Nov 4, 2017
Executives
Marty Cohen - VP, IR Barak Eilam - CEO Beth Gaspich - CFO Eron Liron - EVP, Marketing and Corporate Development
Analysts
Greg McDowell - JMP Securities Dan Bergstrom - RBC Capital Walter Pritchard - Citi John DiFucci - Jefferies Paul Coster - JPMorgan Jeff Kessler - Imperial Capital Gabriela Borges - Goldman Sachs
Marty Cohen
Thank you, operator. With me on the call today are Barak Eilam, Chief Executive Officer; Beth Gaspich, Chief Financial Officer; and Eron Liron, Executive Vice President, Marketing and Corporate Development.
Before we start, I’d 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 the performance of the company to differ materially is contained in the section entitled, Risk Factors, in Item 3 of the company’s 2016 Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on April 21, 2017. During today’s call, we will present a more detailed discussion of third quarter 2017 results and the company’s guidance for the full year 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’ll 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 and very pleased to report another outstanding quarter on both the top and bottom line, demonstrating continued strong momentum in our business.
We reported Q3 revenues of $327 million, which represented an increase of 36% compared to Q3 last year. Furthermore, we had strong double-digit growth in operating profit and earnings per share compared to Q3 of last year.
In addition, cash flow was again very strong as we generated $106 million of cash from operations for the quarter, which is an increase of more than 2.5 times the amount of cash flow in Q3 last year. This $307 million of cash from operations that we generated over the first three quarters already far exceeds the amount generated for all of last year.
Earlier this year, we spoke about our NICE2B strategy, which encapsulates the four pillars of omnichannel, cloud, analytics, and artificial intelligence. The strong results we have reported so far this year, and even more pronounced this quarter, demonstrate that our strategy is working well as we have greatly expanded our cloud presence and increased our total addressable market fivefold, all while driving a material shift in market share.
There are a number of elements driving our success in the cloud in which cloud revenues not only increased substantially year-over-year, but also increased 15% sequentially, over the second quarter. Contributing factors to our strength in the cloud included continued double-digit growth in analytics, much of it being cloud based, double-digit growth in managed analytics, and triple-digit growth in Essentials, our cloud-based Financial Crime and Compliance solution.
Early in Q3, we launched CXone, the industry’s first fully integrated open customer experience cloud platform for companies of all sizes. Since the launch of CXone, we are now addressing cloud opportunities in all market segments and the pipeline is rapidly building.
Furthermore, CXone is starting to win accolades from leading industry analysts. In Q3, we added over 200 new cloud contracts, many of which encompass the CXone platform.
Moreover, we now have more than 80 partners in the CXone partner program, DEVone, which is an evidence of the market acceptance of our platform. Since the beginning of the year, much of the success we have experienced is the result of our ability to address a much larger market.
As part of NICE2B, we characterized this opportunity as 2X2X2; doubling our portfolio available to our customers, doubling the market segment in which we operate, and doubling the customer lifetime value. We’re already seeing this with rapid growth in the mid-market, while at the same time, selling additional solutions at the high end of the market.
This includes replacing competitor on-premise solutions with our cloud solutions and bring new markets for us and expanding footprint in analytics, which grew double-digit in Q3 and artificial intelligence. In fact, we had another quarter of double-digit new logos for our artificial intelligence and machine learning solutions.
We also recently announced our open robotic automation framework to drive intelligent process execution through integration with additional AI technologies in the next evolution of our cognitive automation platform. Beyond winning in the cloud and operating in a much larger total addressable market, we have also witnessed a material shift in market share.
This is supported by the acceleration of competitive replacements in addition to recent reports from industry analysts. In one report centered on speech analytics, NICE was named the clear leader, with over 45% market share and having nearly twice as many analytics seats as the next nearest competitor.
In a WFO market share report, NICE was identified once again as the clear leader with 39% market share based on total revenue and cementing its leadership even further by gaining over 4 percentage points of share in the last year. And lastly, we are named as a leader in Gartner 2017 Magic Quadrant for Cloud Contact Center.
So to summarize, there are three key fundamentals to why we are winning. one, our expansion into the cloud; two, a five-fold increase in our total addressable market; and three, the significant shift in market share.
Let me provide you color on some of the great wins we had this quarter. In the cloud, we closed several seven-digit deals including a federal agency that had an urgent need to turn up a complete emergency center with hundreds of agents in less than a week.
We successfully delivered that with CXone, something that can only be done with a true cloud solution. There are seven-digit cloud deals with an insurance company and a travel management company.
We also closed seven-digit cloud deals with several large financial institutions for our Financial Crime and Compliance Essential solution. Overall this quarter, we saw a very large increase in the number of seven-digit deals compared to Q3 of last year.
We also closed several large eight-digit deals in Q3, including three with major financial institutions as well as an 8-digit deal with the health insurer. These deals demonstrate continue wide adoption of power portfolio by Fortune 100 companies.
As I mentioned earlier, we have seen an acceleration of competitive replacement. In Q3, these included two 7-digit deals with fintech companies and a 7-digit deal with a major financial institution.
These Q3 results provides further validation of our winning strategy and we believe we have the vision, the assets, and the people to continue to build upon the success we have achieved to-date. I will now 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 third quarter of 2017 as well as our outlook for the full year 2017.
The financial results represent continued operations and exclude the businesses that were divested in 2015. However, the cash flow statement includes the results of both divestitures.
And now, I will review the results. Revenue for the third quarter was $327 million, which represented an increase of 36% from $240 million, in the same period of last year.
Customer engagement revenues were $265 million, an increase of 44% compared to $184 million last year and financial crime and compliance revenues were $62 million, an increase of 10% compared to $56 million for the same period last year. Product revenues accounted for 21% of total revenue in the third quarter.
Cloud revenues accounted for 30% of total revenue and services accounted for the remaining 49% of total revenue in the third quarter of 2017. Our recurring revenue continues to grow significantly and now represents 69% of total revenue compared to 51% last year.
On a regional breakdown, revenues in the Americas were $251 million in the third quarter, an increase of 53% compared to the third quarter of 2016. Revenues in EMEA were $50 million for the third quarter 2017, an increase of 3% compared to last year and revenues for the Asia-Pacific region were $26 million for the third quarter 2017, similar to last year.
Gross profit in the third quarter increased 34% to $233 million compared to $174 million last year. Gross margin in Q3 was 71.2% compared to 72.2% in Q3 last year.
The gross margin was impacted by the consolidation of inContact, which historically had a lower gross margin compared to NICE, offset by the continued overall operational efficiency improvement. Operating income in the third quarter increased 22% to $78 million compared to $64 million last year.
Operating margin reached 24% compared to 26.7% last year. The change in the operating margin is the result of the consolidation of inContact.
In the third quarter of 2017, we had net financial expense of $2.2 million as a result of the debt we issued in connection with the acquisition of inContact, compared to a net financial income of $2.3 million in the third quarter of 2016. Earnings per share for the third quarter increased to $0.95 compared to $0.83 last year, a growth of 14%, despite the financial expense versus financial income last year.
Third quarter cash flow from operations was $106 million compared to $41 million, an increase of 155%. Total cash and financial investments were $494 million at the end of September 2017 and total debt was $446 million, net of issuance cost and the equity component associated with our convertible debt.
And now I will turn to guidance. For the full year 2017, due to better visibility, we are narrowing the expected ranges and increasing the midpoints of revenue and earnings per share guidance.
Full year 2017 revenue guidance is expected to be in a range of $1.338 billion to $1.350 billion and the expected midpoint of revenue guidance increased to $1.344 Billion. Full year 2017 earnings per share guidance is expected to be in a range of $4.00 to $4.10 and the expected midpoint of earnings per share guidance increased to $4.05.
That concludes my comments. I will now turn the call over to the operator for questions.
Operator?
Operator
[Operator Instructions] Your first question comes from Greg McDowell from JMP Securities.
Greg McDowell
I want to first ask about the 15% sequential increase in cloud revenue. Obviously, it feels like cloud revenue accelerated versus the 8% sequential increase from Q1 to Q2.
So I guess to start, Barak, could you just outline some of the big cloud wins and where things are going really well with the CXone platform? And then second part of my question, you mentioned the 200 new cloud contracts and I was just hoping you could walk us through -- were all those cloud contracts for CXone?
And how should we think about those new could contracts being new logos versus existing NICE customers converting to the CXone platform?
Barak Eilam
So as I highlighted in my earlier comments, cloud is picking up and picking up very nicely, obviously, year-over-year, but of course, the sequential growth, I think, is impressive and we see the momentum coming in the cloud. And it’s -- as I mentioned, it’s multiple areas.
So the first one is indeed with the success of CXone, we’re winning a lot of logos given the expanded addressable market that now we are a provider that provide a complete platform A to Z, from omnichannel routing to WFO and analytics. And that goes actually beyond the traditional segments of the market.
We also see an acceleration going up-market into what we’ll define as enterprise market; hence we see a very nice pickup over there. It’s not just the number of logos, as you go up-market in the enterprise, as we expected, the number, the size of those deals are most significant.
And second thing, one of the beauty of a true cloud solution like we have is that if there is a customer with an immediate need for a contact center solution, the beauty of the quick turn-ups we have with CXone, like the example of the federal agency that I’ve mentioned, really in less than a week to bring a complete contact center with all the functionality up and running for hundreds of seats. So this is one area, where we see the nice pick-up.
The second one is with analytics. Traditionally in the past several years back, we used to sell analytics mainly on-premise, we still do that.
But at the same time, we see an acceleration in the adoption of analytics in the cloud. There have been many benefits to that, post the acquisition of Nexidia at the beginning of last year and we see a very nice pick up in that area as well.
And lastly as I mentioned also in the Financial Crime and Compliance, we’re seeing an interesting increase over there as well. I’ve highlighted some great Essentials deals, which is not existing customers of NICE, but other new logos.
And this is our ability to take our business, which was traditionally concentrated on the higher end of the market; and with Essentials, on a Financial Crime and Compliance business; to go further down in the market. When I say further down, this is not I would say SMB but they are 1 tier down, which is still very substantial financial institution and very sizable 7-figure deals.
As to your second question, going back to CXone and the overall amount of new logos, so we indeed landed more than 200 new contracts this quarter. The majority of them, the big majority of them are completely new logos where we are, in most cases, replacing an existing on-premise solution.
We do have some customers of NICE that are adding, in many cases, cloud functionality to their existing on-premise solution, or starting a certain transition, but by and large, the bulk majority of those are completely new customers.
Greg McDowell
And one quick follow-up for you, Beth. Just looking at the narrowed guidance range for the full year, it feels like with the upside to Q3 revenue, the new implied guidance for Q4 implies sort of a meaningful deceleration in the year-over-year growth rate versus the 30% plus in Q3.
So I was just wondering, is there a conservatism in that Q4 implied number? Or is there something else you’re saying?
Maybe, you could just walk us through some of the elements to the Q4 implied guidance and the implied deceleration?
Beth Gaspich
First, I would just highlight that when you look at Q4, it is unique relative to Q3 and that we closed the acquisition of inContact about halfway through the quarter of Q4. So, it did kind of gives an implied deceleration, when you look at it, but you need to take the fact that you’re seeing the change in addition of inContact coming into the fourth quarter result.
Operator
Your next question comes from Dan Bergstrom from RBC Capital. Please proceed.
Dan Bergstrom
So there were some comments around addressing cloud opportunities in all segments, even more so on the higher end in the press release and also in the call thus far. I am curious to the reception of moving to the cloud on the higher end, I’m assuming it’s been customer driven so far, but do you have any intent to push the cloud beyond this or push the demand up market, so to speak?
Barak Eilam
So indeed both in the press release as well as in the earlier comments, I’ve talked about a faster adoption of cloud in higher segments of the market compared to what we’ve seen in the past. I attribute this adoption, I would say, to three different things.
The first one general further market acceptance of cloud enterprise customers today are not just more willing to go to cloud, actually they have the desire as they’ve done in other parts of their enterprise, not necessarily related to our business, but it is getting pretty significant in this business. The second part, I believe that in particular to omnichannel routing, we are getting to the point.
NICE is not playing this business before so they obviously, we’re one of the leading players when it comes to CCaaS, contact center as a service. The legacy players that were the on-premise players in this market did not prepare themselves by a large to the cloud era and due to their financial structure being under very high debt and multiple other thing, you look on their innovation cycle and they did not have a viable cloud solution.
Hence overall, the innovation that they offer to customers was pretty limited on the on-premise platform -- on-premise solutions that they have. So customers like actually to go to the innovation and hence they would like to add more channels and have more flexibility.
What we have to offer with CXone is not only competitive in terms of cloud versus on-premise, but also in terms of capabilities that do not exist on the -- with the on-premise one. So all-in-all we see a pretty nice increase in adoption.
It is going up-market. I think it’s a very typical adoption as we’ve seen in other markets.
At adoption, cloud, it always starts from the lower end of the market and then it start to pick up. And these days we have, of course, a lot of activity of cloud in the lower end of the market a very strong activity gaining momentum in there, I will call it, mid-market and up, and even the very high end of the market, it -- either in level of education conversation, but also some customers that are taking part of their business to really experience the cloud.
And one of the first experience that they have, I would say, is the fact that from the minute that they take a decision to the minute it’s up and running, it’s so fast that they are completely shocked compared to what they are used to in on-premise projects that they had in the past.
Dan Bergstrom
And maybe for Beth to build on Greg’s question or maybe to look at the fourth quarter another way. Guidance implies a seasonal fourth quarter that’s something we’ve expected, we modeled, you executed against it the last several years.
But just with more recurring revenue, can you talk about the seasonality of the fourth quarter? What drives it?
What gives you confidence in the forecast?
Beth Gaspich
So you’re correct that we’ve talked about -- we do have a certain seasonality in our business. It’s -- we see it probably to bit of a larger degree on the Enterprise software side, where it’s customary for this industry to -- for a lot of customers to have a lot of their year-end activity in the fourth quarter and we continue to expect to see that.
On the cloud side, unlike some cloud businesses, we also see seasonality. This is really due to the elasticity of the models that we offer to our customer base.
The industry verticals that use our offerings are in industries which have peak activity towards the end of the year, around the holidays, et cetera, so that we get to enjoy some of that seasonality. For us, I would also highlight that in the third quarter, we were actually able to shift some of the opportunities we had earlier into Q3.
So that will somewhat offset a bit of the seasonality that we’ll see in the fourth quarter.
Operator
Your next question comes from Walter Pritchard from Citi.
Walter Pritchard
First question just for Beth. On the cash flow, it’s a very strong performance in the quarter with deferred revenue driving some of that.
Could you help us understand was that a timing factor in terms of where the cash flow lands in the year? Or do you actually -- does that change?
Well I know you don’t guide for cash flow, but change sort of your outlook on the cash generation capacity of the company?
Beth Gaspich
So you’re correct, we had very strong cash flow generation in the third quarter. I think it shows the strength of our profitability and our continued focus on operational efficiencies and that the profitability translated directly into cash flow.
We always also keep our eye on collection activity and so I think just the key focus to that also contributed to the strength of our cash coming in, in the third quarter.
Walter Pritchard
And just maybe a follow-up on that Beth. With the deferred revenue especially strong in the quarter, I know you have the cloud revenue stream this year, you didn’t have that last year in 3Q.
Was that a big factor? And could you help us understand just the general driver of deferred?
Beth Gaspich
So in general, we’ve highlighted in the past that in terms of the cloud business a big part of that comes from inContact. And the inContact model has an invoicing situation where they’re billing monthly in arrears.
So that typically is not leading to significant shifts in, in deferred revenue. If you actually compare the short-term deferred revenue in Q3 compared to Q2, it was primarily unchanged.
We did see a little bit of a pick-up in terms of the long-term deferred and some of that was a result of some customers opting to pay cash, fortunately for us, for a longer-term arrangement, but again, it didn’t have a material impact on the positive cash flow generation I talked about.
Walter Pritchard
And then just last one, Beth, again for you on -- as you think about seasonality next year is there anything you -- I know you’re not guiding specifically to ‘18 at this point, but anything you would point out in terms of how we should think about seasonality given the changing mix of the business and some of the factors that impacted the second half of last year when you brought in InContact.
Beth Gaspich
Yes, as I was speaking earlier about seasonality, even with the addition of inContact, we both have the seasonality factors built into our business. So our expectation going into 2018, is that a similar curves that you’ve seen in the past with respect to a considerable amount of seasonality happening in the fourth quarter of next year.
Operator
Your next question comes from John DiFucci from Jefferies.
John DiFucci
I had a question for Barak and then a follow-up for Beth. Barak, you mentioned CXone as one of the drivers for cloud, but this is a pretty new solution, I think it’s been out about a quarter, are we actually seeing this in the income statement?
Or is this more reflected in the balance sheet and deferred revenue as Walter said. And I know Beth it was flat sequentially, but typically you see quite a dip in current deferred revenue from the second quarter or the third quarter.
Just trying to get a sense of where is this going, trying to sense where it is today because the customer base is anticipating CXone after the acquisition of inContact. But we don’t typically see much of an impact so soon and I guess Barak, if you could just clarify did you say that most of CXone customers were new or were they migrating from on-prem, your existing customers?
Barak Eilam
So indeed CXone was released actually three months ago. We announced it to the market and CXone is our platform when you combine together omnichannel routing, WFO and analytics.
What we have seen in the quarter, we see high demand, first of all the pipeline, --- I will start with that, as a result of the release, is going very nicely and we get a lot of traction. And I will attribute, of course, this traction to the fact that it is a very unique solution, a very unique platform and no one else can offer that and customers really understand that and challenging other vendors, whether they can offer the same, and if at all any time in the future, because either they don’t have the omnichannel routing asset or they don’t have the WFO or they don’t talk about combining them as we have.
With respect to how it translates into Q3 financials, we’re not breaking it down, but it has a certain impact on the financials. CXone going -- went this quarter only to a new customer where we didn’t convert existing customers to CXone.
I do expect that in the future we will see some customers that they will and on either a legacy inContact solution or a legacy WFO, analytics might want to migrate but in this migration they will adopt much more components than in the past because the real value of CXone is actually the ability to connect so many great ingredients together. So even if the customer do migrate the overall, call it ACV, call it revenue from this customer, is expected to increase.
John DiFucci
And we’ve seen that in other areas, when customers migrate in and they are buying more. I have a question, a different question about Q4, the EPS guidance and it’s about the bottom line, it implies about 300 basis points of sequential operating margin expansion.
Realizing you’re going to get economies of scale as this uptick in revenue into Q4, but even the year before inContact you didn’t get that kind of 3Q to 4Q expansion. I’m just wondering if you can talk a little bit about what incremental benefits you’re going to see in the operating margin line other than the economies of scale?
Beth Gaspich
When we think about the expansion that we will continue to see I think you’ve been able to see that in our execution throughout the year, I would say, first of all if you look at our gross margin we’ve actually sequentially improved our gross margin in each quarter of this year, and when you’re looking at our gross margin overall. And we continue to consistently obviously, optimize and look at our operating leverage in the business; efficiently, managing our overall expenses.
We’ll continue to do that in the fourth quarter. Clearly at this stage, we have good visibility into the fourth quarter and that gives us the increased confidence on the expansion at the end of the year.
Operator
Your next question comes from Paul Coster from JPMorgan. Please proceed.
Paul Coster
Barak, I think you are somewhat new to this whole platform play and what are you learning about your DEVone partners here. I mean, I’m guessing here that some of them potentially are encroaching upon your intended portfolio, is it giving you better intelligence of a potential acquisition targets, talk us through that dynamics a little bit, please.
Barak Eilam
One of the focus areas of course as we launched the platform is to on-board partners, and of course there are a few reasons to that I’ll touch upon it in a second, but I will say that we are positively surprised by the number of partners, and also the one that we have in the pipeline that would like to join an on-board DEVone to the extent that even one of our competitors approached us to ask to join DEVone, which we see it as a great complement, of course. The reason that we do that, of course, is that we would like and we are to be able to come to our customers, we have a very rich set of functionality, applications and capability that was brought together under a single platform, but of course we have baked all of those APIs completely open, of course secured, but open to integration to partners.
So it allows us to go to a customer, to any of our customers small or big of any segment and they can adopt our platform, they can enjoy all our capabilities, but they have a preference of either some other product or they have a preference to connect something that we are not dealing with that’s a great way. There is a lot of innovation happening in the customer service space, a lot of small and mid-sized companies that are joining the DEVone.
And it’s indeed, as you hinted, it allows us to really see what is being adopted by our customers and then we can decide either to strengthen the relationship, it can indeed end up with an acquisition and as well as being a strategic, that after the device goes to our customers, if they know that if they standardize on our platform not only we’re committed to invest heavily as we are in our internal innovation, we have such a rich offering outside of our core innovation. So it makes it an easy choice for any enterprise to standardize on CXone.
Paul Coster
But where do this M&A now stand in your sort of priority list?
Barak Eilam
As a company that operate and a market leader in the two main segments we operate, we invest heavily on the organic, we have a lot of development happening, a lot of product and capabilities that will be released. Of course, we remain active on the M&A front.
We believe that we have all the assets that we need in order to continue and fuel our growth and execute well and win the market. Having said that if we will find an opportunity there, a small one, or something more strategic that makes sense, and can serve our strategy, and also make sense financially, we won’t be shy of pursuing that.
Operator
Your next question comes from Jeff Kessler from Imperial Capital. Please proceed.
Jeff Kessler
As you increase your potential TAM, -- increases with what you’re doing and you also increase your marketing to larger enterprise accounts, move out from what you have now, can you talk about the normal length it takes the longer-term negotiating period it takes to get the pipeline to turn into a contract versus the -- your ability to now turn that contract into an actual installation more quickly. What is the [indiscernible] flow of getting a larger enterprise contract now up and running from the day that you start negotiating it?
Barak Eilam
Let me try and answer that. You did mention by the way as we go with marketing to the higher end of the market, if you’re tracking our marketing effort, where we invest in a very focused marketing, we even launched, yesterday, we have a new spoke person for the company, Adam and Jamie, from the famous TV show, Mythbusters, which once again show quite unique in our market to use this [indiscernible] matter, but we continue to be creative, if you’d like, also in our marketing not just in our innovation and go to market in general.
And we’ve got some great feedback from customers since the launch yesterday. But with respect to the length of the campaign so the answer is actually all the above but I’ll try to give you a bit more color into that.
So theoretically, as you go up market indeed solutions becoming a bit more complex, sales cycle, the decision -- historically is lengthier, but at the same time we can see and we see customers, large enterprises that are going more on what we call from our side, a land an expense strategy, they won’t go day one with all of their enterprise migrating to us. They will take a department and deploy the cloud solution, in production, start working for several months and then the expansion is easy due to the elasticity features of the platform.
So that it can vary from anywhere -- we have like a very quick contracts like the one I mentioned of that federal agency that was signed in like no time, from the minute we learned about the opportunity till the time that we signed and later on deployed. And it can still be a lengthy process of several months.
The other thing, I’ll say with respect to activation is, on our end because of the type of the solution and it’s a true cloud solution, fully multitenant, we can turn up customers in record time, it can be a matter of days, it can be a matter of weeks, very different from the lengthy 1 year project of the on-premise. At the same time sometime it depends on the customer, their preparation, training et cetera.
So sometime a customer actually will take this deployment to a longer period of time. I hope I’ve managed to give you some color it’s basically all the above, but as we move forward there will be, probably we’ll be able to give you a bit more color as what we see and maybe characterize it even further.
Jeff Kessler
One quick question. As you also as you move out and increase the number of applications that you have for -- not just the high end, but the middle end, as you talked about today.
You will probably require a bigger and bigger ecosystem around you to make this. More partners or more partners who can provide certain functionalities.
Can you talk a little bit about what you -- what parts you still need to create this larger ecosystem to support the expansion of your business into this greater time you’re talking about?
Barak Eilam
So I’m not sure we are missing certain asset, what we are doing, there is, if you think about the on-premise market, the on-premise market was catered in the last probably two to three decades, our relative on-premise market and the customer service demand, it was catered by thousands of different VARs, resellers, technology partners and so on and so forth that used to either resell or partner with legacy on-premise company. With see realization by these partner community done faster than the other that the market is shifting and shifting to the cloud, hence we see them more so than before going after to select a cloud partner instead of the cloud vendor, instead of the legacy on-premise one, hence, we’re getting calls in a very rapid way.
We’re being approached of course we are approaching as well. And that that’s what we see.
So I don’t think we miss anything that I can characterize specifically it’s just a matter of on boarding partners, enable them, of course, we are on the technology side constantly adding more and more capabilities, opening up even more APIs, than the one that we currently have. So it just a matter of executing as fast as we can.
Operator
Your next question comes from Gabriela Borges from Goldman Sachs.
Gabriela Borges
Maybe for Barak, you’ve talked a little bit about omnichannel and the analytics momentum that you’re seeing. As we shift more from physical humans answering the phone to maybe some more automated transactions that happen via chat part, via email things like that.
Could you maybe just walk us through how the tools that you are selling, that you are selling to the customer, how they change between selling to that physical human versus maybe the analytics that go to support the bots and if there’s any subsequent change in pricing model, how you think about that mix over time?
Barak Eilam
Sure. So great, great question.
So as you know we’ve -- everything that we have these days we are serving the omnichannel market and if you think about how this market evolved, the different channels if you would like. In the past they are very less than a handful of channel.
Today, there are, I would say even dozens of different channels and more and more are added every year. The interesting thing that where new channels -- that new communication channels are added, you don’t see other channels are dropping, because each channel, communication channel has its own pros and cons in serving customers, and they’re optimized to very specific transactions.
Hence came the era from, I would like for multi channel move to omnichannels. And in omnichannel era, it’s not just about game of experience and not just the game of costs, it’s the perfect balance between the right cost, meaning serving the customer on the most efficient and effective channel, but at the same time giving him or her the right or the best experience.
And sometime it’s not just in a single channel, it’s moving between -- between different channels. So we have two approaches for that, the first one, when we are the channel provider with CXone, we see more and more the larger majority of our solutions with CXone and with omnichannel routing we deploy more than a single channel and all of our channels are basically routed together.
We’ve a lot of analytics and I’ll get to that in just one second. And on the other hand, if customers already have multiple channels environment, we have analytical tools allowing them to map the journeys across those channels and reach exactly that desire which is to optimize the connectivity between the customer and the different channels.
You referred to the human and or what you call the attended and unattended or the human or without a human. And we, from the way that we look at it, we look not just about attended or unattended, it’s actually the combination of the two.
Because there are a lot of handoffs in this process, yes, some transaction are fully automated, fully unattended, but some does -- do require as certain attendancy and our -- all of our solution are basically optimizing exactly that. How do you connect the attended and the unattended environment in an omnichannel environment the way to do it is for a lot of analytics.
And this is why we have injected and will continue to inject a lot of analytics into our solutions. Of course, it get us also to artificial intelligence because if you want both the non-human service elements to be effective you must apply some machine learning to that, but also when it does learn with a human and [indiscernible] it has assisted the service, machine learning and artificial intelligence can help in that as well.
Gabriela Borges
And a related follow-up. You touched on the customer journey piece of analytics and analytics have come up a number of times.
Maybe you could just give us a sense, what are the two or three tools that are selling in the highest volume or with the fastest growth rates, I’m assuming customer journey is one of them, but what’s the right way to think about the actual functional applications that customers are using analytics for?
Barak Eilam
So when it comes to customer journey the trend that we see with customers today, with our customers, all of our customers, all enterprises are challenged with the amount of channels that they need to manage. So there are some customers that are relatively early and they are -- I call it in the maturity level of the way that they look on that solution, hence they apply analytics within the channel.
So this is one part of the thing that we are doing. A lot of our analytics growth comes from that’s, the idea, and the desire to optimize the experience within the channel.
Our more advanced customers that took it a step further, they are in the realization that there is a need to move from managing channels to managing journeys. And here, it’s not enough just to look on the channel itself, but also to identify the customer, the end customer and their journey across different channels.
Here come our customer journey solution, which are very heavy analytics based and here again we take our deep domain expertise in to this channel, but we connect the dots between the different channels allowing our customer to have a major paradigm shift from managing the channels into managing customer journeys.
Operator
I’d now like to hand the call back to Barak for closing remarks.
Barak Eilam
Thank you very much for joining us and have a great day. Thank you.