Good day everyone. Welcome to the NICE conference call discussing Fourth Quarter and Full Year 2018 Results. 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 Q&A session. As a reminder, this conference is being recorded February 14th, 2019. I would now like to turn this call over to Mr. Marty Cohen, Vice President, 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 2017 annual report on Form 20-F, as filed with the Securities and Exchange Commission on March 30th, 2018.
During today's call, we will present a more detailed discussion of fourth quarter and full year 2018 results and the company's guidance for the first 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 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. As we communicated in our prior earnings calls, our non-GAAP financial results for 2018 are presented under ASC 605. Effective from January 1st, 2019, our non-GAAP financial results, as well as our guidance, will be reported under ASC 606.
It is important to note that results throughout 2019 will be compared to ASC 606 results for 2018, not ASC 605. We'd also like to remind you that we are hosting our Investor Day on April 16th, in conjunction with our Interactions Annual User Conference in Las Vegas. This special program for analysts and investors will include meetings with NICE executives, presentations from customers, product and technology sessions, and access to the solutions showcase. If you haven't registered, please email us at ir@nice.com. I will now turn the call over to Barak.
Thank you, Marty, and welcome everyone. I'm glad to be on the call with you today. With the release of our Q4 results and the look back at the full year, it is clear that 2018 was a seminal year for NICE. Our cloud business prospered with Q4 cloud revenue growth of 29%, fueled by further adoption of CXone in the marketplace. Some key metrics that underscore 2018 as a milestone year included 9% total revenue growth, 27% cloud revenue growth, and recurring revenue increasing to 70% of total revenue. We reported 13% operating income growth, a 90 basis point improvement in the operating margin, a 14% increase in earnings per share, and nearly $400 million of operating cash generated for the year. Furthermore, we saw a record number of new customers and significant increase in the number of competitive replacements.
As we look forward to 2019 and into the next five years, it also gives us the opportunity to look backward over the past five years and at what we achieved during this time. It was a period in which we transformed NICE into a true enterprise software company. It was also during this time that we moved from being a leader in maturing markets to a leader in a total addressable market of $7 billion today, growing quickly to over $12 billion. We accomplished this by bringing together what we believe to be the greatest assembly of assets in the industry that has allowed us to significantly scale our analytics and cloud businesses to become the clear leader in both areas. At the same time, with a keen focus on operational excellence, we're able to accelerate top-line growth while significantly improving profitability.
Now, with all the right assets in place, we have successfully delivered two profoundly differentiating platforms in the market with CXone for customer engagement and Actimize for financial crime and compliance. With these two platforms and the large total addressable market into which we can continue to expand, it is no longer suitable to just talk about leadership. Rather, and more importantly, it is time to talk about the opportunity to become the leader. What do I mean by this? The leader delivers truly differentiated products and superior and complete offerings as we have done with our two platforms. This causes the leader to become the clear choice of customers, which leads to more R&D investment, which then again turns into more differentiated products and complete offerings. It becomes a perpetual cycle that continues to further support the leader's position in the market.
Eventually, the ecosystem grows very large, and the leader gains the capacity to cover all markets, geographies, and enterprises of all sizes at a significant competitive advantage. How do we become the leader? We already have a wide lead in both market share and product offerings. This gives us the advantage to continue to disrupt the status quo by aggressively moving forward through continued rapid innovation, sound execution, and further differentiating NICE from our competitors. In customer engagement, we will expand CXone, making it an even more comprehensive offering than it is today. We'll further grow the CXone ecosystem and drive our open cloud platform into the market through geographic expansion, deeper penetration into our customer base, and by bringing it to businesses of all sizes. We expect to see CXone as the clear choice among all enterprises.
We'll further inject powerful analytics into everything we do and further augment analytics by infusing AI throughout our analytic solutions. We call this our analytics everywhere approach. Moreover, we'll be delivering more AI-fueled predictive analytics in 2019 and beyond. In financial crime and compliance, we are only at the beginning with X-Sight. Our goal is for X-Sight to be the clear new standard for financial crime and compliance customers. Like CXone, X-Sight allows us to cater to all market segments in the cloud. We already have solutions like ActimizeWatch and the recently announced IFM-X on X-Sight. IFM-X is our next-generation integrated fraud management suite that uses automation and machine learning to optimize effectiveness and reduce total cost of operating a fraud risk management system. With X-Sight, we are becoming a market facilitator for sharing data across financial services organizations. Another building block of our strategy is robotic process automation.
We'll continue to differentiate ourselves in the robotic software market, where we're experiencing rapid growth. This is a market that is still in its infancy, and we are well-positioned for differentiating solutions, such as our leadership in attended RPA, NEVA, which is our one-of-a-kind attended robotic assistant, and Automation Finder, an AI-powered solution that detects processes in the enterprise that are perfectly suited for automation. As we march towards the goal of becoming the leader in our respective markets, we can now look forward five years into the future. We expect to far exceed the $2 billion revenue mark, to see the majority of our revenue come from the cloud, and to have a greater than 30% operating margin. Our Q4 execution provides a glimpse into our march ahead.
In Q4, CXone's presence in the market continued to spread as we firmly established NICE as the only provider of a true open cloud platform that seamlessly combine omnichannel routing, WFO, and analytics under one umbrella. We are getting multiple high marks from industry analysts. Just earlier today, we announced that Gartner has positioned NICE highest as the leader in the MQ for Workforce Engagement Management for the third consecutive year. More importantly, we're seeing evidence of the continued growth of CXone within our customer base and among new customers. Some large CXone deals in Q4 included a seven-digit deal with a state government that had been a long-time on-premise customer with an incumbent that we replaced as this state government is quickly bringing on CXone to support their expanding number of agencies.
There was another seven-digit CXone deal with one of the largest state employment retirement systems in the country. We replaced the incumbent on-premise provider, as the retirement system has a mandate to rapidly move off of an on-premise contact center. They needed technology in the cloud that can accommodate their current and future needs. Other seven-digit CXone replacement deals included a very large mutual fund manager, a federal government agency, an IT services firm, and an online retailer. Analytics is another area where we continue to see strong growth and one in which we believe we continue to outpace the market with cutting-edge technology. This includes recently announced new solutions like Back Office Performance Essentials, which infuses a combination of desktop analytics together with performance management that enables organizations to enhance employee performance.
There is our newly announced Customer Journey Excellence Score, which is an AI-powered metric that provides organizations a consistent means of measuring service quality across touchpoints over time and enables the prediction of future outcomes. In fact, NICE was recognized as a Leader in customer journey analytics in two reports by Forrester Research. We signed a seven-digit deal with an alternative payment provider for a portfolio of solutions, including Nexidia Analytics and Compliance Center. There was a seven-digit deal with a very large insurance services company to provide analytics-driven insight to improve operational efficiency and customer satisfaction. There was a seven-digit deal with a major airline for Nexidia Analytics to help them upsell revenue, reduce costs, and perform in-depth analysis.
Other analytics deals included a seven-digit deal with an international bank for our AML suite, and another seven-digit deal for both fraud and AML with a Leader in prepaid credit card solutions. We witnessed continued strong momentum for ActimizeWatch, which is our cloud-based solution that uses consortium data and state-of-the-art machine learning and artificial intelligence for fraud and AML. In one example, we signed a seven-digit ActimizeWatch deal with a very large international bank. Essentials, our cloud-based fraud and AML suite, also did well, including a seven-digit deal with a new customer, a large credit union where we replaced the incumbent. In robotics, we signed a record number of new logos in 2018 and continue to see rapid growth in this line of business.
We signed several seven-digit RPA deals, including one with a very large telecom company, one with a home services company, and one which was part of a large deal with a major healthcare company. In fact, the total deal size for this healthcare company was in the eight digits and comprised a number of different solutions, including multiple analytics and competitive replacement of real-time authentication. In closing, we are very pleased to end the year on a high note. Now is also the time to look into 2019 and beyond. CXone and X-Sight are our leadership platforms and our substantial, sustainable long-term differentiators to help us become the leader. As the market continues to shift to the cloud, and specifically to platforms, we are in great position to capitalize on the many opportunities at hand.
I'm also looking forward to seeing you in Amplified Interactions, our annual user conference, which is the largest in our industry. We're expecting a record number of customers in attendance this year. I also want to take this opportunity to thank all of our employees around the globe for their outstanding commitment to our strategy and their contribution in making 2018 another successful year for NICE. I will now turn the call over to Beth, who will review our financial results.
Thank you, Barak, and good day, everyone. I'm pleased to provide the analysis of our financial results and business performance for the fourth quarter and full year 2018, as well as our outlook for the first quarter and full year 2019. Before I review the numbers, I would like to remind you that all financial data included in my remarks, except the guidance, are presented under ASC 605. Total revenue for the fourth quarter reached a record of $420 million, an increase of 6% from $396 million in the same period of last year. Full-year revenue was a record of $1.463 billion, which represented 9% growth over 2017. Our total revenue growth was driven by our continued successful execution in the cloud, as our cloud revenue grew 29% in the fourth quarter and 27% for the full year 2018.
Customer engagement revenues for the fourth quarter were $322 million and represented 77% of our total revenues. For the full year, customer engagement revenues were $1.166 billion, an increase of 9% compared to the full year 2017. Financial crime and compliance revenues were $98 million and represented 23% of total revenues. For the full year, financial crime and compliance revenues were $297 million, an increase of 6% compared to the full year 2017. Recurring revenue for the fourth quarter and full year continued to increase and reached 65% and 70%, respectively, of total revenue compared to 60% and 65%, respectively, for the same periods last year. Product revenues accounted for 26% of total revenue in the fourth quarter and 20% for the full year. Cloud revenues accounted for 32% of total revenue for the fourth quarter and full year, up six and five percentage points, respectively.
Service revenues accounted for the remaining 42% of total revenue in the fourth quarter and 48% for the full year 2018. Looking at geographies, Americas contributed $332 million to total revenue in the fourth quarter and $1.140 billion to the full year revenue, which represented 6% and 9% growth, respectively. Revenues in EMEA were $55 million in the fourth quarter, similar to last year. For the full year, EMEA revenues increased 9% to $209 million. APAC revenues in the fourth quarter increased 17% to $33 million, and full-year revenue increased 7% to $114 million. Now to profitability. We continue to grow our gross profit, reaching another record high. In the fourth quarter, it reached $304 million compared to $293 million in the fourth quarter of 2017. For the full year, gross profit was $1.041 billion, compared to $964 million for full year 2017.
Another record for us was operating income, which increased to $119 million and $379 million respectively for the fourth quarter and full year 2018. Full year operating margin expanded 90 basis points to 25.9%, and we expect to see further growth over the next several years. 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 fourth quarter reached an all-time high of $1.47 compared to $1.35 in the fourth quarter of last year. Full year 2018 earnings per share was also a record of $4.69, representing growth of 14%. We experienced another strong quarter of cash generation. Fourth quarter cash flow from operations grew 26% to $109 million, and the full year cash flow from operations was a record of $397 million.
Total cash and financial investments were $731 million at the end of December 2018, and total debt was $456 million, net of issuance costs and the equity component associated with our convertible debt. I will conclude my remarks with our guidance. Our guidance for the first quarter and full year of 2019 is under the accounting standard ASC 606 and will be compared to 2018 ASC 606 results. Effective from January 1st, 2019, both our GAAP and non-GAAP results will be reported under ASC 606. For the first quarter of 2019, we expect total revenue to be in the range of $370 million to $380 million. The midpoint of the guidance represents 11% growth over first quarter 2018 total revenue of $338 million. We expect first quarter 2019 fully diluted earnings per share to be in an expected range of $1.05 to $1.15.
The midpoint of our guidance represents 13% growth over the first quarter 2018 earnings per share of $0.97. For the full year 2019, we expect total revenue to be in the range of $1,558 million to $1,582 million. The midpoint of our guidance represents 8% growth over the full year 2018 total revenue of $1,453 million. We expect full year 2019 fully diluted earnings per share to be in an expected range of $5.08 to $5.28. The midpoint of our guidance represents 9% growth over the full year 2018 earnings per share of $4.75. Similar to the trend of the last two years, cloud revenue continues to grow as a portion of our total revenue, resulting in a more equal distribution of revenue and profitability between the quarters. I will now turn the call over to the operator for questions.
Operator?
Thank you. Ladies and gentlemen, your question and answer session will now begin. If you do wish to ask a question, it's just star then one on your telephone. Just as a reminder, it is just star then one on your telephone. We do have a question. It comes from the line of Shaul Eyal. You're live in the call. Please go ahead.
Where's my call? Cool. Team. Barak, I want to go back to the topic you've addressed in your annual prepared remarks and in the press release regarding the journey towards $2 billion revenue and 30%+ operating margins longer- term, of course. Can you provide us with more color, with the thinking around it? Is it all organic? How should we be thinking about the mix also between cloud, the rest of the segment? How should we be thinking about the AML business growing within this framework?
Sure. Thanks for the question, Shaul. Yes, as we stand here today, the beginning of the new year, five years after I've became the CEO of the company, similarly to what we've done every year, but also five years ago, providing an outlook for the upcoming years, we feel that today, given the trends of our business, the markets we operate in, which are very healthy, the assets that we have built and the momentum in our business, that we can also provide, beyond the healthy outlook for the first quarter and for 2019, also some outlook for the next five years and provide some financial metrics to that. We believe, based on that we can leave the $2 billion mark far behind.
More than 50% of our business by then should be in the cloud, and we're aiming to the goal of the 30% operating margin, as I said. In terms of where that's coming from, we see it right now organically. Obviously, we can augment that with acquisition and further accelerate some of those numbers and trends. We see it in the global businesses, which are very healthy with the recently announced in the past year of both CXone and X-Sight. Very similar trends with respect to analytics, AI, and cloud. The same trend that we've seen with CXone, we believe, are very similar to what we see right now in the financial crime compliance, where cloud is starting to gain a very nice traction.
Overall, it's an effort to give you a glimpse view, if you would like, of our strategic plan, which we feel that we have a good execution to the strategy in the same way that we executed on the past five years.
Got it. Understood. Also, if I may, Barak, when we look on the breakdown between the product, the cloud, the services, do you think that on the enterprise front, so companies with 10,000 plus employees, are you maintaining, are you capturing some market share? On the SMB front, it's very clear, but I want to hear your thoughts about it. Also maybe if I can squeeze another one. Avaya, these guys have been struggling over the course of the past few quarters. Can we think of NICE as some of the ingredients that have been disrupting Avaya's business, specifically as it relates to the contact center, to the routing business? Is that a fair assumption?
Sure. I'll address first the first part of your question, and the answer is yes in all segments. Obviously, we are taking a very nice share and making a lot of replacement in the lower end of the market. I believe the same is true for all different segments of the market. 2018 was a record year for us in the number of competitive replacements. I think that what we see is that we have two type of replacements. The first one is a legacy provider that did not prepare themselves for the era of the cloud. Personally, I think it a bit too late for them to be there, given or knowing what it takes to, in terms of R&D investment and expertise, et cetera.
We find ourselves, in many cases, replacing the on-premise providers, I'll refer to Avaya in a second, with a cloud solution, a true cloud solution that we offer. The second type of replacement that we see is the completeness of our offering, the suite, the platform that we have with our analytics and AI capabilities. There we are replacing whether it's on-premise or cloud, we see it also in the on-premise, providers that have more of a smaller, limited solutions in terms of functionality. With regards to Avaya and in general, the family of providers that today have the lion's share of the on-premise market share, the legacy market share, I think you can see it compare our financials to their financials. No doubt there is a replacement cycle in the industry. We're enjoying it very much.
Yes, Avaya is one of the, I believe, we find ourselves replacing them quite a lot.
Thank you so much. Good luck.
Thank you.
Okay, thank you. Your next question comes from the line of John DiFucci from Jefferies. Please go ahead.
Thank you. I have a question for Barak and a follow-up for Beth. Barak, the cloud revenue accelerated materially in the quarter, this quarter here, and the growth rate's been strong for some time, but that's a reversal after deceleration the last few quarters, and probably, I assume, just because of the law of large numbers. I'm assuming that's almost all CXone, that incremental revenue, since X-Sight's really new. You also had Essentials, though, and some other cloud offerings. I guess the question is it correct to assume that essentially all of the incremental cloud business is CXone?
Thanks, John. Yes, we have seen cloud growth accelerating. The beauty of cloud, we can also have some view into the future and giving that the strong guidance for Q1 with 11% growth overall. Yes, a lot of the acceleration is CXone, I must say that we see some other things picking up. X-Sight and in general, in Optimize, we see it in the booking. It's still not there in the revenue. It will come in the revenue, I believe, this year, that we'll see that booking materialize into revenue. It takes time to ramp it up when it's new. It's definitely happening. Also in some of our analytic solutions, including Nexidia, we see a very nice ramp in the cloud.
all in all, we expect the trend to continue, and we also enjoyed some very nice seasonality in Q4, and we believe we'll experience similar in Q1, as you can see.
Okay, great. That's interesting to hear. X-Sight is actually gaining traction already in the bookings. Okay, thank you. That's really helpful. Beth, I know it's logical. Can you help us a little bit on our model? You guys guide to total revenue, and it's logical that license would continue to decline over time as more new business goes to the cloud. As your increasing number of cloud solutions gain further traction, should we be thinking that that decline could accelerate? I ask that in the context because the quarter looks really strong. Your guidance looks good too, but the top line is a little bit lower than the Street had you. I'm just wondering if it's something about the mix that's affecting that.
Yeah. Thanks for the question, John. I think first to highlight, we believe that our guidance for the full year of 2019, as well as the first quarter, is quite strong. Just as a reminder, the revenue growth based on the midpoint of our guidance for the first quarter of 2019 is 11%. I think it's a good opportunity to remind everyone that as we move into 2019, we are really comparing the year-over-year growth on an apples-to-apples basis. It is using the revenue under ASC 606 as well as profitability compared to the 2018 financial results under 606, which we disclosed throughout the year last year in addition to 605. First, I think it's again very important to make sure you're doing the true apples-to-apples comparison.
With respect to the mix, as you've seen during 2018, as expected, we do see more variability on the product and license side of the house, we expect that we'll continue to see some variability from quarter- to- quarter. Really, the strategic driver that we're seeing of cloud in our business is quite evident in our cloud growth, which we expect to continue to see as well.
Okay. Just continue to expect declines, but whether or not that accelerates is, I guess, still a question. It's kind of up to us.
Yes. As I said, I don't know that you should expect to continue to see declines. I think that you will see variability on the on-premise business from quarter- to- quarter. There will be, again, generally some fluctuations and variability during the quarters of the year is what we expect.
Okay. Thanks.
Thank you.
Thank you. Your next question comes from Walter Pritchard from Citi. You're live in the call. Please go ahead.
Hi, thanks. Just maybe following up on John's question about the cloud growth. You did consolidate Mattersight, I think, fully in Q4. Q3 was kind of a partial quarter, and that's, I think, reported mostly in cloud. Could you help us understand how much of an impact that had on cloud? Then had a follow-up.
Sure. With respect to Mattersight, as you said, we closed that acquisition during the third quarter, and we highlighted at that time that we expected the annual run rate of revenue to be in a range of $32 million to $38 million. The actual results within Q4 were within that range, well within what was expected. We look on both the sequential growth, which was quite strong from Q3 to Q4, putting Mattersight ahead, it's very strong sequential growth as well as the overall growth in our cloud business, which was 27% year-over-year in 2018 versus the prior year. Again, strong cloud momentum. As Barak said, we're also seeing very strong bookings, as you know with the cloud business, it takes longer to actually get those booking results carry through into the revenue.
We're also, again, quite optimistic as we go into 2019 to see the further effects of that business.
Maybe just on 606, could you help us understand I think we get the revenue impacts with any of the expense impacts on 606, probably a bit of a tailwind, and I know you're giving us the comparable from 2018 in both, but maybe the 2019 expense impacts from 606 be helpful as we calibrate models.
Yeah. Again, I think as I highlighted before, what's really important to understand that we will be measuring 2019 under 606, and we'll be comparing it to 2018 under 606. There will be no impact in terms of the accounting change on the expenses.
Okay. We'll follow up on that. Thanks.
Okay.
Thank you. Your next question comes from the line of Sanjit Singh from Morgan Stanley. You're live in the call. Please go ahead.
Thank you for taking the question. I wanted to follow up on Barak on some of your comments in your script on the five-year plan. Could you describe, because I think when thinking about your comments, it seems very ambitious in terms of the types of market segments you're going to go after, the geographic expansion. That could mean competing with a different set of competitors than you traditionally have competed with. From an organizational standpoint, what capabilities do you feel like you have to build to really attack sort of all geos and all segments as sort of dictated by your strategy?
Sure. First of all, we always believe in ambitious plan. We've done it when we started the journey five years ago, I believe we executed well, it's always important to put goals that will make us wake up every morning and drive very fast. I believe that obviously, as we have changed the size of our markets, our total addressable markets quite significantly, needless to say, you hinted to that we are also already in the past two years, though, playing in a different ballgame, we're playing with a broader scope and broader spectrum of competitors. Having said that, I think we are coming from the direction of the disruptors versus the incumbents in certain markets. As disruptors, we came, I believe, quite prepared by the different assets we have assembled together in the last few years.
It's not just those assets, but about putting them together, bringing them with pioneer technology and the right technology. The true native cloud open platform that we have with the completeness of the offering, which I believe from our experience in the day-to-day, is very important in the markets where we play in today in the cloud with the trends with respect to analytics, AI, et cetera. Coming with partial solutions might give you some entrance to the markets, it's not a sustainable strategy. We have built that strategy throughout the last two years, organically, inorganically, we now have the right assets to go with that. This is the reason why we are providing this outlook for you on the call today.
In terms of different things that we are kind of missing in the company, I think that through the different acquisitions we've done in the last two years, we've brought great talent, muscle and DNA to the company, combined with the great talent we had at NICE before. Spreading that throughout the company is something that we're doing and experiencing today, which I think, gives us great results on the execution.
Great. I appreciate the thoughts. I had a follow-up on Walter's question. I guess, a follow-up on John's question as well. I think what we're trying to understand is the sort of sources of growth, because it seems like the model is continuing to transition, which is sort of an obvious statement given the run-up in cloud. In terms of the existing NICE customer base, when we think about that maintenance base, how should we think about growth in that line? Or for more generally, how are your existing on-premise customers, are they moving to the cloud or are they expanding to the cloud with new business? Is there any sort of transition with the maintenance base there?
I think it's a combination. For us, we see it more as an opportunity than a threat. We saw it as vetted before. As you've seen in 2018, we will have some fluctuation in the products. We will see some quarter where the product is growing very nicely and some that it's flattish or declining. Overall, we don't expect any acceleration or a fast decline in this business. Actually, our maintenance business is doing extremely well and is very healthy throughout 2018 as well as in Q4 and also the outlook that we have into 2019. The reason for that is that because of the way we strategize our way into the cloud, we're doing it while entering much larger markets. Our customers, first of all, we have customers that are not ours. I talk about the replacements and the new logos.
For us, these are brand-new opportunities, brand-new customer we've never seen revenue from, and those are coming in the cloud. Existing customers, some of them augmenting our on-premise solution with cloud, as we now added omnichannel routing to our offering and analytics in the cloud and so on and so forth. That is an add-on to the existing on-premise. Even an existing customer that's ready to move all of their on-premise solutions to the cloud, what we see versus the ongoing revenues we can see from this customer in an on-premise, anywhere from a 2x - 3x revenue, just moving that on-premise to the cloud. We see this gradual movement, and I said in five years, we gave you some metrics. We believe that it will be more than half of our business, meaning the cloud.
That's very helpful, Barak. Thank you very much.
Thank you.
Thank you. Your next question comes from the line of Tavy Rosner from Barclays. You're live in the call. Please go ahead.
Thank you for taking my questions. Most of them have been asked. I had one about analytics. You talked about the strong traction you were seeing there. I guess I was wondering, do you have a way to quantify what's the proportion of your existing customer base that are using or not using analytics, and therefore, how large is the opportunity to kind of upsell that base?
Sure. I think we've seen a few trends in our business with regard to analytics. I'll mention a few of them that will help you to answer your question. The first one is that given that we now have analytics both in the cloud as well as fully embedded in both X-Sight and CXone, it give us the opportunity to provide analytics to market segments that before that, didn't think even about adopting analytics given the sizes of their business. It's basically taking analytics down market. That's one area. This is unpenetrated markets for analytics.
With respect to the higher end of the market, where the penetration is more significant, we actually see yet another wave of adoption of analytics customers, large enterprises that enjoyed and got used to what can be done with our analytics and the new generations of our solutions, allowing them to now further adopt and further penetrate with analytics to the complete enterprise as part of our vision, as I mentioned, analytics everywhere. The third part is where we experience the convergence between analytics and AI. These are a customer that has been a user of analytics and now see the opportunity to further elevate the analytics further by introducing our AI solutions that are well embedded now into our analytic solutions.
In a way, it's hard to just mention a penetration rate because, as I said, there are multiple layers and endless opportunity to cross-sell and up-sell, even to customers that already adopted analytics.
That's helpful. Then, just looking back into the M&A story, I guess the inContact was the last large acquisition you made, and it's been quite successful, to say the least. That's going to keep you busy for a while, given the opportunity out there. I guess, looking at your net cash position, would you consider doing buybacks, dividend, or something else for the time being if you don't see any large acquisition in the pipeline?
We have, I think, very good history of a company that is making acquisitions, and the last few acquisition, we believe, have been very successful, both financially as well as strategically for the company and allowed us to open up to such a larger addressable market, moving us from a leader in a limited market to total addressable market, to a very fast-growing market. That has been the past success of our acquisitions. We are constantly, as always, are active on the M&A front. We have our criteria of when and what to buy within our strategy. We see acquisition as something that can augment our strategy as it has been in the past. You're right, we have a very strong balance sheet. We're very proud of our cash generation. That is an indication to the healthiness of our business.
Right now, we believe that this is the right place to be, and looking into acquisition. Any point of time, if we believe that there will be a better way to allocate our capital, to the different measures that you said, of course, we'll assess that.
Thank you for the color. Much appreciated.
Thank you. Your next question comes from the line of Rishi Jaluria from D.A. Davidson. You're now live in the call. Please go ahead.
All right. Thanks. Let me start with Barak. On CXone, you've talked in the past about kind of the APIs that you have on top of that. Would just be curious if you can maybe share how customer and partner usage has been on that front, and if you have any examples that you can provide of customers that have used those APIs and maybe built something interesting or value add on top of that, and then I've got a follow-up for Beth.
Sure. The answer is absolutely yes. One of the things that, beyond the completeness of the CXone platform and of the fact that it's built on a true cloud environment, the other thing that we are very passionate about is the fact that it's open, it has all the APIs that you've mentioned, and we believe that it gives us a very strong competitive edge. There are two main usages to these APIs and open platform. One is customers that would like to further integrate, and use CXone as a platform to their business and integrate it to other systems and actually make it a mission-critical system within business processes that they have. We see enterprises are doing that, easily integrating CXone into their environment.
Obviously, we enjoy it because it makes CXone much more of a mission-critical, and it makes it a much more sticky, of course, which is very, very important to us. The other thing is a lot of point solution vendors. We now already have north of 120 partners, technology partners, that's made their solutions certified and available with CXone and continues to grow. This is also allowing us to continue our leadership with CXone because enterprises that have preference, for example, for a certain chatbot or a certain application in the environment, they can use the CXone platform and embed the technology from different providers. The use cases, there are hundreds of them. I would say that a lot of our customers, the majority of them, are using those APIs to the integration. As this ecosystem grows, of course, we'll provide more and more use cases.
Actually, a lot of our customers in the sales cycle, are looking into this community and are learning a lot from those use cases.
Got it. Thanks. That's helpful. Then Beth, just going back to the earlier question around Mattersight. If I do the math, assuming that Mattersight was purely a cloud, that actually tells me that cloud growth in Q4 was similar to what it was in Q3 on kind of an organic basis. Is my thinking directionally correct, or am I missing anything here? Then maybe just alongside that, since we're on the topic of Mattersight, just would love to hear if there's any thoughts on traction with Mattersight within the existing NICE customer base and how that's going so far. Thanks.
Thanks for the question. Again, just to repeat, I think in terms of the expected performance of Mattersight was really within the range we had expected. Generally, again, the cloud growth we experienced was strong both sequentially, as I said, even organically from quarter- to- quarter and strong growth year-over-year. Again, just further highlighting, we don't disclose the bookings results externally, but certainly we also have visibility into what the forward momentum looks like, which is again, very strong. I think with respect to, again, the integration of Mattersight, generally that's going well and on track with our plan.
All right. Thanks.
Thank you. Your next question comes from the line of Gabriela Borges from Goldman Sachs. You are now live in the call. Please go ahead.
Good morning. This is Daniel Church on for Gabriela Borges. Thanks for taking my question. I guess, to start off, as we head into 2019, can you maybe share how your conversations with customers have changed, what the pipeline looks like, and whether the level of sensitivity around cost control within the contact center has changed?
We don't see any change in the trends from 2018. Conversations continue in the same way that they were before. Contact center and customer engagement in general is a top-of-mind item. It didn't change. This is the way today enterprises differentiate themselves, more and more understand that. It gets a seat at the table, it gets a seat at the boardroom these days of almost all enterprises. We don't see any change in the dynamics. The pipeline that was generated and is still being generated is as strong as it was throughout 2018.
Thanks. Just as a quick follow-up, when you displace an incumbent vendor with CXone, can you maybe give us a sense for what the switching costs look like and deployment times, and anything you can do to make it easier for customers to switch and reduce switching costs?
Sure. Customers, of course, talk to us with that. Each customer is somewhat different depending where they are in their depreciation cycle of their on-premise solution. The main reason for customers to move is not just the financial model. Obviously, it's the benefit, the innovation cycle the cloud provides them, the internal cost that they have. We have a very healthy ROI model that customers adopt very nicely, and a consulting that we provide in terms of how to switch. It's a commercial move, but it's also obviously a transition in terms of the transformation of the business. Yeah, we provide this help to customers on how they move off, and I can tell you that it is happening as we speak. In the past, there were a lot of questions about this.
Today, since everyone, all the customers that we meet, for them, the move to the cloud is no longer a question. The issue of how you transition from the economics side is less and less critical. The last thing I'll mention is that our model provides elasticity also commercially, which is very attractive as you off-board an on-premise solution of the incumbent.
Helpful. Thank you.
Thank you. Your final question comes from the line of Paul Coster from J.P. Morgan. Please go ahead.
Yeah. Hi, this is Mark Strouse on for Paul. Thanks for taking our questions. There was a large enterprise storage company, that talked about a pause at some of its larger customers, owing to some macro uncertainty. NICE obviously has some strong secular tailwinds, but just curious if you're hearing anything from customers, about cyclical risks or macro uncertainty.
No, we don't see anything. We talk to customer on a regular basis, on a daily basis. We haven't seen any of that signs. We read the same newspaper like all of you, and we have the concern, but we don't see it from customers. We don't see it in our business, not in the pipeline, not in the business results.
Okay. That's helpful. Just lastly, Beth, was there any impact in 1Q from the U.S. government partial shutdown that we need to kind of normalize for? No, really no impact on our business that you should take into consideration. Okay. Fair enough. Thank you very much.
Thank you. That was your final question. We have no further questions.
Thank you all very much for joining us. We look forward to serious Interactions in April in Las Vegas. Have a great day.
Thank you. Thank you, everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining. Enjoy the rest of your day.