Strong Momentum Continues Across Key SaaS Metrics

Also Announces New $200 Million Share Buyback Program

Verint® (NASDAQ:VRNT), The Customer Engagement Company™, today announced results for the three and nine months ended October 31, 2022 (FYE 2023). Revenue for the three months ended October 31, 2022 was $225 million on a GAAP basis representing 0.2% year-over-year growth and $226 million on a non-GAAP basis, representing (0.6)% year-over-year change and 2.2% year-over-year growth on a constant currency basis. Revenue for the nine months ended October 31, 2022 was $666 million on a GAAP basis, representing 4.0% year-over-year growth, and $668 million on a non-GAAP basis, representing 3.7% year-over-year growth and 6.0% year-over-year growth on a constant currency basis. For the three months ended October 31, 2022, net loss per share was $(0.02) on a GAAP basis and diluted EPS was $0.69 on a non-GAAP basis. For the nine months ended October 31, 2022, net loss per share was $(0.21) on a GAAP basis and diluted EPS was $1.77 on a non-GAAP basis.

Third Quarter Highlights

	GAAP		Non-GAAP
	Reported	CC	Reported	CC	CC Growth
Revenue	$225 million	$232 million	$226 million	$232 million	2%
SaaS Revenue	$116 million	$119 million	$116 million	$119 million	41%

Note: CC represents constant currency.

New SaaS ACV Growth: Up 51% year-over-year on a constant currency basis
Favorable Mix Shift: 88% of Software Revenue is Recurring (up from 80% last year)
Cloud Revenue: Up 35% year-over-year on a constant currency basis
New Customer Additions: Added 100+ new logos

"I am pleased to report another quarter with continued strong SaaS momentum across key metrics driven by brands looking to close the engagement capacity gap. We had many significant wins from existing and new customers and delivered strong SaaS Revenue growth and New SaaS ACV bookings growth with our bookings mix continuing to shift to SaaS. Revenue came in line with guidance with both gross margins and diluted EPS coming in strong ahead of our prior guidance", said Dan Bodner, Verint CEO.

Year-to-Date Highlights

	GAAP		Non-GAAP
	Reported	CC	Reported	CC	CC Growth
Revenue	$666 million	$681 million	$668 million	$683 million	6%
SaaS Revenue	$313 million	$319 million	$315 million	$321 million	42%

Note: CC represents constant currency.

New SaaS ACV Growth: Up 25% year-over-year on a constant currency basis
Favorable Mix Shift: 85% of Software Revenue is Recurring (up from 82% last year)
Cloud Revenue: Up 34% year-over-year on a constant currency basis
New Customer Additions: Added 100+ new logos each quarter

Doug Robinson, Verint CFO, added, "Throughout this year we delivered strong SaaS metrics and are pleased with our cloud transition. We are also pleased with our ability to manage through the FX environment with a natural hedge on the bottom line. In Q3, we saw a change in behavior from our perpetual license customers and expect perpetual revenue to come in lower than our original outlook. Our current outlook reflects continued strong SaaS growth, including an acceleration in New SaaS ACV bookings in the second half of the year, as well as a continued perpetual revenue decline."

Share Buyback Program

Verint today also announced that our Board of Directors has authorized a new share repurchase program whereby we may repurchase up to $200 million of common stock over the period from December 12, 2022 until January 31, 2025. We may utilize a number of different methods to effect the repurchases, including but not limited to, open market purchases and accelerated share repurchases, and some or all of the repurchases may be made through Rule 10b5-1 plans. The specific timing, price, and size of purchases will depend on prevailing stock prices, general market and economic conditions, and other considerations. The program may be extended, suspended, or discontinued at any time without prior notice and does not obligate us to acquire any particular amount of common stock.

Mr. Bodner continued, "Long term, we operate in a favorable market that supports sustainable SaaS growth. Our new $200 million share buyback program reflects the confidence we have in our long term opportunity."

FYE 2023 Outlook

We are adjusting our non-GAAP annual outlook for the year ending January 31, 2023 reflecting current trends as follows:

Revenue: $900 million +/- 2%, reflecting 5% year-over-year growth on a constant currency basis
SaaS Revenue Growth: More than 35% year-over-year growth with cloud revenue growing more than 30% year-over-year both on a constant currency basis
Diluted EPS: $2.50 at the midpoint of our revenue guidance, reflecting 10% year-over-year growth

FYE 2024 Outlook

We are providing our non-GAAP annual outlook for the year ending January 31, 2024 reflecting the current macroeconomic environment as follows:

Revenue: $945 million +/- 2%, reflecting 6% year-over-year growth on a constant currency basis
SaaS Revenue Growth: Approximately 30% year-over-year growth on a constant currency basis
Diluted EPS: $2.70 at the midpoint of our revenue guidance, reflecting 8% year-over-year growth

Our non-GAAP outlook for the year ending January 31, 2023 excludes the following GAAP measure which we are able to quantify with reasonable certainty:

Amortization of intangible assets of approximately $39 million.

Our non-GAAP outlook for the year ending January 31, 2023 excludes the following GAAP measures for which we are able to provide a range of probable significance:

Revenue adjustments are expected to be between approximately $2 million and $3 million.
Stock-based compensation expenses are expected to be between approximately $79 million and $82 million, assuming market prices for our common stock approximately consistent with current levels.
Costs associated with modifying our workplace in response to our decision to move to a hybrid work environment, including assumed lease terminations and abandonments, IT facilities and infrastructure costs, and other charges are expected to be between approximately $26 million and $29 million.

Our non-GAAP outlook for the year ending January 31, 2024 excludes the following GAAP measure which we are able to quantify with reasonable certainty:

Amortization of intangible assets of approximately $30 million.

Our non-GAAP outlook for the year ending January 31, 2024 excludes the following GAAP measures for which we are able to provide a range of probable significance:

Revenue adjustments are expected to be between approximately $0 million and $1 million.
Stock-based compensation expenses are expected to be between approximately $69 million and $75 million, assuming market prices for our common stock approximately consistent with current levels.
Costs associated with modifying our workplace in response to our decision to move to a hybrid work environment, including assumed lease terminations and abandonments, IT facilities and infrastructure costs, and other charges are expected to be between approximately $20 million and $26 million.

Our non-GAAP guidance does not include the potential impact of any in-process business acquisitions that may close after the date hereof, and, unless otherwise specified, reflects foreign currency exchange rates approximately consistent with current rates.

We are unable, without unreasonable efforts, to provide a reconciliation for other GAAP measures which are excluded from our non-GAAP outlook, including the impact of future business acquisitions or acquisition expenses, future restructuring expenses, and non-GAAP income tax adjustments due to the level of unpredictability and uncertainty associated with these items. For these same reasons, we are unable to assess the probable significance of these excluded items. While historical results may not be indicative of future results, actual amounts for the three and nine months ended October 31, 2022 and 2021 for the GAAP measures excluded from our non-GAAP outlook appear in Tables 2, 3 and 4 of this press release.

Conference Call Information

We will conduct a conference call today at 4:30 p.m. ET to discuss our results for the three and nine months ended October 31, 2022 and outlook. An online, real-time webcast of the conference call and webcast slides will be available on our website at www.verint.com. Participants may register for the call here to receive the dial-in numbers and unique PIN to access the call. Please join the call 5-10 minutes prior to the scheduled start time.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of non-GAAP financial measures presented for completed periods to the most directly comparable financial measures prepared in accordance with GAAP, please see the tables below as well as "Supplemental Information About Non-GAAP Financial Measures and Operating Metrics" at the end of this press release.

About Verint Systems Inc.

Verint^® (NASDAQ:VRNT) helps the world's most iconic brands build enduring customer relationships by connecting work, data, and experiences across the enterprise. More than 10,000 organizations in 180 countries – including over 85 of the Fortune 100 companies – are using the Verint Customer Engagement Platform to draw on the latest advancements in AI, analytics, and an open cloud architecture to elevate customer experience.

Verint. The Customer Engagement Company^®. Learn more at Verint.com.

Cautions About Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint Systems Inc. These forward-looking statements are not guarantees of future performance and they are based on management's expectations that involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, any of which could cause our actual results or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, inflation, economic instability, political unrest, armed conflicts (such as the Russian invasion of Ukraine), natural disasters, climate change or other environmental issues, or outbreaks of disease, such as the COVID-19 pandemic, as well as the resulting impact on spending by customers or partners, on our business; risks that our customers or partners delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or are unable to honor contractual commitments or payment obligations due to liquidity issues or other challenges in their budgets and business; risks that restrictions resulting from the COVID-19 pandemic or actions taken in response to the pandemic adversely impact our operations or our ability to fulfill orders, complete implementations, or recognize revenue; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer challenges and needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization; risks due to aggressive competition in all of our markets and our ability to keep pace with competitors, some of whom may be able to grow faster than us or have greater resources than 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 cloud transition, including increased importance of subscription renewal rates, and risk of increased variability in our period-to-period results based on the mix, terms, and timing of our transactions; risks relating to our ability to properly execute on growth or strategic initiatives, manage investments in our business and operations, 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 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, increasing labor costs, applicable regulatory requirements such as vaccination mandates, or otherwise; challenges associated with selling sophisticated solutions and cloud-based solutions, including with respect to longer sales cycles, more complex sales processes, more complex contractual and information security requirements, and assisting customers in understanding and realizing the benefits of our solutions, as well as with developing, offering, implementing, and maintaining a broad solution portfolio; risks that we may be unable to maintain, expand, and enable our relationships with partners as part of our growth strategy; risks associated with our reliance on cloud hosting providers and other third-party suppliers, partners, or original equipment manufacturers ("OEMs") for certain services, products, or components, including companies that may compete with us or work with our competitors; risks associated with our significant international operations, exposure to regions subject to political or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being held overseas; risks associated with a significant part of our business coming from government contracts and associated procurement processes 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, information security, government contracts, anti-corruption, trade compliance, climate change or other environmental, social and governance matters, tax, and labor matters, relating to our own operations, the products and services we offer, and/or the use of our solutions by our customers; risks associated with the mishandling or perceived mishandling of sensitive or confidential information and data, including personally identifiable information or other information that may belong to our customers or other third parties, including in connection with our software as a service ("SaaS") or other hosted or managed services offerings or when we are asked to perform service or support; risks that our solutions or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures, or disruptions; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use; risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect to liquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertible notes), and our ability to maintain our credit ratings; risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all; risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, Comverse Technology, Inc. ("CTI"), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of the successor to CTI's business operations, Mavenir Inc., being unwilling or unable to provide us with certain indemnities to which we are entitled; risks associated with changing accounting principles or standards, tax laws and regulations, tax rates, and the continuing availability of expected tax benefits; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel, and our ability to successfully implement and maintain enhancements to the foregoing, for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; risks associated with market volatility in the prices of our common stock and convertible notes based on our performance, third-party publications or speculation, or other factors and risks associated with actions of activist stockholders; risks associated with Apax Partners' significant ownership position and potential that its interests will not be aligned with those of our common stockholders; and risks associated with the 2021 spin-off of 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. We assume no obligation to revise or update any forward-looking statement, except as otherwise required by law. For a detailed discussion of these risk factors, see our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, our Quarterly Report on Form 10-Q for the quarter ended July 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended October 31, 2022, when filed, and other filings we make with the SEC.

VERINT, VERINT DA VINCI, THE CUSTOMER ENGAGEMENT COMPANY, BOUNDLESS CUSTOMER ENGAGEMENT, THE ENGAGEMENT CAPACITY GAP and THE SCIENCE OF CUSTOMER ENGAGEMENT are trademarks of Verint Systems Inc. or its subsidiaries. Verint and other parties may also have trademark rights in other terms used herein.


Table 1 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)		2022			2021			2022			2021
Revenue:
Recurring	$	174,222		$	158,811		$	500,029		$	459,442
Nonrecurring		50,971			66,009			165,969			180,899
Total revenue		225,193			224,820			665,998			640,341
Cost of revenue:
Recurring		38,834			36,811			120,714			112,523
Nonrecurring		28,013			30,524			90,781			90,909
Amortization of acquired technology		3,550			4,749			10,742			13,559
Total cost of revenue		70,397			72,084			222,237			216,991
Gross profit		154,796			152,736			443,761			423,350
Operating expenses:
Research and development, net		32,941			31,029			97,844			91,969
Selling, general and administrative		93,757			89,778			302,344			268,800
Amortization of other acquired intangible assets		6,420			7,261			19,887			21,934
Total operating expenses		133,118			128,068			420,075			382,703
Operating income		21,678			24,668			23,686			40,647
Other income (expense), net:
Interest income		1,045			101			1,742			147
Interest expense		(2,147	)		(1,502	)		(5,511	)		(8,720	)
Losses on early retirements of debt		—			—			—			(2,474	)
Other income (expense), net		1,045			(417	)		3,186			3,789
Total other expense, net		(57	)		(1,818	)		(583	)		(7,258	)
Income before provision for income taxes		21,621			22,850			23,103			33,389
Provision for income taxes		17,395			9,349			20,539			13,478
Net income		4,226			13,501			2,564			19,911
Net income attributable to noncontrolling interests		150			264			614			875
Net income attributable to Verint Systems Inc.		4,076			13,237			1,950			19,036
Dividends on preferred stock		(5,200	)		(5,200	)		(15,600	)		(13,722	)
Net (loss) income attributable to Verint Systems Inc. common shares	$	(1,124	)	$	8,037		$	(13,650	)	$	5,314

Net (loss) income per common share attributable to Verint Systems Inc.:
Basic	$	(0.02	)	$	0.12		$	(0.21	)	$	0.08
Diluted	$	(0.02	)	$	0.12		$	(0.21	)	$	0.08

Weighted-average common shares outstanding:
Basic		65,583			65,570			65,161			65,474
Diluted		65,583			66,328			65,161			67,268


Table 2 VERINT SYSTEMS INC. AND SUBSIDIARIES GAAP to Non-GAAP Cloud Metrics (Unaudited)


Cloud Revenue

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)		2022		2021		2022		2021
SaaS revenue - GAAP⁽¹⁾⁽⁷⁾	$	115,787	$	82,103	$	313,071	$	222,079
Bundled SaaS revenue - GAAP		57,041		48,390		161,005		130,639
Unbundled SaaS revenue - GAAP		58,746		33,713		152,066		91,440
Optional managed services revenue - GAAP		15,436		16,358		47,127		49,688
Cloud revenue - GAAP⁽³⁾⁽⁷⁾	$	131,223	$	98,461	$	360,198	$	271,767

Estimated SaaS revenue adjustments	$	374	$	1,985	$	2,323	$	3,701
Estimated bundled SaaS revenue adjustments		374		1,984		2,323		3,638
Estimated unbundled SaaS revenue adjustments		—		1		—		63
Estimated optional managed services revenue adjustments		49		112		161		431
Estimated cloud revenue adjustments	$	423	$	2,097	$	2,484	$	4,132

SaaS revenue - non-GAAP⁽²⁾⁽⁷⁾	$	116,161	$	84,088	$	315,394	$	225,780
Bundled SaaS revenue - non-GAAP		57,415		50,374		163,328		134,277
Unbundled SaaS revenue - non-GAAP		58,746		33,714		152,066		91,503
Optional managed services revenue - non-GAAP		15,485		16,470		47,288		50,119
Cloud revenue - non-GAAP⁽⁴⁾⁽⁷⁾	$	131,646	$	100,558	$	362,682	$	275,899


New SaaS ACV

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
New SaaS ACV⁽⁵⁾⁽⁷⁾	$	26,833		$	18,312		$	78,178		$	63,684
New SaaS ACV Growth YoY		46.5	%		16.9	%		22.8	%		43.9	%


New Perpetual License Equivalent Bookings

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
New perpetual license equivalent bookings⁽⁶⁾⁽⁷⁾	$	71,115		$	75,438		$	229,291		$	209,479
New perpetual license equivalent bookings change YoY		(5.7	) %		14.2	%		9.5	%		19.0	%
New perpetual license equivalent bookings - SaaS component	$	46,865		$	32,966		$	144,224		$	102,610
New perpetual license equivalent bookings - SaaS growth YoY		42.2	%		11.4	%		40.6	%		35.7	%
% of new perpetual license equivalent bookings from SaaS		65.9	%		43.7	%		62.9	%		49.0	%
New perpetual license equivalent bookings - Perpetual component	$	24,250		$	42,472		$	85,067		$	106,869
New perpetual license equivalent bookings - Perpetual change YoY		(42.9	) %		16.4	%		(20.4	) %		6.5	%
% of new perpetual license equivalent bookings from Perpetual		34.1	%		56.3	%		37.1	%		51.0	%

(1) GAAP SaaS revenue for the three and nine months ended October 31, 2022 was $118.5 million, representing 44% year-over-year growth and $318.6 million, representing 43% year-over-year growth, respectively, on a constant currency basis.

(2) Non-GAAP SaaS revenue for the three and nine months ended October 31, 2022 was $118.9 million, representing 41% year-over-year growth and $321.0 million, representing 42% year-over-year growth, respectively, on a constant currency basis.

(3) GAAP cloud revenue for the three and nine months ended October 31, 2022 was $134.9 million, representing 37% year-over-year growth and $367.6 million, representing 35% year-over-year growth, respectively, on a constant currency basis.

(4) Non-GAAP cloud revenue for the three and nine months ended October 31, 2022 was $135.3 million, representing 35% year-over-year growth and $370.2 million, representing 34% year-over-year growth, respectively, on a constant currency basis.

(5) New SaaS ACV for the three and nine months ended October 31, 2022 was $27.6 million, representing 50.7% year-over-year growth and $79.7 million, representing 25.2% year-over-year growth, respectively, on a constant currency basis.

(6) New perpetual license equivalent bookings for the three and nine months ended October 31, 2022 were $72.5 million, representing a (3.9)% year-over-year change and $232.4 million, representing 11.0% year-over-year growth, respectively, on a constant currency basis.

(7) The foregoing measures at constant currency are calculated by translating the non-U.S. dollar portion of the current-period measure into U.S. dollars using average foreign currency exchange rates for the three and nine months ended October 31, 2021, as applicable, rather than actual current-period foreign currency exchange rates.

For further information see "Supplemental Information About Constant Currency" at the end of this press release.


Table 3 VERINT SYSTEMS INC. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Measures (Unaudited)


Revenue

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2022		2021		2022		2021
Recurring revenue - GAAP	$	174,222	$	158,811	$	500,029	$	459,442
Nonrecurring revenue - GAAP		50,971		66,009		165,969		180,899
Total GAAP revenue		225,193		224,820		665,998		640,341
Recurring revenue adjustments		423		2,108		2,498		4,160
Nonrecurring revenue adjustments		—		—		—		—
Total revenue adjustments		423		2,108		2,498		4,160
Recurring revenue - non-GAAP		174,645		160,919		502,527		463,602
Nonrecurring revenue - non-GAAP		50,971		66,009		165,969		180,899
Total non-GAAP revenue	$	225,616	$	226,928	$	668,496	$	644,501


Gross Profit and Gross Margin

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
Recurring costs	$	38,834		$	36,811		$	120,714		$	112,523
Nonrecurring costs		28,013			30,524			90,781			90,909
Amortization of acquired technology		3,550			4,749			10,742			13,559
Total GAAP cost of revenue		70,397			72,084			222,237			216,991
GAAP gross profit		154,796			152,736			443,761			423,350
GAAP gross margin		68.7	%		67.9	%		66.6	%		66.1	%
Revenue adjustments		423			2,108			2,498			4,160
Amortization of acquired technology		3,550			4,749			10,742			13,559
Stock-based compensation expenses		1,329			1,230			4,245			3,918
Acquisition expenses, net		—			121			176			171
Restructuring expenses		593			245			969			792
Separation expenses		—			—			—			78
Non-GAAP gross profit	$	160,691		$	161,189		$	462,391		$	446,028
Non-GAAP gross margin		71.2	%		71.0	%		69.2	%		69.2	%


Research and Development, net

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP research and development, net	$	32,941		$	31,029		$	97,844		$	91,969
As a percentage of GAAP revenue		14.6	%		13.8	%		14.7	%		14.4	%
Stock-based compensation expenses		(3,533	)		(1,949	)		(10,371	)		(5,749	)
Acquisition expenses, net		—			(192	)		(198	)		(272	)
Restructuring expenses		(509	)		(97	)		(646	)		(410	)
Separation expenses		—			—			—			(467	)
Other adjustments		(17	)		—			(67	)		—
Non-GAAP research and development, net	$	28,882		$	28,791		$	86,562		$	85,071
As a percentage of non-GAAP revenue		12.8	%		12.7	%		12.9	%		13.2	%


Selling, General and Administrative Expenses

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP selling, general and administrative expenses	$	93,757		$	89,778		$	302,344		$	268,800
As a percentage of GAAP revenue		41.6	%		39.9	%		45.4	%		42.0	%
Stock-based compensation expenses		(15,037	)		(13,416	)		(49,346	)		(41,422	)
Acquisition expenses, net		(1,172	)		(2,494	)		(2,661	)		(7,481	)
Restructuring expenses		(1,324	)		(140	)		(7,807	)		(1,179	)
Separation expenses		(291	)		(1,915	)		(1,142	)		(10,651	)
Accelerated lease costs		(725	)		(539	)		(7,831	)		(2,023	)
IT facilities and infrastructure realignment		(1,095	)		(30	)		(3,526	)		(572	)
Impairment charges		—			(373	)		(1,799	)		(373	)
Other adjustments		(900	)		67			(2,511	)		(40	)
Non-GAAP selling, general and administrative expenses	$	73,213		$	70,938		$	225,721		$	205,059
As a percentage of non-GAAP revenue		32.5	%		31.3	%		33.8	%		31.8	%


Operating Income and Operating Margin

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP operating income	$	21,678		$	24,668		$	23,686		$	40,647
GAAP operating margin		9.6	%		11.0	%		3.6	%		6.3	%
Revenue adjustments		423			2,108			2,498			4,160
Amortization of acquired technology		3,550			4,749			10,742			13,559
Amortization of other acquired intangible assets		6,420			7,261			19,887			21,934
Stock-based compensation expenses		19,899			16,595			63,962			51,089
Acquisition expenses, net		1,172			2,807			3,035			7,924
Restructuring expenses		2,426			482			9,422			2,381
Separation expenses		291			1,915			1,142			11,196
Accelerated lease costs		725			539			7,831			2,023
IT facilities and infrastructure realignment		1,095			30			3,526			572
Impairment charges		—			373			1,799			373
Other adjustments		917			(67	)		2,578			40
Non-GAAP operating income	$	58,596		$	61,460		$	150,108		$	155,898
Non-GAAP operating margin		26.0	%		27.1	%		22.5	%		24.2	%


Other Expense, Net

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP other expense, net	$	(57	)	$	(1,818	)	$	(583	)	$	(7,258	)
Unrealized losses on derivatives, net		—			—			—			14,305
Expenses and losses on debt modification or retirement		—			—			—			2,474
Change in fair value of future tranche right		—			—			—			(15,810	)
Acquisition benefit, net		—			(122	)		—			(3,470	)
Non-GAAP other expense, net⁽¹⁾	$	(57	)	$	(1,940	)		(583	)		(9,759	)


Provision for Income Taxes

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP provision for income taxes	$	17,395		$	9,349		$	20,539		$	13,478
GAAP effective income tax rate		80.5	%		40.9	%		88.9	%		40.4	%
Non-GAAP tax adjustments		(11,296	)		(2,559	)		(5,204	)		2,068
Non-GAAP provision for income taxes	$	6,099		$	6,790		$	15,335		$	15,546
Non-GAAP effective income tax rate		10.4	%		11.4	%		10.3	%		10.6	%


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

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP net (loss) income attributable to Verint Systems Inc. common shares	$	(1,124	)	$	8,037		$	(13,650	)	$	5,314
Revenue adjustments		423			2,108			2,498			4,160
Amortization of acquired technology		3,550			4,749			10,742			13,559
Amortization of other acquired intangible assets		6,420			7,261			19,887			21,934
Stock-based compensation expenses		19,899			16,595			63,962			51,089
Unrealized losses on derivatives, net		—			—			—			14,305
Expenses and losses on debt modification or retirement		—			—			—			2,474
Change in fair value of future tranche right		—			—			—			(15,810	)
Acquisition expenses, net		1,172			2,685			3,035			4,454
Restructuring expenses		2,425			482			9,422			2,381
Separation expenses		291			1,915			1,142			11,196
Accelerated lease costs		725			539			7,831			2,023
IT facilities and infrastructure realignment		1,095			30			3,526			572
Impairment charges		—			373			1,799			373
Other adjustments		917			(67	)		2,578			40
Non-GAAP tax adjustments		11,296			2,559			5,204			(2,068	)
Dividends, reversed due to assumed conversion of preferred stock⁽³⁾		5,200			5,200			15,600			13,722
Total adjustments		53,413			44,429			147,226			124,404
Non-GAAP net income attributable to Verint Systems Inc. common shares	$	52,289		$	52,466		$	133,576		$	129,718


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

	Three Months Ended October 31,					Nine Months Ended October 31,
(in thousands, except per share data)		2022			2021		2022			2021
GAAP diluted net (loss) income per common share attributable to Verint Systems Inc.	$	(0.02	)	$	0.12	$	(0.21	)	$	0.08
Non-GAAP diluted net income per common share attributable to Verint Systems Inc.⁽³⁾	$	0.69		$	0.69	$	1.77		$	1.71

GAAP weighted-average shares used in computing diluted net (loss) income per common share attributable to Verint Systems Inc.		65,583			66,328		65,161			67,268
Additional weighted-average shares applicable to non-GAAP diluted net income per common share attributable to Verint Systems Inc.		10,004			9,478		10,364			8,544
Non-GAAP diluted weighted-average shares used in computing net income per common share attributable to Verint Systems Inc.⁽³⁾		75,587			75,806		75,525			75,812


GAAP Net Income to Adjusted EBITDA

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP net income	$	4,226		$	13,501		$	2,564		$	19,911
As a percentage of GAAP revenue		1.9	%		6.0	%		0.4	%		3.1	%
Provision for income taxes		17,395			9,349			20,539			13,478
Other expense, net		57			1,818			583			7,258
Depreciation and amortization⁽²⁾		16,158			18,585			50,199			54,696
Revenue adjustments		423			2,108			2,498			4,160
Stock-based compensation expenses		19,899			16,595			63,962			51,089
Acquisition expenses, net		1,172			2,807			3,035			7,924
Restructuring expenses		2,348			456			9,090			2,355
Separation expenses		291			1,915			1,142			10,829
Accelerated lease costs		725			539			7,831			2,023
IT facilities and infrastructure realignment		1,095			30			3,526			572
Impairment charges		—			373			1,799			373
Other adjustments		917			(67	)		2,578			40
Adjusted EBITDA	$	64,706		$	68,009		$	169,346		$	174,708
As a percentage of non-GAAP revenue		28.7	%		30.0	%		25.3	%		27.1	%


Gross Debt to Net Debt

(in thousands)	October 31, 2022		January 31, 2022
Long-term debt	$	408,361	$	406,954
Unamortized debt discounts and issuance costs		6,639		8,046
Gross debt		415,000		415,000
Less:
Cash and cash equivalents		252,073		358,805
Restricted cash and cash equivalents, and restricted bank time deposits		290		6
Short-term investments		10,651		765
Net debt, excluding long-term restricted cash, cash equivalents, time deposits, and investments		151,986		55,424
Long-term restricted cash, cash equivalents, time deposits, and investments		266		409
Net debt, including long-term restricted cash, cash equivalents, time deposits, and investments	$	151,720	$	55,015

(1) For the three months ended October 31, 2022, non-GAAP other expense, net of $0.1 million was comprised of $1.4 million of interest and other expense, net of $1.3 million of foreign exchange gains primarily related to balance sheet revaluations.

(2) Adjusted for financing fee amortization.

(3) EPS calculation includes the more dilutive of either preferred stock dividends or conversion of preferred stock shares. Conversion of the outstanding preferred shares was more dilutive in three and nine months ended October 31, 2022 and 2021.


Table 4 VERINT SYSTEMS INC. AND SUBSIDIARIES GAAP to Non-GAAP Recurring and Nonrecurring Revenue and Gross Profit (Unaudited)


Recurring and Nonrecurring Revenue

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2022		2021		2022		2021
Recurring revenue - GAAP	$	174,222	$	158,811	$	500,029	$	459,442
Cloud revenue - GAAP		131,223		98,461		360,198		271,767
Support revenue - GAAP		42,999		60,350		139,831		187,675
Nonrecurring revenue - GAAP	$	50,971	$	66,009	$	165,969	$	180,899
Perpetual revenue - GAAP		24,425		40,436		88,473		102,108
Professional services revenue - GAAP		26,546		25,573		77,496		78,791
Total revenue - GAAP	$	225,193	$	224,820	$	665,998	$	640,341

Estimated recurring revenue adjustments	$	423	$	2,108	$	2,498	$	4,160
Estimated cloud revenue adjustments		423		2,097		2,484		4,132
Estimated support revenue adjustments		—		11		14		28
Estimated nonrecurring revenue adjustments	$	—	$	—	$	—	$	—
Estimated perpetual revenue adjustments		—		—		—		—
Estimated professional services revenue adjustments		—		—		—		—
Total estimated revenue adjustments	$	423	$	2,108	$	2,498	$	4,160

Recurring revenue - non-GAAP	$	174,645	$	160,919	$	502,527	$	463,602
Cloud revenue - non-GAAP		131,646		100,558		362,682		275,899
Support revenue - non-GAAP		42,999		60,361		139,845		187,703
Nonrecurring revenue - non-GAAP	$	50,971	$	66,009	$	165,969	$	180,899
Perpetual revenue - non-GAAP		24,425		40,436		88,473		102,108
Professional services revenue - non-GAAP		26,546		25,573		77,496		78,791
Total revenue - non-GAAP	$	225,616	$	226,928	$	668,496	$	644,501


Recurring Gross Profit

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP recurring revenue	$	174,222		$	158,811		$	500,029		$	459,442
GAAP recurring costs		38,834			36,811			120,714			112,523
GAAP recurring gross profit		135,388			122,000			379,315			346,919
GAAP recurring gross margin		77.7	%		76.8	%		75.9	%		75.5	%

Recurring revenue adjustments		423			2,108			2,498			4,160
Recurring stock-based compensation expenses		729			540			2,187			1,531
Recurring acquisition expenses, net		—			30			22			80
Recurring restructuring expenses		459			35			588			479
Recurring separation expenses		—			—			—			32
Non-GAAP recurring gross profit	$	136,999		$	124,713		$	384,610		$	353,201
Non-GAAP recurring gross margin		78.4	%		77.5	%		76.5	%		76.2	%


Nonrecurring Gross Profit

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)		2022			2021			2022			2021
GAAP nonrecurring revenue	$	50,971		$	66,009		$	165,969		$	180,899
GAAP nonrecurring costs		28,013			30,524			90,781			90,909
GAAP nonrecurring gross profit		22,958			35,485			75,188			89,990
GAAP nonrecurring gross margin		45.0	%		53.8	%		45.3	%		49.7	%

Nonrecurring revenue adjustments		—			—			—			—
Nonrecurring stock-based compensation expenses		600			690			2,058			2,387
Nonrecurring acquisition expenses, net		—			91			154			91
Nonrecurring restructuring expenses		134			210			381			313
Nonrecurring separation expenses		—			—			—			46
Non-GAAP nonrecurring gross profit	$	23,692		$	36,476		$	77,781		$	92,827
Non-GAAP nonrecurring gross margin		46.5	%		55.3	%		46.9	%		51.3	%


Table 5 VERINT SYSTEMS INC. AND SUBSIDIARIES Calculation of Change in Revenue on a Constant Currency Basis (Unaudited)


	GAAP Revenue⁽²⁾						Non-GAAP Revenue⁽³⁾
(in thousands, except percentages)	Three Months Ended			Nine Months Ended			Three Months Ended			Nine Months Ended
Revenue for the three and nine months ended October 31, 2021	$	224,820		$	640,341		$	226,928		$	644,501
Revenue for the three and nine months ended October 31, 2022	$	225,193		$	665,998		$	225,616		$	668,496
Revenue for the three and nine months ended October 31, 2022 at constant currency⁽¹⁾	$	232,000		$	681,000		$	232,000		$	683,000
Reported period-over-period revenue change		0.2	%		4.0	%		(0.6	) %		3.7	%
% impact from change in foreign currency exchange rates		3.0	%		2.3	%		2.8	%		2.3	%
Constant currency period-over-period revenue growth		3.2	%		6.3	%		2.2	%		6.0	%

(1) Revenue for the three and nine months ended October 31, 2022 at constant currency is calculated by translating current-period GAAP or non-GAAP foreign currency revenue (as applicable) into U.S. dollars using average foreign currency exchange rates for the three and nine months ended October 31, 2021 rather than actual current-period foreign currency exchange rates.

(2) GAAP revenue denominated in non-U.S. dollars was 19% and 22% of our total GAAP revenue for the three months ended October 31, 2022 and 2021, respectively. GAAP revenue denominated in non-U.S. dollars was 21% and 23% of our total GAAP revenue for the nine months ended October 31, 2022 and 2021, respectively. Our combined GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 29% and 32% of our total combined GAAP cost of revenue and operating expenses for the three months ended October 31, 2022 and 2021, respectively. Our combined GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 30% and 32% of our total combined GAAP cost of revenue and operating expenses for the nine months ended October 31, 2022 and 2021, respectively.

(3) Non-GAAP revenue denominated in non-U.S. dollars was 19% and 22% of our total non-GAAP revenue for the three months ended October 31, 2022 and 2021, respectively. Non-GAAP revenue denominated in non-U.S. dollars was 21% and 23% of our total non-GAAP revenue for the nine months ended October 31, 2022 and 2021, respectively. Our combined Non-GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 33% and 35% of our total combined Non-GAAP cost of revenue and operating expenses for the three months ended October 31, 2022 and 2021, respectively. Our combined Non-GAAP cost of revenue and operating expenses denominated in non-U.S. dollars was 34% and 35% of our total combined Non-GAAP cost of revenue and operating expenses for the nine months ended October 31, 2022 and 2021, respectively.

For further information see "Supplemental Information About Constant Currency" at the end of this press release.


Table 6 VERINT SYSTEMS INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited)


	October 31,		January 31,
(in thousands, except share and per share data)		2022		2022
Assets
Current Assets:
Cash and cash equivalents	$	252,073	$	358,805
Short-term investments		10,651		765
Accounts receivable, net of allowance for credit losses of $1.3 million and $1.3 million, respectively		165,888		193,831
Contract assets, net		49,133		42,688
Inventories		10,611		5,337
Prepaid expenses and other current assets		56,439		53,752
Total current assets		544,795		655,178
Property and equipment, net		62,310		64,090
Operating lease right-of-use assets		37,704		35,433
Goodwill		1,300,166		1,353,421
Intangible assets, net		83,300		118,254
Other assets		144,156		134,729
Total assets	$	2,172,431	$	2,361,105

Liabilities, Temporary Equity, and Stockholders' Equity
Current Liabilities:
Accounts payable	$	42,204	$	39,501
Accrued expenses and other current liabilities		127,715		168,694
Contract liabilities		223,968		271,271
Total current liabilities		393,887		479,466
Long-term debt		408,361		406,954
Long-term contract liabilities		17,742		15,872
Operating lease liabilities		35,665		28,457
Other liabilities		44,338