Drill Down Ep. #249: NiCE (NICE:NYSE) CEO Scott

Welcome to the drill down to business stories behind stocks on a move. I'm Corey Johnson. Well, just ahead, NICE is betting nearly a billion dollars that AI agents and automated self-service will define the next decade of customer experience and they're doing it right now. Scott Russell is going to explain why the company is paying a premium to grow that business and what's in the near future of putting AI to work. But first, it's sponsor time. The drill down brought to you by Era. Never miss another critical event or insight with Era. Customize your company watch lists and track key events, mentions, filings, and more. All with easy use and customizable interface. That's era.com.

I'm Corey Johnson. Welcome to the drill down. We're going to talk about the business stories behind when stocks on the move. NICE, it's both the ticker and the company. Software company focused on customer experience, AI automation, fraud and compliance tools for large enterprises. So, think call centers, banks, telecom providers, airlines, government agencies. They've layered in AI across all of their product lines. And they say AI self-service is going to be 40% of recurring revenue in this calendar year. CEO Scott Russell joins us right now from Hoboken, New Jersey. Glad to have you, Scott. And I'm glad you got the wardrobe memo. How do you describe, and in preparing for this interview and listening to conference calls, I realize that sometimes my challenge is to avoid jargon if at all possible. But how do you explain what your business does in a very basic way?

15 million?

It's incredible. And historically, it's been a part of the business which is as much about containment as it is about true resolution because often those service representatives are answering a call. We've all experienced it. We've been on the other end of the line and we've said, 'Oh, can you hold for a few moments?' And they're responding trying to resolve your request, your need. And they're trying to do it in an expedient way. And so that's been the world of contact center. We are the market leader. We have over 20 billion interactions, i.e. a lot of voice, a lot of chat on that platform. But now with AI, that world has changed dramatically. And I'll put it into three simple forms. First of all, automation. You will chat on a voice with an AI agent that will be able to completely resolve we think up to 30% of those engagements automatically through an AI agent that has the knowledge, the data, the process, the insights and the guardrails to be able to meet your needs. What does that mean for us as a consumer? Instantaneous service resolution to our ask without needing to wait. There's no more let me put you on hold. Secondly, if we do need to speak to a human, then we've got assistance. So, augmentation, co-pilot, real-time prompting, knowledge, getting the insights of the organization, but also frankly you as a consumer, how do I feel? What is my sentiment? And being able to do that in effective way. And then last but not least, and the most exciting is AI allows us to automate the resolution of all of those asks that often go into the enterprise, right? Billing complaints, credit claims, and being able to do that autonomously.

So, why do you think we've all seen this probably, and I can think of experiences I've had that were both bad before and I'll get to why I think it's getting better. I'll let you tell me. But why do you think it is that your industry maybe faster than anyone really embraced AI output?

Let me push back there because the same people that are insistent on getting answers right now from you are insistent in every aspect of their life. Why did your industry give them what they were asking for, not others?

The financial modeling geek in me says also if your highest margin business presumably the AI business is a higher margin than the people on telephones. Is that right?

And so if your fastest growing business is also your highest margin business it means your overall profitability is going to ramp as rapidly.

Australia.

I understand what you're saying.

And the kind of outreach that wouldn't have been cost effective if you had to make individuals making calls, cold calling to sell that or something.

Well, let's take that example again, the international traveler. Most the phone users domestically are not going to be international travelers. So find and the marketing function essentially, which is what that is, right? It's a marketing and maybe even a sales function. There are so many steps that we can envision in that, right? Identifying the target audience, creating an offer that's written to them, maybe even in a language that they speak or read. And then there's a sales function behind that to kind of take them through that process. And only the carrier is going to know all of the ways that that works at that carrier. So, I think that that's a wonderful illustration of what is possible with Agentic AI, but while why the programming of Agentic AI is necessary that the customer does that, not NICE or anybody else, whoever they're using. You know, I was at a big Oracle conference a few weeks ago and there was a lot of conversations about how simply you can allow customers to create AI programs and I've heard you talk about the same thing in some of your recent conference calls. It sounds like giving your customers those tools and making them simple enough. If it was me, I wouldn't talk to a customer, but dumb even for my dumb customers to use so they can program it really simply without mistakes. It seems like that must be challenging, but certainly must be the goal.

But there's also the aspect of where the customer themselves might want to tweak it as it's working and they might want to say, 'Oh, you know, we were sending it to this billing system domestic. It turns out we have to send it to the other billing system international. The rest of the program's working. We can do that without having to deal with NICE. We've got our own ability to program this agentic agent.'

Now you've done some acquisitions lately. Talk to me about what holes you're trying to fill or what capabilities those have brought to you and then how you evaluate the return on the investment there.

They're all going to want that soon if not already.

I had a great experience like that yesterday where I was on, I'll give them credit, Shutterfly and I had ordered something and the printing there had just a tiny little error in it that only I would notice but it was bugging me. I quickly got through an AI conversation and they said to talk to an agent. Then the agent came on. Instead of being annoyed that I had explained it already and had to explain it again. I wasn't annoyed. They weren't annoyed. They could see from the notes really quickly. They wanted to see a picture of the thing. I sent them a picture from my phone. They fixed it and gave me credit instantly. And it was a kind of experience that even a year ago could have been miserable. And as I recall was miserable at other companies I've dealt with. And I wonder what's happening under the hood that's making these so much better than they were a year ago.

Let me go back to the $955 million acquisition of Cognigy. What are the metrics by which you will measure its success and how do you look at that so we know how to look at it from the outside.

It also seems to add a little bit of an international flavor. I noticed in the press obviously it was a German company you acquired but I noticed in the press release you talk about the customers they bring along, all you know Nestle, Mercedes, Lufthansa, European and also the mention of humanlike customer service in a 100 different languages which was also super interesting to me in the global nature of that.

Finally, it's got to make you nuts when you see the kind of mainstream press or even business press say things like, 'Yeah, all this investment in AI, but where are the products? Where's the ROI? Where's the payoff?' And no one's really using it except for search. When obviously you guys are deep into the weeds of actually putting it to work.

Great stuff. Scott Russell, CEO of NICE. Scott, thanks so much for your time. Really appreciate it.

It's just about time for the drill down bite at the one number that tells us a whole lot. But first, you can watch the drill down podcast on YouTube, Spotify, listen to the podcast on any of your favorite podcast platforms, iTunes, Spotify, Google Play, iHeart, TuneIn, you name it. Did it with one breath. Please hit that subscribe button to make sure you can catch every show. All right, now it's time for the drill down bite. The one number that tells us a whole lot that bite of course is about NICE and tells us a lot. And that bite, that number is 39%. That is the growth rate of the AI and self-service business at NICE. Showing where the momentum sits and what's working for NICE right now. All right, thanks for checking out the drill down. I'm Corey Johnson. Check us out on all the socials at Corey TV on X and of course on TikTok, Instagram, and YouTube at drill down.