Conference Call to Discuss Selected Financial Information and
Outlook to be Held Today at 4:30 p.m. ET
Verint® Systems Inc. (NASDAQ:VRNT), a
global leader in Actionable Intelligence® solutions and value-added
services, today announced results for the three and nine months
ended October 31, 2016.
Financial Highlights
Below is selected unaudited financial information for the three
and nine months ended October 31, 2016 prepared in accordance with
generally accepted accounting principles (“GAAP”) and not in
accordance with GAAP (“non-GAAP”).
Three Months Ended October 31, 2016 - GAAP
Three Months Ended October 31, 2016 - Non-GAAP
Revenue: $258.9 million(1) Revenue: $260.0 million(1)
Operating income: $5.5 million Operating income: $49.0 million
Diluted net loss per share: $(0.13) Diluted net income per share:
$0.59
Nine Months Ended October 31, 2016 - GAAP
Nine Months Ended October 31, 2016 - Non-GAAP Revenue:
$766.2 million(1) Revenue: $773.2 million(1) Operating loss: $(2.0)
million Operating income: $132.2 million Diluted net loss per
share: $(0.60) Diluted net income per share: $1.62 (1)
Please refer to Table 6 for constant currency revenue information,
and "Supplemental Information about Non-GAAP Financial Measures" at
the end of this press release for more information.
CEO Commentary
“Verint is an actionable intelligence leader in two markets,
Customer Engagement and Cyber Intelligence. In Customer Engagement,
we continue to focus our strategy across four pillars: expanding
our portfolio; delivering advanced analytics; offering deployment
flexibility; and, growing our partner network. We are pleased with
the progress we have made year-to-date on our strategy, and expect
our Customer Engagement business to achieve mid-single digit
non-GAAP revenue growth on a constant currency basis for the year,
and similar growth next fiscal year," said Dan Bodner, Verint CEO
and President.
“In Cyber Intelligence, we are pleased with our strong recent
order activity reflecting governments' need for sophisticated cyber
intelligence solutions to address pressing security threats. We
expect to finish the year with a strong fourth quarter and expect
mid-to-high single digit revenue growth on a constant currency
basis next year in Cyber Intelligence,” Bodner continued.
“This is the first quarter we are reporting as two segments and
we are taking steps to provide our two businesses greater agility
to extend market leadership in their respective markets,” concluded
Bodner.
Financial Outlook
Below is Verint's non-GAAP outlook for the year ending January
31, 2017.
- We expect total revenue to be $1.075
billion +/- 2.0% and diluted earnings per share to be approximately
$2.50 at the mid-point of our revenue guidance.
Below is Verint's non-GAAP preliminary outlook for the year
ending January 31, 2018.
- In Customer Engagement, we expect
mid-single digit revenue growth on a constant currency basis.
- In Cyber Intelligence, we expect
mid-to-high single digit revenue growth on a constant currency
basis.
- Overall, we expect our earnings to grow
slightly faster than revenue with some operating margin
improvement.
We are not providing a complete quantitative reconciliation of
our non-GAAP outlook to the corresponding GAAP information because
the GAAP measures that we exclude from our non-GAAP outlook are
uncertain and difficult to predict, and are therefore not available
without unreasonable effort. Moreover, because of these
uncertainties, we are only able to assess a range of the probable
significance for some but not all of these excluded GAAP
measures.
Our non-GAAP outlook for the year ending January 31, 2017
excludes the following GAAP measures which we are able to quantify
with reasonable certainty:
- Amortization of intangible assets -
approximately $80 million.
- Amortization of discount on convertible
notes - approximately $11 million.
Our non-GAAP outlook for the year ending January 31, 2017
excludes the following GAAP measures for which we are able to
provide a range of probable significance:
- Revenue adjustments related to
completed acquisitions - for the nine months ended October 31,
2016, revenue adjustments related to completed acquisitions were
approximately $7 million, and are expected to be between
approximately $7 million and $8 million for the year ending January
31, 2017.
- Stock-based compensation - for the nine
months ended October 31, 2016, stock-based compensation was
approximately $46 million, and is expected to be between
approximately $60 million and $65 million for the year ending
January 31, 2017, assuming market prices for our common stock
approximately consistent with current levels.
Our non-GAAP outlook does not include the potential impact of
any in-process business acquisitions that may close after the date
hereof, and, unless otherwise specified, reflects foreign currency
exchange rates approximately consistent with current rates.
We are unable to assess the probable significance of other GAAP
measures which are excluded from our non-GAAP outlook, including
the impact of future business acquisitions or acquisition expenses,
future restructuring expenses, and non-GAAP tax adjustments due to
the level of unpredictability and uncertainty associated with these
items. Actual amounts for these measures for the three and nine
months ended October 31, 2016 appear in Table 3 to this press
release.
Conference Call
Information
We will conduct a conference call today at 4:30 p.m. ET to
discuss our results for the three and nine months ended October 31,
2016 and outlook for the year ending January 31, 2017. An online,
real-time webcast of the conference call will be available on our
website at www.verint.com. The
conference call can also be accessed live via telephone at
1-844-309-0615 (United States and Canada) and 1-661-378-9462
(international) and the passcode is 26030570. Please dial in 5-10
minutes prior to the scheduled start time.
About Non-GAAP Financial MeasuresThis press release and
the accompanying tables include non-GAAP financial measures. For a
description of these non-GAAP financial measures, including the
reasons management uses each measure, and reconciliations of
non-GAAP financial measures presented for completed periods to the
most directly comparable financial measures prepared in accordance
with GAAP, please see Tables 2, 3 and 6 as well as "Supplemental
Information About Non-GAAP Financial Measures" at the end of this
press release.
About Verint Systems Inc.Verint® (Nasdaq: VRNT) is a
global leader in Actionable Intelligence® solutions with a focus on
customer engagement optimization, security intelligence, and fraud,
risk and compliance. Today, more than 10,000 organizations in
approximately 180 countries—including over 80 percent of the
Fortune 100—count on intelligence from Verint solutions to make
more informed, effective and timely decisions. Learn more about how
we’re creating A Smarter World with Actionable Intelligence® at
www.verint.com.
Cautions About Forward-Looking StatementsThis press
release contains forward-looking statements, including statements
regarding expectations, predictions, views, opportunities, plans,
strategies, beliefs, and statements of similar effect relating to
Verint Systems Inc. These forward-looking statements are not
guarantees of future performance and they are based on management's
expectations that involve a number of known and unknown risks,
uncertainties, assumptions, and other important factors, any of
which could cause our actual results or conditions to differ
materially from those expressed in or implied by the
forward-looking statements. Some of the factors that could cause
our actual results or conditions to differ materially from current
expectations include, among others: uncertainties regarding the
impact of general economic conditions in the United States and
abroad, particularly in information technology spending and
government budgets, on our business; risks associated with our
ability to keep pace with technological changes, evolving industry
standards, and customer challenges, such as the proliferation and
strengthening of encryption and the transition of portions of the
software market to the cloud, to adapt to changing market potential
from area to area within our markets, and to successfully develop,
launch, and drive demand for new, innovative, high-quality products
that meet or exceed customer needs, while simultaneously preserving
our legacy businesses; risks due to aggressive competition in all
of our markets, including with respect to maintaining margins and
sufficient levels of investment in our business; risks created by
the continued consolidation of our competitors or the introduction
of large competitors in our markets with greater resources than we
have; risks associated with our ability to successfully compete
for, consummate, and implement mergers and acquisitions, including
risks associated with valuations, capital constraints, costs and
expenses, maintaining profitability levels, expansion into new
areas, management distraction, post-acquisition integration
activities, and potential asset impairments; risks relating to our
ability to effectively and efficiently enhance our existing
operations and execute on our growth strategy and profitability
goals, including managing investments in our business and
operations, managing our cloud transition and our revenue mix, and
enhancing and securing our internal and external operations; risks
associated with our ability to effectively and efficiently allocate
limited financial and human resources to business, developmental,
strategic, or other opportunities, and risk that such investments
may not come to fruition or produce satisfactory returns; risks
that we may be unable to establish and maintain relationships with
key resellers, partners, and systems integrators; risks associated
with our reliance on third-party suppliers, partners, or original
equipment manufacturers (“OEMs”) for certain components, products,
or services, including companies that may compete with us or work
with our competitors; risks associated with the mishandling or
perceived mishandling of sensitive or confidential information and
with security vulnerabilities or lapses, including information
technology system breaches, failures, or disruptions; risks that
our products or services, or those of third-party suppliers,
partners, or OEMs which we incorporate into our offerings or
otherwise rely on, may contain defects or may be vulnerable to
cyber-attacks; risks associated with our significant international
operations, including, among others, in Israel, Europe, and Asia,
exposure to regions subject to political or economic instability,
and fluctuations in foreign exchange rates; risks associated with a
significant amount of our business coming from domestic and foreign
government customers, including the ability to maintain security
clearances for applicable projects; risks associated with complex
and changing local and foreign regulatory environments in the
jurisdictions in which we operate; risks associated with our
ability to retain and recruit qualified personnel in regions in
which we operate, including in new markets and growth areas we may
enter; challenges associated with selling sophisticated solutions,
including with respect to educating our customers on the benefits
of our solutions or assisting them in realizing such benefits;
challenges associated with pursuing larger sales opportunities,
including with respect to longer sales cycles, transaction
reductions, deferrals, or cancellations during the sales cycle,
risk of customer concentration, our ability to accurately forecast
when a sales opportunity will convert to an order, or to forecast
revenue and expenses, and increased volatility of our operating
results from period to period; risks that our intellectual property
rights may not be adequate to protect our business or assets or
that others may make claims on our intellectual property or claim
infringement on their intellectual property rights; risks that our
customers or partners delay or cancel orders or are unable to honor
contractual commitments due to liquidity issues, challenges in
their business, or otherwise; risks that we may experience
liquidity or working capital issues and related risks that
financing sources may be unavailable to us on reasonable terms or
at all; risks associated with significant leverage resulting from
our current debt position or our ability to incur additional debt,
including with respect to liquidity considerations, covenant
limitations and compliance, fluctuations in interest rates,
dilution considerations (with respect to our convertible notes),
and our ability to maintain our credit ratings; risks arising as a
result of contingent or other obligations or liabilities assumed in
our acquisition of our former parent company, Comverse Technology,
Inc. (“CTI”), or associated with formerly being consolidated with,
and part of a consolidated tax group with, CTI, or as a result of
CTI's former subsidiary, Xura, Inc. (formerly, Comverse, Inc.),
being unwilling or unable to provide us with certain indemnities or
transition services to which we are entitled; risks relating to the
adequacy of our existing infrastructure, systems, processes,
policies, procedures, and personnel and our ability to successfully
implement and maintain adequate systems and internal controls for
our current and future operations and reporting needs, including
related risks of financial statement omissions, misstatements,
restatements, or filing delays; and risks associated with changing
tax rates, tax laws and regulations, and the continuing
availability of expected tax benefits. We assume no obligation to
revise or update any forward-looking statement, except as otherwise
required by law. For a detailed discussion of these risk factors,
see our Annual Report on Form 10-K for the fiscal year ended
January 31, 2016, our Quarterly Report on Form 10-Q for the quarter
ended October 31, 2016, when filed, and other filings we make with
the SEC.
VERINT, ACTIONABLE INTELLIGENCE, MAKE BIG DATA ACTIONABLE,
CUSTOMER-INSPIRED EXCELLENCE, INTELLIGENCE IN ACTION, IMPACT 360,
WITNESS, VERINT VERIFIED, KANA, LAGAN, VOVICI, GMT, VICTRIO,
AUDIOLOG, CONTACT SOLUTIONS, OPINIONLAB, ENTERPRISE INTELLIGENCE
SOLUTIONS, SECURITY INTELLIGENCE SOLUTIONS, VOICE OF THE CUSTOMER
ANALYTICS, NEXTIVA, EDGEVR, RELIANT, VANTAGE, STAR-GATE, ENGAGE,
CYBERVISION, FOCALINFO, SUNTECH, and VIGIA are trademarks or
registered trademarks of Verint Systems Inc. or its subsidiaries.
Other trademarks mentioned are the property of their respective
owners.
Table 1
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Operations
(Unaudited)
Three Months EndedOctober 31, Nine
Months EndedOctober 31, (in thousands, except per share
data)
2016 2015 2016 2015
Revenue: Product $ 88,004 $ 115,573 $ 254,172 $ 340,139
Service and support 170,898 168,481 512,075
509,333
Total revenue 258,902
284,054 766,247 849,472
Cost of revenue: Product 29,499 34,982 82,455 111,756
Service and support 64,007 61,475 195,892 188,576 Amortization of
acquired technology 9,700 9,060 28,014 26,896
Total cost of revenue 103,206
105,517 306,361 327,228
Gross profit 155,696 178,537
459,886 522,244 Operating
expenses: Research and development, net 41,028 45,443 128,847
134,741 Selling, general and administrative 98,899 99,870 300,080
314,489 Amortization of other acquired intangible assets 10,244
10,896 32,976 32,366
Total operating
expenses 150,171 156,209
461,903 481,596 Operating income
(loss) 5,525 22,328 (2,017
) 40,648 Other income (expense), net:
Interest income 229 335 695 992 Interest expense (8,708 ) (8,467 )
(25,976 ) (25,365 ) Other expense, net (1,121 ) (4,175 ) (2,660 )
(7,715 )
Total other expense, net (9,600 )
(12,307 ) (27,941 ) (32,088
) (Loss) income before provision for income taxes
(4,075 ) 10,021 (29,958 )
8,560 Provision for income taxes 3,359 1,551
4,747 5,119
Net (loss) income (7,434
) 8,470 (34,705 ) 3,441 Net
income attributable to noncontrolling interest 803 836
2,693 3,308
Net (loss) income attributable
to Verint Systems Inc. $ (8,237 ) $
7,634 $ (37,398 ) $
133 Net (loss) income per common share
attributable to Verint Systems Inc.: Basic $
(0.13 ) $ 0.12 $
(0.60 ) $ 0.00 Diluted
$ (0.13 ) $ 0.12 $
(0.60 ) $ 0.00
Weighted-average common shares outstanding: Basic
62,895 62,206 62,602
61,666 Diluted 62,895
62,778 62,602 62,803
Table 2
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Segment Revenue
(Unaudited)
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2016 2015 2016
2015 GAAP Revenue By Segment: Customer Engagement $
172,757 $ 175,607 $ 519,010 $ 515,991 Cyber Intelligence 86,145
108,447 247,237 333,481
GAAP Total Revenue $
258,902 $ 284,054 $ 766,247
$ 849,472 Revenue Adjustments Related to
Acquisitions: Customer Engagement $ 1,103 $ 1,168 $ 6,610 $
2,477 Cyber Intelligence 24 122 300 851
Total Revenue
Adjustments Related to Acquisitions $ 1,127
$ 1,290 $ 6,910 $ 3,328
Non-GAAP Revenue By Segment: Customer Engagement $
173,860 $ 176,775 $ 525,620 $ 518,468 Cyber Intelligence 86,169
108,569 247,537 334,332
Non-GAAP Total Revenue $
260,029 $ 285,344 $ 773,157
$ 852,800
Table 3
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Results
(Unaudited)
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands, except per share data)
2016
2015 2016 2015
Table of
Reconciliation from GAAP Gross Profit to Non-GAAP Gross
Profit
GAAP gross profit $ 155,696
$ 178,537 $ 459,886
$ 522,244 GAAP gross margin 60.1
% 62.9 % 60.0 % 61.5
% Revenue adjustments related to acquisitions 1,127 1,290
6,910 3,328 Amortization of acquired technology 9,700 9,060 28,014
26,896 Stock-based compensation expenses 1,807 2,192 5,573 5,074
Acquisition expenses, net — (2 ) 2 121 Restructuring expenses 787
212 1,829 1,436 Impairment charge — — — 2,282 Other adjustments —
— — —
Non-GAAP gross profit
$ 169,117 $ 191,289
$ 502,214 $ 561,381
Non-GAAP gross margin 65.0 % 67.0
% 65.0 % 65.8 %
Table of
Reconciliation from GAAP Operating Income (Loss) to Non-GAAP
Operating Income
GAAP operating income (loss) $ 5,525
$ 22,328 $ (2,017
) $ 40,648 As a percentage of GAAP
revenue 2.1 % 7.9 % (0.3
)% 4.8 % Revenue adjustments related to
acquisitions 1,127 1,290 6,910 3,328 Amortization of acquired
technology 9,700 9,060 28,014 26,896 Amortization of other acquired
intangible assets 10,244 10,896 32,976 32,366 Stock-based
compensation expenses 13,954 16,424 45,682 50,257 Acquisition
expenses, net 3,480 (95 ) 8,063 6,520 Restructuring expenses 4,955
3,093 12,220 10,332 Impairment charge — — — 2,282 Other adjustments
58 175 401 861
Non-GAAP operating
income $ 49,043 $ 63,171
$ 132,249 $ 173,490
As a percentage of non-GAAP revenue 18.9
% 22.1 % 17.1 % 20.3
%
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net $ (9,600
) $ (12,307 ) $ (27,941
) $ (32,088 ) Unrealized losses (gains)
on derivatives, net 87 (126 ) 479 (1 ) Amortization of convertible
note discount 2,684 2,548 7,948 7,542 Acquisition expenses, net (30
) 1,460 56 1,620 Restructuring expenses (144 ) 153 219 295
Impairment charge — — 2,400 — Other adjustments — — —
—
Non-GAAP other expense, net(1)
$ (7,003 ) $ (8,272 )
$ (16,839 ) $ (22,632 )
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes $ 3,359
$ 1,551 $ 4,747
$ 5,119 GAAP effective income tax rate
(82.4 )% 15.5 % (15.8 )%
59.8 % Non-GAAP tax adjustments 665 3,248
5,895 7,878
Non-GAAP provision for income
taxes $ 4,024 $ 4,799
$ 10,642 $ 12,997
Non-GAAP effective income tax rate 9.6 %
8.7 % 9.2 % 8.6 %
Table of
Reconciliation from GAAP Net (Loss) Income Attributable to Verint
Systems Inc. to Non-GAAP Net Income Attributable to Verint Systems
Inc.
GAAP net (loss) income attributable to Verint Systems
Inc. $ (8,237 ) $ 7,634
$ (37,398 ) $ 133
Revenue adjustments related to acquisitions 1,127 1,290 6,910 3,328
Amortization of acquired technology 9,700 9,060 28,014 26,896
Amortization of other acquired intangible assets 10,244 10,896
32,976 32,366 Stock-based compensation expenses 13,954 16,424
45,682 50,257 Unrealized losses (gains) on derivatives, net 87 (126
) 479 (1 ) Amortization of convertible note discount 2,684 2,548
7,948 7,542 Acquisition expenses, net 3,450 1,365 8,119 8,140
Restructuring expenses 4,811 3,246 12,439 10,627 Impairment charge
— — 2,400 2,282 Other adjustments 58 175 401 861 Non-GAAP tax
adjustments (665 ) (3,248 ) (5,895 ) (7,878 ) Total GAAP net (loss)
income adjustments 45,450 41,630 139,473
134,420
Non-GAAP net income attributable to Verint
Systems Inc. $ 37,213 $
49,264 $ 102,075 $
134,553
Table Comparing
GAAP Diluted Net (Loss) Income Per Common Share Attributable to
Verint Systems Inc. to Non-GAAP Diluted Net Income Per Common Share
Attributable to Verint Systems Inc.
GAAP diluted net (loss) income per common share attributable
to Verint Systems Inc. $ (0.13 ) $ 0.12 $ (0.60 ) $ 0.00
Non-GAAP diluted net income per common share attributable to
Verint Systems Inc. $ 0.59 $ 0.78 $ 1.62 $
2.14
GAAP diluted weighted-average shares used in
computing net (loss) income per common share attributable to Verint
Systems Inc. 62,895 62,778 62,602
62,803 Additional weighted-average anti-dilutive shares
applicable to non-GAAP net income per common share attributable to
Verint Systems Inc. 355 — 385 —
Non-GAAP diluted weighted-average shares used in computing net
income per common share attributable to Verint Systems Inc.
63,250 62,778 62,987
62,803
Table of
Reconciliation from GAAP Net (Loss) Income Attributable to Verint
Systems Inc. to Adjusted EBITDA
GAAP net (loss) income attributable to Verint Systems
Inc. $ (8,237 ) $ 7,634
$ (37,398 ) $ 133 Net income
attributable to noncontrolling interest 803 836 2,693 3,308
Provision for income taxes 3,359 1,551 4,747 5,119 Other expense,
net 9,600 12,307 27,941 32,088 Depreciation and amortization(2)
27,566 26,290 83,007 77,138 Revenue adjustments related to
acquisitions 1,127 1,290 6,910 3,328 Stock-based compensation
expenses 13,954 16,424 45,682 50,257 Acquisition expenses, net
3,480 (95 ) 8,063 6,520 Restructuring expenses 4,289 2,978 11,550
10,184 Impairment charge — — — 2,282 Other adjustments 58
175 401 861
Adjusted EBITDA $
55,999 $ 69,390 $
153,596 $ 191,218
October 31, January 31, 2016 2016
Table of
Reconciliation from Gross Debt to Net Debt
Current maturities of long-term debt $ 4,709 $ 2,104
Long-term debt 742,067 735,983 Unamortized debt discounts and
issuance costs 63,816 73,055
Gross debt
810,592 811,142 Less: Cash and cash
equivalents 295,829 352,105 Restricted cash and bank time deposits
14,628 11,820 Short-term investments 10,318 55,982
Net debt $ 489,817 $
391,235 (1) For the three months ended October
31, 2016, non-GAAP other expense, net of $7.0 million was comprised
of $6.2 million of interest and other expense, and $0.8 million of
foreign exchange charges primarily related to balance sheet
translations. (2) Adjusted for financing fee amortization.
Table 4
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Unaudited)
October 31, January 31, (in thousands,
except share and per share data)
2016 2016
Assets Current Assets: Cash and cash equivalents $
295,829 $ 352,105 Restricted cash and bank time deposits 14,628
11,820 Short-term investments 10,318 55,982
Accounts receivable, net of allowance for
doubtful accounts of $1.9 million and $1.2
million, respectively
260,032 256,419 Inventories 20,392 18,312 Deferred cost of revenue
3,233 1,876 Prepaid expenses and other current assets 66,627
57,598
Total current assets 671,059
754,112 Property and equipment, net 77,551 68,904
Goodwill 1,197,557 1,207,176 Intangible assets, net 215,494 246,682
Capitalized software development costs, net 10,219 11,992 Long-term
deferred cost of revenue 10,462 13,117 Other assets 79,553
53,752
Total assets $ 2,261,895
$ 2,355,735 Liabilities and
Stockholders' Equity Current Liabilities: Accounts
payable $ 57,785 $ 65,447 Accrued expenses and other current
liabilities 203,128 209,071 Deferred revenue 144,787 167,912
Total current liabilities 405,700
442,430 Long-term debt 742,067 735,983 Long-term
deferred revenue 19,872 20,488 Other liabilities 98,178
88,670
Total liabilities 1,265,817
1,287,571 Commitments and Contingencies
Stockholders' Equity:
Preferred stock - $0.001 par value;
authorized 2,207,000 shares at October 31, 2016 and January
31, 2016, respectively; none issued.
— —
Common stock - $0.001 par value;
authorized 120,000,000 shares. Issued 64,027,000
and 62,614,000 shares; outstanding 62,679,000 and
62,266,000 shares at October 31, 2016 and January 31,
2016, respectively.
64 63 Additional paid-in capital 1,435,928 1,387,955
Treasury stock, at cost - 1,348,000 and
348,000 shares at October 31, 2016 and January 31,
2016, respectively.
(46,147 ) (10,251 ) Accumulated deficit (238,834 ) (201,436 )
Accumulated other comprehensive loss (165,816 ) (116,194 )
Total
Verint Systems Inc. stockholders' equity 985,195
1,060,137 Noncontrolling interest 10,883 8,027
Total stockholders' equity 996,078
1,068,164 Total liabilities and stockholders'
equity $ 2,261,895 $
2,355,735
Table 5
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
Nine Months EndedOctober 31, (in thousands)
2016 2015 Cash flows from operating
activities: Net (loss) income $ (34,705 ) $ 3,441
Adjustments to reconcile net (loss) income to net cash provided
by operating activities: Depreciation and amortization 85,411
79,469 Stock-based compensation, excluding cash-settled awards
45,547 50,099 Amortization of discount on convertible notes 7,948
7,542 Non-cash gains (losses) on derivative financial instruments,
net 693 (583 ) Other non-cash items, net 8,767 11,220
Changes in
operating assets and liabilities, net of effects of business
combinations: Accounts receivable 3,708 6,241 Inventories
(2,823 ) (2,138 ) Deferred cost of revenue 1,349 4,477 Prepaid
expenses and other assets (6,066 ) (5,462 ) Accounts payable and
accrued expenses (21,305 ) (16,722 ) Deferred revenue (21,749 )
(40,130 ) Other, net 4,914 (9,883 )
Net cash provided by
operating activities 71,689 87,571
Cash flows from investing activities: Cash paid for
business combinations, including adjustments, net of cash acquired
(72,269 ) (31,618 ) Purchases of property and equipment (20,611 )
(17,012 ) Purchases of investments (34,215 ) (90,689 ) Maturities
and sales of investments 79,930 30,985 Cash paid for capitalized
software development costs (1,730 ) (3,453 ) Change in restricted
cash and bank time deposits, including long-term portion, and other
investing activities, net (31,737 ) 16,843
Net cash used
in investing activities (80,632 ) (94,944
) Cash flows from financing activities:
Repayments of borrowings and other financing obligations (1,987 )
(260 ) Proceeds from exercises of stock options 1 229 Purchases of
treasury stock (35,896 ) — Payments of contingent consideration for
business combinations (financing portion) (3,231 ) (4,792 ) Other
financing activities (1,076 ) (239 )
Net cash used in financing
activities (42,189 ) (5,062 )
Effect of foreign currency exchange rate changes on cash and cash
equivalents (5,144 ) (377 )
Net decrease in cash and cash
equivalents (56,276 ) (12,812 )
Cash and cash equivalents, beginning of period
352,105 285,072 Cash and cash
equivalents, end of period $ 295,829
$ 272,260
Table 6
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Calculation of Change in Revenue on a
Constant Currency Basis
(Unaudited)
GAAP Revenue
Non-GAAP Revenue
Three Months Nine Months Three Months
Nine Months (in thousands, except percentages)
Ended Ended Ended Ended Total
Revenue Revenue for the three and nine months ended October 31,
2015 $ 284,054 $ 849,472 $ 285,344 $ 852,800 Revenue for the three
and nine months ended October 31, 2016 $ 258,902 $ 766,247 $
260,029 $ 773,157 Revenue for the three and nine months ended
October 31, 2016 at constant currency(1) $ 262,000 $ 774,000 $
263,000 $ 781,000 Reported period-over-period revenue change (8.9
)% (9.8 )% (8.9 )% (9.3 )% % impact from change in foreign currency
exchange rates 1.1 % 0.9 % 1.1 % 0.9 % Constant currency
period-over-period revenue change (7.8 )% (8.9 )% (7.8 )% (8.4 )%
Customer Engagement Revenue for the three and nine
months ended October 31, 2015 $ 175,607 $ 515,991 $ 176,775 $
518,468 Revenue for the three and nine months ended October 31,
2016 $ 172,757 $ 519,010 $ 173,860 $ 525,620 Revenue for the three
and nine months ended October 31, 2016 at constant currency(1) $
176,000 $ 526,000 $ 177,000 $ 533,000 Reported period-over-period
revenue change (1.6 )% 0.6 % (1.6 )% 1.4 % % impact from change in
foreign currency exchange rates 1.8 % 1.3 % 1.7 % 1.4 % Constant
currency period-over-period revenue growth 0.2 % 1.9 % 0.1 % 2.8 %
Cyber Intelligence Revenue for the three and nine
months ended October 31, 2015 $ 108,447 $ 333,481 $ 108,569 $
334,332 Revenue for the three and nine months ended October 31,
2016 $ 86,145 $ 247,237 $ 86,169 $ 247,537 Revenue for the three
and nine months ended October 31, 2016 at constant currency(1) $
86,000 $ 248,000 $ 86,000 $ 248,000 Reported period-over-period
revenue change (20.6 )% (25.9 )% (20.6 )% (26.0 )% % impact from
change in foreign currency exchange rates (0.1 )% 0.3 % (0.2 )% 0.2
% Constant currency period-over-period revenue change (20.7 )%
(25.6 )% (20.8 )% (25.8 )% (1) Revenue for the three and
nine months ended October 31, 2016 at constant currency is
calculated by translating current-period foreign currency revenue
into U.S. dollars using average foreign currency exchange rates for
the three and nine months ended October 31, 2015 rather than actual
current-period foreign currency exchange rates.
For further information see "Supplemental Information About
Constant Currency" at the end of this press release.
Verint Systems Inc. and Subsidiaries
Supplemental Information About Non-GAAP Financial
Measures
This press release contains non-GAAP financial measures,
consisting of non-GAAP revenue, non-GAAP gross profit and gross
margin, non-GAAP operating income and operating margin, non-GAAP
other income (expense), net, non-GAAP provision (benefit) for
income taxes and non-GAAP effective income tax rate, non-GAAP net
income attributable to Verint Systems Inc., non-GAAP net income per
common share attributable to Verint Systems Inc., adjusted EBITDA,
net debt, and constant currency measures. Tables 2 and 3 include a
reconciliation of each non-GAAP financial measure for completed
periods presented in this press release to the most directly
comparable GAAP financial measure.
We believe these non-GAAP financial measures, used in
conjunction with the corresponding GAAP measures, provide investors
with useful supplemental information about the financial
performance of our business by:
- facilitating the comparison of our
financial results and business trends between periods, including by
excluding certain items that either can vary significantly in
amount and frequency, are based upon subjective assumptions, or in
certain cases are unplanned for or difficult to forecast,
- facilitating the comparison of our
financial results and business trends with other technology
companies who publish similar non-GAAP measures, and
- allowing investors to see and
understand key supplementary metrics used by our management to run
our business, including for budgeting and forecasting, resource
allocation, and compensation matters.
We also make these non-GAAP financial measures available because
a number of our investors have informed us that they find this
supplemental information useful.
Non-GAAP financial measures should not be considered in
isolation as substitutes for, or superior to, comparable GAAP
financial measures. The non-GAAP financial measures we present have
limitations in that they do not reflect all of the amounts
associated with our results of operations as determined in
accordance with GAAP, and these non-GAAP financial measures should
only be used to evaluate our results of operations in conjunction
with the corresponding GAAP financial measures. These non-GAAP
financial measures do not represent discretionary cash available to
us to invest in the growth of our business, and we may in the
future incur expenses similar to or in addition to the adjustments
made in these non-GAAP financial measures. Other companies may
calculate similar non-GAAP financial measures differently than we
do, limiting their usefulness as comparative measures.
Our non-GAAP financial measures are calculated by making the
following adjustments to our GAAP financial measures:
Revenue adjustments related to acquisitions. We exclude from our
non-GAAP revenue the impact of fair value adjustments required
under GAAP relating to acquired customer support contracts, which
would have otherwise been recognized on a stand-alone basis. We
believe that it is useful for investors to understand the total
amount of revenue that we and the acquired company would have
recognized on a stand-alone basis under GAAP, absent the accounting
adjustment associated with the business acquisition. Our non-GAAP
revenue also reflects certain adjustments from aligning an acquired
company’s revenue recognition policies to our policies. We believe
that our non-GAAP revenue measure helps management and investors
understand our revenue trends and serves as a useful measure of
ongoing business performance.
Amortization of acquired technology and other acquired
intangible assets. When we acquire an entity, we are required under
GAAP to record the fair values of the intangible assets of the
acquired entity and amortize those assets over their useful lives.
We exclude the amortization of acquired intangible assets,
including acquired technology, from our non-GAAP financial measures
because they are inconsistent in amount and frequency and are
significantly impacted by the timing and size of acquisitions. We
also exclude these amounts to provide easier comparability of pre-
and post-acquisition operating results.
Stock-based compensation expenses. We exclude stock-based
compensation expenses related to restricted stock awards, stock
bonus programs, bonus share programs, and other stock-based awards
from our non-GAAP financial measures. We evaluate our performance
both with and without these measures because stock-based
compensation is typically a non-cash expense and can vary
significantly over time based on the timing, size and nature of
awards granted, and is influenced in part by certain factors which
are generally beyond our control, such as the volatility of the
price of our common stock. In addition, measurement of stock-based
compensation is subject to varying valuation methodologies and
subjective assumptions, and therefore we believe that excluding
stock-based compensation from our non-GAAP financial measures
allows for meaningful comparisons of our current operating results
to our historical operating results and to other companies in our
industry.
Unrealized gains and losses on certain derivatives, net. We
exclude from our non-GAAP financial measures unrealized gains and
losses on certain foreign currency derivatives which are not
designated as hedges under accounting guidance. We exclude
unrealized gains and losses on foreign currency derivatives that
serve as economic hedges against variability in the cash flows of
recognized assets or liabilities, or of forecasted transactions.
These contracts, if designated as hedges under accounting guidance,
would be considered “cash flow” hedges. These unrealized gains and
losses are excluded from our non-GAAP financial measures because
they are non-cash transactions which are highly variable from
period to period. Upon settlement of these foreign currency
derivatives, any realized gain or loss is included in our non-GAAP
financial measures.
Amortization of convertible note discount. Our non-GAAP
financial measures exclude the amortization of the imputed discount
on our convertible notes. Under GAAP, certain convertible debt
instruments that may be settled in cash upon conversion are
required to be bifurcated into separate liability (debt) and equity
(conversion option) components in a manner that reflects the
issuer’s assumed non-convertible debt borrowing rate. For GAAP
purposes, we are required to recognize imputed interest expense on
the difference between our assumed non-convertible debt borrowing
rate and the coupon rate on our $400.0 million of 1.50% convertible
notes. This difference is excluded from our non-GAAP financial
measures because we believe that this expense is based upon
subjective assumptions and does not reflect the cash cost of our
convertible debt.
Acquisition Expenses, net. In connection with acquisition
activity (including with respect to acquisitions that are not
consummated), we incur expenses, including legal, accounting, and
other professional fees, integration costs, changes in the fair
value of contingent consideration obligations, and other costs.
Integration costs may consist of information technology expenses as
systems are integrated across the combined entity, consulting
expenses, marketing expenses, and professional fees, as well as
non-cash charges to write-off or impair the value of redundant
assets. We exclude these expenses from our non-GAAP financial
measures because they are unpredictable, can vary based on the size
and complexity of each transaction, and are unrelated to our
continuing operations or to the continuing operations of the
acquired businesses.
Restructuring Expenses. We exclude restructuring expenses from
our non-GAAP financial measures, which include employee termination
costs, facility exit costs, certain professional fees, asset
impairment charges, and other costs directly associated with
resource realignments incurred in reaction to changing strategies
or business conditions. All of these costs can vary significantly
in amount and frequency based on the nature of the actions as well
as the changing needs of our business and we believe that excluding
them provides easier comparability of pre- and post-restructuring
operating results.
Impairment Charges and Other Adjustments. We exclude from our
non-GAAP financial measures asset impairment charges other than
those associated with restructuring or acquisition activity, rent
expense for redundant facilities, and gains or losses on sales of
property, all of which are unusual in nature and can vary
significantly in amount and frequency.
Non-GAAP income tax adjustments. We exclude our GAAP provision
(benefit) for income taxes from our non-GAAP measures of net income
attributable to Verint Systems Inc., and instead include a non-GAAP
provision for income taxes, determined by applying a non-GAAP
effective income tax rate to our income before provision for income
taxes, as adjusted for the non-GAAP items described above. The
non-GAAP effective income tax rate is generally based upon the
income taxes we expect to pay in the reporting year. We adjust our
non-GAAP effective income tax rate to exclude current-year tax
payments or refunds associated with prior-year income tax returns
and related amendments which were significantly delayed as a result
of our previous extended filing delay. Our GAAP effective income
tax rate can vary significantly from year to year as a result of
tax law changes, settlements with tax authorities, changes in the
geographic mix of earnings including acquisition activity, changes
in the projected realizability of deferred tax assets, and other
unusual or period-specific events, all of which can vary in size
and frequency. We believe that our non-GAAP effective income tax
rate removes much of this variability and facilitates
meaningful comparisons of operating results across periods.
Our non-GAAP effective income tax rate for the year ending January
31, 2017 is currently approximately 9%, and was 8.1% for the year
ended January 31, 2016. We evaluate our non-GAAP effective income
tax rate on an ongoing basis and it can change from time to time.
Our non-GAAP income tax rate can differ materially from our GAAP
effective income tax rate.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure defined as net income
(loss) before interest expense, interest income, income taxes,
depreciation expense, amortization expense, revenue adjustments
related to acquisitions, restructuring expenses, acquisition
expenses, and other expenses excluded from our non-GAAP financial
measures as described above. We believe that adjusted EBITDA is
also commonly used by investors to evaluate operating performance
between competitors because it helps reduce variability caused by
differences in capital structures, income taxes, stock-based
compensation accounting policies, and depreciation and amortization
policies. Adjusted EBITDA is also used by credit rating agencies,
lenders, and other parties to evaluate our creditworthiness.
Net Debt
Net Debt is a non-GAAP measure defined as the sum of long-term
and short-term debt on our consolidated balance sheet, excluding
unamortized discounts and issuance costs, less the sum of cash and
cash equivalents, restricted cash and bank time deposits, and
short-term investments. We use this non-GAAP financial measure to
help evaluate our capital structure, financial leverage, and our
ability to reduce debt and to fund investing and financing
activities, and believe that it provides useful information to
investors.
Supplemental Information About Constant
Currency
Because we operate on a global basis and transact business in
many currencies, fluctuations in foreign currency exchange rates
can affect our consolidated U.S. dollar operating results. To
facilitate the assessment of our performance excluding the effect
of foreign currency exchange rate fluctuations, we calculate our
GAAP and non-GAAP revenue, cost of revenue, and operating expenses
on both an as-reported basis and a constant currency basis,
allowing for comparison of results between periods as if foreign
currency exchange rates had remained constant. We perform our
constant currency calculations by translating current-period
foreign currency results into U.S. dollars using prior-period
average foreign currency exchange rates or hedge rates, as
applicable, rather than current period exchange rates. We believe
that constant currency measures, which exclude the impact of
changes in foreign currency exchange rates, facilitate the
assessment of underlying business trends.
Unless otherwise indicated, our financial outlook for revenue,
operating margin, and diluted earnings per share, which is provided
on a non-GAAP basis, reflects foreign currency exchange rates
approximately consistent with rates in effect when the outlook is
provided.
We also incur foreign exchange gains and losses resulting from
the revaluation and settlement of monetary assets and liabilities
that are denominated in currencies other than the entity’s
functional currency. We periodically report our historical non-GAAP
diluted net income per share both inclusive and exclusive of these
net foreign exchange gains or losses. Our financial outlook for
diluted earnings per share includes net foreign exchange gains or
losses incurred to date, if any, but does not include potential
future gains or losses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161207006260/en/
Investor RelationsVerint
Systems Inc.Alan Roden, 631-962-9304alan.roden@verint.com
Verint Systems (NASDAQ:VRNT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Verint Systems (NASDAQ:VRNT)
Historical Stock Chart
From Apr 2023 to Apr 2024