Verint Concerned that Successful Board-Led
Strategy That Has Driven Strong Results Could Be Derailed by
Neuberger Berman
Board Determined to Protect Stockholders from
Neuberger Berman’s Ill-Informed and Dangerous Ideas
Cloud and Automation Acceleration Drive Strong
Q1 2020 Results
Verint Reiterates Commitment to Continue Board
Refreshment This Fiscal Year
Verint® Systems Inc. (Nasdaq: VRNT) today announced that it has
sent a letter to stockholders in connection with its upcoming
Annual Meeting of Stockholders to be held on June 20, 2019, at
8:30am ET. Stockholders of record as of May 7, 2019 will be
entitled to vote at the meeting.
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the full release here:
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The letter urges stockholders to vote the WHITE proxy card “FOR”
all of the company’s highly qualified and experienced directors,
who are driving and overseeing strong performance at Verint.
The stockholder letter, along with other materials related to
the company’s 2019 Annual Meeting, will be available at
www.VoteVerint.com and at www.sec.gov. The website will be updated
as additional information becomes available.
The full text of Verint’s letter to stockholders follows.
June 3, 2019
Dear Fellow Stockholders,
Over two years ago, Verint’s Board began a strategic
transformation that is delivering significant value to our
stockholders. This successful strategy, which includes accelerated
innovation, evolving financial disclosures and Board refreshment –
is under serious threat – and so is the value of your
investment.
DON’T LET NEUBERGER BERMAN DERAIL VERINT’S
SUCCESSFUL TRANSFORMATION
Neuberger Berman, a 2.6% stockholder who has already had input
into the selection of one of our eight directors, is attempting to
gain additional Board influence so that it can force significant
and abrupt changes on Verint that we believe would destroy
value.
Our Board has embraced change and is committed to further
change to continue to drive stockholder value, but believes
that Neuberger Berman’s ideas, if adopted, would harm our customer
relationships, disrupt our business momentum, and remove Board
members who are vital to the success of our company.
WE ARE OPPOSING NEUBERGER BERMAN IN THIS
PROXY CONTEST BECAUSE WE BELIEVE THEIR IDEAS ARE HIGHLY RISKY AND
DAMAGING TO YOUR INVESTMENT
We are determined to protect our stockholders from Neuberger
Berman’s ill-informed and dangerous ideas. We believe their
proposed actions – some of which they have not fully disclosed in
public – would damage the value of your investment. We have engaged
extensively and have tried to reason with Neuberger Berman, but –
despite their public claims – they are privately insisting on
increasing their influence on our Board, we believe, to further
their value-destructive agenda.
IN OUR PRIVATE DISCUSSIONS, NEUBERGER BERMAN
HAS DEMANDED WE COMMIT TO THE FOLLOWING VALUE-DESTRUCTIVE
ACTIONS
- Halt our strong momentum while their
unqualified nominees re-evaluate our successful strategy and
products
- Split the company now, regardless of
the consequences
- Change product and strategy direction
even if it causes concern and confusion for our customers
OUR TRANSFORMATION ALREADY ADDRESSES
NEUBERGER BERMAN’S PUBLIC DEMANDS
We believe Neuberger Berman is trying to
mislead you by asking for changes that they know have already been
underway for two years, at the Board’s initiation.
NEUBERGER BERMAN’S PUBLIC
DEMANDS
VERINT-INITIATED CHANGE OVER THE PAST TWO YEARS Enhanced
Disclosure
- As the business has transformed - Verint has enhanced its
disclosure
- Comprehensive metrics for each business segment
- Comprehensive cloud metrics
- Comprehensive three year targets
Capital
AllocationStrategy
- Three year capital allocation framework, including cash
generation and expected uses of capital
- Absent desirable acquisitions, return cash to stockholders
- Convertible notes (due June 2021) expected to be settled in
cash through refinancing, not shares
Board Refreshment
- Added three independent directors in the last three years
- One recent director was recommended by Neuberger Berman
- Committed to add another independent director this year
VERINT’S INNOVATION ACCELERATION STRATEGY IS
WORKING AND DELIVERING SIGNIFICANT STOCKHOLDER VALUE
TSR Performance Stronger than
Peers’1
1 Year 2 Year
3 Year Verint
56.0 %
51.6 % 75.5 % Enterprise
Peers2 Enterprise Peers include CVLT, NTCT, CSGS, NICE, NUAN, PEGA,
and MSTR. 14.7 % 23.5 %
41.8 % Security Peers3 Security Peers include FEYE, FSCT, SCWX,
EVBG, MSI, BAE, RTN and MANT. (5.5) %
24.2 % 46.8 % NASDAQ 15.0 %
35.3 % 64.0 % S&P 500 11.2 %
22.9 % 41.4 % Russell 2000
4.3 % 15.7 % 43.9 % S&P 1500
IT Svcs 23.2 % 53.3 %
73.9 %
This table shows that our strategy is clearly working. We
believe Neuberger Berman has attempted to deliberately mislead
stockholders by quoting TSR metrics that intentionally exclude the
market’s positive reaction to our FY2019 results and enhanced
disclosures. We believe that Neuberger Berman is misleading
investors by using metrics that date back to periods prior to 2013,
a time when Verint was a controlled company and its parent company
was in turmoil, as they well know. These distraction tactics do not
change the fact that our performance over the last three years has
been excellent.
STRONG Q1 2020 RESULTS ACROSS KEY
METRICS4
Our strong momentum over the last two years accelerated in
Q1. Non-GAAP revenue increased 11% y-o-y, margins expanded by
340bps and EPS increased 38% y-o-y. Cash from operations increased
55% y-o-y, reflecting the underlying strength in our business.
FY20 GUIDANCE RAISED AGAIN FOR REVENUE AND
EPS5
Verint recently raised guidance for the third time for FY20
since providing initial guidance in December. Revenue growth is
expected to accelerate to 10%. Strong revenue growth combined with
continued margin expansion is expected to drive 14% EPS growth.
THREE YEAR TARGETS - 10% REVENUE CAGR
AND 14% EPS CAGR
Our strong results and stock appreciation
reflect the successful execution of our strategy to accelerate
innovation in the areas of automation and cloud. We believe this
strategy will enable us to sustain growth and drive long-term value
for ALL stockholders.
Three Year Targets by Business
Segment6
Verint Revenue:
~$1.65 Billion
Adjusted EBITDA Margin:
~27%
Diluted EPS:
$4.70
CustomerEngagement
Revenue:
~$1.08 Billion
Adjusted EBITDA Margin:
~30%
Cloud Revenue Mix:
>40%
Recurring Revenue Mix:
~70%
Cyber Intelligence Revenue:
~$575 Million
Adjusted EBITDA Margin:
>20%
Gross Margin Expansion fromSoftware Model
Transition
CLOUD FIRST STRATEGY
Verint is now one of the largest cloud vendors in our Customer
Engagement market and we target 30% - 40% cloud revenue CAGR over
the next three years. We have a CLOUD FIRST strategy and our
salesforce is leading with SaaS. All our solutions run in the
Verint cloud and we have a robust cloud offering ranging from
small- to medium-sized business solutions all the way up to
enterprise-class solutions, elevating customer experience and
driving operating efficiencies.
Based on our cloud leadership, we believe our large installed
base will migrate to the cloud over time creating an opportunity
for 2x cloud revenue uplift. We make it easy for our customers to
seamlessly transition their installed base by providing
feature parity between our
on-premise and cloud solutions. Cloud adoption in our market
provides a significant opportunity for revenue upside and margin
expansion.
ANALYSTS SUPPORT VERINT’S STRATEGY AND
GROWTH POTENTIAL
As our growth strategy continues to drive successful results and
share price appreciation, research analysts have reported their
positive views on Verint’s performance and outlook:
“Prospects are brightening as the company is executing well, and
both segments are achieving healthy revenue growth and improved
profitability.”
- Shaul Eyal, Analyst, Oppenheimer &
Co. research report, May 30, 20197
“In our opinion after almost two years of hitting/beating Street
estimates, this story is starting to finally get the respect from
investors it deserves despite some of the recent noise from short
reports/bears. The major investments in automation/analytics and
cloud are clearly paying dividends in the field and speak to
secular tailwinds as more contact centers move to the cloud.”
- Daniel Ives, Analyst, Wedbush
Securities research report, May 30, 20197
“We are encouraged by the more granular disclosure, and believe
that execution towards the company’s targets should lead to
multiple expansion over time. Our price target goes to $72, from
$71. Maintain Overweight.”
- Paul Coster, Analyst, JP Morgan
Securities research report, May 22, 20197
“Revenue-growth is inflecting to above 10% CAGR, and [Verint]
seems well positioned for the deployment of actionable intelligence
into adjacencies. We are increasing our estimates…Reiterate
Overweight with conviction.”
- Paul Coster, CFA, Analyst, JP Morgan
research report, May 7, 20197
VERINT IS COMMITTED TO CONTINUING TO EVOLVE
OUR DISCLOSURES
As our business has evolved, our disclosure has also evolved and
it will continue to do so. Verint has enhanced its disclosure in
the past as our business changed, based on what we heard would be
useful to our investors. We did so again in our first quarter 2020
earnings announcement, sharing three-year non-GAAP revenue and EPS
targets that reflect our confidence in our growth strategy and the
relevance of these metrics to investors.
Analysts are commenting positively on our enhanced
disclosure.
“We also loudly applaud the increased transparency around
revenue/cloud targets as this continues to be a driver for the
stock to get re-rated as [Verint] shifts to a software based model
adding leverage/scale over the next 12 to 18 months.”
- Daniel Ives, Analyst, Wedbush
Securities research report, May 21, 20197
“We also liked [the] expanded view into three year Customer
Engagement targets, which demonstrate the potential growth and
margin opportunities around these trends.”
- Dan Bergstrom, Analyst, RBC Capital
Markets research report, May 21, 20197
“We really appreciate the new disclosures. It's very
helpful.”
- Anubhav Mehla, Jefferies Research
Associate, Verint Customer Engagement Automation and Cloud Strategy
webcast, May 7, 20197
VERINT HAS ROBUST ENGAGEMENT WITH
STOCKHOLDERS AND IS COMMITTED TO CONTINUED BOARD
REFRESHMENT
Your Board and management team have deep, ongoing engagement
with the company’s stockholders, conducting more than 100 calls and
meetings with investors representing approximately 65% of our
shares over the past 12 months, and we welcome constructive ideas
to drive long-term sustainable value creation.
We are committed to ongoing Board refreshment, and we have added
three new directors over the last three years, including one
director at Neuberger Berman’s suggestion in 2017. This fiscal
year we intend to continue the refreshment process and add a
director with recent and relevant experience in cloud, cyber
security, and/or software who will also enhance the diversity of
the Board.
VERINT’S HIGHLY QUALIFIED AND INDEPENDENT
BOARD IS COMMITTED AND BEST-SUITED TO EXECUTE THE STRATEGY THAT
WILL DRIVE VALUE CREATION FOR ALL VERINT STOCKHOLDERS
We strongly urge
stockholders to support Verint by voting “FOR” Verint’s entire slate of eight highly
qualified directors on the WHITE proxy card.
Sincerely,
The Board of Directors of Verint Systems Inc.
If you have any questions, or need assistance
in voting your shares, please call the firm assisting us in the
solicitation of proxies:
INNISFREE M&A INCORPORATED
TOLL-FREE at 1 (877) 750-9496 (from the U.S.
and Canada)
OR +1 (412) 232-3651 (from other
locations)
Remember: Please simply discard any Gold proxy
card you may receive from Neuberger Berman. Any vote on Neuberger
Berman’s Gold proxy card (even a vote in protest of their nominees)
will revoke any earlier proxy card that you have submitted to
Verint.
SUPPLEMENTAL INFORMATION REGARDING NON-GAAP FINANCIAL
MEASURES
This document contains non-GAAP financial measures and non-GAAP
forward looking statements. The tables below reconcile the non-GAAP
financial measures to the most directly comparable financial
measures prepared in accordance with Generally Accepted Accounting
Principles (“GAAP”).
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: (i) 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; (ii)
facilitating the comparison of our financial results and business
trends with other technology companies who publish similar non-GAAP
measures; and (iii) 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.
Year Ended
January 31, 2017
Year Ended
January 31, 2018
Year EndedJanuary 31,
2019
Three MonthsApril 30,
2018
Three MonthsApril 30,
2019
Revenue Reconciliation GAAP Revenue $1,062.1
$1,135.2 $1,229.7 $289.2 $315.2 Revenue
Adjustments 10.6 15.3 15.4 2.8 8.9
Non-GAAP Revenue
$1,072.7 $1,150.5 $1,245.1 $292.0
$324.2 Table of Reconciliation from GAAP Cloud
Revenue to Non-GAAP Cloud Revenue Customer Engagement
Cloud Revenue – GAAP $122.0 $150.7 Estimated
Revenue Adjustments 13.0 14.7
Cloud Revenue – Non-GAAP
$135.0 $165.4 Operating Income
Reconciliation GAAP Operating Income $17.4
$48.6 $114.2 $7.8 $14.5 As a
Percentage of GAAP Revenue 1.6% 4.3% 9.3%
2.7% 4.6% Revenue Adjustments $10.6 $15.3 $15.4 $2.8
$8.9 Amortization of Acquired Technology 37.3 38.2 25.4 7.4 6.7
Amortization of Other Acquired Intangible Assets 44.1 34.2 31.0 7.7
7.7 Stock-Based Compensation Expenses 65.6 69.4 66.7 16.4 17.1
Acquisition Expenses, Net 12.9 1.6 9.9 2.3 3.9 Restructuring
Expenses 15.7 13.4 4.9 1.1 1.4 Impairment Charges - 3.3 – - - Other
Adjustments 1.0 2.1 (0.6) 0.6 2.1
Non-GAAP Operating Income
$204.6 $226.1 $266.9 $46.1 $62.3
As a Percentage of Non-GAAP Revenue 19.1%
19.7% 21.4% 15.8% 19.2% Net
(Loss) Income Attributable to Verint Systems Inc.
Reconciliation GAAP Net (Loss) Income Attributable to Verint
Systems Inc. $(29.4) $(6.6) $66.0
$(2.2) $1.6 Total GAAP Net (Loss) Income Adjustments
188.1 187.5 146.7
36.7 47.5
Non-GAAP Net Income Attributable
to Verint Systems Inc. $158.7 $180.9
$212.7 $34.5 $49.1 GAAP Diluted Net (Loss)
Income per Common Share Attriburtble
to Verint Systems Inc.
$(0.47) $(0.10) $1.00 $(0.03) $0.02 Non-GAAP Diluted Net Income per
Common Share Attributable
to Verint Systems Inc.
$2.51 $2.81 $3.21 $0.53 $0.73
GAAP Weighted-Average Shares Used
in Computing Diluted Net (Loss) Income per Common Share
62,593 63,312 66,245 63,928
67,088 Additional Weighted-Average Shares Applicable to
Non-GAAP Net Income per Common Share Attributable to Verint Systems
Inc. 538 1,046 – 1,203 -
Non-Gaap Diluted Weighted-Average
Shares Used in Computing Net Income per Common Share
63,131 64,358
66,245 65,131
67,088
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.
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.
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.
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.
Important Additional Information and Where to Find It
Verint has filed a definitive proxy statement on Schedule 14A
and form of associated WHITE Proxy Card with the Securities and
Exchange Commission (“SEC”) in connection with the solicitation of
proxies for its 2019 Annual Meeting (the “Definitive Proxy
Statement”). Details concerning the nominees of Verint’s Board of
Directors for election at the 2019 Annual Meeting are included in
the Definitive Proxy Statement. Verint has mailed solicitation
materials, including a WHITE proxy card, to stockholders of record
entitled to vote at the 2019 Annual Meeting. BEFORE MAKING ANY
VOTING DECISION, INVESTORS AND STOCKHOLDERS OF THE COMPANY ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH OR FURNISHED TO THE
SEC, INCLUDING VERINT’S DEFINITIVE PROXY STATEMENT AND ANY
SUPPLEMENTS THERETO AND ACCOMPANYING WHITE PROXY CARD, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION. Stockholders are able to obtain
a free copy of the Definitive Proxy Statement and of these other
documents through the website maintained by the SEC at
http://www.sec.gov and through the website maintained by Verint at
http://www.verint.com/investor-relations as soon as
reasonably practicable after such materials are electronically
filed with, or furnished to, the SEC.
Certain Information Regarding Participants
Verint, its directors and certain of its officers and other
employees will be deemed to be participants in the solicitation of
Verint’s stockholders in connection with Verint’s 2019 Annual
Meeting. Information regarding the names, affiliations and direct
and indirect interests (by security holdings or otherwise) of these
persons is set forth in the Definitive Proxy Statement filed with
the SEC in connection with Verint’s 2019 Annual Meeting. Additional
information regarding the interests of participants of Verint in
the solicitation of proxies in respect of Verint’s 2019 Annual
Meeting will be filed with the SEC when they become available.
Stockholders are able to obtain a free copy of the Definitive Proxy
Statement and other documents filed by Verint with the SEC from the
sources listed above.
This document contains “forward-looking statements,” including
statements regarding expectations, predictions, views,
opportunities, plans, strategies, beliefs, and statements of
similar effect relating to Verint Systems Inc. These
forward-looking statements are not guarantees of future performance
and they are based on management’s expectations that involve a
number of risks, uncertainties and assumptions, any of which could
cause actual results to differ materially from those expressed in
or implied by the forward-looking statements. For a detailed
discussion of these risk factors, see our Annual Report on Form
10-K for the fiscal year ended January 31, 2019, and other filings
we make with the SEC. The forward-looking statements contained in
this document are made as of the date of this document and, except
as required by law, Verint assumes no obligation to update or
revise them or to provide reasons why actual results may
differ.
1 Bloomberg and Capital IQ, as of 8-Apr-2019.
2 Enterprise Peers include CVLT, NTCT, CSGS, NICE, NUAN, PEGA,
and MSTR.
3 Security Peers include FEYE, FSCT, SCWX, EVBG, MSI, BAE, RTN
and MANT.
4 The $324 million revenue, 19.2% operating margin and $0.73 EPS
are non-GAAP metrics.
5Our guidance for FY20F revenue of $1,375 million and Diluted
EPS of $3.65 are on a non-GAAP basis.
6 All targets are on a non-GAAP basis.
7 Permission to use quote neither sought nor obtained.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190603005436/en/
Investor MediaAlan
Rodenalan.roden@verint.comMedia:Jim Barron/David MillarSard
Verbinnen & Co.212 687 8080
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