Welcome to the NICE Conference Call discussing Third Quarter 2024 Results, and thank you all for holding. All participants are at present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded, November 14, 2024. I would now like to turn this 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; and Beth Gaspich, Chief Financial Officer. 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 materially is contained in the section entitled Risk Factors in Item 3 of the company's 2023 Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on March 27, 2024. During today's call, we'll present a more detailed discussion of third quarter 2024 results and the company's guidance for the full year 2024. You can find our press release as well as PDFs of our financial results on NICE's Investor Relations website. 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 share-based compensation, amortization of acquired intangible assets, acquisition-related and other expenses, amortization of discount on debt and loss from extinguishment of debt and tax effect of the non-GAAP adjustments. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. The information and some of our comments discussed on this call may contain forward-looking statements that are subject to risks, uncertainties, and assumptions. And I'll now turn the call over to Barak.

Thank you, Marty. And welcome, everyone. We are thrilled to announce yet another excellent quarter where we exceeded the high end of our expectations, beating the upper limits of our guidance on total revenue and earnings per share. This remarkable performance highlights our competitive edge, propelling us ahead of the industry and certifying NICE as the go-to partner for enterprises across the globe. Our success speaks loud and clear. When businesses want excellence, they turn to NICE. We reported total revenue of $690 million in Q3, representing an increase of 15% compared to the same quarter last year with cloud revenue growing 24% to $500 million, exceeding the $2 billion ARR mark, the highest cloud growth on the largest cloud revenue base in our industry. Our scale and superior platform architecture continue to drive outstanding profitability. The numbers speak volumes. Operating income surged 20% to reach $221 million and operating margin climbed by 140 basis points to a record 32%. This resulted in an impressive 27% leap in EPS over last year's same quarter, hitting $2.88 for Q3. To top it off, we delivered exceptional cash flow, generating $159 million in operating cash, a 32% increase compared to Q3 last year, continuing the year-over-year trend of accelerating cash flow. This strong financial performance is a result of our continued excellent execution, showcasing just how far we are pulling ahead and reshaping the industry landscape. Year-to-date, we have displaced legacy on-prem competitors in over 100 large enterprises. Additionally, over 45 leading brands turned to NICE this year, following failed deployments by other cloud vendors. Our partner ecosystem is flourishing with over 40 new partners joining our ranks since the beginning of the year, including over 20 international partners, all of which chose to join the success of NICE and our Powerhouse CXone platform. These results are more than numbers; they are a resounding testament to our industry-defining leadership. We are on the precipice of the era of exponential impact, fundamentally reshaping the landscape of enterprise software. Artificial intelligence is cutting through the traditional distinction between systems of record, workflow, and intelligence. This paves the way for the creation of a hyper-platform with each market domain serving as the comprehensive system of everything for the first time. Concurrently, we found ourselves in an evolving effort where enterprise users and their desktops are rapidly being displaced from their central positions in organizational workflows, replaced by alternative control points that are essential for delivering AI-driven automation. To navigate this tectonic shift, software leaders must swiftly master new capabilities; just as the transition to the cloud a decade ago necessitated that supervisors evolve from code builders to SaaS operators, this new era will demand that they excel as data curators. This transformative model will not only reshape monetization strategies but also unlock unprecedented avenues for value creation. In the realm of customer service, this era of exponential impact is poised to be pivotal, propelling technology to assume a central role in service delivery. Historically, the customer service equation had been heavily skewed with 90% reliance on human resources and nearly 10% on technological solutions. Today, we possess the tools to invert this equation, bringing us closer than ever to fully automated customer service that meets both precision and scale. Nevertheless, the journey toward authentic automation in customer service is fraught with challenges, with significant barriers to domain expertise; only those vendors fortified with deep resources and a robust foundation in customer service, including agents, workloads, and knowledge, will successfully make this leap. At NICE, we possess that unrivaled advantage. In CRM and generic big tech, we manage billions of customer service interactions every year, providing us exclusive untethered access to customer intent at any given time—the most important ingredient for customer service automation. These, together with our vision, resources, and technological products, put us in a unique position to lead this transformation. A few weeks ago, we unveiled our new mission for NICE, which is to spearhead the wave of customer service automation at scale and with utmost precision. We're achieving this with the introduction of CXone Mpower, our market-leading hyper-platform meticulously designed to facilitate end-to-end automation in customer service. CXone Mpower enables enterprises to design, build, and operate their customer service framework from agents to workflows to knowledge management within a single integrated platform. With customer service-specific functionality in AI, CXone Mpower equips businesses to deliver orchestrated, intelligent customer service that addresses the needs of every B2C organization. CXone Mpower is the combination of over a decade of relentless innovation, combined with NICE's unique set of assets and substantial investments. Today, I would like to share insights from our Q3 results that showcase how we are advancing the transformative capabilities for customer service workflows, agents, and knowledge. In Q3, we continue to see an acceleration in our portfolio deals that demonstrate the desire of customers to master customer service workflows by consolidating multiple disjointed solutions onto CXone. This included an impressive number of eight-digit TCV deals, a 25% growth in the ACV of workflow-driven portfolio deals, and a 32% growth in the number of seven-figure ARR customers. A large healthcare company embarked on a sweeping transformation uniting 20 separate operations under one roof, which resulted in a seven-digit ACV deal that displayed three legacy ACV providers. They chose CXone not only for its complete portfolio but for its ability to automate and streamline customer service workflows within units and for overall growth. In yet another remarkable seven-digit ACV win, the power of CXone as a customer service orchestration platform captured the trust of a major medical technology giant. Frustrated by their cloud ACV providers, which had been in place for nearly two years and failed to deliver a true customer service transformation, they turned to NICE, showing once again why CXone is the clear choice for leading businesses. Agents, whether human or AI, are the backbone of customer service workflow. An increasing number of leading enterprises are choosing NICE for agent augmentation and automation, recognizing that success requires specialized domain expertise, unique data, and rich capabilities. CXone AI proficiency at an AI level goes well beyond slides and demos. The results are real, tangible proof of our speedy progress in this fast-growing area of customer service. In Q3, the ACV of CXone Copilot soared sixfold compared to the same period last year. Since launching, we have welcomed 140 AI agent AutoSummary customers, 50 climbing just this past quarter, and a threefold increase in the ACV of AutoSummary in Q3 compared to the same period last year, all demonstrating rapidly increasing momentum. These numbers speak volumes about the explosive growth of our agent-to-CCI solutions and the powerful energy behind our AI-driven deals with large enterprises. In one such impressive seven-digit ACV deal, a major global payments technology company was looking to empower, augment, and operate their customer service agents. They selected CXone with its capabilities to replace their former cloud providers with solutions including AI AutoSummary and CXone agent Copilot. In another seven-figure ACV deal, a leading financial advisory giant is also pushing AI to the forefront of their customer service strategy. With the powerful duo of Copilot and Autopilot on CXone, they are infusing their agents and operations with advanced intelligence. This innovation is set to provide dramatic ROI while reaching the customer journey. Data is the new oil for enterprise software, but knowledge is what truly powers AI, like high-octane fuel. In customer service, it is the essential energy source that enables seamless workflow management and powers agent automation. For over a decade, we have amassed an unparalleled wealth of mission-critical data and knowledge, positioning us to lead this wave of customer service automation. This foundation makes CXone the only platform capable of managing knowledge at scale for AI-powered customer service automation. It's also the first time that enterprises can centrally manage all customer service AI knowledge assets while applying enterprise-grade guardrails. In Q3 alone, the ACV of our foundational AI knowledge technology, powered by Enlighten, grew by an impressive 163% compared to the same period last year. This wave of interest has also driven a remarkable more than twofold ACV increase year-over-year in CXone Autopilot, our fully automated AI agent that seamlessly powers end-to-end workflows on CXone, leveraging knowledge. We signed a large seven-figure ACV deal with top names in the industry, showcasing exactly how this organization is putting knowledge at the heart of the CXone strategy. Already a valued customer, they are now going all in with CXone Autopilot to deliver full customer service automation, thanks to NICE's unique knowledge assets. In yet another large seven-digit ACV deal, a major Midwest healthcare provider also selected CXone for customer service automation, leveraging NICE's knowledge-powered Autopilot. This is just one example out of many where customers select CXone not only to replace legacy systems but also as their AI automation partner instead of their CRM and other digital providers. It demonstrates the criticality of knowledge that uniquely exists in our leading interaction-centric platform, CXone. These large enterprise deals represent just a glimpse into the deals we continue to sign quarter after quarter, showcasing the transformative capabilities of CXone as a platform that advances powerful foundational intelligence AI for customer service agents, workflows, and knowledge. Additional Q3 customer service automation deals driven by AI included one of the largest financial institutions in Canada, a very large regional healthcare company, a well-known construction service company, a giant owner in the marketplace, one of the largest global telecom companies, and many others. Our success story continues to gain recognition across the industry with recent accolades from Gartner's prestigious annual report. Not only do we hold a strong leadership position in their Magic Quadrant, but we are also the only vendor in the leader quadrant who advanced while others moved downward. Even more exciting, Gartner highlighted our AI capabilities as a clear strength and acknowledgment of our leadership in shaping the future. Our impressive financial results this quarter, alongside major deal signings, especially at the high end of the market and our groundbreaking innovation like CXone Mpower, are just the tip of the iceberg. Beneath the surface, we're working solidly, backed by a strong balance sheet, the industry's largest and most elite go-to-market team, a rapidly expanding partner network, and the biggest R&D team in the business. With all this momentum and the expected accelerated cloud growth in Q4, we are poised to charge ahead on an exciting path forward. And finally, as this will be my last earnings call, I want to express my gratitude to each of you for the trust and support you have shown me over the years. Leading this company has been one of the greatest honors of my life. Together with 9,000 NICErs, we have built NICE into a multibillion-dollar global category leader. I have full confidence in NICE's continued leadership due to the strengths of our team, the resilience of our vision, and the many opportunities ahead. I will continue to drive the company through the end of the year and ensure a smooth transition to Scott Russell, who will assume the CEO position on January 1st. I will now turn the call over to Beth.

Thank you, Barak. I'm proud to report another quarter of excellent financial performance with results in Q3 exceeding the high end of our guidance range for both total revenue and EPS. Our revenue grew 15% year-over-year paired with impressive profitability as our operating margin reached an all-time high of 32%. We've continued to demonstrate our strong ability to unlock operating leverage while we scale our business, which now exceeds $2 billion in cloud annual recurring revenue. This strength was also demonstrated, once again, by our robust last 12 months free cash flow margin, which exceeded 25% in the quarter. Total revenue was a record $690 million with total revenue growth of 15% in the quarter, comprised of healthy growth in both cloud and product revenue. Recurring revenue increased to nearly 90% of total revenue compared to 87% last year. Cloud revenue, which now represents 72% of our total revenue compared to 67% last year, increased 24% year-over-year to a record $500 million. Our cloud growth rate continues to outpace our industry even as we operate on a much larger revenue base and scale. Our third quarter cloud growth was driven predominantly by CXone, where we are displacing both on-premise legacy vendors as well as other CCaaS vendors. CXone's complete suite and unique ability to consolidate all CX needs of enterprise customers, paired with our one-of-a-kind unified AI platform, is driving our sales pipeline and superb win rates. That growth was evidenced in Q3 by the 33% year-over-year increase in the number of our greater than $1 million ARR CXone customers. Furthermore, the attach rate for those customers was 100% in the quarter. Our CXone backlog from signed deals has greatly expanded over the prior year with two main changes in the mix. First, a much larger portion of it is coming from large enterprises, and second, a growing part of this backlog is attributed to our AI solutions. This provides great potential for future revenue, but it does take longer to deploy and recognize. As such, we now expect year-over-year cloud growth for 2024, excluding LiveVox, to be 16% to 17%. The midpoint of this expectation implies an acceleration of growth in Q4, and we are already seeing positive seasonality momentum and healthy customer turn-ups in the first month of the fourth quarter. Services revenue, which was $150 million, represented 22% of total revenue and decreased 6% year-over-year as expected, mainly due to our transition to the cloud, where we are adding less new maintenance revenue associated with our premise-based solutions. Product revenue, which represented 6% of total revenue in the quarter, grew nicely year-over-year, stemming from some large on-premise enterprise deals and increased 6% year-over-year. From a geographic breakdown, the Americas region, which represented 85% of total revenue in Q3, grew 17% year-over-year. The Americas region has continued to excel as we are consistently replacing competitors' on-premise legacy solutions with CXone, in addition to further expanding our existing CXone customer base. The EMEA region, which represented 10% of our total revenue, increased 14% year-over-year, driven by robust growth in cloud revenue. Over 50% of our EMEA total revenue was generated from the cloud in Q3, and we expect our growth in this region to continue to further shift to increasing recurring revenue as a result of cloud wins this year already in our backlog. The APAC region, which represented 5% of total revenue, decreased 12% due to a larger amount of on-premise business with upfront recognition in the prior year versus strong cloud revenue growth this year, which is recognized over time. International cloud revenue from the combined EMEA and APAC region now represents 10% of our total cloud revenue, and there remains enormous future growth potential in this highly underpenetrated customer experience market. We delivered strong results across both our segments. Customer engagement revenues, which represented 84% of our total revenue in Q3, were a record $578 million, a 16% year-over-year increase. The growth in customer engagement was driven predominantly by the growth in CXone, particularly with our AI offerings that are being adopted by customers across all verticals. Revenues from financial claims and compliance, which represented 16% of our total revenue in Q3 and totaled a record $111 million, increased 8% year-over-year, driven primarily by an increase in cloud revenue where we are seeing continued positive traction selling our X-Sight and Xceed cloud platforms across global financial institutions. Moving to profitability, our cloud gross margin totaled 69.7% in Q3 as we continue to scale and invest in international expansion in the cloud, which is already bearing fruit. Additionally, unlike others in our industry, our CXone platform utilizes our proprietary AI solutions that don't rely on generic models, and therefore, our AI is more accretive to our gross margin. We remain steadfast in our expectations to reach our 75% cloud gross margin target in the medium term. In Q3, operating income increased 20% year-over-year to $221 million, and our healthy operating margin expanded 140 basis points to a tremendous record of 32% compared to 30.6% last year. Our strong operating leverage, coupled with continued wins in the higher-margin large enterprise market, positions us well. And we are raising our expectations to finish the year at approximately $850 million of operating income and in excess of the 31% operating margin target we shared at our June Investor Day, and to achieve our 35% operating margin target within the medium term. Earnings per share for the third quarter far exceeded our expectations, coming in well above our guidance range at $2.88, a 27% increase compared to Q3 last year. The ongoing confidence in our business, combined with our commitment to returning value to our shareholders, was evident in our high-performing EPS results this quarter, which benefited from our strong profitability combined with the accelerated buyback we have undertaken this year. Cash flow from operations in Q3 was $159 million, an increase of 32% year-over-year. Over the last 12 months, we have generated free cash flow of $668 million, yielding a free cash flow margin of 25%, a level unrivaled in our industry. This exceptional financial profile enables us to expand our market leadership by reinvesting in innovative AI growth initiatives, pursue strategic M&A opportunities, and enhance shareholder returns through our share buyback program. In Q3, we repurchased shares totaling $86 million, completing our $300 million share buyback program and starting our larger $500 million share repurchase program. Total cash and investments at the end of September totaled $1.527 billion. Our debt stands at $458 million, resulting in net cash and investments exceeding $1.068 billion. In conclusion, our third-quarter results stand out in our industry, demonstrating our proven ability to simultaneously drive strong growth in both total revenue and profitability. Our strong execution has resulted in excellent financial results across the board this quarter. And with great AI momentum, it's clear that we are poised for ongoing success. Before I turn to guidance, I'd like to take a moment to address on behalf of the entire NICE team, our deepest gratitude to Barak. His leadership has been nothing short of extraordinary, and he's fostered a workplace culture that has inspired all of us. Thanks to his vision and direction, we're primed and ready to see the many exciting opportunities that lie ahead. We are equally excited to start our next chapter with Scott Russell joining us as a new CEO in January, and we look forward to delivering ongoing success for years to come. Now I'll close with our total revenue and non-GAAP EPS guidance for the full year 2024. For the full year 2024, we are maintaining our previous total revenue guidance and raising our EPS guidance. We reiterate our full year 2024 total revenue guidance, which is expected to be in the range of $2.715 billion to $2.735 billion, an increase of 15% at the midpoint. We now expect full year 2024 fully diluted earnings per share to increase to a range of $10.95 to $11.15, which represents an increase of 26% at the midpoint. I will now turn the call over to the operator for questions.

Your first question comes from Tyler Radke from Citi.

Could we just go back to the commentary around the revenue mechanics that you're seeing on cloud? You talked about some slower ramp-up. Was that more customer driven or is it that the revenue recognition dynamics are different in cloud? And then as a follow-up, could you just talk about how that growth should trend in cloud heading into next year?

So with respect to the commentary around cloud, I'll give you a little more color, which is, first, as you know, we delivered our best-ever CXone bookings quarter last quarter, and we now have the greatest backlog that we've had at record highs of CXone signed deals. As we look in terms of the timeline for the revenue recognition, there is no change in the accounting. AI does not change that. However, we are signing more and more seven-digit and eight-digit ACV deals with large enterprise customers. That, combined with the success we're having of our AI solutions, Copilot, Autopilot, AutoSummary, brings more complexities into those deployments, and that is what we're seeing take hold in some of our revenue and changes in our estimates. So what we do know is that those deployments ultimately result in very sticky customers that continue to increase their customer lifetime value with us. But again, it is not any kind of change in the accounting; it's really coming from the strength of the backlog we had but more and more large enterprise customers.

And just to add to that about your second question, as we mentioned in the remarks, we are seeing acceleration in the cloud growth rate in the fourth quarter. Are you guys giving guidance for next year? You mentioned that. But we see from October billings and activity, both the turn-up, as Beth mentioned, as well as the billing overall, are very good signs for the fourth quarter.

Your next question comes from the line of Siti Panigrahi from Mizuho.

Just a follow-up to the earlier question. If you recall, one of the key drivers for CCaaS is that 70% still on-prem and will move to cloud. But when you look at your growth and your competitors as well compared to last year, what sort of change are you seeing from customers moving from on-prem to cloud? Do you see some kind of delay from their side in terms of evaluating AI or anything macro? Are you seeing anything of that nature? Any trend would be great.

I wouldn't say there is a change in all of that, but I'll go back to what we said already. We are winning at the higher end of the market. As we mentioned earlier, year-to-date, we won and displaced more than 100 accounts. The legacy on-prem provider was the incumbent, and we're also starting to see a nice trend of displacing places where the customer already selected a cloud provider that failed to deliver. We've signed more than 45 of those from the beginning of the year. So that's the positive momentum. Yes, it is about moving from legacy to the cloud. But these days, more so than not, it is about the notion of automating customer service. And we're very happy to see that in almost 100% of those deals are not just selling like-for-like, if you would, just from on-prem to cloud, but also many of our AI solutions that provide significant acceleration in the footprint and the usage of solutions by our customers in the future.

Your next question comes from the line of Meta Marshall from Morgan Stanley.

I appreciate the commentary just about some of these deals taking longer to get ramped. I guess I would think some of these large deals that would be coming revenue in the second half would have been signed a year ago or so. And so is it that they're kind of going back and making sure that they have all of the AI toolkits and kind of revisiting and adding to what those implementations going to be and that some of the elongation? I guess, I just want to get a sense of are these older deals that are impacting the second half of this year or how we should be thinking about that? And then second, just any commentary on LiveVox, and is it kind of performing as expected for now?

I'll start by talking about the deployments that we highlighted. First, we launched our AI solutions, Copilot and Autopilot, back in Investor Day of 2023. And generally, right out of the gate, we saw great success and Barak just highlighted that we've seen that great success continuing on into this year. So while customers are quite familiar with our traditional CXone platform, when it comes to our AI solutions, they are newer solutions for them. And they are more thoughtful as they consider how AI will be deployed within their organizations. So to your point about the timing of these deals, it really is kind of coming back to both the complexity that we see with the large enterprise deals. And of course, we've had more and more of those from last year coming into 2024 as well inclusive of, as I said, the thoughtful deployment around the newer AI solutions that we offer. If I also comment on the question about LiveVox, so we continue to perform as expected for the LiveVox portion of the business. We are seeing that LiveVox business being more and more integrated into our CXone platform, our go-to-market across the board.

Your next question comes from the line of Rishi Jaluria from RBC Capital Markets.

And Barak, it's been a pleasure working with you, and we look forward to seeing the next chapter in your career. Maybe just two quick ones from me. I want to continue thinking about the ramps on the cloud side. Maybe can you be explicit in terms of how has that ramp over time changed in terms of the lag from booking to when deals go live? And is that purely just a function of closing large deals and maybe they're more complex and that's why they're taking longer to ramp into live production, or is there something else? And maybe related to that, if we take a step back and we think about the Analyst Day where you kind of laid out the long-term model and talking about getting to 80% cloud penetration over the next several years. Maybe can you walk us through from your perspective as these deals start to ramp up what's the kind of right organic cloud growth rate that you'd be happy with in terms of kind of going towards those long-term targets?

Let me start by saying that I don't want to repeat what we have said already. But generally, we have numerous motions in our business. Obviously, there are the more midsized customers that we've always been signing; that doesn't change. We have great opportunity, and we're seeing it already where those customers and new ones easily add a variety of capabilities because of the flexibility of CXone. AutoSummary is a great example of that. But as we go into the more interesting part of the market, we need more and more large customers on our end. From the technology side, the platform is ready to onboard those customers on day one. But the market of customer service automation is not just about the move from on-prem to cloud; that's the easy part, if you wish. It is about, as I said before, reengineering workflows, taking out agents from the workflows and embedding AI instead. So that takes customers a bit longer. But when it happens, it happens on a massive scale and it's going to be there forever because it's going to replace people with our technology that adds tremendous value. So it's revenue with much higher profitability and much higher customer lifetime value. We see, as Beth said before, a significant backlog that we have for CXone. With that change of mix, it gives us optimism about the future. And as we mentioned before, in Q4, given what we've seen in October already, we are estimating acceleration in the cloud growth.

Your next question comes from the line of Jim Fish from Piper Sandler.

I do want to hit on that last point, Barak, that you just made. I mean you guys acquired Playvox earlier in the quarter. I think it looks like $45 million of cash outflow here for it. Our math kind of points to about $20 million of contribution. So first, can you talk about what Playvox gives you strategically when it closes and what we're supposed to be expecting in terms of contribution moving forward?

I'll take that and then allow Barak to add any further commentary. I think, first of all, it's important to highlight that the Playvox was a technology tuck-in acquisition with a purchase price around $40 million. We also saw some published articles that considerably exaggerated the revenue related to those deals and again, highlighted it as immaterial in terms of revenue contribution in our Q3 results.

Our next question comes from the line of Samad Samana from Jefferies.

This is Billy Fitzsimmons on for Samad. Barak, we wish you the best of luck in your future endeavors. And in terms of the question, Barak, since NICE last reported, several larger software vendors have introduced generative tech or autonomous AI solutions. How do you see NICE’s market position evolving as these companies that you partner with offer competing solutions?

As I mentioned before, I think we are—although it's been two years since the launch, if you would, of generative AI, the adoption cycle of enterprises, like many other technological sites, is much slower than our own adoption as individuals. So I think we will move from hype to reality. There is understanding that taking something generic doesn't work for enterprises. It might give you the ability to get further access to knowledge bases and others, but to make it functional takes something else. We're talking about something called functional AI, and that's what happens when you take the right knowledge with the agents and workflow and connect it to all the backend processes and systems of customer service. We have something critical and unparalleled when it comes to customer service automation. We have at any given time, real-time access to customer intents. And without real-time access to customer intent, you can't really automate customer service. We possess this in real-time and have the historical tens of billions of interactions with customer intent, which allow us to provide not just a functional AI but also one that works at scale and with precision. So we're seeing a lot of those enterprises, after two years of trying something generic or small point solutions, coming to us to understand that in order to broaden it and to really achieve customer service automation at scale and not just for a specific small use case requires a much more strategic approach—and this is exactly what we see in our bookings. And the examples I gave in my earlier remarks were just a few of the many that we are seeing.

Your next question comes from the line of Arjun Bhatia from William Blair.

Going back to some of the long implementation times, I was hoping you could just maybe touch a little bit on how much longer we should expect some of these deals to take? Are we talking months, are we talking quarters, given the increased complexity? And then Barak, would love to hear what about the CCaaS displacements that you're seeing. What is the main driver of those? I fully understand, I think, the on-prem wins. But what's driving NICE to win over other CCaaS vendors that have already kind of gotten a foot in the door with some of your customers?

So as we mentioned before, it's a large backlog, but it has a change of mix. It really depends on the customer. We are also working very closely with our partners to be able to drive this adoption by customers. I can't really quantify it right now. But the beauty is that as soon as it's up and running, we'll increase in both adoption, building, and eventually, as I said before, the lifetime customer value; the length of this customer relationship will be as long as it's an extremely sticky solution. About the wins, as I mentioned before, we see an acceleration in winning over legacy providers, the on-prem providers like Cisco, Avaya, Genesys, and all of those legacy providers. But we're seeing—this might be something you can easily see from the Gartner Magic Quadrant; we see that customers who signed up, especially those at scale, sign up with a cloud provider who already moved to the cloud, coming a year or two after to us and moving from their cloud providers to CXone. I gave you examples; we have many more of those in the backlog. And our ecosystem of partners actually helps us with that. Many of those partners that work with those cloud providers turn to us because ultimately, it's their reputation and brand when it comes to customer success.

Your next question comes from the line of Timothy Horan from Oppenheimer.

So do you think the cloud acceleration can continue into next year? And the cloud gross margin ticked down a bit. Can you just talk about the trends there? And then just on this point on the workflow kind of reengineering by enterprises. Do you think you have a good handle on that now, or are you at a stage where you can implement it relatively quickly?

Tim, I'll take the first half, and then hand it over to Barak. As we highlighted earlier today with respect to cloud growth, we're not commenting yet on 2025. Of course, we will provide an update on expectations as we provide our fourth-quarter results. But again, we will just say again, we are expecting acceleration of our cloud revenue growth in the fourth quarter. And we've already completed the month of October, so we can see statistics of our customers, and we can see that the seasonality kicking in, particularly in some of our retail customers. Now it looks like it's going to be a nice season there, and that will help drive the seasonality and growth along with the healthy turn-ups, which happened in the first month as well. You also had asked about our cloud gross margins. One of the things I highlighted earlier today was that we had really great growth in EMEA this quarter, 14%, that was underscored by our cloud growth. And it's really evidencing some early positive signs that we're seeing great cloud traction internationally. But we have made some significant investments outside of the Americas, both in the EMEA and APAC region, and that's what you're seeing as a bit of pressure on fixed costs in those regions associated with the cloud. But of course, as you know, cloud revenue is recognized over time. So we're going to see continued great economies of scale as we deliver on the backlog and the pipeline that we're seeing in those regions. Then I'll hand it over to Barak for the rest of the question.

Yes, appreciate the question on the workflows, and I think that's key for the future of customer service automation. That's the reason we are spending so much time on that, and I've tried to give a bit more color on that. The desire to automate customer service is not new; it has existed for the last 30 years with very true results if you think about it. There have been a few waves in the last few years of hopes for different technologies. If you remember the days of RPA, that was supposed to bring automation. We can make a parallel between RPA and almost like prescriptive or predictive analytics. But it basically delivered automation at a task level, which is definitely not enough to drive full automation. The early days of generative AI augmented specific roles in customer service but didn't touch on the full workflow and didn't deliver the right gains or full automation. We believe, based on what we're seeing, that only functional AI with a system, a platform that oversees all customer service workflows—including all different roles and functions—is what will eventually deliver full customer service automation. That's why we've launched CXone Mpower; it's the evolution of CXone. We have all the knowledge. We have all the agents. And now we have all the workflows in order to design, build, automate, and operate all of those workflows moving forward. Any other tactical efforts to automate customer service, we believe, will result in what we've seen in the past 20 years, which is very small local automation versus what enterprises genuinely want and need.

Your next question comes from the line of Patrick Walravens from Citizens JMP.

And Barak, we're going to miss you. I think one place where there's some investor confusion and I'd love to hear your perspective on it is who has the right to win when it comes to AI SKUs like AutoSummary knowledge management. So if a big bank, for example, is using the Salesforce Service Cloud and they're not using NICE CXone, who has the right to win those AI SKUs and why?

As I mentioned before, we find ourselves in many conversations with customers who are asking themselves the same question: who should automate my customer service? Should it come from NICE or should it come from a generic big tech, or should it come from my CRM? After they try a variety of angles, they understand what I mentioned before; A, you need domain expertise. We understand customer service inside and out. Actually, through our partnership with one of those big tech companies, we realized that the go-to-market team cannot even talk or understand what customer service is all about. When it comes to us versus the CRM, obviously, there is room for CRM and customer service as a system of record. But when it comes to full automation, as I mentioned before, you can't automate something unless you have the customer intent. The analogy I'd like to give is that Google is the best advertising platform in the world because they know what the consumer desires and intends at any given time, given what they're writing in their search. The customer intent only really exists in real-time in the interaction itself. We are an interaction-centric platform. Hence, we are the only ones that have the ability to automate workflows end-to-end. More and more customers understand that. We coexist with the CRM in those environments, but we see more and more of those assets from digital engagement in AI coming to the CXone direction instead of other either point solutions or the system of transactional record, which is the CRM.

Your next question comes from the line of Michael Funk from Bank of America.

I guess the first one is actually more of a request than a question, part question, part request. I guess your comments on the backlog, record levels of backlog, and I also understand longer deployment times for the large enterprise and AI solutions. I think that what the bears are picking at though is the appearance that the organic cloud revenue growth is lower and no certainty around acceleration of that. What would be helpful, I think, is if you could provide some commentary maybe today or in the future about the go-live time and expectations for that backlog? So we can actually bake that into our estimates in the future, that would be very helpful. The question from me is what competitive environment and are you seeing any changes in win rates, execution, pricing pressure in the competitive environment? And if so, where regionally or is that upmarket or downmarket?

First of all, regarding the request, we took a note and we'll consider it moving forward. So I appreciate the advice. On the second one, we feel that our win rate has been accelerating and growing in the last 18 months. We feel that when it comes to larger enterprises, some of the other players that wanted to go into this market aren't able to scale. We feel that some of our competitors are making short-term decisions because of their financial structure or certain desired exits of the company. We feel that some of the big tech that wanted to get into this market and made big noise just six months ago, we haven't seen anything in the field. So we feel our win rate is going well and accelerating, and we're optimistic about continuing in this market. We are very happy to see that Gartner thinks the same with their recent Magic Quadrant.

And Mike, I do want to just quickly kind of address the comments you made about the request, because, first of all, I just want to state again that one of the things we had in the quarter is we saw a 33% year-over-year increase in the number of $1 million-plus ARR CXone customers. Again, it just highlights the large number of enterprise customers that we're winning and that we're seeing in the backlog. When we think about the timing, it's important to say that technically with CXone in our platform, we have the ability to deploy our solution in a matter of days, and we have plenty of instances where we've shown that we have the capability to do that. But as Barak highlighted earlier, especially as you're starting to consider the larger organizations rethinking about how AI, including our Copilot and Autopilot, will actually re-envision seamless process workflow, it's a much more thoughtful deployment. And so that's why we don't give specific timing for deployment, because we have customers who are deploying very, very quickly across all segments of the market. But as we go into the large enterprise with customers that are buying a great amount of capabilities, it can take upwards of six months, nine months, even 12 months as they're deploying some of the AI-based solutions. So just to give you a bit more color, it is something we've shared a bit in the past and just to give you a sense of what to expect in timing.

Your next question comes from the line of Catherine Trebnick from Rosenblatt.

One of my questions is, of the new logos, what would be the attachment rate for 1CX? Because you launched that product, I believe, last March, April, May time frame. It was announced but came in on the market before the Investor Day. And what types of trends are you seeing with the UC and CC attachment is really the question in the large enterprise?

We launched 1CX, which is our UCaaS solution, full-fledged UCaaS solution for 5 bucks per channel earlier in the year. We see tremendous traction, and many deals are signing. Obviously, it's more applicable for the lower end of the market. I think that UCaaS at the higher end of the market is boring and obsolete because it's being displaced by Teams and is completely separate from the CCaaS and the contact center solution, and there is no real need for future UCaaS in the higher end of the market. But for our customers, at any size, we make it available, and we are very happy with the traction that we get.

Next question comes from the line of Chris Reimer from Barclays.

I was wondering if you could comment on the traction—the small uptick this quarter in the product. And what do you think is driving the stickiness there? What kind of customers are on the product segment of the solutions?

I think that if you look at our growth, you'll see that quarter after quarter, our overall revenue growth is being driven by the cloud. This quarter, we had a nice year-over-year growth in product as well. What you see is that, from time to time, there are generally a select and lesser number of large enterprise customers that just haven't yet figured out exactly their roadmap to the cloud. It often occurs with organizations where cloud hasn't yet penetrated much of the market, and they're in very early stages. Generally, you'll see that tend to be more outside of the Americas. Also, we tend to see that from time to time in our FCC or Actimize business, where cloud is still more in the early days. So you will have those customers as you saw this quarter elect to purchase our premise-based solutions.

And your final question comes from the line of Michael Latimore from Northland Securities.

When you talked about cloud accelerating in the fourth quarter, are you referring to a sequential change there or an improvement in the year-over-year growth rate? And if you see year-over-year growth rate, do you expect it to be kind of above or below the guidance you've given for the year?

With respect to the fourth quarter, we do expect the year-over-year growth rate in Q4 to exceed the year-over-year growth rate in Q3. In addition, we expect the sequential contribution in cloud to exceed going from quarter to quarter this year relative to what we experienced one year ago. So what it means for the fourth quarter or for the full year, again, you can do the math, but it is showing that the expectation for Q4 is an accelerated increase. And as we've highlighted a few times on the call, we have our usage coming out of October, which gives us some nice confidence as we head into the end of the year.

And that concludes our question-and-answer session. I will now turn the call back over to Barak Eilam, CEO, for closing remarks.

Thank you all for joining us today. Once again, thank you for the many years of partnership. We will continue to drive the business to the end of the year and hand over the company to Scott with a great team over here, and NICE will continue to thrive. Thank you very much.

This concludes today's conference call. Thank you for your participation. You may now disconnect.