Third Quarter Results Ended September 30, 2015
This presentation contains statements, including statements about future plans and expectations, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such forward looking statements are generally stated in terms of the Company’s plans, expectations and intentions. These statements are based on the current beliefs, expectations and assumptions of the Company’s management and the current economic environment. Forward looking statements are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. The Company cautions that these statements are not guarantees of future performance. There are or will be important known and unknown factors and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward looking statements. These factors, include, but are not limited to, risks associated with the global economic environment on the Company’s customer base (particularly financial services firms) potentially impacting our business and financial condition; competition; changes in technology and market requirements; decline in demand for the Company's products; inability to timely develop and introduce new technologies, products and applications; difficulties or delays in absorbing and integrating acquired operations, products, technologies and personnel; loss of market share; an inability to maintain certain marketing and distribution arrangements; and the effect of newly enacted or modified laws, regulation or standards on the Company and its products; and other factors and uncertainties discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”). You are encouraged to carefully review the section entitled “Risk Factors” in our latest Annual Report on Form 20-F and in our other relevant filings with the SEC for additional information regarding these and other factors and uncertainties that could affect our future performance, and undue reliance should not be placed upon these statements. The forward-looking statements contained in this presentation are made as of the date hereof, and the Company undertakes no obligation to update or revise them, except as required by law. Forward Looking Statements Disclaimer
Explanation of Non-GAAP measures Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, re-organization expenses, restructures expenses, share-based compensation, certain business combination accounting entries, settlement and related expenses and tax adjustment re non-GAAP adjustments. The purpose of such adjustments is to give an indication of our performance exclusive of non-cash charges and other items that are considered by management to be outside of our core operating results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Business combination accounting rules requires us to recognize a legal performance obligation related to a revenue arrangement of an acquired entity. The amount assigned to that liability should be based on its fair value at the date of acquisition. The non- GAAP adjustment is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business. We believe these non-GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating cash flow performance. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statements of Income.
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
5 to $0.75; above guidance range 27% increase in Q3 EPS to $0.75; above guidance range Q3 operating margin Q3 operating margin increased to 25.2% compared to 18.5% last year Q3 cash flow to $50M Q3 cash flow increased 47%, to $50M Q Highlights* Product revenue growth of 13% Increased full year 2015 EPS guidance Q3 operating profit; grew 45% to $56M to $221M; 10% revenue growth excluding FX impact 7% Q3 revenue growth to $221M; 10% revenue growth excluding FX impact Q3 gross margin Q3 gross margin increased to 69.8% compared to 67.2% last year * All numbers, except cash flow, are Non-GAAP and exclude Intelligence and Physical Security divisions
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Good Growth and Execution Q REVENUES (Non-GAAP, $M ) EARNINGS PER SHARE (Non-GAAP, $) Excluding currency impact, revenue growth was 10% Business model focus on product revenue leads to double-digit product revenue growth Strong growth in analytic solutions Good contribution from recent innovations Strong growth in EPS due to revenue growth and improved gross and operating margins Excellent operating leverage Continued successful execution of operational plan * All numbers exclude Intelligence and Physical Security divisions
8 GAAP and Non-GAAP Income Statement – Q $M (except EPS)Q3 2015Q GAAP revenue Valuation adjustment on acquired deferred service revenue-0.0 Non-GAAP revenues GAAP Cost of revenue Amortization of acquired intangible assets on cost of product(6.9)(7.2) Cost of product revenue adjustment(0.1) Cost of services revenue adjustment(0.8)(0.7) Non-GAAP cost of revenue GAAP gross profit Gross profit adjustments Non-GAAP gross profit GAAP operating expenses Research and development(1.4)(0.3) Sales and marketing(3.1)(3.2) General and administrative(2.5)(3.2) Amortization of acquired intangible assets(3.1)(4.2) Restructuring expenses-(2.2) Non-GAAP operating expenses * Errors due to rounding
9 $M (except EPS)Q3 2015Q GAAP taxes on income9.9(2.6) Tax adjustment re non-GAAP adjustments Non-GAAP taxes on income GAAP net income (loss) from continuing operations Valuation adjustment on acquired deferred revenue-0.0 Amortization of acquired intangible assets Share-based compensation Re-organization expenses1.0- Restructuring expenses-2.2 Tax adjustments re non-GAAP adjustments(1.0)(6.6) Non-GAAP net income from continuing operations GAAP diluted earnings (loss) per share from continuing operations Non-GAAP diluted earnings per share from continuing operations * Errors due to rounding GAAP and Non-GAAP Income Statement – Q (cont.)
Revenue Breakdown by Region (Non-GAAP) Q AMERICAS $145M, +4% YoY 66% APAC $26M, +15% YoY 12% EMEA $50M, +10% YoY 22% * All numbers exclude Intelligence and Physical Security divisions
Revenue Breakdown by Business Unit (Non-GAAP) Q CUSTOMER INTERACTIONS $164M, -0.6% YoY 74% FINANCIAL CRIME & COMPLIANCE $57M, +35% YoY 26% * All numbers exclude Intelligence and Physical Security divisions
Gross Margin Q (Non-GAAP) Gross Margin 69.8%| +260bp Product Margin 87.2%| -50bp Services Margin 62.0%| +310bp Gross margin expansion is the result of an increase in product revenue and favorable product mix * All numbers exclude Intelligence and Physical Security divisions
Continued Operating Margin Improvement Q (Non-GAAP) Operating margin improvement is a result of an increase in gross margin and continued cost structure improvement Excellent operating leverage Increased profitability following Security divestitures * All numbers exclude Intelligence and Physical Security divisions
Cost Ratio – Increased Operating Efficiency Q (Non-GAAP) R&D As % of revenue S&M As % of revenue G&A As % of revenue Operating expenses decreased as a percentage of revenue, reflecting further progress in the Company’s operational plan to improve efficiency and profitability * All numbers exclude Intelligence and Physical Security divisions
Analytic Applications As % of bookings Analytics applications are the growth driver of the business. In Q Analytics reached 55% of bookings. * All numbers exclude Physical Security division
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
17 Balance Sheet September 30, 2015 Assets ($M)09/30/201512/31/2014 Cash and cash equivalents Short term investments Trade receivables Other receivables and prepaid expenses Inventories Deferred tax assets Current assets of discontinued operation Total current assets Long term Investments Other long term assets Property and equipment Other Intangible assets Goodwill LT assets of discontinued operation Total Assets1,825.31,642.0 Equity & Liabilities ($M)09/30/201512/31/2014 Trade payables Deferred revenue and advances from customers Accrued expenses and other liabilities Current liabilities of discontinued operation Current liabilities Deferred tax liabilities Other long term liabilities LT liabilities of discontinued operation Total long term liabilities Equity1,378.61,213.5 Equity & Liabilities1,825.31,642.0 * Errors due to rounding
18 Strong Cash Flow From Operations Q $MQ3 2015Q %∆ Cash flow from operations % - Capital expenditure3.03.8(21%) Cash flow from operations after capex % Cash flow from operation after capex as % of revenue21.0%14.5%6.5pp Cash conversion rate * % Days sales outstanding (DSO) **5457(5%) * Cash Conversion Rate = (Cash Flow from Operations after CAPEX / Non-GAAP Net Income ) ** All numbers, except cash flow, include Intelligence and Physical Security divisions
19 Cash Movement and Liquidity September 30, )Total Liquidity = Cash and Cash Equivalents + Current Investments + Long Term Investments Dividend - $29M
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Outlook (Non-GAAP) Q Revenue ($M) EPS ($) FY 2015 Revenue ($M) EPS ($) The outlook is provided as of October There is no guarantee that the Company will change or update these figures in this presentation should a need arise in the future to update the outlook. This is in addition to the forward-looking statements disclaimer at the beginning of the presentation. * All numbers exclude Intelligence and Physical Security divisions