[Business Research Institute] Nice—Attractive Valuation

• Rapid setup time and lower upfront costs, as there is no need to purchase, build, and configure on-premises infrastructure. • Greater reliability, as cloud service providers possess more robust infrastructure and redundancy than on-premises solutions. • Enterprises can easily deploy contact centers across multiple locations using the cloud—without on-premises infrastructure—thereby supporting remote work and expanding the talent pool. • Cloud solutions are billed on a subscription or pay-as-you-go basis, making cost management and budgeting easier. • NICE is well positioned to capitalize on this cloud migration trend, thanks to its CXone platform and AI capabilities. Cloud revenue has reached a tipping point, accounting for 67% of 2023 revenue—a significant increase since 2017 (the first full year following the InContact acquisition). • The shift toward cloud solutions is expected to drive double-digit growth in both revenue and unlevered free cash flow (defined as EBITDA minus capital expenditures and software development costs) over the next three to five years. Profitability is expected to further improve as its cloud services scale and operations become more efficient. NICE’s investments in AI and automation are also expected to enhance efficiency and reduce costs. 2. High Switching Costs • NICE’s software solutions are deeply embedded into customers’ business processes, resulting in high switching costs. Moreover, customer engagement and financial compliance are mission-critical for clients; thus, the risk of disruption typically outweighs any potential benefits—leading to high customer retention. Core Anxiety—Can AI Replace Call Center Agents? 04 This question shouldn’t be rushed to a conclusion—but it serves as an excellent tracking thread and observational window. Conversation is not merely about taking turns speaking. Beyond words, humans rely on tone and context to understand each other’s thoughts and resolve ambiguity. Knowing when to speak, when to listen, or how to interpret subtext is just as important as the words themselves—and these nuances cannot yet be captured by AI models. Large language models trained on billions of written words simply cannot replicate the subtleties of spoken dialogue. AI is a useful tool that assists—but does not replace—human agents. Free Cash Flow 05 As of September 30, 2024, the company generated $668 million in free cash flow over the prior 12 months, representing a free cash flow margin of 25%. Financial Performance 06 In 2023, total revenue reached $2.378 billion, up 9% year-on-year from 2022. Cloud revenue amounted to $1.582 billion, up 22.1% year-on-year and representing 66.5% of total revenue. The company demonstrated strong cash generation: operating cash flow in 2023 totaled $561 million, up 17% year-on-year. Q3 2024 Results 1. Revenue increased 15% year-on-year to $690 million, compared with $601.3 million in Q3 2023. 2. Gross profit was $460.3 million, versus $410.4 million in Q3 2023. Gross margin for Q3 2024 was 66.7%, versus 68.2% in Q3 2023. 3. Operating profit rose 24% year-on-year to $141.4 million in Q3 2024, versus $113.6 million in Q3 2023. Operating margin for Q3 2024 was 20.5%, versus 18.9% in Q3 2023. 4. Net income increased 31% year-on-year to $120.9 million in Q3 2024, versus $92.4 million in Q3 2023. Net income margin for Q3 2024 was 17.5%, versus 15.4% in Q3 2023. 5. Operating cash flow for Q3 2024 was $159 million.

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"The company generates capital and creates its own destiny—truly pulling away from competitors," Matt added, explaining that the company can proactively acquire strategic assets, invest in its own platform, build key global partnerships, or execute share buybacks. Trained in Matt’s signature presentation style, Ian then unpacked three key sets of numbers essential to understanding NICE’s business. Hard Numbers Key Metrics for Understanding NICE 80–90 | 88% | $2 trillion / billions 80–90: Since 2019, NICE’s revenue has grown from $1.58 billion to $2.38 billion, and operating income from $434 million to $704 million (a 13% CAGR). This is a company with a 75% gross margin, a 30% operating margin, an ROTA above 20%, and a total addressable market (TAM) of $30.7 billion. Its future growth runway is enormous—much of which may come from existing customers, not just adding new marquee logos. Today, NICE’s customer support solutions serve over 25,000 customers—including a veritable who’s-who of U.S. corporate America: all ten of the top U.S. health insurers, five of the top five telecom companies, nine of the top ten global financial services firms, and six of the Fortune 10. Yet approximately 80% to 90% of its customers still rely on call centers and on-premises software. Regarding on-premises software, Barak Elam explained, customers use it for several years before returning to NICE to purchase updated versions. By contrast, cloud solutions receive weekly updates with new innovations. Moreover, customers can instantly purchase additional products or services without needing system integration specialists to ensure seamless interoperability across software components. This closely resembles the ERP system built by TechnologyOne. As each customer migrates to AI-powered cloud solutions—replacing expensive global human teams—costs fall by over 20%, while NICE can charge a 50% premium for its cloud platform, which operates in real time across every digital communication channel selected by the customer for brand interaction. This is a win-win—for NICE, its B2B customers, and ultimately their B2C end-users. For this Israeli company, the accelerating shift to the cloud represents a long-term, growth-accelerating 'killer recipe.' Ian then explained there is another growth avenue. He shared enthusiastically that Matt had invited him to participate in a due diligence call with NICE’s Investor Relations team. Ian had never spoken directly with a real IR team before, so he spent an entire weekend preparing questions. He was nervous—but his ears perked up when he heard on the call that less than 10% of NICE’s customer support cloud revenue comes from outside the United States. According to Matt, while total cloud revenue is growing at a 27% CAGR, international growth is outpacing that of the U.S.—and should, and can, become a primary driver of NICE’s future success (Figure 11.8). The Asia-Pacific region is a critical component of its expansion efforts. 11.8 Global Cloud Revenue Growth. Overall, Matt believes the company is on track toward a $5 billion revenue target—and capable of converting 20% to 25% of revenue into free cash flow.

NICE Q3 Revenue Rises 8% to $790.7 Million

Nov 4, 2026

Associated with Air Products and Chemicals Inc, NICE reported Q3 2026 revenue of $790.7 million, an 8% increase year over year. The company announced plans to reduce its global workforce by approximately 5% and raised its full-year adjusted EPS guidance.

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