May 16, 2019
Operator
Welcome to the NICE Conference Call discussing First Quarter 2019 Results. And thank you all for holding.
All participants are at present in a 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, May 16, 2019. I would now like to turn this 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 materially is contained in the section entitled Risk Factors in Item 3 of the company’s 2018 annual report on Form 20-F as filed with the Securities and Exchange Commission on April 5, 2019. During today’s call, we will present a more detailed discussion of first quarter 2019 results and the company’s guidance for second quarter and full year 2019.
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.
This week we're celebrating three years since we announced the acquisition of inContact which was pivotal point for NICE and represented a seismic shift in the customer engagement market. The acquisition and the ensuing delivery of CXone gave us the first and only true native cloud platform that seriously incorporates the marketing and routing, workforce optimization and analytics into a single platform for enterprises of all sizes.
With all these assets combined together with substantial investment in R&D since the acquisition CXone has become the most complete platform in the market. Furthermore with an extensive ecosystem called DEVone and the solutions market place called CXexchange, CXone brings an unmatched offering to enterprises at the expedited condition to manage smart interaction in the cloud.
Fast forward till today, CXone has opened a significant differentiation gap as evidenced by over 500 new CXone customers added annually by being ranked as the number one contact center cloud solution by multiple leading analysts and by the continued strong cloud revenue growth. This is a clear validation of our platform strategy.
Today we're taking the next step in the evolution of CXone by ushering in a new era in CX with the introduction of smart digital conversations. This builds on our CXone platform strategy with an additional market leading innovation that enables our customers to accelerate our transition in managing digital experiences.
This innovation is augmented by the acquisition of Brand Embassy announced earlier today and its integration into CXone. Brand Embassy brings a groundbreaking and proven digital first approach to customer service.
The reality for most enterprises today is that while they recognize the importance of keeping up with consumers and offering them service and build channel choice, they are having a hard time keeping up. Adding this type of channel requires organizations to create new dedicated service silos, which is slow, expensive and does not scale.
The new push-pull paradigm that we're introducing in CXone eliminates this digital agent silos. It dramatically accelerates the adoption and lowers the cost of handling new channels of any type, whether by agent or by bot.
Because it is natively embedded in CXone, it naturally benefits from the WFO analytics and AI capabilities of the platform. This in combination with over 30 supported channels the Brand Embassy brings including Facebook Messenger, Twitter, Apple Business Chat, WhatsApp, LinkedIn, SMS, email and live chats, enables what we call smart digital conversations.
CXone now removes the barrier that historically slowed down the customer experience digital evolution allowing organizations to put digital at the forefront of their interactions with consumers. It is clear that the execution of our strategy is working as reflected in our strong results, including in Q1, where we reported year-over-year double-digit growth in all key metrics.
This included a 12% increase in revenues to $378 million. Operating income was $97 million, which was an increase of 26% compared to Q1 of last year, and operating margin increased 230 basis points to 25.7% compared to the same period last year.
These strong operating results led to a 22% increase in earnings per share to $1.18. Additionally, we reported another quarter of record operating cash flow with $182 million generated in Q1, 33% growth over Q1 last year.
Leading the way and driving our growth in cloud. Cloud revenues increased 30% in Q1 to $137 million.
CXone is the clear differentiator for NICE and its fueling our cloud growth. With CXone we are penetrating all segments of the market from SMB to large enterprises.
And in Q1 we saw further success on this front. We signed multiple seven digit ACV CXone deals, including a large government agency, a public content and data analytics provider, a large insurance provider, a Fortune 100 product company in one of the largest retailers in the world.
In all these deals, CXone was the ultimate choice for enterprises looking to replace the on-premise solutions. Cloud growth was also augmented by our X-Sight Essentials cloud solution.
In Q1, we signed several seven digit Essential deals, including the Southern US based mid-sized bank, where we replaced the incumbents, as they wanted to further to future proof their solutions by building on and leveraging our fraud management platform. We signed a seven digit Essential deal with a cryptoexchange, as well as a company that operates a cloud-based business payments platform.
As we move forward with our analytics everywhere approach to inject powerful analytics into everything we do, we continue to see strong demand and growth for our analytic solutions. We signed an eight digit deal with one of the largest financial institutions in the world, and in the process replaced one of our competitors.
Other seven digit analytics deal included one with top five US bank, one with a large Canadian financial institution, one is well a known entertainment resort and one was a very large pharmacy operator and one with a major healthcare organization among many others. We're continuing to further augment our analytic solutions by infusing AI throughout them.
Our robotics process automation is an area within AI that we're seeing strong demand as we continue to sign many new logos. Our clear differentiation is our domain expertise around the attended RPA and NEVA which is our one-of-a-kind attendant robotics assistance.
Moreover, our unique solutions called automation finder which is an AI part solution that detects processes in the enterprise that are perfectly suited for automation continued to gain traction among our customers. Our RPA was well received at our Interactions User Conference last month where we had attendees of more than 3,000 people.
In closing we're excited about our extended strategy to build on our CXone platform with an additional market leading innovation that enables our customers to accelerate our transition in managing smart digital conversations. We're pleased to start the year on a high note and we have a lot of momentum behind us.
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’m pleased to provide the analysis of our financial results and the business performance for the first quarter of 2019 as well as our outlook for the second quarter and full year 2019.
Total revenue for the first quarter reached $378 million, an increase of 12% from $338 million in the same period of last year. Our total revenue growth was driven by further growth in the cloud as our cloud revenue grew 30% in the first quarter of 2019.
We also saw an increase of 14% in products revenue. Our recurring revenue continues to reflect our strong cloud growth representing 71% of our total revenue, up from 68% in Q1 last year.
Continuing the trend in the last few years and given that our cloud and overall recurring revenue has grown to become a much large portion of our total revenue, we expect both our revenue and our profitability to be more evenly distributed among the quarters this year. Customer engagement revenue for the first quarter increased 14% to $305 million and represented 81% of our total revenues.
Financial crime and compliance revenues increased 6% to $73 million and represented 19% of total revenues. Product revenues accounted for 19% of total revenue in the first quarter.
Cloud revenues accounted for 36% of total revenue for the first quarter which represents an increase from 30% in Q1 last year and services revenues accounted for the remaining 45% of total revenue in the first quarter of 2019. Looking at geographies, Americas grew 12% and reached $289.2 million in the first quarter.
Revenues in EMEA were $64.3 million in the first quarter which represents growth of 18%. APAC revenues in the first quarter contributed $24.4 million to total revenue in the first quarter of 2019 compared to $26 million in the same period of last year.
And now to profitability. Gross profit increased 12% to $267 million in the first quarter.
Gross profit margin increased to 70.5% compared to 70.4% last year. Operating income increased 23% to $97 million in the first quarter.
Operating margin increased significantly to 25.7% compared to 23.4% in the same period of last year, representing an increase of 230 basis points. The strong operating income and margin demonstrates the leverage in our model and our commitment to continue to expand profitability over time.
Earnings per share for the first quarter increased to $1.18 compared to $0.97 in the first quarter of last year, which represents growth of 22%. We experienced record growth during the first quarter in cash generation.
First quarter cash flow from operations grew 33% to one $182 million. Total cash and financial investments were $891 million at the end of March 2019 and total debt was $458 million, net of issuance cost and the equity component associated with our convertible debt.
I will conclude my remarks with our guidance. For the second quarter of 2019, we expect the total revenue to be in the range of $373 million to $383 million.
We expect second quarter 2019 fully diluted earnings per share to be in expected range of $1.16 to $1.26. For the full year 2019, we expect total revenue to be in the range of $1.558 billion to $1.582 billion.
We're increasing the full year 2019 fully diluted earnings per share to be in an expected range of $5.11 to $5.31. I will now turn the call over to the operator for questions.
Operator?
Operator
[Operator Instructions]. Your first question comes from the line of Shaul Eyal, Oppenheimer.
Please go ahead. You're live on the call.
Shaul Eyal
Barak I have a two part M&A related question and then I have one for Beth. So maybe starting with Brand Embassy, how should we be thinking about it?
Without a doubt a tuck-in acquisition but maybe help us understand where it fits with CXone and I know kind of you provided us with some color, but anything additive will be extremely helpful? And also, the second half of that first question is, so now that Mattersight is probably about a year under your belt, are you happy with the contribution results, strategic direction you’re taking with it?
Has it been living to its expectations or maybe even exceeding those?
Barak Eilam
Thanks for the question Shaul. Let's start with Brand Embassy, and actually the broader aspect of what we announced today.
So as I described before, we received clears into the acquisition of inContact with our strategy to come up with a platform that’s putting different assets, leading assets for the market together and enable them to work under one platform providing our customers tremendous value instead of purchasing point solution and integrate them by themselves and of course also provide us a significant differentiation and we see the momentum of CXone. That strategy in mind we ask ourselves and we shared that with you before, where else we can take CXone, although by itself has very strong momentum and of course we talk to our customers and area where we set ourselves to grow next and to expand it into the broader aspect of digital first approach.
We see it as we discussed with our customers while they are transitioning into the cloud and with analytics, the feedback we got from them is they also want our help as they transition to digital and they want it all combined. As we looked in different assets in that area we developed a lot ourselves but we find an opportunity to bring a market leader and their technology into our CXone platform and the beauty is that that particular company, Brand Embassy we know them quite well, they are part and integrated part of our DEVone and CXexchange program.
So we show the traction that they are getting and basically managed to pull them in into CXone with that integration. The challenge that we are addressing as I told you in my opening remarks is that our customers, as we enterprise out there, is dealing today still with every channel as standalone but eventually consumer would like to get a much more integrated approach and a much more cohesive one, it doesn’t start in digital, it doesn’t stop at voice, it’s all together, but for us, we made a quite innovative approach and that’s exactly what did Brand Embassy brings together.
So that’s about Brand Embassy. With respect to the question about Mattersight, the plan continues to our subsection, the idea of acquiring Mattersight actually is very similar to what I just described with Brand Embassy, very strong technology.
We wanted to have the technology in-house and that’s exactly what we've done with Mattersight. We are embedded the technology Mattersight into CXone, offering that to customers and those of you attended interactions, user conference, know that it was presented at the forefront of our recent presentation and there are a lot of good traction during interaction and actually we have a lot of follow on as a result of that.
Shaul Eyal
And maybe one of best on product revenue, 14% year-over-year, really stood out nicely versus our expectations to an extent cloud revenues as well. But specifically on the product front, what were the drivers this quarter, was there anything unusual, is that one of those seven or eight digit contracts that are kicking in that are accelerating it?
I know that you don’t guide to product revenue but generally speaking how should we be thinking about it for the remainder of 2019? Thank you.
Beth Gaspich
Thanks for the question, Shaul, and as you said I mean I think we were really pleased with the strong start that we had to the year and we were able to demonstrate that both in cloud and product with the product going at 14% and really it was just from strong execution, we had multiple deals that Barak talked about in terms of our activities, and really strong momentum. And as I highlighted in the last couple of quarters, with the shift we're seeing in our business and cloud growing, we expect to continue to see some variability from quarter-to-quarter in the mix between product and cloud.
And I think the growth that we saw in product combined with the growth in the quarter for cloud, really just reinforces that our cloud revenue is not replacing the product revenue.
Operator
Thank you. Your next question comes from the line of John DiFucci, Jefferies, please go ahead.
You're live on the call.
John DiFucci
Thank you. My first question I guess is for Barak or Beth, because Beth you just addressed it.
Barak in your prepared remarks, you said that you're looking the CXone deals are oftentimes paraphrasing you, looking to replace on-prem deployments. And I -- and Beth just made a statement for the most part, anyway, the product -- the cloud business is new business, which is what you said in the past.
But I'm just wondering are you seeing more of an effect on your installed base of WFO, like at some point, we may see that right from you like and at that point, we'll see some transition of maintenance into cloud. But I know that that hasn't happened much yet, but that one statement, Barak that you made in your prepared remarks made me wonder is this happening more?
Barak Eilam
So it's a mix of multiple things and let me try to help to expand. First of all, yes, we see a tremendous momentum with CXone.
With CXone, we are replacing or we have stepped into an area where NICE did not have revenue before, this is the only channel routing business. And we are replacing left and right the legacy on-premise provider over there.
So for us, it's a few incremental business. And as I described in the past, given the magnitude of those legacy providers we believe that there is a run way over there that will fuel our growth, will satisfy our growth for many years.
It is in many cases, in some cases combined of course with WFO, but I would say that what we see over there is the first it gives us more opportunities in WFO, so we’re also replacing other WFO competitors because now in a much more combined way being the platform, it allows us actually also to increase our share into WFO. And at the same time we still see a very stronger business on our on-premise business and our products.
I will highlight that for us when I say and when we say product, cloud revenue is just cloud. We counter product, the term license under the product don't count as of course under cloud.
And we have multiple solutions that are still provided as a product and product revenue. And we believe that this will continue and can fluctuate from one quarter to another.
But that's the direction we're seeing.
John DiFucci
Okay, so you're not -- it doesn't sound like -- even when you said displacing or replacing on-premise deployments. For the most part you're talking about sort of the inContact assets and in some cases you may be replacing yourself and that the WFO portions, when there is an independent WFO deployment there, but in other cases you're displacing competitors.
I think I get that now. So thanks for that.
And Beth just a follow up question, cash flow is really strong this quarter, and I mean it’s like take a step back there -- it made us take a step back and try to figure that out and the swing versus our model anyway with the see accrued expense and other current liabilities line, where you had a big positive contribution typically in the first quarter that’s a negative number and I was just wondering what that was and if should we roll that sort of reverse in future quarters, so we will have a negative effect like in the next quarter. So I just want to make sure we anticipate what's happening there?
Beth Gaspich
Sure, I would say similar to the comments I made about the products revenue it really is just a sign of our strong execution. I think we had very strong collections during the quarter, so a lot of attention internally and nothing atypical.
I think the balance sheet and accrued expenses, sometimes there’s timing differences. So I don’t think there’s anything that is really noteworthy there and you’ll see positive cash flow generation throughout the year.
John DiFucci
Okay but that one line, the accounts receivable line with the effect of the strong collections, but the accrued expenses and other current liabilities, can you just -- because it’s usually like a negative line often times like negative 30 million and that was positive 30 million, that was a huge swing this quarter, I just -- there’s something in there that I’d just like to understand a little better.
Beth Gaspich
Yes. As I said John there is nothing noteworthy, I think with accruals they can vary from quarter to quarter and that’s just kind of part of business as usual.
So there is really nothing that sticks out in there that had a significant impact on the cash.
Operator
Thank you. Next question comes from the line of Daniel Ives with Wedbush Securities.
Please go ahead.
Daniel Ives
So what percent of your customers you think moved to cloud from the call center transition, if you had approximate?
Barak Eilam
We don’t share the exact percentage but as I said before Dan it’s again the beauty of our cloud strategy that is based on our platform strategy that we're expecting into areas both for our customers and other customers that we were not present before, I can name a few, first of all NICE historically we're not -- we don’t had very strong presence in the mid market. With cloud, we are now stepping in a dominant way and with strong presence into the mid market and that market is shifting fast to the cloud and in those cases we take it all meaning both analytics and routing, long-term routing and WFO and moving forward we believe a lot of digital channel as well.
And with our installed base, it really depends on the customer. So as I said before I think that there is still there is still a very, very long run way of those on-premise legacy providers that basically are replacing and there’s still a lot to go, many years of potentially here.
Daniel Ives
And just to follow up there, are the conversations becoming much more strategic with customers? I mean it seems like that from deals and all of our checks, but maybe could you just anecdotally talk about that even comparing conversations at this user conference that you had customers and pipeline versus maybe the last few years?
Thanks
Barak Eilam
First of all, we're very happy with the -- and we're positively surprised if you would like with the size of the event this year. On two fronts, actually, both on customer that is 6,000 attendees were way beyond the target we put ourselves internally.
And if you compare it to three years ago, that's a tremendous growth. And also by the way, on the ecosystem side, the number of partners and technology partners we had at the event at some point we had just to shut down additional sponsorship not because we didn't want it, just because we ran out of space in our showcase.
So that’s just in general the traction that we got. I also can tell you someone that is attended probably almost all of those events since we started them as a company, in the last almost 15 or so years, the people who are coming to our events are changing throughout the year.
This year we had also a lot of users but much more executive, much more C-level, we had different breakout sessions that were much more with executives, I attended myself with some of them as well. And the level of conversations are much more strategic.
Many are senior VPs, C-levels as I mentioned from the largest companies in the globe that came for the conference. So definitely the right evolution.
I think it is a result of several things. First of all, the breadth of offering that we have is much more strategic and getting the traction of much more senior people.
That's, number one. And the fact that we are providing much more strategic approach to how they shift their operation to the cloud and the fact that we are providing much more to their analytics-based solutions, which are very interesting to much more of senior people.
Operator
Thank you. Your next question comes from the line of Rishi Jaluria, D.A.
Davidson. Please go ahead.
You're live on the call.
Rishi Jaluria
Let me start with talking about the RPA side of the business. I think it's pretty clear you're getting some good interest from customers and some good momentum there.
Just wanted to understand if you look at where you've gotten some of your RPA deals, has it been mostly in selling these into the existing customer base? Or has there been new customers that weren’t nice customers before that you've been able to kind of land with your RPA and then you’re having differentiation on the attendant side?
And then I have a follow-up for Beth.
Barak Eilam
Sure. So as you said and as I provided in our opening remarks, we have great traction for our RPA solution.
Our -- we believe that the greater opportunity in the long run for RPA is within attendant which is a more complex but much higher value with much also higher stickiness if you would like and we augment that by a lot of AI-based solutions, starting from NEVA, as well as automation finder and few more things that will be released very soon. In terms of where do we get traction, where we get customers, it’s kind of all the above in a sense that we have a great customers base and relationship which allow us to of course sell to this customer base and actually in many cases we started a contact center and expanded into the back office.
We do get traction for a lot of partnership, also it’s completely new, company to the company and we actually have some very good traction as well through our Actimize channel, there’s lot of compliance related and fraud related environment that can benefit and are benefiting from automation in their environment for many of those processes we're expert in. We're actually setting RPA into those environments -- into those processes a well.
Rishi Jaluria
And then Beth just wanted to touch on the cloud gross margin, looked like they did decline a bit year-over-year. Just help us understand what were the drivers here and how should we be thinking about the cloud gross margin line going forward, what’s going to lead to cloud gross margins kind of continue to extend from here?
Thanks.
Beth Gaspich
Thanks for the question, Rishi. I think as you recall we actually acquired Mattersight in the third quarter of last year and so that’s really more comparable if you look on that the cloud gross margin relative to the fourth quarter.
So if you look on quarter to quarter you will see that the cloud gross margin was roughly flat. And as we’ve said in the past we feel confident, we continue to see the margin expand in the cloud and it’s kind of going to come from several different places.
I would say first with respect to just the continued increase we're seeing in the top-line and leverage we have in the model overall and what we said in the past is that as you start to go up market what we see is that there is a greater attachment of the software that comes with a higher margin and that additional software is incremental that is driving more profitability into the cloud margin. So we will continue to see that and as well as on the other side of that we're always continuing to focus on efficiencies internally and one of the areas that we’re focused on is the way that we route calls that impacts the profitability on the telephony side of CXone offering.
And so those are few things that we're doing that give us a confidence we will continue to see the cloud margin expanding in the future.
Rishi Jaluria
And just kind of a clarification question on that. You mentioned the impact of Mattersight, but it looks like Mattersight itself had actually higher gross margin when you do on the cloud gross margin side.
So can you help us understand why is matter side dilutive to cloud gross margins then?
Beth Gaspich
So no Mattersight actually had cloud gross margins which were less than what we were seeing in our cloud business.
Operator
Thank you. Next question comes from Sanjit Singh, Morgan Stanley.
Please go ahead.
Sanjit Singh
Barak, in your script you mentioned on analytics, I think eight figure deal in analytics as opposed to nine figure deals. I was wondering if you can give us the sense of what the attach rate on analytics is with your cloud contactless customers versus your on-premise customers and where do you think that can go over time?
Barak Eilam
So see a few trends that continued and actually further expanding in analytics, which I'll give you my view of what’s the reason for that. First of all, it's now the definitely the majority of our new business for several years now come from analytics.
This is due to the desire of having much more sophisticated and small solutions that our customers consume. We see several opportunities that do increases your likely attachment rate.
First of all, we already have a very healthy customer base. We have the largest market share, according to most of the market analysts.
And we have a very large customer base of customers, large customers using our analytics, and those customers are coming back for more, it’s either additional use cases or expanding further in terms of capacity of the analytics. So that's one area where we see growth, it's not exactly attachment rate, it’s more about expansion.
And the second thing as we proceeded in the last actually three and a half years, in the integration of Nexidia into our solutions, it is much more embedded, of course, it's fully embedded into CXone. And we see the attachment rates to different solution, both on-premise and cloud, that are growing quite dramatically, and we also see quite a good traction selling analytic solution, which is a vendor agnostic in environment that are not native NICE environments, which again an area that's continued to grow for us.
So it's kind of all the above, but expanding in all different directions.
Sanjit Singh
And the other part of this I want to talk a little bit about was financial crime and compliance, seen that accelerated this quarter as it goes up 6% according to Beth’s scripts. You have a new leader in the financial crime and compliance, and you obviously have a site.
What is your confidence about getting the financial crime and compliance business back to sort of historical levels of growth? I know they came down last year, but what's sort of your view on the trajectory of growth in financial crime and compliance, this year but maybe also longer term?
Barak Eilam
So we believe that the market is very strong, both domestically as well as globally. In financial crime and compliance, we do multiple things.
We are dealing with AML and financial market surveillance, which are more compliance driven, but we have a lot of solutions that relates to both efficiencies as well as dealing with fraud. And the market itself is very healthy.
We see a very healthy shift of not just looking at compliance, but also looking on the cost of compliance. And that's allowed us actually to grow and develop further capabilities into our financial crime and compliance offering injecting AI into it in order to provide those efficiencies, those environments for customers are still heavy on manpower, and we have the possibility and the potential to replace a lot of this manpower with the robot technology that we have.
This is one of the reasons, actually a key reason why we indulge with X-Sight, which has very nice a road map there to it and actually very good traction with customers, which allow us now to go to our customers in areas where we were not present before and expand our footprint. The last thing is that we’re starting to see very good traction for cloud for several quarters now and I in my opening remarks have mentioned numerous essential deals of X-Sight that we add them in the revenue, they were booked and now going to step into the revenue and we will see some growth -- very nice growth in cloud also from the X-Sight side of the house.
Operator
Thank you. Next question comes from Tavy Rosner, Barclays.
Please go ahead. Your line is now open.
Tavy Rosner
Most of my question has been asked, so I guess two housekeeping ones. I was wondering if you can comment a little bit about the trend in Asia, I mean I know it’s not a key focus region for you but just wondering why there was a negative growth year-over-year?
Barak Eilam
So if I am not mistaken I didn’t look at that’s in Q1 last year if I am not mistaken, it was relatively healthy for Asia, it’s just a matter of quarterly fluctuation. We're positive about Asia, I think we have some great opportunities over there.
So I wouldn’t look at one particular quarter.
Tavy Rosner
And then just broadly speaking I mean congrats on the acquisition during the quarter. Looking at your portfolio, is there anything else that you are missing and that you are seeing out there, I don’t need specific names, I was just wondering about the acquisition pipeline?
Barak Eilam
So obviously we are very proud with our own innovation internally and we have tremendous investment in R&D which we believe is the right level of investment in R&D which keep providing us some groundbreaking innovation. But every once in a while of course there is an opportunities to accelerate on our strategic vectors with an acquisition and every once in a while there is an opportunity to acquire an asset that would allow us to accelerate on the go to market.
So without getting into specifics, our strategy is kind of well known, I wouldn’t get to very specific targets. We are active on the M&A front.
We have a very healthy balance sheet as you heard from Beth before. We finalized the quarter with $890 million in the bank.
So we have the horse power to make an acquisition. Of course every acquisition, we will look at it separately and see if it makes sense both from strategic rational but of course also financially and its impact to our growth and creating shareholders value.
Operator
Thank you. Next question comes from the line of Jacek Rycko, Citi.
Your line is now open.
Jacek Rycko
I am looking at the favorable EPS guidance range for Q2, I was wondering should be extrapolate the license growth from Q1 sort of continue into Q2 and provide a little bit of a tailwind associated with the profitability mix?
Beth Gaspich
So we don’t guide on that I think and in the first quarter you can see that we had really strong growth in the products revenue and we benefited that in terms of it going directly into the bottom-line but other than that we don’t provide specific guidance there.
Jacek Rycko
And then maybe a broader question. Given your leading revenue share within the cloud center market space, how are you thinking about the growth levers going forward and that is within enterprise and then Actimize and that is vis-à-vis sustaining again within this 20% plus organic growth within your cloud line?
Barak Eilam
As we presented in Q1 it was a very strong start for the year, we provided the guidance for the year. We -- on our previous call I provided some long time view on the company with direction we would like to get to in terms of the percentage of cloud from our revenue, and where we believe will be in a size of the company as well as our operating margin as a company.
But we will guiding for the year and for the quarter and not a specific long-term growth rate.
Operator
Thank you. Next question comes from the line of Dan Bergstrom, RBC Capital Markets.
Please go ahead. You're live on the call.
Dan Bergstrom
So going back to financial crime and compliance, crypto was mentioned that interactions as a potential opportunity. I think that seemed more aspirational to me at the time, but here you are announcing a seven figure deal in the area.
Could you talk about expanded use cases such as this or Fintech and then maybe drill down into that crypto deal a bit?
Barak Eilam
Sure. The definition of what is financial services when it comes to the different solution of financial crime and compliance is expanding constantly, basically any organization that would like to take part of moving money and being responsible in moving money, one way or another, will find themselves in the need for these type of solutions.
So that definition of what is the market is constantly growing for us, both from an AML perspective, from anti-money laundering as well as from fault perspective. Anyway they're not heavily regulated yet, what we see and we all read the headlines, they need to build the reputation and protect their reputation.
And I think we all have seen recently about some unfortunate incident in different cryptoexchanges. So particularly or specifically on the crypto side, we see many of those exchanges and many of those operate in this space would like to be ahead of the curve and protect their consumer and coming to us.
But it doesn't end just with the crypto, it’s still for everyone that is doing payments, everyone that is moving money today, either like to be very clean in terms of the eyes of the regulator making sure that no money laundering scheme are running through their platform or through their solutions, as well as of course, dealing with fraud processor today. It's not that they've stopped trying to attack the banks, but obviously they kind of extended their addressable markets that was served and of course expanding our addressable market.
Operator
Thank you. Next question comes from the line of Paul Coster, JP Morgan, please go ahead.
You're live on the call.
Paul Coster
Beth, the G&A came down pretty significantly, sequentially. Can you just talk us through that?
And then can you elaborate on this comment you made about with recurring and cloud revenues being so significant now that you're going to see more linearity? I understand linearity in revenues.
Will we also see more linearity in the sort of OpEx moving forward as well?
Beth Gaspich
Sure, thanks for the questions, Paul. With respect to G&A, I can say that it was a bit of an anomaly.
If you look at G&A as a percent of revenue, I think you should expect in the future that it'll look more consistent with what you've seen in the past. We've benefited from some one-time credits there during the quarter, but those will kind of normalize as we look ahead.
With respect to your second question regarding the recurring and cloud as we've talked about in the past, I think looking forward, it does give us further transparency and predictably in our revenue overall and we're seeing more linearity at the same time. Do remember that in our cloud business we do still have some seasonality as part of that business.
There are certain end customers that are retail for example that have a little bit of seasonality, specifically more towards the end of the year, so you will see some of that. With respect to operating expenses, generally there are certain operating expenses that are typically pretty linear from quarter-to-quarter and then there are other areas such as in terms of sales and marketing costs where again you will see a little bit more fluctuation and obviously that given depending on various activities during the quarter, which could be related to bookings for example and overall performance.
So I think you will continue to see kind of a combination of both.
Paul Coster
And I am not sure who this question goes to but it’s kind of somewhere in between CFO and CEO land. As this business grows in coming years, where are going to see the operating leverage, will it actually be in the sort of gross margin space or into cloud or is it going to be spread across R&D sales?
And can you sort of give us some sense of where the leverage might be most focused?
Barak Eilam
I will answer that, Paul. In our previous call we talked about NICE several years down the road and we said that we would like -- we believe that we can aim into the area of the 30% operating margin.
I think that we see a great evidence to this quarter coming up and improving by 230 basis points compared to Q1 of last year and I would say that it’s in multiple area. Yes it is somewhat in the gross margin of the cloud.
We believe that there is an opportunity for expansion over there. Although by the way the amortization of R&D will be present in the gross margin over there.
But we have as a company as we showed very nicely I believe in the last five years, we have the ability to manage the company quite well and I believe later it will come also from the ongoing operating expense as a company. And lastly of course is the scale as we grow and we’re starting to bring larger and larger deals, those will provide us better return on decent R&D as well as better margins on the gross margin.
Operator
Thank you. We have no further questions.
I’d now like to turn the call back to Barak.
Barak Eilam
Thank you, everyone, for joining us. And have a great day.
Thank you.
Operator
Thank you. That concludes your conference call for today.
You may now disconnect. Thank you for joining, and enjoy the rest of the day.