Verint Systems Inc.

S&P Global Ratings' stable outlook reflects our expectation that Verint will continue to generate solid free operating cash flow (FOCF) over the coming year and maintain leverage below 3x. We base the improved metrics on our expectations for steady demand in the customer engagement solutions segment and continued strength in the cyber intelligence segment, which can be volatile and subject to budgetary pressures facing government customers. We could raise the ratings on Verint if the company increases its scale significantly (aligning it more comparably with higher-rated peers) while maintaining S&P Global Ratings-adjusted leverage below 2.0x on a sustained basis. Although unlikely over the next 12 months, we could lower the rating on Verint if deteriorating operating performance or an aggressive

...Steady demand for higher-margin cloud-based customer engagement solutions should support gradual EBITDA margin improvement over the next three years. The increasing adoption of and demand for cloud-based customer experience solutions support our expectations for low-teens-percent growth in Verint's customer engagement segment (approximately 65% of total company revenues). Gartner considers customer service and support applications to be the fastest-growing application software market and predicts that by 2022, 70% of customer interactions will involve an emerging technology such as machine learning applications, chatbots, or mobile messaging, up from 15% in 2018. As enterprises pursue software solutions to automate and enhance the efficiency of their customer interactions (as opposed to increasing headcount, for example), Verint's investments in advancing its data capture, predictive analytics, and expertise in unstructured data should position it to meet these market tailwinds. Increasing...

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