Before we get started, I want to thank everybody for coming today. Welcome to our analyst and investor track here at Interactions 20 18. Most of you know me, my name is Marty Cohen. I'm Head of Investor Relations. Also with me today is my IR colleague, Iska Rysz.
She's sitting over there. So let me take you briefly through the agenda for the rest of the day and then we'll begin. So for the investor track, we're going to hear presentations from different members of our senior management team. And then after that, we'll have a senior management panel discussion and you'll have a chance to ask questions. So we have Barak's here.
Barak Ilarme, our CEO Beth Gaspich, our CFO and Eran Liron, who's Executive Vice President, Corporate Development and Strategy. Also with us today is Sherry Nader, she's the Head of HR and also David Kauffman, our Chairman, sitting right over here. So, Barak will provide a general overview of our strategy. Beth will discuss our financials. And Eran will son is Son is graduating from college today.
So unfortunately, he apologizes, he couldn't make it. So following the investor track, we'll break for lunch in the room next door. Management will join us. We'll sit down and have lunch with the senior management team. And after lunch, we've arranged for you a private tour of the demo showcase.
At the showcase, you'll hear let's make a few stops. We'll hear about RPA, CXone and also one of our newer solutions called Compliance Center. And then after the tour, we are also going to follow-up with some product breakout sessions. You'll hear presentations on RPA and AI, customer engagement analytics, and we'll also hear from a customer and a partner a partner who are leveraging the CXone platform through different APIs. That will be the end of the investor program.
But for those of you who are staying tonight, I should put up the agenda before. Those of you who are staying tonight, we have our party at Universal Studios. So please feel free to join us. And then you can all read that and I'll invite Barak up to the front of the room.
Thank you, Marty. Welcome, everyone. Great seeing everyone here. It's better to all of a sudden, it's much smaller than on the big stage. I promise no holograms on this session.
I hope you enjoyed our opening. We always try the opening to give our customers and audience. We do so many different things, but we're trying to give a bit of a taste of everything. And of course, there is the rest 2 days where people will go for the breakout sessions and you will see some of that as well, meet our experts. And of course, the most important thing is, similarly to the session that you've seen of just a sample of 3 customers on the main stage, there are additional 127, if I'm not mistaken, sessions by customers.
So that's a big part of the content of the event. But we're switching over to the reason why we are here, and this is to spend some time with you, with our investors and analysts that are covering the company. And I'll try to give you a broader overview beyond what I've done over there at the with respect to a bit of what we have done and what's the plan now moving forward. So obviously, I see I think I'm familiar with almost all the faces over here, and we've been working together for several years now. And I believe you are familiar with the story or the majority of the story.
And as we progressed in the last several years, every time we provided you with more rationale about how we are moving forward, the beginning of with our NICE 2020 strategic plan and then NICE TO BE. But a different dimension or view to look at what is it that we have done in the last 2 years and also what is the future for us, a lot of the things that we have done, actually the majority of the things that we have done goes to a problem that we have identified somewhat, I would say, 4 years ago, a bit more than 4 years ago when I stepped into the CEO position. And this is that while we played in the past back in 2014 as a market leader in 2 great markets with a strong leadership position, strong market share in these markets, we realized that this is not enough to fuel our growth. And all of the steps that we've done since then, till I would say last year, it was all about expanding our total addressable markets. And in the several or the last few earning calls in the last couple of years, I've shared with you the impact of the different moves that we have done, acquisition, organic and inorganic moves, with regards self playing in very healthy markets.
You can look at it as 2 markets or 3 markets, but we estimate the size of those markets overall today at roughly $7,000,000,000 But the even more exciting thing for us moving forward is all of those markets we believe are growing and will should be able to fuel our growth for many years down the road. At the beginning of this year and those of you who attended the earning calls that took place at the beginning of the year, you heard me talking about that we realized at a certain point that we are at that point that instead of after so many years constantly looking for more places, more markets to play in, and that was kind of the past strategic question at NICE and every morning where to play, we shifted our effort in the past, I would say, 12 months to how to win in the current markets we are playing in because we believe that the TAMs that we have today, as you've seen before, should be able to satisfy our growth for many years down the road. Hence, our effort is now about how to win. By the way, if I have to choose probably for every company between strategic focus number 1 or 2, obviously, I prefer this one.
And I will talk in the next few minutes about why we believe we have the right assets in order to win in those markets we are playing in and how we're planning to go about it. So this is not new. You know that in the last several years, we are working under those 4 strategic pillars. You heard me talk a lot about some of them over there in the main stage. You heard me talk about them in the past as well.
And it's very important for us to have those strategic pillars because we measure ourselves constantly, all of our investments, all of our decisions, organic, non organic decision based on those four elements, so based on those four pillars. Every decision that we take, we wanted to be accretive to be on 1 or more of those items. We manage the company this way. So we have about 6,000 employees in the company and the way that we manage our objective, the dialogue, every employee, regardless of the geography, can find or can have or have a line of sight to either one or new product, new development, of course, acquisition, we measure that how accretive and whether they are well aligned with those strategic pillars. We believe that these are those strategic pillars because they are going well with our strengths, but they are also going well with what's where the market is investing today.
I, in my job, get to meet a lot of CIOs and C level, I'm sure like yourself. And it's it will be a very common conversation that their that their top investment plans for the years to come falls at least under one of those strategic pillars, if not more. So we feel that we are in a great place in the center of where investments are happening these days. This is an effort. This is, of course, not a detailed metrics, but this is an effort to show you just a sample of some of the investments that we have done in the past few years, some of them organic and some of them non organic and how they are aligned with those strategic pillars and how they are contributing to overall strategy of the Nice 2B.
I won't go 1 by 1, but just to mention a few. Obviously, the acquisition of Nexidia took place about 2.5 years ago. We're very happy with this acquisition, allowed us to move very, very nicely. Actually, I would even take it further down because it also allowed us to advance dramatically our cloud journey in analytics, but obviously, analytics and artificial intelligence follow on by the Matters acquisition, which I'll refer to in a bit later on and the rationale behind it. Optimize Watch, which Aron is going to speak about, purely organic development, but a great match between analytics, artificial intelligence and cloud.
Going back to existing customers and you heard me talking in the recent earning call the increased rate of subscription of very large financial services that are standardizing now on optimized watch. You saw today NEVA, which is yet another effort to help organization to really adopt robotic process automation. We're really at the early stage in the market in general about the adoption of RPA and where RPA can be several years down the road. Obviously, in contract, you heard today, I think you've seen the journey. We are going to celebrate, if I'm not mistaken, in just few days, right?
It was May it was May 16 or May 17, 2016, the signing. So this is going to be celebrating 2
years from the signing, not from the closing.
But in just you see in 2 years, you saw CXone today, you saw the integration of all the products in one place. Some of you are maybe not very familiar with the details of the contact center or the customer service domain, and it looks obvious what's the problem to have all of those things administrated in one place, what's the big thing, it's huge. Those customers, the 2,000 customers that sit in the audience, other customers that are seeing this for the first time, it's a dramatic change. It's a dramatic change to sit all in one location with such an open platform with integrating on many different partners. And you saw some of example of IBM and few others over there.
So that's a way to look, and this is how we think about investment internally in the company. So as I said, we believe we have we are playing in the right a winning strategy. And before we I talk about our assets and how are we planning to win and how we're winning today, there are kind of 4 items that we keep in mind all the time when we're thinking about our winning strategy and how do we take bigger share in those exciting markets. The first one is the cloud adoption acceleration. We definitely see the market adoption of cloud accelerating.
When we first acquired Incontact, you heard me saying about the roadmap of us going upmarket with the adoption of enterprises. Personally, I thought that it will take maybe a year or 2 later to what we see today. The acceleration, as you heard on our recent earning call, is happening in a much more rapid pace than I personally expected, which is great. So that's one thing. And we see the same thing, by the way, in our Financial Crime and Compliance business.
And I will talk about that as well. The second thing that we have realized is we invested in for many years to take different innovation that we had and put it under
we'd like
to say, platform are eating software. And platform, our we'd like to say platform are eating softer. And platform are winning and you'll see in just one second how we think about platform. You understand that CXone now is a platform and auto brings to that. It's not just a suite of products, but we are thinking platform across all the few earnings call about AI, natural evolution from us from analytics.
Cloud is a big enabler for AI because you have the data and you can apply much more sophisticated analytics. You can share data, of course, with the relevant privacy and control. And as a result of that, AI algorithms that were true, by the way, 20, 25 years ago, given the availability of data and the cost of computing today, moving AI from fantasy to must have, and we are infusing analytics and AI to every corner of our portfolio. You saw just a sample of that this morning and later on in the showcase and a few more demonstration, you'll see that we had a slight problem with the analytics Nexidia demonstration this morning. Maybe you'll see it in the showcase.
A great example of how we put all of that together. And related to that, that, the ability to leverage data, again, whether in financial crime and compliance, customer engagement, driving a lot of our innovation and solutions that we are bringing to the market. So what is our winning building blocks? A way to think about what we're doing is that basically, we are operating in, I would say, 3 markets. The first one is the customer engagement market or the customer service market.
And we have announced last year in beginning of August the availability of the CXone platform. And since then, we're experiencing a rapid pace of innovation because the minute you have the platform, the ability to innovate in a very rapid and frequent way, we see a significant acceleration of that. And you saw demonstration of some aspects of the platform earlier today. The second platform is the autonomous financial crime and compliance platform. Eran will talk about that.
It is taking what we've done with Aktimized Financial Crime and Compliance in the past. Most, if not all, of the big financial services already using our suite of products. And moving that part from just a suite to a platform will allow us to do a lot of different things. I don't want to steal the fund up from fermentation, but you'll see that coming. And the other part, I think today you got a bit more information about it, is our cognitive RPA platform.
It is a platform today. As I said, we are at the early adoption of robots, whether at the back office or the front office. We have the great adventures as a company due to the fact that we understand the front office, the front line, but we also understand back offices and you cannot resolve them without connecting the 2 together. And the combination of robots with chatbots give us great advantage. And but as I said, just the beginning, we are stepping into an era where there are a lot of low hanging fruits about deploying robots.
There will be a lot of disappointment in the market, hopefully not from our product, but in general in deployment of enterprises. But after organization crossing that chasm, what will come is how do you manage environments with couple of millions of robots in a single organization? Who manage them? Who administrate them? What do you do with exception handling and so on and so forth?
So we believe it's just the beginning of something extremely big. And for that, you need a platform. One of the things we know for many years how to do it nice, we understand enterprise wide deployments. It's not just about let's deploy a robot here and there and pray that they scale. And that's how we think about it.
And you saw a customer on stage today, Sky, that they're deploying it. A lot of customers that's coming to us are the customers that really would like to take it to a our expertise in cloud, analytics and AI. So a lot of things that we do on cloud, basic infrastructure for the CXone platform are relevant and are being used with the other 2 platform. Our analytical capabilities, our data scientist teams are being shared across those 3 domains and 3 platforms. So why do we believe that we are winning and we have the ability to take a share and win those markets?
And I'll go now market by market. And of course, there are many. The list of advantages we believe is are significant. But if I had to kind of synthesize the top three for each. So in the customer engagements, I believe that number 1 is that we have a complete offering.
And you've seen it this morning with the CXone demonstration. We invested a lot in putting together inContact the best omni channel cloud offering out there with Nexidia, which is the best analytical offering, with obviously WFO, which is the best WFO offering there, but putting it together was the first step. And what we see right now is a lot of workflows and value that we can bring the minute this offering is put completely together. Yes, we have competition, but none of those competitors that we believe today have in house best of breed under one platform and that gives us a very significant advantage. The second thing is the ecosystem.
We have a very great ecosystem of partners, both those that are actually reselling and supporting us, but also the technology ecosystem. We signed up more than 100 partners to the Dev 1 program. And I think you saw this morning, once again, just an example of how our customers putting together with our partners a very robust customer service environment. And lastly, we have full market coverage. NICE historically was catering to the higher end of the market.
In context, came with a very, very effective machine at the lower end of the market. And we are putting we have put those that to work. Hence, we can take the offering of the omni channel routing with CXone all the way to the up market, but we also see a lot of customers, smaller customers taking offering to geographically our presence in Europe and in Asia Pacific. And I think you've seen the growth that we experienced in the Q1 in EMEA and in APAC, and it's starting to yield results. The second part is financial crime, the 2nd market.
Once again, we have a complete offering. We are the vendor that have AML fraud, case management, trading surveillance all under one suite, all using the same case management platform. We are not familiar with anyone else that have such a broad suite. This is a work of many, many years that was put into that, and we have a lot of customers seeing the benefit of using all the solutions together. With the launch of autonomous financial crime management system that Eran will talk about, You see how innovative it is and how much more innovation we can bring and what are the reasons that this market is looking for innovation these days.
And we have a very, very strong brand reputation, the NICE Actimize brand in this market, well known for what they are doing and domain expertise among the corridors of NICE Aktimize in the Hoboken office. Some of you visited us in this office, you'll find a lot of ex compliance officers and ex fraud officers and that brings together the technology and the domain expertise. Lastly, on the robotics automation, that is relatively new. It's not completely new to us. It goes all the way back, if you remember, of the Eagle acquisition that we have done around keep me honest, 2,009 10, sorry, 2010.
This was the core of the technology. We invested heavily in innovation over there. And now it's the prime time for the technology. We have a very unique offering because we bring attended and unattended robotic process automation, which is quite unique in this market and the ability to bring because of that the contact center together with the back office. We have the broadest installed base.
We shared with you some numbers in the past and the amount of robots being deployed are significant. This is not just about how many customers, which we have a lot. This is, more importantly, how many robots a customer deploy. And we have customers with phenomenal numbers of 100 and 1000 of robots in production, enterprise wide deployments. And that brings into the last point, which is this is enterprise ready.
We see a lot of players out there, but eventually, at the larger at the higher end of the market, winning the enterprise is a very important thing. Lastly, before I conclude my part, just a few more words about Mattersight, the acquisition and what stands behind it. So we knew obviously, and I believe some of you also knew Mattersight for many years. And when we saw the opportunity to bring the 2 companies together, we saw several things that after a very, very detailed due diligence, we saw certain things that got us excited, actually very excited. And you got hints to some of those things today on stage.
I cannot reveal everything because we have certain things that we are planning down the road. But I will tell you, first of all, on the analytics space, if you think about the journey that we went with from the early days that NICE had analytics, adding Nexidia and now Mattersight. So in the early days, when we sold analytics to customers, we focused mainly on the technology itself and software. The delivery was we come and we deploy it and we hand off the day to day to the customer in many cases. What Nexidia brought to the table beside the phenomenal technology that was nothing that we have seen out there is also managed analytics, meaning that they are working we are working today with our customers as part of a managed analytics to help them fully utilize the technology.
The domain expertise in Mattersight actually take it all the way to full white glove service, to customers that really would like us to be extremely involved in their operation, giving the expertise that we have in managing customer service. So that was one part. The second part, even more exciting, is PBR. You heard me talking about today the end of routing and start connecting.
This is exactly
what we see. At the beginning, I must tell you, I skeptic because it sounds like science fiction, but we are a very serious company and we very detailed due diligence and we tested the technology. We talked to all of the customers and it's phenomenal. PBL is working, matching customers with enterprises based on persona. The benefits are there.
We talk to all of the customers PBR and 1 by 1, they all spoke about the benefit. They show us the metrics, the indexes and there is a great excitement out there. They just launched it about 3 years ago, if I'm not mistaken. They're a small company. They managed to get to 15, 20 customers on the PBR front.
And obviously, with the expertise at NICE, the go to market expertise as well as with the different databases and the customers we have now with NICE Nexidia, we believe that we can change dramatically the way organizations matches consumers to service this day. And this is what we're planning to do. And there are a lot of innovation that we're planning to do on top of that, integrating to 61 and I can also reveal all the exciting things we are going to bring to the market with that. So that was as you know that we've signed this acquisition several weeks back, and we expect the closing to happen sometime in the second half of this year. So with that, I'll hand it over to Ron to discuss our Financial Common Compliance business.
Thanks, Bharat. So as Marty said, Joe wanted to be here, but his son is graduating from college. I did offer him that he will come here and I'll go to his son's graduation, but he preferred to keep it this way. So you have me. So just what I'm going to discuss, I'll remind everyone what we do with Financial Crime and Compliance, give you a bit of an update from what we discussed about a year ago and talk to you about our strategy and autonomous, which Barak mentioned and is a major initiative for us and show you a little bit of how it's actually happening.
So just I love this. I love to say this. What do we do? We stop bad people from doing bad things. And I love to say it because, 1st of all, it's cool.
And second, it's true. And how do we do it? We do it by finding unusual behavior earlier and faster than anyone. And this relies on a few capabilities that we have. 1st of all, the platform that Barak talked about.
2nd, the fact that we support all the process from the analytics to detect the issue to the tools to actually mitigate the issue, all the way even to reporting to the government when you need when that is required. And of course, we have that domain expertise and no less important the brand. You know that in the world of compliance, brand is very, very important to give customers the comfort. And the brand that we support in this market is second to none. So what happened since we last met a year ago, besides the fact that you used to have Joe and now you have me, or at least temporarily?
First of all, we launched Autonomous Financial Crime. I will talk more about that in a couple of slides. It is a revolution in this industry. It will change, we believe everything. We've continued to expand in the cloud, both in the mid market that we discussed before, but also to support autonomous and I'll discuss that.
So the cloud is now propagating not only to the mid market, but also to the up market, where it provides value and you'll understand in a minute. We've also signed up one of the major for fraud and AML. And this will be a major channel. This adds literally thousands of banks that potentially can join our Essentials mid market product. And we've continued the that have kind of picked up steam in the last year.
1 is virtual currency, which as you know is coming more and more under the watch of these cases, it is actually an interplay between the cloud and beyond financial beyond the core banking. So just to kind of remind everyone, how are we growing? We're growing in 3 we have kind of a 3 prone growth strategy in Financial Crime and Compliance. The first is we grow in the core market. We're far from over.
The journey is far from over in the core market. Autonomous is going to be that next vehicle to take us much further in the core market. The second thing is move to mid market. We discussed with you in the past that mid market banks, mid sized banks have kind of a free pass Because as you know, in the world of regulation and compliance, it's not only about having the rules and regulations apply to you. It's about having actual regulators go after you and fine.
Otherwise, people are kind of lax. There's been a step up in the last couple of years of regulators paying attention to the midsized banks kind of made sense. If you're going to do money laundering, if you're money launderer, if you know that there's kind of a whole set of banks that are not being regulated or
not being monitored very
carefully, that's where you're going to do your money laundering. And so to address a to address a market that is literally hundreds and hundreds of banks. And lastly, organizations that were not thought of as financial institutions are becoming more and more under the eyes of the regulator and under the eyes of the perpetrators, targets because they started they're starting to move money and more and more organizations that we would have never thought of as organizations that would that are subject to this to these kinds of technologies need to adopt. In fact, one of the cool things that I like about our technologies, we actually have the 2 largest customers in the world as it pertains to money movement. We actually have the customer, the company that moves the largest amount of money of any company in the world, any institution in the world.
And we have the company that moves the largest volume of transactions of any company in the world. You want to make guesses, which institution moves the most amount of money? Sorry? No, Alipay, well, I think you heard it before. So JPMorgan.
JPMorgan literally moves the entire U. S. Economy every week in terms of volume. Unbelievable. Who is the largest transaction volume?
Alipay. You know Alibaba? Alipay, our customer. So we have both the largest volume and of dollars and the volume of transactions. All this is relying on 3 pillars.
You know the pillars, Brock talked about it. No need to repeat cloud, AI and analytics. So let's talk about the expansion in the core market. What is this autonomous that I'm talking about? Well, let's start with a problem.
The problem is, first of all, the regulation and the complexity of the regulation, regardless of what is you hear is advertised, is not going down. It actually continues to go up. The second thing is the fraudsters are becoming more and more sophisticated, and that requires a lot more sophisticated tools and pace. And as a result, the costs and the pressure on risk and compliance is only increasing. In fact, if you look at what happened over the last 6 to 7 years in the large institutions, they have grown their staff in compliance and fraud, In some cases, fivefold.
Fivefold. Their staff is up to the tens of 1,000 each in each institutions and yet they cannot keep up. The number of alerts that their existing analytic systems are generating is just skyrocketing. And this is again because of the volume of transactions as well as the threat, the increasing threats. They cannot continue this path of adding more and more people.
Already, the cost is in the 1,000,000,000 and many and many 1,000,000,000 of dollars a year. So that as an approach is out. Advances in analytics, machine learning, many startups are trying to sell on the idea of machine learning will solve everything. The fact of the matter is it helps, but it's not enough. What they need to do is combine more smartly, but also they react to the detected more smartly, but also they react to the detected items in a more automated way.
And this is exactly what autonomous is. Autonomous is changing the mindset from having people assisted by machines to letting machines do the work and having people assist them. What is at the heart of autonomous? First of all, you need to look at the barriers today. Today, to do better analytics, better machine learning, you need a lot of data.
You need many data sources. You need many data types. Today, the process of ingesting new data is very time consuming. It's extremely expensive. And so the banks are limited by how much data they can bring in.
With autonomous, we will fix this. It will become easy, flexible and quick to add data sources. The second thing is how fast it takes to tune these models. So when institution, how quickly can they react? How quickly can they respond and tune their models?
Today, it's months before they can deploy a new version. We're talking about moving from months, not to days, not to hours, but to minutes, minute by minute. And the last thing is once something is detected, how much interaction, how much of a human intervention is needed? Today, every alert requires sometimes hours, sometimes days of people's time to address it and work on it. And we're talking about reducing that dramatically.
How is this possible? It's possible by bringing in 3 elements. The first is big data. The second is machine learning and AI and the third is automation. And NICE is in a very unique position because we have all this technology in house.
We're probably the only organization in the world that has all these capabilities in house. And we put it to ourselves a very, very ambitious goal. We want to reduce in the next 36 months, we want to reduce the time it takes to resolve an issue by 70 percent. And we want to reduce the number of issues that they deal with the false positives, the false alerts, we want to reduce by 30%. 30% may not sound like ambitious enough to you.
You may say, well, why aren't they going for 99 percent? Well, if you talk to our customers, 30% reduction is a revolution. It's huge. It's huge. It's bigly.
Now this is not only theory, it's actually happening. We are, we're introducing, SAM9, not here. It's our new AML product and SAM9 is already the 1st incarnation of autonomous. And it already will provide our customers 30% reduction in false positives and 70% reduction in investigation time. Let me give you kind of a sense and a feel for why?
How can you do that? Well, first of all, think about what happens when there's an alert for suspected money laundering. The first thing that the investigator needs to look at is the person or the company moving the money. This is an investigation. It's called it doesn't require 6 detectives and a whole staff, but the person will now go and start investigating the suspicious customer.
How would they do that? They go out to multiple data sources, they bring back data, they look at it, they think and they try to figure out is this person a legitimate person, is this a criminal, Does he have any record in Google of suspicious type of activity, etcetera? If you think about all this part of it can be automated. We can actually have the robots go out, bring in the data, organize the data and just leave for the person the task of looking at the, at that data and figuring out if this person is really suspicious or this is a benign activity. The fact of the matter is the brain is that one decision of whether this is legit or not.
The time is all spent on going to different databases, gathering data and this we can cut out. So this is autonomous and we will be rolling it out in the next few years. The first version is coming out this year. And as I said, we believe this is going to be a huge impact on our customers. If we can achieve even a 10% reduction in their expense, we're talking about literally 1,000,000,000 and 1,000,000,000 of savings a year for all these institutions.
Another example is Actimize Watch. Actimize Watch is actually both the cloud and AI. What did we realize? Realize that each one of our customers is actually dealing with the same threat, the same types of threats. What happens?
Fraudsters understand there's a new way that they can get at money. Once they, they discover it, they go bank by bank by bank by bank and try to defraud the bank. Well, this kind of propagating problem means that everyone has the same problem, but each one of them is dealing with it completely separately. So what's the idea with Factimize Watch? We already have most of these large institutions.
They're already our customers. So if we had a way to bring in the data from all of them, find the first time that the bank is defrauded, any one of them and then share that knowledge through the models. We don't need to tell them. We share that knowledge through the models. Then we can be much faster for all of them.
Most of them will have, think about it like inoculated even before the disease hits them. So this is the idea behind Actimize Watch. The other thing that Actimize Watch does is it automates the machine learning. In many of these institutions, they don't have the skill set or the knowledge to actually develop these machine learning models. Or they may have them in the trading, but they may not have them in the fraud.
So that's the other thing that we do is we will, they will send us the data and we will use that to automatically develop machine learning models. Aktimize Watch is we launched it about 6 months ago and we already have quite a few customers and the more customers we will have on Akdamiz Watch, there's a strong network externality effect here, where the more customers we have, the more useful it is for the next customer to join. So this is what we're doing in the core market. What are we doing in the mid market? Well, we launched Essentials in 2016.
And as you see, every 6 months we've added a big additional pillar to Essentials. We started with AML, we added fraud. We're adding now advanced machine learning and analytics. And in addition, as I said, we added 1 of the largest core banking provider that has adopted us. And so we believe that essentials in the next year or 2 will be a huge vehicle for us to get into that mid market.
And lastly, adjacencies. So we've been talking about adjacencies for a while. You know about casinos. About 2 years ago, there was a big heist that started with Swift and moved money and about it was an attempt to steal about $800,000,000 Most of it was caught, but $90,000,000 disappeared in through cash out of a casino in actually Macau. And from then, the regulators have been paying a lot of attention to gaming, and we've seen a wave of adoption in gaming.
It's still at the beginning. There's still a way to go. The other thing that has happened in the last 6 months is the regulators have started paying a lot of attention to cryptocurrencies exchanges. By the way, we have pretty unique technology in actually de anonymizing a lot of these cryptocurrency transactions, which is very important because as you know, once someone is on ramped, once money makes it into the crypto network, if it's not identified at that point in time, there's no way to attach the movement to a person. So you have to catch it when it comes into the network or when it leaves the network.
The next thing is MSPs, Money Service Bureaus. There are a few money service bureaus in the world. The nice thing about them is each one of them supports thousands and thousands of customers. What we're doing is we're partnering with them and through our ability with the cloud, we can now reach these vast networks of customers. And AB and C, which we talked about in the past, this is our foray completely out of the financial services market into helping customers find issues of fraud and bribery and corruption that may escape their company.
Some people kind of look at us and say, what do you mean bribery and corruption? How can you find bribery and corruption? It's like it's all cash envelopes, right? How is it even possible to detect that? Well, if you think about it, 1,000,000 and 1,000,000 of dollars of bribe do not come out of someone's ATM.
It has to somehow make its way out of the company and into someone's hands. And that kind of behavior, that kind of siphoning money is exactly like money laundering. So the same types of models that we can deploy for money laundering, we can deploy to find bribery and corruption in industries that before were completely opaque like pharmaceuticals, like mining, anyone who usually you look for it where people need to get government licenses. So these are kind of how we are deploying our technology to broader verticals. So to summarize, what we're doing at Aktomize, we're leveraging those same core technologies of cloud, AI and automation and analytics.
And we're leveraging that to grow both in our core market, down market and to adjacencies. And we believe we have a long way to go. So with that, I'll pass it to Beth.
Thank you, Ron. So before I begin and jump into some numbers, I NICE adopted ASC 606 for GAAP reporting purposes. And NICE adopted using the modified retrospective method. And what that means is that for 2018 and looking forward, we will be reporting our results for GAAP purposes under the new accounting guidance. But as we look back historically for 2017 and the prior years, our results will continue to be reported under ASC 605, which is consistent with the methodology.
Also related to the actual adoption of the modified retrospective method, there was a one time adjustment that goes into retained earnings as you move into the adoption. So how does it impact NICE? There are really two areas where it primarily is impacting NICE as an organization. They're around term licenses and product revenue and sales commissions. With respect to term licenses, under the prior accounting for 605, term licenses were generally recognized ratably over the life of the term.
And under the new accounting under ASC 606, term licenses are now generally recognized with the product revenue upfront at the time that you actually ship the product. So how do you what should you expect when you look at 605 versus 606? If you look at 606, the estimated impact for us is that there will be slightly less revenue under 606, and that relates to the term revenue that was from the historical periods and the backlog that was there, which has already been moved into retained earnings at the time of adoption. For commission expense, what you can expect is that sales commission expense was for subscription based activity being recognized generally over that subscription period. And now with the adoption of 606, what you'll find that the commission expense is being recognized over the average life of the contract.
So what that means for us in terms, again, the estimated impact you're looking at a comparison of non GAAP 605 to non GAAP 606 is that we will actually see a slight increase from going into 606 versus 605, and that relates to those active contracts which are still in effect, and the commission expense that now is going to come into the year related to the average life of the contract. So it's expense that's already been recognized, but given that it's active, it's now being stretched over the life of the contract and that pulls it into the current year. With respect to how we elected to adopt this new guidance, we've already highlighted on our earnings calls that we have continued to report our non GAAP results under ASC 605 as well as our guidance is also reported under 60 5. So we've intentionally done that. We did that really with trying to ensure that we create the best transparency in our numbers.
By doing that, we create an apples to apples comparison between the results in 2018 to the results in 2017, which are both now reported under ASC 605. At the same time, we are actually measuring under non GAAP 606 as well. So what that means is as we move into 2019, in 2019, you can expect to see the new non GAAP under 606, and you'll see it relative to 2018 and 606. So that's just a high level overview. And as a reminder, as I talk about all of the numbers in this presentation, again, all of the numbers are based on non GAAP and 605, again, for that year over year comparability.
So moving into our Q1 results, we released our earnings last Thursday and we're very happy and pleased with the results that we had in Q1. Our revenue grew 11% over the same quarter of last year. And really, the growth was fueled from our cloud business. We had 33% growth in the cloud business and a lot of that being fueled by the adoption
of CXone. And Bharat talked a lot about
some of those examples. The adoption of CXone, and Bharat talked a lot about some of those examples on our call
last week. As you look in terms
of how that impacts our business, you'll see that our recurring revenue is continuing to expand, so it increased to our recurring revenue is continuing to expand, so it increased to 69% of our overall revenue is recurring for the Q1 of 2017. And as you look across the remainder of our financial results, you'll see that not only did we have strong growth in our revenue, but we had very strong performance across all of our key metrics, gross margin, operating income, operating margin, EPS and then all the way into the cash generation. We've seen strong revenue growth over the last several years. So starting from 2015 and then moving into the guidance for 2018 this year, we've had a compounded growth rate of 16% over that time frame. And a lot of the revenue growth, which you've seen this quarter, but that's also fueled the growth over several years.
And we've talked about the cloud revenue growth, which you've seen this quarter, but that's also fueled the growth over several years. And we've talked about which you've seen this quarter, but that's also fueled the growth over several years as well as analytics. We talk regularly about analytics being embedded really in everything that we do, and analytics has been a big driver of that growth, as well as the financial crime and compliance business.
And it's important to say
that as we look at the business. And it's important to say that as we look across our end customers, we have very healthy markets, we have a lot of continued growth in business with our existing customer base. And at the same time, we continue to add a lot of many new logos each quarter. And again, on the call last week, we've started talking now about a lot of the adoption, the new logos. We've reached some records in terms of new logos that we're bringing into the company around CXone that are also help fueling that continued growth.
Our revenue is becoming more predictable. So as you look at our recurring revenue starting back at the Q1 of 2015, 47% of our revenue was recurring, and you can see that we're up to 69% in the most recent quarter. That recurring revenue really gives us more confidence in our ability to forecast future revenue streams. And as we've talked about, the other impact is that we're seeing due to that increasing subscription based revenue, we have more revenue, which we are able to see in the first half of the year. And so it means that we're less back end loaded in terms of the revenue coming in, in the second half of the year.
This is a look at the revenue breakdown and segmentation. So on the left hand side is the Q1 segmentation and geographies: 70 6% in the Americas, 16% in EMEA and the remainder in APAC. And in the Q1, we had growth in all three of our regions across the company, and that included double digit growth in both EMEA and APAC and 8% growth in the Americas. Then as you look at the split of our business between our 2 business segments, customer engagement and financial crime and compliance, this is pretty much 1st quarter. And for customer engagement, again, the growth that you saw in the Q1 results, a lot of that came from this side of the business with a 13% growth in the Q1.
And on the Financial Crime and Compliance, we had about 2% growth there in the Q1. However, that was over a really difficult comparison to 21% growth in Q1 of 'seventeen relative to the prior year. So this is a look at our gross profit trend. As you can see, if you look at the revenue and then the blue bar, at the same time, we've been growing the revenues. We've also consistently been growing our gross profit.
And in terms of our gross margin trend, you'll see on the right hand side, we also had year over year improvement in our gross margin. At NICE, we have a lot of attention and focus around our gross margin and really continuing to drive a lot of operational efficiency and profitability into our business. This is a look at specifically our product and services gross margin. On the product side, you'll see the continued increase in the gross margin as well as the services. And from the products perspective, we have started doing more development in house, so there are less fees that are going to 3rd parties, and that's been able to continue to expand our product margins.
We've also renegotiated some of the contracts we have there with vendors. And on the services side, this represents both maintenance and professional services. It's really been a very strong area of focus for the company over the last several years. However, it continues to be an important area of focus. You can see that we still manage to continue to increase that services margin with over a point of increase in the most recent quarter.
On the services side, some of the things that we've done is, 1st of all, just in terms of our staff, we're always monitoring utilization, so we're driving additional utilization from our teams. We do a great amount of tracking metrics and setting targets for our teams that they are attaining in terms of really monitoring and measuring the overall health and efficiency of the business. Outside of some of the higher been able to find very strong talent outside of some of the higher cost regions, and that has also assisted us in boosting the margins. So this is a look at our cloud picture. And again, cloud, I will just remind everyone, this is cloud across NICE.
So this encompasses the CXone business, Actimize Essentials as well as some other analytics in the cloud. And what we're showing here, starting with the far left, is Q4 'sixteen. This is the time when we actually closed the inContact acquisition in November of 'sixteen, so we had half a quarter there. And you can see that quarter after quarter after quarter, we've continued to have consistent growth in the revenue. So we have, again, great predictability and stability that we're seeing.
And at the same time, while we've grown the revenue, you'll see that on the gross margin, also been continuously improving on the gross margin. So one of the things that we've talked about on our calls is high quality cloud revenue. And what that means for us is that we are bringing cloud that's profitable, and you can see that really in our margins. So as we look at our customer base, as we look in the SMB space, we're really focused more on the M of the space and obviously moving that more up into the large enterprise. That means we're focused on the end user that has higher retention, is stickier, and that really translates into profitability us as a company.
In terms of looking into the future, we continue to expect the growth in the cloud revenue coming from Essentials on the Actimize side, Actimize Watch, as well as the again, the big driver of CXone driving that continuous growth. And with respect to the margins, we do expect to be able to continue to expand the cloud gross margin by some of the steps that we've taken more recently. Some of the things we've done have been to look at our network providers opportunities, as opportunities as well as really just getting leverage as we add more revenue and from the higher end of the market again dropping directly into leverage of the model. This is a look at the operating income trends and the results and the gross margin increases that I've mentioned are showing up as well in the operating income. So again, you can see the consistent increase in our operating income and the year over year expansion in the operating margin.
One of the things I would highlight here as well is that I mentioned we closed inContact in the Q4 of 20 16. So it's also important to note that when we acquired Incontact, they were roughly kind of a breakeven ish company, and we mentioned that we would make sure it was accretive. So I think we've demonstrated at this point that we've delivered on that promise, and that really is demonstrated in our performance here. This is a view of our EPS growth. Consecutively in last two years as well as 16% growth from $0.89 to $1.03 in terms of our EPS in the most recent quarter.
And then finally, I'll close with just a view on our cash flow from operations. Went from $525,000,000 of cash on the balance sheet at the end of December up to 647,000,000 at the end of the Q1, and you'll see that in the high bar to the right. So the healthy business that we're doing as a company, the way that we're keeping our eye on ensuring we have operational efficiency and we're driving that into our profitability is really being shown here in terms of it's going all the way in terms of the model into really positive strong cash generation as a company. And as we look across our competitors, this is also something that really differentiates us in being one of our strengths. So our cash flow from operations and our cash in our health and our balance sheet overall is in a very positive place, and it really is enabling us for ensuring we have success in our future growth.
And that concludes my comments. Thank you.