Verint Systems Inc. EBITDA surged on 17.3% and Revenue increased on 6.9%
03/28/2018 • About Verint Systems Inc. (
$VRNT) • By InTwits
Verint Systems Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Verint Systems Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 5.0%. Average EBITDA Margin for the same period was 15.2%. In FY2018 SBC/Revenue was even higher: 6.1%
- Verint Systems Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.3%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $23m in 2018, $38m in 2017, $23m in 2016, $20m in 2015, $14m in 2014
- In the last 5 years the company invested considerably less than D&A: $127m vs. $482m. In FY2018 this situation was still the same: CAPEX was 36 while D&A was 106
- The company has potentially unprofitable business model: ROIC is 2.6%
- It operates with high leverage: Net Debt/EBITDA is 2.8x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 6.9%. Revenue growth showed acceleration in FY18Q4 - it increased 7.7% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.1 pp from 22.5% to 23.6% in 2018. EBITDA Margin followed a declining trend at -1.6 pp per annum in the last 5 years.
Gross Margin showed almost no change in FY2018. During the last 5 years Gross Margin bottomed in FY2016 at 62.1% and was growing since that time. SG&A as a % of Revenue decreased slightly on 1.8 pp from 38.3% to 36.6% in FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. SBC as a % of Revenue followed a growing trend at 0.77 pp per annum in FY2014-FY2018.
Net Income margin increased on 2.2 pp from -2.8% to -0.58% in FY2018. Net Income margin declined at -1.9 pp per annum in FY2014-FY2018.
Investments (CAPEX, working capital and M&A)
Verint Systems Inc.'s CAPEX/Revenue was 3.1% in FY2018. The company's CAPEX/Revenue increased slightly on 1.1 pp from 2.1% in FY2015 to 3.1% in FY2018. It's average level of CAPEX/Revenue for the last three years was 2.7%. CAPEX as a % of Revenue stuck to a growing trend at 0.33 pp per annum in the last 5 years.
Accounts receivable as a % of Revenue increased slightly on 1.0 pp from 25.1% to 26.1% in FY2018. Inventories as a % of Revenue showed almost no change at 1.8% in FY2018. Accounts payable as a % of Revenue increased on 4.6 pp from 16.1% to 20.7% in FY2018.
Verint Systems Inc. has spent
$103m on M&A in FY2018 which accounts for 9.1% of revenue.
Return on investment
The company operates at low but positive ROIC (2.6%) and negative ROE (-0.6%). ROIC increased slightly on 1.7 pp from 0.97% to 2.6% in FY2018. ROE increased on 2.2 pp from -2.8% to -0.62% in FY2018. ROIC declined at -2.0 pp per annum in the last 5 years. ROE declined at -3.6 pp per annum in FY2014-FY2018.
Leverage (Debt)
Debt level is 2.8x Net Debt / EBITDA and 5.0x Debt / EBITDA. Net Debt / EBITDA dropped on 0.5x from 3.4x to 2.8x in FY2018. Debt increased on 3.2% while cash increased on 9.9%.
Verint Systems Inc. has questionable short term financial stability: Interest coverage ratio (ICR) is only 1.4x. Verint Systems Inc. has no short term refinancing risk: cash is higher than short term debt (7,509.8%).
Average interest expence charged on company's debt was 4.7% in FY2018.
The company paid
$3 despite negative Net Income of $-7 in FY2018. Dividends grew on average at -5.6% per annum in the last 5 years).
Management team
The company's CEO is Daniel Bodner "Dan". Daniel Bodner "Dan" is a founder and has 1 year tenure with the company. CEO total compensation was
$8,251,402 in FY2018 which included
$755,000 salary. The company's CFO Douglas E Robinson has spent 12 years with the company.
At the end of financial year the company had 1.8% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 5,200 employees. The number of employees increased slightly on 2.0%. Average revenue per employee in FY2018 was
$218,313 and it increased on 4.8%.
Financial and operational results
FY ended 01/31/2018
Verint Systems Inc. ($VRNT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 907 | 1,128 | 1,130 | 1,062 | 1,135 | 6.9% |
| Gross Profit | 601 | 713 | 701 | 677 | 727 | 7.4% |
| SG&A | 327 | 415 | 413 | 407 | 415 | 2.0% |
| EBITDA | 178 | 179 | 174 | 132 | 154 | 17.3% |
| EBIT | 122 | 79 | 68 | 17 | 49 | 180.0% |
| Interest expence | 30 | 37 | 34 | 35 | 36 | 2.9% |
| Tax | 5 | -15 | 1 | 3 | 22 | 706.4% |
| Net Income | 54 | 31 | 18 | -29 | -7 | |
| Stock Based Compensation | 30 | 46 | 58 | 65 | 69 | 5.9% |
Balance Sheet
|
|---|
| Cash | 379 | 285 | 352 | 307 | 338 | 9.9% |
| Accounts Receivable | 194 | 262 | 256 | 267 | 296 | 11.2% |
| Inventory | 11 | 18 | 18 | 18 | 20 | 13.3% |
| Accounts Payable | 66 | 73 | 65 | 62 | 85 | 36.4% |
| Short Term Debt | 7 | 0 | 2 | 5 | 5 | -2.4% |
| Long Term Debt | 636 | 726 | 736 | 744 | 768 | 3.3% |
Cash flow
|
|---|
| Capex | 16 | 23 | 25 | 28 | 36 | 29.0% |
| Dividends | 4 | | | 2 | 3 | 50.0% |
| Acquisitions | 33 | 605 | 31 | 142 | 103 | -27.4% |
Ratios
|
|---|
| Revenue growth | 8.1% | 24.4% | 0.2% | -6.0% | 6.9% | |
| EBITDA growth | 13.8% | 0.2% | -2.5% | -24.4% | 17.3% | |
|
|---|
| Gross Margin | 66.2% | 63.2% | 62.1% | 63.7% | 64.0% | 0.3% |
| EBITDA Margin | 19.6% | 15.8% | 15.4% | 12.4% | 13.6% | 1.2% |
| EBIT Margin | 13.5% | 7.0% | 6.0% | 1.6% | 4.3% | 2.6% |
| SG&A, % of revenue | 36.1% | 36.8% | 36.5% | 38.3% | 36.6% | -1.8% |
| SBC, % of revenue | 3.3% | 4.1% | 5.1% | 6.2% | 6.1% | -0.1% |
| Net Income Margin | 5.9% | 2.7% | 1.6% | -2.8% | -0.6% | 2.2% |
| CAPEX, % of revenue | 1.7% | 2.1% | 2.2% | 2.6% | 3.1% | 0.5% |
|
|---|
| ROIC | 10.3% | 5.2% | 3.8% | 1.0% | 2.6% | 1.7% |
| ROE | 13.9% | 3.8% | 1.7% | -2.8% | -0.6% | 2.2% |
| Net Debt/EBITDA | 1.5x | 2.5x | 2.2x | 3.4x | 2.8x | -0.5x |
| Interest coverage ratio (ICR) | 4.1x | 2.2x | 2.0x | 0.5x | 1.4x | 0.9x |
| Interest expence / Average debt | 4.6% | 5.4% | 4.6% | 4.7% | 4.7% | -0.1% |
People
|
|---|
| Insider ownership | 1.8% | 1.8% | 1.8% | 1.8% | 1.8% | 0.0% |
| Employees | 3,400 | 4,800 | 5,000 | 5,100 | 5,200 | 2.0% |
| Revenue/Employee, th. $ | 267 | 235 | 226 | 208 | 218 | 4.8% |
Verint Systems Inc. ($VRNT) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 261 | 275 | 281 | 319 | | 6.3% | 4.9% | 8.4% | 7.7% |
| EBITDA | 20 | 30 | 42 | 62 | | 17.6% | -7.7% | 24.7% | 28.8% |
| Net Income | -20 | -6 | 2 | 17 | | | | | 113.2% |
Balance Sheet
|
|---|
| Cash | 340 | 365 | 313 | 338 | | 5.0% | 7.4% | 5.7% | 9.9% |
| Short Term Debt | 0 | 0 | 0 | 5 | | | | -100.0% | -2.4% |
| Long Term Debt | 746 | 764 | 766 | 768 | | 1.1% | 3.2% | 3.2% | 3.3% |
Ratios
|
|---|
| Gross Margin | 57.5% | 63.2% | 60.3% | 67.4% | | -1.4% | 2.3% | 0.2% | 3.5% |
| EBITDA Margin | 7.7% | 10.9% | 15.1% | 19.5% | | 0.7% | -1.5% | 2.0% | 3.2% |
| Net Income Margin | -7.6% | -2.3% | 0.9% | 5.4% | | -0.5% | 2.1% | 4.1% | 2.7% |
Peers in Application Software
Below we provide Verint Systems Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 13.5% | 14.3% | 15.7% | 15.2% |
|---|
| Verint Systems Inc. ($VRNT) | | 24.4% | 0.2% | -6.0% | 6.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 62.8% | 61.7% | 64.2% | 64.6% | 66.0% |
|---|
| Verint Systems Inc. ($VRNT) | 66.2% | 63.2% | 62.1% | 63.7% | 64.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Verint Systems Inc. ($VRNT) | 19.6% | 15.8% | 15.4% | 12.4% | 13.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Verint Systems Inc. ($VRNT) | 1.7% | 2.1% | 2.2% | 2.6% | 3.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| Verint Systems Inc. ($VRNT) | 10.3% | 5.2% | 3.8% | 1.0% | 2.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.9x | -0.7x |
|---|
| Verint Systems Inc. ($VRNT) | 1.5x | 2.5x | 2.2x | 3.4x | 2.8x |
