Dan Bodner: Yes. So in terms of the cost structure, the gross margin expansion is a function of a mix shift towards recurring. So that’s going to continue into next year. We expect Q3, if you look at our OpEx, it’s $102 million, that’s down from Q1 and Q2, and we expect to maintained that in Q4. Part of what’s working in the industry is the fact that the labor environment has cooled off — so we continue to hire talent, but we have selective hiring. And we also have a little bit of a mix shift towards geographies where there is low cost because Verint is a global company. And that’s a lever we’ve used before to manage our cost structure. And of course, the FX, the fact that we have a natural hedge regardless of what the currencies will do, we don’t have to deal with the FX headwind.
It’s a headwind to the top line, and that’s why we report constant currency, but it does not create a headwind on the bottom line. If you look at our last recession, 2008, we used all these levers, and we actually had huge growth in earnings this year because the top line didn’t drop as much as other companies, and we did manage the bottom line and we ended up with great margins. So I think we know how to manage our expenses and we have the ability to use fixed cost and variable cost. At the same time, so far, we think that we see a good pipeline for next year that supports our guidance. So things can get worse and obviously, we’ll prepare. And if needed, we know how to respond.
Peter Levine: With — on the cloud revenue side, can you share or quantify what your net retention rates look like? And I asked because you talk about the 60-40 split. But if I think about 60% net new logos, but if I think about the installed base, — what are you — are you assuming that you’re going to be able to better tap into your installed base, assuming the environment gets tough, right, it’s an easier to sell. So just curious to know, A, can you just quantify net retention rates and then kind of how are you positioning sales reps next year to maybe focus back more on those installed base sales? Thank you.
Dan Bodner: Yes, absolutely. So first, just to clarify, the 60% new is not only a new logo. It’s new logo and expansion from the base. So is anything new, any new business as opposed to conversions. And historically, we’re generating more than 90% every quarter, every year from our base. So large enterprise customers that continue to expand and buy and they need more technology. And we have very sticky solutions and they continue to expand. And now with the cloud platform, the time to value is actually faster. So we actually think it’s going to be easier for our customer base to expand relative to the on-prem environment. So what we kind of discussed historically is that our GRR, our gross retention rates are in the 90s and that NRR, net retention rates are over 100%.
We talked about reporting pure cloud metrics when we get to be more pure cloud company. So in some metrics like new SaaS ACV, we already have that in the dashboard. NRR to get you the specific numbers, they will come over time as we ready to report NRR. But the sales force of your question about the sales force and how we organized, we expect the vast majority of our revenue to come from the base. And when we get new customers, like we got 100 new logos today, and we mentioned some great names in these logos, but they start small. New logos will buy into our platform and then over time, they’ll expand with the platform. So we have very little reliance on new logos. Most of our new business come from the basic spending.
Peter Levine: Great. Thank you very much for taking my questions.
Operator: Our next question will come from the line of Samad Samana from Jefferies. Your line is open.
Samad Samana: Great. Thank you. Thanks for taking my question. Maybe first, just to understand the conversion mix expectation, how many of those customers have already signed up or committed to convert next year? And therefore, you have visibility into it. So like the contract is — I don’t know if the contract would be in or not, but how many have already said they are going to versus — of that 40%, how much do you have to actually go and convinced to convert? And just maybe help us understand that.
Dan Bodner: Yes. So all these customers have contractual vehicles with Verint, they’re not new, we don’t have to get into a new relationship. And many of these customers actually while they didn’t convert the legacy solutions to the cloud already bought some new applications in the Verint cloud. So they’re not necessarily a position that they just need to make a decision first time to test Verint in the cloud. Some decided that they see no rush. They like the varying solutions on-prem. It’s working. They don’t want to be disrupted. But new capabilities that we offer in the cloud, they start the journey with Verint in the cloud. So we have — the bottom line is we do have discussions with these customers, ongoing on their appetite for conversion.
This discussion with most of our customers the discussion started, not now, but a year ago. And many said not this year, maybe next year, maybe the next the year after. So it’s a journey. Customers need to go through their own internal decisions, because it’s affecting their IT organization, their security considerations. And obviously, they look at the ROI, what’s the best time from an ROI perspective to make the move. So I’m not suggesting that we have clear contraction commitments from customers on the date that they will convert, but we have a good sense of which ones are budgeting conversion into next year and which ones are only contemplating. And our assumption for next year is consistent with what we’ve done this year. So it’s not that we are trying to rely on some new dynamics in our base.
You could see that for the last few years, every year, there’s about $50 million or a little bit more than $50 million of maintenance revenue that is converting into the cloud. So it’s pretty consistent for next year.
Samad Samana: Great. Yes, just — that’s very helpful to get more clarity. And then just on the share buyback, you guys gave guidance for the share count for next year, but just maybe how should we think about the prioritization of capital management in terms of tuck-in M&A versus the buyback? Is there any level that we think about where you would prioritize one or over the other? Should we think about it being kind of balanced like you’ve been in the past? Just what’s the higher priority?
