NICE Ltd

Welcome to the NICE conference call discussing second quarter 2023 results and thank you all for holding. All participants at the present are 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 is being recorded August 17, 2023. I would now like to turn this call over to Mr. Marty Cohen, Vice President, Investor Relations at NICE. Please go ahead.

Thank you, operator. With me on the call today are Barack Alon, Chief Executive Officer, and Beth Gaspich, Chief Financial Officer. Before we start, I'd 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 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 of the Company's 2022 Annual Report on Form 20-F as filed with the Securities and Exchange Commission on March 30, 2023. During today's call, we will present a more detailed discussion of second quarter 2023 results and the company's guidance for the third quarter and full year 2023. You can find our press release as well as PDFs of our financial results on NICE's investor relations website. 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 respects from generally accepted accounting principles, as reflected mainly in accounting for share based compensation, Amortization of acquired intangible assets, acquisition-related expenses, amortization of discount on debt and loss from extinguishment of debt, and the tax effect of the non-GAAP adjustments. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. The information and some of our comments discussed on this call may contain forward-looking statements that are subject to risks, uncertainties, and assumptions. I'll now turn the call over to Brock.

Thank you Marty and welcome everyone. Our momentum continued into Q2 as evidenced by another strong quarter, highlighted by another double-digit growth across all key financial metrics. Total revenue increased 10% to $581 million, driven by continued strong growth in the cloud, which grew 23% year-over-year, outpacing the rest of the industry and at a much larger scale. In addition, our industry-leading superior profitability was once again reinforced in Q2 and it has become an unremitting financial competitive advantage. Cloud gross margin continued to increase to 70.3%. Operating income increased 10% to $170 million and our operating margin grew to 29.2%, up 20 basis points year-over-year. EPS came in at $2.13, representing an increase of 15%. Those strong results demonstrate the rapid progress we are making as we expand our total addressable market and leadership from core customer service to the broader CX category. This broader expansion encompasses digital engagement and conversational AI, where we are rapidly capturing market share. NICE is strategically positioned for complete coverage of all customer service interactions, digital and voice, agent-assisted and consumer-led. Furthermore, our state-of-the-art platform CX1, combined with our clear leadership in all segments of the market, particularly large enterprises, allows us to greatly expand our TAM and market share while driving industry-best profitable growth. Let me start by describing how digital engagement drove the success of our business in Q2. We delivered a 70% increase in new digital bookings with much of the deals coming from large enterprises and the share of new digital bookings doubled year-over-year. Many of those deals were displacements of legacy point solution vendors that are failing to deliver on the holistic digital approach required by large enterprises. In addition, we are winning many of these deals due to the native cloud architecture of CX1, the only platform in the market that seamlessly integrates digital and voice CX solutions. In Q2, we signed an 8-digit deal with one of the largest entertainment companies in the world. Not only did this large enterprise want to consolidate onto a cloud platform with a single vendor, but they also wanted to partner with a vendor that can take them into the future digitally, as they are expanding their self-service and IBA capabilities on CX1, replacing legacy digital point solution providers. We signed a 7-digit deal with one of the largest hotel chains in the world, replacing the incumbent Gen 1 digital solution. With CX1's AI-driven knowledge management capabilities, this company can now provide more advanced digital self-service for its customers. We signed a 7-digit deal with a large global payment processor as they are consolidating on our CX1 digital platform to future-proof their digital needs. The emergence of AI coupled with generative AI is the most significant time expansion opportunity for NICE in all of our markets and in the CX space in particular. The investment we made in building Enlighten over the last few years as an embedded AI foundation of CX1 with hundreds of CX-specific models is now emerging as a concrete material differentiation and revenue growth opportunity and this is underscored by a record quarter of enlightened bookings. Moreover, all of our $1 million plus ACB deals in the quarter included AI. We signed a 7-digit AI deal with a major communications company which is looking to expand its capabilities around proactive conversational AI and our advanced innovation was the only one that provided smart self-service. We signed a 7-digit deal with a large energy company replacing the incumbent CX provider who could not meet the requirements as they are aiming to fully transform to AI-powered self-service. This customer is looking to greatly expand its digital interactions volume through trusted conversational AI and selected CX1 so its AI precision and scalability. A very large consumer electronics company signed a seven-digit AI deal as they want to consolidate their self-service experience for sales and service, replacing their legacy bots with CX-1 AI. Enlighten AI ingests all voice and digital interactions, continuously identifies opportunities for automation, and then fully executes interaction flows to self-service. We had many other large enterprise Enlighten deals including one of the largest banks in the world and a Fortune 500 filter company. From these deals and the ongoing momentum we're seeing with AI, we expect to generate significant future revenue resulting from the consumption-based pricing model of AI, which is tightly linked to the fast-growing volume of self-service interactions. Customer demand for Enlighten has been strong ever since we began delivering to the market. During our extremely successful interactions customer conference back in June, we announced three new groundbreaking solutions leveraging the powerful combination of Enlighten and Generative AI. Enlighten Co-Pilot, Turbo Charging, Customer Service Employees, Enlighten Autopilot, the next generation conversational AI, and Enlighten Actions, A whole new paradigm to ManageCX. Subsequently, the Enlightened pipeline has rapidly accelerated. In fact, Enlightened bookings in Q2 were greater than the previous five quarters combined. We continue to win the clodification cycle in our markets across all segments and geographies, especially at the higher end of the market. Our high win rate is also leading to our unmatched profitable growth. The investments that we have made in Building 6.1 as a native cloud platform with a suite of more than 45 applications have resulted in record adoption of incremental applications by our customers, leading to continuous growth in the average revenue per user throughout our entire customer base. Furthermore, the architecture of CX1 with limitless scalability continues to fuel the expansion of our growth margin with every new deal. In Q2, we continue to win market share with large portfolio deals reflecting the leading architecture, completeness, and innovative end-to-end approach, including purpose-built analytics and AI of CX1. We signed an 8-digit deal with one of the largest car manufacturers in the world, replacing two large legacy incumbents, on-premise vendors, both with cloud solutions that could not provide a complete suite and seamless integration experience of CX-1. We signed a 7-digit deal with a very large cruise ship operator, replacing the incumbent on-premise provider. We won the deal for our fully integrated suite of applications on a single cloud platform covering both digital and voice with a seamless and unified user experience. We signed a 7-digit deal with a very large retailer, which is a new Fortune 100 customer for Nice that has standardized on CX1. We replaced the incumbent on-premise provider and following a competitive process, Nice was selected due to the clear leadership of CX1 and our ability to serve all current and future transformational needs of this customer. Other large cloud deals in the quarter included 8-digit deals with two major U.S. banks and a 7-digit deal with the West Coast state government. The momentum that we are seeing at the high end of the market, combined with the adoption of our fast-growing portfolio by our very large customer base will continue to fuel our profitability going forward. In summary, the CX Cloudification cycle is rapidly expanding into the large enterprise market with AI approaching faster than many probably had expected. These dynamics are clearly favorable for NICE as we've been smartly investing over the past six years winning the market and strategically preparing for this moment. In addition, we have an industry-based capital structure that allows us to further expand our market leadership at this crucial pivot to point in the CX market. Moreover, our extremely profitable position allows us to continue to invest and innovate at a breakneck speed while delivering strong top and bottom line results. I'll now turn over the call to Beth.