Delivers Strong Q3 Cloud Revenue Growth; Expects Strong Q4 and
Raises Annual Cloud Revenue Growth Guidance
Introduces FYE 2023 Guidance Above Prior Targets and Raises FYE
2024 Targets
Verint® (Nasdaq: VRNT), The Customer Engagement Company™,
today announced results for the three and nine months ended October
31, 2021 (FYE 2022). Revenue for the three months ended October 31,
2021 was $225 million on a GAAP basis representing 4%
year-over-year growth and $227 million on a non-GAAP basis also
representing 4% year-over-year growth. Revenue for the nine months
ended October 31, 2021 was $640 million on a GAAP basis
representing 6% year-over-year growth and $645 million on a
non-GAAP basis representing 5% year-over-year growth. For the three
months ended October 31, 2021, diluted EPS was $0.12 on a GAAP
basis and, $0.69 on a non-GAAP basis. For the nine months ended
October 31, 2021, diluted EPS was $0.08 on a GAAP basis and $1.71
on a non-GAAP basis.
“The momentum we experienced in the first half of the year
continued in the third quarter with strong cloud revenue growth,
strong new PLE bookings growth, and strong revenue and diluted EPS
coming in significantly ahead of expectations. We expect to finish
the year with a strong Q4 and are raising our annual outlook for
total revenue, cloud revenue, and new PLE bookings. We believe our
results and improved outlook reflect the differentiation of our
cloud platform and our execution following the spin-off of our
security business in February 2021,” said Dan Bodner, Verint
CEO.
Bodner continued, “At the time of the spin-off, we laid out
three-year targets for accelerating growth. I am pleased to report
that based on our strong PLE bookings this year across existing and
new customers, we now believe we are tracking ahead of these
targets. We are introducing guidance for next year of 7% revenue
growth, above our prior targets. We are also increasing our targets
for FYE 2024 to 10% revenue growth taking our total revenue to
$1.03 billion with about $650 million in cloud revenue.”
Third Quarter Key Cloud
Metrics
- Strong Cloud Revenue Growth: Up 32% year-over-year
- Strong Software Bookings Growth: New perpetual license
equivalent (PLE) bookings up 14% year-over-year
- Large Cloud Orders: 21 orders each in excess of $1
million Total Contract Value (TCV)
FYE 2022 and FYE 2023
Outlook
We are increasing our non-GAAP annual outlook for the year
ending January 31, 2022, as follows:
- Cloud Revenue Growth: a range of 35% to 37% (up from our prior
guidance of 35% last quarter and 30% at the start of the year)
- New PLE Bookings Growth: a range of 15% to 17% (up from our
prior guidance of 15% last quarter and 10% at the start of the
year)
- Revenue: $875 million +/- 1% (up from our prior guidance of
$872 million last quarter and $860 million at the start of the
year)
- Diluted EPS: $2.25 at the midpoint of our revenue guidance (up
from our prior guidance of $2.20 at the start of the year)
We are introducing our non-GAAP annual outlook for the year
ending January 31, 2023, above our prior targets, as follows:
- Cloud Revenue: 30% growth resulting in cloud revenue of over
$500 million
- New PLE Bookings Growth: a range of 10% to 12%
- Revenue: $935 million +/- 2% reflecting 7% year-over-year
growth
- Diluted EPS: $2.49 at the midpoint of our revenue guidance,
reflecting 11% year-year-year growth
Our non-GAAP outlook for the 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 $47
million.
- Expenses and losses on debt modification or retirement of
approximately $2 million.
- Favorable change in fair value of future tranche right of
approximately $16 million.
- Unrealized losses on derivatives, net of approximately $14
million.
Our non-GAAP outlook for the 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 $5
million and $7 million.
- Stock-based compensation expenses are expected to be between
approximately $65 million and $70 million for the year ending
January 31, 2022, 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 $13 million and $15 million.
Our initial non-GAAP outlook for the year ending January 31,
2023 excludes the following GAAP measures which we are able to
quantify with reasonable certainty:
- Amortization of intangible assets of approximately $41
million.
Our initial non-GAAP outlook for the year ending January 31,
2023 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 $2
million and $4 million.
- Stock-based compensation expenses are expected to be between
approximately $67 million and $73 million for the year ending
January 31, 2023, assuming market prices for our common stock
approximately consistent with current levels.
- Costs associated with modifying our workplace in response to
the post-spin and COVID work environment, including assumed lease
terminations and abandonments, IT infrastructure costs, and other
charges are expected to be between approximately $20 million and
$30 million.
Our non-GAAP FYE 2024 targets exclude any GAAP revenue
adjustments.
Our non-GAAP guidance and targets do 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 and targets, including the impact of future
business acquisitions or acquisition expenses, future restructuring
expenses, and non-GAAP income tax adjustments due to the level of
unpredictability and uncertainty associated with these items. For
these same reasons, we are unable to assess the probable
significance of these excluded items. While historical results may
not be indicative of future results, actual amounts for the three
and nine months ended October 31, 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 nine months ended October 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 January 31, 2022. 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 7551616. 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 or due to applicable regulatory
requirements such as vaccination mandates; 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 recent spin-off of our
Cyber Intelligence Solutions business, including the possibility
that it 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, our Quarterly Report on Form 10-Q for the quarter ended
October 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
October 31,
Nine Months Ended
October 31,
(in thousands, except per share data)
2021
2020
2021
2020
Revenue:
Recurring
$
158,811
$
150,233
$
459,442
$
418,570
Nonrecurring
66,009
64,989
180,899
186,597
Total revenue
224,820
215,222
640,341
605,167
Cost of revenue:
Recurring
36,811
35,388
112,523
103,252
Nonrecurring
30,524
34,440
90,909
95,835
Amortization of acquired technology
4,749
4,044
13,559
12,589
Total cost of revenue
72,084
73,872
216,991
211,676
Gross profit
152,736
141,350
423,350
393,491
Operating expenses:
Research and development, net
31,029
33,293
91,969
95,853
Selling, general and administrative
89,778
80,167
268,800
234,733
Amortization of other acquired intangible
assets
7,261
7,833
21,934
23,316
Total operating expenses
128,068
121,293
382,703
353,902
Operating income
24,668
20,057
40,647
39,589
Other income (expense), net:
Interest income
101
314
147
1,217
Interest expense
(1,502
)
(9,718
)
(8,720
)
(30,530
)
Losses on early retirements of debt
—
—
(2,474
)
(143
)
Other (expense) income, net
(417
)
(11,670
)
3,789
(26,246
)
Total other expense, net
(1,818
)
(21,074
)
(7,258
)
(55,702
)
Income (loss) from continuing
operations before provision for income taxes
22,850
(1,017
)
33,389
(16,113
)
Provision for income taxes
9,349
1,084
13,478
9,776
Net income (loss) from continuing
operations
13,501
(2,101
)
19,911
(25,889
)
Net income from discontinued
operations
—
13,928
—
44,328
Net income
13,501
11,827
19,911
18,439
Net income from continuing operations
attributable to noncontrolling interests
264
309
875
876
Net income from discontinued operations
attributable to noncontrolling interests
—
1,343
—
4,908
Net income attributable to Verint
Systems Inc.
13,237
10,175
19,036
12,655
Dividends on preferred stock
(5,200
)
(2,658
)
(13,722
)
(5,142
)
Net income attributable to Verint
Systems Inc. common shares
$
8,037
$
7,517
$
5,314
$
7,513
Net income (loss) attributable to
Verint Systems Inc. common shares
Net income (loss) from continuing
operations attributable to Verint Systems Inc. common shares
$
8,037
$
(5,068
)
$
5,314
$
(31,907
)
Net income from discontinued operations
attributable to Verint Systems Inc. common shares
$
—
$
12,585
$
—
$
39,420
Basic net income (loss) per common
share attributable to Verint Systems Inc.:
Continuing operations
$
0.12
$
(0.08
)
$
0.08
$
(0.49
)
Discontinued operations
—
0.19
—
0.61
Total basic net income per common share
attributable to Verint Systems Inc.
$
0.12
$
0.11
$
0.08
$
0.12
Diluted net income (loss) per common
share attributable to Verint Systems Inc.:
Continuing operations
$
0.12
$
(0.08
)
$
0.08
$
(0.48
)
Discontinued operations
—
0.19
—
0.59
Total diluted net income per common
share attributable to Verint Systems Inc.
$
0.12
$
0.11
$
0.08
$
0.11
Weighted-average common shares
outstanding:
Basic
65,570
65,571
65,474
64,973
Diluted
66,328
66,234
67,268
66,000
Table 2
VERINT SYSTEMS INC. AND
SUBSIDIARIES
GAAP to Non-GAAP Cloud
Metrics
(Unaudited)
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2021
2020
2021
2020
Table of
Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud
Revenue
SaaS revenue - GAAP
$
82,103
$
58,983
$
222,079
$
148,100
Bundled SaaS revenue - GAAP
48,390
37,406
130,639
106,617
Unbundled SaaS revenue - GAAP
33,713
21,577
91,440
41,483
Optional managed services revenue -
GAAP
16,358
14,884
49,688
43,344
Cloud revenue - GAAP
$
98,461
$
73,867
$
271,767
$
191,444
Estimated SaaS revenue
adjustments
$
1,985
$
1,944
$
3,701
$
7,620
Estimated bundled SaaS revenue
adjustments
1,984
1,897
3,638
7,485
Estimated unbundled SaaS revenue
adjustments
1
47
63
135
Estimated optional managed services
revenue adjustments
112
223
431
772
Estimated cloud revenue
adjustments
$
2,097
$
2,167
$
4,132
$
8,392
SaaS revenue - non-GAAP
$
84,088
$
60,927
$
225,780
$
155,720
Bundled SaaS revenue - non-GAAP
50,374
39,303
134,277
114,102
Unbundled SaaS revenue - non-GAAP
33,714
21,624
91,503
41,618
Optional managed services revenue -
non-GAAP
16,470
15,107
50,119
44,116
Cloud revenue - non-GAAP
$
100,558
$
76,034
$
275,899
$
199,836
Table of New SaaS
ACV
New SaaS ACV
$
18,312
$
15,659
$
63,684
$
44,248
New SaaS ACV Growth YoY
16.9
%
0.3
%
43.9
%
30.4
%
Table of New
Perpetual License Equivalent Bookings
New perpetual license equivalent
bookings
$
75,438
$
66,084
$
209,479
$
175,994
New perpetual license equivalent bookings
change YoY
14.2
%
(12.3
)
%
19.0
%
(11.7
)
%
% of new perpetual license equivalent
bookings from SaaS
43.7
%
44.8
%
49.0
%
43.0
%
Table 3
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands, except per share data)
2021
2020
2021
2020
REVENUE
Recurring revenue - GAAP
$
158,811
$
150,233
$
459,442
$
418,570
Nonrecurring revenue - GAAP
66,009
64,989
180,899
186,597
Total GAAP revenue
224,820
215,222
640,341
605,167
Recurring revenue adjustments
2,108
2,227
4,160
8,555
Nonrecurring revenue adjustments
—
—
—
—
Total revenue adjustments
2,108
2,227
4,160
8,555
Recurring revenue - non-GAAP
160,919
152,460
463,602
427,125
Nonrecurring revenue - non-GAAP
66,009
64,989
180,899
186,597
Total non-GAAP revenue
$
226,928
$
217,449
$
644,501
$
613,722
GROSS PROFIT AND GROSS MARGIN
Recurring costs
$
36,811
$
35,388
$
112,523
$
103,252
Nonrecurring costs
30,524
34,440
90,909
95,835
Amortization of acquired technology
4,749
4,044
13,559
12,589
Total GAAP cost of revenue
72,084
73,872
216,991
211,676
GAAP gross profit
152,736
141,350
423,350
393,491
GAAP gross margin
67.9
%
65.7
%
66.1
%
65.0
%
Revenue adjustments
2,108
2,227
4,160
8,555
Amortization of acquired technology
4,749
4,044
13,559
12,589
Stock-based compensation expenses
1,230
1,753
3,918
3,447
Acquisition expenses, net
121
92
171
334
Restructuring expenses
245
201
792
1,761
Separation expenses(3)
—
—
78
—
Impairment charges
—
145
—
145
Discontinued operations corporate overhead
adjustment
—
1,433
—
3,310
Allocation methodology difference
—
(121
)
—
(414
)
Non-GAAP gross profit
$
161,189
$
151,124
$
446,028
$
423,218
Non-GAAP gross margin
71.0
%
69.5
%
69.2
%
69.0
%
RESEARCH AND DEVELOPMENT, NET
GAAP research and development,
net
$
31,029
$
33,293
$
91,969
$
95,853
As a percentage of GAAP revenue
13.8
%
15.5
%
14.4
%
15.8
%
Stock-based compensation expenses
(1,949
)
(1,241
)
(5,749
)
(3,910
)
Acquisition expenses, net
(192
)
(28
)
(272
)
(249
)
Restructuring expenses
(97
)
(9
)
(410
)
(1,149
)
Separation expenses(3)
—
—
(467
)
—
Other adjustments
—
(43
)
—
(43
)
Discontinued operations corporate overhead
adjustment
—
(4,242
)
—
(12,736
)
Allocation methodology difference
—
1,494
—
5,525
Non-GAAP research and development,
net
$
28,791
$
29,224
$
85,071
$
83,291
As a percentage of non-GAAP
revenue
12.7
%
13.4
%
13.2
%
13.6
%
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
GAAP selling, general and
administrative expenses
$
89,778
$
80,167
$
268,800
$
234,733
As a percentage of GAAP revenue
39.9
%
37.2
%
42.0
%
38.8
%
Stock-based compensation expenses
(13,416
)
(12,535
)
(41,422
)
(32,179
)
Acquisition (expenses) benefit, net
(2,494
)
(538
)
(7,481
)
64
Restructuring expenses
(679
)
(292
)
(3,202
)
(2,800
)
Separation expenses(3)
(1,915
)
—
(10,651
)
—
Impairment charges
(373
)
—
(373
)
—
Other adjustments
37
(42
)
(612
)
746
Discontinued operations corporate overhead
adjustment
—
(7,341
)
—
(21,128
)
Allocation methodology difference
—
(912
)
—
(3,959
)
Non-GAAP selling, general and
administrative expenses
$
70,938
$
58,507
$
205,059
$
175,477
As a percentage of non-GAAP
revenue
31.3
%
26.9
%
31.8
%
28.6
%
OPERATING INCOME AND OPERATING
MARGIN
GAAP operating income
$
24,668
$
20,057
$
40,647
$
39,589
GAAP operating margin
11.0
%
9.3
%
6.3
%
6.5
%
Revenue adjustments
2,108
2,227
4,160
8,555
Amortization of acquired technology
4,749
4,044
13,559
12,589
Amortization of other acquired intangible
assets
7,261
7,833
21,934
23,316
Stock-based compensation expenses
16,595
15,529
51,089
39,536
Acquisition expenses, net
2,807
658
7,924
519
Restructuring expenses
1,021
502
4,404
5,710
Separation expenses(3)
1,915
—
11,196
—
Impairment charges
373
145
373
145
Other adjustments
(37
)
85
612
(703
)
Discontinued operations corporate overhead
adjustment
—
13,016
—
37,174
Allocation methodology difference
—
(703
)
—
(1,980
)
Non-GAAP operating income
$
61,460
$
63,393
$
155,898
$
164,450
Non-GAAP operating margin
27.1
%
29.2
%
24.2
%
26.8
%
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net
$
(1,818
)
$
(21,074
)
$
(7,258
)
$
(55,702
)
Unrealized losses on derivatives, net
—
931
14,305
758
Amortization of convertible note
discount
—
3,220
—
9,620
Expenses and losses on debt modification
or retirement
—
—
2,474
1,462
Change in fair value of future tranche
right
—
9,224
(15,810
)
22,834
Acquisition (benefit) expenses, net
(122
)
62
(3,470
)
128
Non-GAAP other expense, net(1)
$
(1,940
)
$
(7,637
)
$
(9,759
)
$
(20,900
)
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes
$
9,349
$
1,084
$
13,478
$
9,776
GAAP effective income tax rate
40.9
%
(106.6
)
%
40.4
%
(60.7
)
%
Non-GAAP tax adjustments
(2,559
)
3,558
2,068
2,173
Non-GAAP provision for income
taxes
$
6,790
$
4,642
$
15,546
$
11,949
Non-GAAP effective income tax
rate
11.4
%
8.3
%
10.6
%
8.3
%
Table of
Reconciliation from GAAP Net Income (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 income (loss) from continuing
operations attributable to Verint Systems Inc. common
shares
$
8,037
$
(5,068
)
$
5,314
$
(31,907
)
Revenue adjustments
2,108
2,227
4,160
8,555
Amortization of acquired technology
4,749
4,044
13,559
12,589
Amortization of other acquired intangible
assets
7,261
7,833
21,934
23,316
Stock-based compensation expenses
16,595
15,529
51,089
39,536
Unrealized losses on derivatives, net
—
931
14,305
758
Amortization of convertible note
discount
—
3,220
—
9,620
Expenses and losses on debt modification
or retirement
—
—
2,474
1,462
Change in fair value of future tranche
right
—
9,224
(15,810
)
22,834
Acquisition expenses, net
2,685
720
4,454
647
Restructuring expenses
1,021
502
4,404
5,710
Separation expenses(3)
1,915
—
11,196
—
Impairment charges
373
145
373
145
Other adjustments
(37
)
85
612
(703
)
Discontinued operations corporate overhead
adjustment
—
13,016
—
37,174
Allocation methodology difference
—
(703
)
—
(1,980
)
Non-GAAP tax adjustments
2,559
(3,558
)
(2,068
)
(2,173
)
Dividends, reversed due to assumed
conversion of preferred stock(4)
5,200
2,658
13,722
5,142
Total adjustments
44,429
55,873
124,404
162,632
Non-GAAP net income from continuing
operations attributable to Verint Systems Inc. common
shares
$
52,466
$
50,805
$
129,718
$
130,725
Table Comparing
GAAP Diluted Net Income (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 income (loss) from
continuing operations per common share attributable to Verint
Systems Inc.
$
0.12
$
(0.08
)
$
0.08
$
(0.48
)
Non-GAAP diluted net income from
continuing operations per common share attributable to Verint
Systems Inc.(4)
$
0.69
$
0.73
$
1.71
$
1.91
GAAP weighted-average shares used in
computing diluted net income (loss) from continuing operations per
common share attributable to Verint Systems Inc.
66,328
66,234
67,268
66,000
Additional weighted-average shares
applicable to non-GAAP diluted net income from continuing
operations per common share attributable to Verint Systems Inc.
9,478
3,739
8,544
2,411
Non-GAAP diluted weighted-average
shares used in computing net income from continuing operations per
common share attributable to Verint Systems Inc.(4)
75,806
69,973
75,812
68,411
Table of
Reconciliation from GAAP Net Income (Loss) from Continuing
Operations to Adjusted EBITDA
GAAP net income (loss) from continuing
operations
$
13,501
$
(2,101
)
$
19,911
$
(25,889
)
As a percentage of GAAP revenue
6.0
%
(1.0
)
%
3.1
%
(4.3
)
%
Provision for income taxes
9,349
1,084
13,478
9,776
Other expense, net
1,818
21,074
7,258
55,702
Depreciation and amortization(2)
18,585
18,587
54,696
56,473
Revenue adjustments
2,108
2,227
4,160
8,555
Stock-based compensation expenses
16,595
15,529
51,089
39,536
Acquisition expenses, net
2,807
658
7,924
519
Restructuring expenses
995
502
4,378
5,710
Separation expenses(3)
1,915
—
10,829
—
Impairment charges
373
145
373
145
Other adjustments
(37
)
85
612
(703
)
Discontinued operations corporate overhead
adjustment
—
13,016
—
37,174
Allocation methodology difference
—
(703
)
—
(1,980
)
Adjusted EBITDA
$
68,009
$
70,103
$
174,708
$
185,018
As a percentage of non-GAAP
revenue
30.0
%
32.2
%
27.1
%
30.1
%
Table of
Reconciliation from Gross Debt to Net Debt
October 31, 2021
January 31, 2021
Current maturities of long-term debt
$
—
$
386,713
Long-term debt
406,411
402,781
Unamortized debt discounts and issuance
costs
8,589
7,518
Gross debt
415,000
797,012
Less:
Cash and cash equivalents
307,847
585,273
Restricted cash and cash equivalents, and
restricted bank time deposits
6
15
Short-term investments
661
46,300
Net debt, excluding long-term
restricted cash, cash equivalents, time deposits, and
investments
106,486
165,424
Long-term restricted cash, cash
equivalents, time deposits and investments
492
651
Net debt, including long-term
restricted cash, cash equivalents, time deposits, and
investments
$
105,994
$
164,773
(1) For the three months ended October 31, 2021, non-GAAP other
expense, net of $1.9 million was comprised of $1.2 million of
interest and other expense, net of $0.7 million of foreign exchange
charges primarily related to balance sheet translations.
(2) Adjusted for financing fee amortization.
(3) For the three and nine months ended October 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.
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
October 31,
Nine Months Ended
October 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
$
158,811
$
150,233
$
459,442
$
418,570
Cloud revenue - GAAP
98,461
73,867
271,767
191,444
Support revenue - GAAP
60,350
76,366
187,675
227,126
Nonrecurring revenue - GAAP
$
66,009
$
64,989
$
180,899
$
186,597
Perpetual revenue - GAAP
40,436
35,461
102,108
99,815
Professional services revenue - GAAP
25,573
29,528
78,791
86,782
Total revenue - GAAP
$
224,820
$
215,222
$
640,341
$
605,167
Estimated recurring revenue
adjustments
$
2,108
$
2,227
$
4,160
$
8,555
Estimated cloud revenue adjustments
2,097
2,167
4,132
8,392
Estimated support revenue adjustments
11
60
28
163
Estimated nonrecurring revenue
adjustments
$
—
$
—
$
—
$
—
Estimated perpetual revenue
adjustments
—
—
—
—
Estimated professional services revenue
adjustments
—
—
—
—
Total estimated revenue
adjustments
$
2,108
$
2,227
$
4,160
$
8,555
Recurring revenue - non-GAAP
$
160,919
$
152,460
$
463,602
$
427,125
Cloud revenue - non-GAAP
100,558
76,034
275,899
199,836
Support revenue - non-GAAP
60,361
76,426
187,703
227,289
Nonrecurring revenue - non-GAAP
$
66,009
$
64,989
$
180,899
$
186,597
Perpetual revenue - non-GAAP
40,436
35,461
102,108
99,815
Professional services revenue -
non-GAAP
25,573
29,528
78,791
86,782
Total revenue - non-GAAP
$
226,928
$
217,449
$
644,501
$
613,722
Table of
Reconciliation from GAAP Recurring Gross Profit to Non-GAAP
Recurring Gross Profit
GAAP recurring revenue
$
158,811
$
150,233
$
459,442
$
418,570
GAAP recurring costs
36,811
35,388
112,523
103,252
GAAP recurring gross profit
122,000
114,845
346,919
315,318
GAAP recurring gross margin
76.8
%
76.4
%
75.5
%
75.3
%
Recurring revenue adjustments
2,108
2,227
4,160
8,555
Recurring stock-based compensation
expenses
540
584
1,531
1,321
Recurring acquisition expenses, net
30
77
80
131
Recurring restructuring expenses
35
119
479
902
Recurring separation
expenses(1)
—
—
32
—
Recurring impairment charges
—
—
—
—
Recurring discontinued operations
corporate overhead adjustment
—
332
—
797
Recurring allocation methodology
difference
—
111
—
411
Non-GAAP recurring gross profit
$
124,713
$
118,295
$
353,201
$
327,435
Non-GAAP recurring gross margin
77.5
%
77.6
%
76.2
%
76.7
%
Table of
Reconciliation from GAAP Nonrecurring Gross Profit to Non-GAAP
Nonrecurring Gross Profit
GAAP nonrecurring revenue
$
66,009
$
64,989
$
180,899
$
186,597
GAAP nonrecurring costs
30,524
34,440
90,909
95,835
GAAP nonrecurring gross profit
35,485
30,549
89,990
90,762
GAAP nonrecurring gross margin
53.8
%
47.0
%
49.7
%
48.6
%
Nonrecurring revenue adjustments
—
—
—
—
Nonrecurring stock-based compensation
expenses
690
1,169
2,387
2,126
Nonrecurring acquisition expenses, net
91
15
91
203
Nonrecurring restructuring expenses
210
82
313
859
Nonrecurring separation
expenses(1)
—
—
46
—
Nonrecurring impairment charges
—
145
—
145
Nonrecurring discontinued operations
corporate overhead adjustment
—
1,101
—
2,513
Nonrecurring allocation methodology
difference
—
(232
)
—
(825
)
Non-GAAP nonrecurring gross
profit
$
36,476
$
32,829
$
92,827
$
95,783
Non-GAAP nonrecurring gross
margin
55.3
%
50.5
%
51.3
%
51.3
%
(1) For the three and nine months ended October 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
Nine Months
Ended
Three Months Ended
Nine Months
Ended
Revenue for the three and nine months
ended October 31, 2020
$
215,222
$
605,167
$
217,449
$
613,722
Revenue for the three and nine months
ended October 31, 2021
$
224,820
$
640,341
$
226,928
$
644,501
Revenue for the three and nine months
ended October 31, 2021 at constant currency(1)
$
223,000
$
629,000
$
225,000
$
633,000
Reported period-over-period revenue
growth
4.5
%
5.8
%
4.4
%
5.0
%
% impact from change in foreign currency
exchange rates
(0.9
)
%
(1.9
)
%
(0.9
)
%
(1.9
)
%
Constant currency period-over-period
revenue growth
3.6
%
3.9
%
3.5
%
3.1
%
(1) Revenue for the three and nine months ended October 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 nine months ended October 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)
October 31,
January 31,
(in thousands, except share and per share
data)
2021
2021
Assets
Current Assets:
Cash and cash equivalents
$
307,847
$
585,273
Restricted cash and cash equivalents, and
restricted bank time deposits
6
15
Short-term investments
661
46,300
Accounts receivable, net of allowance for
doubtful accounts of $1.3 million and $1.6 million,
respectively
161,020
206,157
Contract assets, net
35,276
36,716
Inventories
5,760
5,541
Prepaid expenses and other current
assets
49,880
42,814
Current assets of discontinued
operations
—
354,926
Total current assets
560,450
1,277,742
Property and equipment, net
68,634
69,090
Operating lease right-of-use assets
45,698
57,849
Goodwill
1,361,420
1,327,407
Intangible assets, net
130,528
143,744
Other assets
131,555
104,511
Long-term assets of discontinued
operations
—
280,952
Total assets
$
2,298,285
$
3,261,295
Liabilities, Temporary Equity, and
Stockholders' Equity
Current Liabilities:
Accounts payable
$
32,994
$
35,463
Accrued expenses and other current
liabilities
138,502
211,517
Current maturities of long-term debt
—
386,713
Contract liabilities
221,073
261,033
Current liabilities of discontinued
operations
—
268,713
Total current liabilities
392,569
1,163,439
Long-term debt
406,411
402,781
Long-term contract liabilities
17,162
16,502
Operating lease liabilities
43,880
56,712
Other liabilities
37,250
75,710
Long-term liabilities of discontinued
operations
—
58,118
Total liabilities
897,272
1,773,262
Commitments and Contingencies
Temporary Equity:
Preferred Stock - $0.001 par value;
authorized 2,207,000 shares
Series A Preferred Stock; 200,000 shares
issued and outstanding at October 31, 2021 and January 31, 2021,
respectively; aggregate liquidation preference and redemption value
of $203,467 and $206,067 at October 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 $203,467 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 65,694,000 and 70,177,000
shares; outstanding 65,694,000 and 65,773,000 shares at July 31,
2021 and January 31, 2021, respectively.
66
70
Additional paid-in capital
1,121,523
1,726,166
Treasury stock, at cost - — and 4,404,000
shares at July 31, 2021 and January 31, 2021, respectively.
—
(208,124
)
Accumulated deficit
(49,886
)
(113,797
)
Accumulated other comprehensive loss
(109,523
)
(136,878
)
Total Verint Systems Inc. stockholders'
equity
962,180
1,267,437
Noncontrolling interests
2,512
15,127
Total stockholders' equity
964,692
1,282,564
Total liabilities, temporary equity,
and stockholders' equity
$
2,298,285
$
3,261,295
Table 7
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Nine Months Ended
October 31,
(in thousands)
2021
2020
Cash flows from operating
activities:
Net income
$
19,911
$
18,439
(Income) from discontinued operations, net
of income taxes
—
(44,328
)
Adjustments to reconcile net income
from continuing operations to net cash provided by operating
activities:
Depreciation and amortization
56,910
63,664
Stock-based compensation, excluding
cash-settled awards
51,078
39,533
Change in fair value of future tranche
right
(15,810
)
22,834
Amortization of discount on convertible
notes
—
9,620
Non-cash losses on derivative financial
instruments, net
14,374
812
Losses on early retirements of debt
2,474
143
Other, net
264
(173
)
Changes in operating assets and
liabilities:
Accounts receivable
45,586
35,441
Contract assets
1,290
1,389
Inventories
(758
)
(262
)
Prepaid expenses and other assets
(21,586
)
(11,755
)
Accounts payable and accrued expenses
(21,918
)
25,682
Contract liabilities
(42,618
)
(44,155
)
Deferred income taxes
(15,530
)
2,677
Other, net
(3,418
)
1,693
Net cash provided by operating activities
- continuing operations
70,249
121,254
Net cash (used in) provided by operating
activities - discontinued operations
(9,055
)
36,577
Net cash provided by operating
activities
61,194
157,831
Cash flows from investing
activities:
Cash paid for business combinations,
including adjustments, net of cash acquired
(57,214
)
—
Purchases of property and equipment
(11,903
)
(9,918
)
Purchases of investments
—
(98,067
)
Maturities and sales of investments
45,640
18,800
Cash paid for capitalized software
development costs
(5,637
)
(5,916
)
Change in restricted bank time deposits,
and other investing activities, net
(26
)
(24
)
Net cash used in investing activities -
continuing operations
(29,140
)
(95,125
)
Net cash used in investing activities -
discontinued operations
—
(5,551
)
Net cash used in investing
activities
(29,140
)
(100,676
)
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
(312,415
)
(205,447
)
Settlement of 2014 Notes
(386,887
)
—
Purchases of capped calls
(41,060
)
—
Payments of debt-related costs
(10,708
)
(2,287
)
Purchases of treasury stock and common
stock for retirement
(75,933
)
(36,836
)
Payments to repurchase convertible
notes
—
(13,032
)
Preferred stock dividend payments
(12,856
)
(1,589
)
Distributions paid to noncontrolling
interest
(620
)
(749
)
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
(4,621
)
(8,364
)
Net cash (used in) provided by financing
activities - continuing operations
(424,248
)
83,950
Net cash used in financing activities -
discontinued operations
—
(4,877
)
Net cash (used in) provided by
financing activities
(424,248
)
79,073
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
(29
)
(2,093
)
Net (decrease) increase in cash, cash
equivalents, restricted cash, and restricted cash
equivalents
(392,223
)
134,135
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
$
307,910
$
545,792
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
$
307,847
$
526,815
Restricted cash and cash equivalents
included in restricted cash and cash equivalents, and restricted
bank time deposits
6
15,459
Restricted cash and cash equivalents
included in other assets
57
3,518
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
307,910
$
545,792
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 (including those associated with
modifying the workplace), 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), IT infrastructure costs and other charges associated
with modifying the workplace, 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 11% 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211202005945/en/
Investor Relations Contact
Matthew Frankel, CFA Verint Systems Inc. (631) 962-9672
matthew.frankel@verint.com
Verint Systems (NASDAQ:VRNT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Verint Systems (NASDAQ:VRNT)
Historical Stock Chart
From Jul 2023 to Jul 2024