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NICE Reports 25% Cloud Revenue Growth Leading to a Record First Quarter

  • Double-Digit Growth in Operating Income and EPS
  • Quarterly Record of Cash Flow from Operations of $195 million
  • Company Raises Full-Year 2023 Guidance for Total Revenue and EPS

NICE (NASDAQ: NICE) today announced results for the first quarter ended March 31, 2023, as compared to the corresponding period of the previous year.

First Quarter 2023 Financial Highlights

GAAP

Non-GAAP

Total revenue was $571.9 million and increased 8%

 

Total revenue was $571.9 million and increased 8% ($576.0 million in constant currency, up 9%)

Cloud revenue was $367.6 million and increased 25%

 

Cloud revenue was $367.6 million and increased 25%

Cloud gross margin was 64.2% compared to 61.5% last year

 

Cloud gross margin was 70.0% compared to 68.6% last year

Operating income was $93.5 million and increased 29%

Operating income was $163.4 million and increased 10%

Operating margin was 16.4% compared to 13.7% last year

Operating margin was 28.6% compared to 28.3% last year

Diluted EPS was $1.15 and increased 32%

Diluted EPS was $2.03 and increased 13%

Operating cash flow was $195.1 million

 

“We are pleased to begin the year on a high note as we exceeded the high end of our guidance range on both total revenue and earnings per share,” said Barak Eilam, CEO of NICE. “The outperformance was once again driven by great execution in the cloud as cloud revenue increased 25% year over year. Our cloud growth continues to outpace the market, and this growth is not only unique in its magnitude, but in its consistency as well. We also delivered another excellent quarter in profitability, evidenced by continued strong growth in the cloud gross margin, operating margin and record first quarter cash flow of $195 million.”

Mr. Eilam continued, “The first quarter was characterized by many seven-digit and eight-digit deals, demonstrating our superior win rate when it comes to delivering our CXone cloud platform at scale and our Enlighten AI CX solution. Our continued strong performance and clear market leadership are attributed to the tight alignment between our strategic priorities and sharp execution centered on expanding cloud market share, championing the AI opportunity, and our emphasis on profitable growth.”

GAAP Financial Highlights for the First Quarter Ended March 31:

Revenues: First quarter 2023 total revenues increased 8% to $571.9 million compared to $527.4 million for the first quarter of 2022.

Gross Profit: First quarter 2023 gross profit was $385.3 million compared to $360.4 million for the first quarter of 2022. First quarter 2023 gross margin was 67.4% compared to 68.3% for the first quarter of 2022.

Operating Income: First quarter 2023 operating income increased 29% to $93.5 million compared to $72.4 million for the first quarter of 2022. First quarter 2023 operating margin was 16.4% compared to 13.7% for the first quarter of 2022.

Net Income: First quarter 2023 net income increased 33% to $76.9 million compared to $57.9 million for the first quarter of 2022. First quarter 2023 net income margin was 13.5% compared to 11.0% for the first quarter of 2022.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the first quarter of 2023 increased 32% to $1.15 compared to $0.87 in the first quarter of 2022.

Operating Cash Flow and Cash Balance: First quarter 2023 operating cash flow was $195.1 million. In the first quarter 2023, $64.7 million was used for share repurchases. As of March 31, 2023, total cash and cash equivalents, and short-term investments were $1,684.8 million. Our debt, net of a hedge instrument, was $543.5 million, resulting in net cash and investments of $1,141.3 million.

Non-GAAP Financial Highlights for the First Quarter Ended March 31:

Revenues: First quarter 2023 total revenues increased 8% to $571.9 million (up 9% in constant currency to $576.0 million) compared to $527.4 million for the first quarter of 2022.

Gross Profit: First quarter 2023 Non-GAAP gross profit increased to $409.9 million compared to $385.2 million for the first quarter of 2022. First quarter 2023 Non-GAAP gross margin was 71.7% compared to 73.0% for the first quarter of 2022.

Operating Income: First quarter 2023 Non-GAAP operating income increased 10% to $163.4 million compared to $149.0 million for the first quarter of 2022. First quarter 2023 Non-GAAP operating margin was 28.6% compared to 28.3% for the first quarter of 2022.

Net Income: First quarter 2023 Non-GAAP net income increased 13% to $135.6 million compared to $120.5 million for the first quarter of 2022. First quarter 2023 Non-GAAP net income margin totaled 23.7% compared to 22.8% for the first quarter of 2022.

Fully Diluted Earnings Per Share: First quarter 2023 Non-GAAP fully diluted earnings per share increased 13% to $2.03 compared to $1.80 for the first quarter of 2022.

Second Quarter and Full Year 2023 Guidance:

Second Quarter 2023:

Second quarter 2023 Non-GAAP total revenues are expected to be in a range of $573 million to $583 million, representing 9% growth year over year at the midpoint.

Second quarter 2023 Non-GAAP fully diluted earnings per share are expected to be in a range of $2.00 to $2.10, representing 10% growth year over year at the midpoint.

Raising Full Year 2023 Guidance:

The Company increased full-year 2023 Non-GAAP total revenues which are expected to be in a range of $2,350 million to $2,370 million, representing 8% growth at the midpoint compared to full year 2022.

The Company increased full-year 2023 Non-GAAP fully diluted earnings per share which are expected to be in a range of $8.32 to $8.52, representing 11% growth at the midpoint compared to full year 2022.

Quarterly Results Conference Call

NICE management will host its earnings conference call today May 11, 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.

Explanation of Constant Currency

NICE presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current results for transactions in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the current period.

Future expected results for transactions in currencies other than United States dollars are converted into United States dollars using the exchange rates in effect in the last month of the reporting period. NICE has provided this financial information to aid investors in better understanding our performance. These constant currency financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

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 COVID-19 pandemic, 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

 

March 31,

December 31,

2023

2022

Unaudited

Audited

 

ASSETS

 

CURRENT ASSETS:

Cash and cash equivalents

$

630,661

$

529,596

Short-term investments

 

1,054,184

 

1,041,943

Trade receivables

 

503,751

 

518,517

Debt hedge option

 

160,474

 

122,323

Prepaid expenses and other current assets

 

211,431

 

204,754

 

Total current assets

 

2,560,501

 

2,417,133

 

LONG-TERM ASSETS:

Property and equipment, net

 

169,062

 

159,285

Deferred tax assets

 

123,377

 

116,889

Other intangible assets, net

 

185,859

 

209,605

Operating lease right-of-use assets

 

101,415

 

102,893

Goodwill

 

1,620,802

 

1,617,118

Prepaid expenses and other long-term assets

 

232,306

 

231,496

 

 

Total long-term assets

 

2,432,821

 

2,437,286

 

TOTAL ASSETS

$

4,993,322

$

4,854,419

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

CURRENT LIABILITIES:

Trade payables

$

54,902

$

56,019

Deferred revenues and advances from customers

 

376,785

 

338,930

Current maturities of operating leases

 

13,147

 

13,525

Debt

 

248,180

 

209,292

Accrued expenses and other liabilities

 

518,164

 

523,451

 

Total current liabilities

 

1,211,178

 

1,141,217

 

LONG-TERM LIABILITIES:

Deferred revenues and advances from customers

 

53,704

 

57,211

Operating leases

 

97,320

 

99,262

Deferred tax liabilities

 

7,260

 

7,336

Debt

 

455,800

 

455,382

Other long-term liabilities

 

38,544

 

38,588

 

Total long-term liabilities

 

652,628

 

657,779

 

SHAREHOLDERS' EQUITY

Nice Ltd's equity

 

3,117,584

 

3,042,085

Non-controlling interests

 

11,932

 

13,338

 

Total equity

 

3,129,516

 

3,055,423

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

4,993,322

$

4,854,419

 

NICE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

Quarter ended

March 31,

2023

2022

Unaudited

Unaudited

 

Revenue:

Cloud

$

367,567

 

$

294,592

 

Services

 

159,858

 

 

156,974

 

Product

 

44,435

 

 

75,863

 

Total revenue

 

571,860

 

 

527,429

 

 

Cost of revenue:

Cloud

 

131,596

 

 

113,349

 

Services

 

47,905

 

 

46,908

 

Product

 

7,095

 

 

6,745

 

Total cost of revenue

 

186,596

 

 

167,002

 

 

Gross profit

 

385,264

 

 

360,427

 

 

Operating expenses:

Research and development, net

 

78,102

 

 

76,578

 

Selling and marketing

 

148,479

 

 

152,618

 

General and administrative

 

65,176

 

 

58,867

 

Total operating expenses

 

291,757

 

 

288,063

 

 

Operating income

 

93,507

 

 

72,364

 

 

Financial and other income, net

 

(8,721

)

 

(486

)

 

Income before tax

 

102,228

 

 

72,850

 

Taxes on income

 

25,286

 

 

14,909

 

 

Net income

$

76,942

 

$

57,941

 

 
 

Basic

$

1.20

 

$

0.91

 

Diluted

$

1.15

 

$

0.87

 

 

Weighted average shares outstanding:

 

Basic

 

63,941

 

 

63,736

 

Diluted

 

66,662

 

 

66,853

 

 

NICE LTD. AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

U.S. dollars in thousands

Quarter ended

March 31,

2023

2022

Unaudited

Unaudited

 

Operating Activities

 

Net income

$

76,942

 

$

57,941

 

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

Depreciation and amortization

 

41,846

 

 

44,281

 

Share-based compensation

 

44,961

 

 

48,184

 

Amortization of premium and discount and accrued interest on marketable securities

 

1,270

 

 

3,818

 

Deferred taxes, net

 

(7,878

)

 

(1,796

)

Changes in operating assets and liabilities:

Trade Receivables, net

 

16,752

 

 

(21,259

)

Prepaid expenses and other current assets

 

(11,372

)

 

(28,931

)

Operating lease right-of-use assets

 

3,068

 

 

3,942

 

Trade payables

 

(1,180

)

 

9,078

 

Accrued expenses and other current liabilities

 

(694

)

 

29,229

 

Deferred revenues

 

33,247

 

 

52,349

 

Operating lease liabilities

 

(3,907

)

 

(4,997

)

Amortization of discount on long-term debt

 

1,154

 

 

1,137

 

Loss from extinguishment of debt

 

-

 

 

1,092

 

Other

 

862

 

 

(1,357

)

 

Net cash provided by operating activities

 

195,071

 

 

192,711

 

 

Investing Activities

 

Purchase of property and equipment

 

(13,106

)

 

(9,584

)

Purchase of Investments

 

(69,542

)

 

(98,266

)

Proceeds from Investments

 

64,899

 

 

101,666

 

Capitalization of internal use software costs

 

(14,136

)

 

(10,671

)

Net cash used in investing activities

 

(31,885

)

 

(16,855

)

 

Financing Activities

 

Proceeds from issuance of shares upon exercise of options

 

959

 

 

75

 

Purchase of treasury shares

 

(64,715

)

 

(63,842

)

Dividends paid to noncontrolling interest

 

(1,480

)

 

-

 

Repayment of debt

 

-

 

 

(18,093

)

Net cash used in financing activities

 

(65,236

)

 

(81,860

)

 

Effect of exchange rates on cash and cash equivalents

 

1,167

 

 

(937

)

 

Net change in cash, cash equivalents and restricted cash

 

99,117

 

 

93,059

 

Cash, cash equivalents and restricted cash, beginning of period

$

533,095

 

$

378,656

 

 

Cash, cash equivalents and restricted cash, end of period

$

632,212

 

$

471,715

 

 

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

Cash and cash equivalents

$

630,661

 

$

471,715

 

Restricted cash included in other current assets

$

1,551

 

$

-

 

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

$

632,212

$

471,715

 

NICE LTD. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

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

 

Quarter ended

March 31,

2023

2022

GAAP revenues

$

571,860

 

$

527,429

 

Non-GAAP revenues

$

571,860

 

$

527,429

 

 
 

GAAP cost of revenue

$

186,596

 

$

167,002

 

Amortization of acquired intangible assets on cost of cloud

 

(19,369

)

 

(18,665

)

Amortization of acquired intangible assets on cost of services

 

-

 

 

(377

)

Amortization of acquired intangible assets on cost of product

 

(249

)

 

(276

)

Valuation adjustment on acquired deferred cost of cloud

 

-

 

 

15

 

Cost of cloud revenue adjustment (1)

 

(1,947

)

 

(2,324

)

Cost of services revenue adjustment (1)

 

(2,885

)

 

(2,967

)

Cost of product revenue adjustment (1)

 

(138

)

 

(132

)

Non-GAAP cost of revenue

$

162,008

 

$

142,276

 

 
 

GAAP gross profit

$

385,264

 

$

360,427

 

Gross profit adjustments

 

24,588

 

 

24,726

 

Non-GAAP gross profit

$

409,852

 

$

385,153

 

 
 

GAAP operating expenses

$

291,757

 

$

288,063

 

Research and development (1)

 

(8,398

)

 

(8,515

)

Sales and marketing (1)

 

(11,102

)

 

(16,269

)

General and administrative (1)

 

(21,296

)

 

(18,400

)

Amortization of acquired intangible assets

 

(4,515

)

 

(8,811

)

Valuation adjustment on acquired deferred commission

 

40

 

 

53

 

Non-GAAP operating expenses

$

246,486

 

$

236,121

 

 
 

GAAP financial and other income, net

$

(8,721

)

$

(486

)

Amortization of discount and loss of extinguishment on debt

 

(1,154

)

 

(2,229

)

Non-GAAP financial and other income, net

$

(9,875

)

$

(2,715

)

 
 

GAAP taxes on income

$

25,286

 

$

14,909

 

Tax adjustments re non-GAAP adjustments

 

12,308

 

 

16,351

 

Non-GAAP taxes on income

$

37,594

 

$

31,260

 

 
 

GAAP net income

$

76,942

 

 

57,941

 

Valuation adjustment on acquired deferred revenue

 

-

 

 

-

 

Valuation adjustment on acquired deferred cost of cloud revenue

 

-

 

 

(15

)

Amortization of acquired intangible assets

 

24,133

 

 

28,129

 

Valuation adjustment on acquired deferred commission

 

(40

)

 

(53

)

Share-based compensation (1)

 

45,766

 

 

48,607

 

Amortization of discount and loss of extinguishment on debt

 

1,154

 

 

2,229

 

Tax adjustments re non-GAAP adjustments

 

(12,308

)

 

(16,351

)

Non-GAAP net income

$

135,647

 

$

120,487

 

 
 

GAAP diluted earnings per share

$

1.15

 

$

0.87

 

 

Non-GAAP diluted earnings per share

$

2.03

 

$

1.80

 

 

Shares used in computing GAAP diluted earnings per share

 

66,662

 

 

66,853

 

 

Shares used in computing non-GAAP diluted earnings per share

 

66,662

 

 

66,853

 

NICE LTD. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS (continued)

U.S. dollars in thousands

 
 

(1

)

Share-based Compensation

Quarter ended

March 31,

2023

2022

 

Cost of cloud revenue

$

1,947

$

2,324

Cost of services revenue

 

2,885

 

2,967

Cost of product revenue

 

138

 

132

Research and development

 

8,398

 

8,515

Sales and marketing

 

11,102

 

16,269

General and administrative

 

21,296

 

18,400

$

45,766

$

48,607

 

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