Verint Systems Inc.

The stable outlook reflects our expectation that the company will maintain solid operating performance and free cash flow generation over the next 12 months while sustaining adjusted leverage below 3.0x. We would consider lowering our ratings if operating performance unexpectedly declines, if adjusted debt to EBITDA remains above 3.0x, or if free operating cash flow to debt falls below 15%. This could occur in the following scenarios: As a result of a greater-than-expected impact from the coronavirus pandemic, loss of key clients, or declining market share due to competitive pressures or slower-than-expected improvement in cloud migration adoption; or Verint adopts a more-aggressive financial policy. Although unlikely over the next 12 months, we could raise the ratings on Verint if the

...Cloud-based solutions adoption supports solid revenue and gross profit growth and better earnings visibility. As expected, operating performance and earnings visibility improved nearly a year post-spin-off of Verint's cyber intelligence segment. The company grew its revenue 5.8% (approx. 79.7% of Q3 software revenue are recurring) and grew its gross profits 7.6% on a pro forma and GAAP basis in the 9-month period ended Oct. 31, 2021. This was primarily due to 48% growth in cloud-based service and modest growth in perpetual licenses; however, as expected, contributions from professional and support services were lower. Demand is being fueled by structural changes and business process transformation activities as banks, retail, telecommunications, and health care clients rethink and improve the operating performance of their customer service workforce in light of the pandemic. As a result, enterprise customers are investing in new technologies (digital projects and applications), artificial...

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