NICE Ltd. (Israel) Q1 FY2025 earnings call

• Strong first quarter results: Total revenue of $700 million, with cloud revenue up 12% y/y to $527 million led by CXone Mpower. Operating margin expanded to 30.5%, EPS reached $2.87. - Large deals: Signed the largest CXOne empowered deal in company history, a $100 million+ European government agency deal. - Strategic partnerships: Forged partnerships with ServiceNow and AWS, with CXone Mpower now live on AWS Marketplace. - Innovation: CXone Mpower Orchestrator won awards. Portfolio deals ACV grew 26% y/y in Q1.

Total revenue in the first quarter was $700 million. Cloud revenue rose 12% year on year to $527 million, which now represents 75% of total revenue. Customer engagement revenue, representing 85% of total revenue, was $592 million, increasing 7% year over year. Revenues from financial crime and compliance, representing 15% of total revenue, totaled $108 million and met expectations.

• Second quarter 2025: Expected total revenue range $709 million to $719 million (7% y/y midpoint), Q2 EPS range $2.93 to $3.03 (13% y/y midpoint). - Full year 2025: Reaffirmed revenue guidance $2.918 billion to $2.938 billion (7% y/y midpoint), raised non-GAAP EPS guidance to $12.28 to $12.48 (11% y/y midpoint), expect non-GAAP operating margin to increase 50 basis points y/y.

Q: What's the biggest reason for the quarter-on-quarter step down in cloud revenue and when will strategic partnerships start showing more dividends?

A: Beth said the quarter-on-quarter step down was due to seasonality in certain verticals like retail, healthcare, and insurance. Scott said strategic partnerships are already getting feedback from customers and will turn into growth opportunities in coming quarters.

Q: How to understand the additivity of AI and Mpower self-service ARR, and when might the growth momentum pick up?

A: Scott said AI-based usage is largely incremental with no material cannibalization of seat-based revenue. Partnerships will help fulfill AI innovation and drive growth in later part of the year.

Q: How does NICE's AI strategy differentiate and how do partnerships enhance AI development?

A: Scott said NICE's investment in AI provides a strong foundation with 15 billion interactions and intent data. Partnerships like with AWS and ServiceNow extend end-to-end capabilities and automate workflows.

Q: What about delays in large customer deployments and autopilot adoption?

A: Beth said they've invested in services organization and partners to speed up deployments. Scott said autopilot adoption varies by industry and geography, but AI is universally seen as entrenched in customer experience.

Q: What's the expectation for revenue contribution from large deals and confidence in 12% cloud growth?

A: Beth said the large deal from last year is starting to contribute in Q2, the new European deal will start in early 2026. Confidence in 12% cloud growth comes from existing customer usage, backlog, and no macro impact.

Q: Factors impacting cloud gross margin and billings/DSO?

A: Beth said cloud gross margin is impacted by ramping services capacity and international infrastructure investment. Scott said no significant macro impact on deals and pipeline is at record levels.

Q: Breakdown of cloud growth between NRR and new customers and margin expansion balance?

A: Beth said NRR is trailing 12-month based and most revenue is from existing customers. Scott said margin expansion is balanced with investments in growth to drive future revenue growth.

Q: Why does NICE have the right to win in summarizing contact center sessions?

A: Scott said NICE's platform unifies interaction, knowledge, and workflow, providing a single pane of glass for consumers and differentiating from disparate solutions.

Q: AI agent ARPU and M&A activity?

A: Beth said AI ARPU has greater opportunity than human agents. Scott said NICE has flexibility and optionality for inorganic moves to enhance value proposition.