first quarter results ended march 31, 2015. this presentation contains statements, including...
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First Quarter ResultsEnded 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 1995. 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.
Q1 2015 Highlights
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
5
26% increase in Q1 EPS to $0.72; high end of guidance
Q1 operating margin increased to 21.3% and improved operating leverage
Strong Q1 cash flow increased to $104M
Q1 2015 Highlights*
Product revenuegrowth of 17%
Analytic solutions: continued double-digit growth
Increased full year 2015 EPS guidance
7.5% Q1 revenue growth to $246M; 10% revenue growth excluding FX impact
Q1 gross margin increased to 67.9%
* All numbers, except cash flow, are Non-GAAP
Q1 2015 Highlights
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Seasonality Shift to Weighted Q4(Revenue, Non-GAAP, $M)
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15100
150
200
250
300
350
215 217 221
240225 225 230
271
229239
250
294
246
4%
18%
1% 2%
8%
0% 2%
18%
5%
Good Growth and ExecutionQ1 2015
REVENUES (Non-GAAP, $M)
Q1 14 Q1 15200
210
220
230
240
250
229
246
7.5%
Q1 14 Q1 150.1
0.3
0.5
0.7
0.9
1.1
0.570.72
26%
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 – Q1 2015
$M (except EPS) Q1 2015 Q1 2014
GAAP revenue 246.0 228.6
Valuation adjustment on acquired deferred service revenue 0.1 0. 4
Non-GAAP revenues 246.1 229.0
GAAP Cost of revenue 87.1 89.7
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) (0.2)
Cost of services revenue adjustment (0.8) (1.1)
Non-GAAP cost of revenue 79.0 79.2
GAAP gross profit 158.9 138.9
Gross profit adjustments 8.2 10.9
Non-GAAP gross profit 167.1 149.8
GAAP operating expenses 124.6 122.1
Research and development (0.7) (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 114.6 108.2
* Errors due to rounding
10
$M (except EPS) Q1 2015 Q1 2014
GAAP finance & other income, net 1.7 0.8
Amortization of an investment in affiliate 0.2 -
Non-GAAP finance & other income, net 1.9 0.8
GAAP taxes on income 6.8 1.9
Tax adjustment re non-GAAP adjustments 3.5 5.7
Non-GAAP taxes on income 10.3 7.6
GAAP net income (loss) 29.2 15.7
Valuation adjustment on acquired deferred revenue 0.1 0.4
Amortization of acquired intangible assets 10.8 15.6
Share-based compensation 7.2 7.7
Re-organization expenses - 0.8
Restructuring expenses - 0.3
Amortization of an investment in affiliate 0.2 -
Tax adjustments re non-GAAP adjustments (3.5) (5.7)
Non-GAAP net income 44.1 34.8
GAAP diluted earnings (loss) per share 0.48 0.26
Non-GAAP diluted earnings per share 0.72 0.57
* Errors due to rounding
GAAP and Non-GAAP Income Statement – Q1 2015 (cont.)
Revenue Breakdown by Region (Non-GAAP)
Q1 2015
AMERICAS$164M, +11% YoY
67%
APAC$25M, -9% YoY
10%
EMEA$57M, +7% YoY
23%
Revenue Breakdown by Business Unit (Non-GAAP)Q1 2015
CUSTOMER INTERACTIONS$152M, +9% YoY
62%
SECURITY$44M, -6% YoY
18%
FINANCIAL CRIME & COMPLIANCE$50M, +17% YoY
20%
Gross MarginQ1 2015 (Non-GAAP)
Gross Margin
67.9%| +250bp
Q1 14 Q1 15
Gross Margin65.4%
Gross Margin67.9%
Q1 14 Q1 15
Product GM75.9%
Product GM80.7%
Product Margin
80.7%| +480bp
Q1 14 Q1 15
Service GM59.9%
Service GM60.1%
Services Margin
60.1%| +20bp
• Gross margin expansion is the result of an increase in product revenue and favorable product mix
• Product margin increase was the result of an increase in product revenue
Continued Operating Margin ImprovementQ1 2015 (Non-GAAP)
Q1 14 Q1 15
Operating Margin18.2%
Operating Margin21.3%
• Operating margin improvement is a result of an increase in revenues and a continued successful execution of operational plan
• Excellent operating leverage
Cost Ratio – Increased Operating Efficiency Q1 2015 (Non-GAAP)
R&D
As % of revenue
Q1 14 Q1 15
R&D15.7%
R&D14.7%
Q1 14 Q1 15
S&M24.5% S&M
24.2%
S&M
As % of revenue
Q1 14 Q1 15
G&A7.1%
G&A7.7%
G&A
As % of revenue
• Increase in G&A as a percentage of revenue was the result of one-time effects in Q1 2014 that resulted in a much lower G&A expense for that quarter. Excluding this one-time effect in Q1 2014, G&A as a percent of revenue in Q1 2015 would have been lower than in Q1 2014.
Analytic Applications As % of new bookings
Q1 11 Q1 12 Q1 13 Q1 14 Q1 1530%
40%
50%
37%
44%
38%
49%48%
• Analytics applications are the growth driver of the business. In Q1 2015 Analytics reached nearly 50% of new business.
Q1 2015 Highlights
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
18
Balance Sheet March 31, 2015
Assets ($M) 03/31/2015 12/31/2014
Cash and cash equivalents
222.5 187.5
Short term investments 70.1 65.7
Trade receivables 142.2 181.6
Other receivables and prepaid expenses
40.0 34.0
Inventories 14.9 13.4
Deferred tax assets 24.1 24.2
Total current assets 513.9 506.4
Long term Investments 298.6 246.7
Other long term assets 38.1 38.6
Property and equipment 40.7 41.9
Other Intangible assets 100.7 113.7
Goodwill 686.2 694.8
Total Assets 1,678.2 1,642.1
Equity & Liabilities ($M)
03/31/2015 12/31/2014
Trade payables 12.9 11.9
Deferred revenue and advances from customers
191.4 145.2
Accrued expenses and other liabilities
194.8 221.1
Current liabilities 399.1 378.2
Deferred tax liabilities 21.2 23.9
Other long term liabilities
25.6 26.5
Total long term liabilities
46.8 50.4
Equity 1,232.3 1,213.5
Equity & Liabilities 1,678.2 1,642.1
* Errors due to rounding
19
Strong Cash Flow From OperationsQ1 2015
$M Q1 2015 Q1 2014 %∆
Cash flow from operations 104.1 58.4 78%
- Capital expenditure 3.2 4.3 (26%)
Cash flow from operations after capex 100.9 54.1 87%
Cash flow from operation after capex as % of revenue
41.0% 23.6% 17.4pp
Cash conversion rate * 2.3 1.6 44%
Days sales outstanding (DSO) 50 63
* Cash Conversion Rate = (Cash Flow from Operations after CAPEX / Non-GAAP Net Income)
• Cash flow in Q1 2015 was strong as a result of good collections following a strong Q4
20
Cash Movement and LiquidityMarch 31, 2015
Series1
Total liquidity (1) 12/31/14$500M
Operating CF$104M
Capital Expenditure -$3M
Dividend-$10M
Total liquidity (1) 03/31/15 $591M
Buyback-$6M
1) Total Liquidity = Cash and Cash Equivalents + Current Investments + Long Term Investments
Other
$6M
Q1 2015 Highlights
Income Statement
Balance Sheet and Cash Flow Analysis
Outlook
Outlook (Non-GAAP)
Q2 2015 Q2 2014 (Actual)
Revenue ($M) 249-257 239
EPS ($) 0.67-0.73 0.57
FY 2015 FY 2014 (Actual)
Revenue ($M) 1,065-1,085 1,012
EPS ($) 3.10-3.21 2.85
The outlook is provided as of May 7 2015. 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.
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