NICE Systems Reaches New Highs with Fourth Quarter and Fiscal Year 2006 Results

Record revenues, gross margins, operating margins and net income for Q4 and 2006

Ra’anana, Israel, February 21, 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 fourth quarter and full year ending December 31, 2006.

Record 2006 non-GAAP Results Include:

• Revenue of $418.1 million representing 34.4% growth over 2005
• Gross margin of  60.4%, up from 56.7% in 2005
• Operating margin of  15.1%, up from 11.2% in 2005
• Net income of $61.1 million represented 76.6% growth over 2005
• Book-to-bill ratio greater than 1 for the 11th consecutive quarter

Fourth quarter 2006 non-GAAP revenue was a record $120.4 million, representing a 33.7% increase from $90.0 million in the fourth quarter of 2005. Non-GAAP revenues for fiscal year 2006 reached a record high of $418.1 million, a 34.4% increase from $311.1 million in 2005.

Fourth quarter 2006 non-GAAP gross margin reached a record 64.3%, up from 57.7% in the fourth quarter 2005.  Non-GAAP gross margin for the year reached a record 60.4% compared with 56.7% for the year 2005.

Fourth quarter 2006 non-GAAP operating profit totaled record $21.6 million, with operating margin of 17.9%, compared with $12.7 million, and 14.1% operating margin, in the fourth quarter of 2005. For the year, non-GAAP operating profit increased to $63.2 million from $34.9 million in 2005 and non GAAP operating margins reached 15.1%, up from 11.2% in 2005.

Fourth quarter 2006 non-GAAP net income was a record $19.7 million or $0.37 per fully diluted share, up from $12.3 million or $0.28 per fully diluted share in the same quarter of 2005. Non-GAAP net income for the year was $61.1 million or $1.17 per fully diluted share, compared with net income of $34.6 million or $0.84 per fully diluted share for 2005. 

On a GAAP basis: Fourth quarter 2006 revenue was $116.5 million, up from $90.0 million in the fourth quarter of 2005. Fourth quarter 2006 gross margin was $70.5 million, compared with $51.4 million, in the fourth quarter of 2005; operating profit was $8.8 million, compared with operating profit of $11.7 million, in the fourth quarter of 2005; and fourth quarter 2006 net income was $9.9 million, or $0.19 per fully diluted share, compared with net income of $16.1 million, or $0.37 per share, on a fully diluted basis, for the fourth quarter of 2005. 

Total cash and equivalents as at December 31, 2006 rose by $51.9 million during the quarter reaching to $296.1 million, with no debt, compared to $244.2 million at the end of September 30, 2006.  

"2006 was yet another outstanding year for NICE, as reflected in the very strong performance and record results we achieved throughout the year,” said Haim Shani, Chief Executive Officer, NICE Systems Ltd. “We cemented our  leadership position in the enterprise and security markets, by setting the direction and tone with the industries’ most extensive and comprehensive set of innovative solutions.

“Looking ahead to 2007, we intend to grasp the new immediate opportunities that have presented themselves, with the impending consolidation in our markets. We expect to further expand our global market share and leadership positions, even beyond our original goals and, given these unique opportunities, anticipate the first quarter of 2007 will be even stronger than initially planned. We are therefore increasing our guidance for the year 2007.” concluded Mr. Shani.
                                                                                                                                       
“We are raising our full year 2007 non-GAAP revenue guidance to $487-502 million, and non-GAAP EPS guidance, on a fully diluted basis, up to $1.36-$1.46.” said Ran Oz, Corporate Vice President and Chief Financial Officer, NICE Systems Ltd. “First time guidance for Q1 2007, is as follows: Non-GAAP Revenue is expected to be between $114 and $118 million, and non-GAAP EPS, on a fully diluted basis, in the range of $0.27 – $0.31.“

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 after the call. The replay information: US Toll-free: 1-888-326-9310; international: +972-3-9255930; Israel: 03-9255930.  
Non−GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, in−process research and development write−off, legal settlements, 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.

About NICE Systems
NICE Systems (NASDAQ: NICE) is the leading provider of Insight from Interactions™, offering comprehensive performance management and interaction analytics solutions for the enterprise and security markets.  Advanced interaction analytics are performed on unstructured multimedia content – from telephony, web, radio and video communications.  NICE brings the power of Insight from Interactions to IP contact centers, branches, and command and control centers.  NICE’s solutions are changing the way organizations make decisions, enabling them to proactively improve business and operational performance and address security threats.  NICE has over 24,000 customers in 100 countries, including over 75 of the Fortune 100 companies.  More information is available at www.nice.com .

     
   
Trademark Note:  360o View, Alpha, Customer Feedback, Dispatcher Assessment, Emvolve Performance Manager, Encorder, eNiceLink, Executive Connect, Executive Insight*, FAST, FAST alpha blue, FAST alpha silver, Freedom, Freedom Connect, IEX, Interaction Capture Unit, Insight from Interactions, Investigator, Last Message Replay, Mirra, My Universe, NICE, NICE Analyzer, NiceCall, NiceCall Focus, NiceCLS, NICE Inform, NICE Learning, NiceLog, NICE Perform, NiceScreen, NICE Storage Center, NiceTrack, NiceUniverse, NiceUniverse Compact, NiceVision, NiceVision ALTO, NiceVision Harmony, NiceVision Mobile, NiceVision NVSAT, NiceVision PRO, Performix Technologies, Playback Organizer, Renaissance, Scenario Replay, ScreenSense, Tienna, TotalNet, TotalView, Universe, Wordnet 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 owner.

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.

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