Revenue and Diluted EPS ahead of Guidance
Strong SaaS Revenue Growth Drives Recurring Revenue Growth with
Expanding Gross Margins
Expect SaaS Momentum to Continue with 25% to 30% SaaS Revenue
Growth in FYE24
Verint® (Nasdaq: VRNT), The Customer Engagement Company™,
today announced results for the three months and year ended January
31, 2023 (FYE 2023). Revenue for the three months ended January 31,
2023 was $236 million on a GAAP basis representing 0.9%
year-over-year growth and $237 million on a non-GAAP basis,
representing 2.0% year-over-year growth on a non-GAAP constant
currency basis. Revenue for the year ended January 31, 2023 was
$902 million on a GAAP basis, representing 3.2% year-over-year
growth, and $905 million on a non-GAAP basis, representing 5.0%
year-over-year growth on a non-GAAP constant currency basis. For
the three months ended January 31, 2023, diluted EPS was $0.12 on a
GAAP basis and $0.75 on a non-GAAP basis. For the year ended
January 31, 2023, net loss per share was $(0.09) on a GAAP basis
and diluted EPS was $2.52 on a non-GAAP basis.
“I am pleased with our non-GAAP revenue and diluted EPS coming
ahead of our guidance. Our results were driven by our cloud
platform delivering differentiated CX automation to help brands
close the engagement capacity gap. In Q4, we had many significant
SaaS wins from existing customers, including seven and eight digit
deals, and throughout the year we added 100 new logos every
quarter,” said Dan Bodner, Verint CEO.
Bodner continued, “Our multi-year SaaS transition, is tracking
ahead of the plan outlined two years ago at the time of the spin.
As we are approaching the substantial completion of our SaaS
transition next year, we are evolving our disclosure from
transitional to traditional operating SaaS metrics, and today we
are introducing a new operating metric, SaaS Annual Recurring
Revenue (ARR). SaaS ARR has been growing at more than a 30% CAGR
over the last two years and reached a milestone of approximately
half a billion at the end of Fiscal 2023.”
Full Year FYE 2023
Highlights
GAAP
Non-GAAP
(in millions)
Reported
CC
Reported
CC
CC Growth
Revenue
$902
$921
$905
$925
5%
Recurring Revenue
$686
$700
$689
$704
10%
SaaS Revenue
$444
$452
$447
$455
38%
Note: CC represents constant currency.
- Recurring Revenue: Up 10% year-over-year on a non-GAAP
constant currency basis
- SaaS Revenue: Up 38% year-over-year on a non-GAAP
constant currency basis
- SaaS ARR: $498 million, up 25% year-over-year
- New SaaS ACV Growth: Up 11% year-over-year on a constant
currency basis
- Favorable Mix Shift: 86% of non-GAAP Software Revenue is
Recurring (up 330bps year-over-year)
- New Customer Additions: Added 400+ logos with 100+ new
logos every quarter
Grant Highlander, Verint CFO, added, “Throughout the year we
delivered strong SaaS revenue growth and are very pleased with the
progress of our cloud transition. Our cloud operations have reached
scale and we are also pleased with our ongoing gross margin
expansion which we expect to continue over-time. We believe our
SaaS momentum will continue over the long run driving shareholder
value. Last quarter we announced a new $200 million buyback
program, of which we have bought approximately $41 million of stock
so far.”
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: $935 million +/- 2%
- SaaS Revenue: 25% - 30% year-over-year growth
- Diluted EPS: $2.65 at the midpoint of our revenue
guidance
Our non-GAAP outlook for the three months ending April 30, 2023
and 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 $8 million
and $32 million, for the three months ending April 30, 2023 and
year ending January 31, 2024, respectively.
Our non-GAAP outlook for the three months ending April 30, 2023
and 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, and $1 million and $2 million, for the
three months ending April 30, 2023 and year ending January 31,
2024, respectively.
- Stock-based compensation expenses are expected to be between
approximately $14 million and $17 million, and $70 million and $75
million, for the three months ending April 30, 2023 and year ending
January 31, 2024, respectively, 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 nonrecurring charges are expected
to be between approximately $1 million and $3 million, and $27
million and $30 million, for the three months ending April 30, 2023
and year ending January 31, 2024, respectively.
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
months and year ended January 31, 2023 and 2022 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 months and year ended January 31,
2023 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, economic
instability, rising interest rates, tightening credit markets,
inflation, instability in the banking sector, political unrest,
armed conflicts (such as the Russian invasion of Ukraine), actual
or threatened trade wars, natural disasters, 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, downsize, cancel, or refrain
from placing orders or renewing subscriptions or contracts, or are
unable to honor contractual commitments or payment obligations due
to challenges or uncertainties in their budgets, liquidity or and
businesses; risks associated with our ability to keep pace with
technological advances and challenges and evolving industry
standards, including achieving and maintaining the competitive
differentiation of our solution platform; 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 and services 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 successfully transitioning customers to our
cloud platform and the 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 identify and 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 and management 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, increased labor costs,
applicable regulatory requirements, or otherwise; challenges
associated with selling sophisticated solutions and cloud-based
solutions, including with respect to longer sales cycles, more
complex sales processes and customer approval 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 an enterprise class, broad solution portfolio;
risks that we may be unable to maintain, expand, and enable our
relationships with partners as part of our growth strategy while
avoiding excessive concentration with any one partner; risks
associated with our reliance on 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, including exposure to regions
subject to political or economic instability, fluctuations in
foreign exchange rates, inflation, increased financial accounting
and reporting burdens and complexities, 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, artificial intelligence, 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 associated with our reliance on
third parties to provide certain cloud hosting or other cloud-based
services to us or our customers, including the risk of service
disruption, data breaches, or data loss or corruption; 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, vulnerabilities, or develop operational problems;
risks that we or our solutions maybe subject to 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 February 1, 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, 2023,
when filed, and other filings we make with the SEC.
VERINT, VERINT DA VINCI, THE CUSTOMER ENGAGEMENT COMPANY,
BOUNDLESS CUSTOMER ENGAGEMENT and THE ENGAGEMENT CAPACITY GAP are
trademarks of Verint Systems Inc. or its subsidiaries. Verint and
other parties may also have trademark rights in other terms used
herein.
Table 1
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands, except per share data)
2023
2022
2023
2022
Revenue:
Recurring
$
185,508
$
173,687
$
685,537
$
633,129
Nonrecurring
50,739
60,481
216,708
241,380
Total revenue
236,247
234,168
902,245
874,509
Cost of revenue:
Recurring
41,633
44,046
162,347
156,569
Nonrecurring
28,749
33,317
119,530
124,226
Amortization of acquired technology
2,449
4,218
13,191
17,777
Total cost of revenue
72,831
81,581
295,068
298,572
Gross profit
163,416
152,587
607,177
575,937
Operating expenses:
Research and development, net
32,800
31,322
130,644
123,291
Selling, general and administrative
90,595
108,008
392,939
376,808
Amortization of other acquired intangible
assets
6,351
7,061
26,238
28,995
Total operating expenses
129,746
146,391
549,821
529,094
Operating income
33,670
6,196
57,356
46,843
Other income (expense), net:
Interest income
1,559
86
3,301
233
Interest expense
(2,366
)
(1,605
)
(7,877
)
(10,325
)
Losses on early retirements of debt
—
—
—
(2,474
)
Other income, net
(1,204
)
1,438
1,982
5,227
Total other expense, net
(2,011
)
(81
)
(2,594
)
(7,339
)
Income from continuing operations
before provision for income taxes
31,659
6,115
54,762
39,504
Provision for income taxes
18,564
10,375
39,103
23,853
Net income (loss)
13,095
(4,260
)
15,659
15,651
Net income attributable to noncontrolling
interests
147
363
761
1,238
Net income (loss) attributable to
Verint Systems Inc.
12,948
(4,623
)
14,898
14,413
Dividends on preferred stock
(5,200
)
(5,200
)
(20,800
)
(18,922
)
Net income (loss) attributable to
Verint Systems Inc. common shares
$
7,748
$
(9,823
)
$
(5,902
)
$
(4,509
)
Net income (loss) per common share
attributable to Verint Systems Inc.:
Basic
$
0.12
$
(0.15
)
$
(0.09
)
$
(0.07
)
Diluted
$
0.12
$
(0.15
)
$
(0.09
)
$
(0.07
)
Weighted-average common shares
outstanding:
Basic
65,760
65,916
65,332
65,591
Diluted
66,131
65,916
65,332
65,591
Table 2
VERINT SYSTEMS INC. AND
SUBSIDIARIES
GAAP to Non-GAAP Cloud
Metrics
(Unaudited)
Cloud
Revenue
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
SaaS revenue - GAAP(1)(7)
$
131,134
$
100,685
$
444,205
$
322,764
Bundled SaaS revenue - GAAP
61,555
52,396
222,560
183,035
Unbundled SaaS revenue - GAAP
69,579
48,289
221,645
139,729
Optional managed services revenue -
GAAP
14,261
15,960
61,388
65,648
Cloud revenue - GAAP(3)(7)
145,395
116,645
505,593
388,412
Estimated SaaS revenue
adjustments
490
1,920
2,813
5,621
Estimated bundled SaaS revenue
adjustments
490
1,920
2,813
5,558
Estimated unbundled SaaS revenue
adjustments
—
—
—
63
Estimated optional managed services
revenue adjustments
14
81
175
512
Estimated cloud revenue
adjustments
504
2,001
2,988
6,133
SaaS revenue - non-GAAP(2)(7)
131,624
102,605
447,018
328,385
Bundled SaaS revenue - non-GAAP
62,045
54,316
225,373
188,593
Unbundled SaaS revenue - non-GAAP
69,579
48,289
221,645
139,792
Optional managed services revenue -
non-GAAP
14,275
16,041
61,563
66,160
Cloud revenue - non-GAAP(4)(7)
$
145,899
$
118,646
$
508,581
$
394,545
New SaaS
ACV
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
New SaaS ACV(5)(7)
$
23,875
$
30,288
$
102,053
$
93,972
New SaaS ACV Growth YoY
(21.2
)%
38.3
%
8.6
%
42.0
%
New Perpetual
License Equivalent Bookings
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
New perpetual license equivalent
bookings(6)(7)
$
74,427
$
92,633
$
303,718
$
302,112
New perpetual license equivalent bookings
change YoY
(19.7
)%
12.5
%
0.5
%
17.0
%
New perpetual license equivalent
bookings - SaaS component
$
45,053
$
56,321
$
189,216
$
158,911
New perpetual license equivalent bookings
- SaaS growth YoY
(20.0
)%
40.8
%
19.1
%
37.3
%
% of new perpetual license equivalent
bookings from SaaS
60.5
%
60.8
%
62.3
%
52.6
%
New perpetual license equivalent
bookings - Perpetual component
$
29,374
$
36,312
$
114,502
$
143,201
New perpetual license equivalent bookings
- Perpetual change YoY
(19.1
)%
(14.2
)%
(20.0
)%
0.4
%
% of new perpetual license equivalent
bookings from Perpetual
39.5
%
39.2
%
37.7
%
47.4
%
SaaS
ARR
Year Ended
January 31,
(in thousands)
2023
2022
SaaS ARR
$
497,982
$
397,493
SaaS ARR Growth YoY
25.3
%
46.6
%
(1) GAAP SaaS revenue for the three months and year ended
January 31, 2023 was $133.1 million, representing 32%
year-over-year growth and $451.7 million, representing 40%
year-over-year growth, respectively, on a constant currency
basis.
(2) Non-GAAP SaaS revenue for the three months and year ended
January 31, 2023 was $133.6 million, representing 30%
year-over-year growth and $454.6 million, representing 38%
year-over-year growth, respectively, on a constant currency
basis.
(3) GAAP cloud revenue for the three months and year ended
January 31, 2023 was $147.9 million, representing 27%
year-over-year growth and $515.5 million, representing 33%
year-over-year growth, respectively, on a constant currency
basis.
(4) Non-GAAP cloud revenue for the three months and year ended
January 31, 2023 was $148.4 million, representing 25%
year-over-year growth and $518.6 million, representing 31%
year-over-year growth, respectively, on a constant currency
basis.
(5) New SaaS ACV for the three months and year ended January 31,
2023 was $24.3 million, representing 20% year-over-year change and
$104.0 million, representing 11% year-over-year growth,
respectively, on a constant currency basis.
(6) New perpetual license equivalent bookings for the three
months and year ended January 31, 2023 were $76.5 million,
representing a 17% year-over-year change and $308.9 million,
representing 2% 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 months and year ended January 31, 2022, 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
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
Recurring revenue - GAAP
$
185,508
$
173,687
$
685,537
$
633,129
Nonrecurring revenue - GAAP
50,739
60,481
216,708
241,380
Total GAAP revenue
236,247
234,168
902,245
874,509
Recurring revenue adjustments
504
2,011
3,002
6,171
Nonrecurring revenue adjustments
—
—
—
—
Total revenue adjustments
504
2,011
3,002
6,171
Recurring revenue - non-GAAP
186,012
175,698
688,539
639,300
Nonrecurring revenue - non-GAAP
50,739
60,481
216,708
241,380
Total non-GAAP revenue
$
236,751
$
236,179
$
905,247
$
880,680
Gross Profit and
Gross Margin
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
Recurring cost of revenues
$
41,633
$
44,046
$
162,347
$
156,569
Nonrecurring cost of revenues
28,749
33,317
119,530
124,226
Amortization of acquired technology
2,449
4,218
13,191
17,777
Total GAAP cost of revenue
72,831
81,581
295,068
298,572
GAAP gross profit
163,416
152,587
607,177
575,937
GAAP gross margin
69.2
%
65.2
%
67.3
%
65.9
%
Revenue adjustments
504
2,011
3,002
6,171
Amortization of acquired technology
2,449
4,218
13,191
17,777
Stock-based compensation expenses
1,417
1,110
5,662
5,028
Acquisition expenses, net
—
169
176
340
Restructuring expenses
1,478
52
2,447
844
Separation expenses
—
—
—
78
Non-GAAP gross profit
$
169,264
$
160,147
$
631,655
$
606,175
Non-GAAP gross margin
71.5
%
67.8
%
69.8
%
68.8
%
Research and
Development, net
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP research and development,
net
$
32,800
$
31,322
$
130,644
$
123,291
As a percentage of GAAP revenue
13.9
%
13.4
%
14.5
%
14.1
%
Stock-based compensation expenses
(2,205
)
(1,816
)
(12,576
)
(7,565
)
Acquisition expenses, net
—
(243
)
(198
)
(515
)
Restructuring expenses
(1,458
)
—
(2,104
)
(410
)
Separation expenses
—
—
—
(467
)
Other adjustments
(53
)
—
(120
)
—
Non-GAAP research and development,
net
$
29,084
$
29,263
$
115,646
$
114,334
As a percentage of non-GAAP
revenue
12.3
%
12.4
%
12.8
%
13.0
%
Selling, General
and Administrative Expenses
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP selling, general and
administrative expenses
$
90,595
$
108,008
$
392,939
$
376,808
As a percentage of GAAP revenue
38.3
%
46.1
%
43.6
%
43.1
%
Stock-based compensation expenses
(8,530
)
(11,250
)
(57,876
)
(52,672
)
Acquisition benefit (expenses), net
1,346
(2,080
)
(1,315
)
(9,561
)
Restructuring expenses
(2,990
)
(3,582
)
(10,797
)
(4,761
)
Separation expenses
(174
)
(1,740
)
(1,316
)
(12,391
)
Accelerated lease costs
(448
)
(7,771
)
(8,279
)
(9,794
)
IT facilities and infrastructure
realignment
(931
)
(664
)
(4,457
)
(1,236
)
Impairment charges
—
(1,263
)
(1,799
)
(1,636
)
Other adjustments
(399
)
(95
)
(2,910
)
(135
)
Non-GAAP selling, general and
administrative expenses
$
78,469
$
79,563
$
304,190
$
284,622
As a percentage of non-GAAP
revenue
33.1
%
33.7
%
33.6
%
32.3
%
Operating Income
and Operating Margin
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP operating income
$
33,670
$
6,196
$
57,356
$
46,843
GAAP operating margin
14.3
%
2.6
%
6.4
%
5.4
%
Revenue adjustments
504
2,011
3,002
6,171
Amortization of acquired technology
2,449
4,218
13,191
17,777
Amortization of other acquired intangible
assets
6,351
7,061
26,238
28,995
Stock-based compensation expenses
12,152
14,176
76,114
65,265
Acquisition (benefit) expenses, net
(1,346
)
2,492
1,689
10,416
Restructuring expenses
5,926
3,634
15,348
6,015
Separation expenses
174
1,740
1,316
12,936
Accelerated lease costs
448
7,771
8,279
9,794
IT facilities and infrastructure
realignment
931
664
4,457
1,236
Impairment charges
—
1,263
1,799
1,636
Other adjustments
452
95
3,030
135
Non-GAAP operating income
$
61,711
$
51,321
$
211,819
$
207,219
Non-GAAP operating margin
26.1
%
21.7
%
23.4
%
23.5
%
Other Expense,
Net
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP other expense, net
$
(2,011
)
$
(81
)
$
(2,594
)
$
(7,339
)
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
—
5
—
(3,465
)
Separation expenses
1,251
—
1,251
—
Other adjustments
—
(1,168
)
—
(1,168
)
Non-GAAP other expense, net(1)
$
(760
)
$
(1,244
)
(1,343
)
(11,003
)
Provision for
Income Taxes
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP provision for income taxes
$
18,564
$
10,375
$
39,103
$
23,853
GAAP effective income tax rate
58.6
%
169.7
%
71.4
%
60.4
%
Non-GAAP tax adjustments
(14,723
)
(4,355
)
(19,927
)
(2,287
)
Non-GAAP provision for income
taxes
$
3,841
$
6,020
$
19,176
$
21,566
Non-GAAP effective income tax
rate
6.3
%
12.0
%
9.1
%
11.0
%
Net Income (Loss)
Attributable to Verint Systems Inc. Common Shares
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP net income (loss) attributable to
Verint Systems Inc. common shares
$
7,748
$
(9,823
)
$
(5,902
)
$
(4,509
)
Revenue adjustments
504
2,011
3,002
6,171
Amortization of acquired technology
2,449
4,218
13,191
17,777
Amortization of other acquired intangible
assets
6,351
7,061
26,238
28,995
Stock-based compensation expenses
12,152
14,176
76,114
65,265
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) expenses, net
(1,346
)
2,497
1,689
6,951
Restructuring expenses
5,926
3,634
15,348
6,015
Separation expenses
1,425
1,740
2,567
12,936
Accelerated lease costs
448
7,771
8,279
9,794
IT facilities and infrastructure
realignment
931
664
4,457
1,236
Impairment charges
—
1,263
1,799
1,636
Other adjustments
452
(1,073
)
3,030
(1,033
)
Non-GAAP tax adjustments
14,723
4,355
19,927
2,287
Dividends, reversed due to assumed
conversion of preferred stock(3)
5,200
5,200
20,800
18,922
Total adjustments
49,215
53,517
196,441
177,921
Non-GAAP net income attributable to
Verint Systems Inc. common shares
$
56,963
$
43,694
$
190,539
$
173,412
Diluted Net
Income (Loss) Per Common Share Attributable to Verint Systems
Inc.
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands, except per share data)
2023
2022
2023
2022
GAAP diluted net income (loss) per common
share attributable to Verint Systems Inc.
$
0.12
$
(0.15
)
$
(0.09
)
$
(0.07
)
Non-GAAP diluted net income per common
share attributable to Verint Systems Inc.(3)
$
0.75
$
0.57
$
2.52
$
2.28
GAAP weighted-average shares used in
computing diluted net income (loss) per common share attributable
to Verint Systems Inc.
66,131
65,916
65,332
65,591
Additional weighted-average shares
applicable to non-GAAP diluted net income per common share
attributable to Verint Systems Inc.
9,478
10,657
10,235
10,419
Non-GAAP diluted weighted-average
shares used in computing net income per common share attributable
to Verint Systems Inc.(3)
75,609
76,573
75,567
76,010
GAAP Net Income
(Loss) to Adjusted EBITDA
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP net income (loss)
$
13,095
$
(4,260
)
$
15,659
$
15,651
As a percentage of GAAP revenue
5.5
%
(1.8
)%
1.7
%
1.8
%
Provision for income taxes
18,564
10,375
39,103
23,853
Other expense, net
2,011
81
2,594
7,339
Depreciation and amortization(2)
15,134
17,883
65,333
72,579
Revenue adjustments
504
2,011
3,002
6,171
Stock-based compensation expenses
12,152
14,176
76,114
65,265
Acquisition (benefit) expenses, net
(1,346
)
2,492
1,689
10,416
Restructuring expenses
5,849
3,596
14,939
5,951
Separation expenses
174
1,740
1,316
12,569
Accelerated lease costs
448
7,771
8,279
9,794
IT facilities and infrastructure
realignment
931
664
4,457
1,236
Impairment charges
—
1,263
1,799
1,636
Other adjustments
452
95
3,030
135
Adjusted EBITDA
$
67,968
$
57,887
$
237,314
$
232,595
As a percentage of non-GAAP
revenue
28.7
%
24.5
%
26.2
%
26.4
%
Gross Debt to Net
Debt
(in thousands)
January 31,
2023
January 31,
2022
Long-term debt
$
408,908
$
406,954
Unamortized debt discounts and issuance
costs
6,092
8,046
Gross debt
415,000
415,000
Less:
Cash and cash equivalents
282,099
358,805
Restricted cash and cash equivalents, and
restricted bank time deposits
300
6
Short-term investments
697
765
Net debt, excluding long-term
restricted cash, cash equivalents, time deposits, and
investments
131,904
55,424
Long-term restricted cash, cash
equivalents, time deposits, and investments
287
409
Net debt, including long-term
restricted cash, cash equivalents, time deposits, and
investments
$
131,617
$
55,015
(1) For the three months ended January 31, 2023, non-GAAP other
expense, net of $0.8 million was comprised of $0.6 million of
interest and other expense and $0.2 million of foreign exchange
charges 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 months and year ended January 31, 2023 and 2022.
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
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
Recurring revenue - GAAP
$
185,508
$
173,687
$
685,537
$
633,129
Cloud revenue - GAAP
145,395
116,645
505,593
388,412
Support revenue - GAAP
40,113
57,042
179,944
244,717
Nonrecurring revenue - GAAP
50,739
60,481
216,708
241,380
Perpetual revenue - GAAP
28,138
35,970
116,611
138,078
Professional services revenue - GAAP
22,601
24,511
100,097
103,302
Total revenue - GAAP
236,247
234,168
902,245
874,509
Estimated recurring revenue
adjustments
504
2,011
3,002
6,171
Estimated cloud revenue adjustments
504
2,001
2,988
6,133
Estimated support revenue adjustments
—
10
14
38
Estimated nonrecurring revenue
adjustments
—
—
—
—
Estimated perpetual revenue
adjustments
—
—
—
—
Estimated professional services revenue
adjustments
—
—
—
—
Total estimated revenue
adjustments
504
2,011
3,002
6,171
Recurring revenue - non-GAAP
186,012
175,698
688,539
639,300
Cloud revenue - non-GAAP
145,899
118,646
508,581
394,545
Support revenue - non-GAAP
40,113
57,052
179,958
244,755
Nonrecurring revenue - non-GAAP
50,739
60,481
216,708
241,380
Perpetual revenue - non-GAAP
28,138
35,970
116,611
138,078
Professional services revenue -
non-GAAP
22,601
24,511
100,097
103,302
Total revenue - non-GAAP
$
236,751
$
236,179
$
905,247
$
880,680
Recurring Gross
Profit
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP recurring revenue
$
185,508
$
173,687
$
685,537
$
633,129
GAAP recurring cost of revenues
41,633
44,046
162,347
156,569
GAAP recurring gross profit
143,875
129,641
523,190
476,560
GAAP recurring gross margin
77.6
%
74.6
%
76.3
%
75.3
%
Recurring revenue adjustments
504
2,011
3,002
6,171
Recurring stock-based compensation
expenses
669
468
2,856
1,999
Recurring acquisition expenses, net
—
37
22
117
Recurring restructuring expenses
677
52
1,265
531
Recurring separation expenses
—
—
—
32
Non-GAAP recurring gross profit
$
145,725
$
132,209
$
530,335
$
485,410
Non-GAAP recurring gross margin
78.3
%
75.2
%
77.0
%
75.9
%
Nonrecurring
Gross Profit
Three Months Ended
January 31,
Year Ended
January 31,
(in thousands)
2023
2022
2023
2022
GAAP nonrecurring revenue
$
50,739
$
60,481
$
216,708
$
241,380
GAAP nonrecurring cost of revenues
28,749
33,317
119,530
124,226
GAAP nonrecurring gross profit
21,990
27,164
97,178
117,154
GAAP nonrecurring gross margin
43.3
%
44.9
%
44.8
%
48.5
%
Nonrecurring revenue adjustments
—
—
—
—
Nonrecurring stock-based compensation
expenses
748
642
2,806
3,029
Nonrecurring acquisition expenses, net
—
132
154
223
Nonrecurring restructuring expenses
801
—
1,182
313
Nonrecurring separation expenses
—
—
—
46
Non-GAAP nonrecurring gross
profit
$
23,539
$
27,938
$
101,320
$
120,765
Non-GAAP nonrecurring gross
margin
46.4
%
46.2
%
46.8
%
50.0
%
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
Year
Ended
Three Months
Ended
Year
Ended
Revenue for the three months and year
ended January 31, 2022
$
234,168
$
874,509
$
236,179
$
880,680
Revenue for the three months and year
ended January 31, 2023
$
236,247
$
902,245
$
236,751
$
905,247
Revenue for the three months and year
ended January 31, 2023 at constant currency(1)
$
241,000
$
921,000
$
241,000
$
925,000
Reported period-over-period revenue
change
0.9
%
3.2
%
0.2
%
2.8
%
% impact from change in foreign currency
exchange rates
2.0
%
2.1
%
1.8
%
2.2
%
Constant currency period-over-period
revenue growth
2.9
%
5.3
%
2.0
%
5.0
%
(1) Revenue for the three months and year ended January 31, 2023
at constant currency is calculated by translating current-period
GAAP or non-GAAP foreign currency revenue (as applicable) into U.S.
dollars using average foreign currency exchange rates for the three
months and year ended January 31, 2022 rather than actual
current-period foreign currency exchange rates.
(2) GAAP revenue denominated in non-U.S. dollars was 20% and 21%
of our total GAAP revenue for the three months ended January 31,
2023 and 2022, respectively. GAAP revenue denominated in non-U.S.
dollars was 20% and 22% of our total GAAP revenue for the years
ended January 31, 2023 and 2022, respectively. Our combined GAAP
cost of revenue and operating expenses denominated in non-U.S.
dollars was 32% and 30% of our total combined GAAP cost of revenue
and operating expenses for the three months ended January 31, 2023
and 2022, respectively. Our combined GAAP cost of revenue and
operating expenses denominated in non-U.S. dollars was 30% and 31%
of our total combined GAAP cost of revenue and operating expenses
for the years ended January 31, 2023 and 2022, respectively.
(3) Non-GAAP revenue denominated in non-U.S. dollars was 20% and
21% of our total non-GAAP revenue for the three months ended
January 31, 2023 and 2022, respectively. Non-GAAP revenue
denominated in non-U.S. dollars was 20% and 22% of our total
non-GAAP revenue for the years ended January 31, 2023 and 2022,
respectively. Our combined Non-GAAP cost of revenue and operating
expenses denominated in non-U.S. dollars was 34% and 33% of our
total combined Non-GAAP cost of revenue and operating expenses for
the three months ended January 31, 2023 and 2022, 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
years ended January 31, 2023 and 2022, 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)
January 31,
(in thousands, except share and per share
data)
2023
2022
Assets
Current Assets:
Cash and cash equivalents
$
282,099
$
358,805
Short-term investments
697
765
Accounts receivable, net of allowance for
credit losses of $1.3 million and $1.3 million, respectively
188,414
193,831
Contract assets, net
60,444
42,688
Inventories
12,628
5,337
Prepaid expenses and other current
assets
75,374
53,752
Total current assets
619,656
655,178
Property and equipment, net
64,810
64,090
Operating lease right-of-use assets
37,649
35,433
Goodwill
1,347,213
1,353,421
Intangible assets, net
85,272
118,254
Long-term deferred income taxes
10,719
8,091
Other assets
148,282
126,638
Total assets
$
2,313,601
$
2,361,105
Liabilities, Temporary Equity, and
Stockholders' Equity
Current Liabilities:
Accounts payable
$
43,631
$
39,501
Accrued expenses and other current
liabilities
155,944
168,694
Contract liabilities
271,476
271,271
Total current liabilities
471,051
479,466
Long-term debt
408,908
406,954
Long-term contract liabilities
18,047
15,872
Operating lease liabilities
40,744
28,457
Long-term deferred income taxes
11,749
17,460
Other liabilities
68,632
21,996
Total liabilities
1,019,131
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 January 31, 2023 and 2022, respectively;
aggregate liquidation preference and current redemption value of
$206,067 at January 31, 2023 and 2022, respectively.
200,628
200,628
Series B Preferred Stock; 200,000 shares
issued and outstanding at January 31, 2023 and 2022, respectively;
aggregate liquidation preference and current redemption value of
$206,067 at January 31, 2023 and 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 65,404,000
and 66,211,000; outstanding 65,404,000 and 66,211,000 shares at
January 31, 2023 and 2022, respectively.
65
66
Additional paid-in capital
1,055,157
1,125,152
Accumulated deficit
(45,333
)
(54,509
)
Accumulated other comprehensive loss
(154,099
)
(118,515
)
Total Verint Systems Inc. stockholders'
equity
855,790
952,194
Noncontrolling interests
2,359
2,385
Total stockholders' equity
858,149
954,579
Total liabilities, temporary equity,
and stockholders' equity
$
2,313,601
$
2,361,105
Table 7
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Year Ended January 31,
(in thousands)
2023
2022
Cash flows from operating
activities:
Net income
$
15,659
$
15,651
Adjustments to reconcile net income
(loss) from continuing operations to net cash provided by operating
activities:
Depreciation and amortization
67,960
75,449
Provision for credit losses
629
1,396
Stock-based compensation, excluding
cash-settled awards
76,051
65,246
Change in fair value of future tranche
right
—
(15,810
)
Benefit from deferred income taxes
(9,544
)
(11,323
)
Non-cash losses on derivative financial
instruments, net
—
14,374
Losses on early retirements of debt
—
2,474
Other non-cash items, net
9,652
7,416
Changes in operating assets and
liabilities, net of effects of business combinations and
divestitures:
Accounts receivable
3,060
11,712
Contract assets
(18,762
)
(6,391
)
Inventories
(7,753
)
(713
)
Prepaid expenses and other assets
(44,247
)
(33,107
)
Accounts payable and accrued expenses
6,394
(1,772
)
Contract liabilities
5,395
7,820
Other liabilities
40,852
(2,321
)
Other, net
(5,530
)
4,553
Net cash provided by operating activities
— continuing operations
139,816
134,654
Net cash used in operating activities —
discontinued operations
—
(9,055
)
Net cash provided by operating
activities
139,816
125,599
Cash flows from investing
activities:
Cash paid for business combinations,
including adjustments, net of cash acquired
(21,928
)
(57,024
)
Purchases of property and equipment
(27,950
)
(16,962
)
Purchases of investments
(10,627
)
(751
)
Maturities and sales of investments
10,709
46,299
Cash paid for capitalized software
development costs
(7,595
)
(7,560
)
Other investing activities
808
98
Net cash used in investing
activities
(56,583
)
(35,900
)
Cash flows from financing
activities:
Proceeds from issuance of preferred stock
and future tranche right, net of issuance costs
—
198,731
Proceeds from borrowings
—
315,000
Repayments of borrowings and other
financing obligations
(3,658
)
(313,354
)
Settlement of 2014 Notes
—
(386,887
)
Purchases of capped calls
—
(41,060
)
Payments of equity issuance, debt
issuance, and other debt-related costs
(224
)
(10,708
)
Distributions paid to noncontrolling
interest
(787
)
(1,110
)
Purchases of treasury stock and common
stock for retirement
(128,985
)
(75,955
)
Preferred stock dividend payments
(20,800
)
(12,856
)
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 deferred purchase price and
contingent consideration for business combinations (financing
portion) and other financing activities
(3,453
)
(9,045
)
Net cash used in financing
activities
(157,907
)
(430,123
)
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
(2,033
)
(841
)
Net decrease in cash, cash equivalents,
restricted cash, and restricted cash equivalents
(76,707
)
(341,265
)
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, beginning of year
358,868
700,133
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of year
$
282,161
$
358,868
Reconciliation of cash, cash
equivalents, restricted cash, and restricted cash equivalents at
end of year to the consolidated balance sheets:
Cash and cash equivalents
$
282,099
$
358,805
Restricted cash and cash equivalents
included in prepaid expenses and other current assets
5
6
Restricted cash and cash equivalents
included in other assets
57
57
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
282,161
$
358,868
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 and IT facilities and
infrastructure realignment 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, tax, 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 and
other expense adjustments associated with a tax-related
indemnification asset as a result of the spin-off. 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, as
well as asset impairment charges and IT facility exit costs.
Impairment charges and other adjustments. We exclude from our
non-GAAP financial measures asset impairment charges (other than
those already included within restructuring, acquisition, or IT
facilities and realignment 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 ended
January 31, 2023 is 9% 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.
SaaS Annual Recurring Revenue (SaaS ARR) represents the
annualized quarterly run-rate value of active or signed SaaS
contracts as of the end of a period. We use SaaS ARR to identify
the annual recurring value of customer contracts at the end of a
reporting period and to monitor the growth of our recurring
business as we shift to SaaS.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230329005721/en/
Investor Relations Matthew
Frankel, CFA Verint Systems Inc. (631) 962-9672
matthew.frankel@verint.com
Verint Systems (NASDAQ:VRNT)
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