Q3 2020 Nice Ltd Earnings Call
[music].
Welcome to the Nice conference call discussing third quarter low twentys when she results. Thank you all for holding.
All participants.
Our presence in a listen only mode. Following management's formal presentation instructions will be given for the question answer session.
As a reminder, this conference is being recorded if I'm a top 2020 I would now like to turn this cold over to Mr., Marty Cohen VP Investor Relations.
Knox. Please go ahead.
Thank you operator with me on the call today are Peracchi, along Chief Executive Officer.
<unk>, Chief financial Officer, and around the Ron Executive Vice President of marketing and corporate development.
Before we start I would like to point out that some of the statements made on this call.
All constitute forward looking statements.
In accordance with the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995. Please.
Please be advised that the companys actual results could differ materially from these forward looking statements.
Additional information regarding the factors that could cause actual results or performance.
So the company to differ materially is contained in the section entitled risk factors in item three of the company's 2019 annual report on form 20-F as filed with the Securities and Exchange Commission on April 620 Twond.
During today's call we'll present, the more detailed discussion of third quarter 2000.
Only 20 results and the company's guidance.
Following our comments there will be an opportunity for questions.
Let me remind you that on that unless otherwise noted on this call we will be commenting on our adjusted results of operations, which differ.
Respects from generally generally accepted accounting principles.
As reflected mainly in accounting for acquisition related revenues and expenses amortization of intangible assets and accounting for stock based compensation.
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 to Barak.
Thank you Marty and welcome everyone. We are pleased to report a very strong Q3, driven by continued rapid acceleration in our cloud business cloud.
Cloud grew to a record 35% and now represents 50% of our total revenue, which is a major milestone for.
Yes.
We also reported 10% sequential growth in the cloud compared to Q2, and we already suppressed the more than $800 million in cloud revenue run rate that we had expected by the end of the year.
These strong cloud performance underscore the solid.
Well the overall with total revenue, increasing 7% to $412 million.
Operating income was 100 $117 million, which was an increase of 10% compared to Q3 2019, and operating margin increased 95 basis points to 20.
8.3% compared to Q3 last year.
These strong operating results led to an 8% increase in earnings per share to one dollar and 41 cents it.
Additionally, operating cash flow increased 20% to $99 million in Q3 comp.
With regard to the same period last year.
The acceleration and I'll talk about goals is being driven by several factors, including subset substantial growth in new customers rapid adoption by large enterprises.
New verticals that are now more than ever embracing the modes.
Service and digital transformation that has become front and center for organizations of all sizes.
The strong demand for our cloud solutions from new customers can be seen by the large number of new logos, we continued to sign each and every quarter inch.
In Q.
Three alone, we still an increase of over 50% in new logos compared to the same quarter last year.
Many of these new customers are coming from the continued rapid adoption of our six one cloud platform.
Enterprises in all segments of the market around the world recognized sticks.
Swan is the clear market, leading cloud platform to help them deliver on the cloud and digital transformations.
The adoption by new customers is being driven by an acceleration in the market around cloud and digital.
It is also being driven by the success, we're having with al Gore.
Growing ecosystem of partners that are reselling, they'll cloud solutions as well as further penetration into the international markets.
In addition, many new six one customers were the result of an over 80% conversion rate of fixed one at home to a paid subscription.
We are the largest cigarettes provider in our industry doubled the size of our next largest comp largest competitor and we are reporting faster growth.
Much of our all much of our outperformance is the result of our significant competitive advantage in the large enterprise.
The large enterprise market, which.
<unk> defined as enterprises with over 750 agents continues to accelerate and is helping to drive the fast growth of six one.
The next one is the only platform to date that can effectively scaling to both the large and Mega enterprises.
This is because it incorporate.
The seamless integration of Omnichannel routing workforce optimization and analytics all on a single platform.
Furthermore, with over 160 independent software vendors building solutions on our six one exchange marketplace, we both the largest ecosystem of partners in the industry.
Three.
Many of our Q3 deal for six one demonstrate our continued ability to capture share in the upper end of the market as we continue to displace the incumbent on premise providers.
We signed a seven digit HCV deal for six one with one of the largest hospitality.
The operators in the world, replacing the two incumbent on premise providers.
We also signed many expansion deals for six one as customers continue to come back to add additional seats and solutions.
One of those was a very large auto credit company, we signed a seven digit cloud deal with one of the.
Largest global banks also an expansion deal with a longstanding customer to add additional seats.
We signed a seven digit expansion deal for analytics with a longstanding financial services customer into analytics expansion deals with a very large existing telco customers.
There was also a seven.
They see the cloud deal with a large business process Outsourcers, who took on several of our cloud solutions.
Our strength in the large enterprise and also received recognition from industry analyst.
In fact, we were once again named the leader in the 2020, Gartner Magic quadrant for context.
On the service support.
Nice achieved the highest overall position for its ability to execute and has been placed as a leader every year since this magic quadrants inception.
In addition, the recent Forrester wave contact center as a service report identified six one as.
The leader in the market, we have six one receiving the highest possible score in the market presence category and securing top ranking in the current offering and strategy categories.
Our leadership in the cloud and the resulting gross is also being driven by new vertical.
Centers that are embracing remote service.
Among those verticals, our government and the new breed technology companies, which are growing rapidly and recognizing the increased importance of the need for agility and flexibility in their customer service operations.
In the government vertical.
We see continued strength in both local and federal augmented by our federal for duration for six one.
For example in Q3, we signed a seven digit ACVC X one deal with a very large government healthcare organization.
It took only two weeks to sign this deal for thousands.
Agents as they could not scale with their existing on premise providers, which we replaced.
There was also the need for them to turn up quickly and rapidly scale up and down as needed to respond to varying varying level of demand, which demonstrate the enormous flexibility and agility.
Most of the six one platform.
In technology, we signed a seven digit cloud dealing with large sharing economy provider for a portfolio for our analytics solutions, including our new enlighten EHR platform.
Enlighten leverages cutting edge AI and machine learning to identify.
In model, many different behavioral patterns to help predict business outcomes.
There was also a seven digit cloudy with a worldwide streaming music provider.
While there is no doubt that we are in the midst of the digital transformation among enterprises of all sizes were.
Strong demand for an omni experience in those transformations.
In other words enterprises don't want to make the same mistakes as in the past by stitching together digital solutions that operates in separate silos.
It is inefficient usually unproductive inflexible.
Bill and costly.
Renter, they demand a single platform in which all the different digital channels are similar seamlessly integrated this.
This is were six one is clearly differentiated with all those 30 seamlessly integrated digital channels.
So nice we are in a prime competitive position to.
To capture the opportunities provided by these changing market dynamics is native digital solutions are at the core of our business.
In fact, just this past quarter, we witnessed a 91% sequential increase in digital volumes for six one and a 154.
4% increase year over year.
In Q3, 50% of our new six one deals included digital including an online consulting service, a commercial water management company and a business process outsourcing.
The impact of the digital transformation.
Reaches across all our businesses, including financial crime and compliance and public safety.
In financial crime and compliance the digital capabilities of excite and exceed our driving cloud transformations and in fact, we saw 150% increase in cloud revenue in this segment.
And in Q3.
Digital banking presents a tremendous growth potential for us is we're starting to see increasing data monetization opportunities.
For example in Q3, we landed additional data acute deals as the banks feel pressured to materially reduce.
The time to onboard new customers in.
And therefore need to dramatically improve the processing of data from external sources.
Moreover, excite is becoming an industry hub for banks to advance their digital transformations by leveraging the excite marketplace.
Nick site marketplace in the industry's first ecosystem for financial crime and compliance to enable third party innovations.
To date, we have over 50 marketplace partners.
Together with these partners customers can access multiple data sources and applications.
All in one place.
We're also facilitating cloud and digital transformations in public safety.
Just recently, we announced the launch of our evidenced central marketplace.
It is the first open digital evidence management ecosystem of technology vendors.
Geared towards law enforcement in criminal Justice agencies.
The marketplace will greatly enhance the value of our evidenced central end to end digital transformation platform, which includes denies investigate and nice inform solutions.
Through the evidence central marketplace law enforcement.
Meant and criminal justice agencies gain access to a wide variety of best of breed technology solutions are critical to the investigation process.
In all of our markets in which we operate enterprises and organizations of all sizes are heavily engaged in the cloud and digital.
Transformations we.
We witnessed this first hand at our recent user conferences.
Interactions in September of our customer engagement customers and nice engage in October for financial crime and compliance.
Both user conferences had record attendance it was a great opportunity to show.
Yes, our market, leading platform that provide extreme agility and flexibility to our customers 12 facilitate these transformations.
In closing as cloud and digital are beginning to become mainstream we are in a prime competitive position to capture the opportunities ahead.
Oh, though will be on we are only at the very beginning of this evolution in each of our market segments.
The total addressable market. So nice is huge and continues to expand we believe the current market opportunity is about $6.5 billion for nice and we and we.
See that expanding we sit at expanding to over $17 billion over the next five years.
I will now turn the call over to Beth.
Thank you Barak and good day everyone.
I am pleased to provide the analysis of our financial results and business performance for the third quarter of 2020.
Well as our outlook for the full year 2020.
Total revenue for the third quarter reached $412 million, an increase of 7% from $387 million in the same period of last year.
Total revenue growth was led once again by a remarkable cloud.
Performance with a record growth of 35%, reaching $204 million and already exceeding the more than 800 million dollar cloud annual revenue run rate that was expected by year end.
The sequential cloud growth between the second and third quarter of 2020 accelerated to 10%.
As compared to 6% last year.
Another milestone for nice with cloud ran to reaching 50% of total revenue compared to 39% last year.
As a result of the strong cloud growth recurring revenue continued to increase and accounted for 81% of total revenue.
Compared to 74% last year.
Product revenues accounted for 9% of total revenue in the third quarter and service revenues accounted for the remaining 41% of total revenue in the third quarter.
Moving to our business breakdown customer engagement revenues for the third quarter.
With $337 million, a 7% increase over the same quarter in 2019 and represented 82% ever total revenues financial crime and compliance revenues for the third quarter were $75 million, an increase of 4% and represented 18%.
Of total revenues.
Looking at TS Americas revenues grew 10% to $343 million in the third quarter.
Revenues in EMEA were $44 million in the third quarter compared to $47 million last year and a Pac revenues in the.
Third quarter were $25 million compared to 27 million in the same period last year.
We continue to see strong leverage in our operating model as demonstrated by our increased profitability and expanding margins gross profit in the third quarter reached $293 million compared to 200.
And $74 million in the third quarter of 2019, and gross margin reached 71% similar to last year.
The continued acceleration in our cloud business led to a 370 basis point expansion in the cloud gross margin to 65.6% compared.
To 61.9% in the same quarter last year.
Operating income increased 10% to $117 million and the operating margin grew to 28.3% from 27.3% last year.
Earnings per share for the third core.
Quarter increased 8.5% and reached one dollar and 41 cents compared to one dollar and 30 cents in the third quarter of last year.
Cash flow from operations in the third quarter was $99 million, an increase of 20% compared to $82 million in Q3 20.
19.
Total cash and investments at the end of the quarter reached $1 billion and $543 million.
During the quarter, we issued a zero interest rate convertible note for $460 million at the end of the quarter total debt was $891 million.
20, net of issuance cost and the equity component associated with our convertible debt.
I will conclude my remarks with guidance.
We've experienced strong growth in our cloud business throughout 2020, and as we look on the remainder of this year. We expect this strong cloud growth to continue and during two.
2021, we expect across another significant milestone an annualized run rate of $1 billion in cloud revenue we.
We also expect to see the continued trend of cloud representing a greater percentage of the overall mix of our revenue as compared to the prior year.
For the full year.
2020, we expect total revenue to be in the range of $1 billion and $645 million to $1 billion and $655 million. We expect the full year 2020 fully diluted earnings per share to be in a range of $5 and 63.
Guarantee to $5.73 I will now turn the call over to the operator for questions operator.
Thank you very much yes, everyone. Your question and answer session will now begin if you wish to ask a question. Please key star then one on your telephone.
Then thats what drove that question simply key star into you'd be advised.
When you ask your question all the lines will remain on listen only just remind you could do wish to ask a question. The star then one on your telephone thank Keith.
We do have some questions on the line at this time and your first question comes from the line of sure you all from open I know you online from the coal.
Yes go ahead.
Thank you.
Hi, everybody congrats on another solid set of results and guidance.
Brought back you want to start with the Ocwen and the way nights of.
Capturing significant wins within larger enterprises.
You mentioned.
Some of the drivers.
And you will further elaborate on kind of some of the verticals, but the mix. It in your prepared remarks and does.
Does it require a longer sales cycle from prior quarters, though pretty much all you're seeing the same acceleration trend that we had been seeing over the course of the past few quick.
Order because the numbers definitely suggests that by then I have a follow up.
[noise] sensors showed yeah. So so indeed, we see a great adoption of six long an acceleration in the adoption and I've mentioned its guidance on variety of reasons and one of them is the increased adoption.
In both large enterprises as well as some and relatively new verticals, though no new customer service don't usually do adoption I.
And I would say that the two main reasons for dog is first of all that the large enterprises I'm getting to the point of view.
Embolization.
The time has come to accelerate.
No worries are moved to the cloud Colby to accelerate as it accelerates industrialization, it's not related directly to covered but just ah the experience they went through.
The second thing they don't realize is that they really don't really stock on their innovation.
As long as they stay on either on either on premise.
Provider well, even if some of those on burma's provider migrated them to a semi hosted solution you didn't solve their innovation cycle, where a native cloud solutions that provide a six one has both the scalability or end of completeness that these are really required by.
By those large enterprises, it's the only platform. We believe the time those are features and capabilities to cater to this segment of the market.
The other thing that they're experiencing is that even when they start out small if you would like the.
The movies very very fast on like what they've experienced.
In the past a with the migrating from one on premise solution to another one for me solution.
So that's a accelerating at the same time said at the end of my opening remarks, we believe that even with the current adoption will just at the beginning.
And the <unk>.
Accelerate in them there is a longer.
We over here.
Got it got it okay. Thank you for that I elaborated answer Barack also question on the public safety pretty much you discussed that kind of you you kind of bringing that all those capabilities you know back to life mentioned that in your.
Analyst day.
So can you provide us with a little bit of an update how was you know recent months or even to go the recent quarter.
And in that respect anything you can you can share with us shed more light on that activity.
Yeah, we're very happy with the profit.
<unk> or what have you seen the public safety and the reminder for for the rest of the forum on the call. It's a it's a market where nine so we're operating in this market for actually for 30 years and we we offered we have a very large customer base, but our solution used to or focused on a very and niche solution or one.
One product in this market.
And what's happening in this market in the past the Euro class.
That it is going through a very similar theme, we've seen other markets specifically digital transformation.
And that opens our eyes with different technologies, we brought into this market that a weekend.
Significantly broaden our footprint.
For public safety organization, but also expands phone will mainly policing and these days, we are expanding due to the offering of investigate.
To the wider aspects of the overall criminal justice system.
All the way from the.
Defense Court prosecution and of course, a policing as well so very happy with the progress.
I see great traction for the solution by the way both in Europe and in the in the us and even to a certain extent in certain places in Asia.
Uh huh.
And we think there is.
Something that is relatively and mid size at the at the moment, but it can go to to become as something very significant.
Got it thank you good job congrats.
Thank you.
Thank you very much. Your next question on the line comes from the line.
Oh, if Daniel Ives from Wedbush Your life Nicole. Please go ahead.
Oh, yes. Thanks. So my question is in terms of acquisitions can you just talk about your appetite there specifically on cloud given the strength you're seeing things.
Yeah, we continue to overtly a to b.
Very active on the acquisition front at this point, we believe that.
And we have all the components that we need in order to execute on our strategy, but at the same time of course, we will not be shy from augmenting.
Our execution with some relevant acquisition I believe we have as a company.
Good track record not just about acquiring but also those integrating which is the key thing on acquisition and we have done well in the playbook that we have for acquisition.
So we remain very active.
I can tell you know the the market is different now from where it was a few months ago.
But the two three we know we have we have this strategy in front of us and that's what will drive acquisition, we definitely have the capital if we need to.
To go ahead, and do something and we'll continue to monitor and that are in that area.
Great and then just in terms of your conversations with customers could you may be.
In terms of the cloud appetite today versus even at the start of the pandemic. When we go back to March and April maybe compare and contrast.
In terms of different conversations you're having things.
Sure.
Jim I think that the conversation to have I would say similar.
Nature to the beginning of deal before the pandemic, but the sense of urgency changed so the fact that the organization are already took a decision that they want to move to the cloud is not new before and after the beginning of the pandemic would change I believed that the.
No sense of urgency in the timeline and they are providing from that from the same reason I mentioned on the previous Oh My previous answer your question.
And on that front, so just just higher sense of urgency to that it's more about how do we do eat what you know how fast it can do it.
It's not a question about the if we do it.
Thank you great quarter.
Thank you very much or next question comes from the line off at school discussion from Bank of America. Your life in the call. Please go ahead Sir.
Hey, congrats on the strong quarter and thank you for taking my question.
And you hit on a little bit, but how sustainable is this cloud revenue growth and looking at your pipeline in market activity do you think there is room for more acceleration here.
So first of all we'll of course very pleased with the 35% the globe we provided a full.
<unk> for the quarter and generally they feel we still in acceleration you know like cloud the growth we have or will provide all next year guidance I only know February when we report our Q4 earnings and then we'll provide some insight as to what next year, but in general.
We feel confident that bodes well for next year as best that said in his remarks and also for Q4 for sure.
But also moving forward. We believe this is the area of growth for us.
And that's exactly where will we see a change in the.
Size of the market the addressable market.
When we talk about a market that is 6.5 billion today and going to 17 billion. This entire growth is cloud. This is a market that is going through a clarification. So the opportunities there of course, it's for us to continue to execute.
And I believe that if we'll execute as good as we have executed in the past two years.
There is an opportunity to fill there and go dark and we need to remember that in our industry and to seek US business. We all had the largest player by far are twice the size of our next competitor and reporting or a higher growth rates. So the runway is there any thought about.
Get Houston right now.
All right. That's very helpful. And then just one more if I could it looks like you saw some declines abroad. What are the market dynamics in EMEA and APAC right. Now is it's more macro weakness or do you need to educate the market about t. CASM and invest in your channels. Thank you.
Hi, Scott can this if that's okay. Thanks for the question you know as we look at the the markets outside of the Americas and today. They are still more on premise and license based the regions. So we're quite excited about the growth and the expansion we have as our cloud business.
And in fact, we've seen really a it very strong year over year growth and the cloud revenues coming from those regions and but today do you are you are seeing more a reflection of the variability, which we see from time to time in those regions given the the impact of the license based business and were excited about all of the the partner.
Ships, we've created and the last 12 to 18 months in those regions and were driving additional business, but of course cloud revenue takes longer to really being demonstrated in India. The revenue. So the the markets remain a healthy for us and we're excited about the cloud opportunities ahead for us in those markets.
Yes.
Thank you.
Thank you very much. Your next question on the line comes from the line of type you're old enough from Barclays. Your line of Nicole. Please go ahead.
Hi, This is Chris Reimer on for Tabby. Thank you for taking my question.
Actually.
Hi, Wayne Gretzky Garden.
I will follow up with you.
Mentioned in your opening statement about partnerships and while I was wondering if you could expand on the evolution of the carton channel Gordon X one kind.
Hi, Hi points.
Oh.
Okay. Thanks, Thanks for that.
So keep pillar of our strategy, Oh, it's forming more and more partnerships and that's a that's not new it's something we have started to several years back and today the size of the.
For the partnership that we have.
But in terms of the number of partners as well as the volume of business with those partners. It is very substantial part of our business and it's also a key and success profit or as we go and expand into international markets as Benson mentioned before when we reported in the past few quarters.
On some key partnerships that we have signed and we're very happy on on the performances of those Oh those partnerships. It is true for both six one and four excite.
Six one has more mileage so we tend to more partner, but excited is starting to gain also a lot of momentum with partnership as well as like Steve which aim into the.
Bull market of the financial crime and compliance.
And lastly, I will say that we are very happy also with the technological partnership on the different marketplaces that we have on all the different platform that we have created a very strong momentum both technologically for customers, but there is also.
A lot of go to market opportunities with these many dozens of technological partners.
HM Okay.
Yes, well thank you.
Thank you very much.
Your next question on the line comes from Samad Samana from Jefferies. Your life in the call. Please go ahead.
Hi, Good morning, Thanks for taking my question, Jane and but I want to follow up on the really strong cloud performance.
It was very impressive and maybe just Wanna Peel it back just a little bit. So can you maybe break down how much of the strength was pure CX. One first is increasing contribution from exane.
And somebody other cloud offerings on the financial crime and compliance side of the business and I have a follow up to that as well.
Sure. Thanks, Thanks for the question and you know as you look at our strong cloud performance, we've been highlighting every quarter that more and more of our growth in the cloud is coming from multiple.
Arenas and you know if you look back a year ago really our growth was being driven predominantly by CX worn and the Americas and while that's still a significant driving force today of course as I've mentioned, we're seeing a you know growth rates in a double and triple digits across our other business units.
Our active nice for public safety for the regions of course in terms of absolute dollars or they are not as large as a contribution so see X. One today is it still that predominantly driving that growth.
But again as I highlighted we're seeing a very good signs as we start to to build out that.
Crowd expansion and in our other business units as well as other regions.
Great and then Barak, maybe a question for you you know it it's exciting to hear about the 80% plus conversion for Cdx. One at home I'm curious if you could share any characteristics about those customers or are they generally.
Larger than your existing installed base are they on the smaller side or a day or is it getting you into new geographies or new verticals. Just curious how much that's the widening the aperture for nice and who they can look at.
Thanks for that I'm trying to think because it.
It's a I must say it's across the board I can characterize it on a specific territory or specific vertical it's across actually multiple verticals.
We have this success both internationally and domestically.
And also different sizes I think what is.
Common to all of them.
That is the they have experienced.
The the need to move to work from home and then they hit the wall and deliver a limitation to handle the on premises or hosting solution from other provider.
And that came exactly on the right time for them and so they.
Right and then you know just in a matter of days. They realize this is the right solution. So the common thing, it's just a matter of the how outdated legacy.
No legacy solution you a other than that it's of course, you know it's all over the place for my birthday called segments in size.
How funny embed I'm afraid the rules I mean, I'm a squeeze.
Third question in just.
Given nice has such a broad view across so many verticals I'm curious if if you think about the some of the challenged verticals that you serve maybe more in the.
The hospitality travel retail are you starting to see improvements there are you starting to see customers bring back service agents just anything you.
Yes.
Qualitatively or quantitatively that that shows whats happening there trend wise inside of the installed base that would be helpful.
Sure I think you know weve highlighted in past quarters that and Barack highlighted today and he is the discussion around.
We are fortunate to really be driving a lot of growth and acceleration from certain verticals, which are in the government sector and really kind of new breed technology companies. So this is really feeling a and further accelerating the growth we're seeing in the cloud. It internally said challenged verticals do you know I'd say we.
We did see some initial.
Initial slowdown as expected.
From the result of coal then we've seen kind of a flattening in terms of those those verticals.
And certainly we're optimistic as we here.
Positive signs in the market and optimism that.
Those are opportunities for feeling further growth as we go into 2021.
Maybe just answer that from a modeling.
And.
Those verticals that you referred to us, but dollar to travel we're not a very strong verticals for us so just the mental size bras.
Ah, but surprisingly you know one of the deals I think that first do I mentioned in my opening remark was one of the largest hospitality operators in the world.
Yeah that'll was obviously impacted by Cobiz about decided to take do opportunity at this time and are replaced or income did they on premise providers with.
With that we have six one and generally customer service you know its front and center for every organization. So even though so much of the new they'll business. It's an area that they want to continue to excel in.
Great really appreciate the color and great to see the strong progress.
Andrew.
Thank you very much. Your next question on the line comes from the line of Ryan could you for.
From Rosenblatt Securities Your life Nicole. Please go ahead.
Hi, Good morning, Thanks for the question and congrats on the strong cloud growth there.
We've seen success in moving in contact up markets and as you do that.
I wonder if you're seeing.
Changes in the low into the enterprise and the mid market space.
One of the new entrants there from some of the you cast players are starting to impact the competitive market or pricing in that segment. Thank you.
Thanks for the question, so so obviously and.
That said, we see success across the board, but we're very excited about the adoption increase adoption of large enterprises.
This is where we believe the opportunity lies ahead and but at the same time will not neglecting the midmarket. The the SMB, we have a very strong offering at very good the go tomorrow.
I think of capabilities and of course, a very wide network of channel.
To be successful in this market. So we are highly segmented and the way we run our go to market and with the way we run our services and post the deal and of course, we know how to continue to do that and we don't see any.
The current dynamics and those are in those segments.
Got it helpful. Thanks very much.
Thank you.
Thank you very much. Your next question on the line comes from Sanjit Singh from Morgan Stanley. Your one likes Nicole. Please go ahead.
Thank you for taking the questions.
Congrats to the team on on hitting 50% cloud mix, it's really great to see well be able to talk a little bit about the conversion on t.. It's one it's been.
You know, 80% for the past couple of quarters can you give a sense of how strong a funnel that is in terms of driving other new logo out.
Acquisition or even potentially driving some of these larger PCB deals that you're signing.
Yeah. So first of all this quarter, regardless of separate from added six one and told them. This was one contributor we're very happy with the number of new logos overall six one of course is one of them but.
We grew 50% five zero on their new logos acquisition versus the Q4, you have a of last year.
And six one at home is one of those contributors.
The way I look at six one at home is one of the vehicles that we have is it kinda for lead generation.
Very effective lead generation cost Americans over they can fight very very fast in a matter of they are too, it's up and running that and at their disposal live in production and any save a ton amount of time and effort in the sales process.
So.
I'll call. It a very effective piloting programmable trial programmable however, you want to call it.
It's just it's just a very very effective vehicle and by the way in the course of doing that we're very proud also to help some organization.
At a time back in May in April.
Well, they really really needed that support so we just continue the program and it created great momentum in our pipeline but.
But that said, it's one of the elements out of many.
Yeah, and if I could just follow up on that point, and we think I mean, 50%, it's a pretty astounding number and.
This is multiple elements of play I think what's particularly impressive is that.
Large enterprise customers you are cautioned that has the market is doing too.
Doing great there as well so are you guys getting better it sort of.
Sort of online customer acquisition is the sort of pace of decision making.
In terms of converting the pipeline increasing.
What what are what are the things that are changing today versus last year thats driving that that increased velocity.
The new customer acquisition side.
So I will give it to few few factors.
First is that generally the you know rates into the cloud by a lot of enterprises that would like to move and move much faster versus a year ago.
Second is the expansion of our go to market, we have more go to market resources more go to market capabilities.
Third both domestically and internationally, while the revenue internationally you yet see that we actually have a strength in those areas as well, which will eventually also.
I become more pronounced in the revenue as well.
So all of those are all.
A key contributor the beauty about all of those new logos is even if we lend touch a customer and they are starting relatively small even if there are big enterprise and decide to start small and one department the one area.
Once you blended in this this customer and of course, if were successful and.
Customer satisfaction is high and that's our intent of course, the opportunity for expansion and growth with that customer is very substantial and I mentioned in my opening remarks, a lot of.
Some some large a lot a lot of large deals that will follow on expansion deals from new logos.
The two got acquired the year in two years ago.
Mhm.
Excellent. Thank you.
Thank you.
Thank you very much. Your next question on line comes from Rishi Jaluria from D.A. Davidson Your life in the call. Please go ahead.
Hey, guys. Thanks, Thanks for taking my questions.
Nice to see continued acceleration on the cloud side.
First I wanted to go back to the CX I see us one side of the business.
Scott sustainability, but not sustainability of growth rates would thinking just about.
Maybe the sustainability of the Tailwinds that you've seen as a result of co bid as we think about.
Post pandemic, especially with visibility into a potential vaccine. How are you thinking about those tailwinds going forward is there maybe even a replacement opportunity as as those re openings of offices to replace the legacy on premise and increase the velocity of those replacements.
And maybe expanding a question a little bit more as youre talking to your customers, especially the larger up market Wonder you had some nice traction what is your sense for their post pandemic playbook is it a kind of back to business as usual when it's safe to do so is it going to be a hybrid environment and contact centers not.
To get 100% capacity with some remote work option that maybe maybe walk us through them and then I've got a follow up.
So it's kind of I would say several questions on I'll try to answer the first one is you.
No I didn't mention and when we mentioned in the past few quarters.
Right.
Well as we benefited from from the.
The reaction to compete because its likely to accelerate the decisions with with many of our customers and prospects on the flip side, we don't see.
The negativity already negative impact on our business.
When hopefully there will be a vaccine and we would all be out of these to covert situation on the contrary we believe that.
Those are inside and realization and experience organization had during the pandemic will further accelerate the cloud even post the bundling so we don't see.
We concluded and negative.
Negative reaction to our business.
The independent make it clear out with respect to what we hear from customers about their thoughts moving forward.
It's an interesting question and we have this dialogue with a lot of customers customers come to us to to consult.
If we know what other they'll doing and I said or what they really want to know from us These days.
They would like to get for analytical tools.
Two things first of all to understand the real the productivity of their people who are now working from home for the past seven to eight months.
They're all working from home there is a feeling everything is okay, but different things like the customer experience engagement effectiveness etcetera, its something that now increase the consumption of analytical tools and you heard again and many of the analytical deals with analytics deal we had in the quarter that's.
That's one thing we hear from customers and one the other side of it is implementing those tools as they understand that that work from home either in a hybrid mode or just working from home in here to stay potentially and they want to make sure that those environments. The working from home environment is.
As effectively even more effective that they have versus working from the office.
Got it that's really helpful. And then just a quick quick follow up.
As we think about the.
Traction that you've had with the.
Ecosystem and and marketplace right with TX one.
Then now you're building out this xsight marketplace can you speak a little bit about kind of the longer term vision.
For the marketplace and maybe the potential monetization vectors there. Thanks.
So I think we are leaders to devalue within the marketplaces and as you said we.
And then to use the same playbook in six one in excite and in evidence central which is the platform for the public safety and the.
For six one for sure and excite we're already at a point, where there is the scale to the network and it's part of our go to market and it.
Although the cadence of customers to navigate through this ecosystem and are looking to further expand and on board additional let capabilities on top of either six onex idle evidence dental so we're very happy with that so the first one is value to customers. The second thing is we do see.
And we are already starting to execute on some monetization opportunities and.
And the monetization has allowed say variety of options.
In the in reaching the data and our systems and then monetizing on this and I mentioned a bit on that on the exciting part.
But also certain.
So that we can.
Have on events integration and also resale opportunities on a federal opportunities that we might get from this network that are very eager to leverage our goal or go to market.
These are the opportunities that the that we see on a on the economics.
The third layer I'm, sorry is actually great way for us to explore M&A opportunities.
Weakening in real time see who are those players that have very successful who gets traction beyond slide were but actually in real.
We live and that allows us to.
To have a better and more better quickly qualification.
For future acquisitions.
All right wonderful thank you.
Thank you.
Pretty much and your next question on the line comes from the line of Walter Pritchard from Citi. Your life Nicole. Please go ahead.
Thanks, two questions just one first on the on the license side. There was a I think a notion last quarter that you might youve seen some some license deals may be deferred and you might see that come back I'm wondering how you're thinking about licensed especially as you move into next year and then I had a follow up.
Yeah for the <unk>.
Thanks for the question Ah Walter you know as we look at the license side of the business I think you know what we've seen in both Q2 and Q3 was was generally as expected you know we have had some headwinds coming out on the license side of the business and you know as we look forward to the that before.
Last quarter I think we expect you know a bit more of the same in terms of some of that compression on the license side and of course, the on the flip side of that the the momentum we have seen on the cloud is continuing to be strong and we have ongoing momentum there as we look a little bit further into a 2020.
One on the license side of the House say I think that that you know sitting here with the new budgets coming into play and obviously some optimism around that potential vaccine and what that means that on a broader scale. So we believe you know all that likely see some stabilization on the license side there next year and.
Bonnie Lee as I mentioned on the cloud front, we expect that to continue to have to be really the the strong growth in it.
In the fourth quarter as well as looking into next year.
Great interest on a margin question you've made good progress on gross margins generally in the cloud I'm wondering how's the larger enterprise mix within.
Cloud impacts gross margins I know, sometimes those customers don't bring there and telephony and they're just larger deals. So they may have higher gross margin, but how should we think about as you see continued migration of that cloud mix towards larger customers. What the margin impact is at the gross level [noise] yeah.
Yeah, I think you hit the nail on the head really a which is that you know.
That's very true that as we go into the larger enterprises. They do often have their own to less money and of course, we see them buying more of the suite to cross our cloud platforms, whether it be CX won a public safety or financial crime and compliance and the excite platform. So it's really a common theme that the interest.
Going into the large enterprise their board buying a more of that the software and the analytics, which is really coming at the the higher margin profile relative to the to less any piece of the the overall deal. So we are seeing that the it has a positive impact and that's one of the factors that he's country.
We need to get to the nice growth you've seen in the crowd gross margin year over year. I mean, we've had almost a 400 basis point the increase year over year. So we expect to see more of that over time and that that ongoing trend to be in place.
Great. Thanks for the detail.
Thank you very much there on.
No more questions in the queue at this time I would like to hand, the call back over to Barak. Please go ahead.
Thank you all very much for joining us and have a nice day.
Thanks Wireless speakers that concludes your conference call for today, you may disconnect. Thanks for joining and enjoy the rest of your day.
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