Verint dips 10% after financials

Dan Bodner

The company met the analysts' net profit forecast, but fell short in revenue.

Following the close of yesterday's trading on Wall Street, Israeli technology company Verint Systems Inc. (Nasdaq: VRNT) published its financials for May-July 2019, its second fiscal quarter in 2020. The quarter was a tumultuous one for the company, including a dispute with minority shareholders that ended in a compromise and a "Sell" recommendation by a short player that sent Verint's share price tumbling 9% (the share price has yet to recover since the negative recommendation).

The financial statements themselves were not especially dramatic, although the company fell short of the analysts' revenue estimates, while meeting their net profit estimates. Revenue totaled $324 million in the second quarter, 5.9% more than in the second quarter of the preceding year. Revenue from services and support was up 9.2% to $214 million, while revenue from products stayed put at $110 million. Verint supplies business and security intelligence systems and services. Both of its sectors grew in the second quarter: customer engagement by 5.3% and cybersecurity by 7%.

According to GAAP accounting standards, Verint's net profit attributable to shareholders plunged 52% to $10.6 million in the second quarter, among other things due to an increase in operating expenses. Non-GAAP net profit totaled $55.5 million in the second quarter, 10.8% more than in the corresponding period in the preceding year.

The huge difference between Verint's GAAP and non-GAAP net profit can be explained by $20.6 million in stock-based compensation for employees, write-downs relating to technology totaling $5.6 million, write-downs of intangible assets totaling $7.6 million, $2.5 million in expenses pertaining to acquisitions, and miscellaneous adjustments, which soared from $625,000 in the corresponding quarter in the preceding year to $5.7 million in the second quarter of the current year.

Verint's revenue in the first half of the 2020 financial year grew 7.4% to $640 million, while its GAAP net profit attributable to shareholders shrank 38.6% to $12.1 million and its non-GAAP net profit was up 23.6% to $105 million. EBITDA grew 4.4% to $73.8 million in the second quarter and 15.1% to $144 million in the first half.

Verint had $465 million cash and a $817 million debt at the end of the second quarter - a net debt of $325 million.

"Continued acceleration in innovation and development of the business model"

Verint expects to finish the financial year with $1.375 billion revenue, 10.5% more than in the preceding year and slightly higher than the market estimate, and non-GAAP earnings per share of $3.65, $0.02 per share less than estimated, but still higher than in the preceding year.

"We are satisfied with the second quarter and first half results, which reflect our innovation and strong lead in the market," Verint CEO Dan Bodner said. He added that the company was continuing its good performance in cloud computing and increasing its profit margins in cybersecurity. "We are continuing acceleration in innovation and development of our business model," Bodner stated.

Verint was recently attacked by Neuberger Berman, a shareholder, which claimed that the company was underperforming. This conflict ended in a compromise that included a commitment by Verint to provide shareholders with more reports. At the same time, in May, investment concern Spruce Capital, which specializes in short investments, also made claims against the company, saying that its acquisitions over the years were poor, and that it was employing aggressive accounting methods. Verint's share price fell from $61.20 to $55.50 on the day on which this negative recommendation was published, and closed yesterday's session at $53.80. Following the publication of the company's reports, its share price plummeted 9.6% to $48.70 in late trading, pushing its market cap down to $3.25 billion.

Published by Globes, Israel business news - en.globes.co.il - on September 5, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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