Feb 16, 2017
Executives
Marty Cohen - Vice President Investor Relations Barak Eilam - Chief Executive Officer Beth Gaspich - Chief Financial Officer
Analysts
Shaul Eyal - Oppenheimer Dan Bergstrom - RBC Capital Markets Jonathan Ho - William Blair Tal Grant - UBS Tavy Rosner - Barclays Gabriela Borges - Goldman Sachs Paul Coster - JPMorgan Greg McDowell - JMP Securities
Operator
Welcome ladies and gentlemen to the NICE conference discussing Fourth Quarter and Full Year 2016 Results, and thank you for holding. All participants are present in listen-only mode.
Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded, February 16, 2017.
I would like now to turn the call over to Mr. Marty Cohen, Vice President Investor Relations at NICE.
Please go ahead.
Marty Cohen
Thank you, operator. With me on the call today are Barak Eilam, Chief Executive Officer; Beth Gaspich, Chief Financial Officer; and Eran Liron, Executive Vice President Marketing and Corporate Development.
Before we start, I would like to point out that some of the statements made on this call will constitute forward-looking statements in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Please be advised that the company's actual results could differ materially from these forward-looking statements.
Additional information regarding the factors that could cause actual results or performance of the company to differ is contained in the section entitled Risk Factors in Item 3 of the company's 2005 annual report on Form 20-F as filed with the Securities and Exchange Commission on March 23, 2016. During today's call, we will present a more detailed discussion of fourth quarter 2016 results and the company's guidance for the first quarter and full-year of 2017.
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. I will now turn the call over to Barak.
Barak Eilam
Thank you, Marty, and welcome, everyone. I’m glad to be on the call with you today.
We are pleased to close the year on a high note as we reported fourth quarter revenues of $329 million, representing 20% growth over Q4 2015. The growth reflects across the board strength in each of our business segments, healthy end markets, and further growth in analytics, which represented 65% of new bookings in Q4.
We were also pleased to see continued strong leverage in our operating model. Operating income for Q4 was $94 million, representing 16% growth compared to Q4 of last year.
The operating margin was 28.6% and earnings per share was $1.18 for Q4. Two years ago, at the beginning of 2014, we identified certain trends that were taking place in our markets, including the increasing demand for analytics and the initial adoption of the cloud.
We had a vision to position NICE operationally, structurally, and with the right assets to capitalize on these growing trends and the eventual disruption in our markets that would come about as the results. This vision culminated in the NICE 2020 strategic plan.
While we could not publically provide a complete map of the plan ahead of time for most competitive reasons, we did provide ongoing updates as the plan unfolded. The first step in NICE 2020 was to better position NICE operationally.
We realigned internal processes from R&D to sales putting place a more effective go-to-market strategy, strength and innovation both product faster to the market and streamlined our overall operations. The next step was to structurally realign NICE to fully transform into a true enterprise software company, and we accomplished through the successful divestiture of our defense business.
At the same time, through rapid innovation we grew our portfolio began injecting analytics into all of our platform and started to cloudify more of our solutions. We then further strengthened our solution portfolio analytics and cloud offering with the acquisitions of Nexidia and inContact.
Nexidia gives is the most powerful set of analytics in the industry and inContact provides us an unmatched cloud platform that is greatly extended as accessible markets. The ongoing successful execution of NICE 2020 has led to significantly improved growth and profitability and is a major reason behind a consistent strong quarterly performances.
NICE 2020 has also positioned us well to capitalize on the disruptions taking place in our market namely operational analytics, omnichannel, and a transition to cloud. We executed the NICE 2020 faster than planned, and now we’re in the right place at the right time to enter the next phase of our strategy called NICE To Be.
NICE To Be is our vision for NICE as a $2 billion company. Let me provide you with some of the opportunities that we see ahead of us in each of our business segments that gives us a line of sight to the $2 billion mark.
In customer interactions, the acquisitions of both Nexidia was its powerful analytics, and inContact the leading provider of cloud contact center combined with NICE's industry-leading WFO suite has greatly expanded our opportunities in all segments of the market. At the high-end of the market, we have already established ourselves as the defector standard and the clear leader.
A major opportunity here is to take all of our customers to the next generation of high-performance analytics or what we call analytics has no limits. Moreover, customers are demanding omnichannel solutions to get a better handle on what is happening in the organizations across channels.
This is a great opportunity for NICE and we see continued adoption of a customer journey solutions. Another opportunity at both the high-end and mid-markets comes from the combination of inContact's cloud platform and NICE’s leading WFO suite delivering to our customers the industry's only full end-to-end integrated analytics driven suite of customer service solutions in the cloud on a true multi-talent architecture.
We are already seeing great traction here, where an offering of this site is virtually absent. Lastly, up until now both Nexidia and inContact operated mostly in the US.
We can now leverage NICE's global assets to accelerate international expansion of the cloud and analytics offerings. In financial crime and compliance, we have the two-pronged strategy with NICE To Be.
First, we leveraged our technology to enable large financial institutions to considerably lower the cost of compliance, while maintaining top-notch compliance standards. Second, we leverage a strong brand technology and expertise to expand to adjacent markets that have the same requirement, but have been traditionally underserved.
On the first point, we are helping our customers to transition from compliance at any cost to the right cost of compliance utilizing our technology. Modern technology and sophisticated analytics allow our clients to automate many of their medial tasks and even sound the more cognitive tasks that are currently performed by humans or without compromising on quality and re-growth.
A second expansion opportunity for us is adjacencies. First, we introduced our central cloud offering that allows midmarket financial institutions to access our industry-leading capabilities.
We released AML Essentials in the second quarter of 2016 and we have already seen multiple sales and implementations of this solution. The midmarket banks and credit union represents an opportunity that in and of itself doubles our addressable markets for its financial crime and compliance.
Next, regulatory requirements, especially around AML, which helps combat terrorism, are spreading to nearly all industries that move money in one form or another. For instance, we see demand in gaming and entertainment FinTech [ph] payments, insurance, and more.
We have therefore established partnerships with the leading system integrators to help us expand further into these and other industries. In both our business segments, customer interactions and financial crime and compliance are cloud and advanced analytic strategies are starting to merge a longer to offer collective insights.
This is unique capability that leverages our access to broad data across our cloud customers applying analytics to it and provides customers collective insights to predict emerging trends of phenomena that they would not be able to discern from their individual organizations data. NICE To Be, the next phase of our strategic plan.
It encapsulates employing our industry-leading assets to further penetrate markets in which we already operate and enter new market segments and adjacencies to safe NICE’s emotion towards being a $2 billion company. We feel confident in this strategy and we have already seen strong evidence during Q4.
Let me share some examples. We signed several multi-million dollar deals for omnichannel solutions.
In a seven digit deal, a major health insurance company expanded its full footprint with our customer journey solution to increase self service utilization and gain visibility into cost channel journeys. There were also two 7-digit deals for customer journey solution from two major telecom companies both those deals being competitive replacements.
We also continue to see great traction in our next-generation analytics. One major global bank signed an 8-digit deal for analytics and our NICE-engage platform so as to further advance the analytics capabilities.
Furthermore, we gained multiple new customers adopting our analytics with no limit solutions, including a large telecom provider and an e-commerce company. Also, one of the largest banks in the world expanded its commitment with NICE in an 8-digit deal.
In financial crime and compliance, our strategy to enter new adjacencies is already taking hold. We signed another casino in the fourth quarter, which was a 7-digit deal for our AML suite.
There was a 7-digit deal with an insurance company, which is a new customer for AML, fraud, ERCM, and the deal was a competitive replacement. We signed a new customer in the area of human capital management in a 7-digit deal for a global AML program.
It was a competitive deal that we won for what the customer describes as a superior product and exception of the main knowledge. We signed an 8-digit deal which allows US Bank for AML and fraud and another 8-digit deal, which allowed insurance company for fraud, AML, and ERCM.
This deal was also a competitive replacement. In summary, 2016 was very busy and successful year for NICE.
We launched many new products, upgraded existing solution, and took on a record number of new customers while seeing continued expansion of our offerings within our existing customer base. We made two significant acquisitions that are helping us to tap new markets with an unmatched product portfolio.
We accomplished a lot and at the same time continue to execute well as reflected in the strong 2016 results. As we head into 2017, we are well positioned for continued success.
We have the industry-leading technology assets, we have talented and passionate people, and we are in one of the strongest competitive positions that we have ever been. All this, together with the healthy end markets that we operate in makes us excited about the opportunities that lie ahead in 2017, and beyond as we move forward with NICE To Be.
I will turn the call over to Beth, who will review our financial results.
Beth Gaspich
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 fourth quarter and full year of 2016, as well as our outlook for the first quarter and full year of 2017.
Before I begin, please note that the financial results include the inContact acquisition for the period from the closing of the acquisition until the end of the year. Also the financial results represent continued operations and excludes the divested businesses for Q4 2016 and the comparative numbers for 2015.
These two businesses are presented as discontinued operations. However, the cash flow statement includes the results of both divestitures.
And now, I will review the results. Revenue for the fourth quarter was $329 million, which represents an increase of 20% from $274 million in the same period of last year.
Excluding the impact of currency exchange rates revenue growth was 22%. Revenue for the full year 2016 increased 11% to $1.30 billion.
Excluding the impact the currency exchange rate, revenue growth was 12%. Similar to previous year, 2016 was a backend loaded year and we expect this seasonality to continue in 2017 as well.
Customer interaction interactions revenues for the fourth quarter of 2016 grew 21% to $240 million, and financial crime and compliance revenues grew 18% to $89 million on top of the strong growth of 16% in Q4 2015. For the full year of 2016, customer interactions revenues were $768 million, an increase of 12%; and financial crime and compliance revenues were $262 million, an increase of 10%, compared to the same period of last year.
On a regional breakdown, revenues in the Americas were $253 million in the fourth quarter and $734 million for the full year of 2016, compared to $178 million and $630 million respectively for 2015. Revenues in EMEA were $53 million for the fourth quarter and $195 million for the full year of 2016, compared to $65 million and $197 million, respectively for 2015.
Revenues for the Asia-Pacific region were $23 million for the fourth quarter and $102 million for the full year, compared to $30 million and $100 million, respectively for 2015. Looking at revenues by business line, product revenues accounted for 34% of total revenues in the fourth quarter, and 30% for the full year 2016, maintenance revenues accounted for 34% of total revenues in the quarter and 41% for the full year.
Professional services and cloud accounted for the remaining 32% of total revenues in the fourth quarter, and 29% for the full year of 2016. Gross margin in Q4 reached a record of 73.9%, compared to 72.9% in Q4 last year.
The gross margin improvement is mainly a result of a favorable product mix, and continued efficient utilization of the service organization. For the full year 2016, gross margin was 72%, compared to 70.6% in 2015.
Operating income in the fourth quarter increased 16% from $81 million to $94 million. We expect to see continued double-digit growth in operating income.
Operating margin reached 28.6%, compared to 29.7% last year. The change in the operating margin is the result of the consolidation of inContact, which has a lower operating margin compared to NICE.
For the full year 2016, operating margin increased to 26.5%, compared to 25.4% in 2015. The effective tax rate for the quarter was 22.1% for the fourth quarter, compared to 18.9% in the same quarter last year, and 21.4% for the full year 2016, compared to 19% in 2015.
The tax rate was impacted by a slightly different mix of geographies with different tax rate. In the fourth quarter of 2016, we had net financial expense of $1 million as a result of the debt we issued during the quarter, compared to net financial income of $1.2 million in Q4 of 2015.
Earnings per share in Q4 2016 increased to a record of $1.18 compared to $1.09 last year, a growth of 8%. For the full year, earnings per share increased 14% to a record of $3.61, compared to $3.18 last year.
Fourth quarter cash flow from operations was $38 million and $220 million in 2016. Total cash and financial investments were $286 million at the end of December 2016, and total debt was $465 million.
As part of our share repurchase plan, we bought back shares totaling $9 million during the fourth quarter. And now, I will turn to guidance.
For the first quarter 2017, we expect total revenues to be in a range of $303 million to $313 million and fully diluted earnings per share to be in a range of $0.81 to $0.87. For the full year 2017, we expect revenues to be in the range of $1.330 billion to $1.354 billion, and fully diluted earnings per share to be in the range of $3.80 to $4.
That concludes my comments. I will now turn the call over to the operator for questions.
Operator?
Operator
Thank you. [Operator Instructions] Your first question comes from Shaul Eyal from Oppenheimer.
Please go ahead.
Shaul Eyal
Thank you. Good afternoon guys, congrats on a solid end to a very successful and busy year.
Barak, industry is clearly going through a rapid change on the one hand, and on the other hand industry is also experiencing a rapid pace of consolidation, as it relates to NICE where do you see a competitive advantage and how does it impact the industry and I have a follow-up.
Barak Eilam
Sure. No problem.
Indeed our industry - the customer service industry is going through certain changes. I believe that the reason for those changes is the dynamics that we see in the buying behavior and the need for certain change in solution from customers those that I talked before in my previous comment, the market is looking for dramatic solution in the area of omnichannel cloud and analytics, as I have described before.
And I believe that the changes we see in the competitive landscape is a result of few different competitors, some that are missing some of the assets, and some, some time the same that are also struggling financially due to a significant debt and we are all here to different views on different players in this market. With respect to NICE, we believe that all the activity that we have done in the last three years and even more so in 2016 well positioning us to offer what the customer needs this day, which is a full suite of solution, allowing them to face the omnichannel opportunities with high sophistication of analytics and offering all of that in a through cloud solution that is fully multi-tenant and elastic given the recent and strategic activities that we have done, and it’s definitely well positioning us vis-a-vis the competition.
Shaul Eyal
Got it. And you know my follow-up, for those of us who have been following the name for about getting close to two decades now, knowing how NICE tends to forecast its annual guidance initially, are you again taking a more conservative stand of seeing how the year unfolds and then reassessing guidance as we move forward, is that a fair view Barak?
Barak Eilam
I would say that the guidance is what we believe is the right to view at the beginning of the year. Just beginning of the year, we have done two major acquisitions one of them was just late in 2016, bring it all together, I will handle full of work, very good work with a lot of opportunities in our hand, but this is just the beginning of the year and we are - this is what we see to begin with.
Shaul Eyal
Got it. Thank you very much.
Congrats.
Barak Eilam
Thank you.
Operator
Thank you. Your next question comes from Dan Bergstrom from RBC Capital Markets.
Please go ahead.
Dan Bergstrom
Yes, thanks for taking my questions. So with analytics 65% of new bookings this quarter, it is up year-over-year and quarter-over-quarter sort of EMEA points to strong demand from the inContact customers, could you maybe talk to the reception from inContact for your analytics solutions?
Barak Eilam
Sure, no problem. First of all, we did see for many quarters now and we are reporting almost every quarter about the growth that we see in the demand for our analytics solution and it is across the board, across the two industries.
As you look at NICE in all the domains where we operate, those things I have talked about, analytics is one of them, is one of our strongest assets and one of our strongest capabilities and today as you can see the majority of our new business come from that area. So, first of all we see the demand across the board.
Furthermore, as we started to integrate inContact there are many, many different assets that NICE has to offer and are already offering to either the existing customers of inContact and also the ones that we are on boarding as we speak and the prospects that we are looking to add. And also the other direction, by the way, many assets of inContact that are very applicable to the NICE customer base.
So we're very, very happy with the traction that we get both from customers, partners, and also the market overall and not less important also for our employees which are very excited about the joining forces together with inContact.
Dan Bergstrom
Great. Then maybe a bigger picture type question, with the deal close you’ve got additional disclosure around recurring revenue, I was wondering if we should be thinking about the financial model any differently or keeping anything in mind, should we be more focused on deferred revenue or billings, I guess any thoughts about how you are thinking about the financial model versus previously with more than 50% in recurring revenue now?
Thanks.
Beth Gaspich
Sure. Thanks for the question.
So starting in 2017, we do expect to provide more metrics around the cloud base for our business and to be able to provide more visibility into the recurring revenue portion of our business. So, we’ve already seen a trend really starting right away in Q4 with increasing the amount of recurring revenue as a percent of our total and we expect that obviously to continue as we enter into Q1.
So, we will be able to provide metrics starting with the first quarter of 2017 information and results.
Dan Bergstrom
Perfect. Thanks.
Barak Eilam
Thank you.
Operator
Thank you for your question. Your next question comes from Jonathan Ho from William Blair.
Please go ahead.
Jonathan Ho
Hi good morning and congratulations on the strong results. I just wanted to start out on - with a question in terms of the number or percentages of new customers that are electing SaaS and if could you could just give us any color in terms of the trend there?
Barak Eilam
As I said before, cloud represents a great opportunity for us and we started our cloud journey as a company several years back and all of the solution, all of the new solution that we developed in the last few years we have managed to offer both with cloud and some of them on premise, as well as the existing solutions that we have started to upgrade into cloud fashion. Obviously, both Nexidia and inContact are fully cloud companies with inContact offering a complete cloud offering.
What we seen the market is a gradual, but very nice and fast adoption that is going at market. Historically, NICE did not play in the midmarket itself and for us it presents a significant opportunity because it allows us to take our overall portfolio and thanks to inContact now offering it to market that is doubling basically the size of our market.
Similarly in the financial crime and compliance business, historically we have been playing and doing almost all our business at the higher end of the market, as you heard in my previous comments besides going adjacent market, we are also with the cloud can now go to the mid-market, which by itself is a very large market for financial services and with the essential offering of financial crime and compliance, we have seen a greater adoption in that segment of the market. So the answer is that we do see a greater adoption, midmarket going up, and for us it’s a great opportunity as it allows us to address both markets and also market segments in terms of offering that we didn't play in before.
Jonathan Ho
Got it. Got it.
And then are you guys potentially impacted by the shift to ASC 606 and can you give us any color from that potential as well?
Beth Gaspich
Yes. So, we do expect to be impacted, it’s something that we’re already looking at and we are essentially working now to be poised to be adopted in the 2018.
Jonathan Ho
Great, thank you.
Operator
Thank you for your question. Your next question comes from Tal Grant from UBS.
Please go ahead.
Tal Grant
Hi thanks for taking the question and congratulations on a very strong quarter. In the financial crime and compliance division, just wondering related to that, there is obviously talk in the media about Trump taking down or removing some of the regulation in the banks, just wondering how is that going to impact your business if it’s all, will that impact current business or potentially demand going forward, I know you’re moving to different verticals, but how much of an impact could that potentially have?
And then I was a little surprised you didn't break out inContact, are you are not planning to tell us the inContact revenues for Q4 or next year at all? And then I have a follow-up if possible.
Barak Eilam
Sure. So, we obviously like everyone addressing the different changes, different in every aspect with the new administration in the US, we haven't seen any changes to the dynamics of our business and you have seen that Q4 results in our financial crime and compliance business for example were very, very strong ending a very strong year in that business as well.
And if you think about this business, the demand is driven not necessarily from the regulations themselves while there are many regulation in place. Some of them by the U.S.-based, some of them international and global regulations, but the demand that we see is coming from actually some very different aspects.
The first one that I have mentioned in the AML space, AML is no longer just a matter of financial regulation, it’s other from different aspects of taxation, monitoring taxation, and also as I said fighting terrorism, and that’s only growing and it’s actually growing much further than just financial services, as I have mentioned to anyone that’s moving money. The other aspect that we see great adoption is indeed by financial services that are trying to save money and save cost and taking the many tens of thousands of people that each large bank adopted in order to meet different compliance and do those task in a more estimative way and this is where we see the majority of the investment go in our direction.
So, we don't see any impact - the recent changes in regulation and right now we don't believe that the changes that may come or not in terms of the regulation we have an impact on that business. With respect to the second question on inContact, as we shared in our plan to begin with, we are basically integrating and integrated the products we are now offering those on a combined rate to our customers and this will serve the customer service market as a whole, and we don't plan to break it apart as it is one business from the first day of the integration.
Tal Grant
Okay. And then thanks for that.
I’m just wondering on the trade receivables, I think even if, obviously it goes up normally in Q4 a little bit, and plus you’ve got the inContact but it feels like you went up quite a lot from Q3 to Q4, I’m just wondering if there is a like-for-like number, you can share that or maybe not giving what you just said?
Beth Gaspich
Sure. So, we do present them in a combined fashion and you highlighted that inContact the opening balance became part of our accounts receivable, but the primary thing to highlight is that, if you think about our age receivables and that also pertains to our cash flow is, if you look at the change kind of year-over-year in cash and accounts receivables, we continue to include cash that we collected for the divested businesses during the course of 2016.
Whereas in 2016 there were actually cash outlays back to those divested businesses.
Tal Grant
Got it. Thank you.
Operator
Thank you for your question. Your next question comes from Tavy Rosner from Barclays.
Please go ahead.
Tavy Rosner
Hi thanks for taking my question. You talked about extending to new markets, probably for financial crime and compliance, just to see and also regarding inContact's entering new geographies, do you expect sales and marketing expense to increase as a result of that?
Barak Eilam
No, we believe that we are well-positioned with the existing sales capacity that we have. One of the, obviously we have received greater sales force coming with inContact and also with Nexidia, and in the case of the financial crime and compliance we are actually expanding a lot, as a said the ecosystem that we have around us, so we bring the technology we bring the domain expertise in terms of the go to market, our sales people are now way more than before are working with consistent integrators that are bringing the expertise and the relationship in markets where we didn't operate before.
So we feel very good of the current investment in sales and marketing and coming with the brand that we are, the stronger brand that we are we believe it’s okay, also don't forget that the adjacencies that we are growing after are very nearby adjacencies, where NICE and it’s different names are well known and it helps us very fast as we step into these markets to establish ourselves as a leader.
Tavy Rosner
That's helpful and on the two acquisitions you made this year, are they cost cutting that you can implement, and are those already baked into your guidance for 2017?
Barak Eilam
Yes, so when we announced, for example the acquisition of inContact, we talked about several synergies that exist between the two companies just to remind, one of them was the fact that we combine together two public companies; the other one is that there are a lot of corporate activities MIF [ph] Systems, IT et cetera that inContact is a smaller company just started to invest in and all of a sudden being part of NICE, they can enjoy those platform and infrastructure from NICE. And lastly, the fact that inContact did not have a major W4 offering by themselves and now they have the one that is a market leader for NICE and they don't need to take other solutions and pay royalties for that, altogether there are synergies opportunity, we have baked that into our model for 2017, as we realize those synergies during the year, some may come immediately, but some will realize as the year ago by, and we expect to realize some of those synergies later in the year.
Tavy Rosner
Thank you, Barak.
Barak Eilam
Thank you.
Operator
Thank you for your question. Your next question comes from Gabriela Borges from Goldman Sachs.
Please go ahead.
Gabriela Borges
Hi good afternoon, thank you for taking the question. Barak may be on the NICE To Be plan; I was hoping you could share some more assumptions with us and how you are thinking about getting to that revenue level?
How shall we be thinking about timeline specifically, and now that string factors two or three big string factors that could determine what sort of trend line that happens on? And then Beth, if you could just comment on, at that sort of scale what type of margin profile you think is qualitatively the company might be able to achieve?
Thank you.
Barak Eilam
Thank you for the question. So, as I described NICE To Be is our strategic plan at the moment.
Two years ago we came with NICE 2020, back then we got a lot of questions and I believe during those three years we have - every time that we did another move, we provided more and more information of the progress. There is a very detailed plan for us behind NICE To Be we have the line of sight to this goal.
We believe this is important for us as a company to aim high, and this is what we are doing. We are not sharing our internal module and when exactly we're planning to be there, but differently we have a line of sight for it and we are looking for it to get there.
Beth Gaspich
Yes, and with respect to the question around the margins, obviously, we have seen a lot of margin expansion for NICE in the last few years and as I mentioned with the acquisition of inContact, we will see some short-term declines as a result of lower margins as part of their business. However, Barak talked about this synergy that we expect that we start to realize during the course of 2017.
So, we do expect to see a continued gradual improvement of our operating margins over time back to the relative ranges that we were prior to the acquisition.
Gabriela Borges
That's helpful thank you. Please go ahead.
Barak Eilam
And also in 2017, we expect the operating profit to continue to and go in double-digit.
Gabriela Borges
That's helpful thank you. As a follow-up, if I could, on the earlier commentary on inContact and some of the cost synergies that you are able to realize, could you give us some perspective on how the buying cycle of the customers work between contact center infrastructure and the cloud and across workforce engagement or customer engagement solutions, do you find that the buying cycle often coincide and as [indiscernible] people work on the organization that are making those type of decisions adopt contract center and for customer engagement?
Thank you.
Barak Eilam
Yes, absolutely, and I believe that this is one of the reason why we have decided to acquire inContact. Two of the years we have been operating in the customer engagement and the WFO space actually for the last two decades.
And up until the cloud era, while it was the same people making the decision those decision were sequential, sometime made the same time, but in many cases they were done one after the other. The cloud changes, this paradigm and we definitely see that now is the cloud those decisions are made together as someone decides to move to the cloud and they do have an inflow for the routing and ACD and smart - smart routing and smart omnichannel, in many cases we will take the WFO decision at the same time.
And then, we obviously saw the opportunity not just to increase the tax rate, but also to enjoy the growth on both sides of this market segment. So, to sum up, it’s the same people in those, in enterprises that take the decision for the customer engagement WFO analytics and the routing and the infrastructure of the contact center, and the cloud now makes this decision in many cases at the same time.
Gabriela Borges
I appreciate the perspectives. Thank you very much.
Barak Eilam
Thank you.
Operator
Thank you for your question. Your next question comes from the line of Paul Coster from JPMorgan.
Please go ahead.
Paul Coster
Yes, thanks for taking the question. The revenue guidance for 2017, looks a little light to me, if you assume that inContact was approaching a $300 million run rate for the year than in size very low single-digit growth for the legacy business, even if you do that back a bit, it is difficult for me to sort of understand, so perhaps you can talk to me about the revenue guidance, it looks very conservative.
Barak Eilam
As I said, we made the acquisition in November. It’s the early days of the acquisition, obviously it takes a lot of bandwidth from both management of the companies as we build not just for the short-term, but also for the long term we are very busy with the product integration, you see a lot of product announcement coming from us that give was great opportunities for the road ahead, and we believe that it is the right thing for us to do, to come with this guidance, which we believe is very healthy, and allow us to execute well on our strategic plan.
Paul Coster
Are you suggesting Barak that there is some product innovation that’s in the pipeline and the claims the customers are holding back a little bit, pending the release of that on SaaS platform?
Barak Eilam
No, I don't think it is related to that. That’s just a normal - the expectation that we have model of the minimum disruption in the beginning as we would like also to aim for the mid-term and not just for the short-term.
In terms of the customers we are see actually great traction from customers that would like to start and adopting the combined solution, it’s the beginning of the year and this is the right range for us to start the deal, obviously as the year progresses we’ll assess how fast we are executing on the plan.
Paul Coster
Got it. We used to get excited about 7-digit deals now, 8-digit deals are quite common for you, is there any difference in the timeline with which the revenues are subsequently recognized, is it shifting more towards a product business and less of a professional services business and therefore realized within 12 months for instance.
Barak Eilam
Not necessarily, I am trying to think if there is a big difference, I think that from revenue recognition it’s similar to what we have seen in 7-figure deal, maybe if there is a difference we are talking about few months not something substantial. The reason by the way that we see going size of the deal also if you look historically, I think you characterize it correctly, we used to get excited, we still by the way get excited by 7-figure deal, but we have bought large amount of 7-figure deals, and 8-figure deals, I think the reason for that is throughout the year and for sure in 2016 we have managed to grow our portfolio and our approach is that when possible we offer customers instead of taking a very stager approach taking the not - maybe the full suite or large amount of suite going up to larger deployment and that’s the reason that we see those larger and larger deals, which I think characterize companies with the growing portfolio.
Paul Coster
Great, thank you.
Barak Eilam
Thank you.
Operator
Thank you for your question. Your next question comes from Greg McDowell from JMP Securities.
Please go ahead.
Greg McDowell
Great, thank you very much. Just one question, Barak I was wondering if you could talk about some of the differences between the NICE 2020 plan and the NICE To Be plan, it certainly feels like the NICE 2020 plan has this balance of revenue growth and operating margin growth, but also consisted of - as you mentioned divestitures and some large acquisition, so as you think about some of the differences between the two plans, maybe if you could talk about, maybe where you are optimizing, what you're optimizing for the most in the NICE To Be plan?
Thanks.
Barak Eilam
Sure, not a problem. So, if I look in retrospective on the NICE 2020 plan as we put in place two years ago, we were a very different company, obviously, two years with different set of assets playing in somewhat different markets from today.
And the main things of that plan, that was a plan for a bit longer period and we have managed to move faster on this plan was to - as I said reorganize the company that’s the one thing, to focus the company and to start building both organically and in organically, assets that will put us in the right market and the right market sizes. And also to streamline the different infrastructure processes, teams, department in the company to be able to get to the next level and this is to start scaling up the company as we have done in the last few months, and as we plan to do further in the future.
So that was the NICE 2020. The end, not exactly the end, but where we are today is in a place where we actually, very different from 2014, we play in a much larger addressable market.
If you compare the set of addressable markets where we play in the beginning of 2014 to today, we are in significantly higher addressable markets and with the right assets. So the main theme, as I suggested in NICE To Be is actually to leverage on all the opportunities we have created for ourselves with the main themes of analytics, cloud, omnichannel and the combination of those as I have mentioned and now starting to capitalize on those many opportunities that we have created in much bigger addressable markets.
With respect to the financial impact, the NICE 2020 created multiple opportunities both on the top line and the bottom line, and we expect similar opportunities also in the NICE To Be, we expect to have also a very nice go from the top line and at the same time have a very good leverage to the bottom line with the additional element also of more and more recurring revenues and changing mix of the recurring revenues, which happen obviously from more and more cloud solutions.
Greg McDowell
Thank you.
Operator
Thank you for your question. We currently have no further questions.
Barak Eilam
Thank you all very much for joining us today. Have a great day.
Beth Gaspich
Thank you.