NICE Ltd. Q3 FY2025 earnings call

• Renewed strategy is producing clear tangible results with strong financial performance and growing market position. - Strong cloud and AI bookings driven by AI-first strategy, international expansion, and robust go-to-market performance. Cloud backlog increased 15% year-over-year. - Acquisition of Cognigy closed in early September, with its performance included in Q3 results. - Key deals in Q3: leading global auto manufacturer chose CXone for 8-figure ACV deal, AI to cruises used NICE Cognigy for FAQ automation, Consumer Cellular added AI agent augmentation. - International business momentum with DWP extending CX sovereign cloud initiative. - Upcoming Capital Markets Day on November 17 in New York City.

Customer engagement revenue was $613 million, representing 84% of total revenue in the quarter, increasing 6% year-over-year. Revenues from financial crime and compliance, representing 16% of total revenue in Q3 and totaling $119 million, increased 7% year-over-year. Cloud revenue was $563 million, up 13% year-over-year, representing a record 77% of total revenue. On-premises business: services revenue of $139 million represented 19% of total revenue and product revenue of $30 million represented 4% of total revenue.

• Full year 2025 total revenue guidance increased to $2.932 billion to $2.946 billion, representing a year-over-year increase of 7% at the midpoint. - Cloud revenue growth expected in the range of 12% to 13% for the full year. - Operating margin expected to slightly contract due to Cognigy. - Non-GAAP earnings per share for full year 2025 expected in the range of $12.18 to $12.32, representing a 10% increase at the midpoint.

Q: What's the expectation of Q4 revenue contribution from Cognigy?

A: Beth Gaspich said Cognigy contributed roughly 50 basis points to cloud revenue growth in Q3 and should include about 150 basis point impact on cloud revenue growth during Q4.

Q: How is Cognigy positioned on go-to-market?

A: Scott Russell said Cognigy is a world-class leading conversational agentic AI platform and will go after all of the CX market, including companies running on other platforms.

Q: Can Cognigy help accelerate customers not yet in cloud or CCaaS to move to cloud?

A: Scott Russell said Cognigy has 3 growth vectors including serving customers in the cloud looking to do AI transformation, the NICE installed base, and reaching customers starting with AI transformation from on-premise.

Q: Thoughts on competition with Sierra?

A: Scott Russell said Cognigy is a proven market leader in conversational and agentic AI, targeted for its enterprise scale, easy adoption, and proven customer value, validating the market potential and renewing confidence in NICE's competitive positioning.

Q: Changes in pipeline velocity or average deal size through RingCentral partnership?

A: Scott Russell said there is renewed go-to-market momentum with RingCentral, leveraging their existing partnership with Cognigy and the combined offering of UCaaS, CCaaS, and agentic AI platform.

Q: Was cloud growth organic or due to Cognigy?

A: Beth Gaspich said maintained expectation of 12% growth in cloud, excluding Cognigy for 2025, and the increase in the range is predominantly from inclusion of Cognigy.

Q: Thoughts on cloud backlog growth and margin pressure?

A: Beth Gaspich said cloud backlog growth excluding Cognigy was 13% year-over-year, and there will be short-term margin pressure due to international expansion and sovereign cloud infrastructure investments.

Q: Cognigy ARR and NRR impact?

A: Beth Gaspich and Scott Russell said early indicators of Cognigy's ARR are positive, with expectation of $85 million exit ARR by end of 2026, and NRR has stabilized with positive inflection expected ahead.

Q: LiveVox business stability?

A: Beth Gaspich said LiveVox has a positive outlook with ongoing growth in cloud revenue.

Q: NRR trends and pipeline strength?

A: Beth Gaspich said NRR is trailing 12 months, but current cloud growth indicates stabilization and potential inflection, and pipeline is strong with positive sentiment due to AI benefits in CX and strong market demand.

Q: Competition from OpenAI APIs?

A: Scott Russell said LLM providers are seen as partners, and NICE Cognigy provides contextual CX-specific AI built on rich customer interaction data, which is critical for delivering superior customer experience and not competition to simple bots.

Q: Actimize competitive dynamic?

A: Scott Russell said Actimize is the market leader with high demand, benefiting from regulatory focus on compliance and financial crime, and has strong retention rates and ongoing value for large financial institutions.