Verint Systems (VRNT) 8-K Customer Engagement Cloud Platform Connects Work, Data and Experiences Across the Enterprise

EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On February 1, 2021 (the “Separation Date”), Verint (the “Company”) completed the previously announced separation of its Cyber Intelligence Solutions business (the “Business” or “Cognyte”), into a separate, independent publicly traded company, Cognyte Software Ltd. (NASDAQ: CGNT). This separation was completed by means of a distribution in which each holder of Verint’s common stock, par value $0.001 per share, received one share of Cognyte’s common stock, no par value, for every share of common stock of Verint held of record as of the close of business on January 25, 2021 (the “Record Date”). After the distribution, the Company does not beneficially own any shares of common stock in Cognyte and will no longer consolidate Cognyte into its financial results for periods ending after January 31, 2021 (the entire transaction being referred to as the “Separation”).

The unaudited pro forma condensed consolidated financial statements have been derived from the Company’s historical consolidated financial statements and give effect to the Separation. The unaudited pro forma condensed consolidated statements of operations reflect the Company’s results as if the Separation and related transactions had occurred as of February 1, 2017. The unaudited pro forma condensed consolidated balance sheet as of October 31, 2020 reflects the Company’s financial position as if the Separation had occurred on October 31, 2020. After the date of the Separation, the historical financial results of Cognyte will be reflected in our consolidated financial statements as discontinued operations under U.S. generally accepted accounting principles (“GAAP”) for all periods presented through the Separation Date.

The unaudited pro forma condensed consolidated financial statements are not intended to be a complete presentation of the Company’s financial position or results of operations had the Separation occurred as of and for the periods indicated. In addition, the unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only and are not necessarily indicative of the Company’s future results of operations or financial condition had the Separation and related transactions been completed on the dates assumed. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with our historical consolidated financial statements and accompanying notes.

The pro forma adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, and best reflect the Separation and Verint’s financial condition and results of operations as if it was a stand-alone entity in accordance with GAAP. The unaudited pro forma condensed consolidated statements of operations for the nine months ended October 31, 2020 and years ended January 31, 2020, January 31, 2019, and January 31, 2018 include corporate overhead costs previously allocated to the historical combined statements of operations of Cognyte that do not meet the definition of expenses related to discontinued operations in accordance with Financial Accounting Standards Board Accounting Standards Codification 205, “Presentation of Financial Statements” (“ASC 205”). A significant portion of these corporate overhead costs relate to executive management, finance, legal, information technology, and other shared services functions and are reflected in Verint’s pro forma income (loss) from continuing operations. The pro forma adjustments represent our best estimates based on information currently available and may differ from those that will be calculated to report Cognyte as discontinued operations in our future filings.

The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures About Acquired and Disposed Businesses, as adopted by the SEC on May 21, 2020. The unaudited pro forma condensed consolidated financial statements do not include adjustments to reflect any potential synergies that may be achievable, or dis-synergy costs that may occur, in connection with the Separation.

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VERINT SYSTEMS INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Balance Sheet

October 31, 2020

(in thousands)	Historical Consolidated			Cognyte Separation (a)			Transaction Accounting Adjustments			Notes	Pro Forma Verint
Assets
Current Assets:
Cash and cash equivalents	$	526,815		$	(217,883	)	$	153,654		(b)	$	470,029
								7,443		(c)
Restricted cash and cash equivalents, and restricted bank time deposits		24,223			(24,214	)		—				9
Short-term investments		104,454			(11,762	)		—				92,692
Accounts receivable, net of allowance for doubtful accounts		346,565			(181,111	)		—				165,454
Contract assets, net		63,095			(28,676	)		—				34,419
Receivable from Cognyte		—			—			35,000		(d)		35,000
Inventories		21,748			(15,272	)		—				6,476
Prepaid expenses and other current assets		68,800			(33,470	)		—				35,330
Total current assets		1,155,700			(512,388	)		196,097				839,409
Property and equipment, net		108,578			(39,474	)		—				69,104
Operating lease right-of-use assets		90,446			(28,923	)		—				61,523
Goodwill		1,464,451			(157,896	)		—				1,306,555
Intangible assets, net		159,120			(6,181	)		—				152,939
Other assets		146,388			(52,921	)		2,363		(e)		95,830
Total assets	$	3,124,683		$	(797,783	)	$	198,460			$	2,525,360
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	66,807		$	(30,253	)	$	—			$	36,554
Accrued expenses and other current liabilities		246,949			(85,626	)		31,527		(f)		198,518
								418		(c)
								5,250		(d)
Current maturities of long-term debt		383,449			—			—				383,449
Contract liabilities		334,843			(127,531	)		—				207,312
Current maturities of note to parent		—			(7,025	)		7,025		(c)		—
Total current liabilities		1,032,048			(250,435	)		44,220				825,833
Long-term debt		403,292			—			—				403,292
Long-term contract liabilities		39,810			(22,040	)		—				17,770
Operating lease liabilities		80,040			(20,256	)		—				59,784
Other liabilities		98,016			(17,400	)		(5,250	)	(d)		75,366
Total liabilities		1,653,206			(310,131	)		38,970				1,382,045
Preferred Stock		200,628			—			—				200,628
Commitments and Contingencies
Stockholders’ Equity:
Common stock		70			—			—				70
Additional paid-in capital/Net parent investment in Cognyte		1,717,384			(488,425	)		153,654		(b)		1,419,976
								35,000		(d)
								2,363		(e)
Treasury stock		(208,124	)		—			—				(208,124	)
Accumulated deficit		(93,875	)		—			(31,527	)	(f)		(125,402	)
Accumulated other comprehensive loss		(162,806	)		16,403			—				(146,403	)
Total Verint Systems Inc. stockholders’ equity		1,252,649			(472,022	)		159,490				940,117
Noncontrolling interest		18,200			(15,630	)		—				2,570
Total stockholders’ equity		1,270,849			(487,652	)		159,490				942,687
Total liabilities, preferred stock and stockholders’ equity	$	3,124,683		$	(797,783	)	$	198,460			$	2,525,360

See notes to unaudited pro forma condensed consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Nine Months Ended October 31, 2020

(in thousands, except per share data)	Historical Consolidated			Cognyte Separation (a)			Transaction Accounting Adjustments			Notes	Pro Forma Verint
Revenue:
Product	$	279,225		$	(145,141	)	$	—			$	134,084
Service and support		645,380			(174,297	)		—				471,083
Total revenue		924,605			(319,438	)		—				605,167
Cost of revenue:
Product		67,938			(43,063	)		1,722		(g)		26,597
Service and support		222,383			(51,475	)		1,653		(g)		172,561
Amortization of acquired technology		13,307			(718	)		—				12,589
Total cost of revenue		303,628			(95,256	)		3,375				211,747
Gross profit		620,977			(224,182	)		(3,375	)			393,420
Operating expenses:
Research and development, net		175,375			(92,177	)		12,727		(g)		95,803
								(122	)	(i)
Selling, general and administrative		335,141			(113,230	)		29,681		(g)		234,509
								(17,083	)	(i)
Amortization of other acquired intangible assets		24,229			(913	)		—				23,316
Total operating expenses		534,745			(206,320	)		25,203				353,628
Operating income		86,232			(17,862	)		(28,578	)			39,792
Other income (expense), net:
Interest income		2,392			(1,175	)		—				1,217
Interest expense		(30,692	)		137			(118	)	(j)		(30,673	)
Other expense, net		(23,003	)		(3,243	)		160		(k)		(26,086	)
Total other expense, net		(51,303	)		(4,281	)		42				(55,542	)
Income (loss) from continuing operations before provision for income taxes		34,929			(22,143	)		(28,536	)			(15,750	)
Provision for income taxes		16,490			(7,376	)		508		(l)		9,622
Net income (loss) from continuing operations		18,439			(14,767	)		(29,044	)			(25,372	)
Net income attributable to noncontrolling interest		5,784			(4,908	)		—				876
Net income (loss) from continuing operations attributable to Verint Systems Inc.		12,655			(9,859	)		(29,044	)			(26,248	)
Dividends on preferred stock		(5,142	)		—			—				(5,142	)
Net income (loss) from continuing operations attributable to Verint Systems Inc. common shares	$	7,513		$	(9,859	)	$	(29,044	)		$	(31,390	)
Net income (loss) from continuing operations per common share attributable to Verint Systems Inc.:
Basic	$	0.12									$	(0.48	)
Diluted	$	0.11									$	(0.48	)
Weighted-average common shares outstanding:
Basic		64,973										64,973
Diluted		66,000										64,973

See notes to unaudited pro forma condensed consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended January 31, 2020

(in thousands, except per share data)	Historical Consolidated			Cognyte Separation (a)			Transaction Accounting Adjustments			Notes	Pro Forma Verint
Revenue:
Product	$	454,875		$	(231,478	)	$	—			$	223,397
Service and support		848,759			(225,631	)		—				623,128
Total revenue		1,303,634			(457,109	)		—				846,525
Cost of revenue:
Product		127,183			(88,098	)		4,039		(g)		43,124
Service and support		312,599			(73,502	)		2,045		(g)		241,142
Amortization of acquired technology		23,984			(2,405	)		—				21,579
Total cost of revenue		463,766			(164,005	)		6,084				305,845
Gross profit		839,868			(293,104	)		(6,084	)			540,680
Operating expenses:
Research and development, net		231,683			(111,297	)		13,850		(g)		134,236
Selling, general and administrative		488,871			(153,901	)		47,945		(g)		375,019
								(4,800	)	(h)
								(3,096	)	(i)
Amortization of other acquired intangible assets		31,458			(593	)		—				30,865
Total operating expenses		752,012			(265,791	)		53,899				540,120
Operating income		87,856			(27,313	)		(59,983	)			560
Other income (expense), net:
Interest income		5,620			(3,509	)		—				2,111
Interest expense		(40,378	)		481			(152	)	(j)		(40,049	)
Other income, net		205			404			248		(k)		857
Total other expense, net		(34,553	)		(2,624	)		96				(37,081	)
Income (loss) from continuing operations before provision for income taxes		53,303			(29,937	)		(59,887	)			(36,521	)
Provision for income taxes		17,620			(2,567	)		(7,696	)	(m)		7,357
Net income (loss) from continuing operations		35,683			(27,370	)		(52,191	)			(43,878	)
Net income (loss) attributable to noncontrolling interest		6,999			(7,179	)		—				(180	)
Net income (loss) from continuing operations attributable to Verint Systems Inc.	$	28,684		$	(20,191	)	$	(52,191	)		$	(43,698	)
Net income (loss) from continuing operations per common share attributable to Verint Systems Inc.:
Basic	$	0.43									$	(0.66	)
Diluted	$	0.43									$	(0.66	)
Weighted-average common shares outstanding:
Basic		66,129										66,129
Diluted		67,355										66,129

See notes to unaudited pro forma condensed consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended January 31, 2019

(in thousands, except per share data)	Historical Consolidated			Cognyte Separation (a)			Transaction Accounting Adjustments			Notes	Pro Forma Verint
Revenue:
Product	$	454,650		$	(232,929	)	$	—			$	221,721
Service and support		775,097			(200,531	)		—				574,566
Total revenue		1,229,747			(433,460	)		—				796,287
Cost of revenue:
Product		129,922			(95,407	)		1,432		(g)		35,947
Service and support		293,888			(73,949	)		3,128		(g)		223,067
Amortization of acquired technology		25,403			(7,416	)		—				17,987
Total cost of revenue		449,213			(176,772	)		4,560				277,001
Gross profit		780,534			(256,688	)		(4,560	)			519,286
Operating expenses:
Research and development, net		209,106			(100,006	)		13,853		(g)		122,953
Selling, general and administrative		426,183			(137,342	)		41,120		(g)		329,961
Amortization of other acquired intangible assets		31,010			(651	)		—				30,359
Total operating expenses		666,299			(237,999	)		54,973				483,273
Operating income		114,235			(18,689	)		(59,533	)			36,013
Other income (expense), net:
Interest income		4,777			(3,165	)		—				1,612
Interest expense		(37,344	)		499			—				(36,845	)
Other expense, net		(3,906	)		1,414			—				(2,492	)
Total other expense, net		(36,473	)		(1,252	)		—				(37,725	)
Income (loss) from continuing operations before provision (benefit) for income taxes		77,762			(19,941	)		(59,533	)			(1,712	)
Provision (benefit) for income taxes		7,542			(7,620	)		(14,635	)	(m)		(14,713	)
Net income from continuing operations		70,220			(12,321	)		(44,898	)			13,001
Net income attributable to noncontrolling interest		4,229			(3,593	)		—				636
Net income from continuing operations attributable to Verint Systems Inc.	$	65,991		$	(8,728	)	$	(44,898	)		$	12,365
Net income from continuing operations per common share attributable to Verint Systems Inc.:
Basic	$	1.02									$	0.19
Diluted	$	1.00									$	0.19
Weighted-average common shares outstanding:
Basic		64,913										64,913
Diluted		66,245										66,245

See notes to unaudited pro forma condensed consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended January 31, 2018

(in thousands, except per share data)	Historical Consolidated			Cognyte Separation (a)			Transaction Accounting Adjustments			Notes	Pro Forma Verint
Revenue:
Product	$	399,662		$	(215,458	)	$	—			$	184,204
Service and support		735,567			(179,705	)		—				555,862
Total revenue		1,135,229			(395,163	)		—				740,066
Cost of revenue:
Product		131,989			(95,929	)		2,270		(g)		38,330
Service and support		276,582			(64,903	)		2,060		(g)		213,739
Amortization of acquired technology		38,216			(16,000	)		—				22,216
Total cost of revenue		446,787			(176,832	)		4,330				274,285
Gross profit		688,442			(218,331	)		(4,330	)			465,781
Operating expenses:
Research and development, net		190,643			(92,286	)		11,276		(g)		109,633
Selling, general and administrative		414,960			(137,855	)		50,340		(g)		327,445
Amortization of other acquired intangible assets		34,209			(877	)		—				33,332
Total operating expenses		639,812			(231,018	)		61,616				470,410
Operating income (loss)		48,630			12,687			(65,946	)			(4,629	)
Other income (expense), net:
Interest income		2,477			(1,922	)		—				555
Interest expense		(35,959	)		305			—				(35,654	)
Losses on early retirement of debt		(2,150	)		—			—				(2,150	)
Other income, net		5,902			(3,170	)		—				2,732
Total other expense, net		(29,730	)		(4,787	)		—				(34,517	)
Income (loss) from continuing operations before provision for income taxes		18,900			7,900			(65,946	)			(39,146	)
Provision for income taxes		22,354			338			(11,335	)	(m)		11,357
Net loss from continuing operations		(3,454	)		7,562			(54,611	)			(50,503	)
Net income attributable to noncontrolling interest		3,173			(2,907	)		—				266
Net loss from continuing operations attributable to Verint Systems Inc.	$	(6,627	)	$	10,469		$	(54,611	)		$	(50,769	)
Net loss from continuing operations per common share attributable to Verint Systems Inc.:
Basic	$	(0.10	)								$	(0.80	)
Diluted	$	(0.10	)								$	(0.80	)
Weighted-average common shares outstanding:
Basic		63,312										63,312
Diluted		63,312										63,312

See notes to unaudited pro forma condensed consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

NOTES TO UNAUDITED PRO FORMA ADJUSTMENTS

The adjustments included in the unaudited pro forma condensed consolidated financial statements are described below:

(a) Reflects the operations, assets, liabilities and equity of Cognyte, which have been derived from Cognyte’s historical combined financial statements prepared on a “carve-out” basis of accounting.

(b) Reflects an estimated cash payment which Cognyte will distribute to Verint in connection with the Separation.

(c) Reflects the settlement of a loan balance between us and Cognyte as part of the Separation, including accrued interest.

(d) Reflects a cash dividend from Cognyte to the Company that is expected to be paid in cash after the Separation during the three months ending April 30, 2021. The associated accrued withholding tax is reclassed from other liabilities and included in accrued expenses and other current liabilities.

(e) Pursuant to the Tax Matters Agreement, Verint and Cognyte are responsible for any and all income taxes due with respect to their separate returns, except for the portion of taxes attributable to the other’s business. Cognyte has agreed to make payments to Verint or taxing authorities for these taxes, and in case of any adjustment pursuant to a determination with respect to any tax return filed by Verint attributable to Cognyte or other tax costs incurred by Verint in connection with transactions undertaken in anticipation of the spin as determined by Verint. For purposes of the pro forma financial statements, Verint has estimated that the payments will be $2.4 million; the associated asset is reflected in “Other assets” as of October 31, 2020.

(f) We anticipate incurring additional costs of approximately $31.5 million subsequent to October 31, 2020 to complete the Separation. These costs primarily relate to investment banker fees, legal fees, third-party consulting and contractor fees, information technology costs and other costs directly related to the Separation. The unaudited pro forma condensed consolidated balance sheet as of October 31, 2020 has been adjusted to record estimated separation costs of $31.5 million in accrued expenses and other current liabilities, with a corresponding increase to accumulated deficit.

(g) Represents general corporate overhead costs related to executive management, finance, legal, information technology, and other shared services functions that were historically allocated to Cognyte. These amounts exclude the incremental transaction costs allocated to Cognyte of $11.4 million and $2.2 million for the nine months ended October 31, 2020 and year ended January 31, 2020, respectively.

(h) In connection with the Separation, the Company and Cognyte entered into a transition services agreement whereby the Company and Cognyte will provide certain post-closing services to each other on a transitional basis. As such, a pro forma adjustment has been recorded to selling, general and administrative expenses to reflect this contractual arrangement.

(i) Represents the incremental transaction costs directly attributable to the disposition of Cognyte, which will be retrospectively reclassified to discontinued operations upon completion of the Separation.

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(j) Represents the elimination of net intercompany interest expense on the loan between Cognyte and Verint as reflected in Cognyte’s stand-alone combined financial statements and included in the Cognyte Separation column in the unaudited pro forma condensed consolidated statements of operations.

(k) Represents the impact of an expected sublease agreement for office space between the Company and Cognyte in connection with the Separation.

(l) The pro forma Verint provision for income taxes for the nine months ended October 31, 2020 is based on an allocation of the historical consolidated provision for income taxes. The pro forma Verint provision for income taxes has not been based on an estimated annual effective rate as this cannot be reliably estimated due to forecasted near breakeven income from operations and the relative impact of permanent book to tax differences (i.e. non-deductible expenses). A discrete calculation of the provision for income taxes has therefore been calculated for the nine months ended October 31, 2020 and the adjustment herein includes the amount required to calculate such pro forma provision for income taxes.

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(m) Reflects the income tax effects of pro forma adjustments notes (g) - (k) at the applicable statutory rates in effect in the respective tax jurisdictions during the periods presented.

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