Switch to cloud boosts Nice Systems Q2 profit 9.8%

Barak Eilam photo: CRC Media

Second quarter revenue totaled $342 million. Nice has slightly raised its profit guidance.

The switch to cloud has produced another positive quarter of NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE). The company released its second quarter financials today, showing 9.8% growth in revenue in comparison with the corresponding quarter of 2017 to $342 million. The company posted a non-GAAP net profit of $66.7 million, 19.1% higher than in the corresponding quarter.

Nice Systems provides customer relations management and risk management solutions. Among its three areas of business, the fastest growing is cloud, which grew 28.3% in the quarter to $109 million, and in the first half year by 30% to $212 million, in comparison with the corresponding periods of 2017. Second quarter services revenue grew 16.4% to $184 million, while products sales fell 28.1% to $49.4 million. Unlike revenue from product sales, which is recognized almost immediately, cloud revenue is spread over the period of the contract, so that while the quarterly revenue is lower, the deals concerned are larger for Nice.

As far as gross profit margins are concerned, on a GAAP basis cloud actually generates the lowest margin of the three areas of Nice's business, at 50% in the first half-year, compared with 86% for products and 67% for services. Profitability in cloud, however, includes both the product and the accompanying services, and the expectation is that as Nice grows in this area, it will achieve economies of scale that will lead to greater profitability.

Nice posted an accounting net profit of $34.2 million, 67.5% more than in the corresponding quarter, and in the first half profit grew 53.1% to $57.8 million. On a non-GAAP basis, excluding various accounting items, quarterly net profit grew, as mentioned, by 19.1% to $66.7 million. Non-GAAP net profit in the first half-year grew 18.1% to $131 million. Earnings per share in the second quarter were $1.06, higher than market expectations. The company slightly upped its annual profit guidance to $4.446-4.66 per share ($280 million), $0.03 higher than the previous guidance.

Nice Systems generated $201 million cash in the first half-year, almost unchanged from the first half last year, and at the end of the period it had total cash of $689 million. The company recently announced the acquisition of US company Mattersight for $90 million. The deal is expected to close in the third or fourth quarter.

“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 Nice CEO Barak Eilam.

“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," Eilam continued. "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.”

Published by Globes [online], Israel business news - www.globes-online.com - on August 9, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Barak Eilam photo: CRC Media
Barak Eilam photo: CRC Media
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