NICE Ltd

Welcome to the NICE conference call discussing third quarter 2024 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 is being recorded November 14, 2024. I would now like to turn this call over to Mr. Marty Cohen, VP Investor Relations at NICE. Please go ahead.

Thank you, operator. With me on the call today are Barak Alam, 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 Security Litigations 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 three of the company's 2023 annual report on Form 20F, as followed with the Securities and Exchange Commission on March 27, 2024. During today's call, we'll present a more detailed discussion of third quarter 2024 results and the company's guidance for the full year 2024. You can find our press release as well as PDS of our financial results on NYSE'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 and tangible assets, acquisition related and other expenses, amortization of discount on debt, and long-term extinguishment of debt and 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. And I'll now turn the call over to Barack. Thank you, Marty, and welcome, everyone.

We're thrilled to announce yet another excellent quarter where we exceeded the high end of our expectations, beating the upper limits of our guidance on total revenue and earnings per share. This remarkable performance doesn't just highlight our competitive edge. It redefines it, propelling us leagues ahead of the industry and fortifying NICE as the go-to partner for enterprises across the globe. our success speak loud and clear. When businesses want excellence, they turn to NICE. We reported total revenue of $690 million in Q3, representing an increase of 15% compared to the same quarter last year, with cloud revenue growing 24% to $500 million, exceeding the $2 billion ARR mark, the highest cloud growth on the largest cloud revenue base in our industry. Our scale and superior platform architecture continues to drive outstanding profitability. The number speaks volumes. Operating income surged 20% to reach $221 million, and operating margin climbed by 140 basis points to a record 32%. This resulted in an impressive 27% leap in EPS over the last year's same quarter, hitting $2 and 88 cents for Q3. To top it off, we delivered exceptional cash flow, generating $159 million in operating cash, a 32% increase compared to Q3 last year, and continuing the year-over-year trend of accelerating cash flow. This strong financial performance is a result of our continued excellent execution showcasing just how far we're pulling ahead and reshaping the industry landscape. Year to date, we have displaced legacy on-prem competitors in over 100 large enterprises. Additionally, over 45 leading brands turned to NICE this year, following failed Sika's deployment by other cloud vendors. Our partner ecosystem is flourishing, with over 40 new partners joining our ranks from the beginning of the year, including over 20 international partners, all of which chose to join the success of NICE and our powerhouse CX1 platform. These results are more than numbers. They are a resounding testament to our industry-defining leadership. We are on the precipice of the era of exponential impact, fundamentally reshaping the landscape of enterprise software. artificial intelligence is cutting through the traditional distinction between systems of record, workflow, and intelligence. This paved the way for the creation of hyper-platforms with each market domain, serving as the comprehensive system of everything for the first time. Concurrently, we find ourselves in an epoch where enterprise users and their desktops are rapidly being deformed from their central positions in organizational workflows, replaced by an alternative control points that are essential for delivering AI-driven automation. To navigate this tectonic shift, software leaders must swiftly master new capabilities. Just as the transition to the cloud a decade ago necessitated the software providers evolved from code builders to SaaS operators, this new era will demand that they also excel as data curators. This transformative model will not only reshape monetization strategies, but also unlock unprecedented avenues for value creation. In the realm of customer service, this era of exponential impact is poised to be pivotal, propelling technology to assume a central role in service delivery. Historically, the customer service equation has been heavily skewed, with 90% reliance on human resources and nearly 10% on technological solutions. Today, we possess the tools to invert this equation, bringing us closer than ever to fully automated customer service that meets both precision and scale. Nevertheless, the journey toward authentic automation in customer service is fraught with challenges. With significant barriers to domain expertise, only those vendors fortified with deep resources and robust foundation in customer service, including agents, workflows, and knowledge, will successfully make this leap. At NICE, we possess all of that in an unrivaled advantage. Unlike CRM and generic big tech, we manage billions of customer service interactions every year, providing us exclusive unfettered access to customer intent at any given time, the most important ingredient for customer service automation. These, together with our vision, resources, and technological pause, put us in a unique position to lead this transformation. A few weeks ago, we unveiled our new mission for NICE, to spearhead the wave of customer service automation at scale and without most precision. We're achieving this with the introduction of CX1 Empower, our market-leading hyper-platform, meticulously designed to facilitate end-to-end automation in customer service. CX1 Empower enables enterprises to design, build, and operate their customer service framework, from agents to workflows to knowledge management within a single integrated platform. With customer service-specific functional AI, CX1 Empower equips businesses to deliver orchestrated, intelligent customer service that addresses the needs of every B2C organization. CX1 Empower is the culmination of over a decade of relentless innovation combined with NICE's unique set of assets and substantial investments. Today, I would like to share insights from our Q3 results that showcase how we are advancing these transformative capabilities for customer service workflows, agents, and knowledge. In Q3, we continue to see an acceleration in our portfolio deals that demonstrate the desire of customers to master customer service workflows by consolidating multiple disjointed solutions onto CX1. This included an impressive number of eight-digit PCV deals 25% growth in the ACV of workflow-driven portfolio deals, and 32% growth in the number of seven-figure ARR customers. A large healthcare company embarked on a sweeping business transformation, uniting 20 separate operations under one roof, which resulted in a seven-digit ACV deal that displaced three legacy ACV providers. They chose CX1 not only for its complete portfolio, but for its ability to automate and streamline customer service workflows within Unix and for the overall group. In yet another remarkable seven-digit ACV win, the power of CX1 as a customer service orchestration platform captured the trust of a major medical technology giant. Frustrated by their cloud ACV provider, which had been in place for a mere two years, and fail to deliver a true customer service transformation, they turn to Knife, showing once again why CX1 is the clear choice for leading businesses. Agents, whether human or AI, are the backbone of customer service workflows. An increasing number of leading enterprises are choosing Knife for agent augmentation and automation, recognizing that success requires specialized domain expertise unique data and rich capabilities. CX-1 AI proficiency at an AI level goes well beyond slides and demos. The results are real intangible proof of our speedy progress in this fast growing area of customer service. In Q3, the ACV of CX-1 copilot soared six fold compared to the same period last year. Since launching, we have welcomed 140 AI agent AutoSummary customers, 50 signing just this past quarter, and a three-fold increase in the ACV of AutoSummary in Q3 compared to the same period last year, all demonstrating rapidly increasing momentum. These numbers speak volumes about the explosive growth of our agent-assist AI solution and the powerful energy behind our AI-driven deals with large enterprises. In one such impressive seven-digit ACV deal, a major global payments technology company was looking to empower, augment, and automate their customer service agents. They selected CX1 with its full AI capabilities to replace their former cloud providers with solutions including AI Auto Summary and CX1 Agent Copiles. In another seven-figure ACV deal, a leading financial advisory giant is also pushing AI to the forefront of the customer service strategy. With a powerful duo of copilot and autopilot on CX1, they are infusing their agents and operations with advanced intelligence. This innovation is set to provide dramatic ROI while enriching the customer journey. Data. is the new oil for enterprise software. But knowledge is what truly powers AI, like high oxygen fuel. In customer service, it is the essential energy source that enables seamless workflow management and powers agent automation. For over a decade, we have amassed an unparalleled mission-critical amount of depth of data and knowledge, positioning us to lead this wave of customer service automation. This foundation makes CX1 the only platform capable of managing and deploying knowledge at scale for AI-powered customer service automation. It's also the first time that enterprises can centrally manage all the customer service AI knowledge assets while applying enterprise-grade guardrails. AQ3 alone, the ACV of our foundational AI knowledge technology, powered by Enlighten, grew by an impressive 163% compared to the same period last year. This wave of interest has also driven a remarkable more than two-fold ACV increase year-over-year in CX1 Autopilot, our fully automated AI agent that seamlessly powered end-to-end workflows on CX1, leveraging knowledge. We signed a large seven-figure ACV deal with one of the top names in cruise lines, showcasing exactly how this organization is putting knowledge at the heart of the CX-1 strategy. Already a valid customer, they are now going all in with CX-1 Autopilot to deliver full customer service automation, thanks to NICE's unique knowledge assets. In yet another large seven digit ACV deal, a major Midwest healthcare provider also selected CX-1 for customer service automation leveraging NICE's knowledge-powered autopilot. This is one example out of many where customers select CX1 not only to replace legacy systems, but also as their AI automation partner instead of their CRM and other digital providers. It demonstrates the criticality of knowledge that uniquely exists in our leading interaction-centric platform, CX1. These large enterprise deals represent just a glimpse into the deals we continue to sign quarter after quarter, showcasing the transformative capabilities of CX1 as a platform that advances powerful foundational intelligence AI for customer service agents, workflows, and knowledge. Additional Q3 customer service automation deals driven by AI included one of the largest financial institutions in Canada, a very large regional healthcare company, a well-known construction service company, a giant online marketplace, one of the largest global telecom companies, and many others. Our success story continues to gain recognition across the industry, with recent accolades from Gartner's prestigious annual report. Not only do we hold our strong leadership position in the magic quadrant, but we are also the only vendor in the leader's quadrant who advance when others move downward. Even more exciting, Gartner highlighted our AI capabilities as a clear strength and acknowledgement of our leadership in shaping the future. Our impressive financial results this past quarter alongside major deal signing, especially at the high end of the market, and our groundbreaking innovation like 6-1 Empower are just the tip of the iceberg. Beneath the surface, we're financially rock solid, backed by strong balance sheets, the industry largest and most elite go-to market team, a rapidly expanding partner network, and the biggest R&D team in the business. With all this momentum and the expected accelerated cloud goals in Q4, we are poised to charge ahead on an exciting path forward. And finally, As this will be my last earnings call, I want to express my gratitude to each of you for the trust and support you have shown me over the years. Building this company has been one of the greatest honors of my life. Together with 9,000 Nicers, we have built Nice into a multi-billion dollar global category leader. I have full confidence in Nice's continued leadership due to the strength of our team the resilience of our vision, and the many opportunities ahead. I will continue to drive the company to the end of the year and ensure a smooth transition to Scott Russell, who will assume the CEO position on January 1st. I will now turn the call over to Beth.