Verint Broadcasts Q3 FY2021 Outcomes

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Verint Announces Q3 FY2021 Results

MELVILLE, N.Y.–(BUSINESS WIRE)–Verint® Systems Inc. (NASDAQ: VRNT), a global Actionable Intelligence® leader, today announced results for the three and nine months ended October 31, 2020 (FY2021). Revenue for the three months ended October 31, 2020 was $328 million on a GAAP basis and $331 million on a non-GAAP basis. For the three months ended October 31, 2020, diluted EPS was $0.11 on a GAAP basis, and $1.02 on a non-GAAP basis. Revenue for the nine months ended October 31, 2020 was $925 million on a GAAP basis and $936 million on a non-GAAP basis. For the nine months ended October 31, 2020, diluted EPS was $0.11 on a GAAP basis, and $2.61 on a non-GAAP basis.

“We had a solid Q3 with strong sequential revenue growth and year-over-year adjusted EBITDA growth, driving a 16% increase in cash from operations year-to-date. We made significant progress with all our key initiatives, including the business separation, Customer Engagement cloud transition and Cyber Intelligence software model margin expansion. Our shift to the cloud is accelerating and our on-premises business continued to recover from the initial impact of COVID-19. We expect to finish the year strong and are resuming guidance,” said Dan Bodner, CEO.

Separation Progress Highlights

  • On track to complete the separation shortly after fiscal year-end
  • Expect to make public filing with the SEC within two weeks
  • Unveiling new name for our Cyber Intelligence business – Cognyte Software Ltd
  • Cognyte expected to be listed on NASDAQ with ticker CGNT
  • Virtual investor days and management roadshows to take place in January

Bodner continued: “Both of our businesses are market leaders that have significant growth opportunities. We look forward to discussing each company’s strategies and financial models for the post-separation period at our investor days in January.”

Customer Engagement Q3 Highlights

  • Large Cloud Orders Across Multiple Industries (TCV): Including orders for $11 million (insurance), $3 million (healthcare), $2 million (banking), $2 million (business services), $2 million (financial services), and $2 million (utilities)
  • Strong Cloud Momentum: On track for approximately 20% non-GAAP cloud revenue growth this year, excluding ForeSee

“In Q3, we experienced another strong quarter of cloud revenue growth and continued to win new cloud customers and displace competitors due to our product differentiation and partner agnostic strategy. COVID-19 is accelerating our cloud transition and for the full year we expect – for the first time – about half of our new software bookings (on a perpetual license equivalent basis) to come from SaaS, a significant increase from about one third in the prior year. We also expect recurring revenue to represent 80% of our software revenue, a 400bps increase from the prior year. Looking forward, next year we expect our cloud revenue growth to accelerate and to substantially complete our cloud transition.” said Bodner.

Cyber Intelligence Q3 Highlights

  • Large Orders: Including one for ~$15 million, one for ~$7.5 million, and four for ~$5 million each
  • Software Model Drives Margin Expansion and Strong Gross Profit Growth: Gross margins increased 900bps year-over-year and gross profit increased 21% year-over-year, each on a non-GAAP estimated fully allocated basis

Bodner continued, “In Q3, we continued to win many large deals due to our differentiated analytical security software. We are executing well on our software strategy and expect our gross margins to exceed 70% this year on a non-GAAP estimated fully allocated basis. Cognyte is well positioned to be an independent public company with a large and growing TAM, differentiated security analytics software portfolio, and strong track record.”

Announcing Cognyte and Verint Investor Days – January 11th and January 21st

Verint and Cognyte will each host their own respective virtual investor days in January. Members of each company’s leadership team will discuss a variety of topics including their business’ growth strategies and long-term outlooks. A question and answer session will follow the prepared remarks and members of the investment community are invited to submit questions ahead of or during the applicable investor day.

  • Cognyte Investor Day: Monday, January 11, 2021, beginning at 10am ET.
  • Verint Investor Day: Thursday, January 21, 2021, beginning at 10am ET.

Additionally, both the Verint and Cognyte management teams will be conducting virtual roadshows following their respective investor days.

Resuming FY2021 Guidance and Providing Initial FY2022 Outlook and Long-Term Targets on Today’s Conference Call

  • Our FY2021 non-GAAP revenue outlook is $1.280 billion with a range of +/- 1%
  • Our FY2021 non-GAAP diluted EPS outlook is $3.40 at the midpoint of our revenue guidance

“We are pleased with the building momentum in our businesses, our visibility has improved and we are providing guidance for the current year. In addition, we will provide an initial view on our outlook for FY2022 and long-term targets during today’s conference call. We will also provide more details at our virtual investor days in January,” said Doug Robinson, CFO of Verint.

Our non-GAAP outlook for the year ending January 31, 2021 excludes the following GAAP measures which we are able to quantify with reasonable certainty:

  • Amortization of intangible assets of approximately $50 million, including $48 million in Customer Engagement and $2 million in Cyber Intelligence.
  • Amortization of discount on convertible notes of approximately $13 million, all of which pertains to Customer Engagement.
  • Costs to separate Verint into two independent public companies of approximately $45 million, including $28 million attributable to Customer Engagement and $17 million attributable to Cyber Intelligence.

Our non-GAAP outlook for the year ending January 31, 2021 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 $12 million and $15 million, including between $9 million and $11 million in Customer Engagement and between $3 million and $4 million in Cyber Intelligence.
  • Stock-based compensation is expected to be between approximately $68 million and $78 million, assuming market prices for our common stock approximately consistent with current levels, including between $46 million and $52 million in Customer Engagement and between $22 million and $26 million in Cyber Intelligence.

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, 2020 and 2019 for the GAAP measures excluded from our non-GAAP outlook appear in Tables 2 and 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, 2020, outlook, and long-term targets. An online, real-time webcast of the conference call and webcast slides will be available on our website at www.verint.com. The webcast slides will be available on our website until at least January 31, 2021. The conference call can also be accessed live via telephone at 1-844-309-0615 (United States and Canada) and 1-661-378-9462 (international) and the passcode is 5366968. Please dial in 5-10 minutes prior to the scheduled start time.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of non-GAAP financial measures presented for completed periods to the most directly comparable financial measures prepared in accordance with GAAP, please see the tables below as well as “Supplemental Information About Non-GAAP Financial Measures and Operating Metrics” at the end of this press release.

About Verint Systems Inc.

Verint® (Nasdaq: VRNT) is a global leader in Actionable Intelligence® solutions with a focus on customer engagement optimization and cyber intelligence. Today, over 10,000 organizations in more than 180 countries—including over 85 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 changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, economic instability, political unrest, armed conflicts, natural disasters, or outbreaks of disease, such as the COVID-19 pandemic, as well as the resulting impact on information technology spending and government budgets in both developed countries and developing countries, on our business; risks that our customers delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or are unable to honor contractual commitments or payment obligations due to liquidity issues or other challenges in their budgets and business, due to the COVID-19 pandemic or otherwise; risks that restrictions resulting from the COVID-19 pandemic or actions taken in response to the pandemic adversely impact our operations or our ability to fulfill orders, complete implementations, or recognize revenue; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer 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 revenue, margins, and sufficient levels of investment in our business and operations; 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, 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 relating to our ability to properly manage investments in our business and operations, execute on growth initiatives, and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources; risks associated with our ability to retain, recruit, and train qualified personnel in regions in which we operate, including in new markets and growth areas we may enter; risks that we may be unable to establish and maintain relationships with key resellers, partners, and systems integrators and 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, including information that may belong to our customers or other third parties, and with security vulnerabilities or lapses, including cyber-attacks, 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, including third-party hosting platforms, may contain defects, develop operational problems, or 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 political and reputational factors related to our business or operations, including reputational risks associated with our security solutions and our ability to maintain security clearances where required, as well as risks associated with a significant amount of our business coming from domestic and foreign government customers; risks associated with complex and changing local and foreign regulatory environments in the jurisdictions in which we operate, including, among others, with respect to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, relating to our own operations, the products and services we offer, and/or the use of our solutions by our customers; challenges associated with selling sophisticated solutions, including with respect to assisting customers in understanding and realizing the benefits of our solutions, and developing, offering, implementing, and maintaining a broad and sophisticated solution portfolio; 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; challenges associated with our ability to accurately forecast when a sales opportunity will convert to an order, or to accurately forecast revenue and expenses; challenges associated with our Customer Engagement segment cloud transition and our Cyber Intelligence segment software model transition, and risk of 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, 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 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 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 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 changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; 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 the issuance of preferred stock to an affiliate of Apax Partners, including with respect to completion of the second tranche of the investment and Apax’s significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and risks associated with the planned spin-off of our Cyber Intelligence Solutions business, including the possibility that the spin-off transaction may not be completed in the expected timeframe or at all, that it will not achieve the benefits anticipated, or that it may negatively impact our operations or stock price, including as a result of management distraction from our business. 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, 2020, our Quarterly Report on Form 10-Q for the quarter ended April 30, 2020, our Quarterly Report on Form 10-Q for the quarter ended July 31, 2020, our Quarterly Report on Form 10-Q for the quarter ended October 31, 2020, when filed, and other filings we make with the SEC.

VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT COMPANY, CUSTOMER ENGAGEMENT SOLUTIONS and CYBER INTELLIGENCE SOLUTIONS are trademarks of Verint Systems Inc. or its subsidiaries. Verint and other parties may also have trademark rights in other terms used herein.

 

Table 1

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

105,865

 

 

 

$

116,331

 

 

 

$

279,225

 

 

 

$

330,538

 

 

Service and support

 

222,336

 

 

 

208,536

 

 

 

645,380

 

 

 

633,893

 

 

Total revenue

 

328,201

 

 

 

324,867

 

 

 

924,605

 

 

 

964,431

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

Product

 

21,972

 

 

 

30,533

 

 

 

67,938

 

 

 

88,077

 

 

Service and support

 

76,961

 

 

 

76,771

 

 

 

222,383

 

 

 

237,562

 

 

Amortization of acquired technology

 

4,270

 

 

 

5,968

 

 

 

13,307

 

 

 

18,262

 

 

Total cost of revenue

 

103,203

 

 

 

113,272

 

 

 

303,628

 

 

 

343,901

 

 

Gross profit

 

224,998

 

 

 

211,595

 

 

 

620,977

 

 

 

620,530

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development, net

 

61,067

 

 

 

57,694

 

 

 

175,375

 

 

 

173,548

 

 

Selling, general and administrative

 

118,084

 

 

 

116,306

 

 

 

335,141

 

 

 

364,292

 

 

Amortization of other acquired intangible assets

 

8,106

 

 

 

7,778

 

 

 

24,229

 

 

 

23,130

 

 

Total operating expenses

 

187,257

 

 

 

181,778

 

 

 

534,745

 

 

 

560,970

 

 

Operating income

 

37,741

 

 

 

29,817

 

 

 

86,232

 

 

 

59,560

 

 

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest income

 

536

 

 

 

1,404

 

 

 

2,392

 

 

 

4,517

 

 

Interest expense

 

(9,731

)

 

 

(10,102

)

 

 

(30,692

)

 

 

(30,143

)

 

Other (expense) income, net

 

(8,562

)

 

 

1,082

 

 

 

(23,003

)

 

 

1,201

 

 

Total other expense, net

 

(17,757

)

 

 

(7,616

)

 

 

(51,303

)

 

 

(24,425

)

 

Income before provision for income taxes

 

19,984

 

 

 

22,201

 

 

 

34,929

 

 

 

35,135

 

 

Provision for income taxes

 

8,157

 

 

 

9,218

 

 

 

16,490

 

 

 

6,120

 

 

Net income

 

11,827

 

 

 

12,983

 

 

 

18,439

 

 

 

29,015

 

 

Net income attributable to noncontrolling interests

 

1,652

 

 

 

1,302

 

 

 

5,784

 

 

 

5,200

 

 

Net income attributable to Verint Systems Inc.

 

10,175

 

 

 

11,681

 

 

 

12,655

 

 

 

23,815

 

 

Dividends on preferred stock

 

(2,658

)

 

 

 

 

 

(5,142

)

 

 

 

 

Net income attributable to Verint Systems Inc. common shares

 

$

7,517

 

 

 

$

11,681

 

 

 

$

7,513

 

 

 

$

23,815

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to Verint Systems Inc.:

 

 

 

 

 

 

 

 

Basic

 

$

0.11

 

 

 

$

0.17

 

 

 

$

0.12

 

 

 

$

0.36

 

 

Diluted

 

$

0.11

 

 

 

$

0.17

 

 

 

$

0.11

 

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

65,571

 

 

 

66,799

 

 

 

64,973

 

 

 

66,181

 

 

Diluted

 

66,234

 

 

 

67,442

 

 

 

66,000

 

 

 

67,452

 

 

 

Table 2

VERINT SYSTEMS INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Measures by Segment

(Unaudited)

 

 

Three Months Ended

October 31,

 

 

2020

 

2019

(in thousands)

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Total GAAP revenue

 

$

215,222

 

 

 

$

112,979

 

 

 

$

328,201

 

 

 

$

217,936

 

 

 

$

106,931

 

 

 

$

324,867

 

 

Revenue adjustments

 

2,227

 

 

 

692

 

 

 

2,919

 

 

 

6,213

 

 

 

 

 

 

6,213

 

 

Total non-GAAP revenue

 

$

217,449

 

 

 

$

113,671

 

 

 

$

331,120

 

 

 

$

224,149

 

 

 

$

106,931

 

 

 

$

331,080

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED GROSS PROFIT AND GROSS MARGIN

 

 

 

 

 

 

 

 

 

 

 

 

Segment products costs

 

$

9,224

 

 

 

$

11,322

 

 

 

$

20,546

 

 

 

$

8,422

 

 

 

$

20,093

 

 

 

$

28,515

 

 

Segment service expenses

 

54,595

 

 

 

17,122

 

 

 

71,717

 

 

 

56,507

 

 

 

16,526

 

 

 

73,033

 

 

Amortization of acquired technology

 

4,045

 

 

 

225

 

 

 

4,270

 

 

 

5,605

 

 

 

363

 

 

 

5,968

 

 

Stock-based compensation expenses (1)

 

1,795

 

 

 

525

 

 

 

2,320

 

 

 

1,363

 

 

 

403

 

 

 

1,766

 

 

Shared support expenses allocation (3)

 

2,844

 

 

 

1,506

 

 

 

4,350

 

 

 

2,601

 

 

 

1,389

 

 

 

3,990

 

 

Total GAAP estimated fully allocated cost of revenue

 

72,503

 

 

 

30,700

 

 

 

103,203

 

 

 

74,498

 

 

 

38,774

 

 

 

113,272

 

 

GAAP estimated fully allocated gross profit

 

142,719

 

 

 

82,279

 

 

 

224,998

 

 

 

143,438

 

 

 

68,157

 

 

 

211,595

 

 

GAAP estimated fully allocated gross margin

 

66.3

 

%

 

72.8

 

%

 

68.6

 

%

 

65.8

 

%

 

63.7

 

%

 

65.1

 

%

Revenue adjustments

 

2,227

 

 

 

692

 

 

 

2,919

 

 

 

6,213

 

 

 

 

 

 

6,213

 

 

Amortization of acquired technology

 

4,045

 

 

 

225

 

 

 

4,270

 

 

 

5,605

 

 

 

363

 

 

 

5,968

 

 

Stock-based compensation expenses (1)

 

1,795

 

 

 

525

 

 

 

2,320

 

 

 

1,363

 

 

 

403

 

 

 

1,766

 

 

Acquisition expenses, net (4)

 

60

 

 

 

32

 

 

 

92

 

 

 

30

 

 

 

16

 

 

 

46

 

 

Restructuring expenses (4)

 

132

 

 

 

69

 

 

 

201

 

 

 

428

 

 

 

229

 

 

 

657

 

 

Separation expenses (4)

 

51

 

 

 

27

 

 

 

78

 

 

 

 

 

 

 

 

 

 

 

Impairment charges (4)

 

95

 

 

 

50

 

 

 

145

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP estimated fully allocated gross profit

 

$

151,124

 

 

 

$

83,899

 

 

 

$

235,023

 

 

 

$

157,077

 

 

 

$

69,168

 

 

 

$

226,245

 

 

Non-GAAP estimated fully allocated gross margin

 

69.5

 

%

 

73.8

 

%

 

71.0

 

%

 

70.1

 

%

 

64.7

 

%

 

68.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED RESEARCH AND DEVELOPMENT, NET

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

24,318

 

 

 

$

26,023

 

 

 

$

50,341

 

 

 

$

25,134

 

 

 

$

22,818

 

 

 

$

47,952

 

 

Stock-based compensation expenses (2)

 

1,897

 

 

 

1,003

 

 

 

2,900

 

 

 

1,948

 

 

 

1,040

 

 

 

2,988

 

 

Shared support expenses allocation (3)

 

5,119

 

 

 

2,707

 

 

 

7,826

 

 

 

4,404

 

 

 

2,350

 

 

 

6,754

 

 

GAAP estimated fully allocated research and development, net

 

31,334

 

 

 

29,733

 

 

 

61,067

 

 

 

31,486

 

 

 

26,208

 

 

 

57,694

 

 

As a percentage of GAAP revenue

 

14.6

 

%

 

26.3

 

%

 

18.6

 

%

 

14.4

 

%

 

24.5

 

%

 

17.8

 

%

Stock-based compensation expenses (2)

 

(1,897

)

 

 

(1,003

)

 

 

(2,900

)

 

 

(1,948

)

 

 

(1,040

)

 

 

(2,988

)

 

Acquisition expenses, net (4)

 

(18

)

 

 

(10

)

 

 

(28

)

 

 

(79

)

 

 

(42

)

 

 

(121

)

 

Restructuring expenses (4)

 

(172

)

 

 

(90

)

 

 

(262

)

 

 

(204

)

 

 

(109

)

 

 

(313

)

 

Separation expenses (4)

 

(61

)

 

 

(33

)

 

 

(94

)

 

 

 

 

 

 

 

 

 

 

Other adjustments (4)

 

38

 

 

 

20

 

 

 

58

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP estimated fully allocated research and development, net

 

$

29,224

 

 

 

$

28,617

 

 

 

$

57,841

 

 

 

$

29,255

 

 

 

$

25,017

 

 

 

$

54,272

 

 

As a percentage of non-GAAP revenue

 

13.4

 

%

 

25.2

 

%

 

17.5

 

%

 

13.1

 

%

 

23.4

 

%

 

16.4

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

37,946

 

 

 

$

20,927

 

 

 

$

58,873

 

 

 

$

44,155

 

 

 

$

20,484

 

 

 

$

64,639

 

 

Stock-based compensation expenses (2)

 

9,671

 

 

 

5,116

 

 

 

14,787

 

 

 

9,001

 

 

 

4,804

 

 

 

13,805

 

 

Shared support expenses allocation (3)

 

29,053

 

 

 

15,371

 

 

 

44,424

 

 

 

24,686

 

 

 

13,176

 

 

 

37,862

 

 

GAAP estimated fully allocated selling, general and administrative expenses

 

76,670

 

 

 

41,414

 

 

 

118,084

 

 

 

77,842

 

 

 

38,464

 

 

 

116,306

 

 

As a percentage of GAAP revenue

 

35.6

 

%

 

36.7

 

%

 

36.0

 

%

 

35.7

 

%

 

36.0

 

%

 

35.8

 

%

Stock-based compensation expenses (2)

 

(9,671

)

 

 

(5,116

)

 

 

(14,787

)

 

 

(9,001

)

 

 

(4,804

)

 

 

(13,805

)

 

Acquisition expenses, net (4)

 

900

 

 

 

476

 

 

 

1,376

 

 

 

(1,326

)

 

 

(707

)

 

 

(2,033

)

 

Restructuring expenses (4)

 

(519

)

 

 

(274

)

 

 

(793

)

 

 

(718

)

 

 

(383

)

 

 

(1,101

)

 

Separation expenses (4)

 

(8,880

)

 

 

(4,698

)

 

 

(13,578

)

 

 

(964

)

 

 

(515

)

 

 

(1,479

)

 

Other adjustments (4)

 

7

 

 

 

4

 

 

 

11

 

 

 

(229

)

 

 

(122

)

 

 

(351

)

 

Non-GAAP estimated fully allocated selling, general and administrative expenses

 

$

58,507

 

 

 

$

31,806

 

 

 

$

90,313

 

 

 

$

65,604

 

 

 

$

31,933

 

 

 

$

97,537

 

 

As a percentage of non-GAAP revenue

 

26.9

 

%

 

28.0

 

%

 

27.3

 

%

 

29.3

 

%

 

29.9

 

%

 

29.5

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME, OPERATING MARGIN, AND ADJUSTED EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

GAAP estimated fully allocated operating income

 

$

26,882

 

 

 

$

10,859

 

 

 

$

37,741

 

 

 

$

26,459

 

 

 

$

3,358

 

 

 

$

29,817

 

 

GAAP estimated fully allocated operating margin

 

12.5

 

%

 

9.6

 

%

 

11.5

 

%

 

12.1

 

%

 

3.1

 

%

 

9.2

 

%

Revenue adjustments

 

2,227

 

 

 

692

 

 

 

2,919

 

 

 

6,213

 

 

 

 

 

 

6,213

 

 

Amortization of acquired technology

 

4,045

 

 

 

225

 

 

 

4,270

 

 

 

5,605

 

 

 

363

 

 

 

5,968

 

 

Amortization of other acquired intangible assets

 

7,833

 

 

 

273

 

 

 

8,106

 

 

 

7,651

 

 

 

127

 

 

 

7,778

 

 

Stock-based compensation expenses (2)

 

13,363

 

 

 

6,644

 

 

 

20,007

 

 

 

12,312

 

 

 

6,247

 

 

 

18,559

 

 

Acquisition expenses, net (4)

 

(822

)

 

 

(434

)

 

 

(1,256

)

 

 

1,435

 

 

 

765

 

 

 

2,200

 

 

Restructuring expenses (4)

 

823

 

 

 

433

 

 

 

1,256

 

 

 

1,350

 

 

 

721

 

 

 

2,071

 

 

Separation expenses (4)

 

8,992

 

 

 

4,758

 

 

 

13,750

 

 

 

964

 

 

 

515

 

 

 

1,479

 

 

Impairment charges (4)

 

95

 

 

 

50

 

 

 

145

 

 

 

 

 

 

 

 

 

 

 

Other adjustments (4)

 

(45

)

 

 

(24

)

 

 

(69

)

 

 

229

 

 

 

122

 

 

 

351

 

 

Non-GAAP estimated fully allocated operating income

 

63,393

 

 

 

23,476

 

 

 

86,869

 

 

 

62,218

 

 

 

12,218

 

 

 

74,436

 

 

Depreciation and amortization (5)

 

6,710

 

 

 

3,550

 

 

 

10,260

 

 

 

5,655

 

 

 

3,019

 

 

 

8,674

 

 

Estimated fully allocated adjusted EBITDA

 

$

70,103

 

 

 

$

27,026

 

 

 

$

97,129

 

 

 

$

67,873

 

 

 

$

15,237

 

 

 

$

83,110

 

 

Non-GAAP estimated fully allocated operating margin

 

29.2

 

%

 

20.7

 

%

 

26.2

 

%

 

27.8

 

%

 

11.4

 

%

 

22.5

 

%

Estimated fully allocated adjusted EBITDA margin

 

32.2

 

%

 

23.8

 

%

 

29.3

 

%

 

30.3

 

%

 

14.2

 

%

 

25.1

 

%

 

 

Nine Months Ended

October 31,

 

 

2020

 

2019

(in thousands)

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Total GAAP revenue

 

$

605,167

 

 

 

$

319,438

 

 

 

$

924,605

 

 

 

$

636,467

 

 

 

$

327,964

 

 

 

$

964,431

 

 

Revenue adjustments

 

8,555

 

 

 

3,022

 

 

 

11,577

 

 

 

21,973

 

 

 

151

 

 

 

22,124

 

 

Total non-GAAP revenue

 

$

613,722

 

 

 

$

322,460

 

 

 

$

936,182

 

 

 

$

658,440

 

 

 

$

328,115

 

 

 

$

986,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED GROSS PROFIT AND GROSS MARGIN

 

 

 

 

 

 

 

 

 

 

 

 

Segment products costs

 

$

24,429

 

 

 

$

40,150

 

 

 

$

64,579

 

 

 

$

25,745

 

 

 

$

56,597

 

 

 

$

82,342

 

 

Segment service expenses

 

161,237

 

 

 

49,767

 

 

 

211,004

 

 

 

172,178

 

 

 

54,126

 

 

 

226,304

 

 

Amortization of acquired technology

 

12,590

 

 

 

717

 

 

 

13,307

 

 

 

16,217

 

 

 

2,045

 

 

 

18,262

 

 

Stock-based compensation expenses (1)

 

3,889

 

 

 

1,136

 

 

 

5,025

 

 

 

4,017

 

 

 

1,187

 

 

 

5,204

 

 

Shared support expenses allocation (3)

 

6,352

 

 

 

3,361

 

 

 

9,713

 

 

 

7,687

 

 

 

4,102

 

 

 

11,789

 

 

Total GAAP estimated fully allocated cost of revenue

 

208,497

 

 

 

95,131

 

 

 

303,628

 

 

 

225,844

 

 

 

118,057

 

 

 

343,901

 

 

GAAP estimated fully allocated gross profit

 

396,670

 

 

 

224,307

 

 

 

620,977

 

 

 

410,623

 

 

 

209,907

 

 

 

620,530

 

 

GAAP estimated fully allocated gross margin

 

65.5

 

%

 

70.2

 

%

 

67.2

 

%

 

64.5

 

%

 

64.0

 

%

 

64.3

 

%

Revenue adjustments

 

8,555

 

 

 

3,022

 

 

 

11,577

 

 

 

21,973

 

 

 

151

 

 

 

22,124

 

 

Amortization of acquired technology

 

12,590

 

 

 

717

 

 

 

13,307

 

 

 

16,217

 

 

 

2,045

 

 

 

18,262

 

 

Stock-based compensation expenses (1)

 

3,889

 

 

 

1,136

 

 

 

5,025

 

 

 

4,017

 

 

 

1,187

 

 

 

5,204

 

 

Acquisition expenses, net (4)

 

218

 

 

 

116

 

 

 

334

 

 

 

43

 

 

 

23

 

 

 

66

 

 

Restructuring expenses (4)

 

1,150

 

 

 

608

 

 

 

1,758

 

 

 

1,409

 

 

 

752

 

 

 

2,161

 

 

Separation expenses (4)

 

51

 

 

 

27

 

 

 

78

 

 

 

 

 

 

 

 

 

 

 

Impairment charges (4)

 

95

 

 

 

50

 

 

 

145

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP estimated fully allocated gross profit

 

$

423,218

 

 

 

$

229,983

 

 

 

$

653,201

 

 

 

$

454,282

 

 

 

$

214,065

 

 

 

$

668,347

 

 

Non-GAAP estimated fully allocated gross margin

 

69.0

 

%

 

71.3

 

%

 

69.8

 

%

 

69.0

 

%

 

65.2

 

%

 

67.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED RESEARCH AND DEVELOPMENT, NET

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

70,413

 

 

 

$

75,029

 

 

 

$

145,442

 

 

 

$

78,454

 

 

 

$

67,156

 

 

 

$

145,610

 

 

Stock-based compensation expenses (2)

 

5,358

 

 

 

2,834

 

 

 

8,192

 

 

 

5,819

 

 

 

3,106

 

 

 

8,925

 

 

Shared support expenses allocation (3)

 

14,219

 

 

 

7,522

 

 

 

21,741

 

 

 

12,396

 

 

 

6,617

 

 

 

19,013

 

 

GAAP estimated fully allocated research and development, net

 

89,990

 

 

 

85,385

 

 

 

175,375

 

 

 

96,669

 

 

 

76,879

 

 

 

173,548

 

 

As a percentage of GAAP revenue

 

14.9

 

%

 

26.7

 

%

 

19.0

 

%

 

15.2

 

%

 

23.4

 

%

 

18.0

 

%

Stock-based compensation expenses (2)

 

(5,358

)

 

 

(2,834

)

 

 

(8,192

)

 

 

(5,819

)

 

 

(3,106

)

 

 

(8,925

)

 

Acquisition expenses, net (4)

 

(289

)

 

 

(153

)

 

 

(442

)

 

 

(344

)

 

 

(184

)

 

 

(528

)

 

Restructuring expenses (4)

 

(984

)

 

 

(520

)

 

 

(1,504

)

 

 

(583

)

 

 

(311

)

 

 

(894

)

 

Separation expenses (4)

 

(61

)

 

 

(33

)

 

 

(94

)

 

 

 

 

 

 

 

 

 

 

Other adjustments (4)

 

(7

)

 

 

(4

)

 

 

(11

)

 

 

 

 

 

 

 

 

 

 

Non-GAAP estimated fully allocated research and development, net

 

$

83,291

 

 

 

$

81,841

 

 

 

$

165,132

 

 

 

$

89,923

 

 

 

$

73,278

 

 

 

$

163,201

 

 

As a percentage of non-GAAP revenue

 

13.6

 

%

 

25.4

 

%

 

17.6

 

%

 

13.7

 

%

 

22.3

 

%

 

16.5

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

114,397

 

 

 

$

60,831

 

 

 

$

175,228

 

 

 

$

138,429

 

 

 

$

66,450

 

 

 

$

204,879

 

 

Stock-based compensation expenses (2)

 

25,095

 

 

 

13,276

 

 

 

38,371

 

 

 

27,439

 

 

 

14,645

 

 

 

42,084

 

 

Shared support expenses allocation (3)

 

79,488

 

 

 

42,054

 

 

 

121,542

 

 

 

76,499

 

 

 

40,830

 

 

 

117,329

 

 

GAAP estimated fully allocated selling, general and administrative expenses

 

218,980

 

 

 

116,161

 

 

 

335,141

 

 

 

242,367

 

 

 

121,925

 

 

 

364,292

 

 

As a percentage of GAAP revenue

 

36.2

 

%

 

36.4

 

%

 

36.2

 

%

 

38.1

 

%

 

37.2

 

%

 

37.8

 

%

Stock-based compensation expenses (2)

 

(25,095

)

 

 

(13,276

)

 

 

(38,371

)

 

 

(27,439

)

 

 

(14,645

)

 

 

(42,084

)

 

Acquisition expenses, net (4)

 

1,789

 

 

 

947

 

 

 

2,736

 

 

 

(5,205

)

 

 

(2,778

)

 

 

(7,983

)

 

Restructuring expenses (4)

 

(2,865

)

 

 

(1,515

)

 

 

(4,380

)

 

 

(1,364

)

 

 

(728

)

 

 

(2,092

)

 

Separation expenses (4)

 

(18,116

)

 

 

(9,584

)

 

 

(27,700

)

 

 

(1,112

)

 

 

(593

)

 

 

(1,705

)

 

Other adjustments (4)

 

784

 

 

 

415

 

 

 

1,199

 

 

 

(5,160

)

 

 

(2,755

)

 

 

(7,915

)

 

Non-GAAP estimated fully allocated selling, general and administrative expenses

 

$

175,477

 

 

 

$

93,148

 

 

 

$

268,625

 

 

 

$

202,087

 

 

 

$

100,426

 

 

 

$

302,513

 

 

As a percentage of non-GAAP revenue

 

28.6

 

%

 

28.9

 

%

 

28.7

 

%

 

30.7

 

%

 

30.6

 

%

 

30.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME, OPERATING MARGIN, AND ADJUSTED EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

GAAP estimated fully allocated operating income

 

$

64,384

 

 

 

$

21,848

 

 

 

$

86,232

 

 

 

$

48,839

 

 

 

$

10,721

 

 

 

$

59,560

 

 

GAAP estimated fully allocated operating margin

 

10.6

 

%

 

6.8

 

%

 

9.3

 

%

 

7.7

 

%

 

3.3

 

%

 

6.2

 

%

Revenue adjustments

 

8,555

 

 

 

3,022

 

 

 

11,577

 

 

 

21,973

 

 

 

151

 

 

 

22,124

 

 

Amortization of acquired technology

 

12,590

 

 

 

717

 

 

 

13,307

 

 

 

16,217

 

 

 

2,045

 

 

 

18,262

 

 

Amortization of other acquired intangible assets

 

23,316

 

 

 

913

 

 

 

24,229

 

 

 

22,748

 

 

 

382

 

 

 

23,130

 

 

Stock-based compensation expenses (2)

 

34,342

 

 

 

17,246

 

 

 

51,588

 

 

 

37,275

 

 

 

18,938

 

 

 

56,213

 

 

Acquisition expenses, net (4)

 

(1,282

)

 

 

(678

)

 

 

(1,960

)

 

 

5,592

 

 

 

2,985

 

 

 

8,577

 

 

Restructuring expenses (4)

 

4,999

 

 

 

2,643

 

 

 

7,642

 

 

 

3,356

 

 

 

1,791

 

 

 

5,147

 

 

Separation expenses (4)

 

18,228

 

 

 

9,644

 

 

 

27,872

 

 

 

1,112

 

 

 

593

 

 

 

1,705

 

 

Impairment charges (4)

 

95

 

 

 

50

 

 

 

145

 

 

 

 

 

 

 

 

 

 

 

Other adjustments (4)

 

(777

)

 

 

(411

)

 

 

(1,188

)

 

 

5,160

 

 

 

2,755

 

 

 

7,915

 

 

Non-GAAP estimated fully allocated operating income

 

164,450

 

 

 

54,994

 

 

 

219,444

 

 

 

162,272

 

 

 

40,361

 

 

 

202,633

 

 

Depreciation and amortization (5)

 

20,568

 

 

 

10,882

 

 

 

31,450

 

 

 

15,934

 

 

 

8,505

 

 

 

24,439

 

 

Estimated fully allocated adjusted EBITDA

 

$

185,018

 

 

 

$

65,876

 

 

 

$

250,894

 

 

 

$

178,206

 

 

 

$

48,866

 

 

 

$

227,072

 

 

Non-GAAP estimated fully allocated operating margin

 

26.8

 

%

 

17.1

 

%

 

23.4

 

%

 

24.6

 

%

 

12.3

 

%

 

20.5

 

%

Estimated fully allocated adjusted EBITDA margin

 

30.1

 

%

 

20.4

 

%

 

26.8

 

%

 

27.1

 

%

 

14.9

 

%

 

23.0

 

%

(1) Represents the stock-based compensation expenses applicable to cost of revenue, allocated proportionally based upon our year ended January 31, 2020 and 2019, respectively, annual operations and service expense wages for each segment, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our two businesses.

(2) Represents the stock-based compensation expenses applicable to research and development, net and selling, general and administrative, allocated proportionally based upon our non-GAAP segment revenue for the year ended January 31, 2020 and 2019, respectively, which we believe provides a reasonable approximation for purposes of understanding the relative non-GAAP operating margins of our two businesses.

(3) Represents our shared support expenses (as disclosed in footnote 16 to our October 31, 2020 Form 10-Q, when filed), including general and administrative shared services acquisition expenses, net and restructuring expenses, separation expenses, impairment charges and other adjustments, allocated proportionally based upon our non-GAAP segment revenue for the year ended January 31, 2020 and 2019, respectively, which we believe provides a reasonable approximation for purposes of understanding the relative non-GAAP operating margins of our two businesses.

(4) Represents the portion of our acquisition expenses, net and restructuring expenses, separation expenses, impairment charges and other adjustments, allocated proportionally based upon our year ended January 31, 2020 and 2019, respectively, annual non-GAAP segment revenue, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins and operating margins of our two businesses.

(5) Represents certain depreciation and amortization expenses, which are otherwise included in our non-GAAP operating income, allocated proportionally based upon our non-GAAP segment revenue for the year ended January 31, 2020 and 2019, respectively, which we believe provides a reasonable approximation for purposes of understanding the relative adjusted EBITDA of our two businesses.

 

Table 3

VERINT SYSTEMS INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited)

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Table of Reconciliation from GAAP Other Expense, Net to Non-GAAP Other Expense, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other expense, net

 

$

(17,757

)

 

 

$

(7,616

)

 

 

$

(51,303

)

 

 

$

(24,425

)

 

Unrealized losses on derivatives, net

 

931

 

 

 

167

 

 

 

758

 

 

 

1,485

 

 

Amortization of convertible note discount

 

3,220

 

 

 

3,143

 

 

 

9,620

 

 

 

9,306

 

 

Expenses and losses on debt modification or retirement

 

 

 

 

 

 

 

1,462

 

 

 

 

 

Change in fair value of future tranche right

 

9,224

 

 

 

 

 

 

22,834

 

 

 

 

 

Acquisition expenses, net

 

(3,709

)

 

 

(11

)

 

 

(3,643

)

 

 

(68

)

 

Non-GAAP other expense, net(1)

 

$

(8,091

)

 

 

$

(4,317

)

 

 

$

(20,272

)

 

 

$

(13,702

)

 

 

 

 

 

 

 

 

 

 

Table of Reconciliation from GAAP Provision for Income Taxes to Non-GAAP Provision for Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP provision for income taxes

 

$

8,157

 

 

 

$

9,218

 

 

 

$

16,490

 

 

 

$

6,120

 

 

GAAP effective income tax rate

 

40.8

 

%

 

41.5

 

%

 

47.2

 

%

 

17.4

 

%

Non-GAAP tax adjustments

 

(2,101

)

 

 

(3,467

)

 

 

(1,529

)

 

 

9,996

 

 

Non-GAAP provision for income taxes

 

$

6,056

 

 

 

$

5,751

 

 

 

$

14,961

 

 

 

$

16,116

 

 

Non-GAAP effective income tax rate

 

7.7

 

%

 

8.2

 

%

 

7.5

 

%

 

8.5

 

%

 

 

 

 

 

 

 

 

 

Table of Reconciliation from GAAP Net Income Attributable to Verint Systems Inc. Common Shares to Non-GAAP Net Income Attributable to Verint Systems Inc. Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income attributable to Verint Systems Inc. common shares

 

$

7,517

 

 

 

$

11,681

 

 

 

$

7,513

 

 

 

$

23,815

 

 

Revenue adjustments

 

2,919

 

 

 

6,213

 

 

 

11,577

 

 

 

22,124

 

 

Amortization of acquired technology

 

4,270

 

 

 

5,968

 

 

 

13,307

 

 

 

18,262

 

 

Amortization of other acquired intangible assets

 

8,106

 

 

 

7,778

 

 

 

24,229

 

 

 

23,130

 

 

Stock-based compensation expenses

 

20,007

 

 

 

18,559

 

 

 

51,588

 

 

 

56,213

 

 

Unrealized losses on derivatives, net

 

931

 

 

 

167

 

 

 

758

 

 

 

1,485

 

 

Amortization of convertible note discount

 

3,220

 

 

 

3,143

 

 

 

9,620

 

 

 

9,306

 

 

Expenses and losses on debt modification or retirement

 

 

 

 

 

 

 

1,462

 

 

 

 

 

Change in fair value of future tranche right

 

9,224

 

 

 

 

 

 

22,834

 

 

 

 

 

Acquisition expenses, net

 

(4,966

)

 

 

2,190

 

 

 

(5,603

)

 

 

8,510

 

 

Restructuring expenses

 

1,256

 

 

 

2,071

 

 

 

7,642

 

 

 

5,147

 

 

Separation expenses

 

13,750

 

 

 

1,479

 

 

 

27,872

 

 

 

1,705

 

 

Impairment charges

 

145

 

 

 

 

 

 

145

 

 

 

 

 

Other adjustments

 

(69

)

 

 

351

 

 

 

(1,188

)

 

 

7,915

 

 

Non-GAAP tax adjustments

 

2,101

 

 

 

3,467

 

 

 

1,529

 

 

 

(9,996

)

 

Dividends, reversed due to assumed conversion of preferred stock

 

2,658

 

 

 

 

 

 

5,142

 

 

 

 

 

Total adjustments

 

63,552

 

 

 

51,386

 

 

 

170,914

 

 

 

143,801

 

 

Non-GAAP net income attributable to Verint Systems Inc. common shares

 

$

71,069

 

 

 

$

63,067

 

 

 

$

178,427

 

 

 

$

167,616

 

 

 

 

 

 

 

 

 

 

 

Table Comparing GAAP Diluted Net Income 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 per common share attributable to Verint Systems Inc.

 

$

0.11

 

 

 

$

0.17

 

 

 

$

0.11

 

 

 

$

0.35

 

 

Non-GAAP diluted net income per common share attributable to Verint Systems Inc.

 

$

1.02

 

 

 

$

0.94

 

 

 

$

2.61

 

 

 

$

2.48

 

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used in computing diluted net income per common share attributable to Verint Systems Inc.

 

66,234

 

 

 

67,442

 

 

 

66,000

 

 

 

67,452

 

 

Additional weighted-average shares applicable to non-GAAP diluted net income per common share attributable to Verint Systems Inc.

 

3,739

 

 

 

 

 

 

2,411

 

 

 

 

 

Non-GAAP diluted weighted-average shares used in computing net income per common share attributable to Verint Systems Inc.

 

69,973

 

 

 

67,442

 

 

 

68,411

 

 

 

67,452

 

 

 

 

 

 

 

 

 

 

 

Table of Reconciliation from GAAP Net Income Attributable to Verint Systems Inc. to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income attributable to Verint Systems Inc.

 

$

10,175

 

 

 

$

11,681

 

 

 

$

12,655

 

 

 

$

23,815

 

 

As a percentage of GAAP revenue

 

3.1

 

%

 

3.6

 

%

 

1.4

 

%

 

2.5

 

%

Net income attributable to noncontrolling interest

 

1,652

 

 

 

1,302

 

 

 

5,784

 

 

 

5,200

 

 

Provision for income taxes

 

8,157

 

 

 

9,218

 

 

 

16,490

 

 

 

6,120

 

 

Other expense, net

 

17,757

 

 

 

7,616

 

 

 

51,303

 

 

 

24,425

 

 

Depreciation and amortization(2)

 

24,916

 

 

 

22,422

 

 

 

71,258

 

 

 

65,832

 

 

Revenue adjustments

 

2,919

 

 

 

6,213

 

 

 

11,577

 

 

 

22,124

 

 

Stock-based compensation expenses

 

20,007

 

 

 

18,559

 

 

 

51,588

 

 

 

56,213

 

 

Acquisition expenses, net

 

(1,260

)

 

 

2,200

 

 

 

(1,964

)

 

 

8,577

 

 

Restructuring expenses

 

1,244

 

 

 

2,069

 

 

 

7,638

 

 

 

5,146

 

 

Separation expenses

 

11,486

 

 

 

1,479

 

 

 

25,608

 

 

 

1,705

 

 

Impairment charges

 

145

 

 

 

 

 

 

145

 

 

 

 

 

Other adjustments

 

(69

)

 

 

351

 

 

 

(1,188

)

 

 

7,915

 

 

Adjusted EBITDA

 

$

97,129

 

 

 

$

83,110

 

 

 

$

250,894

 

 

 

$

227,072

 

 

As a percentage of non-GAAP revenue

 

29.3

 

%

 

25.1

 

%

 

26.8

 

%

 

23.0

 

%

 

Table of Reconciliation from Gross Debt to Net Debt

 

October 31,

2020

 

January 31,

2020

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

 

 

 

 

$

383,449

 

 

$

4,250

 

Long-term debt

 

 

 

 

 

403,292

 

 

832,798

 

Unamortized debt discounts and issuance costs

 

 

 

 

 

11,334

 

 

22,327

 

Gross debt

 

 

 

 

 

798,075

 

 

859,375

 

Less:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

526,815

 

 

379,146

 

Restricted cash and cash equivalents, and restricted bank time deposits

 

 

 

 

 

24,223

 

 

43,860

 

Short-term investments

 

 

 

 

 

104,454

 

 

20,215

 

Net debt, excluding long-term restricted cash, cash equivalents, time deposits, and investments

 

 

 

 

 

142,583

 

 

416,154

 

Long-term restricted cash, cash equivalents, time deposits and investments

 

 

 

 

 

22,026

 

 

26,363

 

Net debt, including long-term restricted cash, cash equivalents, time deposits, and investments

 

 

 

 

 

$

120,557

 

 

$

389,791

 

 

 

 

 

 

 

 

 

 

(1) For the three months ended October 31, 2020, non-GAAP other expense, net of $8.1 million was comprised of $6.0 million of interest and other expense, and $2.1 million of foreign exchange charges primarily related to balance sheet translations.

(2) Adjusted for financing fee amortization.

 

Table 4

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Customer Engagement Revenue and Cloud Metrics

(Unaudited)

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

2020

 

 

2019

 

2020

 

 

2019

Table of Reconciliation from GAAP Software (includes cloud and support) and Professional Services Revenue to Non-GAAP Software (includes cloud and support) and Professional Services Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Software (includes cloud and support) revenue – GAAP

 

$

185,694

 

 

 

$

185,104

 

 

$

518,385

 

 

 

$

533,424

 

Perpetual revenue – GAAP

 

35,461

 

 

 

43,726

 

 

99,815

 

 

 

139,356

 

Cloud revenue – GAAP

 

71,025

 

 

 

61,429

 

 

184,230

 

 

 

156,327

 

Support revenue – GAAP

 

79,208

 

 

 

79,949

 

 

234,340

 

 

 

237,741

 

Professional services revenue – GAAP

 

$

29,528

 

 

 

$

32,832

 

 

$

86,782

 

 

 

$

103,043

 

Total revenue – GAAP

 

$

215,222

 

 

 

$

217,936

 

 

$

605,167

 

 

 

$

636,467

 

 

 

 

 

 

 

 

 

 

Estimated software (includes cloud and support) revenue adjustments

 

$

2,227

 

 

 

$

6,213

 

 

$

8,555

 

 

 

$

21,973

 

Estimated perpetual revenue adjustments

 

 

 

 

 

 

 

 

 

 

Estimated cloud revenue adjustments

 

2,166

 

 

 

6,147

 

 

8,391

 

 

 

21,709

 

Estimated support revenue adjustments

 

61

 

 

 

66

 

 

164

 

 

 

264

 

Estimated professional services revenue adjustments

 

 

 

 

 

 

 

 

 

 

Total estimated revenue adjustments

 

$

2,227

 

 

 

$

6,213

 

 

$

8,555

 

 

 

$

21,973

 

 

 

 

 

 

 

 

 

 

Software (includes cloud and support) revenue – non-GAAP

 

$

187,921

 

 

 

$

191,317

 

 

$

526,940

 

 

 

$

555,397

 

Perpetual revenue – non-GAAP

 

35,461

 

 

 

43,726

 

 

99,815

 

 

 

139,356

 

Cloud revenue – non-GAAP

 

73,191

 

 

 

67,576

 

 

192,621

 

 

 

178,036

 

Support revenue – non-GAAP

 

79,269

 

 

 

80,015

 

 

234,504

 

 

 

238,005

 

Professional services revenue – non-GAAP

 

$

29,528

 

 

 

$

32,832

 

 

$

86,782

 

 

 

$

103,043

 

Total revenue – non-GAAP

 

$

217,449

 

 

 

$

224,149

 

 

$

613,722

 

 

 

$

658,440

 

 

 

 

 

 

 

 

 

 

Table of Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

SaaS revenue – GAAP

 

$

56,141

 

 

 

$

47,207

 

 

$

140,886

 

 

 

$

114,312

 

Bundled SaaS revenue – GAAP

 

37,406

 

 

 

30,107

 

 

106,617

 

 

 

84,519

 

Unbundled SaaS revenue – GAAP

 

18,735

 

 

 

17,100

 

 

34,269

 

 

 

29,793

 

Optional managed services revenue – GAAP

 

$

14,884

 

 

 

$

14,222

 

 

$

43,344

 

 

 

$

42,015

 

Cloud revenue – GAAP

 

$

71,025

 

 

 

$

61,429

 

 

$

184,230

 

 

 

$

156,327

 

 

 

 

 

 

 

 

 

 

Estimated SaaS revenue adjustments

 

$

1,943

 

 

 

$

5,701

 

 

$

7,619

 

 

 

$

20,197

 

Estimated bundled SaaS revenue adjustments

 

1,897

 

 

 

5,658

 

 

7,485

 

 

 

19,275

 

Estimated unbundled SaaS revenue adjustments

 

46

 

 

 

43

 

 

134

 

 

 

922

 

Estimated optional managed services revenue adjustments

 

$

223

 

 

 

$

446

 

 

$

772

 

 

 

$

1,512

 

Estimated cloud revenue adjustments

 

$

2,166

 

 

 

$

6,147

 

 

$

8,391

 

 

 

$

21,709

 

 

 

 

 

 

 

 

 

 

SaaS revenue – non-GAAP

 

$

58,084

 

 

 

$

52,908

 

 

$

148,505

 

 

 

$

134,509

 

Bundled SaaS revenue – non-GAAP

 

39,303

 

 

 

35,765

 

 

114,102

 

 

 

103,794

 

Unbundled SaaS revenue – non-GAAP

 

18,781

 

 

 

17,143

 

 

34,403

 

 

 

30,715

 

Optional managed services revenue – non-GAAP

 

$

15,107

 

 

 

$

14,668

 

 

$

44,116

 

 

 

$

43,527

 

Cloud revenue – non-GAAP

 

$

73,191

 

 

 

$

67,576

 

 

$

192,621

 

 

 

$

178,036

 

 

 

 

 

 

 

 

 

 

Table of New SaaS ACV

 

 

 

 

 

 

 

New SaaS ACV

 

$

15,659

 

 

 

$

15,605

 

 

$

44,248

 

 

 

$

33,925

 

New SaaS ACV Growth YoY

 

0.3

 

%

 

131.0

%

 

30.4

 

%

 

94.8

%

 

 

 

 

 

 

 

 

 

Table of New Perpetual License Equivalent Bookings

 

 

 

 

 

 

 

New perpetual license equivalent bookings

 

$

65,064

 

 

 

$

69,856

 

 

$

182,332

 

 

 

$

199,235

 

New perpetual license equivalent bookings change YoY

 

(6.9

)

%

 

19.1

%

 

(8.5

)

%

 

13.8

%

 

Table 5

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Cyber Intelligence Revenue Metrics

(Unaudited)

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

2020

 

2019

 

2020

 

2019

Recurring revenue – GAAP

 

$

57,128

 

 

$

47,498

 

 

$

164,817

 

 

$

140,486

 

Nonrecurring revenue – GAAP

 

55,851

 

 

59,433

 

 

154,621

 

 

187,478

 

Total revenue – GAAP

 

$

112,979

 

 

$

106,931

 

 

$

319,438

 

 

$

327,964

 

 

 

 

 

 

 

 

 

 

Estimated recurring revenue adjustments

 

$

692

 

 

$

 

 

$

3,022

 

 

$

151

 

Estimated nonrecurring revenue adjustments

 

 

 

 

 

 

 

 

Total estimated revenue adjustments

 

$

692

 

 

$

 

 

$

3,022

 

 

$

151

 

 

 

 

 

 

 

 

 

 

Recurring revenue – non-GAAP

 

$

57,820

 

 

$

47,498

 

 

$

167,839

 

 

$

140,637

 

Nonrecurring revenue – non-GAAP

 

55,851

 

 

59,433

 

 

154,621

 

 

187,478

 

Total revenue – non-GAAP

 

$

113,671

 

 

$

106,931

 

 

$

322,460

 

 

$

328,115

 

 

 

 

 

 

 

 

 

 

 

Table 6

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Segment and Shared Support Metrics

(Unaudited)

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Segment expenses – GAAP (1)

 

$

225,624

 

 

 

$

238,218

 

 

 

$

662,992

 

 

 

$

732,028

 

 

Shared support expenses – GAAP (2)

 

64,836

 

 

 

56,832

 

 

 

175,381

 

 

 

172,843

 

 

Total expenses – GAAP

 

$

290,460

 

 

 

$

295,050

 

 

 

$

838,373

 

 

 

$

904,871

 

 

 

 

 

 

 

 

 

 

 

Estimated segment expense adjustments

 

$

(25,937

)

 

 

$

(26,926

)

 

 

$

(74,981

)

 

 

$

(81,728

)

 

Estimated shared support expense adjustments

 

(20,272

)

 

 

(11,482

)

 

 

(46,654

)

 

 

(39,223

)

 

Total estimated expense adjustments

 

$

(46,209

)

 

 

$

(38,408

)

 

 

$

(121,635

)

 

 

$

(120,951

)

 

 

 

 

 

 

 

 

 

 

Segment expenses – non-GAAP (1)

 

$

199,687

 

 

 

$

211,292

 

 

 

$

588,011

 

 

 

$

650,300

 

 

Shared support expenses – non-GAAP (2)

 

44,564

 

 

 

45,350

 

 

 

128,727

 

 

 

133,620

 

 

Total expenses – non-GAAP

 

$

244,251

 

 

 

$

256,642

 

 

 

$

716,738

 

 

 

$

783,920

 

 

(1) Segment expenses include expenses incurred directly by our two segments.

(2) Shared support expenses include certain operating expenses that are provided by shared resources or are otherwise generally not controlled by segment management. The majority of which are for administrative support functions, such as information technology, human resources, finance, legal, and other general corporate support, and for occupancy expenses.

 

Table 7

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, 2019

 

$

324,867

 

 

$

964,431

 

 

 

$

331,080

 

 

$

986,555

 

 

Revenue for the three and nine months ended October 31, 2020

 

$

328,201

 

 

$

924,605

 

 

 

$

331,120

 

 

$

936,182

 

 

Revenue for the three and nine months ended October 31, 2020 at constant currency(1)

 

$

325,000

 

 

$

927,000

 

 

 

$

328,000

 

 

$

939,000

 

 

Reported period-over-period revenue change

 

1.0

 

%

(4.1

)

%

 

 

%

(5.1

)

%

% impact from change in foreign currency exchange rates

 

(1.0

)

%

0.2

 

%

 

(0.9

)

%

0.3

 

%

Constant currency period-over-period revenue change

 

 

%

(3.9

)

%

 

(0.9

)

%

(4.8

)

%

 

 

 

 

 

 

 

Customer Engagement

 

 

 

 

 

 

Revenue for the three and nine months ended October 31, 2019

 

$

217,936

 

 

$

636,467

 

 

 

$

224,149

 

 

$

658,440

 

 

Revenue for the three and nine months ended October 31, 2020

 

$

215,222

 

 

$

605,167

 

 

 

$

217,449

 

 

$

613,722

 

 

Revenue for the three and nine months ended October 31, 2020 at constant currency(1)

 

$

213,000

 

 

$

606,000

 

 

 

$

215,000

 

 

$

614,000

 

 

Reported period-over-period revenue change

 

(1.2

)

%

(4.9

)

%

 

(3.0

)

%

(6.8

)

%

% impact from change in foreign currency exchange rates

 

(1.1

)

%

0.1

 

%

 

(1.1

)

%

0.1

 

%

Constant currency period-over-period revenue change

 

(2.3

)

%

(4.8

)

%

 

(4.1

)

%

(6.7

)

%

 

 

 

 

 

 

 

Cyber Intelligence

 

 

 

 

 

 

Revenue for the three and nine months ended October 31, 2019

 

$

106,931

 

 

$

327,964

 

 

 

$

106,931

 

 

$

328,115

 

 

Revenue for the three and nine months ended October 31, 2020

 

$

112,979

 

 

$

319,438

 

 

 

$

113,671

 

 

$

322,460

 

 

Revenue for the three and nine months ended October 31, 2020 at constant currency(1)

 

$

112,000

 

 

$

321,000

 

 

 

$

113,000

 

 

$

325,000

 

 

Reported period-over-period revenue change

 

5.7

 

%

(2.6

)

%

 

6.3

 

%

(1.7

)

%

% impact from change in foreign currency exchange rates

 

(1.0

)

%

0.5

 

%

 

(0.6

)

%

0.8

 

%

Constant currency period-over-period revenue change

 

4.7

 

%

(2.1

)

%

 

5.7

 

%

(0.9

)

%

(1) Revenue for the three and nine months ended October 31, 2020 at constant currency is calculated by translating current-period GAAP or non-GAAP foreign currency revenue (as applicable) into U.S. dollars using average foreign currency exchange rates for the three and nine months ended October 31, 2019 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 8

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

October 31,

 

January 31,

(in thousands, except share and per share data)

 

2020

 

2020

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

526,815

 

 

 

$

379,146

 

 

Restricted cash and cash equivalents, and restricted bank time deposits

 

24,223

 

 

 

43,860

 

 

Short-term investments

 

104,454

 

 

 

20,215

 

 

Accounts receivable, net of allowance for doubtful accounts of $6.5 million and $5.3 million, respectively

 

346,565

 

 

 

382,435

 

 

Contract assets, net

 

63,095

 

 

 

64,961

 

 

Inventories

 

21,748

 

 

 

20,495

 

 

Prepaid expenses and other current assets

 

68,800

 

 

 

87,946

 

 

Total current assets

 

1,155,700

 

 

 

999,058

 

 

Property and equipment, net

 

108,578

 

 

 

116,111

 

 

Operating lease right-of-use assets

 

90,446

 

 

 

102,149

 

 

Goodwill

 

1,464,451

 

 

 

1,469,211

 

 

Intangible assets, net

 

159,120

 

 

 

197,764

 

 

Other assets

 

146,388

 

 

 

131,765

 

 

Total assets

 

$

3,124,683

 

 

 

$

3,016,058

 

 

 

 

 

 

 

Liabilities, Preferred Stock, and Stockholders’ Equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

66,807

 

 

 

$

71,604

 

 

Accrued expenses and other current liabilities

 

246,949

 

 

 

229,698

 

 

Current maturities of long-term debt

 

383,449

 

 

 

4,250

 

 

Contract liabilities

 

334,843

 

 

 

397,350

 

 

Total current liabilities

 

1,032,048

 

 

 

702,902

 

 

Long-term debt

 

403,292

 

 

 

832,798

 

 

Long-term contract liabilities

 

39,810

 

 

 

40,565

 

 

Operating lease liabilities

 

80,040

 

 

 

90,372

 

 

Other liabilities

 

98,016

 

 

 

106,984

 

 

Total liabilities

 

1,653,206

 

 

 

1,773,621

 

 

Preferred Stock – $0.001 par value; authorized 2,207,000 shares; Series A Preferred Stock; 200,000 shares issued and outstanding at October 31, 2020; no shares issued and outstanding at January 31, 2020; aggregate liquidation preference and current redemption value of $203,553 at October 31, 2020.

 

200,628

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

Stockholders’ Equity:

 

 

 

 

Common stock – $0.001 par value; authorized 120,000,000 shares. Issued 70,140,000 and 68,529,000 shares; outstanding 65,736,000 and 64,738,000 shares at July 31, 2020 and January 31, 2020, respectively.

 

70

 

 

 

68

 

 

Additional paid-in capital

 

1,717,384

 

 

 

1,660,889

 

 

Treasury stock, at cost – 4,404,000 and 3,791,000 shares at July 31, 2020 and January 31, 2020, respectively.

 

(208,124

)

 

 

(174,134

)

 

Accumulated deficit

 

(93,875

)

 

 

(105,590

)

 

Accumulated other comprehensive loss

 

(162,806

)

 

 

(151,865

)

 

Total Verint Systems Inc. stockholders’ equity

 

1,252,649

 

 

 

1,229,368

 

 

Noncontrolling interests

 

18,200

 

 

 

13,069

 

 

Total stockholders’ equity

 

1,270,849

 

 

 

1,242,437

 

 

Total liabilities, preferred stock, and stockholders’ equity

 

$

3,124,683

 

 

 

$

3,016,058

 

 

 

 

Table 9

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Nine Months Ended

October 31,

(in thousands)

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

18,439

 

 

 

$

29,015

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

73,458

 

 

 

67,880

 

 

Stock-based compensation, excluding cash-settled awards

 

51,538

 

 

 

56,164

 

 

Change in fair value of future tranche right

 

22,834

 

 

 

 

 

Amortization of discount on convertible notes

 

9,620

 

 

 

9,306

 

 

Non-cash losses (gains) on derivative financial instruments, net

 

522

 

 

 

(460

)

 

Other, net

 

(2,519

)

 

 

3,894

 

 

Changes in operating assets and liabilities, net of effects of business combinations:

 

 

 

 

Accounts receivable

 

31,128

 

 

 

26,791

 

 

Contract assets

 

1,468

 

 

 

(2,175

)

 

Inventories

 

(2,793

)

 

 

(605

)

 

Prepaid expenses and other assets

 

1,552

 

 

 

(109

)

 

Accounts payable and accrued expenses

 

8,534

 

 

 

(10,161

)

 

Contract liabilities

 

(60,306

)

 

 

(29,598

)

 

Other, net

 

4,356

 

 

 

(13,472

)

 

Net cash provided by operating activities

 

157,831

 

 

 

136,470

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Cash paid for business combinations, including adjustments, net of cash acquired

 

 

 

 

(51,481

)

 

Purchases of property and equipment

 

(20,596

)

 

 

(28,388

)

 

Purchases of investments

 

(142,153

)

 

 

(31,760

)

 

Maturities and sales of investments

 

58,210

 

 

 

49,994

 

 

Cash paid for capitalized software development costs

 

(8,740

)

 

 

(12,431

)

 

Change in restricted bank time deposits, and other investing activities, net

 

12,603

 

 

 

4,755

 

 

Net cash used in investing activities

 

(100,676

)

 

 

(69,311

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of preferred stock and future tranche right, net of issuance costs

 

197,254

 

 

 

 

 

Proceeds from borrowings

 

155,000

 

 

 

 

 

Repayments of borrowings and other financing obligations

 

(205,447

)

 

 

(4,671

)

 

Payments to repurchase convertible notes

 

(13,032

)

 

 

 

 

Payments of debt-related costs

 

(2,287

)

 

 

(212

)

 

Purchases of treasury stock

 

(36,836

)

 

 

(474

)

 

Preferred stock dividend payments

 

(1,589

)

 

 

 

 

Distributions paid to noncontrolling interest

 

(749

)

 

 

(949

)

 

Payments of deferred purchase price and contingent consideration for business combinations (financing portion) and other financing activities

 

(13,241

)

 

 

(27,975

)

 

Net cash provided by (used in) financing activities

 

79,073

 

 

 

(34,281

)

 

Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents

 

(2,093

)

 

 

(1,251

)

 

Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents

 

134,135

 

 

 

31,627

 

 

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period

 

411,657

 

 

 

412,699

 

 

Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period

 

$

545,792

 

 

 

$

444,326

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period to the condensed consolidated balance sheets:

 

 

 

 

Cash and cash equivalents

 

$

526,815

 

 

 

$

412,838

 

 

Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits

 

15,459

 

 

 

23,778

 

 

Restricted cash and cash equivalents included in other assets

 

3,518

 

 

 

7,710

 

 

Total cash, cash equivalents, restricted cash, and restricted cash equivalents

 

$

545,792

 

 

 

$

444,326

 

 

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 software revenue (includes cloud and support), non-GAAP perpetual revenue, non-GAAP support revenue, non-GAAP professional services revenue, non-GAAP recurring revenue, non-GAAP nonrecurring 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, estimated GAAP fully allocated cost of revenue, estimated GAAP and non-GAAP fully allocated gross profit and gross margins, estimated GAAP and non-GAAP fully allocated research and development, net, estimated GAAP and non-GAAP fully allocated selling, general and administrative expenses, estimated GAAP and non-GAAP fully allocated operating income and operating margins, 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. common shares, non-GAAP diluted net income per common share attributable to Verint Systems Inc., estimated fully allocated adjusted EBITDA and adjusted EBITDA margins, net debt, non-GAAP segment expenses, non-GAAP shared support expenses and constant currency measures. The tables above include a reconciliation of each non-GAAP financial measure for completed periods presented in this press release to the most directly comparable GAAP financial measure.

We believe these non-GAAP financial measures, used in conjunction with the corresponding GAAP measures, provide investors with useful supplemental information about the financial performance of our business by:

  • facilitating the comparison of our financial results and business trends between periods, by excluding certain items that either can vary significantly in amount and frequency, are based upon subjective assumptions, or in certain cases are unplanned for or difficult to forecast,
  • facilitating the comparison of our financial results and business trends with other technology companies who publish similar non-GAAP measures, and
  • allowing investors to see and understand key supplementary metrics used by our management to run our business, including for budgeting and forecasting, resource allocation, and compensation matters.

We also make these non-GAAP financial measures available because a number of our investors have informed us that they find this supplemental information useful.

Non-GAAP financial measures should not be considered in isolation as substitutes for, or superior to, comparable GAAP financial measures. The non-GAAP financial measures we present have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, and these non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures. These non-GAAP financial measures do not represent discretionary cash available to us to invest in the growth of our business, and we may in the future incur expenses similar to or in addition to the adjustments made in these non-GAAP financial measures. Other companies may calculate similar non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

Our non-GAAP financial measures are calculated by making the following adjustments to our GAAP financial measures:

Revenue adjustments. We exclude from our non-GAAP revenue the impact of fair value adjustments required under GAAP relating to cloud services and customer support contracts acquired in a business acquisition, which would have otherwise been recognized on a stand-alone basis. We believe that it is useful for investors to understand the total amount of revenue that we and the acquired company would have recognized on a stand-alone basis under GAAP, absent the accounting adjustment associated with the business acquisition. Our non-GAAP revenue also reflects certain adjustments from aligning an acquired company’s revenue recognition policies to our policies. We believe that our non-GAAP revenue measure helps management and investors understand our revenue trends and serves as a useful measure of ongoing business performance.

Amortization of acquired technology and other acquired intangible assets. When we acquire an entity, we are required under GAAP to record the fair values of the intangible assets of the acquired entity and amortize those assets over their useful lives. We exclude the amortization of acquired intangible assets, including acquired technology, from our non-GAAP financial measures because they are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. We also exclude these amounts to provide easier comparability of pre- and post-acquisition operating results.

Stock-based compensation expenses. We exclude stock-based compensation expenses related to restricted stock awards, stock bonus programs, bonus share programs, and other stock-based awards from our non-GAAP financial measures. We evaluate our performance both with and without these measures because stock-based compensation is typically a non-cash expense and can vary significantly over time based on the timing, size and nature of awards granted, and is influenced in part by certain factors which are generally beyond our control, such as the volatility of the price of our common stock. In addition, measurement of stock-based compensation is subject to varying valuation methodologies and subjective assumptions, and therefore we believe that excluding stock-based compensation from our non-GAAP financial measures allows for meaningful comparisons of our current operating results to our historical operating results and to other companies in our industry.

Unrealized gains and losses on certain derivatives, net. We exclude from our non-GAAP financial measures unrealized gains and losses on certain 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 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.

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, up to 200,000 shares of Series B Preferred Stock upon the completion of the spin-off of our Cyber Intelligence Solutions business and other customary closing conditions (the “Future Tranche Right”) meets the definition of a freestanding financial instrument. This Future Tranche Right is reported at fair value as an asset or liability on our consolidated balance sheet, and is remeasured at fair value each reporting period until settlement, with changes in its fair value recognized within other income (expense), net on the consolidated statement of operations. We are excluding this change in fair value of the Future Tranche Right from our non-GAAP financial measures because it is unusual in nature, can vary significantly in amount, and is unrelated to our ongoing operations.

Acquisition expenses, 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.

Separation expenses. On December 4, 2019, we announced our intention to separate into two independent publicly traded companies: one which will consist of our Customer Engagement Solutions business, and one which will consist of our Cyber Intelligence Solutions business. We are incurring significant expenses to prepare for this separation, including third-party advisory, accounting, legal, consulting, and other similar services related to the separation as well as costs associated with the operational separation of the two businesses, including those related to human resources, brand management, real estate, and information technology (which IT expenses are included in Separation expenses to the extent not capitalized). Separation expenses also include incremental cash income taxes related to the reorganization of legal entities and operations in order to effect the separation. These costs are incremental to our normal operating expenses and are being incurred solely as a result of the separation transaction. Accordingly, we are excluding these separation expenses from our non-GAAP financial measures in order to evaluate our performance on a comparable basis.

Impairment charges and other adjustments. We exclude from our non-GAAP financial measures asset impairment charges (other than those already included within restructuring or acquisition activity), rent expense for redundant facilities, gains or losses on sales of property, gains or losses on settlements of certain legal matters, and certain professional fees unrelated to our ongoing operations, including fees and expenses (or recoveries) related to a shareholder proxy contest that was settled in June 2019 of $(1.3) million and $7.8 million during the nine months ended October 31, 2020 and 2019, respectively, 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. 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, 2021 is currently approximately 8%, and was 8% for the year ended January 31, 2020. 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.

Customer Engagement Revenue Metrics and Operating Metrics

Software (includes cloud and support) includes, software licenses, appliances, SaaS and optional managed services. Recurring Software Revenue includes SaaS, optional managed services and support revenue.

Cloud revenue, on both a GAAP and non-GAAP basis, primarily consists of SaaS and optional managed services. A portion of our revenue associated with unbundled SaaS is included within support revenue. We expect this amount to become larger and more meaningful over time and intend to include it in our cloud revenue and exclude it from our support revenue.

SaaS revenue includes bundled SaaS, software with standard managed services and unbundled SaaS that we account for as term licenses where managed services are purchased separately.

Optional Managed Services is recurring services that are intended to improve our customers operations and reduce expenses.

New SaaS Annual Contract Value (ACV) includes the annualized contract value of all new SaaS contracts received within the period; in cases where SaaS is offered to partners through usage-based contracts, we include the incremental value of usage contracts over a rolling four quarters.

New Perpetual License Equivalent Bookings are used to normalize between perpetual and SaaS bookings and measure overall software growth. We calculate new perpetual license equivalent bookings by multiplying New SaaS ACV bookings (excluding bookings from maintenance conversions, except for the uplift) by a conversion factor of 2.0 and adding that amount to perpetual license bookings. The conversion factor of 2.0 is an estimate that is derived from an analysis of our historical bookings and may change over time. Management uses perpetual license equivalent bookings to understand our performance, including our software growth and SaaS/perpetual license mix. This metric should not be viewed in isolation from other operating metrics that we make available to investors. The New Perpetual License Equivalent Bookings calculation was adjusted in Q4 FY2020 for the full year to exclude bookings from maintenance conversion, except for uplift.

Cyber Intelligence Recurring and Nonrecurring Revenue Metrics

Recurring revenue, on both a GAAP and non-GAAP basis, primarily consists of initial and renewal support, subscription software licenses, and SaaS in certain limited transactions.

Nonrecurring revenue, on both a GAAP and non-GAAP basis, primarily consists of our perpetual licenses, long-term projects including software customizations that are recognized over time using a percentage of completion (“POC”) method, consulting, implementation and installation services, training, and hardware.

We believe that recurring and nonrecurring revenue provide investors with useful insight into the nature and sustainability of our revenue streams. The recurrence of these revenue streams in future periods depends on a number of factors including contractual periods and customers’ renewal decisions. Please see “Revenue adjustments” above for an explanation for why we present these revenue numbers on both a GAAP and non-GAAP basis.

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, restructuring expenses, acquisition expenses, and other expenses excluded from our non-GAAP financial measures as described above. We believe that adjusted EBITDA is also commonly used by investors to evaluate operating performance between companies because it helps reduce variability caused by differences in capital structures, income taxes, stock-based compensation, accounting policies, and depreciation and amortization policies. Adjusted EBITDA is also used by credit rating agencies, lenders, and other parties to evaluate our creditworthiness.

Net Debt

Net Debt is a non-GAAP measure defined as the sum of long-term and short-term debt on our consolidated balance sheet, excluding unamortized discounts and issuance costs, less the sum of cash and cash equivalents, restricted cash, restricted cash equivalents, restricted bank time deposits, and restricted investments (including long-term portions), and short-term investments. We use this non-GAAP financial measure to help evaluate our capital structure, financial leverage, and our ability to reduce debt and to fund investing and financing activities, and believe that it provides useful information to investors.

Supplemental Information About Constant Currency

Because we operate on a global basis and transact business in many currencies, fluctuations in foreign currency exchange rates can affect our consolidated U.S. dollar operating results. To facilitate the assessment of our performance excluding the effect of foreign currency exchange rate fluctuations, we calculate our GAAP and non-GAAP revenue, cost of revenue, and operating expenses on both an as-reported basis and a constant currency basis, allowing for comparison of results between periods as if foreign currency exchange rates had remained constant. We perform our constant currency calculations by translating current-period foreign currency results into U.S. dollars using prior-period average foreign currency exchange rates or hedge rates, as applicable, rather than current period exchange rates. We believe that constant currency measures, which exclude the impact of changes in foreign currency exchange rates, facilitate the assessment of underlying business trends.

Unless otherwise indicated, our financial outlook 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.