UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 20172023
OR
o☐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


verintlogoa08.jpg
Verint Systems Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware11-3200514
(State or Other Jurisdiction of Incorporation or

Organization)
(I.R.S. Employer Identification No.)
175 Broadhollow Road Melville, New York11747
Melville,New York11747
(Address of Principal Executive Offices)(Zip Code)
(631) 962-9600962-9600
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
The NASDAQ Stock Market, LLC
Common Stock, $.001 par value per shareVRNT(NASDAQ Global Select Market)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No o☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes þ☑ No o☐
 
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“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☑Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth companyo
☐

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 o☐ No þ☑
 
There were 63,781,21163,015,469 shares of the registrant’s common stock outstanding on November 15, 2017.
2023.



Table of Contents
Verint Systems Inc. and Subsidiaries
Index to Form 10-Q
As of and For the Period Ended October 31, 20172023
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Cautionary Note on Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains "forward-looking statements"“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"“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“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“Management’s Discussion and Analysis of Financial Condition and Results of Operations,"Operations”, and are often identified by future or conditional words such as "will"“will”, "plans"“plans”, "expects"“expects”, "intends"“intends”, "believes"“believes”, "seeks"“seeks”, "estimates"“estimates”, or "anticipates"“anticipates”, or by variations of such words or by similar expressions. There can be no assurancesassurance 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 generalchanges in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, economic conditionsinstability, rising interest rates, tightening credit markets, inflation, instability in the United States and abroad, particularly in information technologybanking sector, actual or threatened trade wars, political unrest, armed conflicts, natural disasters, or outbreaks of disease (such as the COVID-19 pandemic), as well as the resulting impact on spending and government budgets,by customers or partners, on our business;
•risks that our customers or partners delay, downsize, cancel, or refrain from placing orders, or renewing subscriptions or contracts, or are unable to honor contractual commitments or payment obligations due to challenges or uncertainties in their budgets, liquidity, or businesses;
•risks associated with our ability to keep pace with technological changes,advances and challenges and evolving industry standards, including achieving and customer challenges, such asmaintaining the proliferation and strengtheningcompetitive differentiation of encryption, and the transition of portions of the software market to the cloud,our solution platform; to adapt to changing market potential from area to area within our markets,markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products and services that meet or exceed customer challenges and needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization;
•risks due to aggressive competition in all of our markets includingand our ability to keep pace with respectcompetitors, some of whom may be able to maintaining margins and sufficient levels of investment in our business;
risks created by the continued consolidation of our competitorsgrow faster than us or the introduction of large competitors in our markets withhave greater resources than we have;us, including in areas such as sales and marketing, branding, technological innovation and development, and recruiting and retention;
•risks associated with our ability to properly execute on our software as a service (“SaaS”) transition, including successfully transitioning customers to our cloud platform and the 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 identify and execute on growth or strategic initiatives, manage investments in our business and operations, and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources;
•risks associated with our ability to or costs to retain, recruit, and train qualified personnel and management in regions in which we operate either physically or remotely, including in new markets and growth areas we may enter, due to competition for talent, increased labor costs, applicable regulatory requirements, or otherwise;
•challenges associated with selling sophisticated solutions and cloud-based solutions, which may incorporate newer technologies, such as artificial intelligence (“AI”), whose adoption and use-cases are still emerging, including with respect to longer sales cycles, more complex sales processes and customer evaluation and approval processes, more complex contractual and information security requirements, and assisting customers in understanding and realizing the benefits of our solutions and technologies, as well as with developing, offering, implementing, and maintaining an enterprise-class, broad solution portfolio;
•risks that we may be unable to maintain, expand, or enable our relationships with partners as part of our growth strategy, including partners with whom we may overlap or compete, while avoiding excessive concentration with one or more partners;
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•risks associated with our reliance on third-party suppliers, partners, or original equipment manufacturers (“OEMs”) for certain services, products, or components, including companies that may compete with us or work with our competitors;
•risks associated with our significant international operations, including exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, inflation, increased financial accounting and reporting burdens and complexities, 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 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, AI, cyber / information security, government contracts, anti-corruption, trade compliance, climate change or other environmental, social and governance matters, tax, and labor matters, relating to our ability to effectivelyown operations, the products and efficiently enhanceservices we offer, and/or the use of our existing operations and execute onsolutions by our growth strategy and profitability goals, including managing investments in our business and operations, managing our cloud transition and our revenue mix, and enhancing and securing our internal and external operations;customers;
risks associated with our ability to effectively and efficiently allocate limited financial and human resources to business, developmental, strategic, or other opportunities, and risk that such investments may not come to fruition or produce satisfactory returns;
risks that we may be unable to establish and maintain relationships with key resellers, partners, and systems integrators;
risks associated with our reliance on third-party suppliers, partners, or original equipment manufacturers ("OEMs") for certain components, products, or services, including companies that may compete with us or work with our competitors;
•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 security vulnerabilitiesour SaaS or lapses,other hosted or managed services offerings or when we are asked to perform service or support;
•risks associated with our reliance on third parties to provide certain cloud hosting or other cloud-based services to us or our customers, including information technology systemthe risk of service disruptions, data breaches, failures, or disruptions;data loss or corruption;
•risks that our productssolutions or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, vulnerabilities, or develop operational problems;
•risk that we or our solutions may be vulnerable to cyber-attacks;
risks associated with our significant international operations, including, among others, in Israel, Europe, and Asia, exposure to regions subject to politicalsecurity vulnerabilities or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas;lapses, including cyber-attacks, information technology system breaches, failures, or disruptions;

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risks associated with a significant amount of our business coming from domestic and foreign government customers, including the ability to maintain security clearances for applicable projects and reputational risks associated with our security solutions;
risks associated with complex and changing local and foreign regulatory environments in the jurisdictions in which we operate, including, among others, with respect to privacy, information security, trade compliance, anti-corruption, and regulations related to our security solutions;
risks associated with our ability to retain and recruit qualified personnel in regions in which we operate, including in new markets and growth areas we may enter;
challenges associated with selling sophisticated solutions, including with respect to educating our customers on the benefits of our solutions or assisting them in realizing such benefits;
challenges associated with pursuing larger sales opportunities, including with respect to longer sales cycles, transaction reductions, deferrals, or cancellations during the sales cycle, risk of customer concentration, our ability to accurately forecast when a sales opportunity will convert to an order, or to forecast revenue and expenses, and increased volatility of our operating results from period to period;
•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, or claim infringement on their intellectual property rights;
risks that our customersrights, or partners delayclaim a violation of their license rights, including relative to free or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in their business, or otherwise;
risks thatopen source components 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;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"(“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of CTI's former subsidiary, Comverse,the successor to CTI’s business operations, Mavenir Inc. (now known as 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, and adequate systems and internal controls for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; and
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•risks associated with changing accounting principlesmarket volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or standards, tax rates, tax lawsspeculation, or other factors, and regulations,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
•risks associated with the continuing availabilityFebruary 1, 2021 spin-off of expected tax benefits.our former Cyber Intelligence Solutions business, including the possibility that the spin-off transaction does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities.
These risks, uncertainties, assumptions, and challenges, as well as other factors, are discussed in greater detail in "Risk Factors"“Risk Factors” under Item 1A of our Annual Report on Form 10-K for the year ended January 31, 2017.2023. 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.



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Part I


Item 1.   Financial Statements





VERINT SYSTEMS INC. AND SUBSIDIARIES
Index to Condensed Consolidated Financial Statements (Unaudited)
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VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
October 31,January 31,
(in thousands, except share and per share data)20232023
Assets  
Current Assets:  
Cash and cash equivalents$209,647 $282,099 
Short-term investments684 697 
Accounts receivable, net of allowance for credit losses of $1.5 million and $1.3 million, respectively173,592 188,414 
Contract assets, net50,338 60,444 
Inventories13,042 12,628 
Prepaid expenses and other current assets56,316 75,374 
  Total current assets503,619 619,656 
Property and equipment, net47,556 64,810 
Operating lease right-of-use assets28,533 37,649 
Goodwill1,343,449 1,347,213 
Intangible assets, net64,219 85,272 
Other assets147,258 159,001 
  Total assets$2,134,634 $2,313,601 
Liabilities, Temporary Equity, and Stockholders' Equity  
Current Liabilities:  
Accounts payable$22,172 $43,631 
Accrued expenses and other current liabilities110,261 155,944 
Contract liabilities237,668 271,476 
  Total current liabilities370,101 471,051 
Long-term debt410,461 408,908 
Long-term contract liabilities12,067 18,047 
Operating lease liabilities31,466 40,744 
Other liabilities68,853 80,381 
  Total liabilities892,948 1,019,131 
Commitments and Contingencies
Temporary Equity:
Preferred Stock — $0.001 par value; authorized 2,207,000 shares
Series A Preferred Stock; 200,000 shares issued and outstanding at October 31, 2023 and January 31, 2023, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at October 31, 2023 and January 31, 2023, respectively.200,628 200,628 
Series B Preferred Stock; 200,000 shares issued and outstanding at October 31, 2023 and January 31, 2023, respectively; aggregate liquidation preference and redemption value of $203,467 and $206,067 at October 31, 2023 and January 31, 2023, respectively.235,693 235,693 
  Total temporary equity436,321 436,321 
Stockholders' Equity:
Common stock — $0.001 par value; authorized 240,000,000 shares; issued 63,465,000 and 65,404,000 shares; outstanding 63,465,000 and 65,404,000 shares at October 31, 2023 and January 31, 2023, respectively.63 65 
Additional paid-in capital999,634 1,055,157 
Accumulated deficit(35,426)(45,333)
Accumulated other comprehensive loss(161,579)(154,099)
Total Verint Systems Inc. stockholders' equity802,692 855,790 
Noncontrolling interest2,673 2,359 
  Total stockholders' equity805,365 858,149 
  Total liabilities, temporary equity, and stockholders' equity$2,134,634 $2,313,601 
  October 31, January 31,
(in thousands, except share and per share data)
2017 2017
Assets
 

 
Current Assets:
 

 
Cash and cash equivalents
$312,666

$307,363
Restricted cash and bank time deposits
63,326

9,198
Short-term investments 6,411
 3,184
Accounts receivable, net of allowance for doubtful accounts of $2.2 million and $1.8 million, respectively
284,050

266,590
Inventories
19,522

17,537
Deferred cost of revenue
4,271

3,621
Prepaid expenses and other current assets
81,436

64,561
  Total current assets
771,682

672,054
Property and equipment, net
85,248

77,551
Goodwill
1,304,971

1,264,818
Intangible assets, net
199,545

235,259
Capitalized software development costs, net
7,881

9,509
Long-term deferred cost of revenue
3,402

5,463
Other assets
70,224

98,130
  Total assets
$2,442,953

$2,362,784







Liabilities and Stockholders' Equity
 

 
Current Liabilities:
 

 
Accounts payable
$73,820

$62,049
Accrued expenses and other current liabilities
220,772

217,835
Deferred revenue
166,945

182,515
  Total current liabilities
461,537

462,399
Long-term debt
766,006

744,260
Long-term deferred revenue
24,095

20,912
Other liabilities
117,948

120,173
  Total liabilities
1,369,586

1,347,744
Commitments and Contingencies





Stockholders' Equity:
 

 
Preferred stock - $0.001 par value; authorized 2,207,000 shares at October 31, 2017 and January 31, 2017, respectively; none issued. —
 —
Common stock - $0.001 par value; authorized 120,000,000 shares. Issued 65,442,000 and 64,073,000 shares; outstanding 63,781,000 and 62,419,000 shares at October 31, 2017 and January 31, 2017, respectively.
65

64
Additional paid-in capital
1,505,492

1,449,335
Treasury stock, at cost - 1,661,000 and 1,654,000 shares at October 31, 2017 and January 31, 2017, respectively.
(57,425)
(57,147)
Accumulated deficit
(255,409)
(230,816)
Accumulated other comprehensive loss
(132,363)
(154,856)
Total Verint Systems Inc. stockholders' equity
1,060,360

1,006,580
Noncontrolling interests
13,007

8,460
  Total stockholders' equity
1,073,367

1,015,040
  Total liabilities and stockholders' equity
$2,442,953

$2,362,784


See notes to condensed consolidated financial statements.

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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)2023202220232022
Revenue:
Recurring$161,117 $174,222 $488,555 $500,029 
Nonrecurring57,430 50,971 156,723 165,969 
  Total revenue218,547 225,193 645,278 665,998 
Cost of revenue:  
Recurring38,883 38,834 118,093 120,714 
Nonrecurring25,046 28,013 79,213 90,781 
Amortization of acquired technology1,609 3,550 5,511 10,742 
  Total cost of revenue65,538 70,397 202,817 222,237 
Gross profit153,009 154,796 442,461 443,761 
Operating expenses:  
Research and development, net32,084 32,941 97,923 97,844 
Selling, general and administrative87,879 93,757 297,532 302,344 
Amortization of other acquired intangible assets6,328 6,420 19,028 19,887 
  Total operating expenses126,291 133,118 414,483 420,075 
Operating income26,718 21,678 27,978 23,686 
Other income (expense), net:  
Interest income1,650 1,045 5,440 1,742 
Interest expense(2,609)(2,147)(7,994)(5,511)
Other income, net59 1,045 59 3,186 
  Total other expense, net(900)(57)(2,495)(583)
Income before provision for income taxes25,818 21,621 25,483 23,103 
Provision for income taxes12,953 17,395 14,772 20,539 
Net income12,865 4,226 10,711 2,564 
Net income attributable to noncontrolling interests253 150 804 614 
Net income attributable to Verint Systems Inc.12,612 4,076 9,907 1,950 
Dividends on preferred stock(5,200)(5,200)(15,600)(15,600)
Net income (loss) attributable to Verint Systems Inc. common shares$7,412 $(1,124)$(5,693)$(13,650)
Net income (loss) per common share attributable to Verint Systems Inc.:  
Basic$0.12 $(0.02)$(0.09)$(0.21)
Diluted$0.12 $(0.02)$(0.09)$(0.21)
Weighted-average common shares outstanding:  
Basic63,887 65,583 64,411 65,161 
Diluted64,144 65,583 64,411 65,161 

  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands, except per share data) 2017 2016 2017 2016
Revenue:  
  
    
Product $94,827
 $88,004
 $279,056
 $254,172
Service and support 185,899
 170,898
 537,442
 512,075
  Total revenue 280,726
 258,902
 816,498
 766,247
Cost of revenue:  
  
    
Product 32,840
 29,499
 98,708
 82,455
Service and support 69,383
 64,007
 205,928
 195,892
Amortization of acquired technology 9,182
 9,700
 28,246
 28,014
  Total cost of revenue 111,405
 103,206
 332,882
 306,361
Gross profit 169,321
 155,696
 483,616
 459,886
Operating expenses:  
  
    
Research and development, net 47,157
 41,028
 141,911
 128,847
Selling, general and administrative 97,304
 98,899
 302,605
 300,080
Amortization of other acquired intangible assets 7,048
 10,244
 26,727
 32,976
  Total operating expenses 151,509
 150,171
 471,243
 461,903
Operating income (loss) 17,812
 5,525
 12,373
 (2,017)
Other income (expense), net:  
  
    
Interest income 654
 229
 1,793
 695
Interest expense (8,891) (8,708) (26,997) (25,976)
Loss on early retirement of debt —
 —
 (1,934) —
Other (expense) income, net (565) (1,121) 2,529
 (2,660)
  Total other expense, net (8,802) (9,600) (24,609) (27,941)
Income (loss) before provision for income taxes 9,010
 (4,075) (12,236) (29,958)
Provision for income taxes 5,944
 3,359
 9,504
 4,747
Net income (loss) 3,066
 (7,434) (21,740) (34,705)
Net income attributable to noncontrolling interests 577
 803
 1,984
 2,693
Net income (loss) attributable to Verint Systems Inc. $2,489
 $(8,237) $(23,724) $(37,398)
         
Net income (loss) per common share attributable to Verint Systems Inc.:  
  
    
Basic $0.04
 $(0.13) $(0.38) $(0.60)
Diluted $0.04
 $(0.13) $(0.38) $(0.60)
         
Weighted-average common shares outstanding:  
  
    
Basic 63,759
 62,895
 63,152
 62,602
Diluted 64,588
 62,895
 63,152
 62,602

See notes to condensed consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive (Loss) Income (Loss)
(Unaudited)
  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands) 2017 2016 2017 2016
Net income (loss) $3,066
 $(7,434) $(21,740) $(34,705)
Other comprehensive income (loss), net of reclassification adjustments:  
  
  
  
Foreign currency translation adjustments 779
 (26,207) 21,883
 (49,476)
Net increase from available-for-sale securities —
 —
 —
 110
Net (decrease) increase from foreign exchange contracts designated as hedges (829) (1,570) 2,272
 1,208
Net increase (decrease) from interest rate swap designated as a hedge —
 478
 (1,021) (1,146)
Benefit (provision) for income taxes on net increase (decrease) from foreign exchange contracts and interest rate swap designated as hedges 29
 169
 (242) (155)
Other comprehensive (loss) income (21) (27,130) 22,892
 (49,459)
Comprehensive income (loss) 3,045
 (34,564) 1,152
 (84,164)
Comprehensive income attributable to noncontrolling interests 688
 667
 2,383
 2,856
Comprehensive income (loss) attributable to Verint Systems Inc. $2,357
 $(35,231) $(1,231) $(87,020)
 Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands)2023202220232022
Net income$12,865 $4,226 $10,711 $2,564 
Other comprehensive loss, net of reclassification adjustments:
Foreign currency translation adjustments(23,704)(22,917)(7,247)(66,590)
Net decrease from foreign exchange contracts designated as hedges(251)(94)(281)(239)
Benefit from income taxes on net decrease from foreign exchange contracts designated as hedges43 17 48 43 
Other comprehensive loss(23,912)(22,994)(7,480)(66,786)
Comprehensive (loss) income(11,047)(18,768)3,231 (64,222)
Comprehensive income attributable to noncontrolling interests253 150 804 614 
Comprehensive (loss) income attributable to Verint Systems Inc.$(11,300)$(18,918)$2,427 $(64,836)
 
See notes to condensed consolidated financial statements.
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VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
 Verint Systems Inc. Stockholders’ Equity  
 Common StockAdditional Paid-in Capital  
Accumulated Other Comprehensive Loss
Total Verint Systems Inc. Stockholders’ Equity Total Stockholders’ Equity
(in thousands) SharesPar
Value		Treasury
Stock		Accumulated
Deficit		Non-controlling
Interests
Balances as of January 31, 202365,404 $65 $1,055,157 $— $(45,333)$(154,099)$855,790 $2,359 $858,149 
Net income— — — — 3,295 — 3,295 339 3,634 
Other comprehensive income— — — — — 8,510 8,510 — 8,510 
Stock-based compensation — equity-classified awards— — 13,436 — — — 13,436 — 13,436 
Common stock issued for stock awards and stock bonuses475 — — — — — — — — 
Common stock repurchased and retired(1,593)(1)(60,095)— — — (60,096)— (60,096)
Distribution to noncontrolling interest— — — — — — — (245)(245)
Balances as of April 30, 202364,286 64 1,008,498 — (42,038)(145,589)820,935 2,453 823,388 
Net (loss) income— — — — (6,000)— (6,000)212 (5,788)
Other comprehensive income— — — — — 7,922 7,922 — 7,922 
Stock-based compensation — equity-classified awards— — 17,404 — — — 17,404 — 17,404 
Common stock issued for stock awards and stock bonuses388 — 7,735 — — — 7,735 — 7,735 
Common stock repurchased and retired(403)— (13,968)— — — (13,968)— (13,968)
Preferred stock dividends— — (10,400)— — — (10,400)— (10,400)
Distribution to noncontrolling interest— — — — — — — (245)(245)
Balances as of July 31, 202364,271 64 1,009,269 — (48,038)(137,667)823,628 2,420 826,048 
Net income— — — — 12,612 — 12,612 253 12,865 
Other comprehensive loss— — — — — (23,912)(23,912)— (23,912)
Stock-based compensation - equity-classified awards— — 15,560 — — — 15,560 — 15,560 
Common stock issued for stock awards and stock bonuses212 — — — — — — — — 
Common stock repurchased and retired(1,018)(1)(25,195)— — — (25,196)— (25,196)
Balances as of October 31, 202363,465 $63 $999,634 $— $(35,426)$(161,579)$802,692 $2,673 $805,365 
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  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 at January 31, 2016 62,266
 $63
 $1,387,955
 $(10,251) $(201,436) $(116,194) $1,060,137
 $8,027
 $1,068,164
Net (loss) income —
 —
 —
 —
 (37,398) —
 (37,398) 2,693
 (34,705)
Other comprehensive (loss) income —
 —
 —
 —
 —
 (49,622) (49,622) 163
 (49,459)
Stock-based compensation - equity-classified awards —
 —
 41,610
 —
 —
 —
 41,610
 —
 41,610
Exercises of stock options —
 —
 1
 —
 —
 —
 1
 —
 1
Common stock issued for stock awards and stock bonuses 1,413
 1
 6,952
 —
 —
 —
 6,953
 —
 6,953
Treasury stock acquired (1,000) —
 —
 (35,896) —
 —
 (35,896) —
 (35,896)
Tax effects from stock award plans —
 —
 (590) —
 —
 —
 (590) —
 (590)
Balances at October 31, 2016 62,679
 $64
 $1,435,928
 $(46,147) $(238,834) $(165,816) $985,195

$10,883
 $996,078
                   
Balances at January 31, 2017 62,419
 $64
 $1,449,335
 $(57,147) $(230,816) $(154,856) $1,006,580
 $8,460
 $1,015,040
Net (loss) income —
 —
 —
 —
 (23,724) —
 (23,724) 1,984
 (21,740)
Other comprehensive income —
 —
 —
 —
 —
 22,493
 22,493
 399
 22,892
Stock-based compensation - equity-classified awards
 —
 —
 43,182
 —
 —
 —
 43,182
 —
 43,182
Common stock issued for stock awards and stock bonuses 1,369
 1
 12,975
 —
 —
 —
 12,976
 —
 12,976
Treasury stock acquired (7) —
 —
 (278) —
 —
 (278) —
 (278)
Initial noncontrolling interest related to business combination —
 —
 —
 —
 —
 —
 —
 2,300
 2,300
Capital contributions by noncontrolling interest —
 —
 —
 —
 —
 —
 —
 580
 580
Dividends to noncontrolling interest —
 —
 —
 —
 —
 —
 —
 (716) (716)
Cumulative effect of adoption of ASU No. 2016-16 —
 —
 —
 —
 (869) —
 (869) —
 (869)
Balances at October 31, 2017 63,781
 $65
 $1,505,492
 $(57,425) $(255,409) $(132,363) $1,060,360
 $13,007
 $1,073,367
Verint Systems Inc. Stockholders’ Equity
Common StockAdditional Paid-in Capital
Accumulated Other Comprehensive Loss
Total Verint Systems Inc. Stockholders’ Equity
Total Stockholders’ Equity
(in thousands)SharesPar
Value		Treasury
Stock		Accumulated
Deficit		Non-controlling
Interests
Balances as of January 31, 202266,211 $66 $1,125,152 $— $(54,509)$(118,515)$952,194 $2,385 $954,579 
Net income— — — — 286 — 286 288 574 
Other comprehensive loss— — — — — (30,045)(30,045)— (30,045)
Stock-based compensation — equity-classified awards— — 16,011 — — — 16,011 — 16,011 
Common stock issued for stock awards and stock bonuses466 1 (1)— — — — — — 
Treasury stock acquired(2,000)— — (105,666)— — (105,666)— (105,666)
Balances as of April 30, 202264,677 67 1,141,162 (105,666)(54,223)(148,560)832,780 2,673 835,453 
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 bonuses531 — 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, 202265,208 65 1,054,873 — (56,635)(162,307)835,996 2,359 838,355 
Net income— — — — 4,076 — 4,076 150 4,226 
Other comprehensive loss— — — — — (22,994)(22,994)— (22,994)
Stock-based compensation - equity-classified awards— — 17,134 — — — 17,134 — 17,134 
Common stock issued for stock awards and stock bonuses668 1 (1)— — — — — — 
Treasury stock acquired(10)— — (457)— — (457)— (457)
Treasury stock retired— — (457)457 — — — — — 
Distribution to noncontrolling interest— — — — — — — (147)(147)
Balances as of October 31, 202265,866 $66 $1,071,549 $— $(52,559)$(185,301)$833,755 $2,362 $836,117 

See notes to condensed consolidated financial statements.




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VERINT SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended
October 31,
(in thousands) 20232022
Cash flows from operating activities:  
Net income$10,711 $2,564 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization57,287 52,166 
Stock-based compensation, excluding cash-settled awards50,286 63,957 
Losses on early retirements of debt237 — 
Other, net5,676 8,072 
Changes in operating assets and liabilities, net of effects of business combinations and divestitures:  
Accounts receivable13,545 22,079 
Contract assets9,943 (8,256)
Inventories(415)(5,452)
Prepaid expenses and other assets32,609 (16,274)
Accounts payable and accrued expenses(50,080)(9,542)
Contract liabilities(39,299)(38,513)
Deferred income taxes1,788 (1,489)
Other, net(10,609)(701)
Net cash provided by operating activities81,679 68,611 
Cash flows from investing activities:
Cash paid for asset acquisitions and business combinations, including adjustments, net of cash acquired(3,173)(3,828)
Purchases of property and equipment(12,839)(17,920)
Maturities and sales of investments3,168 250 
Purchases of investments(3,180)(10,168)
Cash paid for capitalized software development costs(7,109)(5,703)
Change in restricted bank time deposits, and other investing activities, net(1,200)(107)
Net cash used in investing activities(24,333)(37,476)
Cash flows from financing activities:
Proceeds from borrowings100,000 — 
Repayments of borrowings and other financing obligations(102,430)(3,025)
Payments of debt-related costs(232)(224)
Purchases of treasury stock and common stock for retirement(99,263)(106,137)
Preferred stock dividend payments(20,800)(20,800)
Distributions paid to noncontrolling interest(490)(637)
Payments of contingent consideration for business combinations (financing portion), and other financing activities(4,182)(3,518)
Net cash used in financing activities(127,397)(134,341)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents(700)(3,510)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents(70,751)(106,716)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period282,161 358,868 
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period$211,410 $252,152 
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$209,647 $252,073 
Restricted cash and cash equivalents included in prepaid expenses and other current assets1,763 22 
Restricted cash and cash equivalents included in other assets— 57 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$211,410 $252,152 
  Nine Months Ended
October 31,
(in thousands)  2017 2016
Cash flows from operating activities:  
  
Net loss $(21,740) $(34,705)
Adjustments to reconcile net loss to net cash provided by operating activities:  
  
Depreciation and amortization 79,879
 85,411
Stock-based compensation, excluding cash-settled awards 50,397
 45,547
Amortization of discount on convertible notes 8,377
 7,948
Non-cash (gains) losses on derivative financial instruments, net (292) 693
Loss on early retirement of debt 1,934
 —
Other non-cash items, net 307
 8,767
Changes in operating assets and liabilities, net of effects of business combinations:  
  
Accounts receivable (15,824) 3,708
Inventories (2,232) (2,823)
Deferred cost of revenue 1,503
 1,349
Prepaid expenses and other assets (12,947) (6,066)
Accounts payable and accrued expenses 13,145
 (21,305)
Deferred revenue (14,129) (21,749)
Other, net 7,796
 4,914
Net cash provided by operating activities 96,174
 71,689
     
Cash flows from investing activities:  
  
Cash paid for business combinations, including adjustments, net of cash acquired (28,071) (72,269)
Purchases of property and equipment (26,445) (20,611)
Purchases of investments (8,305) (34,215)
Maturities and sales of investments 5,244
 79,930
Cash paid for capitalized software development costs (909) (1,730)
Change in restricted cash and bank time deposits, including long-term portion, and other investing activities, net (30,207) (31,737)
Net cash used in investing activities (88,693) (80,632)
     
Cash flows from financing activities:  
  
Proceeds from borrowings, net of original issuance discount 424,469
 —
Repayments of borrowings and other financing obligations (410,536) (1,987)
Payments of debt-related costs
 (7,107) (249)
Proceeds from exercises of stock options —
 1
Purchases of treasury stock —
 (35,896)
Dividends paid to noncontrolling interest (716) —
Payments of contingent consideration for business combinations (financing portion) (7,210) (3,231)
Other financing activities, net (320) (827)
Net cash used in financing activities (1,420) (42,189)
Effect of foreign currency exchange rate changes on cash and cash equivalents (758) (5,144)
Net increase (decrease) in cash and cash equivalents 5,303
 (56,276)
Cash and cash equivalents, beginning of period 307,363
 352,105
Cash and cash equivalents, end of period $312,666
 $295,829


See notes to condensed consolidated financial statements.

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VERINT SYSTEMS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements




1.BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
1.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Description of Business
 
Unless the context otherwise requires, the terms "Verint"“Verint”, "we"“we”, "us"“us”, and "our"“our” in these notes to condensed consolidated financial statements refer to Verint Systems Inc. and its consolidated subsidiaries.

Verint is a global leader in Actionable Intelligence solutions. Actionable Intelligence is a necessity in a dynamic world of massive information growth because it empowers organizations with crucial insightshelps the world’s most iconic brands continuously elevate the customer experience (“CX”) and enables decision makers to anticipate, respond, and take action. With Verint solutions and value-added services, organizations of all sizes and across many industries can make more informed, timely, and effective decisions. Today, overreduce operating costs. More than 10,000 organizations in more than 180175 countries – including over 80 percent85 of the Fortune 100 usecompanies – rely on Verint’s open customer engagement platform to harness the power of data and artificial intelligence (“AI”) to maximize CX automation.

Through the Verint Customer Engagement Cloud Platform, we offer our customers and partners solutions that are based on AI and are developed specifically for customer engagement. These solutions automate workflows across enterprise silos to optimize customer engagementthe workforce expense and makeat the worldsame time drive an elevated consumer experience. Our customers, which span a safer place.diverse set of verticals, including financial services, healthcare, utilities, technology, and government, include large enterprises with thousands of employees, as well as small to medium sized business organizations.


Verint delivers its Actionable Intelligence solutions through two operating segments:is headquartered in Melville, New York, and has approximately 15 offices worldwide, in addition to a number of on-demand, flexible coworking spaces. We have approximately 4,100 passionate employees plus a few hundred contractors around the globe exclusively focused on helping brands provide Boundless Customer Engagement SolutionsEngagement™.

Spin-Off of Cognyte Software Ltd.

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

Apax Convertible Preferred Stock Investment

On December 4, 2019, we announced that an affiliate (the “Apax Investor”) of Apax Partners (“Apax”) would make an investment in us in an amount of up to $400.0 million. Under the terms of the Investment Agreement, dated as of December 4, 2019 (the “Investment Agreement”), on May 7, 2020, the Apax Investor purchased $200.0 million of our Series A convertible preferred stock (“Series A Preferred Stock”). In connection with the completion of the Spin-Off, on April 6, 2021, the Apax Investor purchased $200.0 million of our Series B convertible preferred stock (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”). As of October 31, 2023, Apax’s ownership in us on an as-converted basis was approximately 13.2%. Please refer to Note 14, "Segment Information"9, “Convertible Preferred Stock” for further details regarding our operating segments.a more detailed discussion of the Apax investment.

We have established leadership positions in Actionable Intelligence by developing highly-scalable, enterprise-class software and services with advanced, integrated analytics for both unstructured and structured information. Our innovative solutions are developed by a large research and development (“R&D”) team comprised of approximately 1,400 professionals and backed by more than 800 patents and patent applications worldwide.

To help our customers maximize the benefits of our technology over the solution lifecycle and provide a high degree of flexibility, we offer a broad range of services, such as strategic consulting, managed services, implementation services, training, maintenance, and 24x7 support. Additionally, we offer a broad range of deployment options, including cloud, on-premises, and hybrid, and software licensing and delivery models that include perpetual licenses and software as a service (“SaaS”).

Headquartered in Melville, New York, we support our customers around the globe directly and with an extensive network of selling and support partners.


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"(“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, 2023 filed with the U.S. Securities and Exchange Commission ("SEC"(“SEC”), except for the year ended January 31, 2017.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 31, 20172023 and 2016,2022, and the condensed consolidated balance sheet as of October 31, 2017,2023, are not audited but reflect all adjustments that, in the opinion of management, 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, 20172023 is derived from the audited consolidated financial statements presented in our Annual Report on Form 10-K for the year ended January 31, 2017.2023. 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
8
Table of Contents
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 filed with the SEC for the year ended January 31, 2017.2023 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, and a joint venture in which we hold a 50% equity interest.  The joint venture is a variable interest entity in which we are the primary beneficiary.subsidiaries. Noncontrolling interests in less than wholly owned subsidiaries are reflected within stockholders’ equity on our condensed consolidated balance sheet, but separately from our stockholders'stockholders’ equity. We hold

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 option to acquire the noncontrolling interests in two majority owned subsidiaries and we account for the option as

an in-substanceidentical or similar investment in the noncontrolling common stock of each such subsidiary. We include the fair value of the option within other liabilities and do not recognize noncontrolling interests in these subsidiaries.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.

Investments in companies in which we have less than a 20% ownership interest and cannot exercise significant influence are accounted for at cost.

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.

Accounts Receivable, Net

Accounts receivable, net, includes unbilled accounts receivable on arrangements recognized under contract accounting methods, representing revenue recognized on contracts for which billing will occur in subsequent periods, in accordance with the terms of the contracts. Unbilled accounts receivable on such contracts were $60.5 million and $39.7 million at October 31, 2017 and January 31, 2017, respectively.

Under most contracts, unbilled accounts receivable are typically billed and collected within one year of revenue recognition. However, as of October 31, 2017, we have unbilled accounts receivable on certain complex projects for which the underlying billing milestones are still in progress and have remained unbilled for periods in excess of one year, and in some cases, for several years. Unbilled accounts receivable on these projects have declined significantly over the past year. We have no history of uncollectible accounts on such projects and believe that collection of all unbilled amounts is reasonably assured. We expect billing and collection of all unbilled accounts receivable to occur within the next twelve months.


Significant Accounting Policies


OurThere have been no material changes in our significant accounting policies areduring the nine months ended October 31, 2023, 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, 2017. There were no material changes2023.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which adds contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with revenue recognition guidance. We adopted this standard on a prospective basis for the annual and interim periods beginning February 1, 2023. The adoption of this standard did not have any impact on our significant accounting policiescondensed consolidated financial statements as 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.

In August 2022, the Inflation Reduction Act (the "IRA") was signed into law. The IRA establishes a new book minimum tax of 15% on consolidated adjusted GAAP pre-tax earnings for corporations with average income in excess of $1 billion and is effective for us in tax years beginning after December 31, 2022. We do not expect to be subject to the corporate minimum tax. In addition, the IRA also introduced a nondeductible 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. During the nine months ended October 31, 2017.

Recent Accounting Pronouncements
New Accounting Pronouncements Recently Adopted

In March 2016,2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation—Stock Compensation (Topic 718), whichamends the accounting for stock-based compensationcalculated excise tax was $0.6 million and requires excess tax benefits and deficiencies to bewas recognized as a componentpart of income tax expense rather thanthe cost basis of shares acquired in our consolidated statement of stockholders' equity. This guidance also requires excess tax benefitsWe do not expect taxes due on future repurchases of our shares to be presented as an operating activityhave a material effect on the consolidated statements of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. ASU No. 2016-09 was effective for us on February 1, 2017. The adoption did not result in a cumulative-effect adjustment to retained earnings, and in accordance with the new guidance, we recorded certain tax effects from stock-based compensation awards as components of the benefit for income taxes for the three and nine months ended October 31, 2017, whereas such tax effects were previously recognized in stockholders’ equity.  These tax effects were not material for the three and nine months ended October 31, 2017. Our accounting for forfeitures of stock-based compensation awards has not changed because we have elected to continue our current policy of estimating expected forfeitures. The effects of adopting the other provisions of ASU No. 2016-09 were not material to our condensed consolidated financial statements.business.


In October 2016,December 2022, the FASB issued ASU No. 2016-16, Income Taxes2022-06, Reference Rate Reform (Topic 740)848): Intra-Entity TransfersDeferral of Assets Other Than Inventorythe Sunset Date of Topic 848, which requiresextends the period of time entities to recognizecan utilize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The newreference rate reform relief guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted asunder ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the beginningEffects of an annual reporting period. The new standard must be adopted using a modified retrospective transition method, withReference Rate Reform on Financial Reporting from December 31, 2022 to December 31, 2024. We expect to elect various optional expedients for contract modifications related to financial instruments affected by the cumulative effect recognized as ofreference rate reform through the effective date of initial adoption. WeDecember 31, 2024, as extended by ASU 2022-06. The application of this guidance did not have any impact on our consolidated financial statements.


elected to early adopt this standard as
9
Table of February 1, 2017, resulting in a $0.9 million cumulative charge to retained deficit, a $1.3 million reduction to other current assets, and a $0.4 million increase in other assets.Contents

New Accounting Pronouncements Not Yet Effective


In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted ImprovementsThere are no new accounting pronouncements not yet adopted or effective that are expected to Accounting for Hedging Activities. This update better aligns risk management activities and financial reporting for hedging relationships, simplifies hedge accounting requirements, and improves disclosures of hedging arrangements. ASU No. 2017-12 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently reviewing this standard to assess the impact on our condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, and ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While we are still assessing the impact of this standard, we do not believe that the adoption of this guidance will have a material impact on our condensed consolidated financial statements.statements and related disclosures.


ASU No. 2017-04 eliminates Step 2
2.    REVENUE RECOGNITION

We derive our revenue primarily from providing customers the right to access our cloud-based solutions, the right to use our software for an indefinite or specified period of time, and related services and support based on when access or control of the goodwill impairment test and requires a goodwill impairmentsoftware passes to be measured asour customers or the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  While weservices are still assessing the impact of this standard, we do not believe that the adoption of this guidance will have a material impact on our condensed consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This update also requires an entity to disclose the nature of restrictions on its cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU No. 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. We typically have restrictions on certain amounts of cash and cash equivalents, primarily consisting of amounts used to secure bank guarantees in connection with sales contract performance obligations, and expect to continue to have similar restrictions in the future. We currently report changes in such restricted amounts as cash flows from investing activities on our consolidated statement of cash flows. This standard will change that presentation. We are currently reviewing this standard to assess other potential impacts on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance with the intent of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. We are currently reviewing this standard to assess the impact on our condensed consolidated financial statements.

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance

sheet, the new guidance will require both types of leases to be recognized on the balance sheet.  The new guidance is effective for all periods beginning after December 15, 2018 and we are currently evaluating the effects that the adoption of ASU No. 2016-02 will have on our consolidated financial statements, but anticipate that the new guidance will significantly impact our condensed consolidated financial statements given our significant number of leases.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. Additionally, this update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customersprovided, in an amount that reflects the consideration to which the entity expectswe expect to be entitled to in exchange for thosesuch goods or services. As originally issued, this guidance was effectiveRevenue is reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transactions, including mandatory government charges that are passed through to our customers.

We determine revenue recognition through the following five steps:

•Identification of the contract, or contracts, with a customer
•Identification of the performance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, performance obligations are satisfied

We account for interima contract when it has approval and annual reportingcommitment 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 beginning after December 15, 2016,depends on a number of factors including contractual periods and early adoption was not permitted. In July 2015, the FASB deferred the effective date by one year,customers' renewal decisions.

•Recurring revenue primarily consists of:
◦Software as a service (“SaaS”) revenue, which consists predominately of bundled SaaS (software access rights with standard managed services) and unbundled SaaS (software licensing rights accounted for as term-based licenses whereby customers have a license to interim and annual reporting periods beginning after December 15, 2017. Early adoptionour software with related support for a specific period).
▪Bundled SaaS revenue is permitted, but not before the original effective date of December 15, 2016. The standard allows entities to apply the standard retrospectively to each prior reporting period presented (“full retrospective adoption”) or retrospectively with the cumulative effect of initially applying the standardrecognized over time.
▪Unbundled SaaS revenue is recognized at a point in time, except for the daterelated 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.
◦Optional managed services revenue.
◦Support revenue, which consists of initial application (“modified retrospective adoption”). We currently expect to adopt ASU No. 2014-09 using the modified retrospective option.and renewal support.

•Nonrecurring revenue primarily consists of our perpetual licenses, hardware, installation services, business advisory consulting and training services, and patent license royalties.

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Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands)2023202220232022
Recurring revenue:
Bundled SaaS revenue$63,251 $57,041 $184,770 $161,005 
Unbundled SaaS revenue52,400 58,746 161,470 152,066 
Total SaaS revenue115,651 115,787 346,240 313,071 
Optional managed services revenue11,842 15,436 36,872 47,127 
Support revenue33,624 42,999 105,443 139,831 
Total recurring revenue161,117 174,222 488,555 500,029 
Nonrecurring revenue:
Perpetual revenue24,557 24,425 74,103 88,473 
Professional services revenue32,873 26,546 82,620 77,496 
Total nonrecurring revenue57,430 50,971 156,723 165,969 
Total revenue$218,547 $225,193 $645,278 $665,998 

ContractBalances

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

(in thousands)October 31, 2023January 31, 2023
Accounts receivable, net$173,592 $188,414 
Contract assets, net$50,338 $60,444 
Long-term contract assets, net (included in other assets)$29,637 $37,950 
Contract liabilities$237,668 $271,476 
Long-term contract liabilities$12,067 $18,047 

We are continuing to review the impacts of adopting ASU No. 2014-09 to our condensed consolidated financial statements. Basedreceive payments from customers based upon our preliminary assessments, we currently do not expect the new standard to materially impact the amount or timing of the majority of revenue recognized in our condensed consolidated financial statements. We are still assessing the impact on the timing of revenue recognized under certain contracts under which customized solutions are delivered over extended periods of time.

In addition, the timing of cost of revenue recognition for certain customer contracts requiring significant customization will change, because unlike current guidance, the new guidance precludes the deferral of costs simply to obtain an even profit margin over the contract term. We are also assessing the new standard’s requirement to capitalize costs associated with obtaining customer contracts, including commission payments, which are currently expensed as incurred. Under the new standard, these costs will be deferred on our consolidated balance sheet. We are evaluating the period over which to amortize these capitalized costs. In addition, for sales transactions that have been billed, but for which the recognition of revenue has been deferredcontractual billing schedules, and the related account receivable has not been collected, we currently do not recognize deferred revenue or the related accounts receivable on our consolidated balance sheet. Under the new standard, we will record accounts receivable and related contract liabilities for noncancelable contracts with customersare 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 unconditional, which we currentlyconditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to multi-year unbundled SaaS contracts and arrangements where our right to consideration is subject to the contractually agreed upon billing schedule. We expect will resultbilling 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 increases inthe three and nine months ended October 31, 2023 and 2022. As of October 31, 2023, two partners, both authorized global resellers of our solutions, accounted for more than 10% of our aggregated accounts receivable and contract assets; Partner A was approximately 15% and Partner B was approximately 12%. As of January 31, 2023, Partner A and Partner B each accounted for approximately 15% of our aggregated accounts receivable and contract assets. Credit losses relating to these customers have historically been immaterial.

Contract liabilities (currently presented as deferred revenue) on our consolidated balance sheet, comparedrepresent consideration received or consideration which is unconditionally due from customers prior to our current presentation. Our preliminary assessmentstransferring goods or services to the customer under the terms of the impactscontract. Revenue recognized during the nine months ended October 31, 2023 and 2022 from amounts included in contract liabilities at the beginning of each period was $225.3 million and $217.6 million, respectively.

RemainingPerformanceObligations

Transaction price allocated to remaining performance obligations 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 condensed consolidated financial statementsarrangements are for periods of adopting this new standard are subjectup to change.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 renewals, the timing of delivery of software licenses, the average length of the contract terms, and foreign currency exchange rates.
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2.NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC.

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

(in thousands)October 31, 2023January 31, 2023
Remaining performance obligations:
Expected to be recognized within 1 year$430,394 $464,346 
Expected to be recognized in more than 1 year259,410 262,695 
Total remaining performance obligations$689,804 $727,041 


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 months ended October 31, 20172023 and 2016:2022:


Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands, except per share amounts) 2023202220232022
Net income$12,865 $4,226 $10,711 $2,564 
Net income attributable to noncontrolling interests253 150 804 614 
Net income attributable to Verint Systems Inc.12,612 4,076 9,907 1,950 
Dividends on preferred stock(5,200)(5,200)(15,600)(15,600)
Net income (loss) attributable to Verint Systems Inc. for basic net loss per common share7,412 (1,124)(5,693)(13,650)
Dilutive effect of dividends on preferred stock— — — — 
Net income (loss) attributable to Verint Systems Inc. for diluted net income (loss) per common share$7,412 $(1,124)$(5,693)$(13,650)
Weighted-average shares outstanding: 
Basic63,887 65,583 64,411 65,161 
Dilutive effect of employee equity award plans257 — — — 
Dilutive effect of 2021 Notes— — — — 
Dilutive effect of assumed conversion of preferred stock— — — — 
Diluted64,144 65,583 64,411 65,161 
Net income (loss) per common share attributable to Verint Systems Inc.:
Basic$0.12 $(0.02)$(0.09)$(0.21)
Diluted$0.12 $(0.02)$(0.09)$(0.21)
  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands, except per share amounts)  2017 2016 2017 2016
Net income (loss) $3,066
 $(7,434) $(21,740) $(34,705)
Net income attributable to noncontrolling interests 577
 803
 1,984
 2,693
Net income (loss) attributable to Verint Systems Inc. $2,489
 $(8,237) $(23,724) $(37,398)
Weighted-average shares outstanding:  
  
    
Basic 63,759
 62,895
 63,152
 62,602
Dilutive effect of employee equity award plans 829
 —
 —
 —
Dilutive effect of 1.50% convertible senior notes —
 —
 —
 —
Dilutive effect of warrants —
 —
 —
 —
Diluted 64,588
 62,895
 63,152
 62,602
Net income (loss) per common share attributable to Verint Systems Inc.:  
  
    
Basic $0.04
 $(0.13) $(0.38) $(0.60)
Diluted $0.04
 $(0.13) $(0.38) $(0.60)


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

  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands)  2017 2016 2017 2016
Common shares excluded from calculation:  
  
    
Stock options and restricted stock-based awards 600
 1,239
 1,205
 1,060
1.50% convertible senior notes 6,205
 6,205
 6,205
 6,205
Warrants 6,205
 6,205
 6,205
 6,205
Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands) 2023202220232022
Common shares excluded from calculation:  
Restricted stock-based awards2,717 2,576 2,177 2,242 
Series A Preferred Stock5,497 5,497 5,497 5,497 
Series B Preferred Stock3,980 3,980 3,980 3,980 


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


Our 1.50% convertible senior notes ("Notes") will not impact
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For the calculation of diluted net income per share unlessthree and nine months ended October 31, 2023, the average price of our common stock as calculated in accordance withdid not exceed the terms of the indenture governing the Notes, exceeds the$62.08 per share conversion price of $64.46 per share. Likewise, diluted net income per share will not include any effect from the Warrantsour 2021 Notes (as defined in Note 6, "Long-Term Debt"7, “Long-Term Debt”) unless, 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 as calculated under the terms of the Warrants,for a quarterly reporting period exceeds the exercise price of $75.00 per share.conversion price.


Our Note HedgesThe Capped Calls (as defined in Note 6, "Long-Term Debt"7, “Long-Term Debt”) do not impact the calculation ofour diluted net incomeearnings per common share under the treasury stock method, becausecalculations as their effect would be anti-dilutive. However,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 an actual conversion our common stock price exceeds the $62.08 conversion price, with such reduction and/or offset subject to a cap of any or all of the Notes, the common shares that would be delivered to us under the Note Hedges would neutralize the dilutive effect of the common shares that we would issue under the Notes. As a result, actual conversion of any or all of the Notes would not increase our outstanding common stock. Up to 6,205,000 common shares could be issued upon exercise of the Warrants. $100.00.

Further details regarding the 2021 Notes Note Hedges, and the WarrantsCapped Calls appear in Note 6, "Long-Term Debt"7, “Long-Term Debt”.



The weighted-average common shares underlying the assumed conversion of the Preferred Stock, on an as-converted basis, were excluded from the calculations of diluted net income (loss) per common share for the three and nine months ended October 31, 2023 and 2022, as their effect would have been anti-dilutive. Further details regarding the Preferred Stock investment appear in Note 9, “Convertible Preferred Stock”.

3.
4.    CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS


The following tables summarize our cash, cash equivalents, and short-term investments as of October 31, 20172023 and January 31, 2017:2023:


October 31, 2023
(in thousands) Cost BasisGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents:
Cash and bank time deposits$131,228 $— $— $131,228 
Money market funds70,449 — — 70,449 
Commercial paper7,472 — — 7,472 
U.S. Treasury bills498 — — 498 
Total cash and cash equivalents$209,647 $— $— $209,647 
Short-term investments:
Bank time deposits$684 $— $— $684 
Total short-term investments$684 $— $— $684 
  October 31, 2017
(in thousands)  Cost Basis Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Cash and cash equivalents:        
Cash and bank time deposits $312,488
 $—
 $—
 $312,488
Money market funds 178
 —
 —
 178
Total cash and cash equivalents $312,666
 $—
 $—
 $312,666
         
Short-term investments:        
Corporate debt securities $1,197
 $—
 $—
 $1,197
Bank time deposits 5,214
 —
 —
 5,214
Total short-term investments $6,411
 $—
 $—
 $6,411

January 31, 2023
(in thousands)Cost BasisGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents:
Cash and bank time deposits$134,289 $— $— $134,289 
Money market funds96,941 — — 96,941 
Commercial paper50,869 — — 50,869 
Total cash and cash equivalents$282,099 $— $— $282,099 
Short-term investments:
Bank time deposits$697 $— $— $697 
Total short-term investments$697 $— $— $697 
  January 31, 2017
(in thousands) Cost Basis Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Cash and cash equivalents:        
Cash and bank time deposits $307,188
 $—
 $—
 $307,188
Money market funds 175
 —
 —
 175
Total cash and cash equivalents $307,363
 $—
 $—
 $307,363
         
Short-term investments:        
Bank time deposits $3,184
 $—
 $—
 $3,184
Total short-term investments $3,184
 $—
 $—
 $3,184


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.


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During the nine months ended October 31, 20172023 and 2016,2022, proceeds from maturities and sales of short-term investments were $5.2$3.2 million and $79.9$0.3 million, respectively.




4.BUSINESS COMBINATIONS

5.    BUSINESS COMBINATIONS, ASSET ACQUISITIONS, AND DIVESTITURES

Nine Months Ended October 31, 20172023


During the nine months ended October 31, 2017,2023, we completed the acquisition of a provider of solutions for workforce scheduling automation, including three transactionsemployees. This transaction resulted in increases to goodwill, customer relationships, and acquired technology intangible assets, but was not material to our Customer Engagement segment, onecondensed consolidated financial statements, and as a result, additional business combination disclosures for this acquisition have been omitted.

Year Ended January 31, 2023

During the year ended January 31, 2023, we completed two business combinations:

•In August 2022, we completed the acquisition of which retained a noncontrolling interest, and onecompany with conversational AI technology including six employees.
•In January 2023, we completed the acquisition in our Cyber Intelligence segment, all of which qualified as business combinations. a provider of appointment scheduling solutions including approximately 20 employees.

These business combinations were not material to our condensed consolidated financial statements individually or in the aggregate.statements.


Year Ended January 31, 2017

Contact Solutions, LLC

On February 19, 2016, we completed the acquisition of Contact Solutions, LLC ("Contact Solutions"), a provider of real-time, contextual self-service solutions, based in Reston, Virginia. The purchase price consisted of $66.9combined consideration for these business combinations was approximately $38.4 million, including $26.1 million of combined cash paid at closing,the closings, contingent consideration with an estimated fair value of $12.2 million, and a $2.5 million post-closing purchase price adjustment basedadjustments of $0.1 million. The combined consideration was partially offset by $4.2 million of combined cash received in the acquisitions. The contingent consideration had a maximum payout amount of approximately $21.4 million as of the respective acquisition dates, and is contingent upon a determinationthe achievement of Contact Solutions' acquisition-date working capital, which was paid during the three months ended July 31, 2016. The cashcertain performance targets over periods extending through January 2026. Cash paid for this acquisitionthese business combinations was funded withby cash on hand.


The combined purchase price for Contact Solutions wasprices were allocated to the tangible and intangible assets, acquiredincluding the recognition of $6.0 million of developed technology, $4.2 million of customer relationships, and liabilities assumed based on their estimated fair values on$0.1 million of trade names. The acquisitions resulted in the acquisition dates, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquired were determined primarily by using therecognition of $25.6 million of goodwill, of which $5.1 million is deductible for income

approach, which discounts expected future cash flows to present value using estimates tax purposes and assumptions determined by management.

Among$20.5 million is not deductible. Included among the factors contributing to the recognition of goodwill as a component of the Contact Solutions purchase price allocationin these transactions were synergies in products and technologies, and the addition of a skilled, assembled workforce. This goodwill has been assigned to our Customer Engagement segment and is deductible for income tax purposes.workforces.


In connection with the purchase price allocation for Contact Solutions, the estimated fair value of undelivered performance obligations under customer contracts assumed in the acquisition was determined utilizing a cost build-up approach. The cost build-up approach calculates fair value by estimating the costs required to fulfill the obligations plus a reasonable profit margin, which approximates the amount that we believe would be required to pay a third party to assume the performance obligations. The estimated costs to fulfill the performance obligations were based on the historical direct costs for delivering similar services. As a result, in allocating the purchase price, we recorded $0.6 million of current and long-term deferred revenue, 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 yet been received, we recorded a $2.9 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $1.2 million of which was included within prepaid expenses and other current assets, and $1.7 million of which was included in other assets. We are amortizing this asset over the underlying delivery periods, which adjusts the revenue we recognize for providing these services to its estimated fair value.

Transactioncombined transaction and related costs, directly related to the acquisition of Contact Solutions, consisting primarily of professional fees and integration expenses were not material$0.2 million and $0.7 million for the three and nine months ended October 31, 2023, respectively, and $0.2 million for the three and nine months ended October 31, 2017,2022. All transaction and $0.4 millionrelated costs were expensed as incurred and $1.0 millionare included in selling, general and administrative expenses.

Revenue and net income (loss) attributable to these acquisitions for the three and nine months ended October 31, 2016, respectively, and2023 were expensed as incurred in selling, general, and administrative expenses.not material.


OpinionLab, Inc.Other Business Combination Information


On November 16, 2016, we completed the acquisition of all of the outstanding shares of Chicago, Illinois-based OpinionLab, Inc. ("OpinionLab"), a leading SaaS provider of omnichannel Voice of Customer (“VoC”) feedback solutions which help organizations collect, understand, and leverage customer insights, helping drive smarter, real-time business action.

The purchase price consisted of $56.4 million of cash paid at the closing, funded from cash on hand, partially offset by $6.4 million of OpinionLab's cash received in the acquisition, resulting in net cash consideration at closing of $50.0 million, and we agreed to pay potential additional future cash consideration of up to $28.0 million, contingent upon the achievement of certain performance targets over the period from closing through January 31, 2021, the acquisition date fair value of which was estimated to be $15.0 million. The acquired business has been integrated into our Customer Engagement operating segment.

The purchase price for OpinionLab was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition dates, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquired were determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates and assumptions determined by management.

Among the factors contributing to the recognition of goodwill as a component of the OpinionLab purchase price allocation were synergies in products and technologies, and the addition of a skilled, assembled workforce. This goodwill has been assigned to our Customer Engagement segment and is not deductible for income tax purposes.

In connection with the purchase price allocation for OpinionLab, the estimated fair value of undelivered performance obligations under customer contracts assumed in the acquisition was determined utilizing a cost build-up approach. The cost build-up approach calculates fair value by estimating the costs required to fulfill the obligations plus a reasonable profit margin, which approximates the amount that we believe would be required to pay a third party to assume the performance obligations. The estimated costs to fulfill the performance obligations were based on the historical direct costs for delivering similar services. As a result, in allocating the purchase price, we recorded $3.1 million of current and long-term deferred revenue, 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 yet been received, we recorded a $5.4 million asset as a component of the purchase price allocation, representing the estimated fair value of these obligations, $3.4 million of which was included within prepaid expenses and other current assets, and $2.0 million of which was included in other assets. We are amortizing this asset over the underlying delivery periods, which adjusts the revenue we recognize for providing these services to its estimated fair value.


Transaction and related costs directly related to the acquisition of OpinionLab, consisting primarily of professional fees and integration expenses, were $0.3 million and $0.8 million for the three and nine months ended October 31, 2017,2023, we recorded a benefit of $0.7 million and $2.8 million, respectively, and $0.4 million in each of the three and nine months ended October 31, 2016. These costs were expensed as incurred within selling, general and administrative expenses.
The following table sets forth the components and the allocations of the purchase prices for our acquisitions of Contact Solutions and OpinionLab. An immaterial adjustment to the purchase price allocation for OpinionLab, which is now complete, was recorded during the three months ended October 31, 2017.
(in thousands) Contact Solutions OpinionLab
Components of Purchase Price:  
  
Cash paid at closing $66,915
 $56,355
Fair value of contingent consideration —
 15,000
Other purchase price adjustments 2,518
 —
Total purchase price $69,433
 $71,355
     
Allocation of Purchase Price:  
  
Net tangible assets (liabilities):  
  
Accounts receivable $8,102
 $748
Other current assets, including cash acquired 2,392
 10,625
Property and equipment, net 7,007
 298
Other assets 1,904
 2,036
Current and other liabilities (4,943) (1,600)
Deferred revenue - current and long-term (642) (3,082)
Deferred Income Taxes - current and long-term —
 (9,877)
Net tangible assets (liabilities) 13,820
 (852)
Identifiable intangible assets:  
  
Customer relationships 18,000
 19,100
Developed technology 13,100
 10,400
Trademarks and trade names 2,400
 1,800
Total identifiable intangible assets 33,500
 31,300
Goodwill 22,113
 40,907
Total purchase price allocation $69,433
 $71,355

For the acquisition of Contact Solutions, the acquired customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of ten years, four years, and five years, respectively, the weighted average of which is approximately 7.3 years.

For the acquisition of OpinionLab, the acquired customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of ten years, six years, and four years, respectively, the weighted average of which is approximately 8.3 years.

The weighted-average estimated useful life of all finite-lived identifiable intangible assets acquired during the year ended January 31, 2017 is 7.8 years.

The acquired identifiable intangible assets are being amortized on a straight-line basis, which we believe approximates the pattern in which the assets are utilized, over their estimated useful lives.

Other Business Combinations

During the year ended January 31, 2017, in addition to the acquisitions of Contact Solutions and OpinionLab, we completed two transactions in our Customer Engagement segment which qualified as business combinations. These business combinations were not material to our condensed consolidated financial statements individually or in the aggregate.

Other Business Combination Information


At October 31, 2017, restricted cash and bank time deposits includes approximately $35.0 million held in an escrow account in connection with an immaterial business combination that closed in November 2017.

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.

In connection with immaterial business combinations that closed during the nine months ended October 31, 2017, we recorded contingent consideration obligations with a combined fair value of $9.1 million.

For the three months ended October 31, 2017 and 2016, we recorded benefits of $6.7 million and charges of $2.2 million, respectively, and for the nine months ended October 31, 2017 and 2016, we recorded benefits of $3.8 million and charges of $4.8 million, respectively, within selling, general and administrative expenses for changes in the fair values of contingent consideration obligations associated with business combinations.combinations, which was based on our historical business combinations achieving certain objectives and milestones. During the three and nine months ended October 31, 2022, the changes in the fair values of contingent consideration obligations associated with business combinations were immaterial. The aggregate fair values of the remaining contingent consideration obligations associated with business combinations was $48.7$7.4 million at October 31, 2017,2023, of which $10.9$4.3 million was recorded within accrued expenses and other current liabilities, and $37.8$3.1 million was recorded within other liabilities.


Payments of contingent consideration earned under these agreements were $0.1$1.8 million for the three months ended October 31, 2017,2023, and $9.4$4.9 million and $3.3$7.5 million for the nine months ended October 31, 20172023 and 2016,2022, respectively. There were no payments of contingent consideration induring the three months ended October 31, 2016.2022.

14


Asset Acquisition
5.

In July 2023, we entered into an agreement to acquire source code that qualifies as an asset acquisition and made an initial deposit payment of $1.0 million upon the execution of the contract and incurred direct transaction costs related to such asset acquisition of $0.2 million. The agreement also stipulates the establishment of additional milestone payments totaling $3.0 million. These milestone payments are contingent upon the successful delivery of the source code and the attainment of specific developmental objectives within the upcoming twelve months and will be reduced by any amounts paid under a separate transition services agreement, which the parties have also entered into. During the three months ended October 31, 2023, we made $1.3 million in milestone payments to the seller, reflecting the achievement of certain source code delivery and integration milestones. The remaining $1.7 million of milestone payments is held in a third-party escrow account classified as restricted cash, which is included in prepaid expenses and other current assets on our condensed consolidated balance sheet as of October 31, 2023.

The transaction also provides for additional consideration contingent upon achieving certain performance targets for the years ending January 31, 2025 and 2026 of up to $5.0 million, with a minimum of $2.0 million guaranteed over the period, plus the opportunity to receive additional payments from us based on any revenue we receive from sales of products based on the acquired technology in adjacent markets. Contingent consideration is not recorded in an asset acquisition until the contingency is resolved (when the contingent consideration is paid or becomes payable) or when probable and reasonably estimable.

Divestiture

In March 2023, we completed the sale of an insignificant product line that we inherited as part of a legacy acquisition and did not fit with our current business priorities or strategic direction. The total consideration for the sale was $0.7 million, which is payable to us in three equal installments through March 2025, the first installment of which was received in July 2023. The transaction reduced goodwill by $0.3 million and intangible assets by $0.2 million and resulted in a gain of approximately $0.2 million, which was recorded within other (expense) income, net in our condensed consolidated statement of operations.


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 31, 20172023 and January 31, 2017:2023:
 October 31, 2023
(in thousands)CostAccumulated
Amortization		Net
Intangible assets with finite lives:   
Customer relationships$453,705 $(405,033)$48,672 
Acquired technology228,585 (213,111)15,474 
Trade names4,474 (4,401)73 
Distribution network2,440 (2,440)— 
Total intangible assets$689,204 $(624,985)$64,219 
 January 31, 2023
(in thousands)CostAccumulated
Amortization		Net
Intangible assets with finite lives:   
Customer relationships$458,013 $(390,113)$67,900 
Acquired technology229,317 (212,065)17,252 
Trade names4,479 (4,359)120 
Distribution network2,440 (2,440)— 
    Total intangible assets$694,249 $(608,977)$85,272 
  October 31, 2017
(in thousands) Cost 
Accumulated
Amortization
 Net
Intangible assets, with finite lives:  
  
  
Customer relationships $418,704
 $(272,263) $146,441
Acquired technology 241,499
 (196,439) 45,060
Trade names 24,901
 (17,133) 7,768
Non-competition agreements 3,047
 (2,771) 276
Distribution network 4,440
 (4,440) —
Total intangible assets $692,591
 $(493,046) $199,545

  January 31, 2017
(in thousands) Cost 
Accumulated
Amortization
 Net
Intangible assets, with finite lives:  
  
  
Customer relationships $403,657
 $(244,792) $158,865
Acquired technology 233,982
 (168,653) 65,329
Trade names 23,493
 (14,187) 9,306
Non-competition agreements 3,047
 (2,499) 548
Distribution network 4,440
 (4,329) 111
Total intangible assets with finite lives 668,619
 (434,460) 234,159
In-process research and development, with indefinite lives 1,100
 —
 1,100
    Total intangible assets $669,719
 $(434,460) $235,259


The following table presents net acquisition-related intangible assets by reportable segment as of October 31, 2017 and January 31, 2017: 
  October 31, January 31,
(in thousands)
2017
2017
Customer Engagement
$183,267

$207,436
Cyber Intelligence
16,278

27,823
Total
$199,545

$235,259
Total amortization expense recorded for acquisition-related intangible assets was $16.2$7.9 million and $19.9$10.0 million for the three months ended October 31, 20172023 and 2016,2022, respectively, and $55.0$24.5 million and $61.0$30.6 million for the nine months ended October
15
31, 20172023 and 2016,2022, 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)
 
Years Ending January 31,
Amount
2018 (remainder of year)
$16,286
2019
45,476
2020
35,987
2021
27,481
2022
23,998
2023 and thereafter
50,317
   Total
$199,545
(in thousands) 
Years Ending January 31,Amount
2024 (remainder of year)$7,899 
202517,337 
202615,988 
202712,243 
20287,505 
2029 and thereafter3,247 
   Total$64,219 
 
There were no impairments of acquired intangible assets during the nine months ended October 31, 2023 and 2022.

Goodwill activity for the nine months ended October 31, 2017, in total and by reportable segment,2023 was as follows: 

    Reportable Segment
(in thousands) Total Customer Engagement 
Cyber
Intelligence
Year Ended January 31, 2017:      
Goodwill, gross, at January 31, 2017 $1,331,683
 $1,188,022
 $143,661
Accumulated impairment losses through January 31, 2017 (66,865) (56,043) (10,822)
   Goodwill, net, at January 31, 2017 1,264,818
 1,131,979
 132,839
Business combinations 22,459
 18,624
 3,835
Foreign currency translation and other 17,694
 17,570
 124
   Goodwill, net, at October 31, 2017 $1,304,971
 $1,168,173
 $136,798
       
Balance at October 31, 2017: 

  
  
Goodwill, gross, at October 31, 2017 $1,371,836
 $1,224,216
 $147,620
Accumulated impairment losses through October 31, 2017 (66,865) (56,043) (10,822)
   Goodwill, net, at October 31, 2017 $1,304,971
 $1,168,173
 $136,798
(in thousands)Amount
Nine Months Ended October 31, 2023:
Goodwill, gross, at January 31, 2023$1,403,256 
Accumulated impairment losses through January 31, 2023(56,043)
   Goodwill, net, at January 31, 20231,347,213 
Foreign currency translation and other(6,277)
Business combinations, including adjustments to prior period acquisitions2,513 
   Goodwill, net, at October 31, 2023$1,343,449
Balance at October 31, 2023
Goodwill, gross, at October 31, 2023$1,399,492 
Accumulated impairment losses through October 31, 2023(56,043)
   Goodwill, net, at October 31, 2023$1,343,449

No events or circumstances indicating the potential for goodwill impairment were identified during the nine months ended October 31, 2017.2023. We will perform our annual goodwill impairment analysis as of November 1, 2023 during the three months ending January 31, 2024.




6.
LONG-TERM DEBT

7.    LONG-TERM DEBT

The following table summarizes our long-term debt at October 31, 20172023 and January 31, 2017: 2023:


October 31,January 31,
(in thousands)20232023
2021 Notes$315,000 $315,000 
Term Loan— 100,000 
Revolving Credit Facility100,000 — 
Less: unamortized debt discounts and issuance costs(4,539)(6,092)
Total debt410,461 408,908 
Less: current maturities— — 
Long-term debt$410,461 $408,908 

2021 Notes

16
  October 31, January 31,
(in thousands) 2017 2017
     
1.50% Convertible Senior Notes $400,000
 $400,000
2014 Term Loans —
 409,038
2017 Term Loan 423,937
 —
Other debt 302
 404
Less: Unamortized debt discounts and issuance costs (53,681) (60,571)
Total debt 770,558
 748,871
Less: current maturities 4,552
 4,611
Long-term debt $766,006
 $744,260

Current maturitiesTable of long-term debt are reported within accrued expenses and other current liabilities on our condensed consolidated balance sheet.Contents

1.50% Convertible Senior Notes

On June 18, 2014,April 9, 2021, we issued $400.0$315.0 million in aggregate principal amount of 1.50%0.25% convertible senior notes due June 1, 2021 ("Notes"April 15, 2026 (the “2021 Notes”), unless earlier converted by the holders pursuant to their terms. Net proceeds from theThe 2021 Notes after underwriting discounts were $391.9 million. The Notesare unsecured and pay interest in cash semiannually in arrears at a rate of 1.50%0.25% per annum.


The Notes were issued concurrently with our publicWe used a portion of the net proceeds from the issuance of 5,750,000 sharesthe 2021 Notes to pay the costs of common stock, the majorityCapped Calls described below. We also used a portion of the
combined net proceeds from the issuance of which were usedthe 2021 Notes, together with the net proceeds from the April 6, 2021 issuance of $200.0 million of Series B Preferred Stock, to partially repay certaina portion of the outstanding indebtedness under our Prior Credit Agreement as furtherdescribed below, to terminate an interest rate swap, and to repurchase shares of our common stock. The remainder is being used for working capital and other general corporate purposes.
described below.


The 2021 Notes are unsecured and are convertible into at our election, cash, shares of our common stock or a combination of both, subject to satisfaction of specified conditions and during specified periods. If converted, we currently intend to pay cash in respect of the principal amount of the Notes.

The Notes have aat an initial conversion rate of 15.512916.1092 shares of common stock per $1,000 principal amount of 2021 Notes, which represents an effectiveinitial conversion price of approximately $64.46$62.08 per share, of common stock and would result in the issuance of approximately 6,205,000 shares if all of the Notes were converted. The conversion rate has not changed since issuance of the Notes, although throughout the term of the Notes, the conversion rate may be adjustedsubject to adjustment upon the occurrence of certain events.
On or after December 1, 2020events, 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 holders may surrender their Notes for conversion regardless of whether any of the other specified conditions for2021 Notes. Upon conversion have been satisfied.

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 31, 2017,2023, the 2021 Notes were not convertible.


In accordanceWe incurred approximately $8.9 million of issuance costs in connection with accounting guidance for convertible debt withthe 2021 Notes, which were deferred and are presented as a cash conversion option, we separately accounted for thereduction of long-term debt, and equity components of the Notes in a manner that reflected our estimated nonconvertible debt borrowing rate. We estimated the debt and equity components of the 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. The excess of the principal amount of the debt component over its carrying amount (the "debt discount") is being amortized as interest expense over the term of the Notes using the effective interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

Issuance costs attributable to the debt component of the Notes were netted against long-term debt andwhich are being amortized as interest expense over the term of the Notes, and issuance costs attributable to the equity component were netted with the equity component in additional paid-in capital. The carrying amount of the equity component, net of issuance costs, was $78.2 million at October 31, 2017.

As of October 31, 2017, the carrying value of the debt component was $350.8 million, which is net of unamortized debt discount and issuance costs of $44.9 million and $4.3 million, respectively.2021 Notes. Including the impact of the debt discount and related deferred debt issuance costs, the effective interest rate on the 2021 Notes was approximately 5.29%0.83% at October 31, 2017.2023.



Based on the closing market price of our common stock on October 31, 2017,2023, the if-converted value of the 2021 Notes was less than thetheir aggregate principal amount of the Notes.amount.


Note Hedges and WarrantsCapped Calls


ConcurrentlyIn connection with the issuance of the 2021 Notes, on April 6, 2021 and April 8, 2021, we entered into convertible note hedgecapped call transactions (the "Note Hedges"“Capped Calls”) and sold warrants (the "Warrants").with certain counterparties. The combination ofCapped Calls are generally intended to reduce the Note Hedges and the Warrants servespotential dilution to increase the effective initial conversion price for the Notes to $75.00 per share. The Note Hedges and Warrants are each separate instruments from the Notes.

Note Hedges

Pursuant to the Note Hedges, we purchased call options on our common stock under whichupon any conversion of the 2021 Notes and/or offset any cash payments we haveare required to make in excess of the right to acquire fromprincipal amount of converted 2021 Notes, in the counterparties up to approximately 6,205,000 sharesevent that at the time of conversion our common stock price exceeds the conversion price, with such reduction and/or offset subject to customary anti-dilution adjustments, at a cap.

The Capped Calls exercise price of $64.46, which equalsis equal to the $62.08 initial conversion price of each of the Notes.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 Note HedgesCapped Calls generally trigger upon conversion of the 2021 Notes, and the Note HedgesCapped Calls terminate upon maturity of the 2021 Notes, or the first day the 2021 Notes are no longer outstanding. The Note Hedges may be settled in cash, sharesAs of our common stock, or a combination thereof, at our option,October 31, 2023, no Capped Calls have been exercised.

Pursuant to their terms, the Capped Calls qualify for classification within stockholders’ equity, and are intendedtheir fair value is not remeasured and adjusted as long as they continue to reduce our exposure to potential dilution upon conversion of the Notes.qualify for stockholders’ equity classification. We paid $60.8approximately $41.1 million for the Note Hedges,Capped Calls, including applicable transaction costs, which was recorded as a reduction to additional paid-in capital. As of October 31, 2017, we had not purchased any shares of our common stock under the Note Hedges.


Warrants

We sold the Warrants to several counterparties. The Warrants provide the counterparties rights to acquire from us up to approximately 6,205,000 shares of our common stock at a price of $75.00 per share. The Warrants expire incrementally on a series of expiration dates beginning in August 2021. At expiration, if the market price per share of our common stock exceeds the strike price of the Warrants, we will be obligated to issue shares of our common stock having a value equal to such excess. The Warrants could have a dilutive effect on net income per share to the extent that the market value of our common stock exceeds the strike price of the Warrants. Proceeds from the sale of the Warrants were $45.2 million and were recorded as additional paid-in capital. As of October 31, 2017, no Warrants had been exercised and all Warrants remained outstanding.

The Note Hedges and Warrants both meet the requirements for classification within stockholders’ equity, and their respective fair values are not remeasured and adjusted as long as these instruments continue to qualify for stockholders’ equity classification.

Credit Agreements

Prior Credit Agreement


In April 2011,On June 29, 2017, we entered into a credit agreement with certain lenders whichand terminated a prior credit agreement. The credit agreement was amended in 2018, 2020, 2021, and restated in March 2013, and2023, as further described below (as amended, in February, March, and June 2014 (the "Prior Credit Agreement"the “Credit Agreement”). The Prior Credit Agreement, as amended and restated, provided for senior secured credit facilities, comprised of $943.5 million of term loans, of which $300.0 million was borrowed in February 2014 and $643.5 million was borrowed in March 2014 (together, the "2014 Term Loans"), the outstanding portion of which was scheduled to mature in September 2019, and a $300.0 million revolving credit facility (the "Prior Revolving Credit Facility"), scheduled to mature in September 2018, subject to increase and reduction from time to time, as described in the Prior Credit Agreement.
In June 2014, we utilized the majority of the combined net proceeds from the issuance of the Notes and the concurrent issuance of 5,750,000 shares of common stock to retire $530.0 million of the 2014 Term Loans and all $106.0 million of then-outstanding borrowings under the Prior Revolving Credit Facility.
The 2014 Term Loans incurred interest at our option at either a base rate plus a margin of 1.75% or an Adjusted LIBOR Rate, as defined in the Prior Credit Agreement, plus a margin of 2.75%.
2017 Credit Agreement

On June 29, 2017, we entered into a new Credit Agreement (the “2017 Credit Agreement”) with certain lenders and terminated the Prior Credit Agreement.


The 2017 Credit Agreement provides for $725.0 million of senior secured credit facilities, comprised of a $425.0 million term loan maturingoriginally set to mature on June 29, 2024 (the “2017 Term“Term Loan”), and a $300.0 million revolving credit facility maturing on June 29, 2022April 9, 2026 (the “2017“Revolving Credit Facility”). 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 maturity dates of the 2017 Term Loan and 2017 Revolving Credit Facility will be accelerated to March 1, 2021 if on such date any Notes remain outstanding.
The majority of the proceeds from the 2017 Term Loan were used to repay all $406.9 million owedoutstanding term loans under our prior credit agreement.

Optional prepayments of loans under the 2014Credit Agreement are generally permitted without premium or penalty. During the three months ended April 30, 2021, in addition to our regular quarterly $1.1 million principal payment, we repaid $309.0
17
million of our Term Loans at June 29, 2017 upon termination ofLoan, reducing the Prior Credit Agreement. There were nooutstanding principal balance to $100.0 million. On April 27, 2023, we repaid the remaining $100.0 million outstanding principal balance on our Term Loan utilizing proceeds from borrowings under the Priorour Revolving Credit Facility, at June 29, 2017.
The 2017along with $0.5 million of accrued interest thereon. As a result, $0.2 million of combined deferred debt issuance costs and unamortized discount associated with the Term Loan was subject to an original issuance discount of approximately $0.5 million. This discount is being amortized aswere written off and are included within interest expense overon our condensed consolidated statement of operations for the term of the 2017 Term Loan using the effective interest method.nine months ended October 31, 2023.

Interest rates on loans under the 2017 Credit Agreement are periodically reset, at our option, originally at either a Eurodollar Rate (which was derived from LIBOR) or an ABRalternative base rate (“ABR”) (each as defined in the 2017 Credit Agreement), plus in each case a margin.

On May 10, 2023, we entered into an amendment to the Credit Agreement (the “Fourth Amendment”) related to the phase-out of LIBOR by the UK Financial Conduct Authority. Effective July 1, 2023, borrowings under the Credit Agreement bear interest, at our option, at either: (i) the ABR, plus the applicable margin therefor or (ii) the adjusted Term Secured Overnight Financing Rate published by the CME Term SOFR Administrator (as more fully defined and set forth in the Credit Agreement, “Adjusted Term SOFR”), plus the applicable margin therefor. The applicable margin in each case is determined based on our Leverage Ratio (as defined below) and ranges from 0.25% to 1.25% for borrowings bearing interest at the 2017 Term Loan is fixed atABR and from 1.25% to 2.25% for Eurodollar loans, and at 1.25% for ABR loans. For loansborrowings bearing interest based on Adjusted Term SOFR.

Borrowings outstanding under the 2017 Revolving Credit Facility were $100.0 million at October 31, 2023, which is included in long-term debt on our condensed consolidated balance sheet. For borrowings under the Revolving Credit Facility, the applicable margin is determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each as defined in the 2017 Credit Agreement) leverage ratio (the “Leverage Ratio”"Leverage Ratio").
As of October 31, 2017,2023, the interest rate on 2017 Term Loanour revolving credit facility borrowings was 3.56%6.94%. 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 3.74% at October 31, 2017. As of January 31, 2017 the weighted-average interest rate on the 2014 Terms Loans was 3.58%.
WeIn addition, we are required to pay a commitment fee with respect to unused availability under the 2017 Revolving Credit Facility at a raterates per annum determined by reference to our Leverage Ratio.
The 2017 Term Loan requires quarterly principal paymentsproceeds of approximately $1.1 million, which commenced on August 1, 2017, with the remaining balance due on June 29, 2024. Optional prepayments of loansborrowings under the 2017Revolving Credit Agreement are generallyFacility may be used for working capital and general corporate purposes, including for permitted without premium or penalty.acquisitions and permitted stock repurchases, and the repayment of term loans, if any.

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

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

The 2017 Credit Agreement provides for events of default with corresponding grace periods that we believe are customary for credit facilities of this type. Upon an event of default, all of our obligations owed under the 2017 Credit Agreement may be declared immediately due and payable, and the lenders’ commitments to make loans under the 2017 Credit Agreement may be terminated.
Loss on Early Retirement of 2014
Deferred debt issuance costs associated with the Term Loans

AtLoan were amortized using the June 29, 2017 closing date of the 2017 Credit Agreement, there were $3.2 million of unamortizedeffective interest rate method, and deferred debt issuance costs and a $0.1 million unamortized term loan discount associated with the 2014 Term Loans and the Prior Revolving Credit Facility. Of the $3.2 million of unamortized deferred debt issuance costs, $1.4 million was associated with commitments under the Prior Revolving Credit Facility provided by lenders that are continuing to provide commitments under the 2017 Revolving Credit Facility and therefore continued to be deferred, and are being amortized on a straight-line basis over the term of the 2017 Revolving Credit Facility. The remaining $1.8 million of unamortized deferred debt issuance costs and the $0.1 million unamortized discount, all of which related to the 2014 Term Loans, were written off as a $1.9 million loss on early retirement of debt during the three months ended July 31, 2017.
2017 Credit Agreement Issuance Costs
We incurred debt issuance costs of approximately $6.8 million in connection with the 2017 Credit Agreement, which were deferred and are being amortized as interest expense over the terms of the facilities under the 2017 Credit Agreement. Of these deferred debt issuance costs, $4.1 million were associated with the 2017 Term Loan and are being amortized using the effective

interest rate method, and $2.7 million were associated with the 2017 Revolving Credit Facility and are being amortized on a straight-line basis.
Future Principal Payments on Term Loan
As of October 31, 2017, future scheduled principal payments on the 2017 Term Loan were as follows:
(in thousands)  
Years Ending January 31, Amount
2018 (remainder of year) $1,062
2019 4,250
2020 4,250
2021 4,250
2022 4,250
2023 and thereafter 405,875
   Total $423,937

Interest Expense


The following table presents the components of interest expense incurred on the 2021 Notes and on borrowings under our credit agreementsCredit Agreement, for the three and nine months ended October 31, 20172023 and 2016:2022:

18
  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands) 2017 2016 2017 2016
1.50% Convertible Senior Notes:        
Interest expense at 1.50% coupon rate $1,500
 $1,500
 $4,500
 $4,500
Amortization of debt discount 2,829
 2,685
 8,377
 7,949
Amortization of deferred debt issuance costs 267
 253
 790
 750
Total Interest Expense - 1.50% Convertible Senior Notes $4,596
 $4,438
 $13,667
 $13,199
         
Borrowings under Credit Agreements:        
Interest expense at contractual rates $3,858
 $3,669
 $11,493
 $10,943
Impact of interest rate swap —
 —
 254
 —
Amortization of debt discounts 17
 15
 48
 44
Amortization of deferred debt issuance costs 396
 557
 1,451
 1,653
Total Interest Expense - Borrowings under Credit Agreements $4,271
 $4,241
 $13,246
 $12,640
 Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands)2023202220232022
2021 Notes:
Interest expense at 0.25% coupon rate$197 $196 $591 $588 
Amortization of deferred debt issuance costs444 441 1,330 1,320 
Total Interest Expense — 2021 Notes$641 $637 $1,921 $1,908 
Borrowings under Credit Agreement:
Interest expense at contractual rates$1,771 $1,186 $5,118 $2,559 
Amortization of debt discounts— 5 5 14 
Amortization of deferred debt issuance costs176 217 563 645 
Losses on early retirements of debt— — 237 — 
Total Interest Expense — Borrowings under Credit Agreement$1,947 $1,408 $5,923 $3,218 




7.SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL STATEMENT INFORMATION
8.    SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL STATEMENT INFORMATION
 
Condensed Consolidated Balance Sheets
 
Inventories consisted of the following as of October 31, 20172023 and January 31, 2017: 2023:
October 31,January 31,
(in thousands)20232023
Raw materials$4,101 $3,325 
Work-in-process291 40 
Finished goods8,650 9,263 
   Total inventories$13,042 $12,628 
  October 31, January 31,
(in thousands) 2017 2017
Raw materials $11,014
 $9,074
Work-in-process 4,673
 4,355
Finished goods 3,835
 4,108
   Total inventories $19,522
 $17,537


Other liabilities consisted of the following as of October 31, 2023 and January 31, 2023:

October 31,January 31,
(in thousands)20232023
Unrecognized tax benefits, including interest and penalties$52,245 $52,887 
Other16,608 27,494 
Total other liabilities$68,853 $80,381 

Condensed Consolidated Statements of Operations
 
Other (expense) income, net consisted of the following for the three and nine months ended October 31, 20172023 and 2016:2022:


 Three Months Ended
October 31,		Nine Months Ended
October 31, 2023
(in thousands)2023202220232022
Foreign currency gains, net$39 $1,360 $212 $3,620 
Other, net20 (315)(153)(434)
Total other income, net$59 $1,045 $59 $3,186 
  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands) 2017 2016 2017 2016
Foreign currency (losses) gains, net $(1,474) $(2,152) $2,384
 $1,870
Gains (losses) on derivative financial instruments, net 834
 1,266
 292
 (696)
Other, net 75
 (235) (147) (3,834)
   Total other (expense) income, net $(565) $(1,121) $2,529
 $(2,660)


Condensed Consolidated Statements of Cash Flows
 
The following table provides supplemental information regarding our condensed consolidated cash flows for the nine months ended October 31, 20172023 and 2016:2022:
19
 Nine Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands) 2017 2016(in thousands)20232022
Cash paid for interest $13,618
 $13,927
Cash paid for interest$6,336 $3,203 
Cash payments of income taxes, net $18,344
 $25,023
Cash payments of income taxes, net$12,979 $12,818 
Cash payments for operating leasesCash payments for operating leases$12,474 $21,275 
Non-cash investing and financing transactions:  
  Non-cash investing and financing transactions: 
Leasehold improvements funded by lease incentiveLeasehold improvements funded by lease incentive$— $5,090 
Finance leases of property and equipmentFinance leases of property and equipment$448 $567 
Accrued but unpaid purchases of property and equipment $3,487
 $5,169
Accrued but unpaid purchases of property and equipment$231 $4,079 
Inventory transfers to property and equipment $1,265
 $139
Liabilities for contingent consideration in business combinations $9,100
 $7,700
Liabilities for contingent consideration in business combinations$2,265 $2,822 
Capital leases of property and equipment $1,929
 $—
Retirement of treasury stockRetirement of treasury stock$— $106,137 
Excise tax on share repurchasesExcise tax on share repurchases$612 $— 




9.    CONVERTIBLE PREFERRED STOCK

On December 4, 2019, we entered into the 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, 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, 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 issuance date.

Voting Rights

Holders of the Preferred Stock have the right to vote on matters submitted to a vote of the holders of our common stock, on an as-converted basis; however, in no event will the holders of Preferred Stock have the right to vote shares of the Preferred Stock on an as-converted basis in excess of 19.9% of the voting power of the common stock outstanding immediately prior to December 4, 2019.

Dividends and Liquidation Rights

The Preferred Stock ranks senior to the shares of our common stock with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of our affairs. Shares of Preferred Stock have a liquidation preference of the greater of $1,000 per share or the amount that would be received if the shares are converted at the then applicable conversion price at the time of such liquidation.

Each series of Preferred Stock pays dividends at an annual rate of 5.2% until May 7, 2024, and thereafter at a rate of 4.0%, subject to adjustment under certain circumstances. Dividends on the Preferred Stock are cumulative and payable semi-annually in arrears in cash. All dividends that are not paid in cash will remain accumulated dividends with respect to each share of Preferred Stock. The dividend rate is subject to increase (i) to 6.0% per annum in the event the number of shares of common stock into which the Preferred Stock could be converted exceeds 19.9% of the voting power of outstanding common stock on December 4, 2019 (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.

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8.STOCKHOLDERS’ EQUITY
For the nine months ended October 31, 2023, we paid $20.8 million of preferred stock dividends, $10.4 million of which was accrued as of January 31, 2023, and there were $6.9 million of cumulative undeclared and unpaid preferred stock dividends at October 31, 2023. There were no dividends paid during the three months ended October 31, 2023 and 2022, and we had no accrued dividends as of October 31, 2023. We reflected $5.2 million and $15.6 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 months ended October 31, 2023, respectively. There were $5.2 million and $15.6 million of preferred stock dividends in our condensed consolidated results of operations for the three and nine months ended October 31, 2022, 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 December 4, 2019. 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 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 31, 2023, 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 million shares and Apax’s ownership in us on an as-converted basis was approximately 13.2%.

Beginning May 7, 2023, in the case of the Series A Preferred Stock, and April 6, 2024, in the case of the Series B Preferred Stock, we 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”). As of October 31, 2023, the volume-weighted average price per share of common stock has not exceeded 175% of the $36.38 conversion price of the Series A Preferred Stock.

We may redeem any or all of the Preferred Stock of a series for cash at any time after May 7, 2026, in the case of the Series A Preferred Stock, and April 6, 2027, in the case of the Series B Preferred Stock, 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 Preferred Stock may not be sold or transferred without our prior written consent. The common stock issuable upon conversion of the Preferred Stock is not subject to this restriction. The restriction on the sale or transfer of the Preferred Stock does not apply to certain transfers to one or more permitted co-investors or transfers or pledges of the Preferred Stock pursuant to the terms of specified margin loans entered into by the Apax Investor as well as transfers effected pursuant to a merger, consolidation, or similar transaction consummated by us and transfers that are approved by our board of directors.

At any time after November 7, 2028, in the case of the Series A Preferred Stock, and October 6, 2029, in the case of the Series B Preferred Stock, or upon the occurrence of a change of control triggering event (as defined in the certificates of designation), the holders of the applicable series of Preferred Stock will have the right to cause us to redeem all of the outstanding shares of Preferred Stock for cash at a redemption price equal to 100% of the liquidation preference of the shares of such series, plus any accrued and unpaid dividends to, but excluding, the redemption date. Therefore, the Preferred Stock has been classified as temporary equity on our condensed consolidated balance sheets as of October 31, 2023 and January 31, 2023, 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 31, 2023, 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 November 7, 2028, in the case of the Series A Preferred Stock, and October 6, 2029, in the case of the Series B Preferred Stock, 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 31, 2023 plus accrued and unpaid dividends. As of October 31, 2023, the stated value of the liquidation preference for each series of Preferred Stock was $200.0 million and cumulative, unpaid dividends on each series of Preferred Stock was $3.5 million.

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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 were recognized as a non-cash charge or benefit within other income (expense), net on the condensed consolidated statement of operations.

Upon issuance of the Series A Preferred Stock on May 7, 2020, the Future Tranche Right was recorded as an asset of $3.4 million, as the purchase price of the Series B Preferred Stock was greater than its estimated fair value at the expected settlement date. This resulted in a $203.4 million carrying value, before direct and incremental issuance costs, for the Series A Preferred Stock.

Immediately prior to the issuance of the Series B Preferred Stock, the Future Tranche Right was remeasured and 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.


10.    STOCKHOLDERS’ EQUITY
 
Dividends on Common Stock Dividends


We did not declare or pay any cash dividends on our common stock during the nine months ended October 31, 20172023 and 2016.2022. Under the terms of our Credit Agreement, we are subject to certain restrictions on declaring and paying cash dividends on our common stock.


ShareTreasury Stock

From time to time, our board of directors has approved limited programs to repurchase shares of our common stock from our directors or officers in connection with the vesting of restricted stock or restricted stock units to facilitate required income tax withholding by us or the payment of required income taxes by such holders. In addition, the terms of some of our equity award agreements with all grantees provide for automatic repurchases by us for the same purpose if a vesting-related or delivery-related tax event occurs at a time when the holder is not permitted to sell shares in the market. Our stock bonus program contains similar terms. Any such repurchases of common stock occur at prevailing market prices and are recorded as treasury stock.

We periodically purchase common stock from our directors, officers, and other employees to facilitate income tax withholding by us or the payment of required income taxes by such holders in connection with the vesting of equity awards 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.

No treasury stock remained outstanding at October 31, 2023 and January 31, 2023, respectively.

Stock Repurchase ProgramPrograms


On March 29, 2016,December 7, 2022, we announced that our board of directors had authorized a sharestock repurchase program for the period from December 12, 2022 until January 31, 2025, whereby we may make up to $150.0 million in purchases of our outstandingrepurchase shares of common stock over the two years following the date of announcement. Under the share repurchase program, purchases can be made from timein an amount not to time using a variety of methods, which may include open market purchases. 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 generatedexceed, in the U.S. and other potential usesaggregate, $200.0 million during the repurchase period.

During the year ended January 31, 2023, we repurchased approximately 649,000 shares of cash, suchour common stock for a cost of $23.5 million under the current stock repurchase program. During the nine months ended October 31, 2023, we repurchased approximately 3,014,000 shares of our common stock for a cost of $99.3 million, including excise tax of $0.6 million, under the
22
current stock repurchase program. During the nine months ended October 31, 2023, we retired all 3,014,000 shares, which was recorded as acquisitions. Purchases may be made through a Rule 10b5-1 plan pursuant to pre-determined metrics set forth in such plan. The authorization of the share repurchase program does not obligate us to acquire any particular amountreduction of common stock and additional paid-in capital. These shares were returned to the program may be suspended or discontinued at any time.status of authorized and unissued shares. Our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the IRA. The excise tax of $0.6 million was recognized as part of the cost basis of shares acquired in the condensed consolidated statements of stockholders’ equity during the nine months ended October 31, 2023.

Treasury Stock
Repurchased shares of common stock are recorded as treasury stock, at cost. We periodically purchase treasury stock from directors, officers, and other employees to facilitate income tax withholding and payment requirements upon vesting of equity awards.


During the nine months ended October 31, 2017,2022, we received approximately 7,000repurchased and retired 2,010,000 shares of treasuryour common stock in a nonmonetary transaction valued at $0.3 million. During the nine months ended October 31, 2016, we acquired 1,000,000 shares of treasury stock atfor a cost of $35.9$106.1 million, which included $105.7 million of share repurchases under a prior stock repurchase program as well as other purchases to facilitate income tax withholding or payments as described above.

Issuance of Convertible Preferred Stock

On December 4, 2019, in conjunction with the aforementioned share repurchase program.

Atplanned Spin-Off, 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 31, 2017 we held2023, Apax’s ownership in us on an as-converted basis was approximately 1,661,000 shares13.2%. Please refer to Note 9, “Convertible Preferred Stock” for a more detailed discussion of treasury stock with a cost of $57.4 million. At January 31, 2017, we held approximately 1,654,000 shares of treasury stock with a cost of $57.1 million.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.


The following table summarizes changes in the components of our accumulated other comprehensive income (loss) by componentloss for the nine months ended October 31, 2017:2023:

(in thousands) Unrealized Gains on Foreign Exchange Contracts Designated as Hedges Unrealized Gain on Interest Rate Swap Designated as Hedge Foreign Currency Translation Adjustments Total
Accumulated other comprehensive income (loss) at January 31, 2017 $575
 $632
 $(156,063) $(154,856)
Other comprehensive income (loss) before reclassifications 5,548
 (341) 21,484
 26,691
Gains reclassified out of accumulated other comprehensive income (loss)
 3,907
 291
 —
 4,198
Net other comprehensive income (loss), current period 1,641
 (632) 21,484
 22,493
Accumulated other comprehensive income (loss) at October 31, 2017 $2,216
 $—
 $(134,579) $(132,363)
(in thousands)Unrealized Losses on Foreign Exchange Contracts Designated as HedgesForeign Currency Translation AdjustmentsTotal
Accumulated other comprehensive loss at January 31, 2023$(87)$(154,012)$(154,099)
Other comprehensive loss before reclassifications(807)(7,247)(8,054)
Amounts reclassified out of accumulated other comprehensive loss(574)— (574)
Net other comprehensive loss(233)(7,247)(7,480)
Accumulated other comprehensive loss at October 31, 2023$(320)$(161,259)$(161,579)


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.


The amounts reclassified out of accumulated other comprehensive income (loss)loss into the condensed consolidated statementstatements of operations, with presentation location, for the three and nine months ended October 31, 20172023 and 20162022 were as follows:

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 Three Months Ended
October 31,		 Nine Months Ended
October 31,		 Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands) 2017 2016 2017 2016 Location(in thousands)2023202220232022Financial Statement Location
Unrealized gains (losses) on derivative financial instruments:         
Unrealized losses on derivative financial instruments:Unrealized losses on derivative financial instruments:
Foreign currency forward contracts $141
 $57
 $407
 $79
 Cost of product revenueForeign currency forward contracts$(3)$— $(7)$— Cost of recurring revenue
 145
 67
 378
 74
 Cost of service and support revenue(24)(19)(61)(50)Cost of nonrecurring revenue
 825
 345
 2,339
 470
 Research and development, net(166)(134)(428)(321)Research and development, net
 461
 213
 1,322
 265
 Selling, general and administrative(79)(73)(199)(170)Selling, general and administrative
 1,572
 682
 4,446
 888
 Total, before income taxes(272)(226)(695)(541)Total, before income taxes
 (252) (75) (539) (94) Provision for income taxes47 38 121 93 Benefit from income taxes
 $1,320
 $607
 $3,907
 $794
 Total, net of income taxes$(225)$(188)$(574)$(448)Total, net of income taxes
         
Interest rate swap agreement $—
 $—
 $(254) $—
 Interest expense
 —
 —
 934
 —
 Other income (expense), net
 —
 —
 680
 —
 Total, before income taxes
 —
 —
 (389) —
 Provision for income taxes
 $—
 $—
 $291
 $—
 Total, net of income taxes




9.11.   INCOME TAXES
 

Our interim (benefit) 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 31, 2017,2023, we recorded an income tax provision of $5.9$13.0 million on pre-taxpretax income of $9.0$25.8 million, which represented an effective income tax rate of 66.0%50.2%. The incomeeffective tax provision does not include income tax benefits on losses incurredrate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain domestic and foreign operations where we maintain valuation allowances. Our pre-tax income in profitable jurisdictions, where we record income tax provisions, was higher than the pre-tax losses in domestic and foreign jurisdictions where we maintain valuation allowances and do not record tax benefits.jurisdictions.


For the three months ended October 31, 2016,2022, we recorded an income tax provision of $3.4$17.4 million on a pre-tax losspretax income of $4.1$21.6 million, which represented a negativean effective income tax rate of 82.4%80.5%. The incomeeffective tax provision does not include income tax benefits on losses incurredrate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain domestic and foreign operations where we maintain valuation allowances and is mainly the result of the activities of profitable jurisdictions. Our pre-tax income in profitable jurisdictions, where we record income tax provisions, was lower than the pre-tax losses in domestic and foreign jurisdictions where we maintain valuation allowances and do not record income tax benefits.


For the nine months ended October 31, 2017,2023, we recorded an income tax provision of $9.5$14.8 million on a pre-tax losspretax income of $12.2$25.5 million, which represented a negativean effective income tax rate of 77.7%58.0%. The incomeeffective tax provision does not include income tax benefits on losses incurredrate varies from the U.S. federal statutory rate of 21% due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain domestic and foreign operations where we maintain valuation allowances. Our pre-tax income in profitable jurisdictions, where we record income tax provisions, was lower than the pre-tax losses in domestic and foreign jurisdictions where we maintain valuation allowances and do not record income tax benefits.jurisdictions.


For the nine months ended October 31, 2016,2022, we recorded an income tax provision of $4.7$20.5 million on a pre-tax losspretax income of $30.0$23.1 million, which represented a negativean effective income tax rate of 15.8%88.9%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities and the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in a foreign jurisdiction, partially offset by lower statutory rates in certain foreign jurisdictions. Excluding the discrete income tax provision does not includeattributable to the foreign jurisdiction valuation allowance, the result was an income tax benefitsprovision of $18.5 million on losses incurred by certain domestic and foreign operations where we maintain valuation allowances and is mainly the result of the activities of profitable jurisdictions. Our pre-tax income of $23.1 million resulting in profitable jurisdictions, where we record incomean effective tax provisions, was significantly lower than the pre-tax losses in domestic and foreign jurisdictions where we maintain valuation allowances and do not record income tax benefits.rate of 79.9%.


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 guidance 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 our federal and certain state and foreign deferred income tax assets as a result of historical losses in the most recent three-year period in the U.S.certain state and in certain foreign jurisdictions. We intend to maintain valuation allowances until sufficient positive evidence exists to support a reversal.


We had unrecognized income tax benefits of $154.9$87.2 million and $148.6$87.9 million (excluding interest and penalties) as of October 31, 20172023 and January 31, 2017, respectively.2023, respectively, that if recognized, would impact our effective income tax rate. The accrued liability for interest and penalties was $4.7$6.8 million and $3.9$5.2 million at October 31, 20172023 and January 31, 2017,2023, respectively. Interest and penalties are recorded as a component of the provision for income taxes in our condensed consolidated statements of operations. As of October 31, 2017 and January 31, 2017, the total amount of unrecognized income tax benefits that, if recognized, would impact our effective income tax rate were approximately $150.5 million and $143.0 million, respectively. We regularly assess the adequacy of our provisions for income tax contingencies in accordance with the
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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 31, 20172023 could decrease by approximately $3.1$12.7 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.



The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines address the increasing digitalization of the global economy, re-allocating taxing rights among countries. The European Union and many other member states have committed to adopting Pillar 2 which calls for a global minimum tax of 15% to be effective for tax years beginning in 2024. The OECD guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. We are monitoring developments and evaluating the impacts these new rules will have on our tax rate, including eligibility to qualify for these safe harbor rules.

10.FAIR VALUE MEASUREMENTS

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 31, 20172023 and January 31, 2017:2023:

 October 31, 2023
 Fair Value Hierarchy Category
(in thousands)Level 1Level 2Level 3
Assets:   
Money market funds$70,449 $— $— 
U.S. Treasury bills, classified as cash and cash equivalents498 — — 
Commercial paper, classified as cash and cash equivalents— 7,472 — 
Foreign currency forward contracts— 10 — 
Total assets$70,947 $7,482 $— 
Liabilities:   
Foreign currency forward contracts$— $396 $— 
Contingent consideration — business combinations— — 7,360 
Total liabilities$— $396 $7,360 
 January 31, 2023
 Fair Value Hierarchy Category
(in thousands)Level 1Level 2Level 3
Assets:   
Money market funds$96,941 $— $— 
Commercial paper, classified as cash and cash equivalents— 50,869 — 
Foreign currency forward contracts— 19 — 
Contingent consideration receivable— 8 — 
Total assets$96,941 $50,896 $— 
Liabilities:   
Foreign currency forward contracts$— $124 $— 
Contingent consideration — business combinations— — 12,717 
Total liabilities$— $124 $12,717 

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  October 31, 2017
  Fair Value Hierarchy Category
(in thousands) Level 1 Level 2 Level 3
Assets:  
  
  
Money market funds $178
 $—
 $—
Foreign currency forward contracts —
 2,811
 —
Interest rate swap agreement —
 1,360
 —
Total assets $178
 $4,171
 $—
Liabilities:  
  
  
Foreign currency forward contracts $—
 $1,591
 $—
Contingent consideration - business combinations —
 —
 48,652
Option to acquire noncontrolling interests of consolidated subsidiaries —
 —
 3,100
Total liabilities $—
 $1,591
 $51,752
  January 31, 2017
  Fair Value Hierarchy Category
(in thousands) Level 1 Level 2 Level 3
Assets:  
  
  
Money market funds $175
 $—
 $—
Foreign currency forward contracts —
 1,646
 —
Interest rate swap agreement —
 1,429
 —
Total assets $175
 $3,075
 $—
Liabilities:  
  
  
Foreign currency forward contracts $—
 $1,246
 $—
Interest rate swap agreement —
 408
 —
Contingent consideration - business combinations —
 —
 52,733
Option to acquire noncontrolling interests of consolidated subsidiaries —
 —
 3,550
Total liabilities $—
 $1,654
 $56,283

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 months ended October 31, 20172023 and 2016: 2022:

 Nine Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands) 2017 2016(in thousands)20232022
Fair value measurement at beginning of period $52,733
 $22,391
Fair value measurement at beginning of period$12,717 $— 
Contingent consideration liabilities recorded for business combinations 9,100
 7,700
Contingent consideration liabilities recorded for business combinations2,265 2,822 
Changes in fair values, recorded in operating expenses (3,769) 4,800
Changes in fair values, recorded in operating expenses(2,830)— 
Payments of contingent consideration (9,412) (3,313)Payments of contingent consideration(4,906)— 
Foreign currency translation and otherForeign currency translation and other114 — 
Fair value measurement at end of period $48,652
 $31,578
Fair value measurement at end of period$7,360 $2,822 
 
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 January 31, 2017, we acquired two majority owned subsidiaries for which we hold an option to acquire the noncontrolling interests. 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 other liabilities and do not recognize noncontrolling interests in these subsidiaries. The following table presents the change in the estimated fair value of this liability, which is measured using Level 3 inputs, for the nine months ended October 31, 2017 and 2016: 

  Nine Months Ended
October 31,
(in thousands) 2017 2016
Fair value measurement at beginning of period $3,550
 $—
Acquisition of option to acquire noncontrolling interests of consolidated subsidiaries —
 3,134
Change in fair value, recorded in operating expenses (450) 300
Fair value measurement at end of period $3,100
 $3,434

There were no transfers between levels of the fair value measurement hierarchy during the nine months ended October 31, 20172023 and 2016.2022.


Fair Value Measurements
 
Money Market Funds and U.S. Treasury Bills - We value our money market funds and U.S. treasury bills using quoted active market prices for such funds.instruments.


Short-term Investments, Corporate Debt Securities, and Commercial Paper - The fair values of short-term investments, as well as corporate debt securities and commercial paper classified as cash equivalents, are estimated using observable market prices for identical securities that are traded in less-active markets, if available. When observable market prices for identical securities are not available, we value these short-term investments using non-binding market price quotes from brokers which we review for reasonableness using observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model.


Foreign Currency Forward Contracts - The estimated fair value of foreign currency forward contracts is based on quotes received from the counterparties thereto. These quotes are reviewed for reasonableness by discounting the future estimated cash flows under the contracts, considering the terms and maturities of the contracts and market foreign currency exchange rates using readily observable market prices for similar contracts.


Interest Rate Swap Agreement - The fair value of our interest rate swap agreement is based in part on data received from the counterparty, and represents the estimated amount we would receive or pay to settle the agreement, taking into consideration current and projected future interest rates as well as the creditworthiness of the parties, all of which can be validated through readily observable data from external sources.
Contingent Consideration Assets and Liabilities - Business Combinations and Divestitures - The fair value of the contingent consideration related to business combinations and divestitures is estimated using a probability-adjusted discounted cash flow model. These fair value measurements are based on significant inputs not observable in the market. The key internally developed assumptions used in these models are discount rates and the probabilities assigned to the milestones to be achieved. We remeasure the fair value of the contingent consideration at each reporting period, and any changes in fair value resulting from either the passage of time or events occurring after the acquisition date, such as changes in discount rates, or in the expectations of achieving the performance targets, are recorded within selling, general, and administrative expenses. Increases or decreases in discount rates would have inverse impacts on the related fair value measurements, while favorable or unfavorable changes in expectations of achieving performance targets would result in corresponding increases or decreases in the related fair value measurements. We utilized discount rates ranging from 3.0%6.5% to 20.0%8.1%, with a weighted average discount rate of 7.6% in our calculation of the estimated fair values of our contingent consideration liabilities as of October 31, 2023. We utilized discount rates ranging from 6.6% to 7.6%, with a weighted average discount rate of 6.9% in our calculations of the estimated fair values of our contingent consideration liabilities as of October 31, 2017 and January 31, 2017.

Option to Acquire Noncontrolling Interests of Consolidated Subsidiaries -2023. 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 12.5% and 14.0% in our calculation of the estimated fair value of the optioncontingent consideration receivable was fully paid as of October 31, 2017 and January 31, 2017, respectively.2023.


Other Financial Instruments

The carrying amounts of accounts receivable, contract assets, accounts payable, and accrued liabilities and other current liabilities approximate fair value due to their short maturities.

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The estimated fair valuesvalue of our term loan borrowings were $426 million and $410Revolving Credit Facility borrowing was approximately $99.0 million at October 31, 2017 and2023. The estimated fair value of our Term Loan borrowing was approximately $100.0 million at January 31, 2017, respectively.2023. On April 27, 2023, we repaid in full the remaining $100.0 million outstanding balance on our Term Loan utilizing proceeds from borrowings under our Revolving Credit Facility. We had no borrowings under our Revolving Credit Facility at January 31, 2023. The estimated fair values of the term loans areTerm Loan borrowings were based upon indicative bid and ask prices as determined by the agent responsible for the syndication of our term loans. We considerconsidered these inputs to be within Level 3 of the fair value

hierarchy because we cannot reasonably observe activity in the limited market in which participationsparticipation in our term loans areTerm Loan traded. The indicative prices provided to us as at each of October 31, 2017 and January 31, 2017 did not significantly differ from par value. The estimated fair value of borrowings under our revolving credit borrowings, if any,Revolving Credit Facility is based upon indicative market values provided by one of our lenders. We had no revolving credit borrowingsThe indicative prices provided to us at October 31, 20172023 and January 31, 2017.2023 did not significantly differ from par value.


The estimated fair values of our 2021 Notes were approximately $393$266.0 million and $381$282.0 million at October 31, 20172023 and January 31, 2017,2023, respectively. The estimated fair values of the 2021 Notes arewere determined based on quoted bid and ask prices in the over-the-counter market in which the 2021 Notes trade.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.



Investments

11.DERIVATIVE FINANCIAL INSTRUMENTS
In March 2023, we invested approximately $1.1 million in a privately-held company via a simple agreement for future equity (“SAFE”). In July 2023, we made a second SAFE investment of $0.5 million for a total investment of approximately $1.6 million. The SAFE provides that, upon the completion by such company of a qualified equity financing, we will automatically receive the number of shares of capital stock of such company equal to the SAFE purchase amount divided by the Discount Price (as such term is defined in the SAFE). If there is a liquidity event affecting such company, such as a change in control or initial public offering, we will receive a cash payment equal to the greater of (a) the SAFE purchase amount or (b) the amount payable on the number of shares of common stock of such company equal to the SAFE purchase amount divided by the Liquidity Price (as such term is defined in the SAFE). Our investment is carried at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer and is included within other assets on the condensed consolidated balance sheets as of October 31, 2023.

The carrying amount of our noncontrolling equity investments in privately-held companies without readily determinable fair values was $5.1 million as of October 31, 2023 and January 31, 2023. These investments were included within other assets on the condensed consolidated balance sheets as of October 31, 2023 and January 31, 2023. There were no observable price changes in our investments in privately-held companies during the nine months ended October 31, 2023 and 2022. We did not recognize any impairments during the three and nine months ended October 31, 2023 and 2022.


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


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. Our joint venture, which has a Singapore dollar functional currency, also periodically utilizes foreign exchange forward contracts to manage its exposure to exchange rate fluctuations related to settlements of liabilities denominated in U.S. dollars. These foreign currency forward contracts generally have maturities of
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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 $145.6$6.2 million and $144.0$6.8 million as of October 31, 20172023 and January 31, 2017,2023, respectively.

Interest Rate Swap Agreement

To partially mitigate risks associated with the variable interest rates on the term loan borrowings under our Prior Credit Agreement, in February 2016 we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution under which we pay interest at a fixed rate of 4.143% and receive variable interest of three-month LIBOR (subject to a minimum of 0.75%), plus a spread of 2.75%, on a notional amount of $200.0 million. Although the Prior Credit Agreement was terminated on June 29, 2017, the interest rate swap agreement remains in effect, and serves as an economic hedge to partially mitigate the risk of higher borrowing costs under our 2017 Credit Agreement resulting from increases in market interest rates.
Prior to June 29, 2017, the interest rate swap agreement was designated as a cash flow hedge and as such, changes in its fair value were recognized in accumulated other comprehensive income (loss) in the condensed consolidated balance sheets and were reclassified into the condensed consolidated statements of operations within interest expense in the period in which the hedged transaction affected earnings. Hedge ineffectiveness, if any, was recognized currently in the condensed consolidated statement of operations.

On June 29, 2017, concurrent with the execution of the 2017 Credit Agreement and termination of the Prior Credit Agreement, the interest rate swap agreement was no longer designated as a cash flow hedge for accounting purposes, and because future

occurrence of the specific forecasted variable cash flows which had been hedged by the interest rate swap agreement was no longer probable, $0.9 million fair value of the interest rate swap at that date was reclassified from accumulated other comprehensive income (loss) into the condensed consolidated statement of operations as income within other income (expense), net. Ongoing changes in the fair value of the interest rate swap agreement are now recognized within other income (expense), net in the condensed consolidated statement of operations.

Settlements with the counterparty under the interest rate swap agreement occur quarterly, and the agreement will terminate on September 6, 2019.


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 31, 20172023 and January 31, 20172023 were as follows:

 Fair Value atFair Value at
 October 31, January 31,October 31,January 31,
(in thousands) Balance Sheet Classification 2017 2017(in thousands) Balance Sheet Classification20232023
Derivative assets:    Derivative assets:
Foreign currency forward contracts:    Foreign currency forward contracts:
Designated as cash flow hedgesPrepaid expenses and other current assets $2,811
 $927
 Designated as cash flow hedgesPrepaid expenses and other current assets$10 $19 
Not designated as hedging instrumentsPrepaid expenses and other current assets —
 719
Interest rate swap agreement:    
Designated as cash flow hedgeOther assets —
 1,429
Not designated as hedging instrumentPrepaid expenses and other current assets 240
 —
Other assets 1,120
 —
Total derivative assets $4,171
 $3,075
 Total derivative assets$10 $19 
    
Derivative liabilities:    Derivative liabilities:
Foreign currency forward contracts:    Foreign currency forward contracts:
Designated as cash flow hedgesAccrued expenses and other current liabilities $288
 $288
 Designated as cash flow hedgesAccrued expenses and other current liabilities$396 $124 
Not designated as hedging instrumentsAccrued expenses and other current liabilities 1,303
 958
Interest rate swap agreement:    
Designated as cash flow hedgeAccrued expenses and other current liabilities —
 408
Total derivative liabilities $1,591
 $1,654
 Total derivative liabilities$396 $124 


Derivative Financial Instruments in Cash Flow Hedging Relationships


The effects of derivative financial instruments designated as cash flow hedges on accumulated other comprehensive loss ("AOCL"(“AOCL”) and on the condensed consolidated statementsstatement of operations for the three and nine months ended October 31, 20172023 and 20162022 were as follows:

  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands)  2017 2016 2017 2016
Net gains (losses) recognized in AOCL:        
Foreign currency forward contracts $743
 $(886) $6,329
 $2,098
Interest rate swap agreement —
 478
 (341) (1,146)
  $743
 $(408) $5,988
 $952
         
Net gains (losses) reclassified from AOCL to the condensed consolidated statements of operations:        
Foreign currency forward contracts $1,572
 $682
 $4,446
 $888
Interest rate swap agreement —
 —
 (254) —
  $1,572
 $682
 $4,192
 $888
Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands) 2023202220232022
Net losses recognized in AOCL:
Foreign currency forward contracts$(523)$(320)$(976)$(780)
Net losses reclassified from AOCL to the condensed consolidated statements of operations:
Foreign currency forward contracts$(272)$(226)$(695)$(541)
 

For information regarding the line item locations of the net (losses) gainslosses on derivative financial instruments reclassified out of AOCL into the condensed consolidated condensed statements of operations, seesee Note 8, "Stockholders' Equity"10, “Stockholders’ Equity”.


There were no gains or losses from ineffectiveness of these cash flow hedges recorded for the three and nine months ended October 31, 2017 and 2016. All of the foreign currency forward contracts underlying the $2.2 million of net unrealized gainslosses recorded in our accumulated other comprehensive loss at October 31, 20172023 mature within twelve months, and therefore we expect all such gainslosses to be reclassified into earnings within the next twelve months.
 
DerivativeFinancial InstrumentsNot Designated as Hedging Instruments
Gains (losses) recognized on derivative financial instruments not designated as hedging instruments in our condensed consolidated statements of operations for the three and nine months endedOctober 31, 2017 and 2016 were as follows: 14.    STOCK-BASED COMPENSATION

  Classification in Condensed Consolidated Statements of Operations Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands)  2017 2016 2017 2016
Foreign currency forward contracts Other (expense) income, net $257
 $1,267
 $(1,025) $(696)
Interest rate swap Other (expense) income, net 577
 —
 1,317
 —
    $834
 $1,267
 $292
 $(696)


12.STOCK-BASED COMPENSATION

Amended and Restated Stock-Based Compensation Plan


On June 22, 2017,2023, our stockholders approved the Verint Systems Inc. Amended and Restated 20152023 Long-Term Stock Incentive Plan (the "2017 Amended Plan"“2023 Plan”), which amended and restated. Upon approval of the Verint Systems Inc. 2015 Long-Term Stock Incentive2023 Plan, new awards were no longer permitted under our prior stock-based compensation plan (the "2015 Plan"“2019 Plan”). As withAwards outstanding at June 22, 2023 under the 20152019 Plan or other previous stock-based compensation plans were not impacted by the 2017 Amendedapproval of the 2023 Plan. Collectively, our stock-based compensation plans are referred to herein as the “Plans”.
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The 2023 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.

The 2017 Amended Plan amends and restates the 2015 Plan to, among other things, increase the number of shares available for issuance under the 2017 Amended Plan. Subject to adjustment as provided in the 2017 Amended2023 Plan, up to an aggregate of (i) 7,975,0009,000,000 shares of our common stock (on an option-equivalent basis), plus (ii) the number of3,982,168 shares of our common stock available for issuance under the 20152019 Plan as of June 22, 2017,2023, plus (iii) the number of shares of our common stock that become available for issuance as a result of awards made under the 20152019 Plan or the 2017 Amended2023 Plan that are forfeited, cancelled, exchanged, withheld or surrendered orthat terminate or expire, may be issued or transferred in connection with awards under the 2017 Amended2023 Plan. Each stock option or stock-settled stock appreciation right granted under the 2017 Amended2023 Plan will reduce the available plan capacity by one share and each other award denominated in shares that is granted under the 2023 Plan will reduce the available plan capacity by 2.471.90 shares.

The 2017 Amended Plan expires on June 22, 2027.


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 months ended October 31, 20172023 and 2016: 2022: 

 Three Months Ended
October 31,		 Nine Months Ended
October 31,		Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands) 2017 2016 2017 2016(in thousands)2023202220232022
Cost of revenue - product $384
 $290
 $1,090
 $802
Cost of revenue - service and support 1,813
 1,517
 4,778
 4,771
Cost of revenue — recurringCost of revenue — recurring$523 $729 $1,505 $2,187 
Cost of revenue — nonrecurringCost of revenue — nonrecurring570 600 1,400 2,058 
Research and development, net 3,181
 2,585
 9,322
 7,193
Research and development, net3,025 3,533 8,818 10,371 
Selling, general and administrative 10,588
 9,562
 35,263
 32,916
Selling, general and administrative12,068 15,037 38,563 49,346 
Total stock-based compensation expense $15,966
 $13,954
 $50,453
 $45,682
Total stock-based compensation expense$16,186 $19,899 $50,286 $63,962 



The following table summarizes stock-based compensation expense by type of award for the three and nine months ended October 31, 2017,2023 and 2016:
2022:
  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands) 2017 2016 2017 2016
Restricted stock units and restricted stock awards $14,201
 $13,121
 $42,951
 $41,610
Stock bonus program and bonus share program 1,840
 788
 7,446
 3,937
Total equity-settled awards 16,041
 13,909
 50,397
 45,547
Phantom stock units (cash-settled awards) (75) 45
 56
 135
Total stock-based compensation expense $15,966
 $13,954
 $50,453
 $45,682

Three Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands)2023202220232022
Restricted stock units and restricted stock awards$15,560 $17,135 $46,400 $56,508 
Stock bonus program and bonus share program564 2,769 3,880 7,449 
Total equity-settled awards16,124 19,904 50,280 63,957 
Phantom stock units (cash-settled awards)62 (5)6 5 
Total stock-based compensation expense$16,186 $19,899 $50,286 $63,962 
 
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 restricted stock units ("RSUs")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 RSU awards to executive officers and certain other employees vest upon the achievement of specified performance goals or market conditions (performance-based RSUs)(performance stock units or “PSUs”).


The following table (Award(“Award Activity Table)Table”) summarizes award activity (including stock-settledfor RSUs, performance-based stock-settled RSUs,PSUs, and other stock awards whichthat reduce available plan capacity) and related informationPlan capacity under the Plans for the nine months ended October 31, 2017:2023 and 2022:

29

(in thousands, except per share data) Number of Shares Weighted-Average Grant Date Fair Value
Awards outstanding, January 31, 2017 2,742
 $45.20
Awards granted 1,766
 $40.12
Awards released (1,369) $46.07
Awards forfeited (295) $49.78
Awards outstanding, October 31, 2017 2,844
 $41.17
Nine Months Ended October 31,
20232022
(in thousands, except per share data)Shares or UnitsWeighted-Average Grant Date Fair ValueShares or UnitsWeighted-Average Grant Date Fair Value
Beginning balance2,230 $52.42 2,454 $42.99 
Granted1,911 $37.08 1,648 $55.43 
Released(1,049)$46.44 (1,547)$41.97 
Forfeited(202)$43.00 (140)$46.74 
Ending balance2,890 $44.44 2,415 $52.58 

Our RSU 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 31, 2017, 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.


With respect to our stock bonus program, the 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 2015 Plan and the 2017 Amended Plan,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“Stock Bonus Program"Program and "BonusBonus Share Program"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 31, 2023, 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.

The following table summarizes PSU activity for performance-based RSUsin isolation under the Plans for the nine months ended October 31, 20172023 and 2016 in isolation2022 (these amounts are alreadyalso included in the Award Activity Table above)above for 2023 and 2022):


Nine Months Ended
October 31,
(in thousands)20232022
Beginning balance532 547 
Granted277 278 
Released(230)(279)
Forfeited(25)(3)
Ending balance554 543 
  Nine Months Ended
October 31,
(in thousands) 2017 2016
Beginning balance 438
 332
Granted 204
 313
Released (50) (159)
Forfeited (86) (48)
Ending balance 506
 438


Excluding performance-based RSUs,PSUs, we granted 1,562,0001,634,000 RSUs during the nine months ended October 31, 2017.2023.


As of October 31, 2017,2023, there was approximately $76.7$85.9 million of total unrecognized compensation expense, net of estimated forfeitures, related to unvested restricted stock units,RSUs, which is expected to be recognized over a weighted-average period of 2.01.8 years. The unrecognized compensation expense does not include compensation expense of up to $1.3 million related to shares for which a grant date has been established but the requisite service period has not begun.


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 remaincapacity remains available for awardsunder the program following the enrollment of all other participants. Shares awarded to executive officers with respect to the discount feature of the program are subject to a one-year vesting period. This program is subject to annual funding approval by our board of directors and an annual cap on the number of shares that can be issued. Subject to these limitations, the number of shares to be issued under the program for a given year is determined using a five-day trailing average price of our common stock when the awards are calculated, reduced by a discount determined by the board of directors each year (the "discount"“discount”). To the extent that this program is not funded in a given year or the number of shares of common stock needed to fully satisfy employee enrollment exceeds the annual cap, the applicable portion of the employee bonuses will generally revert to being paid in cash. Obligations under this

Under our bonus share program, are accounted for as liabilities, because the obligations are based predominantly on fixed monetary amountswe may provide discretionary bonuses to employees or pay earned bonuses that are generally known at inception ofoutside the obligation, to be settled with a variable numberstock bonus program in the form of shares of common stock. Unlike the stock determined usingbonus program, there is no enrollment for this program and no discount feature.
30

For bonuses in respect of the year ended January 31, 2023, our board of directors approved the use of up to 300,000 shares of common stock in the aggregate for awards under these two programs, with up to 200,000 of these shares of common stock, and a discounted average pricediscount of 15% approved for awards under our common stock.stock bonus program. During the three months ended July 31, 2023, we issued approximately 27,000 shares under the stock bonus program and 178,000 shares under the bonus share program, in respect of the year ended January 31, 2023.


The following table summarizes activity under the stock bonus program during the nine months ended October 31, 20172023 and 20162022 in isolation. As noted above, shares issued in respect of the discount feature under the program reduce available plan capacity and are included in the Award Activity Table above. Other shares issued under the program do not reduce available plan capacity and are therefore excluded from the Award Activity Table above.

 Nine Months Ended
October 31,		Nine Months Ended
October 31,
(in thousands) 2017 2016(in thousands)20232022
Shares in lieu of cash bonus - granted and released 21
 25
Shares in respect of discount:    
Shares in lieu of cash bonus — granted and released (not included in Award Activity Table above)Shares in lieu of cash bonus — granted and released (not included in Award Activity Table above)27131
Shares in respect of discount (included in Award Activity Table above):Shares in respect of discount (included in Award Activity Table above):
Granted —
 —
Granted025
Released —
 2
Released 223

Bonus Share Program


In February 2015, the board of directors authorized a separate program under which we may provide discretionary year-end bonuses to employees in the form of shares of common stock. Unlike the stock bonus program, there is no enrollment for this program and no discount feature. Similar to the accounting for the stock bonus program, obligations for these bonuses are accounted for as liabilities, because the obligations are based predominantly on fixed monetary amounts that are generally known, to be settled with a variable number of shares of common stock.

For bonuses in respect of the year ended January 31, 2017, theMarch 2023, our board of directors approved the use of up to 300,000 shares of common stock in the aggregate under this program. During the nine months ended October 31, 2017, approximately 293,000these two programs, with up to 200,000 of these shares of common stock, were awarded and releaseda discount of 15%, for awards under our stock bonus program for the bonus share program in respect ofperformance period ending January 31, 2024. Any shares earned under these programs will be issued during the year ended January 31, 2017.2025.



The combined accrued liabilities for the stock bonus program and the bonus share programthese two programs were $4.5$4.0 million and $10.0$7.9 million at October 31, 20172023 and January 31, 2017,2023, respectively. As noted above, shares issued under this program are included in the Award Activity Table appearing above.


In August 2017, the board of directors approved the use of up to 300,000 shares of common stock for bonuses in respect of the year ending January 31, 2018 under the bonus share program, the stock bonus program, or otherwise. This authorization replaced the board’s previous authorization in March 2017 for the use of up to 125,000 shares under the stock bonus program for the year ending January 31, 2018.


15.   COMMITMENTS AND CONTINGENCIES
13.COMMITMENTS AND CONTINGENCIES

Warranty Liability

The following table summarizes the activity in our warranty liability, which is included in accrued expenses and other liabilities in the condensed consolidated balance sheets, for the nine months ended October 31, 2017 and 2016:
  Nine Months Ended
October 31,
(in thousands) 2017 2016
Warranty liability at beginning of period $962
 $826
Provision (credited) charged to expenses (84) 746
Warranty charges (219) (536)
Foreign currency translation and other —
 1
Warranty liability at end of period $659
 $1,037


Legal Proceedings


OnCTI Litigation

In March 26, 2009, one of our former employees, Ms. Orit Deutsch, commenced legal actions were commenced by Ms. Orit Deutsch,in Israel against our former primary Israeli subsidiary, Cognyte Technologies Ltd. (formerly known as Verint Systems Limited or “VSL”) (Case Number 4186/09) and against our former affiliate CTI (Case Number 1335/09). Also, in March 2009, a former employee of ourComverse Limited (CTI’s primary Israeli subsidiary Verint Systemsat the time), Ms. Roni Katriel, commenced similar legal actions in Israel against Comverse Limited ("VSL"), against VSL in the Tel Aviv Regional Labor Court (Case Number 4186/3444/09) (the "Deutsch Labor Action") and against CTI in the Tel Aviv District Court (Case Number 1335/09) (the "Deutsch District Action"). In these actions, the Deutsch Labor Action, Ms. Deutsch filed a motionplaintiffs generally sought to approve acertify class action lawsuitsuits against the defendants on the grounds that she purported to represent a classbehalf of our employeescurrent and former employees of VSL and Comverse Limited who werehad been granted Verint and CTI stock options in Verint and/or CTI and who were allegedly damaged as a result of thea suspension of option exercises during the period from March 2006 through March 2010, during which we did not make periodic filings with the SEC as a result of certain internal and external investigations and reviews of accounting matters discussed in our prior public filings. In the Deutsch District Action, in addition to a small amount of individual damages, Ms. Deutsch was seeking to certify a class of plaintiffs who were allegedly damaged due to their inability to exercise Verint and CTI stock options as a result of alleged negligence by CTI in its financial reporting. The class certification motions do not specify an amount of damages. On February 8, 2010, the Deutsch Labor Action was dismissed for lack of material jurisdiction and was transferred to the Tel Aviv District Court and consolidated with the Deutsch District Action. On March 16, 2009 and March 26, 2009, respectively, legal actions were commenced by Ms. Roni Katriel, a former employee of CTI's former subsidiary, Comverse Limited, against Comverse Limited in the Tel Aviv Regional Labor Court (Case Number 3444/09) (the "Katriel Labor Action") and against CTI in the Tel Aviv District Court (Case Number 1334/09) (the "Katriel District Action"). In the Katriel Labor Action, Ms. Katriel is seeking to certify a class of plaintiffs who were granted CTI stock options and were allegedly damaged as a result of the suspension ofon option exercises during an extended filing delay period affecting CTI's periodic reportingthat is discussed in CTI'sour and CTI’s historical SECpublic filings. In the Katriel District Action, in addition to a small amount of individual damages, Ms. Katriel is seeking to certify a class of plaintiffs who were allegedly damaged due to their inability to exercise CTI stock options as a result of alleged negligence by CTI in its financial reporting. The class certification motions do not specify an amount of damages. On March 2, 2010, the Katriel Labor Action was transferred toJune 7, 2012, the Tel Aviv District Court, based on an agreed motionwhere the cases had been filed byor transferred, allowed the parties requesting such transfer.

On April 4, 2012, Ms. Deutsch and Ms. Katriel filed an uncontested motionplaintiffs to consolidate and amend their claims and on June 7, 2012,complaints against the District Court allowed Ms. Deutsch and Ms. Katriel to file the consolidated class certification motion and an amended consolidated complaint againstthree defendants: VSL, CTI, and Comverse Limited. Following CTI's announcement of its intention to effect the distribution of

On October 31, 2012, CTI distributed all of the issued and outstanding shares of capitalcommon stock of its former subsidiary, Comverse, Inc., on July 12, 2012,its principal operating subsidiary and parent company of Comverse Limited, to CTI’s shareholders (the “Comverse Share Distribution”). In the plaintiffs filed a motion requesting that the District Court order CTI to set asideperiod leading up to $150.0 million in assets to secure any future judgment. The District Court ruled at such time that it would not decide this motion until the Deutsch and

Katriel class certification motion was heard. Plaintiffs initially filed a motion to appeal this ruling in August 2012, but subsequently withdrew it in July 2014.

Prior to the consummation of the Comverse share distribution,Share Distribution, CTI either sold or transferred substantially all of its business operations and assets (other than its equity ownership interests in usVerint and Comverse)in its then-subsidiary, Comverse, Inc.) to Comverse, Inc. or to unaffiliated third parties. On October 31, 2012, CTI completedAs the Comverse share distribution, in which it distributed all of the outstanding shares of common stock of Comverse to CTI's shareholders. As a result of thethese transactions, Comverse, share distribution, ComverseInc. became an independent public company and ceased to be a wholly owned subsidiary ofaffiliated with CTI, and CTI ceased to have any material assets other than its equity interestinterests in us. On September 9, 2015,Verint. Prior to the completion of the Comverse changed its nameShare Distribution, the plaintiffs sought to Xura,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. and, on February 28, 2017, Xura, Inc. changed its namebecame successor-in-interest to MavenirComverse, Inc.


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On February 4, 2013, we merged with CTI.Verint acquired the remaining CTI shell company in a merger transaction (the “CTI Merger”). As a result of the merger, we haveCTI Merger, Verint assumed certain rights and liabilities of CTI, including any liability of CTI arising out of the Deutsch District Action and the Katriel District Action.foregoing legal actions. However, under the terms of thea Distribution Agreement between CTI and Comverse relating toentered into in connection with the Comverse share distribution,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-in-interestsuccessor to CTI in connection withrelated to the Deutsch District Action and the Katriel District Action.foregoing legal actions.


Following an unsuccessful mediation process, the proceeding before the District Court resumed. Onon 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 and any calculation of damages would be evaluated under New York law.


On December 15, 2016, CTI filed withAs a result of this ruling (which excluded claims related to Verint stock options from the Supreme Court a motion for leave to appeal the District Court's August 28, 2016 ruling. The plaintiffs did not file an appealcase), one of the District Court's August 28, 2016 ruling. On February 5, 2017,original plaintiffs in the District Court approved the plaintiff's motion to appointcase, Ms. Deutsch, was replaced by a new representative plaintiff, Mr. David Vaaknin, forVaaknin. CTI appealed portions of the current or former employees of VSL who held unexercised CTI stock options atDistrict Court’s ruling to the time CTI suspended option exercises in replacement of Ms. Deutsch.

Israeli Supreme Court. On August 8, 2017, the Israeli Supreme Court partially allowed CTI'sCTI’s appeal and ordered the case to be returned to the District Court to determine whether a cause of action exists in this case under New York law based on CTI's previously submittedthe parties’ expert opinionopinions.

Following two unsuccessful rounds of mediation in mid to late 2018 and in mid-2019, the opinion of any expertproceedings resumed. On April 16, 2020, the plaintiffs electDistrict Court accepted the plaintiffs’ application to introduce. The District Court's decision on this question will act to either affirm its earlier rulingamend the motion to certify a portion ofclass action and set deadlines for filing amended pleadings by the suitparties. CTI submitted a motion to appeal the District Court’s decision to the Israeli Supreme Court, as well as a class action ormotion to reverse this class certification. A hearing date beforestay 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 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 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 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 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 yetpaid by the primary obligors. On February 7, 2023, the District Court approved the settlement without material changes. As of October 31, 2023, the first two installments of the compensation amount had been set.paid by Mavenir, leaving one installment of approximately $4.7 million to be paid in April 2024.


FromUnder 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.

As of October 31, 2023, we had a remaining liability of $4.7 million, which is included within accrued expenses and other current liabilities, and an offsetting indemnification receivable of $4.7 million, which is included in prepaid expenses and other current assets. There was no impact to our condensed consolidated statement of operations.

Unfair Competition Litigation and Related Investigation

As previously disclosed, Verint Americas Inc., as successor to ForeSee Results, Inc. (“ForeSee”), was the defendant in two Eastern District of Michigan cases 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) and alleged infringement of two federally registered trademarks and common law unfair competition under federal and state law. 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) and alleged unfair competition and false advertising under federal and state law, as well as tortious interference with contract. We believe that the claims asserted by the plaintiffs in these matters were without merit. Following the filing of the Eastern District of Michigan litigation, ForeSee 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”) asserting fraud and
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other claims against ACSI LLC, CFI, Fornell, and CFI Software for, among other things, their breach of a “Joinder and Waiver Agreement” entered into in connection with the December 2013 sale of ForeSee to its previous owner and misrepresentations in the associated deal documents. Verint acquired ForeSee in December 2018.

In April 2023, the parties reached an agreement in principle to settle these actions, and on June 1, 2023, the parties signed a definitive settlement agreement. Under the terms of the settlement agreement, Verint paid $9.0 million to the Fornell Group in July 2023 and the parties have agreed to certain restrictive covenants with respect to the future business activities of both ForeSee and the Fornell Group. The agreement provides that the settlement does not constitute a ruling on the merits, an admission as to any issue of fact or principle of law, or an admission of liability or wrongdoing by either ForeSee or Verint. Following the execution of the settlement agreement, the two cases in Michigan against us have been dismissed, and the case in Delaware filed by us has been dismissed.

The U.S. Attorney’s Office for the Eastern District of Michigan’s Civil Division (“USAO”) also conducted 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 ForeSee acquisition. Verint received a Civil Investigation Demand (“CID”) in connection with this investigation and provided responses. The False Claims Act contains provisions that allow for private persons (“relators”) to initiate actions by filing claims under seal. We believed and subsequently confirmed that this investigation was initiated by ACSI LLC and CFI in coordination with the Eastern District of Michigan litigation discussed above.

In March 2023, Verint and the Assistant U.S. Attorney overseeing the USAO investigation reached an agreement in principle to resolve the USAO matter. The definitive settlement agreement, which provides that it is not an admission of liability by us, was signed in July 2023 including by the USAO and the relators. Under the terms of the settlement agreement, Verint paid $7.0 million to the government in August 2023 (a portion of which is payable by the government to the relators) in exchange for a release of the asserted claims, and an associated civil action brought by the relators has been dismissed.

As of January 31, 2023, we recognized a $7.0 million legal settlement liability in respect of the USAO matter and a $3.5 million legal settlement liability in respect of the ACSI and CFI matters within accrued expenses and other current liabilities, and a corresponding insurance recovery receivable in prepaid expenses and other current assets on our consolidated balance sheets. These loss accruals and insurance recoveries were offset within selling, general and administrative expenses in our consolidated statements of operations for the year ended January 31, 2023, resulting in no impact on our consolidated statements of operations.

The incremental settlement costs of $5.5 million related to the ACSI and CFI matters as a result of the settlement described above is included within selling, general and administrative expenses in our condensed consolidated statement of operations for the nine months ended October 31, 2023. We reached a final settlement with one of our insurance carriers for a total cumulative insurance recovery of $14.5 million for the losses we incurred related to these actions, which offset settlement and legal expenses during the year ended January 31, 2023. We collected $2.0 million during the year ended January 31, 2023 and $12.5 million was collected in April 2023.

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



14.SEGMENT INFORMATION

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

We report our results in two operating segments—Customer Engagement Solutions ("Customer Engagement") and Cyber Intelligence Solutions ("Cyber Intelligence"). Our Customer Engagement solutions help customer-centric organizations optimize customer engagement, increase customer loyalty, and maximize revenue opportunities, while generating operational efficiencies, reducing cost, and mitigating risk.  Our Cyber Intelligence solutions are used for a wide range of applications, including predictive intelligence, advanced and complex investigations, security threat analysis, and electronic data and physical assets protection, as well as for generating legal evidence and preventing criminal activity and terrorism.

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

Segment revenue includes adjustments associated with revenue of acquired companies which are not recognizable within GAAP revenue.  These adjustments primarily relate to the acquisition-date excess of the historical carrying value over the fair

value of acquired companies’ future maintenance and service performance obligations. As the obligations are satisfied, we report our segment revenue using the historical carrying values of these obligations, which we believe better reflects our ongoing maintenance and service revenue streams, whereas GAAP revenue is reported using the obligations’ acquisition-date fair values. Segment revenue adjustments can also result from aligning an acquired company’s historical revenue recognition policies to our policies.

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

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

Revenue from transactions between our operating segments is not material.

Operating results by segment for the three and nine months ended October 31, 2017 and 2016 were as follows:


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  Three Months Ended
October 31,		 Nine Months Ended
October 31,
(in thousands) 2017 2016 2017 2016
Revenue:  
  
    
Customer Engagement  
  
    
Segment revenue $184,506
 $173,860
 $542,708
 $525,620
Revenue adjustments (2,916) (1,103) (11,065) (6,610)
  181,590
 172,757
 531,643
 519,010
Cyber Intelligence  
  
    
Segment revenue 99,254
 86,169
 285,024
 247,537
Revenue adjustments (118) (24) (169) (300)
  99,136
 86,145
 284,855
 247,237
Total revenue $280,726
 $258,902
 $816,498
 $766,247
         
Segment contribution:  
  
    
Customer Engagement $70,768
 $65,085
 $195,756
 $188,800
Cyber Intelligence 23,160
 20,575
 62,402
 55,506
Total segment contribution 93,928
 85,660
 258,158
 244,306
         
Reconciliation of segment contribution to operating income (loss):  
  
    
Revenue adjustments 3,034
 1,127
 11,234
 6,910
Shared support expenses 38,150
 36,617
 114,022
 112,057
Amortization of acquired intangible assets 16,230
 19,944
 54,973
 60,990
Stock-based compensation 15,966
 13,954
 50,453
 45,682
Acquisition, integration, restructuring, and other unallocated expenses 2,736
 8,493
 15,103
 20,684
Total reconciling items, net 76,116
 80,135
 245,785
 246,323
      Operating income (loss) $17,812
 $5,525
 $12,373
 $(2,017)


With the exception of goodwill and acquired intangible assets, we do not identify or allocate our assets by operating segment.  Consequently, it is not practical to present assets by operating segment.  The allocations of goodwill and acquired intangible assets by operating segment appear in Note 5, "Intangible Assets and Goodwill".

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, 20172023 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“Cautionary Note on Forward-Looking Statements"Statements”.




Overview


Macroeconomic Conditions

During the three and nine months ended October 31, 2023, global macroeconomic conditions were, and continue to be, influenced by a number of factors, including, but not limited to, the impacts of the COVID-19 pandemic, geopolitical conflicts (including the Russian invasion of Ukraine and the Israel-Hamas war), labor shortages, supply chain disruptions, inflation, instability in the global banking industry, and changes to monetary and fiscal policies by central banks and governments around the world. These items are described further below. We believe that these global macroeconomic conditions have increased the length of our sales cycles, impacted customer and partner spending decisions, and resulted in decreased demand and increased costs.

Military Conflicts

We continue to monitor events associated with the Russian invasion of Ukraine and its global impacts, including applicable trade compliance or other legal requirements regarding permissible activities in the region. Based on the current situation, we do not believe the Russia-Ukraine conflict has had or will have a material impact on our business or results of operations. However, if the 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 Ukraine represented immaterial portions of our net assets as of October 31, 2023 and January 31, 2023, and total revenue for the nine months ended October 31, 2023 and 2022.

We also are closely monitoring and reacting to the current war between Israel and Hamas. We have significant operations in Israel, including research and development and support. Some of our employees in Israel are obligated to perform reserve duty in the Israeli military and have been called to do so as a result of the current war. To date, we do not believe the war has had or will have a material impact on our business or results of operations. However, if the conflict worsens or expands, leading to greater disruption in Israel and/or to greater global economic disruptions and uncertainty, our business or results of operations could be materially impacted.

COVID-19 Pandemic and Workplace Modifications

As a result of the impact of the COVID-19 pandemic, 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 re-opened some of our offices and have contracted for co-working space in certain locations for employees to use as needed, subject to applicable government regulations. Beginning in the year ended January 31, 2022 and continuing into the nine months ended October 31, 2023, we decided to exit or reduce our space under certain office leases. We recognized $0.1 million and $6.1 million of accelerated lease expense, including losses on terminations, and other asset impairments, which were reflected within selling, general, and administrative expenses in our condensed consolidated statement of operations for the three and nine months ended October 31, 2023, respectively. We recognized $1.2 million and $13.8 million of accelerated lease expense, including losses on terminations, and other asset impairments, which were reflected within selling, general, and administrative expenses in our condensed consolidated statement of operations for the three and nine months ended October 31, 2022, respectively.

We are in the process of migrating to a new cloud-based IT infrastructure to support the shift to a hybrid work environment and enable us to operate more efficiently. IT charges associated with modifying the workplace, including consolidating and/or migrating data centers and labs to the cloud, simplifying the corporate network, and one-time costs for implementing collaboration tools to enable our hybrid work environment, as well as asset impairment charges and IT facility exit costs were $1.9 million and $1.1 million during the three months ended October 31, 2023 and 2022, respectively, and $16.8 million and
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$3.5 million during the nine months ended October 31, 2023 and 2022, respectively, which were reflected within selling, general, and administrative expenses in our condensed consolidated statement of operations. We also recognized $1.1 million of asset impairment charges related to software licenses that were previously used in research and development as a result of the migration to the cloud and $0.5 million of other costs related to the migration to a new cloud-based IT infrastructure. These charges were reflected within research and development, net expenses in our condensed consolidated statement of operations for the nine months ended October 31, 2023.

Our Business


Verint is a global leader in Actionable Intelligence solutions. Actionable Intelligence is a necessity in a dynamic world of massive information growth because it empowers organizations with crucial insightshelps the world’s most iconic brands continuously elevate the customer experience (“CX”) and enables decision makers to anticipate, respond, and take action. With Verint solutions and value-added services, organizations of all sizes and across many industries can make more informed, timely, and effective decisions. Today, overreduce operating costs. More than 10,000 organizations in more than 180175 countries – including over 80 percent85 of the Fortune 100 use companies – rely on Verint’s open customer engagement platform to harness the power of data and artificial intelligence (“AI”) to maximize CX automation.

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 including the need for AI and automation, ever-expanding customer engagement channels and exponentially more consumer interactions – often while facing limited budgets and resources. As a result, brands are finding it more challenging to deliver the desired customer experience. This creates a capacity gap, which is widening as the digital transformation continues. Organizations are increasingly seeking technology to close this gap with solutions that are based on AI and are developed specifically for customer engagement, such as teams of AI-powered bots working on their own or in collaboration with employees. These AI-based solutions automate workflows across enterprise silos to optimize customer engagementthe workforce expense and makeat the worldsame time drive an elevated consumer experience.

Verint is headquartered in Melville, New York, and has approximately 15 offices worldwide, in addition to a safer place.

number of on-demand, flexible coworking spaces. We have established leadership positions in Actionable Intelligence by developing highly-scalable, enterprise-class software and services with advanced, integrated analytics for both unstructured and structured information. Our innovative solutions are developed byapproximately 4,100 passionate employees plus a large research and development (“R&D”) team comprised of approximately 1,400 professionals and backed by more than 800 patents and patent applications worldwide.

To help our customers maximizefew hundred contractors around the benefits of our technology over the solution lifecycle andglobe exclusively focused on helping brands provide a high degree of flexibility, we offer a broad range of services, such as strategic consulting, managed services, implementation services, training, maintenance, and 24x7 support. Additionally, we offer a broad range of deployment options, including cloud, on-premises, and hybrid, and software licensing and delivery models that include perpetual licenses and software as a service (“SaaS”)Boundless Customer Engagement™.

We conduct our business in two operating segments—Customer Engagement Solutions ("Customer Engagement") and Cyber Intelligence Solutions ("Cyber Intelligence"). Our Customer Engagement solutions help customer-centric organizations optimize customer engagement, increase customer loyalty, and maximize revenue opportunities, while generating operational efficiencies, reducing cost, and mitigating risk.  Our Cyber Intelligence solutions are used for a wide range of applications, including predictive intelligence, advanced and complex investigations, security threat analysis, and electronic data and physical assets protection, as well as for generating legal evidence and preventing criminal activity and terrorism.


Key Trends and Factors That May Impact our Performance


We believe that there are three key market trends that are benefiting Verint today: the acceleration of digital transformation, a changing workforce, and elevated customer expectations.

•Acceleration of Digital Transformation: Digital transformation is 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 factorstouchpoints in the enterprise and across many communication and collaboration platforms, including in contact centers, back-office and branch operations, e-commerce, digital marketing, self-service, and customer experience departments, with digital leading the way. Leading brands understand that affect our abilityas digital rises in importance and telephony becomes more commoditized, organizations need to sustainchange business processes and put their primary focus on application capabilities when making customer engagement technology decisions, especially those powered by AI developed specifically for customer engagement. We believe that the breadth of customer touchpoints across the enterprise and the rapid growth in digital interactions benefit Verint as these trends create demand for more specialized AI-based solutions and bots that can increase automation and connect organizational silos to increase efficiency and elevate the customer experience.

•A Changing Workforce: Brands are facing unprecedented challenges when it comes to how they manage their changing workforce. Increasingly, brands are managing a hybrid workforce of agents and bots, with employees that may be working from anywhere. Providing flexibility for where employees work creates greater challenges in managing and coaching employee teams. And because of the limited resources that are available, brands must drive greater workforce efficiency. They need to find ways to use technology, like AI-powered bots, to augment their workforce. Brands recognize the need to leverage data and automation to achieve greater efficiency. In addition, the importance of employee experience continues to grow, 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 AI-based solutions that can shape the future of work, with a workforce of people and AI-powered bots working together, increased automation, greater employee flexibility, and a greater focus on the voice of the employees.

•Elevated Customer Expectations:Customer expectations for faster, more consistent, and contextual responses continue to rise and meeting those expectations is becoming increasingly difficult with legacy technology. The proliferation in customer channels and the desire of customers to seamlessly shift between channels creates a more
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complex customer journey for brands to manage and support. Customers also expect brands to have a deep understanding of the customer’s relationship with that brand — an understanding that is 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. To develop that deep understanding, leading brands recognize the need to use specialized, AI-powered solutions to both fuse the data that has traditionally existed in silos across the enterprise and analyze the data to inform and automate the customer experience. We believe that this trend benefits Verint as it creates demand for new AI-powered bots and other solutions that help brands support complex customer journeys and increase both revenueautomation to meet elevated customer expectations.

While we continue to see significant demand for our solutions, including due to the foregoing key trends, we believe that current macroeconomic conditions, as described above, are impacting customer and profitability, including:

Market acceptancepartner spending decisions. Future impacts on our business and financial results as a result of Actionable Intelligence solutions. Our future growth dependsthese conditions are not estimable at this time and depend, in part, on the continued and increasing acceptance and realizationextent to which these conditions improve or worsen. See the “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the year ended January 31, 2023 for further discussion of the valuepossible impact of our product offerings. We believe that organizations in both the enterprisemacroeconomic conditions and security markets want and need Actionable Intelligence solutions to help achieve their customer engagement, enhanced security, and risk mitigation goals.

Evolving technologies and market potential. Our success depends in partother global events on our ability to keep pace with technological changes, customer challenges, and evolving industry standards in our product offerings, successfully developing, launching, and driving demand for new, innovative, high-quality products and services that meet or exceed customer needs, and identifying, entering, and prioritizing areas of growing market potential, while migrating away from areas of commoditization. For example, in our Cyber Intelligence business, stronger and more frequent use of encryption has created significantly greater challenges for our customers and for our solutions to address. In our Customer Engagement business, we see increased interest in cloud-based solutions, as well as pricing pressure on legacy products.
business.


In the enterprise market, we believe that today's customer-centric organizations are increasingly seeking Customer Engagement Optimization solutions that allow them to collect and analyze intelligence across different service channels to gain a better understanding of the performance of their workforce, the effectiveness of their service processes, the quality of their interactions, and changing customer behaviors, as well as to anticipate and prevent information security breaches, effectively authenticate customers, protect personal information, mitigate risk, prevent fraud, and help ensure compliance with evolving legal, regulatory, and internal requirements.

In the security market, we believe that terrorism, criminal activities, cyber-attacks, and other security threats, combined with new and more complex security challenges, including increasingly frequent and sophisticated cyber-attacks and increasingly complex and encrypted communication networks, are driving demand for security and intelligence data mining solutions that can access structured and unstructured data and help analyze, anticipate, prepare, and respond to these threats.

Information technology and government spending. Our growth and results depend in part on general economic conditions and the pace of information technology spending by both commercial and governmental customers. In prior fiscal periods, we began to experience trends related to extended sales cycles, particularly for large projects, a reduction in deal sizes, and pressure in certain areas of our legacy business. We have made adjustments in response to these market trends, some of which we continue to see in areas of our business. We believe that these adjustments together with improvements in the economic environment and demand for our solutions will drive growth in both of our segments in the year ending January 31, 2018.

In our Customer Engagement segment, we have aligned our sales strategy to engage more closely with our customers on their long-term customer engagement optimization strategy and to focus on their near-term priorities and budget constraints, including by emphasizing the flexible and modular nature of our solution portfolio, in which a customer can make an initial purchase anywhere in our portfolio and then expand into other areas over time, or can make a larger, more transformational suite purchase all at once. We have also continued to increase the flexibility of our deployment model, affording our customers the choice of deploying our solutions on-premises or in the cloud, or a hybrid of both, and we also offer a menu of managed services.

In our Cyber Intelligence segment, we believe that our solutions have proven to be highly effective in fighting terrorism and crime, which continues to be a high priority around the world. As a result, we have continued to expand our solutions portfolio to address emerging threats and have designed our solutions to address specific customer needs. We have also provided additional focus on smaller transactions, achieving a better mix of transaction sizes, for both our leading edge and legacy solutions, and have continued to expand our security domain expertise.


Critical Accounting Policies and Estimates


Note 1, "Summary“Summary of Significant Accounting Policies"Policies” to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended January 31, 20172023 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“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” in Item 7 of our Annual Report on Form 10-K for the year ended January 31, 2017,2023, and include the following:


•Revenue recognition;
•Accounting for business combinations;
Impairment of goodwill•Goodwill and other acquired intangible assets;
Accounting for income•Income taxes; and
Contingencies;
•Accounting for stock-based compensation;compensation.
Accounting for cost of revenue; and
Allowance for doubtful accounts


There were no significant changes to our critical accounting policies and estimates during the nine months ended October 31, 2017.2023.




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 laterlatter part of that month. We believe that these seasonal and cyclical factors primarily reflect customer spending patterns and budget cycles, as well as the impact of incentive compensation plans for our sales personnel. While seasonal and cyclical factors such as these are common in the software and technology industry, this pattern should not be considered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, may also have an impact on our business and financial results.


Overview of Operating Results

The following table sets forth a summary of certain key financial information for the three and nine months ended October 31, 20172023 and 2016:2022:

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 Three Months Ended
October 31,		 Nine Months Ended
October 31,		Three Months Ended
October 31,		Nine Months Ended October 31,
(in thousands, except per share data) 2017 2016 2017 2016(in thousands, except per share data)2023202220232022
Revenue $280,726
 $258,902
 $816,498
 $766,247
Revenue$218,547 $225,193 $645,278 $665,998 
Operating income (loss) $17,812
 $5,525
 $12,373
 $(2,017)
Net income (loss) attributable to Verint Systems Inc. $2,489
 $(8,237) $(23,724) $(37,398)
Operating incomeOperating income$26,718 $21,678 $27,978 $23,686 
Net income (loss) attributable to Verint Systems Inc. common sharesNet income (loss) attributable to Verint Systems Inc. common shares$7,412 $(1,124)$(5,693)$(13,650)
Net income (loss) per common share attributable to Verint Systems Inc.:  
      Net income (loss) per common share attributable to Verint Systems Inc.: 
Basic $0.04
 $(0.13) $(0.38) $(0.60) Basic$0.12 $(0.02)$(0.09)$(0.21)
Diluted $0.04
 $(0.13) $(0.38) $(0.60) Diluted$0.12 $(0.02)$(0.09)$(0.21)


Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016.2022. Our revenue increaseddecreased approximately $21.8$6.7 million, or 8%, to $280.7from $225.2 million in the three months ended October 31, 2017 from $258.92022 to $218.5 million in the three months ended October 31, 2016.2023. The increasedecrease consisted of a $15.0$13.1 million increasedecrease in service and support revenue and a $6.8 million increase in product revenue.  In our Cyber Intelligence segment, revenue increased approximately $13.0 million, or 15%, from $86.1 million in the three months ended October 31, 2016 to $99.1 million in the three months ended October 31, 2017.  The increase consisted of a $7.8 million increase in product revenue and a $5.2 million increase in service and support revenue. In our Customer Engagement segment, revenue increased $8.8 million, or approximately 5%, from $172.7 million in the three months ended October 31, 2016 to $181.5 million in the three months ended October 31, 2017.  The increase consisted of a $9.8 million increase in service and supportrecurring revenue, partially offset by a $1.0$6.4 million decreaseincrease in productnonrecurring revenue. For additional details on our revenue by segment,category, see "—Revenue by Operating Segment"“—Revenue”. Revenue in the Americas, in Europe, the Middle East and Africa ("EMEA"(“EMEA”), and in the Asia-Pacific ("APAC"(“APAC”) regions represented approximately 52%71%, 32%19%, and 16%10% of our total revenue, respectively, in the three months ended October 31, 2017,2023, compared to approximately 53%72%, 29%19%, and 18%9%, respectively, in the three months ended October 31, 2016.2022. Further details of changes in revenue are provided below.


We reported operating income of $17.8$26.7 million in the three months ended October 31, 20172023 compared to operating income of $5.5$21.7 million in the three months ended October 31, 2016.2022. The increase in operating income was primarily due to a $13.6$6.8 million increasedecrease in gross profit,operating expenses, from $155.7$133.1 million to $169.3$126.3 million, partially offset by a $1.3$1.8 million increasedecrease in operating expenses,gross profit, from $150.2$154.8 million to $151.5$153.0 million. The increasedecrease in operating expenses consisted of a $6.1 million increase in net research and development expenses, partially offset by a $3.2 million decrease in amortization of other acquired intangible assets, and a $1.6$5.9 million decrease in selling, general and administrative expenses. Further details of changes in operating income are provided below.

Net income attributable to Verint Systems Inc. was $2.5 million, and diluted net income per common share was $0.04, in the three months ended October 31, 2017 compared to net loss attributable to Verint Systems Inc. of $8.2 million, and net loss per common share of $0.13, in the three months ended October 31, 2016.  These improved operating results in the three months ended October 31, 2017 were primarily due toexpenses, a $12.3 million increase in operating income described above, and an $0.8 million decrease in total other expense, net, partially offset by a $2.6 million increase in provision for income taxes. 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, 2017 to average exchange rates for the three months ended October 31, 2016, the U.S. dollar weakened relative to the euro, resulting in an overall increase in our revenue on a U.S. dollar-denominated basis. Furthermore, the U.S. dollar weakened relative to our Israeli shekel rate (hedged and unhedged), resulting in an overall increase in cost of revenue and operating expenses on a U.S. dollar-denominated basis.  For the three months ended October 31, 2017, had foreign currency exchange rates remained unchanged from rates in effect for the three months ended October 31, 2016, our revenue would have been approximately $2.3 million lower and our cost of revenue and operating expenses on a combined basis would have been approximately $4.2 million lower, which would have resulted in a $1.9 million increase in our operating income.

Nine Months Ended October 31, 2017 compared to Nine Months Ended October 31, 2016. Our revenue increased approximately $50.3 million, or 7%, to $816.5 million in the nine months ended October 31, 2017 from $766.2 million in the nine months ended October 31, 2016. The increase consisted of a $24.9 million increase in product revenue and a $25.4 million increase in service and support revenue.  In our Cyber Intelligence segment, revenue increased approximately $37.7 million, or 15%, from $247.2 million in the nine months ended October 31, 2016 to $284.9 million in the nine months ended October 31, 2017.  The increase consisted of a $26.5 million increase in product revenue and a $11.2 million increase in service and support revenue. In our Customer Engagement segment, revenue increased $12.6 million, or approximately 2%, from $519.0 million in the nine months ended October 31, 2016 to $531.6 million in the nine months ended October 31, 2017.  The increase consisted of a $14.2 million increase in service and support revenue, partially offset by a $1.6 million decrease in product revenue. For additional details on our revenue by segment, see "—Revenue by Operating Segment".  Revenue in the Americas, in Europe, the Middle East and Africa ("EMEA"), and in the Asia-Pacific ("APAC") regions represented approximately 53%, 31%, and 16% of our total revenue, respectively, in the nine months ended October 31, 2017, compared to approximately 54%, 30%, and 16%, respectively, in the nine months ended October 31, 2016. Further details of changes in revenue are provided below.

We reported operating income of $12.4 million in the nine months ended October 31, 2017 compared to an operating loss of $2.0 million in the nine months ended October 31, 2016.  The increased operating income was primarily due to a $23.7 million increase in gross profit, from $459.9 million to $483.6 million, partially offset by a $9.3 million increase in operating expenses, from $461.9 million to $471.2 million. The increase in operating expenses consisted of a $13.1 million increase in net research and development expenses, and a $2.5 million increase in selling, general and administrative expenses, partially offset by a $6.3$0.1 million decrease in amortization of other acquired intangible assets. Further details of changes in operating income are provided below.


Net lossincome attributable to Verint Systems Inc. common shares was $23.7$7.4 million and diluted net lossincome per common share was $0.38,$0.12 in the ninethree months ended October 31, 20172023 compared to a net loss attributable to Verint Systems Inc. common shares of $37.4$1.1 million and diluted net loss per common share of $0.60,$0.02 in the ninethree months ended October 31, 2016.2022. The smallerincrease in net lossincome attributable to Verint Systems Inc. and net loss per common shareshares in the ninethree months ended October 31, 20172023 was primarily due to a $14.4$5.0 million increase in operating income as discusseddescribed above and a $1.1$4.4 million decrease in our provision for income taxes, partially offset by a $0.8 million increase in interest income, a $1.0 million increase in net gains on derivative instruments, a $0.5 million increase in net foreign currency gains, a $3.7 million decrease intotal other expenses,expense, net, and a $0.7$0.1 million decreaseincrease in net income attributable to noncontrolling interests. These were partially offset by a $1.9 million loss on early retirement of debt, a $4.8 million increase in provision for income taxes, and a $1.0 million increase in interest expense. Further details of these changes are provided below.


Nine Months Ended October 31, 2023 compared to Nine Months Ended October 31, 2022. Our revenue decreased approximately $20.7 million, from $666.0 million in the nine months ended October 31, 2022 to $645.3 million in the nine months ended October 31, 2023. The decrease consisted of a $11.4 million decrease in recurring revenue and a $9.3 million decrease in nonrecurring revenue. For additional details on our revenue by category, see “—Revenue”. Revenue in the Americas, EMEA, and APAC regions represented approximately 69%, 20%, and 11% of our total revenue, respectively, in the nine months ended October 31, 2023, compared to approximately 70%, 20%, and 10%, respectively, in the nine months ended October 31, 2022. Further details of changes in revenue are provided below.

We reported operating income of $28.0 million in the nine months ended October 31, 2023 compared to operating income of $23.7 million in the nine months ended October 31, 2022. The increase in operating income was primarily due to a $5.6 million decrease in operating expenses, from $420.1 million to $414.5 million, partially offset by a $1.3 million decrease in gross profit, from $443.8 million to $442.5 million. The decrease in operating expenses consisted of a $4.8 million decrease in selling, general and administrative expenses and a $0.9 million decrease in amortization of other acquired intangible assets, partially offset by a $0.1 million increase in net research and development expenses. Further details of changes in operating income are provided below.

Net loss attributable to Verint Systems Inc. common shares was $5.7 million and diluted net loss per common share was $0.09 in the nine months ended October 31, 2023 compared to a net loss attributable to Verint Systems Inc. common shares of $13.7 million and diluted net loss per common share of $0.21 in the nine months ended October 31, 2022. The decrease in net loss attributable to Verint Systems Inc. common shares in the nine months ended October 31, 2023 was primarily due to a $5.8 million decrease in our provision for income taxes, and a $4.3 million increase in operating income as described above, partially
37

offset by a $1.9 million increase in total other expense, net, and a $0.2 million increase in net income attributable to noncontrolling interests. Further details of these changes are provided below.

As of October 31, 2023, we employed approximately 4,100 employees plus a few hundred contractors, as compared to approximately 4,300 employees plus a few hundred contractors at October 31, 2022.

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 20% and 19% of our total revenue for the three months ended October 31, 2023 and 2022, respectively. Revenue denominated in non-U.S. dollar currency was 21% of our total revenue for each of the nine months ended October 31, 2023 and 2022. Our combined cost of revenue and operating expenses denominated in non-U.S. dollar currency were 32% and 29% of our total combined cost of revenue and operating expenses for the three months ended October 31, 2023 and 2022, respectively. Our combined cost of revenue and operating expenses denominated in non-U.S. dollar currency were 31% and 30% of our total combined cost of revenue and operating expenses for the nine months ended October 31, 2023 and 2022, respectively.

When comparing average exchange rates for the three months ended October 31, 2023 to average exchange rates for the three months ended October 31, 2022, the U.S. dollar weakened relative to the British pound sterling and the euro and strengthened relative to the Israeli shekel and the Australian dollar, resulting in an overall increase in our revenue and expenses on a U.S. dollar-denominated basis. For the three months ended October 31, 2023, had foreign currency exchange rates remained unchanged from rates in effect for the three months ended October 31, 2022, our revenue would have been approximately $1.7 million lower and our cost of revenue and operating expenses on a combined basis would have been approximately $1.6 million lower, which would have resulted in a $0.1 million decrease in our operating income.

When comparing average exchange rates for the nine months ended October 31, 20172023 to average exchange rates for the nine months ended October 31, 2016,2022, the U.S. dollar strengthened relative to the Australian dollar and the Israeli shekel and weakened relative to the euro and the British pound sterling, resulting in an overall decrease in our revenue on a U.S. dollar-denominated basis.  Furthermore, the U.S. dollar weakened relative to our Israeli shekel rate (hedged and unhedged), resulting in an overall increase in operating expenses on a U.S. dollar-denominated basis. For the nine months ended October 31, 2017,2023, had foreign currency exchange rates remained unchanged from rates in effect for the nine months ended October 31, 2016,2022, our revenue would have been approximately $1.6$0.8 million higher and our cost of revenue and operating expenses on a combined basis would have been approximately $3.0$2.7 million lower,higher, which would have resulted in a $4.6$1.9 million increasedecrease in our operating income.

As of October 31, 2017, we employed approximately 5,000 professionals, including part-time employees and certain contractors, as compared to 4,900 at October 31, 2016.


Revenue by Operating Segment
The following table sets forth revenue for each of our two operating segments for the three and nine months endedOctober 31, 2017 and 2016:

  Three Months Ended
October 31,		 % Change Nine Months Ended
October 31,		 % Change
(in thousands) 2017 2016 2017 - 2016 2017 2016 2017 - 2016
Customer Engagement $181,590
 $172,757
 5% $531,643
 $519,010
 2%
Cyber Intelligence 99,136
 86,145
 15% 284,855
 247,237
 15%
Total revenue $280,726
 $258,902
 8% $816,498
 $766,247
 7%

Customer Engagement Segment

Three Months Ended October 31, 2017 compared to Three Months Ended October 31, 2016. Customer Engagement revenue increased approximately $8.8 million, or 5%, from $172.7 million in the three months ended October 31, 2016 to $181.5 million in the three months ended October 31, 2017.  The increase consisted of a $9.8 million increase in service and support revenue, partially offset by a $1.0 million decrease in product revenue. The increase in service revenue was primarily attributable to growth in sales of our cloud-based solutions in the three months ended October 31, 2017 compared to the three months ended October 31, 2016. The decrease in product revenue primarily reflects a modest decrease in product deliveries in the three months ended October 31, 2017 compared to the three months ended October 31, 2016. We continue to experience a shift in our revenue mix from product revenue to service and support revenue as a result of several factors, including a higher component of service offerings in our standard arrangements (including licenses sold through cloud deployment), an increase in services associated with customer product upgrades, and growth in our customer install base.

Nine Months Ended October 31, 2017 compared to Nine Months Ended October 31, 2016. Customer Engagement revenue increased approximately $12.6 million, or 2%, from $519.0 million in the nine months ended October 31, 2016 to $531.6 million in the nine months ended October 31, 2017.  The increase consisted of a $14.2 million increase in service and support revenue, partially offset by a $1.6 million decrease in product revenue. The increase in service revenue was primarily attributable to growth in sales of our cloud-based solutions in the nine months ended October 31, 2017 compared to the nine months ended October 31, 2016. The decrease in product revenue primarily reflects a modest decrease in product deliveries in the three months ended October 31, 2017 compared to the three months ended October 31, 2016.

Cyber Intelligence Segment
Three Months Ended October 31, 2017 compared to Three Months Ended October 31, 2016. Cyber Intelligence revenue increased approximately $13.0 million, or 15%, from $86.1 million in the three months ended October 31, 2016 to $99.1 million in the three months ended October 31, 2017.  The increase consisted of a $7.8 million increase in product revenue and a $5.2 million increase in service and support revenue. The increase in product revenue was due to an increase in product deliveries and an increase in progress realized during the current year on projects with revenue recognized using the percentage of completion ("POC") method. The increase in service and support revenue was primarily attributable to increases in progress realized during the current year on projects with revenue recognized using the POC method, and an increase in support revenue from existing customers and other value add services.

Nine Months Ended October 31, 2017 compared to Nine Months Ended October 31, 2016. Cyber Intelligence revenue increased approximately $37.7 million, or 15%, from $247.2 million in the nine months ended October 31, 2016 to $284.9 million in the nine months ended October 31, 2017.  The increase consisted of an $26.5 million increase in product revenue and a $11.2 million increase in service and support revenue. The increase in product revenue was due to an increase in product deliveries and an increase in progress realized during the current year on projects with revenue recognized using the POC method, some of which commenced in previous fiscal years. The increase in service and support revenue was primarily attributable to an increase in progress realized during the current year on projects with revenue recognized using the POC method and growth in sales of our cloud-based solutions, partially offset by a decrease in support revenue from existing customers.

Volume and Price
We sell products in multiple configurations, and the price of any particular product varies depending on the configuration of the product sold. Due to the variety of customized configurations for each product we sell, we are unable to quantify the amount of any revenue changes attributable to a change in the price of any particular product and/or a change in the number of products sold.
Product Revenue and Service and Support Revenue


We derive and report our revenue in two categories: (a) recurring revenue, which includes bundled SaaS, unbundled SaaS, hosting services, optional managed services, initial and renewal support revenue, and product revenue, including licensing of software products and sale of hardware products (which include software that works together with the hardware to deliver the product's essential functionality),warranties, and (b) service and supportnonrecurring revenue, including revenue fromwhich primarily consists of perpetual licenses, hardware, installation services, post-contract customer support, project management, hosting services, software-as-a-service ("SaaS"), product warranties,business advisory consulting and training services, and training services.  For multiple-element arrangements for which we are unable to establish vendor-specific objective evidence ("VSOE") for one or more elements, we use various available indicators of fair value and apply our best judgment to reasonably classify the arrangement's revenue into product revenue and service and support revenue.patent license royalties.


The following table sets forth product revenue and service and support revenueby category for the three and nine months endedOctober 31, 20172023 and 2016:2022:

38

 Three Months Ended
October 31,		 % Change Nine Months Ended
October 31,		 % ChangeThree Months Ended
October 31,		% ChangeNine Months Ended
October 31,		% Change
(in thousands) 2017
2016 2017 - 2016 2017 2016 2017 - 2016(in thousands)202320222023 - 2022202320222023 - 2022
Product revenue $94,827
 $88,004
 8% $279,056
 $254,172
 10%
Service and support revenue 185,899
 170,898
 9% 537,442
 512,075
 5%
Recurring revenueRecurring revenue
Bundled SaaS revenueBundled SaaS revenue$63,251 $57,041 11%$184,770 $161,005 15%
Unbundled SaaS revenueUnbundled SaaS revenue52,400 58,746 (11)%161,470 152,066 6%
Total SaaS revenueTotal SaaS revenue115,651 115,787 0%346,240 313,071 11%
Optional managed services revenueOptional managed services revenue11,842 15,436 (23)%36,872 47,127 (22)%
Support revenueSupport revenue33,624 42,999 (22)%105,443 139,831 (25)%
Total recurring revenueTotal recurring revenue161,117 174,222 (8)%488,555 500,029 (2)%
Nonrecurring revenueNonrecurring revenue
Perpetual revenuePerpetual revenue24,557 24,425 1%74,103 88,473 (16)%
Professional services revenueProfessional services revenue32,873 26,546 24%82,620 77,496 7%
Total nonrecurring revenueTotal nonrecurring revenue57,430 50,971 13%156,723 165,969 (6)%
Total revenue $280,726
 $258,902
 8% $816,498
 $766,247
 7%Total revenue$218,547 $225,193 (3)%$645,278 $665,998 (3)%

ProductRecurring Revenue


Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016. Product2022. Recurring revenue increaseddecreased approximately $6.8$13.1 million, or 8%, from $88.0$174.2 million forin the three months ended October 31, 20162022 to $94.8$161.1 million forin the three months ended October 31, 2017, resulting from2023. The decrease consisted of a $7.8 million increase in our Cyber Intelligence segment, partially offset by a $1.0$9.4 million decrease in support revenue, a $3.6 million decrease in optional managed services revenue, and a $0.1 million decrease in SaaS revenue. The decrease in support revenue was primarily due to customers migrating to our Customer Engagement segment.SaaS solutions. The decrease in optional managed services revenue was primarily due to lower demand. The decrease in SaaS revenue was due to a decrease in unbundled SaaS revenue. Unbundled SaaS revenue decreased primarily due to the timing of renewal contracts and lower demand as customers’ buying preferences continued to shift to our bundled SaaS offerings. Bundled SaaS revenue increased due to new customer contracts and existing customers expanding their use of our cloud platform.


Nine Months Ended October 31, 20172023 compared to Nine Months Ended October 31, 2016. Product2022. Recurring revenue increaseddecreased approximately $24.9$11.4 million, or 10%2%, from $254.2$500.0 million forin the nine months ended October 31, 20162022 to $279.1$488.6 million forin the nine months ended October 31, 2017, resulting from2023. The decrease consisted of a $26.5$34.4 million increasedecrease in our Cyber Intelligence segment,support revenue and a $10.2 million decrease in optional managed services revenue, partially offset by a $1.6$33.2 million increase in SaaS revenue. The decrease in support revenue was primarily due to customers migrating to our Customer Engagement segment.SaaS solutions. The decrease in optional managed services revenue was primarily due to lower demand. The increase in SaaS revenue was due to increases in both bundled and unbundled SaaS revenue. The increase in bundled SaaS revenue was primarily due to new customer contracts and existing customers expanding their use of our cloud platform. The increase in unbundled SaaS revenue was primarily due to increased renewal transactions as well as support conversion transactions.


For additional informationWe 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, with an increasing portion of the mix coming from our bundled SaaS offerings. Bundled SaaS revenue is generally recognized ratably over the subscription term, while unbundled SaaS revenue is typically recognized upfront upon delivery of the license keys, or when the license term commences, if later. As a result, our revenue may fluctuate from period to period due to the revenue mix in each period, which is influenced by customer buying preferences. When the percentage of unbundled SaaS to bundled SaaS sold or renewed in a period increases, revenue from such transactions will generally be higher in that period (and lower in future periods) than if the percentage of bundled SaaS to unbundled SaaS were higher. Additionally, a multi-year unbundled SaaS contract will generally result in greater revenue recognition upfront than a one-year unbundled SaaS contract.

While we continue to see "—significant demand for our solutions as our customers accelerate the digitization of their customer interactions and internal operations, we believe that current macroeconomic factors, as described above, are increasing the length of our sales cycles and impacting customer and partner spending decisions.

Nonrecurring Revenue by Operating Segment".
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Service and Support Revenue
Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016. Service and support2022. Nonrecurring revenue increased approximately $15.0$6.4 million, or 9%13%, from $170.9$51.0 million forin the three months ended October 31, 20162022 to $185.9$57.4 million forin the three months ended October 31, 2017.  This2023. The increase was primarily attributable toconsisted of a $9.8$6.3 million increase in our Customer Engagement segmentprofessional services revenue and a $5.2$0.1 million increase in perpetual revenue. The increase in professional services revenue was primarily driven by an increase in patent license royalty revenue for the current period and due to the recognition in the current period of royalties for prior periods that were previously underreported by a licensee, partially offset by a decrease in implementation services as a result of the overall shift in our Cyber Intelligence segment.business to a cloud-based model.


Nine Months Ended October 31, 20172023 compared to Nine Months Ended October 31, 2016. Service and support2022. Nonrecurring revenue increaseddecreased approximately $25.4$9.3 million, or 5%6%, from $512.1$166.0 million forin the nine months ended October 31, 20162022 to $537.5$156.7 million forin the nine months ended October 31, 2017.  This increase was primarily attributable to2023. The decrease consisted of a $14.2$14.4 million decrease in perpetual revenue, partially offset by a $5.1 million increase in professional services revenue. The decrease in perpetual revenue was primarily due to a decrease in on-premises license revenue driven by the continued shift in spending by our Customer Engagement segmentcustomers toward our cloud-based solutions and an $11.2 milliona decrease in demand for our offerings that include third-party hardware with embedded software. The increase in professional services revenue was primarily driven by an increase in patent license royalty revenue for the current period and due to the recognition in the current period of royalties for prior periods that were previously underreported by a licensee, partially offset by a decrease in implementation services as a result of the overall shift in our Cyber Intelligence segment.business to a cloud-based model.

For additional information see "— Revenue by Operating Segment".


Cost of Revenue
 
The following table sets forth the cost of revenue by productrecurring and service and support,nonrecurring, as well as amortization of acquired technology for the three and nine months endedOctober 31, 20172023 and 2016:2022:


  Three Months Ended
October 31,		 % Change Nine Months Ended
October 31,		 % Change
(in thousands) 2017 2016 2017 - 2016 2017 2016 2017 - 2016
Cost of product revenue $32,840
 $29,499
 11% $98,708
 $82,455
 20%
Cost of service and support revenue 69,383
 64,007
 8% 205,928
 195,892
 5%
Amortization of acquired technology 9,182
 9,700
 (5)% 28,246
 28,014
 1%
Total cost of revenue $111,405
 $103,206
 8% $332,882
 $306,361
 9%
We exclude certain costs of both product revenue and service and support revenue, including shared support costs, stock-based compensation, and asset impairment charges (if any), among others, as well as amortization of acquired technology, when calculating our operating segment gross margins.

Cost of Product Revenue
 Three Months Ended
October 31,		% ChangeNine Months Ended
October 31,		% Change
(in thousands)202320222023 - 2022202320222023 - 2022
Cost of recurring revenue$38,883 $38,834 0%$118,093 $120,714 (2)%
Cost of nonrecurring revenue25,046 28,013 (11)%79,213 90,781 (13)%
Amortization of acquired technology1,609 3,550 (55)%5,511 10,742 (49)%
Total cost of revenue$65,538 $70,397 (7)%$202,817 $222,237 (9)%
 
Cost of productRecurring 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-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 31, 2023 compared to Three Months Ended October 31, 2022. Cost of recurring revenue increased approximately $0.1 million, from $38.8 million in the three months ended October 31, 2022 to $38.9 million in the three months ended October 31, 2023. The increase was primarily due to the write-off of certain third-party software licenses and the prior year recovery of a portion of previously written off prepaid license royalties, partially offset by a reduction in service and support costs due to lower personnel costs as a result of a decrease in headcount. Our recurring revenue gross margins decreased from 78% in the three months ended October 31, 2022 to 76% in the three months ended October 31, 2023, primarily driven by a shift in our SaaS revenue mix from unbundled SaaS to bundled SaaS.

Nine Months Ended October 31, 2023 compared to Nine Months Ended October 31, 2022. Cost of recurring revenue decreased approximately $2.6 million, or 2%, from $120.7 million in the nine months ended October 31, 2022 to $118.1 million in the nine months ended October 31, 2023. The decrease was primarily due to a reduction in service and support costs due to lower personnel costs as a result of a decrease in headcount and cost optimization efforts focusing on improvements in utilization of our cloud infrastructure, as well as offshoring certain support activities. These decreases were partially offset by an increase in costs due to the write-off of certain third-party software licenses, and an increase in the amortization of capitalized software development costs. Our recurring revenue gross margins were 76% in each of the nine months ended October 31, 2023 and 2022.

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We expect our cost of recurring revenue to increase on an absolute basis in future periods as we continue to invest in our cloud operations to support our growing cloud customer base and 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 software solutions. When revenue is deferred, we also defer hardware material costs and third-party software royalties and recognize those costs over the same period that the product revenue is recognized. Cost of productnonrecurring revenue also includes amortization of capitalized software development costs, employee compensation and related expenses associated with our global operations, facility costs, and other allocated overhead expenses. In our Cyber Intelligence segment, cost of product revenue also includes employee compensation and related expenses, contractor and consulting expenses, and travel expenses, in each case for resources dedicated to project management and associated product delivery.


As with many other technology companies, our software products tend to have higher gross margins than our hardware products, so the mix of products we sell in a particular period can have a significant impact on our gross margins in that period.

Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016.2022. Cost of productnonrecurring revenue increaseddecreased approximately $3.3$3.0 million, or 11%, from $29.5$28.0 million in the three months ended October 31, 20162022 to $32.8$25.0 million in the three months ended October 31, 20172023. The decrease was primarily driven by a decrease in employee compensation and related expenses due to increased cost of producta decrease in headcount supporting our nonrecurring revenue offerings and a decrease in our Cyber Intelligence segment, principally resulting from costs associated with increased use of contractors.contractor costs. Our overall productnonrecurring gross margins decreased to 65%increased from 45% in the three months ended October 31, 2017 from 66%2022 to 56% in the three months ended October 31, 2016. Product gross margins in our Cyber Intelligence segment decreased from 57% in the three months ended October 31, 2016 to 55% in the three months ended October 31, 20172023, primarily due to a changean increase in product mix.  Product gross margins in our Customer Engagement segment decreased from 81% in the three months ended October 31, 2016 to 80% in the three months ended October 31, 2017 primarily due to a change in product mix.patent license royalty revenue as described above.


Nine Months Ended October 31, 20172023 compared to Nine Months Ended October 31, 2016.2022. Cost of productnonrecurring revenue increaseddecreased approximately $16.2$11.6 million, or 20%13%, from $82.5$90.8 million in the nine months ended October 31, 20162022 to $98.7$79.2 million in the nine months ended October 31, 20172023. The decrease was primarily driven by a decrease in employee compensation and related expenses due to increaseda decrease in headcount supporting our nonrecurring revenue offerings, a decrease in third-party hardware delivered and related shipping and handling costs, a decrease in the cost of product revenuecertain hardware components due to supply chain disruptions in our Cyber Intelligence segment, resulting from increased material coststhe prior year, and increaseda decrease in contractor expenses, driven primarily by increased revenue activity as discussed above.costs. Our overall productnonrecurring gross margins decreased to 65%increased from 45% in the nine months ended October 31, 2017 from 68%2022 to 49% in the nine months ended October 31, 2016. Product gross margins in our Cyber Intelligence segment decreased from 58% in the nine months ended October 31, 2016 to 55% in the nine months ended October 31, 20172023, primarily due to a changean increase in product mix.  Product gross margins in our Customer Engagement segment decreased from 81% in the nine months ended October 31, 2016 to 80% in the nine months ended October 31, 2017 primarily due to a change in product mix.patent license royalty revenue as described above.

Cost of Service and Support Revenue
Cost of service and support revenue primarily consists of employee compensation and related expenses, contractor costs, and travel expenses relating to installation, training, consulting, and maintenance services. Cost of service and support revenue also includes stock-based compensation expenses, facility costs, and other overhead expenses. In accordance with GAAP
and our accounting policy, the cost of service and support revenue is generally expensed as incurred in the period in which the services are performed, with the exception of certain transactions accounted for using the POC method.

Three Months Ended October 31, 2017 compared to Three Months Ended October 31, 2016. Cost of service and support revenue increased approximately $5.4 million, or 8%, from $64.0 million in the three months ended October 31, 2016 to $69.4 million in the three months ended October 31, 2017. The increase was primarily attributable to costs associated with increased use of contractors in our Customer Engagement and Cyber Intelligence segments in the three months ended October 31, 2017

compared to the three months ended October 31, 2016. Our overall service and support gross margins were 63% in each of the three months ended October 31, 2017 and 2016.

Nine Months Ended October 31, 2017 compared to Nine Months Ended October 31, 2016. Cost of service and support revenue increased approximately $10.0 million, or 5%, from $195.9 million in the nine months ended October 31, 2016 to $205.9 million in the nine months ended October 31, 2017. The increase was primarily attributable to costs associated with increased use of contractors in our Cyber Intelligence and Customer Engagement segments in the nine months ended October 31, 2017 compared to the nine months ended October 31, 2016. Our overall service and support gross margins were 62% in each of the nine months ended October 31, 2017 and 2016.


Amortization of Acquired Technology

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


Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016.2022. Amortization of acquired technology decreased approximately $0.5$2.0 million, or 5%55%, from $9.7$3.6 million in the three months ended October 31, 20162022 to $9.2$1.6 million in the three months ended October 31, 2017.2023. The decrease resulted fromwas attributable to acquired technology intangible assets from historical business combinations becoming fully amortized, partially offset by an increase in amortization expense of acquired technology intangible assets associated with recent business combinations.


Nine Months Ended October 31, 20172023 compared to Nine Months Ended October 31, 2016.2022. Amortization of acquired technology increaseddecreased approximately $0.2$5.2 million, or 1%49%, from $28.0$10.7 million in the nine months ended October 31, 20162022 to $28.2$5.5 million in the nine months ended October 31, 2017.2023. The increasedecrease was attributable to amortization associated with recent business combinations, partially offset by acquired technology intangible assets from historical business combinations becoming fully amortized.amortized, partially offset by amortization expense of acquired technology intangible assets associated with recent business combinations.


Further discussion regarding our business combinations appears in Note 4, "Business Combinations"5, “Business Combinations, Asset Acquisitions, and Divestitures” to our condensed consolidated financial statements included under Part I, Item 1 of this report.

Research and Development, Net
 
Research and development expenses, net (“R&D”) 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.and benefits derived from participation in government-sponsored programs in certain jurisdictions for the support of research and development activities conducted in those locations. 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, netR&D for the three and nine months endedOctober 31, 20172023 and 2016: 2022:

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 Three Months Ended
October 31,		 % Change 
Nine Months Ended
October 31,
 % Change Three Months Ended
October 31,		% ChangeNine Months Ended
October 31,		% Change
(in thousands) 2017 2016 2017 - 2016 2017 2016 2017 - 2016(in thousands)202320222023 - 2022202320222023 - 2022
Research and development, net $47,157
 $41,028
 15% $141,911
 $128,847
 10%Research and development, net$32,084 $32,941 (3)%$97,923 $97,844 0%


Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016. Research and development, net increased2022. R&D decreased approximately $6.1$0.8 million, or 15%3%, from $41.0$32.9 million in the three months ended October 31, 20162022 to $47.2$32.1 million in the three months ended October 31, 2017.  The increase is2023. This decrease was primarily dueattributable to a $3.1$1.0 million increase in the capitalization of software development costs, a $0.9 million increase in benefits from participation in certain government-sponsored programs for the support of R&D activities, and a $0.5 million decrease in stock-based compensation expense, partially offset by a $1.5 million increase in employee compensation and related expenses primarily due to increased headcount of research and development employees, and a $1.7 million increaseinvestment in expenses reflecting increased use of contractors for research and development activities primarily in our Cyber Intelligence segment, in the three months ended October 31, 2017 compared to the three months ended October 31, 2016.R&D headcount.


Nine Months Ended October 31, 20172023 compared to Nine Months Ended October 31, 2016. Research and development, net2022. R&D increased approximately $13.1$0.1 million, or 10%, from $128.8$97.8 million in the nine months ended October 31, 20162022 to $141.9$97.9 million in the nine months ended October 31, 2017.  The2023. This increase in the nine months ended October 31, 2017, compared to the nine months ended October 31, 2016, iswas primarily dueattributable to a $5.5$4.1 million increase in employee compensation and related expenses primarily due primarily to increased investment in R&D headcount, $1.1 million of researchasset impairment charges related to a cloud-based IT infrastructure realignment project, and development employees, a $2.8$0.7 million increase in contractor expenses primarily in our Cyber Intelligence segment, andcosts, partially offset by a $2.1$2.7 million increase in benefits from participation in certain government-sponsored programs for the support of R&D activities, a $1.6 million decrease in stock-based compensation expensesexpense, and a $1.4 million increase in the capitalization of software development costs.

attributable to research and development employees related to our bonus share program (which is discussed in Note 12, "Stock-based Compensation" to our condensed consolidated financial statements included under Part I, Item 1 of this report).

Selling, General and Administrative Expenses
 
Selling, general and administrative expenses (“SG&A”) 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 expensesSG&A for the three and nine months endedOctober 31, 20172023 and 2016:2022:

 Three Months Ended
October 31,		 % Change Nine Months Ended
October 31,		 % Change Three Months Ended
October 31,		% ChangeNine Months Ended
October 31,		% Change
(in thousands) 2017 2016 2017 - 2016 2017 2016 2017 - 2016(in thousands)202320222023 - 2022202320222023 - 2022
Selling, general and administrative $97,304
 $98,899
 (2)% $302,605
 $300,080
 1%Selling, general and administrative$87,879 $93,757 (6)%297,532 302,344 (2)%
 
Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016. Selling, general and administrative expenses2022. SG&A decreased approximately $1.6$5.9 million, or 2%6%, from $98.9$93.8 million in the three months ended October 31, 20162022 to $97.3$87.9 million in the three months ended October 31, 2017.2023. This decrease was primarily attributabledue to an $8.9a $3.0 million decrease in stock-based compensation expense primarily due to a decrease in the grant date fair value of equity awards and a longer average vesting schedule of outstanding awards, a $1.1 million decrease in accelerated facility costs and asset impairment charges due to the early termination or abandonment of certain office leases in the prior year, a $1.1 million decrease in employee compensation and related expenses due to a decrease in headcount, a $1.0 million decrease in professional services expense, and a $1.0 million decrease in facilities expenses and depreciation charges as a result of a reduced number of offices. These decreases in SG&A were partially offset by a $0.9 million increase in the cost of third-party software components in order to support our hybrid work environment and a $0.8 million increase in IT costs and asset impairment charges related to a cloud-based IT infrastructure realignment project. SG&A was also impacted by a $0.7 million benefit due to a change in the fair value of our obligations under contingent consideration arrangements 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 October 31, 2022.

Nine Months Ended October 31, 2023 compared to Nine Months Ended October 31, 2022. SG&A decreased approximately $4.8 million, or 2%, from $302.3 million in the nine months ended October 31, 2022 to $297.5 million in the nine months ended October 31, 2023. This decrease was primarily due to a $10.8 million decrease in stock-based compensation expense primarily due to a decrease in the grant date fair value of equity awards and a longer average vesting schedule of outstanding awards, a $7.6 million decrease in accelerated facility costs and asset impairment charges due to the early termination or abandonment of certain office leases in the prior year, a $3.1 million decrease in facilities expenses and depreciation charges as a result of a reduced number of offices, and the recognition of a $1.8 million impairment charge in the prior year recorded to adjust the carrying value of an owned office building to its fair value less costs to sell upon its classification as an asset held for
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sale. These decreases in SG&A were partially offset by a $13.3 million increase in IT costs and asset impairment charges related to a cloud-based IT infrastructure realignment project, a $5.7 million increase in professional services expense primarily due to reaching settlement regarding certain legal matters discussed in Note 15, “Commitments and Contingencies” to our condensed consolidated financial statements included under Part I, Item 1 of this report, and a $2.6 million increase in the cost of third-party software components in order to support our hybrid work environment. SG&A was also impacted by a $2.6 million benefit due to a change in the fair value of our obligations under contingent consideration arrangements, from a net expense of $2.2 million in the three months ended October 31, 2016 to a net benefit of $6.7 million during the three months ended October 31, 2017.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.  The benefit recorded during the three months ended October 31, 2017 resulted from revised outlooks to several unrelated arrangements. This decrease was partially offset by a $2.7 million increase in employee compensation expenses due to increased headcount, a $2.4 million increase in contractor expenses, a $2.0 million increase in legal fees, and a $1.0 million increase in stock-based compensation expenses.

Nine Months Ended October 31, 2017 compared to Nine Months Ended October 31, 2016. Selling, general and administrative expenses increased approximately $2.5 million, or 1%, from $300.1$0.2 million in the nine months ended October 31, 2016 to $302.6 million in the nine months ended October 31, 2017. This increase was primarily attributable to a $4.4 million increase in contractor expenses, a $3.4 million increase in employee compensation expenses, a $2.8 million increase in legal fees, and a $2.3 million increase stock-based compensation expenses. These increases were partially offset by a $8.6 million decrease in the change in fair value of our obligations under contingent consideration arrangements, from a net expense of $4.8 million in the nine months ended October 31, 20162022 to a net benefit of $3.8$2.8 million during the nine months ended October 31, 2017,2023, as a result of revised outlooks for achieving the performance targets set forth in several unrelatedunder certain contingent consideration arrangements, as further discussed in the three-month comparison appearing in the previous paragraph. Additionally, selling, general, and administrative expenses decreased an additional $4.7 million as a result of increased capitalization of costs associated with development of internal-use software during the nine months ended October 31, 2017 compared to the nine months ended October 31, 2016.arrangements.


Amortization of Other Acquired Intangible Assets

Amortization of other acquired intangible assets consists of the 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 the amortization of other acquired intangible assets for the three and nine months ended October 31, 20172023 and 2016:2022:

 Three Months Ended
October 31,		 % Change Nine Months Ended
October 31,		 % Change Three Months Ended
October 31,		% ChangeNine Months Ended
October 31,		% Change
(in thousands)  2017 2016 2017 - 2016 2017 2016 2017 - 2016(in thousands) 202320222023 - 2022202320222023 - 2022
Amortization of other acquired intangible assets $7,048
 $10,244
 (31)% $26,727
 $32,976
 (19)%Amortization of other acquired intangible assets$6,328 $6,420 (1)%$19,028 $19,887 (4)%


Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016.2022. Amortization of other acquired intangible assets decreased approximately $3.2$0.1 million, or 31%1%, from $10.2$6.4 million in the three months ended October 31, 20162022 to $7.0$6.3 million in the three months ended October 31, 2017 as a result of2023. The decrease was attributable to acquired customer-related intangible assets from historical business combinations becoming fully amortized, partially offset by an increase in amortization expense fromassociated with acquired intangible assets from recent business combinations.


Nine Months Ended October 31, 20172023 compared to Nine Months Ended October 31, 2016.2022. Amortization of other acquired intangible assets decreased approximately $6.3$0.9 million, or 19%4%, from $33.0$19.9 million in the nine months ended October 31, 20162022 to $26.7$19.0 million in the nine months ended October 31, 2017 as a result of2023. The decrease was attributable to acquired customer-related intangible assets from historical business combinations becoming fully amortized, partially offset by an increase in amortization expense fromassociated with acquired intangible assets from recent business combinations.


Further discussion regarding our business combinations appears in Note 4, "Business Combinations"5, “Business Combinations, Asset Acquisitions, and Divestitures” to our condensed consolidated financial statements included under Part I, Item 1 of this report.

Other Expense, Net

The following table sets forth total other expense, net for the three and nine months endedOctober 31, 20172023 and 2016:2022:

 Three Months Ended
October 31,		 % Change Nine Months Ended
October 31,		 % Change Three Months Ended
October 31,		% ChangeNine Months Ended
October 31,		% Change
(in thousands) 2017 2016 2017 - 2016 2017 2016 2017 - 2016(in thousands)202320222023 - 2022202320222023 - 2022
Interest income $654
 $229
 186% $1,793
 $695
 158%Interest income$1,650 $1,045 58%$5,440 $1,742 212%
Interest expense (8,891) (8,708) 2% (26,997) (25,976) 4%Interest expense(2,609)(2,147)22%(7,994)(5,511)45%
Loss on early retirement of debt —
 —
 —% (1,934) —
 *
Other income (expense):  
  
 
     Other income (expense):  
Foreign currency (losses) gains , net (1,474) (2,152) (32)% 2,384
 1,870
 27%
Gains (losses) on derivatives 834
 1,266
 (34)% 292
 (696) (142)%
Foreign currency gains, netForeign currency gains, net39 1,360 (97)%212 3,620 (94)%
Other, net 75
 (235) (132)% (147) (3,834) (96)%Other, net20 (315)(106)%(153)(434)(65)%
Total other (expense) income, net (565) (1,121) (50)% 2,529
 (2,660) *
Total other income, netTotal other income, net59 1,045 (94)%59 3,186 (98)%
Total other expense, net $(8,802) $(9,600) (8)% $(24,609) $(27,941) (12)%Total other expense, net$(900)$(57)*$(2,495)$(583)*

* Percentage is not meaningful.

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Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016.2022. Total other expense, net, decreasedincreased by $0.8 million from $9.6$0.1 million in the three months ended October 31, 20162022 to $8.8 million in the three months ended October 31, 2017. 

Interest expense increased from $8.7$0.9 million in the three months ended October 31, 2016 to $8.92023.

Interest income increased from $1.0 million in the three months ended October 31, 20172022 to $1.7 million in the three months ended October 31, 2023 due to higher interest rates on our investments in commercial paper and money market funds, which are included in cash and cash equivalents, as well as our bank time deposits, which are included in short-term investments.

Interest expense increased from $2.1 million in the three months ended October 31, 2022 to $2.6 million in the three months ended October 31, 2023 primarily due to higher interest rates on outstandingour borrowings. Further discussion regarding our borrowings appears in Note 7, “Long-term Debt” to our condensed consolidated financial statements included under Part I, Item 1 of this report.


We recorded $1.5$1.4 million of net foreign currency lossesgains in the three months ended October 31, 20172022 as compared to $2.2 millionan insignificant amount of net foreign currency losses ingains during the three months ended October 31, 2016.  Foreign2023. Our foreign currency lossesgains in the three months ended October 31, 2017prior period resulted primarily from fluctuations associated with the strengthening of the British pound sterling against the euro, resulting in foreign currency losses on euro-denominated net assets in certain entities which use a British pound sterling functional currency, and the strengtheningexchange rate movement of the U.S. dollar against the Singapore dollar, resulting in foreign currency losses on Singapore dollar-denominated net assets in certain entities which use a U.S. dollar functional currency.British pound sterling and the Israeli shekel.


Nine Months Ended October 31, 20172023 compared to Nine Months Ended October 31, 2016.2022. Total other expense, net, decreasedincreased by $3.3$1.9 million from $27.9$0.6 million in the nine months ended October 31, 20162022 to $24.6$2.5 million in the nine months ended October 31, 2017. 2023.


Interest expenseincome increased from $26.0$1.7 million in the nine months ended October 31, 20162022 to $27.0$5.4 million in the nine months ended October 31, 20172023 due to higher interest rates on our investments in commercial paper and money market funds, which are included in cash and cash equivalents, as well as our bank time deposits, which are included in short-term investments.

Interest expense increased from $5.5 million in the nine months ended October 31, 2022 to $8.0 million in the nine months ended October 31, 2023 primarily due to higher interest rates on outstandingour borrowings.


In the nine months ended October 31, 2017 we entered into a new credit agreement with certain lenders and terminated our prior credit agreement. In connection with these transactions, Additionally, we recorded a $1.9$0.2 million lossof losses on early retirement of debt. There were no comparable chargesdebt as a result of repaying the remaining $100.0 million outstanding balance on our Term Loan utilizing proceeds from borrowings under our Revolving Credit Facility. Further discussion regarding our Term Loan and Revolving Credit Facility appears under “Financing Arrangements” below and in the nine months ended October 31, 2016.Note 7, “Long-term Debt” to our condensed consolidated financial statements included under Part I, Item 1 of this report.


We recorded $2.4$0.2 million of net foreign currency gains in the nine months ended October 31, 20172023 compared to $1.9$3.6 million of net foreign currency gains in the nine months ended October 31, 2016.  Foreign2022. Our foreign currency gains in the nine months ended October 31, 2017current period resulted primarily from fluctuations associated with the weakeningexchange rate movement of the U.S. dollar against the euro from January 31, 2017 to October 31, 2017, resulting in foreign currency gains on U.S dollar-denominated net liabilities in certain entities which use a euro functional currency, and the weakening of the U.S. dollar against the British pound sterling, resulting in foreign currency gains on U.S. dollar-denominated net payables in certain entities which use a British pound sterling functional currency.Israeli shekel.

In the nine months ended October 31, 2017, there were net gains on derivative financial instruments (not designated as hedging instruments) of $0.3 million, compared to net losses of $0.7 million on such instruments for the nine months ended October 31, 2016.  The net gains in the current year primarily reflected gains on our interest rate swap agreement, partially offset by losses on contracts executed to hedge movements in the exchange rate between the U.S. dollar and the Singapore dollar.

Other net expenses decreased $3.7 million primarily due to a write-off of a $2.4 million cost-basis investment in our Cyber Intelligence segment in the nine months ended October 31, 2016, with no comparable charges in the nine months ended October 31, 2017. Also contributing to the decrease in other net expenses was resolution of a previously accrued sales tax contingency in our APAC region in the nine months ended October 31, 2017.


Provision for Income Taxes
 
The following table sets forth our provision for income taxes for the three and nine months ended October 31, 20172023 and 2016:2022:

 Three Months Ended
October 31,		 % Change Nine Months Ended October 31, % Change Three Months Ended
October 31,		% ChangeNine Months Ended
October 31,		% Change
(in thousands) 2017 2016 2017 - 2016 2017 2016 2017 - 2016(in thousands)202320222023 - 2022202320222023 - 2022
Provision for income taxes $5,944
 $3,359
 77%
$9,504
 $4,747
 100%Provision for income taxes$12,953 $17,395 (26)%$14,772 $20,539 (28)%

Three Months Ended October 31, 20172023 compared to Three Months Ended October 31, 2016.2022. Our effective income tax rate was 66.0% for the three months ended October 31, 2017, compared to a negative effective income tax rate of 82.4%50.2% for the three months ended October 31, 2016.  2023, compared to an effective income tax rate of 80.5% for the three months ended October 31, 2022. 

For the three months ended October 31, 2017,2023, the pre-tax incomeeffective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in our profitable jurisdictions, where we recorded income tax provisions, was higher than the pre-tax losses in our domestic andcertain foreign jurisdictions where we maintain valuation allowances and did not record the related income tax benefits.jurisdictions. The result was an income tax provision of $5.9$13.0 million on pre-taxpretax income of $9.0$25.8 million, which represented an effective income tax rate of 66.0%50.2%.


For the three months ended October 31, 2016, pre-tax income2022, the effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in our profitable jurisdictions, where we recordedcertain foreign jurisdictions. The result
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was an income tax provisions,provision of $17.4 million on pretax income of $21.6 million, which represented an effective income tax rate of 80.5%.

Nine Months Ended October 31, 2023 compared to Nine Months Ended October 31, 2022. Our effective income tax rate was 58.0% for the nine months ended October 31, 2023, compared to an effective income tax rate of 88.9% for the nine months ended October 31, 2022. 

For the nine months ended October 31, 2023, the effective tax rate varies from the U.S. federal statutory rate of 21% due to the U.S. taxation of certain foreign activities, offset by lower than the pre-tax lossesstatutory rates in our domestic andcertain foreign jurisdictions where we maintain valuation allowances and did not record the related tax benefits.jurisdictions. The result was an income tax provision of $3.4$14.8 million on a pre-tax losspretax income of $4.1$25.5 million, which represented a negativean effective income tax rate of 82.4%58.0%.


Nine Months Ended October 31, 2017 compared to Nine Months Ended October 31, 2016. Our effective income tax rate was negative 77.7% for the nine months ended October 31, 2017, compared to a negative effective income tax rate of 15.8% for the nine months ended October 31, 2016.  For the nine months ended October 31, 2017, pre-tax income2022, the effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities and the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in our profitable jurisdictions, where we recorded income tax provisions, wasa foreign jurisdiction, partially offset by lower than the pre-tax lossesstatutory rates in our domestic andcertain foreign jurisdictions where we maintain valuation allowances and did not record the related income tax benefits.jurisdictions. The result was an income tax provision of $9.5$20.5 million on a pre-tax losspretax income of $12.2$23.1 million, which represented a negativean effective income tax rate of 77.7%88.9%.

For Excluding the nine months ended October 31, 2016, pre-tax income in our profitable jurisdictions, where we recordeddiscrete income tax provisions, was significantly lower thanprovision attributable to the pre-tax losses in our domestic and foreign jurisdictions where we maintainjurisdiction valuation allowances and did not recordallowance, the related tax benefits. The result was an income tax provision of $4.7$18.5 million on a pre-tax lossincome of $30.0$23.1 million, which represented a negativeresulting in an effective income tax rate of 15.8%79.9%.


Backlog

For most of our transactions, delivery generally occurs within several months following receiptThe Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines address the increasing digitalization of the order. However, certain projects, particularlyglobal economy, re-allocating taxing rights among countries. The European Union and many other member states have committed to adopting Pillar 2 which calls for a global minimum tax of 15% to be effective for tax years beginning in 2024. The OECD guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. We are monitoring developments and evaluating the impacts these new rules will have on our Cyber Intelligence segment, can extend over longer periods of time, delivery under which,tax rate, including eligibility to qualify for various reasons, may be delayed, modified, or canceled. As a result, we believe that our backlog at any particular time is not meaningful because it is not necessarily indicative of future revenue.these safe harbor rules.





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 (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”) 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 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 convertible preferred stock (“Series B Preferred 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 31, 2023, Apax’s ownership in us on an as-converted basis was approximately 13.2%.

Each series of Preferred Stock pays dividends at an annual rate of 5.2% until May 7, 2024, and thereafter at a rate of 4.0%, subject to adjustment under certain circumstances. Dividends will be cumulative and payable semiannually in arrears in cash. All dividends that are not paid in cash will remain accumulated dividends with respect to each share of Preferred Stock. We used the proceeds from the Apax investment to repay outstanding indebtedness, to fund a portion of our stock repurchase programs (as described below under “Liquidity and Capital Resources Requirements”), and/or for general corporate purposes. Please refer to Note 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, under our Credit Agreementstock repurchases, dividends on the Preferred Stock, and our Notes, and periodically for business acquisitions. Cash generated from operations, along with our existing cash, cash equivalents, and short-term investments, are our primary sources of operating liquidity, and we believe that our operating liquidity is sufficient to support our current business operations, including debt service and capital expenditure requirements.liquidity.

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On June 29, 2017, we entered into a new Credit Agreement (the “2017 Credit Agreement”) with certain lenders, and terminated our Prior Credit Agreement. The 2017 Credit Agreement provides for $725.0 million of senior secured credit facilities, comprised of a $425.0 million term loan maturing on June 29, 2024 (the “2017 Term Loan”) and a $300.0 million revolving credit facility maturing on June 29, 2022 (the “2017 Revolving Credit Facility”), subject to increase and reduction from time to time according to the terms of the 2017 Credit Agreement. The majority of the proceeds from the 2017 Term Loan were used to repay all $406.9 million owed under the 2014 Term Loans at June 29, 2017 upon termination of the Prior Credit Agreement. There were no borrowings under the Prior Revolving Credit Facility at June 29, 2017. Further discussion of our Credit Agreement 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 $28.1 million and $72.3$21.9 million of net cash expended for business acquisitionscombinations during the year ended January 31, 2023. During the nine months ended October 31, 20172023, we completed the acquisition of a provider of solutions for workforce scheduling automation. This transaction was not material to our condensed consolidated financial statements. In July 2023, we entered into an agreement to acquire source code that qualifies as an asset acquisition and 2016, respectively.made an initial deposit payment of $1.0 million upon the execution of the contract and incurred direct transaction costs related to such asset acquisition of $0.2 million. Additionally, during the three months ended October 31, 2023, we paid $1.3 million related to the satisfaction of milestones. Please refer to Note 5, “Business Combinations, Asset Acquisitions, and Divestitures”, to our condensed consolidated financial statements included under Part I, Item 1 of this report for more information regarding our recent business combinations and asset acquisitions.


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 debtthe incurrence of additional debt. On April 9, 2021, we issued $315.0 million in aggregate principal amount of 0.25% convertible senior notes due April 15, 2026, unless earlier converted by the holders pursuant to their terms (the “2021 Notes”). 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 issuance of the Series B Preferred Stock mentioned above, to repay a portion of the outstanding indebtedness under our 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 in the capital markets.and other general corporate purposes.


A considerable portion of our operating income is earned outside the United States. Cash, cash equivalents, short-term investments, and restricted cash, restricted cash equivalents, and restricted bank time deposits (excluding any long-term portions) held by our subsidiaries outside of the United States were $331.6$123.9 million and $282.1$126.0 million as of October 31, 20172023 and January 31, 2017,2023, 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 $31.5 million and $54.6$0.2 million, at October 31, 20172023 and January 31, 2017, respectively. 2023.

We currently do not anticipate that we will need funds generated fromintend to continue to indefinitely reinvest a portion of the earnings of our foreign operations to fund our domestic operations forsubsidiaries, which, as a result of the next 12 months or for the foreseeable future.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. If available,As noted above, we currently intend to indefinitely reinvest a portion of the earnings of our NOLs, particularly those in the United States, could reduce potential income tax liabilities that may result from repatriated earnings from foreign jurisdictionssubsidiaries to finance foreign activities. Except to the United States. We generallyextent that earnings of our foreign subsidiaries have been subject to U.S. taxation as of October 31, 2023, we have not provided for deferred income taxestax on the excessoutside 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 for financial reporting over the tax basis of investments in our foreign subsidiaries because we currently planincome and withholding taxes that would have to indefinitely reinvestbe provided on such earnings outside the United States.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 31, 20172023 and January 31, 2017:2023:


October 31,January 31,
(in thousands) 20232023
Cash and cash equivalents$209,647 $282,099 
Restricted cash and cash equivalents, and restricted bank time deposits (excluding long term portions)1,763 300 
Short-term investments684 697 
Total cash, cash equivalents, restricted cash and cash equivalents, restricted bank time deposits, and short-term investments$212,094 $283,096 
Total debt, including current portions$410,461 $408,908 

Capital Allocation Framework
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  October 31, January 31,
(in thousands)  2017 2017
Cash and cash equivalents $312,666
 $307,363
Restricted cash and bank time deposits (excluding long term portions) 63,326
 9,198
Short-term investments 6,411
 3,184
Total cash, cash equivalents, restricted cash and bank time deposits, and short-term investments $382,403
 $319,745
Total debt, including current portion $770,558
 $748,871

As noted above, after cash utilization required for working capital, capital expenditures, required debt service, and dividends on the Preferred Stock, we expect that our primary usage of cash will be for business combinations, repayment of outstanding indebtedness, and/or stock repurchases under repurchase programs that may be in place from time to time (subject to the terms of our Credit Agreement). Please see the “Liquidity and Capital Resources Requirements” section 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 threenine months ended October 31, 20172023 and 2016:
2022:
  Nine Months Ended
October 31,
(in thousands) 2017 2016
Net cash provided by operating activities $96,174
 $71,689
Net cash used in investing activities (88,693) (80,632)
Net cash used in financing activities (1,420) (42,189)
Effect of foreign currency exchange rate changes on cash and cash equivalents (758) (5,144)
Net increase (decrease) in cash and cash equivalents $5,303
 $(56,276)


 Nine Months Ended
October 31,
(in thousands)20232022
Net cash provided by operating activities$81,679 $68,611 
Net cash used in investing activities(24,333)(37,476)
Net cash used in financing activities(127,397)(134,341)
Effect of foreign currency exchange rate changes on cash and cash equivalents(700)(3,510)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents$(70,751)$(106,716)

Our operatingfinancing activities generated $96.2used $127.4 million of net cash and our investing activities used $24.3 million of net cash during the nine months ended October 31, 2017,2023, which was partially offset by $90.1$81.7 million of net cash used in combined investing and financing activities during this period.generated from operating activities. Further discussion of these items appears below.


Net Cash Provided by Operating Activities
 
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 generated $96.2$81.7 million of net cash during the nine months ended October 31, 2017,2023, compared to $71.7$68.6 million generated during the nine months ended October 31, 2016.2022. Our operating cash flow in the current period increased primarily due to lower operating lease payments as a result of the early termination of several leased offices in the prior year, a decrease in the non-financing portion of payments under contingent consideration arrangements, and a favorable impact on operating cash flow from changes in operating assets and liabilities compared to the prior period.


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


During the nine months ended October 31, 2017,2023, our investing activities used $88.7$24.3 million of net cash, including $28.1consisting primarily of $19.9 million of payments for property, equipment and capitalized software development, $3.2 million of net cash utilized for business combinations and asset acquisitions, $27.4and a $1.6 million investment in a privately-held company, partially offset by a $0.4 million decrease in restricted bank time deposits during the period.

During the nine months ended October 31, 2022, our investing activities used $37.5 million of net cash, including $23.6 million of payments for property, equipment and capitalized software development costs, $3.1$9.9 million of net purchases of short-term investments, and $30.2 million of net cash used by other investing activities, consisting primarily of a net increase in restricted cash and bank time deposits during the period. Restricted cash and bank time deposits are typically deposits used to secure bank guarantees in connection with sales contracts, the amounts of which will fluctuate from period to period. However, the net increase in restricted cash and bank time deposits during the nine months ended October 31, 2017 resulted primarily from the deposit of approximately $35.0 million into an escrow account in connection with an immaterial business combination that closed in November 2017. This escrow deposit is classified within restricted cash and bank time deposits at October 31, 2017.

During the nine months ended October 31, 2016, our investing activities used $80.6 million of net cash, including $72.3$3.8 million of net cash utilized for business acquisitions, $22.3 million of payments for property, equipment, and capitalized software development costs, and $31.7 million of net cash used in other investing activities, consisting primarily of an increase in restricted cash and bank time deposits during the period. The increase in restricted cash and bank time deposits during the nine months ended October 31, 2016 reflected increased restricted cash associated with several large sales contracts. Partially offsetting those uses were $45.7 million of net proceeds from sales and maturities of short-term investments.combinations.


We had no significant commitments for capital expenditures at October 31, 2017.2023.



Net Cash Used in Financing Activities
 
For the nine months ended October 31, 2017,2023, our financing activities used $1.4$127.4 million of net cash. On June 29, 2017, we entered into the 2017 Credit Agreement with certain lenders,cash, primarily due to $100.0 million of repayments of borrowing under which we received net proceeds of $424.5 million from the 2017our Term Loan, the majority$99.3 million of which was usedpayments to repay all $406.9repurchase common stock, $20.8 million owed under the 2014 Term Loans at June 29, 2017 upon termination of the Prior Credit Agreement. Additionally, we made a $1.1 million quarterly principal payment on our 2017 Term Loan during the three months ended October 31, 2017. Other financing activities during the nine months ended October 31, 2017 included $7.1 million paid for debt issuance costs, $7.2payments of Preferred Stock dividends, $4.2 million for the financing portion of payments under contingent consideration arrangements related to prior business combinations, $2.4 million of finance lease payments and other financing
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obligations, a $0.7$0.5 million dividend paymentdistribution to a noncontrolling shareholder of one of our subsidiaries.subsidiaries and $0.2 million paid for debt-related issuance fees, partially offset by $100.0 million of proceeds from borrowings under our Revolving Credit Facility.


For the nine months ended October 31, 2016,2022, our financing activities used $42.2$134.3 million of net cash, the most significant portionsprimarily due to $106.1 million of which werepayments to repurchase common stock, $20.8 million of payments of $35.9 million of purchases of treasury stock under our share repurchase program, and $3.2Preferred Stock dividends, $3.7 million for the financing portion of payments under contingent consideration arrangements related to prior business combinations.combinations, $3.0 million of finance lease payments and other financing obligations, a $0.6 million distribution to a noncontrolling shareholder of one of our subsidiaries, and $0.2 million paid for debt-related issuance fees.

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.months from the issuance of our consolidated financial statements. Currently, we have no plans to pay any cash dividends on our common stock, which are not permittedsubject to certain restrictions under our Credit Agreement.


Our liquidity could be negatively impacted by a decrease in demand for our products and service and support,services, including the impact of changes in customer buying behavior due to circumstances over which we have no control.control, including, but not limited to, the effects of general economic conditions or geopolitical developments. 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.securities or an increase in our borrowings under our credit facility.


Repurchases of Common Stock

On March 29, 2016,December 7, 2022, we announced that our board of directors had authorized a sharestock repurchase program for the period from December 12, 2022 until January 31, 2025, whereby we may make up to $150 million in purchases of our outstandingrepurchase shares of common stock over the two years following the date of announcement. Under the share repurchase program, purchases can be made from timein an amount not to time using a variety of methods, which may include open market purchases. 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 generatedexceed, in the U.S. and other potential usesaggregate, $200.0 million during the repurchase period.

During the year ended January 31, 2023, we repurchased approximately 649,000 shares of cash, suchour common stock for a cost of $23.5 million under the current stock repurchase program. During the nine months ended October 31, 2023, we repurchased approximately 3,014,000 shares of our common stock at a cost of $99.3 million, including excise tax of $0.6 million, under this program. Our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the IRA. The excise tax of $0.6 million was recognized as acquisitions. Purchases may be made through a Rule 10b5-1 plan pursuant to pre-determined metrics set forth in such plan. The authorizationpart of the share repurchase program does not obligate us to acquire any particular amountcost basis of common stock, andshares acquired in the program may be suspended or discontinued at any time.

We did not acquire any sharescondensed consolidated statements of treasury stockstockholders' equity during the nine months ended October 31, 2017 under this program.2023. Repurchases were funded with available cash in the United States.


Financing Arrangements


1.50% Convertible Senior2021 Notes


On June 18, 2014,April 9, 2021, we issued $400.0$315.0 million in aggregate principal amount of 1.50% convertible senior notes due June 1,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 1.50%0.25% per annum.


The Notes were issued concurrently with ourWe used a portion of the net proceeds from the issuance of 5,750,000 shares of common stock, the majority2021 Notes to pay the costs of the combinedCapped Calls described below. We also used a portion of the net proceeds from the issuance of which were usedthe 2021 Notes, together with the net proceeds from the April 6, 2021 issuance of $200.0 million of Series B Preferred Stock, to partially repay certaina portion of the outstanding indebtedness under our Credit Agreement as further described below.below, to terminate an interest rate swap agreement, and to repurchase shares of our common stock. The remainder is being used for working capital and other general corporate purposes.


The Notes are unsecured and rank senior in right of payment to our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to our indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to indebtedness and other liabilities of our subsidiaries.

The2021 Notes are convertible into at our election, cash, shares of our common stock or a combination of both, subject to satisfaction of specified conditions and during specified periods, as described below. If converted, we currently intend to pay cash in respect of the principal amount.

The conversion price of the Notes at any time is equal to $1,000 divided by the then-applicable conversion rate. The Notes have an initial conversion rate of 15.512916.1092 shares of common stock per $1,000 principal amount of 2021 Notes, which represents an initial effective conversion price of approximately $64.46$62.08 per share, of common stock and would result in the issuance of approximately 6,205,000 shares if all of the Notes were converted. Throughout the term of the Notes, the conversion rate may be adjustedsubject to adjustment upon the occurrence of certain events.

Holders may surrender theirevents, and subject to customary anti-dilution adjustments. Prior to January 15, 2026, the 2021 Notes for conversion at any time prior to the close of business on the business day immediately preceding December 1, 2020,will be convertible only under the following circumstances:

during any calendar quarter commencing after the calendar quarter ending on September 30, 2014, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter, is more than 130% of the conversion price of the Notes in effect on each applicable trading day;

during the ten consecutive trading-day period following any five consecutive trading-day period in which the trading price for the Notes for each such trading day was less than 98% of the closing sale price of our common stock on such date multiplied by the then-current conversion rate; or

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

On or after December 1, 2020and 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 holders may surrender their Notes for conversion regardless of whether any of the foregoing conditions have been satisfied. Holders of the Notes may require us to purchase for cash all or any portion of their Notes upon the occurrence of a “fundamental change” at a price equal to 100% of the principal amount of the Notes being purchased, plus accrued and unpaid interest.

As of October 31, 2017, the Notes were not convertible.

Note Hedges and Warrants

Concurrently with the issuance of the 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 serves to increase the effective initial conversion price for the Notes to $75.00 per share. The Note Hedges and Warrants are each separate instruments from the2021 Notes.

Note Hedges

Pursuant to the Note Hedges, we purchased call options on our common stock, under which we have 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 equals the initial conversion price of the Notes. Our exercise rights under the Note Hedges generally trigger upon Upon conversion of the 2021 Notes, andholders will receive cash up to the Note Hedges terminate upon maturity of the Notes, or the first day the Notes are no longer outstanding. The Note Hedges mayaggregate principal amount, with any remainder to be settled inwith cash shares of ouror common stock, or a combination thereof, at our option,election. As of October 31, 2023, the 2021 Notes were not convertible.
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Based on the closing market price of our common stock on October 31, 2023, the if-converted value of the 2021 Notes was less than their aggregate principal amount.

Capped Calls

In connection with the issuance of the 2021 Notes, on April 6, 2021 and April 8, 2021, we entered into capped call transactions (the “Capped Calls”) with certain counterparties. The Capped Calls are intended generally to reduce our exposure tothe potential dilution to our common stock upon any conversion of the 2021 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2021 Notes, in the event that at the time of conversion our common stock price exceeds the conversion price, with such reduction and/or offset subject to a cap.

The Capped Calls exercise price is equal to the $62.08 initial conversion price of each of the 2021 Notes, and the cap price is $100.00, each subject to certain adjustments under the terms of the Capped Calls. The Capped Calls have the economic effect of 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 Notes.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 31, 2023, 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 $60.8approximately $41.1 million for the Note Hedges,Capped Calls, including applicable transaction costs, which was recorded as a reduction to additional paid-in capital. As of October 31, 2017, we had not purchased any shares under the Note Hedges.

Warrants

We sold the Warrants to several counterparties. The Warrants provide the counterparties rights to acquire from us up to approximately 6,205,000 shares of our common stock at a price of $75.00 per share. The Warrants expire incrementally on a series of expiration dates beginning in August 2021. At expiration, if the market price per share of our common stock exceeds the strike price of the Warrants, we will be obligated to issue shares of our common stock having a value equal to such excess. The proceeds from the sale of the Warrants were $45.2 million and were recorded as additional paid-in capital. As of October 31, 2017, no Warrants had been exercised and all Warrants remained outstanding.


Credit AgreementsAgreement


On June 29, 2017, we entered into a new Credit Agreement (the “2017 Credit Agreement”)credit agreement with certain lenders and terminated a prior credit agreement. The credit agreement was amended in 2018, 2020, 2021, and 2023, as further described below (as amended, the Prior Credit Agreement.“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 maturingoriginally set to mature on June 29, 2024 (the “2017 Term“Term Loan”), and a $300.0 million revolving credit facility maturing on June 29, 2022April 9, 2026 (the “2017“Revolving Credit Facility”). 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 maturity dates of

On April 27, 2023, we repaid the 2017remaining $100.0 million outstanding principal balance on our Term Loan and 2017in full utilizing proceeds from our Revolving Credit Facility, will be accelerated to March 1, 2021 if on such date any Notes remain outstanding.
The majorityalong with $0.5 million of the proceeds from the 2017 Term Loan were used to repay all $406.9accrued interest thereon. As a result, $0.2 million owed under the 2014 Term Loans at June 29, 2017 upon termination of the Prior Credit Agreement. There were no borrowings under the Prior Revolving Credit Facility at June 29, 2017.
As of October 31, 2017, the interest rate on 2017 Term Loan was 3.56%. 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 3.74% at October 31, 2017. As of January 31, 2017 the weighted-average interest rate on the 2014 Terms Loans was 3.58%.
On February 11, 2016, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to partially mitigate risks associated with the variableTerm Loan were written off and are included within interest rateexpense on our term loans, under which we will pay interest at a fixed rate of 4.143% and receive variable interest of three-month LIBOR (subject to a minimum of 0.75%), plus a spread of 2.75%, on a notional amount of $200.0 million. Although the Prior Credit Agreement was terminated on June 29, 2017, the interest rate swap agreement remains in effect, and serves as an economic hedge to partially mitigate the risk of higher borrowing costs under our 2017 Credit Agreement resulting from increases in market interest rates. The interest rate swap agreement is no longer formally designated as a cash flow hedge for accounting purposes, and therefore settlements are reported within other income (expense), net on the condensed consolidated statement of operations not within interest expense.for the nine months ended October 31, 2023.


The 2017 Term Loan requires quarterly principal payments of approximately $1.1 million, which commencedInterest rates on August 1, 2017, with the remaining balance due on June 29, 2024. Optional prepayments of loans under the 2017 Credit Agreement are generally permitted without premiumperiodically reset, at our option, originally at either a Eurodollar Rate (which was derived from LIBOR) or penalty.an alternative base rate (“ABR”) (each as defined in the Credit Agreement), plus in each case a margin.

On May 10, 2023, we entered into an amendment to the Credit Agreement (the “Fourth Amendment”) related to the phase-out of LIBOR by the UK Financial Conduct Authority. Effective July 1, 2023, borrowings under the Credit Agreement bear interest, at our option, at either: (i) the ABR, plus the applicable margin therefor or (ii) the adjusted Term Secured Overnight Financing Rate published by the CME Term SOFR Administrator (as more fully defined and set forth in the Credit Agreement, “Adjusted Term SOFR”), plus the applicable margin therefor. The applicable margin in each case is determined based on our Leverage Ratio (as defined below) and ranges from 0.25% to 1.25% for borrowings bearing interest at the ABR and from 1.25% to 2.25% for borrowings bearing interest based on Adjusted Term SOFR.

Borrowings under the Revolving Credit Facility were $100.0 million at October 31, 2023, which is included in long-term debt on our condensed consolidated balance sheet. For borrowings under the Revolving Credit Facility, the applicable margin is determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each as defined in the Credit Agreement) leverage ratio (the “Leverage Ratio”). As of October 31, 2023, the interest rate on our revolving credit facility borrowings was 6.94%. In addition, 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 proceeds of borrowings under the Revolving Credit Facility were used to repay the outstanding balance of the Term Loan.

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The 2017 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The 2017 Credit Agreement also contains a financial covenant that, solely with respect to the 2017 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.504.5 to 1. At October 31, 2017,2023, our Leverage Ratio was approximately 2.81.2 to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the 2017 Credit Agreement.

Our obligations under the 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 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 Credit Agreement may be declared immediately due and payable, and the lenders’ commitments to make loans under the Credit Agreement may be terminated.

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 31, 2023, 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, 2017 includes a table summarizing2023. For additional information regarding our contractual obligations of approximately $1.1 billion as of January 31, 2017, including approximately $900 million forleases, long-term debt obligations, including projected future interest. That table appears under Item 7, "Management’s Discussion and Analysis of Financial Conditionour commitments and Results of Operations"contingencies, see Note 17, “Leases”, in the report. As described above under "Financing Arrangements"Form 10-K and Note 7, “Long-Term Debt”, duringNote 9, “Convertible Preferred Stock”, and Note 15, “Commitments and Contingencies” in the nine months ended October 31, 2017, we entered into the 2017 Credit Agreement and terminated our Prior Credit Agreement. As a result, our long-term debt obligations, including projected future interest (assuming future interest rates remain consistent with current interest rates), have increased from approximately $900 million at January 31, 2017 to approximately $950 million at October 31, 2017. Details regarding our long-term debt obligations are provided in Note 6, "Long-Term Debt"notes to our condensed consolidated financial statements included underin Part I, Item 1 of this report.


Other than the impactAs of the transactions described above, we believe that our contractual obligations and commercial commitments did not materially change during the nine months ended October 31, 2017.2023, our total operating lease liabilities were $37.9 million, of which $6.4 million is included within accrued expenses and other current liabilities (current portions), and $31.5 million is included as operating lease liabilities (long-term portions), on our condensed consolidated balance sheets.

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 31, 2023 included $52.2 million of non-current tax reserves (including interest and penalties of $6.8 million), net of related benefits for uncertain tax positions. We do not expect to make any significant payments for these uncertain tax positions within the next 12 months.

Contingent Payments Associated with Business Combinations and Asset Acquisitions
 
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 months ended October 31, 2017,2023, we made $9.4$4.9 million of payments under contingent consideration arrangements. As of October 31, 2017,2023, potential future cash payments, and earned consideration expected to be paid, subsequent to October 31, 20172023 under contingent consideration arrangements total $101.8totaled $20.4 million, the estimated fair value of which was $48.7$7.4 million,

including $10.9 of which $4.3 million reported inwas recorded within accrued expenses and other current liabilities, and $37.8$3.1 million reported inwas recorded within other liabilities. The performance periods associated with these potential payments extend through January 2022.2027.

Off-Balance Sheet ArrangementsIn July 2023, we entered into an agreement to acquire source code that qualifies as an asset acquisition and provides for additional consideration contingent upon achieving certain performance targets for the years ending January 31, 2025 and 2026 of up to $5.0 million, with a minimum of $2.0 million guaranteed over the period, plus the opportunity to receive additional payments from us based on any revenue we receive from sales of products based on the acquired technology in adjacent markets.

As of October 31, 2017, we did not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.


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.

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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 enter intouse derivative transactionsinstruments 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


On June 29, 2017,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 the 2017 Credit Agreementcapped call transactions with certain lenders and terminatedcounterparties. These separate transactions were completed to reduce our Prior Credit Agreement.exposure to potential dilution upon conversion of the 2021 Notes.

The 2017 Credit Agreement provides for $725.0 million2021 Notes have a fixed annual interest rate of senior secured credit facilities, comprised0.25% and therefore do not have interest rate risk exposure. However, the fair values of a $425.0 million term loan maturing on June 29, 2024 (the “2017 Term Loan”) and a $300.0 million revolving credit facility maturing on June 29, 2022 (the “2017 Revolving Credit Facility”),the 2021 Notes are subject to increaseinterest rate risk, market risk, and reduction from time to time accordingother factors due to the termsconvertible feature. The fair values of the 2017 Credit Agreement.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 2017 Credit Agreement are periodically reset, at our option, originally at either a Eurodollar Rate or an ABR rate (each as defined in the 2017 Credit Agreement), plus, in each case, a margin. On May 10, 2023, we entered into an amendment to the Credit Agreement (the “Fourth Amendment”) related to the phase-out of LIBOR by the UK Financial Conduct Authority. Effective July 1, 2023, borrowings under the Credit Agreement bear interest, at our option, at either: (i) the ABR, plus the applicable rate margin therefor or (ii) the adjusted Term Secured Overnight Financing Rate published by the CME Term SOFR Administrator (as more fully defined and set forth in the Credit Agreement, “Adjusted Term SOFR”), plus the applicable margin therefor. The applicable margin in each case is determined based on our leverage ratio (described above) and ranges from 0.25% to 1.25% for borrowings bearing interest at the 2017ABR and from 1.25% to 2.25% for borrowings bearing interest based on Adjusted Term SOFR.

On April 27, 2023, we repaid in full the remaining $100.0 million outstanding principal balance related to our Term Loan is fixed at 2.25% for Eurodollar loans, and at 1.25% for ABR loans.with $100.0 million of proceeds from borrowings under our Revolving Credit Facility. For loans 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. Because the interest rates applicable to borrowings under the 2017 Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.

As of October 31, 2017,2023, the interest rate on 2017 Term Loan was 3.56%. There were noour $100.0 million of borrowings outstanding under the 2017our Revolving Credit Facility at that date.

To partially mitigate risks associated with the variablewas 6.94%. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.

Inflation Risk

While we continue to see significant demand for our solutions as our customers accelerate the term loan borrowings underdigitization of their customer interactions and internal operations, we believe that current macroeconomic factors, including increased inflation rates, are impacting customer and partner spending decisions. Given the current macroeconomic environment, we continue to look for ways to manage costs and mitigate any changes in our Prior Credit Agreement,customers’ purchasing behavior that may occur due to significant inflationary pressure or other factors. If our costs, in February 2016particular labor, sales and marketing, and cloud hosting costs, become subject to sustained or increased inflationary pressure, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinationalmay be unable to fully offset such higher costs through price increases, which could harm our business, financial institution under which we pay interest at a fixed ratecondition, and results of 4.143% and receive variable interest of three-month LIBOR (subject to a minimum of 0.75%), plus a spread of 2.75%, on a notional amount of $200.0 million. Although the Prior Credit Agreement was terminated on June 29, 2017, the interest rate swap agreement remains in effect, and serves as an economic hedge to partially mitigate the risk of higher borrowing costs under our 2017 Credit Agreement resulting from increases in market interest rates. The interest rate swap agreement is no longer formally designated as a cash flow hedge for accounting purposes, and therefore settlements are reported within other income (expense), net on the condensed consolidated statement of operations, not within interest expense.operations.

Settlements with the counterparty under the interest rate swap agreement occur quarterly, and the agreement will terminate on September 6, 2019.


The section entitled "Quantitative“Quantitative and Qualitative Disclosures About Market Risk"Risk” under Part II, Item 7A of our Annual Report on Form 10-K for the year ended January 31, 20172023 provides detailed quantitative and qualitative discussions of the market risks

affecting our operations. Other than as described above under "Interest“Interest Rate Risk on Our Debt"Debt” and “Inflation Risk”, and the market risk that is created by the global market disruptions and uncertainties resulting from macroeconomic factors discussed in
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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included under Part I, Item 2 of this report, we believe that our market risk profile did not materially change during the nine months ended October 31, 2017.2023.

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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(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,Act) as of October 31, 2017.2023. 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 31, 2017.2023.

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 31, 2017,2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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.

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Part II


Item 1. Legal Proceedings


See Note 13, "Commitments15, “Commitments and Contingencies" of the NotesContingencies” to theour condensed consolidated financial statements under Part I, Item 1 of this report for information regarding our legal proceedings.




Item 1A.Risk Factors

There have been no material changes to the Risk Factors described in Part I "Item“Item 1A. Risk Factors"Factors” in our Annual Report on Form 10-K for the year ended January 31, 2017.2023. 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, which could materially affect our business, financial condition, or operating results. The risks described in our Annual Report on Form 10-K 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.




Item 2.     Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

Unregistered Sales of Equity Securities and Use of Proceeds


None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers


On March 29, 2016,December 7, 2022, we announced that our board of directors had authorized a sharestock repurchase program for the period from December 12, 2022 until January 31, 2025, whereby we may make up to $150 million in purchases of our outstandingrepurchase shares of common stock overnot to exceed, in the two years followingaggregate, $200.0 million during the date of announcement. Underrepurchase period. During the shareyear ended January 31, 2023, we repurchased approximately 649,000 shares under this stock repurchase program purchases can be made from time to time using a varietyfor an aggregate purchase price of methods, which may include open market purchases. The specific timing, price and size of purchases will depend on prevailing stock prices, general market and economic conditions, and other considerations, including$23.5 million. During the amount of cash generated in the U.S. and other potential uses of cash, such as acquisitions. Purchases may be made through a Rule 10b5-1 plan pursuant to pre-determined metrics set forth in such plan. The authorization of the share repurchase program does not obligate us to acquire any particular amount of common stock, and the program may be suspended or discontinued at any time. There was no share repurchase activity during the threenine months ended October 31, 2017.2023, we repurchased approximately 3,014,000 shares under this stock repurchase program for $99.3 million, including excise tax of $0.6 million. Repurchases were financed with available cash in the United States.


We periodically purchase treasuryFrom time to time, we have purchased common stock from our directors, officers, and other employees to facilitate income tax withholding andby us or the payment requirementsof income taxes by such holders upon vesting of equity awards occurring during a company-imposedCompany-imposed trading blackout or lockup periods. There was no suchperiod.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (the "IRA") into law. The IRA imposes a 1% excise tax on share repurchases, which is effective for us for repurchases completed after December 31, 2022. We reflect the excise tax within equity as part of the repurchase of the common stock.

Share repurchase activity during the three months ended October 31, 2017.2023 was as follows:

PeriodTotal Number Shares PurchasedAverage Price Paid per Share (1)Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in thousands)
August 1, 2023 - August 31, 2023— $— — $— 
September 1, 2023 - September 30, 20231,018,161 24.53 1,018,161 77,970 
October 1, 2023 - October 31, 2023— — — — 
1,018,161 $24.53 1,018,161 $77,970 


(1) Represents the approximate weighted-average price paid per share and excludes excise tax.


Item 3. Defaults Upon Senior Securities


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None.




Item 4. Mine Safety Disclosures
 
Not applicable.




Item 5. Other Information


Not applicable.During the three months ended October 31, 2023, no director or officer of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each of these terms is defined in Item 408(a) of Regulation S-K.

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Item 6.  Exhibits


The following exhibit list includes agreements that we entered into or that became effective during the three months ended October 31, 2017:
2023:
NumberDescription
Filed Herewith /

Incorporated by

Reference from
3.1
Form 8-K filed on November 28, 2023
31.1
Filed herewith
31.2
Filed herewith
32.1
Filed herewith
32.2
Filed herewith
101.INSXBRL Instance DocumentFiled herewith
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
 
(1)These exhibits are being "furnished"“furnished” with this periodic report and are not deemed "filed"“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.



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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, 20172023/s/ Douglas E. RobinsonGrant Highlander
Douglas E. RobinsonGrant Highlander
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



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