Strong Q1 Results Across Key Metrics including Revenue, EPS and
Cash Flow.
Raising Guidance for FY2020
Introducing New Three Year Targets
Verint® Systems Inc. (NASDAQ:VRNT), a
global Actionable Intelligence® leader, today announced results for
the three months ended April 30, 2019 (FY2020).
“We are pleased to have started the year strong with continued
business momentum. Our first quarter results were ahead of our
guidance, for both revenue and EPS, and we are well positioned for
a year of double-digit revenue and EPS growth, on a non-GAAP basis.
We are also pleased with our 55% increase in cash from operations,
to $93 million in Q1, demonstrating the underlying strength in our
business. We believe our strong results reflect the execution of
our strategy to accelerate innovation that we started two years
ago, and that this strategy will enable us to sustain growth over
the long-run. We are also pleased to be in a position to raise our
guidance for the current fiscal year, and to introduce new
three-year targets,” said Dan Bodner, CEO.
FY2020 Financial Highlights (Three Months Ending April 30,
2019, Compared to Prior Year)
GAAP Non-GAAP Revenue of
$315 million, up 9.0% Revenue of $324 million, up 11.0%
Gross margin of 63.8%, up 320bps Gross margin of 67.4%, up
350bps Operating income of $14 million, up 86% Operating
income of $62 million, up 35% Operating margin of 4.6%, up 190bps
Operating margin of 19.2%, up 340bps Diluted EPS of $0.02,
vs. ($0.03) in FY19 Diluted EPS of $0.73, up 38.0% Cash flow
from operations of $93 million, up 55%
Financial Outlook for FY2020 (Year Ending January 31,
2020)
Today, we are raising our non-GAAP outlook for revenue and EPS
for the year ending January 31, 2020 as follows:
- Revenue: Increasing by $5 million to
$1.375 billion with a range of +/- 2%
- Reflects 10.5% year-over-year
growth
- EPS: Increasing by 5 cents to $3.65 at
the midpoint of our revenue guidance
- Reflects 14% year-over-year growth
Three Year Targets (Year Ending January 31,
2022)
Today, we are introducing non-GAAP targets for revenue and EPS
for the year ending January 31, 2022 as follows:
- Revenue: $1.65 billion
- EPS: $4.70
Our 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 $55 million.
- Amortization of discount on convertible
notes of approximately $12 million.
Our 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 are expected to be
between approximately $24 million and $26 million.
- Stock-based compensation is expected to
be between approximately $73 million and $77 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
months ended April 30, 2019 and 2018 for the GAAP measures excluded
from our non-GAAP outlook appear in Table 3 to this press
release.
Our non-GAAP Consolidated, Customer Engagement, and Cyber
Intelligence three-year targets exclude various GAAP measures,
including:
- Amortization of intangible assets.
- Stock-based compensation expenses.
- Revenue adjustments.
- Acquisition expenses.
- Restructuring expenses.
Our non-GAAP Consolidated three-year targets also reflect income
tax provisions on a non-GAAP basis.
We are unable, without unreasonable efforts, to provide a
reconciliation for these GAAP measures which are excluded from our
non-GAAP Consolidated, Customer Engagement, and Cyber Intelligence
three-year targets, 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.
Our non-GAAP Consolidated, Customer Engagement, and Cyber
Intelligence three-year targets reflect foreign currency exchange
rates approximately consistent with current rates.
Conference Call
Information
We will conduct a conference call today at 4:30 p.m. ET to
discuss our results for the three months ended April 30, 2019 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
8290147. 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 and cyber intelligence. 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 challenges, 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 revenues, margins, and sufficient levels of
investment in our business and operations; 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, reputational considerations,
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 properly manage
investments in our business and operations, execute on growth
initiatives, and enhance our existing operations and
infrastructure, including the proper prioritization and allocation
of limited financial and other resources; risks associated with our
ability to retain, recruit, and train qualified personnel in
regions in which we operate, including in new markets and growth
areas we may enter; risks that we may be unable to establish and
maintain relationships with key resellers, partners, and systems
integrators and 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, including information that
may belong to our customers or other third parties, and with
security vulnerabilities or lapses, including cyber-attacks,
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, including third-party hosting platforms, may
contain defects, develop operational problems, or 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 political factors related to our business or
operations, including reputational risks associated with our
security solutions and our ability to maintain security clearances
where required as well as risks associated with a significant
amount of our business coming from domestic and foreign government
customers; 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, relating to both our own
operations as well as the use of our solutions by our customers;
challenges associated with selling sophisticated solutions,
including with respect to assisting customers in understanding and
realizing the benefits of our solutions, and developing, offering,
implementing, and maintaining a broad and sophisticated 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, claim infringement on their intellectual
property rights, or claim a violation of their license rights,
including relative to free or open source components we may use;
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., 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; risks associated
with changing accounting principles or standards, tax laws and
regulations, tax rates, and the continuing availability of expected
tax benefits; and risks associated with market volatility in the
prices of our common stock and convertible notes based on our
performance, third-party publications or speculation, or other
factors and risks associated with actions of activist stockholders.
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, 2019, our Quarterly
Report on Form 10-Q for the quarter ended April 30, 2019, when
filed, and other filings we make with the SEC.
VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT
COMPANY, NEXT IT, FORESEE, OPINIONLAB, KIRAN ANALYTICS, 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 Consolidated Statements of Operations
(Unaudited) Three Months EndedApril 30,
(in thousands, except per share data)
2019
2018 Revenue: Product $ 104,224 $ 105,864 Service and
support 211,035 183,343
Total revenue
315,259 289,207 Cost of revenue:
Product 28,120 34,809 Service and support 79,361 71,857
Amortization of acquired technology 6,707 7,426
Total cost of revenue 114,188 114,092
Gross profit 201,071 175,115
Operating expenses: Research and development, net
57,169 52,152 Selling, general and administrative 121,721 107,497
Amortization of other acquired intangible assets 7,713 7,684
Total operating expenses 186,603
167,333 Operating income 14,468
7,782 Other income (expense), net: Interest
income 1,426 793 Interest expense (9,934 ) (9,062 ) Other expense,
net (790 ) (464 )
Total other expense, net (9,298
) (8,733 ) Income (loss) before provision
for income taxes 5,170 (951 ) Provision
for income taxes 1,409 274
Net income (loss)
3,761 (1,225 ) Net income attributable to
noncontrolling interests 2,185 990
Net income
(loss) attributable to Verint Systems Inc. $
1,576 $ (2,215 ) Net
income (loss) per common share attributable to Verint Systems
Inc.: Basic $ 0.02 $
(0.03 ) Diluted $ 0.02
$ (0.03 ) Weighted-average common
shares outstanding: Basic 65,438
63,298 Diluted 67,088
63,298 Table 2
VERINT SYSTEMS INC. AND SUBSIDIARIES Segment Revenue
(Unaudited)
Three Months Ended April
30,
(in thousands)
2019 2018 GAAP Revenue By
Segment: Customer Engagement $ 207,095 $ 186,456 Cyber
Intelligence 108,164 102,751
GAAP Total Revenue
$ 315,259 $ 289,207
Revenue Adjustments: Customer Engagement $ 8,772 $ 2,719
Cyber Intelligence 127 44
Total Revenue Adjustments
$ 8,899 $ 2,763
Non-GAAP Revenue By Segment: Customer Engagement $ 215,867 $
189,175 Cyber Intelligence 108,291 102,795
Non-GAAP Total
Revenue $ 324,158 $ 291,970
Table 3 VERINT SYSTEMS INC.
AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP
Results (Unaudited)
Three Months Ended April
30,
(in thousands, except per share data)
2019
2018
Table of
Reconciliation from GAAP Gross Profit to Non-GAAP Gross
Profit
GAAP gross profit $ 201,071
$ 175,115 GAAP gross margin 63.8
% 60.6 % Revenue adjustments 8,899 2,763
Amortization of acquired technology 6,707 7,426 Stock-based
compensation expenses 1,404 846 Acquisition expenses, net 15 17
Restructuring expenses 449 363
Non-GAAP gross
profit $ 218,545 $ 186,530
Non-GAAP gross margin 67.4 %
63.9 %
Table of
Reconciliation from GAAP Operating Income to Non-GAAP Operating
Income
GAAP operating income $ 14,468
$ 7,782 As a percentage of GAAP revenue
4.6 % 2.7 % Revenue adjustments 8,899
2,763 Amortization of acquired technology 6,707 7,426 Amortization
of other acquired intangible assets 7,713 7,684 Stock-based
compensation expenses 17,103 16,459 Acquisition expenses, net 3,868
2,315 Restructuring expenses 1,437 1,091 Other adjustments 2,059
595
Non-GAAP operating income $
62,254 $ 46,115 As a
percentage of non-GAAP revenue 19.2 % 15.8
%
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net $ (9,298
) $ (8,733 ) Unrealized losses (gains)
on derivatives, net 679 (543 ) Amortization of convertible note
discount 3,061 2,905 Acquisition expenses, net (34 ) 28
Non-GAAP other expense, net(1) $ (5,592
) $ (6,343 )
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes $ 1,409
$ 274 GAAP effective income tax
rate 27.3 % (28.8 )% Non-GAAP tax
adjustments 4,001 3,982
Non-GAAP provision for
income taxes $ 5,410 $ 4,256
Non-GAAP effective income tax rate 9.5
% 10.7 %
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. $ 1,576 $ (2,215
) Revenue adjustments 8,899 2,763 Amortization of acquired
technology 6,707 7,426 Amortization of other acquired intangible
assets 7,713 7,684 Stock-based compensation expenses 17,103 16,459
Unrealized losses (gains) on derivatives, net 679 (543 )
Amortization of convertible note discount 3,061 2,905 Acquisition
expenses, net 3,834 2,343 Restructuring expenses 1,437 1,091 Other
adjustments 2,059 595 Non-GAAP tax adjustments (4,001 ) (3,982 )
Total GAAP net income (loss) adjustments 47,491 36,741
Non-GAAP net income attributable to Verint Systems
Inc. $ 49,067 $ 34,526
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. $ 0.02 $ (0.03 ) Non-GAAP diluted net
income per common share attributable to Verint Systems Inc. $ 0.73
$ 0.53
GAAP weighted-average shares used in
computing diluted net income (loss) per common share attributable
to Verint Systems Inc. 67,088 63,928 Additional
weighted-average shares applicable to non-GAAP diluted net income
per common share attributable to Verint Systems Inc. — 1,203
Non-GAAP diluted weighted-average shares used in
computing net income per common share attributable to Verint
Systems Inc. 67,088 65,131
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. $ 1,576 $ (2,215
) As a percentage of GAAP revenue 0.5 %
(0.8 )% Net income attributable to noncontrolling
interest 2,185 990 Provision for income taxes 1,409 274 Other
expense, net 9,298 8,733 Depreciation and amortization(2) 22,293
23,310 Revenue adjustments 8,899 2,763 Stock-based compensation
expenses 17,103 16,459 Acquisition expenses, net 3,868 2,315
Restructuring expenses 1,437 1,090 Other adjustments 2,059
595
Adjusted EBITDA $ 70,127
$ 54,314 As a percentage of non-GAAP
revenue 21.6 % 18.6 %
Table of
Reconciliation from Gross Debt to Net Debt
April 30,
2019
January 31,
2019
Current maturities of long-term debt $ 4,303 $ 4,343
Long-term debt 780,260 777,785 Unamortized debt discounts and
issuance costs 33,052 36,589
Gross debt
817,615 818,717 Less: Cash and cash
equivalents 412,024 369,975 Restricted cash and cash equivalents,
and restricted time deposits 39,749 42,262 Short-term investments
39,334 32,329
Net debt, excluding long-term
restricted cash, cash equivalents, time deposits, and
investments 326,508 374,151
Long-term restricted cash, cash equivalents, time deposits and
investments 25,082 23,193
Net debt, including
long-term restricted cash, cash equivalents, time deposits, and
investments $ 301,426 $
350,958 (1) For the three months ended
April 30, 2019, non-GAAP other expense, net of $5.6 million was
comprised of $5.6 million of interest and other expense. (2)
Adjusted for financing fee amortization.
Table 4 VERINT SYSTEMS INC. AND
SUBSIDIARIES Consolidated Balance Sheets
(Unaudited) April 30, January 31, (in
thousands, except share and per share data)
2019 2019
Assets Current Assets: Cash and cash equivalents $
412,024 $ 369,975 Restricted cash and cash equivalents, and
restricted bank time deposits 39,749 42,262 Short-term investments
39,334 32,329 Accounts receivable, net of allowance for doubtful
accounts of $4.5 million and $3.8 million, respectively 316,101
375,663 Contract assets 63,228 63,389 Inventories 27,845 24,952
Prepaid expenses and other current assets 90,016 97,776
Total current assets 988,297
1,006,346 Property and equipment, net 102,340 100,134
Operating lease right-of-use assets 96,811 — Goodwill 1,431,517
1,417,481 Intangible assets, net 219,552 225,183 Other assets
119,024 117,883
Total assets $
2,957,541 $ 2,867,027
Liabilities and Stockholders' Equity Current
Liabilities: Accounts payable $ 65,275 $ 71,621 Accrued
expenses and other current liabilities 244,983 212,824 Contract
liabilities 350,488 377,376
Total current
liabilities 660,746 661,821
Long-term debt 780,260 777,785 Long-term contract liabilities
32,726 30,094 Operating lease liabilities 85,649 — Other
liabilities 123,583 136,523
Total liabilities
1,682,964 1,606,223 Commitments and
Contingencies Stockholders' Equity: Preferred stock -
$0.001 par value; authorized 2,207,000 shares at April 30, 2019 and
January 31, 2019, respectively; none issued. — — Common stock -
$0.001 par value; authorized 120,000,000 shares. Issued 67,446,000
and 66,998,000 shares; outstanding 65,773,000 and 65,333,000 shares
at April 30, 2019 and January 31, 2019, respectively. 67 67
Additional paid-in capital 1,601,156 1,586,266 Treasury stock, at
cost - 1,673,000 and 1,665,000 shares at April 30, 2019 and January
31, 2019, respectively. (58,072 ) (57,598 ) Accumulated deficit
(132,698 ) (134,274 ) Accumulated other comprehensive loss (149,523
) (145,225 )
Total Verint Systems Inc. stockholders' equity
1,260,930 1,249,236 Noncontrolling interests 13,647
11,568
Total stockholders' equity
1,274,577 1,260,804 Total
liabilities and stockholders' equity $ 2,957,541
$ 2,867,027
Table 5 VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months EndedApril 30, (in thousands)
2019 2018 Cash flows from operating
activities: Net income (loss) $ 3,761 $ (1,225 )
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities: Depreciation and amortization 22,954 23,963
Stock-based compensation, excluding cash-settled awards 17,065
16,443 Amortization of discount on convertible notes 3,061 2,905
Non-cash gains on derivative financial instruments, net (549 )
(1,488 ) Other non-cash items, net 2,646 (448 )
Changes in
operating assets and liabilities, net of effects of business
combinations: Accounts receivable 58,900 45,386 Contract assets
(39 ) (18,811 ) Inventories (3,118 ) 2,434 Prepaid expenses and
other assets 5,268 (1,028 ) Accounts payable and accrued expenses
8,487 (3,027 ) Contract liabilities (24,648 ) (4,543 ) Other, net
(725 ) (409 )
Net cash provided by operating activities
93,063 60,152 Cash flows from
investing activities: Cash paid for business combinations,
including adjustments, net of cash acquired (20,210 ) — Purchases
of property and equipment (8,331 ) (7,747 ) Purchases of
investments (9,995 ) (2,792 ) Maturities and sales of investments
2,965 — Cash paid for capitalized software development costs (2,819
) (1,121 ) Change in restricted bank time deposits, and other
investing activities, net 2,941 398
Net cash used
in investing activities (35,449 ) (11,262
) Cash flows from financing activities:
Proceeds from borrowings, net of original issuance discount —
(1,275 ) Repayments of borrowings and other financing obligations
(1,584 ) — Purchases of treasury stock (474 ) (173 ) Dividends paid
to noncontrolling interest — (760 ) Payments of deferred purchase
price and contingent consideration for business combinations
(financing portion) (11,674 ) (2,584 ) Other financing activities,
net — (15 )
Net cash used in financing activities
(13,732 ) (4,807 ) Foreign currency
effects on cash, cash equivalents, restricted cash, and restricted
cash equivalents (853 ) (1,495 )
Net increase in cash, cash
equivalents, restricted cash, and restricted cash equivalents
43,029 42,588 Cash, cash equivalents, restricted
cash, and restricted cash equivalents, beginning of period
412,699 398,210 Cash, cash
equivalents, restricted cash, and restricted cash equivalents, end
of period $ 455,728 $
440,798 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 $ 412,024 $ 382,237 Restricted cash and
cash equivalents included in restricted cash and cash equivalents,
and restricted bank time deposits 39,373 32,541 Restricted cash and
cash equivalents included in other assets 4,331 26,020
Total cash, cash equivalents, restricted cash, and
restricted cash equivalents $ 455,728
$ 440,798
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 Months Ended
Three Months Ended
Total Revenue Revenue for the three months ended April 30,
2018 $ 289,207 $ 291,970 Revenue for the three months ended April
30, 2019 $ 315,259 $ 324,158 Revenue for the three months ended
April 30, 2019 at constant currency(1) $ 321,000 $ 329,000 Reported
period-over-period revenue growth 9.0 % 11.0 % % impact from change
in foreign currency exchange rates 2.0 % 1.7 % Constant currency
period-over-period revenue growth 11.0 % 12.7 %
Customer
Engagement Revenue for the three months ended April 30, 2018 $
186,456 $ 189,175 Revenue for the three months ended April 30, 2019
$ 207,095 $ 215,867 Revenue for the three months ended April 30,
2019 at constant currency(1) $ 211,000 $ 219,000 Reported
period-over-period revenue growth 11.1 % 14.1 % % impact from
change in foreign currency exchange rates 2.1 % 1.7 % Constant
currency period-over-period revenue growth 13.2 % 15.8 %
Cyber Intelligence Revenue for the three months ended April
30, 2018 $ 102,751 $ 102,795 Revenue for the three months ended
April 30, 2019 $ 108,164 $ 108,291 Revenue for the three months
ended April 30, 2019 at constant currency(1) $ 110,000 $ 110,000
Reported period-over-period revenue growth 5.3 % 5.3 % % impact
from change in foreign currency exchange rates 1.8 % 1.7 % Constant
currency period-over-period revenue growth 7.1 % 7.0 %
(1) Revenue for the three months ended April 30, 2019 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 ended April 30, 2018
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 GAAP to Non-GAAP Customer Engagement Cloud
Revenue, Recurring Revenue, and Nonrecurring Revenue
(Unaudited)
Three Months Ended April
30,
(in thousands)
2019 2018
Table of
Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud
Revenue
Customer
Engagement
Cloud revenue - GAAP $ 47,085 $
30,641 Estimated revenue adjustments 8,644 1,719
Cloud revenue - non-GAAP $ 55,729
$ 32,360
Table of
Reconciliation from GAAP Recurring Revenue to Non-GAAP Recurring
Revenue
Customer
Engagement
Recurring revenue - GAAP $ 123,358
$ 105,666 As a percentage of GAAP
revenue 59.6 % 56.7 % Estimated
revenue adjustments 8,772 1,921
Recurring revenue
- non-GAAP $ 132,130 $
107,587 As a percentage of non-GAAP revenue
61.2 % 56.9 %
Table of
Reconciliation from GAAP Nonrecurring Revenue to Non-GAAP
Nonrecurring Revenue
Customer
Engagement
Nonrecurring revenue - GAAP $ 83,737
$ 80,790 As a percentage of GAAP
revenue 40.4 % 43.3 % Estimated
revenue adjustments — 798
Nonrecurring revenue -
non-GAAP $ 83,737 $ 81,588
As a percentage of non-GAAP revenue 38.8
% 43.1 % Table
8 VERINT SYSTEMS INC. AND SUBSIDIARIES Estimated GAAP
and Non-GAAP Fully Allocated Gross Margins (Unaudited)
Three Months Ended April
30,
2019 2018 (in thousands)
Customer Engagement
Cyber Intelligence
Consolidated
Customer Engagement
Cyber Intelligence
Consolidated GAAP product revenue $ 54,002 $ 50,222 $
104,224 $ 48,364 $ 57,500 $ 105,864 GAAP service
revenue 153,093 57,942 211,035 138,092
45,251 183,343
Total GAAP revenue
207,095 108,164 315,259
186,456 102,751 289,207
Products costs 8,462 17,850 26,312 8,799 25,012 33,811
Service expenses 57,523 18,514 76,037 51,521 16,687 68,208
Amortization of acquired technology 5,388 1,319 6,707 4,265 3,161
7,426 Stock-based compensation expenses (1) 1,084 320 1,404 684 162
846 Shared support service allocation (2) 2,431 1,297
3,728 2,494 1,307 3,801
Total GAAP
cost of revenue 74,888 39,300
114,188 67,763 46,329
114,092 GAAP gross profit $
132,207 $ 68,864 $
201,071 $ 118,693 $
56,422 $ 175,115 GAAP gross
margin 63.8 % 63.7 % 63.8
% 63.7 % 54.9 % 60.6
% Revenue adjustments 8,772 127 8,899 2,719 44 2,763
Amortization of acquired technology 5,388 1,319 6,707 4,265 3,161
7,426 Stock-based compensation expenses (1) 1,084 320 1,404 684 162
846 Acquisition expenses, net (3) 10 5 15 11 6 17 Restructuring
expenses (3) 293 156 449 238 125
363
Non-GAAP gross profit $ 147,754
$ 70,791 $ 218,545
$ 126,610 $ 59,920
$ 186,530 Non-GAAP gross margin
68.4 % 65.4 % 67.4 %
66.9 % 58.3 % 63.9 %
(1) Represents the stock-based compensation expenses
applicable to cost of revenue, allocated proportionally to our year
ended January 31, 2019 and 2018, respectively, 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 16 to our April 30, 2019 Form 10-Q, when
filed) applicable to cost of revenue, allocated proportionally to
our year ended January 31, 2019 and 2018, respectively, 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, 2019 and 2018, respectively, annual
non-GAAP segment revenue, and our acquisition expenses, net and
restructuring expenses applicable to cost of 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 9
VERINT SYSTEMS INC. AND SUBSIDIARIES Estimated Non-GAAP
Fully Allocated Operating Margins and Estimated Fully Allocated
Adjusted EBITDA (Unaudited)
Three Months Ended April
30,
2019 2018 (in thousands)
Customer Engagement
Cyber Intelligence
Consolidated
Customer Engagement
Cyber Intelligence
Consolidated Non-GAAP segment revenue
$ 215,867 $ 108,291
$ 324,158 $ 189,175
$ 102,795 $ 291,970
Segment contribution (1) 78,818 27,290 106,108 66,802 21,222
88,024 Estimated allocation of shared support expenses (2) 28,593
15,261 43,854 27,492 14,417
41,909
Estimated non-GAAP operating income
50,225 12,029 62,254
39,310 6,805 46,115
Depreciation and amortization (3) 5,133 2,740 7,873
5,379 2,821 8,200
Estimated adjusted
EBITDA $ 55,358 $ 14,769
$ 70,127 $ 44,689
$ 9,626 $ 54,315
Estimated non-GAAP fully allocated operating margin
23.3 % 11.1 % 19.2 %
20.8 % 6.6 % 15.8 %
Estimated fully allocated adjusted EBITDA margin 25.6
% 13.6 % 21.6 % 23.6
% 9.4 % 18.6 % (1)
See footnote 16 to our April 30, 2019 Form 10-Q, when filed.
(2) Represents our shared support expenses (as disclosed in
footnote 16 to our April 30, 2019 Form 10-Q, when filed), allocated
proportionally to our non-GAAP segment revenue for the year ended
January 31, 2019 and 2018, respectively, which we believe provides
a reasonable approximation for purposes of understanding the
relative non-GAAP operating margins of our two businesses.
(3) Represents certain depreciation and amortization expenses,
which are otherwise included in our non-GAAP operating income,
allocated proportionally to our non-GAAP segment revenue for the
year ended January 31, 2019 and 2018, respectively, which we
believe provides a reasonable approximation for purposes of
understanding the relative adjusted EBITDA of our two businesses.
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 recurring revenue,
non-GAAP nonrecurring revenue, non-GAAP cloud 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, 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. We exclude from our non-GAAP revenue the
impact of fair value adjustments required under GAAP relating to
cloud services and customer support contracts acquired in a
business acquisition, 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 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, including $1.9 million of fees and expenses for
the three months ended April 30, 2019 related to a shareholder
proxy contest, 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. 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, 2020 is currently approximately 10%, and was 11.0% for
the year ended January 31, 2019. 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.
Customer Engagement Cloud, Recurring and
Nonrecurring Revenue Metrics
Recurring revenue, on both a GAAP and non-GAAP basis, is the
portion of our revenue that we believe is likely to be renewed in
the future, and primarily consists of initial and renewal post
contract support and cloud revenue.
Nonrecurring revenue, on both a GAAP and non-GAAP basis,
primarily consists of our perpetual licenses, consulting,
implementation and installation services, and training.
Cloud revenue, on both a GAAP and non-GAAP basis, primarily
consists of SaaS and optional managed services.
SaaS revenue includes bundled SaaS, software with standard
managed services and unbundled SaaS that we account for as term
licenses where managed services are purchased separately.
We believe that recurring revenue, nonrecurring revenue, and
cloud revenue, provide investors with useful insight into the
nature and sustainability of our revenue streams. The recurrence of
these revenue streams in future periods depends on a number of
factors including contractual periods and customers' renewal
decisions. Please see “Revenue adjustments” above for an
explanation for why we present these revenue numbers on both a GAAP
and non-GAAP basis.
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,
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/20190529005934/en/
Investor RelationsAlan
RodenVerint Systems Inc.(631) 962-9304alan.roden@verint.com
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