |
| Total cost of revenue | 40,827 | 50,141 | 81,027 | 97,470 |
| Gross Profit | 56,875 | 76,050 | 104,590 | 144,663 |
| Operating Expenses: | ||||
| Research and development, net | 11,151 | 13,718 | 20,420 | 26,699 |
| Selling and marketing | 21,127 | 27,918 | 41,426 | 55,338 |
| General and administrative | 14,151 | 21,345 | 26,149 | 40,543 |
| Amortization of acquired intangible assets | 628 | 1,840 | 1,226 | 3,692 |
| In-process research and development | - | - | 212 | - |
| Total operating expenses | 47,057 | 64,821 | 89,433 | 126,272 |
| Operating income | 9,818 | 11,229 | 15,157 | 18,391 |
| Financial income, net | 4,064 | 3,435 | 7,931 | 6,686 |
| Other income, net | 78 | 57 | 77 | 56 |
| Income before taxes on income | 13,960 | 14,721 | 23,165 | 25,133 |
| Income tax expense | 3,170 | 3,550 | 5,305 | 5,236 |
| Net income | $ 10,790 | $ 11,171 | $ 17,860 | $ 19,897 |
| Basic income per share | $ 0.22 | $ 0.22 | $ 0.36 | $ 0.39 |
| Diluted income per share | $ 0.21 | $ 0.21 | $ 0.35 | $ 0.37 |
| Weighted average number of shares outstanding used to compute: | ||||
| Basic income per share | 49,300 | 51,938 | 48,985 | 51,668 |
| Diluted income per share | 51,708 | 53,922 | 51,549 | 53,802 |
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 June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| 2006 Unaudited | 2007 Unaudited | 2006 Unaudited | 2007 Unaudited | |
| GAAP net income | $ 10,790 | $ 11,171 | $ 17,860 | $ 19,897 |
| Adjustments | ||||
| US GAAP valuation adjustment on acquired deferred revenue | ||||
| Product Revenue | - | 368 | - | 541 |
| Service Revenue | - | 563 | - | 1,460 |
| Amortization of acquired intangible assets | ||||
| included in cost of product | 1,194 | 2,419 | 2,161 | 4,956 |
| included in operating expense | 628 | 1,840 | 1,226 | 3,692 |
| Compensation expense for stock options | ||||
| included in cost of product | 74 | 153 | 130 | 320 |
| included in cost of services | 266 | 572 | 468 | 1,186 |
| included in research & development | 339 | 638 | 585 | 1,232 |
| included in sales & marketing | 788 | 1,310 | 1,345 | 2,741 |
| included in general & administrative | 1,488 | 2,285 | 2,586 | 4,464 |
| Write-off of acquired in-process research & development | - | - | 212 | - |
| Tax benefit associated with amortization of acquired intangible assets, FAS 123R options compensation and acquired deferred revenue | (1,004) | (1,570) | (1,215) | (4,111) |
| Non-GAAP net income | $ 14,563 | $ 19,749 | $ 25,358 | $ 36,378 |
| Non-GAAP basic income per share | $ 0.30 | $ 0.38 | $ 0.52 | $ 0.70 |
| Non-GAAP diluted income per share | $ 0.28 | $ 0.36 | $ 0.49 | $ 0.67 |
| Weighted average number of shares outstanding used to compute: | ||||
| Non-GAAP basic income per share | 49,300 | 51,938 | 48,985 | 51,668 |
| Non-GAAP diluted income per share (a) | 51,708 | 54,398 | 51,549 | 54,189 |
(a) 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
U.S. dollars in thousands
NICE SYSTEMS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, 2006 | June 30, 2007 | |
|---|---|---|
| Unaudited | Unaudited | |
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash and cash equivalents | $ 67,365 | $ 76,971 |
| Short-term investments | 92,989 | 100,117 |
| Trade receivables | 81,312 | 87,922 |
| Other receivables and prepaid expenses | 11,399 | 16,569 |
| Inventories | 18,619 | 13,580 |
| Deferred tax assets | 14,478 | 12,963 |
| Total current assets | 286,162 | 308,122 |
| LONG-TERM ASSETS: | ||
| Marketable securities | 135,810 | 179,268 |
| Other long-term assets | 12,030 | 12,960 |
| Deferred Tax Assets | 2,917 | 4,276 |
| Property and equipment, net | 15,813 | 15,750 |
| Other intangible assets, net | 111,182 | 102,450 |
| Goodwill | 220,430 | 221,590 |
| Total long-term assets | 498,182 | 536,294 |
| TOTAL ASSETS | $ 784,344 | $ 844,416 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| CURRENT LIABILITIES: | ||
| Trade payables | $ 22,845 | $ 19,907 |
| Accrued expenses and other liabilities | 146,990 | 164,753 |
| Total current liabilities | 169,835 | 184,660 |
| LONG-TERM LIABILITIES: | ||
| Deferred tax liabilities | 33,130 | 30,497 |
| Other long-term liabilities | 11,805 | 13,571 |
| Total long-term liabilities | 44,935 | 44,068 |
| SHAREHOLDERS' EQUITY | 569,574 | 615,688 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 784,344 | $ 844,416 |
NICE SYSTEMS LTD. AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENTS U.S. dollars in thousands
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| 2006 Unaudited | 2007 Unaudited | 2006 Unaudited | 2007 Unaudited | |
| Cash flows from operating activities: | ||||
| Net income | $ 10,790 | $ 11,171 | $ 17,860 | $ 19,897 |
| Adjustments required to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 4,149 | 6,675 | 8,173 | 13,525 |
| Accrued severance pay, net | 667 | 785 | 649 | 840 |
| Amortization of discount (premium) and accrued interest on marketable securities | 178 | (117) | 151 | (146) |
| Stock based compensation | 2,954 | 4,958 | 5,114 | 9,943 |
| Excess tax benefit from share-based payment arrangements | (2,144) | (1,923) | (2,536) | (3,486) |
| In-process research and development | - | - | 212 | - |
| Increase in trade receivables | (4,186) | (9,459) | (1,082) | (6,440) |
| Increase in other receivables and prepaid expenses | (125) | (3,987) | (292) | (5,629) |
| Decrease in inventories | 1,934 | 2,813 | 4,395 | 5,389 |
| Increase (decrease) in trade payables | 117 | 5,771 | (1,628) | (2,970) |
| Increase (decrease) in accrued expenses and other liabilities | (4,343) | 400 | 3,045 | 22,510 |
| Deferred taxes, net | 322 | (179) | (281) | (2,571) |
| Other | (67) | (30) | (64) | (34) |
| Net cash provided by operating activities from continuing operations | 10,246 | 16,878 | 33,716 | 50,828 |
| Net cash provided by operating activities from discontinued operation | - | 476 | - | 476 |
| Net cash provided by operating activities | 10,246 | 17,354 | 33,716 | 51,304 |
| Cash flows from investing activities: | ||||
| Purchase of property and equipment | (1,879) | (1,915) | (3,671) | (4,147) |
| Proceeds from sale of property and equipment | 22 | 20 | 22 | 53 |
| Investment in short-term bank deposits | (14) | (33) | (34) | (77) |
| Proceeds from short-term bank deposits | 22 | 34 | 54 | 55 |
| Proceeds from maturity of marketable securities | 89,506 | 32,100 | 95,086 | 104,450 |
| Investment in marketable securities | (80,300) | (59,495) | (128,375) | (160,731) |
| Proceeds of call of long-term held-to-maturity marketable securities | - | 3,864 | - | 5,864 |
| Capitalization of software development costs | (407) | (242) | (526) | (455) |
| Final settlement related to the purchase of Dictaphone CRS division | 2,000 | - | 2,000 | - |
| Payment for the acquisition of Fast Video Security AG | (139) | - | (21,313) | - |
| Payment of earn-out related to the acquisition of Hannamax Hi-Tech Pty. Ltd. | (500) | (500) | (500) | (500) |
| Payment for the acquisition of certain assets and liabilities of Performix | (14,170) | - | (14,170) | - |
| Payment for the acquisition of IEX Corporation | - | - | - | (1,500) |
| Deferred acquisition costs | (223) | - | (223) | - |
| Decrease in accrued acquisition costs | (6) | (40) | (16) | (88) |
| Other investment activity, net | 69 | - | 69 | - |
| Net cash used by investing activities | (6,019) | (26,207) | (71,597) | (57,076) |
| Cash flows from financing activities: | ||||
| Proceeds from issuance of shares and exercise of share options, net | 4,028 | 4,328 | 12,711 | 11,741 |
| Excess tax benefit from share-based payment arrangements | 2,144 | 1,923 | 2,536 | 3,486 |
| Decrease in accrued expenses associated with the 2005 offering | (169) | - | (273) | - |
| Decrease in short-term bank credit assumed in the acquisition of Fast | - | - | (785) | - |
| Net cash provided by financing activities | 6,003 | 6,251 | 14,189 | 15,227 |
| Effect of exchange rate changes on cash | 184 | 161 | 145 | 151 |
| Increase (decrease) in cash and cash equivalents | 10,414 | (2,441) | (23,547) | 9,606 |
| Cash and cash equivalents at beginning of period | 220,995 | 79,412 | 254,956 | 67,365 |
| Cash and cash equivalents at end of period | $ 231,409 | $ 76,971 | $ 231,409 | $ 76,971 |