Q1 2026 Verint Systems Inc Earnings Call
Good day and thank you for standing by welcome to the burnt Systems, Inc. Q1, 2026 earnings conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the search.
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Speaker Change: Please be advised that today's conference is being recorded I would now like to turn the conference or what are your speaker for today Matthew Frankel. Please go ahead.
Speaker Change: Thank you operator, good afternoon, and thank you for joining our conference call today, I'm here with Dan Bodner burn CEO greenhouses undergoing CFO and Alan Roden Burns Chief Corporate development Officer.
Speaker Change: Before getting started I'd like to mention that accompanying our call today as 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 <unk> Dot com click on the Investor Relations tab and click on webcast link and select today's conference call.
Speaker Change: I'd also like to draw your attention to the fact that certain matters discussed in this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act like 95, and other provisions with federal Securities laws.
Speaker Change: For the payments are based on management's current expectations and are not guarantees of future performance.
Speaker Change: Results could differ materially from those expressed and implied by these forward looking statements.
Speaker Change: The statements are made at the date of this call and except as required by law Geron assumes no obligation to update or revise them.
Speaker Change: That's just a caution not to place undue reliance on these forward looking statements.
Speaker Change: For more detailed discussion using other risks and uncertainties could cause actual results to differ materially from those indicated in these forward looking statements.
Please see our Form 10-K for the fiscal year ended January 31st 125.
Speaker Change: Thank you for the quarter ended April 32025, when filed and other filings with the SEC.
Speaker Change: The financial measures discussed today include non-GAAP measures and certain operating metrics as we believe investors focus on those measures and comparing results between periods and among peer companies.
Speaker Change: Good revenue and AOR growth, which are adjusted for the divestiture. We it's actuated on January 31st 2024.
Speaker Change: We see today's slide presentation, and our earnings release in the Investor Relations section of our website at <unk> Dot com for a reconciliation of non-GAAP financial measures to GAAP measures as well as for more information about our key operating metrics.
Speaker Change: non-GAAP information should not be considered in isolation from a substitute for or superior to GAAP financial information.
Speaker Change: Because management believes provides meaningful supplemental information regarding our operating results when assessing our business and is useful to investors for informational and comparative purposes.
Speaker Change: The non-GAAP financial measures. The company uses have limitations and may differ from those used by other companies.
Dan: Now I'd like to turn the call over to Dan Dan.
Dan: Thank you Max.
Dan: I am pleased to report that we started the year with a strong first quarter.
Dan: And are on track to achieve our annual targets.
Speaker Change: In Q1.
Speaker Change: Our growth accelerated to 6%.
Speaker Change: Reflecting our continued AIG momentum.
Speaker Change: And both revenue and diluted EPS.
Speaker Change: Came in ahead of guidance.
Speaker Change: Beyond our strong momentum our two key differentiators.
Speaker Change: First our ability to transform the latest AI technology.
Speaker Change: Into strong tangible business outcomes.
Speaker Change: Delivering customer value better than any other fee X vendor.
Speaker Change: A second.
Speaker Change: Our ability to deploy AI in <unk>.
Speaker Change: <unk> cloud model.
Speaker Change: <unk>, our AI powered box on top of existing customer environments.
Speaker Change: With variance.
Speaker Change: Customers can benefit from AI value now.
Speaker Change: It can start small with quick AI deployments in real production environments.
Speaker Change: And once they prove their value.
Speaker Change: They can quickly scale with the giant platform.
Speaker Change: Our growth accelerated every quarter over the last year.
Speaker Change: This growth is driven by more and more of our customers' increasing usage.
Speaker Change: This AI powered box.
Speaker Change: Already deployed.
Speaker Change: As well as customers, adding new boss from Rcs automation platform.
Speaker Change: Today.
Speaker Change: Our platform delivers more than 50 box.
Speaker Change: Each designed to automate a specific menu CX workflow.
Speaker Change: Quickly create significant value.
Speaker Change: A combination of a strong first quarter.
Speaker Change: A growing pipeline.
Speaker Change: Our AI solutions.
Speaker Change: Gives us confidence in our annual growth targets.
Speaker Change: And we look to exit the year with 8% year over year growth in E. R. R.
Speaker Change: During Q1, we.
Speaker Change: We continue to win large deals including.
Speaker Change: The $13 million of tissue vision order from a leading insurance company.
Speaker Change: This large multiyear commitment.
Speaker Change: It was driven by the customer's goal of automating workflows.
Chris: Chris workforce capacity.
Speaker Change: We expect to insure it.
Speaker Change: Use the various AI powered box to increase supervisor capacity by more than 50%.
Speaker Change: An agent capacity by more than 25%.
Speaker Change: Resulting in significant value creation.
Speaker Change: And delivering and over 10 X return on their investments.
Speaker Change: The second eight figure deal is it $14 million.
Speaker Change: <unk> order from.
Speaker Change: From a leading healthcare company.
Speaker Change: Let's take a closer look at the AI journey of this customer.
Speaker Change: Over the last year, our IRR from this health care customer nearly doubled from 8 million to $15 6 million as.
Speaker Change: As the customer added multiple various AI box to automate manual CX workflows.
Speaker Change: As discussed on our prior call.
Speaker Change: Very customers can get access to AI powered box hosted in the various cloud.
Speaker Change: Also with various unique hybrid cloud design.
Speaker Change: Customers can choose to maintain their existing varian solutions on prem or in the partner cloud.
Speaker Change: While adding new AI powered solutions in the very cloud.
Speaker Change: This large healthcare customer is a great example of the hybrid cloud model benefits.
Speaker Change: Having faster adoption.
Speaker Change: As customers do not need to rip and replace their existing solutions.
Speaker Change: <unk> advantage of the new variant six automation capabilities now.
Speaker Change: The blue color on the chart.
Speaker Change: Ah represents a portion of our <unk> with this customer.
Speaker Change: This is derived from solutions that include AI capabilities.
Speaker Change: And the great color represents the portion of our a R. It does not include AI capabilities.
Speaker Change: You can see the vast majority of the growth from this customer over the past year has.
Speaker Change: It's been driven by adoption of our AI powered thoughts.
Speaker Change: On our website you can find many examples of customers reporting strong AI business outcomes from the various platform.
Speaker Change: Today Barrick to the pure play CX automation company.
Speaker Change: With a focus on helping brands automate their menu CX workflows.
Speaker Change: Our platform differentiation.
Speaker Change: For many years of experience working with the largest brands in the world.
Speaker Change: CX initiatives.
Speaker Change: And as our customers base increases adoption ovarian AI powered box, we benefit from working closely with leading brands to innovate even faster and we're introducing new cutting edge AI solutions at a rapid pace.
Speaker Change: In summary.
Speaker Change: We deliver AI business outcomes stronger and faster than any other vendor in the market.
Speaker Change: And behind our AI momentum.
Speaker Change: He is a proven value we create for our customers.
Speaker Change: We kicked off the year strong.
Speaker Change: Our AI momentum to continue.
Speaker Change: And are targeting exiting the year with 8% <unk> growth and double digit free cash flow growth.
Grant: And now let me turn the call over to grant.
Grant: Great.
Grant: Thanks, Dan.
Grant: Good afternoon, everyone.
Grant: 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 then the IR section of our website.
Grant: Differences between our GAAP and non-GAAP financial measures include adjustments related to acquisitions and divestitures.
Grant: Excluding amortization of acquisition related intangibles, certain other acquisition and divestiture related expenses stock based compensation expenses restructuring expenses as well as certain other items that can vary significantly in amount and frequency from period to period.
Grant: As Dan highlighted we started the year strong.
Grant: <unk> growth accelerated to 6% year over year, and we over achieved our revenue and non-GAAP diluted EPS guidance.
Grant: We believe that <unk> is the best metric to track our growth and I am very pleased with another quarter of acceleration.
Grant: Revenue came in at $208 million.
Grant: non-GAAP diluted EPS came in at 29.
Grant: Our revenue over achievement was primarily due to the timing of two large unbundled SaaS deals and therefore do not impact our revenue and diluted EPS outlook for the year.
Grant: As we discussed on our last conference call given our unbundled SaaS revenue volatility associated with ASC 606 accounting.
Grant: We are providing guidance and tracking our results in two ways.
Grant: The first way is ratable view of the business via cash generation model.
Grant: And the second way is that traditional P&L models.
Grant: Now here is the guidance, we introduced last quarter for our cash generation models.
Grant: As a reminder, our cash generation model starts with IRR and ends with free cash flow.
Grant: Yes.
Grant: With respect to our outlook for IRR, we expect our momentum to continue with sequential dollar increases every quarter this year.
Grant: For Q2, we expect <unk> to increase to approximately $720 million.
Grant: And we expect to exit the year with around $768 million of IRR, plus or minus 1%, reflecting 8% year over year growth.
Grant: With respect to free cash flow, we expect our 8% AOR growth combined with cash contribution margin expansion to drive an approximate 12% increase in free cash flow to $145 million for the full year.
Grant: I'd like to note that our rolling four quarter SaaS pipeline has increased more than 30% year over year, reflecting strong demand for AI.
Grant: Our growing pipeline combined with our strong Q1 results give us confidence in achieving our fiscal 'twenty six <unk> outlook.
Grant: Now I'd like to double click on how AI is driving our IRR growth.
Grant: This chart shows our AI <unk> performance.
Grant: We define AI IRR is the portion of IRR that is derived from solutions that include AI functionality and represents the annualized quarterly run rate value of the associated active or signed SaaS agreements as of the end of the period.
Grant: As you can see from the chart our AI.
Grant: <unk> has been steadily accelerating.
Grant: In Q1, AI, IRR increased 24% year over year, reaching $354 million.
Grant: We are pleased with this acceleration and I would like to mention that AI.
Grant: Now represents close to 50% of our subscription era.
Grant: For the year, we expect <unk> to continue to grow more than 20% an acceleration from last year as customers increased usage and adopt additional bots from our CX automation platform.
Grant: Turning to our P&L outlook, we are maintaining our annual guidance as follows.
Grant: We are targeting $960 million of revenue with a range of plus minus 3%.
Grant: Driving non-GAAP diluted EPS of $2 93 at the midpoint.
Grant: For modeling purposes, I would like to give you a bit more color on our expectations for Q2.
Grant: As we've discussed in the past our quarterly revenue is heavily influenced by the timing of unbundled SaaS renewals.
Grant: Based on this timing, we expect around $200 million of revenue in Q2.
Grant: With respect to diluted EPS, we expect 26 in Q2.
Grant: Turning to our balance sheet, we continue to be in a very good financial position.
Grant: Our net debt of one times last 12 months EBITDA is further supported by our strong cash flow.
Grant: With regard to capital allocation, we expect the largest use of our free cash flow to be stock buybacks and.
Grant: And during the quarter, we bought back approximately two 5 million common shares.
Grant: As we mentioned on our last call. During Q1, we increased the size of our revolver to $500 million and extended the term to 2030.
Grant: This new revolver can be used to pay down our existing convertible notes upon maturity as we are not currently planning to issue a new convertible note.
Grant: In summary, we are pleased with our strong start to the year and our <unk>.
Grant: <unk> driven by growing AI adoption.
Grant: We began that provided cash generation model to help investors better understand the strong underlying growth trends in our business and the look through the unbundled SaaS revenue volatility.
Grant: Finally, we expect our 8% IRR growth to drive double digit free cash flow growth this year.
Grant: With that operator, please open the line for questions.
Grant: As a reminder, if you would like to ask a question. Please press star one one of your telephone you had an automated message advising your hand is raised we also ask that you. Please wait for your name and company to be announced before proceeding with your question one moment for the first question.
Grant: Okay.
Grant: And the first question will be coming from the line of Joshua Reilly of Needham Your line is open.
Grant: Alright, Thanks for taking my questions, maybe just starting off you know theres a lot of AI noise right now in your space can you help explain how <unk> differentiates given all of that noise and what are you seeing in terms of just growing AI voice chatbot usage, particularly in customer support as a tailwind for your.
Grant: Business and maybe the overall industry.
Speaker Change: Sure. Thank you Josh.
Grant: So first the customer sentiment for investing in AI is very positive.
Grant: But at the same time customers are very cautious.
Grant: And thats due to the noise and high debt.
Grant: But many vendors and also quite frankly, so I'm very bad experiences that customers had.
Grant: With box they purchased and they look good in a demo and 11 environment.
Grant: <unk> did not deliver any value in production.
Grant: So given that situation we have in the market very differentiates from all of this noise.
Grant: Just two simple and quite frankly common principles.
Paul: The first question Paul.
Paul: His proven outcomes.
Grant: Our reported by leading brands around the world.
Grant: So contrast, what we say just see what other customers are able to deliver in terms of value and tangible business outcomes.
Grant: And the second physical is about the hybrid cloud hybrid cloud benefits.
Grant: Which is delivering.
Grant: AI value now.
Grant: There's a lot of noise about you have to change your infrastructure you have to change things in your environment before you can get it to work.
Grant: Our message is no you can layer AI powered box on your existing.
Grant: Infrastructure you can start now.
Grant: Even more important customers can start small they don't have to invest big money in unconventional resources.
Grant: Once they prove the value in their own production environment.
Grant: Then they can quickly scale in the cloud.
Grant: So these are quite strong differentiation.
Grant: Does that work.
Grant: And they drove our 24% growth in AI era or in Q1.
Grant: So I believe the markets.
Grant: Adoption of AI is really this year only in the first inning.
Grant: Where last year I'm, calling it the customers were more exploring there we're fascinated by the promise with AI, but.
Grant: We are exploring as they did a lot of.
Grant: Lab experiments.
Grant: This year at the beginning of question was actually willing to spend money.
Grant: But also they want to make sure that they are investing in the right platform.
Grant: Because customers are not looking to invest in AI technology not in this space nothing to CX space, it's not about technology, they want to invest in our platform.
Grant: It transforms the latest AI technology into strong tangible business outcomes.
Grant: So I think that's kind of.
Josh: Any follow up on that Josh.
Grant: Yes.
Grant: Kind of a follow up is.
Grant: You've been kind of pursuing that strategy of smaller lands with the opportunity to upsell.
Grant: Are there examples that you can provide that demonstrate that that's been a successful strategy thus far.
Grant: Moving to much larger deals from these kind of smaller lands.
Grant: Yes, I can definitely give you example, so.
Grant: I believe I mentioned last quarter that we had a health care company expanding with 18 box.
Grant: <unk>.
Grant: The purchase of those 18 different box, but each one was perfect in different consumption level and they were actually we are increasing the consumption of each box is they've proven the value of exactly the story and we're not failing to the market and this customer when you look at there Jeremy.
Grant: The consumption over time.
Speaker Change: Rich ALR.
Speaker Change: From discussion.
Speaker Change: <unk> is $13 million and thats compared to only $5 million that.
Speaker Change: They were two years ago. So.
Speaker Change: They saw value and we saw increase in consumption, which drove.
Speaker Change: Our growth.
Speaker Change: And give you more examples.
Speaker Change: <unk> company increased consumption.
Speaker Change: And in this case from $2 million in Q1 last year.
Speaker Change: Two 5 million in Q1 now.
Speaker Change: We have a large media company that increase the high consumption and they grew from 3 million to $9 million in Q1 now.
Speaker Change: So the formula.
Speaker Change: That's very clear once customers through.
Speaker Change: Yes, it comes in the oil environment.
Speaker Change: They see the OE is very compelling.
Speaker Change: And.
Speaker Change: It's almost like.
Speaker Change: The solution themselves itself, because they wanted to expand and it's about how can I capture the full value of what I started.
Speaker Change: In a small scale and of course, because our AI is available in the cloud.
Speaker Change: We have built a platform that is easily scalable for our customers. They can.
Speaker Change: The consumption level.
Speaker Change: On a very short notice.
Speaker Change: Got it maybe just one last quick follow up for me is.
Speaker Change: From the work that I have been doing in the industry. It seems that the adoption of AI voice chat bots is accelerating maybe more than people would've expected entering the year. What is the implication for some of your WFAN seat renewal that youre seeing with some of the larger customers are they renewing at a lower level.
Speaker Change: And you would've expected entering the year or has it been pretty consistent with what you would have expected in terms of the long term trajectory of the decline.
Speaker Change: Yes, I think that the.
Speaker Change: Success of the voice box is very clear and also it's quite easy compare to the growth of ICR.
Speaker Change: That was not really.
Speaker Change: Providing much of responses, but it was just the way too.
Speaker Change: Interact and allow customers to choose.
Speaker Change: Menu options have Shawn so a lot of these basic IV ours are being replaced by voice box.
Speaker Change: I think that.
Speaker Change: Today, the voice bots are starting to contain and self service and get more intelligent responses.
Speaker Change: And then what <unk> could do.
Speaker Change: Gary.
Gary: As one of the leading voice bots in the markets if you checked with.
Speaker Change: Industry analyst variances, leading the market in this area.
Gary: If you look at the.
Speaker Change: Customary reported AI business outcomes that variance is putting it on our website youll.
Speaker Change: Youll see a lot of transporting voice bot success stories, where we contained 60 and.
Speaker Change: 80% of interactions with.
Speaker Change: With our voice box.
Speaker Change: Obviously as the technology improves over time and AI is moving very fast.
Speaker Change: I expect like the rest of the market.
Speaker Change: The chatbot and voice will become more capable.
Speaker Change: At the same time, the rent can be really successful.
Speaker Change: Box you need to make them part of our platform you can't just throw a point solution for self service because all of these blocks eventually it needs to work together with the workforce.
Speaker Change: And what do we do in our platform is we provide those chatbot voice bots together with automating.
Emmanuel: Emmanuel CX workflows for the workforce and we do all that with orchestrating the work.
Speaker Change: Boston human in a way to increase workforce capacity.
Speaker Change: So yes, we see some customers starting to reduce the number of agents, we do see that it is not everywhere because again in the first inning.
Speaker Change: When I look at our total number of fits under management, which we told the market. It's 4 million. It's still about the same it's still about 4 million agents today.
Speaker Change: But obviously, we see some customers that are using AI and starting to get capacity and either they reduce agents or <unk>.
Speaker Change: Use agents for Upselling, and increasing revenue different different ways to use the capacity.
Speaker Change: But at the same time, we also see some expansion in.
Speaker Change: The number of agents in other accounts that may be are not yet caught up to the AI. So overall, we did about the same number of agents today 4 million.
Speaker Change: But we see now very clear.
Speaker Change: Transition.
Speaker Change: Sure.
Speaker Change: Our base right, we talked about 50% of our Eros now is AI and it's growing at 24%.
Speaker Change: So we're.
Speaker Change: We're not really relying anymore on any growth in the non AI business.
Speaker Change: Which obviously, we don't expect any expansion of licenses.
Speaker Change: And we see 24% growth in our AI and that's 50% of our business. Obviously, that's the that's the engine that drives the overall growth with Varian and we believe that that will continue.
Speaker Change: And.
Speaker Change: When we replace as we discussed many times before on calls when we replace.
Speaker Change: For our customers when we replace.
Speaker Change: We use AI we.
Speaker Change: We increased our revenue.
Speaker Change: Substantially so that's what we see now in our numbers.
Speaker Change: Where the AI engine basically drives the overall growth of the company.
Speaker Change: Awesome. Thanks, guys.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line of Saul <unk> of TD Cowen Your line is open.
Speaker Change: Thank you so much guys.
Speaker Change: Congrats on a solid start to the year of parties for a little bit of some background noise.
Dan Bodner: Dan what do you think we are from an adoption curve.
Speaker Change: Our weird inflection point as it relates to our AI driven voice box.
Speaker Change: Where are we from from from an inning review point and maybe just as a follow up.
Speaker Change: What internal steps are you guys, taking to assure a more consistent execution and thanks grant for the color on the entire dynamics that we would not.
Speaker Change: And cash flow.
Speaker Change: Yes.
Speaker Change: I think it's a very good question.
Speaker Change: The.
Speaker Change: As I mentioned before I think last year it was.
Speaker Change: It's really difficult for customers to move outside of their lab experiments day lock interest you AI, but it was more show them in the lab.
Speaker Change: Well I'll give you a few number of customers are willing to actually move into production and they all get it on a small scale.
Speaker Change: And.
Speaker Change: Lots of IP organization, a big play anguish AI models that they.
Speaker Change: Hey purchase when they try to.
Speaker Change: Find use cases, so thats kind of the industry last year.
Speaker Change: When I look at Q.
Speaker Change: Q1 is starting to change.
Speaker Change: It's very difficult to say what will be the pace of the change.
Speaker Change: It is clearly changing towards.
Speaker Change: It's time, it's time to do something because there's a lot of pressure by boards and Ceos on the management team to.
Speaker Change: Show value from AI because.
Speaker Change: People think thats, where our potential and they are.
Speaker Change: A little tired of the experiments they want to see real value and I think that's where what I refer to as the first inning.
Speaker Change: Our customers are willing to invest real money and we obviously.
Speaker Change: Talk about some eight figure deals that were predominantly driven by.
Speaker Change: Adoption of box.
Speaker Change: Beyond just the initial scale.
Speaker Change: But.
Speaker Change: I don't think we can predict the pace other than to say with good confidence that it's accelerating.
Speaker Change: I would not call it an inflection point at least at this point because again.
Speaker Change: Got too many situations with customers.
Speaker Change: Adopted the voice box and so very very poor results to the point that they stopped using them because theyre noise customers and they created no value or negative value in terms of.
Speaker Change: Customer retention, so as much as we hear about the good stories I think we hear less about some very bad stories with AI.
Speaker Change: And thats whats, causing the market to be a little bit more cautious.
Speaker Change: What we did.
Speaker Change: And it was.
Speaker Change: The strategy, we talked to the market about more than a year ago that we are going to introduce AI first to our top accounts.
Speaker Change: And last quarter, we talked about.
Speaker Change: 90 of the Fortune 500 companies already have suddenly iPhone varian.
Speaker Change: So our strategy was let's start with the leaders in the market the largest brands in the world.
Speaker Change: Of course, many sectors, we know Abi in financial services, and insurance and healthcare and telco and retail.
Speaker Change: We've kind of targeted large accounts, which on one hand are obviously more difficult because there are large and complex.
Speaker Change: On the other hand once they.
Speaker Change: Adopt AI not only they can scale, but also the influence the rest of the market.
Speaker Change: So I think the more success stories, we can tell from our customers.
Speaker Change: And we will we be able to get more acceleration of adoption in the overall market.
Speaker Change: And we have our engaged customer conference coming up in September and in Orlando.
Speaker Change: And we are.
Speaker Change: Inviting many customers actually to tell their success stories to other customers. So it's not just very intending stories, but I.
Speaker Change: I think it's going to be one of the leading events in the industry in terms of what's really has been accomplished with AI beyond just the hype.
Speaker Change: Of what can be done, but what is working today and what value.
Speaker Change: It is bringing.
Speaker Change: Not just call technology, I think that this kind of progress shallow.
Speaker Change: It's going to accelerate.
Speaker Change: The adoption.
Speaker Change: But there's no there's no lack of.
Speaker Change: Interest from customers.
Speaker Change: Estimate.
Speaker Change: Context to say, let me tell you.
Speaker Change: Our AI story, there's definitely now interested in learning more.
Speaker Change: Great color. Thank you so much.
Speaker Change: Thank you one moment to the next question. The next question will be coming from the line of Peter Levine.
Speaker Change: Evercore Your line is open.
Peter Levine: Great. Thank you very much for taking my question, maybe I'll start grant.
Peter Levine: Can you maybe share with us kind of the conviction or confidence in the second half ramp for IRR, if I looked at.
Peter Levine: Your guidance I believe seven 768, plus or minus one so call it plus 8% exiting Q4.
Peter Levine: It looks like there is a significant ramp here in the second half. So maybe just walk us through the seasonality and then the conviction or confidence that you see today that will kind of help you hit those targets.
Peter Levine: Yes, sure Peter So as I mentioned, we.
Peter Levine: We came in accelerated growth here in the first quarter, 6%.
Peter Levine: We guided that $7 million to $10 million will go up to 720 in Q2 and the guidance and then the second half as well.
Peter Levine: Q3 will help to bridge that gap and ending with the 8% or 768, what we have out there in terms of again the IRR metrics.
Peter Levine: As.
Peter Levine: A signal of the overall growth rate, but at the end of the day.
Peter Levine: Combination of the new bookings as well as offset.
Peter Levine: Just overall attrition and Thats the driver of the growth within the overall growth to get to that 8% IRR.
Peter Levine: We only need 12% or so bookings and as Dan mentioned.
Peter Levine: That's total growth and as Dan mentioned, we see the pipeline.
Peter Levine: For our overall business the SaaS ACB rolling four quarter, it's up greater than 30% year over year. So we got off to a good start here in Q1 I would highlight that anytime you look at the Q4 to Q1 dynamics in terms of overall aggregate IRR Peter Weir.
Peter Levine: And then have the seasonality in the fourth quarter.
Peter Levine: Where usage over and above.
Peter Levine: Fixed contracts is higher and that tends to occur every fourth quarter and so we see some of that acceleration and as we look at the sequencing across the year looking at the pipeline looking at how we got off to a good start in the first quarter I think the combination of those.
Peter Levine: These things give us confidence that we're on track to that 8% just based on the factors.
Speaker Change: And I guess, if you can share are there any metrics that you can give us around even with your AI or AI.
Speaker Change: Sir your line of acronyms or AI.
Speaker Change: Sure.
Peter Levine: <unk>.
Peter Levine: Either on a subscription IRR.
Peter Levine: Or is there a metric you can share with us in terms of what adopt what upsells looked like at renewal would love to know what that looks like on the software side.
Peter Levine: Yes.
Peter Levine: Sure we have obviously a lot of metrics that we.
Peter Levine: Provided in the past and try to balance and actually some of the feedback Peter that we've gotten is that.
Peter Levine: We've provided to many in the past that often times that isn't as clear.
Peter Levine: The drivers of growth et cetera, so in order to be responsive right. We've tried to provide just that focus on the ones that are most important to us which is the aggregate measure of our total business will be the subscription IRR growth, which we highlighted and then let AI IRR.
Peter Levine: <unk> is really the measure.
Peter Levine: Our key driver of that growth, which will be the AI adoption.
Peter Levine: With the AI adoption and that metric growing 24% overall.
Peter Levine: You can imagine that's obviously, that's where we have the combination of very strong.
Peter Levine: New bookings.
Peter Levine: The customers are prioritizing their budgets around.
Peter Levine: And within that obviously, the Retentions are very high so aggregate business, we've seen actually improvements across last year in terms of each of the four quarters. The total IRR acceleration I can tell you that the grrr has improved.
Peter Levine: Each quarter throughout the course of the last year.
Peter Levine: Year as well.
Peter Levine: The signaling for the 8% IRR growth is obviously NRI.
Peter Levine: Well above the 100 Mark.
Peter Levine: Perfect and then maybe just one last one for Dan.
Speaker Change: Can talk much about macro maybe can you share with us kind of what you saw.
Peter Levine: Inspire maybe in the month of April even in May to just would love to hear some of your commentary from customers and how they're thinking about the environment moving forward. Obviously you are.
Peter Levine: Your report I think the numbers you gave us today indicate things.
Peter Levine: Things are looking pretty healthy, but we'd love to know was there any impact.
Peter Levine: Is there any impact to the guide, but just love to hear kind of what customers are saying in today's environment. Thank you.
Peter Levine: Yes, that's a good question obviously the results speak for a strong Q1.
Peter Levine: It's not just a.
Peter Levine: Reported results, but also the pipeline growth 30%.
Peter Levine: Presents strong demand, but if you're looking for extra color I would say that each and every conversation with a customer who is now focused on value.
Peter Levine: And that is measured in less than six months.
Peter Levine: So people are much less.
Peter Levine: Interested in that.
Peter Levine: Multiyear projects, where you move to the cloud and change your entire contact center infrastructure and it's going to take you two years and maybe than you are in the cloud so you're going to be getting some ROI.
Peter Levine: That is much less of an interest now.
Peter Levine: And it is shifting too.
Peter Levine: Discussions about value.
Peter Levine: And one of the things that we actually improved during Q1, given the focus on value is we improved the way we explained value to our customers. We came up with some clear metrics on.
Peter Levine: These are the things that we would measure for you after you deploy.
Peter Levine: Of course, you can measure many other things, but we're going to measure for you these metrics.
Peter Levine: And you'll be able to track.
Peter Levine: On a ongoing basis, how much value, creating based on this.
Peter Levine: Value value model.
Peter Levine: And I think that's been an increasingly important.
Peter Levine: Four questions too.
Peter Levine: To see that.
Peter Levine: There is a value model.
Peter Levine: Having said that they still in most cases started on a small scale.
Peter Levine: So even if they were.
Peter Levine: Firstly the powerpoints.
Peter Levine: And they looked at the value that's implicit value most in most cases, yes, we had some large deals but we had also many deals where.
Peter Levine: Just starting small and you mentioned in your prior question to ground something about extension upon renewal.
Peter Levine: We see AI.
Peter Levine: Investments.
Peter Levine: Disconnected from renewal because again it is not necessarily big deals.
Peter Levine: And.
Peter Levine: We encourage customers.
Peter Levine: There is no disruption with the hybrid cloud design that can just layer box on top of whatever they have they don't have to wait for renewals was variant.
Peter Levine: And they will start small and then upon renewal sometimes it just increase the scale.
Peter Levine: It's a good time when you renew a contract also to expand into into.
Peter Levine: The new the new AI areas, but its always based on first.
Peter Levine: Let me, let me prove that.
Peter Levine: The value that you show me on Powerpoint is actually something that.
Peter Levine: I'm seeing in my own environment.
Peter Levine: So I'm not saying it's completely new.
Peter Levine: We added last year as well, but.
Peter Levine: Perhaps this was because of.
Peter Levine: The overall macro in Q1, it was even more focus on.
Peter Levine: Value selling.
Peter Levine: Yes.
Peter Levine: Perfect I appreciate the color. Thank you very much.
Speaker Change: Thank you as a reminder, if you'd like to ask a question. Please press star one on your telephone.
Speaker Change: The next question and the next question will come from the line of Samad Samana of Jefferies. Your line is open.
Peter Levine: Hey, guys. This is Billy Fitzsimmons on for some Mod.
Speaker Change: Dan maybe for you as we think about the new AI IRR growth and disclosures and the acceleration in year over year bundled SaaS revenue.
Speaker Change: I don't want to get your view on how we should think about <unk> differentiation in the AI world, whether that's for agent assist tools text based chat bonds voice bots in the I think one of the quick questions right now is that <unk>.
Speaker Change: Large well funded software players are kind of investing in some seemingly in some similar opportunities whether thats transcription summarization chat bots IV ours, and we've also seen the emergence of some wells funded startups, who seem to be targeting a similar opportunity obviously <unk> been doing this a long time.
Speaker Change: Large installed base that get to voice data. So curious how we should think about differentiation and how the competitive landscape has maybe changed in recent quarters.
Speaker Change: Yes, good question.
Speaker Change: Look first affected.
Speaker Change: A lot of new players are attracted to this market is positive.
Speaker Change: It's positive because it's creating more demand in our markets.
Speaker Change: And.
Speaker Change: I believe that.
Speaker Change: Yes.
Speaker Change: The opportunity for customers to save.
Speaker Change: A lot of money by shifting their budgets from.
Speaker Change: Human workforce.
Speaker Change: AI is obviously, a very compelling opportunity for <unk>.
Speaker Change: Customers, but then there's going to be an increase in technology spend.
Speaker Change: And.
Speaker Change: <unk> is now going to take 100% market share.
Speaker Change: So.
Speaker Change: Sure.
Speaker Change: New entrants to the market is actually creating a more robust market and I think will accelerate adoption.
Speaker Change: And I believe as we see now 20%, 24% growth in AI and we are looking.
Speaker Change: Looking to have.
Speaker Change: More than 20% growth also as we exit the year.
Speaker Change: I will continue through the year to be the engine to get to the 8%.
Speaker Change: Totally era of growth.
Speaker Change: No.
Speaker Change: We've taken a good market share of what is now becoming a new market.
Speaker Change: And.
Speaker Change: I think we have very strong differentiation today, both against startups as well as against larger companies are showing cool demos, but quite frankly, we don't see.
Speaker Change: Reported outcomes from customers yet.
Speaker Change: So I can be talking with strong conviction about we are differentiated today, we are providing value to our customers today.
Speaker Change: I think your question is how are we going to maintain our differentiation over time.
Speaker Change: And it comes from.
Speaker Change: I would say three main.
Speaker Change: Areas one is.
Speaker Change: Debt.
Speaker Change: We are working with the leading.
Speaker Change: Brands in the world and they are pushing us pushing us really really hard.
Speaker Change: And there is nothing better for our company continue to innovate and to work was the most difficult customers in the world would push your heart.
Speaker Change: And.
Speaker Change: You can see that was the pace of innovation that we are showing over the last eight quarters since we introduced it.
Speaker Change: The new platform seven quarters ago.
Speaker Change: All right. It was the combination of three years into work and obviously two decades of experience.
Speaker Change: We launched seven quarters ago.
Speaker Change: No.
Speaker Change: With large customers that are reporting good outcomes and are continuing to push us to innovate.
Speaker Change: The second is that we havent flexed romantic view on.
Speaker Change: How to use AI in CX.
Speaker Change: It's not just about the.
Speaker Change: One point solution, one chat bot that does one thing.
Speaker Change: Because you need to orchestrate all of these different bots and humans to work together eventually.
Speaker Change: The more <unk> conversation when move to AI and a more complex conversation will remain we humans.
Speaker Change: And the need to maintain relationship in some industries, it's very important for our customers actually for humans to talk to humans, because thats how they.
Speaker Change: Retained relationship that's how the upsell.
Speaker Change: Insurance there is nothing to insurance companies will have more to talk to the customer when they call because it's an opportunity to show them some new products.
Speaker Change: The human workforce is not going anywhere there's going to be changes, but the way we.
Speaker Change: <unk> originally designed this platform with hybrid cloud a lot.
Speaker Change: Other customers too.
Speaker Change: Move forward with AI.
Speaker Change: Evolutionary way not throw away everything and start over again, which doesn't work.
Speaker Change: It's a big advantage and.
Speaker Change: Those startups just don't have the platform.
Speaker Change: And I think the third area that we.
Speaker Change: As designed in the platform that will maintain our differentiation is the fact that we have an open da Vinci AI.
Speaker Change: And in the same platform, we're running many many different AI model from many different vendors.
Speaker Change: As we open and we're taking the latest AI technology, and obviously training gets on data and embedding it into the into real solutions.
Speaker Change: Many of the startups just take one Jimmy I model from somewhere and they just use gen AI to develop something and its core, but it's not going to be.
Speaker Change: Best AI model flavor.
Speaker Change: The pace of change is.
Speaker Change: And we are future proofing, our investment for our customers by actually allowing them to use any lamps incorporates many different.
Speaker Change: Operator.
Speaker Change: Approaches and also brings the best clothes in the market and change them all the time.
Speaker Change: And different box required different AI models, it's not.
Speaker Change: More than 50 bots. Each one is designed to automate different workflow because there are many many different workflows not just chatbot.
Speaker Change: And we have all these different models living in one platform. So these are big advantages that are very core to the approach we have.
Speaker Change: And the end of the day, we are.
Speaker Change: The only 1 billion.
Speaker Change: <unk> place the exclamation company there are a lot of company.
Speaker Change: Turning to <unk> calculation as to what they do.
Speaker Change: But I think we have it at scale, that's all we do.
Speaker Change: And as we move forward, we expect that we'll continue to do better than others.
Speaker Change: Helpful. Thanks, Dan and maybe one for grant obviously, the AI AI <unk> metrics, a new metric you talked about it in the prepared remarks, but I wanted to double click because it's important. So first can you just recap for US what's included in that metric assuming its committed spend for your 50 plus bonds, but any other.
Speaker Change: Products.
Speaker Change: From our portfolio that are in that number that we should be aware of and then second I know you have minimum commitments for some remarks and then there's the potential for over two years from a customer usage or volume.
Speaker Change: Above expectation so does that AI IRR number just capture the committed minimum spend and there's actually potential for upside on the Rev line due to Overages one understand.
Speaker Change: How that kind of impact.
Speaker Change: <unk> the rep number.
Speaker Change: Sure. Thank you.
Speaker Change: So let me start with that definition right.
Speaker Change: Hi, <unk>.
Speaker Change: Is all of the.
Speaker Change: Yes.
Speaker Change: Are derived from our solution that include VII functionality, okay and it.
Speaker Change: Presents.
Speaker Change: Quarterly run rate value of both active or the newly signed SaaS agreements that we have at the end of the period. So it's that combination consistent with our subscription.
Speaker Change: But it's specifically segmenting that subscription IRR and looking at any solutions today include that AI functionality.
Speaker Change: Yeah.
Speaker Change: Now in terms of how we look at these solutions right in terms of the fixed. It does include both all of the fixed term agreements that we have.
Speaker Change: That's providing that.
Speaker Change: Our quarterly annualized run rate of those and then in a given quarter. If we do have Overages then it's going to go ahead and pick up that so usage related the bulbs.
Speaker Change: The fixed commitments, it's capturing that as well.
Speaker Change: Understood Super helpful. Thank you.
Speaker Change: Thank you one moment for the next question and the next question will be coming from the line of Timothy Horan of Oppenheimer. Your line is open.
Speaker Change: Timothy Horan of Oppenheimer. Your line is open.
Speaker Change: Thank you sorry, just missed that.
Speaker Change: Can you talk about which parts are working well and.
Speaker Change: Your analyst day in Orlando last September that Roy was amazing and punch the box like they were working well can you talk about just what's been the customer main reticent to adoption I mean, when they can save.
Speaker Change: 10 or $20 for every dollar of theirs, they're spending with you and.
Speaker Change: How are you overcoming that.
Speaker Change: Yeah.
Speaker Change: So I would say overall, we're getting very positive feedback from customers on all our box.
Speaker Change: And.
Speaker Change: Our box like with their sales channels.
Speaker Change: Thanks, John.
Speaker Change: Certain box more because they require very short sales cycles. So for example, we have.
Speaker Change: But what we call. The Ginnie bought this is a quick add on the customers can add to their business analytics solution.
Speaker Change: And what it does it kind of supercharge analysts.
Speaker Change: And immediately increased its capacity for those.
Speaker Change: Suddenly so it's a it's one that.
Speaker Change: I would say.
Speaker Change: Sales love it because it's so compelling and so easy.
Speaker Change: There are others that requires our customers to change human behavior, so they need to enable their employees and that takes.
Speaker Change: Some time.
Speaker Change: Sure.
Speaker Change: For example, our Copilots coaching box is one that.
Speaker Change: Well provides real time.
Speaker Change: Next best action suggestions to.
Speaker Change: Two agents that that box requires.
Speaker Change: Enable them and some some name.
Speaker Change: Users love it.
Speaker Change: Yes.
Speaker Change: Less because they feel like they already have the answers.
Speaker Change: There is.
Speaker Change: Another co pilots, which provides real time.
Speaker Change: <unk> scores to supervisor so during the call supervisors can get alerts on is the sentiment on the call going up or down.
Speaker Change: And they can see what are the sentiment is because of customer sentiment or increase in demand.
Speaker Change: Sometimes employee gets tired during the day and supervisor can just suggest hey, you should go on a coffee break for 15 minutes because youre tired.
Speaker Change: So they can they can in real time.
Speaker Change: React too.
Speaker Change: The changing sentiment during the call and obviously they laughed at so I would say that the reaction is overall very positive to all of them.
Speaker Change: But like any new technology that you introduced into.
Speaker Change: The workforce.
Speaker Change: Some customers have unions, they need to sell it into the union.
Speaker Change: A lot of complexity in changing.
Speaker Change: The market.
Speaker Change: From being 100% manual to automation.
Speaker Change: We're not part of the design of our platform as we did not underestimate this challenges.
Speaker Change: And I think Thats why.
Speaker Change: Overall, we have great.
Speaker Change: Customer reported outcomes because.
Speaker Change: We're not just showing a nice lift let them all we actually.
Speaker Change: We are encouraging our customers, let's go into production right away, let's skip the.
Speaker Change: Lab experiment and when you are in production.
Speaker Change: Youll find things like this and.
Speaker Change: I think we are.
Speaker Change: This objection to add very well and we will continue to improve will continue to improve because it's part of it's part of what the physician that the whole market next to it.
Speaker Change: It has to make and look we believe that eventually the AI, which is firstly it's.
Speaker Change: Inevitable, but it's also going to be good for the workforce.
Speaker Change: Because it provides a work for us opportunities to do.
Speaker Change: Better job.
Speaker Change: Really delight customers they can.
Speaker Change: Give the box the more mundane jobs in.
Speaker Change: Have more time to develop relationship and deal with more complex issue. So it's not that big.
Speaker Change: Creating negative impact was workforce, but it definitely we see from customers that they need to.
Speaker Change: Make those.
Speaker Change: Changes in behavioral changes in their workforce.
Speaker Change: And I think Thats part of why the industry is moving at the pace they are moving.
Speaker Change: It's not something we contributed a loss.
Speaker Change: And Glenn can you talk about working capital how should that trend over the next few years as you get a lot more a bundled SaaS and what levers can you pull to improve that.
Glenn: Yes sure.
Speaker Change: Way I would look at it right is.
Speaker Change: As our cash generation to the IRR grows 8% exiting this year.
Speaker Change: And we haven't modeled with revenue being very similar to the cash generation model that will that will generate.
Speaker Change: We won't have a lot of working capital burn right now.
Speaker Change: And as I've talked about before the cash Gen is going to drive the free cash flow growth that's throughout the whole model and the reason that we're providing this guidance in both ways, we know that.
Speaker Change: Mix of.
Speaker Change: Our bookings et cetera come in different than that could have a little difference impact on the revenue, but no change whatsoever on the free cash flow, that's where you get into some of the differences on working capital overall change in working capital, but right now.
Speaker Change: We are projecting the year to be similar between the two models.
Speaker Change: And again as I just point to the model going forward as the overall <unk> in cash Gen grows you will see the free cash flow grow continue to grow at a faster pace and double digit periods.
Speaker Change: Thank you.
Speaker Change: Thank you and that concludes today's Q&A session I would like to turn the call back over to Matthew Frankel for closing remarks. Please go ahead.
Speaker Change: Thank you Lisa and thank you everyone for joining us today as always please feel free to reach out with any questions. You have we look forward to speaking to you again soon.
Speaker Change: This does conclude today's conference call you may now disconnect.
Speaker Change: Okay.
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Speaker Change: Good.
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