NICE Systems Fourth Quarter and 2005 Results Set New Records; 2005 Revenue Growth of 23% Translates into Pro-Forma Operating Income Growth of 67%.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: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 fourth quarter and full year ending December December: see month. 31, 2005. Highlights of year 2005 include: --Record revenue of $311.1 million representing 23.1% growth over 2004 --Pro-forma gross margin increased to 56.7% from 55.0% in 2004 --Pro-forma operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to 11.2% from 8.3% in 2004 --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. of $1.67 compared to $1.19 in 2004 Fourth quarter 2005 revenue was $90.0 million, representing a 29.5% increase from $69.5 million in the fourth quarter of 2004. Revenues for fiscal year 2005 reached a record high of $311.1 million, a 23.1% increase from $252.6 million in 2004. Pro-forma gross margin, which excludes 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. in the fourth quarter, reached a record 57.7%, up from 56.2% in the fourth quarter 2004. Pro-forma gross margin for the year reached 56.7% compared with 55.0% for the year 2004. The company also reported record fourth quarter 2005 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. of $12.7 million and operating margin of 14.1%, compared with $9.2 million and 13.2%, respectively, in the fourth quarter of 2004. For the year, pro-forma operating profit increased to $34.9 million from $20.9 million in 2004 and operating margins switched to double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" for the first time at 11.2% from 8.3% in 2004. Fourth quarter 2005 pro-forma net income was $12.3 million or $0.57 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, up from $9.2 million or $0.48 per fully diluted share in the same quarter of 2004. Pro-forma net income for the year was $34.6 million or $1.67 per fully diluted share, compared with net income of $22.2 million or $1.19 per fully diluted share for 2004. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis: Fourth quarter gross margin was 57.1%, compared with 56.0% in the fourth quarter of 2004; operating profit was $11.7 million and operating margin was 13.0%, compared with $9.0 million and 12.9%, respectively, in the fourth quarter of 2004; and fourth quarter net income was $16.1 million, or $0.74 per fully diluted share, compared with net income of $9.0 million, or $0.47 per share, on a fully diluted basis, for the fourth quarter of 2004. Total cash and equivalents at December 31, 2005 rose to $411.6 million compared with $184.9 million at September September: see month. 30, 2005 and with $165.9 million at the end of 2004. Commenting on the results, Haim Haim is the surname of:
"Our strong performance is primarily the result of our unique strategy for leading the Insight from Interactions(TM) revolution in each of our sectors. In the enterprise interactions solutions sector we accelerated the momentum of NICE Perform, with a strong trend of repeat orders. We also doubled the number of our VoIP customers and have seen the dollar value per deal grow significantly. In the public and security sector, NICE won several strategic bids with our next generation of digital video security solutions, which have become the de-facto choice for public authorities seeking to ensure citizen security. We also further 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: our leadership in the emergency communications market." "We remain confident that the strong momentum of our Insight from Interactions solutions, as supported by our vision and powerful growth strategy, will continue to generate growth in 2006." Ran Oz, NICE's Corporate Vice President and Chief Financial Officer, stated, "We had a very strong booking momentum over the last seven quarters with a book-to-bill ratio Book-to-Bill Ratio The technology industry's demand-to-supply ratio for orders on a "firm's book" to number of orders filled. Notes: This ratio tells whether the company has more orders than it can deliver (if greater than 1), has the same amount of orders that it can consistently greater than one. Our strong 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. coming into 2006 gives us excellent visibility. Accordingly, we provide the following guidance for the first quarter of 2006, which is higher than our initial plan: Revenue is expected to be between $84 and $87 million, and pro-forma EPS, on a fully diluted basis, in the range of $0.37 - $0.41." Mr. Oz continued, "Our strong forward visibility gives us confidence for substantial growth in fiscal year 2006, and enables us to raise our previously announced full year 2006 revenue guidance to be between $367 - $375 million; and adjust the EPS guidance, on a fully diluted basis, to $1.90-$2.00, to account for the raised revenue guidance and the additional 4.6 million shares from our December 2005 public offering." 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: +972-3-918-0600; Israel: 03-918-0600. 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: 1-866-276-1485; international: + 972-3-925-5930; Israel: 03-925-5930. Pro-forma results exclude the amortization of acquired intangible assets of $1.0 million and a deferred tax benefit of $4.8 million for Q4 2005. In Q4 2004 the pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma results exclude the amortization of acquired intangible assets of $0.2 million. A reconciliation between results on a GAAP and pro-forma basis is provided in a table immediately following the Consolidated Statement of Operations See Income statement. (Pro-Forma Basis). About NICE NICE Systems (Nasdaq:NICE) is the leading provider of Insight from Interactions(TM), based on advanced content analytics - of traditional 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. and IP, web, radio and video communications. NICE's solutions improve business and operational performance, as well as security. NICE has over 23,000 customers in 100 countries, including the world's top 10 banks and over 75 of the Fortune 100. More information is available at www.nice.com. Trademark Note: 360 Degree View, Alpha Technologies, Customer Feedback, 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, Encorder, eNiceLink, Executive Connect, Executive Insight(a), FAST, FAST alpha blue, FAST alpha silver, Freedom, Freedom Connect, Interaction Capture Unit, Insight from Interactions, Investigator, Last Message Replay, Mirra, My Universe, NICE, NICE Analyzer analyzer /ana·ly·zer/ (an´ah-li?zer) 1. a Nicol prism attached to a polarizing apparatus which extinguishes the ray of light polarized by the polarizer. 2. , NiceCall, NiceCall Focus, NiceCLS, NICE Inform, NICE Learning, NiceLog, NICE Perform, NICE Playback Playback could mean:
(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 Twelve months ended
December 31, December 31,
------------------- ---------------------
2004 2005 2004 2005
Unaudited Unaudited Unaudited Unaudited
--------- --------- ---------- ----------
Revenue
Product $ 51,395 $ 57,327 $ 182,616 $ 206,355
Services 18,124 32,714 70,027 104,755
-------- -------- --------- ---------
Total revenue 69,519 90,041 252,643 311,110
Cost of revenue
Product 17,704 18,563 64,432 67,543
Services 12,870 20,035 49,876 68,683
-------- -------- --------- ---------
Total cost of revenue 30,574 38,598 114,308 136,226
-------- -------- --------- ---------
Gross Profit 38,945 51,443 138,335 174,884
Operating Expenses:
Research and development,
net 6,349 9,369 24,866 30,896
Selling and marketing 15,807 19,603 62,172 72,829
General and administrative 7,761 10,256 30,951 37,742
Amortization of acquired
intangible assets 55 542 318 1,331
-------- -------- --------- ---------
Total operating expenses 29,972 39,770 118,307 142,798
-------- -------- --------- ---------
Operating income 8,973 11,673 20,028 32,086
Financial income, net 790 1,836 3,556 5,398
Other income (expense), net 49 (5) 54 (13)
-------- -------- --------- ---------
Income before taxes on
income 9,812 13,504 23,638 37,471
Income tax expense (benefit) 794 (2,619) 2,319 902
-------- -------- --------- ---------
Net income from continuing
operations 9,018 16,123 21,319 36,569
Net income from discontinued
operation - - 3,236 -
-------- -------- --------- ---------
Net income $ 9,018 $ 16,123 $ 24,555 $ 36,569
======== ======== ========= =========
Basic income per share from
continuing operations $ 0.50 $ 0.80 $ 1.22 $ 1.91
======== ======== ========= =========
Basic income per share from
discontinued operation - - $ 0.18 -
======== ======== ========= =========
Basic income per share $ 0.50 $ 0.80 $ 1.40 $ 1.91
======== ======== ========= =========
Diluted income per share
from continuing operations $ 0.47 $ 0.74 $ 1.14 $ 1.77
======== ======== ========= =========
Diluted income per share
from discontinued operation - - $ 0.17 -
======== ======== ========= =========
Diluted income per share $ 0.47 $ 0.74 $ 1.31 $ 1.77
======== ======== ========= =========
Weighted average number of
shares outstanding used
to compute:
Basic income per share 17,892 20,160 17,497 19,121
Diluted income per share 19,141 21,646 18,703 20,646
NICE SYSTEMS LTD. AND SUBSIDIARIES
FOR COMPARATIVE PURPOSES
NET INCOME AND INCOME PER SHARE EXCLUDING DISCONTINUED OPERATION AND
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
U.S. dollars in thousands (except per share amounts)
Three months ended Twelve months ended
December 31, December 31,
------------------- -------------------
2004 2005 2004 2005
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
GAAP net income $ 9,018 $ 16,123 $ 24,555 $ 36,569
Adjustments:
GAAP net income from
discontinued operation - - (3,236) -
Deferred tax benefit - (4,829) - (4,829)
Amortization of acquired
intangible assets
Included in gross
profit 150 489 598 1,497
Included in operating
expenses 55 542 318 1,331
-------- -------- -------- --------
Non-GAAP net income from
continuing operations $ 9,223 $ 12,325 $ 22,235 $ 34,568
======== ======== ======== ========
Non-GAAP basic income per
share from continuing
operations $ 0.52 $ 0.61 $ 1.27 $ 1.81
======== ======== ======== ========
Non-GAAP diluted income per
share from continuing
operations $ 0.48 $ 0.57 $ 1.19 $ 1.67
======== ======== ======== ========
NICE SYSTEMS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31, December 31,
2004 2005
------------ -----------
Unaudited Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,579 $ 254,956
Short-term investments 24,523 36,261
Trade receivables 46,407 66,153
Other receivables and prepaid expenses 7,937 8,898
Inventories 12,615 23,172
Current Deferred Taxes - 3,360
Assets of discontinued operation 644 646
------------ -----------
Total current assets 118,705 393,446
LONG-TERM INVESTMENTS:
Long-term marketable securities 114,805 120,342
Other long-term investments 9,410 9,755
------------ -----------
Total long-term investments 124,215 130,097
LONG-TERM DEFERRED TAX ASSETS - 4,976
PROPERTY AND EQUIPMENT, NET 16,981 14,888
OTHER ASSETS, NET 12,665 23,990
GOODWILL 25,745 49,853
------------ -----------
TOTAL ASSETS $ 298,311 $ 617,250
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 11,975 $ 18,194
Accrued expenses and other liabilities 55,302 100,544
------------ -----------
Total current liabilities 67,277 118,738
LONG-TERM DEFERRED TAX LIABILITIES - 2,493
OTHER LONG-TERM LIABILITIES 8,163 8,978
SHAREHOLDERS' EQUITY 222,871 487,041
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 298,311 $ 617,250
============ ===========
NICE SYSTEMS LTD. AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
U.S. dollars in thousands
Three months ended Twelve months ended
December 31, December 31,
------------------- ---------------------
2004 2005 2004 2005
Unaudited Unaudited Unaudited Unaudited
--------- --------- ---------- ----------
Cash flows from operating
activities:
----------------------------
Net income $ 9,018 $ 16,123 $ 24,555 $ 36,569
Less income for the period
from discontinued
operation - - (3,236) -
Adjustments required to
reconcile net income to net
cash provided by operating
activities:
Depreciation and
amortization 3,511 3,633 13,793 13,152
Accrued severance pay, net 7 (23) 37 187
Amortization of discount
(premium) and accrued
interest on marketable
securities 193 234 1,205 812
Tax benefit from exercised
options - 1,501 - 1,501
Increase in trade
receivables (275) (9,299) (585) (11,488)
Decrease (increase) in
other receivables and
prepaid expenses 672 602 (549) 386
Increase in inventories (1,072) (988) (122) (3,930)
Increase (decrease) in
trade payables (3,287) 1,009 (3,761) 5,782
Increase in accrued
expenses and other
liabilities 8,157 10,480 13,043 27,339
Deferred taxes, net - (4,841) - (4,841)
Other (116) 36 (112) 234
-------- -------- --------- ---------
Net cash provided by
operating activities from
continuing operations 16,808 18,467 44,268 65,703
Net cash provided by
operating activities from
discontinued operation 146 - 750 -
-------- -------- --------- ---------
Net cash provided by
operating activities 16,954 18,467 45,018 65,703
-------- -------- --------- ---------
Cash flows from investing
activities:
----------------------------
Purchase of property and
equipment (1,504) (1,746) (6,701) (6,128)
Proceeds from sale of
property and equipment 29 18 89 66
Investment in short-term
bank deposits (57) (3) (129) (39)
Proceeds from short-term
bank deposits 33 17 149 108
Proceeds from maturity of
short-term marketable
securities 1,000 31,712 17,710 190,682
Investment in short-term
marketable securities (13,700) (18,300) (16,700) (166,675)
Proceeds of call of long-
term held-to-maturity
marketable securities 11,911 2,000 41,345 9,630
Investment in long-term
held-to-maturity
marketable securities (24,435) (12,410) (105,492) (51,797)
Capitalization of software
development costs (318) (239) (1,305) (806)
Payment for acquisition of
certain assets and
liabilities of Dictaphone
CRS Division - (4) - (39,724)
Payment for acquisition of
certain assets and
liabilities of Hannamax
Hi-Tech Pty. Ltd. (56) (1,889)
Deferred acquisition costs - (256) - (256)
Decrease in accrued
acquisition costs (75) -
Payment in respect of
terminated contract from
TCS acquisition (2,402) - (5,249) -
Proceeds from related
party in respect of TCS
acquisition - - 4,013 2,531
-------- -------- --------- ---------
Net cash provided
(used) by investing
activities from
continuing operations (29,443) 733 (72,345) (64,297)
Net cash provided by
investing activities
from discontinued
operation - - 4,136 -
-------- -------- --------- ---------
Net cash provided
(used) by investing
activities (29,443) 733 (68,209) (64,297)
-------- -------- --------- ---------
Cash flows from financing
activities:
----------------------------
Proceeds from issuance of
shares and exercise of
share options, net 7,196 210,681 19,867 226,983
-------- -------- --------- ---------
Net cash provided by
financing activities 7,196 210,681 19,867 226,983
-------- -------- --------- ---------
Effect of exchange rate
changes on cash 143 3 44 (12)
-------- -------- --------- ---------
Increase (decrease) in cash
and cash equivalents (5,150) 229,884 (3,280) 228,377
Cash and cash equivalents at
beginning of period 31,729 25,072 29,859 26,579
-------- -------- --------- ---------
Cash and cash equivalents at
end of period $ 26,579 $254,956 $ 26,579 $ 254,956
======== ======== ========= =========
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