Company Quick10K Filing
Quick10K
Verint Systems
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$61.32 66 $4,030
10-Q 2019-04-30 Quarter: 2019-04-30
10-K 2019-01-31 Annual: 2019-01-31
10-Q 2018-10-31 Quarter: 2018-10-31
10-Q 2018-07-31 Quarter: 2018-07-31
10-Q 2018-04-30 Quarter: 2018-04-30
10-K 2018-01-31 Annual: 2018-01-31
10-Q 2017-10-31 Quarter: 2017-10-31
10-Q 2017-07-31 Quarter: 2017-07-31
10-Q 2017-04-30 Quarter: 2017-04-30
10-K 2017-01-31 Annual: 2017-01-31
10-Q 2016-10-31 Quarter: 2016-10-31
10-Q 2016-07-31 Quarter: 2016-07-31
10-Q 2016-04-30 Quarter: 2016-04-30
10-K 2016-01-31 Annual: 2016-01-31
10-Q 2015-10-31 Quarter: 2015-10-31
10-Q 2015-07-31 Quarter: 2015-07-31
10-Q 2015-04-30 Quarter: 2015-04-30
10-K 2015-01-31 Annual: 2015-01-31
10-Q 2014-10-31 Quarter: 2014-10-31
10-Q 2014-07-31 Quarter: 2014-07-31
10-Q 2014-04-30 Quarter: 2014-04-30
10-K 2014-01-31 Annual: 2014-01-31
8-K 2019-07-08 Regulation FD, Exhibits
8-K 2019-06-20 Officers, Shareholder Vote, Exhibits
8-K 2019-06-06 Enter Agreement, Regulation FD, Exhibits
8-K 2019-05-29 Earnings, Exhibits
8-K 2019-05-23 Regulation FD, Exhibits
8-K 2019-05-21 Regulation FD, Exhibits
8-K 2019-05-20 Regulation FD, Exhibits
8-K 2019-05-10 Regulation FD, Exhibits
8-K 2019-05-06 Earnings, Exhibits
8-K 2019-04-01 Regulation FD, Exhibits
8-K 2019-03-20 Regulation FD, Exhibits
8-K 2019-01-07 Regulation FD, Exhibits
8-K 2018-12-21 M&A, Exhibits
8-K 2018-12-17 Regulation FD, Exhibits
8-K 2018-12-06 Regulation FD, Exhibits
8-K 2018-12-06 Earnings, Exhibits
8-K 2018-12-03 Regulation FD, Exhibits
8-K 2018-11-27 Regulation FD, Exhibits
8-K 2018-09-17 Regulation FD, Exhibits
8-K 2018-09-05 Earnings, Exhibits
8-K 2018-08-29 Officers
8-K 2018-08-28 Regulation FD, Exhibits
8-K 2018-06-22 Shareholder Vote
8-K 2018-06-13 Regulation FD, Exhibits
8-K 2018-06-07 Earnings, Exhibits
8-K 2018-06-04 Regulation FD, Exhibits
8-K 2018-05-14 Regulation FD, Exhibits
8-K 2018-03-28 Earnings, Exhibits
8-K 2018-03-21 Regulation FD, Other Events, Exhibits
8-K 2018-01-31 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-19 Regulation FD
AFL Aflac 37,640
NXPI NXP Semiconductors 28,610
PKG Packaging of America 9,250
ENLC EnLink Midstream 5,210
HIW Highwoods Properties 4,600
VVI Viad 1,260
VYGR Voyager Therapeutics 875
TBRG Thunder Bridge Acquisition 264
THRO Theron Resource Group 0
SPS Southwestern Public Service 0
VRNT 2019-04-30
Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 vrnt-ex311_20190430xform10.htm
EX-31.2 vrnt-ex312_20190430xform10.htm
EX-32.1 vrnt-ex321_20190430xform10.htm
EX-32.2 vrnt-ex322_20190430xform10.htm

Verint Systems Earnings 2019-04-30

VRNT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 vrnt-2019430xform10xq.htm FORM 10-Q Document
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q 
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                                to                                     .
 
Commission File No. 001-34807

verintlogoa08.jpg
Verint Systems Inc.
(Exact Name of Registrant as Specified in its Charter) 
Delaware
 
11-3200514
(State or Other Jurisdiction of Incorporation or
Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
175 Broadhollow Road, Melville, New York
 
11747
(Address of Principal Executive Offices)
 
(Zip Code)
 
(631) 962-9600
 
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
 
 
 
 
The NASDAQ Stock Market, LLC
Common Stock, $.001 par value per share
 
VRNT
 
(NASDAQ Global Select Market)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o 
Smaller reporting company o
 
Emerging growth company o

 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No þ
 
There were 65,773,328 shares of the registrant’s common stock outstanding on May 15, 2019.
 




Verint Systems Inc. and Subsidiaries
Index to Form 10-Q
As of and For the Period Ended April 30, 2019
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

i


Cautionary Note on Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains “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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include financial projections, statements of plans and objectives for future operations, statements of future economic performance, and statements of assumptions relating thereto. Forward-looking statements may appear throughout this report, including without limitation, Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are often identified by future or conditional words such as “will”, “plans”, “expects”, “intends”, “believes”, “seeks”, “estimates”, or “anticipates”, or by variations of such words or by similar expressions. There can be no assurance that forward-looking statements will be achieved. By their very nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause our actual results or conditions to differ materially from those expressed or implied by such forward-looking statements. Important risks, uncertainties, assumptions, and other factors that could cause our actual results or conditions to differ materially from our forward-looking statements include, among others:
 
uncertainties regarding the impact of general economic conditions in the United States and abroad, particularly in information technology spending and government budgets, on our business;
risks associated with our ability to keep pace with technological changes, evolving industry standards and challenges, to adapt to changing market potential from area to area within our markets, and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization;
risks due to aggressive competition in all of our markets, including with respect to maintaining revenues, margins, and sufficient levels of investment in our business and operations;
risks created by the continued consolidation of our competitors or the introduction of large competitors in our markets with greater resources than we have;
risks associated with our ability to successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, reputational considerations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments;
risks relating to our ability to properly manage investments in our business and operations, execute on growth initiatives, and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources;
risks associated with our ability to retain, recruit, and train qualified personnel in regions in which we operate, including in new markets and growth areas we may enter;
risks that we may be unable to establish and maintain relationships with key resellers, partners, and systems integrators and risks associated with our reliance on third-party suppliers, partners, or original equipment manufacturers (“OEMs”) for certain components, products, or services, including companies that may compete with us or work with our competitors;
risks associated with the mishandling or perceived mishandling of sensitive or confidential information, including information that may belong to our customers or other third parties, and with security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions;
risks that our products or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks;
risks associated with our significant international operations, including, among others, in Israel, Europe, and Asia, exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas;

ii


risks associated with political factors related to our business or operations, including reputational risks associated with our security solutions and our ability to maintain security clearances where required as well as risks associated with a significant amount of our business coming from domestic and foreign government customers;
risks associated with complex and changing local and foreign regulatory environments in the jurisdictions in which we operate, including, among others, with respect to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, relating to both our own operations as well as the use of our solutions by our customers;
challenges associated with selling sophisticated solutions, including with respect to assisting customers in understanding and realizing the benefits of our solutions, and developing, offering, implementing, and maintaining a broad and sophisticated solution portfolio;
challenges associated with pursuing larger sales opportunities, including with respect to longer sales cycles, transaction reductions, deferrals, or cancellations during the sales cycle, risk of customer concentration, our ability to accurately forecast when a sales opportunity will convert to an order, or to forecast revenue and expenses, and increased volatility of our operating results from period to period;
risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use;
risks that our customers or partners delay or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in their business, or otherwise;
risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all;
risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings;
risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of the successor to CTI’s business operations, Mavenir Inc. (“Mavenir”), being unwilling or unable to provide us with certain indemnities to which we are entitled;
risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, and personnel and our ability to successfully implement and maintain enhancements to the foregoing and adequate systems and internal controls for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays;
risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; and
risks associated with market volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or speculation, or other factors and risks associated with actions of activist stockholders.
These risks, uncertainties, assumptions, and challenges, as well as other factors, are discussed in greater detail in “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the year ended January 31, 2019. You are cautioned not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this report. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as otherwise required under the federal securities laws. If we were in any particular instance to update or correct a forward-looking statement, investors and others should not conclude that we would make additional updates or corrections thereafter except as otherwise required under the federal securities laws.


iii


Part I

Item 1.     Financial Statements






1


VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
April 30,
 
January 31,
(in thousands, except share and per share data)

2019
 
2019
Assets

 


 

Current Assets:

 


 

Cash and cash equivalents

$
412,024


$
369,975

Restricted cash and cash equivalents, and restricted bank time deposits

39,749


42,262

Short-term investments
 
39,334

 
32,329

Accounts receivable, net of allowance for doubtful accounts of $4.5 million and $3.8 million, respectively

316,101


375,663

Contract assets
 
63,228

 
63,389

Inventories

27,845


24,952

Prepaid expenses and other current assets

90,016


97,776

  Total current assets

988,297


1,006,346

Property and equipment, net

102,340


100,134

Operating lease right-of-use assets
 
96,811

 

Goodwill

1,431,517


1,417,481

Intangible assets, net

219,552


225,183

Other assets

119,024


117,883

  Total assets

$
2,957,541


$
2,867,027








Liabilities and Stockholders' Equity

 


 

Current Liabilities:

 


 

Accounts payable

$
65,275


$
71,621

Accrued expenses and other current liabilities

244,983


212,824

Contract liabilities

350,488


377,376

  Total current liabilities

660,746


661,821

Long-term debt

780,260


777,785

Long-term contract liabilities

32,726


30,094

Operating lease liabilities
 
85,649

 

Other liabilities

123,583


136,523

  Total liabilities

1,682,964


1,606,223

Commitments and Contingencies






Stockholders' Equity:

 


 

Preferred stock - $0.001 par value; authorized 2,207,000 shares at April 30, 2019 and January 31, 2019, respectively; none issued.
 

 

Common stock - $0.001 par value; authorized 120,000,000 shares. Issued 67,446,000 and 66,998,000 shares; outstanding 65,773,000 and 65,333,000 shares at April 30, 2019 and January 31, 2019, respectively.

67


67

Additional paid-in capital

1,601,156


1,586,266

Treasury stock, at cost - 1,673,000 and 1,665,000 shares at April 30, 2019 and January 31, 2019, respectively.

(58,072
)

(57,598
)
Accumulated deficit

(132,698
)

(134,274
)
Accumulated other comprehensive loss

(149,523
)

(145,225
)
Total Verint Systems Inc. stockholders' equity

1,260,930


1,249,236

Noncontrolling interests

13,647


11,568

  Total stockholders' equity

1,274,577


1,260,804

  Total liabilities and stockholders' equity

$
2,957,541


$
2,867,027


See notes to condensed consolidated financial statements.

2


VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended
April 30,
(in thousands, except per share data)
 
2019
 
2018
Revenue:
 
 

 
 

Product
 
$
104,224

 
$
105,864

Service and support
 
211,035

 
183,343

  Total revenue
 
315,259

 
289,207

Cost of revenue:
 
 

 
 

Product
 
28,120

 
34,809

Service and support
 
79,361

 
71,857

Amortization of acquired technology
 
6,707

 
7,426

  Total cost of revenue
 
114,188

 
114,092

Gross profit
 
201,071

 
175,115

Operating expenses:
 
 

 
 

Research and development, net
 
57,169

 
52,152

Selling, general and administrative
 
121,721

 
107,497

Amortization of other acquired intangible assets
 
7,713

 
7,684

  Total operating expenses
 
186,603

 
167,333

Operating income
 
14,468

 
7,782

Other income (expense), net:
 
 

 
 

Interest income
 
1,426

 
793

Interest expense
 
(9,934
)
 
(9,062
)
Other expense, net
 
(790
)
 
(464
)
  Total other expense, net
 
(9,298
)
 
(8,733
)
Income (loss) before provision for income taxes
 
5,170

 
(951
)
Provision for income taxes
 
1,409

 
274

Net income (loss)
 
3,761

 
(1,225
)
Net income attributable to noncontrolling interests
 
2,185

 
990

Net income (loss) attributable to Verint Systems Inc.
 
$
1,576

 
$
(2,215
)
 
 
 
 
 
Net income (loss) per common share attributable to Verint Systems Inc.:
 
 

 
 

Basic
 
$
0.02

 
$
(0.03
)
Diluted
 
$
0.02

 
$
(0.03
)
 
 
 
 
 
Weighted-average common shares outstanding:
 
 

 
 

Basic
 
65,438

 
63,928

Diluted
 
67,088

 
63,928

 
See notes to condensed consolidated financial statements.





3


VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited) 
 
 
Three Months Ended
April 30,
(in thousands)
 
2019
 
2018
Net income (loss)
 
$
3,761

 
$
(1,225
)
Other comprehensive loss, net of reclassification adjustments:
 
 

 
 

Foreign currency translation adjustments
 
(3,962
)
 
(13,628
)
Net increase (decrease) from foreign exchange contracts designated as hedges
 
1,281

 
(6,583
)
Net (decrease) increase from interest rate swap designated as a hedge
 
(2,017
)
 
220

Benefit for income taxes on net increase (decrease) from foreign exchange contracts and interest rate swap designated as hedges
 
294

 
78

Other comprehensive loss
 
(4,404
)
 
(19,913
)
Comprehensive loss
 
(643
)
 
(21,138
)
Comprehensive income attributable to noncontrolling interests
 
2,079

 
1,038

Comprehensive loss attributable to Verint Systems Inc.
 
$
(2,722
)
 
$
(22,176
)
 
See notes to condensed consolidated financial statements.

4


VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
 
 
Verint Systems Inc. Stockholders’ Equity
 
 
 
 
 
 
Common Stock
 
Additional Paid-in Capital
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
Total Verint Systems Inc. Stockholders’ Equity
 
 
 
Total Stockholders’ Equity
(in thousands) 
 
Shares
 
Par
Value
 
 
Treasury
Stock
 
Accumulated
Deficit
 
 
 
Non-controlling
Interests
 
Balances as of January 31, 2018
 
63,836

 
$
65

 
$
1,519,724

 
$
(57,425
)
 
$
(238,312
)
 
$
(103,460
)
 
$
1,120,592

 
$
11,744

 
$
1,132,336

Net (loss) income
 

 

 

 

 
(2,215
)
 

 
(2,215
)
 
990

 
(1,225
)
Other comprehensive (loss) income
 

 

 

 

 

 
(19,961
)
 
(19,961
)
 
48

 
(19,913
)
Stock-based compensation - equity-classified awards
 

 

 
14,898

 

 

 

 
14,898

 

 
14,898

Common stock issued for stock awards and stock bonuses
 
180

 
1

 

 

 

 

 
1

 

 
1

Treasury stock acquired
 
(4
)
 

 

 
(173
)
 

 

 
(173
)
 

 
(173
)
Capital contributions by noncontrolling interest
 

 

 

 

 

 

 

 
60

 
60

Dividends to noncontrolling interest
 

 

 

 

 

 

 

 
(760
)
 
(760
)
Cumulative effect of adoption of ASU No. 2014-09
 

 

 

 

 
38,047

 

 
38,047

 

 
38,047

Balances as of April 30, 2018
 
64,012

 
$
66

 
$
1,534,622

 
$
(57,598
)
 
$
(202,480
)
 
$
(123,421
)
 
$
1,151,189


$
12,082

 
$
1,163,271

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances as of January 31, 2019
 
65,333

 
$
67

 
$
1,586,266

 
$
(57,598
)
 
$
(134,274
)
 
$
(145,225
)
 
$
1,249,236

 
$
11,568

 
$
1,260,804

Net income
 

 

 

 

 
1,576

 

 
1,576

 
2,185

 
3,761

Other comprehensive loss
 

 

 

 

 

 
(4,298
)
 
(4,298
)
 
(106
)
 
(4,404
)
Stock-based compensation - equity-classified awards
 

 

 
14,890

 

 

 

 
14,890

 

 
14,890

Common stock issued for stock awards and stock bonuses
 
448

 

 

 

 

 

 

 

 

Treasury stock acquired
 
(8
)
 

 

 
(474
)
 

 

 
(474
)
 

 
(474
)
Balances as of April 30, 2019
 
65,773

 
$
67

 
$
1,601,156

 
$
(58,072
)
 
$
(132,698
)
 
$
(149,523
)
 
$
1,260,930

 
$
13,647

 
$
1,274,577

 
See notes to condensed consolidated financial statements.

5


VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended
April 30,
(in thousands) 
 
2019
 
2018
Cash flows from operating activities:
 
 

 
 

Net income (loss)
 
$
3,761

 
$
(1,225
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
22,954

 
23,963

Stock-based compensation, excluding cash-settled awards
 
17,065

 
16,443

Amortization of discount on convertible notes
 
3,061

 
2,905

Non-cash gains on derivative financial instruments, net
 
(549
)
 
(1,488
)
Other non-cash items, net
 
2,646

 
(448
)
Changes in operating assets and liabilities, net of effects of business combinations:
 
 

 
 

Accounts receivable
 
58,900

 
45,386

Contract assets
 
(39
)
 
(18,811
)
Inventories
 
(3,118
)
 
2,434

Prepaid expenses and other assets
 
5,268

 
(1,028
)
Accounts payable and accrued expenses
 
8,487

 
(3,027
)
Contract liabilities
 
(24,648
)
 
(4,543
)
Other, net
 
(725
)
 
(409
)
Net cash provided by operating activities
 
93,063

 
60,152

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Cash paid for business combinations, including adjustments, net of cash acquired
 
(20,210
)
 

Purchases of property and equipment
 
(8,331
)
 
(7,747
)
Purchases of investments
 
(9,995
)
 
(2,792
)
Maturities and sales of investments
 
2,965

 

Cash paid for capitalized software development costs
 
(2,819
)
 
(1,121
)
Change in restricted bank time deposits, and other investing activities, net
 
2,941

 
398

Net cash used in investing activities
 
(35,449
)
 
(11,262
)
 
 
 
 
 
Cash flows from financing activities:
 
 

 
 

Repayments of borrowings and other financing obligations
 
(1,584
)
 
(1,275
)
Purchases of treasury stock
 
(474
)
 
(173
)
Dividends paid to noncontrolling interest
 

 
(760
)
Payments of deferred purchase price and contingent consideration for business combinations (financing portion)
 
(11,674
)
 
(2,584
)
Other financing activities, net
 

 
(15
)
Net cash used in financing activities
 
(13,732
)
 
(4,807
)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents
 
(853
)
 
(1,495
)
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents
 
43,029

 
42,588

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period
 
412,699

 
398,210

Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period
 
$
455,728

 
$
440,798

 
 
 
 
 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period to the condensed consolidated balance sheets:
 
 
 
 
Cash and cash equivalents
 
$
412,024

 
$
382,237

Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits
 
39,373

 
32,541

Restricted cash and cash equivalents included in other assets
 
4,331

 
26,020

Total cash, cash equivalents, restricted cash, and restricted cash equivalents
 
$
455,728


$
440,798


See notes to condensed consolidated financial statements.

6


VERINT SYSTEMS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements


1.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Description of Business
 
Unless the context otherwise requires, the terms “Verint”, “we”, “us”, and “our” in these notes to condensed consolidated financial statements refer to Verint Systems Inc. and its consolidated subsidiaries.
 
Verint is a global leader in Actionable Intelligence solutions. In a world of massive information growth, our solutions empower organizations with crucial, actionable insights and enable decision makers to anticipate, respond, and take action. Today, over 10,000 organizations in more than 180 countries, including over 85 percent of the Fortune 100, use Verint’s Actionable Intelligence solutions, deployed in the cloud and on premises, to make more informed, timely and effective decisions.

Our Actionable Intelligence leadership is powered by innovative, enterprise-class software built with artificial intelligence, analytics, automation, and deep domain expertise established by working closely with some of the most sophisticated and forward-thinking organizations in the world. Our research and development (“R&D”) team is focused on actionable intelligence and is comprised of approximately 1,900 professionals. Our innovative solutions are backed-up by a strong IP portfolio with approximately 1,000 patents and patent applications worldwide across data capture, artificial intelligence, unstructured data analytics, predictive analytics and automation.

Headquartered in Melville, New York, we support our customers around the globe directly and with an extensive network of selling and support partners.

Preparation of Condensed Consolidated Financial Statements

The condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on the same basis as the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 31, 2019 filed with the U.S. Securities and Exchange Commission (“SEC”), except for the recently adopted accounting pronouncements described below. The condensed consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the periods ended April 30, 2019 and 2018, and the condensed consolidated balance sheet as of April 30, 2019, are not audited but reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair presentation of the results for the periods shown. The condensed consolidated balance sheet as of January 31, 2019 is derived from the audited consolidated financial statements presented in our Annual Report on Form 10-K for the year ended January 31, 2019. Certain information and disclosures normally included in annual consolidated financial statements have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and disclosures required by GAAP for a complete set of financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 31, 2019 filed with the SEC. The results for interim periods are not necessarily indicative of a full year’s results.

Principles of Consolidation
 
The accompanying condensed consolidated financial statements include the accounts of Verint Systems Inc., our wholly owned or otherwise controlled subsidiaries, and a joint venture in which we hold a 50% equity interest. The joint venture is a variable interest entity in which we are the primary beneficiary. Noncontrolling interests in less than wholly owned subsidiaries are reflected within stockholders’ equity on our condensed consolidated balance sheet, but separately from our stockholders’ equity. We hold an option to acquire the noncontrolling interests in two majority owned subsidiaries and we account for the option as an in-substance investment in the noncontrolling common stock of each such subsidiary. We include the fair value of the option within other liabilities and do not recognize noncontrolling interests in these subsidiaries.

Equity investments in companies in which we have less than a 20% ownership interest and cannot exercise significant influence, and which do not have readily determinable fair values, are accounted for at cost, adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, less any impairment.

We include the results of operations of acquired companies from the date of acquisition. All significant intercompany transactions and balances are eliminated.

7


 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions, which may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Significant Accounting Policies

Except for the accounting policy for leases appearing below, implemented as a result of adopting Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), there have been no material changes in our significant accounting policies during the three months ended April 30, 2019, as compared to the significant accounting policies described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 31, 2019.

Leases
We determine if an arrangement is a lease at inception. Operating lease assets are presented as operating lease right-of-use (“ROU”) assets, and corresponding operating lease liabilities are presented within accrued expenses and other current liabilities (current portions), and as operating lease liabilities (long-term portions), on our condensed consolidated balance sheet. Finance lease assets are included in property and equipment, and corresponding finance lease liabilities are included within accrued expenses and other current liabilities (current portions), and other liabilities (long-term portions), on our condensed consolidated balance sheet.  
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the remaining lease payments over the lease term at commencement date. Our leases do not provide an implicit interest rate. We calculate the incremental borrowing rate to reflect the interest rate that we would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term, and consider our historical borrowing activities and market data in this determination. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which we account for as a single lease component. Some of our leases contain variable lease payments, which are expensed as incurred unless those payments are based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement and included in the measurement of the lease liability; thereafter, changes to lease payments due to rate or index updates are recorded as rent expense in the period incurred. We have elected not to recognize ROU assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our ROU assets and lease liabilities was not material. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. In addition, we do not have any related party leases and our sublease transactions are de minimis.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-02 supersedes the requirements in Topic 840, Leases, and requires lessees to recognize ROU assets and liabilities for leases with lease terms of more than 12 months. We adopted ASU No. 2016-02 as of February 1, 2019 using the modified retrospective transition method of applying the new standard at the adoption date. Results for reporting periods beginning on or after February 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance. Disclosures required under the new standard will not be provided for dates and periods before February 1, 2019.

The new standard provided a number of optional practical expedients in transition. We elected the transition package of practical expedients available in the standard, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs and the practical expedient to not account for lease and non-lease components separately. We did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us.

The adoption of ASU No. 2016-02 resulted in the recognition of ROU assets of approximately $100.4 million and lease liabilities for operating leases of approximately $110.4 million on our consolidated balance sheet as of February 1, 2019 with no material

8


impact to our consolidated statements of operations. The ROU assets are lower than the operating lease liabilities primarily because previously recorded net deferred rent balances were reclassified into the ROU assets. There was no impact to our accumulated deficit upon adoption of the standard. The adoption of the new standard also resulted in significant additional disclosures regarding our leasing activities. Please refer to Note 14, “Leases” for further details.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides companies the option to reclassify from accumulated other comprehensive income to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). The stranded tax effect represents the difference between the amount previously recorded in other comprehensive income at the historical U.S. federal tax rate that remains in accumulated other comprehensive loss at the time the 2017 Tax Act was effective and the amount that would have been recorded using the newly enacted rate. We adopted this guidance on February 1, 2019, and the adoption did not have an impact on our condensed consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. Adoption of this standard had an immaterial impact on our condensed consolidated financial statements.

New Accounting Pronouncements Not Yet Effective

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements. This standard is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods, with early adoption permitted. We are currently reviewing this standard to assess the impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to The Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. This standard is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods, with early adoption permitted. We are currently reviewing this standard to assess the impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. This new standard changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. We are currently reviewing this standard to assess the impact on our condensed consolidated financial statements.


2.
REVENUE RECOGNITION

We derive our revenue primarily from the licensing of our software products and related services and support based on when control of the software passes to our customers or the services are provided, in an amount that reflects the consideration we expect to be entitled to in exchange for such goods or services. Revenue is reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction, including mandatory government charges that are passed through to our customers.

We determine revenue recognition through the following five steps:

Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price

9


Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, performance obligations are satisfied.

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Disaggregation of Revenue

The following table provides information about disaggregated revenue for our Customer Engagement and Cyber Intelligence segments by product revenue and service and support revenue, as well as by the recurring or nonrecurring nature of revenue for each business segment. Recurring revenue is the portion of our revenue that we believe is likely to be renewed in the future. The recurrence of these revenue streams in future periods depends on a number of factors including contractual periods and customers' renewal decisions.

For our Customer Engagement segment:

Recurring revenue primarily consists of cloud revenue and initial and renewal PCS.
Cloud revenue consists primarily of SaaS revenue with some optional managed services revenue.
SaaS revenue consists predominately of bundled SaaS (software with standard managed services) with some unbundled SaaS (software licensing rights sold separately from managed services and accounted for as term-based licenses). Unbundled SaaS can be deployed in the cloud either by us or a cloud partner.
Bundled SaaS revenue is recognized over time and unbundled SaaS revenue is recognized at a point in time. Unbundled SaaS contracts are eligible to renew after the initial fixed term, which in most cases is between a one-and three-year time frame.
Nonrecurring revenue primarily consists of our perpetual licenses, consulting, implementation and installation services, and training.

For our Cyber Intelligence segment:

Recurring revenue primarily consists of initial and renewal PCS, subscription software licenses, and SaaS in certain limited transactions.
Nonrecurring revenue primarily consists of our perpetual licenses, long-term projects including software customizations that are recognized over time as control transfers to the customer using a percentage of completion (“POC”) method, consulting, implementation and installation services, training, and hardware.

To conform with the presentation described above, the classification of Customer Engagement unbundled SaaS revenue for the three months ended April 30, 2018 in the table below has been updated to reflect $2.2 million of recurring revenue which had previously been presented within nonrecurring revenue.

 
 
Three Months Ended April 30, 2019
 
Three Months Ended April 30, 2018
(in thousands)
 
Customer Engagement
 
Cyber Intelligence
 
Total
 
Customer Engagement
 
Cyber Intelligence
 
Total
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Product
 
$
54,002

 
$
50,222

 
$
104,224

 
$
48,364

 
$
57,500

 
$
105,864

Service and support
 
153,093

 
57,942

 
211,035

 
138,092

 
45,251

 
183,343

Total revenue
 
$
207,095

 
$
108,164

 
$
315,259

 
$
186,456

 
$
102,751

 
$
289,207

 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by recurrence:
 
 
 
 
 
 
 
 
 
 
 
 
Recurring revenue
 
$
123,358

 
$
46,817

 
$
170,175

 
$
107,830

 
$
36,150

 
$
143,980

Nonrecurring revenue
 
83,737

 
61,347

 
145,084

 
78,626

 
66,601

 
145,227

Total revenue
 
$
207,095

 
$
108,164

 
$
315,259

 
$
186,456

 
$
102,751

 
$
289,207


The following table provides a further disaggregation of revenue for our Customer Engagement segment.


10


 
 
Three Months Ended April 30,
(in thousands)
 
2019
 
2018
Customer Engagement revenue:
 
 
 
 
Recurring revenue
 
 
 
 
Cloud
 
$
47,085

 
$
32,805

PCS
 
76,273

 
75,025

Total recurring revenue
 
123,358

 
107,830

Nonrecurring revenue
 
83,737

 
78,626

Total Customer Engagement revenue
 
$
207,095

 
$
186,456


Contract Balances

The following table provides information about accounts receivable, contract assets, and contract liabilities from contracts with customers:
(in thousands)
 
April 30, 2019
 
January 31, 2019
Accounts receivable, net
 
$
316,101

 
$
375,663

Contract assets
 
63,228

 
63,389

Long-term contract assets (included in other assets)
 
1,548

 
1,375

Contract liabilities
 
350,488

 
377,376

Long-term contract liabilities
 
32,726

 
30,094


Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to our significantly customized solutions as the right to consideration is subject to the contractually agreed upon billing schedule. There are two customers in our Cyber Intelligence segment that combined accounted for $84.6 million and $84.3 million of our aggregated accounts receivable and contract assets at April 30, 2019 and January 31, 2019, respectively. These customers are governmental agencies outside of the U.S. which we believe present insignificant credit risk.

Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract. Revenue recognized during the three months ended April 30, 2019 and 2018 from amounts included in contract liabilities at the beginning of each period was $134.6 million and $117.3 million, respectively.

Remaining Performance Obligations

The majority of our arrangements are for periods of up to three years, with a significant portion being one year or less. We had $1.1 billion of remaining performance obligations as of April 30, 2019. We elected to exclude amounts of variable consideration attributable to sales- or usage-based royalties in exchange for a license of our IP from the remaining performance obligations. We currently expect to recognize approximately 65% of our remaining revenue backlog over the next twelve months and the remainder thereafter. The timing and amount of revenue recognition for our remaining performance obligations is influenced by several factors, including seasonality, the timing of PCS renewals, and the revenue recognition for certain projects, particularly in our Cyber Intelligence segment, that can extend over longer periods of time, delivery under which, for various reasons, may be delayed, modified, or canceled. Further, we have historically generated a large portion of our business each quarter by orders that are sold and fulfilled within the same reporting period. Therefore, the amount of remaining obligations may not be a meaningful indicator of future results.


3.
NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC.
 
The following table summarizes the calculation of basic and diluted net income (loss) per common share attributable to Verint Systems Inc. for the three months ended April 30, 2019 and 2018:

11


 
 
Three Months Ended
April 30,
(in thousands, except per share amounts) 
 
2019
 
2018
Net income (loss)
 
$
3,761

 
$
(1,225
)
Net income attributable to noncontrolling interests
 
2,185

 
990

Net income (loss) attributable to Verint Systems Inc.
 
$
1,576

 
$
(2,215
)
Weighted-average shares outstanding:
 
 

 
 

Basic
 
65,438

 
63,928

Dilutive effect of employee equity award plans
 
1,650

 

Dilutive effect of 1.50% convertible senior notes
 

 

Dilutive effect of warrants
 

 

Diluted
 
67,088

 
63,928

Net income (loss) per common share attributable to Verint Systems Inc.:
 
 

 
 

Basic
 
$
0.02

 
$
(0.03
)
Diluted
 
$
0.02

 
$
(0.03
)

We excluded the following weighted-average potential common shares from the calculations of diluted net income (loss) per common share during the applicable periods because their inclusion would have been anti-dilutive:
 
 
Three Months Ended
April 30,
(in thousands) 
 
2019
 
2018
Common shares excluded from calculation:
 
 

 
 

Stock options and restricted stock-based awards
 
606

 
1,587

1.50% convertible senior notes
 
6,205

 
6,205

Warrants
 
6,205

 
6,205


In periods for which we report a net loss attributable to Verint Systems Inc., basic net loss per common share and diluted net loss per common share are identical since the effect of all potential common shares is anti-dilutive and therefore excluded.

Our 1.50% convertible senior notes (“Notes”) will not impact the calculation of diluted net income per share unless the average price of our common stock, as calculated in accordance with the terms of the indenture governing the Notes, exceeds the conversion price of $64.46 per share. Likewise, diluted net income per share will not include any effect from the Warrants (as defined in Note 7, “Long-Term Debt”) unless the average price of our common stock, as calculated under the terms of the Warrants, exceeds the exercise price of $75.00 per share.

Our Note Hedges (as defined in Note 7, “Long-Term Debt”) do not impact the calculation of diluted net income per share under the treasury stock method, because their effect would be anti-dilutive. However, in the event of an actual conversion of any or all of the Notes, the common shares that would be delivered to us under the Note Hedges would neutralize the dilutive effect of the common shares that we would issue under the Notes. As a result, actual conversion of any or all of the Notes would not increase our outstanding common stock. Up to 6,205,000 common shares could be issued upon exercise of the Warrants. Further details regarding the Notes, Note Hedges, and the Warrants appear in Note 7, “Long-Term Debt”.


4. CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS

The following tables summarize our cash, cash equivalents, and short-term investments as of April 30, 2019 and January 31, 2019:

12


 
 
April 30, 2019
(in thousands) 
 
Cost Basis
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Cash and bank time deposits
 
$
377,521

 
$

 
$

 
$
377,521

Money market funds
 
34,503

 

 

 
34,503

Total cash and cash equivalents
 
$
412,024

 
$

 
$

 
$
412,024

 
 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
 
Bank time deposits
 
$
39,334

 
$

 
$

 
$
39,334

Total short-term investments
 
$
39,334

 
$

 
$

 
$
39,334

 
 
January 31, 2019
(in thousands)
 
Cost Basis
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Cash and bank time deposits
 
$
359,266

 
$

 
$

 
$
359,266

Money market funds
 
10,709

 

 

 
10,709

Total cash and cash equivalents
 
$
369,975

 
$

 
$

 
$
369,975

 
 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
 
Bank time deposits
 
$
32,329

 
$

 
$

 
$
32,329

Total short-term investments
 
$
32,329

 
$

 
$

 
$
32,329


Bank time deposits which are reported within short-term investments consist of deposits held outside of the U.S. with maturities of greater than 90 days, or without specified maturity dates which we intend to hold for periods in excess of 90 days. All other bank deposits are included within cash and cash equivalents.

During the three months ended April 30, 2019 proceeds from maturities and sales of short-term investments were $3.0 million. There were no proceeds from maturities and sales of short-term investments during the three months ended April 30, 2018.


5.
BUSINESS COMBINATIONS

Three Months Ended April 30, 2019

During the three months ended April 30, 2019, we completed the acquisition of a SaaS workforce optimization company focused on the small and medium-sized business (SMB) market as part of our strategy to expand our SMB portfolio. This company is being integrated into our Customer Engagement segment. This transaction was not material to our condensed consolidated financial statements.

Year Ended January 31, 2019

ForeSee Results, Inc.

On December 19, 2018, we completed the acquisition of all of the outstanding shares of ForeSee Results, Inc. and all of the outstanding membership interests of RSR Acquisition LLC (together, “ForeSee”), a leading cloud Voice of the Customer (“VOC”) vendor with software solutions designed to measure and benchmark a 360-degree view of the customer across every touch point. ForeSee is based in Ann Arbor, Michigan.

The purchase price of $65.2 million consisted of (i) $58.9 million of cash paid at closing, funded from cash on hand, partially offset by $0.4 million of ForeSee’s cash received in the acquisition, resulting in net cash consideration at closing of $58.5 million; (ii) a post-closing deferred purchase price adjustment of $6.0 million which was paid in April 2019; and (iii) $0.3 million of other purchase price adjustments. The purchase price is subject to customary purchase price adjustments related to

13


the final determination of ForeSee’s cash, net working capital, transaction expenses, and taxes as of December 19, 2018. The acquired business is being integrated into our Customer Engagement operating segment.

The purchase price for ForeSee was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquired were determined primarily by using the income approach, which discounts the expected future cash flows to present value using estimates and assumptions determined by management.

Among the factors contributing to the recognition of goodwill as a component of the ForeSee purchase price allocation were synergies in products and technologies, and the addition of a skilled, assembled workforce. The $34.7 million of goodwill has been assigned to our Customer Engagement segment. For income tax purposes, $3.3 million of this goodwill is deductible and $31.4 million is not deductible.

In connection with the purchase price allocation for ForeSee, the estimated fair value of undelivered performance obligations under customer contracts assumed in the acquisition was determined utilizing a cost build-up approach. The cost build-up approach calculated fair value by estimating the costs required to fulfill the obligations plus a reasonable profit margin, which approximates the amount that we believe would be required to pay a third party to assume the performance obligations. The estimated costs to fulfill the performance obligations were based on the historical direct costs for delivering similar services. As a result, in allocating the purchase price, we recorded $9.8 million of current and long-term contract liabilities, representing the estimated fair value of undelivered performance obligations for which payment had been received, which will be recognized as revenue as the underlying performance obligations are delivered. For undelivered performance obligations for which payment had not been received, we recorded a $10.2 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $5.5 million of which is included within prepaid expenses and other current assets, and $4.7 million of which is included in other assets. We are amortizing this asset over the underlying delivery periods, which adjusts the revenue we recognize for providing these services to its estimated fair value.

Transaction and related costs directly related to the acquisition of ForeSee, consisting primarily of professional fees and integration expenses, were $1.5 million for the three months ended April 30, 2019, and were expensed as incurred and are included in selling, general and administrative expenses.

The following table sets forth the components and the allocation of the purchase price for our acquisition of ForeSee:

(in thousands)
 
Amount
Components of Purchase Price:
 
 
Cash
 
$
58,901

Deferred purchase price consideration
 
6,000

Other purchase price adjustments
 
262

Total purchase price
 
$
65,163

 
 
 
Allocation of Purchase Price:
 
 
Net tangible assets (liabilities):
 
 
Accounts receivable
 
$
7,245

Other current assets, including cash acquired
 
8,059

Other assets
 
6,075

Current and other liabilities
 
(12,868
)
Contract liabilities - current and long-term
 
(9,821
)
Deferred income taxes
 
(11,804
)
Net tangible liabilities
 
(13,114
)
Identifiable intangible assets:
 
 
Customer relationships
 
19,500

Developed technology
 
20,700

Trademarks and trade names
 
3,400

Total identifiable intangible assets
 
43,600

Goodwill
 
34,677

Total purchase price allocations
 
$
65,163



14


The acquired customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of seven and nine years, four years, and four years, respectively, the weighted average of which is approximately 6.1 years. The acquired identifiable assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized, over their estimated useful lives.

Other Business Combinations

During the year ended January 31, 2019, we completed three other business combinations:

On July 18, 2018, we completed the acquisition of a business that has been integrated into our Customer Engagement operating segment.
On November 8, 2018, we completed the acquisition of a business that has been integrated into our Cyber Intelligence operating segment, in which we had a $2.2 million, or approximately 19%, noncontrolling equity investment prior to the acquisition.
On November 9, 2018, we acquired certain technology and other assets for use in our Customer Engagement operating segment in a transaction that qualified as a business combination.

These business combinations were not individually material to our consolidated financial statements.

The combined consideration for these business combinations was approximately $51.3 million, including $33.1 million of combined cash paid at the closings. For two of these business combinations, we also agreed to make potential additional cash payments to the respective former shareholders aggregating up to approximately $35.5 million, contingent upon the achievement of certain performance targets over periods extending through January 2021. The fair value of these contingent consideration obligations was estimated to be $15.9 million at the applicable acquisition dates. The acquisition date fair value of our previously held equity interest was approximately $2.2 million and was included in the measurement of the consideration transferred. Cash paid for these business combinations was funded by cash on hand.

The purchase prices for these business combinations were allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition dates, with the remaining unallocated purchase prices recorded as goodwill. The fair value assigned to identifiable intangible assets acquired were determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates and assumptions determined by management.

Included among the factors contributing to the recognition of goodwill in these transactions were synergies in products and technologies, and the addition of skilled, assembled workforces. Of the $25.1 million of goodwill associated with these business combinations, $14.3 million and $10.8 million was assigned to our Customer Engagement and Cyber Intelligence segments, respectively, and for income tax purposes is not deductible.

Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to these acquisitions, totaled $1.9 million for the three months ended April 30, 2019. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses.

The purchase price allocations for the business combinations completed subsequent to April 30, 2018 have been prepared on a preliminary basis and changes to those allocations may occur as additional information becomes available during the respective measurement periods (up to one year from the respective acquisition dates). Fair values still under review include values assigned to identifiable intangible assets, deferred income taxes, and reserves for uncertain income tax positions.

The following table sets forth the components and the allocations of the combined purchase prices for the business combinations, other than ForeSee, completed during the year ended January 31, 2019:

15


(in thousands)
 
Amount
Components of Purchase Prices:
 
 
Cash
 
$
33,138

Fair value of contingent consideration
 
15,875

Fair value of previously held equity interest
 
2,239

Total purchase prices
 
$
51,252

 
 
 
Allocation of Purchase Prices:
 
 
Net tangible assets (liabilities):
 
 
Accounts receivable
 
$
1,897

Other current assets, including cash acquired
 
6,901

Other assets
 
9,432

Current and other liabilities
 
(2,151
)
Contract liabilities - current and long-term
 
(771
)
Deferred income taxes
 
(7,914
)
Net tangible assets
 
7,394

Identifiable intangible assets:
 
 
Customer relationships
 
7,521

Developed technology
 
10,692

Trademarks and trade names
 
500

Total identifiable intangible assets
 
18,713

Goodwill
 
25,145

Total purchase price allocations
 
$
51,252


For these acquisitions, customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of from seven years to ten years, three years to five years, and four years, respectively, the weighted average of which is approximately 6.6 years.

Other Business Combination Information

The acquisition date fair values of contingent consideration obligations associated with business combinations are estimated based on probability adjusted present values of the consideration expected to be transferred using significant inputs that are not observable in the market. Key assumptions used in these estimates include probability assessments with respect to the likelihood of achieving the performance targets and discount rates consistent with the level of risk of achievement. At each reporting date, we revalue the contingent consideration obligations to their fair values and record increases and decreases in fair value within selling, general and administrative expenses in our condensed consolidated statements of operations. Changes in the fair value of the contingent consideration obligations result from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets.

For the three months ended April 30, 2019 and 2018, we recorded a charge of $1.2 million and a benefit of $0.8 million, respectively, within selling, general and administrative expenses for changes in the fair values of contingent consideration obligations associated with business combinations. The aggregate fair values of the remaining contingent consideration obligations associated with business combinations was $61.4 million at April 30, 2019, of which $30.1 million was recorded within accrued expenses and other current liabilities, and $31.3 million was recorded within other liabilities.

Payments of contingent consideration earned under these agreements were $6.4 million and $3.1 million for the three months ended April 30, 2019 and 2018, respectively.


6.
INTANGIBLE ASSETS AND GOODWILL
 
Acquisition-related intangible assets consisted of the following as of April 30, 2019 and January 31, 2019:
 

16


 
 
April 30, 2019
(in thousands)
 
Cost
 
Accumulated
Amortization
 
Net
Intangible assets with finite lives:
 
 

 
 

 
 

Customer relationships
 
$
455,804

 
$
(305,949
)
 
$
149,855

Acquired technology
 
289,317

 
(227,288
)
 
62,029

Trade names
 
13,422

 
(5,754
)
 
7,668

Distribution network
 
4,440

 
(4,440
)
 

Total intangible assets
 
$
762,983

 
$
(543,431
)
 
$
219,552

 
 
 
January 31, 2019
(in thousands)
 
Cost
 
Accumulated
Amortization
 
Net
Intangible assets with finite lives:
 
 

 
 

 
 

Customer relationships
 
$
452,918

 
$
(299,549
)
 
$
153,369

Acquired technology
 
285,230

 
(221,145
)
 
64,085

Trade names
 
12,859

 
(5,130
)
 
7,729

Distribution network
 
4,440

 
(4,440
)
 

    Total intangible assets
 
$
755,447

 
$
(530,264
)
 
$
225,183


The following table presents net acquisition-related intangible assets by reportable segment as of April 30, 2019 and January 31, 2019
 
 
April 30,
 
January 31,
(in thousands)

2019

2019
Customer Engagement

$
214,585


$
218,738

Cyber Intelligence

4,967


6,445

Total

$
219,552


$
225,183

 
Total amortization expense recorded for acquisition-related intangible assets was $14.4 million and $15.1 million for the three months ended April 30, 2019 and 2018, respectively. The reported amount of net acquisition-related intangible assets can fluctuate from the impact of changes in foreign currency exchange rates on intangible assets not denominated in U.S. dollars.

Estimated future amortization expense on finite-lived acquisition-related intangible assets is as follows:
(in thousands)

 

Years Ending January 31,

Amount
2020 (remainder of year)

$
40,099

2021

46,663

2022

42,942

2023

35,034

2024

25,364

2025 and thereafter

29,450

   Total

$
219,552

 
Goodwill activity for the three months ended April 30, 2019, in total and by reportable segment, was as follows: 

17


 
 
 
 
Reportable Segment
(in thousands)
 
Total
 
Customer Engagement
 
Cyber Intelligence
Three Months Ended April 30, 2019:
 
 
 
 
 
 
Goodwill, gross, at January 31, 2019
 
$
1,484,346

 
$
1,326,370

 
$
157,976

Accumulated impairment losses through January 31, 2019
 
(66,865
)
 
(56,043
)
 
(10,822
)
   Goodwill, net, at January 31, 2019
 
1,417,481

 
1,270,327

 
147,154

Business combinations, including adjustments to prior period acquisitions
 
16,710

 
16,710

 

Foreign currency translation and other
 
(2,674
)
 
(2,345
)
 
(329
)
   Goodwill, net, at April 30, 2019
 
$
1,431,517

 
$
1,284,692

 
$
146,825

 
 
 
 
 
 
 
Balance at April 30, 2019:
 


 
 

 
 

Goodwill, gross, at April 30, 2019
 
$
1,498,382

 
$
1,340,735

 
$
157,647

Accumulated impairment losses through April 30, 2019
 
(66,865
)
 
(56,043
)
 
(10,822
)
   Goodwill, net, at April 30, 2019
 
$
1,431,517

 
$
1,284,692

 
$
146,825

No events or circumstances indicating the potential for goodwill impairment were identified during the three months ended April 30, 2019.


7.
LONG-TERM DEBT

The following table summarizes our long-term debt at April 30, 2019 and January 31, 2019: 
 
 
April 30,
 
January 31,
(in thousands)
 
2019
 
2019
 
 
 
 
 
1.50% Convertible Senior Notes
 
$
400,000

 
$
400,000

2017 Term Loan
 
417,562

 
418,625

Other debt
 
53

 
92

Less: Unamortized debt discounts and issuance costs
 
(33,052
)
 
(36,589
)
Total debt
 
784,563

 
782,128

Less: current maturities
 
4,303

 
4,343

Long-term debt
 
$
780,260

 
$
777,785


Current maturities of long-term debt are reported within accrued expenses and other current liabilities on our condensed consolidated balance sheet.

1.50% Convertible Senior Notes

On June 18, 2014, we issued $400.0 million in aggregate principal amount of 1.50% convertible senior notes due June 1, 2021 (“Notes”), unless earlier converted by the holders pursuant to their terms. Net proceeds from the Notes after underwriting discounts were $391.9 million. The Notes pay interest in cash semiannually in arrears at a rate of 1.50% per annum.

The Notes were issued concurrently with our public issuance of 5,750,000 shares of common stock, the majority of the combined net proceeds of which were used to partially repay certain indebtedness under a prior credit agreement.

The Notes are unsecured and are convertible into, at our election, cash, shares of common stock, or a combination of both, subject to satisfaction of specified conditions and during specified periods. If converted, we currently intend to pay cash in respect of the principal amount of the Notes. We currently expect to refinance the Notes at or prior to maturity with new convertible notes or other debt.

The Notes have a conversion rate of 15.5129 shares of common stock per $1,000 principal amount of Notes, which represents an effective conversion price of approximately $64.46 per share of common stock and would result in the issuance of approximately 6,205,000 shares if all of the Notes were converted. The conversion rate has not changed since issuance of the Notes, although throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events.

18


On or after December 1, 2020 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may surrender their Notes for conversion regardless of whether any of the other specified conditions for conversion have been satisfied.

As of April 30, 2019, the Notes were not convertible.

In accordance with accounting guidance for convertible debt with a cash conversion option, we separately accounted for the debt and equity components of the Notes in a manner that reflected our estimated nonconvertible debt borrowing rate. We estimated the debt and equity components of the Notes to be $319.9 million and $80.1 million, respectively, at the issuance date, assuming a 5.00% non-convertible borrowing rate. The equity component was recorded as an increase to additional paid-in capital. The excess of the principal amount of the debt component over its carrying amount (the “debt discount”) is being amortized as interest expense over the term of the Notes using the effective interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocated transaction costs related to the issuance of the Notes, including underwriting discounts, of $7.6 million and $1.9 million to the debt and equity components, respectively. Issuance costs attributable to the debt component of the Notes are presented as a reduction of long-term debt and are being amortized as interest expense over the term of the Notes, and issuance costs attributable to the equity component were netted with the equity component in additional paid-in capital. The carrying amount of the equity component, net of issuance costs, was $78.2 million at April 30, 2019.

As of April 30, 2019, the carrying value of the debt component was $370.3 million, which is net of unamortized debt discount and issuance costs of $27.1 million and $2.6 million, respectively. Including the impact of the debt discount and related deferred debt issuance costs, the effective interest rate on the Notes was approximately 5.29% at April 30, 2019.

Based on the closing market price of our common stock on April 30, 2019, the if-converted value of the Notes was less than the aggregate principal amount of the Notes.

Note Hedges and Warrants

Concurrently with the issuance of the Notes, we entered into convertible note hedge transactions (the “Note Hedges”) and sold warrants (the “Warrants”). The combination of the Note Hedges and the Warrants serves to increase the effective initial conversion price for the Notes to $75.00 per share. The Note Hedges and Warrants are each separate instruments from the Notes.

Note Hedges

Pursuant to the Note Hedges, we purchased call options on our common stock, under which we have the right to acquire from the counterparties up to approximately 6,205,000 shares of our common stock, subject to customary anti-dilution adjustments, at a price of $64.46, which equals the initial conversion price of the Notes. Our exercise rights under the Note Hedges generally trigger upon conversion of the Notes and the Note Hedges terminate upon maturity of the Notes, or the first day the Notes are no longer outstanding. The Note Hedges may be settled in cash, shares of our common stock, or a combination thereof, at our option, and are intended to reduce our exposure to potential dilution upon conversion of the Notes. We paid $60.8 million for the Note Hedges, which was recorded as a reduction to additional paid-in capital. As of April 30, 2019, we had not purchased any shares of our common stock under the Note Hedges.

Warrants

We sold the Warrants to several counterparties. The Warrants provide the counterparties rights to acquire from us up to approximately 6,205,000 shares of our common stock at a price of $75.00 per share. The Warrants expire incrementally on a series of expiration dates beginning in August 2021. At expiration, if the market price per share of our common stock exceeds the strike price of the Warrants, we will be obligated to issue shares of our common stock having a value equal to such excess. The Warrants could have a dilutive effect on net income per share to the extent that the market value of our common stock exceeds the strike price of the Warrants. Proceeds from the sale of the Warrants were $45.2 million and were recorded as additional paid-in capital. As of April 30, 2019, no Warrants had been exercised and all Warrants remained outstanding.

The Note Hedges and Warrants both meet the requirements for classification within stockholders’ equity, and their respective fair values are not remeasured and adjusted as long as these instruments continue to qualify for stockholders’ equity classification.


19


Credit Agreements

2017 Credit Agreement

On June 29, 2017, we entered into a new credit agreement (the “2017 Credit Agreement”) with certain lenders and terminated a prior credit agreement.

The 2017 Credit Agreement provides for $725.0 million of senior secured credit facilities, comprised of a $425.0 million term loan maturing on June 29, 2024 (the “2017 Term Loan”) and a $300.0 million revolving credit facility maturing on June 29, 2022 (the “2017 Revolving Credit Facility”), subject to increase and reduction from time to time according to the terms of the 2017 Credit Agreement. The maturity dates of the 2017 Term Loan and 2017 Revolving Credit Facility will be accelerated to March 1, 2021 if on such date any Notes remain outstanding.
The majority of the proceeds from the 2017 Term Loan were used to repay all outstanding terms loans under our prior credit agreement.
The 2017 Term Loan was subject to an original issuance discount of approximately $0.5 million. This discount is being amortized as interest expense over the term of the 2017 Term Loan using the effective interest method.
Interest rates on loans under the 2017 Credit Agreement are periodically reset, at our option, at either a Eurodollar Rate or an ABR rate (each as defined in the 2017 Credit Agreement), plus in each case a margin.
On January 31, 2018, we entered into an amendment to the 2017 Credit Agreement (the “2018 Amendment”) providing for, among other things, a reduction of the interest rate margins on the 2017 Term Loan from 2.25% to 2.00% for Eurodollar loans, and from 1.25% to 1.00% for ABR loans. The vast majority of the impact of the 2018 Amendment was accounted for as a debt modification. For the portion of the 2017 Term Loan which was considered extinguished and replaced by new loans, we wrote off $0.2 million of unamortized deferred debt issuance costs as a loss on early retirement of debt during the three months ended January 31, 2018. The remaining unamortized deferred debt issuance costs and discount are being amortized over the remaining term of the 2017 Term Loan.
For loans under the 2017 Revolving Credit Facility, the margin is determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each as defined in the 2017 Credit Agreement) leverage ratio (the “Leverage Ratio”).
As of April 30, 2019, the interest rate on the 2017 Term Loan was 4.50%. Taking into account the impact of the original issuance discount and related deferred debt issuance costs, the effective interest rate on the 2017 Term Loan was approximately 4.68% at April 30, 2019. As of January 31, 2019 the interest rate on 2017 Term Loan was 4.52%.
We are required to pay a commitment fee with respect to unused availability under the 2017 Revolving Credit Facility at a rate per annum determined by reference to our Leverage Ratio.
The 2017 Term Loan requires quarterly principal payments of approximately $1.1 million, which commenced on August 1, 2017, with the remaining balance due on June 29, 2024. Optional prepayments of loans under the 2017 Credit Agreement are generally permitted without premium or penalty.
Our obligations under the 2017 Credit Agreement are guaranteed by each of our direct and indirect existing and future material domestic wholly owned restricted subsidiaries, and are secured by a security interest in substantially all of our assets and the assets of the guarantor subsidiaries, subject to certain exceptions.
The 2017 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The 2017 Credit Agreement also contains a financial covenant that, solely with respect to the 2017 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50 to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the 2017 Credit Agreement.
The 2017 Credit Agreement provides for events of default with corresponding grace periods that we believe are customary for credit facilities of this type. Upon an event of default, all of our obligations owed under the 2017 Credit Agreement may be declared immediately due and payable, and the lenders’ commitments to make loans under the 2017 Credit Agreement may be terminated.
2017 Credit Agreement Issuance Costs

20


We incurred debt issuance costs of approximately $6.8 million in connection with the 2017 Credit Agreement, of which $4.1 million were associated with the 2017 Term Loan, and $2.7 million were associated with the 2017 Revolving Credit Facility, which were deferred and are being amortized as interest expense over the terms of the facilities under the 2017 Credit Agreement. As noted previously, during the three months ended January 31, 2018, we wrote off $0.2 million of deferred debt issuance costs associated with the 2017 Term Loan as a result of the 2018 Amendment. Deferred debt issuance costs associated with the 2017 Term Loan are being amortized using the effective interest rate method, and deferred debt issuance costs associated with the 2017 Revolving Credit Facility are being amortized on a straight-line basis.
Future Principal Payments on Term Loan
As of April 30, 2019, future scheduled principal payments on the 2017 Term Loan were as follows:
(in thousands)
 
 
Years Ending January 31,
 
Amount
2020 (remainder of year)
 
$
3,187

2021
 
4,250

2022
 
4,250

2023
 
4,250

2024
 
4,250

2025 and thereafter
 
397,375

   Total
 
$
417,562

Interest Expense

The following table presents the components of interest expense incurred on the Notes and on borrowings under our credit agreements for the three months ended April 30, 2019 and 2018:
 
 
Three Months Ended
April 30,
(in thousands)
 
2019
 
2018
1.50% Convertible Senior Notes:
 
 
 
 
Interest expense at 1.50% coupon rate
 
$
1,500

 
$
1,500

Amortization of debt discount
 
3,061

 
2,904

Amortization of deferred debt issuance costs
 
289

 
274

Total Interest Expense - 1.50% Convertible Senior Notes
 
$
4,850

 
$
4,678

 
 
 
 
 
Borrowings under Credit Agreements:
 
 
 
 
Interest expense at contractual rates
 
$
4,645

 
$
3,866

Amortization of debt discounts
 
16

 
16

Amortization of deferred debt issuance costs
 
374

 
378

Total Interest Expense - Borrowings under Credit Agreements
 
$
5,035

 
$
4,260



8.
SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL STATEMENT INFORMATION
 
Condensed Consolidated Balance Sheets
 
Inventories consisted of the following as of April 30, 2019 and January 31, 2019: 
 
 
April 30,
 
January 31,
(in thousands)
 
2019
 
2019
Raw materials
 
$
11,819

 
$
10,875

Work-in-process
 
6,091

 
5,567

Finished goods
 
9,935

 
8,510

   Total inventories
 
$
27,845

 
$
24,952



21


Condensed Consolidated Statements of Operations
 
Other expense, net consisted of the following for the three months ended April 30, 2019 and 2018:
 
 
Three Months Ended
April 30,
(in thousands)
 
2019
 
2018
Foreign currency losses, net
 
$
(1,187
)
 
$
(1,835
)
Gains on derivative financial instruments, net
 
549

 
1,488

Other, net
 
(152
)
 
(117
)
   Total other expense, net
 
$
(790
)
 
$
(464
)

Condensed Consolidated Statements of Cash Flows
 
The following table provides supplemental information regarding our condensed consolidated cash flows for the three months ended April 30, 2019 and 2018:
 
 
Three Months Ended
April 30,
(in thousands)
 
2019
 
2018
Cash paid for interest
 
$
4,673

 
$
2,647

Cash (refunds) payments of income taxes, net
 
$
(1,513
)
 
$
4,999

Non-cash investing and financing transactions:
 
 

 
 
Accrued but unpaid purchases of property and equipment
 
$
3,301

 
$
3,397

Inventory transfers to property and equipment
 
$
73

 
$
603

Liabilities for contingent consideration in business combinations, including measurement period adjustments
 
$
5,200

 
$
69



9.
STOCKHOLDERS’ EQUITY
 
Dividends on Common Stock

We did not declare or pay any dividends on our common stock during the three months ended April 30, 2019 and 2018. Under the terms of our 2017 Credit Agreement, we are subject to certain restrictions on declaring and paying dividends on our common stock.

Share Repurchase Program

On March 29, 2016, we announced that our board of directors had authorized a common stock repurchase program of up to $150.0 million over two years. This program expired on March 29, 2018. We made a total of $46.9 million in repurchases under the program.

Treasury Stock
 
Repurchased shares of common stock are recorded as treasury stock, at cost, but may from time to time be retired. We periodically purchase treasury stock from directors, officers, and other employees to facilitate income tax withholding by us or the payment of required income taxes by such holders in connection with the vesting of equity awards.

During the three months ended April 30, 2019, we repurchased approximately 8,000 shares of treasury stock for a cost of $0.5 million to facilitate income tax withholding and payment requirements upon vesting of equity awards. During the three months ended April 30, 2018, we acquired approximately 4,000 shares of stock in a nonmonetary transaction valued at $0.2 million.

At April 30, 2019, we held approximately 1,673,000 shares of treasury stock with a cost of $58.1 million. At January 31, 2019, we held approximately 1,665,000 shares of treasury stock with a cost of $57.6 million.

Accumulated Other Comprehensive Income (Loss)
 

22


Accumulated other comprehensive income (loss) includes items such as foreign currency translation adjustments and unrealized gains and losses on certain marketable securities and derivative financial instruments designated as hedges. Accumulated other comprehensive income (loss) is presented as a separate line item in the stockholders’ equity section of our condensed consolidated balance sheets. Accumulated other comprehensive income (loss) items have no impact on our net income (loss) as presented in our condensed consolidated statements of operations.

The following table summarizes changes in the components of our accumulated other comprehensive income (loss) by component for the three months ended April 30, 2019:
(in thousands)
 
Unrealized Gains (Losses) on Foreign Exchange Contracts Designated as Hedges
 
Unrealized Loss on Interest Rate Swap Designated as Hedge
 
Foreign Currency Translation Adjustments
 
Total
Accumulated other comprehensive loss at January 31, 2019
 
$
(981
)
 
$
(3,043
)
 
$
(141,201
)
 
$
(145,225
)
Other comprehensive income (loss) before reclassifications
 
306

 
(1,593
)
 
(3,856
)
 
(5,143
)
Amounts reclassified out of accumulated other comprehensive loss
 
(845
)
 

 

 
(845
)
Net other comprehensive income (loss)
 
1,151

 
(1,593
)
 
(3,856
)
 
(4,298
)
Accumulated other comprehensive income (loss) at
April 30, 2019
 
$
170

 
$
(4,636
)
 
$
(145,057
)
 
$
(149,523
)

All amounts presented in the table above are net of income taxes, if applicable. The accumulated net losses in foreign currency translation adjustments primarily reflect the strengthening of the U.S. dollar against the British pound sterling, which has resulted in lower U.S. dollar-translated balances of British pound sterling-denominated goodwill and intangible assets.

The amounts reclassified out of accumulated other comprehensive income (loss) into the condensed consolidated statement of operations, with presentation location, for the three months ended April 30, 2019 and 2018 were as follows:
 
 
Three Months Ended April 30,
 
 
(in thousands)
 
2019
 
2018
 
Location
Unrealized (losses) gains on derivative financial instruments:
 
 
 
 
 
 
Foreign currency forward contracts
 
$
(72
)
 
$
37

 
Cost of product revenue
 
 
(84
)
 
40

 
Cost of service and support revenue
 
 
(472
)
 
220

 
Research and development, net
 
 
(311
)
 
136

 
Selling, general and administrative
 
 
(939
)
 
433

 
Total, before income taxes
 
 
94

 
(43
)
 
Benefit (provision) for income taxes
 
 
$
(845