Q4 2019 Earnings Call
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Welcome to the Nice conference call discussing fourth quarter on full year 2019 result.
Thank you all for Youre holding all participants are present in listen only light following managements presentation instructions will be good just for the question I'm secession.
I've heard of minded. This conference is being recorded on February 13th Twentytwenty.
I would now like turn this call loves it and if the multi Cohen VP Investor Relations Nice. Please proceed.
Thank you operator with me on the call today of Lucky of all Chief Executive Officer, Jeff Gaspich, Chief Financial Officer, and around the wrong Executive Vice President marketing a corporate development.
Before we started love to point out at some of the statements made on this call will constitute forward looking statements and of course with the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Please watch the copies actual results could differ materially from these forward looking statements.
Additional information regarding the factors that could cause.
So the company could differ materially is contained in the section entitled risk factors and I'm sorry, the called through 2018 reports on form 20-F.
It's probably just securities and exchange Commission equal since 2019.
During today's call we present, the more detailed discussion a fourth quarter 2019 results and the company's guidance for the first quarter four years 44.
All her comments, though there will be an opportunity for questions.
Let me remind you that unless otherwise noted on this call we won't be commenting on our adjusted results of operations, which differ in certain respects from a generally accepted accounting principles.
That's reflected mainly an 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 equivalent GAAP figures for detailed in today's press release.
We'd also like to remind you that we're hosting our investor day on May 12 in conjunction with our annual interactions user conference in Las Vegas.
Special program for analysts investors well in food meetings with nice executives presentations from customers product and technology sessions access to the solutions showcased.
If you have if you haven't registered keys email us at IR Nice dotcom.
I'll now turn the call over to Brian.
Thank you Marty and welcome other ones I'm good to be on the quota to you today.
2019 was a seminal your for knives, a year in which we sold many components. So far started you materialize into markets.
In 2019 cloud became mainstream in the enterprise segment, including at the upper end of Duff markets.
No longer a solid <unk> early adopters most enterprises now consider clouded thoughtful took one phone that customer service.
Furthermore, picked up is growing fast outside the U.S. and six one grew rapidly in both Europe and as you.
Oh, the French or just stopped some approach natively fusing omni channel vaulting doubled your AFFO analytics to me I had been widely accepted.
Requirements for successful experience that submission.
Evidence by the strongest endorsements, we received from all using industry analyst.
They'll keep partners, including Apple and entity also adopted six wanting to anything team is the vehicle just one phone the customer base to the cloud.
We also have formed a digital engagement market by embedding the most advanced digital engagement Doxil natively into six one.
Oh financial crime and compliance cloud platforms also had a very strong deals.
We onboarded five times more customers into what do you think doing versus the bio even along with an extremely successful launch the excitement gets placed signing spoken you partners in just six months.
What do you think gene was also breaks we are with the launch of Paul Digital evidence management cloud platform called investigate.
We won multiple March you deal with key police forces in several countries.
Investigate is shaping up to be kill neither in a new category that would help bring public safety organizations into the digital age.
We're very pleased with the problem is amazing 29 gene without six one excite investigate platforms.
Our exists exiting the year with strong momentum across all three.
We also freitag financially in twin engine, because we ended the year on high note with strong financial results.
For the year total revenue increased 9% to 1 billion in $577 million driven by another strong year of cloud revenue, which increased 28%.
Just jumped open results led to a southern increasing profitability.
Operating income was $434 million, which wasn't easy we still 30% compared to 28 jeans and operating margins increased 115 basis points to 27.5 per cent compared to last year.
Do you strong operating results led to a 12% increase in earnings per share the $5 and study one cents.
Also in 29 gene, we signed a very large non little new logos deals over $1 billion and competitive replacements all exhibit do significant increases from the previous young.
What do you think you must be endpoint will far nice 2020 plan.
We exceeded all our strategic and financial goals, we set for ourselves at the onset of the plan.
The success, we had this nice 2020 paves the way well next chapter nice 2025.
Well nice 2020 was characterized by the transformation of nice.
Nice 2025, then bodies are becoming the transformation leader with the blocks films that empowers organizations to eat the older inflammation into the new decades.
We expect the bike 2025 cloud will become the need for choice football enterprises globally.
Digital engagement with go exponentially.
In virtually every process wouldn't be powered by <unk> and automation.
Nice seem to be softer platform of choice, but these enabling these changes it's all cloud leadership continues to expand into all segments then globally.
Isn't that become it could be just so centric company and as all AI in analytics capabilities become even smarter and easier to consumers.
So let me know dig into some of the details, but reflecting on 2019 and how does paves the way for 2025.
Yeah, 2019 cloud over the lead driven by our six one cloud Doxil club revenue grew by 28% and represented 38% <unk> total revenue.
John This past quarter, we continue to experience more examples of large enterprises embracing the cloud with six one.
Including many seven digit exhibit.
For multiple industries.
You do it will do the large global core banking provider. It allows global learning company. They went on home services company allows insurance broker volcker.
International Government agency fitness company and nationwide old to do there and the L. healthcare company.
As we move toward 2025, the vast majority of the market opportunity is that had to floss. Its cloud is significantly underpenetrated in all segments of the market.
In customer experience wielding an excellent position to capitalize it six one is already clearly established is the leading cloud platform.
In financial crime and compliance.
Next I'd clouddocs them is paving the way for significant time extension as each enables us to capture the middle markets that was not previously available to us.
And in public safety thousands of organizations have yet to embrace the cloud even got tremendous opportunities to bring be due to the end to end to end evidence management market into the cloud would be investigating Blackstone.
We did great prospects ahead of US we believe that al cloud revenues can move from the current 38% to over 60% <unk> total revenues over the next I'd Love your along with continued improvement in cloud gross margins.
Like cloud in the strong gloves, all far business did your dog is also fueling growth is organizations are moving more of the more aggressively towards digital transformation.
Well ahead of the care if people did our entire portfolio towards digital.
Insects on cyber Monday, 2019, we had a record breaking digital customer service interruptions powered by six one which is 78% increase compared to last year.
We acquired Brenda Embassy, which provides a significant digital extension to six one and real already seeing many customers take on the additional digital channels.
In 2019, we witness an increase in aside deal driven by both digital dense and digital transformations of traditional financial services companies.
Also during the past your nice investigate was launched in all of the became the per meal digital platform. So public safety with more than 10, leading topping 50 organizations selecting the block phone is the vehicles to helped launch them into the digital era.
As we head toward 2025 likes the cloud the digital Revolution would accelerate some of the continued rise of the digital generation in organizations will be space of disruption and they fight to win that didn't just about themselves.
We believe the Beast, we doubled the opportunity for sticks Wong.
In financial crime and compliance digital is presenting the largest ever time expansion opportunity for it side and the Nondeal companies, providing financial services is expected to people.
In public safety thousands of organizations, we focused or energy on moving some paper to digital.
Investigate was developed in the last few years and launched last year to capitalize on these tremendous opportunity.
The most amount of digital data studies being kept your provides organizations and opportunity to make faster and more intelligent decisions by harnessing the power of the yard in another thing.
Three innovation in acquisitions, we have established ourselves as the clearly on the Olympics major.
In 2019, we witnessed continued strong growth well revenues coming from our analytics and United based solutions.
In Q4, we signed a seven digit doing well. So you are deemed bang for our compliance Dr., Susan and seven digit deal with another European financial institution for holistic compliance.
There was a seven didn't even within all night payment providers for portfolio, so far analytic solutions.
And a seven digit do this allows clothing retailer. That's also includes of the pool will fall analytic solutions.
We signed a seven digit deal with allows Dave plug it into engagements managers to loosen seven digit deal with financial services organization for the portfolio of analytics, including RPM and exceed younger than you.
It's one of the seven digit dealing with allows telco for into watching them anything.
So also said seven digit analytics deal with various global financial institutions as well because you know that included eight powered optimize what solution.
As we move forward to 2025 devoid of data we continued to accelerate.
Well it organizations and started to deploy point solutions around analytics in AI, the real opportunity for used to bid on <unk> on the Olympics leadership and advance towards becoming a hub in all our market.
Given our 10 years of success analytics, all dominion expertise and the vast amount of data on off datsun's wearing the best position to take analytics to me I to the next level.
Making them smarter and easier to consume.
The next one will evolve into an eight powered self service doxil.
Excites was kept you more market opportunities is just on the most financial crime and compliance thoughtful powered by <unk> and investigate which means building capabilities will narrowed the gap between the exponential growth of evident data and limited public safety resources.
Why is it cloud digit delome and they are each alone provide tremendous avenues for growth together the interconnected dealers they provide an even greater growth opportunities as we push towards was nice 2025.
In closing we are already on the student club got some leader in all markets was six one exciting listing gates.
As we look ahead, if you DCE platform strategy, but to continue to separate nice whom its competitors.
We have the assets that people ended the call as you to lead us into the next chapter nine.
Nice opportunity between five will be utterance for multi version 920 20.
I also want to take this opportunity to save all our employees around the globe for their outstanding commitments in contribution in helping us exceed the goals we set for ourselves it was nice 20 twin.
We have an excellent theme is nice, but it's still going to excel timing again, which gives me great confidence and take on the mission Nice 2025.
I will not turned the corner over Tibet, who will review our financial results.
Thank you for OCC and good day, everyone I'm pleased to provide the analysis of our financial results and business performance for the fourth quarter and full year 2019, as well as our outlook for the first quarter and full year 2020.
Total revenue for the fourth quarter reached $431 million and increased 4% from $413 million and the same period last year.
Full year revenue was 1 billion and $577 million, which represented 9% growth over 2018 full year revenue of 1 billion and $453 million.
Our total revenue growth was driven by our continued successful execution in the cloud as our cloud revenues were 25% in the fourth quarter and 28% <unk> full year 29 team.
Customer engagement revenues for the fourth quarter were $335 million, 83% increase over the same quarter in 28 team and represented 78% of our total revenues.
For the full year customer engagement revenues were 1 billion and $268 million and increased 9% compared to the full year 2018.
Financial crime compliance revenues for the fourth quarter increased by 10% and were $96 million, representing 22% that's total revenues.
For the full year financial crime and compliance revenues were $309 million and increased 7% compared to the full year 28 teens.
Recurring revenue for the fourth quarter and full year continued to increase and reached 71%, 72%, respectively total revenue compared to 66% and 69% respectively for the same period last year.
Cloud revenues accounted for 39% and 38% total revenue for the fourth quarter and full year up six percentage points compared to the same period last year.
Products revenues accounted for 19% as total revenue in the fourth quarter and 17% for the full year.
Service revenues accounted for the remaining 42% that's total revenue in the fourth quarter and 45% for the full year 2019.
Looking at geography, America's contributed $328 million total revenue in the fourth quarter, and 1 billion and $238 million to the full year revenue, which represented 1% and 9% growth respectively.
Revenues in a mirror EMEA increased by 2% to $57 million in the fourth quarter and for the full year EMEA revenues increased 4% to $217 million revenues in EMEA increased 8% for the full year on a constant currency basis.
ATAC revenues in the fourth quarter increased 34% to $46 million and full year revenue increased 8% to $123 million.
And now to profitability.
We continue to grow our gross profit to a record high.
The fourth quarter, it reached $314 million compared to $297 million in the fourth quarter of 2018.
For the full year gross profit increased 9% and was 1 billion and $125 million compared to $1.032 billion for the full year 2018.
In the fourth quarter gross margin grew 90 basis points from 71.9% to 72.8% driven by our fast growing cloud gross margin, which continue to increase and reached 63.8% compared to 59.9% and the same.
Quarter last year.
Operating income increased to $130 million and $434 million, representing growth of 9.3% and 13.3%, respectively, where this fourth quarter and full year 2019.
Full year operating margin expanded 110 basis points, just 27.5% and we expect to see further growth over the next several years <unk>, 30% operating margin and the results of our continued revenue growth and the leverage in our financial model, we continue to remain.
It is to expand profitability over time.
Earnings per share for the fourth quarter grew 6.8% and reached an all time high and $1.58 cents compared to one dollar and 48 cents in the fourth quarter of last year.
Well, you're 2019 earnings per share was $5.31 representing growth of 12%.
We experienced another strong quarter attached generation, which was $91 million and full year cash flow from operations was $374 million.
Total cash and financial investments were $981 million at the end of December 2019th and total debt was $465 million net issuance cost any equity component associated with our convertible debt.
With cash and financial investments near $1 billion as we exited 29 team combined with consistent ongoing strong cash generation, we announced earlier today, a new share repurchase program any amounts at $200 million.
The new programs demonstrate demonstrates our confidence in our business and financial performance.
Also reflects our ongoing commitment to return capital to our shareholders as disciplined capital allocation is fundamental to our overall strategy.
I will conclude my remarks with our guidance.
For the first quarter of 2020, we expect total revenue to be in that range at $406 million to $416 million.
We expect the first quarter of 2020 fully diluted earnings per share to be and an expected range of $1.27 to $1.37 cents.
For the full year 2020, we expect total revenue to be in the range of 1 billion and $690 million to 1 billion and $710 million.
We expect full year 2020 fully diluted earnings per share to be and an expected range a $5.65 to $5.85.
We expect attack effective tax rate for 2020 to be in the range of 21% to 23%.
To conclude we're looking forward to seeing you at our Investor Day on May 12, we just taking place in conjunction with our interactions conference in Las Vegas, I will now turn the call over to the operator for questions operator.
Thank you so ladies and gentlemen, if he would like to ask a question piece keys stop them one on your kind of five.
If you decide to destroy your question Peasquito start to what questions will be I'm sitting in the old received and you'll be advised went to ask your question. Just remind you that stuff then one on the type of fight.
My first question comes from Hugh Cunningham. Please go ahead your life in the cold.
I can't give us a bit more color on where you expect to find the more attractive.
Growth opportunities related to you were Ah 2025 plan.
[noise] Joel since all the for the question so going back to my earlier remarks are the three domains that drives the suit the food feudal or is it that cover a.
Oh cloud the digital journey I only analytics and this is.
Each and every one of them, but still so tremendous growth opportunity for us across all our businesses.
Well, obviously as you interconnect them there is even bigger opportunity just to say a few words on each so on the cloud sides. One we've seen tremendous success in the past two years in growth, we believe that the market do you.
She wants to be Underpenetrated, and there is a a law and very long gone we over here in both segments the of the market.
And all the enterprises are moving to the cloud and a larger enterprises judge Dalton jure they'll journey to the cloud. So that's one Evan you between go a flu 2025, both also a way beyond even 2025.
The second one as I mentioned in the digital.
While the conversations and the early adoption of digital for many organizations started in the previous decade, many of them out during the early stages to Clinphone yourself on the digital front.
And for us in all different segments of where we operate.
You mean presents a significant a global opportunity in time extension as I mentioned before.
You know the I phones, which of course connected to the fact that fits into cloud and we have all the data who are well cloud and effective tools that provides a lot of our services on the digital phones.
The challenge of the bruises decades of starting and capturing the data.
Ah belong to the Boston moving forward the energy Oh organization is moving to enable people throughout the enterprise.
To navigate through this data and the biggest challenges the ER deficiency in data scientists it will not be so I'm just by adding more built so now it must be SOVEST acknowledging the best position because we have as I said the data domain expertise.
And of course, the platform to support it.
Thanks, Rob just one follow up and this is sort of them on a big picture question I'm not sure. If you have an answer to it but.
What you're describing a looks like a transformation not just the nice but really of the of the entire industries and I'm wondering I see opportunities you've discussed the opportunities.
How did you discuss sort of one vulnerability, which is a shortage of data scientists, but do you see.
As a result of this big transformation any other vulnerabilities opening up not to you, but for customers and do you see a role for nice in solving those vulnerabilities and specific when I'm talking about things like.
When cloud starting to emerge there was concern about security that sort of sitting.
Yeah. So it's a good point on the cloud sorry, I think I'm fine large, giving the advancement of cloud and sort of enterprises to much more confident and comfortable.
To take innovation from from the cloud I think that's buying largely behind us of course, the they'll need to be able to focus and definitely for the other thing that's behind us and those concerns.
A manageable.
I think to as I mentioned on the AI fronts, Andy on the basics forms the a deficiency and data scientists as I mentioned, but the biggest vulnerability organizations the ice fusion conversation with customers and where we engage a lot.
In the face of a innovation.
They want to move to digital I'll, they want to move to the cloud, but the two are interconnected with the current infrastructure build bill legacy.
On permits from different providers their journey to that did it doesn't use of student who smoke.
Absolutely want in fueling the other and affected US. We also both a wheel completed <unk> digital centric and we are the safe chose to move to a real cloud solution getting all the different markets, where we operate.
I will get division selling to see the weakening of the pace of does move and I think it's a great opportunities falls.
Okay. Thanks, Brad Thanks, guys and good luck.
Thank you.
Thank you next question comes from Rishi Jaluria and he's from D.A. Davidson. Please go ahead.
Hey, guys I, usually I must say my question, Greg Let me start with you a huge you talked a little bit I'm in the prepared remarks about the success, you're having with the financial crime and compliance on the cloud side. It's a business maybe can you help us understand or you know a where are you getting a these customers.
Are you getting any deployments and that's one of the larger ones it or is it more at the midsize financial institutions.
And just in terms of scale you know obviously, she actually one of them in the primary driver on the cloud side is there a point at which Ah Ah though.
What you're doing what excites starts to become a material driver on the cloud and then I've got falter about.
Yeah. So so indeed, the once we we said in the previous a few calls it does feel starting to see a lot of production with a with excitement the cloud and he will take time for you to ramp up I provided an update that we on boarded spies time more customers in 29 teams versus a 20.
And then when she was a tremendous.
Philosophy, it's actually a great the Tam the expansion opportunities still Luckily, we've been a providing financial crime compliance solution to the higher end of the market's billion dollars financial services.
The Midmarket was not very available to us because those organizations in hard time to by an adult do solutions on an on premise a away as we launch a sensor that excites it's completely open up for us the Midmarket and this is exactly what we see the opportunity. So most of it two days and the Midmarket student.
By the way very substantial inside a financial services at some points. We believe it will also go back up markets.
So we have opportunity on both sides are over here.
Very healthy uniques, and yes will going into very similar direction of what you've done the snack swamp, we'd even just came out with cloud offering, but the food plot full blown block foamix volumes.
Leveraging and many of the know how into them and expertise we have with lifting Swan and we're starting to see the success in indeed for what are you. So a double digit growth on the financial crime and compliance ER business also annual needs. The goal freight was softer than a 20 team.
So we're very optimistic about the potential out there.
Great. Thanks, that's helpful.
Just wanted to ask a margins question. So yeah operating margins are definitely been been continued to improve over time, but it looks like on the chart shows side jobs. So margins I'm, sorry, that's gone down I think pretty meaningfully or maybe not meaningfully but dropped a little bit so over the past two.
Two years can you maybe help us understand why why this is and how we should be thinking about drivers for cash some margin expansion from here. Thanks.
Sure. Thanks for the question ratio as we look on our cash flow from that October over the last three years, we've actually had very healthy cash generation from from our business.
Consecutively in each of the last three years, we generated nearly S $400 million ER positive net cash from from our operations a and if you recall actually earlier this year during the course out of the second quarter, we utilize some of that the net cash flow to take the opportunity.
To enter into some agreements on on the prepaid side with some of our vendor to lock in discounts that will benefit us going forward. So it's actually been a given an opportunity to put that cash to use a and we've done that both through these are seeing the longer term.
Agreements that the lots and they didn't count as well as it allowed us to a introduce Arden stock buyback plan given the confidence we have really in our cash generation.
Alright, perfect. Thank you so much guys.
Okay. Next question comes from sounds good thing from Morgan Stanley. Please go ahead.
Good morning, and thank you for taking the questions and congrats on the on the really strong cloud growth to end the year rock I had a question for you on sort of a partner enablement strategy you sort of mentioned in your script.
Autos and then chichi broadly as you think about the partner strategy, whereas the traction bid to date you know in 2019 and as we look to next year, where are these partners in terms of ramping up their capabilities them trying to generate pipeline scrutinize all across Oh CX.
One of the big site.
[laughter].
Sure well actually 2019, I talked about at the beach, but a if I looked at it if a flex on 19 and I compared to 18 in 17 was a major acceleration it all falls new strategies during a gain we said that we want to do it in 18 to 19 was.
Headquartered in terms of how many polytunnels, we've managed to on board or during the year.
I think of the changes that's when we soldiering on kinda lots of positive outcome into boss instead of awesome looking for them.
And there isn't Philadelphia is a few twofold I would say the first one as we started to expand lipstick Swan globally, and we entered some that new territories for six one.
We we had a lot of partners approaching us or looking to move or to a adult stock in the cloud choice.
They start to move their customer base from on premise to cloud and that's customers demand to cloud solution with a six long.
That's one part.
Those costs it since those Paul says a lot of know how a in terms of the in this particular case in terms of the customer service market. Onboarding, then was relatively easy it's more about educating them about the cloud and less in both the industry, which is great. It's moving faster on boarding unfold use balls nodes and as I've mentioned.
Already in Q4.
We got a.
Few deals from those balls moved up on board and just a quote or to a before John.
The program, we're very happy with us as you heard.
I'll marketplace.
If the updates on the excitement at phase was lots of great supply positive supply. We just launched just a six months ago and on board in full can do from technology partner.
And I get it provides an update but a the fixed one market. There is also going to extremely well with a way north of 150, if I'm not mistaken partners as part of this program a long enough to offset all customers, it's really wide eco system all solutions.
And that's also and I look forwards its a cool elemental for strategic into outbreak in so many different segments of the market and globally.
We like that way, we can actually Kato to all segments of the market.
In a very a affecting weight and into all of those are very strong global footprint well to well, it's all different occasions.
I appreciate that Barack so it's very helpful. One and one follow up if I may just around investigate platform just kind of no. The third major cloud platform, that's coming into the portfolio.
We talked about in let's say and look for the customer engagement that T M being around 12 billion over next couple of years and financial crime imply it's going from two to 4 billion. How do you do it seems about right sizing the opportunity for investigate and what's the competitive environment look like in that segment of market versus.
Your traditional core markets.
Sure.
So we have a very large customer base in the public safety domain.
Very healthy customer bases are very happy to have a they'll very loyal customers for many many years thousands of customers as I've mentioned.
And we enjoyed working with them and catered to them for four years.
What we've seen and sells its work when's. The last few years of the those guys will giftable bogs very soon.
With the tough, but how to manage a evidence.
This is taking us way beyond all traditional of all in this the markets.
So the opportunity is actually to build lustful, let's would be does that help those that public safety organization to manage.
Evidence in the digital era in an HIV, it's a much under the old and watching hasn't build organization decide.
And we welcome that so couple of years with piloted with a few customers. We had some partners are designed partners and we basically launch dates and laid unique game and we started to marketing drilling 19.
We had some initial success in Europe, and surprisingly started to move or a softening. The second half studio. We also are still ourselves the elected in numerous places also in the U.S.
Well, that's a destruction doesn't see as I mentioned just in 2019 alone just from launching it can vary substance on large.
Public safety organizations adopted Ducs, it's hard to estimate right now what we'll do the size of those markets. We believe it's substantial.
And adjusted beginning Gulf Oh, this market and we believe that lease adoption I would like settlements.
Before then we have better or understanding of the full potential over here and starting to quantify it of course will showed up in Q.
Appreciate it prox. Thank you.
<unk>.
Thank you next question comes from pull cost that from JP Morgan. Please go ahead.
Yes, thanks for taking my questions.
First off Barak I Wonder if you comments on both the convergence and deploying when we've talked to scale or cloud platforms, Bart convergent something well do some evidence. The you know I missed some for instance is bidding some clarity functionality sea food and surprises in suits platform.
And by law, I'm, a big but some of the leading providers with customer engagement.
Solutions, a sort of alarmed Ruth or you could argue about a week or some of the cloud providers. So I'm just wondering how you see that playing out if you see as they are an accurate description of the situation first plugs.
Yeah, we actually faces a great opportunity. The you know this market will stop them or service exists for many years and the fact that we see a mall and more Paul too interested defendants market. It's a good evidence of leases.
The size of the markets with a a potential for a significant time extension. So it's another ever themselves or the next few years I'm going to be extremely exciting induce a in this market.
On the flip side of it which is very good fly into highly specialized markets and it's a village feature reach marketing jungle six capabilities and wasn't required in order to provide a customer engagement solutions for small and large enterprises. It's not just scale all complexity is the combination of.
Complexity and scale and that's what we've been doing for the fossil two years, it's always been hurt us very well to ducts moment and the acceleration does we see a in our business.
We actually have corporation with many of the vendor. So if you have I mentioned.
And we believe the there them playing in this market actually help us to accelerate the move of Ah Ah customers to the or to the cloud.
And there is a play and the market for both the install Soc to serve like the ones that you have mentioned multiple bundle it with public cloud and especially the applications, where we play where we like.
[noise] pretty good or the other question I've got loose a oh choice for doing so conceptually, but that's why you spoke about cloud to do soon I R. M rebook suits and so on a it seems as it could be applaud you pretty much any transaction approach, so so control environment and pretty much any domain.
Look show in New York City CRM.
Let me move it seems a predictable what does it but you do not do I mean in five years from now or is the reason to expect you to be way beyond customer experience customer service.
So I agree that if you look on the set of technologies that we have and what to do and the dealer as I've talked about the other predictable full so many different.
Enterprise software domain, however, I'm a big believer first of all in spoke goods and that's something that we've done I believe well in the last few years.
And the second thing that relates to that.
I'm a strong believer of a in domain expertise and I think if that's what our customers are looking to get somewhat well just the vaguely speed, it's not just setting them generics acknowledges the the minutes for news and it's even stronger when you are now as we said its course to be a hub will fall market.
Hey, I was built and algorithms and machine learning can be the first of generic.
There really a solution you must have domain expertise in in dubs industrials and that takes a lot.
And we're actually doing a great position because it's just thinking about what to read to the table. When it comes to a guy that we bring the two most important thing.
That allows you to create a a dozen into the first swans genes data, we have soft amount of data studies going through a one or.
Well, if any of our solutions.
And the second thing is domain expertise, it's nice besides a lot of technology experts, we have people that have 10 plus years of experience in customer service and tens of people with experience in compliance and financial crime and compliance and tens of years of experience in a public safety when you combine them together.
Sure.
You get there what we believe the superior blossom with these Ah Ah domain expertise. He does open up sort of minutes and I agree with you that we may end up deciding to go through yet spoiled or if the verticals attention.
Okay. Thank you [laughter] hopeful.
Okay next.
A question comes from SAIFI raw snap from Barclays. Please go ahead.
Hi, good afternoon, thank for taking my question.
Barack whom you mentioned you a stronger prompted you to and strategic positioning I'm I'm just I'm looking at some of the cloud names that are growing extremely fast and some of the legacy players also announcing.
Technologies that sounds to me there are two yours. So I'm wondering are these guys kind of closing the gap from a technology spend formed or you consider that you see it have you noticed that bad when he comes to a technology and innovation.
Whereas you know we are have invested or we are investing it'll continue to invest heavily in Howard Dean we believe that Ah the personal for investment R&D gains a handle so many others.
And if you look on the recent reports foam and almost all on them and I think all of them whether its golf no. Other is and you look when were they position not on the magic quadrant than others.
There is a significant gap.
Between us and others, obviously, we will continue to invest in a in a utilization to make sure does get not just to name, but also extending so.
Well take the there to Ah Ah those platforms that mentions of hours if with Dick's fixed long for example, no one else in the market.
As far as I know I put together and we've done meets molded three and a half years ago.
Omni channel Routings, Devon is full and then evenings and digit dog and combined it's under one plus and I think that allows us to open a significant got them is that in both of the us the great wins within the market.
Right. That's helpful. And then you mentioned in your prepared remarks, the I'm the through acquisitions that you made over the last five years and I guess looking good.
Should we expecting assume your pace or for now is now in a different place and therefore, you don't really have.
I have to try to kids real cash towards that condition, but rather returning to shareholders.
So we indeed the done some there or what we believe felt very good acquisitions in the last two years and we got there, but we've been even greater return on those acquisitions also has allowed us to advance the offer in quite significantly.
And completes all it offerings to bid the sleep platforms I've mentioned of course, given affect us a a position to market into sensitive who would like to fill the men.
Leadership and I'll growth, we will continue.
To be active on the a emanate from having said that we believe it definitely have a everything that we need you know those executes on the nice 2025, the vision and strategy that I've mentioned and one example of the odds of that level of confidence that we announced the show by the CRO wrong.
Earlier today or to make sure that we all the doing the right thing going to capital allocation to the shareholders.
Thank you bye.
Michael Kim next question comes from Dan the extra from RBC capital markets. Please proceed.
Yeah. Thanks for taking my question [laughter] Ah. Thanks, Thanks for the look at the opportunity forward here 2025, very exciting [laughter] around that you talked to the early stage with the digital transformation and the opportunities around Tam expansion.
I guess, maybe to build on Paul's question could you dig a little deeper there you know what are some of those Tam expansion opportunities in digital transformation you know how could you book tour to leverage leverage your data and domain expertise there.
Sure.
So.
Let's let's a first of the three different a if you'd like segments. The first one on on six one we all there'd be a leadership positions don't lose your position in customer engagement.
And we are starting to see <unk> increase in digitized interruption and deal requirement of enterprises.
To a a further go only channel and provide a cohesive and coherent.
Service all channels.
By itself as I mentioned going a dabbled in time, but then show for us for six one I Gibson. A example of does what too so inside of a Monday that made me Joel and growth over there and we're well prepared for that because we acquired run the embassy earlier demon on team.
Integrated into the business and all of these so yeah initial deals in in Q4, but that's a one example on the financial coming on line.
The reason why we believe they just spoken presents a tremendous down extension opportunity is actually the market to sell.
Both new banks digital banks, leaving the digital opportunities all created and we see them coming to us as they would like to make sure. They comply with regulation and me thinking fraud and other assets, so actually new customers and the second part of the dam extensions of the traditional banks.
I'm trying to completely rebuild all of the processa solving some customers due diligence. Okay. Why do you see understanding who is the cost similar hey, melt offices thought process news and basically build them from scratch in a in did your dog and dots at rent new business for us.
And lastly on the public safety domain is as I mentioned.
Docs market being weighed behind in terms of it did you saw that transformation or they can no longer stay behind a because as I've mentioned the biggest issue is how do you manage the vast amounts of evidence on every investigation every case.
And here as well we prefer those tests in the last couple of years and launch right, sometimes you 19 or the investigator platform and we see we see the traction. So we see we see all of those evidence and great examples, but we believe.
This is too early and there is a long gone way over here is organization will front some digitally a in the upcoming became.
Thanks Barack very helpful for basketball could you help us with the magnitude of increasing cloud in the fourth quarter here [laughter] versus prior quarter prior quarters in the year [laughter] is that just seasonality a built through the year much like the business overall or are there other things in the fourth quarter here are we should keep in mind.
Sure. Thanks for the question, Dan We had very nice grows a of our cloud revenue in the fourth quarter. It grew at a 25% and and as a reminder, Q4 was purely organic growth in the cloud. So there weren't any anomalies. It was really just the no momentum that we've seen throughout the year.
Playing through in an IRA and our cloud revenue for the fourth quarter, a and of course, we do have some seasonality that we experience and any of the cloud line item, but overall it was really just demonstrating that the growth that coming through in our cloud growth this year.
Thank you.
Thank you.
Next question comes from Ryan can onto Sunrise is not please go ahead.
I'd like to the question you could go back and looked at a macro environment can you contrast, the adoption of the digital transformation Kinda program environment across your major Jos a U.S. Europe and either.
Sure. Thank you.
So we feel all similarity as I've tried to you sound characteristic football whole different territories I believe oldest we don't submission I mentioned, Oh touching all enterprises globally over to the cloud adoption within the U.S. is ahead of you.
I have been a bucket list an hour or other things the markets, though there is tremendous opportunity in a in Asia Pacific and Europe, and actually in 2019, or we saw very nice growth a that I think we're sticking in those territories, so the adoption and starting to ramp up.
On the visit those ones actually went into thing for concrete.
Wes is and then there are some Asian countries of the way more than.
And and European country, I would say a beacon behind that I don't want to be two generic over here is really depends by country.
And the issue, we'll see I am analytics. The combination is in just grow them. The main issue is that I would say dot.
Storing data et cetera, as I mentioned in Charleston belongs to the previous decade, and the shortage in data scientists coming from the second of all enterprises globally understand if you notice to differentiate vis-a-vis to competition they need to use data in the most effective ways, we'll give them differentiation.
And for job, they're looking for people that understand data and they'll fighting for there to find you. There is a limit to how much. They can find something just im going to fight with them of course them, though you're going to see a growth in their differences.
He is the potential of soldiers do they have already 2 million data scientists, so globally and it's going to extend.
Now turning on to how do you take technology, our technology in disguise.
And and heading into the enterprise in a way the almost every employee can have data scientist capabilities.
Couple of thanks very much.
Thank you.
Okay. Next question comes from Daniel Ives on his from Wedbush. Please go ahead.
Thanks, Great quarter again.
So can you maybe just talk about when you think about cloud interest the move that we're seeing on the or on the customer service I just talked about how maybe conversations are changing go into more strategic more.
Of the platform approach in terms, where customers are working for versus maybe 612 18 months ago.
And maybe even stay map rock like how much of it is.
The product versus what's happening in the market I give you just think about.
Sure.
So if I try to think about the conversation I participated in dozens of them with customers in the last a few a few months in quarters.
And I also look a bit bad one other things have changed dramatically and that's already belongs to say a theme is that there is no longer who have a fish in about two or though we should move to the cloud I'm talking from the customer viewpoint, we don't hear it anymore, its cloud safe and things like that of course, they'll doing due diligence and so on and so far.
But the that's phase of educating like cloud is better I think by and large using behind us almost in all segments of the market.
Customers today say, we would like to move to the cloud.
The key questions for them and we want we know what's the end state watch the journey, what's the best way for us to do that Mrs allows the customer he is the more complicated useful them.
Given the varieties integrations are they have complexity past depreciation and so on and so forth.
I think that the real thing that is changing if I look on that Boston here is the better understanding all customers.
Cloud by itself is that the acknowledges the vehicle of delivery buddies at both lucky to enable them and it's not just the economics and it's not just you know the infrastructure.
But I would say two things one is unique to our markets in one I believe is doing several other markets of.
The first one is the pace of innovation the understanding that regardless of cost that are on the second. It's you deployed it's true cloud solution and native cloud solution with all the capabilities you can move your pace of innovation as an organization from once every two years to something that happened constancy binding.
On that this is huge.
It's something that is dramatic in their ability to move forward a the organization and that they believe truthful variety of enterprise software versus across the industry. The longest is quite unique to the customer engagements market is the powerful efficiency you should think about the customer service and you think about.
The ups and downs or they have in terms of demand given differences and out of your Dave into visits and affected us instead of bind to the maximum capacity or in an on from session. They can do acute from someone like off that also for those of you said do not all cloud solutions offering Dakota, Felicity docs huge for them.
And their ability to navigate so those are business into financials.
So that's that's the type of conversation, we say disease.
Great no.
Very insightful and a great job again.
Thank you.
Thank you next question comes from walls that for China from Citi. Please go ahead.
Hi, Thank you question for about kind of question for Barack that's on a on the gross margins you've highlighted a this sort of by downs of sound, probably a conductivity and other costs for cloud and I'm curious when you look at the improvements you've had year over year in gross margin and then how you're thinking about that into 2020.
What factors would you point to that have been most impactful to those so gross margin improvements and then and then as as a as you look in two of which of those are the most sustainable going forward.
Sure. Thank you kind of question Walter as we've gone out our gross margin and we have had nice year over year expansion and you can really see that are coming through and the fourth quarter in particular around our cloud gross margin, which expanded at 400 basis points jumped in the fourth quarter and.
Every year alone and so you know we have consistently had very nice product and services gross margin and we continue to really maintain the level of attention to driving efficiency across our organization around those two areas, but cloud is an area, where we it's really continue to.
Capitalize and we'll see further expansion going in to 2020.
From a number of the areas that first of all just the fact that as we're moving into the larger enterprise, we haven't land and expand an approach that allows us to go in and contained and sell software which comes at a higher margin in higher profitability nurses in the network connectivity. So that's driving more to the bottom line.
The same time, we're also looking at our cloud operations similar to the way that Weve locked down our services business over the past few years really just driving a lot of operational efficiencies and cost control around the business. Although there are some of the areas that are continuing to focus on out throughout 2020 and that constant and well continue.
To to drive me in the overall margin profile higher.
Thank you and then brought on the just there's a question asked earlier on the Hyperscale entry into the into the market and I guess what were seen as well you have but you know some of the traditional CRM players I'm pushing into and it looks like in it you know maybe haven't been there in the past are you seeing any change in the landscape in terms of who's a partner who's a competitor.
If you look at kind of the Q4 selling season versus where you were last year in and Doug in in the past.
[noise] enemy, particularly among the CRM type players.
Yeah, Yeah, no we don't see a any dramatic change you know that we have and partnership with Ah Ah all different than Jason's it all markets CRM, a unified communication or you costs.
It's the eyes of course, and other or stellar as a song have more of a technology partnership some have more or go to market the partnership.
And actually both the files and she's going to EWC aside mm CRM, which is adjacent all market, though very successful who just recently I believe into a couple of weeks ago beats more we announced an extended a thousand shoot for them to a partnership instead of course is going extremely well. These are not a main show to the market, but actually cut.
And there is a very happy with those partnership because it allows them to have better integration a between those like in many industries and we welcomed up a these days. It's all its a combination of Ah Ah Corporation in some other competition or because sometimes hard to know what when certain markets all capability.
And the other one sorry, but I think overall it's healthy.
Oh, it keep us all on it.
With that with customers and we will continue to live up and we're happy with this most of the that's gonna stay competition is a healthy ones.
Great. Thank you.
Thank you.
Then they set of questions it doesn't Ivan.
Oh, great. Thank you very much for joining us and we look forward to see weather interruptions event in many thank you have agreed to.
Thank you, ladies and gentlemen, I concur you called for today you may now disconnect. Thank for joining in Africa that.
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