Press release

Verint Sends Letter to Stockholders Outlining Concerns Over Neuberger Berman’s Proposed Actions

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Verint® Systems Inc. (Nasdaq: VRNT) today announced that it has sent a
letter to stockholders in connection with its upcoming Annual Meeting of
Stockholders to be held on June 20, 2019, at 8:30am ET. Stockholders of
record as of May 7, 2019 will be entitled to vote at the meeting.

This press release features multimedia. View the full release here:
https://www.businesswire.com/news/home/20190603005436/en/

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(Photo: Business Wire)

The letter urges stockholders to vote the WHITE proxy card “FOR” all of
the company’s highly qualified and experienced directors, who are
driving and overseeing strong performance at Verint.

The stockholder letter, along with other materials related to the
company’s 2019 Annual Meeting, will be available at www.VoteVerint.com
and at www.sec.gov.
The website will be updated as additional information becomes available.

The full text of Verint’s letter to stockholders follows.

June 3, 2019

Dear Fellow Stockholders,

Over two years ago, Verint’s Board began a strategic transformation that
is delivering significant value to our stockholders. This successful
strategy, which includes accelerated innovation, evolving financial
disclosures and Board refreshment – is under serious threat – and so is
the value of your investment.

DON’T LET NEUBERGER BERMAN DERAIL VERINT’S SUCCESSFUL TRANSFORMATION

Neuberger Berman, a 2.6% stockholder who has already had input into the
selection of one of our eight directors, is attempting to gain
additional Board influence so that it can force significant and abrupt
changes on Verint that we believe would destroy value.

Our Board has embraced change and is committed to further change to
continue to drive stockholder value
, but believes that Neuberger
Berman’s ideas, if adopted, would harm our customer relationships,
disrupt our business momentum, and remove Board members who are vital to
the success of our company.

WE ARE OPPOSING NEUBERGER BERMAN IN THIS PROXY CONTEST BECAUSE WE
BELIEVE THEIR IDEAS ARE HIGHLY RISKY AND DAMAGING TO YOUR INVESTMENT

We are determined to protect our stockholders from Neuberger Berman’s
ill-informed and dangerous ideas
. We believe their proposed actions
– some of which they have not fully disclosed in public – would damage
the value of your investment. We have engaged extensively and have tried
to reason with Neuberger Berman, but – despite their public claims –
they are privately insisting on increasing their influence on our Board,
we believe, to further their value-destructive agenda.

IN OUR PRIVATE DISCUSSIONS, NEUBERGER BERMAN HAS DEMANDED WE COMMIT
TO THE FOLLOWING VALUE-DESTRUCTIVE ACTIONS

  • Halt our strong momentum while their unqualified nominees re-evaluate
    our successful strategy and products
  • Split the company now, regardless of the consequences
  • Change product and strategy direction even if it causes concern and
    confusion for our customers

OUR TRANSFORMATION ALREADY ADDRESSES NEUBERGER BERMAN’S PUBLIC DEMANDS

We believe Neuberger Berman is trying to mislead you by asking for
changes that they know have already been underway for two years, at the
Board’s initiation.

 

NEUBERGER BERMAN’S
PUBLIC DEMANDS

VERINT-INITIATED CHANGE OVER THE PAST TWO YEARS
Enhanced Disclosure
  • As the business has transformed – Verint has enhanced its
    disclosure
  • Comprehensive metrics for each business segment
  • Comprehensive cloud metrics
  • Comprehensive three year targets

Capital Allocation
Strategy

  • Three year capital allocation framework, including cash
    generation and expected uses of capital
  • Absent desirable acquisitions, return cash to stockholders
  • Convertible notes (due June 2021) expected to be settled in cash
    through refinancing, not shares
Board
Refreshment
  • Added three independent directors in the last three years
  • One recent director was recommended by Neuberger Berman
  • Committed to add another independent director this year
 

VERINT’S INNOVATION ACCELERATION STRATEGY IS WORKING AND DELIVERING
SIGNIFICANT STOCKHOLDER VALUE

TSR Performance Stronger than Peers’1

      1 Year     2 Year     3 Year
Verint     56.0 %     51.6 %     75.5 %
Enterprise Peers2 Enterprise Peers include CVLT, NTCT,
CSGS, NICE, NUAN, PEGA, and MSTR.
    14.7 %     23.5 %     41.8 %
Security Peers3 Security Peers include FEYE, FSCT, SCWX,
EVBG, MSI, BAE, RTN and MANT.
    (5.5) %     24.2 %     46.8 %
NASDAQ     15.0 %     35.3 %     64.0 %
S&P 500     11.2 %     22.9 %     41.4 %
Russell 2000     4.3 %     15.7 %     43.9 %
S&P 1500 IT Svcs     23.2 %     53.3 %     73.9 %

This table shows that our strategy is clearly working. We believe
Neuberger Berman has attempted to deliberately mislead stockholders by
quoting TSR metrics that intentionally exclude the market’s positive
reaction to our FY2019 results and enhanced disclosures. We believe that
Neuberger Berman is misleading investors by using metrics that date back
to periods prior to 2013, a time when Verint was a controlled company
and its parent company was in turmoil, as they well know. These
distraction tactics do not change the fact that our performance over the
last three years has been excellent.

STRONG Q1 2020 RESULTS ACROSS KEY METRICS4

Our strong momentum over the last two years accelerated in Q1.
Non-GAAP revenue increased 11% y-o-y, margins expanded by 340bps and EPS
increased 38% y-o-y. Cash from operations increased 55% y-o-y,
reflecting the underlying strength in our business.

FY20 GUIDANCE RAISED AGAIN FOR REVENUE AND EPS5

Verint recently raised guidance for the third time for FY20 since
providing initial guidance in December. Revenue growth is expected to
accelerate to 10%. Strong revenue growth combined with continued margin
expansion is expected to drive 14% EPS growth.

THREE YEAR TARGETS10% REVENUE CAGR AND 14% EPS CAGR

Our strong results and stock appreciation reflect the successful
execution of our strategy to accelerate innovation in the areas of
automation and cloud. We believe this strategy will enable us to
sustain growth and drive long-term value for ALL
stockholders.

 

Three Year Targets by Business Segment6

Verint       Revenue:

~$1.65 Billion

      Adjusted EBITDA Margin:

~27%

      Diluted EPS:

$4.70

Customer
Engagement

      Revenue:

~$1.08 Billion

      Adjusted EBITDA Margin:

~30%

      Cloud Revenue Mix:

>40%

Recurring Revenue Mix:

~70%

Cyber Intelligence       Revenue:

~$575 Million

      Adjusted EBITDA Margin:

>20%

     

Gross Margin Expansion from
Software Model Transition

 

                 

CLOUD FIRST STRATEGY

Verint is now one of the largest cloud vendors in our Customer
Engagement market and we target 30% – 40% cloud revenue CAGR over the
next three years. We have a CLOUD FIRST strategy and our
salesforce is leading with SaaS. All our solutions run in the Verint
cloud and we have a robust cloud offering ranging from small- to
medium-sized business solutions all the way up to enterprise-class
solutions, elevating customer experience and driving operating
efficiencies.

Based on our cloud leadership, we believe our large installed base will
migrate to the cloud over time creating an opportunity for 2x cloud
revenue uplift. We make it easy for our customers to seamlessly
transition their installed base by providing feature
parity
between our on-premise and cloud solutions. Cloud
adoption in our market provides a significant opportunity for revenue
upside and margin expansion.

ANALYSTS SUPPORT VERINT’S STRATEGY AND GROWTH POTENTIAL

As our growth strategy continues to drive successful results and share
price appreciation, research analysts have reported their positive views
on Verint’s performance and outlook:

“Prospects are brightening as the company is executing well, and both
segments are achieving healthy revenue growth and improved
profitability.”

  • Shaul Eyal, Analyst, Oppenheimer & Co. research report, May 30, 20197

“In our opinion after almost two years of hitting/beating Street
estimates, this story is starting to finally get the respect from
investors it deserves despite some of the recent noise from short
reports/bears. The major investments in automation/analytics and cloud
are clearly paying dividends in the field and speak to secular tailwinds
as more contact centers move to the cloud.”

  • Daniel Ives, Analyst, Wedbush Securities research report, May 30, 20197

“We are encouraged by the more granular disclosure, and believe that
execution towards the company’s targets should lead to multiple
expansion over time. Our price target goes to $72, from $71. Maintain
Overweight.”

  • Paul Coster, Analyst, JP Morgan Securities research report, May 22,
    20197

“Revenue-growth is inflecting to above 10% CAGR, and [Verint] seems
well positioned for the deployment of actionable intelligence into
adjacencies. We are increasing our estimates…Reiterate Overweight with
conviction.”

  • Paul Coster, CFA, Analyst, JP Morgan research report, May 7, 20197

VERINT IS COMMITTED TO CONTINUING TO EVOLVE OUR DISCLOSURES

As our business has evolved, our disclosure has also evolved and it will
continue to do so. Verint has enhanced its disclosure in the past as our
business changed, based on what we heard would be useful to our
investors. We did so again in our first quarter 2020 earnings
announcement, sharing three-year non-GAAP revenue and EPS targets that
reflect our confidence in our growth strategy and the relevance of these
metrics to investors.

Analysts are commenting positively on our enhanced disclosure.

“We also loudly applaud the increased transparency around
revenue/cloud targets as this continues to be a driver for the stock to
get re-rated as [Verint] shifts to a software based model adding
leverage/scale over the next 12 to 18 months.”

  • Daniel Ives, Analyst, Wedbush Securities research report, May 21, 20197

“We also liked [the] expanded view into three year Customer
Engagement targets, which demonstrate the potential growth and margin
opportunities around these trends.”

  • Dan Bergstrom, Analyst, RBC Capital Markets research report, May 21,
    20197

“We really appreciate the new disclosures. It’s very helpful.”

  • Anubhav Mehla, Jefferies Research Associate, Verint Customer
    Engagement Automation and Cloud Strategy webcast, May 7, 20197

VERINT HAS ROBUST ENGAGEMENT WITH STOCKHOLDERS AND IS COMMITTED TO
CONTINUED BOARD REFRESHMENT

Your Board and management team have deep, ongoing engagement with the
company’s stockholders, conducting more than 100 calls and meetings with
investors representing approximately 65% of our shares over the past 12
months, and we welcome constructive ideas to drive long-term sustainable
value creation.

We are committed to ongoing Board refreshment, and we have added three
new directors over the last three years, including one director at
Neuberger Berman’s suggestion in 2017. This fiscal year we intend to
continue the refreshment process and add a director
with recent and
relevant experience in cloud, cyber security, and/or software who will
also enhance the diversity of the Board.

VERINT’S HIGHLY QUALIFIED AND INDEPENDENT BOARD IS COMMITTED AND
BEST-SUITED TO EXECUTE THE STRATEGY THAT WILL DRIVE VALUE CREATION FOR
ALL VERINT STOCKHOLDERS

We strongly urge stockholders to
support Verint by voting “FOR
Verint’s entire slate of eight highly qualified directors on the WHITE
proxy card.

Sincerely,

The Board of Directors of Verint Systems Inc.

If you have any questions, or need assistance in voting your shares,
please call the firm assisting us in the solicitation of proxies:

INNISFREE M&A INCORPORATED

TOLL-FREE at 1 (877) 750-9496 (from the U.S. and Canada)

OR +1 (412) 232-3651 (from other locations)

Remember: Please simply discard any Gold proxy card you may receive from
Neuberger Berman. Any vote on Neuberger Berman’s Gold proxy card (even a
vote in protest of their nominees) will revoke any earlier proxy card
that you have submitted to Verint.

SUPPLEMENTAL INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES

This document contains non-GAAP financial measures and non-GAAP forward
looking statements. The tables below reconcile the non-GAAP financial
measures to the most directly comparable financial measures prepared in
accordance with Generally Accepted Accounting Principles (“GAAP”).

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: (i) 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; (ii) facilitating the comparison of our financial
results and business trends with other technology companies who publish
similar non-GAAP measures; and (iii) 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.

                   
      Year Ended

January 31, 2017

    Year Ended

January 31, 2018

   

Year Ended
January 31, 2019

   

Three Months
April 30, 2018

   

Three Months
April 30, 2019

Revenue Reconciliation
GAAP Revenue $1,062.1 $1,135.2 $1,229.7 $289.2 $315.2
Revenue Adjustments 10.6 15.3 15.4 2.8 8.9
Non-GAAP Revenue $1,072.7 $1,150.5 $1,245.1 $292.0 $324.2
 
Table of Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud
Revenue
Customer Engagement
Cloud Revenue – GAAP $122.0 $150.7
Estimated Revenue Adjustments 13.0 14.7
Cloud Revenue – Non-GAAP $135.0 $165.4
 
Operating Income Reconciliation
GAAP Operating Income $17.4 $48.6 $114.2 $7.8 $14.5
As a Percentage of GAAP Revenue 1.6% 4.3% 9.3% 2.7% 4.6%
Revenue Adjustments $10.6 $15.3 $15.4 $2.8 $8.9
Amortization of Acquired Technology 37.3 38.2 25.4 7.4 6.7
Amortization of Other Acquired Intangible Assets 44.1 34.2 31.0 7.7 7.7
Stock-Based Compensation Expenses 65.6 69.4 66.7 16.4 17.1
Acquisition Expenses, Net 12.9 1.6 9.9 2.3 3.9
Restructuring Expenses 15.7 13.4 4.9 1.1 1.4
Impairment Charges 3.3
Other Adjustments 1.0 2.1 (0.6) 0.6 2.1
Non-GAAP Operating Income $204.6 $226.1 $266.9 $46.1 $62.3
As a Percentage of Non-GAAP Revenue 19.1% 19.7% 21.4% 15.8% 19.2%
 
Net (Loss) Income Attributable to Verint Systems Inc.
Reconciliation
GAAP Net (Loss) Income Attributable to Verint Systems Inc. $(29.4) $(6.6) $66.0 $(2.2) $1.6
Total GAAP Net (Loss) Income Adjustments     188.1     187.5     146.7     36.7     47.5
Non-GAAP Net Income Attributable to Verint Systems Inc. $158.7 $180.9 $212.7 $34.5 $49.1
GAAP Diluted Net (Loss) Income per Common Share Attriburtble

to Verint Systems Inc.

$(0.47) $(0.10) $1.00 $(0.03) $0.02
Non-GAAP Diluted Net Income per Common Share Attributable

to Verint Systems Inc.

$2.51 $2.81 $3.21 $0.53 $0.73
GAAP Weighted-Average Shares Used in Computing Diluted Net (Loss)
Income per Common Share
62,593 63,312 66,245 63,928 67,088
Additional Weighted-Average Shares Applicable to Non-GAAP Net Income
per Common Share Attributable to Verint Systems Inc.
538 1,046 1,203
Non-Gaap Diluted Weighted-Average Shares Used in Computing Net
Income per Common Share
    63,131     64,358     66,245     65,131     67,088
 

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

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

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

We are unable, without unreasonable efforts, to provide a reconciliation
for these GAAP measures which are excluded from our non-GAAP
Consolidated, Customer Engagement, and Cyber Intelligence three-year
targets, due to the level of unpredictability and uncertainty associated
with these items. For these same reasons, we are unable to assess the
probable significance of these excluded items.

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

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

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

Our non-GAAP outlook for the year ending January 31, 2020 excludes the
following GAAP measures for which we are able to provide a range of
probable significance:

  • Revenue adjustments are expected to be between approximately $24
    million and $26 million.
  • Stock-based compensation is expected to be between approximately $73
    million and $77 million, assuming market prices for our common stock
    approximately consistent with current levels.

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

We are unable, without unreasonable efforts, to provide a reconciliation
for other GAAP measures which are excluded from our non-GAAP outlook,
including the impact of future business acquisitions or acquisition
expenses, future restructuring expenses, and non-GAAP income tax
adjustments due to the level of unpredictability and uncertainty
associated with these items. For these same reasons, we are unable to
assess the probable significance of these excluded items.

About Verint Systems Inc.

Verint® (Nasdaq: VRNT) is a global leader in Actionable Intelligence®
solutions with a focus on customer engagement optimization and cyber
intelligence. Today, over 10,000 organizations in more than 180
countries—including over 85 percent of the Fortune 100—count on
intelligence from Verint solutions to make more informed, effective and
timely decisions. Learn more about how we’re creating A Smarter World
with Actionable Intelligence® at www.verint.com.

VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT COMPANY, NEXT
IT, FORESEE, OPINIONLAB, KIRAN ANALYTICS, TERROGENCE, SENSECY, CUSTOMER
ENGAGEMENT SOLUTIONS, CYBER INTELLIGENCE SOLUTIONS, EDGEVR, RELIANT,
VANTAGE, STAR-GATE, SUNTECH, and VIGIA are trademarks or registered
trademarks of Verint Systems Inc. or its subsidiaries. Other trademarks
mentioned are the property of their respective owners.

Important Additional Information and Where to Find It

Verint has filed a definitive proxy statement on Schedule 14A and form
of associated WHITE Proxy Card with the Securities and Exchange
Commission (“SEC”) in connection with the solicitation of proxies for
its 2019 Annual Meeting (the “Definitive Proxy Statement”). Details
concerning the nominees of Verint’s Board of Directors for election at
the 2019 Annual Meeting are included in the Definitive Proxy Statement.
Verint has mailed solicitation materials, including a WHITE proxy card,
to stockholders of record entitled to vote at the 2019 Annual Meeting.
BEFORE MAKING ANY VOTING DECISION, INVESTORS AND STOCKHOLDERS OF THE
COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH OR FURNISHED
TO THE SEC, INCLUDING VERINT’S DEFINITIVE PROXY STATEMENT AND ANY
SUPPLEMENTS THERETO AND ACCOMPANYING WHITE PROXY CARD, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Stockholders are able to obtain a free
copy of the Definitive Proxy Statement and of these other documents
through the website maintained by the SEC at http://www.sec.gov
and through the website maintained by Verint at http://www.verint.com/investor-relations
as soon as reasonably practicable after such materials are
electronically filed with, or furnished to, the SEC.

Certain Information Regarding Participants

Verint, its directors and certain of its officers and other employees
will be deemed to be participants in the solicitation of Verint’s
stockholders in connection with Verint’s 2019 Annual Meeting.
Information regarding the names, affiliations and direct and indirect
interests (by security holdings or otherwise) of these persons is set
forth in the Definitive Proxy Statement filed with the SEC in connection
with Verint’s 2019 Annual Meeting. Additional information regarding the
interests of participants of Verint in the solicitation of proxies in
respect of Verint’s 2019 Annual Meeting will be filed with the SEC when
they become available. Stockholders are able to obtain a free copy of
the Definitive Proxy Statement and other documents filed by Verint with
the SEC from the sources listed above.

This document 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 risks, uncertainties and assumptions, any of
which could cause actual results to differ materially from those
expressed in or implied by the forward-looking statements. For a
detailed discussion of these risk factors, see our Annual Report on Form
10-K for the fiscal year ended January 31, 2019, and other filings we
make with the SEC. The forward-looking statements contained in this
document are made as of the date of this document and, except as
required by law, Verint assumes no obligation to update or revise them
or to provide reasons why actual results may differ.

1 Bloomberg and Capital IQ, as of 8-Apr-2019.

2 Enterprise Peers include CVLT, NTCT, CSGS, NICE, NUAN,
PEGA, and MSTR.

3 Security Peers include FEYE, FSCT, SCWX, EVBG, MSI, BAE,
RTN and MANT.

4 The $324 million revenue, 19.2% operating margin and $0.73
EPS are non-GAAP metrics.

5Our guidance for FY20F revenue of $1,375 million and Diluted
EPS of $3.65 are on a non-GAAP basis.

6 All targets are on a non-GAAP basis.

7 Permission to use quote neither sought nor obtained.