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| 8-K - 8-K - VERINT SYSTEMS INC | october3120148-kearningspr.htm |
Press Release
Contacts:
Investor Relations
Alan Roden
Verint Systems Inc.
(631) 962-9304
alan.roden@verint.com
Verint Announces Third Quarter Results
Conference Call to Discuss Selected Financial Information and Outlook to be Held Today at 4:30 p.m. ET
MELVILLE, N.Y., December 3, 2014 - Verint® Systems Inc. (NASDAQ: VRNT), a global leader in Actionable Intelligence® solutions and value-added services, today announced results for the three and nine months ended October 31, 2014.
“We are pleased with our strong third quarter results which reflect our focus on innovation and our expanding portfolio of actionable intelligence solutions for a smarter world. Our third quarter performance follows the strong execution we had in our first two quarters, and we believe we are well positioned to finish the year strong, and to sustain long-term growth,” said Dan Bodner, CEO and President.
Financial Highlights
Below is selected unaudited financial information for the three and nine months ended October 31, 2014 prepared in accordance with generally accepted accounting principles (“GAAP”) and not in accordance with GAAP (“non-GAAP”).
Three Months Ended October 31, 2014 - GAAP | Three Months Ended October 31, 2014 - Non-GAAP | |||
Revenue: $282.6 million | Revenue: $288.5 million | |||
Operating Income: $24.4 million | Operating Income: $64.7 million | |||
Diluted EPS: $0.17 | Diluted EPS: $0.84 | |||
Nine Months Ended October 31, 2014 - GAAP | Nine Months Ended October 31, 2014 - Non-GAAP | |||
Revenue: $816.8 million | Revenue: $842.6 million | |||
Operating Income: $36.8 million | Operating Income: $174.3 million | |||
Diluted EPS: $0.45 | Diluted EPS: $2.28 | |||
Financial Outlook
Below is Verint’s non-GAAP outlook for the year ending January 31, 2015.
• | We are slightly increasing the mid-point of our revenue outlook, narrowing our revenue range to $1.140 billion to $1.165 billion. |
• | Our guidance for diluted earnings per share is unchanged at a range of $3.35 to $3.50. |
Below is Verint’s non-GAAP preliminary outlook for the year ending January 31, 2016.
• | We are introducing a revenue range of $1.225 billion to $1.275 billion. |
• | We are introducing a diluted earnings per share range of $3.65 to $3.85. |
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, 2014 and outlook for the year ending January 31, 2015. 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 1-877-299-4454 (United States and Canada) and 1-617-597-5447 (international) and the passcode is 92895301. Please dial in 5-10 minutes prior to the scheduled start time.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of non-GAAP financial measures presented for completed periods to the most directly comparable financial measures prepared in accordance with GAAP, please see Tables 2 and 3 as well as "Supplemental Information About Non-GAAP Financial Measures" at the end of this press release.
Our non-GAAP outlook does not include the potential impact of any business acquisitions that may occur after the date hereof, and reflects foreign currency exchange rates approximately consistent with current rates.
We are not providing a quantitative reconciliation of our non-GAAP outlook to the corresponding GAAP information because the GAAP measures that we exclude from our non-GAAP outlook, other than those described below, are difficult to predict and are primarily dependent on future uncertainties. The more significant GAAP measures excluded from our non-GAAP outlook for which we do not prepare a reconcilable GAAP forecast include revenue adjustments related to acquisitions, stock-based compensation, and income taxes.
Our non-GAAP outlook for the year ending January 31, 2015 excludes the following known GAAP measures:
• | Amortization of intangible assets - approximately $78 million; |
• | Amortization of discount on convertible notes - approximately $6 million; and |
• | Losses on early retirements of debt - approximately $13 million. |
Our non-GAAP outlook for the year ending January 31, 2016 excludes the following known GAAP measures:
• | Amortization of intangible assets - approximately $77 million; and |
• | Amortization of discount on convertible notes - approximately $10 million. |
About Verint Systems Inc.
Verint® (NASDAQ: VRNT) is a global leader in Actionable Intelligence® solutions. Actionable Intelligence is a necessity in a dynamic world of massive information growth because it empowers organizations with crucial insights and enables decision makers to anticipate, respond, and take action. Our Actionable Intelligence solutions help organizations address three important challenges: Customer Engagement Optimization; Security Intelligence; and Fraud, Risk, and Compliance. Today, more than 10,000 organizations in over 180 countries, including over 80 percent of the Fortune 100, use Verint solutions to improve enterprise performance and make the world a safer place. Learn more 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 and evolving industry standards in our product offerings and to successfully develop, launch, and drive demand for new and enhanced, innovative, high-quality products that meet or exceed customer needs; risks due to aggressive competition in all of our markets, including with respect to maintaining margins and sufficient levels of investment in our business; risks created by the continued consolidation of our competitors or the introduction of large competitors in our markets with greater resources than we have; risks associated with our ability to successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with capital constraints, valuations, costs and expenses, maintaining profitability levels, management distraction, post-acquisition integration activities, and potential asset impairments; risks relating to our ability to effectively and efficiently execute on our growth strategy, including managing investments in our business and operations and enhancing and securing our internal and external operations; risks associated with our ability to effectively and efficiently allocate limited financial and human resources to business, development, strategic, or other opportunities that may not come to fruition or produce satisfactory returns; risks that we may be unable to maintain and enhance relationships with key resellers, partners, and systems integrators; risks associated with the mishandling or perceived mishandling of sensitive or confidential information, security lapses, or with information technology system failures or disruptions; risks associated with our significant international operations, including, among others, in Israel, Europe, and Asia, exposure to regions subject to political or economic instability, and fluctuations in foreign exchange rates; risks associated with a significant amount of our business coming from domestic and foreign government customers, including the ability to maintain security clearances for certain projects; risks associated with complex and changing local and foreign regulatory environments in the jurisdictions in which we operate; risks associated with our ability to recruit and retain qualified personnel in regions in which we operate; challenges associated with selling sophisticated solutions, long sales cycles, and emphasis on larger transactions, including in assisting customers in realizing the benefits of our solutions and in accurately forecasting revenue and expenses and in maintaining profitability; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property or claim infringement on their intellectual property rights; risks that our products may contain defects, which could expose us to substantial liability; risks associated with our dependence on a limited number of suppliers or original equipment manufacturers for certain components of our products, including companies that may compete with us or work with our competitors; 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, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings; risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of CTI's former subsidiary, Comverse, Inc., being unwilling or unable to provide us with certain indemnities or transition services to which we are entitled; risks relating to our ability to successfully implement and maintain adequate systems and internal controls for our current and future operations and reporting needs and related risks of financial statement omissions, misstatements, restatements, or filing delays; and risks associated with changing tax rates, tax laws and regulations, and the continuing availability of expected tax benefits, including those expected as a result of acquisitions. 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, 2014, our Quarterly Report on Form 10-Q for the quarter ended October 31, 2014, when filed, and other filings we make with the SEC.
VERINT, ACTIONABLE INTELLIGENCE, MAKE BIG DATA ACTIONABLE, CUSTOMER-INSPIRED EXCELLENCE, INTELLIGENCE IN ACTION, IMPACT 360, WITNESS, VERINT VERIFIED, KANA, LAGAN, VOVICI, GMT, VICTRIO, AUDIOLOG, ENTERPRISE INTELLIGENCE SOLUTIONS, SECURITY INTELLIGENCE SOLUTIONS, VOICE OF THE CUSTOMER ANALYTICS, NEXTIVA, EDGEVR, RELIANT, VANTAGE, STAR-GATE, ENGAGE, CYBERVISION, FOCALINFO, SUNTECH, and VIGIA are trademarks or registered trademarks of Verint Systems Inc. or its subsidiaries. Other trademarks mentioned are the property of their respective owners.
Table 1
VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
(in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenue: | ||||||||||||||||
Product | $ | 118,346 | $ | 101,974 | $ | 339,657 | $ | 287,189 | ||||||||
Service and support | 164,228 | 122,340 | 477,126 | 364,358 | ||||||||||||
Total revenue | 282,574 | 224,314 | 816,783 | 651,547 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Product | 32,925 | 33,322 | 104,524 | 94,584 | ||||||||||||
Service and support | 60,082 | 36,900 | 178,939 | 115,568 | ||||||||||||
Amortization of acquired technology and backlog | 8,096 | 1,935 | 23,018 | 7,920 | ||||||||||||
Total cost of revenue | 101,103 | 72,157 | 306,481 | 218,072 | ||||||||||||
Gross profit | 181,471 | 152,157 | 510,302 | 433,475 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development, net | 43,008 | 30,704 | 128,408 | 91,935 | ||||||||||||
Selling, general and administrative | 102,738 | 77,472 | 310,946 | 240,540 | ||||||||||||
Amortization of other acquired intangible assets | 11,367 | 6,150 | 34,124 | 18,193 | ||||||||||||
Total operating expenses | 157,113 | 114,326 | 473,478 | 350,668 | ||||||||||||
Operating income | 24,358 | 37,831 | 36,824 | 82,807 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest income | 208 | 242 | 683 | 563 | ||||||||||||
Interest expense | (8,494 | ) | (7,416 | ) | (28,103 | ) | (21,987 | ) | ||||||||
Losses on early retirements of debt | — | — | (12,546 | ) | (9,879 | ) | ||||||||||
Other income (expense), net | 167 | (646 | ) | 1,266 | (5,013 | ) | ||||||||||
Total other expense, net | (8,119 | ) | (7,820 | ) | (38,700 | ) | (36,316 | ) | ||||||||
Income (loss) before provision for (benefit from) income taxes | 16,239 | 30,011 | (1,876 | ) | 46,491 | |||||||||||
Provision for (benefit from) income taxes | 4,766 | 5,957 | (31,788 | ) | 11,869 | |||||||||||
Net income | 11,473 | 24,054 | 29,912 | 34,622 | ||||||||||||
Net income attributable to noncontrolling interest | 803 | 1,567 | 3,564 | 3,752 | ||||||||||||
Net income attributable to Verint Systems Inc. | 10,670 | 22,487 | 26,348 | 30,870 | ||||||||||||
Dividends on preferred stock | — | — | — | (174 | ) | |||||||||||
Net income attributable to Verint Systems Inc. common shares | $ | 10,670 | $ | 22,487 | $ | 26,348 | $ | 30,696 | ||||||||
Net income per common share attributable to Verint Systems Inc.: | ||||||||||||||||
Basic | $ | 0.18 | $ | 0.42 | $ | 0.46 | $ | 0.58 | ||||||||
Diluted | $ | 0.17 | $ | 0.42 | $ | 0.45 | $ | 0.57 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 60,644 | 53,374 | 57,222 | 52,781 | ||||||||||||
Diluted | 61,492 | 53,946 | 58,332 | 53,561 | ||||||||||||
Table 2
VERINT SYSTEMS INC. AND SUBSIDIARIES
Segment Revenue
(Unaudited)
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
GAAP Revenue By Segment: | ||||||||||||||||
Enterprise Intelligence | $ | 165,526 | $ | 125,897 | $ | 481,119 | $ | 364,693 | ||||||||
Communications Intelligence | 93,040 | 71,130 | 256,165 | 198,633 | ||||||||||||
Video Intelligence | 24,008 | 27,287 | 79,499 | 88,221 | ||||||||||||
GAAP Total Revenue | $ | 282,574 | $ | 224,314 | $ | 816,783 | $ | 651,547 | ||||||||
Revenue Adjustments Related to Acquisitions: | ||||||||||||||||
Enterprise Intelligence | $ | 5,744 | $ | 323 | $ | 25,263 | $ | 692 | ||||||||
Communications Intelligence | 201 | 119 | 523 | 530 | ||||||||||||
Video Intelligence | — | — | — | 167 | ||||||||||||
Total Revenue Adjustments Related to Acquisitions | $ | 5,945 | $ | 442 | $ | 25,786 | $ | 1,389 | ||||||||
Non-GAAP Revenue By Segment: | ||||||||||||||||
Enterprise Intelligence | $ | 171,270 | $ | 126,220 | $ | 506,382 | $ | 365,385 | ||||||||
Communications Intelligence | 93,241 | 71,249 | 256,688 | 199,163 | ||||||||||||
Video Intelligence | 24,008 | 27,287 | 79,499 | 88,388 | ||||||||||||
Non-GAAP Total Revenue | $ | 288,519 | $ | 224,756 | $ | 842,569 | $ | 652,936 | ||||||||
Table 3
VERINT SYSTEMS INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Results
(Unaudited)
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
(in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Table of Reconciliation from GAAP Gross Profit to Non-GAAP Gross Profit | ||||||||||||||||
GAAP gross profit | $ | 181,471 | $ | 152,157 | $ | 510,302 | $ | 433,475 | ||||||||
Revenue adjustments related to acquisitions | 5,945 | 442 | 25,786 | 1,389 | ||||||||||||
Amortization of acquired technology and backlog | 8,096 | 1,935 | 23,018 | 7,920 | ||||||||||||
Stock-based compensation expenses | 1,165 | 701 | 3,491 | 1,780 | ||||||||||||
M&A and other adjustments | (1,078 | ) | 6 | 3,587 | 384 | |||||||||||
Non-GAAP gross profit | $ | 195,599 | $ | 155,241 | $ | 566,184 | $ | 444,948 | ||||||||
Table of Reconciliation from GAAP Operating Income to Non-GAAP Operating Income and Non-GAAP EBITDA | ||||||||||||||||
GAAP operating income | $ | 24,358 | $ | 37,831 | $ | 36,824 | $ | 82,807 | ||||||||
Revenue adjustments related to acquisitions | 5,945 | 442 | 25,786 | 1,389 | ||||||||||||
Amortization of acquired technology and backlog | 8,096 | 1,935 | 23,018 | 7,920 | ||||||||||||
Amortization of other acquired intangible assets | 11,367 | 6,150 | 34,124 | 18,193 | ||||||||||||
Stock-based compensation expenses | 12,626 | 9,729 | 38,553 | 25,154 | ||||||||||||
M&A and other adjustments | 2,295 | 312 | 15,960 | 9,060 | ||||||||||||
Non-GAAP operating income | 64,687 | 56,399 | 174,265 | 144,523 | ||||||||||||
GAAP depreciation and amortization (1) | 24,323 | 12,407 | 72,063 | 38,556 | ||||||||||||
Amortization of acquired technology and backlog | (8,096 | ) | (1,935 | ) | (23,018 | ) | (7,920 | ) | ||||||||
Amortization of other acquired intangible assets | (11,367 | ) | (6,150 | ) | (34,124 | ) | (18,193 | ) | ||||||||
Non-GAAP depreciation and amortization | 4,860 | 4,322 | 14,921 | 12,443 | ||||||||||||
Non-GAAP EBITDA | $ | 69,547 | $ | 60,721 | $ | 189,186 | $ | 156,966 | ||||||||
Table of Reconciliation from GAAP Other Expense, Net to Non-GAAP Other Expense, Net | ||||||||||||||||
GAAP other expense, net | $ | (8,119 | ) | $ | (7,820 | ) | $ | (38,700 | ) | $ | (36,316 | ) | ||||
Losses on early retirements of debt | — | — | 12,546 | 9,879 | ||||||||||||
Unrealized (gains) losses on derivatives, net | (1,562 | ) | 585 | (1,742 | ) | 249 | ||||||||||
Amortization of convertible note discount | 2,417 | — | 3,565 | — | ||||||||||||
M&A and other adjustments | (154 | ) | 347 | (79 | ) | 1,644 | ||||||||||
Non-GAAP other expense, net | $ | (7,418 | ) | $ | (6,888 | ) | $ | (24,410 | ) | $ | (24,544 | ) | ||||
Table of Reconciliation from GAAP Provision for (Benefit from) Income Taxes to Non-GAAP Provision for Income Taxes | ||||||||||||||||
GAAP provision for (benefit from) income taxes | $ | 4,766 | $ | 5,957 | $ | (31,788 | ) | $ | 11,869 | |||||||
Non-cash tax adjustments | (24 | ) | (1,140 | ) | 45,113 | 478 | ||||||||||
Non-GAAP provision for income taxes | $ | 4,742 | $ | 4,817 | $ | 13,325 | $ | 12,347 | ||||||||
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. | $ | 10,670 | $ | 22,487 | $ | 26,348 | $ | 30,870 | ||||||||
Revenue adjustments related to acquisitions | 5,945 | 442 | 25,786 | 1,389 | ||||||||||||
Amortization of acquired technology and backlog | 8,096 | 1,935 | 23,018 | 7,920 | ||||||||||||
Amortization of other acquired intangible assets | 11,367 | 6,150 | 34,124 | 18,193 | ||||||||||||
Stock-based compensation expenses | 12,626 | 9,729 | 38,553 | 25,154 | ||||||||||||
M&A and other adjustments | 2,141 | 659 | 15,881 | 10,704 | ||||||||||||
Losses on early retirements of debt | — | — | 12,546 | 9,879 | ||||||||||||
Unrealized (gains) losses on derivatives, net | (1,562 | ) | 585 | (1,742 | ) | 249 | ||||||||||
Amortization of convertible note discount | 2,417 | — | 3,565 | — | ||||||||||||
Non-cash tax adjustments | 24 | 1,140 | (45,113 | ) | (478 | ) | ||||||||||
Total GAAP net income adjustments | 41,054 | 20,640 | 106,618 | 73,010 | ||||||||||||
Non-GAAP net income attributable to Verint Systems Inc. | $ | 51,724 | $ | 43,127 | $ | 132,966 | $ | 103,880 | ||||||||
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 | $ | 10,670 | $ | 22,487 | $ | 26,348 | $ | 30,696 | ||||||||
Total GAAP net income adjustments | 41,054 | 20,640 | 106,618 | 73,010 | ||||||||||||
Non-GAAP net income attributable to Verint Systems Inc. common shares | $ | 51,724 | $ | 43,127 | $ | 132,966 | $ | 103,706 | ||||||||
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. | $ | 0.17 | $ | 0.42 | $ | 0.45 | $ | 0.57 | ||||||||
Non-GAAP diluted net income per common share attributable to Verint Systems Inc. | $ | 0.84 | $ | 0.80 | $ | 2.28 | $ | 1.93 | ||||||||
Shares used in computing GAAP diluted net income per common share | 61,492 | 53,946 | 58,332 | 53,561 | ||||||||||||
Shares used in computing non-GAAP diluted net income per common share | 61,492 | 53,946 | 58,332 | 53,725 | ||||||||||||
(1) Adjusted for financing fee amortization. | ||||||||||||||||
Table 4
VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
October 31, | January 31, | |||||||
(in thousands, except share and per share data) | 2014 | 2014 | ||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 192,335 | $ | 378,618 | ||||
Restricted cash and bank time deposits | 39,930 | 6,423 | ||||||
Short-term investments | 40,136 | 32,049 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1.1 million and $1.2 million, respectively | 252,003 | 194,312 | ||||||
Inventories | 21,502 | 10,693 | ||||||
Deferred cost of revenue | 11,149 | 10,818 | ||||||
Prepaid expenses and other current assets | 70,111 | 61,478 | ||||||
Total current assets | 627,166 | 694,391 | ||||||
Property and equipment, net | 59,541 | 40,145 | ||||||
Goodwill | 1,221,004 | 853,389 | ||||||
Intangible assets, net | 336,297 | 132,847 | ||||||
Capitalized software development costs, net | 9,031 | 8,483 | ||||||
Long-term deferred cost of revenue | 12,730 | 9,843 | ||||||
Other assets | 41,341 | 33,809 | ||||||
Total assets | $ | 2,307,110 | $ | 1,772,907 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 69,271 | $ | 65,656 | ||||
Accrued expenses and other current liabilities | 217,847 | 179,148 | ||||||
Current maturities of long-term debt | 36 | 6,555 | ||||||
Deferred revenue | 157,581 | 162,124 | ||||||
Total current liabilities | 444,735 | 413,483 | ||||||
Long-term debt | 734,316 | 635,830 | ||||||
Long-term deferred revenue | 13,680 | 13,661 | ||||||
Other liabilities | 93,917 | 76,815 | ||||||
Total liabilities | 1,286,648 | 1,139,789 | ||||||
Commitments and Contingencies | ||||||||
Stockholders' Equity: | ||||||||
Preferred Stock - $0.001 par value; authorized 2,207,000 shares at October 31, 2014 and January 31, 2014; none issued. | — | — | ||||||
Common stock - $0.001 par value; authorized 120,000,000 shares. Issued 61,055,000 and 53,907,000 shares; outstanding 60,707,000 and 53,605,000 shares at October 31, 2014 and January 31, 2014, respectively. | 61 | 54 | ||||||
Additional paid-in capital | 1,305,883 | 924,663 | ||||||
Treasury stock, at cost - 348,000 and 302,000 shares at October 31, 2014 and January 31, 2014, respectively. | (10,251 | ) | (8,013 | ) | ||||
Accumulated deficit | (223,657 | ) | (250,005 | ) | ||||
Accumulated other comprehensive loss | (61,209 | ) | (39,725 | ) | ||||
Total Verint Systems Inc. stockholders' equity | 1,010,827 | 626,974 | ||||||
Noncontrolling interest | 9,635 | 6,144 | ||||||
Total stockholders' equity | 1,020,462 | 633,118 | ||||||
Total liabilities and stockholders' equity | $ | 2,307,110 | $ | 1,772,907 | ||||
Table 5
VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended October 31, | ||||||||
(in thousands) | 2014 | 2013 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 29,912 | $ | 34,622 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 74,298 | 40,230 | ||||||
Stock-based compensation - equity portion | 35,048 | 22,006 | ||||||
Amortization of discount on convertible notes | 3,565 | — | ||||||
Reduction of valuation allowance resulting from acquisition of KANA | (45,171 | ) | — | |||||
Non-cash (gains) losses on derivative financial instruments, net | (1,666 | ) | 44 | |||||
Losses on early retirements of debt | 12,546 | 9,879 | ||||||
Other non-cash items, net | 8,387 | 1,783 | ||||||
Changes in operating assets and liabilities, net of effects of business combinations: | ||||||||
Accounts receivable | (41,717 | ) | (8,820 | ) | ||||
Inventories | (7,801 | ) | (861 | ) | ||||
Deferred cost of revenue | (3,177 | ) | (1,951 | ) | ||||
Prepaid expenses and other assets | 13,111 | 24,822 | ||||||
Accounts payable, accrued expenses, and other current liabilities | 26,472 | 1,607 | ||||||
Deferred revenue | (10,903 | ) | (7,918 | ) | ||||
Other, net | (2,663 | ) | (424 | ) | ||||
Net cash provided by operating activities | 90,241 | 115,019 | ||||||
Cash flows from investing activities: | ||||||||
Cash paid for business combinations, including adjustments, net of cash acquired | (602,943 | ) | (10,457 | ) | ||||
Purchases of property and equipment | (15,831 | ) | (9,439 | ) | ||||
Purchases of short-term investments | (21,175 | ) | (195,509 | ) | ||||
Sales and maturities of short-term investments | 11,363 | 70,000 | ||||||
Cash paid for capitalized software development costs | (4,510 | ) | (3,892 | ) | ||||
Change in restricted cash and bank time deposits, including long-term portion | (37,023 | ) | 5,935 | |||||
Other investing activities, net | (1,466 | ) | 205 | |||||
Net cash used in investing activities | (671,585 | ) | (143,157 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from borrowings, net of original issuance discounts | 1,526,750 | 646,750 | ||||||
Repayments of borrowings and other financing obligations | (1,361,777 | ) | (584,309 | ) | ||||
Proceeds from public issuance of common stock | 274,563 | — | ||||||
Proceeds from issuance of warrants | 45,188 | — | ||||||
Payments for convertible note hedges | (60,800 | ) | — | |||||
Payments of equity issuance, debt issuance and other debt-related costs | (29,164 | ) | (7,754 | ) | ||||
Proceeds from exercises of stock options | 13,081 | 6,432 | ||||||
Purchases of treasury stock | (2,238 | ) | — | |||||
Cash received in CTI Merger | — | 10,370 | ||||||
Payments of contingent consideration for business combinations (financing portion) | (8,684 | ) | (16,087 | ) | ||||
Net cash provided by financing activities | 396,919 | 55,402 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (1,858 | ) | 223 | |||||
Net (decrease) increase in cash and cash equivalents | (186,283 | ) | 27,487 | |||||
Cash and cash equivalents, beginning of period | 378,618 | 209,973 | ||||||
Cash and cash equivalents, end of period | $ | 192,335 | $ | 237,460 | ||||
Verint Systems Inc. and Subsidiaries
Supplemental Information About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. Tables 2 and 3 include a reconciliation of each non-GAAP financial measure for completed periods presented in this press release to the most directly comparable GAAP financial measure. Non-GAAP financial measures should not be considered in isolation or as a substitute for 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.
We believe that the non-GAAP financial measures we present provide meaningful supplemental information regarding our operating results primarily because they exclude certain non-cash charges or items that we do not believe are reflective of our ongoing operating results when budgeting, planning and forecasting, determining compensation, and when assessing the performance of our business with our individual operating segments or our senior management. We believe that these non-GAAP financial measures also facilitate the comparison by management and investors of results between periods and among our peer companies. However, those companies may calculate similar non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.
Adjustments to Non-GAAP Financial Measures
Revenue adjustments related to acquisitions. We exclude from our non-GAAP revenue the impact of fair value adjustments required under GAAP relating to acquired customer support contracts which would have otherwise been recognized on a standalone basis. We exclude these adjustments from our non-GAAP financial measures because these are not reflective of our ongoing operations.
Amortization of acquired intangible assets, including acquired technology and backlog. 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 and backlog, from our non-GAAP financial measures. These expenses are excluded from our non-GAAP financial measures because they are non-cash charges. In addition, these amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Thus, we also exclude these amounts to provide better comparability of pre- and post-acquisition operating results.
Stock-based compensation expenses. We exclude stock-based compensation expenses related to stock options, restricted stock awards and units, stock bonus plans and phantom stock from our non-GAAP financial measures. These expenses are excluded from our non-GAAP financial measures because they are primarily non-cash charges.
M&A and other adjustments. We exclude from our non-GAAP financial measures legal, other professional fees and certain other expenses associated with acquisitions, whether or not consummated, and certain extraordinary transactions, including reorganizations and restructurings. Also excluded are changes in the fair value of contingent consideration liabilities associated with business combinations. These expenses are excluded from our non-GAAP financial measures because we believe that they are not reflective of our ongoing operations.
Unrealized (gains) losses on derivatives, net. We exclude from our non-GAAP financial measures unrealized gains and losses on foreign currency derivatives not designated as hedges. These 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 and which we believe are not reflective of our ongoing operations.
Losses on early retirements of debt. We exclude from our non-GAAP financial measures losses on early retirements of debt attributable to refinancing or repaying our debt because we believe it is not reflective of our ongoing operations.
Amortization of convertible note discount. 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 non-convertible debt borrowing rate. As a result, for GAAP purposes, we are required to recognize imputed interest expense in amounts significantly in excess of the coupon rate on our $400.0 million of 1.50% convertible notes. The difference between the imputed interest expense and the coupon interest expense is excluded from our non-GAAP financial measures because we believe that this non-cash expense is not reflective of ongoing operations.
Non-cash tax adjustments. We exclude from our non-GAAP financial measures non-cash tax adjustments, which represent the difference between the amount of taxes we expect to pay related to current year income, and our GAAP tax provision on an annual basis. On a quarterly basis, this adjustment reflects our expected annual effective tax rate on a cash basis.