Verint(VRNT) - 2026 Q2 - Quarterly Report

Cautionary Note on Forward-Looking Statements The report's forward-looking statements are subject to significant risks and uncertainties that could cause actual results to differ - Forward-looking statements in this report involve known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially[9] - Key risks include the ability to consummate the proposed merger, macroeconomic and global conditions, technological advances (such as AI), aggressive competition, and regulatory changes[9][10] - The company does not commit to revise or update any forward-looking statements unless required by federal securities laws[11] Part I. Financial Information This part presents the company's unaudited financial statements and management's discussion and analysis for the period Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and accompanying notes for Verint Systems Inc Condensed Consolidated Balance Sheets The balance sheets reflect a decrease in total assets and liabilities, alongside a slight increase in stockholders' equity Total Assets (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $2,231,888 | | January 31, 2025 | $2,290,049 | | Change | -$58,161 | Total Liabilities (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $896,447 | | January 31, 2025 | $964,454 | | Change | -$68,007 | Total Stockholders' Equity (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $899,120 | | January 31, 2025 | $889,274 | | Change | +$9,846 | Condensed Consolidated Statements of Operations The statements of operations reveal declines in total revenue and operating income, resulting in a net loss for the period Total Revenue (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $208,007 | $210,170 | -1.0% | | Six Months Ended July 31 | $416,104 | $431,447 | -3.5% | Operating Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $3,349 | $13,870 | -75.9% | | Six Months Ended July 31 | $8,421 | $38,315 | -78.0% | Net (Loss) Income Attributable to Verint Systems Inc. Common Shares (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | $(5,688) | $1,451 | | Six Months Ended July 31 | $(8,066) | $11,492 | Condensed Consolidated Statements of Comprehensive (Loss) Income These statements show a comprehensive loss for the quarter but comprehensive income for the six-month period, driven by currency adjustments Comprehensive (Loss) Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $(4,508) | $18,392 | N/A (loss from income) | | Six Months Ended July 31 | $31,541 | $26,492 | +19.1% | Other Comprehensive (Loss) Income - Foreign Currency Translation Adjustments (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | $(3,315) | $12,721 | | Six Months Ended July 31 | $30,904 | $5,661 | Condensed Consolidated Statements of Stockholders' Equity The statements detail changes in stockholders' equity, including stock repurchases and preferred stock dividends Total Stockholders' Equity (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $899,120 | | January 31, 2025 | $889,274 | | Change | +$9,846 | Common Stock Repurchased and Retired (Six Months Ended July 31, in thousands) | Year | Shares | Cost | | :--- | :--- | :--- | | 2025 | (3,028) | $(51,465) | | 2024 | (1,701) | $(53,108) | Preferred Stock Dividends (Six Months Ended July 31, in thousands) | Year | Amount | | :--- | :--- | | 2025 | $(8,000) | | 2024 | $(9,680) | Condensed Consolidated Statements of Cash Flows The cash flow statements indicate a year-over-year decrease in cash from operations and investing activities Net Cash Provided by Operating Activities (Six Months Ended July 31, in thousands) | Year | Amount | Change (YoY) | | :--- | :--- | :--- | | 2025 | $45,434 | -29.6% | | 2024 | $64,580 | | Net Cash Used in Investing Activities (Six Months Ended July 31, in thousands) | Year | Amount | Change (YoY) | | :--- | :--- | :--- | | 2025 | $(11,054) | -49.1% | | 2024 | $(21,727) | | Net Cash Used in Financing Activities (Six Months Ended July 31, in thousands) | Year | Amount | Change (YoY) | | :--- | :--- | :--- | | 2025 | $(77,995) | +0.7% | | 2024 | $(77,478) | | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of the accounting policies and figures presented in the financial statements Note 1. Basis of Presentation and Significant Accounting Policies This note outlines the basis of presentation for the financial statements and details the pending merger with Calabrio, Inc - Verint is a leader in Customer Experience (CX) Automation, serving over 80 Fortune 100 companies with its AI-powered Open Platform[31] - On August 24, 2025, Verint entered into a Merger Agreement with Calabrio, Inc (an affiliate of Thoma Bravo) for an all-cash acquisition valued at approximately $2 billion, with stockholders to receive $20.50 per share[32] - Apax Partners invested $400.0 million in Series A and Series B convertible preferred stock in 2019 and 2021, holding approximately 13.6% ownership on an as-converted basis as of July 31, 2025[33][145] Note 2. Revenue Recognition This note disaggregates revenue by type, highlighting growth in SaaS revenue offset by declines in other categories Revenue Disaggregation (Three Months Ended July 31, in thousands) | Revenue Type | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Bundled SaaS revenue | $84,897 | $71,593 | 19% | | Unbundled SaaS revenue | $53,928 | $59,511 | (9)% | | Total SaaS revenue | $138,825 | $131,104 | 6% | | Optional managed services revenue | $6,109 | $5,569 | 10% | | Support revenue | $20,587 | $26,556 | (22)% | | Total recurring revenue | $165,521 | $163,229 | 1% | | Nonrecurring perpetual revenue | $22,873 | $23,834 | (4)% | | Nonrecurring professional services and other revenue | $19,613 | $23,107 | (15)% | | Total revenue | $208,007 | $210,170 | (1)% | Revenue Disaggregation (Six Months Ended July 31, in thousands) | Revenue Type | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Bundled SaaS revenue | $166,154 | $137,288 | 21% | | Unbundled SaaS revenue | $120,155 | $134,799 | (11)% | | Total SaaS revenue | $286,309 | $272,087 | 5% | | Optional managed services revenue | $11,123 | $10,737 | 4% | | Support revenue | $41,712 | $53,933 | (23)% | | Total recurring revenue | $339,144 | $336,757 | 1% | | Nonrecurring perpetual revenue | $39,894 | $48,734 | (18)% | | Nonrecurring professional services and other revenue | $37,066 | $45,956 | (19)% | | Total revenue | $416,104 | $431,447 | (4)% | Remaining Performance Obligations (in thousands) | Period | July 31, 2025 | January 31, 2025 | | :--- | :--- | :--- | | Expected to be recognized within 1 year | $422,166 | $441,360 | | Expected to be recognized in more than 1 year | $281,244 | $300,615 | | Total | $703,410 | $741,975 | Note 3. Net (Loss) Income Per Common Share Attributable to Verint Systems Inc. This note provides the calculation for basic and diluted net loss per common share for the reporting periods Net (Loss) Income Per Common Share (Basic & Diluted) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | $(0.09) | $0.02 | | Six Months Ended July 31 | $(0.13) | $0.18 | Weighted-Average Common Shares Outstanding (Basic, in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | 60,308 | 61,864 | | Six Months Ended July 31 | 61,093 | 62,093 | - Potential common shares from restricted and performance stock-based awards, Series A Preferred Stock, and Series B Preferred Stock were excluded from diluted EPS calculations for 2025 due to their anti-dilutive effect[59] Note 4. Cash, Cash Equivalents, and Short-Term Investments This note details the components of the company's cash, cash equivalents, and short-term investments Cash and Cash Equivalents (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $174,968 | | January 31, 2025 | $215,707 | | Change | -$40,739 | Short-term Investments (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $434 | | January 31, 2025 | $1,344 | | Change | -$910 | Note 5. Business Combinations and Asset Acquisitions This note describes the accounting for the recent acquisition of Cogito Corporation and confirms no new combinations in the current period - No business combinations were completed during the three and six months ended July 31, 2025[68] - In October 2024, Verint acquired Cogito Corporation, an AI solutions provider, for a total purchase price of $50.3 million, including cash and contingent consideration[69][77] - The Cogito acquisition resulted in the recognition of $27.1 million of goodwill and $25.8 million of identifiable intangible assets (customer relationships and developed technology)[73][77] Note 6. Intangible Assets and Goodwill This note presents the carrying amounts and changes in intangible assets and goodwill, primarily from the Cogito acquisition Net Intangible Assets with Finite Lives (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $70,423 | | January 31, 2025 | $80,538 | | Change | -$10,115 | Goodwill, Net (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $1,413,859 | | January 31, 2025 | $1,386,734 | | Change | +$27,125 | - Total amortization expense for acquisition-related intangible assets was $11.8 million for the six months ended July 31, 2025, an increase from $9.1 million in the prior year[87] Note 7. Debt This note details the company's outstanding debt, including convertible notes and the amended revolving credit facility Total Debt (including current portions, in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $413,536 | | January 31, 2025 | $412,753 | | Change | +$783 | - The $315.0 million 0.25% convertible senior notes (2021 Notes) due April 2026 are now classified as current debt[92][94] - The Revolving Credit Facility was amended on March 25, 2025, extending its maturity to March 25, 2030, and increasing aggregate borrowing commitments from $300.0 million to $500.0 million[104][333] Note 8. Supplemental Condensed Consolidated Financial Statement Information This note provides supplemental details on various balance sheet and income statement accounts, including inventories and foreign currency gains Total Inventories (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $14,877 | | January 31, 2025 | $14,311 | | Change | +$566 | Total Other Liabilities (in thousands) | Date | Amount | | :--- | :--- | | July 31, 2025 | $80,834 | | January 31, 2025 | $90,906 | | Change | -$10,072 | Foreign Currency (Losses) Gains, Net (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Six Months Ended July 31 | $300 | $(2,471) | Note 9. Convertible Preferred Stock This note describes the terms and ownership details of the Series A and Series B convertible preferred stock held by Apax Partners - Apax Investor purchased $200.0 million of Series A Preferred Stock (May 2020) and $200.0 million of Series B Preferred Stock (April 2021)[121] - Preferred Stock pays cumulative semi-annual cash dividends, with an annual rate of 4.0% after May 7, 2024[120] - As of July 31, 2025, Apax's ownership in Verint on an as-converted basis was approximately 13.6%[125] Note 10. Stockholders' Equity This note covers stockholders' equity matters, including the absence of common stock dividends and the stock repurchase program - No cash dividends were declared or paid on common stock during the six months ended July 31, 2025 and 2024[136] - A new $200.0 million stock repurchase program was authorized on September 4, 2024, for the period from August 29, 2024, until August 29, 2026[141] - During the six months ended July 31, 2025, approximately 3,028,000 shares of common stock were repurchased for a cost of $51.5 million (including tax withholding and excise tax)[143] Note 11. Income Taxes This note explains the significant increase in the effective income tax rate and the potential impact of new tax legislation Effective Income Tax Rate (Six Months Ended July 31) | Year | Pretax Income (in thousands) | Provision for Income Taxes (in thousands) | Effective Tax Rate | | :--- | :--- | :--- | :--- | | 2025 | $5,823 | $5,276 | 90.6% | | 2024 | $33,311 | $12,209 | 36.7% | - The high effective tax rate in 2025 is primarily due to U.S. taxation of certain foreign activities, income tax impacts of stock-based compensation, and interest related to uncertain tax positions[152] - The company is evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its condensed consolidated financial statements[157] Note 12. Fair Value Measurements This note outlines the fair value measurement hierarchy for the company's financial assets and liabilities Assets Measured at Fair Value (July 31, 2025, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Money market funds | $58,856 | — | — | $58,856 | | U.S. Treasury bills | $498 | — | — | $498 | | Foreign currency forward contracts | — | $271 | — | $271 | | Contingent consideration receivable | — | — | $2,446 | $2,446 | | Total Assets | $59,354 | $271 | $2,446 | $62,071 | Liabilities Measured at Fair Value (July 31, 2025, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Foreign currency forward contracts | — | $23 | — | $23 | | Contingent consideration — business combinations | — | $3,313 | $3,447 | $6,760 | | Total Liabilities | — | $3,336 | $3,447 | $6,783 | - The fair value of contingent consideration liabilities decreased from $22.0 million at January 31, 2025, to $3.4 million at July 31, 2025, primarily due to changes in fair values and payments[160] Note 13. Derivative Financial Instruments This note details the use of foreign currency forward contracts to manage currency exposure for operational cash flows - Verint uses foreign currency forward contracts to manage short-term exposures to fluctuations in operational cash flows and foreign-denominated assets, not for speculative purposes[173] - Outstanding foreign currency forward contracts had notional amounts of $6.6 million as of July 31, 2025[174] Net Gains (Losses) Recognized in AOCL from Foreign Currency Forward Contracts (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | $401 | $(49) | | Six Months Ended July 31 | $298 | $(282) | Note 14. Stock-Based Compensation This note reports a decrease in stock-based compensation expense due to lower grant date fair values of equity awards Total Stock-Based Compensation Expense (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $16,850 | $23,746 | -29.0% | | Six Months Ended July 31 | $32,317 | $41,767 | -22.6% | - The decrease in stock-based compensation expense is primarily due to a decrease in the grant date fair value of employee equity awards[182] - As of July 31, 2025, approximately $83.7 million of total unrecognized compensation expense related to unvested RSUs is expected to be recognized over a weighted-average period of 2.2 years[189] Note 15. Commitments and Contingencies This note addresses commitments and contingencies, stating that current litigation is not expected to have a material adverse effect - Verint is a party to various litigation matters and claims arising in the ordinary course of business[196] - Management does not believe any current legal proceedings, individually or in aggregate, will have a material adverse effect on the company's financial condition, results of operations, or liquidity[196] - Litigation accruals are recorded for legal matters that are both probable and estimable[197] Note 16. Segment Information This note confirms the company operates as a single reporting segment and provides a geographic breakdown of revenue - Verint operates as a single operating and reporting segment, with the Chief Executive Officer serving as the Chief Operating Decision Maker (CODM)[199] Revenue by Geographic Area (Three Months Ended July 31, in thousands) | Region | 2025 | 2024 | % of Total 2025 | % of Total 2024 | | :--- | :--- | :--- | :--- | :--- | | Americas | $143,088 | $145,956 | 69% | 69% | | EMEA | $41,942 | $41,754 | 20% | 20% | | APAC | $22,977 | $22,460 | 11% | 11% | | Total | $208,007 | $210,170 | 100% | 100% | Revenue by Geographic Area (Six Months Ended July 31, in thousands) | Region | 2025 | 2024 | % of Total 2025 | % of Total 2024 | | :--- | :--- | :--- | :--- | :--- | | Americas | $286,698 | $307,215 | 69% | 71% | | EMEA | $84,997 | $81,073 | 20% | 19% | | APAC | $44,409 | $43,159 | 11% | 10% | | Total | $416,104 | $431,447 | 100% | 100% | Note 17. Subsequent Event This note describes the subsequent event of the Merger Agreement with Thoma Bravo for an all-cash acquisition - On August 24, 2025, Verint entered into a Merger Agreement to be acquired by the private equity investment firm Thoma Bravo[205] - Common stockholders will receive $20.50 in cash per share, and preferred stock will be redeemed at $1,000 per share plus unpaid accrued dividends[206] - The merger is subject to stockholder approval, regulatory approvals, and other closing conditions, and is expected to close before the end of the current fiscal year[208][209] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows Merger Agreement This section details the terms of the pending all-cash acquisition of Verint by Thoma Bravo for approximately $2 billion - Verint entered into a Merger Agreement on August 24, 2025, to be acquired by Thoma Bravo for approximately $2 billion in cash, with stockholders receiving $20.50 per share[214] - The merger is subject to customary closing conditions, including stockholder and regulatory approvals, and is expected to close before the end of the current fiscal year[214] - Upon consummation, Verint's common stock will no longer be publicly listed and traded on NASDAQ[216] Overview This overview discusses the company's CX Automation business, the impact of macroeconomic conditions, and key subscription ARR metrics - Verint is a leader in Customer Experience (CX) Automation, leveraging its Open Platform and AI-powered bots to deliver AI Business Outcomes[217] - Macroeconomic and geopolitical conditions, such as recession risks, inflation, and elevated interest rates, have impacted customer and partner spending decisions and increased costs[218][219] Subscription Annual Recurring Revenue (ARR, in thousands) | Date | Amount | % Change (YoY) | | :--- | :--- | :--- | | July 31, 2025 | $728,492 | 6% | | July 31, 2024 | $684,692 | | Critical Accounting Policies and Estimates This section confirms no significant changes to the company's critical accounting policies and estimates during the period - Critical accounting policies and estimates include revenue recognition, accounting for business combinations, goodwill and other acquired intangible assets, income taxes, and stock-based compensation[229] - There were no significant changes to critical accounting policies and estimates during the six months ended July 31, 2025[226] Results of Operations This section provides a detailed analysis of the company's operational results, including revenue, costs, and expenses Seasonality and Cyclicality This section explains the business's seasonal patterns, with revenue and orders typically peaking in the fourth quarter - The business exhibits seasonal and cyclical patterns, with the highest revenue and operating income typically in the fourth quarter and lowest in the first quarter[227] - Order volume tends to peak in the final month of each quarter, with particular concentration in the latter weeks, driven by customer budget cycles and sales incentives[227] Subscription Mix This section discusses how different revenue recognition models for SaaS offerings impact period-to-period financial results - Revenue recognition varies by delivery model: bundled SaaS is recognized ratably, while a substantial portion of unbundled SaaS is recognized upfront, creating period-to-period variability[228] - Annual Recurring Revenue (ARR) is used to measure underlying subscription performance, normalizing the impact of seasonality, contract duration, and subscription mix[231] Foreign Currency Exchange Rates' Impact on Results of Operations This section quantifies the impact of foreign currency fluctuations on the company's operating income - A weakening U.S. dollar against the British pound sterling, euro, and Israeli shekel, and strengthening against the Australian dollar, resulted in an overall increase in U.S. dollar-denominated revenue and expenses[241][242] - For the three months ended July 31, 2025, had foreign currency exchange rates remained unchanged, operating income would have increased by approximately $0.7 million[241] - For the six months ended July 31, 2025, had foreign currency exchange rates remained unchanged, operating income would have increased by approximately $0.5 million[242] Revenue This section analyzes revenue performance, noting growth in bundled SaaS offset by declines in other revenue streams Total Revenue (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $208,007 | $210,170 | (1)% | | Six Months Ended July 31 | $416,104 | $431,447 | (4)% | Recurring Revenue (Three Months Ended July 31, in thousands) | Revenue Type | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Bundled SaaS | $84,897 | $71,593 | 19% | | Unbundled SaaS | $53,928 | $59,511 | (9)% | | Support | $20,587 | $26,556 | (22)% | | Total Recurring | $165,521 | $163,229 | 1% | - Nonrecurring perpetual revenue decreased by 18% for the six months ended July 31, 2025, due to reduced demand and a shift towards SaaS solutions[250] Cost of Revenue This section details the increase in cost of revenue, driven primarily by higher third-party cloud infrastructure costs Total Cost of Revenue (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $67,456 | $64,744 | 4% | | Six Months Ended July 31 | $136,651 | $128,505 | 6% | - Cost of recurring revenue increased by 12% for the six months ended July 31, 2025, primarily due to higher third-party cloud infrastructure costs, leading to a decrease in recurring revenue gross margins from 79% to 76%[256] - Amortization of acquired technology increased by 56% for the six months ended July 31, 2025, due to amortization expense associated with acquired technology intangible assets from recent business combinations[267] Research and Development, Net This section explains the rise in R&D expenses due to increased headcount and a shift to cloud-based infrastructure Research and Development, Net (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $39,099 | $35,358 | 11% | | Six Months Ended July 31 | $79,740 | $72,088 | 11% | - The increase was primarily attributable to higher employee compensation and related expenses due to increased R&D headcount and a shift to cloud-based R&D infrastructure costs[270][271] - This increase was partially offset by a decrease in stock-based compensation expense and a $1.7 million benefit from the reversal of consideration payable under an acquisition-related key employee incentive plan[271] Selling, General and Administrative Expenses This section analyzes SG&A expenses, which decreased slightly due to fair value adjustments and lower stock compensation Selling, General and Administrative Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $94,540 | $93,178 | 1% | | Six Months Ended July 31 | $184,210 | $186,454 | (1)% | - The six-month decrease was primarily due to a $7.0 million benefit from changes in the fair value of contingent consideration obligations and a $5.9 million decrease in stock-based compensation expense[275] - These decreases were partially offset by a $9.0 million increase in employee compensation and related expenses due to increased headcount and general wage inflation[275] Amortization of Other Acquired Intangible Assets This section attributes the increase in amortization expense to intangible assets from recent business combinations Amortization of Other Acquired Intangible Assets (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $3,563 | $3,020 | 18% | | Six Months Ended July 31 | $7,082 | $6,085 | 16% | - The increase was attributable to amortization expense associated with acquired intangible assets from recent business combinations, partially offset by acquired customer-related intangible assets from historical business combinations becoming fully amortized[276][277] Other Expense, Net This section details the decrease in other expenses, primarily due to lower interest income and favorable foreign currency movements Total Other Expense, Net (in thousands) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended July 31 | $(2,058) | $(3,893) | (47)% | | Six Months Ended July 31 | $(2,598) | $(5,004) | (48)% | - Interest income decreased by 26% for both periods due to lower average cash balances and lower interest rates[281][284] - For the six months ended July 31, 2025, the company recorded $0.3 million of net foreign currency gains, compared to $2.5 million of net foreign currency losses in the prior year[286] Provision for Income Taxes This section explains the significant increase in the effective tax rate due to U.S. taxation of foreign activities Effective Income Tax Rate (Six Months Ended July 31) | Year | Pretax Income (in thousands) | Provision for Income Taxes (in thousands) | Effective Tax Rate | | :--- | :--- | :--- | :--- | | 2025 | $5,823 | $5,276 | 90.6% | | 2034 | $33,311 | $12,209 | 36.7% | - The significantly higher effective tax rate in 2025 is primarily due to U.S. taxation of certain foreign activities, income tax impacts of stock-based compensation, and interest related to uncertain tax positions[292] - The company is evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its condensed consolidated financial statements[295] Liquidity and Capital Resources This section assesses the company's liquidity, capital resources, and cash flow activities Overview This overview outlines the company's primary liquidity sources and the impact of the pending merger on financial activities - The pending Merger Agreement includes covenants restricting certain business activities, capital expenditures, additional debt, and stock repurchases[296] - Primary sources of operating liquidity are cash from operations, existing cash, and the Revolving Credit Facility[300] - The company intends to refinance or repay all of its $315.0 million 2021 Notes within the next year[302] Condensed Consolidated Cash Flow Activity This section presents a summary of cash flows from operating, investing, and financing activities for the period Net Cash Provided by Operating Activities (Six Months Ended July 31, in thousands) | Year | Amount | Change (YoY) | | :--- | :--- | :--- | | 2025 | $45,434 | -29.6% | | 2024 | $64,580 | | Net Cash Used in Investing Activities (Six Months Ended July 31, in thousands) | Year | Amount | Change (YoY) | | :--- | :--- | :--- | | 2025 | $(11,054) | -49.1% | | 2024 | $(21,727) | | Net Cash Used in Financing Activities (Six Months Ended July 31, in thousands) | Year | Amount | Change (YoY) | | :--- | :--- | :--- | | 2025 | $(77,995) | +0.7% | | 2024 | $(77,478) | | Liquidity and Capital Resources Requirements This section confirms the company's belief in sufficient liquidity for the next 12 months and details the stock repurchase program - The company expects sufficient liquidity for at least the next 12 months from existing cash, operations, and the $500.0 million Revolving Credit Facility[316] - A new $200.0 million stock repurchase program was authorized in September 2024, under which $49.5 million of common stock was repurchased during the six months ended July 31, 2025[319][320] - The stock repurchase program was suspended following the Merger Agreement[371] Financing Arrangements This section describes the company's key financing instruments, including convertible notes and the revolving credit facility - The $315.0 million 2021 Notes mature on April 15, 2026, with an initial conversion price of $62.08 per share[324][326] - The Revolving Credit Facility was increased to $500.0 million and matures on March 25, 2030, with $100.0 million outstanding at July 31, 2025, at an interest rate of 5.86%[333][334] - The company's Leverage Ratio was approximately 1.1 to 1 at July 31, 2025, well within the Credit Agreement's covenant of no greater than 4.5 to 1[335] Contractual Obligations This section summarizes the company's principal contractual commitments, including debt, leases, and purchase orders - Principal commitments include current debt, dividends on Preferred Stock, operating leases, and open non-cancellable purchase orders[338] - Total operating lease liabilities were $36.1 million at July 31, 2025[339] - Potential future cash payments under contingent consideration arrangements totaled $46.2 million, with an estimated fair value of $6.8 million at July 31, 2025[343] Recent Accounting Pronouncements This section refers to Note 1 for information on recent accounting pronouncements and their potential impact - Refer to Note 1, 'Basis of Presentation and Significant Accounting Policies,' for a description of recent accounting pronouncements and their potential impact on the condensed consolidated financial statements[346] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses market risks related to interest rates and foreign currency exchange rate fluctuations - Verint is exposed to market risk related to changes in interest rates and foreign currency exchange rate fluctuations, which are managed using derivative instruments for risk mitigation, not speculation[347] - The $315.0 million 2021 Notes have a fixed annual interest rate of 0.25%, but their fair values are subject to interest rate and market risk due to the convertible feature[349] - Loans under the Revolving Credit Facility have variable interest rates (5.86% at July 31, 2025), but a hypothetical 10% change in interest rates would not have a material impact on financial statements[351] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of July 31, 2025 - Management concluded that the company's disclosure controls and procedures were effective as of July 31, 2025[354] - There were no material changes to internal control over financial reporting during the three months ended July 31, 2025[355] - The effectiveness of control systems is subject to inherent limitations, providing reasonable, not absolute, assurance[356] Part II. Other Information This part provides other required information, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section refers to Note 15, 'Commitments and Contingencies,' for information regarding the company's legal proceedings - Refer to Note 15, 'Commitments and Contingencies,' in Part I, Item 1 of this report for information regarding legal proceedings[357] Item 1A. Risk Factors This section updates risk factors, focusing on potential adverse effects from the pending merger with Thoma Bravo - The pending merger with Thoma Bravo exposes the company to risks such as marketplace uncertainty, business disruption, and challenges in attracting and retaining key personnel[359][360] - Restrictions on business activities while the Merger Agreement is in effect could prevent the company from pursuing strategic opportunities and responding to competitive pressures[362] - If the merger does not close, the company faces risks including a potential decrease in stock price, investor confidence decline, and a requirement to pay a $50 million termination fee under certain circumstances[361] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on share repurchase activities under a new program that was suspended following the merger agreement - A new stock repurchase program for up to $200.0 million was authorized on September 4, 2024, for the period from August 29, 2024, until August 29, 2026[365] - During the six months ended July 31, 2025, approximately 2,924,000 shares of common stock were repurchased for a cost of $49.5 million under the new program[366] - The stock repurchase program was suspended in connection with the entry into the Merger Agreement on August 24, 2025[371] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[372] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[373] Item 5. Other Information This section states that no director or officer modified a trading arrangement during the quarter - No director or officer adopted, modified, or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended July 31, 2025[375] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Agreement and Plan of Merger - The exhibits include the Agreement and Plan of Merger, dated August 24, 2025[376] - Amendment No. 1 to the Verint Systems Inc. 2023 Long-Term Stock Incentive Plan is filed as an exhibit[376] - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Securities Exchange Act Rule 13a-14(b) are included[376] Signature This section contains the formal signature of the company's Chief Financial Officer, authenticating the report - The report was signed on September 2, 2025, by Grant Highlander, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of Verint Systems Inc[381]