UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 31, ~~2021~~2022


☐			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

Verint Systems Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		11-3200514
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

175 Broadhollow Road
Melville,	New York	11747
(Address of Principal Executive Offices)		(Zip Code)


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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

The NASDAQ Stock Market, LLC

Common Stock, $.001 par value per share

VRNT

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were ~~65,703,784~~65,207,506 shares of the registrant’s common stock outstanding on ~~November~~August 15, ~~2021.~~2022.

Table of Contents


Verint Systems Inc. and Subsidiaries
Index to Form 10-Q
As of and For the Period Ended ~~October~~July 31, ~~2021~~2022
		Page

Cautionary Note on Forward-Looking Statements		ii

Part I.	Financial Information	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	43
	Condensed Consolidated Statements of Comprehensive (Loss) Income	64
	Condensed Consolidated Statements of Stockholders’ Equity	75
	Condensed Consolidated Statements of Cash Flows	97
	Notes to Condensed Consolidated Financial Statements	119
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4741
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6860
Item 4.	Controls and Procedures	6962

Part II.	Other Information	7063

Item 1.	Legal Proceedings	7063
Item 1A.	Risk Factors	7063
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7163
Item 3.	Defaults Upon Senior Securities	7163
Item 4.	Mine Safety Disclosures	7264
Item 5.	Other Information	7264
Item 6.	Exhibits	7365

~~Signature~~Signatures		7466

Table of Contents

Cautionary Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, financial projections, statements of plans and objectives for future operations, statements of future economic performance, and statements of assumptions relating thereto. Forward-looking statements may appear throughout this report, including without limitation, in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and are often identified by future or conditional words such as “will”, “plans”, “expects”, “intends”, “believes”, “seeks”, “estimates”, or “anticipates”, or by variations of such words or by similar expressions. There can be no assurance that forward-looking statements will be achieved. By their very nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause our actual results or conditions to differ materially from those expressed or implied by such forward-looking statements. Important risks, uncertainties, assumptions, and other factors that could cause our actual results or conditions to differ materially from our forward-looking statements include, among others:

•uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, inflation, economic instability, political unrest, armed conflicts (such as the Russian invasion of Ukraine), natural disasters, climate change or other environmental issues, or outbreaks of disease, such as the COVID-19 pandemic, as well as the resulting impact on information technology spending by enterprises ~~and~~or government customers, on our business;

•risks that our customers delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or are unable to honor contractual commitments or payment obligations due to liquidity issues or other challenges in their budgets and ~~business, due to the COVID-19 pandemic or otherwise;~~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;

•challenges associated with our cloud transition, including increased importance of subscription renewal rates, and risk of increased variability in our period-to-period results based on the mix, terms, and timing of our transactions;

•risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer challenges and needs, ~~in both existing and new areas,~~ while simultaneously preserving our legacy businesses and migrating away from areas of commoditization;

•risks due to aggressive competition in all of our markets ~~including~~and our ability to keep pace with ~~respect to maintaining revenue, margins, and sufficient levels~~competitors, some of ~~investment in our business and operations, and competitors with~~whom 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 properly execute on our cloud transition, including increased importance of subscription renewal rates, and risk of increased variability in our period-to-period results based on the mix, terms, and timing of our transactions;

•risks relating to our ability to properly execute on growth or strategic initiatives, manage investments in our business and operations, ~~execute on growth or strategic initiatives,~~ and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources;

•risks associated with our ability to ~~identify suitable targets~~or costs to retain, recruit, and train qualified personnel in regions in which we operate either physically or remotely, including in new markets and growth areas we may enter, due to competition for ~~acquisition~~talent, increasing labor costs, applicable regulatory requirements such as vaccination mandates, or investment or successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, reputational considerations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments;otherwise;

•challenges associated with selling sophisticated solutions, including with respect to longer sales cycles, more complex sales processes, and assisting customers in understanding and realizing the benefits of our solutions, as well as with developing, offering, implementing, and maintaining a broad solution portfolio;

•risks that we may be unable to maintain, expand, and enable our relationships with partners as part of our growth strategy;

•risks associated with our reliance on cloud hosting providers and other third-party suppliers, partners, or original equipment manufacturers (“OEMs”) for certain ~~components,~~services, products, or ~~services,~~components, including companies that may compete with us or work with our ~~competitors, as well as cloud hosting providers;~~competitors;

Table of Contents

•risks associated with our ability to retain, recruit, and train qualified personnel in regions in which we operate, including in new markets and growth areas we may enter or due to applicable regulatory requirements such as vaccination mandates;

•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;~~processes and regulatory requirements;

•risks associated with our ability to identify suitable targets for acquisition or investment or successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, legacy liabilities, reputational considerations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments;

•risks associated with complex and changing domestic and foreign regulatory environments, including, among others, with respect to data privacy and protection, government contracts, anti-corruption, trade compliance, climate change or other environmental, social and governance matters, tax, and labor matters, relating to our own operations, the products and services we offer, and/or the use of our solutions by our ~~customers, including, among others, with respect to data privacy and protection, government contracts, anti-corruption, trade compliance, tax, and labor matters;~~customers;

•risks associated with the mishandling or perceived mishandling of sensitive or confidential information and data, including personally identifiable information or other information that may belong to our customers or other third parties, including in connection with our ~~SaaS~~software as a service (“SaaS”) or other hosted or managed ~~service~~services offerings or when we are asked to perform service or support;

•risks that our solutions or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks;

•risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions;

•risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use;

•risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings;

•risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all;

•risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of the successor to CTI’s business operations, Mavenir Inc. (“Mavenir”), being unwilling or unable to provide us with certain indemnities to which we are entitled;

•risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits;

•risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel, and our ability to successfully implement and maintain enhancements to the foregoing, for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays;

•risks associated with market volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or speculation, or other factors, and risks associated with actions of activist stockholders;

•risks associated with Apax Partners’ significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and

iii

Table of Contents

•risks associated with the ~~recent~~2021 spin-off of our former Cyber Intelligence Solutions business, including the possibility that itthe spin-off transaction does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities.

~~iii~~

~~Table of Contents~~

These risks, uncertainties, assumptions, and challenges, as well as other factors, are discussed in greater detail in “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the year ended January 31, ~~2021 and under Item 1A of our Quarterly Report on Form 10-Q for the quarter ended April 30, 2021.~~2022. You are cautioned not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this report. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as otherwise required under the federal securities laws. If we were in any particular instance to update or correct a forward-looking statement, investors and others should not conclude that we would make additional updates or corrections thereafter except as otherwise required under the federal securities laws.

Table of Contents

Part I

Item 1. Financial Statements

Table of Contents

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)


		October 31,		January 31,			July 31,		January 31,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2021		2021		(in thousands, except share and per share data)	2022		2022
Assets	Assets					Assets
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	307,847	$	585,273	Cash and cash equivalents	$	256,502	$	358,805
Restricted cash and cash equivalents, and restricted bank time deposits		6		15
Short-term investments	Short-term investments	661		46,300		Short-term investments	718		765
Accounts receivable, net of allowance for credit losses of $1.3 million and $1.6 million, respectively		161,020		206,157
Accounts receivable, net of allowance for credit losses of $1.4 million and $1.3 million, respectively						Accounts receivable, net of allowance for credit losses of $1.4 million and $1.3 million, respectively	148,472		193,831
Contract assets, net	Contract assets, net	35,276		36,716		Contract assets, net	43,092		42,688
Inventories	Inventories	5,760		5,541		Inventories	6,557		5,337
Prepaid expenses and other current assets	Prepaid expenses and other current assets	49,880		42,814		Prepaid expenses and other current assets	70,380		53,752
Current assets of discontinued operations		—		354,926
Total current assets	Total current assets	560,450		1,277,742		Total current assets	525,721		655,178
Property and equipment, net	Property and equipment, net	68,634		69,090		Property and equipment, net	57,514		64,090
Operating lease right-of-use assets	Operating lease right-of-use assets	45,698		57,849		Operating lease right-of-use assets	31,202		35,433
Goodwill	Goodwill	1,361,420		1,327,407		Goodwill	1,315,109		1,353,421
Intangible assets, net	Intangible assets, net	130,528		143,744		Intangible assets, net	93,370		118,254
Other assets	Other assets	131,555		104,511		Other assets	144,374		134,729
Long-term assets of discontinued operations		—		280,952
Total assets	Total assets	$	2,298,285	$	3,261,295	Total assets	$	2,167,290	$	2,361,105

Liabilities, Temporary Equity, and Stockholders' Equity	Liabilities, Temporary Equity, and Stockholders' Equity					Liabilities, Temporary Equity, and Stockholders' Equity
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts payable	Accounts payable	$	32,994	$	35,463	Accounts payable	$	44,573	$	39,501
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	138,502		211,517		Accrued expenses and other current liabilities	126,603		168,694
Current maturities of long-term debt		—		386,713
Contract liabilities	Contract liabilities	221,073		261,033		Contract liabilities	229,317		271,271
Current liabilities of discontinued operations		—		268,713
Total current liabilities	Total current liabilities	392,569		1,163,439		Total current liabilities	400,493		479,466
Long-term debt	Long-term debt	406,411		402,781		Long-term debt	407,816		406,954
Long-term contract liabilities	Long-term contract liabilities	17,162		16,502		Long-term contract liabilities	14,225		15,872
Operating lease liabilities	Operating lease liabilities	43,880		56,712		Operating lease liabilities	28,056		28,457
Other liabilities	Other liabilities	37,250		75,710		Other liabilities	42,024		39,456
Long-term liabilities of discontinued operations		—		58,118
Total liabilities	Total liabilities	897,272		1,773,262		Total liabilities	892,614		970,205
Commitments and Contingencies	Commitments and Contingencies	0		0		Commitments and Contingencies
Temporary Equity:	Temporary Equity:					Temporary Equity:
Preferred Stock - $0.001 par value; authorized 2,207,000 shares
Series A Preferred Stock; 200,000 shares issued and outstanding at October 31, 2021 and January 31, 2021, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at October 31, 2021 and January 31, 2021, respectively.		200,628		200,628
Series B Preferred Stock; 200,000 shares issued and outstanding at October 31, 2021; no shares issued and outstanding at January 31, 2021; aggregate liquidation preference and redemption value of $203,467 at October 31, 2021.		235,693		—
Equity component of currently redeemable convertible notes		—		4,841
Preferred Stock — $0.001 par value; authorized 2,207,000 shares						Preferred Stock — $0.001 par value; authorized 2,207,000 shares
Series A Preferred Stock; 200,000 shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $200,867 and $206,067 at July 31, 2022 and January 31, 2022, respectively.						Series A Preferred Stock; 200,000 shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $200,867 and $206,067 at July 31, 2022 and January 31, 2022, respectively.	200,628		200,628
Series B Preferred Stock; 200,000 shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $200,867 and $206,067 at July 31, 2022 and January 31, 2022, respectively.						Series B Preferred Stock; 200,000 shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively; aggregate liquidation preference and redemption value of $200,867 and $206,067 at July 31, 2022 and January 31, 2022, respectively.	235,693		235,693
Total temporary equity	Total temporary equity	436,321		205,469		Total temporary equity	436,321		436,321
Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Common stock - $0.001 par value; authorized 120,000,000 shares. Issued 65,694,000 and 70,177,000 shares; outstanding 65,694,000 and 65,773,000 shares at October 31, 2021 and January 31, 2021, respectively.		66		70
Common stock — $0.001 par value; authorized 240,000,000 and 120,000,000 shares; issued 65,208,000 and 66,211,000 shares; outstanding 65,208,000 and 66,211,000 shares at July 31, 2022 and January 31, 2022, respectively.						Common stock — $0.001 par value; authorized 240,000,000 and 120,000,000 shares; issued 65,208,000 and 66,211,000 shares; outstanding 65,208,000 and 66,211,000 shares at July 31, 2022 and January 31, 2022, respectively.	65		66
Additional paid-in capital	Additional paid-in capital	1,121,523		1,726,166		Additional paid-in capital	1,054,873		1,125,152
Treasury stock, at cost - No shares and 4,404,000 shares at October 31, 2021 and January 31, 2021, respectively.		—		(208,124)
Accumulated deficit	Accumulated deficit	(49,886)		(113,797)		Accumulated deficit	(56,635)		(54,509)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(109,523)		(136,878)		Accumulated other comprehensive loss	(162,307)		(118,515)
Total Verint Systems Inc. stockholders' equity	Total Verint Systems Inc. stockholders' equity	962,180		1,267,437		Total Verint Systems Inc. stockholders' equity	835,996		952,194
Noncontrolling interests		2,512		15,127
Noncontrolling interest						Noncontrolling interest	2,359		2,385
Total stockholders' equity						Total stockholders' equity	838,355		954,579
Total liabilities, temporary equity, and stockholders' equity						Total liabilities, temporary equity, and stockholders' equity	$	2,167,290	$	2,361,105

See notes to condensed consolidated financial statements.

Table of Contents

October 31, January 31,
(in thousands, except share and per share data) 2021 2021
Total stockholders' equity 964,692 1,282,564
Total liabilities, temporary equity, and stockholders' equity $ 2,298,285 $ 3,261,295
VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands, except per share data)	2022		2021		2022		2021
Revenue:
Recurring	$	166,440	$	156,178	$	325,807	$	300,631
Nonrecurring	56,459		58,439		114,998		114,890
Total revenue	222,899		214,617		440,805		415,521
Cost of revenue:
Recurring	40,852		37,636		81,880		75,712
Nonrecurring	30,700		30,505		62,768		60,385
Amortization of acquired technology	3,553		4,426		7,192		8,810
Total cost of revenue	75,105		72,567		151,840		144,907
Gross profit	147,794		142,050		288,965		270,614
Operating expenses:
Research and development, net	33,956		31,792		64,903		60,940
Selling, general and administrative	105,705		91,376		208,587		179,022
Amortization of other acquired intangible assets	6,623		7,345		13,467		14,673
Total operating expenses	146,284		130,513		286,957		254,635
Operating income	1,510		11,537		2,008		15,979
Other income (expense), net:
Interest income	498		23		697		46
Interest expense	(1,863)		(2,199)		(3,364)		(7,218)
Losses on early retirements of debt	—		—		—		(2,474)
Other income, net	467		156		2,141		4,206
Total other expense, net	(898)		(2,020)		(526)		(5,440)
Income before provision for income taxes	612		9,517		1,482		10,539
Provision for income taxes	2,848		4,201		3,144		4,129
Net (loss) income	(2,236)		5,316		(1,662)		6,410
Net income attributable to noncontrolling interests	176		316		464		611
Net (loss) income attributable to Verint Systems Inc.	(2,412)		5,000		(2,126)		5,799
Dividends on preferred stock	(5,200)		(5,200)		(10,400)		(8,522)
Net loss attributable to Verint Systems Inc. common shares	$	(7,612)	$	(200)	$	(12,526)	$	(2,723)

Net loss per common share attributable to Verint Systems Inc.:
Basic	$	(0.12)	$	—	$	(0.19)	$	(0.04)
Diluted	$	(0.12)	$	—	$	(0.19)	$	(0.04)

Weighted-average common shares outstanding:
Basic	64,958		65,194		64,948		65,417
Diluted	64,958		65,194		64,948		65,417

See notes to condensed consolidated financial statements.

Table of Contents

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Operations~~

~~(Unaudited)~~
Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands, except per share data) 2021 2020 2021 2020
Revenue:
Recurring $ 158,811 $ 150,233 $ 459,442 $ 418,570
Nonrecurring 66,009 64,989 180,899 186,597
  Total revenue 224,820 215,222 640,341 605,167
Cost of revenue:
Recurring 36,811 35,388 112,523 103,252
Nonrecurring 30,524 34,440 90,909 95,835
Amortization of acquired technology 4,749 4,044 13,559 12,589
  Total cost of revenue 72,084 73,872 216,991 211,676
Gross profit 152,736 141,350 423,350 393,491
Operating expenses:
Research and development, net 31,029 33,293 91,969 95,853
Selling, general and administrative 89,778 80,167 268,800 234,733
Amortization of other acquired intangible assets 7,261 7,833 21,934 23,316
  Total operating expenses 128,068 121,293 382,703 353,902
Operating income 24,668 20,057 40,647 39,589
Other income (expense), net:
Interest income 101 314 147 1,217
Interest expense (1,502) (9,718) (8,720) (30,530)
Losses on early retirements of debt — — (2,474) (143)
Other (expense) income, net (417) (11,670) 3,789 (26,246)
  Total other expense, net (1,818) (21,074) (7,258) (55,702)
Income (loss) from continuing operations before provision for income taxes 22,850 (1,017) 33,389 (16,113)
Provision for income taxes 9,349 1,084 13,478 9,776
Net income (loss) from continuing operations 13,501 (2,101) 19,911 (25,889)
Net income from discontinued operations — 13,928 — 44,328
Net income 13,501 11,827 19,911 18,439
Net income from continuing operations attributable to noncontrolling interests 264 309 875 876
Net income from discontinued operations attributable to noncontrolling interests — 1,343 — 4,908
Net income attributable to Verint Systems Inc. 13,237 10,175 19,036 12,655
Dividends on preferred stock (5,200) (2,658) (13,722) (5,142)
Net income attributable to Verint Systems Inc. common shares $ 8,037 $ 7,517 $ 5,314 $ 7,513
Net income (loss) attributable to Verint Systems Inc. common shares
Net income (loss) from continuing operations attributable to Verint Systems Inc. common shares $ 8,037 $ (5,068) $ 5,314 $ (31,907)
Net income from discontinued operations attributable to Verint Systems Inc. common shares $ — $ 12,585 $ — $ 39,420
Basic net income (loss) per common share attributable to Verint Systems Inc.:
Continuing operations $ 0.12 $ (0.08) $ 0.08 $ (0.49)
Discontinued operations — 0.19 — 0.61
Total basic net income per common share attributable to Verint Systems Inc. $ 0.12 $ 0.11 $ 0.08 $ 0.12

~~Table of Contents~~

Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands, except per share data) 2021 2020 2021 2020
Diluted net income (loss) per common share attributable to Verint Systems Inc.:
Continuing operations $ 0.12 $ (0.08) $ 0.08 $ (0.48)
Discontinued operations — 0.19 — 0.59
Total diluted net income per common share attributable to Verint Systems Inc. $ 0.12 $ 0.11 $ 0.08 $ 0.11
Weighted-average common shares outstanding:
Basic 65,570 65,571 65,474 64,973
Diluted 66,328 66,234 67,268 66,000

~~See notes to condensed consolidated financial statements.~~

~~Table of Contents~~

~~VERINT SYSTEMS INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Statements of~~ Comprehensive (Loss) Income

(Unaudited)


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Net income		$	13,501	$	11,827	$	19,911	$	18,439
Net (loss) income										Net (loss) income	$	(2,236)	$	5,316	$	(1,662)	$	6,410
Other comprehensive (loss) income, net of reclassification adjustments:	Other comprehensive (loss) income, net of reclassification adjustments:									Other comprehensive (loss) income, net of reclassification adjustments:
Foreign currency translation adjustments	Foreign currency translation adjustments	(7,104)		(4,973)		(2,843)		(7,348)		Foreign currency translation adjustments	(13,783)		1,653		(43,673)		4,261
Distribution of Cognyte Software Ltd.	Distribution of Cognyte Software Ltd.	—		—		17,123		—		Distribution of Cognyte Software Ltd.	—		—		—		17,123
Net increase (decrease) from foreign exchange contracts designated as hedges	Net increase (decrease) from foreign exchange contracts designated as hedges	105		(550)		51		57		Net increase (decrease) from foreign exchange contracts designated as hedges	43		12		(145)		(54)
Net increase (decrease) from interest rate swap prior to dedesignation as a hedge		—		1,356		1,014		(4,468)
Net increase from settlement of interest rate swap due to partial early retirement of 2017 Term Loan		—		—		12,017		—
Net increase from interest rate swap prior to dedesignation as a hedge										Net increase from interest rate swap prior to dedesignation as a hedge	—		—		—		1,014
Net increase from settlement of interest rate swap due to partial early retirement of Term Loan										Net increase from settlement of interest rate swap due to partial early retirement of Term Loan	—		—		—		12,017
(Provision for) benefit from income taxes on net increase (decrease) from foreign exchange contracts and interest rate swap designated as hedges	(Provision for) benefit from income taxes on net increase (decrease) from foreign exchange contracts and interest rate swap designated as hedges	(16)		(209)		(7)		914		(Provision for) benefit from income taxes on net increase (decrease) from foreign exchange contracts and interest rate swap designated as hedges	(7)		(2)		26		9
Other comprehensive (loss) income	Other comprehensive (loss) income	(7,015)		(4,376)		27,355		(10,845)		Other comprehensive (loss) income	(13,747)		1,663		(43,792)		34,370
Comprehensive income		6,486		7,451		47,266		7,594
Comprehensive (loss) income										Comprehensive (loss) income	(15,983)		6,979		(45,454)		40,780
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	264		1,787		875		5,880		Comprehensive income attributable to noncontrolling interests	176		316		464		611
Comprehensive income attributable to Verint Systems Inc.		$	6,222	$	5,664	$	46,391	$	1,714
Comprehensive (loss) income attributable to Verint Systems Inc.										Comprehensive (loss) income attributable to Verint Systems Inc.	$	(16,159)	$	6,663	$	(45,918)	$	40,169

See notes to condensed consolidated financial statements.

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

Verint Systems Inc. Stockholders’ Equity
Common Stock Additional Paid-in Capital
Accumulated Other Comprehensive Loss
Total Verint Systems Inc. Stockholders’ Equity Total Stockholders’ Equity
(in thousands) Shares Par
Value Treasury
Stock Accumulated
Deficit Non-controlling
Interests
Balances as of January 31, 2021 65,773 $ 70 $ 1,726,166 $ (208,124) $ (113,797) $ (136,878) $ 1,267,437 $ 15,127 $ 1,282,564
Net income �� — — — 799 — 799 295 1,094
Other comprehensive income, excluding the distribution of Cognyte Software Ltd. — — — — — 15,584 15,584 — 15,584
Distribution of Cognyte Software Ltd. — — (281,665) — — 17,123 (264,542) (12,870) (277,412)
Stock-based compensation - equity-classified awards — — 14,253 — — — 14,253 — 14,253
Common stock issued for stock awards and stock bonuses 827 1 (1) — — — — — —
Common stock repurchased and retired (1,058) (1) (49,580) — — — (49,581) — (49,581)
Treasury stock acquired (543) — — (25,868) — — (25,868) — (25,868)
Purchases of capped calls, net of taxes — — (32,416) — — — (32,416) — (32,416)
Cumulative effect of adoption of ASU No. 2020-06, net of taxes — — (43,445) — 44,875 — 1,430 — 1,430
Balances as of April 30, 2021 64,999 70 1,333,312 (233,992) (68,123) (104,171) 927,096 2,552 929,648
Net income — — — — 5,000 — 5,000 316 5,316
Other comprehensive income — — — — — 1,663 1,663 — 1,663
Stock-based compensation - equity-classified awards — — 15,984 — — — 15,984 — 15,984
Common stock issued for stock awards and stock bonuses 456 — — — — — — — —
Settlement of conversion premium upon maturity of 2014 Notes 1,250 — (59,139) 59,131 — — (8) — (8)
Common stock received from exercise of Note Hedges (1,250) — 57,695 (57,692) — — 3 — 3
Common stock received from exercise of Note Hedges related to repurchased 2014 Notes (42) — 1,959 (1,959) — — — — —
Purchases of capped calls, net of taxes — — (25) — — — (25) — (25)
Treasury stock acquired (1) — — (12) — — (12) — (12)
Preferred stock dividends — — (7,656) — — — (7,656) — (7,656)
Distribution to noncontrolling interest — — — — — — — (245) (245)
Balances as of July 31, 2021 65,412 70 1,342,130 (234,524) (63,123) (102,508) 942,045 2,623 944,668
Net income — — — — 13,237 — 13,237 264 13,501
Other comprehensive loss — — — — — (7,015) (7,015) — (7,015)
Stock-based compensation - equity-classified awards — — 14,386 — — — 14,386 — 14,386
Common stock issued for stock awards and stock bonuses 293 1 (1) — — — — — —
Treasury stock acquired (11) — — (473) — — (473) — (473)
Treasury stock retired — (5) (234,992) 234,997 — — — — —
Distribution to noncontrolling interest — — — — — — — (375) (375)
Balances as of October 31, 2021 65,694 $ 66 $ 1,121,523 $ — $ (49,886) $ (109,523) $ 962,180 $ 2,512 $ 964,692


	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, 2022	66,211	$	66	$	1,125,152	$	—	$	(54,509)	$	(118,515)	$	952,194	$	2,385	$	954,579
Net income	—	—		—		—		286		—		286		288		574
Other comprehensive loss	—	—		—		—		—		(30,045)		(30,045)		—		(30,045)
Stock-based compensation — equity-classified awards	—	—		16,011		—		—		—		16,011		—		16,011
Common stock issued for stock awards and stock bonuses	466	1		(1)		—		—		—		—		—		—
Treasury stock acquired	(2,000)	—		—		(105,666)		—		—		(105,666)		—		(105,666)
Balances as of April 30, 2022	64,677	67		1,141,162		(105,666)		(54,223)		(148,560)		832,780		2,673		835,453
Net (loss) income	—	—		—		—		(2,412)		—		(2,412)		176		(2,236)
Other comprehensive loss	—	—		—		—		—		(13,747)		(13,747)		—		(13,747)
Stock-based compensation — equity-classified awards	—	—		23,362		—		—		—		23,362		—		23,362
Common stock issued for stock awards and stock bonuses	531	—		6,427		—		—		—		6,427		—		6,427
Treasury stock acquired	—	—		—		(14)		—		—		(14)		—		(14)
Treasury stock retired	—	(2)		(105,678)		105,680		—		—		—		—		—
Preferred stock dividends	—	—		(10,400)		—		—		—		(10,400)		—		(10,400)
Distribution to noncontrolling interest	—	—		—		—		—		—		—		(490)		(490)
Balances as of July 31, 2022	65,208	$	65	$	1,054,873	$	—	$	(56,635)	$	(162,307)	$	835,996	$	2,359	$	838,355

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, 2020 64,738 $ 68 $ 1,660,889 $ (174,134) $ (105,590) $ (151,865) $ 1,229,368 $ 13,069 $ 1,242,437
Net (loss) income — — — — (6,014) — (6,014) 2,039 (3,975)
Other comprehensive loss — — — — — (26,909) (26,909) (359) (27,268)
Stock-based compensation - equity-classified awards — — 15,029 — — — 15,029 — 15,029
Common stock issued, or to be issued, for stock awards and stock bonuses 399 1 1,845 — — — 1,846 — 1,846
Exercises of stock options 2 — 12 — — — 12 — 12
Treasury stock acquired (613) — — (33,990) — — (33,990) — (33,990)
Distribution to noncontrolling interest — — — — — — — (245) (245)
Cumulative effect of adoption of ASU No. 2016-13 — — — — (940) — (940) — (940)
Balances as of April 30, 2020 64,526 69 1,677,775 (208,124) (112,544) (178,774) 1,178,402 14,504 1,192,906
Net income — — — — 8,494 — 8,494 2,093 10,587
Other comprehensive income — — — — — 20,479 20,479 320 20,799
Stock-based compensation - equity-classified awards — — 13,420 — — — 13,420 — 13,420
Common stock issued for stock awards and stock bonuses 874 1 — — — — 1 — 1
Preferred stock dividends — — (1,589) — — — (1,589) — (1,589)
Reacquisition of equity component from convertible notes repurchases, net of taxes — — (218) — — — (218) — (218)
Distribution to noncontrolling interest — — — — — — — (404) (404)
Balances as of July 31, 2020 65,400 70 1,689,388 (208,124) (104,050) (158,295) 1,218,989 16,513 1,235,502
Net income — — — — 10,175 — 10,175 1,652 11,827
Other comprehensive (loss) income — — — — — (4,511) (4,511) 135 (4,376)
Stock-based compensation - equity-classified awards — — 15,733 — — — 15,733 — 15,733
Common stock issued for stock awards and stock bonuses 336 — 12,263 — — — 12,263 — 12,263
Distribution to noncontrolling interest — — — — — — — (100) (100)
Balances as of October 31, 2020 65,736 $ 70 $ 1,717,384 $ (208,124) $ (93,875) $ (162,806) $ 1,252,649 $ 18,200 $ 1,270,849


	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, 2021	65,773	$	70	$	1,726,166	$	(208,124)	$	(113,797)	$	(136,878)	$	1,267,437	$	15,127	$	1,282,564
Net income	—	—		—		—		799		—		799		295		1,094
Other comprehensive income, excluding the distribution of Cognyte Software Ltd.	—	—		—		—		—		15,584		15,584		—		15,584
Distribution of Cognyte Software Ltd.	—	—		(281,665)		—		—		17,123		(264,542)		(12,870)		(277,412)
Stock-based compensation — equity-classified awards	—	—		14,253		—		—		—		14,253		—		14,253
Common stock issued for stock awards and stock bonuses	827	1		(1)		—		—		—		—		—		—
Common stock repurchased and retired	(1,058)	(1)		(49,580)		—		—		—		(49,581)		—		(49,581)
Treasury stock acquired	(543)	—		—		(25,868)		—		—		(25,868)		—		(25,868)
Purchases of capped calls, net of taxes	—	—		(32,416)		—		—		—		(32,416)		—		(32,416)
Cumulative effect of adoption of ASU No. 2020-06, net of taxes	—	—		(43,445)		—		44,875		—		1,430		—		1,430
Balances as of April 30, 2021	64,999	70		1,333,312		(233,992)		(68,123)		(104,171)		927,096		2,552		929,648
Net income	—	—		—		—		5,000		—		5,000		316		5,316
Other comprehensive income	—	—		—		—		—		1,663		1,663		—		1,663
Stock-based compensation — equity-classified awards	—	—		15,984		—		—		—		15,984		—		15,984
Common stock issued for stock awards and stock bonuses	456	—		—		—		—		—		—		—		—
Settlement of conversion premium upon maturity of 2014 Notes	1,250	—		(59,139)		59,131		—		—		(8)		—		(8)
Common stock received from exercise of Note Hedges	(1,250)	—		57,695		(57,692)		—		—		3		—		3
Common stock received from exercise of Note Hedges related to repurchased 2014 Notes	(42)	—		1,959		(1,959)		—		—		—		—		—
Purchases of capped calls, net of taxes	—	—		(25)		—		—		—		(25)		—		(25)
Treasury stock acquired	(1)	—		—		(12)		—		—		(12)		—		(12)
Preferred stock dividends	—	—		(7,656)		—		—		—		(7,656)		—		(7,656)
Distribution to noncontrolling interest	—	—		—		—		—		—		—		(245)		(245)
Balances as of July 31, 2021	65,412	$	70	$	1,342,130	$	(234,524)	$	(63,123)	$	(102,508)	$	942,045	$	2,623	$	944,668

See notes to condensed consolidated financial statements.

Table of Contents

VERINT SYSTEMS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Nine Months Ended October 31,					Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income		$	19,911	$	18,439
(Income) from discontinued operations, net of income taxes		—		(44,328)
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Net (loss) income						Net (loss) income	$	(1,662)	$	6,410
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	56,910		63,664		Depreciation and amortization	35,348		37,669
Stock-based compensation, excluding cash-settled awards	Stock-based compensation, excluding cash-settled awards	51,078		39,533		Stock-based compensation, excluding cash-settled awards	44,053		34,489
Change in fair value of future tranche right	Change in fair value of future tranche right	(15,810)		22,834		Change in fair value of future tranche right	—		(15,810)
Amortization of discount on convertible notes		—		9,620
Non-cash losses on derivative financial instruments, net	Non-cash losses on derivative financial instruments, net	14,374		812		Non-cash losses on derivative financial instruments, net	—		14,374
Losses on early retirements of debt	Losses on early retirements of debt	2,474		143		Losses on early retirements of debt	—		2,474
Other, net	Other, net	264		(173)		Other, net	7,631		(878)
Changes in operating assets and liabilities:
Changes in operating assets and liabilities, net of effects of business combinations:						Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable	Accounts receivable	45,586		35,441		Accounts receivable	41,641		55,664
Contract assets	Contract assets	1,290		1,389		Contract assets	(1,600)		(1,334)
Inventories	Inventories	(758)		(262)		Inventories	(1,344)		(206)
Prepaid expenses and other assets	Prepaid expenses and other assets	(21,586)		(11,755)		Prepaid expenses and other assets	(28,580)		(27,926)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(21,918)		25,682		Accounts payable and accrued expenses	(6,289)		(27,271)
Contract liabilities	Contract liabilities	(42,618)		(44,155)		Contract liabilities	(38,626)		(33,466)
Deferred income taxes	Deferred income taxes	(15,530)		2,677		Deferred income taxes	(301)		(16,521)
Other, net	Other, net	(3,418)		1,693		Other, net	(3,591)		(815)
Net cash provided by operating activities - continuing operations		70,249		121,254
Net cash (used in) provided by operating activities - discontinued operations		(9,055)		36,577
Net cash provided by operating activities — continuing operations						Net cash provided by operating activities — continuing operations	46,680		26,853
Net cash used in operating activities — discontinued operations						Net cash used in operating activities — discontinued operations	—		(12,294)
Net cash provided by operating activities	Net cash provided by operating activities	61,194		157,831		Net cash provided by operating activities	46,680		14,559

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Cash paid for business combinations, including adjustments, net of cash acquired	Cash paid for business combinations, including adjustments, net of cash acquired	(57,214)		—		Cash paid for business combinations, including adjustments, net of cash acquired	—		(7,000)
Purchases of property and equipment	Purchases of property and equipment	(11,903)		(9,918)		Purchases of property and equipment	(10,160)		(7,575)
Maturities and sales of investments						Maturities and sales of investments	250		45,640
Purchases of investments	Purchases of investments	—		(98,067)		Purchases of investments	(250)		—
Maturities and sales of investments		45,640		18,800
Cash paid for capitalized software development costs	Cash paid for capitalized software development costs	(5,637)		(5,916)		Cash paid for capitalized software development costs	(3,816)		(3,697)
Change in restricted bank time deposits, and other investing activities, net	Change in restricted bank time deposits, and other investing activities, net	(26)		(24)		Change in restricted bank time deposits, and other investing activities, net	22		22
Net cash used in investing activities - continuing operations		(29,140)		(95,125)
Net cash used in investing activities - discontinued operations		—		(5,551)
Net cash used in investing activities		(29,140)		(100,676)
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(13,954)		27,390

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of preferred stock	Proceeds from issuance of preferred stock	198,731		197,254		Proceeds from issuance of preferred stock	—		198,731
Proceeds from borrowings	Proceeds from borrowings	315,000		155,000		Proceeds from borrowings	—		315,000
Repayments of borrowings and other financing obligations	Repayments of borrowings and other financing obligations	(312,415)		(205,447)		Repayments of borrowings and other financing obligations	(1,675)		(311,335)
Settlement of 2014 Notes	Settlement of 2014 Notes	(386,887)		—		Settlement of 2014 Notes	—		(386,887)
Purchases of capped calls	Purchases of capped calls	(41,060)		—		Purchases of capped calls	—		(41,060)
Payments of debt-related costs	Payments of debt-related costs	(10,708)		(2,287)		Payments of debt-related costs	(224)		(10,531)
Purchases of treasury stock and common stock for retirement	Purchases of treasury stock and common stock for retirement	(75,933)		(36,836)		Purchases of treasury stock and common stock for retirement	(105,666)		(75,460)
Payments to repurchase convertible notes		—		(13,032)
Preferred stock dividend payments	Preferred stock dividend payments	(12,856)		(1,589)		Preferred stock dividend payments	(20,800)		(12,856)
Distributions paid to noncontrolling interest	Distributions paid to noncontrolling interest	(620)		(749)		Distributions paid to noncontrolling interest	(490)		(245)
Payment for termination of interest rate swap	Payment for termination of interest rate swap	(16,502)		—		Payment for termination of interest rate swap	—		(16,502)
Net cash transferred to Cognyte Software Ltd.	Net cash transferred to Cognyte Software Ltd.	(114,657)		—		Net cash transferred to Cognyte Software Ltd.	—		(114,657)
Dividend and other settlements received from Cognyte Software Ltd.	Dividend and other settlements received from Cognyte Software Ltd.	38,280		—		Dividend and other settlements received from Cognyte Software Ltd.	—		38,280
Payments of contingent consideration for business combinations (financing portion), and other financing activities	Payments of contingent consideration for business combinations (financing portion), and other financing activities	(4,621)		(8,364)		Payments of contingent consideration for business combinations (financing portion), and other financing activities	(3,582)		(4,390)
Net cash (used in) provided by financing activities - continuing operations		(424,248)		83,950
Net cash used in financing activities						Net cash used in financing activities	(132,437)		(421,912)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents						Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents	(2,575)		340
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents						Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	(102,286)		(379,623)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period						Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period	358,868		700,133
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period						Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period	$	256,582	$	320,510

Table of Contents


		Nine Months Ended October 31,					Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Net cash used in financing activities - discontinued operations		—		(4,877)
Net cash (used in) provided by financing activities		(424,248)		79,073
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents		(29)		(2,093)
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents		(392,223)		134,135
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period		700,133		411,657
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period		$	307,910	$	545,792

Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period to the condensed consolidated balance sheets:	Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period to the condensed consolidated balance sheets:					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	Cash and cash equivalents	$	307,847	$	526,815	Cash and cash equivalents	$	256,502	$	320,439
Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits	Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits	6		15,459		Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits	—		14
Restricted cash and cash equivalents included in prepaid expenses and other current assets						Restricted cash and cash equivalents included in prepaid expenses and other current assets	23		—
Restricted cash and cash equivalents included in other assets	Restricted cash and cash equivalents included in other assets	57		3,518		Restricted cash and cash equivalents included in other assets	57		57
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	307,910	$	545,792	Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	256,582	$	320,510

See notes to condensed consolidated financial statements.

108

Table of Contents

VERINT SYSTEMS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Unless the context otherwise requires, the terms “Verint”, “we”, “us”, and ~~��our”~~“our” in these notes to condensed consolidated financial statements refer to Verint Systems Inc. and its consolidated subsidiaries.

Verint helps brands provide Boundless Customer Engagement™. For more than two decades, the world’s most iconic brands – including more than 85 of the Fortune 100 companies – have trusted Verint to provide the technology and domain expertise they require to effectively build enduring customer relationships.

Through the Verint Customer Engagement Cloud Platform, we offer our customers and partners solutions that are based on artificial intelligence (“AI”) and ~~analytics to~~are developed specifically for customer engagement. These solutions automate workflows across enterprise silos to optimize the workforce expense and at the same time drive an elevated consumer experience. ~~These~~Our solutions are used by approximately 10,000 organizations in over 175 countries across a diverse set of verticals, including financial services, healthcare, utilities, technology, and government. Our customers include large enterprises with thousands of employees, as well as small to medium sized business (“SMB”) organizations.

Verint is headquartered in Melville, New York, and has ~~more than 40~~approximately 30 offices worldwide. We have approximately ~~4,400~~4,500 passionate professionals around the globe exclusively focused on helping brands provide Boundless Customer ~~Engagement.~~

~~Recent Developments~~Engagement™.

Spin-Off of Cognyte Software Ltd.

On February 1, 2021, we completed the previously announced spin-off (the “Spin-Off”) of Cognyte Software Ltd. (“Cognyte”), a company limited by shares incorporated under the laws of the State of Israel whose business and operations consist of our former Cyber Intelligence Solutions ~~business (the “Cognyte Business”).~~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 1one 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~~In connection with the Spin-Off, we and Cognyte entered into a separation and distribution agreement as well as various other agreements that provide a framework for the ~~three~~relationships between the parties going forward, including among others an employee matters agreement, a tax matters agreement, and ~~nine months ended October 31, 2020 are presented as income from discontinued operations, net~~a transition services agreement, pursuant to which we and Cognyte agreed to provide and/or make available various administrative services and assets to each other for a given period based on each individual service. The performance of ~~taxes on~~services under the ~~condensed consolidated statements of operations and its assets and liabilities~~transition services agreement was substantially concluded as of January 31, ~~2021 are presented~~2022, with only minimal advisory services continuing as ~~assets and liabilities~~ of discontinued operations on the condensed consolidated balance sheets. The historical condensed consolidated statement of cash flows has also been revised to reflect the effect of the Spin-Off. The historical statements of comprehensive income 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 condensed consolidated financial statements pertain to continuing operations.July 31, 2022.

Apax Convertible Preferred Stock Investment

On December 4, 2019, we announced that an affiliate (the “Apax Investor”) of Apax Partners (“Apax”) would make an investment in us in an amount of up to $400.0 million. Under the terms of the Investment Agreement, dated as of December 4, 2019 (the “Investment Agreement”), on May 7, 2020, the Apax Investor purchased $200.0 million of our Series A convertible preferred stock (“Series A Preferred Stock”) ~~in an issuance that closed on May 7, 2020.~~. In connection with the completion of the Spin-Off, on April 6, 2021, the Apax Investor purchased $200.0 million of our Series B convertible preferred stock (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”) ~~in an issuance that closed on April 6, 2021.~~. As of ~~October~~July 31, ~~2021,~~2022, Apax’s ownership in us on an as-converted basis was approximately ~~12.8%~~12.7%. Please refer to Note ~~10,~~9, “Convertible Preferred Stock” for a more detailed discussion of the Apax investment.

~~Impact of COVID-19 Pandemic~~

~~Table of Contents~~

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. This 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 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.

Preparation of Condensed Consolidated Financial Statements

The condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on the same basis as the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 31, ~~2021~~2022 filed with the U.S. Securities and

Table of Contents

Exchange Commission (“SEC”), except for the recently adopted accounting pronouncements described below. The condensed consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for the periods ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, and the condensed consolidated balance sheet as of ~~October~~July 31, ~~2021,~~2022, are not audited but reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair presentation of the results for the periods shown. The condensed consolidated balance sheet as of January 31, ~~2021~~2022 is derived from the audited consolidated financial statements presented in our Annual Report on Form 10-K for the year ended January 31, ~~2021.~~2022. Certain information and disclosures normally included in annual consolidated financial statements have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and disclosures required by GAAP for a complete set of financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 31, ~~2021~~2022 filed with the SEC. The results for interim periods are not necessarily indicative of a full year’s results.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Verint Systems Inc., and our wholly owned or otherwise controlled subsidiaries. Noncontrolling interests in less than wholly owned subsidiaries are reflected within stockholders’ equity on our condensed consolidated balance sheet, but separately from our stockholders’ equity. We hold an option to acquire the noncontrolling interests in 2 majority owned subsidiaries and we account for the option as an in-substance investment in the noncontrolling common stock of each such subsidiary. We include the fair value of the option within accrued expenses and other current liabilities and do not recognize noncontrolling interests in these subsidiaries.

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

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

Use of Estimates

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

In light of the currently unknown extent and duration of the COVID-19 pandemic and other macroeconomic factors, 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 and other macroeconomic factors as of ~~October~~July 31, ~~2021~~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~~

~~Table of Contents~~

Assets Held for Sale

~~Following the Spin-Off, we began to operate~~Assets are classified 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~~held for sale when all of the ~~nature~~following criteria for a plan of ~~our offerings, provide greater transparency~~sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and ~~clarity~~customary; (iii) an active program to ~~users~~locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale of the ~~financial statements,~~property is probable and is ~~more consistent with industry practice~~expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and ~~internal reporting. Accordingly, prior period amounts have been reclassified~~(vi) actions necessary to ~~conform~~complete the plan of sale indicate that it is unlikely that significant changes to the ~~current period presentation in our condensed consolidated financial statements and~~plan will be made or that the ~~accompanying notes. For a description of the types of revenue included in each category, see Note 3, “Revenue Recognition”.~~plan will be withdrawn.

~~Business Segment Information~~During the three months ended July 31, 2022, we commenced plans to sell an approximately 50,000-square foot office building. As of July 31, 2022, the office building had a carrying value of approximately $1.1 million, which was included within property and equipment, net on the condensed consolidated balance sheet. Please refer to Note 12, “Fair Value Measurements” for further information regarding our assets held for sale.

Prior to the Spin-Off, we had 2 reportable segments—Customer Engagement and Cyber Intelligence. Upon completion of the Spin-Off, we are a pure-play customer engagement company that operates as a single reporting segment as our Chief Executive Officer, who is our chief operating decision maker, or CODM, reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Significant Accounting Policies

Table of Contents

There have been no material changes in our significant accounting policies during the ~~nine~~six months ended ~~October~~July 31, ~~2021,~~2022, as compared to the significant accounting policies described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 31, ~~2021, other than the recently adopted accounting pronouncements described below.~~2022.

Recently Adopted Accounting Pronouncements

In ~~December 2019,~~May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. ~~2019-12,~~2021-04, ~~Income Taxes~~Earnings Per Share (Topic ~~740): Simplifying the Accounting for Income Taxes~~260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)~~, which affects general principles within Topic 740, Income Taxes. The new guidance simplifies the~~ to clarify and reduce diversity in an issuer’s accounting for ~~income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the tax basis~~modifications or exchanges of ~~goodwill~~freestanding equity-classified written call options (for example, warrants) that remain equity classified after a business combination, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also changes the calculation of the income tax impact of hybrid taxes and the methodology for calculating income taxes in an interim period.modification or exchange. We adopted this standard as of February 1, ~~2021~~2022, and the adoption did not have any impact on ~~either a prospective basis, or through a modified retrospective approach, as required by the standard. There was no cumulative effect adjustment recorded to accumulated deficit~~our condensed consolidated financial statements, as the ~~amount was not material. The effects~~effect will largely depend on the terms of ~~this standard on our financial position, results of operations and cash flows were not material.~~

~~In August 2020,~~written call options or financings issued or modified in the ~~FASB issued ASU No. 2020-06,~~ future.~~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 have not been restated upon adoption.

Upon adoption of ASU No. 2020-06, we no longer presented the conversion feature of our 2014 convertible senior notes, which matured on June 1, 2021, in equity. Instead, we combined the previously separated equity component with the liability component, which prior to maturity of the 2014 convertible senior 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 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 March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-04 provides optional expedients and exceptions for applying GAAP if certain criteria are met to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued Update 2021-01, Reference Rate Reform (Topic 848): Scope. The update provides additional optional guidance on the transition from LIBOR to include derivative instruments that use an interest rate for margining, discounting, or contract price alignment. The standard will ease, if warranted, the requirements for accounting for the future effects of the rate reform. An entity may elect to apply the amendments prospectively through December 31, 2022. A portion of our indebtedness bears interest at variable interest rates, primarily based on euro-dollar LIBOR. We continue to monitor the impact the discontinuance of LIBOR or another reference rate will have on our contracts, hedging relationships and other transactions. We are currently assessing the impact of this standard on our condensed consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which will require companies to apply the definition of a performance obligation under ASC Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities relating to contracts with customers that are acquired in a business combination. Under current GAAP, an

~~Table of Contents~~

acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. ASU No. 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the impact of this standard on our condensed consolidated financial ~~statements.~~statements but the ultimate impact is dependent on the size and frequency of future acquisitions and does not affect contract assets or contract liabilities related to acquisitions completed prior to the adoption date.

2. ~~DISCONTINUED OPERATIONS~~

On February 1, 2021 (the “Spin-Off Date”), we completed the previously announced Spin-Off of Cognyte by way of a pro rata and generally tax-free 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.

~~To effect the Spin-Off and provide a framework for our relationship with Cognyte post Spin-Off we entered into several agreements with Cognyte, including the following:~~

•~~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 the 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 prior to, at and after the Spin-Off.

Under the Transition Services Agreement (“TSA”) with Cognyte, we and Cognyte will 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 will each pay fees to the other for the services provided, and those fees will generally be 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, and subject to a mutually agreed-upon increase following an extension of the initial service term. The fees charged for the first year of services are fixed. Fees for services provided by third-party suppliers will be on a straight pass-through basis. During the three and nine months ended October 31, 2021, we invoiced Cognyte $1.5 million and $4.4 million, respectively, and Cognyte invoiced us $0.3 million and $0.8 million, respectively, for transition services provided under the TSA.

Under the Tax Matters Agreement with Cognyte, we and Cognyte each agreed to share 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 primarily 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 Cognyte 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 preparing relevant tax returns, which responsibility will depend on the type of a 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 “discontinued operations” in accordance with the accounting guidance upon completion of the separation, and as such, the results of our former Cognyte Business have been classified as discontinued operations in our condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of cash flows for all periods presented. As of October 31, 2021, there were no assets or liabilities from discontinued operations associated with Cognyte. There was no revenue earned or costs and expenses incurred by discontinued operations during the three and nine months ended October 31, 2021.

The following table summarizes the major classes of line items included within discontinued operations in our condensed consolidated statements of operations for the three and nine months ended October 31, 2020:

~~Table of Contents~~

(in thousands) Three Months Ended
October 31, 2020 Nine Months Ended
October 31, 2020
Revenue $ 112,979 $ 319,438
Cost of revenue 29,331 91,952
Operating expenses 65,964 180,843
Other income, net 3,317 4,399
Income from discontinued operations before benefit from income taxes 21,001 51,042
Provision for income taxes 7,073 6,714
Net income from discontinued operations 13,928 44,328
Net income from discontinued operations attributable to noncontrolling interests 1,343 4,908
Net income from discontinued operations attributable to Verint Systems Inc. common shares $ 12,585 $ 39,420

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


~~(in thousands)~~	~~January 31, 2021~~
~~Assets~~
~~Current Assets:~~
~~Cash and cash equivalents~~	$	~~78,570~~
~~Restricted cash and cash equivalents, and restricted bank time deposits~~	~~27,042~~
~~Short-term investments~~	~~4,713~~
~~Accounts receivable, net~~	~~175,001~~
~~Contract assets, net~~	~~20,317~~
~~Inventories~~	~~14,542~~
~~Prepaid expenses and other current assets~~	~~34,741~~
~~Total current assets of discontinued operations~~	~~354,926~~
~~Property and equipment, net~~	~~37,152~~
~~Operating lease right-of-use assets~~	~~31,040~~
~~Goodwill~~	~~158,183~~
~~Intangible assets, net~~	~~5,299~~
~~Other assets~~	~~49,278~~
~~Total long-term assets of discontinued operations~~	~~280,952~~
~~Total assets of discontinued operations~~	$	~~635,878~~

~~Liabilities~~
~~Current Liabilities:~~
~~Accounts payable~~	$	~~41,512~~
~~Accrued expenses and other current liabilities~~	~~100,189~~
~~Contract liabilities~~	~~127,012~~
~~Total current liabilities of discontinued operations~~	~~268,713~~
~~Long-term contract liabilities~~	~~22,037~~
~~Operating lease liabilities~~	~~23,174~~
~~Other liabilities~~	~~12,907~~
~~Total long-term liabilities of discontinued operations~~	~~58,118~~
~~Total liabilities of discontinued operations~~	$	~~326,831~~

In connection with the Spin-Off, $17.1 million of accumulated other comprehensive income, net of income taxes, related to foreign currency translation adjustments and foreign exchange contracts designated as cash flow hedges were transferred 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 Verint and the CTIL board of directors declared a cash dividend in the aggregate amount of $35.0 million payable to Verint, as its sole

~~Table of Contents~~

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 cash equivalents shown in the table above does not reflect the payment of the dividend, which occurred after the completion of the Spin-Off.

3. REVENUE RECOGNITION

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

We determine revenue recognition through the following five steps:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, performance obligations are satisfied.

Table of Contents

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

Disaggregation of Revenue

The following table provides a disaggregation of our recurring and nonrecurring revenue. Recurring revenue is the portion of our revenue that we believe is likely to be renewed in the future. The recurrence of these revenue streams in future periods depends on a number of factors including contractual periods and customers' renewal decisions.

•Recurring revenue primarily consists ~~of cloud revenue and initial and renewal support revenue.~~of:

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

◦▪SaaS revenue ~~primarily~~ consists predominately of bundled SaaS (software access rights with standard managed services) and unbundled SaaS (software licensing rights accounted for as term-based licenses whereby customers ~~use~~have a license to our software with related support for a ~~specified period of time)~~specific period). ~~Unbundled SaaS can be deployed in the cloud either by us or a cloud partner.~~

◦▪Bundled SaaS revenue is recognized over ~~time and unbundled~~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, hardware, installation services, and business advisory consulting and training services.

In order to conform with the presentation described above, unbundled SaaS revenue for the three and nine months ended October 31, 2020 has been revised to reflect $2.9 million and $7.2 million, respectively, of unbundled SaaS support revenue which had previously been presented within support revenue.

~~Table of Contents~~


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Recurring revenue:	Recurring revenue:									Recurring revenue:
Bundled SaaS revenue	Bundled SaaS revenue	$	48,390	$	37,406	$	130,639	$	106,617	Bundled SaaS revenue	$	54,679	$	42,940	$	103,964	$	82,249
Unbundled SaaS revenue	Unbundled SaaS revenue	33,713		21,577		91,440		41,483		Unbundled SaaS revenue	47,875		33,444		93,320		57,727
Optional managed services revenue	Optional managed services revenue	16,358		14,884		49,688		43,344		Optional managed services revenue	15,778		16,872		31,691		33,330
Total cloud revenue	Total cloud revenue	98,461		73,867		271,767		191,444		Total cloud revenue	118,332		93,256		228,975		173,306
Support revenue	Support revenue	60,350		76,366		187,675		227,126		Support revenue	48,108		62,922		96,832		127,325
Total recurring revenue	Total recurring revenue	158,811		150,233		459,442		418,570		Total recurring revenue	166,440		156,178		325,807		300,631
Nonrecurring revenue:	Nonrecurring revenue:									Nonrecurring revenue:
Perpetual revenue	Perpetual revenue	40,436		35,461		102,108		99,815		Perpetual revenue	30,790		32,349		64,048		61,672
Professional services revenue	Professional services revenue	25,573		29,528		78,791		86,782		Professional services revenue	25,669		26,090		50,950		53,218
Total nonrecurring revenue	Total nonrecurring revenue	66,009		64,989		180,899		186,597		Total nonrecurring revenue	56,459		58,439		114,998		114,890
Total revenue	Total revenue	$	224,820	$	215,222	$	640,341	$	605,167	Total revenue	$	222,899	$	214,617	$	440,805	$	415,521

Contract Balances

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


(in thousands)	(in thousands)	October 31, 2021		January 31, 2021		(in thousands)	July 31, 2022		January 31, 2022
Accounts receivable, net	Accounts receivable, net	$	161,020	$	206,157	Accounts receivable, net	$	148,472	$	193,831
Contract assets, net	Contract assets, net	$	35,276	$	36,716	Contract assets, net	$	43,092	$	42,688
Long-term contract assets, net (included in other assets)	Long-term contract assets, net (included in other assets)	$	26,914	$	17,210	Long-term contract assets, net (included in other assets)	$	34,327	$	30,510
Contract liabilities	Contract liabilities	$	221,073	$	261,033	Contract liabilities	$	229,317	$	271,271
Long-term contract liabilities	Long-term contract liabilities	$	17,162	$	16,502	Long-term contract liabilities	$	14,225	$	15,872

We receive payments from customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to multi-year unbundled SaaS contracts and arrangements where our right

Table of Contents

to consideration is subject to the contractually agreed upon billing schedule. We expect billing and collection of a majority of our contract assets to occur within the next twelve months and asset impairment charges related to contract assets were immaterial in the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020. There was one customer, an~~2021. As of July 31, 2022, two partners, both authorized global ~~reseller~~resellers of our solutions, ~~that~~ accounted for ~~approximately 19% and 14%~~more than 10% of our aggregated accounts receivable and contract ~~assets at October 31, 2021~~assets; Partner A was approximately 17% and Partner B was approximately 11%. As of January 31, ~~2021, respectively.~~2022, Partner A accounted for approximately 14% and Partner B accounted for less than 10% of our aggregated accounts receivable and contract assets. Credit losses relating to ~~this reseller~~these customers have historically been immaterial.

Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract. Revenue recognized during the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020~~2021 from amounts included in contract liabilities at the beginning of each period was ~~$223.4~~$170.5 million and ~~$213.8~~$171.0 million, respectively.

Remaining Performance Obligations

Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes contract liabilities and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. The majority of our arrangements are for periods of up to three years, with a significant portion being one year or less.

We elected to exclude amounts of variable consideration attributable to sales- or usage-based royalties in exchange for a license of our IP from the remaining performance obligations. The timing and amount of revenue recognition for our remaining performance obligations is influenced by several factors, including seasonality, the timing of ~~support~~ renewals, the timing of delivery of software licenses, the average length of the contract terms, and foreign currency exchange rates.

~~Table of Contents~~

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


(in thousands)	(in thousands)	October 31, 2021		January 31, 2021		(in thousands)	July 31, 2022		January 31, 2022
RPO:	RPO:					RPO:
Expected to be recognized within 1 year	Expected to be recognized within 1 year	$	396,121	$	405,714	Expected to be recognized within 1 year	$	418,233	$	447,428
Expected to be recognized in more than 1 year	Expected to be recognized in more than 1 year	249,302		229,951		Expected to be recognized in more than 1 year	278,201		274,404
Total RPO	Total RPO	$	645,423	$	635,665	Total RPO	$	696,434	$	721,832

4.3. NET ~~INCOME~~LOSS PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC.

The following table summarizes the calculation of basic and diluted net ~~income~~loss per common share attributable to Verint Systems Inc. for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands, except per share amounts) 2021 2020 2021 2020
Net income (loss) from continuing operations $ 13,501 $ (2,101) $ 19,911 $ (25,889)
Net income from discontinued operations, net of tax — 13,928 — 44,328
Net income 13,501 11,827 19,911 18,439
Net income attributable to noncontrolling interests from continuing operations 264 309 875 876
Net income attributable to noncontrolling interests from discontinued operations — 1,343 — 4,908
Net income attributable to Verint Systems Inc. 13,237 10,175 19,036 12,655
Dividends on preferred stock (5,200) (2,658) (13,722) (5,142)
Net income attributable to Verint Systems Inc. for basic net income per common share 8,037 7,517 5,314 7,513
Dilutive effect of dividends on preferred stock — — — —
Net income attributable to Verint Systems Inc. for diluted net income per common share $ 8,037 $ 7,517 $ 5,314 $ 7,513
Net income (loss) attributable to Verint Systems Inc. common shares
Net income (loss) from continuing operations attributable to Verint Systems Inc. common shares 8,037 (5,068) 5,314 (31,907)
Net income from discontinued operations attributable to Verint Systems Inc. common shares — 12,585 — 39,420
Weighted-average shares outstanding:
Basic 65,570 65,571 65,474 64,973
Dilutive effect of employee equity award plans 758 663 1,043 1,027
Dilutive effect of 2021 Notes — — — —
Dilutive effect of 2014 Notes — — 641 —
Dilutive effect of warrants — — 110 —
Dilutive effect of assumed conversion of preferred stock — — — —
Diluted 66,328 66,234 67,268 66,000
Basic net income (loss) per common share attributable to Verint Systems Inc.:
Continuing operations $ 0.12 $ (0.08) $ 0.08 $ (0.49)
Discontinued operations — 0.19 — 0.61
Total basic net income per common share attributable to Verint Systems Inc. $ 0.12 $ 0.11 $ 0.08 $ 0.12
Diluted net income (loss) per common share attributable to Verint Systems Inc.:


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands, except per share amounts)	2022		2021		2022		2021
Net (loss) income	$	(2,236)	$	5,316	$	(1,662)	$	6,410
Net income attributable to noncontrolling interests	176		316		464		611
Net (loss) income attributable to Verint Systems Inc.	(2,412)		5,000		(2,126)		5,799
Dividends on preferred stock	(5,200)		(5,200)		(10,400)		(8,522)
Net loss attributable to Verint Systems Inc. for basic net loss per common share	(7,612)		(200)		(12,526)		(2,723)
Dilutive effect of dividends on preferred stock	—		—		—		—
Net loss attributable to Verint Systems Inc. for diluted net loss per common share	$	(7,612)	$	(200)	$	(12,526)	$	(2,723)

Weighted-average shares outstanding:
Basic	64,958		65,194		64,948		65,417
Dilutive effect of employee equity award plans	—		—		—		—
Dilutive effect of 2021 Notes	—		—		—		—
Dilutive effect of 2014 Notes	—		—		—		—

1813

Table of Contents

Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands, except per share amounts) 2021 2020 2021 2020
Continuing operations $ 0.12 $ (0.08) $ 0.08 $ (0.48)
Discontinued operations — 0.19 — 0.59
Total diluted net income per common share attributable to Verint Systems Inc. $ 0.12 $ 0.11 $ 0.08 $ 0.11


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands, except per share amounts)	2022		2021		2022		2021
Dilutive effect of warrants	—		—		—		—
Dilutive effect of assumed conversion of preferred stock	—		—		—		—
Diluted	64,958		65,194		64,948		65,417

Net loss per common share attributable to Verint Systems Inc.:
Basic	$	(0.12)	$	—	$	(0.19)	$	(0.04)
Diluted	$	(0.12)	$	—	$	(0.19)	$	(0.04)

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


		Three Months Ended October 31,		Nine Months Ended October 31,			Three Months Ended July 31,		Six Months Ended July 31,
(in thousands)	(in thousands)	2021	2020	2021	2020	(in thousands)	2022	2021	2022	2021
Common shares excluded from calculation:	Common shares excluded from calculation:					Common shares excluded from calculation:
Stock options and restricted stock-based awards	Stock options and restricted stock-based awards	292	867	663	240	Stock options and restricted stock-based awards	2,580	2,209	2,075	2,034
2021 Notes						2021 Notes	—	5,074	—	3,196
2014 Notes	2014 Notes	—	6,002	—	6,114	2014 Notes	—	9,541	—	9,541
Warrants	Warrants	8,333	6,205	—	6,205	Warrants	—	9,865	—	9,865
Series A Preferred Stock	Series A Preferred Stock	5,497	3,738	5,497	2,411	Series A Preferred Stock	5,498	5,498	5,498	5,498
Series B Preferred Stock	Series B Preferred Stock	3,980	—	3,047	—	Series B Preferred Stock	3,980	3,980	3,980	2,573

~~Upon our adoption of ASU No. 2020-06 on February 1, 2021, use of~~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 ~~if-converted method is required for calculating any potential dilutive~~ effect of ~~convertible instruments.~~ all potential common shares is anti-dilutive and therefore excluded.

For the three and six months ended ~~October~~July 31, ~~2021,~~2022, the average price of our common stock did not exceed the $62.08 per share conversion price of our 2021 Notes (as defined in Note 8,7, “Long-Term Debt”), and other requirements for the 2021 Notes to be convertible were not met. The 2021 Notes will have a dilutive impact on net income per common share at any time when the average market price of our common stock for a quarterly reporting period exceeds the conversion price.

The Capped Calls (as defined in Note 8,7, “Long-Term Debt”) do not impact our diluted earnings per common share calculations as their effect would be anti-dilutive. The Capped Calls are generally intended ~~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 $62.08 conversion price, with such reduction and/or offset subject to a cap of $100.00.

There is no impact on our calculation of the dilutive effect of our 2014 Notes (as defined in Note 8, “Long-Term Debt”) 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~~(each as defined in Note 8,7, “Long-Term Debt”) were reduced to $40.55 per share and $47.18 per share, respectively, which increased the equivalent number of underlying common shares to 9,541,000 and 9,865,000, respectively.

Our Note Hedges (as defined in Note 8,7, “Long-Term Debt”) did not impact our diluted earnings per common share ~~calculations~~calculation because their effect would be anti-dilutive. However, in connection with the maturity of the 2014 Notes, the common shares delivered to us under the Note Hedges neutralized the dilutive effect of the common shares that we issued under the 2014 Notes to settle the conversion premium. As a result, the settlement of the outstanding 2014 Notes did not increase our outstanding common stock.

Our Warrants ~~(as defined in Note 8, “Long-Term Debt”) would have~~had a dilutive impact on net income per common share to the extent that we ~~report~~reported net income for the applicable period and the average market value of our common stock ~~exceeds~~exceeded the strike price of the Warrants. The Warrants ~~began to expire incrementally on August 30, 2021 and will continue to expire~~expired incrementally on a series of expiration dates ~~through~~between August 30, 2021 and January 21, 2022. ~~We expect that at~~At each expiration date the Warrants ~~will be~~were exercised ifwhen the market price per share of our common stock ~~exceeds~~exceeded the strike price of the Warrants, and we ~~will be obligated to issue~~issued an aggregate of 293,143 shares of our common stock ~~having a value equal to such excess. As~~as part of ~~October 31, 2021, up to 5,525,000 common shares could be issued upon~~the cashless exercise of ~~the~~approximately 5,031,000 Warrants. All outstanding Warrants were exercised or expired as of January 31, 2022.

Table of Contents

Further details regarding the 2021 Notes, Capped Calls, 2014 Notes, Note Hedges, and the Warrants appear in Note 8,7, “Long-Term Debt”.

~~Table of Contents~~

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~~calculations of diluted net ~~income~~loss per common share for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, as their effect would have been anti-dilutive. Further details regarding the Preferred Stock investment appear in Note ~~10,~~9, “Convertible Preferred Stock”.

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

The following tables summarize our cash, cash equivalents, and short-term investments as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:


		October 31, 2021									July 31, 2022
(in thousands)	(in thousands)	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		(in thousands)	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents:	Cash and cash equivalents:									Cash and cash equivalents:
Cash and bank time deposits	Cash and bank time deposits	$	160,818	$	—	$	—	$	160,818	Cash and bank time deposits	$	143,442	$	—	$	—	$	143,442
Money market funds	Money market funds	147,029		—		—		147,029		Money market funds	43,369		—		—		43,369
Commercial paper										Commercial paper	69,691		—		—		69,691
Total cash and cash equivalents	Total cash and cash equivalents	$	307,847	$	—	$	—	$	307,847	Total cash and cash equivalents	$	256,502	$	—	$	—	$	256,502

Short-term investments:	Short-term investments:									Short-term investments:
Bank time deposits	Bank time deposits	$	661	$	—	$	—	$	661	Bank time deposits	$	718	$	—	$	—	$	718
Total short-term investments	Total short-term investments	$	661	$	—	$	—	$	661	Total short-term investments	$	718	$	—	$	—	$	718


		January 31, 2021									January 31, 2022
(in thousands)	(in thousands)	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		(in thousands)	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents:	Cash and cash equivalents:									Cash and cash equivalents:
Cash and bank time deposits	Cash and bank time deposits	$	243,183	$	—	$	—	$	243,183	Cash and bank time deposits	$	201,769	$	—	$	—	$	201,769
Money market funds	Money market funds	342,090		—		—		342,090		Money market funds	127,041		—		—		127,041
Commercial paper										Commercial paper	29,995		—		—		29,995
Total cash and cash equivalents	Total cash and cash equivalents	$	585,273	$	—	$	—	$	585,273	Total cash and cash equivalents	$	358,805	$	—	$	—	$	358,805

Short-term investments:	Short-term investments:									Short-term investments:
Bank time deposits	Bank time deposits	$	46,300	$	—	$	—	$	46,300	Bank time deposits	$	765	$	—	$	—	$	765
Total short-term investments	Total short-term investments	$	46,300	$	—	$	—	$	46,300	Total short-term investments	$	765	$	—	$	—	$	765

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.

During the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, proceeds from maturities and sales of short-term investments were ~~$45.6~~$0.3 million and ~~$18.8~~$45.6 million, respectively.

6.5. BUSINESS COMBINATIONS

~~Nine~~Six Months Ended ~~October~~July 31, ~~2021~~2022

We did not complete any business combinations during the six months ended July 31, 2022.

Year Ended January 31, 2022

Table of Contents

Conversocial Limited

~~Table of Contents~~

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

The purchase price consisted of (i) $53.4 million of cash paid at closing, funded from cash on hand, partially offset by $3.2 million of Conversocial’s cash received in the acquisition, resulting in net cash consideration at closing of $50.2 million; and (ii) $0.2 million of other purchase price adjustments. The purchase price for Conversocial was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair values assigned to identifiable intangible assets acquired were determined primarily by using the income approach, which discounts the expected future cash flows to present value using estimates and assumptions determined by management.

Among the factors contributing to the recognition of goodwill as a component of the Conversocial purchase price allocation were synergies in products and technologies, and the addition of a skilled, assembled workforce. The acquisition resulted in the recognition of ~~$31.8~~$31.3 million of goodwill, of which $0.5 million is deductible for income tax purposes and ~~$31.3~~$30.8 million is not deductible.

In connection with the purchase price allocation for Conversocial, the estimated fair value of undelivered performance obligations under customer contracts assumed in the acquisition was determined utilizing a cost build-up approach. The cost build-up approach calculated fair value by estimating the costs required to fulfill the obligations plus a reasonable profit margin, which approximates the amount that we believe would be required to pay a third party to assume the performance obligations. The estimated costs to fulfill the performance obligations were based on the historical direct costs for delivering similar services. As a result, in allocating the purchase price, we recorded $3.4 million of current and long-term contract liabilities, representing the estimated fair value of undelivered performance obligations for which payment had been received, which will be recognized as revenue as the underlying performance obligations are delivered. For undelivered performance obligations for which payment had not been received, we recorded a $1.2 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $0.7 million of which is included within prepaid expenses and other current assets and $0.5 million of which is included in other assets. We are amortizing this asset over the underlying delivery periods, which adjusts the revenue we recognize for providing these services to its estimated fair value.

Transaction and related costs directly ~~related~~attributable to the acquisition of Conversocial, consisting primarily of professional fees and integration expenses, were ~~$1.3~~$0.1 million and ~~$2.4~~$1.1 million for the three ~~and nine~~ months ended ~~October~~July 31, 2022 and 2021, respectively, and $1.0 million and $1.1 million for the six months ended July 31, 2022 and 2021, respectively. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses.

Revenue and net income (loss) attributable to Conversocial included in our consolidated statement of operations for the ~~three~~six months ended ~~October~~July 31, ~~2021 was~~2022 were not material.

The purchase price allocation for Conversocial has been prepared on a preliminary basis and changes to the allocation may occur as additional information becomes available during the measurement period (up to one year from the acquisition date). Fair values still under review include values assigned to identifiable intangible assets, deferred income taxes, and reserves for uncertain income tax positions.

The following table sets forth the components and the allocation of the purchase price for our acquisition of ~~Conversocial:~~Conversocial, including adjustments identified subsequent to the valuation date, none of which were material:

2116

Table of Contents


(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 acquired	~~5,302~~5,462
Other assets	511
Current and other liabilities	(1,945)
Contract liabilities -— current and long-term	(3,410)
Deferred income taxes	~~(615)~~(301)
Net tangible assets	~~1,537~~2,011
Identifiable intangible assets:
Customer relationships	9,800
Developed technology	9,900
Trademarks and trade names	200
Total identifiable intangible assets	19,900
Goodwill	~~31,782~~31,308
Total purchase price allocation	$	53,219

The acquired customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of seven years, five years, and one year, respectively, the weighted average of which is approximately 5.9 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

Year Ended January 31, 2022

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 condensed 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 nine months ended October 31, 2021.~~

~~Year Ended January 31, 2021~~

~~We did not complete any business combinations during the year ended January 31, 2021.~~

Other Business Combination Information

~~The pro forma impact of the business combinations completed during the nine months ended October 31, 2021 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 condensed consolidated statements of operations. Changes in the fair value of the contingent consideration obligations result from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets.

For the three months ended ~~October~~July 31, 2021, ~~changes in the fair values~~we recorded a charge of ~~contingent consideration obligations associated with business combinations were immaterial,~~$0.4 million, and for the ~~three~~six months ended ~~October~~July 31, ~~2020,~~2022 and 2021, we recorded a benefit of ~~$0.4 million. For the nine months ended October 31, 2021~~$0.2 million and ~~2020, we recorded~~ a charge of ~~$0.7 million and a benefit of $2.8~~

~~Table of Contents~~

$0.6 million, respectively, within selling, general and administrative expenses for changes in the fair values of contingent consideration obligations associated with business ~~combinations. The aggregate~~combinations, which was based on our historical business combinations achieving certain objectives and milestones. There were no changes in the fair values of ~~the remaining~~our contingent consideration obligations ~~associated with business combinations was $7.6 million at October~~for the three months ended July 31, ~~2021, which was recorded within accrued expenses~~2022, and ~~other current liabilities.~~the contingent consideration obligations were fully paid as of July 31, 2022.

Payments of contingent consideration earned under these agreements were ~~$9.6~~$4.8 million and ~~$14.0~~$2.0 million for ~~the nine months ended October 31, 2021 and 2020, respectively. There were no payments of contingent consideration earned under these agreements during~~ the three months ended ~~October~~July 31, 2022 and 2021, respectively, and ~~2020.~~$7.5 million and $9.6 million for the six months ended July 31, 2022 and 2021, respectively.

7.6. INTANGIBLE ASSETS AND GOODWILL

Acquisition-related intangible assets, excluding certain intangible assets previously acquired that were fully amortized and removed from our condensed consolidated balance sheets, consisted of the following as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:

Table of Contents


		October 31, 2021							July 31, 2022
(in thousands)	(in thousands)	Cost		Accumulated Amortization		Net		(in thousands)	Cost		Accumulated Amortization		Net
Intangible assets with finite lives:	Intangible assets with finite lives:							Intangible assets with finite lives:
Customer relationships	Customer relationships	$	475,038	$	(376,118)	$	98,920	Customer relationships	$	451,655	$	(375,861)	$	75,794
Acquired technology	Acquired technology	231,088		(200,965)		30,123		Acquired technology	221,865		(204,711)		17,154
Trade names	Trade names	5,686		(4,201)		1,485		Trade names	5,132		(4,710)		422
Distribution network	Distribution network	2,440		(2,440)		—		Distribution network	2,440		(2,440)		—
Total intangible assets	Total intangible assets	$	714,252	$	(583,724)	$	130,528	Total intangible assets	$	681,092	$	(587,722)	$	93,370

January 31, 2021
(in thousands) Cost Accumulated
Amortization Net
Intangible assets with finite lives:
Customer relationships $ 464,586 $ (356,064) $ 108,522
Acquired technology 222,040 (189,687) 32,353
Trade names 9,424 (6,555) 2,869
Distribution network 2,440 (2,440) —
Total intangible assets $ 698,490 $ (554,746) $ 143,744

We considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic to assess whether a triggering event had occurred that would result in a potential impairment of our indefinite-lived intangible assets. Based on this assessment, we concluded that a triggering event has not occurred which would require further impairment testing to be performed.


	January 31, 2022
(in thousands)	Cost		Accumulated Amortization		Net
Intangible assets with finite lives:
Customer relationships	$	467,408	$	(375,827)	$	91,581
Acquired technology	229,501		(203,895)		25,606
Trade names	5,677		(4,610)		1,067
Distribution network	2,440		(2,440)		—
Total intangible assets	$	705,026	$	(586,772)	$	118,254

Total amortization expense recorded for acquisition-related intangible assets was ~~$12.0~~$10.2 million and ~~$11.9~~$11.8 million for the three months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$35.5~~$20.7 million and ~~$35.9~~$23.5 million for the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020,~~2021, 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)			(in thousands)
Years Ending January 31,	Years Ending January 31,	Amount		Years Ending January 31,	Amount
2022 (remainder of year)		$	11,333
2023		40,805
2023 (remainder of year)				2023 (remainder of year)	$	18,708
2024	2024	31,617		2024	30,069
2025	2025	15,090		2025	14,403
2026	2026	13,774		2026	13,210
2027 and thereafter		17,909
2027				2027	9,339
2028 and thereafter				2028 and thereafter	7,641
Total	Total	$	130,528	Total	$	93,370

~~Table of Contents~~

~~During the three and nine months ended October 31, 2021, we recorded $0.4 million of~~There were no impairments ~~for certain acquired trade names, which is included within selling, general and administrative expenses. Impairments~~ of acquired intangible assets ~~were insignificant~~ during the ~~three and nine~~six months ended ~~October~~July 31, ~~2020.~~2022 and 2021.

Goodwill activity for the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 was as follows:


(in thousands)	Amount
~~Nine~~Six Months Ended ~~October~~July 31, ~~2021:~~2022:
Goodwill, gross, at January 31, ~~2021~~2022	$	~~1,383,450~~1,409,464
Accumulated impairment losses through January 31, ~~2021~~2022	(56,043)
Goodwill, net, at January 31, ~~2021~~2022	~~1,327,407~~
~~Business combinations~~	~~36,214~~1,353,421
Foreign currency translation ~~and other~~	~~(2,201)~~(38,046)
Business combinations, including adjustments to prior period acquisitions	(266)
Goodwill, net, at ~~October~~July 31, ~~2021~~2022	$	~~1,361,420~~1,315,109

Balance at ~~October~~July 31, ~~2021~~2022
Goodwill, gross, at ~~October~~July 31, ~~2021~~2022	$	~~1,417,463~~1,371,152
Accumulated impairment losses through ~~October~~July 31, ~~2021~~2022	(56,043)
Goodwill, net, at ~~October~~July 31, ~~2021~~2022	$	~~1,361,420~~1,315,109

Table of Contents

~~We evaluated whether there has been a change in~~No events or circumstances ~~as of October 31, 2021 and as of~~indicating the date of this filing in response to the economic impacts seen globally from COVID-19. The valuation methodology to determine the fair value of our reporting unit is sensitive to management's forecasts of future revenue, profitability and market conditions. At this time, the impact of COVID-19 on our forecasts is uncertain and increases the subjectivity that is involved in evaluating goodwillpotential for potential impairment. Our reporting unit fair value may decline as a result of delayed or reduced demand for our products and services, driving lower revenue and operating income across our business. However, given the significant difference between the reporting unit fair value and its carrying value in the most recent quantitative analyses completed as of November 1, 2020, as well as expected long-term recovery, management does not believe that these events were severe enough to result in an impairment trigger. We will perform our annual goodwill impairment ~~analysis as of November 1, 2021~~were identified during the ~~three~~six months ~~ending January~~ended July 31, 2022.

8.7. LONG-TERM DEBT

The following table summarizes our long-term debt at ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:


		October 31,		January 31,			July 31,		January 31,
(in thousands)	(in thousands)	2021		2021		(in thousands)	2022		2022
2021 Notes	2021 Notes	$	315,000	$	—	2021 Notes	$	315,000	$	315,000
2014 Notes		—		386,887
2017 Term Loan		100,000		410,125
Term Loan						Term Loan	100,000		100,000
Less: unamortized debt discounts and issuance costs	Less: unamortized debt discounts and issuance costs	(8,589)		(7,518)		Less: unamortized debt discounts and issuance costs	(7,184)		(8,046)
Total debt	Total debt	406,411		789,494		Total debt	407,816		406,954
Less: current maturities	Less: current maturities	—		386,713		Less: current maturities	—		—
Long-term debt	Long-term debt	$	406,411	$	402,781	Long-term debt	$	407,816	$	406,954

2021 Notes

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

We used a portion of the net proceeds from the issuance of the 2021 Notes to pay the costs of the ~~capped call transactions~~Capped Calls described below. We also used a portion of the net proceeds from the issuance of the 2021 Notes, together with the net proceeds from the April 6, 2021 issuance of $200.0 million of Series B Preferred Stock, to repay a portion of the outstanding

~~Table of Contents~~

indebtedness under our ~~2017~~ Credit Agreement described below, to terminate ~~an interest rate swap agreement,~~the 2018 Swap (as defined in Note 13, “Derivative Financial Instruments”), 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 ~~October~~July 31, ~~2021,~~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~~were deferred and are presented as a reduction of long-term debt, and which are being amortized as interest expense over the term of the 2021 Notes. Including the impact of the deferred debt issuance costs, the effective interest rate on the 2021 Notes was approximately 0.83% at ~~October~~July 31, ~~2021.~~2022.

Based on the closing market price of our common stock on ~~October~~July 31, ~~2021,~~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, with a maturity date of June 1, 2021 (the “2014 Notes”). Net proceeds from the 2014 Notes after underwriting discounts were $391.9 million. The 2014 Notes were unsecured and paid interest in cash semiannually in arrears at a rate of 1.50% per annum.

~~Effective December 1,~~During the three months ended July 31, 2020, until the close of business on the second scheduled trading day immediately preceding the June 1, 2021 maturity date, holders could have surrendered their 2014 Notes for conversion regardless of whether any of the other specified conditions for conversion had been satisfied. On February 26, 2021, we ~~deposited approximately $390.0~~repurchased $13.1 million ~~of cash, representing the full~~ principal amount of the 2014 Notes ~~then outstanding as well as the final interest payment on the~~(the “Repurchased 2014 ~~Notes due at maturity, into~~Notes”) in open market transactions for an ~~escrow account~~aggregate of $13.0 million in cash, resulting in a debt extinguishment loss of $0.1 million, and a $0.2 million charge to ~~cash collateralize the 2014 Notes.~~additional paid-in-capital.

Table of Contents

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 interest thereon using ~~the~~ cash we had placed in ~~escrow.~~escrow on February 26, 2021. 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, 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. 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.

At 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. Through January 31, 2021, the excess of the principal amount of the debt component over its carrying amount (the “debt discount”) was being amortized as interest expense over the term of the 2014 Notes using the effective interest method. The equity component was not remeasured as long as it continued 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

~~Table of Contents~~

Notes were presented as a reduction of long-term debt and were 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.

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 condensed 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 at January 31, 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, 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 condensed 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 ~~October~~July 31, ~~2021,~~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.

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 served 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 ~~were,~~ and Warrants ~~are,~~were each separate instruments from the 2014 Notes.

~~Table of Contents~~

Note Hedges

Pursuant to the Note Hedges, we purchased call options on our common stock, under which we had 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 equaled the initial conversion price of the 2014 Notes. As 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 in cash, shares of our common stock, or a combination thereof, at our option, and the 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 charge to additional paid-in capital. Our exercise rights under the Note Hedges were automatically triggered upon conversion of 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 received 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.

Table of Contents

Warrants

We sold the Warrants to several counterparties. The Warrants initially 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. As a result of the Spin-Off, the terms of the Warrants were adjusted to provide the counterparties the rights to acquire from us up to approximately 9,865,000 shares of our common stock at a price of $47.18 per share. Proceeds from the sale of the Warrants were $45.2 million and were recorded as additional paid-in capital. The Warrants ~~began to expire incrementally on August 30, 2021 and will continue to expire~~expired incrementally on a series of expiration dates ~~through~~between August 30, 2021 and January 21, 2022. ~~We expect that at~~At each expiration date, the Warrants ~~will be~~were exercised ifwhen the market price per share of our common stock ~~exceeds~~exceeded the strike price of the Warrants, and we ~~will be obligated to issue~~issued an aggregate of 293,143 shares of our common stock ~~having a value equal to such excess.~~as part of the cashless exercise of approximately 5,031,000 Warrants. The Warrants ~~have~~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, ~~exceeds~~exceeded the strike price of the Warrants. AsAll outstanding Warrants were exercised or expired as of ~~October~~January 31, 2021, no Warrants had been exercised, 4,340,000 Warrants had expired, and 5,525,000 Warrants remained outstanding. From November 1, 2021 through December 3, 2021, we issued 20,852 shares of common stock as part of the cashless exercise of approximately 1,776,000 Warrants.2022.

The Note Hedges and Warrants both qualified for classification within stockholders’ equity, and therefore no changes to their respective fair values were ~~not remeasured and adjusted as long as these instruments continued to qualify~~recorded in our condensed consolidated statements of operations for ~~stockholders’ equity classification.~~any period.

Credit ~~Agreements~~Agreement

~~2017~~ Credit Agreement

On June 29, 2017, we entered into a credit agreement with certain lenders and terminated a prior credit agreement. The credit agreement was amended in 2018, 2020, and 2021, as further described below (as amended, the ~~“2017 Credit~~“Credit 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~~“Term Loan”), of which $100.0 million ~~and $410.1 million~~ was outstanding at ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021, respectively,~~2022, and a $300.0 million revolving credit facility maturing on April 9, 2026 (the ~~“2021~~“Revolving Credit Facility”), none of which was drawn as of July 31, 2022 and January 31, 2022. The Revolving Credit Facility replaced our prior $300.0 million revolving credit facility (the “Prior Revolving Credit Facility”), and is subject to increase and reduction from time to time according to the terms of the ~~2017~~ Credit Agreement. The majority of the proceeds from the Term Loan were used to repay all outstanding term loans under our prior credit agreement.

The ~~2017~~ Term Loan was subject to an original issuance discount of approximately $0.5 million, 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~~Rate (each as defined in the ~~2017~~ Credit Agreement), plus in each case a margin.

~~Table~~ On January 31, 2018, we entered into an amendment to the Credit Agreement (the “2018 Amendment”) providing for, among other things, a reduction of ~~Contents~~

the interest rate margins on the 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 condensed consolidated statement of operations for the ~~nine~~six months ended ~~October~~July 31, 2021. 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 our $300.0 million 2017~~replaced the Prior Revolving Credit Facility, which would otherwise have matured on June 29, 2022, with the current $300.0 million ~~2021 Revolving Credit Facility. The 2021 Amendment also provides that for purposes of the acceleration of the maturity of the 2017 Term Loan and 2021~~ Revolving Credit Facility neither the 2014 Notes nor the 2021 Notes will be deemed to be outstanding if such notes are cash collateralized prior to their respective maturity dates in accordance with the 2017 Credit Agreement. As noted above, we cash collateralized the 2014 Notes prior to settlementmaturing on ~~June 1, 2021, and we currently intend to cash collateralize, or otherwise refinance or repurchase, the 2021 Notes prior to their maturity in~~April 9, 2026.

The maturity dates of the ~~2017~~ Term Loan and ~~2017~~Prior 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 Spin-Off ~~of our Cyber Intelligence business~~ 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 for purposes of the determination of the maturity dates of the 2017 Term Loan and the 2017 Revolving Credit Facility discussed above. 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.amended.

As of ~~October~~July 31, ~~2021,~~2022, the interest rate on the ~~2017~~ Term Loan was ~~2.08%~~3.80%. 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 ~~2.28%~~4.00% at ~~October~~July 31, ~~2021.~~2022. As of January 31, ~~2021,~~2022, the interest rate on the ~~2017~~ Term Loan was ~~2.14%~~2.10%.

Table of Contents

For borrowings 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"). 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.

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 ~~2021~~ Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50 to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the ~~2017~~ Credit Agreement.

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

~~2017~~ Credit Agreement Issuance 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~~Prior Revolving Credit Facility, which were deferred and are being amortized as interest expense over the terms of the facilities. During the year ended January 31, 2018, we wrote off $0.2 million of deferred debt issuance costs associated with the ~~2017~~ Term Loan as a result of the 2018 Amendment. WeDuring 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

~~Table of Contents~~

million associated with the ~~2017~~Prior Revolving Credit Facility), and which are being amortized along with the previously deferred 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~~Prior Revolving Credit Facility, of which $0.8 million were associated with commitments under the ~~2017~~Prior Revolving Credit Facility provided by lenders that are continuing to provide commitments under the ~~2021~~current 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~~Prior Revolving Credit Facility were written off and are included within losses on early retirements of debt on our condensed consolidated statement of operations for the ~~nine~~six months ended ~~October~~July 31, 2021. 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 ~~2021~~ Revolving Credit Facility are being amortized on a straight-line basis.

Future Principal Payments on the Term Loan

As a result of the significant ~~2017~~ Term Loan principal payments made during the three months ended April 30, 2021, no further principal payments are required prior to the maturity of the ~~2017~~ Term Loan on June 29, 2024.

Interest Expense

The following table presents the components of interest expense incurred on the 2021 Notes, the 2014 Notes, and on borrowings under our ~~2017~~ Credit Agreement, for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands) 2021 2020 2021 2020
2021 Notes:
Interest expense at 0.25% coupon rate $ 197 $ — $ 442 $ —
Amortization of deferred debt issuance costs 436 — 978 —
Total Interest Expense - 2021 Notes $ 633 $ — $ 1,420 $ —
2014 Notes:
Interest expense at 1.50% coupon rate $ — $ 1,450 $ 1,933 $ 4,436
Amortization of debt discount — 3,220 — 9,620
Amortization of deferred debt issuance costs — 303 522 907
Total Interest Expense - 2014 Notes $ — $ 4,973 $ 2,455 $ 14,963
Borrowings under 2017 Credit Agreement:
Interest expense at contractual rates $ 533 $ 2,790 $ 2,830 $ 10,766
Impact of interest rate swap reclassified from accumulated other comprehensive loss — 1,356 1,014 3,068
Amortization of debt discounts 5 18 13 55
Amortization of deferred debt issuance costs 218 497 713 1,327
Total Interest Expense - Borrowings under 2017 Credit Agreement $ 756 $ 4,661 $ 4,570 $ 15,216

Table of Contents


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2022		2021		2022		2021
2021 Notes:
Interest expense at 0.25% coupon rate	$	197	$	197	$	392	$	245
Amortization of deferred debt issuance costs	440		437		879		542
Total Interest Expense - 2021 Notes	$	637	$	634	$	1,271	$	787

2014 Notes:
Interest expense at 1.50% coupon rate	$	—	$	482	$	—	$	1,933
Amortization of deferred debt issuance costs	—		131		—		522
Total Interest Expense - 2014 Notes	$	—	$	613	$	—	$	2,455

Borrowings under Credit Agreement:
Interest expense at contractual rates	$	813	$	537	$	1,373	$	2,297
Impact of interest rate swap reclassified from accumulated other comprehensive loss	—		—		—		1,014
Amortization of debt discounts	4		5		9		8
Amortization of deferred debt issuance costs	217		223		428		495
Total Interest Expense - Borrowings under Credit Agreement	$	1,034	$	765	$	1,810	$	3,814

On May 1, 2020, ~~our interest rate swap agreement~~the 2018 Swap no longer qualified as a cash flow hedge for accounting purposes and as such, accumulated deferred losses on ~~our interest rate swap~~the 2018 Swap that were previously recorded as a component of accumulated other comprehensive loss were being reclassified to the condensed 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 14, “Derivative Financial Instruments”)~~ 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 condensed consolidated statement of operations for the ~~nine~~six months ended ~~October~~July 31, 2021. The associated $3.7 million deferred tax asset was reclassified from

~~Table of Contents~~

accumulated other comprehensive loss and netted against income taxes ~~payable, which are included within other liabilities on our condensed consolidated balance sheet as of October~~receivable during the year ended January 31, ~~2021.~~2022.

Please refer to Note ~~14,~~13, “Derivative Financial Instruments” for further information regarding ~~our interest rate swap agreement.~~the 2018 Swap.

9.8. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL STATEMENT INFORMATION

Condensed Consolidated Balance Sheets

Inventories consisted of the following as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:


		October 31,		January 31,			July 31,		January 31,
(in thousands)	(in thousands)	2021		2021		(in thousands)	2022		2022
Raw materials	Raw materials	$	2,265	$	2,768	Raw materials	$	2,942	$	3,001
Work-in-process	Work-in-process	286		26		Work-in-process	115		150
Finished goods	Finished goods	3,209		2,747		Finished goods	3,500		2,186
Total inventories	Total inventories	$	5,760	$	5,541	Total inventories	$	6,557	$	5,337

Condensed Consolidated Statements of Operations

Other ~~(expense)~~ income, net consisted of the following for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands) 2021 2020 2021 2020
Foreign currency losses, net $ (687) $ (1,456) $ (1,691) $ (1,303)
Losses on derivative financial instruments, net — (949) (14,374) (812)
Change in fair value of future tranche right — (9,224) 15,810 (22,834)
Other, net 270 (41) 4,044 (1,297)
Other (expense) income, net $ (417) $ (11,670) $ 3,789 $ (26,246)

Table of Contents


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2022		2021		2022		2021
Foreign currency gains (losses), net	$	547	$	(463)	$	2,260	$	(1,004)
Losses on derivative financial instruments, net	—		—		—		(14,374)
Change in fair value of future tranche right	—		—		—		15,810
Other, net	(80)		619		(119)		3,774
Total other income, net	$	467	$	156	$	2,141	$	4,206

Please refer to Note ~~10,~~9, “Convertible Preferred Stock” ~~and Note 13, “Fair Value Measurements”~~ for additional information regarding the future tranche right.

Condensed Consolidated Statements of Cash Flows

The following table provides supplemental information regarding our condensed consolidated cash flows for the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Nine Months Ended October 31,					Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Cash paid for interest	Cash paid for interest	$	9,150	$	18,116	Cash paid for interest	$	1,693	$	8,190
Cash payments of income taxes, net	Cash payments of income taxes, net	$	37,371	$	18,133	Cash payments of income taxes, net	$	5,403	$	30,157
Cash payments for operating leases	Cash payments for operating leases	$	14,854	$	15,478	Cash payments for operating leases	$	18,656	$	10,236
Non-cash investing and financing transactions:	Non-cash investing and financing transactions:					Non-cash investing and financing transactions:
Finance leases of property and equipment	Finance leases of property and equipment	$	4,276	$	841	Finance leases of property and equipment	$	189	$	2,150
Liabilities for contingent consideration in business combinations	Liabilities for contingent consideration in business combinations	$	900	$	—	Liabilities for contingent consideration in business combinations	$	—	$	900
Accrued but unpaid purchases of property and equipment	Accrued but unpaid purchases of property and equipment	$	479	$	1,055	Accrued but unpaid purchases of property and equipment	$	2,035	$	2,297
Settlement of Future Tranche Right upon issuance of Series B Preferred Stock	Settlement of Future Tranche Right upon issuance of Series B Preferred Stock	$	36,962	$	—	Settlement of Future Tranche Right upon issuance of Series B Preferred Stock	$	—	$	36,962
Retirement of treasury stock	Retirement of treasury stock	$	234,997	$	—	Retirement of treasury stock	$	105,680	$	—
Settlement of convertible note premium with common stock	Settlement of convertible note premium with common stock	$	59,131	$	—	Settlement of convertible note premium with common stock	$	—	$	59,131
Receipt of common stock from the counterparties under the Note Hedges	Receipt of common stock from the counterparties under the Note Hedges	$	59,651	$	—	Receipt of common stock from the counterparties under the Note Hedges	$	—	$	59,651

~~10.~~9. CONVERTIBLE PREFERRED STOCK

~~Table of Contents~~

On December 4, 2019, we entered into anthe 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”), we issued a total of 200,000 shares of our Series A Preferred Stock for an aggregate purchase price of $200.0 million, or $1,000 per share, to the Apax Investor. In connection therewith, we incurred direct and incremental costs of $2.7 million, including financial advisory fees, closing costs, legal fees, and other offering-related costs. These direct and incremental costs reduced the carrying amount of the Series A Preferred Stock.

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

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

Table of Contents

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.

~~Holders~~Each series of ~~the~~ Preferred Stock ~~are entitled to a cumulative dividend~~pays dividends at aan annual rate of 5.2% ~~per annum~~ until the 48-month anniversary of the Series A Closing Date, and thereafter at a rate of 4.0% ~~per annum.~~, 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 ~~nine~~three and six months ended ~~October~~July 31, ~~2021,~~2022, we paid ~~$12.9~~$10.4 million and $20.8 million of preferred stock dividends, $10.4 million of which ~~$5.2 million~~ was accrued as of January 31, ~~2021,~~2022, and there were ~~$6.9~~$1.7 million of cumulative undeclared and unpaid preferred stock dividends at ~~October~~July 31, ~~2021.~~2022. There were ~~no dividends paid during the three months ended October 31, 2021, and we had~~ no accrued dividends as of ~~October~~July 31, ~~2021.~~2022. We reflected $5.2 million and ~~$13.7~~$10.4 million of preferred stock dividends in our condensed consolidated results of operations, for purposes of computing net ~~income~~loss attributable to Verint Systems Inc. common shares, for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021,~~2022, respectively. There were ~~$2.7~~$5.2 million and ~~$5.2~~$8.5 million of preferred stock dividends recorded in our condensed consolidated results of operations for the three and ~~nine~~six months ended ~~October~~July 31, ~~2020.~~2021, respectively.

Conversion

The Series A Preferred Stock was initially convertible into common stock at the election of the holder, subject to certain conditions, at an initial conversion price of $53.50 per share. The initial conversion price represented a conversion premium of 17.1% over the volume-weighted average price per share of our common stock over the 45 consecutive trading days immediately prior to 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 Preferred Stock conversion price was instead adjusted to $36.38 per share based on the ratio of the relative trading prices of Verint and Cognyte following

~~Table of Contents~~

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 ~~October~~July 31, ~~2021,~~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 ~~9.6~~9.5 million shares and Apax’s ownership in us on an as-converted basis was approximately ~~12.8%~~12.7%.

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”).

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 ~~Series A~~ 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~~our prior written ~~consent of the Company.~~consent. The Apax Investor ~~has~~had also agreed to restrictions on its ability to dispose of the common stock issued upon conversion of the Preferred Stock. The common stock ~~may~~could 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 dodid 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

Table of Contents

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~~certificates of ~~Designation)~~designation), the holders of the applicable series of Preferred Stock will have the right to cause us to redeem all of the outstanding shares of Preferred Stock for cash at a redemption price equal to 100% of the liquidation preference of the shares of such series, plus any accrued and unpaid dividends to, but excluding, the redemption date. Therefore, the Preferred Stock has been classified as temporary equity on our condensed consolidated balance ~~sheet~~sheets as of ~~October~~July 31, ~~2021,~~2022 and January 31, 2022, 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 ~~October~~July 31, ~~2021,~~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 ~~October~~July 31, ~~2021~~2022 plus accrued and unpaid dividends. As of ~~October~~July 31, ~~2021,~~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~~each series of Preferred Stock ~~and the Series B Preferred Stock were $3.5 million and $3.5 million, respectively.~~was $0.9 million.

Future Tranche Right

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

~~Table of Contents~~

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 condensed consolidated statements of operations. ~~For the three and nine months ended October 31, 2020, we recognized non-cash charges of $9.2 million and~~ ~~$22.8 million, respectively,~~ ~~within other (expense) income, net in the condensed consolidated statement of operations for the change in the fair value of the Future Tranche Right.~~ ~~Please refer to Note 13, “Fair Value Measurements” for additional information regarding valuations of the Future Tranche Right.~~

~~11.~~10. STOCKHOLDERS’ EQUITY

Common Stock Dividends

We did not declare or pay any cash dividends on our common stock during the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020.~~2021. Under the terms of our ~~2017~~ Credit Agreement, we are subject to certain restrictions on declaring and paying cash dividends on our common stock.

In connection with the Spin-Off, each holder of Verint’s common stock received 1one 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 Programs

Table of Contents

On ~~December 4, 2019,~~March 31, 2021, we announced ~~that~~that our board of directors had authorized a stock repurchase program whereby we were ~~authorized to repurchase up to $300.0 million~~of common stock over 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 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 ~~have been~~were no repurchases under this program subsequent to April 30, 2021, and ~~no further repurchases are expected under~~ this program ~~for the year ending~~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~~1,500,000 shares of common stock to offset dilution from our equity compensation program for such fiscal year. ~~Repurchases are expected~~To further offset such dilution as well as other dilutive transactions, on March 22, 2022, our board of directors authorized an additional 500,000 shares of common stock to be repurchased under this program. During the six months ended July 31, 2022, we repurchased 2,000,000 shares of our common stock at a cost of $105.7 million under this program. Repurchases were financed with available cash in the United States or through borrowing from the 2021 Revolving Credit Facility, subject to compliance with applicable laws, rules and regulations. Please refer to Note 17, “Subsequent Event”, for more information regarding this stock repurchase program.States.

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~~retired at management’s discretion, as approved by the board of directors in March 2021. From time to time, we have purchased 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~~upon vesting of equity ~~awards.~~awards occurring during a Company-imposed trading blackout or lockup period. When treasury shares are reissued, they are recorded at the average cost of the treasury shares acquired.

During the six months ended July 31, 2022, we repurchased 2,000,000 shares of our common stock for a cost of $105.7 million under the 2022 stock repurchase program described above as well as an insignificant number of shares to facilitate income tax withholding or payments as described above. During the six months ended July 31, 2022, we retired all 2,000,000 shares with a cost of $105.7 million, which was recorded as a reduction of additional paid-in capital and common stock. These shares were returned to the status of authorized and unissued shares.

During the six months ended July 31, 2021, we repurchased approximately 1,602,000 shares of our common stock for a cost of $75.5 million, which included $75.4 million of stock repurchases under the 2021 stock repurchase program described above and other repurchases to facilitate income tax withholding or payments as described above. During the six months ended July 31, 2021, we retired 1,058,300 shares that had been repurchased under the 2021 stock repurchase program described above with a cost of $49.6 million, which was recorded as a reduction of common stock and additional paid-in capital. These shares were returned to the status of authorized and unissued shares.

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 an increase to treasury stock and additional paid-in capital.

~~Table of Contents~~

During the nine months ended October 31, 2021, we repurchased approximately 1,613,000 shares of our common stock for a cost of $75.9 million, which includes $75.4 million of share repurchases 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 nine months ended October 31, 2021, 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 5,000,738 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 nine months ended October 31, 2020, we repurchased approximately 613,000 shares of our common stock for a cost of $34.0 million under the 2019 share repurchase program described above.~~

~~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 ~~October~~July 31, ~~2021,~~2022, Apax’s ownership in us on an as-converted basis was approximately ~~12.8%~~12.7%. Please refer to Note ~~10,~~9, “Convertible Preferred Stock” for a more detailed discussion of the Apax investment.

Accumulated Other Comprehensive ~~Income (Loss)~~Loss

Accumulated other comprehensive ~~income (loss)~~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)~~loss is presented as a separate line item in the stockholders’ equity section of our condensed consolidated balance sheets. Accumulated other comprehensive ~~income (loss)~~loss items have no impact on our net income (loss) as presented in our condensed consolidated statements of operations.

Table of Contents

The following table summarizes changes toin the components of our accumulated other comprehensive ~~income (loss) by component~~loss for the ~~nine~~six months ended ~~October~~July 31, ~~2021:~~2022:

(in thousands) Unrealized Gains (Losses) on Foreign Exchange Contracts Designated as Hedges Unrealized Loss on Interest Rate Swap Designated as Hedge Foreign Currency Translation Adjustments Total
Accumulated other comprehensive income (loss) at January 31, 2021 $ 634 $ (13,031) $ (124,481) $ (136,878)
Distribution of Cognyte Software Ltd. (559) — 17,682 17,123
Other comprehensive income (loss) before reclassifications 180 — (2,843) (2,663)
Amounts reclassified out of accumulated other comprehensive income (loss) 136 (1,014) — (878)
Amounts reclassified upon partial early retirement of the 2017 Term Loan — (12,017) — (12,017)
Net other comprehensive (loss) income (515) 13,031 14,839 27,355
Accumulated other comprehensive income (loss) at
October 31, 2021 $ 119 $ — $ (109,642) $ (109,523)


(in thousands)	Unrealized Losses on Foreign Exchange Contracts Designated as Hedges		Foreign Currency Translation Adjustments		Total
Accumulated other comprehensive loss at January 31, 2022	$	(48)	$	(118,467)	$	(118,515)
Other comprehensive loss before reclassifications	(379)		(43,673)		(44,052)
Amounts reclassified out of accumulated other comprehensive loss	(260)		—		(260)
Net other comprehensive loss	(119)		(43,673)		(43,792)
Accumulated other comprehensive loss at July 31, 2022	$	(167)	$	(162,140)	$	(162,307)

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.

~~Table of Contents~~

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 componentThe amounts reclassified out of accumulated other comprehensive loss ~~were being reclassified to~~into the condensed consolidated ~~statement~~statements of operations, with presentation location, for the three and six months ended July 31, 2022 and 2021 were as ~~interest expense over the remaining term of the interest rate swap, as the previously hedged interest payments occurred.~~ follows:


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2022		2021		2022		2021		Financial Statement Location
Unrealized (losses) gains on derivative financial instruments:
Foreign currency forward contracts	$	—	$	—	$	—	$	1	Cost of recurring revenue
	(22)		1		(31)		13		Cost of nonrecurring revenue
	(138)		7		(187)		72		Research and development, net
	(73)		3		(97)		31		Selling, general and administrative
	(233)		11		(315)		117		Total, before income taxes
	41		(2)		55		(21)		Benefit from (provision for) income taxes
	$	(192)	$	9	$	(260)	$	96	Total, net of income taxes

Interest rate swap agreement	$	—	$	—	$	—	$	(1,014)	Interest expense
	—		—		—		(15,655)		Other income (expense), net
	—		—		—		(16,669)		Total, before income taxes
	—		—		—		3,638		Benefit from income taxes
	$	—	$	—	$	—	$	(13,031)	Total, net of income taxes

On April 13, 2021, we paid $16.5 million to ~~the counterparty to~~ settle the ~~interest rate swap~~2018 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 ~~nine~~six months ended ~~October~~July 31, 2021. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes ~~payable, which are included within other liabilities on our condensed consolidated balance sheet as of October~~receivable during the year ended January 31, ~~2021.~~2022. Please refer to Note ~~14,~~13, “Derivative Financial Instruments” for further information regarding ~~our interest rate swap agreement.~~

~~The amounts reclassified out of accumulated other comprehensive income (loss) into~~ the ~~condensed consolidated statements of operations, with presentation location, for the three and nine months ended October 31, 2021 and 2020 were as follows:~~

Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands) 2021 2020 2021 2020 Location
Unrealized gains (losses) on derivative financial instruments:
Foreign currency forward contracts $ — $ — $ 1 $ — Cost of recurring revenue
5 — 18 — Cost of nonrecurring revenue
28 28 100 28 Research and development, net
14 — 45 — Selling, general and administrative
47 28 164 28 Total, before income taxes
(7) (4) (28) (4) Provision for income taxes
$ 40 $ 24 $ 136 $ 24 Total, net of income taxes
Interest rate swap agreement $ — $ (1,356) $ (1,014) $ (3,067) Interest expense
— — (15,655) — Other income (expense), net
— (1,356) (16,669) (3,067) Total, before income taxes
— 294 3,638 666 Benefit from income taxes
$ — $ (1,062) $ (13,031) $ (2,401) Total, net of income taxes
2018 Swap.

~~12.~~11. INCOME TAXES

Table of Contents

Our interim ~~(benefit from)~~ provision for income taxes is measured using an estimated annual effective income tax rate, adjusted for discrete items that occur within the periods presented.

For the three months ended ~~October~~July 31, ~~2021,~~2022, we recorded an income tax provision of ~~$9.3~~$2.8 million on pretax income of ~~$22.9~~$0.6 million, which represented an effective income tax rate of ~~40.9%~~465.4%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a discrete income tax provision of $2.1 million attributable to the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in a foreign jurisdiction and the U.S. taxation of certain foreign ~~income, partially~~activities, offset by lower statutory rates in certain foreign jurisdictions. Excluding the discrete income tax provision attributable to the foreign jurisdiction valuation allowance, the result was an income tax provision of $0.7 million on pre-tax income of $0.6 million resulting in an effective tax rate of 124.8%.

For the three months ended ~~October~~July 31, ~~2020,~~2021, we recorded an income tax provision of ~~$1.1~~$4.2 million on a pretax ~~loss~~income of ~~$1.0~~$9.5 million, which represented ~~a negative~~an effective income tax rate of ~~106.6%~~44.1%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the impact of U.S. taxation of certain foreign activities ~~limitations on certain~~and the impact of a tax ~~deductions, and~~rate change in a foreign jurisdiction, offset by a change in the fair value of the Future Tranche Right associated with the ~~Series A~~ Preferred stock ~~offset~~issuance and by lower statutory rates in several foreign jurisdictions.

For the ~~nine~~six months ended ~~October~~July 31, 2022, we recorded an income tax provision of $3.1 million on pretax income of $1.5 million, which represented an effective income tax rate of 212.1%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a discrete income tax provision of $2.1 million attributable to the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in a foreign jurisdiction and the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain foreign jurisdictions. Excluding the discrete income tax provision attributable to the foreign jurisdiction valuation allowance, the result was an income tax provision of $1.0 million on pre-tax income of $1.5 million resulting in an effective tax rate of 71.5%.

For the six months ended July 31, 2021, we recorded an income tax provision of ~~$13.5~~$4.1 million on ~~pre-tax~~pretax income of ~~$33.4~~$10.5 million, which represented an effective income tax rate of ~~40.4%~~39.2%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the impact of U.S. taxation of certain foreign ~~income~~activities and the impact of a tax rate change in a foreign

~~Table of Contents~~

jurisdiction, offset by a change in the fair value of the Future Tranche Right associated with the Series A Preferred Stock and by lower statutory rates in ~~certain~~several foreign jurisdictions.

For the nine months ended October 31, 2020, we recorded an income tax provision of $9.8 million on a pre-tax loss of $16.1 million, which represented a negative effective income tax rate of 60.7%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the impact of U.S. taxation of certain foreign activities, limitations on certain tax deductions, and a change in the fair value of the Future Tranche Right associated with the Series A Preferred Stock, offset by lower statutory rates in several foreign jurisdictions and the favorable impact of recently issued regulations.

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 guidance for income taxes requires that a valuation allowance be established when it is more-likely-than-not that all or a portion of the deferred income tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred income tax assets are not more-likely-than-not realizable, we establish a valuation allowance. We determined that there is sufficient negative evidence to maintain the valuation allowances against certain state and foreign deferred income tax assets as a result of historical losses in the most recent three-year period in certain state and foreign ~~jurisdictions.~~jurisdictions, and with respect to the foreign deferred income tax asset related to an asset held for sale, as a result of the differences between the fair market value and the tax basis of the asset. We intend to maintain valuation allowances until sufficient positive evidence exists to support a reversal.

We had unrecognized income tax benefits of ~~$85.8~~$84.0 million and ~~$84.8~~$84.2 million (excluding interest and penalties) as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, respectively, that if recognized, would impact our effective income tax rate. The accrued liability for interest and penalties was ~~$3.2~~$3.7 million and ~~$3.0~~$3.4 million at ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, respectively. Interest and penalties are recorded as a component of the provision for income taxes in our condensed consolidated statements of operations. We regularly assess the adequacy of our provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes. As a result, we may adjust the reserves for unrecognized income tax benefits for the impact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitation. Further, we believe that it is reasonably possible that the total amount of unrecognized income tax benefits at ~~October~~July 31, ~~2021~~2022 could decrease by approximately ~~$1.6~~$0.4 million in the next twelve months as a result of settlement of certain tax audits or lapses of statutes of limitation. Such decreases may involve the payment of additional income taxes, the adjustment of deferred income taxes including the need for additional valuation allowances, and the recognition of income tax benefits. Our income tax returns are subject to ongoing tax examinations in several jurisdictions in which we operate. We also believe that it is reasonably possible that new issues may be raised by tax authorities or developments in tax audits may occur, which would require increases or decreases to the balance of reserves for unrecognized income tax benefits; however, an estimate of such changes cannot reasonably be made. ~~See Note 2, “Discontinued Operations” for discussion related to the Tax Matters agreement entered into between and us and Cognyte as result of the Spin-Off.~~

Table of Contents

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 have deferred the timing of employer payroll taxes and accelerated the refund of AMT credits as permitted by the CARES Act.

~~13.~~12. FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value on a recurring basis consisted of the following as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:

~~Table of Contents~~


		October 31, 2021							July 31, 2022
		Fair Value Hierarchy Category							Fair Value Hierarchy Category
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		(in thousands)	Level 1		Level 2		Level 3
Assets:	Assets:							Assets:
Money market funds	Money market funds	$	147,029	$	—	$	—	Money market funds	$	43,369	$	—	$	—
Commercial paper, classified as cash and cash equivalents								Commercial paper, classified as cash and cash equivalents	—		69,691		—
Foreign currency forward contracts	Foreign currency forward contracts	—		143		—		Foreign currency forward contracts	—		16		—
Contingent consideration receivable	Contingent consideration receivable	—		—		329		Contingent consideration receivable	—		—		138
Total assets	Total assets	$	147,029	$	143	$	329	Total assets	$	43,369	$	69,707	$	138
Liabilities:	Liabilities:							Liabilities:
Foreign currency forward contracts	Foreign currency forward contracts	$	—	$	3	$	—	Foreign currency forward contracts	$	—	$	219	$	—
Contingent consideration - business combinations		—		—		7,615
Option to acquire noncontrolling interests of consolidated subsidiaries		—		—		4,000
Total liabilities	Total liabilities	$	—	$	3	$	11,615	Total liabilities	$	—	$	219	$	—

January 31, 2021
Fair Value Hierarchy Category
(in thousands) Level 1 Level 2 Level 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 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 nine months ended October 31, 2021 and 2020.

Nine Months Ended
October 31,
(in thousands) 2021 2020
Fair value measurement at beginning of period $ (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), net 15,810 (22,834)
Reclassification of future tranche right liability upon settlement 36,962 —
Fair value measurement at end of period $ — $ (19,460)


	January 31, 2022
	Fair Value Hierarchy Category
(in thousands)	Level 1		Level 2		Level 3
Assets:
Money market funds	$	127,041	$	—	$	—
Commercial paper, classified as cash and cash equivalents	—		29,995		—
Foreign currency forward contracts	—		33		—
Contingent consideration receivable	—		—		271
Total assets	$	127,041	$	30,028	$	271
Liabilities:
Foreign currency forward contracts	$	—	$	91	$	—
Contingent consideration — business combinations	—		7,776		—
Total liabilities	$	—	$	7,867	$	—

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

~~Table of Contents~~

consideration receivable within prepaid expenses and other current assets and other assets on our condensed consolidated balance ~~sheet.~~sheets. The estimated fair value of this asset as of ~~October~~July 31, 2022 and 2021, which is measured using Level 3 inputs, was ~~$0.3 million.~~$0.1 million and $0.4 million, respectively. We received payments of ~~$0.2~~$0.1 million during each of the six months ended July 31, 2022 and ~~the~~2021. The change in the estimated fair value of this contingent receivable was not material during the ~~nine~~six months ended ~~October~~July 31, ~~2021. The estimated fair value of this asset as of October 31, 2020 was $0.6 million. We received payments of $0.1 million,~~2022 and ~~the change in the estimated fair value of this contingent receivable was not material, during the nine months ended October 31, 2020.~~2021.

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 ~~nine~~six months ended ~~October~~July 31, ~~2021 and 2020:~~2021:

Nine Months Ended
October 31,
(in thousands) 2021 2020
Fair value measurement at beginning of period $ 15,704 $ 31,367
Contingent consideration liabilities recorded for business combinations 900 —
Changes in fair values, recorded in operating expenses 669 (2,847)
Payments of contingent consideration (9,560) (13,980)
Foreign currency translation and other (98) 188
Fair value measurement at end of period $ 7,615 $ 14,728

Table of Contents



	Six Months Ended July 31,
(in thousands)	2021
Fair value measurement at beginning of period	$	15,704
Contingent consideration liabilities recorded for business combinations	900
Changes in fair values, recorded in operating expenses	636
Payments of contingent consideration	(9,560)
Foreign currency translation and other	(48)
Fair value measurement at end of period	$	7,632

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 condensed consolidated statements of operations within selling, general and administrative expenses.

~~During the year ended~~As of January 31, ~~2017, we acquired 2 majority owned subsidiaries for which we hold an option to acquire~~2022, the noncontrolling interests. We account for the option as an in-substance investment in the noncontrolling common stock of each such subsidiary. We currently expect to exercise the option to acquire the noncontrolling interests prior to its expiration on January 31, 2022. As of October 31, 2021, we included the$7.8 million fair value of the ~~option within accrued expenses and other current liabilities and did not recognize noncontrolling interests in these subsidiaries. As of~~contingent consideration liability was based on actual achievement through the performance periods ended January 31, ~~2021, we included~~2022, and was transferred to Level 2 of the fair value hierarchy as the fair value was determined based on other significant observable inputs. Payments of ~~the option within other liabilities on our condensed consolidated balance sheet. The following table presents the change~~contingent consideration earned under these agreements were $7.5 million. We recorded a benefit of $0.2 million for changes in the ~~estimated~~ fair ~~value~~values of ~~this liability, which is measured using Level 3 inputs,~~contingent consideration obligations associated with business combinations and $0.1 million for changes due to foreign currency translation for the ~~nine~~six months ended ~~October~~July 31, ~~2021 and 2020:~~

Nine Months Ended
October 31,
(in thousands) 2021 2020
Fair value measurement at beginning of period $ 3,250 $ 2,900
Change in fair value, recorded in operating expenses 750 300
Fair value measurement at end of period $ 4,000 $ 3,200

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), net on our consolidated statement of operations for the nine months ended October 31, 2021. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes payable, which are included within other liabilities on our condensed consolidated balance sheet as of October 31, 2021. Please refer to Note 14, “Derivative Financial Instruments” for further information regarding our interest rate swap agreement.2022.

There were no transfers between levels of the fair value measurement hierarchy during the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020.~~2021.

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

~~Table of Contents~~

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 the issuance date, May 7, 2020, are as follows:~~

April 6, May 7,
2021 2020
Risk-free interest rate for preferred stock 2.35 % 1.31 %
Implied credit spread 6.78 % 10.78 %
Expected volatility 30.00 % 30.00 %
Verint common stock price $ 45.91 $ 45.44

~~Interest Rate Swap Agreements -~~ The fair value of our interest rate swap agreements were based in part on data received from the counterparty, and represented the estimated amount we would receive or pay to settle the agreements, 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 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 2.5% to 2.6%, with~~ a ~~weighted average~~ discount rate of 2.5%, in our calculations of the estimated fair values of our contingent consideration liabilities as of October 31, 2021. We utilized discount rates ranging from 3.3% to 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, 2021. We utilized discount rates ranging from 2.4% to 3.0%, with a weighted average discount rate of 2.7%,6.7% in our calculation of the estimated fair value of our contingent consideration asset as of ~~October~~July 31, ~~2021.~~2022. We utilized discount rates ranging from ~~3.3%~~3.5% to ~~4.0%~~3.9%, with a weighted average discount rate of 3.7% in our calculation of the estimated fair value of our contingent consideration asset as of January 31, ~~2021.~~

~~Option to Acquire Noncontrolling Interests of Consolidated Subsidiaries~~ - The fair value of the option is 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 remeasure the fair value of the option at each reporting period, and any changes in fair value are recorded within selling, general, and administrative expenses. We utilized discount rates of 9.0% and 8.5% in our calculations of the estimated fair value of the option as of October 31, 2021 and January 31, 2021, respectively.2022.

Other Financial Instruments

Table of Contents

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~~Term Loan borrowings were approximately $98 million and $100 million ~~and $409 million~~ at ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, respectively. The estimated fair values of the ~~term loans~~Term Loan borrowings 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 participation in our ~~term loans are traded.~~Term Loan trades. The indicative prices provided to us as at each of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021~~2022 did not significantly differ from par value. The estimated fair value of borrowings under our ~~revolving credit borrowings,~~Revolving Credit Facility, if any, is based upon indicative market values provided by one of our lenders.

The estimated fair value of our ~~2014~~2021 Notes ~~which matured in June 2021,~~ was approximately ~~$440~~$300 million and $330 million at July 31, 2022 and January 31, ~~2021.~~2022, respectively. The estimated fair value of ~~our~~the 2021 Notes was ~~approximately $313 million at October 31, 2021. The estimated fair values of the 2014 Notes and 2021 Notes were~~ determined based on quoted bid and ask prices in the over-the-counter market in which the ~~2014 Notes 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.

Assets Held for Sale

We initially measure an asset that is classified as held for sale at the lower of its carrying amount or fair value less costs to sell. We assess the fair value of an asset less costs to sell each reporting period that it remains classified as held for sale, and report any subsequent changes as an adjustment to the carrying amount of the asset. Assets are not depreciated or amortized while they are classified as held for sale.

During the three months ended July 31, 2022, we commenced plans to sell an approximately 50,000-square foot office building. As of ~~October~~July 31, ~~2021,~~2022, the office building had a carrying value of approximately $1.1 million, which was included within property and equipment, net on the condensed consolidated balance sheet. An impairment loss of $1.8 million, which adjusted the carrying amount of the asset to its fair value less costs to sell, was recorded within selling, general, and administrative expenses in our consolidated statement of operations for the three and six months ended July 31, 2022. Fair value was determined based upon the anticipated sale price of the building based on current market conditions and assumptions made by management, which may differ from actual results if market conditions change.

Investments

As of July 31, 2022, the carrying amount of our noncontrolling equity investments in privately-held companies without readily determinable fair values was $5.1 million. These investments are included within other assets on the condensed consolidated balance sheets. 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 ~~nine months~~year ended ~~October~~January 31, ~~2021.~~2022. These investments ~~are~~were included within other assets on the ~~condensed~~ consolidated balance ~~sheets.~~sheet as of January 31, 2022. 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 ~~condensed~~ consolidated statement of operations for the ~~nine~~six months ended ~~October~~July 31, 2021. ~~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 our investments in privately-held companies during the ~~year~~six months ended ~~January~~July 31, ~~2021.~~2022. We did not recognize any impairments during the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020.~~2021.

~~14.~~13. 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

Table of Contents

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 ~~$7.2~~$7.1 million and ~~$6.6~~$7.4 million as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, respectively.

Interest Rate Swap Agreement

~~Table of Contents~~

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~~Loan. Pursuant to the ~~termination of our prior interest rate swap in September 2019, under which~~agreement, 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.

Prior to May 1, 2020, the 2018 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 (loss) income ~~(loss)~~ in the condensed consolidated balance sheet and were reclassified into the condensed consolidated statement of operations within interest expense in the periods in which the hedged transactions affected 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, 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 condensed 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 condensed consolidated statement of operations for the ~~nine~~six months ended ~~October~~July 31, 2021. The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes ~~payable, which are included within other liabilities on our condensed consolidated balance sheet as of October~~receivable during the year ended January 31, ~~2021.~~2022.

Fair Values of Derivative Financial Instruments

The fair values of our derivative financial instruments and their classifications in our condensed consolidated balance sheets as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021~~2022 were as follows:

Fair Value at
October 31, January 31,
(in thousands) Balance Sheet Classification 2021 2021
Derivative assets:
Foreign currency forward contracts:
   Designated as cash flow hedges Prepaid expenses and other current assets $ 143 $ 136
      Total derivative assets $ 143 $ 136
Derivative liabilities:
Foreign currency forward contracts:
   Designated as cash flow hedges Accrued expenses and other current liabilities $ 3 $ 47
   Not designated as hedging instruments Accrued expenses and other current liabilities — 1
Interest rate swap agreement:
Not designated as a hedging instrument Accrued expenses and other current liabilities — 4,316
Not designated as a hedging instrument Other liabilities — 13,565
      Total derivative liabilities $ 3 $ 17,929

Table of Contents


		Fair Value at
		July 31,		January 31,
(in thousands)	Balance Sheet Classification	2022		2022
Derivative assets:
Foreign currency forward contracts:
Designated as cash flow hedges	Prepaid expenses and other current assets	$	16	$	33
Total derivative assets		$	16	$	33

Derivative liabilities:
Foreign currency forward contracts:
Designated as cash flow hedges	Accrued expenses and other current liabilities	$	219	$	91
Total derivative liabilities		$	219	$	91

Derivative Financial Instruments in Cash Flow Hedging Relationships

The effects of derivative financial instruments designated as cash flow hedges on accumulated other comprehensive ~~loss~~(loss) income (“AOCL”) and on the condensed consolidated ~~statements~~statement of operations for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020~~2021 were as follows:

~~Table of Contents~~


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Net gains (losses) recognized in AOCL:
Net (losses) gains recognized in AOCL:										Net (losses) gains recognized in AOCL:
Foreign currency forward contracts										Foreign currency forward contracts	$	(190)	$	22	$	(460)	$	62
											$	(190)	$	22	$	(460)	$	62

Net (losses) gains reclassified from AOCL to the condensed consolidated statements of operations:										Net (losses) gains reclassified from AOCL to the condensed consolidated statements of operations:
Foreign currency forward contracts	Foreign currency forward contracts	$	153	$	47	$	215	$	55	Foreign currency forward contracts	$	(233)	$	11	$	(315)	$	117
Interest rate swap agreement	Interest rate swap agreement	—		—		—		(7,535)		Interest rate swap agreement	—		—		—		(16,669)
		$	153	$	47	$	215	$	(7,480)		$	(233)	$	11	$	(315)	$	(16,552)

Net gains (losses) reclassified from AOCL to the condensed consolidated statements of operations:
Foreign currency forward contracts		$	47	$	28	$	164	$	28
Interest rate swap agreement		—		(1,356)		(16,669)		(3,067)
		$	47	$	(1,328)	$	(16,505)	$	(3,039)

For information regarding the line item locations of the net (losses) gains ~~(losses)~~ on derivative financial instruments reclassified out of AOCL into the condensed consolidated statements of operations, see Note ~~11,~~10, “Stockholders’ Equity”.

All of the foreign currency forward contracts underlying the net unrealized ~~gains~~losses recorded in our accumulated other comprehensive loss at ~~October~~July 31, ~~2021~~2022 mature within twelve months, and therefore we expect all such ~~gains~~losses to be reclassified into earnings within the next twelve months.

Derivative Financial Instruments Not Designated as Hedging Instruments

Losses recognized on derivative financial instruments not designated as hedging instruments in our condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020~~2021 were as follows:


		Classification in Condensed Consolidated Statements of Operations		Three Months Ended October 31,					Nine Months Ended October 31,							Classification in Condensed Consolidated Statements of Operations		Three Months Ended July 31,					Six Months Ended July 31,
(in thousands)	(in thousands)		2021		2020		2021			2020		(in thousands)					2022		2021		2022			2021
Interest rate swap agreement	Interest rate swap agreement		Other expense, net		$	—	$	(949)		$	(14,374)		$	(812)	Interest rate swap agreement		Other income (expense), net		$	—	$	—		$	—	$	(14,374)

~~15.~~14. STOCK-BASED COMPENSATION

Stock-Based Compensation Plan

On June 20, 2019, our stockholders approved the Verint Systems Inc. 2019 Long-Term Stock Incentive Plan (the “2019 Plan”). Upon approval of the 2019 Plan, new awards ~~are~~were no longer permitted under our prior stock-based compensation plan (the “2017 Amended 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 (“RSUs”), performance awards, other stock-based awards, and performance compensation awards. Subject to adjustment as provided in the 2019 Plan, up to an aggregate of (i) 9,475,000 shares of our common stock plus (ii) the number of shares of our common stock available for issuance under the 2017 Amended Plan as of June 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 2017 Amended Plan or the 2019 Plan that are forfeited, cancelled, exchanged, or that terminate or expire, may be issued or transferred in connection with awards under the 2019 Plan. Each stock option or stock-settled stock appreciation right granted under the 2019 Plan will reduce the available plan capacity by 1one share and each other award denominated in shares that is granted under the 2019 Plan will reduce the available plan capacity by 2.38 shares.

In March 2021, our board of directors approved an adjustment of the available plan capacity to the 2019 Plan to 14,239,656 shares based on 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 condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Cost of revenue - recurring		$	540	$	584	$	1,531	$	1,321
Cost of revenue - nonrecurring		690		1,169		2,387		2,126
Cost of revenue — recurring										Cost of revenue — recurring	$	933	$	562	$	1,458	$	991
Cost of revenue — nonrecurring										Cost of revenue — nonrecurring	818		864		1,458		1,697
Research and development, net	Research and development, net	1,949		1,241		5,749		3,910		Research and development, net	4,419		2,027		6,838		3,800
Selling, general and administrative	Selling, general and administrative	13,416		12,535		41,422		32,179		Selling, general and administrative	19,524		14,640		34,309		28,006
Total stock-based compensation expense	Total stock-based compensation expense	$	16,595	$	15,529	$	51,089	$	39,536	Total stock-based compensation expense	$	25,694	$	18,093	$	44,063	$	34,494

The following table summarizes stock-based compensation expense by type of award for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Restricted stock units and restricted stock awards	Restricted stock units and restricted stock awards	$	14,386	$	11,777	$	44,623	$	33,073	Restricted stock units and restricted stock awards	$	23,362	$	15,984	$	39,373	$	30,237
Stock bonus program and bonus share program	Stock bonus program and bonus share program	2,203		3,748		6,455		6,460		Stock bonus program and bonus share program	2,328		2,100		4,680		4,252
Total equity-settled awards	Total equity-settled awards	16,589		15,525		51,078		39,533		Total equity-settled awards	25,690		18,084		44,053		34,489
Phantom stock units (cash-settled awards)	Phantom stock units (cash-settled awards)	6		4		11		3		Phantom stock units (cash-settled awards)	4		9		10		5
Total stock-based compensation expense	Total stock-based compensation expense	$	16,595	$	15,529	$	51,089	$	39,536	Total stock-based compensation expense	$	25,694	$	18,093	$	44,063	$	34,494

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.

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.

Restricted Stock Units and Performance Stock Units

We periodically award RSUs to our directors, officers, and other employees. These awards contain various vesting conditions and are subject to certain restrictions and forfeiture provisions prior to vesting. Some of these awards to executive officers and certain employees vest upon the achievement of specified performance goals or market conditions (performance stock units or “PSUs”).

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 ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Nine Months Ended October 31,							Six Months Ended July 31,
		2021			2020				2022			2021
(in thousands, except per share data)	(in thousands, except per share data)	Shares or Units	Weighted-Average Grant Date Fair Value		Shares or Units	Weighted-Average Grant Date Fair Value		(in thousands, except per share data)	Shares or Units	Weighted-Average Grant Date Fair Value		Shares or Units	Weighted-Average Grant Date Fair Value
Beginning balance	Beginning balance	2,950	$	35.97	1,879	$	52.96	Beginning balance	2,454	$	42.99	2,950	$	35.97
Granted	Granted	1,503	$	48.00	1,399	$	46.82	Granted	1,600	$	56.14	1,316	$	48.51
Released	Released	(1,576)	$	34.87	(1,109)	$	47.53	Released	(878)	$	43.15	(1,283)	$	35.52
Forfeited	Forfeited	(185)	$	39.43	(159)	$	53.17	Forfeited	(94)	$	45.73	(110)	$	39.00
Ending balance	Ending balance	2,692	$	43.10	2,010	$	51.67	Ending balance	3,082	$	49.69	2,873	$	41.81

The beginning balance of the outstanding shares for the ~~nine~~six months ended ~~October~~July 31, 2021 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 values for the nine months ended October 31, 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 ~~October~~July 31, ~~2021,~~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 ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020~~2021 (these amounts are ~~already~~also included in the Award Activity Table above for ~~2021~~2022 and ~~2020)~~2021):


		Nine Months Ended October 31,			Six Months Ended July 31,
(in thousands)	(in thousands)	2021	2020	(in thousands)	2022	2021
Beginning balance	Beginning balance	635	423	Beginning balance	547	635
Granted	Granted	213	297	Granted	278	212
Released	Released	(274)	(182)	Released	(89)	(270)
Forfeited	Forfeited	(24)	(27)	Forfeited	—	(9)
Ending balance	Ending balance	550	511	Ending balance	736	568

Consistent with the table above, the beginning balance of the outstanding shares for the ~~nine~~six months ended ~~October~~July 31, 2021 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 nine months ended October 31, 2020 reflects the number of shares on the date of grant without adjustment.~~

Excluding PSUs, we granted ~~1,290,000~~1,322,000 RSUs during the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022.

As of ~~October~~July 31, ~~2021,~~2022, there was approximately ~~$79.4~~$107.1 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 ~~1.7~~1.9 years.

Stock Bonus Program and Bonus Share 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 ~~generally~~ determined using a ~~5-day~~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.

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 and no shares were issued in respect of the performance period ended January 31, 2021.

In March 2021, our board of directors approved the use of up to 300,000 shares of common stock, and a discount of 15%, for awards under our stock bonus program for the performance period ending January 31, 2022.

~~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.

For bonuses in respect of the year ended January 31, ~~2021,~~2022, our board of directors approved the use of up to 300,000 shares of common stock in the aggregate for awards under ~~the~~these two programs, with up to 300,000 shares of common stock, and a discount of 15% approved for awards under our stock bonus ~~share program, reduced by any~~program. We issued approximately 131,000 shares ~~issued~~ under the stock bonus program ~~in respect of~~during the ~~same performance period. However, the~~three months ended July 31, 2022. The bonus share program was not used, and no shares were issued under this program, in respect of the performance period ended January 31, ~~2021.~~2022.

~~For bonuses~~The following table summarizes activity under the stock bonus program during the six months ended July 31, 2022 and 2021 in isolation. As noted above, shares issued in respect of the ~~year ending January 31,~~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.


	Six Months Ended July 31,
(in thousands)	2022	2021
Shares in lieu of cash bonus — granted and released (not included in Award Activity Table above)	131	—
Shares in respect of discount (included in Award Activity Table above):
Granted	25	—
Released	23	—

In March 2022, our board of directors ~~has~~ approved the use of up to 300,000 shares of common stock in the aggregate under ~~this program, reduced by any~~these two programs, with up to 200,000 shares ~~used~~of common stock, and a discount of 15%, approved for awards under ~~the~~our stock bonus program ~~in respect of the same performance period (the maximum number of shares issuable under the stock bonus program and the bonus share program collectively~~ for the performance period ending January 31, ~~2022~~2023. Any shares earned under these programs for the performance period ending January 31, 2023 will ~~not exceed 300,000).~~be issued during the year ended January 31, 2024.

The combined accrued liabilities for ~~the stock bonus program~~these two programs were $4.8 million and ~~the bonus share program was $6.4~~$6.5 million at ~~October~~July 31, ~~2021. As noted above, no awards were made under the stock bonus program or the bonus share program for the performance period ended~~2022 and January 31, ~~2021 and bonuses for such period were paid in cash.~~2022, respectively.

~~16.~~15. COMMITMENTS AND CONTINGENCIES

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). 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 3three defendants: VSL, CTI, and Comverse Limited.

On October 31, 2012, CTI 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 (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 the 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.

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 two unsuccessful rounds of mediation in mid to late 2018 and in mid-2019, the proceedings resumed. On 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 appeal the District 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. At the recommendation of the District Court, in June 2022, the parties ~~are waiting~~conducted another round of mediation in New York. On July 10, 2022, the parties reached an agreement to settle the matter on terms set forth in a settlement agreement that was executed by all parties and submitted a motion for ~~further instructions~~ approval of the settlement agreement to the District Court. Under the terms of the settlement agreement, subject to full and final waiver, Mavenir Inc. and/or ~~decisions from~~Comverse, Inc. and/or Mavenir Ltd. agreed to pay a total of $16.0 million (such amount to be paid in three phases as set forth in the ~~Supreme Court.~~settlement agreement) as compensation to the plaintiffs and members of the class. The compensation amount is comprehensive, final and absolute and includes within it all the amounts and expenses to be paid in connection with the settlement agreement. Under the terms of an associated guaranty agreement, Verint has guaranteed the payment of the compensation amount in the event it is not paid by the primary obligors. As of July 31, 2022, we recorded a liability of $16.0 million, $11.3 million of which is included within accrued expenses and other current liabilities, and $4.7 million of which is included in other liabilities, and an offsetting indemnification receivable of $16.0 million, $11.3 million of which is included in prepaid expenses and other current assets, and $4.7 million of which is included in other assets on our condensed consolidated balance sheets. There was no impact to our condensed consolidated statement of operations. The settlement remains pending and contingent upon District Court approval. Accordingly, there can be no assurance that the matter will be settled on the terms set forth in the settlement agreement or otherwise.

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, the U.S. District Court for the Eastern District of Michigan issued negative partial summary judgment decisions in two cases pending against Verint Americas Inc., as successor to ForeSee Results, Inc. (“ForeSee”), On July 19, 2022, the court also denied ForeSee’s motions for reconsideration of these rulings.

We believe that the court’s decisions were wrongly decided and are contrary to the facts and the law and we intend to appeal those rulings following a final judgment. Furthermore, we believe that the claims asserted by the plaintiffs are without merit, and as explained in our affirmative Delaware litigation described below, that by bringing the claims, plaintiffs breached an agreement not to pursue such claims against ForeSee in an improper attempt by plaintiffs 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 license, 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.

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 related to ForeSee’s products inherited by Verint in the acquisition. 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.

Following the filing of the Eastern District of Michigan litigation, ForeSee filed affirmative litigation in the U.S. District Court for 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 was then substituted as the named defendant. In that action, ForeSee sought 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. Verint subsequently withdrew the action without prejudice and continues to consider any next actions it may take with respect to this matter.

Following the filing of the Eastern District of Michigan litigation, ForeSee also filed affirmative litigation in the U.S. District Court for 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 (the “Fornell Group”). Claes Fornell founded both ACSI LLC and CFI, and previously co-founded ForeSee before selling it in December 2013 for a significant gain. The Delaware 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 of ForeSee 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. In the Delaware litigation, we are seeking as damages any amounts recovered by ACSI LLC, CFI or the USAO in the proceedings against ForeSee and/or Verint discussed above, as well as attorneys’ fees. Following the filing of our claims, the Fornell Group moved to dismiss, stay or transfer the Delaware litigation. The motion and ForeSee’s objection 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 trial court in 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 at least reasonably possible that our estimates will change in the near term and the effect may be material.

We are a party to other various litigation matters and claims that arise from time to time in the ordinary course of our business. While we believe that the ultimate outcome of any such current matters will not have a material adverse effect on us, their outcomes are not determinable and negative outcomes may adversely affect our financial position, liquidity, or results of operations.

~~17. SUBSEQUENT EVENT~~

~~Stock Repurchase 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. Repurchases are expected to be financed with available cash in the United States or through borrowing from the 2021 Revolving Credit Facility, subject to compliance with applicable laws, rules and regulations. We may utilize a number of different methods to effect the repurchases, including open market purchases, which may include, without limitation, round lot or block transactions, including through one or more accelerated stock repurchase plans or pursuant to the terms of one or more repurchase plans in accordance with Rule 10b5-1 or Rule 10b-18 under the Securities Exchange Act of 1934. The specific timing, price, and size of purchases will depend on prevailing stock prices, general market and economic conditions, and other considerations, including the amount of cash available in the U.S. and other potential uses of cash. The program may be extended, suspended, or discontinued at any time without prior notice and does not obligate us to acquire any particular amount of common stock.

4640

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis is provided to assist readers in understanding our financial condition, results of operations, and cash flows. This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended January 31, ~~2021~~2022 and our unaudited condensed consolidated financial statements and notes thereto contained in 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 under “Cautionary Note on Forward-Looking Statements”.

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”).~~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 $13.8 million and $27.9 million is reflected in our condensed consolidated statement of operations within discontinued operations for the three and nine months ended October 31, 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 and Cognyte entered into ~~several~~a separation and distribution agreement as well as various other agreements ~~with Cognyte~~ that provide a framework for the ~~relationship~~relationships between the parties going forward, including among others an employee matters agreement, a ~~limited duration Transition Services Agreement under~~tax matters agreement, and a transition services agreement, pursuant to which we and Cognyte ~~will~~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~~The performance of services ~~be provided for more than 24 months after~~under the ~~Spin-Off. Services to be provided include certain~~transition services ~~related to finance, accounting, business technology, human resources, information systems, facilities, document management and record retention and technical support. In consideration for such~~agreement was substantially concluded as of January 31, 2022, with only minimal advisory services ~~we and Cognyte will each pay fees to the other for the services provided, and those fees will generally be in amounts intended to allow the party providing services to recover all~~continuing as of ~~its direct and indirect costs incurred in providing those services, plus a standard markup.~~July 31, 2022.

The historical results of operations and financial positions of Cognyte are reported as discontinued operations in our condensed consolidated financial statements. For further information on discontinued operations, see Note 2, “Discontinued Operations”, to the condensed consolidated financial statements in Part I, Item 1 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 (“Apax”) would make an investment in us in an amount of up to $400.0 million. Under the terms of the Investment Agreement, dated as of December 4, 2019 (the “Investment Agreement”), on May 7, 2020, the Apax Investor purchased $200.0 million of our Series A convertible preferred stock (“Series A Preferred Stock”). In connection with the completion of the Spin-Off, on April 6, 2021, the Apax Investor purchased $200.0 million of our Series B convertible preferred stock ~~(“Series~~(the “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”~~Resources — Overview” section below.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. This 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 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 asAs a result of ~~cost containment measures they had implemented. We saw a reduction or delay in certain large customer contracts, particularly on-premises~~the COVID-19 pandemic, we have, among other things, made adjustments to our employee work arrangements and ~~limitations on access~~our approach to business travel, meetings, and events. The COVID-19 pandemic created, and continues to create, significant uncertainty in macroeconomic conditions, including supply chain disruptors and labor shortages. We continue to actively monitor and evaluate the ~~facilities~~situation and may take further actions that alter our business operations as may be required by governmental authorities or that we determine are in the best interests of our employees, customers, partners, stockholders, or other stakeholders.

We have adopted a hybrid work model under which the majority of our employees now work from home on a full or part-time basis. As part of our hybrid model, we have also ~~impacted our ability to deliver~~re-opened some of our ~~products~~offices and ~~complete~~have contracted for co-working space in certain ~~implementations, negatively impacting our ability~~locations for employees to ~~recognize revenue.~~

~~We saw an improvement in the business environment during~~use as needed, subject to applicable government regulations. During the second half of the year ended January 31, ~~2021, which has continued to date~~2022 and continuing into the ~~year ending January 31, 2022. During the nine~~six months ended ~~October~~July 31, ~~2021,~~2022, we ~~continued~~decided to ~~experience solid demand for~~exit or reduce our ~~cloud solutions as our customers have accelerated the digitization of their customer interactions~~space under certain office leases 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 each country in which we and our customers, partners, or vendors operate. We expect to ~~incur additional costs to the extent~~take further actions in this regard as 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.~~ However, we anticipate that the ability to 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. As a result, we continue to evaluate our real estate needs to determine where we can exit, consolidate, or otherwise optimize our use of office space throughout the company. During the nine months ended October 31, 2021, we decided to exit certain leased offices, which resulted in the recognitionfootprint. We recognized $4.9 million and $12.5 million of accelerated lease expense and other asset impairments, ~~of $2.2 million. We will continue to evaluate our real estate footprint to determine where we can exit, consolidate, or modify our office space leases,~~which were reflected within selling, general, 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~~administrative expenses in our ~~offices.~~condensed consolidated statement of operations for the three and six months ended July 31, 2022, respectively.

~~Notwithstanding the strong demand for our cloud solutions and the recovery in the business environment, given the uncertainty~~Russia-Ukraine Conflict

We continue to monitor events associated with the ~~pandemic, our ability to predict how it~~Russian invasion of Ukraine and its global impacts. Based on the current situation, we do not believe the Russia-Ukraine conflict 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 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~~business and results of operation. However, if the Russia-Ukraine conflict worsens or expands, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted. Our operations and customers in Russia, Belarus, and occupied portions of Ukraine represented immaterial portions of our net assets as of July 31, 2022 and January 31, 2022, and total revenue for the ~~nine~~six months ended ~~October~~July 31, ~~2021. However, we have deferred the timing of employer payroll taxes~~2022 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.~~

On September 9, 2021, the U.S. federal government issued the mandatory vaccination and workplace safety protocols of Executive Order 14042 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 by a recently-revised deadline of January 4, 2022, except for those that are legally entitled to an accommodation under applicable law. 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 Executive Order and related guidance. As a result, if our understanding of its application to our workforce differs from our federal customers’ interpretation, or many of 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 contract rather than comply.2021.

Our Business

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 ~~an Engagement Capacity Gap™,~~a capacity gap, which is widening as the digital transformation continues. Organizations are increasingly seeking technology to close this ~~gap,~~gap. Through the Verint Customer Engagement Cloud Platform, we offer our customers and partners solutions that are based on AIartificial intelligence (“AI”) and ~~analytics to~~are developed specifically for customer engagement. These solutions automate workflows across enterprise silos to optimize the workforce expense and toat the same time drive an elevated consumer experience. Our solutions are used by approximately 10,000 organizations in over 175 countries across a diverse set of verticals, including financial services, healthcare, utilities, technology, and government. Our customers include large enterprises with thousands of employees, as well as small to medium sized business (“SMB”) organizations.

Verint is ~~uniquely positioned to help organizations close~~headquartered in Melville, New York, and has approximately 30 offices worldwide. We have approximately 4,500 passionate professionals around the ~~capacity gap with our differentiated Verint Cloud Platform.~~globe exclusively focused on helping brands provide Boundless Customer Engagement™.

Key Trends ~~and Factors That May Impact our Performance~~

~~In addition to~~We believe there are three market trends that are benefiting Verint today: the ~~impact~~acceleration of digital transformation, changes in the ~~COVID-19 pandemic discussed above, we see~~workforce shaping the ~~following business trends~~future of work, and ~~factors which may impact our performance:~~elevated customer expectations.

•Acceleration of Digital ~~Transformation~~Transformation: Digital transformation is ~~Accelerating~~. accelerating, and it is driving significant change in customer engagement for contact centers 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. ~~The~~We believe that the breadth of customer touchpoints across the enterprise and the rapid growth in digital interactions ~~and the emergence of the new workforce – with humans and bots working together – are creating~~benefit Verint as these trends create demand for new ~~solutions.~~solutions that can increase automation and connect organizational silos to increase efficiency and elevate the customer experience.

•~~The Engagement Capacity Gap is Widening.~~A Changing Workforce Shapes the Future of Work: Brands are ~~seeking~~facing unprecedented challenges when it comes to ~~differentiate themselves by providing consumers~~how they manage their changing workforce. Increasingly, brands are managing employees that may work from anywhere. Providing flexibility for where employees work creates challenges in managing and coaching employee 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 ~~strong brand experience. But they cannot afford to do so by hiring more people. With~~workforce of people and bots working together, increased automation, greater employee flexibility and a greater focus on the exponential growth in digital journeys and more demanding consumer expectations, organizations require more resources, but hiring more knowledge workers and further increasing workforce expenses is often not a sustainable solution. This creates an Engagement Capacity Gap, and asvoice of the ~~digital transformation accelerates, the gap is widening. Brands are looking for new technology and solutions to help close the Engagement Capacity Gap.~~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 ~~Market~~increase in the number of channels and the desire of customers to seamlessly shift between channels creates a more complex customer

journey for brands to support and manage. Customers also expect that brands will have a deep understanding of the customer’s relationship with that brand - an understanding that is ~~Shifting Rapidly~~unified across the enterprise regardless of whether the customer touchpoint is in the contact center, on a website, through a mobile app, in the back office, or in a 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 ~~Cloud-Based, AI-Driven Solutions~~. To effectively address the Engagement Capacity Gap, brands are seeking open, cloud-based solutions to break down silos and facilitate the sharing of data across enterprise functions. Brands are also seeking to leverage AI and other advanced data analytic tools to reduce manual work, increase workforce efficiency, and manage the new workforce of humans and bots.meet elevated customer expectations.

~~As discussed above, the current COVID-19 pandemic is also a material factor that may negatively impact us and~~While we continue to see strong demand for our ~~solutions.~~solutions as our customers accelerate the digitization of their customer interactions and internal operations, a continuation or worsening of global events such as the COVID-19 pandemic, the war in Ukraine, and other current macroeconomic factors, such as foreign currency exchange rate fluctuations, increased inflation rates, and increases in the weighted-average cost of capital due to increases in interest rates could adversely affect our results of operations and financial condition in future periods. See the “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the year ended January 31, 2022 for further discussion of the possible impact of the COVID-19 pandemic and other global events on our business. See the “Foreign Currency Exchange Rates’ Impact on Results of Operations” section below for further discussion of the impact that foreign currency exchange rates have had on our results of operations.

Critical Accounting Policies and Estimates

Note 1, “Summary of Significant Accounting Policies” to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended January 31, ~~2021~~2022 describes the significant accounting policies and methods used in the preparation of the condensed consolidated financial statements appearing in this report. The accounting policies that reflect our more significant estimates, judgments and assumptions in the preparation of our condensed consolidated financial statements are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended January 31, ~~2021,~~2022, and include the following:

•Revenue recognition;

•Accounting for business combinations;

•Goodwill and other acquired intangible assets;

•Income taxes; and

•Accounting for stock-based compensation.

There were no significant changes to our critical accounting policies and estimates during the ~~nine~~six months ended ~~October~~July 31, ~~2021, except to the extent such policies or estimates related solely to the Cognyte Business or were no longer relevant as a result of the Spin-Off.~~2022.

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~~latter 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, ~~and more recently, the impact of the COVID-19 pandemic,~~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 three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended
October 31, Nine Months Ended
October 31,
(in thousands, except per share data) 2021 2020 2021 2020
Revenue $ 224,820 $ 215,222 $ 640,341 $ 605,167
Operating income $ 24,668 $ 20,057 $ 40,647 $ 39,589
Net income (loss) from continuing operations attributable to Verint Systems Inc. common shares $ 8,037 $ (5,068) $ 5,314 $ (31,907)
Net income (loss) from continuing operations per common share attributable to Verint Systems Inc.:
Basic $ 0.12 $ (0.08) $ 0.08 $ (0.49)
Diluted $ 0.12 $ (0.08) $ 0.08 $ (0.48)


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands, except per share data)	2022		2021		2022		2021
Revenue	$	222,899	$	214,617	$	440,805	$	415,521
Operating income	$	1,510	$	11,537	$	2,008	$	15,979
Net loss attributable to Verint Systems Inc. common shares	$	(7,612)	$	(200)	$	(12,526)	$	(2,723)
Net loss per common share attributable to Verint Systems Inc.:
Basic	$	(0.12)	$	—	$	(0.19)	$	(0.04)
Diluted	$	(0.12)	$	—	$	(0.19)	$	(0.04)

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Our revenue increased approximately ~~$9.6~~$8.3 million, or 4%, to ~~$224.8~~$222.9 million in the three months ended ~~October~~July 31, ~~2021~~2022 from ~~$215.2~~$214.6 million in the three months ended ~~October~~July 31, ~~2020.~~2021. The increase consisted of ~~an $8.6~~a $10.3 million increase in recurring revenue, ~~and~~partially offset by a ~~$1.0~~$2.0 million ~~increase~~decrease in nonrecurring revenue. For additional details on our revenue by category, see “—Revenue”. Revenue in the Americas, in Europe, the Middle East and Africa (“EMEA”), and in the Asia-Pacific (“APAC”) regions represented approximately ~~70%~~69%, 20%, and ~~10%~~11% of our total revenue, respectively, in the three months ended July 31, 2022, compared to approximately 68%, 21%, and 11%, respectively, in ~~each of~~ the three ~~month periods~~months ended ~~October~~July 31, ~~2021 and October 31, 2020.~~2021. Further details of changes in revenue are provided below.

We reported operating income of ~~$24.7~~$1.5 million in the three months ended ~~October~~July 31, ~~2021~~2022 compared to operating income of ~~$20.1~~$11.5 million in the three months ended ~~October~~July 31, ~~2020.~~2021. The ~~increase~~decrease in operating income was primarily due to ~~an $11.3~~a $15.8 million increase in operating expenses, from $130.5 million to $146.3 million, partially offset by a $5.8 million increase in gross profit, from ~~$141.4~~$142.1 million to ~~$152.7 million, partially offset by a $6.8 million increase in operating expenses, from $121.3 million to $128.1~~$147.9 million. The increase in operating expenses consisted of a ~~$9.6~~$14.3 million increase in selling, general and administrative expenses ~~partially offset by~~and a ~~$2.3~~$2.2 million ~~decrease~~increase in net research and development expenses, ~~and~~partially offset by a ~~$0.5~~$0.7 million decrease in amortization of other acquired intangible assets. Further details of changes in operating income are provided below.

Net ~~income from continuing operations~~loss attributable to Verint Systems Inc. common shares was ~~$8.0~~$7.6 million, and diluted net ~~income~~loss per common share was $0.12 in the three months ended ~~October~~July 31, ~~2021~~2022 compared to a net loss ~~from continuing operations~~ attributable to Verint Systems Inc. common shares of ~~$5.1~~$0.2 million, and diluted net loss per common share of ~~$0.08,~~$0.00 in the three months ended ~~October~~July 31, ~~2020.~~2021. The increase in net ~~income from continuing operations~~loss attributable to Verint

Systems Inc. common shares in the three months ended ~~October~~July 31, ~~2021~~2022 was primarily due to a ~~$19.3~~$10.0 million decrease ~~in total other expense, net and a $4.6 million increase~~ in operating income as described above, partially offset by ~~an $8.3~~a $1.1 million ~~increase~~decrease in total other expense, net, a $1.4 million decrease in the provision for income taxes, and a ~~$2.5~~$0.1 million ~~increase in dividends on preferred stock. The~~ decrease in ~~total other expense,~~ net ~~was primarily due~~income attributable to the settlement of the Future Tranche Right in April 2021 upon the issuance of the Series B Preferred Stock, lower outstanding borrowings, and a decrease in debt discount amortization costs as a result of our adoption of ASU No. 2020-06.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 three months ended October 31, 2021 to average exchange rates for the three months ended October 31, 2020, the U.S. dollar weakened relative to the British pound sterling and the Australian dollar, resulting in an overall increase in our revenue, cost of revenue, and operating expenses on a U.S. dollar-denominated basis. For the three months ended October 31, 2021, had foreign currency exchange rates remained unchanged from rates in effect for the three months ended October 31, 2020, our revenue would have been approximately $1.4 million lower and our cost of revenue and operating expenses on a combined basis would have been approximately $2.3 million lower, which would have resulted in a $0.9 million increase in our operating income.

~~Nine~~Six Months Ended ~~October~~July 31, ~~2021~~2022 compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2020~~2021. . Our revenue increased approximately ~~$35.1~~$25.3 million, or 6%, to ~~$640.3~~$440.8 million in the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 from ~~$605.2~~$415.5 million in the ~~nine~~six months ended ~~October~~July 31, ~~2020.~~2021. The increase consisted of a ~~$40.8~~$25.2 million increase in recurring revenue ~~partially offset by~~and a ~~$5.7~~$0.1 million ~~decrease~~increase in nonrecurring revenue. For additional details on our revenue by category, see “—Revenue”. Revenue in the Americas, EMEA, and APAC regions represented approximately 68%, 21%, and 11% of our total revenue, respectively, in each of the ~~nine~~six months ended ~~October~~July 31, ~~2021, compared to approximately 69%, 20%,~~2022 and ~~11%, respectively, in the nine months ended October 31, 2020.~~2021. Further details of changes in revenue are provided below.

We reported operating income of ~~$40.6~~$2.0 million in the ~~nine~~six months ended ~~October~~July 31, ~~2021,~~2022, compared to operating income of ~~$39.6~~$16.0 million in the ~~nine~~six months ended ~~October~~July 31, ~~2020.~~2021. The ~~increase~~decrease in operating income was primarily due to a ~~$29.9~~$32.4 million increase in operating expenses, from $254.6 million to $287.0 million, partially offset by a $18.4 million increase in gross profit, from ~~$393.5~~$270.6 million to ~~$423.4 million, partially offset by a $28.8 million increase in operating expenses, from $353.9 million to $382.7~~$289.0 million. The increase in operating expenses consisted of a ~~$34.1~~$29.6 million increase in selling, general and administrative expenses ~~partially offset by~~and a ~~$3.9~~$4.0 million ~~decrease~~increase in net research and development expenses, ~~and~~partially offset by a ~~$1.4~~$1.2 million decrease in amortization of other acquired intangible assets. Further details of changes in operating income are provided below.

Net ~~income from continuing operations~~loss attributable to Verint Systems Inc. common shares was ~~$5.3~~$12.5 million and diluted net ~~income~~loss per common share was ~~$0.08,~~$0.19 in the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022, compared to a net loss ~~from continuing operations~~ attributable to Verint Systems Inc. common shares of ~~$31.9~~$2.7 million and diluted net loss per common share of ~~$0.48,~~$0.04 in the ~~nine~~six months ended ~~October~~July 31, ~~2020.~~2021. The increase in net ~~income from continuing operations~~loss attributable to Verint Systems Inc. common shares in the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 was primarily due to a ~~$48.4~~$14.0 million decrease in operating income as described above, and a $1.9 million increase in dividends on preferred stock, partially offset by a $5.0 million decrease in total other expense, net, ~~and~~ a $1.0 million ~~increase~~decrease in ~~operating income as described above, partially offset by an $8.6 million increase in dividends on preferred stock and a $3.7 million increase in~~the provision for income ~~taxes. The~~taxes, and a $0.1 million decrease in ~~total other expense,~~ net ~~was primarily due~~income attributable to a non-cash gain recognized on the final remeasurement of the Future Tranche Right immediately prior to settlement upon the issuance of the Series B Preferred Stock in April 2021, lower outstanding borrowings, and a decrease in debt discount amortization costs as a result of our adoption of ASU No. 2020-06, partially offset by losses on derivatives due to the partial early retirement of the 2017 Term Loan.noncontrolling interests. Further details of these changes are provided below.

As of July 31, 2022, we employed approximately 4,500 professionals, including part-time employees and certain contractors, as compared to approximately 4,300 at July 31, 2021.

Foreign Currency Exchange Rates’ Impact on Results of Operations

A portion of our business is conducted in currencies other than the U.S. dollar, and therefore our revenue, cost of revenue, and operating expenses are affected by fluctuations in applicable foreign currency exchange rates. The income statements of our non-U.S. operations are translated into U.S. dollars at the average exchange rates for each applicable month in a period. Revenue denominated in non-U.S. dollar currency was 21% of our total revenue for the three and six months ended July 31, 2022, and 23% of our total revenue for the three and six months ended July 31, 2021. Our combined cost of revenue and operating expenses denominated in non-U.S. dollar currency were 31% and 32% of our total combined cost of revenue and operating expenses for the three months ended July 31, 2022 and 2021, respectively. Our combined cost of revenue and operating expenses denominated in non-U.S. dollar currency were 30% and 32% of our total combined cost of revenue and operating expenses for the six months ended July 31, 2022 and 2021, respectively.

When comparing average exchange rates for the ~~nine~~three months ended ~~October~~July 31, ~~2021~~2022 to average exchange rates for the ~~nine~~three months ended ~~October~~July 31, ~~2020,~~2021, the U.S. dollar ~~weakened~~strengthened relative to the British pound sterling, the ~~Australian dollar~~euro, and the ~~euro,~~Australian dollar, resulting in an overall ~~increase~~decrease in our revenue ~~cost of revenue,~~ and ~~operating~~ expenses on a U.S. dollar-denominated basis. For the ~~nine~~three months ended ~~October~~July 31, ~~2021,~~2022, had foreign currency exchange rates remained unchanged from rates in effect for the ~~nine~~three months ended ~~October~~July 31, ~~2020,~~2021, our revenue would have been approximately ~~$10.3~~$5.6 million ~~lower~~higher and our cost of revenue and operating expenses on a combined basis would have been approximately ~~$12.3~~$7.2 million ~~lower,~~higher, which would have resulted in a ~~$2.0~~$1.6 million ~~increase~~decrease in our operating income.

~~As of October~~When comparing average exchange rates for the six months ended July 31, 2022 to average exchange rates for the six months ended July 31, 2021, ~~we employed~~the U.S. dollar strengthened relative to the British pound sterling, the euro, and the Australian dollar, resulting in an overall decrease in our revenue and expenses on a U.S. dollar-denominated basis. For the six months ended July 31, 2022, had foreign currency exchange rates remained unchanged from rates in effect for the six months ended July 31, 2021, our revenue would have been approximately ~~4,400 professionals, including part-time employees~~$8.2 million higher and ~~certain contractors, as compared to~~our cost of revenue and operating expenses on a combined basis would have been approximately ~~4,200 at October 31, 2020.~~$9.5 million higher, which would have resulted in a $1.3 million decrease in our operating income.

Revenue

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 warranties, and (b) nonrecurring revenue, which primarily consists of our perpetual licenses, hardware, installation services, and business advisory consulting and training services.

The following table sets forth revenue by category for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				% Change	Nine Months Ended October 31,				% Change		Three Months Ended July 31,				% Change	Six Months Ended July 31,				% Change
(in thousands)	(in thousands)	2021		2020		2021-2020	2021		2020		2021-2020	(in thousands)	2022		2021		2022 - 2021	2022		2021		2022-2021
Recurring revenue	Recurring revenue											Recurring revenue
Bundled SaaS revenue	Bundled SaaS revenue	$	48,390	$	37,406	29%	$	130,639	$	106,617	23%	Bundled SaaS revenue	$	54,679	$	42,940	27%	$	103,964	$	82,249	26%
Unbundled SaaS revenue	Unbundled SaaS revenue	33,713		21,577		56%	91,440		41,483		120%	Unbundled SaaS revenue	47,875		33,444		43%	93,320		57,727		62%
Optional managed services revenue	Optional managed services revenue	16,358		14,884		10%	49,688		43,344		15%	Optional managed services revenue	15,778		16,872		(6)%	31,691		33,330		(5)%
Total cloud revenue	Total cloud revenue	98,461		73,867		33%	271,767		191,444		42%	Total cloud revenue	118,332		93,256		27%	228,975		173,306		32%
Support revenue	Support revenue	60,350		76,366		(21)%	187,675		227,126		(17)%	Support revenue	48,108		62,922		(24)%	96,832		127,325		(24)%
Total recurring revenue	Total recurring revenue	158,811		150,233		6%	459,442		418,570		10%	Total recurring revenue	166,440		156,178		7%	325,807		300,631		8%
Nonrecurring revenue	Nonrecurring revenue											Nonrecurring revenue
Perpetual revenue	Perpetual revenue	40,436		35,461		14%	102,108		99,815		2%	Perpetual revenue	30,790		32,349		(5)%	64,048		61,672		4%
Professional services revenue	Professional services revenue	25,573		29,528		(13)%	78,791		86,782		(9)%	Professional services revenue	25,669		26,090		(2)%	50,950		53,218		(4)%
Total nonrecurring revenue	Total nonrecurring revenue	66,009		64,989		2%	180,899		186,597		(3)%	Total nonrecurring revenue	56,459		58,439		(3)%	114,998		114,890		—%
Total revenue	Total revenue	$	224,820	$	215,222	4%	$	640,341	$	605,167	6%	Total revenue	$	222,899	$	214,617	4%	$	440,805	$	415,521	6%

Recurring Revenue

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Recurring revenue increased approximately ~~$8.6~~$10.2 million, or 6%7%, from ~~$150.2~~$156.2 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$158.8~~$166.4 million in the three months ended ~~October~~July 31, ~~2021.~~2022. The increase consisted of a ~~$24.6~~$25.0 million increase in cloud revenue, partially offset by a ~~$16.0~~$14.8 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.~~services despite challenging macroeconomic and geopolitical conditions. 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 solutions.~~

~~Nine~~Six Months Ended ~~October~~July 31, ~~2021~~2022 compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2020.~~2021. Recurring revenue increased approximately ~~$40.8~~$25.2 million, or ~~10%~~8%, from ~~$418.6~~$300.6 million in the ~~nine~~six months ended ~~October~~July 31, ~~2020~~2021 to ~~$459.4~~$325.8 million in the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022. The increase consisted of ~~an $80.3~~a $55.7 million increase in cloud revenue, partially offset by a ~~$39.5~~$30.5 million decrease in support revenue. The increase in cloud revenue was primarily due to an increase in unbundled SaaS revenue resulting from new cloud deployments and 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 ~~for~~of cloud-based solutions and ~~services.~~services despite challenging macroeconomic and geopolitical conditions. 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 our cloud offerings, which is consistent with our cloud-first strategy and a general market shift from on-premises to cloud-based solutions.

Nonrecurring Revenue

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Nonrecurring revenue ~~increased~~decreased approximately ~~$1.0~~$1.9 million, or 2%3%, from ~~$65.0~~$58.4 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$66.0~~$56.5 million in the three months ended ~~October~~July 31, ~~2021.~~2022. The ~~increase~~decrease consisted of a ~~$5.0~~$1.5 million ~~increase~~decrease in perpetual revenue, ~~partially offset by~~and a ~~$4.0~~$0.4 million decrease in professional services revenue. The ~~increase~~decrease in perpetual revenue was primarily due to ~~the recognition of several large~~a decrease in on-premises license ~~arrangements executed during the three months ended October 31, 2021 that had been delayed~~revenue due to the ~~pandemic.~~continued shift in spending by our customers toward our cloud-based solutions, partially offset by an increase in demand for our offerings that include third-party hardware with embedded software. The decrease in one-time professional services revenue was primarily driven by a decrease in implementation services as a result of the overall shift in our business to a cloud-based model. ~~Our nonrecurring revenue can fluctuate from period to period, as some large contracts can represent a significant share of our nonrecurring revenue for a given period.~~

~~Nine~~Six Months Ended ~~October~~July 31, ~~2021~~2022 compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2020.~~2021. Nonrecurring revenue ~~decreased~~increased approximately ~~$5.7~~$0.1 million, ~~or 3%,~~ from ~~$186.6~~$114.9 million in the ~~nine~~six months ended ~~October~~July 31, ~~2020~~2021 to ~~$180.9~~$115.0 million in the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022. The ~~decrease~~increase consisted of ~~an $8.0~~a $2.4 million ~~decrease~~increase in ~~professional services~~perpetual revenue, partially offset by a $2.3 million decrease in professional services revenue. The increase in perpetual ~~revenue.~~revenue was primarily due to an increase in demand for our offerings that include third-party hardware with embedded software, partially offset by a decrease in on-premises license revenue due to the continued shift in spending by our customers toward our cloud-based solutions. The decrease in one-time professional services revenue was primarily driven by a decrease in implementation services as a result of the overall shift in our business to a cloud-based ~~model. The~~model, partially offset by an increase in ~~perpetual~~implementation services related to our bundled SaaS offerings.

Our nonrecurring revenue ~~was primarily due~~can fluctuate from period to ~~the recognition~~period, as some large contracts can represent a significant share of ~~several large license arrangements executed during the nine months ended October 31, 2021 that had been delayed due to the pandemic.~~our nonrecurring revenue for a given period.

Cost of Revenue

The following table sets forth cost of revenue by recurring and nonrecurring, as well as amortization of acquired technology for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				% Change	Nine Months Ended October 31,				% Change		Three Months Ended July 31,				% Change	Six Months Ended July 31,				% Change
(in thousands)	(in thousands)	2021		2020		2021-2020	2021		2020		2021-2020	(in thousands)	2022		2021		2022 - 2021	2022		2021		2022 - 2021
Cost of recurring revenue	Cost of recurring revenue	$	36,811	$	35,388	4%	$	112,523	$	103,252	9%	Cost of recurring revenue	$	40,852	$	37,636	9%	$	81,880	$	75,712	8%
Cost of nonrecurring revenue	Cost of nonrecurring revenue	30,524		34,440		(11)%	90,909		95,835		(5)%	Cost of nonrecurring revenue	30,700		30,505		1%	62,768		60,385		4%
Amortization of acquired technology	Amortization of acquired technology	4,749		4,044		17%	13,559		12,589		8%	Amortization of acquired technology	3,553		4,426		(20)%	7,192		8,810		(18)%
Total cost of revenue	Total cost of revenue	$	72,084	$	73,872	(2)%	$	216,991	$	211,676	3%	Total cost of revenue	$	75,105	$	72,567	3%	$	151,840	$	144,907	5%

Cost of Recurring Revenue

Cost of recurring 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~~cloud-based solutions. Cost of recurring revenue also includes amortization of capitalized software development costs, stock-based compensation expenses, facility costs, and other allocated overhead expenses.

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Cost of recurring revenue increased approximately ~~$1.4~~$3.3 million, or 4%9%, from ~~$35.4~~$37.6 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$36.8~~$40.9 million in the three months ended ~~October~~July 31, ~~2021.~~2022. The increase was primarily due to an increase in ~~data center~~employee compensation due to an increase in headcount and ~~cloud~~general wage inflation, an increase in contractor costs associated with the increase in cloud revenue, and an increase in ~~employee compensation and general overhead costs due~~amortization expense related to ~~an increase in headcount, partially offset by a decrease in contractor expenses.~~capitalized software development costs. Our recurring revenue gross margins ~~increased~~decreased from 76% in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~77%~~75% in the three months ended ~~October~~July 31, ~~2021,~~2022, primarily due to recurring ~~revenue~~costs increasing at a slightly faster rate than recurring ~~costs.~~revenue.

~~Nine~~Six Months Ended ~~October~~July 31, ~~2021~~2022 compared to ~~Nine~~Six Months Ended ~~October~~July 31, ~~2020.~~2021. Cost of recurring revenue increased approximately ~~$9.2~~$6.2 million, or 9%8%, from ~~$103.3~~$75.7 million in the ~~nine~~six months ended ~~October~~July 31, ~~2020~~2021 to ~~$112.5~~$81.9 million in the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022. The increase was primarily due to an increase in employee compensation ~~general overhead costs, and contractor costs compared to the prior year period during which we had implemented certain cost reduction measures~~ due to ~~the COVID-19 pandemic, as well as~~ an increase in headcount and general wage inflation, an increase in contractor expenses, an increase in amortization expense related to capitalized software development costs, and an increase in data center and cloud costs associated with the increase in cloud revenue. Our recurring ~~revenue~~ gross margins ~~increased from~~were 75% in each of the ~~nine~~six months ended ~~October~~July 31, ~~2020 to 76% in the nine months ended October 31, 2021, primarily due to recurring revenue increasing at a faster rate than recurring costs.~~2022 and 2021.

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~~enhance the security of our solutions.

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~~on-premises software solutions. Cost of nonrecurring 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.

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Cost of nonrecurring revenue ~~decreased~~increased approximately ~~$3.9~~$0.2 million, or ~~11%~~1%, from ~~$34.4 million in the three months ended October 31, 2020 to~~ $30.5 million in the three months ended ~~October~~July 31, 2021. The decrease was primarily driven by a decrease in general overhead expenses as a result of the Spin-Off, and a decrease in employee compensation and related expenses and stock-based compensation expense, due2021 to ~~a decrease in headcount supporting nonrecurring revenue offerings. Our nonrecurring gross margins increased from 47%~~$30.7 million in the three months ended ~~October~~July 31, ~~2020 to 54%~~2022. The increase was primarily driven by an increase in ~~the three months ended October 31, 2021, primarily due to a favorable offering mix~~third-party hardware delivered and related shipping and handling costs and a decrease in ~~nonrecurring costs.~~

~~Nine Months Ended October 31, 2021 compared to Nine Months Ended October 31, 2020.~~ ~~Cost of nonrecurring revenue decreased approximately $4.9 million, or 5%, from $95.8 million in~~capitalized setup costs during the ~~nine months ended October 31, 2020 to $90.9 million in the nine months ended October 31, 2021. The decrease was primarily driven~~current quarter, partially offset by ~~a decrease in general overhead expenses as a result of the Spin-Off,~~ a decrease in employee compensation and related expenses due to a decrease in headcount supporting our nonrecurring revenue ~~offerings, and lower contractor costs.~~offerings. Our overall nonrecurring gross margins ~~increased~~decreased from ~~49%~~48% in the ~~nine~~three months ended ~~October~~July 31, ~~2020~~2021 to ~~50%~~46% in the ~~nine~~three months ended ~~October~~July 31, ~~2021,~~2022, primarily due to a less favorable offering mix and an increase in nonrecurring costs.

Six Months Ended July 31, 2022 compared to Six Months Ended July 31, 2021. Cost of nonrecurring revenue increased approximately $2.4 million, or 4%, from $60.4 million in the six months ended July 31, 2021 to $62.8 million in the six months ended July 31, 2022. The increase was primarily driven by an increase in third-party hardware delivered and related shipping and handling costs and a decrease in capitalized setup costs during the current quarter, partially offset by a decrease in employee compensation and related expenses due to a decrease in headcount supporting our nonrecurring ~~costs.~~revenue offerings. Our overall nonrecurring gross margins decreased from 47% in the six months ended July 31, 2021 to 45% in the six months ended July 31, 2022, primarily due to a less favorable offering mix and nonrecurring costs increasing at a faster rate than nonrecurring revenue.

Amortization of Acquired Technology

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

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Amortization of acquired technology ~~increased~~decreased approximately ~~$0.7~~$0.8 million, or ~~17%~~20%, from ~~$4.0~~$4.4 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$4.7~~$3.6 million in the three months ended ~~October~~July 31, ~~2021.~~2022. The ~~increase~~decrease was attributable to acquired technology intangible assets from historical

business combinations becoming fully amortized, partially offset by amortization expense of acquired technology intangible assets associated with recent business ~~combinations~~combinations.

Six Months Ended July 31, 2022 compared to Six Months Ended July 31, 2021. Amortization of acquired technology decreased approximately $1.6 million, or 18%, ~~partially offset by~~from $8.8 million in the six months ended July 31, 2021 to $7.2 million in the six months ended July 31, 2022. The decrease was attributable to acquired technology intangible assets from historical business combinations becoming fully ~~amortized.~~

~~Nine Months Ended October 31, 2021 compared to Nine Months Ended October 31, 2020.~~ Amortization of acquired technology increased approximately $1.0 million, or 8%, from $12.6 million in the nine months ended October 31, 2020 to $13.6 million in the nine months ended October 31, 2021. The increase was attributable toamortized, partially offset by amortization expense of acquired technology intangible assets associated with recent business ~~combinations, partially offset by acquired technology intangible assets from historical business combinations becoming fully amortized.~~combinations.

Further discussion regarding our business combinations appears in Note 6,5, “Business Combinations” to our condensed consolidated financial statements included under Part I, Item 1 of this report.

Research and Development, Net

Research and development (“R&D”) 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 three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				% Change	Nine Months Ended October 31,				% Change		Three Months Ended July 31,				% Change	Six Months Ended July 31,				% Change
(in thousands)	(in thousands)	2021		2020		2021-2020	2021		2020		2021-2020	(in thousands)	2022		2021		2022 - 2021	2022		2021		2022 - 2021
Research and development, net	Research and development, net	$	31,029	$	33,293	(7)%	$	91,969	$	95,853	(4)%	Research and development, net	$	33,956	$	31,792	7%	$	64,903	$	60,940	7%

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~ 2021.~~Research and development, net (“~~R~~&D”) decreased~~&D increased approximately ~~$2.3~~$2.2 million, or 7%, from ~~$33.3~~$31.8 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$31.0~~$34.0 million in the three months ended ~~October~~July 31, ~~2021.~~2022. This ~~decrease~~increase was primarily attributable to a ~~$4.3~~$2.4 million ~~decrease~~increase in ~~indirect R&D shared support services and facility~~stock-based compensation expenses due to a ~~reduction~~year-over-year increase in our ~~shared support services workforce as~~stock price and an increase in the number of grant participants, a ~~result~~$0.9 million increase in employee compensation and related expenses due primarily to increased investment in R&D headcount, and a $0.8 million increase in contractor costs, partially offset by a $1.2 million decrease in general overhead costs, and a $1.0 million increase in capitalized software development costs.

Six Months Ended July 31, 2022 compared to Six Months Ended July 31, 2021. R&D increased approximately $4.0 million, or 7%, from $60.9 million in the six months ended July 31, 2021 to $64.9 million in the six months ended July 31, 2022. This increase was primarily attributable to a $3.0 million increase in stock-based compensation expenses due to a year-over-year increase in our stock price and an increase in the number of ~~the completion of the Spin-Off,~~grant participants, a ~~$1.0~~$2.4 million increase in employee compensation and related expenses due primarily to increased investment in R&D headcount, and a $1.1 million increase in contractor costs, partially offset by a $1.8 million increase in capitalized software development costs and a $0.9 million decrease in general overhead ~~costs, partially offset by a $2.2 million increase in contractor costs and a $1.8 million increase in employee compensation and related expenses due to increased investment in R&D headcount.~~

~~Nine Months Ended October 31, 2021 compared to Nine Months Ended October 31, 2020.~~ R&D decreased approximately $3.9 million, or 4%, from $95.9 million in the nine months ended October 31, 2020 to $92.0 million in the nine months ended October 31, 2021. This decrease was primarily attributable to a $12.7 million decrease in indirect R&D shared support services and facility expenses due to a reduction in our shared support services workforce as a result of the completion of the Spin-Off and a $2.3 million decrease in general overhead costs, partially offset by a $5.2 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 an increased investment in R&D headcount, a $4.3 million increase in contractor costs, and a $1.8 million increase in stock based compensation due to a shorter vesting schedule for prior year grants which resulted in a greater charge in the current period, additional performance based awards in connection with completion of the Spin-Off, and a change in the employee bonus payment structure.costs.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) 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 three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				% Change	Nine Months Ended October 31,				% Change		Three Months Ended July 31,				% Change	Six Months Ended July 31,				% Change
(in thousands)	(in thousands)	2021		2020		2021-2020	2021		2020		2021-2020	(in thousands)	2022		2021		2022 - 2021	2022		2021		2022 - 2021
Selling, general and administrative	Selling, general and administrative	$	89,778	$	80,167	12%	$	268,800	$	234,733	15%	Selling, general and administrative	$	105,705	$	91,376	16%	$	208,587	$	179,022	17%

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. ~~Selling, general and administrative (“~~SG~~&A”)~~&A expenses increased approximately ~~$9.6~~$14.3 million, or ~~12%~~16%, from ~~$80.2~~$91.4 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$89.8~~$105.7 million in the three months ended ~~October~~July 31, ~~2021.~~2022. This increase was primarily due to $4.9 million of accelerated facility costs and asset impairment charges due to the early termination or abandonment of certain office leases, a $4.9 million increase in stock-based compensation expense due to a year-over-year increase in our stock price and an increase in the number of grant participants, an increase of ~~$6.5~~$4.3 million in employee compensation and related expenses ~~and an increase of $1.7 million in contractor costs~~ compared to the prior year due to an increase in headcount and general wage inflation, a ~~$1.7 million increase in stock-based compensation expense due to a shorter vesting schedule for prior year grants which resulted in a greater charge in the current period, a $1.2~~$3.4 million increase in general overhead costs, ~~due to an increase in headcount,~~ a ~~$0.8~~$2.2 million increase in ~~professional service fees primarily~~marketing related expenses, and the recognition of a $1.8 million impairment charge recorded to ~~recent business combinations, and $0.6 million~~adjust the carrying amount of ~~one-time nonrecurring operational~~an office building we own to its fair value less 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.~~sell upon classification as held for sale. These increases in SG&A expenses were partially offset by a $3.4 million decrease in professional services expense due to one-time nonrecurring costs incurred during the three months ended July 31, 2021 in connection with prior acquisitions and the Spin-Off, and a $3.3 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~~a reduced number of ~~the Spin-Off and a $0.8 million reduction of facilities costs primarily due to the early termination and non-renewal of certain office leases.~~offices. SG&A expenses were also impacted by a $0.4 million decrease due to a change in the fair value of our obligations under contingent consideration arrangements. For the three months ended July 31, 2021, we recorded a net charge of $0.4 million as a result of revised outlooks for achieving the performance targets under several unrelated contingent consideration arrangements. There were no changes in the fair values of our contingent consideration obligations for the three months ended July 31, 2022, and the contingent consideration obligations were fully paid as of July 31, 2022.

Six Months Ended July 31, 2022 compared to Six Months Ended July 31, 2021. SG&A expenses increased approximately $29.6 million, or 17%, from $179.0 million in the six months ended July 31, 2021 to $208.6 million in the six months ended July 31, 2022. This increase was primarily due to $12.5 million of accelerated facility costs and asset impairment charges due to the early termination or abandonment of certain office leases, an increase of $11.5 million in employee compensation and related expenses compared to the prior year due to an increase in headcount and general wage inflation, a $6.3 million increase in stock-based compensation expense due to a year-over-year increase in our stock price and an increase in the number of grant participants, a $4.3 million increase in general overhead costs, a $2.7 million increase in travel and entertainment compared to the prior year during which we had implemented certain cost reduction measures due to the COVID-19 pandemic, a $2.5 million increase in marketing related expenses, and the recognition of a $1.8 million impairment charge recorded to adjust the carrying amount of an office building we own to its fair value less costs to sell upon classification as held for sale. These increases in SG&A expenses were partially offset by a $5.1 million decrease in facilities expenses as a result of a reduced number of offices, and a $5.0 million decrease in professional services expense primarily due to one-time nonrecurring costs incurred during the six months ended July 31, 2021 in connection with prior acquisitions and the Spin-Off. SG&A expenses were also impacted by a $0.8 million decrease due to a change in the fair value of our obligations under contingent consideration arrangements, from a net ~~benefit~~charge of ~~$0.4~~$0.6 million in the ~~three~~six months ended ~~October~~July 31, ~~2020~~2021 to ~~an insignificant amount~~a net benefit of $0.2 million during the ~~three~~six months ended ~~October~~July 31, ~~2021,~~2022, as a result of revised outlooks for achieving the performance targets under several unrelated contingent consideration arrangements.

~~Nine Months Ended October 31, 2021 compared to Nine Months Ended October 31, 2020.~~ SG&A expenses increased approximately $34.1 million, or 15%, from $234.7 million in the nine months ended October 31, 2020 to $268.8 million in the nine months ended October 31, 2021. This increase was primarily due to an increase of $15.2 million in employee compensation and related expenses and a $4.4 million increase in contractor costs compared to the prior year during which we had implemented certain cost reduction measures due to the COVID-19 pandemic, a $11.5 million increase in stock-based compensation expense due to a shorter vesting schedule for prior year grants which resulted in a greater charge in the current period, additional performance based awards in connection with completion of the Spin-Off, and a change in the employee bonus payment structure, a $4.3 million increase in professional service fees primarily related to recent business combinations, a $2.6 million increase in marketing related expenses, $2.1 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, and the absence of a $1.3 million insurance recovery received in the prior year related to a shareholder proxy contest. These increases in SG&A expenses were partially offset by a $9.9 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 and a $1.6 million decrease in travel related expenses due to cost reduction initiatives we implemented in response to the COVID-19 pandemic. SG&A expenses were also impacted by a $3.5 million increase due to a change in the fair value of our obligations under contingent consideration arrangements, from a net benefit of $2.8 million in the nine months ended October 31, 2020 to a net charge of $0.7 million during the nine months ended October 31, 2021, as a result of revised outlooks for achieving the performance targets under several unrelated contingent consideration arrangements.

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.

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 three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				% Change	Nine Months Ended October 31,				% Change		Three Months Ended July 31,				% Change	Six Months Ended July 31,				% Change
(in thousands)	(in thousands)	2021		2020		2021-2020	2021		2020		2021-2020	(in thousands)	2022		2021		2022 - 2021	2022		2021		2022 - 2021
Amortization of other acquired intangible assets	Amortization of other acquired intangible assets	$	7,261	$	7,833	(7)%	$	21,934	$	23,316	(6)%	Amortization of other acquired intangible assets	$	6,623	$	7,345	(10)%	$	13,467	$	14,673	(8)%

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Amortization of other acquired intangible assets decreased approximately ~~$0.5~~$0.7 million, or 7%10%, from ~~$7.8 million in the three months ended October 31, 2020 to~~ $7.3 million in the three months ended ~~October~~July 31, ~~2021.~~2021 to $6.6 million in the three months ended July 31, 2022. The decrease was attributable to acquired customer-related intangible assets from historical business combinations becoming fully amortized, partially offset by ~~amortization expense associated with acquired intangible assets from recent business combinations~~.

~~Nine Months Ended October 31, 2021 compared to Nine Months Ended October 31, 2020.~~ Amortization of other acquired intangible assets decreased approximately $1.4 million, or 6%, from $23.3 million in the nine months ended October 31, 2020 to $21.9 million in the nine months ended October 31, 2021. The decrease was attributable to acquired customer-related intangible assets from historical business combinations becoming fully amortized, partially offset by amortization expense associated with acquired intangible assets from recent business combinations.

Six Months Ended July 31, 2022 compared to Six Months Ended July 31, 2021. Amortization of other acquired intangible assets decreased approximately $1.2 million, or 8%, from $14.7 million in the six months ended July 31, 2021 to $13.5 million in the six months ended July 31, 2022. The decrease was attributable to acquired customer-related intangible assets from historical

business combinations becoming fully amortized, partially offset by amortization expense associated with acquired intangible assets from recent business combinations.

Other Expense, Net

The following table sets forth total other expense, net for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				% Change	Nine Months Ended October 31,				% Change		Three Months Ended July 31,				% Change	Six Months Ended July 31,				% Change
(in thousands)	(in thousands)	2021		2020		2021-2020	2021		2020		2021-2020	(in thousands)	2022		2021		2022 - 2021	2022		2021		2022 - 2021
Interest income	Interest income	$	101	$	314	(68)%	$	147	$	1,217	(88)%	Interest income	$	498	$	23	*	$	697	$	46	*
Interest expense	Interest expense	(1,502)		(9,718)		(85)%	(8,720)		(30,530)		(71)%	Interest expense	(1,863)		(2,199)		(15)%	(3,364)		(7,218)		(53)%
Losses on early retirements of debt	Losses on early retirements of debt	—		—		*	(2,474)		(143)		*	Losses on early retirements of debt	—		—		—%	—		(2,474)		(100)%
Other (expense) income:
Foreign currency losses, net		(687)		(1,456)		(53)%	(1,691)		(1,303)		30%
Other income (expense):												Other income (expense):
Foreign currency gains (losses), net												Foreign currency gains (losses), net	547		(463)		(218)%	2,260		(1,004)		*
Losses on derivatives	Losses on derivatives	—		(949)		(100)%	(14,374)		(812)		*	Losses on derivatives	—		—		—%	—		(14,374)		(100)%
Fair value change of future tranche right	Fair value change of future tranche right	—		(9,224)		(100)%	15,810		(22,834)		*	Fair value change of future tranche right	—		—		—%	—		15,810		(100)%
Other, net	Other, net	270		(41)		*	4,044		(1,297)		*	Other, net	(80)		619		(113)%	(119)		3,774		(103)%
Total other (expense) income, net		(417)		(11,670)		(96)%	3,789		(26,246)		*
Total other income, net												Total other income, net	467		156		199%	2,141		4,206		(49)%
Total other expense, net	Total other expense, net	$	(1,818)	$	(21,074)	(91)%	$	(7,258)	$	(55,702)	(87)%	Total other expense, net	$	(898)	$	(2,020)	(56)%	$	(526)	$	(5,440)	(90)%

* Percentage is not meaningful.

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Total other expense, net, decreased by ~~$19.3~~$1.1 million from ~~$21.1~~$2.0 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$1.8~~$0.9 million in the three months ended ~~October~~July 31, ~~2021.~~2022.

Interest expense decreased from ~~$9.7~~$2.2 million in the three months ended ~~October~~July 31, ~~2020~~2021 to ~~$1.5~~$1.9 million in the three months ended ~~October~~July 31, 2022 due to lower interest rates as well as lower outstanding borrowings due to our 2014 Notes maturing on June 1, 2021.

We recorded $0.5 million of net foreign currency gains in the three months ended July 31, 2022 compared to $0.5 million of net foreign currency losses in the three months ended July 31, 2021. Our foreign currency gains in the current period resulted primarily from fluctuations associated with the exchange rate movement of the U.S. dollar against the British pound sterling and the Israeli shekel.

We recorded $0.1 million of expense within other, net in the three months ended July 31, 2022 compared to $0.6 million of income within other, net in the three months ended July 31, 2021.

Six Months Ended July 31, 2022 compared to Six Months Ended July 31, 2021. Total other expense, net, decreased by $4.9 million from $5.4 million in the six months ended July 31, 2021 to $0.5 million in the six months ended July 31, 2022.

Interest expense decreased from $7.2 million in the six months ended July 31, 2021 to $3.4 million in the six months ended July 31, 2022 due to lower interest rates as well as lower outstanding borrowings due to our 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 $3.2 million in the three months ended October 31, 2020. See Note 1, "Description of Business and Summary of Significant Accounting Policies" in our notes to our unaudited condensed consolidated financial statements included under Part I, Item 1 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 the repayment of all outstanding borrowings under our 2017 Revolving Credit Facility~~ during the three months ended ~~October 31, 2020.~~April 30, 2021. Further discussion regarding our 2014 Notes, ~~2017~~ Term Loan, ~~2017 Revolving Credit Facility,~~ and 2021 Notes appears in Note 8,7, “Long-term Debt” to our condensed consolidated financial statements included under Part I, Item 1 of this report.

~~We recorded $0.7 million of net foreign currency losses in~~During the ~~three~~six months ended October 31, 2021 compared to $1.5 million of net foreign currency losses in the three months ended October 31, 2020. Our foreign currency losses in the current period resulted primarily from fluctuations associated with exchange rate movement of the U.S. dollar against the Brazilian real.

~~We recorded a non-cash Future Tranche~~ ~~Right revaluation loss of $9.2 million in the three months ended October 31, 2020, primarily due to changes in our stock price during the period~~. In April 2021, upon the issuance of the Series B Preferred Stock, the Future Tranche Right liability was reclassified to Series B Preferred Stock and no further fair value changes will be recorded. Please refer to Note 10, “Convertible Preferred Stock” and Note 13, “Fair Value Measurements” to our condensed consolidated financial statements included under Part I, Item 1 of this report for additional information regarding the Future Tranche Right.

~~Nine Months Ended October 31, 2021 compared to Nine Months Ended October 31, 2020.~~ ~~Total other expense, net, decreased by $48.4 million from $55.7 million in the nine months ended October 31, 2020 to $7.3 million in the nine months ended October 31, 2021.~~

Interest expense decreased from $30.5 million in the nine months ended October 31, 2020 to $8.7 million in the nine months ended October 31, 2021 due to lower 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 $9.6 million in the nine months ended October 31, 2020. 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 the repayment of all outstanding borrowings under our 2017 Revolving Credit Facility during the three months ended October 31, 2020.

~~During the nine months ended October~~July 31, 2021, we recorded $2.5 million of losses on early retirements of debt, $2.0 million of which was a result of repaying $309.0 million of our ~~2017~~ Term Loan. In April 2021, we also amended the 2017 Credit Agreement and 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 8,7, “Long-term Debt” to our condensed consolidated financial statements included under Part I, Item 1 of this report.

We recorded ~~$1.7~~$2.3 million of net foreign currency gains in the six months ended July 31, 2022 compared to $1.0 million of net foreign currency losses in the ~~nine~~six months ended ~~October~~July 31, ~~2021 compared to $1.3 million of net foreign currency losses in the nine months ended October 31, 2020.~~2021. Our foreign currency ~~losses~~gains in the current period resulted primarily from fluctuations associated with the exchange rate movement of the U.S. dollar against the British pound sterling, the ~~Australian dollar,~~Brazilian real, and the ~~Brazilian real.~~Israeli shekel.

During the ~~nine~~six months ended ~~October~~July 31, 2021, 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~~current period.

~~During the nine months ended October 31, 2021, we~~We recorded a non-cash Future Tranche Right revaluation gain of $15.8 million ~~compared to a revaluation loss of $22.8 million during nine~~in the six months ended ~~October~~July 31, ~~2020. The non-cash gain for the current period relates~~2021 related to the final mark-to-market adjustment of the Future Tranche Right (right of the Apax Investor to purchase Series B Preferred Stock at a future date), issued in connection with the closing of the Series A Preferred Stock issuance on May 7, 2020. ~~The change in fair value was primarily due to a decrease in our stock price from January 31,~~In April 2021, ~~to immediately prior to~~upon the issuance of the Series B Preferred Stock, ~~which decreased~~ the ~~estimated~~Future Tranche Right liability was reclassified to Series B Preferred Stock and no further fair value changes have been recorded. Please refer to Note 9, “Convertible Preferred Stock” to our condensed consolidated financial statements included under Part I, Item 1 of this report for additional information regarding 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 declining credit market interest rates associated with worsened and uncertain economic conditions occurring during the period due to the COVID-19 pandemic.

~~We recorded $4.0 million of income within other,~~Other expense, net infor the ~~nine~~six months ended ~~October~~July 31, 2021 ~~primarily due to the recognition~~also included an unrealized gain of a $3.1 million, ~~unrealized gain from a fair~~which adjusted the carrying value ~~adjustment to~~of a noncontrolling equity investment ~~related to~~based on an observable transaction. There were no observable price ~~change~~changes in our investments in privately-held companies during the ~~period. During the nine~~six months ended ~~October~~July 31, ~~2020 we recorded $1.3 million of expenses within other, net primarily due to fees in connection with our second amendment to the 2017 Credit Agreement.~~2022.

Provision for Income Taxes

The following table sets forth our provision ~~from~~for income taxes for the three and ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended October 31,				% Change	Nine Months Ended October 31,				% Change		Three Months Ended July 31,				% Change	Six Months Ended July 31,				% Change
(in thousands)	(in thousands)	2021		2020		2021-2020	2021		2020		2021-2020	(in thousands)	2022		2021		2022 - 2021	2022		2021		2022 - 2021
Provision for income taxes	Provision for income taxes	$	9,349	$	1,084	*	$	13,478	$	9,776	38%	Provision for income taxes	$	2,848	$	4,201	(32)%	$	3,144	$	4,129	(24)%

Three Months Ended ~~October~~July 31, ~~2021~~2022 compared to Three Months Ended ~~October~~July 31, ~~2020.~~2021. Our effective income tax rate was ~~40.9%~~465.4% for the three months ended ~~October~~July 31, ~~2021,~~2022, compared to ~~a negative~~an effective income tax rate of ~~106.6%~~44.1% for the three months ended ~~October~~July 31, ~~2020.~~2021.

For the three months ended ~~October~~July 31, ~~2021,~~2022, the effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a discrete income tax provision of $2.1 million attributable to the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in a foreign jurisdiction and U.S. taxation of certain foreign ~~income, partially~~activities, offset by lower statutory rates in certain foreign jurisdictions. The result was an income tax provision of ~~$9.3~~$2.8 million on pretax income of ~~$22.9~~$0.6 million, which represented an effective income tax rate of ~~40.9%~~465.4%. Excluding the discrete income tax provision attributable to the foreign jurisdiction valuation allowance, the result was an income tax provision of $0.7 million on pre-tax income of $0.6 million, resulting in an effective tax rate of 124.8%.

For the three months ended ~~October~~July 31, ~~2020,~~2021, the income tax rate differs from the U.S. federal statutory rate of 21% primarily due to the impact of U.S. taxation of certain foreign activities limitations on certain tax deductions, and a change in the fair value of the Future Tranche Right associated with the Series A Preferred Stock, offset by lower statutory rates in several foreign jurisdictions. The result was an income tax provision of $1.1 million on a pretax loss of $1.0 million, which represented a negative effective income tax rate of 106.6%.

~~Nine Months Ended October 31, 2021 compared to Nine Months Ended October 31, 2020.~~ ~~Our effective income tax rate was 40.4% for the nine months ended October 31, 2021, compared to a negative effective income tax rate of 60.7% for the nine months ended October 31, 2020.~~

~~For the nine months ended October 31, 2021, the effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign income~~ and the impact of a tax rate change in a foreign jurisdiction, offset by a change in the fair value of the Future Tranche Right associated with the Preferred Stock issuance and by lower statutory rates in several foreign jurisdictions. The result was an income tax provision of $4.2 million on pretax income of $9.5 million, which represented an effective income tax rate of 44.1%.

Six Months Ended July 31, 2022 compared to Six Months Ended July 31, 2021. Our effective income tax rate was 212.1% for the six months ended July 31, 2022, compared to an effective income tax rate of 39.2% for the six months ended July 31, 2021.

For the six months ended July 31, 2022, the effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a discrete income tax provision of $2.1 million attributable to the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in a foreign jurisdiction and U.S. taxation of certain foreign activities, offset by lower statutory rates in certain foreign jurisdictions. The result was an income tax provision of ~~$13.5~~$3.1 million on pretax income of ~~$33.4~~$1.5 million, which represented an effective income tax rate of ~~40.4%~~212.1%. Excluding the discrete income tax provision attributable to

the foreign jurisdiction valuation allowance, the result was an income tax provision of $1.0 million on pre-tax income of $1.5 million, resulting in an effective tax rate of 71.5%.

For the ~~nine~~six months ended ~~October~~July 31, ~~2020,~~2021, the income tax rate differs from the U.S. federal statutory rate of 21% primarily due to the impact of U.S. taxation of certain foreign activities ~~limitations on certain~~and the impact of a tax ~~deductions, and~~rate change in a foreign jurisdiction, offset by a change in the fair value of the Future Tranche Right associated with the ~~Series A~~ Preferred Stock ~~offset~~issuance and by lower statutory rates in several foreign ~~jurisdictions and the favorable impact of recently issued regulations.~~jurisdictions. The result was an income tax provision of ~~$9.8~~$4.1 million on a pretax ~~loss~~income of ~~$16.1~~$10.5 million, which represented ~~a negative~~an effective income tax rate of ~~60.7%~~39.2%.

~~Net Income from Discontinued Operations~~

As more fully described in Note 2, "Discontinued Operations” to our condensed consolidated financial statements included under Part I, Item 1 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, the historical results of operations for Cognyte have been included within discontinued operations in our condensed 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 ~~an affiliate of~~the Apax ~~Partners~~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,~~on May 7, 2020, 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 Preferred Stock conversion price was instead adjusted to $36.38 per share based on the ratio of the relative trading prices of Verint and Cognyte following the Spin-Off. In connection with the completion of the Spin-Off, on April 6, 2021, the Apax Investor purchased $200.0 million of our Series B Preferred ~~Stock in an issuance that closed on April 6, 2021.~~Stock. 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 ~~October~~July 31, ~~2021,~~2022, Apax’s ownership in us on an as-converted basis was approximately ~~12.8%~~12.7%.

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.~~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,~~9, “Convertible Preferred Stock”, to our condensed consolidated financial statements included under Part I, Item 1 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 business acquisitions. Cash generated from operations, along with our existing cash, cash equivalents, and short-term investments, are our primary sources of operating liquidity.

On June 29, 2017, we entered into the 2017 Credit Agreement with certain lenders and terminated 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 our 1.5% convertible senior notes (the “2014 Notes”), we paid an aggregate of $389.8 million in cash for the settlement 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.Notes. Further discussion of the settlement of our ~~2017 Credit Agreement as amended,~~2014 Notes 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 ~~$57.2~~$57.0 million of net cash expended for business acquisitions during the ~~nine months~~year ended ~~October~~January 31, ~~2021.~~2022. There were no business acquisitions during the ~~year~~six months ended ~~January~~July 31, ~~2021.~~2022. During the six months ended July 31, 2021, we completed an acquisition of certain assets from a leader in contact center hiring automation that qualified as a business combination. This transaction was not material to our condensed consolidated financial statements. Please refer to Note 6,5, “Business Combinations”, to our condensed consolidated financial statements included under Part I, Item 1 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~~On April ~~6, 2021. Additionally,~~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 ~~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.~~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 issuance of the Series B Preferred Stock mentioned above, 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 portion of our operating income is earned outside the United States. Cash, cash equivalents, short-term investments, and restricted cash, cash equivalents, and restricted bank time deposits (excluding any long-term portions) held by our subsidiaries outside of the United States wer~~e $122.2~~were $121.6 million and ~~$241.1~~$140.2 million as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, 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 $0.3 million and $0.4 million, ~~and $0.6 million,~~ at ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021,~~2022, 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 on~~that earnings of our foreign subsidiaries have been subject to U.S. taxation as of ~~October~~July 31, ~~2021,~~2022, 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, cash equivalents, restricted cash, cash equivalents, and bank time deposits, and short-term investments, as well as our total debt, as of ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021:~~2022:


		October 31,		January 31,			July 31,		January 31,
(in thousands)	(in thousands)	2021		2021		(in thousands)	2022		2022
Cash and cash equivalents	Cash and cash equivalents	$	307,847	$	585,273	Cash and cash equivalents	$	256,502	$	358,805
Restricted cash and cash equivalents, and restricted bank time deposits (excluding long term portions)	Restricted cash and cash equivalents, and restricted bank time deposits (excluding long term portions)	6		15		Restricted cash and cash equivalents, and restricted bank time deposits (excluding long term portions)	23		6
Short-term investments	Short-term investments	661		46,300		Short-term investments	718		765
Total cash, cash equivalents, restricted cash and cash equivalents, restricted bank time deposits, and short-term investments	Total cash, cash equivalents, restricted cash and cash equivalents, restricted bank time deposits, and short-term investments	$	308,514	$	631,588	Total cash, cash equivalents, restricted cash and cash equivalents, restricted bank time deposits, and short-term investments	$	257,243	$	359,576
Total debt, including current portions	Total debt, including current portions	$	406,411	$	789,494	Total debt, including current portions	$	407,816	$	406,954

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 ~~including~~ under ~~our new stock~~ repurchase ~~program~~programs that may be in place from time to time (subject to the terms of our ~~2017~~ Credit Agreement). ~~Further discussion regarding this new stock repurchase program appears in~~Please see the “Liquidity and Capital Resources Requirements” section ~~below.~~below for further information about our recent stock repurchase programs.

Condensed Consolidated Cash Flow Activity

The following table summarizes selected items from our condensed consolidated statements of cash flows for the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and ~~2020:~~2021:

Nine Months Ended
October 31,
(in thousands) 2021 2020
Net cash provided by operating activities from continuing operations $ 70,249 $ 121,254
Net cash used in investing activities from continuing operations (29,140) (95,125)
Net cash (used in) provided by financing activities from continuing operations (424,248) 83,950
Effect of foreign currency exchange rate changes on cash and cash equivalents (29) (2,093)
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents from discontinued operations (9,055) 26,149
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents $ (392,223) $ 134,135


	Six Months Ended July 31,
(in thousands)	2022		2021
Net cash provided by operating activities from continuing operations	$	46,680	$	26,853
Net cash (used in) provided by investing activities	(13,954)		27,390
Net cash used in financing activities	(132,437)		(421,912)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(2,575)		340
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents from discontinued operations	—		(12,294)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	$	(102,286)	$	(379,623)

Our financing activities ~~from continuing operations~~ used ~~$424.2~~$132.4 million of net cash and our investing activities ~~from continuing operations~~ used ~~$29.1~~$14.0 million of net cash during the ~~nine~~six months ended ~~October~~July 31, ~~2021,~~2022, which was partially offset by ~~$70.2~~$46.7 million of cash generated from operating ~~activities from continuing operations.~~activities. 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 ~~$70.2~~$46.7 million of net cash during the ~~nine~~six months ended ~~October~~July 31, ~~2021,~~2022, compared to ~~$121.3~~$26.9 million generated during the ~~nine~~six months ended ~~October~~July 31, ~~2020.~~2021. Our operating cash flow in the current period ~~decreased despite a strong year-over-year increase in collections~~increased due to $31.3 million of lower ~~cash operating costs~~combined interest and net income tax payments, with the higher income tax payments in the prior ~~year~~period being related to the Spin-Off, and a favorable impact on operating cash flow from changes in operating assets and liabilities compared to the prior period, partially offset by $8.4 million of higher operating lease payments as a result of the ~~COVID-19 pandemic, one-time separation costs and higher income tax payments related to the Spin-Off in the current period, and a greater portion~~early termination of ~~bonuses being paid in cash compared to the prior year.~~several leased offices.

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~~(Used in) Provided By Investing Activities ~~from Continuing Operations~~

During the ~~nine~~six months ended ~~October~~July 31, ~~2021,~~2022, our investing activities ~~from continuing operations~~ used ~~$29.1 million of net cash, including $57.2 million of net cash utilized for business combinations and $17.5 million of payments for property,~~

~~equipment and capitalized software development costs, partially offset by $45.6 million of net sales and maturities of short-term investments.~~

~~During the nine months ended October 31, 2020, our investing activities from continuing operations used $95.1~~$14.0 million of net cash, consisting primarily ~~of $79.3 million of net purchases of short-term investments and $15.8 million~~ of payments for property, equipment and capitalized software development costs.

During the six months ended July 31, 2021, our investing activities provided $27.4 million of net cash, consisting primarily of $45.6 million of net sales and maturities of short-term investments, partially offset by $11.3 million of payments for property, equipment and capitalized software development costs and $7.0 million of net cash utilized for a business combination.

We had no significant commitments for capital expenditures at ~~October~~July 31, ~~2021.~~2022.

Net Cash ~~(Used in) Provided by~~Used in Financing Activities

For the ~~nine~~six months ended ~~October~~July 31, 2022, our financing activities used $132.4 million of net cash, primarily due to $105.7 million of payments to repurchase common stock, $20.8 million of payments of Preferred Stock dividends, $3.7 million for the financing portion of payments under contingent consideration arrangements related to prior business combinations, $1.6 million of finance lease payments, a $0.5 million distribution to a noncontrolling shareholder of one of our subsidiaries, and $0.2 million paid for debt-related issuance fees.

For the six months ended July 31, 2021, our financing activities used ~~$424.2~~$421.9 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 completion of the Spin-Off, ~~$75.9~~$75.5 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~~$10.5 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, ~~$2.3~~$1.2 million of finance lease payments, and a ~~$0.6~~$0.2 million distribution to a noncontrolling shareholder of one of our subsidiaries, partially offset by $315.0 million of net proceeds from the issuance of our 2021 Notes, $198.7 million of net proceeds from the issuance of ~~the Series B Preferred Stock,~~preferred stock, and $38.3 million ~~from~~of a dividend and other settlements received from Cognyte ~~during the period~~ in connection with the ~~Spin-Off.~~Spin-Off during the period.

For the nine months ended October 31, 2020, our financing activities from continuing operations provided $84.0 million of net cash, primarily due to $197.3 million of net proceeds from the issuance of the Series A Preferred Stock and a $155.0 million increase in borrowings under our revolving credit facility, partially offset by $205.4 million of repayments of borrowings and other financing obligations, $36.8 million of payments to repurchase common stock, $13.0 million of payments to repurchase $13.1 million principal amount of our convertible notes, $8.5 million for the financing portion of payments under contingent consideration arrangements related to prior business combinations, $2.2 million paid for debt-related costs, $1.6 million of payments of Preferred Stock dividends, and a $0.6 million distribution to a noncontrolling shareholder of one of our subsidiaries.

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 subject 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, including, but not limited to, the effects of the COVID-19 ~~pandemic.~~pandemic or other macroeconomic factors. 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 December 4, 2019, we announced that our board of directors had authorized a stock repurchase program whereby we were authorized to repurchase up to $300.0 million of common stock over the period ending on February 1, 2021. During the year ended January 31, 2021, we acquired approximately 613,000 shares of our common stock at a cost of $34.0 million under this program. Total repurchases under the 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 toto 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 ~~nine months~~year ended ~~October~~January 31, ~~2021,~~2022, we acquired approximately 1,600,000 shares of our common stock at a cost of $75.4 million under this ~~program. No further repurchases are expected under~~program, and this program ~~for the year ending~~expired on January 31, 2022.

States ~~or through borrowing from~~and no further repurchases are expected under this program for the 2021 Revolving Credit Facility, subject to compliance with applicable laws, rules and regulations. Please refer to Note 17, “Subsequent Event”, in Part I, Item 1, of this report for more information regarding this stock repurchase program.year ending January 31, 2023.

Financing Arrangements

2021 Notes

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

We used a portion of the net proceeds from the issuance of the 2021 Notes to pay the costs of the capped 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.

Based on the closing market price of our common stock on ~~October~~July 31, ~~2021,~~2022, the if-converted value of the 2021 Notes was less than their aggregate principal amount.

Capped Calls

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 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 ~~October~~July 31, ~~2021,~~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 with a maturity date of June 1, 2021 (the “2014 Notes”).~~our 2014 Notes. Net proceeds from the 2014 Notes after underwriting discounts were $391.9 million. The 2014 Notes paid 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 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 to cash collateralize the 2014 Notes. On May 28, 2021, prior to 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 interest thereon using the $390.0 million of cash we had placed in ~~escrow.~~escrow on February 26, 2021 to cash collateralize the 2014 Notes. 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, 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 of common stock if all of the 2014 Notes had been converted. 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 of common stock if all of the 2014 Notes had been converted prior to maturity.

~~During the year ended January 31, 2021, we repurchased $13.1 million principal amount of our 2014 Notes in open market transactions for an aggregate of $13.0 million in cash.~~

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”). Prior to the Spin-Off, the combination of the Note Hedges and the Warrants served 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 ~~were,~~ and Warrants ~~are,~~were 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 had 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 equaled the initial conversion price of the 2014 Notes. As 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 in cash, shares of our common stock, or a combination thereof, at our option, and they 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 charge to additional paid-in capital. Our exercise rights under the Note Hedges were automatically triggered upon conversion of 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 received 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.

During the year ended January 31, 2021, we repurchased $13.1 million principal amount of our 2014 Notes (the “Repurchased 2014 Notes”) in open market transactions for an aggregate of $13.0 million in cash. 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

price per share of our common stock ~~exceeds~~exceeded the strike price of the Warrants, and we ~~will be obligated to issue~~issued an aggregate of 293,143 shares of our common stock ~~having a value equal to such excess.~~as part of the cashless exercise of approximately 5,031,000 Warrants. The Warrants ~~have~~had a dilutive effect on net income per share to the extent that the average market value of our common stock ~~exceeds~~exceeded the strike price of the Warrants. AsAll outstanding Warrants were exercised or expired as of ~~October~~January 31, 2021, no Warrants had been exercised, 4,340,000 Warrants had expired, and 5,525,000 Warrants remained outstanding. From November 1, 2021 through December 3, 2021, we issued 20,852 shares of common stock as part of the cashless exercise of approximately 1,776,000 Warrants.2022.

Credit ~~Agreements~~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~~“Term Loan”), of which $100.0 million ~~and $410.1 million~~ was outstanding at ~~October~~July 31, ~~2021~~2022 and January 31, ~~2021, respectively,~~2022, and a $300.0 million revolving credit facility maturing on April 9, 2026 (the ~~“2021~~“Revolving Credit Facility”), none of which was drawn as of July 31, 2022 and January 31, 2022. The Revolving Credit Facility replaced our prior $300.0 million revolving credit facility (the “Prior Revolving Credit Facility”), and is subject to increase and reduction from time to time according to the terms of the ~~2017~~ Credit Agreement.

On April 9, 2021, we amended the 2017 Credit Agreement (the “2021 Amendment”), pursuant to which we refinanced our $300.0 million 2017 Revolving Credit Facility, which would otherwise have matured on June 29, 2022, with the $300.0 million 2021 Revolving Credit Facility. The 2021 Amendment also provides that for purposes of the acceleration of the maturity of the 2017 Term Loan and 2021 Revolving Credit Facility, neither the 2014 Notes nor the 2021 Notes will be deemed to be outstanding if such notes are cash collateralized prior to their respective maturity dates in accordance with the 2017 Credit Agreement. As noted above, we cash collateralized the 2014 Notes prior to settlement on June 1, 2021, and we currently intend to cash collateralize, or otherwise refinance or repurchase, the 2021 Notes prior to their maturity in 2026.

The maturity dates of the ~~2017~~ Term Loan and ~~2017~~Prior 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 Spin-Off ~~of our Cyber Intelligence 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 Term Loan and the Prior Revolving Credit Facility discussed above if such 2014 Notes were cash collateralized in accordance with the ~~2017~~ Credit ~~Agreement for purposes of the determination of the maturity dates of the 2017 Term Loan and the 2017 Revolving Credit Facility discussed above.~~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~~Prior Revolving Credit Facility were not accelerated to March 1, 2021. In connection with, the maturity 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.

On April 9, 2021, we amended the Credit Agreement (the “2021 Amendment”), pursuant to which we refinanced the Prior Revolving Credit Facility, which would otherwise have matured on June 29, 2022, with the $300.0 million Revolving Credit Facility maturing on April 9, 2026.

For borrowings 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"). In addition, under the ~~2021~~ Revolving Credit Facility, and previously under the ~~2017~~Prior 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 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The Credit Agreement also contains a financial covenant that, solely with respect to the Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.5 to 1. At July 31, 2022, our Leverage Ratio was approximately 1.2 to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the Credit Agreement.

Optional prepayments of loans under the ~~2017~~ Credit Agreement are generally permitted without premium or penalty.

Our obligations under the ~~2017~~ Credit Agreement are guaranteed by each of our direct and indirect existing and future material domestic wholly owned restricted subsidiaries and are secured by a security interest in substantially all of our assets and the assets of the guarantor subsidiaries, subject to certain exceptions.

The 2017 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The 2017 Credit Agreement also contains a financial covenant that, solely with respect to the 2021 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50 to 1. At October 31, 2021, our Leverage Ratio was approximately 1.1 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.

Prior to May 1, 2020, the 2018 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 condensed consolidated balance sheet and were reclassified into the condensed consolidated statement of operations within interest expense in the periods in which the hedged transactions affected 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 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 condensed consolidated statement of operations over the remaining term of the 2018 Swap, as the hedged interest payments occur.

On April 13, 2021, we paid $16.5 million to ~~the counterparty to~~ settle ~~the 2018 Swap~~our existing interest rate 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~~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 condensed consolidated statement of operations for the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2021 . The associated $3.7 million deferred tax asset was reclassified from accumulated other comprehensive loss and netted against income taxes ~~payable, which are included within other liabilities on~~receivable during the year ended January 31, 2022.

Please refer to Note 13, “Derivative Financial Instruments”, to our condensed consolidated ~~balance sheet as~~financial statements included under Part I, Item 1 of ~~October 31, 2021.~~this report for more information regarding the termination of our interest rate swap.

Contractual Obligations

Our principal commitments primarily consist of long-term debt, dividends on Preferred Stock, leases for office space and open non-cancellable purchase orders. As of ~~October~~July 31, ~~2021,~~2022, we believe there have been no material changes to our contractual obligations from those disclosed in Part II, Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended January 31, 2022. For additional information regarding our leases, long-term debt and our commitments and contingencies, see Note 17, “Leases”, in the Form 10-K and Note 7, “Long-Term Debt”, Note 9, “Convertible Preferred Stock”, and Note 15, “Commitments and Contingencies” in the notes to our condensed consolidated financial statements included in Part I, Item 1 of this report.

As of July 31, 2022, our total operating lease liabilities were ~~$57.4~~$39.9 million, of which ~~$13.5~~$11.8 million is included within accrued expenses and other current liabilities (current portions), and ~~$43.9~~$28.1 million is included as operating lease liabilities (long-term portions), on our condensed consolidated balance sheets. ~~We have no current plans to lease significant additional office space. During~~Beginning during the ~~nine~~second half of the year ended January 31, 2022 and continuing into the six months ended ~~October~~July 31, ~~2021,~~2022, we decided to exit certain leased offices, 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.

As of October 31, 2021, our unconditional purchase obligations totaled approximately $256.3 million, the majority of which is due over the next 12 to 36 months. Our purchase obligations are primarily commitments to vendors for the procurement of goods and services in the ordinary course of business, commitments with contract manufacturers, and 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 condensed consolidated balance sheet at ~~October~~July 31, ~~2021~~2022 included ~~$13.0~~$16.5 million of non-current tax reserves, net of related benefits (including interest and penalties of ~~$3.2 million)~~$3.7 million ) for uncertain tax positions. 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”, and Note 16, “Commitments and Contingencies” in the notes to our condensed consolidated financial statements included in Part I, Item 1 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 ~~nine~~six months ended ~~October~~July 31, ~~2021,~~2022, we made ~~$9.6~~$7.5 million of payments under contingent consideration arrangements. As of ~~October~~July 31, ~~2021, potential future cash payments, and earned~~2022, we currently do not expect to pay any additional consideration ~~expected to be paid, subsequent to October 31, 2021~~ under contingent consideration arrangements ~~total $14.9 million,~~as the ~~estimated fair value of which was $7.6 million and was reported in accrued expenses and other current liabilities. The~~ performance periods associated with these ~~potential payments extend through~~arrangements expired during the year ended January 31, 2022.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, and the potential impact of these pronouncements on our condensed consolidated financial statements, see Note 1, “Basis of Presentation and Significant Accounting Policies” to the condensed consolidated financial statements in Part I, Item 1 of this report.

6759

Table of Contents

Item 3. 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 April 2021, we issued $315.0 million in aggregate principal amount of the 2021 Notes. 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. Concurrent with the issuance of the 2021 Notes, we entered into 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 ~~2017~~2021 Notes have a fixed annual interest rate of 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.

Interest rates on loans under the Credit Agreement ~~bears interest~~are periodically reset, at ~~variable rates based on LIBOR~~our option, at either a Eurodollar Rate or an ABR Rate (each as defined in the 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 ~~2021~~ Revolving Credit Facility, the margin is determined by reference to our ~~Leverage Ratio. Because the interest rates applicable~~Consolidated Total Debt to ~~borrowings under the 2017 Credit Agreement are variable, we are exposed to market risk from changes~~Consolidated EBITDA (each as defined in the ~~underlying index rates, which affect our cost of borrowing.~~

To partially mitigate risks associated with the variable interest rate on our 2017 Term Loan, in April 2018, we executed a pay-fixed, receive-variable interest rate swap agreement, which was originally set to expire on June 29, 2024.Credit Agreement) leverage ratio. On April 13, 2021, we ~~paid $16.5 million to the counterparty to early-settle the interest rate swap agreement as our interest rate risk exposure had been significantly reduced as we~~ repaid $309.0 million of our ~~2017~~ Term Loan, reducing the outstanding balance to $100.0 ~~million.~~million as of July 31, 2022. As of July 31, 2022, the interest rate on our Term Loan borrowings was 3.80%. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.

The periodic interest rates on borrowings under the 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.

On March 5, 2021, the Financial Conduct Authority of the United Kingdom announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the case of the 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. We are considering the impact the planned phase 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.

~~In April 2021, we issued $315.0 million in aggregate principal amount of the 2021 Notes. The 2021 Notes have a fixed annual interest rate; therefore, we~~Inflation Risk

We do not ~~have economic interest rate exposure on the 2021 Notes. We carry the 2021 Notes at face value less the unamortized issuance costs~~believe that inflation has had a material effect on our ~~condensed consolidated balance sheets. Generally,~~business to date. However, given the ~~fair market value~~current macroeconomic environment, we will continue to look for ways to manage costs and mitigate any changes in our customers purchasing behavior that may occur due to significant inflationary pressure. If our costs, in particular labor, sales and marketing and hosting costs, become subject to sustained or increased inflationary pressure, we may be unable to fully offset such higher costs through price increases, which could harm our business, financial condition, and results of the 2021 Notes will increase as interest rates decline and decrease as interest rates rise. In addition, the fair market value of the 2021 Notes fluctuates when the market price of our common stock fluctuates.operations.

The section entitled “Quantitative and Qualitative Disclosures About Market Risk” under Part II, Item 7A of our Annual Report on Form 10-K for the year ended January 31, ~~2021~~2022 provides detailed quantitative and qualitative discussions of the market risks affecting our operations. Other than as described above under “Interest Rate Risk on Our Debt” and “Inflation Risk”, and the market risk that is created by the global market disruptions and uncertainties resulting from the COVID-19 pandemic and other

Table of Contents

macroeconomic factors, we believe that our market risk profile did not materially change during the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~

2022.

6861

Table of Contents

Item 4. 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 ~~October~~July 31, ~~2021.~~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 ~~October~~July 31, ~~2021.~~2022.

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 ~~October~~July 31, ~~2021,~~2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Due to~~As a result of the COVID-19 pandemic, we have adopted a ~~significant number~~hybrid work model under which the majority of our employees ~~are still working~~now work from ~~home.~~home on a full or part-time basis. 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 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.

6962

Table of Contents

Part II

Item 1. Legal Proceedings

See Note ~~16,~~15, “Commitments and Contingencies” of the Notes to the condensed consolidated financial statements under Part I, Item 1 for information regarding our legal proceedings.

Item 1A. Risk Factors

~~Other than as discussed below, there~~There have been no material changes to the Risk Factors described in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, ~~2021 and the Risk Factor described in Part II “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2021 (the “First Quarter Form 10-Q”).~~2022. In addition to the other information set forth in this Quarterly Report, you should carefully consider the risks discussed in our Annual Report on Form 10-K, ~~and the First Quarter Form 10-Q,~~ which could materially affect our business, financial condition, or operating results. The risks described in our Annual Report on Form 10-K ~~and the First Quarter Form 10-Q~~ are not the only risks facing us, however. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially and adversely affect our business, financial condition, or operating results in the future.

~~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. This 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 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 has continued to date into the year ending January 31, 2022. During the nine months ended October 31, 2021, we continued to experience solid demand for our cloud solutions as our customers have 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 each country in which we and our customers, partners, or vendors operate.

Notwithstanding the strong demand for our cloud 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.

~~Table of Contents~~

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 Executive Order and related guidance. As a result, if our understanding of its application to our workforce differs from our federal customers’ interpretation, or many of 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 contract rather than comply.

The ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made or may make in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities and Use of Proceeds

From November 1, 2021 through December 3, 2021 we issued 20,852 shares of common stock as part of the cashless exercise of approximately 1,776,000 Warrants that were issued concurrently with the issuance of the 2014 Notes. For additional information regarding these Warrants or 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 I, Item 2 of this report.

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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~~1,500,000 shares of common stock to offset dilution from our equity compensation program for such fiscal year. ~~Repurchases are expected~~To further offset such dilution as well as other dilutive transactions, on March 22, 2022, our board of directors authorized an additional 500,000 shares of common stock to be ~~financed~~repurchased under this program. During the six months ended July 31, 2022, we repurchased 2,000,000 shares under this stock repurchase program with available cash in the United States or through borrowing from the 2021 Revolving Credit Facility, subject to compliance with applicable laws, rules and regulations. Please refer to Note 17, “Subsequent Event”, in Part I, Item 1 of this report for more information regarding this stock repurchase program.States.

From time to time, we have purchased ~~treasury~~common stock from our directors, officers, and other employees to facilitate income tax withholding ~~and~~by us or the payment ~~requirements~~of income taxes by such holders upon vesting of equity awards occurring during a Company-imposed trading blackout or lockup period.

Share repurchase activity during the three months ended ~~October~~July 31, ~~2021~~2022 was as follows:

Period Total Number Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that My Yet Be Purchased Under the Plans or Programs
(in thousands)
August 1, 2021 - August 31, 2021 — $ — — $ —
September 1, 2021 - September 30, 2021 10,625 44.57 — —
October 1, 2021 - October 31, 2021 — — — —
10,625 $ 44.57 — $ —


Period	Total Number Shares Purchased	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
May 1, 2022 — May 31, 2022	—	$	—	—	$	—
June 1, 2022 — June 30, 2022	264	52.46		—	—
July 1, 2022 — July 31, 2022	—	—		—	—
	264	$	52.46	—	$	—

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

Item 3. Defaults Upon Senior Securities

None.

7163

Table of Contents

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

7264

Table of Contents

Item 6. Exhibits

The following exhibit list includes agreements that we entered into or that became effective during the three months ended ~~October~~July 31, ~~2021:~~2022:

Number

Description

Filed Herewith /
Incorporated by
Reference from

3.1

Certificate of Amendment of Amended and Restated Certificate of Incorporation of Verint Systems Inc.

Filed herewith

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350 (1)

Filed herewith

32.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350 (1)

Filed herewith

101.INS

XBRL Instance Document

Filed herewith

101.SCH

XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Filed 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.

7365

Table of Contents

Signature

Pursuant to the requirements 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.


~~December 6, 2021~~September 7, 2022			/s/ Douglas E. Robinson
			Douglas E. Robinson
			Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

7466


VERINT SYSTEMS INC. AND SUBSIDIARIES
Index to Condensed Consolidated Financial Statements (Unaudited)
			Page

Condensed Consolidated Balance Sheets as of ~~October~~July 31 ~~2021~~, 2022 and January 31, ~~2021~~2022			2
Condensed Consolidated Statements of Operations for the Three and ~~Nine~~ Six Months Ended ~~October~~July 31 , 2022 and 2021 ~~and 2020~~			43
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and ~~Nine~~Six Months Ended ~~October~~July 31 , 2022 and 2021 ~~and 2020~~			64
Condensed Consolidated Statements of Stockholders’ Equity for the Three and ~~Nine~~ Six Months Ended ~~October~~July 31 , 2022 and 2021 ~~and 2020~~			75
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~October~~July 31 , 2022 and 2021 ~~and 2020~~			97
Notes to Condensed Consolidated Financial Statements			119


(in thousands)	Three Months Ended October 31, 2020		Nine Months Ended October 31, 2020
Revenue	$	112,979	$	319,438
Cost of revenue	29,331		91,952
Operating expenses	65,964		180,843
Other income, net	3,317		4,399
Income from discontinued operations before benefit from income taxes	21,001		51,042
Provision for income taxes	7,073		6,714
Net income from discontinued operations	13,928		44,328
Net income from discontinued operations attributable to noncontrolling interests	1,343		4,908
Net income from discontinued operations attributable to Verint Systems Inc. common shares	$	12,585	$	39,420


(in thousands)	Unrealized Gains (Losses) on Foreign Exchange Contracts Designated as Hedges		Unrealized Loss on Interest Rate Swap Designated as Hedge		Foreign Currency Translation Adjustments		Total
Accumulated other comprehensive income (loss) at January 31, 2021	$	634	$	(13,031)	$	(124,481)	$	(136,878)
Distribution of Cognyte Software Ltd.	(559)		—		17,682		17,123
Other comprehensive income (loss) before reclassifications	180		—		(2,843)		(2,663)
Amounts reclassified out of accumulated other comprehensive income (loss)	136		(1,014)		—		(878)
Amounts reclassified upon partial early retirement of the 2017 Term Loan	—		(12,017)		—		(12,017)
Net other comprehensive (loss) income	(515)		13,031		14,839		27,355
Accumulated other comprehensive income (loss) at October 31, 2021	$	119	$	—	$	(109,642)	$	(109,523)


	April 6,			May 7,
	2021			2020
Risk-free interest rate for preferred stock	2.35		%	1.31		%
Implied credit spread	6.78		%	10.78		%
Expected volatility	30.00		%	30.00		%
Verint common stock price	$	45.91		$	45.44