Alan Roden – Senior Vice President-Corporate Development and Investor Relations Dan Bodner – President, Chief Executive Officer, Corporate Officer and Director Doug Robinson – Corporate Officer and Chief Financial Officer.

Shaul Eyal – Oppenheimer Daniel Ives – FBR Capital Markets Greg Dunham – Goldman Sachs Paul Coster – Morgan Stanley Michael Nemeroff – Credit Suisse Jonathan Ho – William Blair Dan Bergstrom – RBC Capital Markets Jeff Kessler – Imperial Capital.

Good day, ladies and gentlemen and welcome to the Q4 2015 Verint Systems Incorporated Earnings Conference Call. My name is Irene and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference.

[Operator Instructions] As a reminder, this call is being recorded for replay purposes. I’d now like to turn the conference over to your host for today, Mr. Alan Roden, Senior Vice President of Corporate Development. Please proceed..

Thank you, operator. Good afternoon and thank you for joining our conference call today. I’m here with Dan Bodner, Verint’s CEO and President; and Doug Robinson, Verint’s Chief Financial Officer.

By now, you should have seen a copy of our press release that includes selected financial information for our fourth fiscal quarter and year ended January 31, 2015. Our Form 10-K will be filed shortly. Each of our SEC filings and earnings press releases is available under the Investor Relations link on our website and also on the SEC website.

Before starting the call, I’d like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws.

These forward-looking statements are based on management’s current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by the forward-looking statements.

The forward-looking statements are made as of the date of this call and except as required by law, Verint assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements.

For a more detailed discussion of these and other risks and uncertainties could cause Verint’s actual results to differ materially from those indicated in forward-looking statements, please see our Form 10-K for the fiscal year ended January 31, 2015 when filed and other filings we make with the SEC.

The financial information discussed today is primarily non-GAAP. A reconciliation of the non-GAAP financial measures to GAAP measures is included in today’s earnings release as well as under the Investor Relations link on our website.

Non-GAAP financial information should not be considered in isolation or as a substitute for GAAP financial information, but is included because management believes it provides meaningful supplemental information regarding our operating results when assessing our business and is useful to investors for informational and comparative purposes.

The non-GAAP financial measures that company uses have limitations and may differ from those used by other companies. Now, I’d like to turn the call over to Dan.

Dan?.

Thank you, Alan. Good afternoon everyone and thank you for joining us to review our fourth quarter and full year results. The momentum we experienced throughout the year continued in Q4. We’re pleased to report that we finished the year with very strong results.

In Q4, we achieved $316 million of revenue, $89 million of operating income with 28% of operating margins and more than $100 million of cash from operations. These operating results drove non-GAAP diluted EPS of $1.19 when excluding a non-operating foreign exchange charge related to balance sheet translation and $1.06 if discharge is included.

Doug will discuss this non-operating charge a bit later. Turning to the full fiscal year ended January 2015, we reported record results of $1.158 million of revenue, $263 million of operating income and $194 million of cash from operations. We’re very pleased with our results which reflect a 27% increase in revenue compared to the prior year.

At the beginning of the year, we discussed our goal of double-digit revenue growth and we are pleased to report that we achieve this goal both on a reported basis as well as when include KANA’s revenue in both periods.

In addition to strong financial performance, we had many strategic and operational achievements last year and I would like to highlight some of them. First, last year was the first year of execution of our strategic plan including the expansion of our total addressable markets to $8 billion and positioning Verint for long-term growth.

Next, the launching of our customer engagement optimization strategy, which was very well received by our customers and partners, Verint has a strong track record of successfully integrating the acquire companies and I’m pleased to report that the integration of KANA’s operations is substantially completed.

Also the expansion of our security intelligence portfolio to address cyber security and the announcement of what we believe is one of the largest cyber security projects valued at more than $100 million.

In addition, the highest number of million dollar deals, we ever had in a single year, reflecting our broader portfolio and as becoming a more strategic partner to our customers and finally, the continued advancement of our Actionable Intelligence platform, enabling us to develop innovative solutions.

We look forward to building on this achievements and continuing our momentum. Turning to the current year, I would like to highlight three key elements of our growth plan. We’re targeting another year of double-digit revenue growth on a constant currency basis.

We plan to extend our category leadership in the emerging area of customer engagement optimization with multiple launches of new innovative product capabilities throughout the year. In that regard, earlier this week, we announced new analytical capability further extending our market leadership.

Also, we intent to extend our cyber security solutions to the enterprise market in the second half of the year as previously announced. This expands our total addressable market and provides us additional opportunities for growth.

We believe that Actionable Intelligence market is in an early stage as the volume of structured and unstructured information grows, organizations are looking for solutions to help them to gain insights from vast amount of data and turn those insights into Actionable Intelligence.

Over the last decade, we have spend more than a billion dollars in R&D, creating the foundation for Verint advanced actionable intelligence platform that supports to capture voice, video, text and other structured and unstructured data that processing and analysis of this data producing actionable insights.

We believe our actionable intelligence platform combined with a strong brand position us well to address this opportunity. Now, I would like to provide some Q4 customer anecdotes that demonstrate the progression of our growth strategy.

We believe that our customer engagement optimization approach has made us more strategic to our customers, positions us to capture greater wallet share.

During the quarter, we received multiple large orders across the number of verticals including $6 million in orders from an insurance company, $5 million in order from a telecommunications company, $4 million in orders from a business process outsourcer and $4 million in orders from a media company.

We believe this large order reflects our broader suites, growing category leadership, and desire from our customers to work with a more strategic vendor for omni-channel customer engagement. The current acquisitions significantly broaden our suites, and we are starting to benefit from cross-selling opportunities from Verint and KANA install base.

In addition to addressing the large opportunities, we are also targeting the mid-market through our SaaS offerings and in Q4 we expanded our SaaS partnerships primarily brokers on the SMB market.

Turning to the security intelligence market, we continue to see demand for our innovative solutions, driven by a variety of security threats around the world.

During the quarter, we’ve received a number of large orders including for approximately $20 million, one for approximately $15 million and several orders each in excess of $5 million for both new and existing customers.

We believe this large order reflect a broad portfolio of innovative actionable intelligence solutions that address both traditional and emerging security threats such as advanced cyber attacks. Turning to cyber, organizations today are facing the challenge of increasing frequency and sophistication of cyber attacks.

We expect this trend to continue and believe that many organizations are unprepared to protect themselves against such attacks in an efficient and effective manner.

Despite investments in perimeter security and point solutions to help address sophistic network and endpoint vulnerabilities, there have still been many reported incidents of successful cyber attacks, demonstrating that legacy approaches are often not sufficient in protecting against these evolving and advanced threats.

We believe that cyber attacks will become even more targeted and sophisticated and that government and commercial organizations need an advanced threat protection solution that leverages actionable intelligence to protect against these increasingly complex attacks.

Last quarter, we announced a plan to launch our new advanced threat protection solution to the enterprise market. Today, I’m pleased to announce that our development program is progressing well and we are planning to launch the solution at our Enterprise User Conference taking place in Las Vegas in early June.

We expect more than 1,000 participants in this enterprise customer event and it will be a great venue to unveil our new threat protection solution. I would also like to announce that on June 9, we will be holding an Investor Day at the same venue.

The agenda for our Investor Day will include the discussion on trends in customer engagement optimization and cyber security, as well as product demos including our new cyber advanced threat protection solution. We hope you will join us, and at the end of the call, Alan will provide more details.

Before I turn to guidance, given the recent movement in foreign exchange rates, I would like to discuss the geographic distribution of our revenue and operations and the impact of foreign currency have on our top line and bottom line.

We have a truly global business with more than 10,000 customers across more than 180 countries as well as 4,800 professionals with offices in more than 25 countries. In our latest completed fiscal year, we derived 52% of our revenue in the Americas, 31% in EMEA, and 17% in APAC regions.

In addition to generating revenues in many countries and currencies because our employee base is also global, we pay expenses in many currencies, creating a natural hedge for Verint over the long-term.

As a result, our reported revenue will be impacted by currency fluctuations, but we believe that we are well positioned to navigate these fluctuations from a profit and cash flow perspective. Doug will provide more details in a moment.

Turning to guidance; based on the strong finish to the year and opportunities we see ahead of us, we are raising our annual revenue growth expectations on a constant currency basis.

During our conference call on December 3, last year, we provided preliminary revenue guidance that reflected a range of 8% to 12% year-over-year growth on a constant currency basis. Today, we’re increasing our revenue growth outlook to a range of 9% to 13% year-over-year growth on a constant currency basis.

This new guidance translates to a revenue range of $1.2 billion to $1.25 billion, reflecting the strengthening of the dollar, since our last conference call. Consistent with our new revenue range, we’re adjusting our diluted earnings per share guidance to a range of $3.55 to $3.75.

Overall, we believe we are very well positioned for another year of double-digit growth and extending our market leadership. And now, let me turn the call over to Doug..

Yes, thanks Dan. Good afternoon everyone. Most of our discussion today will focus on non-GAAP financial measures. Unless and otherwise indicated, results discussed are on a non-GAAP basis. The reconciliation between our GAAP and non-GAAP financial measures is available, as Alan mentioned, in our earnings release and in the IR section of our website.

Differences between our GAAP and non-GAAP financial measures include adjustments related to acquisitions including fair value revenue adjustments, amortization of acquisition related intangibles, certain other acquisition related expenses, stock-based compensation, as well as certain other non-cash or non-recurring charges, including the amortization of the discounts on our convertible notes.

I’ll start my discussion today with the areas of revenue, gross margin and operating margin. In the fourth quarter, we generated $316 million of revenue across our three segments with $181 million in enterprise intelligence, $104 million in communications intelligence and $31 million in video intelligence.

This compares to $257 million of total revenue in the fourth quarter of the prior year with $136 million in enterprise, $89 million in communications and $32 million in video. In terms of geography, in Q4, we generated $167 million in the Americas, $94 million in EMEA and $55 million in APAC.

This compares to $159 million in the Americas, $50 million in EMEA and $48 million in APAC in the fourth quarter of last year. Given the recent foreign exchange movements, we’d also like to discuss our revenue on a constant currency basis to help investors better understand the underlying operational performance of our business.

In that regard, on a constant currency basis, our revenue in Q4 would have been $325 million, or approximately $10 million higher than our reported results. For the full year, we generated approximately $1.158 billion of revenue across our three segments.

With $688 million in enterprise intelligence, $360 million in Communications Intelligence and $110 million in Video Intelligence. This compares to approximately $910 million of total revenue in the prior year, with $501 million in Enterprise, $289 million in Communications and $120 million in Video.

In terms of geography for the year, we generated approximately $602 million in Americas, $363 million in EMEA, and $193 million in APAC. This compares to approximately $509 million in Americas, $187 million in EMEA and $214 in APAC in the prior year. Q4 gross margins were 69.1%, up from the 67.8% in Q3 and up from the 68.6% in Q4 of last year.

For the full year, gross margins were 67.7%, compared to 68.3% in the prior year as we expected with the inclusion of KANA and their slightly higher services mix.

As we have discussed in the past, due to our product and revenue mix within or across segments and particularly within the security business, overall gross margins can fluctuate significantly from quarter-to-quarter.

During the fourth quarter, we generated operating income of $89 million with margins up 28.1%, compared to $65 million with margins up 25.5% in Q4 last year. I’m particularly pleased with our strong finish to the year in terms of operating income and operating margin.

And for the year operating income came in at $263 million, a 25.2% increase, compared to $210 million in the prior year. EBITDA for the year came in at $283 million, a 24.9% increase, compared to $227 million in the prior year. Now, let’s turn to other income and interest expense.

As Dan mentioned earlier, during the fourth quarter we had an usually large non operating charge, relating to the significant foreign exchange moment in the quarter. This charge is included in our interest and other expenses line, which totaled $14.4 million in the quarter.

The $14.4 million includes $6.4 million of net interest in other expense and $8 million loss from foreign exchange related primarily to inter-company balance sheet translations.

As we’ve discussed in the past, somewhat other global companies, we have inter-company balances that are revalued each quarter based on the foreign exchange rates at the end of the quarter.

While this occurs each quarter to significant strengthening of the dollar in Q4, against the other major currencies, resulted in the unusually high charge of $8 million in Q4. As a reminder, our guidance practice is not to anticipate any foreign exchange gains or losses from balance sheet translations in future quarters.

Our annual cash tax rate was 9% and at year end, we had $59.4 million average diluted shares outstanding. If we had backed $8 million non-operating foreign exchange charge, we delivered diluted EPS of $1.19 in Q4. Inclusive of the charge, EPS was $1.06.

For the year, diluted EPS was $3.35, compared to $2.84 in the prior year representing 18% year-over-year earnings growth. Now, let’s turn to the balance sheet. As of January 31, 2015, we had approximately $358 million of cash and short-term investments including restricted stock.

Our Q4 GAAP cash flow from operations came in very strong at $103 million. For the year, GAAP cash flow from operations increased to $194 million, compared to $178 million the prior year.

We ended the year with gross debt of approximately – excuse me $811 million and net debt of approximately $453 million, excluding discounts primarily associated with our convertible debt.

Before I turn to guidance, given the recent movements in foreign exchange, I’d like to expand advance discussion of the impact of currency on our top and bottom line. As Dan mentioned earlier, we have both revenue and expenses outside the United States, which creates a natural hedge growth on the bottom line over the long run.

From a top line perspective more than 50% of our revenue is in U.S. dollars, approximately 25% of our revenue is in pounds and euros, and the balance is spread across multiple other currencies. From expense perspective, less than half of our expenses in U.S.

dollars, approximately 25% are in euros and pounds and another approximately 20% are in shekels. Because a significant portion of our both our revenue and expenses are denominated in foreign currencies, we have a natural hedge to profits and cash flows.

However, I wanted to point out that since we have approximately 20% of our expenses in shekels with little offsetting revenue, we have historically maintained a 12-month rolling hedge on a majority of our shekel expense. This hedge resulted in a delayed benefit in a period of time where the dollar is strengthening against the shekel.

As a result, while we expect the benefit from the shekel weakening versus the dollar, most of that benefit will come in the second half of the year. Now, I’d like to turn to guidance.

As Dan discussed earlier, based on our strong finish to the year and current outlook, we’re raising our revenue growth outlook on a constant currency basis to a range of 9% to 13% year-over-year, which translates to $1.2 billion to $1.25 billion of revenue based on current exchange rates. We expect operating margin similar to last year.

We expect our quarterly interest in other expense, excluding the potential impact of foreign exchange to be approximately $6 million. Given the continued volatility in foreign exchange rates, there could be a gain or loss related to balance sheet translations and our future results, which as I noted earlier is not included in our guidance.

We expect our non-GAAP cash tax rate to be approximately 9%, reflecting the amount of tax as we expect to pay this year. As we’ve discussed previously, we expect to enjoy a low cash tax rate for several years due to our NOLs and the amount of income we generate in low tax rate jurisdictions.

Based on these assumptions and assuming approximately $63.1 million average diluted shares outstanding for the year, we expect non-GAAP EPS in the range of $3.55 to $3.75. To help you with your earnings models and this environment at the significant foreign exchange movement, we are providing some color on the quarterly trends we expect this year.

From a top line perspective, I would like to highlight two factors that affect our quarterly trends. First, we expect customary, seasonal trends in our Q1results following our strong Q4, which is typical on the enterprise and the software industry.

Second, given the dollar did not start to strengthen to the middle of last year, year-over-year comparisons will be more affected in the first half of the year, than the second half of year. Looking at Q1, with these factors in mind, we expect revenue in the range of $270 million to $280 million and operating margins under 20%.

$280 million of revenue represents 10%, year-over-year revenue growth on a constant currency basis. In summary, we’re pleased with the execution of our strategy, our expanding portfolio of Actionable Intelligence solutions, strong competitive position and believe, we are very well position for continued growth.

And with that operator, let’s open up the line for questions..

[Operator Instructions] Your first question comes from the line of Shaul Eyal with Oppenheimer. Your line is now open..

Thank you operator. Hi, good afternoon, guys. Couple of quick questions on my end. Dan, Doug, Alan, the strong finish we had seen on both the growth and operating margin, I know Doug you mentioned that the mix you hear.

But is that also due to the fact that analytics are nicely kicking in and being an intensive software modules are also benefiting the overall growth and operating margins?.

Yes, I think Shaul you referring to the growth drivers that generally we seen in our business and when we look at Actionable Intelligence, we believe that customers are now more aware of the value that they can grade by using incised that are gleaned from large data sets.

So obviously, the amount and type of structure and unstructured data that able to customer is growing rapidly, but presents increasing challenges and complexities.

So they are looking for analytics and they are looking for big data analytics to help them to address those challenges and take advantage of opportunities and this is where we are well positioned with our expanding portfolio.

So analytics generally drives improving growth, as well as improving margins and what we saw in Q4 was basically a strong finish for the year, where we were able to achieve, strong operating results $316 million of revenue and $325 million if you include this impact of currencies basically position us at the very high-end or even above the range of the guidance that we provided..

Got it. And Dan if I may one additional question on the securities front, so you mentioned I think a handful of security orders at 20,000,015 and a couple of 5 million security orders.

Are those mostly government related or not?.

Yes, the security orders are predominantly governments. We do have a mix of government as well as other public sector and some private sector security orders, but our security portfolio is more – today is more available to government.

And as we announced, we’re going to take our cyber portfolio to the enterprise market, but that’s only going to kick in the second part of the year. So in terms of cyber, it’s governments..

Got it. Okay, thank you. I’m going to step aside and might come back later on for additional questions. Thank you for that and good luck guys..

Okay, thanks Shaul..

Your next question comes from the line of Greg Dunham with Goldman Sachs. You may proceed..

Greg? Greg, are you on mute? We can’t hear you. Operator, they want to go to the next….

Yes, Greg disconnected from the queue. Your next question comes from the line of Daniel Ives with FBR Capital Markets. Please proceed..

Can you just talk specifically about the security pipeline in the next 9 months to 12 months? And how you factor that into guidance in terms of some of these large deals and maybe you’re seeing the pipeline?.

Yes, so in the security markets, we have not just the pipeline of new customers, but we also have many existing customers that we’ve been working with many years and we have a strong brand. So when we look at giving guidance relative to the security growth, we certainly look at our historical performance.

We’ve been growing in the double-digit in securities for many years now. We look at the trends in the market, which is strong. We look obviously the cyber security offering and we discussed on the prior call that we expect cyber to double for us this year. So it was several tens of millions of dollars last year.

And we certainly expect this being a very hot market that we have the opportunity to double that. Of course, we have some large projects as we’ve announced that we execute over multiple fiscal year, so we have more visibility into the performance and timeline of those projects.

And the general sentiment from our customers, we believe that terrorist and criminal activities, cyber attacks and other security threats combined with new and more complex security challenges are driving demand for the solutions that we have..

Got it. And can you just on the success you guys are seeing this year. Maybe talk about how conversations are different now with customers relative to more of the suite versus even a year ago and just maybe anecdotally you could just give us some insights? Thanks..

Yes, so I think across our portfolio, we see that customers prefer to buy multiple solutions from single vendor and they also preferred those solutions to be more tightly integrated to provide the unified work flows.

And that trend is certainly within IT, there is a desire to buy platforms and platforms that can be easily integrated into the existing IT infrastructure.

But also the users whether its business users or security users looking for a better productivity in terms of the analysis and how they use systems and they can only get that better productivity from buying suites and more tight integrations across multiple solutions. So I think that it’s a general trend.

We are able to benefit from this trend as we increase our portfolio and we also increase our investments in the platform. So, for example, last year, we added 450 people in R&D.

That’s a tremendous commitment to R&D and that’s primarily to be able to broaden our portfolio, but also continue our efforts to advance the platform and create more integrated suites..

Thanks guys. Nice quarter..

Okay, thanks Daniel..

Your next question comes from the line of [indiscernible]. You may proceed..

Hi, thanks for taking my question. So this is a broader question on the rationale for the earnings guidance, clearly on the OpEx side. Dan you just mentioned, you added 400 people in R&D, you’re also planning to build out I would imagine an enterprise focused sales team as well.

But given the natural hedge that you discussed in the script, why is the earnings guidance not a little bit higher considering that historically you’ve delivered, but operating margin leverage every year?.

Right, that’s a good question. So we discussed growing – the midpoint of our guidance, we’re growing 11% top line on a constant currency basis and we’re growing less than that although as we discussed we are guiding to similar operating margins.

So, we’ll be able to keep the margin similar to last year with operating expenses going at the same rate as our top line, but we’re not increasing it by the full 11% of the top line growth on a constant currency basis.

And if you remember what’s Doug explained, we have a very good natural hedge that really protect our profits and cash flows from changes in the dollar whether the dollar strength – strengthened or weakened over the long run, we should not [indiscernible] to our cash flows.

However, because of the shekel hedge as Doug mentioned it’s a 12 months rolling hedge, we have a delayed benefit from the shekel.

And we’re going to get that benefit from the shekel effect that the shekel weakened is helping our expenses because we have as Doug mentioned 20% of our expenses in Israel, but that benefit is only going to kicking in the second half of the year.

Now in the long run, if you look at next year, we’re going to get the full benefit of the current exchange rates, and that’s obviously will be the better hedge that the natural hedge that we discussed before.

So we think we have a mix of revenue and expenses that is making Verint pretty neutral to fluctuations in the capital cash flows, but that’s only partially affecting our operating margin this year..

Okay, fair enough. And then just question on the cyber enterprise, what sort of approach are you taking there to, you obviously have a significant reseller network on the Enterprise Intelligence portfolio.

Is there a plan to reuse that same sales force as well as channels for cyber or are you going to have to build out essentially and entirely parallel new channel..

Yes, so it’s a little of both, we discussed that we on veiling the product in Las Vegas in June and that’s going to be in our enterprise, user conference. So we will demonstrate the cyber product to our enterprise customers and we will obviously exposing to our enterprise sales force.

At the same time, we recognized that to be able to sale effectively, the cyber threat protection platform, we also need an overlay sales force that is experts in the cyber security domain. And we are in the process of building out that overlay sales force.

And by the way just that we have a similar situation in the security market where we have sales force that is very well versed in selling security products, but we also have a growing number of cyber experts that supporting the sales force, in order to be more effective in competing on cyber security budgets..

Alright, thank you..

Okay, sure, thanks..

Your next question comes from the line of Greg Dunham with Goldman Sachs. Your line is now open..

Hi, yes, can you hear me..

Yes..

Yes, we can hear you now Greg..

Sorry about earlier. Following-up on [indiscernible] question, on the enterprise side – side by side, can you help us kind of think about the profile of enterprise customer that they will likely adopt, kind of a cyber solution, do you expect these to be large chunky deals or is just more volume play..

Yes, I know it’s more of the larger side, larger enterprises that are more concern about advanced tax. So this is clearly a trend of not just allowed your volume of that, but also more sophisticated of that. And those are targeted and involve groups of people that are focused on trying to penetrate an organization.

The larger customers – the larger enterprise customers will be the once that we’ll invest and protecting themselves against this type of threat first.

So we don’t think our offering is ready for the volume market, the mid-market, but it’s really more to the high end of the market across enterprise, telecom, critical infrastructure, and also MMS space many service security providers..

That makes sense. And then I guess a follow up to that.

Would you expect people from the security business, but that are selling to governments today, you expect some of those to transition to this enterprise role are these are going to be new sales people to this enterprise role, how do you manage that?.

No, we certainly see a transition and we certainly – we also see when it comes to the advanced tax we see also more corporation within enterprise and governments across the world. As enterprise they’re looking for governments to help them to address to more sophisticated tax, some of these tax sometimes come from other countries.

So it’s an interesting evolution here, where the whole area of enterprise and government is blared both from the customer perspective as well as of course from our perspective. We’re going to leverage people with deep security experience in the government market to go and help enterprise customers to deal with the more sophisticated tax..

That makes sense. One last one for Doug, following up on the shekel and the fact that you're growing hedge, is there anyway you can quantify the dollar benefit that you are getting in all of FY2016. I know it’s only in the second half, but is it we taking $10 million benefit, $20 million benefit.

How should we think about that in FY2016 from the shekel move?.

Yes, I guess one way that we looked at as we hadn’t hedge shekel, given where the shekel is right now will kind of benefit would have that given us in the year. It is about $10 million.

We’re starting to get that benefit next year towards the later half of the year when the shekel did we can than we locked in those rates and it will continue into the next year..

Okay, thanks, guys..

Okay you bet..

Your next question comes from the line of Paul Coster with Morgan Stanley. Your line is now open..

JP Morgan, thanks for taking my question. Quick one, first of all on the cyber security and product family, what kind of revenues did you do in 2014, what do you expect in 2015 and what kind of growth rate should we anticipate..

Yes, so we had several tens of millions of dollars of cyber revenues last year. And we expect to double that this year and also to build the foundation for further growth in subsequent years.

So you can see on this year in FY2016 our cyber business will be sub $100 million, but with high growth rates and as we expense to the enterprise market, which is plan for the second half of the year. We expect some contribution for revenue not margin this year and mostly kicking in next year..

Thanks. Is there anyway of sort of positioning this enterprise product versus competitive products. Can you give us some sense of who you think you might be competing with..

We will be competing with point solutions that are in the category of lean forward technologies. So its companies that have advance detection engines.

Our approach as we discussed in the past and we will obviously be able to demonstrate that in June for those of you can join us will be the benefit of integrating multiple point solutions into a platform that has unified work flows and have analytics based on machine learning and that can help investigators be more productive.

One of the issues that we here from customers is that they have lots of reported incidents, the point solutions are providing a lot alert, but they’re only able to investigated the very, very small percentage of the incidents that are aware of, so the all issue, how to improve the detection, but also how to be proved productivity of analyst and make them able to investigate the right incidents prioritize incidents.

And also there is a short hedge of cyber analyst in the markets. So providing automated tools and machine learnings for analyst to be more effective in prioritizing, in investing in incidents. These are all Actionable Intelligence that connects that we’ve been using for many years and we’re going to be offering them to the enterprise market.

We discussed the fact that our government product was a very large scale offerings that we sold for tens of millions of dollars. And we basically our scaling down this capability to an enterprise customers for the ASP will be lower, but we will also provide some of the same – the very same benefits to cyber analyst working for enterprise customers..

And then two last questions, I apologize – will it be a proprietary link between the enterprise products and it will handshake that say enterprise products in the sort of hosted government security side of the solution. And secondly, why did you have strong growth in EMEA in this fourth quarter. .

Yes, for the first question, the answer is yes. We see the enterprise productivity, derivative of the network monitoring product. And hopefully, we’ll have customers that will benefit from the links that we created.

In terms of EMEA, so the strength in EMEA last year, I think it’s attributed one to the fact that KANA had presence in EMEA, so some of it is inorganic. But even when we look at KANA in both areas, EMEA had strong double-digit last year.

And we actually expect the strength in EMEA to continue and we believe we’ll have double-digit growth – build into the guidance for this year and it’s across the board.

But I think its also a very clear in the security business that we have strong strength in EMEA and you may remember that we had a number of years were EMEA was not spending as this was Verint on the security project and we say that this is must be temporary at some point, EMEA government customers will turn back to investing in security and I think that the threats – the security threats in EMEA with some of the events there certainly bring security back to the agenda and we see strength last year and we expect strength this year..

Thank you..

Your next question comes from the line of Michael Nemeroff with Credit Suisse. Your line is now open..

Hey guys, nice quarter. Thanks for taking my questions. Dan, I’m just little confused on the go-to-market strategy on the new enterprise cyber security product. So you are launching it at the enterprise conference, which is mostly focus on the call center in June.

And I’m just trying to understand do you expect that the call center people are going to bring it back into the organization or look at it and tell the other people that are focused on security that they should look at this and buy it.

And then it’s unclear, so you’re repurposing it sounds like you said that you’re repurposing some public sector security sales people I’m going to focus them on the enterprise market, but in addition to that are you hiring enterprise focused sales people.

And where you are going to do the bulk of the market, I’m just trying to understand how you are going to go-to-market with this when it comes out in the couple of quarters and I know it’s early..

Yes, I know, it’s a very good question. So first, we already have questions from our enterprise customers they are focused on customer engagement asking about our cyber security offerings.

And that’s very often discussion when we meet we see that an executive whether its within IT or outside of IT in operations, but this customer base and you know that we have more than 80% of Fortune 500 companies.

That the sea-level executive within our customer base are very aware of the cyber threats and are very interested in what we have to offer.

So the choice to unveil it in our user – in our enterprise user conference is not because we expect that customers they’re going to come with a cheque book but it’s a good place to introduce and get some more feedback from our customers to the product and we will showcase the product and allow them to look at the product in that questions and I think we’re going to learn a lot.

But to your more general questions relative to go-to-market strategy, we’re targeting the high end of the market. So I discussed large banks, clinical infrastructure, telcos, MSPs. And our approach will be much more targeted, we don’t need to go across the market, we need to go after targeted customer list, its going to be a global approach.

So we’re going to do some in the U.S., but certainly in many other countries. And it’s going to be mostly direct, so we expect direct sales force, which partially we’re relying on existing sales force and partially will be through an overlay.

And through partnership with integrators so integrators in many cases, I’m talking about the large integrators. In some cases they are competitors, as they are try to integrate point solutions, but in many cases they are partners, because we provide them a platform that is already more integrated than they can do on their own..

Can you give us a sense for how many people you are going to put into this bucket – I mean the security market in general though, very large market and there is a lot of formidable competitors in that market.

How many people are you going to dedicate towards the cyber security enterprise market, because its sounds like this is pretty large opportunity..

Yes. And we’re going to – we’re hiring and continue to hiring stages. Obviously, we are guiding to similar margin profile. So we’re investing inside there, but we reminded to the level of investment that came forward within our margin profile.

We expect we have 700 people over the company that are involved in cyber, not all of them a dedicated, but in terms of sales force I expect it will be the sales force to have several dozen people that are focused on the cyber opportunity..

Okay, that’s helpful. And then switching gears to the enterprise side of the business, strong quarter organically, could you tell us or Doug can you tell us what the contribution from KANA was in the quarter.

And then Dan, organically how faster we expect the enterprise segment to grow in fiscal 2016 approximately, not hard and fast, but is it a mid-single digit or is it high-single, double-digit, just give us a sense for that if you would please..

Yes, so as we mentioned last year, the business grew double-digit more than 10% withKANA included in both periods. We now provided the guidance at the mid-point of 11% and within this 11% guidance, we expect enterprise to grow a little bit less than the 11% and security little bit more than 11%..

That’s great.

And then lastly my last question for Doug, as it relates to the guidance has been some questions on the EPS and why it wasn’t the stronger number, the years passed you’ve guided relatively conservatively in Q1, and then ratcheted that up is your expectation – has anything changed in the approach to guidance this year versus the last couple of years..

Yes, I don’t think so. Michael, Q1 is always a smaller quarter for us and coming up a very strong Q4 this year. We’ve got lighter revenues just due to seasonality and some crunch on the top line from foreign exchange as well. We’ve had significant movement 3% just from the December call that we last did.

With the shekel hedge, as we discussed earlier, that kind of locking in a good 20% of our expenses. So you don’t get that benefit. So it’s a little bit of a shorter term, currency impact on top of the seasonality that we have in Q1..

That’s great. Thanks for taking my questions. Nice quarter guys..

Yes. Okay, thanks, Michael..

Your next question comes from the line of Jonathan Ho with William Blair. Your line is now open..

Hey guys, just wanted to start off with the currency side, can you maybe give us on maybe a rule of time, in terms of how to think about the exchange rate and perhaps what your current guidance assumes around both the shekel – I’m sorry both the shekel and the euro and the pound in terms of those exchange rates..

Okay, so first we included in our press release a new table, table six that helps investors to understand some of the way we discuss constant currency and then the finish and so forth. But first kind of very clear in terms of guidance we provide today, the guidance is based on current rates.

So we’re not trying to predict with rates will be during the year. What we do on a constant currency basis, in order to facilitate for investors to understand the growth rates, we take the change in current rates from last year average rates. And that is changed 5%, that’s in APAC to 5%.

You should also be aware, if you look at the specific rates that the movement is not wasn’t really equal throughout the year. So we expect 6.5% impact in the first half of this year and then coming down in the second half. But it is 5% based on current rates as of now..

Great, that’s very helpful. And then just in terms of your assumptions for the government portion of your cyber business. I’m just curious to see if you guys could maybe help us quantify what that interest level looks like in terms of these customers they can spend tens of millions of dollars.

Are you seeing the potential market is being hundreds of these types of customers, thousands of these types of customers? I’m just sort of curious how you guys think about that market opportunity and how you are sort of going after those government customers today?.

Yes. We think that the government market is in a very early stage globally there’s a lot of countries that are talking openly about their desire to provide national security framework to help protect the country, but we believe that in many countries they are still in the planning stages so we have a very differentiated solution.

We have much more differentiated on the government side based on the deep expertise and Actionable Intelligence and our ability to work with large scale networks.

And for those customers who already we present a great opportunity, but in terms of the size we believe that countries over time, we will invest in this area, but we also believe that it’s right now very early and only few countries are buying this in more sophisticated solutions..

Got it, thank you..

Yes. Thank you..

Your next question comes from the line of Dan Bergstrom with RBC Capital Markets. Your line is now open..

Yes, thank for taking my question.

Dan on the last conference call you mentioned that the video business should grow next year, I know you are transitioning away from the hardware product does that still look to be case here?.

Yes, I think so, I think, the transition is going well. We’re not just transitioning away from the hardware, but at the same time we made a strategic decision to transition from video surveillance to fraud, risk and compliance solutions and we believe that that’s where the benefit of analytics really provides value to customers.

In the video surveillance market, the video product became commoditized and customers generally did not see value from analytics.

And a lot of companies that we’re focused on analytics didn’t do well, but as we transitioned through the fraud, risk and compliance, we’re able to fuse video with other data sources and provide analytics that can address fraud effectively and ensure compliance, reduce risk.

So we believe that our transition is going well that we declined in video last year, but we expect it to be flat and start to grow into the future..

Thank you. .

Your next question comes from the line of Jeff Kessler with Imperial Capital. Your line is now open..

Yes, thank you for taking my question.

With regard to your analytics solutions beyond customer care and beyond workforce management, what horizontal functions, what horizontal areas, what functionalities are you seeing your commercial customers begin to take that are expanded beyond just in workforce and customer care area?.

Yes, I think that the traditional CRM, Customer Relationship Management, which as an industry that exists for many years is suddenly changing with analytics.

The enterprise customers are basically need to address the evolving customers, customer expectations evolving employee expectations and also they want to become more customer centric and all of that is basically down to analytics and their ability to understand the data.

So what the solutions that we are introducing to the market, they help our customers to enrich customer interactions through business processes, as well as to optimize the workforce and that’s all to achieve strategic objectives and clearly organizations now they look at customer care as not just responding to customers when they need help, but engaging customers in order to maximize strategic opportunities..

And what about overall process improvement making the enterprise itself more efficient..

So we actually one of the reasons we acquired KANA is we got some KANA element such as case management and knowledge management, which are exactly in the business process area but we are combining those elements with analytics.

So that business process is not going to be just based on inventing new process and hoping that it works but actually being able to measure how effective the process is based on real-time data and real-time analytics that is being generated from the business.

So business process is absolutely part of enterprises being more effective but they need to upgrade their business process with the legacy business process tools with analytic tools that help them to really change business process or ensure that employees follow the business process in order to make sure that they actually have an effective approach..

Okay.

One quick question on SMB and SaaS, can you just elaborate a little bit on your – the quick comments you made earlier on and how that’s growing and then where you see the earliest opportunities and how long will essentially the rollout of this business take?.

Yes the SaaS grew double-digit last year for us and our approach is to provide customers with flexibility. So we allow customers to choose between SaaS on-prem or hybrid.

And I think that customer flexibility is important, because many customers will prefer on-prem for data security reasons or other reasons, while other customers prefer hybrid, and so forth. Where we see most of the traction with SaaS, is actually in the mid market. So at a very high end of the market we’ve been doing very well for many years.

We’re announcing large deals every quarter we actually had more than $100 million deals last year. So we clearly are well positioned in the large enterprise and security customer base.

But in terms of the mid markets, the SaaS platform provides us a great access to market, because we did not want to develop a direct sales force, we didn’t think that that’s an effective way to go to the mid market. And SaaS is allowing us to bundle our products with other products and offer them in the cloud through sub partners.

So this is an incremental opportunity and I think one of the drivers of our double-digit growth in SaaS..

Okay. Thank you very much..

Okay. Thank you..

There are no further questions, thank you. I will hand it back over to Alan Roden..

Thank you, operator. Before finishing the call, I’d like to provide some more detail for Investor Day. Our Investor Day we held on June 9, in Las Vegas the event will be held at our annual enterprise user conference which will give investors the opportunity not [indiscernible] Verint management but also from Verint’s customers.

As Dan mentioned earlier the event will include product demos, including a demo of our new cyber advanced threat protection solution which will be launched at the event. If you're interested in attending the event, you can register at her website under the Investor Relations tab. So thank you for joining tonight. So I’ll talk to you in the call.

Have a good night..

Thank you for your participation in today’s conference. This concludes the presentation and you may now disconnect. Have a good day..