Strong Momentum in First Half; Raising Guidance for the Year
Verint® (Nasdaq: VRNT), The Customer Engagement Company™,
today announced results for the three and six months ended July 31,
2021 (FYE 2022). Revenue for the three months ended July 31, 2021
was $215 million on a GAAP basis representing 5% year-over-year
growth and $216 million on a non-GAAP basis representing 4%
year-over-year growth. Revenue for the six months ended July 31,
2021 was $416 million on a GAAP basis representing 7%
year-over-year growth and $418 million on a non-GAAP basis
representing 5% year-over-year growth. For the three months ended
July 31, 2021, diluted EPS was $0.00 on a GAAP basis and, $0.58 on
a non-GAAP basis. For the six months ended July 31, 2021, net loss
per common share was ($0.04) on a GAAP basis, and diluted EPS was
$1.01 on a non-GAAP basis.
“Since the completion of the Cognyte spin at the beginning of
the year, we have experienced strong cloud momentum and believe we
have crossed the mid-point of our cloud transition. We expect our
cloud momentum to continue in the second half of the year and we
are raising our annual outlook for non-GAAP revenue, cloud revenue
and diluted EPS. We are also raising our annual outlook for new
perpetual license equivalent bookings growth, which we believe is
an important metric during our cloud transition and a leading
indicator of future revenue growth,” said Dan Bodner, Verint
CEO.
Bodner added: “Behind our strong momentum is our strategy to
drive automation in customer engagement across the enterprise with
our open cloud platform. We believe that more and more brands are
embracing digital first engagement and that we are uniquely
positioned to help them with our open, partner friendly,
infrastructure-agnostic cloud platform. We continue to rapidly
innovate our cloud platform to power the workforce of people and
bots, to embrace an enterprise-wide customer experience culture,
and to harness data to drive more AI and analytics into their
business.”
Second Quarter Key Cloud
Metrics
- Strong Cloud Growth: Cloud revenue up more than 43%
year-over-year
- Strong Software Bookings Growth: New perpetual license
equivalent (PLE) bookings up 17% year-over-year
- SaaS Bookings Mix: 53% of PLE bookings from SaaS
compared to 43% in the same quarter in the prior year
- Improving Visibility from Multi-year Cloud Deals:
Remaining performance obligations (RPO) increased 29%
year-over-year to $627 million
FYE 2022 Outlook
We are increasing our non-GAAP annual outlook for the year
ending January 31, 2022 as follows:
- Cloud Revenue Growth: 35% (up from a range of 30% to 35%)
- New PLE Bookings Growth: 15% (up from 10%+)
- Revenue: $872 million with a range of +/- 2% (up from $860
million)
- We expect Q3 revenue to be between $215 to $220 million and to
finish the year with our typical seasonally strong fourth quarter
revenue.
- Diluted EPS: $2.25 at the midpoint of our revenue guidance (up
from $2.23)
- We expect Q3 diluted EPS of $0.53 at the midpoint of our
revenue guidance and to finish the year with our typical seasonally
strong fourth quarter profitability.
Our non-GAAP outlook for the three months ending October 31,
2021 and year ending January 31, 2022 excludes the following GAAP
measures which we are able to quantify with reasonable
certainty:
- Amortization of intangible assets of approximately $11 million
and $45 million, for the three months ending October 31, 2021 and
year ending January 31, 2022, respectively.
- Expenses and losses on debt modification or retirement of $0
million and $2 million, for the three months ending October 31,
2021 and year ending January 31, 2022, respectively.
- Favorable change in fair value of future tranche right of $0
million and $16 million, for the three months ending October 31,
2021 and year ending January 31, 2022, respectively.
- Unrealized losses on derivatives, net of $0 million and $14
million, for the three months ending October 31, 2021 and year
ending January 31, 2022, respectively.
Our non-GAAP outlook for the three months ending October 31,
2021 and year ending January 31, 2022 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 $1
million and $2 million, and $3 million and $4 million, for the
three months ending October 31, 2021 and year ending January 31,
2022, respectively.
- Stock-based compensation expenses are expected to be between
approximately $15 million and $17 million, and $64 million and $70
million, for the three months ending October 31, 2021 and year
ending January 31, 2022, respectively, assuming market prices for
our common stock approximately consistent with current levels.
- Further costs associated with Verint’s February 1, 2021
separation into two independent public companies are expected to be
between approximately $2 million and $3 million, and $12 million
and $15 million, for the three months ending October 31, 2021 and
year ending January 31, 2022, respectively.
Our non-GAAP outlook does not include the potential impact of
any in-process business acquisitions that may close after the date
hereof, and, unless otherwise specified, reflects foreign currency
exchange rates approximately consistent with current rates.
We are unable, without unreasonable efforts, to provide a
reconciliation for other GAAP measures which are excluded from our
non-GAAP outlook, including the impact of future business
acquisitions or acquisition expenses, future restructuring
expenses, and non-GAAP income tax adjustments due to the level of
unpredictability and uncertainty associated with these items. For
these same reasons, we are unable to assess the probable
significance of these excluded items. While historical results may
not be indicative of future results, actual amounts for the three
and six months ended July 31, 2021 and 2020 for the GAAP measures
excluded from our non-GAAP outlook appear in Tables 2, 3 and 4 of
this press release.
Conference Call
Information
We will conduct a conference call today at 4:30 p.m. ET to
discuss our results for the three and six months ended July 31,
2021, outlook, and long-term targets. An online, real-time webcast
of the conference call and webcast slides will be available on our
website at www.verint.com. The webcast slides will be available on
our website until at least October 31, 2021. 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 5623319. 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) helps the world’s most iconic brands –
including over 85 of the Fortune 100 companies – build enduring
customer relationships by connecting work, data, and experiences
across the enterprise. The Verint Customer Engagement portfolio
draws on the latest advancements in AI and analytics, an open cloud
architecture, and The Science of Customer Engagement™ to help
customers close The Engagement Capacity Gap™.
Verint. The Customer Engagement Company™. Learn more at
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
COVID-19 pandemic, as well as the resulting impact on information
technology spending by enterprises and government customers, on our
business; risks that our customers delay, cancel, or refrain from
placing orders, refrain from renewing subscriptions or service
contracts, or are unable to honor contractual commitments or
payment obligations due to liquidity issues or other challenges in
their budgets and business, due to the COVID-19 pandemic or
otherwise; risks that restrictions resulting from the COVID-19
pandemic or actions taken in response to the pandemic adversely
impact our operations or our ability to fulfill orders, complete
implementations, or recognize revenue; challenges associated with
our cloud transition, including increased importance of
subscription renewal rates, and risk of increased variability in
our period to period results based on the mix, terms, and timing of
our transactions; 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 challenges and needs in both existing and new
areas, 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 revenue, margins, and sufficient levels of
investment in our business and operations, and competitors with
greater resources than we have; risks relating to our ability to
properly manage investments in our business and operations, execute
on growth or strategic 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 identify suitable targets for
acquisition or investment or 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; challenges
associated with selling sophisticated solutions, including with
respect to longer sales cycles, more complex sales processes, and
assisting customers in understanding and realizing the benefits of
our solutions, as well as with developing, offering, implementing,
and maintaining a broad solution portfolio; risks that we may be
unable to maintain, expand, and enable our relationships with
partners as part of our growth strategy; 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, as well as cloud hosting providers; 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 associated with our
significant international operations, exposure to regions subject
to political or economic instability, fluctuations in foreign
exchange rates, and challenges associated with a significant
portion of our cash being held overseas; risks associated with a
significant part of our business coming from government contracts
and associated procurement processes; risks associated with complex
and changing domestic and foreign regulatory environments, relating
to our own operations, the products and services we offer, and/or
the use of our solutions by our customers, including, among others,
with respect to data privacy and protection, government contracts,
anti-corruption, trade compliance, tax, and labor matters; risks
associated with the mishandling or perceived mishandling of
sensitive or confidential information and data, including
personally identifiable information or other information that may
belong to our customers or other third parties, including in
connection with our SaaS or other hosted or managed service
offerings or when we are asked to perform service or support; risks
that our solutions 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; risk of security vulnerabilities or lapses,
including cyber-attacks, information technology system breaches,
failures, or disruptions; 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 associated with 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 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 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 associated with changing accounting
principles or standards, tax laws and regulations, tax rates, and
the continuing availability of expected tax benefits; 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 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 Apax
Partners' significant ownership position and potential that its
interests will not be aligned with those of our common
stockholders; and risks associated with the spin-off of our Cyber
Intelligence Solutions business, including the possibility that the
spin-off does not achieve the benefits anticipated, does not
qualify as a tax-free transaction, or exposes us to unexpected
claims or liabilities. 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, 2021, our
Quarterly Report on Form 10-Q for the quarter ended April 30, 2021,
our Quarterly Report on Form 10-Q for the quarter ended July 31,
2021, when filed, and other filings we make with the SEC.
VERINT, THE CUSTOMER ENGAGEMENT COMPANY, BOUNDLESS CUSTOMER
ENGAGEMENT, THE ENGAGEMENT CAPACITY GAP and THE SCIENCE OF CUSTOMER
ENGAGEMENT 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
July 31,
Six Months Ended
July 31,
(in thousands, except per share data)
2021
2020
2021
2020
Revenue:
Recurring
$
156,178
$
139,267
$
300,631
$
268,337
Nonrecurring
58,439
64,813
114,890
121,608
Total revenue
214,617
204,080
415,521
389,945
Cost of revenue:
Recurring
37,636
32,936
75,712
67,864
Nonrecurring
30,505
29,776
60,385
61,395
Amortization of acquired technology
4,426
4,189
8,810
8,545
Total cost of revenue
72,567
66,901
144,907
137,804
Gross profit
142,050
137,179
270,614
252,141
Operating expenses:
Research and development, net
31,792
30,148
60,940
62,560
Selling, general and administrative
91,376
77,739
179,022
154,566
Amortization of other acquired intangible
assets
7,345
7,719
14,673
15,483
Total operating expenses
130,513
115,606
254,635
232,609
Operating income
11,537
21,573
15,979
19,532
Other income (expense), net:
Interest income
23
422
46
903
Interest expense
(2,199
)
(10,123
)
(7,218
)
(20,812
)
Losses on early retirements of debt
—
(143
)
(2,474
)
(143
)
Other income (expense), net
156
(12,754
)
4,206
(14,576
)
Total other expense, net
(2,020
)
(22,598
)
(5,440
)
(34,628
)
Income (loss) from continuing
operations before provision for income taxes
9,517
(1,025
)
10,539
(15,096
)
Provision for income taxes
4,201
8,345
4,129
8,692
Net income (loss) from continuing
operations
5,316
(9,370
)
6,410
(23,788
)
Net income from discontinued
operations
—
19,957
—
30,400
Net income
5,316
10,587
6,410
6,612
Net income from continuing operations
attributable to noncontrolling interests
316
327
611
567
Net income from discontinued operations
attributable to noncontrolling interests
—
1,766
—
3,565
Net income attributable to Verint
Systems Inc.
5,000
8,494
5,799
2,480
Dividends on preferred stock
(5,200
)
(2,484
)
(8,522
)
(2,484
)
Net (loss) income attributable to
Verint Systems Inc. common shares
$
(200
)
$
6,010
$
(2,723
)
$
(4
)
Net (loss) income attributable to
Verint Systems Inc. common shares
Net loss from continuing operations
attributable to Verint Systems Inc. common shares
$
(200
)
$
(12,181
)
$
(2,723
)
$
(26,839
)
Net income from discontinued operations
attributable to Verint Systems Inc. common shares
$
—
$
18,191
$
—
$
26,835
Basic net (loss) income per common
share attributable to Verint Systems Inc.:
Continuing operations
$
—
$
(0.19
)
$
(0.04
)
$
(0.42
)
Discontinued operations
—
0.28
—
0.42
Total basic net (loss) income per
common share attributable to Verint Systems Inc.
$
—
$
0.09
$
(0.04
)
$
—
Diluted net (loss) income per common
share attributable to Verint Systems Inc.:
Continuing operations
$
—
$
(0.18
)
$
(0.04
)
$
(0.42
)
Discontinued operations
—
0.27
—
0.42
Total diluted net (loss) income per
common share attributable to Verint Systems Inc.
$
—
$
0.09
$
(0.04
)
$
—
Weighted-average common shares
outstanding:
Basic
65,194
64,954
65,417
64,670
Diluted
65,194
65,849
65,417
64,670
Table 2
VERINT SYSTEMS INC. AND
SUBSIDIARIES
GAAP to Non-GAAP Cloud
Metrics
(Unaudited)
Three Months Ended
July 31,
Six Months Ended
July 31,
(in thousands)
2021
2020
2021
2020
Table of
Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud
Revenue
SaaS revenue - GAAP
$
76,384
$
48,229
$
139,976
$
89,117
Bundled SaaS revenue - GAAP
42,940
35,818
82,249
69,211
Unbundled SaaS revenue - GAAP
33,444
12,411
57,727
19,906
Optional managed services revenue -
GAAP
16,872
14,328
33,330
28,460
Cloud revenue - GAAP
$
93,256
$
62,557
$
173,306
$
117,577
Estimated SaaS revenue
adjustments
$
872
$
2,750
$
1,716
$
5,676
Estimated bundled SaaS revenue
adjustments
872
2,706
1,654
5,588
Estimated unbundled SaaS revenue
adjustments
—
44
62
88
Estimated optional managed services
revenue adjustments
132
268
319
549
Estimated cloud revenue
adjustments
$
1,004
$
3,018
$
2,035
$
6,225
SaaS revenue - non-GAAP
$
77,256
$
50,979
$
141,692
$
94,793
Bundled SaaS revenue - non-GAAP
43,812
38,524
83,903
74,799
Unbundled SaaS revenue - non-GAAP
33,444
12,455
57,789
19,994
Optional managed services revenue -
non-GAAP
17,004
14,596
33,649
29,009
Cloud revenue - non-GAAP
$
94,260
$
65,575
$
175,341
$
123,802
Table of New SaaS
ACV
New SaaS ACV
$
26,568
$
16,697
$
45,372
$
28,589
New SaaS ACV Growth YoY
59.1
%
64.7
%
58.7
%
56.1
%
Table of New
Perpetual License Equivalent Bookings
New perpetual license equivalent
bookings
$
73,059
$
62,218
$
134,041
$
109,910
New perpetual license equivalent bookings
change YoY
17.4
%
1.1
%
22.0
%
(11.4
)%
% of new perpetual license equivalent
bookings from SaaS
52.6
%
43.1
%
51.9
%
41.9
%
Table 3
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Three Months Ended
July 31,
Six Months Ended
July 31,
(in thousands, except per share data)
2021
2020
2021
2020
REVENUE
Recurring revenue - GAAP
$
156,178
$
139,267
$
300,631
$
268,337
Nonrecurring revenue - GAAP
58,439
64,813
114,890
121,608
Total GAAP revenue
214,617
204,080
415,521
389,945
Recurring revenue adjustments
1,013
3,066
2,052
6,328
Nonrecurring revenue adjustments
—
—
—
—
Total revenue adjustments
1,013
3,066
2,052
6,328
Recurring revenue - non-GAAP
157,191
142,333
302,683
274,665
Nonrecurring revenue - non-GAAP
58,439
64,813
114,890
121,608
Total non-GAAP revenue
$
215,630
$
207,146
$
417,573
$
396,273
GROSS PROFIT AND GROSS MARGIN
Recurring costs
$
37,636
$
32,936
$
75,712
$
67,864
Nonrecurring costs
30,505
29,776
60,385
61,395
Amortization of acquired technology
4,426
4,189
8,810
8,545
Total GAAP cost of revenue
72,567
66,901
144,907
137,804
GAAP gross profit
142,050
137,179
270,614
252,141
GAAP gross margin
66.2
%
67.2
%
65.1
%
64.7
%
Revenue adjustments
1,013
3,066
2,052
6,328
Amortization of acquired technology
4,426
4,189
8,810
8,545
Stock-based compensation expenses
1,426
1,157
2,688
1,694
Acquisition expenses, net
25
53
50
242
Restructuring expenses
85
(59
)
547
1,560
Separation expenses(3)
—
—
78
—
Discontinued operations corporate overhead
adjustment
—
452
—
1,877
Allocation methodology difference
—
250
—
(293
)
Non-GAAP gross profit
$
149,025
$
146,287
$
284,839
$
272,094
Non-GAAP gross margin
69.1
%
70.6
%
68.2
%
68.7
%
RESEARCH AND DEVELOPMENT, NET
GAAP research and development,
net
$
31,792
$
30,148
$
60,940
$
62,560
As a percentage of GAAP revenue
14.8
%
14.8
%
14.7
%
16.0
%
Stock-based compensation expenses
(2,027
)
(1,496
)
(3,800
)
(2,669
)
Acquisition expenses, net
(56
)
(20
)
(80
)
(221
)
Restructuring expenses
(129
)
(213
)
(313
)
(1,140
)
Separation expenses(3)
(10
)
—
(467
)
—
Discontinued operations corporate overhead
adjustment
—
(3,973
)
—
(8,494
)
Allocation methodology difference
—
1,829
—
4,031
Non-GAAP research and development,
net
$
29,570
$
26,275
$
56,280
$
54,067
As a percentage of non-GAAP
revenue
13.7
%
12.7
%
13.5
%
13.6
%
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
GAAP selling, general and
administrative expenses
$
91,376
$
77,739
$
179,022
$
154,566
As a percentage of GAAP revenue
42.6
%
38.1
%
43.1
%
39.6
%
Stock-based compensation expenses
(14,640
)
(10,676
)
(28,006
)
(19,644
)
Acquisition (expenses) benefit, net
(3,343
)
(3,141
)
(4,987
)
602
Restructuring expenses
(1,914
)
(490
)
(2,523
)
(2,508
)
Separation expenses(3)
(3,209
)
—
(8,736
)
—
Other adjustments
(605
)
889
(649
)
788
Discontinued operations corporate overhead
adjustment
—
(6,221
)
—
(13,787
)
Allocation methodology difference
—
(1,693
)
—
(3,047
)
Non-GAAP selling, general and
administrative expenses
$
67,665
$
56,407
$
134,121
$
116,970
As a percentage of non-GAAP
revenue
31.4
%
27.2
%
32.1
%
29.5
%
OPERATING INCOME AND OPERATING
MARGIN
GAAP operating income
$
11,537
$
21,573
$
15,979
$
19,532
GAAP operating margin
5.4
%
10.6
%
3.8
%
5.0
%
Revenue adjustments
1,013
3,066
2,052
6,328
Amortization of acquired technology
4,426
4,189
8,810
8,545
Amortization of other acquired intangible
assets
7,345
7,719
14,673
15,483
Stock-based compensation expenses
18,093
13,329
34,494
24,007
Acquisition expenses (benefit), net
3,424
3,214
5,117
(139
)
Restructuring expenses
2,128
644
3,383
5,208
Separation expenses(3)
3,219
—
9,281
—
Other adjustments
605
(889
)
649
(788
)
Discontinued operations corporate overhead
adjustment
—
10,646
—
24,158
Allocation methodology difference
—
114
—
(1,277
)
Non-GAAP operating income
$
51,790
$
63,605
$
94,438
$
101,057
Non-GAAP operating margin
24.0
%
30.7
%
22.6
%
25.5
%
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net
$
(2,020
)
$
(22,598
)
$
(5,440
)
$
(34,628
)
Unrealized (gains) losses on derivatives,
net
—
(173
)
14,305
(173
)
Amortization of convertible note
discount
—
3,174
—
6,400
Expenses and losses on debt modification
or retirement
—
1,462
2,474
1,462
Change in fair value of future tranche
right
—
13,610
(15,810
)
13,610
Acquisition (benefit) expenses, net
(148
)
54
(3,348
)
66
Non-GAAP other expense, net(1)
$
(2,168
)
$
(4,471
)
$
(7,819
)
$
(13,263
)
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes
$
4,201
$
8,345
$
4,129
$
8,692
GAAP effective income tax rate
44.1
%
(814.1
)%
39.2
%
(57.6
)%
Non-GAAP tax adjustments
887
(3,422
)
4,627
(1,385
)
Non-GAAP provision for income
taxes
$
5,088
$
4,923
$
8,756
$
7,307
Non-GAAP effective income tax
rate
10.3
%
8.3
%
10.1
%
8.3
%
Table of
Reconciliation from GAAP Net Loss from Continuing Operations
Attributable to Verint Systems Inc. Common Shares to Non-GAAP Net
Income from Continuing Operations Attributable to Verint Systems
Inc. Common Shares
GAAP net loss from continuing
operations attributable to Verint Systems Inc. common
shares
$
(200
)
$
(12,181
)
$
(2,723
)
$
(26,839
)
Revenue adjustments
1,013
3,066
2,052
6,328
Amortization of acquired technology
4,426
4,189
8,810
8,545
Amortization of other acquired intangible
assets
7,345
7,719
14,673
15,483
Stock-based compensation expenses
18,093
13,329
34,494
24,007
Unrealized (gains) losses on derivatives,
net
—
(173
)
14,305
(173
)
Amortization of convertible note
discount
—
3,174
—
6,400
Expenses and losses on debt modification
or retirement
—
1,462
2,474
1,462
Change in fair value of future tranche
right
—
13,610
(15,810
)
13,610
Acquisition expenses (benefit), net
3,276
3,268
1,769
(73
)
Restructuring expenses
2,128
644
3,383
5,208
Separation expenses(3)
3,219
—
9,281
—
Other adjustments
605
(889
)
649
(788
)
Discontinued operations corporate overhead
adjustment
—
10,646
—
24,158
Allocation methodology difference
—
114
—
(1,277
)
Non-GAAP tax adjustments
(887
)
3,422
(4,627
)
1,385
Dividends, reversed due to assumed
conversion of preferred stock(4)
5,200
2,484
—
2,484
Total adjustments
44,418
66,065
71,453
106,759
Non-GAAP net income from continuing
operations attributable to Verint Systems Inc. common
shares
$
44,218
$
53,884
$
68,730
$
79,920
Table Comparing
GAAP Diluted Net Loss from Continuing Operations Per Common Share
Attributable to Verint Systems Inc. to Non-GAAP Diluted Net Income
from Continuing Operations Per Common Share Attributable to Verint
Systems Inc.
GAAP diluted net loss from continuing
operations per common share attributable to Verint Systems Inc.
$
—
$
(0.18
)
$
(0.04
)
$
(0.42
)
Non-GAAP diluted net income from
continuing operations per common share attributable to Verint
Systems Inc.(4)
$
0.58
$
0.78
$
1.01
$
1.18
GAAP weighted-average shares used in
computing diluted net loss from continuing operations per common
share attributable to Verint Systems Inc.
65,194
65,849
65,417
64,670
Additional weighted-average shares
applicable to non-GAAP diluted net income from continuing
operations per common share attributable to Verint Systems Inc.
10,684
3,495
2,311
2,815
Non-GAAP diluted weighted-average
shares used in computing net income from continuing operations per
common share attributable to Verint Systems Inc.(4)
75,878
69,344
67,728
67,485
Table of
Reconciliation from GAAP Net Income (Loss) from Continuing
Operations to Adjusted EBITDA
GAAP net income (loss) from continuing
operations
$
5,316
$
(9,370
)
$
6,410
$
(23,788
)
As a percentage of GAAP revenue
2.5
%
(4.6
)%
1.5
%
(6.1
)%
Provision for income taxes
4,201
8,345
4,129
8,692
Other expense, net
2,020
22,598
5,440
34,628
Depreciation and amortization(2)
17,830
18,861
36,111
37,886
Revenue adjustments
1,013
3,066
2,052
6,328
Stock-based compensation expenses
18,093
13,329
34,494
24,007
Acquisition expenses (benefit), net
3,424
3,214
5,117
(139
)
Restructuring expenses
2,129
644
3,383
5,208
Separation expenses(3)
3,218
—
8,914
—
Other adjustments
605
(889
)
649
(788
)
Discontinued operations corporate overhead
adjustment
—
10,646
—
24,158
Allocation methodology difference
—
114
—
(1,277
)
Adjusted EBITDA
$
57,849
$
70,558
$
106,699
$
114,915
As a percentage of non-GAAP
revenue
26.8
%
34.1
%
25.6
%
29.0
%
Table of
Reconciliation from Gross Debt to Net Debt
July 31,
2021
January 31,
2021
Current maturities of long-term debt
$
—
$
386,713
Long-term debt
405,873
402,781
Unamortized debt discounts and issuance
costs
9,127
7,518
Gross debt
415,000
797,012
Less:
Cash and cash equivalents
320,439
585,273
Restricted cash and cash equivalents, and
restricted bank time deposits
14
15
Short-term investments
666
46,300
Net debt, excluding long-term
restricted cash, cash equivalents, time deposits, and
investments
93,881
165,424
Long-term restricted cash, cash
equivalents, time deposits and investments
446
651
Net debt, including long-term
restricted cash, cash equivalents, time deposits, and
investments
$
93,435
$
164,773
(1) For the three months ended July 31, 2021, non-GAAP other
expense, net of $2.2 million was comprised of $1.7 million of
interest and other expense, net of $0.5 million of foreign exchange
gains primarily related to balance sheet translations.
(2) Adjusted for financing fee amortization.
(3) For the three and six months ended July 31, 2020, separation
expenses are considered part of discontinued operations and are,
therefore, not included in the reported results from continuing
operations.
(4) EPS calculation includes the more dilutive of either
preferred stock dividends or conversion of preferred stock shares.
Average shares for the calculation of adjusted diluted EPS for the
six months ended July 31, 2021, excludes shares associated with our
convertible preferred stock and therefore earnings include the
preferred stock dividends. Conversion of the outstanding preferred
shares was more dilutive in all other periods presented.
Table 4
VERINT SYSTEMS INC. AND
SUBSIDIARIES
GAAP to Non-GAAP Recurring and
Nonrecurring Revenue and Gross Profit
(Unaudited)
Three Months Ended
July 31,
Six Months Ended
July 31,
(in thousands)
2021
2020
2021
2020
Table of
Reconciliation from GAAP Recurring and Nonrecurring Revenue to
Non-GAAP Recurring and Nonrecurring Revenue
Recurring revenue - GAAP
$
156,178
$
139,267
$
300,631
$
268,337
Cloud revenue - GAAP
93,256
62,557
173,306
117,577
Support revenue - GAAP
62,922
76,710
127,325
150,760
Nonrecurring revenue - GAAP
$
58,439
$
64,813
$
114,890
$
121,608
Perpetual revenue - GAAP
32,349
35,829
61,672
64,354
Professional services revenue - GAAP
26,090
28,984
53,218
57,254
Total revenue - GAAP
$
214,617
$
204,080
$
415,521
$
389,945
Estimated recurring revenue
adjustments
$
1,013
$
3,066
$
2,052
$
6,328
Estimated cloud revenue adjustments
1,004
3,018
2,035
6,225
Estimated support revenue adjustments
9
48
17
103
Estimated nonrecurring revenue
adjustments
$
—
$
—
$
—
$
—
Estimated perpetual revenue
adjustments
—
—
—
—
Estimated professional services revenue
adjustments
—
—
—
—
Total estimated revenue
adjustments
$
1,013
$
3,066
$
2,052
$
6,328
Recurring revenue - non-GAAP
$
157,191
$
142,333
$
302,683
$
274,665
Cloud revenue - non-GAAP
94,260
65,575
175,341
123,802
Support revenue - non-GAAP
62,931
76,758
127,342
150,863
Nonrecurring revenue - non-GAAP
$
58,439
$
64,813
$
114,890
$
121,608
Perpetual revenue - non-GAAP
32,349
35,829
61,672
64,354
Professional services revenue -
non-GAAP
26,090
28,984
53,218
57,254
Total revenue - non-GAAP
$
215,630
$
207,146
$
417,573
$
396,273
Table of
Reconciliation from GAAP Recurring Gross Profit to Non-GAAP
Recurring Gross Profit
GAAP recurring revenue
$
156,178
$
139,267
$
300,631
$
268,337
GAAP recurring costs
37,636
32,936
75,712
67,864
GAAP recurring gross profit
118,542
106,331
224,919
200,473
GAAP recurring gross margin
75.9
%
76.4
%
74.8
%
74.7
%
Recurring revenue adjustments
1,013
3,066
2,052
6,328
Recurring stock-based compensation
expenses
562
472
991
737
Recurring acquisition expenses, net
25
26
50
54
Recurring restructuring expenses
91
2
444
783
Recurring separation
expenses(1)
—
—
32
—
Recurring discontinued operations
corporate overhead adjustment
—
241
—
465
Recurring allocation methodology
difference
—
93
—
300
Non-GAAP recurring gross profit
$
120,233
$
110,231
$
228,488
$
209,140
Non-GAAP recurring gross margin
76.5
%
77.4
%
75.5
%
76.1
%
Table of
Reconciliation from GAAP Nonrecurring Gross Profit to Non-GAAP
Nonrecurring Gross Profit
GAAP nonrecurring revenue
$
58,439
$
64,813
$
114,890
$
121,608
GAAP nonrecurring costs
30,505
29,776
60,385
61,395
GAAP nonrecurring gross profit
27,934
35,037
54,505
60,213
GAAP nonrecurring gross margin
47.8
%
54.1
%
47.4
%
49.5
%
Nonrecurring revenue adjustments
—
—
—
—
Nonrecurring stock-based compensation
expenses
864
685
1,697
957
Nonrecurring acquisition expenses, net
—
27
—
188
Nonrecurring restructuring expenses
(6
)
(61
)
103
777
Nonrecurring separation
expenses(1)
—
—
46
—
Nonrecurring discontinued operations
corporate overhead adjustment
—
211
—
1,412
Nonrecurring allocation methodology
difference
—
157
—
(593
)
Non-GAAP nonrecurring gross
profit
$
28,792
$
36,056
$
56,351
$
62,954
Non-GAAP nonrecurring gross
margin
49.3
%
55.6
%
49.0
%
51.8
%
(1) For the three and six months ended July 31, 2020, separation
expenses are considered part of discontinued operations and are,
therefore, not included in the reported results from continuing
operations.
Table 5
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
Six Months
Ended
Three Months
Ended
Six Months
Ended
Revenue for the three and six months ended
July 31, 2020
$
204,080
$
389,945
$
207,146
$
396,273
Revenue for the three and six months ended
July 31, 2021
$
214,617
$
415,521
$
215,630
$
417,573
Revenue for the three and six months ended
July 31, 2021 at constant currency(1)
$
210,000
$
406,000
$
211,000
$
408,000
Reported period-over-period revenue
growth
5.2
%
6.6
%
4.1
%
5.4
%
% impact from change in foreign currency
exchange rates
(2.3
)%
(2.5
)%
(2.2
)%
(2.4
)%
Constant currency period-over-period
revenue growth
2.9
%
4.1
%
1.9
%
3.0
%
(1) Revenue for the three and six months ended July 31, 2021 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
and six months ended July 31, 2020 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 6
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Unaudited)
July 31,
January 31,
(in thousands, except share and per share
data)
2021
2021
Assets
Current Assets:
Cash and cash equivalents
$
320,439
$
585,273
Restricted cash and cash equivalents, and
restricted bank time deposits
14
15
Short-term investments
666
46,300
Accounts receivable, net of allowance for
doubtful accounts of $1.2 million and $1.6 million,
respectively
150,242
206,157
Contract assets, net
38,081
36,716
Inventories
5,425
5,541
Prepaid expenses and other current
assets
57,628
42,814
Current assets of discontinued
operations
—
354,926
Total current assets
572,495
1,277,742
Property and equipment, net
67,722
69,090
Operating lease right-of-use assets
48,303
57,849
Goodwill
1,335,816
1,327,407
Intangible assets, net
123,534
143,744
Other assets
130,149
104,511
Long-term assets of discontinued
operations
—
280,952
Total assets
$
2,278,019
$
3,261,295
Liabilities, Temporary Equity, and
Stockholders' Equity
Current Liabilities:
Accounts payable
$
31,518
$
35,463
Accrued expenses and other current
liabilities
132,059
211,517
Current maturities of long-term debt
—
386,713
Contract liabilities
228,040
261,033
Current liabilities of discontinued
operations
—
268,713
Total current liabilities
391,617
1,163,439
Long-term debt
405,873
402,781
Long-term contract liabilities
16,571
16,502
Operating lease liabilities
46,738
56,712
Other liabilities
36,231
75,710
Long-term liabilities of discontinued
operations
—
58,118
Total liabilities
897,030
1,773,262
Commitments and Contingencies
Temporary Equity:
Preferred Stock - $0.0001 par
value; authorized 2,207,000 shares
Series A Preferred Stock; 200,000 shares
issued and outstanding at July 31, 2021 and January 31, 2021,
respectively; aggregate liquidation preference and redemption value
of $200,867 and $206,067 at July 31, 2021 and January 31, 2021,
respectively.
200,628
200,628
Series B Preferred Stock; 200,000 shares
issued and outstanding at July 31, 2021; no shares issued and
outstanding at January 31, 2021; aggregate liquidation preference
and redemption value of $200,867 at July 31, 2021.
235,693
—
Equity component of currently redeemable
convertible notes
—
4,841
Total temporary equity
436,321
205,469
Stockholders' Equity:
Common stock - $0.001 par value;
authorized 120,000,000 shares. Issued 70,402,000 and 70,177,000
shares; outstanding 65,412,000 and 65,773,000 shares at July 31,
2021 and January 31, 2021, respectively.
70
70
Additional paid-in capital
1,342,130
1,726,166
Treasury stock, at cost - 4,990,000 and
4,404,000 shares at July 31, 2021 and January 31, 2021,
respectively.
(234,524
)
(208,124
)
Accumulated deficit
(63,123
)
(113,797
)
Accumulated other comprehensive loss
(102,508
)
(136,878
)
Total Verint Systems Inc. stockholders'
equity
942,045
1,267,437
Noncontrolling interests
2,623
15,127
Total stockholders' equity
944,668
1,282,564
Total liabilities, temporary equity,
and stockholders' equity
$
2,278,019
$
3,261,295
Table 7
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Six Months Ended
July 31,
(in thousands)
2021
2020
Cash flows from operating
activities:
Net income
$
6,410
$
6,612
(Income) from discontinued operations, net
of income taxes
—
(30,400
)
Adjustments to reconcile net income
from continuing operations to net cash provided by operating
activities:
Depreciation and amortization
37,669
41,750
Stock-based compensation, excluding
cash-settled awards
34,489
23,998
Change in fair value of future tranche
right
(15,810
)
13,610
Amortization of discount on convertible
notes
—
6,400
Non-cash losses (gains) on derivative
financial instruments, net
14,374
(137
)
Losses on early retirements of debt
2,474
143
Other, net
(878
)
(266
)
Changes in operating assets and
liabilities:
Accounts receivable
55,664
57,746
Contract assets
(1,334
)
5,957
Inventories
(206
)
(1,195
)
Prepaid expenses and other assets
(27,926
)
(10,428
)
Accounts payable and accrued expenses
(27,271
)
12,483
Contract liabilities
(33,466
)
(34,777
)
Deferred income taxes
(16,521
)
628
Other, net
(815
)
5,999
Net cash provided by operating activities
- continuing operations
26,853
98,123
Net cash (used in) provided by operating
activities - discontinued operations
(12,294
)
38,608
Net cash provided by operating
activities
14,559
136,731
Cash flows from investing
activities:
Cash paid for business combinations,
including adjustments, net of cash acquired
(7,000
)
—
Purchases of property and equipment
(7,575
)
(7,388
)
Purchases of investments
—
(59,800
)
Maturities and sales of investments
45,640
9,000
Cash paid for capitalized software
development costs
(3,697
)
(4,574
)
Change in restricted bank time deposits,
and other investing activities, net
22
(27
)
Net cash provided by (used in) investing
activities - continuing operations
27,390
(62,789
)
Net cash used in investing activities -
discontinued operations
—
(5,699
)
Net cash provided by (used in)
investing activities
27,390
(68,488
)
Cash flows from financing
activities:
Proceeds from issuance of preferred
stock
198,731
197,254
Proceeds from borrowings
315,000
155,000
Repayments of borrowings and other
financing obligations
(311,335
)
(3,794
)
Settlement of 2014 Notes
(386,887
)
—
Purchases of capped calls
(41,060
)
—
Payments of debt-related costs
(10,531
)
(2,207
)
Purchases of treasury stock and common
stock for retirement
(75,460
)
(36,836
)
Payments to repurchase convertible
notes
—
(13,032
)
Preferred stock dividend payments
(12,856
)
—
Distributions paid to noncontrolling
interest
(245
)
(649
)
Payment for termination of interest rate
swap
(16,502
)
—
Net cash transferred to Cognyte Software
Ltd.
(114,657
)
—
Dividend and other settlements received
from Cognyte Software Ltd.
38,280
—
Payments of contingent consideration for
business combinations (financing portion) and other financing
activities
(4,390
)
(8,452
)
Net cash (used in) provided by financing
activities - continuing operations
(421,912
)
287,284
Net cash used in financing activities -
discontinued operations
—
(3,382
)
Net cash (used in) provided by
financing activities
(421,912
)
283,902
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
340
(796
)
Net (decrease) increase in cash, cash
equivalents, restricted cash, and restricted cash
equivalents
(379,623
)
351,349
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, beginning of period
700,133
411,657
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of period
$
320,510
$
763,006
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
$
320,439
$
731,101
Restricted cash and cash equivalents
included in restricted cash and cash equivalents, and restricted
bank time deposits
14
22,890
Restricted cash and cash equivalents
included in other assets
57
9,015
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
320,510
$
763,006
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 recurring revenue,
non-GAAP nonrecurring revenue, non-GAAP perpetual revenue, non-GAAP
support revenue, non-GAAP professional services revenue, non-GAAP
cloud revenue, non-GAAP SaaS revenue, non-GAAP bundled SaaS
revenue, non-GAAP unbundled SaaS revenue, non-GAAP optional managed
services revenue, non-GAAP recurring gross profit and gross
margins, non-GAAP nonrecurring gross profit and gross margins,
non-GAAP gross profit and gross margins, non-GAAP research and
development, net, non-GAAP selling, general and administrative
expenses, non-GAAP operating income and operating margins, non-GAAP
other income (expense), net, non-GAAP provision for (benefit from)
income taxes and non-GAAP effective income tax rate, non-GAAP net
income from continuing operations attributable to Verint Systems
Inc. common shares, non-GAAP diluted net income from continuing
operations per common share attributable to Verint Systems Inc.,
adjusted EBITDA and adjusted EBITDA margins, net debt 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 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 for periods prior to February 1, 2021 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 were required to be bifurcated into
separate liability (debt) and equity (conversion option) components
in a manner that reflected the issuer’s assumed non-convertible
debt borrowing rate. For GAAP purposes, we were required to
recognize imputed interest expense on the difference between our
assumed non-convertible debt borrowing rate and the coupon rate on
our 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. Effective with the February 1, 2021
adoption of Accounting Standards Update (" ASU") 2020-06,
Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, we no longer record the conversion feature of our
convertible senior notes in equity. Instead, we combined the
previously separated equity component with the liability component,
which together is classified as debt, thereby eliminating the
subsequent amortization of the debt discount as interest
expense.
Expenses and losses on debt modification or retirement. We
exclude from our non-GAAP financial measures losses on early
retirements of debt attributable to refinancing or repaying our
debt, and expenses incurred to modify debt terms, because we
believe they are not reflective of our ongoing operations.
Change in fair value of future tranche right. On December 4,
2019, we entered into an Investment Agreement with an affiliate of
Apax Partners (the “Apax Investor”), whereby the Apax Investor
agreed to make an investment in us of up to $400.0 million of
convertible preferred stock. In connection with the Apax Investor’s
first $200.0 million investment on May 7, 2020 (for 200,000 shares
of Series A Preferred Stock), we determined that our obligation to
issue, and the Apax Investor’s obligation to purchase the Series B
Preferred Stock in connection with the completion of the spin-off
of Cognyte Software Ltd. (our former Cyber Intelligence Solutions
business) and other customary closing conditions (the “Future
Tranche Right”) met the definition of a freestanding financial
instrument. This Future Tranche Right was reported at fair value as
an asset or liability on our consolidated balance sheet and was
remeasured at fair value each reporting period until the settlement
of the right at the time of issuance of the Series B Preferred
Stock, which occurred on April 6, 2021. Changes in its fair value
were recognized as a non-cash charge or benefit within other income
(expense), net on the condensed consolidated statement of
operations. We excluded this change in fair value of the Future
Tranche Right from our non-GAAP financial measures because it is
unusual in nature, can vary significantly in amount, and is
unrelated to our ongoing operations.
Acquisition expenses (benefit), net. In connection with
acquisition activity (including with respect to acquisitions that
are not consummated), we incur expenses (benefits), 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 February 1, 2021, we completed the
previously announced spin-off of Cognyte Software Ltd., whose
business and operations consist of our former Cyber Intelligence
Solutions business. We have incurred and expect to incur,
significant expenses in connection with the spin-off, 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 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, all of which are unusual in nature and can vary
significantly in amount and frequency.
Discontinued operations corporate overhead adjustment. These
amounts represent general corporate overhead costs related to
executive management, finance, legal, information technology, and
other shared services functions that were historically allocated to
Cognyte, but are not permitted to be included in discontinued
operations under GAAP guidelines as they represent indirect
expenses of Cognyte.
Allocation methodology difference. These amounts are the result
of presenting our former Cyber Intelligence Solutions business on a
discontinued operations basis for quarters previously reported due
to the completion of the spin-off on February 1, 2021. This
adjustment represents the difference between the allocation of
shared corporate support expenses under GAAP guidelines for
reporting discontinued operations compared to management’s
previously estimated allocations of those shared corporate support
expenses.
Non-GAAP income tax adjustments. We exclude our GAAP provision
for (benefit from) 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, 2022 is currently approximately 10% and was 8% for the
year ended January 31, 2021. 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.
Revenue Metrics and Operating
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 cloud revenue and initial and
renewal post contract support.
Nonrecurring revenue, on both a GAAP and non-GAAP basis,
primarily consists of our perpetual licenses, consulting,
implementation and installation services, hardware, and
training.
Cloud revenue primarily consists of SaaS and optional managed
services.
SaaS revenue includes bundled SaaS, software with standard
managed services and unbundled SaaS (including associated support)
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
bookings growth. We calculate new perpetual license equivalent
bookings by adding to perpetual licenses an amount equal to New
SaaS ACV bookings multiplied by a conversion factor that normalizes
the mix of bundled and unbundled SaaS and perpetual bookings in a
given period. The conversion factor used is based on our order mix
and may change from period to period. Management uses perpetual
license equivalent bookings to understand our performance,
including our software bookings growth and SaaS/perpetual license
mix. This metric should not be viewed in isolation from other
operating metrics that we make available to investors.
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, stock-based
compensation expenses, 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 expenses, 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, 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/20210909005951/en/
Investor Relations Matthew
Frankel, CFA Verint Systems Inc. (631) 962-9672
matthew.frankel@verint.com
Verint Systems (NASDAQ:VRNT)
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