Q1 2022 Nice Ltd Earnings Call
[music].
Welcome to the Nice conference call discussing first quarter 2022 results and thank you all for holding.
All participants are at present in a listen only mode. Following management's formal presentation instructions will be given for the question and answer session.
As a reminder, this conference is being recorded May 12 2022.
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 for Rocky Lam, Chief Executive Officer, and best gas purchase Chief Financial Officer.
Before we start I'd 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 conflict to differ materially is contained in the section entitled risk factors.
Item three of the company's 'twenty, one 2021 annual report on form 20-F.
As filed with Securities and Exchange Commission on April five 2022.
During the call we will present, a more detailed discussion of first quarter 2022 results.
Company's guidance for the second quarter and full year 2022.
Following our comments there'll be an opportunity for questions.
Let me remind you that on.
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.
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.
We'd also like to remind you that we are hosting our virtual investor day on may 24th in conjunction with our interactions alive user conference. The program is for analysts and investors and it will include presentations from nice and executives and product and technology sessions.
Haven't received the registration email please email us at IR at nice Dot Com and.
I'll now turn the call over to Barak.
Thank you Marty and welcome everyone.
After a very strong 2021 a year in which our business significantly accelerated.
Happy to report that the momentum continues into 2022, that's reflected in our outstanding Q1 results.
Total revenue increased by 15% and cloud revenue grew 28% year over year.
We continue to drive excellent top line growth and at the same time further improve our unmatched profitability as demonstrated by a 16% increase in operating income, 17% golf in EPS and continued strong operating cash flow with a record $193 million generally.
In Q1.
These stellar Q1 results reflect a strong and durable demand for our solutions.
The total value of seven digit deals increased 93%. The average value of these deals grew 52% and total deal value of competitive replacements increased Huntington, 13%.
In addition, our.
Enterprise customers highly value the powerful platform with tightly integrated solutions as reflected by an 18, 9% increase in six one and on new bookings.
Moving forward the pipeline build a similar story.
The plan is at an all time record growing 55% in Q1, and Moreover, we are witnessing strong increasing five dine in multiple vertical that's held back at all on greater than pre COVID-19 levels.
[noise], what set us apart from the rest of the industry are three driving forces.
Oh, well I didn't leadership in the large enterprise market.
Industry, leading into a national footprint and now Unparallel Nextgen did you tell any Io Frank.
Starting with our increasing leadership in large enterprises, it is far and away our domain.
Our vast experience in this market. We know there are two key elements to winning the enterprise.
This fully integrated and complete enterprise class platform and the ability to deliver complexity at scale.
We see a clear priority from customers and prospects to invest in six one by taking advantage of our full suite of solutions.
This is apparent as evidenced by more than 100% year over year increase in the total value of our portfolio deals, which we define as deals that encompass three or more solutions.
In Q1, we signed multiple large 617 digit ACP deal in which the customer selected a portfolio. So far six one solution.
One such deal included a large and well known clothing retailer.
This customer had a disjointed and siloed architecture in place from a legacy competitor.
They wanted a complete cloud platform that could meet and service their consumers wherever they started their journey without the need to integrate multiple solutions from different vendors.
Nice was chosen because we are the only vendor that can offer a fully complete native cloud platform, we seamlessly integrated digital and AI at scale.
Although a large seven digit deals along these lines included allows regional bank and meet one and mid West based life insurance and annuity company and a leading hospitality platform company.
We also signed an eight digit deal with a large and well known Fintech company and a seven digit deal with a large regional bank.
International which is another key driving force for US he is increasingly becoming a stronghold of our business.
We already have significant go to market assets and the large customer base in all key international markets. Yet it is still a heavily under penetrated the market in which we see accelerating momentum driven by increasing demand for cloud and digital.
Cloud as a percent cloud as a percentage of the new bookings in our international business increased significantly year over year led by several large cloud deals and the total number of international six one deal more than doubled in Q1.
Additionally, there has been significant and generation and our international markets, So they're expanding into new territories with key wins in multiple meaningful opportunities.
We signed our largest ever cloud deal ever an eight digit deal for multiple tens of thousands of agents with allows repeal.
The incumbent solution could not scale with the BP oil growth. So they chose nice Israel, providing a more robust scalable and state of the art solution that will future proof the needs of the business.
Other seven digit international deals, including one of the largest European broadcast companies and deal with a German based off the company.
Our ubiquity in the international markets has extended to the channel well, we have a loud and growing ecosystem of partners.
Another strategic partner, we signed with the language last quarter is I B M to help enterprise customers digitally transform their businesses, we have six one internationally.
Lastly, the third driving force is the extension of stick us to the Nextgen digital AI.
And smart self service, a growing priority for enterprises of all sizes.
The clear differentiation of our digital and small cell service, which is building a widening chasm between us and the rest of the industry is there are six I framework that incorporates decades of industry specific data and purpose built the eye.
Six is in driving digital success and in Q1.
Annual recurring revenue for our digital solutions increased by 88%.
CX is quickly becoming an industry standout for the customer engagement market.
He does a framework that's combined seek us W. E M analytics digital and self service in a single native cloud platform fully powered by AI.
Six I remove the friction feel disjointed siloed approach that is the blight of digital wanted to toe that you get some of our competitors.
Six one is recognized and the trade, placing six cloud platform in the market and the only one that is capable of delivering the full value of fixed site.
We have six side most of our deals with large enterprises now include digital and Smart self service solutions powered by enlightening and delivered in over 35 digital channels seamlessly integrated into six one.
The breadth and depth of our digital solutions are unmatched and include smiles web guidance dynamic knowledge management virtual agents and proactive conversational AI.
In Q1, we signed a large seven digit ACP deal with a prominent medical supplier, which is a new logo.
Chose six want to consolidate their service operation.
Onto a single platform and to provide fully integrated digital and smart and self service capabilities that will scale and support our growth well into the future.
They were also impressed with the ongoing innovation enrollment, it's nice for digital and self service that they felt was far superior compared to others in the industry.
Other seven figure deals led deals in Q1 included digital deal was a payroll company payroll platform company, a well known gaming company a provider of medical Magic management information systems, and a travel management platform company.
We're excited about the momentum we see powered by the afford month three driving forces.
Why do you think leadership in the large enterprise markets, our industry, leading international footprint, and our unparalleled nextgen digital and AI offering.
These drivers paired with strong and durable demand in all markets allows us to focus our efforts on executing our long term strategy to further cement our leadership.
Moreover, our exceptional financial profile of double digit topline growth combined with best in class profitability outstanding cash generation and a rock solid balance sheet provides us the financial field to continue to outpace our competitors.
I would like to take this opportunity and invite all of you to our annual Investor day in conjunction with our interactions user conference on May 24th.
Interactions life is the CX industry's largest virtual event with over 25000 customers prospects and partners in attendance and a great lineup of keynote speakers, including former U S. President George W. Bush and Oscar winning actor George Clooney.
A record number of the world's largest enterprises will show their experience with 96, one including Honeywell Kroger team owned by Disney Verizon Columbia Health, Telus and many others.
Interactions will also be a great opportunity to see firsthand how six one has evolved to become the market number one six site platform. We look forward to seeing you there virtually.
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 first quarter of 2022, and our outlook for the second quarter and full year 2022.
Our first quarter financial results were outstanding on all levels, demonstrating our exceptional financial profile of growing the topline along with best in class profitability and cash generation total revenue for the first quarter increased 15% year over year to $527 million and non.
GAAP fully diluted EPS increased 17% year over year to $1.80 or.
Our total revenue growth is mainly attributed to the growing contribution from cloud revenue, which increased 28% year over year to a total of $295 million and represented a record 56% of total revenue up from 50% in Q1 last year.
Product revenue increased 16% to $76 million and represented 14% of total revenue in Q1.
Services revenue, which totaled $157 million and represented 30% of total revenue decreased 3% year over year in line with expectations as existing on premise customers continue to gradually shift to the cloud.
One of the main Differentiators for nice is our unrivaled CX portfolio not only did the number of customer engagement portfolio deals increased over 50%, but each deal on average increased 67% and average deal size, a testament to our expansive offering and.
Cross sell opportunities.
From a geographic breakdown, the Americas region, which represented 81% of total revenue grew 14% year over year.
The EMEA region, which represented 14% of our total revenue grew 29% year over year and 34% on a constant currency basis APE.
APAC, which represented 5% of total revenue grew 7% year over year and 9% on a constant currency basis.
The contribution from our cloud revenue continues to expand we recorded more than 100% growth in both EMEA and APAC cloud revenue in APAC recorded its largest cloud deal ever.
Moving to our business unit breakdown, we experienced another strong quarter with both our business segments growing in double digits.
Customer engagement revenues, which represented 80% of our total revenue in Q1 with $421 million, a 14% increase compared to last year.
One is the main engine behind the growth in customer engagement with an offering that has been augmented by digital and self service capabilities.
Revenues from financial crime, and compliance, which represented 20% of our total revenue in Q1 and totaled $106 million increased 20% year over year, primarily coming from product revenue.
Our gross profit grew to $385 million in the first quarter of 2022 compared to $332 million last year.
Gross margin increased to 73% compared to 72, 7% in Q1 last year.
The increase in gross margin in the quarter was mainly attributed to an increase of 100 basis points and the cloud gross margin, which reached a record 68, 6% in Q1.
Our cloud business sets itself apart in the industry consistently demonstrating our ability to drive leverage stemming from strong increasing revenue and the inherent scalability in our natively built CX one platform. Our cloud gross margin has expanded nearly 600 basis points since the first.
Quarter of 2020.
In Q1 operating income increased by 16% year over year to a quarterly record of $149 million compared to $129 million in Q1, 2021 and operating margin was 28, 3%.
Earnings per share for the first quarter totaled a record one dollar and 80 cents, an increase of 17% compared to Q1 last year.
We experienced another phenomenal quarter with industry, leading cash flow generated from our operations, which totaled $193 million in Q1, increasing 17% year over year.
We use the change in the end market environment as an opportunity to expand our share repurchases to a total of $64 million. In addition, we used $18 million for debt repayment.
Cash and investments at the end of March totaled $1 billion and $491 million.
Our debt net of hedge instrument with $541 million, resulting in net cash and investments of nearly $1 billion.
Our balance sheet strength continues to remain top in class and the combination of our available cash along with continued cash generation from our growing profitability uniquely positions us to feel the positive momentum we see in our business.
Looking forward to the second half of 2022 we continue to expect ongoing cloud momentum and reiterate our expectation of cloud revenue growth to be at 27% or greater for the full year.
I will conclude my remarks with guidance.
For the second quarter of 2022, we expect total revenue to be in the range of $520 million to $530 million. We expect the second quarter 2022 fully diluted earnings per share to be in a range of one dollar and 75 cents to one dollar.
85 cents.
We are raising our revenue and EPS guidance for the full year 2022, we now expect total revenue to be in the range of $2 billion and $160 million to 2 billion and $180 million, representing 13% growth at the midpoint compared to.
Full year 2021.
We expect the full year 2022 fully diluted earnings per share to be in a range of $7.25 to $7 and 45 reps.
Representing 13% growth at the midpoint compared to full year 2021.
I will now turn the call over to the operator for questions operator.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May 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 would like to remove your question from the Q4.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key her first question comes from the line of Samad Samana with Jefferies. Please proceed with your question.
Hi, good morning, and good to see the strong results Barak and Beth maybe Bryan if I can start on a question for you is that the quarter itself looked really good and the commentary on bookings is always going to be very positive for me on the quarter itself, but maybe could you give us a real time view now that we're halfway through into two Q maybe what.
Youre seeing in terms of pipeline build more recently and if youre seeing activity stay at the same healthy levels as you saw in <unk> or if you're seeing any changes just with a little bit more macro uncertainty out there just what are you guys seeing in real time.
Sure. Thanks Samad.
No no different from what I said on the the earlier remarks throughout 2020. One we spoke about the momentum that we've seen in the business. Both as we report our revenue as well as in the booking and in the pipeline with soda as momentum continues in Q1 and it's no difference in.
Since you know since we closed the quarter a same level of activity higher momentum I mentioned on my call the different driving forces door business you know the large enterprise.
International markets and the she filled the expansion into digital and AI with Smart self service all of those continue to.
Drive the agenda of prospects and customers.
And accelerating so we we don't see any difference you know obviously, we are also read in the newspaper that you all random a weird.
We will look at the market, but in reality in real time right now salmon, we've still so through last year and in Q1.
Okay, Great that's great to hear and then Beth maybe just on the guidance I know you've given cloud for the year could you maybe just help us think about if there's any difference in the seasonality I know the last couple of years have been a little bit different just in terms of the timing around cloud revenue ramps just how should we think about that.
Cloud revenue seasonality for the rest of the year.
Yeah. Thank you for the question, some odd and and the trend that Youre seeing this year is what we expect so that we've seen in prior years as well that that will continue where either as a result of the fact that we have consistent strong growth in the cloud and a higher level of recurring revenue that means we see them more and more.
Equally distribution of both revenue and profitability throughout the year. So you see that strong growth and in our Q1 results and that's a trend that we expect to continue to see them. So there. There is a less seasonality of course, we always tend to see some seasonality in certain quarters like this.
Fourth quarter with retail and other but generally you'll see a pretty consistent spread throughout the year.
Great. Thanks, I appreciate you taking my questions. Thank you.
Yeah.
Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.
Hi, Good morning Barack you talked about some large upticks in the competitive replacements that you saw this quarter I was wondering if you could unpack that what what do you think is driving the increase displacements of your competitors.
So yeah, great question, Yeah, I'll give you a bit more color on that the first one you know the the incumbents where are the markets, where you know while we see our momentum.
Off cloud, let's not forget that the steel the penetration of cloud is still a relatively low to our other markets and even customer who thought they moved to the cloud realizing that they basically shifted to a car.
The hosted version of the legacy.
A competitor and they realize right now that is not cloud and then the only real cloud solution is one that was built natively in a complete manner, but have a you know the complete offering like we offer and what we invested in the last.
Many years of five or six years and that's what we have today. So that's that's one of the driving forces realization of customers that they moved to need to move quickly and into that and replacing the legacy incumbent provider.
The second thing that we see when it comes to a competitive replacement.
Goes to six five and this isn't a a customer doesn't understand is it's not just about moving the customer they'll see expiration to the cloud it's about an opportunity to unify their operation into a single platform and doing it with digital self service and inject a and a plus.
One that is fully injectables. So we found ourselves in those cases, winning all the solutions together and replacing not just one incumbent but multiple other vendors.
And the customer buys from us the complete set of solutions of multiple citizen I mentioned on the call earlier.
About the significant growth, we feel the portfolio the overall portfolio of adoption.
Last but not least is our customers who didn't buy.
Cloud solutions.
In the past, let's say couple of years.
And it was either to a you know wasn't mature enough because it doesn't scale for them.
So they realize that they need a more established platform like ours.
Alternatively, they they they they they kind of committed to build it yourself.
<unk> type of a platform from different components and they are tired of being a system integrator and they want to build they want to buy a fully proof and it fully and complete the platform like ours. So these are the source of of where we see the the incumbency are losing to us and significant.
And competitive replacements.
Yeah.
Thanks, and Beth we saw product revenue come in stronger at least in the street was modeling this quarter could.
Could you help us understand that the driver of that and as we think about the rest of the year. How does your pipeline look just in terms of product revenue.
And how should we be thinking about the growth versus decline in that.
Revenue line. Thank you.
Yeah. Thanks for the question Tyler or product revenue had a great performance in the quarter grew 16% year over year and it was coming really solely from the financial crime and compliance business.
The financial crime and compliance business had a tremendous quarter with with 20% growth year over year and what you see is that are you know in certain markets and that includes FCC cloud is still not as mature in terms of adoption. There. So it gives us a great opportunity you're looking for it on the call.
Cloud <unk>, but certainly with the size of some of the deals are on the active minds front those product deals tend to be large and lumpy and and and more difficult to predict we were very pleased with the performance with that part of the business. So as we look forward into the second half of the year.
For both of our businesses our pipeline continues to become a more and more cloud centric, but as highlighted you know there are certain aspects of the market and that includes FCC, where some of those customers tend to still buy from time to time on friends. So you should expect to see that you know you'll probably see some ongoing.
Ah variability.
In the future looking forward on product, but certainly we do see that continued shift in opportunity to the cloud and that includes the FCC business.
Thank you.
Our next question comes from the line of Pat Wall Ravens with JMP. Please proceed with your question.
Oh, great. Thank you I think this might be for Beth I mean, you guys are executing great. Congratulations.
The market is super challenging so your stock is down I think.
40% this year to date and so Beth you said you bought back if I heard right $64 million.
In the quarter, how do you guys think about future share repurchases.
Thanks for the question Pat you know as I highlighted on the call. We are in a unique position relative to are they really the competitors in our industry generally where we have such a healthy balance sheet. You know we have about a $1 5 billion of cash and investments and and that gives us a really unique opportunity.
<unk> both on the share repurchase front, but clearly also on the M&A front as well and that we are well financed so as we look forward to the rest of the year you know we consistently.
Believe that we have really strong momentum in our business and so of course, we're going to use that opportunity to continue our buybacks during the course of this year.
Okay, and then maybe if I could do a follow up so you know Bert.
Rock.
I'm actually in Tel Aviv this week, but so clearly that the funding for the private companies is it gonna start dragging up how.
How do you feel about doing them.
More M&A.
I I believe that this market, which we will open up some great opportunities for us as a company.
Both in the private and the public markets as Beth mentioned before we have a great balance if we're generating just this quarter, we generated $193 million and we are generating close to half a billion dollar or more on an annual basis in a we have a great balance sheet.
I think that we already see it by the way a lot of the sole source. Most ups that are do not have the runway you know them.
Mount of incoming.
Lets call it incoming inquiries from small cells up grew tenfold in the last few weeks versus what we saw in leverage.
Obviously, we are have a great muscle in the company of not just are doing M&A, but also have a great deal from them. So we're actually excited about the opportunities ahead in asbestos will balance nicely.
Between Ducks, we always have been prudent on acquisitions, but at the same time, we feel that there is also an opportunity to have greater return.
With an aggressive buyback program.
Great. Thank you both.
Yeah.
Our next question comes from the line.
Of Ricci, Julia, whereas the RBC capital markets. Please proceed with your question.
Oh wonderful. Thanks, so much for taking my questions I wanted to go back to a comment that you had made on the prepared remarks I suppose this large deal a large cloud deal in APAC, maybe taking a step back can you help us understand what are you seeing in terms of the appetite for cloud outside of the U S. I know historically.
Eric Lee the U S has always been a stronger market and more ready to move to the cloud, but seems encouraging to see a large.
Cloud deal out in other APAC I think actually you said largest cloud deal ever. So maybe can you talk to us about the environment for cloud in both EMEA and APAC and then I've got a follow up.
Yeah. Thanks for that so generally I will say that you know, we as a company, but every quarter. We report a many many a seven and eight figure.
<unk> cloud deals on them in a very consistent manner, and we see that strength continues to grow and just mentioned that when we mentioned the value of Sudan, we mentioned immediate committed.
Valued by the customer and not necessarily the full potential of which usually is a my child, just just to kind of give it though give us some color.
With respect to international markets as I said in my prepared remarks.
We see a great momentum we have great presence in most key international markets and we continue to put more and more investment in that both with our own team as well as growing the ecosystem that grew dramatically in the international front and yes the adoption.
Is growing very very nicely.
As you said yourself it are used to lag the U S. Now I think in terms of the acceptance it's par to the U S.
But the starting point is much lower in terms of cloud penetration. So are we believe the opportunities are significant and will continue to.
Those opportunities moving forward.
Yeah.
Alright, well wonderful and then Brian you talked about some of the uptick that you're seeing with what with AI I V E et cetera, maybe you know I I again, just thinking from a macro perspective in this environment where.
Companies can't hire fast enough. It's it's it's a super tight labor environment can you maybe right. Yeah. I guess eight talk is that at actual tailwind you're seeing to adoption of these solutions to make existing contact center representatives more productive a and b can you remind us what is that sort of <unk> uplift look like you know what.
Core see cash deal once you're adding in AI and ml capabilities. Thanks.
Sure. So let me start just to explain whats the reason of why do we say this a great momentum in.
In AR and AI, that's driving our smart self service almost every customer we made these days already had some experience in trying to put blocks.
<unk> into their six environment, hoping that that will free up labor or at least the save them the they need to hire more labor into the CX operation.
What we hear across the board as a major disappointment because they adopted a little you know boats from variety of a point solution companies and small companies there isn't a disappointment there isn't why they are engaging with us putting the boat is not enough. It just a framework that's the real power is in the ability to.
Injects sophistication knowledge and understanding into the both otherwise it's almost useless. We are in a unique position, where we have a ton of data we have 25 years of data.
We have used in order to build models in order to make those boats from something that doesn't talk to something that world came out in a very meaningful and very effective way and that's thanks to enlighten III.
Which are the we're just you know keep seeing a record number of deals signed for enlighten and night in AI. So that's the reason that we see that in and I believe that the we are still at the beginning.
What can be a tremendous growth opportunity for us and again, we're in a unique position because we have the data and the data. The most important thing when it comes to that in terms of the uplift when you look at our what you call let's call. It the deal of a classic six one deal and then you add to that.
Our own purpose, a digital and smart self service because usually they come together, it's more than double the ACB with we see from such a customer.
And the reason for the us and the reason why it can be even more going back to your point about labor it difficult contact center agents, depending on the geography cost about $50000. That's the cost of labor.
If we can replace them we can replace some of those agents with AI and even offer you know thinking about just the 25% of the labor you can understand the full potential over here with the market that has about 15 million agents alder.
Yeah.
Wonderful. Thank you so much thank you.
Yeah.
Our next question comes from the line of Christopher <unk> with Barclays. Please proceed with your question.
Hi, yes. Thank you for taking my question congratulations on the great results.
Most of my questions have been answered asked already but that's one for you.
R&D spend has been elevated last couple of quarters I was just wondering if you could give some color on how we should be looking at that going forward and maybe what kind of spend spend contributing to.
Yeah.
Sure. Thank you for the question in General of course are a CX one cloud platforms are leaders in the market. We are always focused on ongoing innovation with within our solutions and our offerings and you see that in terms of the investment that we have and our R&D teams.
It's really just reflective of the focus we have internally too to really continue to build out the the complexity of the depth and breadth of the cloud platforms that we offer and if you look at the R&D kind of as a percentage of revenue.
Generally year over year were pretty consistent then and so you can expect that it stays said roughly in the same range, 14% to 15% of revenue when you add back our capitalized R&D, so that should be the expectation, but again it is driven by our focus to continue to fuel our innovation back into our cloud offerings.
I I want to add something and thank you for the question. So it's a topic that's close to my heart. So I'm very proud of our R&D investment, but if you neutralized the amortization.
That's about 15, and 16% of our Oh, sorry revenue, but the more important thing is that a when you think about our R&D investment is tremendous.
The way we have built six one in a native way with all of the solution allows us already and also in the future to improve on cloud gross margin because we have our own solution. It's fully complete we don't need to resell it at a very high price other solutions that customers enjoy a complete in a native soon.
And you see the result of the improvement that scaling gross margin.
Well other companies that are we'll try to do that or not doing das will actually experienced deterioration in gross margin as they go and resell a lot of other solutions that they don't have in house.
Yeah.
Mhm.
Great. Thank you. Thank you for the color that's it for me.
Thank you.
Your next question comes from the line of meta Marshall with Morgan Stanley . Please proceed with your question.
Great. Thanks, a couple of questions.
One more just.
Digging into the details just if you could give any color on the FX impact in the guide going forward. Since there was some impact in Q1, and then maybe a more in depth question I've just wanted to get a sense of how initial rfps are coming in are they for silver been replaced are they for dish.
It only you know you spoke to and have seen a lot of them.
Bought replacements.
Wondering what youre kind of seeing as the initial foot in the door with implementation does it smaller or is it for the whole implementation great. Thanks.
Yeah. Thank you for the question, Matt I'll I'll address the other FX related question, and then I'll hand, it back to its Iraq and on the guidance question you know if we were to.
Two are adjusted for the impact on the exchange rate you would see even higher guidance and then what we provided so that would be a that would be the impact on a constant currency basis and I'll, let barack address threats, yeah with respect to our two two rfps you know one other thing I'll mention here that viewers back when we just.
Started and built six one and we're just first wanted to converge.
Routing with Wm with analytics in the cloud as a result of the twist, we drove a change in the market and we saw more and more rfps I was taking our approach and after that a lot of hours became a you know as a consolidated lipa and replace of all of it together and as a result.
Of that we you know we had the great a great.
Great outcome, what do we see these days and that's the framework I've talked about before the excise, which is actually further convergence of what I said before plus digital blast cells, a self Oh Smart service Smart self service is also starting to get into Rfps and customers understand that in order.
To make it a reality.
They can't keep buying point solutions from multiple vendors and try to integrate it in and they need to to buy air platform. A doubt is a native was all of those solutions. So we're starting to see the change already and Rfps I mean, we believe it will give us a great advantage in the future.
Yeah.
Great. Thanks, guys.
Thank you.
Our next question comes from the line of Michael Funk with Bank of America. Please proceed with your question.
Yeah. Thank you very much a couple if I if I could so I appreciate that Europe has been a couple of years behind the U S with the cloud migration and that's certainly been a positive tailwind would love to know, though how you were thinking about the macroeconomic environment.
I understand the shifting to the cloud can be a longer term cost savings for enterprise, but obviously there are high upfront cost.
Well what that migration. So if we do hit a more difficult economic environment do you anticipate that migration will slow or do you think that that pace will be maintained.
Okay.
You know I've been with nice for 22 years, and I've been here and back in 2000 and back in 2008 and I can tell you about the line of a at least to our industry.
Our solutions are extremely mission critical you know customer service if you look on the CX business.
<unk> brands need to provide outstanding service to the customers whether there is a a positive economy or negative economy. This is this is you know customer and consumers are the most important thing to brands. So we're.
We're really mission critical to customers and that's what this was my past experience and I believe now is no different than before.
We don't see right now any.
Change in demand or a negative change in demand due to the macroeconomics in any geography on the contrary as I said before.
We see some verticals that were somewhat muted during COVID-19 back to back and actually greater than three Oh go up at the time.
And we believe that are in our industry and all of the markets we operate.
Both in good times and bad times with the economy. They will continue to be very strong demand.
And durability of demand.
Thank you for that and one more if I if I could.
Yes, obviously, we're hearing a lot about about inflation specifically.
Increased energy cost.
So great to see the improvement in margin in your cloud business over the last couple of years, but what is the ability of the provider to pass on those higher energy cost after the data centers and if there is a potential pass through to you how.
Or would that impact your margin in that business.
We you know at least for now we don't see it it's very mild enough for us and you know the results speak for themselves.
The gross margin improvement continues this quarter.
<unk> versus <unk> versus last year, you feel overall profitability keep improving golf with the guidance. We gave for profitability is a is very healthy and you see it also in the cash generation. So you know we're a software company that is in the cloud and I think that those fluctuations have very minimal impact on our business.
Great. Thanks, Thank you again for the questions.
Thank you.
Yeah.
Our next question comes from the line of Paul Chung with Jpmorgan. Please proceed with your question.
Hi, Thanks for taking my question. So just on the pricing environment, you know given such strong demand trends are you seeing opportunities to kind of raise prices.
Or a cross solutions.
The competitive pricing environment in your view.
Yeah.
Yeah.
Hum.
We don't see any dramatic change right now all business are the complexity that's inherent in CX. We don't we didn't see in the past and I don't think we'll see in the future Commoditization in the solution of the solutions on the country as I said before we see ourselves.
We see more customers adopting a larger portion of our portfolio does give us a very nice uplift I do believe that down the road a lot of those are hyped private companies, that's what we're buying or trying to buy into the very lower end of the market and losing tons of money I think.
I'm not sure that their approach is sustainable in this in this market.
Which eventually will you know normalized the market in a way that will be positive to us.
Great and then.
Youre seeing.
Wins quite quite broadly across several different verticals, where you're seeing some.
With his strength across industry verticals and kind of some of the bigger opportunities there for cloud adoption.
Yeah.
Can you repeat I'm not sure I'd go in industry verticals.
Oh, I'm, sorry, I'm, sorry, I I would say you know Barack actually mentioned it in his script you know when we see both in the bookings that we signed recently as well as in our pipeline and specifically you know certain verticals that were kind of sluggish. During COVID-19 are now back at levels that are pre COVID-19, so that looks like hospitality.
A travel related companies those verticals are coming back are quite strong and and so you see that it's being reflected in our business, but also in forward looking pipeline as well.
Great.
And then lastly, you know.
After a big rebound in Opex in 'twenty one.
Fuel some growth and have some expenses come back.
Youre seeing the pace of Opex growth kind of more in line with the revenue is this the right way to think about the pace kind of moving forward slightly below revenue growth.
Reverting back to your typical model. Thank.
Yeah, you know generally what we're seeing is that in terms of our Opex first of all you know we don't see any material impact from the expenses that were in place are you know like travel and that was a much heavier pre COVID-19, it's something that we start to see it come back but of course with an anticipated in terms of our.
Our of our budgets for this year, so and in general I'm you know, we we iterate it last quarter as well that we expect to continue to see.
The expansion in our operating margin and so that's reflected in the cost base and so that's what you should continue to expect for the course of this year and of course is also embedded within our guidance.
Thank you so much.
Thank you.
There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Thank you all very much for joining us and we look forward to see you on the 24th on our Investor day. Thank you and have a great day.
Ladies and gentlemen, this does conclude today's teleconference. Thank you Keith.
You may disconnect your lines at this time and have a wonderful day.
Yeah.