{ "docId": "019dd923-622c-750b-8b98-b531f2b0553d", "docSlug": "c54d9b8bb206", "documentTitle": "Verint Systems, Inc. (VRNT)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2019-05-23 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 60, "pageCount": 108, "prevPage": 59, "nextPage": 61, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "balanced", "nDataPoints": 0, "notes": "The slide uses red underlining to draw attention to specific phrases in the 10-K excerpt that support the activist's thesis.", "elementsJson": [ "headline_text", "paragraph", "screenshot" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-b531f2b0553d/60", "deckHref": "/decks/019dd923-622c-750b-8b98-b531f2b0553d", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-b531f2b0553d.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-b531f2b0553d#slide-60", "components": [ { "bbox": { "h": 0.15, "w": 0.9, "x": 0.05, "y": 0.16 }, "kind": "paragraph", "text": "Management did in fact acknowledge in its FY18 10-K that its adoption of ASC 606 could accelerate the recognition of revenue tied to term licenses. However, it was ambiguous about the potential magnitude of the revenue impact, stating that it was “still in the process of quantifying the impact of the new standard,” but that it “[did] not expect the new standard to materially impact the amount or timing of the majority of revenue recognized in the consolidated financial statements.” Perhaps its adoption of ASC 606 wouldn’t affect the timing of “the majority” of revenue - i.e. more than 50% of revenue - but this still leaves open the possibility that it could affect a very significant share of sales. We find management’s word choice interesting given its demonstrated history of picking its words carefully.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "01898671-8cf9-4de9-b48c-eb4edabf7c9e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.45, "w": 0.9, "x": 0.05, "y": 0.43 }, "kind": "paragraph", "text": "We currently allocate revenue to our software licenses under the residual method when VSOE exists for the remaining undelivered elements. The residual method allocates any future credits or significant discounts entirely to the software license. The adoption of ASU No. 2014-09 will result in future credits, significant discounts, and material rights under this guidance to be allocated to all performance obligations based upon their relative standalone selling prices. Under the new standard, additional software license revenue from the reallocation of such arrangement considerations will be recognized when control is transferred to the customer, which is generally upon delivery of the license. We have not been required to defer a significant amount of revenue due to insufficient VSOE and do not anticipate the updated standard’s requirement to establish or estimate a standalone selling price, rather than defer revenues in the absence of VSOE, will have a significant impact on our consolidated financial statements. We do not expect the new standard to materially impact the amount or timing of the majority of revenue recognized in our consolidated financial statements.\n\nHowever, we have identified certain arrangements where revenue may be recognized earlier than under current GAAP, in particular term licenses and sales- or usage-based license arrangements that include minimum guaranteed amounts. We expect to recognize license revenue from term licenses upon delivery of the software, rather than over the term of the arrangement and the minimum guaranteed amount related to sales- or usage-based arrangements when the customer obtains control of the license. Further, under current rules, the amount of revenue recognized is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (i.e. the non-contingent amount). Under the new standard, the amounts allocated to delivered items and recognized upfront could be higher if it is probable that a significant reversal in the amount of revenue recognized will not occur in future periods upon the delivery of additional items or meeting other specified performance conditions. Due to the complexity of certain Cyber Intelligence arrangements with governmental entities, the actual revenue recognition treatment required under the new standard will depend on contract-specific terms and in some instances may vary from recognition under current guidance. We are still in the process of quantifying the impact of the new standard on these arrangements.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b0adfc23-61d8-4c88-b07f-97862858eeb2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.65, "x": 0.305, "y": 0.03 }, "kind": "title", "text": "Management Quietly Admits That ASC 606 Adoption Accelerates Revenue Recognition", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1c94b6ac-81f5-4e97-98f3-905a3f227c9a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.51, "x": 0.245, "y": 0.38 }, "kind": "title", "text": "VRNT FY18 10-K", "attrs": null, "subkind": "subtitle", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ab8a1dd3-dd1f-4ff5-87e6-4b93d39fb309", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "ceo-quote-contradiction", "slug": null, "matchId": "acd82702-d088-4e3e-ab56-304d4b8a786b", "evidence": "Contrasting management's claim of 'no material impact' with the technical admission of accelerated revenue recognition in the 10-K.", "confidence": 0.9 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }