NICE Ltd. (NICE) Q2 2019 Earnings Report, Transcript and Summary

Welcome to the NICE conference call discussing Second Quarter 2019 results, and thank you all for holding. [Operator Instructions]. As a reminder, this conference is being recorded, August 8, 2019. 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; 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 2018 annual report on Form 20-F as filed with the Securities and Exchange Commission on April 5, 2019. During today's call, we will present a more detailed discussion of second quarter 2019 results and the company's guidance for the third quarter and full year 2019. Following our comments, there will be an opportunity for questions. Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations, which differ in certain respects from generally accepted accounting principles as reflected mainly in accounting for acquisition-related revenues and expenses, amortization of intangible assets, and accounting for stock-based compensation. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. I'll now turn the call over to Barak.

Thank you, Marty, and welcome, everyone. I'm glad to be on the call with you today. We are pleased to report another strong quarter across the board, including all key financial metrics. Total revenue increased 11% to $381 million, driven by another strong quarter in both product and cloud revenue. Product revenue increased 25% and cloud revenue grew 30% in Q2. The strong topline results led to a further increase in profitability. Operating income was $101 million, which was an increase of 14% compared to Q2 of last year. And operating margin increased 74 basis points to 26.6% compared to the same period last year. These strong operating results led to a 14% increase in earnings per share to $1.25. Our success continued to be driven by an acceleration in Cloud, Analytics, and AI. The Cloud growth was very strong in both customer engagement and financial covenant compliance and is being fueled by penetration going to all segments of the market, including large enterprises, where we have witnessed [indiscernible] demand and strong growth. Meanwhile, we are seeing significant expansion of our partnerships around the globe, and at the same time, maintaining an acute focus on product innovation. CXone continues to drive the success of our Cloud business. CXone is unique in that it is the first and only [indiscernible] native cloud platform that seamlessly incorporates the market leading omnichannel routing, offers optimization, analytics into a single platform. Last quarter, we announced the acquisition of Brand Embassy, which provides a significant expansion to CXone and makes it the most comprehensive platform for digital transformation in customer service. The new offering has already been launched to the market. We continue to sign many new cloud customers across multiple segments of the market, including some very large enterprises. The deal included an 8-digit ACV deal with a financial services company, which was an interim replacement of several on-premise providers. We also signed multiple CXone 7-digit ACV deals. For example, we closed a deal with a brokerage and investment advisory company, which is a new customer and a competitive replacement. We signed the deal with one of the largest retailers in the world as they continue to expand their relationship with NICE. There was another deal with an energy company, also a new customer and a competitive replacement, as well as an extension deal with a state government agency where we will replace the incumbent. X-Sight drove meaningful cloud growth for financial compliance. [Indiscernible] in the quarter for our essential cloud-based solution, included a global digital bank, a Canadian-based credit union, a U.S. based bank specializing in small business lending, and a leaning online brokerage firm. Augmenting the success of our cloud growth is the significant expansion of our ecosystem of partners, which is being fueled by our extensive portfolio of solutions and the large and increasing total adjustable market in which we operate. One example is our CXone Partner Ecosystem, through our DEVone and NCX exchange program. We now have 135 partners building on the platform. This extensive network provides our customers with endless solutions options. At the same time, it offers our partners the means to significantly expand their go to market and provide us an excellent vehicle for M&A, similar to our acquisition of Brand Embassy, which was a DEVone partner. We also have many successful go to market partnerships with various [indiscernible] providers, telcos, and other reseller that allows us to capture this fast growing market. This network continues to constantly expand and we are now thoroughly augmenting our partnership strategy with the recent announcement of a partnership with Atos, a global leader in digital transformation with over 110,000 employees in 73 countries. Atos is making CXone a preferred solution for contact centers of service and bringing CXone to the company's install base of hundreds of thousands of contact center agents across the globe, as well as to new customers. With Atos' largest global presence, we're excited about the potential to bring CXone to new customers around the globe, especially in Europe, where Atos has a very large customer base. This is a great opportunity to execute on our strategy of growing CXone in international markets. We also recently announced an expanded collaboration with Microsoft. We introduced new integration for Microsoft teams, which is further enabling organizations to effortlessly collaborate with the contact center. Similar to the CXone marketplace, we announced the X-Sight marketplace, the industry's first financial client managed focused marketplace. The X-Sight marketplace initial solutions category includes ID verification, automate beneficial ownership, value-added data and adverts media, watch lists, device identification, and user authentication fraud. Since the announcement of the new X-Sight marketplace less than two months ago, more than 20 solution providers have already signed up, including a specialist in cybersecurity, a provider of unique life driven technology for biometrics onboarding, and a provider known for its AI-powered risk management content solution. Along with partnering, we also continue to accelerate innovation, especially around analytics and AI. In RPA, where we are seeing strong growth in very fast growing markets, we recently released a new version of RPA. This latest version incorporates deeper AI capabilities for extended automation discovery and real-time monitoring intelligence. In fact, NICE RPA was named a leader in average group peak metrics for the second consecutive year, scoring high on both vision and capability and market impact. The most recent release of CXone adds end-to-end artificial intelligence capabilities. Included, our new AI self-service bot option, new AI-infused focusing and scheduling options, and AI-powered interaction analytics. We have also added predictive behavioral routing for CXone. Moreover, CXone now provides additional depth and breadth for CRM integration for delivering a more personalized customer experience. Another example of innovation includes the introduction of Actimize CDD-X, which modernizes KYC and CDD programs with advanced analytics and the power of AI. NICE Actimize CDD-X leverages ActimizeWatch to apply machine learning to enhance the accuracy of risk rating, using the collective intelligence of previous outcomes. Significant reduction in [indiscernible] costs are realized for the innovative use of utilization and purpose-built intelligent automation to streamline customer view time by up to 70%. In Q2, we continued to sign several 7-digita deals, incorporating cutting edge analytics, including 2 largest deals, which [indiscernible] companies that included our analytics powered Compliance Center solution. These deals, including many others during the quarter, were competitive replacements. We also signed a 7-digit deal with a major cloud processor for a portfolio of our Financial Crime and Compliance Solutions, and a 7-digit deal with some major reinsurance and health solutions company for Interaction Analytics. This company is already a CXone customer and this deal demonstrates the value of our customer's ability to extend on our platform. We also signed a 7-digita analytics deal with one of the largest cruise lines in the world. In closing, we have the market leading technologies, driven by ongoing innovation, through profoundly market differentiating cloud platforms with CXone, X-Sight, and a robust go to market, fueled by an enterprise cloud directed course, and strong and expanding partnerships. We are only just beginning, as these assets position us very well to capture the many growth opportunities ahead in an addressable market of $7 billion, growing to over $12 billion over the next 3 years. 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 the analysis of our financial results and the business performance for the second quarter of 2019 as well as our outlook for the third quarter and full year 2019. Total revenue for the second quarter increased 11% to $381 million compared to $344 million in the same period of last year. Our total revenue growth was driven by further growth in the cloud with 30% cloud growth in the second quarter of 2019, as well as an increase of 25% in product revenue. Our high percentage of recurring revenue continued to increase to 72% of total revenue, reflecting our strong cloud momentum. As we highlighted last quarter, our recurring revenue has grown to become a much larger portion of our total revenue. Therefore, we expect both our revenue and our profitability to be more evenly distributed among the quarters this year. We also witnessed double-digit growth in both of our businesses. Customer Engagement revenues for the second quarter increased 11% to $313 million and represented 82% of our total revenues. Financial Crime and Compliance revenues increased 610% to $68 million and represented 18% of total revenue. Product revenues accounted for 16% of total revenue in the second quarter. Cloud revenues accounted for 38% of total revenue for the second quarter, which represents an increase from 32% in Q2 last year. And Services revenue accounted for the remaining 46% of total revenue in the second quarter of 2019. Looking at geographies, Americas reached $307 million in the second quarter; EMEA, $48 million; and APAC, $26 million in the second quarter of 2019. And now, to profitability. Gross profit increased 12% to $271 million in the second quarter. Gross profit margin improved to 70.9% compared to 70.5% last year. The expansion in gross margins is a result of product mix. Cloud growth margins increase to 61.4% from 59.8% in Q1 2019. Operating income increased 14% to $101 million in the second quarter. Operating margin increased significantly to 26.6% compared to 25.8% in the same period of last year. The strong operating income and margin demonstrates the leverage in our model and our commitment to continue to expand profitability over time. Earnings per share for the second quarter increased 14% to $1.25 compared to $1.10 in the second quarter of last year. Total cash and financial investments were $867 million at the end of June 2019 and total debt was $460 million net of issuance costs and the equity component associated with our convertible debt. I will conclude my remarks with our guidance. For the third quarter of 2019, we expect total revenue to be in the range of $380 million to $390 million. We expect third quarter 2019 fully diluted earnings per share to be in the range of $1.23 to $1.33. We are increasing full year 2019 revenue to be in the expected range of $1.563 billion to $1.583 billion. We're increasing the full year 2019 fully diluted earnings per share to be in an expected range of $5.13 to $5.33. I will now turn the call over to the operator for questions. Operator?

[Operator Instructions]. The first question we have from Shaul Eyal with Oppenheimer & Co.

Barak, the number of 7 and 8-digit transaction keeps showing healthy momentum but it's actually coming also from cloud related transactions. So I think it would appear that the prior view a couple years back was that cloud contracts are probably on the smaller scale. But you're actually showing the opposite and it's not only on CXone but on X-Sight as well. So help us reconcile this view. Is it rapid cloud adoption? Is it that enterprises are showing increased readiness to adopt [indiscernible] solutions? Is it improved TCO? And I have a follow-up.

Indeed, I think that you can see a growing trend in our last few quarters and this quarter it's even more so about both the number as well as the [indiscernible] in terms of size of our cloud deals. I spoke about an 8-figure ACV deal and multiple 7-figure ACV deals in the cloud. And I think that the reason for that is a few reasons. First of all, the market adoption at the higher end of the market for cloud is growing dramatically. And we believe that we are taking a big share of that. So the first one is the adoption. The second thing I would say is a combination of a few things. First of all, the fact that we are selling much more portfolio deals. The NICE portfolio is very complete with both CXone and X-Sight. It gives us an opportunity to sell much larger deals with much more components. And we believe that the market is buying into our vision and strategy, that it makes much more sense to grow out to the integrated set of solutions that we have, given the steps that we've taken as a company. The second thing is the fact that it is a platform. It's much easier to consume it and people are investing into the platform. And as a result of that, we see much larger deals and much stronger long-term and larger commitments for customers. And third, I think that is much more or better [indiscernible] of customers and that our solution is true, native, real native cloud solution versus some of what our competitors came out with a semi-cloud hosted solution and [indiscernible] that they are defining cloud-like or semi-cloud growth on their financials as well as the market. And the market just doesn't buy it. And as you can see, in the multiple competitive [indiscernible] that I've mentioned on the previous remarks.

And I have a follow-up. Maybe also Eran would like to comment on it. So last night, we've all read about the acquisition of ClickSoftware by Salesforce. Most of you know the inside out of Click. We know it, its history. We also know the people at Francisco Partners, some of which come with a strong, nice root. And I'm not suggesting Click is a competitor to you guys but it has been playing in some adjacencies on the workforce optimization front. My question is what do you see happening strategically in this place? Is it that the big CRM guys are beginning to wake up and realize the benefit of workforce optimization cloud-related capabilities?

We saw the news similarly to you. While personally, we know the company, ClickSoftware, from the past, they are in a very remote area to us. We're doing, as far as I know from the past, doing much more of workforce optimization for sales support. Really different than what we are doing. We are not competing and not cooperating with them. So I don't think has an implication on our specific domain. There is some synergy, I think, between CRM and ClickSoftware. I think they even had partnership in place. So I assume it makes sense for Salesforce. But it's hard for me to further relate than that because it is [indiscernible] to what we're doing as a company.

Your next question is from John DiFucci from Jefferies.

I have a question. I think the first one is for Barak and Beth, and then maybe a follow-up for Beth. So the product was strong again this quarter and I know, Beth, you're just going to say -- they'll move around a lot from quarter-to-quarter. But I assume the maintenance was also strong again this quarter. And I just want to verify that. And if so, I think that implies that Pro Services was relatively weak in the quarter, at least weaker than we were looking for. And if that's the case, was it simply a difficult comp, which it was? Or Barak mentioned, as Shaul said, all those large deals but also in the press release, mentioned Atos. And I think you might have said in the prepared remarks. Should we perhaps expect more of this going forward as you move Pro Service more to partners if that's what's happening?

So John, I'll take this to begin with. I think I'll highlight a few of the comments that you made. First, starting with the product growth. As you highlighted, I have mentioned on several occasions that we should expect to see a variability in the product revenue. And of course, we're very pleased with the revenue growth we've seen in our product revenue in the first half of this year, 25% in the most recent quarter. And I think it further evidences really that as we've said all along that the cloud revenue what we're bringing is really incremental to our business. And so you will continue to see strong growth quarters, but at the same time have some variability. As you look on the services for the specific quarter, our maintenance is consistent and we have a healthy retention of our maintenance business. And if you look specifically on Q2 of last year, you'll see that we actually experienced a 13% growth in the second quarter of 2018 and that was related to our professional services where we had some specific milestones we were able to recognize during that quarter. So it was a difficult comparison.

Maybe Barak, should we start to see -- you mentioned the Atos partnership in the press release. Should we start to see perhaps more of that professional services going to partners?

I don't think that that will have any meaningful impact on professional services for us. It's a different partnership we're signing, like the one with Atos, which I believe is a very strategic one for us, is first of all, much of an incremental business. And even with that, they will be required to have our professional services already today in our business. There's a lot of partners doing services, so it's not necessarily taking what we are doing in those services. So I don't see a change to the model as a result of that. The reason we're signing those partnership is that the market is growing very ,very fast in multiple segments and we would like to be able to extend our go to market and we can do it by ourselves to a certain pace, if you would like. But definitely, partnership helping us to take much better coverage in the market.

The question for Beth. The results look really good. It sounds like all the other anecdotal evidence sounds great. But one of the line items that I know I'm going to get questions on is cash flow because that was materially below our estimates. And it was mainly due to underperformance of receivables, and prepaid expenses, and others. So I just want to make sure I understand that. Given how your model works and you bill CXone monthly in arrears and it sounds like you had a lot of big deals here, and Barak mentioned several of them. Is it fair to assume those deals were back end loaded as large deals typically are? So you got little revenue in the quarter and it doesn't go to deferred revenue with that business. But you pay commissions up front and even if you recognize the commissions over time. So I just want to -- because that makes sense to me but if that's wrong, tell me and tell me what else is happening.

Sure. So thanks, you actually highlighted several things, which are true. I think if I just break it down. First of all, if you recall, we actually had a record cash flow from operations in the first quarter of $182 million. And so we decided to take advantage of that strong cash flow and we entered into several agreements that were prepaid expenses where we can lock in discounts and that will benefit us really going forward into the future. That combines with the comments you made, which is true that we do have commissions, which on these deals that Barak mentioned, were primarily revenue that you'll see looking forward and they do come with commissions that sometimes are paid in advance.

The next one now from Dan Ives, Wedbush Securities.

So my question on the fraud detection, the Actimize piece. Just talk about, are you starting to see deal sizes more transformational or larger, just the regulatory environment starts to change? Is that something where you may be seeing an inflection on that area of the business?

We definitely see traction over the market continued to be very attractive. And with the launch of 2 things. First of all, X-Sight is growing our addressable market and through the platform, we manage either those existing customers to expand our footprint and go beyond the traditional fraud solutions that we have. And fraud continues to evolve. So that's one element. The second that I've mentioned is the cloud adoption. Similarly, to what we have started to see, let's say, about 3 years ago or so, 2.5 years ago, on the customer engagement side with a strong demand that started to cloud. We now see it on the Actimize front and our Financial Crime and Compliance Business. And we were prepared for that. And you see the nice growth also on the cloud and [indiscernible] part of the business, which allow us to bring innovation much faster into the market, specifically around fraud, as you had mentioned. And the last part is, again, taking the very similar approach and look very much in a positive way [indiscernible] traction, we launched the X-Sight marketplace just 2 months ago. And in the course of just 2 months, we have an outstanding demand. There's been a demand and we've managed in 2 months to sign up more than 20 partners and I believe this will continue to grow dramatically, which will allow us to provide much more complete analytic solutions through our own innovation in the marketplace around fraud to this growing market with the financial services.

Your next one is from Rishi Jaluria with D.A. Davidson.

This is Hannah on for Rishi. First off, it sounds like you're getting a lot of new customers on the CXone and X-Sight platforms. I was wondering if you could talk about what kind of traction you've seen in terms of converting some of your on-prem customers to the cloud.

So as you've heard from my comments and some of the deals I've highlighted, many of those customers are new customers. Many of the new customers are competitive replacements. Some we are replacing a specific competitor and in some places, given that we're selling a pretty wide portfolio, our customers are actually replacing several competitors at the same time. So that's many of the same that I've highlighted on the call. At the same time, we see an extension and migration to the cloud of our own customers. In some cases, they decide to have some of the solution on premises, some in the cloud. But in other cases, they migrate completely to the cloud. When they do that, we see a significant increase of the annual revenue from such customers. And I think that you can see it from our results this quarter and last quarter as well that while the cloud is growing, product is also moving very nicely in the right direction.

And then second, I was interested to see you guys were recently ranked fourth in terms of RPA revenue by Gartner. I was wondering if you could talk about if you're seeing any changes on the competitive front there.

Thank you. I think I mentioned in my remarks, we see this market is a very interesting market. A lot of activity in this market. It's a highly fragmented market with a dozen if not more than that of players. And we're very happy to be rated among the few leaders in this market. We believe that we have a very robust technology that allows us to serve not just the classic [indiscernible] RPA of the market but much more so, a much more [indiscernible] interesting, the unattended part of the market that [indiscernible] part of the market, which is, we believe, where the future of this market is heading. And indeed, we see multiple opportunities when you [indiscernible] for attended robotics automation. Win rate is going significantly up and I think this market, while it is a very interesting market, it's still in its infancy. And there is a tremendous opportunity for us in this market.

Your next question from Paul Coster with JPMorgan.

Barak, a couple of sort of strategic questions. One is if you look at the geographic mix for a company that's been around a long time, it really does feel very heavily skewed towards the Americas. And I'm just wondering why is that and what do you think -- do you feel like there is more growth accessible to you in EMEA and APAC? And will you start ramping up the organization to go after those regions? Any comments on that geographic mix would be helpful.

As you can see from our financials, that didn't change dramatically. We are very U.S.-centric in a good way. We are very -- we're a strong believer that the law market, the U.S. market presents great opportunity both historically and into the future. Yes, the international market provides tremendous opportunity as well and indeed, we have started to invest more in very specific areas of international markets. The announcement of the Atos relationship, by the way, is part of that strategy. Atos, they operate globally. Their biggest presence and where they have the majority of their customer base, and their go to market efforts, and the different assets that they have, are in Europe. So that's just one example, and I believe that you'll see in the new future more and more of the announcement and activities that we are doing internationally, which will eventually, we believe, will allow us to further fuel our growth in international markets.

And the other question is that I think historically, the firm has really sort of appealed to line of business buyers. And it seems to me, though, that you're assembling a lot of component technologies, robotic process automation, analytics, and so on that might start to appeal more broadly in the enterprise IT context. So I guess the question is, are you seeing any change in the sort of mix, the demographics of your buyers? Are you starting to appeal to enterprise IT directly?

So first of all, we have -- we operate in different solutions but in a very well defined and large market. We have a variety of our buyers to our solutions. I think you characterize it correctly. Our buyers are historically more on the operational side. But as we evolved throughout the years with much more analytics, AI, and a much broader platform, which becoming more strategically, we find ourselves more often than not selling to first, broader than just those buyers. Both or most strategic IT and strategic business but also going much more up the chain, it's becoming now almost a daily habit or a weekly habit of our sales team, of myself, or our senior leadership to have casual conversations and business conversations with C-level executives among the largest Fortune 500 companies out there. So I think that the evolution of the company and especially the thing that we've done including a lot of analytics and AI into our platform and the priority of our cloud solution, I think position us well to sell much higher in those large enterprises.

Your next question is from Sanjit Singh from Morgan Stanley.

Barak, I wanted to revisit some of the themes around analyst day and particularly the five-year target around cloud. When I look at the great progress this year, you're at 38% of revenue from cloud. When the product revenue is also growing really strong and I think the mix is up about 6 points year-on-year. So just wanted to get a sense because it seems like cloud is progressing a lot faster. And so do you think that we're going to cross that 50% threshold earlier than you expect? And what do you think that would imply in terms of the overall growth rate of the company?

We are very -- every time, we try to give not just a quarterly result or not just a specific guidance for the year when we can, and it's the right thing to do, we also provide some more visionary and more strategic goals. We've done it back in '14 with the NICE 2020 plan. And then it's followed with the NICE2B. And indeed, in the latest analyst day, we provided some very, I would say, even specific metrics and KPIs of where we would like to be several years from now. It's been only, I think, a quarter since we announced it and things are progressing, we believe, quite well. So we are absolutely will be very happy to cross those KPIs much faster than the horizon or the timeline that we gave. But I think it's too early for us to update those numbers. But rest assured that we believe we will -- our pace will increase. We will do that, similarly, by the way, to what we've done after 2014. I think we've done it in 2016 that we came with NICE 2020. And we have also a couple of years that we believe that we are getting into those 2020 goals much faster than we thought. So we definitely [indiscernible]. Also, I think it's too early to provide such an update.

And then sticking with some of the themes on analyst day, I think one of the initiatives that you had is moving down market with WFO, taking on WFO and analytics more down market, as well as using X-Sight to extend the reach into other market adjacencies. Could you just give us a progress update on those initiatives as you see it thus far this year? What sort of early signs do you see with respect to both of those initiatives?

I think that we are very happy with the progress of those two initiatives. I'll refer to each one of them as each separately. So the first one is that we have a very strong and very healthy market share in WFO and it goes to the mid and higher end of the market. As [indiscernible] we did not play in the lower end of the market. But with the introduction of CXone, which is actually providing, on the one platform, a fully integrated omnichannel routing analytics and WFO, what we see is a very, very, very high attachment rate between those three as we go to this segment of the market. inContact, by the way, is [indiscernible] we're very strong and still are very strong. So that is going very well and we see that attachment rate increasing quite dramatically compared to the first day that we bought inContact. So the first one, which is, I just said, the down market play for WFO, through 6/1 it's going very well. The second one in X-Sight, I think you can -- heard it from my earlier remarks, the central element, the cloud element of X-Sight, the examples that I gave of several customers that have branded this quarter with X-Sight Essential, just from acquiring those customers, we didn't give specific name, but as you can see that this is not the classic, very large, high-end global banks, although we had some business from them as well. Actually, with both X-Sight and the Essential, we've managed to go much lower in the market, by the way, lower but still pretty sizable financial services.

And the next one now from Chris Reimer from Barclays.

Could you give some more detail on the partnership with Atos as to what products might be available to them and what kind of customer base you think that will generate?

Sure. So the announcement that we have made and what we've signed with Atos is a partnership around the CXone. Atos has a very, very large customer base. Many of those customers, if not all of them, have customer service in a contact center operation. Today, they have, Atos, a unified communication as well as Atos legacy contact center on-premises solution. And basically, the partnership is to grow and offer those customers a migration to the cloud of those contact center customer service assets into a CXone. Atos built that customer base from many years of solid execution and we're talking about an opportunity of hundreds of thousands of contact center agents. And most importantly, Atos has a very successful go to market vehicle for both of their partners, as well as of course, their sales team. Atos is a very large corporation with 110,000 employees around the globe. And this is basically going to serve an extension, a very good extension to our own go to market, penetrating markets where we have either light presence or no presence at all.

And Beth, just a technical question. Did you give the number of recurring revenue this quarter as a percentage? I might have missed it in your comments.

Yes, we did give the recurring revenue. It's continued to increase and this year in the second quarter, it represents 72% of our total revenue.

We now have Pat Walravens for JMP Securities.

This is Mark on for Pat. Thank you so much for taking my question. Just regarding to competition, just want to see if you see any changes, especially around [indiscernible].

No, I don't think we can report on any change in the competitive landscape. We believe that in both markets where we operate, these are very healthy markets. They're growing very fast and we believe, as you heard on our remarks, that we are taking a good share out of the market with a lot of competitive replacements. I prefer not to refer any specific competitor. The one that you had mentioned, we don't hear any change in the dynamics in the market.

So just regarding to RPA, so it's a relatively new technology. So just wondering maybe where do you see the technology add most value to customers? And maybe the technology doesn't work really well and doesn't live up to the expectation. Anything you can share around there.

So obviously, it's an extremely viable technology in the sense that enterprises today are looking on every possible opportunity to both streamline the operation as well as reducing the cost. And RPA is a classic way and actually, the ultimate way to do that in a very cost effective way. It's basically taking mundane tasks that do not necessarily need to be managed by a human being and take those micro-processes, and sometimes macro-processes or complete end-to-end processes and automate them in a very fast and rapid way. That's the basic premise of this technology. The evolution that we see in the market that it started as a market that first we refer to as unattended RPA, meaning that the robot is operating by itself at the back, taking a process without intervention. And that provides a certain list of opportunities in the market. We believe this is very good and we play in this segment as well. But where we see this market evolving more so is into 2 areas. The first one is what I refer to as attended automation, is where you put together the man and the machine, or the man and the robot and they exchange work together. Basically, the person is the one that outsource and if you'd like, quote-unquote, work through the robot. And you take the best out of those 2 individuals or 2 entities, the robot and the machine. These are more complex operation and you need more complex technology. But when it works, and it works of course, it provides tremendous value, much more than just unattended automation. The second part is that we see and we add a lot of AI capabilities into RPA. We have introduced about a year ago a platform called Automation Finder, which is a fully automated, powered by AI vehicle that allows us to actually find automation opportunity, map them, and deploy them. And that's something that we see that we are ahead of the market and others do not have these capabilities. And it gets a lot of traction and it allows us to increase our win rate quite significantly. And just to mention, the last one is the introduction of NEVA, which is a virtual assist entity that allows us to filter and more easily integrate RPA technology into the workforce in larger organizations.

So that concludes the questions at present and I'll just hand it back now to Barak. Thank you, Barak.

Thank you all for joining us today and have a great week. Thank you.

Everyone, thank you. That concludes your conference call for today. You may now disconnect. Thank you for joining and have a good day.