Press release

Verint Announces Third Quarter Results

0
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Verint® (Nasdaq: VRNT), The Customer Engagement Company™, today announced results for the three and nine months ended October 31, 2022 (FYE 2023). Revenue for the three months ended October 31, 2022 was $225 million on a GAAP basis representing 0.2% year-over-year growth and $226 million on a non-GAAP basis, representing (0.6)% year-over-year change and 2.2% year-over-year growth on a constant currency basis. Revenue for the nine months ended October 31, 2022 was $666 million on a GAAP basis, representing 4.0% year-over-year growth, and $668 million on a non-GAAP basis, representing 3.7% year-over-year growth and 6.0% year-over-year growth on a constant currency basis. For the three months ended October 31, 2022, net loss per share was $(0.02) on a GAAP basis and diluted EPS was $0.69 on a non-GAAP basis. For the nine months ended October 31, 2022, net loss per share was $(0.21) on a GAAP basis and diluted EPS was $1.77 on a non-GAAP basis.

Third Quarter Highlights

 

GAAP

Non-GAAP

 

Reported

CC

Reported

CC

CC Growth

Revenue

$225 million

$232 million

$226 million

$232 million

2%

SaaS Revenue

$116 million

$119 million

$116 million

$119 million

41%

Note: CC represents constant currency.

  • New SaaS ACV Growth: Up 51% year-over-year on a constant currency basis
  • Favorable Mix Shift: 88% of Software Revenue is Recurring (up from 80% last year)
  • Cloud Revenue: Up 35% year-over-year on a constant currency basis
  • New Customer Additions: Added 100+ new logos

“I am pleased to report another quarter with continued strong SaaS momentum across key metrics driven by brands looking to close the engagement capacity gap. We had many significant wins from existing and new customers and delivered strong SaaS Revenue growth and New SaaS ACV bookings growth with our bookings mix continuing to shift to SaaS. Revenue came in line with guidance with both gross margins and diluted EPS coming in strong ahead of our prior guidance”, said Dan Bodner, Verint CEO.

Year-to-Date Highlights

 

GAAP

Non-GAAP

 

Reported

CC

Reported

CC

CC Growth

Revenue

$666 million

$681 million

$668 million

$683 million

6%

SaaS Revenue

$313 million

$319 million

$315 million

$321 million

42%

Note: CC represents constant currency.

  • New SaaS ACV Growth: Up 25% year-over-year on a constant currency basis
  • Favorable Mix Shift: 85% of Software Revenue is Recurring (up from 82% last year)
  • Cloud Revenue: Up 34% year-over-year on a constant currency basis
  • New Customer Additions: Added 100+ new logos each quarter

Doug Robinson, Verint CFO, added, “Throughout this year we delivered strong SaaS metrics and are pleased with our cloud transition. We are also pleased with our ability to manage through the FX environment with a natural hedge on the bottom line. In Q3, we saw a change in behavior from our perpetual license customers and expect perpetual revenue to come in lower than our original outlook. Our current outlook reflects continued strong SaaS growth, including an acceleration in New SaaS ACV bookings in the second half of the year, as well as a continued perpetual revenue decline.”

Share Buyback Program

Verint today also announced that our Board of Directors has authorized a new share repurchase program whereby we may repurchase up to $200 million of common stock over the period from December 12, 2022 until January 31, 2025. We may utilize a number of different methods to effect the repurchases, including but not limited to, open market purchases and accelerated share repurchases, and some or all of the repurchases may be made through Rule 10b5-1 plans. The specific timing, price, and size of purchases will depend on prevailing stock prices, general market and economic conditions, and other considerations. The program may be extended, suspended, or discontinued at any time without prior notice and does not obligate us to acquire any particular amount of common stock.

Mr. Bodner continued, “Long term, we operate in a favorable market that supports sustainable SaaS growth. Our new $200 million share buyback program reflects the confidence we have in our long term opportunity.”

FYE 2023 Outlook

We are adjusting our non-GAAP annual outlook for the year ending January 31, 2023 reflecting current trends as follows:

  • Revenue: $900 million +/- 2%, reflecting 5% year-over-year growth on a constant currency basis
  • SaaS Revenue Growth: More than 35% year-over-year growth with cloud revenue growing more than 30% year-over-year both on a constant currency basis
  • Diluted EPS: $2.50 at the midpoint of our revenue guidance, reflecting 10% year-over-year growth

FYE 2024 Outlook

We are providing our non-GAAP annual outlook for the year ending January 31, 2024 reflecting the current macroeconomic environment as follows:

  • Revenue: $945 million +/- 2%, reflecting 6% year-over-year growth on a constant currency basis
  • SaaS Revenue Growth: Approximately 30% year-over-year growth on a constant currency basis
  • Diluted EPS: $2.70 at the midpoint of our revenue guidance, reflecting 8% year-over-year growth

Our non-GAAP outlook for the year ending January 31, 2023 excludes the following GAAP measure which we are able to quantify with reasonable certainty:

  • Amortization of intangible assets of approximately $39 million.

Our non-GAAP outlook for the year ending January 31, 2023 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 $2 million and $3 million.
  • Stock-based compensation expenses are expected to be between approximately $79 million and $82 million, assuming market prices for our common stock approximately consistent with current levels.
  • Costs associated with modifying our workplace in response to our decision to move to a hybrid work environment, including assumed lease terminations and abandonments, IT facilities and infrastructure costs, and other charges are expected to be between approximately $26 million and $29 million.

Our non-GAAP outlook for the year ending January 31, 2024 excludes the following GAAP measure which we are able to quantify with reasonable certainty:

  • Amortization of intangible assets of approximately $30 million.

Our non-GAAP outlook for the year ending January 31, 2024 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 $0 million and $1 million.
  • Stock-based compensation expenses are expected to be between approximately $69 million and $75 million, assuming market prices for our common stock approximately consistent with current levels.
  • Costs associated with modifying our workplace in response to our decision to move to a hybrid work environment, including assumed lease terminations and abandonments, IT facilities and infrastructure costs, and other charges are expected to be between approximately $20 million and $26 million.

Our non-GAAP guidance does not include the potential impact of any in-process business acquisitions that may close after the date hereof, and, unless otherwise specified, reflects foreign currency exchange rates approximately consistent with current rates.

We are unable, without unreasonable efforts, to provide a reconciliation for other GAAP measures which are excluded from our non-GAAP outlook, including the impact of future business acquisitions or acquisition expenses, future restructuring expenses, and non-GAAP income tax adjustments due to the level of unpredictability and uncertainty associated with these items. For these same reasons, we are unable to assess the probable significance of these excluded items. While historical results may not be indicative of future results, actual amounts for the three and nine months ended October 31, 2022 and 2021 for the GAAP measures excluded from our non-GAAP outlook appear in Tables 2, 3 and 4 of this press release.

Conference Call Information

We will conduct a conference call today at 4:30 p.m. ET to discuss our results for the three and nine months ended October 31, 2022 and outlook. An online, real-time webcast of the conference call and webcast slides will be available on our website at www.verint.com. Participants may register for the call here to receive the dial-in numbers and unique PIN to access the call. Please join the call 5-10 minutes prior to the scheduled start time.

About Non-GAAP Financial Measures

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

About Verint Systems Inc.

Verint® (Nasdaq: VRNT) helps the world’s most iconic brands build enduring customer relationships by connecting work, data, and experiences across the enterprise. More than 10,000 organizations in 180 countries – including over 85 of the Fortune 100 companies – are using the Verint Customer Engagement Platform to draw on the latest advancements in AI, analytics, and an open cloud architecture to elevate customer experience.

Verint. The Customer Engagement Company®. Learn more at Verint.com.

Cautions About Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint Systems Inc. These forward-looking statements are not guarantees of future performance and they are based on management’s expectations that involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, any of which could cause our actual results or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, inflation, economic instability, political unrest, armed conflicts (such as the Russian invasion of Ukraine), natural disasters, climate change or other environmental issues, or outbreaks of disease, such as the COVID-19 pandemic, as well as the resulting impact on spending by customers or partners, on our business; risks that our customers or partners delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or are unable to honor contractual commitments or payment obligations due to liquidity issues or other challenges in their budgets and business; risks that restrictions resulting from the COVID-19 pandemic or actions taken in response to the pandemic adversely impact our operations or our ability to fulfill orders, complete implementations, or recognize revenue; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer challenges and needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization; risks due to aggressive competition in all of our markets and our ability to keep pace with competitors, some of whom may be able to grow faster than us or have greater resources than us, including in areas such as sales and marketing, branding, technological innovation and development, and recruiting and retention; risks associated with our ability to properly execute on our cloud transition, including increased importance of subscription renewal rates, and risk of increased variability in our period-to-period results based on the mix, terms, and timing of our transactions; risks relating to our ability to properly execute on growth or strategic initiatives, manage investments in our business and operations, 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 or costs to retain, recruit , and train qualified personnel in regions in which we operate either physically or remotely, including in new markets and growth areas we may enter, due to competition for talent, increasing labor costs, applicable regulatory requirements such as vaccination mandates, or otherwise; challenges associated with selling sophisticated solutions and cloud-based solutions, including with respect to longer sales cycles, more complex sales processes, more complex contractual and information security requirements, and assisting customers in understanding and realizing the benefits of our solutions, as well as with developing, offering, implementing, and maintaining a broad solution portfolio; risks that we may be unable to maintain, expand, and enable our relationships with partners as part of our growth strategy; risks associated with our reliance on cloud hosting providers and other third-party suppliers, partners, or original equipment manufacturers (“OEMs”) for certain services, products, or components, including companies that may compete with us or work with our competitors; risks associated with our significant international operations, exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas; risks associated with a significant part of our business coming from government contracts and associated procurement processes and regulatory requirements; risks associated with our ability to identify suitable targets for acquisition or investment or successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, legacy liabilities, 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 associated with complex and changing domestic and foreign regulatory environments, including, among others, with respect to data privacy, information security, government contracts, anti-corruption, trade compliance, climate change or other environmental, social and governance matters, tax, and labor matters, relating to our own operations, the products and services we offer, and/or the use of our solutions by our customers; risks associated with the mishandling or perceived mishandling of sensitive or confidential information and data, including personally identifiable information or other information that may belong to our customers or other third parties, including in connection with our software as a service (“SaaS”) or other hosted or managed services offerings or when we are asked to perform service or support; risks that our solutions 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; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions; 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 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 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 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 associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; 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 market volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or speculation, or other factors and risks associated with actions of activist stockholders; risks associated with Apax Partners’ significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and risks associated with the 2021 spin-off of our former Cyber Intelligence Solutions business, including the possibility that the spin-off transaction does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities. 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, 2022, our Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, our Quarterly Report on Form 10-Q for the quarter ended July 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended October 31, 2022, when filed, and other filings we make with the SEC.

VERINT, VERINT DA VINCI, THE CUSTOMER ENGAGEMENT COMPANY, BOUNDLESS CUSTOMER ENGAGEMENT, THE ENGAGEMENT CAPACITY GAP and THE SCIENCE OF CUSTOMER ENGAGEMENT are trademarks of Verint Systems Inc. or its subsidiaries. Verint and other parties may also have trademark rights in other terms used herein.

 

Table 1

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands, except per share data)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

Recurring

 

$

174,222

 

 

$

158,811

 

 

$

500,029

 

 

$

459,442

 

Nonrecurring

 

 

50,971

 

 

 

66,009

 

 

 

165,969

 

 

 

180,899

 

Total revenue

 

 

225,193

 

 

 

224,820

 

 

 

665,998

 

 

 

640,341

 

Cost of revenue:

 

 

 

 

 

 

 

 

Recurring

 

 

38,834

 

 

 

36,811

 

 

 

120,714

 

 

 

112,523

 

Nonrecurring

 

 

28,013

 

 

 

30,524

 

 

 

90,781

 

 

 

90,909

 

Amortization of acquired technology

 

 

3,550

 

 

 

4,749

 

 

 

10,742

 

 

 

13,559

 

Total cost of revenue

 

 

70,397

 

 

 

72,084

 

 

 

222,237

 

 

 

216,991

 

Gross profit

 

 

154,796

 

 

 

152,736

 

 

 

443,761

 

 

 

423,350

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development, net

 

 

32,941

 

 

 

31,029

 

 

 

97,844

 

 

 

91,969

 

Selling, general and administrative

 

 

93,757

 

 

 

89,778

 

 

 

302,344

 

 

 

268,800

 

Amortization of other acquired intangible assets

 

 

6,420

 

 

 

7,261

 

 

 

19,887

 

 

 

21,934

 

Total operating expenses

 

 

133,118

 

 

 

128,068

 

 

 

420,075

 

 

 

382,703

 

Operating income

 

 

21,678

 

 

 

24,668

 

 

 

23,686

 

 

 

40,647

 

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest income

 

 

1,045

 

 

 

101

 

 

 

1,742

 

 

 

147

 

Interest expense

 

 

(2,147

)

 

 

(1,502

)

 

 

(5,511

)

 

 

(8,720

)

Losses on early retirements of debt

 

 

 

 

 

 

 

 

 

 

 

(2,474

)

Other income (expense), net

 

 

1,045

 

 

 

(417

)

 

 

3,186

 

 

 

3,789

 

Total other expense, net

 

 

(57

)

 

 

(1,818

)

 

 

(583

)

 

 

(7,258

)

Income before provision for income taxes

 

 

21,621

 

 

 

22,850

 

 

 

23,103

 

 

 

33,389

 

Provision for income taxes

 

 

17,395

 

 

 

9,349

 

 

 

20,539

 

 

 

13,478

 

Net income

 

 

4,226

 

 

 

13,501

 

 

 

2,564

 

 

 

19,911

 

Net income attributable to noncontrolling interests

 

 

150

 

 

 

264

 

 

 

614

 

 

 

875

 

Net income attributable to Verint Systems Inc.

 

 

4,076

 

 

 

13,237

 

 

 

1,950

 

 

 

19,036

 

Dividends on preferred stock

 

 

(5,200

)

 

 

(5,200

)

 

 

(15,600

)

 

 

(13,722

)

Net (loss) income attributable to Verint Systems Inc. common shares

 

$

(1,124

)

 

$

8,037

 

 

$

(13,650

)

 

$

5,314

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

 

$

0.12

 

 

$

(0.21

)

 

$

0.08

 

Diluted

 

$

(0.02

)

 

$

0.12

 

 

$

(0.21

)

 

$

0.08

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

65,583

 

 

 

65,570

 

 

 

65,161

 

 

 

65,474

 

Diluted

 

 

65,583

 

 

 

66,328

 

 

 

65,161

 

 

 

67,268

 

 

Table 2

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Cloud Metrics

(Unaudited)

 

Cloud Revenue

 

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

2021

 

 

2022

 

 

2021

SaaS revenue – GAAP(1)(7)

 

$

115,787

 

$

82,103

 

$

313,071

 

$

222,079

Bundled SaaS revenue – GAAP

 

 

57,041

 

 

48,390

 

 

161,005

 

 

130,639

Unbundled SaaS revenue – GAAP

 

 

58,746

 

 

33,713

 

 

152,066

 

 

91,440

Optional managed services revenue – GAAP

 

 

15,436

 

 

16,358

 

 

47,127

 

 

49,688

Cloud revenue – GAAP(3)(7)

 

$

131,223

 

$

98,461

 

$

360,198

 

$

271,767

 

 

 

 

 

 

 

 

 

Estimated SaaS revenue adjustments

 

$

374

 

$

1,985

 

$

2,323

 

$

3,701

Estimated bundled SaaS revenue adjustments

 

 

374

 

 

1,984

 

 

2,323

 

 

3,638

Estimated unbundled SaaS revenue adjustments

 

 

 

 

1

 

 

 

 

63

Estimated optional managed services revenue adjustments

 

 

49

 

 

112

 

 

161

 

 

431

Estimated cloud revenue adjustments

 

$

423

 

$

2,097

 

$

2,484

 

$

4,132

 

 

 

 

 

 

 

 

 

SaaS revenue – non-GAAP(2)(7)

 

$

116,161

 

$

84,088

 

$

315,394

 

$

225,780

Bundled SaaS revenue – non-GAAP

 

 

57,415

 

 

50,374

 

 

163,328

 

 

134,277

Unbundled SaaS revenue – non-GAAP

 

 

58,746

 

 

33,714

 

 

152,066

 

 

91,503

Optional managed services revenue – non-GAAP

 

 

15,485

 

 

16,470

 

 

47,288

 

 

50,119

Cloud revenue – non-GAAP(4)(7)

 

$

131,646

 

$

100,558

 

$

362,682

 

$

275,899

 

New SaaS ACV

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

New SaaS ACV(5)(7)

 

$

26,833

 

 

$

18,312

 

 

$

78,178

 

 

$

63,684

 

New SaaS ACV Growth YoY

 

 

46.5

%

 

 

16.9

%

 

 

22.8

%

 

 

43.9

%

 

New Perpetual License Equivalent Bookings

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

New perpetual license equivalent bookings(6)(7)

 

$

71,115

 

 

$

75,438

 

 

$

229,291

 

 

$

209,479

 

New perpetual license equivalent bookings change YoY

 

 

(5.7

) %

 

 

14.2

%

 

 

9.5

%

 

 

19.0

%

New perpetual license equivalent bookings – SaaS component

 

$

46,865

 

 

$

32,966

 

 

$

144,224

 

 

$

102,610

 

New perpetual license equivalent bookings – SaaS growth YoY

 

 

42.2

%

 

 

11.4

%

 

 

40.6

%

 

 

35.7

%

% of new perpetual license equivalent bookings from SaaS

 

 

65.9

%

 

 

43.7

%

 

 

62.9

%

 

 

49.0

%

New perpetual license equivalent bookings – Perpetual component

 

$

24,250

 

 

$

42,472

 

 

$

85,067

 

 

$

106,869

 

New perpetual license equivalent bookings – Perpetual change YoY

 

 

(42.9

) %

 

 

16.4

%

 

 

(20.4

) %

 

 

6.5

%

% of new perpetual license equivalent bookings from Perpetual

 

 

34.1

%

 

 

56.3

%

 

 

37.1

%

 

 

51.0

%

(1) GAAP SaaS revenue for the three and nine months ended October 31, 2022 was $118.5 million, representing 44% year-over-year growth and $318.6 million, representing 43% year-over-year growth, respectively, on a constant currency basis.

(2) Non-GAAP SaaS revenue for the three and nine months ended October 31, 2022 was $118.9 million, representing 41% year-over-year growth and $321.0 million, representing 42% year-over-year growth, respectively, on a constant currency basis.

(3) GAAP cloud revenue for the three and nine months ended October 31, 2022 was $134.9 million, representing 37% year-over-year growth and $367.6 million, representing 35% year-over-year growth, respectively, on a constant currency basis.

(4) Non-GAAP cloud revenue for the three and nine months ended October 31, 2022 was $135.3 million, representing 35% year-over-year growth and $370.2 million, representing 34% year-over-year growth, respectively, on a constant currency basis.

(5) New SaaS ACV for the three and nine months ended October 31, 2022 was $27.6 million, representing 50.7% year-over-year growth and $79.7 million, representing 25.2% year-over-year growth, respectively, on a constant currency basis.

(6) New perpetual license equivalent bookings for the three and nine months ended October 31, 2022 were $72.5 million, representing a (3.9)% year-over-year change and $232.4 million, representing 11.0% year-over-year growth, respectively, on a constant currency basis.

(7) The foregoing measures at constant currency are calculated by translating the non-U.S. dollar portion of the current-period measure into U.S. dollars using average foreign currency exchange rates for the three and nine months ended October 31, 2021, as applicable, 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 3

VERINT SYSTEMS INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited)

 

Revenue

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

2022

 

2021

 

2022

 

2021

Recurring revenue – GAAP

 

$

174,222

 

$

158,811

 

$

500,029

 

$

459,442

Nonrecurring revenue – GAAP

 

 

50,971

 

 

66,009

 

 

165,969

 

 

180,899

Total GAAP revenue

 

 

225,193

 

 

224,820

 

 

665,998

 

 

640,341

Recurring revenue adjustments

 

 

423

 

 

2,108

 

 

2,498

 

 

4,160

Nonrecurring revenue adjustments

 

 

 

 

 

 

 

 

Total revenue adjustments

 

 

423

 

 

2,108

 

 

2,498

 

 

4,160

Recurring revenue – non-GAAP

 

 

174,645

 

 

160,919

 

 

502,527

 

 

463,602

Nonrecurring revenue – non-GAAP

 

 

50,971

 

 

66,009

 

 

165,969

 

 

180,899

Total non-GAAP revenue

 

$

225,616

 

$

226,928

 

$

668,496

 

$

644,501

 

 

 

 

 

 

 

 

 

Gross Profit and Gross Margin

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Recurring costs

 

$

38,834

 

 

$

36,811

 

 

$

120,714

 

 

$

112,523

 

Nonrecurring costs

 

 

28,013

 

 

 

30,524

 

 

 

90,781

 

 

 

90,909

 

Amortization of acquired technology

 

 

3,550

 

 

 

4,749

 

 

 

10,742

 

 

 

13,559

 

Total GAAP cost of revenue

 

 

70,397

 

 

 

72,084

 

 

 

222,237

 

 

 

216,991

 

GAAP gross profit

 

 

154,796

 

 

 

152,736

 

 

 

443,761

 

 

 

423,350

 

GAAP gross margin

 

 

68.7

%

 

 

67.9

%

 

 

66.6

%

 

 

66.1

%

Revenue adjustments

 

 

423

 

 

 

2,108

 

 

 

2,498

 

 

 

4,160

 

Amortization of acquired technology

 

 

3,550

 

 

 

4,749

 

 

 

10,742

 

 

 

13,559

 

Stock-based compensation expenses

 

 

1,329

 

 

 

1,230

 

 

 

4,245

 

 

 

3,918

 

Acquisition expenses, net

 

 

 

 

 

121

 

 

 

176

 

 

 

171

 

Restructuring expenses

 

 

593

 

 

 

245

 

 

 

969

 

 

 

792

 

Separation expenses

 

 

 

 

 

 

 

 

 

 

 

78

 

Non-GAAP gross profit

 

$

160,691

 

 

$

161,189

 

 

$

462,391

 

 

$

446,028

 

Non-GAAP gross margin

 

 

71.2

%

 

 

71.0

%

 

 

69.2

%

 

 

69.2

%

 

Research and Development, net

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP research and development, net

 

$

32,941

 

 

$

31,029

 

 

$

97,844

 

 

$

91,969

 

As a percentage of GAAP revenue

 

 

14.6

%

 

 

13.8

%

 

 

14.7

%

 

 

14.4

%

Stock-based compensation expenses

 

 

(3,533

)

 

 

(1,949

)

 

 

(10,371

)

 

 

(5,749

)

Acquisition expenses, net

 

 

 

 

 

(192

)

 

 

(198

)

 

 

(272

)

Restructuring expenses

 

 

(509

)

 

 

(97

)

 

 

(646

)

 

 

(410

)

Separation expenses

 

 

 

 

 

 

 

 

 

 

 

(467

)

Other adjustments

 

 

(17

)

 

 

 

 

 

(67

)

 

 

 

Non-GAAP research and development, net

 

$

28,882

 

 

$

28,791

 

 

$

86,562

 

 

$

85,071

 

As a percentage of non-GAAP revenue

 

 

12.8

%

 

 

12.7

%

 

 

12.9

%

 

 

13.2

%

 

Selling, General and Administrative Expenses

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP selling, general and administrative expenses

 

$

93,757

 

 

$

89,778

 

 

$

302,344

 

 

$

268,800

 

As a percentage of GAAP revenue

 

 

41.6

%

 

 

39.9

%

 

 

45.4

%

 

 

42.0

%

Stock-based compensation expenses

 

 

(15,037

)

 

 

(13,416

)

 

 

(49,346

)

 

 

(41,422

)

Acquisition expenses, net

 

 

(1,172

)

 

 

(2,494

)

 

 

(2,661

)

 

 

(7,481

)

Restructuring expenses

 

 

(1,324

)

 

 

(140

)

 

 

(7,807

)

 

 

(1,179

)

Separation expenses

 

 

(291

)

 

 

(1,915

)

 

 

(1,142

)

 

 

(10,651

)

Accelerated lease costs

 

 

(725

)

 

 

(539

)

 

 

(7,831

)

 

 

(2,023

)

IT facilities and infrastructure realignment

 

 

(1,095

)

 

 

(30

)

 

 

(3,526

)

 

 

(572

)

Impairment charges

 

 

 

 

 

(373

)

 

 

(1,799

)

 

 

(373

)

Other adjustments

 

 

(900

)

 

 

67

 

 

 

(2,511

)

 

 

(40

)

Non-GAAP selling, general and administrative expenses

 

$

73,213

 

 

$

70,938

 

 

$

225,721

 

 

$

205,059

 

As a percentage of non-GAAP revenue

 

 

32.5

%

 

 

31.3

%

 

 

33.8

%

 

 

31.8

%

 

Operating Income and Operating Margin

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP operating income

 

$

21,678

 

 

$

24,668

 

 

$

23,686

 

 

$

40,647

 

GAAP operating margin

 

 

9.6

%

 

 

11.0

%

 

 

3.6

%

 

 

6.3

%

Revenue adjustments

 

 

423

 

 

 

2,108

 

 

 

2,498

 

 

 

4,160

 

Amortization of acquired technology

 

 

3,550

 

 

 

4,749

 

 

 

10,742

 

 

 

13,559

 

Amortization of other acquired intangible assets

 

 

6,420

 

 

 

7,261

 

 

 

19,887

 

 

 

21,934

 

Stock-based compensation expenses

 

 

19,899

 

 

 

16,595

 

 

 

63,962

 

 

 

51,089

 

Acquisition expenses, net

 

 

1,172

 

 

 

2,807

 

 

 

3,035

 

 

 

7,924

 

Restructuring expenses

 

 

2,426

 

 

 

482

 

 

 

9,422

 

 

 

2,381

 

Separation expenses

 

 

291

 

 

 

1,915

 

 

 

1,142

 

 

 

11,196

 

Accelerated lease costs

 

 

725

 

 

 

539

 

 

 

7,831

 

 

 

2,023

 

IT facilities and infrastructure realignment

 

 

1,095

 

 

 

30

 

 

 

3,526

 

 

 

572

 

Impairment charges

 

 

 

 

 

373

 

 

 

1,799

 

 

 

373

 

Other adjustments

 

 

917

 

 

 

(67

)

 

 

2,578

 

 

 

40

 

Non-GAAP operating income

 

$

58,596

 

 

$

61,460

 

 

$

150,108

 

 

$

155,898

 

Non-GAAP operating margin

 

 

26.0

%

 

 

27.1

%

 

 

22.5

%

 

 

24.2

%

Other Expense, Net

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP other expense, net

 

$

(57

)

 

$

(1,818

)

 

$

(583

)

 

$

(7,258

)

Unrealized losses on derivatives, net

 

 

 

 

 

 

 

 

 

 

 

14,305

 

Expenses and losses on debt modification or retirement

 

 

 

 

 

 

 

 

 

 

 

2,474

 

Change in fair value of future tranche right

 

 

 

 

 

 

 

 

 

 

 

(15,810

)

Acquisition benefit, net

 

 

 

 

 

(122

)

 

 

 

 

 

(3,470

)

Non-GAAP other expense, net(1)

 

$

(57

)

 

$

(1,940

)

 

 

(583

)

 

 

(9,759

)

 

Provision for Income Taxes

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP provision for income taxes

 

$

17,395

 

 

$

9,349

 

 

$

20,539

 

 

$

13,478

 

GAAP effective income tax rate

 

 

80.5

%

 

 

40.9

%

 

 

88.9

%

 

 

40.4

%

Non-GAAP tax adjustments

 

 

(11,296

)

 

 

(2,559

)

 

 

(5,204

)

 

 

2,068

 

Non-GAAP provision for income taxes

 

$

6,099

 

 

$

6,790

 

 

$

15,335

 

 

$

15,546

 

Non-GAAP effective income tax rate

 

 

10.4

%

 

 

11.4

%

 

 

10.3

%

 

 

10.6

%

Net (Loss) Income Attributable to Verint Systems Inc. Common Shares

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP net (loss) income attributable to Verint Systems Inc. common shares

 

$

(1,124

)

 

$

8,037

 

 

$

(13,650

)

 

$

5,314

 

Revenue adjustments

 

 

423

 

 

 

2,108

 

 

 

2,498

 

 

 

4,160

 

Amortization of acquired technology

 

 

3,550

 

 

 

4,749

 

 

 

10,742

 

 

 

13,559

 

Amortization of other acquired intangible assets

 

 

6,420

 

 

 

7,261

 

 

 

19,887

 

 

 

21,934

 

Stock-based compensation expenses

 

 

19,899

 

 

 

16,595

 

 

 

63,962

 

 

 

51,089

 

Unrealized losses on derivatives, net

 

 

 

 

 

 

 

 

 

 

 

14,305

 

Expenses and losses on debt modification or retirement

 

 

 

 

 

 

 

 

 

 

 

2,474

 

Change in fair value of future tranche right

 

 

 

 

 

 

 

 

 

 

 

(15,810

)

Acquisition expenses, net

 

 

1,172

 

 

 

2,685

 

 

 

3,035

 

 

 

4,454

 

Restructuring expenses

 

 

2,425

 

 

 

482

 

 

 

9,422

 

 

 

2,381

 

Separation expenses

 

 

291

 

 

 

1,915

 

 

 

1,142

 

 

 

11,196

 

Accelerated lease costs

 

 

725

 

 

 

539

 

 

 

7,831

 

 

 

2,023

 

IT facilities and infrastructure realignment

 

 

1,095

 

 

 

30

 

 

 

3,526

 

 

 

572

 

Impairment charges

 

 

 

 

 

373

 

 

 

1,799

 

 

 

373

 

Other adjustments

 

 

917

 

 

 

(67

)

 

 

2,578

 

 

 

40

 

Non-GAAP tax adjustments

 

 

11,296

 

 

 

2,559

 

 

 

5,204

 

 

 

(2,068

)

Dividends, reversed due to assumed conversion of preferred stock(3)

 

 

5,200

 

 

 

5,200

 

 

 

15,600

 

 

 

13,722

 

Total adjustments

 

 

53,413

 

 

 

44,429

 

 

 

147,226

 

 

 

124,404

 

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

 

$

52,289

 

 

$

52,466

 

 

$

133,576

 

 

$

129,718

 

 

Diluted Net (Loss) Income Per Common Share Attributable to Verint Systems Inc.

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands, except per share data)

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

GAAP diluted net (loss) income per common share attributable to Verint Systems Inc.

 

$

(0.02

)

 

$

0.12

 

$

(0.21

)

 

$

0.08

Non-GAAP diluted net income per common share attributable to Verint Systems Inc.(3)

 

$

0.69

 

 

$

0.69

 

$

1.77

 

 

$

1.71

 

 

 

 

 

 

 

 

 

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

 

 

65,583

 

 

 

66,328

 

 

65,161

 

 

 

67,268

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

 

 

10,004

 

 

 

9,478

 

 

10,364

 

 

 

8,544

Non-GAAP diluted weighted-average shares used in computing net income per common share attributable to Verint Systems Inc.(3)

 

 

75,587

 

 

 

75,806

 

 

75,525

 

 

 

75,812

 

GAAP Net Income to Adjusted EBITDA

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP net income

 

$

4,226

 

 

$

13,501

 

 

$

2,564

 

 

$

19,911

 

As a percentage of GAAP revenue

 

 

1.9

%

 

 

6.0

%

 

 

0.4

%

 

 

3.1

%

Provision for income taxes

 

 

17,395

 

 

 

9,349

 

 

 

20,539

 

 

 

13,478

 

Other expense, net

 

 

57

 

 

 

1,818

 

 

 

583

 

 

 

7,258

 

Depreciation and amortization(2)

 

 

16,158

 

 

 

18,585

 

 

 

50,199

 

 

 

54,696

 

Revenue adjustments

 

 

423

 

 

 

2,108

 

 

 

2,498

 

 

 

4,160

 

Stock-based compensation expenses

 

 

19,899

 

 

 

16,595

 

 

 

63,962

 

 

 

51,089

 

Acquisition expenses, net

 

 

1,172

 

 

 

2,807

 

 

 

3,035

 

 

 

7,924

 

Restructuring expenses

 

 

2,348

 

 

 

456

 

 

 

9,090

 

 

 

2,355

 

Separation expenses

 

 

291

 

 

 

1,915

 

 

 

1,142

 

 

 

10,829

 

Accelerated lease costs

 

 

725

 

 

 

539

 

 

 

7,831

 

 

 

2,023

 

IT facilities and infrastructure realignment

 

 

1,095

 

 

 

30

 

 

 

3,526

 

 

 

572

 

Impairment charges

 

 

 

 

 

373

 

 

 

1,799

 

 

 

373

 

Other adjustments

 

 

917

 

 

 

(67

)

 

 

2,578

 

 

 

40

 

Adjusted EBITDA

 

$

64,706

 

 

$

68,009

 

 

$

169,346

 

 

$

174,708

 

As a percentage of non-GAAP revenue

 

 

28.7

%

 

 

30.0

%

 

 

25.3

%

 

 

27.1

%

 

Gross Debt to Net Debt

(in thousands)

 

October 31,

2022

 

January 31,

2022

Long-term debt

 

$

408,361

 

$

406,954

Unamortized debt discounts and issuance costs

 

 

6,639

 

 

8,046

Gross debt

 

 

415,000

 

 

415,000

Less:

 

 

 

 

Cash and cash equivalents

 

 

252,073

 

 

358,805

Restricted cash and cash equivalents, and restricted bank time deposits

 

 

290

 

 

6

Short-term investments

 

 

10,651

 

 

765

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

 

 

151,986

 

 

55,424

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

 

 

266

 

 

409

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

 

$

151,720

 

$

55,015

(1) For the three months ended October 31, 2022, non-GAAP other expense, net of $0.1 million was comprised of $1.4 million of interest and other expense, net of $1.3 million of foreign exchange gains primarily related to balance sheet revaluations.

(2) Adjusted for financing fee amortization.

(3) EPS calculation includes the more dilutive of either preferred stock dividends or conversion of preferred stock shares. Conversion of the outstanding preferred shares was more dilutive in three and nine months ended October 31, 2022 and 2021.

 

Table 4

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Recurring and Nonrecurring Revenue and Gross Profit

(Unaudited)

 

Recurring and Nonrecurring Revenue

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

2022

 

2021

 

2022

 

2021

Recurring revenue – GAAP

 

$

174,222

 

$

158,811

 

$

500,029

 

$

459,442

Cloud revenue – GAAP

 

 

131,223

 

 

98,461

 

 

360,198

 

 

271,767

Support revenue – GAAP

 

 

42,999

 

 

60,350

 

 

139,831

 

 

187,675

Nonrecurring revenue – GAAP

 

$

50,971

 

$

66,009

 

$

165,969

 

$

180,899

Perpetual revenue – GAAP

 

 

24,425

 

 

40,436

 

 

88,473

 

 

102,108

Professional services revenue – GAAP

 

 

26,546

 

 

25,573

 

 

77,496

 

 

78,791

Total revenue – GAAP

 

$

225,193

 

$

224,820

 

$

665,998

 

$

640,341

 

 

 

 

 

 

 

 

 

Estimated recurring revenue adjustments

 

$

423

 

$

2,108

 

$

2,498

 

$

4,160

Estimated cloud revenue adjustments

 

 

423

 

 

2,097

 

 

2,484

 

 

4,132

Estimated support revenue adjustments

 

 

 

 

11

 

 

14

 

 

28

Estimated nonrecurring revenue adjustments

 

$

 

$

 

$

 

$

Estimated perpetual revenue adjustments

 

 

 

 

 

 

 

 

Estimated professional services revenue adjustments

 

 

 

 

 

 

 

 

Total estimated revenue adjustments

 

$

423

 

$

2,108

 

$

2,498

 

$

4,160

 

 

 

 

 

 

 

 

 

Recurring revenue – non-GAAP

 

$

174,645

 

$

160,919

 

$

502,527

 

$

463,602

Cloud revenue – non-GAAP

 

 

131,646

 

 

100,558

 

 

362,682

 

 

275,899

Support revenue – non-GAAP

 

 

42,999

 

 

60,361

 

 

139,845

 

 

187,703

Nonrecurring revenue – non-GAAP

 

$

50,971

 

$

66,009

 

$

165,969

 

$

180,899

Perpetual revenue – non-GAAP

 

 

24,425

 

 

40,436

 

 

88,473

 

 

102,108

Professional services revenue – non-GAAP

 

 

26,546

 

 

25,573

 

 

77,496

 

 

78,791

Total revenue – non-GAAP

 

$

225,616

 

$

226,928

 

$

668,496

 

$

644,501

 

Recurring Gross Profit

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP recurring revenue

 

$

174,222

 

 

$

158,811

 

 

$

500,029

 

 

$

459,442

 

GAAP recurring costs

 

 

38,834

 

 

 

36,811

 

 

 

120,714

 

 

 

112,523

 

GAAP recurring gross profit

 

 

135,388

 

 

 

122,000

 

 

 

379,315

 

 

 

346,919

 

GAAP recurring gross margin

 

 

77.7

%

 

 

76.8

%

 

 

75.9

%

 

 

75.5

%

 

 

 

 

 

 

 

 

 

Recurring revenue adjustments

 

 

423

 

 

 

2,108

 

 

 

2,498

 

 

 

4,160

 

Recurring stock-based compensation expenses

 

 

729

 

 

 

540

 

 

 

2,187

 

 

 

1,531

 

Recurring acquisition expenses, net

 

 

 

 

 

30

 

 

 

22

 

 

 

80

 

Recurring restructuring expenses

 

 

459

 

 

 

35

 

 

 

588

 

 

 

479

 

Recurring separation expenses

 

 

 

 

 

 

 

 

 

 

 

32

 

Non-GAAP recurring gross profit

 

$

136,999

 

 

$

124,713

 

 

$

384,610

 

 

$

353,201

 

Non-GAAP recurring gross margin

 

 

78.4

%

 

 

77.5

%

 

 

76.5

%

 

 

76.2

%

 

Nonrecurring Gross Profit

 

 

Three Months Ended

October 31,

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

GAAP nonrecurring revenue

 

$

50,971

 

 

$

66,009

 

 

$

165,969

 

 

$

180,899

 

GAAP nonrecurring costs

 

 

28,013

 

 

 

30,524

 

 

 

90,781

 

 

 

90,909

 

GAAP nonrecurring gross profit

 

 

22,958

 

 

 

35,485

 

 

 

75,188

 

 

 

89,990

 

GAAP nonrecurring gross margin

 

 

45.0

%

 

 

53.8

%

 

 

45.3

%

 

 

49.7

%

 

 

 

 

 

 

 

 

 

Nonrecurring revenue adjustments

 

 

 

 

 

 

 

 

 

 

 

 

Nonrecurring stock-based compensation expenses

 

 

600

 

 

 

690

 

 

 

2,058

 

 

 

2,387

 

Nonrecurring acquisition expenses, net

 

 

 

 

 

91

 

 

 

154

 

 

 

91

 

Nonrecurring restructuring expenses

 

 

134

 

 

 

210

 

 

 

381

 

 

 

313

 

Nonrecurring separation expenses

 

 

 

 

 

 

 

 

 

 

 

46

 

Non-GAAP nonrecurring gross profit

 

$

23,692

 

 

$

36,476

 

 

$

77,781

 

 

$

92,827

 

Non-GAAP nonrecurring gross margin

 

 

46.5

%

 

 

55.3

%

 

 

46.9

%

 

 

51.3

%

 

Table 5

VERINT SYSTEMS INC. AND SUBSIDIARIES

Calculation of Change in Revenue on a Constant Currency Basis

(Unaudited)

 

 

 

 

GAAP Revenue(2)

 

 

Non-GAAP Revenue(3)

(in thousands, except percentages)

 

Three Months

Ended

Nine Months

Ended

 

Three Months

Ended

Nine Months

Ended

Revenue for the three and nine months ended October 31, 2021

 

$

224,820

 

$

640,341

 

 

$

226,928

 

$

644,501

 

Revenue for the three and nine months ended October 31, 2022

 

$

225,193

 

$

665,998

 

 

$

225,616

 

$

668,496

 

Revenue for the three and nine months ended October 31, 2022 at constant currency(1)

 

$

232,000

 

$

681,000

 

 

$

232,000

 

$

683,000

 

Reported period-over-period revenue change

 

 

0.2

%

 

4.0

%

 

 

(0.6

) %

 

3.7

%

% impact from change in foreign currency exchange rates

 

 

3.0

%

 

2.3

%

 

 

2.8

%

 

2.3

%

Constant currency period-over-period revenue growth

 

 

3.2

%

 

6.3

%

 

 

2.2

%

 

6.0

%

(1) Revenue for the three and nine months ended October 31, 2022 at constant currency is calculated by translating current-period GAAP or non-GAAP foreign currency revenue (as applicable) into U.S. dollars using average foreign currency exchange rates for the three and nine months ended October 31, 2021 rather than actual current-period foreign currency exchange rates.

(2) GAAP revenue denominated in non-U.S. dollars was 19% and 22% of our total GAAP revenue for the three months ended October 31, 2022 and 2021, respectively. GAAP revenue denominated in non-U.S. dollars was 21% and 23% of our total GAAP revenue for the nine months ended October 31, 2022 and 2021, respectively. Our combined GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 29% and 32% of our total combined GAAP cost of revenue and operating expenses for the three months ended October 31, 2022 and 2021, respectively. Our combined GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 30% and 32% of our total combined GAAP cost of revenue and operating expenses for the nine months ended October 31, 2022 and 2021, respectively.

(3) Non-GAAP revenue denominated in non-U.S. dollars was 19% and 22% of our total non-GAAP revenue for the three months ended October 31, 2022 and 2021, respectively. Non-GAAP revenue denominated in non-U.S. dollars was 21% and 23% of our total non-GAAP revenue for the nine months ended October 31, 2022 and 2021, respectively. Our combined Non-GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 33% and 35% of our total combined Non-GAAP cost of revenue and operating expenses for the three months ended October 31, 2022 and 2021, respectively. Our combined Non-GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 34% and 35% of our total combined Non-GAAP cost of revenue and operating expenses for the nine months ended October 31, 2022 and 2021, respectively.

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

 

Table 6

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

October 31,

 

January 31,

(in thousands, except share and per share data)

 

 

2022

 

 

 

2022

 

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

252,073

 

 

$

358,805

 

Short-term investments

 

 

10,651

 

 

 

765

 

Accounts receivable, net of allowance for credit losses of $1.3 million and $1.3 million, respectively

 

 

165,888

 

 

 

193,831

 

Contract assets, net

 

 

49,133

 

 

 

42,688

 

Inventories

 

 

10,611

 

 

 

5,337

 

Prepaid expenses and other current assets

 

 

56,439

 

 

 

53,752

 

Total current assets

 

 

544,795

 

 

 

655,178

 

Property and equipment, net

 

 

62,310

 

 

 

64,090

 

Operating lease right-of-use assets

 

 

37,704

 

 

 

35,433

 

Goodwill

 

 

1,300,166

 

 

 

1,353,421

 

Intangible assets, net

 

 

83,300

 

 

 

118,254

 

Other assets

 

 

144,156

 

 

 

134,729

Total assets

 

$

2,172,431

 

 

$

2,361,105

 

 

 

 

 

 

Liabilities, Temporary Equity, and Stockholders’ Equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

42,204

 

 

$

39,501

 

Accrued expenses and other current liabilities

 

 

127,715

 

 

 

168,694

 

Contract liabilities

 

 

223,968

 

 

 

271,271

 

Total current liabilities

 

 

393,887

 

 

 

479,466

 

Long-term debt

 

 

408,361

 

 

 

406,954

 

Long-term contract liabilities

 

 

17,742

 

 

 

15,872

 

Operating lease liabilities

 

 

35,665

 

 

 

28,457

 

Other liabilities

 

 

44,338

 

 

 

39,456

 

Total liabilities

 

 

899,993

 

 

 

970,205

 

Commitments and Contingencies

 

 

 

 

Temporary Equity:

 

 

 

 

Preferred Stock — $0.001 par value; authorized 2,207,000 shares

 

 

 

 

Series A Preferred Stock; 200,000 shares issued and outstanding at October 31, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at October 31, 2022 and January 31, 2022, respectively.

 

 

200,628

 

 

 

200,628

 

Series B Preferred Stock; 200,000 shares issued and outstanding at October 31, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at October 31, 2022 and January 31, 2022, respectively.

 

 

235,693

 

 

 

235,693

 

Total temporary equity

 

 

436,321

 

 

 

436,321

 

Stockholders’ Equity:

 

 

 

 

Common stock — $0.001 par value; authorized 240,000,000 and 120,000,000 shares; issued 65,866,000 and 66,211,000 shares; outstanding 65,866,000 and 66,211,000 shares at October 31, 2022 and January 31, 2022, respectively.

 

 

66

 

 

 

66

 

Additional paid-in capital

 

 

1,071,549

 

 

 

1,125,152

 

Accumulated deficit

 

 

(52,559

)

 

 

(54,509

)

Accumulated other comprehensive loss

 

 

(185,301

)

 

 

(118,515

)

Total Verint Systems Inc. stockholders’ equity

 

 

833,755

 

 

 

952,194

 

Noncontrolling interest

 

 

2,362

 

 

 

2,385

 

Total stockholders’ equity

 

 

836,117

 

 

 

954,579

 

Total liabilities, temporary equity, and stockholders’ equity

 

$

2,172,431

 

 

$

2,361,105

 

 

Table 7

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended

October 31,

(in thousands)

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

2,564

 

 

$

19,911

 

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

 

 

 

 

Depreciation and amortization

 

 

52,166

 

 

 

56,910

 

Stock-based compensation, excluding cash-settled awards

 

 

63,957

 

 

 

51,078

 

Change in fair value of future tranche right

 

 

 

 

 

(15,810

)

Non-cash losses on derivative financial instruments, net

 

 

 

 

 

14,374

 

Losses on early retirements of debt

 

 

 

 

 

2,474

 

Other, net

 

 

8,072

 

 

 

264

 

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

 

 

 

 

Accounts receivable

 

 

22,079

 

 

 

45,586

 

Contract assets

 

 

(8,256

)

 

 

1,290

 

Inventories

 

 

(5,452

)

 

 

(758

)

Prepaid expenses and other assets

 

 

(16,274

)

 

 

(21,586

)

Accounts payable and accrued expenses

 

 

(9,542

)

 

 

(21,918

)

Contract liabilities

 

 

(38,513

)

 

 

(42,618

)

Deferred income taxes

 

 

(1,489

)

 

 

(15,530

)

Other, net

 

 

(701

)

 

 

(3,418

)

Net cash provided by operating activities — continuing operations

 

 

68,611

 

 

 

70,249

 

Net cash used in operating activities — discontinued operations

 

 

 

 

 

(9,055

)

Net cash provided by operating activities

 

 

68,611

 

 

 

61,194

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

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

 

 

(3,828

)

 

 

(57,214

)

Purchases of property and equipment

 

 

(17,920

)

 

 

(11,903

)

Maturities and sales of investments

 

 

250

 

 

 

45,640

 

Purchases of investments

 

 

(10,168

)

 

 

 

Cash paid for capitalized software development costs

 

 

(5,703

)

 

 

(5,637

)

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

 

 

(107

)

 

 

(26

)

Net cash used in investing activities

 

 

(37,476

)

 

 

(29,140

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of preferred stock

 

 

 

 

 

198,731

 

Proceeds from borrowings

 

 

 

 

 

315,000

 

Repayments of borrowings and other financing obligations

 

 

(3,025

)

 

 

(312,415

)

Settlement of 2014 Notes

 

 

 

 

 

(386,887

)

Purchases of capped calls

 

 

 

 

 

(41,060

)

Payments of debt-related costs

 

 

(224

)

 

 

(10,708

)

Purchases of treasury stock and common stock for retirement

 

 

(106,137

)

 

 

(75,933

)

Preferred stock dividend payments

 

 

(20,800

)

 

 

(12,856

)

Distributions paid to noncontrolling interest

 

 

(637

)

 

 

(620

)

Payment for termination of interest rate swap

 

 

 

 

 

(16,502

)

Net cash transferred to Cognyte Software Ltd.

 

 

 

 

 

(114,657

)

Dividend and other settlements received from Cognyte Software Ltd.

 

 

 

 

 

38,280

 

Payments of contingent consideration for business combinations (financing portion), and other financing activities

 

 

(3,518

)

 

 

(4,621

)

Net cash used in financing activities

 

 

(134,341

)

 

 

(424,248

)

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

 

 

(3,510

)

 

 

(29

)

Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents

 

 

(106,716

)

 

 

(392,223

)

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

 

 

358,868

 

 

 

700,133

 

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

 

$

252,152

 

 

$

307,910

 

 

 

 

 

 

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

 

$

252,073

 

 

$

307,847

 

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

 

 

 

 

 

6

 

Restricted cash and cash equivalents included in prepaid expenses and other current assets

 

 

22

 

 

 

 

Restricted cash and cash equivalents included in other assets

 

 

57

 

 

 

57

 

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

 

$

252,152

 

 

$

307,910

 

 

Verint Systems Inc. and Subsidiaries

Supplemental Information About Non-GAAP Financial Measures and Operating Metrics

This press release contains non-GAAP financial measures, consisting of non-GAAP revenue, non-GAAP recurring revenue, non-GAAP nonrecurring revenue, non-GAAP perpetual revenue, non-GAAP support revenue, non-GAAP professional services revenue, non-GAAP cloud revenue, non-GAAP SaaS revenue, non-GAAP bundled SaaS revenue, non-GAAP unbundled SaaS revenue, non-GAAP optional managed services revenue, non-GAAP recurring gross profit and gross margins, non-GAAP nonrecurring gross profit and gross margins, non-GAAP gross profit and gross margins, non-GAAP research and development, net, non-GAAP selling, general and administrative expenses, non-GAAP operating income and operating margins, non-GAAP other income (expense), net, non-GAAP provision for (benefit from) income taxes and non-GAAP effective income tax rate, non-GAAP net income (loss) attributable to Verint Systems Inc. common shares, non-GAAP diluted net income (loss) per common share attributable to Verint Systems Inc., adjusted EBITDA and adjusted EBITDA as a percentage of non-GAAP revenue, net debt and constant currency measures. The tables above include a reconciliation of each non-GAAP financial measure for completed periods presented in this press release to the most directly comparable GAAP financial measure.

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

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

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

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

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

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

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

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

Unrealized gains and losses on certain derivatives, net. We exclude from our non-GAAP financial measures unrealized gains and losses on certain derivatives which are not designated as hedges under accounting guidance. We exclude unrealized gains and losses on foreign currency derivatives that serve as economic hedges against variability in the cash flows of recognized assets or liabilities, or of forecasted transactions. These contracts, if designated as hedges under accounting guidance, would be considered “cash flow” hedges. These unrealized gains and losses are excluded from our non-GAAP financial measures because they are non-cash transactions which are highly variable from period to period. Upon settlement of these foreign currency derivatives, any realized gain or loss is included in our non-GAAP financial measures.

Expenses and losses on debt modification or retirement. We exclude from our non-GAAP financial measures losses on early retirements of debt attributable to refinancing or repaying our debt, and expenses incurred to modify debt terms, because we believe they are not reflective of our ongoing operations.

Change in fair value of future tranche right. On December 4, 2019, we entered into an Investment Agreement with an affiliate of Apax Partners (the “Apax Investor”), whereby the Apax Investor agreed to make an investment in us of up to $400.0 million of convertible preferred stock. In connection with the Apax Investor’s first $200.0 million investment on May 7, 2020 (for 200,000 shares of Series A Preferred Stock), we determined that our obligation to issue, and the Apax Investor’s obligation to purchase the Series B Preferred Stock in connection with the completion of the spin-off of our former Cyber Intelligence Solutions business and the satisfaction of other customary closing conditions (the “Future Tranche Right”) met the definition of a freestanding financial instrument. This Future Tranche Right was reported at fair value as an asset or liability on our consolidated balance sheet and was remeasured at fair value each reporting period until the settlement of the right at the time of issuance of the Series B Preferred Stock, which occurred on April 6, 2021. Changes in its fair value were recognized as a non-cash charge or benefit within other income (expense), net on the condensed consolidated statement of operations. We excluded this change in fair value of the Future Tranche Right from our non-GAAP financial measures because it was unusual in nature, could vary significantly in amount, and was unrelated to our ongoing operations.

Acquisition expenses (benefit), net. In connection with acquisition activity (including with respect to acquisitions that are not consummated), we incur expenses (benefits), including legal, accounting, and other professional fees, integration costs, changes in the fair value of contingent consideration obligations, and other costs. Integration costs may consist of information technology expenses as systems are integrated across the combined entity, consulting expenses, marketing expenses, and professional fees, as well as non-cash charges to write-off or impair the value of redundant assets. We exclude these expenses from our non-GAAP financial measures because they are unpredictable, can vary based on the size and complexity of each transaction, and are unrelated to our continuing operations or to the continuing operations of the acquired businesses.

Restructuring expenses (benefit). We exclude restructuring expenses (benefit) from our non-GAAP financial measures, which include employee termination costs, facility exit costs (except as included in Accelerated lease costs described below), certain professional fees, asset impairment charges, and other costs directly associated with resource realignments incurred in reaction to changing strategies or business conditions. All of these costs can vary significantly in amount and frequency based on the nature of the actions as well as the changing needs of our business and we believe that excluding them provides easier comparability of pre- and post-restructuring operating results.

Separation expenses. On February 1, 2021, we completed the spin-off of our former Cyber Intelligence Solutions business. We exclude from our non-GAAP financial measures expenses incurred in connection with the spin-off, including third-party advisory, accounting, legal, consulting, and other similar services related to the separation as well as costs associated with the operational separation of the two businesses, including those related to human resources, brand management, real estate, and information technology (which are included in Separation expenses to the extent not capitalized). Separation expenses also include incremental cash income taxes related to the reorganization of legal entities and operations in order to effect the separation. These costs are incremental to our normal operating expenses and are being incurred solely as a result of the separation transaction. Accordingly, we are excluding these separation expenses from our non-GAAP financial measures in order to evaluate our performance on a comparable basis.

Accelerated lease costs. We exclude from our non-GAAP financial measures accelerated facility costs and associated accelerated lease expenses due to the early termination or abandonment of certain office leases as a result of our move to a hybrid work model because these charges are not reflective of our ongoing business and operating results.

IT facilities and infrastructure realignment. We exclude from our non-GAAP financial measures nonrecurring IT facilities and infrastructure realignment costs and other IT charges associated with modifying the workplace, including consolidating and/or migrating data centers and labs to the cloud, simplifying the corporate network, and one-time costs for implementing collaboration tools to enable our work from anywhere strategy.

Impairment charges and other adjustments. We exclude from our non-GAAP financial measures asset impairment charges (other than those already included within restructuring or acquisition activity), rent expense for redundant facilities, gains or losses on sales of property, gains or losses on settlements of certain legal matters, and certain professional fees unrelated to our ongoing operations, all of which are unusual in nature and can vary significantly in amount and frequency.

Non-GAAP income tax adjustments. We exclude from our non-GAAP measures of net income attributable to Verint Systems Inc., our GAAP provision for (benefit from) income taxes and instead include a non-GAAP provision for income taxes, determined by applying a non-GAAP effective income tax rate to our income before provision for income taxes, as adjusted for the non-GAAP items described above. The non-GAAP effective income tax rate is generally based upon the income taxes we expect to pay in the reporting year. Our GAAP effective income tax rate can vary significantly from year to year as a result of tax law changes, settlements with tax authorities, changes in the geographic mix of earnings including acquisition activity, changes in the projected realizability of deferred tax assets, and other unusual or period-specific events, all of which can vary in size and frequency. We believe that our non-GAAP effective income tax rate removes much of this variability and facilitates meaningful comparisons of operating results across periods. Our non-GAAP effective income tax rate for the year ending January 31, 2023 is currently approximately 10% and was 11% for the year ended January 31, 2022. We evaluate our non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time. Our non-GAAP income tax rate can differ materially from our GAAP effective income tax rate.

Revenue Metrics and Operating Metrics

Recurring revenue, on both a GAAP and non-GAAP basis, is the portion of our revenue that we believe is likely to be renewed in the future, and primarily consists of cloud revenue and initial and renewal post contract support.

Nonrecurring revenue, on both a GAAP and non-GAAP basis, primarily consists of our perpetual licenses, consulting, implementation and installation services, hardware, training and patent license royalties.

Cloud revenue primarily consists of SaaS and optional managed services.

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

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

Percentage of software revenue that is recurring revenue is calculated as the sum of cloud and support revenue as a percentage of total cloud, support, and perpetual revenue.

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

New Perpetual License Equivalent Bookings are used to normalize between perpetual and SaaS bookings and measure overall software bookings growth. We calculate New Perpetual License Equivalent Bookings by adding to perpetual licenses (“New PLE Bookings – Perpetual Component”) an amount equal to New SaaS ACV bookings multiplied by a conversion factor that normalizes the mix of bundled and unbundled SaaS and perpetual bookings in a given period (”New PLE Bookings – SaaS Component”) The conversion factor used is based on our order mix and may change from period to period. Management uses perpetual license equivalent bookings to understand our performance, including our software bookings growth and SaaS/perpetual license mix. This metric should not be viewed in isolation from other operating metrics that we make available to investors.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before interest expense, interest income, income taxes, depreciation expense, amortization expense, stock-based compensation expenses, revenue adjustments, restructuring expenses, acquisition expenses, separation expenses, accelerated leases, IT facilities and infrastructure realignment, and other expenses excluded from our non-GAAP financial measures as described above. We believe that adjusted EBITDA is also commonly used by investors to evaluate operating performance between companies because it helps reduce variability caused by differences in capital structures, income taxes, stock-based compensation expenses, accounting policies, and depreciation and amortization policies. Adjusted EBITDA is also used by credit rating agencies, lenders, and other parties to evaluate our creditworthiness.

Net Debt

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

Supplemental Information About Constant Currency

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

Unless otherwise indicated, our financial outlook, which is provided on a non-GAAP basis, reflects foreign currency exchange rates approximately consistent with rates in effect when the outlook is provided.

We also incur foreign exchange gains and losses resulting from the revaluation and settlement of monetary assets and liabilities that are denominated in currencies other than the entity’s functional currency. We periodically report our historical non-GAAP diluted net income per share both inclusive and exclusive of these net foreign exchange gains or losses. Our financial outlook for diluted earnings per share includes net foreign exchange gains or losses incurred to date, if any, but does not include potential future gains or losses.