Q4 2020 Nice Ltd Earnings Call
[music].
Welcome to the Nice conference call discussing fourth quarter and full year 2020 results and thank you all for holding all participants are at present in a listen only mode.
Following managements formal presentation instructions will be given for the question and answer session. As a reminder, this conference is being recorded February 18th 2021.
I'd now like to turn this call over to Mr. Marty Cohen, Vice President Investor Relations at Nice. Please go ahead.
Thank you operator with me on the call today are Brockie Lam Chief Executive Officer, Best gas pitcher Chief Financial Officer and are on their own executive Vice President marketing and corporate development.
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 that the company's actual results could differ materially from.
From these forward looking statements.
Additional information regarding the factors that could cause actual results or performance of the company to differ materially is contained in his section entitled risk factors in item three of the company's 2019 annual report on form 20-F.
As filed with US as filed with the Securities and Exchange Commission on April six 2020.
During today's call, we will present, a more detailed discussion of fourth quarter and full year 'twenty 'twenty results and the company's guidance for the first quarter and full year 'twenty 'twenty one.
Following our comments there will be an opportunity for questions.
Let me remind you that unless otherwise noted on this call we will be commenting on our adjusted results of operations, which differ in certain respects from generally generally accepted accounting principles as reflected mainly in accounting for acquisition related revenue and expenses amortization of intangible assets and 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 will now turn the call over to Barak.
Oh.
Thank you Marty and welcome everyone.
Over the past several years, we have successfully built nice into a company that is able to quickly funds flow.
It does with no doubt put to the test as a result of day events that took place last year.
We more than just pass the test we woke barriers turning 2020 into another groundbreaking gear from nice.
Our strategy in the past few years has been to transform our markets with cloud digital platforms that embed artificial intelligence it.
It was proven to be successful and capitalize on growth.
2020 was an eye opener for organizations of all sizes, realizing that the only viable choice still keep up is to fully embed embrace cloud digital and artificial intelligence.
The result is that cloud digital and AI adoption has now leapt several years forward.
Israel now the clear market leader in all of these domains well extremely well positioned to be the platform of choice.
'twenty 'twenty was a standout year for nice in cloud we.
We have taken a wide industry lead as we suppress day mark of nearly 50% of our total revenue coming from the cloud.
We exited 2020 with a cloud annual revenue run rate exceeding $900 million.
At the same time, we delivered nearly 400 basis point improvement in cloud gross margin in 'twenty 'twenty compared to 2019, which drove a 90 basis point increase in the operating margin, although the same period.
Our cloud leadership was driven by accelerating cloud revenue growth throughout 2020, and we ended the full year 'twenty 'twenty with 31% cloud revenue growth compared to 2019.
We all our strength in the cloud to continued product innovation and strong competitive advantages provided by our cloud platforms, namely six wanting customer engagement excite and exceeding our financial crime and compliance and evidenced central in public safety.
We further penetrated in new market segments in the cloud, taking our solutions Downmarket and establishing our leadership in this segment was the same time sink rapid penetration in large enterprises.
We have six one we have established significant beachheads with a record number of customer wins and the high end of the market, replacing the legacy solutions of our competitors along the way.
We witnessed further penetration in the international markets were six one.
A record number of agents from six one in 2020 as well.
We also opened a brand new cloud opportunities in financial crime and compliance with our New York City cloud platform, providing a gateway to the lower end of the market encompassing thousands of financial institutions that we may not have had access to in the past.
The traction with Ixia has been rapid with new customers already signing on to the new platform.
In customer engagement, we now have the entire financial crime and compliance market covered in the cloud with both excite so large financial institutions and exceeded for the small and mid size market.
And in public safety, we had a record here.
We more than doubled the non bill sought public safety customers in the cloud driven by our evidence central cloud platform and its anchor solution nice investigate.
With the need for digital evidence management rapidly accelerating evidenced central end to end digital transformation platform is helping to bring the public safety market into the digital age.
Digital transformation became top of mind for customers in 2020 and for US 'twenty 'twenty was a year of digital breakthrough.
We witnessed the accelerated use of digital channel across our markets and our platforms. What are the driving force for the new frontiers of digital customer service.
Banking and digital policing.
In 2020 over half of our all contact center opportunities contained digital elements and we still have an overwhelming 100% year over year increase in our customers digital interactions volume.
We owe this to the breadth of our portfolio and best in class digital capabilities natively integrated into six one.
Most of our financial income current compliance deals were driven by the imperative for digital transformation in banks and.
And nice investigate is today the fastest growing digital evidence solution in the financial crime Justice market.
Yeah.
Yeah.
'twenty 'twenty was also you know well we witnessed a major transition from nice to being the leader the leading provider of cutting edge analytics to the preeminent provider of breakthrough artificial intelligence.
We're now injecting AI in almost everything we do.
In fact, our enlighten platform is now the underpinning for civil of new and existing solutions.
Since the launch of enlighten last year, we have seen substantial growth in the pipeline with several deals from multiple verticals already signed throughout D or <unk>.
Including three of the top 10, new economy companies M.
Major health care provider every known tax preparation provider one of the largest global hospitality companies, a prominent telco company and many others.
On top of all of this in 2020, we continued to significantly expand our ecosystem of partners with a growing number of independent software vendors building their solutions on our open market places for all our platforms boasting the largest ecosystem in our domains.
'twenty 'twenty was a successful year it nice and the fourth quarter results brought the year to a strong finish in.
In Q4 cloud revenue grew 33 per cent compared to the same quarter of 2019.
Cloud gross margin increased 380 basis points and the operating margin exceeded 30%.
In addition, cash flow from operations grew 82% to $167 million in Q4, leading to a record annual cash flow from operations of $480 million for 2020.
The strong results in our cloud business are reflected in the continued signing of significant cloud deals in the large enterprises in Q4 was no exception.
We signed many multi year low seven digit ACB six one deals, including one with a leading multinational automotive brands. This organization is transforming the customer experience by adopting a seamless omni channel platform with nice that provides scale and agility will replace seven.
Competitors in the process.
Other seven digit HCV CX one deals included a multinational financial institution, a large south American based bank, if preeminent security company, a leading brokerage firm and a large government customer that included approximately 20 different agencies.
There was a seven digit deal with one of the biggest hospitality companies in the World, which was the quick expansion of the deal is signed just want one quarter prior.
Other seven digit deals included a large outsourcers.
Transportation leasing company, a very prominent aviation company.
<unk> National auto dealer.
The common factor behind these large enterprises six one deals in Q4, what did they took they took on a multi solution portfolio approach. This is a trend we are seeing malls as a growing number of large enterprise customers understand the significant benefits of a seamlessly integrated cloud only.
China platform from a single vendor.
More will most of those deals were replacements of on premise legacy vendor solutions.
We closed many significant deals in financial crime and compliance in Q4 one.
One such deal was it eight digits in the cloud with a very large financial services firm.
This was a new customer as we replaced the homegrown AML solutions with our cloud platform.
There was a seven digit deal with a very large European financial services to further expanding our relationship with this customer and another seven digit cloud expansion deal with a U S based brokerage field.
Our New York fifth platform drove a significant number of cloud deals with both new and existing customers in Q4.
One such existing customer a U S based regional bank transitioned from our on premise solutions to or exceed cloud platform in a seven digit deal.
The number of new logos increased significantly in financial crime and compliance as a result of the strong demand for exceed with many of the deals centered around digital banking.
Mobile will further driving demand for exceed two partnerships and one such partnership we recently signed with fenestra fin.
So NAFTA it provider of core banking solutions and payments will still will deliver or exceed platform to their customer base.
In public safety in Q4, we signed several seven digit deals, including with two major U S cities and an APAC based police operation.
We are proud of the results we achieved in 2020, but 'twenty 'twenty was just a warm up.
We will leverage the success, we had in 2020 and take that into the new year.
'twenty 'twenty, one is shaping up to be a year in which the game has changed.
We are in a new reality in which the event of 2020 have created a new normal.
And at the same time provided new opportunities.
The first reality in this new normal is the move from old notion of time to value to the new reality of immediate value.
In 2020 organizations of all sizes were taken by complete surprise by the crisis.
They realize they need to get things done much faster than ever before.
And they discovered that the old rules of low loan project planning and dependencies on Congress somebody who of course is simply not a blip applicable anymore.
Organizations are now looking for technologies that will allow them to routinely break the execution speed limit of complex multi stage projects, while not compromising the quality and outcome of their efforts.
The second reality in this new normal is the move from sporadic change to continuous adaptation.
When it comes to driving organizational change implementing changes in sequential serial way one change at a time would not work anymore.
Enterprises need to adopt an approach of continuous adaptation they must have the ability to drive and manage constant change in an old way across the entire organization based on immediate insight accurate real time data and execute on it with maximum precision.
The third reality is the move from cloud us duration to cloud formation.
For years, we've been speaking about the journey to the cloud and about cloud transformation.
The cloud is no longer a future aspirational intent, but an immediate urgent master of reality.
On premise solutions are no longer effective living organizations, no choice, but to adopt cloud platform Foundation.
The final reality is the move from digital one O one two digital fluency.
Digital is no longer the next big thing. It is happening now organizations are referring to day to the term digital is the same with anything considered to be the next generation.
It is therefore no wonder the digital is the preferred language spoken.
There is an actual raised alder, where organizations are rushing to become digitally fluent across everything they do.
And that means cultivating an all encompassing digital mindset and culture injecting a digital approach to drive new business models offerings and processes.
We are well positioned for this transition to the new normal with our leading digital cloud platforms and cutting edge AI.
We already saw great success in 2020.
Now with this vast opportunities provided by this new normal combined with a large and growing Tam that we see expanding to over $17 billion over the next five years, we're very much looking forward to 'twenty 'twenty, one with thought leadership GAAP continuing to widen versus our competitors 'twenty 'twenty, one and beyond.
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In 2020 more than ever we have witnessed the ultimate power of a nice spirit I would like to take this opportunity and thank our 7000 nisource around the globe for their relentless innovation and endless dedication during these unprecedented unprecedented ear.
I know the district. This spirit will continue to push us forward, which gives me great confidence to take on 'twenty 'twenty, one and the years ahead.
I will now turn the call over to Beth.
Thank you Barak and good day everyone.
I'm pleased to provide the analysis of our financial results and business performance for the fourth quarter and full year of 2020 as well as our outlook for the first quarter and full year 2021.
Total revenue for the fourth quarter reached a record of $438 million compared to $431 million in the same period of last year.
Full year revenue was also a record and totaled $1 billion and $657 million, an increase of five per cent compared to 2019.
Total revenue growth was again driven by our impressive cloud revenue, which grew 33% in Q4 and 31 per cent for the full year and we exited 2020 with an annual cloud revenue run rate of more than $900 million.
As a result of our ongoing transition to the cloud we continue to experience unexpected shift to an increasing concentration of cloud revenue and the percentage of our total revenue. We expect this trend to continue in 2021.
In the fourth quarter cloud revenue reached 51 per cent in total revenue compared to 39% last year.
As a result recurring revenue increased to 81% of total revenue compared to 71% last year four.
For full year 2020 cloud revenue reached 47% of total revenue compared to 38% last year and recurring revenue was 79% of total revenue compared to 72% for 2019.
Product revenue accounted for 9% of total revenue in the fourth quarter and 11% in 2020 and services revenues accounted for the remaining 40% of total revenue in the fourth quarter and 42 per cent for full year 2020.
Moving to our business breakdown.
Customer engagement revenue were $361 million for the fourth quarter, and 1 billion M $349 million for 2020, and eight per cent and 6% increase respectively.
Financial crime and compliance revenues were $78 million for the fourth quarter and $308 million for 2020. This compares to $96 million and $309 million for the fourth quarter and full year 2019, respectively.
Looking at geographies Americas revenues grew 11% in the fourth quarter and 10% in 2000 $20 million to $364 million and two 1 billion M $361 million respectively.
Revenues in EMEA were $48 million in the fourth quarter compared to $57 million last year.
For the full year revenue from EMEA was $186 million compared to $217 million in the same period of last year.
APAC revenues in the fourth quarter were $26 million compared to 46 million in the same period last year and $110 million for the full year 2020 compared to $123 million in 2019.
We continue to focus on and expand our cloud gross margin in the fourth quarter cloud gross margin increased 388 basis points to a record of nearly 68 per cent for.
For the full year 2020 cloud gross margin increased 380 basis points to 65.6 per cent.
As our cloud business continues to grow we expect further expansion in the cloud gross margin.
Our gross profit grew to $317 million in the fourth quarter compared to $314 million for the fourth quarter of 2019.
For the full year gross profit increased 5% to 1 billion and $182 million compared to 1 billion and $125 million for the full year 2019.
In the fourth quarter gross margin with 72.2 per cent compared to 72 eight per cent in the same quarter last year.
For the full year gross margin was 71 three per cent similar to last year.
Gross margin was positively impacted by the cloud gross margin improvement offset by the decline in product revenue.
In Q4, 2020 operating income increased to $132 million compared to $130 million in Q4, 2019, and operating margin was 31% similar to last year.
Full year operating income increased 8% to a record of $470 million compared to $434 million in 2019.
Operating margin in 2020 expanded 90 basis points to $28 four per cent compared to 27, 5% last year.
We expect further expansion over the next several years to a 30% operating margin as a result of our continued revenue growth, primarily driven by our cloud platforms and the leverage in our financial model.
Earnings per share for the fourth quarter reached an all time high of $1 61, compared to $1 58 in the fourth quarter of last year.
Full year 2020 earnings per share was $5 and 73.
Representing growth of 8% also an all time high.
We experienced an outstanding strong quarter and year of cash generation, which led to an increase of 82% and cash flow from operations in the fourth quarter to $167 million and two a record of $480 million for the full year, which represented an increase.
<unk> 28 per cent.
Due to strong cash generation from our operations, both in the quarter and expected for the future, we repaid our $215 million term loan during the fourth quarter as a result, total debt with $681 million net of issuance cost and the equity component associated with.
Our convertible debt.
Total cash and investments at the end of December 2020, with $1 billion and $464 million.
I will conclude my remarks with guidance.
For the first quarter of 2021, we expect total revenue to be in the range of $445 million to $455 million. We expect the fourth quarter 2021 fully diluted earnings per share to be in a range of one dollar and 42 cents to one dollar.
And 52 cents.
For the full year 2021, we expect total revenue to be in the range of $1 billion and $790 million to 1 billion and $810 million we.
We expect the full year 2021 fully diluted earnings per share to be in a range of $6 and 12 to $6.32.
I will now turn the call over to the operator for questions operator.
Yeah.
Thank you and at this time, we will be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad income.
Information current will indicate your line is in the question queue. You may price start to if he would like to remove your question from the queue.
New participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys Wonder.
One moment, please while we poll for questions.
And our first question is from Samad Samana with Jefferies. Please proceed with your question.
Hi, good morning, Thanks for taking my questions and nice to see the strong cloud revenue results are best maybe one for you on debt on the guidance. So if I think about one Q revenue is guided to go up sequentially normally revenue comes down. It can you just help us maybe for modeling purposes think about how we should think about cloud revenue.
New versus product revenue in the first quarter, just given the atypical seasonality in there in the revenue guidance and and then just even stepping back for full year 2021, just any update on what we should expect that cloud revenue run rate to look like exiting 'twenty one given the outperformance in 2020.
Sure somebody new.
For the question. So let me first address the growth that you mentioned coming out of Q4 and and looking ahead to Q1 I think first of all it's important to note that actually we've been seeing a trend now as we look on the last few years, which is that both with our revenue as well as our profitability are given.
The further shift to the cloud, we see more and more of a concentration of recurring revenue and so as a result of that it shifts more of the growth on earlier during the course of the here and that that revenue is a more evenly distributed so you're seeing that both in our 2020 results and we're expecting that dynamic to continue to play out.
And in 2021 as well I mentioned in my comments or remarks also that you know we've seen a significant shift in the mix of cloud a cloud in the last two quarters has been more than 50% of our overall revenue and we also expect that that shift to continue as well.
Where cloud will continue to be the primary growth driver and we will see that becoming a larger and larger portion of our overall total revenue in 2021.
So maybe it's just it's just with the.
The strong guidance for Q1 reflect the very strong Q4 bookings that we had that I talked about on many deals that we had in the quarter and we are entering into there was a very healthy backlog.
Great and Barak that that brings me to a follow up question I appreciated all the all the color on the call around New York, New deal activity, but maybe as we think about.
The pipeline if you could comment on how the new deal pipeline looks for CX, one, especially as we <unk> <unk> as we lapped 2020, which was a very strong year are we entering with you know more and more deals in the pipeline that are of larger maybe anything you can give either quantitatively or qualitatively around the forward pipe.
Blind for CX, one deals I think would be helpful as well.
Yeah, we can seem to see healthy also momentum in terms of the pipeline and the activity in the market across the board. It's true for six on it. So it's low for all our domains and markets and its both on the large or the higher end of day market as well as the smaller are the lower segments of.
The market and I think you also heard me on the call are starting to see very healthy dynamics from the international markets you see them in the revenues, but there are going to kick in obviously, it's cloud, but you're one of those deals on the international one.
And the deals are getting bigger and bigger and the other thing that we see I talked in my earlier remarks about multiple beachheads that we've blended the flow of 'twenty 'twenty, but also in Q4 and we believe that this is also an opportunity for a lot of expansions moving forward. So we are stepping into the year with a stronger feeling.
This momentum will.
We will continue.
Great I'll turn it over to the day the next day off but thanks again for taking my questions and and on the strong cloud revenue growth.
Thank you.
And our next question is from Sanjay <unk> with Morgan Stanley. Please proceed with your question.
Thank you for taking the questions and congrats to the team on a 30%.
Growth year in cloud with Terry.
Very impressive I wanted to understand a couple of dimensions and the model around growth going into next year on the product side. It was down 48% year over year in Q4 maintenance.
Down year over year.
What are the sort of the key factors, what's going on there is that a function of more.
Transitioning the Wfl base to cloud.
And the impact of macro is it just changes in customer buying patterns. If you could sort of parse out the different variables that are going on on the maintenance items that I had a follow up question.
Yeah.
I'll take it in a M best feel free to chime in so.
So indeed, you know obviously our strategy is we chose a few as you transition the business to the cloud. This is always with our main emphasis both winning a lot of new ground with cloud as well as transitioning existing customers most of the cloud growth. So far it came from brand new business for us, but we do a we do have some transition of existing customers.
The cloud, we like those transitions because they provide us.
A significant boost to the revenue because we see much more revenue from our customers day move to the <unk> to the cloud.
Indeed, you know 'twenty 'twenty was a lighter year on the product. It's the combination of what I said on the cloud as well as you know Covid did have impact on the product.
The decline we believe that moving forward you know the Gulf will come from the cloud and we will see fluctuation in the in the product Q4, specifically I think was a bit of a anomaly in terms of how sharp the product decline was.
And we don't expect to see exactly that number moving moving forwards.
That's very helpful. Barak and then just a higher level question on what's now three or four major platforms. You have our PAA has exceeded excite you have it.
Investigate to complement CX one.
If I look at the debt.
The contribution outside of CX one does.
Does that become 10%, 20%, 30% per business in a couple of years as we as you look out you know over the next two or three years, how big can the non CX one on cloud portfolio.
Contributing to the overall business.
Yeah. So obviously the still the lion's share of our cloud business is either fix one and this is our main platform as we go into the customer engagement market actually its deep platform, where we sell into customer engagement.
Third and as I highlighted earlier, we have two more cloud platform that all serving different markets, we have the financial crime and compliance market. We cater to these markets actually with two plots zone because of the high end and low end. This is exciting and exceed and we have a relatively new cloud phone call evidenced central.
Which is allowing us to take the public safety market and expanded from a center around policing to overall criminal Justice. We believe that we can take the same playbook. We have done successfully in the past four or five years in customer engagement and use the same playbook in DS.
Markets they'll still be adoption in this market is still at its early phases actually we're very happy with the bookings and the performance that we've seen in financial crime and compliance Q4 was an outstanding bookings quarter for this business predominantly cloud, it's still small numbers of course.
The six one but it can start to grow nicely and kicking into revenue and EBITDA evident central Twenty-twenty was really a breakthrough a breakthrough year for this business still small numbers, but from a growth percentages, they're starting to look very nicely. So in the long run we believe that they can.
Start by themselves become an absolute numbers healthy numbers, but needless to say that though you know main market today is the customer engagement and six one as the platform for us in this market.
Appreciate the thoughts Barak.
Yeah.
And our next question is from Daniel <unk> with Wedbush Securities. Please proceed with your question.
So.
My question is more in terms of cloud obviously the growth that you have and is this something that you feel you can continue do organically in other words do you start to get more aggressive even in tuck in M&A as we go into 'twenty. One could you maybe just talk about that just in terms of any mindset changed on every day.
So we continue to be a to be active on the AR on the M&A front as you know us from a historic historically, we have a good track record of acquiring companies and knowing how to.
Good day right value are the reason, we believe that the reason for that is that M&A is on serving growth strategy and not the opposite we don't change our strategy because if an M&A opportunity.
And right now we believe we have a many of the all of the components that we need to fuel our growth our markets are very healthy.
We have leading platforms, but we remain.
We remain active on the M&A front, and if we see something that can fill though.
M accelerates the execution on our strategy or our fuel our growth as long as it is in line with our strategy will continue to do that because the muscle of integrating our M&A is is it healthy muscle at day at nice and of course, we have the capital to go ahead and do that if we fall.
And something relevant.
Great and then just was with cloud are you continuing to see the trend. We're just conversions and overall sales cycles to cloud customers is continuing to shorten you continue to see that accelerates from where it was even a year ago.
Yeah, we.
I mentioned kind of as I reflect on 2020.
One of the thing that is clear is that.
All the key pillars, where we operate and cloud digital and AI, what's happened in 2020 as they kind of flip forward.
'twenty 'twenty created a kind of a leap forward in the adoption level of diesel solutions organizations realized.
As a result of the 2020 event that even if they had plans to adopt cloud only several years down the road. It is now a much more important much more critical in order for them to continue and adapt to the changing environment. So we see that and it's a similar dynamics as we said.
Before and to smaller enterprises day adoption is rapid in the larger enterprises, we see much more of kind of a land and expand.
Our customers would like are they just it's too complex for them to move everything in one day. So they will adopt tasteful one division or one side of the business and then expand.
From that beachhead that that's a trend that we've seen in 2020 and we believe it will continue this year and also moving forwards.
Thanks.
And our next question is from Walter Pritchard with Citi.
Please proceed with your question.
Thanks question on the on the FCC side with cloud, where it seems like you've seen an uptick this quarter can you talk about what you think drove that was it sort of a kind of a budget flush dynamic in Q4, where those customers were really looking to put money to work into the future and then how do you think about that.
Proceeding from here, what types of financial institutions, or you're seeing move to cloud and which ones are lagging.
Yeah.
So great questions first the overall dynamic of the this market is very healthy they need to meet the regulations and fight financial crime is the same as it was before as I've mentioned throughout 2020, and even more so in Q4, we had a announced.
Standing booking a year that will translate into revenue, but there are certain the changing dynamics over there one of them is as I've mentioned is the shift to the cloud. This was a market that was slow to adopt cloud and we are starting to see now there's a shift to the cloud.
Second thing is that for US we historically operated mainly in the higher end of the market with that we are excite and introduction of exceed earlier this year.
Got us an opportunity to actually cater to the entire market, including to the smallest financial services out there and we didn't expect it to be a doctor to get to debt. So fast, but you are very happy.
To see that the adoption of succeed to day look smaller customers that used to have kind of homegrown solution or very basic solutions. We now have the opportunity in this market. So that will allow us to transition. This business also in into cloud and I think what we see in the revenue as the classic.
Phenomenal for a shift to the cloud it takes time for the revenue to realize and we'll see that coming day in and we know very well strong believer in the business in 2021 and also we're moving forward. The last one is that we see more and more in partnerships in this business, we've talked a lot about partnerships in this business and signing financed.
In Q4.
It allow us to further expand our footprint and our market reach.
Great and then just a question on the if we look at the growth rate in cloud Q3 versus Q4, Q3, obviously higher is there anything that you can help us understand that was the driver in Q3 in cloud overall, but that did not continue into into Q4, I mean, obviously, we understand the numbers are getting bigger as well, but just curious sort of the internals of the cloud revenue in it.
We've been in an environment, that's been changing pretty quickly. So I wanted to see if there was any more detail there.
Yeah. Thanks for the question Walter I think in General you know like any revenue lines, you know there'll be some slight fluctuations from quarter to quarter occasionally that oh that that happened you know in general we're quite pleased with the the overall growth rate you know higher than 30% growth for the full year of 2020 in M.
And we remain confident and looking forward in terms of.
Cloud, our cloud platforms and more particularly the ex one continuing to be the driver of that strong growth going into next year as well.
Great. Thank you.
And our next question is from Rishi <unk> with D. A Davidson. Please proceed with your question.
Hey, everyone. Thanks for taking my questions nice to see continued strength in our business.
Wanted to first start.
Philosophically buyback thinking about.
How youre looking at in a post pandemic future items and the sustainability on both the topline and so by that you know acceleration of digital transformation and accelerating simple cloud how are you thinking about the sustainability.
Is that post pandemic and then on the on the cost side I'm sure you've gotten a lot of cost savings as a result of just not having any effectively zero TV budgets and not having a physical conference.
You know as we as we have the ability to go back to business travel, let's say optimistically in the back half from this year. How how are you thinking about some of those costs, which are going to be coming back what you're gonna be permanent cost savings and then I've got a follow up.
Okay. Thanks for the question I'll start with the first part and the best to take the cost element. So.
I think we've shown in the past and we definitely see that.
You know and day end of the day you know the.
The pandemic itself accelerated certain trends.
Starting with the adoption of cloud the shift to digital and the adoption of AI and we don't think it's temporary and think it's a little bit.
The you know the aftermath of the pandemic those are three things as well as others, but those three things where it will remain with us well after a COVID-19 world.
<unk> will be out of the headlines and that dovetails before our business is instead organizations of all sizes.
Had a true.
Mark you'd like from the early days of the pandemic and their ability to be agile in their respond to different dynamics and our index. After them, if they're realizing that they need to shift faster than they thought before in the adoption. So philosophically.
Perfectly or high level all of those three domains, which are the pillars to everything that we do cloud digital and AI.
Only going to be stronger and accelerates builder Oh.
To close I'll hand, it over to Tibet, Yeah, Yeah. Thanks, Brock I think Rishi on on the cost side of the house and you know clearly our primary focus is around our topline growth and furthering our overall cloud growth.
And in order to do that we're also very focused in how we spend as an organization. So our eyes are really focused on continuing to.
To fuel that growth through further innovation and doing that through further investment in our R&D as well as really our go to market machine and so that's our focus in terms of how we are.
Spend internally what will continue on those two areas and and you know as we look at the overall makeup of our profitability and we have always been keenly focused on running a very a well optimize the organization with a lot of leverage and so you know as you look at the the ongoing picture.
We still remain fully confident in our ability to continue to drive profitability, while filling out of the cloud growth as well.
But just to add to that Michele just the debt on your question about whether it's you know the savings are one time all day will continue we didn't have thrown off savings from deep and dynamic you know office. There's you know we continue to pay early so there isn't as much savings there. The only services, we had a bit on the bid but on travel.
And we you know it will it's interesting to see what will happen with travel moving forward how much of diesel organization will need we don't think that will have any material impact on our profitability moving forward and on the flip side with thing debt post pandemic the modification high buoy the walk from her.
Home would actually help us to drive some savings on M. M on the real estate and so we don't think that the quote unquote the savings with the extended C are all going to disappear.
Got it that's helpful and then Beth I wanted to drill a little bit more into our 'twenty 'twenty, one guidance would pop on some earlier questions but.
You know look at the numbers right you're talking about at the midpoint, 9% growth in Q1, and probably close to 8% through the remaining three quarters. If I look at the midpoint of full year guidance.
And I guess why shouldn't growth our overall growth accelerate you know our post Q1, especially given.
The comps get a lot easier, especially in Q2, and Q4 and you'll have a more favorable cloud mix shift that that's a day that maybe help us understand the assumptions baked into that.
Okay.
Yeah, I think thanks for the question I think and I'll add my views and then let the Embraco chime in if he has anything else you'd add I think that you know generally when we look on the growth in the distribution of that debt. During the course of the year you know.
First Barak mentioned, we had really strong Q4, we're coming to the year with a nice backlog I mentioned also the dynamic of.
The fact that where we're bringing more of the growth than earlier in the year given that we're coming in with this the strong base of cloud.
Our overall mix and you know as we look kind of on on the product side of the house I think you can expect the 2021, well will likely look you know more similar to what we had kind of pre pandemic in terms of we were seeing some declines there.
Don't expect to see unlikely that we'd see the same sharp declines that we experienced.
During the course of 2020, but it is likely that a.
Given the acceleration we see in the markets overall are that that transformation is going to continue to drive the dynamic in the top line, which is the continued strong growth in the cloud and the continued transformation with product in an on premise, becoming a less and less of our business overall.
Alright wonderful thank you.
Yeah.
Our next question is from Dan Bergstrom with RBC capital markets. Please proceed with your question.
Yeah. Thanks for taking my question, maybe to build on re shoes post Covid question, a bit you talked about you're working arrangements going forward, but what are you hearing from large customers as far as the vaccine potentially returning to work on premise.
You know I know much of the efforts over the last year, we're about making it work from home just as effective as working from the office just curious what you're hearing about return to work or continuation of more of a hybrid work from there.
The old model.
Yeah, we will obviously have a lot of those conversations with our customers as part of a small book of every conversation without a these days I think the real answer is that no. One really knows everyone have certain estimates I'm organizations are making some preparation, but it's a lot of estimation.
On one hand, there is the understanding that the there will be a change everyone's talking about something that will be not temporary about the ease of change.
M. There are several models alder, so I'm talking about you know a hybrid so I'm talking about enabling a full work from home and some even talking about work from anywhere, which you know which has its.
Challenges, if you would like but the bottom line is no one really knows even even though our customers and what they want to have is the agility all day the flexibility to to change quickly to whatever comes their way.
That's what we hear from them. So when we talk you know when we ended small talk when we talk about project, what we want what they want is the are the agility of our debt and in the tech sector. I think you all we all read the same M P.
Headlines.
And what we enabled our employees were very happy with how we've operated this year, it's probably a combination.
The nation of the the spirit of nice, but the engagement level at nice remains very very high actually higher in working from home are doing a lot of course to maintain that productivity increased as we work from home and we you know we are waiting to see that Oh. It will be haynesville are obviously on the safety of our employees though.
A priority for us and one of the things clear out we will take a decision on how to operate moving forward. It will probably be a combination of everything that I said before.
It makes sense and then it sounds like enlightened had a really good quarter here with the number of deals growing pipeline across verticals.
Is it the behavioral modeling and predictive outcomes, that's really driving the traction here.
Can you drill down into the platform a bit you know, what's what's really resonating with customers.
Yeah, I think it's ex it's exactly that.
We.
Selling analytics to our customers for many many years and many of our customers are you using our analytics solutions.
And adopted them.
The enlighten with AI capabilities, either direct continuation offer analytics and understanding that we also have the data to if you'd like elevate the analytical capabilities to AI.
And the ability to put analytics on steroids are using a light and if I can use this analogy and wish that we had launched enlighten earlier in 2020.
And what we the pipeline started to builds we expected a few deals in Q4, but we didn't expect so many and from so many of you know fortune 100, and very marquee brands as I provided in my earlier remarks, So we're very happy with the adoption and it's exactly the doctors the ability to.
Our product provide predictions prediction models and take a decision in real time, if you would like and bring our real time decisioning.
Based on those capabilities.
That's great. Thanks Brock.
And our next question is from Paul Coster with J P. Morgan. Please proceed with your question.
Yeah. Thank you for taking my question I, just want to go back to the products and services.
Segment.
Ken from moment, if you don't mind I'm not quite sure how to think about this long term.
Mentioned kind of looking back to 2019, but when I look back over the last few years, it's so dependent a little bit.
Lumpy.
Is this a sort of flattish current are these flattish kind of revenue lines for the foreseeable future is I guess my question.
Yeah, I think thanks for the question Paul.
To add some additional color. There you know I think first of all looking back to 2019, an analogy I was making there as you know from quarter to quarter product will vary and I think you know we should expect that all quarters in terms of product won't necessarily look alike and so what we're focused on is of course to the longer.
Term trends when we look at our revenue lines and how that mix will change over time and then next over time, we expected as I had highlighted is to actually increase cloud and so by default as cloud increases over time, youre going to see that the product gradually declines as well you know.
We are shifting the business.
Market is shifting and accelerating and moving into the cloud and so that is going to create a dynamic where over time.
You'll see a decline in product revenue as I highlighted again, you may see some variability or Lumpiness, you know on a quarter to quarter basis. So that's kind of the longer term trend you should expect.
As you look on the services you know services had a couple of components, there's the deployment or the professional services, we're providing to actually deploy the on Prem solution and of course that that kind of goes a little bit non lockstep, our hand in hand with the change in product of course, the much larger piece there is our maintenance stream.
And on the maintenance stream.
Is a legacy.
Our WSI M customer base and we also believe that over time that is the are the maintenance that will ultimately also transform it into the cloud but of course in the large enterprise that has a very long tail and so that's not going to be a near term transition that that's going to take many.
Many years to actually see that shift and we do know based on our customers that have already made that shift that we have a very nice lift when those customers are moving from our traditional on prem customers and over to the cloud. So those are kind of some of the expectations around the different segmentation of the revenue lines.
But that was very helpful.
As we sort of look over the long term as well or do you anticipate gradual diseconomies of scale.
Geez.
As those businesses kind of lagged the cloud or is everything fungible here.
Our resources, just simply get flipped over to the growth segments. This is on the Opex side really.
We as best I think said in the opening remarks, we continue to expect to further gradually improve our operating income and operating margin and we are aiming at the for at least 30%. We had a very nice improvement in the past three years and that actually was very nice improvement.
So in 2020.
And this is driven by the fact that although this business is shifting to the cloud a gross margin of the cloud is rapidly rapidly improving and actually it's getting closer to the mix of the business from the perpetual there all day to 68, and it's very close to where we would like to be and we believe we can take it much much higher.
Here as we scale and go to the enterprises with respect to resource of as you can imagine in the past few years and also moving forward. We are shifting a lot of our resources from our on premise business ER to ER to the cloud.
Okay. Thank you.
Thank you Paul.
Okay.
And our next question is from Pat well Rubens well reasoned with JMP Group. Please proceed with your question.
Oh, great. Thank you congratulations you guys.
M and broth, maybe this is for you, but I'm wondering if you can comment on sort of how the competitive environment is evolving and in particular with one question I get is when investors look at the 2020 magic quadrant versus 2019.
What they see is it Amazon connect shows up as a new player five night actually moves backwards from our leader Challenger and.
And Genesis moves a lot closer to nice in the leaders quadrant.
Just wondering is that reflective of what you're actually seeing in the market.
Okay.
So first of all I'm very proud and happy to be.
The number one player on the multiple of analyst reports and all the markets. We play in we all day number one on the leading analyst on financial crime and compliance and same goes of course from the customer engagement Gardner is one but the others like force the Frost and Sullivan et cetera, and in all of them will do non bill.
Day, one and it's a healthy market, it's a growing market and when the time is growing a lot of players would like to play both large players that are want to get into the space a lot of small start ups and also the the existing our existing go on we're very confident in our strategy to lead the way we believe that.
Putting together in the past few years, the workforce optimization analytics and a M and routing with the addition of digital and AI was a step that no one else had and others still don't have and will have to work hard to get to where we were actually several years back.
But we'll keep monitoring the competitive dynamics, it's hard for me to say, whether you know those are small fluctuation or changes you know one moving upward down is is really representing what we see out there I can tell you from the alder in the market there are a ton of opportunities.
Our participation rate is increasing rapidly and our win rate is very very high. That's that's what I can tell you from from from the field.
Great. Thank you and then if I can add one more so.
So I appreciate your comment on.
No one really knows in terms of the work from home, but you know I'm wondering what you are planning on doing in terms of your policies at nice.
You know we're struggling with this too but do you plan to be sort of a full remote company do you plan to be worked from home company what.
What are you telling your own employees.
So all I'll tell you what whether its total tau, but so far we feel permission I prefer to tell their employees first what is the next step before I share it yourself.
So no it's great.
To come over to the breakout breaking news here to our employees, but so far we right. The low working from home net felt of debt and 100% 7000 people at end of March last year overnight, we moved to work from home, we adjusted to that very quickly with Zillow. This option in the business and it's working.
Well for US we need to remember two things as we are doing that and all of those people that are used to working from home today or most of them used to work together in offices. So they know each other.
And then if there is a new people are getting higher there is a question of how do we keep them engaged and how do we make sure. They adjusted the nice day culture. That's number one M and a second thing those things like ideation and collaboration which is still I believe in the personally I believe that individual world are not the same as meeting.
People people in person.
So I don't think in reality, given where we stand with vaccine in different territories personally I don't think it's going to change much between now and let's say the end of the year or the summer Ah.
Few months of the left or the right I know the difference. So I think that's for the foreseeable future for us that's going to continue to be the model for fruition.
With respect to what happens after and if things are safe and we can actually have the flexibility to choose that's something we all day debating internally today, what's the best thing for us and for our employees and we will announce it to our employees are relatively soon and then I'll share it with you.
Alright, great. Thank you.
Thanks.
Yeah.
And our next question is from Ryan Koontz with Rosenblatt Securities. Please proceed with your question.
Alright, thanks for the question.
It took about your comments on on AI and specifically on the CX one could you touch on the use cases, there or is that more for coaching or or your all your digital engagement capabilities fully automated there with AI and how do you how do you monetize that AI capability.
Yes.
Sure.
Let's think for a second of what we do at six one we have hundreds of thousands of people. Conversely morning, actually they're not coming anymore, they're working from home, but are opening their laptops and working on six one and this is the main issue.
If you'd like as the main operating system for customer service, whether it's digital or not.
And that's all being done in the cloud for us and as a result of debt we have a lot of data going through floor plus from.
And our the system our systems all are smart to learn from every interaction are that.
Before going through our through our systems.
And as we inject AI to the different corners of our six one we see more and more use cases are starting to shape up starting from the ability as you said to Cogent guide in real time, a day agent or the service providers as they interact with customers then goes to our engagement in our most sophisticated way on.
Different digital channels with different Boston chat bots, and getting smarter and smarter every day.
A M.
Few other use cases can be on the compliance area again still in the customer services space. So the beauty is that as we inject AI to the different corners of six one.
We're learning new use cases, but actually many of our customers are coming with use cases, we never thought about before.
Okay.
Yeah.
Okay.
Operator.
And our next question is from Scott Tasha with Bank of America. Please proceed with your question.
Hey, Thanks for taking the question it seems like you've developed a very strong backlog in the quarter can you maybe talk about the time. It takes to go from bookings to revenue for the cloud revenues and CX one specifically.
In other words have we seen the full benefit from the <unk> market acceleration, yet or does the recent acceleration take more time to show up in the top line.
Yeah, It's a it's a great question and it's.
So you know it's hard to give any numbers here because it really depends on multiple dynamics are we have multiple it you know if we fix.
Fix one you know there are small customers, though big customer that's the beauty and even more so in 2020.
We can make customers up and running in 24 hours and actually with great. Examples of new use cases or the case studies from the peak of the pandemic back in March where we actually had to bring customers up and running at scale in 24 hours and we've managed to do that in most cases.
Actually the issue is not the issue of getting up and running is not on our side, it's actually the level of readiness of all of our customers and some of the needs of the certain integration on their side.
And all those things and training and so on and so forth. So today, it's really depends on the customer side and so in some cases it can be immediate like a middle of a few days and in some cases can go all the way to a several months like six or seven months.
So there is a blend of a day of multiple things and we didn't see a dramatic change if you would like in the debt.
Time it are on average from.
From booking to activation it'd be tired of it.
It's a it's just go to the enterprise market, but it's a very similar to what you've seen before.
Thank you that's very helpful. And then I guess one more from me can you talk a little bit about <unk>.
Maybe the benefit you saw in 2020 from usage of the platform and cloud usage.
Was there a benefit from usage in 2020 that May go away next year and create a headwind and that's all from me. Thank you.
Yeah.
We don't believe so obviously we are we are very proud to take part we were we were proud in 'twenty 'twenty to take part of the.
Business related to and on the government on the state and local related to dip in day make at the beginning it was more about the you know just being available on the QE.
Q&A Oh information centers in the early days of March and April than it is kind of converted into big centers about testing then it converted to big centers around contact tracing and these days. It is a lot of our big centers around the vaccination, which we believe will stay through 'twenty two.
When you want at least 2021. So that's that's in that segment on the flip side on the commercial settlements, which of course is our biggest business on a six one we saw different ups and downs, but overall its the nothing that is just one off from one time.
We actually believe that.
If things pick up the travel and tourism industry, we're starting to see that picking up as people are starting to schedule their vacations.
And with a sense of optimism for the summer and full day second half of the year.
Oh.
Operator.
And we have reached the end of the question and answer session and I will now turn the call over to Barak.
Closing remarks.
Thank you very much everyone for joining us today and have a great day. Thank you.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
[laughter].
Yeah.
Hum.