Verint Systems, Inc. Q2 FY2025 earnings call

• AI momentum: New AI bookings increased over 40% YOY in Q2, Bundled SaaS revenue driven by AI grew 15% YOY (acceleration from 10% in Q1).
• Fiscal 2025 outlook: On-track to achieve guidance; Q2 revenue at $210 million within guidance range. Full-year guidance for 5% adjusted revenue growth, $2.90 non-GAAP diluted EPS, and 10% adjusted EBITDA growth maintained.
• Contact center AI opportunity: CX industry spends ~$2 trillion annually on labor costs; Verint addressing large TAM with differentiated open platform delivering tangible results.
• Customer examples: Healthcare customer expanded bot deployment from 300 to 30,000 agents, leading to $17 million annual agent capacity increase; insurance customer started AI journey with 5 bots for 600 agents, with growth opportunity as consumption expands.
• Platform differentiation: Verint Open Platform with Verint Da Vinci AI at core, enabling quick deployment of AI in existing ecosystems, avoiding disruptive rip and replace programs.

Non-GAAP revenue in Q2 was $210 million, a 3% year-over-year increase adjusted for divestiture. Bundled SaaS revenue grew 15% year-over-year, driven by AI adoption. Unbundled SaaS revenue was lower than expected due to deal timing but doesn't impact annual guidance. Non-GAAP gross margins were 71.2% in Q2, up 170 basis points year-over-year. Bundled SaaS revenue growth accelerated to 15% YOY, new Bundled SaaS ACV bookings from new deals increased 37% YOY, and SaaS term lengths on renewal contracts were about 20% longer than a year ago.

• Maintaining full-year guidance for 5% adjusted revenue growth, $2.90 non-GAAP diluted EPS, and 10% adjusted EBITDA growth.
• Targeting ~40% increase in free cash flow to ~$180 million for full-year.
• Announcing a new $200 million share buyback program over two years, with plan to use half of free cash flow for buybacks.

Forward-looking statements are subject to risks and uncertainties discussed in Verint's Form 10-K, 10-Q filings with the SEC, which could cause actual results to differ materially from forward-looking statements.

Q: About unbundled deals and customer churn/retention.

A: Unbundled SaaS revenue affected by deal timing; net new SaaS ARR add was strong, with new SaaS ACV in Q2 at $21.06 million. AI bookings and Bundled SaaS revenue growth, along with better retention, contributing to SaaS ARR improvement. Customer retention and churn: AI business outcomes driving adoption and positive retention trends.

Q: Competitive landscape and product use cases.

A: Competitive market, but Verint's 'Switzerland' approach (AI first, infrastructure later) attractive as customers seek AI outcomes now. Customers asking about new use cases like self-service improvement, agent co-pilots, fraud avoidance, etc.

Q: Bundled SaaS ACV mix and bot billing mechanics.

A: AI booking from new deals ahead of expectations, conversion down as customers adopt AI first. Bot billing: Minimum commits with option to increase commits via purchase orders instead of overages, allowing customers to easily scale consumption after validating AI outcomes.