Nice Ltd (NICE) 2016 Q4 法說會逐字稿

Welcome, ladies and gentlemen, to the NICE conference discussing fourth quarter and full-year 2016 results, and thank you for holding. (Operator instructions.) As a reminder, this conference is being recorded February 16th, 2017. I would like now 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 Barak Eilam, Chief Executive Officer; Beth Gaspich, Chief Financial Officer, and Eran Liron, Executive Vice President, Marketing and Corporate Development.

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 Company to differ is contained in the section entitled "Risk Factors" in Item Three of the Company's 2005 Annual Report on Form 20-F as filed with the Securities & Exchange Commission on March 23rd, 2016.

During today's call, we will present a more detailed discussion of fourth quarter 2016 results and the Company's guidance for the first quarter and full year of 2017. Following our comments, there will be an opportunity for questions. Let me remind you that, unless otherwise noted on this call, we will be commenting on our adjusted results of operations, which differ in certain respects from Generally 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 will now turn the call over to Barak.

Thank you, Marty, and welcome, everyone. I'm glad to be on the call with you today. We are pleased to close the year on a high note, as we reported fourth quarter revenues of $329 million, representing 20% growth over Q4 2015. The growth reflects across-the-board strength in each of our business segments, healthy end markets, and further growth in analytics, which represented 65% of new bookings in Q4.

We are also pleased to see continued strong leverage in our operating model. Operating income for Q4 was $94 million, representing 16% growth compared to Q4 of last year. The operating margin was 28.6%, and earnings per share was $1.18 for Q4.

Three years ago, at the beginning of 2014, we identified certain trends that were taking place in our markets, including the increasing demand for analytics and the initial adoption of the cloud. We had a vision to position NICE operationally, structurally, and with the right assets to capitalize on these growing trends and the eventual disruption in our markets that would come about as a result.

This vision culminated in the NICE 2020 Strategic Plan. While we could not publicly provide a complete map of the plan ahead of time for mostly competitive reasons, we did provide ongoing updates as the plan unfolded. The first step in NICE 2020 was to better position NICE operationally. We realigned internal processes from R&D to sales, put in place a more effective go-to-market strategy, strengthened innovation, brought products faster to the market, and streamlined our overall operations.

The next step was to structurally realign NICE to fully transform into a true enterprise software company, and we accomplished this through the successful divestiture of our defense business. At the same time, through rapid innovation, we grew our portfolio, began injecting analytics into all of our platforms and started to cloudify more of our solutions.

We then further strengthened our solution portfolio, analytics and cloud offering with the acquisitions of Nexidia and inContact. Nexidia gives us the most powerful set of analytics in the industry, and inContact provides us an unmatched cloud platform that has greatly expanded our addressable market.

The ongoing successful execution of NICE 2020 has led to significantly improved growth and profitability, and is a major reason behind the consistent strong quarterly performances. NICE 2020 has also positioned us well to capitalize on the disruptions taking place in our market, namely operational analytics, omni-channel, and the transition to cloud.

We executed the NICE 2020 faster than planned, and now we are in the right place at the right time to enter the next phase of our strategy, called NICE2B. NICE2B is our vision for NICE as a $2 billion company. Let me provide you with some of the opportunities that we see ahead of us in each of our business segments that gives us a line of sight to that $2 billion mark.

In Customer Interactions, the acquisitions of both Nexidia, with its powerful analytics, and inContact, the leading provider of cloud contact center, combined with NICE's industry-leading WFO suite, has greatly expanded our opportunities in all segments of the market.

At the high end of the market, we have already established ourselves as the de facto standard and the clear leader. A major opportunity here is to take all of our customers to the next generation of high-performance analytics, or what we call Analytics with No Limits. Moreover, customers are demanding omni-channel solutions to get a better handle on what is happening in their organizations across channels. This is a great opportunity for NICE, and we see continued adoption of our customer journey solutions.

Another opportunity, and of the high-end and mid-market, comes from the combination of inContact cloud platform and NICE's leading WFO suite delivering to our customers the industry's only full end-to-end integrated analytics-driven suite of customer service solutions in the cloud on a true multi-talent architecture. We are already seeing great traction here, where an offering of this type is virtually absent.

Lastly, up until now, both Nexidia and inContact operated mostly in the US. We can now leverage NICE's global assets to accelerate international expansion of the cloud and analytics offerings.

In Financial Crime and Compliance, we have a two-pronged strategy with NICE2B. First, we leverage our technology to enable large financial institutions to considerably lower their cost of compliance while maintaining top-notch compliance standards. Second, we leverage our strong brand, technologies, and expertise to expand to adjacent markets that have the same requirements but have been traditionally underserved.

On the first point, we are helping our customers to transition from compliance at any cost to the right cost of compliance utilizing our technology. Modern technology and sophisticated analytics allow our clients to automate many of the remedial tasks, and even some of the more cognitive tasks, that are currently performed by humans, all without compromising on quality and rigors.

A second expansion opportunity for us is adjacencies. First, we introduced our essential cloud offering that allows mid-market financial institutions to access our industry-leading capabilities. We released AML Essentials in the second quarter of 2016, and we have already seen multiple sales and implementations of this solution. The mid-market banks and credit unions represent an opportunity that in and of itself doubles our addressable markets for Financial Crime and Compliance.

Next, regulatory requirements, especially around AML, which helps combat terrorism, are spreading to nearly all industries that move money in one form or another. For instance, we see demand in gaming and entertainment, fintech, payments, insurance, and more. We have therefore established partnerships with leading system integrators to help us expand further into these and other industries.

In both our business segments, Customer Interactions in Financial Crime and Compliance, our cloud and advanced analytics strategies are starting to merge, allowing us to offer Collective Insights. This is a unique capability that leverages our access to broad data across our cloud customers, applying analytics to it, and provides customers collective insights to predict emerging trends or phenomena that they would not be able to discern from their individual organization's data.

NICE2B is the next phase of our strategic plan. It encapsulates employing our industry-leading assets to further penetrate markets in which we already operate and enter new market segments and adjacencies to set NICE in motion towards being a $2 billion company. We feel confident in this strategy, and we have already seen strong evidence during Q4. Let me share some examples.

We signed several multimillion-dollar deals for our omni-channel solutions. In a seven-digit deal, a major health insurance company expanded its footprint with our Customer Journey solution to increase sales service utilization and gain visibility into cross-channel journeys. There were also two seven-digit deals for our Customer Journey solution from two major telecom companies, both those deals being competitive replacements.

We also continued to see great traction in our next-generation analytics. One major global bank signed an eight-digit deal for analytics in our NICE Engage platform so as to further advance their analytics capabilities. Furthermore, we gained multiple new customers adopting our Analytics with No Limits solution, including a large telecom provider and an e-commerce company. Also, one of the largest banks in the world expanded its commitment with NICE in an eight-digit deal.

In Financial Crime and Compliance, our strategy to enter new adjacencies is already taking hold. We signed another casino in the fourth quarter, which was a seven-digit deal for our AML suite. There was a seven-digit deal with an insurance company, which is a new customer for AML, Fraud, and ERCM, and the deal was a competitive replacement. We signed a new customer in the area of human capital management in a seven-digit deal for a global AML program. It was a competitive deal that we won for what the customer described as our superior products and exceptional domain knowledge.

We signed an eight-digit deal with a large US bank for AML and Fraud, and another eight-digit deal with a large insurance company for Fraud, AML, and ERCM. This deal was also a competitive replacement.

In summary, 2016 was a very busy and successful year for NICE. We launched many new products, upgraded existing solutions, and took on a record number of new customers while seeing continued expansion of our offerings within our existing customer base. We made two significant acquisitions that are helping us to tap new markets with an unmatched product portfolio. We accomplished a lot, and at the same time continued to execute well, as reflected in the strong 2016 results.

As we head into 2017, we are well-positioned for continued success. We have the industry's leading technology assets, we have talented and passionate people, and we are in one of the strongest competitive positions that we have ever been. All this, together with the healthy end markets that we operate in, makes us excited about the opportunities that lie ahead in 2017 and beyond as we move forward with NICE2B.

I will turn the call over to Beth, who will review our financial results.

Thank you, Barak, and good day, everyone. I am pleased to provide you with an analysis of our financial results and business performance for the fourth quarter and full year of 2016, as well as our outlook for the first quarter and full year of 2017. Before I begin, please note that the financial results include the inContact acquisition for the period from the closing of the acquisition until the end of the year. Also, the financial results represent continued operations and exclude the divested businesses for Q4 2016 and the comparative numbers for 2015. These two businesses are presented as discontinued operations. However, the cash flow statement includes the results of both divestitures.

And now, I will review the results. Revenue for the fourth quarter was $329 million, which represents an increase of 20% from $274 million in the same period of last year. Excluding the impact of currency exchange rates, revenue growth was 22%. Revenue for the full year 2016 increased 11% to 1 billion and 30 million dollars. Excluding the impact of currency exchange rates, revenue growth was 12%.

Similar to previous years, 2016 was a back-end loaded year, and we expect this seasonality to continue in 2017, as well.

Customer Interactions revenues for the fourth quarter of 2016 grew 21% to $240 million, and financial crime and compliance revenues grew 18% to $89 million on top of the strong growth of 16% in Q4 2015. For the full year of 2016, Customer Interactions revenues were $768 million, an increase of 12%, and Financial Crime and Compliance revenues were $262 million, an increase of 10% compared to the same period of last year.

On a regional breakdown, revenues in the Americas were $253 million in the fourth quarter and $734 million for the full year of 2016 compared to $178 million and $630 million respectively for 2015. Revenues in EMEA were $53 million for the fourth quarter and $195 million for the full year of 2016 compared to $65 million and $197 million respectively for 2015. Revenues for the Asia-Pacific region were $23 million for the fourth quarter and $102 million for the full year compared to $30 million and $100 million respectively for 2015.

Looking at revenues by business line, product revenues accounted for 34% of total revenues in the fourth quarter and 30% for the full year 2016. Maintenance revenues accounted for 34% of total revenues in the quarter and 41% for the full year. Professional services and cloud accounted for the remaining 32% of total revenues in the fourth quarter and 29% for the full year 2016. Gross margin in Q4 reached a record of 73.9% compared to 72.9% in Q4 last year. The gross margin improvement is mainly a result of a favorable product mix and continued efficient utilization of the service organization. For the full year 2016, gross margin was 72% compared to 70.6% in 2015.

Operating income in the fourth quarter increased 16%, from $81 million to $94 million. We expect to see continued double-digit growth in operating income. Operating margin reached 28.6% compared to 29.7% last year. The change in the operating margin is the result of the consolidation of inContact, which has a lower operating margin compared to NICE. For the full year 2016, operating margin increased to 26.5% compared to 25.4% in 2015.

The effective tax rate for the quarter was 22.1% for the fourth quarter compared to 18.9% in the same quarter last year, and 21.4% for the full year 2016 compared to 19% in 2015. The tax rate was impacted by a slightly different mix of geographies with different tax rates.

In the fourth quarter of 2016, we had net financial expense of $1 million as a result of the debt we issued during the quarter compared to net financial income of $1.2 million in Q4 2015. Earnings per share in Q4 2016 increased to a record of $1.18 compared to $1.09 last year, a growth of 8%. For the full year, earnings per share increased 14% to a record of $3.61 compared to $3.18 last year. Fourth quarter cash flow from operations was $38 million and $220 million in 2016. Total cash and financial investments were $286 million at the end of December 2016, and total debt was $465 million. As part of our share repurchase plan, we bought back shares totaling $9 million during the fourth quarter.

And now, I will turn to guidance. For the first quarter 2017, we expect total revenues to be in a range of $303 million to $313 million, and fully diluted earnings per share to be in a range of $0.81 to $0.87.

For the full year 2017, we expect revenues to be in the range of $1.330 billion to $1.354 billion, and fully diluted earnings per share to be in a range of $3.80 to $4.00.

That concludes my comments. I will now turn the call over to the operator for questions.

(Operator instructions.) Shaul Eyal, Oppenheimer.

Congrats on a solid end to a very successful and busy year. Barak, industry is clearly going through a rapid change, on the one hand, and on the other hand, industry is also experiencing a rapid pace of consolidation. As it relates to NICE, where you do see a competitive advantage, and how does it impact the industry?

So, indeed, our industry, the customer service industry, is going through certain changes. I believe that the reason for those changes is the dynamics that we see in the buying behavior and the need for certain changing solution from customers, those that I talked before in my previous comments. The market is looking for a dramatic solution in the area of omni-channel, cloud, and analytics, as I've described before, and I believe that the changes that we see in the competitive landscape is a result of a few different competitors, some that are missing some of the assets, and some, some time the same that are also struggling financially due to significant debts, and we all hear the different views on different players in this market.

With respect to NICE, we believe that all the activities that we have done in the last two years, and even more so in 2016, are well-positioning us to offer what the customer needs this day, which is a full suite of solution allowing them to face the omni-channel opportunities with high sophistication of analytics and offering all of that in a true cloud solution that is fully multi-tenant and elastic given the recent and strategic activities that we have done. And it's definitely well-positioning us vis a vis the competition.

And my follow-up, for those of us who have been following the name for getting close to two decades now, knowing how NICE tends to forecast its annual guidance initially, are you again taking a more conservative stand of seeing how the year unfolds, and then reassessing guidance as we move forward? Is that a fair view, Barak?

I would say that the guidance is what we believe is the right view at the beginning of the year. Just beginning of the year, we've done two major acquisition. One of them was just late in 2016. Bring it all together, our hands are full of work, very good work, with a lot of opportunities in our hand. But, this is just at the beginning of the year, and this is what we see to begin with.

Dan Bergstrom, RBC Capital Markets.

So, with analytics 65% of new bookings this quarter. It's up year-over-year and quarter-over-quarter, so to me it points to strong demand from the inContact customers. Could you maybe talk to the reception from inContact for your analytic solutions?

So, first of all, we did see for many quarters now, and we are reporting almost every quarter about the growth that we see in the demand for our analytic solution. And it's across the board, across the two industries. As you look at NICE in all the domains where we operate, those are things I've talked about, Analytics is one of them, is one of our strongest assets and one of our strongest capabilities. And today, as you can see, the majority of our new business come from that area.

So, first of all we see the demand across the board. Furthermore, as we started to integrate inContact, there are many, many different assets that NICE has to offer, and are already offering to either the existing customers of inContact and also the ones that we are onboarding as we speak, and the prospects that we are looking to add, and also the other direction, by the way, many assets of inContact that are very applicable to the NICE customer base.

So, we are very, very happy with the traction that we get both from customers, partners, and also the market overall, and not less important also for our employees which are very excited about the joining forces together with inContact.

And then, maybe a bigger picture-type question. With the deal closed, you've got additional disclosure around recurring revenue. I was wondering if we should be thinking about the financial model any differently or keeping anything in mind. Should we be more focused on deferred revenue or billings? Any thoughts about how you're thinking about the financial model versus previously, with more than 50% in recurring revenue now? Thanks.

So, starting in 2017, we do expect to provide more metrics around the cloud base of our business and to be able to provide more visibility into the recurring revenue portion of our business. So, we've already seen a trend really starting right away in Q4 with increasing the amount of recurring revenue as a percent of our total, and we expect that obviously to continue as we enter into Q1. So, we will be able to provide metrics starting with the first quarter of 2017 information and results.

Jonathan Ho, William Blair.

Congratulations on the strong results. I just wanted to start out with a question in terms of the number or percentage of new customers that are electing SaaS, and if could you could just give us any color in terms of the trend there?

As I said before, cloud represents a great opportunity for us, and we started our cloud journey as a Company several years back. And all of the solution, all of the new solution that we developed in the last few years we have managed to offer both with cloud, and some of them on-premise, as well as the existing solutions that we have started to upgrade into cloud fashion.

Obviously, both Nexidia and inContact are fully cloud companies, with inContact offering a complete cloud offering. What we see the market is a gradual but very nice and fast adoption that is going up-market. Historically, NICE did not play in the mid-market itself, and for us it presents a significant opportunity because it allows us to take our overall portfolio, and thanks to inContact now offering it to market that is doubling basically the size of our market.

Similarly, in the Financial Crime and Compliance business, historically we have been playing and doing almost all our business at the higher end of the market. As you heard in my previous comments, besides going into adjacent market, we are also with the cloud can now go to the mid-market, which by itself is a very large market for financial services. And with the essential offering of Financial Crime and Compliance, we've seen a great adoption in that segment of the market.

So, the answer is that we do see greater adoption mid-market going up, and for us it's a great opportunity, as it allows us to address both markets, and also market segments in terms of offering that we didn't play in before.

And then, are you guys potentially impacted by the shift to ASC 606? And can you give us any color from that potential as well?

Yes. So, we do expect to be impacted. It's something that we're already looking at, and we are essentially working now to be poised to be adopt it in 2018.

Tal Grant, UBS.

Congratulations on a very strong quarter. In the Financial Crime and Compliance division, just wondering, related to that, there's obviously talk in the media about Trump taking down or removing some of the regulation in the banks. Just wondering, how is that going to impact your business, if at all? Will that impact current business, or potentially demand, going forward? I know you're moving into different verticals, but how much of an impact could that potentially have? And then, I was a little surprised you didn't break out inContact. Are you are not planning to tell us the inContact revenues for Q4 or next year at all?

Sure. So, we obviously, like everyone tracking the different changes, different in every aspect with the new administration in the US, we haven't seen any changes to the dynamics of our business. And you have seen that Q4 results in our Financial Crime and Compliance business, for example, were very, very strong, ending a very strong year in that business, as well.

And if you think about this business, the demand is driven not necessarily from the regulations themselves. While there are many regulation in place, some of them, by the way, US-based, some of them international and global regulations, but the demand that we see is coming from actually some very different aspect. The first one that I have mentioned in the AML space, AML is no longer just a matter of financial regulation. It's either from different aspects of taxation, monitoring taxation, and also as I said, fighting terrorism. And that's only growing, and it's actually growing much further than just financial services, as I have mentioned, to anyone that's moving money.

The other aspect where we see great adoption is indeed by financial services that are trying to save money and save cost, and taking the many tens of thousands of people that each large bank adopted in order to meet different compliance, and do those task in a more automated way, and this is where we see the majority of the investments go in that direction. So, we don't see any impact, the recent changes in regulation. And right now, we don't believe that the changes that may come or not in terms of the regulation will have an impact on that business.

With respect to the second question on inContact, as we shared in our plan to begin with, we are basically integrating and integrated the products. We are now offering those on a combined way to our customers, and this will serve the customer service market as a whole. And we don't plan to break it apart, as it is one business from the first day of the integration.

I'm just wondering, on the trade receivables, I think obviously it goes up normally in Q4 a little bit, and plus you've got the inContact, but it still feels like it went up quite a lot from Q3 to Q4. I'm just wondering if there is a like-for-like number you can share there, or maybe not, given what you just said?

So, we do present them in a combined fashion, and you highlighted that inContact, the opening balance became part of our accounts receivable. But, the primary thing to highlight is that, if you think about our trade receivables, and this also pertains to our cash flows, if you look at the change year-over-year in cash and accounts receivables, we continue to include cash that we collected for the divested businesses during the course of 2015, whereas in 2016 there were actually cash outlays back to those divested businesses.

Tavy Rosner, Barclays.

You talked about expanding to new markets, probably not just for fFinancial Crime and Compliance (inaudible) Also, regarding inContact's entering new geographies, do you expect sales and marketing expense to increase as a result of that?

No. We believe that we are well-positioned with the existing sales capacity that we have. Obviously, we have received greater sales force coming with inContact, and also with Nexidia, and in the case of the Financial Crime and Compliance, we are actually expanding a lot, as I said, the ecosystem that we have around us. So, we bring the technology. We bring the domain expertise. In terms of the go-to-market, our salespeople are now, way more than before, are working with different system integrators that are bringing the expertise and the relationship in markets where we didn't operate before.

So, we feel very good of the current investment in sales and marketing, and coming with the brand that we are, the strong brand that we are, we believe it's okay. Also, don't forget that the adjacencies that we are going after are very nearby adjacencies, where NICE and its different names are well-known, and it help us very fast as we step into these markets to establish ourselves as a leader.

And on the two acquisitions you made this year, are there cost-cutting that you can implement, and are those already baked into your guidance for 2017?

Yes. So, when we announce, for example, the acquisition of inContact, we talked about several synergies that exist between the two companies. Just to remind, one of them was the fact that we combine together two public companies. The other one is that there are a lot of corporate activities, MIS systems, IT, et cetera, that inContact is a smaller company, just started to invest in. And all of a sudden, being part of NICE, they can enjoy those platform and infrastructure from NICE.

And lastly, the fact that inContact did not have a major WFO offering by themselves, and now they have the one that is a market leader from NICE, and they don't need to take other solutions and pay royalties for that. Altogether, there are synergies opportunity. We have baked that into our model for 2017. As we will realize those synergies during the year, some may come immediately, but some will realize as the year ago by, and we expect to realize some of those synergies later in the year.

Gabriela Borges, Goldman Sachs.

Barak, maybe on the NICE2B plan, I was hoping you could share some more assumptions with us on how you're thinking about getting to that revenue level. How should we be thinking about timeline specifically? And I know there are swing factors, two or three big swing factors that could determine what sort of trend line that happens on.

And then, Beth, if you could just comment on, at that sort of scale, what type of margin profile you think, at least qualitatively, the Company might be able to achieve? Thank you.

So, as I described, NICE2B is our strategic plan at the moment. Two years ago, we came with NICE 2020. Back then, we got a lot of questions, and I believe during those three years, every time that we did another move, we provided more and more information of the progress. There is a very detailed plan for us behind NICE2B.

We have the line of sight to this goal. We believe it's important for us as a Company to aim high, and this is what we are doing. We are not sharing our internal model and when exactly we are planning to be there, but definitely we have a line of sight for it, and we are looking forward to get there.

And with respect to the question around the margins, obviously we've seen a lot of margin expansion for NICE in the last few years. And as I mentioned, with the acquisition of inContact, we'll see some short-term decline as a result of lower margins as part of their business. However, Barak talked about the synergies that we expected we'd start to realize during the course of 2017. So, we do expect to see a continual gradual improvement of our operating margins over time back to the relative ranges that we were prior to the acquisition.

And also in 2017, we expect the operating profit to continue to and go in double-digit.

As a follow-up, if I could, on the earlier commentary on inContact and some of the cost synergies that you're able to realize, could you give us some perspective on how the buying cycle of the customers work between contact center infrastructure in the cloud and classic workforce engagement or customer engagement solutions? Do you find that the buying cycles often coincide? And is it the same people work on the organization that are making those type of decisions for both contract center and for customer engagement? Thank you.

Yes, absolutely, and I believe that this is one of the reason why we have decided to acquire inContact. Two of the years we have been operating in the customer engagement and the WFO space, actually for the last two decades. And up until the cloud era, while it was the same people making the decision, those decision were sequential, sometime made at the same time, but in many cases they were done one after the other.

The cloud changes this paradigm, and we definitely see that, now with the cloud, those decision are made together as someone decides to move to the cloud and they do have a need for both, for the routing and ACD, and the smart routing and smart omni-channel, in many cases will take the WFO decision at the same time. And then, we obviously saw the opportunity not just to increase the attach rate, but also to enjoy the growth on both sides of these market segments.

So, to sum up, it's the same people in those enterprises that take the decision for the customer engagement, WFO analytics, and the routing and the infrastructure of the contact center and the cloud now makes this decision in many cases at the same time.

Paul Coster, JPMorgan. Please go ahead.

The revenue guidance for 2017 looks a little light to me. If you assume that inContact was approaching a $300 million run rate for the year, then that implies very low single-digit growth for the legacy business. Even if you pare that back a bit, it's difficult for me to sort of understand, so perhaps you can talk to me about the revenue guidance, which looks very conservative.

As I said, we made the acquisition in November. It's the early days of the acquisition. Obviously it takes a lot of bandwidth from both management of the Companies as we build not just for the short-term, but also for the long-term. We are very busy with the product integration. You'll see a lot of product announcement coming from us that give us great opportunities for the road ahead, and we believe that it's the right thing for us to do, to come with this guidance, which we believe is very healthy, and allow us to execute well on our strategic plan.

Are you suggesting, Barak, that there's some product innovation that's in the pipeline, and the client customers are holding back a little bit pending the release of that on the SaaS platform?

No, I don't think it relate to that. That's just a normal -- the expectation that we have model of some minimal disruption at the beginning, as we would like also to aim for the mid-term and not just for the short-term. In terms of customers, we see actually great traction from customers that would like to start in adopting the combined solution. It's the beginning of the year, and this is the right range for us to start the year. Obviously, as the year progresses, we'll assess how fast we are executing on the plan.

We used to get excited about seven-digit deals. Now, eight-digit deals are quite common for you. Is there any difference in the timeline with which the revenues are subsequently recognized? Is it shifting more towards the product business and less of a professional services business, and therefore realized within 12 months, for instance?

Not necessarily. I'm trying to think if there is a big difference. I think that, from revenue recognition, it's similar to what we have seen in seven-figure deal. Maybe if there is a difference, we are talking about few months, not something substantial.

The reason, by the way, that we see growing sizes of deal, also if you look historically, I think you characterize it correctly, we used to get excited. We still, by the way, get excited by seven-figure deal, but we have large amount of seven-figure deals and eight-figure deals. I think the reason for that is throughout the year, and for sure in 2016, we have managed to grow our portfolio, and our approach is that, when possible, we offer customers instead of taking a very stagger approach, taking not maybe the full suite or large amount of the suite, going after larger deployment, and that's the reason that we see those larger and larger deal, which I think characterize companies with a growing portfolio.

Greg McDowell, JMP Securities.

Just one question. Barak, I was wondering if you could talk about some of the differences between the NICE 2020 plan and the NICE2B plan. It certainly feels like the NICE 2020 plan had this balance of revenue growth and operating margin growth, but also consisted of, as you mentioned, divestitures and some large acquisition. So, as you think about some of the differences between the two plans, maybe if you could talk about maybe where you're optimizing, what you're optimizing for the most in the NICE2B plan? Thanks.

So, if I look in retrospective on the NICE 2020 plan that we put in place three years ago, we were a very different company, obviously, three years ago, with different set of assets playing in somewhat different markets from today. And the main theme of that plan, that was a plan for a bit longer period, and we have managed to move faster on this plan, was to, as I said, reorganize the Company, and that's the one thing, to focus the Company, and to start building, both organically and inorganically, assets that would put us in the right market and the right market sizes.

And also, to streamline the different infrastructure processes, teams, department in the Company to be able to get to the next level, and this is to start scaling up the Company as we have done in the last few months, and as we plan to do further in the future. So, that was the NICE 2020. The end, it's not exactly the end, but where we are today is in a place where we actually very different from 2014. We play in a much larger addressable market. If you compare the set of addressable markets where we play in in the beginning of 2014 to today, we are in a significantly higher addressable markets and with the right assets.

So, the main theme, as I suggested in NICE2B, is actually to leverage on all the opportunities we have created to ourselves with the main themes of analytics, cloud, omni-channel, and the combination of those, as I have mentioned, and now starting to capitalize on those many opportunities that we have created in much bigger addressable markets.

With respect to the financial impact, the NICE 2020 created multiple opportunity both from the top line and the bottom line, and we expect similar opportunities also in the NICE2B. We expect to have also a very nice growth on the top line, and at the same time have a very good leverage to the bottom line, with the additional element also of more and more recurring revenues and changing mix of the recurring revenue, which happen obviously from more and more cloud solutions.

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