• Revenue: $224 million, approximately 5% year-over-year growth, $14 million ahead of guidance.
• Gross Margin: Non-GAAP margin at 72%, up approximately 70 basis points year-over-year.
• Non-GAAP Diluted EPS: $0.54, approximately $0.11 ahead of guidance.
• Bundled SaaS Revenue Growth: Increased 19% year-over-year.
• Unbundled SaaS Revenue: $73 million, ahead of expectations.
• Full Year Revenue Guidance: $933 million, plus/minus 2%, reflecting over 5% growth.
• Full Year Non-GAAP Diluted EPS Guidance: $2.90 at the midpoint of revenue guidance.
• SaaS ARR Growth: Increased 11% year-over-year.
• Free Cash Flow Growth: 25% more year-to-date compared to last year, targeting over 30% growth for the full year.
• New SaaS ACV Bookings Growth: Increased 37% year-over-year in Q3.

• Warning! GuruFocus has detected 4 Warning Signs with VRNT.

Release Date: December 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Verint Systems Inc (NASDAQ:VRNT) reported Q3 revenue of $224 million, which was $14 million ahead of guidance, representing a 5% year-over-year growth.
• The company experienced strong SaaS momentum, with bundled SaaS revenue increasing by 19% year-over-year, driven by AI innovation.
• Gross margin expanded year-over-year, reflecting a favorable shift towards higher-margin recurring revenue.
• Verint Systems Inc (NASDAQ:VRNT) secured large contracts, including an $11 million order from a financial services company and a $7 million order from an insurance company, showcasing strong demand for their AI solutions.
• The company reported significant AI-driven business outcomes for customers, such as a top telecommunications company saving over $10 million annually using Verint's AI-powered solutions.

Negative Points

• The company faces competition from both point solution vendors and internal IT development efforts within enterprises, which could impact market share.
• There is a noted AI paralysis in the market due to noise and hype, which may slow down customer decision-making and adoption of AI solutions.
• Verint Systems Inc (NASDAQ:VRNT) acknowledged that some of their contracts allow customers to terminate at any time, which could lead to revenue uncertainty.
• The company expects minimal contribution from its new partnership with RingCentral in Q4, indicating that the partnership's financial impact may take time to materialize.
• Despite strong results, the company maintained its full-year guidance, suggesting potential challenges in achieving higher growth targets.

Q & A Highlights

Q: Dan, do you currently view Verint as gaining market share within the contact center arena, which you've indicated is ripe for the upcoming AI cycle? A: Yes, we believe we are leading the CX automation market and taking market share. We deliver CX automation platforms and report customer business outcomes that are unique. Our differentiation comes from our open platform, allowing customers to start small and expand as they see results. We compete well against point solution vendors and internal IT development efforts.

Q: Can you provide details on the recent tuck-in acquisition and its contribution to Verint? A: The acquisition involved a startup with strong AI technology, which we've integrated into our platform. While the company is small with about 10 customers, we recognized about $1 million in revenue from it in Q3, with potential for several million in Q4. The acquisition enhances our AI capabilities, particularly with the new CX EX scoring bot.

Q: Are you seeing any changes in customer seat counts and net spend due to AI adoption in contact centers? A: Yes, we see customers deploying AI to increase agent capacity. Some reduce workforce, while others use agents for deeper customer relationships. We have about 4 million agents using our software, generating $200 per agent annually. AI outcomes are accretive for Verint, as customers spend $1,200 per bot to replace agents, presenting a significant opportunity.

Q: Do you think sales cycles will improve in 2025 as customers better understand AI's role in contact centers? A: Yes, the initial AI excitement led to some paralysis, but as customers see peers achieving real AI business outcomes, they are more inclined to invest. Our hybrid cloud model allows them to deploy AI in existing ecosystems with minimal investment, which helps overcome hesitation and accelerates adoption.

Q: Can you discuss the new partnership with RingCentral and its potential impact? A: The partnership with RingCentral involves cloud-to-cloud integration, allowing them to offer Verint's capabilities to their customers. While it's early, we expect minimal contribution in Q4, but it will be a growth engine next year. This integration provides customers with seamless access to communication infrastructure and AI business outcomes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.