Shaul Eyal: Thank you. Good afternoon, guys. My first question is on your fiscal ’24 guidance. Dan. what’s the level of confidence you have in the current guidance given the macro environment? And I have a follow-up.
Dan Bodner: Yes. So I can give you a short answer which is basically our guidance. Our guidance is consistent with processes. But I think given the environment, it’s probably better to give a detailed answer, just to take you through our thinking. So let me just put this together. So first, we’re guiding for 25% to 30% SaaS revenue growth and that’s compared to 38% last year. And SaaS revenue growth is the critical metric in our guidance because it drives the recurring revenue growth, which in turn is driving the gross margin expansion and, of course, the opportunity to grow EPS faster than revenue. So let me focus first on why we think that 25% to 30% SaaS revenue guidance represents about $570 million SaaS revenue at the midpoint of our guidance.
And how do we plan to achieve it in the current environment? So first, the benefit of achieving SaaS maturity. And our SaaS offering is no longer in early stages. We already achieved scale in our SaaS operations and including adoption by some of the very large customers in the world that moved to SaaS with Verint. So we ended the year with $500 million SaaS ARR. So I think all that gives us confidence that our SaaS offering is very, very robust. Second, when we look back, and I see very strong SaaS momentum over the last few years, and I look at the sources of what drove this very fast growth. And the source of growth are not changing in the current environment and that’s basically conversion and expansion. So as Grant said before, 38% growth last year, 50% growth came from conversion and 23% came from expansion.
So we have very large conversion pipeline opportunities still ahead of us. We have many customers that converted, but we see a clear trend that customers are increasingly adopting SaaS. But we also see that we have a lot of customers that have not converted yet. So for the guidance this year compared to 15% growth last year, we’re dialing 10% to 15% growth this year. And then, the other source is new deals expansion and new logos. So that’s a 23% growth last year. We expect this to be lower, about 5%, 10% lower this year. And that’s consistent with the current environment assumptions. And the expansion comes from a very large customer base that continues to have many business needs. And we know that they will continue to expand in the Verint platform.
And also, we’ve brought to the company many new logos, 100 new logos every quarter, and of course, those are expected to grow over time. So that’s kind of the year. But now obviously, I’m going to focus on how we think about Q1 because this is an environment that changed very quickly. So Q1 guidance or the color that Grant provided is also important. And we’re looking to start the year strong. We expect the SaaS revenue in Q1 to grow in line with our annual guidance, so 25% to 30%. And based on the current pipeline, we also expect New SaaS ACV to grow double digits, in line with our annual guidance of 11%. And this result was strong Q1 recurring revenue, which is more predictable, of course. And we’re targeting $750 million of recurring revenue for the year, which is 10% growth, but Verint is a tale of two cities.
On one hand, we have $750 million, growing 10% and at the same time, we have $180 million of non-recurring revenue, which is declining. But the good news is it’s also becoming less relevant over time because it becomes very small. So during Q1, we expect a big drop in perpetual versus last year, almost $15 million non-recurring revenue drop year-over-year. And this is almost 6% impact on total revenue growth. But non-recurring revenue, we expect to be flat this year, $45 million every quarter, and that creates a tough compare at the beginning of the year, but more favorable later in H2. So kind to summarize, we see last year was 38% growth. We see the growth drivers intact. Our guidance is SaaS revenue is up 25% to 30% with margin expansion, and we believe that’s achievable.
Our Q1 guidance reflects strong SaaS growth with continued decline in perpetual. And finally, we introduced a new metric, $500 million of SaaS ARR metric, that’s up 25% year-over-year, and we expect to complete our SaaS transition next year. And that’s kind of the summary of our thinking of guidance.
Shaul Eyal: Got it. And then, my follow-up would be, you mentioned that some contracts came ahead of time versus some of that slipped. Why would these contracts come at an earlier timeframe? But is it budget flush, is it discount related? How would you characterize that specific phenomenon?
Dan Bodner: Yes. I don’t think it’s budget flush because our year-end at the end of January, so it’s mostly not aligning with customer budgets. I think it’s customers that just have needs and these are our needs that they have to satisfy. As opposed to conversion. We saw many of the slipped deals were actually conversions because in this case, customers already have the Verint product, it’s working, it’s operational, and they can take more time to keep the tier and decide to do conversion. They do want to convert to SaaS, that’s pretty much their direction. But they don’t feel the urgency that they feel if they need something new. So we really see, we saw conversions pushing out. We saw some expansions that came in somewhat smaller.
So the customer kind of put few phases into the expansion and awarded a little smaller than originally expected. At the same time, there were deals that customer decided to take earlier. And the new logos was very strong as well in Q4. So I think it’s a mix of different behaviors.
Operator: Our next question comes from the line of Peter Levine with Evercore. Your line is open.
