“The continued strong execution around our growth pillars of cloud, analytics and artificial intelligence led to another quarter of double digit increases in total revenue and earnings per share. For each of these growth pillars, we believe that we are still at the early stage of our journey with a long runway for growth ahead of us,” said Barak Eilam, CEO, NICE.
Mr. Eilam continued, “A major part of this journey is the cloud, which grew 28% this quarter and is being driven by the continued success of our CXone platform, the only true, native, open cloud platform in the industry encompassing the broadest portfolio of customer experience solutions. We are witnessing a growing movement of large enterprises shifting to the cloud, and we are capturing an increasing number of these opportunities with CXone.
Analytics was also a healthy contributor to the strong results in the second quarter. Analytics solutions infused with artificial intelligence, like robotic process automation and ActimizeWatch, are helping to fuel the continued success of our analytics portfolio.”
GAAP Financial Highlights for the Second Quarter Ended June 30:
The GAAP numbers presented below for the second quarter 2018 are under ASC 606 and the comparison period GAAP numbers for the second quarter 2017 are under ASC 605
Revenues: Second quarter 2018 total revenues increased 9.8% to $342.0 million compared to $311.5 million for the second quarter of 2017.
Gross Profit: Second quarter 2018 gross profit and gross margin increased to $223.4 million and 65.3%, respectively, compared to $197.9 million and 63.5%, respectively, for the second quarter of 2017.
Operating Income: Second quarter 2018 operating income and operating margin increased to $46.4 million and 13.6%, respectively, compared to $25.8 million and 8.3%, respectively, for the second quarter of 2017.
Net Income: Second quarter 2018 net income and net income margin increased to $34.2 million and 10.0%, respectively, compared to $20.4 million and 6.6%, respectively, for the second quarter of 2017.
Fully Diluted Earnings Per Share: Fully diluted earnings per share for the second quarter of 2018 increased to $0.54 compared to $0.33 in the second quarter of 2017.
Operating Cash Flow and Cash Balance: Second quarter 2018 operating cash flow was $63.8 million. In the second quarter, $6.4 million was used for share repurchases. As of June 30, 2018, total cash and cash equivalents, short term investments and marketable securities were $688.5 million, and total debt was $451.7 million.
Non-GAAP Financial Highlights for the Second Quarter Ended June 30:
The non-GAAP numbers presented below for the second quarter 2018 and for the comparison period non-GAAP numbers for the second quarter 2017 are both under ASC 605.
Revenues: Second quarter 2018 non-GAAP total revenues increased to $345.4 million, up 9.5% from $315.3 million for the second quarter of 2017.
Gross Profit: Second quarter 2018 non-GAAP gross profit and non-GAAP gross margin increased to $243.8 million and 70.6%, respectively, from $222.3 million and 70.5%, respectively, for the second quarter of 2017.
Operating Income: Second quarter 2018 non-GAAP operating income and non-GAAP operating margin increased to $85.4 million and 24.7%, respectively, from $72.0 million and 22.8%, respectively, for the second quarter of 2017.
Net Income: Second quarter 2018 non-GAAP net income and non-GAAP net income margin increased to $66.7 million and 19.3%, respectively, from $56.0 million and 17.8%, respectively, for the second quarter of 2017.
Fully Diluted Earnings Per Share:Second quarter 2018 non-GAAP fully diluted earnings per share increased 17.8% to $1.06, compared to $0.90 for the second quarter of 2017.
Third Quarter and Full Year 2018 Guidance:
Guidance for the third quarter and the full-year 2018 is provided using the accounting standard ASC 605 in order to provide better transparency and comparability to 2017 financial data, which was reported under ASC 605.
The following guidance does not include the financial data of Mattersight, as the acquisition has not yet closed.
Third Quarter 2018: Third quarter 2018 non-GAAP total revenues are expected to be in a range of $347 million to $357 million. Third quarter 2018 non-GAAP fully diluted earnings per share are expected to be in a range of $1.04 to $1.10.
Full Year 2018: The Company reaffirmed full year 2018 non-GAAP total revenues to be in an expected range of $1,434 million to $1,458 million. The Company increased full year 2018 non-GAAP fully diluted earnings per share to an expected range of $4.46 to $4.66.
Adoption of the New Revenue Recognition Standard - ASC 606
NICE adopted the new revenue recognition accounting standard, Accounting Standards Codification ("ASC") 606, effective January 1, 2018, on a modified retrospective basis. Financial results for reporting periods during 2018 are presented in compliance with the ASC 606. Historical financial results for reporting periods prior to 2018 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard, ASC 605. This press release includes additional information to reconcile the impacts of the adoption of the new revenue recognition standard on the Company's financial results for the quarter ended June 30, 2018.
Quarterly Results Conference Call
NICE management will host its earnings conference call today, August 9th, 2018 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 in to the following numbers: United States 1-866-804-8688 or +1-718-354-1175, International +44(0)1296-311-600, United Kingdom 0-800-678-1161, Israel 1-809-344-364. The Passcode is 783 901 37. Additional access numbers can be found at http://www.btconferencing.com/globalaccess/?bid=54_attended. The call will be webcast live on the Company’s website at
https://www.nice.com/news-and-events/ir-events. An online replay will also be available approximately two hours following the call. A telephone replay of the call will be available for 7 days after the live broadcast, and may be accessed by dialing: United States 1-877-482-6144, International +44(0)20-7136-9233, United Kingdom 0-800-032-9687. The Passcode for the replay is 287 261 71.
Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, share-based compensation, certain business combination accounting entries, amortization of discount on long term debt, ASC 606 to ASC 605 adjustments and tax adjustment re non-GAAP adjustments. 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 assigned 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 Statements of Income.