NICE Ltd

Welcome to the NICE conference call discussing first quarter 2025 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 May 15, 2025. I would now like to turn this call over to Mr. Marty Cohen, VP of Investor Relations at NICE. Please go ahead.

Thank you, operator. With me on the call today are Scott Russell, 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 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 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 2024 annual report on Form 20F, as followed by the Securities and Exchange Commission on March 19, 2025. During today's call, we will present a more detailed discussion of first quarter 2025 results and the company's guidance for the second quarter and full year 2025. 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 adjusted results of operations, which differ in certain respects from the generally accepted accounting principles. As reflected mainly in accounting for share-based compensation, amortization of acquired and tangible, acquisition-related and other expenses, amortization of discount on debt, and the tax effect of the non-GAPS adjustments. The differences between the non-GAPS adjusted results and the equivalent GAP 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. Before I turn over to Scott, I'd like to remind you that we're hosting our Investor Day on June 17th in conjunction with our Interactions User Conference in Las Vegas. The program for analysts and investors will include presentations from NICE executives and access to the innovations hall where you'll see plenty of demos. If you haven't received the registration email, please email us at iratnice.com. I'll now turn over to Scott.

Thank you, Marty, and welcome everyone. Over the past four months since joining NICE, I've had the opportunity to meet many of our stakeholders, customers, shareholders, and employees. These conversations have further elevated my confidence and excitement about our future. That confidence is demonstrated by our strong start to the year. In the first quarter, we delivered total revenue of $700 million, underscoring the strength of our business. Cloud revenue rose 12% -on-year to $527 million, led by the continued adoption of CX1 Empower, the industry's premier AI platform that's transforming customer experience at scale. We also extended our leadership and profitability, operating margin expanded by 20 basis points to 30.5%, reflecting our disciplined execution and ongoing focus of operational efficiency. This translated into strong bottom-line results, with earnings per share reaching $2.87, the high end of our guidance range, and 11% over the prior year. Our cash generation remains a core strength, with operating cash flow up 12% -over-year to $285 million. This robust profitability and cash flow not only differentiate us competitively, but also positions us to reinvest in innovation and long-term growth. Additionally, our strong financial position gives us significant flexibility in capital allocation. This was clearly demonstrated by the share repurchase we executed in Q1, the largest quarterly buyback in our company's history, reflecting the deep confidence we have in our long-term strategy and the value we're creating. Beth will provide more details in a moment. When we last spoke, I emphasized the importance of moving quickly, and in my first, in my four months at NICE, that's exactly what we've done. We're operating at lightning speed, capitalizing on three key drivers. A relentless focus on execution, a great market in which we operate, and a deep commitment to ensuring our customers win with AI and agentic AI in particular. Our sharpened focus on execution is already yielding enhanced results. We recently signed the largest CX1 Empowered deal in our company's history. We secured a landmark agreement with a major European government agency, home to the largest customer service operation in Europe, representing a total contract value exceeding $100 million. This marks the second nine-figure government agency deal we've closed in less than a year, underscoring the scalability and strength of CX1 Empower, empowering mission-critical customer service at scale. We successfully displaced a long-standing incumbent and won against several direct competitors, a clear testament to the differentiated value our platform delivers. And the execution doesn't stop there. As mentioned in our last earnings call, we put an emphasis on strategic partnerships to help drive our future growth. Partnerships have always helped us scale, but today our focus is sharper and our impact is deeper. We're forging high-value strategic alliances that deliver real, measurable outcomes for our customers. I am especially proud to share two new milestone partnerships with ServiceNow and AWS. With ServiceNow, we're bringing together the front and the back office like never before. This integration eliminates silos, accelerates resolution, and turns disconnected customer journeys into seamless, loyalty-building experiences all on one unified platform. And with AWS, we're taking our partnership to a whole new level. Together, we're co-innovating to embed AI, automation, and cloud at the core of customer service, helping organizations unlock the full power of their data across every interaction. We're also expanding our -to-market strategy, and I'm pleased to share that CX1 Empower is now live on the AWS marketplace. These alliances with more on the horizon, combined with our continued investment in the deep relationships with leading systems integrators, is reinforcing our leadership position and our growth accelerators for our customers and for NICE. Our second driver stems from the strength and the tremendous potential of the market that we operate in. Our market is undergoing accelerated transformation, and AI is the driving force behind it. CX goes well beyond efficiently managing contact centers. It is becoming evident that the only way to do CX right is by delivering AI-driven, intelligent, -to-end workflow orchestration. AgentiK AI is redefining how consumers interact with service, demanding a new approach that goes beyond the contact center, unlocking new use cases, new workflows, and new adjacent markets. When you include the transition from labor to technology, that shift is expanding our total addressable market to more than $330 billion, according to market analysts. NICE is uniquely positioned to lead this change. We're not just automating tasks, we're fulfilling entire customer intents with precision and intelligence. With our category defining innovation, deep domain expertise, trusted customer relationships, and strong financial position, we are built to lead and win in the next chapter of AI-driven growth. And that brings me to our third key driver, our unwavering commitment to helping our customers win with AI. At the heart of this is CX1 Empower, the industry's most complete AI-powered platform for customer experience. CX1 Empower goes beyond interaction management. It is a true AI engine for business execution. We're automating -to-end workflows on a unified, intelligent platform where human agents and AI agents work side by side, seamlessly connecting data, systems, and fulfillment in real time. This is more than automation. It's the rise of intelligent agents that can reason, decide, and act independently to drive faster outcomes and better experiences. We're no longer only orchestrating interactions, we're automating intent to resolution with agent TKI embedded across the entire service journey. This evolution is unlocking entirely new revenue streams, dramatically expanding the value we deliver, and further separating NICE from the NICE. We're recognizing our competitive differentiation when it comes to CXAI, as witnessed by the strong CX1 Empower AI results. In Q1, CX1 Empower AI was included in 100% of our new Empower deals over a million dollars in ACV. We recently launched CX1 Empower Orchestrator. This new solution seamlessly integrates AI-driven insights, third-party applications, and enterprise-wide workflows into a unified and automated framework. This groundbreaking solution has earned NICE top honors, being named overall best of Enterprise Connect 2025 and recognized for the most innovative use of AI at Enterprise Connect, both awards celebrating the power of CX1 Empower Orchestrator. We're at a transformative moment in the evolution of CXAI to unlock its potential organizations must move beyond outdated, fragmented point solutions, which have historically led to disjointed and frustrating customer experiences. As AI adoption accelerates, it's more important than ever to implement it on a unified single platform where AI can elevate consistency and enhance brand reputation. This is another reason why our unified AI-powered platform, CX1 Empower, is fundamental to provide exceptional customer experiences. We continue to see an increasing number of large enterprises consolidating disparate solutions onto CX1 Empower. The evidence of this is in the growth of our ACV in our portfolio deals, defined as consolidations of three or more vendor point solutions onto CX1 Empower. In Q1, the ACV of portfolio deals grew by 26% compared to Q1 last year. A standout example of this is a seven figure deal with a Fortune 100 global sportswear company. By unifying multiple CX point solutions on CX1 Empower, they're reducing operational complexity through workflow automation while providing outstanding experiences for their consumers. With CX1 Empower, they can seamlessly deploy AI across their customer service operation. In a similar seven figure win with a leading nonprofit health and wellbeing organization, we replaced solutions from four separate vendors onto CX1 Empower. We secured a significant seven figure AI deal with a leading financial services organization by delivering AI-powered solutions to the client required to support their continued growth and elevate agent productivity. In another seven digit AI-led deal, an existing customer, a leading bank on the West Coast, is deepening its investment in CX1 Empower by adding advanced AI automation, enhancing self-service capabilities, unifying operations on a single platform, and driving greater ROI across the organization. A premier service provider in the life sciences industry selected NICE in a significant seven figure deal. We won the deal with our market leading AI roadmap and proven impact of our AI-powered self-service solutions. Beyond these headlines, the quarter saw a wave of additional leading companies, including Gapping, Lloyds Banking Group, and Hunter Douglas, choosing to partner with NICE, underscoring the strong confidence the market has in our solutions. And there are many more marketing customers from which you will hear inspiring stories at interactions in June. You'll also receive exciting updates that reimagine the world of customer experience with NICE at the center. You'll see groundbreaking AI solutions, purpose-built and powered by the intelligence of CX1 Empower. I will now turn the floor over to Ben.

Thank you, Scott. I'm pleased to report a strong start to the year reflecting solid execution across the board. Revenue in Q1 was $700 million, increasing 6% year over year, driven by 12% growth in our cloud revenue, which totals $526 million and now represents a record 75% of our total revenue. Our cloud revenue growth was predominantly driven by the growing adoption of our CX1 Empower platform, namely from our customer service AI solutions, such as autopilot, copilot, and proactive AI agents. As part of our ongoing commitment to enhance transparency and provide greater insights into our cloud business, I'm excited to announce that we are introducing two new cloud metrics. The first is our CX AI and self-service cloud revenue, and the second is net revenue retention of our overall cloud revenue base. In the first quarter, our CX AI and self-service solutions annual recurring revenue exceeded $200 million that increased an impressive 39% year over year. The strong momentum of Empower AI is clear and demonstrates the successful delivery of our growth strategy. Our business has transitioned from a contact center offering to become the -to-end cloud platform of choice for organizations to manage both the external experience of the consumer while fulfilling the internal processes to fully complete and operationalize the customer experience journey. Further, with the introduction of new strategic partnerships, we expect Empower AI to gain even further momentum as these relationships gain traction. Our cloud NRR represents the percentage of revenue retained from our existing customer base over the last 12 months, including expansion revenue from existing products, upselling, and cross-selling. Our cloud NRR in the first quarter was 111%. This healthy NRR demonstrates the health and positive customer satisfaction of our customer base in the cloud and the breadth of our offering. Moving to our premise-based revenues, services and revenue performed as expected this quarter. Service revenue, which represented 20% of our total revenue, declined 6%. Product revenue, which represented the remaining 5% of our total revenue, declined 20%. We are pleased with the pace of the ongoing increase of our cloud revenue to the record 75% composition of total revenue achieved this quarter. The shift to cloud reflects the ongoing broader market trend of increasing transformations from outdated legacy premise software to the cloud. We continue to prioritize cloud-first solutions and incentivize our customers, partners, and sales organization to drive adoption of our cloud and AI offerings. From a geographic breakdown, the Americas region, which represented 84% of total revenue in Q1, grew 6% year over year as strong cloud revenue growth was partially offset by a decrease in on-premises related revenue. The EMEA and APAC regions, which represented 11% and 5% of our total revenue, respectively increased 10% and 9% year over year respectively, driven by strong cloud revenue growth in both regions. While international revenue remains a smaller portion of our overall business, we continue to see a steady shift towards cloud adoption across global markets. This quarter, we reached an important milestone with 50% of international revenue now coming from cloud solutions, driven by the strength of our -to-market strategy, our expanding global presence, and the deep partnerships we've cultivated to accelerate adoption worldwide. Moreover, at 50%, these less penetrated international markets provide a great growth opportunity for us to continue to drive cloud growth. Turning to our business segments, customer engagement revenue, which represented 85% of our total revenue in the quarter, was $592 million, increasing 7% year over year, driven by the strong growth in our cloud business in all geographies, which offset the continued transition of our premise-based business. Revenues from financial crime and compliance, which represented 15% of our total revenue in Q1 and totaled $108 million, met our expectations. We delivered robust cloud revenue growth in the quarter. Consistent with our customer engagement business segments, our strategy in FCC is cloud-first. We expect our full-year FCC revenue to be flat to modest declines in 2025 as we further accelerate our intent to shift this market segment to the cloud. Moving to profitability, our total growth margin was .9% compared to .9% last year, a slight decline primarily due to a decrease in higher margin on-premise based revenue recognized in the prior year. Our cloud growth margin totaled and expected .4% in Q1. During the quarter, we invested heavily in onboarding new and incremental service partner capacity to drive faster -to-revenue of our cloud business. In addition, we continue to make strategic investments in expanding and scaling our cloud offerings internationally. Our operating income in Q1 increased 7% year over year to $214 million, and our healthy operating margin expanded 20 basis points year over year to 30.5%. With Scott's clear focus on driving long-term sustained growth in the cloud, we have already prioritized the key areas of focus spent. Additional R&D talent to continue to drive our AI innovation, expansion of our external service partners to drive faster called cloud adoption, and the creation of new centers of excellence to optimize full utilization of our platform capabilities by our customers. Our continued prudent management and profitable growth has succeeded in our ability to confidently add these growth investments to yield higher future revenue growth while maintaining our healthy operating profile. Earnings per share for the first quarter were $2.87, an 11% increase compared to last year. Our cash flow from operations in Q1 delivered another exceptional performance this quarter, reaching an all-time high of $285 million and surpassing the previous records that just last quarter. Our free cash flow was $264 million, increasing 16% year over year, and yielding outstanding 38% free cash flow margin. Our conviction in the strength of our business and the opportunities ahead was demonstrated by our largest ever share quarterly buyback in Q1, which underscores our confidence in our market position, long-term strategy, and ability to drive sustained value for our shareholders. We repurchased shares for an all-time record high, totaling $252 million. We have already executed more than 70% of our current $500 million buyback program. Following the accelerated buyback in the first quarter, we are pleased to announce the introduction of a new $500 million buyback program that we will begin implementing following the completion of the current plan. Total cash and investments at the end of March totaled $1 611 million. Our debt stands at $459 million, resulting in net cash and investments of $1.2 billion. Our debt matures in mid-September of this year. At this time, our expectation is still to repay the debt at maturity. Before I close with guidance and in conclusion, we are pleased with the strong start to the year. This momentum reflects the continued strength of our business and disciplined execution, but we view this as just the beginning. We are continuing to grow our team at NICE and forging new strategic partnerships to fuel ongoing growth. The investments in our AI innovations and strategic -to-market strategy will begin to yield impact toward the end of this year and into 2026, positioning us well to further expand our leadership in this market. We remain confident in our strategy and our ability to drive long-term value for our customers and shareholders. We look forward to seeing you at our upcoming Investor Day, where we plan to share some exciting details of recent wins and new AI innovation launches in our CX1 Empower platform. Now, I'll close with our guidance for total revenue and non-GAAP EPS for the second quarter and full year 2025. For the second quarter of 2025, we expect total revenue to be in the range of $709 million, $719 million, representing 7% -over-year growth at the midpoint. We expect the second quarter 2025 fully diluted earnings per share to be in a range of $2.93 to $3.03, representing 13% -over-year growth at the midpoint. For the full year, we are reaffirming our prior revenue guidance. While we do not anticipate a significant macro impact at this time, we'll continue to monitor the situation and update as the year progresses. Full year 2025 total revenue is expected to be in a range of $2,918 million to $2,938 million, which represents an increase of 7% at the midpoint. We continue to expect our non-GAAP operating margin to increase an estimated 50 basis points -over-year. We are raising the year 2025 non-GAAP fully diluted earnings per share guidance, which is now expected to be in a range of $12.28 to $12.48, which represents an increase of 11% at the midpoint. I will now turn the call over to the operator for questions. Operator?

At this time, I would like to remind everyone in order to ask a question. Press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. The first question comes from Meta Marshall from Morgan Stanley. Your line is open.

Great. Thanks. A couple of questions. Just maybe first, kind of on the quarter on quarter step down in the cloud revenue, just kind of biggest reasons for that you guys haven't traditionally had a lot of seasonality. So if there's just kind of more seasonality coming into the business, that'd be helpful to determine. And then second, just on the strategic partnerships and kind of the expansion of those, when would you expect for those to start to show more dividends? Thanks.

Thanks for the question, Meta. I think I'll start off with your question and hand it over to Scott. In terms of the quarter on quarter step down, we addressed that coming into the year. Our cloud revenue was in line with our expectations in the first quarter, increasing up to .4% year over year growth. And the key reasons really for that change, as we had highlighted last quarter, where we saw some stronger than what we've typically seen seasonality that occurred in fourth quarter, that we correctly anticipated would not come into the first quarter. And that really comes from a few key verticals that had some, I would say, very strong seasonality in Q4 that includes some of our retail customer base, as well as some of our healthcare and insurance related customers. So as I highlighted, it was as expected, and we're pleased with the cloud performance in the first quarter. And with that, I'll hand it over to Scott to address the second question.

Thanks, Meta. So a couple of comments on the strategic partnerships. First of all, these partnerships are really important, and they're already getting feedback from customers, literally, as soon as we announced, because customers are very clear that they have a landscape of different technology providers, and they want to be a unified solution. So we're already receiving questions, understanding roadmap. And secondly, the partnerships are both product related, innovation related, and also go to market as well. So the product work, there's obviously some work that we're doing to be able to build out those roadmap, and that's already underway. What I expect to see is those customer conversations turning into growth opportunities for both ourselves and our key partners, as we're able to bring a unified solution to our customers. I'd also just like to highlight, as I mentioned in my opening, we're not limited. There's more to come. We're really clear that these strategic partnerships, each providing unique value, enhances our differentiation, but also enhance value to the customers so they can unlock more benefits for them. And we'll see that come in the coming quarters.

Great. Thank you.

The next question comes from Tyler Radke from Citi. Your line is open.

Good morning. Thank you for taking the questions, and I appreciate the incremental disclosure on the ARR for the CXAI and self-service, as well as the cloud NRR. As we think about that AI and power, self-service ARR, for customers that you see adopting that solution, can you just help us understand, is that all incremental spend? Are you starting to see any cannibalization of the core non-AI spend, whether that's fewer seats? Just help us understand how additive that is. And then it sounded like you were optimistic that potentially the growth of that could accelerate, or the momentum pick up in the later part of the year, just as you see more partnership leverage, if you could just double-click on that as well.

Sure, I can do. So a couple of thoughts on this. First of all, on the seat-based revenue, we're not seeing any material change, any difference there, which is positive. So the AI-based usage is largely incremental, and it's interesting how customers are deploying many are starting their sort of investing and they're leading with the AI capabilities to be able to drive it, be able to then deliver more efficiency, more value, more insights, better customer service. Some are driving to automation. I mentioned on the call, on my opening about disparate point solutions unified together. So we are confident as both our innovation roadmap continues to build out nearly exclusively on the AI side together with innovation. It will both enhance the usage of our existing platform capabilities, which is deployed at scale with the largest provider at the contact centers. So it will enhance that, but also discrete solutions that are incremental. You mentioned about the partnerships. What's really important about the partnerships is it helps us fulfill the AI innovation that's happening with the technology partners and their innovation embedded on our platform. Ultimately, that means customer service will be more automated, more integrated in the workflows from the customer contact all the way through to fulfilling their tasks and leveraging the innovations that our partners bring that we can put into our platform. So yeah, I'm excited and optimistic about the potential it brings. And I think we'll see that continue to be a transition as they deploy it at scale using AI. We'll obviously see how that then affects the seat-based, but right now it's only incremental.

Thanks. And just a quick follow up on the partnerships. You announced a partnership with ServiceNow recently out at the Knowledge Conference. One of the questions that we often get from investors is just how to think about where the nice orchestration and kind of agentic AI ends and vice versa for ServiceNow. Both companies have AI workflow orchestration products, but where is that overlap if there is any? And has that become any clearer in your mind with customers just post the partnership announcement?

Yeah, it's a great question. And our customers often ask the same thing. So first of all, our partnership leverages the core deep strengths that we have. In our case, we understand, we know customer service best. We understand the interactions, the intents, we know what consumers need, when they need it, why they need it, how they need it. We know which channel. We have the deepest knowledge of the industry, unique insights and between each of the industries. So our agentic AI very much is around what that intent is, how do we fulfill it, and then trying to orchestrate that with knowledge, with workflow, and with our service. But ServiceNow clearly brings the unified -to-end workflows of the enterprise and being able to connect the front and the back office and helping our platform leveraging this. So the synergy, the overlap is very minimal. The advantage is our platform, whether it's a human agent or an AI agent, connecting with their AI assistant, their AI platform to be able to fulfill those needs of consumers at the point of interaction. And that's the exciting part because we're able to bring not only efficiency, but a higher and better customer experience for consumers. Thank you.

The next question comes from Michael Funk from Bank of America. Your line is open.

Yeah, thank you for the questions this morning. Going back to the AI question, and I think NYCIS strategy has been slightly different given the amount of investment NYCIS made in AI over the years. And so first of all, just thinking about how that differentiates your AI strategy and how it's driving maybe some of the deals and then related, how these new partnerships might enhance or accelerate development of AI, whether it's access to data, domain expertise, partners might have that you don't. Love to get a better feel for that.

So the investments, you're right, Michael, the investments that NYCIS put in AI really does set us up well. So if you think about the thousands of foundational models, what we've built on in our Lightman platform and XO, we're really, really strong at both the data, the intent data, the 15 billion interactions and understanding what consumers need and being able to then respond and have a great customer service experience. That is an incredibly important foundation because no one else really has that capability. And it's a prerequisite for us to move into and expand into orchestration from intent to fulfillment, orchestrating workflows, because we know what task needs to be done and we know it at finite detail by industry and by geography. So it's a really important prerequisite and it's the foundation. Then you go forward and you think about our investments and you'll hear more about this at interactions. The agentic gives us the ability to be able to then automate through self-service like never before, but actually task completion because the key with an AI agent is to be able to deliver what a human agent would have done. And so with our knowledge and our workflow all in that one platform, it becomes a really critical. But I think the most important part is the coexistence. And what we're seeing from customers is this. They might use a self-service platform to do a couple of use cases and they use their contact center to manage their agents. But the coexistence from a consumer standpoint, they want the knowledge, the data, the workflow to be able to interoperate in a seamless way. And they've got a Frankenstack out there right now. They've used different point solutions. And so we are seeing significant demand where they want to consolidate onto a platform that is able to orchestrate that interaction experience with the consumer when we're best placed. Now that then leads to the partnerships. The partnerships give us an extended -to-end capability that goes beyond the interaction. As we go deeper, so for example with AWS, our AWS partnerships, they have the insights and the access to all the data that sits into the enterprise. All of the systems of record, all of the flows and through their AI platform, we can then use that knowledge in our CX1N Power Platform and we can automate that. Something we've never really been able to unlock before. If you take ServiceNow, their orchestration of -to-end workflows is superb. And what that means for us is that as we connect to their platform, again, whether it be a human or an AI agent, we can then fulfill tasks for consumers way faster, way more effective than we've ever been able to achieve. So it opens up the power and the value that we can bring to our customers from an automation and also from a consumer's experience. And we're really excited about it because it brings the best of both. And I think you'll find that that deep knowledge in CX, it is critically important, which is why we don't see any overlap in these partnerships. It really is complementary.

And then I'll bite with one more quick question. The recent news coming out that Clarida, which had leaned very heavily into replacing humans with AI, is now backtracking in part, right? Saying they actually want to backfill and add more human agents because AI was not satisfactory. Are you hearing similar comments from customers when thinking about adopting AI? I know you're more of a copilot model or alongside the human model. And then how do you interpret those comments and what it means maybe for NICE and your own opportunity?

Yeah, so a couple of comments. The first is we truly believe that AI agents will be able to deliver a significant amount of what happens in customer service over time. We are investing in it, we're building it, we're partnering in it, and we think we can fulfill it. But most customers are clear that their customer engagement is critical. You think about the market right now, there's a lot of uncertainty. Consumers are interacting with the enterprise, with their companies more than ever. And often it's about knowledge or insights or wanting to get information. The coexistence of a human and AI is really important. What we see for the majority of customers is they're not going to turn off the contact center tomorrow. But what they are doing is they're building that self-service. We've got autopilot, which is a significant growth driver. A self-service ability for consumers to interact. But when it doesn't quite fulfill the task, or there's a more complex question, let's face it, as humans we have spontaneous needs and questions and wants. And so when it does that, you have to have the ability to then switch and interact with a human agent and then maybe go back to AI. Our platform brings that natively out of the box. What happens to these companies is if they've got all these other point solutions, they have to put the connective tissue together and it's really, really hard. So the power of platform to be able to manage that coexistence as self-service increases and scales, I think, is going to be hugely, it's a huge differentiator for us. And frankly, most customers are demanding that need and they look to us as a part of their platform requirement.

That was great. Thank you for the time and your comments.

The next question comes from Arjun Bhatia from William Blair. Your line is open.

Perfect. Thank you so much. Could you just touch a little bit on some of the delays that we saw last quarter in terms of getting large customers deployed? I'm curious if that's improved at all and maybe the operational changes that you've made or are making to help remedy that this quarter going forward?

Thanks for the question, Arjun. I'll start with that one. I think right out of the gate this year, we've made some additional investments and capacities around the services organization and driving those large-scale enterprise deployments faster, both internal as well as partnering with some additional services providers. And that's something we're going to continue to do as part of our focus around strategic partnerships. We're pleased to report that, of course, already we are seeing some nice improvement. I think it's important to highlight that, you know, as large enterprise players, you should expect a longer, you know, deployment cycle relative to more of the SMB space. However, we are already seeing advancement and it's going to continue to be a focus for us looking ahead as well.

Okay, got it. And then maybe one for Scott. On autopilot, how comfortable are customers at just unleashing AI on their customers through agents? Are you seeing that just as more enterprises become more familiar with AI, they're starting to do this more and more? Or is there some sort of hesitancy to say, hey, you know, maybe we don't have the data, we don't have the right context, the agents aren't grounded enough? I'm curious where we are actually in that process right now.

Yeah, it's a great question because you definitely see differences by industry, even differences by geography on the speed of adoption. There's no doubt that our autopilot platform already can deliver a significant amount of self-service with the knowledge that we have in the platform, let alone what we bring through these partnerships. And so the adoption curve, some are quite aggressive, they're very optimistic about the potential and usually driven more from an automation standpoint. What we're seeing is it's now even more important from the customer engagement. They want to be able to answer queries to be able to solve those intents really quickly. An AI platform allows them to do that. So the rollout is very much about the risk base and the driving forces. If it's an ROI base, usually it's more about the automation side. If it's an enhancing the customer, usually co-pilot is the first area where they use and then they progressively roll out autopilot. So it really does vary by industry. What I would say is this, the acceptance across the customer base is universal that AI will be an infringed part of customer experience. That, there's no debate. There will be leaders and laggards in terms of the adoption curve, but no one is saying we're not going to do it. In fact, more the point is they work with us on how they can utilize the platform. And it's exciting because you look at our roadmap, more and more of our roadmap is about click and use. So turning it on, so we're no longer as constrained about the time to roll out per the previous question. It's got to be more and more about being able to use and consume and progressively deploy that. So I'm optimistic that the growth will come. And I do think as customers become more comfortable, we're already seeing with existing customers, they're expanding their usage, which comes to the guidance and the revenue that we gave earlier, the expansion of usage when they first deployed more and more use cases, we're seeing that as a part of our customer base. So it gives us confidence about the future rollout. Wonderful.

Thank

you.

The next question comes from Siti Panigrahi from Izuho. Your line is open.

Thanks for taking my question and congratulations on one of the largest landfigger deals. In fact, you guys had a few deals last year too, this mega deal. So I'm wondering what's your expectation in terms of revenue contribution from those deals and what gives you the confidence to deliver that 12% cloud growth this year? I assume you still expect that 12% growth.

Yeah, thanks for the question, Siti. A couple of things. I think first of all, we're really excited about the traction we're seeing internationally in our CX business. As you highlighted, this is now the second extremely large deal that we've signed in less than 12 months. If we look back to the one that we announced last year, that is just now starting to gradually come into the revenue in the course of Q2. So we'll start to see that contribution reflected in the current and upcoming quarter with Q2. And of course, that will continue to gradually expand as they expand the adoption of the platform over time. But we'll start to see that happening. With the new extremely large deal that we've just signed and we're really excited about out of the European region, that is another extremely large deal for us. We expect that you'll like to see that probably starting to come into the revenue in early 2026. So you won't see revenue contribution from that this year. You should expect early 2026.

And you still expect 12% growth on the cloud side?

On the 12% growth, we have confidence both in looking at the usage we're seeing in our customers. We're not seeing any impact from macro in any way. We're also looking at a large portion of our revenue is already set as we come into the year. So strong existing ARR as well as a backlog that we have coming into the year. So a combination of all of those factors give us quite a bit of confidence looking forward for the rest of the year to be able to achieve 12% or more.

That's great. And one quick follow up with your cloud gross margin was slightly below. What are the factors impacting that cloud gross margin and how should we think about that?

Yeah, I commented a little bit about that last quarter that both the cloud gross margin and the overall margin this year, we expect to be really flattish throughout the course of the year. It's expected. And for cloud specifically, it's coming from really a couple of different factors. The first is around the services that I highlighted. We are ramping up some of the capacity for the partners and that is driving through some of that services deployment that is capitalized in the cloud revenue. So we have a match in terms of some of the third party services vendors in that. And in addition, we are seeing this great growth internationally and that's where we're seeing investment. So we're also putting in infrastructure that flows through the cost of cloud line as we build up a lot of our sovereign cloud deployments internationally. So it's coming from a combination of those two. And as I highlighted, you should expect more of that as we're investing for growth during the course of this year.

Great. I appreciate that. Thank you.

Just a quick reminder, we ask that you please limit your question to one. Thank you so much. The next question comes from Jim Fish from Piper Sandler. Your line is open.

Hey, guys. Appreciate the question here. Look, I know it's a small part of your business, but you guys acquired LiveVox, which was highly exposed to student loans. With payments starting to resume, is that what's driving some of the confidence, Beth, on the site underneath as collection agencies are starting to ramp and pick back up? How to think about that business? And then just as my follow up, because I'm the only one getting one question currently, billings grew about- Jim, I'm sorry about

that. Everybody, if you need to ask a follow up question, yes, you can ask a follow up question. Sorry about that. All

right. I'll let you

answer that one first.

Yeah, that's a sure. Thanks for the question, Jim. I think let's start out with the question you had with respect to LiveVox. For LiveVox, we highlighted coming into the year, actually the LiveVox growth is a bit of a headwind to our business overall. To your point, I think with the changing in the macro, there's certainly some opportunity as companies given the overall environment are focused around credit. I think there is some potential to really optimize that opportunity for us. We are seeing it sometimes also with other verticals where for other organizations, maybe it's a risk. There are certain verticals for us and I'll use government as an example where sometimes we have upside opportunity just given the criticality of the nature of our platform.

Working off of Arjun's question really as a follow up, Billings actually grew about 9% and your DSOs climbed again. Can you just talk about linearity in the quarter and whether you're seeing any sort of push out of timing in terms of closing some of these deals still and when we should start to expect to see enterprises really start moving their business over to the cloud? Because it seems like we've been on sort of a delay the last couple of years here. Thanks guys.

So maybe I'll cover the question around the pace of the enterprise deals and when we can start to see that. So look, there's no doubt that in first quarter there was a level of uncertainty for a period of time that I think on the macroeconomic side that we all saw. But we're not seeing any significant impact of that or any impact of that really in terms of both our pipeline, which is at record levels as well as our outlook in terms of the deals. So we do have confidence that as we move forward and as reflected in what I described in some of those landmark wins that we've got the confidence that enterprises are investing in CX as a differentiated platform. They see the automation opportunity. They're excited about AI. It's cases. They're also in an environment where the interaction and consumer retention, consumer, their DPS, their engagement with their customers becomes even more critical because in market times you have uncertainty. So it's interesting in some of our pipeline we've seen some customers look to accelerate because they're wanting to make sure that they've got a platform that can cater and fulfill their customers even better than what they've done before. So it's interesting how it becomes a bit of a driver for us and we're quite resilient in that way. So look, I'm very confident that as we look forward, customers willingness to then move to the enterprises move to do these larger transformations leveraging the AI but also just driving a best of consumer experience, we don't see any negative impact that invest on that.

Just add with respect to kind of what you were asking around DSO and billings. I think generally, first of all, remind everyone that we are on our CX side of our business, we do billing in a rear. So first of all, you see that coming into the DSO that we report regularly. But also, of course, as we are dealing with large enterprise customers, first of all, we have great creditworthiness. If I look at our customer base broadly at NICE, it's one of the things I think stands out about the overall health of who we're doing business with, you know, in organizations. And so the DSO sometimes is going to be impacted by timing of collections, but we had a great cash quarter in Q1. And again, I think our overall balance sheet is reflective of the health of the companies that we're dealing with as our customers.

Operator,

next person. The next question comes from Samad Samana from Jefferies. Your line is open.

Hi, good morning. Thank you for taking my question. Maybe first, Beth, if I just think about the 111% NRR for cloud in one queue and then kind of that north of 12% growth, it sounds like most of the growth in the quarter came from the install base. I'm just thinking how we should think about those two components as the year progresses. What's embedded in the 12% cloud growth outlook between NRR with existing customers and then new revenue from new customers?

Yeah, thanks for the question, Samad. So the first thing I would highlight as, you know, we've introduced NRR for the first time on a quarterly basis. It's important to highlight that that NRR is built on a trailing 12 months. So you have to take that into consideration when you're thinking about the breakdown of the existing revenue concentration that's built into our relative to the new logos. And as I highlighted earlier in the call, when we step into the year, most broad portion of our revenue is already baked, right? We have a strong recurring revenue. We're stepping into the year that we've already addressed the seasonality that we highlighted in the fourth quarter. So a big portion of our revenue is coming from that existing customer base, both in the existing revenue stream, along with the backlog of deals that they've already executed last year. And again, more and more of those customers, of course, are those large enterprise customers, where we're gradually adding the revenue every quarter, as well as expanding it as they further adopt the platform. So that's really what we're thinking. You know, I highlighted as well last quarter, which we haven't changed our outlook on is that, you know, as we look towards the end of Q4 this year, we had stripped out some of the seasonality, of course, that we have seen, you know, in Q4 of last year. So we do believe that as we go into the latter half of this year, there could be some upside from a seasonality perspective on that as well.

Great. Thank you. And then Scott, you've now been there for several months, and it's still early in your tenure. But as you think about the growth versus margin expansion framework, and as you think about some of the opportunities ahead, should we look at the maintenance of the 50 base points as maybe incremental upside for now goes into growth investments? Or just based on what you've seen so far, how are you thinking about that balance?

Yeah, great question. So first of all, it's been a four months feels way longer than that. I feel very much a part of the nice family for a long time, which is great. And I'm very proud of the execution speed on many of the things. And I'll just allude to what Beth mentioned earlier around the margin and the fact that we're investing in the services capabilities, our centers of excellence being able to drive accelerated revenue adoption, as well as an increased investment in our AI capabilities, as we look to be able to capitalize and be able to then differentiate ourselves in the market. So we were fast to move, fast to execute, and you can see that. So that's why we've guided on the full year, that's a slight improvement on margin, because I really do believe that to win in this market, we need to use all of the levers available to us, organic investment into the differentiating capabilities, speed of adoption for our customers, partnerships, as well as the strength that we have to be able to look at other levers on an inorganic basis, but all under long term growth for our business and driving shareholder value. So I think we've guided correctly, but we're clearly looking to be able to accelerate so that we not only differentiate, but we can create more value from existing customers, but then win over more and more new logos like the one in Europe, which not only game changing for our customer, but also really enhance our capabilities to be the premier platform. Great,

thank you so much.

The next question comes from Patrick Well-Revans from the United States. Your line is open.

Good morning, thank you for taking my question. This is Nick on for Pat. Scott, if you look at something like summarizing contact center customer service sessions, who has the right to deliver the service? Like if you look at a lot of big enterprises, they use Salesforce Service Cloud, but then there's also a CCAS player like NICE. So the ROI on summarizing the caller providing basic knowledge management is off the charts. Why does NICE have the right to win there? Yeah, it's actually really

simple. The interaction with the consumer fits with us. That interaction, that critical first contact, no matter what channel they go through, no matter what other technology is used on the fulfillment, that first interaction and the knowledge of what they want, when they want, we know all of it at depth, industry deep with foundational models to be able to resolve that and then workflows to orchestrate the resolution or the fulfillment of the ask. That starts with us. That is a point that is unavoidable. And more importantly, the reason why enterprises keep coming to NICE as that platform of interaction is because they don't want disparate solutions in the interaction with their consumers. That's what drives frustration. They don't want different technology. They want a unified platform. And then with our partnership, we work, for example, with Salesforce and their Service Cloud capabilities, we have more interactions with their platform than anybody else. And we've been doing that for many, many years. So this isn't a case of either us or others. This is about using the strengths of where the layers are deepest. And I'm firmly of the view that as the CX leader, that not only provides the point of differentiation of the platform of interaction, but our opportunity is then to do the fulfillment of our platform better than we've ever done before. And that's what AI brings for us. So you don't need to then be able to swap across or have manual tasks or disparate solutions, points of integration, fragmented systems, different data sets. We can unify that on the system of interaction. So I'm obviously firmly of the view, and it's supported by our pipeline. It's supported by our customer feedback. It's supported by our innovation roadmap that I think you'll find that in the CX space, this will be a key way that AI is used and adopted as a part of the enterprise tech space that enterprises have.

Great. Thank you for your perspective on that.

The next question comes from Timothy Horan from Oppenheimer. Your line is open.

Thanks a lot. So do you think enterprises now have the processes and the governance in place to really start using AI and replacing agents with, well, live agents with AI agents? And can you give us maybe what the relative ARPU is if you replace a unit with an AI agent? Thank

you. Thanks, Tim. So as I mentioned earlier, enterprises are very clear that in the world of customer service, the opportunity of both self-service, so the use of AI agents to fulfill, but also the complementary platform. The beauty is the same data set, insights, knowledge, and platform that you're using for a self-service is also used for copilot or auto summary that when a human agent gets brought into the loop, so you're using the same unified platform, which means all the history, all the knowledge, all the interaction, we get it and it's natively available. And so I think customers definitely see the benefits. There's no doubt, as I also mentioned before, the change journey and the adoption journey does vary. I mean, it's a very important area. They certainly don't want breaks of service. It's really critical for them resilience and scalability. We don't talk about it much in these calls, but what I can tell you is the use of other platforms, they're very comfortable with nice. We've been delivering a scalable, proven, resilient, mission critical platform for decades. And so they want their AI platform to have the same capabilities. It's got to have the inherent resilience and rigor. And I think it's those together with the change adoption in their contact centers, that's where we're seeing that transition. And I think it will accelerate. I think as we bring it to scale, we drive these partnerships, you'll see more and more expansive adoption because it's a logical area. As it relates to ARPU, we probably all hand it best to give a bit of comment on that.

I can just say that, you know, when you think about the comparison of an AI ARPU relative to a human agent, I think the opportunity is significantly greater, right? Today, we're already looking at a human agent and it does have a limited opportunity. Now we're talking about really having a single pane of glass for a consumer all the way from the interaction, where we're already managing that interaction today, but going far beyond that and what Scott is talking about to extend all through fulfillment and using AI to handle and create this full, seamless journey that's all the way to fulfillment as well. So really now you're greatly expanding the TAM opportunity and the ARPU opportunity as well for AI agent ARPU.

Thank

you.

The next question comes from Catherine Trednick from Russin Blot Securities, Inc. Your line is open. So thanks for squeezing me in.

One question on the partnerships for the AWS. Are you trying to leverage that to go down market more? And then the follow-up question is on ServiceNow. There are several competitors that have also announced partnerships. Is there any type of incentive that you arrange with them that they would bring forth your opportunity over the others? Thank you.

Yeah, great question. So on the AWS side, there's no doubt that AWS have a breadth and a market coverage, not only down market, but across the entire market. And one of the advantages purely on a -to-market side that now that we've got CX1M power on the AWS marketplace, it becomes a lot easier for existing customers of AWS who use their capabilities for other areas to be able to then extend and use nice. So no doubt that we see the -to-market advantage, but I just highlight on AWS partnership. We really are focusing on the joint product innovation, the inherent technology capabilities that they have to be able to enhance our, for example, access to data sets across the enterprise that we can use in the fulfillment of our interactions so we can become even more value-adding to our consumers and doing that in a native way. So it's, and that's applicable for down market as much as it is for up market. On the ServiceNow side, ServiceNow are clearly working with us to be able to help fulfill the front office, so that initial interaction and then fulfillment, which requires an -to-end workflows that take you into other systems, being able to interact and do that at speed. And the advantage we see that differentiates us is through that partnership, we will be able to provide that at the point of interaction and automatic resolution. What's happened in the past is normally an agent would then go and interact and then kick off those workflows in those other back-office systems, we'll be able to automate that either by a human agent or an AI agent. So that's a differentiator, and we're excited about how that really does reimagine the way customer service is being delivered.

All right, thank you. The last question comes from Chris Reimer from Barclays. Your line is open. Yeah, hi,

thanks for fitting me in. Actually, most of my questions have been answered already, but I thought I might get any comments you have on further M&A activity if it's still on your radar.

So I think I've mentioned before, and I'll probably repeat it, the beauty, one of the advantages of NICE is, you know, the operational rigor that Beth and the team have delivered over a period of time, a long period of time, but also the strong balance sheet, the financial position really does give us flexibility and optionality. My focus, and I've mentioned this before, is very much around long-term growth, long-term shareholder value and looking at inorganics. So we very much are looking at both return, you know, the share buyback is an indication of providing ongoing value to shareholders, but looking at inorganic moves that will enhance our value proposition and being able to do that and having the flexibility to do so. So very much on the horizon.

Great, thanks for that.

That concludes our Q&A session. I will now turn the call over to Scott Russell for closing remarks.

Scott Russell, CEO, NICE Thank you, operator. Well, thank you, everyone. I appreciate the questions. Beth and I appreciate the questions, but even more importantly, the opportunity to share what we saw was a really strong quarter. As I think I've mentioned, we're executing fast. We've got a lot of positive outlook in terms of the things to come, and we look forward to sharing in more detail with interactions at our Invest Today where we can share not only the product roadmap and the insights and what we're building, but how that fits into our financial outlook. And I look forward to seeing you there. Thank you, everyone.

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.