NICE Soars Past Earnings Expectations, But Stock Still Struggles
NICE reported adjusted earnings of $2.88 per share for the third quarter of 2024. This figure not only surpassed the Zacks Consensus Estimate by 7.46% but also marked a 27% increase from the previous year.
Non-GAAP revenues totaled $690 million, exceeding forecasts by 1.07% and reflecting a 15% year-over-year rise. The growth was mainly fueled by the strength of its cloud business and expanding customer base.
In the Americas, revenues reached $587 million, marking a 17% increase from last year. In EMEA, revenues totaled $69 million, up 14% year over year. However, APAC saw a decline of 12% in revenues, totaling $34 million.
Despite these gains, NICE’s shares have dipped 8.6% year to date, while the Zacks Computer & Technology sector has risen by 29.3%. However, increased guidance could help NICE’s stock recover.
NICE Earnings and Price Performance Overview
NICE price-consensus-eps-surprise-chart | Nice Quote
NICE Revenue Insights
Cloud revenues, which comprised 72.5% of total revenues, amounted to $500 million. Although this fell short of the Zacks Consensus Estimate by 1.27%, it represented a 24% year-over-year increase.
The company has focused heavily on its cloud offerings, particularly the CXone platform, which has become a key driver of growth.
NICE also exceeded the $2 billion mark in Annual Recurring Revenue for its cloud business in the third quarter, demonstrating significant growth and scalability.
AI-powered customer service automation has increasingly influenced this growth. The introduction of AI capabilities, such as CXone Copilot and AutoSummary, has been particularly well-received.
In this quarter, CXone Copilot saw a six-fold increase in annual contract value, underscoring the demand for AI-enhanced customer service solutions.
Product revenues, which accounted for 5.8% of total revenues, hit $40 million, exceeding expectations by 45.51% and rising 5.8% year over year.
Service revenues contributed $150 million, beating the consensus by 0.80% but experiencing a decline of 6.5% compared to last year. Meanwhile, Customer Engagement revenues rose 15% year over year to $578 million.
Financial Crime & Compliance revenues increased by 8% year over year to $111 million, boosted by cloud revenues and strong contributions from on-premise products.
NICE Operational Highlights
On a non-GAAP basis, the gross margin decreased by 120 basis points (bps) to 71.1%. The product margin dropped by 130 bps to 84.8%. In contrast, the services margin fell 170 bps year over year to 71.9%.
The cloud margin contracted 70 bps year over year to 69.7%.
Research & development expenses, as a proportion of revenues, decreased by 80 bps to 13.3%. Sales & marketing expenses contracted 180 bps to 22.1%. General & administrative expenses rose by 40 bps to 10.8% year over year.
Overall, operating expenses, on a non-GAAP basis, shrank by 260 bps year over year to 39.1%. The operating margin expanded 140 bps to 32% year over year.
NICE Balance Sheet and Financial Position
As of September 30, NICE reported cash and cash equivalents (including short-term investments) of $1.52 billion, a slight rise from $1.50 billion at the end of June 2024.
Long-term debt stood at $458.4 million, compared to $457.9 million as of June 30, 2024.
The cash flow from operations in the third quarter was $159 million, slightly down from $169.7 million in the previous quarter.
NICE allocated $86.4 million for share repurchases during this quarter.
NICE’s FY24 Guidance Released
Looking ahead, NICE anticipates non-GAAP revenues for 2024 will fall between $2,715 million and $2,735 million, reflecting a projected 15% growth at the midpoint.
Estimated non-GAAP earnings are expected to be in the range of $10.95 to $11.5 per share, suggesting a growth of 26% at the midpoint.
NICE’s Zacks Rank & Other Stock Insights
NICE currently holds a Zacks Rank #3 (Hold).
Other well-ranked stocks in the broader Zacks Computer & Technology sector include Tuya (TUYA), NVIDIA (NVDA), and NetApp (NTAP). While Tuya and NVDA have a Zacks Rank #1 (Strong Buy), NTAP holds a Rank #2 (Buy) at this time.
Year to date, Tuya’s shares have declined 33.1%. TUYA is set to announce its third-quarter results on November 18.
NVIDIA has seen its shares soar by 196.3% this year and is scheduled to report its third-quarter fiscal 2025 results on November 20.
NetApp’s shares have increased by 33.9% year to date, with reports for second-quarter fiscal 2025 expected on November 21.
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