NICE Reports Third Quarter 2010 Results; Record Non-GAAP Revenues of $176 Million, EPS up at $0.45

Oct 27, 2010, 05:50 ET from NICE Systems

RA'ANANA, Israel, October 27, 2010 /PRNewswire-FirstCall/ -- NICE Systems (NASDAQ: NICE), the worldwide leader of intent-based solutions that extract insight to impact business performance, reduce financial risk and ensure safety and security, today announced results for the third quarter ending September 30, 2010.

    Third Quarter 2010 non-GAAP Highlights Include:

    - Revenues at new all time high of $176 million, up 21% year-over-year

    - Operating income at a record of $32 million, up 28% year-over-year

    - Earnings per fully diluted share increased to $0.45 from $0.38 last
    year

    - Strong cash flow from operations; crossed $100 million in first three
    quarters

    - Company increases its annual guidance for 2010

"We are pleased with our performance in both the third quarter and year-to-date. Our business continued to demonstrate growth and improved profitability. We ended the quarter with record revenues, record operating income, strong cash from operations, and healthy backlog and pipeline. These achievements, combined with our current forecast for a strong fourth quarter, lead us to update once again our guidance for the year," said Zeevi Bregman, President and Chief Executive Officer, NICE Systems.

"We continued to execute on our strategy to provide enterprise-wide intent-based solutions. Our customers use our analytics offerings to obtain insight on their business and transform it into impact. We believe that our ability to provide real-time impact solutions across our businesses is a clear differentiator of NICE. It enables our customers to significantly improve their business performance and customer experience and to ensure safety and compliance," Mr. Bregman concluded.

Non-GAAP Financial Highlights for the Third Quarter Ended September 30, 2010:

Revenues: Third quarter 2010 non-GAAP revenues increased 21% to a record $176.2 million, up from $146.1 million in the third quarter of 2009.

Gross Profit: Third quarter 2010 non-GAAP gross profit and margin increased, reaching a record $115.9 and 65.8%, respectively, from $91.8 million and 62.9% in the third quarter of 2009.

Operating Income: Third quarter 2010 non-GAAP operating income and margin increased to $31.8 million and 18.1%, respectively, from $24.9 million and 17.0% in the third quarter of 2009.

Net Income: Third quarter 2010 non-GAAP net income reached $28.7 million, up from $24.0 million in the third quarter of 2009.

Earnings per Fully Diluted Share: Third quarter 2010 non-GAAP earnings per fully diluted share increased to $0.45, up from $0.38 in the third quarter of 2009.

GAAP Financial Highlights for the Third Quarter Ended September 30, 2010:

Revenues: Third quarter 2010 revenues increased 21% to $174.9 million from $144.7 million in the third quarter of 2009.

Gross Profit: Third quarter 2010 gross profit and margin increased to $107.9 million and 61.7%, respectively, up from $85.4 million and 59.0% in the third quarter of 2009.

Operating Income: Third quarter 2010 operating income increased to $12.6 million, compared with $4.8 million in the third quarter of 2009.

Net Income: Third quarter 2010 net income increased to $12.5 million, compared to $7.8 million in the third quarter of 2009.

Earnings per Fully Diluted Share: Earnings per fully diluted share in the third quarter 2010 increased to $0.20, from $0.12 in the third quarter of 2009.

Operating Cash Flow and Cash Balance: Third quarter 2010 operating cash flow was $30.9 million. As of September 30, 2010, total cash and equivalents were $611 million, with no debt. This follows the approximately $26 million that were paid for acquisitions and compares to $596 million as of June 30, 2010.

Updated Fiscal Year and Fourth Quarter 2010 Guidance:

Fiscal Year 2010: Non-GAAP revenue guidance for the full year is raised to be in the range of $685 and $690 million. Guidance for Non-GAAP EPS, on a fully diluted basis, is raised to be in the range of $1.71 and $1.75.

Fourth Quarter 2010: Non-GAAP revenue guidance for the fourth quarter is in the range of $177 and $182 million. Non-GAAP EPS, on a fully diluted basis, is expected to be in the range of $0.47and $0.51.

Quarterly Results Conference Call

NICE management will host a teleconference, today, Oct 27, 2010 at 8:30 ET, 14:30 Israel, to discuss the results and the company's outlook. Please call the following dial-in numbers to participate in the call: United States +1-866-229-7198 or +1-888-668-9141, International +972-3- 9180609, Israel 03- 9180609. This call will be webcast live on http://www.nice.com at http://www.nice.com/news-and-events/ir-events. An online replay will also be available approximately three hours following the call. A telephone replay of the call will be available for 72 hours after the live broadcast, and may be accessed by dialing: United States 1-888-269-0005, International +972-3-9255930, Israel 03-9255930.

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, re-organization expenses, share based compensation expenses, realized gain on previously impaired marketable securities as well as certain business combination accounting entries. 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.

About NICE

NICE Systems is the worldwide leader of intent-based solutions that capture and analyze interactions and transactions, realize intent, and extract and leverage insights to deliver impact in real time. Driven by cross-channel and multi-sensor analytics, NICE solutions enable organizations to improve business performance, increase operational efficiency, prevent financial crime, ensure compliance, and enhance safety and security. NICE serves over 25,000 organizations in the enterprise and security sectors, representing a variety of sizes and industries in more than 150 countries, and including over 80 of the Fortune 100 companies. http://www.nice.com

Trademark Note: NICE and the NICE logo are trademarks or registered trademarks of NICE Systems. All other marks are trademarks of their respective owners. For a full list of NICE Systems' 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. Such forward-looking statements, including the statements by Messer Bregman, are based on the current expectations of the management of NICE-Systems Ltd. (the Company) only, and are subject to a number of risks and uncertainties that could cause the actual results or performance of the Company to differ materially from those described herein, including but not limited to the impact of the global economic environment on the Company's customer base (particularly financial services firms) and the resulting uncertainties; 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 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. 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, including the Company's Annual Report on Form 20-F. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company undertakes no obligation to update or revise them, except as required by law.

                        NICE SYSTEMS LTD. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                U.S. dollars in thousands (except per share amounts)

                                Quarter ended              Year to date
                                September 30,              September 30,
                            ---------------------    -----------------------
                              2009        2010          2009        2010
                            Unaudited   Unaudited    Unaudited   Unaudited
                            ---------   ---------    ---------   ---------
    Revenue
     Product                  $ 69,233   $ 83,556   $203,509      $237,695
     Services                   75,451     91,300    220,785       265,611
                             ---------   ---------    ---------   ---------
    Total revenue              144,684    174,856    424,294       503,306

    Cost of revenue
     Product                    22,648     26,061     63,323        79,603
     Services                   36,612     40,944    108,747       119,257
                             ---------   ---------    ---------   ---------
    Total cost of revenue       59,260     67,005    172,070       198,860
                             ---------   ---------    ---------   ---------
    Gross profit                85,424    107,851    252,224       304,446

    Operating Expenses:
     Research and
     development, net           19,454     25,481     55,465        70,947
     Selling and marketing      35,116     44,050    102,995       128,585
     General and administrative 21,964     20,717     55,249        58,569
     Amortization of acquired
     intangible assets           4,077      4,968     11,329        14,459
                             ---------   ---------    ---------   ---------
    Total operating expenses    80,611     95,216    225,038       272,560
                             ---------   ---------    ---------   ---------
    Operating income             4,813     12,635     27,186        31,886

    Financial income, net        1,622      3,474      6,240         7,183
    Other expense, net             (27)       (97)      (100)         (129)
                             ---------   ---------    ---------   ---------
    Income before taxes on
    income                       6,408     16,012     33,326        38,940
    Taxes on income             (1,388)     3,474      3,319         7,615
                             ---------   ---------    ---------   ---------
    Net income                 $ 7,796   $ 12,538   $ 30,007      $ 31,325
                             =========   =========    =========   =========
    Basic earnings per share    $ 0.13     $ 0.20     $ 0.49        $ 0.50
                             =========   =========    =========   =========
    Diluted earnings per share  $ 0.12     $ 0.20     $ 0.48        $ 0.49
                             =========   =========    =========   =========
    Weighted average number of
    shares outstanding used to
    compute:

    Basic earnings per share    61,332     62,711     61,118        62,478
    Diluted earnings per share  62,887     63,720     62,082        64,009



                       NICE SYSTEMS LTD. AND SUBSIDIARIES
                   RECONCILIATION OF GAAP TO NON-GAAP RESULTS
               U.S. dollars in thousands (except per share amounts)


                              Quarter ended          Year to date
                              September 30,          September 30,
                          ____________________   ___________________
                            2009        2010      2009         2010
                          ____________________   ___________________

    GAAP revenues        $ 144,684   $ 174,856  $ 424,294   $ 503,306

    Valuation adjustment
    on acquired deferred
    product revenue            480         638        480       1,579

    Valuation adjustment
    on acquired deferred
    service revenue            887         713        975       3,465
                          _________  _________  _________   _________
    Non-GAAP revenues    $ 146,051   $ 176,207  $ 425,749   $ 508,350
                          =========  =========  =========   =========

    GAAP cost of revenue  $ 59,260    $ 67,005  $ 172,070   $ 198,860

    Amortization of
    acquired intangible
    assets on cost of
    product                 (4,330)     (6,146)   (12,429)    (17,226)

    Valuation adjustment
    on acquired deferred
    cost of services             -         205          -         640

    Cost of product
    revenue adjustment(1,2)    (10)       (113)      (239)       (315)


    Cost of services revenue
    adjustment (1,2)          (703)       (670)    (1,842)     (1,972)
                          _________  _________  _________   _________
    Non-GAAP cost of
    revenue               $ 54,217    $ 60,281  $ 157,560   $ 179,987
                          =========  =========  =========   =========

    GAAP gross profit     $ 85,424   $ 107,851  $ 252,224   $ 304,446
    Gross profit
    adjustments              6,410       8,075     15,965      23,917
                          _________  _________  _________   _________
    Non-GAAP gross profit $ 91,834   $ 115,926  $ 268,189   $ 328,363
                          =========  =========  =========   =========

    GAAP operating
    expenses              $ 80,611    $ 95,216  $ 225,038   $ 272,560

    Research and
    development (1,2,3)     (1,633)       (978)    (3,861)     (3,720)

    Sales and marketing
    (1,2)                   (1,654)     (1,738)    (4,972)     (4,561)

    General and
    administrative
    (1,2,3)                 (2,244)     (2,450)    (5,513)     (8,523)

    Amortization of
    acquired intangible
    assets                  (4,077)     (4,968)    (11,329)    (14,459)

    Acquisition related
    expenses (4)            (4,069)       (980)     (4,069)     (1,599)
                          _________  _________  _________   _________
    Non-GAAP operating
    expenses              $ 66,934    $ 84,102   $ 195,294   $ 239,698
                          =========  =========  =========   =========
    GAAP finance & other
    income, net            $ 1,595     $ 3,377     $ 6,140     $ 7,054

    Realized gain on
    previously impaired
    marketable securities        -        (625)          -        (625)

    Re-organization expenses     -           -          52           -

    Acquisition related
    expenses (4)                 -          97           -          97
                          _________  _________  _________   _________
    Non-GAAP finance &
    other income, net      $ 1,595     $ 2,849     $ 6,192     $ 6,526
                          =========  =========  =========   ==========

    GAAP taxes on Income  $ (1,388)    $ 3,474     $ 3,319     $ 7,615

    Tax adjustments re
    non-gaap adjustments     3,898       2,539       8,371       8,229
                          _________  _________  _________   _________
    Non-GAAP taxes         $ 2,510     $ 6,013    $ 11,690    $ 15,844
                          =========  =========  ==========   =========

    GAAP net income        $ 7,796     $ 12,538   $ 30,007    $ 31,325

    Valuation adjustment
    on acquired deferred
    revenue                  1,367        1,351      1,455       5,044

    Valuation adjustment
    on acquired deferred
    cost of services             -         (205)         -        (640)

    Amortization of acquired
    intangible assets        8,407       11,114     23,758      31,685

    Share-based
    compensation (1)         5,528        5,638     12,939      15,896

    Re-organization
    expenses (2)                 -            -      2,213       2,262

    Acquisition related
    compensation expense (3)   716          311      1,327         933

    Acquisition related
    expenses (4)             4,069        1,077      4,069       1,696

    Realized gain on
    previously impaired
    marketable securities        -         (625)         -        (625)

    Tax adjustments re
    non-gaap adjustments    (3,898)      (2,539)    (8,371)     (8,229)
                           _________  _________  _________   __________
    Non-GAAP net income   $ 23,985     $ 28,660   $ 67,397    $ 79,347
                          =========  =========   =========   =========
    GAAP diluted earnings
    per share               $ 0.12       $ 0.20     $ 0.48      $ 0.49
                          =========  =========   =========   =========
    Non-GAAP diluted
    earnings per share      $ 0.38       $ 0.45     $ 1.09      $ 1.24
                          =========  =========   =========   =========
    Shares used in
    computing US GAAP
    diluted earnings per
    share                   62,887       63,720     62,082      64,009


    Shares used in computing
    Non-GAAP diluted
    earnings per share      62,792       63,720     62,051      64,009



                         NICE SYSTEMS LTD. AND SUBSIDIARIES
                RECONCILIATION OF GAAP TO NON-GAAP RESULTS (continued)



    U.S. dollars in thousands

    (1) Share-based Compensation
                                   Quarter ended      Year to date
                                  September 30,     September 30,
                                   _______  ______  ______     ______
                                   2009       2010   2009        2010
                                   _______  ______  ______     ______
        Cost of product revenue   $ (10)  $ (113)   $ (238)   $ (315)
        Cost of service revenue    (703)    (670)   (1,522)   (1,686)
        Research and development (1,194)    (667)   (2,096)   (2,787)
        Sales and marketing      (1,654)  (1,738)   (4,171)   (4,054)
        General and
        administrative           (1,967)  (2,450)   (4,912)   (7,054)
                                   _______  ______  ______     ______
                               $ (5,528)$ (5,638)$ (12,939)$ (15,896)
                                   =======  ======  ======    =======

     (2) Re-organization expenses
                                   Quarter ended      Year to date
                                  September 30,      September 30,
                                   _______  ______  ______     ______
                                   2009     2010      2009       2010
                                   _______  ______  ______     ______
         Cost of product revenue    $ -     $ -      $ (1)       $ -
         Cost of service revenue      -       -      (320)      (286)
         Research and development     -       -      (991)         -
         Sales and marketing          -       -      (801)      (507)
         General and administrative   -       -       (48)    (1,469)
         Other expense                -       -       (52)         -
                                   _______  ______  ______     ______
                                    $ -     $ -   $(2,213)  $ (2,262)
                                   =======  ======  ======    =======

     (3) Acquisition related compensation expense

                                    Quarter ended      Year to date
                                    September 30,       September 30,
                                   _______  ______  ______     ______
                                   2009     2010      2009       2010
                                   _______  ______  ______     ______
         Research and development $ (439) $ (311)   $ (774)    $ (933)
         General and
         administrative             (277)     -       (553)         -
                                   _______  ______  ______     ______
                                  $ (716) $ (311) $ (1,327)    $ (933)
                                   =======  ======  ======    =======

     (4) Acquisition related expense

                                    Quarter ended       Year to date
                                   September 30,        September 30,
                                   _______  ______  ______     ______
         Research and development    $ -     $ (72)     $ -      $ (73)
         Sales and marketing           -       (77)       -        (77)
         General and
         administrative           (4,069)     (831)  (4,069)    (1,449)
         Other expense, net            -       (97)       -        (97)
                                   _______  ______  ______     _______
                                $ (4,069) $ (1,077)$ (4,069)  $ (1,696)
                                   =======  ======   ======    =======




                          NICE SYSTEMS LTD. AND SUBSIDIARIES
                         CONDENSED CONSOLIDATED BALANCE SHEETS
                              U.S. dollars in thousands

                                             December 31,  September 30,
                                               2009          2010
                                             ---------      ---------
                                             Unaudited      Unaudited
                                             ---------      ---------
         ASSETS

    CURRENT ASSETS:
       Cash and cash equivalents              $ 214,811     $ 84,627
       Short-term investments                   108,850      227,768
       Trade receivables                        102,147       96,797
       Other receivables and prepaid expenses    23,887       32,312
       Inventories                               14,445       13,099
       Deferred tax assets                        8,181        9,316
                                              ---------    ---------
       Total current assets                     472,321      463,919
                                              ---------    ---------
    LONG-TERM ASSETS:
       Marketable securities                    224,828      298,831
       Other long-term assets                    29,314       32,335
       Property and equipment, net               22,052       22,054
       Other intangible assets, net             156,664      153,933
       Goodwill                                 494,498      526,903
                                              ---------    ---------
       Total long-term assets                   927,356    1,034,056
                                              ---------    ---------
    TOTAL ASSETS                            $ 1,399,677  $ 1,497,975
                                              =========    =========
       LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES:
       Trade payables                          $ 26,342     $ 16,302
       Accrued expenses and other liabilities   261,519      300,334
                                              ---------    ---------
       Total current liabilities                287,861      316,636
                                              ---------    ---------
    LONG-TERM LIABILITIES:
       Deferred tax liabilities                  25,899       22,419
       Other long-term liabilities               23,163       26,443
                                              ---------    ---------
       Total long-term liabilities               49,062       48,862
                                              ---------    ---------
    SHAREHOLDERS' EQUITY                      1,062,754    1,132,477
                                              ---------    ---------
    TOTAL LIABILITIES AND
    SHAREHOLDERS' EQUITY                    $ 1,399,677  $ 1,497,975
                                              =========    =========


                     NICE SYSTEMS LTD. AND SUBSIDIARIES
                     CONSOLIDATED CASH FLOW STATEMENTS
                        U.S. dollars in thousands

                                      Quarter ended         Year to date
                                      September 30,         September 30,
                                     ------------------- --------------------
                                        2009     2010      2009        2010
                                     Unaudited Unaudited Unaudited  Unaudited
                                     --------- --------- ---------  ---------

    Cash flows from operating activities:

     Net income                        $ 7,796 $ 12,538  $ 30,007   $ 31,325
     Adjustments required to reconcile
     net income to net cash
      provided by operating activities:
      Depreciation and amortization     11,831   14,650    33,776     42,092
      Stock based compensation           5,528    5,638    12,939     15,896
      Excess tax benefit from
      share-based payment arrangements    (633)    (204)     (632)      (399)
      Accrued severance pay, net          (301)    (101)   (1,347)      (570)
      Amortization of discount (premium)
      and accrued interest
       on marketable securities            728     (157)    1,394        281
      Gain on marketable securities sold, (126)    (410)     (823)    (1,204)
      called or impaired
      Deferred taxes, net               (2,213)    (991)   (7,095)    (6,457)
      Decrease (increase) in trade
      receivables                       (3,072)  (2,156)   16,895      9,194
      Decrease (increase) in other
      receivables and prepaid expenses  (3,162)   3,672    (4,003)    (4,387)
      Decrease (increase) in inventories    18     (825)    1,111      1,357
      Decrease in trade payables        (5,314)  (2,309)   (8,328)   (10,864)
      Increase in accrued expenses and
      other liabilities                 17,432    1,372    16,296     24,003
      Other                               (164)     193       112        348
                                     --------- --------- ---------  ---------
      Net cash provided by operating
      activities                        28,348   30,910    90,302    100,615
                                     --------- --------- ---------  ---------

    Cash flows from investing activities:

     Purchase of property and equipment (2,095)  (3,463)   (6,012)    (8,550)
     Proceeds from sale of property and
     equipment                               3        4        38         15
     Investment in marketable
     securities                        (17,398) (97,240) (123,519)  (304,546)
     Proceeds from maturity, call and
     sale of marketable securities      48,025   16,420   149,640     79,568
     Investment in short-term bank
     deposits                          (31,021)       -  (110,021)         -
     Proceeds from short-term bank
     deposits                           17,014   10,002    69,464     40,029
     Capitalization of software
     development costs                    (387)    (313)     (943)    (1,051)
     Purchase of intangible assets          -         -    (1,000)         -
     Payments for acquisitions         (80,459) (26,201)  (84,903)   (52,267)
                                     --------- --------- ---------  ---------

      Net cash used in investing
      activities                       (66,318)(100,791) (107,256)  (246,802)
                                     --------- --------- ---------  ---------

    Cash flows from financing activities:

     Proceeds from issuance of shares
     upon exercise of share options
     and ESPP, net                      11,551    3,677    15,550     15,351
     Excess tax benefit from
     share-based payment arrangements      633      204       632        399
                                     --------- --------- ---------  ---------
      Net cash provided by financing
      activities                        12,184    3,881    16,182     15,750
                                     --------- --------- ---------  ---------
    Effect of exchange rate
    changes on cash                        367    1,530     1,081        253
                                     --------- --------- ---------  ---------
    Increase (decrease) in cash
    and cash equivalents               (25,419) (64,470)      309   (130,184)
    Cash and cash equivalents at
    beginning of period                170,104  149,097   144,376    214,811
                                     --------- --------- ---------  ---------
    Cash and cash equivalents
    at end of period                 $ 144,685 $ 84,627  $144,685   $ 84,627
                                    =========  ========  ========   =========


    Corporate Media
    Galit Belkind           NICE Systems           +1-877-245-7448

                            galit.belkind@nice.com
    Investors
    Daphna Golden           NICE Systems           +1-877-245-7449

                            ir@nice.com

SOURCE NICE Systems