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.