Verint Systems Inc.

Good day, and thank you for standing by, and welcome to the Variant Systems Inc. Q3 2022 Earnings Conference Call. At this time, our participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. Please be advised this call is being recorded. If you require any further assistance, please press star zero. We would now like to hand the conference over to your host today, Matthew Frankel. You may begin.

Thank you, operator. Good afternoon and thank you for joining our conference call today. I'm here with Dan Bodnar, Varon's CEO, Doug Robinson, Varon's CFO, and Alan Roden, Varon'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 Varon.com. Click on the Investor Relations tab and 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 on 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 of the date of this call and, as accepted as required by law, Barron assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion about these and other risks and uncertainties could cause variance actual results to differ materially from those indicated in these forward-looking statements, please see our Form 10-K for the fiscal year ended January 31st, 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 of our website at barron.com for a 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. Those 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 the momentum we experienced in the first half of the year continued in our third quarter. We had strong cloud revenue growth, strong new PLE booking growth, and overall revenue and diluted earnings per share coming in significantly ahead of our expectations. Looking ahead, We expect the momentum to continue in Q4 and are raising our annual guidance for non-GAAP revenue to $875 million at the midpoint of our range. We're also raising our annual guidance for both cloud revenue growth and new PLE booking growth. We believe our results and improved outlook reflect the differentiation of our cloud platform and our strong execution following the spin of our security business earlier this year. At the time of the spin, we provided three-year targets for our cloud-first strategy and accelerating growth. I'm pleased to report that we are tracking ahead of our three-year plan. We're introducing guidance for next year above our prior targets and also increasing our targets for fiscal 24. Let me start with our Q3 results and discuss what we believe is behind our strong cloud growth and booking momentum. In Q3, our cloud revenue grew 33% on a GAAP basis and 32% on a non-GAAP basis year over year. We expect our strong cloud revenue growth to continue in Q4. and we are raising our guidance for more than 35% for the year. We also had strong new booking growth on a PLE basis across new logos and existing customers with 21 large cloud orders, each in excess of $1 million TCV. New PLE bookings increased 14% year-over-year in Q3, and we are raising our outlook for the year to more than 15%. Our numerous multi-million cloud orders in Q3 included some of the more normal brands in the world, such as Costco, Disney, Goldman Sachs, and HP. Regarding new customers, I'm glad to report that during Q3, we added more than 100 new logos, including Western Digital, Blackstone, Eventbrite, Network Markets, and the Bank of Hawaii. Regarding existing customers, we had many expansions as a cloud platform strategy makes it easier and faster for customers to expand and benefit from our AI innovation. Overall, we had strong booking momentum and are pleased with the addition of many new customers. In Q3, we continue to innovate and introduce new capabilities in our cloud platform to help brands close the engagement capacity gap. For example, we recently announced new AI-driven real-time agent assist capabilities, including real-time sentiment analysis and a new highly accurate cloud transcription engine based on deep neural network models. We also introduced in our cloud platform new social messaging functionality that can be deployed together with intelligent virtual assistants to automate social messaging. Our cloud platform has an open multi-cloud architecture that enables us to deliver innovation at an accelerated pace. Our openness enables the platform to seamlessly fit with existing enterprise ecosystems. It provides customers out-of-the-box integrations with many communication infrastructure, enterprise data, and CRM vendors. This strategy of a truly open and agnostic platform is very attractive to both our customers and a growing set of partners. At the heart of our cloud platform is Varian DaVinci AI, which drives strong automation and customer ROI. Because the platform is also modular, brands are able to deploy our workforce engagement, digital first engagement, and experience management based on their business priorities to close the engagement capacity gap. Looking forward, we're pleased with the momentum we experienced throughout this year and are introducing guidance for next year, fiscal 23, above our prior targets. For fiscal 23, we now expect $935 million of total revenue, reflecting 7% growth, up from our prior target of 6%. We're also expecting 30% cloud revenue growth, driving cloud revenue to over $500 million, around 55% of our total revenue. As previously discussed, our shift to the cloud will positively impact cash flow, and we're expecting more than 20% growth in cash flow operations next year. Behind our improved growth outlook for fiscal 23 is our significant bookings momentum this year. As a reminder, since the beginning of fiscal 22, we have raised our outlook multiple times for new PLE booking growth, which is a leading indicator of future revenue growth. In addition, I would like to point out that we expect to finish the year with non-GAAP cloud revenue in Q4 of around $117 million, providing us with a solid starting point to achieve more than $500 million in cloud revenue next year. Turning to fiscal 24, We're now targeting 10% revenue growth, which will take us to $1 billion and $30 million of revenue up from previous target of high single digit growth. We're also raising our cloud revenue target for fiscal 24 to over $650 million with another year of 30% growth. I would like to take a minute to review our multi-year cloud journey. In fiscal 19, only around 20% of our total revenue came from the cloud. And we're now expecting around 55% next year and targeting around 65% in fiscal 24. Shifting our revenue mix to the cloud has had many benefits to variants, including more recurring revenue, better visibility, and improved economics over the customer lifetime. In summary, I'm very pleased with our significant progress on all fronts. Since the spin, we've posted three-quarters of strong results, executing ahead of our three-year plan, and we're now raising our targets again. Our AI-powered cloud platform is differentiated and delivers significant ROI to customers, and our open and partner-friendly strategy is resonating well in the market and we are adding many new customers. Finally, I would like to thank our employees for their hard work and dedication. We continue to hear from our employees that they like our strong customer-centric culture and our focus on customer engagement as a pure play company. Now let me turn the call over to Doug to provide more details on our Q3 results and outlook. Doug?