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NICE Systems Sets New Records for Third Quarter 2007RA'ANANA, Israel --(Business Wire)-- 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 Degree 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
========== ========== ========== ==========
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