Verint Announces Strong Q1 FY2020 Results and Outlook

Strong Q1 Results Across Key Metrics including Revenue, EPS and Cash
Flow.

Raising Guidance for FY2020

Introducing New Three Year Targets

MELVILLE, N.Y.–(BUSINESS WIRE)–Verint® Systems Inc. (NASDAQ:VRNT), a
global Actionable Intelligence® leader, today announced
results for the three months ended April 30, 2019 (FY2020).

“We are pleased to have started the year strong with continued business
momentum. Our first quarter results were ahead of our guidance, for both
revenue and EPS, and we are well positioned for a year of double-digit
revenue and EPS growth, on a non-GAAP basis. We are also pleased with
our 55% increase in cash from operations, to $93 million in Q1,
demonstrating the underlying strength in our business. We believe our
strong results reflect the execution of our strategy to accelerate
innovation that we started two years ago, and that this strategy will
enable us to sustain growth over the long-run. We are also pleased to be
in a position to raise our guidance for the current fiscal year, and to
introduce new three-year targets,” said Dan Bodner, CEO.

FY2020 Financial Highlights (Three Months Ending April 30, 2019,
Compared to Prior Year)

     
GAAP   Non-GAAP
Revenue of $315 million, up 9.0%   Revenue of $324 million, up 11.0%
Gross margin of 63.8%, up 320bps   Gross margin of 67.4%, up 350bps
Operating income of $14 million, up 86%   Operating income of $62 million, up 35%
Operating margin of 4.6%, up 190bps   Operating margin of 19.2%, up 340bps
Diluted EPS of $0.02, vs. ($0.03) in FY19   Diluted EPS of $0.73, up 38.0%
Cash flow from operations of $93 million, up 55%    
 

Financial Outlook for FY2020 (Year Ending January 31, 2020)

Today, we are raising our non-GAAP outlook for revenue and EPS for the
year ending January 31, 2020 as follows:

  • Revenue: Increasing by $5 million to $1.375 billion with a range of
    +/- 2%

    • Reflects 10.5% year-over-year growth
  • EPS: Increasing by 5 cents to $3.65 at the midpoint of our revenue
    guidance

    • Reflects 14% year-over-year growth

Three Year Targets (Year Ending January 31, 2022)

Today, we are introducing non-GAAP targets for revenue and EPS for the
year ending January 31, 2022 as follows:

  • Revenue: $1.65 billion

    • Reflects 10% CAGR
  • EPS: $4.70

    • Reflects 14% CAGR

Our non-GAAP outlook for the year ending January 31, 2020 excludes the
following GAAP measures which we are able to quantify with reasonable
certainty:

  • Amortization of intangible assets of approximately $55 million.
  • Amortization of discount on convertible notes of approximately $12
    million.

Our non-GAAP outlook for the year ending January 31, 2020 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 $24
    million and $26 million.
  • Stock-based compensation is expected to be between approximately $73
    million and $77 million, 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 months ended April 30, 2019 and 2018 for the GAAP
measures excluded from our non-GAAP outlook appear in Table 3 to this
press release.

Our non-GAAP Consolidated, Customer Engagement, and Cyber Intelligence
three-year targets exclude various GAAP measures, including:

  • Amortization of intangible assets.
  • Stock-based compensation expenses.
  • Revenue adjustments.
  • Acquisition expenses.
  • Restructuring expenses.

Our non-GAAP Consolidated three-year targets also reflect income tax
provisions on a non-GAAP basis.

We are unable, without unreasonable efforts, to provide a reconciliation
for these GAAP measures which are excluded from our non-GAAP
Consolidated, Customer Engagement, and Cyber Intelligence three-year
targets, 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.

Our non-GAAP Consolidated, Customer Engagement, and Cyber Intelligence
three-year targets reflect foreign currency exchange rates approximately
consistent with current rates.

Conference Call Information

We will conduct a conference call today at 4:30 p.m. ET to discuss our
results for the three months ended April 30, 2019 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 8290147. 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” 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 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 challenges,
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 revenues,
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 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 both our own operations as well as 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, 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, 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 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 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, 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; risks associated with changing accounting principles or
standards, tax laws and regulations, tax rates, and the continuing
availability of expected tax benefits; and 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. 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, 2019, our Quarterly Report on Form 10-Q for the
quarter ended April 30, 2019, when filed, and other filings we make with
the SEC.

VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT COMPANY, NEXT
IT, FORESEE, OPINIONLAB, KIRAN ANALYTICS, TERROGENCE, SENSECY, CUSTOMER
ENGAGEMENT SOLUTIONS, CYBER INTELLIGENCE SOLUTIONS, EDGEVR, RELIANT,
VANTAGE, STAR-GATE, 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
Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended
April 30,
(in thousands, except per share data) 2019   2018
Revenue:
Product $ 104,224 $ 105,864
Service and support 211,035   183,343  
Total revenue 315,259   289,207  
Cost of revenue:
Product 28,120 34,809
Service and support 79,361 71,857
Amortization of acquired technology 6,707   7,426  
Total cost of revenue 114,188   114,092  
Gross profit 201,071   175,115  
Operating expenses:
Research and development, net 57,169 52,152
Selling, general and administrative 121,721 107,497
Amortization of other acquired intangible assets 7,713   7,684  
Total operating expenses 186,603   167,333  
Operating income 14,468   7,782  
Other income (expense), net:
Interest income 1,426 793
Interest expense (9,934 ) (9,062 )
Other expense, net (790 ) (464 )
Total other expense, net (9,298 ) (8,733 )
Income (loss) before provision for income taxes 5,170 (951 )
Provision for income taxes 1,409   274  
Net income (loss) 3,761 (1,225 )
Net income attributable to noncontrolling interests 2,185   990  
Net income (loss) attributable to Verint Systems Inc. $ 1,576   $ (2,215 )
 
Net income (loss) per common share attributable to Verint Systems
Inc.:
Basic $ 0.02   $ (0.03 )
Diluted $ 0.02   $ (0.03 )
 
Weighted-average common shares outstanding:
Basic 65,438   63,298  
Diluted 67,088   63,298  
 
     
Table 2
VERINT SYSTEMS INC. AND SUBSIDIARIES
Segment Revenue
(Unaudited)
 

Three Months Ended
April 30,

(in thousands) 2019   2018
GAAP Revenue By Segment:
Customer Engagement $ 207,095 $ 186,456
Cyber Intelligence 108,164   102,751
GAAP Total Revenue $ 315,259   $ 289,207
 
Revenue Adjustments:
Customer Engagement $ 8,772 $ 2,719
Cyber Intelligence 127   44
Total Revenue Adjustments $ 8,899   $ 2,763
 
Non-GAAP Revenue By Segment:
Customer Engagement $ 215,867 $ 189,175
Cyber Intelligence 108,291   102,795
Non-GAAP Total Revenue $ 324,158   $ 291,970
 
     
Table 3
VERINT SYSTEMS INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Results
(Unaudited)
 

Three Months Ended
April 30,

(in thousands, except per share data) 2019   2018
 

Table of Reconciliation from GAAP Gross
Profit to Non-GAAP Gross Profit

 
GAAP gross profit $ 201,071   $ 175,115  
GAAP gross margin 63.8 % 60.6 %
Revenue adjustments 8,899 2,763
Amortization of acquired technology 6,707 7,426
Stock-based compensation expenses 1,404 846
Acquisition expenses, net 15 17
Restructuring expenses 449   363  
Non-GAAP gross profit $ 218,545   $ 186,530  
Non-GAAP gross margin 67.4 % 63.9 %
 

Table of Reconciliation from GAAP
Operating Income to Non-GAAP Operating Income

 
GAAP operating income $ 14,468   $ 7,782  
As a percentage of GAAP revenue 4.6 % 2.7 %
Revenue adjustments 8,899 2,763
Amortization of acquired technology 6,707 7,426
Amortization of other acquired intangible assets 7,713 7,684
Stock-based compensation expenses 17,103 16,459
Acquisition expenses, net 3,868 2,315
Restructuring expenses 1,437 1,091
Other adjustments 2,059   595  
Non-GAAP operating income $ 62,254   $ 46,115  
As a percentage of non-GAAP revenue 19.2 % 15.8 %
 

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

 
GAAP other expense, net $ (9,298 ) $ (8,733 )
Unrealized losses (gains) on derivatives, net 679 (543 )
Amortization of convertible note discount 3,061 2,905
Acquisition expenses, net (34 ) 28  
Non-GAAP other expense, net(1) $ (5,592 ) $ (6,343 )
 

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

 
GAAP provision for income taxes $ 1,409   $ 274  
GAAP effective income tax rate 27.3 % (28.8 )%
Non-GAAP tax adjustments 4,001   3,982  
Non-GAAP provision for income taxes $ 5,410   $ 4,256  
Non-GAAP effective income tax rate 9.5 % 10.7 %
 

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. $ 1,576   $ (2,215 )
Revenue adjustments 8,899 2,763
Amortization of acquired technology 6,707 7,426
Amortization of other acquired intangible assets 7,713 7,684
Stock-based compensation expenses 17,103 16,459
Unrealized losses (gains) on derivatives, net 679 (543 )
Amortization of convertible note discount 3,061 2,905
Acquisition expenses, net 3,834 2,343
Restructuring expenses 1,437 1,091
Other adjustments 2,059 595
Non-GAAP tax adjustments (4,001 ) (3,982 )
Total GAAP net income (loss) adjustments 47,491   36,741  
Non-GAAP net income attributable to Verint Systems Inc. $ 49,067   $ 34,526  
 

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 to
Verint Systems Inc.
$ 0.02   $ (0.03 )
Non-GAAP diluted net income per common share attributable to Verint
Systems Inc.
$ 0.73   $ 0.53  
 
GAAP weighted-average shares used in computing diluted net income
(loss) per common share attributable to Verint Systems Inc.
67,088 63,928
Additional weighted-average shares applicable to non-GAAP diluted
net income per common share attributable to Verint Systems Inc.
  1,203  
Non-GAAP diluted weighted-average shares used in computing net
income per common share attributable to Verint Systems Inc.
67,088   65,131  
 

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. $ 1,576   $ (2,215 )
As a percentage of GAAP revenue 0.5 % (0.8 )%
Net income attributable to noncontrolling interest 2,185 990
Provision for income taxes 1,409 274
Other expense, net 9,298 8,733
Depreciation and amortization(2) 22,293 23,310
Revenue adjustments 8,899 2,763
Stock-based compensation expenses 17,103 16,459
Acquisition expenses, net 3,868 2,315
Restructuring expenses 1,437 1,090
Other adjustments 2,059   595  
Adjusted EBITDA $ 70,127   $ 54,314  
As a percentage of non-GAAP revenue 21.6 % 18.6 %
 

Table of Reconciliation from Gross Debt
to Net Debt

April 30,

2019

January 31,

2019

 
Current maturities of long-term debt $ 4,303 $ 4,343
Long-term debt 780,260 777,785
Unamortized debt discounts and issuance costs 33,052   36,589  
Gross debt 817,615   818,717  
Less:
Cash and cash equivalents 412,024 369,975
Restricted cash and cash equivalents, and restricted time deposits 39,749 42,262
Short-term investments 39,334   32,329  
Net debt, excluding long-term restricted cash, cash equivalents,
time deposits, and investments
326,508   374,151  
Long-term restricted cash, cash equivalents, time deposits and
investments
25,082   23,193  
Net debt, including long-term restricted cash, cash equivalents,
time deposits, and investments
$ 301,426   $ 350,958  
 
 
(1) For the three months ended April 30, 2019, non-GAAP other
expense, net of $5.6 million was comprised of $5.6 million of
interest and other expense.
 
(2) Adjusted for financing fee amortization.
 
       
Table 4
VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
 
April 30, January 31,
(in thousands, except share and per share data) 2019 2019
Assets
Current Assets:
Cash and cash equivalents $ 412,024 $ 369,975
Restricted cash and cash equivalents, and restricted bank time
deposits
39,749 42,262
Short-term investments 39,334 32,329
Accounts receivable, net of allowance for doubtful accounts of $4.5
million and $3.8 million, respectively
316,101 375,663
Contract assets 63,228 63,389
Inventories 27,845 24,952
Prepaid expenses and other current assets 90,016   97,776  
Total current assets 988,297   1,006,346  
Property and equipment, net 102,340 100,134
Operating lease right-of-use assets 96,811
Goodwill 1,431,517 1,417,481
Intangible assets, net 219,552 225,183
Other assets 119,024   117,883  
Total assets $ 2,957,541   $ 2,867,027  
 
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable $ 65,275 $ 71,621
Accrued expenses and other current liabilities 244,983 212,824
Contract liabilities 350,488   377,376  
Total current liabilities 660,746   661,821  
Long-term debt 780,260 777,785
Long-term contract liabilities 32,726 30,094
Operating lease liabilities 85,649
Other liabilities 123,583   136,523  
Total liabilities 1,682,964   1,606,223  
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock – $0.001 par value; authorized 2,207,000 shares at
April 30, 2019 and January 31, 2019, respectively; none issued.
Common stock – $0.001 par value; authorized 120,000,000 shares.
Issued 67,446,000 and 66,998,000 shares; outstanding 65,773,000 and
65,333,000 shares at April 30, 2019 and January 31, 2019,
respectively.
67 67
Additional paid-in capital 1,601,156 1,586,266
Treasury stock, at cost – 1,673,000 and 1,665,000 shares at April
30, 2019 and January 31, 2019, respectively.
(58,072 ) (57,598 )
Accumulated deficit (132,698 ) (134,274 )
Accumulated other comprehensive loss (149,523 ) (145,225 )
Total Verint Systems Inc. stockholders’ equity 1,260,930 1,249,236
Noncontrolling interests 13,647   11,568  
Total stockholders’ equity 1,274,577   1,260,804  
Total liabilities and stockholders’ equity $ 2,957,541   $ 2,867,027  
 

Contacts

Investor Relations
Alan Roden
Verint
Systems Inc.
(631) 962-9304
alan.roden@verint.com

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