Customer Engagement: Accelerating Cloud Adoption in Large
Enterprises
Cyber Intelligence: Transition to Software Model Ahead of
Plan
Customers Looking to Verint for Help Navigating the Challenges
of COVID-19
Verint® Systems Inc. (NASDAQ: VRNT), a global Actionable
Intelligence® leader, today announced results for the three months
and year ended January 31, 2020 (FY20). Revenue for the three
months ended January 31, 2020 was $339 million on a GAAP basis and
$349 million on a non-GAAP basis. Diluted EPS for the three months
ended January 31, 2020 was $0.07 on a GAAP basis and $1.11 on a
non-GAAP basis. Revenue for the year ended January 31, 2020 was
$1,304 million on a GAAP basis and $1,336 million on a non-GAAP
basis. Diluted EPS for the year ended January 31, 2020 was $0.43 on
a GAAP basis and $3.59 on a non-GAAP basis.
“In FY20, we made significant progress with our three strategic
objectives and are pleased to report strong execution of our
Customer Engagement Cloud First strategy, our Cyber Intelligence
Software Model strategy and our plan to separate our two
businesses. In the current COVID-19 environment, we are highly
engaged with our global base of customers helping them to navigate
the new challenges they are facing. Our employees remain fully
engaged, working either from home, or from offices that have been
authorized to remain open, and we believe our business continuity
plan is working well," said Dan Bodner, CEO.
Customer Engagement FY20
Highlights
- Cloud adoption accelerating at large enterprises: Cloud
contracts with TCV > $1 million up 93% y-o-y
- Strong cloud revenue growth: Cloud revenue up about 45%
y-o-y
- Strong SaaS bookings growth: New SaaS ACV up more than
70% y-o-y
- Recurring revenue: Percentage of software revenue that
is recurring increased ~400 bps y-o-y to around 75%
- Large project from the Social Security Administration
(revenue expected in FY21)
- See Tables 2, 4 and 7 for additional Customer Engagement
financial information
“In Customer Engagement, the market continued its shift to the
cloud, with a notable acceleration in large enterprises. We are
pleased to report that all key cloud metrics were up significantly
in FY20, with cloud revenue up about 45%, new SaaS ACV up more than
70%, and the percentage of software revenue that is recurring up
approximately 400 basis points to around 75%. We are also pleased
to announce that the Social Security Administration has selected
Verint solutions for a large project, consisting of $35 million in
perpetual software licenses, plus services and support, to be
deployed in several stages. Revenue from this project was
previously expected to be partially recognized in our FY20 fourth
quarter. The project is being delayed due to appeals and we now
expect it to contribute to revenue in FY21. In FY20 (excluding any
revenue from this large project), we achieved high-single digit
revenue growth on a constant currency basis. Looking ahead, Verint
is well positioned for long-term market growth due to our large
differentiated portfolio, cloud first go-to-market, and expanding
cloud channel partnerships," Bodner added.
Current COVID-19 Environment for Customer
Engagement Bodner continued, “We are focused on helping our
customers navigate their COVID-19 challenges and our solutions
support them with the pressing issues they are facing, including
the urgent need for advanced analytics, addressing the growth in
self-service interactions and managing work from home dynamics. An
example is the Centers for Disease Control and Prevention, or CDC,
a long-standing Verint customer. The CDC has recently experienced a
huge spike in website traffic and we help them to leverage
analytics to drive COVID-19 insights. The majority of our customers
are large enterprises in financial services, healthcare, utilities,
technology and government, where productivity, compliance, and
fraud detection remain a high priority.”
Cyber Intelligence FY20
Highlights
- Software Model Transition: Estimated Fully Allocated
Gross Margins Up ~400bps y-o-y
- Estimated Fully Allocated Gross Profit Growth: Up 13%
y-o-y
- Large Orders: Including one for ~$15 million, one for
~$10 million, and five for ~$5 million each
- See Tables 2, 5 and 7 for additional Cyber Intelligence
financial information
“In Cyber Intelligence, advanced data mining software continues
to play a critical role in accelerating security investigations and
generating actionable insights to fight crime and terror. In FY20,
we won many large contracts with an increased software mix, driving
a 13% year-over-year increase in gross profit on an estimated fully
allocated basis. Our software model transition, which was ahead of
plan in FY20, provides our customers faster innovation and software
refresh cycles to address security threats that are rapidly
becoming more complex with increased data types and volume. Verint
is well positioned to help our customers address these evolving
threats and sustain growth over the long run," said Bodner.
Current COVID-19 Environment for Cyber
Intelligence Bodner concluded, “Our customers are
responsible for maintaining law and order in times of peace and in
times of crisis. We have been asked by governments around the world
to address use cases directly related to the current COVID-19
environment, including helping them monitor and enforce quarantines
from a centralized control center and scan the internet and social
media for signs of increased criminal and terrorism activity in a
time of greater uncertainty. With close working relationships with
government and commercial organizations in more than 100 counties,
we are committed to helping our customers keep the world safe.”
Outlook Doug Robinson, CFO,
added, “Verint has a large customer base of more than 10,000
customers around the world and a very strong and differentiated
portfolio. We had a successful FY20 and entered FY21 with a strong
outlook. At this point, considering the rapidly changing conditions
arising from COVID-19 and uncertainty about its potential impact,
we are unable to provide guidance. In the event the global economy
deteriorates due to the pandemic, we have a strong balance sheet
with $3 billion of assets, including more than $550 million of cash
and short-term investments. We believe we are well positioned to
navigate the current environment, as we stay focused on supporting
our customers and partners during this period."
Conference Call Information
We will conduct a conference call today at 4:30 p.m. ET to discuss
our results for the three months and year ended January 31, 2020
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 2862907. 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 and Operating Metrics" 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 changes in macroeconomic and/or global conditions,
including as a result of slowdowns, recessions, economic
instability, political unrest, armed conflicts, natural disasters,
or outbreaks of disease, such as the novel coronavirus COVID-19
pandemic, as well as the resulting impact on information technology
spending and government budgets, on our business; risks associated
with our ability to keep pace with technological advances and
challenges and evolving industry standards; 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 our own operations as well as to 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; challenges associated with our ability to accurately
forecast when a sales opportunity will convert to an order, or to
accurately forecast revenue and expenses; challenges associated
with our Customer Engagement segment cloud transition and our Cyber
Intelligence segment software model transition, and risk of
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 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, internal
controls, and personnel, and our ability to successfully implement
and maintain enhancements to the foregoing, 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; 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; risks associated with the
planned issuance of preferred stock to an affiliate of Apax
Partners, including with respect to completion of the transaction
and Apax's resulting significant ownership position and potential
that its interests will not be aligned with those of our common
stockholders; and risks associated with the planned spin-off of our
Cyber Intelligence Solutions business, including the possibility
that the spin-off transaction may not be completed in the expected
timeframe or at all, that it does not achieve the benefits
anticipated, or that it negatively impacts our operations or stock
price, including as a result of management distraction from our
business. 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, 2020, when
filed, and other filings we make with the SEC.
VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT
COMPANY, CUSTOMER ENGAGEMENT SOLUTIONS and CYBER INTELLIGENCE
SOLUTIONS are trademarks of Verint Systems Inc. or its
subsidiaries. Verint and other parties may also have trademark
rights in other terms used herein.
Table 1
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended January
31,
Year Ended January 31,
(in thousands, except per share data)
2020
2019
2020
2019
Revenue:
Product
$
124,337
$
127,074
$
454,875
$
454,650
Service and support
214,866
203,156
848,759
775,097
Total revenue
339,203
330,230
1,303,634
1,229,747
Cost of revenue:
Product
39,106
29,005
127,183
129,922
Service and support
75,037
75,046
312,599
293,888
Amortization of acquired technology
5,722
6,524
23,984
25,403
Total cost of revenue
119,865
110,575
463,766
449,213
Gross profit
219,338
219,655
839,868
780,534
Operating expenses:
Research and development, net
58,135
53,113
231,683
209,106
Selling, general and administrative
124,579
114,701
488,871
426,183
Amortization of other acquired intangible
assets
8,328
8,289
31,458
31,010
Total operating expenses
191,042
176,103
752,012
666,299
Operating income
28,296
43,552
87,856
114,235
Other income (expense), net:
Interest income
1,103
1,531
5,620
4,777
Interest expense
(10,235
)
(9,674
)
(40,378
)
(37,344
)
Other income (expense), net
(996
)
(1,712
)
205
(3,906
)
Total other expense, net
(10,128
)
(9,855
)
(34,553
)
(36,473
)
Income before provision for income
taxes
18,168
33,697
53,303
77,762
Provision for income taxes
11,500
5,389
17,620
7,542
Net income
6,668
28,308
35,683
70,220
Net income attributable to noncontrolling
interests
1,799
1,002
6,999
4,229
Net income attributable to Verint
Systems Inc.
$
4,869
$
27,306
$
28,684
$
65,991
Net income per common share
attributable to Verint Systems Inc.:
Basic
$
0.07
$
0.42
$
0.43
$
1.02
Diluted
$
0.07
$
0.41
$
0.43
$
1.00
Weighted-average common shares
outstanding:
Basic
65,994
65,305
66,129
64,913
Diluted
66,999
66,504
67,355
66,245
Table 2
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Measures by Segment
(Unaudited)
Three Months Ended
January 31,
2020
2019
(in thousands)
Customer Engagement
Cyber Intelligence
Consolidated
Customer Engagement
Cyber Intelligence
Consolidated
REVENUE
Total GAAP revenue
$
210,058
$
129,145
$
339,203
$
211,557
$
118,673
$
330,230
Revenue adjustments
4,702
5,557
10,259
6,233
200
6,433
Total non-GAAP revenue
$
214,760
$
134,702
$
349,462
$
217,790
$
118,873
$
336,663
ESTIMATED GROSS PROFIT AND GROSS
MARGIN
Segment products costs
$
9,710
$
26,694
$
36,404
$
8,564
$
19,256
$
27,820
Segment service expenses
54,377
16,642
71,019
53,075
18,293
71,368
Amortization of acquired technology
5,361
361
5,722
5,043
1,481
6,524
Stock-based compensation expenses (1)
2,301
679
2,980
1,063
514
1,577
Shared support expenses allocation (3)
2,438
1,302
3,740
2,148
1,138
3,286
Total GAAP estimated fully allocated
cost of revenue
74,187
45,678
119,865
69,893
40,682
110,575
GAAP estimated fully allocated gross
profit
135,871
83,467
219,338
141,664
77,991
219,655
GAAP estimated fully allocated gross
margin
64.7
%
64.6
%
64.7
%
67.0
%
65.7
%
66.5
%
Revenue adjustments
4,702
5,557
10,259
6,233
200
6,433
Amortization of acquired technology
5,361
361
5,722
5,043
1,481
6,524
Stock-based compensation expenses (1)
2,301
679
2,980
1,063
514
1,577
Acquisition expenses, net (4)
38
20
58
233
125
358
Restructuring expenses (4)
235
125
360
234
132
366
Non-GAAP estimated fully allocated
gross profit
$
148,508
$
90,209
$
238,717
$
154,470
$
80,443
$
234,913
Non-GAAP estimated fully allocated
gross margin
69.2
%
67.0
%
68.3
%
70.9
%
67.7
%
69.8
%
ESTIMATED RESEARCH AND DEVELOPMENT,
NET
Segment expenses
$
22,548
$
23,552
$
46,100
$
24,050
$
21,118
$
45,168
Stock-based compensation expenses (2)
2,935
1,566
4,501
1,680
896
2,576
Shared support expenses allocation (3)
4,913
2,621
7,534
3,501
1,868
5,369
GAAP estimated fully allocated research
and development, net
30,396
27,739
58,135
29,231
23,882
53,113
As a percentage of GAAP revenue
14.5
%
21.5
%
17.1
%
13.8
%
20.1
%
16.1
%
Stock-based compensation expenses (2)
(2,935
)
(1,566
)
(4,501
)
(1,680
)
(896
)
(2,576
)
Acquisition expenses, net (4)
(202
)
(108
)
(310
)
(130
)
(70
)
(200
)
Restructuring expenses (4)
(270
)
(144
)
(414
)
(79
)
(42
)
(121
)
Non-GAAP estimated fully allocated
research and development, net
$
26,989
$
25,921
$
52,910
$
27,342
$
22,874
$
50,216
As a percentage of non-GAAP
revenue
12.6
%
19.2
%
15.1
%
12.6
%
19.2
%
14.9
%
ESTIMATED SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Segment expenses
$
41,011
$
25,002
$
66,013
$
41,870
$
21,917
$
63,787
Stock-based compensation expenses (2)
12,390
6,614
19,004
7,821
4,174
11,995
Shared support expenses allocation (3)
25,794
13,768
39,562
25,375
13,544
38,919
GAAP estimated fully allocated selling,
general and administrative expenses
79,195
45,384
124,579
75,066
39,635
114,701
As a percentage of GAAP revenue
37.7
%
35.1
%
36.7
%
35.5
%
33.4
%
34.7
%
Stock-based compensation expenses (2)
(12,390
)
(6,614
)
(19,004
)
(7,821
)
(4,174
)
(11,995
)
Acquisition expenses, net (4)
(1,298
)
(693
)
(1,991
)
(3,321
)
(1,772
)
(5,093
)
Restructuring expenses (4)
(422
)
(226
)
(648
)
(938
)
(500
)
(1,438
)
Separation expenses (4)
(2,336
)
(1,247
)
(3,583
)
(16
)
(8
)
(24
)
Other adjustments (4)
(1,449
)
(773
)
(2,222
)
247
132
379
Non-GAAP estimated fully allocated
selling, general and administrative expenses
$
61,300
$
35,831
$
97,131
$
63,217
$
33,313
$
96,530
As a percentage of non-GAAP
revenue
28.5
%
26.6
%
27.8
%
29.0
%
28.0
%
28.7
%
OPERATING INCOME, OPERATING MARGIN, AND
ADJUSTED EBITDA
GAAP estimated fully allocated
operating income
$
18,165
$
10,131
$
28,296
$
29,286
$
14,266
$
43,552
GAAP estimated fully allocated
operating margin
8.6
%
7.8
%
8.3
%
13.8
%
12.0
%
13.2
%
Revenue adjustments
4,702
5,557
10,259
6,233
200
6,433
Amortization of acquired technology
5,361
361
5,722
5,043
1,481
6,524
Amortization of other acquired intangible
assets
8,115
213
8,328
8,081
208
8,289
Stock-based compensation expenses (2)
17,626
8,859
26,485
10,564
5,584
16,148
Acquisition expenses, net (4)
1,538
821
2,359
3,684
1,967
5,651
Restructuring expenses (4)
927
495
1,422
1,251
674
1,925
Separation expenses (4)
2,336
1,247
3,583
16
8
24
Other adjustments (4)
1,449
773
2,222
(247
)
(132
)
(379
)
Non-GAAP estimated fully allocated
operating income
60,219
28,457
88,676
63,911
24,256
88,167
Depreciation and amortization (5)
5,803
3,097
8,900
4,692
2,504
7,196
Estimated fully allocated adjusted
EBITDA
$
66,022
$
31,554
$
97,576
$
68,603
$
26,760
$
95,363
Non-GAAP estimated fully allocated
operating margin
28.0
%
21.1
%
25.4
%
29.3
%
20.4
%
26.2
%
Estimated fully allocated adjusted
EBITDA margin
30.7
%
23.4
%
27.9
%
31.5
%
22.5
%
28.3
%
Year Ended
January 31,
2020
2019
(in thousands)
Customer Engagement
Cyber Intelligence
Consolidated
Customer Engagement
Cyber Intelligence
Consolidated
REVENUE
Total GAAP revenue
$
846,525
$
457,109
$
1,303,634
$
796,287
$
433,460
$
1,229,747
Revenue adjustments
26,675
5,708
32,383
15,059
293
15,352
Total non-GAAP revenue
$
873,200
$
462,817
$
1,336,017
$
811,346
$
433,753
$
1,245,099
ESTIMATED GROSS PROFIT AND GROSS
MARGIN
Segment products costs
$
35,455
$
83,291
$
118,746
$
35,018
$
90,553
$
125,571
Segment service expenses
226,555
70,768
297,323
209,305
70,228
279,533
Amortization of acquired technology
21,578
2,406
23,984
17,985
7,418
25,403
Stock-based compensation expenses (1)
6,318
1,866
8,184
4,427
1,308
5,735
Shared support expenses allocation (3)
10,125
5,404
15,529
8,457
4,514
12,971
Total GAAP estimated fully allocated
cost of revenue
300,031
163,735
463,766
275,192
174,021
449,213
GAAP estimated fully allocated gross
profit
546,494
293,374
839,868
521,095
259,439
780,534
GAAP estimated fully allocated gross
margin
64.6
%
64.2
%
64.4
%
65.4
%
59.9
%
63.5
%
Revenue adjustments
26,675
5,708
32,383
15,059
293
15,352
Amortization of acquired technology
21,578
2,406
23,984
17,985
7,418
25,403
Stock-based compensation expenses (1)
6,318
1,866
8,184
4,427
1,308
5,735
Acquisition expenses, net (4)
81
43
124
226
121
347
Restructuring expenses (4)
1,644
877
2,521
980
523
1,503
Non-GAAP estimated fully allocated
gross profit
$
602,790
$
304,274
$
907,064
$
559,772
$
269,102
$
828,874
Non-GAAP estimated fully allocated
gross margin
69.0
%
65.7
%
67.9
%
69.0
%
62.0
%
66.6
%
ESTIMATED RESEARCH AND DEVELOPMENT,
NET
Segment expenses
$
101,002
$
90,708
$
191,710
$
94,935
$
80,927
$
175,862
Stock-based compensation expenses (2)
8,754
4,672
13,426
6,435
3,435
9,870
Shared support expenses allocation (3)
17,309
9,238
26,547
15,240
8,134
23,374
GAAP estimated fully allocated research
and development, net
127,065
104,618
231,683
116,610
92,496
209,106
As a percentage of GAAP revenue
15.0
%
22.9
%
17.8
%
14.6
%
21.3
%
17.0
%
Stock-based compensation expenses (2)
(8,754
)
(4,672
)
(13,426
)
(6,435
)
(3,435
)
(9,870
)
Acquisition expenses, net (4)
(546
)
(292
)
(838
)
(134
)
(71
)
(205
)
Restructuring expenses (4)
(853
)
(455
)
(1,308
)
(312
)
(167
)
(479
)
Non-GAAP estimated fully allocated
research and development, net
$
116,912
$
99,199
$
216,111
$
109,729
$
88,823
$
198,552
As a percentage of non-GAAP
revenue
13.4
%
21.4
%
16.2
%
13.5
%
20.5
%
15.9
%
ESTIMATED SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Segment expenses
$
179,440
$
91,452
$
270,892
$
159,199
$
80,108
$
239,307
Stock-based compensation expenses (2)
39,829
21,259
61,088
33,286
17,766
51,052
Shared support expenses allocation (3)
102,293
54,598
156,891
88,557
47,267
135,824
GAAP estimated fully allocated selling,
general and administrative expenses
321,562
167,309
488,871
281,042
145,141
426,183
As a percentage of GAAP revenue
38.0
%
36.6
%
37.5
%
35.3
%
33.5
%
34.7
%
Stock-based compensation expenses (2)
(39,829
)
(21,259
)
(61,088
)
(33,286
)
(17,766
)
(51,052
)
Acquisition expenses, net (4)
(6,503
)
(3,471
)
(9,974
)
(6,112
)
(3,263
)
(9,375
)
Restructuring expenses (4)
(1,786
)
(954
)
(2,740
)
(1,931
)
(1,031
)
(2,962
)
Separation expenses (4)
(3,448
)
(1,840
)
(5,288
)
(202
)
(108
)
(310
)
Other adjustments (4)
(6,609
)
(3,528
)
(10,137
)
615
328
943
Non-GAAP estimated fully allocated
selling, general and administrative expenses
$
263,387
$
136,257
$
399,644
$
240,126
$
123,301
$
363,427
As a percentage of non-GAAP
revenue
30.2
%
29.4
%
29.9
%
29.6
%
28.4
%
29.2
%
OPERATING INCOME, OPERATING MARGIN, AND
ADJUSTED EBITDA
GAAP estimated fully allocated
operating income
$
67,004
$
20,852
$
87,856
$
93,083
$
21,152
$
114,235
GAAP estimated fully allocated
operating margin
7.9
%
4.6
%
6.7
%
11.7
%
4.9
%
9.3
%
Revenue adjustments
26,675
5,708
32,383
15,059
293
15,352
Amortization of acquired technology
21,578
2,406
23,984
17,985
7,418
25,403
Amortization of other acquired intangible
assets
30,863
595
31,458
30,360
650
31,010
Stock-based compensation expenses (2)
54,901
27,797
82,698
44,148
22,509
66,657
Acquisition expenses, net (4)
7,130
3,806
10,936
6,472
3,455
9,927
Restructuring expenses (4)
4,283
2,286
6,569
3,223
1,721
4,944
Separation expenses (4)
3,448
1,840
5,288
202
108
310
Other adjustments (4)
6,609
3,528
10,137
(615
)
(328
)
(943
)
Non-GAAP estimated fully allocated
operating income
222,491
68,818
291,309
209,917
56,978
266,895
Depreciation and amortization (5)
21,737
11,602
33,339
19,449
10,380
29,829
Estimated fully allocated adjusted
EBITDA
$
244,228
$
80,420
$
324,648
$
229,366
$
67,358
$
296,724
Non-GAAP estimated fully allocated
operating margin
25.5
%
14.9
%
21.8
%
25.9
%
13.1
%
21.4
%
Estimated fully allocated adjusted
EBITDA margin
28.0
%
17.4
%
24.3
%
28.3
%
15.5
%
23.8
%
(1) Represents the stock-based compensation expenses applicable
to cost of revenue, allocated proportionally based upon our year
ended January 31, 2019, 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 stock-based compensation expenses applicable
to research and development, net and selling, general and
administrative, allocated proportionally based upon our non-GAAP
segment revenue for the year ended January 31, 2019, which we
believe provides a reasonable approximation for purposes of
understanding the relative non-GAAP operating margins of our two
businesses.
(3) Represents our shared support expenses (as disclosed in
footnote 17 to our January 31, 2020 Form 10-K, when filed),
allocated proportionally based upon our non-GAAP segment revenue
for the year ended January 31, 2019, which we believe provides a
reasonable approximation for purposes of understanding the relative
non-GAAP operating margins of our two businesses.
(4) Represents the portion of our acquisition expenses, net and
restructuring expenses, separation expenses and other adjustments,
allocated proportionally based upon our year ended January 31,
2019, annual non-GAAP segment revenue, which we believe provides a
reasonable approximation for purposes of understanding the relative
GAAP and non-GAAP gross margins and operating margins of our two
businesses.
(5) Represents certain depreciation and amortization expenses,
which are otherwise included in our non-GAAP operating income,
allocated proportionally based upon our non-GAAP segment revenue
for the year ended January 31, 2019, which we believe provides a
reasonable approximation for purposes of understanding the relative
adjusted EBITDA of our two businesses.
Table 3
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Three Months Ended January
31,
Year Ended January 31,
(in thousands, except per share data)
2020
2019
2020
2019
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net
$
(10,128
)
$
(9,855
)
$
(34,553
)
$
(36,473
)
Unrealized losses on derivatives, net
—
896
1,485
1,135
Amortization of convertible note
discount
3,184
3,021
12,490
11,850
Acquisition expenses, net
(22
)
58
(90
)
374
Non-GAAP other expense, net(1)
$
(6,966
)
$
(5,880
)
$
(20,668
)
$
(23,114
)
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes
$
11,500
$
5,389
$
17,620
$
7,542
GAAP effective income tax rate
63.3
%
16.0
%
33.1
%
9.7
%
Non-GAAP tax adjustments
(5,911
)
4,211
4,085
19,345
Non-GAAP provision for income
taxes
$
5,589
$
9,600
$
21,705
$
26,887
Non-GAAP effective income tax
rate
6.8
%
11.7
%
8.0
%
11.0
%
Table of
Reconciliation from GAAP Net Income Attributable to Verint Systems
Inc. to Non-GAAP Net Income Attributable to Verint Systems
Inc.
GAAP net income attributable to Verint
Systems Inc.
$
4,869
$
27,306
$
28,684
$
65,991
Revenue adjustments
10,259
6,433
32,383
15,352
Amortization of acquired technology
5,722
6,524
23,984
25,403
Amortization of other acquired intangible
assets
8,328
8,289
31,458
31,010
Stock-based compensation expenses
26,485
16,148
82,698
66,657
Unrealized losses on derivatives, net
—
896
1,485
1,135
Amortization of convertible note
discount
3,184
3,021
12,490
11,850
Acquisition expenses, net
2,339
5,709
10,846
10,301
Restructuring expenses
1,419
1,925
6,569
4,944
Separation expenses
3,583
24
5,288
310
Other adjustments
2,222
(379
)
10,137
(943
)
Non-GAAP tax adjustments
5,911
(4,211
)
(4,085
)
(19,345
)
Total GAAP net income adjustments
69,452
44,379
213,253
146,674
Non-GAAP net income attributable to
Verint Systems Inc.
$
74,321
$
71,685
$
241,937
$
212,665
Table Comparing
GAAP Diluted Net Income 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 per common share
attributable to Verint Systems Inc.
$
0.07
$
0.41
$
0.43
$
1.00
Non-GAAP diluted net income per common
share attributable to Verint Systems Inc.
$
1.11
$
1.08
$
3.59
$
3.21
GAAP weighted-average shares used in
computing diluted net income per common share attributable to
Verint Systems Inc.
66,999
66,504
67,355
66,245
Additional weighted-average shares
applicable to non-GAAP diluted net income per common share
attributable to Verint Systems Inc.
—
—
—
—
Non-GAAP diluted weighted-average
shares used in computing net income per common share attributable
to Verint Systems Inc.
66,999
66,504
67,355
66,245
Table of
Reconciliation from GAAP Net Income Attributable to Verint Systems
Inc. to Adjusted EBITDA
GAAP net income attributable to Verint
Systems Inc.
$
4,869
$
27,306
$
28,684
$
65,991
As a percentage of GAAP revenue
1.4
%
8.3
%
2.2
%
5.4
%
Net income attributable to noncontrolling
interest
1,799
1,002
6,999
4,229
Provision for income taxes
11,500
5,389
17,620
7,542
Other expense, net
10,128
9,855
34,553
36,473
Depreciation and amortization(2)
22,951
22,007
88,783
86,242
Revenue adjustments
10,259
6,433
32,383
15,352
Stock-based compensation expenses
26,485
16,148
82,698
66,657
Acquisition expenses, net
2,359
5,651
10,936
9,927
Restructuring expenses
1,421
1,927
6,567
4,944
Separation expenses
3,583
24
5,288
310
Other adjustments
2,222
(379
)
10,137
(943
)
Adjusted EBITDA
$
97,576
$
95,363
$
324,648
$
296,724
As a percentage of non-GAAP
revenue
27.9
%
28.3
%
24.3
%
23.8
%
Table of
Reconciliation from Gross Debt to Net Debt
January 31, 2020
January 31, 2019
Current maturities of long-term debt
$
4,250
$
4,343
Long-term debt
832,798
777,785
Unamortized debt discounts and issuance
costs
22,327
36,589
Gross debt
859,375
818,717
Less:
Cash and cash equivalents
379,146
369,975
Restricted cash and cash equivalents, and
restricted bank time deposits
43,860
42,262
Short-term investments
20,215
32,329
Net debt, excluding long-term
restricted cash, cash equivalents, time deposits, and
investments
416,154
374,151
Long-term restricted cash, cash
equivalents, time deposits and investments
26,363
23,193
Net debt, including long-term
restricted cash, cash equivalents, time deposits, and
investments
$
389,791
$
350,958
(1) For the three months ended January 31, 2020, non-GAAP other
expense, net of $7.0 million was comprised of $5.9 million of
interest and other expense, and $1.1 million of foreign exchange
charges primarily related to balance sheet translations.
(2) Adjusted for financing fee amortization.
Table 4
VERINT SYSTEMS INC. AND
SUBSIDIARIES
GAAP to Non-GAAP Customer
Engagement Revenue and Cloud Metrics
(Unaudited)
Three Months Ended January
31,
Year Ended January 31,
(in thousands)
2020
2019
2020
2019
Table of
Reconciliation from GAAP Software (includes cloud and support) and
Professional Services Revenue to Non-GAAP Software (includes cloud
and support) and Professional Services Revenue
Software (includes cloud and support)
revenue - GAAP
$
180,836
$
180,536
$
714,260
$
661,796
Perpetual revenue - GAAP
40,526
57,397
179,882
196,125
Cloud revenue - GAAP
59,500
43,624
215,827
150,743
Support revenue - GAAP
80,810
79,515
318,551
314,928
Professional services revenue -
GAAP
$
29,222
$
31,021
$
132,265
$
134,491
Total revenue - GAAP
$
210,058
$
211,557
$
846,525
$
796,287
Estimated software (includes cloud and
support) revenue adjustments
$
4,702
$
6,233
$
26,675
$
15,059
Estimated perpetual revenue
adjustments
—
—
—
—
Estimated cloud revenue adjustments
4,637
6,145
26,346
14,690
Estimated support revenue adjustments
65
88
329
369
Estimated professional services revenue
adjustments
—
—
—
—
Total estimated revenue
adjustments
$
4,702
$
6,233
$
26,675
$
15,059
Software (includes cloud and support)
revenue - non-GAAP
$
185,538
$
186,769
$
740,935
$
676,855
Perpetual revenue - non-GAAP
40,526
57,397
179,882
196,125
Cloud revenue - non-GAAP
64,137
49,769
242,173
165,433
Support revenue - non-GAAP
80,875
79,603
318,880
315,297
Professional services revenue -
non-GAAP
$
29,222
$
31,021
$
132,265
$
134,491
Total revenue - non-GAAP
$
214,760
$
217,790
$
873,200
$
811,346
Table of
Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud
Revenue
SaaS revenue - GAAP
$
44,981
$
31,289
$
159,293
$
109,640
Bundled SaaS revenue - GAAP
31,406
23,368
115,925
84,715
Unbundled SaaS revenue - GAAP
13,575
7,921
43,368
24,925
Optional managed services revenue -
GAAP
$
14,519
$
12,335
$
56,534
$
41,103
Cloud revenue - GAAP
$
59,500
$
43,624
$
215,827
$
150,743
Estimated SaaS revenue
adjustments
$
4,267
$
5,599
$
24,464
$
12,485
Estimated bundled SaaS revenue
adjustments
4,225
5,105
23,500
9,681
Estimated unbundled SaaS revenue
adjustments
42
494
964
2,804
Estimated optional managed services
revenue adjustments
$
370
$
546
$
1,882
$
2,205
Estimated cloud revenue
adjustments
$
4,637
$
6,145
$
26,346
$
14,690
SaaS revenue - non-GAAP
$
49,248
$
36,888
$
183,757
$
122,125
Bundled SaaS revenue - non-GAAP
35,631
28,473
139,425
94,396
Unbundled SaaS revenue - non-GAAP
13,617
8,415
44,332
27,729
Optional managed services revenue -
non-GAAP
$
14,889
$
12,881
$
58,416
$
43,308
Cloud revenue - non-GAAP
$
64,137
$
49,769
$
242,173
$
165,433
Table of New SaaS ACV
New SaaS ACV
$
15,785
$
11,658
$
49,710
$
29,069
New SaaS ACV Growth YoY
35.4
%
n/a
71.0
%
57.6
%
Table of New
Perpetual License Equivalent Bookings
New perpetual license equivalent
bookings
$
76,372
$
81,678
$
275,607
$
256,811
New perpetual license equivalent bookings
growth YoY
(6.5
)%
n/a
7.3
%
n/a
Table 5
VERINT SYSTEMS INC. AND
SUBSIDIARIES
GAAP to Non-GAAP Cyber
Intelligence Revenue Metrics
(Unaudited)
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2020
2019
2020
2019
Recurring revenue - GAAP
$
52,092
$
46,027
$
192,578
$
165,265
Nonrecurring revenue - GAAP
77,053
72,646
264,531
268,195
Total revenue - GAAP
$
129,145
$
118,673
$
457,109
$
433,460
Estimated recurring revenue
adjustments
$
471
$
200
$
622
$
293
Estimated nonrecurring revenue
adjustments
5,086
—
5,086
—
Total estimated revenue
adjustments
$
5,557
$
200
$
5,708
$
293
Recurring revenue - non-GAAP
$
52,563
$
46,227
$
193,200
$
165,558
Nonrecurring revenue - non-GAAP
82,139
72,646
269,617
268,195
Total revenue - non-GAAP
$
134,702
$
118,873
$
462,817
$
433,753
Table 6
VERINT SYSTEMS INC. AND
SUBSIDIARIES
GAAP to Non-GAAP Segment and
Shared Support Metrics
(Unaudited)
Three Months Ended January
31,
Year Ended January 31,
(in thousands)
2020
2019
2020
2019
Segment expenses - GAAP (1)
$
249,479
$
232,141
$
981,507
$
914,322
Shared support expenses - GAAP (2)
61,428
54,537
234,271
201,190
Total expenses - GAAP
$
310,907
$
286,678
$
1,215,778
$
1,115,512
Estimated segment expense adjustments
$
(32,378
)
$
(26,150
)
$
(114,106
)
$
(100,013
)
Estimated shared support expense
adjustments
(17,740
)
(12,034
)
(56,963
)
(37,297
)
Total estimated expense
adjustments
$
(50,118
)
$
(38,184
)
$
(171,069
)
$
(137,310
)
Segment expenses - non-GAAP (1)
$
217,101
$
205,991
$
867,401
$
814,309
Shared support expenses - non-GAAP (2)
43,688
42,503
177,308
163,893
Total expenses - non-GAAP
$
260,789
$
248,494
$
1,044,709
$
978,202
(1) Segment expenses include expenses incurred directly by our
two segments.
(2) Shared support expenses include certain operating expenses
that are provided by shared resources or are otherwise generally
not controlled by segment management. The majority of which are for
administrative support functions, such as information technology,
human resources, finance, legal, and other general corporate
support, and for occupancy expenses.
Table 7
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
Year Ended
Three Months Ended
Year Ended
Total Revenue
Revenue for the three months and year
ended January 31, 2019
$
330,230
$
1,229,747
$
336,663
$
1,245,099
Revenue for the three months and year
ended January 31, 2020
$
339,203
$
1,303,634
$
349,462
$
1,336,017
Revenue for the three months and year
ended January 31, 2020
at constant currency(1)
$
340,000
$
1,316,000
$
350,000
$
1,349,000
Reported period-over-period revenue
growth
2.7
%
6.0
%
3.8
%
7.3
%
% impact from change in foreign currency
exchange rates
0.3
%
1.0
%
0.2
%
1.0
%
Constant currency period-over-period
revenue growth
3.0
%
7.0
%
4.0
%
8.3
%
Customer Engagement
Revenue for the three months and year
ended January 31, 2019
$
211,557
$
796,287
$
217,790
$
811,346
Revenue for the three months and year
ended January 31, 2020
$
210,058
$
846,525
$
214,760
$
873,200
Revenue for the three months and year
ended January 31, 2020
at constant currency(1)
$
210,000
$
855,000
$
215,000
$
882,000
Reported period-over-period revenue
change
(0.7
)%
6.3
%
(1.4
)%
7.6
%
% impact from change in foreign currency
exchange rates
—
%
1.1
%
0.1
%
1.1
%
Constant currency period-over-period
revenue change
(0.7
)%
7.4
%
(1.3
)%
8.7
%
Cyber Intelligence
Revenue for the three months and year
ended January 31, 2019
$
118,673
$
433,460
$
118,873
$
433,753
Revenue for the three months and year
ended January 31, 2020
$
129,145
$
457,109
$
134,702
$
462,817
Revenue for the three months and year
ended January 31, 2020
at constant currency(1)
$
130,000
$
461,000
$
135,000
$
467,000
Reported period-over-period revenue
growth
8.8
%
5.5
%
13.3
%
6.7
%
% impact from change in foreign currency
exchange rates
0.7
%
0.9
%
0.3
%
1.0
%
Constant currency period-over-period
revenue growth
9.5
%
6.4
%
13.6
%
7.7
%
(1) Revenue for the three months and year ended January 31, 2020
at constant currency is calculated by translating current-period
GAAP or non-GAAP foreign currency revenue (as applicable) into U.S.
dollars using average foreign currency exchange rates for the three
months and year ended January 31, 2019 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 8
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Unaudited)
January 31,
(in thousands, except share and per share
data)
2020
2019
Assets
Current Assets:
Cash and cash equivalents
$
379,146
$
369,975
Restricted cash and cash equivalents, and
restricted bank time deposits
43,860
42,262
Short-term investments
20,215
32,329
Accounts receivable, net of allowance for
doubtful accounts of $5.3 million and $3.8 million,
respectively
382,435
375,663
Contract assets
64,961
63,389
Inventories
20,495
24,952
Prepaid expenses and other current
assets
87,946
97,776
Total current assets
999,058
1,006,346
Property and equipment, net
116,111
100,134
Operating lease right-of-use assets
102,149
—
Goodwill
1,469,211
1,417,481
Intangible assets, net
197,764
225,183
Deferred income taxes
13,802
21,040
Other assets
117,963
96,843
Total assets
$
3,016,058
$
2,867,027
Liabilities and Stockholders'
Equity
Current Liabilities:
Accounts payable
$
71,604
$
71,621
Accrued expenses and other current
liabilities
229,698
208,481
Current maturities of long-term debt
4,250
4,343
Contract liabilities
397,350
377,376
Total current liabilities
702,902
661,821
Long-term debt
832,798
777,785
Long-term contract liabilities
40,565
30,094
Operating lease liabilities
90,372
—
Deferred income taxes
39,829
43,171
Other liabilities
67,155
93,352
Total liabilities
1,773,621
1,606,223
Commitments and Contingencies
Stockholders' Equity:
Preferred stock - $0.001 par value;
authorized 2,207,000 shares at January 31, 2020 and 2019,
respectively; none issued.
—
—
Common stock - $0.001 par value;
authorized 120,000,000 shares. Issued 68,529,000 and 66,998,000
shares; outstanding 64,738,000 and 65,333,000 shares at January 31,
2020 and 2019, respectively
68
67
Additional paid-in capital
1,660,889
1,586,266
Treasury stock, at cost 3,791,000 and
1,665,000 shares at January 31, 2020 and 2019, respectively
(174,134
)
(57,598
)
Accumulated deficit
(105,590
)
(134,274
)
Accumulated other comprehensive loss
(151,865
)
(145,225
)
Total Verint Systems Inc. stockholders'
equity
1,229,368
1,249,236
Noncontrolling interests
13,069
11,568
Total stockholders' equity
1,242,437
1,260,804
Total liabilities and stockholders'
equity
$
3,016,058
$
2,867,027
Table 9
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Year Ended January 31,
(in thousands)
2020
2019
Cash flows from operating
activities:
Net income
$
35,683
$
70,220
Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
Depreciation and amortization
91,532
88,915
Provision for doubtful accounts
2,572
2,746
Stock-based compensation, excluding
cash-settled awards
82,698
66,657
Amortization of discount on convertible
notes
12,490
11,850
Provision (benefit) from deferred income
taxes
2,145
(3,017
)
Non-cash gains on derivative financial
instruments, net
(599
)
(2,511
)
Other non-cash items, net
4,544
(2,328
)
Changes in operating assets and
liabilities, net of effects of business combinations and
divestitures:
Accounts receivable
(6,894
)
(21,520
)
Contract assets
(1,470
)
5,751
Inventories
1,752
(8,208
)
Prepaid expenses and other assets
13,523
(4,753
)
Accounts payable and accrued expenses
(14,488
)
(15,648
)
Contract liabilities
27,575
32,919
Other liabilities
(13,290
)
(7,328
)
Other, net
131
1,506
Net cash provided by operating
activities
237,904
215,251
Cash flows from investing
activities:
Cash paid for business combinations,
including adjustments, net of cash acquired
(74,096
)
(90,022
)
Purchases of property and equipment
(35,028
)
(31,686
)
Purchases of investments
(47,407
)
(59,065
)
Maturities and sales of investments
59,324
33,118
Settlements of derivative financial
instruments not designated as hedges
3,093
1,335
Cash paid for capitalized software
development costs
(17,222
)
(7,320
)
Change in restricted bank time deposits,
including long-term portion
(14,215
)
(21,304
)
Other investing activities
(250
)
(779
)
Net cash used in investing
activities
(125,801
)
(175,723
)
Cash flows from financing
activities:
Proceeds from borrowings, net of original
issuance discount
45,000
—
Repayments of borrowings and other
financing obligations
(6,478
)
(5,983
)
Payments of equity issuance, debt
issuance, and other debt-related costs
(212
)
(206
)
Proceeds from exercises of stock
options
—
—
Dividends or distributions paid to
noncontrolling interests
(5,488
)
(4,409
)
Purchases of treasury stock
(113,690
)
(173
)
Payments of deferred purchase price and
contingent consideration for business combinations (financing
portion) and other financing activities
(30,454
)
(11,110
)
Net cash used in financing
activities
(111,322
)
(21,881
)
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
(1,823
)
(3,158
)
Net (decrease) increase in cash, cash
equivalents, restricted cash, and restricted cash
equivalents
(1,042
)
14,489
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, beginning of year
412,699
398,210
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of year
$
411,657
$
412,699
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
$
379,146
$
369,975
Restricted cash and cash equivalents
included in restricted cash and cash equivalents, and restricted
bank time deposits
24,513
40,152
Restricted cash and cash equivalents
included in other assets
7,998
2,572
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
411,657
$
412,699
Verint Systems Inc. and Subsidiaries
Supplemental Information About Non-GAAP Financial Measures and
Operating Metrics
This press release contains non-GAAP financial measures,
consisting of non-GAAP revenue, non-GAAP software (includes cloud
and support), non-GAAP professional services, non-GAAP recurring
revenue, non-GAAP nonrecurring revenue, non-GAAP cloud revenue,
non-GAAP SaaS revenue, non-GAAP optional managed services revenue,
estimated fully allocated cost of revenue, estimated GAAP and
non-GAAP fully allocated gross profit and gross margins, estimated
GAAP and non-GAAP fully allocated research and development, net,
estimated GAAP and non-GAAP fully allocated selling, general and
administrative expenses, estimated GAAP and non-GAAP fully
allocated operating income and operating margins, 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., estimated fully
allocated adjusted EBITDA and adjusted EBITDA margins, net debt,
non-GAAP segment expenses, non-GAAP shared support expenses and
constant currency measures. 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.
Separation expenses. On December 4, 2019, we announced our
intention to separate into two independent publicly traded
companies: one which will consist of our Customer Engagement
Solutions business, and one which will consist of our Cyber
Intelligence Solutions business. We are incurring significant
expenses to prepare for this separation, including third-party
advisory, accounting, legal, consulting, and other similar services
related to the separation as well as costs associated with the
operational separation of the two businesses, including those
related to human resources, brand management, real estate, and
information technology (which IT expenses are included in
Separation expenses to the extent not capitalized). Separation
expenses also include incremental cash income taxes related to the
reorganization of legal entities and operations in order to effect
the separation. These costs are incremental to our normal operating
expenses and are being incurred solely as a result of the
separation transaction. Accordingly, we are excluding these
separation expenses from our non-GAAP financial measures in order
to evaluate our performance on a comparable basis.
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 $7.9 million of fees and expenses
related to a shareholder proxy contest that was settled during
three months ended July 31, 2019, 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 ended
January 31, 2020 is 8%, and was 11% 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 Revenue Metrics and
Operating Metrics
Software (includes cloud and support) includes, software
licenses, appliances, SaaS and optional managed services.
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.
Optional Managed Services is recurring services that are
intended to improve our customers operations and reduce
expenses.
New SaaS Annual Contract Value (ACV) includes the annualized
contract value of all new SaaS contracts received within the
period; in cases where SaaS is offered to partners through
usage-based contracts, we include the incremental value of usage
contracts over a rolling four quarters.
New Perpetual License Equivalent Bookings are used to normalize
between perpetual and SaaS bookings and measure overall software
growth. We calculate new perpetual license equivalent bookings by
multiplying New SaaS ACV bookings (excluding bookings from
maintenance conversions, except for the uplift) by a conversion
factor of 2.0 and adding that amount to perpetual license bookings.
The conversion factor of 2.0 is an estimate that is derived from an
analysis of our historical bookings and may change over time.
Management uses perpetual license equivalent bookings to understand
our performance, including our software growth and SaaS/perpetual
license mix. This metric should not be viewed in isolation from
other operating metrics that we make available to investors. The
New Perpetual License Equivalent Bookings calculation was adjusted
in Q4 for the full year to exclude bookings from maintenance
conversion, except for uplift.
Cyber Intelligence Recurring and
Nonrecurring Revenue Metrics
Recurring revenue, on both a GAAP and non-GAAP basis, primarily
consists of initial and renewal support, subscription software
licenses, and SaaS in certain limited transactions.
Nonrecurring revenue, on both a GAAP and non-GAAP basis,
primarily consists of our perpetual licenses, long-term projects
including software customizations that are recognized over time
using a percentage of completion (“POC”) method, consulting,
implementation and installation services, training, and
hardware.
We believe that recurring and nonrecurring 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200331005803/en/
Investor Relations Alan
Roden Verint Systems Inc. (631) 962-9304 alan.roden@verint.com
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