Welcome to the NICE Conference Call discussing 4th Quarter and Full Year 2020 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, February 18, 2021. I would now like to turn this call over to Mr.
Marty Cohen, Vice President of Investor Relations at NICE. Please go ahead.
Thank you, operator. With me on the call today are Barak Elam, 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 Actual results or performance of the company to differ materially is contained in the section entitled Risk Factors In Item 3, the company's 2019 annual report on Form 20F as filed with the Securities and Exchange Commission on April 6, 2020.
During today's call, we will present a more detailed discussion of 4th quarter and full year 2020 results and the company's guidance for the Q1 and full year 2021. 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 revenue 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 will now turn the call over to Bharat.
Thank you, Marty, and welcome everyone. Over the past several years, we have successfully built NICE into a company that is able to quickly transform. ADAT was no doubt put to the test as a result of the events that took place last year. We more than just passed the test. We broke barriers turning 2020 into another groundbreaking year for NICE.
Our strategy in the past few years has been to transform our markets with cloud digital platforms that embed artificial intelligence. It was proven to be successful and catalyze our growth. 2020 was an eye opener for organizations of all sizes, Realizing that the only viable choice to keep up is to fully embrace cloud, digital and artificial intelligence. The result is that cloud, digital and AI adoption has now leaped several years forward. As we are now The clear market leader in all these domains, we are extremely well positioned to be the platform of choice.
2020 was a standout year for NICE in cloud. We have taken a wide industry lead as we suppressed the mark of Nearly 50% of our total revenue coming from the cloud. We exited 2020 with a cloud annual revenue run rate Exceeding $900,000,000 At the same time, we delivered nearly 400 basis point improvement In cloud gross margin in 2020 compared to 2019, which drove a 90 basis point increase in the operating margin over the same period. Our cloud leadership was driven by accelerating cloud revenue growth throughout 2020 and we ended the full year 2020 with 31% cloud revenue growth compared to 2019. We owe our strength in the cloud to continued product innovation and strong competitive advantages provided by our cloud platforms, Namely CXone in customer engagement, excite and exceed financial crime and compliance and Evidence Central in public safety.
We filled the penetrated new market segments in the cloud, taking our solutions down market and establishing our leadership in this segment, While at the same time seeing rapid penetration in large enterprises. With CXone, we have established significant beachheads With a record number of customer wins at the high end of the market, replacing the legacy solutions of our competitors along the way. We witnessed further penetration in the international markets with CXone and saw a record number of agents on CXone in 2020 as well. We also opened brand new cloud opportunities in Financial Common Compliance with our new Exede cloud platform, Providing a gateway to the lower end of the market encompassing thousands of financial institutions that we may not have had access to in the past. The traction with Exceed has been rapid with new customers already signing on to the new platform.
As in customer engagements, we now have the entire Financial Crime and Compliance market covered in the cloud with both X Sight for large financial institutions And exceed for the small and mid sized market. And in public safety, we had a record year. We more than doubled the number of our public safety customers in the cloud driven by our Evidence Central cloud platform And it's anchor solution NICE Investigate. With the need for digital evidence management rapidly accelerating Our Evidence Central end to end digital transformation platform is helping to bring the public safety market into the digital age. Digital transformation became top of mind for customers in 2020 and for us 2020 was a year of digital breakthrough.
We witnessed the accelerated use of digital channels across our markets and our platforms We're a driving force for the new frontiers of digital customer service, digital banking and digital policing. In 2020, over half of our all contact center opportunities contain digital elements And we saw an overwhelming 100% year over year increase in our customers' digital interactions volume. We owe this to the breadth of our portfolio and best in class digital capabilities natively integrated into CXone. Most of our financial and crime compliance deals were driven by the imperative for digital transformation in banks. A NICE Investigate is today the fastest growing digital evidence solution in the financial crime justice market.
2020 was also a year where we witnessed a major transition from NICE being the leader, the leading provider of cutting edge analytics To the preeminent provider of breakthrough artificial intelligence as we are now injecting AI in almost everything we do. In fact, our nLIGHTEN platform is now the underpinning for several of new and existing solutions. Since the launch of nLIGHTEN last year, we have seen substantial growth in the pipeline with several deals from multiple verticals Already signed throughout the year, including 3 of the top 10 new economy companies, a major healthcare provider, A renowned text operation provider, one of the largest global hospitality companies, a prominent telco company and many others. On top of all of this, in 2020, we continue to significantly expand our ecosystem of partners With a growing number of independent software vendors building their solutions on our open marketplaces for all our platforms, Boasting the largest ecosystem in our domains. 2020 was a successful year at NICE And the 4th quarter results brought the year to a strong finish.
In Q4, cloud revenue grew 33% Compared to the same quarter of 2019, cloud gross margin increased 380 basis points And the operating margin exceeded 30%. In addition, cash flow from operations Grew 82 percent to $167,000,000 in Q4, leading to a record annual cash flow From operations of $480,000,000 for 2020. The strong results in our cloud business are reflected in the continued signing of significant cloud deals in the large enterprises And Q4 was no exception. We signed many multiyear 7 digit ACV CXone deals, Including 1 of the leading multinational automotive brand, this organization is transforming the customer experience By adopting a seamless omni channel platform with NICE that provides scale and agility, We replaced several competitors in the process. Other 7 digit ACV CXone deals Included a multinational financial institution, a large South American based bank, a preeminent security company, a leading brokerage firm And a large government customer that included approximately 20 different agencies.
There was a 7 digit Deal with one of the biggest hospitality companies in the world, which was a quick expansion of a deal signed just 1 quarter prior. Other 7 digit deals included large outsourcers, a remote transportation leasing company, A very prominent aviation company and a leading national auto dealer. The common factor behind these large enterprises CXone deals in Q4 was that they took on a multi solution portfolio approach. This is the trend we're seeing more of As a growing number of large enterprise customers understand the significant benefit of a seamlessly integrated Cloud omni channel platform from a single vendor. Moreover, most of those deals were replacements of on premise legacy vendor solutions.
We closed many significant deals in Financial Crime and Compliance in Q4. One such deal was 8 digit in the cloud with a very large financial services firm. This was a new customer As we replaced the homegrown AML solutions with our cloud platform, there was a 7 digit deal with a very large European financial services Further expanding our relationship with this customer and another 7 digit cloud expansion deal with the U. S.-based brokerage firm. Our new Xced platform drove a significant number of cloud deals with both new and existing customers in Q4.
One such existing customer, a U. S.-based regional bank transitioned from our on premise solutions to our Exede cloud platform in a 7 digit deal. The number of new logos increased significantly in financial crime and compliance As a result of the strong demand for Exede with many of the deals centered around digital banking. Moreover, we are further driving demand for Xcede through partnerships and one such partnership we recently signed was with Finastra. Finasta, a provider of core banking solutions and payment software will deliver our Xced platform to their customer base.
In public safety in Q4, we signed several 7 digit deals including with 2 major U. S. Cities And an APAC based police operation. We are proud of the results we achieved in 2020, But 2020 was just a warm up. We will leverage the success we had in 2020 and take that into the New Year.
2021 is shaping up to be a year in which the game has changed. We are in a new reality In which the event of 2020 have created a new normal and at the same time provided new opportunities. The first reality in this new normal is the move from old notion of time to value to the new reality of immediate value. In 2020, organizations of all sizes were taken by complete surprise by the crisis. They realized They need to get things done much faster than ever before and they discovered that the old rules of long projects planning Independencies on cumbersome bureaucracies are simply not applicable anymore.
Organizations are now looking for technologies that will allow them to routinely break the execution speed limit of complex multi stage projects While not compromising the quality and outcome of their efforts. The second reality in this new normal It's the move from sporadic change to continuous adaptation. When it comes to driving organizational change, Implementing changes in sequential serial way, one change at a time will not work anymore. Enterprises need to adopt an approach of continuous adaptation. They must have the ability to drive and manage constant change In an ordered way across the entire organization based on immediate insights, accurate real time data and execute on it with maximum precision.
The third reality is the move from cloud aspiration to cloud affirmation. For years, we've been speaking about the journey to the cloud and about cloud transformation. The cloud is no longer a future aspirational intent, But an immediate urgent master reality, on premise solutions are no longer effective, leaving organizations no choice But to adopt cloud platform foundations, the final reality is the move from digital 101 To digital fluency, digital is no longer the next big thing. It is happening now. Organizations Referring today to the term digital is the same with anything considered to be next generation.
It is therefore no wonder The digital is the preferred language spoken. There is an actual race out there where organizations are rushing to become Digitally fluent across everything they do and that means cultivating an all encompassing digital mindset and culture, Injecting a digital approach to drive new businesses, models, offerings and processes. We are well positioned for this transition to the new normal with our leading digital cloud platforms and cutting edge AI. We already saw great success in 2020. Now with these vast opportunities provided by this new normal Combined with the large and growing TAM that we see expanding to over $17,000,000,000 over the next 5 years, We are very much looking forward to 2021.
With our leadership gap continuing to widen versus our competitors, 2021 and beyond is the time to turn that gap into a chasm. In 2020 more than ever, we have witnessed the ultimate power of our NICE spirit. I would like to take this opportunity And thank our 7,000 NICERs around the globe for their relentless innovation and endless dedication during this unprecedented year. I know that this spirit will continue to push us forward, which gives me great confidence to take on 2021 and the years ahead. I will now turn the call over to Beth.
Thank you, Brock, and good day, everyone. I'm pleased to provide the analysis of our financial results and business performance for the Q4 and full year of 2020 as well as our outlook for the Q1 and full year 2021. Total revenue for the Q4 reached a record of $438,000,000 compared to 4.31 $1,000,000 in the same period of last year. Full year revenue was also a record and totaled 1.6 $157,000,000 an increase of 5% compared to 2019. Total revenue growth was again driven by our impressive Cloud revenue, which grew 33% in Q4 and 31% for the full year, and we exited 2020 with an annual cloud revenue run rate of more than $900,000,000 As a result of our ongoing transition to the Cloud.
We continue to experience an expected shift to an increasing concentration of cloud revenue as a percentage of our total revenue. We expect this trend to continue in 2021. In the Q4, cloud revenue reached 51% of total revenue compared to 39% last year. As a result, recurring revenue increased of total revenue compared to 38% last year and recurring revenue was 79% of total revenue Compared to 72% for 2019. Product revenue accounted for 9% of total revenue in the 4th quarter And 11% in 2020.
And services revenues accounted for the remaining 40% of total revenue in the 4th quarter And 42% for full year 2020. Moving to our business breakdown. Customer engagement revenues were $361,000,000 for the 4th quarter and 1.3 $49,000,000 for 2020, an 8% and 6% increase, respectively. Financial Crime and Compliance revenues were $78,000,000 for the Q4 $308,000,000 for 2020. This compares to $96,000,000 $309,000,000 for the Q4 and full year 2019, respectively.
Looking at geographies, Americas revenues grew 11% in the 4th quarter and 10% in 2020 To $364,000,000 to $1,361,000,000 respectively. Revenues in EMEA were $48,000,000 in the Q4 compared to $57,000,000 last year. For the full year, revenue from MIMEA was $186,000,000 compared to $217,000,000 In the same period of last year, APAC revenues in the Q4 were $26,000,000 compared to 40 $6,000,000 in the same period last year $110,000,000 for the full year 2020 Compared to $123,000,000 in 2019. We continue to focus on and expand our cloud gross margin. In the Q4, cloud gross margin increased 388 basis points to a record of nearly 68%.
For the full year 2020, cloud gross margin increased 380 basis points to a 65.6%. As our cloud business continues to grow, we expect further expansion in the cloud gross margin. Our gross profit Grew to $317,000,000 in the 4th quarter compared to $314,000,000 for the Q4 of 2019. For the full year, gross profit increased 5% to $1,182,000,000 compared to $1,125,000,000 for the full year 2019. In the Q4, gross margin was 72.2% compared to 72.8% in the same quarter last year.
For the full year, gross margin was 71.3%, similar to last year. Gross margin was positively impacted by the cloud gross Margin improvement offset by the decline in product revenue. In Q4 2020, operating income Increased to $132,000,000 compared to $130,000,000 in Q4 2019, And operating margin was 30.1% similar to last year. Full year operating income increased 8% To a record of $470,000,000 compared to $434,000,000 in 2019. Operating margin in 2020 expanded 90 basis points to 28.4% Compared to 27.5 percent last year, we expect further expansion over the next several years To a 30% operating margin as a result of our continued revenue growth, primarily driven by our cloud platforms and the leverage in our financial model.
Earnings per share for the 4th quarter reached an all time high of $1.61 Compared to $1.58 in the Q4 of last year. Full year 2020 earnings per share With $5.73 representing growth of 8%, also an all time high. We experienced an outstanding strong quarter and year of cash generation, which led to an increase of 82% And cash flow from operations in the 4th quarter to $167,000,000 and Due to strong cash generation from our operations, both in the quarter and expected for the future, we repaid our 2 $15,000,000 term loans during the Q4. As a result, total debt was $681,000,000 Net of issuance cost and the equity component associated with our convertible debt. Total cash and investments at The end of December 2020 was $1,464,000,000 I will conclude my remarks with guidance.
For the Q1 of 2021, we expect total revenue to be in the range of $445,000,000 To $455,000,000 We expect the full quarter 2021 fully diluted earnings per share To be in a range of $1.42 to 1 $0.52 For the full year 2021, we expect total revenue to be in the range of $1,790,000,000 to $1,810,000,000 We expect the full year 2021 fully diluted earnings per share To be in a range of $6.12 to $6.32 I will now turn the call over to the operator for questions. Operator?
Thank you. And at this time, we will be conducting a question and answer session. One moment please while we poll for questions. And our first question is from Samad Samana with Jefferies. Please proceed with your
Hi, good morning. Thanks for taking my questions and nice to see the strong cloud revenue results. Beth, maybe one for you on the guidance. So if I think about 1Q, revenue is guided to go up sequentially. Normally revenue comes down.
Can you just help us maybe for modeling Just think about how we should think about cloud revenue versus product revenue in the Q1, just given the atypical seasonality in the revenue guidance? And then just even stepping back for full year 2021, just any update on what we should expect that cloud revenue run rate to look like Exiting 'twenty one given the outperformance in 2020?
Sure, Samad. Thank you for the question. So let me first To address the growth that you mentioned coming out of Q4 and looking ahead to Q1. I think first of all, it's important To note that actually we've been seeing a trend now as we look on the last few years, which is that both with our revenue as well as our profitability, Given the further shift to the cloud, we see more and more of a concentration of recurring revenue. And so as a result of that, it Chips more of the growth earlier during the course of the year and that revenue is more evenly distributed.
So you're seeing that both in our 2020 results and we're expecting that dynamic to continue to play out in 2021 as well. I mentioned in my comments or remarks also that we've seen a significant shift in the mix of cloud. Cloud in the last two quarters has been more than 50% of our overall revenue. And we also expect that shift to Continue as well. Where cloud will continue to be the primary growth driver and we'll see that becoming a larger and larger portion And of our overall total revenue in 2021.
So Matt, maybe just it's Barag just to add, the Strong guidance for Q1 reflect the very strong Q4 booking that we had. I talked about many deals that we had in the quarter and we Entering into the year was a very healthy backlog.
Great. And Barak, that brings me to a follow-up question. Appreciated all the color On the call around new deal activity, but maybe as we think about the pipeline, if you could comment on How the new deal pipeline looks for CXone, especially as we lap 2020, which is a very strong year? Are we entering with more deals in the pipeline that are larger? Maybe anything you can give either quantitatively or qualitatively Around the forward pipeline for CXone deals, I think would be helpful as well.
Yes, we continue to see healthy momentum in terms The pipeline and the activity in the market across the board, it's true for CXone, it's true for all our domains and markets. And it's both on the larger, the higher end of the market as well as the smaller, the lower segments of the market. I think you also heard me on the call, we're starting to see very healthy dynamics on the international market. You yet see them in the revenues, But they are going to kick in, obviously it's cloud, but you want a lot of deals on the international one and the deals are getting just bigger and bigger. And the other thing that we see, I talked in my earlier remarks about multiple beachheads that we have landed full out 2020, but also in Q4.
And we believe that this is also an opportunity for a lot of expansions moving forward. So we are stepping into the year with a stronger feeling This momentum will continue.
Great. I'll turn it over to the next analyst. But thanks again for taking my questions and on the strong cloud revenue growth.
Thank
you. And our next question is from Sanjit Singh with Morgan Stanley. Please proceed with your question.
Thank you for taking the questions and congrats to the team on a 30% growth year in cloud. It's very impressive. I wanted to understand a couple of dimensions in the model around growth going into next year. On the product side, it was down 48% Year over year, in Q4, maintenance is down year over year. What are sort of the key factors going on there?
Is that a Function of more transitioning like the WFO base to cloud? Is it an impact of macro? Is it just Changes in customer buying patterns, if you could sort of parse out the different variables that are going on, on the maintenance side? And then I had a follow-up question.
Yes, I'll take it and Beth feel free to chime in. So indeed, Obviously, our strategy as we shared with you is to transition the business to the cloud. This is where we put our main emphasis, both winning a lot of new ground with Cloud as well as transitioning existing customers. Most of the cloud growth so far came from brand new business for us, But we do have some transition of existing customers to the cloud. We like those transitions because they provide A significant boost to the revenue because we see much more revenue from a customer as they move to the cloud.
Indeed, 2020 was a lighter year on the product. It's the combination of what I said on the cloud as well as COVID did have impact in the product decline. We believe that moving forward, the growth will come from the cloud and we'll see fluctuation In the product, Q4 specifically, I think was a bit of anomaly in terms of how sharp the product decline was and we don't Good to see exactly that number moving forward.
That's very helpful, Bharat. And then just a higher level question on What's now 3 or 4 major platforms, you have RPA, you have Xcede, you have X Sight, you have Investigate to complement CXone. If I look at the contribution outside of CXone, does that become 10%, 20%, 30% of the business in the next couple of years as we as you look out over the next 2 or 3 years, how big can the non CXone On cloud portfolio contribute to the overall business?
Yes. So obviously, still the lion's share of our cloud business Yves CXone. And this is our main platform as we go into the customer engagement market. Actually it's the platform where we sell into customer engagement. As you said and as I highlighted earlier, we have 2 more cloud platforms that are serving different markets.
We have the Financial Crime and Compliance market where we cater to this market actually with 2 platform because of the high end and low end. This is excite and exceed and we have a relatively new platform called Evidence Central, which is allowing us to take the public safety market And expanded from center around policing to overall criminal justice. We believe that we can take the same playbook We have done successfully in the past 4, 5 years in customer engagement and use that same playbook in these markets. There are still the adoption in this market is still at its early phases. Actually we're very happy with the booking And performance as we've seen in Financial Crime and Compliance, Q4 was an outstanding booking quarter for this business, Predominantly cloud, it's still small numbers of course compared to CXone, but it can start to grow nicely and kick in into revenue.
And Evidence Central, 2020 was really a breakthrough year for this business, still small numbers, but from a growth percentages, They're starting to look very nicely. So in the long run, we believe that they can start by themselves become in absolute numbers, Healthy numbers, but needless to say that our main market today is the customer engagement and CXone is the platform for us In this market.
Appreciate the thoughts, Parag.
And our next question is from Daniel Evans with Wedbush Securities. Please proceed with your question.
Thanks. So my question is more in terms of cloud, obviously, the growth that you're having, is this something that you feel you can continue to do organically? Other words, do you start to get more aggressive even in tuck in M and A as we go into 2021? Could you maybe just talk about that Just in terms of any mindset change on M and A?
So we continue to be active on the M and A front. As you know us from historically, we have a good track record of acquiring companies and knowing how to Get the right value. The reason we believe that the reason for that is that M and As are serving our strategy and not the We don't change our strategy because of an M and A opportunity. And right now we believe we have many of the all of the components that we need Steve, on the M and A front and if we see something that can further accelerate the execution on our strategy Fuel our growth as long as it is aligned with our strategy, we'll continue to do that because the muscle Of integrating M and A is a healthy muscle at NICE. And of course, we have the capital to go ahead and do that if we find something relevant.
Great. And then just last, with cloud, are you continuing to see the trend Just conversions and overall sales cycles to cloud customers is continuing to shorten. You continue to see that accelerate Where was even a year ago?
Yes, we
I mentioned kind of as I reflect on 2020, One of the things that is clear is that all the key pillars where we operate in cloud, digital and AI, what's And in 2020, they kind of flipped forward, 2020 created the kind of a leap forward in the adoption level of these solutions, organizations realized as a result of the 2020 events that even if they had plans to adopt Cloud only several years down the road, it is now a much more important, much more critical in order for them To continue and adapt to the changing environment. So we see that and it's a similar dynamics as we said before in the Smaller enterprises, the adoption is rapid. In the larger enterprises, we see much more kind of a lend and expand, Our customers would like, they just it's too complex for them to move everything in one day. So they will adopt it for one division or one side of the business and then And from that beachhead, that's a trend that we've seen in 2020 and we believe it will continue This year and also moving forward.
Thanks.
And our next question is from Walter Pritchard with Citi. Please proceed with your question.
Thanks. Question on the FCC side with Cloud, where it seems like you've seen an uptick this quarter. Can you talk about what you think drove that? Was it sort of a kind of budget flush dynamic in Q4 where those customers were We're really looking to put money to work into the future. And then how do you think about that business proceeding from here?
What types of financial Are you seeing move to cloud and which ones are lagging?
Great questions. First, the overall dynamic, this market is very healthy. The need to meet the regulations and fight financial crime is It's same as it was before. As I've mentioned, throughout 2020 and even more so in Q4, we had an outstanding booking year that will translate Tending booking a year that will translate into revenue, but there are certain changing dynamics over there. One of them, as I've mentioned, is the shift to the cloud.
This was a market that was slow to adopt cloud and we're starting to see now this shift to the cloud. The second thing is that for us, we historically operated mainly in the higher end of the market with X Sight And the introduction of Exede earlier this year, got us an opportunity to actually cater to the entire market, including To the smallest financial services out there. And we didn't expect to be adopted to get to that so fast, but we're very happy To see that the adoption of SUCCEED to the smaller customers that used to have kind of homegrown solution Very basic solutions. We now have the opportunity in this market. So that will allow us to transition this business Also in the cloud and I think what we see in the revenue is the classic phenomena of as you shift to the cloud, it takes time for the revenue to realize and we'll see that coming in and we are a strong believer In that business in 2021 and also moving forward.
The last one is that we see more and more partnerships In this business, we talked a lot about partnerships in this business and signing Finastra in Q4 will allow us to further Spend our footprint and market reach.
Great. And then just question on the if we look at the growth rate in cloud Q3 versus Q4, Q3 obviously Hi, Eric. Is there anything that you can help us understand that was a driver in Q3 in cloud overall that did not continue into Q4? I mean, obviously, we understand the numbers Getting bigger as well, but just curious sort of the internals of the cloud revenue and that we've been in an environment that's been changing pretty quickly. So I wanted to see if there was any more detail there.
Thanks for the question, Walter. I think in general, like any revenue lines, there will be some slight fluctuations from quarter to quarter occasionally That happened. In general, we're quite pleased with the overall growth rate, higher than 30% growth for the full year of 2020. And we remain confident looking forward in terms of Cloud, our cloud platforms and more particularly CXone continuing to be the driver of that strong growth going into next year as well.
Great. Thank you.
And our next question is from Rishi Jaluria with D. A. Davidson, please proceed with your question.
Hi, everyone. Thanks for taking my questions. Nice to see a continued strength in the business. I wanted to first start philosophically by thinking about how you're looking at a post And the sustainability on both the top line. And so by that the acceleration of Digital transformation and accelerating shift to the cloud, how are you thinking about the sustainability of that post pandemic?
And On the cost side, I'm sure you've gotten a lot of cost savings as a result of just not having any effectively zero TV budgets and Not having a physical conference, as we have the ability to go back to business travel, let's say, optimistically in the back half of this year, How are you thinking about some of those costs, which are going to be coming back, which are going to be permanent cost savings? And then I've got a follow-up.
Okay. Thanks for the question. I'll start with the first part and Beth will take the cost element. So I think we shared in the past and we definitely see that at the end of the day, The pandemic itself accelerated certain trends, starting with the adoption of cloud, the shift to digital And the adoption of AI. And we don't think it's temporary.
We think it's a bit the aftermath of the pandemic, Those are three things as well as others, but those three things will remain with us well after COVID will be out of the headlines and that's healthy for our business. As I said, organizations at all sizes Had a trauma if you would like from the early days of the pandemic and their ability to be agile in their respond to different dynamics. And in this aftermath, they're realizing that they need to shift faster than they thought before in the adoption. So philosophically or high level, All of those 3 domains which are the pillars to everything that we do, cloud, digital and AI are only going to be stronger and accelerate further. About the cost, I'll hand it over to Bethia.
Yes. Thanks, Barak. I think Rishi, on the cost side of the house, Clearly, our primary focus is around our top line growth and furthering our overall cloud growth. And in order to do that, we're also very focused in how we spend as an organization. So our eyes are really focused on continuing To fuel that growth through further innovation and doing that through further investment in our R and D as well as really our go to market machine.
And so that focus in terms of how we spend internally, we'll continue in those two areas. And as we look at the overall makeup of our profitability, we have always been We're keenly focused on running a very well optimized organization with a lot of leverage. And so as you look at The ongoing picture, we still remain fully confident in our ability to continue to drive profitability while feeling the cloud growth as well.
But just to add to that, Rishi, just to add to that on your question about whether it's the savings are one time or they will continue. We didn't have ton of savings from the pandemic. Our offices, we continue to pay our lease, so there isn't much saving there. The only saving we had is a bit on not a bit, but on travel. And it's interesting to see what will happen with travel moving forward, how much of this organization will need.
We don't think that will have any material impact on our profitability moving forward. On the flip side, we think that Post pandemic, the mode of operation, hybrid or work from home would actually help us to drive some savings On the real estate, so we don't think that the saving that we've seen this year are going to disappear.
Got it. That's helpful. And then, Beth, I wanted to drill a little bit more into 2021 guidance and follow-up on some earlier questions. But As we look at the numbers, right, you're talking about at the midpoint 9% growth in Q1 and probably close to 8 Percent through the remaining three quarters, if I look at the midpoint of full year guidance. I guess why shouldn't growth overall growth Accelerate post Q1, especially because the costs get a lot easier, especially in Q2 and Q4 And you have a more favorable cloud mix that should aid that.
Maybe help us understand the assumptions baked into that. Thanks.
Yes. Thanks for the question. I think I'll add my views and then let Barak Chime in, if you have anything else here to add. I think generally when we look on the growth and the distribution of that during the course of the year, First, Barak mentioned we had really strong Q4. We're coming to the year with a nice backlog.
I mentioned also a dynamic of The fact that we're bringing more of the growth earlier in the year given that we're coming in with this strong base of cloud in our overall mix. As we look kind of on the product side of the house, I think you can expect 2021, we'll likely look more similar to what we had kind of pre pandemic in terms of we were seeing some declines there. We don't expect to see unlikely that we see the same sharp declines that we experienced during the course of 2020. But it is likely that Given the acceleration we see in the markets overall that transformation is going to continue To drive the dynamic in the top line, which is the continued strong growth in the cloud and the continued transformation with Product and on premise becoming less of our business overall.
All right, wonderful. Thank you.
Our next question is from Dan Bergstrom with RBC Capital Markets. Please proceed with your question.
Yes. Thanks for taking my question. Maybe to build on Rishi's post COVID question a bit, you talked about your working arrangements going forward. But what are you hearing from large customers as far as a vaccine potentially returning to work on premise? I know much of the efforts over the last We're about making work from home just as effective as working from the office.
Just curious what you're hearing about return to work or continuation of more of a hybrid work from home model.
Yes, we obviously have a
lot of those conversations for our customers. It's part of a small talk of every conversation we start These days, I think the real answer is that no one really knows. Everyone has certain estimates, some organizations are Making some preparation, but it's a lot of guesstimation. On one hand, there is understanding that there will be a change, Evan talking about something that will be Not temporary, but either change. There are several models out there, some talking about a hybrid, Some talking about enabling a full work from home and some even talking about work from anywhere, which has Challenges if you would like.
But the bottom line is no one really knows, even our customers and what they want to have is The agility or the flexibility to change quickly, to whatever come their way, That's what we hear from them. So when we talk when we end the small talk and we talk about projects, what we want, what they want The agility of that. And in the tech sector, I think you all we all read the same headlines And what we enabled to our employees, we are very happy with how we operated this year. It's probably combination of the spirit of NICE, but the engagement level at NICE remains very, very high, actually higher In working from home, we're doing a lot of course to maintain that our productivity increased as we work from home and we're waiting to see that We'll be able, obviously the safety of our employees are a top priority for us and when things clear out, we'll take a decision how to operate moving It will probably be a combination of everything I said before.
Makes sense. Then it sounds like Enlightened had a really good quarter here with a number of deals, growing pipeline across verticals. Is it the behavioral modeling and predictive that's really driving the traction here. Could you drill down into the platform a bit? What's really resonating with customers?
Yes, I think it's exactly that. We've been selling analytics to our customers for many, many years and many of our customers are using our analytics solutions and adopted them. Enlighten with its AI capabilities is a direct continuation of our analytics and the understanding that we also have the data If you would like elevate the analytical capabilities to AI and the ability to put analytics on steroids Using enlighten, if I can use this analogy. And we had launched enlighten earlier in 2020. And what we the pipeline started to build, we expected few deals in Q4, but we didn't expect so many.
And from so many Fortune 100 and very marquee brands as I provided in my earlier remarks. So We're very happy with the adoption and it's exactly that. It's the ability to provide prediction models And take decision in real time if you would like and bring a real time decisioning based on those capabilities.
That's great. Thanks, Barak.
And our next question is from Paul Coster with JPMorgan. Please proceed with your question.
Yes. Thank you for taking my question. I just want to go back to the Products and Services segments again for a moment, if you don't mind. I'm not quite sure how we're to think about this long term. You mentioned kind of looking back to 2019, but when I look back over the last few years, it's sort of been a little bit lumpy.
Is this a sort of flattish kind of are these flattish kind of revenue lines for the foreseeable future is I guess my question?
Yes. Thanks for the question, Paul. Just to add some additional color there. I think, 1st of all, looking back to 2019, analogy I was making there is, from quarter to quarter, products will vary. And I think we should expect that all quarters in terms of product won't necessarily look alike.
And so what we're focused Dawn, it's of course the longer term trends. When we look at our revenue lines and how that mix will change over time, And the mix over time, we expect is, as I had highlighted, is to actually increase cloud. And so by default, as Cloud increases over time, you're going to see that product gradually declines as well. We are shifting the business. The market is shifting and accelerating and moving into the cloud.
And so that is going to create a dynamic where over time, you'll The decline in product revenue. As I highlighted, again, you may see some variability or lumpiness on Quarter to quarter basis, that's kind of the longer term trend you should expect. As you look on the services, services has a couple components. There's the deployment or the professional services we're providing to actually deploy the on prem solutions. And of course, that kind of goes a little bit lockstep or hand in hand with the change in product.
Of course, the much larger piece there is our maintenance And on the maintenance stream, this is a legacy of our WFM customer base. And we Also believe that over time that is the maintenance that will ultimately also transform into the cloud. But of course In the large enterprise, that's a very long tail. So that's not going to be a near term transition. That's going to take Many years to actually see that shift.
We do know, based on our customers that have already made that shift that we have a very nice lift When those customers are moving from our traditional on prem customers and over to the cloud. So those are kind of some of the around the different segmentation of the revenue lines.
Beth, that was very helpful. As we sort of look Over the long term as well, do you anticipate gradual diseconomies of scale or dis synergies As those businesses kind of lag the cloud or is everything fungible here and resources just simply get Now flipped over to the growth segments. This is on the OpEx side really.
We as Beth, I think said in the opening remarks, We continue to expect to further gradually improve our operating income and operating margin and we are Aiming at least 30%. We had a very nice improvement in the past few years and that actually was very nice improvement also in 2020. And this is driven by the fact that although the business is shifting to the cloud, our gross margin in the cloud It's rapidly improving and actually it's getting closer to the mix of the business on the perpetual. We're already at 68 and It's very close to where we would like to be and we believe we can take it much higher as we scale and go to the enterprise. With respect to resources, As you can imagine in the past few years and also moving forward, we are shifting a lot of our resources from our on premise business to the cloud.
Okay. Thank you.
Thank you, Paul.
And our next question is from Pat Walravens with JMP Group. Please proceed with your question. Great.
Thank you. Congratulations you guys. And Bharat, maybe this is for you, but I'm wondering if you can comment on sort of how the competitive environment It's evolving. In particular, one question I get is when investors look at the 2020 Magic Quadrant versus 2019, What they see is that Amazon Connect shows up as a new player, Five9 actually moves backwards from a leader to a challenger, And Genesis moves a lot closer to NICE in the leaders quadrant. So I'm just wondering, is that reflective of what you're actually seeing in the market?
So first, we're very proud and happy to be the number one player on the multiple analyst All the markets we play in. We are the number 1 on the leading analyst on financial crime and compliance And same goes of course on the customer engagement. Gartner is 1, but there are others like Forrester, Frost and Sullivan, etcetera. I mean all of them we are the number 1. It's a healthy market.
It's a growing market. And when the time is growing, a lot of players would like to play both large Players that want to get into the space, a lot of small startups and also the existing one. We're very confident in our strategy To lead the way, we believe that putting together in the past few years workforce optimization analytics And routing with the addition of digital and AI was a step that no one else Ted and others still don't have and we'll have to work hard to get to where we were actually several years back. But we'll keep monitoring the competitive dynamics. It's hard for me to say whether those small fluctuation or changes, one moving up or down It's really representing what we see out there.
I can tell you from the out there in the market, there are ton of opportunities. Our participation rate is increasing rapidly and our win rate is very, very high. That's what I can tell you from the field.
Great. Thank you. And then if I can add one more. So I appreciated your comment on No one really knows in terms of the work from home, but I'm wondering what you are planning on doing in terms of your policies at NICE. We're struggling with this too.
But do you plan to be sort of a full remote company? Do you plan to be a work from home company? What are you telling your own employees?
So I'll tell you what I've told to our employees so far. With your permission, I prefer to tell the employees first what is the next step before I share it with our investors. So I'm not going To come out with breaking news here to our employees, but so far we right now we're working from home, let's start with that, 100%, 7,000 people at end of March last year overnight we moved to work from home. We adjusted to that very quickly. We have zero disruption in the business and it's working well for us.
We need to remember 2 things as we are doing that. All of those people that used to that are working from home today or most of them Used to work together in offices, so they know each other. And as there is new people are getting hired, there is a question of how do we keep them engaged and how do we Make sure they adjust to the nice culture, that's number 1. And the second thing is there are things like ideations and collaboration, Which is still I believe in personally, I believe that in the virtual world are not the same as meeting people in person. So I don't think in reality given where we stand with vaccine in different territories personally, I don't think it's going to change much Between now and let's say the end of the year or the summer, few months to the left or to the right are not that different.
So I think that's for the foreseeable future For us, that's going to continue to be the model for operation. With respect to what happens after and things are safe and we can actually have ability to choose, that's something we are debating internally today, what's the best thing for us and for our employees. And we will announce it to our employees relatively soon and then I'll share it with you.
All right, great. Thank you.
Okay, thanks.
And our next Question is from Ryan Coats with Rosenblatt Securities. Please proceed with your question.
Hi, thanks for the question. Could you go back to your comments on AI and Specifically on the CXone, can you touch on the use cases there? Is that more for coaching or are your digital Engagement capabilities fully automated there with AI and how do you monetize that AI capability? Thank you.
Sure. Let's think for a second of what we do with CXone. We have 100 of 1000 of They'll come every morning. Actually they're not coming anymore. They're working from home, but are opening their laptops and working on CXone and this is the main, If you would like, it's the main operating system for customer service, whether it's digital or not.
And that's all being done in the cloud for us. And as a result of that, we have a lot of data going through our platform. And our Our smart to learn from every interaction that are going through our systems. And as we inject Say hi to the different corners of CXone, we see more and more use cases starting to shape up, Starting from the ability, as you said, to coach and guide in real time, the agents or the service providers as the interactive customers, Then goes to engagement in a more sophisticated way on different digital channels with different bots and chat bots and getting them smarter and smarter every day. And few other use cases can be on the compliance area, again, still in the customer services space.
So the beauty is that as we inject AI to the different corners of CXone, we are learning new use cases, but actually many of our customers are coming with use cases Operator?
And our next question is from Scott Tacher with Bank of America. Please proceed with your question.
Hey, thanks for taking the question. It seems like you've developed a very strong backlog in the quarter. Can you maybe talk about the time it takes To go from bookings to revenue for the cloud revenues and CXone specifically, in other words, have we seen the full benefit from the CCaaS market Acceleration yet or does the recent acceleration take more time to show up in the top line? Thank you.
It's a great question and It's hard to give a number here because it really depends on multiple dynamics. We have multiple with CXone, there are Small customers, big customers debuted in even more so in 2020, we can make customers up and running In 24 hours. And actually we had great examples and use cases and case studies from the peak of the pandemic back in March where we actually had to Bring customers up and running at scale in 24 hours and we've managed to do that. In most cases, Actually the issue is not the issue of getting up and running is not on our side. It's actually the level of readiness of our customers.
And some of them need to do certain integration on their side, and other things and training and so on and so forth. So today it really depends more on the customer side. So in some cases it can be immediate like a matter of a few days and in some cases can go all the way to Several months like 6 or 7 months. So there is a blend over there of multiple things. We didn't see a dramatic change if you would like In the time it on average from booking to activation, a bit higher As it go to the enterprise market, but it's very similar to what we've seen before.
Thank you. That's very helpful. And then I guess one more for me. Can you talk a little bit about maybe the benefit you saw in 2020 from Usage of the platform and cloud usage, was there a benefit from usage in 2020 that May go away next year and create a headwind? And that's all for me.
Thank you.
We don't believe so. Obviously, We are very proud to take part we were proud in 2020 to take part of the business related to On the government, on the state and local related to the pandemic at the beginning, it was more about just being available on Q and A or information centers in the early days of March April, then it's kind of converted into big centers about testing, Then it converted to big centers around contact tracing. And these days it is a lot of our big centers around the vaccination, Which we believe will stay through 2021, at least 2021. So that's on that segment. On the flip side, on the commercial segment, which of course is our biggest business on CXone, we saw different ups and downs, but overall it's the Nothing that is just one off or one time.
We actually believe that as Things pick up, the travel and tourism industry, we're starting to see it picking up as people are starting to schedule their vacations With a sense of optimism for the summer and for the second half of the year.
Operator? And we have reached the end of the question and answer And I will now turn the call over to Barak Idean for closing remarks.
Thank you very much everyone for joining us today and have a great day. Thank you.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.