Conference Call to Discuss Selected Financial Information and
Outlook to be Held Today at 8:30 a.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, 2018.
Financial Highlights
Below is selected unaudited financial information for the three
and nine months ended October 31, 2018 prepared in accordance with
generally accepted accounting principles (“GAAP”) and not in
accordance with GAAP (“non-GAAP”).
Three Months Ended October 31, 2018 -
GAAP
Three Months Ended October 31, 2018 -
Non-GAAP
Revenue: $304.0 million Revenue: $308.0 million Operating income:
$33.7 million Operating income: $69.2 million Diluted net income
per share: $0.29 Diluted net income per share: $0.85
Nine Months Ended October 31, 2018 -
GAAP
Nine Months Ended October 31, 2018 -
Non-GAAP
Revenue: $899.5 million Revenue: $908.4 million Operating income:
$70.7 million Operating income: $178.7 million Diluted net income
per share: $0.59 Diluted net income per share: $2.14
CEO Commentary
“In Q3, our positive momentum continued as we delivered more
than 8% year-over-year revenue growth with margin expansion and
strong cash generation. We believe this momentum reflects the
investments we have made over the last several years in advanced
analytics, automation and cloud across our actionable intelligence
portfolio. We are very pleased with the execution of our growth
strategy this year which establishes a solid foundation for our
next year's initial guidance of double digit earnings growth on a
non-GAAP basis,” said Dan Bodner, Verint CEO.
Financial Outlook
Verint’s non-GAAP outlook for the year ending January 31, 2019
is as follows:
- Revenue: $1.24 billion with a range of
+/- 1%
- EPS: $3.15 at the midpoint of our
revenue guidance
Verint’s initial non-GAAP outlook for the year ending January
31, 2020 is as follows:
- Revenue: $1.325 billion with a range of
+/- 2%
- EPS: $3.50 at the midpoint of our
revenue guidance
Our non-GAAP outlook for the year ending January 31, 2019
excludes the following GAAP measures which we are able to quantify
with reasonable certainty:
- Amortization of intangible assets of
approximately $55 million.
- Amortization of discount on convertible
notes of approximately $12 million.
Our non-GAAP outlook for the year ending January 31, 2019
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 $11
million and $13 million.
- Stock-based compensation is expected to
be between approximately $65 million and $68 million, assuming
market prices for our common stock approximately consistent with
current levels.
Our initial non-GAAP outlook for the year ending January 31,
2020 excludes the following GAAP measures which we are able to
quantify with reasonable certainty:
- Amortization of intangible assets of
approximately $45 million.
- Amortization of discount on convertible
notes of approximately $12 million.
Our initial non-GAAP outlook for the year ending January 31,
2020 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 $11 million.
- Stock-based compensation is expected to
be between approximately $64 million and $68 million, 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, without unreasonable efforts, to provide a
reconciliation for 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 income tax adjustments due to the level of
unpredictability and uncertainty associated with these items. For
these same reasons, we are unable to assess the probable
significance of these excluded items. While historical results may
not be indicative of future results, actual amounts for the three
and nine months ended October 31, 2018 and 2017 for the GAAP
measures excluded from our non-GAAP outlook appear in Table 3 to
this press release.
Conference Call
Information
We will conduct a conference call today at 8:30 a.m. ET to
discuss our results for the three and nine months ended October 31,
2018 and outlook. 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
7880725. 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 the tables
below 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 85 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 use in or with 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 trade compliance, anti-corruption,
information security, data privacy and protection, tax, labor,
government contracts, 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, and offering and
maintaining a broad solution portfolio; 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 the successor to CTI's
business operations, Mavenir, Inc. ("Mavenir"), being unwilling or
unable to provide us with certain indemnities 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 or standards, tax laws and
regulations, tax rates, 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, 2018, our
Quarterly Report on Form 10-Q for the quarter ended October 31,
2018, when filed, and other filings we make with the SEC.
VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT
COMPANY, NEXT IT, OPINIONLAB, TERROGENCE, SENSECY, CUSTOMER
ENGAGEMENT SOLUTIONS, CYBER INTELLIGENCE SOLUTIONS, EDGEVR,
RELIANT, VANTAGE, STAR-GATE, 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)
2018 2017 2018
2017 Revenue: Product $ 111,670 $ 94,827 $
327,576 $ 279,056 Service and support 192,313 185,899
571,941 537,442
Total revenue 303,983
280,726 899,517 816,498
Cost of revenue: Product 33,124 32,840 100,917 98,708
Service and support 72,182 69,383 218,842 205,928 Amortization of
acquired technology 5,933 9,182 18,879 28,246
Total cost of revenue 111,239
111,405 338,638 332,882
Gross profit 192,744 169,321
560,879 483,616 Operating
expenses: Research and development, net 51,587 47,157 155,993
141,911 Selling, general and administrative 99,902 97,304 311,482
302,605 Amortization of other acquired intangible assets 7,585
7,048 22,721 26,727
Total operating
expenses 159,074 151,509
490,196 471,243 Operating income
33,670 17,812 70,683
12,373 Other income (expense), net: Interest
income 1,319 654 3,246 1,793 Interest expense (8,686 ) (8,891 )
(27,670 ) (26,997 ) Loss on early retirement of debt — — — (1,934 )
Other (expense) income, net (489 ) (565 ) (2,194 ) 2,529
Total other expense, net (7,856 )
(8,802 ) (26,618 ) (24,609
) Income (loss) before provision for income taxes
25,814 9,010 44,065 (12,236 )
Provision for income taxes 5,601 5,944 2,153
9,504
Net income (loss) 20,213 3,066
41,912 (21,740 ) Net income attributable to
noncontrolling interests 1,293 577 3,227 1,984
Net income (loss) attributable to Verint Systems Inc.
$ 18,920 $ 2,489 $
38,685 $ (23,724 ) Net
income (loss) per common share attributable to Verint Systems
Inc.: Basic $ 0.29 $
0.04 $ 0.60 $
(0.38 ) Diluted $ 0.29
$ 0.04 $ 0.59 $
(0.38 ) Weighted-average common shares
outstanding: Basic 65,122 63,759
64,690 63,152 Diluted
66,200 64,588 65,885
63,152
Table 2 VERINT SYSTEMS INC. AND SUBSIDIARIES
Segment Revenue (Unaudited) Three Months
Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2018 2017 2018
2017 GAAP Revenue By Segment: Customer
Engagement $ 197,467 $ 181,590 $ 584,730 $ 531,643 Cyber
Intelligence 106,516 99,136 314,787 284,855
GAAP Total Revenue $ 303,983 $
280,726 $ 899,517 $
816,498 Revenue Adjustments Related to
Acquisitions: Customer Engagement $ 3,981 $ 2,916 $ 8,826 $
11,065 Cyber Intelligence 24 118 93 169
Total Revenue Adjustments Related to Acquisitions $
4,005 $ 3,034 $
8,919 $ 11,234 Non-GAAP
Revenue By Segment: Customer Engagement $ 201,448 $ 184,506 $
593,556 $ 542,708 Cyber Intelligence 106,540 99,254
314,880 285,024
Non-GAAP Total Revenue $
307,988 $ 283,760 $
908,436 $ 827,732
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)
2018
2017 2018 2017
Table of
Reconciliation from GAAP Gross Profit to Non-GAAP Gross
Profit
GAAP gross profit $ 192,744
$ 169,321 $ 560,879
$ 483,616 GAAP gross margin 63.4
% 60.3 % 62.4 % 59.2
% Revenue adjustments related to acquisitions 4,005 3,034
8,919 11,234 Amortization of acquired technology 5,933 9,182 18,879
28,246 Stock-based compensation expenses 1,367 2,197 4,158 5,868
Acquisition expenses, net 10 23 (11 ) 91 Restructuring expenses 57
919 1,137 1,937
Non-GAAP gross
profit $ 204,116 $ 184,676
$ 593,961 $ 530,992
Non-GAAP gross margin 66.3 %
65.1 % 65.4 % 64.2 %
Table of
Reconciliation from GAAP Operating Income to Non-GAAP Operating
Income
GAAP operating income $ 33,670
$ 17,812 $ 70,683
$ 12,373 As a percentage of GAAP
revenue 11.1 % 6.3 % 7.9
% 1.5 % Revenue adjustments related to
acquisitions 4,005 3,034 8,919 11,234 Amortization of acquired
technology 5,933 9,182 18,879 28,246 Amortization of other acquired
intangible assets 7,585 7,048 22,721 26,727 Stock-based
compensation expenses 16,595 15,966 50,509 50,453 Acquisition
expenses, net 1,889 (4,063 ) 4,276 2,455 Restructuring expenses
1,022 6,309 3,019 11,557 Other adjustments (1,498 ) 490 (278
) 1,091
Non-GAAP operating income $
69,201 $ 55,778 $
178,728 $ 144,136 As a
percentage of non-GAAP revenue 22.5 % 19.7
% 19.7 % 17.4 %
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net $ (7,856
) $ (8,802 ) $ (26,618
) $ (24,609 ) Unrealized losses (gains)
on derivatives, net 366 (890 ) 239 (1,877 ) Amortization of
convertible note discount 2,981 2,829 8,829 8,377 Loss on early
retirement of debt — — — 1,934 Acquisition expenses, net (15 ) (10
) 316 710 Restructuring expenses — 1 — 139
Non-GAAP other expense, net(1) $
(4,524 ) $ (6,872 ) $
(17,234 ) $ (15,326 )
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes $ 5,601
$ 5,944 $ 2,153
$ 9,504 GAAP effective income tax rate
21.7 % 66.0 % 4.9 %
(77.7 )% Non-GAAP tax adjustments 1,415 (91 )
15,134 5,082
Non-GAAP provision for income
taxes $ 7,016 $ 5,853
$ 17,287 $ 14,586
Non-GAAP effective income tax rate 10.8 %
12.0 % 10.7 % 11.3 %
Table of
Reconciliation from GAAP Net Income (Loss) Attributable to Verint
Systems Inc. toNon-GAAP Net
Income Attributable to Verint Systems Inc.
GAAP net income (loss) attributable to Verint Systems
Inc. $ 18,920 $ 2,489
$ 38,685 $ (23,724 )
Revenue adjustments related to acquisitions 4,005 3,034 8,919
11,234 Amortization of acquired technology 5,933 9,182 18,879
28,246 Amortization of other acquired intangible assets 7,585 7,048
22,721 26,727 Stock-based compensation expenses 16,595 15,966
50,509 50,453 Unrealized losses (gains) on derivatives, net 366
(890 ) 239 (1,877 ) Amortization of convertible note discount 2,981
2,829 8,829 8,377 Loss on early retirement of debt — — — 1,934
Acquisition expenses, net 1,874 (4,073 ) 4,592 3,165 Restructuring
expenses 1,022 6,310 3,019 11,696 Other adjustments (1,498 ) 490
(278 ) 1,091 Non-GAAP tax adjustments (1,415 ) 91 (15,134 )
(5,082 ) Total GAAP net income (loss) adjustments 37,448
39,987 102,295 135,964
Non-GAAP net income
attributable to Verint Systems Inc. $ 56,368
$ 42,476 $ 140,980
$ 112,240
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. $ 0.29 $ 0.04 $ 0.59 $
(0.38 ) Non-GAAP diluted net income per common share attributable
to Verint Systems Inc. $ 0.85 $ 0.66 $ 2.14 $
1.75
GAAP weighted-average shares used in
computing diluted net income (loss) per common share
attributable to Verint Systems Inc.
66,200 64,588 65,885 63,152
Additional weighted-average shares
applicable to non-GAAP dilutednet income per common share
attributable to Verint Systems Inc.
— — — 912
Non-GAAP diluted weighted-average
shares used in computing net income per common share
attributable to Verint Systems Inc.
66,200 64,588 65,885
64,064
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. $ 18,920 $ 2,489
$ 38,685 $ (23,724 )
As a percentage of GAAP revenue 6.2 %
0.9 % 4.3 % (2.9 )% Net
income attributable to noncontrolling interest 1,293 577 3,227
1,984 Provision for income taxes 5,601 5,944 2,153 9,504 Other
expense, net 7,856 8,802 26,618 24,609 Depreciation and
amortization(2) 20,623 23,798 64,235 77,652 Revenue adjustments
related to acquisitions 4,005 3,034 8,919 11,234 Stock-based
compensation expenses 16,595 15,966 50,509 50,453 Acquisition
expenses, net 1,889 (4,063 ) 4,276 2,455 Restructuring expenses
1,021 6,309 3,017 11,553 Other adjustments (1,498 ) 490 (278
) 1,091
Adjusted EBITDA $ 76,305
$ 63,346 $ 201,361
$ 166,811 As a percentage of non-GAAP
revenue 24.8 % 22.3 % 22.2
% 20.2 %
Table of
Reconciliation from Gross Debt to Net Debt
October 31,2018
January 31,2018
Current maturities of long-term debt $ 4,382 $ 4,500
Long-term debt 775,342 768,484 Unamortized debt discounts and
issuance costs 40,095 50,141
Gross debt
819,819 823,125 Less: Cash and cash
equivalents 353,422 337,942 Restricted cash and cash equivalents,
and restricted time deposits 32,457 33,303 Short-term investments
49,434 6,566
Net debt, excluding long-term
restricted cash, cash equivalents, time deposits, and
investments 384,506 445,314
Long-term restricted cash, cash equivalents, time deposits and
investments 26,703 28,402
Net debt, including
long-term restricted cash, cash equivalents, time deposits, and
investments $ 357,803 $
416,912 (1) For the three months ended October
31, 2018, non-GAAP other expense, net of $4.5 million was comprised
of $4.5 million of interest and other expense. (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)
2018 2018 Assets
Current Assets: Cash and cash equivalents $ 353,422 $
337,942 Restricted cash and cash equivalents, and restricted bank
time deposits 32,457 33,303 Short-term investments 49,434 6,566
Accounts receivable, net of allowance for doubtful accounts of $2.9
million and $2.2 million, respectively 311,492 296,324 Contract
assets 70,076 — Inventories 21,737 19,871 Deferred cost of revenue
9,651 6,096 Prepaid expenses and other current assets 85,310
82,090
Total current assets 933,579
782,192 Property and equipment, net 95,875 89,089
Goodwill 1,364,452 1,388,299 Intangible assets, net 192,186 226,093
Capitalized software development costs, net 11,557 9,228 Long-term
deferred cost of revenue 4,283 2,804 Other assets 101,643
82,915
Total assets $ 2,703,575
$ 2,580,620 Liabilities and
Stockholders' Equity Current Liabilities: Accounts
payable $ 79,372 $ 84,639 Accrued expenses and other current
liabilities 181,452 224,765 Contract liabilities 306,240
196,107
Total current liabilities 567,064
505,511 Long-term debt 775,342 768,484
Long-term contract liabilities 27,512 24,519 Other liabilities
120,158 149,770
Total liabilities
1,490,076 1,448,284 Commitments and
Contingencies Stockholders' Equity: Preferred stock -
$0.001 par value; authorized 2,207,000 shares at October 31, 2018
and January 31, 2018, respectively; none issued. — —
Common stock - $0.001 par value;
authorized 120,000,000 shares. Issued 66,937,000 and
65,497,000shares; outstanding 65,272,000 and 63,836,000 shares at
October 31, 2018 and January 31, 2018, respectively.
67 65 Additional paid-in capital 1,572,806 1,519,724 Treasury
stock, at cost - 1,665,000 and 1,661,000 shares at October 31, 2018
and January 31, 2018, respectively. (57,598 ) (57,425 ) Accumulated
deficit (161,580 ) (238,312 ) Accumulated other comprehensive loss
(154,148 ) (103,460 )
Total Verint Systems Inc. stockholders'
equity 1,199,547 1,120,592 Noncontrolling
interests 13,952 11,744
Total stockholders'
equity 1,213,499 1,132,336 Total
liabilities and stockholders' equity $ 2,703,575
$ 2,580,620 Table
5 VERINT SYSTEMS INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Cash Flows (Unaudited)
Nine Months EndedOctober 31, (in thousands)
2018 2017 Cash flows from operating
activities: Net income (loss) $ 41,912 $ (21,740 )
Adjustments to reconcile net income (loss) to net cash provided
by operating activities: Depreciation and amortization 66,231
79,879 Stock-based compensation, excluding cash-settled awards
50,509 50,397 Amortization of discount on convertible notes 8,829
8,377 Non-cash gains on derivative financial instruments, net
(3,760 ) (292 ) Loss on early retirement of debt — 1,934 Other
non-cash items, net (1,972 ) 307
Changes in operating assets and
liabilities, net of effects of business combinations: Accounts
receivable 35,879 (15,824 ) Contract assets (999 ) — Inventories
(4,404 ) (2,232 ) Deferred cost of revenue 2,184 1,503 Prepaid
expenses and other assets (8,443 ) (12,947 ) Accounts payable and
accrued expenses (17,841 ) 13,145 Contract liabilities (29,940 )
(14,129 ) Other, net (6,535 ) 7,796
Net cash provided by
operating activities 131,650 96,174
Cash flows from investing activities: Cash paid for
business combinations, including adjustments, net of cash acquired
(27,370 ) (28,071 ) Purchases of property and equipment (22,933 )
(26,445 ) Purchases of investments (53,868 ) (8,305 ) Maturities
and sales of investments 10,620 5,244 Cash paid for capitalized
software development costs (4,767 ) (909 ) Change in restricted
bank time deposits, and other investing activities, net (21,128 )
(111 )
Net cash used in investing activities (119,446
) (58,597 ) Cash flows from
financing activities: Proceeds from borrowings, net of original
issuance discount — 424,469 Repayments of borrowings and other
financing obligations (4,317 ) (410,536 ) Payments of debt-related
costs (206 ) (7,107 ) Purchases of treasury stock (173 ) —
Dividends paid to noncontrolling interest (760 ) (716 ) Payments of
contingent consideration for business combinations (financing
portion) (10,681 ) (7,210 ) Other financing activities, net (429 )
(320 )
Net cash used in financing activities (16,566
) (1,420 ) Foreign currency effects on cash,
cash equivalents, restricted cash, and restricted cash equivalents
(3,864 ) 447
Net (decrease) increase in cash, cash
equivalents, restricted cash, and restricted cash equivalents
(8,226 ) 36,604 Cash, cash equivalents,
restricted cash, and restricted cash equivalents, beginning of
period 398,210 369,329 Cash,
cash equivalents, restricted cash, and restricted cash equivalents,
end of period $ 389,984 $
405,933
Reconciliation of cash, cash
equivalents, restricted cash, and restricted cash equivalents at
end of period to the condensed consolidated balance
sheets:
Cash and cash equivalents $ 353,422 $ 312,666 Restricted cash and
cash equivalents included in restricted cash and cash equivalents,
and restricted bank time deposits 32,212 62,664 Restricted cash and
cash equivalents included in other assets 4,350 30,603
Total cash, cash equivalents, restricted cash, and
restricted cash equivalents $ 389,984
$ 405,933 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
Nine MonthsEnded
Three MonthsEnded
Nine MonthsEnded
Total Revenue Revenue for the three and nine
months ended October 31, 2017 $ 280,726 $ 816,498 $ 283,760 $
827,732 Revenue for the three and nine months ended October 31,
2018 $ 303,983 $ 899,517 $ 307,988 $ 908,436 Revenue for the three
and nine months ended October 31, 2018 at constant currency(1) $
307,000 $ 896,000 $ 311,000 $ 904,000 Reported period-over-period
revenue growth 8.3 % 10.2
%
8.5 % 9.8
%
% impact from change in foreign currency exchange rates 1.1 % (0.5
)%
1.1 % (0.6
)%
Constant currency period-over-period revenue growth 9.4 % 9.7
%
9.6 % 9.2
%
Customer Engagement Revenue for the three and nine
months ended October 31, 2017 $ 181,590 $ 531,643 $ 184,506 $
542,708 Revenue for the three and nine months ended October 31,
2018 $ 197,467 $ 584,730 $ 201,448 $ 593,556 Revenue for the three
and nine months ended October 31, 2018 at constant currency(1) $
199,000 $ 582,000 $ 203,000 $ 590,000 Reported period-over-period
revenue growth 8.7 % 10.0
%
9.2 % 9.4
%
% impact from change in foreign currency exchange rates 0.9 % (0.5
)%
0.8 % (0.7
)%
Constant currency period-over-period revenue growth 9.6 % 9.5
%
10.0 % 8.7
%
Cyber Intelligence Revenue for the three and nine
months ended October 31, 2017 $ 99,136 $ 284,855 $ 99,254 $ 285,024
Revenue for the three and nine months ended October 31, 2018 $
106,516 $ 314,787 $ 106,540 $ 314,880 Revenue for the three and
nine months ended October 31, 2018 at constant currency(1) $
108,000 $ 314,000 $ 108,000 $ 314,000 Reported period-over-period
revenue growth 7.4 % 10.5
%
7.3 % 10.5
%
% impact from change in foreign currency exchange rates 1.5 % (0.3
)%
1.5 % (0.3
)%
Constant currency period-over-period revenue growth 8.9 % 10.2
%
8.8 % 10.2
%
(1) Revenue for the three and nine months ended October 31,
2018 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, 2017 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.
Table 7 VERINT SYSTEMS INC. AND SUBSIDIARIES
Estimated GAAP and Non-GAAP Fully Allocated Gross Margins
(Unaudited) Three Months Ended
October 31,
2018 2017 Customer
Cyber Customer Cyber (in
thousands)
Engagement Intelligence
Consolidated Engagement Intelligence
Consolidated GAAP product revenue $ 52,353 $ 59,317 $
111,670 $ 41,422 $ 53,405 $ 94,827 GAAP service revenue 145,114
47,199 192,313 140,168 45,731
185,899
Total GAAP revenue 197,467
106,516 303,983 181,590
99,136 280,726 Products costs
9,132 22,912 32,044 8,121 24,097 32,218 Service expenses 50,981
17,258 68,239 49,062 15,412 64,474 Amortization of acquired
technology 4,573 1,360 5,933 5,238 3,944 9,182 Stock-based
compensation expenses (1) 1,106 261 1,367 1,777 420 2,197 Shared
support service allocation (2) 2,398 1,258 3,656
2,187 1,147 3,334
Total GAAP cost of
revenue 68,190 43,049
111,239 66,385 45,020
111,405 GAAP gross profit $
129,277 $ 63,467 $
192,744 $ 115,205 $
54,116 $ 169,321 GAAP gross
margin 65.5 % 59.6 % 63.4
% 63.4 % 54.6 % 60.3
% Revenue adjustments related to acquisitions 3,981 24 4,005
2,916 118 3,034 Amortization of acquired technology 4,573 1,360
5,933 5,238 3,944 9,182 Stock-based compensation expenses (1) 1,106
261 1,367 1,777 420 2,197 Acquisition expenses, net (3) 7 3 10 15 8
23 Restructuring expenses (3) 38 19 57 603
316 919
Non-GAAP gross profit $
138,982 $ 65,134 $
204,116 $ 125,754 $
58,922 $ 184,676 Non-GAAP
gross margin 69.0 % 61.1 %
66.3 % 68.2 % 59.4 %
65.1 % Nine Months Ended
October 31,
2018 2017 Customer Cyber
Customer Cyber (in thousands)
Engagement
Intelligence Consolidated Engagement
Intelligence Consolidated GAAP product revenue
$ 156,245 $ 171,331 $ 327,576 $ 122,577 $ 156,479 $ 279,056 GAAP
service revenue 428,485 143,456 571,941
409,066 128,376 537,442
Total GAAP
revenue 584,730 314,787
899,517 531,643 284,855
816,498 Products costs 26,454 71,297 97,751
24,628 70,647 95,275 Service expenses 155,491 51,549 207,040
148,251 44,733 192,984 Amortization of acquired technology 12,942
5,937 18,879 16,212 12,034 28,246 Stock-based compensation expenses
(1) 3,364 794 4,158 4,747 1,121 5,868 Shared support service
allocation (2) 7,091 3,719 10,810 6,894
3,615 10,509
Total GAAP cost of revenue
205,342 133,296 338,638
200,732 132,150 332,882
GAAP gross profit $ 379,388
$ 181,491 $ 560,879
$ 330,911 $ 152,705
$ 483,616 GAAP gross margin 64.9
% 57.7 % 62.4 % 62.2
% 53.6 % 59.2 % Revenue
adjustments related to acquisitions 8,826 93 8,919 11,065 169
11,234 Amortization of acquired technology 12,942 5,937 18,879
16,212 12,034 28,246 Stock-based compensation expenses (1) 3,364
794 4,158 4,747 1,121 5,868 Acquisition expenses, net (3) (7 ) (4 )
(11 ) 60 31 91 Restructuring expenses (3) 746 391
1,137 1,271 666 1,937
Non-GAAP gross
profit $ 405,259 $ 188,702
$ 593,961 $ 364,266
$ 166,726 $ 530,992
Non-GAAP gross margin 68.3 %
59.9 % 65.4 % 67.1 %
58.5 % 64.2 % (1) Represents the
stock-based compensation expenses applicable to cost of revenue,
allocated proportionally to our year ended January 31, 2018 annual
operations and service expense wages for each segment, which we
believe provides a reasonable approximation for purposes of
understanding the relative GAAP and non-GAAP gross margins of our
two businesses. (2) Represents the portion of our shared
support expenses (as disclosed in footnote 15 to our October 31,
2018 Form 10-Q, when filed) applicable to cost of revenue,
allocated proportionally to our year ended January 31, 2018 annual
non-GAAP segment revenue, which we believe provides a reasonable
approximation for purposes of understanding the relative GAAP and
non-GAAP gross margins of our two businesses. (3) Represents
the portion of our acquisition expenses, net and restructuring
expenses applicable to cost of revenue, allocated proportionally to
our year ended January 31, 2018 annual non-GAAP segment revenue,
which we believe provides a reasonable approximation for purposes
of understanding the relative GAAP and non-GAAP gross margins of
our two businesses.
Table 8 VERINT SYSTEMS
INC. AND SUBSIDIARIES Estimated Non-GAAP Fully Allocated
Operating Margins (Unaudited) Three Months
Ended
October 31,
2018 2017 Customer Cyber
Customer Cyber (in thousands)
Engagement Intelligence Consolidated
Engagement Intelligence Consolidated
Non-GAAP segment revenue $ 201,448 $ 106,540 $
307,988 $ 184,506 $ 99,254 $ 283,760
Segment contribution (1) 79,593 29,193 108,786 70,768 23,160
93,928 Estimated allocation of shared support expenses (2) 25,968
13,617 39,585 25,026 13,124
38,150 Estimated non-GAAP operating income $ 53,625 $
15,576 $ 69,201 $ 45,742 $ 10,036 $
55,778 Estimated non-GAAP fully allocated operating
margin 26.6 % 14.6 % 22.5 % 24.8 % 10.1 % 19.7 %
Nine Months Ended
October 31,
2018 2017 Customer Cyber
Customer Cyber (in thousands)
Engagement
Intelligence Consolidated Engagement
Intelligence Consolidated Non-GAAP segment
revenue $ 593,556 $ 314,880 $ 908,436 $
542,708 $ 285,024 $ 827,732 Segment
contribution (1) 225,154 74,964 300,118 195,756 62,402 258,158
Estimated allocation of shared support expenses (2) 79,632
41,758 121,390 74,798 39,224 114,022
Estimated non-GAAP operating income $ 145,522 $
33,206 $ 178,728 $ 120,958 $ 23,178 $
144,136 Estimated non-GAAP fully allocated operating
margin 24.5 % 10.5 % 19.7 % 22.3 % 8.1 % 17.4 % (1) See
footnote 15 to our October 31, 2018 Form 10-Q, when filed.
(2) Represents our shared support expenses (as disclosed in
footnote 15 to our October 31, 2018 Form 10-Q, when filed),
allocated proportionally to our year ended January 31, 2018 annual
non-GAAP segment revenue, which we believe provides a reasonable
approximation for purposes of understanding the relative non-GAAP
operating margins of our two businesses.
Verint Systems Inc. and
SubsidiariesSupplemental 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, constant currency measures, estimated GAAP and non-GAAP
fully allocated gross margins, and estimated non-GAAP fully
allocated operating margins. The tables above 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.
Losses and expenses on early retirements or modifications of
debt. We exclude from our non-GAAP financial measures losses on
early retirements of debt attributable to refinancing or repaying
our debt, and expenses incurred to modify debt terms, because we
believe they are not reflective of our ongoing operations.
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 already included within restructuring or acquisition
activity), rent expense for redundant facilities, gains or losses
on sales of property, gains or losses on settlements of certain
legal matters, and certain professional fees unrelated to our
ongoing operations, 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 historical 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, 2019 is currently approximately 11%, and was 11.5% for the year
ended January 31, 2018. 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 companies 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, restricted cash equivalents,
restricted bank time deposits, and restricted investments
(including long-term portions), 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20181206005134/en/
Investor RelationsAlan
RodenVerint Systems Inc.(631) 962-9304alan.roden@verint.com
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