Verint moves to cloud offerings, but higher growth awaits (NASDAQ:VRNT)


Violeta Stoimenova

A quick take on Verint

Verint Systems (NASDAQ: VRNT) released its financial results for the first quarter of 2023 on June 7, 2022, beating expected revenue and EPS estimates.

The company provides customer and stakeholder engagement software to organizations around the world.

With total income growth is expected to remain modest, VRNT is not a high-growth pure cloud technology software stock, at least not yet.

I’m on hold for Verint at short notice.

Verint Overview

Verint, based in Melville, NY, was founded in 1994 and offers a suite of customer and stakeholder experience tools for organizations to improve their customer service and engagement capabilities.

The company is led by founder and CEO Dan Bodner. He became chairman of the company’s board of directors in 2017.

The company’s main offerings include:

  • Forecasting and planning

  • Quality and Compliance

  • Conversational AI

  • Orchestration of commitments

  • Experience Management

  • Information about interactions

  • real time work

  • Engagement Channels

  • Knowledge management

  • Fraud and Security Solutions

The company acquires customers through a direct sales model as well as through partner referrals, with customers typically starting with a subset of its offerings and then increasing the number of products they use over time. This is called the “land and expand” approach.

Verint Market and Competition

According to a recent market research report According to Mordor Intelligence, the customer engagement solutions market was estimated at $15.5 billion in 2020 and is expected to reach nearly $31 billion by 2026.

This represents a projected CAGR of 12.65% from 2021 to 2026.

The main drivers of this expected growth are the growing use of smartphones by customers and businesses’ desire to connect more frequently and meaningfully with prospects and customers in a more automated and cost-effective way.

In addition, retail and consumer goods sectors are expected to account for considerable market share of solution demand, while North America region is expected to maintain the highest market share by region, Asia region -Pacific expected to generate strong growth over the period.

Major competitors or other industry participants include:

  • Avaya (AVYA)

  • Appearance Software

  • Calabria

  • Genesys

  • IBM (IBM)

  • cool systems

  • Communications Shades

  • Open Text (OTEX)

  • Oracle (ORCL)

  • Pegasystems (PEGA)

Verint’s Recent Financial Performance

  • Total revenue per quarter has increased over the last 5 quarters as follows:

Total turnover over 5 quarters

Total turnover over 5 quarters (Looking for Alpha)

  • Gross margin by quarter followed a similar trajectory to total revenue:

Gross profit over 5 quarters

Gross profit over 5 quarters (Looking for Alpha)

  • Selling, G&A expenses as a percentage of total revenue per quarter have remained within a relatively narrow range in recent quarters:

Sales over 5 quarters, G&A % of turnover

Sales over 5 quarters, G&A % of turnover (Looking for Alpha)

  • Operating income by quarter has varied greatly over the last five quarters:

Operating result for the 5 quarters

Operating result for the 5 quarters (Looking for Alpha)

  • Earnings per share (diluted) has fluctuated in positive and negative territory over the past reporting periods:

5 quarters of earnings per share

5 quarters of earnings per share (Looking for Alpha)

(All data in the graphs above are in accordance with GAAP)

Over the past 12 months, VRNT stock price has risen 10.3% compared to the US S&P 500 index falling by around 11.8%, as shown in the chart below :

52 week stock prices

52 week stock prices (Looking for Alpha)

Valuation and other measures for Verint

Below is a table of relevant capitalization and valuation figures for the company:

Measure [TTM]


Enterprise Value / Sales


Revenue growth rate


Net profit margin




Market capitalization


Enterprise value


Operating cash flow


Earnings per share (fully diluted)


(Source – Alpha Research)

For reference, a relevant partial audience comparable would be Sprinklr (CXM); Below is a comparison of their main evaluation metrics:



Verint Systems


Net profit margin




Revenue growth rate




Operating cash flow




Enterprise Value / Sales




(Source – Alpha Research)

A full comparison of the two companies’ performance metrics can be viewed here.

The Rule of 40 is a software industry rule of thumb that states that as long as the combined revenue growth rate and EBITDA percentage rate are equal to or greater than 40%, the company is on a trajectory acceptable growth/EBITDA.

VRNT’s most recent GAAP Rule of 40 calculation was 18.2% in Q1 2023, so the company needs improvement in this regard, according to the table below:

Rule of 40 – GAAP


Recent Rev. Growth %






(Source – Alpha Research)

Comment on Verint

In its latest earnings call (Source – Seeking Alpha), covering Q1 2023 results, management highlighted growth in its SaaS business as the company continues its transition from on-premises legacy software to a subscription revenue and a cloud delivery model.

The company’ reservations mix continued to shift to the cloud with 58% of our new PLE [Perpetual License Equivalent] reservations from SaaS compared to 51% in the first quarter of the previous year.’

Additionally, the company added 26 cloud orders with a total contract value of more than $1 million, indicating strong adoption by large cloud customers of its platform.

Regarding its financial results, total revenue increased by 8.5% while non-GAAP EPS was $0.52, which is quite different from the GAAP EPS loss of $0.08.

Additionally, sales, G&A as a percentage of revenue increased markedly and operating profit fell sharply to just $1.2 million for the quarter. (GAAP figures)

Notably, management did not disclose the company’s net dollar retention rate for its subscription business, a glaring omission since it is an important metric for determining churn and the health of its cross-selling and marketing effectiveness.

On the balance sheet, the firm ended the quarter with cash, cash equivalents and short-term investments of $285.8 million and long-term debt of $407.4 million.

Over the past twelve months, VRNT generated free cash flow of $132 million.

Looking ahead, management said it was “tracking ahead of our three-year plan that we presented last year, and we are raising our full-year outlook for cloud revenue growth.”

Regarding valuation, the market values ​​VRNT at an EV/Sales multiple of around 4.3x.

The SaaS Capital Index of publicly traded SaaS software companies had an EV/Average Revenue multiple of approximately 7.7x as of July 31, 2022, as shown in the chart below:

SaaS Capital Index

SaaS Capital Index (SaaS Capital)

Thus, by comparison, VRNT is currently priced by the market at a discount to the SaaS Capital Index, at least as of July 31, 2022.

The main risk to the company’s outlook is a potential macroeconomic slowdown or recession, which could slow sales cycles and reduce its cloud revenue growth trajectory.

Additionally, Verint is one of many enterprise software companies looking to manage the transition from legacy on-premises software to the cloud.

An important factor is whether and to what extent the company can increase its total revenue rather than just converting existing customers to the cloud.

With total revenue growth expected to remain modest, VRNT is not a high-growth pure cloud technology software stock, at least not yet.

I’m on hold for Verint at short notice.


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