Verint Systems Inc (VRNT) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter Verint Systems earnings conference call. My name is Philip and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Alan Roden, Senior Vice President of Corporate Development. Please proceed, sir.

Thank you, operator. Good afternoon and thank you for joining our conference call today. I'm here with Dan Bodner, Verint's CEO and President; and Doug Robinson, Verint's Chief Financial Officer. By now you should have seen a copy of our press release that includes selective financial information for our first quarter ended April 30, 2013. A Form 10-Q will be filed shortly. Each of our SEC filings and earnings press releases is available under the Investor Relations link on our website and also on the SEC website.

Before starting the call, I'd like to draw your attention to the fact that certain matters discussed in this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, the provisions of Section 27A of the Securities Act of 1933 as amended and Section 21E of Securities Exchange Act of 1934 as amended. These forward-looking statements are based on management's current expectations and not guarantees of future performance. Actual results could differ materially from those expressed in or implied by the forward-looking statements. The forward-looking statements are made as of the date of this call and except as required by law, Verint assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements.

For a more detailed discussion on how these and other risks and uncertainties could cause Verint's actual results to differ materially from those indicated in forward-looking statements, please see our Form 10-Q for the fiscal year ended January 31, 2013; our Form 10-Q for the fiscal quarter ended April 30, 2013 when filed; and the other filings we make with the SEC. Some of the financial information discussed today is non-GAAP. A reconciliation of the non-GAAP financial measures to GAAP measures is included in today's earnings press release as well as in the GAAP to non-GAAP reconciliation found on 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 it provides meaningful supplemental information regarding our operating results when assessing our business and 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'd like to turn the call over to Dan. Dan?

Thank you, Alan. Good afternoon everyone an thank you for joining us to review our first-quarter results. In Q1, we delivered $205 million of revenue and $0.44 of fully-diluted earnings per share. We also had strong business activity in Q1, driven by several large orders. Cash flow from operations was very healthy and we ended the quarter with approximately $330 million of cash and investments and a strong balance sheet. Overall we are pleased with our first quarter revenue results, which reflect performance in the Americas region in line with our expectations and over-achievement in the APAC region, partially offset by under-performance in the EMEA region.

For the year, we expect Americas to grow approximately in line with our annual revenue guidance of 6% to 7%. In Asia-Pacific we expect the strength that we experienced in Q1 to continue driving double-digit growth for the year. And in EMEA, we expect the environment to remain challenging near term, and our current view is that EMEA will be flat or near flat for the full year. However, long-term, we see similar growth opportunities in all three regions for our broad portfolio of big data analytic solutions.

Turning to our Enterprise Intelligence market, we continue to perform well relative to our competitors, and we believe this is attributed to our focus on delivering market-leading innovative analytical solutions that address 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 into new areas across the Enterprise, such as back office and branch operations. And three, the adoption of innovative customer experience analytic solutions to drive the customer-centric Enterprise.

I would like to share with you some recent customer anecdotes. During Q1, we received a $2 million order for workforce optimization suite from an existing global B2B customer. This customer has previously deployed our workforce management and desktop analytic solution and decided to add additional components of our suites including recording, quality monitoring and speech analytics as part of the Company's ongoing initiative to drive efficiencies while delivering a positive customer experience. We received an initial $1 million order from a new telecom services customer in the Asia-Pacific region for our suite including recording, quality monitoring, desktop analytics and speech analytics. We believe these two orders reflect the contact center market preference toward purchasing multiple products from a single vendor in a unified suite. We also believe they reflect continued interest in sophisticated customer experience analytics used to understand and improve the customer experience.

Outside the contact center we received a $3 million order from an existing financial services industry customer for our back office workforce optimization solutions. This customer had previously deployed our solutions in a portion of its back office operations and decided to expand our solutions to achieve service-level consistency across different customer touch points. We also received a $1 million order for a back office workforce optimization solution from a healthcare company. Our solution will help remove process bottlenecks and improve overall operational visibility. We believe these two orders are indicative of interest in our solutions outside the contact center.

To better address market demand for big data analytics, we continue to invest in OEM and other partnerships. These partnerships provide Verint broader market coverage and our partnership strength is an important differentiating factor of our go-to-market strategy. We continue to expand our partner network including both OEM and SaaS partnerships, which provide our customers flexibility to deploy our solutions in a way that is most suitable to their needs. We believe behind our strong competitive position in the Enterprise Intelligence market, is our focus on innovation and our broad portfolio of IRI solutions.

Turning to the security market. In Communications and Cyber Intelligence we believe that terrorism, criminal activities, cyber and other security threats, combined with expanding forms of communication devices and protocols are driving demand for innovative solutions. In Q1, we received orders totaling more than $20 million from an existing international government customer. We also received an order in excess of $50 million from a new international government customer. We believe these large orders, which we expect will be he deployed over multiple quarters, reflect customer demand from existing and new customers for innovative security solutions that efficiently collect, fuse and analyze very large amounts of content to generate actionable intelligence.

In Video and Situation Intelligence, we offer our customers a broad portfolio with a focus on three main verticals, retail, banking, and critical infrastructure. In retail, organizations 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 quarter, we received a $4 million order from a big box retailer. In financial services, organizations are deploying our Video Intelligence solutions to enhance the security of their branches and facilities. During the quarter, we received a $2 million order from one of the largest US banks, an existing customer, and an initial $2 million order from another US bank, a new customer for Verint. In critical infrastructure, organizations are deploying our Video and Situation Intelligence solutions to protect facilities such as airports, sea ports, transportation networks and utilities, as well as in safe city initiative. During the quarter, we received an order for a new safe city initiative in the Americas region to be deployed as part of a new public safety control center to monitor activity in seven areas of the city.

Our strategy continues to focus on the retail banking and critical infrastructure and we believe we are well positioned in these verticals with a broad portfolio of high value solutions. Behind our success in both the Enterprise and Security Intelligence markets is our commitment to developing innovative analytical solutions. As previously discussed, while our Legacy Capture products are best of breed, they represent a relatively low-growth-rate opportunity. On the other hand, we believe our newer analytical solutions represent a higher-growth-rate opportunity. We continue to invest with a goal of shifting our mix to high-value analytical solutions which over time should lead to higher revenue growth and expanding margins.

I would like to briefly mention several new offerings for the Enterprise and Security Intelligence markets which we recently launched. Verint introduced an innovative solution to enable law enforcement customers to conduct more effective investigations by fusing audio and video data originated from multiple sources. We launched enhancements to our unified Enterprise feedback platform that enables our Enterprise customers to design and deliver multi-channel surveys across e-mail, text messages and telephony channels eliminating the need for multiple and separate service systems. We also announced several new business impact solutions for our Enterprise customers including a call avoidance solution which uses Verint's analytics to maximize first core resolution, help eliminate self service failures and identify new opportunities for self service offering. We believe our strategy of introducing new analytical solutions that help customers Make Big Data Actionable is key to our success and competitive advantage.

Turning to our guidance. We are maintaining our annual outlook for revenue growth of 6% to 7%, and EPS of $2.75 plus or minus $0.05. Our guidance assumes that revenue from EMEA will be flat or near flat this year as compared to last year. We will, of course, continue to closely monitor the environment in EMEA as we progress through the year. In Q1, we completed the acquisition of Comverse and refinanced our debt, significantly enhancing our balance sheet and strategic flexibility. This, combined with a broad portfolio of innovative Enterprise and Security solutions, and our strong market presence and brand, position us well to continue to execute our growth strategy. We are encouraged by our first-quarter business activity, our strength in the Asia-Pacific region, and our strong cash generation and look forward to having the opportunity to accelerate our overall growth rate once the EMEA macro-environment improves. Now I would like the to turn it over to Doug to discuss our financial results 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 non-GAAP financial measures is available as previously mentioned. 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 including expenses associated with our merger with Comverse. In addition to our typical adjustment this quarter, we are also adjusting for the one-time $9.7 million charge associated with the refinancing of our term loan. Our earnings release provides further information on these non-GAAP adjustments.

I'll start my discussion today with the areas of revenue, gross margin and operating margin. In the first quarter, we generated approximately $205 million of total revenue across our three segments. With $113 million in Enterprise Intelligence, $29 million in Video Intelligence, and $63 million in Communications Intelligence. This compares to approximately $200 million of total revenue in the first quarter of the prior year with $112 million in Enterprise, $29 million in Video, and $59 million in Communications. In terms of geography in Q1, we generated $112 million in the Americas, $41 million in EMEA, and $52 million in APAC. This compares to approximately $105 million in the Americas, $50 million in EMEA, and $45 million in APAC in the first quarter of the prior year.

Q1 gross margins were 66.4%, compared to 70.5% in Q4, and 68.1% in Q1 of the prior year. As we've discussed in the past, due to the product and revenue mix within or across segments, overall gross margins can fluctuate significantly from quarter to quarter. We currently expect gross margins in Q2 to be at a level close to Q1 and for the full year we expect gross margins to be similar to last year. During Q1, we generated $37 million of operating income, compared to $61 million in Q4 and $39 million in Q1 in the prior year. Operating margins in Q1 were 17.9% compared to 26.5% in Q4 and 19.7% in Q1 in the prior year, primarily due to gross margin fluctuations. Our Q1 EBITDA came in at $41 million, or 20% of revenue, bringing our last 12 months EBITDA to $203 million.

Now let's turn to other income and interest expense. In the first quarter, other expense net totaled $9.1 million, reflecting $7.4 million of interest and related expense, with the balance related to the impact of foreign exchange. We had a $1.7 million expense associated with inter-Company foreign currency translations, impacting EPS by approximately $0.04. Our Q1 cash tax rate was 11%, reflecting what we expect to pay in cash taxes for the balance of the year. As we previously discussed, we expect to enjoy a low cash tax rate for several years due to our NOLs and the amount of income we generate in low tax rate jurisdictions. Thee results drove diluted EPS of $0.44 per share.

Now turning to the balance sheet. As of April 30, 2013, we had approximately $330 million of cash and short-term and long-term investments, including restricted cash, compared to approximately $238 million of cash at the end of last year. Our almost $100 million increase in cash was due to the refinancing of our term loan at the beginning of the quarter as well as strong cash generation. Q1 cash from operations on a GAAP basis came in at $26 million. Adjusting for acquisition-related and other extraordinary expenses primarily related to the Comverse transaction, cash from operations was $37 million. We ended the quarter with total debt of $649 million, and net debt of approximately $319 million. At the end of the quarter we had 53.3 million average fully-diluted shares outstanding, reflecting the shares issued in the Comverse merger.

Before moving to Q&A, I'd like to discuss our guidance for the year ending January 31, 2014. As Dan noted earlier we expect revenue to increase between 6% and 7%, compared to the year ended January 31, 2013. We are targeting operating margins similar to last year at approximately 22%. Based on recent foreign exchange rates, in Q2 we expect our quarterly interest and other expense to be at a similar level to Q1. Assuming no significant changes in foreign exchange going forward, we would expect quarterly interest and other expense to return to approximately $7.3 million in Q3 and Q4. We expect our non-GAAP cash tax rate to be approximately 11% for the year, reflecting the amount of taxes we expect to pay this year. Based on these assumptions and assuming approximately 53.8 million average diluted shares outstanding for the year, we expect non-GAAP EPS to be $2.75 plus or minus $0.05. In conclusion, we had a good start to the year with strong business activity and we believe we are well positioned for continued market leadership and growth. This concludes my prepared remarks so with that, operator, can we open the lines for questions?

Of course, sir.

(Operator Instructions)

Daniel Ives, FBR Capital Records.

Could you talk, maybe anecdotally, month to month, what you saw in terms of customer buying behavior? Did you see things change throughout the quarter? Any sort of differences?

Well, I think that in Q1 we had, as we mentioned before, we had a particularly strong business activity relative to first quarter in the year, which usually for seasonality reasons starts low and gets better throughout the year. But we kind of brought a lot of orders earlier in the year and actually came, some of them, some of the large projects came in Q1 in February. So I think it was kind of atypical and we drove, in Q1, a lot of the business earlier, but I wouldn't say that this is a trend. It just happened in Q1, and obviously that helps in terms of our ability to reaffirm our guidance for the year, despite the fact that in EMEA when we gave guidance last quarter, we assumed that EMEA would be slightly growing this year. Now our view of EMEA that it will be flat or near flat, but despite that relative weakness in EMEA, we had strength in Asia-Pacific to offset that, and we are able to affirm our guidance. But other than that, Daniel, I don't think I have any other meaningful trends, month to month, to report.

Okay. And then just in terms of expenses, just walk through your philosophy in terms of investments throughout the year. I mean, obviously you guys feel good about growth, but in terms of that op margin lever, in terms of reinvesting in the business after a number of years of, you could say, under-investing in the business, maybe talk about that in your view.

In terms of our model, based on this guidance that we affirmed today, we also firmed our target for operating margins of about 22%. So that is similar to last year and as you may recall, we mentioned in Q4 that we had planned some investments and that they shifted into the year. During this year we do intend to increase our headcount about 5%, so that's give or take 150 people. That will be primarily in R&D and Sales and Support. We got some leverage obviously on the G&A side, as we grow the Company. And in terms of these investments, it's mostly focused on new analytical solutions that drive growth for Verint and some sales coverage that we need in specific geographies and vertical markets. Even in EMEA, despite the fact that EMEA is overall not strong, obviously, and we hopefully will see some recovery, but even within EMEA there are countries that perform better than others and it's not homogeneous. We do make investments where we see opportunity short-term, and obviously in our Support Services as we sell licenses, more licenses, we also are investing in implementation services around those licenses.

Okay. Thanks.

Nandan Amladi, Deutsche Bank.

Thanks for taking my question. Dan, you talked about in the growth profile how the traditional contact center is a little bit slower growth business and you're focusing more of your energies on the higher-value software and analytics areas. Where is that product mix now and where do you see it going, say, two to three years from now?

I think if we kind of broadly look at our product set as capture product, so solutions that help customers to capture data, voice, video, text, social media, but more on the capture side, that's probably kind of 50% of our business. And solution that's focused on analyzing the data to uncover insights and trends and help the business to leverage data to improve business performance, to enhance security, that's the other 50%. As we feel very strong about our capture products, they are best of breed. Obviously that allows us to invest more of our R&D dollars in the new Analytical solutions and naturally as we introduce more Analytical solution, I just mentioned earlier three solutions that we launched in Q1. As we launch more and more solutions that help customer leverage to capture data, we're going to shift our mix toward less capture and more analytics and analytics are growing faster and that's overall going to accelerate our growth rate. That's the plan.

Right now for this year, as I look at the outlook, revenue-wise, I mentioned before how we see the split between Americas, APAC and EMEA. In terms of Security and Enterprise, we believe this year will grow mid to high single-digit in both Enterprise and Security. Within Security, we have factored growth in Communication Intelligence, then Video Intelligence, but still mid to high single-digit overall in Security. And as we look at the year, we expect that our Enterprise revenue will increase every quarter from Q1. And if linear, you may expect roughly $10 million increase each quarter from our Q1 result. The Security revenues are lumpy. We did mention that we had some big orders in Q1 that will be recognized over several quarters. So what we see now based on these pig quarters, we see the Q2 in Security could be slightly down from Q1. But we do expect a strong second half as we start to recognize revenue from those orders that we landed in Q1. So that's kind of the outlook for this year and we're not providing specific outlook beyond the year, but we did mention that this investment we make, we are planning to accelerate overall growth over time.

Okay. One quick follow-up if I might. In the distribution of the size of the orders that you discussed, it appeared like some of the Enterprise orders might have been smaller but then you had two very large Security orders. Is that seasonality or was there something more to it than that?

We actually had strong business activity. We landed a number of multi-million dollar projects across all businesses. I can say that overall we mentioned two eight-digit deals which are mega-deals, but in terms of seven-digit deals we had more than 30 projects that were over $1 million. So that's not a low number for us and Q1 was strong in terms of both the seven-digit and eight-digit deals. A good quarter on business activity.

Okay. Thank you.

Shaul Eyal, Verint.

With Oppenheimer for the time being. (laughter) Good afternoon. Good afternoon, Doug, Dan, Alan. Couple quick questions on my end. If I'm looking at the gross margins expectations for the second quarter, given Doug's commentary, should we be expecting the similar level of mix between Product and Service as we had seen in the first quarter?

Yes, I think we expect to see in Q2 similar gross margins to Q1 based on the mix we see currently. As we've said in the past, it's fairly lumpy, depending on what lands when. We are looking for the full year to be similar gross margins to last year. But Q2, probably similar to what you saw in Q1.

In terms of Products and Services, we certainly, longer-term, expect that there will be some shift from Product to Service which is kind of typical in the overall software business, especially when we have large projects where revenue are being allocated to services sometimes when we have to do some product optimization and things of this nature. So we do expect Product to grow for the year, but we expect Services to grow at a higher rate than product.

Got it. And Dan or Doug, I don't know who wants to take the following question, but given Dan's commentary with respect to the prior question, I mean the prior analyst, I think you talked about a very solid, strong business activity. I know you guys don't talk about the book-to-bill or backlog, but is it fair to assume, given the eight-digit deals that you signed during the quarter and the seven-digit deals, that your backlog is probably running at its highest level in the Company's history?

We had good deferred revenue. They're up. And we had some big deals. So we don't track the backlog. We don't think it's a meaningful number for us to base our visibility. Obviously it's one element, but we have other elements that we use to give annual guidance and give our -- and do our focus. But I think generally with deferred revenue up and big orders, it's probably a good backlog level.

Got it. And cash from operations this quarter, Doug, should we be expecting similar, even better levels in the second quarter?

Yes. Well, cash from ops can move around. Generally, Q4's our strongest. Q1 tends to be somewhat strong. And it's seasonal. But when we look at the full year, our outlook is the $2.75 mid-point of the guidance would translate to about a $220 million EBITDA number. So $220 million EBITDA number. So when you take out the interest and the taxes, about $50 million from that, you end up at about $170 million, which is a real cash number. Now, from that we have some working cap usage and some Comverse and a few other types of non-GAAP charges in there, so we've said $130 million to $140 million would be a GAAP cash from ops number to expect from us this year.

Got it. Thank you very much for that and good luck with the User Conference getting off later on.

Yes, okay. Thanks, Shaul.

Jeff Kessler, Imperial Capital.

Thank you. Thank you for taking my call. I'm wondering, with the increased level of contract activity that you received in terms of at least size in the first part of the year, was gross margin affected to any extent by preparation and planning and beginning of installation of these larger contracts? Particularly on the Security side, on the Communications side where you say things tend to get more lumpy.

No, no, it wasn't, because we really did not start to recognize any meaningful revenue from those large contracts. So there was no opportunity to affect the gross margins because of that.

Okay.

Usually there is work that we do to win the contract but --

That's what I was thinking of.

This is not gross margin. This comes from our sales and marketing expense, and you see that throughout as we participate in RFPs, sometimes pilots, that all goes to our sales and marketing line. It's not affecting gross margin.

It really had to do with the particular mix of business we pulled through in the quarter that really related to bookings from previous quarters.

All right. Great. My other questions have been answered. Thank you very much.

So before we move on, Shaul, the previous analyst, mentioned our User Conference. I want to update everyone, I'm not sure everyone knows. This week we are holding our Enterprise User Conference. We're expecting about 1,000 people. And this is the first time for Verint that we are inviting Wall Street analysts to participate in this event, where we're going to showcase our latest technology and interact with customers.

Jonathan Ho, William Blair.

Good afternoon, guys. With regards to the impact from the Encoder business, I just wanted to get a sense of how your business screw may be excluding that impact, how the organic revenue growth was without that headwind, if we assume that that's going to tail off.

The Encoder situation, as we expected, stabilized. So it's now under 2% of our overall revenue. Our Q1 Encoder business was in line with our expectation. We do expect it to, as we said last quarter, we expect it to decline a little bit this year, but really not much, not even close to the major decline we had last year. So that's not an issue anymore, not right now.

Got it. And with regard to the larger deals that you guys booked but will be recognized in the second half of the year, how should we think about the mix of Product versus Services on those larger deals? Is it typically product revenue first or is it a pretty even mix between Product and Services?

It really varies. Some of these large contracts are being recognized on a percentage of completion basis. So we have milestones and we recognize a portion of the revenue based on achieving a milestone. It could be a mix of Product and Service and as I mentioned before, sometimes even when we deliver Product, if we make some changes to the Product which is not unusual with large contracts, once we make those changes the Product is not considered Product anymore, it's considered Service. So we report it under the Service line. Obviously, it's our license but it's not our plain vanilla software. If we modified it to a certain extent, it can be recognized as Service. And that's hard to predict and only once we land the project and we start to do the detailed design and the work, that we make those accounting determinations, whether it's going to be Product or Service. So it's kind of hard to predict. I think we're getting better in that prediction over time. But as a general trend I think we see that the Service growth rates this year will be higher than Product growth rates, as Services is not just labor services, but it's also other type of revenue that is being categorized as Service.

Great. And one last one. Given some of the more tragic events that have happened recently, including in Boston, are you guys seeing an uptick in interest in more municipal-type systems or broader piecing-type activity just from folks that may be in and around that situation?

Yes, we see some increasing interest. We did report today one new Safe City Initiative in the Americas region. I don't think this interest has been translated to a lot of deals at this point. Obviously, post event like this, the various state and local governments are reconsidering how they need to be prepared. I think it will take more time before I can say that this is going to be translated to actually revenue activity.

Great. Thank you.

Brian Ruttenbur, CRT capital.

One quick question about the quarter's breakdown in terms of cash generation. Can you address that, how it's going to be weighted throughout the year? Is it traditionally, I think it's the second half of the year, is that how you're looking again this year?

Yes, Q1 and Q4 are generally our strongest cash flow generation quarters. So if you're looking at seasonality, you could look at the last couple of years by quarter and proportion it like that. Shouldn't be too far from that.

Okay. In terms of cash then on the year, given your guidance, you should end with cash of around $400 million? Is that -- you're at $330 million right now.

We're not giving particular guidance on cash because obviously we may use the cash in a number of different ways. But if you look at what Doug mentioned before, $130 million to $140 million GAAP cash from operations, and our capital needs are about, let's say $20 million, we have north of $100 million of free cash flow. So obviously we're generating a lot of cash. In terms of where we're going to end in the year, obviously depends how we're going to use that cash.

Thank you very much.

Sure, Brian.

Michael Nemeroff, Credit Suisse.

Hi, this is Mike Anderson on behalf of Michael. Thank you for taking our questions. First, can you comment on the deal environment for the Enterprise Intelligence business? It looked down a little bit more than normal sequentially from Q4 to Q1. Curious if RFP discussions are extending as you enter into suite discussions with customers? And also if there's any deals that may have slipped in the quarter that have, or already, closed in Q2?

Yes, there are deals that slipped that were closed in Q2, including deal that is more than $1 million. I'm not sure that's unique to our situation. We're already a month into the quarter. In terms of the deal environment, I think mostly where we see the impact is EMEA. As I mentioned before, EMEA, you look at Q1, it came very much below our expectations and we were fortunate that Asia-Pacific was strong to offset that. We don't expect EMEA the rest of the year to be as negative as Q1. But we do expect now for the year to be again flat or near flat, and Enterprise business, that means the deals take longer and deals eventually get smaller than where they start. Having said that, we have strong pipeline in EMEA. We just need a better economic environment to be able to bring those deals.

And in the Americas, I think we have a pretty steady situation in the Enterprise market. I think it's a tough spending environment. I don't think Americas is going on all cylinders but it hasn't been that case also last year. So it's certainly not worse than what it was. And overall in the Enterprise business we think we did pretty well in Q1 and we took a little bit of market share.

Okay. That's helpful. And then clarify a prior comment that you said, I think you said to expect roughly a linear increase of about $10 million per quarter in Enterprise Intelligence. Is that correct?

Yes, obviously, I said if it's going to be linear. But obviously hard to predict on a quarterly basis. But generally if you look at the trend that we have, we start Q1 low, and last year from Q1 to Q4 we added about $30 million, and I think it will be similar this year. So if it's going to be driven linear it's going to be about $10 million increase from the Q1 level in each of the subsequent quarters.

That's helpful for sure. And then just one last question, a really quick one. Accounts receivable looked like it spiked more than normal in Q1. Usually it looks like more of a cash collection quarter for you guys. I'm just wondering, was there any back end loading into that number? What was going on there?

You might have noticed that we had accounts receivable went up. We also had very strong cash balances collected. So we had both and really that speaks to the strong business activity we were talking about.

I think some of the orders we received drove cash from advanced payments. So overall, we increased our overall cash position by almost $100 million from last quarter. Some of it came from our refinancing, but obviously a lot of cash was generated through some good cash collection. So yes, increased AR but obviously that's an opportunity to generate more cash in the future.

When we look at our AR aging, we're not particularly concerned. It's fairly newer AR that's on the books, so it's really more of a level of the business activity than it is any kind of collection issue.

Great. Well, thank you very much.

Matt Hedberg, RBC.

Hey, this is Matt Swanson calling for Matt Hedberg. I had some questions about the government vertical. I know it's been an area of weakness for some other companies I'm looking at and at least from a big deal perspective it looks like you guys had a pretty good quarter. I was just wondering what you guys were kind of seeing for competitive environment in those deals.

Yes, I think what's helpful to Verint is our global diversified business and not having lots of exposure to the US government business, very little to federal and also not to much to state and local. That's very helpful and government is 25% of our business. The big data opportunity for government is big. There is tremendous amount of opportunity in improving the intelligence gathering and making it more efficient and effective by using big data analytics and collecting a lot of data from voice, video, text, social media and being able to analyze that. So that opportunity for government is something that drives our business. Also, I think that because of the variety of different sources and media types, government has to update their technology in order to continue and gather intelligence. So obviously with a big Q1 government number, two eight-digit deals that came from government agencies, and we continue to be positive about government's business this year.

All right, thanks. All my other questions have been answered.

Ladies and gentlemen, this will conclude today's question-and-answer session of today's conference. And I would now like to turn it back over to Alan Roden for closing remarks.

I'd like to thank everyone for joining us tonight. Have a great evening. Talk to you on the next call. Take care.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation and you may now disconnect. Have a great day.