Verint Systems (VRNT) 8-K Verint Completes Financial Filings

Exhibit 99.2

Verint Systems Inc. and Subsidiaries
Information About Non-GAAP Measures

The following tables include a reconciliation of certain financial measures not prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) to the most directly comparable financial measure prepared in accordance with GAAP. Non-GAAP measures should not be considered in isolation or as a substitute for comparable measures of financial performance prepared in accordance with GAAP. We believe that the non-GAAP measures we present in the following tables have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

We believe that the non-GAAP measures we present in the following tables provide meaningful supplemental information regarding Verint’s operating results primarily because they exclude certain non-cash charges or items that we do not consider part of ongoing operating results when planning and forecasting and when assessing the performance of our business, with our individual operating segments or our senior management. We believe that our non-GAAP measures also facilitate the comparison by management and investors of results between periods and among our peer companies.

Our non-GAAP measures reflect adjustments to the corresponding GAAP measure based on the items set forth below. The purpose of these adjustments is to give an indication of our performance exclusive of certain non-cash charges and other items that are considered by our senior management to be outside of our ongoing operating results.

Acquisition Related Adjustments

Acquisition related adjustments include (i) revenue adjustments related to acquisitions, (ii) amortization of acquisition-related intangibles, (iii) integration costs, (iv) acquisition related write-downs, (v) in-process research and development, (vi) impairment of goodwill and intangible assets and (vii) other adjustments. These adjustments are discussed below.

Revenue adjustments related to acquisitions.We exclude from our non-GAAP revenue the impact of fair value adjustments required under GAAP relating to acquired customer support contracts which would have otherwise been recognized on a standalone basis. We also exclude certain sales concession adjustments associated with acquisitions, relating to accounts receivable balances that existed prior to the acquisition date. We exclude these adjustments from our non-GAAP measures because these are not reflective of our ongoing operations.

Amortization of other acquired intangible assets.When we acquire an entity, we are required under GAAP to record the fair values of the intangible assets of the acquired entity and amortize them over their useful lives. We exclude the amortization of acquisition-related intangibles from our non-GAAP measures. These expenses are excluded from our non-GAAP measures because they are non-cash charges. In addition, these amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Thus, we also exclude these amounts to provide better comparability of pre- and post-acquisition operating results.

Integration costs.We exclude from our non-GAAP measures expenses directly related to the integration of acquired entities. These expenses are excluded from our non-GAAP measures because they are not reflective of our ongoing operations.

In-process research and development.We exclude from our non-GAAP measures the fair value of in-process research and development upon the date of an acquisition, which represents incomplete

research and development projects that had not yet reached technological feasibility and have no known alternative future use as of the date of the acquisition. These expenses are excluded from our non-GAAP measures because they are non-cash charges.

Impairments of goodwill and other acquired intangible assets.Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and identifiable intangible assets acquired. We exclude from our non-GAAP measures charges relating to impairment of goodwill and acquired identifiable intangible assets. These expenses are excluded from our non-GAAP measures because they are non-cash charges.

Other legal expenses (recoveries).We exclude from our non-GAAP measures other legal fees and settlements associated with certain intellectual property inherited from acquisitions and certain other litigation unrelated to acquisitions. We excluded these items from our non-GAAP results because they are not reflective of our ongoing operations.

Other adjustments.We exclude from our non-GAAP measures legal and other professional fees associated with acquisitions. We excluded these items from our non-GAAP results because they are not reflective of our ongoing operations.

Other Adjustments

Stock-based compensation expenses.We exclude stock-based compensation expenses related to stock options, restricted stock awards and units and phantom stock from our non-GAAP measures. These expenses are excluded from our non-GAAP measures because they are generally non-cash charges although in current periods we had higher amounts of phantom stock settled in cash.

Expenses related to our filing delay.We exclude from our non-GAAP measures expenses associated with our restatement of previously filed financial statements and our extended filing delay. These expenses included professional fees and related expenses as well as expenses associated with a special cash retention program. These expenses are excluded from our non-GAAP measures because they are not reflective of our ongoing operations.

Restructuring costs.We exclude from our non-GAAP measures expense associated with the restructuring of our operations due to internal or external market factors. These expenses are excluded from our non-GAAP measures because they are not reflective of our ongoing operations.

Unrealized gains and losses on investments and derivatives.We exclude from our non-GAAP measures investment write-down in auction rate securities and unrealized gain/(loss) on embedded derivatives, interest rate swaps, and foreign currency derivatives. These gains/(losses) are excluded from our non-GAAP measures because they are non-cash gains/(losses).

Settlement with OCS.In the year ended January 31, 2007, we recorded a charge related to our July 31, 2006 settlement with the Office of Chief Scientist in Israel (“OCS”), pursuant to which we exited a royalty-bearing program and the OCS accepted a settlement of our royalty obligations under this program. We exclude from our non-GAAP financial results expenses associated with exiting this program because they are not reflective of our ongoing operations.

Gain on sale of land.We exclude from our non-GAAP financial measures the gain from the sale of a parcel of land. This gain is excluded from our non-GAAP measures because it is not reflective of our ongoing operations.

Non-cash tax adjustments.Our non-GAAP quarterly provision for income taxes reflects expected annual effective tax rate on a cash basis. Our non-GAAP annual provision for income taxes reflects the amount of taxes we actually paid. Non-cash tax adjustments are the difference between this amount and our GAAP tax provision.

Reconciliation of GAAP to Non-GAAP Results
(In thousands, except per share data)

																												Three Months
	Years Ended January 31,												Three Months Ended												Year Ended			Ended
	2006			2007			2008			2009			Apr 30, 2009			Jul 31, 2009			Oct 31, 2009			Jan 31, 2010			Jan 31, 2010			April 30, 2010
Table of Reconciliation from GAAP Revenue to Non-GAAP Revenue
GAAP revenue	$	278,754		$	368,778		$	534,543		$	669,544		$	175,148		$	169,269		$	186,480		$	172,736		$	703,633		$	172,613
Revenue adjustments related to acquisitions		—			—			37,254			5,890			—			—			—			—			—			—
Non-GAAP revenue	$	278,754		$	368,778		$	571,797		$	675,434		$	175,148		$	169,269		$	186,480		$	172,736		$	703,633		$	172,613
Table of Reconciliation from GAAP Gross Profit to Non-GAAP Gross Profit
GAAP gross profit	$	144,143		$	177,507		$	304,501		$	411,294		$	118,079		$	110,202		$	122,970		$	112,447		$	463,698		$	114,806
Revenue adjustments related to acquisitions		—			—			37,254			5,890			—												—			—
Amortization and impairment of acquired technology and backlog		5,017			7,664			8,018			9,024			2,099			1,977			1,973			1,972			8,021			2,233
Settlement with OCS		—			19,158			—			—			—			—			—			—			—			—
Stock-based compensation expenses		11			1,673			4,548			5,433			915			1,556			1,647			1,736			5,854			2,408
Expenses related to our filing delay		—			—			2,427			—			—			—			—			—			—			—
Non-GAAP gross profit	$	149,171		$	206,002		$	356,748		$	431,641		$	121,093		$	113,735		$	126,590		$	116,155		$	477,573		$	119,447
Table of Reconciliation from GAAP Operating Income (Loss) to Non-GAAP Operating Income
GAAP operating income (loss)	$	4,112		$	(47,253	)	$	(114,630	)	$	(15,026	)	$	36,009		$	13,709		$	23,735		$	(7,774	)	$	65,679		$	(3,982	)
Revenue adjustments related to acquisitions		—			—			37,254			5,890			—			—			—			—			—			—
Amortization and impairment of acquired technology and backlog		5,017			7,664			8,018			9,024			2,099			1,977			1,973			1,972			8,021			2,233
Amortization of other acquired intangible assets		1,337			3,164			19,668			25,249			5,930			5,586			5,376			5,376			22,268			5,339
Settlement with OCS		—			19,158			—			—			—			—			—			—			—			—
Impairments of goodwill and other acquired intangible assets		—			21,103			22,934			25,961			—			—			—			—			—			—
In-process research and development		2,852			—			6,682			—			—			—			—			—			—			—
Integration costs		—			—			10,980			3,261			—			—			—			—			—			—
Restructuring costs		—			—			3,308			5,685			13			9			1			118			141			—
Other legal expenses (recoveries)		2,554			—			8,708			(4,292	)		—			—			—			—			—			—
Stock-based compensation expenses		1,187			18,791			31,061			36,011			6,556			13,138			11,682			12,869			44,245			17,969
Other adjustments		—			—			—			—			—			—			—			762			762			507
Expenses related to our filing delay		26			3,660			41,422			28,681			6,562			10,220			12,473			25,256			54,511			20,213
Gain on sale of land		—			(765	)		—			—			—			—			—			—			—			—
Non-GAAP operating income	$	17,085		$	25,522		$	75,405		$	120,444		$	57,169		$	44,639		$	55,240		$	38,579		$	195,627		$	42,279
Table of Reconciliation from GAAP Other Income (Expense), net to Non-GAAP Other Income (Expense), net
GAAP other income (expense), net	$	7,995		$	7,796		$	(55,186	)	$	(43,880	)	$	(11,169	)	$	(9,377	)	$	(8,617	)	$	(12,308	)	$	(41,471	)	$	(9,563	)
Unrealized gains and losses on investments and derivatives		—			—			26,703			(1,807	)		(2,462	)		(1,381	)		(634	)		(3,572	)		(8,049	)		(3,967	)
Non-GAAP other income (expense), net	$	7,995		$	7,796		$	(28,483	)	$	(45,687	)	$	(13,631	)	$	(10,758	)	$	(9,251	)	$	(15,880	)	$	(49,520	)	$	(13,530	)
Table of Reconciliation from GAAP Tax Provision to Non-GAAP Tax Provision
GAAP tax provision	$	9,625		$	141		$	27,729		$	19,671		$	4,268		$	2,850		$	1,803		$	(1,813	)	$	7,108		$	2,071
Non-cash tax adjustments		(5,436	)		3,182			(23,616	)		(16,352	)		(794	)		(146	)		1,867			3,626			4,553			1,091
Non-GAAP tax provision	$	4,189		$	3,323		$	4,113		$	3,319		$	3,474		$	2,704		$	3,670		$	1,813		$	11,661		$	3,162

																											Three Months
	Years Ended January 31,											Three Months Ended												Year Ended			Ended
	2006		2007			2008			2009			Apr 30, 2009			Jul 31, 2009			Oct 31, 2009			Jan 31, 2010			Jan 31, 2010			April 30, 2010
Table of Reconciliation from GAAP Net Income (Loss) Attributable to Verint Systems Inc. to Non-GAAP Net Income Attributable to Verint Systems Inc.
GAAP net income (loss) attributable to Verint Systems Inc.	$	1,664	$	(40,519	)	$	(198,609	)	$	(80,388	)	$	19,634		$	1,598		$	13,176		$	(18,791	)	$	15,617		$	(16,208	)
GAAP net income (loss) adjustments
Revenue adjustments related to acquisitions		—		—			37,254			5,890			—			—			—			—			—			—
Amortization and impairment of acquired technology and backlog		5,017		7,664			8,018			9,024			2,099			1,977			1,973			1,972			8,021			2,233
Amortization of other acquired intangible assets		1,337		3,164			19,668			25,249			5,930			5,586			5,376			5,376			22,268			5,339
Settlement with OCS		—		19,158			—			—			—			—			—			—			—			—
Impairments of goodwill and other acquired intangible assets		—		21,103			22,934			25,961			—			—			—			—			—			—
In-process research and development		2,852		—			6,682			—			—			—			—			—			—			—
Integration costs		—		—			10,980			3,261			—			—			—			—			—			—
Restructuring costs		—		—			3,308			5,685			13			9			1			118			141			—
Other legal expenses (recoveries)		2,554		—			8,708			(4,292	)		—			—			—			—			—			—
Stock-based compensation expenses		1,187		18,791			31,061			36,011			6,556			13,138			11,682			12,869			44,245			17,969
Other adjustments		—		—			—			—			—			—			—			762			762			507
Expenses related to our filing delay		26		3,660			41,422			28,681			6,562			10,220			12,473			25,256			54,511			20,213
Gain on sale of land		—		(765	)		—			—			—			—			—			—			—			—
Unrealized gains and losses on investments and derivatives		—		—			26,703			(1,807	)		(2,462	)		(1,381	)		(634	)		(3,572	)		(8,049	)		(3,967	)
Non-cash tax adjustments		5,436		(3,182	)		23,616			16,352			794			146			(1,867	)		(3,626	)		(4,553	)		(1,091	)
Total GAAP net income (loss) adjustments		18,409		69,593			240,354			150,015			19,492			29,695			29,004			39,155			117,346			41,203
Non-GAAP net income attributable to Verint Systems Inc.	$	20,073	$	29,074		$	41,745		$	69,627		$	39,126		$	31,293		$	42,180		$	20,364		$	132,963		$	24,995
Table of Reconciliation from GAAP Net Income (Loss) Attributable to Verint Systems Inc. Common Shares to Non-GAAP Net Income Attributable to Verint Systems Inc. Common Shares
GAAP net income (loss) attributable to Verint Systems Inc. common shares		1,664		(40,519	)		(207,290	)		(93,452	)		16,372			(1,808	)		9,733			(22,271	)		2,026			(19,611	)
Total GAAP net income (loss) adjustments		18,409		69,593			240,354			150,015			19,492			29,695			29,004			39,155			117,346			41,203
Non-GAAP net income (loss) attributable to Verint Systems Inc. common shares	$	20,073	$	29,074		$	33,064		$	56,563		$	35,864		$	27,887		$	38,737		$	16,884		$	119,372		$	21,592
Table Comparing GAAP Diluted Net Income (Loss) Per Share Attributable to Verint Systems Inc. to Non-GAAP Net Income Per Share Attributable to Verint Systems Inc.
GAAP diluted net income (loss) per share attributable to Verint Systems Inc.	$	0.05	$	(1.26	)	$	(6.43	)	$	(2.88	)	$	0.47		$	(0.06	)	$	0.29		$	(0.68	)	$	0.06		$	(0.60	)
Non-GAAP diluted net income per share attributable to Verint Systems Inc.	$	0.62	$	0.88		$	1.00		$	1.65		$	0.93		$	0.73		$	0.98		$	0.47		$	3.09		$	0.57
GAAP diluted weighted-average common shares outstanding		32,620		32,156			32,222			32,394			42,151			32,465			33,330			32,517			33,127			32,663
Non-GAAP diluted weighted-average common shares outstanding		32,620		32,979			33,035			42,298			42,151			42,682			43,213			43,551			42,963			43,920