With me on the call today are Barak Elam, Chief Executive Officer Beth Gaspich, Chief Financial Officer and Doron 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 30, 2018. During today's call, we will present a more detailed discussion of Q2 2018 results and the company's guidance for Q3 and full year 2018.
Following our comments, there will be an opportunity for questions. Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations, which differ in certain respects from generally accepted accounting principles as reflected mainly in accounting for acquisition related revenues and expenses, amortization of intangible assets and accounting for stock based compensation. The differences between the non GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. Additionally, NICE adopted new accounting standard ASC 606 in the Q1 of 2018 on a modified retrospective basis. This means that results for reporting periods beginning on or after January 1, 2018 are presented under the new standard, while the prior period amounts before January 1, 2018 are not adjusted.
All financial data for the Q2 of 2018 as well as the guidance for the Q3 and full year 20 18 are provided under ASC 605. We chose to do this to provide better transparency and comparability to 2017 financial data, which was reported under ASC 605. I will now turn the call over to Barak.
Thank you, Maury, and welcome, everyone. I'm glad to be on the call with you today and pleased to announce another strong quarter of double digit growth in both revenue and EPS. We reported revenue of $345,000,000 representing a 10% increase from Q2 of last year. Operating income was $85,000,000 which was an increase of 90% compared to Q2 last year and operating margin increased 190 basis points to 24.7% compared to the same period last year. These strong operating results led to an 18% increase in earnings per share to $1.06 Also in Q2, we saw dramatic increases in the number of competitive replacements, 7 digit deals and new customers.
All three metrics increased strong double digits in Q2 compared to the same period last year. These strong results are being driven by the continued strength and the growth opportunities in our strategic pillars of cloud, analytics and artificial intelligence. Moreover, we are still in the very early innings as each of these pillars have a long run rate for growth in what we believe to be a total addressable market of $7,000,000,000 to date, expanding to $12,000,000,000 in the coming years. We are only at the beginning of our journey. And of course, cloud is a major part of this journey.
We reported 28% year over year growth in cloud revenue in Q2 and it represented 32% of total revenue compared to 27% in Q2 last year. We are on course to exceed annual recurring cloud revenue of $500,000,000 by the end of the year. Our exceptional cloud execution is being driven by our market leading CXone platform, recently ranked 1st in the 2018 contact center in the cloud report from Ventana Research, CXone is the only true native open cloud platform in the industry. CXone encompasses the broader portfolio of customer experience solutions, a growing ecosystem of partners and burgeoning solutions marketplace called CXchange. The 2 power of CXone is the ability of the platform to appeal to all segments of the market.
It is one platform for all. And this includes large enterprises. We are witnessing a growing movement of large enterprises shifting to the cloud and we are capturing an increasing number of these opportunities. As examples of some of these large enterprises CXone deals, a top 5 U. S.
Bank signed a 7 digit ACV deal in a 4000 C deployment. We also signed a 7 digit ACV deal with the data and services provider, a 7 digit ACV deal with the large hospital system and a 7 digit ACV deal with a large institutional investment firm. While the initial size of these large enterprise deals is high, the long term strategic value of these relationships are even greater due to the opportunity for further expansion within these customers for both additional coverage and additional solutions. We also witnessed continued success in the cloud in our Financial Crime and Compliance business with our Essentials solutions. You may recall that earlier this year, we spoke about a new partnership with 1 of the largest core banking providers, which selected our Financial Crime and Compliance Cloud Platform as their standard solution.
This strategic partnership opens up a new and effective distribution channel to thousands of mid tier financial institutions. And in Q2, we have already begun to see results, closing several deals for this partnership for our Essentials cloud solution. We also closed several Essentials deals outside of this partnership, including a 7 digit ACV deal with a large financial institution for AML and an AML and FortCloud deal with a large federal credit union. The move to the cloud is just beginning for both our business segments and we believe that we are well positioned to capture the opportunities afforded by this shift to the cloud. Analytics and AI were also a healthy contributor to the strong results in Q2 as they represented the majority of our new bookings.
We signed a 7 digit deal with a large global technology platform company that enables digital and mobile payments for our customer journey solution as they chose NICE for a multichannel and multi factor authentication decisioning capabilities. There was a 7 digit deal with a top 5 European bank for compliance analytics, a 7 digit deal with a marketing data and card services company for interaction analytics and a 7 digit analytic deal with a provider of financial management and compliance products. Also, a financial institution signed a 7 digit expansion deal to further automate and modernize the processes around AML and purchased Robotic Process Automation, also referred to as RPA, to improve operational efficiency. Speaking of RPA, we turned in another solid quarter for artificial intelligence. We signed many new large enterprise customers for RPA as we continue to lead the market.
Our robotic process automation offering is highly differentiated for our competitors considering the breadth of our portfolio that incorporates functionality around both attended and unattended automation. Our robots have the unique ability to work alongside employees and enhance their performance in real time. We are leading the automation market in embedding AI and machine learning into our robot's capabilities and today our attentive robots can identify automation opportunities themselves. They do this by leveraging unsupervised learning algorithms to discover the best potential automation in the organization's processes landscape. Our latest launch of Neva, NICE employee virtual attendant, is another example of the use of AI to differentiate our robots that can be activated by employees via speech or text.
Our RPA offering was recently named as the leader and star performer by Everest Group, and it received a Stevie Award for breaking new ground with unique integration of process automation and artificial intelligence technologies. Also part of our AI offering, we gained additional traction with our AxiomizWatch cloud based solution, which is part of our autonomous financial crime management offering that uses consortium data and state of the art machine learning and artificial intelligence. The large financial institutions that subscribe to Aktima growth in Q1 are further increasing the size and quality of the data consortium. In fact, as we continue to see increasing subscription to Aktimize Watch, the data consortium becomes progressively more powerful, allowing us to provide additional data based on this data. We are only at the early stage of our journey.
We are a little more than halfway through the year and we have already seen significant progress in our strategic pillars of cloud, analytics and AI as reflected in our reported results and numerous deals we continue to sign within each of these pillars. We have thousands of customers and we've only scratched the surface of the opportunities that exist inside our customer base as well as with the large number of new logos we continue to acquire each and every quarter. With great assets in place, along with expanding addressable markets, we believe there are many opportunities for growth ahead of us in the quarters and years to come. The runway is long and we are only just beginning. 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 you with an analysis of our financial results and business performance for the Q2 as well as our outlook for the Q3 and full year 2018. Revenue for the Q2 was $345,000,000 which represented an increase of 10% from $315,000,000 in the same period of last year. Customer engagement revenues for the 2nd quarter were $281,000,000 an increase of 11% compared to $254,000,000 last year and financial crime and compliance revenues were $64,000,000 compared to $61,000,000 last year, an increase of 4%. Product revenues accounted for 15% of total revenue in the 2nd quarter.
Cloud revenues accounted for 32% of total revenue in the 2nd quarter and services accounted for the remaining 53% of total revenue in the 2nd quarter. Recurring revenue for Q2 2018 continued to increase and reached 73% of total revenue compared to 66% in the same quarter of last year. As our cloud and overall recurring revenue have grown to become a much larger portion of our total revenue, this is having an impact on the quarterly revenue distribution. Therefore, as we mentioned last quarter, we expect our revenue to be more evenly distributed among the quarters this year, rather than back end loaded as it was in the past. On a regional breakdown, revenues in the Americas were 2 $69,000,000 in the 2nd quarter, an increase of 10% compared to Q2 2017.
Revenues in EMEA increased 12 percent to $48,000,000 for the Q2 compared to Q2 2017 and revenues for the Asia Pacific region were $28,000,000 for the Q2 similar to last year. Gross profit in the 2nd quarter increased 10% to $244,000,000 compared to $222,000,000 last year. Gross margin in Q2 also increased 70.6% from 70.5% in Q2 last year, driven by continued improvements in cloud and services margins. Operating income in the 2nd quarter grew 19% to $85,000,000 compared to $72,000,000 last year. Operating margin increased 190 basis points to 24.7% compared to 22.8% last year.
The increase in the operating margin demonstrates strong leverage in our operating model. Earnings per share for the Q2 increased to $1.06 compared to $0.90 last year, representing growth of 18%. 2nd quarter cash flow from operations was $64,000,000 Total cash and financial investments were $689,000,000 at the end of June 2018 and total debt was $452,000,000 net of issuance cost and the equity component associated with our convertible debt. Before I provide the guidance, I would like to remind that the guidance for the Q3 and full year of 2018 is under the accounting standard of ASC 605. Also the following guidance doesn't include the financial data of Mattersight as the acquisition has not yet closed.
And now I will turn to the guidance. For the Q3 2018, we expect total revenue to be in the range of 347,000,000 dollars to $357,000,000 and fully diluted earnings per share to be in a range of $1.04 to $1.10 For the full year 2018, we reaffirm total revenue to be in an expected range of $1,434,000,000 to $1,458,000,000 and we increased fully diluted earnings per share to be an expected range of $4.46 to $4.66 I will now turn the call over to the operator for questions. Operator?
First question we have is from the line of John DiFucci. Your line is now open. Please go ahead.
Hi, this is Julian Serfini on for John today. Thanks for taking my question. So I just want to start out with on the product revenue, right. So we saw the large decline of product revenue this quarter, which we understand. Should we expect similar trend going forward to the rest of the year, like something similar like high negative like 20% year over year decline?
Like how should we be thinking about that going forward?
Sure, Julien. Thanks for the question. Very simple, we are a cloud company. We're leading with cloud and prioritize cloud in our go to market. I think you can see evidence that this in our cloud growth, not just this quarter, also in the past few quarter.
And the fact that our year has been distributed more evenly over the 4 quarters rather than being back ended loaded. Moving forward, we expect fluctuation in the product. It can go up and down every quarter vis a vis the previous year. And we continue to prioritize, of course, cloud.
Okay. Thank you. And I guess one follow-up question too. So on a deferred revenue, we typically see a bit of like a sequential decline in Q2. It just looks like the decline was a little bit larger, I guess, than in prior years this quarter.
So I just want to see if there's anything like specifically that was going on or anything you may want to point out with that?
Thank you for the question. There's nothing that is really significant going off the deferred revenue. We do see variation from quarter to quarter. And so there's nothing really relevant there to add.
Okay. Thank you.
Next question we have is from the line of Dan Bergstrom. Your line is now open. Please go ahead.
Yes. Hi. Thanks for taking my questions. Maybe to build on the first question in another way, could you help us better think about the services strength this quarter? And then how should we think about the line item in the second half here?
And then, Beth, it looks like services gross margins were up nicely quarter over quarter and year over year. Could you talk to the strength here? Is this a structural change? Or should we kind of expect segment gross margins more along the lines of the historical 67% to 68% levels? Thank you.
Sure. Thank you for the question. So just to answer sort of your 2 part question. Your first question was around service revenue. And if you continued to have a strong recurring business in our maintenance.
We have high retention with our customers and we continue to see that as a strength as we look forward in our business. With respect to the services margins, this has been a trend for quite some time that if you look on a multi quarter trend, we've been very effective at our internal operational efficiencies. That includes both the margins in our services business as well as our cloud business. So in this quarter compared to the same quarter of last year, we continue to grow those both of those margins. In the cloud business specifically, we have increased the margin up until 63%, which is a nice expansion from last year.
It will continue to be something that we are leveraging steps that we've taken in other areas of the business to continue to slowly and consistently keep our eye on that and drive it consistently over time.
Thanks. And then maybe one for Barak. Barak, you highlighted a 4,000 seat CXone deployment at a top 5 financial institution on the call. Could you drill down into that deal a little more for us? Is this an existing customer, a new customer?
Why did you win? What's the use case? And then what type of additional opportunities could there be for a deal such as this?
Sure. I think this deal exemplified what we see and I talked about it in my earlier remarks about the adoption of cloud in the enterprise side of the market, the large enterprise of the market. It's something we haven't seen, I would say, 2 years ago and we see it in a very quite significant way as we speak. While we see the adoption happening in a much rapid way, as I said on the call, we are still in the early market penetration. The adoption is happening, but there is a long, long runway over here to take over a big market share in the cloud.
And what we see with those customers, even this one in particular, is that we have relationship with these customers. NICE historically before the acquisition of Pim Contact, as you remember, has been well positioned in the higher end of the market. So NICE brought in this relationship, great relationship. And now we come with a much broader portfolio covering different segments and solutions including digital and omni channel routing that we didn't play in before. And with the cloud, we expand our footprint dramatically with those customers, turning a customer that used to have a relatively light revenues NICE to a much more significant one.
So in this particular customer is similar to what you see also in other large enterprises. They don't start small. They start actually in a pretty high footprint. But the opportunity moving forward to expand, as I said before, is both higher coverage. This customer has many more seats to go.
And also additional products from our portfolio, which is a much easier sell and much easier adoption when you come into a platform like CXone, which is so robust and have all the solution on it fully integrated with workflow between them. Thank you.
Next question is from the line of Gabriela Borges of Goldman Sachs. Your line is now live. Please go ahead.
Great. Good morning, good afternoon, and thank you for taking the question. Maybe I'll start with on the displacement activity that was mentioned in the prepared remarks. Maybe for Bharat, could you walk us through how much heavy lifting has to happen on the
customer side to
make a displacement happen? In other
words, how
pro services team can do to help with that process?
Sure. So as I said, the market is shifting. There is a very large customer base out there of legacy on premise providers that they're experiencing 2 things. 1st of all, their technology is getting outdated. And the second, they haven't invested in real cloud solutions like we have with CXone.
So customers this day are proactively seeking to move into the cloud. Cloud in our market provide a lot of benefits starting from a very fast turn up time versus the on premise solution, very fast cycles of innovation, elasticity, which is very important in the customer service business. Hence, there is we're starting to see in the last 18 months, a shift in the market from early adopters to those that are seeking proactively customers, large customers seeking proactively to shift to the cloud. And we're getting into those deals, helping our customers or helping customers to cross the bridging between how do they move from the on premise to the cloud. So I must say that the displacement efforts are not that difficult.
It's less about arguing like in the past whether what's better on premise or cloud. It's much more about making sure they understand the value in CXone. Our win rates are increasing quite dramatically. And we are enjoying from the market transitioning into cloud. And there is still a very, very large legacy on premise base over there of competitors, legacy competitors, which we are converting to the cloud.
That's helpful. Thank you. And the follow-up is for Beth, if I may. So we mentioned earlier a little bit of the changes that are happening on the P and L as you move towards more of a subscription mix. I also wanted to ask a little bit similar to the previous question on the deferred revenue and billings piece of this.
So I understand variability and I can also appreciate that for your contracts, a lot of them are billed monthly as opposed to annually or multi year. So I would just love to get your perspective, how much should we be paying attention to deferred revenue to the billings line? It's always more helpful to look at the P and
L. Thanks Gabriela. Yes, I think you really kind of nailed it when you said earlier that as we've highlighted in the past, the cloud growth that you're seeing of the 28% year over year is predominantly being driven by the CXone platform and the business there. And as we've mentioned, it is a monthly pay as you go actually build in arrears. And that's one of the real added attractions for our customer base given the elastic model that they can use what they need from month to month in that model.
So that's a little bit different than most cloud companies that you would expect that could maybe have annually paying in advance. So we have a different model and therefore, we are not looking at deferred revenue in the same way given the elastic model of our business.
Okay. Thank you.
Thank you.
Next question we have is from Sanjit Singh of Morgan Stanley. Your line is live. Please go ahead.
Thank you and good morning and congrats to the team on the strong operational improvements year over year. Brock, maybe I wanted to dive into sort of the composition of your new bookings. In your script, you mentioned some momentum with AI and robotic process automation. Can you give us a sense of how your new bookings competition looks today versus this time last year? And what are sort of the main drivers?
What are the main contributors to your new bookings and how that might be different year over year?
So we continue to see this is a journey we went through in the last, I would say, 5 years or even more than that. Where in the past analytics was the smaller parts of our new booking. And today, as I said, it represents a big portion or even the majority of our booking. This has been our journey for the last several years. It started with even more basic analytics many years back with early adopters 5 or 6 years ago.
And these customers expanded 12 years and today customers are going with us to the next generation of analytics, which is, I would say, 2 fold. 1st of all, it's more advanced analytics, which they take to additional use cases. And then recently in the last couple of years, the injection of AI, which is a classic evolution from our basic analytics solution many years in the back, much more of a machine learning algorithm and other artificial intelligence related activities that play on top of our analytics capabilities. We have a lot of data, a lot of services over there to customers. And as I said, both to new customers as well as to the installed base of the customer base, we see it expanding very nicely.
Got it. Understood. And then in terms of the customer evaluation cycles, trying to offer trying to offer large enterprise customers these new capabilities. When you guys are looking at some of these displacement opportunities and these requests for proposals, is there more people competing for these deals? And how would that how does that potentially impact the length of these customer evaluation cycles?
Actually, we enjoyed very much the recent higher interest that we see in the market and more vendors making statements about the contact center and the customer service domain as a whole. This market has been not quiet, but it wasn't been in the spotlight for many years. And I'm personally a veteran of this market for 20 years. And in the last 2 years, it's getting more significant attention. We enjoy it very much because we have for several years all of the relevant analytics, artificial intelligence and other capabilities.
And this further attention the market gets help us actually to educate the market solutions that in the past domains and the analytics space, artificial intelligence that's considered to be more of early adopter domain or even science fiction becoming more and more into the mainstream and we actually benefit from that. One of the biggest advantage that we have for many years and even more so today with CXone is the fact that we are not just we're not a point solution company, but also provides a very wide single solution is not enough. Customers are tired from doing their system integration themselves. They want to see an end to end solution that cover all the different channels, all the different scenarios and the barrier of entry to DAS, the solution that is an enterprise grade that can cover all aspects of customer service across all channels, there aren't too many of those solutions out there. So on one hand, we enjoy the helping the educating the market.
On the other hand, we see many customers selecting eventually to go with a robust portfolio like what we have at NICE. NICE.
Next question is from the line of Rishi Jaluria of D. A. Davidson. Your line is now live. Please go ahead.
All right. Thanks. Hey, guys. Thanks for taking my questions. Bharat, let me start with you.
I mean, you mentioned in the prepared remarks that you're seeing cloud traction on the financial crime and compliance side as well. I was wondering if you could expand on that, maybe give us a sense for what types of customers you're succeeding with there? And is it a conversion of existing customers with AkamaiSe to AkamaiSe cloud? Is it new customers? Is it expansion?
Maybe a little bit more color. And then I have a follow-up for Beth.
Sure. So I said that up until a year ago, you heard us mentioning in the call a lot of focus that we gave in the market as well obviously in our offering to the cloud in our customer service domain. But we have preferred ourselves to the adoption of cloud also in the Financial Crime and Compliance business. Obviously, some of those different dynamics in this market, but we are starting in the last few quarters to see it happening. Still in early stage, but the dynamic are very, very good and we see the adoption is increasing.
But try to give you a bit more color as to where we see the adoption. Historically, financial crime and compliance, we've been playing mainly at the very, very high end of the market. And we've been this is the market we have caters for many years. We didn't go further down in the market. And when I say down in the market, these are still very large financial institution, because the model itself was quite expensive and quite complex for these customers to adopt.
So that's mid market. And to qualify the mid market, I'll say these are still financial services with assets between, I would say, dollars 10,000,000,000 up to $80,000,000,000 that's my definition here of mid market. We see the adoption and the desire of these customers to have solutions that are rich as the one that we have with NICE Optimize and cloud actually enable those customers to move and to enjoy the set of offerings that we have in a much better way. So that's one end to that. And we are satisfying this need and seeing the demand with our essential solution, which we have launched about a year and a half ago or so.
In parallel to that, in order to accelerate our go to market, because we did not have up until last year an effective go to market vehicle for this market, we have signed a partnership that's starting to be very successful, as we said, with a very large core banking provider that actually is the leading one in this market. And they have adopted our both fraud and AML platform to be the standard solution for this market. We updated on that early this year. And in Q2, we're starting to see adoption. And even in July, we're starting to see even higher adoption.
So now we don't just have the solution itself and the market dynamic, we also have a very effective vehicle for this market. So we expect this to continue. And the third part of it, the last one is that also cloud enable us in a much more rapid way to build what we are hoping to get for many years. And this is a consortium of customers of financial services that are starting to share some best practices by leveraging joint data. And that we have achieved by combining cloud intelligence with OptimizeWatch and we see an accelerated pace of large financial institution adopting OptimizeWatch.
They'll subscribe to this AI service. And as more and more large financial institutions subscribing to it, the value of the consortium becoming very significant and we expect to see an even further rapid pace of adoption as we step into the second half of this year and twenty nineteen.
Okay, great. Thanks. That's super helpful. And then Beth, you touched on cloud gross margins and obviously some solid expansion relative to last year. Just how should we be thinking about cloud gross margins from here?
And what sort of steps are remaining to optimize the margins other than scale? Thanks.
Sure. Thanks, Rishi. As you highlighted already, we have seen a nice trend in the year over year growth in our cloud gross margin. We expect to see more of the same as we look forward into the future. Clearly, it's being driven by the strong top line growth in our revenue, the 28% that we had this year over year.
We have very strong leverage in our model. And so we've taken a lot of steps around cloud that we have taken in our services business as well that we've highlighted previously. So some of those things include higher talent and other low cost areas. We've also really focused KPIs internally around driving certain operational effectiveness. And specific to the CXone platform, it's often very associated with telephony.
And so we also have looked at smarter routing associated with a lot of our calls. So those are just some of the steps and we'll continue to do that and more as we continue to grow the margins over time.
All right, perfect. Thank you.
Next question is from the line of Greg MacDowell of JMP Securities. Your line is open. Please go ahead.
Great. Thank you very much. Just one for you, Barak. There's a lot of excitement around the RPA space. And one thing I noticed is the competitive dynamics around RPA are a little different than other markets you attack that maybe have more legacy incumbents.
And here in the Valley, there's recently been a lot of venture capital excitement and funding in this category and Blueprint out of the U. K, it seems to be doing really, really well. So I wanted to ask, I guess, number 1, how you expect this category to evolve over time? And maybe number 2, and I think you touched on it, but when you win with RPA, why do you win? And what are the key nice differentiators in the RPA space?
Thanks.
Sure. You're absolutely right. There is a lot of activity, excitement and market momentum around the RPA. It's a big headline and yes, a lot of investment getting into this market, which help a lot in creating also market dynamics from customers' perspective. I would say that a year ago or 2 years ago, there was a lot of initial trials and trials with customers and what we're starting to see right now is moving from sampling to a more large adoption.
Now as large enterprise are starting to adopt robotics and they start to do it in a more large production environment, one of the most important things that they're looking for is scalability. And one of the benefit that we have as a company is knowing how to cater and provide enterprise grade solutions. So one of our differentiator is robots that can function 100 and 1000 of them in a highly scalable environment with all the different sets imbalances and control. That's one thing. The second thing, we come as a company with the main expertise from the customer service arena, which is the most complex arena in terms of processes and much more complex on the back office.
And it's also heavy on employees and employee engagement. So the second differentiator that we have and I referred to that before is the fact that we actually have not just unattended robots, which are relatively simple, but also attended robots that work side to side and actually with the employees and these are expertise will bring with us from the contact center, how do you guide employees to operate in real time and you will bring it into the back office and that's a quite unique differentiator that we have and in order to get that it's the barrier of entry to develop a viable attended automation is much, much higher than unattended robots, which are potentially even are getting somewhat commoditized. And the 3rd level to that, we see it with customers who adopted robotics or RPA a couple of years ago. There are lots of low hanging fruits in terms of automating processes. But when a customer exhaust those low hanging fruits, you get to the more complex stuff and this is to really not just replace processes by robots, but also to find opportunities to enhance.
And that comes with adding analytics and AI, and that's an area we invested in, in the last couple of years beyond the basic robotics that you would like. And we started to see good traction of that and this is with the ability for example for robots to identify automation opportunities by themselves and then recommend and implement those robots in the best possible way. If we add all of this together, scalability, on one hand, the attended automation and the introduction of AI to the space, we are well positioned with some great assets. And at the same time, what I didn't mention is that we are growing the ecosystem around us to provide the different services and we have signed up quite a lot of different SIs and partners in the last 12 months that see the differentiator the differentiation, I'm sorry, in our robots as they go into large scale enterprise deployments.
Thanks, Bharat. I appreciate it.
Next question is from the line of Walter Pritchard of Citi. Your line is live. Please go ahead.
Hi, thanks. Two questions. I guess there's been a lot of asking about this issue, but I just want to hit it directly. So on the license piece, I think we've seen a lot of companies go through these transitions where cloud and license kind of interplay with each other. It looks like what I'm seeing in your numbers is more services license.
And I'm trying to understand qualitatively what factors would drive a swing in the mix between the services and the license line?
Sure. I wouldn't connect between fully connected between the different line. On the license line, as I mentioned before, we are leading with cloud and we can expect fluctuations in the product line. But as we saw the overall growth given the cloud as a service line is very, very healthy and we believe that that will continue to be the trend moving forward. On the service line, as Beth explained before, it comprises of both professional services and maintenance.
We have a very healthy recurring base over there. And we believe that it will continue to grow and be stable. And on the services itself, cloud and not cloud, we continue to offer new type of services, value services to our customers that come also at a higher margin as you can see from the margin line of this service line. So all in all, we can expect in this space to be much more of a stable one and growing line.
And then just on Actimize, I
know that business bounces around to some degree seasonally and with larger deals and so forth. It sounds like you're also seeing a pickup in cloud success around Aktimize. Can you talk about that you expect that to impact the seasonality that you're seeing in that business as we look forward?
Sure. So financial crime and compliance under our brand of SMITE ACTIMIZE, the market itself is very strong and healthy. We see a great demand. As I mentioned before, we see also higher demand in the cloud, which for us is an incremental market because we didn't play before very effectively or even at all in the mid market. So this is where we see the pickup of cloud.
And we have a lot of new offerings, as I mentioned before, AksimizWatch and the overall autonomous financial crime management sort of solutions that we have. I think as we've seen before in the past couple of years, there are fluctuations between quarter and active line. And we still believe that this is a double digit grower business. And that's what we can expect moving forward. As we build also the cloud business in this, I can say that the pipeline moving forward for Actimize is the strongest that we've seen for many years.
Operator?
Okay. I'll go to the next question. That's from the line of Paul Coster of GPM. Your line is now live. Please go ahead.
Yes. Thanks for taking my questions. A quick one for Beth. You obviously are pointing out that revenue is going to be more linear during the year owing to the mix shift here. EPS though still seems pretty back end loaded.
The growth rate from 3Q to 4Q based on guidance is maybe a little lower than last year, but it's still very significant Q on Q jump. So can you just talk us through why the 4Q is still back end loaded from an EPS perspective?
Thanks for your question. Yeah, I think as we've talked about again, the revenues are evenly distributed and that's what we expect to see more of going forward given the recurring revenue. And with respect to the EPS, I think, again, it's linear and not unexpected.
I'm sorry, I didn't quite get it. So there's no should we expect EPS to be more linear then as well? Because it doesn't
represent well. Yes. So I think it's fair to expect it will be a bit more. Yes.
Okay. Thanks.
And now I'd like
to hand the call back to Barak for closing remarks.
Thank you all for joining us and we look forward to talk to you again. Thank you.