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Operator: Welcome to the NICE conference call discussing third quarter 2025 results, and thank you all for holding. [Operator Instructions] As a reminder, this conference is being recorded, November 13, 2025. I would now like to turn this call over to Mr. Ryan Gilligan, VP, Investor Relations at NICE. Please go ahead.
Ryan Gilligan: Thank you, operator. I'm incredibly excited to join NICE as the company's new Vice President of Investor Relations, and I look forward to working closely with all of you in the investment community. With me on today's call are Scott Russell, Chief Executive Officer; and Beth Gaspich, Chief Financial Officer. 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 2024 annual report on Form 20-F as filed with the Securities and Exchange Commission on March 19, 2025. During today's call, we will present a more detailed discussion of third quarter 2025 results and the company's guidance for full year 2025. You can find our press release as well as PDFs of our financial results on NICE's Investor Relations website. 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 share-based compensation, amortization of acquired intangible assets, acquisition-related expenses, amortization of discount on debt and loss from extinguishment of debt and the tax effect of the non-GAAP adjustments. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. The information and some of our comments discussed on this call may contain forward-looking statements that are subject to risks, uncertainties and assumptions. I will now turn the call over to Scott.
Scott Russell: Thank you, Ryan, and we are thrilled to welcome you on board and have you join our team. Good morning, and welcome, everyone. Well, let me start by saying the renewed strategy that we laid out for NICE at the beginning of the year is now producing clear tangible results, reflected in both our financial performance and our growing market position. We're seeing great momentum across our entire business, setting a solid foundation for sustained growth. We're pleased to report another strong quarter underlined by exceptional cloud and AI bookings, stemming from the continued expansion and execution of our AI-first strategy, our international expansion and our robust go-to-market performance. This quarter reinforced the strength of our AI solutions, driving real transformation for our customers with exceptional cloud bookings, driving a cloud backlog increase of 15% year-over-year and with our AI capabilities included in every new 7-figure CX deal. In Q3, total revenue was $732 million at the high end of our guidance range, with cloud revenue reaching $563 million, up 13% year-over-year. Our cloud revenue growth was primarily driven by our AI and self-service offerings, whose ARR accelerated to 49%, driven by sustained organic momentum and the contribution from NICE Cognigy, which closed in early September. This demand for our AI offering is reflected in strong bookings for Autopilot and Copilot deals more than tripling in Q3. We also achieved a higher win rate against our key CX competitors, underscoring the growing customer appetite of our AI-powered and domain-rich solutions. Furthermore, it reinforces our conviction that we operate in a vibrant growing market where organizations are showing robust demand for accelerating their AI transformation using our offerings. We at NICE perceive AI not only as a catalyst for our groundbreaking innovation, but more importantly, as a fundamental force for reinventing how business, technology and humans interact in each of our markets. In the world of customer experience, our leading CX AI platform, CXone, is using purpose-built AI to reshape customer journeys in exciting new ways. Our AI-powered orchestration allows us to perfectly blend human and AI agents, creating seamlessness in the end-to-end experiences that go well beyond the contact center, delivering automated workflows that move from accurately identified customer intent all the way to organizational fulfillment and resolution. We're also seeing increased demand for our leading NICE Cognigy conversational and agentic AI solutions, available for implementation on any technology environment, allowing companies to design, run and optimize AI agents quickly and simply with little to no code requirements and with specific CX-built functionality and vertical know-how. There's tremendous added value that we're seeing for the powerful combination of CXone and NICE Cognigy together. Our ownership of the point of engagement awards us a distinct understanding of customer intent, sentiment, preference and context across literally billions of engagements. This distinct AI-ready foundational data then forms the basis for automated creation of smart agentic AI, turning this data into CX-built workflow intelligence. The symbiosis of CX engagement data dynamically informing AI agent conversations and actions, all happening as a part of a single unified platform is at the core of our differentiation and what sets us apart in our markets. Our innovation road map is already well ahead with many NICE Cognigy integration capabilities already completed and many more underway. NICE Cognigy drives further growth of the CXone platform and CXone accelerates the NICE Cognigy expansion in our customer base, particularly in the enterprise segment. Combining sophisticated agentic AI with engagement-based data also enables us to change the paradigm of customer engagement from a reactive to a proactive framework identifying business-initiated intents that can utilize human or AI agents to reach out to consumers, increasing sales, reducing effort, improving loyalty and trust. Our CX AI solutions are resonating with organizations of all sizes and verticals as evidenced by some of our key deals in the quarter. In Q3, one of the leading global auto manufacturers chose CXone to transform their customer experiences as part of an 8-figure ACV deal, underscoring NICE's continued leadership in the cloud contact center transformation and reinforcing the completeness of our CX AI platform. Their decision reflects the growing enterprise shift away from fragmented legacy systems towards a unified cloud and AI platform that enables modernization, agility and superior customer engagement. In another substantial Q3 deal, AI to cruises chose NICE Cognigy for their FAQ automation initiative, creating accurate dynamic responses to customer requests. Our integration with their existing environment allowed AI to cruises to capitalize on their existing data and workflows while modernizing the overall customer engagement experience. Our AI solutions are also generating strong upsell momentum. Consumer Cellular, an existing NICE customer added AI agent augmentation using our Copilot solution in a 7-digit ACV deal, enabling real-time proactive triggering of agent guidance, injection of knowledge and conversational suggestions and improving the ongoing customer engagement. Q3 also saw continued momentum in our international business as an increasing number of organizations across the globe look to NICE for their CX transformation. DWP, U.K.'s Department of Work and Pensions, extended their CX sovereign cloud initiative with NICE's self-service solutions in another 7-digit ACV deal, modernizing citizen engagement through automation and digital self-service. They chose NICE for our compliance with sovereign cloud standards, proven public sector standards, platform scalability and our ability to execute on their AI and digital transformation road map. Our overall strong Q3 performance is further proof that our strategy is hitting the mark and that we're delivering across all our key focus areas. Our commitment to leading the AI revolution in all our markets and specifically in CX with CXone and our NICE Cognigy solutions. The emphasis on developing our ecosystem and strategic partnerships to scale our impact, leverage our collaboration with major technology and GSI partners and with many more to come. Our international expansion and cloud adoption acceleration in global markets and of course, maintaining our financial strength with both operational rigor and industry-leading profitability while thoughtfully deploying capital through acquisitions and share repurchases. This is the perfect opportunity to remind everyone that our Capital Markets Day is coming up in just a few days on Monday, 17th of November in New York City. The event will feature presentations from our executive management team covering in more detail our long-term strategy and the future of the CX market, our CX innovation road map with NICE Cognigy and our financial overview, including midterm outlook. If you've not registered yet and you'd like to attend, please contact our Investor Relations team at ir@nice.com. We look forward to seeing you all in person at this event. And with that, I will now turn the call over to Beth.
Beth Gaspich: Thank you, Scott. I'm pleased to share another quarter of strong financial execution underscored by robust cloud revenue growth and continued positive momentum from our AI and self-service business. Our acquisition of Cognigy, the global leader in AI-driven customer service solutions closed in early September, earlier than originally anticipated, and Cognigy's performance is included in our third quarter financial results. Total revenue of $732 million came in at the high end of our guidance range, increasing 6% year-over-year for the third quarter. Cloud revenue increased 13% year-over-year, contributing $563 million, representing a record 77% of our total revenue. Excluding Cognigy, cloud revenue increased 12% year-over-year, in line with our expectations. Our cloud revenue growth in the third quarter continued to be driven by the strong performance of our CX AI and self-service ARR, which totaled $268 million in Q3, increasing 49% year-over-year and 43% year-over-year, excluding Cognigy. This key growth driver in our business continues to expand and next-generation CX AI now represents 12% of our overall cloud revenue. Our fast-growing CX AI is expected to becoming more meaningful in the coming years, especially with the addition of Cognigy, which we expect will further augment our AI and self-service growth trajectory. Our cloud NRR for the trailing 12 months of Q3 was 109%, reflecting continued strength in customer loyalty and expansion activity as we scale across a larger base. Our NRR is reported on a last 12 months basis and naturally lags current trends as demonstrated by our consistent cloud revenue growth year-to-date and the strong 15% year-over-year growth in our cloud backlog, as highlighted by Scott, we're seeing positive underlying indicators that our healthy NRR can inflect upward over the next few quarters. Our on-premises business performed in line with expectations as services revenue of $139 million represented 19% of total revenue and product revenue of $30 million represented the remaining 4% of total revenue. From a geographic breakdown, the Americas region, which represented 84% of revenue in Q3 increased 5% year-over-year with double-digit cloud revenue growth and strong product revenue, which was partially offset by a decrease in services-related revenue as our customers continue to migrate their maintenance to our cloud. Our international business demonstrated strong revenue growth in the third quarter as our cloud business continues to drive momentum with our continued success of large enterprise scale wins in the international markets. Our international revenue contribution increased from last year, and we expect this trend to continue. EMEA revenue increased 7% year-over-year and APAC revenue increased 19% year-over-year. Together, our international revenue increased 11% year-over-year. Our international markets represent one of our most compelling growth opportunities. These regions remain relatively underpenetrated in terms of cloud adoption, creating a significant runway for expansion. We're seeing tangible traction with large enterprise wins in both EMEA and APAC now going live and contributing to our revenue results. Our ongoing investments in sovereign cloud infrastructure are proving instrumental in securing these opportunities, offering local compliance, data residency and trust advantages that customers increasingly prioritize. In addition, Cognigy's strong presence and brand recognition in EMEA, coupled with their growing presence in the Americas, further enhance our reach in the region, serving as a powerful catalyst for growth and enabling cross-selling of our complementary AI and self-service solutions. Turning to our business segments. Customer engagement revenue, which represented 84% of our total revenue in the quarter was $613 million, increasing 6% year-over-year, driven by the continued strength of our CXone AI cloud platform across all geographies, which more than offset the continued transition from our on-prem business. Revenues from financial crime and compliance, which represented 16% of our total revenue in Q3 and totaled $119 million increased 7% year-over-year. This was due primarily to strong cloud and product revenue growth. Moving to profitability. Our total gross margin was 69.9% compared to 71.7% last year, reflecting our deliberate investments to scale international operations and to continue to expand our global cloud footprint where we are already seeing dividends as highlighted in our strong international revenue growth. Our operating income in Q3 increased 5% year-over-year to $231 million, and our operating margin totaled 31.5%. The impact of Cognigy on our profitability was immaterial on our gross margin and operating margin in the third quarter. Looking forward to the fourth quarter and beyond, we expect no significant impact to the gross margin from Cognigy. However, we do expect dilution to the operating margin, which we previously communicated and is factored into our updated guidance that I'll touch on in a moment. Earnings per share for the third quarter were $3.18, a 10% increase compared to last year. Our cash flow from operations in Q3 was $191 million, up 20% year-over-year, underscoring strong operational execution and profitability. During the quarter, we deployed significant capital to advance our strategic priorities, repurchasing $41 million of shares, fully repaying $460 million of outstanding debt and funding the acquisition of Cognigy. We ended the quarter debt-free with total cash and short-term investments of $456 million, demonstrating both the strength of our balance sheet and our capacity to invest decisively in durable, profitable growth and create long-term shareholder value. In summary, we delivered another quarter of strong execution, driven by sustained cloud growth, accelerating AI and self-service adoption and disciplined financial management. Our recent momentum, together with Cognigy now part of our portfolio and a debt-free balance sheet, we are entering the next phase of growth from a position of exceptional financial and operational strength focused on driving innovation, scale and long-term shareholder value. We're excited to share more financial details at our upcoming Capital Markets Day, including a 2026 and midterm outlook. Now I'll close with our guidance for total revenue and non-GAAP EPS for the full year 2025. Our updated guidance includes the expected results of Cognigy from the date of acquisition through year-end. We are increasing our full year 2025 total revenue guidance, which is now expected to be in the range of $2.932 billion to $2.946 billion, which represents a year-over-year increase of 7% at the midpoint. We are increasing our expected year-over-year cloud revenue growth to be in the range of 12% to 13% for the full year. Previously, we shared an expected year-over-year increase of 50 basis points to our operating margin. Our expectation for our organic operating margin, excluding the impact of Cognigy, remains unchanged. As a result of the acquisition of Cognigy, we now expect our operating margin to slightly contract. Previously, we shared an expected year-over-year growth in non-GAAP earnings per share of 12% at the midpoint. Our expectations for our organic non-GAAP earnings per share, excluding the impact of Cognigy, remain unchanged. As a result of the acquisition of Cognigy, we now expect the full year 2025 non-GAAP fully diluted earnings per share to be in the range of $12.18 to $12.32, which represents an increase of 10% at the midpoint. I will now turn the call over to the operator for questions. Operator?
Operator: [Operator Instructions] Your first question comes from the line of Siti Panigrahi with Mizuho.
Sitikantha Panigrahi: I just wanted to ask about Cognigy. You closed in September. So what's your expectation of Q4 revenue contribution from Cognigy? And specifically, how are you planning to position Cognigy in terms of go-to-market? And any changes to the partnership they have with other CCaaS vendors?
Beth Gaspich: Yes. Thank you, Siti, for the question. So I'll start off with the financial aspect of the question. First, we are very pleased that we were able to close the acquisition of Cognigy earlier than originally anticipated. We originally anticipated a Q4 close, and we were very excited that we received the regulatory approvals earlier than originally anticipated. What it means for our revenue contribution is that in the third quarter, it contributed roughly about 50 basis points to our cloud revenue growth from the inclusion of Cognigy. And what we've anticipated and that's included in our updated guidance for the full year is that it should include an increase about 150 basis point impact and increase to our cloud revenue growth during the fourth quarter. So those are the assumptions we've made on the financial inclusion and as a result of the Cognigy acquisition.
Scott Russell: And on the go-to-market side -- thanks, Beth. On the go-to-market, it is really clear that Cognigy is a world-class leading conversational agentic AI platform. And they are actively and we will expand and grow going after all of the CX market, whether NICE is the underlying CCaaS platform or not, but more importantly, going after that market because we know those companies who are running on other platforms don't have an integrated solution. They need an AI platform and the Cognigy solution is ready-made and we will go after that market. So we're excited about the potential that brings. And you can be assured that the Cognigy team are very excited to have the power of NICE behind them as we go pursue that.
Sitikantha Panigrahi: And Scott, just a quick follow-up to that. We keep hearing from a lot of customers who are not yet in cloud or CCaaS. They use Cognigy for AI. Do you see this is an opportunity now for you to even accelerate or reach out to those customers and move them to cloud as well?
Scott Russell: Yes, for sure. I mean if you think about it, we have 3 growth vectors for our Cognigy business that we're really excited about. First, a customer that is in the cloud that have already done the CCaaS migration, but they're looking to do their AI transformation, Cognigy is the market leader. They are fantastic at being able to provide that automation, that customer service experience. And so secondly, is the nice installed base and the tremendous opportunity in the enterprise customer base that we have, bringing Cognigy into that installed base. And then third, to your point, is we are the only company that has the combined world-leading AI platform and the world-leading CCaaS platform that we combine together. And if they want to start with their on-premise, they want to start with AI transformation, they lead the way with NICE Cognigy. If they want to do their cloud migration on CXone, they start there. But either way, we can give them the end-to-end journey on a unified platform. So it does give us real optionality for our customers in terms of their transformation journey from their on-prem. And that's obviously very exciting.
Sitikantha Panigrahi: Great and look forward to hearing more on Monday.
Scott Russell: Look forward to it.
Operator: Your next question comes from the line of Patrick Walravens with Citizens.
Patrick Walravens: Great. Congratulations to you guys on all the momentum in the business. It's great to see. So Scott, with Cognigy, as you're getting deeper into all these sales cycles, can I ask if you're seeing Sierra? And I bring it, I'm sure you're getting this question a lot, but for anyone who doesn't know, they just raised $350 million in September at a $10 billion valuation. So it would be great to hear your thoughts in terms of what the competition looks like.
Scott Russell: Yes. Great question. So let me first say, the growth and the expansion of AI in the CX market is clearly evident. And we've been talking about this for a period of time. But when the introduction of new players, it's a validation of the attractiveness of the growth potential that this market brings. And I guess you can see our move of acquiring a proven market leader. Cognigy is a proven market leader in conversational and agentic AI. They're already there. They're proven with some of the world's leading brands, and it's a testament of our leadership and our ability to capitalize on the opportunity. And just as a reminder and why we feel really strongly about our competitive positioning, Cognigy was specifically targeted because of its enterprise scale. It is already delivering at the enterprise, the top end of what organizations need of scale. It's easy to adopt. There's no words like forward deployed engineers by our Cognigy team. We don't need services surrounding. It's easy to adopt, and it's proven customer value that we can scale with both CXone and non-CXone customers. So yes, we see new entrants in the market. It's a validation of the potential that market brings, but it also gives us renewed confidence about our ability to lead on an AI-only play, a CCaaS and then the combination of the 2 together. And I think we'll be able to share much more details, Patrick, in our Capital Markets Day on Monday, where we can really showcase that capability.
Operator: Your next question comes from the line of Elizabeth Porter with Morgan Stanley.
Elizabeth Elliott: Now that we're a few months out from the renewed and expanded RingCentral partnership, are there any changes that you're seeing in pipeline velocity or average deal size through this channel? And understanding we're probably going to get a little bit more next week, but any context for how we should think about this as an incremental driver to fiscal '26 bookings?
Scott Russell: Yes. Look, it's a great question. So first of all, Vlad and I and our teams have been in really tight collaboration with the renewed partnership. We've got an updated go-to-market. We've got the real potential to have an expansion. I'll give you 2 key levers. One is RingCentral were already an existing partner of Cognigy and a proven scalable partner of Cognigy. So not only in the combined installed base that we have with RingCentral together, but as their go-to-market, as their agentic and conversational AI platform supporting their solutions, it is a great collaboration. We're doubling down on that super. And then secondly, as you rightly point out, with our renewed partnership commitment, we're able to give confidence to our customers across all segments around combining world-leading UCaaS platform with the best-in-class CCaaS and now agentic AI platform as a unified offering. So yes, identified leads, clear go-to-market momentum and collaboration between our 2 go-to-market organizations means that we do expect renewed growth, and I know that the RingCentral team feel the same way.
Operator: Your next question comes from the line of Samad Samana with Jefferies.
Samad Samana: Maybe one, just Beth as a housekeeping question. If I think about the guidance increase for the year, was any of that on the cloud side an organic increase as well? Or was it largely due to Cognigy? And then I have a follow-up.
Beth Gaspich: Yes. Thank you. We have maintained our expectation of 12% growth in the cloud, excluding Cognigy for the course of 2025. So that is remaining unchanged. And so the increase that you're seeing in the range in the midpoint -- up to the 12.5% midpoint is predominantly coming from the inclusion of Cognigy.
Samad Samana: Great. And then maybe just zooming out from that very specific question, Scott, and I don't want to front run the Capital Markets Day on Monday, where I'm sure you'll dig into this in detail. But as you think about the early days of Cognigy being folded in, and what they brought in the NICE team. How are you thinking about the joint go-to-market effort right now? What have the early observations been? Is it better together? And are customers appreciating that better together story? Or is it still today CXone and Cognite maybe going a bit separately, but you'll fill that in over time?
Scott Russell: Yes. Thanks, Samad. So a couple of observations. First of all, I was really pleased, and I talked about our cloud backlog growth and the growth of it. NICE Cognigy has already been an injection of positivity to our backlog. It's -- as a stand-alone business that has a really great pipeline that has a really great brand and recognition in the market. It has not been diluted. In fact, it's been enhanced. So that's exciting because it means the acknowledgment of the market that a leading conversational AI platform in its own right, competing head-to-head with competitors in that space, they stand really, really strong. We obviously have been really active in making sure that the NICE teams are fully up to speed. So it was quite advantageous actually. We didn't expect the closing to happen in September. But because it did, we were able to get ahead of the enablement of our go-to-market, the large coverage we have, including our partners. Don't forget, our partners play a huge part of our go-to-market execution. And so through September, we really ramped that up, which means we're able to hit the ground running in Q4 and as we lead into '26, with the NICE team being really equipped about leading those conversations on the AI and the automation play that Cognigy brings. So those 2 are really good -- and the resonance that we're getting from the NICE customer base is also really strong. But the third part that I guess I want to just reiterate what I replied before to Patrick or Elizabeth when we're just talking about is there is a large -- it might have been Saudi actually. There's a large amount of market, both internationally and in the U.S., which are evaluating their transformation journey where they've got an on-prem suite, fragmented solutions and they're trying to figure out what's my transformation road map. And what it's meant for us is instead of saying you've got to do your CCaaS move to the cloud first and then do your AI, they love the optionality, "hey, I might lead with my AI, get some real productivity and automation savings that will drive through", but then the unified platform gives us that potential to have even higher. We've already increased our win rates, but we're looking at even higher win rates as a result of NICE Cognigy. So look, Samad, I guess it's -- you're right, we will share more on Monday, but we do expect that the benefits that we had planned for and expected through the acquisition, the early indicators are really positive, and that forms a big part of our growth potential not only in Q4 but 2026 and beyond.
Beth Gaspich: And one additional point that I would add to what Scott just said as well is when we think about the cloud backlog, of course, we're excited about the momentum Cognigy is bringing and what that means for us. But when we looked at the cloud backlog at the end of the third quarter, it's important to highlight that the growth, excluding Cognigy, also was increasing to 13%. So when we look ahead to our expectations stepping into 2026, we see the positive sign there of the ability to inflect and see further growth in the cloud revenue, which is exactly what we'd like to see and we expect to see going forward.
Scott Russell: Yes. We got the organic, the inorganic and then the better together, so really positive effect.
Operator: Your next question comes from the line of Tyler M. Radke with Citi.
Tyler Radke: So Scott, I think you talked about 15% cloud backlog growth. I know it's not a stat we get every quarter, but certainly 15% is higher than where you're getting -- where we're seeing cloud revenue. So could you just talk about, is there any Cognigy impact there or anything on duration? Or is that a good read for where perhaps cloud revenue growth could go going forward, perhaps into next year?
Beth Gaspich: Yes. So Tyler, I'll take that question, and it's actually what I was trying to clarify after Scott made his comments in the prior question from Samad. With the cloud backlog that we referenced, so the 15% year-over-year growth, we did have inclusion of Cognigy. If you exclude the backlog of Cognigy, we had cloud growth of 13% year-over-year. So the 13% year-over-year backlog growth compares to our 12% growth expectation this year. So of course, that builds a lot of confidence for us as we look forward into 2026 in our ability to further accelerate our growth.
Scott Russell: Which we'll share more details on Monday.
Tyler Radke: Yes. Okay. So no duration impact, but 13% is what we should be thinking about. Okay. Perfect. And then just on the margin side, I mean, I know there's some moving pieces with the international expansion and bringing on Cognigy. But maybe just help us understand, are there additional sort of investments you're making that should pressure margins on a go-forward basis? Obviously, we can kind of see where margins are with the first full quarter of Cognigy here in Q4. But should we expect kind of additional pressure, additional kind of costs that are going to lead revenue, whether that's international expansion or AI beyond Q4?
Beth Gaspich: Yes. So it's a great question, Tyler. And we'll talk a lot more deeply about this specifically on Monday as well as we start to talk more around what you should expect to see in 2026 and the midterm outlook, '27, '28. But in general, I think what you should expect is that this is an area of investment for us. When we think about this area, we've had great success internationally. And often, that requires some sovereign cloud infrastructure. So you're building that infrastructure, putting it in place internationally ahead of the impact of the positive accretion that you get from natural growth in the cloud. So we still haven't seen all of the benefit from the great business we've been signing internationally that will continue to drive leverage in that margin. But in the short term, we are going to continue to make those investments. We see tremendous opportunities internationally. We've been very successful there. And so yes, you should expect that you'll see in the near term a slight pressure that you're seeing during the course of Q4, and we'll talk more again about expectations for 2026 and beyond on this coming Monday.
Operator: Your next question comes from the line of Jim Fish with Piper Sandler.
James Fish: Appreciate the color on Cognigy and breaking it out. Beth, 50 basis -- I'm sorry, 1.5% impact for Q4 gets you to about $8 million. But some quick math after that would kind of point to a big ramp to get to that $85 million ARR exiting next year. I guess, how do you get there? And how should we think about the impact to expansion rate from here just because if you kind of look at that 111% last quarter that you had on cloud net retention rate, now we're talking 109%. You have the ability to cross-sell this into the base, but it did imply a fairly decent drop sequentially. So it's really 2 questions, and I'll be quiet. And it's essentially that how do you get to that big ramp? And secondly, what's going on with net retention rate? And how can Cognigy kind of fill that hole?
Beth Gaspich: Yes. Thank you, Jim. I'll try to break it down. Let's start with the $85 million because it's really important that we clarify that, first of all. The $85 million, we expect as our exit ARR for Cognigy at the end of December 2026 as we exit the year. That means that's the run rate coming out of the year. It does not mean that it represents the revenue contribution we expect from Cognigy during the course of 2026. So of course, the revenue is going to be distributed and ramping up through the course of that year. And so that is the exit point. So that's the first thing that I would clarify there. I think that as you think about Q4 and what we're predicting for the fourth quarter, in particular, first, I would say it's a little bit of early days with this acquisition. So we are factoring that into our expectation in the near term, but we have already seen the positive momentum that's really exciting even out of the gate from the Cognigy business. So we do expect to see that inflection continuing to happen throughout the course of 2026. And so I think that's built into everything that I've described.
Scott Russell: Maybe let me just quickly add, Jim. I just want to reiterate our expectation of our -- of the exit 2026 ARR at the $85 million, we feel very comfortable that that's on track. The early indicators, as Beth mentioned, is very positive. That's not only on the revenue that you're seeing that you mentioned in Q4, but the momentum around backlog, bookings, pipeline that then generates into revenue or more importantly, into ARR by the end of next year.
Operator: Your next question comes from the line of Arjun Bhatia with William Blair & Company.
Willow Miller: I'm Willow Miller on for Arjun Bhatia. Can we get an update on LiveVox? Are you seeing stability in the business after seeing some elevated churn earlier this year?
Beth Gaspich: Yes. Thank you for the question. I think it's -- first of all, you'll see that our cloud revenue growth during the quarter achieved exactly as expected. We achieved the 12%. And of course, LiveVox is a part of that. So really, what it emphasizes is that the core of our cloud business is growing even better than what you see externally. With respect to LiveVox, in particular, it has a positive outlook, and it's actually forecasting ongoing growth in cloud revenue. So all good and healthy signs that we're seeing in that part of the business.
Operator: Your next question comes from the line of Michael Funk with Bank of America.
Michael Funk: Beth, earlier in the prepared remarks, you mentioned the NRR trends. And I think you commented some expectation or hope of positive inflection in NRR. So can you just talk through the NRR trends intra-quarter? I know your metric is a trailing 12 month. And then related, can you talk about your pipeline, the strength of the pipeline and quality of pipeline and overall feedback you're hearing from customers about their appetite for spending?
Beth Gaspich: Yes. Thank you for the quarter -- I'm sorry, for the comment or the question. So for NRR, in particular, I did highlight in my comments, and it's important to highlight that NRR is not in-quarter specifically. That is looking at the trailing 12 months and of course, reflects some of the change that we saw in our cloud growth that was happening during 2024. When you look at the current impact in quarter of the NRR, we see exactly what we would expect, which is stabilization that's consistent with the 12% growth that you've seen throughout the course of this year. And we talked about the ability to positively see that inflect in a positive manner looking ahead. And of course, we're looking at cloud backlog, but some other trends that we see as well that give that positive confidence in the growth and great cross-sell and upsell efforts we have with our existing installed base.
Scott Russell: Yes. Maybe I'll cover the pipeline question. So Michael, the pipeline is strong. And you can probably tell the sentiment that I'm sharing, it's based on not only execution of what we see and what we've experienced in Q3 and our execution against the strategy, but it's also based on what we're seeing in the market. I think the first thing that I will say is there is lots of questions about AI in the market, and I understand why that potentially is the case. That is not true for CX. In CX, the proven benefits that you -- with a world-class AI platform that drives automation, great experiences, reduced cost, increased loyalty, ability to be able to drive upsell and sales and benefits for your customers, we can prove that with real customer references today. So the demand of that to be able to improve customer experiences as an AI transformation initiative in the -- we -- it's positive momentum. Whereas in other parts of AI, you can question, you don't question it here. But I would also add our growth drivers, and we'll talk more about this on Monday, but if you think about the growth drivers that we have, we've clearly got still a significant market on the jump balls of on-prem to cloud. We're improving our win rates. We see increased pipeline, very good. Our international expansion on the back of the investments, we see a lot more on the international side. We see that in our pipeline. And of course, I'm very optimistic on all the things that I talked before about NICE Cognigy inside of our business, whether it be the net new market where NICE doesn't have a role today, where we're going after that, the installed base where we're going after that and then an accelerated opportunity on those jump ball scenarios. A lot of that pipeline, we haven't even put into -- we're in the early days of bringing that into our business. So I guess it's not only on the current pipeline that we see that is strong and the buying sentiment, but the potential that we have now that we've got the complete end-to-end capability. So yes, it is borne from the trends being in our favor, which we were predicting, but it's good to see that it's coming to life.
Operator: Your next question comes from the line of atharine Trebnick with Rosenblatt Securities.
Catharine Trebnick: I have one for Scott. Most of your Cognigy customers are using speech to text to LLM and back to speech. OpenAI and others have recently released direct real-time voice APIs. And are you seeing competition from these APIs? And why or why not? Sorry, that was more technical, but I had to ask...
Scott Russell: No, no, no, very happy to answer the question, Catharine. Look, I think we've got to just pause a little bit and look at this market for the reality it is. Anyone can create a bot, anyone. I can do it myself in 10 minutes. But creating an AI agent, whether it's teach -- text to speech, speech to text and all the other capabilities, but creating an AI agent that delivers superior customer experience, exceptional customer experience, advanced from what a human does today. That takes a whole lot more than creating a bot with some simple capabilities. And so we actually don't see the LLM providers as competition in this space. In fact, we see them as partners within our ecosystems. Their models are really good. They're general purpose, they've got an expanded capability, but with NICE and in particular, with our Cognigy, we provide the contextual CX-specific AI built, that's built on rich customer interaction data. It's built on the knowledge of what that data is, the sentiments, the context as well as the intents -- and that contextual knowledge, together with the guardrails, together with the regulations, together with the knowledge and the standards inside the enterprise, integrating those also with the legacy systems that you need to connect to, to make sure that you're delivering according to the standards that an enterprise needs. No simple bot does that. You need a complete platform. And so I guess we see the goodness of the demand because what happens is a customer often says, "Oh, I'll try to build it myself on this, on -- whether it would be OpenAI or Anthropic or other platforms, fantastic. But as soon as they see the reality of you need much more richness to be able to deliver a great consumer experience with that AI agent, it quickly comes straight to us, and we're able to leverage that. So we leverage the large language models. They're super. They're really important, but also the complementary of what we bring with the contextual intelligence means that it actually drives demand for us in a really positive way. So I love the question because we get it a lot, but it immediately then translates to validation of why the domain-specific capabilities that we have are really critical when you're in delivering to your consumers because no one is going to introduce inferior customer experience to their customers, no one.
Operator: Your next question comes from the line of Tavy Rosner with Barclays.
Tavy Rosner: Most of my questions have been asked. I just wanted to touch on Actimize for a second. What's the competitive dynamic? It does feel like more players are trying to disrupt the market. Is there -- do you feel anything on your end?
Scott Russell: Look, I guess I would say a couple of things. Obviously, we've put a lot of emphasis around the CX business. And it's obviously an exciting inflection point in the CX market with the AI potential momentum, everything that we've talked about. And we're clearly proactively positioning our leadership in that and winning, which is why we've emphasized that so heavily. But we have got a really strong business in Actimize. It's the market leader. There continues to be high demand. The regulatory environment around the standards and the expectations around compliance and avoiding financial crime and compliance continues to be a really important aspect for financial institutions. So that business is in a really positive place. It's got a lot of cloud potential and momentum still to come. But the thing I love about the Actimize business, candidly, it is the retention rates and the -- it's -- we don't lose a customer because once it's implemented, it just provides an ongoing value and model that resonates to the largest financial institutions on the planet. So that industry definitely benefits from continued focus on compliance and financial crime, and that is a driver for us. And yes, we're positive about the outlook of that business.
Operator: That concludes our question-and-answer session. I will now turn the call back over to Scott Russell for closing remarks.
Scott Russell: Thank you. Look, so first of all, I appreciate the time for everyone today. As you can clearly see, we're excited. We're excited about our ability to be able to execute on the strategy that we laid out, the renewed strategy that I've talked about on many times on these calls and seeing the results. And frankly, the expectations is Q3 is a part of a proof point of a long journey in front of us to really lead and win in this market and be excited about it. We're also excited to be with you next Monday to join us. I think it's really important that you can understand and see really the NICE Cognigy platform, how it then benefits with the CXone platform and how bringing the 2 together, the 1 plus 1 equals way more than 2, it's 5, it's 10 and the potential that brings, but also from Beth and I, the updated strategy, the midterm outlook and how that plays out. So I appreciate the time and look forward to seeing you all on Monday.
Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.