NICE Systems Delivers a Record Second Quarter with 35.3% Revenue Growth; Sets New Highs with Record Pro-Form Gross and Operating Margins, Translating into Pro-Forma Net Income Growth of 99.6%.RA'ANANA Ra'anana (Hebrew רַעֲנָנָה; Standard Hebrew Ra'anana) is a city in the southern Sharon Plain in the Center District of Israel, Israel, 19 km north of Tel Aviv. , Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. -- NICE Systems (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :NICE), the global provider of advanced solutions that enable organizations to extract To decompress. WinZip and other decompression utilities use the term to mean "pulling out" the original files from the compressed archive. See WinZip and data compression. Insight from Interactions(TM) to drive performance, today announced results for the second quarter of 2006. Second quarter 2006 revenue was a record $97.7 million, representing a 35.3% increase from $72.2 million in the second quarter of 2005. Pro-forma gross profit in the second quarter was a record $58.4 million, or 59.8% pro-forma gross margin, up from $40.9 million, or 56.7% gross margin in the second quarter 2005. The company also reported a record pro-forma operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for the quarter, of $14.6 million and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 14.9%, compared with $7.1 million and 9.8%, respectively, in the second quarter of 2005. Second quarter 2006 pro-forma net income was a record $14.6 million, up 99.6% from $7.3 million in the second quarter of 2005. Pro-forma earnings Pro-Forma Earnings Projected earnings based on a set of assumptions and often used to present a business plan (in Latin pro forma means "for the sake of form"). It also refers to earnings which exclude non-recurring items. Pro-forma earnings are not derived by standard GAAP methods. per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share were at $0.28 up from $0.18 in the same quarter of 2005, post split. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis: second quarter 2006 gross margin was 58.2%, compared with 56.3% in the second quarter of 2005; operating profit was $9.8 million and operating margin was 10.0%, compared with $6.6 million and 9.1%, respectively, in the second quarter of 2005; and second quarter 2006 net income was $10.8 million, or $0.21 per fully diluted share, compared with net income of $6.8 million, or $0.17 per share, on a fully diluted basis, for the second quarter of 2005, post split. Total cash and equivalents at June June: see month. 30, 2006 was at $421.1 million. This follows the approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $13 million that were paid for Performix during the quarter and does not include the $200 million paid for IEX IEX Ion Exchange (chromatography) IEX Inter-Exchange Carrier on July July: see month. 6th. Commenting on the results, Haim Haim is the surname of:
Ran Oz, NICE's Corporate Vice President and Chief Financial Officer, stated, "Following a very strong first half of 2006, the increasing demand for our Insight from Interactions solutions, and a growing backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. we are raising previously announced full year guidance for 2006, with revenues at $408 - $417 million up from $395 - $405 million, and pro-forma EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. at a range of $1.06 - $1.15 up from $1.00 - $1.06 per fully diluted share, post split." Mr. Oz continued "We provide first time Q3 2006 guidance as follows: We expect revenue to be between $108 and $112 million, and pro-forma EPS per fully diluted share 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 EST electroshock therapy. EST abbr. electroshock therapy (15:30 Israel). Participants may access the conference call by dialing US toll-free 1-866-860-9642; international: +972-3-918-0610; Israel: 03-918-0610. The call will also be broadcast live on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the via NICE's website at www.nice.com. A telephone replay will be available for up to 72 hours three hours after the call. The replay information: US Toll-free: 1-866-276-1485; international: + 972-3-925-5930; Israel: 03-925-5930. Pro-forma Pro-forma results exclude the amortization of acquired intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. of $1.6 million net of taxes in Q2 2006 and $0.5 million in Q2 2005, expensing of options of $2.2 million net of taxes for Q2 2006, A reconciliation between results on a GAAP and pro-forma basis is provided in a table immediately following the Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statement of Operations See Income statement. (Pro-Forma Basis). About NICE NICE Systems (NASDAQ:NICE) is the leading provider of Insight from Interactions(TM), offering comprehensive performance management and interaction analytics solutions for the enterprise and public safety and security markets. Advanced interaction analytics are performed on unstructured multimedia content - from telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. , 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: Insight from Interactions(TM), 360 Degree View(TM), Executive Connect(R), Executive Insight(TM)(a), Freedom(R), Investigator(R), Mirra(R), Universe(R), My Universe(TM), NICE(R), NiceCall(R), NiceCall Focus(TM), NiceCLS(TM), NICE Learning(TM), eNiceLink(TM), NiceLog(R), Playback Playback could mean:
1. a Nicol prism attached to a polarizing apparatus which extinguishes the ray of light polarized by the polarizer. 2. (TM), Last Message Replay(TM), NiceUniverse Compact(TM), Customer Feedback(TM), Interaction Capture Unit(TM), Dispatcher Software that determines what pending tasks should be done next and assigns the available resources to accomplish it. It may execute other programs or generate a list for human operators to follow. See scheduler. Assessment(TM), Encorder(TM), Freedom Connect(R), FAST(R), FAST Alpha Silver(TM), FAST Alpha Blue(TM) and Alpha(R), Emvolve Performance Manager(TM), Performix Technologies(TM), IEX(R), TotalNet(R), TotalView(R) 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. (a)in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. only This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 ab·sorb tr.v. ab·sorbed, ab·sorb·ing, ab·sorbs 1. To take (something) in through or as through pores or interstices. 2. To occupy the full attention, interest, or time of; engross. 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 Six months ended
June 30, June 30,
------------------- -------------------
2005 2006 2005 2006
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
Revenue
Product $47,673 $61,544 $94,950 $118,818
Services 24,557 36,158 43,402 66,799
--------- --------- --------- ---------
Total revenue 72,230 97,702 138,352 185,617
Cost of revenue
Product 15,346 19,068 30,903 38,867
Services 16,243 21,759 30,234 42,160
--------- --------- --------- ---------
Total cost of revenue 31,589 40,827 61,137 81,027
--------- --------- --------- ---------
Gross Profit 40,641 56,875 77,215 104,590
Operating Expenses:
Research and development, net 6,999 11,151 13,756 20,420
Selling and marketing 17,949 21,127 33,979 41,426
General and administrative 8,901 14,151 17,241 26,149
Amortization of acquired
intangible assets 206 628 244 1,226
In-process research and
development - - - 212
--------- --------- --------- ---------
Total operating expenses 34,055 47,057 65,220 89,433
--------- --------- --------- ---------
Operating income 6,586 9,818 11,995 15,157
Financial income, net 1,245 4,064 2,297 7,931
Other income, net - 78 - 77
--------- --------- --------- ---------
Income before taxes on income 7,831 13,960 14,292 23,165
Income tax expenses 1,030 3,170 1,715 5,305
--------- --------- --------- ---------
Net income $6,801 $10,790 $12,577 $17,860
========= ========= ========= =========
Basic income per share $0.18 $0.22 $0.34 $0.36
========= ========= ========= =========
Diluted income per share $0.17 $0.21 $0.31 $0.35
========= ========= ========= =========
Weighted average number of
shares outstanding used
to compute:
Basic income per share 37,536 49,300 37,180 48,985
Diluted income per share 40,610 51,708 40,166 51,549
During May 2006, the Company effected a 2 to 1 stock split on its
Ordinary shares. All Ordinary share, options and per share amounts
have been adjusted to give retroactive effect to the stock split for
all periods presented.
NICE SYSTEMS LTD. AND SUBSIDIARIES
NON-GAAP CONSOLIDATED STATEMENTS OF INCOME - QUARTER
U.S. dollars in thousands (except per share amounts)
Three months ended Three months ended
June 30, June 30,
------------------------ ---------------------------
2005 2005 2006 2006
Reported Adj. Non-GAAP Reported Adj. Non-GAAP
-------- ----- -------- -------- ------- --------
Revenue
Product $47,673 $47,673 $61,544 $61,544
Services 24,557 24,557 36,158 36,158
-------- ----- -------- -------- ------- --------
Total revenue 72,230 - 72,230 97,702 - 97,702
Cost of revenue
Product 15,346 (243) a 15,103 19,068 (1,268)a,b 17,800
Services 16,243 (46) a 16,197 21,759 (266) b 21,493
-------- ----- -------- -------- ------- --------
Total cost of
revenue 31,589 (289) 31,300 40,827 (1,534) 39,293
-------- ----- -------- -------- ------- --------
Gross Profit 40,641 289 40,930 56,875 1,534 58,409
Operating
Expenses:
Research and
development,
net 6,999 6,999 11,151 (339) b 10,812
Selling and
marketing 17,949 17,949 21,127 (788) b 20,339
General and
administrative 8,901 8,901 14,151 (1,488) b 12,663
Amortization of
acquired
intangible
assets 206 (206) a - 628 (628) a -
-------- ----- -------- -------- ------- --------
Total operating
expenses 34,055 (206) 33,849 47,057 (3,243) 43,814
-------- ----- -------- -------- ------- --------
Operating income 6,586 495 7,081 9,818 4,777 14,595
Financial income,
net 1,245 1,245 4,064 4,064
Other income, net - - 78 78
-------- ----- -------- -------- ------- --------
Income before
taxes on income 7,831 495 8,326 13,960 4,777 18,737
Income tax
expenses 1,030 1,030 3,170 1,004 c 4,174
-------- ----- -------- -------- ------- --------
Net income $6,801 $495 $7,296 $10,790 $3,773 $14,563
======== ===== ======== ======== ======= ========
Basic income per
share $0.18 $0.19 $0.22 $0.30
======== ======== ======== ========
Diluted income per
share $0.17 $0.18 $0.21 $0.28
======== ======== ======== ========
Weighted average number of
shares outstanding used
to compute:
Basic income per
share 37,536 37,536 49,300 49,300
Diluted income per
share 40,610 40,610 51,708 51,708
During May 2006, the Company effected a 2 to 1 stock split on its
Ordinary shares. All Ordinary share, options and per share amounts
have been adjusted to give retroactive effect to the stock split for
all periods presented.
a Amortization of acquired intangible assets
b Compensation expense for stock options
c Tax benefit associated with the amortization of acquired intangibles
and FAS 123R options compensation
NICE SYSTEMS LTD. AND SUBSIDIARIES
NON-GAAP CONSOLIDATED STATEMENTS OF INCOME - YEAR TO DATE
U.S. dollars in thousands (except per share amounts)
Six months ended
June 30,
------------------------
2005 2005
Reported Adj. Non-GAAP
-------- ----- --------
Revenue
Product $94,950 $94,950
Services 43,402 43,402
-------- ----- --------
Total revenue 138,352 - 138,352
Cost of revenue
Product 30,903 (346) 30,557
Services 30,234 (94) a 30,140
Total cost of revenue 61,137 (440) 60,697
-------- ----- --------
Gross Profit 77,215 440 77,655
Operating Expenses:
Research and development, net 13,756 13,756
Selling and marketing 33,979 33,979
General and administrative 17,241 17,241
Amortization of acquired intangible assets 244 (244) a -
In-process research and development - -
-------- ----- --------
Total operating expenses 65,220 (244) 64,976
-------- ----- --------
Operating income 11,995 684 12,679
Financial income, net 2,297 2,297
Other income, net - -
-------- ----- --------
Income before taxes on income 14,292 684 14,976
Income tax expenses 1,715 - 1,715
-------- ----- --------
Net income $12,577 $684 $13,261
======== ===== ========
Basic income per share $0.34 $0.36
======== ========
Diluted income per share $0.31 $0.33
======== ========
Weighted average number of shares
outstanding used to compute:
Basic income per share 37,180 37,180
Diluted income per share 40,166 40,166
Six months ended
June 30,
------------------------------
2006 2006
Reported Adj. Non-GAAP
--------- ------- ---------
Revenue
Product $118,818 $118,818
Services 66,799 66,799
--------- ------- ---------
Total revenue 185,617 - 185,617
Cost of revenue
Product 38,867 (2,291) a,b 36,576
Services 42,160 (468) b 41,692
Total cost of revenue 81,027 (2,759) 78,268
--------- ------- ---------
Gross Profit 104,590 2,759 107,349
Operating Expenses:
Research and development, net 20,420 (585) b 19,835
Selling and marketing 41,426 (1,345) b 40,081
General and administrative 26,149 (2,586) b 23,563
Amortization of acquired intangible
assets 1,226 (1,226) a -
In-process research and development 212 (212) c -
--------- ------- ---------
Total operating expenses 89,433 (5,954) 83,479
--------- ------- ---------
Operating income 15,157 8,713 23,870
Financial income, net 7,931 7,931
Other income, net 77 77
--------- ------- ---------
Income before taxes on income 23,165 8,713 31,878
Income tax expenses 5,305 1,215 d 6,520
--------- ------- ---------
Net income $17,860 $7,498 $25,358
========= ======= =========
Basic income per share $0.36 $0.52
========= =========
Diluted income per share $0.35 $0.49
========= =========
Weighted average number of shares
outstanding used to compute:
Basic income per share 48,985 48,985
Diluted income per share 51,549 51,549
During May 2006, the Company effected a 2 to 1 stock split on its
Ordinary shares. All Ordinary share, options and per share amounts
have been adjusted to give retroactive effect to the stock split for
all periods presented.
a Amortization of acquired intangible assets
b Compensation expense for stock options
c In-process research and development acquired in connection with the
acquisition of Fast Video Security A.G.
d Tax benefit associated with the amortization of acquired intangibles
and FAS 123 R Option Compensation
NICE SYSTEMS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December June
31, 30,
2005 2006
--------- ---------
Audited Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $254,956 $231,409
Short-term investments 36,261 69,678
Trade receivables 66,153 67,941
Other receivables and prepaid expenses 9,544 10,474
Inventories 23,172 18,798
Deferred tax assets 3,360 4,486
--------- ---------
Total current assets 393,446 402,786
--------- ---------
LONG-TERM ASSETS:
Marketable securities 120,342 120,048
Other long-term assets 9,755 10,928
Deferred Tax Assets 4,976 4,601
Property and equipment, net 14,888 15,385
Other intangible assets, net 23,990 41,075
Goodwill 49,853 72,477
--------- ---------
Total long-term assets 223,804 264,514
--------- ---------
TOTAL ASSETS $617,250 $667,300
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $18,194 $19,494
Accrued expenses and other liabilities 100,544 104,698
--------- ---------
Total current liabilities 118,738 124,192
--------- ---------
LONG-TERM LIABILITIES:
Deferred tax liabilities 2,493 4,364
Other long-term liabilities 8,978 10,626
--------- ---------
Total long-term liabilities 11,471 14,990
--------- ---------
SHAREHOLDERS' EQUITY 487,041 528,118
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $617,250 $667,300
========= =========
NICE SYSTEMS LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2005 2006 2005 2006
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
Cash flows from operating
activities:
-------------------------
Net income $6,801 $10,790 $12,577 $17,860
Adjustments required to
reconcile net income to net
cash provided by operating
activities:
Depreciation and
amortization 2,951 4,149 5,961 8,173
Accrued severance pay, net 248 667 199 649
Amortization of discount
(premium) and accrued
interest on marketable
securities 164 178 445 151
Stock based compensation - 2,954 - 5,114
In-process research and
development - - - 212
Decrease (increase) in
trade receivables 3,133 (4,186) (276) (1,082)
Decrease (increase) in
other receivables and
prepaid expenses 712 (125) (45) (292)
Decrease (increase) in
inventories (1,499) 1,934 (1,295) 4,395
Increase (decrease) in
trade payables 1,609 117 4,706 (1,628)
Increase (decrease) in
accrued expenses and
other liabilities 5,068 (6,487) 9,656 509
Deferred taxes, net - 322 - (281)
Other 35 (67) 70 (64)
--------- --------- --------- ---------
Net cash provided by
operating activities 19,222 10,246 31,998 33,716
--------- --------- --------- ---------
Cash flows from investing
activities:
-------------------------
Purchase of property and
equipment (1,351) (1,879) (2,722) (3,671)
Proceeds from sale of
property and equipment 44 22 45 22
Investment in short-term bank
deposits (3) (14) (25) (34)
Proceeds from short-term bank
deposits 33 22 67 54
Proceeds from maturity of
marketable securities 95,625 89,506 149,460 95,086
Investment in marketable
securities (76,650) (80,300) (151,123) (128,375)
Proceeds of call of long-term
held-to-maturity marketable
securities 6,130 - 6,130 -
Capitalization of software
development costs (210) (407) (427) (526)
Payment for the acquisition
of certain assets and
liabilities of Dictaphone
CRS division (38,939) (38,939) -
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 for the acquisition
of certain assets and
liabilities of Performix - (14,170) - (14,170)
Payment of earn-out related
to the acquisition of
Hannamax Hi-Tech Pty. Ltd. - (500) - (500)
Deferred acquisition costs - (223) - (223)
Decrease in accrued
acquisition costs - (6) - (16)
Proceeds from related party
in respect of TCS
acquisition - - 2,531 -
Other investment activity,
net - 69 - 69
--------- --------- --------- ---------
Net cash used by investing
activities (15,321) (6,019) (35,003) (71,597)
--------- - ------- - ------- - -------
Cash flows from financing
activities:
-------------------------------
Proceeds from issuance of
shares and exercise of share
options, net 5,766 4,028 11,469 12,711
Tax benefit from exercised
options - 2,144 - 2,536
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 5,766 6,003 11,469 14,189
--------- --------- --------- ---------
Effect of exchange rate changes
on cash (134) 184 (90) 145
--------- --------- --------- ---------
Increase (decrease) in cash and
cash equivalents 9,533 10,414 8,374 (23,547)
Cash and cash equivalents at
beginning of period 25,420 220,995 26,579 254,956
--------- --------- --------- ---------
Cash and cash equivalents at
end of period $34,953 $231,409 $34,953 $231,409
========= ========= ========= =========
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