NICE Ltd. (NASDAQ:NICE) Q4 2022 Earnings Call Transcript

And I believe they are taking decisions that are impacting negatively their ability to compete in, again, both the short term and the long term. So that’s one competitive landscape, and I think, it provides a great opportunity for us. We see it already that customers and partners are starting to move away from selecting these platforms. The other side of the market, as you’ve mentioned, our customer €“ sorry, our vendors that are either in the last €“ basically since they started, they basically were banking on a continuous injection of capital. They were either losing money or close to breakeven, and that is no longer the case, and they no longer have the ability to do that. And we hear about a lot of cost reduction activities that they are doing and others that are starting now to experience deceleration, a significant one, in the growth rate and are focusing their efforts on profitability.

We operated since ever looking for profitable growth. We have the muscles and the know-how in the company on how to drive growth, drive profitability. And at the same time, we are constantly investing at least 15% of our revenues in R&D making sure that we continue to open the gap and our list of differentiation is just getting bigger and bigger by the day. And we think that it will be very, very hard, potentially impossible, for others, especially in this economy to compete with us in the long run. And I think one last thing I would say is that if you look on, as far as we know, most or all of our competitors went through several rounds of layoffs and we are actually hiring people these days.

Tyler Radke: Got it. Thank you. And Beth, on the guidance for 2023, you commented that product revenue can have some fluctuations, which we’ve certainly seen that in years past. But I am curious if there is a broader just mix shift that is occurring that you’re embedding in 2023 aside from the usual volatility just given that the Cloud guidance was relatively strong in line to slightly ahead of the Street, but total revenue was quite a bit lower. So maybe is there a bigger shift or something you’re doing on the sales incentive side to drive a bigger mix shift to Cloud. If you could just kind of elaborate on the product assumptions in that outlook. Thank you.

Beth Gaspich: Yes. Thanks, Tyler. It’s a great question. And it is embedded in our guidance for next year. We saw that our Cloud revenue as a percentage of our total revenue mix in Q4 was at a record 63%. We expect that momentum in our Cloud to continue to drive our overall growth. And of course, that means that the mix will continue to be further concentrated as more Cloud revenue as a natural result of that, of course, that means our premise-based business and particularly our new product revenue is expected to see reductions in the current year and looking forward. And of course, that’s completely aligned with our expectations and our strategic focus to do really continue our transformation fully as a Cloud company across all of our business segments.

Barak Eilam: Maybe just to add to that because you asked about the sales incentive. So the answer is absolutely yes. We think this is not just the year. We’ve done it in the past few years, but this is time for us to go all in, going back to the comment before about the competitive landscape and prioritize the Cloud in everything that we do, by the way, across all our business lines. We believe it’s the right thing for both the mid- and the long-term. And as a result of that, as Beth said, we are going to experience a decrease in product revenue, but it’s the right thing for building ourselves as a very large and fast-growing Cloud company, especially with the fact that our Cloud is coming at north of 70% gross margin that is not just a top line play, it also allows us to build an extremely profitable business moving forward.