Q1 2020 Earnings Call
Welcome to the Nice conference call discussing fish caught twentytwenty results. Thank you all holding all participants are at present in the listen only mode.
Following managements formal presentation instructions will be given so the question answer session I sort of mind at this conference is being recorded May fall chain Twentytwenty I wouldn't I'd like to try and this call over to Mr. Marty Cohen VP.
Investor Relations Nice please go ahead.
Thank you operator or what's the on the call today, our best Gaspich, Chief Financial Officer, and Iran, Laronde Executive Vice President marketing a corporate development.
Unfortunately due to the death of his father Rocky Olam CEO is unable to join the call today, we sent him and his family our deepest condolences.
Before we start I would like to point out that some of the statements made on this call will constitute forward looking statements in accordance with the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995, please be advised at the company's actual results could differ materially.
From these forward looking statements.
Additional information regarding the factors that could cause actual <unk> actual results or performance or the company to differ materially including the impact.
Including the covert 19, the impact of the Kobin 19 pandemic is contained in his section entitled risk factors in items, three or the company's 2019 annual report on form 20-F.
His father to Securities Exchange Commission <unk> April 620 20.
During today's call will present, a more detailed discussion or first quarter 2020 results and the company's guidance.
Following our comments there will be an opportunity for questions.
Let me remind you that unless unless otherwise noted on this call we will be commenting on our adjusted results of operations, which differ in certain respects.
Generally accepted accounting principles, that's reflected mainly in accounted for acquisition related revenues and expenses.
Well as they should have intangible assets.
Accounting for stock based compensation.
The differences between the non-GAAP adjusted results.
And the equivalent GAAP figures are detailed in today's press release.
I'll now turn the call over two or on their own.
Thank you Marty and welcome everyone.
First I will likely joined Marty and on behalf of the entire nice didn't extend their condolences to block the loss of his father.
As for the business environment, we're not we're operating in an unprecedented time never before have organization had to read for one of the way they operate in a matter of Dave and then constantly keep adapting to changes on a daily basis amidst the uncertainty they are all experiences.
After years of building organizational muscle centered on the fishing season experience no extreme organizational agility and suddenly become the most important critical capability of any enterprise. They once navigate these uncertain times.
Changes that used to acquire years to implement.
No be done these days.
Organizational agility, which is the company's ability or new itself.
Change quickly to succeed in a rapidly changing ambiguous intermodal environment.
Well the stress tested beyond belief in the past couple of money.
At the same time organizations are starting to we think the long term realizing that the need for GLP is not temporary but rather is here to stay and wrapping an abrupt changes are the new normal for night.
When the vendor position to enable organizational agility for our customers. This is true for all markets, we operated including customer engagement financial crime and compliance and public safety.
Over the past couple of months, we've been able to new and existing customers to respond to rapid changes in a matter of hours or days.
Furthermore, these recent months, where a testament to the mission critical nature of our solution.
As we have seen continued adoption along with a dramatic increase in volumes going through a platforms across multiple vertical markets.
In response to the need of organizations to quickly that's in the current environment, we launched new offerings at record pace.
At the onset of the locked down every enterprise with the customer service operation, what's ways with enormous challenges moving employees to work from home overnight and it's the same time dealing with a massive spike in the number of interaction.
In fact industry wide 50 million contact center employees around the globe had to move to work from home well maintaining uninterrupted service in response, we launched seems to want to tone.
We're going to those organizations with contact centers using on premise infrastructures from legacy vendors.
Well these on premise infrastructures are highly flexible and difficult to more.
<unk> environment, it's one that Tom can actually be deployed in 48 hours or OLED and supports work anywhere.
That's far we've seen strong demand for say, it's one of the tone within a few dozen organizations already adopting the operating and many more in the pipeline.
It is important to know that many of these organizations that have adopted six wonderful.
We're using a competitive on premise solution and we're not wanting to shift to the cloud in the foreseeable future, but decided to do so once they realize the extreme challenges that they were facing.
For our existing customers or X one we've been able to successful transition hundreds of thousands of contact center agents.
The work from home within hours those enterprises using saves one we're able to maintain fully operational customer service levels without interruption, including both self service and digital channels.
Additionally, we're experiencing unprecedented increase instincts, one volumes from both existing and new local and federal agency customers.
As the only spread ramp authorized cloud platform, we're very proud to take part in providing government agencies with the ability to support tens of millions of citizens, we were able to flawlessly support fivefold volume increase in this vertical.
The intrinsic agility and scalability of our platform.
Also with hundreds of thousands of employees working from home Supervisors, a phase with the new challenge for managing their remote workforce.
In response to this urgent need we launched WGN at home.
Both new and existing customers to provide advanced remote management capabilities with debris I'm its own supervisors can now getting control and focus employees on shifting customer priorities.
The public so they 50 sectors also challenged the need to conduct investigation doesn't go away in the kind of environment and they might not sorry strike a balance.
The ability to continue to conduct investigations.
While still maintaining the safety of their employee.
Therefore, we immediately launch nice investigate express.
Nice investigate expense eliminates the need to do.
To physically handle everything it enables electronics sharing of information, both internally and externally and even allow quantify public safety personnel to continue to work from home.
Thousands of public safety personnel across the U.S. and the UK already started using the new solution in the very first weeks and interest is growing steadily. This is another example of how the current environment is accelerating the digital transformation in the public safety sector.
We're also seeing being similar requirement in our financial crime and compliance market.
A few years I've started a few weeks ago. The government launch the care that and you into the provisions of the stack financial services organizations are facing a person an influx of loan applications and they need to provide accessibility to the pictures protection program.
In record time, despite this large influx.
Loan applications.
Thank you all organizations are still required to follow all know your customers regulations and procedures, but no an expedited timeframe in response, we launch anyway, it's spread.
I see express in the cloud solution, which automated manual they would get procedures, reducing hours of matter meal steps to minute minimizing errors and dramatically increasing the speed of can we see processes by more than 80%.
Across all segments of our business. We're pleased to see that we have witnessed great response to these offering for the immediate need provide supervise the agility so organization.
Over the past couple of years, we spoke about their strategy to enable organizational transformation is related to digital cloud analytics.
Well, we continue to address the short term needs of our customers. We're also starting to see organizations prepare for the next phase.
The recent events demonstrated to them that it is critical to accelerate these transformations.
Furthermore, their ability to respond very rapidly in the last few months and manage in Dave changes to the south we see years in giving them the confidence that they can transform quickly.
Among other things visual dramatically accelerate the shift to the cloud that's for digital to be a mainstream component of their operations and altered their mind that from just experimenting with a <unk> domestically adopting.
We're in a prime competitive position to enable organizations to expedite their transformation as the overcome their immediate challenges and begin to prepare for the future.
Our cloud in digital leadership as well the mission critical nature of our solutions.
Well demonstrated by our strong first quarter results.
In Q1 total revenue increased 9% of $411 million driven by another quarter of accelerated revenue growth.
Which increased 27%.
The strong topline results led to further increase in profitability operating income was $111 million, which is an increased 14% compared to Q1 2019, an operating margin increased 120 basis points to 26.9 per cent compared to Q1 last years.
These strong operating results led to a 14% increase in earnings per share to $1.34 cents.
The 27% cloud growth was once again driven by six one with multiple seven digit ACB deal with many new logo.
The next one deals included a seven digit ACB deal with a large financial institution, but decided to standardize on six one with our full analytics portfolio.
And in the process, we're pleased to have been condominium.
We also signed a seven digit ACB next one deal with a large state agency. We also signed at seven digit deal with a major telecom for analytics and it's seven digit Gill with one of the largest insurance companies in the world also for analytics.
In Q1, we also received two eight digit orders.
One with a large global financial services integrator and the other was a major federal agency.
We signed several seven digit deals for our financial crime and compliance solutions, including a large payment processing company and some large global banks. In addition, we signed several seven different deals or essential.
Yes.
The quarter, we also experienced significant expansion in our partner echoes ecosystem.
We signed a new strategic partnership with Infosys for financial crime and compliance solutions.
Global partnership will allow emphasis to resell our aim known fraud solutions to their very large customer base around the world.
We also signed new reseller partnerships for six one.
One was with a major European telecom.
To help expanding the reach of six one in the European market and the other with the largest re still in the contact center industry that is moving more of their business to the cloud.
Our other recently signed partnerships are doing well and continue to rapidly grow their business with night.
Moving to our financial outlook.
Just on a press release, we are providing Q2 guidance, but given the uncertainty or the economic conditions, where withdrawing our annual guidance.
Hi, confidence and expect strong growth in our club business. However, our license business dependent bars on large upfront capital expenditures by our customers and we're being cautious about such expenditures in the near term.
As a company continually focused on profitability, we do expect to maintain strong growth in our earnings.
In closing.
The challenges of with and environment have opened the eyes of companies around the world. So the importance of organizational agility.
This is underscored by the inflexibility of today's on premise solutions from legacy vendors.
We believe this bodes well for an accelerated adoption of our cloud platforms and our mission critical solutions as the current environment.
However, the harsh warning to organization that they can no longer delayed their cloud and digital transformation.
As the clear leader in both cloud and digital along with a strong balance sheet strong cash generation as stable and well established business and then the kids focus on profitability when the best competitive position to capture the opportunities ahead of us.
Let me finish by thanking our employees, who are not working from home for their dedication and support during these unprecedent dozen times.
And for continuing to give 100% of their effort and commitment to driving the success of night.
I will now turn over the call to bed.
Thank you, Iran, and good day, everyone I'm pleased to provide the analysis of our financial results and business performance for the first quarter of 2020 as well as our outlook for the second quarter and full year 2020.
Total revenue for the first quarter reached $411 million, an increase of 9% from $378 million in the same period of last year.
Total revenue growth was driven once again by are impressive cloud growth, which was up 27% in the first quarter of 2020.
Our recurring revenue increased 400 basis points over the prior year from 71% in the first quarter of 29 team to 75% in the first quarter of 2020 <unk>.
The increase demonstrates the continued acceleration, we're experiencing and the shift to cloud.
Cloud revenues accounted for 42% that's total revenue for the first quarter compared to 36% in the same period last year.
Product revenue accounted for 16% of total revenue in the first quarter and service revenues accounted for the remaining 42% of total revenue in the first quarter.
Both our segments contributed to the year over year gross.
Customer engagement revenues for the first quarter were $328 million, an 8% increase over the same quarter and 29 team and represented 80% of our total revenue.
Financial crime and compliance revenues for the first quarter increased by 14% and were $83 million, representing 20% of total revenues.
Looking at geography America's contributed $337 million total revenue in the first quarter, which represented an increase of 17%.
Revenues in AMEA were $48 million in the first quarter and Asia Pac revenues in the first quarter increased 7% $26 million.
Now to profitability.
Gross profit in the first quarter reached $292 million, an increase of 9% compared to $267 million in the first quarter of 2019 gross.
Gross margin grew 40 basis point, just 70.9% driven by our cloud gross margin, which continued to increase and reached 62.9% compared to 59.8% in the same quarter last year.
Operating income increased 14% to $111 million and we continue to expand our operating margin to 26.9% an increase of 120 basis points.
Earnings per share for the first quarter grew 14% to $1.34 cents compared to $1.18 cents and the first quarter of last year.
Our tax rate was 21% during the first quarter. It will continue to vary somewhat from quarter to quarter based on the mix as profitability and different tax jurisdictions. However, we continue to expect it to be into the similar range. We previously communicated between 21% to 23%.
We continue to generate healthy cash flow from our operations and exceeded the threshold of $1 billion in total cash and financial investments at the end of the corner.
As we look forward to the future we will continue to manage our expenses prudently and expect this strong cash generation trend to continue.
The leverage we maintain and our financial model well continue to provide us with strong liquidity for further investment back into our business and in parallel to support our capital allocation program.
At the end of the quarter total debt was $467 million net of issuance cost and the equity component associated with our convertible debt.
I will conclude my remarks, with some commentary regarding the strength of our business the outlook for the rest of 2020 and our financial guidance.
Our customer base is well diversified across multiple industries geographies in business segment.
We have more than 25000 customers, which more than 85% or fortune 100 customers.
We do not have any one customer which represents more than 5% cover overall revenue. We had numerous go to market partnerships that span across the globe.
The economic future for the remainder of 2020 is uncertain.
We expect that some customers may delay certain decisions in the short term, which may make it difficult to predict our license related revenue and therefore, we are withdrawing our full year guidance.
With that being said is wrong highlighted in his comments today, we continue to see robust demand for our cloud solution and expect continued strong sabra.
Furthermore, as we've done each and every quarter, we can continue to be committed to grow our profitability as evidenced in our first quarter results and our second quarter guidance.
For the second quarter of 2020.
Expect total revenue to be in the range of $387 million to $397 million.
We expect a second quarter of 2020 fully diluted earnings per share to be in an expected range of one dollar and 28 cents to $1.38 cents.
I will now turn the call over to the operator for questions operator.
[noise]. Thank you if you would like to ask a question. Please press Star then one on your telephone if you decided to withdraw your question simply fresh start shape, you will be advice when twice. Your question on all other lines will remain on let's not only just to remind you asked a question. Please press Star then one on your telephone.
The first question is from Sean I all of Oppenheimer. Please go ahead.
Thank you good often and good morning, Beth Ron Marty a glance that everybody is doing well please send our sincere condolences to upper rock.
Congrats on the strong first quarter performance, but I want to start like touching on cloud growth, some really great 27% year over year performance.
I'm thinking about the cloud ongoing growth in light of the fab that a difficult when is being removed the guidance for the year.
Thanks, Thanks for the question a show and we're also quite pleased with the other performance of our first quarter.
With respect to our cloud growth you know looking forward, we continue to expect to see the strong cloud growth that we've been experiencing as as we looked on the first quarter. We've experienced a lot of increases in volumes transactional volumes and that spans across multiple verticals.
So as we look ahead, we expect that trend to continue.
And is it right highlighted today as well as many of the organizations that adopted Rcs one at home offering during the quarter. We're organizations that we're using on premise solution that shifted to the cloud and really in order to give them the agility they needed in their organizations.
We've seen that the that trend and a you know weve also seen that that really reinforces the the stability and or the overall strength of our platform and our ability to really confidently supports a large enterprise given that some of the dramatic increases involved.
Games. So looking forward, we're quite confident a in India continued growth and our cloud revenue.
Thank you for that and then my follow up that or Iran. We can definitely can see and understand the mission critical nature and beneficial to see it Swan and and and Dxi platform. When you think about nine cents or whole block product offerings will probably when your customers are thinking about it oh they take.
The same nondiscretionary you, that's so to speak Wendy considering.
Our P.A., yeah analytic a and again because of just just examples are so pretty much are they taking the same nondiscretionary of course with the entire portfolio or are there some diversions between some of the plot.
So ah. Thank you obviously there are a different solutions have different value. However, the two specific solutions that you highlighted the RFP, a and nexidia analytics are both having a very strong demand these days.
Keep in mind that two things are happening.
When people shifts to move from home and then of course, I would probably need to shifts back and maybe partially and there was a probability that they will need to ship yet again back home.
The processes needs to become much more agile.
RPK specifically allows.
Craig a lot of as a organizational agility and to make fabs changes and processes that are required in order to support all these changes.
That's one expedia analytics, what we've seen over the last few weeks is that working from home and working during cold would.
It's not just simply a matter of.
He stupid.
The nature of the calls and the way that people they handle and the interactions actually changes both on the customer side as well as employees done.
They've been using expedia quite extensively to understand the trends.
Well the calls changes what is changing in local and our people handling them and also wasn't makes for a good handling overall, our interaction and what the what it makes for a poor handling all that interaction.
And therefore, specifically for that to a solutions you've asked about we're actually seeing an increase in criticality.
During these Ah these times.
Thank you for that.
Thank you. So that your next question is from Don I use of Wedbush. Please go ahead.
Yeah. Thanks, I'm sure, but can you talk about from a cost structure perspective, how you're thinking about things like are you kidding.
Maybe more Becca stress has type scenario over the coming quarters, maybe crazy makes senses.
Just given uncertainty thanks.
Thank you for the question, Dan and Ah you know as we emphasize when we.
Read through our script earlier I think that a it's clear that as a company. We haven't always that continue to be highly focused on on our profitability or we have strong leverage in our financial model, a and it's a it's of importance to us and something that we continue to keep really a very keen focus on.
So as we look forward you know when in terms of the rest of the year as well as the first quarter. We are obviously reprioritize.
Where we invest in the company and we don't have a any plans in terms of.
Workforce reductions, we are really focused around the making a critical hires that there will continue to drive that the growth that we've continued to see and the cloud.
But as I highlighted you know from an overall standpoint, as we look at the some of the discretionary spend.
Of course, we have made some changes or to a ensure that we will continue to see the health and deliver on the the profitability increases that we have in the past.
Got it.
Her Ron could you talk about just sales cycles like what walkers through.
Are you starting to see April 1st part of May maybe more normalize versus March and just maybe walk through no going from face to face virtual.
From a day to day perspective, how you're kind of seeing those I guess challenges opportunities. Thanks.
Yeah.
So in terms of the sale cycles actually we are positively.
Surprise that we're able to close.
Very large deals are completely remotely if you had asked US. The you know a year ago I wouldn't have never believed that type of deals that we're able to close.
From cradle to signature without physically meeting the customer, it's surprising and encouraging.
In terms of the pipeline et cetera that that actually looks.
Very a it very healthy.
In terms of the close rate or you know we are off to a good start but I have some caution that as you know and Alvin every software company. The last month of every quarter is the more critical one and so we will have to wait patiently until the month of.
June so have a kind of than they are very sharp understanding all the impact on sales cycle.
So far we haven't seen any dramatic changes in a in the length of the sales cycle.
Thanks.
Thanks for that next question is from some odd Simona of Jefferies. Please go ahead.
Hi, good morning, Thanks for taking my questions or maybe if I could ask one on six one at home Bethany.
Right I think you said a few dozen customers have already adopted it I'm curious if you could give us an idea or maybe how many seats that represents a and or any characteristics around those customers are they more mid market are they more on enterprise are they doing more tactical deployments or full deployments.
Just any color around that would be helpful. Sure.
So first I have to a qualified these are all the customers that were completely new to the ER to us in terms of the pipeline was not a conversion of a customer they were already and the pipeline than just the close of takes one the town.
In terms of the size of the customer it spans the gamut.
We have seen midsized customers and some very significant enterprises I can give you an exact number on it on the number of east, but it is a wall in the thousand.
In terms of the seats that are already deployed.
And the pipeline.
It looks very strong in terms of Ah this specific.
Verticals.
We have seen a.
Movement from verticals that you would have never expected it to a to run a sales cycle from first contact to sign.
In a matter of days and some of these literally to less than 10 days from the first time, we talk to them until they sign and this includes the verticals like government.
Which is mind boggling that could move this quickly. It includes the financial services. It includes telecom so we did.
On the pretty broad set of vertical at all which are verticals that I would have traditionally were.
Considered verticals that run more conservative processing that take a fairly long time.
Great Thats up one facet, maybe maybe one for you I appreciate it.
Yeah, they kind of lack of visibility in the license side and then as you know the commentary on cloud could you just maybe try and get a at least a little bit more on on QQ, what's embedded for cloud growth Wow, what's the current guidance given for the second quarter, just a and maybe what are some of the assumptions underneath that.
Sure. Thanks for the question a as some odd so.
Look at that Q2, specifically first dog would say as you know we don't a everguide on on specific line items, what I can add in terms of some overall color as I've said is that we continue to see a you know unexpected similar cloud growth that we've been experiencing.
And and so you know looking at the that's in the past several quarters. I think you know we will assume that will still continue to have this growth we've talked about the increase in volumes that are that we've experienced during the quarter. We're seeing this the you know maintained in a kind of the early part of Q2.
Great I'm, just going to slip one more and then I apologize for it but when we think about the license sales how much of that is typically two to completely new customers versus selling back into the existing customer base.
Okay.
So.
So obviously the majority of our sales are into a existing customers it but there's a fairly but.
Good portion is the that the non <unk> negligible that goes into a new customers.
And.
At this point, though however, when it comes to license builds obviously, whether it's new or a or existing.
Even with existing customers in many cases.
It is a new product for them, so its expanding our footprint and the number of products that they use for bus.
Until it would still require them to a kind of have Ah.
A project around it.
Great. Thanks.
Wishing everybody well stay safe in saying thank you again.
Thank you.
Thank you. The next question is for Sanjit Singh of Morgan Stanley. Please go ahead.
Thank you for taking my questions and we definitely our condolences to Brock and his family I wanted to.
Yeah good.
I've a question around how you're thinking about the market over the next 12 to 18 months and if I sort of.
Go back at this time last year at sort of analyst day, the message at least in terms of large enterprise market that that it was going to be a steady shifts to cloud no no major inflection points and so in terms of your investment profile, we're going to grow margins as you sort of execute against that cloud penetration opportunity overtime.
I'm wondering how you think about that now as we get through and get out of codes that is this would you be forced success selling later to the cloud and how does that sort of.
[noise] alter or not alter your thinking on investment profiles. This is a once in a decade shift to the cloud de do you do you potentially increase your investments not necessarily in the in the near near term, but in the in the coming months or isn't in the next year to capture that opportunity.
So.
Yeah, Let me handle the first part of the question then I'll handle the best to discuss kind of ongoing investment.
Obviously, we look at it didn't a in kind of a fuel horizons. There was a very very short term. We're looking at still they are kind of the height of or the kogas situation and these are these turbulent waters are pretty hard to predict.
Have you asked me a two month ago or what I would have expected I would have probably guess that we would see more oh they it for you.
What we've actually experience, especially when it comes to the cloud the deals are coming in new customers are signing up.
A new environments are going up so I'm actually positively surprised that this kind of what's happening in may I have the store.
However, this is a is this period shall pass and hopefully in the air pretty quickly.
And then when we look at what's going to happen in kind of the second horizon, which is the.
We are quoted the kind of low work from home is is.
Ah over and now we're dealing with the repercussions.
As I talked about the extensively in my remarks.
We believe that the cloud adoption will accelerate.
And it will accelerate in two ways first of all more organization that did not think of adopting cloud will now adopt cloud so the potential market will grow but there's another with BARDA look celebration, which is simply that we.
We believe the sales cycles will get shorter because companies I've gotten a lot better as making tough decisions.
We see this I don't expect the.
Hey sales cycles will convert couldn't bid to a week like we've been seeing them a lot a couple months, but still a we believe the sales cycles will accelerate.
And.
Hi.
As you think through that.
Obviously, I would say two things on the strategic side. One is when you want to scale quickly partners matter and we've been.
Working extensively on adding and growing our partner ecosystem, which is a it deliver that allows a allows one to.
Grow our reach get.
Better on the front end of or the sales Ah without massively increasing ER and growing the sales force.
The second.
The point is as.
They fill cycles become shorter the efficiency of a salesperson grows. So it's single person can do more so those are two kind of positive.
And that wins that we expect that wouldn't be as a result of both are actions isn't enough in the last couple of years as well as the dynamics at least in the market now as for specific future investments I'm going to handed over to bet.
Yeah, I would just add to what it would have Ron said, if you think about it more from an operational perspective first I think it's really important attach a highlight that nice when one of our strengths is that that we really working in entered a fashion on a regular basis, meaning that we're always at repricing.
Retiring and and shifting our our investments internally to ensure we are really driving our continued success in and the growth we've seen in our operation and a more specifically ensuring that we are really feeling that the continuation of our cloud growth. So there's there's you know will continue to do that as we have.
I've done in the past and a if you look at some of the a the targets that we've previously shared from a from a longer term perspective I'm you know we've talked about the as far exceeding 2 billion in revenue, having cloud revenue be 60% or more of our total revenue or operating more.
Margin or reaching 30% or more on those targets stay on track if anything we expect that the other cloud or concentration as a percent of the overall revenue or maybe happening faster than that and what we previously expected. But then we are certainly committed till the to those longer term.
Jack is in reaching them.
Appreciate the thoughts are very thoughtful some color there maybe as my last follow up more tactical question on the cloud momentum so understand US a license businesses. Obviously, you know has has more more volatility associated with it but cloud usage also can cuts.
Spike up in Spike down and so I wanted to get a sense of how much of kind of the surge in demand in March that you saw drove upside in the quarter and how do you think you know that you said sort of sustains and its can give us any sort of insight on in terms of your an average customers sort of subscription contract.
How much flexibility do they have to spike up in spike down without incurring I'm charges on the platform.
Sure.
So.
We have had some customers that have spiked up quite dramatically in March but.
But our club business is getting to.
The scale with Ah literally thousands of customers that it just becomes a law of large numbers as you can imagine some spike up some spike down are all in all the we did see an increased but it is not as extreme as these ah it customers who have spike fivefold.
In a specific verticals.
In terms of or the license, but they'll do the way our license works.
They do have a minimum commands and there is no limits on how much it can spike up.
But there there are limited and how much it can go down.
Yeah. They couldn't obviously go down as much as the a as they needed but they will have to pay up for a bit below the minimum committed.
The.
The the mountains. They can go down is different and ER with different customers and different sized customers.
Yeah, but the way you could think about it is a.
Average.
We will be above the a expected.
Usage, because the customers that spike up.
They.
Do more than the customers that are that the it spiked out.
In terms of the sustainability of it.
Am.
Hi, it's hard to predict kind of these Ah these spikes, but I don't think that the if you look at kind of our performance in the last quarter I don't think that this is a result, all or a one time a spike.
It is more a testament of the sustainable growth in the business.
Very helpful. If I think I appreciate it.
Thank you. That's so next question is from Toffee Roche [laughter] Barclays. Please go ahead.
Oh, Yeah, it's always thinking question and that's something like on the them to two bark or most of my question to ask just wondering if you can comment on the competitive environments. One I'm thinking about your strategic positioning in regards to sum up even more legacy competitors such as.
Very endogenous c., so where do you see yourself at the moment then there would be helpful.
So a you know I I prefer not to address a specific competitors Oh I can say is we feel very comfortable with our position or if you follow the kind of the a analysts reports that cover our market such as the.
Gartner Magic quadrant.
You would see that they are the there was kind of a very broad recognition that ER. Our six one platform. It has a significant differentiation a against anything that is out there.
And also there is a matter of scale it is Ah.
The.
Probably.
Mhm, a multiple but anything else that as anyone else that is competing against the in terms of the number of agents the skills. The revenues on the platform. So we feel very comfortable we don't see any.
Any dramatic change in Ah dynamics.
You know, we're all innovating our competitors keep innovating as well, but Ah hey, we we feel that the a gap.
Is why didn't you rather than a as shrinking.
That's helpful.
To determine the person I guess, it's rather than Twox to your thoughts you know with regard to M&A I guess, you feel that beyond potential small deals either in your room for knowledge runs down the road you feel that anything.
Potentially me see would be value, adding to your T. organization.
I'm I'm sure there are things that are value out of the story that organization, we always a examined and look at opportunities or we don't feel that we have a gaping hole that requires some and some significant moves that we have to make however.
Where are we can see a lot of a different things of could be helpful. In building up our strategy.
At the same time as you probably know Oh, we tend to be very disciplined around how we do a M&A and ER.
The value or the integration as well as the valuation.
And so if we see something that is a strategic but we think that weekend or integrate well on that or is the price in the way that will create a shareholder value for our show those it. We can you are we going to be doing it whether it's a small medium or long.
Great. Thank you congrats again.
Thank you. That's your next question is from Patrick Walravens J M. Pay. Please go ahead.
Oh, great. Thank you and let me add my best wishes.
So I guess my first question would be with with the.
You know with the with the massive shift to two working at home.
Some investors might actually expect the cloud business to accelerate so what are the factors preventing that from happened what what sort of the other side of that.
Well, we do feel that the cloud ER business will accelerate the I think that's the way we've been very clear on that affects the if there's a lot of strength there.
I mean, maybe I got my numbers wrong, but it was 27% last quarter, 27% this quarter and the guidance for next quarter seems around the same based on what that said it did I get somebody from our growth then last quarter in class Patrick was at 25%. So we experienced an acceleration into 27% this quarter and of course every call as well.
But typically we have the you know the highest level of seasonality even in the cloud in the fourth quarter.
Okay, Great and so you think that can happen again.
You know as I've said, we were out is running by both have said you know, we're highly confident and and continued growth of our cloud. So we expect the you know similar comparable growth to what we've seen in quarters huh.
Okay I would guide and then one thing that's great.
As as you know it feels like we've been men that are crisis for 18 years.
It is a it didnt being a month and a half.
And ER and you are probably a it well enough acknowledged and know the dynamics of cloud revenue.
And that they take a time or to a to translate into Ah so business trend to translate into revenue.
I think with the expectation that Ah things all turned on in a theme in a week is probably a.
A little too optimistic.
It does feel like 18 years, two other quick ones how's customer churn and what are your assumptions for that for the rest of the year.
And then what's your plan for eventually returning or employees to work here, but also in Tel Aviv.
That's a.
We don't see.
Any and changes in the customer churn our customers are.
Customer churn as a in the cloud is a is a very healthy and sense of because Ah. It it is low.
And we haven't seen any a and dramatic.
Changes in that and not in either direction.
Obviously, we Ah you know where.
It it will depend on the I'm kind of the long to sustain the longer term a economic conditions.
And.
Yeah I'd for him.
I'm sorry.
What was the second part of what's your plans to have your employees go back to work in the U.S. and until a deal.
So with respect to our plans in terms of returning to our employees back to our offices. This close we've been working from home really smoothly a in the last couple of months with no interruption to our customers that were working in a across the company kind of in across function.
Oh man or two to ensure that said we're comfortable at the appropriate time to move back in our offices. So we haven't set in stone the other specific timeline, yet to a return or employees and to either a israel or any of our offices and certainly we will be reopening those offices that person giving price.
Due to the countries that are that are more advanced a and where they are with respect to being on the the downside of the curve with respect to cope with it. So you know as we look at our offices, we certainly would expect it to Israel will likely be one of the offices if not the first office that we would look to reopen.
Great. Thank you congratulations again.
Thanks Pat.
Thank you next question is from on the extent of RBC capital. Please go ahead.
Yes, thanks for taking my questions, maybe to build on Dan and Sanjay its questions earlier could you talk about the cadence of business or what customers for doing the quarter during the quarter.
From an activity level compared to normal I guess, you know did you see a pull back in mid March in the license deals or was there actually more activity going on getting customers up and ready to work for home for with she X one at home.
So our overall activity level has Ah it increased and obviously you can imagine I talked a during my remarks about launching several offering to our specifically targeted into helping our customers make this a massive.
Shift.
To work from home or again, a win win when people move the thousands of employees to work from home, it's not simply a it whereas the end of the line for a for the telephone or for their computer. It's a very very different way of working they don't have eye contact with their employee.
Yes, they don't they can't walk the halls and talk to them. So they need a lot of tools that help them keep.
Got it keeps a machine so to speak going.
We've also seen a dramatic changes in dynamics in how employees expects to work from home.
The one then they are they can jump in Ah started working a immediately on the eye, but on the other hand, they expect more flexibility if they need to take a break they need to go into their kids et cetera. So this is a very very different work environment and they need tools to help them not deal with that.
So we've seen a lot of activity a dramatic or.
The increase in activity around that.
In terms of Ah a.
The actual a deal signing as they said we've signed many deals as we were I was surprised that could actually sign without.
Meeting up face to face even one.
And but they did sign.
There are others the a interruptions.
You know we have customers in a in sectors that were heavily impacted some sectors that were impacted for them. It and got positive momentum in some that's got a negative momentum.
Great. Thanks, and then maybe just on the strength in the Americas, 17% growth really strong some of the strongest we've seen in several years.
Passive does that does that largely the response to getting customers up on work from home or there is.
Is there more but on the underlying strength or.
And the Americas growth. It is really very directly tied to our cloud revenue growth overall and a that gets attributed directly to see X. One. So certainly the strength we saw all in the Americas in a quarter was directly correlated and teach you really the grows we talked about the most.
But it really being driven by by CX, one, but also to send them more and more general growth across other aspects of our business as well.
Thank you.
Thank you. That's next question is from Ryan Lynch Rosenblatt Securities. Please go ahead.
Sure Hi, Thanks for the question. That's what did you could summarize just sit at a high level some of the puts and takes that go into the.
The the June guide as it relates to covert 19, and how you think about that and how you factored into your good. Thank you.
Sure. Thanks for the question I, you know as we looked at a Q2 you know the considerations. We took in into consideration were really around primarily there's a different set of mixed model that we have here at night. So of course as we highlighted you know over and over we're highly confident on that.
Cloud growth and how that will factor into this quarter.
Early indications on you know today, we're still seeing large transactional volumes and increases in T X. One on the flip side of that you know as busy as the license aspect of our business and even before coming into a couple of it we we've seen that there's variability from quarter to quarter, which we.
Understand and our on premise a license aspect of our business. So certainly with the overall environment. We know organizations are looking at their budgets and pulling back in in certain a an aspect. So we've taken that into consideration because clearly a you know it from an on premise perspective.
Typically most of the activity and most of the buying happens in the last couple of weeks if not the last week of each quarter. So you have a lot less visibility into a understanding how are you ultimately end up so with respect to the other license model. So we've taken up both of those into consideration.
With respect to our services again, we continue to you know see a the strength and our overall services predominantly with respect to and the support and maintenance, we provide for customers and providing our critical need system.
We're also really focused on driving a lot of the recurring says or services as well, which are also support them. During these times.
Hopefully <unk> I'm, not a decline and visibility is tied to <unk>.
Her segments were touching customers.
<unk> or you know, it's tied to the kind of your travel and leisure. We're kinda exposure do you have to these.
Consumer segments that are really looked looking like going to be hurt for awhile.
Yeah again, a declining visibility is really no different than what we've experienced a pretty cool right with respect to our the on premise business as I said that that's typical that you see the buying behavior or really happening and and the the last couple of weeks ever corridor.
Of course, the difference is that a you know at this time you have less certainty as to if the a those those same organizations will change their decision making process.
At the the very end of the sales cycle. So under typical situations in a normal buying cycle. You know you get to the point, where you're quite comfortable with the an organization's ability to have the budget and commit to to making a oh deal and closing the deal I think.
In this environment of course again, there is that uncertainty, which is heightened as organizations, but ultimately I say I get to the very end of the sales cycle just decide to add to pull back and so that's the difference in what we're seeing today versus a typical corner.
Sure helpful. Thank you so much.
Thank you. That's next question is from Rishi Jaluria of D.A. Davidson. Please go ahead.
Everyone. Thanks for taking my questions I'm glad you're all staying safe and my condolences pets blackens family as well one of the start out by asking about CX. One first let's yes, one at home if I read right.
Offered to no charters for 45 days.
Maybe help us understand what's the path for customers that weren't CX one customers. They adopt she asked one at home.
It is do they you know after that 45 days transition to kind of a a lighter version of CX. One is there an upgrade path to get on the full C. S. One platform I, maybe alongside that tends to follow up on some earlier questions that I would be subject was asking.
On the pricing side. Since you asked one is build in arrears can you just directionally remind us how much of the revenue is kind of off fixed price per seat versus consumption based and then I've got a follow up.
So in terms of the it seems fine at home.
In order to get people up and running in less than 48 hours a week do we have created some pre passengers.
There isn't a a path to upgrade.
For a obviously a ones are up and running and.
For obviously additional lifestyles.
Therefore.
What we've seen in many cases as people start they they get going there started to they start to handle interactions with just kind of think about it as the it like a emergency procedure. There are no. The and then they start expanding to a additional capability.
Okay.
And.
If we if we had created a you know the richness of our Oh their capabilities in Sichuan and they all the option.
If it was an all a car menu then it would just take longer to ER for the customer so even a define what they need.
And so that's the idea and we see that does a as a a potential a plus because again, we've seen multiple these customers come back and expand their their.
Their purchase because.
Ah they want more of the 61 capabilities.
In terms of the the mix. It's one is is building the rears.
Its not a portion of it that are virtually all of it that is build them nobody is.
It is true that there's a significant portion of it that is committed but we still wait until the or is the yeah month is over to see what was actually consume.
And then bill whether if it was below the minimum committed we built a minimum committed to put towards the boat we bill.
The overconsumption.
Okay got it that's that's helpful. I am I wrong in the prepared remarks, you talked already and maturity section you mentioned that you're seeing more interesting Rps and I think it makes sense to all of US that you know RPM is going to become increasingly important in this environment I'm just curious if I'm not mistaken RPM.
He is an on premise solution right now given the environment, we're in and the fact that we're gonna be remote working for a while should be does that I think increase the need for for a.
Cloud based RP, a solution to kind of make it easier to deploy or what's your thought process on that side.
We actually are launched a few months ago, a a cloud capability for our P.A. in response to even before the crisis or is some of the a it dynamics that you just described so you're right and we're on it.
[laughter].
Alright, perfect. Thank you so much.
Thank you. That's next question is from Walter Pritchard of Citi. Please go ahead.
Hi, Thanks question for bets on a on the Europe business was ER was down quite a bit how much of that was just lumpiness. A large deals was there any trend that you saw emerging there and obviously the cobot impact their first and then how to follow up.
Hi, Thanks for the question Walter on really if you looked at the revenue for it for the first quarter four on me are.
The important thing to look at is where we landed in Q1 of the prior year. So looking back to Q1 of 19, a you might recall that we had extremely strong growth in Q1 of 19 of 18%, there's really a a difficult compare.
If you look at the the EMEA region again, you know we have a healthy customer base. There I remain optimistic about the outlook, we've talked about our focus around international expansion, specifically with with CX, one in our international markets, including a me Oh of course as you're looking at sea.
One with cloud it takes a much longer to ultimately or be a apparent in the revenue line item, but we're we're trending in a positive direction there with the growth, we're seeing and CX one.
Great and then around the there was a acquisition in the quarter. It looks like from a cash flow argues that help us understand what that was and where where that technology acquired fits into the product portfolio.
Yes, it's a it was a is small technology acquisition into the financial crime and compliance business that would that help us with certain types of.
Advanced analytics or for a metal processing.
It is a it is primarily a technical capability.
Great. Thank you.
Thank you. That's we have no further questions waiting I will now have Nicole back to Iran.
Oh, Thank you everyone and we hope that to meet you again in our next quarterly call. Thanks.
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