Nice Ltd (NICE) 2017 Q4 法說會逐字稿

Welcome to the NICE Conference Call discussing the fourth quarter and full year 2017 results, and thank you all for holding. (Operator Instructions) As a reminder, this conference is being recorded on February 15, 2018.

I would now like to turn this call over to Mr. Marty Cohen, VP, Investor Relations at NICE. Please go ahead, sir.

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 would like to point out that some of the statements made on this call will constitute forward-looking statements in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please be advised that the company's actual results could differ materially from these forward-looking statements.

Additional information regarding the factors that could cause actual results or performance of the company to differ materially is contained in the section entitled Risk Factors, in Item 3 of the company's 2016 annual report on Form 20-F as filed with the Securities and Exchange Commission on April 21, 2017.

During today's call, we will present a more detailed discussion of the fourth quarter 2017 results and the company's guidance for the first quarter and full year 2018. 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.

We also like to remind you that we are hosting our Investor Day on May 15 in conjunction with our Annual User Conference in Orlando. The special program for analysts and investors will include meetings with NICE executives, presentations from customers, product and technology sessions and access to the Solutions Showcase, where you can see demos of many of our solutions. If you haven't registered, please e-mail us at ir@nice.com.

And 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. I'm very pleased to report that we ended the year on a high note, with strong performances on both the top and bottom line, demonstrating strong momentum across the board, particularly in our strategic pillars of cloud and analytics.

1 year ago, we shared with you our NICE2B strategy, describing the opportunities ahead that we feel are fast becoming a $2 billion revenue company. Now that you have the full results of 2017, let me share with you why we are confident about our ability to execute the NICE2B plan and the great opportunities it presents for NICE in 2018 and beyond.

First is the market increase in our addressable markets. Through both acquisition and innovation, we have grown from an addressable market of $3 billion to $7 billion to date, which is growing rapidly to become a more than $12 billion market. Unlike in the past, the size of our addressable market is no longer an inhibitor to our growth.

Second is analytics. Our journey in analytics started many years ago and represented a small percentage of our business at that time. Today, analytics, which represents more than 60% of our new business, is a rapidly expanding market. And our leadership position will allow us to continue to grow our analytics business in the years to come. Furthermore, with hundreds of customers using our analytics, it presents a great opportunity for them to progress into more AI-based solutions.

Third is cloud. As recently as 2 years ago, cloud represented about 5% of our total revenues. Today, cloud represents nearly 30% of our business, and we expect that to grow to 50% in the years to come, propelled by the growth of CXone, Essentials and analytics in the cloud.

And fourth is our ability to now address all segments of the market. Not too long ago, we were almost exclusively focused on the higher end of the market, with the small and midsized enterprises being a very small percentage of our business. These changed significantly in 2017, and we expect to continue to win in the rapidly growing SMB market across all of our businesses.

Now let me give you some color about the results of Q4 and full year 2017. We reported Q4 revenues of $396 million, which represented an increase of 20% compared to Q4 last year.

Operating income was $112 million, which was an increase of 20% compared to last year. And earnings per share grew 14% to $4.10 per share compared to Q4 of last year.

We also reported another strong quarter of operating cash flow of $87 million, more than doubling the amount of cash generated compared to the same quarter, 1 year ago. For all of 2017, we generated $395 million of operating cash, representing an increase of 73% compared to 2016.

In Q4, our momentum accelerated in regards to the number of 7 and 8 figure deals, the rate of competitive replacements, cloud adoption and AI. Let me provide you a few examples from these 4 areas.

7 and 8 figure deals are being driven by our market-leading analytics solutions, which in Q4 again grew triple digits compared to the same period last year. The significant increase in these larger deals included an 8-digit deal with a customer service mobilization for a portfolio of our solutions, including analytics.

We've signed new customers, including 2 7-digit deals with large financial institutions for our Voice Biometrics solutions to identify caller and improve customer experience and help prevent fraud. We signed a 7-digit deal for our uncharnel optimization solution with a major health insurer, a 7-digit deal with a large financial institution for customer experience analytics and another 7-digit deal for customer experience analytics to help prevent churn and improve sales ROI with a well-known security company.

Also in Q4, we continued to see strong momentum in the number of new log-ons that we are signing. In fact, 2017 was a record year of new customer acquisition, many of which were competitive replacements. Examples of just a few of the many competitive replacement deals in Q4 included, one with a very large brokerage firm. It was a 7-digit deal in which we replaced the incumbent with several solutions from our Financial Crime and Compliance portfolio.

There was another 7 deal -- there was another 7-digit deal with one of the largest Chinese companies for a portfolio of our solutions, including analytics and a 7-digit deal with a large European bank, replacing the incumbent with our leading WFO solution.

Our strong competitive position was recently further endorsed by leading market analysts, including BMG Consulting and Gartner, both recognizing our leadership in product and market share.

Moving to the cloud. As you saw earlier this week, we won more than 550 new cloud customers in 2017. The momentum in gaining new customers accelerated earlier this year with the introduction of CXone. Now as the only true platform provider, we are winning in the cloud in all segments of the market, including an increasing number of deals with large enterprises where we are replacing legacy on-premise providers. For example, we had a 7-digit competitive replacement deal with a business process outsourcer, 2 deals with state agencies and a deal with a Fortune 100 consumer product company. Each of these customers has thousands of contacts in the industry, which demonstrates the strong position of CXone in all market segments.

We have continued to find many deals of this nature and expect to see many more in the years to come as thousands of large enterprises shift from the legacy on-premise contact center to the cloud.

Cloud is also a key component of our Financial Crime and Compliance business. As you saw in our significant announcement yesterday, one of the largest core banking providers selected our Financial Crime and Compliance cloud platform as their standard solution. This strategic partnership opens up a new and effective distribution channel to thousands of mid-tier financial institutions. As part of this new alliance, several dozen customers were already committed in Q4 for future deployment.

In Q4, we saw continued momentum in AI. We've signed 17 new logos in Q4 for our Robotics Automation solution powered by AI, including a 7-digit deal with a major financial institution that chose NICE for its breadth of functionality, including attended and unattended automation. We signed 2 significant deals with major banks, one being an 8-digit deal and the other a 7-digit deal adopting our ActimizeWatch solution. ActimizeWatch, which is part of our autonomous financial crime management offering, uses consortium data and state-of-the-art machine learning to help the stand against potential new types of fraud.

Also, following the announcement of our DEVone partner program earlier this year, we see a significant momentum in the number of DEVone partners joining CXone with the AI-infused solution, including more than 10 of the leading chat-bot providers.

2017 was just the beginning. We are poised for execution as we move into 2018 and beyond. Our total addressable market has increased substantially. Analytics are still very much under-penetrated in our customer base and our industry in general.

And our strong momentum in the cloud continues as we are capturing high-quality cloud revenue that is producing profitable growth. By the end of 2018, we expect to have a revenue run rate of over $0.5 billion in the cloud. Furthermore, we expect to continue to grow our operating income at a double-digit rate.

I want to take this opportunity to thank all of our employees around the world for their outstanding commitment and contribution in making 2017 yet another successful year for NICE.

I will now 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 2017 as well as our outlook for the first quarter and full year 2018.

The financial results represent continued operations and exclude the businesses that were divested in 2016. However, the cash flow statement includes the results of those divestitures. And now I will review the results.

Revenue for the fourth quarter was a record of $396 million, which represented an increase of 20% from $329 million in the same period of last year.

Revenue for the full year 2017 increased 31% to a record of $1,346,000,000.

Customer engagement revenues for the fourth quarter were $303 million, an increase of 26% compared to $240 million last year. And Financial Crime and Compliance revenues were $93 million, an increase of 4% compared to $89 million for the same period last year.

For the full year of 2017, Customer Engagement revenues were $1,065,000,000, an increase of 39%. And Financial Crime and Compliance revenues were $281 million, an increase of 7% compared with the same period of last year.

Products revenues accounted for 29% of total revenue in the fourth quarter and 24% in 2017.

Cloud revenues accounted for 26% of total revenue in the fourth quarter and 27% in 2017.

Services accounted for the remaining 45% of total revenue in the fourth quarter and 49% in the full year of 2017.

For the full year of 2017, recurring revenue represented 65% of total revenue compared to 53% last year.

On a regional breakdown, revenues in the Americas were $313 million in the fourth quarter and $1,050,000,000 for the full year 2017, an increase of 24% and 43%, respectively, compared to last year.

Revenues in EMEA were $54 million for the fourth quarter and $192 million for the full year of 2017, similar to last year.

Revenues for the Asia-Pacific region were $28 million for the fourth quarter and $107 million for the full year of 2017, an increase of 24% and 5%, respectively.

Gross profit in the fourth quarter increased 21% to a record of $293 million compared to $243 million last year. Gross margin in Q4 was also a record at 74.2% compared to 73.9% in Q4 last year. The record gross margin was achieved due to a strong product margin together with continued improvement of the service organization.

For the full year of 2017, gross profit increased 30% to a record of $964 million, and gross margin was 71.6% compared to 72% in 2016.

Operating income in the fourth quarter increased 20% to a record of $112 million compared to $94 million last year. Operating margin reached 28.4% compared to 28.6% last year. For the full year 2017, operating income increased 23% to a record of $336 million. And operating margin reached 25% compared to 26.5% in 2016. The change in the operating margin is the result of the consolidation of inContact.

The effective tax rate for the quarter was 23.8% compared to 22.1% in the same quarter last year. The tax rate was impacted by different mix of geographies with different tax rates.

Earnings per share for the fourth quarter increased to a record of $1.35 compared to $1.18 last year, a growth of 14%. For the full year, earnings per share increased 14% to a record of $4.10 compared to $3.61 last year. The double-digit growth in EPS for the fourth quarter and the full year was achieved despite a higher tax rate than expected and having financial expense in 2017 versus financial income in 2016.

Fourth quarter cash flow from operations was $87 million compared to $42 million, an increase of 104%. Full year cash flow from operations was a record of $395 million, an increase of 73%. Total cash and financial investments were $525 million at the end of December 2017. And total debt was $448 million, net of issuance costs and the equity component associated with our convertible debt.

Before I speak about guidance, a few words on the adoption of ASC 606. Beginning January 1, 2018, we began adopting the new accounting standard, ASC 606, using the modified retrospective method. We are currently still evaluating the full effect that the updated standard will have on our consolidated financial statements and related disclosures, but at this point, we don't expect a material impact.

In that regard, while we will be providing 2018 financial data in both ASC 606 and ASC 605, we elected to provide guidance for Q1 2018 and the full year 2018 using the accounting standard ASC 605. We chose to do this to provide better transparency and comparability to 2017 financial data, which was reported in ASC 605.

Now to guidance. For the first quarter 2018, we expect total revenue to be in the range of $328 million to $338 million; and fully diluted earnings per share to be in a range of $0.97 to $1.03. For the full year 2018, we expect total revenues to be in a range of $1,430,000,000 to $1,454,000,000 and fully diluted earnings per share to be in a range of $4.40 to $4.60. For the full year 2018, we also expect our operating income to continue to grow in a double-digit rate. And by the end of the 2018, we expect our cloud revenue to reach $500 million.

Due to cloud becoming a bigger portion of our revenue, we are seeing a change in our seasonality. And as a result, we expect our revenue this year to be less back-end loaded. We expect the effective tax rate for 2018 to be in the range of 21% to 23%.

To conclude, we are looking forward to seeing you all at our Investor Day on May 15, which is taking place in conjunction with our Interactions User Conference in Orlando, Florida.

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

(Operator Instructions) Our first question comes from the line of Greg McDowell from JMP Securities.

So I guess, Barak, first for you, and then I have one follow-up for Beth. Barak, I'd love to hear about how you're thinking about the sales organization and the structure for 2018. I'm especially interested in your commentary on attacking the SMB market. Have you made any wholesale changes to the sales force in 2018 to sort of optimize the sales organization to start attacking that market? And then one quick follow-up for Beth.

So at the beginning of February, we are doing always certain fine tunes and adjustment. As you heard in my opening remarks, we see a lot of great momentum in the areas that I've talked about, whether that's analytics or cloud, artificial intelligence. And specifically in the market segment, we see the very nice momentum in the higher end of the market with analytics-based solutions and the fact that today we have a very effective portfolio for the lower end of the market and an effective go-to-market allow us to also (inaudible) the market. We see the same type of trend and demand continuing for us in 2018. Hence, we did not make any dramatic exchange as we step into 2018 besides certain small tweaks, particularly in certain investments, as we do every year in certain areas. We obviously look on the different segments of the market separately, we segment as we did in the past and even more so today, our go-to-market. And obviously, we treat the very high end of the market in a different way than the middle part of the market and then to the lower end of the market. And the last thing I would say, it's also interesting, obviously, when we go to the SMB market, and today, it's a nice portion of our business, one of the things we are constantly looking there to make sure we are doing correctly, SMB market, on one hand, it's very appealing, you can generate an interesting revenue. But at the same time, we would like this revenue to be profitable and profitable for the long run. So we are calculating more carefully in this market. We are not just about inflating our top line but rather make customer acquisitions that become profitable for the long run. And this is a very important way for us in the way we strategize the SMB. The last thing I would say about the SMB relates to our Financial Crime and Compliance, and this is that while so far we have been going mainly direct to this market, I think a landmark -- a milestone for us is what we announced yesterday is, first, our distribution -- very large, very significant distribution agreement with a very large and successful core banking provider that have access and thousands of existing customers, a much more effective go-to-market for us in that domain to go out to that segment of the market. We have the right product. And now we have a much more effective vehicle to go after this market.

That's helpful. And Beth, multi-part 606 question for you; everybody's favorite topic. I guess, number one, the -- when we put our models out, is it your hope that we put our models out on a 605 basis? And then at a future point, when you provide guidance on a 606 basis, that we then adjust our models down? So that's Part A of the 606 question. Part B would be, you mentioned it's going to be a nonmaterial impact. But if you could just give us any sense or orders of magnitude on how many transactions would be impacted by the move to 606 or what are some of the -- maybe a better way of asking it is, what are some of the puts and takes of 606 in the NICE financial model?

So you had 2 separate questions. So let me start with your question with respect to ASC 605 versus ASC 606 first. So you asked whether or not we would recommend that you model using ASC 605, and the answer is yes. As I highlighted earlier, our guidance is based on 605. And throughout 2018, we will continue to provide guidance based on ASC 605. So we don't, at this time, have any expectation that we would ask you to change to look at ASC 606 during 2018. As we move into 2019, then obviously, we would have 2019 based on ASC 606 because we would be able to look at that 2 years of comparability. So again, for all of 2018, the expectation is that both your models and the guidance that we give will be based on 605. When we go to provide actual results, we will highlight both the actual results under 605 as well as the new guidance of 606. The second part of your question was with respect to the impact. And as you highlighted, at this point, we do not expect the impact of the new guidance 606 to be material to our financial results. I would say, if we highlight the areas of impact to NICE from the guidance, there are really 3 primary areas that I would point to. The first is around subscription for terms-based product revenue. There is a change in the accounting under the new guidance. Previously, it was recognized over the period of the subscription, where under 606, it would allow you to be able to recognize the revenue at the time of sale. So that is one of the impacts. And for NICE, most of our on-premise business is not on a subscription basis. However, we do have some, but that is the reason we've said, overall, if we look at all of these in aggregation, we don't expect a material impact. The second area would be the allocation of revenue within the line. So under 605, there was a concept of the [SOE] or fair value, which attributed revenue to the differences in lines between product and services. That guidance is changing slightly during 606. So again, you will see some potential change in the mix of revenues. And then finally, the last item that I would mention which is most relevant to NICE, is the impact on the expense side, which, under the new guidance, there is guidance that certain commission expense and expenses that are related to the customer contract, be capitalized. So again, in totality, we continue to analyze the impact of these. And we will further give you more information throughout the year. But as I highlighted, we don't expect a material impact to our financial results.

Let me just add one sentence. As Beth said, the way we are reporting and giving guidance is to give the utmost transparency from '16 to '17. With the policy of 605, we want to give you ability to really compare apples-to-apples, and that's what we are doing so it's the utmost transparency.

Next question comes from John DiFucci from Jefferies.

Barak, I have a couple of questions for you. I think, first of all, we try to back into what we look at we call new subscription ACV or new business captured in the quarter. And I know you don't disclose that specifically, but we've seen improved momentum in the last 2 quarters sort of growing from single-digit growth to like double-digit growth. So I guess, first, is that directionally accurate? And then secondly, what is it that's driving that? Is it CXone already having an effect on the numbers? We know it's having an effect on your business, and we hear that there's a lot of excitement out there. But is it actually already affecting the numbers? And can this accelerate or sustain momentum for a while here? Or is there something else happening here that we're just not thinking about?

So you're right that we are seeing a very nice traction to cloud. And obviously, what we see right now in the numbers are the revenue, there is always a gap between the point that we actually lend the business and the point of the activations, some activations are extremely quick to the -- a matter of even a day, and some activations take longer than that, depending on the scenario of the solution, and so on and so forth. But we definitely see a very nice momentum in the cloud. I think by saying that, first of all, seeing that we cross the $100 million in the quarterly revenue of cloud this quarter, and we said that we are going to -- we see the ability to cross the run rate of $0.5 billion at the exit of 2018, we definitely see a good momentum in the cloud. It's coming from 3 main areas. So the first one is in the -- definitely, in the CXone space since the introduction of CXone, which was late July, beginning of August. There is a significant pickup, both of traction and dialogue with customer and actual deals. And the beauty of that is that it's -- the service is really upmarket very, very nicely. Some of the deals, what I talked about have thousands of seats filled, there is no more question about the ability to effect CXone to all segments of the market. The other areas where we see cloud momentum very nicely is analytics in the cloud. Most of our analytic sales are now done in the cloud in a very nice way, allowing us to penetrate accounts that were not historically or the classic NICE accounts. And thirdly, as I mentioned, which we saw a nice pickup, and we believe this distribution agreement I talked before, we believe it will pick up very nicely in '18 moving forward in our Financial Crime and Compliance with the Essentials solution. So it's across those 3 cloud solutions.

Great. That's helpful. And if I could, a follow-up to that, Barak. Business sounds very good. And at the same time, guidance implies -- and again, this is from our math, it implies about 7% organic revenue growth next year or 6% constant currency organic revenue growth. That's how we go through it. And I'm just trying to reconcile the impressive wins you talked about, what you just talked about with the cloud, and what looks like sort of flattish growth year-over-year. Actually, we estimate 7% organic constant growth in 2017 versus guidance implying something like 6%. And understand what guidance means, and I think you do a good job of sort of prudence around that guidance, but just trying to gauge what all this means going forward. Guidance seems okay, and it doesn't sort of reflect some of the excitement we're hearing about in the field and what you're talking about here on the call.

So we are at the beginning of the year. This is relatively early in the year. We definitely feel the momentum when we stated our results in Q3 and Q4. And we also are providing, I believe, a very healthy one for Q1, but it's still early in the year and have a lot of moving parts in our business. Many of them are very, very positive, and that's the guidance we feel confident to go out with right now, given the different aspects of our business. Obviously, we are playing for the long run. We have a long runway over here, all the trends I've talked about, whether that's opening of the market, the cloud and analytics. We are very optimistic about them, not just about '18, but also for the long run. And we play it in the right way in the long run. I would say that it's very important for us to keep a very good operating leverage, not just about inflating the top line with cloud deals that will not be profitable. So we are selecting in the type of deals we are doing and how we are making them, we would like to make sure that as we grow our revenue in the cloud, and we said that we expect it to become healthy for our business in a few years, we wanted to continue (inaudible) and in our guidance for '18 a highly profitable business.

The next question comes from Walter Pritchard from Citi.

Two questions. One for Barak, on the FC&C business. That business looks like, if I look at it on a full year basis, it's slowed down. I understand the results there can be very volatile quarter-to-quarter, but it slowed it down versus what you seen historically. And we did note you announced the relationship to take it down market. But how do we think about, is there a transition there in growth drivers from the larger financial institutions to the smaller? Any change that would explain what's going on in growth and then your strategy going forward?

So with respect to the Financial Crime and Compliance business, I will say a few things. First of all, I think we have demonstrated in the last several quarters -- 8 quarters. In third quarter it's highly volatile business. If you remember, Q3 was very significant growth for this business. By the way, also Q4 of last year was 18% growth. So all of a sudden, this quarter it might seem to be lower, but it's a very, very fast growth. But we remain bullish on this business similarly to before, all the fundamentals of the business are stronger than before. And moving forward, the different elements of our strategy in this business we believe can continue and fuel the growth of this business. There's mainly, I would say, there's 2 of them. So one, as you have mentioned, is going down market. I wouldn't even call it SMB because it's a mid-tier, and even mid-tier bank is a very substantial -- can be a very substantial customer. And so far, we have done it mainly ourselves as far as testing, and this particular distribution in business I believe opens the door for us to accelerate in a way down market. The second thing is our general framework, what we call autonomous financial crime management, which allows us to go back to our dozen and hundreds of customers in this segment and allow them to manage in a very nice way the very, very heavy cost model of managing their compliance. And the traction of this new vision that was just introduced a few months back is very good and very high. And thirdly, it's starting to monetize both the customer base as well as the data that we have with customers. And this is by what I've mentioned the ActimizeWatch, which is injecting artificial intelligence with the benefit of the cloud to this market. And you heard me on the previous remarks mentioning the 2 additional customers that signed up for the consortium. It's not just signing up to the consortium, both those customers with that landed a 7-digit deal for ActimizeWatch. So those 3 areas, beyond the very basic fundamentals of this business, we did not change the view of this business in the future. We do expect the business, given the nature of some very large license deals, to manage volatility between quarters.

Got it. And then Beth, on your end, gross margins have seen very good progress over the course of the year. Can you talk about -- I know right after your InContact acquisition, there were some opportunities there on gross margins. Can you talk about generally what factors drove gross margins in the fourth quarter and were they consistent with what you've seen throughout the year in terms of the drivers?

Sure. So as you highlighted, throughout the year, we've continued to improve our gross margin. We actually had a sequential increase each quarter in the overall gross margin throughout 2017. And I would say what applied in Q4 is what we've done well really throughout the year as well as in prior years. We have very close management of the overall business in the health and it drives through a lot of operational efficiencies. So throughout 2017, on the services side, we have continued to be very successful at driving and doing the hiring in some of our offshore locations. We've now started to also focus more on that on the cloud side of the business as well. As you know, we also, on the cloud front, we moved off one of our competitors’ products on the WFM side and moved on to our own offering there as part of our CXone offering, so that we also had benefits throughout 2017 on the cloud margin. And in general, we have a lot of experience in evaluating our relationships with third parties, and we have the power of negotiation by looking at the aggregated NICE overall in our vendor relationships, which we've also been able to positively influence and drive further positive margin.

And then just progress on that into the future, do you see that continuing -- do you see further progress on gross margins? Or do you feel like -- I know some of the moves you were making with inContact maybe had a time frame that you were completing them. How you think about it going forward?

So we are still positive that we'll still be able to continue to positively influence our margins.

The next question comes from Gabriela Borges from Goldman Sachs.

This is Manik Mahajan on behalf on Gabriela Borges. I would like to dig a little bit deeper in terms of your different segments. How should we think about growth in products versus services business going forward?

We -- in terms of our guidance, we don't break down the specific of products, services and cloud. We just give the high level one.

All right. And a follow-up, if I may. You mentioned cloud business to exit 2018 with a revenue run rate of $500 million. Could you help us understand seasonality of this business during the year?

Sure. So with respect to the cloud side of the business, there is seasonality within that part of the business. The model and the offering we have of the CXone platform is based on the agent count. And as a result of that, when we are selling the offering, we'll see that we typically have an increase in the usage related to the industries that are using the offering. So for example, we have increases in the retail area that occurs more towards the end of the year, as we get into the holidays, and they have pickup in the activity in the customer experience side of the business. So as a result of that, typically, when we go into the latter half of the year, we see more seasonality on that side of the business.

Next question comes from Dan Bergstrom from RBC Capital Markets.

Yes. So Barak, you touched a bit on this in the answer to John's question, but I'm curious about the large Fortune 100 companies that migrated over to cloud solutions. Could you talk a little bit about what those customers were looking for when adopting cloud solutions? And then maybe a little bit more on just the reception of cloud solutions upmarket.

Sure, I can give you a bit more color on that. And obviously, it's very dynamic, and it's growing there very, very nicely. So I would say that I think I've got this question just after we acquired inContact and we came with the vision of being the only vendor out there that is putting together WFO, CCaaS and analytics fully. (inaudible) others are trying to do a similar thing. And then later on obviously, we introduce it as complete unified suite but also as a full classroom. And we have done all of that because exactly that point, we believe that the adoption, similarly to what happened to many other enterprise software industries, will start to pick up at the higher end of the market, the market is divided into multiple segments. And it is happening every (inaudible) due to, I would say, several reasons. First of all, I would say kind of the killer value proposition of the cloud, it's very hard to resist both the commercial model and the elasticity of the cloud in the contact center space. As well, of course, there's the rapid innovation, rapid deployment that it provides, which is very significant compared to past models, which are on-premises models. Second thing -- the second reason why we see this adoption starting to pick up is that some of the -- some or most of the legacy providers that used to be on-premises provider, due to the financial factor and the way they strategize their road map, they did not move really to the cloud. They did not have a vital, true cloud product. So they do not really offer these customers a vital way to migrate from the current on-premise to the cloud. And you see today in all different enterprises, there are market shifts in the mindset, from the CIO down and from the bottom up, of when they would like to do investment, it will be really the case that they were making investments in moving completely to a new platform, which will be on-premise. If they did the investment, it will be to the cloud. Specifically, what we see right now, we see, I would say midsize enterprises moving rapidly to the cloud, a very nice project. It's a very good [understanding] to that enterprise of what is a true cloud solution and what is more of the kind of the wholesale or semi, and they would like to get to a cloud solution like we offer. And on the Fortune, I would say, 500 and 100, as we said, we actually see them move into the cloud, maybe they are starting a bit slower, but just a few quarters after that, they will move more and more. One of the examples that I have mentioned, a Fortune 100 customer that moved in Q4, they have moved about half their operation already through the commitment in Q4. And there was already a dialogue with them within 2018 to move all the rest as well. So we see all the things we talked about happening to us, and we're very happy with the timing of CXone because it allows us to cover now all segments of the market with one winning product -- winning platform.

There are no further questions at the moment, so I'd like to hand back to Barak.

Thank you all very much for joining us today. Similar to Beth, Marty and the team, I'm looking forward to see you at our Investor Day in May in Orlando. Have a great day. Thank you.

Thank you.

Thank you. Ladies and gentlemen, that concludes your call for today. You may now disconnect. Thank you for joining. Have a good day.