Verint Systems Inc (VRNT) 2016 Q3 法說會逐字稿

Hello everyone, and welcome to the third-quarter 2016 Verint Systems Incorporation's earning conference call.

(Operator Instructions)

I would now like to turn the call over to Alan Roden, Senior Vice President Corporate Development.

Thank you, operator.

Good afternoon and thank you for joining our conference call today. I am 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 selected financial information for our third fiscal quarter ended October 31, 2015. Our form 10-Q will be filed shortly. Each of our SEC filings and earnings press releases is available on the investor relations link on 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 in this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward-looking statements are based on management's current expectations, are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by forward-looking statements. The forward-looking statement 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 of 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 10K for the fiscal year ended January 31, 2015 and other filings we make with the SEC.

The financial information discussed today is primarily non-GAAP. A reconciliation of the non-GAAP financial measures to GAAP measures is included in today's earnings release, as well as on the investors relations link on our website. Non-GAAP financial information should not be considered in isolation or a substitute for GAAP 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 may have limitations that may differ from those used by other companies.

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

Thank you, Alan.

Good afternoon everyone, and thank you for joining us to review our third-quarter performance. In Q3 we delivered $285 million of non-GAAP revenue and diluted earnings per share of $0.82, excluding nonoperating foreign-exchange charges. Fluctuations in foreign exchange rates continue to affect our results, and therefore we'll continue to discuss our results on a constant currency basis. Year to date on a constant currency basis our revenue increased 5% compared to the prior year. In Q3 our revenue came in lower for reasons we will discuss shortly. At the same time, we are pleased to report strong operating margins of 22.1%, driving $69 million of adjusted EBITDA.

Verint is a leader in Actionable Intelligence solutions with more than 10,000 customers in the area of customer engagement optimization and security intelligence. Verint's leadership has been driven by a history of rapid growth for innovation and strong execution. Over the last several years we have made investments that have expanded our portfolio significantly, increased our total adjustable market, or TAM, and made us a more strategic vendor to our customers. Earlier this year we discussed our ability to offer customers best-of-breed solutions as well as a comprehensive solution set for transformational projects.

During the third quarter we continue to [win some] large projects, which demonstrated the demand for comprehensive solution sets. At the same time, we continue to see longer approval cycles. Later I will discuss certain adjustments we are making to our go-to-market strategy designed to drive faster adoption of our best-of-breed portfolio and reduce our dependency on the timing of large projects.

Now I would like to discuss some Q3 highlights, starting with customer engagement optimization. We believe that forward-thinking enterprises are looking to address evolving consumer expectations by transforming their customer engagement operations. Our strategy is to enable enterprises to perform by offering the market an integrated and open Actionable Intelligence platform combined with the industry's broadest portfolio of best-of-breed solutions. We believe that some enterprises are planning to transform rapidly, while others are taking a more gradual approach.

During the quarter we received many orders for our best-of-breed solutions, as well as several large orders for our comprehensive solution sets. Here are some examples. We were awarded a nearly $20 million project from a leading outsourcer following a very long sales cycle. By selecting Verint as a strategic vendor and taking a platform approach, this outsourcer is better positioned to improve workforce productivity and customer engagement, standardize business processes and enhance operational efficiency. This $20 million order is one of the one largest enterprise orders we have ever received, and the solution will be deployed in the cloud with many services and support components deployed over several years. This order demonstrates our ability to win large transformational projects, although with longer sales cycle.

We also received approximately $3 million in orders from a pharmacy retailer in connection with its ongoing roll-out of a customer engagement portfolio, bringing total orders from this customer to nearly $10 million since the beginning of last year. Approximately $3 million in orders from a government agency, as part of a program to use Verint's platform to improve customer service and citizen communications, bringing total orders from this customer to nearly $5 million since the beginning of this year. Approximately $2 million in orders from a leading provider of residential mortgage services. This customers has already deployed multiple Verint applications, and is extending Verint's platform by adding speech analytics to help reduce customer complaints and comply with industry regulations. And approximately $2 million in orders from a leading insurance provider, this customer previously had a multi-vendor environment and were replacing multiple point solutions from another vendor with Verint's platform.

We believe this last orders reflect the desire from organizations to work with a strategic vendor to transform the customer engagement operations. They also reflect our growing portfolio, and the progress of our land-and-expand strategy. In Q3 our enterprise segment revenue growth was up slightly on a constant currency basis, reflecting long approval cycle associated with large transformational projects.

Looking forward into next year, we believe growth rates will improve due to adjustments we're making to our go-to-market strategy that will enable our sales force to close deals faster and minimize the impact of longer approval cycles. With these adjustments, we continue to expect multiple large deals in our fourth quarter, but we also expect an increase in the numbers of orders from customers who choose to purchase and deploy more gradually. We believe Verint's expertise in Actionable Intelligence can help enterprises transform customer engagement successfully and position us well for long-term growth.

Turning to the Security Intelligence area, we offer an Actionable Intelligence platform combined with a broad portfolio of security intelligence solutions to address a variety of security threats around the world. We believe that our domain expertise in communications intelligence and cyber intelligence is unique and position us well with differentiated capabilities. During the quarter we received a number of large orders, including more than $50 million in orders from an existing customer, close to $10 million in orders from another existing customer, and two other orders each in excess of $5 million from new and existing customers. We believe these large orders reflect our broad, highly innovative security portfolio and our ability to help organizations address both traditional and emerging security threats.

Turning to cyber intelligence and security, our primary focus continues to be on the government sector, along with an early-stage move into the enterprise sector. In government, we see customers interested in deploying a cyber intelligence platform that is capable of addressing multiple types of threats. In enterprise, we see customers interested in taking a more intelligent approach to cyber security. To address the enterprise market, we are pleased to announce that during the third quarter we entered into agreements with two MSSP providers, one in the Americas and one in Asia Pacific. MSSP, or Managed and Security Service Providers, is one of the fastest growing areas of enterprise cyber security. Driven by increased threats of sophisticated attacks coupled with the shortage of qualified cyber analysts, enterprises of all sizes are increasingly looking to outsource their cyber security operations to MSSPs that deploy the latest cyber security technologies. Looking ahead, our cyber go-to-market strategy for the enterprise market consists of both direct and indirect sales, including partnerships with MSSPs in multiple countries.

Our strategy for the government markets includes offering a combination of our cyber intelligence and cyber security capabilities as a highly differentiated solution. We sell our security intelligence solutions to many government agencies worldwide, including in many countries that are part of the emerging market sector.

Last quarter we discussed uncertainty related to large projects, as we saw potential budget constraints and project approval delays in certain countries due to a difficult economic environment. Accordingly, we have adjusted our go-to-market strategy and have started to offer more entry-level packages to customers that are affected by the current economic slowdown but need to innovate to address more immediate threats. Overall, we believe that organizations around the world are seeking innovative solutions to address both traditional and emerging security threats and we are meeting this demand with a broad portfolio of innovative applications. In summary, we believe we are well positioned for long-term growth in both enterprise and security intelligence.

I would now like to provide an update to our guidance. We started the year with double-digit constant currency growth expectations, assuming we would see an increase in large projects in both customer engagement and security intelligence. With three-quarters of the year behind us, and achieving 5% growth year to date, we are now adjusting our growth expectations for the current year to around 5% on a constant currency basis. At the same time we continue to maintain our operating margin target of between 22% to 23%. Looking ahead to next year, while it is too early to provide guidance, on a preliminary basis we are assuming a similar level of revenue growth and some margin expansion, driving earnings faster than revenue.

And now let me turn the call over to Doug.

Thanks, Dan. Good afternoon, everyone.

Most of our discussion today will focus on non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available, as Alan mentioned, in our earnings release and in the IR section of our website. Differences between our GAAP and non-GAAP financial measures include adjustments related to acquisitions, including fair value revenue adjustments, amortization of acquisition-related intangibles, certain other acquisition-related expenses, stock-based compensation, as well as certain other non-cash or nonrecurring charges. For certain metrics it also includes adjustments related to the foreign exchange rates.

I will start my discussion today with the areas of revenue, gross margin and operating margin. In the third quarter we generated $285 million of revenue across our three segments, with $161 million in Enterprise Intelligence, $95 million in Communications Intelligence, and $29 million in Video Intelligence. This compares to $289 million of total revenue in the third quarter of the prior year, with $172 million in Enterprise, $93 million in Communications, and $24 million in Video. In terms of geography, in Q3 we generated $153 million in the Americas, $83 million in EMEA and $49 million in APAC. This compares to approximately $153 million in the Americas, $97 million in EMEA and $39 million in APAC in the third quarter of last year.

Given the recent foreign exchange movements, we'd like to discuss our revenue on a constant currency basis to help investors better understand the underlying operational performance of our business. In that regard on a constant currency basis, our revenue in Q3 would've been approximately $298 million, or $13 million higher.

Q3 gross margins increased approximately 2 percentage points to 67% from 65.3% in Q2. As we've discussed in the past due to product, services and revenue mix within or across segments, overall gross margins can fluctuate significantly from quarter to quarter. Notwithstanding we are pleased with our sequential improvement in gross margin in Q3 and expect another sequential increase in Q4. During the third quarter we generated operating income of $63.2 million with an operating margin of 22.1%. Our adjusted EBITDA for the quarter came in at $69.4 million, or 24.3% of revenue.

Now let's turn to other income interest expense. In the third quarter other expense net totaled $8.3 million, reflecting $6 million of interest expense and a $2.3 million in loss from foreign exchange, driven primarily by inter-company balance sheet translations. Our cash tax rate was 8.7%. As we've 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 low tax rate jurisdictions.

For the quarter we had 62.8 million average diluted shares outstanding. These results drove diluted EPS of $0.78, or $0.82 when excluding the $2.3 million nonoperating foreign-exchange charge.

Now turning to the balance sheet. As of October 31, 2015 we had approximately $385 million of cash and short-term investments, including restricted cash. First nine months cash flow from operations on a GAAP basis came in at $88 million, similar to the $90 million we generated in the first nine months of last year. We ended the quarter with net debt of approximately $426 million, excluding discounts primarily associated with our convertible debt.

Before moving to Q&A, I would like to discuss our current guidance for the year ending January 31, 2016. Our revenue guidance is a range of $1.15 billion to $1.19 billion. On a constant currency basis, this translates to a range of $1.192 billion to $1.233 billion of revenue. Our revenue guidance reflects around 5% year-over-year constant currency growth at the midpoint. We expect to deliver between 22% and 23% operating margins for the year at the midpoint of our revenue guidance. We expect our quarterly interest and other expense, excluding the potential impact of foreign exchange, to be approximately $6 million. Given the continued volatility in foreign exchange rates, there could be a gain or loss related to balance sheet translations in our future results which is not included in our guidance.

We expect our non-GAAP cash tax rate to be approximately 9% for the year, reflecting the amount of taxes we expect to pay this year. Based on these assumptions and assuming approximately 63.1 million average diluted shares outstanding for the year, we expect EPS at the midpoint of our revenue range to be $3.30.

Looking ahead to next year, on a preliminary basis we are assuming a similar level of revenue growth next year of around 8% on a constant currency basis while maintaining our long term target of double-digit revenue growth. From an earnings perspective we expect some margin expansion next year which will drive earnings faster than revenue.

In conclusion, we are pleased with the expanding portfolio of Actionable Intelligence solutions and a strong competitive position, and believe we're well positioned to sustain long-term growth.

This concludes my prepared remarks. And with that, operator, can we open up for questions?

(Operator Instructions)

Nandan Amladi, Deutsche Bank.

Question. Dan, the first question is on the sales cycle, and this is a question that I've been getting frequently. And this started from your commentary on the last earnings call. You are selling a broader suite. And I guess some of the elongation in the sales cycle could be attributed to that. But between selling a broader suite and sales cycle extending because of that versus sales cycle extending simply because the purchasing environment is perhaps getting a little bit softer, can you explain that a little bit -- in a little bit more nuanced way?

Yes. So I think that the market is still very strong, and we see that in our pipeline. We have strong growing pipeline. But it took us a couple of quarter to identify trend. But we now believe that the trend of longer approval cycle for large project is what's causing our pipeline to -- not to close as fast as we expected.

So to put things in perspective, last year we announced that we expanding our TAM to $8 billion through expanding into adjacent markets. And the strategy was land and expand. We discussed the fact that we have a very broad portfolio of better-breed solutions, and we also have a large customer base when we acquired KANA and we got their customer base. So we saw a great opportunity to land and expand within the customer base, and as well as new customers. It has actually worked very well for us last year where we achieved double digit organic growth as we were executing on this land-and-expand strategy last year.

At the beginning of this year we heard from customers that they would like to move faster through a transformation. And we decided that rather than just sell best-of-breed solutions, point solutions, we also take advantage of the fact that we have a suite and we'll package together offerings for customers that could get them faster towards transformation. And customers showed a lot of interest in that. And we felt this offer will accelerate our revenue growth. Therefore our go-to-market strategy was in favor of large projects, and our sales force was engaged with many customers on discussing large transformational projects.

What became clear to us now after a couple of quarter of looking at the trend is that while our customers are very interested in working with vendors that have a broad portfolio and moving faster toward transformation, the approval cycle does take longer. And when they approach management, they need to go back and defend the proposal and go through a long, [a ride] explanation and so forth.

So we attribute this to perhaps an industry trend, perhaps softer industry now, customers because of the cloud are more used to smaller projects. But clearly we see now that as a trend. And what we are doing is we are adjusting our go-to-market strategy to a more balanced approach. We do have best-of-breed solution and we can help customers go through a gradual transformation. And we believe that this adjustment will eventually get customers exactly where they want to be.

But rather than buying, like we announced today, a $20 million deal, which I think is a great example of those didn't exist where customers decide to spend $20 million in one order. But also this was a deal that took over a year with a very long approval cycle. So rather than do that, we can certainly land and expand through our customer base in a more gradual manner. And we think that this new adjustments will kick in in a couple of quarters, and will help us improve the growth rates in our enterprise market.

Great. And a follow-up, if I might, on the cyber security side. You laid out a pretty broad vision at your Analyst Day a few months ago. Can you characterize how you saw the market at that point relative to both the government side, and probably more interestingly, the enterprise side? And how that's evolved, and how do you see it today?

So we still see the same trend in both government and enterprise toward intelligence platform, taking an approach of not just prevention but achieving advanced threat protection through a methodology of collecting big data, analyzing big data, understanding the insight, and being smart about the cyber threat. We certainly believe that this is -- this trend is intact. I think in the government side, it's more obvious to customers now that cyber intelligence is something that they can be leverage into addressing a number of different threats, including protecting their own networks, but also identifying through intelligence different threats. So we certainly have there a unique position of providing a platform that have multiple intelligence applications for cyber intelligence.

The enterprise, as you said, is something more interesting. I think there what we discussed in Investor Day is that we think we have a differentiated product, but we also realize that we are going to have to invest in a sales force because we do have the government sales force that have been successful with government customers for many years and relative to the IT security, we need to hire people that come from that market. So we've been hiring and building that sales force. But we also since then realize that the MSSP, the Managed Service Security Providers, are actually getting stronger because customers are more interested now in outsourcing some of this security operations to organizations that specialize in that.

I think it's a combination of the fact that there is a shortage in the market of cyber analysts and it's very difficult for enterprise to hire their own teams. And they also feel like that's a domain expertise that in some cases they would rather get from the outside. So with that trend of MSSP getting stronger, we also noticed that the MSSPs, they are competing with each other trying to differentiate based on advanced technology, and that's a win/win situation for Verint and for MSSPs. We can provide them an intelligence platform that they can use not just with one customer, but actually in the cloud -- on a cloud basis, they can use it with many customers.

And our approach going forward is going to be a hybrid approach. We still going to leverage direct sales force for direct sales, but we also increasingly are going to sign up MSSPs as an indirect channel. And we are pleased that in Q3 we signed up two MSSPs, one in the Americas and one in Asia Pacific.

Thank you.

Dan Bergstrom, RBC Capital Markets.

Thanks for taking my questions. On the Security Intelligence side, could you talk about the mix of business coming from existing and new customers? I think most of the larger deals are existing customers, but you pointed out several new over the past couple of quarters. What's driving the new customers to you?

Yes. So like we announced today, several large deals, one of them was $5 million from a new customer. So the history we have in the government market is that they develop confidence in the vendors over time. So their initial purchase could be a couple of million dollars in a small projects and then they will be buying again and again over many years. But it's a market we have been in many years. It does take to create relationship and credibility with government agencies. They are more selective relative to the vendors that they invite to participate in bids.

And therefore historically we generate more revenue from existing customers. But we see that logical challenges that our customers are facing are ever-changing. So even our existing customers that have been with Verint many, many years are still buying new solutions because of new technological challenges. And I think we all hear in the news how encryption, communication encryption, is creating a great challenge to intelligence organizations. And of course it's a challenge but it's also an opportunity for vendors like Verint to innovate and create solutions that address the challenge, and allow intelligence organizations to still be in business while the bad guys are tending to use more and more encrypted solutions.

Thank you.

Shaul Eyal, Oppenheimer.

Thank you. Hi. Good afternoon, guys. A couple of quick questions on my end. Dan, I want to try and stay just for a second on the enterprise security front. So on the total protection system, the one launched back in early June, and I know you guys have indicated a number of wins over the course of the past few months. Did you see further wins during the third quarter?

Yes, we did. Our -- as discussed in Investor Day and on the last call, we see that as a long-term opportunity. We did target to get a number of customers this year, which we -- and we are on target. More importantly is our ability to expand the sales force and to drive sales broader into the market. And we want to do that not just in one country but in few countries. So we have now targeted several countries where we are developing the pipeline. And again considering the fact that investment in a sales force could be very expensive, the emergence of MSSP as a channel is obviously interesting for us. And that's one of the things we're emphasizing now, because we think that hybrid model of direct and indirect sales force leveraging MSSP could be a good cost effective way to address the market.

Got it. A couple of weeks ago we have all unfortunately witnessed the tragic events in Paris. Do you see that down the road -- or maybe I should ask it a little differently. Have you guys started to see at least some growing interest from some government agencies following what we have seen in Paris a couple of weeks ago?

Yes. And that's very typical. We've seeing that also after similar attacks in the past in London, Mumbai, and others. There was also, interesting enough, there was a trade show, a Milipol, that was in Paris shortly after the attack. And there was a lot of interest in Milipol relative to the type of solution that can generate intelligence that was clearly lacking in that attack. So, yes. I think that these type of attacks are generally acting as a reminder. But I believe also that our customers are clearly aware that the security threat is getting bigger, that the terrorists, the criminals are trying to leverage communication channels that are less obvious. And that creates constantly new challenges and new opportunities for Verint to innovate and deliver new solutions.

Got it. And then just a final one, if I may. I think for the benefit of everybody, because I have been receiving a couple of emails. Doug, on the FY17 guide, I thought you heard probably similar to this year, 5% growth in constant currency. I think, Doug, you mentioned something to the effect of 8%. So just maybe you can help us clarify that point?

Yes. Sure, Shaul. So our base assumption is at this point revenue growth similar to this year. So that's the 5% constant currency. We did -- I did mention a few minutes ago we expect some margin expansion. I think when you look below the line, then, at interestingly similar, kind of the $6 million a quarter that we are seeing, tax rate's up maybe slightly, share count up slightly. For those of you modeling this out, that should drive EPS probably somewhere in the neighborhood of $3.50 for next year on a preliminary basis.

Got it. Okay. Thank you so much.

Sure, Shaul. Take care.

Jeff Kessler, Imperial Capital.

Thank you. Could you please discuss a little bit about the increase in gross margin? Was it mix that did it, or obviously -- or was it just being more efficient? In other words, going forward as you enter a hybrid sales approach, is that going to affect the way your gross margin ends up? And is it going to stunt or will it help the improvement that you've been seeing in gross margin? Because you've just said you expect a little bit more of improvement in overall margins for next year in the operating margins.

Yes. I think we believe that gross margin should improve over time, and that's partially why we are targeting operating margin expansion for next year. And I think that the gross margin improvement in Q3 is a mix and can fluctuate, but as we go also into Q4, we expect another gross margin improvement in Q4, just because we also -- Q4 is our biggest quarter and we have fixed costs. And as the revenue goes up, gross margin should go up. So near term, Q3 was good improvement because of mix. Q4, we expect another improvement. And longer term, we expect modest improvement that can help drive better operating margins.

Okay. One other question. And that would be, you have talked in somewhat general terms about filling in the holes and the lumpiness. You are obviously getting good conversations going on some of these larger projects, particularly at the new enterprise as well as ongoing government security projects. Is it your intention to have the channel or the MSSPs fill in those periods of -- the low periods of lumpiness, or are -- do you think that they will be at truly -- are they going to be additive? Or is it going to be a way for you to smooth out the revenue lumpiness a bit?

Yes. I think they will be additive and I think that will help smooth the lumpiness. We looking for both. It's partly adjusting the go-to-market strategy. As I mentioned before, we clearly see the trend within Verint, but we also think it's an industry trend. And that customers really have preference to just buy it in smaller chunks. That preference can be driven by a lot of different reasons.

But if you look at Verint's strength, 50% of the business that we are generating is from $1 million-plus projects. And 50% is from projects that are less than $1 million. So I think we already have a pretty broad customer base and we already have many channels that are focused on kind of smoothing the growth. But we also are very good at getting, securing and delivering on $1 million-plus deals. What we saw this year in the first three quarters that we got fewer deals that are $1 million-plus than last year. And also the total value of those deals was less than last year.

So as we look at that fact, why do we have fewer deals and why the value is lower than last year, we don't see that we lost deals to competitors. We don't see that the issue that our products are not competitive. But we analyzed that many cases and just see that it takes too long for customers to make the decision when the budgets, when the numbers are big and the budget needs to be justified. And so we will continue to see big deals because that is our strength and many customers will prefer to go with big deals. But our sales force is going to have a more balanced approach. If the customer wants a big deal, we will be happy to help them, and if they prefer to buy a best-of-breed point solution we will be equally happy to help them.

Okay. Are you confident enough in your own -- in your existing relationships so that you are not worried about customer touch, things like that being lost a little bit as you move toward a third-party or a channel partner?

No, because we also have today 50%, it happened to be there also, 50% of the business is indirect already. So we're not trying to shift the business to be way more indirect. But I think we can continue to go to direct and indirect channels. And in some cases the indirect channel is very effective. In the case of cyber security, we think MSSPs will be very effective. We also have many, many cloud partners that are very effective for us to go after the SMB market, which is a market that we -- is very under-penetrated for Verint. So there are areas where channels are extremely effective and there are areas where we, especially more innovative, large government project where we are executing better on a direct approach.

Okay. Thank you very much.

Sure.

Daniel Ives, FBR.

Thanks. Dan, if I look back the last 12 months, what do you think is maybe a strategic misstep, or if there's been a miscalculation and now you're trying to change?

Yes. I think the land-and-expand strategy I think is right, and we'll continue to pursue that because we think that our customer base is not penetrated and we got many, many solutions in our portfolio that we can sell over time. I think where we missed is on the assumption that we can accelerate growth by packaging point solutions together and creating large transformational projects. I think we were led to believe by many customers that this is their preference. And I think customers actually were very sincere about it and quite surprised when they approached their management and were finding difficulties to get approval. So we missed that.

We believe that now, we believe that go-to-market strategy actually slowed down the sales force because the sales force had to spend a lot of cycles with customers to go back and reissue the proposal and reissue ROI documents and defend the deal just to go back to do it again and again. And we know that sales force effectiveness is in closing deals faster. So going forward, we think that to correct that miss, we adjusting a more balanced approach. The sales force, when they -- obviously one of the strengths of Verint is our largest portfolio.

Customers really like the fact, even if they buy only one point solution, they truly love the fact that Verint has many other point solutions, for a number of reasons. First, they don't want to work with too many vendors. Second, they believe that over time if they buy the second and third and fourth solution in an integrated fashion, they can benefit from all the workflow integration that we have done. And thirdly, Verint has the domain expertise. We understand more than just communities. We understand more than just knowledge management, more than just workforce management.

We do have expertise across the customer engagement team that help customers really understand not just about the problem they are trying to solve now, but we really are consultative in our selling approach to help them think about how they going to solve the problems of tomorrow. So customers like the fact that they can work as a broad team at Verint. But the end of the day, if they can get approval for $0.5 million project for this quarter and another $1 million next quarter, and that's great velocity in the sales process, that will make our sales force more effective and our numbers to improve much faster.

Thanks.

Jonathan Ho, William Blair and Company.

Hi. This is John Weidemoyer for Jonathan who's traveling. Thanks for taking my question. On your increase in approval cycles, was that behavior consistent across geographies?

So the geographical trends are intact. So we grew in all three geographies year to date. I think that the one thing that I will emphasize is emerging markets in the security area. When I think about our guidance, our guidance reduction relative to where we started the year, besides FX issues, I would say that half of the guidance reduction came from the Security side and half from the Enterprise side. And while in both cases it's attributed to fewer large projects, and large projects that we didn't lose but we didn't secure yet. And we saw uncertainty in timing of securing those large deals.

But in the Security market it's tied more closely to customers in countries where there is economic slowdown. So what's called the emerging market sector, countries that have been affected by oil price, commodity prices or other reasons that there was economic slowdown that created pressure on government budgets. So that's the one area, the emerging market countries for the Security sector that I would say has shown some geographical trend.

Thank you. And then I just want to clarify. When you mentioned the four large orders, the $50 million, the $10 million and the two $5 million, were those all cyber deals or were some of those broader security deals?

Those are broader security deals. I think many of them are cyber intelligence deals.

I am sorry, so cyber was maybe part of them but they were in general broader security deals?

Yes. We don't break by deal. And some deals we do get a combination of cyber intelligence and communication intelligence, but there are many cyber intelligence deals that we're getting now on the government side.

Okay. All right. Thank you very much.

I would now like to turn the call back over to Alan Roden for closing remarks.

I'd like to thank everyone for joining us tonight. And for those who are attending the Imperial Capital conference next week, we look forward to seeing you there. Have a great evening. Take care.