Q1 2023 NICE Ltd Earnings Call

Speaker 1: To that.

Speaker 2: Greetings. Welcome to the nice first quarter of 2023 earnings conference call. All participants are at present in a listen only moment.

Speaker 2: Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded May 11, 2023. I would now like to turn this call over to Mr. Marty Cohen, Vice President of the President of the Western Relations, at Nice. Please go ahead.

Speaker 3: Thank you, operator. With me on the call today, or Barakay Long, Chief Executive Officer and Beth Gaspich, Chief Financial Officer.

Speaker 3: Before we start, I'd like to point out that some of the statements made on this call will constitute forward-looking statements and accord us with the Safe Harbor Provision of the Private Security's Litigation Reform Act of 1995. Please be advised that the company's actual results could differ materially from these forward-looking statements.

Speaker 3: of Companies 2022 annual report on Form 20F has followed the Security and Exchange Commission on March 30, 2023.

Speaker 3: During today's call, we will present a more detailed discussion of first quarter 2022 results and the company's guidance for the second quarter and full year 2023. Following our comments, there will be an opportunity for questions.

Speaker 3: Let me remind you that unless otherwise noted on this call, we will be commenting on our just results of operations which differ in certain respects from generally accepted accounting principles.

Speaker 3: As we've reflected mainly in accounting for acquisition related review and expenses, amortization of intangible assets, and accounting for stock-based compensation.

Speaker 3: The differences between the non-GAP adjustment results and the equivalent gap figures are detailed in today's pressures. We'd also like to remind you that we're hosting our investor day on June 6th in conjunction with our interaction's user conference in New York City.

Speaker 3: The special program for analysts and investors will include presentations from NICE executives and access to the solutions showcase.

Speaker 3: If you haven't received the registration email, please email us at IR at nice.com and I'll now turn the call over to Brock.

Speaker 4: Thank you, Maury, and welcome everyone.

Speaker 4: We are pleased to begin the year on a high note with strong first quarter results as we continue to outpace the market.

Speaker 4: We reported total revenue of $572 million which exceeded the high end of our guidance range and represented 9% growth at constant currency.

Speaker 4: Driving the great execution on the top line was once again our industrial leading cloud business as cloud revenue to 25% in Q1.

Speaker 4: Along with our top-line goals, we continue to lead in that exclusive club of profitable growth as we turn in another highly profitable quarter.

Speaker 4: The cloud growth margin improved by another 140 basis points to 70% compared to Q1 last year.

Speaker 4: The operating margin increased 30 basis points to 88.6% and earnings per share came in at $2.3, also exceeding the high end of our guidance range and represented growth of 13%.

Speaker 4: We are proud of our healthy rule of 40 mix, going 9% in total revenue within EBITDA margin of 32%. Our continued sole performance and clear market leadership are attributed to the tight alignment between our strategic priorities.

Speaker 4: and sharp execution centered on expanding cloud market share, championing the A-opportunity and our emphasis on profitable growth.

Speaker 4: Our cloud growth continues to lead the market and this growth is not only uniquely in its magnitude but in its consistency as well. Our cloud growth continues to lead the market and this growth is not only uniquely in its magnitude but in its consistency as well.

Speaker 4: Our strong performance over the past several years had led to rapid increase in scale evidenced by $1.5 billion in cloud error. Even at the current scale of our business, we believe we are only at the beginning of our cloud potential with the lion's share of our cloud opportunity still ahead.

Speaker 4: For us, our success in the cloud has always been and continues to be about opportunity, strategy and execution.

Speaker 4: On opportunity, cloud is still only 20% penetrated in our industry and even less penetrated at the high end of the enterprise market where we continue to excel.

Speaker 4: On strategy, the qualification approach is unique, and it is not just about the classic business model transition from on premise to cloud, but whether a much broader dynamic of market convergence.

Speaker 4: From the first Ziofall Cloud strategy, we have strategically targeted to expand from leading the on-premise WAN markets to consolidating and converging major CX application categories into a broad single platform.

Speaker 4: The typical cloud business model transition is often characterized by an acute and grown-out downturn in growth and profitability.

Speaker 4: Conversely, our transition led to an accelerated growth in revenue and profitability, propelled by a vast increase in our total addressable market, driven by our successful convergence to a single platform vendor.

Speaker 4: On execution, we continue to widen our leadership as evidenced by multiple recent milestones.

Speaker 4: including out-distancing the competition with Brazilian Cloud Gold, with a recognition as the market leader by Gardner Inforonster. And just recently, we announced reaching 1 million agents of 6-1 that highest in our market.

Speaker 4: We have the largest customer base, nearly 300 customers, building over $1 million a year and the largest ecosystem of partners that continues to expand.

Speaker 4: In Q1 we signed multiple significant cloud deals, including 8-digit deals with customers in a diverse set of industries.

Speaker 4: In one eight-digit deal with the last Northeast Energy Company, we replaced several vendors with the customer standardizing in CX1.

Speaker 4: We want them for the Man Expertise, our success with other utility companies, the un-misculability of CX-1 and our ability to deliver conversational AI as an integral part of the platform.

Speaker 4: In another 8-digit deal with a very large medical logistics company, we replaced the legacy incumbent with CX-1 as this customer was looking to adopt a market-leading platform with a proven track record for large-scale innovation.

Speaker 4: After a thorough selection process, they chose CX1. We sign a seven-digit deal with a very large bank replacing the incumbent, and a seven-digit deal with a health insurance technology company for CX1. We replace one of our cloud competitors.

Speaker 4: that failed to deliver, which happened with more than one customer this quarter.

Speaker 4: We signed a seven-digit deal with one of the largest media and entertainment companies, which continues to adopt CX-1 advanced digital engagement capabilities.

Speaker 4: We sign a seven-digit deal with allowed certification services company as they are moving off the legacy incumbent and on to the cloud with CX1.

Speaker 4: We warned the deal based on the breadth and depth of our platform as other cloud vendors could not deliver the seamless integrated suite the CX1 provides.

Speaker 4: We also continue to expand internationally in the cloud, as demonstrated by continued large deals in EMEA and APAC.

Speaker 4: In one such 7-digit deal, we signed a very large insurance company where CX1 simplified our technology stack by consolidating all interaction channels and applications into our single cloud platform while offering out-of-the-box integrations to other enterprise-wide solutions. Here was a 7-digit deal which allowed you to...

Speaker 4: multiple great use cases for AI along with significant monetization opportunities. CX Driven AI has the potential to solve three long-standing significant strategic operational challenges for enterprises that have been weighing on the customer service market for decades.

Speaker 4: The ever growing need for additional skilled labor.

Speaker 4: business research, business decision velocity and mass personalization is key.

Speaker 4: CX is becoming endlessly complex and as a result, even with the current spend on technology, the effectiveness of the 15 million employees in this market is deteriorating.

Speaker 4: AI Driven CX has the potential to be a force multiplier for these employees, empowering them to become three times more effective and as a result, Spencer CX technology will grow threefold.

Speaker 4: Second, the holy grail of CX is to achieve outstanding customer satisfaction and retention along with brand elevation at the lowest possible cost.

Speaker 4: The ability to conquer this challenge relies on the space of decision velocity.

Speaker 4: how the core reason why AI is a game changer for the CX market. This market is still spending 90% of its cost and labor, but can now redirect budgets into technology without sending returns. However, while the opportunity is meaningful, like we have seen numerous times in the past, CX is an extremely specialized market with a very high barrier of entry. The winner of AI driven CX must have a well-adopted platform with full suite of solutions.

Speaker 4: massive amounts of historical and current fully labeled high quality data and deep CX focused domain expertise.

Speaker 4: Nice is prime to be the AI leader of the SEX market.

Speaker 4: And it is by far our biggest time expansion opportunity we've ever had. Importantly, when it comes to CX, generic AI simply doesn't work.

Speaker 4: This is why we have spent the last several years building in Lighten, the AI Core of CX1, to become the best purpose built AI platform for CX. A few months ago, we partied to unique integration with generative AI further humanizing the conversation. Moreover, our unique label datasets, including derivative information from tens of billions of past interactions from numerous verticals in second to none.

Speaker 4: Enlighten, combined with generative AI, provides enterprises with the essential ongoing precision, security guardrails and integration that are mandatory in the highly complex world of CX.

Speaker 4: CX1 has the broadest market penetration. And now with AI injected throughout the platform, we are rapidly expanding beyond the core contact center and to the entire customer journey. Digital and non-digital, human assisted and consumer led.

Speaker 4: With 80% of customer service interactions, managed outside of the contact center, this opportunity represent a potential fivefold increase in our time.

Speaker 4: In fact, we are already seeing many examples of existing customers that are expanding into our AI-driven CX solutions.

Speaker 4: and as a result, our error from these customers is going between 3 to 5 times.

Speaker 4: In Q1 we saw multiple and significant AI driven deals. For example, in 17-digit deal, a very large insurance company selected 6-1 and light-end, winning the deal against two other AI-PON solution providers.

Speaker 4: This customer is focused on augmenting labor with AI-enabled self-service to help them appeal to a younger demographic. And sex on a light end is providing the means to do it.

Speaker 4: In another AI-led deal, 7 digit 1, a large transportation company expanded their use of CX-1 and LITER, adopting additional AI models to dramatically increase their decision velocity as they aim to take further market share from their competition.

Speaker 4: We also signed a 7-digit Enlighten deal with a very large digital communications company, which is implementing Enlighten AI in order to streamline their customer journeys across digital engagements and voice for attended and unattended interactions.

Speaker 4: We signed a seven-digit Enlightened AI expansion team with a large health care company further providing mass personalization for their customers following the first line of business that successfully adopted Enlightened.

Speaker 4: Nice is well positioned to further expand our leadership and take share in cloud and AI, bolstered by our superior financial profile. Our natively build cloud platform with its exceptional architecture delivers world-class unit economics.

Speaker 4: This is the driving force behind our expanding cloud goes margin and we expect it to continue to go with further scale.

Speaker 4: In addition, with $1.7 billion of cash in the bank and our business generating more than half a billion dollars annually in cash flow from operations, it allows us to think and operate strategically.

Speaker 4: In summary, we are clearly leading in the two growth areas within our industry, Cloud and AI, and we have built nice.

Speaker 4: to monetize on our leadership with outstanding profitability and returns. When I speak to customers lately, they tell me that they want to partner with a vendor that shares their vision, is committed to innovation and is committed to innovation.

Speaker 4: and has the financial resources to back it up. Nice is delivering on all of it. We look forward to continue to execute well during 2023 and beyond.

Speaker 5: I'll now turn the call over to Beth. Thank you, Barak, and good day, everyone. I'm pleased to provide an analysis of our financial results and business performance for the first quarter of 2023 and our outlook for the second quarter and full year 2023.

Speaker 5: Our financial results in the first quarter continue to demonstrate the strength of our business with both total revenue and EPS exceeding the high end of our guidance range.

Speaker 5: Total revenue for the first quarter was $572 million of 8% year-over-year and 9% at constant currency.

Speaker 5: Cloud revenue increased 25% to $368 million in the first quarter, performing at the high end of our expectations and outpacing comparable market growth.

Across all our markets, we continue to see further penetration in the cloud with increasing adoption by large enterprises.

This was evident in the record 64% mixed with cloud as a percentage of total revenue, up from 56% in Q1 last year.

Services revenue, which represented 28% of total revenue, was $160 million, a slight increase of 2% year-over-year.

Product revenue, which represented 8% of total revenue in the quarter, compared to 14% of total revenue last year, decreased 41% to $44 million.

This shift in the mix of our revenue was in line with our expectations as our overall revenue growth is increasingly driven by our cloud platform.

The resilience of our business model is evident in our recurring revenue, which increased to 85% of total revenue in the first quarter, compared to 79% last year.

Recurring revenue is comprised primarily from a combination of cloud and maintenance revenue.

From a geographic breakdown, the Americas region, which represented 83% of total revenue, grew 12% year-over-year. The EMEA region, which represented 11% of our total revenue, decreased 13% year-over-year, and 8% in constant currency.

The APAC region, which represented 6% of total revenue, increased 14% year-over-year and 15% in constant currency. The adoption of cloud across the globe is evident as we deliver double-digit growth in cloud revenue in all three regions.

Moving to our business unit breakdown, customer engagement revenues, which represented 83% of our total revenue in Q1, were $472 million, a 12% increase and 13% increase in constant currency compared to last year.

CX1, our customer experience cloud platform, is the main driver for growth in customer engagement as we continue to add over 200 new logos a quarter, expand internationally, expand our partner distribution network, and cross-sell and up-sell into our sizable existing customer base.

Revenues from financial crime and compliance, which represented 17 percent of our total revenue in Q1 and totaled $100 million, decreased 5 percent year-over-year and 4 percent in constant currency.

We're seeing an accelerated adoption of cloud in this market, which has led to a much higher recurring revenue base in comparison to the prior year when revenue was driven primarily from non-recurring product revenue. The transition of our financial prime segment to an increasing adoption of our cloud platforms is a trend that is expected to continue.

Like customer engagement, our financial crime and compliance cloud platform have greatly expanded our growth opportunity and total addressable market, as we serve both the SMB and high end of our customer segments.

our financial prime and compliance cloud platform have greatly expanded our growth opportunity and total addressable market as we serve both the SMB and high end of our customer segments. Now to profitability.

Our gross profit grew 6% year-over-year to $410 million. Our gross margin in Q1 was 71.7% compared to 73% in Q1 last year.

Cloud growth margin increased 140 basis points year-over-year to 70% in Q1.

In Q1, operating income increased by 10% year-over-year to $163 million, and our industry-leading operating margin increased 30 basis points to 28.6% compared to 28.3% last year.

EBITDA increased by 9% year-over-year to $180 million in the first quarter. Our industry leading EBITDA margin in the first quarter increased to 31.5% compared to 31.2% last year.

Earnings per share for the first quarter totaled a record $2.03, a double-digit increase of 13% compared to Q1 last year.

Our financial and other income was $10 million, resulting from interest income earned from our healthy cash and investment portfolio.

Cash flow from operations in Q1 increased to a record of $195 million compared to the prior year, which was also an all-time high cash generation, reflecting strong collections and our healthy business. Our 29% free cash flow margin in Q1 is best in class and our...

using $65 million and amount of repurchase in one quarter, which was near the full amount we repurchased in all of 2021.

Total cash and investments at the end of March totaled $1,685,000,000. Our debt, net of a hedged instrument, was $544,000,000 resulting in net cash and investments exceeding $1.1 billion.

We pride ourselves on the consistency in which we have always operated our business to deliver growth in both revenue and profitability. This laser focus is also extended to our balance sheet and healthy cash flow generated from operations together with debt, which is nearly interest-free.

The combination of our industry leading business financial results paired with our strong balance sheet sets us apart with unparalleled capital allocation opportunities. I will conclude my remarks with guidance.

For the second quarter of 2023, we expect total revenue to be in the range of $572 million to $582 million, representing 9% year-over-year growth at the midpoint.

We expect the second quarter of 2023 fully diluted earnings per share to be in a range of $2 to $2.10, representing 10% year-over-year growth at the midpoint.

We are raising our full year 2023 total revenue and EPS guidance. We now expect total revenue to be in the range of $2 billion and $350 million to $2 billion and $370 million representing 8% growth at the midpoint compared to the full year 2022.

We now expect a full year 2023 fully diluted earnings per share to be in a range of $8.32 representing 11% growth at the midpoint compared to full year 22.

I will now turn the call over to the operator for questions. Operator?

Thank you. At this time, we will be conducting a question and answer session.

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Our first question comes from the line of Samaya Samana with Jefferies.

Please proceed with your question. Hi, good morning. Thanks for taking my questions. Barack, I appreciate how much time you spent on talking about the opportunity with AI. I wanted to maybe drill into that. Just there's a lot of debate going on right now in the investment community about how AI impacts different companies' business models. I'm curious how you think about

the potential for it being deflationary to the number of seats in the market versus the monetization that exists by making the platform more powerful for the brands that you're ultimately powering. So can you maybe just help us think about what you've seen at least in early contracts where you're including AI and the deal?

and how that compares to the deals that you have it had it involved or just how you think about balancing those two elements and how you think about the revenue opportunity. Thanks for the questions, Saman. So I was trying in my earlier month to give some a call about what we feel and believe is a tremendous opportunity for us as a

in the cloud.

In terms of the monetization opportunities, if you would like, as I mentioned, organizations are seeing the potential in three areas. One is the augmenting, the need that they have of a skilled labor, obviously decision velocity of the enterprise and then the mass personalization at the scale.

of an employee in a customer service is roughly $50,000 a year. And the ROI hands on AI is very significant. And what we see in all of those deals that I've mentioned, a customer of ours in the classic contact center that has AI capabilities, which allows us, by the way, to expand way beyond the contact center.

We see anywhere from 3 to 5 X, ARR increase versus just a typical per-seat opportunity. I want to add based on your question one thing you're asking about what we see with customers. So maybe just one more thing to add and this is kind of what we have thousands of customers. And we speak to the emigilary.

to service their customers because of that concern. And the other camp is those that see the potential but experience significant disappointment following an initial use of out-of-the-box generative AI.

But what we do see is that both camps are coming to us as the go to CX platform provider and they are a trusted vendor when it comes to elevating the CX operation and leveraging AI. But both camps as a result of those discussions and the experience.

they do understand a few things. That we have the proven infrastructure to deploy SCX specific data, both in context and in scale.

We have the math decades of historical high quality label data from, you know, wider rate of verticals and use cases that is really extremely almost impossible to obtain. We provide a high level of security that is very big concern with even considering kind of the more of a generative AI.

and how do you mitigate between the public domain and the private domain. And of course we have the domain expertise that are un-match and do not exist in generative AI companies or small CF specific companies.

And I would say that the last one is that eventually when enterprises are deploying AI, they are not looking for a generic approach. They are looking for the AI eventually to service the customers, but to service the customer in light of their business goals and their brand desire. And that's why there is nothing generic about it and that's what we see these days.

Thank you. I appreciate that response and the thoroughness there. Beth, maybe a follow-up for you. There's some uncertainty in the financial services sector and I know both with the financial crime and compliance segmented in somewhat on the CX side that NYSCIS exposure there. Was there anything in that vertical that impacted the quarter?

and maybe what are you seeing so far from that end customer base in the second quarter so far?

Yeah, thank you for the question, Samad. First, I'll say that what we saw with the segment overall in the quarter didn't impact our first quarter results. What we see in our first quarter results, of course, is an acceleration of cloud in that market, furthering the cloud mix overall, and that's a trend we expect to continue to see in our FCC segment.

When we look on the banking sector, first I'll highlight that those customers that were highlighted in the news, they were an immaterial amount of our overall business that relates to the FCC segment, so no impact there.

And if you think about our FCC business, it's a business we've had for decades, where of course we started at the very high end of the market with the largest FIs in the world. Those large FIs are continuing to do quite well in this economy, and that's what we see with our customer base. I think it's also reflected in the market.

Our next question comes from the line of Tyler Radtke with Citi. Please proceed with your question.

of AI, I guess maybe to ask it more directly, you know, hypothetically, we see a 20% reduction in agency counts across the industry. How are you just thinking about the impact? How are you thinking about your ability to maybe evolve your pricing model? Should we see some deflationary impacts?

impact the number of seats out there.

that everyone predicted that number of agents or agents would disappear. And here we are today with a much higher number than it was a decade or 15 years ago. And the reason for that is that eventually the number of transactions or interactions is actually growing, continuing to grow exponentially. It grew 100 fold in the last 15 years. There is the overall number of interactions over a variety of channels.

because most of our business to date has been predominantly inside the contact center. And what we've been seeing in the last year and a half with us expanding into digital AI is that we are now covering the entire customer journey. And we monetize not only on 20% of the journey which is the contact center, but also on the other side of the journey.

but over the entire journey and over that part of the journey, the number of interactions are growing exponentially and we managed to monetize on that because organization further understanding that there is huge potential and huge impact, positive and negative on the brand to cover all aspects of customer interaction, not just those inside the context.

them has nothing to do with the attended peer agent opportunity but they're completely outside of the contact

That's a helpful perspective, Brock. Thank you. So I wanted to actually talk about some of those large deals you saw in the quarter. It sounded like pretty healthy kind of 7, 8 figure deal momentum despite it being fiscal Q1. How did the large deals compare relative to your expectations?

to what we see right now in the in the marketplace. First let's start at a more high-level view. We grew in the quarter 25% that's our cloud business and same goes for the previous quarter and this is what

both from those of the public companies who are reporting official numbers, but also from what we hear from other companies, that this is by far a much faster growth than anyone else around us in both the narrow definition of the market and the wider definition of the market.

And I believe that there is only one way to look at it is that we are taking a market chart, well, outpacing the growth of the market.

actually see high demand for that. And the needs that they had a year ago did not change actually even further accelerated, but they also understand that they want to partner with a vendor that doesn't just speak about innovation, but can also deliver and have the means to deliver it. So you mentioned a via like and others, and I think everyone understand that.

This is not going anywhere positive and customers are looking to migrate and not so like for like but like for better, like for much better. The other thing is that we see a lot of companies around us that are struggling, have never been profitable.

customers and that they see it as a negative. And there are some private companies that are highly leveraged carrying the significant debt paying right now spending most of the time about struggling to servicing the debt and because of that they have to take tactical decisions instead of strategic decisions that are hurting those

Wonderful guys, thanks so much for taking my questions. One question on generative AI and then follow up. Appreciate all the color and helping us think through the business model. I want to talk a little bit about use cases. A lot of the focus from the Investment Committee on generative AI.

has been on IVAs, chatbots. But, you know, it feels from when we're having conversations with customers and partners, there's an equally big, if not bigger opportunity on kind of the post call side of the equation, which is more complimenting existing agents.

And maybe can you talk a little bit about some of those use cases and how that can work alongside your leadership and WFM? That'd be helpful and then I got a quick follow up. You're absolutely right and that goes to my first point that this industry does have your own broadcast.

you know, a lot of labor. We're talking about 15 million people and in this economy, enterprises are really struggling both to find people but also to find skilled labor. And even if you find that skilled labor, the thing that they need to master are really, really, really hard. So even in the example that I gave in the Q1 deals, not all of them were skilled labor. They were not skilled labor.

Now the reason why you cannot just take Generative AI to do that is that basically in order to be able to have that assisted bot, it must be educated and constantly trained with the latest and greatest information that sits between the public domain.

and the private domain which is the proprietary information and data of the enterprise. And enterprises do not want to take it, put it in the public domain and have generative AI being trained on that. Not to speak about the fact that you know there is nothing generic about what brands are trying to do when they provide service. They are trying to...

make sure that their consumer are being led to meet their own business goals. They want to sell certain things, they don't want to recommend certain things, they don't want to recommend the competition, and they don't want any opportunity for embarrassment and saying the wrong thing for the customer. And that's exactly why Enlighten that sit on this mass amount of information, over tens, many, many tens of billions of...

Wonderful. That's really helpful. And then I wanted to talk about, you know, it seems like you're starting to see a number of displacements from other real cloud, C cast vendors. I know you mentioned a few before and mentioned a few this time. You talked about maybe some of the financial reasons why that's happening. But can you maybe talk a little bit about.

A. How you're finding those deals? Are these customers that are coming to you? Are you able to kind of go out there and find those dissatisfied customers? And are there, you know, actual technical limitations of some of the true cloud competitors that you're seeing out there that you're able to offer?

depth and breadth that they're not. So some additional color there would be really helpful. Thank you.

Sure, no problem. And I gave you examples in the quarter and I mentioned that it was more than one and it's starting to be not kind of the one or ad hoc thing. It's starting to be a phenomenon of ice. A customer deciding on a competitive platform but coming back to us. It's starting to be a phenomenon of ice.

a few months later, six months later after the initial deployment, experiencing disappointment and deciding to move to us. And I would say that the reason for that is twofold. First of all, they are coming to us because we are recognized, as I mentioned before, by the government of the Forest Hill of the world and others as the market leader. After a disappointment, after a disappointment, after a disappointment,

of choosing a vendor that is not the leader or maybe was selected for their own reason, they don't want to fail twice and they come to the leader. We have a very strong market awareness to our brand and then this is how they are coming to us. The reason why I believe those vendors are failing and we can deliver eventually go to our architecture. And it's not something that you can fix overnight. We have spent cumulatively

40,000 many years in building CX1. And we have done it from the ground up with all the functionality in order to meet two very important things. One is scalability. We don't need to put band-aids or to stitch things together in order to meet scale.

And in this market where the enterprises are starting to adopt it, scale is extremely important and it's a completely different ballgame to operate at scale. So that's the first reason. And the other reason is the completeness. We have all the applications, 45 different sex applications that was built natively by us.

All right, wonderful. Thank you so much. Thank you. Our next question comes from the line of Jim Fish with 5%ler. You will see with your question. Hey, this is Quintenant for Jim Fish. Thanks for taking our questions. Brock, maybe for you, what is the team seeing in terms of deployment or implementation timelines, especially in those larger 8-figure deals? Has there been a noticeable increase in those cycles, year-to-date, maybe compared to prior years, or has macro uncertainty not really had an impact on those timelines? So we don't see a big change from before.

expectations from here. Thank you.

Thank you. Of course we were quite pleased with the 25% cloud growth that we delivered in the first quarter. We still remain with the expectation that for the year the range will be somewhere between 22 to 25 percent and of course we're optimistic looking forward since we are seeing strong bookings in the first quarter combined with a healthy pipeline. So yes we stand...

behind and still have that as our expectation for the year. Great, thank you. Our next question comes from the line of Mike Falkwood Bank of America. Beautiful, see what you have a question. Thank you for the question this morning. A bit more than AI opportunity in roadmap.

you are making internally in headcount and in engineers. So maybe just touch on and dig into the differentiation that you believe you can drive an AI relative to competitors.

Sure, I think I related to some of it in my earlier remarks, but I'll emphasize a few points. Thank you for the question. I think that when it comes to CX, it's actually the opposite, meaning that AI is the opposite.

As I mentioned, has tremendous potential to solve some long-standing challenges in this market with respect to the challenges with ski labor, decision velocity and mass personalization at scale. But to do that, as I said, there is nothing generic about it. And it doesn't reduce the level of investment one needs to do in order to deliver on that.

that is the high quality, highly labeled, and it's nothing, again, this is not a public domain information, and we have it because we have thousands of customers and we have seen throughout the history, hundreds of billions of interactions go through our platform and we have the derivative data from that. To promote and bro Relationship for the App to tens of thousands of visitors.

You can take 500 people and try to replicate or imitate that. It's just impossible to do that. And we did not start doing it yesterday. Second, you need to have a well adopted platform that can be added to. Otherwise, the effort is just tremendous. And that's what CX1 is all about. CX1 has thousands of customers, well adopted across.

the board and it's an add-on and it was designed and developed to be infused with AI. And last, I must tell you again, what we hear from customers is a real concern about security. And there are two aspects of security I trust. Number one, what do I share?

with the AI engine at the public domain in order to make it extremely precise and accurate and that's something that we provide to customers and they don't need to go to the public domain for that. And second, this is not a generic approach because you want your AI to service the brand and aim to a certain certain goals. So for example, if the customer is a...

seeking to ask, well, you know, what is the best thing I can do with my service? You don't want the AI engine to offer the customer to go to a competitor or to say something that will embarrass the brand. And to do all of that, that's exactly what we've been doing for years and it's very, very hard to imitate or to catch up to what we're doing. I actually think AI increased the value of entry to CX and it doesn't democratise it or take it down.

That was great, Tyler. Thank you very much. Thank you. Our next question comes from the line of Madam Marshall with Morgan Stanley . Please proceed with your question. Great. Thanks. Maybe first question, just can you just walk through kind of initiatives to make sure that existing customers are kind of up to the – or the initiatives to attach Enlighten AI CX.

One of the beauty that we have and we operate with such a scale in the cloud and the way that we operate as a company, unlike many other companies in our space that right now we're here reducing those forests and cutting in different departments, we are expanding and we've been doing it, we've been operating in a prudent way throughout the past several years.

and we have a very very large and effective go-to-market team that is constantly in touch with all of our customers and those conversations about all of our products as well as Enlighten are happening on a daily basis. I myself, together with the executive team, are attending multiple meetings and I must say to customers, as I said, we are very happy to have you here.

are coming to us because they know that we are their CX platform and they have the appetite to do that and there is a lot of noise out there but these are serious customers that understand what CX is all about and are not planning to deploy a technology that is available out there.

without working with us. So that's one thing and we believe that we have a great coverage to conduct those conversation and coastal to the base as well as winning new customers. And about the macro impact on our customer base, we have an outstanding both growth retention rate and NRR it actually increased.

in Q1 and it's even better than it was at this point last year. So I would say that we continue to see customers expanding. And I think the reason for that is regardless of macro, when you think on our businesses, whether it is in the CX business.

of the criminal justice system, these are such mission critical things and these are among the last few things that customers will avoid spending on. So that's the reason why I think we see this strength when it comes to our customer base.

and justice system, these are such mission critical things. And these are among the last few things that customers will avoid spending on. So that's the reason why I think we see this strength when it comes to our customer base. Great, thanks.

Our next question comes from the line of Patrick Wall-Ravins with J&P, a citizen company. Please proceed with your question. Oh, great. Thank you so much. Hey, Beth, can we take this opportunity to have you remind us what the opportunity is that remains in terms of taking your maintenance space to the cloud over time? Yes, please.

Yes, hi Pat, thanks for the question. Hi. If you see our recurring revenue base, of course it's a combination of cloud and maintenance. And we continue to see that maintenance space slowly shift to the cloud. We have a great track record and from the customers that we've already seen make that change.

of portfolio solutions that are embedded within CX1. And so we find that it's typical that as those clients make that transition to the cloud, they're at the same time taking the opportunity to really enjoy a broader set of our offerings. And so that's what we typically see. And of course, over time, we expect to see maintenance continuing to reduce as a result of that as those large enterprise customers.

the drivers of our overall cloud growth

drivers of our overall cloud growth in the years to come. Great, thank you.

And we have reached the end of the question and answer session. I'll now turn the call back over to CEO Barak Nila for close remarks. Thank you everyone for joining us today. We look forward to see you at our largest industry event interaction in the Java Center in New York in early June . And we look forward to meet you.

After several years in person, it's going to be awesome. Have a great and nice day. Thank you very much And this concludes today's conference and you may disconnect your line at this time. Thank you for your participation.

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