Strong Momentum Continues Across Key SaaS Metrics
Also Announces New $200 Million Share Buyback Program
Verint® (Nasdaq: VRNT), The Customer Engagement Company™,
today announced results for the three and nine months ended October
31, 2022 (FYE 2023). Revenue for the three months ended October 31,
2022 was $225 million on a GAAP basis representing 0.2%
year-over-year growth and $226 million on a non-GAAP basis,
representing (0.6)% year-over-year change and 2.2% year-over-year
growth on a constant currency basis. Revenue for the nine months
ended October 31, 2022 was $666 million on a GAAP basis,
representing 4.0% year-over-year growth, and $668 million on a
non-GAAP basis, representing 3.7% year-over-year growth and 6.0%
year-over-year growth on a constant currency basis. For the three
months ended October 31, 2022, net loss per share was $(0.02) on a
GAAP basis and diluted EPS was $0.69 on a non-GAAP basis. For the
nine months ended October 31, 2022, net loss per share was $(0.21)
on a GAAP basis and diluted EPS was $1.77 on a non-GAAP basis.
Third Quarter Highlights
GAAP
Non-GAAP
Reported
CC
Reported
CC
CC Growth
Revenue
$225 million
$232 million
$226 million
$232 million
2%
SaaS Revenue
$116 million
$119 million
$116 million
$119 million
41%
Note: CC represents constant currency.
- New SaaS ACV Growth: Up 51% year-over-year on a constant
currency basis
- Favorable Mix Shift: 88% of Software Revenue is
Recurring (up from 80% last year)
- Cloud Revenue: Up 35% year-over-year on a constant
currency basis
- New Customer Additions: Added 100+ new logos
“I am pleased to report another quarter with continued strong
SaaS momentum across key metrics driven by brands looking to close
the engagement capacity gap. We had many significant wins from
existing and new customers and delivered strong SaaS Revenue growth
and New SaaS ACV bookings growth with our bookings mix continuing
to shift to SaaS. Revenue came in line with guidance with both
gross margins and diluted EPS coming in strong ahead of our prior
guidance”, said Dan Bodner, Verint CEO.
Year-to-Date Highlights
GAAP
Non-GAAP
Reported
CC
Reported
CC
CC Growth
Revenue
$666 million
$681 million
$668 million
$683 million
6%
SaaS Revenue
$313 million
$319 million
$315 million
$321 million
42%
Note: CC represents constant currency.
- New SaaS ACV Growth: Up 25% year-over-year on a constant
currency basis
- Favorable Mix Shift: 85% of Software Revenue is
Recurring (up from 82% last year)
- Cloud Revenue: Up 34% year-over-year on a constant
currency basis
- New Customer Additions: Added 100+ new logos each
quarter
Doug Robinson, Verint CFO, added, “Throughout this year we
delivered strong SaaS metrics and are pleased with our cloud
transition. We are also pleased with our ability to manage through
the FX environment with a natural hedge on the bottom line. In Q3,
we saw a change in behavior from our perpetual license customers
and expect perpetual revenue to come in lower than our original
outlook. Our current outlook reflects continued strong SaaS growth,
including an acceleration in New SaaS ACV bookings in the second
half of the year, as well as a continued perpetual revenue
decline.”
Share Buyback Program
Verint today also announced that our Board of Directors has
authorized a new share repurchase program whereby we may repurchase
up to $200 million of common stock over the period from December
12, 2022 until January 31, 2025. We may utilize a number of
different methods to effect the repurchases, including but not
limited to, open market purchases and accelerated share
repurchases, and some or all of the repurchases may be made through
Rule 10b5-1 plans. The specific timing, price, and size of
purchases will depend on prevailing stock prices, general market
and economic conditions, and other considerations. The program may
be extended, suspended, or discontinued at any time without prior
notice and does not obligate us to acquire any particular amount of
common stock.
Mr. Bodner continued, “Long term, we operate in a favorable
market that supports sustainable SaaS growth. Our new $200 million
share buyback program reflects the confidence we have in our long
term opportunity.”
FYE 2023 Outlook
We are adjusting our non-GAAP annual outlook for the year ending
January 31, 2023 reflecting current trends as follows:
- Revenue: $900 million +/- 2%, reflecting 5%
year-over-year growth on a constant currency basis
- SaaS Revenue Growth: More than 35% year-over-year growth
with cloud revenue growing more than 30% year-over-year both on a
constant currency basis
- Diluted EPS: $2.50 at the midpoint of our revenue
guidance, reflecting 10% year-over-year growth
FYE 2024 Outlook
We are providing our non-GAAP annual outlook for the year ending
January 31, 2024 reflecting the current macroeconomic environment
as follows:
- Revenue: $945 million +/- 2%, reflecting 6%
year-over-year growth on a constant currency basis
- SaaS Revenue Growth: Approximately 30% year-over-year
growth on a constant currency basis
- Diluted EPS: $2.70 at the midpoint of our revenue
guidance, reflecting 8% year-over-year growth
Our non-GAAP outlook for the year ending January 31, 2023
excludes the following GAAP measure which we are able to quantify
with reasonable certainty:
- Amortization of intangible assets of approximately $39
million.
Our 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 $3 million.
- Stock-based compensation expenses are expected to be between
approximately $79 million and $82 million, assuming market prices
for our common stock approximately consistent with current
levels.
- Costs associated with modifying our workplace in response to
our decision to move to a hybrid work environment, including
assumed lease terminations and abandonments, IT facilities and
infrastructure costs, and other charges are expected to be between
approximately $26 million and $29 million.
Our non-GAAP outlook for the year ending January 31, 2024
excludes the following GAAP measure which we are able to quantify
with reasonable certainty:
- Amortization of intangible assets of approximately $30
million.
Our non-GAAP outlook for the year ending January 31, 2024
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 $0
million and $1 million.
- Stock-based compensation expenses are expected to be between
approximately $69 million and $75 million, assuming market prices
for our common stock approximately consistent with current
levels.
- Costs associated with modifying our workplace in response to
our decision to move to a hybrid work environment, including
assumed lease terminations and abandonments, IT facilities and
infrastructure costs, and other charges are expected to be between
approximately $20 million and $26 million.
Our non-GAAP guidance 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 nine months ended October 31, 2022 and 2021 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,
2022 and outlook. An online, real-time webcast of the conference
call and webcast slides will be available on our website at
www.verint.com. Participants may
register for the call here to receive the dial-in numbers and
unique PIN to access the call. Please join the call 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
build enduring customer relationships by connecting work, data, and
experiences across the enterprise. More than 10,000 organizations
in 180 countries – including over 85 of the Fortune 100 companies –
are using the Verint Customer Engagement Platform to draw on the
latest advancements in AI, analytics, and an open cloud
architecture to elevate customer experience.
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, inflation, economic instability, political unrest,
armed conflicts (such as the Russian invasion of Ukraine), natural
disasters, climate change or other environmental issues, or
outbreaks of disease, such as the COVID-19 pandemic, as well as the
resulting impact on spending by customers or partners, on our
business; risks that our customers or partners 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; 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; 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, while simultaneously preserving our legacy
businesses and migrating away from areas of commoditization; risks
due to aggressive competition in all of our markets and our ability
to keep pace with competitors, some of whom may be able to grow
faster than us or have greater resources than us, including in
areas such as sales and marketing, branding, technological
innovation and development, and recruiting and retention; risks
associated with our ability to properly execute on 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 relating to our ability to properly execute on growth or
strategic initiatives, manage investments in our business and
operations, 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
or costs to retain, recruit , and train qualified personnel in
regions in which we operate either physically or remotely,
including in new markets and growth areas we may enter, due to
competition for talent, increasing labor costs, applicable
regulatory requirements such as vaccination mandates, or otherwise;
challenges associated with selling sophisticated solutions and
cloud-based solutions, including with respect to longer sales
cycles, more complex sales processes, more complex contractual and
information security requirements, 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 cloud
hosting providers and other third-party suppliers, partners, or
original equipment manufacturers (“OEMs”) for certain services,
products, or components, including companies that may compete with
us or work with our competitors; 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 and regulatory requirements;
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, legacy liabilities, reputational considerations,
capital constraints, costs and expenses, maintaining profitability
levels, expansion into new areas, management distraction,
post-acquisition integration activities, and potential asset
impairments; risks associated with complex and changing domestic
and foreign regulatory environments, including, among others, with
respect to data privacy, information security, government
contracts, anti-corruption, trade compliance, climate change or
other environmental, social and governance matters, tax, and labor
matters, relating to our own operations, the products and services
we offer, and/or the use of our solutions by our customers; 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 software as a service ("SaaS") or other hosted
or managed services 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
significant leverage resulting from our current debt position or
our ability to incur additional debt, including with respect to
liquidity considerations, covenant limitations and compliance,
fluctuations in interest rates, dilution considerations (with
respect to our convertible notes), and our ability to maintain our
credit ratings; risks 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 2021 spin-off of our
former Cyber Intelligence Solutions business, including the
possibility that the spin-off transaction 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, 2022, our Quarterly Report on Form
10-Q for the quarter ended April 30, 2022, our Quarterly Report on
Form 10-Q for the quarter ended July 31, 2022, our Quarterly Report
on Form 10-Q for the quarter ended October 31, 2022, when filed,
and other filings we make with the SEC.
VERINT, VERINT DA VINCI, 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)
2022
2021
2022
2021
Revenue:
Recurring
$
174,222
$
158,811
$
500,029
$
459,442
Nonrecurring
50,971
66,009
165,969
180,899
Total revenue
225,193
224,820
665,998
640,341
Cost of revenue:
Recurring
38,834
36,811
120,714
112,523
Nonrecurring
28,013
30,524
90,781
90,909
Amortization of acquired technology
3,550
4,749
10,742
13,559
Total cost of revenue
70,397
72,084
222,237
216,991
Gross profit
154,796
152,736
443,761
423,350
Operating expenses:
Research and development, net
32,941
31,029
97,844
91,969
Selling, general and administrative
93,757
89,778
302,344
268,800
Amortization of other acquired intangible
assets
6,420
7,261
19,887
21,934
Total operating expenses
133,118
128,068
420,075
382,703
Operating income
21,678
24,668
23,686
40,647
Other income (expense), net:
Interest income
1,045
101
1,742
147
Interest expense
(2,147
)
(1,502
)
(5,511
)
(8,720
)
Losses on early retirements of debt
—
—
—
(2,474
)
Other income (expense), net
1,045
(417
)
3,186
3,789
Total other expense, net
(57
)
(1,818
)
(583
)
(7,258
)
Income before provision for income
taxes
21,621
22,850
23,103
33,389
Provision for income taxes
17,395
9,349
20,539
13,478
Net income
4,226
13,501
2,564
19,911
Net income attributable to noncontrolling
interests
150
264
614
875
Net income attributable to Verint
Systems Inc.
4,076
13,237
1,950
19,036
Dividends on preferred stock
(5,200
)
(5,200
)
(15,600
)
(13,722
)
Net (loss) income attributable to
Verint Systems Inc. common shares
$
(1,124
)
$
8,037
$
(13,650
)
$
5,314
Net (loss) income per common share
attributable to Verint Systems Inc.:
Basic
$
(0.02
)
$
0.12
$
(0.21
)
$
0.08
Diluted
$
(0.02
)
$
0.12
$
(0.21
)
$
0.08
Weighted-average common shares
outstanding:
Basic
65,583
65,570
65,161
65,474
Diluted
65,583
66,328
65,161
67,268
Table 2 VERINT SYSTEMS
INC. AND SUBSIDIARIES GAAP to Non-GAAP Cloud Metrics
(Unaudited)
Cloud
Revenue
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
SaaS revenue - GAAP(1)(7)
$
115,787
$
82,103
$
313,071
$
222,079
Bundled SaaS revenue - GAAP
57,041
48,390
161,005
130,639
Unbundled SaaS revenue - GAAP
58,746
33,713
152,066
91,440
Optional managed services revenue -
GAAP
15,436
16,358
47,127
49,688
Cloud revenue - GAAP(3)(7)
$
131,223
$
98,461
$
360,198
$
271,767
Estimated SaaS revenue
adjustments
$
374
$
1,985
$
2,323
$
3,701
Estimated bundled SaaS revenue
adjustments
374
1,984
2,323
3,638
Estimated unbundled SaaS revenue
adjustments
—
1
—
63
Estimated optional managed services
revenue adjustments
49
112
161
431
Estimated cloud revenue
adjustments
$
423
$
2,097
$
2,484
$
4,132
SaaS revenue - non-GAAP(2)(7)
$
116,161
$
84,088
$
315,394
$
225,780
Bundled SaaS revenue - non-GAAP
57,415
50,374
163,328
134,277
Unbundled SaaS revenue - non-GAAP
58,746
33,714
152,066
91,503
Optional managed services revenue -
non-GAAP
15,485
16,470
47,288
50,119
Cloud revenue - non-GAAP(4)(7)
$
131,646
$
100,558
$
362,682
$
275,899
New SaaS
ACV
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
New SaaS ACV(5)(7)
$
26,833
$
18,312
$
78,178
$
63,684
New SaaS ACV Growth YoY
46.5
%
16.9
%
22.8
%
43.9
%
New Perpetual
License Equivalent Bookings
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
New perpetual license equivalent
bookings(6)(7)
$
71,115
$
75,438
$
229,291
$
209,479
New perpetual license equivalent bookings
change YoY
(5.7
) %
14.2
%
9.5
%
19.0
%
New perpetual license equivalent
bookings - SaaS component
$
46,865
$
32,966
$
144,224
$
102,610
New perpetual license equivalent bookings
- SaaS growth YoY
42.2
%
11.4
%
40.6
%
35.7
%
% of new perpetual license equivalent
bookings from SaaS
65.9
%
43.7
%
62.9
%
49.0
%
New perpetual license equivalent
bookings - Perpetual component
$
24,250
$
42,472
$
85,067
$
106,869
New perpetual license equivalent bookings
- Perpetual change YoY
(42.9
) %
16.4
%
(20.4
) %
6.5
%
% of new perpetual license equivalent
bookings from Perpetual
34.1
%
56.3
%
37.1
%
51.0
%
(1) GAAP SaaS revenue for the three and nine months ended
October 31, 2022 was $118.5 million, representing 44%
year-over-year growth and $318.6 million, representing 43%
year-over-year growth, respectively, on a constant currency
basis.
(2) Non-GAAP SaaS revenue for the three and nine months ended
October 31, 2022 was $118.9 million, representing 41%
year-over-year growth and $321.0 million, representing 42%
year-over-year growth, respectively, on a constant currency
basis.
(3) GAAP cloud revenue for the three and nine months ended
October 31, 2022 was $134.9 million, representing 37%
year-over-year growth and $367.6 million, representing 35%
year-over-year growth, respectively, on a constant currency
basis.
(4) Non-GAAP cloud revenue for the three and nine months ended
October 31, 2022 was $135.3 million, representing 35%
year-over-year growth and $370.2 million, representing 34%
year-over-year growth, respectively, on a constant currency
basis.
(5) New SaaS ACV for the three and nine months ended October 31,
2022 was $27.6 million, representing 50.7% year-over-year growth
and $79.7 million, representing 25.2% year-over-year growth,
respectively, on a constant currency basis.
(6) New perpetual license equivalent bookings for the three and
nine months ended October 31, 2022 were $72.5 million, representing
a (3.9)% year-over-year change and $232.4 million, representing
11.0% year-over-year growth, respectively, on a constant currency
basis.
(7) The foregoing measures at constant currency are calculated
by translating the non-U.S. dollar portion of the current-period
measure into U.S. dollars using average foreign currency exchange
rates for the three and nine months ended October 31, 2021, as
applicable, 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 3 VERINT SYSTEMS
INC. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP
Measures (Unaudited)
Revenue
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
Recurring revenue - GAAP
$
174,222
$
158,811
$
500,029
$
459,442
Nonrecurring revenue - GAAP
50,971
66,009
165,969
180,899
Total GAAP revenue
225,193
224,820
665,998
640,341
Recurring revenue adjustments
423
2,108
2,498
4,160
Nonrecurring revenue adjustments
—
—
—
—
Total revenue adjustments
423
2,108
2,498
4,160
Recurring revenue - non-GAAP
174,645
160,919
502,527
463,602
Nonrecurring revenue - non-GAAP
50,971
66,009
165,969
180,899
Total non-GAAP revenue
$
225,616
$
226,928
$
668,496
$
644,501
Gross Profit and
Gross Margin
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
Recurring costs
$
38,834
$
36,811
$
120,714
$
112,523
Nonrecurring costs
28,013
30,524
90,781
90,909
Amortization of acquired technology
3,550
4,749
10,742
13,559
Total GAAP cost of revenue
70,397
72,084
222,237
216,991
GAAP gross profit
154,796
152,736
443,761
423,350
GAAP gross margin
68.7
%
67.9
%
66.6
%
66.1
%
Revenue adjustments
423
2,108
2,498
4,160
Amortization of acquired technology
3,550
4,749
10,742
13,559
Stock-based compensation expenses
1,329
1,230
4,245
3,918
Acquisition expenses, net
—
121
176
171
Restructuring expenses
593
245
969
792
Separation expenses
—
—
—
78
Non-GAAP gross profit
$
160,691
$
161,189
$
462,391
$
446,028
Non-GAAP gross margin
71.2
%
71.0
%
69.2
%
69.2
%
Research and
Development, net
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP research and development,
net
$
32,941
$
31,029
$
97,844
$
91,969
As a percentage of GAAP revenue
14.6
%
13.8
%
14.7
%
14.4
%
Stock-based compensation expenses
(3,533
)
(1,949
)
(10,371
)
(5,749
)
Acquisition expenses, net
—
(192
)
(198
)
(272
)
Restructuring expenses
(509
)
(97
)
(646
)
(410
)
Separation expenses
—
—
—
(467
)
Other adjustments
(17
)
—
(67
)
—
Non-GAAP research and development,
net
$
28,882
$
28,791
$
86,562
$
85,071
As a percentage of non-GAAP
revenue
12.8
%
12.7
%
12.9
%
13.2
%
Selling, General
and Administrative Expenses
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP selling, general and
administrative expenses
$
93,757
$
89,778
$
302,344
$
268,800
As a percentage of GAAP revenue
41.6
%
39.9
%
45.4
%
42.0
%
Stock-based compensation expenses
(15,037
)
(13,416
)
(49,346
)
(41,422
)
Acquisition expenses, net
(1,172
)
(2,494
)
(2,661
)
(7,481
)
Restructuring expenses
(1,324
)
(140
)
(7,807
)
(1,179
)
Separation expenses
(291
)
(1,915
)
(1,142
)
(10,651
)
Accelerated lease costs
(725
)
(539
)
(7,831
)
(2,023
)
IT facilities and infrastructure
realignment
(1,095
)
(30
)
(3,526
)
(572
)
Impairment charges
—
(373
)
(1,799
)
(373
)
Other adjustments
(900
)
67
(2,511
)
(40
)
Non-GAAP selling, general and
administrative expenses
$
73,213
$
70,938
$
225,721
$
205,059
As a percentage of non-GAAP
revenue
32.5
%
31.3
%
33.8
%
31.8
%
Operating Income
and Operating Margin
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP operating income
$
21,678
$
24,668
$
23,686
$
40,647
GAAP operating margin
9.6
%
11.0
%
3.6
%
6.3
%
Revenue adjustments
423
2,108
2,498
4,160
Amortization of acquired technology
3,550
4,749
10,742
13,559
Amortization of other acquired intangible
assets
6,420
7,261
19,887
21,934
Stock-based compensation expenses
19,899
16,595
63,962
51,089
Acquisition expenses, net
1,172
2,807
3,035
7,924
Restructuring expenses
2,426
482
9,422
2,381
Separation expenses
291
1,915
1,142
11,196
Accelerated lease costs
725
539
7,831
2,023
IT facilities and infrastructure
realignment
1,095
30
3,526
572
Impairment charges
—
373
1,799
373
Other adjustments
917
(67
)
2,578
40
Non-GAAP operating income
$
58,596
$
61,460
$
150,108
$
155,898
Non-GAAP operating margin
26.0
%
27.1
%
22.5
%
24.2
%
Other Expense,
Net
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP other expense, net
$
(57
)
$
(1,818
)
$
(583
)
$
(7,258
)
Unrealized losses on derivatives, net
—
—
—
14,305
Expenses and losses on debt modification
or retirement
—
—
—
2,474
Change in fair value of future tranche
right
—
—
—
(15,810
)
Acquisition benefit, net
—
(122
)
—
(3,470
)
Non-GAAP other expense, net(1)
$
(57
)
$
(1,940
)
(583
)
(9,759
)
Provision for
Income Taxes
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP provision for income taxes
$
17,395
$
9,349
$
20,539
$
13,478
GAAP effective income tax rate
80.5
%
40.9
%
88.9
%
40.4
%
Non-GAAP tax adjustments
(11,296
)
(2,559
)
(5,204
)
2,068
Non-GAAP provision for income
taxes
$
6,099
$
6,790
$
15,335
$
15,546
Non-GAAP effective income tax
rate
10.4
%
11.4
%
10.3
%
10.6
%
Net (Loss) Income
Attributable to Verint Systems Inc. Common Shares
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP net (loss) income attributable to
Verint Systems Inc. common shares
$
(1,124
)
$
8,037
$
(13,650
)
$
5,314
Revenue adjustments
423
2,108
2,498
4,160
Amortization of acquired technology
3,550
4,749
10,742
13,559
Amortization of other acquired intangible
assets
6,420
7,261
19,887
21,934
Stock-based compensation expenses
19,899
16,595
63,962
51,089
Unrealized losses on derivatives, net
—
—
—
14,305
Expenses and losses on debt modification
or retirement
—
—
—
2,474
Change in fair value of future tranche
right
—
—
—
(15,810
)
Acquisition expenses, net
1,172
2,685
3,035
4,454
Restructuring expenses
2,425
482
9,422
2,381
Separation expenses
291
1,915
1,142
11,196
Accelerated lease costs
725
539
7,831
2,023
IT facilities and infrastructure
realignment
1,095
30
3,526
572
Impairment charges
—
373
1,799
373
Other adjustments
917
(67
)
2,578
40
Non-GAAP tax adjustments
11,296
2,559
5,204
(2,068
)
Dividends, reversed due to assumed
conversion of preferred stock(3)
5,200
5,200
15,600
13,722
Total adjustments
53,413
44,429
147,226
124,404
Non-GAAP net income attributable to
Verint Systems Inc. common shares
$
52,289
$
52,466
$
133,576
$
129,718
Diluted Net
(Loss) Income Per Common Share Attributable to Verint Systems
Inc.
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands, except per share data)
2022
2021
2022
2021
GAAP diluted net (loss) income per common
share attributable to Verint Systems Inc.
$
(0.02
)
$
0.12
$
(0.21
)
$
0.08
Non-GAAP diluted net income per common
share attributable to Verint Systems Inc.(3)
$
0.69
$
0.69
$
1.77
$
1.71
GAAP weighted-average shares used in
computing diluted net (loss) income per common share attributable
to Verint Systems Inc.
65,583
66,328
65,161
67,268
Additional weighted-average shares
applicable to non-GAAP diluted net income per common share
attributable to Verint Systems Inc.
10,004
9,478
10,364
8,544
Non-GAAP diluted weighted-average
shares used in computing net income per common share attributable
to Verint Systems Inc.(3)
75,587
75,806
75,525
75,812
GAAP Net Income
to Adjusted EBITDA
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP net income
$
4,226
$
13,501
$
2,564
$
19,911
As a percentage of GAAP revenue
1.9
%
6.0
%
0.4
%
3.1
%
Provision for income taxes
17,395
9,349
20,539
13,478
Other expense, net
57
1,818
583
7,258
Depreciation and amortization(2)
16,158
18,585
50,199
54,696
Revenue adjustments
423
2,108
2,498
4,160
Stock-based compensation expenses
19,899
16,595
63,962
51,089
Acquisition expenses, net
1,172
2,807
3,035
7,924
Restructuring expenses
2,348
456
9,090
2,355
Separation expenses
291
1,915
1,142
10,829
Accelerated lease costs
725
539
7,831
2,023
IT facilities and infrastructure
realignment
1,095
30
3,526
572
Impairment charges
—
373
1,799
373
Other adjustments
917
(67
)
2,578
40
Adjusted EBITDA
$
64,706
$
68,009
$
169,346
$
174,708
As a percentage of non-GAAP
revenue
28.7
%
30.0
%
25.3
%
27.1
%
Gross Debt to Net
Debt
(in thousands)
October 31,
2022
January 31,
2022
Long-term debt
$
408,361
$
406,954
Unamortized debt discounts and issuance
costs
6,639
8,046
Gross debt
415,000
415,000
Less:
Cash and cash equivalents
252,073
358,805
Restricted cash and cash equivalents, and
restricted bank time deposits
290
6
Short-term investments
10,651
765
Net debt, excluding long-term
restricted cash, cash equivalents, time deposits, and
investments
151,986
55,424
Long-term restricted cash, cash
equivalents, time deposits, and investments
266
409
Net debt, including long-term
restricted cash, cash equivalents, time deposits, and
investments
$
151,720
$
55,015
(1) For the three months ended October 31, 2022, non-GAAP other
expense, net of $0.1 million was comprised of $1.4 million of
interest and other expense, net of $1.3 million of foreign exchange
gains primarily related to balance sheet revaluations.
(2) Adjusted for financing fee amortization.
(3) 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
three and nine months ended October 31, 2022 and 2021.
Table 4 VERINT SYSTEMS
INC. AND SUBSIDIARIES GAAP to Non-GAAP Recurring and
Nonrecurring Revenue and Gross Profit (Unaudited)
Recurring and
Nonrecurring Revenue
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
Recurring revenue - GAAP
$
174,222
$
158,811
$
500,029
$
459,442
Cloud revenue - GAAP
131,223
98,461
360,198
271,767
Support revenue - GAAP
42,999
60,350
139,831
187,675
Nonrecurring revenue - GAAP
$
50,971
$
66,009
$
165,969
$
180,899
Perpetual revenue - GAAP
24,425
40,436
88,473
102,108
Professional services revenue - GAAP
26,546
25,573
77,496
78,791
Total revenue - GAAP
$
225,193
$
224,820
$
665,998
$
640,341
Estimated recurring revenue
adjustments
$
423
$
2,108
$
2,498
$
4,160
Estimated cloud revenue adjustments
423
2,097
2,484
4,132
Estimated support revenue adjustments
—
11
14
28
Estimated nonrecurring revenue
adjustments
$
—
$
—
$
—
$
—
Estimated perpetual revenue
adjustments
—
—
—
—
Estimated professional services revenue
adjustments
—
—
—
—
Total estimated revenue
adjustments
$
423
$
2,108
$
2,498
$
4,160
Recurring revenue - non-GAAP
$
174,645
$
160,919
$
502,527
$
463,602
Cloud revenue - non-GAAP
131,646
100,558
362,682
275,899
Support revenue - non-GAAP
42,999
60,361
139,845
187,703
Nonrecurring revenue - non-GAAP
$
50,971
$
66,009
$
165,969
$
180,899
Perpetual revenue - non-GAAP
24,425
40,436
88,473
102,108
Professional services revenue -
non-GAAP
26,546
25,573
77,496
78,791
Total revenue - non-GAAP
$
225,616
$
226,928
$
668,496
$
644,501
Recurring Gross
Profit
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP recurring revenue
$
174,222
$
158,811
$
500,029
$
459,442
GAAP recurring costs
38,834
36,811
120,714
112,523
GAAP recurring gross profit
135,388
122,000
379,315
346,919
GAAP recurring gross margin
77.7
%
76.8
%
75.9
%
75.5
%
Recurring revenue adjustments
423
2,108
2,498
4,160
Recurring stock-based compensation
expenses
729
540
2,187
1,531
Recurring acquisition expenses, net
—
30
22
80
Recurring restructuring expenses
459
35
588
479
Recurring separation expenses
—
—
—
32
Non-GAAP recurring gross profit
$
136,999
$
124,713
$
384,610
$
353,201
Non-GAAP recurring gross margin
78.4
%
77.5
%
76.5
%
76.2
%
Nonrecurring
Gross Profit
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)
2022
2021
2022
2021
GAAP nonrecurring revenue
$
50,971
$
66,009
$
165,969
$
180,899
GAAP nonrecurring costs
28,013
30,524
90,781
90,909
GAAP nonrecurring gross profit
22,958
35,485
75,188
89,990
GAAP nonrecurring gross margin
45.0
%
53.8
%
45.3
%
49.7
%
Nonrecurring revenue adjustments
—
—
—
—
Nonrecurring stock-based compensation
expenses
600
690
2,058
2,387
Nonrecurring acquisition expenses, net
—
91
154
91
Nonrecurring restructuring expenses
134
210
381
313
Nonrecurring separation expenses
—
—
—
46
Non-GAAP nonrecurring gross
profit
$
23,692
$
36,476
$
77,781
$
92,827
Non-GAAP nonrecurring gross
margin
46.5
%
55.3
%
46.9
%
51.3
%
Table 5 VERINT SYSTEMS
INC. AND SUBSIDIARIES Calculation of Change in Revenue on a
Constant Currency Basis (Unaudited)
GAAP Revenue(2)
Non-GAAP Revenue(3)
(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, 2021
$
224,820
$
640,341
$
226,928
$
644,501
Revenue for the three and nine months
ended October 31, 2022
$
225,193
$
665,998
$
225,616
$
668,496
Revenue for the three and nine months
ended October 31, 2022 at constant currency(1)
$
232,000
$
681,000
$
232,000
$
683,000
Reported period-over-period revenue
change
0.2
%
4.0
%
(0.6
) %
3.7
%
% impact from change in foreign currency
exchange rates
3.0
%
2.3
%
2.8
%
2.3
%
Constant currency period-over-period
revenue growth
3.2
%
6.3
%
2.2
%
6.0
%
(1) Revenue for the three and nine months ended October 31, 2022
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, 2021 rather than actual
current-period foreign currency exchange rates.
(2) GAAP revenue denominated in non-U.S. dollars was 19% and 22%
of our total GAAP revenue for the three months ended October 31,
2022 and 2021, respectively. GAAP revenue denominated in non-U.S.
dollars was 21% and 23% of our total GAAP revenue for the nine
months ended October 31, 2022 and 2021, respectively. Our combined
GAAP cost of revenue and operating expenses denominated in non-U.S.
dollars was 29% and 32% of our total combined GAAP cost of revenue
and operating expenses for the three months ended October 31, 2022
and 2021, respectively. Our combined GAAP cost of revenue and
operating expenses denominated in non-U.S. dollars was 30% and 32%
of our total combined GAAP cost of revenue and operating expenses
for the nine months ended October 31, 2022 and 2021,
respectively.
(3) Non-GAAP revenue denominated in non-U.S. dollars was 19% and
22% of our total non-GAAP revenue for the three months ended
October 31, 2022 and 2021, respectively. Non-GAAP revenue
denominated in non-U.S. dollars was 21% and 23% of our total
non-GAAP revenue for the nine months ended October 31, 2022 and
2021, respectively. Our combined Non-GAAP cost of revenue and
operating expenses denominated in non-U.S. dollars was 33% and 35%
of our total combined Non-GAAP cost of revenue and operating
expenses for the three months ended October 31, 2022 and 2021,
respectively. Our combined Non-GAAP cost of revenue and operating
expenses denominated in non-U.S. dollars was 34% and 35% of our
total combined Non-GAAP cost of revenue and operating expenses for
the nine months ended October 31, 2022 and 2021, respectively.
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)
2022
2022
Assets
Current Assets:
Cash and cash equivalents
$
252,073
$
358,805
Short-term investments
10,651
765
Accounts receivable, net of allowance for
credit losses of $1.3 million and $1.3 million, respectively
165,888
193,831
Contract assets, net
49,133
42,688
Inventories
10,611
5,337
Prepaid expenses and other current
assets
56,439
53,752
Total current assets
544,795
655,178
Property and equipment, net
62,310
64,090
Operating lease right-of-use assets
37,704
35,433
Goodwill
1,300,166
1,353,421
Intangible assets, net
83,300
118,254
Other assets
144,156
134,729
Total assets
$
2,172,431
$
2,361,105
Liabilities, Temporary Equity, and
Stockholders' Equity
Current Liabilities:
Accounts payable
$
42,204
$
39,501
Accrued expenses and other current
liabilities
127,715
168,694
Contract liabilities
223,968
271,271
Total current liabilities
393,887
479,466
Long-term debt
408,361
406,954
Long-term contract liabilities
17,742
15,872
Operating lease liabilities
35,665
28,457
Other liabilities
44,338
39,456
Total liabilities
899,993
970,205
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, 2022 and January 31, 2022,
respectively; aggregate liquidation preference and redemption value
of $203,467 and $206,067 at October 31, 2022 and January 31, 2022,
respectively.
200,628
200,628
Series B Preferred Stock; 200,000 shares
issued and outstanding at October 31, 2022 and January 31, 2022,
respectively; aggregate liquidation preference and redemption value
of $203,467 and $206,067 at October 31, 2022 and January 31, 2022,
respectively.
235,693
235,693
Total temporary equity
436,321
436,321
Stockholders' Equity:
Common stock — $0.001 par value;
authorized 240,000,000 and 120,000,000 shares; issued 65,866,000
and 66,211,000 shares; outstanding 65,866,000 and 66,211,000 shares
at October 31, 2022 and January 31, 2022, respectively.
66
66
Additional paid-in capital
1,071,549
1,125,152
Accumulated deficit
(52,559
)
(54,509
)
Accumulated other comprehensive loss
(185,301
)
(118,515
)
Total Verint Systems Inc. stockholders'
equity
833,755
952,194
Noncontrolling interest
2,362
2,385
Total stockholders' equity
836,117
954,579
Total liabilities, temporary equity,
and stockholders' equity
$
2,172,431
$
2,361,105
Table 7 VERINT SYSTEMS
INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Cash Flows (Unaudited)
Nine Months Ended
October 31,
(in thousands)
2022
2021
Cash flows from operating
activities:
Net income
$
2,564
$
19,911
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
52,166
56,910
Stock-based compensation, excluding
cash-settled awards
63,957
51,078
Change in fair value of future tranche
right
—
(15,810
)
Non-cash losses on derivative financial
instruments, net
—
14,374
Losses on early retirements of debt
—
2,474
Other, net
8,072
264
Changes in operating assets and
liabilities, net of effects of business combinations:
Accounts receivable
22,079
45,586
Contract assets
(8,256
)
1,290
Inventories
(5,452
)
(758
)
Prepaid expenses and other assets
(16,274
)
(21,586
)
Accounts payable and accrued expenses
(9,542
)
(21,918
)
Contract liabilities
(38,513
)
(42,618
)
Deferred income taxes
(1,489
)
(15,530
)
Other, net
(701
)
(3,418
)
Net cash provided by operating activities
— continuing operations
68,611
70,249
Net cash used in operating activities —
discontinued operations
—
(9,055
)
Net cash provided by operating
activities
68,611
61,194
Cash flows from investing
activities:
Cash paid for business combinations,
including adjustments, net of cash acquired
(3,828
)
(57,214
)
Purchases of property and equipment
(17,920
)
(11,903
)
Maturities and sales of investments
250
45,640
Purchases of investments
(10,168
)
—
Cash paid for capitalized software
development costs
(5,703
)
(5,637
)
Change in restricted bank time deposits,
and other investing activities, net
(107
)
(26
)
Net cash used in investing
activities
(37,476
)
(29,140
)
Cash flows from financing
activities:
Proceeds from issuance of preferred
stock
—
198,731
Proceeds from borrowings
—
315,000
Repayments of borrowings and other
financing obligations
(3,025
)
(312,415
)
Settlement of 2014 Notes
—
(386,887
)
Purchases of capped calls
—
(41,060
)
Payments of debt-related costs
(224
)
(10,708
)
Purchases of treasury stock and common
stock for retirement
(106,137
)
(75,933
)
Preferred stock dividend payments
(20,800
)
(12,856
)
Distributions paid to noncontrolling
interest
(637
)
(620
)
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
(3,518
)
(4,621
)
Net cash used in financing
activities
(134,341
)
(424,248
)
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
(3,510
)
(29
)
Net decrease in cash, cash equivalents,
restricted cash, and restricted cash equivalents
(106,716
)
(392,223
)
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, beginning of period
358,868
700,133
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of period
$
252,152
$
307,910
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
$
252,073
$
307,847
Restricted cash and cash equivalents
included in restricted cash and cash equivalents, and restricted
bank time deposits
—
6
Restricted cash and cash equivalents
included in prepaid expenses and other current assets
22
—
Restricted cash and cash equivalents
included in other assets
57
57
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
252,152
$
307,910
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 (loss) attributable to Verint Systems Inc. common shares,
non-GAAP diluted net income (loss) per common share attributable to
Verint Systems Inc., adjusted EBITDA and adjusted EBITDA as a
percentage of non-GAAP revenue, 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 unit and
performance stock unit 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.
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 our former Cyber Intelligence Solutions business and the
satisfaction of 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 was
unusual in nature, could vary significantly in amount, and was
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 (benefit). We exclude restructuring
expenses (benefit) from our non-GAAP financial measures, which
include employee termination costs, facility exit costs (except as
included in Accelerated lease costs described below), 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
spin-off of our former Cyber Intelligence Solutions business. We
exclude from our non-GAAP financial measures expenses incurred 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.
Accelerated lease costs. We exclude from our non-GAAP financial
measures accelerated facility costs and associated accelerated
lease expenses due to the early termination or abandonment of
certain office leases as a result of our move to a hybrid work
model because these charges are not reflective of our ongoing
business and operating results.
IT facilities and infrastructure realignment. We exclude from
our non-GAAP financial measures nonrecurring IT facilities and
infrastructure realignment costs and other IT charges associated
with modifying the workplace, including consolidating and/or
migrating data centers and labs to the cloud, simplifying the
corporate network, and one-time costs for implementing
collaboration tools to enable our work from anywhere strategy.
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.
Non-GAAP income tax adjustments. We exclude from our non-GAAP
measures of net income attributable to Verint Systems Inc., our
GAAP provision for (benefit from) income taxes 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, 2023 is currently approximately 10% and was 11% for the
year ended January 31, 2022. 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, training and
patent license royalties.
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 are recurring services that are
intended to improve our customers' operations and reduce
expenses.
Percentage of software revenue that is recurring revenue is
calculated as the sum of cloud and support revenue as a percentage
of total cloud, support, and perpetual revenue.
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 (“New PLE Bookings -
Perpetual Component”) 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
(”New PLE Bookings - SaaS Component”) 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, separation expenses, accelerated leases, IT
facilities and infrastructure realignment, 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, GAAP and non-GAAP cloud revenue, new
SaaS ACV, new perpetual license equivalent bookings, 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 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/20221207005744/en/
Investor Relations Contact
Matthew Frankel, CFA Verint Systems Inc. (631) 962-9672
matthew.frankel@verint.com
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