RESULTS Ended December 31, 2017 Forward Looking Statements - - PowerPoint PPT Presentation

2017 FOURTH QUARTER AND FULL YEAR RESULTS

Ended December 31, 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

• f 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

• utside 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

Q4 and Full Year 2017 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

Q4 and Full Year 2017 Highlights*

* All numbers are Non-GAAP

Record revenue for Q4 and FY; growth

• f 20% and 31%

YoY respectively

5

Record operating cash flow of $395M in FY; compared to $228M last year Record gross margin of 74.2% in Q4; compared to 73.9% last year Record gross profit for Q4 and FY; growth of 21% and 30% YoY respectively FY recurring revenue represents 65% of total revenue; compared to 53% last year Analytics continues to grow; represent 68% of new bookings in Q4 Record EPS for Q4 and FY; $1.35 and $4.10 respectively, growth of 14% YoY Record operating income for Q4 and FY; growth of 20% and 23% YoY respectively

Q4 and Full Year 2017 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

Strong Growth and Execution

REVENUES (Non-GAAP, $M)

329 396 1,030 1,346

Q4 16 Q4 17 FY 16 FY 17

20% 31%

1.18 1.35

3.61 4.10

Q4 16 Q4 17 FY 16 FY 17

14% 14% EARNINGS PER SHARE (Non-GAAP, $)

• Record revenue for the quarter and the full

year

• Strong growth reflects across-the-board

momentum especially in our strategic pillars of cloud and analytics

• Recurring revenue accounted for 65% of total

revenue in 2017

• Record EPS for the quarter and the full year
• Double digit growth in EPS due to improved

gross margin and positive leverage in the business model

GAAP and Non-GAAP Income Statement

$M (except EPS) Q4 2017 Q4 2016 FY 2017 FY 2017

GAAP revenue 392.2 323.9 1,332.1 1,015.5 Valuation adjustment on acquired deferred product revenue 0.0 0.5 0.3 2.0 Valuation adjustment on acquired deferred service revenue 0.8 2.9 4.7 6.9 Valuation adjustment on acquired deferred cloud revenue 2.8 1.2 8.8 5.9 Non-GAAP revenue 395.8 328.5 1,345.9 1,030.3 GAAP Cost of revenue 123.9 102.8 468.7 337.7 Amortization of acquired intangible assets on cost of product (5.3) (6.0) (23.8) (26.2) Amortization of acquired intangible assets on cost of services (1.0) (3.0) (6.3) (9.6) Amortization of acquired intangible assets on cost of cloud (12.6) (5.5) (46.4) (5.5) Valuation adjustments on acquired deferred cost of service 0.4 0.2 1.5 0.2 Cost of product revenue adjustment (0.2) (0.2) (0.7) (0.5) Cost of services revenue adjustment (2.1) (2.1) (7.7) (7.0) Cost of cloud revenue adjustment (0.8) (0.5) (3.0) (0.7) Non-GAAP cost of revenue 102.3 85.7 382.3 288.4 GAAP gross profit 268.3 221.1 863.5 677.8 Gross profit adjustments 25.2 21.7 100.1 64.0 Non-GAAP gross profit 293.5 242.8 963.6 741.8 GAAP operating expenses 205.1 184.0 713.4 543.6 Research and development (2.4) (2.2) (9.0) (6.6) Sales and marketing (6.1) (7.0) (23.2) (18.1) General and administrative (5.0) (19.2) (12.0) (32.4) Amortization of acquired intangible assets (10.6) (6.8) (41.9) (17.2) Non-GAAP operating expenses 181.1 148.9 627.2 469.3

8

GAAP and Non-GAAP Income Statement (cont.)

$M (except EPS) Q4 2017 Q4 2016 FY 2017 FY 2016

GAAP finance & other income (expense), net (3.7) (1.4) (20.4) 10.3 Amortization of discount on long term debt 2.1 0.4 13.5 0.4 Realized gain from substantial liquidation of marketable securities

• (2.7)

Non-GAAP finance & other income (expense), net (1.6) 1.0 (6.9) 8.0 GAAP taxes on income (19.9) 5.8 (13.6) 21.4 Tax adjustment re non-GAAP adjustments 15.4 14.7 57.7 38.5 Tax reform adjustments 30.9

• 30.9
• Non-GAAP taxes on income

26.4 20.5 75.0 59.9 GAAP net income from continuing operations 79.4 30.0 143.3 123.1 Valuation adjustment on acquired deferred revenue 3.5 4.6 13.7 14.8 Valuation adjustment on acquired deferred cost of service of revenue (0.3) (0.2) (1.5) (0.2) Amortization of acquired intangible assets 29.5 21.2 118.4 58.5 Share-based compensation 16.1 14.8 57.0 40.5 Re-organization expenses

• 7.8

(3.0) 11.0 Acquisition related expenses 0.5 8.5 1.7 13.7 Amortization of discount on long term debt 2.1 0.4 13.5 0.4 Realized gain from substantial liquidation of marketable securities

• (2.7)

Tax adjustments re non-GAAP adjustments and tax reform (46.3) (14.7) (88.6) (38.5) Non-GAAP net income from continuing operations 84.5 72.4 254.5 220.6 GAAP diluted earnings per share from continuing operations 1.27 0.49 2.31 2.02 Non-GAAP diluted earnings per share from continuing operations 1.35 1.18 4.10 3.61

9

Revenue Breakdown by Region (Non-GAAP)

10

Q4 2017

EMEA $54M, +2% YoY

14%

APAC $28M, +24% YoY

7% 79%

AMERICAS $313M, +24% YoY

Revenue Breakdown by Region (Non-GAAP)

11

Full Year 2017

EMEA $192M, -2% YoY

14%

APAC $107M, +5% YoY

8% 78%

AMERICAS $1,048M, +43% YoY

12

Revenue Breakdown by Business Unit (Non-GAAP)

Q4 2017

77%

CUSTOMER ENGAGEMENT

$303M, +26% YoY

FINANCIAL CRIME & COMPLIANCE

$93M, +4% YoY

23%

Revenue Breakdown by Business Unit (Non-GAAP)

Full Year 2017

79%

CUSTOMER ENGAGEMENT

$1,065M, +39% YoY

FINANCIAL CRIME & COMPLIANCE

$281M, +7% YoY

21%

13

Gross Profit and Margin (Non-GAAP)

243 293

73.9% 74.2%

60.0% 70.0% 80.0% 90.0%

Q4 16 Q4 17

50 100 150 200 250 300 350

Gross Income Gross Margin

14

• Q4 gross margin increased to a record of 74.2% as a result of strong product margin and continued, quarter-to-quarter

sequential improvement in overall operational efficiency

• FY 2017 gross margin decreased slightly due to the consolidation of inContact, which historically had a lower gross margin.

742 964

72.0% 71.6%

20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0%

FY 16 FY 17

200 400 600 800 1000 1200

Gross Income Gross Margin

Product GM 93.7% Product GM 94.9%

Q4 16 Q4 17

Gross Margin Q4 2017 (Non-GAAP)

PRODUCT MARGIN 94.9%| +120bp CLOUD MARGIN 61.7%| +300bp

Cloud GM 58.7% Cloud GM 61.7%

Q4 16 Q4 17

Service GM 65.3% Service GM 68.1%

Q4 16 Q4 17

SERVICES MARGIN 68.1%| +280bp

• Continued expansion in the services gross margin is a result of continued efficient utilization of the services organization
• The increase in the product margin is the result of product mix
• The increase in the cloud margin is the result of continued quarter-to-quarter improvement in the integration of the inContact cloud business

15

Product GM 91.4% Product GM 91.7%

FY 16 FY 17

Gross Margin Full Year 2017 (Non-GAAP)

PRODUCT MARGIN 91.7%| +30bp CLOUD MARGIN 61.3%| -150bp

Cloud GM 62.8% Cloud GM 61.3%

FY 16 FY 17

Service GM 63.8% Service GM 67.6%

FY 16 FY 17

SERVICES MARGIN 67.6%| +380bp

• Continued expansion in the services gross margin is a result of continued efficient utilization of the services organization
• The increase in the product margin is the result of product mix
• The decrease in the cloud margin is the result of the consolidation of inContact

16

Operating Income and Margin (Non-GAAP)

• Record Q4 and FY operating income, which increased 20% and 23%, respectively
• The decrease in the operating margin is the result of an increase in OPEX due to the consolidation of inContact

94 112

28.6% 28.4%

20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 32.0% 34.0% 36.0% 38.0% 40.0%

Q4 16 Q4 17

30 40 50 60 70 80 90 100 110 120

Operating Income Operating Margin

17

273 336

26.5% 25.0%

20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 32.0%

FY 16 FY 17

50 100 150 200 250 300 350 400

Operating Income Operating Margin

Cost Ratio Q4 2017 (Non-GAAP)

R&D As % of revenue

R&D 11.8% R&D 12.1%

Q4 16 Q4 17

S&M 25.9% S&M 25.5%

Q4 16 Q4 17

S&M As % of revenue

G&A 7.7% G&A 8.2%

Q4 16 Q4 17

G&A As % of revenue

• Increase in G&A is the result of the consolidation of inContact

18

Cost Ratio Full Year 2017 (Non-GAAP)

R&D As % of revenue

R&D 13.1% R&D 12.8%

FY 16 FY 17

S&M 24.3% S&M 25.1%

FY 16 FY 17

S&M As % of revenue

G&A 8.2% G&A 8.7%

FY 16 FY 17

G&A As % of revenue

• R&D expenses increased YoY but decreased as a percentage of revenue
• Increases in S&M and G&A are the result of the consolidation of inContact

19

Analytic applications as % of new bookings

59% 62% 59% 65% 68% Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 Analytics continue to grow, and in Q4 2017 represented 68% of new bookings

20

Q4 and Full Year 2017 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

Balance Sheet

December 31, 2017

Assets ($M) 12/31/2017 12/31/2016 Cash and cash equivalents 328.3 157.0 Short term investments 64.0 30.3 Trade receivables 230.7 260.2 Prepaid expenses and other current assets 68.0 58.0 Discontinued operation 2.0 3.7 Total current assets 693.0 509.2 Long term Investments 132.8 98.7 Property and equipment 118.3 87.7 Deferred tax assets 11.9 14.1 Other Intangible assets 551.3 618.7 Goodwill 1,318.2 1,284.7 Other long term assets 19.5 18.7 Total Assets 2,845.0 2,631.9 Equity & Liabilities ($M) 12/31/2017 12/31/2016 Current maturities of long term loan

• 21.2

Trade payables 29.4 25.6 Deferred revenue and advances from customers 184.6 149.8 Accrued expenses and other liabilities 309.2 273.1 Discontinued operation 0.2 3.1 Current liabilities 523.4 472.8 Deferred revenue and advances from customers 37.6 22.7 Deferred tax liabilities 57.8 146.9 Long term debt 447.6 444.0 Other long term liabilities 29.2 34.1 Total long term liabilities 572.2 647.7 Equity 1,749.6 1,511.3 Equity & Liabilities 2,845.0 2,631.9

22

Cash Flow from Operations ($M)

• Q4 cash flow from operations more than doubled
• Full year 2017 cash flow from operations grew 73% to a record of $394 million

42 87

Q4 16 Q4 17

104%

23

228 395

FY 16 FY 17

73%

Cash Flow From Operations **

$M Q4 17 Q4 16 %∆ FY 17 FY 16 %∆ Cash flow from operations 86.6 42.4 104% 394.7 228.2 73%

• Capital expenditure

8.5 9.1 (7%) 39.9 27.3 46%

• Capitalization of software development

6.9 3.8 82% 27.9 8.5 228% Cash flow from operations after capex & software capitalization 71.2 29.5 141% 326.9 192.4 70% Cash flow from operation after capex and software capitalization as % of non-GAAP revenue 18% 9% 9pp 24% 19% 5pp Cash conversion rate * 0.84 0.41 105% 1.3 0.9 44% Days sales outstanding (DSO) 62 91 (32%) 62 91 (32%)

* Cash Conversion Rate = (Cash Flow from Operations after CAPEX and software capitalization / Non-GAAP Net Income)

** Cash flow numbers include divested Intelligence and Physical Security divisions

24

Cash Movement and Liquidity

December 31, 2017

25

** CAPEX movement includes R&D capitalization

Liquidity 12/31/16* $286 Liquidity 12/31/17* $525 Dividend

• $10

Operating CF $395 Convertibles $260 Debt

• $260

Acquisitions

• $76

Proceeds from

• ptions exercise

$19 Other $3 CAPEX**

• $68

Buyback

• $24M

Q4 and Full Year 2017 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

Outlook (Non-GAAP)

27

The outlook is provided as of February 15, 2018. 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.

Q1 2018 FY 2018

Revenue ($M)

328-338 1,430-1,454

EPS ($)

0.97-1.03 4.40-4.60

28