NICE Ltd. (Israel) Q3 FY2024 earnings call

• The company had an excellent quarter, exceeding the high end of expectations with total revenue of $690 million, a 15% y-o-y increase. Cloud revenue grew 24% to $500 million, exceeding $2 billion ARR. Operating income surged 20% to $221 million, operating margin climbed to 32%. EPS was $2.88, a 27% y-o-y leap. - Launched CXone Mpower to facilitate end-to-end automation in customer service. CXone AI solutions like Copilot, Autopilot, AutoSummary saw significant growth in ACV. - Secured large enterprise deals across various sectors, leveraging NICE's unique knowledge assets and interaction centric platform. - Recognized by Gartner for strong leadership in the Magic Quadrant, with AI capabilities highlighted as a clear strength.

In Q3 2024, customer engagement revenues were a record $578 million, a 16% year-over-year increase, representing 84% of total revenue. Revenues from financial claim and compliance totaled a record $111 million, a 8% year-over-year increase, representing 16% of total revenue. Cloud revenue was $500 million, a 24% year-over-year increase, accounting for 72% of total revenue. Recurring revenue increased to nearly 90% of total revenue compared to 87% last year.

• Full year 2024 total revenue guidance remains $2.715 billion to $2.735 billion, a 15% increase at midpoint. - Full year 2024 diluted EPS guidance raised to $10.95 to $11.15, a 26% increase at midpoint. - Expected year-over-year cloud growth excluding LiveVox for 2024 is 16% to 17%. - Anticipate acceleration in cloud growth rate in Q4 2024, with positive seasonality momentum and customer turnups observed.

• Deployment complexities of large enterprise deals and AI solutions may lead to longer implementation times. - General risks associated with forward-looking statements and uncertainties in market adoption of new technologies like AI in customer service automation.

Q: Could we just go back to the commentary around the revenue mechanics that you're seeing on cloud? You talked about some slower ramp-up. Was that more customer driven or is it that the revenue recognition dynamics are different in cloud? And then as a follow-up, could you just talk about how that growth should trend in cloud heading into next year?

A: Beth Gaspich: As you know, we delivered our best ever CXone bookings quarter last quarter and we now have the greatest backlog that we've had at record highs of CXone signed deals. As we look in terms of the timeline for the revenue recognition, there is no change in the accounting. AI does not change that. However, we are signing more and more seven digit and eight digit ACV deals with large enterprise customers. Barak Eilam: And just to add to that, about your second question, as we mentioned on the remarks, we are seeing acceleration in the cloud growth rate in the fourth quarter. Are you guys giving guidance for next year? You mentioned that. But we see from October billings and activity, both the turnup, as Beth mentioned, as well as the billing overall, a very good sign for the fourth quarter.

Q: Giong back to the -- some of the long implementation times, I was hoping you could just maybe touch a little bit on how much longer we should expect some of these deals to take? Are we talking months, are we talking quarters, given the increased complexity? And then Barak would love to hear what about the CCaaS displacements that you're seeing. What is the main driver of those?

A: Beth Gaspich: Mike, I do want to just quickly kind of address the comments you made about the request, because first of all, I just want to state again that one of the things we had in the quarter is we saw a 33% year-over-year in the increase of the number of 1 million plus ARR CXone customers. And again, it just highlights the large number of enterprise customers that we're winning and that we're seeing in the backlog. When we think about the timing, it's important to say that technically with CXone in our platform we have the ability to deploy our solution in a matter of days, and we have plenty of instances where we've shown that we have the capability to do that. But as Barak highlighted earlier, especially as you're starting to consider about large organizations rethinking about how AI and how our Copilot and Autopilot will actually reenvision kind of seamless process workflow, it's a much more thoughtful deployment. And so that's why we don't give specific the deployment time, because we have customers, we continue to operate in all segments of the market that are deploying very, very quickly. But as we go into the large enterprise with customers that are buying a great amount of capabilities, it can take upwards six, nine, even 12 months as they're deploying some of the AI based solution. Barak Eilam: So as we mentioned before, it's -- I don't want to repeat on what we have said already. But generally, we have numerous motions in our business. Obviously, there is the more midsized customers that we've always been signing, that doesn't change. We have great opportunity and we're seeing it already where those customers and new ones easily adding a variety of capabilities because of the flexibility of CXone. AutoSummary was a great example of that. But as we go into the more interesting part of the market and we need more and more large customers on our end from the technology side the platform is ready to onboard those customers in day one. But the market of customer service automation is not -- it’s not just about the move from on-prem to cloud, that's the easy part, if you would like. It is about, as I said before, reengineering workflows, taking out agents from the workflows and embedding AI instead. So that’s from customers take a bit longer. But when it happens, it happens in a massive scale and it's going to be there forever, because it's going to replace people with our technology that had tremendous value. So it's a revenue that has much higher profitability and much higher customer -- lifetime customer value. We see, as Beth said before, a significant backlog that we have for CXone. With that change of mix, it gives us optimism about the future. And as we mentioned before, in Q4, given what we've seen in October already, we are estimating acceleration in the cloud growth