Verint Announces Q4 And FYE 2021 Results

Strong Fourth Quarter Results for Both Customer Engagement and Cyber Intelligence (now Cognyte)

Verint Becomes Pure-Play Customer Engagement Company Following Completion of Cognyte Spin

Customer Engagement Cloud Growth Accelerates in Q4; Raising Outlook for FYE 22 Cloud Revenue Growth

MELVILLE, N.Y.–(BUSINESS WIRE)–Verint® (Nasdaq: VRNT), The Customer Engagement Company, today announced results for the three months and year ended January 31, 2021 (FYE 2021), including both Customer Engagement and Cyber Intelligence. Revenue for the three months ended January 31, 2021 was $349 million on a GAAP basis and $351 million on a non-GAAP basis. For the three months ended January 31, 2021, net loss per share was ($0.34) on a GAAP basis, and diluted EPS was $0.98 on a non-GAAP basis. Revenue for the year ended January 31, 2021 was $1,274 million on a GAAP basis and $1,288 million on a non-GAAP basis. For the year ended January 31, 2021, net loss per share was ($0.23) on a GAAP basis, and diluted EPS was $3.60 on a non-GAAP basis. Cash flow from operations for the year was $253.8 million compared to $237.9 million in the prior year.

“On February 1st, we completed the spin-off of our Cyber Intelligence business into an independent public company called Cognyte Software Ltd. (Nasdaq: CGNT). Following the spin, we are now a pure play customer engagement company well-positioned with a differentiated cloud platform and extensive resources – including approximately 4,300 professionals worldwide – focused on helping brands provide Boundless Customer Engagement,” said Dan Bodner, CEO.

Customer Engagement Q4 Highlights

Large Cloud Wins Across Multiple Industries (TCV): Including orders for $13 million (financial services), $8 million (insurance), $7 million (banking), $7 million (consumer services), $4 million (home services), $4 million (healthcare) and $4 million (business services)
Strong Cloud Revenue Growth: Cloud revenue up more than 30% year-over-year
Strong Cloud Bookings Growth: New Perpetual License Equivalents (PLE) bookings up 15% year-over-year with approximately half of PLE bookings derived from SaaS
Improving Visibility: Exited the year with strong cloud momentum driving remaining performance obligations (RPO) to $636 million, representing backlog growth of 29% year-over-year

Bodner continued, “We are pleased with our strong performance in Q4 across all key cloud metrics, our many competitive cloud wins and finishing the year ahead of guidance. We believe that behind our strong cloud momentum is our open cloud platform, expanding partner network and our strategy to help brands with their digital transformations. The momentum we experienced in the second half of last year increases our confidence and we are raising our outlook for the current year for cloud revenue growth to a range of 30% to 35%.”

Cyber Intelligence Q4 Highlights

GAAP Revenue: $124.0 million for the quarter and $443.5 million for the year
Non-GAAP Revenue: $124.6 million for the quarter and $447.0 million for the year
GAAP Estimated Fully Allocated Operating Income: $4.9 million for the quarter and $26.7 million for the year
Estimated Fully Allocated Adjusted EBITDA: $23.8 million for the quarter and $89.7 million for the year

Bodner concluded, “The Cyber Intelligence business, which was part of Verint through the end of the last fiscal year, finished the year strong. Cognyte announced today that they will review their results for the year ended January 31, 2021 in an earnings call to be scheduled for the second half of April. Verint’s results for Cyber Intelligence reflect Verint’s accounting policies. Cognyte has indicated that they expect their results to be slightly different based on their application of accounting allocation methodologies.”

New Stock Repurchase Program

We are pleased to announce a new stock repurchase program in which we will use a portion of our strong cashflow generation to buy back stock. We plan to buy back up to the number of shares to be issued under our incentive equity program each year.

FYE 2022 Outlook

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

Revenue: $860 million with a range of +/- 2%
Cloud Revenue Growth: 30% to 35%
Diluted EPS: $2.20 at the midpoint of our revenue guidance

Our non-GAAP outlook for the three months ended April 30, 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 April 30, 2021 and year ending January 31, 2022, respectively.
Amortization of discount on convertible notes of approximately $3 million and $4 million, for the three months ending April 30, 2021 and year ending January 31, 2022, respectively.

Our non-GAAP outlook for the three months ending April 30, 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 April 30, 2021 and year ending January 31, 2022, respectively.
Stock-based compensation is expected to be between approximately $15 million and $18 million, and $65 million and $75 million, for the three months ending April 30, 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 $8 million and $12 million, for the three months ending April 30, 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 and year ended January 31, 2021 and 2020 for the GAAP measures excluded from our non-GAAP outlook appear in Tables 2 and 3 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 and year ended January 31, 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 April 30, 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 7559326. 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^.

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 or 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, including, among others, with respect to data privacy and protection, government contracts, anti-corruption, trade compliance, tax, and labor matters, relating to our own operations, the products and services that we offer, and/or the use of our solutions by our customers; risks associated with the mishandling or perceived mishandling of sensitive or confidential information and data, including personally identifiable information or other information that may belong to our customers or other third parties, including in connection with our SaaS or other hosted or managed services offerings or when we are asked to perform service or support; risks that our solutions or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use; risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings; risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all; risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of the successor to CTI’s business operations, Mavenir, Inc., being unwilling or unable to provide us with certain indemnities to which we are entitled; risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel, and our ability to successfully implement and maintain enhancements to the foregoing, for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; risks associated with market volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or speculation, or other factors and risks associated with actions of activist stockholders; risks associated with the issuance of preferred stock to an affiliate of Apax Partners, including with respect to completion of the second tranche of the investment and Apax’s significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and risks associated with the recently completed spin-off of our Cyber Intelligence Solutions business, including the possibility that the spin-off transaction does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities. We assume no obligation to revise or update any forward-looking statement, except as otherwise required by law. For a detailed discussion of these risk factors, see our Annual Report on Form 10-K for the fiscal year ended January 31, 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 January 31,				Year Ended January 31,
(in thousands, except per share data)	2021		2020		2021		2020
Revenue:
Product	$	127,029	$	124,337	$	406,254	$	454,875
Service and support	222,071		214,866		867,451		848,759
Total revenue	349,100		339,203		1,273,705		1,303,634
Cost of revenue:
Product	28,223		39,106		96,161		127,183
Service and support	78,145		75,037		300,528		312,599
Amortization of acquired technology	5,598		5,722		18,905		23,984
Total cost of revenue	111,966		119,865		415,594		463,766
Gross profit	237,134		219,338		858,111		839,868
Operating expenses:
Research and development, net	64,794		58,135		240,169		231,683
Selling, general and administrative	143,101		124,579		478,242		488,871
Amortization of other acquired intangible assets	6,766		8,328		30,995		31,458
Total operating expenses	214,661		191,042		749,406		752,012
Operating income	22,473		28,296		108,705		87,856
Other (expense) income, net:
Interest income	416		1,103		2,808		5,620
Interest expense	(9,283)		(10,235)		(39,975)		(40,378)
Other (expense) income, net	(32,312)		(996)		(55,315)		205
Total other expense, net	(41,179)		(10,128)		(92,482)		(34,553)
(Loss) income before (benefit) provision for income taxes	(18,706)		18,168		16,223		53,303
(Benefit) provision for income taxes	(160)		11,500		16,330		17,620
Net (loss) income	(18,546)		6,668		(107)		35,683
Net income attributable to noncontrolling interests	1,376		1,799		7,160		6,999
Net (loss) income attributable to Verint Systems Inc.	(19,922)		4,869		(7,267)		28,684
Dividends on preferred stock	(2,514)		—		(7,656)		—
Net (loss) income attributable to Verint Systems Inc. common shares	$	(22,436)	$	4,869	$	(14,923)	$	28,684

Net (loss) income per common share attributable to Verint Systems Inc.:
Basic	$	(0.34)	$	0.07	$	(0.23)	$	0.43
Diluted	$	(0.34)	$	0.07	$	(0.23)	$	0.43

Weighted-average common shares outstanding:
Basic	65,753		65,994		65,173		66,129
Diluted	65,753		66,999		65,173		67,355

Table 2 VERINT SYSTEMS INC. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Measures by Segment (Unaudited)

	Three Months Ended January 31,
	2021									2020
(in thousands)	Customer Engagement			Cyber Intelligence			Consolidated			Customer Engagement			Cyber Intelligence			Consolidated
REVENUE
Total GAAP revenue	$	225,080		$	124,020		$	349,100		$	210,058		$	129,145		$	339,203
Revenue adjustments	1,781			547			2,328			4,702			5,557			10,259
Total non-GAAP revenue	$	226,861		$	124,567		$	351,428		$	214,760		$	134,702		$	349,462

ESTIMATED GROSS PROFIT AND GROSS MARGIN
Segment products costs	$	10,089		$	16,369		$	26,458		$	9,710		$	26,694		$	36,404
Segment service expenses	57,682			18,732			76,414			54,377			16,642			71,019
Amortization of acquired technology	5,373			225			5,598			5,361			361			5,722
Stock-based compensation expenses (1)	270			79			349			2,301			679			2,980
Shared support expenses allocation (3)	2,058			1,089			3,147			2,438			1,302			3,740
Total GAAP estimated fully allocated cost of revenue	75,472			36,494			111,966			74,187			45,678			119,865
GAAP estimated fully allocated gross profit	149,608			87,526			237,134			135,871			83,467			219,338
GAAP estimated fully allocated gross margin	66.5		%	70.6		%	67.9		%	64.7		%	64.6		%	64.7		%
Revenue adjustments	1,781			547			2,328			4,702			5,557			10,259
Amortization of acquired technology	5,373			225			5,598			5,361			361			5,722
Stock-based compensation expenses (1)	270			79			349			2,301			679			2,980
Acquisition expenses, net (4)	12			6			18			38			20			58
Restructuring expenses (4)	282			149			431			235			125			360
Separation expenses (4)	33			17			50			—			—			—
Impairment charges (4)	233			124			357			—			—			—
Non-GAAP estimated fully allocated gross profit	$	157,592		$	88,673		$	246,265		$	148,508		$	90,209		$	238,717
Non-GAAP estimated fully allocated gross margin	69.5		%	71.2		%	70.1		%	69.2		%	67.0		%	68.3		%

ESTIMATED RESEARCH AND DEVELOPMENT, NET
Segment expenses	$	25,372		$	30,838		$	56,210		$	22,548		$	23,552		$	46,100
Stock-based compensation expenses (2)	879			465			1,344			2,935			1,566			4,501
Shared support expenses allocation (3)	4,735			2,505			7,240			4,913			2,621			7,534
GAAP estimated fully allocated research and development, net	30,986			33,808			64,794			30,396			27,739			58,135
As a percentage of GAAP revenue	13.8		%	27.3		%	18.6		%	14.5		%	21.5		%	17.1		%
Stock-based compensation expenses (2)	(879)			(465)			(1,344)			(2,935)			(1,566)			(4,501)
Acquisition expenses, net (4)	(24)			(13)			(37)			(202)			(108)			(310)
Restructuring expenses (4)	(135)			(72)			(207)			(270)			(144)			(414)
Separation expenses (4)	(178)			(94)			(272)			—			—			—
Other adjustments (4)	(15)			(7)			(22)			—			—			—
Non-GAAP estimated fully allocated research and development, net	$	29,755		$	33,157		$	62,912		$	26,989		$	25,921		$	52,910
As a percentage of non-GAAP revenue	13.1		%	26.6		%	17.9		%	12.6		%	19.2		%	15.1		%

ESTIMATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Segment expenses	$	45,020		$	22,302		$	67,322		$	41,011		$	25,002		$	66,013
Stock-based compensation expenses (2)	5,529			3,623			9,152			12,390			6,614			19,004
Shared support expenses allocation (3)	44,031			22,596			66,627			25,794			13,768			39,562
GAAP estimated fully allocated selling, general and administrative expenses	94,580			48,521			143,101			79,195			45,384			124,579
As a percentage of GAAP revenue	42.0		%	39.1		%	41.0		%	37.7		%	35.1		%	36.7		%
Stock-based compensation expenses (2)	(5,529)			(3,623)			(9,152)			(12,390)			(6,614)			(19,004)
Acquisition expenses, net (4)	(2,625)			(1,390)			(4,015)			(1,298)			(693)			(1,991)
Restructuring expenses (4)	(2,607)			(1,380)			(3,987)			(422)			(226)			(648)
Separation expenses (4)	(12,761)			(6,752)			(19,513)			(2,336)			(1,247)			(3,583)
Other adjustments (4)	(276)			(147)			(423)			(1,449)			(773)			(2,222)
Non-GAAP estimated fully allocated selling, general and administrative expenses	$	70,782		$	35,229		$	106,011		$	61,300		$	35,831		$	97,131
As a percentage of non-GAAP revenue	31.2		%	28.3		%	30.2		%	28.5		%	26.6		%	27.8		%

OPERATING INCOME, OPERATING MARGIN, AND ADJUSTED EBITDA
GAAP estimated fully allocated operating income	$	17,582		$	4,891		$	22,473		$	18,165		$	10,131		$	28,296
GAAP estimated fully allocated operating margin	7.8		%	3.9		%	6.4		%	8.6		%	7.8		%	8.3		%
Revenue adjustments	1,781			547			2,328			4,702			5,557			10,259
Amortization of acquired technology	5,373			225			5,598			5,361			361			5,722
Amortization of other acquired intangible assets	6,460			306			6,766			8,115			213			8,328
Stock-based compensation expenses (2)	6,678			4,167			10,845			17,626			8,859			26,485
Acquisition expenses, net (4)	2,661			1,409			4,070			1,538			821			2,359
Restructuring expenses (4)	3,024			1,601			4,625			927			495			1,422
Separation expenses (4)	12,972			6,863			19,835			2,336			1,247			3,583
Impairment charges (4)	233			124			357			—			—			—
Other adjustments (4)	291			154			445			1,449			773			2,222
Non-GAAP estimated fully allocated operating income	57,055			20,287			77,342			60,219			28,457			88,676
Depreciation and amortization (5)	6,686			3,537			10,223			5,803			3,097			8,900
Estimated fully allocated adjusted EBITDA	$	63,741		$	23,824		$	87,565		$	66,022		$	31,554		$	97,576
Non-GAAP estimated fully allocated operating margin	25.1		%	16.3		%	22.0		%	28.0		%	21.1		%	25.4		%
Estimated fully allocated adjusted EBITDA margin	28.1		%	19.1		%	24.9		%	30.7		%	23.4		%	27.9		%