Morningstar | Reacceleration in Cloud: Verint’s Cloud Growing 40% and ARR Passes $200 Million; Raising FVE to $52. See Updated Analyst Note from 27 Mar 2019
Strong growth in their cloud segment underlined a strong fiscal 2019 for Verint, pushing management to raise guidance for fiscal 2020. Cloud revenue reaccelerated, growing 40% year over year and crossing the $200 million annual recurring revenue, or ARR, threshold for the first time. Management expects the strong growth in cloud to continue in 2020 as 40% growth continues, driving cloud ARR past $250 million. The rise in cloud revenue is being driven mainly by new customers to Verint who are embracing the flexible cloud deployment model. Verint’s management team also disclosed that the $300 million in maintenance revenue could provide a long-term tailwind for the cloud business, as the conversion to cloud revenue would provide a twofold revenue uplift. The strong report propelled the stock up 8% in afterhours trading with shares passing $55 per share. We are raising our fair value estimate for no-moat, stable trend Verint to $52 from $47, due to the stronger than expected performance and outlook for the cloud segment.Total revenue came in at $1.3 billion, an 8% increase year over year. Fourth-quarter revenue came in at $330 million, a 9% increase sequentially. The fourth quarter was once again Verint’s strongest, making up 27% of 2019’s revenue. This is down 100 basis points from fiscal 2018, which could be an early indication that the strength in cloud is leading to more linearity in Verint’s revenue stream. Non-GAAP EPS of $3.21 exceeded management guidance due in part to gross margin expansion and cost control in selling, general, and administrative expenses.
Looking forward to fiscal 2020, Verint raised both top and bottom-line guidance by over 10%. Revenue guidance now has a midpoint of $1.37 billion while non-GAAP EPS for 2020 was raised $0.10 to $3.60. Management called out 10% revenue growth expectations for both customer engagement and cyber intelligence segments. This would be roughly in line with cyber intelligence’s year-over-year increase and an acceleration from the 5% year-over-year growth in customer engagement seen in fiscal 2019, driven by the mix shift toward cloud. First-quarter 2020 revenue is expected to be $315 million, which would be a smaller sequential drop than Verint has experienced in prior years.
Verint Systems is a provider of Actionable Intelligence? solutions. The company's segments include: Customer Engagement Solutions (Customer Engagement), which provides a portfolio across a spectrum of customer engagement functions; and Cyber Intelligence Solutions (Cyber Intelligence), which provides security and intelligence data mining software. The company's Customer Engagement products include: automated quality management, automated verification, branch surveillance and investigation, case management, chat engagement, coaching/learning, compliance recording, and customer communities. The company's Cyber Intelligence products include: cyber security, network intelligence suite, and situational intelligence.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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