First Quarter Results Ended March 31, 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, restructuring expenses, share-based compensation, certain business combination accounting entries, and tax adjustments 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. The intangible assets created in the acquisitions of Merced are preliminary and subject to further review and completion of valuation analyses.
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
5 to $0.72; high end of guidance 26% increase in Q1 EPS to $0.72; high end of guidance Q1 operating margin improved operating leverage Q1 operating margin increased to 21.3% and improved operating leverage Strong Q1 cash flow Strong Q1 cash flow increased to $104M Q Highlights* Product revenue growth of 17% : continued double-digit growth Analytic solutions: continued double-digit growth Increased full year 2015 EPS guidance to $246M; 10% revenue growth excluding FX impact 7.5% Q1 revenue growth to $246M; 10% revenue growth excluding FX impact Q1 gross margin Q1 gross margin increased to 67.9% * All numbers, except cash flow, are Non-GAAP
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Seasonality Shift to Weighted Q4 (Revenue, Non-GAAP, $M) 1% 2% 8% 0%2% 18% 5%
Good Growth and Execution Q REVENUES (Non-GAAP, $M ) EARNINGS PER SHARE (Non-GAAP, $) Excellent execution Excluding currency impact, revenue growth would have been 10% Strong growth in product revenue Continued demand for analytic solutions led to another quarter of double-digit growth Strong growth in EPS due to revenue growth, improved gross margin and continued successful execution of operational plan Excellent operating leverage
9 GAAP and Non-GAAP Income Statement – Q $M (except EPS)Q1 2015Q GAAP revenue Valuation adjustment on acquired deferred service revenue Non-GAAP revenues GAAP Cost of revenue Amortization of acquired intangible assets on cost of product(7.1)(8.9) Amortization of acquired intangible assets on cost of services-(0.3) Cost of product revenue adjustment(0.2) Cost of services revenue adjustment(0.8)(1.1) Non-GAAP cost of revenue GAAP gross profit Gross profit adjustments Non-GAAP gross profit GAAP operating expenses Research and development(0.7) Sales and marketing(2.7)(3.8) General and administrative(2.8)(2.7) Amortization of acquired intangible assets(3.7)(6.4) Restructuring expenses-(0.3) Non-GAAP operating expenses * Errors due to rounding
10 $M (except EPS)Q1 2015Q GAAP finance & other income, net Amortization of an investment in affiliate0.2- Non-GAAP finance & other income, net GAAP taxes on income Tax adjustment re non-GAAP adjustments Non-GAAP taxes on income GAAP net income (loss) Valuation adjustment on acquired deferred revenue Amortization of acquired intangible assets Share-based compensation Re-organization expenses-0.8 Restructuring expenses-0.3 Amortization of an investment in affiliate0.2- Tax adjustments re non-GAAP adjustments(3.5)(5.7) Non-GAAP net income GAAP diluted earnings (loss) per share Non-GAAP diluted earnings per share * Errors due to rounding GAAP and Non-GAAP Income Statement – Q (cont.)
Revenue Breakdown by Region (Non-GAAP) Q AMERICAS $164M, +11% YoY 67% APAC $25M, -9% YoY 10% EMEA $57M, +7% YoY 23%
Revenue Breakdown by Business Unit (Non-GAAP) Q CUSTOMER INTERACTIONS $152M, +9% YoY 62% SECURITY $44M, -6% YoY 18% FINANCIAL CRIME & COMPLIANCE $50M, +17% YoY 20%
Gross Margin Q (Non-GAAP) Gross Margin 67.9%| +250bp Product Margin 80.7%| +480bp Services Margin 60.1%| +20bp Gross margin expansion is the result of an increase in product revenue and favorable product mix Product margin increase was the result of an increase in product revenue
Continued Operating Margin Improvement Q (Non-GAAP) Operating margin improvement is a result of an increase in revenues and a continued successful execution of operational plan Excellent operating leverage
Cost Ratio – Increased Operating Efficiency Q (Non-GAAP) R&D As % of revenue S&M As % of revenue G&A As % of revenue Increase in G&A as a percentage of revenue was the result of one-time effects in Q that resulted in a much lower G&A expense for that quarter. Excluding this one-time effect in Q1 2014, G&A as a percent of revenue in Q would have been lower than in Q
Analytic Applications As % of new bookings Analytics applications are the growth driver of the business. In Q Analytics reached nearly 50% of new business.
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
18 Balance Sheet March 31, 2015 Assets ($M)03/31/201512/31/2014 Cash and cash equivalents Short term investments Trade receivables Other receivables and prepaid expenses Inventories Deferred tax assets Total current assets Long term Investments Other long term assets Property and equipment Other Intangible assets Goodwill Total Assets1,678.21,642.1 Equity & Liabilities ($M) 03/31/201512/31/2014 Trade payables Deferred revenue and advances from customers Accrued expenses and other liabilities Current liabilities Deferred tax liabilities Other long term liabilities Total long term liabilities Equity1,232.31,213.5 Equity & Liabilities1,678.21,642.1 * Errors due to rounding
19 Strong Cash Flow From Operations Q $MQ1 2015Q %∆ Cash flow from operations % - Capital expenditure3.24.3(26%) Cash flow from operations after capex % Cash flow from operation after capex as % of revenue41.0%23.6%17.4pp Cash conversion rate * % Days sales outstanding (DSO)5063 * Cash Conversion Rate = (Cash Flow from Operations after CAPEX / Non-GAAP Net Income) Cash flow in Q was strong as a result of good collections following a strong Q4
20 Cash Movement and Liquidity March 31, )Total Liquidity = Cash and Cash Equivalents + Current Investments + Long Term Investments Other $6M
Q Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Outlook (Non-GAAP) Q2 2015Q (Actual) Revenue ($M) EPS ($) FY 2015 FY 2014 (Actual) Revenue ($M)1,065-1,0851,012 EPS ($) The outlook is provided as of May 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.