Is Verint Systems Stock A Buy After AI Achievements Fail To Impress?

Core Viewpoint - Verint Systems has shown promising growth in its AI-related business, but overall growth remains tepid, leading to a decline in stock price after the latest earnings report. This situation presents a potential buying opportunity for investors interested in the future of contact centers and customer service [1]. AI Business Growth - Verint's AI bookings increased over 40% year-over-year in Q2 - Bundled SaaS revenue driven by AI rose 15% year-over-year from $62.1 million to $71.6 million (GAAP) - SaaS renewal contracts have term lengths approximately 20% longer than the previous year - The company highlighted numerous customer success stories to demonstrate the effectiveness of its AI solutions [2]. Overall Business Performance - Verint reported no revenue growth year-over-year, with a 3% increase after adjusting for divestiture - Both recurring and non-recurring revenue lines remained essentially flat year-over-year - Gross profit saw a modest increase of 2.9% [3]. Profitability Metrics - Diluted EPS was $0.02 on a GAAP basis and $0.49 on a non-GAAP basis, compared to -$0.17 and $0.48 respectively a year ago - GAAP operating income was $13.87 million, up from a loss of $7.51 million a year ago - GAAP net income attributable to Verint was $5.53 million, compared to a loss of $6.0 million a year ago [4]. Cash Management and Buybacks - Verint announced a new $200 million stock buyback program, expected to be executed over two years - The company plans to allocate half of its free cash flow to stock repurchases - Stock-based compensation increased by 22.3% year-over-year to $41.8 million, potentially diluting the impact of buybacks [5]. Valuation Insights - A DCF model suggested an intrinsic value of $28.57 for Verint - The company currently trades at a price/sales ratio of 1.80, which is considered a discount - A private equity firm could potentially pay 3-4 times sales for Verint once its AI-driven business model gains momentum [6]. Competitive Landscape - Verint faces growing competition in the contact center software market, with many companies adopting AI-driven automation - The company believes its products are ahead of competitors due to its expertise in contact centers and effective AI integration - Verint's hybrid cloud design allows for faster AI deployment, which is a competitive advantage [7]. Future Guidance - Verint maintains its guidance for 5% year-over-year revenue growth after accounting for divestiture - The company aims for a non-GAAP diluted EPS of $2.90 and 10% EBITDA growth for the full year - An ambitious target is set for fiscal 2027, aiming for a combined revenue growth rate and profit margin of at least 40% [8]. Investment Outlook - The recent price setback is viewed as an opportunity to accumulate Verint stock - There is limited downside risk in the long term, although short-term challenges are anticipated due to seasonal factors and softening IT spending [9].