Verint Systems, Inc. Q4 FY2025 earnings call

Key Points

• Strong AI momentum continued in Q4 with ARR growth of 5%, ahead of guidance. ARR growth accelerated every quarter in fiscal 2025 as customers expanded AI deployments.
• Key drivers of AI momentum:
  • Delivering strong and differentiated AI business outcomes (e.g., healthcare insurer saw 30-second call time reduction; telecom company saw 5% agent productivity increase).
  • Ability to deliver AI outcomes faster without disruption via hybrid cloud, allowing customers to start small, prove outcomes, and scale.
  • Customer AI seeding from prior years, with customers increasing consumption of bots over time.
• Q4 bookings were a record for SaaS ACV, driven by customers reporting strong AI outcomes and seeking hybrid cloud solutions. Examples of customers like a financial services company, telecom, and insurance company increasing ARR through AI deployments with hybrid cloud.
• Fiscal 2025 cash generation was $8 million ahead of guidance, and cash contribution was $16 million ahead of guidance, with cash contribution at $228 million, a 2% year-over-year increase.

In Q4, Verint's ARR was $712 million, up 5% year over year, ahead of the 4% guidance adjusted for divestiture. For fiscal 2026, the ARR outlook is raised to $768 million, representing 8% growth. Bundled SaaS revenue grew 17% year over year in fiscal 2025. SaaS ACV bookings from new deals in Q4 were $32 million, a 30% year-over-year growth, with prior quarters (Q1: 34%, Q2: 29%, Q3: 37%) also showing strong growth.

Forward-Looking Statements

• Raised ARR outlook for fiscal 2026 to $768 million, reflecting 8% growth.
• Guidance provided on a ratable basis for ARR, cash generation, and cash contribution with a narrow range of plus or minus 1%. Cash generation is targeted at $960 million with a range of plus or minus 1%.
• Revenue guidance for fiscal 2026 is $960 million with a range of plus or minus 3%. For Q1 2026, ARR year-over-year growth is expected to accelerate to 6%, and revenue is expected to be in the range of $190 million to $200 million.

Risks

• Forward-looking statements are based on current expectations and actual results could differ materially. Uncertainties in the timing and mix of unbundled SaaS revenue can impact revenue guidance as the mix of unbundled and bundled SaaS bookings is difficult to predict.

Q: How does the macro environment impact contact center spending and customer confidence in buying solutions?

A: Verint helps customers overcome AI paralysis by delivering strong and faster AI business outcomes. Customers are evolving from AI experiments to scale, with hybrid cloud allowing them to start small, prove outcomes, and scale. Examples like Fiserv using Verint QualityBot to automate compliance work show tangible benefits.

Q: Regarding FY26 guidance, are the $20 million in pushed unbundled revenues expected to close?

A: Deals are from existing customers with ongoing rollouts. ARR guidance is not impacted by unbundled mix as ARR is ratable. The mix of unbundled and bundled bookings doesn't affect ARR guidance, but revenue guidance accounts for the uncertainty in unbundled timing.

Q: Talk about channel mix and confidence in AI products.

A: Most channels are in a co-selling model relying on Verint's presales and product experts. Channel partners benefit from customer-reported AI outcomes. Verint expects channel contribution to grow as partners become more capable in selling AI solutions.

Q: Are the slipped deals US or internationally driven and competitive market share?

A: Slipped deals were from large US companies. Verint is gaining market share in CX automation by delivering strong AI outcomes via hybrid cloud, with top customers showing significant ARR growth, positioning Verint as a market leader in CX automation.