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 months and year
ended January 31, 2017.
Financial Highlights
Below is selected unaudited financial information for the three
months and year ended January 31, 2017 prepared in accordance with
generally accepted accounting principles (“GAAP”) and not in
accordance with GAAP (“non-GAAP”).
Three Months Ended January 31, 2017 - GAAP
Three Months Ended January 31, 2017 - Non-GAAP
Revenue: $295.9 million(1) Revenue: $299.5 million(1) Operating
income: $19.4 million Operating income: $72.4 million Diluted net
income per share: $0.13 Diluted net income per share: $0.90
Year Ended January 31, 2017 - GAAP Year Ended January 31,
2017 - Non-GAAP Revenue: $1,062.1 million(1) Revenue: $1,072.7
million(1) Operating income: $17.4 million Operating income: $204.6
million Net loss per share: $(0.47) Diluted net income per share:
$2.51
(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
"Our fourth quarter is typically our strongest quarter of the
year and we are pleased with our strong sequential and
year-over-year revenue increase in Q4 in both Customer Engagement
and Cyber Intelligence," said Dan Bodner, Verint CEO and
President.
"In Customer Engagement, fourth quarter revenue increased 8%
sequentially and 6% year-over-year on a constant currency basis. We
continue to expand our portfolio with a flexible hybrid cloud
deployment strategy. We are pleased with our progress and expect
our cloud revenue to increase more than 25%, driving mid-single
digit revenue growth in the current year for Customer Engagement,"
said Dan Bodner, Verint CEO and President.
"In Cyber Intelligence, fourth quarter revenue increased 26%
sequentially and 7% year-over year on a constant currency basis
reflecting a better global spending environment and increasing
demand for our cyber intelligence solutions. Our strong finish to
the year, and recent business activity, has contributed to our
improved outlook of high-single digit revenue growth in the current
year for Cyber Intelligence," concluded Bodner.
Financial Outlook
Below is Verint's non-GAAP outlook for the year ending January
31, 2018.
- We expect revenue as follows:
- In our Customer Engagement segment, we
expect mid-single digit revenue growth.
- In our Cyber Intelligence segment, we
expect high-single digit revenue growth.
- Based on the above, we expect total
revenue of $1.14 billion with a range of +/- 2% and diluted
earnings per share of $2.70 at the midpoint.
Our non-GAAP outlook for the year ending January 31, 2018
excludes the following GAAP measures which we are able to quantify
with reasonable certainty:
- Amortization of intangible assets of
approximately $68 million.
- Amortization of discount on convertible
notes of approximately $11 million.
Our non-GAAP outlook for the year ending January 31, 2018
excludes the following GAAP measures for which we are able to
provide a range of probable significance:
- Revenue adjustments related to
completed acquisitions are expected to be between approximately $9
million and $12 million for the year ending January 31, 2018.
- Stock-based compensation is expected to
be between approximately $60 million and $70 million for the year
ending January 31, 2018, 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 months and
year ended January 31, 2017 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 months and year ended January 31,
2017 and outlook for the year ending January 31, 2018. 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 88328037. 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 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, over 10,000 organizations in more than 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 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 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 and
migrating away from areas of commoditization; 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,
fluctuations in foreign exchange rates, and challenges associated
with a significant portion of our cash being held overseas; 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 and
reputational risks associated with our security solutions; risks
associated with complex and changing local and foreign regulatory
environments in the jurisdictions in which we operate, including,
among others, with respect to privacy, information security, trade
compliance, anti-corruption, and regulations related to our
security solutions; 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
enhancements to the foregoing and 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 accounting principles, 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, 2017, 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, ADTECH, CUSTOMER
ENGAGEMENT SOLUTIONS, CYBER 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
Consolidated Statements of
Operations
(Unaudited)
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands, except per share data)
2017
2016 2017 2016 Revenue: Product
$ 124,332 $ 115,267 $ 378,504 $ 455,406 Service and support 171,527
165,527 683,602 674,860
Total
revenue 295,859 280,794
1,062,106 1,130,266 Cost of
revenue: Product 40,824 33,315 123,279 145,071 Service and
support 66,086 59,485 261,978 248,061 Amortization of acquired
technology 9,358 8,878 37,372 35,774
Total cost of revenue 116,268 101,678
422,629 428,906 Gross
profit 179,591 179,116
639,477 701,360 Operating
expenses: Research and development, net 42,223 42,909 171,070
177,650 Selling, general and administrative 106,872 98,239 406,952
412,728 Amortization of other acquired intangible assets 11,113
10,764 44,089 43,130
Total operating
expenses 160,208 151,912
622,111 633,508 Operating income
19,383 27,204 17,366
67,852 Other income (expense), net: Interest
income 353 498 1,048 1,490 Interest expense (8,986 ) (8,520 )
(34,962 ) (33,885 ) Other expense, net (4,266 ) (4,562 ) (6,926 )
(12,277 )
Total other expense, net (12,899 )
(12,584 ) (40,840 ) (44,672
) Income (loss) before (benefit) provision for income
taxes 6,484 14,620 (23,474 )
23,180 (Benefit) provision for income taxes (1,975 )
(4,167 ) 2,772 952
Net income (loss)
8,459 18,787 (26,246 ) 22,228
Net income attributable to noncontrolling interest 441 1,282
3,134 4,590
Net income (loss) attributable
to Verint Systems Inc. $ 8,018 $
17,505 $ (29,380 ) $
17,638 Net income (loss) per common share
attributable to Verint Systems Inc.: Basic $
0.13 $ 0.28 $
(0.47 ) $ 0.29 Diluted
$ 0.13 $ 0.28 $
(0.47 ) $ 0.28
Weighted-average common shares outstanding: Basic
62,558 62,260 62,593
61,813 Diluted 63,207
62,900 62,593 62,921
Table 2
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Segment Revenue
(Unaudited)
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2017 2016 2017
2016 GAAP Revenue By Segment: Customer Engagement $
186,887 $ 178,866 $ 705,897 $ 694,857 Cyber Intelligence 108,972
101,928 356,209 435,409
GAAP Total
Revenue $ 295,859 $ 280,794
$ 1,062,106 $ 1,130,266
Revenue Adjustments Related to Acquisitions: Customer
Engagement $ 3,656 $ 964 $ 10,266 $ 3,441 Cyber Intelligence 24
83 324 934
Total Revenue Adjustments
Related to Acquisitions $ 3,680 $
1,047 $ 10,590 $
4,375 Non-GAAP Revenue By Segment: Customer
Engagement $ 190,543 $ 179,830 $ 716,163 $ 698,298 Cyber
Intelligence 108,996 102,011 356,533 436,343
Non-GAAP Total Revenue $ 299,539
$ 281,841 $ 1,072,696
$ 1,134,641
Table 3
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Results
(Unaudited)
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands, except per share data)
2017
2016 2017 2016
Table of
Reconciliation from GAAP Gross Profit to Non-GAAP Gross
Profit
GAAP gross profit $ 179,591
$ 179,116 $ 639,477
$ 701,360 GAAP gross margin 60.7
% 63.8 % 60.2 % 62.1
% Revenue adjustments related to acquisitions 3,680 1,047
10,590 4,375 Amortization of acquired technology 9,358 8,878 37,372
35,774 Stock-based compensation expenses 3,014 2,111 8,587 7,185
Acquisition expenses, net — (3 ) 2 118 Restructuring expenses 460
1,566 2,289 3,002 Impairment charges — 923 —
3,205
Non-GAAP gross profit $ 196,103
$ 193,638 $ 698,317
$ 755,019 Non-GAAP gross margin
65.5 % 68.7 % 65.1 %
66.5 %
Table of
Reconciliation from GAAP Operating Income to Non-GAAP Operating
Income
GAAP operating income $ 19,383
$ 27,204 $ 17,366
$ 67,852 As a percentage of GAAP
revenue 6.6 % 9.7 % 1.6
% 6.0 % Revenue adjustments related to
acquisitions 3,680 1,047 10,590 4,375 Amortization of acquired
technology 9,358 8,878 37,372 35,774 Amortization of other acquired
intangible assets 11,113 10,764 44,089 43,130 Stock-based
compensation expenses 19,926 14,292 65,608 64,549 Acquisition
expenses, net 4,824 493 12,887 7,013 Restructuring expenses 3,523
6,993 15,743 17,325 Impairment charges — 923 — 3,205 Other
adjustments 568 130 969 991
Non-GAAP
operating income $ 72,375 $
70,724 $ 204,624 $
244,214
As a percentage of non-GAAP
revenue
24.2
% 25.1 % 19.1 % 21.5
%
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net $ (12,899
) $ (12,584 ) $ (40,840
) $ (44,672 ) Unrealized losses (gains)
on derivatives, net 79 (2 ) 558 (3 ) Amortization of convertible
note discount 2,720 2,581 10,668 10,123 Acquisition expenses, net
(192 ) 1,364 (136 ) 2,984 Restructuring expenses 44 42 263 337
Impairment charges — — 2,400 —
Non-GAAP other expense, net(1) $
(10,248 ) $ (8,599 ) $
(27,087 ) $ (31,231 )
Table of
Reconciliation from GAAP (Benefit) Provision for Income Taxes to
Non-GAAP Provision for Income Taxes
GAAP (benefit) provision for income taxes $
(1,975 ) $ (4,167 ) $
2,772 $ 952 GAAP effective
income tax rate (30.5 )% (28.5 )%
(11.8 )% 4.1 % Non-GAAP tax adjustments
7,032 8,335 12,927 16,213
Non-GAAP
provision for income taxes $ 5,057
$ 4,168 $ 15,699 $
17,165 Non-GAAP effective income tax rate
8.1 % 6.7 % 8.8 %
8.1 %
Table of
Reconciliation from GAAP Net Income (Loss) Attributable to Verint
Systems Inc. to Non-GAAP Net Income Attributable to Verint Systems
Inc.
GAAP net income (loss) attributable to Verint Systems
Inc. $ 8,018 $ 17,505
$ (29,380 ) $ 17,638
Revenue adjustments related to acquisitions 3,680 1,047 10,590
4,375 Amortization of acquired technology 9,358 8,878 37,372 35,774
Amortization of other acquired intangible assets 11,113 10,764
44,089 43,130 Stock-based compensation expenses 19,926 14,292
65,608 64,549 Unrealized losses (gains) on derivatives, net 79 (2 )
558 (3 ) Amortization of convertible note discount 2,720 2,581
10,668 10,123 Acquisition expenses, net 4,632 1,857 12,751 9,997
Restructuring expenses 3,567 7,035 16,006 17,662 Impairment charges
— 923 2,400 3,205 Other adjustments 568 130 969 991 Non-GAAP tax
adjustments (7,032 ) (8,335 ) (12,927 ) (16,213 ) Total GAAP net
income (loss) adjustments 48,611 39,170 188,084
173,590
Non-GAAP net income attributable to Verint
Systems Inc. $ 56,629 $
56,675 $ 158,704 $
191,228
Table Comparing
GAAP Diluted Net Income (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 income (loss) per common share attributable
to Verint Systems Inc. $ 0.13 $ 0.28 $ (0.47 ) $ 0.28
Non-GAAP diluted net income per common share attributable to
Verint Systems Inc. $ 0.90 $ 0.90 $ 2.51 $
3.04
GAAP diluted weighted-average shares used in
computing net income (loss) per common share attributable to Verint
Systems Inc. 63,207 62,900 62,593
62,921 Additional weighted-average anti-dilutive shares
applicable to non-GAAP net income per common share attributable to
Verint Systems Inc. — — 538 —
Non-GAAP diluted weighted-average shares used in computing net
income per common share attributable to Verint Systems Inc.
63,207 62,900 63,131
62,921
Table of
Reconciliation from GAAP Net Income (Loss) Attributable to Verint
Systems Inc. to Adjusted EBITDA
GAAP net income (loss) attributable to Verint Systems
Inc. $ 8,018 $ 17,505 $
(29,380 ) $ 17,638 Net income
attributable to noncontrolling interest 441 1,282 3,134 4,590
(Benefit) provision for income taxes (1,975 ) (4,167 ) 2,772 952
Other expense, net 12,899 12,584 40,840 44,672 Depreciation and
amortization(2) 28,033 26,037 111,040 103,175 Revenue adjustments
related to acquisitions 3,680 1,047 10,590 4,375 Stock-based
compensation expenses 19,926 14,292 65,608 64,549 Acquisition
expenses, net 4,824 493 12,887 7,013 Restructuring expenses 3,456
7,023 15,006 17,207 Impairment charges — 923 — 3,205 Other
adjustments 568 130 969 991
Adjusted
EBITDA $ 79,870 $ 77,149
$ 233,466 $ 268,367
January 31, 2017 2016
Table of
Reconciliation from Gross Debt to Net Debt
Current maturities of long-term debt $ 4,611 $ 2,104
Long-term debt 744,260 735,983 Unamortized debt discounts and
issuance costs 60,571 73,055
Gross debt
809,442 811,142 Less: Cash and cash
equivalents 307,363 352,105 Restricted cash and bank time deposits
9,198 11,820 Short-term investments 3,184 55,982
Net debt $ 489,697 $
391,235 (1) For the three months ended January
31, 2017, non-GAAP other expense, net of $10.2 million was
comprised of $6.1 million of interest and other expense, and $4.1
million of foreign exchange charges primarily related to balance
sheet translations. (2) Adjusted for financing fee
amortization.
Table 4
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
January 31, (in thousands, except share and per share
data)
2017 2016 Assets Current
Assets: Cash and cash equivalents $ 307,363 $ 352,105
Restricted cash and bank time deposits 9,198 11,820 Short-term
investments 3,184 55,982 Accounts receivable, net of allowance for
doubtful accounts of $1.8 million and $1.2 million, respectively
266,590 256,419 Inventories 17,537 18,312 Deferred cost of revenue
3,621 1,876 Prepaid expenses and other current assets 64,561
57,598
Total current assets 672,054
754,112 Property and equipment, net 77,551 68,904
Goodwill 1,264,818 1,207,176 Intangible assets, net 235,259 246,682
Capitalized software development costs, net 9,509 11,992 Long-term
deferred cost of revenue 5,463 13,117 Deferred income taxes 21,510
17,528 Other assets 76,620 36,224
Total assets
$ 2,362,784 $ 2,355,735
Liabilities and Stockholders' Equity Current
Liabilities: Accounts payable $ 62,049 $ 65,447 Accrued
expenses and other current liabilities 213,224 206,967 Current
maturities of long-term debt 4,611 2,104 Deferred revenue 182,515
167,912
Total current liabilities
462,399 442,430 Long-term debt 744,260
735,983 Long-term deferred revenue 20,912 20,488 Deferred income
taxes 25,814 27,042 Other liabilities 94,359 61,628
Total liabilities 1,347,744 1,287,571
Commitments and Contingencies Stockholders'
Equity: Preferred stock - $0.001 par value; authorized
2,207,000 shares at January 31, 2017 and 2016, respectively; none
issued. — — Common stock - $0.001 par value; authorized 120,000,000
shares. Issued 64,073,000 and 62,614,000 shares; outstanding
62,419,000 and 62,266,000 shares at January 31, 2017 and 2016,
respectively. 64 63 Additional paid-in capital 1,449,335 1,387,955
Treasury stock, at cost - 1,654,000 and 348,000 shares at January
31, 2017 and 2016, respectively. (57,147 ) (10,251 ) Accumulated
deficit (230,816 ) (201,436 ) Accumulated other comprehensive loss
(154,856 ) (116,194 )
Total Verint Systems Inc. stockholders'
equity 1,006,580 1,060,137 Noncontrolling
interest 8,460 8,027
Total stockholders'
equity 1,015,040 1,068,164 Total
liabilities and stockholders' equity $ 2,362,784
$ 2,355,735
Table 5
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Consolidated Statements of Cash
Flows
(Unaudited)
Year Ended January 31, (in thousands)
2017
2016 Cash flows from operating activities: Net
(loss) income $ (26,246 ) $ 22,228
Adjustments to reconcile net
(loss) income to net cash provided by operating activities:
Depreciation and amortization 114,257 106,300 Provision for
doubtful accounts 1,791 669 Stock-based compensation, excluding
cash-settled awards 65,421 64,387 Amortization of discount on
convertible notes 10,668 10,123 Benefit for deferred income taxes
(16,941 ) (5,640 ) Excess tax benefits from stock award plans (6 )
(523 ) Non-cash losses (gains) on derivative financial instruments,
net 323 (394 ) Other non-cash items, net 7,666 12,343
Changes in
operating assets and liabilities, net of effects of business
combinations: Accounts receivable (353 ) 3,433 Inventories (286
) (3,258 ) Deferred cost of revenue 7,124 6,187 Prepaid expenses
and other assets 4,941 (2,886 ) Accounts payable and accrued
expenses (9,521 ) (15,260 ) Deferred revenue 8,705 (12,364 ) Other
liabilities 4,987 (28,515 ) Other, net (115 ) 73
Net cash
provided by operating activities 172,415
156,903 Cash flows from investing
activities: Cash paid for business combinations, including
adjustments, net of cash acquired (141,803 ) (31,358 ) Purchases of
property and equipment (27,540 ) (25,265 ) Purchases of investments
(36,761 ) (92,808 ) Maturities and sales of investments 89,342
71,457 Settlements of derivative financial instruments not
designated as hedges (349 ) 766 Cash paid for capitalized software
development costs (2,338 ) (5,027 ) Change in restricted cash and
bank time deposits, including long-term portion (36,579 ) 11,133
Other investing activities — (4,498 )
Net cash used in
investing activities (156,028 ) (75,600
) Cash flows from financing activities:
Repayments of borrowings and other financing obligations (3,308 )
(309 ) Payments of equity issuance, debt issuance and other
debt-related costs (249 ) (239 ) Proceeds from exercises of stock
options 7 232 Dividends paid to noncontrolling interest (2,421 )
(3,199 ) Purchases of treasury stock (46,896 ) — Excess tax
benefits from stock award plans 6 523 Payments of contingent
consideration for business combinations (financing portion) and
other financing activities (4,058 ) (7,212 )
Net cash used in
financing activities (56,919 ) (10,204
) Effect of exchange rate changes on cash and cash
equivalents (4,210 ) (4,066 )
Net (decrease) increase in cash
and cash equivalents (44,742 ) 67,033
Cash and cash equivalents, beginning of year 352,105
285,072 Cash and cash equivalents, end of
year $ 307,363 $ 352,105
Table 6
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Calculation of Change in Revenue on a
Constant Currency Basis
(Unaudited)
GAAP Revenue
Non-GAAP Revenue
(in thousands, except percentages)
Three MonthsEnded
YearEnded
Three MonthsEnded
YearEnded
Total Revenue Revenue for the three months and year
ended January 31, 2016 $ 280,794 $ 1,130,266 $ 281,841 $ 1,134,641
Revenue for the three months and year ended January 31, 2017 $
295,859 $ 1,062,106 $ 299,539 $ 1,072,696 Revenue for the three
months and year ended January 31, 2017 at constant currency(1) $
298,000 $ 1,072,000 $ 302,000 $ 1,083,000 Reported
period-over-period revenue change 5.4 % (6.0 )% 6.3 % (5.5 )% %
impact from change in foreign currency exchange rates 0.7 % 0.8 %
0.9 % 0.9 % Constant currency period-over-period revenue change 6.1
% (5.2 )% 7.2 % (4.6 )%
Customer Engagement Revenue
for the three months and year ended January 31, 2016 $ 178,866 $
694,857 $ 179,830 $ 698,298 Revenue for the three months and year
ended January 31, 2017 $ 186,887 $ 705,897 $ 190,543 $ 716,163
Revenue for the three months and year ended January 31, 2017 at
constant currency(1) $ 189,000 $ 715,000 $ 193,000 $ 726,000
Reported period-over-period revenue growth 4.5 % 1.6 % 6.0 % 2.6 %
% impact from change in foreign currency exchange rates 1.2 % 1.3 %
1.3 % 1.4 % Constant currency period-over-period revenue growth 5.7
% 2.9 % 7.3 % 4.0 %
Cyber Intelligence Revenue for
the three months and year ended January 31, 2016 $ 101,928 $
435,409 $ 102,011 $ 436,343 Revenue for the three months and year
ended January 31, 2017 $ 108,972 $ 356,209 $ 108,996 $ 356,533
Revenue for the three months and year ended January 31, 2017 at
constant currency(1) $ 109,000 $ 357,000 $ 109,000 $ 357,000
Reported period-over-period revenue change 6.9 % (18.2 )% 6.8 %
(18.3 )% % impact from change in foreign currency exchange rates —
% 0.2 % 0.1 % 0.1 % Constant currency period-over-period revenue
change 6.9 % (18.0 )% 6.9 % (18.2 )%
(1) Revenue for the three months and year ended January 31, 2017
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 months and year ended January
31, 2016 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 ended January
31, 2017 is 8.8%, 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/20170328006441/en/
Verint Systems Inc.Investor Relations:Alan Roden,
631-962-9304alan.roden@verint.com
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