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NICE Q3 Earnings Beat, Cloud Revenues Drive Top Line Y/Y

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NICE’s (NICE - Free Report) third-quarter 2020 adjusted earnings of $1.41 per share beat the Zacks Consensus Estimate by 1.4% and also increased 8.5% year over year.

Further, non-GAAP revenues of $412.4 million trumped the consensus mark by 1.1% and improved 6.5% year over year. The revenues were primarily driven by rapid growth in the company’s cloud business.

Recurring revenues, as a percentage of revenues, were 81% compared with 74% in the year-ago quarter.

Revenues in Americas (83% of revenues) were $343 million, up 10% year over year. Revenues in EMEA (11% of revenues) were $44 million in the reported quarter, down 5%. APAC revenues (6% of revenues) were down 8% year over year to $25 million.

Nice Ltd. Price, Consensus and EPS Surprise

 

Top-Line Details

Cloud revenues (49.2% of revenues) rose 33.9% year over year to $201.7 million.

NICE surpassed the 2020 annual run rate of more than $800 million in cloud revenues, in the reported quarter. Growth in cloud revenues was mainly driven by the ongoing digital transformation supported by the strong adoption of the company’s CXone cloud platform and an expanded enterprise clientele.

Service revenues declined 5.2% from the year-ago quarter to $169.4 million. Moreover, product revenues plunged 32% from the year-ago quarter to $38.7 million.

Customer-engagement revenues were $337 million, which increased 7% year over year and represented 82% of total revenues.

Financial crime and compliance revenues grew 4% to $75 million, representing 18% of total revenues.

This Zacks Rank #3 (Hold) company’s solid partner base, which includes Orange Business Services, ConvergeOne, Zoom Video (ZM - Free Report) , Infosys (INFY - Free Report) and Microsoft (MSFT - Free Report) , bodes well for its focus on expanding in the international markets. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operating Details

Gross margin expanded 40 basis points (bps) year over year to 71.5% in the reported quarter, driven by higher cloud gross margin, which jumped 370 bps to 65.6%.

Research & development (R&D) expenses increased 14.3% year over year to $55.5 million. As a percentage of revenues, R&D expenses were up 100 bps year over year to 13.5%.

Sales & marketing (S&M) expenses were $97 million, up 0.9% year over year. As a percentage of revenues, S&M expenses decreased 120 bps to 23.7%.

General & administrative (G&A) expenses increased 7.9% year over year to $45.8 million. As a percentage of revenues, G&A increased 20 bps on a year-over-year basis to 11.2%.

Operating margin expanded 70 bps on a year-over-year basis to 15.1%.

Balance Sheet & Other Details

As of Sep 30, 2020, NICE had cash and cash equivalents (including short & long-term investments) worth $1.5 billion compared with $1.1 billion as of Jun 30, 2020.

Long-term debt as of Sep 30, 2020, was $633.6 million compared with $214 million as of Jun 30, 2020.

The company’s quarterly cash flow came in at $99 million compared with $59.6 million in the previous quarter and $82.3 million in the year-ago quarter.

Guidance

For full-year 2020, non-GAAP revenues are expected between $1.6 billion and $1.7 billion. Non-GAAP earnings are expected between $5.6 and $5.7 per share.

NICE expects accelerated growth in the cloud business and increasing contribution of cloud revenues to total revenues to continue for the rest of the year. Moreover, for 2021, the company expects to surpass the annual run rate of more than $1 billion in cloud revenues.

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