Verint(US:VRNT)2023-12-05 16:00Part I. Financial Information Financial Statements (Unaudited) Verint's Q3 2023 revenue slightly decreased, but operating income and net income improved, with total assets declining due to financing activities Condensed Consolidated Balance Sheets | (in thousands) | October 31, 2023 | January 31, 2023 | | :--- | :--- | :--- | | Total current assets | $503,619 | $619,656 | | Goodwill | $1,343,449 | $1,347,213 | | Total assets | $2,134,634 | $2,313,601 | | Total current liabilities | $370,101 | $471,051 | | Long-term debt | $410,461 | $408,908 | | Total liabilities | $892,948 | $1,019,131 | | Total stockholders' equity | $805,365 | $858,149 | - Total assets decreased by approximately $179 million from January 31, 2023, to October 31, 2023, primarily due to a reduction in cash and cash equivalents and other current assets. Total liabilities also decreased, mainly from a reduction in current liabilities like accounts payable and contract liabilities19 Condensed Consolidated Statements of Operations | (in thousands, except per share data) | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | Nine Months Ended Oct 31, 2023 | Nine Months Ended Oct 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $218,547 | $225,193 | $645,278 | $665,998 | | Gross profit | $153,009 | $154,796 | $442,461 | $443,761 | | Operating income | $26,718 | $21,678 | $27,978 | $23,686 | | Net income (loss) attributable to Verint Systems Inc. common shares | $7,412 | $(1,124) | $(5,693) | $(13,650) | | Diluted net income (loss) per common share | $0.12 | $(0.02) | $(0.09) | $(0.21) | - For the third quarter, revenue decreased by 3.0% year-over-year, but operating income increased by 23.2%. The company swung to a net income attributable to common shares of $7.4 million from a net loss of $1.1 million in the prior-year quarter21 Condensed Consolidated Statements of Cash Flows | (in thousands) | Nine Months Ended Oct 31, 2023 | Nine Months Ended Oct 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $81,679 | $68,611 | | Net cash used in investing activities | $(24,333) | $(37,476) | | Net cash used in financing activities | $(127,397) | $(134,341) | | Net decrease in cash and equivalents | $(70,751) | $(106,716) | - For the nine months ended October 31, 2023, cash from operations increased to $81.7 million from $68.6 million year-over-year. Significant uses of cash in financing activities included $99.3 million for stock repurchases and $20.8 million for preferred stock dividend payments32 Notes to Condensed Consolidated Financial Statements - The company helps brands elevate customer experience (CX) and reduce costs through its open customer engagement platform, leveraging data and AI. It serves over 10,000 organizations in 175 countries, including over 85 of the Fortune 10035 | (in thousands) | Nine Months Ended Oct 31, 2023 | Nine Months Ended Oct 31, 2022 | | :--- | :--- | :--- | | Recurring revenue | | | | Bundled SaaS revenue | $184,770 | $161,005 | | Unbundled SaaS revenue | $161,470 | $152,066 | | Support revenue | $105,443 | $139,831 | | Total recurring revenue | $488,555 | $500,029 | | Nonrecurring revenue | | | | Perpetual revenue | $74,103 | $88,473 | | Professional services revenue | $82,620 | $77,496 | | Total nonrecurring revenue | $156,723 | $165,969 | | Total revenue | $645,278 | $665,998 | - Total remaining performance obligations (RPO), representing contracted revenue not yet recognized, were $689.8 million as of October 31, 2023, a decrease from $727.0 million as of January 31, 2023. Approximately $430.4 million is expected to be recognized within one year62 - The company repurchased approximately 3,014,000 shares of its common stock for $99.3 million during the nine months ended October 31, 2023, under its $200 million stock repurchase program authorized through January 2025132133 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses how macroeconomic conditions impact sales cycles, highlighting the company's AI-powered platform strategy and Q3 2023 revenue decline offset by operating income growth and sufficient liquidity Overview - Global macroeconomic conditions, including geopolitical conflicts (Israel-Hamas war, Russia-Ukraine), inflation, and banking instability, have increased the length of sales cycles and impacted customer spending203 - The company has significant operations in Israel. While some employees have been called for military reserve duty due to the Israel-Hamas war, it is not currently expected to have a material impact on business, though the risk remains if the conflict expands205 - Verint is focused on helping organizations close the "Engagement Capacity Gap" with its AI-powered Customer Engagement Cloud Platform, addressing challenges from new workforce dynamics, expanding engagement channels, and limited budgets210 - Key market trends benefiting Verint include the acceleration of digital transformation, the need to manage a changing and hybrid workforce (humans and bots), and elevated customer expectations for faster, more contextual service212213214 Results of Operations | (in thousands) | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $218,547 | $225,193 | (3)% | | Operating income | $26,718 | $21,678 | 23% | | Net income (loss) attributable to common shares | $7,412 | $(1,124) | N/A | | Revenue Category (in thousands) | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | Bundled SaaS revenue | $63,251 | $57,041 | 11% | | Unbundled SaaS revenue | $52,400 | $58,746 | (11)% | | Support revenue | $33,624 | $42,999 | (22)% | | Total recurring revenue | $161,117 | $174,222 | (8)% | | Total nonrecurring revenue | $57,430 | $50,971 | 13% | - The decrease in recurring revenue for Q3 was driven by a $9.4 million decline in support revenue as customers migrate to SaaS solutions. While total SaaS revenue was flat, bundled SaaS grew 11% while unbundled SaaS declined 11%, reflecting a shift in customer buying preference232 - Selling, General and Administrative (SG&A) expenses decreased by 6% in Q3 YoY, primarily due to lower stock-based compensation, reduced facility costs from office consolidation, and lower professional services expenses256257 Liquidity and Capital Resources | (in thousands) | October 31, 2023 | January 31, 2023 | | :--- | :--- | :--- | | Cash, cash equivalents, and short-term investments | $210,331 | $282,796 | | Total debt, including current portions | $410,461 | $408,908 | - Net cash provided by operating activities for the nine months ended Oct 31, 2023, was $81.7 million, an increase from $68.6 million in the prior year period290291 - During the nine months ended Oct 31, 2023, the company used $99.3 million to repurchase 3.0 million shares of common stock and paid $20.8 million in dividends on its preferred stock296302 - On April 27, 2023, the company repaid the remaining $100.0 million outstanding on its Term Loan using proceeds from its Revolving Credit Facility312 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on variable-rate debt and foreign currency volatility, while fixed-rate convertible notes mitigate some risk, and inflation poses a threat to costs and customer spending - The company is exposed to interest rate risk through its Credit Agreement. As of October 31, 2023, borrowings of $100.0 million under the Revolving Credit Facility had a variable interest rate of 6.94%. A hypothetical 10% change in interest rates is not expected to have a material impact331 - The $315.0 million of 0.25% convertible senior notes due 2026 have a fixed interest rate, thus they do not pose an interest rate risk to earnings, though their fair value fluctuates with market rates and the company's stock price329 - Inflation is identified as a risk that could harm business by increasing costs (labor, sales, cloud hosting) and potentially reducing customer and partner spending332 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of October 31, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of October 31, 2023335 - No changes occurred during the three months ended October 31, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting336 Part II. Other Information Legal Proceedings This section refers to Note 15 of the financial statements for details on legal proceedings, including the ForeSee acquisition litigation settlement and an ongoing indemnified matter - For details on legal proceedings, the report refers to Note 15, 'Commitments and Contingencies' in the financial statements338 Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2023, were reported - There have been no material changes to the Risk Factors described in the company's Annual Report on Form 10-K for the year ended January 31, 2023339 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company reported stock repurchase activity for Q3 FY2024, including 1,018,161 shares repurchased in September, with $78.0 million remaining under the program - The company has a stock repurchase program authorized for up to $200.0 million, effective until January 31, 2025341 | Period | Total Number Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | August 2023 | — | $— | — | | September 2023 | 1,018,161 | $24.53 | $77,970 | | October 2023 | — | $— | — | Defaults Upon Senior Securities No defaults upon senior securities were reported - The company reported no defaults upon senior securities347 Mine Safety Disclosures This section is not applicable to the company - This section is not applicable to the company348 Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the third quarter - During the three months ended October 31, 2023, no director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement349 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with this report include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002351