Technology company Verint Systems Inc. (Nasdaq: VRNT) published its reports for the first fiscal quarter of 2018 on Thursday after the close of trading on Wall Street. Verint both reported good results and provided good forward guidance and its share price responded on Friday with a slight rise to $44.50, a six-month high, giving the company a $2.8 billion market cap. Verint provides business intelligence and security services and systems; its solutions are designed to take a collection of information and turn it into intelligence information for purposes of making decisions and taking specific action.
Verint recent made headlines following reports that the company was planning to acquire NSO, a company founded in Israel and currently under US ownership, at a $1 billion valuation. NSO provides controversial cyber intelligence solutions. This potential acquisition went virtually unmentioned in Verint's financial reports and the company's ensuing conference call.
In response to an analyst's question on the subject, Verint CEO Dan Bodner said, "Okay. So we do not comment on rumors and, of course, there's nothing to announce in this regard," but commented on Verint's acquisition strategy in general. He said that there was strong demand in the cyber sector for data mining software, saying that the market was very dispersed with many opportunities for non-organic growth for Verint. "In this area, we have historically not made many acquisitions, but we're always looking for good opportunities to build size and improve profit margins, obviously at a reasonable cost," Bodner remarked.
Reaching operational profitability and reducing the net loss
Verint begins its fiscal year in February, so it is now publishing its reports for the first quarter of the 2019 fiscal year (which ends in January 2019). The company reported $289 million in revenue, 10.8% more than in the first quarter of the preceding year. Distribution of sales by activity shows that revenue from customer engagement accounted for nearly 65% of Verint's revenue, with the rest coming from the security (cyber) sector. In the civilian market, revenue grew 9.7% to $186 million, while security revenue was up 12.9% to $103 million.
Verint's GAAP gross profit margin in the first quarter was 60.6%, compared with 57.5% in the first quarter of the preceding year. Despite an increase in operating expenses, Verint replaced its previous operating loss with a $7.8 million operating profit in the first quarter, while the company's quarterly net loss attributable to shareholders was $2.2 million.
Verint's non-GAAP net profit attributable to shareholders was $34.5 million, or $0.53 per share, 11.4% more than in the corresponding quarter in the preceding year and higher than the analysts' forecasts. Adjusted EBITDA was up 8% to $54.3 million.
Verint generated $60.2 million from current activity in the quarter, almost the same as in the corresponding quarter in the preceding year. The company had $424 million in cash and $799 million in long-term debt at the end of the first quarter.
Verint's guidance: 7% revenue growth, 10% profit growth
Verint left its guidance for the year unchanged and continues to project growth of less than 10% in revenue from the civilian sector and 10% growth in revenue from the cyber sector. Verint's revenue guidance for the year is $1.23 billion, representing 6.9% growth, and earnings per share of $3.09, representing 10% growth in comparison with the previous year.
"Last year’s momentum continued with a strong start of the year, and we are pleased with our first quarter revenue growth of approximately 10%. We believe our results reflect the successful execution of our growth strategy and our strong competitive position in both customer engagement and cyber intelligence. Our first quarter provides a solid foundation for another successful year of revenue growth with expanding margins as we target double-digit earnings growth on a non-GAAP basis,” said Bodner.
Verint's share price has climbed 46% since hitting a low point in 2016, but is still 33% below the peak in early June 2015, when the share was traded at over $66, reflecting a $4 billion market cap.
Published by Globes [online], Israel business news - www.globes-online.com - on June 11, 2018
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