NICE Reports 10% Increase in Non-GAAP Revenues to $221 Million and 19% Increase in Non-GAAP EPS to $0.64 for the Third Quarter

"We reported record revenues and earnings per share for the third quarter of 2012. The results were supported by another strong quarter for our analytics based advanced applications. As we enter the final quarter of the year, we see strong demand for our solutions and expect it to be a strong quarter in bookings and revenues," said Zeevi Bregman, President and CEO of NICE Systems.

Mr. Bregman continued, "The opportunities around Big Data are growing and we continue to strengthen our domain leading position in Big Data analytics through further product development, strategic partnerships and acquisitions. Our best-in-class, real-time analytic solutions provide our customers with the capabilities to better extract value from Big Data to help them understand what is transpiring from within, across and outside of their organizations and to better support their mission critical operations. This enables our customers to meet the challenges around compliance and regulation, fraud prevention, safety and security, and organizations' needs to improve operations and enhance the customer experience amid rapidly increasing social media influence. Our broad offering of analytic solutions is where the future growth lies for NICE."

Non-GAAP Financial Highlights for the Third Quarter Ended September 30, 2012:

Revenues: Third quarter 2012 non-GAAP total revenues were a record $220.9 million, up 10.2% from $200.4 million for the third quarter of 2011.

Gross Profit: Third quarter 2012 non-GAAP gross profit and non-GAAP gross margin increased to $145.0 million and 65.6%, respectively, from $129.5 million and 64.6%, respectively, for the third quarter of 2011.

Operating Income: Third quarter 2012 non-GAAP operating income and non-GAAP operating margin were $42.1 million and 19.1%, respectively, compared to $38.9 million and 19.4%, respectively, for the third quarter of 2011.

Net Income: Third quarter 2012 non-GAAP net income and non-GAAP net margin increased to $39.7 million and 18.0%, respectively, from $34.5 million and 17.2%, respectively, for the third quarter of 2011.

Fully Diluted Earnings Per Share: Third quarter 2012 non-GAAP fully diluted earnings per share increased to a record $0.64, up 18.5% from $0.54 for the third quarter of 2011.

GAAP Financial Highlights for the Third Quarter Ended September 30, 2012:

Revenues: Third quarter 2012 total revenues increased 9.7% to $218.9 million compared to $199.5 million for the third quarter of 2011.

Gross Profit: Third quarter 2012 gross profit and gross margin were $130.5 million and 59.6%, respectively, compared to $121.8 million and 61.1%, respectively, for the third quarter of 2011.

Operating Income: Third quarter 2012 operating income and operating margin were $13.3 million and 6.1%, respectively, compared to $20.4 million and 10.2%, respectively, for the third quarter of 2011.

Net Income: Third quarter 2012 net income and net margin were $16.8 million and 7.7%, respectively, compared to $18.3 million and 9.2%, respectively, for the third quarter of 2011.

Fully Diluted Earnings Per Share: Fully diluted earnings per share for the third quarter of 2012 was $0.27 compared to $0.29 for the third quarter of 2011.

Operating Cash Flow and Cash Balance: Third quarter 2012 operating cash flow was $11.6 million. In the third quarter, approximately $28 million was used for share repurchases. As of September 30, 2012, total cash and cash equivalents, short term investments and marketable securities were $422 million, with no debt.

Share Repurchase Program

During October 2012 the company completed its share repurchase program that was announced late last year. The Company announced that its Board of Directors has authorized a new program to repurchase up to $100 million of its issued and outstanding ordinary shares and ADRs. Repurchases may be made from time to time in the open market or in privately negotiated transactions and will be in accordance with applicable securities laws and regulations. The timing and amount of the repurchase transactions will be determined by management and may depend on a variety of factors, including market conditions, alternative investment opportunities and other considerations. The program does not obligate the Company to acquire any particular amount of ordinary shares and ADRs and the program may be modified or discontinued at any time without prior notice.

Fourth Quarter and Full Year 2012 Guidance:

Fourth Quarter 2012: Fourth quarter non-GAAP total revenues for 2012 are expected to be in a range of $237 million to $257 million. Fourth quarter non-GAAP fully diluted earnings per share for 2012 are expected to be in a range of $0.64 to $0.69.

Full Year 2012: The Company reiterated its guidance for full year 2012 non-GAAP total revenues and increased its guidance for fully diluted earnings per share. Full year 2012 non-GAAP total revenues are expected to be in a range of $890 million to $910 million. Full year 2012 non-GAAP fully diluted earnings per share is expected to be in a range of $2.41 to $2.46.

Quarterly Results Conference Call

NICE management will host its earnings conference call today, October 31, 2012 at 8:30 AM EDT, 12:30 GMT, 14:30 Israel, to discuss the results and the company's outlook. To participate in the call, please dial in to the following numbers: United States 1-866-804-8688 or +1-718-354-1175, International +44(0)1296-480-100, United Kingdom 0-800-783-0906, Israel 1-809-242-041. The Passcode is 784 680 78. Additional access numbers can be found at [ http://www.btconferencing.com/globalaccess/?bid=54_attended ]. The call will be webcast live on the Company's website at [ http://www.nice.com/news-and-events/ir-events ]. An online replay will also be available approximately two hours following the call. A telephone replay of the call will be available for 7 days after the live broadcast, and may be accessed by dialing: United States 1-877-482-6144, International +44(0)20-7136-9233, United Kingdom 0-800-032-9687. The Passcode for the replay is 46379739.

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, re-organization expenses, restructuring expenses, share-based compensation, settlements and related expenses and 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. The intangible assets created in the acquisitions of Merced are preliminary and subject to further review and completion of valuation analyses.

About NICE

NICE (NASDAQ: [ NICE ]) is the worldwide leader of software solutions that deliver strategic insights by capturing and analyzing mass quantities of structured and unstructured data in real time from multiple sources, including phone calls, mobile apps, emails, chat, social media, and video. NICE's solutions enable organizations to take the Next-Best-Action to improve customer experience and business results, ensure compliance, fight financial crime, and safeguard people and assets. NICE solutions are used by over 25,000 organizations in more than 150 countries, 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, -------------------- --------------------- 2012 2011 2012 2011 Unaudited Unaudited Unaudited Unaudited ------------------------------------------ Revenue: Product $ 92,115 $ 88,677 $269,221 $257,831 Services 126,744 110,784 372,106 322,378 -------- -------- -------- -------- Total revenue 218,859 199,461 641,327 580,209 Cost of revenue: Product 31,273 29,394 93,660 85,129 Services 57,055 48,265 168,852 140,531 -------- -------- -------- -------- Total cost of revenue 88,328 77,659 262,512 225,660 -------- -------- -------- -------- Gross profit 130,531 121,802 378,815 354,549 Operating Expenses: Research and development, net 30,094 27,065 88,910 79,820 Selling and marketing 54,892 45,963 165,113 144,941 General and administrative 22,186 22,528 71,649 68,618 Amortization of acquired intangible assets 8,225 5,818 24,364 17,262 Restructuring expenses 1,884 - 1,884 - -------- -------- -------- -------- Total operating expenses 117,281 101,374 351,920 310,641 -------- -------- -------- -------- Operating income 13,250 20,428 26,895 43,908 Finance and other income, net 1,617 2,075 6,135 7,454 -------- -------- -------- -------- Income before taxes on income 14,867 22,503 33,030 51,362 Taxes on income (tax benefit) (1,910) 4,181 (2,734) 9,344 -------- -------- -------- -------- -------- -------- -------- -------- Net income $ 16,777 $ 18,322 $ 35,764 $ 42,018 -------- -------- -------- -------- -------- -------- -------- -------- Basic earnings per share $ 0.28 $ 0.29 $ 0.59 $ 0.66 -------- -------- -------- -------- -------- -------- -------- -------- Diluted earnings per share $ 0.27 $ 0.29 $ 0.57 $ 0.65 -------- -------- -------- -------- -------- -------- -------- -------- Weighted average number of shares outstanding used to compute: Basic earnings per share 60,766 62,824 61,108 63,325 Diluted earnings per share 61,971 64,002 62,523 64,661

 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, ----------------------- ----------------------- 2012 2011 2012 2011 ------------------------------------------------ GAAP revenues $ 218,859 $ 199,461 $ 641,327 $ 580,209 Valuation adjustment on acquired deferred product revenue 229 607 3,930 3,010 Valuation adjustment on acquired deferred service revenue 1,814 362 7,502 865 --------- --------- --------- --------- Non-GAAP revenues $ 220,902 $ 200,430 $ 652,759 $ 584,084 --------- --------- --------- --------- --------- --------- --------- --------- GAAP cost of revenue $ 88,328 $ 77,659 $ 262,512 $ 225,660 Amortization of acquired intangible assets on cost of product (10,364) (6,390) (31,553) (20,397) Amortization of acquired intangible assets on cost of services (1,025) - (2,734) - Valuation adjustment on acquired deferred cost of services 11 133 107 466 Cost of product revenue adjustment (1,2,4) (47) (79) (336) (307) Cost of services revenue adjustment (1,2,3,4) (957) (378) (3,012) (1,770) --------- --------- --------- --------- Non-GAAP cost of revenue $ 75,946 $ 70,945 $ 224,984 $ 203,652 --------- --------- --------- --------- --------- --------- --------- --------- GAAP gross profit $ 130,531 $ 121,802 $ 378,815 $ 354,549 Gross profit adjustments 14,425 7,683 48,960 25,883 --------- --------- --------- --------- Non-GAAP gross profit $ 144,956 $ 129,485 $ 427,775 $ 380,432 --------- --------- --------- --------- --------- --------- --------- --------- GAAP operating expenses $ 117,281 $ 101,374 $ 351,920 $ 310,641 Research and development (1,2,3) (546) (861) (2,652) (3,142) Sales and marketing (1,2,3) (1,426) (1,796) (6,072) (6,083) General and administrative (1,2,3) (2,089) (1,519) (6,797) (6,596) Amortization of acquired intangible assets (8,225) (5,818) (24,364) (17,262) Acquisition related expenses (4) - (793) (4,348) (6,199) Settlement and related expenses (267) - (267) - Restructuring expenses (1,884) - (1,884) - --------- --------- --------- --------- Non-GAAP operating expenses $ 102,844 $ 90,587 $ 305,536 $ 271,359 --------- --------- --------- --------- --------- --------- --------- --------- GAAP taxes on Income $ (1,910) $ 4,181 $ (2,734) $ 9,344 Tax adjustments re non-gaap adjustments 5,949 2,318 20,145 10,139 --------- --------- --------- --------- Non-GAAP taxes on income $ 4,039 $ 6,499 $ 17,411 $ 19,483 --------- --------- --------- --------- --------- --------- --------- --------- GAAP net income $ 16,777 $ 18,322 $ 35,764 $ 42,018 Valuation adjustment on acquired deferred revenue 2,043 969 11,432 3,875 Valuation adjustment on acquired deferred cost of services (11) (133) (107) (466) Amortization of acquired intangible assets 19,614 12,208 58,651 37,659 Share-based compensation (1) 4,961 4,285 17,712 15,273 Re-organization expenses (2) - - 746 910 Acquisition related compensation expense (3) 104 345 367 1,706 Acquisition related expenses (4) - 796 4,392 6,208 Settlement and related expenses 267 - 267 - Restructuring expenses 1,884 - 1,884 - Tax adjustments re non-gaap adjustments (5,949) (2,318) (20,145) (10,139) --------- --------- --------- --------- Non-GAAP net income $ 39,690 $ 34,474 $ 110,963 $ 97,044 --------- --------- --------- --------- --------- --------- --------- --------- GAAP diluted earnings per share $ 0.27 $ 0.29 $ 0.57 $ 0.65 --------- --------- --------- --------- --------- --------- --------- --------- Non-GAAP diluted earnings per share $ 0.64 $ 0.54 $ 1.77 $ 1.50 --------- --------- --------- --------- --------- --------- --------- --------- Shares used in computing US GAAP diluted earnings per share 61,971 64,002 62,523 64,661 Shares used in computing Non-GAAP diluted earnings per share 61,971 64,002 62,523 64,661 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, --------------------- ----------------------- 2012 2011 2012 2011 ---------------------------------------------- Cost of product revenue $ (47) $ (76) $ (331) $ (238) Cost of service revenue (952) (362) (2,899) (1,654) Research and development (461) (640) (2,173) (2,085) Sales and marketing (1,412) (1,743) (5,512) (5,750) General and administrative (2,089) (1,464) (6,797) (5,546) -------- -------- --------- --------- $ (4,961) $ (4,285) $ (17,712) $ (15,273) -------- -------- --------- --------- -------- -------- --------- --------- (2) Re-organization expenses Quarter ended Year to date September 30, September 30, -------------------- ----------------------- 2012 2011 2012 2011 ---------------------------------------------- Cost of product revenue $ - $ - $ - $ (60) Cost of service revenue - - (52) - Research and development - - (177) (141) Sales and marketing - - (517) - General and administrative - - - (709) ------- -------- --------- --------- $ - $ - $ (746) $ (910) ------- -------- --------- --------- ------- -------- --------- --------- (3) Acquisition related compensation expense Quarter ended Year to date September 30, September 30, -------------------- ----------------------- 2012 2011 2012 2011 ---------------------------------------------- Cost of service revenue $ (5) $ (16) $ (22) $ (116) Research and development (85) (221) (302) (916) Sales and marketing (14) (53) (43) (333) General and administrative - (55) - (341) ------- -------- --------- --------- $ (104) $ (345) $ (367) $ (1,706) ------- -------- --------- --------- ------- -------- --------- --------- (4) Acquisition related expenses Quarter ended Year to date September 30, September 30, -------------------- ----------------------- 2012 2011 2012 2011 ---------------------------------------------- Cost of product revenue $ - $ (3) $ (5) $ (9) Cost of service revenue - - (39) - Research and development - (49) (31) (81) Sales and marketing - 27 100 (2,180) General and administrative - (771) (4,417) (3,938) ------- -------- --------- --------- $ - $ (796) $ (4,392) $ (6,208) ------- -------- --------- --------- ------- -------- --------- ---------

 NICE SYSTEMS LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands September 30, December 31, 2012 2011 ------------ ----------- Unaudited Unaudited ------------ ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 74,844 $ 204,437 Short-term investments 211,014 144,003 Trade receivables 140,687 126,981 Other receivables and prepaid expenses 43,084 43,941 Inventories 11,005 13,404 Deferred tax assets 13,073 10,405 ---------- ----------- Total current assets 493,707 543,171 ---------- ----------- LONG-TERM ASSETS: Marketable securities 136,254 214,136 Other long-term assets 30,160 28,890 Property and equipment, net 37,475 28,299 Other intangible assets, net 243,221 158,153 Goodwill 687,597 609,187 ---------- ----------- Total long-term assets 1,134,707 1,038,665 ---------- ----------- TOTAL ASSETS $ 1,628,414 $ 1,581,836 ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables $ 22,792 $ 19,014 Deferred revenues 160,275 160,242 Accrued expenses and other liabilities 197,664 190,372 ----------- ----------- Total current liabilities 380,731 369,628 ----------- ----------- LONG-TERM LIABILITIES: Deferred tax liabilities 62,887 27,766 Other long-term liabilities 25,624 25,798 ----------- ----------- Total long-term liabilities 88,511 53,564 ----------- ----------- SHAREHOLDERS' EQUITY 1,159,172 1,158,644 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,628,414 $ 1,581,836 ----------- ----------- ----------- -----------

 NICE SYSTEMS LTD. AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENTS U.S. dollars in thousands Quarter ended Year to date September 30, September 30, ---------------------------------------------- 2012 2011 2012 2011 Unaudited Unaudited Unaudited Unaudited ---------------------------------------------- Operating Activities Net income $ 16,777 $ 18,322 $ 35,764 $ 42,018 Adjustments to reconcile net income to net cash from operations: Depreciation, amortization and other 24,753 16,080 72,218 48,908 Stock based compensation 4,960 4,285 17,711 15,273 Excess tax shortfall (benefit) from share-based payment arrangements 122 102 60 (367) Net recognized losses (gains) on investments and derivatives 200 329 (749) 1,616 Gain on sale of intangible assets - - (1,125) - Deferred taxes, net (5,972) (1,807) (19,681) (8,732) Changes in operating assets and liabilities: - Trade Receivables (8,466) (9,325) 2,453 (17,210) Other receivables and prepaid expenses (4,801) 1,526 433 811 Inventories 1,566 1,169 3,467 (1,457) Trade payables (4,305) 2,761 2,834 (238) Accrued expenses and other current liabilities (13,999) (15,390) (20,185) 19,955 Other long-term liabilities 761 (110) 364 504 ------- ------- ------- ------- Net cash provided by operating activities 11,596 17,942 93,564 101,081 ------- ------- ------- ------- Investing Activities Purchase of property and equipment (6,786) (5,689) (20,464) (13,181) Proceeds from sale of property and equipment 3 62 1,010 81 Purchase of investments (66,437) (51,132) (139,176) (170,375) Proceeds from investments 36,534 73,628 160,092 229,959 Capitalization of software development costs (386) (311) (1,141) (850) Proceeds from sale of intangible assets, net - - 1,125 - Purchase of intangible assets - (3,000) - (3,000) Payments for acquisitions, net of cash acquired - - (155,503) (64,947) ------- ------- ------- ------- Net cash provided by (used in) investing activities (37,072) 13,558 (154,057) (22,313) ------- ------- ------- ------- Financing Activities Proceeds from issuance of shares upon exercise of share options and ESPP 2,926 3,099 25,650 18,080 Purchase of treasury shares (28,327) (54,019) (93,446) (84,991) Excess tax benefit (shortfall) from share-based payment arrangements (122) (102) (60) 367 ------- ------- ------- ------- Net cash used in financing activities (25,523) (51,022) (67,856) (66,544) ------- ------- ------- ------- Effect of exchange rates on cash and cash equivalents (446) (928) (1,244) 406 ------- ------- ------- ------- Net change in cash and cash equivalents (51,445) (20,450) (129,593) 12,630 ------- ------- ------- ------- Cash and cash equivalents, beginning of period 126,289 142,606 204,437 109,526 ------- ------- ------- ------- Cash and cash equivalents, end of period $ 74,844 $ 122,156 $ 74,844 $ 122,156 ------- ------- ------- ------- ------- ------- ------- -------

Media Contact
Erik Snider, +1-877-245-7448, [ erik.snider@nice.com ]

Investors
Marty Cohen, +1-212-574-3635, [ ir@nice.com ], ET
Anat Earon-Heilborn, +972-9-775-3798, [ ir@nice.com ], CET

SOURCE Nice Systems Ltd.

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NICE Reports 10% Increase in Non-GAAP Revenues to $221 Million and 19% Increase in Non-GAAP EPS to $0.64 for the Third Quarter