Verint(US:VRNT)2022-06-06 16:00Part I. Financial Information Item 1. Financial Statements (Unaudited) Verint's unaudited Q1 2022 financial statements are presented, detailing balance sheets, operations, cash flows, and accounting notes Condensed Consolidated Balance Sheets Verint's total assets decreased to $2.20 billion from $2.36 billion, mainly due to reduced cash and treasury stock purchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | April 30, 2022 | January 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $285,046 | $358,805 | | Goodwill | $1,327,444 | $1,353,421 | | Total Assets | $2,201,041 | $2,361,105 | | Liabilities & Equity | | | | Total current liabilities | $439,874 | $479,466 | | Long-term debt | $407,402 | $406,954 | | Total Liabilities | $929,267 | $970,205 | | Total Stockholders' Equity | $835,453 | $954,579 | Condensed Consolidated Statements of Operations Q1 2022 total revenue increased 8.5% to $217.9 million, but operating income declined, leading to a $4.9 million net loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended April 30, 2022 | Three Months Ended April 30, 2021 | | :--- | :--- | :--- | | Total Revenue | $217,906 | $200,904 | | Recurring Revenue | $159,367 | $144,453 | | Nonrecurring Revenue | $58,539 | $56,451 | | Gross Profit | $141,171 | $128,564 | | Operating Income | $498 | $4,442 | | Net Income | $574 | $1,094 | | Net Loss Attributable to Common Shares | ($4,914) | ($2,523) | | Diluted Net Loss Per Share | ($0.08) | ($0.04) | Condensed Consolidated Statements of Cash Flows Q1 2022 operating cash flow was $53.9 million, but financing activities, primarily stock repurchases, resulted in a $73.7 million net cash decrease Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended April 30, 2022 | Three Months Ended April 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $53,926 | $29,702 | | Net cash (used in) provided by investing activities | ($7,207) | $39,273 | | Net cash used in financing activities | ($118,030) | ($20,056) | | Net (decrease) increase in cash | ($73,742) | $49,137 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies and financial results, covering the Cognyte spin-off, Apax investment, cloud shift, debt, and litigation - On February 1, 2021, Verint completed the spin-off of its former Cyber Intelligence Solutions business into a separate public company, Cognyte Software Ltd. Verint no longer consolidates Cognyte's financial results after this date37 - An affiliate of Apax Partners completed its $400 million investment with the purchase of $200 million in Series B Preferred Stock on April 6, 2021, following an initial $200 million Series A investment in May 202039 - The company is involved in ongoing litigation, including the CTI Litigation inherited from a merger and an Unfair Competition Litigation related to its ForeSee acquisition. The company believes the claims are without merit but notes a reasonably possible loss exposure219228235 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses Q1 2022 results: 8% revenue growth to $217.9 million (cloud-driven), operating income decline due to expenses, and covers liquidity - The company has adopted a hybrid work model and is exiting certain office leases, which resulted in $7.6 million of accelerated lease expense and other asset impairments in Q1 2022242 - Key market trends benefiting Verint include the acceleration of digital transformation, changes in the workforce shaping the future of work, and elevated customer expectations249 - The Russia-Ukraine conflict is not expected to have a material impact on business, as customers in the affected regions represent an immaterial portion of revenue and assets245 Results of Operations Q1 2022 total revenue grew 8% to $217.9 million (cloud-driven), but operating expenses increased 17%, leading to lower operating income Revenue by Category (in thousands) | Revenue Category | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Cloud Revenue | $110,643 | $80,050 | 38% | | - Bundled SaaS | $49,285 | $39,309 | 25% | | - Unbundled SaaS | $45,445 | $24,283 | 87% | | Support Revenue | $48,724 | $64,403 | (24)% | | Total Recurring Revenue | $159,367 | $144,453 | 10% | | Total Nonrecurring Revenue | $58,539 | $56,451 | 4% | | Total Revenue | $217,906 | $200,904 | 8% | - Selling, general and administrative (SG&A) expenses increased 17% to $102.9 million, largely due to $7.6 million in accelerated facility costs from exiting office leases and a $7.2 million increase in employee compensation279 - The shift to cloud is evident as cloud revenue increased by $30.6 million while support revenue from on-premises solutions decreased by $15.7 million263 Liquidity and Capital Resources Verint's cash decreased to $285.8 million due to $105.7 million in stock repurchases, despite $53.9 million operating cash flow - The company repurchased 2,000,000 shares of common stock for $105.7 million during the quarter under its authorized stock repurchase program for fiscal year 2023322 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended April 30, 2022 | | :--- | :--- | | Net cash provided by operating activities | $53,926 | | Net cash used in investing activities | ($7,207) | | Net cash used in financing activities | ($118,030) | | Net decrease in cash | ($73,742) | - Cash held by foreign subsidiaries was $157.6 million as of April 30, 2022, which the company intends to continue to indefinitely reinvest abroad304305 Quantitative and Qualitative Disclosures About Market Risk Verint faces market risks from interest rates, foreign currency, and inflation, with fixed-rate notes and a variable-rate term loan - The company's $100.0 million Term Loan carries a variable interest rate, exposing it to interest rate fluctuations. A hypothetical 10% change in rates would not have a material impact362 - The company is monitoring the impact of the planned phase-out of LIBOR, as its Credit Agreement borrowings are based on it. The transition to an alternative rate like SOFR is being evaluated364 - The fair value of the $315.0 million 0.25% convertible notes is subject to interest rate and market risk, but changes in fair value do not impact the financial statements as they are not carried at fair value361 Controls and Procedures CEO and CFO concluded disclosure controls were effective as of April 30, 2022, with no material changes to internal financial reporting controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of April 30, 2022368 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting369 Part II. Other Information Legal Proceedings This section refers to Note 15 for detailed information on legal proceedings, including the CTI Litigation and Unfair Competition Litigation - For information regarding legal proceedings, the report directs readers to Note 15, "Commitments and Contingencies" in the financial statements373 Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2022 - There have been no material changes to the Risk Factors described in the Annual Report on Form 10-K for the year ended January 31, 2022374 Unregistered Sales of Equity Securities and Use of Proceeds Verint repurchased 2,000,000 common shares for $105.6 million at $52.81 per share under its fiscal year 2023 stock repurchase program Share Repurchase Activity (Feb 1, 2022 - Apr 30, 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Feb 2022 | 1,500,000 | $52.11 | | Mar 2022 | 0 | N/A | | Apr 2022 | 500,000 | $54.94 | | Total | 2,000,000 | $52.81 | - The board of directors authorized a stock repurchase program for the fiscal year ending January 31, 2023, initially for 1,500,000 shares, and later increased by an additional 500,000 shares376 Exhibits This section lists exhibits filed with the Form 10-Q, including management compensation agreements, CEO/CFO certifications, and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Section 302 of the Sarbanes-Oxley Act384 - The filing includes Interactive Data Files (XBRL Instance Document, Schema, Calculation, etc.) as required384