NICE Ltd

Welcome to the NICE conference call discussing second quarter 2020 results and thank you all for holding. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference has been recorded August 6, 2020. I would now like to turn the call over to Mr. Marty Cohen, VP, Investor Relations at NICE. Please go ahead.

Thank you, Operator. With me on the call today are Barack Elam, Chief Executive Officer, Beth Gaspich, Chief Financial Officer, and Aron Laron, Executive Vice President, Marketing and Corporate Development. Before we start, I would like to point out that some of the statements made on this call will constitute forward-looking statements. In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, please be advised that the company's actual results could differ materially from these forward-looking statements. Additional information regarding the factors that could cause actual results or performance of the company to differ materially is contained in the section entitled Risk Factors in Item 3, for the company's 2019 Annual Report on Form 20-F as followed by the Securities and Exchange Commission on April 6, 2020. During today's call, we will present a more detailed discussion of second quarter 2020 results and the company's guidance. Following our comments, there will be an opportunity for questions. Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations which differ in certain from generally accepted accounting principles as reflected mainly in accounting for acquisition-related revenues and expenses, amortization of intangible assets, and accounting for stock-based compensation. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. We would also like to remind you that we are hosting our Virtual Investor Day on September 15 in conjunction with our Interactions Live user conference. The special program for analysts and investors will include presentations from NICE executives and product and technology sessions. If you haven't received the registration email, please email us at ir.nice.com. I'll now turn the call over to Barack.

Thank you, Marty, and welcome, everyone. We are pleased to report a strong quarter driven by further acceleration of our cloud growth. On our last call, We talked about our expectation that organizations will become more focused on extreme agility due to the need to respond in record time to the constantly changing circumstances. Today, three months later, as evidenced by our Q2 results, we see that it's happening at a rapid pace and that we are well positioned at the center of this effort. Furthermore, we can clearly see from the changing environment that one, NICE is extremely mission critical to our customers now more than ever. Two, our solutions are essential to enable a flexible work from home mode of operation. And three, cloud and digital transformations, which are at the core of our business, are now dramatically accelerating in the enterprise due to recent events. Our strong Q2 performance, underscored by an accelerated, robust, 30% growth in the cloud demonstrates how well positioned we are together with the strength of our cloud platforms. All Q metrics were strong. Total revenue increased 4% to $395 million. Operating income was $111 million which was an increase of 10% compared to Q2 2019 and operating margin increased 163 basis points to 28.2% compared to Q2 last year. These strong operating results led to a 10% increase in earning per share to $1.37. Additionally, operating cash flow increased 231% to $60 million in Q2 compared to the same period last year. We are winning in the cloud because we have the most firmly established, proven and comprehensive platforms. Our cloud platforms are capturing opportunities in all segments of the market from SMB to the largest enterprises. In SMB, we continue to see a vast amount of new business signing nearly 200 new logos each and every quarter for CX1 alone. At the higher end of the market, We continue to demonstrate our strength as having the only cloud native platform in that market. We have a significant competitive advantage and a strong leadership position due to the substantial breadth and depth of our offering which is absolutely critical in order to compete in this segment as well as our many years of experience and domain expertise with large enterprises. We are also winning in the cloud to the largest and fastest growing ecosystem of partners, both domestic and international. We continue to sign new key partners at a rapid pace. Just recently, we signed a partnership with Orange Business Services, which serves enterprises across six continents. They will bring CX-1 to the company's install base of 90,000 contact center agents, many of which are in Europe, as well as other international locations. We also signed a partnership with Converge One. Converge One can now bring CX One to the very large on-premise customer base. This is on top of the several new resale partnerships we mentioned on previous calls as well as further partnerships including with Salesforce.com, Zendesk, RingCentral, Zoom and Microsoft. We are winning in the cloud through continued and clear leadership as recognized by many of the independent industry analysts. For example, NICE is the only vendor that was named D-Leader by Gartner across both the Magic Quadrant for Contact Center as a Service and Magic Quadrant for Workforce Engagement Management. In another industry report by DMG, NICE was named D-Leader in Cloud WFO with a double-digit percentage lead over the nearest competitor. Nice Actimize was also named the leader in the IDC MarketScape 2020 Enterprise Fraud Management Report. We are the largest cloud provider in our market and we are twice the size of our next largest cloud competitor as well as demonstrating faster growth. As our cloud business, with its very high retention rates, continues to flourish, we expect that we will end the year with an annual run rate of well above $800 million in cloud revenue. Moreover, during 2021, we expect to cross a significant milestone, an annual run rate of $1 billion in cloud revenue. CX One continues to drive our cloud business. It is unique in the customer engagement market in that it is the only fully integrated native cloud platform that incorporates omnichannel routing, workforce optimization, and analytics. CX One also boasts an ecosystem of 160 independent software vendors building solutions on CX One and fast-going marketplace called CS Exchange on which those software vendors can sell their solutions. The continued success of CX1 is evident in the numbers. We are seeing an increase in the number and size of deals in all segments of the market, especially in the large enterprise. We continue to witness the displacement of incumbent on-premise providers. To date, 80% of CX One at Home free trial customers have committed to a paid subscription, demonstrating the much needed flexibility that we provide to organizations as they move to work from home. We saw a dramatic increase in the number of seven-figure deals signed this quarter compared to the second quarter of last year. We signed a seven-digit cloud ACV deem with a large consulting and services company in which we replaced the on-premise legacy incumbent. We also signed a 7-digit cloud ACV deal with a large financial services provider also replacing the on-premise legacy incumbent vendor. We are seeing continued strength in our government verticals boosted by our FedRAMP authorization as we signed multiple deals including a 7-digit ACV deal with a large state agency. We signed a 7-digit cloud deal with a well-known media streaming company as well as a 7-digit deal with a large financial services company as they are transforming to a common cloud platform. In addition, we continue to see acceleration in our RPA business, signing multiple new logos as well as significant expansion deals with existing RPA customers. For example, We signed a large 7-digit expansion deal with a very big global home furnishing company that has standardized on our RPA solution. In financial credit compliance, we are seeing an increase in the number of customers leveraging the capabilities, tools, and analytics of our XITE cloud platform. In addition, the number of partners building solutions on XITE platform continues to grow. We now have more than 50 partners on the XITE marketplace. We continue to see an increase in cloud growth in financial crime and compliance up triple-digit percentage year-over-year as our XITE cloud platform continues to gain traction. We signed several 7-digit cloud deals, including one with a large global bank, replacing the incumbent with our cloud AML and fraud offerings. We signed another 7-digit cloud deal with a large domestic bank as they needed the flexibility of a cloud platform along with the ability to expand with NICE as they grow. We signed an 8-digit deal with a large insurance company expanding their relationship with NICE for fraud and AML as well as a 7-digit deal with a very large Canadian financial services institution. Our Public Safety Cloud Platform also continues to thrive as NICE Investigate gains more traction. Thousands of public safety organizations have yet to embrace the cloud, giving us tremendous opportunities to bring the end-to-end evidence management market into the cloud with the NICE Investigate Cloud Platform. Just this past quarter, we continued to sign new NICE Investigate customers including two large public safety organizations in the UK. We also signed a large government state agency for nearly $60 million to enable their digital transformation over the next few years. As the current situation continues to unfold, we are in a unique position to further accelerate the pace of our innovation and widen the gap compared to our competitors. For example, we just recently announced a significant breakthrough with our launch of real-time interaction guidance powered by our proven AI technology called Enlighten. With this new solution, AI behavioral models help to predict agent behaviors that directly drive customer satisfaction. Nice Enlighten technology is an integral part of the CX1 platform Infusing AI into all customer engagement processes. In conclusion, it is clear that the changes taking place in the environment are no longer just temporary in the minds of business leaders and therefore rethinking the need for agility is now a part of their long-term plans. We believe that we are clearly in the best competitive position to capture the opportunities ahead of us in this rapidly changing environment as a key strategic part of organizations' current and future plans. The reasons, one, NICE is extremely mission critical to our customers. Two, our solutions are essential to enable a work-from-home mode of operation. And three, cloud and digital transformation, which are at the core of our business, are now dramatically accelerating in the enterprise due to recent events. And finally, it has been our tradition that we meet with many of you in person at our annual Investor Day in conjunction with our Interactions User Conference. This year, given the circumstances, we are bringing our conference to you with the industry's largest virtual event, Interactions Live. and we look forward to hosting all of you. I will now turn the call over to Beth.