Barak Eilam: Sure, thanks for the question. So the answer is yes. We’re seeing traction, of course, with new prospects, as I highlighted in the earlier remarks, but definitely, within the very loyal and very large customer base that we have, it’s also very easy for them to add those capabilities. Don’t forget that it’s in the cloud. It’s a platform that updates itself very frequently. And those capabilities can be toggled on very, very fast. So we have a team, several teams actually that are making sure that our existing customers are up to date on all the capabilities and they add those capabilities, of course, it increases the ARPU and generating the ARR we see from existing customers. So this is about that. In terms of different of adoption between U.S. and internationally, the excitement is everywhere and the adoption or the fact that AI is not triggering, our success is equally as we see it in other territories and not just in the U.S. Of course, there are some local differences between one territory to another.
There are some European regulations and things like that. But generally, I think that since the value proposition and the core needs are so similar, I think we’ll see the same traction internationally as we see it domestically.
Siti Panigrahi: Great. And then one follow-up on Microsoft partnership. If I remember it, you guys signed that agreement more than a year ago, probably sometimes in 2022. How is that partnership growing? So any update on that?
Barak Eilam: Yes. We have a great partnership with Microsoft. Yes, it was signed. You’re right about the timing, but I think it was only July that we actually started to see their go-to-market moving full motion also in terms of their compensation. We have a very large and growing pipeline with them. We had a few wins together with Microsoft in the fourth quarter that the combination of NICE and Microsoft made a difference and help us win the deal. And I believe it will continue to grow moving forward.
Siti Panigrahi: Great. Thank you.
Operator: Thank you. Next question is coming from Pat Walravens of Citizens JMP. Please go ahead. Pat, please make sure your phone is not on mute.
Patrick Walravens: Sorry about that. Barak, what are the top two or three things you need to do to integrate [Techincal Difficulty]
Barak Eilam: Pat, I think it’s — you’re breaking up a bit. I think your question was about what are the few things we need to do about the LiveVox integration? Was that the question?
Patrick Walravens: Yes, that’s correct.
Barak Eilam: Sure. Thanks for that. So as you know, we have — at NICE, we had a playbook on how we do acquisitions. In the past 10 years, we’ve done 20 acquisitions, small and big. And people ask me about why NICE is such a great statistics about making acquisitions, the multiple factors to that. One of them is that before we go and actually close the deal, we have the full PMI, the 18 — the first 18 months of the PMI fully planned. It’s a book with all the details day by day, what are we going to do with all the relevant functions in the company in the first 18 months. So the minute we closed the acquisition, all parties basically move to pure execution mode and follow-up in the execution. No questions that remain out there instead of just starting the planning.
So we are now, as I said, about two months into this execution. And I would say that, first of all, from integrating the two organization that’s behind us, you can also see it in the great profitability that we have guided to this year, not only from LiveVox, but obviously, they are accretive to that as well. But on the more strategic part of it, we have combined the go-to-market. There is some further training that needs to be done to all different sales organizations in the partner network. That already is in motion, but of course, it takes — will take a bit more time. And then there are product integrations, very detailed integrations that are planned for the next 12 months. It’s already connected and integrated but we are now making it tighter together, and there is a very solid plan for that for the next 12 months.
Patrick Walravens: That’s great. Thank you.
Operator: Thank you. The next question is coming from Rishi Jaluria of RBC. Please go ahead.
Rishi Jaluria: Wonderful, thanks so much for taking my question. First, I just wanted to go back to the AI bookings commentary. I know you talked about, hey, look, it’s going to take time to flow through to revenue. In those deals, can you talk a little bit about how does the actual revenue and pricing model look like when it comes to AI? I know you’ve talked in the past about having maybe some level of consumption when it comes to AI. Maybe if you could help us understand that, that would be helpful. And I have a quick follow-up.
Beth Gaspich: Thanks for the question, Rishi. So we’ve talked about it a bit in prior quarters. But what we’re seeing is we continue to provide more AI-based solutions is that we are now moving towards, as you’ve highlighted, both in the agency, in some cases, plus an aspect of the consumption-based instances or interactions that are happening digitally. And in some cases, when our offerings are purely digital, for example, there may be a, for example, a base fee on the software plus an additional fee for the consumption use, again, based on the interactions. So we are seeing that, that is continuing to be more of a hybrid model. And of course, it’s one of the reasons why we such have such an enormous TAM opportunity ahead of us.
We know that the level and number of interactions that are happening across the globe are just growing exponentially. And as our pricing continues to evolve with more and more increase in the sales and bookings of our A&I that is a great opportunity for us to see that incremental revenue more so in 2024, late 2024 and beyond as we materialize and bring those bookings into the revenue.
Rishi Jaluria: All right. Wonderful. And just quickly, what is the services attach look like for AI deals versus non-AI deals?
Beth Gaspich: With respect to services, in general, you might have noticed that, in particular, in the fourth quarter, we had a very strong quarter of services, and it was actually initiated by our professional services. So across both of our business segments that we see that customers need support with deploying our AI solutions. And so there is an opportunity there for a NICE services attach rate. And Barak highlighted earlier in the call, we’re often going to market with partners in those deals as well. So there are opportunities both from the collaboration and the growth of our partnership as well as nice attach rates from the professional services side of the house.
Rishi Jaluria: Wonderful. Thank you so much.
Operator: Thank you. The next question is coming from James Fish of Piper Sandler. Please go ahead.
James Fish: Hey guys. On the cloud side, what are you guys seeing with expansion rates with your existing customers? I was guessing it ticked up a bit versus last quarter. And what are you seeing with migrations of your on-prem base this year versus last year as organizations really try to understand and figure out their AI strategies?
Barak Eilam: Yes. Thanks for that. We see there is constantly a seasonality, but we see customers continue to expand into the cloud in different segments. It’s not the question of if, it’s a question of when and how for them — so we continue to do that. We see our existing customer base continue to both expand but also the cross-selling activities, as Beth mentioned before. And the — what we call the attachment rate of solutions to the core of the car solution continue to expand, including with the customer base. So these are kind of the trend, generally, as I mentioned before, when it comes to the conversion of either existing customers of NICE, but more so, of course, the entire base of other on-prem legacy providers because I’ll remind you, NICE do not have, we didn’t play in the on-prem market of core ACD routing.
For us, every time that we win one of those customers, the logos brand-new revenue, cloud revenue stream and not the conversion. Obviously, we have also the WM on-prem basis, but continue the migration in the same pace that we’ve seen before. And we think that it has the potential to accelerate.
James Fish: Got it. And Beth, you had mentioned the return to growth for the financial crime compliance unit. Did you mean that for 2024, how should we think about the timing or segment growth rates underneath for what’s included in guide annually? And what’s the mix of cloud versus on-prem within financial crimes given you said it’s getting to a meaningful level at this point?
Beth Gaspich: Yes. Thank you for the question, James. So first, I’ll say that we are, as I said, pleased with the performance of FCC last year. And our expectation and what we’ve seen in that business is that the cloud business continues to accelerate and is doing quite well. I think with that business, there are certain financial institutions that still have a preference from time to time to purchase on-prem as well. So you can expect that you may continue to see some variability in their revenue quarter-by-quarter. Once we get to the point where it’s really more of an apples-to-apples basis with a cloud versus cloud comparison, I think that is when you’ll really be able to visibly see the kind of more linear growth. But we are confident in terms of the momentum that we have in that business that we will see a nice return to growth.
We don’t provide guidance specifically for the FCC business on a stand-alone basis. But again, I think we’re feeling very positive about that business and it’s a trajectory and certainly know that it will return to growth in the future, whether it’s 2024 or beyond. With respect to the breakdown or the split of cloud revenue relative to the on-premise part of that business, we do not currently segment it. As you highlighted, it is becoming more meaningful. And certainly, we’re very pleased with the performance of the cloud growth that they have seen resulting from their Xceed and X-Sight platforms. It’s something that we are currently reviewing and discussing and we’ll consider — we’ll continue to consider whether it may be something that we break out in the future.
James Fish: Thanks, guys.
Operator: Thank you. The next question is coming from Arjun Bhatia of William Blair. Please go ahead.
Arjun Bhatia: Thank you. One on the AI front. Barak, I know you mentioned that 80% of customers are still on-prem. In your — I’m sure AI is such a big catalyst to get these customers to move over. But when you think about the timing, are the early signs of ROI on AI implementations enough to get these customers to move over in the near term? Or do you think there needs to be a little bit more of proof points and data points on AI ROI before we see kind of a base inflection curve in — or a big inflection rather in how these customers move over.
Barak Eilam: Yes. It’s — I — on a weekly basis, get to speak with a lot of executives throughout enterprises in multiple verticals and multiple segments in terms of size. And I can tell you, regardless, first to CX generally there is somewhat of a — throughout missing out on AI. And there is somewhat general wrong expectation, again, not necessarily for CX in terms of how fast and how big savings AI will bring to those organizations. Obviously, there are, but there are a bit of an exaggeration at least for the short term. But when it comes to CX, going back to the notion that it is very labor-intensive market. As I said, 90% of the spend is still on labor, it’s very repetitive in some cases. On the flip side of it, it is the most mission-critical in terms of customer relationship and protecting the brand.
So on one hand, there is recitation [ph]. On the other hand, there is clear realization that when they want to implement AI, it has to be even better than what is being provided today by people. So in the places where it is deployed. And I can tell you we have many of those, and I have conversations with these executive cost effect, we see great ROI to both areas. One is the augmentation of the user, making it, as I said, a 10x better. They see it. I hear great excitement, very specific proof point ROI, and this is accelerating very, very nice, but also due automation. And the two goes together. This notion in the past of — it’s either automated or not is no longer true when it comes to deploying AI, especially with NICE. It is about augmenting the user, finding tasks, finding areas, finding specific users when they’re just doing repetitive work, then fully automated.
That journey give them the confidence that they can move forward with the AI. So it was a long answer, but the short version of that we see a growing number of very specific improving ROI and they get it, they like it, and this is why we’re so optimistic about this year and moving forward.
Arjun Bhatia: Perfect. That’s super helpful. Thank you. I’ll leave it there and congrats on the good results here.
Barak Eilam: Thank you.
Operator: Thank you. The next question is coming from Michael Funk of Bank of America. Please go ahead.
Michael Funk: Thank you for the questions. A couple if I could. So first one related to the prior question. One of your competitors said that they think they’re seeing a positive inflection in enterprise migration to the cloud. So accelerating movement, accelerating demand trends that really first emerged in the last quarter too. So I’m just wondering if you’re seeing the same trend and if you are, why we wouldn’t see accelerating cloud growth in 2024?
