Conference Call to Discuss Selected
Financial Information and Outlook to be Held Today at 4:30 p.m.
ET
Verint® Systems Inc. (NASDAQ: VRNT), a
global leader in Actionable Intelligence® solutions and value-added
services, today announced results for the three and nine months
ended October 31, 2017.
Financial Highlights
Below is selected unaudited financial information for the three
and nine months ended October 31, 2017 prepared in accordance with
generally accepted accounting principles (“GAAP”) and not in
accordance with GAAP (“non-GAAP”).
Three Months Ended October 31, 2017 - GAAP
Three Months Ended October 31, 2017
- Non-GAAP Revenue: $280.7 million(1) Revenue:
$283.8 million(1) Operating income: $17.8 million Operating income:
$55.8 million Diluted net income per share: $0.04 Diluted net
income per share: $0.66
Nine Months Ended October 31,
2017 - GAAP Nine Months Ended October 31, 2017 -
Non-GAAP Revenue: $816.5 million(1) Revenue: $827.7 million(1)
Operating income: $12.4 million Operating income: $144.1 million
Net loss per share: $(0.38) Diluted net income per share: $1.75
(1) Please refer to Table 6 for constant currency revenue
information, and "Supplemental Information about Non-GAAP Financial
Measures" at the end of this press release for more
information.
CEO Commentary
“We are pleased with our strong third quarter and year-to-date
results. For Q3, we had sequential and year-over-year revenue
growth in both of our segments and earnings increased faster than
revenue driven by top line growth and expanding margins,” said Dan
Bodner, Verint CEO and President.
Bodner continued, “In Customer Engagement, we are a market
leader, offering one of the broadest portfolios of hybrid cloud
solutions to simplify and modernize customer engagement. We expect
our ongoing innovation, including the recent introduction of new
automation and artificial intelligence capabilities, will
contribute to sustained long-term growth.”
“In Cyber Intelligence, we are a market leader in security and
intelligence data mining software and we are pleased with our
double digit year-over-year revenue growth for the third
consecutive quarter this year. Our results reflect the demand for
solutions that can address terrorism, crime, cyber-attacks, and
other threats that remain pervasive around the world. We believe
our broad portfolio, domain expertise and on-going innovation will
contribute to sustained long-term growth,” Bodner concluded.
Financial Outlook
Verint's non-GAAP outlook for the year ending January 31, 2018
is as follows:
- Segment Revenue Outlook:
- In our Customer Engagement segment, we
expect around 5% revenue growth.
- In our Cyber Intelligence segment, we
expect around 10% revenue growth.
- Total Revenue and EPS outlook: Based on
the above, we expect total revenue of $1.14 billion with a narrower
range of +/- 1% and diluted earnings per share of $2.75 at the
midpoint.
Verint's preliminary non-GAAP outlook for the year ending
January 31, 2019 is as follows:
- Segment Revenue Outlook:
- In our Customer Engagement segment, we
expect around 5% revenue growth.
- In our Cyber Intelligence segment, we
expect around 10% revenue growth.
- Total Revenue and EPS outlook: Based on
the above, we expect total revenue of $1.215 billion with a range
of +/- 2% and diluted earnings per share of $3.00 at the
midpoint.
Our non-GAAP outlook for the year ending January 31, 2018
excludes the following GAAP measures which we are able to quantify
with reasonable certainty:
- Amortization of intangible assets of
approximately $71 million.
- Amortization of discount on convertible
notes of approximately $11 million.
Our non-GAAP outlook for the year ending January 31, 2018
excludes the following GAAP measures for which we are able to
provide a range of probable significance:
- Revenue adjustments related to
completed acquisitions are expected to be between approximately $12
million and $14 million for the year ending January 31, 2018.
- Stock-based compensation is expected to
be between approximately $65 million and $70 million for the year
ending January 31, 2018, assuming market prices for our common
stock approximately consistent with current levels.
Our preliminary non-GAAP outlook for the year ending January 31,
2019 excludes the following GAAP measures which we are able to
quantify with reasonable certainty:
- Amortization of intangible assets of
approximately $47 million.
- Amortization of discount on convertible
notes of approximately $12 million.
Our preliminary non-GAAP outlook for the year ending January 31,
2019 excludes the following GAAP measures for which we are able to
provide a range of probable significance:
- Revenue adjustments related to
completed acquisitions are expected to be between approximately $4
million and $6 million for the year ending January 31, 2019.
- Stock-based compensation is expected to
be between approximately $60 million and $70 million for the year
ending January 31, 2019, assuming market prices for our common
stock approximately consistent with current levels.
Our non-GAAP outlook does not include the potential impact of
any in-process business acquisitions that may close after the date
hereof, and, unless otherwise specified, reflects foreign currency
exchange rates approximately consistent with current rates.
We are unable, without unreasonable efforts, to provide a
reconciliation for other GAAP measures which are excluded from our
non-GAAP outlook, including the impact of future business
acquisitions or acquisition expenses, future restructuring
expenses, and non-GAAP income tax adjustments due to the level of
unpredictability and uncertainty associated with these items. For
these same reasons, we are unable to assess the probable
significance of these excluded items. While historical results may
not be indicative of future results, actual amounts for the three
and nine months ended October 31, 2017 and 2016 for the GAAP
measures excluded from our non-GAAP outlook appear in Table 3 to
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,
2017 and outlook. An online, real-time webcast of the conference
call will be available on our website at www.verint.com. The conference call can also be
accessed live via telephone at 1-844-309-0615 (United States and
Canada) and 1-661-378-9462 (international) and the passcode is
3286436. Please dial in 5-10 minutes prior to the scheduled start
time.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP
financial measures. For a description of these non-GAAP financial
measures, including the reasons management uses each measure, and
reconciliations of non-GAAP financial measures presented for
completed periods to the most directly comparable financial
measures prepared in accordance with GAAP, please see Tables 2, 3,
6 and 7 as well as "Supplemental Information About Non-GAAP
Financial Measures" at the end of this press release.
About Verint Systems Inc.
Verint® (Nasdaq: VRNT) is a global leader in Actionable
Intelligence® solutions with a focus on customer engagement
optimization, security intelligence, and fraud, risk and
compliance. Today, over 10,000 organizations in more than 180
countries—including over 80 percent of the Fortune 100—count on
intelligence from Verint solutions to make more informed, effective
and timely decisions. Learn more about how we’re creating A Smarter
World with Actionable Intelligence® at www.verint.com.
Cautions About Forward-Looking Statements
This press release contains forward-looking statements,
including statements regarding expectations, predictions, views,
opportunities, plans, strategies, beliefs, and statements of
similar effect relating to Verint Systems Inc. These
forward-looking statements are not guarantees of future performance
and they are based on management's expectations that involve a
number of known and unknown risks, uncertainties, assumptions, and
other important factors, any of which could cause our actual
results or conditions to differ materially from those expressed in
or implied by the forward-looking statements. Some of the factors
that could cause our actual results or conditions to differ
materially from current expectations include, among others:
uncertainties regarding the impact of general economic conditions
in the United States and abroad, particularly in information
technology spending and government budgets, on our business; risks
associated with our ability to keep pace with technological
changes, evolving industry standards, and customer challenges, such
as the proliferation and strengthening of encryption, and the
transition of portions of the software market to the cloud, to
adapt to changing market potential from area to area within our
markets, and to successfully develop, launch, and drive demand for
new, innovative, high-quality products that meet or exceed customer
needs, while simultaneously preserving our legacy businesses and
migrating away from areas of commoditization; risks due to
aggressive competition in all of our markets, including with
respect to maintaining margins and sufficient levels of investment
in our business; risks created by the continued consolidation of
our competitors or the introduction of large competitors in our
markets with greater resources than we have; risks associated with
our ability to successfully compete for, consummate, and implement
mergers and acquisitions, including risks associated with
valuations, capital constraints, costs and expenses, maintaining
profitability levels, expansion into new areas, management
distraction, post-acquisition integration activities, and potential
asset impairments; risks relating to our ability to effectively and
efficiently enhance our existing operations and execute on our
growth strategy and profitability goals, including managing
investments in our business and operations, managing our cloud
transition and our revenue mix, and enhancing and securing our
internal and external operations; risks associated with our ability
to effectively and efficiently allocate limited financial and human
resources to business, developmental, strategic, or other
opportunities, and risk that such investments may not come to
fruition or produce satisfactory returns; risks that we may be
unable to establish and maintain relationships with key resellers,
partners, and systems integrators; risks associated with our
reliance on third-party suppliers, partners, or original equipment
manufacturers (“OEMs”) for certain components, products, or
services, including companies that may compete with us or work with
our competitors; risks associated with the mishandling or perceived
mishandling of sensitive or confidential information and with
security vulnerabilities or lapses, including information
technology system breaches, failures, or disruptions; risks that
our products or services, or those of third-party suppliers,
partners, or OEMs which we use in or with our offerings or
otherwise rely on, may contain defects or may be vulnerable to
cyber-attacks; risks associated with our significant international
operations, including, among others, in Israel, Europe, and Asia,
exposure to regions subject to political or economic instability,
fluctuations in foreign exchange rates, and challenges associated
with a significant portion of our cash being held overseas; risks
associated with a significant amount of our business coming from
domestic and foreign government customers, including the ability to
maintain security clearances for applicable projects and
reputational risks associated with our security solutions; risks
associated with complex and changing local and foreign regulatory
environments in the jurisdictions in which we operate, including,
among others, with respect to privacy, information security, trade
compliance, anti-corruption, and regulations related to our
security solutions; risks associated with our ability to retain and
recruit qualified personnel in regions in which we operate,
including in new markets and growth areas we may enter; challenges
associated with selling sophisticated solutions, including with
respect to educating our customers on the benefits of our solutions
or assisting them in realizing such benefits; challenges associated
with pursuing larger sales opportunities, including with respect to
longer sales cycles, transaction reductions, deferrals, or
cancellations during the sales cycle, risk of customer
concentration, our ability to accurately forecast when a sales
opportunity will convert to an order, or to forecast revenue and
expenses, and increased volatility of our operating results from
period to period; risks that our intellectual property rights may
not be adequate to protect our business or assets or that others
may make claims on our intellectual property or claim infringement
on their intellectual property rights; risks that our customers or
partners delay or cancel orders or are unable to honor contractual
commitments due to liquidity issues, challenges in their business,
or otherwise; risks that we may experience liquidity or working
capital issues and related risks that financing sources may be
unavailable to us on reasonable terms or at all; risks associated
with significant leverage resulting from our current debt position
or our ability to incur additional debt, including with respect to
liquidity considerations, covenant limitations and compliance,
fluctuations in interest rates, dilution considerations (with
respect to our convertible notes), and our ability to maintain our
credit ratings; risks arising as a result of contingent or other
obligations or liabilities assumed in our acquisition of our former
parent company, Comverse Technology, Inc. (“CTI”), or associated
with formerly being consolidated with, and part of a consolidated
tax group with, CTI, or as a result of CTI's former subsidiary,
Comverse, Inc. (now known as Mavenir, Inc.), being unwilling or
unable to provide us with certain indemnities to which we are
entitled; risks relating to the adequacy of our existing
infrastructure, systems, processes, policies, procedures, and
personnel and our ability to successfully implement and maintain
enhancements to the foregoing and adequate systems and internal
controls for our current and future operations and reporting needs,
including related risks of financial statement omissions,
misstatements, restatements, or filing delays; and risks associated
with changing accounting principles or standards, tax rates, tax
laws and regulations, and the continuing availability of expected
tax benefits. 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, 2017, our
Quarterly Report on Form 10-Q for the quarter ended October 31,
2017, when filed, and other filings we make with the SEC.
VERINT, ACTIONABLE INTELLIGENCE, MAKE BIG DATA ACTIONABLE,
CUSTOMER-INSPIRED EXCELLENCE, INTELLIGENCE IN ACTION, IMPACT 360,
WITNESS, VERINT VERIFIED, KANA, LAGAN, VOVICI, GMT, VICTRIO,
AUDIOLOG, CONTACT SOLUTIONS, OPINIONLAB, ADTECH, VERBA, CUSTOMER
ENGAGEMENT SOLUTIONS, CYBER INTELLIGENCE SOLUTIONS, VOICE OF THE
CUSTOMER ANALYTICS, NEXTIVA, EDGEVR, RELIANT, VANTAGE, STAR-GATE,
ENGAGE, CYBERVISION, FOCALINFO, SUNTECH, and VIGIA are trademarks
or registered trademarks of Verint Systems Inc. or its
subsidiaries. Other trademarks mentioned are the property of their
respective owners.
Table 1
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Operations
(Unaudited)
Three Months EndedOctober 31,
Nine Months EndedOctober 31, (in
thousands, except per share data)
2017
2016 2017 2016 Revenue:
Product $ 94,827 $ 88,004 $ 279,056 $ 254,172 Service and support
185,899 170,898 537,442 512,075
Total revenue 280,726 258,902
816,498 766,247 Cost of revenue:
Product 32,840 29,499 98,708 82,455 Service and support 69,383
64,007 205,928 195,892 Amortization of acquired technology 9,182
9,700 28,246 28,014
Total cost of
revenue 111,405 103,206
332,882 306,361 Gross profit
169,321 155,696 483,616
459,886 Operating expenses: Research and
development, net 47,157 41,028 141,911 128,847 Selling, general and
administrative 97,304 98,899 302,605 300,080 Amortization of other
acquired intangible assets 7,048 10,244 26,727
32,976
Total operating expenses 151,509
150,171 471,243 461,903
Operating income (loss) 17,812 5,525
12,373 (2,017 ) Other income
(expense), net: Interest income 654 229 1,793 695 Interest
expense (8,891 ) (8,708 ) (26,997 ) (25,976 ) Loss on early
retirement of debt — — (1,934 ) — Other (expense) income, net (565
) (1,121 ) 2,529 (2,660 )
Total other expense, net
(8,802 ) (9,600 ) (24,609
) (27,941 ) Income (loss) before provision
for income taxes 9,010 (4,075 )
(12,236 ) (29,958 ) Provision for
income taxes 5,944 3,359 9,504 4,747
Net income (loss) 3,066 (7,434 )
(21,740 ) (34,705 ) Net income
attributable to noncontrolling interests 577 803
1,984 2,693
Net income (loss) attributable to
Verint Systems Inc. $ 2,489 $
(8,237 ) $ (23,724 ) $
(37,398 )
Net income (loss) per common share
attributable to Verint Systems
Inc.:
Basic $ 0.04 $ (0.13
) $ (0.38 ) $ (0.60
) Diluted $ 0.04 $
(0.13 ) $ (0.38 ) $
(0.60 ) Weighted-average common shares
outstanding: Basic 63,759 62,895
63,152 62,602 Diluted
64,588 62,895 63,152
62,602
Table 2
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Segment Revenue
(Unaudited)
Three Months
Ended
October
31,
Nine Months
Ended
October
31,
(in thousands)
2017 2016
2017 2016 GAAP Revenue By
Segment: Customer Engagement $ 181,590 $ 172,757 $ 531,643 $
519,010 Cyber Intelligence 99,136 86,145 284,855
247,237
GAAP Total Revenue $ 280,726
$ 258,902 $ 816,498
$ 766,247 Revenue Adjustments
Related to Acquisitions: Customer Engagement $ 2,916 $ 1,103 $
11,065 $ 6,610 Cyber Intelligence 118 24 169
300
Total Revenue Adjustments Related to Acquisitions
$ 3,034 $ 1,127 $
11,234 $ 6,910 Non-GAAP
Revenue By Segment: Customer Engagement $ 184,506 $ 173,860 $
542,708 $ 525,620 Cyber Intelligence 99,254 86,169
285,024 247,537
Non-GAAP Total Revenue $
283,760 $ 260,029 $
827,732 $ 773,157
Table 3
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP
Results
(Unaudited)
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands, except per share data)
2017
2016 2017 2016
Table of
Reconciliation from GAAP Gross Profit to Non-GAAP Gross
Profit
GAAP gross profit $ 169,321
$ 155,696 $ 483,616
$ 459,886 GAAP gross margin 60.3
% 60.1 % 59.2 % 60.0
% Revenue adjustments related to acquisitions 3,034 1,127
11,234 6,910 Amortization of acquired technology 9,182 9,700 28,246
28,014 Stock-based compensation expenses 2,197 1,807 5,868 5,573
Acquisition expenses, net 23 — 91 2 Restructuring expenses 919
787 1,937 1,829
Non-GAAP gross
profit $ 184,676 $ 169,117
$ 530,992 $ 502,214
Non-GAAP gross margin 65.1 %
65.0 % 64.2 % 65.0 %
Table of
Reconciliation from GAAP Operating Income (Loss) to Non-GAAP
Operating Income
GAAP operating income (loss) $ 17,812
$ 5,525 $ 12,373
$ (2,017 ) As a percentage of GAAP
revenue 6.3 % 2.1 % 1.5
% (0.3 )% Revenue adjustments related to
acquisitions 3,034 1,127 11,234 6,910 Amortization of acquired
technology 9,182 9,700 28,246 28,014 Amortization of other acquired
intangible assets 7,048 10,244 26,727 32,976 Stock-based
compensation expenses 15,966 13,954 50,453 45,682 Acquisition
expenses, net (4,063 ) 3,480 2,455 8,063 Restructuring expenses
6,309 4,955 11,557 12,220 Other adjustments 490 58
1,091 401
Non-GAAP operating income $
55,778 $ 49,043 $
144,136 $ 132,249 As a
percentage of non-GAAP revenue 19.7 % 18.9
% 17.4 % 17.1 %
Table of
Reconciliation from GAAP Other Expense, Net to Non-GAAP Other
Expense, Net
GAAP other expense, net $ (8,802
) $ (9,600 ) $ (24,609
) $ (27,941 ) Unrealized (gains) losses
on derivatives, net (890 ) 87 (1,877 ) 479 Amortization of
convertible note discount 2,829 2,684 8,377 7,948 Loss on early
retirement of debt — — 1,934 — Acquisition expenses, net (10 ) (30
) 710 56 Restructuring expenses 1 (144 ) 139 219 Impairment charges
— — — 2,400
Non-GAAP other expense,
net(1) $ (6,872 ) $
(7,003 ) $ (15,326 ) $
(16,839 )
Table of
Reconciliation from GAAP Provision for Income Taxes to Non-GAAP
Provision for Income Taxes
GAAP provision for income taxes $ 5,944
$ 3,359 $ 9,504
$ 4,747 GAAP effective income tax rate
66.0 % (82.4 )% (77.7 )%
(15.8 )% Non-GAAP tax adjustments (91 ) 665
5,082 5,895
Non-GAAP provision for income
taxes $ 5,853 $ 4,024
$ 14,586 $ 10,642
Non-GAAP effective income tax rate 12.0 %
9.6 % 11.3 % 9.2 %
Table of
Reconciliation from GAAP Net Income (Loss) Attributable to Verint
Systems Inc. to Non-GAAP Net Income Attributable to Verint
Systems Inc.
GAAP net income (loss) attributable to Verint Systems
Inc. $ 2,489 $ (8,237
) $ (23,724 ) $ (37,398
) Revenue adjustments related to acquisitions 3,034 1,127
11,234 6,910 Amortization of acquired technology 9,182 9,700 28,246
28,014 Amortization of other acquired intangible assets 7,048
10,244 26,727 32,976 Stock-based compensation expenses 15,966
13,954 50,453 45,682 Unrealized (gains) losses on derivatives, net
(890 ) 87 (1,877 ) 479 Amortization of convertible note discount
2,829 2,684 8,377 7,948 Loss on early retirement of debt — — 1,934
— Acquisition expenses, net (4,073 ) 3,450 3,165 8,119
Restructuring expenses 6,310 4,811 11,696 12,439 Impairment charges
— — — 2,400 Other adjustments 490 58 1,091 401 Non-GAAP tax
adjustments 91 (665 ) (5,082 ) (5,895 ) Total GAAP net
income (loss) adjustments 39,987 45,450 135,964
139,473
Non-GAAP net income attributable to Verint
Systems Inc. $ 42,476 $
37,213 $ 112,240 $
102,075
Table Comparing
GAAP Diluted Net Income (Loss) Per Common Share Attributable to
Verint Systems Inc. to Non-GAAP Diluted Net Income Per Common
Share Attributable to Verint Systems Inc.
GAAP diluted net income (loss) per common
share attributable toVerint Systems Inc.
$ 0.04 $ (0.13 ) $ (0.38 ) $ (0.60 )
Non-GAAP diluted net income per common
share attributable toVerint Systems Inc.
$ 0.66 $ 0.59 $ 1.75 $ 1.62
GAAP weighted-average shares used in
computing diluted net income (loss) per common share
attributable to Verint Systems Inc.
64,588 62,895 63,152 62,602
Additional weighted-average shares
applicable to non-GAAPdiluted net income per common share
attributable to VerintSystems Inc.
— 355 912 385
Non-GAAP diluted weighted-average
shares used in computing net income per common share
attributable to Verint Systems Inc.
64,588 63,250 64,064
62,987
Table of
Reconciliation from GAAP Net Income (Loss) Attributable to Verint
Systems Inc. to Adjusted EBITDA
GAAP net income (loss) attributable to Verint Systems
Inc. $ 2,489 $ (8,237
) $ (23,724 ) $
(37,398 ) As a percentage of GAAP revenue
0.9 % (3.2 )% (2.9 )%
(4.9 )% Net income attributable to noncontrolling
interest 577 803 1,984 2,693 Provision for income taxes 5,944 3,359
9,504 4,747 Other expense, net 8,802 9,600 24,609 27,941
Depreciation and amortization(2) 23,798 27,566 77,652 83,007
Revenue adjustments related to acquisitions 3,034 1,127 11,234
6,910 Stock-based compensation expenses 15,966 13,954 50,453 45,682
Acquisition expenses, net (4,063 ) 3,480 2,455 8,063 Restructuring
expenses 6,309 4,289 11,553 11,550 Other adjustments 490 58
1,091 401
Adjusted EBITDA $
63,346 $ 55,999 $
166,811 $ 153,596 As a
percentage of non-GAAP revenue 22.3 % 21.5
% 20.2 % 19.9 %
Table of
Reconciliation from Gross Debt to Net Debt
October 31,
2017
January 31,
2017
Current maturities of long-term debt $ 4,552 $ 4,611
Long-term debt 766,006 744,260 Unamortized debt discounts and
issuance costs 53,681 60,571
Gross debt
824,239 809,442 Less: Cash and cash
equivalents 312,666 307,363 Restricted cash and bank time deposits
63,326 9,198 Short-term investments 6,411 3,184
Net debt, excluding long-term restricted cash 441,836
489,697 Long-term restricted cash 31,637
54,566
Net debt, including long-term restricted
cash $ 410,199 $ 435,131
(1) For the three months ended October 31, 2017, non-GAAP other
expense, net of $6.9 million was comprised of $5.4 million of
interest and other expense, and $1.5 million of foreign exchange
charges primarily related to balance sheet translations.
(2) Adjusted for financing fee amortization.
Table 4
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Unaudited)
October 31, January
31, (in thousands, except share and per share data)
2017
2017 Assets Current Assets: Cash and cash
equivalents $ 312,666 $ 307,363 Restricted cash and bank time
deposits 63,326 9,198 Short-term investments 6,411 3,184
Accounts receivable, net of allowance for
doubtful accounts of $2.2 million and $1.8
million, respectively
284,050 266,590 Inventories 19,522 17,537 Deferred cost of revenue
4,271 3,621 Prepaid expenses and other current assets 81,436
64,561
Total current assets 771,682
672,054 Property and equipment, net 85,248 77,551
Goodwill 1,304,971 1,264,818 Intangible assets, net 199,545 235,259
Capitalized software development costs, net 7,881 9,509 Long-term
deferred cost of revenue 3,402 5,463 Other assets 70,224
98,130
Total assets $ 2,442,953
$ 2,362,784 Liabilities and
Stockholders' Equity Current Liabilities: Accounts
payable $ 73,820 $ 62,049 Accrued expenses and other current
liabilities 220,772 217,835 Deferred revenue 166,945 182,515
Total current liabilities 461,537
462,399 Long-term debt 766,006 744,260 Long-term
deferred revenue 24,095 20,912 Other liabilities 117,948
120,173
Total liabilities 1,369,586
1,347,744 Commitments and Contingencies
Stockholders' Equity:
Preferred stock - $0.001 par value;
authorized 2,207,000 shares at October 31, 2017 and January
31, 2017, respectively; none issued.
— —
Common stock - $0.001 par value;
authorized 120,000,000 shares. Issued 65,442,000
and 64,073,000 shares; outstanding 63,781,000 and
62,419,000 shares at October 31, 2017 and
January 31, 2017, respectively.
65 64 Additional paid-in capital 1,505,492 1,449,335
Treasury stock, at cost - 1,661,000 and
1,654,000 shares at October 31, 2017 and January 31,
2017, respectively.
(57,425 ) (57,147 ) Accumulated deficit (255,409 ) (230,816 )
Accumulated other comprehensive loss (132,363 ) (154,856 )
Total
Verint Systems Inc. stockholders' equity 1,060,360
1,006,580 Noncontrolling interests 13,007 8,460
Total stockholders' equity 1,073,367
1,015,040 Total liabilities and stockholders'
equity $ 2,442,953 $
2,362,784
Table 5
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
Nine Months EndedOctober
31,
(in thousands)
2017 2016 Cash flows
from operating activities: Net loss $ (21,740 ) $ (34,705 )
Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation and amortization 79,879
85,411 Stock-based compensation, excluding cash-settled awards
50,397 45,547 Amortization of discount on convertible notes 8,377
7,948 Non-cash (gains) losses on derivative financial instruments,
net (292 ) 693 Loss on early retirement of debt 1,934 — Other
non-cash items, net 307 8,767
Changes in operating assets and
liabilities, net of effects of business combinations: Accounts
receivable (15,824 ) 3,708 Inventories (2,232 ) (2,823 ) Deferred
cost of revenue 1,503 1,349 Prepaid expenses and other assets
(12,947 ) (6,066 ) Accounts payable and accrued expenses 13,145
(21,305 ) Deferred revenue (14,129 ) (21,749 ) Other, net 7,796
4,914
Net cash provided by operating
activities 96,174 71,689
Cash flows from investing activities: Cash paid for business
combinations, including adjustments, net of cash acquired (28,071 )
(72,269 ) Purchases of property and equipment (26,445 ) (20,611 )
Purchases of investments (8,305 ) (34,215 ) Maturities and sales of
investments 5,244 79,930 Cash paid for capitalized software
development costs (909 ) (1,730 )
Change in restricted cash and bank time
deposits, including long-term portion, and other
investingactivities, net
(30,207 ) (31,737 )
Net cash used in investing activities
(88,693 ) (80,632 ) Cash
flows from financing activities: Proceeds from borrowings, net
of original issuance discount 424,469 — Repayments of borrowings
and other financing obligations (410,536 ) (1,987 ) Payments of
debt-related costs (7,107 ) (249 ) Proceeds from exercises of stock
options — 1 Purchases of treasury stock — (35,896 ) Dividends paid
to noncontrolling interest (716 ) — Payments of contingent
consideration for business combinations (financing portion) (7,210
) (3,231 ) Other financing activities, net (320 ) (827 )
Net
cash used in financing activities (1,420 )
(42,189 ) Effect of foreign currency exchange rate
changes on cash and cash equivalents (758 ) (5,144 )
Net
increase (decrease) in cash and cash equivalents 5,303
(56,276 ) Cash and cash equivalents, beginning of
period 307,363 352,105 Cash and
cash equivalents, end of period $ 312,666
$ 295,829
Table 6
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Calculation of Change in Revenue on a
Constant Currency Basis
(Unaudited)
GAAP Revenue
Non-GAAP Revenue
(in thousands, except percentages)
Three Months
Ended
Nine Months
Ended
Three Months
Ended
Nine Months
Ended
Total Revenue Revenue for the three and nine months
ended October 31, 2016 $ 258,902 $ 766,247 $ 260,029 $ 773,157
Revenue for the three and nine months ended October 31, 2017 $
280,726 $ 816,498 $ 283,760 $ 827,732
Revenue for the three and nine months
ended October 31, 2017 atconstant currency(1)
$ 278,000 $ 818,000 $ 281,000 $ 829,000 Reported period-over-period
revenue growth 8.4 % 6.6 % 9.1 % 7.1 % % impact from change in
foreign currency exchange rates (1.0 )% 0.2 % (1.0 )% 0.1 %
Constant currency period-over-period revenue growth 7.4 % 6.8 % 8.1
% 7.2 %
Customer Engagement Revenue for the three and
nine months ended October 31, 2016 $ 172,757 $ 519,010 $ 173,860 $
525,620 Revenue for the three and nine months ended October 31,
2017 $ 181,590 $ 531,643 $ 184,506 $ 542,708
Revenue for the three and nine months
ended October 31, 2017 atconstant currency(1)
$ 180,000 $ 534,000 $ 183,000 $ 545,000 Reported period-over-period
revenue growth 5.1 % 2.4 % 6.1 % 3.3 % % impact from change in
foreign currency exchange rates (0.9 )% 0.5 % (0.8 )% 0.4 %
Constant currency period-over-period revenue growth 4.2 % 2.9 % 5.3
% 3.7 %
Cyber Intelligence Revenue for the three and
nine months ended October 31, 2016 $ 86,145 $ 247,237 $ 86,169 $
247,537 Revenue for the three and nine months ended October 31,
2017 $ 99,136 $ 284,855 $ 99,254 $ 285,024
Revenue for the three and nine months
ended October 31, 2017 atconstant currency(1)
$ 98,000 $ 284,000 $ 98,000 $ 284,000 Reported period-over-period
revenue growth 15.1 % 15.2 % 15.2 % 15.1 % % impact from change in
foreign currency exchange rates (1.3 )% (0.3 )% (1.5 )% (0.4 )%
Constant currency period-over-period revenue growth 13.8 % 14.9 %
13.7 % 14.7 %
(1) Revenue for the three and nine months ended October 31, 2017
at constant currency is calculated by translating current-period
foreign currency revenue into U.S. dollars using average foreign
currency exchange rates for the three and nine months ended October
31, 2016 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 7
VERINT SYSTEMS INC. AND
SUBSIDIARIES
Estimated Non-GAAP Fully Allocated
Operating Margins
(Unaudited)
Three Months Ended
October 31,
2017 2016 (in thousands)
Customer Engagement
Cyber Intelligence
Consolidated
Customer Engagement
Cyber Intelligence
Consolidated Non-GAAP segment revenue $
184,506 $ 99,254 $ 283,760 $ 173,860 $
86,169 $ 260,029 Segment contribution (1)
70,768 23,160 93,928 65,085 20,575 85,660
Estimated allocation of shared
supportexpenses (2)
25,484 12,666 38,150 24,460 12,157
36,617
Estimated non-GAAP operatingincome
$ 45,284 $ 10,494 $ 55,778 $ 40,625 $
8,418 $ 49,043
Estimated non-GAAP fully
allocatedoperating margin
24.5 % 10.6 % 19.7 % 23.4 % 9.8 % 18.9 %
Nine Months Ended
October 31,
2017 2016 (in thousands)
Customer Engagement
Cyber Intelligence
Consolidated
Customer Engagement
Cyber Intelligence
Consolidated Non-GAAP segment revenue $ 542,708
$ 285,024 $ 827,732 $ 525,620 $ 247,537
$ 773,157 Segment contribution (1) 195,756
62,402 258,158 188,800 55,506 244,306
Estimated allocation of shared
supportexpenses (2)
76,167 37,855 114,022 74,854 37,203
112,057
Estimated non-GAAP operatingincome
$ 119,589 $ 24,547 $ 144,136 $ 113,946
$ 18,303 $ 132,249
Estimated non-GAAP fully
allocatedoperating margin
22.0 % 8.6 % 17.4 % 21.7 % 7.4 % 17.1 %
(1) See footnote 14 to our Form 10-Q for the three and nine
months ended October 31, 2017, when filed.
(2) Represents our shared support expenses (as disclosed in
footnote 14 to our Form 10-Q for the three and nine months ended
October 31, 2017, when filed), allocated proportionally to our year
ended January 31, 2017 annual non-GAAP segment revenue, which we
believe provides a reasonable approximation for purposes of
understanding the relative non-GAAP operating margins of our two
businesses.
Verint Systems Inc. and
SubsidiariesSupplemental Information About Non-GAAP
Financial Measures
This press release contains non-GAAP financial measures,
consisting of non-GAAP revenue, non-GAAP gross profit and gross
margin, non-GAAP operating income and operating margin, non-GAAP
other income (expense), net, non-GAAP provision (benefit) for
income taxes and non-GAAP effective income tax rate, non-GAAP net
income attributable to Verint Systems Inc., non-GAAP net income per
common share attributable to Verint Systems Inc., adjusted EBITDA,
net debt, constant currency measures and estimated non-GAAP fully
allocated operating margins. Tables 2 and 3 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, including 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 related to acquisitions. We exclude from our
non-GAAP revenue the impact of fair value adjustments required
under GAAP relating to acquired customer support contracts, which
would have otherwise been recognized on a stand-alone basis. We
believe that it is useful for investors to understand the total
amount of revenue that we and the acquired company would have
recognized on a stand-alone basis under GAAP, absent the accounting
adjustment associated with the business acquisition. Our non-GAAP
revenue also reflects certain adjustments from aligning an acquired
company’s revenue recognition policies to our policies. We believe
that our non-GAAP revenue measure helps management and investors
understand our revenue trends and serves as a useful measure of
ongoing business performance.
Amortization of acquired technology and other acquired
intangible assets. When we acquire an entity, we are required under
GAAP to record the fair values of the intangible assets of the
acquired entity and amortize those assets over their useful lives.
We exclude the amortization of acquired intangible assets,
including acquired technology, from our non-GAAP financial measures
because they are inconsistent in amount and frequency and are
significantly impacted by the timing and size of acquisitions. We
also exclude these amounts to provide easier comparability of pre-
and post-acquisition operating results.
Stock-based compensation expenses. We exclude stock-based
compensation expenses related to restricted stock awards, stock
bonus programs, bonus share programs, and other stock-based awards
from our non-GAAP financial measures. We evaluate our performance
both with and without these measures because stock-based
compensation is typically a non-cash expense and can vary
significantly over time based on the timing, size and nature of
awards granted, and is influenced in part by certain factors which
are generally beyond our control, such as the volatility of the
price of our common stock. In addition, measurement of stock-based
compensation is subject to varying valuation methodologies and
subjective assumptions, and therefore we believe that excluding
stock-based compensation from our non-GAAP financial measures
allows for meaningful comparisons of our current operating results
to our historical operating results and to other companies in our
industry.
Unrealized gains and losses on certain derivatives, net. We
exclude from our non-GAAP financial measures unrealized gains and
losses on certain foreign currency derivatives which are not
designated as hedges under accounting guidance. We exclude
unrealized gains and losses on foreign currency derivatives that
serve as economic hedges against variability in the cash flows of
recognized assets or liabilities, or of forecasted transactions.
These contracts, if designated as hedges under accounting guidance,
would be considered “cash flow” hedges. These unrealized gains and
losses are excluded from our non-GAAP financial measures because
they are non-cash transactions which are highly variable from
period to period. Upon settlement of these foreign currency
derivatives, any realized gain or loss is included in our non-GAAP
financial measures.
Amortization of convertible note discount. Our non-GAAP
financial measures exclude the amortization of the imputed discount
on our convertible notes. Under GAAP, certain convertible debt
instruments that may be settled in cash upon conversion are
required to be bifurcated into separate liability (debt) and equity
(conversion option) components in a manner that reflects the
issuer’s assumed non-convertible debt borrowing rate. For GAAP
purposes, we are required to recognize imputed interest expense on
the difference between our assumed non-convertible debt borrowing
rate and the coupon rate on our $400.0 million of 1.50% convertible
notes. This difference is excluded from our non-GAAP financial
measures because we believe that this expense is based upon
subjective assumptions and does not reflect the cash cost of our
convertible debt.
Loss on early retirement of debt. We exclude from our non-GAAP
financial measures losses on early retirements of debt attributable
to refinancing or repaying our debt because we believe they are not
reflective of our ongoing operations.
Acquisition Expenses, net. In connection with acquisition
activity (including with respect to acquisitions that are not
consummated), we incur expenses, including legal, accounting, and
other professional fees, integration costs, changes in the fair
value of contingent consideration obligations, and other costs.
Integration costs may consist of information technology expenses as
systems are integrated across the combined entity, consulting
expenses, marketing expenses, and professional fees, as well as
non-cash charges to write-off or impair the value of redundant
assets. We exclude these expenses from our non-GAAP financial
measures because they are unpredictable, can vary based on the size
and complexity of each transaction, and are unrelated to our
continuing operations or to the continuing operations of the
acquired businesses.
Restructuring Expenses. We exclude restructuring expenses from
our non-GAAP financial measures, which include employee termination
costs, facility exit costs, certain professional fees, asset
impairment charges, and other costs directly associated with
resource realignments incurred in reaction to changing strategies
or business conditions. All of these costs can vary significantly
in amount and frequency based on the nature of the actions as well
as the changing needs of our business and we believe that excluding
them provides easier comparability of pre- and post-restructuring
operating results.
Impairment Charges and Other Adjustments. We exclude from our
non-GAAP financial measures asset impairment charges other than
those associated with restructuring or acquisition activity, rent
expense for redundant facilities, and gains or losses on sales of
property, all of which are unusual in nature and can vary
significantly in amount and frequency.
Non-GAAP income tax adjustments. We exclude our GAAP provision
(benefit) for income taxes from our non-GAAP measures of net income
attributable to Verint Systems Inc., and instead include a non-GAAP
provision for income taxes, determined by applying a non-GAAP
effective income tax rate to our income before provision for income
taxes, as adjusted for the non-GAAP items described above. The
non-GAAP effective income tax rate is generally based upon the
income taxes we expect to pay in the reporting year. We adjust our
non-GAAP effective income tax rate to exclude current-year tax
payments or refunds associated with prior-year income tax returns
and related amendments which were significantly delayed as a result
of our previous extended filing delay. 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, 2018 is currently approximately 11%, and was 8.8% for the year
ended January 31, 2017. 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.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure defined as net income
(loss) before interest expense, interest income, income taxes,
depreciation expense, amortization expense, revenue adjustments
related to acquisitions, restructuring expenses, acquisition
expenses, and other expenses excluded from our non-GAAP financial
measures as described above. We believe that adjusted EBITDA is
also commonly used by investors to evaluate operating performance
between competitors because it helps reduce variability caused by
differences in capital structures, income taxes, stock-based
compensation accounting policies, and depreciation and amortization
policies. Adjusted EBITDA is also used by credit rating agencies,
lenders, and other parties to evaluate our creditworthiness.
Net Debt
Net Debt is a non-GAAP measure defined as the sum of long-term
and short-term debt on our consolidated balance sheet, excluding
unamortized discounts and issuance costs, less the sum of cash and
cash equivalents, restricted cash and bank time deposits, and
short-term investments. We use this non-GAAP financial measure to
help evaluate our capital structure, financial leverage, and our
ability to reduce debt and to fund investing and financing
activities, and believe that it provides useful information to
investors.
Supplemental Information About Constant
Currency
Because we operate on a global basis and transact business in
many currencies, fluctuations in foreign currency exchange rates
can affect our consolidated U.S. dollar operating results. To
facilitate the assessment of our performance excluding the effect
of foreign currency exchange rate fluctuations, we calculate our
GAAP and non-GAAP revenue, cost of revenue, and operating expenses
on both an as-reported basis and a constant currency basis,
allowing for comparison of results between periods as if foreign
currency exchange rates had remained constant. We perform our
constant currency calculations by translating current-period
foreign currency results into U.S. dollars using prior-period
average foreign currency exchange rates or hedge rates, as
applicable, rather than current period exchange rates. We believe
that constant currency measures, which exclude the impact of
changes in foreign currency exchange rates, facilitate the
assessment of underlying business trends.
Unless otherwise indicated, our financial outlook for revenue,
operating margin, and diluted earnings per share, which is provided
on a non-GAAP basis, reflects foreign currency exchange rates
approximately consistent with rates in effect when the outlook is
provided.
We also incur foreign exchange gains and losses resulting from
the revaluation and settlement of monetary assets and liabilities
that are denominated in currencies other than the entity’s
functional currency. We periodically report our historical non-GAAP
diluted net income per share both inclusive and exclusive of these
net foreign exchange gains or losses. Our financial outlook for
diluted earnings per share includes net foreign exchange gains or
losses incurred to date, if any, but does not include potential
future gains or losses.
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version on businesswire.com: http://www.businesswire.com/news/home/20171206006246/en/
Investor RelationsVerint
Systems Inc.Alan Roden, 631-962-9304alan.roden@verint.com
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