Press release

Verint Announces Q4 and Full Year FY2020 Results

0
Sponsored by Businesswire

Verint® Systems Inc. (NASDAQ: VRNT), a global Actionable Intelligence® leader, today announced results for the three months and year ended January 31, 2020 (FY20). Revenue for the three months ended January 31, 2020 was $339 million on a GAAP basis and $349 million on a non-GAAP basis. Diluted EPS for the three months ended January 31, 2020 was $0.07 on a GAAP basis and $1.11 on a non-GAAP basis. Revenue for the year ended January 31, 2020 was $1,304 million on a GAAP basis and $1,336 million on a non-GAAP basis. Diluted EPS for the year ended January 31, 2020 was $0.43 on a GAAP basis and $3.59 on a non-GAAP basis.

“In FY20, we made significant progress with our three strategic objectives and are pleased to report strong execution of our Customer Engagement Cloud First strategy, our Cyber Intelligence Software Model strategy and our plan to separate our two businesses. In the current COVID-19 environment, we are highly engaged with our global base of customers helping them to navigate the new challenges they are facing. Our employees remain fully engaged, working either from home, or from offices that have been authorized to remain open, and we believe our business continuity plan is working well,” said Dan Bodner, CEO.

Customer Engagement FY20 Highlights

  • Cloud adoption accelerating at large enterprises: Cloud contracts with TCV > $1 million up 93% y-o-y
  • Strong cloud revenue growth: Cloud revenue up about 45% y-o-y
  • Strong SaaS bookings growth: New SaaS ACV up more than 70% y-o-y
  • Recurring revenue: Percentage of software revenue that is recurring increased ~400 bps y-o-y to around 75%
  • Large project from the Social Security Administration (revenue expected in FY21)
  • See Tables 2, 4 and 7 for additional Customer Engagement financial information

“In Customer Engagement, the market continued its shift to the cloud, with a notable acceleration in large enterprises. We are pleased to report that all key cloud metrics were up significantly in FY20, with cloud revenue up about 45%, new SaaS ACV up more than 70%, and the percentage of software revenue that is recurring up approximately 400 basis points to around 75%. We are also pleased to announce that the Social Security Administration has selected Verint solutions for a large project, consisting of $35 million in perpetual software licenses, plus services and support, to be deployed in several stages. Revenue from this project was previously expected to be partially recognized in our FY20 fourth quarter. The project is being delayed due to appeals and we now expect it to contribute to revenue in FY21. In FY20 (excluding any revenue from this large project), we achieved high-single digit revenue growth on a constant currency basis. Looking ahead, Verint is well positioned for long-term market growth due to our large differentiated portfolio, cloud first go-to-market, and expanding cloud channel partnerships,” Bodner added.

Current COVID-19 Environment for Customer Engagement

Bodner continued, “We are focused on helping our customers navigate their COVID-19 challenges and our solutions support them with the pressing issues they are facing, including the urgent need for advanced analytics, addressing the growth in self-service interactions and managing work from home dynamics. An example is the Centers for Disease Control and Prevention, or CDC, a long-standing Verint customer. The CDC has recently experienced a huge spike in website traffic and we help them to leverage analytics to drive COVID-19 insights. The majority of our customers are large enterprises in financial services, healthcare, utilities, technology and government, where productivity, compliance, and fraud detection remain a high priority.”

Cyber Intelligence FY20 Highlights

  • Software Model Transition: Estimated Fully Allocated Gross Margins Up ~400bps y-o-y
  • Estimated Fully Allocated Gross Profit Growth: Up 13% y-o-y
  • Large Orders: Including one for ~$15 million, one for ~$10 million, and five for ~$5 million each
  • See Tables 2, 5 and 7 for additional Cyber Intelligence financial information

“In Cyber Intelligence, advanced data mining software continues to play a critical role in accelerating security investigations and generating actionable insights to fight crime and terror. In FY20, we won many large contracts with an increased software mix, driving a 13% year-over-year increase in gross profit on an estimated fully allocated basis. Our software model transition, which was ahead of plan in FY20, provides our customers faster innovation and software refresh cycles to address security threats that are rapidly becoming more complex with increased data types and volume. Verint is well positioned to help our customers address these evolving threats and sustain growth over the long run,” said Bodner.

Current COVID-19 Environment for Cyber Intelligence

Bodner concluded, “Our customers are responsible for maintaining law and order in times of peace and in times of crisis. We have been asked by governments around the world to address use cases directly related to the current COVID-19 environment, including helping them monitor and enforce quarantines from a centralized control center and scan the internet and social media for signs of increased criminal and terrorism activity in a time of greater uncertainty. With close working relationships with government and commercial organizations in more than 100 counties, we are committed to helping our customers keep the world safe.”

Outlook

Doug Robinson, CFO, added, “Verint has a large customer base of more than 10,000 customers around the world and a very strong and differentiated portfolio. We had a successful FY20 and entered FY21 with a strong outlook. At this point, considering the rapidly changing conditions arising from COVID-19 and uncertainty about its potential impact, we are unable to provide guidance. In the event the global economy deteriorates due to the pandemic, we have a strong balance sheet with $3 billion of assets, including more than $550 million of cash and short-term investments. We believe we are well positioned to navigate the current environment, as we stay focused on supporting our customers and partners during this period.”

Conference Call Information

We will conduct a conference call today at 4:30 p.m. ET to discuss our results for the three months and year ended January 31, 2020 and outlook. An online, real-time webcast of the conference call will be available on our website at www.verint.com. The conference call can also be accessed live via telephone at 1-844-309-0615 (United States and Canada) and 1-661-378-9462 (international) and the passcode is 2862907. Please dial in 5-10 minutes prior to the scheduled start time.

About Non-GAAP Financial Measures

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

About Verint Systems Inc.

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

Cautions About Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint Systems Inc. These forward-looking statements are not guarantees of future performance and they are based on management’s expectations that involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, any of which could cause our actual results or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, economic instability, political unrest, armed conflicts, natural disasters, or outbreaks of disease, such as the novel coronavirus COVID-19 pandemic, as well as the resulting impact on information technology spending and government budgets, on our business; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization; risks due to aggressive competition in all of our markets, including with respect to maintaining revenues, margins, and sufficient levels of investment in our business and operations; risks created by the continued consolidation of our competitors or the introduction of large competitors in our markets with greater resources than we have; risks associated with our ability to successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, reputational considerations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments; risks relating to our ability to properly manage investments in our business and operations, execute on growth initiatives, and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources; risks associated with our ability to retain, recruit, and train qualified personnel in regions in which we operate, including in new markets and growth areas we may enter; risks that we may be unable to establish and maintain relationships with key resellers, partners, and systems integrators and risks associated with our reliance on third-party suppliers, partners, or original equipment manufacturers (“OEMs”) for certain components, products, or services, including companies that may compete with us or work with our competitors; risks associated with the mishandling or perceived mishandling of sensitive or confidential information, including information that may belong to our customers or other third parties, and with security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions; risks that our products or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks; risks associated with our significant international operations, including, among others, in Israel, Europe, and Asia, exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas; risks associated with political factors related to our business or operations, including reputational risks associated with our security solutions and our ability to maintain security clearances where required, as well as risks associated with a significant amount of our business coming from domestic and foreign government customers; risks associated with complex and changing local and foreign regulatory environments in the jurisdictions in which we operate, including, among others, with respect to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, relating to our own operations as well as to the use of our solutions by our customers; challenges associated with selling sophisticated solutions, including with respect to assisting customers in understanding and realizing the benefits of our solutions, and developing, offering, implementing, and maintaining a broad and sophisticated solution portfolio; challenges associated with pursuing larger sales opportunities, including with respect to longer sales cycles, transaction reductions, deferrals, or cancellations during the sales cycle; risk of customer concentration; challenges associated with our ability to accurately forecast when a sales opportunity will convert to an order, or to accurately forecast revenue and expenses; challenges associated with our Customer Engagement segment cloud transition and our Cyber Intelligence segment software model transition, and risk of increased volatility of our operating results from period to period; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use; risks that our customers delay or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in their business, or otherwise; risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all; risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings; risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of the successor to CTI’s business operations, Mavenir, Inc., being unwilling or unable to provide us with certain indemnities to which we are entitled; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel, and our ability to successfully implement and maintain enhancements to the foregoing, for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; 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 the planned issuance of preferred stock to an affiliate of Apax Partners, including with respect to completion of the transaction and Apax’s resulting significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and risks associated with the planned spin-off of our Cyber Intelligence Solutions business, including the possibility that the spin-off transaction may not be completed in the expected timeframe or at all, that it does not achieve the benefits anticipated, or that it negatively impacts our operations or stock price, including as a result of management distraction from our business. 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, 2020, when filed, and other filings we make with the SEC.

VERINT, ACTIONABLE INTELLIGENCE, THE CUSTOMER ENGAGEMENT COMPANY, CUSTOMER ENGAGEMENT SOLUTIONS and CYBER INTELLIGENCE SOLUTIONS 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

January 31,

 

Year Ended

January 31,

(in thousands, except per share data)

 

2020

 

2019

 

2020

 

2019

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

124,337

 

 

$

127,074

 

 

$

454,875

 

 

$

454,650

 

Service and support

 

214,866

 

 

203,156

 

 

848,759

 

 

775,097

 

Total revenue

 

339,203

 

 

330,230

 

 

1,303,634

 

 

1,229,747

 

Cost of revenue:

 

 

 

 

 

 

 

 

Product

 

39,106

 

 

29,005

 

 

127,183

 

 

129,922

 

Service and support

 

75,037

 

 

75,046

 

 

312,599

 

 

293,888

 

Amortization of acquired technology

 

5,722

 

 

6,524

 

 

23,984

 

 

25,403

 

Total cost of revenue

 

119,865

 

 

110,575

 

 

463,766

 

 

449,213

 

Gross profit

 

219,338

 

 

219,655

 

 

839,868

 

 

780,534

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development, net

 

58,135

 

 

53,113

 

 

231,683

 

 

209,106

 

Selling, general and administrative

 

124,579

 

 

114,701

 

 

488,871

 

 

426,183

 

Amortization of other acquired intangible assets

 

8,328

 

 

8,289

 

 

31,458

 

 

31,010

 

Total operating expenses

 

191,042

 

 

176,103

 

 

752,012

 

 

666,299

 

Operating income

 

28,296

 

 

43,552

 

 

87,856

 

 

114,235

 

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest income

 

1,103

 

 

1,531

 

 

5,620

 

 

4,777

 

Interest expense

 

(10,235

)

 

(9,674

)

 

(40,378

)

 

(37,344

)

Other income (expense), net

 

(996

)

 

(1,712

)

 

205

 

 

(3,906

)

Total other expense, net

 

(10,128

)

 

(9,855

)

 

(34,553

)

 

(36,473

)

Income before provision for income taxes

 

18,168

 

 

33,697

 

 

53,303

 

 

77,762

 

Provision for income taxes

 

11,500

 

 

5,389

 

 

17,620

 

 

7,542

 

Net income

 

6,668

 

 

28,308

 

 

35,683

 

 

70,220

 

Net income attributable to noncontrolling interests

 

1,799

 

 

1,002

 

 

6,999

 

 

4,229

 

Net income attributable to Verint Systems Inc.

 

$

4,869

 

 

$

27,306

 

 

$

28,684

 

 

$

65,991

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.42

 

 

$

0.43

 

 

$

1.02

 

Diluted

 

$

0.07

 

 

$

0.41

 

 

$

0.43

 

 

$

1.00

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

65,994

 

 

65,305

 

 

66,129

 

 

64,913

 

Diluted

 

66,999

 

 

66,504

 

 

67,355

 

 

66,245

 

 

 

Table 2

VERINT SYSTEMS INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Measures by Segment

(Unaudited)

 

 

 

Three Months Ended

January 31,

 

 

2020

 

2019

(in thousands)

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Total GAAP revenue

 

$

210,058

 

 

$

129,145

 

 

$

339,203

 

 

$

211,557

 

 

$

118,673

 

 

$

330,230

 

Revenue adjustments

 

4,702

 

 

5,557

 

 

10,259

 

 

6,233

 

 

200

 

 

6,433

 

Total non-GAAP revenue

 

$

214,760

 

 

$

134,702

 

 

$

349,462

 

 

$

217,790

 

 

$

118,873

 

 

$

336,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED GROSS PROFIT AND GROSS MARGIN

 

 

 

 

 

 

 

 

 

 

 

 

Segment products costs

 

$

9,710

 

 

$

26,694

 

 

$

36,404

 

 

$

8,564

 

 

$

19,256

 

 

$

27,820

 

Segment service expenses

 

54,377

 

 

16,642

 

 

71,019

 

 

53,075

 

 

18,293

 

 

71,368

 

Amortization of acquired technology

 

5,361

 

 

361

 

 

5,722

 

 

5,043

 

 

1,481

 

 

6,524

 

Stock-based compensation expenses (1)

 

2,301

 

 

679

 

 

2,980

 

 

1,063

 

 

514

 

 

1,577

 

Shared support expenses allocation (3)

 

2,438

 

 

1,302

 

 

3,740

 

 

2,148

 

 

1,138

 

 

3,286

 

Total GAAP estimated fully allocated cost of revenue

 

74,187

 

 

45,678

 

 

119,865

 

 

69,893

 

 

40,682

 

 

110,575

 

GAAP estimated fully allocated gross profit

 

135,871

 

 

83,467

 

 

219,338

 

 

141,664

 

 

77,991

 

 

219,655

 

GAAP estimated fully allocated gross margin

 

64.7

%

 

64.6

%

 

64.7

%

 

67.0

%

 

65.7

%

 

66.5

%

Revenue adjustments

 

4,702

 

 

5,557

 

 

10,259

 

 

6,233

 

 

200

 

 

6,433

 

Amortization of acquired technology

 

5,361

 

 

361

 

 

5,722

 

 

5,043

 

 

1,481

 

 

6,524

 

Stock-based compensation expenses (1)

 

2,301

 

 

679

 

 

2,980

 

 

1,063

 

 

514

 

 

1,577

 

Acquisition expenses, net (4)

 

38

 

 

20

 

 

58

 

 

233

 

 

125

 

 

358

 

Restructuring expenses (4)

 

235

 

 

125

 

 

360

 

 

234

 

 

132

 

 

366

 

Non-GAAP estimated fully allocated gross profit

 

$

148,508

 

 

$

90,209

 

 

$

238,717

 

 

$

154,470

 

 

$

80,443

 

 

$

234,913

 

Non-GAAP estimated fully allocated gross margin

 

69.2

%

 

67.0

%

 

68.3

%

 

70.9

%

 

67.7

%

 

69.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED RESEARCH AND DEVELOPMENT, NET

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

22,548

 

 

$

23,552

 

 

$

46,100

 

 

$

24,050

 

 

$

21,118

 

 

$

45,168

 

Stock-based compensation expenses (2)

 

2,935

 

 

1,566

 

 

4,501

 

 

1,680

 

 

896

 

 

2,576

 

Shared support expenses allocation (3)

 

4,913

 

 

2,621

 

 

7,534

 

 

3,501

 

 

1,868

 

 

5,369

 

GAAP estimated fully allocated research and development, net

 

30,396

 

 

27,739

 

 

58,135

 

 

29,231

 

 

23,882

 

 

53,113

 

As a percentage of GAAP revenue

 

14.5

%

 

21.5

%

 

17.1

%

 

13.8

%

 

20.1

%

 

16.1

%

Stock-based compensation expenses (2)

 

(2,935

)

 

(1,566

)

 

(4,501

)

 

(1,680

)

 

(896

)

 

(2,576

)

Acquisition expenses, net (4)

 

(202

)

 

(108

)

 

(310

)

 

(130

)

 

(70

)

 

(200

)

Restructuring expenses (4)

 

(270

)

 

(144

)

 

(414

)

 

(79

)

 

(42

)

 

(121

)

Non-GAAP estimated fully allocated research and development, net

 

$

26,989

 

 

$

25,921

 

 

$

52,910

 

 

$

27,342

 

 

$

22,874

 

 

$

50,216

 

As a percentage of non-GAAP revenue

 

12.6

%

 

19.2

%

 

15.1

%

 

12.6

%

 

19.2

%

 

14.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

41,011

 

 

$

25,002

 

 

$

66,013

 

 

$

41,870

 

 

$

21,917

 

 

$

63,787

 

Stock-based compensation expenses (2)

 

12,390

 

 

6,614

 

 

19,004

 

 

7,821

 

 

4,174

 

 

11,995

 

Shared support expenses allocation (3)

 

25,794

 

 

13,768

 

 

39,562

 

 

25,375

 

 

13,544

 

 

38,919

 

GAAP estimated fully allocated selling, general and administrative expenses

 

79,195

 

 

45,384

 

 

124,579

 

 

75,066

 

 

39,635

 

 

114,701

 

As a percentage of GAAP revenue

 

37.7

%

 

35.1

%

 

36.7

%

 

35.5

%

 

33.4

%

 

34.7

%

Stock-based compensation expenses (2)

 

(12,390

)

 

(6,614

)

 

(19,004

)

 

(7,821

)

 

(4,174

)

 

(11,995

)

Acquisition expenses, net (4)

 

(1,298

)

 

(693

)

 

(1,991

)

 

(3,321

)

 

(1,772

)

 

(5,093

)

Restructuring expenses (4)

 

(422

)

 

(226

)

 

(648

)

 

(938

)

 

(500

)

 

(1,438

)

Separation expenses (4)

 

(2,336

)

 

(1,247

)

 

(3,583

)

 

(16

)

 

(8

)

 

(24

)

Other adjustments (4)

 

(1,449

)

 

(773

)

 

(2,222

)

 

247

 

 

132

 

 

379

 

Non-GAAP estimated fully allocated selling, general and administrative expenses

 

$

61,300

 

 

$

35,831

 

 

$

97,131

 

 

$

63,217

 

 

$

33,313

 

 

$

96,530

 

As a percentage of non-GAAP revenue

 

28.5

%

 

26.6

%

 

27.8

%

 

29.0

%

 

28.0

%

 

28.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME, OPERATING MARGIN, AND ADJUSTED EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

GAAP estimated fully allocated operating income

 

$

18,165

 

 

$

10,131

 

 

$

28,296

 

 

$

29,286

 

 

$

14,266

 

 

$

43,552

 

GAAP estimated fully allocated operating margin

 

8.6

%

 

7.8

%

 

8.3

%

 

13.8

%

 

12.0

%

 

13.2

%

Revenue adjustments

 

4,702

 

 

5,557

 

 

10,259

 

 

6,233

 

 

200

 

 

6,433

 

Amortization of acquired technology

 

5,361

 

 

361

 

 

5,722

 

 

5,043

 

 

1,481

 

 

6,524

 

Amortization of other acquired intangible assets

 

8,115

 

 

213

 

 

8,328

 

 

8,081

 

 

208

 

 

8,289

 

Stock-based compensation expenses (2)

 

17,626

 

 

8,859

 

 

26,485

 

 

10,564

 

 

5,584

 

 

16,148

 

Acquisition expenses, net (4)

 

1,538

 

 

821

 

 

2,359

 

 

3,684

 

 

1,967

 

 

5,651

 

Restructuring expenses (4)

 

927

 

 

495

 

 

1,422

 

 

1,251

 

 

674

 

 

1,925

 

Separation expenses (4)

 

2,336

 

 

1,247

 

 

3,583

 

 

16

 

 

8

 

 

24

 

Other adjustments (4)

 

1,449

 

 

773

 

 

2,222

 

 

(247

)

 

(132

)

 

(379

)

Non-GAAP estimated fully allocated operating income

 

60,219

 

 

28,457

 

 

88,676

 

 

63,911

 

 

24,256

 

 

88,167

 

Depreciation and amortization (5)

 

5,803

 

 

3,097

 

 

8,900

 

 

4,692

 

 

2,504

 

 

7,196

 

Estimated fully allocated adjusted EBITDA

 

$

66,022

 

 

$

31,554

 

 

$

97,576

 

 

$

68,603

 

 

$

26,760

 

 

$

95,363

 

Non-GAAP estimated fully allocated operating margin

 

28.0

%

 

21.1

%

 

25.4

%

 

29.3

%

 

20.4

%

 

26.2

%

Estimated fully allocated adjusted EBITDA margin

 

30.7

%

 

23.4

%

 

27.9

%

 

31.5

%

 

22.5

%

 

28.3

%

 

 

Year Ended

January 31,

 

 

2020

 

2019

(in thousands)

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

 

Customer

Engagement

 

Cyber

Intelligence

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Total GAAP revenue

 

$

846,525

 

 

$

457,109

 

 

$

1,303,634

 

 

$

796,287

 

 

$

433,460

 

 

$

1,229,747

 

Revenue adjustments

 

26,675

 

 

5,708

 

 

32,383

 

 

15,059

 

 

293

 

 

15,352

 

Total non-GAAP revenue

 

$

873,200

 

 

$

462,817

 

 

$

1,336,017

 

 

$

811,346

 

 

$

433,753

 

 

$

1,245,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED GROSS PROFIT AND GROSS MARGIN

 

 

 

 

 

 

 

 

 

 

 

 

Segment products costs

 

$

35,455

 

 

$

83,291

 

 

$

118,746

 

 

$

35,018

 

 

$

90,553

 

 

$

125,571

 

Segment service expenses

 

226,555

 

 

70,768

 

 

297,323

 

 

209,305

 

 

70,228

 

 

279,533

 

Amortization of acquired technology

 

21,578

 

 

2,406

 

 

23,984

 

 

17,985

 

 

7,418

 

 

25,403

 

Stock-based compensation expenses (1)

 

6,318

 

 

1,866

 

 

8,184

 

 

4,427

 

 

1,308

 

 

5,735

 

Shared support expenses allocation (3)

 

10,125

 

 

5,404

 

 

15,529

 

 

8,457

 

 

4,514

 

 

12,971

 

Total GAAP estimated fully allocated cost of revenue

 

300,031

 

 

163,735

 

 

463,766

 

 

275,192

 

 

174,021

 

 

449,213

 

GAAP estimated fully allocated gross profit

 

546,494

 

 

293,374

 

 

839,868

 

 

521,095

 

 

259,439

 

 

780,534

 

GAAP estimated fully allocated gross margin

 

64.6

%

 

64.2

%

 

64.4

%

 

65.4

%

 

59.9

%

 

63.5

%

Revenue adjustments

 

26,675

 

 

5,708

 

 

32,383

 

 

15,059

 

 

293

 

 

15,352

 

Amortization of acquired technology

 

21,578

 

 

2,406

 

 

23,984

 

 

17,985

 

 

7,418

 

 

25,403

 

Stock-based compensation expenses (1)

 

6,318

 

 

1,866

 

 

8,184

 

 

4,427

 

 

1,308

 

 

5,735

 

Acquisition expenses, net (4)

 

81

 

 

43

 

 

124

 

 

226

 

 

121

 

 

347

 

Restructuring expenses (4)

 

1,644

 

 

877

 

 

2,521

 

 

980

 

 

523

 

 

1,503

 

Non-GAAP estimated fully allocated gross profit

 

$

602,790

 

 

$

304,274

 

 

$

907,064

 

 

$

559,772

 

 

$

269,102

 

 

$

828,874

 

Non-GAAP estimated fully allocated gross margin

 

69.0

%

 

65.7

%

 

67.9

%

 

69.0

%

 

62.0

%

 

66.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED RESEARCH AND DEVELOPMENT, NET

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

101,002

 

 

$

90,708

 

 

$

191,710

 

 

$

94,935

 

 

$

80,927

 

 

$

175,862

 

Stock-based compensation expenses (2)

 

8,754

 

 

4,672

 

 

13,426

 

 

6,435

 

 

3,435

 

 

9,870

 

Shared support expenses allocation (3)

 

17,309

 

 

9,238

 

 

26,547

 

 

15,240

 

 

8,134

 

 

23,374

 

GAAP estimated fully allocated research and development, net

 

127,065

 

 

104,618

 

 

231,683

 

 

116,610

 

 

92,496

 

 

209,106

 

As a percentage of GAAP revenue

 

15.0

%

 

22.9

%

 

17.8

%

 

14.6

%

 

21.3

%

 

17.0

%

Stock-based compensation expenses (2)

 

(8,754

)

 

(4,672

)

 

(13,426

)

 

(6,435

)

 

(3,435

)

 

(9,870

)

Acquisition expenses, net (4)

 

(546

)

 

(292

)

 

(838

)

 

(134

)

 

(71

)

 

(205

)

Restructuring expenses (4)

 

(853

)

 

(455

)

 

(1,308

)

 

(312

)

 

(167

)

 

(479

)

Non-GAAP estimated fully allocated research and development, net

 

$

116,912

 

 

$

99,199

 

 

$

216,111

 

 

$

109,729

 

 

$

88,823

 

 

$

198,552

 

As a percentage of non-GAAP revenue

 

13.4

%

 

21.4

%

 

16.2

%

 

13.5

%

 

20.5

%

 

15.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTIMATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Segment expenses

 

$

179,440

 

 

$

91,452

 

 

$

270,892

 

 

$

159,199

 

 

$

80,108

 

 

$

239,307

 

Stock-based compensation expenses (2)

 

39,829

 

 

21,259

 

 

61,088

 

 

33,286

 

 

17,766

 

 

51,052

 

Shared support expenses allocation (3)

 

102,293

 

 

54,598

 

 

156,891

 

 

88,557

 

 

47,267

 

 

135,824

 

GAAP estimated fully allocated selling, general and administrative expenses

 

321,562

 

 

167,309

 

 

488,871

 

 

281,042

 

 

145,141

 

 

426,183

 

As a percentage of GAAP revenue

 

38.0

%

 

36.6

%

 

37.5

%

 

35.3

%

 

33.5

%

 

34.7

%

Stock-based compensation expenses (2)

 

(39,829

)

 

(21,259

)

 

(61,088

)

 

(33,286

)

 

(17,766

)

 

(51,052

)

Acquisition expenses, net (4)

 

(6,503

)

 

(3,471

)

 

(9,974

)

 

(6,112

)

 

(3,263

)

 

(9,375

)

Restructuring expenses (4)

 

(1,786

)

 

(954

)

 

(2,740

)

 

(1,931

)

 

(1,031

)

 

(2,962

)

Separation expenses (4)

 

(3,448

)

 

(1,840

)

 

(5,288

)

 

(202

)

 

(108

)

 

(310

)

Other adjustments (4)

 

(6,609

)

 

(3,528

)

 

(10,137

)

 

615

 

 

328

 

 

943

 

Non-GAAP estimated fully allocated selling, general and administrative expenses

 

$

263,387

 

 

$

136,257

 

 

$

399,644

 

 

$

240,126

 

 

$

123,301

 

 

$

363,427

 

As a percentage of non-GAAP revenue

 

30.2

%

 

29.4

%

 

29.9

%

 

29.6

%

 

28.4

%

 

29.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME, OPERATING MARGIN, AND ADJUSTED EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

GAAP estimated fully allocated operating income

 

$

67,004

 

 

$

20,852

 

 

$

87,856

 

 

$

93,083

 

 

$

21,152

 

 

$

114,235

 

GAAP estimated fully allocated operating margin

 

7.9

%

 

4.6

%

 

6.7

%

 

11.7

%

 

4.9

%

 

9.3

%

Revenue adjustments

 

26,675

 

 

5,708

 

 

32,383

 

 

15,059

 

 

293

 

 

15,352

 

Amortization of acquired technology

 

21,578

 

 

2,406

 

 

23,984

 

 

17,985

 

 

7,418

 

 

25,403

 

Amortization of other acquired intangible assets

 

30,863

 

 

595

 

 

31,458

 

 

30,360

 

 

650

 

 

31,010

 

Stock-based compensation expenses (2)

 

54,901

 

 

27,797

 

 

82,698

 

 

44,148

 

 

22,509

 

 

66,657

 

Acquisition expenses, net (4)

 

7,130

 

 

3,806

 

 

10,936

 

 

6,472

 

 

3,455

 

 

9,927

 

Restructuring expenses (4)

 

4,283

 

 

2,286

 

 

6,569

 

 

3,223

 

 

1,721

 

 

4,944

 

Separation expenses (4)

 

3,448

 

 

1,840

 

 

5,288

 

 

202

 

 

108

 

 

310

 

Other adjustments (4)

 

6,609

 

 

3,528

 

 

10,137

 

 

(615

)

 

(328

)

 

(943

)

Non-GAAP estimated fully allocated operating income

 

222,491

 

 

68,818

 

 

291,309

 

 

209,917

 

 

56,978

 

 

266,895

 

Depreciation and amortization (5)

 

21,737

 

 

11,602

 

 

33,339

 

 

19,449

 

 

10,380

 

 

29,829

 

Estimated fully allocated adjusted EBITDA

 

$

244,228

 

 

$

80,420

 

 

$

324,648

 

 

$

229,366

 

 

$

67,358

 

 

$

296,724

 

Non-GAAP estimated fully allocated operating margin

 

25.5

%

 

14.9

%

 

21.8

%

 

25.9

%

 

13.1

%

 

21.4

%

Estimated fully allocated adjusted EBITDA margin

 

28.0

%

 

17.4

%

 

24.3

%

 

28.3

%

 

15.5

%

 

23.8

%

(1) Represents the stock-based compensation expenses applicable to cost of revenue, allocated proportionally based upon our year ended January 31, 2019, annual operations and service expense wages for each segment, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our two businesses.

(2) Represents the stock-based compensation expenses applicable to research and development, net and selling, general and administrative, allocated proportionally based upon our non-GAAP segment revenue for the year ended January 31, 2019, which we believe provides a reasonable approximation for purposes of understanding the relative non-GAAP operating margins of our two businesses.

(3) Represents our shared support expenses (as disclosed in footnote 17 to our January 31, 2020 Form 10-K, when filed), allocated proportionally based upon our non-GAAP segment revenue for the year ended January 31, 2019, which we believe provides a reasonable approximation for purposes of understanding the relative non-GAAP operating margins of our two businesses.

(4) Represents the portion of our acquisition expenses, net and restructuring expenses, separation expenses and other adjustments, allocated proportionally based upon our year ended January 31, 2019, annual non-GAAP segment revenue, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins and operating margins of our two businesses.

(5) Represents certain depreciation and amortization expenses, which are otherwise included in our non-GAAP operating income, allocated proportionally based upon our non-GAAP segment revenue for the year ended January 31, 2019, which we believe provides a reasonable approximation for purposes of understanding the relative adjusted EBITDA of our two businesses.

 

Table 3

VERINT SYSTEMS INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited)

 

 

 

Three Months Ended

January 31,

 

Year Ended

January 31,

(in thousands, except per share data)

 

2020

 

2019

 

2020

 

2019

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

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other expense, net

 

$

(10,128

)

 

$

(9,855

)

 

$

(34,553

)

 

$

(36,473

)

Unrealized losses on derivatives, net

 

 

 

896

 

 

1,485

 

 

1,135

 

Amortization of convertible note discount

 

3,184

 

 

3,021

 

 

12,490

 

 

11,850

 

Acquisition expenses, net

 

(22

)

 

58

 

 

(90

)

 

374

 

Non-GAAP other expense, net(1)

 

$

(6,966

)

 

$

(5,880

)

 

$

(20,668

)

 

$

(23,114

)

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP provision for income taxes

 

$

11,500

 

 

$

5,389

 

 

$

17,620

 

 

$

7,542

 

GAAP effective income tax rate

 

63.3

%

 

16.0

%

 

33.1

%

 

9.7

%

Non-GAAP tax adjustments

 

(5,911

)

 

4,211

 

 

4,085

 

 

19,345

 

Non-GAAP provision for income taxes

 

$

5,589

 

 

$

9,600

 

 

$

21,705

 

 

$

26,887

 

Non-GAAP effective income tax rate

 

6.8

%

 

11.7

%

 

8.0

%

 

11.0

%

 

 

 

 

 

 

 

 

 

Table of Reconciliation from GAAP Net Income Attributable to Verint Systems Inc. to Non-GAAP Net Income Attributable to Verint Systems Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income attributable to Verint Systems Inc.

 

$

4,869

 

 

$

27,306

 

 

$

28,684

 

 

$

65,991

 

Revenue adjustments

 

10,259

 

 

6,433

 

 

32,383

 

 

15,352

 

Amortization of acquired technology

 

5,722

 

 

6,524

 

 

23,984

 

 

25,403

 

Amortization of other acquired intangible assets

 

8,328

 

 

8,289

 

 

31,458

 

 

31,010

 

Stock-based compensation expenses

 

26,485

 

 

16,148

 

 

82,698

 

 

66,657

 

Unrealized losses on derivatives, net

 

 

 

896

 

 

1,485

 

 

1,135

 

Amortization of convertible note discount

 

3,184

 

 

3,021

 

 

12,490

 

 

11,850

 

Acquisition expenses, net

 

2,339

 

 

5,709

 

 

10,846

 

 

10,301

 

Restructuring expenses

 

1,419

 

 

1,925

 

 

6,569

 

 

4,944

 

Separation expenses

 

3,583

 

 

24

 

 

5,288

 

 

310

 

Other adjustments

 

2,222

 

 

(379

)

 

10,137

 

 

(943

)

Non-GAAP tax adjustments

 

5,911

 

 

(4,211

)

 

(4,085

)

 

(19,345

)

Total GAAP net income adjustments

 

69,452

 

 

44,379

 

 

213,253

 

 

146,674

 

Non-GAAP net income attributable to Verint Systems Inc.

 

$

74,321

 

 

$

71,685

 

 

$

241,937

 

 

$

212,665

 

 

 

 

 

 

 

 

 

 

Table Comparing GAAP Diluted Net Income Per Common Share Attributable to Verint Systems Inc. to Non-GAAP Diluted Net Income Per Common Share Attributable to Verint Systems Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.07

 

 

$

0.41

 

 

$

0.43

 

 

$

1.00

 

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

 

$

1.11

 

 

$

1.08

 

 

$

3.59

 

 

$

3.21

 

 

 

 

 

 

 

 

 

 

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

 

66,999

 

 

66,504

 

 

67,355

 

 

66,245

 

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

 

 

 

 

 

 

 

 

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

 

66,999

 

 

66,504

 

 

67,355

 

 

66,245

 

Table of Reconciliation from GAAP Net Income Attributable to Verint Systems Inc. to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income attributable to Verint Systems Inc.

 

$

4,869

 

 

$

27,306

 

 

$

28,684

 

 

$

65,991

 

As a percentage of GAAP revenue

 

1.4

%

 

8.3

%

 

2.2

%

 

5.4

%

Net income attributable to noncontrolling interest

 

1,799

 

 

1,002

 

 

6,999

 

 

4,229

 

Provision for income taxes

 

11,500

 

 

5,389

 

 

17,620

 

 

7,542

 

Other expense, net

 

10,128

 

 

9,855

 

 

34,553

 

 

36,473

 

Depreciation and amortization(2)

 

22,951

 

 

22,007

 

 

88,783

 

 

86,242

 

Revenue adjustments

 

10,259

 

 

6,433

 

 

32,383

 

 

15,352

 

Stock-based compensation expenses

 

26,485

 

 

16,148

 

 

82,698

 

 

66,657

 

Acquisition expenses, net

 

2,359

 

 

5,651

 

 

10,936

 

 

9,927

 

Restructuring expenses

 

1,421

 

 

1,927

 

 

6,567

 

 

4,944

 

Separation expenses

 

3,583

 

 

24

 

 

5,288

 

 

310

 

Other adjustments

 

2,222

 

 

(379

)

 

10,137

 

 

(943

)

Adjusted EBITDA

 

$

97,576

 

 

$

95,363

 

 

$

324,648

 

 

$

296,724

 

As a percentage of non-GAAP revenue

 

27.9

%

 

28.3

%

 

24.3

%

 

23.8

%

 

 

 

 

 

 

 

 

 

Table of Reconciliation from Gross Debt to Net Debt

 

 

 

 

January 31,

2020

 

January 31,

2019

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

 

 

 

 

$

4,250

 

 

$

4,343

 

Long-term debt

 

 

 

 

 

832,798

 

 

777,785

 

Unamortized debt discounts and issuance costs

 

 

 

 

 

22,327

 

 

36,589

 

Gross debt

 

 

 

 

 

859,375

 

 

818,717

 

Less:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

379,146

 

 

369,975

 

Restricted cash and cash equivalents, and restricted bank time deposits

 

 

 

 

 

43,860

 

 

42,262

 

Short-term investments

 

 

 

 

 

20,215

 

 

32,329

 

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

 

 

 

 

 

416,154

 

 

374,151

 

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

 

 

 

 

 

26,363

 

 

23,193

 

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

 

 

 

 

 

$

389,791

 

 

$

350,958

 

 

 

 

 

 

 

 

 

 

(1) For the three months ended January 31, 2020, non-GAAP other expense, net of $7.0 million was comprised of $5.9 million of interest and other expense, and $1.1 million of foreign exchange charges primarily related to balance sheet translations.

(2) Adjusted for financing fee amortization.

 

Table 4

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Customer Engagement Revenue and Cloud Metrics

(Unaudited)

 

 

 

Three Months Ended

January 31,

 

Year Ended

January 31,

(in thousands)

 

2020

 

2019

 

2020

 

2019

Table of Reconciliation from GAAP Software (includes cloud and support) and Professional Services Revenue to Non-GAAP Software (includes cloud and support) and Professional Services Revenue

 

 

 

 

 

 

 

 

 

Software (includes cloud and support) revenue – GAAP

 

$

180,836

 

 

$

180,536

 

 

$

714,260

 

 

$

661,796

 

Perpetual revenue – GAAP

 

40,526

 

 

57,397

 

 

179,882

 

 

196,125

 

Cloud revenue – GAAP

 

59,500

 

 

43,624

 

 

215,827

 

 

150,743

 

Support revenue – GAAP

 

80,810

 

 

79,515

 

 

318,551

 

 

314,928

 

Professional services revenue – GAAP

 

$

29,222

 

 

$

31,021

 

 

$

132,265

 

 

$

134,491

 

Total revenue – GAAP

 

$

210,058

 

 

$

211,557

 

 

$

846,525

 

 

$

796,287

 

 

 

 

 

 

 

 

 

 

Estimated software (includes cloud and support) revenue adjustments

 

$

4,702

 

 

$

6,233

 

 

$

26,675

 

 

$

15,059

 

Estimated perpetual revenue adjustments

 

 

 

 

 

 

 

 

Estimated cloud revenue adjustments

 

4,637

 

 

6,145

 

 

26,346

 

 

14,690

 

Estimated support revenue adjustments

 

65

 

 

88

 

 

329

 

 

369

 

Estimated professional services revenue adjustments

 

 

 

 

 

 

 

 

Total estimated revenue adjustments

 

$

4,702

 

 

$

6,233

 

 

$

26,675

 

 

$

15,059

 

 

 

 

 

 

 

 

 

 

Software (includes cloud and support) revenue – non-GAAP

 

$

185,538

 

 

$

186,769

 

 

$

740,935

 

 

$

676,855

 

Perpetual revenue – non-GAAP

 

40,526

 

 

57,397

 

 

179,882

 

 

196,125

 

Cloud revenue – non-GAAP

 

64,137

 

 

49,769

 

 

242,173

 

 

165,433

 

Support revenue – non-GAAP

 

80,875

 

 

79,603

 

 

318,880

 

 

315,297

 

Professional services revenue – non-GAAP

 

$

29,222

 

 

$

31,021

 

 

$

132,265

 

 

$

134,491

 

Total revenue – non-GAAP

 

$

214,760

 

 

$

217,790

 

 

$

873,200

 

 

$

811,346

 

 

 

 

 

 

 

 

 

 

Table of Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SaaS revenue – GAAP

 

$

44,981

 

 

$

31,289

 

 

$

159,293

 

 

$

109,640

 

Bundled SaaS revenue – GAAP

 

31,406

 

 

23,368

 

 

115,925

 

 

84,715

 

Unbundled SaaS revenue – GAAP

 

13,575

 

 

7,921

 

 

43,368

 

 

24,925

 

Optional managed services revenue – GAAP

 

$

14,519

 

 

$

12,335

 

 

$

56,534

 

 

$

41,103

 

Cloud revenue – GAAP

 

$

59,500

 

 

$

43,624

 

 

$

215,827

 

 

$

150,743

 

 

 

 

 

 

 

 

 

 

Estimated SaaS revenue adjustments

 

$

4,267

 

 

$

5,599

 

 

$

24,464

 

 

$

12,485

 

Estimated bundled SaaS revenue adjustments

 

4,225

 

 

5,105

 

 

23,500

 

 

9,681

 

Estimated unbundled SaaS revenue adjustments

 

42

 

 

494

 

 

964

 

 

2,804

 

Estimated optional managed services revenue adjustments

 

$

370

 

 

$

546

 

 

$

1,882

 

 

$

2,205

 

Estimated cloud revenue adjustments

 

$

4,637

 

 

$

6,145

 

 

$

26,346

 

 

$

14,690

 

 

 

 

 

 

 

 

 

 

SaaS revenue – non-GAAP

 

$

49,248

 

 

$

36,888

 

 

$

183,757

 

 

$

122,125

 

Bundled SaaS revenue – non-GAAP

 

35,631

 

 

28,473

 

 

139,425

 

 

94,396

 

Unbundled SaaS revenue – non-GAAP

 

13,617

 

 

8,415

 

 

44,332

 

 

27,729

 

Optional managed services revenue – non-GAAP

 

$

14,889

 

 

$

12,881

 

 

$

58,416

 

 

$

43,308

 

Cloud revenue – non-GAAP

 

$

64,137

 

 

$

49,769

 

 

$

242,173

 

 

$

165,433

 

 

 

 

 

 

 

 

 

 

Table of New SaaS ACV

 

 

 

 

 

 

New SaaS ACV

 

$

15,785

 

 

$

11,658

 

 

$

49,710

 

 

$

29,069

 

New SaaS ACV Growth YoY

 

35.4

%

 

n/a

 

71.0

%

 

57.6

%

 

 

 

 

 

 

 

 

 

Table of New Perpetual License Equivalent Bookings

 

 

 

 

 

 

New perpetual license equivalent bookings

 

$

76,372

 

 

$

81,678

 

 

$

275,607

 

 

$

256,811

 

New perpetual license equivalent bookings growth YoY

 

(6.5

)%

 

n/a

 

7.3

%

 

n/a

Table 5

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Cyber Intelligence Revenue Metrics

(Unaudited)

 

 

 

Three Months Ended

January 31,

 

Year Ended

January 31,

(in thousands)

 

2020

 

2019

 

2020

 

2019

Recurring revenue – GAAP

 

$

52,092

 

 

$

46,027

 

 

$

192,578

 

 

$

165,265

 

Nonrecurring revenue – GAAP

 

77,053

 

 

72,646

 

 

264,531

 

 

268,195

 

Total revenue – GAAP

 

$

129,145

 

 

$

118,673

 

 

$

457,109

 

 

$

433,460

 

 

 

 

 

 

 

 

 

 

Estimated recurring revenue adjustments

 

$

471

 

 

$

200

 

 

$

622

 

 

$

293

 

Estimated nonrecurring revenue adjustments

 

5,086

 

 

 

 

5,086

 

 

 

Total estimated revenue adjustments

 

$

5,557

 

 

$

200

 

 

$

5,708

 

 

$

293

 

 

 

 

 

 

 

 

 

 

Recurring revenue – non-GAAP

 

$

52,563

 

 

$

46,227

 

 

$

193,200

 

 

$

165,558

 

Nonrecurring revenue – non-GAAP

 

82,139

 

 

72,646

 

 

269,617

 

 

268,195

 

Total revenue – non-GAAP

 

$

134,702

 

 

$

118,873

 

 

$

462,817

 

 

$

433,753

 

 

 

 

 

 

 

 

 

 

 

Table 6

VERINT SYSTEMS INC. AND SUBSIDIARIES

GAAP to Non-GAAP Segment and Shared Support Metrics

(Unaudited)

 

 

 

Three Months Ended

January 31,

 

Year Ended

January 31,

(in thousands)

 

2020

 

2019

 

2020

 

2019

Segment expenses – GAAP (1)

 

$

249,479

 

 

$

232,141

 

 

$

981,507

 

 

$

914,322

 

Shared support expenses – GAAP (2)

 

61,428

 

 

54,537

 

 

234,271

 

 

201,190

 

Total expenses – GAAP

 

$

310,907

 

 

$

286,678

 

 

$

1,215,778

 

 

$

1,115,512

 

 

 

 

 

 

 

 

 

 

Estimated segment expense adjustments

 

$

(32,378

)

 

$

(26,150

)

 

$

(114,106

)

 

$

(100,013

)

Estimated shared support expense adjustments

 

(17,740

)

 

(12,034

)

 

(56,963

)

 

(37,297

)

Total estimated expense adjustments

 

$

(50,118

)

 

$

(38,184

)

 

$

(171,069

)

 

$

(137,310

)

 

 

 

 

 

 

 

 

 

Segment expenses – non-GAAP (1)

 

$

217,101

 

 

$

205,991

 

 

$

867,401

 

 

$

814,309

 

Shared support expenses – non-GAAP (2)

 

43,688

 

 

42,503

 

 

177,308

 

 

163,893

 

Total expenses – non-GAAP

 

$

260,789

 

 

$

248,494

 

 

$

1,044,709

 

 

$

978,202

 

(1) Segment expenses include expenses incurred directly by our two segments.

(2) Shared support expenses include certain operating expenses that are provided by shared resources or are otherwise generally not controlled by segment management. The majority of which are for administrative support functions, such as information technology, human resources, finance, legal, and other general corporate support, and for occupancy expenses.

 

Table 7

VERINT SYSTEMS INC. AND SUBSIDIARIES

Calculation of Change in Revenue on a Constant Currency Basis

(Unaudited)

 

 

 

 

GAAP Revenue

 

 

Non-GAAP Revenue

(in thousands, except percentages)

 

Three Months

Ended

Year

Ended

 

Three Months

Ended

Year

Ended

Total Revenue

 

 

 

 

 

 

Revenue for the three months and year ended January 31, 2019

 

$

330,230

 

$

1,229,747

 

 

$

336,663

 

$

1,245,099

 

Revenue for the three months and year ended January 31, 2020

 

$

339,203

 

$

1,303,634

 

 

$

349,462

 

$

1,336,017

 

Revenue for the three months and year ended January 31, 2020

at constant currency(1)

 

$

340,000

 

$

1,316,000

 

 

$

350,000

 

$

1,349,000

 

Reported period-over-period revenue growth

 

2.7

%

6.0

%

 

3.8

%

7.3

%

% impact from change in foreign currency exchange rates

 

0.3

%

1.0

%

 

0.2

%

1.0

%

Constant currency period-over-period revenue growth

 

3.0

%

7.0

%

 

4.0

%

8.3

%

 

 

 

 

 

 

 

Customer Engagement

 

 

 

 

 

 

Revenue for the three months and year ended January 31, 2019

 

$

211,557

 

$

796,287

 

 

$

217,790

 

$

811,346

 

Revenue for the three months and year ended January 31, 2020

 

$

210,058

 

$

846,525

 

 

$

214,760

 

$

873,200

 

Revenue for the three months and year ended January 31, 2020

at constant currency(1)

 

$

210,000

 

$

855,000

 

 

$

215,000

 

$

882,000

 

Reported period-over-period revenue change

 

(0.7

)%

6.3

%

 

(1.4

)%

7.6

%

% impact from change in foreign currency exchange rates

 

%

1.1

%

 

0.1

%

1.1

%

Constant currency period-over-period revenue change

 

(0.7

)%

7.4

%

 

(1.3

)%

8.7

%

 

 

 

 

 

 

 

Cyber Intelligence

 

 

 

 

 

 

Revenue for the three months and year ended January 31, 2019

 

$

118,673

 

$

433,460

 

 

$

118,873

 

$

433,753

 

Revenue for the three months and year ended January 31, 2020

 

$

129,145

 

$

457,109

 

 

$

134,702

 

$

462,817

 

Revenue for the three months and year ended January 31, 2020

at constant currency(1)

 

$

130,000

 

$

461,000

 

 

$

135,000

 

$

467,000

 

Reported period-over-period revenue growth

 

8.8

%

5.5

%

 

13.3

%

6.7

%

% impact from change in foreign currency exchange rates

 

0.7

%

0.9

%

 

0.3

%

1.0

%

Constant currency period-over-period revenue growth

 

9.5

%

6.4

%

 

13.6

%

7.7

%

(1) Revenue for the three months and year ended January 31, 2020 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 months and year ended January 31, 2019 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 8

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

January 31,

(in thousands, except share and per share data)

 

2020

 

2019

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

379,146

 

 

$

369,975

 

Restricted cash and cash equivalents, and restricted bank time deposits

 

43,860

 

 

42,262

 

Short-term investments

 

20,215

 

 

32,329

 

Accounts receivable, net of allowance for doubtful accounts of $5.3 million and $3.8 million, respectively

 

382,435

 

 

375,663

 

Contract assets

 

64,961

 

 

63,389

 

Inventories

 

20,495

 

 

24,952

 

Prepaid expenses and other current assets

 

87,946

 

 

97,776

 

Total current assets

 

999,058

 

 

1,006,346

 

Property and equipment, net

 

116,111

 

 

100,134

 

Operating lease right-of-use assets

 

102,149

 

 

 

Goodwill

 

1,469,211

 

 

1,417,481

 

Intangible assets, net

 

197,764

 

 

225,183

 

Deferred income taxes

 

13,802

 

 

21,040

 

Other assets

 

117,963

 

 

96,843

 

Total assets

 

$

3,016,058

 

 

$

2,867,027

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

71,604

 

 

$

71,621

 

Accrued expenses and other current liabilities

 

229,698

 

 

208,481

 

Current maturities of long-term debt

 

4,250

 

 

4,343

 

Contract liabilities

 

397,350

 

 

377,376

 

Total current liabilities

 

702,902

 

 

661,821

 

Long-term debt

 

832,798

 

 

777,785

 

Long-term contract liabilities

 

40,565

 

 

30,094

 

Operating lease liabilities

 

90,372

 

 

 

Deferred income taxes

 

39,829

 

 

43,171

 

Other liabilities

 

67,155

 

 

93,352

 

Total liabilities

 

1,773,621

 

 

1,606,223

 

Commitments and Contingencies

 

 

 

 

Stockholders’ Equity:

 

 

 

 

Preferred stock – $0.001 par value; authorized 2,207,000 shares at January 31, 2020 and 2019, respectively; none issued.

 

 

 

 

Common stock – $0.001 par value; authorized 120,000,000 shares. Issued 68,529,000 and 66,998,000 shares; outstanding 64,738,000 and 65,333,000 shares at January 31, 2020 and 2019, respectively

 

68

 

 

67

 

Additional paid-in capital

 

1,660,889

 

 

1,586,266

 

Treasury stock, at cost 3,791,000 and 1,665,000 shares at January 31, 2020 and 2019, respectively

 

(174,134

)

 

(57,598

)

Accumulated deficit

 

(105,590

)

 

(134,274

)

Accumulated other comprehensive loss

 

(151,865

)

 

(145,225

)

Total Verint Systems Inc. stockholders’ equity

 

1,229,368

 

 

1,249,236

 

Noncontrolling interests

 

13,069

 

 

11,568

 

Total stockholders’ equity

 

1,242,437

 

 

1,260,804

 

Total liabilities and stockholders’ equity

 

$

3,016,058

 

 

$

2,867,027

 

Table 9

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Year Ended January 31,

(in thousands)

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

Net income

 

$

35,683

 

 

$

70,220

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

91,532

 

 

88,915

 

Provision for doubtful accounts

 

2,572

 

 

2,746

 

Stock-based compensation, excluding cash-settled awards

 

82,698

 

 

66,657

 

Amortization of discount on convertible notes

 

12,490

 

 

11,850

 

Provision (benefit) from deferred income taxes

 

2,145

 

 

(3,017

)

Non-cash gains on derivative financial instruments, net

 

(599

)

 

(2,511

)

Other non-cash items, net

 

4,544

 

 

(2,328

)

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

 

 

 

 

Accounts receivable

 

(6,894

)

 

(21,520

)

Contract assets

 

(1,470

)

 

5,751

 

Inventories

 

1,752

 

 

(8,208

)

Prepaid expenses and other assets

 

13,523

 

 

(4,753

)

Accounts payable and accrued expenses

 

(14,488

)

 

(15,648

)

Contract liabilities

 

27,575

 

 

32,919

 

Other liabilities

 

(13,290

)

 

(7,328

)

Other, net

 

131

 

 

1,506

 

Net cash provided by operating activities

 

237,904

 

 

215,251

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

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

 

(74,096

)

 

(90,022

)

Purchases of property and equipment

 

(35,028

)

 

(31,686

)

Purchases of investments

 

(47,407

)

 

(59,065

)

Maturities and sales of investments

 

59,324

 

 

33,118

 

Settlements of derivative financial instruments not designated as hedges

 

3,093

 

 

1,335

 

Cash paid for capitalized software development costs

 

(17,222

)

 

(7,320

)

Change in restricted bank time deposits, including long-term portion

 

(14,215

)

 

(21,304

)

Other investing activities

 

(250

)

 

(779

)

Net cash used in investing activities

 

(125,801

)

 

(175,723

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from borrowings, net of original issuance discount

 

45,000

 

 

 

Repayments of borrowings and other financing obligations

 

(6,478

)

 

(5,983

)

Payments of equity issuance, debt issuance, and other debt-related costs

 

(212

)

 

(206

)

Proceeds from exercises of stock options

 

 

 

 

Dividends or distributions paid to noncontrolling interests

 

(5,488

)

 

(4,409

)

Purchases of treasury stock

 

(113,690

)

 

(173

)

Payments of deferred purchase price and contingent consideration for business combinations (financing portion) and other financing activities

 

(30,454

)

 

(11,110

)

Net cash used in financing activities

 

(111,322

)

 

(21,881

)

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

 

(1,823

)

 

(3,158

)

Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents

 

(1,042

)

 

14,489

 

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

 

412,699

 

 

398,210

 

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

 

$

411,657

 

 

$

412,699

 

 

 

 

 

 

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

 

$

379,146

 

 

$

369,975

 

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

 

24,513

 

 

40,152

 

Restricted cash and cash equivalents included in other assets

 

7,998

 

 

2,572

 

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

 

$

411,657

 

 

$

412,699

 

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 software (includes cloud and support), non-GAAP professional services, non-GAAP recurring revenue, non-GAAP nonrecurring revenue, non-GAAP cloud revenue, non-GAAP SaaS revenue, non-GAAP optional managed services revenue, estimated fully allocated cost of revenue, estimated GAAP and non-GAAP fully allocated gross profit and gross margins, estimated GAAP and non-GAAP fully allocated research and development, net, estimated GAAP and non-GAAP fully allocated selling, general and administrative expenses, estimated GAAP and non-GAAP fully allocated operating income and operating margins, non-GAAP other income (expense), net, non-GAAP provision (benefit) for income taxes and non-GAAP effective income tax rate, non-GAAP net income attributable to Verint Systems Inc., non-GAAP net income per common share attributable to Verint Systems Inc., estimated fully allocated adjusted EBITDA and adjusted EBITDA margins, net debt, non-GAAP segment expenses, non-GAAP shared support expenses 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 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 foreign currency 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.

Amortization of convertible note discount. Our non-GAAP financial measures exclude the amortization of the imputed discount on our convertible notes. Under GAAP, certain convertible debt instruments that may be settled in cash upon conversion are required to be bifurcated into separate liability (debt) and equity (conversion option) components in a manner that reflects the issuer’s assumed non-convertible debt borrowing rate. For GAAP purposes, we are required to recognize imputed interest expense on the difference between our assumed non-convertible debt borrowing rate and the coupon rate on our $400.0 million of 1.50% convertible notes. This difference is excluded from our non-GAAP financial measures because we believe that this expense is based upon subjective assumptions and does not reflect the cash cost of our convertible debt.

Acquisition expenses, net. In connection with acquisition activity (including with respect to acquisitions that are not consummated), we incur expenses, 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. We exclude restructuring expenses from our non-GAAP financial measures, which include employee termination costs, facility exit costs, 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 December 4, 2019, we announced our intention to separate into two independent publicly traded companies: one which will consist of our Customer Engagement Solutions business, and one which will consist of our Cyber Intelligence Solutions business. We are incurring significant expenses to prepare for this separation, 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 IT expenses 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.

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, including $7.9 million of fees and expenses related to a shareholder proxy contest that was settled during three months ended July 31, 2019, all of which are unusual in nature and can vary significantly in amount and frequency.

Non-GAAP income tax adjustments. We exclude our GAAP provision (benefit) for income taxes from our non-GAAP measures of net income attributable to Verint Systems Inc., 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 ended January 31, 2020 is 8%, and was 11% for the year ended January 31, 2019. 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.

Customer Engagement Revenue Metrics and Operating Metrics

Software (includes cloud and support) includes, software licenses, appliances, SaaS and optional managed services.

Cloud revenue, on both a GAAP and non-GAAP basis, primarily consists of SaaS and optional managed services.

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

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

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 growth. We calculate new perpetual license equivalent bookings by multiplying New SaaS ACV bookings (excluding bookings from maintenance conversions, except for the uplift) by a conversion factor of 2.0 and adding that amount to perpetual license bookings. The conversion factor of 2.0 is an estimate that is derived from an analysis of our historical bookings and may change over time. Management uses perpetual license equivalent bookings to understand our performance, including our software growth and SaaS/perpetual license mix. This metric should not be viewed in isolation from other operating metrics that we make available to investors. The New Perpetual License Equivalent Bookings calculation was adjusted in Q4 for the full year to exclude bookings from maintenance conversion, except for uplift.

Cyber Intelligence Recurring and Nonrecurring Revenue Metrics

Recurring revenue, on both a GAAP and non-GAAP basis, primarily consists of initial and renewal support, subscription software licenses, and SaaS in certain limited transactions.

Nonrecurring revenue, on both a GAAP and non-GAAP basis, primarily consists of our perpetual licenses, long-term projects including software customizations that are recognized over time using a percentage of completion (“POC”) method, consulting, implementation and installation services, training, and hardware.

We believe that recurring and nonrecurring revenue provide investors with useful insight into the nature and sustainability of our revenue streams. The recurrence of these revenue streams in future periods depends on a number of factors including contractual periods and customers’ renewal decisions. Please see “Revenue adjustments” above for an explanation for why we present these revenue numbers on both a GAAP and non-GAAP basis.

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, revenue adjustments, restructuring expenses, acquisition expenses, 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, 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, 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 foreign currency 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 for revenue, operating margin, and diluted earnings per share, 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.