Q3 2021 Nice Ltd Earnings Call
[music].
Welcome to Nice conference call discussing third quarter 2021 results and thank you all for holding.
All participants are in a listen only mode.
Following managements formal remarks instructions will be given for the question and answer session.
Minder. This conference being recorded November 11th 2021, I would now like to turn the call over to Mr. Marty Cohen VP Investor Relations at Nice. Please go ahead.
Thank you operator with me on the call today are rocking along Chief Executive Officer, and best gas pitcher Chief Financial Officer.
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 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 the section entitled risk factors in item three of the company's 2020 annual report on form 20-F as filed with Securities and Exchange Commission.
On March 23 2021.
During today's call, we will present, a more detailed discussion of third quarter 2020 results.
And the company's guidance for the full year 2021.
Following our comments there will be an opportunity for questions let.
Let me remind you that unless unless otherwise noted on this call we will be commenting on our adjusted results of operations, which differ in certain respects from generally accepted accounting principles as reflected mainly in accounting for acquisition related revenues and expenses Amarin.
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.
Now I'll turn the call over to Brock.
Thank you Marty and welcome everyone.
We are pleased to report a banner quarter with Q3 total revenue just shy of pass $1 billion for the first time in our company's history.
The quarter was characterized by continued accelerated growth across the board underscored by 20% total revenue growth and 29% growth in the cloud.
These strong Q2 results reflect the uplift we are receiving from being at the center of four key dynamics that are taking place in our industry.
Cloud digital AI and the shift to platforms.
Specialized applications natively built in the cloud at scale.
Now, taking a central role in organizations transformation to cloud technology.
Six one has become the premier native cloud specialized platform for customer experience.
We built six one with the world's largest and most comprehensive customer engagements set of solutions.
We are for the first time ever in this industry fulfilling CX needs. That's the decades could not be achieved with the old paradigm of disjointed on premise and non cloud native solutions.
Over the past year, we have added a dozen new native six on solution to our portfolio with hundreds of new features.
We now have over 725000 agents in 100 countries using six one making us by far the clear market leader.
In our go to market, we have added 27, new partners. So far this year and have extended six one internationally, which I'll talk about.
Later.
[noise] consumers exponential adoption of digital is far outpacing organization slow linear digital evolution.
This is the root cause of the rapidly growing friction between consumers and service.
Linear or evolution will never catch up to exponential growth.
Our digital strategy has one goal.
To be the next generation engine, allowing organizations to radically shift from slow digital evolution.
April ahead of the digital consumers.
Twenty-twenty wanted the stamina alere in our execution on this strategy.
Catapulting six one to the center of the digital Arena.
We are already seeing tremendous success and expansion with our digital first approach with six one.
In Q3 digital revenues grew 78%.
The number of cross sell digital deals grew 34% in the numbers.
So a first a first time digital only deals grew seven fold.
Even after decades of investment in productivity process optimization and automation tools.
87% of spend in the <unk> market is still attributed to labor.
Artificial intelligence.
With high quality CX data is finally, starting to the soft the axiom that the only investment in incremental manpower can deliver a great customer service.
Six one with its massive six data repository, he's taking giant steps towards becoming the ultimate six.
Hey hub it organizations shift to automated smart CX with unprecedented return on investment.
Data and AI served as a catalyst to six on rapids win rates and expansion in Q3.
This is reflected in the very strong momentum we continued to see within lighting, which is the Arab brain and the core of six one that he didn't.
Better across our entire platform.
In Q3 area drove third of the men's for enlighten is the number of enlightened do tripled in the quarter compared to last year.
Platforms are the only viable way to master complexity at scale.
They'll do ultimately the glue between technology and processes for organizations.
Our goal is six one as a platform is to master the extreme complexity of scale for the CX market.
There are no shortcuts in reaching this goal.
Only way to achieve it is with a complete fully unified and open suites.
Six one to date has more than 4000 development many years and decades of domain expertise invested toward this goal.
We are the only player in the CX market that possesses all the assets natively built into one platform.
In fact, seven out of 10 organization adopting six on today are retiring three or more separate software solutions.
These four dynamics cloud digital AI and platform provides tremendous long term growth opportunities and we continue to strategically double down on them.
Let me now turn to Q3, we continued to outperform our 2021 plan by expanding upmarket to the enterprise expanding to international markets, expanding our reach through partnerships and expanding our leadership in digital.
Our decade long expertise and go to market experience with large enterprises, which we defined as organizations with at least 750 agents easily reflected in the great success, we're having at the high end of the market with six one.
Although six one new bookings in Q3 grew 100% year over year and the number of seven digit and above deals goose at 46% in Q3 versus last year.
One example was an eight digit ACB deal with one of the largest retail brokerage in the world.
This customer which was with an on premise incumbent for many years evaluated the cloud solution of the incumbent and selected six one for its all the oil superiority.
This integration and the breadth and depth of the platform.
Another large signing for six one included a seven digit ACP deal with the major interactive gaming company and the incumbent provider was unable to support their needs.
Taking into account the large seasonality shifts in their business they needed a platform that was highly flexible and elastic.
We also signed a seven digit ACP deal with a very large federal government agency.
Other allows just for the quarter at the high end of the market included an eight digit deal with an existing customer a very large financial services organization that added multiple new solutions.
We signed a seven digit deal with one of the largest airlines in the world.
Airlines is now able to.
Sophisticated analytics to 100% of their interactions volume up from 10% to effectively understand the interactions with their customers.
Other seven digit deals with large enterprises focused on modernizing their CX platform, including a well known provider of human to human capital management solutions, and a very large pharmacy company.
Another growth vector in our 2021 execution plan is international where we see tremendous opportunities as many organizations are beginning to adopt cloud and digital it's faster pace.
In Q3, the number of new international CX logos as well as international bookings of six one grew 48% compared to the same period last year driven by major expansion with our international Channel partners.
International deals for six one, including the well known Canadian based logistics and shipping company, which was a competitive replacements.
Companies focused on cloud and digital transformation to help make interactions with their customers seamless and with the support of self service.
Other large international CX one deals.
The major University located in the APAC region.
Brazil, Brazilian based bank and allows suppliers of industrial products based in Australia.
Two years of Friday innovation combined with key strategic acquisition in digital Nei has significantly widen the gap in our competitive differentiation in 2021 and significantly increase our win rates in Q3.
Our success in digital and AI has two main drivers.
The first is organization, who chose to move from legacy Omnichannel solution 12, Nextgen digital CX platform.
In these cases, we're experiencing a doubling of the ACB with the adoption of digital.
A few of these examples include the U S based PPO and international insurance broker a financial services organization specializing in retirement planning.
Well known vitamin in Arab company, a beauty care products company and several others.
The second driver is the transition to AI powered self service is organizations realize that this is the only way to address the need of the digital consumers.
Some of that Houston deals include a large waste management company, a well known household company and the large energy infrastructure company.
The exact same thing that makes I discussed earlier cloud digitally I and the shift of platforms.
Fueling the accelerated growth in our financial crime and compliance segment as evidenced by the year over year, 21% revenue growth in Q3.
We signed an eight digit deal with a very large German bank, which selected nice due to the scalability of the solution and breadth of functionality.
In a seven digit deal with a loud European bank, they purchase a portfolio of <unk> solutions to modernize the financial climbing.
Clients platform in the fast evolving digital environment.
Other large seven digit deals included a major bank based in the U K one of the largest U S insurance companies and two of the world's largest banks.
In summary, we have taken a central all and are leading the market in shaping the full dynamics, taking place in CX cloud digital AI and the shift of Clarksons.
Up until a few quarters ago nice was a single digit total revenue growth company executing on its transition to the cloud.
2021, clearly reflects the dramatic change in our financial profile as we quickly shifted to a company that is now ongoing its total annual revenue in double digits delivering fast growth in the cloud with the run rate of over $1 billion and.
Trading consistent profitability of nearly 30%.
With the tremendous opportunities ahead of us and our commitment to continued solid execution. We believe that the shift that we've seen in 2021 is paving the way for continued success and expanded market leadership.
Thank you and I will turn it 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 third quarter of 2021, and our outlook for the fourth quarter and full year.
Our third quarter financial results were excellent with 20% year over year growth in total revenue, which marks the third consecutive quarter that we reported year over year accelerated growth.
Total revenue for the third quarter reached a record $494 million compared to $412 million in the same period of last year.
Our financial performance in the quarter was reflective of the strong execution that we've demonstrated across multiple fronts.
We delivered double digit year over year growth in both cloud and prospects.
All three regions that we operate in and in both our business segments.
The Q3 top line was driven by another strong quarter in the cloud with 29% year over year growth, coupled with an outstanding performance in our product revenue, which grew 73% year over year.
Cloud revenue contributed $262 million and represented 53% of our total revenue.
Services revenue totaled $164 million and contributed 33%.
And the remaining $67 million or 14% with product revenue.
Our sequential cloud growth of 7% demonstrates the continued momentum and strength of our cloud business we.
Our by far the largest cloud provider in our industry with an annual cloud revenue run rate, that's more than $1 billion.
Our success in the cloud is primarily being driven by our main growth engine CX one.
Thanks to the continued effective execution of our expansion plan and international large enterprises partnerships and digital as well as leveraging the breadth and depth of our platform with cross sale opportunities.
In Q3, we recorded impressive revenue growth across all geographies, the Americas region, which represented 82% of total revenue grew 19% year over year.
Our strong international go to market presence and expansion with partners is contributing to our strong growth globally.
EMEA market grew 30% year over year and represented 12% of our total revenue.
APAC grew 14% year over year and represented the remaining 6%.
Moving to our business unit breakdown.
Or engagement revenues, which represented 82% of our total revenue in Q3 totaled $403 million, a 20% increase compared to the same quarter last year.
Our continued topline growth and customer engagement is a result of our ongoing success with the X one.
Revenues from financial crime, and compliance, which represented 18% of our total revenue in Q3 totaled $91 million for the third quarter, which was a record increase of 21% year over year.
The growth in the quarter was reflective of growing cloud revenue contribution from our cloud platform X sight and exceed as well as strong product growth.
While focusing on penetrating the market and driving topline growth, we continue to exhibit strong profitability and the generation of very healthy cash flow from our operation.
Our gross profit accelerated to a record $358 million in the third quarter compared to $293 million for the third quarter of 2020.
Gross margin increased to 72, 3% compared to 71% in Q3 last year.
The increase in gross margin was mainly attributed to an increase of 154 basis points in the cloud gross margin.
We expect ongoing gradual improvements in our cloud gross margin as our cloud revenue has continued to deliver strong growth and we remain confident in our ability to achieve our longer term goal of a 70% or higher cloud gross margin.
Our expanding margin is being driven by new cloud revenue stream as we are successfully establishing beachheads with new and existing customers witnessing increasing software attach rate and driving cross sell opportunities, while gaining efficiency and scalability on the cost side.
In Q3 operating income increased by 20% year over year to $140 million compared to $117 million in Q3, 2020, and operating margin was 28, 3% like last year.
Earnings per share for the third quarter totaled $1 68, an increase of 19% compared to Q3 last year.
We experienced another strong quarter and operating cash flow, which totaled $104 million in Q3.
Total cash and investments at the end of September totaled 1 billion and $456 million.
Net of debt of $607 million or net cash totaled $848 million.
Our strong cash flow generation and healthy balance sheet continue to allow us to capitalize on synergistic strategic acquisitions that are consistent with our digital growth strategy and capital allocation plans.
I will conclude my remarks with guidance.
We are raising our full year 2021 guidance for both total revenue and EPS.
For the full year 2021, we now expect total revenue to be in the range of $1 billion and $899 million to $1 billion and $909 million.
This implies that Q4 2021 total revenue is expected to grow between 11% and 14% year over year.
For the full year 2021, we now expect fully diluted earnings per share to be in a range of $6 43.
The $6 53 and.
I will now turn the call over to the operator for questions operator.
Thank you at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
From ancient home indicate your line is in the question queue.
Plus start to if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary, we could pick up your handset before pressing the sake.
Once again Thats star one to ask a question at this time one moment, while we poll for first question.
Our first question comes from so not Samana with Jefferies. Please proceed.
Hi, Good morning, Congrats on the strong result Barack I wanted to clarify I thought I heard you said that the excellent bookings were up 100% year over year that's.
That's a really big number so first I just want to make sure I heard correctly.
And it's true can you maybe just help us understand what's driving that strong bookings performance, even as we has moved well beyond some of the pandemic tailwind that the company benefited from last year.
Sure.
I think some others. So yes, you heard correctly.
Bookings of six one in the quarter, new bookings of six one in the quarter grew 100% year over year. It was really a phenomenal booking and this is following also the last few quarters of very strong booking are across the board and also with a six one as we commented on previous calls.
The drivers of all the above everything I mentioned in my earlier remarks, the adoption and the win rates, we're experiencing at the higher end of the markets I mentioned some of those.
Deals and the list is too long to read on the on the script.
Expansion into our international.
We are fast adoption of digital which Ive mentioned that when we and did you tell them to six one <unk> doubled the HCV and sometimes even more than that.
And overall, our additional expansions.
What we see from our existing customers.
Great. That's very impressive and then maybe sticking in that being that digital revenue as you mentioned it grew.
Almost double the rate that overall cloud revenue is growing how should we maybe think about a digital revenue going forward and how durable is that that robust growth that youre seeing on the digital side specifically.
Okay.
We believe that the digital is still it's in the very early innings.
From a variety of reasons digital is not new as a concept dry bulk most organizations do have some form of digital.
But it's our solutions and Siloed solutions that belongs to previous generation as I mentioned in my earlier remarks.
We all see it we all are aware all consumers and we ourselves as consumers adopting digital in an exponential.
Grill.
Gross if you would like.
Musician that are trying to fight it and lineal evolution will never managed to catch up. So there is no understanding as we meet with a lot of customers there.
Just trying to patchell to add kind of.
Volatile AD hoc solution and point solution is not going to fight for them, what we offer with digital is the key.
Combination of data digital and AI that comes together.
And that's the real a major.
The major difference.
The big thing about digital and how do you adopt digital given cost consumers the right experience and without inflating your manpower and it can only be done with the right digital technology Ah the massive amount of data that we have in our platform and of course, the right algorithms.
We believe the Sky's the limit Florida potential in digital.
And it just the early days so it's not a specific number but it's a really in early days.
Very helpful and then Beth I can't not asking you a question it wouldn't be a nice earnings call without one for me for years. So just as I think about R&D expense jumped.
Pretty significantly and I know the company is investing behind behind that maybe just how should we think about the shape.
Expenses and investments.
Forward.
Especially as the company ramps the international side, just maybe get some context around that.
Sure. Thanks for the question and when you look on our R&D for the quarter and generally in our appetite for investing back you know we see this really strong growth in our top line and we're being fueled by a predominantly a CX one and of course, we're going to continue to fuel that investment.
And that's what you've seen in the quarter.
At the same time as a company and we've always maintained our philosophy on having a balanced approach and we've provided.
A benchmark of expectation for a 30% operating margin and in the future and and that doesn't change. So it's a combination of a balanced approach to investing back in but at the same time continuing to watch it to drive the increasing profitability on a few if you look on our current year as an example.
You'll see we have a growth in the teens both in our revenue line as well as in our operating income.
Great. Thanks for taking my questions. Congrats on all the success. Thank you. Thank you so much.
Our next question comes from Rishi jewelry or with RBC. Please proceed.
Wonderful Thanks, and then great to see overall growth accelerated to 20% I don't think any of us really expected that sort so really great to see I had two questions first on on the international traction Youre seeing there maybe a housekeeping can you help us understand in conjunction when you talk about international and the momentum and especially on the <unk> side.
You know is this happening with internationally based customer that was happening with existing U S customers that have big oldest is present.
And and alongside that you talked about.
X one doing really well internationally are you starting to see an inflection point in cloud appetite overseas and then just alongside that I have another housekeeping any FX impact on the quarter I don't know about bold.
Sure. So I'll start on the in the international.
So it's all of the first quarter that we see on international in the last few quarters. We gave you some color about the momentum we've seen internationally thinking now you also seats.
Just in the leading indicators like the booking you start to see it happening also in the revenue is reflected in both EMEA and APAC are this are this quarter.
And the answer is yes to the question, yes, we see rapid.
Growth in the an accelerated adoption.
All of the oldest singles, where it's also sitting in the U S market and so in the U S market in the past it's very similar.
Next we invested heavily in the past two years.
There isn't a national expansion, we had footprint before we are not new to international markets, but we have added a lot of capacity are.
Both in terms of the adaptation of the platform. The people the go to market. The support services. The language. The localization if you would like and now we're seeing a tremendous.
Tremendous our success and our growth with respect to these are not just expansions of existing U S. Based customers going overseas. This is I gave you example of that company.
Companies that are headquartered Ah internationally, both in APAC and EMEA Latin America.
Of course, our U S companies also have multinational presence, but those would count actually under all U S numbers.
Back to the ethics number then hand, it over to Beth with respect to the the ethics number if you look at our business M. 82% of our revenue was driven out of the Americas. So we're still a you know.
Predominantly based in any U S. It's it's quite similar in terms of our expense base as well if you look on our individual markets. For example for EMEA EMEA did enjoy a few points of growth this quarter and despite that you know they were at 30% our.
Gross so still strong and in all respects.
And as you look at our expense base, where we're typically naturally hedged by doing business and having physically physical presence and in our most of our regions outside of the Americas and in those locations, where we don't have as much revenue, but have the expense space typically in those cases, we are.
Hedging forward in terms of the exchange rate. So we have the visibility and stability looking forward on an exchange. So all in all that means that there wasn't any significant impact of FX on the quarter.
Okay. Thanks, a lot.
Just drilling into our cloud gross margin it looks like it ticked down about 60 points.
Essentially.
And anything to call out there that that led to that was that mix of software versus network connectivity or or something else. There and more importantly, you know how should we be thinking about that line going forward. Thanks.
Yeah, we had nice growth year over year was about 154 basis point pick up year over year, what you're referring to is the sequential movement between quarters on the cloud gross margin and of course, you're going to see some variability from quarter to quarter and we are you know expanding internationally.
In increasing our footprint internationally with that comes with certain cost. We're also starting to see the other parts of our business like financial crime and compliance as well as public safety start to expand more and of course, they're not at the same scale.
As the CX one business, so you'll see that come into play a little bit and see some variability from quarter to quarter, but keep in mind. If you look at our cloud gross margin expansion over the last few years. It has been a really significant we've seen some great expansion and we expect to continue to see that expansion over time, So we don't focus.
Really on a quarter to quarter move movement, we're looking at the long term growth.
And then on a longer term growth and profitability perspective, we expect to see that cloud gross margin continue to expand and it's coming you know as we are go up into the larger enterprise of course, we have a higher attach rates. So our customers. There have complex organizations are buying more of the offerings.
Have on the <unk> one platform for example, and that drives and expands the cloud gross margins. So that along with just the continued expansion and scale of our cloud business and we'll continue to to grow the cloud gross margins. So again don't focus so much on on the are the short term quarter to quarter change, but long term we see.
They'll remain confident in the 70% cloud gross margin and higher that we've talked about in the past.
Alright wonderful thank you so much.
Our next question comes from Tyler Radke with Citi. Please proceed.
Hey, good morning, guys.
Thanks for taking my question wanted to just go back to the 100% plus bookings.
Bookings growth in CX, one, obviously really impressive and.
Especially considering CX ones that the primary.
Drivers for the card business. So I just wanted to understand you know a little bit.
That number was there any type of duration tailwind that that kind of elevated that number and I'm just trying to understand how that growth rate, which clearly is above well above the cloud revenue growth rate should kind of impact that that.
That revenue growth rate going forward or if there's just anything unusual to call out from a duration perspective.
Needless to say, we're very happy with the performance.
Loud.
And the booking of six one and we also monitor the pipeline and the pipeline moving forward the seems to be very robust.
It doesn't change our overall outlook as we've stated before we believe that the overall cloud with our scale of north of $1 billion for cloud, we expect it to continue and be a nowhere for the next few years, 25% or higher.
As we step into next year, we'll look at the on all the backlog that we have on their cloud and beside our you know how to specifically multi.
Modify or change we'll keep the the.
The outlook, but overall as a what impact. This number is obviously a very large enterprises that are tapping into a six one and as you think about large enterprises. Unlike a small company. It takes longer time to convert the actual booking to the full ramp up of the.
Revenue, but on the flip side of it when.
When they are fully on board on the six one.
The expectation of our retention is much much longer it's a very sticky highly integrated to a lot of our information. So we are building the business correctly.
For the long run thinking about it strategically.
And that's our that's the way we think about it we wanted to of course to provide you with this important anecdote of the bookings for the quarter.
Thanks, Tim and Beth if I could ask a follow up just on the Q4 revenue guidance it looks like that's coming in.
45% above.
You know the street and kind of what was implied in the <unk>.
Prior guide.
How are you just thinking about the relative drivers of cloud versus products and that number. It looks like you do have a pretty easy comp on the product side and obviously you saw a lot of parts shrink this quarter. So just curious how you're seeing kind of the composition of the deals.
Evolve in the pipeline for Q4, thank you.
Sure. Thanks for the question and as you said, we we are implying a higher growth than where we were last quarter in terms of Q4 looking at our growth in the teens.
If you compare that to our quarters passed of course, we were typically in single digits. So it is implying a strong growth and if you look at our Q4 in particular, we see that on the product side again, we had a somewhat lower levels of comparison last year and so that comes.
Into play for a Q4, but we do expect to you know that is factored in on the product front.
Along with continued momentum that that we're seeing in the cloud. So it's a combination of our overconfidence that are in both for the quarter.
Thank you.
Okay.
Our next question comes from Tim Horan with Oppenheimer. Please proceed.
Thanks, guys great quarter.
You talk about what the main bottleneck is for enterprises adopting digital in is there something that's going to change that bottleneck is cloud adoption at a point, where we can really see an acceleration at this point or are there other issues that are preventing adoption.
Yeah.
Yes, great question.
We.
Have discussions with many of our customers and prospects with respect to digital everyone are trying something right. They have as I said some legacy digital our solutions in place that are very siloed are not well connected to each other and I'm kind of behind the consumers' expectations. So many of them have tried you know.
Different point solutions from small and bigger players.
And there is generally kind of a.
Filling of disappointment.
Triodos and there is much more understanding today with organizations that what's what's needed in order to have a true.
A comprehensive Nextgen digital solution are fully embedded with the eye is the data. The data is the key over here with all the data it's almost a useless. Even if you have offensive digital solution and that cannot be provided by you know small best of breed of point solution you need.
The domain expertise into use repository.
In order to train new digital solutions, and Youll, Boston storms before and that's exactly what they get with a six one so those conversations and we are starting to see the maturation of the majority of organization as it goes through those experiences and that's exactly what pushes them in the direction of six one as I said.
At the beginning it's still in its early days and we believe there is ton of potential it wouldn't even with al Digaetano.
I'll kind of runway of the company was great and digital in the past a year and a half with the strategic investments we've done in this area R&D. Some other places.
Now starting to.
Serve as a very strong driver by itself.
And can you talk about the sales process. It's one of the digital I can't imagine, it's just a formal bake off but I mean is it more of a consultative sale on where you're going in and engaging the customer and basically becoming almost a partner or a consultant to the customer.
Absolutely, it's a much more of a consolidated sell it a few more stakeholders on the customer side.
Forget the digital in many places is owned by <unk>.
Different policies multiple parties in the organization and they do look for someone that are common in a much more consultative approach and allow them to build internal if you'd like almost coalition.
And that our in depth guard and we also have great partners that we have.
Signed up in the last two and a half some of them even in the biggest side.
That there are sometimes we bring them or they bring us into those until those deals.
And they absolutely are all you're correct.
Thank you.
Our next question comes from meta Marshall with Morgan Stanley. Please proceed.
Great. Thank you.
One of the questions that I had is just what is your best kind of channels for some of the enterprise traction that you're seeing because I guess I'm just wondering about.
You know is that largely your installed base is kind of your best entry point to those enterprise deals are you finding that some of the channel relationships that you're building or what kind of help you bring you went to some larger conversations and then maybe just a second question on digital.
You know you've noted you know clearly it's doing very well just wanted to get a sense of you know is that our conversation starter and a lot of deals or you know is that tended to be its you know coming in with with existing customers or kind of layering that on to existing customers just trying to get a sense of when that conversation.
Starting on the customer journey.
Sure. So let me start with the was the first one.
You know one of the benefits we have as a company is that our we entered the broader six market would stick us after many years.
We had a lot of our expertise and presence and leadership in the higher end of the market with a W. E M solution W full solutions.
Meaning that we have the expertise we have much of the installed base of the W of both solutions and that allows us it's a great channel into the expansion.
For a full CX solution flu <unk> solutions with a six one so that's a great thing to add to that we have added a lot of other channels and expanding much or ecosystem.
Both internationally and also domestically in the past few years, so all of those things.
Really allowing us to extend nicely into the large enterprises.
And it's really you know and also the solution itself our solutions as I said in my earlier remarks, it's not just about complexity all scale, it's about managing complexity at scale and that's something that.
We have been doing as a company and the management team has been doing for the past 10 years. So that's what brings us I believe a lot of.
Competitive edge an advantage when it comes to the enterprise market with.
With respect to the second part about the digital.
So it's it's both of them sometime it's a it's a completely digital.
Digital AD digital first type of approach not combined with anything else understanding that the customers would like to stepped into Nextgen did.
Digital solutions and we now are a market leader in that space with the recent.
Launched a variety of solutions as well as some assets we have acquired in this in this area and other cases, yes. It is an add on where our customer already have for example, a sick.
X one contact center contact center solution from US and then we expanded nicely into digital and in those cases as I mentioned, a what we see is actually double doubling the ACB from southern customer.
Great. Thank you.
At this time I would like to turn the call back over to management for closing comments.
Thank you all very much for joining us and have a great day. Thank you.
Yeah.
Thank you. This does concludes today's teleconference. You may disconnect. Your lines at this time and thank you for your participation.
[music].
With me on the call today are Barack in alarm, Chief Executive Officer, and best gas pitcher Chief Financial Officer.
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 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 the section entitled risk factors in item three of the company's 2020 annual report on form 20-F as filed with the Securities and Exchange Commission.
On March 23 2021.
During today's call, we will present, a more detailed discussion of third quarter 2020 results.
And the company's guidance for the full year 2021.
Following our comments there will be an opportunity for questions let.
Let me remind you that unless unless otherwise noted on this call we will be commenting on our adjusted results of operations, which differ in certain respects from 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.
The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release.
I'll now turn the call over to Brock.
Thank you Marty and welcome everyone.
We're pleased to report a banner quarter with Q3 total revenue just shy of half a billion dollars for the first time in our company's history.
The quarter was characterized by continued accelerated growth across the board I underscored by 20% total revenue growth and 29% growth in the cloud.
These strong Q2 results reflect the uplift we are receiving from being at the center of four key dynamics that are taking place in our industry.
Cloud digital AI and the shift to platforms.
Specialized applications natively built into cloud at scale I'll now, taking a central role in organizations drunk summation two cloud technology.
Six one as it becomes a premier native cloud specialized Gladstone full customer experience.
We built six one with the worlds largest and most comprehensive customer engagement set of solutions.
We are for the first time ever in this industry fulfilling CX needs. That's the decades could not be achieved with the old paradigm of disjointed on premise and non cloud native solutions.
Over the past year, we have added a dozen new native six on solution to our portfolio with hundreds of new features.
We now have over 725000 agents in 100 countries using six one making us by far the clear market leader.
In our go to market, we have added 27, new partners. So far this year and have extended six one internationally, which I'll talk about.
Peter.
Consumers exponential adoption of digital is far outpacing organizations slow linear digital evolution.
This is the root cause of the rapidly growing friction between consumers and service.
Linear or evolution will never catch up to exponential growth.
Our digital starter is one goal.
To be the next generation engine, allowing organizations to radically shift from slow digital evolution and leapfrog ahead of those digital consumers.
2021 of the seminal ear in our execution on this strategy.
Holding six one to the center of the digital Arena.
We are already seeing tremendous success and expansion with our digital first approach with six one.
In Q3 digital revenues grew 78%.
The number of cross sell digital deals grew 34% and the number of first time first time digital only deals grew seven fold.
Even after decades of investment in productivity process optimization and automation tools, 87% of spend in the <unk> market is still attributed to labor.
Artificial intelligence fused with high quality CX data is finally, starting to disrupt the axiom that only investment in incremental manpower can deliver a great customer service.
Six one with its massive six data repository, he's taking giant steps towards becoming the ultimate six eight a hub it organization shift to automated smart CX with unprecedented return on investment.
Data and AI served as a catalyst to six on rapids win rates and expansion in Q3.
This is reflected in the very strong momentum we continue to see lift in lighting, which is the add brain and the core of six one that is embedded across our entire platform.
In Q3 area drove third of the men's store in lighting is the number of enlighten deal tripled in the quarter compared to last year.
Platforms are the only viable way to master complexity at scale.
They'll be ultimately the glue between technology and processes for organizations.
Our goal is six one as a platform is to master the extreme complexity at scale for the CX market.
There are no shortcuts in reaching this goal.
Only way to achieve it is with a complete fully unified and open suites.
Six one to date has more than 4000 development many years and decades of domain expertise invested toward this goal.
We are the only player in the <unk> market that possesses all the assets natively built into one platform.
In fact, seven out of 10 organization adopting six on today are retiring three or more separate software solutions.
These four dynamics cloud digital AI and platform provides tremendous long term growth opportunities and we continue to strategically double down on them.
Let me now turn to Q3, we continued to outperform our 2021 plan by expanding upmarket to the enterprise expanding to international markets, expanding our reach through partnerships and expanding our leadership in digital.
Our decade long expertise and go to market experience with large enterprises, which we defined as organizations with at least 750 agents is reflected in the great success, we're having at the high end of the market with six one.
Although all six one new bookings in Q3 grew 100% year over year and the number of seven digit and above deals both at 46% in Q3 versus last year.
One example was an eight digit ACB deal with one of the largest retail brokerage in the world.
This customer which was with an on premise incumbent for many years evaluated the cloud solution of the incumbent and selected six one for its all the oil superiority.
This integration and the breadth and depth of the platform.
Another large signing for six one included a seven digit ACB deal with the major interactive gaming company and the incumbent provider was unable to support their needs.
Taking into account the large seasonality shifts in their business they needed a platform that was highly flexible and elastic.
We also signed a seven digit <unk> deal with a very large federal government agency.
Other allows just for the quarter at the high end of the market included an eight digit deal with an existing customer a very large financial services organization that added multiple new solutions.
We signed a seven digit deal with one of the largest airlines in the world.
The airline is now able to.
To apply sophisticated analytics to 100% of their interactions volume up from 10% to effectively understand the interactions with their customers.
Other seven digit deals with large enterprises focused on modernizing their CX platform, including a well known provider of human to human capital management solutions, and a very large pharmacy company.
Another growth vector in <unk> 2021 execution plan is international where we see tremendous opportunities as many organizations are beginning to adopt cloud and digital at faster pace.
In Q3, the number of new international CX logos as well as international bookings of six one grew 48% compared to the same period last year driven by major expansion with our international Channel partners.
International deals for six one, including the well known Canadian based logistics and shipping company, which was a competitive replacement the company's focus on cloud and digital transformation to help make interactions with their customers seamless and with the support of self service.
Other large international CX one deal included a major University located in the APAC region allows Brazil, Brazilian based bank and allows suppliers of industrial products based in Australia.
Yes.
Two years of rapid innovation combined with key strategic acquisition in digital and AI has significantly widen the gap in our competitive differentiation in 2021 and significantly increase our win rates in Q3.
Our success in digital and AI has two main drivers.
The first is organization, who chose to move from legacy Omni channel solution to our Nextgen digital CX platform.
In these cases, we're experiencing a doubling of the ACB with the adoption of digital.
A few of these examples including the U S based PPO and international insurance broker and financial services organization specializing in retirement planning.
Well known vitamin in Arab company, the beauty care products company and several others.
The second driver is the transition to AI powered self service is organizations realize that this is the only way to address the need of the digital consumers.
Some of the Q3 deals include a large waste management company, a well known household company and the large energy infrastructure company.
The exact same dynamics I discussed earlier cloud digital AI and the shift of platforms are fueling the accelerated growth in our financial crime and compliance segment as evidenced by the year over year, 21% revenue growth in Q3.
We signed an eight digit deal with a very large German bank, which selected <unk> due to the scalability of the solution and breadth of functionality.
In a seven digit deal with the large European bank. They purchased a portfolio of <unk> solutions to modernize the financial crime and compliance platform.
Fast evolving digital environment.
Other large seven digit deals included a major bank based in the UK one of the largest U S insurance companies and two of the world's largest banks.
In summary, we have taken a central hall and are leading the market in shaping the full dynamics taking place in CX.
Cloud digital AI and the shift of Clarksons.
Up until a few quarters ago nice was a single digit total revenue growth company executing on its transition to the cloud.
2021, clearly reflects the dramatic change in our financial profile as we quickly shifted to a company that is now ongoing its total annual revenue in double digits delivering fast growth in the cloud with a run rate of over $1 billion and.
Creating consistent profitability of nearly 30%.
With the tremendous opportunities ahead of us and our commitment to continued solid execution. We believe that the shift that we've seen in 2021 is paving the way for continued success and expanded market leadership.
Thank you and I will turn it 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 2021, and our outlook for the fourth quarter and full year.
Third quarter financial results were excellent with 20% year over year growth in total revenue, which marks the third consecutive quarter that we reported year over year accelerated growth.
Total revenue for the third quarter reached a record $494 million compared to $412 million in the same period of last year.
Our financial performance in the quarter was reflective of the strong execution that we've demonstrated across multiple fronts. We.
We delivered double digit year over year growth in both cloud and protect all three regions that we operate in and in both our business segments.
The Q3 top line was driven by another strong quarter in the cloud with 29% year over year growth, coupled with an outstanding performance in our product revenue, which grew 73% year over year.
Cloud revenue contributed $262 million and represented 53% of our total revenue.
Services revenue totaled $164 million and contributed 33%.
And the remaining $67 million or 14% with product revenue.
Our sequential cloud growth of 7% demonstrates the continued momentum and strength of our cloud business.
Our by far the largest cloud provider in our industry with an annual cloud revenue run rate, that's more than $1 billion.
Our success in the cloud is primarily being driven by our main growth engine <unk>.
Thanks to the continued effective execution of our expansion plan and international large enterprises partnerships and digital as well as leveraging the breadth and depth of our platform with cross sale opportunities.
In Q3, we recorded impressive revenue growth across all geographies, the Americas region, which represented 82% of total revenue grew 19% year over year.
Our strong international go to market presence and expansion with partners is contributing to our strong growth globally.
EMEA market grew 30% year over year and represented 12% of our total revenue.
APAC grew 14% year over year and represented the remaining 6%.
Moving to our business unit breakdown.
<unk> engagement revenues, which represented 82% of our total revenue in Q3 totaled $403 million, a 20% increase compared to the same quarter last year.
Our continued topline growth and customer engagement is a result of our ongoing success with the X one.
Revenues from financial crime, and compliance, which represented 18% of our total revenue in Q3 totaled $91 million for the third quarter, which was a record increase of 21% year over year.
The growth in the quarter was reflective of growing cloud revenue contribution from our cloud platform X sight and exceed as well as strong product growth.
While focusing on penetrating the market and driving topline growth, we continue to exhibit strong profitability and the generation of very healthy cash flow from our operation.
Our gross profit accelerated to a record $358 million in the third quarter compared to $293 million for the third quarter of 2020.
Gross margin increased to 72, 3% compared to 71% in Q3 last year.
The increase in gross margin was mainly attributed to an increase of 154 basis points in the cloud gross margin.
We expect ongoing gradual improvements in our cloud gross margin as our cloud revenue has continued to deliver strong growth and we remain confident in our ability to achieve our longer term goal of a 70% or higher cloud gross margin.
Our expanding margin is being driven by new cloud revenue stream as we are successfully established beachheads with new and existing customers witnessing increasing software attach rate and driving cross sell opportunities, while gaining efficiency and scalability on the cost side.
In Q3 operating income increased by 20% year over year to $140 million compared to $117 million in Q3, 2020, and operating margin was 28, 3% like last year.
Earnings per share for the third quarter totaled $1 68.
An increase of 19% compared to Q3 last year.
We experienced another strong quarter and operating cash flow, which totaled $104 million in Q3.
Total cash and investments at the end of September totaled $1 billion and $456 million.
Net of debt of $607 million or net cash totaled $848 million.
Our strong cash flow generation and healthy balance sheet continue to allow us to capitalize on synergistic strategic acquisitions that are consistent with our digital growth strategy and capital allocation plans.
I will conclude my remarks with guidance, we are raising our full year 2021 guidance for both total revenue and EPS.
For the full year 2021, we now expect total revenue to be in the range of $1 billion and $899 million to $1 billion and $909 million.
This implies that Q4 2021 total revenue is expected to grow between 11% and 14% year over year.
For the full year 2021, we now expect fully diluted earnings per share to be in a range of $6 43.
The $6 53.
I will now turn the call over to the operator for questions operator.
Thank you at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you will.
Like to remove your question from the queue.
For participants using speaker equipment, it may be necessary, we could pick up your handset before pressing the star Keith.
Once again Thats star one to ask a question at this time.
One moment, while we poll for question.
Our first question comes from so not Samana with Jefferies. Please proceed.
Hi, good morning, Congrats on the strong results Barack I wanted to clarify that I thought I heard you say that.
Excellent bookings were up 100% year over year.
That's a really big number so first I just want to make sure I heard correctly and it is true can you maybe just help us understand what's driving that strong bookings performance, even as we are.
Moved well beyond some of the pandemic tailwind that the company benefited from last year.
Sure. Thanks.
So yes, you heard correctly.
Bookings of six one in the quarter, new bookings of six one in the quarter grew 100% year over year.
It was really a phenomenal bookings.
This is following also the last few quarters of very strong bookings across the board and also with a six one as we commented on previous calls.
The drivers are all the above everything I mentioned in my earlier remarks, the adoption and the win rates, we're experiencing at the higher end of the markets I mentioned some of those.
Deals and the list is too long to read on the on the script.
The expansion into international.
We are fast adoption of digital which Ive mentioned that when we and digital lead to six one it doubles, the HCV and sometimes even more than that.
And overall additional expansions.
That we see from our existing customers.
Great. That's very impressive and then maybe sticking in that being that digital revenue as you mentioned it grew.
Almost double the rate that overall cloud revenue is growing how should we maybe think about.
Digital revenue going forward and how durable is that that robust growth that youre seeing on the digital side specifically.
Yeah.
We believe that digital is still it's in a very early innings.
From a variety of reasons digital is not new as a concept drydock. Most organization do have some form of digital but it's solutions and Siloed solutions that belonged to previous generation as I mentioned in my earlier remarks.
We all see it we all are we're all consumers and we ourselves as consumers adopting digital in an exponential.
Hum.
Growth as you'd like and organizations that are trying to fight it and lineal evolution will never managed to catch up. So there is no understanding as we meet with a lot of customers that just are trying to patchell to add kind of a sport all AD hoc solution and point solution is not going up.
For them, what we offer with digital is the combination of data digital and AI that comes together.
And that's real.
The major difference.
The big thing about digital and how do you adapt digital giving consumers the right experience and without inflating your manpower and it can only be done with variety of digital technology.
The massive amount of data that we have in our platform and of course right AI algorithms.
So we believe the sky's the limit Florida potential in digital.
And it just the early days so it's not a specific number but it's really in early days.
Very helpful and then Beth I can't not asking you a question it wouldn't be a nice earnings call without one for me for you. So just as I think about R&D expense jumped.
Any significantly and I know the company is investing behind behind that maybe just how should we think about the shape of.
Expenses and investments are.
Going forward.
Especially as the company ramps the international side, just maybe get some context around that.
Sure. Thanks for the question and when you look on our R&D for the quarter and generally in our appetite for investing back we see this really strong growth in our top line and we're being fueled by a predominantly a CX one and of course, we're going to continue to fuel that investment.
And that's what you've seen in the quarter.
At the same time as a company and we've always maintained our philosophy on having a balanced approach and we've provided.
A benchmark of expectation for a 30% operating margin in the future and that doesn't change. So it's a combination of a balanced approach to investing back in but at the same time continuing to watch it to drive the increasing profitability on a few if you look on our current year as an example.
You'll see we have a growth in the teens both in our revenue line as well as in our operating income.
Great. Thanks for taking my questions. Congrats on all the success. Thank you. Thank you so much.
Our next question comes from Rishi jewelry or with RBC. Please proceed.
Wonderful Thanks, and then great to see overall growth accelerated to 20% I don't think any of US what we were expecting that sort so really great to see I had two questions first on on the international traction Youre seeing there.
Maybe a housekeeping can you help us understand in conjunction when you talk about international and the momentum and especially on the <unk> side. You know is this happening with internationally based customer that was happening with existing U S customers that have big overseas presence.
And alongside that you talked about a CX one doing really well internationally are you starting to see an inflection point in cloud appetite overseas.
And then just alongside that I have another housekeeping any FX impact on the quarter I don't know about bold.
Sure. So I'll start on the in the international.
So it's not the first quarter that we see on international in the last few quarters. We gave you some color about the momentum we've seen internationally thinking now you also see not just in the leading indicators like the booking you start to see it happening also in the revenue is reflected in both EMEA and APAC are this this quarter and.
And the answer is yes to the question, yes, we see.
Our rapid.
Growth in the an accelerated adoption.
All of the all the things that we are also sitting in the U S market and so in the U S market in the past it's very similar.
Dynamics, we invested heavily in the past two years.
National expansion, we had footprint before we are not new to international markets, but we have added a lot of capacity.
Both in terms of the adaptation of the platform. The people the go to market the support services the language.
The localization if you'd like and now we're seeing a tremendous success and growth with respect to these are not just expansions of existing U S based customers going overseas. This is.
I guess your example of that.
Companies that are headquartered.
Internationally, both in APAC EMEA Latin America of course are U S. Companies also have multinational that present, but those would count actually handle all U S numbers.
With respect to the ethics number then hand, it over to Beth with respect to the FX number if you look at our business M. 82% of our revenue is driven out of the the Americas. So we're still.
Predominantly based in the U S. It's quite similar in terms of our expense base as well if you look on our individual markets. For example for EMEA EMEA did enjoy a few points of growth this quarter and despite that they were at 30%.
Gross so still strong and in all respects.
And as you look at our expense base, where it typically naturally hedged by doing business and having physically physical presence and in our most of our regions outside of the Americas and in those locations, where we don't have as much revenue, but have the expense space typically in those cases, we are.
Hedging forward in terms of the exchange rates. So we have the visibility and stability looking forward on exchange. So all in all that means that there wasn't any significant impact of FX on the quarter.
Okay. Thanks, a lot.
Just drilling into our cloud gross margin it looks like it ticked down about 60 points sequentially.
And anything to call out there that that led to that was that mix of software versus network connectivity or or something else. There and more importantly, you know how should we be just thinking about that line going forward. Thanks.
Yeah, we had nice growth year over year was about 154 basis points pick up year over year, and what you're referring to is the sequential movement between quarters on the cloud gross margin and of course, you're going to see some variability from quarter to quarter and we are expanding internationally.
In increasing our footprint internationally with the it comes with certain cost. We're also starting to see the other parts of our business like financial crime and compliance as well as public safety start to expand more and of course theyre not at the same scale as the the CX one business, so you'll see that come into play a little bit.
And see some variability from quarter to quarter, but keep in mind. If you look at our cloud gross margin expansion over the last few years. It has been a really significant we've seen some great expansion and we expect to continue to see that expansion over time. So we don't focus really on a quarter to quarter move movement. We're looking at the the long.
Term growth.
On a longer term growth and profitability perspective, we expect to see that cloud gross margin continue to expand and it's coming you know as we go up into the larger enterprise of course, we have a higher attach rates. So our customers. There have complex organizations are buying more of the offerings we have.
On the <unk> platform for example, and that drives and expands the cloud gross margins. So that along with just the continued expansion and scale of our cloud business and we'll continue to to grow the cloud gross margin. So again don't focus so much on the short term quarter to quarter change, but long term we see.
We remain confident in the 70% cloud gross margin and higher that we've talked about in the past.
Alright wonderful thank you so much.
Our next question comes from Tyler Radke with Citi. Please proceed.
Hey, good morning, guys. Thanks.
Thanks for taking my question I wanted to just go back to the 100% plus bookings.
Bookings growth in CX, one, obviously really impressive and especially considering CX ones that the primary.
Driver for the cloud business. So I just wanted to understand a little bit.
On that number was there any type of duration tailwind that that kind of elevated that number and just trying to understand how that growth rate, which clearly is above well above the cloud revenue growth rate should kind of impact that.
That revenue growth rate going forward or if there's just anything unusual to call out from a duration perspective.
Needless to say, we're very happy with the performance of the cloud in the Blue.
Booking of six one and we also monitor the pipeline and the pipeline looking for the seems to be very robust.
It doesn't change our overall outlook as we stated before we believe that the overall cloud with our scale.
North of 1 billion full cloud we expect it to continue for the next few years, 25% or higher.
You know as we step into next year, we'll look at the on.
And all the backlog that we have on the cloud and beside.
How to specifically.
Modify or change we'll keep the the.
The outlook, but overall as a what impact. This number is obviously a very large enterprises that are tapping into a six one and as you think about large enterprises. Unlike a small company. It takes longer time to convert the actual booking to the full ramp up of the.
Revenue, but on the flip side of it and.
When they are fully on board on the six one.
The expectation of our retention is much much longer it's a very sticky highly integrated to a lot of information. So we are building the business correctly.
For the long run thinking about it strategically.
And that's our that's the way we think about it we wanted to of course provide you with this important anecdote of the booking for the quarter.
Thanks, Tim and Beth if I could ask.
Follow up just on the Q4 revenue guidance.
Looks like that's coming in.
45% or above.
You know the street and kind of what was implied in the.
Our prior guide.
How are you just thinking about the relative drivers of cloud versus products and that number. It looks like you do have a pretty easy comp on the product side and obviously you saw a lot of product strength. This quarter. So just curious how you're seeing kind of the composition of the deals.
Evolve.
The pipeline for Q4, thank you.
Sure. Thanks for the question and as you said, we are implying a higher growth than where we were last quarter in terms of Q4 looking at growth in the teens.
If you compare that to our quarters.
Quarters passed of course, we were typically in single digits. So it is implying a strong growth.
If you look at our Q4 in particular, we see that on the product side again, we had a somewhat lower levels of comparison last year and so that comes into play for a Q4, but.
But we do expect to you know that is factored in on the product front.
Long with the continued momentum that we're seeing in the cloud. So it's a combination of our of our confidence that in both for the quarter.
Thank you.
Okay.
Our next question comes from Tim Horan with Oppenheimer. Please proceed.
Thanks, guys great quarter.
Can you talk about what the main bottleneck is for enterprises adopting digital in is there something that's going to change that bottleneck is cloud adoption at a point, where we can really see an acceleration at this point or are there other issues that are preventing adoption.
Yeah.
Yes, great question.
As we.
Have discussions with many of our customers and prospects with respect to digital everyone are trying something right. They have as I said some legacy digital solutions in place that are very siloed.
Well connected to each other and I'm kind of behind the consumers' expectations. So many of them have tried different point solutions from <unk>.
Small and bigger players.
And there is generally kind of a.
Filling of disappointment.
<unk> and there is much more understanding today with organizations that what's what's needed in order to have a true.
Comprehensive Nextgen digital solution.
Fully embedded with AI is the data the data is the key over here with all of the data. It's almost a useless. Even you have you ever fencing solution and that cannot be provided by you know small best of breed of point solution you need the domain expertise into use repository.
Order to train Youll digital solutions, and Youll, Boston, Saddam's before and that's exactly what they get with a six one so those conversations and we are starting to see them.
The duration of the majority of organizations as they go through those experiences and that's exactly what pushes them in the direction of of six one as I said at the beginning it's still in its early days and we believe there is ton of potential it wouldn't even with our digital <unk> are all kind of runway of the company was great.
And digital in the past a year and a half with the strategic investments we've done in this area R&D. Some other places is now starting to.
Serve as a very strong driver by itself.
And can you talk about the sales process. It's one of the digital I can't imagine, it's just a formal bake off but I mean is it more of a consultative sale on where you're going in and engaging the customer and basically becoming almost a partner or a consultant to the customer.
Absolutely, it's a much more of a consolidated sell it a few more stakeholders on the customer side.
Forget the digital in many places is owned by.
Different parties multiple parties in the organization and they do look for someone that are common in a much more conservative approach and allow them to build the internal if you'd like almost coalition.
In that in depth guard and we also have great partners we have.
Signed up in the last two and a half some of them even in the biggest side.
That there are sometimes we bring them or they bring us into those until those deals.
And they absolutely are all you're correct.
Thank you.
Our next question comes from meta Marshall with Morgan Stanley. Please proceed.
Great. Thank you.
<unk>.
One of the questions that I had is just what is your best kind of channels for some of the enterprise traction that you're seeing because I guess I'm. Just wondering about you know is that largely your installed base is kind of your best entry point to those enterprise deals are you finding that some of the channel really.
And chips that you're building or what kind of help you bring you went to some larger conversations and then maybe just a second question on digital.
You know you've noted you know clearly it's doing very well just wanted to get a sense of you know is that our conversation starter and a lot of deals or you know is that tended to be it's coming in with with existing customers or kind of layering that on to existing customers just trying to get a sense of when that conversation.
Starting on the customer journey.
Sure. So let me start with the first one.
You know one of the benefits we have as a company is that our we entered.
The broader six market would stick us after many years that we had a lot of expertise and presence and leadership in the higher end of the market with a W. E M solutions and <unk> solutions.
Meaning that we have the expertise we have much of the installed base of the W of both solutions and that allows us it's a great channel into the expansion.
Two a full CX solution full <unk> solutions with a six one so that's a great channel to add to that we have added a lot of other channels and expanding much our ecosystem.
Both internationally and also domestically in the past few years, so all of those things.
Really allowing us to extend nicely into internet into the large enterprises.
And it's really you know and also the solution itself our solutions as I said in my earlier remarks, it's not just about complexity all scale, it's about managing complexity at scale and that's something that.
We have been doing as a company and the management team has been doing for the past 10 years. So that's what brings us I believe a lot of.
Competitive edge an advantage when it comes to the enterprise market.
With respect to the second part about the digital.
So it's it's both of them sometime it's a it's a completely did.
Digital led digital first type of approach.
Not combined with anything else understanding that our customers would like to step into Nextgen did.
Digital solutions, and we know our end market leader in that space with the recent.
Launched a variety of solutions as well as some assets we have acquired in this in this area and other cases, yes. It is an add on where a customer already have for example, a six one contact center contact center solution from US and then we expanded nicely into digital and in those cases.
I mentioned, what we see is actually double doubling the ACB from such a customer.
Great. Thank you.
At this time I would like to turn the call back over to management for closing comments.
Thank you all very much for joining us and have a great day. Thank you.