NICE Ltd. (NICE) Management on Q1 2020 Results - Earnings Call
NICE Ltd. (NASDAQ:NICE) Q1 2020 Earnings Conference Call May 14, 2020 8:30 AM ET
Company Participants
Marty Cohen - Vice President, Investor Relations
Eran Liron - Executive Vice President, Marketing & Corporate Development
Beth Gaspich - Chief Financial Officer
Conference Call Participants
Shaul Eyal - Oppenheimer
Daniel Ives - Wedbush
Samad Samana - Jefferies
Sanjit Singh - Morgan Stanley
Tavy Rosner - Barclays
Patrick Walravens - JMP Securities
Dan Bergstrom - RBC Capital Markets
Ryan Koontz - Rosenblatt Securities
Rishi Jaluria - D.A. Davidson
Walter Pritchard - Citi
Operator
Welcome to the NICE Conference Call discussing first quarter 2020 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 14, 2020.
I would now like to turn this call over to Mr. Marty Cohen, VP, Investor Relations at NICE. Please go ahead.
Marty Cohen
Thank you, operator. With me on the call today are Beth Gaspich, Chief Financial Officer; and Eran Liron, Executive Vice President, Marketing and Corporate Development. Unfortunately, due to the death of his father, Barak Eilam, CEO, is unable to join the call today. We send him and his family our deepest condolences.
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, including the impact of the COVID-19 pandemic, is contained in the section entitled risk factors in item three of the company's 2019 annual report on Form 20-F, as filed with the Securities and Exchange Commission on April 6, 2020.
During today's call, we will present a more detailed discussion of first quarter 2020 results and the company's guidance. 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 Eran Liron.
Eran Liron
Thank you, Marty, and welcome, everyone. First, I would like to join Marty, and on behalf of the entire NICE team, extend our condolences to Barak for the loss of his father. As for the business environment, we're operating in an unprecedented time. Never before have organizations had to reprogram the way we operate in a matter of days, and then constantly keep adapting to changes on a daily basis amidst the uncertainty they are all experiencing. After years of building organizational muscle centered on efficiency and experience, now, extreme organizational agility has suddenly become the most important critical capability of any enterprise that wants to navigate these uncertain times. Changes that used to require years to implement must now be done in days. Organizational agility, which is a company's ability to renew itself, adapt, and change quickly to succeed in a rapidly changing, ambiguous, and troubling environment was stress tested beyond belief in the past couple of months.
At the same time, organizations are starting to rethink the long term, realizing that the need for agility is not temporary, but rather is here to stay, and rapid and abrupt changes are the new normal. For NICE, we're in the vendor position to enable organizational agility for our customers. This is true for all markets we operate in, including customer engagement, financial crime and compliance, and public safety. Over the past couple months we have enabled new and existing customers to respond to rapid changes in a matter of hours or days. Furthermore, these recent months were a testament to the mission critical nature of our solutions, as we have seen continued adoption, along with a dramatic increase in volumes going through our platforms across multiple vertical markets. In response to the need of organizations to quickly adapt in the current environment, we launched new offerings at record pace. At the onset of the lockdown, every enterprise with a customer service operation was faced with two enormous challenges, moving employees to work from home overnight, and at the same time, dealing with a massive spike in the number of interactions. In fact, industry wide, 15 million contact center employees around the globe had to move to work from home, while maintaining uninterrupted service. In response, we launched CXone@home, targeted at those organizations with contact centers using on-premise infrastructures from legacy vendors.
While these on-premise infrastructures are highly inflexible and difficult to move their motor [ph] environment, CXone@home can actually be deployed in 48 hours or less, and supports work anywhere. Thus far, we've seen strong demand for CXone@home, with a few dozen organizations already adopting the offering and many more in the pipeline. It is important to note that many of these organizations that have adopted CXone@home were using a competitive on-premise solution and were not planning to shift to the cloud in the foreseeable future, but decided to do so once they realized the extreme challenges that they were facing. For our existing customers already on CXone, we've enabled the successful transition of hundreds of thousands of contact center agents to work from home within hours. Those enterprises using CXone were able to make same fully operational customer service levels without interruption, including both self-service and digital channels.
Additionally, we're experiencing an unprecedented increase in CXone volumes from both existing and new, local and federal agency customers. As the only FedRAMP authorized cloud platform, we are very proud to take part in providing government agencies with the ability to support tens of millions of citizens. We were able to flawlessly support a fivefold volume increase in this vertical, due to the intrinsic agility and scalability of our platform. Also, with hundreds of thousands of employees working from home, supervisors are faced with a new challenge for managing a remote workforce. In response to this urgent need, we launched WM@home [ph] to both, new and existing customers to provide advanced remote management capabilities. With WM@home [ph], supervisors can now gain control and focus employees on shifting customer priorities.
The public safety sector is also challenged. The need to conduct investigations doesn't go away in the current environment, and they must strike a balance in the ability to continue to conduct investigation, while still maintaining the safety of their employees. Therefore, we immediately launched NICE Investigate Xpress. NICE Investigate Xpress eliminates the need to physically handle everything. It enables the electronic sharing of information, both internally and externally, and even allows quarantined public safety personnel to continue to work from home. Thousands of public safety personnel across the U.S. and the U.K. already started using the new solution in the very first week, and interest is growing steadily. This is another example of how the current environment is accelerating the digital transformation in the public safety sector.
We are also seeing similar requirements in our financial crime and compliance market. A few weeks ago, the government launched the CARES Act, and due to the provisions of this act, financial services organizations are facing an unprecedented influx of loan applications, and they need to provide accessibility to the Paycheck Protection Program in record time. Despite this large influx of loan applications, financial organizations are still required to follow all, 'Know Your Customers' regulations and procedures, but now in an expedited timeframe. In response, we launched KYC Xpress. KYC Xpress is a cloud solution, which automates manual KYC procedures, reducing hours of manual steps to minutes, minimizing errors, and dramatically increasing the speed of KYC processes by more than 80%.
Across all segments of our business, we're pleased to see that we have witnessed great response to these offerings for the immediate needs to provide agility for organizations. Over the past couple of years, we spoke about our strategy to enable organizational transformations related to digital cloud and analytics. While we continue to address the short-term needs of our customers, we're also starting to see organizations prepare for the next phase, the reason demonstrated to them that it is not critical to accelerate these transformations. Furthermore, their ability to respond very rapidly in the last few months and manage in days changes that they thought would take years, is giving them the confidence that they can transform quickly. Among other things, this will dramatically accelerate the shift in the cloud to transform digital to be a mainstream component of their operations and alter their mindset from just experimenting with AI to massively adopting it. We're in a prime competitive position to enable organizations to expedite their transformations as they overcome their immediate challenges and begin to prepare for the future.
Our cloud and digital leadership, as well as the mission critical nature of our solutions, was demonstrated by our strong first quarter results. In Q1, total revenue increased 9% to $411 million, driven by another quarter of accelerated cloud revenue growth, which increased 27%. The strong top line results led to further increase in profitability. Operating income was $111 million, which is an increase of 14% compared to Q1 2019, and operating margin increased 120 basis points to 26.9% compared to Q1 last year. These strong operating results led to a 14% increase in earnings per share to $1.34. The 27% cloud growth was once again driven by CXone with multiple seven-digit ACB deals with many new logos. The CXone deals included a seven-digit ACV deal with a large financial institution that decided to standardize on CXone with our full analytics portfolio, and in the process, replaced two incumbents. We also signed the seven-digit ACB CXone deal with a large state agency. We also signed a seven-digit deal with a major telecom for analytics, and the seven-digit deal with one of the largest insurance companies in the world, also for analytics.
In Q1, we also received two eight-digit orders, one with a large global financial services integrator, and the other with a major federal agency. We signed several seven-digit deals for our financial crime and compliance solutions, including a large payment processing company and some large global banks. In addition, we signed several seven-digit deals for essentials. In the quarter, we also experienced significant expansion in our partner ecosystem. We signed a new strategic partnership with Infosys for our financial crime and compliance solutions. This global partnership will allow Infosys to resell our AML and fraud solutions to their very large customer base around the world. We also signed new retail partnerships for CXone. One was with a major European telecom to help expand the reach of CXone in the European market, and the other was the largest refill in the contact center industry that is moving more of their business to the cloud. Our other recently signed partnerships are doing well and continue to rapidly grow their business with NICE.
Moving to our financial outlook, as you saw in our press release, we are providing Q2 guidance. But given the uncertainty of the economic conditions, we are withdrawing our annual guidance. We continue to have high confidence and expect strong growth in our cloud business. However, our licensed business depends in part on large upfront capital expenditures by our customers, and we're being cautious about such expenditures in the near term. As a company continually focused on profitability, we do expect to maintain strong growth in our earnings.
In closing, the challenges of the current environment have opened the eyes of companies around the world to the importance of organizational agility. This is underscored by the inflexibility of today's on-premise solutions from legacy vendors. We believe this bodes well for an accelerated adoption of our cloud platforms and our mission critical solutions, as the current environment has delivered a harsh warning to organizations that they can no longer delay their cloud and digital transformation. As the clear leader in both cloud and digital, along with a strong balance sheet, strong cash generation, a stable and well established business, and an acute focus on profitability, we're in the best competitive position to capture the opportunities ahead of us.
Let me finish by thanking our employees who are now working from home for their dedication and support during these unprecedented admin times, and for continuing to give 100% of their effort and commitment to driving the success of NICE. I will now turn over the call Beth.
Beth Gaspich
Thank you, Eran, and good day, everyone. I'm pleased to provide the analysis of our financial results and business performance for the first quarter of 2020, as well as our outlook for the second quarter and full year 2020. Total revenue for the first quarter reached $411 million, an increase of 9% from $378 million in the same period of last year. Our total revenue growth was driven once again by our impressive cloud growth, which was up 27% in the first quarter of 2020. Our recurring revenue increased 400 basis points over the prior year from 71% in the first quarter of 2019 to 75% in the first quarter of 2020. This increase demonstrates the continued acceleration we're experiencing in the shift to cloud.
Cloud revenues accounted for 42% of total revenue for the first quarter, compared to 36% in the same period last year. Product revenues accounted for 16% of total revenue in the first quarter, and service revenues accounted for the remaining 42% of total revenue in the first quarter. Both our segments contributed to the year-over-year growth. Customer engagement revenues for the first quarter were $328 million, an 8% increase over the same quarter in 2019, and represented 80% of our total revenues. Financial crime and compliance revenues for the first quarter increased by 14%, and were $83 million, representing 20% of total revenues. Looking at geographies, Americans contributed $337 million to total revenue in the first quarter, which represented an increase of 17%. Revenues in EMEA were $48 million in the first quarter, and APAC revenues in the first quarter increased 7% to $26 million.
And now to profitability. Gross profit in the first quarter reached $292 million, an increase of 9% compared to $267 million in the first quarter of 2019. Gross margin grew 40 basis points to 70.9%, driven by our cloud gross margin, which continued to increase and reached 62.9% compared to 59.8% in the same quarter last year. Operating income increased 14% to $111 million, and we continue to expand our operating margin to 26.9%, an increase of 120 basis points. Earnings per share for the first quarter grew 14% to $1.34, compared to $1.18 in the first quarter of last year. Our tax rate was 21% during the first quarter. It will continue to vary somewhat from quarter to quarter, based on the mix of profitability in different tax jurisdictions. However, we continue to expect it to be in the similar range we previously communicated, between 21% to 23%.
We continue to generate healthy cash flow from our operations, and exceeded the threshold of $1 billion in total cash and financial investments at the end of the quarter. As we look forward to the future, we will continue to manage our expenses prudently, and expect this strong cash generation trend to continue. The leverage we maintain in our financial model will continue to provide us with strong liquidity for further investment back into our business, and in parallel, to support our capital allocation programs. At the end of the quarter, total debt was $467 million, net of issuance cost and the equity component associated with our convertible debt.
I will conclude my remarks with some commentary regarding the strength of our business, the outlook for the rest of 2020, and our financial guidance. Our customer base is well diversified across multiple industries, geographies, and business segments. We have more than 25,000 customers, of which more than 85% are Fortune 100 customers. We do not have any one customer which represents more than 5% of our overall revenue. We have numerous go-to-markets partnerships that span across the globe. The economic future for the remainder of 2020 is uncertain. We expect that some customers may delay certain decisions in the short term, which may make it difficult to predict our licensed related revenue. And therefore, we are withdrawing our full year guidance.
With that being said, as Eran highlighted in his comments today, we continue to see robust demand for our cloud solutions, and expect continued strong cloud growth. Furthermore, as we've done each and every quarter, we can continue to be committed to grow our profitability, as evidenced in our first quarter results and our second quarter guidance. For the second quarter of 2020, we expect total revenue to be in the range of $387 million to $397 million. We expect the second quarter of 2020 fully diluted earnings per share to be in an expected range of $1.28 to $1.38.
I will now turn the call over to the operator for questions. Operator?
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question is from Shaul Eyal of Oppenheimer. Please go ahead.
Shaul Eyal
Thank you. Good afternoon. Good morning, Beth, Eran, Marty. Glad that everybody is doing well. Please send our sincere condolences to Barak. Congrats on the strong first quarter performance. Beth, I wanted to start by touching on cloud growth. Some really great 27% year-over-year performance. How could we be thinking about this cloud's ongoing growth in the light of the fact that fiscal '20 is being removed, the guidance for the year?
Beth Gaspich
Thanks. Thanks for the question, Shaul. And we're also quite pleased with the performance of our first quarter. With respect to our cloud growth, looking forward, we continue to expect to see the strong cloud growth that we've been experiencing. As we looked on the first quarter, we've experienced a lot of increases in volumes, transactional volumes, and that spans across multiple verticals. So as we look ahead, we expect that trend to continue. And as Eran highlighted today as well, many of the organizations that adopted our CXone@home offering during the quarter were organizations that were using on-premise solutions that shifted to the cloud, and really in order to give them the agility they needed in their organizations. So we've seen that that trend, and we've also seen that that really reinforces the stability and the overall strength of our platform, and our ability to really confidently support large enterprise, given some of the dramatic increases in volumes. So looking forward, we're quite confident in the continued growth in our cloud revenue.
Shaul Eyal
Thank you for that. And my follow up, Beth or Eran, we can definitely see and understand the mission critical nature and benefits of the CXone and the X-Sight platform. When we think about NICE's overall broad product offerings, or probably when your customers are thinking about it, are they taking the same non-discretionary view, so to speak, when they're considering RPA, Nextiva analytics? And again, these are just examples. So pretty much, are they taking the same non-discretionary approach for the entire portfolio? Or are there some diversions between some of the products?
Eran Liron
So thank you. Obviously, different solutions have different value. However, the two specific solutions that you highlighted, the RPA and Nextiva analytics, are both having a very strong demand these days. Keep it in mind that two things are happening. When people shift to move from home and then of course, would probably need to shift back and maybe partially, and there's a probability that they will need to shift yet again back home, the processes need to become much more agile. RPA specifically allows to create a lot of organizational agility, and to make fast changes and processes that are required in order to support all these changes.
As for Nextiva analytics, what we've seen over the last few weeks is that working from home and working during COVID is not just simply a matter of the CP system [ph]. The nature of the calls and the way that people handle the interactions actually changes, both on the customer side, as well as employee side. And they've been using Nextiva quite extensively to understand the trends, how are the calls changing, what is changing in the call, and how are people handling them, and also what makes for a good handling of the caller interaction, and what makes for a poor handling of an interaction.
And therefore, specifically for the two solutions you've asked about, we're actually seeing an increase in criticality during these times.
Shaul Eyal
Thank you for that.
Operator
Thank you for that. Your next question is from Dan Ives of Wedbush. Please go ahead.
Daniel Ives
Thanks. So, Beth, can sort of talk about, from a cost structure perspective, how you're thinking about things? Are you cutting to maybe more of like a stress test type scenario over the coming quarters? Maybe provide some expenses, especially just as given the uncertainty. Thanks.
Beth Gaspich
Thank you for the question, Dan. And as we emphasized when we read through our script earlier, I think that it's clear that as a company we have and always continue to be highly focused on our profitability. We have strong leverage in our financial model, and it's of importance to us and something that we continue to keep really a very keen focus on. So as we look forward, in terms of the rest of the year as well as the first quarter, we are obviously reprioritizing where we invest in the company. We don't have any plans in terms of workforce reductions. We are really focused around making critical hires that will continue to drive the growth that we've continued to see in the cloud. But as I highlighted, from an overall standpoint, as we look at some of the discretionary spend, of course, we have made some changes to ensure that we will continue to see the health and deliver on the profitability increases that we have in the past.
Daniel Ives
Got it. And for Eran, could you just talk about just sales cycles? Walk us through -- are you starting to see April, first part of May maybe more normalized versus March? And just maybe walk through going from face-to-face to virtual, just from a day-to-day perspective, how you're kind of seeing those, I guess, challenges and opportunities. Thanks.
Eran Liron
So in terms of the sales cycles, actually, we are positively surprised that we're able to close very large deals completely remotely. If you had asked us this a year ago, I would have never believed that the type of deals that we are able to close from cradle to signature without physically meeting the customer. It's surprising and encouraging. In terms of the pipeline, et cetera, that actually looks very healthy. In terms of the close rates, we are off to a good start. But I have to caution that, as you know, and as in every software company, the last month of every quarter is the more critical one. And so, we will have to wait patiently until the month of June to have kind of a very sharp understanding of the impact on the sales cycle. So far, we haven't seen any dramatic changes in the length of the sales cycle.
Daniel Ives
Thanks.
Operator
Thanks for that. The next question is from Samad Samana of Jefferies. Please go ahead.
Samad Samana
Hi. Good morning, and thanks for taking my questions. Maybe if I could ask one on CXone@home. Beth, I think you said -- or sorry, Eran, I think you said a few dozen customers have already adopted it. I'm curious if you could give us an idea of maybe how many seats that represents and/or any characteristics around those customers? Are they more mid-market? Are they more on enterprise? Are they doing more tactical deployments or full deployments? Just any color around that would be helpful.
Eran Liron
Sure. So first, I have to qualify. These are all customers that were completely new to the -- to us in terms of the pipeline which is not a conversion of the customers that were already in the pipeline and just closed the CXone@home. In terms of the size of the customer, it spans the gamut. We have seen mid-size customers and some very significant enterprises. I can't give you an exact number on the number of seats, but it is well in the thousands in terms of the seats that are already deployed, and the pipeline looks very strong. In terms of the specific verticals, we have seen a movement from verticals that we would have never expected to run a sales cycle from first contact to signed in a matter of days and some of these literally took less than 10 days from the first time we talked to them, until they signed. And this includes the verticals like government, which is mind-boggling that could move this quickly; it includes our financial services, it includes Telecom. So, we see it on a pretty broad set of verticals; all glitch [ph] are verticals that I would have traditionally considered; verticals that run more conservative processes that take fairly long time.
Samad Samana
Great. That's up, Eran [ph]. Beth, maybe -- maybe one for you. I appreciate the kind of lack of visibility on the license side, and as you know, the commentary on cloud. Could you just maybe triangulate at least a little bit more on 2Q? What's embedded for cloud growth with the current guidance given for the second quarter? Just -- and then, maybe what are some of the assumptions underneath that?
Beth Gaspich
Sure. Thanks for the question, Samad. So, as we look at Q2 specifically, first of all, I would say as you know, we don't ever guide on specific line items. What I can add in terms of some overall color, as I've said, is that we continue to see, you know, and expect a similar cloud growth that we've been experiencing. And so, you know, looking at the past several quarters, I think, you know, we will assume that we'll still continue to have this growth. We've talked about the increase in volumes that we've experienced during the quarter. We're seeing this, you know, maintained in kind of the early part of Q2.
Samad Samana
Great. I'm just going to slip one more and I apologize for it. But when we think about the license sales, how much of that is typically to completely new customers versus selling back into the existing customer base?
Eran Liron
So obviously, the majority of our sales are into existing customers but there is a fairly significant portion that's non-negligible that goes into new customers. And at this point, however, when it comes to licensed sales, obviously, whether it's new or existing, even where existing customers in many cases, it is the new product for them. So, it's expanding our footprint and the number of products that they use from us. And so, it would still require them to kind of have a project around it.
Samad Samana
Great, thank you and wishing everybody well and stay safe and sane. Thank you again.
Beth Gaspich
Thank you.
Operator
Thank you. The next question is from Sanjit Singh of Morgan Stanley. Please go ahead.
Sanjit Singh
Thank you for taking the questions and we definitely send out our condolences to Barak and his family. I wanted it to -- Eran -- going to have a question around how you're thinking about the market over the next 12 to 18 months. And if I sort of go back to this time last year, at sort of Analyst Day; the message, at least in terms of large enterprise market that -- that it was going to be a steady shift to cloud; no major inflection points. And so in terms of your investment profile, we're going to grow margins as you sort of execute against that cloud penetration opportunity overtime.
I'm wondering how you think about that now, as we get through and get out of COVID? Is this going to be [indiscernible] into the cloud? And how does that sort of alter or not alter your thinking on investment profiles? This is a once-in-a-decade shift to the cloud; do you potentially increase your investments, not necessarily in the near near-term, but in the coming months or in the next year to capture that opportunity?
Eran Liron
So, let me handle the first part of the question, then I'll handle -- so best to discuss kind of ongoing investment. Obviously, we look at it in terms of few horizons; there is a very, very short-term where we're looking at still via -- kind of the height of the COVID situation. And these turbulent waters are pretty hard to predict. Had you asked me two months ago, what I would have expected; I would have probably guessed that we would be more of freed what we've actually experienced, especially when it comes to the cloud the deals are coming in. New customers are signing up; new environments are going up. So, I'm actually positively surprised that this kind of what's happening in the eye of the storm. However, this is a -- this period shall pass, and hopefully end pretty quickly.
And then, when we look at what's going to happen in kind of the second horizon which is via COVID kind of work-from-home is over and now we're dealing with the repercussions. And as I talked about extensively in my remarks, we believe that the cloud adoption will accelerate and it will accelerate in two ways. First of all, more organizations that did not think of adopting cloud will now adopt cloud; so the potential market will grow but there is another part of acceleration, which is simply that we believe the sales cycles will get shorter because companies have gotten a lot better at making fast decisions. We see this -- I don't expect the sales cycles will convert -- convince to a week like we've been seeing in the last couple of months but still, we believe that sales cycles will accelerate.
And as you think through that, obviously, I would say two things on the strategic side. One is, when you want to scale quickly, partners matter, and we've been working extensively on adding and growing our partner ecosystem, which is a -- it's a lever that allows one to grow our reach, get better on the front-end of the sales without massively increasing and growing the sales force. The second point is as the sales cycles become shorter, the efficiency of a salesperson grows; so, a single person can do more. So, those are two kinds of positive backwinds [ph] that we expect that would be as a result of both our actions in the next -- in the last couple of years, as well as the dynamics that we see in the market now.
As for the specific future investments, I'm going to hand it over to Beth.
Beth Gaspich
Yes, I would just add to what Eran said. If you think about it more from an operational perspective, first, I think it's really important to highlight that at NICE, one of our strengths is that we really work in an iterative fashion on a regular basis, meaning that we are always reprioritizing and shifting our investments internally to ensure we're really driving our continued success and the growth we've seen in our operation; and then, more specifically, ensuring that we are really fueling the continuation of our cloud growth. So there is -- you know, we'll continue to do that, as we have done in the past. And if you look at some of the targets that we've previously shared from a longer-term perspective, we've talked about the far exceeding $2 billion in revenue, having cloud revenue be 60% or more of our total revenue, and our operating margin reaching 30% or more, those targets stay on-track.
If anything we expect that the cloud, the concentration as a percent of the overall revenue may be happening faster than what we previously expected but we were certainly committed to those longer-term objectives and in reaching them.
Sanjit Singh
I appreciate the thoughts; very thoughtful color there. Maybe as my last follow-up, a more tactical question on the cloud momentum. So, I understand that the licensed business is obviously, has more volatility associated with it; but cloud usage also can spike up and spike down. And so, I wanted to get a sense of how much of -- kind of the surge in demand in March that you saw drove upside in the quarter? And how do you think that usage sort of sustains? And, if you can give us any sort of insight on in terms of your -- an average customer sort of subscription contract; how much flexibility do they have to spike up and spike down without incurring charges on the platform?
Eran Liron
Sure. So, we have had some customers that have spiked up quite dramatically in March. But our cloud business is getting to the scale with literally thousands of customers that it just becomes a law of large numbers. As you can imagine some spike up, some spike down; all in all, we did see an increase, but it is not as extreme as these customers who have spiked five-folds in specific verticals. In terms of the license flexibility, the way our license works, they do have a minimum commit, there is no limit on how much they can spike up but they are limited in how much they can go down. They can obviously go down as much as they need but they will have to pay for a bit below the minimum commit. And the amount that they can go down is different and with different customers and different size customers, but the way you could think about it is on average, we will be above the expected usage because the customers that spike up do more than the customers that spike down.
In terms of the sustainability of it, and I -- it's hard to predict kind of these spikes, but I don't think that if you look at kind of our performance in the last quarter, I don't think that this is a result of a one-time spike. It is more a testament of the sustainable growth in the business.
Sanjit Singh
Very helpful. Thank you. I appreciate it.
Operator
Thank you. The next question is from Tavy Rosner of Barclays. Please go ahead.
Tavy Rosner
Yes. Thanks for taking my questions, and please pass on my condolences to Barak. Most of my questions have been asked. Just wondering, if you can comment on the competitive environment -- I'm thinking [ph] retro-strategic positioning with regards to some of your more legacy competitors such as Verint or Genesis [ph]; where do you see yourself at the moment? I mean, it would be helpful.
Eran Liron
So, I prefer not to address specific competitors. All I can say is, we feel very comfortable with our position. If you follow the kind of the analyst reports that cover our market, such as the Gartner Magic Quadrant, you would see that there is kind of a very broad recognition that our CXone platform has significant differentiation against anything that is out there. And also, there is a matter of scale; it is probably a multiple; anything else that is -- anyone else that is competing against us in terms of the number of agents, the scale, the revenues on the platform. So, we feel very comfortable. We don't see any dramatic change in dynamics, we are all innovating, our competitors keep innovating as well, but we feel that the gap is widening rather than shrinking.
Tavy Brosner
That's helpful. And since you're the M&A person, I guess, it's relevant to ask you your thoughts, with regards to M&A. I guess, do you feel that beyond potential small deals, is there any room for the large one down the road? Do you feel that anything is potentially missing or could be value adding to your organization?
Eran Liron
I'm sure there are things that are value added to the organization. We always examine and look at opportunities. We don't feel that we have a gaping hole that requires some significant move that we have to make. However, we can see a lot of different things that could be helpful in building up our strategy. At the same time, as you probably know, we tend to be very disciplined around how we do M&A, and the value of the integration, as well as the valuation. And so, if we see something that is strategic, that we think that we can integrate well, and that is priced in a way that will create the shareholder value for our shareholders; we can see doing it whether it's small, medium, or large.
Tavy Brosner
Great. Thank you. And congrats, again, for the good results.
Operator
Thank you for that. Your next question is from Patrick Walravens from JMP. Please go ahead.
Patrick Walravens
Great, thank you. And let me add my best wishes. So I guess my first question would be with the massive shift to working at home, some investors might actually expect the cloud business to accelerate. So what are the factors preventing that from happening? What's sort of the other side of that?
Eran Liron
Well, we do feel that the cloud business will accelerate. I think that's why we've been very clear on the fact that there is a lot of strength there.
Patrick Walravens
I mean, maybe I got my numbers wrong, but it was 27% last quarter, 27% this quarter, and the guidance for next quarter seems around the same based on what Beth said. Did I get something wrong?
Beth Gaspich
Our growth in last quarter in cloud, Patrick, was 25%. So we experienced an acceleration at 27% this quarter. And of course, recall as well, that typically we have the highest level of seasonality, even in the cloud and in the fourth quarter.
Patrick Walravens
Okay, great. And so you think that can happen again, Beth?
Beth Gaspich
You know, as I've said, we were -- as Eran and I, both have said, we're highly confident in continued growth of our cloud. So we expect similar, comparable growth to what we've seen in quarters past.
Patrick Walravens
Okay. And then…
Eran Liron
I would add one thing, Patrick. As you know, it feels like we've been in this crisis for 18 years. It has been a month and a half, and you probably, whether or not acknowledge [ph] and know the dynamics of cloud revenues, and that they take time to translate into business trends to translate into revenues. So I think that the expectation that things will turn on in a week is probably a little too optimistic.
Patrick Walravens
It does feel like 18 years. Okay, two other quick ones. How's customer churn and what are your assumptions for that for the rest of the year? And then, what's your plan for eventually returning your employees to work here but also in Tel Aviv?
Eran Liron
We don't see any changes in the customer churn. Our customer churn in the cloud is very healthy and sensitive, because it is low. And we haven't seen any dramatic changes in that in either direction. And obviously, it will depend on kind of the longer term economic conditions. I'm sorry, what was the second question?
Patrick Walravens
What's your plan to have your employees go back to work in the U.S. and in Tel Aviv?
Beth Gaspich
With respect to our plans in terms of returning to our employees, back to our offices, if closed, we've been working from home really smoothly in the last couple of months with no interruption to our customers. We're working across the company kind of in a cross functional manner to ensure that we're comfortable at the appropriate time to move back in our offices. So we haven't set in stone the specific timeline yet to return our employees to either Israel or any of our offices.
But certainly we will be reopening those offices first and giving priority to the countries that are more advanced and where they are with respect to being on the downside of the curve with respect to COVID. So, you know, as we look at our offices, we certainly would expect that Israel will likely be one of the offices if not the first office that we would look to reopen.
Patrick Walravens
Great, thank you, and congratulations again.
Beth Gaspich
Thanks, Pat.
Operator
Thank you. Our next question is from Dan Bergstrom of RBC Capital. Please go ahead.
Dan Bergstrom
Yes, thanks for taking my questions. Maybe to build on Dan and Sanjit's questions earlier, could you talk about the cadence of business or what customers are doing during the quarter from an activity level compared to normal? I guess, you know, did you see a pullback in mid-March on the license deals? Or was there actually more activity going on getting customers up and ready to work for home with CXone at home?
Eran Liron
So our overall activity level has increased. And obviously, you can imagine I talked during my remarks about launching several offerings that were specifically targeted to helping our customers make this a massive shift to work from home. Again, when people move thousands of employees to work from home, it's not simply a -- where's the end of the line for a – for their telephone or for their computer. It's a very, very different way of working. They don't have eye contact with their employees, they can't walk the halls and talk to them. So they need a lot of tools that help them keep the machine, so to speak, going. And we've also seen dramatic changes in dynamics and how employees expect to work from home.
On the one hand, they can jump in and start working immediately, but on the other hand, they expect more flexibility, if they need to take a break, they need to go attend to their kids, etc. So this is a very, very different work environment. And they need tools to help them deal with that. So we've seen a lot of activity, a dramatic increase in activity around that. In terms of the actual deal signing, as I said, we've signed many deals that we were -- I was surprised that could actually sign without meeting face to face, even one, but they did sign. There are obviously interruptions, you know, we have customers in sectors that were heavily impacted.
Some sectors that were impacted and got positive momentum and some that got negative momentum.
Dan Bergstrom
Great, thanks. And then maybe just on the strength in the Americas, 17% percent growth, really strong, some of the strongest we've seen in several years, impressive. Is that does that largely the response to getting customers up on work from home or is there more of an underlying strength there?
Beth Gaspich
The Americas' growth is really very directly tied to our cloud revenue growth overall. And that gets attributed directly to CXone. So certainly the strength we saw in the Americas and the quarter was directly correlated -- really the growth, we talked about, most of it, really being driven by CXone, but also some more general growth across other aspects of our business as well.
Dan Bergstrom
Thank you.
Operator
Thank you for that. Next question is from Ryan Koontz of Rosenblatt Securities. Please go ahead.
Ryan Koontz
Sure. Hi, thanks for the question. Beth, what if you could summarize just at a high level some of the puts and takes that go into the June guide as it relates to COVID-19, and how you think about that and how you factor that into your guide? Thank you.
Beth Gaspich
Sure, thanks for the question. You know, as we look at the Q2, the considerations we took in into consideration were really around, primarily, the difference mixed model that we have here at NICE. So of course, as we've highlighted, over and over, we're highly confident on the cloud growth and how that will factor into the quarter or early indications. Today, we're still seeing large transactional volumes and increases in CXone.
On the flip side of that is the license aspect of our business, and even before coming into COVID, we've seen that there's variability from quarter-to-quarter, which we've experienced in our on-premise license aspect of our business. So certainly, with the overall environment, we know organizations are looking at their budgets and pulling back in certain aspects. So we've taken that into consideration because clearly, from an on-premise perspective, typically, most of the activity and most of the buying happens in the last couple of weeks, if not the last week of each quarter.
So you have less visibility into understanding how you will ultimately end up with respect to the license model. So we've taken both of those into consideration. With respect to our services, again, we continue to see the strength in our overall services, predominantly with respect to the support and maintenance we provide for our customers, and in providing our critical needs systems. And we're also really focused on driving a lot of the recurring services as well which also supports them during these times.
Ryan Koontz
So pulling on that decline in visibility, is that tied to particular segments or types of customers? Is there any -- or is it tied to the kind of travel and leisure? What kind of exposure do you have to these consumer segments that are really looking like they'll be hurting for a while?
Beth Gaspich
Yes, again, the decline in visibility is really no different than what we would experience pre-COVID. Right? With respect to our -- the on-premise business, as I said that's typical that you see the buying behavior really happening in the last couple of weeks of a quarter. Of course, the difference is that at this time, you have less certainty as to if those same organizations will change their decision-making process at the very end of a sales cycle.
So under typical situations in a normal buying cycle, you get to the point where you're quite comfortable with an organization's ability to have the budget and commit to making a deal and to closing the deal. I think in this environment, of course, again, there is that uncertainty which is heightened as organizations could ultimately, as they get to the very end of a sales cycle, decide to pull back. And so that's the difference in what we're seeing today versus a typical quarter.
Ryan Koontz
Super helpful. Thank you so much.
Operator
Thank you for that. The next question is from Rishi Jaluria of D.A. Davidson. Please go ahead.
Rishi Jaluria
Hey, everyone. Thanks for taking my questions. Glad you're all staying safe and my condolences to Barak and his family as well. I wanted to start out by asking about CXone, you know, first with CXone at home, if I read right, you know, it's offered at no charge for 45 days. Maybe help us understand what's the path for customers that weren't CXone customers? Did they adopt CXone at home? Did they after the 45 days transition to kind of a lighter version of CXone, is there an upgrade path to get on the full CXone platform? And maybe alongside that, to follow up on some earlier questions that, I believe, Sanjit was asking. On the pricing side, so the CXone is building arrears. Can you just directly remind us how much of the revenue is kind of a fixed price per seed versus consumption base, and then I've got a follow-up?
Eran Liron
So in terms of the CXone at home, in order to get people up and running in less than 48 hours, we have created some free packages. There is a path to upgrade for obviously, once you're up and running and for obviously, additional license, and therefore, what we've seen in many cases as people start, they get going, they start to handle interactions, which is kind of think about it as like a emergency procedure they're now. And then they start expanding to additional capabilities. And if we had created the richness of the capabilities in CXone and all the options, if it was an a la carte menu, then it would just take longer for the customer to even define what they need. And so that's the idea, and we see that as a potential plus, because, again, we've seen multiple of these customers come back and expand their purchase because they want more of the CXone capabilities.
In terms of the mix, CXone is a build in the rears [ph], it's not a portion of it, it's virtually all of it that is built in the rears [ph]. It is true that there is a significant portion of it that is committed but we still wait until the month is over to see what was actually consumed, and then bill, whether if it was below the minimum commit, we bill the minimum commit; if it was above, we bill the overconsumption.
Rishi Jaluria
Okay, got it. That's helpful. And Eran, in the prepared remarks, you talked -- or in the Q&A section, you mentioned that you're seeing more interest in RPA, and I think it makes sense to all of us that RPA is going to become increasingly important in this environment. Just curious, if I'm not mistaken, RPA is an on-premise solution right now. Given the environment we're in and the fact that we're going to be remote working for a while, should we -- does that, I think, increase the need for a cloud-based RPA solution to kind of make it easier to deploy or what's your thought process on that side?
Eran Liron
We actually launched a few months ago, a cloud capability for RPA in response to even before the crisis in some of the dynamics that you just described. So you're right, and we're on it.
Rishi Jaluria
All right, perfect. Thank you so much.
Operator
Thank you for that. The next question is from Walter Pritchard of Citi. Please go ahead.
Walter Pritchard
Hi, thanks. Question for Beth on the Europe business was down quite a bit. How much of that was just lumpiness of large deals? Was there any trend that you saw emerging there and obviously the COVID impact was there first, and then had a follow-up?
Beth Gaspich
Thanks for the question, Walter. Really if you looked at the revenue for the first quarter, for me, the important thing to look at is where we landed in Q1 of the prior year. So looking back to Q1 of 2019, you might recall that we had extremely strong growth in Q1 of 2019 of 18%. So it was really a difficult compare. If you look at the EMEA region, again, you know, we have a healthy customer base there, remain optimistic about the outlook.
We've talked about our focus around international expansion, specifically with CXone in our international markets, including EMEA, of course, as you're looking at CXone with cloud, it takes much longer to ultimately be apparent in the revenue line item, but we're trending in a positive direction there with the growth we're seeing in CXone.
Walter Pritchard
Great. And then around the -- there was an acquisition in the quarter, it looked like from the cash flow, can you just help us understand what that was and where that technology part fits into the product portfolio?
Eran Liron
Yes, it was a small technology acquisition into the financial crime and compliance business that would help us with certain types of advanced analytics for AML processes. It is primarily a technical capability.
Walter Pritchard
Great, thank you.
Operator
Thank you for that. We have no further questions waiting. I will now hand the call back to Eran.
Eran Liron
Thank you, everyone. And we hope to meet you again in our next quarterly earnings call. Thanks.
