2017 THIRD QUARTER RESULTS Ended September 30, 2017
Forward Looking Statements Disclaimer 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. 2
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, share-based compensation, and certain business combination accounting entries, settlement, amortization of discount on long term debt 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. 3
Q3 2017 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Q3 2017 Highlights* Revenue of $327M, Cloud revenue grew Operating income EPS growth of 14% growth of 36% YoY 15% sequentially increased to $78M, YoY to $0.95, growth of 22% YoY compared to $0.83 last year Strong operating Recurring revenue Analytics Guidance ranges cash flow of $106M, accounted for 69% represented 60% of for FY17 revenue compared to $41M of total revenue, new bookings in Q3 and EPS were last year compared to 51% narrowed; guidance last year midpoints increased * All numbers are Non-GAAP 5
Q3 2017 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Strong Growth and Execution REVENUES (Non-GAAP, $M) • Strong revenue growth driven by continued 327 momentum in cloud and analytics coupled with 240 expansion of total addressable market • Cloud accounted for 30% of total revenue, 36% compared to 6% in Q3 2016 • Recurring revenue accounted for 69% of total revenue compared to 51% last year Q3 16 Q3 17 EARININGS PER SHARE (Non-GAAP, $) • Excellent operating leverage results in double 0,95 0,83 digit EPS growth 14% Q3 16 Q3 17 7
GAAP and Non-GAAP Income Statement $M (except EPS) Q3 2017 Q3 2016 GAAP revenue 322.8 237.2 Valuation adjustment on acquired deferred product revenue 0.0 0.1 Valuation adjustment on acquired deferred service revenue 0.8 1.6 Valuation adjustment on acquired deferred cloud revenue 3.1 1.4 Non-GAAP revenues 326.8 240.3 GAAP Cost of revenue 115.4 78.0 Amortization of acquired intangible assets on cost of product (6.1) (6.3) Amortization of acquired intangible assets on cost of services (1.0) (3.2) Amortization of acquired intangible assets on cost of cloud (11.8) - Valuation adjustments on acquired deferred cost of service 0.4 - Cost of product revenue adjustment (0.2) (0.1) Cost of services revenue adjustment (1.9) (1.6) Cost of cloud revenue adjustment (0.6) (0.1) Non-GAAP cost of revenue 94.2 66.7 GAAP gross profit 207.4 159.1 Gross profit adjustments 25.1 14.4 Non-GAAP gross profit 232.5 173.5 GAAP operating expenses 174.3 123.1 Research and development (2.2) (1.4) Sales and marketing (5.7) (4.1) General and administrative (1.6) (5.1) Amortization of acquired intangible assets (10.6) (3.2) Non-GAAP operating expenses 154.2 109.3 8
GAAP and Non-GAAP Income Statement (cont.) $M (except EPS) Q3 2017 Q3 2016 GAAP finance & other income (4.3) 5.0 Amortization of discount on long term debt 2.1 - Realized gain from substantial liquidation of marketable securities - (2.7) Non-GAAP finance & other income (2.2) 2.3 GAAP taxes on income 2.6 8.6 Tax adjustment re non-GAAP adjustments 14.6 7.2 Non-GAAP taxes on income 17.2 15.8 GAAP net income (loss) from continuing operations 26.2 32.4 Valuation adjustment on acquired deferred revenue 4.0 3.1 Valuation adjustment on acquired deferred cost of service of revenue (0.4) - Amortization of acquired intangible assets 29.4 12.6 Share-based compensation 14.0 9.5 Re-organization expenses (3.1) 1.5 Acquisition related expenses 1.3 1.5 Amortization of discount on long term debt 2.1 - Realized gain from substantial liquidation of marketable securities - (2.7) Tax adjustments re non-GAAP adjustments (14.6) (7.2) Non-GAAP net income from continuing operations 58.9 50.7 GAAP diluted earnings (loss) per share from continuing operations 0.42 0.53 Non-GAAP diluted earnings per share from continuing operations 0.95 0.83 9
Q3 2017 Revenue Breakdown by Region (Non-GAAP) 77% 15% AMERICAS EMEA $251M, +53% YoY $50M, +3% YoY 8% APAC $26M, -7% YoY 10
Q3 2017 Revenue Breakdown by Business Unit (Non-GAAP) 19% FINANCIAL CRIME & COMPLIANCE $62M, +10% YoY 81% CUSTOMER ENGAGEMENT $265M, +44% YoY 11
Gross Margin Q3 2017 (Non-GAAP) 72,2% 71,2% Q3 16 Q3 17 • Gross margin slightly decreased as a result of the consolidation of inContact, which has a lower gross margin, and offset by continued improvement in overall operational efficiency following the acquisition as Q3 2017 gross margin increased compared to Q2 2017 (70.5%) and Q1 2017 (69.9%). 12
Gross Margin Q3 2017 (Non-GAAP) SERVICES MARGIN PRODUCT MARGIN CLOUD MARGIN 68.7%| +450bp 62.4%| -300bp 90.0%| -210bp Product GM 92,1% Product GM Service GM 90,0% 68,7% Cloud GM Service GM 65,4% Cloud 64,2% GM 62,4% Q3 16 Q3 17 Q3 16 Q3 17 Q3 16 Q3 17 • Continued expansion in the services gross margin as a result of continued efficient utilization of the services organization • The decrease in the product margin is the result of product mix • The decrease in the cloud margin is the result of the consolidation of inContact and offset by continued improvement in overall 13 operational efficiency following the acquisition as Q3 2017 cloud margin increased compared to Q2 2017 (60.4%) and Q1 2017 (60.3%)
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