Verint Systems Inc (VRNT) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2011 Verint Systems earnings conference call. My name is Amisia and I will be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator instruction).

I would now like to turn the call over to Mr. Alan Roden. Please proceed.

Thank you, operator. This is Alan Roden, Senior Vice President - Corporate Development of Verint Systems. I am here with Dan Bodner, Verint's CEO and President, and Doug Robinson, Verint's Chief Financial Officer. Good afternoon and thank you for joining us today.

By now you should have seen a copy of our press release that includes selected financial information for our fourth fiscal quarter and full year ended January 31, 2012. Form 10-K will be filed at a later time. Each of our filings and earnings press releases is available under the Investor Relations link of our website and also on the SEC website.

Before starting the call I would like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint. These forward-looking statements are not guarantees of future performance and are based on management's expectations and involve a number of risk, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements.

The forward-looking statements are made as of the day of this call and except as required by law Verint assumes no obligation to update or revise them or to provide reasons why actual results may differ. Investors are cautioned not to place undue reliance on these forward-looking statements, which are time-sensitive and speak only as of today. For a more detailed discussion of how these and other risks and uncertainties could cause Verint's actual results to differ materially from those indicated in these forward-looking statements please see our Form 10-K for the fiscal year ended January 31, 2011, our Form 10-K for the fiscal year ended January 31, 2012, which we expect to be filed by Monday and other filings we make with the SEC.

Most of the financial information discussed today is not prepared in accordance with generally accepted accounting principles and is therefore non-GAAP. A reconciliation of the non-GAAP financial measures provided in today's call to the most directly comparable GAAP financial measures as well as an explanation of why management uses these measures is included in our press release dated March 28, 2012, as well as in the GAAP to non-GAAP reconciliation found under the Investor Relations link on our website.

Non-GAAP financial information should not be considered in isolation or as a substitute for GAAP financial information but is included because management believes that it provides meaningful supplemental information regarding our operating results and when assessing our business is useful to investors for informational and comparative purposes. The non-GAAP financial measures the Company uses have limitations and may differ from those used by other companies.

Now I would like to turn the call over to Dan. Dan?

Thank you, Alan. Good afternoon, everyone, and thank you for joining us to review our fourth quarter and full year results. In Q4, we delivered $219 million of total revenue representing a 17% year-over-year increase and $0.75 of fully diluted earnings per share ahead of our expectations. Our strong fourth-quarter revenue resulted in $796 million of revenue for the year, representing a 9.6% year-over-year increase and $2.47 of fully diluted EPS.

We are pleased with our results, which reflect our leadership position and strong performance in both the enterprise intelligence and security intelligence markets. We experienced broad business strength in Q4. Revenue increased both sequentially and year over year in all three of our segments -- Enterprise Intelligence, Video and Situation Intelligence, and Communications and Cyber Intelligence. Geographically, we also experienced sequential and year-over-year revenue growth in all three of our regions -- Americas, EMEA, and APAC.

Our operating margins increased sequentially to 24% driven by our higher-than-expected Q4 revenue. Strong business activity in the quarter drove cash from operations to a record $61 million. We achieved these strong financial results while continuing to invest to accelerate growth.

Last year, we added close to 400 people, principally in sales, R&D and services, bringing our total headcount to approximately 3,200. In sales and marketing, we significantly increased our market coverage with the addition of approximately 125 people, the opening of new offices in several emerging markets and the strengthening of our partner relationships.

In research and development, we continued our innovation strategy, adding approximately 130 people and broadening our enterprise intelligence and security intelligence portfolios with new applications and analytical solutions. In services and operations, we added approximately 85 people and expanded our customer implementation and support programs. We believe these investments have contributed to our success and position us well for long-term growth in the enterprise intelligence and security intelligence markets.

In enterprise intelligence, we continued to benefit from three market trends that we have highlighted in the past. One, organizations increasingly looking to purchase workforce optimization solutions in the form of a unified suite from a single vendor. Two, the migration of workforce optimization solutions across the enterprise into new areas such as back office and branch operations. And three, the adoption of innovative and legal solutions to better understand the Voice of the Customer.

For example, in Q4 we received orders in excess of $2 million from an existing international banking customer, bringing total orders from this customer to $10 million for the year for its call center, back office, and branch operations. This banking customer had initially deployed our recording and quality monitoring solutions and decided to expand to a more comprehensive unified solution. They followed with the deployment of our Speech Analytics in their call center and are deploying our Workforce Management Desktop Analytics and Performance Management Solution for the first time in its back-office and branch operations.

We believe this enterprisewide deployment is indicative of the market preference towards purchasing multiple solutions from a single vendor, sometimes all at once, but more often over time. Verint is well-positioned to capitalize on this strength, given our broad suite and large installed base of more than 10,000 customers.

While the opportunity for our solutions outside the contact centers still represents a small part of Verint's business today, we continue to see interest across a number of customer verticals. For example during Q4 we received an order close to $3 million for our Process Analytics and Performance Management Solutions from a leading healthcare company that is deploying Verint solutions to effectively measure and optimize its back office workforce operations.

Moving to the Voice of the Customer analytics, we believe that customer-centric organizations are increasingly interested in deploying sophisticated analytics such as speech, text, and enterprise feedback management to gain a better understanding of the customer experience, workforce performance, and the factors underlying business trends. During Q4, we received a $2 million [SAS] order for our Enterprise Customer Feedback Solution, the newest component of our Voice of the Customer platform, from a new international energy customer. The customer will use our Enterprise Feedback Solution to conduct surveys among its tens of thousands of employees worldwide as part of its global initiative to align employees with the Company's core values and business objectives.

To better address market demand for Enterprise Intelligence Solutions, we are investing in OEM and other partnerships. We believe partnerships are an important part of our go to market strategy, and we continue to expand partnerships. In Q4 we received an order in excess of $4 million from a new global outsourcing customer through one of our OEM partners and, overall, last year our OEM business increased more than 25% year over year. We plan to continue to invest in partnerships to expand our ecosystem and better serve our customers.

We believe that customer-centricity has been a major contributor to our success. A core part of our growth strategy is to ensure that customers maximize value from our solutions. We are very pleased to have recently received CRM Magazine's Service Winner Award for Workforce Optimization for the fifth consecutive year. The award was based on customer interviews and market research across three categories -- reputation for customer satisfaction, depth of product functionality, and company direction.

Verint received the highest ranking overall as well as in each of the three categories.

Overall, we believe we are expanding our market leadership and are well-positioned to capitalize on the trends driving growth in our markets.

Turning to Security Intelligence, our strategy continue to be to deliver a broad portfolio of innovative IT security intelligence solutions to meet our customer's specific security challenges across several vertical markets including government, retail, finance, and critical infrastructure.

In the government sector, customers are deploying our innovative Communications Intelligence Solutions to effectively detect, investigate, and neutralize criminal and terrorist threats and are deploying our video and situation intelligence solutions to improve the security of sensitive facilities and infrastructure. We continue to see governments around the world seeking solutions to keep pace with the growing amount and type of network traffic and unstructured data, and our strategy is to deliver innovative solutions that help them efficiently collect and analyze very large amounts of content to generate actionable intelligence.

In Q4, we received an order in excess of $20 million from a new international government customer and in Q1 we are received order in excess of $20 million from another international government customer. These large orders are indicative of customer demand for new innovative security solutions, and are expected to be deployed over multiple quarters.

In retail, customers are deploying our Video Intelligence Solutions to reduce shrinkage, manage liability, provide a safe environment for employees and customers, and leverage video to enhance business performance. During the fourth quarter, we received orders of approximately $3 million from an existing retail customer and an order close to $2 million from a new retail customer, one of the largest retailers in the United States.

We believe that, in addition to improving security, retailers are beginning to leverage video for operational purposes such as benchmarking store performance, analyzing the customer experience, and optimizing stocking levels, facility layouts, and product placement and that Verint is well-positioned to address this opportunity with retail-specific analytical solutions.

In critical infrastructure, our customers are deploying our Video and Situation Intelligence Solutions to protect infrastructure and properties such as airports, seaports, transportation networks, utilities, and safe city initiatives. During the quarter we received an order for a new safe city project in Latin America and we continue to see interest in safe city projects in other parts of the world.

Overall, we finished the year with very strong business activity and security; and we believe we are well-positioned in the security market with a broad portfolio of IT security solutions.

In both the Enterprise and Security Intelligence markets we are seeing interest in our analytical solutions due to increasing amounts of unstructured data and the need to generate Actionable Intelligence to improve enterprise performance and security. Our strategy is to capitalize on this opportunity by adding new analytical solutions to our Enterprise and Security Intelligence portfolios through investments and selective acquisitions, making us more strategic to our customers and partners.

Last year we expanded our product portfolios, increased our direct and indirect sales efforts, and grew our service organization to scale the business. We believe this investment, combined with our leadership position in the enterprise and security market and our installed base of more than 10,000 customers, positions us well for sustained future growth.

Turning to the current year, we expect revenue in the range of $860 million to $880 million and earnings per share in the range of $2.55 to $2.70 for the year ending January 31, 2013. Our guidance reflects the strong finish we had to last year and the market trends we discussed today. It also reflects our investment strategy to accelerate growth while achieving healthy operating margins in the low 20% range.

Now I would like to turn the call over to Doug to discuss our Q4 and full year results and outlook in more detail. Doug?

Thanks, Dan. Good afternoon, everyone. Most of the discussion today will focus on non-GAAP financial measures. A reconciliation between our GAAP and our non-GAAP financial measures is available as previously described.

Differences between our GAAP and non-GAAP financial measures include adjustments related to acquisitions, including amortization of acquisition-related intangibles, certain other acquisition-related expenses, stock-based compensation, as well as certain other non-cash or nonrecurring charges. Our earnings release provides further information on these non-GAAP adjustments.

I would like to begin today's discussion with the areas of revenue, gross margin, and operating margin. In the fourth quarter, we generated approximately $219 million of total revenue across our three segments with $125 million in the Enterprise Intelligence, $36 million in Video Intelligence, and $58 million in Communications Intelligence. This compares to approximately $187 million of total revenue in the fourth quarter of last year, with $112 million in Enterprise Intelligence, $35 million in Video Intelligence, and $40 million in Communications Intelligence.

For the full year, we generated approximately $796 million of revenue with $445 million in Enterprise Intelligence, $140 million in Video, and $211 million in Communications Intelligence. This compares to approximately $727 million of total revenue last year with $411 million in Enterprise, $134 million in Video, and $182 million in Communications Intelligence.

In terms of geography, in Q4 we generated $121 million in the Americas, $57 million in EMEA, and $41 million in APAC. This compares to approximately $104 million in the Americas, $50 million in EMEA, and $33 million in APAC in the fourth quarter of last year.

Q4 gross margins were 68.5% compared to 67.8% in Q3 and 69% in Q4 of last year. As we have discussed in the past, gross margins can fluctuate significantly quarterly due to the revenue mix. For the year, gross margins were 68.3%.

In Q4, we experienced strong sequential operating income growth in operating margins. Our Q4 operating income increased $9 million sequentially to $53 million from $44 million in Q3 driving our operating margins up almost 3% to 24% in Q4. For the year, operating income was $177 million with operating margins of 22.2%. Our Q4 EBITDA came in at $57 million or 25.9% of revenue. For the year, EBITDA came in at $194 million or 24.4% of revenue.

Now let's turn to other income and interest expense.

In the fourth quarter, other expense net totaled $9 million reflecting $8 million of interest expense as well as $1 million of negative foreign exchange impact related to balance sheet translations. For the year, other expense net totaled $32 million. In the tax area, our Q4 non-GAAP cash tax rate was 11.6% bringing our annual cash tax rate to 11.5%. As we have discussed previously, we expect to enjoy a low cash tax rate for several years due to our NOLS and the amount of income we generate in the low tax rate jurisdictions.

Now let's turn to the balance sheet. As of January 31, 2012, we had approximately $164 million of cash including $13 million of restricted cash compared to approximately $120 million of cash as of the end of our third quarter. Cash from operations for Q4 came in very strong at $61 million, and for the year came in at $106 million. On an adjusted basis, excluding $29 million of interest payments, $10 million of cash settled restricted stock payments and $12 million of other nonrecurring expenses primarily related to M&A, we generated close to $160 million of cash from operations for the year.

We ended the year with net debt of $433 million reflecting our $597 million of total debt. Our strong Q4 business activity resulted in a healthy sequential increase of approximately $19 million in deferred revenue. While we continue to expect deferred revenue to be lumpy, primarily due to the timing of large security orders we believe the impact on deferred revenue from our revenue statement is largely behind us, except for a small declining amount in our Video Intelligence segment.

At the end of the quarter, we had 50.5 million average fully diluted shares outstanding including approximately 10.8 million shares underlining our convertible preferred stock. And for the year we had 50.1 million average fully diluted shares outstanding.

Before moving to Q&A I would like to discuss our guidance for the year ending January 31, 2013. We are providing revenue guidance in the range of $860 million to $880 million reflecting our strong fourth-quarter business activity and positive industry trends. We expect non-GAAP operating margins for the year to be in the low 20% range, consistent with our investment strategy. We expect our quarterly interest and other expense excluding the potential impact of foreign exchange to be approximately $8 million. We expect our non-GAAP cash tax rate to be approximately 12% for the year, reflecting the amount of taxes we expect to pay this year. Based on these assumptions and assuming approximately 51 million average fully diluted shares outstanding for the year, we expect non-GAAP EPS to be in the range of $2.55 to $2.70.

While this is our annual guidance, please remember there are seasonal trends in the enterprise software industry and we expect Q1 revenue to be down close to 10% sequentially from Q4 levels but still up double digits from Q1 last year. Consequently, while we expect operating margins to be in the low 20s for the full year, in Q1 we expect operating margins to be less than 20% due to that Q1 seasonality.

In conclusion, we finished the year very strong and believe the investments we have made position us very well for continued market leadership and growth.

This concludes my compared remarks. So with that, operator, can we please open up the lines for questions?

(Operator Instructions). Daniel Meron with RBC Capital.

Thank you. Congrats on a solid fourth quarter. Couple of questions in mind. The first one I think, Doug, you mentioned the numbers for 2012. If we look on a long-term basis it seems like you guys are in somewhat of an investment cycle right now.

What kind of growth do you think you can sustain still around the high single digits or above? And second part is obviously how do you think that operating margins long term could look like? Thank you.

Let me take the first part about the growth perspective, and then Doug can add more about the operating margins. So when we look at growth in this business, we feel that we have a portion of our business that we sell analytical solutions that grow very, very fast. At the same time, there is also some portion of our business such as recording that has been around for a while and is not going [to staff]. And as we said before, we believe that our average growth rates in the market is basically mid to high single digits.

But as we continue to invest in analytical solutions and add more analytical solutions and grow the portion of the revenue that comes from this fast growth analytics, we believe that there is an opportunity to accelerate organic growth. And as we said before, we are targeting double-digit growth in our business longer term.

Yes and with respect to operating margins, last year we target low 20s -- 21% to 22%. We feel that that is a good balance of the investments we need to make in the business for the long-term growth, as well as producing good profitability and return to shareholders. We overachieved that, as you can see, from particularly the Q4 results. Next year we are targeting similar numbers as we continue to invest in the business. But over long term we will build that scale. We'll have better geographic presence, et cetera, and start to leverage the model and we would expect to see the operating margins start to come up come years on now but next year the guidance is what it is as we have outlined.

Right, but is the next target like once you finish this investment cycle I don't know if it is three years, five years, whatever the number is, but could you see the business generating something like midteens -- mid 20s, I mean?

Yes, I think we would see them start to come up. I mean it's hard for us to sit here today and tell you what operating margins are going to be three to five years from now. But as we do build scale we would see those operating margins start to go up.

Okay. That's great. And then just another question. I think, Dan, you mentioned that OEM business grew by 25% year over year. Can you give us that number of what was the base for that? Or what was the share of the revenue of the OEM in 2012 -- sorry, 2011? And then can you provide a little more color on that OEM business? Who are the main partners that you are seeing both in enterprise and security? And what part of the growth cycle that you are looking for are they going [for certain], are they going to be expanding the funnel and just getting you to more places, et cetera? So, what is the strategy with those partners?

Yes. So first, OEM program at this point is focused on our Enterprise business and we will consider expanding it also on the security side. But it is primarily focused on the Enterprise side. The program is several years old. The one prominent partner there that we have discussed before is Avaya, but we do have other partners that have joined the program since and so other partners that are in the process of joining the program. And in terms of size, it is still in the order of magnitude of tens of millions of dollars at this point, but it is an important part of our strategy. We think we can expand our outreach to the market. We can leverage the strength of this partner and obviously as it scales it can be also very profitable. And we will continue to report progress on this program and it is still small, relative to the overall size of Verint. But I hope it will become more and more meaningful.

Okay. Thank you. I will yield the floor. Good luck.

Paul Coster with JPMorgan.

Thank you for taking my question. Dan, it sounded to me like there was a fairly long list of big deals, multimillion dollar deals including the two $20 million plus deals in the Security segment.

Can you talk a little bit about what is happening with deal size, the sales cycle close rate And, also, what in aggregate it means from visibility now versus the most immediate path? Is visibility improving for you?

You are right. Q4 was particularly strong overall and strong in large deals. I believe we had a record number of over $1 million deals and some of them very significant. While it is kind of hard to pinpoint trends because we do have deals of all sizes, small, medium, large, I think generally we do agree that the deal size is creeping up because we have a big, broader portfolio and because more and more customers like to buy the full suite from a single vendor. And that is contributing to also the deal size.

Like the example I gave, the $10 million international bank. You know it was a $2 million deal in Q4 but it was actually a $10 million deal for the year and they just bought it in a number of chunks. I believe in Q3, I discussed another customer that bought the full suite across call center branch and enterprise and that customer bought a $15 million deal in one shot. So I think we are going to see probably more customers building their portfolio over time than those that are buying these seven-figure deals. But generally I do expect to see larger deals and more dollars from the same customers.

In terms of visibility, we are not a backlog business but we do have improvement in deferred revenue. And maybe Doug, do you want to talk a little bit about visibility?

Yes, sure. As you may have seen from the balance sheet, deferred revenue short term was up quite a bit. So we saw a nice trend there, about $20 million quarter over quarter, about $14 million year over year. So as we run off that deferred revenue impact, we are seeing from the restatement we are seeing deferred revenues start to grow. You know they will be lumpy, of course. Our large projects tends to move deferred revenue allowed. But in the last few years we have seen it come down. We are starting to see it come up and we expect over the long run to grow commensurate with the growth in the business.

Okay. My last question is that there is much speculation about the possibility of separation from Comverse. Is there anything in the guidance that is associated with the cost of such a separation? And what, if anything, can you say about that possibility?

Yes, so first the guidance does not include any potential separation or any other decisions that will be made vis-a-vis our situation with our controlling shareholder; and our view here is that we will see what is going to happen. But management will support any strategy that allows Verint to execute on the business and pursue a growth strategy, and that is really what we can say at this point.

Okay. Thanks very much.

(Operator Instructions). Shaul Eyal with Oppenheimer & Co.

Good afternoon. Good quarter. Two quick questions on my end. Obviously you finished the year with a bang as it relates to, specifically, the cash flow $61 million this quarter. How should we be thinking --? I think about $164 million for the year. How can we be thinking about cash flow, Doug, for fiscal 2012?

Yes, well, you can see the seasonality of it in Q3. We were talking about Q4 is generally strong and it came in beyond our expectations even. So on an adjusted basis for interest and a couple of the other things I mentioned a few moments ago, we got close to $160 million. So I think the cash flow is a good proxy around the operating income so I think as you see operating income come up a little bit, you'll see the cash flow, a little bit. Some tiny differences around working capital. But for the most part we look for a modest increase year over year in cash from operations.

Got it. Okay. I know Dan just indicated that you guys are not a backlog company but kind of still whatever you can share with us specifically on the backlog. As you exited the fourth quarter of this year, is it basically record levels for you guys at this juncture?

Yes. With respect to backlog, that's not something we really track. The deferred revenues are a fair amount of the backlog, and beyond that there is some what we call off balance sheet. For the most part, aside from some large projects that we do do, we have a fairly short-term revenue turn.

But I think by looking at the deferred revenue accounts that's as good a measure of the backlog as any. And it continues to build as the business grows, certainly.

Yes, so we also -- let me just add that we also in terms of general visibility, we also generate almost 40% of the business from maintenance and SAS revenue which feature very high renewal rates and gives us visibility. And we have relationships with very large enterprise customers and government agencies that tend to come back and buy and I just -- before -- just announced a new retailer which is one of the 10 top retailers in the US. And typically with retailers they have many, many stores and they start with initial orders. But if the deployments is going well then we see orders over time. And that is true for retailers. It's true for call centers and many of our large security customers.

So when we look at our visibility it comes from a lot of different ways to measure pipeline strength and not just from backlog.

Got it. Okay. That's fair enough. Maybe if I can sneak in a final one, Dan, you clearly disclosed those kind of big 8 digit millions international government contracts. Leaving those aside just for the sake of the discussion, given a lot of kind of mixed views about federal spending, state spending, help us understand what you guys are seeing coming from that vertical.

Yes. So we actually had a very strong year with the government overall worldwide. As you recall, for us the business is not focused on the US government but it is diversified across many countries worldwide and many agencies within each country. So I think the reciprocation as well as the strength of our IT intelligence portfolio is really what is driving growth. So in a government sector overall we grew 9.6% year over year. In the government sector we grew a little bit above that. So it was a strong year in government.

And in terms of going forward we do expect that there will be strength. Again different countries could be different dynamics, but overall, we expect strength in the government sector going forward.

Okay. Thank you very much and good luck. Good quarter.

Jonathan Ho with William Blair.

Good afternoon. Just wanted to start out with a question around the analytic opportunity. What are you guys seeing there today in terms of adoption trends? And are you really seeing that accelerate at this point? It seems like analytics has been part of the story for a number of years but has there been a shift or are you seeing anything fundamental there that is really changing that growth rate to be more of a driver?

Yes. I think the trend is intact and I think what is accelerating growth is really the portion of our portfolio that is high-growth analytical solutions. Because what we have reported for a number of years now is that our recording and quality monitoring which is legacy solutions are not fast-growth product anymore. And at the same time we have applications in analytics that are growing at high double digits. So it's the average weighted -- weighted average mix that is caught -- that creep up as a portion of the revenue becomes higher from the high-growth analytical solution.

And the adoption rate it is not so much in terms of market adoption of the concept, but it is more in terms of penetration rates. So if you look at our recording, again, this is highly penetrated market, so we do get some new customers here and there, but a lot of the revenue comes from existing customers upgrading infrastructures, so forth while some of the analytics solutions are at very low penetration rates and that is what drives the high-growth rate. And as we continue to innovate and we introduce -- we introduced quite a few new innovative analytics solutions last year, obviously that changes the mix to be more high-growth analytics and push the overall weighted average to higher organic growth rates.

Got it. And just a quick question around Comverse. Do you see them changing anything with the preferred at this point? Or any signs that they might potentially shift around I guess the capital structure there?

I -- we cannot really comment on any decisions that would be made by Comverse. We want to focus our discussion today on our business and we are not discussing Comverse. And I think you can refer to this question to them.

Got it. Thank you.

Craig Nankervis with First Analysis.

Good afternoon and congratulations on a nice quarter. A couple of different questions. First of all, on your hiring, Dan. 14% headcount growth in the last year. Was that a level that you planned at the beginning of the year or did your hiring plan accelerate as you went through the year? Was there anything market-related that influenced the quantity of your hires? Maybe if we could start with that.

Yes, it was planned and we did report that we ramped up, we were at 350 hires, not hires but net additions in the end of Q3 and then we said we are going to slow down in Q4. So it is overall 400 now for the year. And last year was a very big investment. So, we are not planning to do as many net new hires this year.

But some of the things we wanted to achieve last year, obviously as I reported a lot of salespeople. We hired many people also in emerging markets, a disproportional investment in opening offices and adding people in emerging markets, because we believe there is good growth opportunities for our solutions there. And obviously a significant investment in R&D, which is supporting our strategy of innovative analytics that can drive the organic growth up.

Okay, so the R&D part doesn't necessarily signal you are going to be introducing more products than you do on average, but it is maybe a signal that you are focusing more in a particular area. Is that a right inference?

No, the R&D was across a number of different solutions that we are working on. Some of this we announced already. Like we announced the Cyber Security Solutions and that one we said we expect some business this year, but maybe revenues only next year. But certainly we have an R&D cycle that started last year and will continue through this year. And some R&D investment is in areas that we didn't announce yet. Products that are not ready yet to be announced but that we would expect over time as we feel ready to launch, we will announce new products.

So innovation is actually part of the ongoing strategy. We also did a number of small technology acquisitions to accelerate product innovation. We think that we have a very large customer base. We have a large sales force. So whatever we can bring a product from a small company and accelerate the introduction to the market, this could be a very strong model to generate revenue and profit. So that type strategy will continue, but as I said 400 people in one year was a big investment last year and we are not planning right now to have the same level of investment for this year.

Right. Okay. And then you actually -- you got into what my next question was. The government security initiative. Is there any flavor you can provide around what you're doing? Is it something that leverages somehow your existing position with government entities or is it somehow distinctly different from that? What can you say about what you want to do in security?

Yes. No, it's generally leveraging our position with our customers both in terms of the relationship, reputation. In the government market, reputation is critical. Many of these type of projects the vendors that are being invited to bid are carefully selected. So I think we benefit from many years of good reputation in this market, and when we innovate and create new product, very often it is really with input from our customers as they point out some pinpoints and security challenges they are facing and kind of help us to come to the conclusion that -- hey, maybe we should invest in R&D and develop a solution.

And mostly where we are introducing new solutions in the same vision of Actionable Intelligence. What Verint does very well is helping our customers collect massive amounts of information, mostly unstructured, and analyze it so they can understand the intelligence that is buried and unearth the critical trends and the information they need to improve security. We do the same things by the way for our Enterprise customers, but obviously it is a different application.

So that's where we focus on. Cyber Security is no different. We have an expertise in analyzing network, IP tropical networks, and one of the applications that we now are working on is the ability to identify suspicious cyber security profiles. So this is the type of innovation you should be expecting from Verint going forward.

Thank you for that. That's helpful. Lastly, and maybe this is appropriate for Doug. If you discussed it, I missed it. Did you discuss the amount of revenue you recognized in the January quarter from the $20 million plus security deal you landed?

Yes, no, we didn't touch on that. But those very large projects, generally the revenue comes in over time. So we haven't taken any material revenue from those large ones we mentioned yet.

Thank you.

Ladies and gentlemen, this concludes the question-and-answer session for today's call. I would now like to hand the call over to Mr. Alan Roden for closing remarks.

Thank you, everyone, for joining us today and we look forward to talking to you on our next call. Have a great night.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.