Verint Announces Strong Cloud Growth in the First Quarter

Open Cloud Platform Drives Large Cloud Wins

MELVILLE, N.Y.–(BUSINESS WIRE)–Verint® (Nasdaq: VRNT), The Customer Engagement Company™, today announced results for the three months ended April 30, 2021 (FYE 2022). Revenue for the three months ended April 30, 2021 was $201 million on a GAAP basis representing 8% year-over-year growth and $202 million on a non-GAAP basis representing 7% year-over-year growth. For the three months ended April 30, 2021, net loss per common share was ($0.04) on a GAAP basis, and diluted EPS was $0.44 on a non-GAAP basis.

“We are pleased with our results coming in ahead of our expectations and our strong performance across all key cloud metrics. We believe our open cloud platform is a true differentiator helping brands connect work, data and experiences across the enterprise to support their digital transformation strategies,” said Dan Bodner, Verint CEO.

Bodner added: “Recent large multi-year cloud wins driven by our cloud platform include orders (total contract value) for $17 million (healthcare), $10 million (financial services), $4 million (business services), $4 million (logistics) and $3 million (insurance). In May, we held our annual Customer Engage Conference with 5,000 registrations, up nearly 40% year-over-year. During the event we showcased innovation across our open cloud platform including our new solutions for Real-time Work, providing in-the-moment AI based assistance to the workforce.”

First Quarter Key Cloud Metrics

Strong Cloud Growth: Cloud revenue up more than 35% year-over-year
Strong Software Bookings Growth: Perpetual license equivalent bookings (PLE) up 28% year-over-year with more than half derived from SaaS
Improving Visibility from Multi-year Cloud Deals: Remaining performance obligations (RPO) increased 30% year-over-year to $619 million

FYE 2022 Outlook

Our non-GAAP outlook for the year ending January 31, 2022 is as follows:

Cloud Revenue Growth: 30% to 35%
New PLE Bookings Growth: 10+%
Revenue: $860 million with a range of +/- 2%
Diluted EPS: $2.23 at the midpoint of our revenue guidance

Our non-GAAP outlook for the three months ending July 31, 2021 and year ending January 31, 2022 excludes the following GAAP measures which we are able to quantify with reasonable certainty:

Amortization of intangible assets of approximately $12 million and $45 million, for the three months ending July 31, 2021 and year ending January 31, 2022, respectively.
Losses on early retirement of debt of $0 million and $2 million, for the three months ending July 31, 2021 and year ending January 31, 2022, respectively.
Favorable change in fair value of future tranche right of $0 million and $16 million, for the three months ending July 31, 2021 and year ending January 31, 2022, respectively.
Unrealized losses on derivatives, net of $0 million and $14 million, for the three months ending July 31, 2021 and year ending January 31, 2022, respectively.

Our non-GAAP outlook for the three months ending July 31, 2021 and year ending January 31, 2022 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 $1 million and $2 million, and $3 million and $4 million, for the three months ending July 31, 2021 and year ending January 31, 2022, respectively.
Stock-based compensation is expected to be between approximately $17 million and $20 million, and $65 million and $72 million, for the three months ending July 31, 2021 and year ending January 31, 2022, respectively, assuming market prices for our common stock approximately consistent with current levels.
Further costs associated with Verint’s February 1, 2021 separation into two independent public companies are expected to be between approximately $3 million and $5 million, and $12 million and $15 million, for the three months ending July 31, 2021 and year ending January 31, 2022, respectively.

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

We are unable, without unreasonable efforts, to provide a reconciliation for other GAAP measures which are excluded from our non-GAAP outlook, including the impact of future business acquisitions or acquisition expenses, future restructuring expenses, and non-GAAP income tax adjustments due to the level of unpredictability and uncertainty associated with these items. For these same reasons, we are unable to assess the probable significance of these excluded items. While historical results may not be indicative of future results, actual amounts for the three months ended April 30, 2021 and 2020 for the GAAP measures excluded from our non-GAAP outlook appear in Tables 2, 3 and 4 of this press release.

Conference Call Information

We will conduct a conference call today at 4:30 p.m. ET to discuss our results for the three months ended April 30, 2021, outlook, and long-term targets. An online, real-time webcast of the conference call and webcast slides will be available on our website at www.verint.com. The webcast slides will be available on our website until at least July 31, 2021. 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 8399029. 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) helps the world’s most iconic brands – including over 85 of the Fortune 100 companies – build enduring customer relationships by connecting work, data, and experiences across the enterprise. The Verint Customer Engagement portfolio draws on the latest advancements in AI and analytics, an open cloud architecture, and The Science of Customer Engagement^™ to help customers close the Engagement Capacity Gap™.

Verint. The Customer Engagement Company^™. Learn more at Verint.com.

Cautions About Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint Systems Inc. These forward-looking statements are not guarantees of future performance and they are based on management’s expectations that involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, any of which could cause our actual results or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, economic instability, political unrest, armed conflicts, natural disasters, or outbreaks of disease, such as the COVID-19 pandemic, as well as the resulting impact on information technology spending by enterprises and government customers, on our business; risks that our customers delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or are unable to honor contractual commitments or payment obligations due to liquidity issues or other challenges in their budgets and business, due to the COVID-19 pandemic or otherwise; risks that restrictions resulting from the COVID-19 pandemic or actions taken in response to the pandemic adversely impact our operations or our ability to fulfill orders, complete implementations, or recognize revenue; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer challenges and needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization; risks due to aggressive competition in all of our markets, including with respect to maintaining revenue, margins, and sufficient levels of investment in our business and operations, and competitors with greater resources than we have; risks relating to our ability to properly manage investments in our business and operations, execute on growth or strategic 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 identify suitable targets for acquisition or investment or 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; challenges associated with selling sophisticated solutions, including with respect to longer sales cycles, more complex sales processes, and assisting customers in understanding and realizing the benefits of our solutions, as well as with developing, offering, implementing, and maintaining a broad solution portfolio; challenges associated with our cloud transition, including increased importance of subscription renewal rates, and risk of increased variability in our period to period results based on the mix, terms, and timing of our transactions; risks that we may be unable to maintain, expand, and enable our relationships with partners as part of our growth strategy; risks associated with our reliance on 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, as well as cloud hosting providers; 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 associated with our significant international operations, exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas; risks associated with a significant part of our business coming from government contracts and associated procurement processes; risks associated with complex and changing domestic and foreign regulatory environments, relating to our own operations, the products and services we offer, and/or the use of our solutions by our customers, including, among others, with respect to data privacy and protection, government contracts, anti-corruption, trade compliance, tax, and labor matters; risks associated with the mishandling or perceived mishandling of sensitive or confidential information and data, including personally identifiable information or other information that may belong to our customers or other third parties, including in connection with our SaaS or other hosted or managed service offerings or when we are asked to perform service or support; risks that our solutions or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use; risks associated with leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings; risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all; risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of the successor to CTI’s business operations, Mavenir, Inc., being unwilling or unable to provide us with certain indemnities to which we are entitled; risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel, and our ability to successfully implement and maintain enhancements to the foregoing, for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; risks associated with market volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or speculation, or other factors and risks associated with actions of activist stockholders; risks associated with Apax Partners’ significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and risks associated with the spin-off of our Cyber Intelligence Solutions business, including the possibility that the spin-off does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities. We assume no obligation to revise or update any forward-looking statement, except as otherwise required by law. For a detailed discussion of these risk factors, see our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, our Quarterly Report on Form 10-Q for the quarter ended April 30, 2021, when filed, and other filings we make with the SEC.

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


Table 1
VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
	Three Months Ended April 30,
(in thousands, except per share data)	2021			2020
Revenue:
Recurring	$	144,453		$	129,070
Nonrecurring	56,451			56,795
Total revenue	200,904			185,865
Cost of revenue:
Recurring	38,076			34,928
Nonrecurring	29,880			31,619
Amortization of acquired technology	4,384			4,356
Total cost of revenue	72,340			70,903
Gross profit	128,564			114,962
Operating expenses:
Research and development, net	29,148			32,412
Selling, general and administrative	87,646			76,827
Amortization of other acquired intangible assets	7,328			7,764
Total operating expenses	124,122			117,003
Operating income (loss)	4,442			(2,041		)
Other income (expense), net:
Interest income	23			481
Interest expense	(5,019		)	(10,689		)
Losses on early retirements of debt	(2,474		)	—
Other income (expense), net	4,050			(1,822		)
Total other expense, net	(3,420		)	(12,030		)
Income (loss) from continuing operations before provision for income taxes	1,022			(14,071		)
(Benefit from) provision for income taxes	(72		)	347
Net income (loss) from continuing operations	1,094			(14,418		)
Net income from discontinued operations	—			10,443
Net income (loss)	1,094			(3,975		)
Net income attributable to noncontrolling interests from continuing operations	295			240
Net income attributable to noncontrolling interests from discontinued operations	—			1,799
Net income (loss) attributable to Verint Systems Inc.	799			(6,014		)
Dividends on preferred stock	(3,322		)	—
Net loss attributable to Verint Systems Inc. common shares	$	(2,523	)	$	(6,014	)

Net (loss) income attributable to Verint Systems Inc. common shares
Net loss from continuing operations attributable to Verint Systems Inc. common shares	$	(2,523	)	$	(14,658	)
Net income from discontinued operations attributable to Verint Systems Inc. common shares	$	—		$	8,644

Basic net (loss) income per common share attributable to Verint Systems Inc.:
Continuing operations	$	(0.04	)	$	(0.23	)
Discontinued operations	—			0.14
Total basic net loss per common share attributable to Verint Systems Inc.	$	(0.04	)	$	(0.09	)

Diluted net (loss) income per common share attributable to Verint Systems Inc.:
Continuing operations	$	(0.04	)	$	(0.23	)
Discontinued operations	—			0.14
Total diluted net loss per common share attributable to Verint Systems Inc.	$	(0.04	)	$	(0.09	)

Weighted-average common shares outstanding:
Basic	65,661			64,376
Diluted	65,661			64,376

Table 2
VERINT SYSTEMS INC. AND SUBSIDIARIES
GAAP to Non-GAAP Cloud Metrics
(Unaudited)
	Three Months Ended April 30,
(in thousands)	2021			2020
Table of Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud Revenue
SaaS revenue – GAAP	$	63,592		$	40,888
Bundled SaaS revenue – GAAP	39,309			33,393
Unbundled SaaS revenue – GAAP	24,283			7,495
Optional managed services revenue – GAAP	16,458			14,132
Cloud revenue – GAAP	$	80,050		$	55,020

Estimated SaaS revenue adjustments	$	844		$	2,926
Estimated bundled SaaS revenue adjustments	782			2,882
Estimated unbundled SaaS revenue adjustments	62			44
Estimated optional managed services revenue adjustments	187			281
Estimated cloud revenue adjustments	$	1,031		$	3,207

SaaS revenue – non-GAAP	$	64,436		$	43,814
Bundled SaaS revenue – non-GAAP	40,091			36,275
Unbundled SaaS revenue – non-GAAP	24,345			7,539
Optional managed services revenue – non-GAAP	16,645			14,413
Cloud revenue – non-GAAP	$	81,081		$	58,227

Table of New SaaS ACV
New SaaS ACV	$	18,804		$	11,892
New SaaS ACV Growth YoY	58.1		%	45.3		%

Table of New Perpetual License Equivalent Bookings
New perpetual license equivalent bookings	$	60,982		$	47,692
New perpetual license equivalent bookings change YoY	27.9		%	(23.7)		%
% of new perpetual license equivalent bookings from SaaS	51.2		%	40.2		%


Table 3
VERINT SYSTEMS INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
	Three Months Ended April 30,
(in thousands, except per share data)	2021			2020
REVENUE
Recurring revenue – GAAP	$	144,453		$	129,070
Nonrecurring revenue – GAAP	56,451			56,795
Total GAAP revenue	200,904			185,865
Recurring revenue adjustments	1,039			3,262
Nonrecurring revenue adjustments	—			—
Total revenue adjustments	1,039			3,262
Recurring revenue – non-GAAP	145,492			132,332
Nonrecurring revenue – non-GAAP	56,451			56,795
Total non-GAAP revenue	$	201,943		$	189,127

GROSS PROFIT AND GROSS MARGIN
Recurring costs	$	38,076		$	34,928
Nonrecurring costs	29,880			31,619
Amortization of acquired technology	4,384			4,356
Total GAAP cost of revenue	72,340			70,903
GAAP gross profit	128,564			114,962
GAAP gross margin	64.0		%	61.9		%
Revenue adjustments	1,039			3,262
Amortization of acquired technology	4,384			4,356
Stock-based compensation expenses	1,262			537
Acquisition expenses, net	25			189
Restructuring expenses	462			1,619
Separation expenses⁽³⁾	78			—
Discontinued operations corporate overhead adjustment	—			1,425
Allocation methodology difference	—			(543		)
Non-GAAP gross profit	$	135,814		$	125,807
Non-GAAP gross margin	67.3		%	66.5		%

RESEARCH AND DEVELOPMENT, NET
GAAP research and development, net	$	29,148		$	32,412
As a percentage of GAAP revenue	14.5		%	17.4		%
Stock-based compensation expenses	(1,773		)	(1,173		)
Acquisition expenses, net	(24		)	(201		)
Restructuring expenses	(184		)	(927		)
Separation expenses⁽³⁾	(457		)	—
Discontinued operations corporate overhead adjustment	—			(4,521		)
Allocation methodology difference	—			2,202
Non-GAAP research and development, net	$	26,710		$	27,792
As a percentage of non-GAAP revenue	13.2		%	14.7		%

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
GAAP selling, general and administrative expenses	$	87,646		$	76,827
As a percentage of GAAP revenue	43.6		%	41.3		%
Stock-based compensation expenses	(13,366		)	(8,968		)
Acquisition (expenses) benefit, net	(1,644		)	3,743
Restructuring expenses	(609		)	(2,018		)
Separation expenses⁽³⁾	(5,527		)	—
Other adjustments	(44		)	(101		)
Discontinued operations corporate overhead adjustment	—			(7,566		)
Allocation methodology difference	—			(1,354		)
Non-GAAP selling, general and administrative expenses	$	66,456		$	60,563
As a percentage of non-GAAP revenue	32.9		%	32.0		%

OPERATING INCOME (LOSS) AND OPERATING MARGIN
GAAP operating income (loss)	$	4,442		$	(2,041	)
GAAP operating margin	2.2		%	(1.1		)%
Revenue adjustments	1,039			3,262
Amortization of acquired technology	4,384			4,356
Amortization of other acquired intangible assets	7,328			7,764
Stock-based compensation expenses	16,401			10,678
Acquisition expenses (benefit), net	1,693			(3,353		)
Restructuring expenses	1,255			4,564
Separation expenses⁽³⁾	6,062			—
Other adjustments	44			101
Discontinued operations corporate overhead adjustment	—			13,512
Allocation methodology difference	—			(1,391		)
Non-GAAP operating income	$	42,648		$	37,452
Non-GAAP operating margin	21.1		%	19.8		%

Table of Reconciliation from GAAP Other Expense, Net to Non-GAAP Other Expense, Net
GAAP other expense, net	$	(3,420	)	$	(12,030	)
Unrealized losses on derivatives, net	14,305			—
Amortization of convertible note discount	—			3,226
Losses on early retirements of debt	2,474			—
Change in fair value of future tranche right	(15,810		)	—
Acquisition (benefit) expenses, net	(3,200		)	12
Non-GAAP other expense, net⁽¹⁾	$	(5,651	)	$	(8,792	)

Table of Reconciliation from GAAP (Benefit from) Provision for Income Taxes to Non-GAAP Provision for Income Taxes
GAAP (benefit from) provision for income taxes	$	(72	)	$	347
GAAP effective income tax rate	(7.1		)%	(2.5		)%
Non-GAAP tax adjustments	3,740			2,037
Non-GAAP provision for income taxes	$	3,668		$	2,384
Non-GAAP effective income tax rate	9.9		%	8.3		%

Table of Reconciliation from GAAP Net Loss from Continuing Operations Attributable to Verint Systems Inc. Common Shares to Non-GAAP Net Income from Continuing Operations Attributable to Verint Systems Inc. Common Shares
GAAP net loss from continuing operations attributable to Verint Systems Inc. common shares	$	(2,523	)	$	(14,658	)
Revenue adjustments	1,039			3,262
Amortization of acquired technology	4,384			4,356
Amortization of other acquired intangible assets	7,328			7,764
Stock-based compensation expenses	16,401			10,678
Unrealized losses on derivatives, net	14,305			—
Amortization of convertible note discount	—			3,226
Losses on early retirements of debt	2,474			—
Change in fair value of future tranche right	(15,810		)	—
Acquisition benefit, net	(1,507		)	(3,341		)
Restructuring expenses	1,255			4,564
Separation expenses⁽³⁾	6,062			—
Other adjustments	44			101
Discontinued operations corporate overhead adjustment	—			13,512
Allocation methodology difference	—			(1,391		)
Non-GAAP tax adjustments	(3,740		)	(2,037		)
Dividends, reversed due to assumed conversion of preferred stock	3,322			—
Total adjustments	35,557			40,694
Non-GAAP net income from continuing operations attributable to Verint Systems Inc. common shares	$	33,034		$	26,036

Table Comparing GAAP Diluted Net Loss from Continuing Operations Per Common Share Attributable to Verint Systems Inc. to Non-GAAP Diluted Net Income from Continuing Operations Per Common Share Attributable to Verint Systems Inc.
GAAP diluted net loss from continuing operations per common share attributable to Verint Systems Inc.	$	(0.04	)	$	(0.23	)
Non-GAAP diluted net income from continuing operations per common share attributable to Verint Systems Inc.	$	0.44		$	0.40

GAAP weighted-average shares used in computing diluted net loss from continuing operations per common share attributable to Verint Systems Inc.	65,661			64,376
Additional weighted-average shares applicable to non-GAAP diluted net income from continuing operations per common share attributable to Verint Systems Inc.	10,031			1,233
Non-GAAP diluted weighted-average shares used in computing net income from continuing operations per common share attributable to Verint Systems Inc.	75,692			65,609

Table of Reconciliation from GAAP Net Income (Loss) from Continuing Operations Attributable to Verint Systems Inc. to Adjusted EBITDA
GAAP net income (loss) from continuing operations attributable to Verint Systems Inc.	$	799		$	(14,658	)
As a percentage of GAAP revenue	0.4		%	(7.9		)%
Net income attributable to noncontrolling interest	295			240
(Benefit from) provision for income taxes	(72		)	347
Other expense, net	3,420			12,030
Depreciation and amortization⁽²⁾	18,281			19,025
Revenue adjustments	1,039			3,262
Stock-based compensation expenses	16,401			10,678
Acquisition expenses (benefit), net	1,693			(3,353		)
Restructuring expenses	1,254			4,564
Separation expenses⁽³⁾	5,696			—
Other adjustments	44			101
Discontinued operations corporate overhead adjustment	—			13,512
Allocation methodology difference	—			(1,391		)
Adjusted EBITDA	$	48,850		$	44,357
As a percentage of non-GAAP revenue	24.2		%	23.5		%