Dear Fellow Shareholders
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Dear Fellow Shareholders: I am writing to you in the midst of these extraordinary times, and while we may see the light at the end of the tunnel, it is too early to relate to the COVID-19 crisis in past tense. Although many of the long lasting personal and business implications of the unprecedented events we experienced in 2020 are going to be with us for the long run, I do want to give you a different perspective as I reflect on the last 12 months. In March of 2020, almost overnight the world seemed to have shut down. We had to remain in our homes, stores and restaurants were closed, and the office buildings we would commute to every day stood empty. But with all that unwelcome change and strict social distancing, we still managed to communicate, collaborate, get medical care and shop. Our children continued to receive education and while the world around us changed dramatically, the global economy did not shut down. This immediate adjustment to a reality we never experienced before was enabled by the technology innovations of the last two decades. It was inspiring to see how cloud infrastructure is becoming a true business continuity enabler as organizations had to move hundreds of millions of employees to work remotely overnight and how data analytics became the de-facto compass for managers as they had to maintain their teams’ engagement and well-being in a completely remote mode of operation for over 12 months. I truly believe that if it wasn’t for the adoption of these technologies, we could have faced a catastrophic outcome and a much different recovery pattern. The pandemic of 2020 has encased the entire globe, changed it permanently and transformed the way we live, the way we work, learn, access healthcare, and much more, but it also completely shattered many well- ingrained business myths not only on how we do things, but also on how fast they can be done. I believe that we are all on the cusp of a major transformation that will define our new normal as we move from two decades of globalization to the new era of accelerated virtualization. This transformation will be accomplished through a massive and accelerated adoption of technologies, blending digitalization, cloud and AI capabilities, that will support the evolution and betterment of personalized virtual experiences in every aspect of our lives. This new era is going to be characterized by a “phygital” way of life for consumers and organizations alike. We are going to create and consume experiences where the physical and digital dimensions are blended together, maintaining a fine line between personalization and privacy. The winners of this era will be the ones that will enable this transformational force and will lead the way for organizations to leap forward. Several years ago, I shared with you our vision for NICE to be a company that is built to transform. Moreover, a company with the power to be a transformational leader in our markets, helping our customers to transform themselves. As we navigate these extraordinary times, we remain more committed than ever to our long-term strategy and further expanding it, as we set an inspirational mission statement to be the company that transforms experiences to be extraordinary and trusted. With this mission statement, we aim to empower our customers to be leaders in the era of virtualization. Over the last 7 years, in light of this strategy, we invested heavily in building our DNA and 2020 put it to the ultimate test. Today, I can say with confidence and endless pride that together with our 7,000 NICErs around the globe we served our customers with courage and conviction, innovated faster than ever, and we are stepping into 2021 knowing that we have the power of extreme agility to take on the new normal in 2021 and beyond. When I look at our execution and performance in 2020 there are four common themes that made it a banner year for NICE, but are also the driving forces that will fuel our future growth. First, we operate in markets that are at the core of the virtualization transformation. Second, our strategic pillars, which are at the center of our innovation that embody Cloud, Digital and AI, are the undoubted cornerstones of the new virtual era and are recognized as essential to enable truly “phygital” experiences. Third, our solutions have always been mission critical for our customers, but the last 12 months further reinforced their vital importance and criticality especially in extreme and rapidly changing conditions. Lastly, what I refer to as the NICE “agility muscle,” our ability to tackle, manage and thrive in the most extreme situations, has proven to be one of our unique leadership assets. These four common themes powered 2020, making it a pivotal year for NICE and I would like to share some of our accomplishments. It was only a few years ago that we started our cloud transformation and in 2020, driven by our cloud platform strategy, cloud revenue represented nearly 50% of our total revenues, with remarkable 31% year-over-year growth. At the same time, our cloud profitability has significantly grown, reflected in close to a four hundred basis point increase in the cloud gross margin compared to 2019. Our customers look to us to provide them with smarter ways to manage their operations, and in 2020 we helped them to leap several years forward in their AI adoption. Shortly after launching ENLIGHTEN, our AI driven, out-of-the-box solution, we experienced an overwhelming demand for the unique benefits it unlocks. ENLIGHTEN has been successfully deployed by some of the largest enterprises globally, helping them gain a deep understanding of behavioral patterns, eliminate human errors and subjectivity and ensure quick identification and resolution of mission-critical issues. Further fueling our growth is the fact that consumers of all generations are becoming digital and are expecting to communicate with organizations just like they would with their friends and families. In 2020, over half of all our opportunities contained digital elements, and we saw an astonishing 100% year-over-year increase in our customers’ digital interactions volume, along with an acceleration in the digital transformation of banks. In 2020, we significantly scaled up our global market presence by taking our entire portfolio and best in class cloud platforms CXone and X-Sight to new geographies and market segments. This tremendous international expansion was enabled by the strong vote of confidence from the record number of new partners that joined our ecosystem. We are also very proud that while taking care of our customers and business we made a substantial contribution to our communities by using the power of our innovation to help address some of the most urgent needs that came with COVID-19. First, the strength and agility of our CXone cloud platform enabled our existing customers to move their hundreds of thousands of employees to work from home overnight. In addition, through rapid innovation, we provided CXone@home free of charge for new customers that were challenged with their on- premises infrastructures from legacy providers as they needed to quickly adhere to the changing environment. Lastly, as government agencies around the globe were working diligently in the past year to build and scale their COVID-19 response centers, we were there for them every step of the way. From the early days of uncertainty building overnight information centers, followed by massive scale testing operations and all the way to the current global vaccination supply chain, our technology was, and still is, front and center in eliminating bottlenecks, ensuring smooth processes and guaranteeing flawless and clear communications throughout. We are entering 2021 with great momentum, well thought-out strategy and extreme clarity as we begin our journey into the virtual transformation Key milestones decade. We are the leading player in each of our markets with our native cloud digital platforms. CXone and X-Sight, with their deep and broad portfolio of cutting-edge analytics, AI and best-in- class solutions, clearly set us apart and further Exited 2020 with a cloud cemented our leadership. We are excited about the annual revenue run rate in opportunities ahead of us and we will continue to excess of $900 million charge forward. With our industry-leading technology assets and cutting-edge innovation, combined with our fast-growing market share and a burgeoning partner ecosystem, we are in the Further expanded our strongest competitive position in our history as a leadership position in all company. leading industry analyst reports Our strategy is executed by the best team in our industry, our 7,000 NICErs around the world. I would like to take this opportunity to thank each and every one of them for their relentless innovation and 31% cloud revenue growth endless dedication during this unprecedented year. with a nearly 400 basis I know that this spirit will continue to push us point expansion in cloud forward, which gives me great confidence in our gross margin in 2020 continued success in 2021 and the years ahead. I want to extend our sincerest gratitude to our partners - we value your partnerships and appreciate the confidence you put in our solutions Record year of new CXone that you are delivering to your customers. I want to logos driven by digital thank our customers. Our success comes from your transformation and continuous trust in our products and technology, international expansion and we look forward to serving you for many years to come. And, finally, I want to thank our shareholders for their continued support and to Infused AI across our cloud whom we are dedicated to drive continued success at NICE.