0001166388-19-000124.txt : 20190904 0001166388-19-000124.hdr.sgml : 20190904 20190904161404 ACCESSION NUMBER: 0001166388-19-000124 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20190904 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190904 DATE AS OF CHANGE: 20190904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERINT SYSTEMS INC CENTRAL INDEX KEY: 0001166388 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 113200514 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-34807 FILM NUMBER: 191074699 BUSINESS ADDRESS: STREET 1: 175 BROADHOLLOW ROAD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 6319629600 MAIL ADDRESS: STREET 1: 175 BROADHOLLOW ROAD CITY: MELVILLE STATE: NY ZIP: 11747 8-K 1 july3120198-kearningsp.htm 8-K Document
false0001166388 0001166388 2019-09-04 2019-09-04


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
_________________________ 
FORM 8-K
 
_________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 4, 2019
Date of Report (Date of earliest event reported)
 
_________________________ 
Verint Systems Inc
(Exact name of registrant as specified in its charter)
 
_________________________  
Delaware
001-34807
11-3200514
(State or other jurisdiction
of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)

175 Broadhollow Road
Melville,
New York
11747

(Address of principal executive offices, and zip code)
(631)
962-9600

(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.001
par value per share
VRNT
The NASDAQ Stock Market, LLC
 
 
(NASDAQ Global Select Market)
_________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 





Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐







Item 2.02 Results of Operations and Financial Condition.
 
On September 4, 2019, Verint Systems Inc. (the "Company") issued a press release providing selected financial information for the three and six months ended July 31, 2019, and its outlook. A copy of the press release is attached as Exhibit 99.1 hereto and is incorporated by reference into this Item 2.02 in its entirety.

 
Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits.
 
Exhibit
 
 
Number
 
Description
 
 
 
 
 
 
 









SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
VERINT SYSTEMS INC. 
 
 
 
 
Date:
September 4, 2019
 
 
 
 
 
 
 
 
By:
  /s/ Douglas E. Robinson
 
 
 
Name:
Douglas E. Robinson
 
 
 
Title:
Chief Financial Officer









EXHIBIT INDEX
 



EX-99.1 2 july312019earningspres.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

verintlogobluehighresa08.jpg
Press Release


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

Verint Announces Q2 FY2020 Results with Strong Cloud Growth


MELVILLE, N.Y., September 4, 2019 - Verint® Systems Inc. (NASDAQ: VRNT), a global Actionable Intelligence® leader, today announced results for the three and six months ended July 31, 2019 (FY2020).

“We are pleased with our second quarter and first half results which reflect our strong innovation and market leadership. In Customer Engagement, we continue to execute well on our Cloud First initiative with strong cloud revenue growth and large enterprise wins. In Cyber Intelligence, our strategic initiative to unbundle and productize our data mining software is tracking well ahead of plan and resulted in significant gross margin expansion. Overall, we continue to accelerate innovation and evolve our business models which we believe is resonating well with our customers and large partner network,” said Dan Bodner, CEO.

FY2020 Financial Highlights (Three and Six Months Ended July 31, 2019, Compared to Three and Six Months Ended July 31, 2018)

 
Three Months Ended July 31, 2019
Six Months Ended July 31, 2019
 
GAAP
Non-GAAP
GAAP
Non-GAAP
Revenue
$324 million
$331 million
$640 million
$655 million
y-o-y change
+5.9%
+7.4%
+7.4%
+9.2%
Revenue (Constant Currency)
$328 million
$335 million
$649 million
$664 million
y-o-y change
+7.1%
+8.6%
+9.0%
+10.6%
Gross Margin
64.1%
67.5%
63.9%
67.4%
y-o-y change
+110bps
+160bps
+210bps
+250bps
Operating Income
$15 million
$66 million
$30 million
$128 million
y-o-y change
-47.7%
+4.0%
-19.6%
+17.0%
Operating Margin
4.7%
19.9%
4.7%
19.6%
y-o-y change
-480bps
-70bps
-150bps
+140bps
Diluted EPS
$0.16
$0.82
$0.18
$1.55
y-o-y change
-51.5%
+8.0%
-40.0%
+20.3%


FY2020 First Half Highlights

Customer Engagement
Revenue growth of 8.1% on a GAAP basis and 12.2% on a non-GAAP constant currency basis
“Cloud First” strategy progressing well



    

Strong cloud revenue growth on a GAAP basis of 37% and on a non-GAAP basis of 49%
Strong new SaaS ACV growth of 84%
11 cloud orders over $1 million Total Contract Value (TCV) versus 4 in the prior year first half
Automation innovation helping customers achieve elevated customer experience while reducing their operating costs

Cyber Intelligence
Revenue growth of 6.1% on a GAAP basis and 7.5% on a non-GAAP constant currency basis
While accelerating our planned reduction of low margin pass-through hardware revenue
Software model strategy ahead of plan
Gross margins (estimated fully allocated) up more than 600bps
Continuing to win large orders reflecting customer need for advanced data mining solutions
Added approximately 50 new customers in the first half


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

Our non-GAAP outlook for revenue and EPS for the year ending January 31, 2020 is as follows:
Revenue: $1.375 billion with a range of +/- 2%
Reflects 10.5% year-over-year growth
EPS: $3.65 at the midpoint of our revenue guidance
Reflects 14% year-over-year growth

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 $26 million and $28 million.
Stock-based compensation is expected to be between approximately $75 million and $79 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 and six months ended July 31, 2019 and 2018 for the GAAP measures excluded from our non-GAAP outlook appear in Table 3 to this press release.


Conference Call Information

We will conduct a conference call today at 4:30 p.m. ET to discuss our results for the three and six months ended July 31, 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 3464357. 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 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 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 our own operations as well as to 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 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, 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; 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, our Quarterly Report on Form 10-Q for the quarter ended July 31, 2019, when filed, and other filings we make with the SEC.

VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT COMPANY, NEXT IT, FORESEE, OPINIONLAB, KIRAN ANALYTICS, TRANSVERSAL, TERROGENCE, SENSECY, CUSTOMER ENGAGEMENT SOLUTIONS, CYBER INTELLIGENCE SOLUTIONS, GI2, GITA, FIRSTMILE, OMNIX, WEBINT, LUMINAR, 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
July 31,
 
Six Months Ended
July 31,
(in thousands, except per share data)
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 

 
 

 
 
 
 
Product
 
$
109,983

 
$
110,042

 
$
214,207

 
$
215,906

Service and support
 
214,322

 
196,285

 
425,357

 
379,628

  Total revenue
 
324,305

 
306,327

 
639,564

 
595,534

Cost of revenue:
 
 

 
 

 
 
 
 
Product
 
29,424

 
32,984

 
57,544

 
67,793

Service and support
 
81,430

 
74,803

 
160,791

 
146,660

Amortization of acquired technology
 
5,587

 
5,520

 
12,294

 
12,946

  Total cost of revenue
 
116,441

 
113,307

 
230,629

 
227,399

Gross profit
 
207,864

 
193,020

 
408,935

 
368,135

Operating expenses:
 
 

 
 

 
 
 
 
Research and development, net
 
58,685

 
52,254

 
115,854

 
104,406

Selling, general and administrative
 
126,265

 
104,083

 
247,986

 
211,580

Amortization of other acquired intangible assets
 
7,639

 
7,452

 
15,352

 
15,136

  Total operating expenses
 
192,589

 
163,789

 
379,192

 
331,122

Operating income
 
15,275

 
29,231

 
29,743

 
37,013

Other income (expense), net:
 
 

 
 

 
 
 
 
Interest income
 
1,687

 
1,134

 
3,113

 
1,927

Interest expense
 
(10,107
)
 
(9,922
)
 
(20,041
)
 
(18,984
)
Other income (expense), net
 
909

 
(1,241
)
 
119

 
(1,705
)
  Total other expense, net
 
(7,511
)
 
(10,029
)
 
(16,809
)
 
(18,762
)
Income before benefit from income taxes
 
7,764

 
19,202

 
12,934

 
18,251

Benefit from income taxes
 
(4,507
)
 
(3,722
)
 
(3,098
)
 
(3,448
)
Net income
 
12,271

 
22,924

 
16,032

 
21,699

Net income attributable to noncontrolling interests
 
1,713

 
944

 
3,898

 
1,934

Net income attributable to Verint Systems Inc.
 
$
10,558

 
$
21,980

 
$
12,134

 
$
19,765

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

 
 

 
 
 
 
Basic
 
$
0.16

 
$
0.34

 
$
0.18

 
$
0.31

Diluted
 
$
0.16

 
$
0.33

 
$
0.18

 
$
0.30

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 

 
 

 
 
 
 
Basic
 
66,272

 
64,694

 
65,870

 
64,314

Diluted
 
67,519

 
65,840

 
67,338

 
65,509





    

Table 2
VERINT SYSTEMS INC. AND SUBSIDIARIES
Segment Revenue
(Unaudited)
 
 
 
Three Months Ended
July 31,
 
Six Months Ended
July 31,
 (in thousands)
 
2019
 
2018
 
2019
 
2018
GAAP Revenue By Segment:
 
 
 
 
 
 
 
 
Customer Engagement
 
$
211,436

 
$
200,807

 
$
418,531

 
$
387,263

Cyber Intelligence
 
112,869

 
105,520

 
221,033

 
208,271

GAAP Total Revenue
 
$
324,305

 
$
306,327

 
$
639,564

 
$
595,534

 
 
 
 
 
 
 
 
 
Revenue Adjustments:
 
 
 
 
 
 
 
 
Customer Engagement
 
$
6,988

 
$
2,126

 
$
15,760

 
$
4,845

Cyber Intelligence
 
24

 
25

 
151

 
69

Total Revenue Adjustments
 
$
7,012

 
$
2,151

 
$
15,911

 
$
4,914

 
 
 
 
 
 
 
 
 
Non-GAAP Revenue By Segment:
 
 
 
 
 
 
 
 
Customer Engagement
 
$
218,424

 
$
202,933

 
$
434,291

 
$
392,108

Cyber Intelligence
 
112,893

 
105,545

 
221,184

 
208,340

Non-GAAP Total Revenue
 
$
331,317

 
$
308,478

 
$
655,475

 
$
600,448





    

Table 3
VERINT SYSTEMS INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)

 
 
Three Months Ended
July 31,
 
Six Months Ended
July 31,
 (in thousands, except per share data)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Gross Profit to Non-GAAP Gross Profit
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
207,864

 
$
193,020

 
$
408,935

 
$
368,135

   GAAP gross margin
 
64.1
 %
 
63.0
 %
 
63.9
 %
 
61.8
 %
Revenue adjustments
 
7,012

 
2,151

 
15,911

 
4,914

Amortization of acquired technology
 
5,587

 
5,520

 
12,294

 
12,946

Stock-based compensation expenses
 
2,034

 
1,945

 
3,438

 
2,791

Acquisition expenses, net
 
5

 
(38
)
 
20

 
(21
)
Restructuring expenses
 
1,055

 
717

 
1,504

 
1,080

Non-GAAP gross profit
 
$
223,557

 
$
203,315

 
$
442,102

 
$
389,845

   Non-GAAP gross margin
 
67.5
 %
 
65.9
 %
 
67.4
 %
 
64.9
 %
 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Operating Income to Non-GAAP Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating income
 
$
15,275

 
$
29,231

 
$
29,743

 
$
37,013

   As a percentage of GAAP revenue
 
4.7
 %
 
9.5
 %
 
4.7
 %
 
6.2
 %
Revenue adjustments
 
7,012

 
2,151

 
15,911

 
4,914

Amortization of acquired technology
 
5,587

 
5,520

 
12,294

 
12,946

Amortization of other acquired intangible assets
 
7,639

 
7,452

 
15,352

 
15,136

Stock-based compensation expenses
 
20,551

 
17,455

 
37,654

 
33,914

Acquisition expenses, net
 
2,508

 
72

 
6,376

 
2,387

Restructuring expenses
 
1,639

 
906

 
3,076

 
1,997

Other adjustments
 
5,732

 
625

 
7,791

 
1,220

Non-GAAP operating income
 
$
65,943

 
$
63,412

 
$
128,197

 
$
109,527

   As a percentage of non-GAAP revenue
 
19.9
 %
 
20.6
 %
 
19.6
 %
 
18.2
 %
 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Other Expense, Net to Non-GAAP Other Expense, Net
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP other expense, net
 
$
(7,511
)
 
$
(10,029
)
 
$
(16,809
)
 
$
(18,762
)
Unrealized losses (gains) on derivatives, net
 
639

 
416

 
1,318

 
(127
)
Amortization of convertible note discount
 
3,102

 
2,943

 
6,163

 
5,848

Acquisition expenses, net
 
(23
)
 
303

 
(57
)
 
331

Non-GAAP other expense, net(1)
 
$
(3,793
)
 
$
(6,367
)
 
$
(9,385
)
 
$
(12,710
)
 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Benefit from Income Taxes to Non-GAAP Provision for Income Taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP benefit from income taxes
 
$
(4,507
)
 
$
(3,722
)
 
$
(3,098
)
 
$
(3,448
)
   GAAP effective income tax rate
 
(58.0
)%
 
(19.4
)%
 
(24.0
)%
 
(18.9
)%
Non-GAAP tax adjustments
 
9,462

 
9,737

 
13,463

 
13,719

Non-GAAP provision for income taxes
 
$
4,955

 
$
6,015

 
$
10,365

 
$
10,271

   Non-GAAP effective income tax rate
 
8.0
 %
 
10.5
 %
 
8.7
 %
 
10.6
 %
 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Net Income Attributable to Verint Systems Inc. to Non-GAAP Net Income Attributable to Verint Systems Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income attributable to Verint Systems Inc.
 
$
10,558

 
$
21,980

 
$
12,134

 
$
19,765




    

Revenue adjustments
 
7,012

 
2,151

 
15,911

 
4,914

Amortization of acquired technology
 
5,587

 
5,520

 
12,294

 
12,946

Amortization of other acquired intangible assets
 
7,639

 
7,452

 
15,352

 
15,136

Stock-based compensation expenses
 
20,551

 
17,455

 
37,654

 
33,914

Unrealized losses (gains) on derivatives, net
 
639

 
416

 
1,318

 
(127
)
Amortization of convertible note discount
 
3,102

 
2,943

 
6,163

 
5,848

Acquisition expenses, net
 
2,485

 
375

 
6,319

 
2,718

Restructuring expenses
 
1,639

 
906

 
3,076

 
1,997

Other adjustments
 
5,732

 
625

 
7,791

 
1,220

Non-GAAP tax adjustments
 
(9,462
)
 
(9,737
)
 
(13,463
)
 
(13,719
)
Total GAAP net income adjustments
 
44,924

 
28,106

 
92,415

 
64,847

Non-GAAP net income attributable to Verint Systems Inc.
 
$
55,482

 
$
50,086

 
$
104,549

 
$
84,612

 
 
 
 
 
 
 
 
 
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.
 
$
0.16

 
$
0.33

 
$
0.18

 
$
0.30

Non-GAAP diluted net income per common share attributable to Verint Systems Inc.
 
$
0.82

 
$
0.76

 
$
1.55

 
$
1.29

 
 
 
 
 
 
 
 
 
GAAP weighted-average shares used in computing diluted net income per common share attributable to Verint Systems Inc.
 
67,519

 
65,840

 
67,338

 
65,509

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

 

 

 

Non-GAAP diluted weighted-average shares used in computing net income per common share attributable to Verint Systems Inc.
 
67,519

 
65,840

 
67,338

 
65,509

 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Net Income Attributable to Verint Systems Inc. to Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income attributable to Verint Systems Inc.
 
$
10,558

 
$
21,980

 
$
12,134

 
$
19,765

   As a percentage of GAAP revenue
 
3.3
 %
 
7.2
 %
 
1.9
 %
 
3.3
 %
Net income attributable to noncontrolling interest
 
1,713

 
944

 
3,898

 
1,934

Benefit from income taxes
 
(4,507
)
 
(3,722
)
 
(3,098
)
 
(3,448
)
Other expense, net
 
7,511

 
10,029

 
16,809

 
18,762

Depreciation and amortization(2)
 
21,117

 
20,302

 
43,410

 
43,612

Revenue adjustments
 
7,012

 
2,151

 
15,911

 
4,914

Stock-based compensation expenses
 
20,551

 
17,455

 
37,654

 
33,914

Acquisition expenses, net
 
2,508

 
72

 
6,376

 
2,387

Restructuring expenses
 
1,640

 
906

 
3,077

 
1,996

Other adjustments
 
5,732

 
625

 
7,791

 
1,220

Adjusted EBITDA
 
$
73,835

 
$
70,742

 
$
143,962

 
$
125,056

   As a percentage of non-GAAP revenue
 
22.3
 %
 
22.9
 %
 
22.0
 %
 
20.8
 %
 
 
 
 
 
 
 
 
 
Table of Reconciliation from Gross Debt to Net Debt
 
 
 
 
July 31,
 2019
 
January 31,
 2019
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
 
 
 
 
 
$
4,263

 
$
4,343

Long-term debt
 
 
 
 
 
782,589

 
777,785

Unamortized debt discounts and issuance costs
 
 
 
 
 
29,661

 
36,589

Gross debt
 
 
 

 
816,513

 
818,717

Less:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
388,546

 
369,975




    

Restricted cash and cash equivalents, and restricted bank time deposits
 
 
 
 
 
24,239

 
42,262

Short-term investments
 
 
 
 
 
25,590

 
32,329

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

 

 
378,138

 
374,151

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

 
 
 
27,257

 
23,193

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

 

 
$
350,881

 
$
350,958

 
 
 
 
 
 
 
 
 
 (1) For the three months ended July 31, 2019, non-GAAP other expense, net of $3.8 million was comprised of $5.4 million of interest and other expense, net of $1.6 million of foreign exchange gains primarily related to balance sheet translations.
 
 
 
 
 
 
 
 
 
 (2) Adjusted for financing fee amortization.



    

Table 4
VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
 
 
July 31,
 
January 31,
(in thousands, except share and per share data)
 
2019
 
2019
Assets
 
 

 
 

Current Assets:
 
 

 
 

Cash and cash equivalents
 
$
388,546

 
$
369,975

Restricted cash and cash equivalents, and restricted bank time deposits
 
24,239

 
42,262

Short-term investments
 
25,590

 
32,329

Accounts receivable, net of allowance for doubtful accounts of $5.5 million and $3.8 million, respectively
 
349,161

 
375,663

Contract assets
 
55,239

 
63,389

Inventories
 
28,459

 
24,952

Prepaid expenses and other current assets
 
89,556

 
97,776

  Total current assets
 
960,790

 
1,006,346

Property and equipment, net
 
106,393

 
100,134

Operating lease right-of-use assets
 
100,924

 

Goodwill
 
1,430,082

 
1,417,481

Intangible assets, net
 
215,332

 
225,183

Other assets
 
118,185

 
117,883

  Total assets
 
$
2,931,706

 
$
2,867,027

 
 
 
 
 
Liabilities and Stockholders' Equity
 
 

 
 

Current Liabilities:
 
 

 
 

Accounts payable
 
$
73,021

 
$
71,621

Accrued expenses and other current liabilities
 
218,533

 
212,824

Contract liabilities
 
347,226

 
377,376

  Total current liabilities
 
638,780

 
661,821

Long-term debt
 
782,589

 
777,785

Long-term contract liabilities
 
34,967

 
30,094

Operating lease liabilities
 
93,137

 

Other liabilities
 
94,255

 
136,523

  Total liabilities
 
1,643,728

 
1,606,223

Commitments and Contingencies
 
 
 
 
Stockholders' Equity:
 
 

 
 

Preferred stock - $0.001 par value; authorized 2,207,000 shares at July 31, 2019 and January 31, 2019, respectively; none issued.
 

 

Common stock - $0.001 par value; authorized 120,000,000 shares. Issued 68,444,000 and 66,998,000 shares; outstanding 66,771,000 and 65,333,000 shares at July 31, 2019 and January 31, 2019, respectively.
 
68

 
67

Additional paid-in capital
 
1,628,665

 
1,586,266

Treasury stock, at cost - 1,673,000 and 1,665,000 shares at July 31, 2019 and January 31, 2019, respectively.
 
(58,072
)
 
(57,598
)
Accumulated deficit
 
(122,140
)
 
(134,274
)
Accumulated other comprehensive loss
 
(175,197
)
 
(145,225
)
Total Verint Systems Inc. stockholders' equity
 
1,273,324

 
1,249,236

Noncontrolling interests
 
14,654

 
11,568

  Total stockholders' equity
 
1,287,978

 
1,260,804

  Total liabilities and stockholders' equity
 
$
2,931,706

 
$
2,867,027





    

Table 5
VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
 
 
Six Months Ended
July 31,
(in thousands) 
 
2019
 
2018
Cash flows from operating activities:
 
 

 
 

Net income
 
$
16,032

 
$
21,699

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

 
 

Depreciation and amortization
 
44,766

 
44,935

Stock-based compensation, excluding cash-settled awards
 
37,605

 
33,871

Amortization of discount on convertible notes
 
6,163

 
5,848

Non-cash gains on derivative financial instruments, net
 
(728
)
 
(2,709
)
Other non-cash items, net
 
3,305

 
(2,606
)
Changes in operating assets and liabilities, net of effects of business combinations:
 
 

 
 

Accounts receivable
 
23,439

 
45,515

Contract assets
 
7,884

 
(12,217
)
Inventories
 
(4,436
)
 
175

Prepaid expenses and other assets
 
8,169

 
(2,984
)
Accounts payable and accrued expenses
 
(8,291
)
 
(14,736
)
Contract liabilities
 
(24,460
)
 
(5,695
)
Other, net
 
(11,169
)
 
(6,943
)
Net cash provided by operating activities
 
98,279

 
104,153

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Cash paid for business combinations, including adjustments, net of cash acquired
 
(49,258
)
 
(27,442
)
Purchases of property and equipment
 
(17,718
)
 
(17,897
)
Purchases of investments
 
(20,101
)
 
(9,261
)
Maturities and sales of investments
 
23,836

 
7,152

Cash paid for capitalized software development costs
 
(6,581
)
 
(2,902
)
Change in restricted bank time deposits, and other investing activities, net
 
3,807

 
(22,079
)
Net cash used in investing activities
 
(66,015
)
 
(72,429
)
 
 
 
 
 
Cash flows from financing activities:
 
 

 
 

Repayments of borrowings and other financing obligations
 
(3,194
)
 
(2,728
)
Payments of debt-related costs
 
(212
)
 
(206
)
Purchases of treasury stock
 
(474
)
 
(173
)
Dividends or distributions paid to noncontrolling interests
 
(655
)
 
(760
)
Payments of deferred purchase price and contingent consideration for business combinations (financing portion)
 
(22,601
)
 
(9,351
)
Other financing activities, net
 

 
(433
)
Net cash used in financing activities
 
(27,136
)
 
(13,651
)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents
 
(1,890
)
 
(3,578
)
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents
 
3,238

 
14,495

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period
 
412,699

 
398,210

Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period
 
$
415,937

 
$
412,705

 
 
 
 
 
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
 
$
388,546

 
$
375,077

Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits
 
23,702

 
35,476

Restricted cash and cash equivalents included in other assets
 
3,689

 
2,152

Total cash, cash equivalents, restricted cash, and restricted cash equivalents
 
$
415,937

 
$
412,705





    

Table 6
VERINT SYSTEMS INC. AND SUBSIDIARIES
Calculation of Change in Revenue on a Constant Currency Basis
(Unaudited)




 
 

GAAP Revenue
 

Non-GAAP Revenue
(in thousands, except percentages)
 
Three Months
 Ended
Six Months
 Ended
 
Three Months
 Ended
Six Months
 Ended
Total Revenue
 
 
 
 
 
 
Revenue for the three and six months ended July 31, 2018
 
$
306,327

$
595,534

 
$
308,478

$
600,448

Revenue for the three and six months ended July 31, 2019
 
$
324,305

$
639,564

 
$
331,317

$
655,475

Revenue for the three and six months ended July 31, 2019 at constant currency(1)
 
$
328,000

$
649,000

 
$
335,000

$
664,000

Reported period-over-period revenue growth
 
5.9
%
7.4
%
 
7.4
%
9.2
%
% impact from change in foreign currency exchange rates
 
1.2
%
1.6
%
 
1.2
%
1.4
%
Constant currency period-over-period revenue growth
 
7.1
%
9.0
%
 
8.6
%
10.6
%
 
 
 
 
 
 
 
Customer Engagement
 
 
 
 
 
 
Revenue for the three and six months ended July 31, 2018
 
$
200,807

$
387,263

 
$
202,933

$
392,108

Revenue for the three and six months ended July 31, 2019
 
$
211,436

$
418,531

 
$
218,424

$
434,291

Revenue for the three and six months ended July 31, 2019 at constant currency(1)
 
$
214,000

$
425,000

 
$
221,000

$
440,000

Reported period-over-period revenue growth
 
5.3
%
8.1
%
 
7.6
%
10.8
%
% impact from change in foreign currency exchange rates
 
1.3
%
1.6
%
 
1.3
%
1.4
%
Constant currency period-over-period revenue growth
 
6.6
%
9.7
%
 
8.9
%
12.2
%
 
 
 
 
 
 
 
Cyber Intelligence
 
 
 
 
 
 
Revenue for the three and six months ended July 31, 2018
 
$
105,520

$
208,271

 
$
105,545

$
208,340

Revenue for the three and six months ended July 31, 2019
 
$
112,869

$
221,033

 
$
112,893

$
221,184

Revenue for the three and six months ended July 31, 2019 at constant currency(1)
 
$
114,000

$
224,000

 
$
114,000

$
224,000

Reported period-over-period revenue growth
 
7.0
%
6.1
%
 
7.0
%
6.2
%
% impact from change in foreign currency exchange rates
 
1.0
%
1.5
%
 
1.0
%
1.3
%
Constant currency period-over-period revenue growth
 
8.0
%
7.6
%
 
8.0
%
7.5
%


(1) Revenue for the three and six months ended July 31, 2019 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 six months ended July 31, 2018 rather than actual current-period foreign currency exchange rates.


For further information see "Supplemental Information About Constant Currency" at the end of this press release.







    

Table 7
VERINT SYSTEMS INC. AND SUBSIDIARIES
GAAP to Non-GAAP Customer Engagement Cloud Revenue, Recurring Revenue,
and Nonrecurring Revenue
(Unaudited)

 
 
Three Months Ended
July 31,
 
Six Months Ended
July 31,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Table of Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer Engagement
 
 
 
 
 
 
 
 
Cloud revenue - GAAP
 
$
47,813

 
$
36,658

 
$
94,898

 
$
69,463

Estimated revenue adjustments
 
6,918

 
2,056

 
15,562

 
4,573

Cloud revenue - non-GAAP
 
$
54,731

 
$
38,714

 
$
110,460

 
$
74,036

 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Recurring Revenue to Non-GAAP Recurring Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer Engagement
 
 
 
 
 
 
 
 
Recurring revenue - GAAP
 
$
129,332

 
$
117,759

 
$
252,690

 
$
225,589

   As a percentage of GAAP revenue
 
61.2
%
 
58.6
%
 
60.4
%
 
58.3
%
Estimated revenue adjustments
 
6,988

 
2,126

 
15,760

 
4,845

Recurring revenue - non-GAAP
 
$
136,320

 
$
119,885

 
$
268,450

 
$
230,434

   As a percentage of non-GAAP revenue
 
62.4
%
 
59.1
%
 
61.8
%
 
58.8
%
 
 
 
 
 
 
 
 
 
Table of Reconciliation from GAAP Nonrecurring Revenue to Non-GAAP Nonrecurring Revenue
 
 
 
 
 
 
 
 


 
 
 
 
Customer Engagement
 
 
 
 
 
 
 
 
Nonrecurring revenue - GAAP & non-GAAP
 
$
82,104

 
$
83,048

 
$
165,841

 
$
161,674




 





    

Table 8
VERINT SYSTEMS INC. AND SUBSIDIARIES
Estimated GAAP and Non-GAAP Fully Allocated Gross Margins
(Unaudited)

 
 
Three Months Ended
July 31,
 
 
2019
 
2018
(in thousands)
 
Customer Engagement
 
Cyber Intelligence
 
Consolidated
 
Customer Engagement
 
Cyber Intelligence
 
Consolidated
GAAP product revenue
 
$
54,468

 
$
55,515

 
$
109,983

 
$
55,528

 
$
54,514

 
$
110,042

GAAP service revenue
 
156,968

 
57,354

 
214,322

 
145,279

 
51,006

 
196,285

Total GAAP revenue
 
211,436

 
112,869

 
324,305

 
200,807

 
105,520

 
306,327

 
 
 
 
 
 
 
 
 
 
 
 
 
Products costs
 
8,852

 
18,649

 
27,501

 
8,523

 
23,373

 
31,896

Service expenses
 
57,165

 
18,560

 
75,725

 
52,989

 
17,604

 
70,593

Amortization of acquired technology
 
5,224

 
363

 
5,587

 
4,104

 
1,416

 
5,520

Stock-based compensation expenses (1)
 
1,570

 
464

 
2,034

 
1,574

 
371

 
1,945

Shared support expenses allocation (2)
 
3,647

 
1,947

 
5,594

 
2,199

 
1,154

 
3,353

Total GAAP cost of revenue
 
76,458

 
39,983

 
116,441

 
69,389

 
43,918

 
113,307

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
134,978

 
$
72,886

 
$
207,864

 
$
131,418

 
$
61,602

 
$
193,020

    GAAP gross margin
 
63.8
%
 
64.6
%
 
64.1
%
 
65.4
%
 
58.4
%
 
63.0
%
Revenue adjustments
 
6,988

 
24

 
7,012

 
2,126

 
25

 
2,151

Amortization of acquired technology
 
5,224

 
363

 
5,587

 
4,104

 
1,416

 
5,520

Stock-based compensation expenses (1)
 
1,570

 
464

 
2,034

 
1,574

 
371

 
1,945

Acquisition expenses, net (3)
 
3

 
2

 
5

 
(25
)
 
(13
)
 
(38
)
Restructuring expenses (3)
 
688

 
367

 
1,055

 
470

 
247

 
717

Non-GAAP gross profit
 
$
149,451

 
$
74,106

 
$
223,557

 
$
139,667

 
$
63,648

 
$
203,315

    Non-GAAP gross margin
 
68.4
%
 
65.6
%
 
67.5
%
 
68.8
%
 
60.3
%
 
65.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
July 31,
 
 
2019
 
2018
(in thousands)
 
Customer Engagement
 
Cyber Intelligence
 
Consolidated
 
Customer Engagement
 
Cyber Intelligence
 
Consolidated
GAAP product revenue
 
$
108,470

 
$
105,737

 
$
214,207

 
$
103,892

 
$
112,014

 
$
215,906

GAAP service revenue
 
310,061

 
115,296

 
425,357

 
283,371

 
96,257

 
379,628

Total GAAP revenue
 
418,531

 
221,033

 
639,564

 
387,263

 
208,271

 
595,534

 
 
 
 
 
 
 
 
 
 
 
 
 
Products costs
 
17,314

 
36,499

 
53,813

 
17,322

 
48,385

 
65,707

Service expenses
 
114,688

 
37,074

 
151,762

 
104,510

 
34,291

 
138,801

Amortization of acquired technology
 
10,612

 
1,682

 
12,294

 
8,369

 
4,577

 
12,946

Stock-based compensation expenses (1)
 
2,654

 
784

 
3,438

 
2,258

 
533

 
2,791

Shared support expenses allocation (2)
 
6,078

 
3,244

 
9,322

 
4,693

 
2,461

 
7,154

Total GAAP cost of revenue
 
151,346

 
79,283

 
230,629

 
137,152

 
90,247

 
227,399

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
267,185

 
$
141,750

 
$
408,935

 
$
250,111

 
$
118,024

 
$
368,135

    GAAP gross margin
 
63.8
%
 
64.1
%
 
63.9
%
 
64.6
%
 
56.7
%
 
61.8
%
Revenue adjustments
 
15,760

 
151

 
15,911

 
4,845

 
69

 
4,914

Amortization of acquired technology
 
10,612

 
1,682

 
12,294

 
8,369

 
4,577

 
12,946

Stock-based compensation expenses (1)
 
2,654

 
784

 
3,438

 
2,258

 
533

 
2,791

Acquisition expenses, net (3)
 
13

 
7

 
20

 
(14
)
 
(7
)
 
(21
)
Restructuring expenses (3)
 
981

 
523

 
1,504

 
708

 
372

 
1,080

Non-GAAP gross profit
 
$
297,205

 
$
144,897

 
$
442,102

 
$
266,277

 
$
123,568

 
$
389,845

    Non-GAAP gross margin
 
68.4
%
 
65.5
%
 
67.4
%
 
67.9
%
 
59.3
%
 
64.9
%