Q2 2020 Nice Ltd Earnings Call
Welcome to the Middle East Conference calls just a phase <unk> second quarter Twentytwenty with folks do you think you also cold chain.
All participants are especially taking a slightly naive.
Following managements formal presentation instructions will be given for the question and <unk> session.
I'm going to this conference is being recorded orcas six twentytwenty I would I like to tend to play so finish the novelty Cohen VP Investor Relations.
Please go ahead.
Thank you operator, well the call today of Rocky along Chief Executive Officer, That's Casterbridge Chief Financial Officer.
On the wrong Executive Vice President marketing, a corporate development [noise].
Before we start what we'd like to point out that somebody in statements made on this call will constitute forward looking statements.
In accordance with the Safe Harbor.
Visions of the private Securities Litigation Reform Act from light you might be fog. Please be advised copies actual results could differ materially from these forward looking statements.
Additional information regarding factors that could cause actual results or performance of the company could differ materially is contained in the structural childish factors.
Sorry for the copies 2000, my cheat on your report on form 20-F.
As filed with the Securities and Exchange Commission on April 620 Twond.
[noise] during today's call, we're presenting more detailed discussion of second quarter 2020 results and the copies guidance.
Following our comments 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 generally talk generally accepted accounting for sports was reflected mainly in California acquisition related revenues and expenses.
Realization of the casual wash its an accounting for stock based compensation.
The difference just between a non-GAAP adjusted results an equivalent GAAP figures Arctic challengers press release.
We'd also like to remind you that we're hosting our virtual investor day on September 15 in conjunction with our interactions life user conference.
Special programs outside investors, hopefully presentations from most executives and product technology specials.
If you haven't received a registration email.
<unk> email us at <unk> <unk> nice dotcom.
I'll now turn the call over to Brock.
Thank you Marty and welcome everyone.
We're pleased to report strong quarter, driven by the other acceleration football cloud growth.
When I left school, we talked about our expectation that's organizations will become more focused one extreme agility.
It doesn't need to respond in record time, so the constantly changing circumstances.
To date three months' neither as evidenced by our Q3 results, we see that's happening at the rapid pace. It does feel well positioned at the Stemco of this effort.
Furthermore, we can clearly see from the changing environment. That's one nice is extremely mission critical to our customers now more than ever.
To our solutions are essential to enable a flexible work from home multiple operation.
In Threed.
Now than they just don't fronts from nations, which are in the core far business.
No the mechanically accelerating in the enterprise due to recent event.
Our strong Q2 performance underscored by an accelerated wrote about 30% growth into cloud.
Demonstrate how well positioned we are together were destroyed so cloud platforms.
Well, it's your metrics were still in.
Total revenue increased 4% to $300 million to $95 million.
Operating income was in 110 $11 million, which was an increase of 10% compared to Q2 2019.
Operating margin increased 163 basis points to 28.2% refer to Q2 last year.
These joint operating results led to a 10% increase in earning for sure the $1.37 cents.
Additionally, operating cash flow increased 231%.
$10 million in Q2 compared to the same period last year.
[noise], we're winning in the cloud because we have the most feeling established proven and comprehensive platforms.
Oh cropped up from.
Capturing opportunities in all segments of the markets <unk> SMB the largest enterprises.
In SMB, we continued to see a Boston meant to Mount New business, signing nearly 200, new logos, each and every quarter for six one alone.
And the higher end of the market, we continue to demonstrate the strength and having the only cloud native Blackstone in dark markets.
We have a significant competitive advantage and a strong leadership position due to the substantial breadth and depth, so far offering which is absolutely critical in order to compete in this segment as well as are many years of experience and domain expertise with large enterprises.
Well also winning into cloud so the largest the fastest growing ecosystem Oh, no both domestic and international.
We continue to sign you keep partners at a rapid pace.
Just recently, we started a partnership with Orange business services.
Service enterprises across six continents.
They will bring six along to the company's installed base 90000 contact center agents, many of which are in Europe as well as other international locations.
We also starting to partnership with converge one.
First one cannot bring six one so theyre very loud on premise customer base.
This is on top of the sitting on your recent partnership we mentioned on previous calls it's what is further partnership.
Clothing with sales for the quarter, Zendesk, Ringcentral zoom and Microsoft.
[noise] well winning in the cloud.
Continued and clear leadership is recognized by many of the independent industry analysts.
For example, nice you're the only Vandal that was named the leader.
Gardner across both the magic quadrant full contact center this service and Magic quadrants Fulfils engagement management.
In another industry reports by Dingy nice was named the leader in cloud I believe so we've had double digit percentage lead over the nearest competitor.
Nice African Wise was also named the leader in the I'd see Marketscape 2020 enterprise fraud management report.
We have the largest cloud provider you know markets and wheel twice the size thumb next largest cloud competitors as well as demonstrating foster growth.
It's all cloud business, we fits very high retention rates continues to flourish, we expect the tool endear <unk> annual run rate of well over well above $800 million you cloud revenue.
Moreover, drink 2021, we expect to cross significant milestones.
I never run rate $1 billion in cloud revenue.
[noise] six one continues to drive all cloud business.
These unique in the customer engagements market and that did he is the only 40 integrated native cloud platform that incorporate omni channel out being workforce optimization analytics.
Six one also boasts an ecosystem 100 to 60 independent software vendors building solution on six one.
Bob going marketplace quotes exchange on which still soft event or tends to other solutions.
The continued success of six one is evident in the numbers.
We're seeing an increase in the number and the size of deals in all segments of the markets, especially in the large enterprise.
We continue to witness displacement of incumbent on premise providers.
To date, 80% of six wanted tone, we tried customers has committed to a paid subscription.
Demonstrating the much needed flexibility that we provide two organizations as they move to work from home.
We saw a dramatic increase in the Nondeal seven figure deals signed this quarter compared to the second quartile of last year.
We signed a seven digits cloud they seem to be dealing with a lot it's consulting and services company in a way to replace the on premise legacy incumbent.
[noise] [noise] as we started multiple deal, including a seven digit ATV deal with a large state agency.
We signed to seven digit cloud deal with the well known media streaming company as well as a seven did you deal with a large financial services company <unk> they'll from swarming to common cloth lots of them.
In addition, we continued to six celebration you know R. P. A business signing multiple new logos as well as significant expansion deals with existing RPI customers.
For example, we signed a large seven digit expansion deal with a very big global home furnishing company that they standardized on our our P. A solution.
In financial Carmen complaints were singing increase in the number of customers leveraging to keep the abilities tools and analytics before excites cloth platform.
In addition, the number of partners building solutions Unexcited Blossom continues to grow.
We now has more than 50 partners on the psych marketplace.
We continuing to see an increase in cloud girlfriend financial Klarman compliance up triple digits percentage you over here, it's our excite cloud classroom continues to gain traction.
We signed several seven digits crowds, including one with a large global bank, replacing the incumbent we saw cloud AML unquote offerings.
We signed another seven digit cloud deal with a loud domestic bank.
They needed the flexibility off the clouds bloodstone, along with the ability to expand with nice big room.
Signed an eight digit deal with a large insurance company extending their relationship with nice for for the name, though as well as a seven digit deal with a very loud Canadian financial services institution.
Public safety club classroom also continues to fries is nice investigate games more traction.
Thousands of public safety organizations have yet to embrace the cloud, giving us tremendous opportunities to bring the end to end evidence management market into the crowd with the nice investigate cross platform.
Just this past quarter, we continued to sign noon ninth investigate customers, including two large public safety organization in the U K.
We also signed the large government state agency for nearly $60 million to enable their digital transformation over the next few years.
And the current situation continues to unfold we are in unique position to further accelerates the faithful for innovation and waiting to get compared to our competitors.
For example, we just recently announced a significant break food with our lunch a thrill time interaction guidance powered by a proven the I technology called enlightened.
If this new solution.
Behavior other models helped to predict agent behaviors that directly drive customer satisfaction.
Nice and Lightning technology is an integral part of the six one platform refusing AI into old customer engagement processing.
In conclusion.
It is clear that changes did it changes taking place in the environment Oh, no no no longer just temporary in the minds of business leaders and therefore rethinking the need for agility is now if part of the long term plain.
We believe that we are clearly in the best competitive position to catch all the opportunities ahead of us in this rapidly changing environment.
T strategic parts of organization current and future plans.
The reasons, one nicer extremely mission critical to our customers.
To our solutions are essential to enable at work from home Motor Corporation.
And three <unk>.
Cloud in digital transformation, which are and decor for a business I'll know dramatically accelerating India enterprise due to recent events.
And finally, it has been our tradition that we meet with many of you in person, it's our annual investor in conjunction with our interactions user conference.
This year given the circumstances were bringing a conference to you the industry largest mutual event interaction light.
And we look forward to hosting all of you.
I will now turn to call over too bad.
Thank you Brock and good day, everyone I'm pleased to provide the analysis of our financial results in business performance for the second quarter of 2020, [noise] as well as our outlook for the third corner.
[noise] total revenue for the second quarter reached $395 million, an increase a 4% from $381 million in the same period of last year.
Your total revenue growth was driven again by a strong cloud performance cloud revenue increased 30 per cent in the corner and reached $186 million.
Sequential grows in cloud revenue between the first and second quarter of 2020, nearly doubled compared to the same period and 2019, demonstrating the acceleration we're seeing in our cloud business.
Cloud revenue continue to grow as a percentage of our total revenue accounting for 47% of total revenue.
Product revenues accounted for 10% of total revenue and the second quarter and service revenues accounted for the remaining 43% a total revenue and the second quota.
Moving to our business breakdown customer engagement revenues for the second quarter, where $323 million, 83% increase over the same quarter and 2019 and represented 82 per cent of our total revenues.
Financial crime in compliance revenues for the second quarter, where $72 million, an increase of six per cent and represented 18% of total revenues.
Looking at Geography's Americans news with 317 million and the second quarter compared to $307 million for the same period last year.
Revenues in EMEA, we're $45 million and the second quarter compared to $48 million last year, and a pack revenues and the second quarter or $33 million compared to 26 million and the same period last year.
And now to profitability <unk>.
Gross profit and the second quarter reached $281 million compared to $271 million and the second quarter of 2019, and gross margin reached 71% similar to last year.
The strong performance of our club business. There's also evidence and the class gross margin as an expanded by 430 basis points and reached 65, 7% compared to 61, 4% and the same quarter last year.
<unk> continued to expand our cloud operations internationally, while simultaneously expanding our cloud margins due to our substantial operating leverage.
Operating income increased 10% two $111 million and operating margin was 28.2% and increase of 160 basis points.
Earnings per sure for the second quarter grew 10% to one dollar and 37 cents compared to one dollar and 25 cents and the second quarter of last year.
Cash flow from operations in the second quarter with $68 million, an increase of over 230% compared to $18 million and cute to 2019.
The increase is primarily attributed just wrong collections.
Total cash and investments at the end of the quarter reached 1 billion and $103 million.
At the end of the quarter total that was $470 million native insurance costs and the equity component associated with our convertible that.
Turning over to guidance.
Given the continued uncertainty and the current environment. It is challenging to predict are license related revenue and consistent with our direction from last quarter, we're not providing guidance for the full year 2020. Instead, we will continue to provide only quarterly guidance at this time.
Well a license related revenue is harder to predict are clad business remains consistently strong as reflected in our class growth and the first half of this year.
We continue to see excellent demand for our cloud solutions unexpected continued strong growth for the remainder of the year with an expected and of the year annual run rate of more than $800 million and cloud revenue.
As we see rapidly increasing cloud revenue and as we have highlighted in previous quarters, we expose both our revenue and our profitability to continue to be more evenly distributed among the quarters.
Our guidance is as follows.
For the third quarter of 2020, we expect total revenue to be in the range of $403 million to $413 million. We expect the third quarter of 2020 fully diluted earnings per sure to be in unexpected range of $1.33 to one dollar and 43.
I will now turn the call over to the operator for questions operator.
<unk> T. If you wish to ask a question. Please <unk> split probably won't on your telephone if your questions pay Nancy told you wish to install it.
<unk>. Please P. <unk>. Please turn thigh for you first question.
[noise] <unk> question comes from the line so M C.
<unk> <unk>. Please go ahead.
Thank you so would Oklahoma good day, everybody congrats on the ongoing consistent execution.
Barack though the account for four months is really stomach yeah. This quarter, none of that they're making little thing.
<unk>.
27 per cent last order 30 per cent.
This order I think he also implying probably about 20 per cent schools, that's spelled thinking about physical 21, and please pull up that try to to take I know that you've mentioned some of the drivers behind it and you're prepared remarks, but can you provide us with slightly more color R. O D cloud went through the bike.
Placements Green put up with Tomatoes is there any specific vertical which is buying more clouds binoculars and maybe what's typically the average clunk with fries or the cloud related engagement and I have a follow up.
Sure. Thanks so.
So if I could give a beautiful color and indeed, we see an acceleration in the crowd business Doctor to begin with was very strong and we're also important to notice that though to dimension that this is a globe over pretty big.
Cloud the revenue that we have a pretty big base as I said significantly bigger than the next <unk>. So we have in the market <unk>.
We see three main drivers related to the kind of the current situation, but the drive in golf club business I would say that one is.
More of but let's go through the first one so the first one is.
All our solution and for sure cloud solution, we see and as a result of the current situation arm mission critical.
Industrial Vitus is very strong strength to the business and we the result of that experiencing very high retention rates an expansion opportunity just from the fact that we are the cloud incumbent with many of our customers.
The second thing that they can driver is more calling for short term and meat there.
Is organization.
You know moving to work from home or now trying to enable and even third of them more flexibility being able to toggle between work from home and woke from everywhere.
Solutions are central to enable duck.
A lot of organization, but the experienced that's moving painful way with their own premise legacy solutions backing March now coming to us to displace.
There are other vendors with your own premise, one and moved to our solutions, which are essential in order to enable very flexible work from home modification.
And a long term a little bit further into the future.
Oh of course, our business in the corner of the strategy that we have.
Is banking on different formation of organizations, both of the cloud and to visit.
And we see very large enterprises that we thought will drive those transformation only two fingers down the road.
Starting to move those much move the fourth.
And do it much faster than the originally thought as a result of the awesome method you'd like of covered 19. So these are the key driver.
As I mentioned on the example that they gave me it's actually cause many different verticals.
Even verdict cause the considered to be less.
Foster react like government in states I'm moving very advanced into these for information as I've mentioned.
With respect with a side of the <unk> the outgoing in a rapid pace.
Do two two fifth first that we are going foskey upmarket and signing much bigger deals than in the originally N D. S. M D.
Second since we are the only provide though that provide such a breath of offering with a complete blood phone with six one for example.
We did that are we getting much more in terms of for a T V because of the desire of customers to standardize and the mustard portfolio then Jim justifying solution.
Got it got it a medium coke.
Thinking about that can happen for 2020, what what's the current thinking about Ohio link.
Yeah. So we have continue to a higher both in the the first half of this year and we expect that hiring to continue on to the second half of this year, you know broth tractor specifically today around innovation and the importance of that in in our leadership position in the market more generally.
And even looking at cute too you can see the impact of that as as we are continuing to invest heavily in in our R&D efforts and will continue to focus on there.
Got it thank you come back again.
[noise]. Thank you.
I think he you next question comes from the line send that seminar Okay. Let's check. Please. Please go ahead.
Ah Gomorrah named interesting my questions bracket to have you have your back on the call as well and congrats on a on a great corner. So maybe just a following up on the last question around deals and in the increased shacking up market any change in either who you're displacing or who inside of the.
Organization, when you're selling a deal was making a decision you know we've heard that <unk>.
Increasingly you're getting you know see level and board level decisions given the disruption that's happened from working from home. So I'm just curious if you're seeing anything in that regard and then I have a couple of follow up.
Yeah. Thanks, Thanks for that.
I wouldn't say that there is a dramatic change due to the current situation, but we do see that a lot over organization Ah that experience where does it take to have their b B C people and execute to the back in March.
Having the sea level initiative to make sure that they do move into up to call. This agility. So it's he's do you live a driven and there are special budget starting to get allocated to that the.
<unk>.
Some aren't they can get a relatively tactically like let them fast and somehow moving much border.
And so I would say that we do getting more and more visibility to more so you live alone, though even before Arthur listen used to so to be sold to it's pretty you know senor people.
The other thing that I I I seem to market is that.
The whole notion of customer service for example.
[noise] and customer engagement as a result of what happened back in March the only the realization that because it's very critical parts of for every BCP plentiful organization, they need to be able to stay in touch would feel customers consumers and city then.
That have high demand of communication, while you're.
Executing on you'll be see people and.
So it's elevate the criticality if you'd like of customer service in the customer service wrong in the BCP plans of play organization.
I'm very very helpful. And then maybe just you know on the on the free trials that were were brought up on on the earnings call last quarter and then it is you just think maybe have how's conversion activity you been there and alright, you know now that you've seen it that's something that's driving your customers how should we think about.
Maybe extending that Ah just on a on a go forward basis, the the free trials.
So to date, we have seen 80 per cent of all six one at home.
Trial that we had.
Converted too long term commitment bay commitment by customers.
And that's what we've seen so far behind the man, who decided to extend it instead of a market.
But it's also enable us to somewhat we can change or go to market in the way that we have enabling those type of trials in a very fast.
And deployment in an excavation.
Gave us a cellphone realisation that we can do things they've been much faster.
So we're very happy with both the conversion as well as the realizations of how we can round the business moving forward.
Great and then maybe Bath one for you on on Fanjuls I know that international what is a priority as far as investments go I guess any change in the in the near term investment philosophy of where maybe <unk> or expense hours are hiring or being allocated between you as an international.
Yeah. Thank you. Thank you for the question specifically international is a focus for S, especially as we were continuing to expand our cloud business an internationally and certainly as we have looked over the past several quarters, we are promoting and and investing.
[noise] in those areas to to help promote that that rapid expansion. There. So we continue you'd expect that international gross and specifically or around the the cloud platforms.
Great. Thank you for taking my questions and congrats again, I'll I'll, how about a a Q.
Thank you thanks.
N T. You next question is from San <unk> C. A smoking. Some me. Please go ahead.
Thank you for taking the question and congrats on the exceptional cloud grilled about 30 per cent is definitely very very impressive.
On that front <unk> on the sort of composition of the classic I was wondering if I could get some more context around it it to what extent has a club growth been sort of it's celebrated by seasonal seatbelts or an uptick in seat counts.
And that normalized blinked going into like into the second half and then more more broadly as you look at the large enterprise document what I wanted to get a sense is your customer acquisition cost coming down meeting that is it easier to bring on new deals are seal cycles short drinks.
So that they should see.
Wiring new cloudy are are.
[noise] any sort of comments on kind of a use it economics the club business. Thank you.
Sure so, let's let's filled or the first one about the comment about the seasonality or any additional color. So you know first of all we do have Susan another peanuts cloud business.
And I'll I'll remind you lived in every year. We have we have this is not let's see depending on the vertical et cetera, and we'll have to see how the rest of these days out in terms of if there's another thing.
No doubt the current.
Situation cause certain birthday cause to have a higher volume what other had laura volume, but that will that too. Good. The majority of the girls just the defensive there's more customers more food.
More deal.
Foster activation and you've got all of that together. This is what brought up to the onto the 30% growth which of course, we're very happy with it would also provided some color about our expectations for the rest of the year with the runway the run right. We believe that the end of December we will be.
Much higher than the $800 million did you say.
And crossing the 1 billion Tomorrow sometime next year about the customer acquisition cost and the answer is yes. It did go up market and you're signed larger and larger deal.
At least in the way. The three operates we believe that there are unit economics Ah improve improve it had been dramatically.
Also believed to the fact that the cloud and the customer engagements market in financial come in compliance and <unk> and also in public safety.
Letting to become much more of a mainstream.
Sell psychos auditing shorter there is much less if at all need to educate customers white cloud.
Going through certain tries and things like that and by definition Duck a short on the fifth like an adult of that reducing the.
Cost of acquisition of customer.
That's that's great to hear and just one follow up on on the traction with the large enterprise if I remember maybe from from earnings called maybe a year or so ago. You guys were penetrating the large enterprise, but kind of at a I I didn't want to say departmental level, but just sort of a large enterprise customer maybe expanding at a particular region.
Or a particular geography can you give us a sense of what's different in July or now versus versus last year terms of the size of the of the deployments that the customers are looking to <unk> to get on board with <unk> is it a much more larger standardization.
[noise] typed appointment versus a a a sort of trial on a specific region any sort of color on how the sizes on the large enterprises deals or changed today versus versus maybe four or five years ago.
I would say generally speaking the difference from a year ago and it does related thank those girlfriend realization and clarity organization got to do to their experience with addressing the covered 19 is that they see your.
Ago, we still large enterprises.
[noise] towards cloud.
I'd say now there are rushing towards clubs.
And the reason is that the understanding that they need two completely change the approach that they have in their infrastructure research there technology steak and see the benefits.
And the benefits they just being how clouded essential.
Order for them to respond.
To highly dynamic environment. So that's that's just change that that we see and as you said it's lost your we talked a bit about large enterprises deploying eat and you know and department or something like that.
Today, there is much more empathize to advance much faster in both digital and clouds information and things with both would happen to a few years down the road.
I'll I'll I'll put forward to now and we see an empathetic to go only and if you'd like on both cloud in digital.
Thank you Barack in Nebraska.
Thank you.
Do you next question comes from the line <unk> S. T. Please go ahead.
Hi, Thanks, I'm wondering if you could talk a little bit a R. P. A U highlighted it more in the script I assume you're not ready to start breaking up that business, but maybe help us understand what the source of what it seems good it sounds like an acceleration isn't that business in any order of magnitude you can give us on the on the size of that in terms of your revenue.
Yeah, I think we're starting thanks for the question I think that's what we're starting to to see is let's call. It a R. P. A.
<unk>.
In the past two years, what we sewing R. P. A is F adoption of what's it called I'm offended robots by many many enterprises that so the value and Ah actually still many of the low hanging foods. They can address we've.
Honest and that's all Boston Indeed, many many enterprises deployed in here and there are different problems and and most deployments were relatively small both in terms of the footprint and in terms of the the dollar value.
What we see right now is there any relation that in order to take our P. A and the mustard will strategic level in the enterprise.
Two things are important and smaller good enough just to automate Microsoft's is like college and if you really want a game the full benefit and <unk>.
There needs to tickets moles strategically in the sense that they need to augment it with the manpower to smoke and different back offices and this is our approach of attended R. P. A meaning to puts robots together with the manpower human beans, and combining the two efforts together.
Second thing is injecting or would you be using a lot of AI capability. The machine learning in order to enable more sophisticated automation scenarios. So this was lucky C. As a result of dot what do we see is.
Larger expansion with both existing customers as well as new customers that are taking it most of food. So physically then just buying a few few box.
I still believe that we are in the.
Early evening in this market is it's still it's an infant thin I cause it's kind of <unk> two <unk> Oh, I think we'll have a few more generation.
And there is a very long and help you run right.
Great position, because we also have the domain expertise we've done that in the conflict central market. We optimize this market for many many years and now we're bringing both the technology unique are period technology that we have together with domain expertise of how do you optimize processes to a market that is broader.
Just them to contact center markets Ross.
And could follow up for Beth on on sales capacities would think about cloud how can we think about your your broken feels capacity around cloud as we as we head into 2021 or are you looking to add rats with the sort of pacey, we're adding you know either adding him now we're adding him six months ago or do you picked up the slow.
[noise] down to speed up specifically around cloud.
Sure. Thanks for the question Walter generally as we look at our our ourselves organization I'm looking forward for the rest of the year and moving into 2021, we we generally expect Keelage continue at a at a similar paste it what we've had in the past.
Great. Thank you.
Sure.
<unk> question is from the line Samuel S. A sweat. Please go ahead.
Yeah, Thanks to <unk> <unk>, when you're thinking about within the next year.
Just give them the cloud grew up that you see and do you think the bigger opportune is new logos replacements or continued penetration existing customers just going to the the burger crowd strategy.
Thanks for the question.
Well the answer for US is is is both and I <unk> further explained I think that the.
Well the beauty of our crowd transformation of the company is that it's not just taking our own on premise customer base and transfer it to move it to the clouds and of course, a few years.
And we've seen in the last two years, but also into the future.
The benefits crosses that's real doing both.
Seem to eat to cloud.
In a much broader aspect and just what we used to do with the company in the <unk> pardon me.
Most of the clouds business with you can fill phone was thinking market.
And domain well, we did not operating as in on premise provider. So that has been most of alcohol Grove so far.
Same time and while this will continue I believe in and dramatic way don't forget that can most of our market penetration of cloud.
Feel roughly it somewhere in the 15% so the still a very long way to go and tremendous opportunity, but on top of that there's an opportunity for us also too.
Convert our own on premise products into the cloud. So that's the tool combine through a great opportunity for us moving forward and we also see existing customers with flowers already moved to the cloud, giving the fact that our platform I'll not just going to loosen, but they'll all very Y as in terms of.
The offering does we have a lot of those customer they'll know adopting.
More and more if our offerings, meaning expansion opportunities, especially in the areas of analytics, an AI and also is different for me to visit though.
Great. Thanks.
T O next question, it's from the line also occasion.
887. Please go ahead.
Hey, guys as as I wish you Gonna get some da Davidson.
Thanks for taking my questions I'm, I'm really nice to see.
Continued acceleration Macleod sobs wanted to start by asking about the recent acquisition of Garden <unk> I was wondering if you could give us a little bit more color on on the strategy for their solid kitchen with that would be actually see side of the business and maybe how it can.
Accelerated cloud I'm I'm, not Saddam and I've got a follow up.
Yeah. Thanks for the of questions. So we did announce the acquisition not so long ago, and very appealing to phase of the regulatory approval and.
We believe that we can feel close the deal before the end of the year pending of course on Deregulatory approve of from our strategic Air perspective, we announced the deal what we still have Guardian is a very unique.
Technology that will enable us to further.
Accelerate and a mental fraud capabilities and a financial Carmen compliance business as well if they can do to.
Other aspects they'll find out all financial Clement complain.
And in the middle part.
<unk> see in a few other places so the technology thick and the ice tea Garden has will help us to both of those solutions and as this markets. Overall is also starting to migrate to the cloud I referred in my earlier remarks that this quarter different.
NASA klarman complain for business and specifically excites.
Grew double triple triple digits percentage wise.
On the clouds.
That can also help us to accelerate that farnsworth because it is when you deal with the I.
Is much more favorable to inject AI to cloud solutions because of the accessibility to data.
Alright, great that's plausible.
And then that for you wanted to touch it a little bit on cloud gross margins and saw some really nice I'll go with Martin that's nine seven 430 basis points.
Over a year, but what led to that margin that sounds familiar with that Ah revenue mix and Ah infrastructure efficiency benefits of scale.
Allison.
Maybe.
[noise] today, if it was kind of the direction apart gross margins going forward or or actually because without that line.
Thanks for the questionnaire <unk> as you highlighted we had very strong a cloud gross margin during the quarter was actually an all time high of just under 66%.
And it is a trend we expect to continue to see it's really reflective of the the strengthen our cloud business and the rock is talked a lot about our move more into the large enterprise.
And as we shift even further into leather large enterprise, what we see with that as we have a higher attach rate of the software that we're selling on our platforms and that comes at a higher margin relative to the the network or telephony component that leave highlighted in the past so as a person.
Sent in the next we're selling more software.
Again is expanding as well as our average contract value of ourselves in our AC that we're signing so it. It is a trend that we can expect to continue to see in our cloud business.
Wonderful. Thank you so much.
Your next question comes from the line.
Kathy Rosner.
Please please go ahead.
Hi, Thank you for taking my questions My most of them I've been ask.
I had one operating expense I guess when you look at the current situation with most of your employees nuts.
Traveling taking flights I guess some of them working from home.
You guys Oh thing conference is virtually.
Are there any structural savings that you can he can keep you even posts and they make that would.
That you can sustain and that would improve euro structural margins.
Yeah. Thanks for the question Tabby <unk>, you're correct that given the the recent events. This year, we have been able to <unk> reduction in cost savings.
Certainly I should go through times like this it does give you the opportunity to kind of further dig into all of your expenses. It's always been extremely important it nice that we're very prudent when it comes chela cost management.
And so absolutely we will be able to be able to retain some of those savings.
As we go on beyond kind of the current situation and.
Looking for it and into the future. So we will be able to to retain some of the benefits and some of the other changes we've made internally here at night.
Great. Thank you and congrats on those don't really go.
Thank you. Thank you.
Your next question is from the line Oh Hot Rowland J M. C. Please go ahead.
Oh, great. Thank you and congratulations.
Hey, Beth just I just want to make sure I understand so for.
The cloud run right when we say 800 million by the end of this year that mean Q4 will be north of $200 million right.
[noise] Hi, Pat. Thank thank you for the question generally when we talk about the the 800 million run right.
Cloud business for revenue, what we are talking about the the run right. We expect to exit with however, we're confident in saying that that we expect it to be well above the 800 million Mark.
Yeah cause I was gonna say, your where the street's already there so the well it got got it with a well above now when you look at what you said for next year that sorta more interesting. So there if you're saying north Vermilion, we're talking about two for being north of 250, right and that is sort of well above where I am. So I just wanted to make sure we're interpreting that right.
So we we specifically of highlighted again, the 800 million Mark as as we exit this year. So I think in terms of the the growth that we're talking about on cloud. That's what we're seeing as I said, we expect to be above that but that's kind of milestone we expect to see this year and N as in Ohio.
<unk>.
Really excited and highly confidant and being able to surpass the other 1 billion.
Milestone of cloud run right in our revenue next year.
Wonderful, Okay, and then <unk> you know it's been two years now since matter site and I think.
When you bought it was $50 million business I know you had to make a ton of changes and now it's part of your analytic solution How's it working out.
We're very happy with the acquisition of another side. The reason why we acquired Metaphyte was less about the revenue which was a mix of.
Some overlaps or existing business, but we acquired maritime because of their.
PBR predictive behavioral.
Routing technology and they intend can exist isn't exactly how we executed does look to embed that technology to six one.
The order to give us a very unique capability.
To our platform and that's exactly what we've done invested in the past couple of years.
Mainly on that front, what you're thinking the technology and embedded into a into fix wanted today. Indeed, when we go out there to the market. It gives us a tremendous.
<unk> advantage.
As we go ahead and.
You too take the market with six one.
Great. Thank you very much thank.
Thank you. Thank you.
And you next question is from New Orleans, Oh, Brian.
Is there anything securities. Please go ahead.
[noise] hi, congrats and thanks for the questions on the.
Six one go to market partners as you move up market there in the cloud and check on bigger enterprise deals that you talked about.
How he positioned to handle the demand for professional services for some of these deals do you work with the the global S eyes or you know how much of that you bring in house versus outsource I have a follow up question as well.
Sure. So the answer is I guess all the above.
We of course, some customers would like to get those professional services and consulting services and met services from off but we have today.
Sort of experience with some great partners and they are great opportunities for <unk>.
They go in Philadelphia Vulgar services.
So if if we have a partner that can do the work will of course will be very happy to hand, it over to a partner and it's not very different from what within the in the mid the market.
That's the main difference of today versus a couple of years ago.
As I.
Said before and on the Oakland some previous cold is that we go in and sign a lot of new partners some of them all the bars and some of them or a side.
And especially as we go to the international markets will we have less presence in terms of professional services. There are critical and our ability to expand so we're very happy with this expansion and from our perspective.
Customer prefer to have that work done by a thousand would be very more than happy doing good department to do the work.
Great and just a follow on on the international comment there because you're moving to these new markets.
How repositioned to handle some of the local infrastructure there as far as G. D. P. R at the local Donna silent thanks.
Sure. So first of all knife Ah even before died before the cloud we we had a lot of the presence internationally. So it helps us a lot and I'll take the cloud over.
That history that we have and many different territory's, including the legal entities and other ask that you you talked about and we have that experience.
As we started internet time expansion efforts and both several years back.
We already put into a plan and executed many different aspects of localization dimension G. D. P. R.
Other <unk> other localization aspect, so well well into the execution on those in every.
Until geography will we operate in we are fully comply with the local regulation and local infrastructure and privacy and so on and so forth.
Don't forget that also a few years back we also sign many.
Customer that there may be based in the U S, but have international President's with different franchises and branches. So that's walk was done already several years back and what's your expanding right now is mainly I'll go to market capabilities.
In those international markets.
Excellent. Thanks, so much for the answers.
Thank you.
Thank you see your questions I would know I liked to tend to cool lazy to correct <unk>.
Thank you for joining us today and as I said before we look forward to see all of you.
Grilled short event interaction lives in September Thank you and have a great big.
Okay.
Thank you actually wanted to a medium that complete your cool keeps disconnecting lines.
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