Q4 2024 Verint Systems Inc Earnings Call
Operator: Good day, and thank you for standing by. And welcome to the Verint Systems Inc. Q4 2024 Earnings Conference. At this time, all participants are listening only. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your keyboard, then hear an automated message device in your ear. To withdraw your question, please press star 1.
Good day, and thank you for standing by.
And welcome to the <unk> Systems, Inc. Q4, 2024 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message of Biogen Your handicap.
Is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
Matthew H. Frankel: Please see advice at today's meeting. I would now like to hand the conference over to your speaker today, Matthew Frankel, Investor Relations and Corporate Development Director. Please go ahead.
Now I'd like to hand, the conference over to your Speaker today, Matthew Frankel Investor Relations and corporate development Director. Please go ahead.
Matthew H. Frankel: Thank you, operator. Good afternoon, and thank you for joining our conference call today. I'm here with Dan Bodner, Verint CEO; Grant Highlander, Verint CFO; and Alan Roden, Verint's Chief Corporate Developer. Before getting started, I'd like to mention that accompanying our call today is a slide presentation. If you'd like to view these slides in real-time during the call, please visit the IR section of our website at Verint.com, click on the Investor Relations tab, and click on the webcast link and select today's topic. I'd also like to draw your attention to the fact that certain matters discussed in the call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities These forward-looking statements are based on management's current expectations and are not guaranteed for future performance. actual results could differ materially from those expressed in or implied by these four listed statements.
Matthew H. Frankel: Thank you operator, good afternoon, and thank you for joining our conference call today have you ever Dan Bodner guarantee you Grant Highlander parents, CFO and Alan Roden bearings, Chief Corporate development Officer.
Matthew H. Frankel: Before getting started I'd like to mention that accompanying our call today. The slide presentation, if you'd like to give you flagged in real time during the call.
Matthew H. Frankel: IR section of our website at <unk> Dot com click on the Investor Relations tab and click on the webcast link.
Today's conference call.
Matthew H. Frankel: I'd also like to draw your attention to the fact that certain matters discussed on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act.
Matthew H. Frankel: And other provisions of the federal Securities laws. These forward looking statements are based on management's current expectations and are not guarantees of future performance.
Matthew H. Frankel: Actual results could differ materially from those expressed in or implied by these forward looking statements.
Matthew H. Frankel: The forward-looking statements are made at the date of this call and, as accepted as required by law, Verint Systems has no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For more detailed discussion about these and other risks and uncertainties, which could cause various actual results in different materials and from those indicated in these bulletin statements.
Matthew H. Frankel: Forward looking statements are made as the date of this call.
Matthew H. Frankel: As required by law embarrassing no obligation to update or revise them.
Matthew H. Frankel: Investors are cautioned not to place undue reliance on these forward looking statements.
Matthew H. Frankel: For more detailed discussion of abuse and other risks and uncertainties could cause actual results to differ materially from those indicated in esports. These statements. Please see our Form 10-K for the fiscal year ended June 31, 2024, when filed and other filings we make with the SEC.
Matthew H. Frankel: Please see our Form 10-K for the fiscal year and the Jan 31, 2024, one file and other filings we make with the FCC. The financial measures discussed today include non-GAAP measures, as we believe investors focus on these measures in preparing results between periods and among our peer companies. Please see today's slide presentation, our earnings release, and the investor relations section of our website at Barron.com for a reconciliation of non-GAAP financial measures to GAAP. Non-GAAP financial information should not be considered in isolation as a substitute for or superior to GAAP financial information but is included because management believes it provides meaningful supplemental information regarding our operating results when assessing our business, and it's useful to investors for informational and comparative purposes Now, I'd like to turn the call over to Dan. Okay Dan?
Matthew H. Frankel: The financial measures discussed today include non-GAAP measures, because we believe investors focus on these measures and comparing results between periods and among our peer companies.
Matthew H. Frankel: Today's slide presentation, our earnings release, and Investor relation section of our website at <unk> Dot com for a reconciliation of non-GAAP financial measures to GAAP.
Matthew H. Frankel: non-GAAP financial information should not be considered in isolation from as a substitute for or superior to GAAP financial information, but is included because management believes it provides meaningful supplemental information regarding our operating results when assessing our business and are useful to investors for informational and comparative purposes. The.
Matthew H. Frankel: The non-GAAP financial measures. The company uses have limitations and may differ from magazines by other companies now.
Dan Bodner: Now I'd like to turn the call over to Dan Dan.
Dan: Thank you Matt.
Dan: I'm pleased to report a strong finish for the year with Q4 revenue and non-GAAP diluted EPS.
Dan: Come again ahead of our expectations.
Dan: Behind our momentum is a very open platform, we introduced last year.
Dan Bodner: Thank you, Matt. I'm pleased to report a strong finish for the year, with Q4 revenue and non-GAAP diluted EPS coming in ahead of our expectations. Behind that momentum is the Verint open platform we introduced last year, which enables Verint to deliver tangible AI business outcomes better than any other vendor in our market. The market today is looking to increase data exfiltration, and Verint is leading the way.
Dan: Which enables varian can deliver tangible business outcomes.
Better than any other vendor in our markets.
Dan: The market today.
Dan: He is looking to increase the explanation.
Dan: <unk> is leading the way.
Dan: Throughout the last year, we built supplemental driven.
Dan: Driven by our AI differentiation.
Dan: We are raising encourage your outlook.
Dan: To reflect market demand for AI powered CX reclamation.
Dan Bodner: Throughout the last year, we built Settlement, driven by our AI differentiation, and we are raising cards here at Outlook to reflect market demand for AI-powered CX automation. Today, I will start with a fourth quarter trend. Then I will discuss our open platform differentiation. And finally, I will review our Fiscal 25 Outlook. 3 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29, Q4, Revenue grew 12% year over year. A couple million dollars above our guidance, given the strong SAS revenue growth of 28%. Non-GAAP diluted Q4 EPS came in at $1.07, up 42% year-over-year.
Speaker Change: Today, I will start with our fourth quarter trends.
Speaker Change: Then I will discuss our open platform differentiation.
Speaker Change: And finally, I will review, our fiscal 'twenty outlook and three year targets.
Speaker Change: Q4 revenue grew 12% year over year.
Speaker Change: A couple of million dollars above our guidance.
Speaker Change: Driven by strong SaaS revenue growth of 28%.
Speaker Change: non-GAAP diluted Q4, EPS came in at $1 seven.
Speaker Change: Up 42% year over year.
Speaker Change: <unk> ahead of our guidance.
Speaker Change: Driven by our revenue over achievement and strong margin expansion.
Speaker Change: At our Investor day.
Speaker Change: We discussed how the various open platform and team of AI powered box.
Drive bundled SaaS growth.
Speaker Change: We also discussed how we are tracking AI demand using.
Speaker Change: Using the bundled SaaS bookings metric.
Speaker Change: I'm pleased to report that in Q4.
Speaker Change: Bundled SaaS, new ACD bookings increased 16% year over year.
Dan Bodner: Eighth Sense, ahead of our guidance, driven by revenue overachievement and Strong Margin Expansion. It's our investor day. We discussed how the Variant Open Platform and team of AI-powered bots drive bundle SAS growth. We also discussed how we are tracking AI demand using the bundled SAS booking metric. I'm pleased to report that in Q4... Bundles of new ACV bookings increased 16% year-over-year, and the 12-month pipeline for BundleSUS increased over 20% year-over-year. We expect demand for AI to not only drive bundled SaaS growth but also accelerate free cash flow acceleration. For the current year, we expect over 40% growth in free cash flow.
Speaker Change: And the 12 months pipeline for bundled SaaS.
Speaker Change: Over 20% year over year.
Speaker Change: We expect demand for AI to not only drive bundled SaaS growth.
Speaker Change: But also a free cash flow exploration.
Speaker Change: For the current year, we expect over 40% growth in free cash flow.
Speaker Change: And over the next three years.
Speaker Change: It continues to drive growth in bundled SaaS free.
Free cash flow will grow faster than revenue.
Speaker Change: The customer engagement industry has been challenged for many years was a growing number of interactions.
Speaker Change: And higher customer expectations.
Speaker Change: Today brands realize that hiring more workers and increasing labor expenses.
Speaker Change: No longer sustainable solution.
Speaker Change: We have automation provides brands with significant economic benefits.
Dan Bodner: And over the next three years, as AI continues to drive growth in bundle SAS, free cash flow will grow faster than revenue. The customer engagement industry has been challenged for many years with a growing number of interactions and Higher Customer Expectations. Today, brands realize that hiring more workers and increasing labor expenses is no longer a sustainable solution.
Speaker Change: And at the same time increases the addressable market for <unk>.
Speaker Change: Well, Brian the economic benefits come from the lower costs.
Speaker Change: Due to the higher workforce productivity and increase customer loyalty.
Speaker Change: We're very the addressable market increases over time.
Speaker Change: A portion of the large amount that labor.
Speaker Change: Setting for both brands.
Speaker Change: She is purchasing the AI platform.
Speaker Change: Today, we estimate.
Dan Bodner: CX Automation provides brands with significant economic benefits and, at the same time, increases the addressable market for variants. For brands, the economic benefits come from lower costs. Due to higher workforce productivity and increased customer loyalty. For Verint, the addressable market increases over time, as a portion of the large amount that labor savings by brands will shift to purchasing the AI plus. Today, we estimate that there are tens of millions of people around the world involved in customer engagement through cross-contact centers, back offices, and branches.
Speaker Change: There are tens of millions of people around the world involved in customer engagement across contact centers back office and branches.
Speaker Change: The industry is ripe for CX automation platforms.
Speaker Change: Deliver AI business outcomes.
Speaker Change: We believe variant is uniquely positioned to lead the emerging CX automation category do.
Speaker Change: Due to three factors.
Speaker Change: First our large customer base across many industries and geographies.
Speaker Change: Which consist of a 4 million agents currently using different platform and looking to add AI powered bots.
Speaker Change: Second the.
Speaker Change: The customer data we have in the platform is critical to train the boss.
Dan Bodner: And the industry is ripe for CX automation platforms that can deliver AI business outcomes. We believe Verint is uniquely positioned to lead the emerging CX automation category, due to three factors. First, a large customer base across many industries and geographies, which consists of four million agents currently using the Verint platform and looking to add AI-powered bots. Second.
Speaker Change: And third our open platform is designed to deliver AI business outcomes.
Speaker Change: Better than any other vendor in our market.
Speaker Change: Successfully delivering business outcomes.
Speaker Change: Requires much more than just Jeremy <unk> models.
Speaker Change: It requires a combination of three key and good ingredients.
Speaker Change: The latest commercial ample priority AI technology.
Dan Bodner: The customer data we have in the platform is critical to train the bot. And third, our open platform is designed to deliver AI business outcomes better than any other vendor in our market. However, successfully delivering AI business outcomes requires much more than just Gen-AI models. It requires the combination of three key ingredients, the latest commercial and proprietary AI technology, relevant customer data, and Business Workflows.
Speaker Change: Relevant customer data.
Speaker Change: And business workflows.
Speaker Change: They weren't open platform and our team of 40 AI powered box.
Speaker Change: L brands deliver tangible business outcomes across the enterprise.
Speaker Change: Let's look at what makes the various open platform highly differentiated.
Speaker Change: And its ability to turn AI technology into measurable business outcomes.
Speaker Change: It starts with the various da Vinci, which acts as a factory for our box.
Speaker Change: Very da Vinci allows us to combine the latest commercial open source and proprietary AI.
Dan Bodner: The Verint Open Platform and our team of 40 AI-powered bots help brands deliver tangible AI business outcomes across the enterprise. Let's look at what makes the Verint Open Platform highly differentiated and its ability to turn AI technology into measurable AI business outcomes. It starts with the Variant Da Vinci, which acts as the factory for our bots.
Speaker Change: And delivery to all various thoughts from the core of the platform.
Speaker Change: As they emerge from the factory.
Speaker Change: We're in both of our training continuously on real time behavioral data.
Speaker Change: Available in the platform data hub.
Speaker Change: Finally, the various open platform leverages the workflows customers use every day.
Speaker Change: Enabling brands to benefit from AI business outcomes now.
Dan Bodner: Verint Da Vinci allows us to combine the latest commercial, open source, and proprietary AI and deliver it to all Verint bots from the core of the platform, as they emerge from the factory. Verint Bots are trained continuously on real-time behavioral data available in the platform DataHub. Finally...
Garrett is innovating at a fast pace and a large team of AI powered box is growing.
Speaker Change: The very box augment not just the agents, but also the supervisor analyst and other roles.
Each very bought deliver specific AI business outcome.
Speaker Change: And our customers make purchase one or a team of box to drive greater ROI.
Dan Bodner: The Verint Open Platform leverages the workflows customers use every day, enabling brands to benefit from AI Business Outcomes Now. Verint is innovating at a fast pace, and a large team of AI-powered bots is growing. The bots augment not just the agents but also the supervisor, analyst, and other roles. Each variant bot delivers a specific AI business outcome, and our customers may purchase one or a team of bots. [inaudible] Some of the Verint bots use JNI models, while other bots use proprietary models that are specifically designed for CX automation.
Speaker Change: Some of the very large use Jamie RMR rules.
Speaker Change: Other bulk use proprietary models that are specifically designed for CX automation.
Speaker Change: An example of a box.
Speaker Change: Using various proprietary AI <unk>.
Speaker Change: Customer and workforce data and workflows.
Speaker Change: Is it time flex box, which we announced last week.
Speaker Change: The biggest problem this box off.
Speaker Change: The inability of agents to dynamically change their schedules.
Today is.
Speaker Change: These agents need to get out of their shift.
Speaker Change: To take a charge to the doctor.
Speaker Change: Or towards the soccer game.
Speaker Change: Very often this request will be denied.
Speaker Change: Because of limited supervise their resources to modify the schedule in real time and find a suitable replacement.
Dan Bodner: An example of a box, using Verint Proprietary AI for Customer and Workforce Data and Workflows, is the TimeFlex bot which we announced last week. The biggest problem this bot solves is the inability of agents to dynamically change their schedule. [inaudible] If agents need to get out of their shift... take a child to the doctor, or watch the soccer game. Very often, this request will be denied because of limited supervisor resources to modify the schedule in real time and find a suitable replacement.
Speaker Change: In other words.
Speaker Change: The scheduling process is just too manual to provide agents was the work life balance.
Speaker Change: They increasingly expect.
Speaker Change: The <unk> flex bought delivers AI business outcome to solve this problem.
Speaker Change: Agents can make unlimited scheduled changes.
Speaker Change: With no additional supervisors needed.
Speaker Change: The box augments the existing supervisors.
Speaker Change: Automating their approval of schedule change for your questions.
Speaker Change: For example, <unk>.
Speaker Change: <unk> customer using the time flex bought reported reduced employee attrition.
Dan Bodner: In other words... The scheduling process is just too manual to provide agents with the work-life balance they increasingly expect. The TimeFlexBot delivers AI business outcomes to solve this problem. Agents can make unlimited schedule changes, with no additional supervisors needed.
Speaker Change: Higher employee engagement and millions of dollars in annual savings.
Speaker Change: Like other very box to very complex bought can be quickly deployed into existing customer ecosystems.
Speaker Change: Reducing operating cost and elevating employee and customer experience.
Speaker Change: Let me now turn to our Q4 wins.
Dan Bodner: The board augments the existing supervisors by automating their approval of schedule change requests. For example, a Verint customer using the TimeFlexBot reported reduced employee attrition, Higher Employee Engagement, and millions of dollars in annual savings. Like other Variant Bots, the Variant TimeFlex Bot can be quickly deployed into existing customer ecosystems, reducing operating costs, and an Elevating Employee and Customer Experience. Let me now turn to our Q
Speaker Change: In Q4, we continue to have significant wins across existing customers and new logos driven.
Speaker Change: Driven by our highly differentiated <unk> platform and quicker we deliver to our customers.
Speaker Change: We had approximately 50 orders in the quarter with over $1 million, each including from some of the world's leading brands such.
Speaker Change: Such as AT&T HSBC Goldman Sachs is the cart and UBS.
Speaker Change: We had more than 100, new logos in the quarter, including the results company Christian Dior and Suncor.
Speaker Change: And as I discussed earlier, our 12 month pipeline for bundled SaaS grew over 20% year over year, reflecting demand for AI innovation.
Speaker Change: Yes.
Speaker Change: I would like to double click on one large Q4 order.
Dan Bodner: In Q4, we continue to have significant wins across existing customers and new logos. Driven by our highly differentiated open platform and quick ROI, we deliver to our customers, with approximately 50 orders in the quarter with over $1 million in TCG each. including from some of the world's leading brands, such as AT&T, HSBC, Goldman Sachs, Instacart, and UPS. We had more than 100 new logos in the quarter, including the results company, Christian Dior, and Suncor.
Speaker Change: In January we announced a $49 million GCB order was a five year term.
Speaker Change: From a leading healthcare company.
Speaker Change: This large contract came from an existing varying customer that was looking to add AI innovation now.
Speaker Change: Various open approach enabled the customer to deploy hybrid cloud platform.
Speaker Change: So they could keep what they have on premises and at the same time.
Speaker Change: Leap forward with AI innovation into very cloud.
Speaker Change: Let me share some additional details of this order.
Speaker Change: 50% of the revenue will be in bundled SaaS.
Speaker Change: Including more than 10 very box hosted in the cloud.
Speaker Change: The other 50% of the revenue will be in unbundled SaaS.
Speaker Change: The order enables the customer to leverage the openness of the platform.
And imports there on large language models in.
Dan Bodner: And as I discussed earlier, a 12-month pipeline for BundleSUS grew over 20% year-over-year. Reflecting Demand for AI Innovation, I would like to double-click on one large Q4 order. In January, we announced a $49 million TCV order. It was a five-year term, from a leading healthcare company.
Speaker Change: The very platform.
Speaker Change: You're future proof their AI investments.
Speaker Change: Also the order enables the customer to migrate their unbundle SaaS solutions to bundled SaaS at their own pace anytime.
Speaker Change: During the five year term.
Speaker Change: We believe this eight digit order is a great example of our open platform and hybrid cloud approach deliver AI business outcomes.
Speaker Change: We're pleased with our strong finish to fiscal 'twenty, four and are raising the outlook for the current year.
We believe the perpetual license headwinds from the SaaS transition are now behind us and going forward.
Dan Bodner: This large contract came from an existing Verint customer that was looking to add AI innovation now. Verint's open approach enabled the customer to deploy a hybrid cloud platform so they could keep what they have on-premises and at the same time leap forward with AI innovation in the cloud. Let me share some additional details of this order.
Speaker Change: We expect growing AI demand to provide a tailwind to a bundle of such growth.
Speaker Change: <unk> overall revenue growth acceleration.
Speaker Change: Looking beyond this year.
Speaker Change: CX automation category leader and.
Speaker Change: And we believe increasing demand for AI.
Speaker Change: Coupled with our differentiated open platform.
Speaker Change: Greg the roadmap to achieve our targets for our rule of 40 company in fiscal 2007.
Speaker Change: And now I would like to turn the call over to grant to discuss the financials in more detail.
Dan Bodner: 50% of the revenue will be in bundle sales, including more than 10 Verint bots hosted in the Verint Cloud. The other 50% of the revenue will be in unbundled stuff. The order enables the customer to leverage the openness of the platform and import their own large-language models into the VERT Platform to future-proof their AI investments. Also, the order enables the customer to migrate their unbundled sauce solutions to bundled sauce at their own pace, anytime during the five-year term. We believe this eight-digit order is a great example of our open platform and hybrid cloud approach delivering AI business outcomes now. We're pleased with the strong finish to Fisker 24, and are raising the outlook for the current year.
Speaker Change: <unk>.
Greg: Thanks, Dan and good afternoon, everyone.
Grant A. Highlander: Our discussion today will include non-GAAP financial measures a reconciliation between our GAAP and non-GAAP financial measures is available as Matt mentioned in our earnings release and in the IR section of our website.
Grant A. Highlander: Differences between our GAAP and non-GAAP financial measures includes adjustments related to acquisitions and divestitures, including fair value revenue adjustments amortization of acquisition related intangibles.
Grant A. Highlander: Certain other acquisition and divestiture related expenses.
Grant A. Highlander: Stock based compensation expenses separation related expenses accelerated lease costs.
Grant A. Highlander: Facilities and infrastructure realignment as well as certain other items that can vary significantly in amount and frequency from period to period.
Dan Bodner: We believe the perpetual license headwinds from the sub-transition are now behind us. Going forward, we expect growing A.I. demand to provide tailwinds to bundled subgrowth, driving overall revenue growth acceleration beyond this year.
None: Let me start with an overview of our Q4 results.
None: Revenue increased a very strong 12% year over year to $265 million.
Grant A. Highlander: Verint is a CX Automation category leader, and we believe increasing demand for AI, coupled with our differentiated open platform, creates the roadmap to achieve our targets for a Rule of 40 company in Fiscal 27. And now, I would like to turn the call over to Grant to discuss the financials in more detail. Grant? Thanks, Dan. Good afternoon, everyone.
None: Couple of million dollars ahead of our guidance.
None: The large increase was driven by approximately 28% increase in SaaS revenue from a combination of new business as well as the unbundled SaaS renewals that we discussed during our Q3 conference call.
Grant A. Highlander: Our discussion today will include non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available, as Matt mentioned, in our earnings release and in the IR section of our website. Differences between our GAAP and non-GAAP financial measures include adjustments related to acquisitions and divestitures, including fair value revenue adjustments.
non-GAAP gross margins came in strong at 74, 7% up 320 basis points year over year.
None: We are pleased with our gross margin, which is steadily expanded since the spin of our security business three years ago.
None: We believe our ability to increase gross margins reflects the strength of our AI innovation in the business outcomes, we deliver to our customers.
Grant A. Highlander: Amortization of Acquisition-Related Intangibles, certain other acquisition and divestiture-related expenses, Stock-based Compensation Expenses, separation-related expenses, accelerated lease costs, IT facilities, and infrastructure realignment, as well as certain other items that can vary significantly in amount and frequency from period to period.
None: The combination of our revenue over achievement and strong gross margins drove non-GAAP diluted EPS of $1 seven.
None: Eight.
None: Ahead of expectations.
None: During our Investor day, we discussed how we are innovating at a very fast pace and our bundled SaaS offerings and that we expect bundled SaaS to be our main growth driver going forward.
I am pleased to report that in Q4 bundled SaaS, new ACB bookings increased 16% year over year.
Grant A. Highlander: Let me start with an overview of our Q4 results. Revenue increased by a very strong 12% year over year to $265 million, a couple million dollars ahead of our guidance. The large increase was driven by approximately 28% increase in SAS revenue from a combination of new business as well as the unbundled SAS renewals that we discussed during our Q3 conference call. Non-gap gross margins came in strong at 74.7%, up 320 basis points year over year.
None: I'm also pleased to report that as of the end of Q4, our 12 month bundled SaaS pipeline increased more than 20% year over year, driven by demand for our AI innovation.
None: Our pipeline growth as a leading indicator and we expect bundled SaaS, new ACB bookings to accelerate this year and.
None: The acceleration in bundled SaaS bookings is also expected to drive free cash flow acceleration and later I will discuss our free cash flow outlook.
None: Before turning to guidance I would like to discuss Q4 highlights related to the AI investments, we are making to support our roadmap for becoming a rule of 40 company.
Grant A. Highlander: We are pleased with our gross margin, which has steadily expanded since the spin-off of our security business three years ago. We believe our ability to increase gross margins reflects the strength of our AI innovation and the business outcomes we deliver to our customers. The combination of our revenue overachievement and strong gross margins drove non-GAAP diluted EPS of $1.78, $0.08 ahead of expectation.
None: First.
None: We continued our investment in AI ending the year with 1300 engineers in R&D and cloud operations.
None: Second.
None: We expanded our customer success team with additional resources to drive AI adoption.
None: And third we aligned our services catalog to our AI offerings, expanding our value realization service offerings and divesting a manual managed services offering.
Grant A. Highlander: During our investor day, we discussed how we are innovating at a very fast pace in our bundled fast offer and that we expect bundled SAS to be our main growth driver going forward. I am pleased to report that in Q4, bundled SAS new ACB bookings increased 16% year-over-year. I'm also pleased to report that as of the end of Q4, our 12-month bundled SAS pipeline increased more than 20% year-over-year, driven by demand for our AI innovation. Our pipeline growth is a leading indicator, and we expect bundled SAS new ACV bookings to accelerate this year. The acceleration and bundle test bookings are also expected to drive free cash flow acceleration.
None: Regarding the services alignment to AI and.
None: In Q4, we decided to divest our manual quality managed service offering which is being replaced by an AI powered bot.
None: The transaction closed on January 31, the last day of our fiscal year.
None: To assist you in your modeling the offering generated $25 million of revenue last year and you can find the quarterly breakdown in our press release and on our website.
None: Turning to our revenue outlook.
None: We believe the AI momentum, we experienced last year will continue and we expect our revenue growth to accelerate this year.
Grant A. Highlander: And later I will discuss our free cash flow out for turning the guide. First, I would like to discuss Q4 highlights related to the AI investments we are making to support our roadmap for becoming a rule-of-40 company.
None: There are two primary drivers for our faster growth.
None: First.
None: The customer engagement market is ripe for automation and.
None: AI adoption is driving strong demand for our bundled SaaS solutions, and we expect bundled SaaS, new ACB bookings growth to accelerate from the 16% we delivered in Q4 to 20% this year.
Grant A. Highlander: We continued our investment in AI, ending the year with 1,300 engineers in R&D and cloud operations. Second, we expanded our customer success team with additional resources to drive AI adoption. Third, we align their services catalog to our AI office. Transcribed by https://otter.ai. Regarding the services alignment to AI, in Q4 we decided to divest our manual quality managed service offering, which is being replaced by an AI-powered bot. The transaction closed on January 31st, the last day of our fiscal year.
None: Second.
None: We have completed our perpetual the SaaS transition and expect perpetual revenue to be flat in fiscal 'twenty five eliminating prior headwinds from this transition.
None: Our revenue outlook for fiscal 'twenty, five is approximately $930 million, reflecting 5% growth compared to fiscal 'twenty four as adjusted for the divestiture, we just discussed.
Grant A. Highlander: To assist you in your modeling, the offering generated $25 million of revenue last year, and you can find the quarterly breakdown in our press release and on our website. Turning to our revenue outlook, we believe the AI momentum we experienced last year will continue, and we expect our revenue growth to accelerate this year. There are two primary drivers for faster growth. First,
None: Turning to our overall guidance for fiscal 'twenty five.
None: On a non-GAAP basis again for revenue, we expect approximately $930 million plus or minus 2%.
None: We expect gross margin to increase approximately 100 basis points. Following strong expansion, we had last year.
None: The combination of revenue growth and continued operating margin expansion is expected to drive operating income up approximately 7% year over year.
Grant A. Highlander: Customer Engagement Market is ripe for automation. AI adoption is driving strong demand for our bundled SaaS solutions, and we expect bundled SaaS new ACV bookings growth to accelerate from the 16% we delivered in Q4 to 20% this year.
None: And for diluted EPS, we expect $2 89.
None: At the midpoint of our revenue guidance.
None: Regarding below the line assumptions, we expect.
None: Interest and other expense net to average around $500 per quarter.
None: Net income from Noncontrolling interest of around $250000 per quarter.
Grant A. Highlander: We have completed our perpetual to SASH transition and expect perpetual revenue to be flat in fiscal 25, eliminating prior headwinds from this transition. Our revenue outlook for fiscal 25 is approximately $930 million, reflecting 5% growth compared to fiscal 24, as adjusted for the divestiture we just discussed. Turning to our overall guidance for Fiscal 25, on a non-gap basis. Again, for revenue, we expect approximately $930 million, plus or minus 2%. We expect gross margin to increase approximately 100 basis points following the strong expansion we had last year. A combination of revenue growth and continued operating margin expansion is expected to drive operating income up approximately 7% year over year. And for diluted EPS, we expect $2.89 at the midpoint of our revenue guidance. Regarding below-the-line assumptions, we expect... interest and other expense to average around $500,000 per quarter. Net income from a non-controlling interest of around $250,000 per quarter.
None: And for the full year, we expect a cash tax rate of around 11% and approximately $72 5 million fully diluted shares.
None: Let me also discuss how we see the year progressing.
None: Similar to last year, we expect bundled SaaS revenue to grow steadily throughout the year and the level of unbundled SaaS revenue each quarter to fluctuate driven by the timing of renewals.
None: More specifically adjusted for the divestiture.
None: We expect double digit revenue growth in Q4 again similar to last year.
None: Low single digit revenue growth in the first three quarters of the year.
None: For Q1, we expect revenue in a range of $212 million to $216 million up from an adjusted $210 million in Q1 of last year.
None: At the midpoint of the revenue range, we expect diluted EPS to be 54.
None: Turning to free cash flow.
None: At this point in our SaaS journey I am pleased to report that our free cash flow growth is accelerating.
None: We define free cash flow is our GAAP cash from operations less our capex, which includes purchases of property and equipment and capitalized software development costs.
Grant A. Highlander: And for the full year, we expect a cash tax rate of around 11% and approximately $72.5 million in fully diluted shares. Let me also discuss how we see the year progressing. Similar to last year, we expect bundled SAS revenue to grow steadily throughout the year and the level of unbundled SAS revenue each quarter to fluctuate driven by the timing of renewal. More specifically, adjusted for the divestiture, we expect double-digit revenue growth in Q4, again, similar to last year, and low single-digit revenue growth in the first three quarters of the year. For Q1, we expect revenue in a range of $212 million to $216 million, up from an adjusted $210 million in Q1 of last year. At the midpoint of the revenue range, we expect a looted EPS to be $0.54.
None: Looking to fiscal 'twenty, five we are targeting a greater than 40% increase in free cash flow to approximately $180 million.
Turning to our balance sheet, we continue to be in a very good financial position.
None: Our net debt remains well under one times last 12 month EBITDA.
None: And this is further supported by our strong cash flow.
None: Over the last few years, we have steadily repurchase shares at an increasing pace and have reduced our share count by 3 million shares.
None: Over the next three years, we expect to generate about $600 million.
None: Free cash flow and expect our largest use of cash to be share buybacks, which will further reduce share count.
None: In summary.
None: We are pleased to have over achieved revenue and non-GAAP diluted EPS in Q4 and to be in a position to raise guidance for the current year.
Grant A. Highlander: Turning the Pre-Cash Flow. At this point in our SaaS journey, I am pleased to report that our free cash flow growth is accelerating. We define pre-cash flows or gap cash from operations less or cap at, which includes purchases of property and equipment and capitalized software development.
None: As we discussed today.
None: <unk> AI powered bots deliver economic benefits to both Barratt and brands.
None: These economic benefits drive our roadmap to become a rule of 40 company in three years with revenue acceleration and margin expansion along the way.
None: With that operator, please open the line for questions.
Grant A. Highlander: Looking to fiscal 25, we are targeting a greater than 40% increase in pre-cash flow to approximately $180 million. Turning to our balance sheet, we continue to be in a very good financial position. Our net debt remains well under one times last 12 month EBITDA and is further supported by our strong cash. Over the last few years, we have steadily repurchased shares at an increasing pace and have reduced our share count by 3 million shares. Over the next three years, we expect to generate about $600 million of free cash flow and expect our largest use of cash to be share buybacks, which will further reduce share price. In summary,
None: And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star. One again, please standby will be compile the Q&A roster and one moment for our first question.
None: One moment.
None: First question comes from Shaul Eyal from TD Cowen Your line is now open.
Shaul Eyal: Thank you.
Shaul Eyal: Good afternoon, gentlemen, congrats on completing a successful year and raising guidance correct me if I'm wrong I think it's been a while.
Grant A. Highlander: We are pleased to have overachieved revenue and non-GAP diluted EPS in Q4, and to be in a position to raise guidance for the current quarter, as we discuss today. Verint's AI-powered bots deliver economic benefits to both Verint and its customers. These economic benefits drive our roadmap to become a rule of 40 company in three years with revenue acceleration and margin expansion along the way. With that, Operator, please open the line for questions. And thank you.
Shaul Eyal: Since you've raised your revenue guidance again, if my recollection serves me well so again congrats.
Shaul Eyal: Dan I wanted to ask what has been driving the recent momentum in what is likely to continue and drive.
Shaul Eyal: It seems to be healthy demand trends and then also as my follow up question.
Shaul Eyal: Any changes within the competitive landscape, especially in light of the changing AI and.
None: Environment. Thank you.
Dan: Sure. Thank you, yes, yes.
Operator: As a reminder to ask a question, please press star one on your telephone and wait for your name. To withdraw your question, please press star 1. Stand by while we compile the Q&A. One moment for our first question. And our first question comes from Shaul Eyal from TD Cowan. Your line is now open. Thank you. Good afternoon, gentlemen.
Dan: Yes, we completed the transition so what's driving our momentum now is in one word it's AI.
None: But I'll give you.
None: So there is more than one word.
None: We believe the momentum that we had in Q3 and continued in Q4 is driven by the strong demand in the market for CX reclamation.
None: No.
None: We see now that.
Shaul Eyal: Congratulations on completing a successful year and raising guidance. Correct me if I'm wrong, but I think it's been a while since you raised your revenue guidance. Again, if my recollection serves me well, so again, congrats.
None: The other platform that we announced.
None: We announced last year it was engaged in the summer.
None: It is resonating very well with customers.
None: And.
None: The success, we see now is of course, new logos customer expansions and also renewals.
None: So we had more than how can a new logos in Q4, and they were primarily driven by our differentiation.
Dan Bodner: Dan, I wanted to ask what has been driving the recent momentum and what is likely to continue to drive what seems to be healthy demand trends. Also, as a follow-up question, any changes within the competitive landscape, especially in light of the changing AI environment? Thank you.
None: We're driving big expansion projects as some of our large customers are.
None: Arctic to move into AI and we.
None: Discuss the health care provider.
None: That was adding more than 10 bots indifferent cloud and that resulted in a 50 million to order approximately and we also see very strong renewal activity in Q4, and Thats really whats driving the 28% SaaS revenue growth that we had in Q4.
Dan Bodner: Yes, we completed the transition. So what's driving our momentum now is, in one word, AI. But I'll give you an answer that is more than one word. So we believe the momentum that we had in Q3 and will continue in Q4 is driven by the strong demand in the market for CX automation.
None: So as you kind of look into what is this six automation demand in.
None: Hopefully you will compare to your question about competitor.
Dan Bodner: We see now that the open platform that we announced last year was Engage in the summer. It's responding very well with customers. And the success we see now is across new logos, customer extensions, and also renewals. So we had more than 100 new logos in Q4, and they were primarily driven by AI differentiation. We're driving big expansion projects as some of our large customers are starting to move into AI. We discussed a healthcare provider that was adding more than 10 bots to the Verint cloud, and that resulted in a $50 million order, approximately. And we also saw very strong renewal activity in Q4, and that's really what's driving the 28% SAS revenue growth that we had in Q4.
We believe that behind our differentiation is that we drive AI business outcomes.
None: And we do it better than any other vendor in the market.
None: And the reason that we can do it better is because our platform is designed to deliver business outcomes.
None: So.
We saw some really good leading indicators.
None: In Q4 and.
None: And we expect them to continuing in the current year.
None: So we mentioned.
None: SaaS <unk> bookings, which is basically what's driving it.
None: The way drive AI drives our growth has been up 60%.
None: And the pipeline that we have for the next 12 months is over 20% growth.
None: And based on where we are right now in Q1, we believe that we will do a 20% growth in Q1 than we expected for the rest of the year.
None: Bundled SaaS.
Dan Bodner: So as you kind of look into what this sex automation demand is and, Also, your question about competitors. We believe that behind our differentiation is that we drive AI business outcomes now, and we do it better than any other vendor in the market. And the reason we can do it better is because our platform is designed to deliver AI business outcomes. So, um... We saw some really good leading indicators in Q4, and we expect them to continue in the current year. So, you know, we mentioned SAS, bundle SAS booking, which is basically what drives AI. The way AI drives our growth has been up 60%. And the pipeline that we have for the next 12 months is over 20%.
None: Bookings growing at the ACB bookings growing at 20%.
None: Driven by AI.
None: So.
None: To answer your differentiation I think.
None: The best way to do it as two examples so let me give you a few I'll start with this large order the $49 million order.
None: We are discussing we have tens of thousands of employees.
None: And other vendors in our market basically all having the same story. They told discussion is hey, do you want to move forward you have to move your entire infrastructure to the cloud first.
None: And.
None: Discussions I realize that would take several years and huge disruption so risky project and they really.
None: Well, it's something now and very until then.
None: AI business outcomes now.
None: And the result is that they are investing in AI. They will deploy 10 box that they are deploying now can box.
None: Voting is very long risky and disruptive rip and replace project. So.
We are very differentiated in that in that sense.
Dan Bodner: And based on where we are right now in Q1, we believe that we'll do 20% growth in Q1 and we expect it for the rest of the year. Bundles us, bookings going at the HTV booking going at 20% driven by AI. So, to answer your differentiation question, I think... the best way to do it is through examples, so let me give you a few.
None: The customer will move their telephony and other applications that they have now on premises they will move into the cloud, but with very they can do it at their own pace.
None: Innovation is in the cloud, but because we have a hybrid cloud platform.
None: <unk> is connected to everything that they have now.
None: It's working they liked it they don't see the urgency to do anything with what's working so they can look forward with AIG business outcomes.
Dan Bodner: I'll start with this large order, the $49 million order. And this customer has tens of thousands of employees. And other vendors in our market are basically all telling the same story. They tell these customers, hey, if you want to move forward, you have to move your entire infrastructure to the cloud first. And, you know, this customer realized that it would take them several years and a huge disruption, and it's a risky project, and they really wanted something now.
None: Another example.
None: This one is from from EMEA.
None: This is a new logo for variance.
None: Even smaller but several thousand speaks pretty large customer service.
None: People in the workforce.
None: They originally issued an RFP and invited.
None: Variant and many other <unk>.
<unk> market again, the RFP was very much at the beginning.
None: For the entire contact center moving to the cloud.
None: But after they learned from variant about our open approach.
None: And our ability to support the hybrid cloud.
None: It really fell in love with this idea of AI business outcomes now.
Dan Bodner: And Verint told them, you can have AI business outcomes now. And the result is that, you know, they're investing in AI. They will deploy 10 bots; they are already deploying 10 bots. They're avoiding this very long, risky, and disruptive rip-and-replace project. So we are very differentiated in that sense.
None: So they basically canceled RFP.
None: Awarded a contract to variant.
None: And maybe the third example, I'll give you one form.
None: Australia.
None: This this customer again Q4 win competitive process against our competitors.
None: Yes.
None: The usual suspects.
Dan Bodner: The customers will move their telephony and other applications that they have now on-premises, they will move them to the cloud, but with Verit, they can do it at their own pace. So the AI innovation is in the cloud, but because we have a hybrid cloud platform. AI innovation is connected to everything they have now. It's working, they like it, and they don't see the urgency to do anything with what's working, so they can look forward to AI business outcomes now. Another example, this one is from EMEA. This is a new logo for Verint, it's a little bit smaller, but several thousands, pretty large customers, several thousands of people in their workforce.
None: This one has about 1000 people close to 1000 people so again a little smaller.
None: But what's interesting about this customers that.
None: Part of their business.
None: Priority was to provide.
None: First of all customer service to their customers. So they did not really wanted to automate too many things in terms of a box.
None: <unk> answering the phones, because they believe that people should talk to people.
None: They also did not want to offshore the employees stay really 100% Australian.
Employees, which they know costing more than offshoring and definitely costing more than bought but this was part of their business model.
None: They realize they have to pay more for those Australia employees, but.
Dan Bodner: And they originally issued an RFP and invited Verint and many other vendors in the market. Again, the RFP was, at the beginning, for the entire contact center moving to the cloud. But after they learned from Verint about our open approach... and our ability to support the hybrid cloud, they really fell in love with this idea of AI business outcomes. So they basically canceled the RFP and awarded the contract to Verint. And maybe the third example, I'll give you one from Australia. This customer, again a Q4 win, a competitive process against other competitors, the usual suspects, and this one has about 1,000 people, close to 1,000 people, so again, a little smaller. But, you know, what's interesting about this customer is that, um... Part of their business priority was to provide personalized customer service to their customers, so they did not really want to automate too many things in terms of bots answering the phones because they believe that people should talk to people. Thank you for watching, and please subscribe to my YouTube channel for more videos.
None: They were looking for six automation to reduce cost and it was.
None: Eric just for them they need to do it now so it became a key requirements in this in this competitive process.
None: And.
None: The outcome was that they.
None: They chose variance I wasn't Australia in Q4, so I met the customer.
None: Face to face and it was interesting because they were talking to me about the box that they didnt purchase so.
None: They purchased quite a few but they were already so excited about deploying given more box.
None: And we kind of went through this large portfolio of box that very testing the platform are discussed.
None: What is the business outcome that each bought can deliver what is their biggest priority why does this one before the next one.
None: Yes.
None: Consumption is right for their MRO and so on and so on so.
None: I think another example, with customers really focusing on AI business outcomes now.
None: It's very differentiated.
None: Thank you so much for that.
None: Okay.
None: And thank you.
None: And one moment for our next question.
None: And our next question comes from Peter Levine from Evercore ISI. Your line is now open.
Peter Marc Levine: Great. Thanks, guys for taking my question, maybe dead or.
Dan Bodner: They were looking for CX automation to reduce costs, and it was urgent for them. They needed to do it now, so it became a key requirement in this competitive process. And the outcome was that, you know, they chose Variant. I was in Australia in Q4, so I met the customer.
Peter Marc Levine: Sure, Greg maybe help us understand the monetization of the thoughts I think you have 40 plus box.
Peter Marc Levine: Walk us through what Youre charging as that usage is it per seat.
Peter Marc Levine: If you could give us like some kind of.
Peter Marc Levine: Uplift to ACB from the adoption of these drugs.
Greg: Yes, so I'll start Glenn feel free to add anything you did I missed but.
Dan Bodner: And we kind of went through this large portfolio of bots that Verint has on its platform and discussed, you know, what is the business outcome that each bot can deliver? What is their business priority? Why should they do this one before the next one?
Greg: The concept is very.
Greg: Give me a call to how AI is being deployed.
Greg: And especially where it's all about.
Greg: Business outcomes.
Glenn: We are aligning the pricing of the box to the outcomes to the customer is expecting.
Glenn: So they can see that the can measure.
Glenn: And it can increase.
Glenn: The usage based on the results that they may actually.
Dan Bodner: What level of consumption is right for their model, and so on and so on. So I think another example of where customers are really focusing on AI business outcomes now. Verint is very differentiated. Thank you so much for that, and thank you. And one moment for our next question. And our next question comes from Peter Levine from Evercore ISI. Your line is now open.
Glenn: Measure.
Glenn: So many of our customers that have bought.
Glenn: In Q4.
Glenn: And I can say that with new logos almost entirely.
Glenn: On August.
August SAS HCV debacle shortly.
Glenn: Then we got some new logos was about.
Glenn: <unk>.
Glenn: So.
Glenn: It's definitely resonating well with our customers.
Glenn: They are trying to expand with varian, but also how we win new logos.
Glenn: It's all about you can start.
Peter Marc Levine: Great. Thanks, guys, for taking my question. Yeah, maybe Dan or Grant could help us understand the monetization of these bots. I think you have 40 plus bots. You know, walk us through what you're charging. Is it usage? Is it per seat?
Glenn: Applying those box to your business model.
Glenn: And any volume that is right for you to begin with we're not dictating to the customer what is the initial consumption level.
Glenn: In some cases, we have minimum constructions, because we're not going to do this for <unk>.
Glenn: $10000 deal, but our customers also don't want to.
Glenn: But there are two to.
Glenn: To deploy.
Dan Bodner: And, you know, if you can give us some kind of, you know, uplift to ACV from the adoption of these bugs. Yeah, so I'll start, Grant, and feel free to add anything that I missed, but the concept is very typical to how AI is being deployed, and especially where it's all about AI business outcomes. We are aligning the pricing of the bot to the outcomes that the customer is expecting. So they can see the ROI, they can measure the ROI, and they can increase the... The usage, based on the results that they actually measure.
Glenn: Small projects.
Glenn: So to your question how do we what's the unit of measure for the box it really depends on what the board is doing.
Glenn: So in the case of.
Glenn: The conflicts that I discussed before.
Glenn: But the biggest problem is.
Glenn: It is simply engagement.
Glenn: <unk> are not able to change the schedules.
Glenn: So.
Glenn: Sometimes there's urgency things in their life, but it can change the schedule.
Glenn: So customers see attrition.
Glenn: Customers see some difficult relations with.
Glenn: Employees that just <unk>.
Glenn: Don't show up they ask for approval.
Dan Bodner: So many of our customers that have bought AI and Q4. And I can say that with new logos, almost entirely. And all the SAS ACVs, the Battle SAS ACV that we got from Ulogos were about AI and bots.
Glenn: The approval is denied they don't show up because they have to go and do something first of all.
Glenn: So there's a lot of issues. So they can measure this in.
In.
Glenn: Lots of Patricia avoiding attrition, so thats kind of one measurement.
Glenn: The other thing is that our customers were trying to hire supervisors too.
Dan Bodner: So, it's definitely responding well with our customers that are trying to expand with Verint, but also with how we win new logos. It's all about you can start applying those bots to your business model at any volume that is right for you to begin with. We're not dictating to the customer what the initial consumption level should be. [inaudible] So, to your question, how do we, you know, what the unit of measure for the bot is? It really depends on what the bot is doing. So in the case of... The TimeFlexBot that I discussed before. The business problem is, you know, employee engagement. Employees are not able to change their schedules.
Glenn: Measure.
Glenn: Our global flexible and do all the scheduled schedule changes in real time, clearly not practical but if they tried to do that they can also measure how many supervisors they want to hire and how they can avoid this cost and to compare that to the to the <unk> block. So if they want if they have let's say a thousand employees that can slide I'm just going to.
Glenn: Give time for the extra 200 employees and I'm going to measure the ROI and if I see that it's what I like I will just increase the entitlement and a very cloud.
Glenn: And.
Glenn: Grow to as many as opposed to what I need.
Glenn: But every every board has its own.
Glenn: Business outcome of course, sometimes we deliver a team of box because the business problem that a customer trying to solve requires several box working together.
So.
Glenn: It's.
Glenn: It's.
Glenn: Obviously, it will be bigger, but more importantly, the way we designed the platform is that the customer can measure on a very granular basis.
Dan Bodner: So sometimes there are urgent things in their lives, but they can't change the schedule. So customers see attrition. We've had customers see some difficult relations with employees that just don't show up. They ask for approval. The approval is denied, and they don't show up because they have to go and do something personal.
Glenn: The alloy so.
Glenn: He is now a big buzzwords and.
Glenn: Our.
Glenn: Our message to customers, which is very differentiated.
Glenn: For example, AI technology.
Glenn: You're buying from various AI.
Glenn: AI business outcome, and you should be able to measure the ROI.
Dan Bodner: So there are a lot of issues, so they can measure this in, you know. I'm going to talk a little bit about the concept of the timeflex bot. So the timeflex bot is software that is used to measure loss of attrition and avoid attrition, so that's kind of one measurement. The other thing is that there are customers who are trying to hire supervisors to be a bit more flexible and do all these schedule changes in real time. It's really not practical, but if they try to do that, they can also measure how many employees they need. They can decide, I'm just going to give timeflex to 200 employees, and I'm going to measure their ROI, and if I see that it's what I like, I'll just increase the entitlement in the variant cloud and grow to as many employees as I need. But every bot has its own business outcome. Of course, sometimes we deliver a team of bots because the business problem that customers like to solve requires several bots working together.
None: Yes, sorry, I jumped on late if you discussed it but from your last question you talked about 20%.
None: Bookings growth throughout the year.
None: Look at the full year guide, obviously, there was a $25 million headwind.
None: What's the disconnect between but I think the uptick youre seeing in bookings growth ACB growth to the call. It mid single digits revenue growth number.
None: Yes, so what we discussed.
None: At Investor Day is that because of the high end because AI is only available in bundled SaaS.
None: The best way to look at our AI momentum if you look at bundled SaaS growth.
None: But what we had last year is the Unbilled unbundle flex booking declines.
None: Because the customers are shifting into battles us. So the result is.
None: 60% bundle assessable can go up in Q4.
None: And.
None: And we basically guiding to 20%. So we go from six in Q4 'twenty.
None: 20%, we expect in Q1 and 20% we expect for the full year.
None: But in unbundled SaaS, which does not include AI, we do not expect growth.
Dan Bodner: So it's, you know, the ROI obviously will be bigger, but more importantly, the way we design the platform is that the customer can measure on a very granular basis. So, you know, AI is now a big buzzword, and our, our, our message to customers is very differentiated. You're not buying from Verint AI Technologies. You buy from AI Business Outcomes, and you should be able to measure the ROI. And, you know, sorry, I jumped on late if you discussed it.
None: So it became a small part of our booking.
None: So it's about.
None: 20% of our booking but the unbundled.
None: And that'll start booking is not expected to grow there is no AI involved there.
None: But as I explained before our customers don't have unbundled SaaS solutions can renew in unbundled SaaS.
None: And they can add bundle such AI on top of it and it's all working as one hybrid platform.
None: So they don't have to do any migration.
None: In order to expand in bundled SaaS, but we expect that AI is going to drive bundle such expansions.
None: Okay.
None: So bundled SaaS as a percentage of bookings is how much 80% you said.
Peter Marc Levine: But, you know, from your last question, you talked about 20% bookings growth throughout the year. If you look at the full year guide, obviously, there was the $25 million headwind. Then what's the disconnect between I think the uptick you're seeing in bookings growth, ACB growth to call it, you know, mid single digits, revenue growth? Yeah, so what we discussed today is that because of AI and because AI is only available in bundled SAS, the best way to look at our AI momentum is to look at bundles as growth. But what we had last year was the unbundled flush booking decline because customers were shifting into the bundled sets.
None: It's about 80% yes.
None: Okay.
None: And then I'll quit.
None: And that's where the growth of the company.
None: We explain the Investor day that.
None: The growth in our journey to the rule of 40 is based on balanced growth.
None: <unk> is the best metric to measure AI adoption and bought attachment rate all of that is actually translating into bundles such growth.
None: Boneless is booking is the metric that will demonstrate success in AI and also success toward that rule of 48 target that we have.
None: Thank you.
None: And thank you.
None: And one moment our next question.
None: And our next question comes from Joshua Reilly from Needham. Your line is now open.
Josh Weiss: Alright, thanks for taking my questions and nice job, finishing out the fiscal year here.
Dan Bodner: So the result is, you know, 16% bundled sets booking growth in Q4, and we're basically guiding to 20%, so we'll go from 16Q4. 20% we expect in Q1 and 20% we expect for the full year. But in unbundled SAS, which does not include AI, we do not expect growth. So it has become a small part of our booking.
Josh Weiss: What if anything are you doing within the direct sales force to make them successful at selling the AI bots when the competitive landscape for some of these boxes, a little more complex than different than the core workforce management solution that you've historically dominated in the enterprise market.
None: Yes, that's very interesting.
So we launched the platform was the box.
Dan Bodner: So it's about, you know, 20% of our bookings, but the unbundled SaaS booking is not expected to grow because there is no AI involved there. But as I explained before, our customers that have unbundled SaaS solutions can renew in unbundled SaaS, and they can add bundled SAS AI on top of it, and it's all working as one hybrid platform. So they don't have to do any migration in order to expand into Bundlesus, but we expect that AI is going to drive Bundlesus expansion. So bundled SAS as a percentage of bookings is how much? 80%, you said? It's about 80% yes.
None: Mid last year and.
None: At the time, we had 25 box now with 40. So we are innovating at a very fast pace.
None: Number of parts is increasing and.
None: I expect we will continue to innovate throughout this year was more and more parts.
None: And having that many Bakken the platform.
None: Is differentiating because customary it's an open platform customers can choose the one that is.
None: Most.
None: Compelling for them at any given time and it can expand and so on.
But.
None: What we did was the direct sales force last year is firstly, we enable them on this open platform. So they can explain the benefits of being open.
None: And flexibility in our.
Modular approach of box. So you can buy any Boston any given time.
None: But the other things that we did is we shifted the discussions from technology to business outcomes and our sales force is quite good because they've been an enterprise sales force always selling applications not infrastructure. So they are very good at understanding business issues and solving problems.
Dan Bodner: And it's also more than a pipeline, and that's where the growth of the company is. You know, we explained it yesterday that the growth in our journey to the Rule of 40 is based on Banal Set Growth. And BundleSus is the best metric to measure AI adoption and bot attachment rate. All that is actually translated into BundleSus growth.
None: I'll give you an example, again a customer that.
None: We engaged with is they wanted AI business outcomes now but theyre.
None: It just made big investments in Jan journey II platform.
None: So wanted to standardize AI in the company and they were basically kind of not really very interested in.
None: Any other AI. They just made a big investment so what our slots what day it is.
Unknown Attendee: So a bundle such as this booking is the metric that will demonstrate success in AI and also success toward that Rule of 40 target that we have. Thank you, and thank you. Take one moment for our next question. And our next question is from Joshua Riley, from Needham, Yolanda.
None: We explained the open approach to explain the biggest users.
None: Why they can they can soften really business problems now but.
None: But more and more interest and more importantly, they engage with ITN explained it Hey, you know if you have.
None: And <unk>. If you have large language models that you develop we can import your lapse into our platform. Because we are totally open very da Vinci will take any commercial.
Unknown Attendee: All right, thanks for taking my questions and nice job finishing out the fiscal year here. What, if anything, are you doing within the direct sales force to make them successful at selling the AI bots when the competitive landscape for some of these bots is a little more complex and different than the core workforce management solution that you've historically dominated in the enterprise market? Yes, that's a very interesting topic. So we launched the platform with BART mid-last year, and at the time, we had 25 bots; now we have 40, so we are innovating at a very fast pace. The number of bots is increasing, and I expect we'll continue to innovate throughout this year with more and more bots. And having that many bots in the platform is differentiating because Customer is an open platform. Customers can choose the one that is the most compelling for them at any given time, and they can expand it, and so on.
None: Open source proprietary as well as customer provided in our labs.
None: And when you realize that.
None: They don't have to really develop contact center business outcomes because they are in our lives will be in the classroom doing that for them in the Marin platform.
None: This all discussion went away from less comparable with AI technology is better we just neutralize this whole discussion and it was about.
None: Providing them all right now and it was really thrilled because it's a win whatever they developed is being leveraged by variance.
None: Combining the various data so we can train the airlines on our data.
None: And fresh 24, seven and.
None: Embedding <unk> into our workflows, so that it can be.
None: With no disruption provided to the agents at their fingertips. So all these things that we're bringing in the platform, we're definitely saving them time and providing.
None: The value that they were expecting now.
None: So I think that.
None: Salesforce is really focusing not on who is the eye is better.
Dan Bodner: But what we did with the direct sales force last year is first, we enabled them on this open platform so they can explain the benefits of being open and flexible in, you know, a modular approach of two bots, so you can buy any bot at any given time. But the other thing that we did is we shifted the discussions from technology to business outcomes. And the sales force is pretty good because they've always been an enterprise sales force, always selling applications, not infrastructure. So they're very good at understanding business issues and solving problems.
None: But.
None: <unk>.
None: What are the business issues.
None: Those issues and look at how do you.
None: Solve issues and this could be increasing capacity for the AGM to create increasing capacity for the supervisors.
None: It could be elevating.
None: Elevating the employee experience elevating customer experience, there's a lot of different pre.
None: In Oregon as the company is half.
None: But each company can find a box that was something that they really they really need now.
None: Got it that's helpful. And then just on gross margin recurring gross margin was stronger than what we modeled in the quarter. Maybe can you give us some more color on what's driving that higher margin and how do we think about the I think you mentioned the 100 basis point improvement in gross margin. This year, how do we think about the mix.
Dan Bodner: So I'll give you an example of, again, a customer that we engaged with. They wanted AI business outcomes now, but their IT had just made a big investment in the Gen AI platform. So IT wanted to standardize AI in the company, and they were basically kind of not really very interested in any other AI, you know, they just made a big investment.
None: There are between the recurring and the nonrecurring gross margin. Thanks.
Brian: Brian Thats for you.
Dan Bodner: So what our Salesforce did is, again, we explained the open approach; they explained to the business users why they could, you know, they could solve some real business problems now. But more importantly, they engage with IT and explain that, hey, you know, if you have... [inaudible] And when IT realized that, you know, they don't have to really develop context-centered business outcomes because their LMs will be in the platform doing that for them on the VIRN platform, this whole discussion went away from, "Let's compare who's AI technology is better, right?" We have just neutralized this whole discussion.
Brian: Yes.
None: So the.
Brian: The recurring gross margin.
Brian: Obviously strong in the fourth quarter, specifically that was on the back of the unbundled SaaS the volume of the renewals. So that obviously drove the strong expansion that maybe you didn't have in your models for the fourth quarter.
Brian: But going forward, obviously, we have and I mentioned this right. The revenue will once again have a similar combination of steady bundled SaaS growing sequentially throughout the quarters in fiscal 'twenty, five and that large one.
Dan Bodner: And it was about, you know, providing them ROI now, and IT was really thrilled because it's a win, right? Combining the variant data so we can train their LLMs on our data. [inaudible] The value that they were expecting now. So I think that, you know, Salesforce is really focusing not on who the AI is better. But, you know... What are the business issues? Prioritize those issues and look at how you solve these issues, and this could be increasing capacity for the agents or increasing capacity for the supervisors.
Brian: Again volume and it's a different I should make this clear it's a different set of contracts that are coming up.
Brian: It will be weighted to the fourth quarter again and providing once again.
Brian: Strong.
Brian: Expansion of the gross margin overall so.
Brian: I think it'll be and youll see it be kind of similar but what's driving the expansion year to year 24 going into 'twenty. Five is once again, we are expecting operational improvements in the bundled SaaS and once again given that that is driving the bookings are driving the revenue growth in the revenue.
Dan Bodner: It could be, you know, elevating employee experience, or elevating customer experience. There are a lot of different priorities that companies have, but each company can find a box that will do something they really need now. Got it. That's helpful.
Unknown Attendee: And then just on gross margin, recurring gross margin, Unknown Attendee, Grant Highlander, Samad Samana, Peter Levine, Mason Marion, Dan Bodner, Unknown Attendee, Grant Highlander, Jaime Meritt, Rob Scudiere, Steve Seger, Jeffrey Bretana, Josh Weiss, Sayan Navaratnam, Verint Systems Inc. Grant, that's for you. Yeah. So the recurring gross margin was obviously strong, and in the fourth quarter specifically, that was on the back of the unbundled SAS, the volume of the renewals. So that obviously drove the strong expansion that maybe you didn't have in your models, you know, for the fourth quarter. But going forward, obviously, and I mentioned this, revenue will once again have a similar combination of the steady bundled SAS growing sequentially throughout the quarters in fiscal 25, and that large, once again, volume, and it's a different, I should make this clear, a different set of contracts that are coming up that will be weighted to the fourth quarter again and provide, once again, a strong expansion of the gross margin overall.
Brian: Seeing some operational expansion.
Brian: Within the bundled SaaS all of that will help to drive the over 100 basis points that once again, we were looking for this year.
None: Got it and then just.
None: A quick follow up on that how much of the managed services business.
None: Is that factored into that 100 basis point improvement as well.
None: No.
None: It's factored in but it's the operational improvement or bundled SaaS is obviously driving a good portion of that.
None: Got it thanks guys.
None: You bet.
None: And thank you.
None: Yeah.
And one moment our next question.
None: And our next question comes from Timothy Horan.
Timothy Kelly Horan: Thanks, guys can you give us a sense of how big.
Timothy Kelly Horan: Our bundled SaaS is or what percentage of revenue that is.
Secondly, I think you have.
Timothy Kelly Horan: Guidance for 10% growth in a couple of years it sounds like bookings are going a lot better.
Timothy Kelly Horan: Can you maybe see that happening in 18 months or so.
Unknown Attendee: So, you know, I think it'll be, and you'll see it be kind of similar, but what's driving the expansion year to year, 24 going into 25, is that once again, we are expecting operational improvements in the bundled SAS. And once again, given that that is driving the bookings or driving revenue growth and revenue, and seeing some operational expansion within the bundled SAS, all of that will help to drive the over 100 basis points that, once again, we're looking for this year. I got it.
Timothy Kelly Horan: And then third.
Timothy Kelly Horan: When you these chat bots from customer spend.
Timothy Kelly Horan: Dollars.
Do you have a sense of how much you're saving on labor or other expenses.
Thank you.
Timothy Kelly Horan: Yes.
None: Let me start and grant you can give the.
None: The SaaS percentage later.
Grant A. Highlander: So I think that.
Grant A. Highlander: When customers are looking for.
Grant A. Highlander: First.
Grant A. Highlander: They're looking for the best solution that can give them the best ROI right. So it's not just a box.
Grant A. Highlander: I need to buy.
Grant A. Highlander: But it's it has the ability to drive business outcomes.
Grant A. Highlander: I think that.
Grant A. Highlander: The gross margin expansion.
Grant A. Highlander: Is.
Grant A. Highlander: And we have it now steady it's the result of really innovation.
Unknown Attendee: And then just a quick follow-up on that. How much of the managed services does that factored into that 100 basis point improvement as well? Yes, it does.
Grant A. Highlander: So when you're delivering stronger strong ROI for customers Theyre not really pressuring your.
Grant A. Highlander: Pricing.
Grant A. Highlander: So we.
Grant A. Highlander: We are kind of sharing the benefits of the DIY between where the customer.
Grant A. Highlander: No, it's factored in, but the operational improvement of bundled SAS is obviously, you know, driving a good portion of that. Got it. Thanks, guys. You bet. And thank you.
Get some from labor savings to what we get.
Innovation in bundled SaaS.
Grant A. Highlander: Now how much NOI so.
Grant A. Highlander: Gave you in the Investor day, some examples there.
Operator: And one moment for our next question. And the next question is from Timothy Horan. Thanks, guys.
Grant A. Highlander: Different box create different savings so the containment barge can reduce the cost of wanting direction from.
Timothy Kelly Horan: Can you give us a sense of how big the bundled SAS is and what percentage of revenue that is? Um, secondly, I think you have guidance out there for 10% growth in a couple of years. It sounds like bookings are going a lot better. I mean, can you maybe see that happening in, you know, another 18 months or so?
$5 50 to just 50 cents.
Grant A. Highlander: So that's the one to 10 ratio in terms of <unk>.
Grant A. Highlander: Cost versus return.
Grant A. Highlander: And just as successful containment. This is not just reflection of the call.
Grant A. Highlander: The customer calls talks to a bottom than ever comes back. This is where we measure that on basis loss, we really replaced a person with a bot that gave a full answer to where the customers are trying to do so again the quality of the boss are very important because a lot of companies talk about <unk> and how.
Dan Bodner: You know, I think thirdly, when you use these chatbots when customers spend, you know, $1,000 on them, do you have a sense of how much you're saving in labor or other expenses, you know, in total? Yes, let me start, and Grant, you can give the..., the SAS percentage later. Yeah.
Grant A. Highlander: They can.
Grant A. Highlander: Duo self service, but.
Grant A. Highlander: Successful soft surface meeting successful containment not just reflection.
Grant A. Highlander: On that basis. This margin is generating one to 10 ratio.
Dan Bodner: So I think that, uh... When customers are looking for an ally, first... They're looking for the best solution that can give them the best ROI, right? So it's not just about, "I need to buy AI," but it's the ability to drive business outcomes. I think that, you know, the gross margin expansion... and we have it now steady, it's the result of real innovation. So when you're delivering strong ROI for customers, they're not really pressuring your pricing. Of course, we're kind of sharing the benefits of the ROI between, you know, with the customer, uh... get from from labor-saving to what we get from uh... innovation in bundles. Now, how So I gave in Invest Today some examples that different bots create different savings. For example, the containment box can reduce the cost of one interaction from $5.50 to just $0.50. So that's a 1 to 10 ratio in terms of cost versus return.
Grant A. Highlander: When you look at the time flex bots.
Grant A. Highlander:
Grant A. Highlander: The.
Grant A. Highlander: It depends on how much customers investing today in flexibility, but we also see customers that have one to 10 ratio.
Grant A. Highlander: Some have lower than that.
Grant A. Highlander: But you know.
Grant A. Highlander: Many customers today, if the employee want to change their shift once a day.
Grant A. Highlander: They fire there.
Grant A. Highlander: They just can't afford employee not adhering to the schedule every day they want to change.
Grant A. Highlander: <unk> bought we have a customer reporting that employees are changing scheduled five times a day.
Grant A. Highlander: They want a coffee break they take 50 minutes of the schedule and the schedule of itself a coffee break and they take a few minutes later than somewhere else.
Grant A. Highlander: So again.
Grant A. Highlander: Ally is going to be a little bit.
Grant A. Highlander: Customized and we are helping customers to generate their own ROI models. So they can do their internal business justification.
Grant A. Highlander: But it's always clearly because this is why AI so exciting.
Grant A. Highlander: Talking about the market has shifted completely from.
Grant A. Highlander: Let's just move my telephony to the cloud to no I need to increase the explanation.
Grant A. Highlander: This shift is because the ROI is is huge and because AI just makes it possible now it wasn't possible a year ago.
Dan Bodner: And this is successful containment; this is not just deflection of the core, where, you know, the customer calls, talks to a bot, and then never calls back. This is where, you know, we measure that on the basis that we really replaced a person with a bot that gave a full answer to what the customers were trying to do. So, again, the quality of the bots is very important. There are a lot of companies that talk about IVAs and how they can, you know, do self-service, but successful self-service means successful containment, not just deflection. But on that basis, this board is generating a 1 to 10 ratio.
Grant A. Highlander: Definitely not five years ago, but it is possible now we architected the whole platform to do this so.
Grant A. Highlander: So it's open with data and da Vinci AI at the core and all these things are actually making this business outcomes possible now.
And.
Grant A. Highlander: Yes.
None: Pardon me speakers.
None: Yes.
None: Yes, Jessica it sounds like we lost and I think Greg.
None: So let me lay.
None: Let me go ahead and address the second part on the bundled SaaS. So youre exactly right bundled SaaS is driving the acceleration of growth what we've laid out there.
None: Investor Day rate was the mid single digit growth and accelerating modestly 26, and then getting the 10% growth in 2007 and I highlighted that on the back of the bundled SaaS bookings, which then drives the revenue over time.
Dan Bodner: When you look at the TimeFlexBot... Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/policies, It depends on, you know, how much the customer is investing today in flexibility. But we also see customers that have a one to 10 ratio of ROI, some lower than that. But, you know, many customers today if the employee wants to change their shift once a day... They fire them, you know; they just can't afford employees not adhering to the schedule every day they want to change. With the TimeFlex bot, we have custom reporting that employees are changing schedules five times a day. They want a coffee break. They take 15 minutes off their schedule, and they schedule themselves a coffee break, and they take 15 minutes later somewhere else.
None: To answer the question for perspective, the bundled SaaS in fiscal 'twenty, four and again I'll adjust for the managed services divestiture. It made up 28% $250 million a little over $250 million of revenue for bundled SaaS.
None: Roughly 28% of our overall revenue again, excluding divestiture and as you look at this and what we have trajectory.
None: It will grow.
None: About four points and make up 32% of the $930 million of revenue right around that ballpark.
Dan Bodner: So, again, the ROI is gonna be a little bit customized, and we are helping customers to generate their own ROI models, so they can do their internal business justification, but it's always pretty big. This is why AI is so exciting. You know, we're talking about the market that has shifted completely from, you know, let's just move my telephony to the cloud to, no, I need to increase X automation. This shift is because the ROI is huge and because AI just makes it possible now. It wasn't possible a year ago, definitely not five years ago, but it is possible now.
And we expect it to continue just on the pace that we had modeled.
None: It's going to continue to increase towards 37% in 2006.
None: Would be 40% of our overall revenue by.
None: The.
Then again driving that 10% growth.
None: On the back of that line. So that's kind of the magnitude that we see.
None: We'll still have unbundled, SaaS, which Dan mentioned, we give the customers flexibility.
Operator: We architected the whole platform to do this. So it's open with data and DaVinci AI at the core, and all these things are actually making these business outcomes possible now, and uh... you know that they are all... Pardon me, Justin. It sounds like we lost Gag.
None: I don't have to migrate all of that unbundled SaaS or term licenses they can get.
None: Matt.
None: Without any disruption of the converging.
None: Gration and we expect that will come over time as well so hopefully that answered the question.
Grant A. Highlander: I think Grant can... Yeah, and let me go ahead and address the second part of the bundled SaaS. So you're exactly right. Bundled SaaS is driving the acceleration of growth. What we laid out there, you know, investor day, right, was the mid-single-digit growth and accelerating modestly at 26 and then getting the 10% growth in 27. And I highlighted that on the back of the bundled SaaS bookings, which then drives revenue over time. Just to answer the question for perspective, bundled SaaS in fiscal 24, and again, I'll adjust for the managed services divestiture, it made up 28%. $250 million, a little over $250 million of revenue for bundled SaaS, was roughly 28% of our overall revenue, again, excluding divestiture.
None: Very helpful. Thank you.
None: You bet.
None: And thank you.
None: Okay. Thank you and I would now like to turn the call back over to Matthew Frankel for closing remarks.
Matthew H. Frankel: Great. Thank you Justin and thank you everyone for joining us today of course feel free to reach out with any questions you have.
None: Look forward to speaking to you again soon have a good night.
None: This concludes today's conference call. Thank you for participating you may now disconnect.
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Grant A. Highlander: And as you look at this and what we have trajectory, you know, it'll grow about four points and make up 32% of the $930 million of revenue right around that ballpark. And, you know, we expect it to continue just at the pace that we had modeled, which is going to continue to increase towards, you know, 37% in 26. And it would be 40% of our overall revenue by, you know, the fiscal 27, again driving that 10% growth on the back of that line. So that's kind of the magnitude that we see. We'll still have unbundled SAS, which as Dan mentioned, we give the customers flexibility. They don't have to migrate all of that unbundled SAS or term licenses. They can get AI now without any disruption of the converging migration, and we expect that will come in time as well.
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Grant A. Highlander: So hopefully, that answered the question. Very helpful, thank you, and thanks, thank you, and I would now like to turn the call back. Matthew Frankel for closed.
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Matthew H. Frankel: Thank you, Justin. And thank you, everyone, for joining us today. Of course, feel free to reach out with any questions you have. And we look forward to speaking to you again soon. Have a good night. This concludes today's conference call. Thanks for participating.
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