Verint Systems Inc.

Good day, and thank you for standing by, and welcome to Variant Systems Inc. Q2 Fiscal 2022 Earnings Conference Call. At this time, our participants are on the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Matthew Frankel. Please go ahead.

Thank you, Operator, and good afternoon, and thank you for joining our conference call today. I'm here with Dan Bodnar, Barron's CEO, Doug Robinson, Barron's CFO, and Alan Roden, Barron's Chief Corporate Development Officer. Before getting started, I'd like to mention that accompanying our call today is a WebEx with slides. If you'd like to view these slides in real time during the call, please visit the IR section of our website at barron.com. Click on the Investor Relations tab, click on the webcast link, and select today's conference call. 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 of 1995 and other provisions of federal securities laws. These forward-looking statements are based on management's current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by these forward-looking statements. The forward-looking statements are made as the date of this call and, except as required by law, Verna sends no obligation to update or revise them. investors have cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of how these and other risks and uncertainties could cause Barron's actual results to differ materially from those indicated in these forward-looking statements, please see our Form 10-K for the fiscal year ended Jan 31, 2021, and other filings we make with the SEC. The financial measures discussed today include non-GAAP measures, as we believe investors focus on those measures in comparing results between periods and among our peer companies. Please see today's WebEx slides and earnings release in the investor relations section or our website at barron.com for reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from, as a substitute for, or superior to GAAP financial information, but is included because management believes it provides meaningful supplemental information regarding our operating results when assessing our business and is useful to investors for informational and comparative purposes. The non-GAAP financial measures the company uses have limitations and may differ from those used by other companies. Now, I'd like to turn the call over to Dan. Dan?

Thank you, Matt. I'm pleased to report a strong second quarter across all key cloud metrics, with both revenues and diluted EPS coming in ahead of our expectations. Since the completion of the Cognite spin at the beginning of the year, we've experienced strong cloud momentum and crossed the midpoint of our cloud transition. We expect our cloud momentum to continue in the second half of the year, and we're raising our annual outlook for both revenue and diluted EPS. We're also raising our annual outlook for new PLE bookings, which we believe is an important metric during a cloud transition. Let me start today's discussion with a review of our Q2 cloud KPIs. First, I'll review new PLE bookings growth and mix. To remind you, new perpetual license equivalent bookings normalizes the mix of perpetual and SAS bookings to compare bookings growth period over period. In Q2, new PLE came in strong with 17% year-over-year growth reflecting our continued strong bookings momentum. Also, the percentage of new PLE that came from SAS continued to increase. In Q2, 53% of our new PLE bookings came from SAS, up from 51% in Q1, representing the second quarter of crossing the midpoint of our cloud transition. In addition, I'm pleased to report 20 SaaS deals over $1 million PCV in Q2, an increase of 100% year over year. Overall, you can see on the slide, all of our bookings metrics came in strong in Q2. Looking at revenue, non-GAAP cloud revenue was also strong with 44% year over year growth. Later, I will discuss the relationship between booking growth in current periods and revenue growth in future periods. Behind our strong momentum is our strategy to drive automation in customer engagement across the enterprise with our open cloud platform. We believe that more and more, brands are embracing digital-first engagement and that we are uniquely positioned to help them with our open, partner-friendly, and infrastructure-agnostic cloud platform. I would like to briefly discuss our platform. It has been designed with an open multi-cloud architecture and provides our customers a unified engagement data hub and a broad set of AI and analytics engines. As the platform is completely open, customers are able to deploy our workforce engagement, digital engagement, and experience management solutions based on their business priorities. The platform is designed to help brands close the engagement capacity gap by reducing their operating costs while elevating the customer experience. To illustrate the value of our platform, I'm happy to share the results of a study performed by Forrester Consulting that examined the potential ROI and business benefits of our solutions. The study encompassed varying customers that handled 10 million interactions annually in the aggregate and found that on average, these customers achieved a payback period of under six months and a 400% return on their investment over four years. This ROI was achieved through a variety of improvements, including a 45% deflection of calls to less expensive channels, a 44% improvement in contact center efficiency, a 20% improvement in agent productivity, and an 8% reduction in employee turnover. To drive even more value for our customers, We continue to innovate our cloud platform, providing customers new functionality to power the workforce of people and bots, to embrace an enterprise-wide customer experience culture, and to harness data to drive more AI and analytics into their business. Another important differentiation of our cloud platform is the open design that makes it seamlessly fit with existing enterprise ecosystems. This is very important for our customers, and I would like to discuss three aspects of our open imperative. First, relative to communication infrastructure, including CCaaS, UCaaS, and CPaaS, Variant's platform is agnostic and enables our customers to quickly integrate with the vendor of their choice. We've recently seen some M&A activity among communication infrastructure vendors that combine these three infrastructure solutions into a single vendor. We believe this should benefit Variant as a pure-play enterprise application platform with an open infrastructure agnostic strategy. Second, many of our customers are using CRM solutions as a system of record for sales, marketing, and service functions. The Variant platform augments CRM solutions and will enable our customers to easily integrate data between Variant platform and their CRM systems. And third, for enterprise data and BI systems, we provide access to a wealth of engagement data managed by the Variant platform that can be easily shared with enterprise data lakes. Our open platform is driving wins of new logos as well as expansions with our customer base. Some of the new logos we won in the first half of the year include FedEx, Global Payments, Northern LifeLock, and Vodacom. Leading companies around the world select Variant because of our market-leading open cloud platform, broad customer ecosystem, and partner ecosystem, and our focus as a pure play customer engagement company. Variant is a broad customer base, and in Q2, we received multi-million dollar expansion orders as our customers continue to evolve their digital-first engagement strategies. As I mentioned earlier, in Q2, we had 20 SaaS orders with 50V greater than $1 million. Here are two examples of Q2 expansion deals. The first is a $3 million SaaS order we received from one of the world's largest financial services companies. This customer had applications for multiple vendors, including variants, and decided to consolidate their existing applications onto the Variant platform while expanding with additional functionality. Variant selection was driven by the value the customers saw in the Variant platform, delivering strong ROI and our ability to connect customer engagements across their contact centers and branches. The second expansion example is a $2 million order from a leading transportation company. This win was due to the best of brief functionality of our open platform and a strategy of working closely with partners. We are very pleased with our strong first half momentum and are raising our annual non-GAAP guidance as follows. For new PLE bookings, we are raising our growth outlook to 15% up from our initial guidance of 10%. For cloud revenue growth, we are raising our growth outlook to 35% up from our prior range of 30 to 35%. For revenue, we are raising our guidance to $872 million at the midpoint. And for diluted EPS, we are raising our guidance to $2.25. Doug will provide further details on our revised guidance shortly. We believe our strong performance this year positions us well for accelerated revenue growth going forward, which I will discuss next. In Q1, we provided three-year targets and explained why we expect our revenue growth to accelerate as we cross the midpoint of our cloud transition. Our three-year targets were based on an assumption for new PLE booking to grow at a 10% CAGR. We discussed that the 10% level over the three-year period is expected to drive higher revenue growth rates next year and the year after. With two quarters under our belt as a pure play customer engagement company, in which we overachieved the 10% level and built strong momentum, we now have increased confidence in our long-term targets. Overall, I'm very pleased with our first half results, the number of competitive wins we experienced, and the momentum we have going into the second half of the year. Now, let me turn the call over to Doug. Doug?