Verint® Systems Inc. (NASDAQ: VRNT), a
global leader in Actionable Intelligence® solutions and value-added
services, today announced results for the quarter ended April 30,
2011.
“Behind Verint’s success and leadership is a commitment to
innovation. Earlier this year, we introduced new innovative
solutions for the workforce optimization and security intelligence
markets, including the latest version of our Impact 360® Workforce
Optimization™ suite, our Voice-of-the-Customer platform, our
Situational Management solution and our Web Investigation solution.
Verint’s continued investment in innovation coupled with our strong
operating margins positions us well for future success and growth,”
said Dan Bodner, CEO and President of Verint Systems Inc.
Below is selected financial information for the three months
ended April 30, 2011 and 2010 prepared in accordance with generally
accepted accounting principles (“GAAP”) and not prepared in
accordance with GAAP (“non-GAAP”).
(Dollars in thousands, except per share data) Selected GAAP
Information Selected Non-GAAP Information Three Months Ended
April 30, Three Months Ended April 30, 2011 2010 2011
2010 Revenue $ 176,332 $ 172,613 $ 176,567 $ 172,613
Gross Profit 120,983 114,806 124,837 119,447 Gross Margin 68.6%
66.5% 70.7% 69.2% Operating Income (Loss) 18,834 (3,982)
39,517 42,279 Operating Margin 10.7% (2.3%) 22.4% 24.5%
Diluted Net (Loss) Income per Common Share Attributable to Verint
Systems Inc. $ (0.10) $ (0.60) $ 0.56 $ 0.57
Outlook for the Year Ending January 31,
2012
- We expect revenue to increase
approximately 8% compared to the year ended January 31, 2011.
- We are targeting a non-GAAP operating
margin in the low 20%.
Conference Call Information
We will be conducting a conference call today at 8:30 a.m. to
discuss our results for the first quarter and outlook for the year
ending January 31, 2012. An on-line, 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
1-888-680-0878 (United States) and 1-617-213-4855 (international)
and the passcode is 72480035. Please dial in 5-10 minutes prior to
the scheduled start time.
About Non-GAAP Financial Measures
This 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 these non-GAAP financial measures to the most
directly comparable financial measures prepared in accordance with
GAAP, please see Table 2 as well as "Supplemental Information About
Non-GAAP Financial Measures" at the end of this press release.
Because we do not predict special items that might occur in the
future, and our outlook is developed at a level of detail different
than that used to prepare GAAP financial measures, we are not
providing a reconciliation to GAAP of our forward-looking financial
measures for the year ending January 31, 2012.
About Verint Systems Inc.
Verint® Systems Inc. is a global leader in Actionable
Intelligence® solutions and value-added services. Our solutions
enable organizations of all sizes to make timely and effective
decisions to improve enterprise performance and make the world a
safer place. More than 10,000 organizations in over 150
countries—including over 85 percent of the Fortune 100—use Verint
Actionable Intelligence solutions to capture, distill, and analyze
complex and underused information sources, such as voice, video,
and unstructured text. Headquartered in Melville, New York, we
support our customers around the globe directly and with an
extensive network of selling and support partners. Visit us at our
website www.verint.com.
Cautions About Forward-Looking Statements
This 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 risks and uncertainties, any of which could cause actual
results to differ materially from those expressed in or implied by
the forward-looking statements. Some of the factors that could
cause actual future results or conditions to differ materially from
current expectations include: uncertainties regarding the impact of
general economic conditions, particularly in information technology
spending, on our business; 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
associated with keeping pace with technological changes and
evolving industry standards in our product offerings and with
successfully introducing new, quality products which meet customer
needs and achieve market acceptance; risks created by continued
consolidation of competitors or introduction of large competitors
in our markets with greater resources than we have; risks
associated with successfully competing for, consummating, and
implementing mergers and acquisitions, including risks associated
with capital constraints, post-acquisition integration activities,
and potential asset impairments; risks that 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 relating to our implementation and maintenance
of adequate systems and internal controls for our current and
future operations and reporting needs and related risks of
financial statement omissions, misstatements, restatements, or
filing delays; risks associated with being a consolidated,
controlled subsidiary of Comverse Technology, Inc. (“Comverse”) and
formerly part of Comverse’s consolidated tax group, including risks
of any future impact on us resulting from Comverse’s extended
filing delay or any other future issues; risks associated with
Comverse controlling our board of directors and the outcome of all
matters submitted for stockholder action, including the approval of
significant corporate transactions, such as certain equity
issuances or mergers and acquisitions, as well as speculation or
announcements regarding Comverse’s strategic plans; risks that
products may contain undetected defects which could expose us to
substantial liability; risks associated with allocating limited
financial and human resources to opportunities that may not come to
fruition or produce satisfactory returns; risks associated with
significant foreign and international operations, including
exposure to regions subject to political instability or
fluctuations in exchange rates; risks associated with complex and
changing local and foreign regulatory environments; risks
associated with our ability to recruit and retain qualified
personnel in geographies in which we operate; challenges in
accurately forecasting revenue and expenses and maintaining
profitability; risks relating to our ability to improve our
infrastructure to support growth; 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
associated with a significant amount of our business coming from
domestic and foreign government customers, including the ability to
maintain security clearances for certain projects; risks that we
improperly handle sensitive or confidential information or
perception of such mishandling; risks associated with our
dependence on a limited number of suppliers or original equipment
manufacturers (“OEMs”) for certain components of our products;
risks that we are unable to maintain and enhance relationships with
key resellers, partners, and systems integrators; risks that
contract terms may expose us to unlimited liability or other
unfavorable positions and risks that we may experience losses that
are not covered by insurance; risks that we will experience
liquidity or working capital issues and related risks that
financing sources will be unavailable to us on reasonable terms or
at all; risks associated with significant leverage resulting from
our current debt position; risks that we will be unable to comply
with the leverage ratio covenant under our credit facility; risks
that our credit rating could be downgraded or placed on a credit
watch; risks relating to timely implementation of new accounting
pronouncements or new interpretations of existing accounting
pronouncements and related risks of future restatements or filing
delays; risks associated with future regulatory actions or private
litigations relating to our extended filing delay and related
circumstances; and risks that use of our tax benefits may be
restricted or eliminated in the future. 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, 2011.
VERINT, the VERINT logo, ACTIONABLE INTELLIGENCE, POWERING
ACTIONABLE INTELLIGENCE, INTELLIGENCE IN ACTION, ACTIONABLE
INTELLIGENCE FOR A SMARTER WORKFORCE, VERINT VERIFIED, WITNESS
ACTIONABLE SOLUTIONS, STAR-GATE, RELIANT, VANTAGE, X-TRACT,
NEXTIVA, EDGEVR, ULTRA, AUDIOLOG, WITNESS, the WITNESS logo, IMPACT
360, the IMPACT 360 logo, IMPROVE EVERYTHING, EQUALITY,
CONTACTSTORE, EYRETEL, BLUE PUMPKIN SOFTWARE, BLUE PUMPKIN, the
BLUE PUMPKIN logo, EXAMETRIC and the EXAMETRIC logo, CLICK2STAFF,
STAFFSMART, AMAE SOFTWARE and the AMAE logo are trademarks and
registered trademarks of Verint Systems Inc. Other trademarks
mentioned are the property of their respective owners.
Table 1
Verint Systems Inc. and Subsidiaries
Condensed Consolidated Statements of
Operations
(Unaudited)
(In thousands, except per share data)
Three Months Ended April 30, 2011 2010
Revenue: Product $ 83,278 $ 92,070 Service and support
93,054 80,543
Total revenue
176,332 172,613 Cost
of revenue: Product 22,531 26,852 Service and support 30,168
28,722 Amortization of acquired technology 2,650
2,233
Total cost of revenue
55,349 57,807 Gross
profit 120,983 114,806
Operating expenses: Research and development, net
26,368 26,432 Selling, general and administrative 70,235 87,017
Amortization of other acquired intangible assets 5,546
5,339
Total operating expenses
102,149 118,788 Operating
income (loss) 18,834 (3,982
) Other income (expense), net Interest income 148 83
Interest expense (8,794 ) (5,948 ) Loss on extinguishment of debt
(8,136 ) - Other income (expense), net 1,012
(3,698 )
Total other expense, net (15,770
) (9,563 ) Income (loss) before
provision for income taxes 3,064 (13,545 )
Provision for income taxes 1,509 2,071
Net income (loss) 1,555 (15,616 ) Net
income attributable to noncontrolling interest 1,667
592
Net loss attributable to Verint Systems
Inc. (112 ) (16,208 ) Dividends on
preferred stock (3,549 ) (3,403 )
Net loss
attributable to Verint Systems Inc. common shares $
(3,661 ) $ (19,611 )
Net loss per common share attributable to Verint Systems
Inc. Basic $ (0.10 ) $
(0.60 ) Diluted $ (0.10 )
$ (0.60 ) Weighted-average common
shares outstanding Basic 37,392
32,663 Diluted 37,392
32,663
Table 2
Verint Systems Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP
Results
(Unaudited)
(In thousands, except per share data)
Three Months Ended April 30,
2011 2010
Table of
Reconciliation from GAAP Revenue to Non-GAAP Revenue
GAAP revenue $ 176,332 $ 172,613 Revenue adjustments related to
acquisitions 235 - Non-GAAP revenue $
176,567 $ 172,613
Table of
Reconciliation from GAAP Gross Profit to Non-GAAP Gross
Profit
GAAP gross profit $ 120,983 $ 114,806 Revenue adjustments
related to acquisitions 235 - Amortization of acquired technology
2,650 2,233 Stock-based compensation expenses 969
2,408 Non-GAAP gross profit $ 124,837 $
119,447
Table of
Reconciliation from GAAP Operating Income (Loss) to Non-GAAP
Operating Income
GAAP operating income (loss) $ 18,834 $ (3,982 ) Revenue
adjustments related to acquisitions 235 - Amortization of acquired
technology 2,650 2,233 Amortization of other acquired intangible
assets 5,546 5,339 Stock-based compensation expenses 7,550 17,969
Other adjustments 3,711 507 Expenses related to our filing delay
991 20,213 Non-GAAP operating income $
39,517 $ 42,279
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net $ (15,770 ) $ (9,563 ) Loss on
extinguishment of debt 8,136 - Unrealized (gains) losses on
derivatives, net 1,107 (3,967 ) Non-GAAP other
expense, net $ (6,527 ) $ (13,530 )
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes $ 1,509 $ 2,071 Non-cash tax
adjustments 2,120 1,091 Non-GAAP
provision for income taxes $ 3,629 $ 3,162
Table of
Reconciliation from GAAP Net Loss Attributable to Verint Systems
Inc. to Non-GAAP Net Income Attributable to Verint Systems
Inc.
GAAP net loss attributable to Verint Systems Inc. $ (112 ) $
(16,208 ) Revenue adjustments related to acquisitions 235 -
Amortization of acquired technology 2,650 2,233 Amortization of
other acquired intangible assets 5,546 5,339 Stock-based
compensation expenses 7,550 17,969 Other adjustments 3,711 507
Expenses related to our filing delay 991 20,213 Loss on
extinguishment of debt 8,136 - Unrealized (gains) losses on
derivatives, net 1,107 (3,967 ) Non-cash tax adjustments
(2,120 ) (1,091 ) Total GAAP net loss adjustments
27,806 41,203 Non-GAAP net income attributable
to Verint Systems Inc. $ 27,694 $ 24,995
Table of
Reconciliation from GAAP Net Loss Attributable to Verint Systems
Inc. Common Shares to Non-GAAP Net Income Attributable to Verint
Systems Inc. Common Shares
GAAP net loss attributable to Verint Systems Inc. common
shares $ (3,661 ) $ (19,611 ) Total GAAP net loss adjustments
27,806 41,203 Non-GAAP net income
attributable to Verint Systems Inc. common shares $ 24,145 $
21,592
Table Comparing GAAP
Diluted Net Loss 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 per common share attributable to
Verint Systems Inc. $ (0.10 ) $ (0.60 ) Non-GAAP diluted net
income per common share attributable to Verint Systems Inc. $ 0.56
$ 0.57 Shares used in computing GAAP diluted
net loss per common share (in thousands) 37,392
32,663 Shares used in computing non-GAAP
diluted net income per common share (in thousands) 49,553
43,946 Table 3 Verint Systems Inc. and
Subsidiaries Segment Revenue (Unaudited) (In thousands)
Three Months Ended April 30, 2011 2010 GAAP Revenue By
Segment Workforce Optimization Segment $ 97,271 $ 96,880
Video Intelligence Segment 30,034 31,545 Communications
Intelligence Segment 49,027 44,188 Total Video and
Communications Intelligence 79,061 75,733 GAAP Total
Revenue $ 176,332 $ 172,613 Revenue adjustments related to
acquisitions $ 235 $ - Non-GAAP Revenue By Segment Workforce
Optimization Segment $ 97,271 $ 96,880 Video Intelligence
Segment 30,269 31,545 Communications Intelligence Segment
49,027 44,188 Total Video and Communications Intelligence
79,296 75,733 Non-GAAP Total Revenue $ 176,567 $
172,613 Table 4 Verint Systems Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (Unaudited) (In thousands, except share
and per share data)
April 30,
January 31,
2011 2011
Assets Current Assets: Cash and cash
equivalents $ 179,358 $ 169,906 Restricted cash and bank time
deposits 12,305 13,639 Accounts receivable, net 137,553 150,769
Inventories 20,650 16,987 Deferred cost of revenue 5,500 6,269
Prepaid expenses and other current assets 45,157
44,374
Total current assets
400,523 401,944 Property and
equipment, net 24,297 23,176 Goodwill 757,463 738,674 Intangible
assets, net 155,554 157,071 Capitalized software development costs,
net 6,630 6,787 Long-term deferred cost of revenue 20,924 21,715
Other assets 32,776 26,760
Total
assets $ 1,398,167 $
1,376,127 Liabilities, Preferred Stock, and
Stockholders' Equity Current Liabilities: Accounts
payable $ 37,502 $ 36,861 Accrued expenses and other current
liabilities 147,646 163,029 Current maturities of long-term debt
4,500 - Deferred revenue 144,048 142,465 Liabilities to affiliates
1,951 1,847
Total current
liabilities 335,647 344,202
Long-term debt 592,500 583,234 Long-term deferred revenue
39,391 40,424 Other liabilities 43,821 45,038
Total liabilities 1,011,359
1,012,898 Preferred Stock - $0.001 par value;
authorized 2,500,000 shares. Series A convertible preferred stock;
293,000 shares issued and outstanding; aggregate liquidation
preference and redemption value of $341,918 at April 30, 2011.
285,542 285,542
Commitments and Contingencies Stockholders' Equity:
Common stock - $0.001 par value; authorized 120,000,000 shares.
Issued 38,579,000 and 37,349,000 shares, respectively; outstanding
38,305,000 and 37,089,000 shares, as of April 30, 2011 and January
31, 2011, respectively. 39 38 Additional paid-in capital 531,422
519,834 Treasury stock, at cost - 274,000 and 260,000 shares as of
April 30, 2011 and January 31, 2011, respectively. (7,141 ) (6,639
) Accumulated deficit (394,869 ) (394,757 ) Accumulated other
comprehensive loss (31,196 ) (42,069 )
Total
Verint Systems Inc. stockholders' equity 98,255
76,407 Noncontrolling interest 3,011
1,280
Total liabilities stockholders' equity
101,266 77,687 Total
liabilities, preferred stock, and stockholders' equity $
1,398,167 $ 1,376,127 Table 5
Verint Systems Inc. and Subsidiaries Condensed Consolidated
Statements of Cash Flows (Unaudited) (In thousands)
Three Months Ended April 30, 2011 2010
Cash flows from operating
activities: Net income (loss) $ 1,555 $ (15,616 )
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities: Depreciation and
amortization 12,954 11,898 Stock-based compensation 5,785 7,546
Non-cash losses on derivative financial instruments, net 1,933
1,703 Loss on extinguishment of debt 8,136 - Other non-cash items,
net 3,132 1,189
Changes in operating assets and liabilities, net
of effects of business combination: Accounts receivable 14,164
(13,787 ) Inventories (3,421 ) (488 ) Deferred cost of revenue
2,516 6,161 Prepaid expenses and other assets 1,178 1,501 Accounts
payable and accrued expenses (22,568 ) 14,959 Deferred revenue
(4,201 ) (18,476 ) Other, net (1,869 ) (1,110 )
Net cash provided by (used in) operating activities
19,294 (4,520 ) Cash
flows from investing activities: Cash paid for business
combination, net of cash acquired (11,958 ) (15,292 ) Purchases of
property and equipment (3,131 ) (1,878 ) Settlements of derivative
financial instruments not designated as hedges (826 ) (6,333 ) Cash
paid for capitalized software development costs (1,076 ) (462 )
Change in restricted cash and bank time deposits 1,543
205
Net cash used in investing
activities (15,448 ) (23,760
) Cash flows from financing activities:
Proceeds from borrowings, net of original issuance discount 597,000
- Repayments of borrowings and other financing obligations (583,362
) (580 ) Payment of debt issuance and other debt-related costs
(13,952 ) (897 ) Proceeds from exercises of stock options 5,122 -
Purchases of treasury stock (502 ) (3,312 ) Other financing
activities (1,804 ) -
Net cash provided by
(used in) financing activities 2,502
(4,789 ) Effect of exchange rate changes on
cash and cash equivalents 3,104
(1,863 ) Net increase (decrease) in cash and cash
equivalents 9,452 (34,932 ) Cash and
cash equivalents, beginning of period 169,906
184,335 Cash and cash equivalents,
end of period $ 179,358 $
149,403 Supplemental disclosures of cash
flow information: Cash paid for interest $ 13,027 $
3,538 Cash paid for income taxes, net of refunds received $
4,136 $ 1,525
Non-cash investing and financing
transactions: Accrued but unpaid purchases of property and
equipment $ 1,435 $ 495 Inventory transfers to
property and equipment $ 181 $ 77 Liabilities for
contingent consideration in business combinations $ 904 $
3,224 Stock options exercised, proceeds received subsequent
to period end $ 156 $ - Accrued but unpaid debt
issuance and other debt-related costs $ 999 $ -
Verint Systems Inc. and Subsidiaries
Supplemental Information About Non-GAAP
Financial Measures
This press release contains non-GAAP financial measures. Table 2
includes a reconciliation of each non-GAAP financial measure
presented in this press release to the most directly comparable
GAAP financial measure. Non-GAAP financial measures should not be
considered in isolation or as a substitute for 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.
We believe that the non-GAAP financial measures we present
provide meaningful supplemental information regarding our operating
results primarily because they exclude certain non-cash charges or
items that we do not believe are reflective of our ongoing
operating results when budgeting, planning and forecasting,
determining compensation, and when assessing the performance of our
business with our individual operating segments or our senior
management. We believe that these non-GAAP financial measures also
facilitate the comparison by management and investors of results
between periods and among our peer companies. However, those
companies may calculate similar non-GAAP financial measures
differently than we do, limiting their usefulness as comparative
measures.
Adjustments to Non-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 standalone basis. We
exclude these adjustments from our non-GAAP financial measures
because these are not reflective of our ongoing operations.
Amortization of acquired intangible assets, including acquired
technology. When we acquire an entity, we are required under GAAP
to record the fair value of the intangible assets of the acquired
entity and amortize it over their useful lives. We exclude the
amortization of acquired intangible assets, including acquired
technology, from our non-GAAP financial measures. These expenses
are excluded from our non-GAAP financial measures because they are
non-cash charges. In addition, these amounts are inconsistent in
amount and frequency and are significantly impacted by the timing
and size of acquisitions. Thus, we also exclude these amounts to
provide better comparability of pre- and post-acquisition operating
results.
Stock-based compensation expenses. We exclude stock-based
compensation expenses related to stock options, restricted stock
awards and units, and phantom stock from our non-GAAP financial
measures. These expenses are excluded from our non-GAAP financial
measures because they are primarily non-cash charges. In recent
periods, we also incurred significant cash-settled stock
compensation due to our extended filing delay and restrictions on
our ability to issue new shares of common stock to our
employees.
Other adjustments. We exclude from our non-GAAP financial
measures legal, other professional fees and certain other expenses
associated with acquisitions and certain extraordinary
transactions, in both cases, whether or not consummated. These
expenses are excluded from our non-GAAP financial measures because
we believe that they are not reflective of our ongoing
operations.
Expenses related to our filing delay. We exclude from our
non-GAAP financial measures expenses related to our restatement of
previously filed financial statements and our extended filing
delay. These expenses included professional fees and related
expenses, as well as expenses associated with a special cash
retention program. These expenses are excluded from our non-GAAP
financial measures because we believe that they are not reflective
of our ongoing operations.
Unrealized (gains) losses on derivatives, net. We exclude from
our non-GAAP financial measures unrealized gains and losses on
interest rate swaps and foreign currency derivatives. These gains
and losses are excluded from our non-GAAP financial measures
because they are non-cash transactions.
Loss on extinguishment of debt. We exclude from our non-GAAP
financial measures loss on extinguishment of debt attributable to
refinancing of our debt because we believe it is not reflective of
our ongoing operations.
Non-cash tax adjustments. Non-cash tax adjustments represent the
difference between the amount of taxes we actually paid and our
GAAP tax provision on an annual basis. On a quarterly basis, this
adjustment reflects our expected annual effective tax rate on a
cash basis.
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