Second Quarter Results Ended June 30, 2015 Forward Looking - - PowerPoint PPT Presentation

Second Quarter Results

Ended June 30, 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

• ther 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, restructures expenses, share-based compensation, certain business combination accounting entries, settlement and related expenses 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

• ther 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.

Q2 2015 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

5

21% increase in Q2 EPS to $0.70; high end of guidance

Q2 operating margin

increased to 22.3% compared to 18.9% last year and

Strong Q2 cash flow increased to $57M, more than double compared to last year

Q2 2015 Highlights*

Product revenue growth of 12% Americas revenue; grew 14% , double digit growth fourth quarter in a row Increased full year 2015 EPS guidance 6.0% Q2 revenue growth to $235M; 9% revenue growth excluding FX impact Q2 gross margin increased to 68.7% compared to 67.3% last year

* All numbers, except cash flow, are Non-GAAP ** All numbers, except cash flow, are excluding Intelligence division *** All numbers include Physical Security division

Q2 2015 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

Good Growth and Execution

Q2 2015

REVENUES (Non-GAAP, $M) 222 235

200 210 220 230 240 Q2 14 Q2 15

6.0%

0.58 0.70

0.1 0.3 0.5 0.7 0.9 1.1

Q2 14 Q2 15

21%

EARNINGS PER SHARE (Non-GAAP, $)

• Excluding currency impact, revenue growth

would have been 9%

• Strong growth in product revenue
• Strong growth in EPS due to revenue

growth, improved gross margin and continued successful execution of

• perational plan
• Excellent operating leverage

* All numbers exclude Intelligence division and include Physical Security division

8

GAAP and Non-GAAP Income Statement – Q2 2015

$M (except EPS) Q2 2015 Q2 2014

GAAP revenue 234.7 221.3 Valuation adjustment on acquired deferred service revenue 0.1 0.3 Non-GAAP revenues 234.8 221.6 GAAP Cost of revenue 80.9 82.8 Amortization of acquired intangible assets on cost of product (6.8) (8.3) Cost of product revenue adjustment (0.1) (0.1) Cost of services revenue adjustment (0.5) (1.9) Non-GAAP cost of revenue 73.5 72.5 GAAP gross profit 153.7 138.5 Gross profit adjustments 7.5 10.5 Non-GAAP gross profit 161.2 149.0 GAAP operating expenses 118.4 124.8 Research and development (0.3) (1.0) Sales and marketing (2.5) (3.5) General and administrative (2.7) (4.5) Amortization of acquired intangible assets (3.7) (5.4) Acquisition related expenses

• (0.2)

Settlement and related expenses (0.4)

• Restructuring expenses
• (3.1)

Non-GAAP operating expenses 108.8 107.1

** Errors due to rounding * All numbers include Physical Security division

9

$M (except EPS) Q2 2015 Q2 2014

GAAP taxes on income 7.2 2.4 Tax adjustment re non-GAAP adjustments 2.9 4.8 Non-GAAP taxes on income 10.1 7.2 GAAP net income (loss) from continuing operations 28.7 11.9 Valuation adjustment on acquired deferred revenue 0.1 0.3 Amortization of acquired intangible assets 10.5 13.7 Share-based compensation 6.1 7.1 Re-organization expenses

• 3.9

Acquisition related expenses

• 0.2

Restructuring expenses

• 3.1

Settlement and related expenses 0.4

• Tax adjustments re non-GAAP adjustments

(2.8) (4.8) Non-GAAP net income from continuing operations 43.0 35.3 GAAP diluted earnings (loss) per share from continuing operations 0.47 0.19 Non-GAAP diluted earnings per share from continuing operations 0.70 0.58

** Errors due to rounding

GAAP and Non-GAAP Income Statement – Q2 2015 (cont.)

* All numbers include Physical Security division

Revenue Breakdown by Region (Non-GAAP) Q2 2015

AMERICAS $164M, +14% YoY

70%

APAC $23M, 1% YoY

10%

EMEA $48M, -12% YoY

20%

* All numbers exclude Intelligence division and include Physical Security division

EMEA and APAC negatively impacted by currency exchange rates

Revenue Breakdown by Business Unit (Non-GAAP)

Q2 2015

CUSTOMER INTERACTIONS $144M, +0% YoY

62%

SECURITY $34M, +17% YoY

14%

FINANCIAL CRIME & COMPLIANCE $57M, +20% YoY

24%

* All numbers exclude Intelligence division and include Physical Security division

Gross Margin

Q2 2015 (Non-GAAP)

Gross Margin 68.7%| +140bp

Gross Margin 67.3% Gross Margin 68.7%

Q2 14 Q2 15

Product

GM 83.2%

Product GM 84.2%

Q2 14 Q2 15

Product Margin 84.2%| +100bp

Service GM 59.6% Service GM 60.6%

Q2 14 Q2 15

Services Margin 60.6%| +100bp

• 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
• Increase in service margin is the result of improved effiiciencies

* All numbers exclude Intelligence division and include Physical Security division

Continued Operating Margin Improvement

Q2 2015 (Non-GAAP)

Operating Margin 18.9% Operating Margin 22.3%

Q2 14 Q2 15

• Operating margin improvement is a result of an increase in gross margin and

further progress in expenses management improvement

• Excellent operating leverage

* All numbers exclude Intelligence division and include Physical Security division

Cost Ratio – Increased Operating Efficiency

Q2 2015 (Non-GAAP)

R&D As % of revenue

R&D 14.6% R&D 14.0%

Q2 14 Q2 15

S&M 25.6% S&M 24.2%

Q2 14 Q2 15

S&M As % of revenue

G&A 8.2% G&A 8.1%

Q2 14 Q2 15

G&A As % of revenue

• Operating expenses decreased as a percentage of revenue, reflecting further progress in the

Company’s operational plan to improve efficiency and profitability

* All numbers exclude Intelligence division and include Physical Security division

Analytic Applications

As %

• f new bookings

37% 44% 38% 49% 48% 48% 30% 40% 50%

Q1 11 Q1 12 Q1 13 Q1 14 Q1 15

• Analytics applications are the growth driver of the business. In Q2 2015

Analytics reached nearly 50% of new business.

* All numbers include Physical Security division

Q2 2015 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

17

Balance Sheet

June 30, 2015

Assets ($M) 06/30/2015 12/31/2014 Cash and cash equivalents 236.3 187.5 Short term investments 70.3 65.7 Trade receivables 143.9 166.0 Other receivables and prepaid expenses 40.9 33.5 Inventories 11.6 10.5 Deferred tax assets 22.8 22.8 Current assets of discontinued operation 41.4 20.3 Total current assets 567.3 506.4 Long term Investments 322.1 246.7 Other long term assets 31.2 29.9 Property and equipment 40.3 41.0 Other Intangible assets 90.7 112.1 Goodwill 689.4 689.0 LT assets of discontinued

• peration
• 16.9

Total Assets 1,741.1 1,642.1 Equity & Liabilities ($M) 06/30/2015 12/31/2014 Trade payables 16.6 10.9 Deferred revenue and advances from customers 185.8 134.8 Accrued expenses and other liabilities 194.0 200.2 Current liabilities of discontinued operation 34.1 32.3 Current liabilities 430.6 378.2 Deferred tax liabilities 18.6 23.7 Other long term liabilities 21.8 21.9 LT liabilities of discontinued

• peration
• 4.8

Total long term liabilities 40.4 50.4 Equity 1,270.0 1,213.5 Equity & Liabilities 1,741.1 1,642.1 ** Errors due to rounding * All numbers include Physical Security division

18

Strong Cash Flow From Operations

Q2 2015

$M Q2 2015 Q2 2014

%∆

Cash flow from operations 57.0 25.9 120%

• Capital expenditure

4.7 4.7

• Cash flow from operations after capex

52.3 21.2 147% Cash flow from operation after capex as % of revenue 22.3% 9.6% 12.7pp Cash conversion rate * 1.2 0.6 100% Days sales outstanding (DSO) ** 53 63

* Cash Conversion Rate = (Cash Flow from Operations after CAPEX / Non-GAAP Net Income) ** All numbers, except cash flow, exclude the Intelligence division *** All numbers include Physical Security division

19

Cash Movement and Liquidity

June 30, 2015

Total liquidity (1) 12/31/14

$500M

Operating CF

$162M

Capital Expenditure

• $8M

Dividend

• $19M

Total liquidity (1) 06/30/15

$629M

Buyback

• $18M

1) Total Liquidity = Cash and Cash Equivalents + Current Investments + Long Term Investments

Other $12M

Q2 2015 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook

Outlook (Non-GAAP)

Previous Q3 2015

• Inc. Physical Security

Current Q3 2015

• Ex. Physical Security

Revenue ($M) 236-246 215-225 EPS ($) 0.68-0.74 0.65-0.71 Previous FY 2015

• Inc. Physical Security

Current FY 2015

• Ex. Physical Security

Revenue ($M) 985-1,005 914-934 EPS ($) 3.04-3.15 2.97-3.08

The outlook is provided as of August 3 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.

* All numbers exclude Intelligence and Physical Security divisions

Physical Security Divestiture

On August 3, 2015 the company announced the divestiture of its Physical Security division. Therefore, beginning in the third quarter of 2015, the company will present its results from continued operations on a pro forma basis with the Physical Security business unit as a discontinued operation. The company is therefore revising its guidance to exclude the Physical Security business unit’s projected contribution from third quarter and full-year non-GAAP total revenues and non-GAAP fully diluted earnings per share.