UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 20192022

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-20220131_g1.jpg
Verint Systems Inc.
(Exact Name of Registrant as Specified in its Charter) 
Delaware11-3200514
(State or Other Jurisdiction of Incorporation or

Organization)
(I.R.S. Employer Identification No.)
175 Broadhollow Road Melville, New York11747
Melville,NY11747
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (631) 962-9600
Securities registered pursuant to Section 12(b) of the Act:

(631)962-9600
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange
on which registered
The NASDAQ Stock Market, LLC
Common Stock, $.001 par value per share
The NASDAQ Stock Market, LLC
VRNT
(NASDAQ Global Select Market)


Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer o
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
Non-accelerated filer o Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
    
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☑                        

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No þ
 
The aggregate market value of common stock held by non-affiliates of the registrant, based on the closing price for the registrant’s common stock on the NASDAQ Global Select Market on the last business day of the registrant’s most recently completed second fiscal quarter (July 31, 2018)2021) was approximately $2,898,954,000.$2,712,248,000.


There were 65,332,54664,710,802 shares of the registrant’s common stock outstanding on March 15, 2019.2022.


DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Stockholders to be held in 2019,2022, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.




Table of Contents

Verint Systems Inc. and Subsidiaries
Index to Form 10-K
As of and For the Year Ended January 31, 20192022
Page
 

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Cautionary Note on Forward-Looking Statements

This Annual Report on Form 10-K 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 II, Item 7, “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, but are not limited to, those described below under “Risk Factor Summary” as well as other risks, uncertainties, assumptions, and factors described in this Annual Report on Form 10-K, including in Part I, Item 1A “Risk Factors”, in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and described from time to time in our filings with the Securities and Exchange Commission (the “SEC”). All of our forward-looking statements are qualified in their entirety by these factors.

There may be other factors of which we are not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. We do not assume any obligation to publicly update or supplement any forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such statements other than as required by law. 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. Forward-looking statements speak only as of the date of this report or as of the dates indicated in the statements.


Risk Factor Summary

Our business is subject to a number of risks and uncertainties that may affect our business, results of operations, and financial condition, or the trading price of our common stock or other securities. We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risks and uncertainties emerge from time to time. Management cannot predict such new risks and uncertainties, nor can it assess the extent to which any of the risk factors below or any such new risks and uncertainties, or any combination thereof, may impact our business. These risks are more fully described in Part I, Item 1A. “Risk Factors”. These risks include, among others:others, the following:

uncertainties regarding the impact of generalchanges in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, inflation, economic conditions ininstability, political unrest, armed conflicts (such as the United States and abroad, particularly inMarch 2022 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 andby enterprises or government budgets,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 changes,advances and challenges and evolving industry standards and challenges,standards; to adapt to changing market potential from area to area within our markets,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;
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risks due to aggressive competition in all of our markets includingand our ability to keep pace with respect to maintaining revenues, margins, and sufficient levelscompetitors, some of investment in our business and operations;
risks created by the continued consolidation of our competitors or the introduction of large competitors in our markets withwhom have greater resources than we have;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 successfully compete for, consummate,properly execute on our cloud transition, including increased importance of subscription renewal rates, and implement mergersrisk of increased variability in our period-to-period results based on the mix, terms, and acquisitions, including risks associated with valuations, reputational considerations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments;timing of our transactions;
risks relating to our ability to properly execute on growth or strategic initiatives, manage investments in our business and operations, execute on growth initiatives, and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources;
risks associated with our ability 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;enter, due to competition for talent, increasing labor costs, applicable regulatory requirements such as vaccination mandates, or otherwise;
risks that we may be unable to establishmaintain, expand, and maintainenable our relationships with key resellers, partners and systems integrators and 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 components,services, products, or services,components, including companies that may compete with us or work with our competitors;
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 distractions, 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, andincluding in connection with security vulnerabilitiesour SaaS or lapses, including cyber-attacks, information technology system breaches, failures,other hosted or disruptions;managed services offerings or when we are asked to perform service or support;
risks that our productssolutions or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks;
risks associated with our significant international operations, including, among others, in Israel, Europe, and Asia, exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas;

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risks associated with political factors related to our business or operations, including reputational risks associated with our security solutions and our ability to maintain security clearances where required as well as risks associated with a significant amount of our business coming from domestic and foreign government customers;
risks associated with complex and changing local and foreign regulatory environments in the jurisdictions in which we operate, including, among others, with respect to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, relating to both our own operations as well as the use of our solutions by our customers;
challenges associated with selling sophisticated solutions, including with respect to assisting customers in understanding and realizing the benefits of our solutions, and developing, offering, implementing, and maintaining a broad and sophisticated solution portfolio;
challenges associated with pursuing larger sales opportunities, including with respect to longer sales cycles, transaction reductions, deferrals, or cancellations during the sales cycle, risk of customer concentration, our ability to accurately forecast when a sales opportunity will convert to an order,security vulnerabilities or to forecast revenue and expenses, and increased volatility of our operating results from period to period;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 that our customers or partners delay or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in their business, or otherwise;
risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all;
risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings;
risks 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
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consolidated tax group with, CTI, or as a result of the successor to CTI’s business operations, Mavenir Inc. (“Mavenir”), being unwilling or unable to provide us with certain indemnities to which we are entitled;
risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, and personnel and our ability to successfully implement and maintain enhancements to the foregoing and adequate systems and internal controls for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays;
risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits;
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.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
These risks uncertainties, assumptions, and challenges,associated with the 2021 spin-off of our Cyber Intelligence Solutions business, including the possibility that the spin-off transaction does not achieve the benefits anticipated, does not qualify as well as other factors, are discussed in greater detail in “Risk Factors” under Item 1A of this report. You are cautioned nota tax-free transaction, or exposes us 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 reviseunexpected claims 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.


liabilities.
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PART I


Item 1. Business


Our Company


Verint® Systems Inc. (together with its consolidated subsidiaries, “Verint”, the “Company”, “we”, “us”, and “our”, unless the context indicates otherwise) is a global leader in Actionable Intelligence® solutions.

In a world of massive information growth, our solutions empower organizations with crucial, actionable insights and enable decision makers to anticipate, respond, and take action. Today, over 10,000 organizations inhelps brands provide Boundless Customer Engagement™. For more than 180 countries,two decades, the world’s most iconic brands – including overmore than 85 percent of the Fortune 100 use Verint’s Actionable Intelligencecompanies – have trusted Verint to provide the technology and domain expertise they require to effectively build enduring customer relationships.

Verint is uniquely positioned to help organizations close the Engagement Capacity Gap™ with our differentiated Verint Customer Engagement Cloud Platform. Brands today are challenged by new workforce dynamics, ever-expanding customer engagement channels and exponentially more consumer interactions – often while facing limited budgets and resources. As a result, brands are finding it more challenging to deliver the desired customer experience. This creates a capacity gap, which is widening as the digital transformation continues. Organizations are increasingly seeking technology to close this gap with solutions deployed in the cloud andthat are based on premises, to make more informed, timely, and effective decisions.

Our Actionable Intelligence leadership is powered by innovative, enterprise-class software built with artificial intelligence analytics, automation,(AI) and deep domain expertise established by working closely with some ofare developed specifically for customer engagement. These solutions automate workflows across enterprise silos to optimize the most sophisticatedworkforce expense and forward-thinking organizations inat the world. We believe we have one of the industry’s strongest research and development (“R&D”) teams focused on actionable intelligence consisting of approximately one-third of our approximately 6,100 professionals. Our innovative solutions are backed-up by a strong IP portfolio with close to 1,000 patents and patent applications worldwide across data capture, artificial intelligence, machine learning, unstructured data analytics, predictive analytics and automation.same time drive an elevated consumer experience.


HeadquarteredVerint is headquartered in Melville, New York, we support our customersand has more than 30 offices worldwide. We have approximately 4,400 passionate professionals around the globe directly and with an extensive network of selling and support partners.exclusively focused on helping brands provide Boundless Customer Engagement™.


Company Background


We were incorporated in Delaware in February 1994 and completed our initial public offering (“IPO”) in May 2002. Since

On February 1, 2021, we completed the spin-off (the “Spin-Off”) of Cognyte Software Ltd. (“Cognyte”), whose business and operations consisted of our formation, we have consistently expanded our portfolio of Actionable Intelligence solutions, extended our market leadership, and scaled the business through focus on innovation via a combination of organic development and acquisitions.

Verint’s Actionable Intelligence strategy is focused on two use cases and the company has two operating segments: Customer Engagement Solutions (“Customer Engagement”) andformer Cyber Intelligence Solutions(“Cyber Intelligence” business (the “Cognyte Business”). Our two operating segments, into an independent public company. 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. The historical results of operations and financial positions of Cognyte are describedreported as discontinued operations in greater detail below and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this report. See also Note 16 to our consolidated financial statements, “Segment, Geographic, and Significant Customer Information,” included understatements. For further information on discontinued operations, see Note 2, “Discontinued Operations” in Part II, Item 8 of this report for additional information and financial data about each of our operating segments and geographic regions.report.


Through our website at www.verint.com, we make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as amendments to those reports, filed or furnished by us pursuant to Section 13(a) or Section 15(d) of the Exchange Act, free of charge, as soon as reasonably practicable after we file such materials with, or furnish such materials to, the Securities and Exchange Commission (“SEC”).SEC. Our website address set forth above is not intended to be an active link, and information on our website is not incorporated in, and should not be construed to be a part of, this report.


Market Opportunity

The customer engagement market is increasingly embracing digital transformation across the enterprise while also transitioning to the cloud. With the shift to digital, brands are experiencing an increasing number of customer interactions as well as elevated customer expectations for faster and more consistent and contextual responses across any engagement channel. With the constraints of limited budget and resources, brands realize that hiring more workers and increasing workforce expense is not a sustainable solution. This creates an Engagement Capacity Gap™, and as consumer adoption of digital accelerates, the gap is widening. Many brands are already experiencing the consequences of the widening gap and face the risk of declining brand reputation and customer attrition. The market is seeking new customer engagement technology and the opportunity is to use innovative AI, specifically designed for customer engagement automation, that can help brands close this gap.

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The Opportunity: Close the Engagement Capacity Gap™

Market Trends

We believe there are three market trends that are benefiting Verint today: the acceleration of digital transformation, changes in the workforce shaping the future of work, and elevated customer expectations.

Acceleration of Digital Transformation: Digital transformation is accelerating, and it is driving significant change in customer engagement for the contact center and across the enterprise. Long gone are the days when customer journeys were limited to phone calls into a contact center. Today, customer journeys take place across many touchpoints in the enterprise and across many communication and collaboration platforms, with digital leading the way. Customer touchpoints take place in contact centers, in back-office and branch operations, in ecommerce, in digital marketing, in self-service, and in customer experience departments. We believe that the breadth of customer touchpoints across the enterprise and the rapid growth in digital interactions benefit Verint as these trends create demand for new solutions that increase automation and connect organizational silos to increase efficiency and elevate the customer experience.

A Changing Workforce Shapes the Future of Work: Brands are facing unprecedented challenges when it comes to how they manage their changing workforce. Increasingly, brands are managing employees that may work from anywhere. Providing flexibility for where their employees work creates challenges in managing and coaching their teams. And because of the limited resources that are available, brands must find ways to use technology like AI-powered bots to augment their workforce. “The Great Resignation” has put a spotlight on the importance of employee experience and brands must quickly evolve how they recruit, onboard, and retain employees. We believe that these trends benefit Verint as they create demand for new solutions that can shape the future of work, with a workforce of people and bots working together, increased automation, greater employee flexibility, and a greater focus on the voice of the employees.

Elevated Customer Expectations: Customer expectations for faster, more consistent, and contextual responses continue to rise, and meeting those expectations is becoming more difficult with legacy technology. The increase in the number of channels and customer desire to seamlessly shift between channels creates a more complex customer journey for brands to support and manage. Customers also expect that each brand will have a deep understanding of the customer’s relationship with the brand - one that is unified across the enterprise regardless of whether the customer touchpoint is in the contact center, on a website, through a mobile app, or in the back office or branch. We believe that this trend benefits Verint as it creates demand for new solutions that help brands support complex customer journeys and increase automation to meet elevated customer expectations.

Our Actionable Intelligence Strategy

We focus on two Actionable Intelligence use cases: Actionable Intelligence for a Smarter Enterprise and Actionable Intelligence for a Safer World. Our customers across both use cases are looking for innovative solutions that incorporate the most advanced technologies to empower them with actionable insights, critical to achieving their strategic objectives. Our strategy is to combine the latest artificial intelligence, analytics, and automation technology with the deep domain expertise that is unique to each of our markets. We have invested more than $1 billion in R&D over the last decade in our highly innovative Actionable Intelligence platform, which provides a foundation for our solution portfolio across both use cases. This platform can be described along three key pillars:

Data Capture and Fusion. Enables the capture of a wide range of structured and unstructured data, such as operational, transactional, network, web, and social data. It also enables data fusion from multiple sources, different systems, and numerous environments.

Data Analysis and Artificial Intelligence. Facilitates a wide range of algorithms for data analytics and automation, including classification, correlation, anomaly detection, identity extraction, behavioral analysis, artificial intelligence, and predictive analytics. Artificial Intelligence plays an increasingly important role in automating the capture and analytics process to reveal actionable insights in the data.

Data Visualization and Actionable Insights. Supports multiple use cases across Customer Engagement and Cyber Intelligence. Actionable insights are generated from massive amounts of data and are distributed to decision makers based on the specific use case and end-user operational scenarios.


Our strategy is to continue to growhelp brands close the Engagement Capacity Gap with our innovative, AI-powered, cloud platform. Our platform helps brands create significant business across both Actionable Intelligence use cases, leveraging our investment in our Actionable Intelligence platform and continuing to invest in artificial intelligence and analytics to drivevalue throughout the organization by introducing automation and workflows to create technology differentiation. We will also continue to expand our broad portfolios through innovative technology, combined with further developing our domain expertise in both Customer Engagement and Cyber Intelligence. We believe that the combination of a strong technology platform and deep knowledge of our customers has been, and will continue to be, key to our leadership in the actionable intelligence market.

Customer Engagement Solutions

Overview

Organizations have cited effective customer engagement as a key to creating sustainable competitive advantage and as critical to their future success. As a result, many are making it a priority to invest in new customer engagement technologies that can elevate the customer experience, andreduce operating costs while at the same time reduce operating cost.increasing customer satisfaction and revenue opportunities.

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As The
We designed the Verint Customer Engagement CompanyCloud Platform based on an open multi-cloud architecture and with an open strategy. This open approach enables Verint to innovate at an accelerated pace, and helps brands to seamlessly integrate the platform into their specific ecosystem as well as to quickly consume new applications on the platform to address pressing business needs. This approach also empowers our broad set of partners to easily integrate with our platform and provide their customers with value-added services. Our strategy is to continue expanding our partner network to address both the small to medium sized business (SMB) and enterprise segments of the markets across many vertical industries.

vrnt-20220131_g3.jpg

Below are the key elements of our platform, including how we have architected our platform to support multiple cloud environments to accelerate innovation, our open approach to the ecosystem which has made us easy to work with, our market leading Verint Da Vinci™ AI and Analytics™ and our robust Engagement Data Hub:

Open Multi-Cloud Architecture: The shift to cloud, the explosion in AI, and the growth of the application programming interface (API) economy have dramatically changed customer and partner expectations regarding what they need from their core technology vendors. The days of the closed ecosystem are long gone. With an open cloud architecture, the Verint Cloud Platform was designed for multi-cloud support, capable of running in the leading cloud infrastructure environments. The open cloud architecture accelerates innovation by standardizing our approach to microservice container architectures and fully automated development operations to speed development while improving reliability and security.

Open Approach to the Ecosystem: Because it is designed to be open, the Verint Cloud Platform can seamlessly fit into a brand’s enterprise ecosystem. The open and extensible architecture enables the platform to easily integrate and augment the brand’s existing systems of record such as customer relationship management (CRM). The platform is designed to manage a large volume of engagement data and seamlessly integrate with the brand’s enterprise data strategy. The platform is agnostic to communication infrastructure choices and seamlessly integrates with a brand’s existing CCaaS (contact center as-a-service), UCaaS (unified communications as-a-service), and CPaaS (communications platform as-a-service) solutions. Verint’s open cloud platform is more than the technology alone – it provides an opportunity for our customers and partners to build a community through our Verint Connect web portal. Verint Connect can be accessed directly from our cloud platform and provides the tools and resources to foster a rich partner and customer ecosystem around our applications. These tools include a marketplace where Verint and partner components are made available to accelerate time to value with downloadable extensions, and a developer portal where customers can engage directly with the Verint technical community. Our APIs are available to test, with code samples, developer sandboxes, downloadable test clients, education, and discussion forums. Verint Connect also provides access to educational courses, our support teams, a knowledgebase and a community for customers and partners to interact with each other.

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Verint Da Vinci™ AI and Analytics: We believe Verint is an established global leader in cloud and automationleading the market with AI solutions specifically designed for customer engagement withengagement. Verint’s AI capabilities, named Verint Da Vinci™ AI and Analytics are embedded natively in the core of the Verint Cloud Platform. Verint Da Vinci is used by the business applications running in the platform to infuse AI across the platform. Verint Da Vinci capabilities are the result of over two decades of research into optimizing customer engagement and use state-of-the-art machine learning, natural language processing, and deep learning algorithms. Honed on our unique data set, Verint Da Vinci is supported by Verint Labs, which features a large and growing team of data and AI scientists, working on pure and applied research to advance Verint Da Vinci and solve global customer engagement challenges.

Engagement Data Hub: The Verint Cloud Platform includes an Engagement Data Hub. Interaction data captured from multiple voice, video, digital, and social communication systems, experience helping organizations worldwide achieve their strategic objectives. Our strategy is to help organizations elevate customer experiencedata captured from multiple survey systems, and enrichment data from systems of record, are unified and managed in a single data hub at the same time reduce operating cost by simplifying, modernizing, and automating customer engagement across the enterprise.

For most organizations, customer engagement is no longer just a contact center function. It has become a responsibility shared across many partscore of the enterprise. To supportplatform. Engagement data in the needs of our customers, we offer a broad portfolio of customer engagement solutions that address requirements throughout the enterprise, including contact centers, back-office and branch operations, self-service, ecommerce, customer experience, marketing, IT, and compliance.

hub is made available for Verint is a leader in cloud and automation solutions in Customer Engagement with one of the broadest portfolios available, including offeringsDa Vinci algorithms, for Workforce Engagement, Self-Service, Voice of the Customer, and Compliance and Fraud. We leverage the latest in artificial intelligence (AI) and advanced analytics technologyany Verint application which requires access to unlock the potential of automation and intelligence to drive real business impact across the enterprise. We offer organizations a smooth transition to the cloud, and through our hybrid models, organizations can deploy our solutions using a public cloud (SaaS), private cloud, and/or perpetual license approach,it, as well as combinations of these models. Independent industry experts, such as Forrester, Gartner,for the brand’s data lake strategy, to its business intelligence tools, and Ventana Research, have all recognizedto its partners who need data to develop their own applications. Verint as a leader in customer engagement.

We have more than 10,000 customers and a large partner network globally, helping us drive ongoing innovation in our award-winning offerings. We focus on developing customers for life, and have been recognized as a “CRM Service Winner” for 11 consecutive years. Verint has also been named a winner onapplications use the 2019 CRM Watchlist, which recognizes companies that had the greatest impactengagement data in the worldhub to address multiple use cases for brands, including contact center analytics, enterprise analytics, customer journey analytics, workforce compliance with policies and regulations, and fraud mitigation.

Our Customer Engagement Solutions

The Verint Cloud Platform offers a broad set of customer-facing technology insolutions, to help brands close the prior year.Engagement Capacity Gap. The platform is open and modular to offer maximum flexibility. Brands can choose to deploy solutions by starting anywhere based on their business priorities and then expand with other solutions over time to maximize their return on investment.


TrendsIn addition to the platform’s core components described above, brands can deploy a variety of business applications across three solution areas: Digital-First Engagement, Workforce Engagement, and Experience Management.


Many organizations are facing complex, dated, and mostly disparate environments invrnt-20220131_g4.jpg


Digital-First Engagement

Our Digital-First Engagement applications help brands accelerate their legacy customer engagement operations that make it challenging to deliver on the promise of an exceptional customer experience. Faced with higher customer expectations and the need for market differentiation, organizations view customer engagement and elevatingdigital strategy, including through:

Engagement Channels: Brands can digitally transform the customer experience as essential to their future success. To elevate customer experience, many organizations are faced with the need to grow their workforce and find the resulting increase in operating cost unsustainable. As a result, they are looking to invest in new customer engagement technologies that can elevate the customer experience, while reducing operating cost. We believe the following trends are driving growth in our market as organizations seek to:


Reduce Complexity and Become More Agile to Adapt Faster. Many organizations have complex environments that were assembled over many years with multiple legacy systems from many different vendors deployed in silos across the enterprise. To reduce complexity and simplify operations, these organizations are looking for new solutions that are open and flexible and make it easier to address evolving requirements, while protecting their legacy investments. Organizations are also seeking open platforms that address their customer engagement needs across many enterprise functions, including the contact center, back-office and branch operations, self-service, ecommerce, customer experience, marketing, IT, and compliance.

Modernize Customer Engagement IT Architectures. Many organizations are looking to modernize their legacy customer engagement operations by transitioning to the cloud, adopting modern architectures that facilitate the orchestration of disparate systems and the sharing of data across enterprise functions. Organizations which are at different stages of migrating to the cloud and other modernization initiatives are also looking for vendors that can help them evolve customer engagement at their own pace with minimal disruption to their operations.

Automate Customer Engagement Operations. Many organizations are seeking solutions that incorporate artificial intelligence and analytics to reduce manual work and increase workforce efficiency through automation. They also seek to empower their customers with self-service backed by AI-powered bots, and human/bot collaboration, to elevate the customer experience in a fast, personalized way.

Our Strategy

Our strategy was designed working closely with our customers, which include more than 85 percent of the Fortune 100, as well as with our large global partner network. This strategy, as outlined below, is intended to enable organizations to simplify, modernize, and automate their customer engagement operations and turn customer engagement into a sustainable competitive advantage, while reducing complexity and cost in customer operations.

Simplifying Customer Engagement. We offer solutions that are open, easy to deploy, and simple to use. Our open portfolio is designed to integrate into organizations’ current and evolving technology environments and to share data seamlessly across the organization. This enables customers to protect their existing investments, as they can “start anywhere” within the Verint portfolio based on their business-specific requirements and expand over time. Our open portfolio is also compatible with leading providers of call center communications solutions, providing organizations flexibility to select the most suitable communications solution for their contact centers, while leveraging Verint’s portfolio for elevating the customer experience and reducing cost. We believe this compatibility is particularly important now as the contact center communications market is going through change with new entrants offering disruptive approaches to communications.
Modernizing Customer Engagement. We offer organizations a smooth transition to the cloud, and through our hybrid cloud model, they can deploy solutions from our portfolio in public cloud (SaaS), private cloud and perpetual license models, or combinations of these. Our API-rich portfolio provides organizations the ability to easily share data across the enterprise and integrate with third-party applications. Our modern and open portfolio also makes our solutions compatible with IT initiatives for modernizing enterprise architectures.

Automating Customer Engagement. We enable organizations to draw on the power of automation to reduce repetitive, manual tasks, increase employee efficiency, and lower cost. Our strategy is to infuse automation capabilities throughout our solution portfolio to enable employees to focus on more strategic work, empower consumers with AI bots so they can serve themselves, and support human/bot collaboration. Our automation capabilities deliver intelligence and context in real-time, reduce errors in manual work, ensure adherence to compliance requirements, and enable customer experiences that are faster, personalized, and more enjoyable.
Our Offerings

For most organizations, customer engagement is no longer just a contact center function, it is a responsibility shared across the entire enterprise. To support the needs of our customers, we offer a broad portfolio across a wide spectrumnumber of channels, including messaging, social, chat, email, interactive voice response (IVR), and community.

Conversational AI: With our intelligent virtual assistant (IVA), enable human-like conversations across every channel delivering effortless and personal experiences.

Engagement Orchestration: Brands can improve employee efficiency, time to resolution, compliance, and customer satisfaction with workflows and automation that support simple customer channel interactions or complex orchestration of customer engagement functions. Our solutions address requirementsengagements across contact centers, back-officeall channels, devices, and branch operations, self-service, ecommerce, customer experience, marketing, IT,touchpoints.

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Knowledge Management:Enable humans and bots to deliver stellar service with tools for accessing content across the organization, delivering consistent and compliant answers, and achieving compliance functions. Our offerings span the following categories: Workforce Engagement, Self-Service, Voice of the Customer,with regulations and Compliance and Fraud.processes.


Workforce Engagement


Our Workforce Engagement offeringsapplications help brands manage their customer engagement work and their workforce across the enterprise. From the contact center to the back office and branch, these applications enable organizationsbrands to empower a workforce of humans and bots, enable connected work across all silos, and drive real-time work actions. We offer applications for the following:

Forecasting & Scheduling: Understand the work needed to meet and exceed customer expectations, determine the optimal resourcing strategy to address customer expectations with a combination of employee input and automation, and provide staff across all customer touchpoints and across the enterprise with flexible scheduling options for balancing work and personal needs.

Quality & Compliance: Use automation and workflows to make customer interactions across both attended and self-service voice and digital channels more pleasant, productive, and secure, while empowering employees with the skills they need to deliver outstanding performance.

Interaction Insights: Extract insights from structured and unstructured customer interactions and activities across the enterprise to drive strategy, productivity, customer loyalty, and revenue.

Real-Time Work: Support in-the-moment workforce activities with workflows, guidance, assistance, and automation to engageenhance customer experiences, workforce engagement, and compliance, while reducing operating costs.

Experience Management

Our Experience Management applications help brands collect and analyze customer experience data across all customer journeys - including direct, indirect, and inferred experiences - across digital, contact center, and location touchpoints. With a complete and unified view of the customer experience, brands are empowered with insights and actions to improve engagement from every level of the organization. Within this solution area, we offer applications for the following:

Employee Experience: Help brands understand how employees are developing and where they may need coaching to improve.

Customer Experience: Understand the experience brands are delivering to their customers effectivelyacross channels, including voice and digital, and use that data to create a holistic, cross-channel view of customer experience at scale.

Our Experience Management applications can be combined to provide solutions that solve experience management challenges throughout the enterprise, in the contact center, for digital teams, retail locations, marketing organizations and in back-officefor human resources departments.

In addition to the Verint Cloud Platform, Verint continues to develop and branch operations. Theseenhance its Workforce Engagement (WFE) On-Premises Platform. Customers running the On-Premises Platform may also choose to keep their applications on-premises, while adding applications from the Verint Cloud Platform. They can also choose to convert to the Verint Cloud Platform when they are ready to move their applications to the cloud. We are committed to providing our customers with choice and flexibility when it comes to deploying solutions empower employees and managers with modern tools to simplify their jobs, easily access and share knowledge, reduce costs, increase revenue, and orchestrate the delivery of exceptional experiences across all engagement channels.

Self-Service
Our Self-Service offerings enable organizations to improve customer experiences and reduce costs by delivering automated help to their customers that’s faster and requires less effort. These solutions help make customer self-service as simple and effective as assisted service. Leveraging the same intelligence that empowers employees, self-service bots enable customers to succeed at helping themselves, and create a modern, conversational experience that is consistent across voice and digital channels.

Voice of the Customer
Our Voice of the Customer (VoC) offerings enable organizations to improve customer experiences and reduce costs by effectively listening, analyzing, and acting on customer intelligence to drive desired customer and business outcomes. These solutions measure and improve experiences, satisfaction, and loyalty, and they provide feedback to drive improvements in operational processes. Within our VoC solution set, we offer a unique science-driven methodology that helps business leaders make better decisions and prioritize where to invest limited resources across the customer journey. And with benchmarks across more than 800 industries and subcategories, we allow companies to benchmark their customer experience over time, against their peers, and against best in class. Our VoC offerings are deployed across the organization by functions including, customer support, marketing, customer experience, and others.

Compliance and Fraud
Our Compliance and Fraud offerings enable organizations to avoid fines and minimize fraud. Our Compliance solutions support regulatory requirements, such as the General Data Protection Regulation (GDPR), in contact centers, financial trading compliance, emergency response operations, and other environments. Our Fraud solutions help investigate and mitigate the risk of contact center identity fraud, branch banking fraud, and self-service systems fraud. 

All our products are availableon-premises or in the cloud and offered in a hybrid cloud model for maximumcloud. We can help our customers evolve customer flexibility. Our cloud strategy is to help customers transition to the cloudengagement at their own pace. pace, while protecting their existing investments with minimal disruption to their operations.

Our cloud offering scalesCustomers

Our customer engagement 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 SMB organizations. In the year ended January 31, 2022, we derived approximately 69%, 20%, and 11% of our revenue from SMBsales to very large enterprise customers with cloud deployments in many countries around the world.Americas, in Europe, the Middle East and Africa (“EMEA”), and in the Asia-Pacific (“APAC”) regions, respectively. No end-customer represented more than 10% of our total revenue during the years ended January 31, 2022, 2021, or 2020. In the year ended January 31, 2021, we had an authorized

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We offerglobal reseller of our customers solutions that represented approximately 10% of our total revenue, but did not represent 10% or greater of our total revenue for the years ended January 31, 2022 or 2020.

Seasonality and Cyclicality

As is typical for many software and technology companies, our business is subject to seasonal and cyclical factors. In most years, our revenue and operating income are comprisedtypically highest in the fourth quarter and lowest in the first quarter (prior to the impact of oneunusual or morenonrecurring items). Moreover, revenue and operating income in the first quarter of a new year may be lower than in the fourth quarter of the following products (listedpreceding year, in alphabetical order):

Product Name

Description

Automated Quality Management
Automates the entire quality management (QM) process, from scoring evaluations to assigning coaching. Delivers consistent, calibrated scoring and new levels of employee performance and transparency, bringing a modern, employee-empowering, and cost-effective approach to QM.

Automated VerificationAutomates testing and verification of systems across multiple applications (e.g., ACD, IVR, recording, desktop applications, routers, firewalls) to ensure optimum operation. Actively checks systems for issues and proactively simulates user transactions to validate performance. Provides enhanced control and awareness of system health, status, and performance to avoid issues with service availability, data integrity, and data breaches.
Branch Surveillance and Investigation
Helps financial institutions, retailers, and other organizations identify security threats and vulnerabilities, mitigate risk, ensure operational compliance, and improve fraud investigations. Offers real-time intelligence and protection to enhance the customer experience, while safeguarding people, property, and assets. Features video recording and analytics to heighten protection, improve performance, reduce costs, and provide rapid action/response when required.


Case Management
Allows organizations to automate and adapt business processes rapidly in response to changing market and customer requirements. Tracks the progress of customer and internal issues as they are resolved between various parties in the organization, helping deliver end-to-end case lifecycle management using business rules and service level agreements (SLAs).

Chat Engagement
Enables employees to help online customers in real-time. Provides customers with a quick, easy way to communicate with customer service employees via a simple text interface, and helps employees rapidly address needs and decrease abandonment of online transactions. Guides customers through online processes using chat in conjunction with co-browsing.

Coaching/Learning
Provides a framework for consistent, performance-based mentoring of employeessome years, potentially by supervisors and the automated delivery of training right to the employee desktop. Can be scheduled at the best times to minimize impact on service levels, and enable employees to engage and improve their skills on-demand.

Compliance Recording
Reliably and securely captures, encrypts, archives, searches, and replays interactions for compliance and liability protection. Enables organizations and employees to protect credit card data and personal information (data compliance), adhere to rules for recording and telemarketing practices (communications compliance), proactively address complaints, and help prevent identity theft.

Customer Communities
Enables organizations to establish and manage online communities for their customers and partners to support social customer service, digital marketing, and engagement. Fosters self-service, knowledge sharing, collaboration, and networking through peer-to-peer support forums, communications blogs, and online resources, such as discussion forums, product documentation, and how-to videos.

Desktop and Process Analytics
Provides organizations with visibility into how employees use different systems, applications, and processes to perform their functions. Helps identify opportunities to improve business processes, increase employee productivity and capacity, enhance compliance, and heighten the overall efficiency, cost, and quality of customer service.

Digital Feedback
Features an enterprise solution that captures customer-initiated feedback via web and mobile channels during key moments in the customer journey, and empowers organizations to analyze and act in real-time on that feedback to deliver demonstrable business value.

Email Engagement
Automates the process of capturing, documenting, interpreting, and routing emails, helping organizations respond to customers quickly and consistently. Routes messages to the most appropriate employee based on skills, entitlements, and availability, providing standard templates and responses, a central knowledge base, and unified customer history across channels. Features a secure web portal for customers to send/receive confidential information as needed.

Employee Desktop
Unifies the disparate applications on an employee’s desktop. Presents on one screen all of the contextual customer information, relevant knowledge, and business process guidance that an employee needs to handle interactions in any channel, without having to toggle between numerous screens and applications.

Enterprise Feedback
Provides an enterprise-class platform to help organizations gain a complete view of the voice of their customers and employees through company-initiated surveys delivered via mobile, email, web, IVR, and SMS channels, together with the ability to analyze and act on that feedback to achieve desired outcomes.

Financial ComplianceImproves compliance in trading room, contact center, and financial back-office operations by capturing voice, video, desktop, and text interactions across multiple channels, including collaboration tools (e.g., Skype for Business and Cisco Jabber). Delivers reliable, robust recording, indexing, archiving, and retrieval of interactions and transactions to address complex challenges, including MiFID II, trading floor compliance, collaboration compliance, legal hold, and more.

Full-Time RecordingEnables enterprise recording to support customer engagement. Reliably and securely captures, encrypts, indexes, archives, searches, and replays audio, screen, and other methods of interaction from different and mixed recording environments, and couples these capabilities with powerful speech analytics to provide greater value from recorded interactions.
Gamification
Applies automated game mechanics to energize employee engagement, communicate personal and organizational goals, measure and acknowledge achievements, inspire collaboration, and motivate teams. Delivers key performance indicator (KPI)-linked programs to transform the process of acquiring, maintaining, and improving the skills, knowledge, and behaviors necessary for employees to enhance quality, customer engagement, sales, and other expertise.

Identity Analytics
Combines automated recorder-embedded “passive” voice biometrics technology with multifactor metadata analytics to screen calls against the databases of both customer and known fraudster voiceprints. Offers “upstream fraud detection” functionality to identify suspicious caller behavior within voice self-service interactions, and helps improve experiences by authenticating legitimate customers faster, reducing call handling and fraud-related losses.

Interaction Analytics
Unifies data visualization of top categories, terms and themes from contact center interactions across voice-based and text-based channels, using purpose-built engines for each interaction type. Provides the ability to see high-level trends impacting the business, as well as drill down into specific interactions.

Internal Communities
Supports employee engagement, collaboration, and enterprise social networking through open and closed micro-communities, peer-to-peer support forums, communications blogs, wikis, activity streams, and online resources. Enables knowledge and best practice sharing in a high-value, low-effort manner, enhancing relationships, productivity, and efficiency.

Knowledge ManagementProvides a central repository of up-to-date information to deliver the right knowledge to users in the contact center and to customers through self-service. Provides answers quickly by searching, browsing, or following guided processes, with personalized results tailored to the customer’s context. Helps increase first contact resolution, improve the consistency and quality of answers, enhance compliance with regulations and company processes, and reduce employee training time.
Mobile Workforce
Comprises a family of mobile applications, offering anytime, anywhere access to important operational information. Allows employees to access and change schedules and view performance information, and enables the convenient collection of in-the-moment feedback through device-friendly survey formats over the web, email, and SMS, as well as on site in retail stores and sporting venues.

Performance Management
Provides a complete, closed-loop solution to manage individual and departmental performance against goals. Provides a comprehensive view of KPIs using performance scorecards to report on customer interactions, customer experience trends, and contact center, branch, and back-office staff performance. Leverages scorecards, along with learning, coaching, and gamification as part of a broader capability.

Robotic Process Automation
Automates repetitive manual processes, allowing employees to focus on more complex and value-added customer-facing activities. Leverages software robots to execute specific tasks or entire multistep processes within a functional area, leading to improved quality and productivity.

Social Analytics
Collects, analyzes, and reports relevant insights derived from posts and content published to social media sites and messaging services. Reveals intelligence and trends related to sentiment, emerging topics and themes, and locations, enabling organizations to understand the voice of the customer and giving employees the means and insight they need to respond to/address issues and concerns expressed through these channels.


Speech Transcription
Enables the export of transcripts of 100% of contact center telephone interactions for use by big data, predictive and business insight teams. Transcripts are speaker-separated, time stamped, and available in over 60 languages and variants and in 3 different formats based on intended use.

Speech AnalyticsAutomatically analyzes and identifies trends, themes, and the root causes driving customer call volumes in order to proactively respond to issues and act on opportunities that enhance the customer experience and support business objectives.
Text Analytics
Performs root cause analysis on the drivers and trends driving customer interactions through text-based communications channels-including survey verbatims, email, and customer service chat sessions-to improve performance, optimize processes, and enhance the customer experience.

Virtual Assistant
Uses artificial intelligence (AI) and machine learning to provide conversational access to information, get answers to complex questions, and orchestrate self-service transactions across voice and digital channels. Predicts user intent based on context and initiates best next actions based on business rules in order to deliver successful outcomes.

Voice Self-Service
Provides natural language, speech-enabled voice self-service enhanced by real-time, contextual automation and analytics-driven personalization. Leverages business intelligence to analyze and adapt call flow and the pace of interactions based on caller behavior, and to continually improve performance over time.

Voice Self-Service Fraud Detection
Automates and provides upstream fraud detection based on real-time analysis of over 60 parameters of caller behavior in voice self-service across multiple calls and programs. Identifies and flags suspicious callers based on threat level, and alerts the enterprise so action can be taken to mitigate risk prior to account takeover.

Web/Mobile Self-Service
Enables customers to self-serve on the web or via their mobile devices. Unites knowledge management, case management, process management, and channel escalation to enable personalized web and mobile self-service experiences. Features advanced cross-channel messaging, enabling customers to start a digital interaction on one device and continue it on another, as well as seamlessly transition from self-service to live service within a mobile app, mobile web, or web application.

Work Manager
Helps increase productivity, meet service delivery goals, and enhance customer satisfaction by prioritizing the work of individual employees, helping ensure they focus on the right activities at the right time. Provides a practical approach to managing claims processing, loan production, and other blended and back-office functions by prioritizing work items to meet SLAs based on available employees with the right skills.

Workforce Management
Enables organizations to efficiently plan, forecast, and schedule employees to meet service level goals. Provides visibility into and a singular management tool for the work, the people, and the processes across customer touchpoints in contact center, branch and back-office operations.


Cyber Intelligence Solutions

Overview

Verint is a leading global providersignificant margin. In addition, we generally receive a higher volume of security and intelligence data mining software. Our solutions are deployedorders in over 100 countries, helping governments, critical infrastructure and enterprise organizations to neutralize and prevent terror, crime and cyber threats. Our data mining software helps security organizations capture and analyze data from multiple sources and turnthe last month of a quarter, with orders concentrated in the later part of that data into actionable insights. Verint has over two decades of cyber intelligence experience leveraging data mining software, deep domain expertise and advanced intelligence methodologies to address a broad range of security missions for intelligence, cyber and physical security organizations.


month. We believe that security organizations face new kinds of sophisticated threats that are increasingly complex,these seasonal and they seek to deploy data mining solutions that are powered by predictive intelligencecyclical factors primarily reflect customer spending patterns and incorporate a higher level of automation using artificial intelligence and other advanced analytic technologies. Our significant experience serving leading security agencies around the world provides us with a unique perspective on our customers’ evolving needs and allows us to respond quickly to new market trends.

Verint’s growth strategy is to expand our portfolio to address market trends and to offer our solutions directly and through partners to our growing installed base and to new customers globally.

Trends

We believe that the following trends are driving demand for security and intelligence data mining software:

Security Threats Becoming Increasingly Pervasive and Complex. Governments, critical infrastructure providers, and enterprises face many types of security threats from criminal and terrorist organizations and foreign governments. Some of these security threats come from well-organized and well-funded organizations that utilize new and increasingly sophisticated methods. As a result, security and intelligence organizations find it more difficult and complicated to detect, investigate and neutralize threats. Many of these organizations are seeking to deploy more advanced data mining solutions that can help them capture and analyze data from multiple sources to effectively and efficiently address the challenge of increased sophistication and complexity.

Shortage of Security Analysts Increasing the Need for Automation. Security organizations are using data mining solutions to help conduct investigations and generate actionable insights. Typically, data mining solutions require security organizations to employ intelligence analysts and data scientists to operate them. However, there is a shortage of such qualified personnel globally leading to elongated investigations and increased risk that security threats go undetected or are not addressed. To overcome this challenge, many security organizations are seeking advanced data mining solutions that automate functions historically performed manually to improve the quality and speed of investigations and intelligence production. These organizations are also increasingly seeking artificial intelligence and other advanced data analysis tools to gain intelligence faster with fewer analysts and data scientists.

Need for Predictive Intelligence as a Force Multiplier. Predictive intelligence is generated by correlating massive amounts of data from a wide range of disparate sources to uncover previously unknown connections, identify suspicious behaviors using advanced analytics, and predict future events. Predictive intelligence is a force multiplier, enabling security organizations to allocate resources more effectively to prioritize various operational tasks based on actionable intelligence. Security organizations are seeking advanced data mining solutions that can generate accurate and actionable predictive intelligence to shorten investigation times and empower their teams with greater insights.

Our Strategy
We believe we are well positioned to address these market trends. The key elements of our growth strategy include:

Addressing the Increased Complexity of Security Threats with Advanced Data Mining Software, Proven Intelligence Methodologies and Deep Domain Expertise. Verint has a long history of working closely with leading security organizations around the world and has designed its data mining software portfolio based on a thorough understanding of our customers’ needs, proven intelligence methodologies and deep domain expertise. We believe this experience positions us well to expand existing customer relationships, win new customers, and continue to grow our data mining software portfolio to address evolving and more complex security needs.

Leveraging Automation Technologies to Reduce Dependency on Security Analysts and Data Scientists. Security analysts and data scientists are critical to conducting security investigations in an environment of growing complexity. However, given a shortage of these skilled resources, it is important to reduce the dependency on them by automating tedious and repetitive functions that previously required manual operation. Our strategy is to increase the use of automation and artificial intelligence technologies across our portfolio and introduce advanced data mining software that can further automate the intelligence and investigative processes for our customers, while reducing dependency on large numbers of intelligence analysts and data scientists.

Improving the Effectiveness of Security Organizations with Predictive Intelligence Capabilities. Our data mining software portfolio provides our customers the capability to capture and analyze data and to generate predictive intelligence.Our strategy is to further enhance our software to empower security organizations with more accurate

predictive intelligence by leveraging analytics and machine learning technologies that can correlate massive amounts of data from a wide range of disparate sources. Our solutions are engineered to collect and analyze vast amounts of data from multiple and diverse sources and leverage artificial intelligence,budget cycles, as well as other advanced analytic tools, to generate intelligencethe impact of compensation incentive plans for our sales personnel. While seasonal and predict future events, shortening the time to intelligence, reducing the number of routine tasks, and empowering our customers to execute their missions faster and more efficiently.

Our Products

Product NameDescription
Cyber SecurityOur cyber security software captures cyber security data and applies machine learning and behavioral analytics to empower an organization’s Security Operations Center. “Virtual Analysts” automate the process of detecting, investigating and responding to advanced cyber-attacks and driving intelligence to the security operations team.
Intelligence Fusion Center (IFC) and Web and Social Intelligence
Our Intelligence Fusion software enables security analysts to work more efficiently by fusing cross-organizational data sources, generating and surfacing valuable insights, and turning knowledge into actions and predictive intelligence. Our Web & Social Intelligence software enables the collection, fusion and analysis of data from the web, including the deep web and dark nets, from social media blogs, and from the media.

Network Intelligence Suite
Our network intelligence data mining software helps security organizations generate critical intelligence from large amounts of data captured from a variety of network, internal and external open sources.

Situational IntelligenceOur Situational Intelligence software delivers intelligence to help organizations increase situational awareness, improve security responsiveness and realize greater operational efficiency. It captures and fuses data from multiple systems and sensors, such as access control, video, intrusion, fire, public safety, weather, traffic, first responder, and other mobile device systems. It enables security organizations to quickly fuse, analyze, and report information, and take action on risks, alarms, and incidents.


Our Solutions: By Industry

Verint offers its broad portfolio of cyber intelligence solutions to government and enterprise customers.

Government. National security and law enforcement agencies are using Verint solutions to prevent terrorism, collect intelligence and investigate security threats and to fight a wide range of criminal activity,cyclical factors such as arson, drug trafficking, homicides, human trafficking, identity theft, kidnapping, poaching, illegal immigration, financial crimes,these are common in the software and other organized crimes.

Enterprise. Commercial organizations and critical infrastructure, such as airports, transportation systems, power plants, public and government facilities, are using Verint solutions to improve efficiency and effectiveness of physical security and to detect and respond to cyber threats. In addition, telecommunication carriers are using Verint solutions to comply with certain government regulations requiring them to assist the government in their evidence and intelligence collection processes.

Our Solutions: By Security Challenge

Below are examples of the challenges security organizations around the world are using Verint’s Intelligence-Powered Security portfolio to address:

Counter terrorism - Tracking terrorist organizations and generating actionable intelligence for detecting and preventing terror attacks.


Fighting Transnational Drug Trafficking - Identifying local and international drug networks, running complex investigations, generating legal evidence, and taking action against traffickers.

Crime Syndicate Investigations - Accelerating investigations through behavioral profiles and visual link analysis and revealing investigation clues.

Cyber Security for Advanced Threats - Detecting breaches across attack chains and automating cyber investigations and threat hunting.

Physical Security, Emergency Management & Response -Evaluating and responding more efficiently to incidents to ensure facility and asset protection, as well as employee safety.

Financial Crime Investigations - Fusing data from financial databases, the web and other sources to identify and investigate suspicious financial transactions.

Locating Natural Disaster Survivors - Empowering field teams with intelligence to quickly zero-in on areas of need and provide urgent help.

Border Control - Tracking and preventing illegal border activity.

Customer Services

We offertechnology industry, this pattern should not be considered a range of customer services, including implementation and training, consulting and managed services, and maintenance and support, to help our customers maximize their return on investment in our solutions.

Implementation and Training

Our solutions are implemented by our service organizations, authorized partners, resellers, or by our customers themselves. Our implementation services include project management, system installation, and commissioning, including integrating our solutions with our customers’ environments and third-party solutions. Our training programs are designed to enable our customers to use our solutions effectively and to maximize the valuereliable indicator of our solutions. Our Customer Engagement solutions business includes training programs designed to certifyfuture revenue or financial performance. Many other factors, including general economic conditions, also have an impact on our partners to sell, install, and support our solutions. Customer and partner training is provided at the customer site, at our training centers around the world, and/or remotely online.

Consulting

Our management consulting capabilities include business strategy, process excellence, performance management, intelligence methodologies, and project and program management, and are designed to help our customers maximize the value of our solutions in their own environments.

Managed Services

We offer a range of managed services designed to help our customers effectively run their operations, and maximize business and intelligence insights. These managed services are recurringfinancial results. See “Risk Factors” in nature and can be delivered in conjunction with Verint’s technology or onItem 1A of this report for a standalone basis and help to deepen our trusted partner relationships with our customers.

Maintenance and Support

We offer a rangemore detailed discussion of customer maintenance and support plans to our customers and resellers,factors which may include phoneaffect our business and web access to technical personnel up to 24-hours-a-day, seven-days-a-week. Our support programs are designed to help ensure long-term, successful use of our solutions. We believe that customer support is critical to retaining and expanding our customer base. Our Customer Engagement solutions are generally sold with a warranty of one year for hardware and 90 days for software. Our Cyber Intelligence solutionsare generally sold with warranties that typically range from 90 days to three years and, in some cases, longer. In addition, customers are typically provided the option to purchase maintenance plans that provide a range of services, such as telephone support, advanced replacement, upgrades when and if available, and on-site repair or replacement. Currently, the majority of our maintenance revenue is related to our Customer Engagement solutions.financial results.


Direct and Indirect Sales


We sell our solutions through our direct sales teams and indirect channels, including distributors, systems integrators, value-added resellers (“VARs”), and OEM partners. Approximately half of our overall sales are made through partners, distributors, resellers, and system integrators.

Each of our solutions is sold by trained, dedicated, regionally-organized direct and indirect sales teams.
channels. Our direct sales teams are focused on large and mid-sized customers and, in many cases, co-sell with our other channels and sales agents.
indirect channels. Our indirect channels also address large and midsize customers, as well as smaller customers. Our direct sales teams are focused on developing and supporting relationships with our indirect channels which provide us with broader market coverage, including access to their customer bases, integration services, and presence in certain geographies and vertical markets.

Our sales teams are supported by business consultants, solutions specialists, and pre-salespresales engineers who, during the sales process, help determine customer requirements and develop technical responses to those requirements.

Customer Success

We sell directlyhelp our customers achieve success and indirectlymaximize their return on investment in bothour solutions through a range of services.

Cloud Operations. We deploy our segments. See “Risk FactorsRisks Relatedcloud applications in multiple cloud environments, including the leading cloud infrastructure environments. We provide our customers with service-level commitments with respect to Our BusinessCompetition, Markets,uptime and OperationsIf wesupport.

Managed Services. We offer a range of managed services that are unable to establishrecurring in nature and maintain ourcan be delivered in conjunction with Verint’s technology or on a standalone basis, which help build strong relationships with third parties that marketour customers.

Implementation. Configurations, commissioning, integrations, and sellother implementation work can be performed by us, our products,authorized partners, or by end customers themselves.

Training. Training programs are designed for customers and to certify our businesspartners. Customer and ability to grow could be materially adversely affected” under Item 1A of this report for a more detailed discussion of certain sales and distribution risks that we face.

Customers

Our solutions are used by over 10,000 organizations in more than 180 countries. Inpartner training is provided at the year ended January 31, 2019, we derived approximately 65% and 35% ofcustomer site, at our revenue from the sale of our Customer Engagement and Cyber Intelligence solutions, respectively. We are party to contracts with customers in both of our segments, the loss of which could have a material adverse effect on the segment.

In the year ended January 31, 2019, we derived approximately 54%, 26%, and 20% of our revenue from sales to end users in the Americas, in Europe, the Middle East and Africa (“EMEA”), and in the Asia-Pacific (“APAC”) regions, respectively.See also Note 16, “Segment, Geographic, and Significant Customer Information” to our consolidated financial statements included under Item 8 of this report for additional information and financial data about each of our operating segments and geographic regions.

For the year ended January 31, 2019, approximately one third of our business was generated from contracts with various governmentstraining centers around the world, including local, regional,and/or remotely online.

Consulting. We and national government agencies. Due toour partners offer customers help in maximizing the unique nature of the terms and conditions associated with government contracts generally, our government contracts may be subject to renegotiation or termination at the election of the government customer. Somevalue of our customer engagements require ussolutions, including consulting on business strategy, process excellence, performance management, and project and program management.

Support. We offer a range of support plans to have security credentials orour customers and partners, designed to participate in projects through an approved legal entity.

Seasonality and Cyclicality

As is typical for many software and technology companies, our business is subject to seasonal and cyclical factors. In most years, our revenue and operating income are typically highest in the fourth quarter and lowest in the first quarter (prior to the impact of unusual or nonrecurring items). Moreover, revenue and operating income in the first quarter of a new year may be lower than in the fourth quarter of the preceding year, in some years, potentially by a significant margin. In addition, we generally receive a higher volume of orders in the last month of a quarter, with orders concentrated in the later part of that month. We believe that these seasonal and cyclical factors primarily reflect customer spending patterns and budget cycles, as well as the impact of compensation incentive plans for our sales personnel. While seasonal and cyclical factors such as these are common in the software and technology industry, this pattern should not be considered a reliable indicatorhelp ensure long-term successful use of our future revenue or financial performance. Many other factors, including general economic conditions, also have an impact on our business and financial results. See “Risk Factors” under Item 1A of this report for a more detailed discussion of factors which may affect our business and financial results.solutions.


Research and Development


We continue to enhance the features and performance of our existing solutions and to introduce new solutions through extensive research and development (R&D) activities. Our R&D activities.team, which is comprised of engineers, data scientists, PhDs and other technical experts, have deep software expertise, particularly in the areas of artificial intelligence, data aggregation and curation, machine learning, specialized language and vocabulary processing, and other key areas that support our strategic initiatives. In addition to the development of new solutions and the addition of capabilities to existing solutions, our R&D activities include cloud platform and shared service investment, quality assurance, and advanced technical support for our customer services organization. In certain instances, primarily in our Cyber Intelligence segment, we may tailor our products to meet the particular requirements of our

customers. R&D is performed primarily in the United States, Israel, the United Kingdom, Ireland, the Netherlands, Hungary, and Indonesia for our Customer Engagement segment; and in Israel, Germany, Brazil, Cyprus, Taiwan, the Netherlands, Romania, and Bulgaria for our Cyber Intelligence segment.Indonesia.


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To support our research and development efforts, we make significant investments in R&D every year. We have a well-defined roadmap to introduce new features and functionality that we believe will further enhance the value of our solutions to our customers. We allocate our R&D resources in response to market research and customer demand for additional features and solutions. Our development strategy involves rolling out initial releases of our products and cloud services and adding features over time. We incorporate productconsider feedback received from our customers intoas part of our product development process. While the majority of our products are developed internally, in some cases, we also acquire or license technologies, products, and applications from third parties based on timing and cost considerations. See “Risk FactorsRisks Related to Our BusinessMarkets, Competition, Markets, and OperationsFor certain services, products, components, or services,components, including our cloud hosting operations, we rely on third-party suppliers, manufacturers, and partners, and if these relationships are disrupted, lost, or must be terminated, weproviders, which may not be able to obtain substitutes or may face other difficulties” undercreate significant exposure for us” in Item 1A of this report.


As noted above, a significant portion of our R&D operations is located outside the United States. We have derived benefits from participation inThird-Party Suppliers

For certain government-sponsored programs, including those of the Israel Innovation Authority (“IIA”), formerly the Office of the Chief Scientist (“OCS”), and in other jurisdictions for the support of R&D activities conducted in those locations. In the case of Israel, the Israeli law under which our IIA grants are made limits our ability to manufactureservices, products, or transfer technologies, developed using these grants outside of Israel without permission from the IIA. See “Risk FactorsRisks Related to Our BusinessCompetition, Markets, and OperationsBecause we have significant foreign operations and business, we are subject to geopolitical and other risks that could materially adversely affect our results” and “Risk FactorsRisks Related to Our BusinessCompetition, Markets, and OperationsConditions in and our relationship to Israel may materially adversely affect our operations and personnel and may limit our ability to produce and sell our products or engage in certain transactions” under Item 1A of this report for a discussion of certain risks associated with our foreign operations.

Manufacturing, Suppliers, and Service Providers

While our primary focus is on developing and producing software, to accommodate customers’ desire for turnkey solutions, we also deliver solutions that incorporate third-party hardware components. This applies mainly to our Cyber Intelligence segment, as the majority of the solutions from our Customer Engagement segment are comprised of software and do not incorporate hardware components. We utilize both unaffiliated manufacturing subcontractors, as well as our internal operations, to produce, assemble, and deliver solutions incorporating hardware components. These internal operations consist primarily of installing our software on externally purchased hardware components, final assembly, repair, and testing, which involves the application of extensive quality control procedures to materials, components, subassemblies, and systems. We also perform system integration functions prior to shipping turnkey solutions to our customers. Our internal operations are performed primarily in our German, Israeli, U.S. and Cypriot facilities for solutions in our Cyber Intelligence segment, and in our U.S. facility for certain solutions in our Customer Engagement segment. Although we have occasionally experienced delays and shortages in the supply of proprietary components in the past, we have typically been able to obtain adequate supplies of all material components in a timely manner from alternative sources, when necessary. We also rely on third parties to provide certain services to us or to our customers. We deploy our cloud solutions on third-party cloud computing and hosting platforms. We provide our customers with service level commitments with respect to uptime and accessibility for these hosted offerings. See “Risk FactorsRisks Related to Our BusinessCompetition, Markets, and OperationsFor certain products, components, or services, including our cloud hosting operations, we rely on third-party suppliers, manufacturers,providers, which may create significant exposure for us. See “Risk Factors—Risks Related to Our Business—Markets, Competition, and partners, and if these relationships are disrupted, lost,Operations—For certain services, products, or must be terminated,components, including our cloud hosting operations, we rely on third-party providers, which may not be able to obtain substitutes or may face other difficulties” undercreate significant exposure for us” in Item 1A of this report for a discussion of risks associated with our manufacturing operationssuppliers.

Human Capital

At Verint, we are committed to conducting our business in an ethical manner and suppliers.to creating value for all of our stakeholders: customers and partners, employees and shareholders, the communities in which we work, and the global community at large.

Employees


As of January 31, 2019,2022, we employed approximately 6,1004,400 professionals, including certain contractors, with approximately 41%45%, 25%, 23%34%, and 11%21% of our employees and contractors located in the Americas, Israel, EMEA (excluding(including Israel), and APAC, respectively.

We consider our relationship with our employees to be good and a critical factor in our success. The market for talent in our industry is highly competitive. See Item 1A of this report for a more detailed discussion of the human capital risks we face.

Our employees in the United States are not covered by any collective bargaining agreements. In some cases, our employees outside the United States are automatically subject to certain protections negotiated by organized labor in those countries directly with the government or trade unions, or are automatically entitled to severance or other benefits mandated under local laws.

Culture and Values

Verint is built on five core values that shape the way we do business with our customers, our partners, and each other. They express the company we want Verint to be — from the people we hire to the way we design our solutions — and they guide us in the decisions we make every day. Our five core values are:

The integrity to do what’s right
The innovation to create leading solutions for real-world challenges
The transparency that fuels mutual trust and productive, collaborative working relationships
The humility to view our successes as milestones in our journey, and our mistakes as opportunities for improvement
A passion for making our customers and partners successful

These values embody the spirit of Verint and form the foundation for our objectives of superior solutions, unparalleled service, and an unwavering commitment to customer success.

Diversity, Equity, and Inclusion

We embrace differences and work to cultivate an inclusive organization. We believe in providing a supportive environment and opportunities for all of our employees to develop and advance. We support diverse groups in the workplace, with equal terms of employment, professional opportunities, and benefits. We are an Equal Opportunity Employer - we have affirmative action plans in place to help ensure that qualified applicants and employees are receiving an equal opportunity for recruitment, selection, and advancement. We offer our employees competitive compensation and benefits packages, with many company-paid offerings, including paid time off, tuition reimbursement, paid training and wellness programs, to support our recruiting and retention goals. We recognize differences in family composition and our U.S. benefit plans provide options for employees in diverse family circumstances including domestic partner benefits, adoption assistance, and fertility assistance.
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We track and periodically report on our global diversity results to our board of directors. For example, whilethe year ended January 31, 2022, our female gender composition increased on a global basis and our minority employee composition increased across the U.S. We also increased the number of women within our senior leadership team (vice president and above) over the prior year. We intend to continue to focus on expanding diversity and inclusion as an intrinsic part of our business objectives, including through recruitment and promotional opportunities.

We have established a Diversity & Inclusion Council. The Council’s mandate is to help us foster an environment that attracts and retains the best talent, values diversity of life experiences and perspectives, educates our personnel, and encourages innovation. The Diversity & Inclusion Council currently has several initiatives underway, including partnering with non-profit organizations for talent acquisition and community outreach, and an educational series for Verint employees. The Diversity & Inclusion Council has also implemented a direct deposit program for employees to participate in charitable giving to two organizations: Black Girls Code, an organization that encourages and supports the aspirations of young women of color to code, engineer, and achieve careers in computer science and other STEM fields, and the Gay, Lesbian, Straight Education Network (GLSEN), an organization that tries to ensure every member of every school community is valued and respected regardless of sexual orientation, gender identity or gender expression. The Diversity & Inclusion Council increases cultural and diversity awareness within our organization and encourages employees to continue to drive outreach opportunities through employee and recruiting events.

We also encourage socially responsible procurement practices by actively pursuing business relationships with suppliers owned by minorities or by women.

Community Outreach

At Verint, we are committed to giving back to the communities in which we live and work. In 2005, we launched the Verint Next-Generation Program, which engages Verint employees around the globe in projects that benefit children in need. The program puts our core values to work in our local communities, with the goal of affording the next generation greater opportunities and the tools for making the most of them. As part of the program, Verint employees engage in various community activities, from supplying food pantries, to participating in blood drives, to collecting clothing and school supplies, to building playgrounds, to cleaning parks and planting gardens. Verint is also proud to support our employees’ community service activities with programs for donating employee time to qualified children’s organizations and matching grants. In 2021, Verint employees donated over $525,000 to children’s charities through the program. Globally, over 1,600 Verint employees supported more than 125 local non-profit organizations in local Verint communities. In 2021, we also focused on supporting events to help families struggling due to the COVID-19 pandemic by providing food and clothing to those in need.

Employee Development

At Verint, we are dedicated to providing a productive, ethical, and safe working environment in which innovation and market leadership can flourish. We recognize that our employees are the driving force behind Verint’s success. Our fast-paced, challenging, and collaborative work environment nurtures professional growth and offers a wide array of career advancement opportunities, and our workforce planning tools provide managers with a framework for thinking strategically about the talent our company requires to achieve our business goals.

Continuous learning and the professional development of our employees are key factors in our success. Verint’s approach is based on the learning philosophy of “70:20:10”. We believe that seventy percent of skill development occurs through on-the-job experiences, twenty percent through colleague and leadership interactions, and ten percent through formal professional and academic learning opportunities. All our employees are afforded the opportunity to take part in our training programs, with the ability to focus their learning on the skills and knowledge that are most relevant for their professional development. We offer thousands of training courses in our online Learning Center in addition to classroom training. Throughout the pandemic, we have encouraged our employees to continue their professional development and acquisition of knowledge and skills, through existing and newly developed online learning.

Employees are also invited to establish an Individual Development Plan in collaboration with their managers to establish and facilitate the employee’s short- and long-term development goals. These plans are tailored to the employee’s own individual competencies and aspirations in the context of our business goals and available opportunities.

Please see the Diversity and Inclusion section of our website and our Environmental, Social, and Governance (ESG) report in the Corporate Responsibility section of our website for further information on our ESG initiatives, including with respect to
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human capital. These resources and the information contained on or connected to our website is not a partyincorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the SEC.

Competition

We face strong competition from many vendors, some of whom focus on customer engagement and some of whom offer customer engagement-related capabilities. Key competitors include Alvaria, Inc., Calabrio, Inc., Genesys Telecommunications, Medallia Inc., NICE Ltd., Pegasystems Inc., divisions of larger companies, including Microsoft Corporation, Oracle Corporation, and Salesforce.com, Inc., as well as many smaller companies, which vary from region to any collective bargainingregion globally.

We believe that we compete principally on the basis of:

Product performance and functionality;
Product quality and reliability;
Breadth of product portfolio and pre-defined integrations;
Global presence, reputation, and high-quality customer service and support;
Specific domain expertise, industry knowledge, vision, and experience; and
Price.

We believe that our competitive success depends primarily on our ability to provide technologically advanced and cost-effective solutions and services. Some of our competitors have superior brand recognition and significantly greater financial or other agreementresources than we do. We expect that competition will increase as other established and emerging companies enter our markets or we enter theirs, and as new products, services, technologies, and delivery methods are introduced. In addition, consolidation is common in our markets and has in the past and may in the future improve the position of our competitors. See “Risk FactorsRisks Related to Our BusinessMarkets, Competition, and OperationsIntense competition in our markets and competitors with any labor organizationgreater resources or the ability to move faster than us may limit our market share, profitability, and growth” in Israel, certain provisionsItem 1A of the

collective bargaining agreements between the Histadrut (General Federation of Laborers in Israel) and the Coordinating Bureau of Economic Organizations (including the Manufacturers’ Association of Israel) are applicable to our Israeli employees by virtue of expansion ordersthis report for a more detailed discussion of the Israeli Ministry of Industry, Trade and Labor.competitive risks we face.


Intellectual Property Rights


General


Our success depends to a significant degree on the legal protection of our software and other proprietary technology. We rely on a combination of patent, trade secret, copyright, and trademark laws, and confidentiality and non-disclosure agreements with employees and third parties to establish and protect our proprietary rights.


Patents


As of January 31, 2019,2022, we had nearly 1,000more than 650 patents and patent applications worldwide across areas including more than 120 patent issuances or allowances during the past year.data capture, artificial intelligence, machine learning, unstructured data analytics, predictive analytics, and automation. We regularly review new areas of technology related to our businesses to determine whether they can and should be patented.


Licenses


Our customer and partner license agreements prohibit the unauthorized use, copying, and disclosure of our software technology and contain customer restrictions and confidentiality terms. These agreements generally warrant that the software and proprietary hardware will materially comply with written documentation and assert that we own or have sufficient rights in the software we distribute and have not violated the intellectual property rights of others.

We generally make our solutions available through our cloud platform or license our productsthem in a format that does not permit users to change the software code. See “Risk FactorsRisks Related to Our BusinessCompetition, Markets, and OperationsFor certain products, components, or services, including our cloud hosting operations, we rely on third-party suppliers, manufacturers, and partners, and if these relationships are disrupted, lost, or must be terminated, we may not be able to obtain substitutes or may face other difficulties” under Item 1A of this report.


While we employ many of our innovations exclusively in our own products and services, we also engage in outbound and inbound licensing of specific patented technologies. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, we believe, based on industry practice, such licenses generally can be obtained on commercially reasonable terms. See “Risk FactorsRisks Related to Our BusinessMarkets, Competition, and OperationsFor certain services, products, or components, including our cloud hosting operations, we rely on third-party providers, which may create significant exposure for us” in Item 1A of this report.


Trademarks and Service Marks


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We use various trademarks and service marks to protect the marks used in our business. We also claim common law protections for other marks we use in our business. Competitors and other companies could adopt similar marks or try to prevent us from using our marks, consequently impeding our ability to build brand identity and possibly leading to customer confusion.

See “Risk FactorsRisks Related to Our BusinessInformation/Product Security and Intellectual PropertyOur intellectual property may not be adequately protected” underand “Risk Factors—Risks Related to Our Business—Information/Product Security and Intellectual Property—Our products or other IP may infringe or may be alleged to infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions for us and may require us to indemnify our customers and resellers for any damages they suffer” in Item 1A of this report for a more detailed discussion regarding the risks associated with the protection of our intellectual property.


CompetitionRegulatory Matters


We face strong competitionOur business and operations are subject to a variety of regulatory requirements in all ofthe countries in which we operate or in which we offer our markets, and we expect that competition will persist and intensify.

In our Customer Engagement segment, our competitors include Aspect Software, Inc., Genesys Telecommunications, Medallia Inc., NICE Systems Ltd., Nuance Communications, Inc., Pegasystems Inc., divisions of larger companies,solutions, including, Microsoft Corporation, Oracle Corporation, SAP, and Salesforce.com, Inc., as well as many smaller companies, which can vary across regions. In our Cyber Intelligence segment, our competitors include BAE Systems plc, Elbit Systems Ltd., FireEye, Inc., Genetec Inc., IBM Corporation, JSI Telecom, Palantir Technologies, Inc., and Rohde & Schwarz GmbH & Co., KG, as well as a number of smaller companies and divisions of larger companies that compete with us in certain regions or onlyamong other things, with respect to portions of our product portfolio.

In each of our operating segments, we believe that we compete principally on the basis of:


Product performancedata privacy and functionality;
Product qualityprotection, government contracts, anti-corruption, trade compliance, tax, and reliability;
Breadth of product portfolio and pre-defined integrations;
Global presence, reputation, and high-quality customer service and support;
Specific domain expertise, industry knowledge, vision, and experience; and
Price.

We believe that our competitive success depends primarily on our ability to provide technologically advanced and cost-effective solutions and services. Some of our competitors have superior brand recognition and significantly greater financial or other resources than we do. We expect that competition will increase as other established and emerging companies enter our markets or we enter theirs, and as new products, services, technologies, and delivery methods are introduced. In addition, consolidation is common in our markets and has in the past and may in the future improve the position of our competitors.labor matters. See “Risk FactorsFactors—Risks Related to Our BusinessCompetition, Markets,Business—Regulatory Matters, Data Privacy, Information Security, and OperationsIntense competitionProduct Functionality—We are subject to complex, evolving regulatory requirements that may be difficult and expensive to comply with and that could negatively impact us or our business, and —Increasing regulatory focus on data privacy issues and expanding laws in these areas may result in increased compliance costs, impact our marketsbusiness models, and competitors with greater resources thanexpose us may limit our market share, profitability, and growth” underto increased liability” in Item 1A of this report for a more detailed discussion of the competitiveregulatory risks we face.

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Export Regulations

We and our subsidiaries are subject to applicable export control regulations in countries from which we export goods and services. These controls may apply by virtue of the country in which the products are located or by virtue of the origin of the content contained in the products. If the controls of a particular country apply, the level of control generally depends on the nature of the goods and services in question. For example, our Cyber Intelligence solutions tend to be more highly controlled than our Customer Engagement solutions. Where controls apply, the export of our products generally requires an export license or authorization or that the transaction qualify for a license exception or the equivalent, and may also be subject to corresponding reporting requirements.


Item 1A.Risk Factors
 
Many of the factors that affect our business and operations involve risks and uncertainties. The factors described below are risks that could materially harm our business, financial condition, and results of operations. These are not all the risks we face, and other factors currently considered immaterial or unknown to us may have a material adverse impact on our future operations.


Risks Related to Our Business
 
Markets, Competition, Markets, and Operations
 
Our business is impacted by changes in general economicmacroeconomic and/or global conditions andas well as the resulting impact on information technology spending and government spending in particular.budgets.
 
Our business is subject to risks arising from adverse changes in domestic and global economicmacroeconomic and other conditions. Slowdowns, recessions, inflation, economic instability, political unrest, armed conflicts or(such as the March 2022 Russian invasion of Ukraine), natural disasters, climate change or other environmental issues, or outbreaks of disease, such as the COVID-19 pandemic, around the world may cause companies and governments to delay, reduce, or even cancel planned spending. In particular, declines in information technology spending, and limitedmay increase costs, or reduced government budgets have affected the markets for our solutions in both the Customer Engagement market and the Cyber Intelligence market in certain periods and in certain regions. For the year ended January 31, 2019, approximately one third ofmay otherwise disrupt or negatively impact our business was generated from contracts with various governments around the world, including national, regional, and local government agencies. We expect that government contracts will continue to be a significant source of our revenue for the foreseeable future. Macroeconomicor operations. Other macroeconomic changes, such as rising interest rates, significant changes in commodity prices,tightening credit markets, inflation, actual or threatened trade wars, or the implementation of the United Kingdom’s decision to exit from the European Union (referred to as “Brexit”) may also impact demand for our products. Brexit could, among other outcomes, alsosolutions or otherwise disrupt or negatively impact our business or operations. Declines in information technology spending by enterprise or government customers have affected the free movement of goods, services,markets for our solutions in the past and people between the U.K.may affect them again based on current and the E.U., have a detrimental impact on the U.K. and E.U. economy, and provide some disruption to business activities in all sectors. future macroeconomic and/or global conditions. 

Customers or partners who are facing business challenges, reduced budgets, liquidity issues, or other impacts from such macroeconomic or other global changes are also more likely to defer purchase decisions or projects or cancel or reduce orders, as well as to delay or default on payments. If customers or partners significantly reduce their spending with us, significantly delay projects, or significantly delay or fail to make payments to us, our business, results of operations, and financial condition would be materially adversely affected.



The full extent to which the COVID-19 pandemic will adversely affect our business and results of operations cannot be predicted at this time.

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The pandemic has caused significant economic disruption and uncertainty and governmental authorities around the world have implemented numerous measures attempting to contain and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, shutdowns, limitations or closures of non-essential businesses, and social distancing requirements. Our customers, partners, and vendors have also implemented actions in response to the pandemic, including among others, office closings, site restrictions, and employee travel restrictions. In response to these challenges, we established remote working arrangements for our employees, limited non-essential business travel, and cancelled or shifted our customer, employee, and industry events to a virtual-only format. During the first half of 2020, we also implemented certain cost-reduction actions of varying durations. Such actions included, but were not limited to, reducing our discretionary spending, decreasing capital expenditures, reconsidering the optimal uses of our cash and other capital resources, including with respect to our stock repurchases, and reducing workforce-related costs. During the first half of 2020, our revenue was adversely impacted by delays and reduced spending attributed to the impact of the pandemic on our customers’ operational priorities and as a result of cost containment measures they had implemented. We saw a reduction in or delay in certain large customer contracts, particularly on-premises arrangements, and limitations on access to the facilities of our customers also impacted our ability to deliver some of our products and complete certain implementations, negatively impacting our ability to recognize revenue.

We saw an improvement in the business environment during the second half of 2020 which continued through 2021 (the year ended January 31, 2022) as our customers accelerated the digitization of their customer interactions and internal operations due to the pandemic. Based on the improved business environment and our financial performance, we have in many cases resumed investments and other spending; however, these actions may need to be reassessed depending on how the facts and circumstances surrounding the pandemic evolve. Any such renewed cost controls may have an adverse impact on us, particularly if they remain in place for an extended period. As the pandemic has evolved, we have also adapted our pandemic response on a localized basis based on the prevailing conditions in the locations in which we and our customers, partners, or vendors operate. We expect to incur additional costs to the extent we further resume business-related travel and our employees return to our office locations, the timing and extent of which remains undetermined at this time. We anticipate that the ability to
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open offices will vary significantly from region to region based on a number of factors, including the availability of vaccines and the spread of new variants of the virus. We also continue to evaluate our real estate needs and have begun making adjustments in light of the remote work environment.

Notwithstanding the recovery in the business environment since the early part of the pandemic, given the uncertainty associated with the pandemic, our ability to predict how it will impact our business, financial condition, liquidity, and financial results in future periods is limited, particularly if the pandemic fails to abate for an extended period of time or worsens.

On September 9, 2021, the U.S. federal government issued the mandatory vaccination and workplace safety protocols of Executive Order 14042 (the “EO”) and subsequent guidance issued thereunder by the Safer Federal Workforce Task Force. This mandate applies broadly to require covered federal contractor employees on covered contracts, those who perform duties in connection with a covered contract, and those working at the same workplace as covered employees, to be fully vaccinated for COVID-19, except for those that are legally entitled to an accommodation under applicable law. The enforceability of the EO has been subject to numerous lawsuits and is currently subject to a number of injunctions. As a result, the EO is not being enforced by the federal government. We are party to or perform duties under such contracts. We may similarly be required to flow-down our obligations to certain of our subcontractors and suppliers. The guidance remains subject to the interpretation of various government agencies and other entities, and questions remain regarding the specific application of the EO and related guidance. As a result, if our understanding of its application to our workforce differs from our federal customers’ interpretation, or if our covered employees are unwilling to comply with the mandate, we may experience increased costs, business disruptions and attrition as a result of the mandate. Additionally, we may be subject to potential breach of contract claims, loss of business and assessment of fines if we or our affected subcontractors and suppliers are not able to fully comply in the time frame provided or if such subcontractors and suppliers choose to terminate their contracts rather than comply.

The industry in which we operate is characterized by rapid technological changes, evolving industry standards and challenges, and changing market potential from area to area, and if we cannot anticipate and react to such changes our results may suffer.

The markets for our products are characterized by rapidly changing technology and evolving industry standards and challenges. The introduction of products embodying new technology, new delivery platforms, the commoditization of older technologies, and the emergence of new industry standards and technological hurdles can exert pricing pressure on existing products and services and/or render them unmarketable or obsolete. For example, in our Cyber Intelligence business, the increasing complexity and sophistication of security threats and prevalence of encrypted communications have created significantly greater challenges for our customers and for our solutions to address. In our Customer Engagement business, we see a continued shift to cloud-based solutions as well as market saturation for more mature solutions. Moreover, the market potential and growth rates of the markets we serve are not uniform and are evolving. It is critical to our success that we are able to anticipate and respond to changes in technology and industry standards and new customer challenges by consistently developing new, innovative, high-quality products and services that meet or exceed the changing challenges and needs of our customers. Any failure to develop high-quality solutions and to provide high-quality services and support could adversely affect our reputation, our ability to sell our services offerings to existing and prospective customers, and our operating results. We must also successfully identify, enter, and appropriately prioritize areas of growing market potential, including by launching, successfully executing, and driving demand for new and enhanced solutions and services, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization. We must also develop and maintain the expertise of our employees as the needs of the market and our solutions evolve. If we are unable to execute on these strategic priorities, we may lose market share or experience slower growth, and our profitability and other results of operations may be materially adversely affected.


Intense competition in our markets and competitors with greater resources or the ability to move faster than us may limit our market share, profitability, and growth.
 
We face aggressive competition from numerous and varied competitors in all of our markets, making it difficult to maintain market share, remain profitable, invest, and grow. We are also encountering new competitors as we expand into new markets or as new competitors expand into ours. Our competitors may be able to more quickly develop or adapt to new or emerging technologies, better respond to changes in customer needs or preferences, better identify and enter into new areas of growth, or devote greater resources to the development, promotion, and sale of their products. Some of our competitors have, in relation to us, superior brand recognition with customers, partners, employees, or investors, higher growth rates, superior margins, longer operating histories, larger customer bases, longer standing relationships with customers, superior brand recognition, superior margins, and significantly greater financial or other resources, especially in new markets we may enter. Consolidation among our competitors may also improve their competitive position. We also face competition from solutions developed internally by our customers or partners.  To the extent that we cannot compete effectively, our market share and results of operations, would be materially adversely affected.


Because price and related terms are key considerations for many of our customers, we may have to accept less-favorable payment terms, lower the prices of our products and services, and/or reduce our cost structure, including reducing headcount or
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investment in R&D, in order to remain competitive. If we are forced to take these kinds of actions to remain competitive in the short-term, such actions may adversely impact our ability to execute and compete in the long-term.


Our future success and financial results depend on our ability to properly execute on our cloud transition and manage our sales mix.

Our revenue and profitability objectives are highly dependent on our ability to continue to expand our cloud business and cloud operations, including keeping pace with the market transition to cloud-based software, making new cloud sales, enhancing our cloud sales processes and execution, and managing the conversion of our customer support base. The expansion of our cloud business and operations increases our reliance on our cloud-hosting partners and increases the amount of customer data for which we are responsible.

Our cloud transition and the mix, terms, and timing of transactions in a given period can have a significant impact on our financial results in that period. Our financial results and ability to forecast our revenues (and attendant budgeting and guidance decisions) are impacted by the fact that pricing, margins, and other deal terms, including license model (e.g., perpetual license versus subscription), may vary substantially from transaction to transaction. We recognize cloud revenue over the term of the subscription, so as our cloud revenue continues to grow, we expect a greater amount of our revenue to be recognized over longer periods, in some cases several years, as compared to the way revenue is recognized for perpetual licenses. This change in the pattern of recognition also means that increases or decreases in cloud subscription activity impact the amount of revenue recognized in both current and future periods. Because transaction-specific factors are difficult to predict in advance, this also complicates the forecasting of revenue and creates challenges in managing our cloud transition and revenue mix. As our cloud transition continues and accelerates, our subscription renewal rates have become more important to our financial results, generally, and if customers choose not to renew, or to reduce, their subscriptions, our business and financial results will suffer.

The deferral or loss of one or more significant orders or a delay in a large implementation can also materially adversely affect our operating results, especially in a given quarter. As with other software-focused companies, a large amount of our quarterly business tends to come in the last few weeks, or even the last few days, of each quarter. This trend has also complicated the process of accurately predicting revenue and other operating results, particularly on a quarterly basis. Finally, our business is subject to seasonal factors that may also cause our results to fluctuate from quarter to quarter.

If we are unable to properly manage our cloud transition, or if it does not progress as expected, our financial results and our stock price may suffer.

Our future success depends on our ability to execute on growth or strategic initiatives, properly manage investments in our business and operations, execute on growth initiatives, and enhance our existing operations and infrastructure.


Our success also depends on our ability to execute on other growth or strategic initiatives we are pursuing. A key element of our long-term strategy is to continue to invest in and grow our business and operations, both organically and through acquisitions. 

Investments in, among other things, new markets, new products, solutions, and technologies, R&D, infrastructure and systems, geographic expansion, and headcount are critical components for achieving this strategy. In particular, we believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. Our investments in research and development may result in products or services that generate less revenue than we anticipate or may not result in marketable products and services for several years or at all.

However, such investments and efforts present challenges and risks and may not be successful (financially or otherwise), especially in new areas or new markets in which we have little or no experience, and even if successful, may negatively impact our profitability in the short-term. To be successful in such efforts, we must be able to properly allocate limited investment dollarsfunds and other resources, prioritize among opportunities, projects, and implementations, balance the extent and timing of investments with the associated impact on profitability, balance our focus between new areas or new markets and the operation and servicing of our legacy businesses and customers, capture efficiencies and economies of scale, and compete in the new areas or new markets, or with the new solutions, in which we have invested.

Our success also depends on our ability to execute on other growth initiatives we are pursuing. For example, in our Customer Engagement segment, in addition to the other factors described in this section, our revenue and profitability objectives are highly dependent on our ability to continue to expand our cloud business and cloud operations, including keeping pace with the market transition to cloud-based software, making new sales, and managing the conversion of our maintenance base. In our Cyber Intelligence segment, in addition to the other factors described in this section, our profitability objectives are highly

dependent on our ability to continue to shift our product mix towards software and away from professional services and hardware resales.


Our success also depends on our ability to effectively and efficiently enhance our existing operations. Our existing infrastructure, systems, security, processes, and personnel may not be adequate for our current or future needs. System upgrades or new implementations can be complex, time-consuming, and expensive and we cannot assure you that we will not experience problems during or following such implementations, including among others, potential disruptions in our operations or financial reporting.

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If we are unable to properly manage our investments, execute on growth initiatives, manage our investments, and enhance our existing operations and infrastructure, our results of operations and market share may be materially adversely affected.


If we cannot retain and recruit qualified personnel, or if labor costs continue to rise, our ability to operate and grow our business may be impaired and our financial results may suffer.
We depend on the continued services of our management and employees to run and grow our business. To remain successful and to grow, we need to retain existing employees and attract new qualified employees, including in new markets and growth areas we may enter. Retention is an industry issue given the competitive technology labor market, especially with the remote work options brought on by the COVID-19 pandemic, and as the millennial workforce continues to value multiple company experience over long tenure. As we grow, we must also enhance and expand our management team to execute on new and larger agendas and challenges. The market for qualified personnel is competitive in the geographies in which we operate as well as for qualified remote workers and may be limited especially in areas of emerging technology. We may be at a disadvantage to larger companies with greater brand recognition or financial resources or to start-ups or other emerging companies in trending market sectors. Work visa restrictions, especially in the United States, have also become significantly tighter in recent years, making it difficult or impossible to source qualified personnel from other countries or even to hire those already in the United States on current visas. Regulatory requirements such as vaccine mandates may also create risks in our ability to recruit and retain employees. Efforts we engage in to establish operations in new geographies where additional talent may be available, potentially at a lower cost, may be unsuccessful or fail to result in the desired cost savings. Remote employment arrangements also come with challenges, including with respect to collaboration, training, and corporate culture, especially at a significant scale. If we are unable to attract and retain qualified personnel when and where they are needed or to develop our remote workforce, our ability to operate and grow our business could be impaired. Moreover, if we are not able to properly balance investment in personnel with sales, our profitability may be adversely affected.

While the market for talent in our industry has been competitive for many years, in recent quarters, the labor market has become even tighter, increasing the difficulty and lead time in filling open positions with qualified candidates. As a result, labor costs have increased more significantly than in prior periods. Labor shortages or increased labor costs could negatively affect our financial condition, results of operations, or cash flows, especially if rising costs outpace our revenue growth.

The broad and sophisticated solution portfolio that we offer requires strong execution in our sales processes and other areas.
We offer our customers a broad solution portfolio with the flexibility to purchase a single point solution, which can be expanded over time, or a larger more comprehensive system. Regardless of the size of a customer’s purchase, many of our solutions are sophisticated and may represent a significant investment for our customers.

Our sales cycles can range in duration from as little as a few weeks to more than a year. Our larger sales typically require a minimum of a few months to consummate. As the length or complexity of a sales process increases, so does the risk of successfully closing the sale. There is greater risk of customers deferring, scaling back, or canceling sales as a result of, among other things, their receipt of a competitive proposal, changes in budgets and purchasing priorities, extensive internal approval processes, or the introduction or anticipated introduction of new or enhanced products by us or our competitors during the process. Larger sales are often made by competitive bid, which also increases the time and uncertainty associated with such opportunities. Customers may also require education on the value and functionality of our solutions as part of the sales process, further extending the time frame and uncertainty of the process.
Larger solution sales also require greater expertise in sales execution and transaction implementation than more basic product sales, including establishing and maintaining appropriate contacts and relationships within customer and partner organizations, and with respect to integration, services, and support. Our ability to develop, sell, implement, and support larger solutions and a broad solution portfolio is a competitive differentiator for us, which provides for solution diversification and more opportunities for growth, but also requires greater investment for us and demands stronger execution in many areas, including among others, sales, product development, and cloud operations.

After the completion of a sale, our customers or partners may need assistance from us in making full use of the functionality of our solutions, in realizing their benefits, or in implementation generally. If we are unable to assist our customers and partners in realizing the benefits they expect from our solutions and products, demand for our solutions and products may decline and our operating results may suffer.
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If we are unable to maintain, expand, and enable our relationships with partners, our business and ability to grow could be materially adversely affected.
During the fiscal year ended January 31, 2022, approximately 45% of our sales were made through partners, resellers, and systems integrators. To remain successful, we must maintain our existing relationships as well as identify and establish new relationships with such parties. Our growth strategy depends in part on expanding our sales through partners. We must often compete with other suppliers for these relationships and our competitors often seek to establish exclusive or preferred relationships with these sales channels. Our ability to establish and maintain these relationships is based on, among other things, factors that are similar to those on which we compete for end customers, including features, functionality, ease of use, ease of implementation / installation, support, and price. Even if we are able to secure such relationships on terms we find acceptable, there is no assurance that we will be able to realize the benefits we anticipate. Some of our partners may also compete with us or have affiliates that compete with us, or may also partner with our competitors or offer our products and those of our competitors as alternatives when presenting proposals to end customers. Our ability to achieve our revenue goals and growth depends to a significant extent on maintaining, expanding, and enabling these sales channels, and if we are unable to do so, our business and ability to grow could be materially adversely affected.
For certain services, products, or components, including our cloud hosting operations, we rely on third-party providers, which may create significant exposure for us.
We rely on third parties to provide certain services to us or to our customers, including cloud hosting partners and providers of other cloud-based services. We make contractual commitments to customers on the basis of these relationships and, in some cases, also entrust these providers with both our own sensitive data as well as the sensitive data of our customers (which may include sensitive end user data). If these third-party providers do not perform as expected or encounter service disruptions, cyber-attacks, data breaches, or other difficulties, we or our customers may be materially and adversely affected, including, among other things, by facing increased costs, potential liability to customers, end users, or other third parties, regulatory issues, and reputational harm. If it is necessary to migrate these services to other providers as a result of poor performance, security issues or considerations, or other financial or operational factors, it could result in service disruptions to our customers and significant time, expense, or exposure to us, any of which could materially adversely affect our business.

We also purchase technology, outsource aspects of our operations, license intellectual property rights, and oversee third-party manufacturing of certain products or components, in some cases, by or from companies that may compete with us or work with our competitors. While we endeavor to use larger, more established providers wherever possible, in some cases, these providers may be smaller, less established companies, particularly in the case of new or unique technologies that we have not developed internally, or in an effort to benefit our margins. 

If any of these providers experience financial, operational, manufacturing, or quality assurance difficulties, cease production or sale, or there is any other disruption in our supply, including as a result of the acquisition of a supplier or partner by a competitor, macroeconomic issues like those described above (such as the COVID-19 pandemic or the March 2022 Russian invasion of Ukraine), or otherwise, we will be required to locate and migrate to alternative sources of supply or alternative providers, to internally develop the applicable technologies, to redesign our products, and/or to remove certain features from our products, any of which would be likely to increase expenses, create delays, and negatively impact our sales. Although we endeavor to establish contractual protections with key providers, such as source code escrows, warranties, and indemnities, we may not be successful in obtaining adequate protections, these agreements may be short-term in duration, and the counterparties may be unwilling or unable to stand behind such protections. Moreover, these types of contractual protections offer limited practical benefits to us in the event our relationship with a key provider is interrupted.

Because we have significant operations and business around the world, we are subject to geopolitical and other risks that could materially adversely affect our results.

We have significant operations and business around the world, including sales, research and development, manufacturing, customer services and support, and administrative services. The countries in which we have our most significant foreign operations include the United Kingdom, India, Israel, Indonesia and Australia. We also generate significant revenue and cash collections from outside the United States, including from countries in emerging markets, and we intend to continue to grow our business internationally.

Our global operations are, and any future foreign growth will be, subject to a variety of risks, many of which are beyond our control, including risks associated with:

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foreign currency fluctuations;

political, security, and economic instability or corruption;

geopolitical risks from war, natural disasters, pandemics or other events;

changes in and compliance with both international and local laws and regulations, including those related to data privacy and protection, trade compliance, anti-corruption, tax, labor, currency restrictions, and other requirements;

differences in tax regimes and potentially adverse tax consequences of operating in foreign countries or costs of repatriating cash, if needed;

product localization issues;

legal uncertainties regarding intellectual property rights or rights and obligations generally; and

challenges or delays in collection of accounts receivable.

Any or all of these factors could materially adversely affect our business or results of operations. For example, we are closely monitoring the evolving situation in Russia and Ukraine relative to, among other things, the health and safety of our employees and contractors in the region and the impact of the Russian invasion and resulting regulatory restrictions on our internal and external operations, including sales, research and development, customer service, payment processing, cyber security, and the ability of our employees and contractors to work.
Conditions in and our relationship to Israel may materially adversely affect our operations and personnel and may limit our ability to produce and sell our products or engage in certain transactions.
We have significant operations in Israel, including R&D, and support. Conflicts and political, economic, and/or military conditions in Israel and the Middle East region have affected and may in the future affect our operations in Israel. Violence within Israel or the outbreak of violent conflicts between Israel and its neighbors, including the Palestinians or Iran, may impede our ability to support our products or engage in R&D, or otherwise adversely affect our business, operations, or personnel. 
Restrictive laws, policies, or practices in certain countries directed toward Israel, Israeli goods, or companies having operations in Israel may also limit our ability to sell some of our products in certain countries.
We have in the past received grants from the Israeli Innovation Authority (the “IIA”) for the financing of a portion of our research and development expenditures in Israel. The Israeli law under which these IIA grants are made limits our ability to manufacture products, or transfer technologies, developed using these grants outside of Israel. This may limit our ability to engage in certain outsourcing or business combination transactions involving these products or require us to pay significant royalties or fees to the IIA in order to obtain any IIA consent that may be required in connection with such transactions.

Israeli tax requirements may also place practical limitations on our ability to sell or engage in other transactions involving our Israeli companies or assets, to restructure our Israeli business, or to access funds in Israel.

Contracting with government entities exposes us to additional risks inherent in the government procurement process.

We provide products and services, directly and indirectly, to a variety of government entities, both domestically and internationally. For the year ended January 31, 2022, approximately 10% of our business was generated from contracts with various governments around the world. We expect that government contracts will continue to be a significant source of our revenue for the foreseeable future.

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Risks associated with licensing and selling products and services to government entities include more extended sales and collection cycles, varying governmental budgeting processes, adherence to complex procurement regulations, and other government-specific contractual requirements, including possible renegotiation or termination at the election of the government customer, including due to geo-political events and macro-economic conditions that are beyond our control. We may also be subject to audits, investigations, or other proceedings relating to our government contracts, including under statutes such as the False Claims Act, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.

Our revenue from governmental entities are directly affected by their budgetary constraints and the priority given in their budgets to the procurement of our solutions. This risk is heightened during periods of global economic slowdown. Accordingly, governmental purchases of our solutions, products, and services may decline in the future if governmental purchasing agencies terminate, reduce, or modify contracts.

We may not be able to identify suitable targets for acquisition or investment, or complete acquisitions or investments on terms acceptable to us, which could negatively impact our ability to implement our growth strategy.

As part of our long-term growth strategy, we have made a number of acquisitions and investments and expect to continue to make acquisitions and investments in the future. In many areas, we have seen the market for acquisitions become more competitive and valuations increase. Our competitors also continue to make acquisitions in or adjacent to our markets and may have greater resources than we do, enabling them to pay higher prices. As a result, it may be more difficult for us to identify suitable acquisition or investment targets or to consummate acquisitions or investments once identified on acceptable terms or at all. If we are not able to execute on our acquisition strategy, we may not be able to achieve our long-term growth strategy, may lose market share, or may lose our leadership position in one or more of our markets.
Our acquisition and investment activity presents certain risks to our business, operations, and financial position.


Acquisitions and investments are an important part of our growth strategy. Acquisitions and investments present significant challenges and risks to a buyer, including with respect to the transaction process, the integration of the acquired company or assets, and the post-closing operation of the acquired company or assets. If we are unable to successfully address these challenges and risks, we may experience both a loss on the investment and damage to our existing business, operations, financial results, and valuation.


The potential challenges and risks associated with acquisitions and investments include, among others:


the effect of the acquisition on our strategic position and our reputation, including the impact of the market’s reception of the transaction;


the impact of the acquisition on our financial position and results, including our ability to maintain and/or grow our revenue and profitability;


risk that we fail to successfully implement our business plan for the combined business, including plans to accelerate growth or achieve the anticipated benefits of the acquisition, such as synergies or economies of scale;


risk of unforeseen or underestimated challenges or liabilities associated with an acquired company’s business or operations;


management distraction from our existing operations and priorities;


risk that the market does not accept the integrated product portfolio;


challenges in reconciling business practices or in integrating product development activities, logistics, or information technology and other systems and processes;


retention risk with respect to key customers, suppliers, and employees and challenges in integrating and training new employees;


challenges in complying with newly applicable laws and regulations, including obtaining or retaining required approvals, licenses, and permits; and

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potential impact on our systems, processes, and internal controls over financial reporting.


Acquisitions and/or investments may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, goodwill impairments, and amortization expenses or write-downs related to intangible assets, such as goodwill, any of which could have a material adverse effect on our operating results or financial condition. Investments in immature businesses with unproven track records and technologies have an especially high degree of risk, with the possibility that we may lose our entire investment or incur unexpected liabilities. Transactions that are not immediately accretive to earnings may make it more difficult for us to maintain satisfactory profitability levels or compliance with the maximum leverage ratio covenant under the revolving credit facility under our senior credit agreement (the “2017 Credit Agreement”). Large or costly acquisitions or investments may also diminish our capital resources and liquidity or limit our ability to engage in additional transactions for a period of time.


The foregoing risks may be magnified as the cost, size, or complexity of an acquisition or acquired company increases, where the acquired company’s products, market, or business are materially different from ours, or where more than one transaction or integration is occurring simultaneously or within a concentrated period of time. There can be no assurance that we will be successful in making additional acquisitions in the future or in integrating or executing on our business plan for existing or future acquisitions.


Sales processes for sophisticated solutionsRegulatory Matters, Data Privacy, Information Security, and a broad solution portfolio like ours present significant challenges.Product Functionality
 
We offer our customers a broad solution portfolio with the flexibility to purchase a single point solution, which can be expanded over time, or a larger more comprehensive system. Regardless of the size of a customer’s purchase, many of our solutions are sophisticated and may represent a significant investment for our customers. As a result, our sales cycles can range in duration from as little as a few weeks to more than a year. Our larger sales typically require a minimum of a few months to consummate. As the length or complexity of a sales process increases, so does the risk of successfully closing the sale. Larger sales are often made by competitive bid, which also increases the time and uncertainty associated with such opportunities. Customers may also require education on the value and functionality of our solutions as part of the sales process, further extending the time frame and uncertainty of the process. 

Longer sales cycles, competitive bid processes, and the need to educate customers means that:
There is greater risk of customers deferring, scaling back, or canceling sales as a result of, among other things, their receipt of a competitive proposal, changes in budgets and purchasing priorities, or the introduction or anticipated introduction of new or enhanced products by us or our competitors during the process.
We may make a significant investment of time and money in opportunities that do not come to fruition, which investments may not be usable or recoverable in future projects.

We may be required to bid on a project in advance of the completion of its design or be required to begin working on a project in advance of finalizing a sale, in either case, increasing the risk of unforeseen technological difficulties or cost overruns.
We face greater downside risks if we do not correctly and efficiently deploy limited personnel and financial resources and convert such sales opportunities into orders.

Larger solution sales also require greater expertise in sales execution and transaction implementation than more basic product sales, including in establishing and maintaining appropriate contacts and relationships with customers and partners, product development, project management and implementation, staffing, integration, services, and support. Our ability to develop, sell, implement, and support larger solutions and a broad solution portfolio is a competitive differentiator for us, which provides for diversification and more opportunities for growth, but also requires greater investment for us and presents challenges, including, among others, challenges associated with competition for limited internal resources, complex customer requirements, and project deadlines.

After the completion of a sale, our customers or partners may need assistance from us in making full use of the functionality of our solutions, in realizing all of their benefits, or in implementation generally. If we are unable to assist our customers and partners in realizing the benefits they expect from our solutions and products, demand for our solutions and products may decline and our operating results may suffer.

The extended time frame and uncertainty associated with many of our sales opportunities also makes it difficult for us to accurately forecast our revenues (and attendant budgeting and guidance decisions) and increases the volatility of our operating

results from period to period. Our ability to forecast and the volatility of our operating results is also impacted by the fact that pricing, margins, and other deal terms may vary substantially from transaction to transaction, especially across business lines. The terms of our transactions, including with respect to pricing, future deliverables, delivery model (e.g., perpetual license versus SaaS), and termination clauses, also impact the timing of our ability to recognize revenue. We recognize SaaS revenue over the term of the SaaS subscription, so as our SaaS revenue continues to grow and becomes a more significant component of our overall revenue, we expect a greater amount of our revenue to be recognized over longer periods, in some cases several years, as compared to the way revenue is recognized for perpetual licenses. This change in the pattern of recognition also means that increases or decreases in SaaS subscription activity impacts the amount of revenue recognized in both current and future periods. Because these transaction-specific factors are difficult to predict in advance, this also complicates the forecasting of revenue and creates challenges in managing our cloud transition and revenue mix. The deferral or loss of one or more significant orders or a delay in a large implementation can also materially adversely affect our operating results, especially in a given quarter. Larger transactions also increase the risk that our revenue and profitability becomes concentrated in a given period or over time. As with other software-focused companies, a large amount of our quarterly business tends to come in the last few weeks, or even the last few days, of each quarter. This trend has also complicated the process of accurately predicting revenue and other operating results, particularly on a quarterly basis. Finally, our business is subject to seasonal factors that may also cause our results to fluctuate from quarter to quarter.

If we are unable to establish and maintain our relationships with third parties that market and sell our products, our business and ability to grow could be materially adversely affected.
Approximately half of our sales are made through partners, distributors, resellers, and systems integrators. To remain successful, we must maintain our existing relationships as well as identify and establish new relationships with such third parties. We must often compete with other suppliers for these relationships and our competitors often seek to establish exclusive relationships with these sales channels or to become a preferred partner for them. Our ability to establish and maintain these relationships is based on, among other things, factors that are similar to those on which we compete for end customers, including features, functionality, ease of use, installation and maintenance, and price. Even if we are able to secure such relationships on terms we find acceptable, there is no assurance that we will be able to realize the benefits we anticipate. Some of our channel partners may also compete with us or have affiliates that compete with us, or may also partner with our competitors or offer our products and those of our competitors as alternatives when presenting proposals to end customers. Our ability to achieve our revenue goals and growth depends to a significant extent on maintaining, enabling, and adding to these sales channels, and if we are unable to do so, our business and ability to grow could be materially adversely affected.
For certain products, components, or services, including our cloud hosting operations, we rely on third-party suppliers, manufacturers, and partners, which may create significant exposure for us.
Although we generally use standard parts and components in our products, we do rely on non-affiliated suppliers and OEM partners for certain non-standard products or components which may be critical to our products, including both hardware and software, and on manufacturers of assemblies that are incorporated into our products. We also purchase technology, license intellectual property rights, and oversee third-party development and localization of certain products or components, in some cases, by or from companies that may compete with us or work with our competitors. While we endeavor to use larger, more established suppliers, manufacturers, and partners wherever possible, in some cases, these providers may be smaller, less established companies, particularly in the case of new or unique technologies that we have not developed internally. 

If any of these suppliers, manufacturers, or partners experience financial, operational, manufacturing, or quality assurance difficulties, cease production or sale, or there is any other disruption in our supply, including as a result of the acquisition of a supplier or partner by a competitor, we will be required to locate alternative sources of supply or manufacturing, to internally develop the applicable technologies, to redesign our products, and/or to remove certain features from our products, any of which would be likely to increase expenses, create delivery delays, and negatively impact our sales.  Although we endeavor to establish contractual protections with key providers, including source code escrows (where needed), warranties, and indemnities, we may not be successful in obtaining adequate protections, these agreements may be short-term in duration, and the counterparties may be unwilling or unable to stand behind such protections. Moreover, these types of contractual protections offer limited practical benefits to us in the event our relationship with a key provider is interrupted.

We also rely on third parties to provide certain services to us or to our customers, including hosting partners and providers of other cloud-based services. We make contractual commitments to customers on the basis of these relationships and, in some cases, also entrust these providers with both our own sensitive data as well as the sensitive data of our customers (which may include sensitive end customer data). If these third-party providers do not perform as expected or encounter service disruptions, cyber-attacks, data breaches, or other difficulties, we or our customers may be materially and adversely affected,

including, among other things, by facing increased costs, potential liability to customers, end customers, or other third parties, regulatory issues, and reputational harm. If it is necessary to migrate these services to other providers as a result of poor performance, security issues or considerations, or other financial or operational factors, it could result in service disruptions to our customers and significant time, expense, or exposure to us, any of which could materially adversely affect our business.
If we cannot retain and recruit qualified personnel, our ability to operate and grow our business may be impaired.
We depend on the continued services of our management and employees to run and grow our business. To remain successful and to grow, we need to retain existing employees and attract new qualified employees, including in new markets and growth areas we may enter. Retention is an industry issue given the competitive technology labor market and as the millennial workforce continues to value multiple company experience over long tenure. As we grow, we must also enhance and expand our management team to execute on new and larger agendas and challenges. The market for qualified personnel is competitive in the geographies in which we operate and may be limited especially in areas of emerging technology. We may be at a disadvantage to larger companies with greater brand recognition or financial resources or to start-ups or other emerging companies in trending market sectors. Work visa restrictions, especially in the U.S., have also become significantly tighter in recent years, making it difficult or impossible to source qualified personnel from other countries or even to hire those already in the U.S. on current visas. Efforts we engage in to establish operations in new geographies where additional talent may be available, potentially at a lower cost, may be unsuccessful or fail to result in the desired cost savings.
If we are unable to attract and retain qualified personnel when and where they are needed, our ability to operate and grow our business could be impaired. Moreover, if we are not able to properly balance investment in personnel with sales, our profitability may be adversely affected.

Because we have significant foreign operations and business, we are subject to geopolitical and other risks that could materially adversely affect our results.

We have significant operations and business outside the United States, including sales, research and development, manufacturing, customer services and support, and administrative services. The countries in which we have our most significant foreign operations include Israel, the United Kingdom, India, Cyprus, Indonesia, Australia, Brazil and the Netherlands. We also generate significant revenue from more than a dozen foreign countries, and smaller amounts of revenue from many more, including a number of emerging markets. We intend to continue to grow our business internationally.

Our foreign operations are, and any future foreign growth will be, subject to a variety of risks, many of which are beyond our control, including risks associated with:

foreign currency fluctuations;

political, security, and economic instability or corruption;

changes in and compliance with both international and local laws and regulations, including those related to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, currency restrictions, and other requirements;

differences in tax regimes and potentially adverse tax consequences of operating in foreign countries;

product customization or localization issues;

preferences for or policies and procedures that protect local suppliers;

legal uncertainties regarding intellectual property rights or rights and obligations generally; and

challenges or delays in collection of accounts receivable.

Any or all of these factors could materially adversely affect our business or results of operations.
Conditions in and our relationship to Israel may materially adversely affect our operations and personnel and may limit our ability to produce and sell our products or engage in certain transactions.
We have significant operations in Israel, including R&D, manufacturing, sales, and support. Conflicts and political, economic, and/or military conditions in Israel and the Middle East region have affected and may in the future affect our operations in

Israel. Violence within Israel or the outbreak of violent conflicts between Israel and its neighbors, including the Palestinians or Iran, may impede our ability to manufacture, sell, and support our products or engage in R&D, or otherwise adversely affect our business or operations. Many of our employees in Israel are required to perform annual compulsory military service and are subject to being called to active duty at any time. Hostilities involving Israel may also result in the interruption or curtailment of trade between Israel and its trading partners or a significant downturn in the economic or financial condition of Israel and could materially adversely affect our results of operations.
Restrictive laws, policies, or practices in certain countries directed toward Israel, Israeli goods, or companies having operations in Israel may also limit our ability to sell some of our products in certain countries.
We receive grants from the IIA for the financing of a portion of our research and development expenditures in Israel. The availability in any given year of these IIA grants depends on IIA approval of the projects and related budgets that we submit to the IIA each year. The Israeli law under which these IIA grants are made limits our ability to manufacture products, or transfer technologies, developed using these grants outside of Israel. This may limit our ability to engage in certain outsourcing or business combination transactions involving these products or require us to pay significant royalties or fees to the IIA in order to obtain any IIA consent that may be required in connection with such transactions.

Israeli tax requirements may also place practical limitations on our ability to sell or engage in other transactions involving our Israeli companies or assets, to restructure our Israeli business, or to access funds in Israel.

Political factors related to our business or operations may adversely affect us.

We may experience negative publicity, reputational harm, or other adverse impacts on our business as a result of offering certain types of Cyber Intelligence solutions or if we sell such solutions to countries or customers that are considered disfavored by the media or political or social rights organizations, even where such activities or transactions are permissible under applicable law. The risk of these adverse impacts may also result in lost opportunities that impact our results of operations.
Some of our subsidiaries maintain security clearances domestically and abroad in connection with the development, marketing, sale, and/or support of our Cyber Intelligence solutions. These clearances are reviewed from time to time by these countries and could be deactivated, including for political reasons unrelated to the merits of our solutions, such as the list of countries we do business with or the fact that our local entity is controlled by or affiliated with an entity based in another country. If we lose our security clearances in a particular country, we may be unable to sell our Cyber Intelligence solutions for secure projects in that country and might also experience greater challenges in selling such solutions even for non-secure projects in that country.  Even if we are able to obtain and maintain applicable security clearances, government customers may decline to purchase our Cyber Intelligence solutions if they were not developed or manufactured in that country or if they were developed or manufactured in other countries that are considered disfavored by such country. 

Contracting with government entities exposes us to additional risks inherent in the government procurement process.

We provide products and services, directly and indirectly, to a variety of government entities, both domestically and internationally. Risks associated with licensing and selling products and services to government entities include more extended sales and collection cycles, varying governmental budgeting processes, adherence to complex procurement regulations, and other government-specific contractual requirements, including possible renegotiation or termination at the election of the government customer. We may be subject to audits and investigations relating to our government contracts and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.

We are subject to complex, evolving regulatory requirements that may be difficult and expensive to comply with and that could negatively impact us or our business.
 
Our business and operations are subject to a variety of regulatory requirements in the United States and abroad,countries in which we operate or in which we offer our solutions, including, among other things, with respect to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, anti-corruption, trade compliance, tax, and cyber intelligence. labor matters.

In addition, as we are increasingly building new and evolving technologies, such as artificial intelligence, machine learning, analytics, and biometrics, into many of our offerings, our business and operations may become subject to additional complex and evolving regulatory requirements pertaining to the sale or use of these technologies. The sale of these technologies, or their use by us or by our customers or partners, may also subject us to additional risks, including reputational harm, competitive harm or legal liabilities, due to their perceived or actual impact on human rights, privacy, or employment, or in other social contexts. Third-parties may criticize us or seek to hold us responsible not only for our own activities in this regard but also for the activities of our customers or partners.

We anticipate that we will become subject to an increasing amount of regulation and disclosure requirements related to environmental, social and governance (“ESG”) matters, including on topics such as diversity and sustainability. We have seen increased scrutiny on these matters from a variety of stakeholders, including investors, proxy advisors, rating agencies, customers, partners, and employees, and we cannot assure you that such stakeholders will be satisfied with our efforts or progress. Stakeholders may pressure us to publicly establish goals or even make commitments on these matters which may be difficult to manage or achieve, or may criticize us if we do not. If we fail to meet any public goals or commitments we make, we may be subject to reputational harm or legal liability.

Compliance with theseapplicable regulatory requirements may be onerous, time-consuming, and expensive, especially where these requirements are inconsistent from jurisdiction to jurisdiction or where the jurisdictional reach of certain requirements is not clearly defined or seeks to reach across national borders. Regulatory requirements in one jurisdiction may make it difficult or impossible to do business in or comply with the rules of another jurisdiction. We may also be unsuccessful in obtaining permits, licenses, or other authorizations required to operate our business, such as for the marketing or sale or import or export of our products and services. 


While we endeavor to implement policies, procedures, and systems designed to achieve compliance with these regulatory requirements, we cannot assure you that these policies, procedures, or systems will be adequate or that we or our personnel will not violate these policies and procedures or applicable laws and regulations. Violations of these laws or regulations may harm our reputation and deter government agencies and other existing or potential customers or partners from purchasing our solutions. Furthermore, non-compliance with applicable laws or regulations could result in fines, damages, criminal sanctions against us, our officers, or our employees, restrictions on the conduct of our business, and damage to our reputation.
 
Regulatory requirements, such as laws requiring telecommunications providers to facilitate the monitoring of communications by law enforcement or governing the purchase and use of security solutions like ours, may also influence market demand for many of our products and/or customer requirements for specific functionality and performance or technical standards. The domestic and international regulatory environment is subject to constant change, often based on factors beyond our control or anticipation, including political climate, budgets, and current events, which could reduce demand for our products or require us to change or redesign products to maintain compliance or competitiveness.

Increasing regulatory focus on information security and data privacy issues and expanding laws in these areas may result in increased compliance costs, impact our business models, and expose us to increased liability.


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As a global company, Verint is subject to global privacy and data security laws, and regulations. These laws and regulations may be inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. Government regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. This increased scrutiny may result in additional compliance obligations, orcosts, new interpretations of existing laws and regulations. Globally, newregulations, increased regulatory proceedings or litigation, and emergingincreased exposure for significant fines, penalties, or commercial liabilities.

Globally, laws such as the General Data Protection Regulation (“GDPR”) in Europe, state laws in the U.S.United States on privacy, data and related technologies, such as the California Consumer Privacy Act, the California Privacy Rights Act, the California Invasion of Privacy Act, the Florida Security of Communications Act, and the Illinois Biometrics Information Act, as well as industry self-regulatory codes create new compliance obligations and expand the scope of potential liability, either jointly or severally with our customers and suppliers. While we have invested in readiness to comply with applicable requirements, these new and emerging laws, regulations and codes may affect our ability to reach current and prospective customers, to respond to both enterprise and individual customer requests under the laws (such as individual rights of access, correction, and deletion of their personal information), to share information internally, and to implement our business models effectively. These new laws may also impact our products and services as well as our innovation in new and emerging technologies. These requirements, among others, may impact demand for our offerings and force us to bear the burden of more onerous obligations in our contracts or otherwise increase our exposure to customers, regulators, or other third parties.


Transferring personal information across international borders is becoming increasingly complex. For example, European data transfers outside the European Economic Area are highly regulated. The mechanisms that we and many other companies rely upon for data transfers, including standard contract clauses, may be contested or invalidated. If the mechanisms for transferring personal information from certain countries or areas, including Europe to the United States, should be found invalid or if other countries implement more restrictive regulations for cross-border data transfers (or not permit data to leave the country of origin), such developments could harm our business, financial condition and results of operations.

Information / Product Security and Intellectual Property

The mishandling or the perceived mishandling of sensitive information could harm our business.
 
Some of our products are used by customers to compile and analyze highly sensitive or confidential information and data, including information or data used in intelligence gathering or law enforcement activities as well as personally identifiable information. While our customers’ use of our products does not by itself provide us access to the customer’s sensitive or confidential information or data (or the information or data our customers may collect), we or our partners may receive or come into contact with such information or data, including personally identifiable information, in connection with our cloud or managed services offerings or when we are asked to perform servicesservice or support functions for our customers. We or our partners may also receive or come into contact with such information or data in connection with our SaaS or other hosted or managed services offerings. Customers are also increasingly focused on the security of our products and services and we continuously work to address these concerns, including through the use of encryption, access rights, and other customary security features, which vary based on the solution in question and customer requirements.support. We expect to receive, come into contact with, or become custodian of an increasing amount of customer data (including end customer data) as our cloud business and cloud operations expand, increasing ourleading to increased exposure if we or one of our hosting partners experiences an issue relating to the security or the proper handling of that information. information, which could have a material adverse impact on our financial condition or reputation. The expansion of our cloud business and the related increase in the amount of customer data on our cloud platforms also increases our exposure to end customers or other third parties who may seek to hold us responsible for the use of these platforms by our customers.

We have implemented policies and procedures, and use information technology systems, to help ensure the proper handling of suchcustomer and end customer information and data including background screening of certain services personnel, non-disclosure agreements with employeesfrom both a data privacy and partners, access rules, and controls on ouran information technology systems.security perspective. We also evaluate the information security of potential

partners and vendors as part of our selection process and attempt to negotiate adequate protections from such third parties in our contracts. However,Our customer contracts also obligate our customers to configure and operate our solutions, including our cloud platforms, in compliance with applicable law. While these policies, procedures, systems, contractual provisions, and measures are designed to mitigate the risks associated with handling or processing sensitive data, andthey cannot always safeguard against all risks, at all times.nor can we control the actions of third parties, including customers and partners. The improper handling of sensitive data, or even the perception of such mishandling (whether or not valid), or other security lapses or breaches affecting us, our partners, our customers, or our products or services, could reduce demand for our products or services or otherwise expose us to financial or reputational harm or legal liability.
 
Our solutions may contain defects or experience disruptions, or may be vulnerable to cyber-attacks, which could expose us to both financial and non-financial damages.


Our solutions may contain defects or may develop operational problems. This risk is amplified for our more sophisticated solutions. New products and new product versions, service models such asprovision of hosting SaaS,platforms and managed services, and the incorporation of third-party products or services into our solutions, also give rise to the risk of defects, errors, or errors.vulnerabilities. These defects, errors, or errorsvulnerabilities may relate to the quality, reliability, operation, or the security of our products or services, including third party componentshosting platforms or services such as hosting.third-party components. If we do not discover and remedy such defects, errors, vulnerabilities, or other operational or security problems until after a product has been released toin advance, our customers and
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partners may experience data losses or partners,unplanned downtimes and we may incur significant costs to correct such problems and/or become liable for substantial damages for product liability claims or other liabilities.


Our solutions, including our cloud offerings, may be vulnerable to cyber-attacks even if they do not contain defects. Customers are increasingly focused on the security of our products and services and we work to address these concerns, including through the use of encryption, access rights, and other customary security features, which vary based on the solution in question and customer requirements. We regularly monitor global and geopolitical events, some of which have in the past and may in the future increase cyber-attacks on us and our offerings, thereby increasing the risk of breaches. If there is a successful cyber-attack on one of our products or services, even absent a defect or error, it may also result in questions regarding the integrity of our products or services generally, which could cause adverse publicity and impair their market acceptance and could have a material adverse effect on our results or financial condition.


We may be subject to information technology system attacks, breaches, failures, or disruptions that could harm our operations, financial condition, or reputation.
 
We rely extensively on information technology systems to operate and manage our business and to process, maintain, and safeguard information, including information belongingrelated to our customers, partners, and personnel. This information may be processed and maintained on our internal information technology systems or on systems hosted by third-party service providers. These systems, whether internal or external, may be subject to breaches, failures, or disruptions as a result of, among other things, cyber-attacks, computer viruses, physical security breaches, natural disasters, accidents, power disruptions, telecommunications failures, new system implementations, or acts of terrorism or war. We regularly monitor global and geopolitical events, some of which have in the past and may in the future increase cyber-attacks on us and our offerings, thereby increasing the risk of breaches. We have experienced cyber-attacks in the past and expect to continue to experience them in the future, potentially with greater frequency.

While we are continually working to maintain secure and reliable systems, our security, redundancy, and business continuity efforts may be ineffective or inadequate. We must continuously improve our design and coordination of security controls across our business groups and geographies. Despite our efforts, it is possible that our security systems, controls, and other procedures that we follow or those employed by our third-party service providers, may not prevent breaches, failures, or disruptions. Such breaches, failures, or disruptions have in the past and could in the future subject us to the loss, compromise, destruction, or disclosure of sensitive or confidential information, including personally identifiable information, or intellectual property, either of our own information or IP or that of our customers (including end customers) or other third parties that may have been in our custody or in the custody of our third-party service providers, financial costs or losses from remedial actions, litigation, regulatory issues, liabilities to customers or other third parties, damage to our reputation, delays in our ability to process orders, delays in our ability to provide products and services to customers, including SaaS or other hostedcloud or managed services offerings, R&D or production downtimes, or delays or errors in financial reporting. Information system breaches or failures at one of our partners, including hosting providers or those who support other cloud-based offerings, may also result in similar adverse consequences. Any of the foregoing could harm our competitive position, result in a loss of customer confidence, and materially and adversely affect our results of operations or financial condition.


Intellectual Property

Our intellectual property may not be adequately protected.
 
While much of our intellectual property is protected by patents or patent applications, we have not and cannot protect all of our intellectual property with patents or other registrations. There can be no assurance that patents we have applied for will be issued on the basis of our patent applications or that, if such patents are issued, they will be, or that our existing patents are,patent portfolio is sufficiently broad enough to protect all our technologies, products, or services. Our intellectual property rights may not be successfully asserted in the future or may be invalidated, designed around, or challenged.
 
In order to safeguard our unpatented proprietary know-how, source code, trade secrets, and technology, we rely primarily upon trade secret protection and non-disclosure provisions in agreements with employees and other third parties having access to our confidential information. There can be no assurance that these measures will adequately protect us from improper disclosure or misappropriation of our proprietary information.

 
Preventing unauthorized use or infringement of our intellectual property rights is difficult even in jurisdictions with well-established legal protections for intellectual property such as the United States. It may be even more difficult to protect our intellectual property in other jurisdictions where legal protections for intellectual property rights are less established. If we are unable to adequately protect our intellectual property against unauthorized third-party use or infringement, our competitive position could be adversely affected.
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Our products or other IP may infringe or may be alleged to infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions for us and may require us to indemnify our customers and resellers for any damages they suffer.
 
The technology industry is characterized by frequent allegations of intellectual property infringement. In the past, third parties have asserted that certain of our products or other IP have infringed on their intellectual property rights and similar claims may be made in the future. Any allegation of infringement against us could be time consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause product shipment delays, or force us to enter into royalty or license agreements. If patent holders or other holders of intellectual property initiate legal proceedings against us, either with respect to our own intellectual property or intellectual property we license from third parties, we may be forced into protracted and costly litigation, regardless of the merits of these claims. We may not be successful in defending such litigation, in part due to the complex technical issues and inherent uncertainties in intellectual property litigation and may not be able to procure any required royalty or license agreements on terms acceptable to us, or at all. Competitors and other companies could adopt trademarks that are similar to ours or try to prevent us from using our trademarks, consequently impeding our ability to build brand identity and possibly leading to customer confusion. Third parties may also assert infringement claims against our customers or partners. Subject to certain limitations, we generally indemnify our customers and partners with respect to infringement by our products on the proprietary rights of third parties, which, in some cases, may not be limited to a specified maximum amount and for which we may not have sufficient insurance coverage or adequate indemnification in the case of intellectual property licensed from a third party. If any of these claims succeed, we may be forced to pay damages, be required to obtain licenses for the products our customers or partners use or sell or incur significant expenses in developing non-infringing alternatives. If we cannot obtain necessary licenses on commercially reasonable terms, our customers may be forced to stop using or, in the case of resellers and other partners, stop selling our products.
 
Use of free or open source software could expose our products to unintended restrictions and could materially adversely affect our business.
 
Some of our products contain free or open source software (together, “open source software”) and we anticipate making use of open source software in the future. Open source software is generally covered by license agreements that permit the user to use, copy, modify, and distribute the software without cost, provided that the users and modifiers abide by certain licensing requirements. The original developers of the open source software generally provide no support or warranties on such software or indemnification or other contractual protections in the event the open source software infringes a third party’s intellectual property rights. In addition, some open source licenses contain requirements that we make available source code for modifications or derivative works we create based on the type of open source software we use, or grant other licenses to our intellectual property. Moreover, the terms of many open source licenses have not been interpreted by U.S. or foreign courts. As a result, there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our products and services. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their solutions. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software.

Although we endeavor to monitor the use of open source software in our product development, we cannot assure you that past, present, or future products, including products inherited in acquisitions, will not contain open source software elements that impose unfavorable licensing restrictions or other requirements on our products, including the need to seek licenses from third parties, to re-engineer affected products, to discontinue sales of affected products, or to release all or portions of the source code of affected products. Any of these developments could materially adversely affect our business.
 
Risks Related to Our Finances and Capital Structure
 
We have a significant amount of indebtedness, which exposes us to leverage risks and subjects us to covenants which may adversely affect our operations.
 
AtAs of March 15, 2019,2022, we had total outstanding indebtedness of approximately $817.6$415.0 million under our 2017 Credit Agreement and our 1.50%0.25% convertible senior notes due 20212026 (the “Notes”“2021 Notes”), meaning that we are significantly leveraged.. In addition, we have the ability to borrow additional amounts under our 2017 Credit Agreement, including the revolving credit facility, for a variety of purposes, including, among others, acquisitions and stock repurchases. Our leverage position may, among other things:


limit our ability to obtain additional debt financing in the future for working capital, capital expenditures, acquisitions, or other general corporate purposes;


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require us to dedicate a substantial portion of our cash flow from operations to debt service, reducing the availability of our cash flow for other purposes;



require us to repatriate cash for debt service from our foreign subsidiaries resulting in dividend tax costs or require us to adopt other disadvantageous tax structures to accommodate debt service payments; or


increase our vulnerability to economic downturns, limit our ability to capitalize on significant business opportunities, and restrict our flexibility to react to changes in market or industry conditions.

In addition, because our indebtedness under our 2017 Credit Agreement, which is comprised of a term loan maturing on June 29, 2024 and a revolving credit facility maturing on April 9, 2026, bears interest at a variable rate, we are exposed to risk from fluctuations in interest rates. Interest rates on loans under the 2017 Credit Agreementterm loan are periodically reset, at our option, at either a Eurodollar Rate or an ABR rate (each as defined in the 2017 Credit Agreement), plus in each case a margin. TheBorrowings under our revolving credit facility also bear interest at either a Eurodollar Rate or an ABR rate, plus in each case a margin. In July 2017, the Financial Conduct Authority ofin the United Kingdom plans toannounced that it would phase out LIBOR as a benchmark by the end of 2021. On March 5, 2021, and we have approached the administrative agent under this facilityFinancial Conduct Authority announced that all LIBOR settings will either cease to discussbe provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the impactcase of the planned phase out. However, it is currently uncertain what, if any.one-week and two-month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. Our 2017 Credit Agreement incorporates fallback language mechanisms to accommodate the eventual establishment of an alternate rate of interest, including alternative reference interestbenchmark rates or other reforms will be enacted in responsesuch as the Secured Overnight Financing Rate, upon the occurrence of certain events related to the planned phase out,phase-out of any applicable interest rate. The transition from LIBOR to a new replacement benchmark is uncertain at this time and wethe consequences of such developments cannot assure you thatbe entirely predicted but could result in an alternative to LIBOR (on whichincrease in the Eurodollar Rate is based) that we find acceptable will be available to us.cost of our borrowings under our existing credit facility and any future borrowings.

The revolving credit facility under our 2017 Credit Agreement contains a financial covenant that requires us to satisfy a maximum consolidated leverage ratio test. Our ability to comply with the leverage ratio covenant is dependent upon our ability to continue to generate sufficient earnings each quarter, or in the alternative, to reduce expenses and/or reduce the level of our outstanding debt, and we cannot assure that we will be successful in any or all of these regards.
 
Our 2017 Credit Agreement also includes a number ofseveral restrictive covenants which limit our ability to, among other things:


incur additional indebtedness or liens or issue preferred stock;


pay dividends or make other distributions or repurchase or redeem our stock or subordinated indebtedness;


engage in transactions with affiliates;


engage in sale-leaseback transactions;


sell certain assets;


change our lines of business;


make investments, loans, or advances; and


engage in consolidations, mergers, liquidations, or dissolutions.


These covenants could limit our ability to plan for or react to market conditions, to meet our capital needs, or to otherwise engage in transactions that might be considered beneficial to us.

If certain events of default occur under our 2017 Credit Agreement, our lenders could declare all amounts outstanding to be immediately due and payable. An acceleration of indebtedness under our 2017 Credit Agreement may also result in an event of default under the indenture governing the 2021 Notes. Additionally, if a change of control as defined in our 2017 Credit Agreement were to occur, the lenders under our credit facilities would have the right to require us to repay all of our outstanding obligations under the facilities.


If a fundamental change as defined inIn connection with the indenture governing the Notes were to occur, the holders may require us to purchase for cash all or any portion of their Notes at 100% of the principal amount of the Notes, plus accrued and unpaid interest. Additionally, in the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert their Notes during specified periods of time at their option. If one or more holders elect to convert their Notes, we may be required to settle all or a portionmaturity of our conversion obligation in cash, which could adversely affect our liquidity.
Ifdebt obligations or if any of the events described in the foregoing paragraphsabove were to occur, in order to satisfy our obligations we may be forcedneed to seek an amendment of and/or waiver under our debt agreements, raise additional capital through securities offerings, asset sales,
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or other transactions, or seek to refinance or restructure our debt. In such a case, there can be no assurance that we will be able to consummate such a transaction on reasonable terms or at all.

We consider other financing and refinancing options from time to time,time; however, we cannot assure you that such options will

be available to us on reasonable terms or at all. If one or more rating agencies were to downgrade our credit ratings, that could also impede our ability to refinance our existing debt or secure new debt, increase our future cost of borrowing, and create third-party concerns about our financial condition or results of operations.


If we are not able to generate sufficient cash domestically in order to fund our U.S. operations, strategic opportunities, and to service our debt, we may incur withholding taxes in order to repatriate certain overseas cash balances, or we may need to raise additional capital in the future.

On December 22, 2017 the Tax Cuts and Jobs Act (“2017 Tax Act”) was enacted in the United States. The 2017 Tax Act included significant changes to corporate taxation in the United States including a mandatory one-time tax on accumulated earnings of foreign subsidiaries. As a result, all deferred foreign earnings not previously subject to U.S. income tax have now been taxed and we therefore do not expect to incur any significant additional U.S. taxes related to such amounts. However, certain unremitted earnings may be subject to foreign withholding tax upon repatriation to the United States.


If the cash generated by our domestic operations, plus certain foreign cash which we would repatriate and for which we have accrued the related foreign withholding tax, is not sufficient to fund our domestic operations, our broader corporate initiatives such as acquisitions, and other strategic opportunities, and to service our outstanding indebtedness, we may need to raise additional funds through public or private debt or equity financings, or we may need to obtain new credit facilities to the extent we choose not to repatriate additional overseas cash. Such additional financing may not be available on terms favorable to us, or at all, and any new equity financings or offerings would dilute our current stockholders’ ownership. Furthermore, lenders may not agree to extend us new, additional, or continuing credit. If adequate funds are not available, or are not available on acceptable terms, we may be forced to repatriate foreign cash and incur a significant tax cost (in addition to amounts previously accrued) or we may not be able to take advantage of strategic opportunities, develop new products, respond to competitive pressures, repurchase outstanding stock or repay our outstanding indebtedness. In any such case, our business, operating results or financial condition could be adversely impacted.


We may be adversely affected by our acquisition of CTI or our historical affiliation with CTI and its former subsidiaries.


As a result of the February 2013 acquisition of our former parent company, CTI (the “CTI Merger”), CTI’s liabilities, including contingent liabilities, have been consolidated into our financial statements. If CTI’s liabilities are greater than represented, if the contingent liabilities we have assumed become fixed, or if there are obligations of CTI of which we were not aware at the time of completion of the CTI Merger, we may have exposure for those obligations and our business or financial condition could be materially and adversely affected. Adjustments to the CTI consolidated group’s tax liabilitynet operating losses (“NOLs”) for periods prior to the CTI Merger could also affect the net operating losses (“NOLs”)NOLs allocated to Verint as a result of the CTI Merger and cause us to incur additional tax liability in future periods. In addition, adjustments to the historical CTI consolidated group’s tax liabilityNOLs for periods prior to Verint’s IPO could affect the NOLs allocated to Verint in the IPO and cause us to incur additional tax liability in future periods.


We are entitled to certain indemnification rights from the successor to CTI’s business operations (Mavenir Inc.) under the agreements entered into in connection with the distribution by CTI to its shareholders of substantially all of its assets other than its interest in us (the “Comverse Share Distribution”) prior to the CTI Merger. However, there is no assurance that Mavenir will be willing and able to provide such indemnification if needed. If we become responsible for liabilities not covered by indemnification or substantially in excess of amounts covered by indemnification, or if Mavenir becomes unwilling or unable to stand behind such protections, our financial condition and results of operations could be materially and adversely affected.


Our financial results may be significantly impacted by changes in our tax position.
We are subject to taxes in the United States and numerous foreign jurisdictions. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation allowance on deferred tax assets (including our NOL carryforwards), changes in unrecognized tax benefits, or changes in tax laws or their interpretation. Any of these changes could have a material adverse effect on our profitability. In addition, the tax authorities in the jurisdictions in which we operate, including the United States, may from time to time review the pricing arrangements between us and our foreign subsidiaries or among our foreign subsidiaries. An adverse determination by one or more tax authorities in this regard may have a material adverse effect on our financial results.
We have significant deferred tax assets which can provide us with significant future cash tax savings if we are able to use them, including significant NOLs inherited as a result of the CTI Merger. However, the extent to which we will be able to use these NOLs may be impacted, restricted, or eliminated by a number of factors, including changes in tax rates, laws or regulations,

whether we generate sufficient future taxable income, and possible adjustments to thetax attributes of CTI or its non-Verint subsidiaries for periods prior to the CTI Merger. To the extent that we are unable to utilize our NOLs or other losses, our results of operations, liquidity, and financial condition could be materially adversely affected. When we cease to have NOLs available
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to us in a particular tax jurisdiction, either through their expiration, disallowance, or utilization, our cash tax liability will increase in that jurisdiction.

In addition, on December 22, 2017, the 2017 Tax Act was enacted in the United States. The 2017 Tax Act significantly revised the Internal Revenue Code of 1986, as amended, and it includes fundamental changes to taxation of U.S. multinational corporations. Compliance with the 2017 Tax Act requires significant complex computations not previously required by U.S. tax law.

The key provisions of the 2017 Tax Act, which may significantly impact our current and future effective tax rates, include new limitations on the tax deductions for interest expense and executive compensation, elimination of the alternative minimum tax (“AMT”) and the ability to refund unused AMT credits over a four-year period, and new rules related to uses and limitations of NOL carryforwards. New international provisions add a new category of deemed income from our foreign operations, eliminate U.S. tax on foreign dividends (subject to certain restrictions), and add a minimum tax on certain payments made to foreign related parties.


Changes in accounting principles, or interpretations thereof, could adversely impact our financial condition or operating results.


We prepare our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“GAAP”). These principles are subject to interpretation by the SEC and other organizations that develop and interpret accounting principles. New accounting principles arise regularly, implementation of which can have a significant effect on and may increase the volatility of our reported operating results and may even retroactively affect previously reported operating results. In addition, the implementation of new accounting principles may require significant changes to our customer and vendor contracts, business processes, accounting systems, and internal controls over financial reporting. TheThese changes can be difficult to predict and the costs and effects of these changes could adversely impact our operatingfinancial condition and our results of operations, and difficulties in implementing new accounting principles could cause us to fail to meet our financial reporting obligations. In some cases, we may be required to apply a new or revised accounting standard retroactively, resulting in a requirement to restate our prior period financial statements.


OurIf we are unable to maintain an effective system of internal controls over financial reporting, we may not prevent misstatements and material weaknesses or deficiencies could arise in the future which could lead to restatements or filing delays.delays and potential stockholders may lose confidence in our financial reporting.

Our system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with GAAP. We are required, on a quarterly basis, to evaluate the effectiveness of our internal controls and disclose any changes and material weaknesses in those internal controls. Because of its inherent limitations, our system of internal control over financial reporting may not prevent or detect every misstatement. An evaluation of effectiveness is subject to the risk that the controls may become inadequate because of changes in conditions, because the degree of compliance with policies or procedures decreases over time, or because of unanticipated circumstances or other factors. As a result, although our management has concluded that our internal controls are effective as of January 31, 2019,2022, we cannot assure you that our internal controls will prevent or detect every misstatement, that material weaknesses or other deficiencies will not occur or be identified in the future, that this or future financial reports will not contain material misstatements or omissions, that future restatements will not be required, or that we will be able to timely comply with our reporting obligations in the future. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.


If our goodwill or other intangible assets become impaired, our financial condition and results of operations could be negatively affected.

Because we have historically acquired a significant number of companies, goodwill and other intangible assets have represented a substantial portion of our assets. Goodwill and other intangible assets totaled approximately $1.6$1.5 billion, or approximately 57%62% of our total assets, as of January 31, 2019.2022. We test our goodwill for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment, and we assess on an as-needed basis whether there have been impairments in our other intangible assets. We make assumptions and estimates in this assessment which are complex and often subjective. These assumptions and estimates can be affected by a variety of factors, including external factors such as industry anddeteriorating economic trends, and internal factors such asconditions, including those caused by future COVID-19 pandemic developments, technological changes, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in our business strategy or our internal forecasts.use of the assets, intensified competition, divestitures, market capitalization declines and other factors. To the extent that the factors described above change, we could be required to record additional non-cash impairment charges in the future, which could negatively affect our financial condition and results of operations.



Our international operations subject usWe are exposed to fluctuations in foreign currency exchange risk.rates that could negatively impact our financial results.

We earn revenue, pay expenses, own assets, and incur liabilities in countries using currencies other than the U.S. dollar, including the Israeli shekel, euro, British pound sterling, Singaporeeuro, Australian dollar, Brazilian real,Indian rupee, Israeli shekel, and AustraliaCanadian dollar, among others. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenue, expenses, assets, and liabilities of entities using non-U.S. dollar functional currencies into U.S. dollars using currency exchange rates in effect during or at the end of each reporting period, meaning that we are exposed to the impact of changes in currency exchange rates. In addition, our net income is impacted by the revaluation and settlement of monetary assets and liabilities denominated in currencies other than an entity’s functional currency, gains or losses on which are recorded within other income (expense), net.
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We attempt to mitigate a portion of these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity and expense. However, our hedging activities are limited in scope and duration and may not be effective at reducing the U.S. dollar cost of our global operations.


In addition, our financial outlooks do not assume fluctuations in currency exchange rates. Adverse fluctuations in currency exchange rates subsequent toafter providing our financial outlooks could cause our actual results to differ materially from those anticipated in our outlooks, which could negatively affect the price of our common stock.


The prices of our common stock and the 2021 Notes have been, and may continue to be, volatile and your investment could lose value.


The prices of our common stock and the 2021 Notes have been, and may continue to be, volatile. Those prices could be affected by any of the risk factors discussed in this Item. In addition, other factors that could impact the prices of our common stock and/or the 2021 Notes include:


announcements by us or our competitors regarding, among other things, strategic changes, expectations regarding our cloud transition, new products, product enhancements or technological advances, acquisitions, major transactions, significant litigation or regulatory matters, stock repurchases, or management changes;


press or analyst publications, including with respect to changes in recommendations or earnings estimates or growth rates by financial analysts, changes in investors’ or analysts’ valuation measures for our securities, our credit ratings, our security solutions and customers, speculation regarding strategy or M&A, or market trends unrelated to our performance;


stock sales by our directors, officers, or other significant holders, or stock repurchases by us;


hedging or arbitrage trading activity by third parties, including by the counterparties to the note hedgeparties; and warrant transactions that we entered into in connection with the issuance of the Notes; and


dilution that may occur upon any conversion of the 2021 Notes.


A significant drop in the price of our common stock or the 2021 Notes could also expose us to the risk of securities class action lawsuits, which could result in substantial costs and divert management’s attention and resources, which could adversely affect our business.



Actions of activist stockholders may cause us to incur substantial costs, disrupt our operations, divert management’s attention, or have other material adverse effects on us.

From time to time, activist investors may take a position in our stock. These activist investors may disagree with decisions we have made or may believe that alternative strategies or personnel, either at a management level or at a board level, would produce higher returns. Such activists may or may not be aligned with the views of our other stockholders, may be focused on short-term outcomes, or may be focused on building their reputation in the market. These activists may not have a full understanding of our business and markets and the alternative personnel they may propose may also not have the qualifications or experience necessary to lead the company.

Responding to advances or actions by activist investors may be costly and time-consuming, may disrupt our operations, and may divert the attention of our board of directors, management team, and employees from running our business and maximizing performance. Such activist activities could also interfere with our ability to execute our strategic plan, disrupt the functioning of our board of directors, or negatively impact our ability to attract and retain qualified executive leadership or board members, who may be unwilling to serve with activist personnel. Uncertainty as to the impact of activist activities may also affect the market price and volatility of our common stock.

Apax owns a substantial portion of our equity and its interests may not be aligned with yours.

On December 4, 2019, we entered into an Investment Agreement (the “Investment Agreement”) with an affiliate (the “Apax Investor”) of Apax Partners (“Apax”). Under the terms of 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 (“Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Preferred Stock”). As of January 31, 2022, Apax’s ownership in us on an as-converted basis was approximately 12.9%. Additionally, Apax has the right to designate one director to our board of directors and to mutually select with us a second independent director. Circumstances may occur in
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which the interests of Apax could conflict with the interests of our other stockholders. For example, the existence of Apax as a significant stockholder and Apax’s board appointment rights may have the effect of limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of the Company.

Risks Related to the Spin-Off

The Spin-Off may not achieve the anticipated benefits and will expose us to new risks.

On February 1, 2021, we completed the separation of our Cyber Intelligence Solutions business through the Spin-Off of Cognyte Software Ltd. to our shareholders. We may not realize the anticipated strategic, financial, operational, or other benefits from the Spin-Off. We cannot predict with certainty when the benefits expected from the Spin-Off will occur or the extent to which they will be achieved. In addition, we incurred one-time costs in connection with the Spin-Off that may negate some of the benefits we expect to achieve. If we do not realize these assumed benefits, we could suffer a material adverse effect on our financial condition. As a result of the Spin-Off, our operational and financial profile has changed, and we face new risks. We are now a smaller, less-diversified company than we were prior to the Spin-Off and may be more vulnerable to changing market conditions as a result.

We may be exposed to claims and liabilities or incur operational difficulties as a result of the Spin-Off.

The Spin-Off continues to involve a number of risks, including, among other things, certain indemnification risks. In connection with the Spin-Off, we entered into a separation and distribution agreement and various other agreements (including a transition services agreement, a tax matters agreement, an employee matters agreement and intellectual property and trademark cross license agreements) (the “Spin-Off Agreements”). The Spin-Off Agreements govern the Spin-Off and the relationship between the two companies going forward.

The Spin-Off Agreements provide for indemnification obligations designed to make Cognyte financially responsible for certain liabilities that may exist relating to its business activities, whether incurred prior to or after the Spin-Off, including any pending or future litigation. It is possible that a court would disregard the allocation agreed to between us and Cognyte and require us to assume responsibility for obligations allocated to Cognyte. Third parties could also seek to hold us responsible for any of these liabilities or obligations, and the indemnity rights we have under the separation and distribution agreement may not be sufficient to fully cover all of these liabilities and obligations. Even if we are successful in obtaining indemnification, we may have to bear costs temporarily. In addition, our indemnity obligations to Cognyte may be significant. These risks could negatively affect our business, financial condition or results of operations.

The Spin-Off Agreements could also lead to disputes over rights to certain shared property and rights and over the allocation of costs and revenues for products and operations. If Cognyte is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur losses.

The Spin-Off could result in substantial tax liability to us and our shareholders if the Spin-Off distribution does not qualify as a tax-free transaction.

In connection with the Spin-Off, we received tax rulings from U.S. and Israeli tax authorities as well as an opinion of our U.S. tax advisor. However, the U.S. tax ruling only addressed certain requirements for tax-free treatment and the remaining requirements were addressed by the tax opinion. The tax opinion will not be binding on any taxing authority or court. Accordingly, taxing authorities or the courts may reach conclusions with respect to the Spin-Off that are different from the conclusions reached in the tax opinion. Moreover, the U.S. tax ruling and tax opinion were based on certain statements and representations made by us, which, if incomplete or inaccurate in any material respect, could invalidate the ruling or the opinion. If the Spin-Off and certain related transactions were determined to be taxable, we could be subject to a substantial tax liability that could have a material adverse effect on our financial condition, results of operations and cash flows. In addition, if the Spin-Off were taxable, each holder of our common stock who received Cognyte shares in the Spin-Off would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares received.

We might not be able to engage in certain strategic transactions because we have agreed to certain restrictions to comply with U.S. federal income tax requirements for a tax‑free spin‑off.

To preserve the intended tax treatment of the distribution of Cognyte shares in the Spin-Off, we agreed to comply with certain restrictions under current U.S. federal income tax laws for spin‑offs, including (i) continuing to own and manage our historic
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business and (ii) limiting sales or redemptions of our common stock. These restrictions could prevent us from pursuing otherwise attractive business opportunities, result in our inability to respond effectively to competitive pressures, industry developments and future opportunities and may otherwise harm our business, financial results and operations. If these restrictions, among others, are not followed, the Spin-Off distribution could be treated as a dividend to our stockholders and subject us to taxable gain on the distribution of Cognyte shares. In addition, we could be required to indemnify Cognyte for any tax liability incurred by Cognyte as a result of our non‑compliance with these restrictions, and such indemnity obligations could be substantial.


Item 1B. Unresolved Staff Comments


None.




Item 2. Properties

The following describes our material properties as of the date of this report.
We lease a total of approximately 1,155,000470,000 square feet of office space covering approximately 80more than 30 offices around the world, excluding space under certain leases that we have accelerated and terminated in advance of their originally scheduled lease term. In addition, we own an aggregate of approximately 79,00053,000 square feet of office space at threetwo sites in Scotland Germany, and Indonesia.

Other than as described below, these properties are comprised of small and mid-sized facilities that are used to support our administrative, marketing, manufacturing, product development, sales, training, support, and services needs for our two operating segments.needs.
Our corporate headquarters is located in a leased facility in Melville, New York, and consists of approximately 49,000 square feet of space under a lease that we entered into on February 13, 2015 and that expires in 2027. The Melville facility is used primarily by our executive management and corporate groups, including finance, legal, and human resources, as well as for customer support and services for our Customer Engagement operations.services.
We lease approximately 133,000 square feet of space at a facility in Alpharetta, Georgia under a lease that expires in 2026.2023. The Alpharetta facility is used primarily by the administrative, marketing, product development, support, and sales groupsgroups.
Currently, the majority of our employees are working remotely. We expect to incur additional costs to the extent we further resume business-related travel and as we prepare our facilities for a safe return to work environment as we anticipate implementing a hybrid work model during the year ending January 31, 2023. During the year ended January 31, 2022, we decided to exit twenty-one leased offices. We will continue to evaluate our Customer Engagement operations.
real estate footprint to determine where we can exit, consolidate, or modify our office space leases, and we anticipate exiting or reducing additional office leases in the future as we continue to assess how and to what extent our employees will return to work in our offices. We also occupy approximately 176,000 square feet ofwill continue to evaluate our real estate footprint to determine where we can exit, consolidate, or modify our office space atleases, and we anticipate exiting or reducing additional office leases in the future as we continue to assess how and to what extent our main facilityemployees will return to work in Herzliya, Israel under a lease that we renewed on October 1, 2015 and that expires in 2025. This Herzliya facility is used primarily for manufacturing, storage, development, sales, marketing, and support related to our Cyber Intelligence operations, as well as for product development related to our Customer Engagement solutions.offices.
From time to time, we may lease or sublease portions of our owned or leased facilities to third parties based on our operational needs. For additional information regarding our lease obligations, see Note 15, “Commitments and Contingencies”17, “Leases” to our consolidated financial statements included underin Part II, Item 8 of this report.
We believe that our leased and owned facilities are in good operating condition and are adequate for our current requirements, although changes in our business may require us to acquirerequirements. If required, we believe that additional facilities or modify existing facilities. We believe that alternative locations are available on commercially reasonable terms in all areas where we currently do business.




Item 3. Legal Proceedings


CTI Litigation

In March 2009, one of our former employees, Ms. Orit Deutsch, commenced legal actions in Israel against our former primary Israeli subsidiary, Cognyte Technologies Ltd. (formerly known as Verint Systems Limited (“VSL”or “VSL”), (Case Number 4186/09) and against our former affiliate CTI (Case Number 1335/09). Also, in March 2009, a former employee of Comverse Limited (CTI’s primary Israeli subsidiary at the time), Ms. Roni Katriel, commenced similar legal actions in Israel against Comverse Limited (Case Number 3444/09), and against CTI (Case Number 1334/09). In these actions, the plaintiffs generally sought to certify class action suits against the
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defendants on behalf of current and former employees of VSL and Comverse Limited who had been granted stock options in Verint and/or CTI and who were allegedly damaged as a result of a suspension on option exercises during an extended filing delay period that is discussed in our and CTI’s historical public filings. On June 7, 2012, the Tel Aviv District Court, where the cases had been filed or transferred, allowed the plaintiffs to consolidate and amend their complaints against the three defendants: VSL, CTI, and Comverse Limited.


On October 31, 2012, CTI completed the Comverse Share Distribution, in which it distributed all of the outstanding shares of common stock of Comverse, Inc., its principal operating subsidiary and parent company of Comverse Limited, to CTI’s shareholders.shareholders (the “Comverse Share Distribution”). In the period leading up to the Comverse Share Distribution, CTI either sold or transferred substantially all of its business operations and assets (other than its equity ownership interests in Verint and in its then-subsidiary, Comverse, Inc.) to Comverse, Inc. or to unaffiliated third parties. As athe result of these transactions, Comverse, Inc. became an independent company and ceased to be affiliated with CTI, and CTI ceased to have any material assets other than its equity interests in Verint. Prior to the completion of the Comverse Share Distribution, the plaintiffs sought to compel CTI to set aside up to $150.0 million in assets to secure any future judgment, but the District Court did not rule on this motion. In February 2017, Mavenir Inc. became successor-in-interest to Comverse, Inc.


On February 4, 2013, Verint acquired the remaining CTI shell company in the CTI Merger.a merger transaction (the “CTI Merger”). As a result of the CTI Merger, Verint assumed certain rights and liabilities of CTI, including any liability of CTI arising out of the foregoing legal actions. However, under the terms of a Distribution Agreement entered into in connection with the Comverse Share Distribution, we, as successor to CTI, are entitled to indemnification from Comverse, Inc. (now Mavenir) for any losses we may suffer in our capacity as successor to CTI related to the foregoing legal actions.


Following an unsuccessful mediation process, on August 28, 2016, the District Court (i) denied the plaintiffs’ motion to certify the suit as a class action with respect to all claims relating to Verint stock options, (ii) dismissed the motion to certify the suit against VSL and (ii)Comverse Limited, and (iii) approved the plaintiffs’ motion to certify the suit as a class action against CTI with respect to claims of current or former employees of Comverse Limited (now part of

Mavenir) or of VSL who held unexercised CTI stock options at the time CTI suspended option exercises. The court also ruled that the merits of the case would be evaluated under New York law.

As a result of this ruling (which excluded claims related to Verint stock options from the case), one of the original plaintiffs in the case, Ms. Deutsch, was replaced by a new representative plaintiff, Mr. David Vaaknin. CTI appealed portions of the District Court’s ruling to the Israeli Supreme Court. On August 8, 2017, the Israeli Supreme Court partially allowed CTI’s appeal and ordered the case to be returned to the District Court to determine whether a cause of action exists under New York law based on the parties’ expert opinions.


Following a secondtwo unsuccessful roundrounds of mediation in mid to late 2018 and in mid-2019, the proceedings resumed. The plaintiffs have filedOn April 16, 2020, the District Court accepted plaintiffs’ application to amend the motion to certify a class action and set deadlines for filing amended pleadings by the parties. CTI submitted a motion to amendappeal the class certificationDistrict Court’s decision to the Israeli Supreme Court, as well as a motion to stay the proceedings in the District Court pending the resolution of the appeal. On July 6, 2020, the Israeli Supreme Court granted the motion for a stay. On July 27, 2020, the plaintiffs filed their response on the merits of the motion for leave to appeal. On December 15, 2021, the Israeli Supreme Court rejected CTI’s motion to appeal and the proceedings in the District Court resumed.

On February 1, 2021, we completed the Spin-Off. As a result of the Spin-Off, Cognyte is now an independent, publicly traded company. Under the terms of the Separation and Distribution Agreement entered into between Verint and Cognyte, Cognyte has agreed to indemnify Verint for Cognyte’s share of any losses that Verint may suffer related to the foregoing legal actions either in its capacity as successor to CTI, to the extent not indemnified by Mavenir, or due to its former ownership of Cognyte and VSL.

Unfair Competition Litigation and Related Investigation

On February 14, 2022, Verint Americas Inc., as successor to ForeSee Results, Inc. (“ForeSee”), received negative partial summary judgment decisions in two cases pending against it in the United States District Court for the Eastern District of Michigan. As discussed below, we believe that the court’s decisions were wrongly decided and are contrary to the facts and the law. We are seeking reconsideration of the rulings and will ultimately appeal the rulings if necessary. We believe that the claims asserted by the plaintiffs are without merit. In addition, as explained in our affirmative Delaware litigation, we also believe that by bringing the claims, plaintiffs breached an agreement not to pursue such claims in an improper attempt by them and their founder, Claes Fornell, to extract additional monies from ForeSee.
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The two Eastern District of Michigan cases are captioned ACSI LLC v. ForeSee Results, Inc. and CFI Group USA LLC v. Verint Americas Inc. The former case was filed on October 24, 2018 against ForeSee Results, Inc. by American Customer Satisfaction Index, LLC (“ACSI LLC”). Case No. 2:18-cv-13319. Verint completed its acquisition of ForeSee on December 19, 2018. In its complaint, ACSI LLC alleged infringement of two federally registered trademarks and common law unfair competition under federal and state law. ACSI LLC asserts that ForeSee, despite cancelling its license to use ACSI LLC’s alleged trademarks in 2013, has continued to use ACSI LLC’s trademarks. The trademark infringement claim was subsequently dismissed, but the common law unfair competition claims have proceeded. The latter case was filed on September 5, 2019 against Verint Americas Inc. (as successor in interest to ForeSee) by CFI Group USA LLC (“CFI”). Case No. 2:19-cv-12602. In its complaint, CFI alleges unfair competition and false advertising under federal and state law, as well as tortious interference with contract. CFI asserts that ForeSee engaged in unfair competition by using ACSI LLC’s trademarks without a correspondinglicense, and that ForeSee engaged in false advertising by mis-describing its customer satisfaction products. ACSI LLC’s and CFI’s complaints seek unspecified damages on their claims.

Following discovery, on June 3, 2021, ACSI LLC and CFI moved for partial summary judgment on their claims and ForeSee moved for summary judgment against their claims. On February 14, 2022, the Eastern District of Michigan generally granted ACSI LLC’s and CFI’s motions for partial summary judgment and generally denied ForeSee’s motions for summary judgment. As noted above, ForeSee believes that the court’s decisions were wrongly decided, ignore substantial factual evidence in the record, and are contrary to applicable law. On February 28, 2022, ForeSee moved for reconsideration, and that motion is pending before the court. ForeSee continues to believe that there are substantial defenses to the claims in the ACSI LLC and CFI litigations and intends to continue to defend them vigorously.

Verint has also been informed that the U.S. Attorney’s Office for the Eastern District of Michigan’s Civil Division (“USAO”) is conducting a False Claims Act investigation concerning allegations ForeSee and/or Verint failed to provide the federal government the services described in certain government contracts. Verint received a Civil Investigation Demand (“CID”) in connection with this investigation and has provided responses. The False Claims Act contains provisions that allow for private persons to initiate actions by filing claims under seal. We believe that this investigation was initiated in coordination with the Eastern District of Michigan litigation discussed above. Verint continues to work cooperatively with the USAO in its review of this matter. At this point, Verint has not determined that there were any deficiencies in ForeSee’s and/or Verint’s performance of the government contracts.

ForeSee also filed affirmative litigation in the Northern District of Georgia (Case No. 1:19-cv-02892, Complaint filed on June 25, 2019) against ACSI LLC’s predecessor in interest. ACSI LLC has now been substituted as the named defendant. In that action, ForeSee seeks cancellation of ACSI LLC’s federally registered trademarks. In response to ASCI LLC’s motion to dismiss the action, on March 15, 2022, the Georgia court issued an order transferring that action to the Eastern District of Michigan.

ForeSee has also filed affirmative litigation in the District of Delaware (Case No. 1:21-cv-00674, Complaint filed on May 7, 2021) against ACSI LLC, CFI, Claes Fornell, and CFI Software LLC. Claes Fornell founded both ACSI LLC and CFI, and previously co-founded ForeSee before selling it in December 2013 for a response.significant gain. The next court hearing is scheduledDelaware action asserts claims against ACSI LLC, CFI, Fornell, and CFI Software for April 2019.their breach of a “Joinder and Waiver Agreement” entered into in connection with the December 2013 sale in which they represented that they had no claims against ForeSee and in which they released any such claims. The Delaware action alleges that the Eastern District of Michigan litigations effectively represent an improper attempt by Fornell and his affiliates to profit off of ForeSee a second time (first by selling it in 2013 as a law-abiding company, only to sue it in 2018 and 2019 claiming violations of law for business practices that began while Fornell owned a significant position in ForeSee (via CFI Software) and during the time that Fornell served as chairman of ForeSee’s board). The Delaware action also asserts fraud claims against Fornell and CFI Software for affirmative statements they made in the December 2013 merger agreement which effectuated the sale and in other contemporaneous materials that ForeSee was not engaging in unfair competition or other violations of law. The Delaware litigation seeks as damages any amounts recovered by ACSI LLC, CFI or the USAO in the proceedings discussed above, as well as attorneys’ fees. Defendants moved to dismiss, stay or transfer the Delaware litigation, and the magistrate judge assigned to the case denied the motions to dismiss and transfer but recommended temporarily staying the case pending decisions on the motions for summary judgment in the Eastern District of Michigan. ForeSee objected to the recommended stay, and those objections are currently pending before the Delaware court.


FromWe are a party to various other litigation matters and claims that arise from time to time we or our subsidiaries may be involved in legal proceedings and/or litigation arising in the ordinary course of our business. While the outcome of these matters cannot be predicted with certainty, we do not believe that the ultimate outcome of any such current claimsmatters will not have a material adverse effect on us, their outcomes are not determinable and negative outcomes may adversely affect our consolidated financial position, liquidity, or results of operations, or cash flows.operations.



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Item 4. Mine Safety Disclosures
 
Not applicable.

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PART II


Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities


Market Information


Our common stock trades on the NASDAQ Global Select Market under the symbol “VRNT”.


Holders


There were approximately 1,7501,625 holders of record of our common stock at March 15, 2019.2022. Such record holders include holders who are nominees for an undetermined number of beneficial owners.


Dividends


Common Stock

We have not declared or paid any cash dividends on our equity securitiescommon stock and have no current plans to pay any dividends on our equity securities.securities, except as may be required by the terms of any preferred equity securities we have issued or may in the future issue. We intend to retain our earnings to finance the development of our business, repay debt, and for other corporate purposes. Any future determination as to the payment of dividends on our common stock will be made by our board of directors at its discretion, subject to the limitations contained in our 2017 Credit Agreement and the terms of any preferred equity securities we may issue, and will depend upon our earnings, financial condition, capital requirements, and other relevant factors.


Preferred Stock

Each series of Preferred Stock pays dividends at an annual rate of 5.2% until the 48-month anniversary of the Series A Closing Date, and thereafter at a rate of 4.0%, subject to adjustment under certain circumstances. Dividends on our 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 in certain circumstances, as described in greater detail in Note 10, “Convertible Preferred Stock”, to our consolidated financial statements included in Part II, Item 8 of this report. For the year ended January 31, 2022, we paid $12.9 million of preferred stock dividends, of which $5.2 million was accrued as of January 31, 2021. There were $12.1 million of cumulative unpaid preferred stock dividends at January 31, 2022.

For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report.


Stock Performance Graph


The following table compares the cumulative total stockholder return on our common stock with the cumulative total return on the NASDAQ Composite Index and the NASDAQ Computer & Data Processing Services Index, assuming an investment of $100 on January 31, 20142017 through January 31, 2019,2022, and the reinvestment of any dividends. The comparisons in the graph below are based upon the closing sale prices on NASDAQ for our common stock from January 31, 20142017 through January 31, 2019.2022. This data is not indicative of, nor intended to forecast, future performance of our common stock.

stockperformancegraph.jpg On February 1, 2021, we completed the spin-off of Cognyte with the pro rata distribution to our stockholders of one ordinary share of Cognyte for every one share of Verint common stock held of record as of the close of business on January 25, 2021, pursuant to which Cognyte became an independent public company. For the purpose of the following table, the effect of the separation of Cognyte is reflected in the cumulative total return of Verint common stock as a reinvested dividend.
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January 31, 2014 2015 2016 2017 2018 2019
Verint Systems Inc. $100.00
 $117.47
 $80.57
 $82.20
 $91.88
 $106.45
NASDAQ Composite Index $100.00
 $114.30
 $115.10
 $141.84
 $189.26
 $187.97
NASDAQ Computer & Data Processing Index $100.00
 $105.64
 $132.80
 $154.15
 $223.67
 $227.03
vrnt-20220131_g5.jpg


January 31,201720182019202020212022
Verint Systems Inc.$100.00 $111.78 $129.50 $155.29 $207.34 $204.87 
NASDAQ Composite Index$100.00 $133.43 $132.52 $168.35 $242.57 $265.98 
NASDAQ Computer & Data Processing Index$100.00 $144.17 $136.45 $180.82 $258.69 $293.64 

Note: This graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filing.


RecentUnregistered Sales of UnregisteredEquity Securities and Use of Proceeds


None.From August 30, 2021 through January 21, 2022 we issued 293,143 shares of our common stock as part of the cashless exercise of approximately 5,031,000 Warrants that were issued concurrently with the issuance of the 2014 Notes (each as defined in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). For additional information regarding these Warrants and the issuance of equity in settlement of the cashless exercise of these Warrants, see “Management Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Financing Arrangements—Note Hedges and Warrants—Warrants” in Part II, Item 7 of this report.


Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.


On March 29, 2016,31, 2021, we announced that our board of directors had authorized a common stock repurchase program ofwhereby we were authorized to repurchase up to $150a number of shares of common stock approximately equal to the number of shares to be issued as
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equity compensation during the fiscal year ending January 31, 2022. During the year ended January 31, 2022, we acquired approximately 1,600,000 shares of our common stock at a cost of $75.4 million over two years. Thisunder this program.

On December 2, 2021, we announced that our board of directors had authorized a new stock repurchase program expired onfor the fiscal year ending January 31, 2023 whereby we may repurchase up to 1.5 million shares of common stock to offset dilution from our equity compensation program for such fiscal year. Subsequent to January 31, 2022, we repurchased 1.5 million shares under this stock repurchase program with available cash in the United States. On March 29, 2018. We made a total22, 2022, our board of $46.9 million in repurchasesdirectors authorized an additional 500,000 shares of common stock to be repurchased under thethis program. Please refer to Note 21, “Subsequent Event”, for more information regarding this stock repurchase program.


From time to time, we have purchased treasuryshares of our common stock from our directors, officers, and other employees to facilitate income tax withholding and payment requirements upon vesting of equity awards during a Company-imposed trading blackout or lockup periods. There was no such

Share purchase activity during the three months ended January 31, 2019.2022 was as follows:



PeriodTotal Number Shares PurchasedAverage Price Paid per Share (1)Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in thousands)
November 1, 2021 - November 30, 2021480 $46.60 — $— 
December 1, 2021 - December 31, 2021— — — — 
January 1, 2022 - January 31, 2022— — — — 
480 $46.60  $— 

(1) Represents the approximate weighted-average price paid per share.


Item 6. Selected Financial Data[Reserved]


The following selected consolidated financial data has been derived from our audited consolidated financial statements. The data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 and our consolidated financial statements and notes thereto included under Item 8 of this report.

Our historical results should not be viewed as indicative of results expected for any future period.

Five-Year Selected Financial Highlights:


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Consolidated Statements of Operations Data
  Year Ended January 31,
(in thousands, except per share data) 2019 2018 2017 2016 2015
Revenue $1,229,747
 $1,135,229
 $1,062,106
 $1,130,266
 $1,128,436
Operating income $114,235
 $48,630
 $17,366
 $67,852
 $79,111
Net income (loss) $70,220
 $(3,454) $(26,246) $22,228
 $36,402
Net income (loss) attributable to Verint Systems Inc. $65,991
 $(6,627) $(29,380) $17,638
 $30,931
Net income (loss) attributable to Verint Systems Inc. common shares $65,991
 $(6,627) $(29,380) $17,638
 $30,931
Net income (loss) per share attributable to Verint Systems Inc.:          
Basic $1.02
 $(0.10) $(0.47) $0.29
 $0.53
Diluted $1.00
 $(0.10) $(0.47) $0.28
 $0.52
Weighted-average shares:          
Basic 64,913
 63,312
 62,593
 61,813
 58,096
Diluted 66,245
 63,312
 62,593
 62,921
 59,374


We have never declared a cash dividend to common stockholders.

Consolidated Balance Sheet Data
  January 31,
(in thousands) 2019 2018 2017 2016 2015
Total assets $2,867,027
 $2,580,620
 $2,362,784
 $2,355,735
 $2,340,452
Long-term debt, including current maturities $782,128
 $772,984
 $748,871
 $738,087
 $726,258
Capital lease obligations, including current portions $4,282
 $4,350
 $68
 $
 $
Total stockholders’ equity $1,260,804
 $1,132,336
 $1,015,040
 $1,068,164
 $1,004,903

The consolidated financial data as of and for the year ended January 31, 2019 reflects our February 1, 2018 adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), further details for which appear in Note 2, “Revenue Recognition” to our consolidated financial statements included under Item 8 of this report.

During the five-year period ended January 31, 2019, we acquired a number of businesses, the operating results of which have been included in our consolidated financial statements since their respective acquisition dates. Further details regarding our business combinations for the three years ended January 31, 2019 appear in Note 5, “Business Combinations” to our consolidated financial statements included under Item 8 of this report.

In addition to business combinations, our consolidated operating results and consolidated financial condition during the five-year period ended January 31, 2019 included the following other notable transactions and items:


As of and for the year ended January 31,Description
2018
Losses on early retirements of debt of $2.2 million, associated with refinancing and amending our Credit Agreement.

Provisional deferred income tax expense of $15.0 million related to withholding on foreign earnings which may be repatriated.
2015
An income tax benefit of $44.4 million resulting from the reduction of a valuation allowance on our deferred income tax assets recorded in connection with a business combination.

Losses on early retirements of debt of $12.5 million, primarily associated with an amendment to our Credit Agreement and the early partial retirement of our term loans.


Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with “Business” underin Item 1, “Selected Financial Data” under Item 6, and our consolidated financial statements and the related notes thereto included underin Part II, Item 8 of this report. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and all of which could be affected by uncertainties and risks. Our actual results may differ materially from the results contemplated in these forward-looking statements as a result of many factors including, but not limited to, those described in “Risk Factors” underin Part I, Item 1A of this report.


Overview


Recent Developments

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 “Cognyte Business”). The Spin-Off was completed by way of a pro rata distribution on February 1, 2021 of all of the then-issued and outstanding ordinary shares, no par value, of Cognyte to holders of record of our common stock as of the close of business on January 25, 2021. After the distribution, we do not beneficially own any ordinary shares of Cognyte and beginning February 1, 2021, we no longer consolidate Cognyte within our financial results or reflect the financial results of Cognyte within our continuing results of operations.

We incurred cumulative transaction costs of $53.0 million prior to the completion of the Spin-Off, of which $47.7 million and $5.3 million is reflected in our consolidated statement of operations within discontinued operations for the years ended January 31, 2021 and 2020, respectively. Transaction costs primarily consisted of costs incurred for the establishment of separate information systems for each company, along with related information technology costs, third-party advisory, consulting, legal and professional services, as well as other items that were incremental and one-time in nature that related to the Spin-Off.

In connection with the Spin-Off, we entered into several agreements with Cognyte that provide a framework for the relationship between the parties going forward, including a limited duration Transition Services Agreement under 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. In no case will services be provided for more than 24 months after the Spin-Off. Services provided included certain services related to finance, accounting, business technology, human resources, information systems, facilities, document management and record retention and technical support. In consideration for such services, we and Cognyte paid fees to each other for the services provided, and those fees were generally in amounts intended to allow the party providing services to recover all of its direct and indirect costs incurred in providing those services, plus a standard markup. As of January 31, 2022, the performance of services under the Transition Services Agreement was substantially concluded.

The historical results of operations and financial positions of Cognyte are reported as discontinued operations in our consolidated financial statements. For further information on discontinued operations, see Note 2, “Discontinued Operations”, to the consolidated financial statements in Part II, Item 8 of this report. Pursuant to the Spin-Off of the Cognyte Business, we now operate in a single reportable segment, which is described in the “Our Business” section below.

Apax Investment

On December 4, 2019, we announced that an affiliate (the “Apax Investor”) of Apax Partners would make an investment in us in an amount of up to $400.0 million. Under the terms of 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 (“Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Preferred Stock”). Further discussion regarding the Apax investments and details of the closing of both tranches appears in the “Liquidity and Capital Resources-Overview” section below.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The pandemic has caused significant economic disruption and uncertainty and governmental authorities around the world have implemented
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numerous measures attempting to contain and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, shutdowns, limitations or closures of non-essential businesses, and social distancing requirements and many such restrictions remain in place. Our customers, partners, and vendors, have also implemented actions in response to the pandemic, including among others, office closings, site restrictions, and employee travel restrictions. In response to these challenges, we established remote working arrangements for our employees, limited non-essential business travel, and canceled or shifted our customer, employee, and industry events to a virtual-only format. During the first half of the year ended January 31, 2021, we also implemented certain cost-reduction actions of varying durations. Such actions included, but were not limited to, reducing our discretionary spending, decreasing capital expenditures, reconsidering the optimal uses of our cash and other capital resources, including with respect to our stock repurchases, and reducing workforce-related costs. During the first half of the year ended January 31, 2021, our revenue was adversely impacted by delays and reduced spending attributed to the impact of the pandemic on our customers’ operational priorities and as a result of cost containment measures they had implemented. We saw a reduction or delay in certain large customer contracts, particularly on-premises arrangements, and limitations on access to the facilities of our customers also impacted our ability to deliver some of our products and complete certain implementations, negatively impacting our ability to recognize revenue.

We saw an improvement in the business environment during the second half of the year ended January 31, 2021, which continued through the year ended January 31, 2022 as our customers accelerated the digitization of their customer interactions and internal operations due to the pandemic. This ongoing shift to a digital-first world has increased the importance and relevance of our solutions. Based on the improved business environment and our financial performance, we have in many cases resumed investments and other spending; however, these actions may need to be reassessed depending on how the facts and circumstances surrounding the pandemic evolve. Any such renewed cost controls may have an adverse impact on us, particularly if they remain in place for an extended period. As the pandemic has evolved, we have also adapted our pandemic response on a localized basis based on the prevailing conditions in the locations in which we and our customers, partners, or vendors operate. Currently, the majority of our employees are working remotely. We expect to incur additional costs to the extent we further resume business-related travel and as we prepare our facilities for a safe return to work environment as we anticipate implementing a hybrid work model during the year ending January 31, 2023. During the year ended January 31, 2022, we decided to exit twenty-one leased offices, which resulted in the recognition of accelerated lease expense and other asset impairments of $13.3 million, which is reflected in our consolidated statement of operations within selling, general, and administrative expenses for the year ended January 31, 2022. We will continue to evaluate our real estate footprint to determine where we can exit, consolidate, or modify our office space leases, and we anticipate exiting or reducing additional office leases in the future as we continue to assess how and to what extent our employees will return to work in our offices.

We are monitoring developments related to the U.S. federal, state, and local vaccination mandates and testing requirements and are evaluating the impact such mandates and requirements may have on our business and results of operations, including any potential impact on our employees, customers, partners, and vendors. Notwithstanding the strong demand for our cloud-based solutions and the recovery in the business environment, given the uncertainty associated with the pandemic, our ability to predict how it will impact our business, financial condition, liquidity, and financial results in future periods is limited, particularly if the pandemic fails to abate for an extended period of time or worsens. See Part I, Item IA “Risk Factors” of this report for additional discussion of the impact that the COVID-19 pandemic could have on our business and results of operations in the future.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The CARES Act did not have a material impact on our consolidated financial condition or results of operations as of and for the year ended January 31, 2022. However, we have deferred the timing of employer payroll taxes and accelerated the refund of AMT credits as permitted by the CARES Act. Where taxes payable to government entities have been deferred to a later date, no reduction of expenses has been recorded.

Our Business


Verint is a global leader in Actionable Intelligence solutions. In a world of massive information growth, our solutions empower organizations with crucial, actionable insights and enable decision makers to anticipate, respond, and take action. Today, over 10,000 organizations inhelps brands provide Boundless Customer Engagement™. For more than 180 countries,two decades, the world’s most iconic brands – including overmore than 85 percent of the Fortune 100 use Verint’s Actionable Intelligencecompanies – have trusted Verint to provide the technology and domain expertise they require to effectively build enduring customer relationships.

Verint is uniquely positioned to help organizations close the Engagement Capacity Gap™ with our differentiated Verint Customer Engagement Cloud Platform. Brands today are challenged by new workforce dynamics, ever-expanding customer engagement channels and exponentially more consumer interactions – often while facing limited budgets and resources. As a result, brands are finding it more challenging to deliver the desired customer experience. This creates a capacity gap, which is widening as the digital transformation continues. Organizations are increasingly seeking technology to close this gap, solutions deployed in the cloud and
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that are based on premises, to make more informed, timely, and effective decisions.

Our Actionable Intelligence leadership is powered by innovative, enterprise-class software built with artificial intelligence analytics, automation,(AI) and deep domain expertise established by working closely with some ofare developed specifically for customer engagement. These solutions automate workflows across enterprise silos to optimize the most sophisticatedworkforce expense and forward-thinking organizationsat the same time drive an elevated consumer experience.

Verint is headquartered in Melville, New York, and has more than 30 offices worldwide. We have approximately 4,400 passionate professionals around the world. We believe we have one of the industry’s strongest R&D teamsglobe exclusively focused on actionable intelligence consisting of 1,900 professionals. Our innovative solutions are backed-up by a strong IP portfolio with close to 1,000 patents and patent applications worldwide across data capture, artificial intelligence, unstructured data analytics, predictive analytics and automation.helping brands provide Boundless Customer Engagement™.

Verint’s Actionable Intelligence strategy is focused on two use cases and the company has two operating segments: Customer Engagement Solutions and Cyber Intelligence Solutions. For the years ended January 31, 2019, 2018, and 2017, our Customer Engagement segment represented approximately 65%, 65%, and 66% of our total revenue, respectively, while for those same years, our Cyber Intelligence segment represented approximately 35%, 35%, and 34% of our total revenue, respectively.


Key Trends and Factors That May Impact our Performance


We seebelieve there are three market trends that are benefiting Verint today: the following trendsacceleration of digital transformation, changes in the workforce shaping the future of work, and factors which may impact our performance:elevated customer expectations.


Customer Engagement

Reducing ComplexityAcceleration of Digital Transformation: Digital transformation is accelerating, and Enhancing Agility. Many organizations have complex environments that were assembled over many years, with multiple legacy systems from many different vendors deployedit is driving significant change in siloscustomer engagement for the contact center and across the enterprise. To reduce complexityLong gone are the days when customer journeys were limited to phone calls into a contact center. Today, customer journeys take place across many touchpoints in the enterprise and simplifyacross many communication and collaboration platforms, with digital leading the way. Customer touchpoints take place in contact centers, in back-office and branch operations, in ecommerce, in digital marketing, in self-service, and in customer experience departments. We believe that the breadth of customer touchpoints across the enterprise and the rapid growth in digital interactions, benefit Verint as these organizations are lookingtrends create demand for new solutions that increase automation and connect organizational silos to increase efficiency and elevate the customer experience.

A Changing Workforce Shapes the Future of Work: Brands are openfacing unprecedented challenges when it comes to how they manage their changing workforce. Increasingly, brands are managing employees that may work from anywhere. Providing flexibility for where their employees work creates challenges in managing and flexiblecoaching their teams. And because of the limited resources that are available, brands must find ways to use technology like AI-powered bots to augment their workforce. “The Great Resignation” has put a spotlight on the importance of employee experience and make it easierbrands must quickly evolve how they recruit, onboard, and retain employees. We believe that these trends benefit Verint as they create demand for new solutions that can shape the future of work, with a workforce of people and bots working together, increased automation, greater employee flexibility and a greater focus on the voice of the employees.

Elevated Customer Expectations: Customer expectations for faster, more consistent, and contextual responses continue to address evolving requirements, while protecting theirrise and meeting those expectations is becoming more difficult with legacy investments. Organizations aretechnology. The increase in the number of channels and customer desire to seamlessly shift between channels creates a more complex customer journey for brands to support and manage. Customers also seeking open platformsexpect that address theireach brand will have a deep understanding of the customer’s relationship with the brand - one that is unified across the enterprise regardless of whether the customer engagement needs across many enterprise functions,

includingtouchpoint is in the contact center, back-office and branch operations, self-service, e-commerce, customer experience, marketing, IT, and compliance.

Modernizing Customer Engagement IT Architectures. Many organizations are looking to modernize their legacy customer engagement operations by transitioning toon a website, through a mobile app, or in the cloud, adopting modern architecturesback office or branch. We believe that facilitate the orchestration of disparate systems and the sharing of data across enterprise functions. Organizations which are at different stages of migrating to the cloud and other modernization initiatives are also lookingthis trend benefits Verint as it creates demand for vendors that can help them evolve customer engagement at their own pace with minimal disruption to their operations.

Automating Customer Engagement Operations. Many organizations are seekingnew solutions that incorporate machine learning and analytics to reduce manual workhelp brands support complex customer journeys and increase workforce efficiency through automation. Theyautomation to meet elevated customer expectations.

As discussed above, the COVID-19 pandemic is also seek to empower their customers with self-service backed by AI-powered botsa material factor that may negatively impact us and human/bot collaboration, to elevate the customer experience in a fast, personalized way.

Cyber Intelligence

Security Threats Becoming Increasingly Pervasive and Complex. Governments, critical infrastructure providers, and enterprises face many types of security threats from criminal and terrorist organizations and foreign governments. Some of these security threats come from well-organized and well-funded organizations that utilize new and increasingly sophisticated methods. As a result, security and intelligence organizations find it more difficult and complicated to detect, investigate and neutralize threats. Many of these organizations are seeking to deploy more advanced data mining solutions that can help them capture and analyze data from multiple sources to effectively and efficiently address the challenge of increased sophistication and complexity.

Shortage of Security Analysts Increasing the Need for Automation. Security organizations are using data mining solutions to help conduct investigations and generate actionable insights. Typically, data mining solutions require security organizations to employ intelligence analysts and data scientists to operate them. However, there is a shortage of such qualified personnel globally leading to elongated investigations and increased risk that security threats go undetected or are not addressed. To overcome this challenge, many security organizations are seeking advanced data mining solutions that automate functions historically performed manually to improve the quality and speed of investigations and intelligence production. These organizations are also increasingly seeking artificial intelligence and other advanced data analysis tools to gain intelligence faster with fewer analysts and data scientists.

Need for Predictive Intelligence as a Force Multiplier. Predictive intelligence is generated by correlating massive amounts of data from a wide range of disparate sources to uncover previously unknown connections, identify suspicious behaviors using advanced analytics, and predict future events. Predictive intelligence is a force multiplier, enabling security organizations to allocate resources more effectively to prioritize various operational tasks based on actionable intelligence. Security organizations are seeking advanced data mining solutions that can generate accurate and actionable predictive intelligence to shorten investigation times and empower their teams with greater insights.

See Item 1, “Business”, of this report for more information on key trends that we believe are driving demand for our solutions and “Risk Factors” under Item 1A of this report for a more complete description of risks that may impact future revenue and profitability.solutions.




Critical Accounting Policies and Estimates


An appreciation of our critical accounting policies is necessary to understand our financial results. The accounting policies outlined below are considered to be critical because they can materially affect our operating results and financial condition, as these policies may require us to make difficult and subjective judgments regarding uncertainties. The accuracy of these estimates and the likelihood of future changes depend on a range of possible outcomes and a number of underlying variables, many of which are beyond our control, and there can be no assurance that our estimates are accurate.


Revenue Recognition


We derive and report our revenue in two categories: (a) recurring revenue, which includes bundled SaaS, unbundled SaaS, hosting services, optional managed services, initial and renewal support revenue, and product revenue, including licensing of software products and sale of hardware products (which include software that works together with the hardware to deliver the product’s essential functionality),warranties, and (b) service and supportnonrecurring revenue, including revenue fromwhich primarily consists of our perpetual licenses, hardware, installation services, post-contract customer support (“PCS”), project management, hosting services, SaaS, managed services, product warranties,and business advisory consulting and

training services. We account for a contract with a customer when it has written approval, the contract is committed, the
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rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Products sold by us are delivered electronically, shipped from our facilities, or drop-shipped directly from the vendor. We generate all of our revenue from contracts with customers. We generally invoice a customer upon delivery, or in accordance with specific contractual provisions. Payments are due as per contract terms and do not contain a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our goods and services, and not to provide financing to or from customers.


We account for revenue in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Our revenue recognition policies require us to make significant judgments and estimates. In applying our revenue recognition policy, we must determine which portions of our revenue are recognized at a point in time (generally productperpetual and term license revenue) and which portions must be deferred and recognized over time (generally cloud, professional services, and support revenue). We analyze various factors including, but not limited to, the selling price of undelivered services when sold on a stand-alone basis, our pricing policies, the creditworthiness of our customers, and contractual terms and conditions in helping us to make such judgments about revenue recognition. Changes in judgment on any of these factors could materially impact the timing and amount of revenue recognized in a given period.


Our contracts with customers often include promises to transfer multiple products and services to a customer. Typically, our customer contracts include perpetual or term-based licenses, professional services, and PCS. In contracts with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the contract at contract inception. Performance obligations that are not distinct at contract inception are combined. ContractsFor bundled SaaS arrangements, we determine whether the services performed during the initial phases of an arrangement, such as setup activities, are distinct. In most cases, we consider our bundled SaaS deliverable to represent a single performance obligation comprised of a series of distinct services that include software customization may result inare substantially the combinationsame and that have the same pattern of the customizationtransfer (i.e., distinct days of service). We record deferred revenue attributable to certain process transition, setup activities where such activities do not represent separate performance obligations. Implementation, support, and other services are typically considered distinct performance obligations when sold with thea software license as one distinct performance obligation.unless these services are determined to significantly modify the software. The transaction price is generally in the form of a fixed fee at contract inception, and excludes taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer.


We allocate the transaction price to each distinct performance obligation based on the estimated standalone selling price (“SSP”) for each performance obligation. Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we estimate the SSP of each performance obligation based on either a cost-plus-margin approach or an adjusted market assessment approach. We may have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP.


We then look to how control transfers to the customer in order to determine the timing of revenue recognition. SoftwareRevenue related to bundled SaaS, professional services and productcustomer education services is typically recognized over time as the services are performed. We recognize support revenue, which includes software updates on a when-and-if-available basis, telephone support, and bug fixes or patches, over the term of the customer support agreement, which is typically one year for perpetual licenses support and one to three years for unbundled SaaS support. Unbundled SaaS and perpetual license revenue is typically recognized when the software is delivered and/or made available for download as this is the point the user of the software can direct the use of and obtain substantially all of the remaining benefits from the functional intellectual property. We do not recognize software revenue related to the renewal of software licenses earlier than the beginning of the renewal period. In contracts thatsituations where arrangements include customer acceptance we recognizeprovisions, revenue is recognized when we have deliveredcan objectively verify the software and received customer acceptance. We recognize revenue from PCS performance obligations, which includes software updates on a when-and-if-available basis, telephone support, and bug fixes or patches, overcomplies with the term ofspecifications underlying acceptance and the customer support agreement, which is typically one year. Revenue related to professional services and customer education services is typically recognized as the services are performed.

Some of our customer contracts require significant customization of the product to meet the particular requirements specified by each customer. The contract pricing is stated as a fixed amount and generally results in the transfer ofhas control of the applicable performance obligation over time. We recognize revenue based on the proportion of labor hours expended to the total hours expected to complete the performance obligation. The determination of the total labor hours expected to complete the performance obligation on fixed fee contracts involves significant judgment. We incorporate revisions to hour and cost estimates when the causal facts become known. We measure our estimate of completion on fixed-price contracts, which in turn determines the amount of revenue we recognize, based primarily on actual hours incurred to date and our estimate of remaining hours necessary to complete the contract.software.


Our products are generally not sold with a right of return and credits and incentives granted have been minimal in both amount and frequency. Shipping and handling activities that are billed to customers and occur after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of revenue. Historically, these expenses have not been material.


Accounting for Business Combinations


We allocate the purchase price of acquired companies to the tangible and intangible assets acquired, including in-process research and development assets, and liabilities assumed, based upon their estimated fair values at the acquisition date.dates, with
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the remaining unallocated purchase prices recorded as goodwill. These fair values are typically estimated with assistance from independent valuation specialists. The purchase price allocation process

requires us to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets, contractual support obligations assumed, contingent consideration arrangements, and pre-acquisition contingencies.


Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.


Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:


future expected cash flows from software license sales, SaaS and support agreements, consulting contracts, other customer contracts, and acquired developed technologies;


expected costs to develop in-process research and development into commercially viable products and estimated cash flows from the projects when completed;


the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio;


cost of capital and discount rates; and


estimating the useful lives of acquired assets as well as the pattern or manner in which the assets will amortize.


In connection with the purchase price allocations for applicable acquisitions, we estimate the fair value of the contractual SaaS and support obligations we are assuming from the acquired business. The estimated fair value of the SaaS and support obligations is determined utilizing a cost build-up approach, which determines fair value by estimating the costs related to fulfilling the obligations plus a reasonable profit margin. The estimated costs to fulfill the SaaS and support obligations are based on the historical direct costs related to providing the support services. The sum of these costs and operating profit represents an approximation of the amount that we would be required to pay a third party to assume the supportthese obligations.


Impairment of Goodwill and Other Acquired Intangible Assets


We test goodwill for impairment at the reporting unit level, which can be an operating segment or one level below an operating segment, on an annual basis as of November 1, or more frequently if changes in facts and circumstances indicate that impairment in the value of goodwill may exist. AsSubsequent to the Spin-Off of January 31, 2019, ourCognyte on February 1, 2021, we became a pure-play customer engagement company that operates as a single reporting units are Customer Engagement, Cyber Intelligence (excluding situational intelligence solutions), and Situational Intelligence, which is a component of our Cyber Intelligence operating segment.unit.


In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we elect to bypass a qualitative assessment, or if our qualitative assessment indicates that goodwill impairment is more likely than not, we perform quantitative impairment testing. For quantitative impairment testing performed prior to February 1, 2018, we performed a two-step test by first comparing the carrying value of the reporting unit to its fair value. If the carrying value exceeded the fair value, a second step was performed to compute the goodwill impairment. Effective with our February 1, 2018 adoption of ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, if our quantitative testing determines that the carrying value of athe reporting unit exceeds its fair value, goodwill impairment is recognized in an amount equal to that excess, limited to the total goodwill allocated to thatthe reporting unit, eliminating the need for the second step.unit.


For reporting units whereWhen we decide to perform a qualitative assessment, we assess and make judgments regarding a variety of factors which potentially impact the fair value of athe reporting unit, including general economic conditions, industry and market-specific conditions, customer behavior, cost factors, our financial performance and trends, our strategies and business plans, capital requirements, management and personnel issues, and our stock price, among others. We then consider the totality of these and other factors, placing more weight on the events and circumstances that are judged to most affect athe reporting unit’s fair value or the carrying amount of its net assets, to reach a qualitative conclusion regarding whether it is more likely than not that the fair value of athe reporting unit exceeds its carrying amount.


For reporting units whereWhen we perform quantitative impairment testing, we utilize one or more of three primary approaches to assess fair value: (a) an income-based approach, using projected discounted cash flows, (b) a market-based approach, using

valuation multiples of comparable companies, and (c) a transaction-based approach, using valuation multiples for recent acquisitions of similar businesses made in the marketplace.


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Our estimate of fair value of eachour reporting unit is based on a number of subjective factors, including: (a) appropriate consideration of valuation approaches (income approach, comparable public company approach, and comparable transaction approach), (b) estimates of future growth rates, (c) estimates of our future cost structure, (d) discount rates for our estimated cash flows, (e) selection of peer group companies for the comparable public company and the comparable transaction approaches, (f) required levels of working capital, (g) assumed terminal value, and (h) time horizon of cash flow forecasts.


The determination of reporting units also requires judgment. We assess whether a reporting unit exists within a reportable segment by identifying the unit, determining whether the unit qualifies as a business under GAAP, and assessing the availability and regular review by segment management of discrete financial information for the unit.


We review intangible assets that have finite useful lives and other long-lived assets when an event occurs indicating the potential for impairment. If any indicators are present, we perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the assets in question to their carrying amounts. If the undiscounted cash flows used in the test for recoverability are less than the long-lived assets carrying amount, we determine the fair value of the long-lived asset and recognize an impairment loss if the carrying amount of the long-lived asset exceeds its fair value. The impairment loss recognized is the amount by which the carrying amount of the long-lived asset exceeds its fair value.


For all of our goodwill and other intangible asset impairment reviews, the assumptions and estimates used in the process are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy or our internal forecasts. Although we believe the assumptions, judgments, and estimates we have used in our assessments are reasonable and appropriate, a material change in any of our assumptions or external factors could lead to future goodwill or other intangible asset impairment charges.


Based upon our November 1, 2018 qualitative2021 quantitative goodwill impairment review of eachour reporting unit, we determined that it is more likely than not that the fair value of each of our reporting units substantially exceeds the respective carrying amounts. Accordingly, there was no indication of impairment and a quantitative goodwill impairment test was not performed. Based on our November 1, 2017 quantitative goodwill impairment reviews, we concluded that the estimated fair values of allvalue of our reporting unitsunit significantly exceeded theirits carrying values.value. Our Customer Engagement, Cyber Intelligence, and Situational Intelligence reporting unitsunit carried goodwill of $1.3 billion, $124.9$1,353.4 million and $22.3 million, respectively, at January 31, 2019.2022.


Income Taxes


We account for income taxes under the asset and liability method, which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus deferred taxes. Deferred taxes result from differences between the financial statement and tax bases of our assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated.


We are subject to income taxes in the United States and numerous foreign jurisdictions. The calculation of our income tax provision involves the application of complex tax laws and requires significant judgment and estimates. On December 22, 2017, the 2017 Tax Act was enacted in the United States. The 2017 Tax Act significantly revised the Internal Revenue Code of 1986, as amended, and it included fundamental changes to taxation of U.S. multinational corporations. Compliance with the 2017 Tax Act requires significant complex computations not previously required by U.S. tax law.


We evaluate the realizability of our deferred tax assets for each jurisdiction in which we operate at each reporting date, and we establish a valuation allowance when it is more likely than not that all or a portion of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the same character and in the same jurisdiction. We consider all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. In circumstances where there is sufficient negative evidence indicating that our deferred tax assets are not more likely than not realizable, we establish a valuation allowance.



We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in a tax return by assessing whether they are more likely than not sustainable, based solely on their technical merits, upon examination, and including resolution of any related appeals or litigation process. The second step is to measure the associated tax benefit of each position as the largest amount that we believe is more likely than not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements represent our unrecognized income tax benefits, which we either record as a liability or as a reduction of deferred tax assets. Our policy is to include interest (expense and/or income) and penalties related to unrecognized income tax benefits as a component of the provision for income taxes.


Contingencies

We recognize an estimated loss from a claim or loss contingency when and if information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for claims and contingencies requires the use of significant judgment and estimates. One notable potential source of loss contingencies is pending or threatened litigation. Legal counsel and other advisors and experts are consulted on issues related to litigation as well as on matters related to contingencies occurring in the ordinary course of business.

Accounting for Stock-Based Compensation


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We recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of the award.


During the three-year period ended January 31, 2019,2022, restricted stock units were our predominant stock-based payment award. The fair value of these awards is equivalent to the market value of our common stock on the grant date.


We periodically award restricted stock units to executive officers and certain employees that vest upon the achievement of specified performance goals or market conditions. The recognition of the compensation costs of the performance-based awards with performance goals requires an assessment of the probability that the specified performance criteria will be achieved. At each reporting date, we update our assessment of the probability that the specified performance criteria will be achieved and adjust our estimate of the fair value of the award, if necessary. For the performance-based awards with market conditions, the condition is incorporated into the grant date fair value valuation of the award and compensation costs are recognized even if the market condition is not satisfied.


Awards are generally subject to multi-year vesting periods. We recognize compensation expense for awards on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods, reduced by estimated forfeitures.

Changes in assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions we use in calculating the fair value of stock-based payment awards represent our best estimates, which involve inherent uncertainties and the application of judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.




Results of Operations

Seasonality and Cyclicality

As is typical for many software and technology companies, our business is subject to seasonal and cyclical factors. In most years, our revenue and operating income are typically highest in the fourth quarter and lowest in the first quarter (prior to the impact of unusual or nonrecurring items). Moreover, revenue and operating income in the first quarter of a new year may be lower than in the fourth quarter of the preceding year, in some years, by a significant margin. In addition, we generally receive a higher volume of orders in the last month of a quarter, with orders concentrated in the later part of that month. We believe that these seasonal and cyclical factors primarily reflect customer spending patterns and budget cycles, as well as the impact of incentive compensation plans for our sales personnel. While seasonal and cyclical factors such as these are common in the software and technology industry, this pattern should not be considered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, may also have an impact on our business and financial results.


Overview of Operating Results


The following table sets forth a summary of certain key financial information for the years endedJanuary 31, 2019, 2018,2022, 2021, and 2017: 
2020: 
 Year Ended January 31,Year Ended January 31,
(in thousands, except per share data) 2019 2018 2017(in thousands, except per share data)202220212020
Revenue $1,229,747
 $1,135,229
 $1,062,106
Revenue$874,509 $830,247 $846,525 
Operating income $114,235
 $48,630
 $17,366
Net income (loss) attributable to Verint Systems Inc. $65,991
 $(6,627) $(29,380)
Net income (loss) per common share attributable to Verint Systems Inc.:  
    
Operating income (loss)Operating income (loss)$46,843 $57,422 $(1,973)
Net loss from continuing operations attributable to Verint Systems Inc. common sharesNet loss from continuing operations attributable to Verint Systems Inc. common shares$(4,509)$(57,310)$(47,089)
Net loss from continuing operations per common share attributable to Verint Systems Inc.:Net loss from continuing operations per common share attributable to Verint Systems Inc.:  
Basic $1.02
 $(0.10) $(0.47) Basic$(0.07)$(0.88)$(0.71)
Diluted $1.00
 $(0.10) $(0.47) Diluted$(0.07)$(0.88)$(0.71)


Year EndedJanuary 31, 20192022 compared to Year EndedJanuary 31, 2018.2021. Our revenue increased approximately $94.5 million, or 8%, from $1,135.2 million in the year endedJanuary 31, 2018 to $1,229.7 million in the year ended January 31, 2019.  The increase consisted of a $55.0 million increase in product revenue and a $39.5 million increase in service and support revenue.  In our Customer Engagement segment, revenue increased approximately $56.2$44.3 million, or 8%5%, from $740.1 million in the year ended January 31, 2018 to $796.3 million in the year ended January 31, 2019. The increase consisted of a $37.5 million increase in product revenue and an $18.7 million increase in service and support revenue. In our Cyber Intelligence segment, revenue increased approximately $38.3 million, or 10%, from $395.2$830.2 million in the year ended January 31, 20182021 to $433.5$874.5 million in the year ended January 31, 2019.2022. The increase consisted of a $20.8$57.5 million increase in service and supportrecurring revenue, and $17.5partially offset by a $13.2 million increasedecrease in productnonrecurring revenue. For additional details on our revenue by segment,category, see “—Revenue by Operating Segment”Revenue”. Revenue in the Americas, EMEA, and APAC represented approximately 54%69%, 26%20%, and 20%11% of our total revenue, respectively, in the year endedJanuary 31, 2019, 2022,
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compared to approximately 53%69%, 31%21%, and 16%10%, respectively, in the year endedJanuary 31, 2018.2021. Further details of changes in revenue are provided below.


Operating income was $114.2$46.8 million in the year endedJanuary 31, 20192022, compared to $48.6$57.4 million in the year endedJanuary 31, 2018.2021. This increasedecrease in operating income was primarily due to a $92.1 million increase in gross profit, reflecting increased gross profit in both of our segments and a decrease in amortization of acquired technology intangible assets, partially offset by a $26.5$43.8 million increase in operating expenses, which primarily consisted of an $18.5partially offset by a $33.2 million increase in net research and developmentgross profit. The increase in operating expenses and an $11.2consisted of a $49.5 million increase in selling, general and administrative expenses, partially offset by a $3.2$4.9 million decrease in net research and development expenses and a $0.8 million decrease in amortization of other acquired intangible assets. Further details of changes in operating income are provided below.


Net incomeloss from continuing operations attributable to Verint Systems Inc. common shares was $66.0$4.5 million and diluted net incomeloss per common share was $1.00,$0.07 in the year endedJanuary 31, 2019,2022, compared to a net loss from continuing operations attributable to Verint Systems Inc. common shares of $6.6$57.3 million and diluted net loss per common share of $0.10, in the year endedJanuary 31, 2018. These improved operating results$0.88 in the year ended January 31, 2019 were2021. The decrease in net loss from continuing operations attributable to Verint Systems Inc. per common share and diluted net loss per common share in the year ended January 31, 2022 was primarily due to a $65.6$91.8 million decrease in total other expense, net primarily due to the elimination of a non-cash revaluation loss related to the Future Tranche Right as a result of the issuance of the Series B Preferred Stock, partially offset by a $16.9 million increase in our provision for income taxes, an $11.3 million increase in Preferred Stock dividends due to the issuance of the Series B Preferred Stock, a $10.6 million decrease in operating income, as described above, and a $14.9 million decrease in our provision for income taxes primarily resulting from a decrease in accrued withholding taxes and the release of certain valuation allowances, partially offset by a $6.8 million increase in total other expense, net, and a $1.1$0.2 million increase in net income from continuing operations attributable to our noncontrolling interests. Further details of these changes are provided below.


A portion of our business is conducted in currencies other than the U.S. dollar, and therefore, our revenue and operating expenses are affected by fluctuations in applicable foreign currency exchange rates. When comparing average exchange rates for the year ended January 31, 20192022 to average exchange rates for the year ended January 31, 2018, the U.S. dollar strengthened relative to the Brazilian real and Australian dollar resulting in an overall decrease in our revenue on a U.S. dollar-denominated basis. Furthermore,2021, the U.S. dollar weakened relative to our hedgedthe British pound sterling, the Australian dollar, the euro, and the Israeli shekel rate euro,(hedged and British pound sterling,unhedged), resulting in an overall increase in our revenue, cost of revenue and operating expenses on a U.S. dollar-denominated basis. For the year ended January 31, 2019,2022, had foreign exchange rates remained unchanged from rates in effect for the year ended January 31, 2018,2021, our revenue would have been approximately $0.7$9.2 million higherlower and our cost of revenue and operating expenses on a combined basis would have been approximately $7.8$11.9 million lower, which would have resulted in a $8.5$2.7 million increase in operating income.


As of January 31, 2019,2022, we employed approximately 6,1004,400 professionals, including part-time employees and certain contractors, compared to approximately 5,2004,300 at January 31, 2018.2021.


Year Ended January 31, 20182021 compared to Year Ended January 31, 2017.2020. Our revenue increaseddecreased approximately $73.1$16.3 million, or 7%2%, from $1,062.1$846.5 million in the year ended January 31, 20172020 to $1,135.2$830.2 million in the year ended January 31, 2018.2021. The increasedecrease consisted of a $52.0$57.5 million decrease in nonrecurring revenue, partially offset by a $41.2 million increase in service and support revenue and a $21.1 million increase in product revenue. 

In our Cyber Intelligence segment, revenue increased approximately $39.0 million, or 11%, from $356.2 million in the year ended January 31, 2017 to $395.2 million in the year ended January 31, 2018.  The increase consisted of a $20.9 million increase in service and support revenue and $18.1 million increase in product revenue. In our Customer Engagement segment, revenue increased approximately $34.2 million, or 5%, from $705.9 million in the year ended January 31, 2017 to $740.1 million in the year ended January 31, 2018. The increase consisted of a $31.1 million increase in service and support revenue and a $3.1 million increase in productrecurring revenue. For additional details on our revenue by segment,category, see “—Revenue by Operating Segment”Revenue”. Revenue in the Americas, EMEA, and APAC represented approximately 53%69%, 31%21%, and 16%10% of our total revenue, respectively, in the year ended January 31, 2018,2021, compared to approximately 54%70%, 30%20%, and 16%10%, respectively, in the year ended January 31, 2017.2020. Further details of changes in revenue are provided below.


Operating income was $48.6$57.4 million in the year ended January 31, 20182021, compared to $17.4an operating loss of $2.0 million in the year ended January 31, 2017.2020. This increase in operating income was primarily due to a $48.9$59.1 million decrease in operating expenses and a $0.3 million increase in gross profit, reflecting increased gross profit in both of our segments, partially offset by an $17.7 million increaseprofit. The decrease in operating expenses which primarily consisted of a $19.6$51.9 million increasedecrease in selling, general and administrative expenses primarily due to cost reduction initiatives we implemented in response to the COVID-19 pandemic, a $6.1 million decrease in net research and development expenses, and an $8.0 million increase in selling, general and administrative expenses, partially offset by a $9.9$1.1 million decrease in amortization of other acquired intangible assets. Further details of changes in operating income are provided below.


Net loss from continuing operations attributable to Verint Systems Inc. common shares was $6.6$57.3 million and diluted net loss per common share was $0.10,$0.88 in the year ended January 31, 2018,2021, compared to a net loss from continuing operations attributable to Verint Systems Inc. common shares of $29.4$47.1 million and diluted net loss per common share of $0.47,$0.71 in the year ended January 31, 2017.2020. The decreaseincrease in net loss from continuing operations attributable to Verint Systems Inc. per common share and diluted net loss per common share in the year ended January 31, 20182021 was primarily due to a $31.2$61.5 million increase in total other expense, net primarily due to the change in fair value of the Future Tranche Right issued in connection with our Preferred Stock, a $7.7 million increase in dividends on Preferred Stock, and a $0.5 million increase in net income from continuing operations attributable to our noncontrolling interests, partially offset by a $59.4 million increase in operating income, as described above. Further details of these changes are provided below.

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As noted above, a $1.5 million increase in interest income, and a $12.8 million increase in other income. These were partially offset by a $1.0 million increase in interest expense, a $2.1 million loss on extinguishment of debt, and a $19.6 million increase in our provision for income taxes primarily resulting from a $15.0 million accrual for withholding taxes on foreign cash we may repatriate in the future.

A portion of our business is conducted in currencies other than the U.S. dollar, and therefore our revenue and operating expenses are affected by fluctuations in applicable foreign currency exchange rates. When comparing average exchange rates for the year ended January 31, 20182021 to average exchange rates for the year ended January 31, 2017,2020, the U.S. dollar weakenedstrengthened relative to the Brazilian real, and Indian rupee and weakened against the euro, Australian dollarBritish pound sterling, and the Singapore dollar, resulting in an overall increase in our revenue on a U.S. dollar-denominated basis.Furthermore, the U.S. dollar weakened relative to our Israeli shekel rate (hedged and unhedged), resulting in an overall increase in operatingour revenue and expenses, on a U.S. dollar-denominated basis. For the year ended January 31, 2018,2021, had foreign exchange rates remained unchanged from rates in effect for the year ended January 31, 2017,2020, our revenue would have been approximately $4.8$1.3 million lower and our cost of revenue and operating expenses on a combined basis would have been approximately $10.7$0.5 million lower, which would have resulted in a $5.9$0.8 million increasedecrease in operating income.


As of January 31, 2018,2021 and 2020, we employed approximately 5,2004,300 professionals, including part-time employees and certain contractors, compared to approximately 5,100 at January 31, 2017.contractors.


Revenue by Operating Segment


As describedWe derive and report our revenue in Note 2, “Revenue Recognition” totwo categories: (a) recurring revenue, which includes bundled SaaS, unbundled SaaS, hosting services, optional managed services, initial and renewal support revenue, and product warranties, and (b) nonrecurring revenue, which primarily consists of our consolidated financial statements under Item 8 of this report, calculated revenue for the year ended January 31, 2019 without the adoption of ASU No. 2014-09 would have been lower than the revenue we are reporting under the new accounting guidance. However, the lower calculated revenue results not only from the impact of the new accounting guidance, but also from changes we made to ourperpetual licenses, hardware, installation services, and business practices in anticipation,advisory consulting and as a result, of the new accounting guidance. These business practice changes adversely impact the calculation of revenue under the prior accounting guidance and include, among other things, the way we manage our professional services projects, offer and deploy our solutions, structure certain customer contracts, and make pricing decisions. While the many variables, required assumptions, and other complexities associated with these business practice changes make it impractical to precisely quantify the impact of these changes, we believe that calculated revenue under the prior accounting guidance, but absent these business practice changes, would have been closer to the revenue we are reporting under the new accounting guidance.training services.


The following table sets forth revenue for each of our operating segmentsby category for the years ended January 31, 2019, 2018,2022, 2021, and 2017: 
2020:
  Year Ended January 31, % Change
(in thousands) 2019 2018 2017 2019 - 2018 2018 - 2017
Customer Engagement $796,287
 $740,067
 $705,897
 8% 5%
Cyber Intelligence 433,460
 395,162
 356,209
 10% 11%
Total revenue $1,229,747
 $1,135,229
 $1,062,106
 8% 7%

Year Ended January 31,% Change
(in thousands)2022202120202022 - 20212021 - 2020
Recurring revenue
Bundled SaaS revenue$183,035 $145,962 $115,925 25 %26 %
Unbundled SaaS revenue139,729 71,990 48,018 94 %50 %
Optional managed services revenue65,648 59,459 56,534 10 %%
Total cloud revenue388,412 277,411 220,477 40 %26 %
Support revenue244,717 298,213 313,901 (18)%(5)%
Total recurring revenue633,129 575,624 534,378 10 %%
Nonrecurring revenue
Perpetual revenue138,078 141,840 179,882 (3)%(21)%
Professional services revenue103,302 112,783 132,265 (8)%(15)%
Total nonrecurring revenue241,380 254,623 312,147 (5)%(18)%
Total revenue$874,509 $830,247 $846,525 %(2)%
Customer Engagement Segment
Recurring Revenue

Year Ended January 31, 20192022 compared to Year Ended January 31, 2018. Customer Engagement2021. Recurring revenue increased approximately $56.2$57.5 million, or 8%10%, from $740.1 million in the year ended January 31, 2018 to $796.3 million in the year ended January 31, 2019. The increase consisted of a $37.5 million increase in product revenue and an $18.7 million increase in service and support revenue. The application of ASU No. 2014-09 primarily resulted in differences in the timing and amount of revenue recognition for term-based licenses, which under the new accounting standard are recognized at a point in time similar to perpetual licenses rather than over time, minimum guaranteed amounts related to usage-based licenses, and professional services for which payment is contingent upon the achievement of milestones. Excluding the impact of ASU No. 2014-09, Customer Engagement revenue increased approximately $26.2 million, or 4%, from $740.1$575.6 million in the year ended January 31, 20182021 to $766.3$633.1 million in the year ended January 31, 2019, consisting2022. The increase consisted of a $19.2$111.0 million increase in productcloud revenue, partially offset by a $53.5 million decrease in support revenue. The increase in cloud revenue was primarily due to an increase in unbundled SaaS revenue resulting from support conversion transactions and new cloud deployments, and an increase in bundled SaaS and optional managed services as we continue to see positive demand from customers across our portfolio of cloud-based solutions and services. The decrease in support revenue was primarily due to customers migrating to our cloud-based solutions. We expect our revenue mix to continue to shift to recurring sources, which is consistent with our cloud-first strategy and a general market shift from on-premises to cloud-based solutions.

Year Ended January 31, 2021 compared to Year Ended January 31, 2020. Recurring revenue increased approximately $41.2 million, or 8%, from $534.4 million in the year ended January 31, 2020 to $575.6 million in the year ended January 31, 2021. The increase consisted of a $56.9 million increase in cloud revenue, partially offset by a $15.7 million decrease in support revenue. The increase in cloud revenue was primarily due to an increase in bundled SaaS driven by positive demand from customers across our portfolio for cloud-based solutions and services, and an increase in unbundled SaaS revenue resulting from new cloud deployments and support conversion transactions. The decrease in support revenue was primarily due to customers migrating to our cloud-based solutions.

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Nonrecurring Revenue

Year Ended January 31, 2022 compared to Year Ended January 31, 2021. Nonrecurring revenue decreased approximately $13.2 million, or 5%, from $254.6 million in the year ended January 31, 2021 to $241.4 million in the year ended January 31, 2022. The decrease consisted of a $9.5 million decrease in professional services revenue and a $7.0$3.7 million increasedecrease in service and supportperpetual revenue. As noted at the top of this section,The decrease in professional services revenue was primarily driven by a decrease in implementation services as a result of the adoption of ASU No. 2014-09, we made certain changesoverall shift in our business to a cloud-based model. The decrease in perpetual revenue was primarily due to a continued shift in spending by our Customer Engagement contracting and business processes that would have otherwise not occurred under the priorcustomers towards our cloud-based solutions. Our nonrecurring revenue recognition guidance and we believe that absent these changes, revenue under the prior accounting guidance would have been closer to the revenue we are reporting under the new accounting guidance. Under either accounting standard, the increase in product revenue primarily reflects a higher aggregate value of executed perpetual and term-based license arrangements, which comprises the majority of our product revenue and which can fluctuate from period to period. The increase in service and support revenue was primarily attributable to an increase in our customer installed base, and the related support and SaaS revenue generated from this customer base. We continue to experience steady growth in services and support revenue, while product revenue growth is less predictable as the timing of our software license revenue can create significant fluctuations in our resultsperiod, as some large contracts can represent a significant share of our productnonrecurring revenue for a given period. Our business combinations can also affect our revenue mix depending on the nature of the underlying business acquired.

Year Ended January 31, 20182021 compared to Year Ended January 31, 2017. Customer Engagement2020. Nonrecurring revenue increaseddecreased approximately $34.2$57.5 million, or 5%18%, from $705.9$312.1 million in the year ended January 31, 20172020 to $740.1$254.6 million in the year ended January 31, 2018.2021. The increasedecrease consisted of a $31.1$38.0 million increasedecrease in service and supportperpetual revenue and a $3.1$19.5 million increasedecrease in productprofessional services revenue. The increasedecrease in service and supportperpetual revenue was primarily attributabledriven by delayed purchasing decisions on large contracts, particularly on-premises arrangements, and reduced product spending by customers, both due to growth in sales of our cloud-based solutions during the year ended January 31, 2018. The increase in product revenue primarily reflects a modest increase in product deliveries during the year ended January 31, 2018. During the year ended January 31, 2018, we continued to experienceCOVID-19 pandemic, and a shift in spending by our revenue mix from product revenue to service and support revenue as a result of several factors, including a higher component of service offeringscustomers towards our cloud-based solutions. The decrease in our standard arrangements (including licenses sold through cloud deployment), an increase inprofessional services associated with customer product upgrades, and growth in our customer installed base, both organically and as a result of business combinations.

Cyber Intelligence Segment
Year Ended January 31, 2019 compared to Year Ended January 31, 2018. Cyber Intelligence revenue increased approximately $38.3 million, or 10%, from $395.2 million in the year ended January 31, 2018 to $433.5 million in the year ended January 31, 2019. The increase consisted of a $20.8 million increase in service and support revenue and an $17.5 million increase in product revenue. The increase in service and support revenue was primarily attributable to an increase in support revenue from existing customers and an increase in revenue from our SaaS offerings, partially offset by a decrease in progress realized during the current year on long-term projects for which revenue is recognized over time using the percentage of completion (“POC”) method. The increase in product revenue was primarily due to the adoptionimpact of ASU No. 2014-09 which resulted in differences in the timingCOVID-19 pandemic and amount of revenue recognition for software licensesrelated containment measures, including customer facility closures and a long-term customization project that was accepted by the customer during the year ended January 31, 2019, which had been previously recognized under prior revenue recognition accounting standardstravel restrictions, and an increaseoverall shift in product deliveries, including software licenses recognized over time, partially offset by a decrease in progress realized during the current period on long-term projects with revenue recognized over time using the POC method. Excluding the impact of ASU No. 2014-09, Cyber Intelligence revenue increased approximately

$20.5 million, or 5%, from $395.2 million in the year ended January 31, 2018 to $415.7 million in the year ended January 31, 2019. The increase consisted of a $20.8 million increase in service and support revenue, partially offset by a $0.3 million decrease in product revenue. As noted at the top of this section, as a result of the adoption of ASU No. 2014-09, we made certain changes to our Cyber Intelligence software licensing offerings that would have otherwise not occurred under the prior revenue recognition guidance and we believe that absent these changes, revenue under the prior accounting guidance would have been closer to the revenue we are reporting under the new accounting guidance.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Cyber Intelligence revenue increased approximately $39.0 million, or 11%, from $356.2 million in the year ended January 31, 2017 to $395.2 million in the year ended January 31, 2018. The increase consisted of a $20.9 million increase in service and support revenue and an $18.1 million increase in product revenue. The increase in service and support revenue was primarily attributable to an increase in progress realized during the year on projects with revenue recognized using the POC method, some of which commenced in previous years, an increase in support services revenue from new and existing customers, and an increase in revenue from our SaaS offerings. The increase in product revenue was primarily due to an increase in product deliveries and,business to a lesser extent, an increase in progress realized during the year on projects with revenue recognized using the POC method, some of which commenced in previous years.cloud-based model.


Volume and Price
We sell products in multiple configurations, and the price of any particular product varies depending on the configuration of the product sold. Due to the variety of customized configurations for each product we sell, we are unable to quantify the amount of any revenue increase attributable to a change in the price of any particular product and/or a change in the number of products sold.
Product Revenue and Service and Support Revenue
We derive and report our revenue in two categories: (a) product revenue, including licensing of software products and sale of hardware products (which include software that works together with the hardware to deliver the product’s essential functionality), and (b) service and support revenue, including revenue from installation services, post-contract customer support, project management, hosting services, cloud deployments, SaaS, managed services, product warranties, and business advisory consulting and training services. 

The following table sets forth product revenue and service and support revenue for the years endedJanuary 31, 2019, 2018, and 2017:
  Year Ended January 31, % Change
(in thousands) 2019 2018 2017 2019 - 2018 2018 - 2017
Product revenue $454,650
 $399,662
 $378,504
 14% 6%
Service and support revenue 775,097
 735,567
 683,602
 5% 8%
Total revenue $1,229,747
 $1,135,229
 $1,062,106
 8% 7%
Product Revenue
Year EndedJanuary 31, 2019 compared to Year EndedJanuary 31, 2018. Product revenue increased approximately $55.0 million, or 14%, from $399.7 million for the year endedJanuary 31, 2018 to $454.7 million for the year endedJanuary 31, 2019, resulting from a $37.5 million increase in our Customer Engagement segment and a $17.5 million increase in our Cyber Intelligence segment.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Product revenue increased approximately $21.2 million, or 6%, from $378.5 million for the year ended January 31, 2017 to $399.7 million for the year ended January 31, 2018, resulting from an $18.1 million increase in our Cyber Intelligence segment and a $3.1 million increase in our Customer Engagement segment.

For additional information see “—Revenue by Operating Segment”.
Service and Support Revenue

Year Ended January 31, 2019 compared to Year Ended January 31, 2018. Service and support revenue increased approximately $39.5 million, or 5%, from $735.6 million for the year ended January 31, 2018 to $775.1 million for the year ended January 31, 2019, resulting from a $20.8 million increase in our Cyber Intelligence segment and an $18.7 million increase in our Customer Engagement segment.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Service and support revenue increased approximately $52.0 million, or 8%, from $683.6 million for the year ended January 31, 2017 to $735.6 million for the year ended January 31, 2018, resulting from a $31.1 million increase in our Customer Engagement segment and a $20.9 million increase in our Cyber Intelligence segment.

For additional information see “— Revenue by Operating Segment”.

Cost of Revenue

The following table sets forth cost of revenue by productrecurring and service and support,nonrecurring, as well as amortization of acquired technology for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:

 Year Ended January 31, % Change Year Ended January 31,% Change
(in thousands) 2019 2018 2017 2019 - 2018 2018 - 2017(in thousands)2022202120202022 - 20212021 - 2020
Cost of product revenue $129,922
 $131,989
 $123,279
 (2)% 7%
Cost of service and support revenue 293,888
 276,582
 261,978
 6% 6%
Cost of recurring revenueCost of recurring revenue$156,569 $139,044 $132,789 13%5%
Cost of nonrecurring revenueCost of nonrecurring revenue124,226 130,545 149,795 (5)%(13)%
Amortization of acquired technology 25,403
 38,216
 37,372
 (34)% 2%Amortization of acquired technology17,777 17,962 21,579 (1)%(17)%
Total cost of revenue $449,213
 $446,787
 $422,629
 1% 6%Total cost of revenue$298,572 $287,551 $304,163 4%(5)%
We exclude certain costs of both product revenue and service and support revenue, including shared support costs, stock-based compensation, and asset impairment charges, among others, when calculating our operating segment gross margins.


Cost of ProductRecurring Revenue

Cost of productrecurring revenue primarily consists of employee compensation and related expenses for our cloud operations and support teams, contractor costs, cloud infrastructure and data center costs, travel expenses relating to optional managed services and support, and royalties due to third parties for software components that are embedded in our cloud-based solutions. Cost of recurring revenue also includes stock-based compensation expenses, facility costs, and other allocated overhead expenses.

Year Ended January 31, 2022 compared to Year Ended January 31, 2021. Cost of recurring revenue increased approximately $17.6 million, or 13%, from $139.0 million for the year ended January 31, 2021 to $156.6 million for the year ended January 31, 2022. The increase was primarily due to an increase in employee compensation, contractor expenses, and general overhead costs compared to the prior year during which we had implemented certain cost reduction measures due to the COVID-19 pandemic, as well as an increase in headcount, the write-off of prepaid license royalties that are not core to our growth strategy, and an increase in data center and cloud costs associated with the increase in cloud revenue. Our recurring revenue gross margins decreased slightly from 76% in the year ended January 31, 2021 to 75% in the year ended January 31, 2022, primarily due to the one-time write-off of prepaid license royalties during the year ended January 31, 2022.

Year Ended January 31, 2021 compared to Year Ended January 31, 2020. Cost of recurring revenue increased approximately $6.2 million, or 5%, from $132.8 million for the year ended January 31, 2020 to $139.0 million for the year ended January 31, 2021, primarily due to an increase in data center and cloud costs associated with the corresponding increase in cloud revenue and an increase in employee compensation and related expenses, partially offset by a decrease in travel and general overhead costs as a result of cost reduction initiatives related to the COVID-19 pandemic. Our recurring revenue gross margins increased from 75% in the year ended January 31, 2020 to 76% in the year ended January 31, 2021, primarily due to temporary COVID-19 pandemic cost containment measures that we implemented.

We expect our cost of recurring revenue to continue to increase as we continue to invest in our cloud operations to support our growing cloud customer base and improve the security of our solutions.
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Cost of Nonrecurring Revenue

Cost of nonrecurring revenue primarily consists of employee compensation and related expenses, contractor costs, travel expenses relating to installation, training and consulting services, hardware material costs, and royalties due to third parties for software components that are embedded in our on-premises software solutions. Cost of productnonrecurring revenue also includes amortization of capitalized software development costs, employee compensation and related expenses associated with our global operations, facility costs, and other allocated overhead expenses. In our Cyber Intelligence segment, cost of product revenue also includes employee compensation and related expenses, contractor and consulting expenses, and travel expenses, in each case for resources dedicated to project management and associated product delivery.


As with many other technology companies, our software products tend to have higher gross margins than our hardware products, so the mix of products we sell in a particular period can have a significant impact on our gross margins in that period.
Year Ended January 31, 20192022 compared to Year Ended January 31, 2018.2021. Cost of productnonrecurring revenue decreased approximately $2.1$6.3 million, or 2%5%, from $132.0$130.5 million for the year ended January 31, 2018 to $129.9 million for the year ended January 31, 2019, primarily due to a decrease in third-party hardware costs and travel expenses related to on-site deliveries in our Cyber Intelligence segment. Our overall product gross margins increased from 67% in the year ended January 31, 20182021 to 71%$124.2 million in the year ended January 31, 2019. Product gross margins2022. The decrease was primarily driven by a decrease in our Customer Engagement segment increased from 81%general overhead expenses as a result of the Spin-Off, a decrease in the year ended January 31, 2018 to 84% in the year ended January 31, 2019 primarily due to a change in product mix. Product gross margins in our Cyber Intelligence segment increased from 57% in the year ended January 31, 2018 to 61% in the year ended January 31, 2019 primarilyemployee compensation and related expenses due to a decrease in third-party hardware costs as a result of a change in product mixheadcount supporting nonrecurring revenue offerings, and the implementation of a hardware cost reduction initiative for certain products. This decreaselower contractor costs. These decreases were offset by an increase in third-party hardware delivered and related shipping and handling costs was partially offset byduring the adoption of ASU No. 2014-09, which impacted productcurrent year. Our overall nonrecurring gross margins primarily due to a change in the timing of cost of product revenue recognition for certain customer contracts requiring significant customization, because unlike prior guidance, the new guidance precludes the deferral of costs simply to obtain an even profit margin over the contract term. Excluding the impact of the adoption of ASU No. 2014-09, our overall product gross margins increased to 70% in the year ended January 31, 2019 from 67% in the year ended January 31, 2018.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Cost of product revenue increased approximately $8.7 million, or 7%, from $123.3 million for the year ended January 31, 2017 to $132.0 million for the year ended January 31, 2018, primarily due to increased contractor expenses and, to a lesser extent, an increase in material costs in our Cyber Intelligence segment, driven primarily by increased revenue activity as discussed above. Our overall product gross margins

were 67%49% in each of the years ended January 31, 20182022 and 2017. Product gross margins in our Customer Engagement segment decreased slightly from 82% in the year ended January 31, 2017 to 81% in the year ended January 31, 2018 primarily due to a change in product mix. Product gross margins in our Cyber Intelligence segment were 57% in each of the years ended January 31, 2018 and 2017.2021.

Cost of Service and Support Revenue
Cost of service and support revenue primarily consists of employee compensation and related expenses, contractor costs, hosting infrastructure costs, and travel expenses relating to installation, training, consulting, and maintenance services. Cost of service and support revenue also includes stock-based compensation expenses, facility costs, and other overhead expenses. In accordance with GAAP and our accounting policy, the cost of service and support revenue is generally expensed as incurred in the period in which the services are performed.
Year Ended January 31, 20192021 compared to Year Ended January 31, 2018.2020. Cost of service and supportnonrecurring revenue increaseddecreased approximately $17.3$19.3 million, or 6%13%, from $276.6$149.8 million in the year ended January 31, 20182020 to $293.9$130.5 million in the year ended January 31, 2019.2021. The increasedecrease was primarily due to increaseda decrease in travel costs, employee compensation, and related expenses in both our Customer Engagement and Cyber Intelligence segmentscontractor costs as a result of additional services employee headcountcost reduction initiatives related to support the delivery ofCOVID-19 pandemic and our services and support revenue, and an increase in costs associated with providing ouroverall shift towards cloud-based solutions, which corresponds with growth in cloud-based revenue.solutions. Our overall service and supportnonrecurring gross margins were 62% in each of the years ended January 31, 2019 and 2018. Cost of service and support revenue under the prior revenue recognition guidance did not differ materiallymargin decreased from cost of service and support revenue under ASU No. 2014-0952% in the year ended January 31, 2019.

Year Ended January 31, 2018 compared2020 to Year Ended January 31, 2017. Cost of service and support revenue increased approximately $14.6 million, or 6%, from $262.0 million49% in the year ended January 31, 2017 to $276.6 million in the year ended January 31, 2018. Cost of service and support revenue increased in our Customer Engagement segment2021, primarily due to costs associated with providing our cloud-based solutions, which corresponds with growth in cloud-based revenue, and an increase in costs attributablelower sales volume due to the use of contractors during the year ended January 31, 2018. Cost of service and supportCOVID-19 pandemic, which resulted in revenue increased in our Cyber Intelligence segment primarily due to costs associated with increased use of contractors asdecreasing at a result of increased revenue activity as discussed above. Our overall service and support gross margins were 62% in each of the years ended January 31, 2018 and 2017.faster rate than nonrecurring costs.


Amortization of Acquired Technology

Amortization of acquired technology consists of amortization of technology assets acquired in connection with business combinations.


Year Ended January 31, 20192022 compared to Year Ended January 31, 2018.2021. Amortization of acquired technology decreased approximately $12.8$0.2 million, or 34%1%, from $38.2$18.0 million in the year ended January 31, 20182021 to $25.4$17.8 million in the year ended January 31, 2019.2022. The decrease was attributable to acquired technology intangible assets from historical business combinations becoming fully amortized during the year ended January 31, 2019,2022, partially offset by amortization expense of acquired technology-basedtechnology intangible assets associated with recent business combinations.


Year Ended January 31, 20182021 compared to Year Ended January 31, 2017.2020. Amortization of acquired technology increaseddecreased approximately $0.8$3.6 million, or 2%17%, from $37.4$21.6 million in the year ended January 31, 20172020 to $38.2$18.0 million in the year ended January 31, 2018.2021. The increasedecrease was attributable to amortization expense of acquired technology-based intangible assets associated with business combinations that closed during the year ended January 31, 2018, as well as business combinations that closed during the year ended January 31, 2017 for which a full year of amortization expense is reflected in the year ended January 31, 2018. This increase was partially offset by a decrease in amortization expense as a result of acquired technology intangible assets from historical business combinations becoming fully amortized during the year ended January 31, 2018.2021, partially offset by amortization expense of acquired technology intangible assets associated with business combinations that closed during the prior year, for which a full year of amortization expense was reflected in the year ended January 31, 2021.


Further discussion regarding our business combinations appears in Note 5,6, “Business Combinations”Combinations and Divestitures” to our consolidated financial statements included underin Part II, Item 8 of this report.

Research and Development, Net

Research and development expenses consist primarily of personnel and subcontracting expenses, facility costs, and other allocated overhead, net of certain software development costs that are capitalized, as well as reimbursements under government programs.capitalized. Software development costs are capitalized upon the establishment of technological feasibility and continue to be capitalized through the general release of the related software product.


The following table sets forth research and development, net for the years endedJanuary 31, 2019, 2018,2022, 2021, and 2017:2020:

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 Year Ended January 31, % Change Year Ended January 31,% Change
(in thousands) 2019 2018 2017 2019 - 2018 2018 - 2017(in thousands)2022202120202022 - 20212021 - 2020
Research and development, net $209,106
 $190,643
 $171,070
 10% 11%Research and development, net$123,291 $128,152 $134,236 (4)%(5)%

Year EndedJanuary 31, 20192022 compared to Year EndedJanuary 31, 2018.2021. Research and development, net increaseddecreased approximately $18.5$4.9 million,, or 10%4%, from $190.6$128.2 million in the year endedJanuary 31, 20182021 to $209.1$123.3 million in the year endedJanuary 31, 2019. The increase2022. This decrease was primarily attributable to a $16.9 million decrease in indirect R&D shared support services and facility expenses due to a $14.0reduction in our shared support services workforce as a result of the completion of the Spin-Off, a $3.6 million increase in benefits from participation in certain government-sponsored programs for the support of R&D activities, and a $2.5 million decrease in general overhead costs. These decreases were partially offset by a $7.8 million increase in employee compensation and related expenses compared to the prior year period during which we had implemented certain cost reduction measures due to the COVID-19 pandemic, and a $4.1 million increaseincreased investment in allocated overhead costs as a result of increased R&D headcount, and a $5.7 million increase in contractor costs, a $3.6 million increase in stock-based compensation expenses primarilydue to a shorter vesting schedule for prior year grants which resulted in a greater charge in the current year, additional performance based awards in connection with completion of the Spin-Off, and a change in our Cyber Intelligence segment, partially offset byR&D employee bonus payment structure, and a $1.1 million increase in third party software components in support of our cloud business.

Year Ended January 31, 2021 compared to Year Ended January 31, 2020. Research and development, net decreased approximately $6.0 million, or 5%, from $134.2 million in the year ended January 31, 2020 to $128.2 million in the year ended January 31, 2021. The decrease was primarily due to a $3.3 million decrease in stock-based compensation expenses as a result of a change in our R&D employee bonus payment structure and cost reduction initiatives we implemented in response to the COVID-19 pandemic, which resulted in a $1.7$1.8 million decrease in travel related expenses, and a $1.3 million decrease in employee compensation and related expenses, excluding stock-based compensation, partially offset by a $0.4 million decrease in capitalized software development costs, and a $0.5 million decrease in R&D reimbursements received from government programs in the year ended January 31, 2019 compared to the year ended January 31, 2018.costs.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Research and development, net increased approximately $19.5 million, or 11%, from $171.1 million in the year ended January 31, 2017 to $190.6 million in the year ended January 31, 2018. The increase was primarily due to a $12.7 million increase in employee compensation and related expenses as a result of increased R&D headcount, a $3.6 million increase in contractor expenses primarily in our Cyber Intelligence segment, and a $1.5 million increase in stock-based compensation expenses for R&D employees.


Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel costs and related expenses, professional fees, changes in the fair values of our obligations under contingent consideration arrangements, sales and marketing expenses, including travel costs, sales commissions and sales referral fees, facility costs, communication expenses, and other administrative expenses.

The following table sets forth selling, general and administrative expenses for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:

 Year Ended January 31, % Change Year Ended January 31,% Change
(in thousands) 2019 2018 2017 2019 - 2018 2018 - 2017(in thousands)2022202120202022 - 20212021 - 2020
Selling, general and administrative $426,183
 $414,960
 $406,952
 3% 2%Selling, general and administrative$376,808 $327,345 $379,234 15%(14)%

Year Ended January 31, 20192022 compared to Year Ended January 31, 2018.2021. Selling, general and administrative expenses increased approximately $11.2$49.5 million, or 3%15%, from $415.0$327.3 million in the year ended January 31, 20182021 to $426.2$376.8 million in the year ended January 31, 2019.2022. This increase was primarily attributabledue to an increase of $14.9 million in employee compensation and related expenses, a $10.6$7.0 million increase in employee compensationcontractor costs, and a $3.8 million increase in marketing related expenses compared to the prior year during which we had implemented certain cost reduction measures due to increased headcount asthe COVID-19 pandemic, a result of recent business combinations, a $3.3$17.5 million increase in stock-based compensation expenseexpenses due to a shorter vesting schedule for prior year grants which resulted in a greater charge in the current year period, additional performance-based awards in connection with completion of the Spin-Off, and a change in the employee bonus payment structure, $13.3 million of accelerated facility costs and asset impairment charges due to the early termination or abandonment of certain office leases, a $5.0 million increase in professional service fees primarily related to recent business combinations, and $2.6 million of one-time nonrecurring operational costs incurred during the current period related to the Spin-Off, in that they are only necessary because of the Spin-Off, but they are not transactional type costs. These increases in SG&A expenses were partially offset by a $13.4 million decrease in indirect SG&A shared support services and facilities expenses due to a reduction in our shared support services workforce as a result of the completion of the Spin-Off. SG&A expenses were also impacted by a $1.7 million increase due to a change in bonus payment structure,the fair value of our obligations under contingent consideration arrangements, from a $2.9net benefit of $0.8 million increase in travel related expenses due primarilyfor the year ended January 31, 2021 to increased travel expenses in our Customer Engagement segment, and a $1.9net charge of $0.9 million increase in depreciation expense on fixed assets usedduring the year ended January 31, 2022, as a result of revised outlooks for general administration purposes. Additionally, selling,achieving the performance targets under several unrelated contingent consideration arrangements.

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Year Ended January 31, 2021 compared to Year Ended January 31, 2020. Selling, general and administrative expenses increaseddecreased approximately $51.9 million, or 14%, from $379.2 million in the year ended January 31, 2020 to $327.3 million in the year ended January 31, 2021. This decrease was primarily attributable to cost reduction initiatives we implemented in response to the COVID-19 pandemic, which resulted in a $13.7 million decrease in travel related costs, a $7.8 million decrease in contractors used for corporate support activities, and a $5.6 million decrease in marketing related expenses due to the cancellation of certain sales and marketing events and trade shows. Additionally, stock-based compensation decreased by $4.7$14.2 million primarily due to a change in employee bonus payment structure and professional fees decreased by $7.9 million due to a shareholder proxy contest that impacted the year ended January 31, 2020. Selling, general, and administrative expenses were also impacted by a $5.7 million decrease due to the change in the fair value of our obligations under contingent consideration arrangements, from a net benefitexpense of $8.3$4.9 million in the year ended January 31, 20182020 to a net benefit of $3.6$0.8 million during the year ended January 31, 2019,2021, as thea result of revised outlooks for achieving the performance targets under several unrelated contingent consideration arrangements. These increasesdecreases were partially offset by a $6.8 million decrease in allocated overhead costs, a $3.4 million decrease in facility expenses primarily due to the early termination of a facility lease in the EMEA region during the prior year, and a $2.7 million decrease in contractor expenses primarily due to the substantial completion of certain business agility initiatives in the prior year.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Selling, general and administrative expenses increased approximately $8.0 million, or 2%, from $407.0 million in the year ended January 31, 2017 to $415.0 million in the year ended January 31, 2018. This increase was primarily attributable to the following:

$8.5$4.6 million increase in employee compensation and related expenses attributed primarily to additional personnel driven by business combinations;depreciation expense on fixed assets used for general administration purposes.
$5.0 million increase in professional fees resulting primarily from legal services provided in connection with business combinations;

$4.7 million increase in contractor expenses due primarily to business agility initiatives, including upgrading our business information systems;
$3.3 million charge for impairments of certain acquired customer-related intangible assets in our Customer Engagement segment;
$2.4 increase in stock-based compensation expense due primarily to business combinations that closed during the year ended January 31, 2018, as well as business combinations that closed during the year ended January 31, 2017 for which a full year of stock-based compensation expense is reflected in the year ended January 31, 2018;
$2.0 million increase in software subscription expenses related to internal-use software; and
$1.8 million increase in rent expense associated with business combinations that closed during the year ended January 31, 2018, as well as business combinations that closed during the year ended January 31, 2017 for which a full year of rent expense is reflected in the year ended January 31, 2018.

These increases were partially offset by a $15.6 million decrease in selling, general, and administrative expenses resulting from changes in fair value of our obligations under contingent consideration arrangements from a net expense of $7.3 million during the year ended January 31, 2017 to net benefit of $8.3 million in the year ended January 31, 2018. The impact of contingent consideration arrangements on our operating results can vary over time as we revise our outlook for achieving the performance targets underlying the arrangements. This impact on our operating results may be more significant in some periods than in others, depending on a number of factors, including the magnitude of the change in the outlook for each arrangement separately as well as the number of contingent consideration arrangements in place, the liabilities requiring adjustment in that period, and the net effect of those adjustments. Additionally, selling, general, and administrative expenses decreased by $4.6 million as a result of increased capitalization of costs associated with development of internal-use software during the year ended January 31, 2018 compared to the prior year.


Amortization of Other Acquired Intangible Assets

Amortization of other acquired intangible assets consists of amortization of certain intangible assets acquired in connection with business combinations, including customer relationships, distribution networks, trade names and non-compete agreements.

The following table sets forth amortization of other acquired intangible assets for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:

 Year Ended January 31, % Change Year Ended January 31,% Change
(in thousands)  2019 2018 2017 2019 - 2018 2018 - 2017(in thousands) 2022202120202022 - 20212021 - 2020
Amortization of other acquired intangible assets $31,010
 $34,209
 $44,089
 (9)% (22)%Amortization of other acquired intangible assets$28,995 $29,777 $30,865 (3)%(4)%

Year Ended January 31, 20192022 compared to Year Ended January 31, 2018.2021. Amortization of other acquired intangible assets decreased approximately $3.2$0.8 million, or 9%3%, from $34.2$29.8 million in the year ended January 31, 20182021 to $31.0$29.0 million in the year ended January 31, 2019 as a result of2022. The decrease was attributable to acquired customer-related intangible assets from historical business combinations becoming fully amortized partially offset by an increase in amortization expense from acquired intangible assets from business combinations that closed during the year ended January 31, 2019, as well as2022, partially offset by amortization expense associated with acquired intangible assets from recent business combinations.

Year Ended January 31, 2021 compared to Year Ended January 31, 2020. Amortization of other acquired intangible assets decreased approximately $1.1 million, or 4%, from $30.9 million in the year ended January 31, 2020 to $29.8 million in the year ended January 31, 2021. The decrease was attributable to acquired customer-related intangible assets from historical business combinations becoming fully amortized during the year ended January 31, 2021, partially offset by amortization expense associated with acquired intangible assets from business combinations that closed during the prior year, for which a full year of amortization expense is reflected in the current year.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Amortization of other acquired intangible assets decreased approximately $9.9 million, or 22%, from $44.1 million in the year ended January 31, 2017 to $34.2 million in the year ended January 31, 2018 as a result of acquired customer-related intangible assets from historical business combinations becoming fully amortized, partially offset by an increase in amortization expense from acquired intangible assets from business combinations that closed during the year ended January 31, 2018, as well as business combinations that closed during the prior year, for which a full year of amortization expense iswas reflected in the year ended January 31, 2018.2021.


Further discussion regarding our business combinations appears in Note 5,6, “Business Combinations”Combinations and Divestitures” to our consolidated financial statements included underin Part II, Item 8 of this report.

Other Expense, Net

The following table sets forth total other expense, net for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:


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 Year Ended January 31, % Change Year Ended January 31,% Change
(in thousands) 2019 2018 2017 2019 - 2018 2018 - 2017(in thousands)2022202120202022 - 20212021 - 2020
Interest income $4,777
 $2,477
 $1,048
 93% 136%Interest income$233 $1,461 $2,111 (84)%(31)%
Interest expense (37,344) (35,959) (34,962) 4%
3%Interest expense(10,325)(39,803)(40,314)(74)%(1)%
Losses on early retirements of debt 
 (2,150) 
 —%
*Losses on early retirements of debt(2,474)(143)— **
Other (expense) income:  
  
  
 


Other income (expense):Other income (expense):   
Foreign currency (losses) gains (5,519) 6,760
 (2,743) (182)%
(346)%Foreign currency (losses) gains(1,644)(1,584)672 4%*
Gains (losses) on derivatives 2,511
 (17) (322) *
*
(Losses) gains on derivatives(Losses) gains on derivatives(14,374)(1,267)204 **
Fair value change of future tranche rightFair value change of future tranche right15,810 (56,146)— (128)%*
Other, net (898) (841) (3,861) 7%
*Other, net5,435 (1,604)(267)**
Total other (expense) income, net (3,906) 5,902
 (6,926) (166)%
(185)%
Total other income (expense), netTotal other income (expense), net5,227 (60,601)609 (109)%*
Total other expense, net $(36,473) $(29,730) $(40,840) 23%
(27)%Total other expense, net$(7,339)$(99,086)$(37,594)(93)%164%

* Percentage is not meaningful.

Year Ended January 31, 20192022 compared to Year Ended January 31, 2018.2021. Total other expense, net, increaseddecreased by $6.8$91.7 million from $29.7$99.1 million in the year ended January 31, 20182021 to $36.5$7.3 million in the year ended January 31, 2019. 2022.


Interest expense increaseddecreased to $37.3$10.3 million in the year ended January 31, 20192022 from $36.0$39.8 million in the year ended January 31, 2018 primarily2021 due to higherlower interest expense related to our 2014 Notes, as a result of the 2014 Notes maturing on June 1, 2021 and our early adoption of ASU No. 2020-06 on February 1, 2021. As a result of this adoption, the 2014 Notes were accounted for as a single liability until maturity as the new accounting guidance eliminated the amortization of the debt discount. Prior to February 1, 2021, the carrying amount of the equity component of the 2014 Notes was recorded as a debt discount and amortized to interest expense. Interest expense related to the amortization of debt discount costs associated with the 2014 Notes was $12.9 million in the year ended January 31, 2021. See Note 1, “Description of Business and Summary of Significant Accounting Policies” in our notes to our consolidated financial statements included in Part II, Item 8 of this report for more information regarding the adoption of ASU No. 2020-06. Interest expense also decreased due to lower interest rates on outstanding borrowings as well as lower outstanding borrowings as a result of the partial prepayment of our 2017 Term Loan in conjunction with the issuance of the 2021 Notes and no outstanding balances under our 2017 Revolving Credit Facility during the year ended January 31, 2019, partially offset by a $1.0 million reversal of accrued interest related to a legal matter which was settled in the year ended January 31, 2019.2022.


During the year ended January 31, 2018,2022, we entered into a new credit agreement (the “2017 Credit Agreement”),recorded $2.5 million of losses on early retirements of debt, $2.0 million of which was subsequentlya result of repaying $309.0 million of our 2017 Term Loan. In April 2021, we also amended and terminated our Priorthe 2017 Credit Agreement (as definedand refinanced our 2017 Revolving Credit Facility, which otherwise would have matured on June 29, 2022, resulting in the write off of $0.5 million of unamortized deferred debt issuance costs related to certain lenders who will no longer provide commitments under the 2021 Revolving Credit Facility. Further discussion regarding our 2017 Credit Agreement, 2017 Term Loan and 2021 Revolving Credit Facility appears in Note 7, “Long-Term8, “Long-term Debt” to our consolidated financial statements included underin Part II, Item 8 of this report). Inreport.

We recorded $1.6 million of net foreign currency losses in each of the years ended January 31, 2022 and 2021. Our foreign currency losses in the current year period resulted primarily from fluctuations associated with the exchange rate movement of the U.S. dollar against the British pound sterling, the Australian dollar, and the Brazilian real.

During the year ended January 31, 2022, we recorded a $14.4 million loss on our interest rate swap as a result of the partial early retirement of our 2017 Term Loan, with no comparable transaction in the prior year period.

During the year ended January 31, 2022, we recorded a non-cash Future Tranche Right revaluation gain of $15.8 million compared to a revaluation loss of $56.1 million during year ended January 31, 2021. The non-cash gain for the current period relates to the final mark-to-market adjustment of the Future Tranche Right, issued in connection with these transactions, wethe closing of the Series A Preferred Stock on May 7, 2020 relative to the potential future issuance of the Series B Preferred Stock. The change in fair value was primarily due to a decrease in our stock price from January 31, 2021 to immediately prior to the issuance of the Series B Preferred Stock, which decreased the estimated fair value of the Future Tranche Right. Upon the issuance of the Series B Preferred Stock on April 6, 2021, the Future Tranche Right was settled and no further charges (or benefits) will be recorded. The non-cash charge for the prior year period relates to the change in fair value of the Future Tranche Right primarily due to a significant increase in our stock price during the period, which increased the estimated fair value of the Future Tranche Right. Please refer to Note 10, “Convertible Preferred Stock” and Note 14, “Fair Value Measurements” to our consolidated financial statements included in Part II, Item 8 of this report for additional information regarding the Future Tranche Right.
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We recorded $2.2$5.4 million of losses on early retirements of debt. There were no comparable chargesincome within other, net in the year ended January 31, 2019.2022, primarily due to the recognition of a $3.1 million unrealized gain from a fair value adjustment to a noncontrolling equity investment related to an observable price change in the period. During the year ended January 31, 2021, we recorded $1.6 million of expenses within other, net primarily due to fees in connection with our second amendment to the 2017 Credit Agreement.


Year Ended January 31, 2021 compared to Year Ended January 31, 2020. Total other expense, net, increased by $61.5 million from $37.6 million in the year ended January 31, 2020 to $99.1 million in the year ended January 31, 2021.

Interest income decreased from $2.1 million in the year ended January 31, 2020 to $1.5 million in the year ended January 31, 2021 due to a decrease in average interest rates, partially offset by interest earned on higher cash balances.

Interest expense decreased to $39.8 million in the year ended January 31, 2021 from $40.3 million in the year ended January 31, 2020 primarily due to lower interest rates on outstanding borrowings.

We recorded $5.5$1.6 million of net foreign currency losses in the year ended January 31, 20192021 compared to $6.8$0.7 million of net foreign currency gains in the year ended January 31, 2018. Foreign2020. Our foreign currency gains and losses inare primarily the year ended January 31, 2019 resulted primarily fromresult of fluctuations associated with the strengtheningexchange rate movement of the U.S. dollar against the euro, from January 31, 2018 to January 31, 2019, resulting in foreign currency losses on euro denominated net assets in certain entities which use a U.S. dollar functional currencythe Israeli shekel, the Brazilian real, and foreign currency losses on U.S. dollar-denominated net liabilities in certain entities which use a euro functional currency, the strengthening of the U.S. dollar against the Singapore dollar, resulting in foreign currency losses on Singapore dollar-denominated net assets in certain entities which use a U.S. dollar functional currency, the strengthening of the U.S. dollar against the British pound sterling, resulting in foreign currency losses on U.S. dollar-denominated net liabilities in certain entities which use a British pound sterling functional currency, and the strengthening of the U.S. dollar against the Australian dollar, resulting in foreign currency losses on U.S. dollar-denominated net liabilities in certain entities which use an Australian dollar functional currency.sterling.

InDuring the year ended January 31, 2019,2021, there were net gainslosses on derivative financial instruments (not designated as hedging
instruments) of $2.5$1.3 million, compared to insignificant$0.2 million of net lossesgains on such instruments for the year ended January 31, 2018.2020. The net gains in the current period primarily reflected gains on an interest rate swap and contracts executed to hedge movements in the exchange rate between the U.S. dollar and the Singapore dollar.

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Total other expense, net, decreased by $11.1 million from $40.8 million in the year ended January 31, 2017 to $29.7 million in the year ended January 31, 2018. 

Interest expense increased to $36.0 million in the year ended January 31, 2018 from $35.0 million in the year ended January 31, 2017 primarily due to higher interest rates on outstanding borrowingslosses during the year ended January 31, 2018.2021 were primarily the result of an unrealized loss associated with our interest rate swap contract.


During the year ended January 31, 2018 we entered into the 2017 Credit Agreement with certain lenders and terminated our Prior Credit Agreement. In connection with these transactions,2021, we recorded a $2.2 million lossnon-cash Future Tranche Right charge of $56.1 million. This non-cash charge for the period relates to the change in fair value of the Future Tranche Right (the right of the Apax Investor to purchase the Series B Preferred Stock at a future date), issued in connection with the closing of the Series A Preferred Stock on early retirementMay 7, 2020. The change in fair value was primarily due to a significant increase in our stock price during the period, which increased the estimated fair value of debt. There were no comparable charges inthe Future Tranche Right.

During the year ended January 31, 2017.

We2021, we recorded $6.8$1.6 million of expenses within other, net compared to $0.3 million of net foreign currency gains in the year ended January 31, 2018 compared to $2.7 million of net losses in the year ended January 31, 2017. Foreign currency gains in the year ended January 31, 2018 resulted primarily from the weakening of the U.S. dollar against the euro, resulting in foreign currency gains on euro denominated net assets in certain entities which use a U.S. dollar functional currency, the weakening of the U.S. dollar against the Singapore dollar, resulting in

foreign currency gains on Singapore dollar-denominated net assets in certain entities which use a U.S. dollar functional currency, and the weakening of the U.S. dollar against the British pound sterling, resulting in foreign currency gains on U.S. dollar-denominated net liabilities in certain entities which use a British pound sterling functional currency.
In the year ended January 31, 2018, there were insignificant net losses on derivative financial instruments (not designated as hedging instruments), compared to net losses of $0.3 million on such instrumentsexpenses for the year ended January 31, 2017.2020. The net losses in the prior year reflected losses on contracts executed to hedge movements in the exchange rate between the U.S. dollar and the Brazilian real.

Other net expenses decreased to $0.8 million in the year ended January 31, 2018 from $3.9 million in the year ended January 31, 2017. In the year ended January 31, 2017, we recorded a write-off of a $2.4 million cost-basis investment in our Cyber Intelligence segment, with no comparable charges in the year ended January 31, 2018. Also contributing to the decrease in other net expenses was resolution of a previously accrued sales tax contingency in our APAC region during the year ended January 31, 2018.2021 were primarily due to fees in connection with our second amendment to the 2017 Credit Agreement. Further discussion of the second amendment to the 2017 Credit Agreement appears in Note 8, “Long-Term Debt” to our consolidated financial statements included in Part II, Item 8 of this report.


Provision for Income Taxes

The following table sets forth our provision for income taxes from continuing operations for the years ended January 31, 2019, 20182022, 2021, and 2020:

 Year Ended January 31,
(in thousands)202220212020
Provision for income taxes$23,853 $6,937 $6,943 

Intra-period allocation rules require us to allocate our provision for income taxes between continuing operations and other categories such as discontinued operations or comprehensive income (loss). As described in Item 8, Note 2, “Discontinued Operations”, and 2017:the results of Cognyte have been reported as discontinued operations for all periods presented.

  Year Ended January 31,
(in thousands) 2019 2018 2017
Provision for income taxes $7,542
 $22,354
 $2,772
Year Ended January 31, 20192022 compared to Year Ended January 31, 2018.2021. Our effective income tax rate was 9.7%60.4% for the year ended January 31, 2019,2022, compared to ana negative effective income tax rate of 118.3%16.6% for the year ended January 31, 2018.2021. For the year ended January 31, 2019,2022, our effective income tax rate was higher than the U.S. federal statutory income tax rate of 21.0% primarily due to the U.S. taxation of certain foreign income and impact of a tax rate change in a foreign jurisdiction, offset by the change in the fair value of the Future Tranche Right associated with the Preferred Stock issuance. The effective tax rate is further impacted by the mix and levels of income and losses among taxing jurisdictions, changes in valuation allowances, and changes in unrecognized income tax benefits.
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For the year ended January 31, 2021, our effective income tax rate was lower than the U.S. federal statutory income tax rate of 21.0% primarily due to a net reductionthe impact of U.S. taxation of certain foreign activities, and the change in valuation allowancesthe fair value of $24.1 million,the Future Tranche Right associated with the Preferred Stock issuance. The effective rate is further impacted by the mix and levels of income and losses among taxing jurisdictions, changes in valuation allowances, and changes in unrecognized income tax benefits. The net reduction in valuation allowance is primarily related to reductions in U.S. valuation allowances as a result of deferred tax liabilities recorded in connection with business combinations, and the utilization of significant NOLs, which reduced our deferred tax assets. As a result, we ended the year in a net federal deferred tax liability position in the U.S. The deferred income tax liabilities recorded in connection with business combinations were primarily attributable to acquired intangible assets to the extent the amortization will not be deductible for income tax purposes. Under accounting guidelines, because the amortization of the intangible assets in future periods provides a source of taxable income, we expect to realize a portion of our existing deferred income tax assets. As such, we reduced the valuation allowance recorded on our deferred income tax assets to the extent of the deferred income tax liabilities recorded. Because the valuation allowance related to existing Verint deferred income tax assets, the impact of the release was reflected as a discrete income tax benefit and not as a component of the business combination accounting.


In accordance with the provisions of SAB No. 118, as ofYear Ended January 31, 2018 we considered amounts related2021 compared to the 2017 Tax Act to be reasonably estimated. During the year endedYear Ended January 31, 2019, we refined and completed the accounting for the 2017 Tax Act as we obtained, prepared, and analyzed additional information and as additional legislative, regulatory, and accounting guidance and interpretations became available, resulting in no adjustment under SAB No. 118.

For the year ended January 31, 2018, our2020. Our effective income tax rate was higher than the U.S. federal statutory income tax rate of 33.8% due to withholding tax expense of $15.0 million, a benefit of $5.4 million related to the revaluation of U.S. deferred tax items resulting from the 2017 Tax Act, the mix and levels of income and losses among taxing jurisdictions, and changes in unrecognized income tax benefits. Our statutory ratenegative 16.6% for the year ended January 31, 2018 was 33.8% due to the 2017 Tax Act, which included a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%. Section 15 of the Internal Revenue Code stipulates that our fiscal year ending January 31, 2018 had a blended corporate tax rate of 33.8% which is based on the applicable tax rates before and after the 2017 Tax Act and the number of days in the period. As a result of the 2017 Tax Act, we recorded a Transition Tax on previously untaxed foreign earnings. The Transition tax resulted in no impact to the tax provision as we used a portion of the NOL carryforward and released valuation allowances on the associated deferred tax assets resulting in a net impact of $0 to the tax provision. Foreign earnings subject to the Transition Tax will not be subject to further U.S. taxation upon repatriation. Therefore, we may repatriate certain foreign cash, a portion of which will be subject to a withholding tax. As such, withholding tax of $15 million was recorded. Also, we remeasured U.S. deferred tax items to reflect the reduced rate under the 2017 Tax Act resulting in the $5.4 million benefit. In addition, pre-tax income in our profitable jurisdictions, where we recorded income tax provisions at rates lower than the U.S. federal statutory income tax rate, was greater than the pre-tax losses in our domestic and foreign jurisdictions where we maintained valuation allowances and did not record the related income tax benefits. The result was an income tax provision of $22.4 million on a pre-tax income of

$18.9 million, which represented an effective income tax rate of 118.3%. Excluding the net impact of the 2017 Tax Act, the result was an income tax provision of $12.7 million on pre-tax income of $18.9 million, resulting in an effective income tax rate of 67.3%

Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Our effective income tax rate was 118.3% for the year ended January 31, 2018,2021, compared to a negative effective income tax rate of 11.8%17.5% for the year ended January 31, 2017.2020. For the year ended January 31, 2018, our effective income tax rate was higher than the U.S. federal statutory income tax rate of 33.8% due to withholding tax expenses of $15 million, a benefit of $5.4 million related to the revaluation of U.S. deferred tax items, the mix and levels of income and losses among taxing jurisdictions, and changes in unrecognized income tax benefits. Our statutory rate for the year ended January 31, 2018 is 33.8% due to the 2017 Tax Act as discussed above.

For the year ended January 31, 2017,2021, our effective income tax rate was lower than the U.S. federal statutory income tax rate of 35%21.0% primarily due to the releaseimpact of $10.4 millionU.S. taxation of valuation allowances,certain foreign activities and the change in the fair value of the Future Tranche Right associated with the Preferred Stock. The effective tax rate is further impacted by the mix and levels of income and losses among taxing jurisdictions, offset bychanges in valuation allowances, and changes in unrecognized income tax benefits. We maintain valuation allowances on our net U.S. deferred income tax assets related to federal and certain state jurisdictions. In connection with business combinations during

For the year ended January 31, 2017, we recorded deferred2020, our effective income tax liabilities primarily attributable to acquired intangible assets to the extent the amortization will not be deductible for income tax purposes. Pre-tax income in our profitable jurisdictions, where we recorded income tax provisions at ratesrate was lower than the U.S. federal statutory income tax rate was lower thanof 21.0% primarily due to the pre-taximpact of U.S. taxation of certain foreign activities, the mix and levels of income and losses in our domesticamong taxing jurisdictions, and foreign jurisdictions where we maintainchanges in valuation allowances and did not record the relatedin unrecognized income tax benefits. The

Net Income from Discontinued Operations

As more fully described in Note 2, “Discontinued Operations” to our consolidated financial statements included in Part II, Item 8 of this report, on February 1, 2021, we completed the Spin-Off of our Cognyte Business into an independent public company, Cognyte. As a result, was an income tax provisionthe historical results of $2.8 million on a pre-tax loss of $23.5 million, which represented a negative effective income tax rate of 11.8%.operations for Cognyte have been included within discontinued operations in our consolidated financial statements.




Liquidity and Capital Resources

Overview

Our primary recurring source of cash is the collection of proceeds from the sale of products and services to our customers, including cash periodically collected in advance of delivery or performance.


On December 4, 2019, we announced that the Apax Investor 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 Apax Investor purchased $200.0 million of our Series A Preferred Stock in an issuance that closed on May 7, 2020, with an initial conversion price of $53.50 per share. In accordance with the Investment Agreement, the Series A Preferred Stock did not participate in the Spin-Off distribution of the Cognyte shares described above and the Series A 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. In connection with the completion of the Spin-Off, the Apax Investor purchased $200.0 million of our Series B Preferred Stock in an issuance that closed on April 6, 2021. The Series B Preferred Stock is convertible at a conversion price of $50.25, based in part on our trading price over the 20 trading day period following the Spin-Off. As of January 31, 2022, Apax’s ownership in us on an as-converted basis was approximately 12.9%.

Each series of Preferred Stock pays dividends at an annual rate of 5.2% until the 48-month anniversary of the closing of the Series A Preferred Stock investment, and thereafter at a rate of 4.0%, subject to adjustment under certain circumstances. Dividends will be cumulative and payable semiannually in arrears in cash. All dividends that are not paid in cash will remain accumulated dividends with respect to each share of Preferred Stock. We used the proceeds from the Apax investment to repay outstanding indebtedness, to fund a portion of our stock repurchase programs (as described below under“Liquidity and Capital Resources Requirements”), and/or for general corporate purposes. Please refer to Note 10, “Convertible Preferred Stock”, to our consolidated financial statements included in Part II, Item 8 of this report for more information regarding the Apax convertible preferred stock investment.

Our primary recurring use of cash is payment of our operating costs, which consist primarily of employee-related expenses, such as compensation and benefits, as well as general operating expenses for cloud operations, marketing, facilities and overhead costs, and capital expenditures. We also utilize cash for debt service, stock repurchases, dividends on the Preferred Stock, and periodically for business acquisitions. Cash generated from operations, along with our existing cash, cash equivalents, and short-term investments, are our primary sources of operating liquidity, and we believe that our operating liquidity is currently
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sufficient to support our current business operations, including debt service, and capital expenditure requirements.requirements, and the payment of dividends on the convertible preferred stock.


On June 29, 2017, we entered into the 2017 Credit Agreement with certain lenders, and terminated our Prior Credit Agreement.a prior credit agreement. The 2017 Credit Agreement was amended on January 31, 2018 (the “2018 Amendment”), again on June 8, 2020 (the “2020 Amendment”), and again on April 9, 2021 (the “2021 Amendment”). Pursuant to the 2020 Amendment, we were permitted to effect the Spin-Off within the parameters set forth in the 2017 Credit Agreement, as amended, and our 2014 Notes would not be deemed to be outstanding if such 2014 Notes were cash collateralized in accordance with the 2017 Credit Agreement, as amended, for purposes of the determination of the maturity dates of the 2017 Term Loan and the 2017 Revolving Credit Facility. On February 26, 2021, we deposited approximately $390.0 million of cash, representing the full principal amount of the 2014 Notes then outstanding, as well as the final interest payment on the 2014 Notes due at maturity, into an escrow account in satisfaction of the cash collateralization provisions of the 2020 Amendment. On May 28, 2021, prior to the June 1, 2021 maturity date of the 2014 Notes, we used the escrowed cash to settle the principal amount, including the final interest payment, and the incremental conversion value of $57.7 million was settled with approximately 1,250,000 shares of common stock. Further discussion of our 2017 Credit Agreement and 2018 Amendmentas amended, appears below, under “Financing Arrangements”.


We have historically expanded our business in part by investing in strategic growth initiatives, including acquisitions of products, technologies, and businesses. We may finance such acquisitions using cash, debt, stock, or a combination of the foregoing, however, we have used cash as consideration for substantially all of our historical business acquisitions, including approximately $90 million and $103$57.0 million of net cash expended for business acquisitions during the yearsyear ended January 31, 2019 and 2018, respectively.2022. There were no business acquisitions during the year ended January 31, 2021. Please refer to Note 6, “Business Combinations”, to our consolidated financial statements included in Part II, Item 8 of this report for more information regarding our recent business combinations.


We continually examine our options with respect to terms and sources of existing and future short-term and long-term capital resources to enhance our operating results and to ensure that we retain financial flexibility, and may from time to time elect to raise capital through the issuance of additional equity or the incurrence of additional debt. In connection with the completion of the Spin-Off, the Apax Investor purchased $200.0 million of our Series B Preferred Stock in an issuance that closed on April 6, 2021. Additionally, we issued $315.0 million in aggregate principal amount of 0.25% convertible senior notes due April 15, 2026, unless earlier converted by the holders pursuant to their terms, on April 9, 2021 (the “2021 Notes”). We used a portion of the net proceeds from the issuance of the 2021 Notes to pay the costs of the capped call transactions. We also used a portion of the net proceeds from the issuance of the 2021 Notes, together with the net proceeds from the issuance of the Series B Preferred Stock, to repay a portion of the outstanding indebtedness under our 2017 Credit Agreement, to terminate an interest rate swap agreement, and to repurchase shares of our common stock. The remainder is being used for working capital and other general corporate purposes.


A considerable portion of our operating income is earned outside the United States. Cash, cash equivalents, short-term investments, and restricted cash and cash equivalents, and restricted bank time deposits (excluding any long-term portions) held by our subsidiaries outside of the United States were $399.4$140.2 million and $346.2$241.1 million as of January 31, 20192022 and 2018,2021, respectively, and are generally used to fund the subsidiaries’ operating requirements and to invest in growth initiatives, including business acquisitions. These subsidiaries also held long-term restricted cash and cash equivalents, and restricted bank time deposits of $23.1$0.4 million and $28.4$0.6 million, at January 31, 20192022 and 2018,2021, respectively.



We currently intend to continue to indefinitely reinvest a portion of the earnings of our foreign subsidiaries, which, as a result of the 2017 Tax Cuts and Jobs Act, may now be repatriated without incurring additional U.S. federal income taxes.


Should other circumstances arise whereby we require more capital in the United States than is generated by our domestic operations, or should we otherwise consider it in our best interests, we could repatriate future earnings from foreign jurisdictions, which could result in higher effective tax rates. As noted above, we currently intend to indefinitely reinvest a portion of the earnings of our foreign subsidiaries to finance foreign activities. Except to the extent of the U.S. tax provided onthat earnings of our foreign subsidiaries have been subject to U.S. taxation as of January 31, 2019,2022, and withholding taxes of $15.0$1.0 million accrued as of January 31, 2019,2022 with respect to certain identified cash that may be repatriated to the U.S.,United States, we have not provided tax on the outside basis difference of foreign subsidiaries nor have we provided for any additional withholding or other tax that may be applicable should a future distribution be made from any unremitted earnings of foreign subsidiaries. Due to complexities in the laws of the foreign jurisdictions and the assumptions that would have to be made, it is not practicable to estimate the total amount of income and withholding taxes that would have to be provided on such earnings.


The following table summarizes our total cash, and cash equivalents, restricted cash, and cash equivalents, restrictedand bank time deposits, and short-term investments, as well as our total debt, as of January 31, 20192022 and 2018:2021:
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 January 31,January 31,
(in thousands)  2019 2018(in thousands) 20222021
Cash and cash equivalents $369,975
 $337,942
Cash and cash equivalents$358,805 $585,273 
Restricted cash and cash equivalents, and restricted bank time deposits (excluding long term portions) 42,262
 33,303
Restricted cash and cash equivalents, and restricted bank time deposits (excluding long term portions)15 
Short-term investments 32,329
 6,566
Short-term investments765 46,300 
Total cash, cash equivalents, restricted cash and cash equivalents, restricted bank time deposits, and short-term investments $444,566
 $377,811
Total cash, cash equivalents, restricted cash and cash equivalents, restricted bank time deposits, and short-term investments$359,576 $631,588 
Total debt, including current portions $782,128
 $772,984
Total debt, including current portions$406,954 $789,494 

Capital Allocation Framework

As noted above, after cash utilization required for working capital, capital expenditures, required debt service, and dividends on the Preferred Stock, we expect that our primary usage of cash will be for business combinations, repayment of outstanding indebtedness, and/or stock repurchases under repurchase programs that may be in place from time to time (subject to the terms of our 2017 Credit Agreement). Please see the “Liquidity and Capital Resources Requirements” section below for further information about our recent stock repurchase programs.

Consolidated Cash Flow Activity

The following table summarizes selected items from our consolidated statements of cash flows for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:
 Year Ended January 31,
(in thousands)202220212020
Net cash provided by operating activities from continuing operations$134,654 $159,653 $126,998 
Net cash used in investing activities from continuing operations(35,900)(54,015)(96,261)
Net cash (used in) provided by financing activities from continuing operations(430,123)76,810 (107,903)
Effect of foreign currency exchange rate changes on cash and cash equivalents(841)(60)(1,823)
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents from discontinued operations(9,055)106,088 77,947 
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents$(341,265)$288,476 $(1,042)
  Year Ended January 31,
(in thousands) 2019 2018 2017
Net cash provided by operating activities $215,251
 $176,327
 $172,415
Net cash used in investing activities (175,723) (146,194) (116,442)
Net cash used in financing activities (21,881) (5,503) (56,919)
Effect of foreign currency exchange rate changes on cash and cash equivalents (3,158) 4,251
 (4,167)
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents $14,489
 $28,881
 $(5,113)


Our operatingfinancing activities generated $215.3from continuing operations used $430.1 million of net cash and our investing activities from continuing operations used $35.9 million of net cash during the year ended January 31, 2019,2022, which was partially offset by $197.6$134.7 million of net cash used in combined investing and financinggenerated from operating activities during this period.from continuing operations. Further discussion of these items appears below.


Net Cash Provided by Operating Activities from Continuing Operations

Net cash provided by operating activities is driven primarily by our net income or loss, as adjusted for non-cash items, and working capital changes. Operating activities from continuing operations generated $215.3$134.7 million of net cash during the year ended January 31, 2019,2022, compared to $176.3$159.7 million generated during the year ended January 31, 2018.2021. Our improved operating cash flow in the current year was primarilydecreased despite a year-over-year increase in collections due to lower cash operating costs in the prior year as a result of the COVID-19 pandemic, one-time separation costs and higher operating income partially offset bytax payments related to the net effectSpin-Off in the current year period, and a greater portion of changesbonuses being paid in operating assets and liabilities and the net effect of non-cash items, ascash compared to the prior year.


Operating activities from continuing operations generated $176.3$159.7 million of net cash during the year ended January 31, 2018,2021, compared to $172.4$127.0 million generated during the year ended January 31, 2017.2020. Our improved operating cash flow in the year ended January 31, 2018 reflected,2021 was primarily due to cost reduction initiatives we implemented in part, $3.6response to the COVID-19 pandemic during the first half of the year, partially offset by $8.0 million of lowerhigher combined interest and net income tax payments during the year ended January 31, 2021 as compared to the prior year.



Our cash flow from operating activities can fluctuate from period to period due to several factors, including the timing of our billings and collections, the timing and amounts of interest, income tax and other payments, and our operating results.


Net Cash Used in Investing Activities from Continuing Operations

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During the year ended January 31, 2019,2022, our investing activities from continuing operations used $175.7$35.9 million of net cash, including $90.0consisting primarily of $57.0 million of net cash utilized for business acquisitions, $39.0combinations and $24.5 million of payments for property, equipment, and capitalized software development, partially offset by a $45.5 million of net sales and maturities of short-term investments and a $0.1 million decrease in restricted bank time deposits.

During the year ended January 31, 2021, our investing activities from continuing operations used $54.0 million of net cash, consisting primarily of $32.8 million of net purchases of short-term investments and $21.3 million of payments for property, equipment, and capitalized software development costs, $25.9partially offset by a $0.1 million decrease in restricted bank time deposits.

During the year ended January 31, 2020, our investing activities from continuing operations used $96.3 million of net cash, consisting primarily of $55.4 million of net cash utilized for business combinations, $30.9 million of payments for property, equipment, and capitalized software development costs, and $12.5 million of net purchases of short-term investments, and a $21.3 million increase in restricted bank time deposits during the period. Restricted bank time deposits are typically short-term deposits used to secure bank guarantees in connection with sales contracts, the amounts of which will fluctuate from period to period. The cash used by these investing activities was partially offset by $2.9 million of proceeds from settlements of our derivative financial instruments not designated as hedges.

During the year ended January 31, 2018, our investing activities used $146.2 million of net cash, including $103.0 million of net cash utilized for business acquisitions, $38.7 million of payments for property, equipment, and capitalized software development costs, $3.2 million of net purchases of short-term investments, and $1.7 million of net cash used by other investing activities.

During the year ended January 31, 2017, our investing activities used $116.4 million of net cash, including $141.8 million of net cash utilized for business acquisitions, and $29.9 million of payments for property, equipment, and capitalized software development costs. Partially offsetting those uses were $52.6 million of net proceeds from sales, maturities, and purchases of short-term investments and a $3.0 million decrease in restricted bank time deposits during the period associated with several large sales contracts.


We had no significant commitments for capital expenditures at January 31, 2019.2022.

Net Cash Used in(Used in) Provided by Financing Activities from Continuing Operations

For the year ended January 31, 2019,2022, our financing activities from continuing operations used $21.9$430.1 million of net cash primarily due to $386.9 million of payments to settle our 2014 Notes, $310.1 million of repayments of borrowings under our 2017 Term Loan, $114.7 million of net cash transferred to Cognyte upon the most significant portionscompletion of which werethe Spin-Off, $76.0 million of payments to repurchase common stock, $41.1 million of payments to purchase the capped calls in connection with the issuance of our 2021 Notes, $16.5 million paid to terminate our interest rate swap, $12.9 million of payments of Preferred Stock dividends, $10.7 million paid for debt-related issuance fees, $4.5 million for the financing portion of payments under contingent consideration arrangements related to prior business combinations, $6.0$4.5 million paid to exercise an option to acquire the noncontrolling interests of two majority owned subsidiaries, $3.1 million of finance lease payments, and a $1.1 million distribution to a noncontrolling shareholder of one of our subsidiaries, partially offset by $315.0 million of proceeds from the issuance of our 2021 Notes, $198.7 million of net proceeds from the issuance of the Series B Preferred Stock, and $38.3 million from a dividend and other settlements received from Cognyte during the period in connection with the Spin-Off.

For the year ended January 31, 2021, our financing activities from continuing operations generated $76.8 million of net cash, primarily due to $197.3 million of net proceeds from the issuance of preferred stock and $155.0 million of proceeds from borrowings under our revolving credit facility used to fund share repurchases, partially offset by $207.2 million for repayments of borrowings and other financing obligations, dividend payments of $4.4 million to the noncontrolling interest holders in our joint venture, which serves as a systems integrator for certain Asian markets, and $0.2 million paid for costs related to the 2017 Credit Agreement.

For the year ended January 31, 2018, our financing activities used $5.5$36.8 million of net cash. Under the 2017 Credit Agreement, we received net proceeds of $424.5 million from the 2017 Term Loan, the majority of which was usedpayments to repay all $406.9 million that remained outstanding under the 2014 Term Loans (both the 2017 Term Loan and the 2014 Term Loans are as defined in Note 7, “Long-Term Debt” to our consolidated financial statements included under Item 8 of this report) at June 29, 2017 upon termination of the Prior Credit Agreement. In addition, under the 2018 Amendment, $19.9repurchase common stock, $13.0 million of the 2017 Term Loan was considered extinguished and replaced by new loans. We also used $5.1payments to repurchase $13.1 million for repaymentsprincipal amount of borrowings and other financing obligations during the year. Other financing activities during the year included payments of $7.5our 2014 Notes, $9.3 million for the financing portion of payments under contingent consideration arrangements related to prior business combinations, $7.1a $5.4 million paiddistribution to a noncontrolling shareholder of one of our subsidiaries, $2.3 million of payments for debt issuancedebt-related costs, related to the 2017 Credit Agreement, and dividend$1.6 million of payments of $3.3 million to the noncontrolling interest holders in our joint venture.preferred stock dividends.


For the year ended January 31, 2017,2020, our financing activities from continuing operations used $56.9$107.9 million of net cash, the most significant portions of which were $113.7 million of payments of $46.9 million forto repurchase common stock, repurchases under our share repurchase program, $3.3 million for repayments of borrowings and other financing obligations, $3.2$21.0 million for the financing portion of payments under contingent consideration arrangements related to prior business combinations, $6.5 million for repayments of borrowings and dividendother financing obligations, payments of $2.4$6.0 million related to thedeferred purchase price of a prior period business combination, and a $5.5 million distribution to a noncontrolling interest holders inshareholder of one of our joint venture.subsidiaries. The cash used by these financing activities was partially offset by $45.0 million of proceeds from borrowings under our revolving credit facility used to fund share repurchases.

Liquidity and Capital Resources Requirements

Based on past performance and current expectations, we believe that our cash, cash equivalents, short-term investments and cash generated from operations will be sufficient to meet anticipated operating costs, required payments of principal and interest, dividends on Preferred Stock, working capital needs, ordinary course capital expenditures, research and development spending, and other commitments for at least the next 12 months. Currently, we have no plans to pay any cash dividends on our common stock, which are not permittedsubject to certain restrictions under our 2017 Credit Agreement.



Our liquidity could be negatively impacted by a decrease in demand for our products and service and support,services, including the impact of changes in customer buying behavior due to circumstances over which we have no control.control, including, but not limited to, the
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effects of the COVID-19 pandemic. If we determine to make additional business acquisitions or otherwise require additional funds, we may need to raise additional capital, which could involve the issuance of additional equity or debt securities or an increase in our borrowings under our credit facility.


On March 29, 2016,December 4, 2019, we announced that our board of directors had authorized a common stock repurchase program ofwhereby we were authorized to repurchase up to $150 $300.0 million of common stock over two years following the date of announcement. This program expiredperiod ending on March 29, 2018. We made a total of $46.9 million in repurchases and we did not acquire any shares of treasury stock duringFebruary 1, 2021. During the year ended January 31, 20192021, we acquired approximately 613,000 shares of our common stock at a cost of $34.0 million under this program. During the year ended January 31, 2020, we acquired approximately 2,119,000 shares of our common stock at a cost of $116.1 million under this program, of which $2.8 million was settled in cash in February 2020. Total repurchases under the program.program, which expired on February 1, 2021, were $150.1 million.


On March 31, 2021, we announced that our board of directors had authorized a stock repurchase program whereby we were authorized to repurchase up to a number of shares of common stock approximately equal to the number of shares to be issued as equity compensation during the fiscal year ending January 31, 2022. During the year ended January 31, 2022, we acquired approximately 1,600,000 shares of our common stock at a cost of $75.4 million under this program.

On December 2, 2021, we announced that our board of directors had authorized a new stock repurchase program for the fiscal
year ending January 31, 2023 whereby we may repurchase up to 1.5 million shares of common stock to offset dilution from our
equity compensation program for such fiscal year. Subsequent to January 31, 2022, we repurchased 1.5 million shares under this stock repurchase program with available cash in the United States. On March 22, 2022, our board of directors authorized an additional 500,000 shares of common stock to be repurchased under this program. Please refer to Note 21, “Subsequent Event”, for more information regarding this stock repurchase program.

Financing Arrangements


1.50% Convertible Senior2021 Notes


On April 9, 2021, we issued $315.0 million in aggregate principal amount of 0.25% convertible senior notes due April 15, 2026, 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 call transactions 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 2017 Credit Agreement described below, to terminate an interest rate swap agreement, 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 January 31, 2022, the 2021 Notes were not convertible.

Based on the closing market price of our common stock on January 31, 2022, 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 intended generally 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. The Capped Calls have the economic effect of
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increasing the conversion price of the 2021 Notes from $62.08 per share to $100.00 per share. 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 January 31, 2022, 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.

2014 Notes

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


The 2014 Notes were issued concurrently with our public issuance of 5,750,000 shares of common stock, the majority of the combined net proceeds of which were used to partially repay certain indebtedness under a prior credit agreement.

On February 26, 2021, we deposited approximately $390.0 million of cash, representing the Prior Credit Agreement.

Thefull principal amount of the 2014 Notes are unsecured and rank senior in right ofthen outstanding as well as the final interest payment on the 2014 Notes due at maturity, into an escrow account to our indebtedness that is expressly subordinated in right of paymentcash collateralize the 2014 Notes. On May 28, 2021, prior to the Notes; equalmaturity of the 2014 Notes on June 1, 2021, we paid an aggregate of $389.8 million in rightcash for the settlement of the 2014 Notes, which included $386.9 million in satisfaction of the outstanding principal of the 2014 Notes and $2.9 million related to the final interest payment to our indebtedness that is not so subordinated; effectively subordinatedon the 2014 Notes. We funded the repayment of the outstanding principal amount of the 2014 Notes and accrued interest thereon using the cash we had placed in rightescrow. Additionally, the 2014 Notes had an incremental conversion value of payment to any$57.7 million, as the market value per share of our secured indebtedness tocommon stock, as measured under the extentterms of the value2014 Notes, was greater than the conversion price of the assets securing such indebtedness; and structurally subordinated to indebtedness and other liabilities of our subsidiaries.

The Notes are convertible into, at our election, cash,2014 Notes. We issued approximately 1,250,000 shares of common stock or a combination of both, subject to satisfaction of specified conditions and during specified periods, as described below. If converted, we currently intend to pay cash in respectthe holders of the principal amount2014 Notes as payment of the Notes.conversion premium, which we issued from treasury stock.


TheAs of January 31, 2021, the 2014 Notes havehad a conversion rate of 15.5129 shares of common stock per $1,000 principal amount of 2014 Notes, which representsrepresented an effective conversion price of approximately $64.46 per share of common stock and would resulthave resulted in the issuance of approximately 6,205,0006,002,000 shares of common stock if all of the 2014 Notes were converted. The conversion rate has not changed since issuanceconverted and the conversions were settled entirely in common stock. As a result of the Notes, although throughout the term of the Notes,Spin-Off, the conversion rate may bewas adjusted upon the occurrenceto 24.6622 shares of certain events.

Holders may surrender their Notes for conversion at any time prior to the close of business on the business day immediately preceding December 1, 2020, only under the following circumstances:

during any calendar quarter commencing after the calendar quarter which ended on September 30, 2014, if the closing sale price of our common stock for at least 20 trading days (whether or not consecutive) in the periodper $1,000 principal amount of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter, is more than 130% of the2014 Notes, which represented an effective conversion price of $40.55 per share of common stock and would have resulted in the Notes in effect on each applicable trading day;

during the ten consecutive trading-day period following any five consecutive trading-day period in which the trading price for the Notes for each such trading day was less than 98%issuance of approximately 9,541,000 shares of common stock if all of the closing sale price of our2014 Notes had been converted prior to maturity and the conversions were settled entirely in common stock on such date multiplied bystock.

During the then-current conversion rate; or

upon the occurrence of specified corporate events, as described in the indenture governing the Notes, such as a consolidation, merger, or binding share exchange.

On or after December 1, 2020 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may surrender their Notes for conversion regardless of whether any of the foregoing conditions have been satisfied. Holders of the Notes may require us to purchase for cash all or any portion of their Notes upon the occurrence of a “fundamental change” at a price equal to 100% of theyear ended January 31, 2021, we repurchased $13.1 million principal amount of theour 2014 Notes being purchased, plus accrued and unpaid interest.(the “Repurchased 2014 Notes”) in open market transactions for an aggregate of $13.0 million in cash.

As of January 31, 2019, the Notes were not convertible.


Note Hedges and Warrants


Concurrently with the issuance of the 2014 Notes, we entered into convertible note hedge transactions (the “Note Hedges”) and sold warrants (the “Warrants”). ThePrior to the Spin-Off, the combination of the Note Hedges and the Warrants servesserved to increase the effective initial conversion price for the 2014 Notes to $75.00 per share. Subsequent to the Spin-Off, as a result of the conversion rate adjustments, the Note Hedges and the Warrants served to increase the effective conversion price for the 2014 Notes to $47.18 per share. The Note Hedges and Warrants arewere each separate instruments from the 2014 Notes.


Note Hedges


Pursuant to the Note Hedges, we purchased call options on our common stock, under which we havehad the right to acquire from the counterparties up to approximately 6,205,000 shares of our common stock, subject to customary anti-dilution adjustments, at a price of $64.46, which equalsequaled the initial conversion price of the 2014 Notes. Our exercise rights underAs a result of the Spin-Off, on February 1, 2021, the call options on our stock were adjusted to allow us to purchase up to 9,865,000 shares of our common stock at a price of $40.55, which was equal to the adjusted conversion price of the 2014 Notes. We were permitted to settle the Note Hedges generally trigger upon conversion of the Notes and the Note Hedges terminate upon maturity of the Notes, or the first day the Notes are no longer outstanding. The Note Hedges may be settled in cash, shares of our common stock, or a combination thereof, at our option, and arethey were intended to reduce our exposure to potential dilution upon conversion of the 2014 Notes. We paid $60.8 million for the Note Hedges, which was recorded as a reductioncharge to additional paid-in capital. AsOur exercise rights under the Note Hedges were automatically triggered upon conversion of January 31, 2019,any 2014 Notes and the Note Hedges otherwise terminated upon maturity of the 2014 Notes, on June 1, 2021. In connection
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with the maturity of the 2014 Notes on June 1, 2021, we had not purchased anyreceived approximately 1,250,000 shares of our common stock from the counterparties under the Note Hedges, which offset the dilution resulting from the settlement of the conversion premium on the 2014 Notes as the market value per share of our common stock, as measured under the terms of the Note Hedges, was greater than the strike price of the Note Hedges.


The Repurchased 2014 Notes acquired during the year ended January 31, 2021 as described above did not change the number of common shares subject to the Note Hedges as the counterparties agreed that the options under the Note Hedges remained outstanding notwithstanding such repurchase. Upon maturity of the 2014 Notes, we received approximately 42,000 shares of our common stock from the counterparties to the Note Hedges as reimbursement for the in-the-money portion of the Repurchased 2014 Notes.

Warrants


We sold the Warrants to several counterparties. The Warrants provideinitially provided the counterparties rights to acquire from us up to approximately 6,205,000 shares of our common stock at a price of $75.00 per share. The Warrants expire incrementally onAs a seriesresult of expiration dates beginning in August 2021. At expiration, if the market price per share of our common stock exceedsSpin-Off, the strike priceterms of the Warrants we will be obligatedprovided the counterparties rights to issueacquire from us up to approximately 9,865,000 shares of our common stock havingat a value equal to such excess. The Warrants could have a dilutive effect on net income per share to the extent that the market value of our common stock exceeds the strike price of the Warrants.$47.18 per share. Proceeds from the sale of the Warrants were $45.2 million and were recorded as additional paid-in capital. AsThe 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 where 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. The Warrants had a dilutive effect on net income per share to the extent that the average market value of our common stock, exceeded the strike price of the Warrants. There are no Warrants outstanding as of January 31, 2019, no Warrants had been exercised and all Warrants remained outstanding.2022.


Credit Agreements

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


The 2017 Credit Agreement currently provides for $725.0 million of senior secured credit facilities, comprised of a $425.0 million term loan maturing on June 29, 2024 (the “2017 Term Loan”), of which $100.0 million and $410.1 million was outstanding at January 31, 2022 and 2021, respectively, and a $300.0 million revolving credit facility maturing on June 29, 2022April 9, 2026 (the “2021 Revolving Credit Facility”), which refinanced our prior $300.0 million revolving credit facility (the “2017 Revolving Credit Facility”), subject to increase and reduction from time to time according to the terms of the 2017 Credit Agreement. The majority of the proceeds from the 2017 Term Loan were used to repay all $406.9 million that remained outstanding under the 2014 Term Loans at June 29, 2017 upon termination of the Prior Credit Agreement. There were no borrowings under our Prior Revolving Credit Facility (as defined in Note 7, “Long-Term Debt” to our consolidated financial statements included under Item 8 of this report) at June 29, 2017.

The maturity dates of the 2017 Term Loan and 2017 Revolving Credit Facility will be accelerated to March 1, 2021, if on such date any Notes remain outstanding.

The 2017 Term Loan was subject to an original issuance discount of approximately $0.5 million. This discount is being amortized as interest expense over the term of the 2017 Term Loan using the effective interest method.


Interest rates on loans under the 2017 Credit Agreement are periodically reset, at our option, at either a Eurodollar Rate or an ABR rate (each as defined in the 2017 Credit Agreement), plus in each case a margin.
We
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 2017 Term Loan, reducing the outstanding balance to $100.0 million. As a result, $1.8 million of deferred debt issuance costs and $0.2 million of unamortized discount associated with the 2017 Term Loan were written off, and are requiredincluded within losses on early retirements of debt on our consolidated statement of operations for the year ended January 31, 2022.

The maturity dates of the 2017 Term Loan and 2017 Revolving Credit Facility would have been accelerated to payMarch 1, 2021 if on such date any 2014 Notes remained outstanding, unless such outstanding 2014 Notes were cash collateralized pursuant to a commitment fee with respectsecond amendment to unused availability underthe 2017 Credit Agreement (the “2020 Amendment”), entered into on June 8, 2020. Pursuant to the 2020 Amendment, we were permitted to effect the Spin-Off of our Cyber Intelligence Solutions business within the parameters set forth in the 2017 Credit Agreement, as amended, and our 2014 Notes would not be deemed to be outstanding for purposes of the determination of the maturity dates of the 2017 Term Loan and the 2017 Revolving Credit Facility at a rate per annum determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each as defineddiscussed above if such 2014 Notes were cash collateralized in accordance with the 2017 Credit Agreement) leverage ratio (the “Leverage Ratio”).

The 2017 Term Loan requires quarterly principal payments of approximately $1.1 million, which commenced on August 1, 2017, withAgreement. On February 26, 2021, as noted above, we cash collateralized the remaining balance due on June 29, 2024. Optional prepayments of loans under the 2017 Credit Agreement are generally permitted without premium or penalty.

On January 31, 2018, we entered into the 2018 Amendment to our 2017 Credit Agreement, providing for, among other things, a reduction2014 Notes in satisfaction of the interest rate margins on the 2017 Term Loan from 2.25% to 2.00% for Eurodollar loans, and from 1.25% to 1.00% for ABR loans. The vast majoritycash collateralization provisions of the impact of2020 Amendment. Accordingly, the 2018 Amendment was accounted for as a debt modification. For

the portionmaturity dates of the 2017 Term Loan which was considered extinguished and replaced by new loans, we wrote off $0.2 million of unamortized deferred debt issuance costs as a loss on early retirement of debt during2017 Revolving Credit Facility were not accelerated to March 1, 2021. In connection with, the three months ended January 31, 2018. The remaining unamortized deferred debt issuance costs and discount are being amortized over the remaining termmaturity of the 2014 Notes, we used the escrowed cash to settle the principal amount, including the final interest payment, and the incremental conversion value of $57.7 million was settled with approximately 1,250,000 shares of our common stock.

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On April 9, 2021, we amended the 2017 Term Loan.

For loans underCredit Agreement (the “2021 Amendment”), pursuant to which we refinanced the 2017 Revolving Credit Facility, which would otherwise have matured on June 29, 2022, with the margin is determined by reference to our Leverage Ratio.$300.0 million 2021 Revolving Credit Facility maturing on April 9, 2026.

As of January 31, 2019,2022, the interest rate on the 2017 Term Loan was 4.52%2.10%. Taking into account the impact of the original issuance discount and related deferred debt issuance costs, the effective interest rate on the 2017 Term Loan was approximately 4.70%2.30% at January 31, 2019.

In February 2016, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to partially mitigate risks associated with2022. As of January 31, 2021, the variable interest rate on the term loans2017 Term Loan was 2.14%.

For borrowings under the 2021 Revolving Credit Facility, and previously under the 2017 Revolving Credit Facility, the margin is determined by reference to our PriorConsolidated Total Debt to Consolidated EBITDA (each as defined in the 2017 Credit Agreement) leverage ratio (the “Leverage Ratio”). In addition, under the 2021 Revolving Credit Facility, and previously under the 2017 Revolving Credit Facility, we are required to pay a commitment fee with respect to unused availability at rates per annum determined by reference to our Leverage Ratio. The 2017 Credit Agreement under which we pay interest at a fixed ratecontains certain customary affirmative and negative covenants for credit facilities of 4.143% and receive variable interest of three-month LIBOR (subject to a minimum of 0.75%), plus a spread of 2.75%, on a notional amount of $200.0 million (the “2016 Swap”). Although the Priorthis type. The 2017 Credit Agreement also contains a financial covenant that, solely with respect to the 2021 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50 to 1. At January 31, 2022, our Leverage Ratio was terminated on June 29,approximately 1.1 to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the 2017 the 2016 Swap remains in effect, and serves as an economic hedge to partially mitigate the riskCredit Agreement.

Optional prepayments of higher borrowing costsloans under the 2017 Credit Agreement resulting from increases in market interest rates. The 2016 Swap is no longer formally designated as a cash flow hedge for accounting purposes, and therefore settlements are reported within other (expense) income, net on the consolidated statement of operations, not within interest expense.

In April 2018, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to partially mitigate risks associated with the variable interest rate on our 2017 Term Loan for periods following the termination of the 2016 Swap, under which we will pay interest at a fixed rate of 2.949% and receive variable interest of three-month LIBOR (subject to a minimum of 0.00%), on a notional amount of $200.0 million (the “2018 Swap”). The effective date of the 2018 Swap is September 6, 2019, and settlements with the counterparty will occur on a quarterly basis, beginning on November 1, 2019. The 2018 Swap will terminate on June 29, 2024.

During the operating term of the 2018 Swap, if we elect three-month LIBOR at the periodic interest rate reset dates for at least $200.0 million of our 2017 Term Loan, the annual interest rate on that amount of the 2017 Term Loan will be fixed at 4.949% (including the impact of our current 2.00% interest rate margin on Eurodollar loans) for the applicable interest rate period.

The 2018 Swap is designated as a cash flow hedge and as such, changes in its fair value are recognized in accumulated other comprehensive income (loss) in the consolidated balance sheet and are reclassified into the statement of operations within interest expense in the period in which the hedged transaction affects earnings.

generally permitted without premium or penalty.
Our obligations under the 2017 Credit Agreement are guaranteed by each of our direct and indirect existing and future material domestic wholly owned restricted subsidiaries, and are secured by a security interest in substantially all of our assets and the assets of the guarantor subsidiaries, subject to certain exceptions.

The 2017 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The 2017 Credit Agreement also contains a financial covenant that, solely with respect to the 2017 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50 to 1. At January 31, 2019, our Leverage Ratio was approximately 2.3 to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the 2017 Credit Agreement.


The 2017 Credit Agreement provides for events of default with corresponding grace periods that we believe are customary for credit facilities of this type. Upon an event of default, all of our obligations owed under the 2017 Credit Agreement may be declared immediately due and payable, and the lenders’ commitments to make loans under the 2017 Credit Agreement may be terminated.


Interest Rate Swap

In April 2018, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to partially mitigate risks associated with the variable interest rate on our 2017 Term Loan, under which we paid interest at a fixed rate of 2.949% and received variable interest of three-month LIBOR (subject to a minimum of 0.00%), on a notional amount of 200.0 million (the “2018 Swap”). The effective date of the 2018 Swap was September 6, 2019, and settlements with the counterparty began on November 1, 2019 and occurred on a quarterly basis. The 2018 Swap had a termination date of June 29, 2024.

On May 1, 2020, which was an interest rate reset date on our 2017 Term Loan, we selected an interest rate other than three-month LIBOR. As a result, the 2018 Swap, which was designated specifically to hedge three-month LIBOR interest payments, no longer qualified as a cash flow hedge. Subsequent to May 1, 2020, changes in fair value of the 2018 Swap were accounted for as a component of other income (expense), net. Accumulated deferred losses on the 2018 Swap of $20.4 million, or $16.0 million after tax, at May 1, 2020 that were previously recorded as a component of accumulated other comprehensive loss, were being amortized to interest expense in the consolidated statement of operations over the remaining term of the 2018 Swap, as the hedged interest payments occurred.

On April 13, 2021, we paid $16.5 million to the counterparty to settle the 2018 Swap prior to its June 2024 maturity. Upon settlement, we recorded an unrealized gain of $1.3 million in other income (expense), net to adjust the 2018 Swap to its fair value at settlement date and reclassified the remaining $15.7 million of pretax accumulated deferred losses from accumulated other comprehensive loss within stockholders’ equity to other income (expense), net on our consolidated statement of operations for the year ended January 31, 2022. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes receivable, which are included within prepaid expenses and other current assets on our consolidated balance sheet as of January 31, 2022.

Contractual Obligations


At January 31, 2019, our contractual obligations were as follows: 

  Payments Due by Period
(in thousands) Total < 1 year 1-3 years 3-5 years > 5 years
Long-term debt obligations, including interest $938,966
 $29,098
 $455,189
 $45,308
 $409,371
Operating lease obligations 129,379
 22,769
 41,099
 32,034
 33,477
Capital lease obligations 4,597
 1,343
 2,382
 872
 
Purchase obligations 158,712
 120,349
 22,332
 16,031
 
Other long-term obligations 286
 47
 94
 94
 51
Total contractual obligations $1,231,940
 $173,606
 $521,096
 $94,339
 $442,899

TheOur principal commitments primarily consist of long-term debt, obligations reflected above include projected interest payments over the term of our outstanding debt as of January 31, 2019, assuming interest rates consistent with those in effectdividends on Preferred Stock, leases for our 2017 Term Loan as of January 31, 2019.

Operating lease obligations reflected above exclude future sublease income from certainoffice space we have subleased to third parties.and open non-cancellable purchase orders. As of January 31, 2019,2022, our total expected future sublease income was $4.5operating lease liabilities were $53.0 million, of which $24.5 million is included within accrued expenses and will range from $0.6other current liabilities (current portions), and $28.5 million is included as
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operating lease liabilities (long-term portions), on our consolidated balance sheets. We have no current plans to $0.9 million on an annual basis through February 2025.

We entered into leases for infrastructure equipment that qualify as capital leases duringlease significant additional office space. During the yearsyear ended January 31, 20192022, we decided to exit certain leased offices, and 2018.we anticipate exiting or reducing additional office leases in the future as we continue to assess how and to what extent our employees will return to work in our offices.


As of January 31, 2022, our unconditional purchase obligations totaled approximately $240.3 million, the majority of which is due over the next 12 to 36 months. Our purchase obligations are associated with agreementsprimarily commitments to vendors for purchasesthe procurement of goods orand services generally including agreements that are enforceablein the ordinary course of business, commitments with contract manufacturers, and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transactions.data center hosting services. Agreements to purchase goods or services that have cancellation provisions with no penalties are excluded from these purchase obligations.


It is not our business practice to enter into off-balance sheet arrangements. However, in the normal course of business, we enter into contracts in which we make representations and warranties that guarantee the performance of our products and services. Historically, there have been no significant losses related to such guarantees.

Our consolidated balance sheet at January 31, 20192022 included $33.1$16.3 million of non-current tax reserves, net of related benefits (including interest and penalties of $4.6$3.4 million) for uncertain tax positions. However, these amounts are not included in the table above because we are unable to reasonably estimate the timing of payments for these obligations. We do not expect to make any significant payments for these uncertain tax positions within the next 12 months.

For additional information regarding our long-term debt, Preferred Stock, and our commitments and contingencies, see Note 8, “Long-Term Debt”, Note 10, “Convertible Preferred Stock”, Note 17, “Leases”, and Note 18, “Commitments and Contingencies” in the notes to our consolidated financial statements included in Part II, Item 8 of this report.

Contingent Payments Associated with Business Combinations

In connection with certain of our business combinations, we have agreed to make contingent cash payments to the former owners of the acquired companies based upon the achievement of performance targets following the acquisition dates.


For the year ended January 31, 2019,2022, we made $13.6$9.6 million of payments under contingent consideration arrangements. As of January 31, 2019, potential future cash payments2022, consideration expected to be paid subsequent to January 31, 2022 under contingent consideration arrangements including consideration earned in completed performance periods which is still to be paid, total $150.1totaled $7.8 million the estimated fair value of whichand was $61.3 million, including $28.4 million reported in accrued expenses and other current liabilities, and $32.9 million reported in other liabilities. The performance periods associated with these potential payments extend through January 2022.
Off-Balance Sheet Arrangements
As of expired during the year ended January 31, 2019, we did not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.2022.



Recent Accounting Pronouncements

See also Note 1, “Summary of Significant Accounting Policies” to our consolidated financial statements included underin Part II, Item 8 of this report for additional information about recent accounting pronouncements recently adopted and those not yet effective.




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 
Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. We are exposed to market risk related to changes in interest rates and foreign currency exchange rate fluctuations. To manage the volatility relating to interest rate and foreign currency risks, we periodically enter into derivative instruments

including foreign currency forward exchange contracts and interest rate swap agreements. It is our policy to use derivative instruments only to the extent considered necessary to meet our risk management objectives. We use derivative instruments solely to reduce the financial impact of these risks and do not use derivative instruments for speculative purposes.


Interest Rate Risk on Our Debt


In June 2014,April 2021, we issued $400.0$315.0 million in aggregate principal amount of 1.50%0.25% convertible senior notes due June 1, 2021. Holders may convertApril 15, 2026. Prior to January 15, 2026, the 2021 Notes prior to maturitywill be convertible only upon the occurrence of certain conditions.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 we wouldof the 2021 Notes, holders will receive cash up to the aggregate principal amount, with any remainder to be required to pay the holders, at our election,settled with cash shares ofor common stock, or a combination of both.thereof, at our election. Concurrent with the issuance of the 2021 Notes, we entered into the Note Hedges and sold the Warrants.capped call transactions with certain counterparties. These separate transactions were completed to reduce our exposure to potential dilution upon conversion of the 2021 Notes.

The 2021 Notes have a fixed annual interest rate of 1.50%0.25% and therefore do not have interest rate risk exposure. However, the fair values of the 2021 Notes are subject to interest rate risk, market risk, and other factors due to the convertible feature. The fair values of the 2021 Notes are also affected by our common stock price. Generally, the fair values of the 2021 Notes will increase as interest rates fall and/or our common stock price increases, and decrease as interest rates rise and/or our common stock price decreases. Changes in the fair values of the 2021 Notes do not impact our financial position, cash flows, or results of operations due to the fixed nature of the debt obligations. We do not carry the 2021 Notes at fair value on our consolidated balance sheet, but we report the fair value of the 2021 Notes for disclosure purposes.


On June 29, 2017, we entered into the 2017 Credit Agreement with certain lenders and terminated our Prior Credit Agreement.prior credit agreement. The 2017 Credit Agreement provides for $725.0 million of senior secured credit facilities, comprised of the $425.0 million 2017 Term Loan maturing on June 29, 2024 and the $300.0 million 20172021 Revolving Credit Facility maturing on June 29, 2022,April 6, 2026, subject to increase and reduction from time to time according to the terms of the 2017 Credit Agreement.


Interest rates on loans under the 2017 Credit Agreement are periodically reset, at our option, at either a Eurodollar Rate or an ABR rate (each as defined in the 2017 Credit Agreement), plus in each case a margin. The margin for the 2017 Term loan is fixed at 2.00% for Eurodollar loans, and 1.00% for ABR loans. For loans under the Revolving Credit Facility, the margin is determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each as defined in the 2017 Credit Agreement) leverage ratio. As of January 31, 2019, we have $418.6 million of outstanding term loan borrowings and no outstanding borrowings under the revolving credit facility. As of January 31, 2019, the interest rate on our term loan borrowings was 4.52%.

Because the interest rates applicable to borrowings under the 2017 Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing. To partially mitigate risks associated with the variable interest rates on the term loan borrowings under the Prior Credit Agreement, in February 2016, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution under which we pay interest at a fixed rate of 4.143% and receive variable interest of three-month LIBOR (subject to a minimum of 0.75%), plus a spread of 2.75%, on a notional amount of $200.0 million (the “2016 Swap”). Although the Prior Credit Agreement was terminated on June 29, 2017, the 2016 Swap remains in effect, and serves as an economic hedge to partially mitigate the risk of higher borrowing costs under the 2017 Credit Agreement resulting from increases in market interest rates. Settlements with the counterparty under the 2016 Swap occur quarterly, and the agreement will terminate on September 6, 2019.

Prior to June 29, 2017, the 2016 Swap was designated as a cash flow hedge for accounting purposes. On June 29, 2017, concurrent with the execution of the 2017 Credit Agreement and termination of the Prior Credit Agreement, the 2016 Swap was no longer designated as a cash flow hedge for accounting purposes and, because occurrence of the specific forecasted variable cash flows which had been hedged by the 2016 Swap agreement was no longer probable, the $0.9 million fair value of the 2016 Swap at that date was reclassified from accumulated other comprehensive income (loss) into the consolidated statement of operations as income within other income (expense), net. Ongoing changes in the fair value of the 2016 Swap agreement are now recognized within other income (expense), net in the consolidated statement of operations, not within interest expense. As of January 31, 2019, the fair value of the 2016 Swap was a gain of $2.1 million.

In April 2018, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to partially mitigate risks associated with the variable interest rate on our 2017 Term Loan, for periods following the termination of the 2016 Swap in September 2019, underApril 2018, we executed a pay-fixed, receive-variable interest rate swap agreement, which we will pay interest at a fixed rate of 2.949% and receive variable interest of three-month LIBOR (subjectwas originally set to a minimum of 0.00%), on a notional amount of $200.0 million (the “2018 Swap”). The effective date of the 2018 Swap is September 6, 2019, and settlements with the counterparty will occur on a quarterly basis, beginning on November 1, 2019. The 2018 Swap is designated as a cash flow hedge for accounting purposes and will terminateexpire on June 29, 2024. As of January 31, 2019,On April 13, 2021, we paid $16.5 million to the fair value ofcounterparty to early-settle the 2018 Swap was a loss of $4.0 million.


During the operating term of the 2018 Swap, if we elect three-month LIBOR at the periodic interest rate reset dates for at least $200.0swap agreement as our interest rate risk exposure had been significantly reduced as we repaid $309.0 million of our 2017 Term Loan, reducing the annualoutstanding balance to $100.0 million as of January 31, 2022. As of January 31, 2022, the interest rate on that amount of the 2017 Term Loan will be fixed at 4.949% (including the impact of our current 2.00% interest rate margin on Eurodollar loans) for the applicable interest rate period.term loan borrowings was 2.10%.

The periodic interest rates on borrowings under the 2017 Credit Agreement are currently a function of several factors, the most important of which is LIBOR, which is the rate we elect for the vast majority of our periodic interest rate reset events.


TheOn March 5, 2021, the Financial Conduct Authority of the United Kingdom plansannounced that all LIBOR settings will either cease to phase out LIBORbe provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the endcase of 2021,the one week and we have approachedtwo-month U.S. dollar settings; and (b) immediately after June 30, 2023, in the administrative agent under this facility to discusscase of the remaining U.S. dollar settings. We are considering the impact of the planned phase out.out would have on our credit facility. The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR. However, it is currently uncertain what, if any, alternative reference interest rates, including SOFR, or other reforms will be enacted in response to the planned phase out, and we cannot assure you that an alternative to LIBOR (on which the Eurodollar Rate is based) that we find acceptable will be available to us.


Excluding the impact of the interest swap agreement, uponUpon our borrowings as of January 31, 2019,2022, for each 1.00% increase in the applicable LIBOR rate, our annual interest expense would increase by approximately $4.2$1.0 million.


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Interest Rate Risk on Our Investments


We invest in cash, cash equivalents, bank time deposits, and marketable debt securities. Market interest rate changes increase or decrease the interest income we generate from these interest-bearing assets. Our cash, cash equivalents, and bank time deposits are primarily maintained at high credit-quality financial institutions around the world, and our marketable debt security investments are restricted to highly rated corporate debt securities. We have not invested in marketable debt securities with remaining maturities in excess of twelve months or in marketable equity securities during the three-year period ended January 31, 2019.2022.


The primary objective of our investment activities is the preservation of principal while maximizing investment income and minimizing risk. We have investment guidelines relative to diversification and maturities designed to maintain safety and liquidity.


As of January 31, 20192022 and 2018,2021, we had cash and cash equivalents totaling approximately $370.0$358.8 million and $337.9$585.3 million, respectively, consisting of demand deposits, bank time deposits with maturities of 90 days or less, money market accounts, commercial paper, and marketable debt securities with remaining maturities of 90 days or less. At such dates we also held $65.5$0.4 million and $61.7$0.2 million, respectively, of restricted cash, cash equivalents, and restricted bank time deposits (including long-term portions) which were not available for general operating use. These restricted balances primarily represent deposits to secure bank guarantees in connection with customer sales contracts. The amounts of these deposits can vary depending upon the terms of the underlying contracts. We also had short-term investments of $32.3$0.8 million and $6.6$46.3 million at January 31, 20192022 and 2018,2021, respectively, consisting of bank time deposits and marketable debt securities of corporations, all with remaining maturities in excess of 90 days, but less than one year, at the time of purchase.


To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming, during the year ending January 31, 2019,2023, average short-term interest rates increase or decrease by 50 basis points relative to average rates realized during the year ended January 31, 2018.2022. Such a change would cause our projected interest income from cash, cash equivalents, restricted cash and cash equivalents, bank time deposits, and short-term investments to increase or decrease by approximately $2.3$1.8 million, assuming a similar level of investments in the year ending January 31, 20202023 as in the year ended January 31, 2019.2022.


Due to the short-term nature of our cash and cash equivalents, time deposits, money market accounts, and marketable debt securities, their carrying values approximate their market values and are not generally subject to price risk due to fluctuations in interest rates.


Foreign Currency Exchange Risk


The functional currency for most of our foreign subsidiaries is the applicable local currency, although we have several subsidiaries with functional currencies that differ from their local currency, of which the most notable exceptions areis our subsidiariessubsidiary in Israel, whose functional currencies arecurrency is the U.S. dollar. We are exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars for consolidated reporting purposes. If there are changes in foreign currency exchange rates, the conversiontranslation of the foreign subsidiaries’ financial statements into U.S. dollars

results in an unrealized gain or loss which is recorded as a component of accumulated other comprehensive loss within stockholders’ equity.


For the year ended January 31, 2019,2022, a significant portion of our operating expenses, primarily labor expenses, were denominated in the local currencies where our foreign operations are located, primarily Israel, the United Kingdom, Germany, Australia, Israel, and Singapore.India. We also generate some portion of our revenue in foreign currencies, mainly the euro, British pound sterling, Singaporeeuro, Australian dollar, Indian rupee, and AustralianCanadian dollar. As a result, our consolidated U.S. dollar operating results are subject to potential material adverse impact from fluctuations in foreign currency exchange rates between the U.S. dollar and the other currencies in which we transact.


In addition, we have certain monetary assets and liabilities that are denominated in currencies other than the respective entity’s functional currency. Changes in the functional currency value of these assets and liabilities result in gains or losses which are reported within other income (expense), net in our consolidated statement of operations. We recorded net foreign currency losses of $5.5$1.6 million and $2.7 million, forin each of the years ended January 31, 2019,2022 and 2017, respectively,2021, and net foreign currency gains of $6.8$0.7 million for the year ended January 31, 2018.2020.


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From time to time, we enter into foreign currency forward contracts in an effort to reduce the volatility of cash flows primarily related to forecasted payroll and payroll-related expenses denominated in Israeli shekels. These contracts are generally limited to durations of approximately 12 months or less. We have also periodically entered into foreign currency forward contracts to manage exposures resulting from forecasted customer collections denominated in currencies other than the respective entity’s functional currency and exposures from cash, cash equivalents, and short-term investments and accounts payable denominated in currencies other than the applicable functional currency.


We had $0.1 million of net unrealized losses on outstanding foreign currency forward contracts as of January 31, 2022, with notional amounts totaling $7.4 million. We had $0.1 million of net unrealized gains on outstanding foreign currency forward contracts as of January 31, 2021, with notional amounts totaling $6.6 million. During the year ended January 31, 2019,2020 we recorded $1.9$0.3 million of net gains on foreign currency forward contracts not designated as hedges for accounting purposes. For the year ended January 31, 2018, net losses on foreign currency forward contracts not designated as hedges for accounting purposes were $2.5 million, and we recorded net losses of $0.3 million on such contracts for the year ended January 31, 2017. We had $0.7 million of net unrealized losses on outstanding foreign currency forward contracts as of January 31, 2019, with notional amounts totaling $123.0 million. We had $2.4 million of net unrealized gains on outstanding foreign currency forward contracts as of January 31, 2018, with notional amounts totaling $153.5 million.


A sensitivity analysis was performed on all of our foreign exchange derivatives as of January 31, 2019.2022. This sensitivity analysis was based on a modeling technique that measures the hypothetical market value resulting from a 10% shift in the value of exchange rates relative to the U.S. dollar, and assumes no changes in interest rates. A 10% increase in the relative value of the U.S. dollar would decrease the estimated fair value of our foreign exchange derivatives by approximately $4.1$0.7 million. Conversely, a 10% decrease in the relative value of the U.S. dollar would increase the estimated the fair value of these financial instruments by approximately $5.1$0.8 million.


The counterparties to our foreign currency forward contracts are multinational commercial banks. While we believe the risk of counterparty nonperformance is not material, past disruptions in the global financial markets have impacted some of the financial institutions with which we do business. A sustained decline in the financial stability of financial institutions as a result of disruption in the financial markets could affect our ability to secure creditworthy counterparties for our foreign currency hedging programs.


The foregoing risk management discussion and the effect thereof are forward-looking statements. Actual results in the future may differ materially from these projected results due to actual developments in global financial markets. The analytical methods used by us to assess and minimize the risk discussed above should not be considered projections of future events or losses.
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Item 8.     Financial Statements and Supplementary Data






VERINT SYSTEMS INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
VERINT SYSTEMS INC. AND SUBSIDIARIESPage
Index to Consolidated Financial Statements
Page





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Stockholders and the Board of Directors and Stockholders of Verint Systems Inc.
Melville, New York


Opinion on the Financial Statements


We have audited the accompanying consolidated balance sheets of Verint Systems Inc. and subsidiaries (the “Company”) as of January 31, 20192022 and 2018,2021, the related consolidated statements of operations, comprehensive income, (loss), shareholders’stockholders’ equity, and cash flows, for each of the three years in the period ended January 31, 2019,2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 20192022 and 2018,2021, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2019,2022, in conformity with accounting principles generally accepted in the United States of America.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2019,2022, based on criteria established in Internal Control - IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 27, 2019,29, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.


Basis for Opinion


These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.



Critical Audit Matter


The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition — Software License Arrangements — Refer to Note 2 to the financial statements
Critical Audit Matter Description

The Company generates revenue from multiple sources, including software license revenue, maintenance revenue from customer support, and services revenue primarily derived from the Company’s cloud-based solutions and other software applications and consulting services. The Company’s license and cloud contracts often contain multiple performance obligations. As disclosed by management, the Company’s revenue was $874.5 million for the fiscal year ended January 31, 2022.

New contracts meeting certain quantitative and qualitative criteria require a detailed analysis by the Company of the contractual terms and application of more complex accounting guidance, to determine the appropriate revenue recognition of the identified performance obligations.
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Factors in these contracts with potentially significant judgments include:

the identification of the complete customer contract;
the accounting treatment of any contract modifications;
the valuation and allocation of identified material rights;
the allocation of arrangement consideration.

Given the accounting complexity and the management judgment necessary to properly identify, classify, and account for performance obligations in relation to license and cloud contracts, auditing such estimates required extensive audit effort due to the complexity of these arrangements and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to license and cloud revenue contracts included the following, among others:

We tested the effectiveness of controls over revenue recognition, including those over the identification of performance obligations included in the transaction, accounting treatment of contract modifications, identification of material rights, and allocation of arrangement consideration.
We selected a sample of customer contracts and performed the following:
Evaluated whether the Company properly identified the terms of the contracts and considered all contract terms that may have an impact on revenue recognition.
Evaluated whether the Company appropriately identified all performance obligations in the contract and whether the methodology to allocate the transaction price to the individual performance obligations was appropriately applied.
Tested the accuracy of management’s calculation of revenue for each performance obligation by developing an expectation for the revenue to be recorded in the current period and comparing it to the Company’s recorded balances.
Evaluated management’s assessment of other contracts with the same customer or any ongoing negotiations with the customer to determine if required to be combined for revenue recognition purposes.
Analyzed the proper accounting treatment for any contract modifications based on 1) whether the additional products and services are distinct from the products and services in the original arrangement, and 2) whether the amount of consideration expected for the added products and services reflects the stand-alone selling price of those products and services.
Evaluated management’s determination of whether certain renewal clauses, additional product offers, or additional usage offers represented material rights included in the contract.
For contracts with a performance obligation of bundled professional services, independently recalculate the stand-alone selling price for each bundled fixed price service.
Obtained evidence of delivery of the elements of the arrangement to the customer.



/s/ DELOITTE & TOUCHE LLP


New York, New York
March 27, 201929, 2022


We have served as the Company’s auditor since 2001.



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VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 31,
 (in thousands, except share and per share data)20222021
Assets  
Current Assets:  
Cash and cash equivalents$358,805 $585,273 
Restricted cash and cash equivalents, and restricted bank time deposits15 
Short-term investments765 46,300 
Accounts receivable, net of allowance for credit losses of $1.3 million and $1.6 million, respectively193,831 206,157 
Contract assets, net42,688 36,716 
Inventories5,337 5,541 
Prepaid expenses and other current assets53,746 42,814 
Current assets of discontinued operations— 354,926 
  Total current assets655,178 1,277,742 
Property and equipment, net64,090 69,090 
Operating lease right-of-use assets35,433 57,849 
Goodwill1,353,421 1,327,407 
Intangible assets, net118,254 143,744 
Long-term deferred income taxes8,091 7,287 
Other assets126,638 97,224 
Long-term assets of discontinued operations— 280,952 
  Total assets$2,361,105 $3,261,295 
Liabilities, Temporary Equity, and Stockholders' Equity  
Current Liabilities:  
Accounts payable$39,501 $35,463 
Accrued expenses and other current liabilities168,694 211,517 
Current maturities of long-term debt— 386,713 
Contract liabilities271,271 261,033 
Current liabilities of discontinued operations— 268,713 
  Total current liabilities479,466 1,163,439 
Long-term debt406,954 402,781 
Long-term contract liabilities15,872 16,502 
Operating lease liabilities28,457 56,712 
Long-term deferred income taxes17,460 32,991 
Other liabilities21,996 42,719 
Long-term liabilities of discontinued operations— 58,118 
  Total liabilities970,205 1,773,262 
Commitments and Contingencies00
Temporary Equity:
Preferred Stock — $0.001 par value; authorized 2,207,000 shares
Series A Preferred Stock; 200,000 shares issued and outstanding at January 31, 2022 and 2021, respectively; aggregate liquidation preference and current redemption value of $206,067 at January 31, 2022 and 2021, respectively.200,628 200,628 
Series B Preferred Stock; 200,000 shares issued and outstanding at January 31, 2022; no shares issued and outstanding at January 31, 2021; aggregate liquidation preference and current redemption value of $206,067 at January 31, 2022.235,693 — 
Equity component of currently redeemable convertible notes— 4,841 
  Total temporary equity436,321 205,469 
Stockholders' Equity:  
Common stock — $0.001 par value; authorized 120,000,000 shares. Issued 66,211,000 and 70,177,000; outstanding 66,211,000 and 65,773,000 shares at January 31, 2022 and 2021, respectively.66 70 
Additional paid-in capital1,125,152 1,726,166 
Treasury stock, at cost — No shares and 4,404,000 shares at January 31, 2022 and 2021, respectively.— (208,124)
Accumulated deficit(54,509)(113,797)
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  January 31,
 (in thousands, except share and per share data)
2019 2018
Assets
 
  
Current Assets:
 
  
Cash and cash equivalents
$369,975
 $337,942
Restricted cash and cash equivalents, and restricted bank time deposits
42,262
 33,303
Short-term investments 32,329
 6,566
Accounts receivable, net of allowance for doubtful accounts of $3.8 million and $2.2 million, respectively
375,663
 296,324
Contract assets 63,389
 
Inventories
24,952
 19,871
Deferred cost of revenue
10,302
 6,096
Prepaid expenses and other current assets
87,474
 82,090
  Total current assets
1,006,346
 782,192
Property and equipment, net
100,134
 89,089
Goodwill
1,417,481
 1,388,299
Intangible assets, net
225,183
 226,093
Capitalized software development costs, net
13,342
 9,228
Long-term deferred cost of revenue
4,630
 2,804
Deferred income taxes 21,040
 30,878
Other assets
78,871
 52,037
  Total assets
$2,867,027
 $2,580,620




 

Liabilities and Stockholders' Equity
 
  
Current Liabilities:
 
  
Accounts payable
$71,621
 $84,639
Accrued expenses and other current liabilities
208,481
 220,265
Current maturities of long-term debt
4,343
 4,500
Contract liabilities
377,376
 196,107
  Total current liabilities
661,821
 505,511
Long-term debt
777,785
 768,484
Long-term contract liabilities
30,094
 24,519
Deferred income taxes 43,171
 35,305
Other liabilities
93,352
 114,465
  Total liabilities
1,606,223
 1,448,284
Commitments and Contingencies


 

Stockholders' Equity:
 
  
Preferred stock - $0.001 par value; authorized 2,207,000 shares at January 31, 2019 and 2018, respectively; none issued. 
 
Common stock - $0.001 par value; authorized 120,000,000 shares. Issued 66,998,000 and 65,497,000 shares; outstanding 65,333,000 and 63,836,000 shares at January 31, 2019 and 2018, respectively
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Additional paid-in capital
1,586,266
 1,519,724
Treasury stock, at cost - 1,665,000 and 1,661,000 shares at January 31, 2019 and 2018, respectively
(57,598) (57,425)
Accumulated deficit
(134,274) (238,312)
Accumulated other comprehensive loss
(145,225) (103,460)
Total Verint Systems Inc. stockholders' equity
1,249,236
 1,120,592
Noncontrolling interests
11,568
 11,744
  Total stockholders' equity
1,260,804
 1,132,336
  Total liabilities and stockholders' equity
$2,867,027
 $2,580,620
January 31,
 (in thousands, except share and per share data)20222021
Accumulated other comprehensive loss(118,515)(136,878)
Total Verint Systems Inc. stockholders' equity952,194 1,267,437 
Noncontrolling interests2,385 15,127 
  Total stockholders' equity954,579 1,282,564 
  Total liabilities, temporary equity, and stockholders' equity$2,361,105 $3,261,295 


See notes to consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
 
 Year Ended January 31,
 (in thousands, except per share data)202220212020
Revenue:  
Recurring$633,129 $575,624 $534,378 
Nonrecurring241,380 254,623 312,147 
  Total revenue874,509 830,247 846,525 
Cost of revenue:   
Recurring156,569 139,044 132,789 
Nonrecurring124,226 130,545 149,795 
Amortization of acquired technology17,777 17,962 21,579 
  Total cost of revenue298,572 287,551 304,163 
Gross profit575,937 542,696 542,362 
Operating expenses:   
Research and development, net123,291 128,152 134,236 
Selling, general and administrative376,808 327,345 379,234 
Amortization of other acquired intangible assets28,995 29,777 30,865 
  Total operating expenses529,094 485,274 544,335 
Operating income (loss)46,843 57,422 (1,973)
Other income (expense), net:   
Interest income233 1,461 2,111 
Interest expense(10,325)(39,803)(40,314)
Losses on early retirements of debt(2,474)(143)— 
Other income (expense), net5,227 (60,601)609 
  Total other expense, net(7,339)(99,086)(37,594)
Income (loss) from continuing operations before provision for income taxes39,504 (41,664)(39,567)
Provision for income taxes23,853 6,937 6,943 
Net income (loss) from continuing operations15,651 (48,601)(46,510)
Net income from discontinued operations— 48,494 82,193 
Net income (loss)15,651 (107)35,683 
Net income from continuing operations attributable to noncontrolling interests1,238 1,053 579 
Net income from discontinued operations attributable to noncontrolling interests— 6,107 6,420 
Net income (loss) attributable to Verint Systems Inc.14,413 (7,267)28,684 
Dividends on preferred stock(18,922)(7,656)— 
Net (loss) income attributable to Verint Systems Inc. common shares$(4,509)$(14,923)$28,684 
Net (loss) income attributable to Verint Systems Inc. common shares:   
Net loss from continuing operations attributable to Verint Systems Inc. common shares$(4,509)$(57,310)$(47,089)
Net income from discontinued operations attributable to Verint Systems Inc. common shares$— $42,387 $75,773 
Basic net (loss) income per common share attributable to Verint Systems Inc.:
Continuing operations$(0.07)$(0.88)$(0.71)
Discontinued operations— 0.65 1.14 
Total basic net (loss) income per common share attributable to Verint Systems Inc.$(0.07)$(0.23)$0.43 
Diluted net (loss) income per common share attributable to Verint Systems Inc.:
Continuing operations$(0.07)$(0.88)$(0.71)
Discontinued operations— 0.65 1.14 
Total diluted net (loss) income per common share attributable to Verint Systems Inc.$(0.07)$(0.23)$0.43 
Weighted-average common shares outstanding:   
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  Year Ended January 31,
 (in thousands, except per share data) 2019 2018 2017
Revenue:  
  
  
Product $454,650
 $399,662
 $378,504
Service and support 775,097
 735,567
 683,602
  Total revenue 1,229,747
 1,135,229
 1,062,106
Cost of revenue:  
  
  
Product 129,922
 131,989
 123,279
Service and support 293,888
 276,582
 261,978
Amortization of acquired technology 25,403
 38,216
 37,372
  Total cost of revenue 449,213
 446,787
 422,629
Gross profit 780,534
 688,442
 639,477
Operating expenses:  
  
  
Research and development, net 209,106
 190,643
 171,070
Selling, general and administrative 426,183
 414,960
 406,952
Amortization of other acquired intangible assets 31,010
 34,209
 44,089
  Total operating expenses 666,299
 639,812
 622,111
Operating income 114,235
 48,630
 17,366
Other income (expense), net:  
  
  
Interest income 4,777
 2,477
 1,048
Interest expense (37,344) (35,959) (34,962)
Losses on early retirements of debt 
 (2,150) 
Other (expense) income, net (3,906) 5,902
 (6,926)
  Total other expense, net (36,473) (29,730) (40,840)
Income (loss) before provision for income taxes 77,762
 18,900
 (23,474)
Provision for income taxes 7,542
 22,354
 2,772
Net income (loss) 70,220
 (3,454) (26,246)
Net income attributable to noncontrolling interests 4,229
 3,173
 3,134
Net income (loss) attributable to Verint Systems Inc. $65,991
 $(6,627) $(29,380)
       
Net income (loss) per common share attributable to Verint Systems Inc.:  
  
  
Basic $1.02
 $(0.10) $(0.47)
Diluted $1.00
 $(0.10) $(0.47)
       
Weighted-average common shares outstanding:  
  
  
Basic 64,913
 63,312
 62,593
Diluted 66,245
 63,312
 62,593
 Year Ended January 31,
 (in thousands, except per share data)202220212020
Basic65,591 65,173 66,129 
Diluted65,591 65,173 66,129 
 
See notes to consolidated financial statements.









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VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)


  Year Ended January 31,
(in thousands) 2019 2018 2017
Net income (loss) $70,220
 $(3,454) $(26,246)
Other comprehensive (loss) income, net of reclassification adjustments:  
  
  
Foreign currency translation adjustments (34,485) 49,810
 (42,130)
Net increase from available-for-sale securities 
 
 110
Net (decrease) increase from foreign exchange contracts designated as hedges (4,774) 3,042
 2,750
Net (decrease) increase from interest rate swap designated as a hedge (4,028) (1,021) 1,021
Benefit (provision) for income taxes on net (decrease) increase from foreign exchange contracts and interest rate swap designated as hedges 1,466
 85
 (693)
Other comprehensive (loss) income (41,821) 51,916
 (38,942)
Comprehensive income (loss) 28,399
 48,462
 (65,188)
Comprehensive income attributable to noncontrolling interests 4,173
 3,693
 2,854
Comprehensive income (loss) attributable to Verint Systems Inc. $24,226
 $44,769
 $(68,042)
See notes to consolidated financial statements.

VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
  Verint Systems Inc. Stockholders’ Equity    
  Common Stock Additional Paid-in Capital     
Accumulated Other Comprehensive Loss
 Total Verint Systems Inc. Stockholders’ Equity   Total Stockholders’ Equity
(in thousands)  Shares 
Par
Value
  
Treasury
Stock
 
Accumulated
Deficit
   
Non-controlling
Interests
 
Balances as of January 31, 2016 62,266
 $63
 $1,387,955
 $(10,251) $(201,436) $(116,194) $1,060,137
 $8,027
 $1,068,164
Net (loss) income 
 
 
 
 (29,380) 
 (29,380) 3,134
 (26,246)
Other comprehensive loss 
 
 
 
 
 (38,662) (38,662) (280) (38,942)
Stock-based compensation - equity-classified awards 
 
 55,123
 
 
 
 55,123
 
 55,123
Exercises of stock options 1
 
 7
 
 
 
 7
 
 7
Common stock issued for stock awards and stock bonuses 1,458
 1
 6,952
 
 
 
 6,953
 
 6,953
Treasury stock acquired (1,306) 
 
 (46,896) 
 
 (46,896) 
 (46,896)
Dividends to noncontrolling interest 
 
 
 
 
 
 
 (2,421) (2,421)
Tax effects from stock award plans 
 
 (702) 
 
 
 (702) 
 (702)
Balances as of January 31, 2017 62,419
 64
 1,449,335
 (57,147) (230,816) (154,856) 1,006,580
 8,460
 1,015,040
Net (loss) income 
 
 
 
 (6,627) 
 (6,627) 3,173
 (3,454)
Other comprehensive income 
 
 
 
 
 51,396
 51,396
 520
 51,916
Stock-based compensation - equity-classified awards 
 
 57,414
 
 
 
 57,414
 
 57,414
Common stock issued for stock awards and stock bonuses 1,424
 1
 12,975
 
 
 
 12,976
 
 12,976
Treasury stock acquired (7) 
 
 (278) 
 
 (278) 
 (278)
Initial noncontrolling interest related to business combination 
 
 
 
 
 
 
 2,300
 2,300
Capital contributions by noncontrolling interest 
 
 
 
 
 
 
 595
 595
Dividends to noncontrolling interest 
 
 
 
 
 
 
 (3,304) (3,304)
Cumulative effect of adoption of ASU No. 2016-16 
 
 
 
 (869) 
 (869) 
 (869)
Balances as of January 31, 2018 63,836
 65
 1,519,724
 (57,425) (238,312) (103,460) 1,120,592

11,744
 1,132,336
Net income 
 
 
 
 65,991
 
 65,991
 4,229
 70,220
Other comprehensive loss 
 
 
 
 
 (41,765) (41,765) (56) (41,821)
Stock-based compensation - equity-classified awards 
 
 57,659
 
 
 
 57,659
 
 57,659
Common stock issued for stock awards and stock bonuses 1,501
 2
 8,883
 
 
 
 8,885
 
 8,885
Treasury stock acquired (4) 
 
 (173) 
 
 (173) 
 (173)
Capital contributions by noncontrolling interest 
 
 
 
 
 
 
 60
 60
Dividends to noncontrolling interest 
 
 
 
 
 
 
 (4,409) (4,409)
Cumulative effect of adoption of ASU No. 2014-09 
 
 
 
 38,047
 
 38,047
 
 38,047
Balances as of January 31, 2019 65,333
 $67
 $1,586,266
 $(57,598) $(134,274) $(145,225) $1,249,236
 $11,568
 $1,260,804
Year Ended January 31,
(in thousands)202220212020
Net income (loss)$15,651 $(107)$35,683 
Other comprehensive income (loss), net of reclassification adjustments:   
Foreign currency translation adjustments(11,668)17,794 (772)
Distribution of Cognyte Software Ltd.17,123 — — 
Net (decrease) increase from foreign exchange contracts designated as hedges(147)37 1,786 
Net increase (decrease) from interest rate swap designated as a hedge1,014 (3,168)(9,473)
Net increase from settlement of interest rate swap due to partial early retirement of 2017 Term Loan12,017 — — 
Benefit from income taxes on net increase from foreign exchange contracts and interest rate swap designated as hedges24 636 1,809 
Other comprehensive income (loss)18,363 15,299 (6,650)
Comprehensive income34,014 15,192 29,033 
Comprehensive income attributable to noncontrolling interests1,238 7,472 6,989 
Comprehensive income attributable to Verint Systems Inc.$32,776 $7,720 $22,044 
 
See notes to consolidated financial statements.

68


VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
 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, 201965,333 $67 $1,586,266 $(57,598)$(134,274)$(145,225)$1,249,236 $11,568 $1,260,804 
Net income— — — — 28,684 — 28,684 6,999 35,683 
Other comprehensive loss— — — — — (6,640)(6,640)(10)(6,650)
Stock-based compensation — equity-classified awards— — 65,080 — — — 65,080 — 65,080 
Common stock issued for stock awards and stock bonuses1,531 9,543 — — — 9,544 — 9,544 
Treasury stock acquired(2,126)— — (116,536)— — (116,536)— (116,536)
Dividends or distribution to noncontrolling interests— — — — — — — (5,488)(5,488)
Balances as of January 31, 202064,738 68 1,660,889 (174,134)(105,590)(151,865)1,229,368 13,069 1,242,437 
Net (loss) income— — — — (7,267)— (7,267)7,160 (107)
Other comprehensive income— — — — — 14,987 14,987 312 15,299 
Stock-based compensation — equity-classified awards— — 63,005 — — — 63,005 — 63,005 
Common stock issued for stock awards and stock bonuses1,646 14,108 — — — 14,110 — 14,110 
Exercises of stock options— 12 — — — 12 — 12 
Treasury stock acquired(613)— — (33,990)— — (33,990)— (33,990)
Dividends or distribution to noncontrolling interests— — — — — — — (5,414)(5,414)
Preferred stock dividends— — (6,789)— — — (6,789)— (6,789)
Reacquisition of equity component from convertible notes repurchases, net of taxes— — (218)— — — (218)— (218)
Temporary equity reclassification— — (4,841)— — — (4,841)— (4,841)
Cumulative effect of adoption of ASU No. 2016-13— — — — (940)— (940)— (940)
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— — — — 14,413 — 14,413 1,238 15,651 
Other comprehensive income, excluding the distribution of Cognyte Software Ltd.— — — — — 1,240 1,240 — 1,240 
Distribution of Cognyte Software Ltd.— — (281,665)— — 17,123 (264,542)(12,870)(277,412)
Stock-based compensation — equity-classified awards— — 58,679 — — — 58,679 — 58,679 
Common stock issued for stock awards and stock bonuses1,800 (2)— — — — —  
Common stock repurchased and retired(1,058)(1)(49,580)— — — (49,581)— (49,581)
Settlement of conversion premium upon maturity of 2014 Notes1,250 — (59,139)59,131 — — (8)— (8)
Common stock received from exercise of Note Hedges(1,250)— 57,695 (57,692)— — — 3 
Common stock received from exercise of Note Hedges related to repurchased 2014 Notes(42)— 1,959 (1,959)— — — —  
Common stock issued upon settlement of Warrants293 — (25)20 — — (5)— (5)
Purchases of capped calls, net of taxes— — (32,441)— — — (32,441)— (32,441)
Treasury stock acquired(555)— — (26,375)— — (26,375)— (26,375)
Treasury stock retired— (5)(234,994)234,999 — — — —  
69


 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
Distribution to noncontrolling interest— — — — — — — (1,110)(1,110)
Preferred stock dividends— — (18,056)— — — (18,056)— (18,056)
Cumulative effect of adoption of ASU No. 2020-06, net of taxes— — (43,445)— 44,875 — 1,430 — 1,430 
Balances as of January 31, 202266,211 $66 $1,125,152 $ $(54,509)$(118,515)$952,194 $2,385 $954,579 
See notes to consolidated financial statements.
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VERINT SYSTEMS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
 Year Ended January 31,
(in thousands) 202220212020
Cash flows from operating activities:  
Net income (loss)$15,651 $(107)$35,683 
(Income) from discontinued operations, net of income taxes— (48,494)(82,193)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:   
Depreciation and amortization75,449 85,380 80,847 
Provision for credit losses1,396 1,959 1,211 
Stock-based compensation, excluding cash-settled awards65,246 45,208 64,802 
Change in fair value of future tranche right(15,810)56,146 — 
Amortization of discount on convertible notes— 12,883 12,490 
Benefit from deferred income taxes(11,323)(1,398)(4,284)
Non-cash losses (gains) on derivative financial instruments, net14,374 1,267 (204)
Losses on early retirements of debt2,474 143 — 
Other non-cash items, net7,416 (1,804)8,307 
Changes in operating assets and liabilities, net of effects of business combinations and divestitures:   
Accounts receivable11,712 (3,896)16,284 
Contract assets(6,391)(63)(19,128)
Inventories(713)599 (502)
Prepaid expenses and other assets(33,107)(28,166)2,356 
Accounts payable and accrued expenses(1,772)33,380 (17,197)
Contract liabilities7,820 5,438 18,042 
Other liabilities(2,321)534 6,754 
Other, net4,553 644 3,730 
Net cash provided by operating activities — continuing operations134,654 159,653 126,998 
Net cash (used in) provided by operating activities — discontinued operations(9,055)94,193 110,906 
Net cash provided by operating activities125,599 253,846 237,904 
Cash flows from investing activities:  
Cash paid for business combinations, including adjustments, net of cash acquired(57,024)— (55,403)
Purchases of property and equipment(16,962)(14,035)(21,339)
Purchases of investments(751)(102,531)(18,308)
Maturities and sales of investments46,299 69,763 5,797 
Settlements of derivative financial instruments not designated as hedges(69)(54)2,881 
Cash paid for capitalized software development costs(7,560)(7,312)(9,583)
Change in restricted bank time deposits, including long-term portion107 154 (56)
Other investing activities60 — (250)
Net cash used in investing activities — continuing operations(35,900)(54,015)(96,261)
Net cash provided by (used in) investing activities — discontinued operations— 16,772 (29,540)
Net cash used in investing activities(35,900)(37,243)(125,801)
Cash flows from financing activities:  
Proceeds from issuance of preferred stock and future tranche right, net of issuance costs198,731 197,254 — 
Proceeds from borrowings315,000 155,000 45,000 
Repayments of borrowings and other financing obligations(313,354)(207,165)(6,478)
Payments to repurchase convertible notes— (13,032)— 
Settlement of 2014 Notes(386,887)— — 
Purchases of capped calls(41,060)— — 
Payments of equity issuance, debt issuance, and other debt-related costs(10,708)(2,287)(212)
Distributions paid to noncontrolling interest(1,110)(5,414)(5,488)
Purchases of treasury stock and common stock for retirement(75,955)(36,836)(113,690)
Preferred stock dividend payments(12,856)(1,589)— 
Payment for termination of interest rate swap(16,502)— — 
Net cash transferred to Cognyte Software Ltd.(114,657)— — 
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  Year Ended January 31,
(in thousands)  2019 2018 2017
Cash flows from operating activities:  
  
  
Net income (loss) $70,220
 $(3,454) $(26,246)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
  
  
Depreciation and amortization 88,915
 105,730
 114,257
Provision for doubtful accounts 2,746
 559
 1,791
Stock-based compensation, excluding cash-settled awards 66,657
 69,296
 65,421
Amortization of discount on convertible notes 11,850
 11,243
 10,668
Benefit from deferred income taxes (3,017) (7,533) (16,941)
Excess tax benefits from stock award plans 
 
 (6)
Non-cash (gains) losses on derivative financial instruments, net (2,511) 17
 323
Losses on early retirements of debt 
 2,150
 
Other non-cash items, net (2,328) (428) 7,666
Changes in operating assets and liabilities, net of effects of business combinations:  
  
  
Accounts receivable (21,520) (23,512) (353)
Contract assets 5,751
 
 
Inventories (8,208) (2,865) (286)
Deferred cost of revenue 1,400
 282
 7,124
Prepaid expenses and other assets (6,153) (2,030) 4,941
Accounts payable and accrued expenses (15,648) 10,158
 (9,521)
Contract liabilities 32,919
 9,686
 8,705
Other liabilities (7,328) 8,599
 4,987
Other, net 1,506
 (1,571) (115)
Net cash provided by operating activities 215,251
 176,327
 172,415
       
Cash flows from investing activities:  
  
  
Cash paid for business combinations, including adjustments, net of cash acquired (90,022) (102,978) (141,803)
Purchases of property and equipment (31,686) (35,530) (27,540)
Purchases of investments (59,065) (11,875) (36,761)
Maturities and sales of investments 33,118
 8,721
 89,342
Settlements of derivative financial instruments not designated as hedges 1,335
 (1,558) (349)
Cash paid for capitalized software development costs (7,320) (3,126) (2,338)
Change in restricted bank time deposits, including long-term portion (21,304) 362
 3,007
Other investing activities (779) (210) 
Net cash used in investing activities (175,723) (146,194) (116,442)
       
Cash flows from financing activities:  
  
  
Proceeds from borrowings, net of original issuance discount 
 444,341
 
Repayments of borrowings and other financing obligations (5,983) (431,888) (3,308)
Payments of equity issuance, debt issuance, and other debt-related costs (206) (7,137) (249)
Proceeds from exercises of stock options 4
 
 7
Dividends paid to noncontrolling interest (4,409) (3,304) (2,421)
Purchases of treasury stock (173) 
 (46,896)
Excess tax benefits from stock award plans 
 
 6
Payments of contingent consideration for business combinations (financing portion) and other financing activities (11,114) (7,515) (4,058)
Net cash used in financing activities (21,881) (5,503) (56,919)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents (3,158) 4,251
 (4,167)
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents 14,489
 28,881
 (5,113)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of year 398,210
 369,329
 374,442
 Year Ended January 31,
(in thousands) 202220212020
Dividend and other settlements received from Cognyte Software Ltd.38,280 — — 
Payments of deferred purchase price and contingent consideration for business combinations (financing portion) and other financing activities(9,045)(9,121)(27,035)
Net cash (used in) provided by financing activities — continuing operations(430,123)76,810 (107,903)
Net cash used in financing activities — discontinued operations— (4,877)(3,419)
Net cash (used in) provided by financing activities(430,123)71,933 (111,322)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents(841)(60)(1,823)
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents(341,265)288,476 (1,042)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of year700,133 411,657 412,699 
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of year$358,868 $700,133 $411,657 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of year to the consolidated balance sheets:
Cash and cash equivalents$358,805 $663,843 $379,146 
Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits6 25,910 24,513 
Restricted cash and cash equivalents included in other assets57 10,380 7,998 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$358,868 $700,133 $411,657 

Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of year $412,699
 $398,210
 $369,329
       
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 $369,975
 $337,942
 $307,363
Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits 40,152
 32,955
 8,237
Restricted cash and cash equivalents included in other assets 2,572
 27,313
 53,729
Total cash, cash equivalents, restricted cash, and restricted cash equivalents $412,699
 $398,210
 $369,329


See notes to consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements




1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Description of Business
 
Unless the context otherwise requires, the terms “Verint”, “we”, “us”, and “our” in these notes to consolidated financial statements refer to Verint Systems Inc. and its consolidated subsidiaries.
 
Verint is a global leader in Actionable Intelligence solutions. In a world of massive information growth, our solutions empower organizations with crucial, actionable insights and enable decision makers to anticipate, respond, and take action. Today, over 10,000 organizations inhelps brands provide Boundless Customer Engagement™. For more than 180 countries,two decades, the world’s most iconic brands – including overmore than 85 percent of the Fortune 100 use Verint’s Actionable Intelligencecompanies – 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 deployed in the cloud andthat are based on premises, to make more informed, timely, and effective decisions.

Our Actionable Intelligence leadership is powered by innovative, enterprise-class software built with artificial intelligence analytics, automation,(“AI”) and deep domain expertise establishedare 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 working closely with some of the most sophisticated and forward-thinkingapproximately 10,000 organizations in the world.over 175 countries across a diverse set of verticals, including financial services, healthcare, utilities, technology, and government. Our research and developmentcustomers include large enterprises with thousands of employees, as well as small to medium sized business (“R&D”SMB”) teamorganizations.

Verint is focused on actionable intelligence and is comprised of approximately 1,900 professionals. Our innovative solutions are backed-up by a strong IP portfolio with close to 1,000 patents and patent applications worldwide across data capture, artificial intelligence, unstructured data analytics, predictive analytics and automation.

Headquarteredheadquartered in Melville, New York, we support our customersand has more than 30 offices worldwide. We have approximately 4,400 passionate professionals around the globe directlyexclusively focused on helping brands provide Boundless Customer Engagement™.

Recent Developments

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 by laws of the State of Israel whose business and operations consist of our former Cyber Intelligence Solutions business (the “Cognyte 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 1 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.

The financial results of Cognyte for the years ended January 31, 2021 and 2020 are presented as income from discontinued operations, net of taxes on the consolidated statements of operations and its assets and liabilities as of January 31, 2021 are presented as assets and liabilities of discontinued operations on the consolidated balance sheets. The historical consolidated statement of cash flows has also been revised to reflect the effect of the Spin-Off. The historical statements of comprehensive income (loss) and the balances related to stockholders’ equity have not been revised to reflect the effect of the Spin-Off. For further information on discontinued operations, see Note 2, “Discontinued Operations”. Unless noted otherwise, discussion in the notes to the consolidated financial statements pertain to continuing operations.

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”), the Apax Investor purchased $200.0 million of our Series A convertible preferred stock (“Series A Preferred Stock”) in an issuance that closed on May 7, 2020. In connection with the completion of the Spin-Off, the Apax Investor purchased $200.0 million of Series B convertible preferred stock (“Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”) in an extensive networkissuance that closed on April 6, 2021. As of sellingJanuary 31, 2022, Apax’s ownership in us on an as-converted basis was approximately 12.9%. Please refer to Note 10, “Convertible Preferred Stock” for a more detailed discussion of the Apax investment.

Impact of COVID-19 Pandemic

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On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The pandemic has caused significant economic disruption and support partners.uncertainty, and governmental authorities around the world have implemented numerous measures attempting to contain and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, shutdowns, limitations or closures of non-essential businesses, and social distancing requirements. Our customers, partners, and vendors have also implemented actions in response to the pandemic, including among others, office closings, site restrictions, and employee travel restrictions. In response to these challenges, we established remote working arrangements for our employees, limited non-essential business travel, and canceled or shifted our customer, employee, and industry events to a virtual-only format. As the pandemic has evolved, we have adapted our pandemic response on a localized basis based on the prevailing conditions in each country in which we and our customers, partners, or vendors operate.


Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of Verint Systems Inc., and our wholly owned or otherwise controlled subsidiaries, and a joint venture in which we hold a 50% equity interest. The joint venture is a variable interest entity in which we are the primary beneficiary.subsidiaries. Noncontrolling interests in less than wholly owned subsidiaries are reflected within stockholders’ equity on our consolidated balance sheet, but separately from our stockholders’ equity. We hold anOn January 31, 2022, we exercised the option to acquire the noncontrolling interests in two2 majority owned subsidiaries andsubsidiaries. Prior to the exercise, we accountaccounted for the option as an in-substance investment in the noncontrolling common stock of each such subsidiary. We includeincluded the fair value of the option within accrued expenses and other current liabilities and dodid not recognize noncontrolling interests in these subsidiaries.


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

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 U.S. generally accepted accounting principles (“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 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 January 31, 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.

Reclassifications

Following the Spin-Off, we began to operate as a pure-play customer engagement company and determined that presenting our revenue and cost of revenue as recurring and nonrecurring would be a more meaningful representation of the nature of our offerings, provide greater transparency and clarity to users of the financial statements, and is more consistent with industry practice and internal reporting. Accordingly, prior period amounts have been reclassified to conform to the current period presentation in our consolidated financial statements and the accompanying notes. For a description of the types of revenue included in each category, see Note 3, “Revenue Recognition”.

Restricted Cash and Cash Equivalents, and Restricted Bank Time Deposits


Restricted cash and cash equivalents, and restricted bank time deposits are pledged as collateral or otherwise restricted as to use for vendor payables, general liability insurance, workers’ compensation insurance, warranty programs, and other obligations.


Investments


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Our investments generally consist of bank time deposits, and marketable debt securities of corporations, the U.S. government, and agencies of the U.S. government, all with remaining maturities in excess of 90 days at the time of purchase. As of

January 31, 2019 weWe held no marketable debt securities. As ofsecurities at January 31, 2018, we held $2.0 million of marketable debt securities.2022 and 2021. Investments with maturities in excess of one year are included in other assets.


Accounts Receivable, Net


Trade accounts receivable are comprised of invoiced amounts due from customers for which we have an unconditional right to collect and are not interest-bearing.Credit is extended to customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable.

Please refer to Note 2, “Revenue Recognition” under the heading “Financial Statement Impact of Adoption” for a description of the presentation changes made to accounts receivable on our consolidated balance sheet as of February 1, 2018, with the adoption of the new revenue accounting standard.


Concentrations of Credit Risk


Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, bank time deposits, short-term investments, trade accounts receivable, and contract assets (unbilled amounts previously included in accounts receivable).assets. We invest our cash in bank accounts, certificates of deposit, and money market accounts with major financial institutions, in U.S. government and agency obligations, and in debt securities of corporations. By policy, we seek to limit credit exposure on investments through diversification and by restricting our investments to highly rated securities.


We grant credit terms to our customers in the ordinary course of business. Concentrations of credit risk with respect to trade accounts receivable and contract assets are generally limited due to the large number of customers comprising our customer base and their dispersion across different industries and geographic areas. There are two customers inwas one customer, an authorized global reseller of our Cyber Intelligence segmentsolutions, that combined accounted for $84.3 million and $99.7 millionapproximately 14% of our aggregated accounts receivable and contract assets at January 31, 20192022 and 2018, respectively. These customers are governmental agencies outside2021, and approximately 10% of our total revenue for the U.S. which we believe present insignificant credit risk.year ended January 31, 2021, but did not represent 10% or greater of our total revenue for the years ended January 31, 2022 or 2020. Credit losses relating to this reseller have historically been immaterial. No end-customer represented more than 10% of our revenue during the years ended January 31, 2022, 2021, and 2020.


Allowance for Doubtful AccountsCredit Losses


We estimateadopted Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments on February 1, 2020. ASU No. 2016-13 requires us to make judgments as to our ability to collect outstanding receivables and provide allowances for a portion of receivables over the collectabilitylifetime of the receivables. Our allowance for expected credit losses is estimated based on an analysis of the aging of our accounts receivable balances each accounting period and adjust our allowancecontract assets, historical write-offs, customer payment patterns, individual customer creditworthiness, current economic trends, reasonable and supportable forecasts of future economic conditions, and/or establishment of specific reserves for doubtful
accounts accordingly. Considerable judgment is requiredcustomers in assessing the collectability of accounts receivable, including consideration of the creditworthiness of each customer, their collection history, and the related aging of past due accounts receivable balances. We evaluate specific accounts when we learn that a customer may be experiencing a deterioratingadverse financial condition due to lower credit ratings, bankruptcy, or other factors that may affect its ability to render payment.condition. We write-off an account receivable and charge it against its recorded allowance at the point when it is considered uncollectible. We assess the adequacy of the allowance for credit losses on a quarterly basis.


The following table summarizes the activity in our allowance for doubtful accountscredit losses for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:
Year Ended January 31,
(in thousands)202220212020
Allowance for credit losses, beginning of year$1,609 $1,239 $866 
Cumulative effect of adoption of ASU No. 2016-13— 577 — 
Provisions charged to expense1,242 1,899 1,211 
Amounts written off(1,666)(1,931)(1,024)
Other, including fluctuations in foreign exchange rates75 (175)186 
Allowance for credit losses, end of year$1,260 $1,609 $1,239 
  Year Ended January 31,
(in thousands) 2019 2018 2017
Allowance for doubtful accounts, beginning of year $2,217
 $1,842
 $1,170
Provisions charged to expense 2,746
 559
 1,791
Amounts written off (1,172) (482) (1,484)
Other, including fluctuations in foreign exchange rates (14) 298
 365
Allowance for doubtful accounts, end of year $3,777
 $2,217
 $1,842


Our estimated expected credit losses associated with contract assets were not material as historical write-offs have been insignificant.

Inventories


Inventories are stated at the lower of cost or market.net realizable value. Cost is determined using the weighted-average method of inventory accounting. The valuation of our inventories requires us to make estimates regarding excess or obsolete inventories,
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including making estimates of the future demand for our products. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand, price, or technological developments could have a significant impact on the value of our inventory and reported operating results. Charges for excess and obsolete inventories are included within cost of revenue.



Property and Equipment, net


Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method based over the estimated useful lives of the assets. The vast majority of equipment, furniture and other is depreciated over periods ranging from three years to seven years. Software is typically depreciated over periods ranging from three years to four years. Buildings are depreciated over periods ranging from ten years to twenty-five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term. CapitalFinance leased assets are amortized over the related lease term.


The cost of maintenance and repairs of property and equipment is charged to operations as incurred. When assets are retired or
disposed of, the cost and accumulated depreciation or amortization thereon are removed from the consolidated balance sheet and any resulting gain or loss is recognized in the consolidated statement of operations.


Business Segment ReportingInformation


Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly evaluated by the enterprise’s chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance.


We conductPrior to the Spin-Off, we conducted our business through two2 operating segments, which arewere also our 2 reportable segments, segments—Customer Engagement Solutions (“Customer Engagement”) and Cyber Intelligence Solutions (“Cyber Intelligence”). OrganizingIntelligence. Upon completion of the Spin-Off, we are a pure-play customer engagement company that operates as a single reporting segment as our business through two operating segments allows us to align our resources and domain expertise to effectively address the Actionable Intelligence market. We determine our reportable segments based on a number of factors our management uses to evaluate and run our business operations, including similarities of customers, products, and technology. Our Chief Executive Officer, who is our CODM, who regularly reviews segment revenue and segment operating contribution when assessing the financial performanceinformation presented on a consolidated basis for purposes of our segmentsallocating resources and allocating resources.

We measure the performance of our operating segments based upon segment revenue and segment contribution.

Segment revenue includes adjustments associated with revenue of acquired companies which are not recognizable within GAAP revenue. These adjustments primarily relate to the acquisition-date excess of the historical carrying value over the fair value of acquired companies’ future maintenance and service performance obligations. As the obligations are satisfied, we report our segment revenue using the historical carrying values of these obligations, which we believe better reflects our ongoing maintenance and service revenue streams, whereas GAAP revenue is reported using the obligations’ acquisition-date fair values. Segment revenue adjustments can also result from aligning an acquired company’s historical revenue recognition policies to our policies.

Segment contribution includes segment revenue and expenses incurred directly by the segment, including material costs, service costs, research and development and selling, marketing, and administrative expenses. When determining segment contribution, we do not allocate certain operating expenses, which are provided by shared resources or are otherwise generally not controlled by segment management. These expenses are reported as “Shared support expenses” when reconciling segment contribution to operating income, the majority of which are expenses for administrative support functions, such as information technology, human resources, finance, legal, and other general corporate support, and for occupancy expenses. These unallocated expenses also include procurement, manufacturing support, and logistics expenses.

In addition, segment contribution does not include amortization of acquired intangible assets, stock-based compensation, and other expenses that either can vary significantly in amount and frequency, are based upon subjective assumptions, or in certain cases are unplanned for or difficult to forecast, such as restructuring expenses and business combination transaction and integration expenses, all of which are not considered when evaluating segmentfinancial performance.

Revenue from transactions between our operating segments is not material.

Please refer to Note 16, “Segment, Geographic, and Significant Customer Information” for further details regarding our operating segments.


Goodwill and Other Acquired Intangible Assets and Long-Lived Assets


For business combinations, the purchase prices are allocated to the tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition dates, with the remaining unallocated purchase prices recorded

as goodwill. Goodwill is assigned, at the acquisition date, to those reporting units expected to benefit from the synergies of the combination.


We test goodwill for impairment at the reporting unit level, which can be an operating segment or one level below an operating segment, on an annual basis as of November 1, or more frequently if changes in facts and circumstances indicate that impairment in the value of goodwill may exist. AsSubsequent to the Spin-Off of January 31, 2019, ourCognyte on February 1, 2021, we became a pure-play customer engagement company that operates as a single reporting units are Customer Engagement, Cyber Intelligence (excluding situational intelligence solutions), and Situational Intelligence, which is a component of our Cyber Intelligence operating segment.unit.


In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we elect to bypass a qualitative assessment, or if our qualitative assessment indicates that goodwill impairment is more likely than not, we perform quantitative impairment testing. For quantitative impairment testing performed prior to February 1, 2018, we performed a two-step test by first comparing the carrying value of the reporting unit to its fair value. If the carrying value exceeded the fair value, a second step was performed to compute the goodwill impairment. Effective with our February 1, 2018 adoption of Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, if our quantitative testing determines that the carrying value of athe reporting unit exceeds its fair value, goodwill impairment is recognized in an amount equal to that excess, limited to the total goodwill allocated to thatthe reporting unit, eliminating the need for the second step.unit.


We utilize some or all of three primary approaches to assess the fair value of a reporting unit: (a) an income-based approach, using projected discounted cash flows, (b) a market-based approach, using valuation multiples of comparable companies, and (c) a transaction-based approach, using valuation multiples for recent acquisitions of similar businesses made in the marketplace. Our estimate of fair value of eachour reporting unit is based on a number of subjective factors, including: (a) appropriate consideration of valuation approaches (income approach, comparable public company approach, and comparable transaction approach), (b) estimates of future growth rates, (c) estimates of our future cost structure, (d) discount rates for our estimated cash flows, (e) selection of peer group companies for the comparable public company and the comparable market transaction approaches, (f) required levels of working capital, (g) assumed terminal value, and (h) time horizon of cash flow forecasts.


The valuation methodology to determine the fair value of the reporting units is sensitive to management's forecasts of future revenue, profitability and market conditions. In addition, the extent to which the COVID-19 pandemic may adversely impact our business depends on future developments, which are uncertain and unpredictable, depending upon the severity and duration
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of the outbreak, and the effectiveness of actions taken globally to contain or mitigate its effects. Any resulting financial impact cannot be estimated reasonably at this time but may adversely affect our business and financial results. If there were an adverse change in facts and circumstances, then an impairment charge may be necessary in the future. Should the fair value of our reporting unit fall below its carrying amount because of reduced operating performance, market declines, changes in the discount rate, or other conditions, charges for impairment may be necessary. We monitor our reporting unit to determine if there is an indicator of potential impairment.

Acquired identifiable intangible assets include identifiable acquired technologies, customer relationships, trade names, distribution networks, non-competition agreements, sales backlog, and in-process research and development. We amortize the cost of finite-lived identifiable intangible assets over their estimated useful lives, which are periods of ten10 years or less. Amortization is based on the pattern in which the economic benefits of the intangible asset are expected to be realized, which typically is on a straight-line basis. The fair values assigned to identifiable intangible assets acquired in business combinations are determined primarily by using the income approach, which discounts expected future cash flows attributable to these assets to present value using estimates and assumptions determined by management. The acquired identifiable finite-lived intangible assets are being amortized primarily on a straight-line basis, which we believe approximates the pattern in which the assets are utilized, over their estimated useful lives.


Fair Value Measurements


Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This fair value hierarchy consists of three levels of inputs that may be used to measure fair value:
 
Level 1:  quoted prices in active markets for identical assets or liabilities;


Level 2:  inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or


Level 3:  unobservable inputs that are supported by little or no market activity.


We review the fair value hierarchy classification of our applicable assets and liabilities at each reporting period. Changes in the observability of valuation inputs may result in transfers within the fair value measurement hierarchy. We did not identify anyPlease refer to Note 14, “Fair Value Measurements”, for further discussion regarding transfers between levels of the fair value measurement hierarchy during the years ended January 31, 2019 and 2018.hierarchy.
 

Fair Values of Financial Instruments


Our recorded amounts of cash and cash equivalents, restricted cash and cash equivalents, and restricted bank time deposits, accounts receivable, contract assets, investments, and accounts payable approximate fair value, due to the short-term nature of these instruments. We measure certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.


Derivative Financial Instruments


As part of our risk management strategy, when considered appropriate, we use derivative financial instruments including foreign currency forward contracts and interest rate swap agreements to hedge against certain foreign currency and interest rate exposures. Our intent is to mitigate gains and losses caused by the underlying exposures with offsetting gains and losses on the derivative contracts. By policy, we do not enter into speculative positions with derivative instruments.

We record all derivatives as assets or liabilities on our consolidated balance sheets at their fair values. Gains and losses from the changes in values of these derivatives are accounted for based on the use of the derivative and whether it qualifies for hedge accounting.

The counterparties to our derivative financial instruments consist of several major international financial institutions. We regularly monitor the financial strength of these institutions. While the counterparties to these contracts expose us to credit-related losses in the event of a counterparty’s non-performance, the risk would be limited to the unrealized gains on such
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affected contracts. We do not anticipate any such losses.losses and we do not have a material portfolio of derivative financial instruments.


Revenue Recognition


We account for revenue in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which was adopted on February 1, 2018, using the modified retrospective transition method. For further discussion of our accounting policies related to revenue see Note 2,3, “Revenue Recognition.”


Cost of Revenue


Our cost of revenue includes costs of materials, compensation and benefit costs for operations and service personnel, subcontractor costs, royalties and license fees related to third-party software included in our products, cloud infrastructure costs, depreciation of equipment used in operations and service, amortization of capitalized software development costs and certain purchased intangible assets, and related overhead costs. Costs that relate to satisfied (or partially satisfied) performance obligations in customer contracts (i.e. costs that relate to past performance) are expensed as incurred. Please refer to Note 2,3, “Revenue Recognition” under the heading “Costs to Obtain and Fulfill Contracts” for further details regarding customer contract costs.


Research and Development, net


With the exception of certain software development costs, all research and development costs are expensed as incurred, and consist primarily of personnel and consulting costs, travel, depreciation of research and development equipment, and related overhead and other costs associated with research and development activities.


We receive non-refundable grants from the Israeli Innovation Authority (“IIA”), formerly the Israel Office of the Chief Scientist (“OCS”), that fund a portion of our research and development expenditures. We currently only enter into non-royalty-bearing arrangements with the IIA which do not require us to pay royalties. Funds received from the IIA are recorded as a reduction to research and development expense. Royalties, to the extent paid, are recorded as part of our cost of revenue.

We also periodically derive benefits from participation in certain government-sponsored programs in othercertain jurisdictions, for the support of research and development activities conducted in those locations.


Software Development Costs


Costs incurred to acquire or develop software to be sold, leased or otherwise marketed are capitalized after technological feasibility is established, and continue to be capitalized through the general release of the related software product. Amortization of capitalized costs begins in the period in which the related product is available for general release to customers

and is recorded on a straight-line basis, which approximates the pattern in which the economic benefits of the capitalized costs are expected to be realized, over the estimated economic lives of the related software products, generally fourfive years.


Internal-Use Software Development Costs and Cloud Computing Arrangements


We capitalizeexpense costs associated with the assessment stage of software that is acquired, internally developed or modified solely to meet our internal needs.development projects. Capitalization begins when the preliminary project stage has been completed and management with the relevant authority authorizes and commits to the funding of the project. These capitalized costs include external direct costs utilized in developing or obtaining the applications and expensespayroll and payroll-related costs for employees who are directly associated with the development of the applications. Capitalization of such costs continues untilWe expense the project is substantially complete and is ready for its intended purpose. Capitalizedpersonnel-related costs of computertraining and data conversion. We also expense costs associated with the post-implementation and operation stage, including maintenance and specified upgrades; however, we capitalize internal and external costs associated with significant upgrades to existing systems that result in additional functionality. Cloud computing arrangement costs follow the internal-use software developed for internal useaccounting guidance to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized internal-use software development costs are generally amortized over estimated useful lives of periods ranging from four years to seven years on a straight-line basis, which best represents the pattern of the software’s use. Capitalized implementation costs related to a service contract will be amortized over the term of the hosting arrangement beginning when the component of the hosting arrangement is ready for its intended use. Periodically, we reassess the useful life considering technology, obsolescence, and other factors.


Income Taxes


We account for income taxes under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus deferred taxes. Deferred taxes result from differences between the financial statement and tax bases of our
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assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated.


We are subject to income taxes in the United States and numerous foreign jurisdictions. The calculation of our income tax provision involves the application of complex tax laws and requires significant judgment and estimates. On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted in the United States. The 2017 Tax Act significantly revised the Internal Revenue Code of 1986, as amended, and it included fundamental changes to taxation of U.S. multinational corporations. Compliance with the 2017 Tax Act requires significant complex computations not previously required by U.S. tax law.


We evaluate the realizability of our deferred tax assets for each jurisdiction in which we operate at each reporting date, and establish valuation allowances when it is more likely than not that all or a portion of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the same character and in the same jurisdiction. We consider all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. In circumstances where there is sufficient negative evidence indicating that our deferred tax assets are not more-likely-than-not realizable, we establish a valuation allowance.


We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in a tax return by assessing whether they are more-likely-than-not sustainable, based solely on their technical merits, upon examination and including resolution of any related appeals or litigation process. The second step is to measure the associated tax benefit of each position as the largest amount that we believe is more-likely-than-not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements represent our unrecognized income tax benefits, which we either record as a liability or as a reduction of deferred tax assets. Our policy is to include interest (expense and/or income) and penalties related to unrecognized income tax benefits as a component of the provision for income taxes.


Functional Currencies and Foreign Currency Transaction Gains and Losses


The functional currency for most of our foreign subsidiaries is the applicable local currency, although we have severalsome subsidiaries with functional currencies that differ from their local currency, of which the most notable exceptions areexception is our subsidiariessubsidiary in Israel, whose functional currencies arecurrency is the U.S. dollar.


Transactions denominated in currencies other than a functional currency are converted to the functional currency on the transaction date, and any resulting assets or liabilities are further translatedremeasured at each reporting date and at settlement. Gains and losses recognized upon such translationsremeasurements are included within other income (expense), net in the consolidated statements of operations. We recorded net foreign currency losses of $5.5$1.6 million for each of the years ended January 31, 2022 and 2021, and net foreign currency gains of $0.7 million for the year ended January 31, 2019, net foreign currency gains of $6.8 million for the year ended January 31, 2018, and net foreign currency losses of $2.7 million for the year ended January 31, 2017.2020.


For consolidated reporting purposes, in those instances where a foreign subsidiary has a functional currency other than the U.S. dollar, revenue and expenses are translated into U.S. dollars using average exchange rates for the reporting period, while assets and liabilities are translated into U.S. dollars using period-end rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive (loss) incomeloss in the accompanying consolidated balance sheets.


Stock-Based Compensation


We recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of the award. We recognize the fair value of the award as compensation expense over the period during which an employee is required to provide service in exchange for the award.


For performance stock units for which vesting is in part dependent on total shareholder return, the fair value of the award is estimated on the date of grant using a Monte Carlo Simulation. Expected volatility and expected term are input factors for that model and may require significant management judgment. Expected volatility is estimated utilizing daily historical volatility for Verint common stock price and the constituents of the specific comparator index over a period commensurate with the remaining award performance period. The risk-free interest rate used is equal to the implied daily yield of the zero-coupon U.S. Treasury bill that corresponds with the remaining performance period of the award as of the valuation date.


Net Income (Loss) Per Common Share Attributable to Verint Systems Inc.


Basis net income (loss) per common share is computed by dividing net income (loss) attributable to common shareholders by the weighted-average common stock outstanding during the respective period. Net income (loss) attributable to common shareholders is computed by deducting both the dividends declared in the period on the Preferred Stock and the dividends
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accumulated for the period on the Preferred Stock from net income (loss). Shares used in the calculation of basic net income (loss) per common share are based on the weighted-average number of common shares outstanding during the accounting period. Shares used in the calculation of basic net income per common share include vested but unissued shares underlying awards of restricted stock units when all necessary conditions for earning those shares have been satisfied at the award’s vesting date, but exclude unvested shares of restricted stock because they are contingent upon future service conditions.

We have
Diluted net income per common share is computed by dividing net income attributable to common and common equivalent shareholders by the total of the weighted-average common stock outstanding and common equivalent shares outstanding during the respective period. The number of common equivalent shares outstanding has been determined in accordance with the if-converted method for the Preferred Stock and the treasury stock method for employee stock options and restricted stock units to the extend they are dilutive. Under the treasury stock method, the exercise price paid by the option holder and future share-based compensation expense that we have not yet recognized are assumed to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due uponbe used to repurchase shares.

Upon conversion of our 1.50%0.25% convertible senior notes due June 1, 2021April 15, 2026 (the “Notes”“2021 Notes”), further details for which appear in Note 7,8, “Long-Term Debt”. WeDebt,” we are currently intendobligated to settle the principal amount of the 2021 Notes in cash upon conversion and as a result, only the amounts payable in excess of the principal amounts of the 2021 Notes, if any, are assumed to be settled with shares of common stock for purposes of computing diluted net income per share.



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


Leases

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

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

Recent Accounting Pronouncements


New Accounting Pronouncements Recently Adopted


In May 2014,December 2019, the Financial Accounting Standards Board (“FASB”(the “FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers2019-12, Income Taxes (Topic 606). ASU No. 2014-09 supersedes740): Simplifying the revenueAccounting for Income Taxes, which affects general principles within Topic 740, Income Taxes. The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the tax basis of goodwill after a business combination, and the recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue when controlof deferred tax liabilities for outside basis differences. The new guidance also changes the calculation of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted ASU No. 2014-09 asincome tax impact of February 1, 2018 using the modified retrospective transition method. Please refer to Note 2, “Revenue Recognition” for further details.

In January 2016, the FASB issued ASU No. 2016‑01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, associated with the recognition and measurement of financial assets and liabilities, with further clarifications made in February 2018 with the issuance of ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amended guidance requires certain equity investments that are not consolidated and not accounted for under the equity method to be measured at fair value with changes in fair value recognized in net income rather than as a component of accumulated other comprehensive income (loss). It further states that an entity may choose to measure equity investments that do not have readily determinable fair values using a quantitative approach, or measurement alternative, which is equal to its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We adopted this amended guidance on February 1, 2018, using a prospective transition approach, which did not have an impact on our consolidated financial statements.

We concluded that all equity investments within the scope of ASU No. 2016-01, previously accounted for under the cost method, do not have readily determinable fair values. Accordingly, the value of these investments beginning February 1, 2018 has been measured using the measurement alternative, as noted above. As of January 31, 2019, the carrying amount of our equity investments without readily determinable fair values was $3.8 million. During the year ended January 31, 2019, we did not recognize any impairments or other adjustments.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance with the intent of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The clarifications provided by this guidance did not have a material impact on our consolidated statement of cash flows.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We retrospectively adopted ASU No. 2016-18 on February 1, 2018 and as a result, we now include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the condensed consolidated statements of cash flows. Prior to adoption of this new guidance, we reported changes in restricted cash and restricted cash equivalents as cash flows from investing activities. We typically have restrictions on certain amounts of cash and cash equivalents, primarily consisting of amounts used to secure bank guarantees in connection with sales contract performance obligations, and expect to continue to have similar restrictions in the future.

As a result of the adoption of ASU No. 2016-18, we adjusted the previously reported consolidated statements of cash flows for the years ended January 31, 2018 and 2017 as follows:

  Year Ended January 31, 2018
  As Previously Reported Adjustments As Adjusted
Net cash provided by operating activities $176,327
 $
 $176,327
Net cash used in investing activities (144,481) (1,713) (146,194)
Net cash used in financing activities (5,503) 
 (5,503)
Foreign currency effect on cash, cash equivalents, restricted cash, and restricted cash equivalents 4,236
 15
 4,251
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents 30,579
 (1,698) 28,881
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period 307,363
 61,966
 369,329
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period $337,942
 $60,268
 $398,210
  Year Ended January 31, 2017
  As Previously Reported Adjustments As Adjusted
Net cash provided by operating activities $172,415
 $
 $172,415
Net cash used in investing activities (156,028) 39,586
 (116,442)
Net cash used in financing activities (56,919) 
 (56,919)
Foreign currency effect on cash, cash equivalents, restricted cash, and restricted cash equivalents (4,210) 43
 (4,167)
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents (44,742) 39,629
 (5,113)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period 352,105
 22,337
 374,442
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period $307,363
 $61,966
 $369,329

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, whichclarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If an entity determines that substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. If this threshold is not met, in order to be considered a business the set of transferred assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. We prospectively adopted ASU No. 2017-01 on February 1, 2018,hybrid taxes and the adoption had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) - Simplifying the Testmethodology for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill.calculating income taxes in an interim period. We elected to early adoptadopted this standard as of February 1, 2018 and the effects of adoption were not material to our consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities. This update better aligns risk management activities and financial reporting for hedging relationships, simplifies hedge accounting requirements, and improves disclosures of hedging arrangements. We early adopted this standard2021 on February 1, 2018 oneither a prospective basis.basis, or through a modified retrospective approach, as required by the standard. There was no cumulative effect adjustment recorded to accumulated deficit as the amount was not material. The effects of this standard on our consolidatedfinancial position, results of operations and cash flows were not material.

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In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU No. 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. ASU No. 2020-06 also eliminates the treasury stock method to calculate diluted earnings per share and requires the if-converted method for convertible instruments. We early adopted ASU No. 2020-06 as of February 1, 2021 using the modified retrospective transition method. Prior period financial statements werehave not material.been restated upon adoption.


Upon adoption of ASU No. 2020-06, we no longer presented the conversion feature of our 1.50% convertible senior notes due June 1, 2021 (the “2014 Notes”), in equity. Instead, we combined the previously separated equity component with the liability component, which prior to maturity of the 2014 Notes, was classified as debt, thereby eliminating the subsequent amortization of the debt discount as interest expense. Similarly, the portion of issuance costs previously allocated to equity was reclassified to debt and amortized as interest expense until the 2014 Notes matured. Accordingly, we recorded a decrease to accumulated deficit of approximately $44.9 million, a decrease to additional paid-in capital of $43.4 million, a decrease to temporary equity of $4.8 million, an increase to current maturities of long-term debt of $4.4 million, a decrease to deferred tax liabilities of $0.9 million, and an increase in debt issuance costs of $0.1 million. There was no impact to earnings per share as a result of the adoption.

New Accounting Pronouncements Not Yet Effective


In August 2018,March 2020, the FASB issued ASU No. 2018-15, Intangibles-Goodwill2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-04 provides optional expedients and Other-Internal-Use Software (Subtopic 350-40)exceptions for applying GAAP if certain criteria are met to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued Update 2021-01, Reference Rate Reform (Topic 848): Customer’s AccountingScope. The update provides additional optional guidance on the transition from LIBOR to include derivative instruments that use an interest rate for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifiesmargining, discounting or contract price alignment. The standard will ease, if warranted, the requirements for accounting for implementation coststhe 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 financial condition and results of operations.

In May 2021, the FASB issued 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 cloud computing arrangements. This standardEntity'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. The guidance is effective for annual reporting periodsfiscal years beginning after December 15, 2019, including2021, and interim reporting periods within those annual reporting periods,fiscal years. We do not expect the adoption of ASU No. 2021-04 to have any impact on our consolidated financial statements as the effect will largely depend on the terms of written call options or financings issued or modified in the future.

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 reviewingevaluating the impact of this standard to assess the impact on our consolidated financial statements.


In August 2018,
2.DISCONTINUED OPERATIONS

On February 1, 2021 (the “Spin-Off Date”), we completed the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changespreviously announced Spin-Off of Cognyte by way of a pro rata distribution of all of the then-issued and outstanding ordinary shares of Cognyte to holders of record of our common stock as of the close of business on January 25, 2021.
The Disclosure Requirements
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To effect the Spin-Off and provide a framework for Fair Value Measurement, which modifiesour relationship with Cognyte post Spin-Off we entered into several agreements with Cognyte, including the disclosure requirements on fair value measurements. This standard is effectivefollowing:

a Separation and Distribution Agreement;
a Tax Matters Agreement;
an Employee Matters Agreement;
a Transition Services Agreement;
an Intellectual Property Cross License Agreement; and
a Trademark Cross License Agreement.

These agreements provide for annual reportingthe allocation of assets, employees, liabilities, and obligations (including property, employee benefits, litigation, and tax-related assets and liabilities) between us and Cognyte attributable to periods beginningprior to, at and after December 15, 2019, including interim reporting periods within those annual reporting periods, with early adoption permitted. We are currently reviewing this standard to assess the impact on our consolidated financial statements.Spin-Off.


In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting,to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the newTransition Services Agreement with Cognyte, 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, with an option to extend certain services after the first year. In no case will services be provided for more than 24 months after the Spin-Off Date. In consideration for such services, we and Cognyte each paid fees to the other for the services provided, and those fees were generally in amounts intended to allow the party providing services to recover all of its direct and indirect costs incurred in providing those services, plus a standard mostmarkup, and subject to a mutually agreed-upon increase following an extension of the guidanceinitial service term. The fees charged for the first year of services were fixed. Fees for services provided by third-party suppliers were billed on stock compensation paymentsa straight pass-through basis. For the year ended January 31, 2022, we invoiced Cognyte $5.9 million, and Cognyte invoiced us $1.1 million, for transition services provided under the Transition Services Agreement. As of January 31, 2022, the performance of services under the Transition Services Agreement was substantially concluded.

Under the Tax Matters Agreement with Cognyte, we and Cognyte each agreed to nonemployees wouldshare the obligation to pay any taxes as shown on tax returns filed by Cognyte (or any member of its group), on one hand, and us (or any member of our group), on the other hand, such that we will be alignedprimarily responsible for any taxes related to, or arising in connection with our business and Cognyte will be responsible for any taxes related to, or arising in connection with, the requirementsCognyte Business, regardless of which party prepares and files any such tax return and whether such taxes arise prior to or after the Spin-Off. We and Cognyte also agreed to share responsibility for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods, with early adoption permitted. While we continue to assess the potential impact of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842),preparing relevant tax returns, which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarilyresponsibility will depend on itsthe type of tax return and the period for which such tax return is being filed. We and Cognyte agreed to indemnify each other under the Tax Matters Agreement for certain actions or inactions.

The Spin-Off met the criteria for classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on“discontinued operations” in accordance with the balance sheet, the newaccounting guidance will require both types of leases to be recognized on the balance sheet. The ASU is effective for interim

and annual periods beginning after December 15, 2018, with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginningupon completion of the earliest comparative period presentedseparation, and as such, the results of our former Cognyte Business have been classified as discontinued operations in the financial statements as its date of initial application. If an entity chooses the second option, the entity must recast its comparative period financial statements and provide disclosures required by the new standard for the comparative periods. We adopted the new standard on February 1, 2019 using the effective date as our date of initial application. Consequently, financial information will not be updated and disclosures required under the new standard will not be provided for dates and periods before February 1, 2019.

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

We currently anticipate that the adoption of this new standard will materially affect our consolidated balance sheets, by recognizing new right-of-use (“ROU”) assets and lease liabilities for operating leases. We expect adoption of the standard will result in the recognition of ROU assets of approximately $90.0 million to $100.0 million and lease liabilities of approximately $100.0 million to $110.0 million at February 1, 2019, with the most significant impact from recognition of ROU assets and lease liabilities related to our office space operating leases. The impact on our resultsconsolidated statements of operations and consolidated statements of cash flows is not expected to be material. We are implementing a new lease accounting systemfor all periods presented. As of January 31, 2022, there were no assets or liabilities from discontinued operations associated with Cognyte. There was no revenue earned or costs and updatingexpenses incurred by discontinued operations during the year ended January 31, 2022.

The following table summarizes the major classes of line items included within discontinued operations in our processes and controls in preparationconsolidated statements of operations for the adoption of the new standard, including the requirement to provide significant new disclosures about our leasing activities. Please refer to Note 15, “Commitments and Contingencies” for additional information about our leases, including the future minimum lease payments for our operating leases atyears ended January 31, 2019.2021 and 2020:



Year ended January 31,
(in thousands)20212020
Revenue$443,458 $457,109 
Cost of revenue128,043 159,603 
Operating expenses264,132 207,677 
Other income, net6,604 3,041 
Income from discontinued operations before benefit from income taxes57,887 92,870 
Provision for income taxes9,393 10,677 
Net income from discontinued operations48,494 82,193 
Net income from discontinued operations attributable to noncontrolling interests6,107 6,420 
Net income from discontinued operations attributable to Verint Systems Inc. common shares$42,387 $75,773 

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The following table summarizes the assets and liabilities that were transferred to Cognyte on February 1, 2021 and presented as discontinued operations in our consolidated balance sheet as of January 31, 2021:

2.(in thousands)REVENUE RECOGNITIONJanuary 31, 2021
Assets
Current Assets:
Cash and cash equivalents$78,570 
Restricted cash and cash equivalents, and restricted bank time deposits27,042 
Short-term investments4,713 
Accounts receivable, net175,001 
Contract assets, net20,317 
Inventories14,542 
Prepaid expenses and other current assets34,741 
Total current assets of discontinued operations354,926
Property and equipment, net37,152 
Operating lease right-of-use assets31,040 
Goodwill158,183 
Intangible assets, net5,299 
Deferred income taxes7,202 
Other assets42,076 
Total long-term assets of discontinued operations280,952
Total assets of discontinued operations$635,878
Liabilities
Current Liabilities:
Accounts payable$41,512 
Accrued expenses and other current liabilities100,189 
Contract liabilities127,012 
Total current liabilities of discontinued operations268,713
Long-term contract liabilities22,037 
Operating lease liabilities23,174 
Deferred income taxes3,985 
Other liabilities8,922 
Total long-term liabilities of discontinued operations58,118
Total liabilities of discontinued operations$326,831

On February 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts
In connection with Customers (Topic 606), using the modified retrospective method appliedSpin-Off, $17.1 million of accumulated other comprehensive income, net of income taxes, related to thoseforeign currency translation adjustments and foreign exchange contracts thatdesignated as cash flow hedges were not completed astransferred to Cognyte on the Spin-Off Date. Additionally, Verint transferred its interests in Cognyte Technologies Israel Ltd. (formerly Verint Systems Limited) (“CTIL”) on the Spin-Off Date. Prior to the transfer, CTIL was a wholly owned subsidiary of February 1, 2018. Results for reporting periods beginning after February 1, 2018 are presented under ASU No. 2014-09, while prior period amounts are not adjustedVerint and continue to be reportedthe CTIL board of directors declared a cash dividend in accordance with our historic accounting under prior guidance. For contracts that were modified before the effective date of ASU No. 2014-09, we recorded the aggregate effectamount of all modifications when identifying performance obligations$35.0 million payable to Verint, as its sole holder of record of ordinary shares, on January 29, 2021. In April 2021, we received the dividend from Cognyte less applicable withholding taxes. The $78.6 million of cash and allocatingcash equivalents shown in the transaction price in accordance withtable above does not reflect the practical expedient provided for under the new guidance,which permits an entity to record the aggregate effect of all contract modifications that occur before the beginningpayment of the earliest period presented in accordance withdividend, which occurred after the new standardcompletion of the Spin-Off.


3.REVENUE RECOGNITION

Revenue is recognized when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

Under the new standard, an entity recognizes revenue when itsa customer obtains control of promised goods or services in an amount that reflects the consideration that the entity expectswe expect to receive in exchange for those goods or services. To determineWhen an arrangement contains multiple performance obligations, we account for individual performance obligations separately if they are distinct. We recognize revenue recognition for contracts that are withinthrough the scopeapplication of new standard, we perform the following five steps:


1) Identify the contract(s) with a customer
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A contract with a customer exists when (i) we enter into an enforceable contract with the customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or in the case of a new customer, published credit and financial information pertaining to the customer. Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Multiple contracts with a single counterparty entered into at the same time are evaluated to determine if the contracts should be combined and accounted for as a single contract.


2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, we must apply judgment to determine whether promised goods or services are capable of being distinct and are distinct in the context of the contract. If these criteria are not met the promised goods or services are accounted for as a combined performance obligation. Generally, our contracts do not include non-distinct performance obligations, but certain Cyber Intelligence customers require design, development,goods or significant customization of our products to meet their specific requirements, in which case the products and services are combined into one distinct performance obligation.services.


3) Determine the transaction price
The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer. We assess the timing of transfer of goods and services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less, which is the case in the majority of our customer contracts. The primary purpose of our invoicing terms is not to receive or provide financing from or to customers. Our Cyber Intelligence contracts may require an advance payment to encourage customer commitment to the project and protect us from early termination of the contract. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price, if we assessed that it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Typically, our contracts do not provide our customers with any right of return or refund, and we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.


4) Allocate the transaction price to the performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct goods or services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, we must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. We allocate the variable amount to one or more distinct performance obligations but not all or to one or more distinct services that forms a part of a single performance obligation, when the payment terms of the variable amount relate solely to our efforts to satisfy that distinct performance obligation and it results in an allocation that is consistent with the overall allocation objective of ASU No. 2014-09. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation. We determine standalone selling price (“SSP”) based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, we estimate the SSP taking into account available information such as market conditions, including geographic or regional specific factors, competitive positioning, internal costs, profit objectives, and internally approved pricing guidelines related to the performance obligation.


5) Recognize revenue when (or as) the entity satisfies a performance obligation
We satisfy performance obligations either over time or at a point in time depending on the nature of the underlying promise. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. In the case of contracts that include customer acceptance criteria, revenue is not
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recognized until we can objectively conclude that the product or service meets the agreed-upon specifications in the contract.


We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to our customers. Revenue is measured based on consideration specified in a contract with a customer, and excludes taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer.


Shipping and handling activities that are billed to the customer and occur after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of revenue. Historically, these expenses have not been material.


Nature of Goods and Services


We derive and report our revenue in two categories: (a) recurring revenue, which includes bundled SaaS, unbundled SaaS, hosting services, optional managed services, initial and renewal support revenue, and product revenue, including licensing of software products, and the sale of hardware products,warranties, and (b) service and supportnonrecurring revenue, including revenue fromwhich primarily consists of perpetual licenses, hardware, installation services, post-contract customer support (“PCS”), project management, hosting services, cloud deployments, SaaS, managed services, product warranties,and business advisory consulting and training services.


Our bundled SaaS contracts are typically comprised of a right to access our software, maintenance, hosting fees and standard managed services. We do not provide the customer with the contractual right to take possession of the software at any time during the hosting period under these contracts. The customer can only benefit from the SaaS license, maintenance and standard managed services when combined with the hosting service as the hosting service is the only way for the customer to access the software and benefit from the maintenance and managed services. Accordingly, each of the license, maintenance, hosting and standard managed services is not considered a distinct performance obligation in the context of the contract, and are combined into a single performance obligation (“bundled SaaS services”) and recognized ratably over the contract period. Our bundled SaaS customer contracts can consist of fixed, variable, and usage-based fees. Typically, we invoice fees at the outset of the contract, though quarterly or monthly billing terms are included in certain contracts. Certain bundled SaaS contracts include a nonrefundable upfront fee for setup services, which are not distinct from the bundled SaaS services. Non-distinct setup services represent an advanced payment for future bundled SaaS services, and are recognized as revenue when those bundled SaaS services are satisfied, unless the nonrefundable fee is considered to be a material right, in which case the nonrefundable fee is recognized over the expected benefit period, which includes anticipated renewals. We determine SSP for our bundled SaaS services based on the price at which the performance obligation is sold separately, which is observable through past renewal transactions. We satisfy our bundled SaaS services by providing access to our software over time and processing transactions for usage-based contracts. For non-usage based fees, the period of time over which we perform is commensurate with the contract term because that is the period during which we have an obligation to provide the service. The performance obligation is recognized on a time elapsed basis, by day for which the services are provided.

Our software licenses typicallyeither provide forour customers a perpetual right to use our software though we also sell term-based software licenses that provide our customers withor, in the case of unbundled SaaS, the right to use our software for only a fixed term, in most cases between a one-one- and three-year time frame. Generally, our contracts do not provide significant services of integration and customization and installation services are not required to be purchased directly from us. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have concluded that the software license is distinct as the customer can benefit from the software on its own. Software revenue is typically recognized when the software is delivered or made available for download to the customer. We rarely sell our software licenses on a standalone basis and as a result SSP is not directly observable and must be estimated. We apply the adjusted market assessment approach, considering both market conditions and entity specific factors such as assessment of historical data of bundled sales of software licenses in combination with other promised goods and services in order to maximize the use of observable inputs. Software SSP is established based on an appropriate discount from our established list price, taking into consideration whether there are certain stratifications of the population with different pricing practices. Revenue for hardware is recognized at a point in time, generally upon shipment or delivery.

Contracts that require us to significantly customize our software are generally recognized over time as we perform because our performance does not create an asset with an alternative use and we have an enforceable right to payment plus a reasonable profit for performance completed to date. Revenue is recognized over time based on the extent of progress towards completion of the performance obligation. We use labor hours incurred to measure progress for these contracts because it best depicts the transfer of the asset to the customer. Under the labor hours incurred measure of progress, the extent of progress towards completion is measured based on the ratio of labor hours incurred to date to the total estimated labor hours at completion of the distinct performance obligation. Due to the nature of the work performed in these arrangements, the estimation of total labor hours at completion is complex, subject to many variables and requires significant judgment. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in revenue on a cumulative catch-up basis in the period in which the circumstances that gave rise to the revision become known. We use the expected cost plus a margin approach to estimate the SSP of our significantly customized solutions.


Professional services revenues primarily consist of fees for deployment and optimization services, as well as training, and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are performed. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation. We determine SSP for our professional services based on the price at which the performance obligation is sold separately, which is observable through past transactions.


Our SaaS contracts are typically comprised
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Table of a right to access our software, maintenance, and hosting fees. We do not provide the customer the contractual right to take possession of the software at any time during the hosting period under these contracts. The customer can only benefit from the SaaS license and the maintenance when combined with the hosting service as the hosting service is the only way for the customer to access the software and benefit from the maintenance services. Accordingly, each of the license, maintenance, and hosting services is not considered a distinct performance obligation in the context of the contract, and are combined into a single performance obligation (“SaaS services”) and recognized ratably over the contract period. Our SaaS customer contracts can consist of fixed, variable, and usage based fees. Typically, we invoice a portion of the fees at the outset of the contract and then monthly or quarterly thereafter. Certain SaaS contracts include a nonrefundable upfront fee for setup services, which are not distinct from the SaaS services. Non-distinct setup services represent an advanced payment for future SaaS services, and are recognized as revenue when those SaaS services are satisfied, unless the nonrefundable fee is considered to be a material right, in which case the nonrefundable fee is recognized over the expected benefit period, which includes anticipated SaaS renewals. We determine SSP for our SaaS services based on the price at which the performance obligation is sold separately, which is observable through past SaaS renewal transactions. We satisfy our SaaS services by providing access to our software over time and processing transactions for usage based contracts. For non-usage based fees, the period of time over which we perform is commensurate with the contract term because that is the period duringContents

which we have an obligation to provide the service. The performance obligation is recognized on a time elapsed basis, by month for which the services are provided.

Customer support revenue is derived from providing telephoneremote technical support services, bug fixes and unspecified software updates and upgrades to customers on a when-and-if-available basis. Each of these performance obligations provide benefit to the customer on a standalone basis and are distinct in the context of the contract. Each of these distinct performance obligations represent a stand ready obligation to provide service to a customer, which is concurrently delivered and has the same pattern of transfer to the customer, which is why we account for these support services as a single performance obligation. We recognize support services ratably over the contractual term, which typically is one year for perpetual licenses and developone to three years for unbundled SaaS. SSP for support services is developed based on standalone renewal contracts.


Our Customer Engagement solutions are generally sold with a warranty of one year to three years for hardware and 90 days for software. Our Cyber Intelligence solutionsare generally sold with warranties that typically range from 90 days to three years and, in some cases, longer. These warranties do not represent an additional performance obligation as services beyond assuring that the software license and hardware complies with agreed-upon specifications are not provided.


Disaggregation of Revenue


The following table provides information about disaggregated revenue fora disaggregation of our Customer Engagementrecurring and Cyber Intelligence segments by product revenue and service and support revenue, as well as by the recurring or nonrecurring nature of revenue for each business segment.revenue. Recurring revenue is the portion of our revenue that we believe is likely to be renewed in the future, and primarily consists of initial and renewal PCS, SaaS, term-based licenses, managed services, sales-and-usage based royalties, and subscription licenses recognized over time.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 usage 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.
Support revenue, which consists of initial and renewal support.
Nonrecurring revenue primarily consists of our perpetual licenses, long-term customization projects that are recognized over time as control transfers to the customer using a percentage of completion (“POC”) method, consulting, implementation andhardware, installation services, and business advisory consulting and training and hardware.services.

Year Ended January 31,
(in thousands)202220212020
Recurring revenue
Bundled SaaS revenue$183,035 $145,962 $115,925 
Unbundled SaaS revenue139,729 71,990 48,018 
Optional managed services revenue65,648 59,459 56,534 
Total cloud revenue388,412 277,411 220,477 
Support revenue244,717 298,213 313,901 
Total recurring revenue633,129 575,624 534,378 
Nonrecurring revenue
Perpetual revenue138,078 141,840 179,882 
Professional services revenue103,302 112,783 132,265 
Total nonrecurring revenue241,380 254,623 312,147 
Total revenue$874,509 $830,247 $846,525 

  Year Ended January 31, 2019
(in thousands) Customer Engagement Cyber Intelligence Total
Revenue:      
Product $221,721
 $232,929
 $454,650
Service and support 574,566
 200,531
 775,097
Total revenue $796,287
 $433,460
 $1,229,747
       
Revenue by recurrence:      
Recurring revenue $465,671
 $165,265
 $630,936
Nonrecurring revenue 330,616
 268,195
 598,811
Total revenue $796,287
 $433,460
 $1,229,747
ContractBalances

The following table provides a further disaggregation of revenue for our Customer Engagement segment. Cloud revenue primarily consists of SaaS and managed services revenue recognized over time and term-based licenses, which are recognized at a point in time.
(in thousands) Year Ended January 31, 2019
Customer Engagement revenue:  
Cloud $150,743
Other 645,544
  Total Customer Engagement revenue $796,287

ContractBalances


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

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January 31,
(in thousands) January 31, 2019(in thousands)20222021
Accounts receivable, net $375,663
Accounts receivable, net$193,831 $206,157 
Contract assets 63,389
Long-term contract assets (included in other assets) 1,375
Contract assets, netContract assets, net$42,688 $36,716 
Long-term contract assets, net (included in other assets)Long-term contract assets, net (included in other assets)$30,510 $17,210 
Contract liabilities 377,376
Contract liabilities$271,271 $261,033 
Long-term contract liabilities 30,094
Long-term contract liabilities$15,872 $16,502 


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 significantly customized solutions as the 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 had no asset impairment charges related to contract assets inwere immaterial for each of the period.years ended January 31, 2022, 2021, and 2020. There are two customers inwas one customer, an authorized global reseller of our Cyber Intelligence segmentsolutions, that accounted for a combined $34.9 million and $62.3 millionapproximately 14% of our aggregated accounts receivable and contract assets (unbilled amounts previously included in accounts receivable) at January 31, 20192022 and 2021. Credit losses relating to this reseller have historically been immaterial. During the years ended January 31, 2018, respectively. These customers are governmental agencies outside2022 and 2021, we transferred $37.7 million and $26.6 million, respectively, to accounts receivable from contract assets recognized at the beginning of each period, as a result of the U.S. which we believe present insignificant credit risk. right to the transaction consideration becoming unconditional. We recognized $57.4 million and $43.7 million of contract assets during the years ended January 31, 2022 and 2021, respectively. Contract assets recognized during each year primarily related to multi-year unbundled SaaS contracts that are invoiced annually with license revenue recognized upfront.

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 yearyears ended January 31, 20192022 and 2021 from amounts included in contract liabilities at February 1, 2018the beginning of each period was $303.0 million. During the year ended January 31, 2019, we transferred $60.3$247.9 million and $239.2 million, respectively.

RemainingPerformanceObligations

Transaction price allocated to accounts receivable fromremaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes contract assetsliabilities and non-cancelable amounts that will be invoiced and recognized at February 1, 2018, as a result of the right to the transaction consideration becoming unconditional. We recognized $63.8 million of contract assets during the year ended January 31, 2019. Contract assets recognized during the period primarily related to our rights to consideration for work completed but not billed on long-term Cyber Intelligence contracts.

RemainingPerformanceObligations

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. We had $1.0 billion of remaining performance obligations as of January 31, 2019.

We elected to exclude amounts of variable consideration attributable to sales- or usage-based royalties in exchange for a license of our IP from the remaining performance obligations. We currently expect to recognize approximately 65% of our remaining revenue backlog over the next twelve months and the remainder thereafter. The timing and amount of revenue recognition for our remaining
performance obligations is influenced by several factors, including seasonality, the timing of PCS renewals, the timing of
delivery of software licenses, the average length of the contract terms, and the revenue recognition for certain projects, particularly inforeign currency exchange rates.

The following table provides information about when we expect to recognize our Cyber Intelligence segment, that can extend over longer periods of time, delivery under which, for various reasons, may be delayed, modified, or canceled. Further, we have historically generated a large portion of our business each quarter by orders that are sold and fulfilled within the same reporting period. Therefore, the amount of remaining obligations may not be a meaningful indicator of future results.performance obligations:


January 31,
(in thousands)20222021
RPO:
Expected to be recognized within 1 year$447,428 $405,714 
Expected to be recognized in more than 1 year274,404 229,951 
Total RPO$721,832 $635,665 

Costs to Obtain and Fulfill Fulfill Contracts


We capitalize commissions paid to internal sales personnel and agent commissions that are incremental to obtaining customer contracts. We have determined that these commissions are in fact incremental and would not have occurred absent the customer contract. Capitalized sales and agent commissions are amortized on a straight-line basis over the period the goods or services are transferred to the customer to which the assets relate, which ranges from immediate to as long as six years, if commission amounts paid upon renewal are not commensurate with amounts paid on the initial contract. A portion of the initial commission
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payable on the majority of Customer Engagementour contracts is amortized over the anticipated PCS renewal period, which is generally four to six years, due to commissions paid on PCS renewal contracts not being commensurate with amounts paid on the initial contract.


Total capitalized costs to obtain contracts were $36.3$55.8 million as of January 31, 2019,2022, of which $6.5$3.9 million is included in prepaid expenses and other current assets and $29.8$51.9 million is included in other assets on our consolidated balance sheet. Total capitalized costs to obtain contracts were $48.4 million as of January 31, 2021, of which $2.0 million is included in prepaid expenses and other current assets and $46.4 million is included in other assets on our consolidated balance sheet. During the yearyears ended January 31, 2019,2022, 2021, and 2020, we expensed $45.7$33.1 million, $26.1 million and $26.2 million, respectively, of sales and agent commissions, which are included in selling, general and administrative expenses and there waswere no impairment losslosses recognized for these capitalized costs.


We capitalize costs incurred to fulfill our contracts when the costs relate directly to the contract and are expected to generate resources that will be used to satisfy the performance obligation under the contract and are expected to be recovered through

revenue generated under the contract. Costs to fulfill contracts are expensed to cost of revenue as we satisfy the related performance obligations.Total capitalized costs to fulfill contracts were $14.9$6.1 million as of January 31, 2019,2022, of which $10.3$0.2 million is included in deferred cost of revenueprepaid expenses and $4.6other current assets and $5.9 million is included in long-term deferred costother assets on our consolidated balance sheet. Total capitalized costs to fulfill contracts were $6.5 million as of revenueJanuary 31, 2021, of which $0.2 million is included in prepaid expenses and other current assets and $6.3 million is included in other assets on our consolidated balance sheet. Deferred cost of revenue is classified in its entirety as current or long-term based on whether the related revenue will be recognized within twelve months of the origination date of the arrangement. The amounts capitalized primarily relate to nonrecurringone-time costs incurred in the initial phase of our bundled SaaS arrangements (i.e., setup costs), which consist of costs related to the installation of systems and processes and prepaid third-party cloud infrastructure costs.processes. Capitalized setup costs are amortized on a straight-line basis over the expected period of benefit, which includes anticipated contract renewals or extensions, consistent with the transfer to the customer of the services to which the asset relates. During the yearyears ended January 31, 2019,2022, 2021, and 2020, we amortized $18.3$3.2 million, $2.7 million, and $1.7 million, respectively, of contract fulfillment costs.


Financial Statement Impact of Adoption

We adopted ASU No. 2014-09 utilizing the modified retrospective method. The cumulative impact of applying the new guidance to all contracts with customers that were not completed as of February 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new standard, the following adjustments were made to accounts on the consolidated balance sheet as of February 1, 2018:4.NET (LOSS) INCOME PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC.


(in thousands) Balance at January 31, 2018 Adjustments from Adopting ASU No. 2014-09 Balance at February 1, 2018
Assets:      
Accounts receivable, net $296,324
 $53,682
 $350,006
Contract assets 
 69,217
 69,217
Deferred cost of revenue 6,096
 2,056
 8,152
Prepaid expenses and other current assets 82,090
 (829) 81,261
Long-term deferred cost of revenue 2,804
 2,193
 4,997
Deferred income taxes 30,878
 (2,248) 28,630
Other assets 52,037
 14,912
 66,949
       
Liabilities:      
Accrued expenses and other current liabilities 220,265
 (46,062) 174,203
Contract liabilities 196,107
 139,517
 335,624
Long-term contract liabilities 24,519
 6,518
 31,037
Deferred income taxes 35,305
 963
 36,268
       
Stockholders' Equity:      
Total stockholders' equity 1,132,336
 38,047
 1,170,383

In connection with the adoption of the new revenue recognition accounting standard, we decreased our accumulated deficit by $38.0 million, due to uncompleted contracts at February 1, 2018, for which $17.2 million of revenue will not be recognized in future periods under the new standard. Upon adoption, we deferred $4.2 million of previously expensed contract costs and reversed $2.9 million of expenses due to the new standard precluding the recognition or deferral of costs to simply obtain an even profit margin over the contract term, which was acceptable under prior contract accounting guidance. We capitalized $16.9 million of incremental sales commission costs at the adoption date directly related to obtaining customer contracts and are amortizing these costs as we satisfy the underlying performance obligations, which for certain contracts can include anticipated renewal periods. The acceleration of revenue that was deferred under prior guidance as of February 1, 2018, was primarily attributable to being able to recognize minimum guaranteed amounts upon delivery of our software rather than over the term of the arrangement, the ability to recognize professional services revenue in advance of achieving billing milestones, no longer requiring the separation of promised goods or services, such as software licenses, technical support, or unspecified update rights on the basis of vendor specific objective evidence, and the impact of allocating the transaction price to the performance obligations in the contract on a relative basis using SSP rather than allocating under the residual method, which allocates the entire arrangement discount to the delivered performance obligations.


The net change in deferred income taxes of $3.2 million is primarily due to the deferred tax effects resulting from the adjustment to accumulated deficit for the cumulative effect of applying ASU No. 2014-09 to active contracts as of the adoption date.

We made certain presentation changes to our consolidated balance sheet on February 1, 2018 to comply with ASU No. 2014-09. Prior to adoption of the new standard, we offset accounts receivable and contract liabilities (previously presented as deferred revenue on our consolidated balance sheet) for unpaid deferred performance obligations included in contract liabilities. Under the new standard, we record accounts receivable and related contract liabilities for noncancelable contracts with customers when the right to consideration is unconditional. Upon adoption, the right to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time were reclassified from accounts receivable to contract assets. In addition, we reclassified amounts related to billings in excess of costs and estimated earnings on uncompleted contracts, which under prior guidance was included in accrued expenses and other liabilities on our consolidated balance sheet, to contract liabilities upon adoption.

Impact of ASU No. 2014-09 on Financial Statement Line Items

The impact of adoption of ASU No. 2014-09 on our consolidated balance sheet as of January 31, 2019 and on our consolidated statement of operations for the year ended January 31, 2019 was as follows:

  January 31, 2019
(in thousands) As Reported Balances without Adoption of ASU No. 2014-09 Effect of Change Higher (Lower)
Consolidated Balance Sheet      
Assets:      
Accounts receivable, net $375,663
 $260,630
 $115,033
Contract assets 63,389
 
 63,389
Deferred cost of revenue 10,302
 11,574
 (1,272)
Prepaid expenses and other current assets 87,474
 93,470
 (5,996)
Long-term deferred cost of revenue 4,630
 1,196
 3,434
Deferred income taxes 21,040
 23,222
 (2,182)
Other assets 78,871
 48,499
 30,372
       
Liabilities:      
Accrued expenses and other current liabilities 208,481
 248,120
 (39,639)
Contract liabilities 377,376
 226,423
 150,953
Long-term contract liabilities 30,094
 29,160
 934
Deferred income taxes 43,171
 42,241
 930
       
Stockholders' Equity:      
Total stockholders' equity 1,260,804
 1,171,204
 89,600

While the table below indicates that calculated revenue for the year ended January 31, 2019 without the adoption of ASU No. 2014-09 would have been lower than the revenue we are reporting under the new accounting guidance, this lower calculated revenue results not only from the impact of the new accounting guidance, but also from changes we made to our business practices in anticipation and as a result of the new accounting guidance. These business practice changes adversely impact the calculation of revenue under the prior accounting guidance and include, among other things, the way we manage our professional services projects, offer and deploy our solutions, structure certain customer contracts, and make pricing decisions. While the many variables, required assumptions, and other complexities associated with these business practice changes make it impractical to precisely quantify the impact of these changes, we believe that calculated revenue under the prior accounting guidance, but absent these business practice changes, would have been closer to the revenue we are reporting under the new accounting guidance.


  Year Ended
January 31, 2019
(in thousands) As Reported Balances without Adoption of ASU No. 2014-09 Effect of Change Higher (Lower)
Consolidated Statement of Operations      
Revenue:      
Product $454,650
 $418,531
 $36,119
Service and support 775,097
 763,444
 11,653
       
Cost of revenue:      
Product 129,922
 124,705
 5,217
Service and support 293,888
 294,580
 (692)
       
Expenses and Other:      
Selling, general and administrative 426,183
 440,124
 (13,941)
Provision for income taxes 7,542
 1,842
 5,700
Net income 70,220
 18,732
 51,488

The adoption of ASU No. 2014-09 had no impact to cash provided by or used in operating, investing, or financing activities on our consolidated statement of cash flows.


3.NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC.
The following table summarizes the calculation of basic and diluted net (loss) income (loss) per common share attributable to Verint Systems Inc. for the years endedJanuary 31, 2019, 2018,2022, 2021, and 2017:2020:

Year Ended January 31,
(in thousands, except per share amounts) 202220212020
Net income (loss) from continuing operations$15,651 $(48,601)$(46,510)
Net income from discontinued operations— 48,494 82,193 
Net income (loss)15,651 (107)35,683 
Net income attributable to noncontrolling interests from continuing operations1,238 1,053 579 
Net income attributable to noncontrolling interests from discontinued operations— 6,107 6,420 
Net income (loss) attributable to Verint Systems Inc.14,413 (7,267)28,684 
Dividends on preferred stock(18,922)(7,656)— 
Net (loss) income attributable to Verint Systems Inc. for basic net (loss) income per common share(4,509)(14,923)28,684 
Dilutive effect of dividends on preferred stock— — — 
Net (loss) income attributable to Verint Systems Inc. for diluted net (loss) income per common share$(4,509)$(14,923)$28,684 
Net (loss) income attributable to Verint Systems Inc. common shares
Net loss from continuing operations attributable to Verint Systems Inc. common shares(4,509)(57,310)(47,089)
Net income from discontinued operations attributable to Verint Systems Inc. common shares— 42,387 75,773 
Weighted-average shares outstanding:   
Basic65,591 65,173 66,129 
Dilutive effect of employee equity award plans— — — 
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  Year Ended January 31,
(in thousands, except per share amounts)  2019 2018 2017
Net income (loss) $70,220
 $(3,454) $(26,246)
Net income attributable to noncontrolling interests 4,229
 3,173
 3,134
Net income (loss) attributable to Verint Systems Inc. $65,991
 $(6,627) $(29,380)
Weighted-average shares outstanding:  
  
  
Basic 64,913
 63,312
 62,593
Dilutive effect of employee equity award plans 1,332
 
 
Dilutive effect of 1.50% convertible senior notes 
 
 
Dilutive effect of warrants 
 
 
Diluted 66,245
 63,312
 62,593
Net income (loss) per common share attributable to Verint Systems Inc.:  
  
  
Basic $1.02
 $(0.10) $(0.47)
Diluted $1.00
 $(0.10) $(0.47)
Year Ended January 31,
(in thousands, except per share amounts) 202220212020
Dilutive effect of 2021 Notes— — — 
Dilutive effect of 2014 Notes— — — 
Dilutive effect of warrants— — — 
Dilutive effect of assumed conversion of preferred stock— — — 
Diluted65,591 65,173 66,129 
Basic net (loss) income per common share attributable to Verint Systems Inc.:   
Continuing Operations$(0.07)$(0.88)$(0.71)
Discontinued Operations— 0.65 1.14 
Total basic net (loss) income per common share attributable to Verint Systems Inc.$(0.07)$(0.23)$0.43 
Diluted net (loss) income per common share attributable to Verint Systems Inc.:
Continuing operations$(0.07)$(0.88)$(0.71)
Discontinued operations— 0.65 1.14 
Total diluted net (loss) income per common share attributable to Verint Systems Inc.$(0.07)$(0.23)$0.43 


We excluded the following weighted-average potential common shares from the calculations of diluted net (loss) income (loss) per common share during the applicable periods because their inclusion would have been anti-dilutive: 
Year Ended January 31,
(in thousands) 202220212020
Common shares excluded from calculation:
Stock options and restricted stock-based awards1,580 1,337 2,126 
2014 Notes481 6,002 6,205 
Warrants117 6,205 6,205 
Series A Preferred Stock5,498 2,743 — 
Series B Preferred Stock3,282 — — 
  Year Ended January 31,
(in thousands)  2019 2018 2017
Stock options and restricted stock-based awards 276
 1,187
 1,097
1.50% convertible senior notes 6,205
 6,205
 6,205
Warrants 6,205
 6,205
 6,205



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


Our 1.50%Upon our adoption of ASU No. 2020-06 on February 1, 2021, use of the if-converted method is required for calculating any potential dilutive effect of convertible senior notes will not impactinstruments. For the calculation of diluted net income per share unlessyear ended January 31, 2022, the average price of our common stock as calculated in accordance withdid not exceed the terms$62.08 per share conversion price of our 2021 Notes, and other requirements for the indenture governing2021 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 Notes,average market price of our common stock for a quarterly reporting period exceeds the conversion price.

The Capped Calls (as defined in Note 8, “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 $64.46 per share. Likewise, diluted net income per share will not include any$100.00.

There is no impact on our calculation of the dilutive effect fromof our 2014 Notes upon adoption of ASU No. 2020-06 as we were obligated to settle the principal amount of our 2014 Notes in cash and settled the conversion spread with shares of our common stock in connection with the maturity of the 2014 Notes. Following the completion of the Spin-Off on February 1, 2021, the strike prices of the conversion features of our 2014 Notes and Warrants (as defined in Note 7,8, “Long-Term Debt”) unlesswere reduced to $40.55 per share and $47.18 per share, respectively, which increased the average priceequivalent number of ourunderlying common stock, as calculated under the termsshares to 9,541,000 and 9,865,000, respectively.

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Table of the Warrants, exceeds the exercise price of $75.00 per share.Contents

Our Note Hedges (as defined in Note 7,8, “Long-Term Debt”) dodid not impact the calculation ofour diluted net income (loss)earnings per common share under the treasury stock method,calculations because their effect would be anti-dilutive. However, in connection with the event of an actual conversion of any or allmaturity of the 2014 Notes, the common shares that would be delivered to us under the Note Hedges would neutralizeneutralized the dilutive effect of the common shares that we would issueissued under the Notes.2014 Notes to settle the conversion premium. As a result, actual conversion of any or allthe settlement of the outstanding 2014 Notes woulddid not increase our outstanding common stock. Up

Our Warrants (as defined in Note 8, “Long-Term Debt”) had a dilutive impact on net income per common share to 6,205,000the extent that we reported net income for the applicable period and the average market value of our common shares could, however, be issued upon exercisestock exceeded the strike price of the Warrants. The Warrants expired incrementally on a series of expirations dates between August 30, 2021 and January 21, 2022. At each expiration date the Warrants were exercised where 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. There are no Warrants outstanding as of January 31, 2022.

Further details regarding the 2021 Notes, Capped Calls, 2014 Notes, Note Hedges, and the Warrants appear in Note 7,8, “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 calculation of diluted net income per common share for the years ended January 31, 2022 and 2021, as their effect would have been anti-dilutive. Further details regarding the Preferred Stock investment appear in Note 10, “Convertible Preferred Stock”.

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


The following tables summarize our cash, cash equivalents, and short-term investments as of January 31, 20192022 and 2018:2021:


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 

January 31, 2021
(in thousands)Cost BasisGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents:
Cash and bank time deposits$243,183 $— $— $243,183 
Money market funds342,090 — — 342,090 
Total cash and cash equivalents$585,273 $ $ $585,273 
Short-term investments:
Bank time deposits$46,300 $— $— $46,300 
Total short-term investments$46,300 $ $ $46,300 

90
  January 31, 2019
(in thousands)  Cost Basis Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Cash and cash equivalents:        
Cash and bank time deposits $359,266
 $
 $
 $359,266
Money market funds 10,709
 
 
 10,709
Total cash and cash equivalents $369,975
 $
 $
 $369,975
         
Short-term investments:        
Bank time deposits $32,329
 $
 $
 $32,329
Total short-term investments $32,329
 $
 $
 $32,329

  January 31, 2018
(in thousands) Cost Basis Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Cash and cash equivalents:        
Cash and bank time deposits $337,756
 $
 $
 $337,756
Money market funds 186
 
 
 186
Total cash and cash equivalents $337,942
 $
 $
 $337,942
         
Short-term investments:        
Corporate debt securities (available-for-sale) $2,002
 $
 $
 $2,002
Bank time deposits 4,564
 
 
 4,564
Total short-term investments $6,566
 $
 $
 $6,566

Bank time deposits which are reported within short-term investments consist of deposits held outside of the U.S.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.

As of January 31, 2018, all of our available-for-sale investments had contractual maturities of less than one year. Gains and losses on sales of available-for-sale securities during the years ended January 31, 2019, 2018, and 2017 were not significant.


During the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, proceeds from maturities and sales of available-for-sale securitiesshort-term investments were $33.1$46.3 million, $8.7$69.8 million, and $52.8$5.8 million, respectively.


The decrease in cash and cash equivalents primarily related to refinancing of our outstanding borrowings, further details of which appear in Note 8, “Long-term Debt”.
5.
BUSINESS COMBINATIONS



6.BUSINESS COMBINATIONS AND DIVESTITURES

Year Ended January 31, 20192022


ForeSee Results, Inc.Conversocial Limited


On December 19, 2018,August 23, 2021, we completed the acquisition of all of the outstanding shares of ForeSee Results, Inc. and all of the outstanding membership interests of RSR Acquisition LLCConversocial Limited (together “ForeSee”with its subsidiaries, “Conversocial”), a leading cloud Voice of the Customer (“VOC”) vendor with software solutions designedmessaging platform that enables brands to measuredeliver superior customer experiences. Conversocial has offices in London, United Kingdom and benchmark a 360-degree view of the customer across every touch point. ForeSee is based in Ann Arbor, Michigan.New York, New York.


The purchase price of $64.9 million consisted of $58.9(i) $53.4 million of cash paid at closing, funded from cash on hand, and a post-closing deferred purchase price adjustment of $6.0 million of cash to be paid in April 2019 or earlier upon the resolution of a contingency, partially offset by $0.4$3.2 million of ForeSee’sConversocial’s cash received in the acquisition, resulting in net cash consideration at closing of $58.5 million. The$50.2 million; and (ii) $0.2 million of other purchase price is subject to customary purchase price adjustments related to the final determination of ForeSee’s cash, net working capital, transaction expenses, and taxes as of December 19, 2018. The acquired business is being integrated into our Customer Engagement operating segment.

adjustments. The purchase price for ForeSeeConversocial 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 valuevalues assigned to identifiable intangible assets acquired were determined primarily by using the income approach, which discounts the expected future cash flows to present value using estimates and assumptions determined by management.


Among the factors contributing to the recognition of goodwill as a component of the ForeSeeConversocial purchase price allocation were synergies in products and technologies, and the addition of a skilled, assembled workforce. The $33.7acquisition resulted in the recognition of $31.6 million of goodwill, has been assigned to our Customer Engagement segment. Forof which $0.5 million is deductible for income tax purposes $3.3 million of this goodwill is deductible and $30.4$31.1 million is not deductible.


In connection with the purchase price allocation for ForeSee,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 $10.0$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 $10.4$1.2 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $5.6$0.7 million of which is included within prepaid expenses and other current assets and $4.8$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 related to the acquisition of ForeSee,Conversocial, consisting primarily of professional fees and integration expenses, were $3.3$3.4 million for the year ended January 31, 2019,2022, and were expensed as incurred and are included in selling, general and administrative expenses.


Revenue and net income (loss) attributable to ForeSeeConversocial included in our consolidated statement of operations for the year ended January 31, 2019 was2022 were not material. A loss before provision (benefit)

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.

91

Table of $6.0 million attributable to ForeSee is included in our consolidated statement of operations for the year ended January 31, 2019.Contents

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


(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 relationships9,800 
Developed technology9,900 
Trademarks and trade names200 
Total identifiable intangible assets19,900
Goodwill31,574
Total purchase price allocation$53,219
(in thousands) Amount
Components of Purchase Price:  
Cash $58,901
Deferred purchase price consideration 6,000
Total purchase price $64,901
   
Allocation of Purchase Price:  
Net tangible assets (liabilities):  
Accounts receivable $7,245
Other current assets, including cash acquired 8,145
Other assets 6,586
Current and other liabilities (12,993)
Contract liabilities - current and long-term (10,037)
Deferred income taxes (11,343)
Net tangible liabilities (12,397)
Identifiable intangible assets:  
Customer relationships 19,500
Developed technology 20,700
Trademarks and trade names 3,400
Total identifiable intangible assets 43,600
Goodwill 33,698
Total purchase price allocation $64,901


The acquired customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of seven and nine years, fourfive years, and four years,one year, respectively, the weighted average of which is approximately 6.15.9 years. The acquired identifiable intangible assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized, over their estimated useful lives.


Other Business Combinations


During the three months ended July 31, 2021, we completed the acquisition of certain assets from a leader in contact center hiring automation that qualified as a business combination. This transaction resulted in increases to goodwill, customer relationships, and acquired technology intangible assets, but was not material to our consolidated financial statements, and as a result, additional business combination disclosures for this acquisition have been omitted. There were no other business combinations during the year ended January 31, 2022.

Year Ended January 31, 2021

We did not complete any business combinations during the year ended January 31, 2021.

Year Ended January 31, 2020

During the year ended January 31, 2019,2020, we completed three other3 business combinations:


On July 18, 2018,February 1, 2019, we completed the acquisition of a SaaS workforce optimization company focused on the small and medium-sized business that has been integrated into(“SMB”) market as part of our Customer Engagement operating segment.strategy to expand our SMB portfolio.
On November 8, 2018,July 25, 2019, we completed the acquisition of a business that has been integratedSaaS company focused on cloud-based knowledge management solutions as part of our strategy to add additional artificial intelligence and machine learning capabilities into our Cyber Intelligence operating segment, in whichportfolio.
On January 13, 2020, we hadcompleted the acquisition of a $2.2 million, or approximately 19%, noncontrolling equity investment prior to the acquisition.
SaaS based company providing web and mobile session replay solutions.
On November 9, 2018, we acquired certain technology and other assets for use in our Customer Engagement operating segment in a transaction that qualified as a business combination.


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


92

The combined consideration for these business combinations was approximately $51.3$65.9 million,, including $33.1 and consisted of (i) $57.4 million of combined cash paid at closings or shortly thereafter, partially offset by $2.2 million of cash acquired, resulting in net cash consideration at closing of $55.2 million; (ii) the closings.fair value of the contingent consideration arrangements described below of $8.2 million; and (iii) $0.3 million of other purchase price adjustments. For two2 of thesethe business combinations, we also agreed to make potential additional cash payments to the respective former shareholders aggregating up to approximately $35.5$14.3 million,, contingent upon the achievement of certain performance targets over periods extendingthat extended through January 2021. The2022, the fair valuevalues of these contingent consideration obligations waswhich were estimated to be $15.9$8.2 million at the applicable acquisition dates. The acquisition date fair value of our previously held equity interest was approximately $2.2 million and was included in the measurement of the consideration transferred. Cash paid for these business combinations was funded by cash on hand.


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



Included among the factors contributing to the recognition of goodwill in these transactions were synergies in products and technologies, and the addition of skilled, assembled workforces. OfThese acquisitions resulted in the $25.1recognition of a combined $39.1 million of goodwill, associated with these business combinations, $14.3$15.7 million and $10.8 million was assigned to our Customer Engagement and Cyber Intelligence segments, respectively, andof which is deductible for income tax purposes is not deductible.purposes.


Revenue and net income (loss) attributable to these business acquisitions for the year ended January 31, 20192020 were not material.


Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to these acquisitions,business combinations, totaled $0.9$1.3 million and $5.4 million for the yearyears ended January 31, 2019.2021 and 2020, respectively. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses.


The purchase price allocations for the business combinations completed during the year ended January 31, 2019 have been prepared on a preliminary basis and changes to those allocations may occur as additional information becomes available during the respective measurement periods (up to one year from the respective acquisition dates). Fair values still under review include values assigned to identifiable intangible assets, contingent consideration, deferred income taxes, and reserves for uncertain income tax positions.

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

(in thousands) Amount
Components of Purchase Prices:  
Cash $33,138
Fair value of contingent consideration 15,875
Fair value of previously held equity interest 2,239
Total purchase prices $51,252
   
Allocation of Purchase Prices:  
Net tangible assets (liabilities):  
Accounts receivable $1,897
Other current assets, including cash acquired 6,901
Other assets 9,432
Current and other liabilities (2,151)
Contract liabilities - current and long-term (771)
Deferred income taxes (7,914)
Net tangible assets 7,394
Identifiable intangible assets:  
Customer relationships 7,521
Developed technology 10,692
Trademarks and trade names 500
Total identifiable intangible assets 18,713
Goodwill 25,145
Total purchase price allocations $51,252

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

Year Ended January 31, 2018

During the year ended January 31, 2018, we completed seven business combinations:

On February 1, March 20, October 3, November 3, December 19, and December 21, 2017, we completed acquisitions of businesses in our Customer Engagement operating segment. One of the transactions was an asset acquisition that qualified as a business combination, and another of which retained a noncontrolling interest.
On July 1, 2017, we completed the acquisition of a business in our Cyber Intelligence operating segment.



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

The combined consideration for these business combinations was approximately $134.8 million, including $106.0 million of combined cash paid at the closings. For five of these business combinations, we also agreed to make potential additional cash payments to the respective former shareholders aggregating up to approximately $47.3 million, contingent upon the achievement of certain performance targets over periods extending through January 2022. The fair value of these contingent consideration obligations was estimated to be $25.9 million at the applicable acquisition dates. Cash paid for these business combinations was funded by cash on hand.

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

Included among the factors contributing to the recognition of goodwill in these transactions were synergies in products and technologies, and the addition of skilled, assembled workforces. Of the $80.2 million of goodwill associated with these business combinations, $76.4 million and $3.8 million was assigned to our Customer Engagement and Cyber Intelligence segments, respectively. For income tax purposes, $14.5 million of this goodwill is deductible and $65.7 million is not deductible.


Revenue and the impact on net loss attributable to these acquisitions for the year ended January 31, 2018 were not material.

Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to these acquisitions, totaled $2.5 million and $4.9 million for the years ended January 31, 2019 and 2018, respectively. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses.

The purchase price allocations for the business combinations completed during the year ended January 31, 20182020 are final.


The following table sets forth the components and the allocations of the combined purchase prices for the business combinations completed during the year ended January 31, 2018,2020, including adjustments identified subsequent to the respective valuation dates,date, none of which were material:



(in thousands)Amount
Components of Purchase Prices:
Cash$57,355 
Fair value of contingent consideration8,230 
Other purchase price adjustments281 
Total purchase prices$65,866
Allocation of Purchase Prices:
Net tangible assets (liabilities):
Accounts receivable$1,790 
Other current assets, including cash acquired6,590 
Other assets3,799 
Current and other liabilities(5,428)
Contract liabilities - current and long-term(3,240)
Deferred income taxes(2,719)
Net tangible assets792
Identifiable intangible assets:
Customer relationships11,847 
Developed technology13,083 
Trademarks and trade names1,000 
Total identifiable intangible assets25,930
Goodwill39,144
Total purchase prices allocation$65,866

93

(in thousands) Amount
Components of Purchase Prices:  
Cash $106,049
Fair value of contingent consideration 25,874
Other purchase price adjustments 2,897
Total purchase prices $134,820
   
Allocation of Purchase Prices:  
Net tangible assets (liabilities):  
Accounts receivable $4,184
Other current assets, including cash acquired 15,108
Other assets 2,765
Current and other liabilities (12,512)
Contract liabilities - current and long-term (4,424)
Deferred income taxes (7,381)
Net tangible liabilities (2,260)
Identifiable intangible assets:  
Customer relationships 24,812
Developed technology 29,614
Trademarks and trade names 2,456
Total identifiable intangible assets 56,882
Goodwill 80,198
Total purchase price allocations $134,820
Table of Contents

For these business acquisitions, customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of from threeseven years to tennine years, from threefour years to eightfive years, and from one yearfour years to sevenfive years, respectively, the weighted average of which is approximately 6.86.4 years.


Year Ended January 31, 2017

Contact Solutions, LLC

On February 19, 2016, we completed the acquisition of Contact Solutions, LLC (“Contact Solutions”), a provider of real-time, contextual self-service solutions, based in Reston, Virginia. The purchase price consisted of $66.9 million of cash paid at closing, and a $2.5 million post-closing purchase price adjustment based upon a determination of Contact Solutions’ acquisition-date working capital, which was paid during the three months ended July 31, 2016. The cash paid for this acquisition was funded with cash on hand.

The purchase price for Contact Solutions was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquired were determined primarily by using the income approach, which discounts 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 Contact Solutions purchase price allocation were synergies in products and technologies, and the addition of a skilled, assembled workforce. This goodwill was assigned to our Customer Engagement segment and is deductible for income tax purposes.

In connection with the purchase price allocation for Contact Solutions, 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 calculates 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 $0.6 million of current and long-term contract liabilities, representing the estimated fair value of undelivered performance obligations for which payment had been received, which is being recognized as revenue as the underlying performance obligations are delivered. For undelivered performance obligations

for which payment had not yet been received, we recorded a $2.9 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $1.2 million of which was included within prepaid expenses and other current assets, and $1.7 million of which was included in other assets. We are amortizing this asset over the underlying delivery periods, which adjusts the revenue we recognize for providing these services to its estimated fair value.

Transaction and related costs directly related to the acquisition of Contact Solutions, consisting primarily of professional fees and integration expenses, were $0.2 million and $1.4 million for the years ended January 31, 2018 and 2017, respectively, and were expensed as incurred and are included in selling, general and administrative expenses.

Revenue attributable to Contact Solutions included in our consolidated statement of operations for the year ended January 31, 2017 was not material. Contact Solutions reported a loss before provision (benefit) for income taxes of $8.5 million, which is included in our consolidated statement of operations for the year ended January 31, 2017.

OpinionLab, Inc.

On November 16, 2016, we completed the acquisition of all of the outstanding shares of OpinionLab, Inc. (“OpinionLab”), a leading SaaS provider of omnichannel Voice of Customer (“VoC”) feedback solutions which help organizations collect, understand, and leverage customer insights, helping drive smarter, real-time business action. OpinionLab is based in Chicago, Illinois.

The purchase price consisted of $56.4 million of cash paid at the closing, funded from cash on hand, partially offset by $6.4 million of OpinionLab’s cash received in the acquisition, resulting in net cash consideration at closing of $50.0 million. We also agreed to pay potential additional future cash consideration of up to $28.0 million, contingent upon the achievement of certain performance targets over the period from closing through January 31, 2021, the acquisition date fair value of which was estimated to be $15.0 million. The purchase price was subject to customary purchase price adjustments related to the final determination of OpinionLab’s cash, net working capital, transaction expenses, and taxes as of November 16, 2016. The acquired business has been integrated into our Customer Engagement operating segment.

The purchase price for OpinionLab was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquired were determined primarily by using the income approach, which discounts 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 OpinionLab purchase price allocation were synergies in products and technologies, and the addition of a skilled, assembled workforce. This goodwill was assigned to our Customer Engagement segment and is not deductible for income tax purposes.

In connection with the purchase price allocation for OpinionLab, 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 calculates 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 $3.1 million of current and long-term contract liabilities, representing the estimated fair value of undelivered performance obligations for which payment had been received, which is being recognized as revenue as the underlying performance obligations are delivered. For undelivered performance obligations for which payment had not yet been received, we recorded a $5.4 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $3.4 million of which was included within prepaid expenses and other current assets, and $2.0 million of which was included in other assets. We are amortizing this asset over the underlying delivery periods, which adjusts the revenue we recognize for providing these services to its estimated fair value.

Transaction and related costs directly related to the acquisition of OpinionLab, consisting primarily of professional fees and integration expenses, were $0.9 million and $0.6 million for the years ended January 31, 2018 and 2017, respectively, and were expensed as incurred and are included in selling, general and administrative expenses.

Revenue and (loss) income before provision (benefit) for income taxes attributable to OpinionLab included in our consolidated statement of operations for the year ended January 31, 2017 were not material.

The following table sets forth the components and the allocation of the purchase price for our acquisitions of Contact Solutions and OpinionLab.

(in thousands) Contact Solutions OpinionLab
Components of Purchase Price:  
  
Cash paid at closing $66,915
 $56,355
Fair value of contingent consideration 
 15,000
Other purchase price adjustments 2,518
 
Total purchase price $69,433
 $71,355
     
Allocation of Purchase Price:  
  
Net tangible assets (liabilities):  
  
Accounts receivable $8,102
 $748
Other current assets, including cash acquired 2,392
 10,625
Property and equipment, net 7,007
 298
Other assets 1,904
 2,036
Current and other liabilities (4,943) (1,600)
Contract liabilities - current and long-term (642) (3,082)
Deferred income taxes 
 (9,877)
Net tangible assets (liabilities) 13,820
 (852)
Identifiable intangible assets:  
  
Customer relationships 18,000
 19,100
Developed technology 13,100
 10,400
Trademarks and trade names 2,400
 1,800
Total identifiable intangible assets 33,500
 31,300
Goodwill 22,113
 40,907
Total purchase price allocation $69,433
 $71,355

For the acquisition of Contact Solutions, the acquired customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of ten years, four years, and five years, respectively, the weighted average of which was approximately 7.3 years.

For the acquisition of OpinionLab, the acquired customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of ten years, six years, and four years, respectively, the weighted average of which was approximately 8.3 years.

The weighted-average estimated useful life of all finite-lived identifiable intangible assets acquired during the year ended January 31, 2017 was 7.8 years.

The acquired identifiable intangible assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized, over their estimated useful lives.

The purchase price allocations for business combinations completed during the year ended January 31, 2017 are final.

Other Business Combinations

During the year ended January 31, 2017, we completed two transactions that qualified as business combinations in our Customer Engagement segment. These business combinations were not material to our consolidated financial statements individually or in the aggregate.

Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to these acquisitions, totaled $0.7 million, and $0.6 million for the years ended January 31, 2018, and 2017 respectively. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses.

Other Business Combination Information


The pro forma impact of all business combinations completed during the three years ended January 31, 20192022 was not material to our historical consolidated operating results and is therefore not presented.


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


For the years ended January 31, 2019, 2018,2022 and 2017,2020, we recorded charges of $0.9 million and $4.9 million, respectively, and we recorded a benefit of $3.6$0.8 million a benefit of $8.3 million, and a charge of $7.3 million, respectively,in the year ended January 31, 2021, within selling, general and administrative expenses for changes in the fair values of contingent consideration obligations associated with business combinations. The aggregate fair value of the remaining contingent consideration obligations associated with business combinations was $61.3$7.8 million at January 31, 2019,2022, all of which $28.4 million was recorded within accrued expenses and other current liabilities, and $32.9 million was recorded within other liabilities.


Payments of contingent consideration earned under these agreements were $13.6$9.6 million, $9.4$15.2 million, and $3.3$29.7 million for the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, respectively.



Divestiture
6.
INTANGIBLE ASSETS AND GOODWILL

Acquisition-relatedIn January 2020, we completed the sale of an insignificant subsidiary which qualified as a separate business, as it no longer fit with our strategic direction or growth targets. In accordance with the terms of the sale agreement, the aggregate purchase price is equal to a percentage of net sales of the former subsidiary’s products during the thirty-six month period following the transaction closing date. We determined the estimated fair value of the contingent consideration with the assistance of a third-party valuation specialist and estimates made by management. The transaction reduced goodwill by $1.1 million and intangible assets consistedby $1.9 million. The transaction resulted in a loss of the followingapproximately $2.2 million, which was recorded as part of January 31, 2019selling, general, and 2018:
  January 31, 2019
(in thousands) Cost 
Accumulated
Amortization
 Net
Intangible assets with finite lives:  
  
  
Customer relationships $452,918
 $(299,549) $153,369
Acquired technology 285,230
 (221,145) 64,085
Trade names 12,859
 (5,130) 7,729
Distribution network 4,440
 (4,440) 
Total intangible assets $755,447
 $(530,264) $225,183
  January 31, 2018
(in thousands) Cost 
Accumulated
Amortization
 Net
Intangible assets, all with finite lives:  
  
  
Customer relationships $438,664
 $(281,592) $157,072
Acquired technology 273,156
 (212,571) 60,585
Trade names 26,820
 (18,570) 8,250
Non-competition agreements 3,047
 (2,861) 186
Distribution network 4,440
 (4,440) 
Total intangible assets $746,127
 $(520,034) $226,093

Inadministrative expenses in our consolidated statement of operations for the year ended January 31, 2019,2020. Please refer to Note 14, “Fair Value Measurements” for a more detailed discussion of changes in the gross carrying amountestimated fair value of acquired intangibles was reduced bythe contingent consideration.


7.INTANGIBLE ASSETS AND GOODWILL

Acquisition-related intangible assets, excluding certain intangible assets previously acquired that were fully amortized and were removed from our consolidated balance sheet.

Thesheets, consisted of the following table presents net acquisition-related intangible assets by reportable segment as of January 31, 20192022 and 20182021:


 January 31, 2022
(in thousands)CostAccumulated
Amortization
Net
Intangible assets with finite lives:   
Customer relationships$467,408 $(375,827)$91,581 
Acquired technology229,501 (203,895)25,606 
Trade names5,677 (4,610)1,067 
Distribution network2,440 (2,440)— 
Total intangible assets$705,026 $(586,772)$118,254 

94

  January 31,
(in thousands)
2019
2018
Customer Engagement
$218,738

$213,963
Cyber Intelligence
6,445

12,130
Total
$225,183

$226,093
 January 31, 2021
(in thousands)CostAccumulated
Amortization
Net
Intangible assets with finite lives:   
Customer relationships$464,586 $(356,064)$108,522 
Acquired technology222,040 (189,687)32,353 
Trade names9,424 (6,555)2,869 
Distribution network2,440 (2,440)— 
Total intangible assets$698,490 $(554,746)$143,744 

Total amortization expense recorded for acquisition-related intangible assets was $56.4$46.8 million, $72.4$47.7 million, and $81.5$52.4 million for the years endedJanuary 31, 2019, 2018,2022, 2021, and 2017,2020, 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)
 
(in thousands) 
Years Ending January 31,
AmountYears Ending January 31,Amount
2020
$53,883
2021
45,664
2022
41,924
2023
33,461
2023$40,479 
2024
23,340
202431,359 
2025202514,978 
2026202613,681 
202720279,733 
Thereafter
26,911
Thereafter8,024 
Total
$225,183
Total$118,254 

During the year ended January 31, 2018, weWe recorded $3.3$0.4 million of impairments for certain acquired customer-related intangible assets,trade names, which is included within selling, general and administrative expenses. Noexpenses for the year ended January 31, 2022. There were no material impairments of acquired intangible assets were recorded duringfor the years ended January 31, 20192021 and 2017.2020.


Goodwill activity for the years ended January 31, 2019,2022, and 2018, in total and by reportable segment,2021 was as follows:
(in thousands)Total
Year Ended January 31, 2021:
Goodwill, gross, at January 31, 2020$1,367,111 
Accumulated impairment losses through January 31, 2020(56,043)
Goodwill, net, at January 31, 20201,311,068 
Foreign currency translation and other16,339 
Goodwill, net, at January 31, 2021$1,327,407
Year Ended January 31, 2022:
Goodwill, gross, at January 31, 2021$1,383,450 
Accumulated impairment losses through January 31, 2021(56,043)
Goodwill, net, at January 31, 20211,327,407 
Business combinations36,006 
Foreign currency translation and other(9,992)
Goodwill, net, at January 31, 2022$1,353,421
Balance at January 31, 2022
Goodwill, gross, at January 31, 2022$1,409,464 
Accumulated impairment losses through January 31, 2022(56,043)
Goodwill, net, at January 31, 2022$1,353,421

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    Reportable Segment
(in thousands) Total Customer Engagement Cyber Intelligence
Year Ended January 31, 2018:      
Goodwill, gross, at January 31, 2017 $1,331,683
 $1,188,022
 $143,661
Accumulated impairment losses through January 31, 2017 (66,865) (56,043) (10,822)
Goodwill, net, at January 31, 2017 1,264,818
 1,131,979
 132,839
Business combinations, including adjustments to prior period acquisitions 81,180
 77,345
 3,835
Foreign currency translation and other 42,301
 41,769
 532
Goodwill, net, at January 31, 2018 $1,388,299
 $1,251,093
 $137,206
       
Year Ended January 31, 2019:      
Goodwill, gross, at January 31, 2018 $1,455,164
 $1,307,136
 $148,028
Accumulated impairment losses through January 31, 2018 (66,865) (56,043) (10,822)
Goodwill, net, at January 31, 2018 1,388,299
 1,251,093
 137,206
Business combinations, including adjustments to prior period acquisitions 59,035
 48,225
 10,810
Foreign currency translation and other (29,853) (28,991) (862)
Goodwill, net, at January 31, 2019 $1,417,481
 $1,270,327
 $147,154
       
Balance at January 31, 2019: 

  
  
Goodwill, gross, at January 31, 2019 $1,484,346
 $1,326,370
 $157,976
Accumulated impairment losses through January 31, 2019 (66,865) (56,043) (10,822)
Goodwill, net, at January 31, 2019 $1,417,481
 $1,270,327
 $147,154
Table of Contents
For purposes of reviewing for potential goodwill impairment, as of January 31, 2022, we have threehad 1 reporting units, consisting of Customer Engagement, Cyber Intelligence (excluding situational intelligence solutions), and Situational Intelligence, which is a component of our Cyber Intelligence operating segment.unit. Based on our November 1, 2018 goodwill impairment qualitative

review of each reporting unit, we determined that it is more likely than not that the fair value of each of our reporting units substantially exceeds the respective carrying amounts. Accordingly, there was no indication of impairment2021 and a quantitative goodwill impairment test was not performed. Based on our November 1, 20172020 quantitative goodwill impairment reviews, we concluded that the estimated fair values of all of our reporting unitsunit significantly exceeded theirits carrying values.value.


No changes in circumstances or indicators of potential impairment were identified between November 1 and January 31 in each of the years ended January 31, 20192022 and 2018.2021.

No goodwill impairment was identified for the years endedJanuary 31, 2019, 2018,2022, 2021, and 2017.2020.




7.
LONG-TERM DEBT

8.LONG-TERM DEBT

The following table summarizes our long-term debt at January 31, 20192022 and 2018:2021: 
January 31,
(in thousands)20222021
2021 Notes$315,000 $— 
2014 Notes— 386,887 
2017 Term Loan100,000 410,125 
Less: Unamortized debt discounts and issuance costs(8,046)(7,518)
Total debt406,954 789,494 
Less: current maturities— 386,713 
Long-term debt$406,954 $402,781 
  January 31,
(in thousands) 2019 2018

    
1.50% Convertible Senior Notes $400,000
 $400,000
June 2017 Term Loan 418,625
 422,875
Other debt 92
 250
Less: Unamortized debt discounts and issuance costs (36,589) (50,141)
Total debt 782,128
 772,984
Less: current maturities 4,343
 4,500
Long-term debt $777,785
 $768,484


1.50% Convertible Senior2021 Notes


On April 9, 2021, we issued $315.0 million in aggregate principal amount of 0.25% convertible senior notes due April 15, 2026, 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 call transactions 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 2017 Credit Agreement described below, to terminate an interest rate swap agreement, 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 January 31, 2022, the 2021 Notes were not convertible.

We incurred approximately $8.9 million of issuance costs in connection with the 2021 Notes, which have been 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. Including the impact of the deferred debt issuance costs, the effective interest rate on the 2021 Notes was approximately 0.83% at January 31, 2022.

Based on the closing market price of our common stock on January 31, 2022, the if-converted value of the 2021 Notes was less than their aggregate principal amount.

2014 Notes

On June 18, 2014, we issued $400.0 million in aggregate principal amount of 1.50% convertible senior notes, duewith a maturity date of June 1, 2021 (“Notes”), unless earlier converted by the holders pursuant to their terms.2021. Net proceeds from the 2014 Notes after underwriting discounts were $391.9 million. The 2014 Notes paywere unsecured and paid interest in cash semiannually in arrears at a rate of 1.50% per annum.
The Notes were issued concurrently with our public issuance
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The Notes are unsecured and rank senior in right of payment to our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to our indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to indebtedness and other liabilities of our subsidiaries.
The Notes are convertible into, at our election, cash, shares of common stock, or a combination of both, subject to satisfaction of specified conditions and during specified periods, as described below. If converted, we currently intend to pay cash in respect of the principal amount of the Notes.
The Notes have a conversion rate of 15.5129 shares of common stock per $1,000 principal amount of Notes, which represents an effective conversion price of approximately $64.46 per share of common stock and would result in the issuance of approximately 6,205,000 shares if all of the Notes were converted. The conversion rate has not changed since issuance of the Notes, although throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events.
Holders may surrender their Notes for conversion at any time prior to the close of business on the business day immediately preceding December 1, 2020, only under the following circumstances:

during any calendar quarter commencing after the calendar quarter which ended on September 30, 2014, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter, is more than 130% of the conversion price of the Notes in effect on each applicable trading day;


during the ten consecutive trading-day period following any 5 consecutive trading-day period in which the trading price for the Notes for each such trading day was less than 98% of the closing sale price of our common stock on such date multiplied by the then-current conversion rate; or

upon the occurrence of specified corporate events, as described in the indenture governing the Notes, such as a consolidation, merger, or binding share exchange.

On or afterEffective December 1, 2020 until the close of business on the second scheduled trading day immediately preceding the June 1, 2021 maturity date, holders may surrendercould have surrendered their 2014 Notes for conversion regardless of whether any of the foregoingother specified conditions havefor conversion had been satisfied. HoldersOn February 26, 2021, we deposited approximately $390.0 million of cash, representing the Notes may require us to purchase for cash all or any portion of their Notes upon the occurrence of a “fundamental change” at a price equal to 100% of thefull principal amount of the 2014 Notes being purchased, plusthen outstanding as well as the final interest payment on the 2014 Notes due at maturity, into an escrow account to cash collateralize the 2014 Notes.
In connection with the maturity of the 2014 Notes on June 1, 2021, we paid an aggregate of $389.8 million in cash for the settlement of the 2014 Notes, which included $386.9 million in satisfaction of the outstanding principal of the 2014 Notes and $2.9 million related to the final interest payment on the 2014 Notes. We funded the repayment of the outstanding principal amount of the 2014 Notes and accrued and unpaid interest.interest thereon using the cash we had placed in escrow. Additionally, the 2014 Notes had an incremental conversion value of $57.7 million as the market value per share of our common stock, as measured under the terms of the 2014 Notes, was greater than the conversion price of the 2014 Notes. We issued approximately 1,250,000 shares of common stock to the holders of the 2014 Notes as payment of the conversion premium, which we issued from treasury stock.
As of January 31, 2019,2021, the 2014 Notes had a conversion rate of 15.5129 shares of common stock per $1,000 principal amount of 2014 Notes, which represented an effective conversion price of approximately $64.46 per share of common stock and would have resulted in the issuance of approximately 6,002,000 shares if all of the 2014 Notes had been converted and the conversions were not convertible.settled entirely in common stock. As a result of the Spin-Off, the conversion rate was adjusted to 24.6622 shares of common stock per $1,000 principal amount of 2014 Notes, which represented an effective conversion price of $40.55 per share of common stock and would have resulted in the issuance of approximately 9,541,000 shares if all of the 2014 Notes had been converted prior to maturity and the conversions were settled entirely in common stock.


InAt issuance, in accordance with then-applicable accounting guidance for convertible debt with a cash conversion option, we separately accounted for the debt and equity components of the 2014 Notes in a manner that reflected our estimated nonconvertible debt borrowing rate. We estimated the debt and equity components of the 2014 Notes to be $319.9 million and $80.1 million, respectively, at the issuance date, assuming a 5.00% non-convertible borrowing rate. The equity component was recorded as an increase to additional paid-in capital. TheThrough January 31, 2021, the excess of the principal amount of the debt component over its carrying amount (the “debt discount”) iswas being amortized as interest expense over the term of the 2014 Notes using the effective interest method. The equity component iswas not remeasured as long as it continuescontinued to meet the conditions for equity classification.


We allocated transaction costs related to the issuance of the 2014 Notes, including underwriting discounts, of $7.6 million and $1.9 million to the debt and equity components, respectively. Issuance costs attributable to the debt component of the 2014 Notes are presented as a reduction of long-term debtand are beingwere amortized as interest expense over the term of the 2014 Notes, and issuance costs attributable to the equity component were netted with the equity component in additional paid-in capital. The

During the three months ended July 31, 2020, we repurchased $13.1 million principal amount of the 2014 Notes (the “Repurchased 2014 Notes”) in open market transactions for an aggregate of $13.0 million in cash, resulting in a debt extinguishment loss of $0.1 million, and a $0.2 million charge to additional paid-in-capital.

At January 31, 2021, because the 2014 Notes were convertible, $4.8 million of the 2014 Notes’ equity component was classified as temporary equity on our consolidated balance sheet, representing the difference between the principal amount and the net carrying amount of the 2014 Notes that could be requested for conversion.

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU No. 2020-06 eliminates the liability and equity separation model for convertible instruments with a cash conversion feature, such as the 2014 Notes.

As permitted, on February 1, 2021, we early adopted ASU No. 2020-06, which otherwise would have been effective for us on February 1, 2022. As a result, effective February 1, 2021, we no longer presented separate liability and equity components for the 2014 Notes on our consolidated balance sheet. We implemented the provisions of ASU No. 2020-06 using the modified retrospective approach, such that comparative information has not been restated and continues to be reported under accounting standards in effect for those periods.

The adoption of ASU No. 2020-06 resulted in the $78.0 million carrying value of the 2014 Notes’ equity component net of issuance costs, was $78.2 million at January 31, 2019.2021, which included applicable issuance costs and the portion classified within temporary equity, being reclassified and combined with the liability component of the 2014 Notes. This resulted in a $43.4 million decrease to additional paid-in capital,

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a $4.8 million decrease to temporary equity, a $4.4 million increase to current maturities of long-term debt, a $0.9 million decrease to deferred tax liabilities, a $0.1 million increase in unamortized debt issuance costs (a component of long-term debt), and a $44.9 million decrease to our accumulated deficit.

As the 2014 Notes were due June 1, 2021, they are classified within current maturities of long-term debt on our consolidated balance sheets as of January 31, 2021.

Capped Calls, Note Hedges and Warrants

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 January 31, 2019,2022, no Capped Calls have been exercised.

Pursuant to their terms, the carryingCapped Calls qualify for classification within stockholders’ equity, and their fair value ofis not remeasured and adjusted as long as they continue to qualify for stockholders’ equity classification. We paid approximately $41.1 million for the debt componentCapped Calls, including applicable transaction costs, which was $367.0 million, which is net of unamortized debt discount and issuance costs of $30.2 million and $2.8 million, respectively. Including the impact of the debt discount and related deferred debt issuance costs, the effective interest rate on the Notes was approximately 5.29% for each of the years ended January 31, 2019, 2018, and 2017.recorded as a reduction to additional paid-in capital.

Based on the closing market price of our common stock on January 31, 2019, the if-converted value of the Notes was less than the aggregate principal amount of the Notes.


Note Hedges and Warrants


Concurrently with the issuance of the 2014 Notes, we entered into convertible note hedge transactions (the “Note Hedges”) and sold warrants (the “Warrants”). The combination of the Note Hedges and the Warrants servesserved to increase the effective initial conversion price for the 2014 Notes to $75.00 per share. Subsequent to the Spin-Off, as a result of conversion rate adjustments, the Note Hedges and the Warrants served to increase the effective conversion price for the 2014 Notes to $47.18 per share. The Note Hedges and Warrants arewere each separate instruments from the 2014 Notes.
Note Hedges
Pursuant to the Note Hedges, we purchased call options on our common stock, under which we havehad the right to acquire from the counterparties up to approximately 6,205,000 shares of our common stock, subject to customary anti-dilution adjustments, at a price of $64.46, which equalsequaled the initial conversion price of the 2014 Notes. Our exercise rights underAs a result of the Spin-Off, on February 1, 2021, the call options on our stock were adjusted to allow us to purchase up to 9,865,000 shares of our common stock at a price of $40.55, which is equal to the adjusted conversion price of the 2014 Notes. We were permitted to settle the Note Hedges generally trigger upon conversion of the Notes and the Note Hedges terminate upon maturity of the Notes, or the first day the Notes are no longer outstanding. The Note Hedges may be settled in cash, shares of our common stock, or a combination thereof, at our option, and arethe Note Hedges were intended to reduce our exposure to potential dilution upon conversion of the 2014 Notes. We paid $60.8 million for the Note Hedges, which was recorded as a reductioncharge to additional paid-in capital. AsOur exercise rights under the Note Hedges were automatically triggered upon conversion of January 31, 2019,any 2014 Notes and the Note Hedges otherwise terminated upon maturity of the 2014 Notes on June 1, 2021. In connection with the maturity of the 2014 Notes on June 1, 2021, we had not purchased anyreceived approximately 1,250,000 shares of our common stock from the counterparties under the Note Hedges, which offset the dilution resulting from the stock settlement of the conversion premium on the 2014 Notes as the market value per share of our common stock, as measured under the terms of the Note Hedges, was greater than the strike price of the Note Hedges.
The Repurchased 2014 Notes acquired during the three months ended July 31, 2020 as described above did not change the number of common shares subject to the Note Hedges as the counterparties agreed that the options under the Note Hedges remained outstanding notwithstanding such repurchase. Upon maturity of the 2014 Notes, we received approximately 42,000 shares of our common stock from the counterparties to the Note Hedges as reimbursement for the in-the-money portion of the Repurchased 2014 Notes.
Warrants
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We sold the Warrants to several counterparties. The Warrants provideinitially provided the counterparties rights to acquire from us up to approximately 6,205,000 shares of our common stock at a price of $75.00 per share. The Warrants expire incrementally onAs a

series result of expiration dates beginning in August 2021. At expiration, if the market price per share of our common stock exceedsSpin-Off, the strike priceterms of the Warrants we will be obligatedwere adjusted to issueprovide the counterparties the rights to acquire from us up to approximately 9,865,000 shares of our common stock havingat a value equal to such excess. The Warrants could have a dilutive effect on net income per share to the extent that the market value of our common stock exceeds the strike price of the Warrants.$47.18 per share. Proceeds from the sale of the Warrants were $45.2 million and were recorded as additional paid-in capital. AsThe 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 where 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. The Warrants had a dilutive effect on net income per share to the extent that the average market value of our common stock, as measured under the terms of the Warrants, exceeded the strike price of the Warrants. There are no Warrants outstanding as of January 31, 2019, no Warrants had been exercised and all Warrants remained outstanding.2022.
The Note Hedges and Warrants both meet the requirementsqualified for classification within stockholders’ equity and therefore no changes to their respective fair values are not remeasured and adjusted as long as these instruments continue to qualifywere recorded in our consolidated statements of operations for stockholders’ equity classification.any period.
Credit Agreements
Prior Credit Agreement
In April 2011, we entered into a credit agreement with certain lenders, which was amended and restated in March 2013, and further amended in February, March, and June 2014 (as amended, the “Prior Credit Agreement”). The Prior Credit Agreement provided for senior secured credit facilities, comprised of $943.5 million of term loans, of which $300.0 million was borrowed in February 2014 and $643.5 million was borrowed in March 2014 (together, the “2014 Term Loans”), the outstanding portion of which was scheduled to mature in September 2019, and a $300.0 million revolving credit facility (the “Prior Revolving Credit Facility”), scheduled to mature in September 2018, subject to increase and reduction from time to time, in accordance with the terms of the Prior Credit Agreement.
In June 2014, we utilized the majority of the combined net proceeds from the issuance of the Notes and the concurrent issuance of 5,750,000 shares of common stock to retire $530.0 million of the 2014 Term Loans, and all $106.0 million of then-outstanding borrowings under the Prior Revolving Credit Facility.
The 2014 Term Loans incurred interest at our option at either a base rate plus a margin of 1.75% or an Adjusted LIBOR Rate, as defined in the Prior Credit Agreement, plus a margin of 2.75%.

2017 Credit Agreement


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


The 2017 Credit Agreement provides for $725.0 million of senior secured credit facilities, comprised of a $425.0 million term loan maturing on June 29, 2024 (the “2017 Term Loan”), of which $100.0 million and $410.1 million was outstanding at January 31, 2022 and 2021, respectively, and a $300.0 million revolving credit facility maturing on June 29, 2022April 9, 2026 (the “2021 Revolving Credit Facility”), which refinanced our prior $300.0 million revolving credit facility (the “2017 Revolving Credit Facility”), subject to increase and reduction from time to time according to the terms of the 2017 Credit Agreement. The maturity dates of the 2017 Term Loan and 2017 Revolving Credit Facility will be accelerated to March 1, 2021 if on such date any Notes remain outstanding.


The majority of the proceeds from the 2017 Term Loan were used to repay all $406.9 million that remained outstanding terms loans under the 2014 Term Loans at June 29, 2017 upon termination of the Prior Credit Agreement. There were no borrowings under the Prior Revolving Credit Facility at June 29, 2017.

our prior credit agreement.
The 2017 Term Loan was subject to an original issuance discount of approximately $0.5 million. This discountmillion, which is being amortized as interest expense over the term of the 2017 Term Loan using the effective interest method.


Interest rates on loans under the 2017 Credit Agreement are periodically reset, at our option, at either a Eurodollar Rate or an ABR rate (each as defined in the 2017 Credit Agreement), plus in each case a margin.

On January 31, 2018, we entered into an amendment to the 2017 Credit Agreement (the “2018 Amendment”) providing for, among other things, a reduction of the interest rate margins on the 2017 Term Loan from 2.25% to 2.00% for Eurodollar loans, and from 1.25% to 1.00% for ABR loans.

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 2017 Term Loan, reducing the outstanding balance to $100.0 million. As a result, $1.8 million of deferred debt issuance costs and $0.2 million of unamortized discount associated with the 2017 Term Loan were written off, and are included within losses on early retirements of debt on our consolidated statement of operations for the year ended January 31, 2022. Optional prepayments of loans under the 2017 Credit Agreement are generally permitted without premium or penalty.
On April 9, 2021, we amended the 2017 Credit Agreement (the “2021 Amendment”), pursuant to which we refinanced the 2017 Revolving Credit Facility, which would otherwise have matured on June 29, 2022, with the $300.0 million 2021 Revolving Credit Facility maturing on April 9, 2026.
The vast majority of the impact of the 2018 Amendment was accounted for as a debt modification. For the portionmaturity dates of the 2017 Term Loan whichand 2017 Revolving Credit Facility would have been accelerated to March 1, 2021 if on such date any 2014 Notes remained outstanding, unless such outstanding 2014 Notes were cash collateralized pursuant to a second amendment to the 2017 Credit Agreement (the “2020 Amendment”), entered into on June 8, 2020. Pursuant to the 2020 Amendment, we were permitted to effect the previously announced Spin-Off of our Cyber Intelligence Solutions business within the parameters set forth in the 2017 Credit Agreement, as amended, and our 2014 Notes would not be deemed to be outstanding for purposes of the determination of the maturity dates of the 2017 Term Loan and the 2017 Revolving Credit Facility discussed above if such 2014 Notes were cash collateralized in accordance with the 2017 Credit Agreement. On February 26, 2021, as noted above, we cash collateralized the 2014 Notes in satisfaction of the cash collateralization provisions of the 2020 Amendment. Accordingly, the maturity dates of the 2017 Term Loan and 2017 Revolving Credit Facility were not accelerated to March 1, 2021.
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As of January 31, 2022, the interest rate on the 2017 Term Loan was considered extinguished2.10%. Taking into account the impact of the original issuance discount and replaced by new loans, we wrote off $0.2 million of unamortizedrelated deferred debt issuance costs, as a lossthe effective interest rate on early retirement of debt during the three months ended January 31, 2018. The remaining unamortized deferred debt issuance costs and discount is being amortized over the remaining term of the 2017 Term Loan.Loan was approximately 2.30% at January 31, 2022. As of January 31, 2021, the interest rate on the 2017 Term Loan was 2.14%.
For loansborrowings under the 2021 Revolving Credit Facility, and previously under the 2017 Revolving Credit Facility, the margin is determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each as defined in the 2017 Credit Agreement) leverage ratio (the “Leverage Ratio”"Leverage Ratio").

As of January 31, 2019, In addition, under the interest rate on2021 Revolving Credit Facility, and previously under the 2017 Term Loan was 4.52%. Taking into account the impact of the original issuance discount and related deferred debt issuance costs, the effective interest rate on the 2017 Term Loan was approximately 4.70% at January 31, 2019. As of January 31, 2018, the interest rate on the 2017 Term Loan was 3.58%.
WeRevolving Credit Facility, we are required to pay a commitment fee with respect to unused availability under the 2017 Revolving Credit Facility at a raterates per annum determined by reference to our Leverage Ratio.
The 2017 Term Loan requires quarterly principal payments During the three months ended October 31, 2020, we repaid in full $200.0 million of approximately $1.1 million, which commenced on August 1, 2017, with the remaining balance due on June 29, 2024. Optional prepayments of loansborrowings then outstanding under the 2017 Revolving Credit Agreement are generally permitted without premium or penalty.

Facility using available cash on hand.
Our obligations under the 2017 Credit Agreement are guaranteed by each of our direct and indirect existing and future material domestic wholly owned restricted subsidiaries, and are secured by a security interest in substantially all of our assets and the assets of the guarantor subsidiaries, subject to certain exceptions.

The 2017 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The 2017 Credit Agreement also contains a financial covenant that, solely with respect to the 2017 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50 to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the 2017 Credit Agreement.

The 2017 Credit Agreement provides for events of default with corresponding grace periods that we believe are customary for credit facilities of this type. Upon an event of default, all of our obligations owed under the 2017 Credit Agreement may be declared immediately due and payable, and the lenders’ commitments to make loans under the 2017 Credit Agreement may be terminated.
Loss on Early Retirement of 2014 Term Loans

At the June 29, 2017 closing date of the 2017 Credit Agreement, there were $3.2 million of unamortized deferred debt issuance costs and a $0.1 million unamortized term loan discount associated with the 2014 Term Loans and the Prior Revolving Credit Facility. Of the $3.2 million of unamortized deferred debt issuance costs, $1.4 million was associated with commitments under the Prior Revolving Credit Facility provided by lenders that are continuing to provide commitments under the 2017 Revolving Credit Facility and therefore continued to be deferred, and are being amortized on a straight-line basis over the term of the 2017 Revolving Credit Facility. The remaining $1.8 million of unamortized deferred debt issuance costs and the $0.1 million unamortized discount, all of which related to the 2014 Term Loans, were written off as a $1.9 million loss on early retirement of debt during the three months ended July 31, 2017.


2017 Credit Agreement Issuance and Amendment Costs


We incurred debt issuance costs of approximately $6.8 million in connection with the 2017 Credit Agreement, of which $4.1 million were associated with the 2017 Term Loan and $2.7 million were associated with the 2017 Revolving Credit Facility, which were deferred and are being amortized as interest expense over the terms of the facilities underfacilities. During the 2017 Credit Agreement. As noted previously, during the three monthsyear ended January 31, 2018, we wrote off $0.2 million of deferred debt issuance costs associated with the 2017 Term LoanLoan as a result of the 2018 Amendment. During the year ended January 31, 2021, we incurred $2.1 million of debt modification costs related to the 2020 Amendment, $1.2 million of which were expensed, and $0.9 million of which were deferred (comprised of $0.5 million associated with the 2017 Term Loan, and $0.4 million associated with the 2017 Revolving Credit Facility), and which are being amortized along with the existing unamortized debt issuance costs.

At the time of the 2021 Amendment, there were $1.3 million of unamortized deferred debt issuance costs associated with the 2017 Revolving Credit Facility, of which $0.8 million were associated with commitments under the 2017 Revolving Credit Facility provided by lenders that are continuing to provide commitments under the 2021 Revolving Credit Facility and therefore continued to be deferred, and which are now being amortized over the term of the 2021 Revolving Credit Facility. The remaining $0.5 million of unamortized deferred debt issuance costs associated with the 2017 Revolving Credit Facility were written off and are included within losses on early retirements of debt on our consolidated statement of operations for the year ended January 31, 2022. We incurred $1.5 million of debt modification costs related to the 2021 Amendment, all of which are associated with the 2021 Revolving Credit Facility, which have been deferred and are being amortized along with the previously deferred debt issuance costs over the term of the 2021 Revolving Credit Facility.

Deferred debt issuance costs associated with the 2017 Term Loan are being amortized using the effective interest rate method, and deferred debt issuance costs associated with the 2017 Revolving Credit Facility are being amortized on a straight-line basis.


Future Principal Payments on the Term LoansLoan


As a result of January 31, 2019, future scheduledthe significant 2017 Term Loan principal payments onmade during the three months ended April 30, 2021, no further principal payments are required prior to the maturity of the 2017 Term Loan were as follows:on June 29, 2024.

(in thousands)  
Years Ending January 31, Amount
2020 $4,250
2021 4,250
2022 4,250
2023 4,250
2024 4,250
2025 and thereafter 397,375
Total $418,625


Interest Expense


The following table presents the components of interest expense incurred on the 2021 Notes, 2014 Notes, and on borrowings under our credit agreements2017 Credit Agreement for the years ended January 31, 2019,2022, 2021, and 2020:
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 Year Ended January 31,
(in thousands)202220212020
2021 Notes:
Interest expense at 0.25% coupon rate$639 $— $— 
Amortization of deferred debt issuance costs1,416 — — 
Total Interest Expense - 2021 Notes$2,055 $ $ 
2014 Notes:
Interest expense at 1.50% coupon rate$1,933 $5,887 $6,000 
Amortization of debt discount— 12,884 12,490 
Amortization of deferred debt issuance costs522 1,215 1,177 
Total Interest Expense - 2014 Notes$2,455 $19,986 $19,667 
Borrowings under 2017 Credit Agreement:
Interest expense at contractual rates$3,366 $13,018 $18,021 
Impact of interest rate swap agreement1,014 4,368 792 
Amortization of debt discounts18 74 68 
Amortization of deferred debt issuance costs930 1,811 1,569 
Total Interest Expense - Borrowings under 2017 Credit Agreement$5,328 $19,271 $20,450 

On May 1, 2020, our interest rate swap agreement no longer qualified as a cash flow hedge for accounting purposes and as such, accumulated deferred losses on our interest rate swap that were previously recorded as a component of accumulated other comprehensive loss were being reclassified to the consolidated statement of operations as interest expense over the remaining term of the interest rate swap, as the previously hedged interest payments occurred. On April 13, 2021, we paid $16.5 million to the counterparty to settle the 2018 Swap (as defined in Note 15, “Derivative Financial Instruments”) prior to its June 2024 maturity, and 2017:reclassified the remaining $15.7 million of pretax accumulated deferred losses from accumulated other comprehensive loss within stockholders’ equity to other income (expense) on our consolidated statement of operations for the year ended January 31, 2022. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes receivable, which are included within prepaid expenses and other current assets on our consolidated balance sheet as of January 31, 2022.

Please refer to Note 15, “Derivative Financial Instruments” for a more detailed discussion of our interest rate swap agreement.


9.SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION
  Year Ended January 31,
(in thousands) 2019 2018 2017
1.50% Convertible Senior Notes:      
Interest expense at 1.50% coupon rate $6,000
 $6,000
 $6,000
Amortization of debt discount 11,850
 11,244
 10,669
Amortization of deferred debt issuance costs 1,118
 1,060
 1,007
Total Interest Expense - 1.50% Convertible Senior Notes $18,968
 $18,304
 $17,676
       
Borrowings under Credit Agreements:      
Interest expense at contractual rates $17,741
 $15,412
 $14,682
Impact of interest rate swap agreement 
 254
 259
Amortization of debt discounts 67
 65
 58
Amortization of deferred debt issuance costs 1,554
 1,839
 2,211
Total Interest Expense - Borrowings under Credit Agreements $19,362
 $17,570
 $17,210


8.SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION

Consolidated Balance Sheets

Inventories consisted of the following as of January 31, 20192022 and 2018: 2021:


January 31,
(in thousands)20222021
Raw materials$3,001 $2,768 
Work-in-process150 26 
Finished goods2,186 2,747 
Total inventories$5,337 $5,541 
  January 31,
(in thousands) 2019 2018
Raw materials $10,875
 $9,870
Work-in-process 5,567
 6,269
Finished goods 8,510
 3,732
Total inventories $24,952
 $19,871

Property and equipment, net consisted of the following as of January 31, 20192022 and 2018:2021:
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 January 31,January 31,
(in thousands) 2019 2018(in thousands)20222021
Land and buildings $10,632
 $10,276
Land and buildings$7,994 $8,124 
Leasehold improvements 31,694
 29,793
Leasehold improvements18,155 23,153 
Software 51,950
 54,032
Software76,152 61,871 
Equipment, furniture, and other 164,351
 135,548
Equipment, furniture, and other64,363 66,444 
Total cost 258,627
 229,649
Total cost166,664 159,592 
Less: accumulated depreciation and amortization (158,493) (140,560)Less: accumulated depreciation and amortization(102,574)(90,502)
Total property and equipment, net $100,134
 $89,089
Total property and equipment, net$64,090 $69,090 


The amounts in the table above as of January 31, 2021 have been revised to decrease previously presented equipment, furniture and other, and increase previously presented software by $44.5 million, respectively. This reclassification did not affect total property and equipment, net on our consolidated balance sheet as of January 31, 2021.

Depreciation expense on property and equipment was $25.5$20.7 million,, $26.0 $30.6 million,, and $25.2$23.5 million in the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, respectively.


Prepaid and other current assets consisted of the following as of January 31, 2022 and 2021:

January 31,
(in thousands)20222021
Prepaid expenses$22,639 $23,125 
Other current assets31,107 19,689 
Total prepaid expenses and other current assets$53,746 $42,814 

Other assets consisted of the following as of January 31, 20192022 and 2018:2021:
January 31,
(in thousands)20222021
Deferred commissions$51,714 $46,379 
Long-term contract assets, net30,510 17,210 
Capitalized software development costs, net22,483 19,250 
Long-term deferred cost of revenue5,907 6,316 
Noncontrolling equity investments5,146 2,034 
Deferred debt issuance costs, net1,950 1,449 
Long-term security deposits702 567 
Long-term restricted cash and time deposits409 651 
Other7,817 3,368 
Total other assets$126,638 $97,224 
  January 31,
(in thousands) 2019 2018
Long-term restricted cash and time deposits $23,193
 $28,402
Deferred commissions 29,815
 
Deferred debt issuance costs, net 2,836
 3,668
Long-term security deposits 3,760
 4,139
Other 19,267
 15,828
Total other assets $78,871
 $52,037


Accrued expenses and other current liabilities consisted of the following as of January 31, 20192022 and 2018:2021:

January 31,
(in thousands)20222021
Compensation and benefits$86,777 $77,942 
Operating lease obligations - current portion24,551 14,230 
Taxes other than income taxes16,313 21,764 
Preferred Stock dividends payable10,400 5,200 
Contingent consideration - current portion7,776 9,595 
Professional and consulting fees3,771 4,996 
Income taxes602 1,514 
Fair value of future tranche right— 52,772 
Other18,504 23,504 
Total accrued expenses and other current liabilities$168,694 $211,517 

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  January 31,
(in thousands) 2019 2018
Compensation and benefits $96,703
 $83,216
Billings in excess of costs and estimated earnings on uncompleted contracts 
 46,062
Income taxes 7,497
 14,464
Contingent consideration - current portion 28,415
 13,187
Distributor and agent commissions 11,446
 12,255
Taxes other than income taxes 20,428
 11,424
Professional and consulting fees 3,929
 8,752
Other 40,063
 30,905
Total accrued expenses and other current liabilities $208,481
 $220,265
Table of Contents

Other liabilities consisted of the following as of January 31, 20192022 and 2018:2021:
January 31,
(in thousands)20222021
Unrecognized tax benefits, including interest and penalties$16,345 $14,441 
Finance lease obligations - long-term portion3,831 2,969 
Derivative financial instruments - long-term portion— 13,565 
Contingent consideration - long-term portion— 6,109 
Other1,820 5,635 
Total other liabilities$21,996 $42,719 
  January 31,
(in thousands) 2019 2018
Unrecognized tax benefits, including interest and penalties $33,063
 $41,014
Contingent consideration - long-term portion 32,925
 49,149
Deferred rent expense 12,254
 12,168
Obligations for severance compensation 2,601
 3,028
Capital lease obligations - long-term portion 3,067
 3,315
Other 9,442
 5,791
Total other liabilities $93,352
 $114,465


Consolidated Statements of Operations
 
Other income (expense) income,, net consisted of the following for the years ended January 31, 2019, 2018,2022, 2021, and 20172020: 
 Year Ended January 31,
(in thousands)202220212020
Foreign currency (losses) gains, net$(1,644)$(1,584)$672 
(Losses) gains on derivative financial instruments, net(14,374)(1,267)204 
Change in fair value of future tranche right15,810 (56,146)— 
Other, net5,435 (1,604)(267)
Total other income (expense), net$5,227 $(60,601)$609 
  Year Ended January 31,
(in thousands) 2019 2018 2017
Foreign currency (losses) gains, net $(5,519) $6,760
 $(2,743)
Gains (losses) on derivative financial instruments, net 2,511
 (17) (322)
Other, net (898) (841) (3,861)
Total other (expense) income, net $(3,906) $5,902
 $(6,926)


Consolidated Statements of Cash Flows
 
The following table provides supplemental information regarding our consolidated cash flows for the years ended January 31, 2022, 2021, and 2020:
 Year Ended January 31,
(in thousands)202220212020
Cash paid for interest$9,716 $24,612 $23,209 
Cash payments of income taxes, net$42,917 $21,476 $14,859 
Non-cash investing and financing transactions: 
Liabilities for contingent consideration in business combinations$900 $— $8,230 
Preferred Stock dividends declared$10,400 $5,200 $— 
Finance leases of property and equipment$4,041 $903 $3,287 
Settlement of Future Tranche Right upon issuance of Series B Preferred Stock$36,962 $— $— 
Retirement of treasury stock$234,999 $— $— 
Settlement of convertible note premium with common stock$59,131 $— $— 
Receipt of common stock from the counterparties under the Note Hedges$59,651 $— $— 
Accrued but unpaid purchases of property and equipment$750 $2,731 $962 
Accrued but unpaid purchases of treasury stock$— $— $2,846 
Leasehold improvements funded by lease incentives$— $119 $2,604 
Contingent receivable in exchange for sale of subsidiary$— $— $738 


10.CONVERTIBLE PREFERRED STOCK

On December 4, 2019, we entered into an 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 (the “Series A Closing Date”), 2018we 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 (the “Series B Closing Date” and together with the Series A Closing Date, as applicable, the “Applicable Closing Date”), we issued a total of 200,000shares 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 Closing 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 pays dividends at an annual rate of 5.2% until the 48-month anniversary of the Series A Closing Date, and thereafter 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 the Series A Closing Date (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 year ended January 31, 2022, we paid $12.9 million of preferred stock dividends, of which $5.2 million was accrued as of January 31, 2021, and there were $12.1 million of cumulative unpaid preferred stock dividends at January 31, 2022, of which $10.4 million was declared and recorded within accrued expenses and other liabilities on our consolidated balance sheet as of January 31, 2022. We reflected $18.9 million and $7.7 million of preferred stock dividends in our consolidated results of operations, for purposes of computing net (loss) income attributable to Verint Systems Inc. common shares, for the years ended January 31, 2022 and 2021.

Conversion

The Series A Preferred Stock was 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 the date of the Investment Agreement. 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 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 January 31, 2022, 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 9.8 million shares and Apax’s ownership in us on an as-converted basis was approximately 12.9%.

At any time after 36 months following the Applicable Closing Date, we will 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 Conversion”).

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We may redeem any or all of the Preferred Stock of a series for cash at any time after the 72-month anniversary of the Applicable Closing Date 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 Apax Investor has agreed to restrictions on its ability to dispose of shares of the Preferred Stock until the earlier of (1) the 36-month anniversary of the Series A Closing Date or (2) the 24-month anniversary of the consummation of the Spin-Off (the “Preferred Stock Restricted Period”). Following the Preferred Stock Restricted Period, the Preferred Stock may not be sold or transferred without the prior written consent of the Company. The Apax Investor has also agreed to restrictions on its ability to dispose of the common stock issued upon conversion of the Preferred Stock. The common stock may not be disposed of until the earlier of (1) the 12-month anniversary of consummation of the Spin-Off or (2) the 24-month anniversary of the Series A Closing Date. These restrictions do not apply to certain transfers to one or more permitted co-investors or transfers or pledges of the Preferred Stock or common stock pursuant to the terms of specified margin loans to be 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 the 102-month anniversary of the Applicable Closing Date 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 consolidated balance sheets as of January 31, 2022 and 2021, 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 January 31, 2022, 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 the 102-month anniversary of the Applicable Closing Date 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 January 31, 2022 plus accrued and unpaid dividends. As of January 31, 2022, the stated value of the liquidation preference for each series of Preferred Stock was $200.0 million and cumulative, unpaid dividends on the Series A Preferred Stock and the Series B Preferred Stock were $6.1 million and $6.1 million, respectively.

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 2017:changes in its fair value have been recognized as a non-cash charge or benefit within other income (expense), net on the consolidated statement of operations.


At the Series A Closing Date, 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 to fair value and as a result we recorded a non-cash benefit of $15.8 million related to the change in fair value of the Future Tranche Right for the three months ended April 30, 2021, within other income (expense), net. 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 consolidated statement of operations. For the year ended January 31, 2021, we recognized non-cash charges of $56.1 million within other income (expense), net in the consolidated statement of operations for the change in the fair value of the Future Tranche Right.
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  Year Ended January 31,
(in thousands) 2019 2018 2017
Cash paid for interest $22,258
 $24,402
 $21,892
Cash payments of income taxes, net $26,887
 $23,450
 $29,582
Non-cash investing and financing transactions:  
    
Liabilities for contingent consideration in business combinations $15,944
 $27,605
 $26,400
Capital leases of property and equipment $1,137
 $4,350
 $151
Accrued but unpaid purchases of property and equipment $3,376
 $2,367
 $2,868
Inventory transfers to property and equipment $1,699
 $437
 $552
Leasehold improvements funded by lease incentives $1,397
 $
 $82
Please refer to Note 14, “Fair Value Measurements” for additional information regarding valuations of the Future Tranche Right.




9.STOCKHOLDERS’ EQUITY

11.STOCKHOLDERS’ EQUITY

Common Stock Dividends


We did not declare or pay any cash dividends on our common stock during the years ended January 31, 2019, 2018,2022, 2021, and 2017.2020. Under the terms of our 2017 Credit Agreement, we are subject to certain restrictions on declaring and paying cash dividends on our common stock.


ShareIn connection with the Spin-Off, each holder of Verint’s common stock received 1 ordinary share of Cognyte for every share of common stock of Verint held of record as of the close of business on January 25, 2021.

Stock Repurchase ProgramPrograms


On March 29, 2016,December 4, 2019, we announced that our board of directors had authorized a common stock repurchase program ofwhereby we were authorized to repurchase up to $150$300.0 millionof common stock over two years.the period ending on February 1, 2021. We made $34.0 million and $116.1 million in repurchases under the program during the years ended January 31, 2021 and January 31, 2020, respectively. This program expired on February 1, 2021.

On March 29, 2018.31, 2021, we announced that our board of directors had authorized a stock repurchase program whereby we were authorized to repurchase up to a number of shares of common stock approximately equal to the number of shares to be issued as equity compensation during the fiscal year ending January 31, 2022. During the three months ended April 30, 2021, we repurchased 1,600,000 shares of our common stock at a cost of $75.4 million under this program. There were no repurchases under this program subsequent to April 30, 2021, and this program expired on January 31, 2022.


On December 2, 2021, we announced that our board of directors had authorized a new stock repurchase program for the fiscal year ending January 31, 2023 whereby we may repurchase up to 1.5 million shares of common stock to offset dilution from our equity compensation program for such fiscal year. Subsequent to January 31, 2022, through the date of filing this report, we repurchased 1,500,000 shares of our common stock for $78.2 million under this program. Repurchases were financed with available cash in the United States. On March 22, 2022, our board of directors authorized an additional 500,000 shares of common stock to be repurchased under this program. Please refer to Note 21, “Subsequent Event”, for more information regarding this stock repurchase program.

Treasury Stock
Repurchased shares of common stock are recorded as treasury stock, at cost, but may from time to time be retired. At January 31, 2019, we held approximately 1,665,000 shares of treasury stock with a cost of $57.6 million. At January 31, 2018, we held approximately 1,661,000 and shares of treasury stock with a cost of $57.4 million.

During the year ended January 31, 2019 we acquired approximately 4,000 shares of treasury stock for a cost of $0.2 million. During the year ended January 31, 2018 we received approximately 7,000 shares of treasury stock in a nonmonetary transaction valued at $0.3 million. During the year ended January 31, 2017 we acquired approximately 1,306,000 shares of treasury stock with a cost of $46.9 million under the aforementioned share repurchase program.


From time to time, our board of directors has approved limited programs to repurchase shares of our common stock from directors or officers in connection with the vesting of restricted stock or restricted stock units to facilitate required income tax withholding by us or the payment of required income taxes by such holders. In addition, the terms of some of our equity award agreements with all grantees provide for automatic repurchases by us for the same purpose if a vesting-related or delivery-related tax event occurs at a time when the holder is not permitted to sell shares in the market. Our stock bonus program contains similar terms. Any such repurchases of common stock occur at prevailing market prices and are recorded as treasury stock.

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

During the three months ended July 31, 2021, in connection with the maturity of our 2014 Notes, we issued approximately 1,250,000 treasury shares with an average cost of $47.30 per share to the holders of the 2014 Notes in satisfaction of the conversion premium, which was recorded as a $59.1 million reduction of treasury stock and additional paid-in capital. Additionally, we received approximately 1,250,000 shares of our common stock having a value of $57.7 million from the counterparties under the Note Hedges, as well as approximately 42,000 shares of our common stock having a value of $2.0 million from the counterparties related to the reimbursement for the in-the-money portion of the Repurchased 2014 Notes under the Note Hedge agreements, which was recorded as increase to treasury stock and additional paid-in capital.
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During the year ended January 31, 2022, we repurchased approximately 1,613,000 shares of our common stock for a cost of $76.0 million, which includes $75.4 million of share repurchased under the 2021 share repurchase program described above, and other repurchases to facilitate income tax withholding upon vesting of equity awards. On March 30, 2021, our board of directors approved the retirement of such repurchased shares of common stock and any other shares held as treasury stock, at management’s discretion. During the year ended January 31, 2022, we retired 1,058,300 shares of our common stock with a cost of $49.6 million that had been repurchased under the 2021 share repurchase program described above, as well as all of our common stock held as treasury stock, which totaled 5,000,786 shares, and restored them to the status of authorized and unissued shares. The aggregate cost of the treasury stock retired was $235.0 million, which was recorded as a reduction of common stock and additional paid-in capital.

During the year ended January 31, 2021 we repurchased 613,000 shares of our common stock for a cost of $34.0 million under the 2019 share repurchase program described above. During the year ended January 31, 2020, we repurchased approximately 2,126,000 shares of our common stock for a cost of $116.5 million, which included $116.1 million of share repurchases under the December 2019 stock repurchase program described above and other purchases to facilitate income tax withholding upon vesting of equity awards.

At January 31, 2021, we held approximately 4,404,000 shares of treasury stock with a cost of $208.1 million.

Issuance of Convertible Preferred Stock

On December 4, 2019, in conjunction with the planned separation of our businesses into two independent publicly traded companies, 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 January 31, 2022, Apax’s ownership in us on an as-converted basis was approximately 12.9%. Please refer to Note 10, “Convertible Preferred Stock” for a more detailed discussion of the Apax investment.

Accumulated Other Comprehensive Income (Loss)

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


The following table summarizes changes in the components of our accumulated other comprehensive income (loss) by component for the years ended January 31, 20192022 and 2018:2021:


107

(in thousands) Unrealized Gains (Losses) on Derivative Financial Instruments Designated as Hedges Unrealized Gain on Interest Rate Swap Designated as Hedge Unrealized Gains (Losses) on Available-for-Sale Investments Foreign Currency Translation Adjustments Total
Accumulated other comprehensive income (loss) at January 31, 2017 $575
 $632
 $
 $(156,063) $(154,856)
Other comprehensive income (loss) before reclassifications 8,867
 (341) 
 49,291
 57,817
Amounts reclassified out of accumulated other comprehensive income 6,130
 291
 
 
 6,421
Net other comprehensive income (loss) 2,737
 (632) 
 49,291
 51,396
Accumulated other comprehensive income (loss) at January 31, 2018 3,312
 
 
 (106,772) (103,460)
Other comprehensive loss before reclassifications (8,083) (3,043) 
 (34,429) (45,555)
Amounts reclassified out of accumulated other comprehensive income (loss) (3,790) 
 
 
 (3,790)
Net other comprehensive loss (4,293) (3,043) 
 (34,429) (41,765)
Accumulated other comprehensive loss at January 31, 2019 $(981) $(3,043) $
 $(141,201) $(145,225)
(in thousands)Unrealized Gains (Losses) on Foreign Exchange Contracts Designated as HedgesUnrealized Losses on Interest Rate Swap Designated as HedgeForeign Currency Translation AdjustmentsTotal
Accumulated other comprehensive income (loss) at January 31, 2020$626 $(10,528)$(141,963)$(151,865)
Other comprehensive income (loss) before reclassifications1,869 (5,916)17,482 13,435 
Amounts reclassified out of accumulated other comprehensive income (loss) from continuing operations225 (3,413)— (3,188)
Amounts reclassified out of accumulated other comprehensive income (loss) from discontinued operations1,636 — — 1,636 
Net other comprehensive income (loss)(2,503)17,482 14,987 
Accumulated other comprehensive income (loss) at January 31, 2021634 (13,031)(124,481)(136,878)
Distribution of Cognyte Software Ltd.(559)— 17,682 17,123 
Other comprehensive income (loss) before reclassifications70 — (11,668)(11,598)
Amounts reclassified out of accumulated other comprehensive income (loss)193 (1,014)— (821)
Amounts reclassified upon partial early retirement of the 2017 Term Loan— (12,017)— (12,017)
Net other comprehensive (loss) income(682)13,031 6,014 18,363 
Accumulated other comprehensive loss at January 31, 2022$(48)$ $(118,467)$(118,515)


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.


On May 1, 2020, our interest rate swap agreement no longer qualified as a cash flow hedge for accounting purposes and as such, accumulated deferred losses on our interest rate swap that were previously recorded as a component of accumulated other comprehensive loss were being reclassified to the consolidated statement of operations as interest expense over the remaining term of the interest rate swap, as the previously hedged interest payments occurred. On April 13, 2021, we paid $16.5 million to the counterparty to settle the interest rate swap agreement prior to its June 2024 maturity, and reclassified the remaining $15.7 million of pretax accumulated deferred losses from accumulated other comprehensive loss within stockholders’ equity to other income (expense) on our consolidated statement of operations for the year ended January 31, 2022. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes receivable, which are included within prepaid expenses and other current assets on our consolidated balance sheet as of January 31, 2022. Please refer to Note 15, “Derivative Financial Instruments” for further information regarding our interest rate swap agreement.

The amounts reclassified out of accumulated other comprehensive income (loss) into the consolidated statement of operations, with presentation location, for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 were as follows:
108

 Year Ended January 31, Financial Statement LocationYear Ended January 31,Financial Statement Location
(in thousands) 2019 2018 2017 (in thousands)202220212020
Unrealized gains (losses) on derivative financial instruments:       Unrealized gains (losses) on derivative financial instruments:
Foreign currency forward contracts $(350) $621
 $108
 Cost of product revenueForeign currency forward contracts$$$(3)Cost of recurring revenue
 (388) 599
 115
 Cost of service and support revenue24 28 Cost of nonrecurring revenue
 (2,138) 3,577
 651
 Research and development, net142 182 42 Research and development, net
 (1,343) 2,016
 383
 Selling, general and administrative65 56 20 Selling, general and administrative
 (4,219) 6,813
 1,257
 Total, before income taxes232 267 64 Total, before income taxes
 429
 (683) (118) Benefit (provision) for income taxes(39)(42)(6)Provision for income taxes
 $(3,790) $6,130
 $1,139
 Total, net of income taxes$193 $225 $58 Total, net of income taxes
       
Interest rate swap agreement $
 $(254) $
 Interest expenseInterest rate swap agreement$(1,014)$(4,367)$(792)Interest expense
 
 934
 
 Other income (expense), net(15,655)— — Other income (expense), net
 
 680
 
 Total, before income taxes(16,669)(4,367)(792)Total, before income taxes
 
 (389) 
 Provision for income taxes3,638 954 175 Benefit from income taxes
 $
 $291
 $
 Total, net of income taxes$(13,031)$(3,413)$(617)Total, net of income taxes




10. 12.RESEARCH AND DEVELOPMENT, NET


Our gross research and development expenses for the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, were $211.0$123.3 million,, $192.6 $128.2 million,, and $174.6$134.2 million,, respectively. Reimbursements from the IIA and other government grant programs amounted to $1.9 million, $2.0 million, and $3.5 million for the years ended January 31, 2019, 2018, and 2017, respectively, which were recorded as reductions of gross research and development expenses.



We capitalize certain costs incurred to develop our commercial software products, and we then recognize those costs within cost of product revenue as the products are sold. Activity for our capitalized software development costs for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 was as follows:
Year Ended January 31,
(in thousands)202220212020
Capitalized software development costs, net, beginning of year$19,250 $15,351 $7,266 
Software development costs capitalized during the year7,560 7,312 9,584 
Amortization of capitalized software development costs(4,247)(3,304)(1,538)
Write-offs of capitalized software development costs— (129)— 
Foreign currency translation and other(80)20 39 
Capitalized software development costs, net, end of year$22,483 $19,250 $15,351 
  Year Ended January 31,
(in thousands) 2019 2018 2017
Capitalized software development costs, net, beginning of year $9,228
 $9,509
 $11,992
Software development costs capitalized during the year 7,320
 3,126
 2,338
Amortization of capitalized software development costs (3,101) (3,338) (3,341)
Impairments, foreign currency translation, and other (105) (69) (1,480)
Capitalized software development costs, net, end of year $13,342
 $9,228
 $9,509


During the year ended January 31, 2017,2021, we recorded an impairment charge of $0.1 million in nonrecurring cost of revenue, reflecting the write-off of previously capitalized software development costs that were deemed non-recoverable based on our expectations of $1.3 million reflecting strategy changes in certain product development initiatives, due in part to acquisition of technology associated with business combinations.future market conditions. There were no material impairments of such capitalized costs during the years ended January 31, 20192022 and 2018.2020.




11.INCOME TAXES
On December 22, 2017, the Tax Cuts and Jobs Act was enacted in the United States. The 2017 Tax Act significantly revised the Internal Revenue Code of 1986, as amended, and it includes fundamental changes to taxation of U.S. multinational corporations. Ongoing compliance with the 2017 Tax Act will require significant complex computations not previously required by U.S. tax law.13.INCOME TAXES

The key provisions of the 2017 Tax Act, which may significantly impact our current and future effective tax rates, include new limitations on the tax deductions for interest expense and executive compensation, elimination of the alternative minimum tax (“AMT”) and the ability to refund unused AMT credits over a four-year period, and new rules related to uses and limitations of net operating loss carryforwards. New international provisions add a new category of deemed income from our foreign operations (global intangible low-taxed income, GILTI), eliminates U.S. tax on foreign dividends (subject to certain restrictions), and adds a minimum tax on certain payments made to foreign related parties. We have adopted an accounting policy to account for GILTI as a period cost when incurred, rather than recognizing deferred taxes.

In accordance with the provisions of SAB No. 118, as of January 31, 2018 we considered amounts related to the 2017 Tax Act to be reasonably estimated. During the year ended January 31, 2019, we refined and completed the accounting for the 2017 Tax Act as we obtained, prepared, and analyzed additional information and as additional legislative, regulatory, and accounting guidance and interpretations became available, resulting in no adjustment under SAB No. 118.


The components of income (loss) before provision for income taxes for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 were as follows:
Year Ended January 31,
(in thousands)202220212020
Domestic$(12,492)$127,909 $(46,896)
Foreign51,996 (169,573)7,329 
Total income (loss) before provision for income taxes$39,504 $(41,664)$(39,567)
  Year Ended January 31,
(in thousands) 2019 2018 2017
Domestic $(12,927) $(44,502) $(60,722)
Foreign 90,689
 63,402
 37,248
Total income (loss) before provision for income taxes $77,762
 $18,900
 $(23,474)


The provision for income taxes from continuing operations for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 consisted of the following:



109

 Year Ended January 31,Year Ended January 31,
(in thousands) 2019 2018 2017(in thousands)202220212020
Current provision (benefit) for income taxes:      
Current provision for income taxes:Current provision for income taxes:
Federal $(1,582) $4,364
 $604
Federal$3,215 $373 $7,204 
State 2,299
 1,215
 989
State1,121 1,663 974 
Foreign 9,842
 24,308
 18,120
Foreign30,840 6,299 3,049 
Total current provision for income taxes 10,559
 29,887
 19,713
Total current provision for income taxes35,176 8,335 11,227 
Deferred provision (benefit) for income taxes:      
Deferred provision for (benefit from) income taxes:Deferred provision for (benefit from) income taxes:
Federal (4,099) 4,734
 (8,179)Federal6,714 1,366 (4,430)
State (2,687) (58) (842)State255 (188)862 
Foreign 3,769
 (12,209) (7,920)Foreign(18,292)(2,576)(716)
Total deferred benefit for income taxes (3,017) (7,533) (16,941)
Total provision for income taxes $7,542
 $22,354
 $2,772
Total deferred benefit from income taxes Total deferred benefit from income taxes(11,323)(1,398)(4,284)
Total provision for income taxes from continuing operationsTotal provision for income taxes from continuing operations$23,853 $6,937 $6,943 


Intra-period allocation rules require us to allocate our provision for income taxes between continuing operations and other categories such as discontinued operations or comprehensive income (loss). As described in Note 2, “Discontinued Operations”, the results of Cognyte have been reported as discontinued operations for all periods presented.

The reconciliation of the U.S. federal statutory rate to our effective tax rate on income (loss) before provision for income taxes from continuing operations for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 was as follows:
Year Ended January 31,
(in thousands)202220212020
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
Income tax provision (benefit) at the U.S. federal statutory rate$8,296 $(8,733)$(8,307)
State income tax (benefit) provision(1,238)2,017106
Foreign tax rate differential6,262 5,99210,134
Tax incentives(6,378)(2,681)(6,224)
Valuation allowances2,616 (3,269)2,311
Stock-based and other compensation897 2,958(926)
Non-deductible expenses(238)(1,007)1,127
Tax credits117 875266
Tax contingencies2,108 (5,652)161
Change in fair value of future tranche right(3,320)11,791
Changes in tax laws1,552 
U.S. tax effects of foreign operations13,480 3,8288,299
Other, net(301)818(4)
Total provision for income taxes$23,853 $6,937$6,943
Effective income tax rate60.4 %(16.6)%(17.5)%
  Year Ended January 31,
(in thousands) 2019 2018 2017
U.S. federal statutory income tax rate 21.0% 33.8% 35.0 %
       
Income tax provision (benefit) at the U.S. federal statutory rate $16,330
 $6,394
 $(8,215)
State income tax provision (benefit) 3,968
 1,792
 (312)
Foreign tax rate differential 9,516
 (9,434) (5,794)
Tax incentives (7,377) (3,891) (3,507)
Valuation allowances (24,099) 14,539
 (3,640)
Stock-based and other compensation 678
 (8,656) 2,522
Non-deductible expenses (412) (2,091) 5,315
Tax contingencies (3,035) 5,017
 5,566
Tax effects of reorganizations and liquidations 
 
 975
U.S. tax effects of foreign operations 11,559
 8,591
 9,542
Impact of the 2017 Tax Act 
 9,641
 
Other, net 414
 452
 320
Total provision for income taxes $7,542
 $22,354
 $2,772
Effective income tax rate 9.7% 118.3% (11.8)%


The table above reflects a January 31, 2019 U.S. federal statutory incomeChange in the effective tax rate of 21.0% and January 31, 2018 U.S. federal statutory income tax rate of 33.8%from the prior year to the current year presentation are due to the 2017 Tax Act. The 2017 Tax Act includes a reductionallocation of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%. Section 15 of the Internal Revenue Code stipulates that our fiscal year ending January 31, 2018 had a blended corporate tax rate of 33.8% which is based on the applicable tax rates beforeexpense between continuing operations and after the 2017 Tax Act and the number of days in the year.discontinued operations when applying intra-period allocation rules.


Our operations in Israel have been granted “Approved Enterprise” (“AE”) status by the Investment Center of the Israeli Ministry of Industry, Trade and Labor, which makes us eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. Under the terms of the program, income attributable to an approved enterprise is exempt from income tax for a period of two years and is subject to a reduced income tax rate for the subsequent five years to eight years (generally 10% - 23%, depending on the percentage of foreign investment in the company). In addition, certain operationsOur AE status remained in Cyprus qualifyeffect through January 31, 2020. Beginning January 31, 2021, based on the current law, the company qualifies for favorablean alternative tax treatmentincentive program as a Preferred Technological Enterprise (“PTE”). Pursuant to Amendment 73 to the Investment Law adopted in 2017, a company located in the Center of Israel that meets the conditions for PTE is subject to a 12% tax rate on eligible income. Income not eligible for PTE benefits is taxed at the regular corporate rate of 23%, excluding income derived from manufacturing activity which is entitled to tax benefits according to the “Preferred Enterprise” regime. Income eligible for tax benefits under the Cypriot Intellectual Property Regime (“IP Regime”)Preferred Enterprise regime is taxed at 16%. This legislation exempts 80%

110

In total, tax incentives decreased our effective tax rate by 9.0%, 17.8%16.1% for the year ended January 31, 2022, and increased our effective tax rate by 6.4%, and 12.4%15.8% for the years ended January 31, 2019, 2018,2021, and 2017,2020, respectively. The negative benefits are a result of taxable losses in Israel on a continuing operations basis in prior years.


Deferred tax assets and liabilities from continuing operations consisted of the following at January 31, 20192022 and 2018:2021:

January 31,
(in thousands)20222021
Deferred tax assets:
Accrued expenses$4,464 $5,383 
Operating lease liabilities9,275 11,040 
Fair value of derivatives— 4,149 
Loss carryforwards21,764 17,672 
Tax credits5,780 5,946 
Stock-based and other compensation6,802 7,434 
Total deferred tax assets48,085 51,624 
Deferred tax liabilities:
Deferred cost of revenue(8,457)(5,100)
Goodwill and other intangible assets(20,810)(29,876)
Unremitted earnings of foreign subsidiaries(970)(14,882)
Operating lease right-of-use assets(4,959)(8,569)
Other, net(1,547)(2,140)
Total deferred tax liabilities(36,743)(60,567)
Valuation allowance(20,711)(16,761)
Net deferred tax liabilities$(9,369)$(25,704)
Recorded as:
Deferred tax assets$8,091 $7,287 
Deferred tax liabilities(17,460)(32,991)
Net deferred tax liabilities$(9,369)$(25,704)

  January 31,
(in thousands) 2019 2018
Deferred tax assets:    
Accrued expenses $9,510
 $7,637
Contract liabilities 
 2,421
Loss carryforwards 25,451
 47,009
Tax credits 9,239
 11,935
Stock-based and other compensation 14,646
 17,568
Capitalized research and development expenses 8,178
 10,316
Other, net 
 3,749
Total deferred tax assets 67,024
 100,635
Deferred tax liabilities:    
Deferred cost of revenue (8,173) 
Goodwill and other intangible assets (41,781) (36,977)
Unremitted earnings of foreign subsidiaries (12,257) (12,257)
Other, net (2,418) (712)
Total deferred tax liabilities (64,629) (49,946)
Valuation allowance (24,526) (55,116)
Net deferred tax liabilities $(22,131) $(4,427)
     
Recorded as:    
Deferred tax assets $21,040
 $30,878
Deferred tax liabilities (43,171) (35,305)
Net deferred tax liabilities $(22,131) $(4,427)

At January 31, 2019,2022, we had U.S. federal NOL carryforwards of approximately $337.5$309.1 million. Except for $13.1 million. These of NOLs that can be carried forward indefinitely, these loss carryforwards expire in various years ending from January 31, 20202023 to January 31, 2037. We had state NOL carryforwards of approximately $189.4$206.7 million. Except for $2.4 million, expiring of NOLs that can be carried forward indefinitely, those loss carryforwards expire in various years ending from January 31, 20202023 to January 31, 2036.2040. We had foreign NOL carryforwards of approximately $76.9 million.$33.1 million. At January 31, 2019,2022, all but $9.2$2.9 million of these foreign loss carryforwards had indefinite carryforward periods. Certain of these federal, state, and foreign loss carryforwards and credits are subject to Internal Revenue Code Section 382 or similar provisions, which impose limitations on their utilization following certain changes in ownership of the entity generating the loss carryforward. We had U.S. federal, state, and foreign tax credit carryforwards of approximately $14.0$8.9 million at January 31, 2019,2022, the utilization of which is subject to limitation. At January 31, 2019,2022, approximately $6.1$2.7 million of these tax credit carryforwards may be carried forward indefinitely. The balance of $7.9$6.2 million expires in various years ending from January 31, 20192023 to January 31, 2034.2037.

As of January 31, 2019 we continue to record U.S. federal alternative minimum tax credit carryforwards as deferred tax assets.


We currently intend to continue to indefinitely reinvest a portion of the earnings of our foreign subsidiaries to finance foreign activities. Except to the extent of the U.S. tax provided onthat earnings of our foreign subsidiaries have been subject to U.S. taxation as of January 31, 20192022 and withholding taxes of $15.0$1.0 million accrued as of January 31, 20192022 with respect to certain identified cash that may be repatriated to the U.S.,United States, we have not provided tax on the outside basis difference of foreign subsidiaries nor have we provided for any additional withholding or other tax that may be applicable should a future distribution be made from any unremitted earnings of foreign subsidiaries. Due to complexities in the laws of the foreign jurisdictions and the assumptions that would have to be made, it is not practicable to estimate the total amount of income and withholding taxes that would have to be provided on such earnings.


As required by the authoritative guidance on accounting for income taxes, we evaluate the realizability of deferred income tax assets on a jurisdictional basis at each reporting date. Accounting for income taxes guidance requires that a valuation allowance be established when it is more likely than notmore-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 thanmore-likely-than- not realizable, we establish a valuation allowance. We determined that there is sufficient negative evidence to maintain
111

the valuation allowances against certain state and foreign deferred income tax assets as a result of historical losses in 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 have recorded valuation allowances in the amounts of $24.5$20.7 million and $55.1$16.8 million at January 31, 20192022 and 2018,2021, respectively.


Activity in the recorded valuation allowance consisted of the following for the years ended January 31, 20192022 and 2018:2021:

Year Ended January 31,
(in thousands)20222021
Valuation allowance, beginning of year$(16,761)$(19,512)
Income tax (provision) benefit(2,616)3,269 
Fair value of derivatives and convertible debt instruments(1,139)— 
Currency translation adjustment and other(195)(518)
Valuation allowance, end of year$(20,711)$(16,761)
  Year Ended January 31,
(in thousands) 2019 2018
Valuation allowance, beginning of year $(55,116) $(108,609)
Income tax benefit 24,099
 2,868
Adoption of ASU No. 2014-09 5,763
 
Adoption of ASU No. 2016-09 
 (17,407)
Impact of 2017 Tax Act 
 70,832
Business combinations 124
 (2,061)
Currency translation adjustment 604
 (739)
Valuation allowance, end of year $(24,526) $(55,116)


In accordance with the authoritative guidance on accounting for uncertainty in income taxes, differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements, determined by applying the prescribed methodologies of accounting for uncertainty in income taxes, represent our unrecognized income tax benefits, which we either record as a liability or as a reduction of deferred tax assets.


For the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, the aggregate changes in the balance of gross unrecognized tax benefits were as follows:
Year Ended January 31,
(in thousands)202220212020
Gross unrecognized tax benefits, beginning of year$84,847 $85,327 $86,312 
Increases related to tax positions taken during the current year672 706 575 
Increases related to tax positions taken during prior years430 — 147 
Increases related to foreign currency exchange rates45 136 146 
Reductions for tax positions of prior years(152)(193)(1,555)
Lapses of statutes of limitations(1,613)(1,129)(298)
Gross unrecognized tax benefits, end of year$84,229 $84,847 $85,327 
  Year Ended January 31,
(in thousands) 2019 2018 2017
Gross unrecognized tax benefits, beginning of year $115,709
 $148,639
 $142,271
Increases related to tax positions taken during the current year 8,843
 12,260
 11,034
Increases as a result of business combinations 1,032
 43
 
Increases related to tax positions taken during prior years 10,305
 9,226
 585
(Decreases) increases related to foreign currency exchange rates (2,253) 2,449
 648
Reductions for tax positions of prior years (23,415) (8,266) (5,094)
Reductions for settlements with tax authorities (1,054) (140) (145)
Reduction for rate change due to the 2017 Tax Act 
 (48,004) 
Lapses of statutes of limitations (101) (498) (660)
Gross unrecognized tax benefits, end of year $109,066
 $115,709
 $148,639


AsWe had unrecognized income tax benefits of $84.2 million (excluding interest and penalties) as of January 31, 2019, we had $109.1 million of unrecognized tax benefits, of which $100.9 million represents the amount2022, that, if recognized, would impact the effective income tax rate in future periods.rate. We recorded $0.7$0.5 million,, $1.5 $0.4 million,, and $0.5$0.2 million of tax expense for interest and penalties related to uncertain tax positions in our provision for income taxes for the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, respectively. Accrued liabilitiesThe accrued liability for interest and penalties were $4.6was $3.4 million and $5.6$3.0 million at January 31, 20192022 and 2018,2021, respectively. Interest and penalties (expense and/or benefit) are recorded as a component of the provision (benefit) for income taxes in the consolidated financial statements.statements of operations.


Our income tax returns are subject to ongoing tax examinations in several jurisdictions in which we operate. In Israel, we are no longer subject to income tax examination for years prior to January 31, 2014. In the United Kingdom, with the exception of years which are currently under examination, we are no longer subject to income tax examination for years prior to January 31, 2016.2019. In the U.S.,United States, our federal returns are no longer subject to income tax examination for years prior to January 31, 2015.2019. However, to the extent we generated NOLs or tax credits in closed tax years, future use of the NOL or tax credit carry forward balance would be subject to examination within the relevant statute of limitations for the year in which utilized.


As of January 31, 2019,2022, income tax returns are under examination in the following significant tax jurisdictions:
JurisdictionTax Years
United KingdomDecember 31, 2006, January 31, 2008
IndiaMarch 31, 2007, March 31, 2008, March 31, 2010 - March 31, 2013, March 31, 2017, March 31, 2020
IsraelJanuary 31, 2015,2018 - January 31, 2016, January 31, 20172020


We regularly assess the adequacy of our provisions for income tax contingencies.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 expiration. Welimitation. Further, we believe that it is reasonably
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possible that the total amount of unrecognized income tax benefits at January 31, 20192022 could decrease by approximately

$5.8 $0.3 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 certain 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. See Note 2, “Discontinued Operations” for discussion related to the Tax Matters Agreement entered into between us and Cognyte as a result of the Spin-Off.



On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The income tax provisions of the CARES Act do not have a significant impact on our current taxes, deferred taxes, or uncertain tax positions. However, we deferred the timing of employer payroll taxes and accelerated the refund of AMT credits as permitted by the CARES Act.

12.
FAIR VALUE MEASUREMENTS

14.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 January 31, 20192022 and 2018: 2021: 
 January 31, 2019 January 31, 2022
 Fair Value Hierarchy Category Fair Value Hierarchy Category
(in thousands) Level 1 Level 2 Level 3(in thousands)Level 1Level 2Level 3
Assets:  
  
  
Assets:   
Money market funds $10,709
 $
 $
Money market funds$127,041 $— $— 
Commercial paper, classified as cash and cash equivalentsCommercial paper, classified as cash and cash equivalents— 29,995 — 
Foreign currency forward contracts 
 1,401
 
Foreign currency forward contracts— 33 — 
Interest rate swap agreements 
 2,072
 
Contingent consideration receivableContingent consideration receivable— — 271 
Total assets $10,709
 $3,473
 $
Total assets$127,041 $30,028 $271 
Liabilities:  
  
  
Liabilities:   
Foreign currency forward contracts 
 $2,086
 $
Foreign currency forward contracts$— $91 $— 
Interest rate swap agreements 
 4,028
 
Contingent consideration - business combinations 
 
 61,340
Option to acquire noncontrolling interests of consolidated subsidiaries 
 
 3,000
Contingent consideration — business combinationsContingent consideration — business combinations— 7,776 — 
Total liabilities $
 $6,114
 $64,340
Total liabilities$ $7,867 $ 
 
 January 31, 2021
 Fair Value Hierarchy Category
(in thousands)Level 1Level 2Level 3
Assets:   
Money market funds$342,090 $— $— 
Foreign currency forward contracts— 136 — 
Contingent consideration receivable— — 565 
Total assets$342,090 $136 $565 
Liabilities:   
Foreign currency forward contracts$— $48 $— 
Interest rate swap agreements— 17,881 — 
Future tranche right— — 52,772 
Contingent consideration — business combinations— — 15,704 
Option to acquire noncontrolling interests of consolidated subsidiaries— — 3,250 
Total liabilities$ $17,929 $71,726 

We evaluated the Future Tranche Right associated with the Series A Preferred Stock issued on May 7, 2020 and determined that the Future Tranche Right was a freestanding financial instrument. The Future Tranche Right was initially recorded as an
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  January 31, 2018
  Fair Value Hierarchy Category
(in thousands) Level 1 Level 2 Level 3
Assets:  
  
  
Money market funds $186
 $
 $
Short-term investments, classified as available-for-sale 
 2,002
 
Foreign currency forward contracts 
 3,682
 
Interest rate swap agreement 
 2,580
 
Total assets $186
 $8,264
 $
Liabilities:  
  
  
Foreign currency forward contracts $
 $1,308
 $
Contingent consideration - business combinations 
 
 62,829
Option to acquire noncontrolling interests of consolidated subsidiaries 
 
 2,950
Total liabilities $
 $1,308
 $65,779
asset and was re-measured at each reporting period until the redemption feature was exercised in connection with the sale and issuance of the Series B Preferred Stock on April 6, 2021. Immediately prior to the issuance of the Series B Preferred Stock, the Future Tranche Right was remeasured to fair value with the change in fair value recognized as a component of other income (expense). Upon the issuance of the Series B Preferred Stock, the Future Tranche Right liability 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. Please refer to Note 10, “Convertible Preferred Stock” for additional information regarding the Future Tranche Right and preferred stock investment.


The following table presents the changes in the estimated fair value of the Future Tranche Right measured using significant unobservable inputs (Level 3) for the years ended January 31, 2022 and 2021.

Year Ended January 31,
(in thousands)20222021
Fair value measurement, beginning of year$(52,772)$— 
Fair value of future tranche right upon issuance of the Series A Preferred Stock— 3,374 
Change in fair value, recorded in other income (expense), net15,810 (56,146)
Reclassification of future tranche right liability upon settlement36,962 — 
Fair value measurement, end of year$ $(52,772)

In January 2020, we completed the sale of an insignificant subsidiary. In accordance with the terms of the sale agreement, 100% of the aggregate purchase price is contingent in nature based on a percentage of net sales of the former subsidiary’s products during the thirty-six month period following the transaction closing. We include the fair value of the contingent consideration receivable within prepaid expenses and other current assets and other assets on our consolidated balance sheets. The estimated fair value of this asset as of January 31, 2022, which is measured using Level 3 inputs, was $0.3 million. We received payments of $0.3 million, and the change in the estimated fair value of this contingent receivable was not material, during the year ended January 31, 2022. The estimated fair value of this asset as of January 31, 2021 was $0.6 million. We received payments of $0.1 million, and the change in the estimated fair value of this contingent receivable was not material, during the year ended January 31, 2021. Due to the timing of this transaction, there was no change to the estimated fair value of this receivable recorded in operating expenses for the year ended January 31, 2020.

The following table presents the changes in the estimated fair values of our liabilities for contingent consideration measured using significant unobservable inputs (Level 3) for the years endedJanuary 31, 20192022 and 20182021: 
 Year Ended January 31, Year Ended January 31,
(in thousands) 2019 2018(in thousands)20222021
Fair value measurement, beginning of year $62,829
 $52,733
Fair value measurement, beginning of year$15,704 $31,367 
Contingent consideration liabilities recorded for business combinations 15,944
 27,604
Contingent consideration liabilities recorded for business combinations900 — 
Changes in fair values, recorded in operating expenses (3,561) (8,324)Changes in fair values, recorded in operating expenses883 (806)
Payments of contingent consideration (13,600) (9,412)Payments of contingent consideration(9,560)(15,183)
Foreign currency translation and other (272) 228
Foreign currency translation and other(151)326 
Transfer of contingent consideration liability to Level 2 of the fair value hierarchyTransfer of contingent consideration liability to Level 2 of the fair value hierarchy(7,776)— 
Fair value measurement, end of year $61,340
 $62,829
Fair value measurement, end of year$ $15,704 
 

Our estimated liability for contingent consideration represents potential payments of additional consideration for business combinations, payable if certain defined performance goals are achieved. Changes in fair value of contingent consideration are recorded in the consolidated statements of operations within selling, general and administrative expenses.


During the year endedOn January 31, 2017,2022, we acquired two majority owned subsidiaries for which we holdexercised an option to acquire the noncontrolling interests. We accountinterests in 2 majority owned subsidiaries. Prior to the exercise, we accounted for the option as an in-substance investment in the noncontrolling common stock of each such subsidiary. We includeincluded the fair value of the option within accrued expenses and other current liabilities and dodid not recognize noncontrolling interests in these subsidiaries.

The following table presents the change in the estimated fair value of this liability, which is measured using Level 3 inputs, for the years ended January 31, 20192022 and 2018:2021:
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 Year Ended January 31,Year Ended January 31,
(in thousands) 2019 2018(in thousands)20222021
Fair value measurement, beginning of year $2,950
 $3,550
Fair value measurement, beginning of year$3,250 $2,900 
Change in fair value, recorded in operating expenses 50
 (600)Change in fair value, recorded in operating expenses1,245 350 
Amount paid upon exercise of option to acquire noncontrolling interests of consolidated subsidiariesAmount paid upon exercise of option to acquire noncontrolling interests of consolidated subsidiaries(4,495)— 
Fair value measurement, end of year $3,000
 $2,950
Fair value measurement, end of year$ $3,250 


There were no transfers between levelsOn April 13, 2021, we paid $16.5 million to the counterparty to settle the interest rate swap agreement prior to its June 2024 maturity, and reclassified the remaining $15.7 million of pretax accumulated deferred losses from accumulated other comprehensive loss within stockholders’ equity to other income (expense), net on our consolidated statement of operations for the fair value measurement hierarchy during the yearsyear ended January 31, 20192022. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and 2018.netted against income taxes receivable, which are included within prepaid expenses and other current assets on our consolidated balance sheet as of January 31, 2022. Please refer to Note 15, “Derivative Financial Instruments” for further information regarding our interest rate agreement.

Fair Value Measurements
 
Money Market Funds - We value our money market funds using quoted active market prices for such funds.


Short-term Investments, Corporate Debt Securities, and Commercial Paper - The fair values of short-term investments, as well as corporate debt securities and commercial paper classified as cash equivalents, are estimated using observable market prices for identical securities that are traded in less-active markets, if available. When observable market prices for identical securities are not available, we value these short-term investments using non-binding market price quotes from brokers which we review for reasonableness using observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model.


Foreign Currency Forward Contracts - The estimated fair value of foreign currency forward contracts is based on quotes received from the counterparties thereto. These quotes are reviewed for reasonableness by discounting the future estimated cash flows under the contracts, considering the terms and maturities of the contracts and market foreign currency exchange rates using readily observable market prices for similar contracts.


Future Tranche Right - The fair value of the Future Tranche Right was classified within Level 3 of the fair value hierarchy because it was valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The fair value of the Future Tranche Right was estimated using a binomial tree model to estimate the value of the Series B Preferred Stock and a Monte Carlo simulation to estimate our stock price post-Spin-Off, which we believe was reflective of all significant assumptions that market participants would likely consider in negotiating the transfer of the Future Tranche Right. The fair value of the Future Tranche Right also reflected the likelihood of the Series B Preferred Stock being issued, which management considered to be highly probable for all periods the Future Tranche Right was outstanding.

Significant inputs and assumptions used in the valuation model immediately prior to the settlement date, April 6, 2021, and as of January 31, 2021, are as follows:

April 6,January 31,
20212021
Risk-free interest rate for preferred stock2.35 %1.86 %
Implied credit spread6.78 %6.78 %
Expected volatility30.00 %30.00 %
Verint common stock price$45.91$73.83

Interest Rate Swap Agreements Agreement - The fair valuesvalue of our interest rate swap agreements areagreement was based in part on data received from the counterparty, and representsrepresented the estimated amount we would receive or pay to settle the agreements,agreement, taking into consideration current and projected future interest rates as well as the creditworthiness of the parties, all of which can be validated through readily observable data from external sources.
 
Contingent Consideration Assets and Liabilities - Business Combinations and Divestitures - The fair value of the contingent consideration related to business combinations and divestitures is estimated using a probability-adjusted discounted cash flow
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model. These fair value measurements are based on significant inputs not observable in the market. The key internally developed assumptions used in these models are discount rates and the probabilities assigned to the milestones to be achieved. We remeasure the fair value of the contingent consideration at each reporting period, and any changes in fair value resulting from either the passage of time or events occurring after the acquisition date, such as changes in discount rates, or in the expectations of achieving the performance targets, are recorded within selling, general, and administrative expenses. Increases or decreases in discount rates would have inverse impacts on the related fair value measurements, while favorable or unfavorable changes in expectations of achieving performance targets would result in corresponding increases or decreases in the related fair value measurements. We utilized discount rates ranging from 3.8%3.3% to 5.8%3.8%, with a weighted average discount rate of 3.5% in our calculations of the estimated fair values of our contingent consideration liabilities as of January 31, 2019.2021. We utilized discount rates ranging from 3.0%3.5% to 5.0%3.9%, with a weighted average discount rate of 3.7%, in our calculationscalculation of the estimated fair valuesvalue of our contingent consideration liabilitiesassets as of January 31, 2018.2022. We utilized discount rates ranging from 3.3% to 4.0%, with a weighted average discount rate of 3.7% in our calculation of the estimated fair value of our contingent consideration assets as of January 31, 2021.


As of January 31, 2022, the $7.8 million fair value of the contingent consideration liability was based on actual achievement through the performance periods ended January 31, 2022, and was transferred to Level 2 of the fair value hierarchy as the fair value was determined based on other significant observable inputs.

Option to Acquire Noncontrolling Interests of Consolidated Subsidiaries - The fair value of the option iswas determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates and assumptions determined by management. This fair value measurement is based upon significant inputs not observable in the market. We remeasureremeasured the fair value of the option at each reporting period, and any changes in fair value arewere recorded within selling,

general, and administrative expenses. We utilized a discount ratesrate of 12.5% and 13.5%8.5% in our calculation of the estimated fair value of the option as of January 31, 2019 and 2018, respectively.2021.


Other Financial Instruments

The carrying amounts of accounts receivable, contract assets, accounts payable, and accrued liabilities and other current liabilities approximate fair value due to their short maturities.
 
The estimated fair values of our term loan borrowings were $412approximately $100 million and $425$409 million at January 31, 20192022 and 2018,2021, respectively. The estimated fair values of the term loans are based upon indicative bid and ask prices as determined by the agent responsible for the syndication of our term loans. We consider these inputs to be within Level 3 of the fair value hierarchy because we cannot reasonably observe activity in the limited market in which participationsparticipation in our term loans are traded. The indicative prices provided to us as at each of January 31, 20192022 and 20182021 did not significantly differ from par value. The estimated fair value of our revolving credit borrowings, if any, is based upon indicative market values provided by one of our lenders. We had no revolving credit borrowings

The estimated fair value of our 2014 Notes, which matured in June 2021, was approximately $440 million at January 31, 2019 and 2018.

2021. The estimated fair value of our 2021 Notes was approximately $330 million at January 31, 2022. The estimated fair values of ourthe 2014 Notes were approximately $400 millionand $389 million at January 31, 2019 and 2018, respectively. The estimated fair value of the2021 Notes iswere determined based on quoted bid and ask prices in the over-the-counter market in which the 2014 Notes trade.and 2021 Notes traded. We consider these inputs to be within Level 2 of the fair value hierarchy.
 
Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
 
In addition to assets and liabilities that are measured at fair value on a recurring basis, we also measure certain assets and liabilities at fair value on a nonrecurring basis. Our non-financial assets, including goodwill, intangible assets, operating lease right-of-use assets, and property, plant and equipment, are measured at fair value when there is an indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows. These assets are recorded at fair value only when an impairment charge is recognized. Further details regarding our regular impairment reviews appear in Note 1, “Summary of Significant Accounting Policies”.



As of January 31, 2022, the carrying amount of our noncontrolling equity investments in privately-held companies without readily determinable fair values was $5.1 million, of which $4.4 million was remeasured to fair value based on an observable transaction during the year ended January 31, 2022. These investments are included within other assets on the consolidated balance sheets. An unrealized gain of $3.1 million, which adjusted the carrying value of a noncontrolling equity investment based on an observable transaction was recorded in other income (expense), net on the consolidated statement of operations for the year ended January 31, 2022. As of January 31, 2021, the carrying amount of our noncontrolling equity investments in privately-held companies without readily determinable fair values was $2.0 million. There were no observable price changes in
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13. our investments in privately-held companies during the year ended January 31, 2021. We did not recognize any impairments during the years ended January 31, 2022 and 2021.


15.DERIVATIVE FINANCIAL INSTRUMENTS
 
Our primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk, when deemed appropriate. We enter into these contracts in the normal course of business to mitigate risks and not for speculative purposes.
 
Foreign Currency Forward Contracts


Under our risk management strategy, we periodically use foreign currency forward contracts to manage our short-term exposures to fluctuations in operational cash flows resulting from changes in foreign currency exchange rates. These cash flow exposures result from portions of our forecasted operating expenses, primarily compensation and related expenses, which are transacted in currencies other than the U.S. dollar, most notably the Israeli shekel. We also periodically utilize foreign currency forward contracts to manage exposures resulting from forecasted customer collections to be remitted in currencies other than the applicable functional currency, and exposures from cash, cash equivalents and short-term investments denominated in currencies other than the applicable functional currency. These foreign currency forward contracts generally have maturities of no longer than twelve months, although occasionally we will execute a contract that extends beyond twelve months, depending upon the nature of the underlying risk.


We held outstanding foreign currency forward contracts with notional amounts of $123.0$7.4 million and $153.5$6.6 million as of January 31, 20192022 and 2018,2021, respectively.


Interest Rate Swap Agreements



To partially mitigate risks associated with the variable interest rates on the term loan borrowings under the Prior Credit Agreement,prior credit agreement, in February 2016, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution under which we paypaid interest at a fixed rate of 
4.143% and receivereceived variable interest of three-month LIBOR (subject to a minimum of 0.75%), plus a spread of 2.75%, on a notional amount of $200.0 million (the “2016 Swap”). Although the Prior Credit Agreementprior credit agreement was terminated on June 29, 2017, the 2016 Swap agreement remainsremained in effect until September 6, 2019, and servesserved as an economic hedge to partially mitigate the risk of higher borrowing costs under our 2017 Credit Agreement result

ingresulting from increases in market interest rates. Settlements with the counterparty under the 2016 Swap occuroccurred quarterly and the 2016 Swap will terminatematured on September 6, 2019.


Prior to June 29, 2017, the 2016 Swap was designated as a cash flow hedge for accounting purposes and as such, changes in its fair value were recognized in accumulated other comprehensive income (loss) in the consolidated balance sheet and were reclassified into the statement of operations within interest expense in the period in which the hedged transaction affected earnings. Hedge ineffectiveness, if any, was recognized currently in the consolidated statement of operations.


On June 29, 2017, concurrent with the execution of the 2017 Credit Agreement and termination of the Prior Credit Agreement,prior credit agreement, the 2016 Swap was no longer designated as a cash flow hedge for accounting purposes and because occurrence of the specific forecasted variable cash flows which had been hedged by the 2016 Swap was no longer probable, the $0.9 million fair value of the 2016 Swap at that date was reclassified from accumulated other comprehensive income (loss) into the consolidated statement of operations as income within other income (expense), net. Ongoing changes in the fair value of the 2016 Swap are nowwere recognized within other income (expense), net in the consolidated statement of operations.


In April 2018, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to partially mitigate risks associated with the variable interest rate on our 2017 Term Loan for periods following the termination of the 2016 Swap in September 2019, under which we will paypaid interest at a fixed rate of 2.949% and receivereceived variable interest of three-month LIBOR (subject to a minimum of 0.00%), on a notional amount of $200.0 million (the “2018 Swap”). The effective date of the 2018 Swap iswas September 6, 2019, and settlements with the counterparty will occurbegan on November 1, 2019 and occurred on a quarterly basis, beginning on November 1, 2019.basis. The 2018 Swap will terminate onhad a termination date of June 29, 2024.


During the operating term ofPrior to May 1, 2020, the 2018 Swap if we elect three-month LIBOR at the periodic interest rate reset dates for at least $200.0 million of our 2017 Term Loan, the annual interest rate on that amount of the 2017 Term Loan will be fixed at 4.949% (including the impact of our current 2.00% interest rate margin on Eurodollar loans) for the applicable interest rate period.

The 2018 Swap iswas designated as a cash flow hedge for accounting purposes and as such, changes in its fair value arewere recognized in accumulated other comprehensive income (loss) in the consolidated balance sheet and arewere reclassified into the consolidated statement of operations within interest expense in the periods in which the hedged transactions affectaffected earnings.

On May 1, 2020, which was an interest rate reset date on our 2017 Term Loan, we selected an interest rate other than three-month LIBOR. As a result, the 2018 Swap, which was designated specifically to hedge three-month LIBOR interest payments, no longer qualified as a cash flow hedge. Subsequent to May 1, 2020, changes in the fair value of the 2018 Swap were accounted for as a component of other income (expense), net. Accumulated deferred losses on the 2018 Swap of $20.4 million,
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or $16.0 million after taxes, at May 1, 2020 that were previously recorded as a component of accumulated other comprehensive loss, were being reclassified to the consolidated statement of operations as interest expense over the remaining term of the 2018 Swap, as the previously hedged interest payments occurred.

On April 13, 2021, we paid $16.5 million to the counterparty to settle the 2018 Swap agreement prior to its June 2024 maturity. Upon settlement, we recorded an unrealized gain of $1.3 million in other income (expense) to adjust the 2018 Swap to its fair value at settlement date and reclassified the remaining $15.7 million of pretax accumulated deferred losses from accumulated other comprehensive loss within stockholders’ equity to other income (expense), net on our consolidated statement of operations for the year ended January 31, 2022. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes receivable, which are included within prepaid expenses and other current assets on our consolidated balance sheet as of January 31, 2022.

Fair Values of Derivative Financial Instruments
 
The fair values of our derivative financial instruments and their classifications in our consolidated balance sheets as of January 31, 20192022 and 20182021 were as follows:
 
January 31,
(in thousands) Balance Sheet Classification20222021
Derivative assets:
Foreign currency forward contracts:
Designated as cash flow hedgesPrepaid expenses and other current assets$33 $136 
Total derivative assets$33 $136 
Derivative liabilities:
Foreign currency forward contracts:
Designated as cash flow hedgesAccrued expenses and other current liabilities$91 $47 
Not designated as hedging instrumentsAccrued expenses and other current liabilities— 
Interest rate swap agreements:
Not designated as a hedging instrumentAccrued expenses and other current liabilities— 4,316 
Not designated as a hedging instrumentOther liabilities— 13,565 
Total derivative liabilities$91 $17,929 
    January 31,
(in thousands)  Balance Sheet Classification 2019 2018
Derivative assets:      
Foreign currency forward contracts:      
Designated as cash flow hedges Prepaid expenses and other current assets $738
 $3,682
Not designated as hedging instruments Prepaid expenses and other current assets 663
 
Interest rate swap agreements:      
Not designated as a hedging instrument Prepaid expenses and other current assets 2,072
 1,330
  Other assets 
 1,250
Total derivative assets   $3,473
 $6,262
       
Derivative liabilities:      
Foreign currency forward contracts:      
Designated as cash flow hedges Accrued expenses and other current liabilities $1,830
 $
Not designated as hedging instruments Accrued expenses and other current liabilities 256
 1,061
  Other liabilities 
 247
Interest rate swap agreements:      
Designated as a cash flow hedge Accrued expenses and other current liabilities 122
 
Designated as a cash flow hedge Other liabilities 3,906
 $
Total derivative liabilities   $6,114
 $1,308



Derivative Financial Instruments in Cash Flow Hedging Relationships
 
The effects of derivative financial instruments designated as cash flow hedges on accumulated other comprehensive loss (“AOCL”) and on the consolidated statement of operations for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 were as follows:


Year Ended January 31,
(in thousands) 202220212020
Net gains (losses) recognized in AOCL:
Foreign currency forward contracts$85 $323 $289 
Interest rate swap agreement— (7,535)(10,265)
$85 $(7,212)$(9,976)
Net (losses) gains reclassified from AOCL to the consolidated statements of operations:
Foreign currency forward contracts$232 $267 $64 
Interest rate swap agreement(16,669)(4,367)(792)
$(16,437)$(4,100)$(728)
  Year Ended January 31,
(in thousands)  2019 2018 2017
Net (losses) gains recognized in AOCL:      
Foreign currency forward contracts $(981) $3,312
 $575
Interest rate swap agreement (3,043) (341) 632
  $(4,024) $2,971
 $1,207
Net (losses) gains reclassified from AOCL to the consolidated statements of operations:      
Foreign currency forward contracts $(4,219) $6,813
 $1,257
Interest rate swap agreement 
 (254) 
  $(4,219) $6,559
 $1,257


For information regarding the line item locations of the net (losses) gains on derivative financial instruments reclassified out of AOCL into the consolidated statements of operations, see Note 9,11, “Stockholders’ Equity”.


There were no gains or losses from ineffectiveness
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Table of these cash flow hedges recorded for the years ended January 31, 2018, and 2017. Effective with our February 1, 2018 adoption of ASU No. 2017-12, ineffectiveness of cash flow hedges is no longer recognized. Contents
All of the foreign currency forward contracts underlying the $1.0 million of net unrealized lossesgains recorded in our accumulated other comprehensive loss at January 31, 20192022 mature within twelve months, and therefore we expect all such lossesgains to be reclassified into earnings within the next twelve months.


DerivativeFinancial InstrumentsNot Designated as Hedging Instruments
 
Gains (losses)(Losses) gains recognized on derivative financial instruments not designated as hedging instruments in our consolidated statements of operations for the years endedJanuary 31, 2019, 2018,2022, 2021, and 20172020 were as follows: 
Classification in Consolidated Statements of OperationsYear Ended January 31,
(in thousands)202220212020
Foreign currency forward contractsOther income (expense), net$— $— $251 
Interest rate swap agreementsOther income (expense), net(14,374)(1,267)(48)
$(14,374)$(1,267)$203 


16.STOCK-BASED COMPENSATION AND OTHER BENEFIT PLANS
  Classification in Consolidated Statements of Operations Year Ended January 31,
(in thousands)  2019 2018 2017
Foreign currency forward contracts Other income (expense), net $1,891
 $(2,546) $(323)
Interest rate swap agreements Other income (expense), net 620
 2,529
 
    $2,511
 $(17) $(323)


14.STOCK-BASED COMPENSATION AND OTHER BENEFIT PLANS
 
Stock-Based Compensation Plans


Plan Summaries


We issue stock-based incentive awards to eligible employees, directors and consultants, including restricted stock units (“RSUs”), performance stock units (“PSUs”), stock options (both incentive and non-qualified), and other awards, under the terms of our outstanding stock benefit plans (the “Plans” or “Stock Plans”) and/orand forms of equity award agreements approved by our board of directors.


Awards are generally subject to multi-year vesting periods. We recognize compensation expense for awards on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods, reduced by estimated forfeitures. Upon issuance of restricted stock, exercise of stock options, or issuance of shares under the Plans, we generally issue new shares of common stock, but occasionally may issue treasury shares.


Amended and Restated Stock-Based Compensation PlanPlans



On June 22, 2017,20, 2019, our stockholders approved the Verint Systems Inc. Amended and Restated 20152019 Long-Term Stock Incentive Plan (the “2019 Plan”). Upon approval of the 2019 Plan, new awards are no longer permitted under our prior stock-based compensation plan (the “2017 Amended Plan”), which amended and restated the Verint Systems Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”). As with the 2015 Plan,Awards outstanding at June 20, 2019 under the 2017 Amended Plan or other previous stock-based compensation plans were not impacted by the approval of the 2019 Plan. Collectively, our stock-based compensation plans are referred to herein as the “Plans”.

The 2019 Plan authorizes our board of directors to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock-based awards, and performance compensation awards.

The 2017 Amended Plan amended and restated the 2015 Plan to, among other things, increase the number of shares available for issuance thereunder. Subject to adjustment as provided in the 2017 Amended2019 Plan, up to an aggregate of (i) 7,975,0009,475,000 shares of our common stock (on an option-equivalent basis), plus (ii) the number of shares of our common stock available for issuance under the 20152017 Amended Plan as of June 22, 2017,20, 2019, plus (iii) the number of shares of our common stock that become available for issuance as a result of awards made under the 20152017 Amended Plan or the 2017 Amended2019 Plan that are forfeited, cancelled, exchanged, withheld or surrendered orthat terminate or expire, may be issued or transferred in connection with awards under the 2017 Amended2019 Plan. Each stock option or stock-settled stock appreciation right granted under the 2017 Amended2019 Plan will reduce the available plan capacity by one1 share and each other award denominated in shares that is granted under the 2019 Plan will reduce the available plan capacity by 2.472.38 shares.


The 2017 AmendedIn March 2021, our board of directors approved an adjustment of the available plan capacity to the 2019 Plan expiresto 14,239,656 shares based on June 22, 2027.an adjustment ratio of approximately 1.45 as a result of the Spin-Off.


Stock-Based Compensation Expense


We recognized stock-based compensation expense in the following line items on the consolidated statements of operations for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:
 
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 Year Ended January 31,Year Ended January 31,
(in thousands) 2019 2018 2017(in thousands)202220212020
Component of income (loss) before (benefit) provision for income taxes:      
Cost of revenue - product $1,309
 $1,561
 $1,290
Cost of revenue - service and support 4,426
 6,904
 7,297
Component of income before provision for income taxes:Component of income before provision for income taxes:
Cost of revenue — recurringCost of revenue — recurring$1,999 $1,109 $2,100 
Cost of revenue — nonrecurringCost of revenue — nonrecurring3,029 2,184 3,316 
Research and development, net 9,870
 13,144
 11,637
Research and development, net7,565 3,918 7,212 
Selling, general and administrative 51,052
 47,757
 45,384
Selling, general and administrative52,672 37,989 52,211 
Total stock-based compensation expense 66,657
 69,366
 65,608
Total stock-based compensation expense65,265 45,200 64,839 
Income tax benefits related to stock-based compensation (before consideration of valuation allowances) 10,377
 16,504
 15,752
Income tax benefits related to stock-based compensation (before consideration of valuation allowances)10,615 6,684 7,357 
Total stock-based compensation, net of taxes $56,280
 $52,862
 $49,856
Total stock-based compensation, net of taxes$54,650 $38,516 $57,482 


The following table summarizes stock-based compensation expense by type of award for the years ended January 31, 2019, 2018,2022, 2021, and 2017: 2020: 


 Year Ended January 31,Year Ended January 31,
(in thousands) 2019 2018 2017(in thousands)202220212020
Restricted stock units and restricted stock awards $57,639
 $57,188
 $55,123
Restricted stock units and restricted stock awards$58,678 $47,598 $49,475 
Stock bonus program and bonus share program 8,943
 12,108
 10,298
Stock bonus program and bonus share program6,568 (2,390)15,327 
Total equity-settled awards 66,582
 69,296
 65,421
Total equity-settled awards65,246 45,208 64,802 
Phantom stock units (cash-settled awards) 75
 70
 187
Phantom stock units (cash-settled awards)19 (8)37 
Total stock-based compensation expense $66,657
 $69,366
 $65,608
Total stock-based compensation expense$65,265 $45,200 $64,839 
 
Awards under our stock bonus and bonus share programs are accounted for as liability-classified awards, because the obligations are based predominantly on fixed monetary amounts that are generally known at inception of the obligation, to be settled with a variable number of shares of our common stock, which for awards under our stock bonus program is determined using a discounted average price of our common stock.
 
Effective with our adoption of ASU No. 2016-09 on February 1, 2017, weWe recorded a $0.2$2.5 million net excess tax benefit, and a $0.5$0.9 million net excess tax deficiency, and a $1.9 million net excess tax benefit resulting from our Stock Plans as a component of income tax expense for the years ended January 31, 20192022, 2021, and 2018,2020, respectively. A net excess tax deficiency of $0.7 million resulting from our Stock Plans was recorded as a decrease to additional paid-in capital for the year ended January 31, 2017.


Restricted Stock Units and Performance Stock Units
 

We periodically award RSUs to our directors, officers, and other employees. The fair value of these awards is equivalent to the market value of our common stock on the grant date. RSUs are not shares of our common stock and do not have any of the rights or privileges thereof, including voting or dividend rights. On the applicable vesting date, the holder of an RSU becomes entitled to a share of our common stock. RSUs are subject to certain restrictions and forfeiture provisions prior to vesting.


We periodically award PSUs to executive officers and certain employees that vest upon the achievement of specified performance goals or market conditions. We separately recognize compensation expense for each tranche of a PSU award as if it were a separate award with its own vesting date. For certain PSUs, an accounting grant date may be established prior to the requisite service period.


Once a performance vesting condition has been defined and communicated, and the requisite service period has begun, our estimate of the fair value of PSUs requires an assessment of the probability that the specified performance criteria will be achieved, which we update at each reporting date and adjust our estimate of the fair value of the PSUs, if necessary. All compensation expense for PSUs with market conditions is recognized if the requisite service period is fulfilled, even if the market condition is not satisfied.


RSUs, and PSUs, or phantom stock units that are expected to settle with cash payments upon vesting, if any, are reflected as liabilities on our consolidated balance sheets. Such RSUs and PSUsawards were insignificant at January 31, 20192022, 2021, and 2018.2020.


The following table (“Award Activity Table”) summarizes activity for RSUs, PSUs, and other stock awards that reduce available Plan capacity under the Plans for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:


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 Year Ended January 31,Year Ended January 31,
 2019 2018 2017202220212020
(in thousands, except grant date fair values) Shares or Units Weighted-Average Grant-Date Fair Value Shares or Units Weighted-Average Grant-Date Fair Value Shares or Units Weighted-Average Grant-Date Fair Value(in thousands, except grant date fair values)Shares or UnitsWeighted-Average Grant-Date Fair ValueShares or UnitsWeighted-Average Grant-Date Fair ValueShares or UnitsWeighted-Average Grant-Date Fair Value
Beginning balance 2,808
 $41.18
 2,742
 $45.20
 2,649
 $54.57
Beginning balance2,950 $35.97 1,879 $52.96 1,877 $40.98 
Granted 1,708
 $43.03
 1,804
 $40.19
 1,870
 $35.33
Granted1,540 $48.01 1,469 $47.30 1,157 $59.89 
Released (1,481) $43.67
 (1,403) $45.96
 (1,433) $47.98
Released(1,800)$36.14 (1,125)$47.53 (1,009)$39.76 
Forfeited (258) $41.07
 (335) $48.92
 (344) $52.20
Forfeited(236)$40.23 (206)$52.59 (146)$45.07 
Ending balance 2,777
 $41.05
 2,808
 $41.18
 2,742
 $45.20
Ending balance2,454 $42.99 2,017 $51.90 1,879 $52.96 


The beginning balance of the outstanding shares for the year ended January 31, 2022 reflects the adjusted shares based on an adjustment ratio of approximately 1.45 as a result of the Spin-Off on February 1, 2021. The related weighted-average grant date fair value for the beginning outstanding shares reflects the adjusted fair value of the awards on the Spin-Off Date. The adjusted shares preserve the same terms and conditions and vesting schedules as the original awards.

The beginning balance of the shares and the respective weighted-average grant date fair value for the years ended January 31, 2021 and 2020 reflect the shares and fair values on the original date of grant without adjustment.

With respect to our stock bonus program, activity presented in the table above only includes shares earned and released in consideration of the discount provided under that program. Consistent with the provisions of the Plans under which such shares are issued, other shares issued under the stock bonus program are not included in the table above because they do not reduce available plan capacity (since such shares are deemed to be purchased by the grantee at fair value in lieu of receiving an earned cash bonus). Activity presented in the table above includes all shares awarded and released under the bonus share program. Further details appear below under “Stock Bonus Program” and “Bonus Share Program”.


Our RSU and PSU awards may include a provision which allows the awards to be settled with cash payments upon vesting, rather than with delivery of common stock, at the discretion of our board of directors. As of January 31, 2019,2022, for such awards that are outstanding, settlement with cash payments was not considered probable, and therefore these awards have been accounted for as equity-classified awards and are included in the table above.


In order to achieve an equitable modification of the existing awards following the Spin-Off, we converted unvested awards as of February 1, 2021 by a factor of approximately 1.45, resulting in additional awards being granted to remaining employees denominated solely in Verint common stock. As noted above, a corresponding adjustment was also made to the available capacity under the 2019 Plan.

The following table summarizes PSU activity in isolation under the Plans for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 (these amounts are alreadyalso included in the Award Activity Table above)above for 2022, 2021, and 2020):


Year Ended January 31,
(in thousands)202220212020
Beginning balance743 423 414 
Granted212 297 237 
Released(381)(182)(200)
Forfeited(27)(27)(28)
Ending balance547 511 423 
  Year Ended January 31,
(in thousands) 2019 2018 2017
Beginning balance 506
 438
 332
Granted 228
 204
 312
Released (139) (50) (159)
Forfeited (83) (86) (47)
Ending balance 512
 506
 438


Consistent with the table above, the beginning balance of the outstanding shares for the year ended January 31, 2022 reflects the adjusted shares based on an adjustment ratio of approximately 1.45 as a result of the Spin-Off on February 1, 2021. The beginning balance of the outstanding shares of the years ended January 31, 2021 and 2020 reflects the number of shares on the date of grant without adjustment.

Excluding PSUs, we granted 1,480,0001,328,000 RSUs during the year ended January 31, 2019.2022.


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As of January 31, 2019,2022, there was approximately $65.8$66.8 million of total unrecognized compensation expense, net of estimated forfeitures, related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 1.61.4 years.


Stock Options


We did not grant stock options during the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, and activity from stock options awarded in prior periods was not material during these years.


Phantom Stock Units


We have periodically issued phantom stock units to certain employees that settle, or are expected to settle, with cash payments upon vesting. Like equity-settled awards, phantom stock units are awarded with vesting conditions and are subject to certain forfeiture provisions prior to vesting.


Phantom stock unit activity for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 was not significant.


Adjustment in Connection with the Spin-Off

In accordance with the terms of our applicable equity incentive plans, following the completion of the Spin-Off on February 1, 2021, we equitably adjusted the number of shares underlying our remaining unvested awards by a factor of approximately 1.45 based on the ratio of the trading prices of our common stock prior to the Spin-Off to the trading prices of our common stock following the Spin-Off.

Stock Bonus Program


Our stock bonus program permits eligible employees to receive a portion of their earned bonuses, otherwise payable in cash, in the form of discounted shares of our common stock. Executive officers are eligible to participate in this program to the extent that shares remain available for awards following the enrollment of all other participants. Shares awarded to executive officers with respect to the discount feature of the program are subject to a one-year vesting period. This program is subject to annual funding approval by our board of directors and an annual cap on the number of shares that can be issued. Subject to these limitations, the number of shares to be issued under the program for a given year is determined using a five-day trailing average price of our common stock when the awards are calculated, reduced by a discount determined by the board of directors each year (the “discount”). To the extent that this program is not funded in a given year or the number of shares of common stock needed to fully satisfy employee enrollment exceeds the annual cap, the applicable portion of the employee bonuses will generally revert to being paid in cash. Obligations under this program are accounted for as liabilities, because the obligations are based predominantly on fixed monetary amounts that are generally known at inception of the obligation, to be settled with a variable number of shares of common stock determined using a discounted average price of our common stock. Shares earned under the program are issued after the end of the performance period, in the subsequent fiscal year.

For bonuses in respect of the year ended January 31, 2019, our board of directors approved the use of up to 200,000 shares of common stock, and a discount of 15%, for awards under this program. We issued 97,000 shares in lieu of cash bonuses and 13,000 shares for the discount feature in the year ended January 31, 2020 (in respect of the performance period ended January 31, 2019).

For bonuses in respect of the year ended January 31, 2020, our board of directors approved the use of up to 200,000 shares of common stock, and a discount of 15%, for awards under this program. We issued 32,000 shares in lieu of cash bonuses and 3,000 shares for the discount feature in the year ended January 31, 2021 (in respect of the performance period ended January 31, 2020).

For bonuses in respect of the year ended January 31, 2021, our board of directors approved the use of up to 200,000 shares of common stock, and a discount of 15%, for awards under this program. However, the program was not used for such performance period and no shares were issued during the year ended January 31, 2022 (in respect of the performance period ended January 31, 2021).

For bonuses in respect of the year ended January 31, 2022, our board of directors approved the use of up to 300,000 shares of common stock, and a discount of 15%, for awards under this program. Shares earned under the program will be calculated and issued during the first half of the year ending January 31, 2023.

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The following table summarizes activity under the stock bonus program during the years ended January 31, 2019, 2018,2022, 2021, and 20172020 in isolation.isolation from other share activity. As noted above, shares issued in a given fiscal year are in respect of the prior fiscal year’s program period. Also, as noted above, shares issued in respect of the discount feature under the program reduce available plan capacity and are included in the Award Activity Table above. Other shares issued under the program do not reduce available plan capacity and are therefore excluded from the Award Activity Table above.


Year Ended January 31,
(in thousands)202220212020
Shares in lieu of cash bonus — granted and released (not included in the Award Activity Table above)— 32 97 
Shares in respect of discount (included in the Award Activity Table above):
   Granted— — 16 
   Released— 13 
  Year Ended January 31,
(in thousands) 2019 2018 2017
Shares in lieu of cash bonus - granted and released (not included in the Award Activity Table above) 19
 21
 25
Shares in respect of discount (included in the Award Activity Table above):      
   Granted 
 
 
   Released 
 
 


Awards underAs noted above, the stock bonusshares to be issued in respect of the program for the performance period ended January 31, 2019 are expected to2022 will be calculated and issued during the first half of the year ending January 31, 2020.2023 and are therefore not shown in this table.


In March 2019, our board of directors increased the maximum number of shares of common stock authorized for issuances under the stock bonus program for the year ended January 31, 2019 from 125,000 to 150,000.

Also in March 2019,2022, our board of directors approved up to 150,000200,000 shares of common stock, and a discount of 15%, for awards under our stock bonus program for the yearperformance period ending January 31, 2020. Executive officers2023. Any shares earned under the program will be permitted to participate in this program forissued during the year ending January 31, 2020, but only to the extent that shares remain available for awards following the

enrollment of all other participants. Shares awarded to executive officers with respect to the 15% discount will be subject to a one-year vesting period.2024.
    
Bonus Share Program


Under our bonus share program, we may provide discretionary bonuses to employees or pay earned bonuses that are outside the stock bonus program in the form of shares of common stock. Unlike the stock bonus program, there is no enrollment for this program and no discount feature. Similar to the accounting for the stock bonus program, obligations for these bonuses are accounted for as liabilities, because the obligations are based predominantly on fixed monetary amounts that are generally known, to be settled with a variable number of shares of common stock. As noted above, all shares issued under this program are included in the Award Activity Table above.
During Like the year ended January 31, 2018, approximately 293,000stock bonus program, shares of common stock were awarded and released under the bonus share program in respectare issued after the end of the performance period, ended January 31, 2017. These shares are included in the Award Activity Table above.

During the year ended January 31, 2019, approximately 197,000 shares of common stock were awarded and released under the bonus share program in respect of the performance period ended January 31, 2018. These shares are included in the Award Activity Table above.

subsequent fiscal year.
For bonuses in respect of the year ended January 31, 2019, theour board of directors has approved the use of up to 300,000 shares of common stock under this program, reduced byminus any shares used under the stock bonus program in respect of the same performance periodperiod. Approximately 59,000 shares of common stock were awarded and released under this program during the year ended January 31, 2019. Awards under the bonus share program for2020 (in respect of the performance period ended January 31, 2019 are expected2019).

For bonuses in respect of the year ended January 31, 2020, our board of directors approved the use of up to be305,000 shares of common stock under this program, minus any shares used under the stock bonus program in respect of the same performance period. Approximately 272,000 shares of common stock were awarded and released under this program during the year ended January 31, 2021 (in respect of the performance period ended January 31, 2020).

For bonuses in respect of the year ended January 31, 2021, our board of directors approved the use of up to 300,000 shares of common stock under this program, minus any shares used under the stock bonus program in respect of the same performance period. Any shares awarded under this program would have been issued during the first half of the year endingended January 31, 2020.2022, however the program was not used, and no shares of common stock were issued during the year ended January 31, 2022 (in respect of the performance period ended January 31, 2021). Bonuses in respect of the year ended January 31, 2021 were paid solely in cash.


For bonuses in respect of the year endingended January 31, 2020,2022, our board of directors has approved the use of up to 300,000 shares of common stock under this program, reduced byminus any shares used under the stock bonus program in respect of the same performance period (the maximum numbers of shares issuable under the stock bonus program and the bonus share program collectively for the performance period ended January 31, 2022 will not exceed 300,000). Any shares awarded under this program will be issued during the first half of the year ending January 31, 2020.2023, however, we do not currently expect to issue any shares under this program in respect of the performance period ended January 31, 2022.

For bonuses in respect of the year ended January 31, 2023, in March 2022 our board of directors approved the use of up to 300,000 shares of common stock under this program, minus any shares used under the stock bonus program in respect of the
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same performance period. Any shares awarded under this program will be issued during the first half of the year ending January 31, 2024.

The combined accrued liabilities for the stock bonus program and the bonus share program were $9.3 million and $9.2was $6.5 million at January 31, 2019 and 2018, respectively.2022.


Other Benefit Plans


401(k) Plan and Other Retirement Plans


We maintain a 401(k) Plan for our full-time employees in the United States. The plan allows eligible employees who attain the age of 21 beginning with the first of the month following their date of hire to elect to contribute up to 60% of their annual compensation, subject to the prescribed maximum amount. We match employee contributions at a rate of 50%, up to a maximum annual matched contribution of $2,000$2,000 per employee.


Employee contributions are always fully vested, while our matching contributions for each year vest on the last day of the calendar year provided the employee remains employed with us on that day.


Our matching contribution expenses for our 401(k) Plan were $2.7$2.6 million,, $2.5 $2.6 million,, and $2.6$2.9 million for the years ended January 31, 2019, 2018,2022, 2021, and 2017,2020, respectively.


We provide retirement benefits for non-U.S. employees as required by local laws or to a greater extent as we deem appropriate through plans that function similar to 401(k) plans. Funding requirements for programs required by local laws are determined on an individual country and plan basis and are subject to local country practices and market circumstances.


Severance Pay


We are obligated to make severance payments for the benefit of certain employees of our foreign subsidiaries. Severance payments made to Israeli employees are considered significant compared to all other subsidiaries with severance payment arrangements. Under Israeli law, we are obligated to make severance payments to employees of our Israeli subsidiaries,subsidiary, subject to certain conditions. In most cases, our liability for these severance payments is fully provided for by regular deposits to funds administered by insurance providers and by an accrual for the amount of our liability which has not yet been deposited.



Severance expenses for our Israeli employees for the years ended January 31, 2022, 2021, and 2020 were $1.3 million, $1.1 million, and $1.1 million, respectively.
Severance

17.LEASES
We have entered into operating leases primarily for corporate offices, research and development facilities, datacenters, and automobiles. Our finance leases primarily relate to infrastructure equipment. Our leases have remaining lease terms of 1 year to 8 years, some of which may include options to extend the leases for up to 10 years, and some of which may include options to terminate the leases within 1 to 3 years. As of January 31, 2022 and 2021, assets recorded under finance leases were $14.4 million and $11.0 million, respectively. As of January 31, 2022 and 2021, accumulated depreciation associated with finance leases was $5.0 million and $2.7 million, respectively.

The components of lease expenses for the years ended January 31, 2019, 2018,2022, 2021, and 20172020 were $13.3 million, $7.1as follows:

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Year Ended January 31,
(in thousands)202220212020
Operating lease expenses$24,241 $28,617 $26,583 
Finance lease expenses:
Amortization of right-of-use assets3,223 2,295 581 
Interest on lease liabilities260 312 204 
Total finance lease expenses3,483 2,607 785 
Variable lease expenses6,344 5,504 5,609 
Short-term lease expenses1,055 584 657 
Sublease income(1,804)(966)(908)
Total lease expenses$33,319 $36,346 $32,726 

During the years ended January 31, 2022 and 2021, we exited certain leased offices primarily due to our workforce operating under remote work environments in certain locations due to the COVID-19 pandemic, which resulted in the recognition of accelerated operating lease costs of $9.8 million and $6.4$2.4 million, respectively.


15. COMMITMENTS AND CONTINGENCIES

Operating and Capital Leases

We lease office, manufacturing, and warehouse space, as well as certain equipment, under non-cancelable operating lease agreements. We have also periodically entered into capital leases. Terms of the leases, including renewal options and escalation clauses, vary by lease.

Rent expense incurred under all operating leases was $22.6 million, $26.1 million, and $25.6 millionexpenses for the years ended January 31, 2019, 2018,2021 and 2017, respectively.2020 included $6.9 million and $6.7 million, respectively, of indirect shared facility expenses, which were no longer a component of lease cost subsequent to the completion of the Spin-Off.


Other information related to leases was as follows:
Year Ended January 31,
(dollars in thousands)202220212020
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$19,360$21,243$20,083
Operating cash flows from finance leases260312204
Financing cash flows from finance leases3,1892,3891,930
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$11,282$7,619$17,843
Finance leases4,0419033,288
Weighted average remaining lease terms
Operating leases3 years6 years6 years
Finance leases3 years3 years3 years
Weighted average discount rates
Operating leases4.8 %5.8 %5.7 %
Finance leases3.8 %4.0 %5.1 %

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Maturities of lease liabilities as of January 31, 2022 were as follows:
January 31, 2022
(in thousands)Operating LeasesFinance Leases
Year Ending January 31,
2023$26,526 $2,804 
20249,808 2,017 
20258,221 1,418 
20265,056 550 
20274,312 19 
Thereafter5,423 — 
Total future minimum lease payments59,346 6,808 
Less: imputed interest(6,338)(348)
Total$53,008 $6,460 
Reported as of January 31, 2022:
Accrued expenses and other current liabilities$24,551 $2,629 
Operating lease liabilities28,457 — 
Other liabilities— 3,831 
Total$53,008 $6,460 

As of January 31, 2019, our minimum2022, we have additional operating leases for office facilities, equipment, and vehicles that have not yet commenced with future rentlease obligations under non-cancelableof $2.4 million. These operating and capital leases with initial or remaining termswill commence in excess of onethe year were as follows:
(in thousands) Operating Capital
Years Ending January 31, Leases Leases
2020 $22,769
 $1,343
2021 21,942
 1,252
2022 19,157
 1,130
2023 16,882
 765
2024 15,152
 107
Thereafter 33,477
 
Total $129,379
 4,597
Less: amount representing interest and other charges   (315)
Present value of minimum lease payments   $4,282

We sublease certain space in our facilities to third parties. As ofending January 31, 2019, total expected future sublease income was $4.5 million and will range from $0.6 million2023 with lease terms of 3 years to $0.9 million on an annual basis through February 2025.4 years.



18.COMMITMENTS AND CONTINGENCIES

Unconditional Purchase Obligations


In the ordinary course of business, we enter into certain unconditional purchase obligations, which are agreements to purchase goods or services that are enforceable, legally binding, and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on current needs and are typically fulfilled by our vendors within a relatively short time horizon.

As of January 31, 2019,2022, our unconditional purchase obligations totaled approximately $158.7 million, the majority of which were scheduled to occur within the subsequent twelve months. Due to the relatively short life of the obligations, the carrying value approximates the fair value of these obligations at January 31, 2019.$240.3 million.


Licenses and Royalties


We license certain technology and pay royalties under such licenses and other agreements entered into in connection with research and development activities.


As discussed in Note 1, “Summary of Significant Accounting Policies”,Historically, we receivehave received non-refundable grants from the IIAIsraeli Innovation Authority (“IIA”) that fundfunded a portion of our research and development expenditures. The Israeli law under which the IIA grants are made limits our ability to manufacture products, or transfer technologies, developed using these grants outside of Israel. If we were to seek approval to manufacture products, or transfer technologies, developed using these grants outside of Israel, we could be subject to additional royalty requirements or be required to pay certain redemption fees. If we were to violate these restrictions, we could be required to refund any grants previously received, together with interest and penalties, and may be subject to criminal penalties. Funds received from the IIA were recorded as a reduction to research and development expenses and amounts received were not material during the years ended January 31, 2022, 2021 and 2020.


Off-Balance Sheet Risk


In the normal course of business, we provide certain customers with financial performance guarantees, which are generally backed by standby letters of credit or surety bonds. In general, we would only be liable for the amounts of these guarantees in the event that our nonperformance permits termination of the related contract by our customer, which we believe is remote. At January 31, 2019,2022, we had approximately $97.4$1.5 million of outstanding letters of credit and surety bonds relating primarily to these performance guarantees. As of January 31, 2019,2022, we believe we were in compliance with our performance obligations under all
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contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees will not have a material adverse effect on our consolidated results of operations, financial position, or cash flows. Our historical non-compliance with our performance obligations has been insignificant.


Indemnifications


In the normal course of business, we provide indemnifications of varying scopes to customers against claims of intellectual property infringement made by third parties arising from the use of our products. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.


To the extent permitted under Delaware law or other applicable law, we indemnify our directors, officers, employees, and agents against claims they may become subject to by virtue of serving in such capacities for us. We also have contractual indemnification agreements with our directors, officers, and certain senior executives. The maximum amount of future payments we could be required to make under these indemnification arrangements and agreements is potentially unlimited; however, we have insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid. We are not able to estimate the fair value of these indemnification arrangements and agreements in excess of applicable insurance coverage, if any.


Legal Proceedings


CTI Litigation

In March 2009, one of our former employees, Ms. Orit Deutsch, commenced legal actions in Israel against our former primary Israeli subsidiary, Cognyte Technologies Ltd. (formerly known as Verint Systems Limited (“VSL”or “VSL”), (Case Number 4186/09) and against our former affiliate CTI (Case Number 1335/09). Also, in March 2009, a former employee of Comverse Limited (CTI’s primary Israeli subsidiary at the time), Ms. Roni Katriel, commenced similar legal actions in Israel against Comverse Limited (Case Number 3444/09), and against CTI (Case Number 1334/09). In these actions, the plaintiffs generally sought to certify class action suits against the defendants on behalf of current and former employees of VSL and Comverse Limited who had been granted stock options in Verint and/or CTI and who were allegedly damaged as a result of a suspension on option exercises during an extended filing delay period that is discussed in our and CTI’s historical public filings. On June 7, 2012, the Tel Aviv District Court, where the cases had been filed or transferred, allowed the plaintiffs to consolidate and amend their complaints against the three3 defendants: VSL, CTI, and Comverse Limited.


On October 31, 2012, CTI completed the Comverse Share Distribution, in which it distributed all of the outstanding shares of common stock of Comverse, Inc., its principal operating subsidiary and parent company of Comverse Limited, to CTI’s shareholders.shareholders (the “Comverse Share Distribution”). In the period leading up to the Comverse Share Distribution, CTI either sold or transferred substantially all of its business operations and assets (other than its equity ownership interests in Verint and in its then-subsidiary, Comverse, Inc.) to Comverse, Inc. or to unaffiliated third parties. As athe result of these transactions, Comverse, Inc. became an independent company and ceased to be affiliated with CTI, and CTI ceased to have any material assets other than its equity interests in Verint. Prior to the completion of the Comverse Share Distribution, the plaintiffs sought to compel CTI to set aside up to $150.0 million in assets to secure any future judgment, but the District Court did not rule on this motion. In February 2017, Mavenir Inc. became successor-in-interest to Comverse, Inc.


On February 4, 2013, Verint acquired the remaining CTI shell company in a merger transaction (the “CTI Merger”). As a result of the CTI Merger, Verint assumed certain rights and liabilities of CTI, including any liability of CTI arising out of the foregoing legal actions. However, under the terms of a Distribution Agreement entered into in connection with the Comverse Share Distribution, we, as successor to CTI, are entitled to indemnification from Comverse, Inc. (now Mavenir) for any losses we may suffer in our capacity as successor to CTI related to the foregoing legal actions.


Following an unsuccessful mediation process, on August 28, 2016, the District Court (i) denied the plaintiffs’ motion to certify the suit as a class action with respect to all claims relating to Verint stock options, (ii) dismissed the motion to certify the suit against VSL and (ii)Comverse Limited, and (iii) approved the plaintiffs’ motion to certify the suit as a class action against CTI with respect to claims of current or former employees of Comverse Limited (now part of Mavenir) or of VSL who held unexercised CTI stock options at the time CTI suspended option exercises. The court also ruled that the merits of the case would be evaluated under New York law.

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As a result of this ruling (which excluded claims related to

Verint stock options from the case), one of the original plaintiffs in the case, Ms. Deutsch, was replaced by a new representative plaintiff, Mr. David Vaaknin. CTI appealed portions of the District Court’s ruling to the Israeli Supreme Court. On August 8, 2017, the Israeli Supreme Court partially allowed CTI’s appeal and ordered the case to be returned to the District Court to determine whether a cause of action exists under New York law based on the parties’ expert opinions.


Following a secondtwo unsuccessful roundrounds of mediation in mid to late 2018 and in mid-2019, the proceedings resumed. The plaintiffs have filedOn April 16, 2020, the District Court accepted plaintiffs’ application to amend the motion to certify a class action and set deadlines for filing amended pleadings by the parties. CTI submitted a motion to amendappeal the class certificationDistrict Court’s decision to the Israeli Supreme Court, as well as a motion to stay the proceedings in the District Court pending the resolution of the appeal. On July 6, 2020, the Israeli Supreme Court granted the motion for a stay. On July 27, 2020, the plaintiffs filed their response on the merits of the motion for leave to appeal. On December 15, 2021, the Israeli Supreme Court rejected CTI’s motion to appeal and the proceedings in the District Court resumed.

On February 1, 2021, we completed the Spin-Off. As a result of the Spin-Off, Cognyte is now an independent, publicly traded company. Under the terms of the Separation and Distribution Agreement entered into between Verint and Cognyte, Cognyte has agreed to indemnify Verint for Cognyte’s share of any losses that Verint may suffer related to the foregoing legal actions either in its capacity as successor to CTI, to the extent not indemnified by Mavenir, or due to its former ownership of Cognyte and VSL.

Unfair Competition Litigation and Related Investigation

On February 14, 2022, Verint Americas Inc., as successor to ForeSee Results, Inc. (“ForeSee”), received negative partial summary judgment decisions in two cases pending against it in the United States District Court for the Eastern District of Michigan. As discussed below, we believe that the court’s decisions were wrongly decided and are contrary to the facts and the law. We are seeking reconsideration of the rulings and will ultimately appeal the rulings if necessary. We believe that the claims asserted by the plaintiffs are without merit. In addition, as explained in our affirmative Delaware litigation, we also believe that by bringing the claims, plaintiffs breached an agreement not to pursue such claims in an improper attempt by them and their founder, Claes Fornell, to extract additional monies from ForeSee.

The two Eastern District of Michigan cases are captioned ACSI LLC v. ForeSee Results, Inc. and CFI Group USA LLC v. Verint Americas Inc. The former case was filed on October 24, 2018 against ForeSee Results, Inc. by American Customer Satisfaction Index, LLC (“ACSI LLC”). Case No. 2:18-cv-13319. Verint completed its acquisition of ForeSee on December 19, 2018. In its complaint, ACSI LLC alleged infringement of two federally registered trademarks and common law unfair competition under federal and state law. ACSI LLC asserts that ForeSee, despite cancelling its license to use ACSI LLC’s alleged trademarks in 2013, has continued to use ACSI LLC’s trademarks. The trademark infringement claim was subsequently dismissed, but the common law unfair competition claims have proceeded. The latter case was filed on September 5, 2019 against Verint Americas Inc. (as successor in interest to ForeSee) by CFI Group USA LLC (“CFI”). Case No. 2:19-cv-12602. In its complaint, CFI alleges unfair competition and false advertising under federal and state law, as well as tortious interference with contract. CFI asserts that ForeSee engaged in unfair competition by using ACSI LLC’s trademarks without a correspondinglicense, and that ForeSee engaged in false advertising by mis-describing its customer satisfaction products. ACSI LLC’s and CFI’s complaints seek unspecified damages on their claims.

Following discovery, on June 3, 2021, ACSI LLC and CFI moved for partial summary judgment on their claims and ForeSee moved for summary judgment against their claims. On February 14, 2022, the Eastern District of Michigan generally granted ACSI LLC’s and CFI’s motions for partial summary judgment and generally denied ForeSee’s motions for summary judgment. As noted above, ForeSee believes that the court’s decisions were wrongly decided, ignore substantial factual evidence in the record, and are contrary to applicable law. On February 28, 2022, ForeSee moved for reconsideration, and that motion is pending before the court. ForeSee continues to believe that there are substantial defenses to the claims in the ACSI LLC and CFI litigations and intends to continue to defend them vigorously.

Verint has also been informed that the U.S. Attorney’s Office for the Eastern District of Michigan’s Civil Division (“USAO”) is conducting a False Claims Act investigation concerning allegations ForeSee and/or Verint failed to provide the federal government the services described in certain government contracts. Verint received a Civil Investigation Demand (“CID”) in connection with this investigation and has provided responses. The False Claims Act contains provisions that allow for private persons to initiate actions by filing claims under seal. We believe that this investigation was initiated in coordination with the Eastern District of Michigan litigation discussed above. Verint continues to work cooperatively with the USAO in its review of this matter. At this point, Verint has not determined that there were any deficiencies in ForeSee’s and/or Verint’s performance of the government contracts.
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ForeSee also filed affirmative litigation in the Northern District of Georgia (Case No. 1:19-cv-02892, Complaint filed on June 25, 2019) against ACSI LLC’s predecessor in interest. ACSI LLC has now been substituted as the named defendant. In that action, ForeSee seeks cancellation of ACSI LLC’s federally registered trademarks. In response to ASCI LLC’s motion to dismiss the action, on March 15, 2022, the Georgia court issued an order transferring that action to the Eastern District of Michigan.

ForeSee has also filed affirmative litigation in the District of Delaware (Case No. 1:21-cv-00674, Complaint filed on May 7, 2021) against ACSI LLC, CFI, Claes Fornell, and CFI Software LLC. Claes Fornell founded both ACSI LLC and CFI, and previously co-founded ForeSee before selling it in December 2013 for a response.significant gain. The nextDelaware action asserts claims against ACSI LLC, CFI, Fornell, and CFI Software for their breach of a “Joinder and Waiver Agreement” entered into in connection with the December 2013 sale in which they represented that they had no claims against ForeSee and in which they released any such claims. The Delaware action alleges that the Eastern District of Michigan litigations effectively represent an improper attempt by Fornell and his affiliates to profit off of ForeSee a second time (first by selling it in 2013 as a law-abiding company, only to sue it in 2018 and 2019 claiming violations of law for business practices that began while Fornell owned a significant position in ForeSee (via CFI Software) and during the time that Fornell served as chairman of ForeSee’s board). The Delaware action also asserts fraud claims against Fornell and CFI Software for affirmative statements they made in the December 2013 merger agreement which effectuated the sale and in other contemporaneous materials that ForeSee was not engaging in unfair competition or other violations of law. The Delaware litigation seeks as damages any amounts recovered by ACSI LLC, CFI or the USAO in the proceedings discussed above, as well as attorneys’ fees. Defendants moved to dismiss, stay or transfer the Delaware litigation, and the magistrate judge assigned to the case denied the motions to dismiss and transfer but recommended temporarily staying the case pending decisions on the motions for summary judgment in the Eastern District of Michigan. ForeSee objected to the recommended stay, and those objections are currently pending before the Delaware court.

No amounts have been recognized in our consolidated financial statements for these loss contingencies as it is not probable a loss has been incurred and the range of a possible loss is not yet estimable. However, in light of the recent rulings by the court hearingin the Eastern District of Michigan, we consider the potential exposure reasonably possible. An estimate of a reasonably possible loss (or a range of loss) cannot be made in either the commercial litigation or False Claims Act investigation at this time. As these matters are ongoing it is scheduled for April 2019.at least reasonably possible that our estimates will change in the near term and the effect may be material.


FromWe are a party to other various litigation matters and claims that arise from time to time we or our subsidiaries may be involved in legal proceedings and/or litigation arising in the ordinary course of our business. While the outcome of these matters cannot be predicted with certainty, we do not believe that the ultimate outcome of any such current claimsmatters will not have a material adverse effect on us, their outcomes are not determinable and negative outcomes may adversely affect our consolidated financial position, liquidity, or results of operations, or cash flows.operations.




16. 19.SEGMENT, GEOGRAPHIC, AND SIGNIFICANT CUSTOMER INFORMATION
 
Segment Information


Operating segments are defined as components of an enterprise about which separate financial information is available that is
evaluated regularly by the enterprise’s chief operating decision maker, or CODM, or decision making group, in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer is our CODM.

In August 2016,
Prior to the Spin-Off, we reorganized into two businesses and began reporting our results in two operating segments, had 2 reportable segments—Customer Engagement and Cyber Intelligence.

We measure the performance of our operating segments based upon segment revenue and segment contribution.

Segment revenue includes adjustments associated with revenue of acquired companies which are not recognizable within GAAP revenue.  These adjustments primarily relate to the acquisition-date excess Upon completion of the historical carrying value overSpin-Off, we began operating as a pure-play customer engagement company that operates as a single reporting segment as our CODM reviews the fair valuefinancial information presented on a consolidated basis for purposes of acquired companies’ future maintenanceallocating resources and service performance obligations. As the obligations are satisfied, we report our segment revenue using the historical carrying values of these obligations, which we believe better reflects our ongoing maintenance and service revenue streams, whereas GAAP revenue is reported using the obligations’ acquisition-date fair values. Segment revenue adjustments can also result from aligning an acquired company’s historical revenue recognition policies to our policies.

Segment contribution includes segment revenue and expenses incurred directly by the segment, including material costs, service costs, research and development, selling, marketing, and certain administrative expenses. When determining segment contribution, we do not allocate certain operating expenses which are provided by shared resources or are otherwise generally not controlled by segment management. These expenses are reported as “Shared support expenses” in our table of segment operating results, the majority of which are expenses for administrative support functions, such as information technology, human resources, finance, legal, and other general corporate support, and for occupancy expenses. These unallocated expenses also include procurement, manufacturing support, and logistics expenses.

In addition, segment contribution does not include amortization of acquired intangible assets, stock-based compensation, and other expenses that either can vary significantly in amount and frequency, are based upon subjective assumptions, or in certain cases are unplanned for or difficult to forecast, such as restructuring expenses and business combination transaction and integration expenses, all of which are not considered when evaluating segmentfinancial performance.


Revenue from transactions between our operating segments is not material.

Operating results by segment for the years ended January 31, 2019, 2018, and 2017 were as follows:


  Year Ended January 31,
(in thousands) 2019 2018 2017
Revenue:  
  
  
Customer Engagement:  
  
  
Segment revenue $811,346
 $755,038
 $716,163
Revenue adjustments (15,059) (14,971) (10,266)
  796,287
 740,067
 705,897
Cyber Intelligence:  
  
  
Segment revenue 433,753
 395,420
 356,533
Revenue adjustments (293) (258) (324)
  433,460
 395,162
 356,209
Total revenue $1,229,747
 $1,135,229
 $1,062,106
       
Segment contribution:  
  
  
Customer Engagement $316,776
 $286,236
 $269,017
Cyber Intelligence 114,012
 94,585
 85,777
Total segment contribution 430,788
 380,821
 354,794
       
Reconciliation of segment contribution to operating income:  
  
  
Revenue adjustments 15,352
 15,229
 10,590
Shared support expenses 163,893
 154,673
 150,170
Amortization of acquired intangible assets 56,413
 72,425
 81,461
Stock-based compensation 66,657
 69,366
 65,608
Acquisition, integration, restructuring, and other unallocated expenses 14,238
 20,498
 29,599
Total reconciling items, net 316,553
 332,191
 337,428
Operating income $114,235
 $48,630
 $17,366

With the exception of goodwill and acquired intangible assets, we do not identify or allocate our assets by operating segment.  Consequently, it is not practical to present assets by operating segment. In connection with our August 2016 change in segmentation, we reallocated goodwill previously assigned to our former Video Intelligence operating segment to the Customer Engagement and Cyber Intelligence operating segments. There were no other material changes in the allocations of goodwill and acquired intangible assets by operating segment during the years ended January 31, 2019, 2018, and 2017.  Further details regarding the allocations of goodwill and acquired intangible assets by operating segment appear in Note 6, “Intangible Assets and Goodwill”.

Geographic Information


Revenue by major geographic region is based upon the geographic location of the customers who purchase our products and services. The geographic locations of distributors, resellers, and systems integrators who purchase and resell our products may be different from the geographic locations of end customers.


Revenue in the Americas includes the United States, Canada, Mexico, Brazil, and other countries in the Americas. Revenue in Europe, the Middle East and Africa (“EMEA”) includes the United Kingdom, Germany, Israel, and other countries in EMEA. Revenue in the Asia-Pacific (“APAC”) region includes Australia, India, Singapore, and other Asia-Pacific countries.

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The information below summarizes revenue from unaffiliated customers by geographic area for the years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:

Year Ended January 31,
(in thousands)202220212020
Americas:
United States$552,680 $515,480 $539,586 
Other48,043 54,470 49,489 
Total Americas600,723 569,950 589,075 
EMEA:
United Kingdom100,606 100,855 100,107 
Other79,560 72,361 68,835 
Total EMEA180,166 173,216 168,942 
APAC93,620 87,081 88,508 
Total revenue$874,509 $830,247 $846,525 
  Year Ended January 31,
(in thousands) 2019 2018 2017
Americas:      
United States $555,365
 $445,406
 $438,034
Other 103,158
 150,993
 134,111
Total Americas 658,523
 596,399
 572,145
EMEA 321,723
 354,495
 322,130
APAC 249,501
 184,335
 167,831
Total revenue $1,229,747
 $1,135,229
 $1,062,106


Our long-lived assets primarily consist of net property and equipment, operating lease right-of-use assets, goodwill and other intangible assets, capitalized software development costs, deferred cost of revenue, and deferred income taxes. We believe that our tangible long-lived assets, which consist of our net property and equipment, are exposed to greater geographic area risks and uncertainties than intangible assets, operating lease right of use assets, and long-term cost deferrals, because these tangible assets are difficult to move and are relatively illiquid.
 
Property and equipment, net by geographic area consisted of the following as of January 31, 20192022 and 2018:2021:
January 31,
(in thousands)20222021
United States$50,241 $51,537 
United Kingdom9,225 11,345 
Other countries4,624 6,208 
Total property and equipment, net$64,090 $69,090 
  January 31,
(in thousands) 2019 2018
United States $51,006
 $45,942
Israel 30,310
 27,089
Other countries 18,818
 16,058
Total property and equipment, net $100,134
 $89,089


Significant Customers
 
No single customer accounted forend-customer represented more than 10% of our total revenue during the years ended January 31, 2019, 2018,2022, 2021, and 2017.2020. In the year ended January 31, 2021, we had an authorized global reseller of our solutions that represented approximately 10% of our total revenue, but did not represent 10% or greater of our total revenue for the years ended January 31, 2022 or 2020.




17. 20.SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


Summarized condensed quarterly financial information for the years ended January 31, 20192022 and 20182021 appears in the following tables:

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 Three Months Ended
 April 30, July 31, October 31, January 31,Three Months Ended
(in thousands, except per share data) 2018 2018 2018 2019(in thousands, except per share data)April 30, 2021July 31, 2021October 31, 2021January 31, 2022
Revenue $289,207
 $306,327
 $303,983
 $330,230
Revenue$200,904 $214,617 $224,820 $234,168 
Gross profit $175,115
 $193,020
 $192,744
 $219,655
Gross profit$128,564 $142,050 $152,736 $152,587 
(Loss) income before provision for income taxes $(951) $19,202
 $25,814
 $33,697
Net (loss) income $(1,225) $22,924
 $20,213
 $28,308
Net (loss) income attributable to Verint Systems Inc. $(2,215) $21,980
 $18,920
 $27,306
Income from continuing operations before provision for income taxesIncome from continuing operations before provision for income taxes$1,022 $9,517 $22,850 $6,115 
Net income (loss) from continuing operationsNet income (loss) from continuing operations$1,094 $5,316 $13,501 $(4,260)
Net income (loss) attributable to Verint Systems Inc.Net income (loss) attributable to Verint Systems Inc.$799 $5,000 $13,237 $(4,623)
Net (loss) income attributable to Verint Systems Inc. common sharesNet (loss) income attributable to Verint Systems Inc. common shares$(2,523)$(200)$8,037 $(9,823)
        
Net (loss) income per common share attributable to Verint Systems Inc.        
Net (loss) income from continuing operations attributable to Verint Systems Inc. common sharesNet (loss) income from continuing operations attributable to Verint Systems Inc. common shares
Basic $(0.03) $0.34
 $0.29
 $0.42
Basic$(0.04)$— $0.12 $(0.15)
Diluted $(0.03) $0.33
 $0.29
 $0.41
Diluted$(0.04)$— $0.12 $(0.15)



Three Months Ended
(in thousands, except per share data)April 30, 2020July 31, 2020October 31, 2020January 31, 2021
Revenue$185,865 $204,080 $215,222 $225,080 
Gross profit$114,962 $137,179 $141,350 $149,205 
Loss from continuing operations before provision for income taxes$(14,071)$(1,025)$(1,017)$(25,551)
Net loss from continuing operations$(14,418)$(9,370)$(2,101)$(22,712)
Net (loss) income attributable to Verint Systems Inc.$(6,014)$8,494 $10,175 $(19,922)
Net loss from continuing operations attributable to Verint Systems Inc. common shares$(14,658)$(12,181)$(5,068)$(25,403)
Net income from discontinued operations attributable to Verint Systems Inc. common shares$8,644 $18,191 $12,585 $2,967 
Net loss per common share attributable to Verint Systems Inc. from continuing operations
   Basic$(0.23)$(0.19)$(0.08)$(0.39)
   Diluted$(0.23)$(0.18)$(0.08)$(0.39)
Net income per common share attributable to Verint Systems Inc. from discontinued operations
   Basic$0.14 $0.28 $0.19 $0.05 
   Diluted$0.14 $0.27 $0.19 $0.05 
  Three Months Ended
  April 30, July 31, October 31, January 31,
(in thousands, except per share data) 2017 2017 2017 2018
Revenue $260,995
 $274,777
 $280,726
 $318,731
Gross profit $150,192
 $164,103
 $169,321
 $204,826
(Loss) income before (benefit) provision for income taxes $(19,932) $(1,314) $9,010
 $31,136
Net (loss) income $(19,040) $(5,766) $3,066
 $18,286
Net (loss) income attributable to Verint Systems Inc. $(19,786) $(6,427) $2,489
 $17,097
         
Net (loss) income per common share attributable to Verint Systems Inc.        
   Basic $(0.32) $(0.10) $0.04
 $0.27
   Diluted $(0.32) $(0.10) $0.04
 $0.26


Net (loss) income per common share attributable to Verint Systems Inc. is computed independently for each quarterly period and for the year. Therefore, the sum of quarterly net (loss) income per common share amounts may not equal the amounts reported for the years.


As a result of the Spin-Off, the statement of operations, balance sheets, and related financial information reflect Cognyte’s operations, assets and liabilities as discontinued operations. Please refer to Note 2, “Discontinued Operations” for a more detailed discussion of the Spin-Off.

The quarterly operating results for the year ended January 31, 20192022 did not include any material unusual or infrequently occurring items. During

Net loss from continuing operations attributable to Verint Systems Inc. common shares for the three months ended January 31, 2018, we recognized provisional deferred income tax withholding expense2021 reflects a non-cash Future Tranche Right charge of $15.0 million on foreign earnings that may be repatriated$33.3 million. Please refer to Note 10, “Convertible Preferred Stock” and Note 14, “Fair Value Measurements” for additional information regarding the U.S., in connection with the 2017 Tax Act, which was enacted into law in December 2017.Future Tranche Right.


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As is typical for many software and technology companies, our business is subject to seasonalseasonable and cyclical factors. In most years, our revenue and operating income are typically highest in the fourth quarter and lowest in the first quarter (prior to the impact of unusual or nonrecurring items). Moreover, revenue and operating income in the first quarter of a new year may be lower than in the fourth quarter of the preceding year, in some years, potentially by a significant margin. In addition, we generally receive a higher volume of orders in the last month of a quarter, with orders concentrated in the later part of that month. We believe that these seasonal and cyclical factors primarily reflectsreflect customer spending patterns and budget cycles, as well as the impact of compensation incentive plans for our sales personnel. While seasonal and cyclical factors such as these are common in the software and technology industry, this pattern should not be considered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, also have an impact on our business and financial results. See “Risk Factors” underin Item 1A of this report for a more detailed discussion of factors which may affect our business and financial results.




21.SUBSEQUENT EVENT

On December 2, 2021, we announced that our board of directors had authorized a new stock repurchase program for the fiscal year ending January 31, 2023 whereby we may repurchase up to 1.5 million shares of common stock to offset dilution from our equity compensation program for such fiscal year. Subsequent to January 31, 2022, through the date of filing this report, we repurchased 1.5 million shares of our common stock for an aggregate purchase price of $78.2 million at an average price of $52.11 per share under our stock repurchase program. Repurchases were financed with available cash in the United States.

On March 22, 2022, our board of directors authorized an additional 500,000 shares of common stock to be repurchased under this program.

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Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure


None.




Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures
 
Management conducted an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of January 31, 2019.2022. Disclosure controls and procedures are those controls and other procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified by the rules and forms promulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As a result of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of January 31, 2019.2022.
 
Management’s Report on Internal Control Over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 31, 20192022 based on the 2013 framework established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.


Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of January 31, 2019.2022. We reviewed the results of management’s assessment with our Audit Committee.
 
Our independent registered accounting firm, Deloitte & Touche LLP, has audited the effectiveness of our internal control over financial reporting as stated in their report included herein.


Changes in Internal Control Over Financial Reporting


There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended January 31, 2019,2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


As a result of the COVID-19 pandemic, our global workforce continued to operate primarily in a work from home environment for the quarter ended January 31, 2022. The design of our financial reporting processes, systems, and controls allows for remote execution with accessibility to secure data.

Inherent Limitations on Effectiveness of Controls


Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be achieved. Further, the design of a control system must reflect the impact of resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the possibility that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can be circumvented by individual acts, by collusion of two or more people, or by
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management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all possible conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 


To the ShareholdersStockholders and the Board of Directors of Verint Systems Inc.
Melville, New York
 
Opinion on Internal Control over Financial Reporting


We have audited the internal control over financial reporting of Verint Systems Inc. and subsidiaries (the “Company”) as of January 31, 2019,2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2019,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2019,2022, of the Company and our report dated March 27, 2019,29, 2022, expressed an unqualified opinion on those financial statements.
 
Basis for Opinion


The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
Definition and Limitations of Internal Control over Financial Reporting


A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
/s/ DELOITTE & TOUCHE LLP


New York, New York
March 27, 201929, 2022



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Item 9B. Other Information


Not applicable.



Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.
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PART III


Item 10. Directors, Executive Officers and Corporate Governance


Except as set forth below, the information required by Item 10 will be included under the captions “Election“Proposal No. 1 - Election of Directors”, “Corporate Governance”, “Executive Officers” and “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” in our definitive Proxy Statement for the 20192022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the year ended January 31, 20192022 (the “2019“2022 Proxy Statement”) and is incorporated herein by reference.


Corporate Governance Guidelines


All of our employees, including our executive officers, are required to comply with our Code of Conduct. Additionally, our Chief Executive Officer, Chief Financial Officer, and senior officers must comply with our Code of Business Conduct and Ethics for Senior Officers. The purpose of thesethis corporate policiespolicy is to ensure to the greatest possible extent that our business is conducted in a consistently legal and ethical manner. The text of the Code of Conduct and the Code of Business Conduct and Ethics for Senior Officers is available on our website (www.verint.com). We intend to disclose on our website any amendment to, or waiver from, a provision of our policies as required by law.




Item 11. Executive Compensation


The information required by Item 11 will be included under the captions “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the 20192022 Proxy Statement and is incorporated herein by reference.




Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


Except as set forth below, the information required by Item 12 will be included under the caption “Security Ownership of Certain Beneficial Owners and Management” in the 20192022 Proxy Statement and is incorporated herein by reference.


Securities Authorized for Issuance Under Equity Compensation Plans


The following table sets forth certain information regarding our equity compensation plans as of January 31, 2019.2022.
Plan Category
(a)
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants, and Rights
(b)
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1)
(c)
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans approved by security holders2,454,314 $— 11,094,875 (2)
Equity compensation plans not approved by security holders— — 
Total2,454,314 11,094,875 
Plan Category 
(a)
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants, and Rights
 
(b)
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1)
 
(c)
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
 
        
Equity compensation plans approved by security holders 2,777,795
(2)$8.73
 5,851,918
(3)
Equity compensation plans not approved by security holders 
   
 
        
Total 2,777,795
   5,851,918
 


(1) The weighted-average price relates to outstanding stock options only (as of the applicable date). Other outstanding awards carry no exercise price and are therefore excluded from the weighted-average price.


(2) Consists of 1,362 stock options and 2,776,433 restricted stock units.

(3) Consists of shares that may be issued pursuant to future awards under the Verint Systems Inc. 20152019 Long-Term Stock Incentive Plan as amended and restated on June 22, 2017 (the “2015“2019 Plan”). The 20152019 Plan uses a fungible ratio such that each option or stock-settled stock appreciation right granted under the 20152019 Plan will reduce the plan capacity by one share and each

other award denominated in shares that is granted under the 20152019 Plan will reduce the available capacity by 2.472.38 shares. Prior to

The information presented above reflects adjustments resulting from the plan amendment, the fungible ratio was 2.29.Spin-Off.




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Item 13.  Certain Relationships and Related Transactions, and Director Independence


The information required by Item 13 will be included under the captions “Corporate Governance” and “Certain Relationships and Related Person Transactions” in the 20192022 Proxy Statement and is incorporated herein by reference.




Item 14. Principal Accounting Fees and Services


The information required by Item 14 will be included under the caption “Audit Matters” in the 20192022 Proxy Statement and is incorporated herein by reference.



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PART IV


Item 15.  Exhibits and Financial Statement Schedules
 
(a) Documents filed as part of this report


(1) Financial Statements


The consolidated financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.


(2) Financial Statement Schedules


All financial statement schedules have been omitted here because they are not applicable, not required, or the information is shown in the consolidated financial statements or notes thereto.


(3) Exhibits


See (b) below.


(b) Exhibits
NumberDescription
Filed Herewith /

Incorporated by

Reference from
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NumberDescriptionFiled Herewith /
Incorporated by
Reference from



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NumberDescriptionFiled Herewith /
Incorporated by
Reference from
101.INSXBRL Instance DocumentFiled herewith
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith




(1) These exhibits are being “furnished” with this periodic report and are not deemed “filed” with the SEC and are not incorporated by reference in any filing of the company under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.



* Certain exhibits and schedules have been omitted, and the Company agrees to furnish supplementally to the SEC a copy of any omitted exhibits or schedules upon request.


** Denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(b) of this report.
 
(c) Financial Statement Schedules


None

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Item 16. Form 10-K Summary


Not applicable.





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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 
 
VERINT SYSTEMS INC.
March 27, 201929, 2022/s/ Dan Bodner
Dan Bodner
Chief Executive Officer
March 27, 201929, 2022/s/ Douglas E. Robinson
Douglas E. Robinson
Chief Financial Officer




Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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NameTitleDate
/s/ Dan BodnerChief Executive Officer, and Chairman of the BoardMarch 29, 2022
Dan Bodner(Principal Executive Officer)
/s/ Douglas E. RobinsonChief Financial OfficerMarch 29, 2022
Douglas E. Robinson(Principal Financial Officer and Principal Accounting Officer)
/s/ Linda CrawfordDirectorMarch 29, 2022
Linda Crawford
NameTitleDate
/s/ Dan BodnerChief Executive Officer, and Chairman of the BoardMarch 27, 2019
Dan Bodner(Principal Executive Officer)
/s/ Douglas E. RobinsonChief Financial OfficerMarch 27, 2019
Douglas E. Robinson(Principal Financial Officer and Principal Accounting Officer)
/s/ John R. EganDirectorMarch 27, 201929, 2022
John R. Egan
/s/ Reid French, Jr.DirectorMarch 29, 2022
Reid French, Jr.
/s/ Stephen J. GoldDirectorMarch 27, 201929, 2022
Stephen J. Gold
/s/ Penelope HerscherDirectorMarch 27, 2019
Penelope Herscher
/s/ William H. KurtzDirectorMarch 27, 201929, 2022
William H. Kurtz
/s/ Andrew MillerDirectorMarch 29, 2022
Andrew Miller
/s/ Richard NottenburgDirectorMarch 27, 201929, 2022
Richard Nottenburg
/s/ Howard SafirKristen RobinsonDirectorMarch 27, 201929, 2022
Howard SafirKristen Robinson
/s/ Earl ShanksJason WrightDirectorMarch 27, 201929, 2022
Earl ShanksJason Wright


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