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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2024
OR
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.)
225 Broadhollow Road 
Melville,New York11747
(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 classTrading Symbol(s)Name of each exchange on which registered
The NASDAQ Stock Market, LLC
Common Stock, $.001 par value per shareVRNT(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 ☑ No ☐
 
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 ☑ No ☐
 
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 filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
 
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 ☐ No
 
There were 61,776,686 shares of the registrant’s common stock outstanding on May 15, 2024.



Verint Systems Inc. and Subsidiaries
Index to Form 10-Q
As of and For the Period Ended April 30, 2024
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, but are not limited to, 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, in 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 changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, economic instability, rising interest rates, tightening credit markets, inflation, instability in the banking sector, actual or threatened trade wars, political unrest, armed conflicts, natural disasters, or outbreaks of disease (including global epidemics or pandemics), as well as the resulting impact on spending by customers or partners, on our business;
risks that our customers or partners delay, downsize, cancel, or refrain from placing orders or renewing subscriptions or contracts, or are unable to honor contractual commitments or payment obligations due to challenges or uncertainties in their budgets, liquidity, or businesses;
risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards, including achieving and maintaining the competitive differentiation of our solution platform; 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 and services that meet or exceed customer challenges and needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization;
risks due to aggressive competition in all of our markets and our ability to keep pace with competitors, some of whom may be able to grow faster than us or have greater resources than us, including in areas such as sales and marketing, branding, technological innovation and development, and recruiting and retention;
risks associated with our ability to properly execute on our software as a service (“SaaS”) transition, including successfully transitioning customers to our cloud platform and the increased importance of subscription renewal rates, and risk of increased variability in our period-to-period results based on the mix, terms, and timing of our transactions;
risks relating to our ability to properly identify and execute on growth or strategic initiatives, manage investments in our business and operations, 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 or costs to retain, recruit, and train qualified personnel and management in regions in which we operate either physically or remotely, including in new markets and growth areas we may enter, due to competition for talent, increased labor costs, applicable regulatory requirements, or otherwise;
challenges associated with selling sophisticated solutions and cloud-based solutions, which may incorporate newer technologies, such as artificial intelligence (“AI”), whose adoption and use-cases are still emerging (and may present risks of their own), including with respect to longer sales cycles, more complex sales processes and customer evaluation and approval processes, more complex contractual and information security requirements, and assisting customers in understanding and realizing the benefits of our solutions and technologies, as well as with developing, offering, implementing, and maintaining an enterprise-class, broad solution portfolio;
risks that we may be unable to maintain, expand, or enable our relationships with partners as part of our growth strategy, including partners with whom we may overlap or compete, while avoiding excessive concentration with one or more partners;
ii

risks associated with our reliance on third-party suppliers, partners, or original equipment manufacturers (“OEMs”) for certain services, products, or components, including companies that may compete with us or work with our competitors;
risks associated with our significant international operations, including exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, inflation, increased financial accounting and reporting burdens and complexities, and challenges associated with a significant portion of our cash being held overseas;
risks associated with a significant part of our business coming from government contracts, and associated procurement processes and regulatory requirements;
risks associated with our ability to identify suitable targets for acquisition or investment or successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, legacy liabilities, 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 associated with complex and changing domestic and foreign regulatory environments, including, among others, with respect to data privacy, AI, cyber/information security, government contracts, anti-corruption, trade compliance, climate change or other environmental, social and governance matters, tax, and labor matters, relating to our own operations, the products and services we offer, and/or the use of our solutions by our customers;
risks associated with the mishandling or perceived mishandling of sensitive or confidential information and data, including personally identifiable information or other information that may belong to our customers or other third parties, including in connection with our SaaS or other hosted or managed services offerings or when we are asked to perform service or support;
risks associated with our reliance on third parties to provide certain cloud hosting or other cloud-based services to us or our customers, including the risk of service disruptions, data breaches, or data loss or corruption;
risks that our solutions 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, vulnerabilities, or develop operational problems;
risk that we or our solutions may be subject to security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions;
risks that our intellectual property (“IP”) rights may not be adequate to protect our business or assets or that others may make claims on our IP, claim infringement on their IP rights, or claim a violation of their license rights, including relative to free or open source components we may use;
risks associated with 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 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 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 associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits;
risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel, and our ability to successfully implement and maintain enhancements to the foregoing, for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays;
iii

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;
risks associated with Apax Partners’ significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and
risks associated with the February 1, 2021 spin-off (the “Spin-Off”) of our former Cyber Intelligence Solutions business, including the possibility that the Spin-Off transaction does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities.
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, 2024. 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.

iv

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)20242024
Assets  
Current Assets:  
Cash and cash equivalents$236,592 $241,400 
Short-term investments785 686 
Accounts receivable, net of allowance for credit losses of $1.3 million and $1.2 million, respectively
155,903 190,461 
Contract assets, net71,490 66,913 
Inventories16,589 14,209 
Prepaid expenses and other current assets48,775 59,505 
  Total current assets530,134 573,174 
Property and equipment, net48,689 47,704 
Operating lease right-of-use assets28,836 30,118 
Goodwill1,354,933 1,352,715 
Intangible assets, net58,450 57,466 
Other assets168,970 165,247 
  Total assets$2,190,012 $2,226,424 
Liabilities, Temporary Equity, and Stockholders' Equity  
Current Liabilities:  
Accounts payable$29,327 $26,301 
Accrued expenses and other current liabilities122,391 137,433 
Contract liabilities242,478 254,437 
  Total current liabilities394,196 418,171 
Long-term debt411,365 410,965 
Long-term contract liabilities9,394 10,581 
Operating lease liabilities30,933 32,100 
Other liabilities88,892 85,620 
  Total liabilities934,780 957,437 
Commitments and Contingencies
Temporary Equity:
Preferred Stock — $0.001 par value; authorized 2,207,000 shares
Series A Preferred Stock; 200,000 shares issued and outstanding at April 30, 2024 and January 31, 2024, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at April 30, 2024 and January 31, 2024, respectively.
200,628 200,628 
Series B Preferred Stock; 200,000 shares issued and outstanding at April 30, 2024 and January 31, 2024, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at April 30, 2024 and January 31, 2024, respectively.
235,693 235,693 
  Total temporary equity436,321 436,321 
Stockholders' Equity:
Common stock — $0.001 par value; authorized 240,000,000 shares; issued 61,914,000 and 62,738,000 shares; outstanding 61,914,000 and 62,738,000 shares at April 30, 2024 and January 31, 2024, respectively.
62 63 
Additional paid-in capital958,062 979,671 
Retained earnings (accumulated deficit)8,518 (6,723)
Accumulated other comprehensive loss(150,241)(142,962)
Total Verint Systems Inc. stockholders' equity816,401 830,049 
Noncontrolling interest2,510 2,617 
  Total stockholders' equity818,911 832,666 
  Total liabilities, temporary equity, and stockholders' equity$2,190,012 $2,226,424 

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)20242023
Revenue:
Recurring$173,528 $166,439 
Nonrecurring47,749 50,127 
  Total revenue221,277 216,566 
Cost of revenue:  
Recurring35,923 39,643 
Nonrecurring26,480 26,795 
Amortization of acquired technology1,358 1,965 
  Total cost of revenue63,761 68,403 
Gross profit157,516 148,163 
Operating expenses:  
Research and development, net36,730 31,782 
Selling, general and administrative93,276 101,279 
Amortization of other acquired intangible assets3,065 6,330 
  Total operating expenses133,071 139,391 
Operating income24,445 8,772 
Other income (expense), net:  
Interest income1,978 1,982 
Interest expense(2,591)(2,781)
Other (expense) income, net(498)24 
  Total other expense, net(1,111)(775)
Income before provision for income taxes23,334 7,997 
Provision for income taxes7,955 4,363 
Net income15,379 3,634 
Net income attributable to noncontrolling interests138 339 
Net income attributable to Verint Systems Inc.15,241 3,295 
Dividends on preferred stock(5,200)(5,200)
Net income (loss) attributable to Verint Systems Inc. common shares$10,041 $(1,905)
Net income (loss) per common share attributable to Verint Systems Inc.:  
Basic$0.16 $(0.03)
Diluted$0.16 $(0.03)
Weighted-average common shares outstanding:  
Basic62,335 64,940 
Diluted62,845 64,940 


See notes to condensed consolidated financial statements.
3

VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited) 
 Three Months Ended
April 30,
(in thousands)20242023
Net income$15,379 $3,634 
Other comprehensive (loss) income, net of reclassification adjustments:
Foreign currency translation adjustments(7,060)8,612 
Net decrease from foreign exchange contracts designated as hedges(266)(123)
Benefit from income taxes on net decrease from foreign exchange contracts designated as hedges47 21 
Other comprehensive (loss) income(7,279)8,510 
Comprehensive income8,100 12,144 
Comprehensive income attributable to noncontrolling interests138 339 
Comprehensive income attributable to Verint Systems Inc.$7,962 $11,805 
 
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 StockAdditional Paid-in Capital 
 (Accumulated
Deficit) / Retained Earnings
Accumulated Other Comprehensive Loss
Total Verint Systems Inc. Stockholders’ Equity Total Stockholders’ Equity
(in thousands) SharesPar
Value
Treasury
Stock
Non-controlling
Interests
Balances as of January 31, 202462,738 $63 $979,671 $ $(6,723)$(142,962)$830,049 $2,617 $832,666 
Net income— — — — 15,241 — 15,241 138 15,379 
Other comprehensive loss— — — — — (7,279)(7,279)— (7,279)
Stock-based compensation — equity-classified awards— — 16,508 — — — 16,508 — 16,508 
Common stock issued for stock awards and stock bonuses410 — — — — — — —  
Common stock repurchased and retired(1,234)(1)(38,117)— — — (38,118)— (38,118)
Distribution to noncontrolling interest— — — — — — — (245)(245)
Balances as of April 30, 202461,914 $62 $958,062 $ $8,518 $(150,241)$816,401 $2,510 $818,911 
Balances as of January 31, 202365,404 $65 $1,055,157 $ $(45,333)$(154,099)$855,790 $2,359 $858,149 
Net income— — — — 3,295 — 3,295 339 3,634 
Other comprehensive income— — — — — 8,510 8,510 — 8,510 
Stock-based compensation — equity-classified awards— — 13,436 — — — 13,436 — 13,436 
Common stock issued for stock awards and stock bonuses475 — — — — — — —  
Common stock repurchased and retired(1,593)(1)(60,095)— — — (60,096)— (60,096)
Distribution to noncontrolling interest— — — — — — — (245)(245)
Balances as of April 30, 202364,286 $64 $1,008,498 $ $(42,038)$(145,589)$820,935 $2,453 $823,388 


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) 20242023
Cash flows from operating activities:  
Net income$15,379 $3,634 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization11,367 17,503 
Stock-based compensation, excluding cash-settled awards18,009 14,814 
Losses on early retirements of debt 237 
Other, net179 45 
Changes in operating assets and liabilities, net of effects of business combinations and divestitures:  
Accounts receivable33,802 31,124 
Contract assets(4,776)1,923 
Inventories(2,372)(937)
Prepaid expenses and other assets1,404 21,278 
Accounts payable and accrued expenses(2,410)(6,821)
Contract liabilities(12,418)(19,245)
Deferred income taxes775 90 
Other, net1,778 (3,638)
Net cash provided by operating activities60,717 60,007 
Cash flows from investing activities:
Cash paid for asset acquisitions and business combinations, including adjustments, net of cash acquired(9,206) 
Divestitures, net of cash divested1,300  
Purchases of property and equipment(3,591)(4,923)
Maturities and sales of investments228 232 
Purchases of investments(330)(3,180)
Cash paid for capitalized software development costs(2,538)(1,868)
Change in restricted bank time deposits, and other investing activities, net2 (1,019)
Net cash used in investing activities(14,135)(10,758)
Cash flows from financing activities:
Proceeds from borrowings 100,000 
Repayments of borrowings and other financing obligations(553)(100,530)
Purchases of treasury stock and common stock for retirement(37,095)(60,294)
Preferred stock dividend payments(10,400)(10,400)
Distributions paid to noncontrolling interest(245)(245)
Payments of contingent consideration for business combinations (financing portion)(2,658)(18)
Cash received for contingent consideration for business divestitures (financing portion) and other financing activities214 1 
Net cash used in financing activities(50,737)(71,486)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents(848)859 
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents(5,003)(21,378)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period242,669 282,161 
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period$237,666 $260,783 
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$236,592 $260,719 
Restricted cash and cash equivalents included in prepaid expenses and other current assets1,074 6 
Restricted cash and cash equivalents included in other assets 58 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$237,666 $260,783 

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 leader in customer experience (“CX”) automation. The world’s most iconic brands – including more than 80 of the Fortune 100 companies – use the Verint Open Platform and our team of AI-powered bots to deliver tangible AI business outcomes across the enterprise.

Verint is uniquely positioned to help brands increase CX automation with our differentiated AI-powered Open Platform. Brands today are challenged to delight their customers while facing limited budgets and resources. As a result, organizations are turning to AI-powered platforms specifically designed for the customer engagement domain to increase the level of their CX automation rather than hire additional employees.

Verint is headquartered in Melville, New York, and has approximately 15 offices worldwide, in addition to a number of on-demand, flexible coworking spaces. We have approximately 3,700 employees plus a few hundred contractors around the globe focused on helping brands increase CX automation.

Apax Convertible Preferred Stock Investment

On December 4, 2019, we announced that an affiliate (the “Apax Investor”) of Apax Partners (“Apax”) would make an investment in us in an amount of up to $400.0 million. Under the terms of the Investment Agreement, dated as of December 4, 2019 (the “Investment Agreement”), on May 7, 2020, the Apax Investor purchased $200.0 million of our Series A convertible preferred stock (“Series A Preferred Stock”). On February 1, 2021, we completed the spin-off (the “Spin-Off”) of Cognyte Software Ltd. (“Cognyte”), a company limited by shares incorporated under the laws of the State of Israel whose business and operations consist of our former Cyber Intelligence Solutions business. In connection with the completion of the Spin-Off, on April 6, 2021, the Apax Investor purchased $200.0 million of our Series B convertible preferred stock (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”). As of April 30, 2024, Apax’s ownership in us on an as-converted basis was approximately 13.5%. Please refer to Note 9, “Convertible Preferred Stock” for a more detailed discussion of the Apax investment.

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, 2024 filed with the U.S. Securities and Exchange Commission (“SEC”). The condensed consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the periods ended April 30, 2024 and 2023, and the condensed consolidated balance sheet as of April 30, 2024, are not audited but reflect all adjustments that, in the opinion of management, 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, 2024 is derived from the audited consolidated financial statements presented in our Annual Report on Form 10-K for the year ended January 31, 2024. 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, 2024 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., and our wholly owned or otherwise controlled subsidiaries. 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.
7


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.

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. Key estimates in the accompanying condensed consolidated financial statements include, among others, revenue recognition, allowances for doubtful accounts, determining the fair value of assets and liabilities assumed in business combinations, recoverability of goodwill, amortization of intangibles, evaluation of contingencies, and the accounting for income taxes. Actual results could differ from those estimates.

Significant Accounting Policies

There have been no material changes in our significant accounting policies during the three months ended April 30, 2024, 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, 2024.

Recently Adopted Accounting Pronouncements

There have been no recently adopted accounting pronouncements since the filing of our Annual Report on Form 10-K for the year ended January 31, 2024 that may have a material impact on our condensed consolidated financial statements.

New Accounting Pronouncements Not Yet Effective

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which will require public companies to report incremental segment information on an annual and interim basis, including enhanced disclosures of significant segment expenses included within each reported measure of segment profit or loss. ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively. We plan to adopt ASU No. 2023-07 effective for the annual report on Form 10-K for the year ending January 31, 2025 and subsequent interim periods, and are currently evaluating the impact of this standard on our condensed consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which will require greater disaggregation of a reporting entity’s effective tax rate reconciliation as well as income taxes paid. ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis, with early adoption permitted. We are currently evaluating the impact of this standard on our condensed consolidated financial statement disclosures.


2.    REVENUE RECOGNITION

We derive our revenue primarily from providing customers the right to access our cloud-based solutions, the right to use our software for an indefinite or specified period of time, and related services and support based on when access or 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 transactions, 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
8

Identification of the performance obligations in the contract
Determination of the transaction price
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 a disaggregation of our recurring and nonrecurring revenue. 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.

Recurring revenue primarily consists of:
Software as a service (“SaaS”) revenue, which consists predominately of bundled SaaS (software access rights with standard managed services) and unbundled SaaS (software licensing rights accounted for as term-based licenses whereby customers have a license to our software with related support for a specific period).
Bundled SaaS revenue is recognized over time.
Unbundled SaaS revenue is recognized at a point in time, except for the related support which is recognized over time. Unbundled SaaS contracts are eligible for renewal after the initial fixed term, which in most cases is between a one- and three-year time frame. Unbundled SaaS can be deployed in the cloud, either by us or a cloud partner.
Optional managed services revenue.
Support revenue, which consists of initial and renewal support on our perpetual licenses.
Nonrecurring revenue primarily consists of our perpetual licenses, hardware, installation services, business advisory consulting and training services, and patent license royalties.

Three Months Ended
April 30,
(in thousands)20242023
Recurring revenue:
Bundled SaaS revenue$65,695 $59,453 
Unbundled SaaS revenue75,288 57,695 
Total SaaS revenue140,983 117,148 
Optional managed services revenue5,168 12,865 
Support revenue27,377 36,426 
Total recurring revenue173,528 166,439 
Nonrecurring revenue:
Perpetual revenue24,900 24,334 
Professional services and other revenue22,849 25,793 
Total nonrecurring revenue47,749 50,127 
Total revenue$221,277 $216,566 

Contract Balances

The following table provides information about accounts receivable, contract assets, and contract liabilities from contracts with customers:

(in thousands)April 30, 2024January 31, 2024
Accounts receivable, net$155,903 $190,461 
Contract assets, net$71,490 $66,913 
Long-term contract assets, net (included in other assets)$38,115 $31,379 
Contract liabilities$242,478 $254,437 
Long-term contract liabilities$9,394 $10,581 

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We receive payments from customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. 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 multi-year unbundled SaaS contracts and arrangements where our right to consideration is subject to the contractually agreed upon billing schedule. We expect billing and collection of a majority of our contract assets to occur within the next twelve months and asset impairment charges related to contract assets were immaterial in the three months ended April 30, 2024 and 2023. As of April 30, 2024, two partners, both authorized global resellers of our solutions, accounted for more than 10% of our aggregated accounts receivable and contract assets; Partner A was approximately 13% and Partner B was approximately 14%. As of January 31, 2024, Partner A and Partner B each accounted for approximately 14% of our aggregated accounts receivable and contract assets. Credit losses relating to these customers have historically been immaterial.

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, 2024 and 2023 from amounts included in contract liabilities at the beginning of each period was $99.1 million and $101.5 million, respectively.

Remaining Performance Obligations

Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes contract liabilities and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. The majority of our arrangements are for periods of one to three years, although the contract term can extend up to five years.

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. The timing and amount of revenue recognition for our remaining performance obligations are influenced by several factors, including seasonality, the timing of renewals, the timing of delivery of software licenses, the average length of the contract terms, and foreign currency exchange rates.

The following table provides information about when we expect to recognize our remaining performance obligations:

(in thousands)April 30, 2024January 31, 2024
Remaining performance obligations:
Expected to be recognized within 1 year$437,659 $464,600 
Expected to be recognized in more than 1 year279,785 279,702 
Total remaining performance obligations
$717,444 $744,302 


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, 2024 and 2023:

Three Months Ended
April 30,
(in thousands, except per share amounts) 20242023
Net income$15,379 $3,634 
Net income attributable to noncontrolling interests138 339 
Net income attributable to Verint Systems Inc.15,241 3,295 
Dividends on preferred stock(5,200)(5,200)
Net income (loss) attributable to Verint Systems Inc. for basic net loss per common share 10,041 (1,905)
Dilutive effect of dividends on preferred stock  
Net income (loss) attributable to Verint Systems Inc. for diluted net income (loss) per common share$10,041 $(1,905)
Weighted-average shares outstanding: 
Basic62,335 64,940 
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Three Months Ended
April 30,
(in thousands, except per share amounts) 20242023
Dilutive effect of employee equity award plans510  
Dilutive effect of 2021 Notes  
Dilutive effect of assumed conversion of preferred stock  
Diluted62,845 64,940 
Net income (loss) per common share attributable to Verint Systems Inc.:
Basic$0.16 $(0.03)
Diluted$0.16 $(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) 20242023
Common shares excluded from calculation:  
Restricted and performance stock-based awards1,733 2,080 
Series A Preferred Stock5,498 5,498 
Series B Preferred Stock3,980 3,980 

In periods for which we report a net loss attributable to Verint Systems Inc. common shares, 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.

For the three months ended April 30, 2024, the average price of our common stock did not exceed the $62.08 per share conversion price of our 2021 Notes, and other requirements for the 2021 Notes (as defined in Note 7, “Long-Term Debt”), to be convertible were not met. The 2021 Notes will have a dilutive impact on net income per common share at any time when the average market price of our common stock for a quarterly reporting period exceeds the conversion price.

The Capped Calls (as defined in Note 7, “Long-Term Debt”) do not impact our diluted earnings per common share calculations as their effect would be anti-dilutive. The Capped Calls are generally intended to reduce the potential dilution to our common stock upon any conversion of the 2021 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2021 Notes, in the event that at the time of conversion our common stock price exceeds the $62.08 conversion price, with such reduction and/or offset subject to a cap of $100.00.

Further details regarding the 2021 Notes and Capped Calls appear in Note 7, “Long-Term Debt”.

The weighted-average common shares underlying the assumed conversion of the Preferred Stock, on an as-converted basis, were excluded from the calculations of diluted net income (loss) per common share for the three months ended April 30, 2024 and 2023, as their effect would have been anti-dilutive. Further details regarding the Preferred Stock investment appear in Note 9, “Convertible Preferred Stock”.


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

The following tables summarize our cash, cash equivalents, and short-term investments as of April 30, 2024 and January 31, 2024:

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April 30, 2024
(in thousands) Cost BasisGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents:
Cash and bank time deposits$184,041 $— $— $184,041 
Money market funds52,053 — — 52,053 
U.S. Treasury bills498 — — 498 
Total cash and cash equivalents$236,592 $ $ $236,592 
Short-term investments:
Bank time deposits$785 $ $ $785 
Total short-term investments$785 $ $ $785 

January 31, 2024
(in thousands)Cost BasisGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents:
Cash and bank time deposits$155,504 $— $— $155,504 
Money market funds85,647 — — 85,647 
U.S. Treasury Bills
249 — — 249 
Total cash and cash equivalents$241,400 $ $ $241,400 
Short-term investments:
Bank time deposits$686 $ $ $686 
Total short-term investments$686 $ $ $686 

Bank time deposits which are reported within short-term investments consist of deposits held outside of the United States 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 each of the three months ended April 30, 2024 and 2023, proceeds from maturities and sales of short-term investments were $0.2 million.


5.    BUSINESS COMBINATIONS, ASSET ACQUISITIONS, AND DIVESTITURES

Three Months Ended April 30, 2024

During the three months ended April 30, 2024, we completed the acquisition of an AI-powered analytics company, including fourteen employees. Pursuant to the terms of the purchase agreement, the purchase price consisted of $8.8 million of cash paid at closing, contingent consideration with an estimated fair value of $3.4 million, and the acquisition date fair value of our previously held investment via a simple agreement for future equity (“SAFE”), which was approximately $1.7 million. Further discussion regarding this SAFE investment appears in Note 12, “Fair Value Measurements”. We recognized intangible assets of $5.2 million for developed technology, $0.2 million for the acquired customer relationships, and goodwill of $8.3 million. The acquisition qualified as a stock transaction for tax purposes. This transaction was not material to our condensed consolidated financial statements, and as a result, additional business combination disclosures for this acquisition have been omitted.

Year Ended January 31, 2024

During the year ended January 31, 2024, we completed the acquisition of a provider of solutions for workforce scheduling automation, including three employees. This transaction resulted in increases to goodwill, customer relationships, and acquired technology intangible assets, but was not material to our condensed consolidated financial statements, and as a result, additional business combination disclosures for this acquisition have been omitted.

Revenue and net income (loss) attributable to this acquisition for the three months ended April 30, 2024 was not material.
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Other Business Combination Information

For the three months ended April 30, 2024 and 2023, we recorded a benefit of $0.4 million and a charge of $0.2 million, respectively, within selling, general and administrative expenses for changes in the fair values of contingent consideration obligations associated with business combinations, which was based on our historical business combinations achieving certain objectives and milestones. The aggregate fair values of the remaining contingent consideration obligations associated with business combinations was $6.9 million at April 30, 2024, of which $2.1 million was recorded within accrued expenses and other current liabilities, and $4.8 million was recorded within other liabilities.

Payments of contingent consideration earned under these agreements were $3.3 million and $0.3 million for the three months ended April 30, 2024 and 2023, respectively.

Asset Acquisition

In July 2023, we entered into an agreement to acquire source code that qualified as an asset acquisition and made an initial deposit payment of $1.0 million upon the execution of the contract and incurred direct transaction costs related to such asset acquisition of $0.2 million. The agreement also stipulates the establishment of additional milestone payments totaling $3.0 million, of which $2.0 million was deposited into a third-party escrow account in connection with the closing of the transaction. These milestone payments are contingent upon the successful delivery of the source code and the attainment of specific developmental objectives subject to reduction by certain amounts paid under a separate transition services agreement entered into by the parties. During the year ended January 31, 2024, we made $1.8 million in milestone payments to the seller, of which $0.8 million was released from the escrow account upon the achievement of certain source code delivery and integration milestones. During the three months ended April 30, 2024, we made an additional $0.2 million integration milestone payment to the seller, which was released from the escrow account. The remaining $1.0 million of milestone payments remains in the third-party escrow account, is classified as restricted cash, and is included in prepaid expenses and other current assets on our condensed consolidated balance sheet as of April 30, 2024.

The transaction also provides for additional consideration that is contingent upon achieving certain performance targets for the years ending January 31, 2025 and 2026 of up to $5.0 million, with a minimum of $2.0 million guaranteed over the period, contingent upon achieving the milestones outlined above by the agreed upon dates, plus the opportunity to receive additional payments from us based on any revenue we receive from sales of products based on the acquired technology in adjacent markets. During the three months ended April 30, 2024, we made a $0.3 million noncontingent prepayment against the first period earn-out. Contingent consideration is not recorded in an asset acquisition until the contingency is resolved (when the contingent consideration is paid or becomes payable) or when probable and reasonably estimable.

Divestitures

On January 31, 2024, we completed the sale of a services business for manual quality managed services. We sold the business to the former managers, who were our employees. Today, our platform includes an AI-powered solution for automating the quality monitoring process. We expect our customers to adopt AI over time and believe that a people centric managed services offering is no longer core to our offering.

We estimated the sale price under the sale agreement to be $6.0 million based on (i) the estimated fair value of our share of the future adjusted operating income (as defined in the sale agreement) of the business, to be paid annually over a minimum of six years following the transaction closing date, (ii) the amount by which the closing working capital of the business exceeds the working capital target, and (iii) the estimated amount of future collections of outstanding receivables as of the closing date from a certain customer, net of certain expenses. We determined the estimated fair value of the contingent consideration with the assistance of a third-party valuation specialist and estimates made by management. During the three months ended January 31, 2024, we recognized a pre-tax loss on the sale of $9.7 million, which was recorded as part of selling, general, and administrative expenses in our consolidated statement of operations, and included $0.8 million of cumulative foreign translation loss that was released from accumulated other comprehensive loss and divestiture-related expenses were not material. As part of the transaction, we divested $6.5 million of cash, most of which was intended as reimbursement for certain liabilities assumed by the buyer, as well as $1.0 million of tangible net assets, $0.5 million of intangible assets, and $6.8 million of goodwill. The divested services business generated $6.8 million of revenue during the three months ended April 30, 2023, and several hundred employees dedicated to this managed services business were transferred or terminated as part of the transaction. During the three months ended April 30, 2024, we received $1.5 million of the outstanding receivables as of the closing date.

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In March 2023, we completed the sale of an insignificant product line that we inherited as part of a legacy acquisition and that no longer fit with our current business priorities or strategic direction. The total consideration for the sale was $0.7 million, which is payable to us in three equal installments through March 2025, the first installment of which was received in July 2023, and the second installment of which was received in February 2024. The transaction reduced goodwill by $0.3 million and intangible assets by $0.2 million and resulted in a gain of approximately $0.2 million during the three months ended April 30, 2023.

These divestitures did not meet the criteria to be reported as discontinued operations in our condensed consolidated financial statements as our decision to divest these businesses did not represent a strategic shift that would have a major effect on our operations and financial results.


6.    INTANGIBLE ASSETS AND GOODWILL
 
Acquisition-related intangible assets, excluding certain intangible assets previously acquired that were fully amortized and intangible assets of the businesses we divested which were removed from our condensed consolidated balance sheets, consisted of the following as of April 30, 2024 and January 31, 2024:
 
 April 30, 2024
(in thousands)CostAccumulated
Amortization
Net
Intangible assets with finite lives:   
Customer relationships$453,183 $(413,670)$39,513 
Acquired technology236,203 (217,310)18,893 
Trade names3,725 (3,681)44 
Distribution network2,440 (2,440) 
Total intangible assets$695,551 $(637,101)$58,450 
 
 January 31, 2024
(in thousands)CostAccumulated
Amortization
Net
Intangible assets with finite lives:   
Customer relationships$455,184 $(412,587)$42,597 
Acquired technology231,815 (217,006)14,809 
Trade names3,727 (3,667)60 
Distribution network2,440 (2,440) 
    Total intangible assets$693,166 $(635,700)$57,466 

Total amortization expense recorded for acquisition-related intangible assets was $4.4 million and $8.3 million for the three months ended April 30, 2024 and 2023, 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
2025 (remainder of year)$13,451 
202617,419 
202713,652 
20288,849 
20293,968 
2030 and thereafter1,111 
   Total$58,450 
 
There were no impairments of acquired intangible assets during the three months ended April 30, 2024 and 2023.

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Goodwill activity for the three months ended April 30, 2024 was as follows: 

(in thousands)Amount
Three Months Ended April 30, 2024:
Goodwill, gross, at January 31, 2024$1,408,758 
Accumulated impairment losses through January 31, 2024(56,043)
   Goodwill, net, at January 31, 20241,352,715 
Foreign currency translation and other(6,123)
Business combinations8,341 
   Goodwill, net, at April 30, 2024$1,354,933 
Balance at April 30, 2024 
Goodwill, gross, at April 30, 2024$1,410,976 
Accumulated impairment losses through April 30, 2024(56,043)
   Goodwill, net, at April 30, 2024$1,354,933 

No events or circumstances indicating the potential for goodwill impairment were identified during the three months ended April 30, 2024.


7.    LONG-TERM DEBT

The following table summarizes our long-term debt at April 30, 2024 and January 31, 2024:

April 30,January 31,
(in thousands)20242024
2021 Notes$315,000 $315,000 
Revolving Credit Facility100,000 100,000 
Less: unamortized debt discounts and issuance costs(3,635)(4,035)
Total debt411,365 410,965 
Less: current maturities  
Long-term debt$411,365 $410,965 

2021 Notes

On April 9, 2021, we issued $315.0 million in aggregate principal amount of 0.25% convertible senior notes due April 15, 2026 (the “2021 Notes”), unless earlier converted by the holders pursuant to their terms. The 2021 Notes are unsecured and pay interest in cash semiannually in arrears at a rate of 0.25% per annum.

We used a portion of the net proceeds from the issuance of the 2021 Notes to pay the costs of the Capped Calls described below. We also used a portion of the net proceeds from the issuance of the 2021 Notes, together with the net proceeds from the April 6, 2021 issuance of $200.0 million of Series B Preferred Stock, to repay a portion of the outstanding indebtedness under our Credit Agreement described below, to terminate an interest rate swap, and to repurchase shares of our common stock. The remainder is being used for working capital and other general corporate purposes.

The 2021 Notes are convertible into shares of our common stock at an initial conversion rate of 16.1092 shares per $1,000 principal amount of 2021 Notes, which represents an initial conversion price of approximately $62.08 per share, subject to adjustment upon the occurrence of certain events, and subject to customary anti-dilution adjustments. Prior to January 15, 2026, the 2021 Notes will be convertible only upon the occurrence of certain events and during certain periods, and will be convertible thereafter at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2021 Notes. Upon conversion of the 2021 Notes, holders will receive cash up to the aggregate principal amount, with any remainder to be settled with cash or common stock, or a combination thereof, at our election. As of April 30, 2024, the 2021 Notes were not convertible.

We incurred approximately $8.9 million of issuance costs in connection with the 2021 Notes, which were deferred and are presented as a reduction of long-term debt, and which are being amortized as interest expense over the term of the 2021 Notes.
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Including the impact of the deferred debt issuance costs, the effective interest rate on the 2021 Notes was approximately 0.83% at April 30, 2024.

Based on the closing market price of our common stock on April 30, 2024, the if-converted value of the 2021 Notes was less than their aggregate principal amount.

Capped Calls

In connection with the issuance of the 2021 Notes, on April 6, 2021 and April 8, 2021, we entered into capped call transactions (the “Capped Calls”) with certain counterparties. The Capped Calls are generally intended to reduce the potential dilution to our common stock upon any conversion of the 2021 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2021 Notes, in the event that at the time of conversion our common stock price exceeds the conversion price, with such reduction and/or offset subject to a cap.

The Capped Calls exercise price is equal to the $62.08 initial conversion price of each of the 2021 Notes, and the cap price is $100.00, each subject to certain adjustments under the terms of the Capped Calls. Our exercise rights under the Capped Calls generally trigger upon conversion of the 2021 Notes, and the Capped Calls terminate upon maturity of the 2021 Notes, or the first day the 2021 Notes are no longer outstanding. As of April 30, 2024, no Capped Calls have been exercised.

Pursuant to their terms, the Capped Calls qualify for classification within stockholders’ equity, and their fair value is not remeasured and adjusted as long as they continue to qualify for stockholders’ equity classification. We paid approximately $41.1 million for the Capped Calls, including applicable transaction costs, which was recorded as a reduction to additional paid-in capital.

Credit Agreement

On June 29, 2017, we entered into a credit agreement with certain lenders and terminated a prior credit agreement. The credit agreement was amended in 2018, 2020, 2021, and 2023, as further described below (as amended, the “Credit Agreement”).

The Credit Agreement provides for $725.0 million of senior secured credit facilities, comprised of a $425.0 million term loan that was scheduled to mature on June 29, 2024 (the “Term Loan”) prior to being repaid by us in full, and a $300.0 million revolving credit facility maturing on April 9, 2026 (the “Revolving Credit Facility”). The Revolving Credit Facility replaced our prior $300.0 million revolving credit facility (the “Prior Revolving Credit Facility”) and is subject to increase and reduction from time to time according to the terms of the Credit Agreement. The majority of the proceeds from the Term Loan were used to repay all outstanding term loans under our prior credit agreement.

Optional prepayments of loans under the Credit Agreement are generally permitted without premium or penalty. During the three months ended April 30, 2021, in addition to our regular quarterly $1.1 million principal payment, we repaid $309.0 million of our Term Loan, reducing the outstanding principal balance to $100.0 million. On April 27, 2023, we repaid the remaining $100.0 million outstanding principal balance on our Term Loan utilizing proceeds from borrowings under our Revolving Credit Facility, along with $0.5 million of accrued interest thereon. As a result, $0.2 million of combined deferred debt issuance costs and unamortized discount associated with the Term Loan were written off and were included within interest expense on our condensed consolidated statement of operations for the three months ended April 30, 2023.

Interest rates on loans under the Credit Agreement are periodically reset, at our option, originally at either a Eurodollar Rate (which was derived from LIBOR) or an alternative base rate (“ABR”) (each as defined in the Credit Agreement), plus in each case a margin.

On May 10, 2023, we entered into an amendment to the Credit Agreement (the “Fourth Amendment”) related to the phase-out of LIBOR by the UK Financial Conduct Authority. Effective July 1, 2023, borrowings under the Credit Agreement bear interest, at our option, at either: (i) the ABR, plus the applicable margin therefor or (ii) the adjusted Term Secured Overnight Financing Rate published by the CME Term SOFR Administrator (as more fully defined and set forth in the Credit Agreement, “Adjusted Term SOFR”), plus the applicable margin therefor. The applicable margin in each case is determined based on our Leverage Ratio (as defined below) and ranges from 0.25% to 1.25% for borrowings bearing interest at the ABR and from 1.25% to 2.25% for borrowings bearing interest based on Adjusted Term SOFR.

Borrowings outstanding under the Revolving Credit Facility were $100.0 million at April 30, 2024 and January 31, 2024, which is included in long-term debt on our condensed consolidated balance sheet. For borrowings under the Revolving Credit Facility, the applicable margin is determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each as defined in
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the Credit Agreement) leverage ratio (the "Leverage Ratio"). As of April 30, 2024, the interest rate on our Revolving Credit Facility borrowings was 6.93%. In addition, we are required to pay a commitment fee with respect to unused availability under the Revolving Credit Facility at rates per annum determined by reference to our Leverage Ratio. The proceeds of borrowings under the Revolving Credit Facility may be used for working capital and general corporate purposes, including for permitted acquisitions and permitted stock repurchases, and the repayment of term loans, if any.

Our obligations under the 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 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The Credit Agreement also contains a financial covenant that, solely with respect to the 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 Credit Agreement.

The 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 Credit Agreement may be declared immediately due and payable, and the lenders’ commitments to make loans under the Credit Agreement may be terminated.

Deferred debt issuance costs associated with the Term Loan were amortized using the effective interest rate method, and deferred debt issuance costs associated with the Revolving Credit Facility are being amortized on a straight-line basis.

Interest Expense

The following table presents the components of interest expense incurred on the 2021 Notes and on borrowings under our Credit Agreement, for the three months ended April 30, 2024 and 2023:

 Three Months Ended
April 30,
(in thousands)20242023
2021 Notes:
Interest expense at 0.25% coupon rate
$197 $197 
Amortization of deferred debt issuance costs446 443 
Total Interest Expense — 2021 Notes$643 $640 
Borrowings under Credit Agreement:
Interest expense at contractual rates$1,736 $1,650 
Amortization of deferred debt issuance costs172 204 
Amortization of debt discounts 5 
Losses on early retirements of debt 237 
Total Interest Expense — Borrowings under Credit Agreement$1,908 $2,096 


8.    SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL STATEMENT INFORMATION
 
Condensed Consolidated Balance Sheets
 
Inventories consisted of the following as of April 30, 2024 and January 31, 2024:
 
April 30,January 31,
(in thousands)20242024
Raw materials$5,813 $4,402 
Work-in-process487 69 
Finished goods10,289 9,738 
   Total inventories$16,589 $14,209 

Accrued expenses and other current liabilities consisted of the following as of April 30, 2024 and January 31, 2024:
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April 30,January 31,
(in thousands)20242024
Accrued bonus$30,057 $25,816 
Other92,334 111,617 
Total accrued expenses and other current liabilities$122,391 $137,433 

Other liabilities consisted of the following as of April 30, 2024 and January 31, 2024:

April 30,January 31,
(in thousands)20242024
Unrecognized tax benefits, including interest and penalties$72,589 $71,330 
Other16,303 14,290 
Total other liabilities$88,892 $85,620 

Condensed Consolidated Statements of Operations
 
Other (expense) income, net consisted of the following for the three months ended April 30, 2024 and 2023:

 Three Months Ended
April 30,
(in thousands)20242023
Foreign currency (losses) gains, net$(537)$237 
Other, net39 (213)
Total other (expense) income, net$(498)$24 

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, 2024 and 2023:
 Three Months Ended
April 30,
(in thousands)20242023
Cash paid for interest$2,210 $2,513 
Cash payments of income taxes, net$6,298 $3,758 
Cash payments for operating leases$2,037 $1,640 
Non-cash investing and financing transactions: 
Finance leases of property and equipment$634 $212 
Accrued but unpaid purchases of property and equipment$1,081 $360 
Liabilities for contingent consideration in business combinations$3,397 $ 
Accrued but unpaid purchases of treasury stock$773 $ 
Excise tax on share repurchases$250 $417 


9.    CONVERTIBLE PREFERRED STOCK

On December 4, 2019, we entered into the Investment Agreement with the Apax Investor whereby, subject to certain closing conditions, the Apax Investor agreed to make an investment in us in an amount up to $400.0 million as follows:

On May 7, 2020, we issued a total of 200,000 shares of our Series A Preferred Stock for an aggregate purchase price of $200.0 million, or $1,000 per share, to the Apax Investor. In connection therewith, we incurred direct and incremental costs of $2.7 million, including financial advisory fees, closing costs, legal fees, and other offering-related costs. These direct and incremental costs reduced the carrying amount of the Series A Preferred Stock.

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In connection with the completion of the Spin-Off, on April 6, 2021, we issued a total of 200,000 shares of our Series B Preferred Stock for an aggregate purchase price of $200.0 million, or $1,000 per share, to the Apax Investor. In connection therewith, we incurred direct and incremental costs of $1.3 million, including financial advisory fees, closing costs, legal fees, and other offering-related costs. These direct and incremental costs reduced the carrying amount of the Series B Preferred Stock.

Each of the rights, preferences, and privileges of the Series A Preferred Stock and Series B Preferred Stock are set forth in separate certificates of designation filed with the Secretary of State of the State of Delaware on the applicable issuance date.

Voting Rights

Holders of the Preferred Stock have the right to vote on matters submitted to a vote of the holders of our common stock, on an as-converted basis; however, in no event will the holders of Preferred Stock have the right to vote shares of the Preferred Stock on an as-converted basis in excess of 19.9% of the voting power of the common stock outstanding immediately prior to December 4, 2019.

Dividends and Liquidation Rights

The Preferred Stock ranks senior to the shares of our common stock with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of our affairs. Shares of Preferred Stock have a liquidation preference of the greater of $1,000 per share or the amount that would be received if the shares are converted at the then applicable conversion price at the time of such liquidation.

Each series of Preferred Stock paid dividends at an annual rate of 5.2% until May 7, 2024, and thereafter pays at a rate of 4.0%, subject to adjustment under certain circumstances. Dividends on the Preferred Stock are cumulative and payable semi-annually in arrears in cash. All dividends that are not paid in cash will remain accumulated dividends with respect to each share of Preferred Stock. The dividend rate is subject to increase (i) to 6.0% per annum in the event the number of shares of common stock into which the Preferred Stock could be converted exceeds 19.9% of the voting power of outstanding common stock on December 4, 2019 (unless we obtain shareholder approval of the issuance of common stock upon conversion of the Preferred Stock) and (ii) by 1.0% each year, up to a maximum dividend rate of 10.0% per annum, in the event we fail to satisfy our obligations to redeem the Preferred Stock in specified circumstances.

For the three months ended April 30, 2024, we paid $10.4 million of preferred stock dividends, all of which was accrued as of January 31, 2024, and there were $6.9 million of cumulative undeclared and unpaid preferred stock dividends at April 30, 2024. There were no accrued dividends as of April 30, 2024. We reflected $5.2 million of preferred stock dividends in our condensed consolidated results of operations, for purposes of computing net income (loss) attributable to Verint Systems Inc. common shares, for each of the three months ended April 30, 2024 and 2023.

Conversion

The Series A Preferred Stock was initially convertible into common stock at the election of the holder, subject to certain conditions, at an initial conversion price of $53.50 per share. The initial conversion price represented a conversion premium of 17.1% over the volume-weighted average price per share of our common stock over the 45 consecutive trading days immediately prior to December 4, 2019. In accordance with the Investment Agreement, the Series A Preferred Stock did not participate in the Spin-Off distribution of the Cognyte shares, which occurred on February 1, 2021, and the Series A Preferred Stock conversion price was instead adjusted to $36.38 per share based on the ratio of the relative trading prices of Verint and Cognyte following the Spin-Off.

The Series B Preferred Stock is convertible at a conversion price of $50.25, based in part on our trading price over the 20-day trading period following the Spin-Off.

As of April 30, 2024, the maximum number of shares of common stock that could be required to be issued upon conversion of the outstanding shares of Preferred Stock was approximately 9.6 million shares and Apax’s ownership in us on an as-converted basis was approximately 13.5%.

Beginning May 7, 2023, in the case of the Series A Preferred Stock, and April 6, 2024, in the case of the Series B Preferred Stock, we have the option to require that all (but not less than all) of the then-outstanding shares of Preferred Stock of the series convert into common stock if the volume-weighted average price per share of the common stock for at least 30 trading days in any 45 consecutive trading day period exceeds 175% of the then-applicable conversion price of such series (a “Mandatory
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Conversion”). As of April 30, 2024, the volume-weighted average price per share of common stock has not exceeded 175% of the $36.38 conversion price of the Series A Preferred Stock or the $50.25 conversion price of the Series B Preferred Stock.

We may redeem any or all of the Preferred Stock of a series for cash at any time after May 7, 2026, in the case of the Series A Preferred Stock, and April 6, 2027, in the case of the Series B Preferred Stock, at a redemption price equal to 100% of the liquidation preference of the shares of the Preferred Stock, plus any accrued and unpaid dividends to, but excluding, the redemption date, plus a make-whole amount designed to allow the Apax Investor to earn a total 8.0% internal rate of return on such shares.

The Preferred Stock may not be sold or transferred without our prior written consent. The common stock issuable upon conversion of the Preferred Stock is not subject to this restriction. The restriction on the sale or transfer of the Preferred Stock does not apply to certain transfers to one or more permitted co-investors or transfers or pledges of the Preferred Stock pursuant to the terms of specified margin loans entered into by the Apax Investor as well as transfers effected pursuant to a merger, consolidation, or similar transaction consummated by us and transfers that are approved by our board of directors.

At any time after November 7, 2028, in the case of the Series A Preferred Stock, and October 6, 2029, in the case of the Series B Preferred Stock, or upon the occurrence of a change of control triggering event (as defined in the certificates of designation), the holders of the applicable series of Preferred Stock will have the right to cause us to redeem all of the outstanding shares of Preferred Stock for cash at a redemption price equal to 100% of the liquidation preference of the shares of such series, plus any accrued and unpaid dividends to, but excluding, the redemption date. Therefore, the Preferred Stock has been classified as temporary equity on our condensed consolidated balance sheets as of April 30, 2024 and January 31, 2024, separate from permanent equity, as the potential required repurchase of the Preferred Stock, however remote in likelihood, is not solely under our control.

As of April 30, 2024, the Preferred Stock was not redeemable, and we have concluded that it is currently not probable of becoming redeemable, including from the occurrence of a change in control triggering event. The holders’ redemption rights which occur at November 7, 2028, in the case of the Series A Preferred Stock, and October 6, 2029, in the case of the Series B Preferred Stock, are not considered probable because there is a more than remote likelihood that the Mandatory Conversion may occur prior to such redemption rights. We therefore did not adjust the carrying amount of the Preferred Stock to its current redemption amount, which was its liquidation preference at April 30, 2024 plus accrued and unpaid dividends. As of April 30, 2024, the stated value of the liquidation preference for each series of Preferred Stock was $200.0 million and cumulative, unpaid dividends on each series of Preferred Stock was $3.5 million.

Future Tranche Right

We determined that our obligation to issue and the Apax Investor’s obligation to purchase 200,000 shares of the Series B Preferred Stock in connection with the completion of the Spin-Off and the satisfaction of other customary closing conditions (the “Future Tranche Right”) met the definition of a freestanding financial instrument as the Future Tranche Right is legally detachable and separately exercisable from the Series A Preferred Stock. At issuance, we allocated a portion of the proceeds from the issuance of the Series A Preferred Stock to the Future Tranche Right based upon its fair value at such time, with the remaining proceeds being allocated to the Series A Preferred Stock. The Future Tranche Right was remeasured at fair value each reporting period until the settlement of the right (at the time of the issuance of the Series B Preferred Stock), and changes in its fair value were recognized as a non-cash charge or benefit within other income (expense), net on the condensed consolidated statements of operations.

Upon issuance of the Series A Preferred Stock on May 7, 2020, the Future Tranche Right was recorded as an asset of $3.4 million, as the purchase price of the Series B Preferred Stock was greater than its estimated fair value at the expected settlement date. This resulted in a $203.4 million carrying value, before direct and incremental issuance costs, for the Series A Preferred Stock.

Immediately prior to the issuance of the Series B Preferred Stock, the Future Tranche Right was remeasured and upon the issuance of the Series B Preferred Stock in April 2021, the Future Tranche Right was settled, resulting in a reclassification of the $37.0 million fair value of the Future Tranche Right liability at that time to the carrying value of the Series B Preferred Stock. This resulted in a $237.0 million carrying value, before direct and incremental issuance costs, for the Series B Preferred Stock. As a result of the issuance of the Series B Preferred Stock, we no longer recognize changes in the fair value of the Future Tranche Right in our condensed consolidated statements of operations.


10.    STOCKHOLDERS’ EQUITY
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Common Stock Dividends

We did not declare or pay any cash dividends on our common stock during the three months ended April 30, 2024 and 2023. Under the terms of our Credit Agreement, we are subject to certain restrictions on declaring and paying cash dividends on our common stock.

Treasury Stock

We periodically purchase common stock from our directors, officers, and other employees to facilitate income tax withholding or payments in connection with the vesting of equity awards occurring during a Company-imposed trading blackout or lockup period. Any such repurchases of common stock occur at prevailing market prices and are recorded as treasury stock. When treasury shares are reissued, they are recorded at the average cost of the treasury shares acquired.

No treasury stock remained outstanding at April 30, 2024 and January 31, 2024, respectively.

Stock Repurchase Programs

On December 7, 2022, we announced that our board of directors had authorized a stock repurchase program for the period from December 12, 2022 until January 31, 2025, whereby we may repurchase shares of common stock in an amount not to exceed, in the aggregate, $200.0 million during the repurchase period.

During the three months ended April 30, 2024, we repurchased approximately 1,233,000 shares of our common stock for a cost of $38.1 million, including excise tax of $0.3 million, under the current stock repurchase program, as well as an insignificant number of shares to facilitate income tax withholding or payments as described above. During the three months ended April 30, 2024, we retired all 1,234,000 shares, which was recorded as a reduction of common stock and additional paid-in capital. These shares were returned to the status of authorized and unissued shares. Our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act (“IRA”). The excise tax of $0.3 million was recognized as part of the cost basis of shares acquired in the condensed consolidated statements of stockholders’ equity during the three months ended April 30, 2024. Subsequent to April 30, 2024 through May 30, 2024, we repurchased approximately 270,000 shares of our common stock for $8.5 million under this program.

During the three months ended April 30, 2023, we repurchased and retired 1,593,000 shares of our common stock for a cost of $60.1 million, including excise tax of $0.4 million.

Issuance of Convertible Preferred Stock

On December 4, 2019, in conjunction with the planned Spin-Off, we announced that an affiliate of Apax Partners would invest up to $400.0 million in us, in the form of convertible preferred stock. Under the terms of the Investment Agreement, the Apax Investor purchased $200.0 million of our Series A Preferred Stock, which closed on May 7, 2020. In connection with the completion of the Spin-Off, the Apax Investor purchased $200.0 million of our Series B Preferred Stock, which closed on April 6, 2021. As of April 30, 2024, Apax’s ownership in us on an as-converted basis was approximately 13.5%. Please refer to Note 9, “Convertible Preferred Stock” for a more detailed discussion of the Apax investment.

Accumulated Other Comprehensive Loss
 
Accumulated other comprehensive loss includes items such as foreign currency translation adjustments and unrealized gains and losses on derivative financial instruments designated as hedges. Accumulated other comprehensive loss is presented as a separate line item in the stockholders’ equity section of our condensed consolidated balance sheets. Accumulated other comprehensive 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 loss by component for the three months ended April 30, 2024:

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(in thousands)
Unrealized Gains (Losses) on Foreign Exchange Contracts Designated as Hedges
Foreign Currency Translation AdjustmentsTotal
Accumulated other comprehensive income (loss) at January 31, 2024$141 $(143,103)$(142,962)
Other comprehensive loss before reclassifications(192)(7,060)(7,252)
Amounts reclassified out of accumulated other comprehensive loss27  27 
Net other comprehensive loss(219)(7,060)(7,279)
Accumulated other comprehensive loss at April 30, 2024$(78)$(150,163)$(150,241)

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 loss into the condensed consolidated statements of operations, with presentation location, for the three months ended April 30, 2024 and 2023 were as follows:

Three Months Ended
April 30,
(in thousands)20242023Financial Statement Location
Unrealized gains (losses) on derivative financial instruments:
Foreign currency forward contracts$ $(2)Cost of recurring revenue
3 (20)Cost of nonrecurring revenue
21 (140)Research and development, net
9 (65)Selling, general and administrative
33 (227)Total, before income taxes
(6)39 (Provision for) benefit from income taxes
$27 $(188)Total, net of income taxes


11.   INCOME TAXES
 
Our interim provision for income taxes is measured using an estimated annual effective income tax rate, adjusted for discrete items that occur within the periods presented.

For the three months ended April 30, 2024, we recorded an income tax provision of $8.0 million on pretax income of $23.3 million, which represented an effective income tax rate of 34.1%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain foreign jurisdictions.

For the three months ended April 30, 2023, we recorded an income tax provision of $4.4 million on pretax income of $8.0 million, which represented an effective income tax rate of 54.6%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain foreign jurisdictions.

We evaluate the realizability of deferred income tax assets on a jurisdictional basis at each reporting date. A valuation allowance is established when it is more-likely-than-not that all or a portion of the deferred income tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred income tax assets are not more-likely-than-not realizable, we establish a valuation allowance. We determined that there is sufficient negative evidence to maintain the valuation allowances against certain state and foreign deferred income tax assets as a result of historical losses in
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the most recent three-year period in certain state and foreign jurisdictions. We intend to maintain valuation allowances until sufficient positive evidence exists to support a reversal.

We had unrecognized income tax benefits of $82.5 million and $83.3 million (excluding interest and penalties) as of April 30, 2024 and January 31, 2024, respectively, that if recognized, would impact our effective income tax rate. The accrued liability for interest and penalties was $7.2 million and $6.4 million at April 30, 2024 and January 31, 2024, respectively. Interest and penalties are recorded as a component of the provision for income taxes in our condensed consolidated statements of operations. We regularly assess the adequacy of our provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes. As a result, we may adjust the reserves for unrecognized income tax benefits for the impact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitation. Further, we believe that it is reasonably possible that the total amount of unrecognized income tax benefits at April 30, 2024 could decrease by approximately $8.1 million in the next twelve months as a result of settlement of certain tax audits or lapses of statutes of limitation. Such decreases may involve the payment of additional income taxes, the adjustment of deferred income taxes including the need for additional valuation allowances, and the recognition of income tax benefits. Our income tax returns are subject to ongoing tax examinations in several jurisdictions in which we operate. We also believe that it is reasonably possible that new issues may be raised by tax authorities or developments in tax audits may occur, which would require increases or decreases to the balance of reserves for unrecognized income tax benefits; however, an estimate of such changes cannot reasonably be made.

The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines address the increasing digitalization of the global economy, re-allocating taxing rights among countries. The European Union and many other member states have committed to adopting Pillar 2 which calls for a global minimum tax of 15% to be effective for tax years beginning in 2024. Certain jurisdictions in which we operate have enacted Pillar 2 legislation and others are considering changes to their tax laws to adopt the Pillar 2 proposals. We are monitoring developments and evaluating the impacts these new rules will have on our tax rate, including eligibility to qualify for safe harbor rules. We do not currently anticipate that the rules will have a material impact on our income tax provision this year.


12.   FAIR VALUE MEASUREMENTS
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
Our assets and liabilities measured at fair value on a recurring basis consisted of the following as of April 30, 2024 and January 31, 2024:

 April 30, 2024
 Fair Value Hierarchy Category
(in thousands)Level 1Level 2Level 3
Assets:   
Money market funds$52,053 $ $ 
U.S. Treasury bills, classified as cash and cash equivalents498   
Foreign currency forward contracts 23  
Contingent consideration receivable  2,345 
Total assets$52,551 $23 $2,345 
Liabilities:   
Foreign currency forward contracts$ $117 $ 
Contingent consideration — business combinations 750 6,182 
Total liabilities$ $867 $6,182 
23

 <
 January 31, 2024
 Fair Value Hierarchy Category
(in thousands)Level 1Level 2Level 3
Assets:   
Money market funds$85,647 $ $ 
U.S. Treasury bills, classified as cash and cash equivalents249   
Foreign currency forward contracts 183  
Contingent consideration receivable   2,685 
Total assets$85,896 $183 $2,685 
Liabilities:   
Foreign currency forward contracts$ $11 $