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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, 2022
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

vrnt-20220430_g1.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 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 64,676,525 shares of the registrant’s common stock outstanding on May 16, 2022.



Verint Systems Inc. and Subsidiaries
Index to Form 10-Q
As of and For the Period Ended April 30, 2022
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, inflation, economic instability, political unrest, armed conflicts (such as the Russian invasion of Ukraine), natural disasters, climate change or other environmental issues, or outbreaks of disease, such as the COVID-19 pandemic, as well as the resulting impact on information technology spending by enterprises or government customers, on our business;
risks that our customers delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or are unable to honor contractual commitments or payment obligations due to liquidity issues or other challenges in their budgets and business;
risks that restrictions resulting from the COVID-19 pandemic or actions taken in response to the pandemic adversely impact our operations or our ability to fulfill orders, complete implementations, or recognize revenue;
risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; 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 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 have greater resources than us, including in areas such as sales and marketing, branding, technological innovation and development, recruiting and retention, and growth;
risks associated with our ability to properly execute on our cloud transition, including 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 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 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, increasing labor costs, applicable regulatory requirements such as vaccination mandates, or otherwise;
challenges associated with selling sophisticated solutions, including with respect to longer sales cycles, more complex sales processes, and assisting customers in understanding and realizing the benefits of our solutions, as well as with developing, offering, implementing, and maintaining a broad solution portfolio;
risks that we may be unable to maintain, expand, and enable our relationships with partners as part of our growth strategy;
risks associated with our reliance on cloud hosting providers and other 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;
ii

risks associated with our significant international operations, 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;
risks associated with a significant part of our business coming from government contracts and associated procurement processes;
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 and protection, government contracts, anti-corruption, trade compliance, 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 software as a service (“SaaS”) or other hosted or managed services offerings or when we are asked to perform service or support;
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, develop operational problems, or be vulnerable to cyber-attacks;
risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions;
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 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 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;
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
iii

risks associated with the 2021 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, 2022. 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)20222022
Assets  
Current Assets:  
Cash and cash equivalents$285,046 $358,805 
Short-term investments745 765 
Accounts receivable, net of allowance for credit losses of $1.3 million and $1.3 million, respectively
149,758 193,831 
Contract assets, net37,993 42,688 
Inventories5,225 5,337 
Prepaid expenses and other current assets56,433 53,752 
  Total current assets535,200 655,178 
Property and equipment, net61,577 64,090 
Operating lease right-of-use assets32,724 35,433 
Goodwill1,327,444 1,353,421 
Intangible assets, net104,838 118,254 
Other assets139,258 134,729 
  Total assets$2,201,041 $2,361,105 
Liabilities, Temporary Equity, and Stockholders' Equity  
Current Liabilities:  
Accounts payable$35,482 $39,501 
Accrued expenses and other current liabilities146,327 168,694 
Contract liabilities258,065 271,271 
  Total current liabilities439,874 479,466 
Long-term debt407,402 406,954 
Long-term contract liabilities15,704 15,872 
Operating lease liabilities29,096 28,457 
Other liabilities37,191 39,456 
  Total liabilities929,267 970,205 
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, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at April 30, 2022 and January 31, 2022, respectively.
200,628 200,628 
Series B Preferred Stock; 200,000 shares issued and outstanding at April 30, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at April 30, 2022 and January 31, 2022, respectively.
235,693 235,693 
  Total temporary equity436,321 436,321 
Stockholders' Equity:
Common stock — $0.001 par value; authorized 120,000,000 shares. Issued 66,677,000 and 66,211,000 shares; outstanding 64,677,000 and 66,211,000 shares at April 30, 2022 and January 31, 2022, respectively.
67 66 
Additional paid-in capital1,141,162 1,125,152 
Treasury stock, at cost — 2,000,000 shares at April 30, 2022; No shares at January 31, 2022.
(105,666) 
Accumulated deficit(54,223)(54,509)
Accumulated other comprehensive loss(148,560)(118,515)
Total Verint Systems Inc. stockholders' equity832,780 952,194 
Noncontrolling interests2,673 2,385 
  Total stockholders' equity835,453 954,579 
  Total liabilities, temporary equity, and stockholders' equity$2,201,041 $2,361,105 

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)20222021
Revenue:
Recurring$159,367 $144,453 
Nonrecurring58,539 56,451 
  Total revenue217,906 200,904 
Cost of revenue:  
Recurring41,028 38,076 
Nonrecurring32,068 29,880 
Amortization of acquired technology3,639 4,384 
  Total cost of revenue76,735 72,340 
Gross profit141,171 128,564 
Operating expenses:  
Research and development, net30,947 29,148 
Selling, general and administrative102,882 87,646 
Amortization of other acquired intangible assets6,844 7,328 
  Total operating expenses140,673 124,122 
Operating income498 4,442 
Other income (expense), net:  
Interest income199 23 
Interest expense(1,501)(5,019)
Losses on early retirements of debt (2,474)
Other income, net1,674 4,050 
  Total other income (expense), net372 (3,420)
Income before provision for (benefit from) income taxes870 1,022 
Provision for (benefit from) income taxes296 (72)
Net income574 1,094 
Net income attributable to noncontrolling interests288 295 
Net income attributable to Verint Systems Inc.286 799 
Dividends on preferred stock(5,200)(3,322)
Net loss attributable to Verint Systems Inc. common shares$(4,914)$(2,523)
Net loss per common share attributable to Verint Systems Inc.:  
Basic$(0.08)$(0.04)
Diluted$(0.08)$(0.04)
Weighted-average common shares outstanding:  
Basic64,947 65,661 
Diluted64,947 65,661 

See notes to condensed consolidated financial statements.
3

VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited) 
 Three Months Ended
April 30,
(in thousands)20222021
Net income$574 $1,094 
Other comprehensive (loss) income, net of reclassification adjustments:
Foreign currency translation adjustments(29,890)2,608 
Distribution of Cognyte Software Ltd. 17,123 
Net decrease from foreign exchange contracts designated as hedges(188)(66)
Net increase from interest rate swap prior to dedesignation as a hedge 1,014 
Net increase from settlement of interest rate swap due to partial early retirement of Term Loan 12,017 
Benefit from income taxes on net (decrease) increase from foreign exchange contracts and interest rate swap designated as hedges33 11 
Other comprehensive (loss) income(30,045)32,707 
Comprehensive (loss) income(29,471)33,801 
Comprehensive income attributable to noncontrolling interests288 295 
Comprehensive (loss) income attributable to Verint Systems Inc.$(29,759)$33,506 
 
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 Other Comprehensive Loss
Total Verint Systems Inc. Stockholders’ Equity Total Stockholders’ Equity
(in thousands) SharesPar
Value
Treasury
Stock
Accumulated
Deficit
Non-controlling
Interests
Balances as of January 31, 202266,211 $66 $1,125,152 $ $(54,509)$(118,515)$952,194 $2,385 $954,579 
Net income— — — — 286 — 286 288 574 
Other comprehensive loss— — — — — (30,045)(30,045) (30,045)
Stock-based compensation — equity-classified awards— — 16,011 — — — 16,011 — 16,011 
Common stock issued for stock awards and stock bonuses466 1 (1)— — — — —  
Treasury stock acquired(2,000)— — (105,666)— — (105,666)— (105,666)
Balances as of April 30, 202264,677 $67 $1,141,162 $(105,666)$(54,223)$(148,560)$832,780 $2,673 $835,453 
Balances as of January 31, 202165,773 $70 $1,726,166 $(208,124)$(113,797)$(136,878)$1,267,437 $15,127 $1,282,564 
Net income— — — — 799 — 799 295 1,094 
Other comprehensive income, excluding the distribution of Cognyte Software Ltd. — — — — — 15,584 15,584 — 15,584 
Distribution of Cognyte Software Ltd. — — (281,665)— — 17,123 (264,542)(12,870)(277,412)
Stock-based compensation — equity-classified awards— — 14,253 — — — 14,253 — 14,253 
Common stock issued for stock awards and stock bonuses827 1 (1)— — — — —  
Common stock repurchased and retired(1,058)(1)(49,580)— — — (49,581)— (49,581)
Treasury stock acquired(543)— — (25,868)— — (25,868)— (25,868)
Purchases of capped calls, net of taxes— — (32,416)— — — (32,416)— (32,416)
Cumulative effect of adoption of ASU No. 2020-06, net of taxes— — (43,445)— 44,875 — 1,430 — 1,430 
Balances as of April 30, 202164,999 $70 $1,333,312 $(233,992)$(68,123)$(104,171)$927,096 $2,552 $929,648 

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) 20222021
Cash flows from operating activities:  
Net income$574 $1,094 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization18,048 19,049 
Stock-based compensation, excluding cash-settled awards18,364 16,405 
Change in fair value of future tranche right (15,810)
Non-cash losses on derivative financial instruments, net 14,374 
Losses on early retirements of debt 2,474 
Other, net2,163 (2,317)
Changes in operating assets and liabilities:  
Accounts receivable41,766 58,026 
Contract assets4,024 (2,184)
Inventories68 (350)
Prepaid expenses and other assets(8,686)(18,781)
Accounts payable and accrued expenses(5,694)(1,510)
Contract liabilities(9,645)(15,524)
Deferred income taxes(1,074)(16,977)
Other, net(5,982)(260)
Net cash provided by operating activities — continuing operations53,926 37,709 
Net cash used in operating activities — discontinued operations (8,007)
Net cash provided by operating activities53,926 29,702 
Cash flows from investing activities:
Purchases of property and equipment(5,224)(4,369)
Maturities and sales of investments250 45,640 
Purchases of investments(250) 
Cash paid for capitalized software development costs(2,003)(1,966)
Change in restricted bank time deposits, and other investing activities, net20 (32)
Net cash (used in) provided by investing activities(7,207)39,273 
Cash flows from financing activities:
Proceeds from issuance of preferred stock 200,000 
Proceeds from borrowings 315,000 
Repayments of borrowings and other financing obligations(775)(310,633)
Purchases of capped calls (40,950)
Payments of debt-related costs(93)(9,422)
Purchases of treasury stock and common stock for retirement(105,213)(75,014)
Preferred stock dividend payments(10,400)(5,200)
Payment for termination of interest rate swap (16,502)
Net cash transferred to Cognyte Software Ltd. (114,657)
Dividend and other settlements received from Cognyte Software Ltd.  40,164 
Payments of contingent consideration for business combinations (financing portion), and other financing activities(1,549)(2,842)
Net cash used in financing activities(118,030)(20,056)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents(2,431)218 
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents(73,742)49,137 
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period358,868 700,133 
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period$285,126 $749,270 
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$285,046 $359,418 
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 Three Months Ended
April 30,
(in thousands) 20222021
Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits 389,795 
Restricted cash and cash equivalents included in prepaid expenses and other current assets23  
Restricted cash and cash equivalents included in other assets57 57 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$285,126 $749,270 

See notes to condensed consolidated financial statements.
7

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 helps brands provide Boundless Customer Engagement™. For more than two decades, the world’s most iconic brands – including more than 85 of the Fortune 100 companies – have trusted Verint to provide the technology and domain expertise they require to effectively build enduring customer relationships. Through the Verint Customer Engagement Cloud Platform, we offer our customers and partners solutions that are based on artificial intelligence (“AI”) and are developed specifically for customer engagement. These solutions automate workflows across enterprise silos to optimize the workforce expense and at the same time drive an elevated consumer experience. These solutions are used by approximately 10,000 organizations in over 175 countries across a diverse set of verticals, including financial services, healthcare, utilities, technology, and government. Our customers include large enterprises with thousands of employees, as well as small to medium sized business (“SMB”) organizations.

Verint is headquartered in Melville, New York, and has approximately 30 offices worldwide. We have approximately 4,400 passionate professionals around the globe exclusively focused on helping brands provide Boundless Customer Engagement™.

Spin-Off of Cognyte Software Ltd.

On February 1, 2021, we completed the previously announced 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. The Spin-Off of Cognyte was completed by way of a pro rata distribution in which holders of Verint’s common stock, par value $0.001 per share, received one ordinary share of Cognyte, no par value, for every share of common stock of Verint held of record as of the close of business on January 25, 2021. After the distribution, we do not beneficially own any ordinary shares of Cognyte and no longer consolidate Cognyte into our financial results for periods ending after January 31, 2021. The Spin-Off was intended to be generally tax-free to our stockholders for U.S. federal income tax purposes.

In connection with the Spin-Off, we and Cognyte entered into a separation and distribution agreement as well as various other agreements that provide a framework for the relationships between the parties going forward, including among others an employee matters agreement, a tax matters agreement, and a transition services agreement, pursuant to which we and Cognyte agreed to provide and/or make available various administrative services and assets to each other for a given period based on each individual service. The performance of services under the transition services agreement was substantially concluded as of January 31, 2022, with only minimal advisory services continuing as of April 30, 2022.

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”). 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, 2022, Apax’s ownership in us on an as-converted basis was approximately 13.0%. 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, 2022 filed with the U.S. Securities and Exchange Commission (“SEC”), except for the recently adopted accounting pronouncements described below. The condensed
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consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for the periods ended April 30, 2022 and 2021, and the condensed consolidated balance sheet as of April 30, 2022, 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, 2022 is derived from the audited consolidated financial statements presented in our Annual Report on Form 10-K for the year ended January 31, 2022. 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, 2022 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.

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. Actual results could differ from those estimates.

In light of the currently unknown extent and duration of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply to certain of our significant accounting policies. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of April 30, 2022 and through the date of this report. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Significant Accounting Policies

There have been no material changes in our significant accounting policies during the three months ended April 30, 2022, 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, 2022.

Recently Adopted Accounting Pronouncements

In May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. We adopted this standard as of February 1, 2022, and the adoption did not have any impact on our condensed consolidated financial statements, as the effect will largely depend on the terms of written call options or financings issued or modified in the future.

New Accounting Pronouncements Not Yet Effective

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-04 provides optional expedients and exceptions for applying GAAP if certain criteria are met to contracts, hedging relationships and other transactions that reference LIBOR or another
9

reference rate expected to be discontinued. In January 2021, the FASB issued Update 2021-01, Reference Rate Reform (Topic 848): Scope. The update provides additional optional guidance on the transition from LIBOR to include derivative instruments that use an interest rate for margining, discounting, or contract price alignment. The standard will ease, if warranted, the requirements for accounting for the future effects of the rate reform. An entity may elect to apply the amendments prospectively through December 31, 2022. A portion of our indebtedness bears interest at variable interest rates, primarily based on euro-dollar LIBOR. We continue to monitor the impact of the discontinuance of LIBOR or another reference rate will have on our contracts, hedging relationships and other transactions. We are currently assessing the impact of this standard on our condensed consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which will require companies to apply the definition of a performance obligation under ASC Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities relating to contracts with customers that are acquired in a business combination. Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. ASU No. 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the impact of this standard on our condensed consolidated financial statements but the ultimate impact is dependent on the size and frequency of future acquisitions and does not affect contract assets or contract liabilities related to acquisitions completed prior to the adoption date.


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
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:
Cloud revenue, which consists primarily of software as a service (“SaaS”) revenue and optional managed services revenue.
SaaS revenue 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.
10

Support revenue, which consists of initial and renewal support.
Nonrecurring revenue primarily consists of our perpetual licenses, hardware, installation services, and business advisory consulting and training services.

Three Months Ended
April 30,
(in thousands)20222021
Recurring revenue:
Bundled SaaS revenue$49,285 $39,309 
Unbundled SaaS revenue45,445 24,283 
Optional managed services revenue15,913 16,458 
Total cloud revenue110,643 80,050 
Support revenue48,724 64,403 
Total recurring revenue159,367 144,453 
Nonrecurring revenue:
Perpetual revenue33,258 29,323 
Professional services revenue25,281 27,128 
Total nonrecurring revenue58,539 56,451 
Total revenue$217,906 $200,904 

Contract Balances

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

(in thousands)April 30, 2022January 31, 2022
Accounts receivable, net$149,758 $193,831 
Contract assets, net$37,993 $42,688 
Long-term contract assets, net (included in other assets)$36,549 $30,510 
Contract liabilities$258,065 $271,271 
Long-term contract liabilities$15,704 $15,872 

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, 2022 and 2021. As of April 30, 2022, 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 20% and Partner B was approximately 11%. As of January 31, 2022, Partner A accounted for approximately 14% and Partner B accounted for less than 10% 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, 2022 and 2021 from amounts included in contract liabilities at the beginning of each period was $96.9 million and $97.6 million, respectively.

Remaining Performance Obligations

Transaction price allocated to remaining performance obligations (“RPO”) 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 up to three years, with a significant portion being one year or less.

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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 is 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, 2022January 31, 2022
RPO:
Expected to be recognized within 1 year$433,052 $447,428 
Expected to be recognized in more than 1 year278,208 274,404 
Total RPO$711,260 $721,832 


3.    NET LOSS PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC.

The following table summarizes the calculation of basic and diluted net loss per common share attributable to Verint Systems Inc. for the three months ended April 30, 2022 and 2021:

Three Months Ended
April 30,
(in thousands, except per share amounts) 20222021
Net income$574 $1,094 
Net income attributable to noncontrolling interests288 295 
Net income attributable to Verint Systems Inc.286 799 
Dividends on preferred stock(5,200)(3,322)
Net loss attributable to Verint Systems Inc. for basic net loss per common share (4,914)(2,523)
Dilutive effect of dividends on preferred stock  
Net loss attributable to Verint Systems Inc. for diluted net loss per common share$(4,914)$(2,523)
Weighted-average shares outstanding: 
Basic64,947 65,661 
Dilutive effect of employee equity award plans  
Dilutive effect of 2021 Notes  
Dilutive effect of 2014 Notes  
Dilutive effect of warrants  
Dilutive effect of assumed conversion of preferred stock  
Diluted64,947 65,661 
Net loss per common share attributable to Verint Systems Inc.:
Basic$(0.08)$(0.04)
Diluted$(0.08)$(0.04)

We excluded the following weighted-average potential common shares from the calculations of diluted net loss per common share during the applicable periods because their inclusion would have been anti-dilutive:

12

Three Months Ended
April 30,
(in thousands) 20222021
Common shares excluded from calculation:  
Stock options and restricted stock-based awards1,571 1,859 
2021 Notes 1,254 
2014 Notes 9,541 
Warrants 9,865 
Series A Preferred Stock5,498 5,498 
Series B Preferred Stock3,980 1,118 

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.

For the three months ended April 30, 2022, the average price of our common stock did not exceed the $62.08 per share conversion price of our 2021 Notes (as defined in Note 7, “Long-Term Debt”), and other requirements for the 2021 Notes 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.

Following the completion of the Spin-Off on February 1, 2021, the strike prices of the conversion features of our 2014 Notes and Warrants (each as defined in Note 7, “Long-Term Debt”) were reduced to $40.55 per share and $47.18 per share, respectively, which increased the equivalent number of underlying common shares to 9,541,000 and 9,865,000, respectively.

Our Note Hedges (as defined in Note 7, “Long-Term Debt”) did not impact our diluted earnings per common share calculation because their effect would be anti-dilutive. However, in connection with the maturity of the 2014 Notes, the common shares delivered to us under the Note Hedges neutralized the dilutive effect of the common shares that we issued under the 2014 Notes to settle the conversion premium. As a result, the settlement of the outstanding 2014 Notes did not increase our outstanding common stock.

Our Warrants had a dilutive impact on net income per common share to the extent that we reported net income for the applicable period and the average market value of our common stock exceeded the strike price of the Warrants. The Warrants expired incrementally on a series of expiration dates between August 30, 2021 and January 21, 2022. At each expiration date the Warrants were exercised when the market price per share of our common stock exceeded the strike price of the Warrants, and we issued an aggregate of 293,143 shares of our common stock as part of the cashless exercise of approximately 5,031,000 Warrants. All outstanding Warrants were exercised or expired as of January 31, 2022.

Further details regarding the 2021 Notes, Capped Calls, 2014 Notes, Note Hedges, and the Warrants appear in Note 7, “Long-Term Debt”.

On December 4, 2019, we announced that the Apax Investor would invest up to $400.0 million in us in the form of convertible preferred stock. On May 7, 2020, the purchase of $200.0 million of our Series A Preferred Stock closed. On April 6, 2021, in connection with the completion of the Spin-Off, the Apax Investor purchased $200.0 million of our Series B Preferred Stock. 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 loss per common share for the three months ended April 30, 2022 and 2021, 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, 2022 and January 31, 2022:
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April 30, 2022
(in thousands) Cost BasisGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents:
Cash and bank time deposits$184,944 $— $— $184,944 
Money market funds25,135 — — 25,135 
Commercial paper74,967 — — 74,967 
Total cash and cash equivalents$285,046 $ $ $285,046 
Short-term investments:
Bank time deposits$745 $ $ $745 
Total short-term investments$745 $ $ $745 

January 31, 2022
(in thousands)Cost BasisGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents:
Cash and bank time deposits$201,769 $— $— $201,769 
Money market funds127,041 — — 127,041 
Commercial paper29,995 — — 29,995 
Total cash and cash equivalents$358,805 $ $ $358,805 
Short-term investments:
Bank time deposits$765 $ $ $765 
Total short-term investments$765 $ $ $765 

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 the three months ended April 30, 2022 and 2021, proceeds from maturities and sales of short-term investments were $0.3 million and $45.6 million, respectively.


5.    BUSINESS COMBINATIONS

Three Months Ended April 30, 2022

We did not complete any business combinations during the three months ended April 30, 2022.

Year Ended January 31, 2022

Conversocial Limited

On August 23, 2021, we completed the acquisition of all of the outstanding shares of Conversocial Limited (together with its subsidiaries, “Conversocial”), a leading messaging platform that enables brands to deliver superior customer experiences. Conversocial has offices in London, United Kingdom and New York, New York.

The purchase price consisted of (i) $53.4 million of cash paid at closing, funded from cash on hand, partially offset by $3.2 million of Conversocial’s cash received in the acquisition, resulting in net cash consideration at closing of $50.2 million; and (ii) $0.2 million of other purchase price adjustments. The purchase price for Conversocial 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 values assigned to identifiable intangible assets acquired were
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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 Conversocial purchase price allocation were synergies in products and technologies, and the addition of a skilled, assembled workforce. The acquisition resulted in the recognition of $31.6 million of goodwill, of which $0.5 million is deductible for income tax purposes and $31.1 million is not deductible.

In connection with the purchase price allocation for Conversocial, 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 $3.4 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 $1.2 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $0.7 million of which is included within prepaid expenses and other current assets and $0.5 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 attributable to the acquisition of Conversocial, consisting primarily of professional fees and integration expenses, were $0.9 million for the three months ended April 30, 2022, and were expensed as incurred and are included in selling, general and administrative expenses.

Revenue and net income (loss) attributable to Conversocial included in our consolidated statement of operations for the three months ended April 30, 2022 was not material.

The purchase price allocation for Conversocial has been prepared on a preliminary basis and changes to the allocation may occur as additional information becomes available during the measurement period (up to one year from the acquisition date). 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 allocation of the purchase price for our acquisition of Conversocial, including adjustments identified subsequent to the valuation date, none of which were material:
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(in thousands)Amount
Components of Purchase Price: 
Cash$53,409 
Other purchase price adjustments(190)
Total purchase price$53,219 
Allocation of Purchase Price: 
Net tangible assets (liabilities): 
Accounts receivable$1,694 
Other current assets, including cash acquired5,302 
Other assets511 
Current and other liabilities(1,945)
Contract liabilities — current and long-term(3,410)
Deferred income taxes(407)
Net tangible assets1,745 
Identifiable intangible assets: 
Customer relationships