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Verint Systems Inc (VRNT -3.45%)
Q1Â 2020 Earnings Call
Jun 9, 2020, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Verint Systems First Quarter Conference Call. [Operator Instructions] After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to your speaker, Mr. Alan Roden, Senior Vice President of Corporate Development. Please go ahead, sir.
Alan Roden -- Senior Vice President, Corporate Development and Investor Relations
Thank you, operator. Good afternoon and thank you for joining our conference call today. I'm here with Dan Bodner, Verint's CEO; and Doug Robinson, Verint's CFO. Before getting started, I'd like to mention that accompanying our call today is a WebEx with slides. If you'd like to view these slides real-time during the call, please visit the IR section of our website at verint.com, click on the Investor Relations tab, click on the webcast link, and select today's conference call.
I'd also like to draw your attention to the fact that certain matters discussed on 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 and are 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 more detailed discussion of these and other risks and uncertainties that could cause Verint's actual results to differ materially from those indicated in the forward-looking statements, please see our Form 10-K for the fiscal year ended January 31, 2020, which will be filed today, and other filings we make with the SEC.
The financial measures discussed today include non-GAAP measures, as we believe investors focus on these measures in comparing results between periods and among peer companies. Please see today's WebEx slides, our earnings releases in the Investor Relations section of our website at verint.com for a reconciliation of non-GAAP financial measures to GAAP measures.
Non-GAAP financial information should not be considered in isolation from, as a substitute for or superior to GAAP financial information, but 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?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Thank you, Alan. From the onset of COVID-19, we took immediate steps to help our customers address the challenges of this new environment. We're pleased to have received positive customer feedback for our innovation, customer-centricity and a quick response of our employees. Following bookings growth in February and March, many customers delayed project in April, primarily on-premises deployments. Looking forward, as organizations gradually return to offices and travel restrictions are lifted, customers are expressing that they intend to resume on-premises deployments and are considering accelerating clouds. We now expect a sequential improvement in Q2 and continued improvement in the second half of the year.
Before reviewing our Q1 results, I'm pleased to report significant progress on our plan to create two independent public companies. We recently amended our term loan agreement on favorable terms to facilitate the separation. We've also closed the first tranche of the Apax investments. Jason Wright, lead software partner at Apax joined Verint's Board and will help drive the separation and our growth strategy. We are targeting completion of the separation shortly after fiscal year end and Doug will review the progress we've made later in the call.
Turning to our Customer Engagement business. As I mentioned before, on-premises deployments were impacted by COVID-19, but cloud momentum continued in Q1. Consistent with this trend, we received many large cloud orders from both existing and new customers, including competitive displacements. These orders include a $5 million cloud order from a leading financial services company that is expanding the deployments of our cloud solutions from one to three business units.
A $3 million cloud order from a bank customer that is adapting additional modules of a cloud portfolio while replacing an on-premises solution from a competitor. A $3 million cloud order from another global bank customer, a $2 million cloud order from a leading business services provider and a $1 million cloud order from a leading insurance and services company, a new customer for Verint and another competitive displacements.
As you can see, most of these large cloud orders came from banking, insurance, business services and government customers which are strong verticals representing a majority of our customer base. I will further discuss the resilience of our customer base in few minutes. Overall, we are seeing strong interest in our cloud solutions and are pleased to report that new SaaS ACV increased 45% year-over-year in Q1.
SaaS revenue increased double-digits year-over-year excluding ForeSee. Just to remind you, we acquired ForeSee five quarters ago and expect that their legacy revenue to decline, but we are very pleased with their technology which has been fully integrated into our Experience Management platform. Doug will review later the Q1 key cloud metrics and trends.
We are targeting cloud growth through direct sales force and a growing network of cloud partners. I'm pleased to report that our communication infrastructure agnostic strategy and our cloud offering are resonating well with partners. With respect to post COVID-19, there is a potential acceleration for cloud and digital transformations in our industry and we believe that we are well-positioned to participate in this acceleration.
Customers rely on our solutions to drive workforce productivity, business analytics, compliance and fraud detection. Our revenue is primarily generated from large enterprises across strong verticals, including financial services, healthcare, utilities, technology and governments. We also generate the majority of our revenue from our existing customer base, which includes over 85% of Fortune 100 organizations.
We are pleased to report that during Q1, our renewal rates remained strong and we believe that on-premises deals that were delayed will come back as the environment improves. Our ability to grow new cloud bookings and sustain renewal rates during the pandemic reflects a strong customer base and our ongoing relationships with our customers. Last month, we had our Annual User Conference with almost 4,000 customers and partners attending virtually, which is double the number of attendees we had last year and demonstrates strong interest in our latest innovative solutions.
I would like to expand on some of our recent innovations. The initial focus of our customers as they shifted to work from home was providing connectivity for their employees. Organizations have now turned their attention from connectivity to addressing business challenges such as workforce productivity, business analytics, compliance and fraud with some of employees working at home and some in the office.
Let me give you a few examples of how we are helping customers. We have recently enhanced our Workforce Engagement Solution to help organizations automate workforce planning for gradual and safe return to the office. These new capabilities enable organizations to meet service levels and elevate their customer experience, while complying with office social distancing rules, workspace hygiene checks and workforce assignments rules.
Verint has created a new workflow that customer can use to automatically create a comprehensive schedule that accommodates not only traditional workforce management criteria such as skill level in peak hours, but also new requirements including the needs for staggered work schedules, scheduling a mix of work from home and in office agents, safe distancing guidelines and opportunities for employees to create -- to rotate in and out of the office.
Another example is, in analytics package, we launched to help increase the productivity of agents at home. For some agents the work conditions at home could be disruptive and affect their productivity, a new package helps supervisors to remotely analyze agent desktop applications and workflows and to suggest improvements in real time. The new package also helps management to identify best practices that were disrupted by the transition to work from home and make adjustments to increase productivity.
And the third example is a new automated compliance package, that's helps ensure that agents at home adhere to compliance rules the same way they did when working from the office. Each and every call is automatically screened by our software and alert are triggered in case of compliance errors occur. Also agents are provided individual reports on compliance gaps to help create a strong compliance culture. The pandemic has disrupted how people work and we believe will have a long-term impact on the workforce in our industry. Verint has always been a thought leader in workforce engagements and we are quickly addressing new requirements from our customers with innovation driven by strong analytics and automation.
Looking forward, we see three areas that should positively contributes to our Customer Engagement growth. First, we expect on-premises deals to come back as organizations reopen their offices and travel restrictions are lifted. At the same time, we expect the industry to accelerate its shift to the cloud and more customers to purchase new solutions in the cloud as well as migrate their legacy on-premises solutions. And third, we believe that organizations managing their workforce in the new normal will require the type of analytical workforce engagement solutions, for which, Verint has been recognized as a leader for many years.
Turning to Cyber Intelligence. Advanced data mining analytics continued to play a critical role in accelerating security investigations and generating actionable insights to fight crime intel. Our solutions help maintain law and order both in terms of peace and crisis. In Q1, we received multiple large orders, including an order for greater than $15 million, three orders for approximately $5 million each and four orders for approximately $3 million each. We believe these large orders reflect ongoing demand for our data mining solutions and our strong competitive position with the global set of customers across more than 100 countries. Most of our revenue today comes from a broad base of government customers, who chose Verint as a strategic partner and which we have strong relationships for many years.
In Q1, our software model strategy continued to generate benefits for our customers and for Verint. Our Q1 gross margin on an estimated fully allocated basis increased approximately 400 bps year-over-year continuing the trend of the significant increase over the last few years. In addition, during part of the introduction of new subscription-based solutions, our recurring revenue as a percentage of total revenue increased by about one-third a few years ago to more than half in Q1. We believe our software strategy resonates well with customers and provide Verint a competitive advantage. It also benefits our customers with faster software refresh cycles to quickly address security threats that are rapidly evolving around the world.
Looking forward, we see three areas that should positively impact our Cyber Intelligence growth. First, the gradual reopening of offices and lifting of travel restrictions will facilitate the performance of on-premises solutions that were delayed in Q1. Second, the pandemic has elevated climb and unrest globally, driving interest in new data mining analytics to fight crime and terror. And third, our software model will continue to improve our financial results, to improve our competitive position and benefit customers with faster software refresh cycles to better respond to threats. Overall, we believe our Cyber Intelligence business is well positioned to be a successful independent software company.
We are targeting the completion of the Cyber Intelligence Spin shortly after fiscal year end and have made good progress since our last call. In May, we completed the first $200 million investment tranche from Apax Partners and yesterday, we completed an amendment of our term loan. The amendment will facilitate our separation into two public companies and enable our existing credit facility to survive the separation, providing us with attractive credit terms through 2024. Following the investment and amendments, we believe both businesses will be well capitalized for the separation.
And now let me turn the call over to Doug to discuss our financial results in more detail. Doug?
Douglas Robinson -- Chief Financial Officer
Thanks, Dan. Good afternoon, everyone. Our discussion today will include 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 items that can vary significantly in amounts and frequency, for certain metrics that also includes adjustments related to foreign exchange rates.
Today, I'd like to discuss several things. First, briefly review our first quarter results, which as Dan mentioned were impacted by COVID-19 which caused delays in our on-premises deals in both segments. Then I'll discuss how we're managing our business through COVID-19 and our outlook. And finally, I'll provide an update on our separation plan. This is a dashboard we developed a few quarters back for our Customer Engagement business. It includes our Q1 results and can be found in our IR website. It shows the key metrics for our Customer Engagement business which we believe are most helpful to understand the performance of our business.
In Q1, on a constant currency basis, Customer Engagement GAAP revenue was down 9% and non-GAAP revenue was down 12% year-over-year due to a decline in perpetual license revenue as on-premises deals were delayed. Perpetual equivalents were also down for the same reason, although new SaaS ACV was up 45%. Looking forward, we expect improvement in Q2 and the second half of the year as on-premises deals come back and our cloud momentum continues. In Q1, non-GAAP estimated fully allocated operating margin for Customer Engagement came in at around 20%, reflecting the April weakness we discussed earlier and the cost controls we began to put in place.
I'd now like to take a closer look at our cloud performance in Q1. Starting with cloud bookings, as discussed, in Q1 we had another strong quarter of new cloud bookings growth. Regarding booking quality, as Dan mentioned earlier, our new bookings in Q1 included many multi-million dollar cloud deals despite COVID-19. I'd like to note that the average contract -- cloud contract term remained above two years as our solutions are sticky and customers typically use our software for many years rather than purchase for short-term needs. Another measure of stickiness is our recurring revenue and renewal rates.
In Q1, the percentage of our revenue, software revenue that is recurring came in at 82%, an increase of approximately 900 bips year-over-year. This significant increase was a result of cloud mix shift and strong renewal rates. Our Q1 recurring renewal rate was around 90%, similar to last fiscal year and came in a few points stronger when excluding the renewal rates for ForeSee's legacy products.
Turning to revenue. The cloud metrics are provided in the dashboard and I'd like to explain our cloud revenue trends across bundled SaaS, unbundled SaaS and optional managed services. Non-GAAP bundled SaaS revenue increased 5% year-over-year, were around 25% excluding ForeSee, whose products we stopped selling since we acquired the company. The 25% is consistent with a strong growth in new SaaS ACV that we've achieved over the last few quarters. Unbundled SaaS, which tends to fluctuate quarter-to-quarter declined a bit, and optional managed services was up slightly in Q1 year-over-year.
Regarding our cloud conversion program, as a reminder, we have a maintenance base of more than $300 million and offer our customers the flexibility to migrate from an existing on-premise solution to cloud at their own pace. Customers can migrate to the cloud to improve TCO or choose to keep legacy solutions on-premises and purchase incremental functionality from Verint in the cloud. Large enterprises require this flexibility as they migrate to the cloud over time.
As Dan mentioned due to the pandemic, we believe the industry will accelerate the shift to the cloud. During the pandemic, most customers slowdown down their migration initiatives, but we expect those migrations to resume and then increase in the coming months and post-pandemic. Overall, we are well positioned for cloud growth and we believe there is now an opportunity to complete our cloud transition faster as the industry accelerates cloud adoption post COVID-19.
Now I'll provide a few comments on the Cyber Intelligence segment. This is the dashboard for our Cyber Intelligence business, which includes our Q1 results and can also be found on our IR website. Similar to the Customer Engagement dashboard, it includes the key metrics we believe are most helpful to understanding the performance of this segment as we go through our software model transition. In Q1, as Dan mentioned, we received many multi-million dollar deals which will be converted to revenue over time. Our revenue in Q1 declined around 5% year-over-year both on a GAAP and non-GAAP basis as on-premises deals were impeded by COVID-19.
While on-premises deals were impacted, gross profit remained strong as we continue to reduce hardware and low-margin services as part of our software model transition. Non-GAAP estimated fully allocated gross margins came in at 69% and approximately 400 bips increase year-over-year. The percentage of our revenue that is recurring increased to around 55%, up 1,200 bips year-over-year. Non-GAAP estimated fully allocated operating margins came in at around 10%.
And now turning to our balance sheet. We continue to prepare the company for the separation of our two segments and are pleased to have closed both the first $200 million tranche of the Apax investment and a term loan amendment allowing us to continue with attractive credit terms now and beyond the separation through June 2024. Both of these actions have helped solidify an already strong balance sheet and will facilitate the separation. During the quarter, we continued to buy back shares which took our non-GAAP share count down to 65.6 million shares in the quarter, driving $0.52 in non-GAAP EPS.
With the Apax investment be accounted for as equity rather than debt, we expect our non-GAAP share count for the year to be approximately 59 million shares. Today, including the first tranche of the Apax investment, we have over $800 million of cash and short-term investments and a leverage ratio of less than 1 times net debt to last 12 months EBITDA on an adjusted basis. Our cash flow from operations on a GAAP basis was strong in Q1 coming in at $76 million, reflecting our strong enterprise and government customer base.
Let me take a moment now to discuss our customer base. The majority of our revenue is generated from large existing customer base, primarily across the financial services, healthcare, utilities, technology and government verticals. In Q1, we benefited from the resiliency of our customer base with continued strong renewal rates. We're also benefiting from a growing portion of revenue generated from recurring sources.
Verint has experienced managing through different economic cycles, and at the onset of COVID-19, we took actions to manage our expenses while continuing to invest for long-term growth. We remained focused on executing our cloud for a strategy and software model transitions and preparing the company for the separation. I believe that the actions we have taken during the pandemic to support our customers, partners and employees will enable us to emerge even stronger.
Finally, I'd like to provide an update on our plan to separate Verint into two public companies. Since our last earnings call, in addition to closing the Apax investment and completing the credit agreement amendment, we have made progress across many areas. On the tax side, we made the required filings with the authorities in both the US and Israel and our tax ruling process is under way. On the financial side, we continue to prepare the required carve-out financials for our Cyber Intelligence business. On the public reporting side, the transactional and SEC documents that are required to effectuate the spin are in process. And on the IT side, we continue to execute the infrastructure and application separation plan. Overall, at this point, we are making good progress with the separation and we'll continue to update you on our progress on future earnings calls.
That concludes our prepared remarks. So operator, can we now open up the call for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from Ryan Macdonald with Needham. Please go ahead.
Ryan Macdonald -- Needham -- Analyst
Hi. Good afternoon, everyone. Thanks for taking my questions. First, I'd love to get a little bit more color on the discussions you're having with customers that are under way with on-premises deployments. And just to get a sense of how long you think the delay or what they're looking at, is it a matter of weeks and months on some of the pipeline conversion here or is it a multi-quarter issue do you think?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Yeah. I'd be happy to provide an update. So as we previously discussed, we had strong bookings in February and March. And then at the end of March, beginning of April, we started to see the impact of the pandemic and that's why we didn't give guidance on the last call. And April was pretty much shutdown in terms of on-premises, we could not travel to the customer sites and also customers did not want us to be there. In May -- at the beginning of May, it continues, I would say, the last two weeks we're starting to see customers are discussing, scheduling on-premises installations. We did get the first customer last week that actually put a schedule and they want us to come shortly on site and help them with an on-premises installation.
So it's starting to change not unexpectedly, given what's going on in the country. And we believe that customer is working through priorities, and in many cases, customer engagement is a big priority, especially as they are starting to prepare to bring some of the workforce back to the office and clearly everyone is talking about the new normal where they'll be a hybrid workforce that works partially from home and partially from the office. Certainly in the near future, this is a challenge how to bring employees to the office and social distancing rules and workspace hygiene and all kind of regulations and policies.
So we're clearly helping customers to address their return to the office that will impact the workforce, and I think that's one of the highest priorities that organizations have is to plan the best -- their return to the office in the most least disruptive way they can. So some optimism certainly that's the reason why we guided for improvement in Q2. We believe June will be stronger and July will be stronger, and we see improvement continuing through the year.
Ryan Macdonald -- Needham -- Analyst
Excellent. And then in terms of -- that you talked about the potential migration opportunity and able to convert some of that maintenance revenue. What sort of acceleration have you seen and sort of the discussions with those types of customers and willingness to move to the cloud? Thanks.
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
So the cloud -- obviously in Q1, we had very strong performance with many multi-million dollar cloud deals. So despite the disruption of COVID-19, cloud was much less disrupted. And certainly within the verticals that we are strong in financial services and governments and utilities and so on, that was continuing to be strong and we reported great wins, and the impact was on-premises. So there is discussion now, early signs that even customers that were reluctant to move to the cloud, they were -- for security reasons or other internal reasons they thought they will do it over many years are seeing the benefits of cloud and are being more opened to cloud deployments.
As you know, we support cloud customers to move to the cloud with their own pace so they can keep some of their solutions on-prem and purchase some new solutions in the cloud and those will work seamlessly if they're all on-prem or all in the cloud, so we invested in a hybrid cloud deployment model to help our customers transition to the cloud at their own pace and we believe that's a competitive advantage and one of the reasons we're getting big cloud orders. But there is discussion that the industry may now accelerate adoption of cloud and obviously this is very positive for Verint as this has been our intention to help the industry move to the cloud and we have a cloud-first strategy with our direct sales force and a cloud strategy with our cloud partners.
So at this point, I would say that we previously targeted a cloud transition to complete in three years and we now see an opportunity to complete it in two years and that includes also converting the legacy installed base, the support base. So specifically about conversion, as Doug mentioned, we have more than $300 million of revenue from our base in recurring revenue that comes through support contracts. And here the opportunity to convert the support contract to a SaaS contract with a 2 times multiple as we move the software to the cloud and provide the customers multi-tenant hosting services as well.
But this is a good opportunity for our base to get rid of their data centers and don't have to worry about IT costs because that's all going to be delivered by Verint. And obviously, we have already a pretty large revenue base, last year, we had close to $250 million cloud revenue, so we built a scalable infrastructure. And as customers move to the cloud, we can do it very efficiently. We discussed gross margins that are going to be favorable when we host in the multi-tenant cloud, around 80% gross margin, so the more of our legacy support revenue move to the cloud or convert to the cloud, we see an opportunity for revenue multiple and also some gross margin expansion.
So early signs, but I think COVID-19 have many lessons learnt that's yet to be adopted by the industry. But the two areas that we think are showing some early signs of change is, cloud acceleration is one and the second thing is the workforce, and adopting the new normal with the workforce. And I think both areas are favorable to Verint.
Ryan Macdonald -- Needham -- Analyst
Excellent. Thanks for taking my questions.
Operator
Thank you. Our next question will come from Shaul Eyal with Oppenheimer. Please go ahead.
Shaul Eyal -- Oppenheimer -- Analyst
Thank you. Hey, guys. Good afternoon. Dan I had a question about the delayed or the slipped business in the final month of the quarter. Were there any cancellations or just slippage into the second quarter and potentially into the second half off of this year?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Yeah. So in April, we had a number of on-premises deals that we were expecting and customers basically told us that obviously they're not in the office and they cannot continue with the on-premises. This is all not just new deals, but also deployments of deals, so the professional service is to deploy deals that we had was also slowed down. In terms of what happens to these deals, none of these deals we lost to any competitor. And these are, as we said before, primarily our business comes from large enterprise customers as they expand and buy new solutions, so we believe that this business will come back.
In terms of intentions, many customers indicated that their budget has not been lost and they still have the budget in the year and they expect to do it later in the year. But I don't think that at this point, any of our customers speaks with a lot of confidence in terms of exactly when, and this is why today, we're not giving guidance for the year, but we are giving some color on -- certainly on Q2 where we see, given the improvement we saw so far, we forecast sequential improvement in Q2 in terms of revenue, few million dollars of sequential improvement in revenue. And we also, as you know, we spoke about how we can manage cost in the recession.
So you can see that in Q1, February and March were strong bookings, but in April we started to manage our costs, so Q1 opex is lower than last year Q1 opex and some of the actions we took in April obviously will be now in full effect during Q2. So we expect the Q2 opex to come down further about $10 million more further cost reduction. And we believe that with this modest revenue improvement and cost controls we believe will result in Q2 EBITDA that will be similar to last year. So this is how we manage right now the business.
We manage expenses and we are working with our customers to help them come back to the office and resume their on-premises business. At the same time, we do see momentum in cloud. We had ACV growth in Q1 and we expect to also have new ACV growth in Q2 and continued cloud momentum throughout the year.
Shaul Eyal -- Oppenheimer -- Analyst
Got it. Thank you. Thank you for the color. I want to go back to the slide on the product front, on the workforce engagement, the productivity analytics and the automated compliance. Dan are you seeing new private companies in the various verticals or buckets, companies that you haven't seen before say the past two years or so?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
We saw -- we see some new small companies. They usually are trying to enable. They do not represent at this point a serious competitive threat. They are mostly going after more simple use cases at the low end of the market. For our customers, we have the breadth functionality they need. I think solid [Phonetic] example that we gave earlier was in terms of the workforce return to the office and the challenge of calculating [Phonetic] the workforce to make sure that you have sufficient skill level -- skills and sufficient headcount to address the volume of course obviously is changing quite a bit and when you have employees return to the office, they partially work from the office and partially from home.
In the office, there are zones, there are social distancing and there's so many people you can accommodate in a shift, you have to accommodate for break between shifts so you can clean the workspaces, there's a lot of different rules now that need to be incorporate into workforce planning. And we were able very quickly to launch to our customer base a planning automation tool with algorithms that take into consideration all this new return to office regulations and help them to prepare a schedule that will elevate the customer experience.
So this type of capabilities that we have and flexibility of the product, I think we are very well positioned for the more complex mid to high end of the market and where we see some, as you said, new small companies they're really mostly focused on the low ends.
Shaul Eyal -- Oppenheimer -- Analyst
Got it. Understood. Thank you for that. Appreciate it.
Operator
Thank you. Our next question will come from Daniel Ives with Wedbush. Please go ahead.
Daniel Ives -- Wedbush -- Analyst
Yeah. Thanks. I mean my question kind of to Shaul hit on it a bit, but is there anything from an execution perspective when you look back in April now going into June, July and obviously going forward. Is there anything that you have started to change in terms of strategically in the field on either both or each of the businesses, just given this environment what you've learned some customers and their execution? Thanks.
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Yes, we did. So we see two fronts. I gave three examples earlier, but we actually launched 11 new packages over the last two months. So this is very, very rapid innovation and we were able to launch this so quickly based on a strong foundation we have in analytics and artificial intelligence. And this package is all focused on helping our customer adjust quickly to the changing environment. The industry overall in the first month in April was focused on connectivity. How do I ensure that my employees at home have the right connectivity to be in a position to respond to customers?
But right after the connectivity issues were addressed, and I would say, generally the industry addressed it very well. Their focus shifted to productivity because processes were disrupted, analytics to understand what our customers are really asking because the conversation have changed quite a bit. And also compliance and fraud where organization have to remain compliant regardless of the change in the workforce. And of course fraud, we had many customers reporting elevated fraud activity.
So all these issues start to become more the forefront in May and we very quickly decided to rather than go after the large on-premises deals that will come back later, we wanted to help our customers address the urgent needs now. And it's not just the need they had during COVID-19, but we now believe that many of these things will be in the new normal. So we see organization require this type of automation and analytics certainly for the next year and may be permanently.
Daniel Ives -- Wedbush -- Analyst
Thanks for the insight.
Operator
Thank you. Our next question will come from Brian Essex with Goldman Sachs. Please go ahead.
Brian Essex -- Goldman Sachs -- Analyst
Hi. Good afternoon and thank you for taking the question. I guess, Doug, do you have any insight around how we might be able to think about the companies once they're separated in terms of anticipated incremental public company costs for two different companies. And then any milestones that you need to still complete particularly on the CIS business with regard to staffing and executive team, for example. I mean just help us understand like what sort of expectations for cost and incremental staffing needs be for the remainder of the year and kind of how to think about that into next fiscal year?
Douglas Robinson -- Chief Financial Officer
Yeah. Sure. We're making good progress. I mean, having the first tranche of Apax, having the term loan B amended are good things moving forward. We have been working with IT plans and the carve-out financial plans. We got our tax rulings going. So I think we're in good shape here and we still have plenty of time. We're not looking to do the spin until just shortly after the end of fiscal year. So we've been looking at how we'd build up kind of the public company infrastructure for the Cyber Intelligence business. We've got a management team that's in there, so that's fine. We'll have to build our Board for that separate -- from the, what we call, RemainCo, which will be the Customer Engagement business. And we had some kind of -- it's mostly shared services.
So, yes, there'll be some dis-synergies in terms of public company costs, insurance for two separate companies will be a little bit more, we'll have a few more staff we need to add. But both businesses run very independently already, the R&D and the sales and the whole infrastructure of the kind of the go-to-market is completely independent now. So it's really just kind of separating out the IT, the finance, the legal type of operations. And we'll provide some more kind of quantitative updates as we get closer and realize what those costs will be more specifically. But again, it's just more of the shared service kind of duplicative costs that we'll have running as two public entities.
Brian Essex -- Goldman Sachs -- Analyst
Okay. That's really helpful. And maybe just a follow-up. If I could follow-up to last quarter on a source security administration deal in the appeals process. And I think you had a large financial services customer where existing customer worsen business push. Any updates with regard to the status of either of those?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Yeah. The social security deal, the appeal is due for the government decision in July. Obviously, I can do that earlier. But at this point, they did not provide a decision and we still expect that it will be awarded to our partner and to Verint and that will have revenue this year.
Brian Essex -- Goldman Sachs -- Analyst
Okay. Anything on the financial services side?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
That's a long-standing customer that has been for the last seven years, have been spending with Verint around $15 million a year and still very good relationship with this customer. We did not lose the business. It's an on-premises business and we expect to -- now if other on-premises deals to come back when offices will be open.
Brian Essex -- Goldman Sachs -- Analyst
Right. Great. That's very helpful. Thank you very much.
Operator
Thank you. And our next question will come from Jeff Kessler with Imperial Capital. Please go ahead.
Jeff Kessler -- Imperial Capital -- Analyst
Thank you. When the nature of COVID became quite apparent, you came out with several announcements and programs in the Cyber Intelligence side. One or I guess related to -- one related to monitoring and surveillance for COVID to compliance. The other I guess related to somewhat to the use of now ForeSee acquisition helping to notify authorities where and when things were happening. Did you get any revenues during the quarter or are you receiving those types of revenues now from those programs that were marketed?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Yes. We got several deals and there's some revenues although these deals were delivered in the cloud. So the revenue will be over time. So the revenue in Q1 was very minimal. But we got few deals. These are quarantine management solutions based on our analytics. It's not a business, but we have relationship with these type of customers, national security organizations that in many countries were responsible for the quarantine management and obviously for law and order in times with COVID-19, and as you know, in many countries now there is a concern for elevated crime and terror as a result of the post-COVID-19 consequences.
But we kind of -- we had request some customers that, we know many years, to help with quarantine management and we quickly put together this type of solution. This is not what we see as our ongoing business, but it was very good in terms of helping our customers to achieve their short-term goals. And again part of what we can do with analytics automation is it's fairly -- when you have a strong foundation it's fairly simple to quickly adapt to solution to do data mining around quarantine because you have all the tools and algorithms that could facilitate gathering data and doing deep analytics.
This is really, at the end of the day, the strength of our Cyber Intelligence business is big data. Big data comes from a lot of different sources, that could come from the web, they can come from different types of media, voice, text and video, but our expertise was always in unstructured data, helping customers to capture and analyze unstructured data and quarantine management ended up being another used case of our unstructured data analytics.
Jeff Kessler -- Imperial Capital -- Analyst
Okay. Thank you. On a company wide basis, when we talk about the new normal there is approximately I think it's a 14 states where the number of cases is actually going up and there's three or four that have been put on a, if you want to call it, on a real emergency alert because those -- because they are spiking at this point in time. So this is something that may hang around for a while. How are you -- given the fact that you've already dealt with a close -- essentially a closed down of premises, how do you get back on-premises in particularly in states where they are still seeing problems?
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Yeah. The on-premises return to office is gradual. Again even in states where they still see problems they allow return to office, but they have regulations. They don't allow the full capacity. So organization needs to do zoning and plan who can come to the office, how many people at the same time and take care of hygiene and HR -- new HR policies. So each state there are regulations. I think what's -- again the solution that we announced around the workforce planning can automatically put all these rules into the plan and help our customers to anticipate how many people can be in the office, how many of your employees actually want to be in the office because some do, some don't they have all kind of personal situations. You have to take into consideration furnace rules when it comes to the workforce. So we were able to quickly automate the return to office for our customers and help them with workforce planning.
It is different. You're right in different states. And it's also different in different companies because each company adapt different pace to return to the office. But I think what's nice about the tool is that allows the customer to stipulate their own specific rules and it takes the algorithm, we'll just consider that in doing their workforce planning. So we think this is very much the new normal. It's going to take time. It's going to be different for different companies. But potentially even for the long-term companies are discussing that they don't need a full return to the office and they do like the hybrid environment of people staying from home, either for some of the work or working in remote series where labor is not as costly and they can actually do the job remotely but they need the tools, they need to be able to be in compliance, they need to make sure that those employees are productive and they need analytics to understand how it's going to impact the overall business when they're changing the workforce composition.
Jeff Kessler -- Imperial Capital -- Analyst
Thank you very much. Appreciate it.
Operator
Thank you. And speakers I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Alan Roden for any further remarks.
Alan Roden -- Senior Vice President, Corporate Development and Investor Relations
Thank you, operator. And thank you, everyone, for joining us tonight. Have a great evening. Look forward to talking to you on our next call.
Operator
[Operator Closing Remarks]
Duration: 54 minutes
Call participants:
Alan Roden -- Senior Vice President, Corporate Development and Investor Relations
Dan Bodner -- President, Chief Executive Officer and Chairman of the Board of Directors
Douglas Robinson -- Chief Financial Officer
Ryan Macdonald -- Needham -- Analyst
Shaul Eyal -- Oppenheimer -- Analyst
Daniel Ives -- Wedbush -- Analyst
Brian Essex -- Goldman Sachs -- Analyst
Jeff Kessler -- Imperial Capital -- Analyst
