Welcome to the NICE Conference Call discussing 3rd Quarter 2019 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 in November 14, 2019. I would now like to turn this call over to Mr.
Marty Korn, VP, 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 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, of Q3 2019 results and the company's guidance for the 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 with 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. And I'll now turn the call over to Burak.
Thank you, Marty, and welcome, everyone. I'm glad to be on the call with you today. Earlier in the year, we talked about the opportunity to become the leader amid exciting and expanding markets that are experiencing rapid and accelerating growth. This vision is taking shape as evidenced by our strong and consistent financial results, recognition from industry analysts, accelerated pace of innovation and the fast growth of our global partner ecosystem. Starting with financial results, Q3 was another strong quarter.
In Q3, total revenue increased 8% to $387,000,000 driven by another strong quarter in cloud revenue, which increased 27%. The strong top line results led to further increase in profitability. Operating income was $106,000,000 which was an increase of 9% compared to Q3 last year and operating margin increased 40 basis points to 27.4% compared to the same period last year. These strong operating results led to an 8% increase in earnings per share to $1.30 With the current annual cloud revenue run rate higher than $600,000,000 there is no doubt that we are the largest cloud company and the clear front runner in a market that is transforming to the cloud. Cloud revenue powered by CXone now represents nearly 40% of our total revenue, while total recurring revenue represents 74% of our total revenue, up from 70% 1 year ago.
We are consistently signing more CXone deals each quarter driven by increased coverage of additional market segments and geographies. At the same time, deal sizes are going, demonstrating the rapid penetration of CXone into very large enterprises. Furthermore, the attachment rates of our seamlessly integrated workforce optimization and analytics are increasing, dramatically boosting our win rates. This collectively demonstrates the value of CXone as a truly integrated and differentiated native cloud platform that seamlessly incorporates the market leading routing, workforce optimization and analytics. Other evidence of our leadership is the continued confirmation and recognition we get from industry analysts.
In the recently released Gautam Magic Quadrant, we were named the leader for contact center as a service. We achieved the highest overall position for both our ability to execute and completeness of vision, further widening the gap between us and all other competitors. Moreover, our long term leadership position is made more apparent by the fact that we have been named the leader every year since the Magic Quadrant's inception. In Financial Crime and Compliance, we are recognized as the leader in anti money laundering solutions by Forrester Research. The analyst group recognized NICE Actimize as the most significant vendor in the market in the Forrester Wave Anti Money Laundering Solutions report.
NYSE Optimize received the highest scores possible for both offering and strategy. In another leading analyst report, NICE's RPA was recognized for innovation and successful global implementations. The analyst firm noted NICE's consistent innovation and cutting edge capabilities for its RPA and NICE employee virtual attended, which is our AI driven attended automation offering. Another area in which we see our leadership strengthening is innovation, which is being powered by the flexibility and agility of CXone and X Sight. For example, the new photo release of CXone twenty nineteen now makes it possible for organizations to reach and interact with customers in their channel of choice using a vast range of natively integrated digital channels such as SMS text, Twitter, WhatsApp, Facebook Messenger, WeChat and many others, all unified on the CXone platform.
CXone ushered in a new paradigm that allows agents to handle both real time and digital messaging interactions in one intelligent inbox and with a 3 60 degree view of the customer. Companies can now run a true digital first omni channel operation. Other areas of market leading innovation center on AI. We recently announced a new generation of analytics with AI based anomaly discovery and correction, leveraging AI based unsupervised machine learning. These capabilities provide organizations with cross channel insights on service anomalies and surfaces areas that are customers' pain points.
Also as part of our autonomous financial crime management portfolio, we recently introduced Solveil X, the industry first AI powered, cloud native, true holistic trade related surveillance solution that detects all forms of risky behavior to ensure compliance with key global regulations. Further indication of our leadership can be seen by the large and increasing number of global partners that are asking to join NICE partner network. It is being driven by their desire to sell and support the market leading cloud platform CXone as these partners migrate away from outdated on premise legacy vendors. Last quarter, I mentioned the new partners at Atos, a global leader in digital transformation with over 110,000 employees in 73 countries. Atos made CXone a preferred solution for contact center as a service and is bringing CXone to the company's customer base of 100 of 1000 of contact center agents across the globe as well as to new customers.
The partnership with Atos is gaining traction. The pipeline is growing fast and we are expecting to close our initial deals with Atos in the Q4 of 2019. Just this past quarter, we announced the addition of multiple new partnerships in Asia Pacific and Europe, which will bring CXone to contact center customers throughout these regions. These new partners have go to market operations and services teams across the Americas, EMEA and APAC. For example, 4 out of the 5 largest partners in Australia are using CXone as the primary go to market Sika solution.
In fact, we just recently signed a partnership agreement with NTT Australia, a very large global service organization, which will be reselling our solutions. These agreements opens up brand new market opportunities for NICE. The NICE Optimize X Sight marketplace, which was launched this year, continues to gain momentum as nearly 40 partners have already joined. The community is already generating significant traction with customers and prospects. Now that we have just discussed the drivers of our strengthening leadership, let me provide some examples of Q3 deals reflecting the power of that leadership.
In Q3, we continue to sign large enterprise deals for CXone. One such deal was a 7 digit ACV deal with a large and well known automakers' finances division, which was well into the 8 digits on a TCV basis. We were selected for this deal because we were the only vendor that could offer a broad portfolio on a single unified cloud platform. We also signed a 7 digit ACV deal with a very large mutual fund company where they consider replacing existing on premise solutions with other on premise solutions, but instead decided to go with NICE CXone as they realized the power of an integrated cloud platform. We also signed a 7 digit ACP deal with a large regional brokerage and investment banking firm replacing the incumbent.
Other large deals in Q3 included a large and well known big box retailer in a 3 box retailer. In this 8 digit deal, they standardized on NICE replacing solutions from multiple vendors. We signed another ABG deal with a very large global financial services company for several solutions from our financial requirement compliance portfolio. They replaced the incumbent because NICE was the only vendor able to meet their mandate to consolidate vendors while having the complete portfolio to combat regulatory pressure and deliver enterprise wide consistency. And then there was another 8 digit portfolio deal one of the largest banks in the world to help them modernize and automate a vast portfolio of the process to improve agility and flexibility.
We signed a 7 digit deal with a large payments processor for portfolio of our financial crime and compliance solutions replacing the incumbent. This company needed a platform that leverages the new technology to allow them to scale as they are planning to double in size in the very near future. Moreover, they are looking to standardize on a single platform. Our success in international markets is reflected in the large deals we signed just this past quarter. In one such 7 digit cloud deal with a large telecom company, we replaced the incumbent and in another 7 digit deal with a large insurance broker, they purchased a portfolio of our solutions.
There were also several 7 digit deals in the APAC region, including a large telecom company for RPA in which we won the deal of other well known RPA vendors. There was also a 7 digit deal with a business process outsourcer, we will replace the incumbents. In closing, our vision to become de leader is taking shape as evidenced by our strong and consistent financial results, recognition from industry analysts, accelerated pace of innovation and the fast growth in our global ecosystem. We will continue to build our leadership and further distance NICE from its competitors by continuing to capture the many opportunities ahead of us. We have allowed addressable market in which we operate and we plan on leveraging it to further success.
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 business performance for the Q3 of 2019 as well as our outlook for the full year of 2019. Total revenue for the Q3 was $387,000,000 compared to $359,000,000 in the same period of last year, an increase of 8%. Our total revenue growth was driven by cloud with 27% growth in cloud revenue in the Q3 of 2019. The percent of total recurring revenue continued to increase to a record of 74% compared to 70% in Q3 2018, reflecting our strong cloud momentum.
Customer engagement revenues for the 3rd quarter increased 9% to $315,000,000 representing 81% of our total revenues. And Financial Crime and Compliance revenues increased 2% to $72,000,000 representing 19% of total revenues. Cloud revenues accounted for 39% of total revenue for the 3rd quarter, which represents an increase from 33% in Q3 last year. Product revenues accounted for 15% of total revenue in the 3rd quarter and services revenues accounted for the remaining 46% of total revenue in the Q3 of 2019. Looking at geographies, Americas grew 10% and reached $313,000,000 in the 3rd quarter.
EMEA was $47,000,000 in the 3rd quarter, which represented a 5% decline, and APAC was $27,000,000 which represented 13% growth compared to last year. And now to profitability. Gross profit increased 8% to $274,000,000 in the 3rd quarter and gross margin was 70.9 percent similar to last year. Cloud gross margin continued to increase and reached 61.9% compared to 61.6% last year. Operating income increased 9% to $106,000,000 in the 3rd quarter.
Operating margin continued to expand and reached 27.4% compared to 27% in the same period of last year. The increase in operating income and the continued margin expansion demonstrates the leverage in our model and our commitment to further expand profitability over time. The effective tax rate for the 3rd quarter increased to 22.3% compared to 21.2% last year. The tax rate was impacted by a different mix of geographies with different tax rates. Earnings per share for the 3rd quarter increased 8% to $1.30 compared to $1.20 in the Q3 of last year.
Cash flow from operations was $82,000,000 similar to last year. Total cash and financial investments were $927,000,000 at the end of September 2019, and total debt was 463 cost and the equity component associated with our convertible debt. We continue to deploy cash towards our buyback program and so far we have used approximately half of the approved buyback plan. I will conclude my remarks with our guidance. For the full year 2019, we expect revenue to be in an expected range of 1,563,000,000 dollars to $1,583,000,000 We are increasing full year 2019 fully diluted earnings per share to be in an expected range of $5.15 to $5.35 I will now turn the call over to the operator for questions.
Operator?
We already have some questions on the line. The first one is coming from the line of Shaul Eyal from Oppenheimer. Please proceed. Your line is open.
Thank you. Hey, guys. Good afternoon. Congrats on the ongoing performance and execution. 1 for Barak, one for Iran.
Barak, so the CXone platform continues to resonate well within the overall market from your prepared remarks. It will also appear that it's driven by the Hyatt Enterprises adoption, which appears to be at a rapid pace. I know you've mentioned that also during your prepared remarks, but can you talk to us a little bit of what appears to be this driving this accelerating trend? And maybe in association with that, are you seeing any prolonged cycle because it would appear at you, you're seeing none in that respect?
Sure. And the observation is correct and you can hear it from the different many deals that I've mentioned on the call today. We definitely see the upper side of the market, the enterprise side of the market adopting CXone in a rapid pace. Just to provide some clarity, our definition or our threshold for enterprises is 750 seats and up. We see traction in all market segment, but that's our definition for enterprise.
I know that other SMB players define it much lower. And this is where we see a lot of traction these days. I think that the reason is a few fold. First of all, the pace of innovation that they see on a platform like CXone, a native cloud platform versus what they see on their on premise provider and the fact that the innovation there either stop or slow down quite dramatically. The other thing is the completeness of the offering that we have and it goes also to the other things I've mentioned about the attachment rate.
We see very high attachment rate, customers at that segment in all segments, but for sure the enterprise segment that are selecting to go day 1, not just with routing or not just with W4, but all of it together, routing, W4, analytics and other capabilities altogether. So we see increase in the number of deals, the deal sizes, and of course with the attachment rate.
Awesome. Awesome. One for Iran. So with Mattersight now integrated for about 18 months, how would you characterize your satisfaction level from that specific transaction? We have been on ICE for many years.
You've done an outstanding job as it relates to your M and A strategy. You guys know how to pick up the right candidate to integrate. How would you characterize Mattersight in that respect
around? So Shaul, if you recall, when we acquired Mattersight, we said that the main reason and motivation behind that acquisition was to create a differentiated offering for CXone. And as you said, it has been integrated and we see that it's creating a new category in the world of routing, Something that is amazing that was that has not happened before, AI driven routing and the ability to match the customer with the right person to handle them is something that seems to have as been a latent demand in the market. So when we look at acquisitions that are technology driven acquisition like Mattersight, we look at a few things. We look at how we achieve our integration goals and the answer is yes.
We look at the impact that it's having in the market in terms of differentiating the product, creating a buzz for the product, and the answer is absolutely yes. And the third is we look at the team, the talent that we acquired and are they still with us and motivated? The answer is again, we've had very good success there. And of course, we look at the financial metrics. So as I look at all these dimensions, we are very happy with the acquisition.
Thank you.
The next question is coming from the line of Rishi Jaluria. Please proceed. Your line is open.
Hi, guys. This is Hannah on for Rishi this morning. Thanks for taking my question. Just first off, it seems like EMEA revenue growth came in a little weak this quarter. Could you talk about anything you're seeing that's driving that and anything in the macro environment you're seeing?
Yes, we always have some fluctuation between the different regions, nothing to read from that. EMEA was impacted to a certain extent also from changes in currency. But we see regular demand. With respect to the macro EMEA and rest of the places, we don't see any difference from what we've seen a few quarters ago. The environment in our market continue to be very healthy.
Great, great. That's helpful. And then on the Addus partnership, on the deals you've signed far, do you see that you've been able to penetrate more markets in Europe because I know that's something that the partnership is providing you with?
So as part of our overall strategy, but for sure as we go internationally into Europe and Asia Pacific, as you can hear in the last few quarters as well as in my earlier remarks, we're doing very well. We get a lot of traction. We see combination of few types of partners, those that have partnered for many years in the in that market with legacy on premise providers and are looking to migrate their customer base and to win back in the market and understand that you need to do it with CCUS. And after they are doing their diligence, they are selecting us and we have a lot of them, if you would like, almost standing in line to sign partnerships with us and we're very happy with that. And the second type of partnerships is those that believe that it's an adjacent market for them and they see the dynamics in this market and they would like to step into this market and they're also doing their diligence using the market analyst and other and they are selecting us.
All of those partners, we've signed in the last few quarters. It takes time to enable them, but they are putting a lot of investments behind this enablement. And at least from the indication in the pipeline, it's very healthy. They have relationships with thousands of customers. They have very strong customer base.
And we believe that it will have a very positive impact on our win rate and our market coverage moving forward, both internationally as well as in the U. S.
Great. Thank you.
The next question is coming from the line of Dan Bergstrom from RBC Capital. Please proceed. Your line is open.
Yes. Thanks for taking my questions. Say with the adoption of CXone by very large enterprises and increased attach of WFO and analytics, does that change the way we should think about who is adopting the cloud? Historically here, I think we've thought that most of the cloud growth was coming from new markets and new customers. Is that still the case?
Yes. From our perspective, it is the case. I would like to remind you that with respect to those 2 markets that were separate markets, WFO analytics was 1 market and the adjacent market was routing or omni channel routing. NICE evolved from the WFO analytics space being a leader in that space. And prior to cloud, we did not play in the routing business.
So for us, every customer that's adopting routing with WFO Analytics is a pure upside. That's one. So we're taking markets in places where we didn't play before. The second thing, the value of the customer for us in the cloud is significantly higher than in on premise. With respect to the actual buyer, it's always been and still is the combination of the IT buyer as well as the operational side of customer service.
But given the fact that customer service today is much more strategic for many B2C companies as well as B2B, but mainly B2C companies, we get a seat with a lot of C level these days and this domain is getting the exposure of C level CEOs and other very large enterprises.
Great. And then maybe around Optimize, they're hosting Engage 2019 next week. Sounds like a good dedicated event for financial crime and compliance professionals. Anything we should be watching for out of the event? And then maybe along with that on X Sight, it seems like there's been a number of announcements around the X Sight marketplace recently, maybe highlight some traction with that ecosystem?
Thanks.
Sure. So first of all, we're very excited towards the event next week. This is the first time we are actually combining what we had as the client forum and the user conference together of financial crime and compliance. We have a record, the tendency and registration that I believe will lead to record a tendency. It's becoming a very big event.
That group, all the professionals, many of the professionals in this market and it's becoming one of the largest events in that industry. I will have to wait for Monday, I guess, before we announce some product things and other not to steal the thunder from the team. So stay tuned for different offering and portfolio announcement and partnership that I believe will come from this event. But you'll hear all about them next week. But we're definitely going back to Q3, seeing great traction in few fronts.
First of all, the cloud is picking up very nicely in this market. We see a growing number of cloud deals in a pretty rapid pace, which is great for us because before the cloud, we played mainly in the higher end of the market and cloud enable us to cater to mid market banks, which are still very substantial in size. But in terms of volume of customers, that opens up a very significant market for us. And the second thing is the traction that excites with its marketplace, the traction that it's getting. We announced the marketplace of X Sight, I believe, only few months ago, maybe 2 quarters ago, and we already have almost 40 partners who subscribed to the program.
And we're starting to see, as I said on my earlier remarks, a very good traction with customers. They see that they have a platform today that they can choose different vendors and different partners and combine them under one platform. So we are very excited on all of those fronts with Aktimizer.
Thanks, Parag.
Next question is coming from the line of Dan Ives from Wedbush. Please proceed. Your line is open.
Yes, thanks. Another great quarter. Sort of a follow-up to the last question. I mean, Barak, as you're going into sales cycles, are things changing with customers? I mean, are you seeing maybe a year ago in the cloud shift, a lot more skepticism, having to do demos, products sort of deep dive.
And now today, it's more of a pull rather than a push in terms of just some of the dynamics?
Yes, I would say that I definitely see this evolution happening. I'll give it like from our perspective 2 phases of evolution and I looking forward of course to the next one.
I would say that 3, 4 years ago, I would say 3 years ago,
with many customers, mainly when you go up we still had to educate them about the value of the cloud and why cloud is better than on premise and what is real cloud and true cloud and native cloud and so on and so forth. That's no longer happening. Customers, enterprises of all sizes for all of them, it's no longer a question of if, it's a question of when and how do they move. They all want to move to the cloud. They all understand the difference between different cloud solutions, what is a native cloud versus something that is more hosted or migrated from on premise and they see the value in the native cloud.
So that's something that is no longer happening, meaning there is no longer a need to sell the value of the cloud. But the second thing that we see and I believe it's due to what we've done with CXone, in the past, they still used to think about omnichannel routing and other solutions like W4 and analytics almost separately, 2 separate purchase cycles. And what we see right now is the convergence also become almost becoming de facto standard that a customer approach that is if I go to the cloud, not if, when I go to the cloud, I want omni channel routing, fully integrated, seamlessly integrated into WFO and analytics and digital and few other things and that's becoming the new de facto standard. So that's the evolution we've seen in the buying behavior, which are of course very positive for us. Thank you.
Our next question is coming from the line of Samad Samana from Jefferies. Please proceed. Your line is open.
Hi, good morning. Thanks for taking my questions. Nice quarter. One, if I may, and then I have a follow-up for Beth. But, Bharat, there's been a lot of small M and A in the space and a lot of changes in terms of strategic partnerships with vendors, etcetera.
So I was just curious how you think about the build versus buy versus partner strategy for as far as M and A or technology partnerships go? And maybe if there's any evolution in the way that NICE is approaching it with all of the changes that are happening with the rest of the group? And then I have a follow-up. Thank you.
Sure. So at least from our perspective, we have all of those avenues and we are managing them in a very thoughtful and strategic way, meaning that we both partner in many cases, when we think it makes sense. From time to time, we will acquire in order to own the technology and the assets. And of course, we focus the majority of our effort, given our investment in R and D in organic development. And that's, of course, our prime focus.
We believe we have great ROI on our organic development. In regards to those different options, I would say that given that today we have a platform like the CXone platform and same goes for X Sight, one of the way that we are approaching that is that it's a very open platform that is easy to integrate with those partnerships that we have built with the marketplace of X Sight and the exchange of CXone. Both of them are allowing us to evaluate many of the different players out there to see who's doing well and who's integrating well into our platform. And from time to time, we might decide that it's better to further integrate with them by buying them versus just partnership. And a great example of that is the acquisition that we have done 3 months ago, it's more 4 months ago with Brand Embassy.
We had many partners with digital engagement capabilities. We sold Brand Embassy and we saw that they have something very unique, very mature and the one that can give us a major differentiator. Hence, we decided to go and acquire them. And here we are a few months later, already with 2 releases of CXone that further embedded Brand Embassy into the platform. And today, our customers who are looking to further integrate digital channels with voice and managing them in a unified inbox.
That created a major differentiation for us in CXone and I believe more to come with regards to those digital capabilities from brand empathy.
Very helpful. And then Beth, maybe just a follow-up for you. I know partnerships are something that the company is increasingly docked by in terms of go to market partnerships. Are there any material differences in the unit economics or the lifetime value of a customer that's acquired with using a partner versus direct customer acquisition?
Thanks for the question. Samad, as you mentioned and as Barak highlighted, partnerships are very important for us overall. But when you look at the unit economics, no, there's really no big difference between the go to market strategy there.
Our next question is coming from the line of Walter Pritchard from Citi.
Hi. First question for Beth. Just wondering, if I look at the guidance, you have the annual guidance out there, which is about a $20,000,000 range. If I look back over the last couple of years, it's actually a wider range than you've left open for the Q4 in both revenue and EPS. And your business is more recurring.
So you have, I think, 74% of the business is now cloud maintenance. What is there some and you're reporting a week later too, so you have a little bit more visibility into the quarter versus last year. Is there anything that you're kind of embedding in the guide with more uncertainty? Or just trying to get to the bottom of why that range would be why you're giving more recurring revenue?
Sure. Thanks for the question, Walter. No, there's nothing embedded there. We remain highly confident about the full year guidance that we've provided. We're already through half of the fourth quarter and we're confident.
If you look on the year throughout 2019, we've actually raised guidance on EPS throughout the year. And in terms of the top line, we just increased revenue last quarter. So again, we're highly confident on the full year outlook.
Great. Thank you very much.
The next question is coming from the line of Sanjit Singh from Morgan Stanley. Please proceed. You're live in the call now.
Thank you for taking the questions and congrats on the strong cloud results again this quarter. To that end, Barak, I was wondering if you can give us a sense of the uptake of cloud based WFO and cloud based analytics versus what you've been seeing maybe a year ago? Any sort of trends on the mix of cloud on the WFO and the analytics side?
Yes, sure. So as I said before, we the main changes we see is with the attachment rates, putting together omni channel routing, WSO analytics and few other solutions where customer decide to purchase them together. In many cases, we replaced the incumbents and these are the type of situation. We don't see any dramatic change on the WFO Analytics as a standalone. Sometime customer decide to go to the cloud, sometime not.
And if they decide to go to the cloud, they're actually quite happy, because in terms of the annual run rate from such a customer, it is significantly higher than the on premise paradigm.
Thank you. That makes a ton of sense. And then my follow-up question is around the RPA. You mentioned in your script that you landed a really nice RPA versus some of the, I would say, maybe more well known competitors in the RPA space. How are you thinking about the RPA opportunity going forward?
Do you see RPA as becoming a more material driver of top line growth as that product or category starts to mature?
So we see the RPA markets in two way. 1 is the fact that it's a market by itself that is well covered and getting traction and we are a player in this market, a well recognized player in this market. And we see a lot of use cases where we take the RPA technology and embedded into both our platform CXone and X Sight, where there are a lot of opportunities both within the contact center and for banks to automate them and make them more autonomous. With respect to the market itself, I think it's getting to the point that is a healthy point that is which will soon get to the I call it over the hype point. What we hear from customers is that they've tried it, they've tried different technologies, They try the concept of the unattended automation, which is basically taking robots with a decent use case of automating very specific, very small micro tasks.
But now they understand that the real value is actually with what we believe in, which is the attended automation, which is basically what you need to do in order to embed robotics capabilities in a workforce environment where you put the man and the machine together in a perfect dual play. And that's where we play. It's much more sophisticated. It requires much more AI and it requires a lot of domain expertise that in the markets we play and we believe we have them. So for us, the opportunity as I said is in both domains, both within our classic markets where we can offer it as part of our suite and get much more for the suite and become much more strategic.
And second is other markets that are very adjacent to our markets, very similar buyers or close buyers to where we play, where we sell it as well. Operator?
Our next question is coming from the line of Pat Walravens from GMP Securities. Please proceed. Your line is open now.
Hi. This is Mark for Pat. Thank you so much for taking my question. I was wondering as customers transition to the cloud, do you also see them changing their communication service provider from legacy solutions to platform like Twilio and Bandwidth?
Not sure that this is something that I'm we are familiar with. When we sell our CXone, it's a full contact center as a service platform. In some cases, actually, we will be the one selling some of the reselling some of those communication services. Usually, it's much lower the lower end of the market. At the high end of the market, the customer will decide to procure those outside of our offering.
With respect to, I think, one of the players that you have mentioned, they play more in the selling the middleware and some components. We don't tend to see them in the different deals that we compete on.
Okay. Thank you so much.
Our next question is coming from the line of Tevye Brosner from Barclays. Please proceed. Your line is open now.
Thank you. Just following up on the competitive environment. We've heard other players seeing very good traction, mostly in the cloud. I was wondering if you're seeing increased pressure when you go to market, if you get pushed back, if you have to kind of give up on price to win contracts or has nothing really changed compared to, let's say, a year ago?
Thank you. No, we don't see any dramatic change in the competitive landscape. I think that the real change that we see is the fact that the higher end of the market is increasing its pace of adoption. And the other thing, as I've mentioned, is that customers are looking to buy a platform that is more complete, that have the capabilities of omni channel routing, digital, WFO and analytics. Hence, the competitive landscape somewhat changing the fact that some players do not have it and they cannot really play in this particular offering.
In terms of the pricing pressure, it's not different from where it was a year ago. I think the customers see great value. Many of the conversations are not just about replacing one solution with another, but other about how we transform customer experience for customers, very strategic discussions. Hence, it's less discussion just about price, much more about value.
We do not have any further questions. So I would like to hand it back over to Barak now.
Thank you very much all for joining us and we look forward to speak to you again next quarter. Thank you.