Verint Systems Annual Report 2017

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2018Commission File No. 001-34807Verint Systems Inc.(Exact Name of Registrant as Specified in its Charter) Delaware11-3200514(State or Other Jurisdiction of Incorporation orOrganization)(I.R.S. Employer Identification No.) 175 Broadhollow Road, Melville, New York11747(Address of Principal Executive Offices)(Zip Code)Registrant’s telephone number, including area code: (631) 962-9600Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchangeon which registeredCommon Stock, $.001 par value per share The NASDAQ Stock Market, LLC(NASDAQ Global Select Market)Securities registered pursuant to Section 12(g) of the Act:None(Title of Class)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes þ No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired 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 shorterperiod that the registrant was required to submit and post such files). Yes þ No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer þ Accelerated filer oNon-accelerated filer o Smaller reporting company o(Do not check if a smaller reporting company) Emerging growth company oIf 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 orrevised 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 The aggregate market value of common stock held by non-affiliates of the registrant, based on the closing price for the registrant’s common stock on theNASDAQ Global Select Market on the last business day of the registrant’s most recently completed second fiscal quarter (July 31, 2017) was approximately$2,502,717,000.There were 63,836,109 shares of the registrant’s common stock outstanding on March 15, 2018.DOCUMENTS INCORPORATED BY REFERENCEThe information required by Part III of this report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxystatement relating to the Annual Meeting of Stockholders to be held in 2018, which definitive proxy statement shall be filed with the Securities andExchange Commission within 120 days after the end of the fiscal year to which this report relates. Table of ContentsVerint Systems Inc. and SubsidiariesIndex to Form 10-KAs of and For the Year Ended January 31, 2018 Page Cautionary Note on Forward-Looking Statementsii PART I Item 1.Business1Item 1A.Risk Factors14Item 1B.Unresolved Staff Comments27Item 2.Properties27Item 3.Legal Proceedings27Item 4.Mine Safety Disclosures29 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data31Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations33Item 7A.Quantitative and Qualitative Disclosures About Market Risk56Item 8.Financial Statements and Supplementary Data60Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure116Item 9A.Controls and Procedures116Item 9B.Other Information119 PART III 120 Item 10.Directors, Executive Officers and Corporate Governance120Item 11.Executive Compensation120Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters120Item 13.Certain Relationships and Related Transactions, and Director Independence121Item 14.Principal Accounting Fees and Services121 PART IV Item 15.Exhibits, Financial Statement Schedules122Item 16.Form 10-K Summary125 Signatures126 iTable of ContentsCautionary Note on Forward-Looking Statements This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, theprovisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, asamended (the “Exchange Act”). Forward-looking statements include 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 II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are oftenidentified by future or conditional words such as “will”, “plans”, “expects”, “intends”, “believes”, “seeks”, “estimates”, or “anticipates”, or by variations ofsuch words or by similar expressions. There can be no assurance that forward-looking statements will be achieved. By their very nature, forward-lookingstatements involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause our actual results or conditions todiffer materially from those expressed or implied by such forward-looking statements. Important risks, uncertainties, assumptions, and other factors that couldcause our actual results or conditions to differ materially from our forward-looking statements include, among others: •uncertainties regarding the impact of general economic conditions in the United States and abroad, particularly in information technology spendingand government budgets, on our business;•risks associated with our ability to keep pace with technological changes, evolving industry standards, and customer challenges, such as theproliferation and strengthening of encryption, and the transition of portions of the software market to the cloud, to adapt to changing marketpotential from area to area within our markets, and to successfully develop, launch, and drive demand for new, innovative, high-quality productsthat meet or exceed customer needs, while simultaneously preserving our legacy businesses and migrating away from areas of commoditization;•risks due to aggressive competition in all of our markets, including with respect to maintaining margins and sufficient levels of investment in ourbusiness;•risks created by the continued consolidation of our competitors or the introduction of large competitors in our markets with greater resources thanwe have;•risks associated with our ability to successfully compete for, consummate, and implement mergers and acquisitions, including risks associated withvaluations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments;•risks relating to our ability to effectively and efficiently enhance our existing operations and execute on 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 securingour internal and external operations;•risks associated with our ability to effectively and efficiently allocate limited financial and human resources to business, developmental, strategic, orother 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 with security vulnerabilities or lapses,including information technology system breaches, failures, or disruptions;•risks that our products or services, or those of third-party suppliers, partners, or OEMs which we use in or with our offerings or otherwise rely on, maycontain defects or 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 topolitical or economic instability, fluctuations in foreign exchange rates, and challenges associated with a significant portion of our cash being heldoverseas;iiTable of Contents•risks associated with a significant amount of our business coming from domestic and foreign government customers, including the ability tomaintain 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, amongothers, with respect to trade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, andregulations 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 areaswe may enter;•challenges associated with selling sophisticated solutions, including with respect to educating our customers on the benefits of our solutions orassisting them in realizing such benefits, and offering and maintaining a broad solution portfolio;•challenges associated with pursuing larger sales opportunities, including with respect to longer sales cycles, transaction reductions, deferrals, orcancellations during the sales cycle, risk of customer concentration, our ability to accurately forecast when a sales opportunity will convert to anorder, 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 intellectualproperty or claim infringement on their intellectual property rights;•risks that our customers or partners delay or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in theirbusiness, or otherwise;•risks that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonableterms or at all;•risks associated with significant leverage resulting from our current debt position or our ability to incur additional debt, including with respect toliquidity considerations, covenant limitations and compliance, fluctuations in interest rates, dilution considerations (with respect to our convertiblenotes), and our ability to maintain our credit ratings;•risks arising as a result of contingent or other obligations or liabilities assumed in our acquisition of our former parent company, ComverseTechnology, Inc. (“CTI”), or associated with formerly being consolidated with, and part of a consolidated tax group with, CTI, or as a result of thesuccessor to CTI’s business operations, Mavenir Inc. (“Mavenir”), being unwilling or unable to provide us with certain indemnities to which we areentitled;•risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, and personnel and our ability to successfullyimplement and maintain enhancements to the foregoing and adequate systems and internal controls for our current and future operations andreporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; and•risks associated with changing accounting principles or standards, tax rates, tax laws and regulations, and the continuing availability of expectedtax benefits. These risks, uncertainties, assumptions, and challenges, as well as other factors, are discussed in greater detail in “Risk Factors” under Item 1A of this report.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. Wemake 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, investorsand others should not conclude that we would make additional updates or corrections thereafter except as otherwise required under the federal securities laws.iiiTable of ContentsPART IItem 1. BusinessOur CompanyVerint® Systems Inc. (together with its consolidated subsidiaries, “Verint”, the “Company”, “we”, “us”, and “our”, unless the context indicates otherwise) is aglobal leader in Actionable Intelligence® solutions.Actionable Intelligence is a necessity in a dynamic world of massive information growth because it empowers organizations with crucial insights and enablesdecision makers to anticipate, respond, and take action. With Verint solutions and value-added services, organizations of all sizes and across many industriescan make more informed, timely, and effective decisions. Today, over 10,000 organizations in more than 180 countries, including over 85 percent of theFortune 100, use Verint solutions to optimize customer engagement and make the world a safer place. Verint delivers its Actionable Intelligence solutionsthrough two operating segments: Customer Engagement Solutions™ (“Customer Engagement”) and Cyber Intelligence Solutions™ (“Cyber Intelligence”).We have established leadership positions in Actionable Intelligence by developing highly-scalable, enterprise-class software and services with advanced,integrated analytics for both structured and unstructured 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 850 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 ofservices, such as strategic consulting, managed services, implementation services, training, maintenance, and 24x7 support. Additionally, we offer a broadrange of deployment options, including cloud, on-premises, and hybrid, and software licensing and delivery models that include perpetual licenses andsoftware 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.Company BackgroundWe were incorporated in Delaware in February 1994 and completed our initial public offering (“IPO”) in May 2002. Over the last two decades, we havegrown our revenue and expanded our portfolio of Actionable Intelligence solutions through a combination of organic innovation and acquisitions.Our two operating segments are described in greater detail below and in “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” under Item 7 of this report. Each operating segment has dedicated management teams, sales and marketing, customer service, and research anddevelopment resources with shared back-office services. See also Note 15, “Segment, Geographic, and Significant Customer Information” to our consolidatedfinancial statements included under Item 8 of this report for additional information and financial data about each of our operating segments and geographicregions.Through our website at www.verint.com, we make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form8-K, as well as amendments to those reports, filed or furnished by us pursuant to Section 13(a) or Section 15(d) of the Exchange Act, free of charge, as soon asreasonably practicable after we file such materials with, or furnish such materials to, the Securities and Exchange Commission (“SEC”). Our website addressset forth above is not intended to be an active link and information on our website is not incorporated in, and should not be construed to be a part of, thisreport.Our Actionable Intelligence StrategyTo address the need for Actionable Intelligence across many use cases in Customer Engagement and Cyber Intelligence, we developed an innovativefoundation—Verint’s advanced Actionable Intelligence platform. We define our platform as having the following four components:•Data Capture. Our Actionable Intelligence platform enables the capture of a wide range of data, including both structured and unstructured data,such as operational, transactional, network, and web data. Our platform is designed1Table of Contentsto support big data applications which depend on the ability to capture, store, and manage very large data sets from multiple data sources.•Data Processing. Our Actionable Intelligence platform facilitates the process of taking structured and unstructured data from multiple sources andthen cleansing, fusing, and preparing the data for analysis. This data processing stage is particularly important in applications that require datacapture and fusion from multiple sources, different systems, and numerous environments.•Data Analysis. Our Actionable Intelligence platform enables the use of a wide range of engines for data analytics, including classification,correlation, anomaly detection, identity extraction, behavioral analysis, and predictive analytics. Big data analysis is a crucial step in identifyingcritical insights that otherwise might not be intuitive.•Data Visualization. Our Actionable Intelligence platform facilitates the presentation of crucial insights from data to decision makers and theprovision of workflow, collaboration, and case management capabilities so they can make more timely and informed decisions. The platformsupports many use cases, and the type of data visualization used for delivering actionable insights to users can be optimized based on the specificuser environment.Our strategy is to continue to leverage our Actionable Intelligence platform as a foundation for new analytical solutions to address specific use cases forCustomer Engagement and Cyber Intelligence. As noted above, our two operating segments have dedicated domain experts and operational functionsfocused on understanding the specific requirements of their respective markets and customers, and developing leading Actionable Intelligence solutions thatcan effectively address the unique needs of their customers.Customer Engagement SolutionsOverviewOrganizations have cited effective customer engagement as a key to creating sustainable competitive advantage and as critical to their future success. As aresult, many are making it a priority to invest in new customer engagement technologies that can elevate the customer experience, and at the same timereduce operating cost.As The Customer Engagement Company™, Verint is an established global leader with over two decades of experience helping organizations worldwideimprove their customer engagement operations. Our strategy is to help organizations meet their strategic goals by simplifying, modernizing, and automatingcustomer engagement across the enterprise.For most organizations, customer engagement is no longer just a contact center function. It has become a responsibility shared across many parts of theenterprise. To support the needs of our customers, we offer a broad portfolio of customer engagement solutions that address requirements throughout theenterprise, including contact centers, back-office and branch operations, self-service, ecommerce, customer experience, marketing, IT, and compliance.Verint is a leader in cloud and has one of the broadest Customer Engagement™ portfolios available, including offerings for Workforce Engagement, Self-Service, Voice of the Customer, and Compliance and Fraud. We leverage the latest in artificial intelligence (AI) and advanced analytics technology to unlockthe potential of automation and intelligence to drive real business impact across organizations. We offer organizations a smooth transition to the cloud, andthrough our hybrid models, organizations can deploy our solutions using a public cloud (SaaS), private cloud, and/or perpetual license approach, as well ascombinations of these models. Independent industry experts, such as Forrester, Gartner, and Ventana Research, have all recognized Verint as a leader incustomer engagement.We have more than 10,000 customers and a large partner network globally, helping us drive ongoing innovation in our award-winning offerings. We focus ondeveloping customers for life, and have been recognized as a “CRM Service Winner” for 10 consecutive years. TrendsMany organizations are facing complex, dated, and mostly disparate environments in their legacy customer engagement operations that make it challengingto deliver on the promise of an exceptional customer experience. Faced with higher customer expectations and the need for market differentiation,organizations view customer engagement as essential to their future success. As a result, they are investing in new customer engagement technologies thatcan elevate the customer2Table of Contentsexperience, while reducing operating cost. We believe the following trends are driving growth in our market as organizations seek to:•Reduce Complexity and Become More Agile to Adapt Faster. Many organizations have complex environments that were put together over manyyears with multiple legacy systems from many different vendors deployed in silos across the enterprise. To reduce complexity, they are looking fornew solutions that are open and flexible and make it simple to address evolving requirements, while protecting their legacy investments.Organizations also are seeking open platforms that address their customer engagement needs across many enterprise functions, including the contactcenter, back-office and branch operations, self-service, ecommerce, customer experience, marketing, IT, and compliance.•Modernize Customer Engagement IT Architectures. Many organizations are looking to modernize their legacy customer engagement operationsby transitioning to the cloud, adopting modern architectures that facilitate the orchestration of disparate systems and the sharing of data acrossenterprise functions. Organizations, which are at different stages of moving to the cloud and other modernization initiatives also are looking forvendors that can help them evolve customer engagement at their own pace with minimal disruption to their operations.•Automate Customer Engagement Operations. Many organizations are looking to improve the customer experience and increase revenue, while atthe same time reducing cost. To achieve this, they seek solutions that incorporate machine learning and analytics to reduce manual work andincrease workforce efficiency through automation. They also seek to empower their customers with self-service backed by AI-powered bots, andhuman/bot collaboration, to elevate the customer experience in a fast, personalized way.Our StrategyOur strategy was designed working closely with our customers, which include more than 85 percent of the Fortune 100, as well as with our large globalpartner network. This strategy, as outlined below, is intended to enable organizations to simplify, modernize, and automate their customer engagementoperations and turn customer engagement into a sustainable competitive advantage, while reducing complexity and cost in customer operations.•Simplifying Customer Engagement. We offer solutions that are open, easy to deploy, and simple to use. Our open portfolio is designed to integrateinto organizations’ current and evolving technology environments and to share data seamlessly across the organization. This enables customers toprotect their existing investments, as they can “start anywhere” within the Verint portfolio based on their business-specific requirements and expandover time. Our open portfolio is also compatible with leading providers of call center communications solutions, providing organizations flexibilityto select the most suitable communications solution for their contact centers, while leveraging Verint’s portfolio for elevating the customerexperience and reducing cost. We believe this compatibility is particularly important now as the contact center communications market is goingthrough change with new entrants offering disruptive approaches to communications. •Modernizing Customer Engagement. We offer organizations a smooth transition to the cloud, and through our hybrid cloud model, they candeploy solutions from our portfolio in public cloud (SaaS), private cloud and perpetual license models, or combinations of these. Our API-richportfolio provides organizations the ability to easily share data across the enterprise and integrate with third-party applications. Our modern andopen portfolio also makes our solutions compatible with IT initiatives for modernizing enterprise architectures.•Automating Customer Engagement. We enable organizations to draw on the power of automation to reduce repetitive, manual tasks, increaseemployee efficiency, and lower cost. Our strategy is to infuse automation capabilities throughout our solution portfolio to enable employees tofocus on more strategic work, empower consumers with AI bots so they can serve themselves, and support human/bot collaboration. Our automationcapabilities deliver intelligence and context in real-time, reduce errors in manual work, ensure adherence to compliance requirements, and enablecustomer experiences that are faster, personalized, and more enjoyable. Our OfferingsFor most organizations, customer engagement is no longer just a contact center function, it is a responsibility shared across the entire enterprise. To supportthe needs of our customers, we offer a broad portfolio across a wide spectrum of customer engagement functions. Our solutions address requirements acrosscontact centers, back-office and branch operations, self-3Table of Contentsservice, ecommerce, customer experience, marketing, IT, and compliance functions. Our offerings span the following categories: Workforce Engagement,Self-Service, Voice of the Customer, and Compliance and Fraud.•Workforce EngagementOur Workforce Engagement offerings enable organizations to empower the workforce to engage with customers effectively in the contact center andin back-office and branch operations. These solutions empower employees and managers with modern tools to simplify their jobs, easily access andshare knowledge, reduce costs, increase revenue, and orchestrate the delivery of exceptional experiences across all engagement channels.•Self-ServiceOur Self-Service offerings enable organizations to improve customer experiences and reduce costs by delivering automated help to their customersthat’s faster and requires less effort. These solutions help make customer self-service as simple and effective as assisted service. Leveraging the sameintelligence that empowers employees, self-service bots enable customers to succeed at helping themselves, and create a modern, conversationalexperience that is consistent across voice and digital channels.•Voice of the CustomerOur Voice of the Customer offerings enable organizations to improve customer experiences and reduce costs by effectively listening, analyzing, andacting on customer intelligence, and transforming it into enterprise intelligence to drive desired customer and business outcomes. These solutionsmeasure and improve experiences, satisfaction, and loyalty, and they provide feedback to drive improvements in operational processes. Theofferings are deployed across contact center, customer experience, marketing, and other organizational functions.•Compliance and FraudOur Compliance and Fraud offerings enable organizations to avoid fines and minimize fraud. Our Compliance solutions support regulatoryrequirements, such as the General Data Protection Regulation (GDPR), in contact centers, financial trading compliance, emergency responseoperations, and other environments. Our Fraud solutions help investigate and mitigate the risk of contact center identity fraud, branch bankingfraud, and self-service systems fraud. We offer our customers solutions that are comprised of one or more of the following products (listed in alphabetical order):Product NameDescriptionAutomated Quality ManagementAutomates the entire quality management (QM) process, from scoring evaluations to assigning coaching.Delivers consistent, calibrated scoring and new levels of employee performance and transparency, bringinga modern, employee-empowering, and cost-effective approach to QM.Automated VerificationAutomates testing and verification of systems across multiple applications (e.g., ACD, IVR, recording,desktop applications, routers, firewalls) to ensure optimum operation. Actively checks systems for issuesand proactively simulates user transactions to validate performance. Provides enhanced control andawareness of system health, status, and performance to avoid issues with service availability, data integrity,and data breaches.Branch Surveillance and InvestigationHelps financial institutions, retailers, and other organizations identify security threats and vulnerabilities,mitigate risk, ensure operational compliance, and improve fraud investigations. Offers real-time intelligenceand protection to enhance the customer experience, while safeguarding people, property, and assets.Features video recording and analytics to heighten protection, improve performance, reduce costs, andprovide rapid action/response when required.Case ManagementAllows organizations to automate and adapt business processes rapidly in response to changing market andcustomer requirements. Tracks the progress of customer and internal issues as they are resolved betweenvarious parties in the organization, helping deliver end-to-end case lifecycle management using businessrules and service level agreements (SLAs).4Table of ContentsChat EngagementEnables employees to help online customers in real-time. Provides customers with a quick, easy way tocommunicate with customer service employees via a simple text interface, and helps employees rapidlyaddress needs and decrease abandonment of online transactions. Guides customers through online processesusing chat in conjunction with co-browsing.Coaching/LearningProvides a framework for consistent, performance-based mentoring of employees by supervisors and theautomated delivery of training right to the employee desktop. Can be scheduled at the best times tominimize impact on service levels, and enable employees to engage and improve their skills on-demand.Compliance RecordingReliably and securely captures, encrypts, archives, searches, and replays interactions for compliance andliability protection. Enables organizations and employees to protect credit card data and personalinformation (data compliance), adhere to rules for recording and telemarketing practices (communicationscompliance), proactively address complaints, and help prevent identity theft.Customer CommunitiesEnables organizations to establish and manage online communities on behalf of their customers andpartners to support social customer service, digital marketing, and engagement. Fosters self-service,knowledge sharing, collaboration, and networking through peer-to-peer support forums, communicationsblogs, and online resources, such as discussion forums, product documentation, and how-to videos.Desktop and Process AnalyticsProvides organizations with visibility into how employees use different systems, applications, andprocesses to perform their functions. Helps identify opportunities to improve business processes, increaseemployee productivity and capacity, enhance compliance, and heighten the overall efficiency, cost, andquality of customer service.Digital FeedbackFeatures an enterprise solution that captures customer-initiated feedback via web and mobile channelsduring key moments in the customer journey, and empowers organizations to analyze and act in real-timeon that feedback to deliver demonstrable business value.Email EngagementAutomates the process of capturing, documenting, interpreting, and routing emails, helping organizationsrespond to customers quickly and consistently. Routes messages to the most appropriate employee basedon skills, entitlements, and availability, providing standard templates and responses, a central knowledgebase, and unified customer history across channels. Features a secure web portal for customers tosend/receive confidential information as needed.Employee DesktopUnifies the disparate applications on an employee’s desktop. Presents on one screen all of the contextualcustomer information, relevant knowledge, and business process guidance that an employee needs tohandle interactions in any channel, without having to toggle between numerous screens and applications.Enterprise FeedbackProvides an enterprise-class platform to help organizations gain a complete view of the voice of theircustomers and employees through company-initiated surveys delivered via mobile, email, web, IVR, andSMS channels, together with the ability to analyze and act on that feedback to achieve desired outcomes.Financial ComplianceImproves compliance in trading room, contact center, and financial back-office operations by capturingvoice, video, desktop, and text interactions across multiple channels, including collaboration tools (e.g.,Skype for Business and Cisco Jabber). Delivers reliable, robust recording, indexing, archiving, and retrievalof interactions and transactions to address complex challenges, including MiFID II, trading floorcompliance, collaboration compliance, legal hold, and more.Full-Time RecordingEnables enterprise recording to support customer engagement. Reliably and securely captures, encrypts,indexes, archives, searches, and replays audio, screen, and other methods of interaction from different andmixed recording environments, and couples these capabilities with powerful speech analytics to providegreater value from recorded interactions.5Table of ContentsGamificationApplies automated game mechanics to energize employee engagement, communicate personal andorganizational goals, measure and acknowledge achievements, inspire collaboration, and motivate teams.Delivers key performance indicator (KPI)-linked programs to transform the process of acquiring,maintaining, and improving the skills, knowledge, and behaviors necessary for employees to enhancequality, customer engagement, sales, and other expertise.Identity AnalyticsCombines automated recorder-embedded “passive” voice biometrics technology with multifactor metadataanalytics to screen calls against the databases of both customer and known fraudster voiceprints. Offers“upstream fraud detection” functionality to identify suspicious caller behavior within voice self-serviceinteractions, and helps improve experiences by authenticating legitimate customers faster, reducing callhandling and fraud-related losses.Internal CommunitiesSupports employee engagement, collaboration, and enterprise social networking through open and closedmicro-communities, peer-to-peer support forums, communications blogs, wikis, activity streams, and onlineresources. Enables knowledge and best practice sharing in a high-value, low-effort manner, enhancingrelationships, productivity, and efficiency.Knowledge ManagementProvides a central repository of up-to-date information to deliver the right knowledge to users in the contactcenter and to customers through self-service. Provides answers quickly by searching, browsing, or followingguided processes, with personalized results tailored to the customer’s context. Helps increase first contactresolution, improve the consistency and quality of answers, enhance compliance with regulations andcompany processes, and reduce employee training time.Mobile WorkforceComprises a family of mobile applications, offering anytime, anywhere access to important operationalinformation. Allows employees to access and change schedules and view performance information, andenables the convenient collection of in-the-moment feedback through device-friendly survey formats overthe web, email, and SMS, as well as on site in retail stores and sporting venues.Performance ManagementProvides a complete, closed-loop solution to manage individual and departmental performance againstgoals. Provides a comprehensive view of KPIs using performance scorecards to report on customerinteractions, customer experience trends, and contact center, branch, and back-office staff performance.Leverages scorecards, along with learning, coaching, and gamification as part of a broader capability.Robotic Process AutomationAutomates repetitive manual processes, allowing employees to focus on more complex and value-addedcustomer-facing activities. Leverages software robots to execute specific tasks or entire multistep processeswithin a functional area, leading to improved quality and productivity.Social AnalyticsCollects, analyzes, and reports relevant insights derived from posts and content published to social mediasites and messaging services. Reveals intelligence and trends related to sentiment, emerging topics andthemes, and locations, enabling organizations to understand the voice of the customer and givingemployees the means and insight they need to respond to/address issues and concerns expressed throughthese channels.Speech AnalyticsAutomatically analyzes and identifies trends, themes, and the root causes driving customer call volumes inorder to proactively respond to issues and act on opportunities that enhance the customer experience andsupport business objectives. Text AnalyticsPerforms root cause analysis on the drivers and trends driving customer interactions through text-basedcommunications channels-including survey verbatims, email, and customer service chat sessions-toimprove performance, optimize processes, and enhance the customer experience.6Table of ContentsVirtual AssistantUses artificial intelligence (AI) and machine learning to provide conversational access to information, getanswers to complex questions, and orchestrate self-service transactions across voice and digital channels.Predicts user intent based on context and initiates best next actions based on business rules in order todeliver successful outcomes.Voice Self-ServiceProvides natural language, speech-enabled voice self-service enhanced by real-time, contextual automationand analytics-driven personalization. Leverages business intelligence to analyze and adapt call flow andthe pace of interactions based on caller behavior, and to continually improve performance over time.Voice Self-Service Fraud DetectionAutomates and provides upstream fraud detection based on real-time analysis of over 60 parameters ofcaller behavior in voice self-service across multiple calls and programs. Identifies and flags suspiciouscallers based on threat level, and alerts the enterprise so action can be taken to mitigate risk prior to accounttakeover.Web/Mobile Self-ServiceEnables customers to self-serve on the web or via their mobile devices. Unites knowledge management, casemanagement, process management, and channel escalation to enable personalized web and mobile self-service experiences. Features advanced cross-channel messaging, enabling customers to start a digitalinteraction on one device and continue it on another, as well as seamlessly transition from self-service tolive service within a mobile app, mobile web, or web application.Work ManagerHelps increase productivity, meet service delivery goals, and enhance customer satisfaction by prioritizingthe work of individual employees, helping ensure they focus on the right activities at the right time.Provides a practical approach to managing claims processing, loan production, and other blended and back-office functions by prioritizing work items to meet SLAs based on available employees with the right skills.Workforce ManagementEnables organizations to efficiently plan, forecast, and schedule employees to meet service level goals.Provides visibility into and a singular management tool for the work, the people, and the processes acrosscustomer touchpoints in contact center, branch and back-office operations.Cyber Intelligence SolutionsOverviewVerint is a leading global provider of security and intelligence data mining software. Our Intelligence-Powered Security™ software is deployed in over 100 countries, helping governments, critical infrastructure and enterprise organizations to neutralize and prevent terror, crimeand cyber threats. Our data mining software helps security organizations capture and analyze data from multiple sources and turn that data into actionableinsights. Verint has over two decades of cyber intelligence experience leveraging data mining software, deep domain expertise and advanced intelligencemethodologies to address a broad range of security missions for intelligence, cyber and physical security organizations.We believe that security organizations face new kinds of sophisticated threats that are increasingly complex, and they seek to deploy data mining solutionsthat are powered by predictive intelligence and incorporate a higher level of automation using artificial intelligence and other advanced analytictechnologies. Our significant experience serving leading security agencies around the world provides us with a unique perspective on our customers’evolving needs and allows us to respond quickly to new market trends.Verint’s growth strategy is to expand our Intelligence-Powered Security software portfolio to address market trends and to offer our solutions directly andthrough partners to our growing installed base and to new customers globally.TrendsWe believe that the key trends driving demand for security and intelligence data mining software include:7Table of Contents•Security Threats are Pervasive and Becoming More Complex. Governments, critical infrastructure providers, and enterprises face many types ofsecurity threats from criminal and terrorist organizations and foreign governments. Some of these security threats come from well-organized andwell-funded organizations that utilize new and increasingly sophisticated methods. As a result, security and intelligence organizations find it morecomplex to detect, investigate and neutralize threats. Many of these organizations are seeking to deploy more advanced data mining solutions thatcan help them capture and analyze data from multiple sources to effectively and efficiently address the challenge of increased complexity.•Shortage of Security Analysts Make It Difficult to Address the Growing Complexity of Security Threats. Security organizations are using datamining solutions to help conduct investigations and generate actionable insights. Typically, data mining solutions require security organizations toemploy intelligence analysts and data scientists to operate them. However, there is a shortage of such qualified personnel globally leading toelongated investigations and increased risk that security threats go undetected or are not addressed. To overcome this challenge, many securityorganizations are seeking advanced data mining solutions that automate functions historically performed manually to improve the quality andspeed of investigations and intelligence production. These organizations are also increasingly seeking artificial intelligence and other advanceddata analysis tools to gain intelligence faster with fewer analysts and data scientists.•Security Organizations are Looking for Predictive Intelligence as a Force Multiplier. Predicative intelligence is generated by correlatingmassive amounts of data from a wide range of disparate sources to uncover previously unknown connections, to identify suspicious behaviors usingadvanced analytics and to predict future events. Predictive intelligence is a force multiplier, enabling security organizations to allocate resourcesmore effectively to prioritize various operational tasks based on actionable intelligence. Security organizations are seeking advanced data miningsolutions that can generate accurate and actionable predictive intelligence to shorten investigation times and empower their teams with greaterinsights.Our Strategy We believe we are well positioned to address these market trends. The key elements of our growth strategy include:•Address the Increased Complexity of Security Threats with Advanced Data Mining Software, Proven Intelligent Methodologies and DeepDomain Expertise. Verint has a long history of working closely with leading security organizations around the world and has designed its datamining software portfolio based on a thorough understanding of our customers’ needs, proven intelligence methodologies and deep domainexpertise. We believe this experience positions us well to expand existing customer relationships, win new customers, and continue to grow our datamining software portfolio to address evolving and more complex security threats.•Leverage Automation Technologies to Reduce Dependency on Security Analysts and Data Scientists. Security analysts and data scientists arecritical to conducting security investigations in an environment of growing complexity. However, given a shortage of these skilled resources, it isimportant to reduce the dependency on them by automating tedious and repetitive functions that previously required manual operation. Our strategyis to increase the use of automation and artificial intelligence technologies across our portfolio and introduce advanced data mining software thatcan further automate the intelligence and investigative processes for our customers, while reducing dependency on large numbers of intelligenceanalysts and data scientists.•Improve the Effectiveness of Security Organizations with Predictive Intelligence Capabilities. Our data mining software portfolio provides ourcustomers the capability to capture and analyze data and to generate predictive intelligence. Our strategy is to further enhance our software toempower security organizations with more accurate predictive intelligence by leveraging analytics and machine learning technologies that cancorrelate massive amounts of data from a wide range of disparate sources. Our solutions are engineered to collect and analyze vast amounts of datafrom multiple and diverse sources and leverage artificial intelligence, as well as other advanced analysis tools, to generate intelligence and predictfuture events, shortening the time to intelligence, reducing the number of routine tasks and empowering our customers to execute their missionsfaster and more efficiently.Our Products8Table of ContentsProduct NameDescriptionCyber SecurityOur cyber security software captures cyber security data and applies machine learning and behavioralanalytics to empower an organization’s Security Operations Center. “Virtual Analysts” automate theprocess of detecting, investigating and responding to advanced cyber-attacks and drive intelligence to thesecurity operations team.Intelligence Fusion Center (IFC) and Web andSocial IntelligenceOur Intelligence Fusion software enables security analysts to work more efficiently by fusing cross-organizational data-sources, generating and surfacing valuable insights, and turning knowledge intoactions and predictive intelligence. Our Web & Social Intelligence software enables the collection, fusionand analysis of data from the web, including the deep web and dark nets, from social media blogs and fromthe media.Network Intelligence SuiteOur network intelligence data mining software helps security organizations generate critical intelligencefrom large amount of data captured from a variety of network and open sources.Situational IntelligenceOur Situational Intelligence software delivers intelligence to help organizations increase situationalawareness, improve security responsiveness and realize greater operational efficiency. It captures and fusesdata from multiple systems and sensors, such as access control, video, intrusion, fire, public safety, weather,traffic, first responder, and other mobile device systems. It enables security organizations to quickly fuse,analyze, and report information, and take action on risks, alarms, and incidents.Our Solutions: By IndustryVerint offers its broad portfolio of Intelligence-Powered Security software to the security market across many industries, including:•National Security agencies are using Verint solutions to prevent terrorism, collect intelligence and investigate security threats.•Law Enforcement Agencies are using Verint solutions to fight a wide range of criminal activity, such as arson, drug trafficking, homicides, humantrafficking, identity theft, kidnapping, anti-poaching, illegal immigration, financial crimes, and other organized crimes.•Critical Infrastructure, such as airports, transportation systems, power plants, public and government facilities, are using Verint solutions toimprove efficiency and effectiveness of physical security and to detect and respond to cyber threats.•Enterprises are using Verint solutions to improve efficiency and effectiveness of security of physical assets and safety of people, to detect andrespond to cyber threats, and to investigate fraud.•Telecommunication Carriers are using Verint solutions to comply with certain government regulations requiring them to assist the government intheir evidence and intelligence collection processes.Our Solutions: By Security ChallengeBelow are examples of the challenges security organizations around the world are using Verint’s Intelligence-Powered Security portfolio to address:•Terrorism - Tracking terrorist organizations and generating actionable intelligence for detecting and preventing terror attacks.•Drug Trafficking - Identifying local and international drug networks, running complex investigations, generating legal evidence and taking actionagainst traffickers.9Table of Contents•Criminal Investigations - Accelerating investigations through behavioral profiles and visual link analysis and revealing investigation clues.•Advanced Cyber Threats - Detecting breaches across attack chains and automating cyber investigations.•Physical Security - Evaluating and responding more efficiently to incidents to ensure facility and asset protection, as well as employee safety.•Poaching - Generating intelligence about sellers, middlemen and buyers of contraband.•Financial Crime - Fusing data from financial databases, the web and other sources to identify and investigate suspicious financial transactions.•Natural Disasters - Empowering field teams with intelligence to quickly zero-in on areas of need and provide urgent help.•Border Control - Tracking and preventing illegal border activity.Customer ServicesWe offer a range of customer services, including implementation and training, consulting and managed services, and maintenance and support, to help ourcustomers maximize their return on investment in our solutions.Implementation and TrainingOur solutions are implemented by our service organizations, authorized partners, resellers, or customers. Our implementation services include projectmanagement, system installation, and commissioning, including integrating our solutions with our customers’ environments and third-party solutions. Ourtraining programs are designed to enable our customers to use our solutions effectively and to certify our partners to sell, install, and support our solutions.Customer and partner training is provided at the customer site, at our training centers around the world, and/or remotely online.ConsultingOur management consulting capabilities include business strategy, process excellence, performance management, intelligence methodologies, and projectand program management, and are designed to help our customers maximize the value of our solutions in their own environments.Managed ServicesWe offer a range of managed services designed to help our customers effectively run their operations, and maximize business and intelligence insights. Thesemanaged services are recurring in nature and can be delivered in conjunction with Verint’s technology or on a standalone basis and help to deepen ourtrusted partner relationships with our customers.Maintenance and SupportWe offer a range of customer maintenance and support plans to our customers and resellers, which may include phone and web access to technical personnelup to 24-hours-a-day, seven-days-a-week. Our support programs are designed to help ensure long-term, successful use of our solutions. We believe thatcustomer support is critical to retaining and expanding our customer base. Our Customer Engagement solutions are generally sold with a warranty of one yearfor hardware and 90 days for software. Our Cyber Intelligence solutions are generally sold with warranties that typically range from 90 days to three yearsand, in some cases, longer. In addition, customers are typically provided the option to purchase maintenance plans that provide a range of services, such astelephone support, advanced replacement, upgrades when and if available, and on-site repair or replacement. Currently, the majority of our maintenancerevenue is related to our Customer Engagement solutions.Direct and Indirect Sales10Table of ContentsWe sell our solutions through our direct sales teams and indirect channels, including distributors, systems integrators, value-added resellers (“VARs”), andOEM partners. Approximately half of our overall sales are made through partners, distributors, resellers, and system integrators.Each of our solutions is sold by trained, dedicated, regionally-organized direct and indirect sales teams.•Our direct sales teams are focused on large and mid-sized customers and, in many cases, co-sell with our other channels and sales agents.•Our indirect sales teams are focused on developing and supporting relationships with our indirect channels, which provide us with broader marketcoverage, including access to their customer bases, integration services, and presence in certain geographies and vertical markets.Our sales teams are supported by business consultants, solutions specialists, and pre-sales engineers who, during the sales process, help determine customerrequirements and develop technical responses to those requirements. We sell directly and indirectly in both of our segments. See “Risk Factors—RisksRelated to Our Business—Competition, Markets, and Operations—If we are unable to establish and maintain our relationships with third parties that marketand sell our products, our business and ability to grow could be materially adversely affected” under Item 1A of this report for a more detailed discussion ofcertain sales and distribution risks that we face.CustomersOur solutions are used by over 10,000 organizations in more than 180 countries. In the year ended January 31, 2018, we derived approximately 65% and35% of our revenue from the sale of our Customer Engagement and Cyber Intelligence solutions, respectively. In the year ended January 31, 2017, wederived approximately 66% and 34% of our revenue from the sale of our Customer Engagement and Cyber Intelligence solutions, respectively. In the yearended January 31, 2016, we derived approximately 61% and 39% of our revenue from the sale of our Customer Engagement and Cyber Intelligencesolutions, respectively. We are party to contracts with customers in both of our segments, the loss of which could have a material adverse effect on thesegment.In the year ended January 31, 2018, we derived approximately 53%, 31%, and 16% of our revenue from sales to end users in the Americas, in Europe, theMiddle East and Africa (“EMEA”), and in the Asia-Pacific (“APAC”) regions, respectively. In the year ended January 31, 2017, we derived approximately54%, 30%, and 16% of our revenue from sales to end users in the Americas, EMEA, and APAC, respectively. In the year ended January 31, 2016, we derivedapproximately 51%, 31%, and 18% of our revenue from sales to end users in the Americas, EMEA, and APAC, respectively. See also Note 15, “Segment,Geographic, and Significant Customer Information” to our consolidated financial statements included under Item 8 of this report for additional informationand financial data about each of our operating segments and geographic regions.For the year ended January 31, 2018, approximately one third of our business was generated from contracts with various governments around the world,including local, regional, and national government agencies. Due to the unique nature of the terms and conditions associated with government contractsgenerally, our government contracts may be subject to renegotiation or termination at the election of the government customer. Some of our customerengagements require us to have security credentials or to participate in projects through an approved legal entity.Seasonality and CyclicalityAs is typical for many software and technology companies, our business is subject to seasonal and cyclical factors. In most years, our revenue and operatingincome are typically highest in the fourth quarter and lowest in the first quarter (prior to the impact of unusual or nonrecurring items). Moreover, revenue andoperating income in the first quarter of a new year may be lower than in the fourth quarter of the preceding year, in some years, potentially by a significantmargin. In addition, we generally receive a higher volume of orders in the last month of a quarter, with orders concentrated in the later part of that month. Webelieve that these seasonal and cyclical factors primarily reflect customer spending patterns and budget cycles, as well as the impact of compensationincentive plans for our sales personnel. While seasonal and cyclical factors such as these are common in the software and technology industry, this patternshould not be considered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, alsohave an impact on our business and financial results. See “Risk Factors” under Item 1A of this report for a more detailed discussion of factors which mayaffect our business and financial results.Research and Development11Table of ContentsWe continue to enhance the features and performance of our existing solutions and to introduce new solutions through extensive R&D activities, includingthe development of new solutions, the addition of capabilities to existing solutions, quality assurance, and advanced technical support for our customerservices organization. In certain instances, primarily in our Cyber Intelligence segment, we may tailor our products to meet the particular requirements of ourcustomers. R&D is performed primarily in the United States, Israel, the United Kingdom, Ireland, the Netherlands, and Indonesia for our CustomerEngagement segment; and in Israel, Germany, Brazil, Cyprus, Taiwan, the Netherlands, and Bulgaria for our Cyber Intelligence segment.To support our research and development efforts, we make significant investments in R&D every year. In the years ended January 31, 2018, 2017, and 2016,we spent approximately $190.6 million, $171.1 million, and $177.7 million, respectively, on R&D, net. We allocate our R&D resources in response to marketresearch and customer demand for additional features and solutions. Our development strategy involves rolling out initial releases of our products and addingfeatures over time. We incorporate product feedback received from our customers into our product development process. While the majority of our productsare developed internally, in some cases, we also acquire or license technologies, products, and applications from third parties based on timing and costconsiderations. See “Risk Factors—Risks Related to Our Business—Competition, Markets, and Operations—For certain products, components, or services,we rely on third-party suppliers, manufacturers, and partners, and if these relationships are interrupted we may not be able to obtain substitute suppliers,manufacturers, or partners on favorable terms or at all and we may be subject to other adverse effects” under Item 1A of this report.As noted above, a significant portion of our R&D operations is located outside the United States. We have derived benefits from participation in certaingovernment-sponsored programs, including those of the Israel Innovation Authority (“IIA”), formerly the Office of the Chief Scientist (“OCS”), and in otherjurisdictions for the support of R&D activities conducted in those locations. In the case of Israel, the Israeli law under which our IIA grants are made limits ourability to manufacture products, or transfer technologies, developed using these grants outside of Israel without permission from the IIA. See “RiskFactors—Risks Related to Our Business—Competition, Markets, and Operations—Because we have significant foreign operations and business, we aresubject to geopolitical and other risks that could materially adversely affect our results” and “Risk Factors—Risks Related to Our Business—Competition,Markets, and Operations—Conditions in and our relationship to Israel may materially adversely affect our operations and personnel and may limit our abilityto produce and sell our products or engage in certain transactions” under Item 1A of this report for a discussion of certain risks associated with our foreignoperations.Manufacturing, Suppliers, and Service ProvidersWhile Verint is focused on developing software to accommodate customers’ desire for turnkey solutions, we also deliver solutions that incorporate third-party hardware components. This applies mainly to our Cyber Intelligence segment, as the majority of the solutions from our Customer Engagement segmentare comprised of software and do not incorporate hardware components. We utilize both unaffiliated manufacturing subcontractors, as well as our internaloperations, to produce, assemble, and deliver solutions incorporating hardware components. These internal operations consist primarily of installing oursoftware on externally purchased hardware components, final assembly, repair, and testing, which involves the application of extensive quality controlprocedures to materials, components, subassemblies, and systems. We also perform system integration functions prior to shipping turnkey solutions to ourcustomers. Our internal operations are performed primarily in our German, Israeli, U.S. and Cypriot facilities for solutions in our Cyber Intelligence segment,and in our U.S. facility for certain solutions in our Customer Engagement segment. Although we have occasionally experienced delays and shortages in thesupply of proprietary components in the past, we have typically been able to obtain adequate supplies of all material components in a timely manner fromalternative sources, when necessary. We also rely on third parties to provide certain services to us or to our customers, including hosting providers andproviders of other cloud-based services. See “Risk Factors—Risks Related to Our Business—Competition, Markets, and Operations—For certain products,components, or services, we rely on third-party suppliers, manufacturers, and partners, and if these relationships are interrupted we may not be able to obtainsubstitute suppliers, manufacturers, or partners on favorable terms or at all and we may be subject to other adverse effects” under Item 1A of this report for adiscussion of risks associated with our manufacturing operations and suppliers.EmployeesAs of January 31, 2018, we employed approximately 5,200 professionals, including certain contractors, with approximately 42%, 22%, 24%, and 12% of ouremployees and contractors located in the Americas, Israel, EMEA (excluding Israel), and APAC, respectively.12Table of ContentsWe consider our relationship with our employees to be good and a critical factor in our success. Our employees in the United States are not covered by anycollective bargaining agreements. In some cases, our employees outside the United States are automatically subject to certain protections negotiated byorganized labor in those countries directly with the government or trade unions, or are automatically entitled to severance or other benefits mandated underlocal laws. For example, while we are not a party to any collective bargaining or other agreement with any labor organization in Israel, certain provisions ofthe collective bargaining agreements between the Histadrut (General Federation of Laborers in Israel) and the Coordinating Bureau of EconomicOrganizations (including the Manufacturers’ Association of Israel) are applicable to our Israeli employees by virtue of expansion orders of the Israeli Ministryof Industry, Trade and Labor.Intellectual Property RightsGeneralOur success depends to a significant degree on the legal protection of our software and other proprietary technology. We rely on a combination of patent,trade secret, copyright, and trademark laws, and confidentiality and non-disclosure agreements with employees and third parties to establish and protect ourproprietary rights.PatentsAs of January 31, 2018, we had more than 850 patents and patent applications worldwide, including more than 130 patent issuances or allowances during thepast year. We have accumulated a significant amount of proprietary know-how and expertise in developing Actionable Intelligence solutions. We regularlyreview new areas of technology related to our businesses to determine whether they can and should be patented.LicensesWhile we employ many of our innovations exclusively in our products and services, we also engage in outbound and inbound licensing of specific patentedtechnologies. Our licenses are designed to prohibit unauthorized use, copying, and disclosure of our software technology. When we license our software tocustomers, we require license agreements containing restrictions and confidentiality terms customary in the industry in order to protect our proprietary rightsin the software. These agreements generally warrant that the software and propriety hardware will materially comply with written documentation and assertthat we own or have sufficient rights in the software we distribute and have not violated the intellectual property rights of others.We license our products in a format that does not permit users to change the software code. See “Risk Factors—Risks Related to Our Business—Competition,Markets, and Operations—For certain products, components, or services, we rely on third-party suppliers, manufacturers, and partners, and if theserelationships are interrupted we may not be able to obtain substitute suppliers, manufacturers, or partners on favorable terms or at all and we may be subject toother adverse effects” under Item 1A of this report.We license certain software, technology, and related rights for use in the manufacture and marketing of our products and pay royalties to third parties undersuch licenses and other agreements. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, we believe,based on industry practice, such licenses generally can be obtained on commercially reasonable terms.Trademarks and Service MarksWe use various trademarks and service marks to protect the marks used in our business. We also claim common law protections for other marks we use in ourbusiness. Competitors and other companies could adopt similar marks or try to prevent us from using our marks, consequently impeding our ability to buildbrand identity and possibly leading to customer confusion. See “Risk Factors—Risks Related to Our Business—Information/Product Security andIntellectual Property—Our intellectual property may not be adequately protected” under Item 1A of this report for a more detailed discussion regarding therisks associated with the protection of our intellectual property.CompetitionWe face strong competition in all of our markets, and we expect that competition will persist and intensify.In our Customer Engagement segment, our competitors include Aspect Software, Inc., eGain Corporation, Genesys Telecommunications, Medallia Inc., NICESystems Ltd., Nuance Communications, Inc., Pegasystems Inc., and divisions of13Table of Contentslarger companies, including Microsoft Corporation, Oracle Corporation, and Salesforce.com, Inc., along with many smaller companies, which can vary acrossregions. In our Cyber Intelligence segment, our competitors include BAE Systems plc, Cyberbit Ltd. (a subsidiary of Elbit Systems Ltd.), FireEye, Inc.,Genetec Inc., IBM Corporation, JSI Telecom, Palantir Technologies, Inc., Rohde & Schwarz GmbH & Co. KG, and Thales Group, along with a number ofsmaller companies and divisions of larger companies that compete with us in certain regions or only with respect to portions of our product portfolio, andmany smaller companies, which can vary across regions.In each of our operating segments, we believe that we compete principally on the basis of:•Product performance and functionality;•Product quality and reliability;•Breadth of product portfolio and pre-defined integrations;•Global presence and high-quality customer service and support;•Specific domain expertise, industry knowledge, vision, and experience; and•Price.We believe that our competitive success depends primarily on our ability to provide technologically advanced and cost-effective solutions and services.Some of our competitors have superior brand recognition and significantly greater financial or other resources than we do. We expect that competition willincrease as other established and emerging companies enter our markets or we enter theirs, and as new products, services, technologies, and delivery methodsare introduced. In addition, consolidation is common in our markets and has in the past and may in the future improve the position of our competitors. See“Risk Factors—Risks Related to Our Business—Competition, Markets, and Operations—Intense competition in our markets and competitors with greaterresources than us may limit our market share, profitability, and growth” under Item 1A of this report for a more detailed discussion of the competitive risks weface.Export RegulationsWe and our subsidiaries are subject to applicable export control regulations in countries from which we export goods and services. These controls may applyby virtue of the country in which the products are located or by virtue of the origin of the content contained in the products. If the controls of a particularcountry apply, the level of control generally depends on the nature of the goods and services in question. For example, our Cyber Intelligence solutions tendto be more highly controlled than our Customer Engagement solutions. Where controls apply, the export of our products generally requires an export licenseor authorization or that the transaction qualify for a license exception or the equivalent, and may also be subject to corresponding reporting requirements.Item 1A. Risk Factors Many of the factors that affect our business and operations involve risks and uncertainties. The factors described below are risks that could materially harmour business, financial condition, and results of operations. These are not all the risks we face and other factors currently considered immaterial or unknownto us may have a material adverse impact on our future operations.Risks Related to Our Business Competition, Markets, and Operations Our business is impacted by changes in general economic conditions and information technology and government spending in particular. Our business is subject to risks arising from adverse changes in domestic and global economic conditions. Slowdowns, recessions, economic instability,political unrest, armed conflicts, or natural disasters around the world may cause companies and governments to delay, reduce, or even cancel plannedspending. In particular, declines in information technology spending and limited or reduced government budgets have affected the markets for our solutionsin both the Customer Engagement market and the Cyber Intelligence market in certain periods and in certain regions. For the year ended January 31, 2018,approximately one third of our business was generated from contracts with various governments around the world, including national, regional, and localgovernment agencies. We expect that government contracts will continue to be a significant source of our revenue for the foreseeable future. Customers orpartners who are facing business challenges, reduced budgets, or14Table of Contentsliquidity issues are also more likely to defer purchase decisions or cancel or reduce orders, as well as to delay or default on payments. If customers or partnerssignificantly reduce their spending with us or significantly delay or fail to make payments to us, our business, results of operations, and financial conditionwould be materially adversely affected.The industry in which we operate is characterized by rapid technological changes, evolving industry standards and challenges, and changing marketpotential from area to area, and if we cannot anticipate and react to such changes our results may suffer. The markets for our products are characterized by rapidly changing technology and evolving industry standards and challenges. The introduction ofproducts embodying new technology, new delivery platforms, managed services, or other cloud-based solutions, the commoditization of older technologies,and the emergence of new industry standards and technological hurdles can exert pricing pressure on existing products and services and/or render themunmarketable or obsolete. For example, in our Cyber Intelligence business, the increasing complexity and sophistication of security threats and encryptedcommunications have created significantly greater challenges for our customers and for our solutions to address. In our Customer Engagement business, wesee a continued increase in interest in cloud-based solutions as well as market saturation for legacy, more mature solutions. Moreover, the market potentialand growth rates of the markets we serve are not uniform and are evolving. It is critical to our success that we are able to anticipate and respond to changes intechnology and industry standards and new customer challenges by consistently developing new, innovative, high-quality products and services that meet orexceed the changing needs of our customers. We must also successfully identify, enter, and appropriately prioritize areas of growing market potential,including by launching, successfully executing, and driving demand for new and enhanced solutions and services, while simultaneously preserving ourlegacy businesses and migrating away from areas of commoditization. If we are unable to execute on these strategic priorities, we may lose market share orexperience slower growth, and our profitability and other results of operations may be materially adversely affected.Intense competition in our markets and competitors with greater resources than us may limit our market share, profitability, and growth. We face aggressive competition from numerous and varied competitors in all of our markets, making it difficult to maintain market share, remain profitable,invest, and grow. We are also encountering new competitors as we expand into new markets or as new competitors expand into ours. Our competitors may beable to more quickly develop or adapt to new or emerging technologies, better respond to changes in customer needs or preferences, better identify and enterinto new areas of growth, or devote greater resources to the development, promotion, and sale of their products. Some of our competitors have, in relation tous, longer operating histories, larger customer bases, longer standing relationships with customers, superior brand recognition, superior margins, andsignificantly greater financial, technical, marketing, customer service, public relations, distribution, or other resources, especially in new markets we mayenter. Consolidation among our competitors may also improve their competitive position. We also face competition from solutions developed internally byour customers or partners. To the extent that we cannot compete effectively, our market share and, therefore, results of operations could be materiallyadversely affected.Because price and related terms are key considerations for many of our customers, we may have to accept less-favorable payment terms, lower the prices ofour products and services, and/or reduce our cost structure, including reducing headcount or investment in R&D, in order to remain competitive. If we areforced to take these kinds of actions to remain competitive in the short-term, such actions may adversely impact our ability to execute and compete in thelong-term.Our future success depends on our ability to enhance our existing operations, execute on our growth strategy, and properly manage investment in ourbusiness and operations.A key element of our long-term strategy is to continue to invest in, enhance, and secure our business and operations and grow, both organically and throughacquisitions. Investments in, among other things, new markets, new products, solutions, and technologies, R&D, infrastructure and systems, geographicexpansion, and headcount are critical components for achieving this strategy. However, such investments and efforts may not be successful, especially innew areas or new markets in which we have little or no experience, and even if successful, may negatively impact our short-term profitability. Our successdepends on our ability to effectively and efficiently enhance our existing operations and execute on our growth strategy. This includes our ability to properlyallocate limited investment dollars, balance the extent and timing of investments with the associated impact on expenses and profitability, balance our focusbetween new areas or new markets and the operation and servicing of our legacy businesses and customers, capture efficiencies and economies of scale, andcompete in the new areas or new markets and with the new solutions in which we have invested. Moreover, our existing infrastructure, systems, processes,and personnel may not be adequate for our current or future needs. For example, we recently upgraded our enterprise resource planning system and continueto work on the implementation of our new revenue recognition system. These kinds of implementations15Table of Contentsare complex, time-consuming, and expensive and we cannot assure you that we will not experience problems during or following such implementations,including among others, potential disruptions in our ability to report accurate and timely financial results. If we are unable to effectively and efficientlyenhance our existing operations, execute on our growth strategy, and properly manage our investments, focus, and expenditures, our results of operations andmarket share may be materially adversely affected.We may not be able to identify suitable targets for acquisition or investment, or complete acquisitions or investments on terms acceptable to us, whichcould negatively impact our ability to implement our growth strategy.As part of our long-term growth strategy, we have made a number of acquisitions and investments and expect to continue to make acquisitions andinvestments in the future, subject to the terms of our senior credit agreement (the “2017 Credit Agreement”), the indenture governing our 1.50% convertiblesenior notes due June 1, 2021 (the “Notes”), and other restrictions.In many areas, we have seen the market for acquisitions become more competitive and valuations increase. Our competitors also continue to makeacquisitions in or adjacent to our markets and may have greater resources than we do, enabling them to pay higher prices. As a result, it may be more difficultfor us to identify suitable acquisition or investment targets or to consummate acquisitions or investments once identified on acceptable terms or at all. If weare not able to execute on our acquisition strategy, we may not be able to achieve our long-term growth strategy, may lose market share, or may lose ourleadership position in one or more of our markets.Our acquisition and investment activity presents certain risks to our business, operations, and financial position.Acquisitions and investments are an important part of our strategy. Successful execution of a transaction, including the process of integrating an acquiredcompany’s business following the closing of an acquisition or investment, is paramount to achieving the anticipated benefits of the transaction. If we areunable to execute successfully, we may experience both a loss on the investment and damage to our legacy business and valuation.The process of integrating an acquired company’s business into our operations and investing in new technologies is challenging and may result in expectedor unexpected operating or compliance challenges, which may require significant expenditures and a significant amount of our management’s attention thatwould otherwise be focused on the ongoing operation of our business. The potential difficulties or risks of integrating an acquired company’s businessinclude, among others:•the effect of the acquisition on our financial and strategic positions and our reputation;•risk that we fail to successfully implement our business plan for the combined business, including plans to accelerate growth;•risk that we are unable to obtain the anticipated benefits of the acquisition, including synergies or economies of scale;•risk of unforeseen or underestimated challenges associated with an acquired company’s business or operations;•risk that the market does not accept the integrated product portfolio;•challenges in reconciling business practices or in integrating product development activities, logistics, or information technology and othersystems;•retention risk with respect to key customers, suppliers, and employees and challenges in assimilating and training new employees;•challenges in complying with newly applicable laws and regulations, including obtaining or retaining required approvals, licenses, and permits;and•potential impact on our internal controls over financial reporting.Acquisitions and/or investments may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, theexpenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a materialadverse effect on our operating results or financial condition. Investments in immature businesses with unproven track records and technologies have anespecially high degree of risk, with16Table of Contentsthe possibility that we may lose our entire investment or incur unexpected liabilities. Transactions that are not immediately accretive to earnings may makeit more difficult for us to maintain satisfactory profitability levels or compliance with the maximum leverage ratio covenant under the revolving creditfacility under our 2017 Credit Agreement. Large or costly acquisitions or investments may also diminish our capital resources and liquidity or limit ourability to engage in additional transactions for a period of time.All of the foregoing risks may be magnified as the cost, size, or complexity of an acquisition or acquired company increases, where the acquired company’sproducts, market, or business are materially different from ours, or where more than one transaction or integration is occurring simultaneously or within aconcentrated period of time. There can be no assurance that we will be successful in making additional acquisitions in the future or in integrating orexecuting on our business plan for existing or future acquisitions.Sales opportunities and sales processes for sophisticated solutions and a broad solution portfolio like ours present significant challenges. We offer our customers a broad solution portfolio with the flexibility to purchase a single point solution, which can be expanded over time, or a larger morecomprehensive system. Regardless of the size of a customer’s purchase, many of our solutions are sophisticated and may represent a significant investment forthe customer. As a result, our sales cycles can range in duration from as little as a few weeks to more than a year. Our larger sales typically require a minimumof a few months to consummate. As the length or complexity of a sales process increases, so does the risk of successfully closing the sale. Larger sales areoften made by competitive bid, which also increases the time and uncertainty associated with such opportunities. Customers may also require education onthe value and functionality of our solutions as part of the sales process, further extending the time frame and uncertainty of the process. Longer sales cycles, competitive bid processes, and the need to educate customers means that: •There is greater risk of customers deferring, scaling back, or cancelling sales as a result of, among other things, their receipt of a competitiveproposal, changes in budgets and purchasing priorities, or the introduction or anticipated introduction of new or enhanced products by us or ourcompetitors during the process. • We may make a significant investment of time and money in opportunities that do not come to fruition, which investments may not be usable orrecoverable in future projects.•We may be required to bid on a project in advance of the completion of its design or be required to begin working on a project in advance offinalizing a sale, in either case, increasing the risk of unforeseen technological difficulties or cost overruns. •We face greater downside risks if we do not correctly and efficiently deploy limited personnel and financial resources and convert such salesopportunities into orders.Larger solution sales also require greater expertise in sales execution and transaction implementation than more basic product sales, including in establishingand maintaining appropriate contacts and relationships with customers and partners, product development, project management, staffing, integration,services, and support. Our ability to develop, sell, and support larger solutions and a broad solution portfolio is a competitive differentiator for us, whichprovides for diversification and more opportunities for growth, but also requires greater investment for us and challenges associated with competition forlimited internal resources.After the completion of a solution sale or the sale of a more sophisticated product in general, our customers or partners may need assistance from us in makingfull use of the functionality of these solutions or products, in realizing all of their benefits, or in implementation generally. If we are unable to assist ourcustomers and partners in realizing the benefits they expect from our solutions and products, demand for our solutions and products may decline and ouroperating results may suffer.The extended time frame and uncertainty associated with many of our sales opportunities also makes it difficult for us to accurately forecast our revenues(and attendant budgeting and guidance decisions) and increases the volatility of our operating results from period to period. Our ability to forecast and thevolatility of our operating results is also impacted by the fact that pricing, margins, and other deal terms may vary substantially from transaction totransaction, especially across business lines. The terms of our transactions, including with respect to pricing, future deliverables, delivery model (e.g.,perpetual license versus subscription), and post-contract customer support, also impact the timing of our ability to recognize revenue. Because thesetransaction-specific factors are difficult to predict in advance, this also complicates the forecasting of revenue and creates17Table of Contentschallenges in managing our cloud transition and revenue mix. The deferral or loss of one or more significant orders or a delay in a large implementation canalso materially adversely affect our operating results, especially in a given quarter. Larger transactions also increase the risk that our revenue andprofitability becomes concentrated in a given period or over time. As with other software-focused companies, a large amount of our quarterly business tendsto come in the last few weeks, or even the last few days, of each quarter. This trend has also complicated the process of accurately predicting revenue andother operating results, particularly on a quarterly basis. Finally, our business is subject to seasonal factors that may also cause our results to fluctuate fromquarter to quarter.If we are unable to establish and maintain our relationships with third parties that market and sell our products, our business and ability to grow couldbe materially adversely affected. Approximately half of our sales are made through partners, distributors, resellers, and systems integrators. To remain successful, we must maintain ourexisting relationships as well as identify and establish new relationships with such third parties. We must often compete with other suppliers for theserelationships and our competitors often seek to establish exclusive relationships with these sales channels or to become a preferred partner for them. Ourability to establish and maintain these relationships is based on, among other things, factors that are similar to those on which we compete for end customers,including features, functionality, ease of use, installation and maintenance, and price. Even if we are able to secure such relationships on terms we findacceptable, there is no assurance that we will be able to realize the benefits we anticipate. Some of our channel partners may also compete with us or haveaffiliates that compete with us, or may partner with our competitors or offer our products and those of our competitors as alternatives when presentingproposals to end customers. Our ability to achieve our revenue goals and growth depends to a significant extent on maintaining, enabling, and adding tothese sales channels, and if we are unable to do so, our business and ability to grow could be materially adversely affected. For certain products, components, or services, we rely on third-party suppliers, manufacturers, and partners, and if these relationships are interruptedwe may not be able to obtain substitute suppliers, manufacturers, or partners on favorable terms or at all and we may be subject to other adverse effects. Although we generally use standard parts and components in our products, we do rely on non-affiliated suppliers and OEM partners for certain non-standardproducts or components which may be critical to our products, including both hardware and software, and on manufacturers of assemblies that areincorporated into our products. We also purchase technology, license intellectual property rights, and oversee third-party development and localization ofcertain products or components, in some cases, by or from companies that may compete with us or work with our competitors. While we endeavor to uselarger, more established suppliers, manufacturers, and partners wherever possible, in some cases, these providers may be smaller, less established companies,particularly in the case of suppliers of new or unique technologies that we have not developed internally. If these suppliers, manufacturers, or partnersexperience financial, operational, manufacturing capacity, or quality assurance difficulties, cease production or sale, or there is any other disruption in oursupply, including as a result of the acquisition of a supplier or partner by a competitor, we will be required to locate alternative sources of supply ormanufacturing, to internally develop the applicable technologies, to redesign our products, and/or to remove certain features from our products, any of whichwould be likely to increase expenses, create delivery delays, and negatively impact our sales. Although we endeavor to establish contractual protectionswith key providers, including source code escrows (where needed), warranties, and indemnities, we may not be successful in obtaining adequate protections,these agreements may be short-term in duration, and the counterparties may be unwilling or unable to stand behind such protections. Moreover, these typesof contractual protections offer limited practical benefits to us in the event our relationship with a key provider is interrupted.We also rely on third parties to provide certain services to us or to our customers, including hosting partners and providers of other cloud-based services. Ifthese third-party providers do not perform as expected, our customers may be adversely affected, resulting in potential liability and negative exposure for us.If it is necessary to migrate these services to other providers as a result of poor performance by these third parties, cyber breaches, other securityconsiderations, or other financial or operational factors, it could result in service disruptions to our customers and significant time and expense to us, any ofwhich could adversely affect our business. If we cannot retain and recruit qualified personnel, our ability to operate and grow our business may be impaired. We depend on the continued services of our management and employees to run and grow our business. To remain successful and to grow, we need to retainexisting employees and attract new employees who understand and/or have experience with our products, services, and markets, including new markets andgrowth areas we may enter. As we grow, we must also enhance and expand our management team to execute on new and larger agendas and challenges. Themarket for qualified personnel is competitive in the geographies in which we operate and may be limited especially in areas of emerging technology, and wemay be at a disadvantage to companies with greater brand recognition or financial resources in recruiting. If we are unable to18Table of Contentsattract and retain qualified personnel, when and where they are needed, our ability to operate and grow our business could be impaired. Moreover, if we arenot able to properly balance investment in personnel with growth in our business, our profitability may be adversely affected.Because we have significant foreign operations and business, we are subject to geopolitical and other risks that could materially adversely affect ourresults.We have significant operations and business outside the United States, including sales, research and development, manufacturing, customer services andsupport, and administrative services. The countries in which we have our most significant foreign operations include Israel, the United Kingdom, India,Cyprus, Indonesia, Australia, Brazil and the Netherlands. We also generate significant revenue from more than a dozen foreign countries, and smaller amountsof revenue from many more, including a number of emerging markets. We intend to continue to grow our business internationally.Our foreign operations are, and any future foreign growth will be, subject to a variety of risks, many of which are beyond our control, including risksassociated with:•foreign currency fluctuations;•political, security, and economic instability or corruption;•changes in and compliance with both international and local laws and regulations, including those related to trade compliance, anti-corruption,information security, data privacy and protection, tax, labor, currency restrictions, and other requirements;•differences in tax regimes and potentially adverse tax consequences of operating in foreign countries;•product customization or localization issues;•preferences for or policies and procedures that protect local suppliers;•legal uncertainties regarding intellectual property rights or rights and obligations generally; and•challenges or delays in collection of accounts receivable.Any or all of these factors could materially adversely affect our business or results of operations. Conditions in and our relationship to Israel may materially adversely affect our operations and personnel and may limit our ability to produce and sellour products or engage in certain transactions. We have significant operations in Israel, including R&D, manufacturing, sales, and support. Conflicts and political, economic, and/or military conditions inIsrael and the Middle East region have affected and may in the future affect our operations in Israel. Violence within Israel or the outbreak of violentconflicts between Israel and its neighbors, including the Palestinians or Iran, may impede our ability to manufacture, sell, and support our products or engagein R&D, or otherwise adversely affect our business or operations. Many of our employees in Israel are required to perform annual compulsory military serviceand are subject to being called to active duty at any time. Hostilities involving Israel may also result in the interruption or curtailment of trade between Israeland its trading partners or a significant downturn in the economic or financial condition of Israel and could materially adversely affect our results ofoperations. Restrictive laws, policies, or practices in certain countries directed toward Israel, Israeli goods, or companies having operations in Israel may also limit ourability to sell some of our products in certain countries. We receive grants from the IIA for the financing of a portion of our research and development expenditures in Israel. The availability in any given year ofthese IIA grants depends on IIA approval of the projects and related budgets that we submit to the IIA each year. The Israeli law under which these IIA grantsare made limits our ability to manufacture products, or transfer technologies, developed using these grants outside of Israel. This may limit our ability toengage in certain outsourcing or business combination transactions involving these products or require us to pay significant royalties or fees to the IIA inorder to obtain any IIA consent that may be required in connection with such transactions. Israeli tax requirements may also place practical limitations on ourability to sell Israeli assets, restructure our Israeli business, or access funds in Israel.19Table of ContentsLoss of security clearances or political factors may adversely affect our business. Some of our subsidiaries maintain security clearances domestically and abroad in connection with the development, marketing, sale, and/or support of ourCyber Intelligence solutions. These clearances are reviewed from time to time by these countries and could be deactivated, including for political reasonsunrelated to the merits of our solutions, such as the list of countries we do business with or the fact that our local entity is controlled by or affiliated with anentity based in another country. If we lose our security clearances in a particular country, we may be unable to sell our Cyber Intelligence solutions for secureprojects in that country and might also experience greater challenges in selling such solutions even for non-secure projects in that country. Even if we areable to obtain and maintain applicable security clearances, government customers may decline to purchase our Cyber Intelligence solutions if they were notdeveloped or manufactured in that country or if they were developed or manufactured in other countries that are considered disfavored by such country. Wemay also experience negative publicity or other adverse impacts on our business as a result of offering certain types of Cyber Intelligence solutions or if wesell our Cyber Intelligence solutions to countries that are considered disfavored by the media or political or social rights organizations even where suchactivities or transactions are permissible under applicable law.We are subject to complex, evolving regulatory requirements that may be difficult and expensive to comply with and that could negatively impact ourbusiness. Our business and operations are subject to a variety of regulatory requirements in the United States and abroad, including, among other things, with respect totrade compliance, anti-corruption, information security, data privacy and protection, tax, labor, government contracts, and cyber intelligence. Compliancewith these regulatory requirements may be onerous, time-consuming, and expensive, especially where these requirements are inconsistent from jurisdiction tojurisdiction or where the jurisdictional reach of certain requirements is not clearly defined or seeks to reach across national borders. Regulatory requirementsin one jurisdiction may make it difficult or impossible to do business in another jurisdiction. We may also be unsuccessful in obtaining permits, licenses, orother authorizations required to operate our business, such as for the marketing or sale or import or export of our products and services. While we have implemented policies, procedures, and systems designed to achieve compliance with these regulatory requirements, we cannot assure you thatthese policies, procedures, or systems will be adequate or that we or our personnel will not violate these policies and procedures or applicable laws andregulations. Violations of these laws or regulations may harm our reputation and deter government agencies and other existing or potential customers orpartners from purchasing our solutions. Furthermore, non-compliance with applicable laws or regulations could result in fines, damages, criminal sanctionsagainst us, our officers, or our employees, restrictions on the conduct of our business, and damage to our reputation. Regulatory requirements, such as laws requiring telecommunications providers to facilitate the monitoring of communications by law enforcement, may alsoinfluence market demand for many of our products and/or customer requirements for specific functionality and performance or technical standards. Thedomestic and international regulatory environment is subject to constant change, often based on factors beyond our control or anticipation, includingpolitical climate, budgets, and current events, which could reduce demand for our products or require us to change or redesign products to maintaincompliance or competitiveness.Regulation of privacy and data security may adversely affect sales of our products and result in increased compliance costs.We believe that regulation will continue to increase around the world with respect to the solicitation, collection, processing, and/or use of personal, financial,and consumer information. In addition, the interpretation and application of existing consumer and data protection laws and industry standards in the UnitedStates, Europe, and elsewhere are often uncertain and in flux. The application of existing laws to cloud-based solutions is particularly uncertain and cloud-based solutions may be subject to further regulation, the impact of which cannot be fully understood at this time. Moreover, it is possible that these laws maybe interpreted and applied in a manner that is inconsistent with our data and privacy practices. Complying with these various laws and regulations may causeus to incur substantial costs or require us to change our business practices in a manner adverse to our business. Information / Product Security and Intellectual Property The mishandling or the perceived mishandling of sensitive information could harm our business. Our products are in some cases used by customers to compile and analyze highly sensitive or confidential information and data,20Table of Contentsincluding information or data used in intelligence gathering or law enforcement activities. While our customers’ use of our products does not provide usaccess to the customer’s sensitive or confidential information or data, we or our partners may receive or come into contact with such information or data,including personally identifiable information, when we are asked to perform services or support functions for our customers. We or our partners may alsoreceive or come into contact with such information or data in connection with our SaaS or other hosted or managed services offerings. We have implementedpolicies and procedures, and use information technology systems, to help ensure the proper handling of such information and data, including backgroundscreening of certain services personnel, non-disclosure agreements with employees and partners, access rules, and controls on our information technologysystems. Customers are also increasingly focused on the security of our products and services and we continuously work to address these concerns, includingthrough the use of encryption, access rights, and other customary security features, which vary based on the solution in question and customer requirements.However, these measures are designed to mitigate the risks associated with handling or processing sensitive data and cannot safeguard against all risks at alltimes. The improper handling of sensitive data, or even the perception of such mishandling (whether or not valid), or other security lapses or breachesaffecting us, our partners, or our products or services, could reduce demand for our products or services or otherwise expose us to financial or reputationalharm or legal liability. Our solutions may contain defects or may be vulnerable to cyber-attacks, which could expose us to both financial and non-financial damages.Many of our existing solutions are and future solutions are expected to be sophisticated and may develop operational problems. New products and newproduct versions, service models such as hosting, SaaS, and managed services, and the incorporation of third-party products or services into our solutions,also give rise to the risk of defects or errors. These defects or errors may relate to the operation or the security of the products. If we do not discover andremedy such defects, errors, or other operational or security problems until after a product has been released to customers or partners, we may incur significantcosts to correct such problems and/or become liable for substantial damages for product liability claims or other liabilities. Moreover, even products orservices that are well-designed and tested may be vulnerable to cyber-attacks. If one or more of our products or services, including elements provided bythird-party suppliers or partners, are found to have defects or errors, or if there is a successful cyber-attack on one of our products or services even absent adefect or error, it may also result in questions regarding the integrity of our products or services generally, which could cause adverse publicity and impairtheir market acceptance and could have a material adverse effect on our results or financial condition.We may be subject to information technology system breaches, failures, or disruptions that could harm our operations, financial condition, orreputation. We rely extensively on information technology systems to operate and manage our business and to process, maintain, and safeguard information, includinginformation belonging to our customers, partners, and personnel. These systems may be subject to breaches, failures, or disruptions as a result of, amongother things, cyber-attacks, computer viruses, physical security breaches, natural disasters, accidents, power disruptions, telecommunications failures, newsystem implementations, or acts of terrorism or war. We have experienced cyber-attacks in the past and may experience them in the future, potentially withgreater frequency. While we are continually working to maintain secure and reliable systems, our security, redundancy, and business continuity efforts maybe ineffective or inadequate. We must continuously improve our design and coordination of security controls across our business groups and geographies.Despite our efforts, it is possible that our security controls, and other procedures that we follow, may not prevent system breaches, failures, or disruptions.Such system breaches, failures, or disruptions could subject us to the loss, compromise, or disclosure of sensitive or confidential information or intellectualproperty, the destruction or corruption of data, financial losses from remedial actions, litigation, regulatory issues, liabilities to customers or other thirdparties, damage to our reputation, delays in our ability to process orders, delays in our ability to provide products and services to customers, including SaaSor other hosted or managed services offerings, R&D or production downtimes, or delays or errors in financial reporting. Information system breaches orfailures at one of our partners, including hosting providers or those who support other cloud-based offerings, may also result in similar adverse consequences.Any of the foregoing could harm our competitive position, result in a loss of customer confidence, and materially and adversely affect our results ofoperations or financial condition.Our intellectual property may not be adequately protected. While much of our intellectual property is protected by patents or patent applications, we have not and cannot protect all of our intellectual property withpatents or other registrations. There can be no assurance that patents we have applied for will be issued on the basis of our patent applications or that, if suchpatents are issued, they will be, or that our existing patents are, sufficiently broad enough to protect our technologies, products, or services. Our intellectualproperty rights may not be successfully asserted in the future or may be invalidated, designed around, or challenged. 21Table of ContentsIn order to safeguard our unpatented proprietary know-how, source code, trade secrets, and technology, we rely primarily upon trade secret protection andnon-disclosure provisions in agreements with employees and other third parties having access to our confidential information. There can be no assurance thatthese measures will adequately protect us from improper disclosure or misappropriation of our proprietary information. Preventing unauthorized use or infringement of our intellectual property rights is difficult even in jurisdictions with well-established legal protections forintellectual property such as the United States. It may be even more difficult to protect our intellectual property in other jurisdictions where legal protectionsfor intellectual property rights are less established. If we are unable to adequately protect our intellectual property against unauthorized third-party use orinfringement, our competitive position could be adversely affected. Our products may infringe or may be alleged to infringe on the intellectual property rights of others, which could lead to costly disputes or disruptionsfor us and may require us to indemnify our customers and resellers for any damages they suffer. The technology industry is characterized by frequent allegations of intellectual property infringement. In the past, third parties have asserted that certain ofour products infringed on their intellectual property rights and similar claims may be made in the future. Any allegation of infringement against us could betime consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause product shipment delays, or force us toenter into royalty or license agreements. If patent holders or other holders of intellectual property initiate legal proceedings against us, either with respect toour own intellectual property or intellectual property we license from third parties, we may be forced into protracted and costly litigation, regardless of themerits of these claims. We may not be successful in defending such litigation, in part due to the complex technical issues and inherent uncertainties inintellectual property litigation, and may not be able to procure any required royalty or license agreements on terms acceptable to us, or at all. Third partiesmay also assert infringement claims against our customers or partners. Subject to certain limitations, we generally indemnify our customers and partners withrespect to infringement by our products on the proprietary rights of third parties, which, in some cases, may not be limited to a specified maximum amountand for which we may not have sufficient insurance coverage or adequate indemnification in the case of intellectual property licensed from a third party. Ifany of these claims succeed, we may be forced to pay damages, be required to obtain licenses for the products our customers or partners use or sell, or incursignificant expenses in developing non-infringing alternatives. If we cannot obtain necessary licenses on commercially reasonable terms, our customers maybe forced to stop using or, in the case of resellers and other partners, stop selling our products. Use of free or open source software could expose our products to unintended restrictions and could materially adversely affect our business. Some of our products contain free or open source software (together, “open source software”) and we anticipate making use of open source software in thefuture. Open source software is generally covered by license agreements that permit the user to use, copy, modify, and distribute the software without cost,provided that the users and modifiers abide by certain licensing requirements. The original developers of the open source software generally provide nowarranties on such software or protections in the event the open source software infringes a third party’s intellectual property rights. Although we endeavor tomonitor the use of open source software in our product development, we cannot assure you that past, present, or future products will not contain open sourcesoftware elements that impose unfavorable licensing restrictions or other requirements on our products, including the need to seek licenses from third parties,to re-engineer affected products, to discontinue sales of affected products, or to release all or portions of the source code of affected products. Any of thesedevelopments could materially adversely affect our business. Risks Related to Our Finances and Capital Structure We have a significant amount of indebtedness, which exposes us to leverage risks and subjects us to covenants which may adversely affect ouroperations. At March 15, 2018, we had total outstanding indebtedness of approximately $822 million under our 2017 Credit Agreement and the Notes, meaning that weare significantly leveraged. In addition, we have the ability to borrow additional amounts under our 2017 Credit Agreement, including the revolving creditfacility, for a variety of purposes, including, among others, acquisitions and stock repurchases. Our leverage position may, among other things:•limit our ability to obtain additional debt financing in the future for working capital, capital expenditures, acquisitions, or other general corporatepurposes;22Table of Contents•require us to dedicate a substantial portion of our cash flow from operations to debt service, reducing the availability of our cash flow for otherpurposes;•require us to repatriate cash for debt service from our foreign subsidiaries resulting in dividend tax costs or require us to adopt other disadvantageoustax structures to accommodate debt service payments; or•increase our vulnerability to economic downturns, limit our ability to capitalize on significant business opportunities, and restrict our flexibility toreact to changes in market or industry conditions. In addition, because our indebtedness under our 2017 Credit Agreement bears interest at a variable rate, we are exposed to risk from fluctuations in interestrates. The revolving credit facility under our 2017 Credit Agreement contains a financial covenant that requires us to satisfy a maximum consolidated leverageratio test. Our ability to comply with the leverage ratio covenant is dependent upon our ability to continue to generate sufficient earnings each quarter, or inthe alternative, to reduce expenses and/or reduce the level of our outstanding debt, and we cannot assure that we will be successful in any or all of theseregards. Our 2017 Credit Agreement also includes a number of restrictive covenants which limit our ability to, among other things:•incur additional indebtedness or liens or issue preferred stock;•pay dividends or make other distributions or repurchase or redeem our stock or subordinated indebtedness;•engage in transactions with affiliates;•engage in sale-leaseback transactions;•sell certain assets;•change our lines of business;•make investments, loans, or advances; and•engage in consolidations, mergers, liquidations, or dissolutions.These covenants could limit our ability to plan for or react to market conditions, to meet our capital needs, or to otherwise engage in transactions that mightbe considered beneficial to us. If certain events of default occur under our 2017 Credit Agreement, our lenders could declare all amounts outstanding to be immediately due and payable. Anacceleration of indebtedness under our 2017 Credit Agreement may also result in an event of default under the indenture governing the Notes. Additionally,if a change of control as defined in our 2017 Credit Agreement were to occur, the lenders under our credit facilities would have the right to require us to repayall of our outstanding obligations under the facilities.If a fundamental change as defined in the indenture governing the Notes were to occur, the holders may require us to purchase for cash all or any portion oftheir Notes at 100% of the principal amount of the Notes, plus accrued and unpaid interest. Additionally, in the event the conditional conversion feature ofthe Notes is triggered, holders of the Notes will be entitled to convert their Notes during specified periods of time at their option. If one or more holders electto convert their Notes, we may be required to settle all or a portion of our conversion obligation in cash, which could adversely affect our liquidity. If any of the events described in the foregoing paragraphs were to occur, in order to satisfy our obligations we may be forced to seek an amendment of and/orwaiver under our debt agreements, raise additional capital through securities offerings, asset sales, or other transactions, or seek to refinance or restructure ourdebt. In such a case, there can be no assurance that we will be able to consummate such a transaction on reasonable terms or at all. We consider other financing and refinancing options from time to time, however, we cannot assure you that such options will be available to us on reasonableterms or at all. If one or more rating agencies were to downgrade our credit ratings, that could also impede our ability to refinance our existing debt or securenew debt, increase our future cost of borrowing, and create third-party concerns about our financial condition or results of operations.23Table of ContentsIf we are not able to generate sufficient cash domestically in order to fund our U.S. operations, stock repurchases, and strategic opportunities, and toservice our debt, we may incur withholding taxes in order to repatriate certain overseas cash balances, or we may need to raise additional capital in thefuture.On December 22, 2017 the Tax Cuts and Jobs Act (“2017 Tax Act”) was enacted in the United States. The newly enacted 2017 Tax Act includes significantchanges to corporate taxation in the United States including a mandatory one-time tax on accumulated earnings of foreign subsidiaries. As a result, alldeferred foreign earnings not previously subject to U.S. income tax have now been taxed and we therefore do not expect to incur any significant additionalU.S. taxes related to such amounts. However, certain unremitted earnings may be subject to foreign withholding tax upon repatriation to the United States.If the cash generated by our domestic operations, plus certain foreign cash which we would repatriate and for which we have accrued the related withholdingtax, is not sufficient to fund our domestic operations, our broader corporate initiatives such as stock repurchases, acquisitions, and other strategicopportunities, and to service our outstanding indebtedness, we may need to raise additional funds through public or private debt or equity financings, or wemay need to obtain new credit facilities to the extent we choose not to repatriate additional overseas cash. Such additional financing may not be available onterms favorable to us, or at all, and any new equity financings or offerings would dilute our current stockholders’ ownership. Furthermore, lenders may notagree to extend us new, additional or continuing credit. If adequate funds are not available, or are not available on acceptable terms, we may be forced torepatriate foreign cash and incur a significant tax cost (in addition to amounts previously accrued) or we may not be able to take advantage of strategicopportunities, develop new products, respond to competitive pressures, repurchase outstanding stock or repay our outstanding indebtedness. In any suchcase, our business, operating results or financial condition could be adversely impacted.We may be adversely affected by our acquisition of CTI or our historical affiliation with CTI and its former subsidiaries.As a result of the February 2013 acquisition of our former parent company, CTI (the “CTI Merger”), CTI’s liabilities, including contingent liabilities, havebeen consolidated into our financial statements. If CTI’s liabilities are greater than represented, if the contingent liabilities we have assumed become fixed, orif there are obligations of CTI of which we were not aware at the time of completion of the CTI Merger, we may have exposure for those obligations and ourbusiness or financial condition could be materially and adversely affected. Adjustments to the CTI consolidated group’s tax liability for periods prior to theCTI Merger could also affect the net operating losses (“NOLs”) allocated to Verint as a result of the CTI Merger and cause us to incur additional tax liabilityin future periods.As a result of our historical affiliation with CTI and other members of the historical CTI consolidated tax group, we could also become liable for taxes ofother members of the CTI consolidated group for historical periods under certain circumstances. Adjustments to the historical CTI consolidated group’s taxliability for periods prior to Verint’s IPO could also affect the NOLs allocated to Verint in the IPO and cause us to incur additional tax liability in futureperiods.We are entitled to certain indemnification rights from the successor to CTI’s business operations (Mavenir Inc.) in connection with the transactionscontemplated by our agreement and plan of merger with CTI and the agreements entered into in connection with the distribution by CTI to its shareholders ofsubstantially all of its assets other than its interest in us (the “Comverse Share Distribution”). However, there is no assurance that Mavenir will be willing andable to provide such indemnification if needed. If we become responsible for liabilities (including tax liabilities) not covered by indemnification orsubstantially in excess of amounts covered by indemnification, or if Mavenir becomes unwilling or unable to stand behind such protections, our financialcondition and results of operations could be materially and adversely affected.Our financial results may be significantly impacted by changes in our tax position.We are subject to taxes in the United States and numerous foreign jurisdictions. Our future effective tax rates could be affected by changes in the mix ofearnings in countries with differing statutory tax rates, changes in valuation allowance on deferred tax assets (including our NOL carryforwards), changes inunrecognized tax benefits, or changes in tax laws or their interpretation. Any of these changes could have a material adverse effect on our profitability. Inaddition, the tax authorities in the jurisdictions in which we operate, including the United States, may from time to time review the pricing arrangementsbetween us and our foreign subsidiaries or among our foreign subsidiaries. An adverse determination by one or more tax authorities in this regard may have amaterial adverse effect on our financial results.We have significant deferred tax assets which can provide us with significant future cash tax savings if we are able to use them, including significant NOLsinherited as a result of the CTI Merger. However, the extent to which we will be able to use these24Table of ContentsNOLs may be impacted, restricted, or eliminated by a number of factors, including changes in tax rates, laws or regulations, whether we generate sufficientfuture taxable income, and possible adjustments to the tax attributes of CTI or its non-Verint subsidiaries for periods prior to the CTI Merger. To the extentthat we are unable to utilize our NOLs or other losses, our results of operations, liquidity, and financial condition could be materially adversely affected.When we cease to have NOLs available to us in a particular tax jurisdiction, either through their expiration, disallowance, or utilization, our cash tax liabilitywill increase in that jurisdiction.In addition, on December 22, 2017, the 2017 Tax Act was enacted in the United States. The 2017 Tax Act significantly revises the Internal Revenue Code of1986, as amended, and it includes fundamental changes to taxation of U.S. multinational corporations.The key provisions impacting our January 31, 2018 year include a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% andour use of NOLs to reduce the one-time tax on previously untaxed earnings of foreign subsidiaries at reduced rates regardless of whether the earnings areactually repatriated (the “Transition Tax”).Additional provisions that are effective beginning after January 31, 2018, which may significantly impact our effective tax rate, include new limitations onthe tax deductions for interest expense and executive compensation, elimination of the alternative minimum tax (“AMT”) and the ability to refund unusedAMT credits over a four year period, and new rules related to uses and limitations of NOL carryforwards. New international provisions add a new category ofdeemed income from our foreign operations, eliminates U.S. tax on foreign dividends (subject to certain restrictions), and add a minimum tax on certainpayments made to foreign related parties.Compliance with the 2017 Tax Act will require significant complex computations not previously required by U.S. tax law. It is unclear how certainprovisions of the 2017 Tax Act will be applied absent further legislative, regulatory, or accounting clarification and guidance. In addition, it is uncertain ifand to what extent various states will enact legislation to conform to the 2017 Tax Act. It is also uncertain if and to what extent foreign governments mayenact tax legislation in response to the 2017 Tax Act. These uncertainties and the final interpretation of the 2017 Tax Act may adversely affect our businessand financial condition.Changes in accounting principles, or interpretations thereof, could adversely impact our financial condition or operating results.We prepare our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“GAAP”). These principles are subjectto interpretation by the SEC and other organizations that develop and interpret accounting principles. New accounting principles arise regularly,implementation of which can have a significant effect on and may increase the volatility of our reported operating results and may even retroactively affectpreviously reported operating results. In addition, the implementation of new accounting principles may require significant changes to our customer andvendor contracts, business processes, accounting systems, and internal controls over financial reporting. The costs and effects of these changes couldadversely impact our operating results, and difficulties in implementing new accounting principles could cause us to fail to meet our financial reportingobligations.For example, in May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue fromContracts with Customers (Topic 606), which supersedes nearly all existing GAAP revenue recognition guidance, changes how and when revenue isrecognized, and provides guidance on how to account for costs related to contracts with customers. This new guidance became effective for us on February 1,2018. We are implementing changes to our accounting systems and processes, internal controls, and disclosures to comply with the requirements of the newguidance. Our assessment of this new revenue recognition guidance and its impact is further discussed in Note 1, “Summary of Significant AccountingPolicies” to our consolidated financial statements included under Item 8 of this report, under “Recent Accounting Pronouncements”, along with discussionsof other new accounting standards.Our internal controls over financial reporting may not prevent misstatements and material weaknesses or deficiencies could arise in the future whichcould lead to restatements or filing delays. Our system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of consolidated financial statements for external reporting purposes in accordance with GAAP. Because of its inherent limitations,internal control over financial reporting may not prevent or detect every misstatement. An evaluation of effectiveness is subject to the risk that the controlsmay become inadequate because of changes in conditions, because the degree of compliance with policies or procedures decreases over time, or because ofunanticipated circumstances or other factors. As a result, although our management has concluded that our internal controls are25Table of Contentseffective as of January 31, 2018, we cannot assure you that our internal controls will prevent or detect every misstatement, that material weaknesses or otherdeficiencies will not occur or be identified in the future, that this or future financial reports will not contain material misstatements or omissions, that futurerestatements will not be required, or that we will be able to timely comply with our reporting obligations in the future.If our goodwill or other intangible assets become impaired, our financial condition and results of operations could be negatively affected. Because we have historically acquired a significant number of companies, goodwill and other intangible assets have represented a substantial portion of ourassets. Goodwill and other intangible assets totaled approximately $1.6 billion, or approximately 63% of our total assets, as of January 31, 2018. We test ourgoodwill for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment, and we assess on an as-needed basiswhether there have been impairments in our other intangible assets. We make assumptions and estimates in this assessment which are complex and oftensubjective. These assumptions and estimates can be affected by a variety of factors, including external factors such as industry and economic trends, andinternal factors such as changes in our business strategy or our internal forecasts. To the extent that the factors described above change, we could be requiredto record additional non-cash impairment charges in the future, which could negatively affect our financial condition and results of operations.Our international operations subject us to currency exchange risk. We earn revenue, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar, including the Israeli shekel, euro,British pound sterling, Singapore dollar, and Australia dollar, among others. Because our consolidated financial statements are presented in U.S. dollars, wemust translate revenue, expenses, assets, and liabilities of entities using non-U.S. dollar functional currencies into U.S. dollars using currency exchange ratesin effect during or at the end of each reporting period, meaning we are exposed to the impact of changes in currency exchange rates. In addition, our netincome is impacted by the revaluation and settlement of monetary assets and liabilities denominated in currencies other than an entity’s functional currency,gains or losses on which are recorded within other income (expense), net. We attempt to mitigate a portion of these risks through foreign currency hedging,based on our judgment of the appropriate trade-offs among risk, opportunity and expense. However, our hedging activities are limited in scope and durationand may not be effective at reducing the U.S. dollar cost of our global operations.In addition, our financial outlooks do not assume fluctuations in currency exchange rates. Adverse fluctuations in currency exchange rates subsequent toproviding our financial outlooks could cause our actual results to differ materially from those anticipated in our outlooks, which could negatively affect theprice of our common stock.The prices of our common stock and the Notes have been, and may continue to be, volatile and your investment could lose value.The prices of our common stock and the Notes have been, and may continue to be, volatile. Those prices could be affected by any of the risk factors discussedin this Item. In addition, other factors that could impact the prices of our common stock and/or the Notes include:•announcements by us or our competitors regarding, among other things, strategic changes, new products, product enhancements or technologicaladvances, acquisitions, major transactions, stock repurchases, or management changes;•speculation in the press and the analyst community, including with respect to changes in recommendations or earnings estimates or growth rates byfinancial analysts, changes in investors’ or analysts’ valuation measures for our securities, our credit ratings, or market trends unrelated to ourperformance;•stock sales by our directors, officers, or other significant holders, or stock repurchases by us;•hedging or arbitrage trading activity by third parties, including by the counterparties to the note hedge and warrant transactions that we entered intoin connection with the issuance of the Notes; and•dilution that may occur upon any conversion of the Notes.26Table of ContentsA significant drop in the price of our common stock or the Notes could also expose us to the risk of securities class action lawsuits, which could result insubstantial costs and divert management’s attention and resources, which could adversely affect our business.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesThe following describes our material properties as of the date of this report.We lease a total of approximately 1.1 million square feet of office space covering approximately 72 offices around the world and we own an aggregate ofapproximately 79,000 square feet of office space at three sites in Scotland, Germany, and Indonesia.Other than as described below, these properties are comprised of small and mid-sized facilities that are used to support our administrative, marketing,manufacturing, product development, sales, training, support, and services needs for our two operating segments.Our corporate headquarters is located in a leased facility in Melville, New York, and consists of approximately 49,000 square feet of space under a lease thatwe entered into on February 13, 2015 and that expires in 2027. The Melville facility is used primarily by our executive management and corporate groups,including finance, legal, and human resources, as well as for customer support and services for our Customer Engagement operations.We lease approximately 132,700 square feet of space at a facility in Alpharetta, Georgia under a lease that expires in 2026. The Alpharetta facility is usedprimarily by the administrative, marketing, product development, support, and sales groups for our Customer Engagement operations.We also occupy approximately 176,000 square feet of space at our main facility in Herzliya, Israel under a lease that we renewed on October 1, 2015 and thatexpires in 2025. This Herzliya facility is used primarily for logistics and storage, development, sales, marketing, and support related to our Cyber Intelligenceoperations. We also lease approximately 52,000 square feet of space at secondary facilities in Herzliya under leases with varying expiration dates.From time to time, we may lease or sublease portions of our owned or leased facilities to third parties based on our operational needs. For additionalinformation regarding our lease obligations, see Note 14, “Commitments and Contingencies” to our consolidated financial statements included under Item 8of this report.We believe that our leased and owned facilities are in good operating condition and are adequate for our current requirements, although changes in ourbusiness may require us to acquire additional facilities or modify existing facilities. We believe that alternative locations are available on commerciallyreasonable terms in all areas where we currently do business.Item 3. Legal ProceedingsOn March 26, 2009, legal actions were commenced by Ms. Orit Deutsch, a former employee of our subsidiary, Verint Systems Limited (“VSL”), against VSLin the Tel Aviv Regional Labor Court (Case Number 4186/09) (the “Deutsch Labor Action”) and against CTI in the Tel Aviv District Court (Case Number1335/09) (the “Deutsch District Action”). In the Deutsch Labor Action, Ms. Deutsch filed a motion to approve a class action lawsuit on the grounds that shepurported to represent a class of our employees and former employees who were granted Verint and CTI stock options and were allegedly damaged as a result27Table of Contentsof the suspension of option exercises during the period from March 2006 through March 2010, during which we did not make periodic filings with the SECas a result of certain internal and external investigations and reviews of accounting matters discussed in our prior public filings. In the Deutsch DistrictAction, 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 theirinability to exercise Verint and CTI stock options as a result of alleged negligence by CTI in its financial reporting. The class certification motions did notspecify an amount of damages. On February 8, 2010, the Deutsch Labor Action was dismissed for lack of material jurisdiction and was transferred to the TelAviv 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 inthe Tel Aviv District Court (Case Number 1334/09) (the “Katriel District Action”). In the Katriel Labor Action, Ms. Katriel was seeking to certify a class ofplaintiffs who were granted CTI stock options and were allegedly damaged as a result of the suspension of option exercises during an extended filing delayperiod affecting CTI’s periodic reporting discussed in CTI’s historical SEC filings. In the Katriel District Action, in addition to a small amount of individualdamages, Ms. Katriel was seeking to certify a class of plaintiffs who were allegedly damaged due to their inability to exercise CTI stock options as a result ofalleged negligence by CTI in its financial reporting. The class certification motions did not specify an amount of damages. On March 2, 2010, the KatrielLabor Action was transferred to the Tel Aviv District Court, based on an agreed motion filed by the parties requesting such transfer.On April 4, 2012, Ms. Deutsch and Ms. Katriel filed an uncontested motion to consolidate and amend their claims and on June 7, 2012, the District Courtallowed Ms. Deutsch and Ms. Katriel to file the consolidated class certification motion and an amended consolidated complaint against VSL, CTI, andComverse Limited. Following CTI’s announcement of its intention to effect the Comverse Share Distribution, on July 12, 2012, the plaintiffs filed a motionrequesting that the District Court order CTI to set aside up to $150.0 million in assets to secure any future judgment. The District Court ruled at such time thatit would not decide this motion until the Deutsch and Katriel class certification motion was heard. Plaintiffs initially filed a motion to appeal this ruling inAugust 2012, but subsequently withdrew it in July 2014.Prior to the consummation of the Comverse Share Distribution, CTI either sold or transferred substantially all of its business operations and assets (other thanits equity ownership interests in us and its then-subsidiary, Comverse, Inc.) to Comverse, Inc. or unaffiliated third parties. On October 31, 2012, CTIcompleted the Comverse Share Distribution, in which it distributed all of the outstanding shares of common stock of Comverse, Inc. to CTI’s shareholders. Asa result of the Comverse Share Distribution, Comverse became an independent company and ceased to be a wholly owned subsidiary of CTI, and CTI ceasedto have any material assets other than its equity interest in us. As of February 28, 2017, Mavenir Inc. became successor-in-interest to Comverse, Inc.On February 4, 2013, we completed the CTI Merger. As a result of the CTI Merger, we have assumed certain rights and liabilities of CTI, including anyliability of CTI arising out of the Deutsch District Action and the Katriel District Action. However, under the terms of the Distribution Agreement betweenCTI and Comverse, Inc. relating to the Comverse Share Distribution, we, as successor to CTI, are entitled to indemnification from Comverse, Inc. (nowMavenir) for any losses we suffer in our capacity as successor-in-interest to CTI in connection with the Deutsch District Action and the Katriel District Action.Following an unsuccessful mediation process, the proceeding before the District Court resumed. On August 28, 2016, the District Court (i) denied theplaintiffs’ motion to certify the suit as a class action with respect to all claims relating to Verint stock options and (ii) approved the plaintiffs’ motion tocertify the suit as a class action with respect to claims of current or former employees of Comverse Limited (now Mavenir) or VSL who held unexercised CTIstock 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 evaluatedunder New York law.On December 15, 2016, CTI filed with the Supreme Court a motion for leave to appeal the District Court’s August 28, 2016 ruling. The plaintiffs did not filean appeal of the District Court’s August 28, 2016 ruling. On February 5, 2017, the District Court approved the plaintiffs’ motion to appoint a newrepresentative plaintiff, Mr. David Vaaknin, for the current or former employees of VSL who held unexercised CTI stock options at the time CTI suspendedoption exercises, in replacement of Ms. Deutsch.On August 8, 2017, the Supreme Court partially allowed CTI’s appeal and ordered the case to be returned to the District Court to determine whether a causeof action exists in this case under New York law, based on CTI’s previously submitted expert opinion and the opinion of any expert the plaintiffs elect tointroduce.28Table of ContentsOn November 28, 2017, the plaintiffs submitted an expert opinion regarding New York law. On January 3, 2018, CTI filed a motion to dismiss the motion tocertify the class action on the basis that the New York law opinion submitted by the plaintiffs does not directly address the causes of action in question, oralternatively, to dismiss the portions of the opinion that do not specifically relate to CTI’s expert opinion. On January 22, 2018, the court ruled that theplaintiffs should submit a motion to amend their class certification motion and that CTI’s motion to dismiss would remain pending. Based on input from thecourt, the parties have agreed to enter into a further round of mediation in an effort to settle the matter.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 theoutcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any current claims will have a material effect on ourconsolidated financial position, results of operations, or cash flows.Item 4. Mine Safety Disclosures Not applicable.29Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock trades on the NASDAQ Global Select Market under the symbol “VRNT”.The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported by the NASDAQ GlobalSelect Market. Low HighYear Ended January 31, 2017: First quarter $29.76 $38.00Second quarter $31.43 $37.13Third quarter $33.59 $39.68Fourth quarter $33.40 $38.95 Year Ended January 31, 2018: First quarter $35.90 $44.70Second quarter $38.55 $44.25Third quarter $37.05 $44.10Fourth quarter $38.35 $44.55HoldersThere were approximately 1,800 holders of record of our common stock at March 15, 2018. Such record holders include holders who are nominees for anundetermined number of beneficial owners.DividendsWe have not declared or paid any cash dividends on our equity securities and have no current plans to pay any dividends on our equity securities. We intendto retain our earnings to finance the development of our business, repay debt, and for other corporate purposes. In addition, the terms of our 2017 CreditAgreement restrict our ability to pay cash dividends on shares of our common stock. See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Liquidity and Capital Resources” included under Item 7 of this report and Note 6, “Long-Term Debt” to our consolidated financialstatements included under Item 8 of this report for a more detailed discussion of these limitations.Any future determination as to the payment of dividends on our common stock will be made by our board of directors at its discretion, subject to thelimitations contained in our 2017 Credit Agreement and will depend upon our earnings, financial condition, capital requirements, and other relevant factors.Stock Performance GraphThe following table compares the cumulative total stockholder return on our common stock with the cumulative total return on the NASDAQ CompositeIndex and the NASDAQ Computer & Data Processing Services Index, assuming an investment of $100 on January 31, 2013 through January 31, 2018, andthe reinvestment of any dividends. The comparisons in the graph below are based upon the closing sale prices on NASDAQ for our common stock fromJanuary 31, 2013 through January 31, 2018. This data is not indicative of, nor intended to forecast, future performance of our common stock.30Table of ContentsJanuary 31, 2013 2014 2015 2016 2017 2018Verint Systems Inc. $100.00 $134.44 $157.93 $108.31 $110.50 $123.52NASDAQ Composite Index $100.00 $133.35 $152.66 $153.70 $187.33 $249.85NASDAQ Computer & Data Processing Index $100.00 $145.41 $153.09 $191.82 $222.37 $322.02Recent Sales of Unregistered SecuritiesNone.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNone.On March 29, 2016, we announced that our board of directors had authorized a common stock repurchase program of up to $150 million over two years. Thisprogram expires on March 29, 2018. We have made a total of $46.9 million in repurchases under the program.From time to time, we have purchased treasury stock from directors, officers, and other employees to facilitate income tax withholding and paymentrequirements upon vesting of equity awards during a Company-imposed trading blackout or lockup periods. There was no such activity during the yearended January 31, 2018.Item 6. Selected Financial Data31Table of ContentsThe following selected consolidated financial data has been derived from our audited consolidated financial statements. The data below should be read inconjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 and our consolidated financialstatements and notes thereto included under Item 8 of this report.Our historical results should not be viewed as indicative of results expected for any future period.Five-Year Selected Financial Highlights:Consolidated Statements of Operations Data Year Ended January 31,(in thousands, except per share data) 2018 2017 2016 2015 2014Revenue $1,135,229 $1,062,106 $1,130,266 $1,128,436 $907,292Operating income $48,630 $17,366 $67,852 $79,111 $122,286Net (loss) income $(3,454) $(26,246) $22,228 $36,402 $58,776Net (loss) income attributable to Verint Systems Inc. $(6,627) $(29,380) $17,638 $30,931 $53,757Net (loss) income attributable to Verint Systems Inc. commonshares $(6,627) $(29,380) $17,638 $30,931 $53,583Net (loss) income per share attributable to Verint SystemsInc.: Basic $(0.10) $(0.47) $0.29 $0.53 $1.01Diluted $(0.10) $(0.47) $0.28 $0.52 $0.99Weighted-average shares: Basic 63,312 62,593 61,813 58,096 52,967Diluted 63,312 62,593 62,921 59,374 53,878We have never declared a cash dividend to common stockholders.Consolidated Balance Sheet Data January 31,(in thousands) 2018 2017 2016 2015 2014Total assets $2,580,620 $2,362,784 $2,355,735 $2,340,452 $1,768,192Long-term debt, including current maturities $772,984 $748,871 $738,087 $726,258 $637,670Capital lease obligations, including current portions $4,350 $68 $— $— $—Total stockholders’ equity $1,132,336 $1,015,040 $1,068,164 $1,004,903 $633,118During the five-year period ended January 31, 2018, we acquired a number of businesses, the more significant of which are identified in the table below. Theoperating results of acquired businesses have been included in our consolidated financial statements since their respective acquisition dates.Our consolidated operating results and consolidated financial condition during the five-year period ended January 31, 2018 included the following notabletransactions and items:32Table of ContentsAs of and for theyear endedJanuary 31, Description2018 •Completion of seven business combination throughout the year, for total consideration of approximately $136.0 million. •Losses on early retirements of debt of $2.2 million, associated with refinancing and amending our Credit Agreement. •Provisional deferred income tax expense of $15.0 million related to withholding on foreign earnings which may be repatriated. 2017 •Completion of the acquisitions of Contact Solutions LLC in February 2016 and OpinionLab, Inc. in November 2016. 2016 •None 2015 •Completion of the acquisitions of KANA Software, Inc. and its subsidiaries (“KANA”) in February 2014 and UTX TechnologiesLimited in March 2014. •An income tax benefit of $44.4 million resulting from the reduction of a valuation allowance on our deferred income tax assetsrecorded in connection with the acquisition of KANA. •Losses on early retirements of debt of $12.5 million, primarily associated with an amendment to our Credit Agreement and theearly partial retirement of our term loans. 2014 •Completion of the CTI Merger on February 4, 2013. •Losses on early retirements of debt of $9.9 million, primarily associated with an amendment to our Credit Agreement.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with “Business”under Item 1, “Selected Financial Data” under Item 6, and our consolidated financial statements and the related notes thereto included under Item 8 of thisreport. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and all of which could be affectedby uncertainties and risks. Our actual results may differ materially from the results contemplated in these forward-looking statements as a result of manyfactors including, but not limited to, those described in “Risk Factors” under Item 1A of this report.OverviewOur BusinessVerint is a global leader in Actionable Intelligence solutions. Actionable Intelligence is a necessity in a dynamic world of massive information growthbecause it empowers organizations with crucial insights 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, over 10,000organizations in more than 180 countries, including over 85 percent of the Fortune 100, use Verint solutions to optimize customer engagement and make theworld a safer place.We have established leadership positions in Actionable Intelligence by developing highly-scalable, enterprise-class software and services with advanced,integrated analytics for both structured and unstructured 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 850 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 ofservices, such as strategic consulting, managed services, implementation services, training, maintenance, and 24x7 support. Additionally, we offer a broadrange of deployment options, including cloud, on-premises, and hybrid, and software licensing and delivery models that include perpetual licenses and SaaS.33Table of ContentsIn August 2016, we reorganized into two businesses, and are now reporting our results in two operating segments, Customer Engagement and CyberIntelligence. For the years ended January 31, 2018, 2017, and 2016, our Customer Engagement segment represented approximately 65%, 66%, and 61% ofour total revenue, respectively, while for those same years, our Cyber Intelligence segment represented approximately 35%, 34%, and 39% of our totalrevenue, respectively.Generally, we make business decisions by evaluating the risks and rewards of the opportunities available to us in the markets served by each of our segments.We view each operating segment differently and allocate capital, personnel, resources, and management attention accordingly. In reviewing each operatingsegment, we also review the performance of that segment by geography. Our marketing and sales strategies, expansion opportunities, and product offeringsmay differ materially within a particular segment geographically, as may our allocation of resources between segments. When making decisions regardinginvestments in our business, capital expenditures, or other decisions that may affect our profitability, we also consider the leverage ratio in our revolvingcredit facility. See “— Liquidity and Capital Resources” for more information.Key Trends and Factors That May Impact our PerformanceWe see the following trends and factors which may impact our performance:Customer Engagement•Many organizations have significant investments in existing legacy systems that they wish to protect. Our open portfolio is designed to easilyintegrate into customers’ current and evolving technology environments, and easily share data across the organization. Our open portfolio is alsocompatible with leading providers of call center communications products, which provides organizations flexibility to select the most suitablesolutions for their contact centers, while leveraging Verint’s portfolio for the both the contact center and enterprise. We believe this compatibility isparticularly important now as the contact center communications market is evolving with new entrants offering disruptive approaches tocommunications.•Many organizations are looking to modernize their legacy customer engagement operations by transitioning to the cloud, adopting modernarchitectures that facilitate the orchestration of disparate systems and the sharing of data across enterprise functions. We offer organizations a smoothtransition to the cloud, and through our hybrid cloud model, organizations can deploy solutions from our portfolio in public cloud (SaaS), privatecloud and perpetual license models, or combinations of these models. Organizations are looking for solutions that incorporate machine learning andanalytics to automate work and reduce manual labor. Our solutions enable organizations to draw on the power of automation to reduce repetitive,manual tasks, increase employee efficiency, and lower cost. Our growth will be impacted by the rate of adoption of our new solutions and the rate ofmarket saturation for our legacy, more mature solutions.Cyber Intelligence•Security and intelligence organizations are finding it more difficult to detect, investigate and neutralize threats. Many of these organizations areseeking to deploy more advanced data mining solutions that can help them capture and analyze data from multiple sources to effectively andefficiently address the challenge of the increased complexity and sophistication of today’s security threats and encrypted communications. Verinthas a long history of working closely with leading security organizations around the world and has designed its data mining software portfolio basedon a deep understanding of our customers’ needs, proven intelligence methodologies and deep domain expertise in an effort to help them addressthese constantly evolving challenges. Our growth will be impacted by our ability to innovate and work with customers to address the more complexsecurity and intelligence challenges.•Many security organizations are seeking advanced data mining solutions that automate functions historically performed manually to improve thequality and speed of investigations and intelligence production. These organizations are also increasingly seeking artificial intelligence and otheradvanced data analysis tools such as predictive intelligence to gain intelligence faster with fewer analysts and data scientists, especially given theshortage of qualified personnel in today’s market. Our growth will be impacted by our ability to leverage automation and predictive intelligencetechnologies to improve the quality and speed of investigations and intelligence production.See Item 1, “Business”, of this report for more information on key trends that we believe are driving demand for our solutions and “Risk Factors” under Item1A of this report for a more complete description of risks that may impact future revenue and profitability.34Table of ContentsCritical Accounting Policies and EstimatesAn appreciation of our critical accounting policies is necessary to understand our financial results. The accounting policies outlined below are considered tobe critical because they can materially affect our operating results and financial condition, as these policies may require us to make difficult and subjectivejudgments regarding uncertainties. The accuracy of these estimates and the likelihood of future changes depend on a range of possible outcomes and anumber of underlying variables, many of which are beyond our control, and there can be no assurance that our estimates are accurate.Revenue RecognitionOur revenue recognition policy is a critical component of determining our operating results and is based on a complex set of accounting rules that require usto make significant judgments and estimates. We derive and report our revenue in two categories: (a) product revenue, including licensing of softwareproducts and sale of hardware products (which include software that works together with the hardware to deliver the product’s essential functionality), and (b)service and support revenue, including revenue from installation services, post-contract customer support (“PCS”), project management, hosting services,SaaS, application managed services, product warranties, business advisory consulting and training services. We follow the appropriate revenue recognitionrules for each of these revenue streams. For additional information, see Note 1, “Summary of Significant Accounting Policies” to our consolidated financialstatements included under Item 8 of this report. Revenue recognition for a particular arrangement is dependent upon such factors as the level ofcustomization within the solution and the contractual delivery, acceptance, payment, and support terms with the customer. Significant judgment is oftenrequired to conclude on each of these factors, and if we were to change any of these assumptions or judgments, it could cause a material increase or decreasein the amount of revenue that we report in a particular period.We generally consider a purchase order or executed sales quote, when combined with a master license agreement, to constitute evidence of an arrangement.Delivery occurs when the product is shipped or transmitted and title and risk of loss have transferred to the customers. Our typical customer arrangements donot include substantive product acceptance provisions; however, if such provisions are provided, delivery is deemed to occur upon acceptance. We considerthe fee to be fixed or determinable unless the fee is subject to refund or adjustment or is not payable within our standard payment terms. If the fee due from acustomer is not fixed or determinable due to extended payment terms, revenue is recognized when payment becomes due or upon cash receipt, whichever isearlier.For multiple-element arrangements comprised only of tangible products containing software components and non-software components and related services,we allocate revenue to each element in an arrangement based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specificobjective evidence (“VSOE”), if available, third-party evidence (“TPE”), if VSOE is not available, or estimated selling price (“ESP”), if neither VSOE nor TPEis available. The total transaction revenue is allocated to the multiple elements based on each element’s relative selling price compared to the total sellingprice.We account for multiple-element arrangements that contain only software and software-related elements by allocating a portion of the total purchase price tothe undelivered elements, primarily installation services, PCS, consulting, and training, using VSOE of fair value of the undelivered elements. The remainingportion of the total transaction value is allocated to the delivered software, referred to as the residual method. If we are unable to establish VSOE for theundelivered elements of the arrangement, revenue recognition is deferred for the entire arrangement until all elements of the arrangement are delivered, unlessthe only undelivered element is PCS, in which case we recognize the arrangement fee ratably over the PCS period.For multiple-element arrangements that are comprised of a combination of software and non-software deliverables, the total transaction value is bifurcatedbetween the software deliverables and non-software deliverables based on the relative selling prices of the software and non-software deliverables as a group.Revenue is then recognized for the software and software-related services following the residual method or ratably over the PCS period if VSOE for PCS doesnot exist, and for the non-software deliverables following the revenue recognition methodology outlined above for multiple-element arrangements thatcontain tangible products and other non-software related services.Our policy for establishing VSOE for installation, business advisory consulting, and training is based upon an analysis of separate sales of services. Weutilize either the substantive renewal rate approach or the bell-shaped curve approach to establish VSOE for our PCS offerings, depending upon the businesssegment, geographical region, or product line. The timing of revenue recognition on software licenses and other revenue could be significantly impacted ifwe are unable to maintain VSOE on one or more undelivered elements during any quarterly period. Loss of VSOE could result in (i) the complete deferral ofall revenue or (ii) ratable recognition of all revenue under a customer arrangement until such time as VSOE is re-established.35Table of ContentsIf we are unable to determine the selling price because VSOE or TPE does not exist, we determine ESP for the purposes of allocating the arrangement byconsidering several external and internal factors including, but not limited to, pricing practices, similar product offerings, margin objectives, geographies inwhich we offer our products and services, internal costs, competition, and product lifecycle. The determination of ESP is made through consultation with andapproval by our management, taking into consideration our go-to-market strategies. We have established processes to update ESP for each element, whenappropriate, to ensure that it reflects recent pricing experience.PCS revenue is derived from providing technical software support services and unspecified software updates and upgrades to customers on a when-and-if-available basis. PCS revenue is recognized ratably over the term of the maintenance period which, in most cases, is one year. When PCS is included within amultiple-element arrangement, we utilize either the substantive renewal rate approach or the bell-shaped curve approach to establish VSOE of the PCS,depending upon the business operating segment, geographical region, or product line.Under the substantive renewal rate approach, we believe it is necessary to evaluate whether both the support renewal rate and term are substantive, andwhether the renewal rate is being consistently applied to subsequent renewals for a particular customer. We establish VSOE under this approach throughanalyzing the renewal rate stated in the customer agreement and determining whether that rate is above the minimum substantive VSOE renewal rateestablished for that particular PCS offering. The minimum substantive VSOE rate is determined based upon an analysis of renewal rates associated withhistorical PCS contracts. Typically, renewal rates of 15% for PCS plans that provide when-and-if-available upgrades, and 10% for plans that do not providefor when-and-if-available upgrades, would be deemed to be minimum substantive renewal rates.Under the bell-shaped curve approach of establishing VSOE, we perform a VSOE compliance test to ensure that a substantial majority (75% or over) of ouractual PCS renewals are within a narrow range of plus or minus 15% of the median pricing.Some of our arrangements require significant customization of the product to meet the particular requirements of the customer. For these arrangements,revenue is recognized under contract accounting methods, typically using the percentage of completion (“POC”) method. Under the POC method, revenuerecognition is generally based upon the ratio of hours incurred to date to the total estimated hours required to complete the contract. Profit estimates on long-term contracts are revised periodically based on changes in circumstances, and any losses on contracts are recognized in the period that such losses becomeevident. Generally, the terms of long-term contracts provide for progress billings based on completion of milestones or other defined phases of work.Significant judgment is often required when estimating total hours and progress to completion on these arrangements, as well as whether a loss is expected tobe incurred on the contract due to several factors including the degree of customization required and the customer’s existing environment. We use historicalexperience, project plans, and an assessment of the risks and uncertainties inherent in the arrangement to establish these estimates. Uncertainties in thesearrangements include implementation delays or performance issues that may or may not be within our control.We extend customary trade payment terms to our customers in the normal course of conducting business. To assess the probability of collection for purposesof revenue recognition, we have established credit policies that establish prudent credit limits for our customers. These credit limits are based upon our riskassessment of the customer’s ability to pay, their payment history, geographic risk, and other factors, and are not contingent upon the resale of the product orupon the collection of payments from their customers. These credit limits are reviewed and revised periodically on the basis of updated customer financialstatement information, payment performance, and other factors. When a customer is not deemed creditworthy, revenue is recognized when payment isreceived.We record provisions for estimated product returns in the same period in which the associated revenue is recognized. We base these estimates of productreturns upon historical levels of sales returns and other known factors. Actual product returns could be different from our estimates and current or futureprovisions for product returns may differ from historical provisions. Concessions granted to customers are recorded as reductions to revenue in the period inwhich they were granted and have been minimal in both amount and frequency.Product revenue derived from shipments to resellers and OEMs who purchase our products for resale are generally recognized when such products are shipped(on a “sell-in” basis) since we do not expect our resellers or OEMs to carry inventory of our products. This policy is predicated on our ability to estimate salesreturns as well as other criteria regarding these customers. We are also required to evaluate whether our resellers and OEMs have the ability to honor theircommitment to make fixed or determinable payments regardless of whether they collect payment from their customers. In this regard, we assess whether ourresellers and OEMs are new, poorly capitalized, or experiencing financial difficulty, and whether they have a pattern of not paying as amounts become dueon previous arrangements or seeking payment terms longer than those provided to end customers. If we were to change any of these assumptions orjudgments, it could cause a material change to the revenue36Table of Contentsreported in a particular period. We have historically experienced insignificant product returns from resellers and OEMs, and our payment terms for thesecustomers are similar to those granted to our end-users. Our policy also presumes that we have no significant performance obligations in connection with thesale of our products by our resellers and OEMs to their customers. If a reseller or OEM develops a pattern of payment delinquency, or seeks payment termslonger than generally granted to our resellers or OEMs, we defer the recognition of revenue from transactions with that reseller or OEM until the receipt ofcash.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenuerecognition guidance under GAAP. The standard’s core principle is that an entity should recognize revenue when it transfers promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09defines a five-step process to implement this core principle. In implementing this new principle, it is possible more judgment and estimates may be requiredwithin the revenue recognition process than are required under existing revenue recognition guidance. We adopted ASU No. 2014-09 under the modifiedretrospective option effective February 1, 2018. For additional information regarding the new revenue recognition accounting standard, please refer to Note1, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included under Item 8 of this report, under “RecentAccounting Pronouncements”.Allowance for Doubtful AccountsWe estimate the collectability of our accounts receivable balances each accounting period and adjust our allowance for doubtful accounts accordingly. Weexercise a considerable amount of judgment in assessing the collectability of accounts receivable, including consideration of the creditworthiness of eachcustomer, their collection history, and the related aging of past due accounts receivable balances. We evaluate specific accounts when we learn that acustomer may be experiencing a deterioration of its financial condition due to lower credit ratings, bankruptcy, or other factors that may affect its ability torender payment. If the financial condition of our customers were to deteriorate, affecting their ability to make payments, additional customer-specificprovisions for doubtful accounts may be required. Any such additional provisions would reduce operating income in the periods in which they wererecorded.Accounting for Business CombinationsWe allocate the purchase price of acquired companies to the tangible and intangible assets acquired, including in-process research and development assets,and liabilities assumed, based upon their estimated fair values at the acquisition date. These fair values are typically estimated with assistance fromindependent valuation specialists. The purchase price allocation process requires us to make significant estimates and assumptions, especially at theacquisition date with respect to intangible assets, contractual support obligations assumed, contingent consideration arrangements, and pre-acquisitioncontingencies.Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historicalexperience and information obtained from the management of the acquired companies and are inherently uncertain.Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:•future expected cash flows from software license sales, support agreements, consulting contracts, other customer contracts, and acquired developedtechnologies;•expected costs to develop in-process research and development into commercially viable products and estimated cash flows from the projects whencompleted;•the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be usedin the combined company’s product portfolio;•cost of capital and discount rates; and•estimating the useful lives of acquired assets as well as the pattern or manner in which the assets will amortize.In connection with the purchase price allocations for applicable acquisitions, we estimate the fair value of the contractual support obligations we areassuming from the acquired business. The estimated fair value of the support obligations is determined utilizing a cost build-up approach, which determinesfair value by estimating the costs related to fulfilling the obligations plus a reasonable profit margin. The estimated costs to fulfill the support obligations arebased on the historical37Table of Contentsdirect costs related to providing the support services. The sum of these costs and operating profit represents an approximation of the amount that we would berequired to pay a third party to assume the support obligations.Impairment of Goodwill and Other Intangible AssetsWe test goodwill for impairment at the reporting unit level, which can be an operating segment or one level below an operating segment, on an annual basisas of November 1, or more frequently if changes in facts and circumstances indicate that impairment in the value of goodwill may exist. As of January 31,2018, our reporting units are Customer Engagement, Cyber Intelligence (excluding situational intelligence solutions), and Situational Intelligence, which isa component of our Cyber Intelligence operating segment.We review goodwill for impairment utilizing either a qualitative assessment or a two-step process. If we decide that it is appropriate to perform a qualitativeassessment and conclude that the fair value of a reporting unit more likely than not exceeds its carrying value, no further evaluation is necessary. Forreporting units where we perform the two-step process, the first step requires us to estimate the fair value of each reporting unit and compare that fair value tothe respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not consideredimpaired and no further evaluation is necessary. If the carrying value is higher than the estimated fair value, there is an indication that impairment may existand the second step is required. In the second step, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over thefair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit’s goodwill, thedifference is recognized as an impairment charge.For reporting units where we decide to perform a qualitative assessment, we assess and make judgments regarding a variety of factors which potentiallyimpact the fair value of a reporting unit, including general economic conditions, industry and market-specific conditions, customer behavior, cost factors, ourfinancial performance and trends, our strategies and business plans, capital requirements, management and personnel issues, and our stock price, amongothers. We then consider the totality of these and other factors, placing more weight on the events and circumstances that are judged to most affect a reportingunit’s fair value or the carrying amount of its net assets, to reach a qualitative conclusion regarding whether it is more likely than not that the fair value of areporting unit exceeds its carrying amount.For reporting units where we perform the two-step process, we utilize one or more of three primary approaches to assess fair value: (a) an income-basedapproach, using projected discounted cash flows, (b) a market-based approach, using valuation multiples of comparable companies, and (c) a transaction-based approach, using valuation multiples for recent acquisitions of similar businesses made in the marketplace.Our estimate of fair value of each reporting unit is based on a number of subjective factors, including: (a) appropriate consideration of valuation approaches(income approach, comparable public company approach, and comparable transaction approach), (b) estimates of future growth rates, (c) estimates of ourfuture cost structure, (d) discount rates for our estimated cash flows, (e) selection of peer group companies for the comparable public company and thecomparable transaction approaches, (f) required levels of working capital, (g) assumed terminal value, and (h) time horizon of cash flow forecasts.The determination of reporting units also requires judgment. We assess whether a reporting unit exists within a reportable segment by identifying the unit,determining whether the unit qualifies as a business under GAAP, and assessing the availability and regular review by segment management of discretefinancial information for the unit.We review intangible assets that have finite useful lives and other long-lived assets when an event occurs indicating the potential for impairment. If anyindicators are present, we perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the assets inquestion to their carrying amounts. If the undiscounted cash flows used in the test for recoverability are less than the long-lived assets carrying amount, wedetermine the fair value of the long-lived asset and recognize an impairment loss if the carrying amount of the long-lived asset exceeds its fair value. Theimpairment loss recognized is the amount by which the carrying amount of the long-lived asset exceeds its fair value.For all of our goodwill and other intangible asset impairment reviews, the assumptions and estimates used in the process are complex and often subjective.They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in ourbusiness strategy or our internal forecasts. Although we believe the assumptions, judgments, and estimates we have used in our assessments are reasonableand appropriate, a material change in any of our assumptions or external factors could lead to future goodwill or other intangible asset impairment charges.Based upon our November 1, 2017 goodwill impairment reviews, we concluded that the estimated fair values of our Customer Engagement, CyberIntelligence, and Situational Intelligence reporting units significantly exceeded their carrying values.38Table of ContentsOur Customer Engagement, Cyber Intelligence, and Situational Intelligence reporting units carried goodwill of $1.3 billion, $126.0 million, and $11.3million, respectively, at January 31, 2018.Income TaxesWe account for income taxes under the asset and liability method, which includes the recognition of deferred tax assets and liabilities for the expected futuretax consequences of events that have been included in our consolidated financial statements. Under this approach, deferred taxes are recorded for the futuretax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes representsincome taxes paid or payable for the current year plus deferred taxes. Deferred taxes result from differences between the financial statement and tax bases ofour assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws orrates are not anticipated.We are subject to income taxes in the United States and numerous foreign jurisdictions. The calculation of our income tax provision involves the applicationof complex tax laws and requires significant judgment and estimates. On December 22, 2017, the 2017 Tax Act was enacted in the United States. The 2017Tax Act significantly revises the Internal Revenue Code of 1986, as amended, and it includes fundamental changes to taxation of U.S. multinationalcorporations. Compliance with the 2017 Tax Act will require significant complex computations not previously required by U.S. tax law. It is unclear howcertain provisions of the 2017 Tax Act will be applied absent further legislative, regulatory, or accounting clarification and guidance. In addition, it isuncertain if and to what extent various states will enact legislation to conform to the 2017 Tax Act. It is also uncertain if and to what extent foreigngovernments may enact tax legislation in response to the 2017 Tax Act. Also, on December 22, 2017, the staff of the Securities and Exchange Commissionissued Staff Accounting Bulletin No. 118 (“SAB No. 118”). SAB No. 118 provides guidance on accounting for the tax effects of the 2017 Tax Act and allowsregistrants to record provisional amounts for a period of up to one year from the date of enactment of the 2017 Tax Act. We consider amounts related to the2017 Tax Act to be reasonably estimated as of January 31, 2018. We expect to refine and complete the accounting for the 2017 Tax Act during the yearending January 31, 2019 as we obtain, prepare, and analyze additional information and as additional legislative, regulatory, and accounting guidance andinterpretations become available.We evaluate the realizability of our deferred tax assets for each jurisdiction in which we operate at each reporting date, and we establish a valuationallowance when it is more likely than not that all or a portion of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income of the same character and in the same jurisdiction. We consider all available positive and negativeevidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and taxplanning strategies. In circumstances where there is sufficient negative evidence indicating that our deferred tax assets are not more likely than not realizable,we establish a valuation allowance.We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in atax return by assessing whether they are more likely than not sustainable, based solely on their technical merits, upon examination, and including resolutionof any related appeals or litigation process. The second step is to measure the associated tax benefit of each position as the largest amount that we believe ismore likely than not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of taxbenefits recognized in our financial statements represent our unrecognized income tax benefits, which we either record as a liability or as a reduction ofdeferred tax assets. Our policy is to include interest (expense and/or income) and penalties related to unrecognized income tax benefits as a component of theprovision for income taxes.ContingenciesWe recognize an estimated loss from a claim or loss contingency when and if information available prior to issuance of the financial statements indicates thatit is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can bereasonably estimated. Accounting for claims and contingencies requires the use of significant judgment and estimates. One notable potential source of losscontingencies is pending or threatened litigation. Legal counsel and other advisors and experts are consulted on issues related to litigation as well as onmatters related to contingencies occurring in the ordinary course of business.Accounting for Stock-Based CompensationWe recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of the award.39Table of ContentsDuring the three-year period ended January 31, 2018, restricted stock units were our predominant stock-based payment award. The fair value of these awardsis equivalent to the market value of our common stock on the grant date.We periodically award restricted stock units to executive officers and certain employees that vest upon the achievement of specified performance goals ormarket conditions. The recognition of the compensation costs of the performance-based awards with performance goals requires an assessment of theprobability that the specified performance criteria will be achieved. At each reporting date, we update our assessment of the probability that the specifiedperformance criteria will be achieved and adjust our estimate of the fair value of the award, if necessary. For the performance-based awards with marketconditions, the condition is incorporated into the grant date fair value valuation of the award and compensation costs are recognized even if the marketcondition is not satisfied.Changes in assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. Theassumptions we use in calculating the fair value of stock-based payment awards represent our best estimates, which involve inherent uncertainties and theapplication of judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially differentin the future.Cost of RevenueWe have made an accounting policy election whereby certain costs of product revenue, including hardware and third-party software license fees, arecapitalized and amortized over the same period that product revenue is recognized, while installation and other service costs are generally expensed asincurred, except for certain contracts recognized according to contract accounting.For example, in a multiple-element arrangement where revenue is recognized over the PCS support period, the cost of revenue associated with the product iscapitalized upon product delivery and amortized over that same period. However, the cost of revenue associated with the services is expensed as incurred inthe period in which the services are performed. In addition, we expense customer acquisition and origination costs to selling, general and administrativeexpenses, including sales commissions, as incurred, with the exception of certain sales referral fees in our Cyber Intelligence segment which are capitalizedand amortized ratably over the revenue recognition period.The new revenue recognition accounting standard discussed above includes guidance on how to account for costs related to a contract, distinguishingbetween costs of obtaining a contract and costs of fulfilling a contract. When the application of this guidance results in the capitalization of costs, additionalguidance is provided on determining an appropriate amortization period and on impairment considerations. For additional information regarding the newrevenue recognition accounting standard, please refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to Consolidated FinancialStatements included under Item 8 of this report, under “Recent Accounting Pronouncements”.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 operatingincome are typically highest in the fourth quarter and lowest in the first quarter (prior to the impact of unusual or nonrecurring items). Moreover, revenue andoperating 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. Inaddition, we generally receive a higher volume of orders in the last month of a quarter, with orders concentrated in the later part of that month. We believethat these seasonal and cyclical factors primarily reflect customer spending patterns and budget cycles, as well as the impact of incentive compensation plansfor our sales personnel. While seasonal and cyclical factors such as these are common in the software and technology industry, this pattern should not beconsidered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, may also have animpact on our business and financial results.Overview of Operating Results 40Table of ContentsThe following table sets forth a summary of certain key financial information for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands, except per share data) 2018 2017 2016Revenue $1,135,229 $1,062,106 $1,130,266Operating income $48,630 $17,366 $67,852Net (loss) income attributable to Verint Systems Inc. $(6,627) $(29,380) $17,638Net (loss) income per common share attributable to Verint Systems Inc.: Basic $(0.10) $(0.47) $0.29 Diluted $(0.10) $(0.47) $0.28Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Our revenue increased approximately $73.1 million, or 7%, from $1,062.1 millionin the year ended January 31, 2017 to $1,135.2 million in the year ended January 31, 2018. The increase consisted of a $52.0 million increase in service andsupport revenue and a $21.1 million increase in product revenue. In our Cyber Intelligence segment, revenue increased approximately $39.0 million, or11%, from $356.2 million in the year ended January 31, 2017 to $395.2 million in the year ended January 31, 2018. The increase consisted of a $20.9million increase in service and support revenue and $18.1 million increase in product revenue. In our Customer Engagement segment, revenue increasedapproximately $34.2 million, or 5%, from $705.9 million in the year ended January 31, 2017 to $740.1 million in the year ended January 31, 2018. Theincrease consisted of a $31.1 million increase in service and support revenue and a $3.1 million increase in product revenue. For additional details on ourrevenue by segment, see “—Revenue by Operating Segment”. Revenue in the Americas, EMEA, and APAC represented approximately 53%, 31%, and 16%of our total revenue, respectively, in the year ended January 31, 2018, compared to approximately 54%, 30%, and 16%, respectively, in the year endedJanuary 31, 2017. Further details of changes in revenue are provided below.Operating income was $48.6 million in the year ended January 31, 2018 compared to $17.4 million in the year ended January 31, 2017. This increase inoperating income was primarily due to a $48.9 million increase in gross profit, reflecting increased gross profit in both of our segments, partially offset by an$17.7 million increase in operating expenses, which primarily consisted of a $19.6 million increase in net research and development expenses and an $8.0million increase in selling, general and administrative expenses, partially offset by a $9.9 million decrease in amortization related to other acquiredintangible assets. Further details of changes in operating income are provided below.Net loss attributable to Verint Systems Inc. was $6.6 million, and net loss per common share was $0.10, in the year ended January 31, 2018, compared to a netloss attributable to Verint Systems Inc. of $29.4 million, and net loss per common share of $0.47, in the year ended January 31, 2017. The decrease in net lossattributable to Verint Systems Inc. and net loss per common share in the year ended January 31, 2018 was primarily due to a $31.2 million increase inoperating income, as described above, a $1.5 million increase in interest income, and a $12.8 million increase in other income. These were partially offset bya $1.0 million increase in interest expense, a $2.1 million loss on extinguishment of debt, and a $19.6 million increase in our provision for income taxesprimarily resulting from a $15.0 million accrual for withholding taxes on foreign cash we may repatriate in the future.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 fluctuationsin applicable foreign currency exchange rates. When comparing average exchange rates for the year ended January 31, 2018 to average exchange rates forthe year ended January 31, 2017, the U.S. dollar weakened relative to the euro, Australian dollar and the Singapore dollar, resulting in an overall increase inour revenue on a U.S. dollar-denominated basis. Furthermore, the U.S. dollar weakened relative to our Israeli shekel rate (hedged and unhedged), resulting inan overall increase in operating expenses on a U.S. dollar-denominated basis. For the year ended January 31, 2018, had foreign exchange rates remainedunchanged from rates in effect for the year ended January 31, 2017, our revenue would have been approximately $4.8 million lower and our cost of revenueand operating expenses on a combined basis would have been approximately $10.7 million lower, which would have resulted in a $5.9 million increase inoperating income.As of January 31, 2018, we employed approximately 5,200 professionals, including part-time employees and certain contractors, compared to approximately5,100 at January 31, 2017. Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Our revenue decreased approximately $68.2 million to $1,062.1 million in theyear ended January 31, 2017 from $1,130.3 million in the year ended January 31, 2016. The decrease consisted of a $76.9 million decrease in productrevenue, partially offset by an $8.7 million increase in service and support revenue. In our Cyber Intelligence segment, revenue decreased approximately$79.2 million, or 18%, from $435.4 million in41Table of Contentsthe year ended January 31, 2016 to $356.2 million in the year ended January 31, 2017. The decrease consisted of a $55.8 million decrease in product revenueand a $23.4 million decrease in service and support revenue. In our Customer Engagement segment, revenue increased approximately $11.0 million, or 2%,to $705.9 million in the year ended January 31, 2017 from $694.9 million in the year ended January 31, 2016. The increase consisted of a $32.1 millionincrease in service and support revenue, partially offset by a $21.1 million decrease in product revenue. For additional details on our revenue by segment, see“—Revenue by Operating Segment”. Revenue in the Americas, EMEA, and APAC represented approximately 54%, 30%, and 16% of our total revenue,respectively, in the year ended January 31, 2017, compared to approximately 51%, 31%, and 18%, respectively, in the year ended January 31, 2016. Furtherdetails of changes in revenue are provided below.Operating income was $17.4 million in the year ended January 31, 2017 compared to $67.9 million in the year ended January 31, 2016. This decrease inoperating income was primarily due to a $61.9 million decrease in gross profit primarily due to decreased gross profit in our Cyber Intelligence segment,partially offset by an $11.4 million decrease in operating expenses, which primarily consisted of a $6.6 million decrease in net research and developmentexpenses and a $5.7 million decrease in selling, general and administrative expenses. Further details of changes in operating income are provided below.Net loss attributable to Verint Systems Inc. was $29.4 million, and net loss per common share was $0.47 in the year ended January 31, 2017, compared to netincome attributable to Verint Systems Inc. of $17.6 million, and diluted net income per common share of $0.28, in the year ended January 31, 2016. Thedecrease in net income attributable to Verint Systems Inc. and diluted net income per common share in the year ended January 31, 2017 was primarily due todecreased operating income, as described above, a $1.5 million decrease net income attributable to our noncontrolling interests, a $1.1 million increase ininterest expense, and a $1.8 million increase in our provision for income taxes. These increases were partially offset by a $5.3 million decrease in net foreigncurrency losses. When comparing average exchange rates for the year ended January 31, 2017 to average exchange rates for the year ended January 31, 2016, the U.S. dollarstrengthened relative to the British pound sterling and our hedged Israeli shekel rate, resulting in an overall decrease in our revenue, cost of revenue, andoperating expenses on a U.S. dollar-denominated basis. For the year ended January 31, 2017, had foreign exchange rates remained unchanged from rates ineffect for the year ended January 31, 2016, our revenue would have been approximately $10.2 million higher and our cost of revenue and operating expenseson a combined basis would have been approximately $17.1 million higher, which would have resulted in a $6.9 million decrease in operating income. As of January 31, 2017, we employed approximately 5,100 professionals, including part-time employees and certain contractors, compared to approximately5,000 at January 31, 2016. Revenue by Operating Segment The following table sets forth revenue for each of our operating segments for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31, % Change(in thousands) 2018 2017 2016 2018 - 2017 2017 - 2016Customer Engagement $740,067 $705,897 $694,857 5% 2%Cyber Intelligence 395,162 356,209 435,409 11% (18)%Total revenue $1,135,229 $1,062,106 $1,130,266 7% (6)% Customer Engagement Segment Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Customer Engagement revenue increased approximately $34.2 million, or 5%,from $705.9 million in the year ended January 31, 2017 to $740.1 million in the year ended January 31, 2018. The increase consisted of a $31.1 millionincrease in service and support revenue and a $3.1 million increase in product revenue. The increase in service and support revenue was primarily attributableto growth in sales of our cloud-based solutions during the year ended January 31, 2018. The increase in product revenue primarily reflects a modest increasein product deliveries during the year ended January 31, 2018. We continue to experience a shift in our revenue mix from product revenue to service andsupport revenue as a result of several factors, including a higher component of service offerings in our standard arrangements (including licenses sold throughcloud deployment), an increase in services associated with customer product upgrades, and growth in our customer installed base, both organically and as aresult of business combinations. 42Table of ContentsYear Ended January 31, 2017 compared to Year Ended January 31, 2016. Customer Engagement revenue increased approximately $11.0 million, or 2%,from $694.9 million in the year ended January 31, 2016 to $705.9 million in the year ended January 31, 2017. The increase consisted of a $32.1 millionincrease in service and support revenue, partially offset by a $21.1 million decrease in product revenue. The increase in Customer Engagement revenuereflects the implementation of our product strategy of expanding our portfolio of Customer Engagement Solutions, through both internal development andacquisitions, and our go-to-market strategy of offering customers the ability to purchase our solutions individually or part of a more comprehensivedeployment.Cyber Intelligence Segment Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Cyber Intelligence revenue increased approximately $39.0 million, or 11%, from$356.2 million in the year ended January 31, 2017 to $395.2 million in the year ended January 31, 2018. The increase consisted of a $20.9 million increasein service and support revenue and an $18.1 million increase in product revenue. The increase in service and support revenue was primarily attributable to anincrease in progress realized during the current year on projects with revenue recognized using the POC method, some of which commenced in previousyears, an increase in support services revenue from new and existing customers, and an increase in revenue from our SaaS offerings. The increase in productrevenue was primarily due to an increase in product deliveries and, to a lesser extent, an increase in progress realized during the current year on projects withrevenue recognized using the POC method, some of which commenced in previous years.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Cyber Intelligence revenue decreased approximately $79.2 million, or 18%, from$435.4 million in the year ended January 31, 2016 to $356.2 million in the year ended January 31, 2017. The decrease consisted of a $55.8 million decreasein product revenue and a $23.4 million decrease in service and support revenue. The decrease in product revenue was primarily due to a decrease in productdeliveries and, to a lesser extent, a decrease in progress realized during the current year on projects with revenue recognized using the POC method, some ofwhich commenced in previous years. The decrease in service and support revenue was primarily attributable to a decrease in progress realized during thecurrent year on projects with revenue recognized using the POC method, some of which commenced in previous years, partially offset by an increase insupport and other value-added services revenue from new and 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 thevariety of customized configurations for each product we sell, we are unable to quantify the amount of any revenue increase attributable to a change in theprice 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) product revenue, including licensing of software products and sale of hardware products (whichinclude software that works together with the hardware to deliver the product’s essential functionality), and (b) service and support revenue, includingrevenue from installation services, post-contract customer support, project management, hosting services, cloud deployments, SaaS, application managedservices, product warranties, and business advisory consulting and training services. The following table sets forth product revenue and service and support revenue for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31, % Change(in thousands) 2018 2017 2016 2018 - 2017 2017 - 2016Product revenue $399,662 $378,504 $455,406 6% (17)%Service and support revenue 735,567 683,602 674,860 8% 1%Total revenue $1,135,229 $1,062,106 $1,130,266 7% (6)% Product Revenue Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Product revenue increased approximately $21.2 million, or 6%, from $378.5million for the year ended January 31, 2017 to $399.7 million for the year ended January 31, 2018,43Table of Contentsresulting from an $18.1 million increase in our Cyber Intelligence segment and a $3.1 million increase in our Customer Engagement segment.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Product revenue decreased approximately $76.9 million, or 17%, from $455.4million for the year ended January 31, 2016 to $378.5 million for the year ended January 31, 2017, resulting from a $55.8 million decrease in our CyberIntelligence segment and a $21.1 million decrease in our Customer Engagement segment.For additional information see “—Revenue by Operating Segment”. Service and Support Revenue Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Service and support revenue increased approximately $52.0 million, or 8%, from$683.6 million for the year ended January 31, 2017 to $735.6 million for the year ended January 31, 2018, resulting from a $31.1 million increase in ourCustomer Engagement segment and a $20.9 million increase in our Cyber Intelligence segment.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Service and support revenue increased approximately $8.7 million, or 1%, from$674.9 million for the year ended January 31, 2016 to $683.6 million for the year ended January 31, 2017, resulting from a $32.1 million increase in ourCustomer Engagement segment, partially offset by a decrease of $23.4 million in our Cyber Intelligence segment.For additional information see “— Revenue by Operating Segment”.Cost of Revenue The following table sets forth cost of revenue by product and service and support, as well as amortization of acquired technology for the years endedJanuary 31, 2018, 2017, and 2016: Year Ended January 31, % Change(in thousands) 2018 2017 2016 2018 - 2017 2017 - 2016Cost of product revenue $131,989 $123,279 $145,071 7% (15)%Cost of service and support revenue 276,582 261,978 248,061 6% 6%Amortization of acquired technology 38,216 37,372 35,774 2% 4%Total cost of revenue $446,787 $422,629 $428,906 6% (1)% We exclude certain costs of both product revenue and service and support revenue, including shared support costs, stock-based compensation, and assetimpairment charges, among others, when calculating our operating segment gross margins.Cost of Product Revenue Cost of product revenue primarily consists of hardware material costs and royalties due to third parties for software components that are embedded in oursoftware solutions. When revenue is deferred, we also defer hardware material costs and third-party software royalties and recognize those costs over the sameperiod that the product revenue is recognized. Cost of product revenue also includes amortization of capitalized software development costs, employeecompensation and related expenses associated with our global operations, facility costs, and other allocated overhead expenses. In our Cyber Intelligencesegment, cost of product revenue also includes employee compensation and related expenses, contractor and consulting expenses, and travel expenses, ineach case for resources dedicated to project management and associated product delivery.Our product gross margins are impacted by the mix of products that we sell from period to period. As with many other technology companies, our softwareproducts tend to have higher gross margins than our hardware products. Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Cost of product revenue increased approximately 7% from $123.3 million for theyear ended January 31, 2017 to $132.0 million for the year ended January 31, 2018, primarily due to increased contractor expenses and, to a lesser extent, anincrease in material costs in our Cyber Intelligence segment, driven primarily by increased revenue activity as discussed above. Our overall product grossmargins were 67% in each of the years ended January 31, 2018 and 2017. Product gross margins in our Customer Engagement segment decreased slightlyfrom44Table of Contents82% in the year ended January 31, 2017 to 81% in the year ended January 31, 2018 primarily due to a change in product mix. Product gross margins in ourCyber Intelligence segment were 57% in each of the years ended January 31, 2018 and 2017.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Cost of product revenue decreased approximately 15% from $145.1 million forthe year ended January 31, 2016 to $123.3 million for the year ended January 31, 2017 primarily due to decreased cost of product revenue in our CyberIntelligence segment as a result of decreased Cyber Intelligence product revenue discussed above. Our overall product gross margins decreased slightly to67% in the year ended January 31, 2017 from 68% in the year ended January 31, 2016. Product gross margins in our Customer Engagement segment were82% in each of the years ended January 31, 2017 and 2016. Product gross margins in our Cyber Intelligence segment decreased from 62% in the year endedJanuary 31, 2016 to 57% in the year ended January 31, 2017 primarily due to a change in product mix and decreased product revenue, resulting in decreasedabsorption of fixed overhead costs during in the year ended January 31, 2017 compared to the year ended January 31, 2016. Cost of Service and Support Revenue Cost of service and support revenue primarily consists of employee compensation and related expenses, contractor costs, hosting infrastructure costs, andtravel expenses relating to installation, training, application managed services, consulting, and maintenance services. Cost of service and support revenuealso includes stock-based compensation expenses, facility costs, and other overhead expenses. In accordance with GAAP and our accounting policy, the costof service and support revenue is generally expensed as incurred in the period in which the services are performed, with the exception of certain transactionsaccounted for using the POC method. Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Cost of service and support revenue increased approximately 6% from $262.0million in the year ended January 31, 2017 to $276.6 million in the year ended January 31, 2018. Cost of service and support revenue increased in ourCustomer Engagement segment primarily due to costs associated with providing our cloud-based solutions, which corresponds with growth in cloud-basedrevenue, and an increase in costs attributable to the use of contractors during the year ended January 31, 2018. Cost of service and support revenue increasedin our Cyber Intelligence segment primarily due to costs associated with increased use of contractors as a result of increased revenue activity as discussedabove. Our overall service and support gross margins were 62% in each of the years ended January 31, 2018 and 2017.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Cost of service and support revenue increased approximately 6% from $248.1million in the year ended January 31, 2016 to $262.0 million in the year ended January 31, 2017. Cost of service and support revenue increased in ourCustomer Engagement segment primarily due to increased employee compensation and related expense as a result of additional services employeeheadcount in connection with business combinations that closed in the year ended January 31, 2017. This increase was partially offset primarily by decreasedcost of service and support revenue in our Cyber Intelligence segment resulting from decreased employee compensation and related expense. Our overallservice and support gross margins decreased from 63% in the year ended January 31, 2016 to 62% in the year ended January 31, 2017.Amortization of Acquired Technology Amortization of acquired technology consists of amortization of technology assets acquired in connection with business combinations.Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Amortization of acquired technology increased approximately 2% from $37.4million in the year ended January 31, 2017 to $38.2 million in the year ended January 31, 2018. The increase was attributable to amortization expense ofacquired technology-based intangible assets associated with business combinations that closed during the year ended January 31, 2018, as well as businesscombinations that closed during the prior year, for which a full year of amortization expense is reflected in the current year. This increase was partially offsetby a decrease in amortization expense as a result of acquired technology intangibles from historical business combinations becoming fully amortized duringthe year ended January 31, 2018.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Amortization of acquired technology increased approximately 4% from $35.8million in the year ended January 31, 2016 to $37.4 million in the year ended January 31, 2017. The increase was attributable to amortization expense ofacquired technology-based intangible assets associated with business combinations that closed during the year ended January 31, 2017, partially offset by adecrease in amortization expense as a result of acquired technology intangibles from historical business combinations becoming fully amortized.45Table of ContentsFurther discussion regarding our business combinations appears in Note 4, “Business Combinations” to our consolidated financial statements included underItem 8 of this report. Research and Development, Net Research and development expenses consist primarily of personnel and subcontracting expenses, facility costs, and other allocated overhead, net of certainsoftware development costs that are capitalized, as well as reimbursements under government programs. Software development costs are capitalized upon theestablishment 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, net for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31, % Change(in thousands) 2018 2017 2016 2018 - 2017 2017 - 2016Research and development, net $190,643 $171,070 $177,650 11% (4)% Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Research and development, net increased approximately $19.5 million, or 11%,from $171.1 million in the year ended January 31, 2017 to $190.6 million in the year ended January 31, 2018. The increase was primarily due to a $12.7million increase in employee compensation and related expenses as a result of increased R&D headcount, a $3.6 million increase in contractor expensesprimarily in our Cyber Intelligence segment, and a $1.5 million increase in stock-based compensation expenses for R&D employees.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Research and development, net decreased approximately $6.6 million, or 4%,from $177.7 million in the year ended January 31, 2016 to $171.1 million in the year ended January 31, 2017. The decrease was primarily due to decreasedemployee compensation and related expenses as a result of decreased R&D employee headcount in both of our operating segments.Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of personnel costs and related expenses, professional fees, 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 expenses for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31, % Change(in thousands) 2018 2017 2016 2018 - 2017 2017 - 2016Selling, general and administrative $414,960 $406,952 $412,728 2% (1)% Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Selling, general and administrative expenses increased approximately $8.0million, or 2%, from $407.0 million in the year ended January 31, 2017 to $415.0 million in the year ended January 31, 2018. This increase was primarilyattributable to the following:•$8.5 million increase in employee compensation and related expenses attributed primarily to additional personnel driven by recent businesscombinations;•$5.0 million increase in professional fees resulting primarily from legal services provided in connection with recent business combinations;•$4.7 million increase in contractor expenses due primarily to business agility initiatives, including upgrading our business information systems;•$3.3 million charge for impairments of certain acquired customer-related intangible assets in our Customer Engagement segment;•$2.4 increase in stock-based compensation expense due primarily to business combinations that closed during the year ended January 31, 2018, as wellas business combinations that closed during the prior year for which a full year of stock-based compensation expense is reflected in the current year;•$2.0 million increase in software subscription expenses related to internal-use software; and46Table of Contents•$1.8 million increase in rent expense associated with business combinations that closed during the year ended January 31, 2018, as well as businesscombinations that closed during the prior year for which a full year of rent expense is reflected in the current year.These increases were partially offset by a $15.6 million decrease in selling, general, and administrative expenses resulting from changes in fair value of ourobligations under contingent consideration arrangements from a net expense of $7.3 million during the year ended January 31, 2017 to net benefit of $8.3million in the year ended January 31, 2018. The impact of contingent consideration arrangements on our operating results can vary over time as we revise ouroutlook for achieving the performance targets underlying the arrangements. This impact on our operating results may be more significant in some periodsthan 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 numberof contingent consideration arrangements in place, the liabilities requiring adjustment in that period, and the net effect of those adjustments. Additionally,selling, general, and administrative expenses decreased by $4.6 million as a result of increased capitalization of costs associated with development ofinternal-use software during the year ended January 31, 2018 compared to the prior year.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Selling, general and administrative expenses decreased approximately $5.7million, or 1%, from $412.7 million in the year ended January 31, 2016 to $407.0 million in the year ended January 31, 2017. This decrease was primarilyattributable to the following:•$4.2 million decrease as a result of increased capitalized software development costs compared to the year ended January 31, 2016;•$3.3 million decrease in employee compensation and related expenses due primarily to a decrease in headcount of general and administrativeemployees; and•$5.3 million decrease in agent commissions in our Cyber Intelligence segment.These decreases were partially offset by an $8.2 million increase in selling, general, and administrative expenses resulting from changes in fair value of ourobligations under contingent consideration arrangements from a net benefit of $0.9 million during the year ended January 31, 2016 to net expense of $7.3million in the year ended January 31, 2017.Amortization of Other Acquired Intangible Assets Amortization of other acquired intangible assets consists of 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 amortization of other acquired intangible assets for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31, % Change(in thousands) 2018 2017 2016 2018 - 2017 2017 - 2016Amortization of other acquired intangible assets $34,209 $44,089 $43,130 (22)% 2% Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Amortization of other acquired intangible assets decreased approximately $9.9million, or 22%, from $44.1 million in the year ended January 31, 2017 to $34.2 million in the year ended January 31, 2018 as a result of acquired customer-related intangible assets from historical business combinations becoming fully amortized, partially offset by an increase in amortization expense fromacquired intangible assets from business combinations that closed during the year ended January 31, 2018, as well as business combinations that closedduring the prior year, for which a full year of amortization expense is reflected in the current year.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Amortization of other acquired intangible assets increased approximately $1.0million, or 2%, from $43.1 million in the year ended January 31, 2016 to $44.1 million in the year ended January 31, 2017 primarily due to amortizationexpense from acquired intangible assets from business combinations that closed during the year ended January 31, 2017, partially offset by a decrease inamortization expense as a result of acquired other intangibles from historical business combinations becoming fully amortized.Further discussion regarding our business combinations appears in Note 4, “Business Combinations” to our consolidated financial statements included underItem 8 of this report. Other Expense, Net 47Table of ContentsThe following table sets forth total other expense, net for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31, % Change(in thousands) 2018 2017 2016 2018 - 2017 2017 - 2016Interest income $2,477 $1,048 $1,490 136% (30)%Interest expense (35,959) (34,962) (33,885) 3%3%Losses on early retirements of debt (2,150) — — —%*Other income (expense): Foreign currency gains (losses) 6,760 (2,743) (8,037) (346)%(66)%(Losses) gains on derivatives (17) (322) 394 **Other, net (841) (3,861) (4,634) (78)%*Total other income (expense), net 5,902 (6,926) (12,277) (185)%(44)%Total other expense, net $(29,730) $(40,840) $(44,672) (27)%(9)% * Percentage is not meaningful. Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Total other expense, net, decreased by $11.1 million from $40.8 million in theyear ended January 31, 2017 to $29.7 million in the year ended January 31, 2018. Interest expense increased to $36.0 million in the year ended January 31, 2018 from $35.0 million in the year ended January 31, 2017 primarily due to higherinterest rates on outstanding borrowings during the year ended January 31, 2018.During the year ended January 31, 2018 we entered into a new credit agreement (the “2017 Credit Agreement”), which was subsequently amended, andterminated our Prior Credit Agreement (as defined in Note 6, “Long-Term Debt” to our consolidated financial statements included under Item 8 of this report).In connection with these transactions, we recorded $2.2 million of losses on early retirements of debt. There were no comparable charges in the year endedJanuary 31, 2017.We recorded $6.8 million of net foreign currency gains in the year ended January 31, 2018 compared to $2.7 million of net losses in the year endedJanuary 31, 2017. Foreign currency gains in the year ended January 31, 2018 resulted primarily from the weakening of the U.S. dollar against the euro,resulting in foreign currency gains on euro denominated net assets in certain entities which use a U.S. dollar functional currency, the weakening of the U.S.dollar against the Singapore dollar, resulting in foreign currency gains on Singapore dollar-denominated net assets in certain entities which use a U.S. dollarfunctional currency, and the weakening of the U.S. dollar against the British pound sterling, resulting in foreign currency gains on U.S. dollar-denominatednet payables in certain entities which use a British pound sterling functional currency. In the year ended January 31, 2018, there were insignificant net losses on derivative financial instruments (not designated as hedging instruments), comparedto net losses of $0.3 million on such instruments for the year ended January 31, 2017. The net losses in the prior year reflected losses on contracts executedto hedge movements in the exchange rate between the U.S. dollar and the Brazilian real.Other net expenses decreased to $0.8 million in the year ended January 31, 2018 from $3.9 million in the year ended January 31, 2017. In the year endedJanuary 31, 2017, we recorded a write-off of a $2.4 million cost-basis investment in our Cyber Intelligence segment, with no comparable charges in the yearended January 31, 2018. Also contributing to the decrease in other net expenses was resolution of a previously accrued sales tax contingency in our APACregion during the year ended January 31, 2018.Year Ended January 31, 2017 compared to Year Ended January 31, 2016. Total other expense, net, decreased by $3.9 million from $44.7 million in the yearended January 31, 2016 to $40.8 million in the year ended January 31, 2017.Interest expense increased to $35.0 million in the year ended January 31, 2017 from $33.9 million in the year ended January 31, 2016 primarily due to higherinterest rates on outstanding borrowings during the year ended January 31, 2017.We recorded $2.7 million of net foreign currency losses in the year ended January 31, 2017 compared to $8.0 million of net losses in the year ended January31, 2016. Foreign currency losses in the year ended January 31, 2017 resulted primarily from the strengthening of the U.S. dollar against the British poundsterling, resulting in foreign currency losses on U.S dollar-denominated net liabilities in certain entities which use the British pound sterling functionalcurrency, and the weakening of the U.S. dollar against the Brazilian real, resulting in foreign currency losses on U.S. dollar-denominated net assets in certainentities which use the Brazilian real function currency.48Table of ContentsIn the year ended January 31, 2017, there were net losses on derivative financial instruments (not designated as hedging instruments) of $0.3 million,compared to net gains of $0.4 million on such instruments for the year ended January 31, 2016. The net losses in the year ended January 31, 2017 reflectedlosses on contracts executed to hedge movements in the exchange rate between the U.S. dollar and the Brazilian real.Other net expenses decreased to $3.9 million in the year ended January 31, 2017 from $4.6 million in the year ended January 31, 2016. In the year endedJanuary 31, 2017, we recorded a write-off of a $2.4 million cost-basis investment in our Cyber Intelligence segment. In the year ended January 31, 2016,other, net expense consisted primarily of write-offs of indemnification assets associated with tax liabilities recorded in connection with prior businesscombinations.Provision for Income Taxes The following table sets forth our provision for income taxes for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 2016Provision for income taxes $22,354 $2,772 $952 Year Ended January 31, 2018 compared to Year Ended January 31, 2017. Our effective income tax rate was 118.3% for the year ended January 31, 2018,compared to a negative effective income tax rate of 11.8% for the year ended January 31, 2017. For the year ended January 31, 2018, our effective income taxrate was higher than the U.S. federal statutory income tax rate of 33.8% due to withholding tax expenses of $15 million, a benefit of $5.4 million related tothe revaluation of U.S. deferred tax items, the mix and levels of income and losses among taxing jurisdictions, and changes in unrecognized income taxbenefits. Our statutory rate for the year ended January 31, 2018 is 33.8% due to the 2017 Tax Act. The 2017 Tax Act includes a reduction of the corporate taxrate from a top marginal rate of 35% to a flat rate of 21%. Section 15 of the Internal Revenue Code stipulates that our fiscal year ending January 31, 2018 willhave a blended corporate tax rate of 33.8% which is based on the applicable tax rates before and after the 2017 Tax Act and the number of days in the year.As a result of the 2017 Tax Act, we recorded a provisional Transition Tax on previously untaxed foreign earnings. The Transition tax results in no impact tothe tax provision as we intend to utilize a portion of the NOL carryforward and release valuation allowance on the associated deferred tax asset resulting in anet impact of $0 to the tax provision. Foreign earnings subject to the Transition Tax will not be subject to further U.S. taxation upon repatriation. Therefore,we may repatriate certain foreign cash, a portion of which will be subject to a withholding tax estimated to be $15 million. Also, we remeasured U.S. deferredtax items to reflect the reduced rate that will apply under the 2017 Tax Act resulting in the $5.4 million benefit. In accordance with the provisions of SAB No.118, we consider amounts related to the 2017 Tax Act to be reasonably estimated as of January 31, 2018. We expect to refine and complete the accountingfor the 2017 Tax Act during the year ending January 31, 2019 as we obtain, prepare, and analyze additional information and as additional legislative,regulatory, and accounting guidance and interpretations become available. In addition, pre-tax income in our profitable jurisdictions, where we recordedincome tax provisions at rates lower than the U.S. federal statutory income tax rate, was greater than the pre-tax losses in our domestic and foreignjurisdictions where we maintain valuation allowances and did not record the related income tax benefits. The result was an income tax provision of $22.4million on a pre-tax income of $18.9 million, which represented an effective income tax rate of 118.3%. Excluding the net impact of the 2017 Tax Act, theresult was an income tax provision of $12.7 million on pre-tax income of $18.9 million, resulting in an effective income tax rate of 67.3%For the year ended January 31, 2017, our effective income tax rate was lower than the U.S. federal statutory income tax rate of 35% due to the release of $10.4million of Verint valuation allowances, and the mix and levels of income and losses among taxing jurisdictions, offset by changes in unrecognized incometax benefits. We maintain valuation allowances on our net U.S. deferred income tax assets related to federal and certain state jurisdictions. In connection withacquisitions during the fourth quarter of the year ended January 31, 2017 (OpinionLab, Inc. and an acquisition deemed immaterial in our CustomerEngagement segment), we recorded deferred income tax liabilities primarily attributable to acquired intangible assets to the extent the amortization will notbe deductible for income tax purposes. Under accounting guidelines, because the amortization of the intangible assets in future periods provides a source oftaxable income, we expect to realize a portion of our existing deferred income tax assets. As such, we reduced the valuation allowance recorded on ourdeferred income tax assets to the extent of the deferred income tax liabilities recorded. Because the valuation allowance related to existing Verint deferredincome tax assets, the impact of the release was reflected as a discrete income tax benefit and not as a component of the acquisition accounting. Pre-taxincome in our profitable jurisdictions, where we recorded income tax provisions at rates lower than the U.S. federal statutory income tax rate, was lower thanthe pre-tax losses in our domestic and foreign jurisdictions where we maintain valuation allowances and did not record the related income tax benefits. Theresult was an income tax provision of $2.8 million on a pre-tax loss of $23.5 million, which represented a negative effective income tax rate of 11.8%.49Table of ContentsYear Ended January 31, 2017 compared to Year Ended January 31, 2016. Our effective income tax rate was negative 11.8% for the year ended January 31,2017, compared to an effective income tax rate of 4.1% for the year ended January 31, 2016. For the year ended January 31, 2017, our effective income taxrate was lower than the U.S. federal statutory income tax rate of 35% for the reasons discussed above. For the year ended January 31, 2016, our effectiveincome tax rate was lower than the U.S. federal statutory income tax rate of 35% primarily due to mix and levels of income and losses among taxingjurisdictions and changes in unrecognized income tax benefits. We recorded tax benefits of $20.2 million as a result of audit settlements and statute oflimitation lapses related to domestic and foreign jurisdictions. Pre-tax income in our profitable jurisdictions, where we recorded income tax provisions atrates lower than the U.S. federal statutory income tax rate, was substantially offset by our domestic losses where we maintain valuation allowances and didnot record the related income tax benefits. The result was an income tax provision of $1.0 million on $23.2 million of pre-tax income, which represented aneffective income tax rate of 4.1%.The comparison of our effective income tax rates between periods is significantly impacted by changes in the U.S. federal statutory income tax rate, the leveland mix of earnings and losses by tax jurisdiction, foreign income tax rate differentials, amount of permanent book to tax differences, the impact ofunrecognized tax benefits, and the effects of valuation allowances on certain loss jurisdictions.Backlog For most of our transactions, delivery generally occurs within several months following receipt of the order. However, certain projects, particularly in ourCyber Intelligence segment, can extend over longer periods of time, delivery under which, for various reasons, may be delayed, modified, or canceled. As aresult, we believe that our backlog at any particular time is not meaningful because it is not necessarily indicative of future revenue.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 periodicallycollected in advance of delivery or performance.Our primary recurring use of cash is payment of our operating costs, which consist primarily of employee-related expenses, such as compensation andbenefits, as well as general operating expenses for marketing, facilities and overhead costs, and capital expenditures. We also utilize cash for debt service andperiodically for business acquisitions. Cash generated from operations, along with our existing cash, cash equivalents, and short-term investments, are ourprimary sources of operating liquidity, and we believe that our operating liquidity is sufficient to support our current business operations, including debtservice and capital expenditure requirements.On June 29, 2017, we entered into the 2017 Credit Agreement with certain lenders, and terminated our Prior Credit Agreement. The 2017 Credit Agreementwas amended on January 31, 2018 (the “2018 Amendment”). Further discussion of our 2017 Credit Agreement and 2018 Amendment appears below, under“Financing Arrangements”.We have historically expanded our business in part by investing in strategic growth initiatives, including acquisitions of products, technologies, andbusinesses. We may finance such acquisitions using cash, debt, stock, or a combination of the foregoing, however, we have used cash as consideration forsubstantially all of our historical business acquisitions, including approximately $103 million and $142 million of net cash expended for businessacquisitions during the years ended January 31, 2018 and 2017, respectively.We continually examine our options with respect to terms and sources of existing and future short-term and long-term capital resources to enhance ouroperating results and to ensure that we retain financial flexibility, and may from time to time elect to raise additional equity or debt capital in the capitalmarkets.A considerable portion of our operating income is earned outside the United States. Cash, cash equivalents, short-term investments, and restricted cash andbank time deposits (excluding any long-term portions) held by our subsidiaries outside of the United States were $346.2 million and $282.1 million as ofJanuary 31, 2018 and 2017, respectively, and are generally used to fund the subsidiaries’ operating requirements and to invest in growth initiatives,including business acquisitions. These50Table of Contentssubsidiaries also held long-term restricted cash and bank time deposits of $28.4 million and $54.5 million at January 31, 2018 and January 31, 2017,respectively.While we intend to continue to indefinitely reinvest a portion of our foreign subsidiaries’ earnings, we currently no longer intend to indefinitely invest allsuch earnings, which, as a result of the 2017 Tax Act, may now be repatriated without incurring additional U.S. federal income taxes. Accordingly, werecognized provisional deferred income tax expense of $15.0 million for the year ended January 31, 2018 for withholding taxes on certain unremitted foreignearnings, for which we are evaluating our plans for repatriation.Should other circumstances arise whereby we require more capital in the United States than is generated by our domestic operations, or should we otherwiseconsider it in our best interests, we could repatriate future earnings from foreign jurisdictions, which could result in higher effective tax rates. We currentlyintend to indefinitely reinvest a portion of the earnings of our foreign subsidiaries to finance foreign activities. Except to the extent of the U.S. federal taxprovided under the 2017 Tax Act and withholding taxes on certain identified cash that may be repatriated to the U.S., we have not provided for taxes on theoutside basis difference of foreign subsidiaries nor have we provided for any additional withholding or other tax that may be applicable should a futuredistribution be made from any unremitted earnings of foreign subsidiaries. It is not practical to estimate this potential liability.The following table summarizes our total cash, cash equivalents, restricted cash and bank time deposits, and short-term investments, as well as our total debt,as of January 31, 2018 and 2017: January 31,(in thousands) 2018 2017Cash and cash equivalents $337,942 $307,363Restricted cash and bank time deposits (excluding long term portions) 33,303 9,198Short-term investments 6,566 3,184Total cash, cash equivalents, restricted cash and bank time deposits, and short-term investments $377,811 $319,745Total debt, including current maturities $772,984 $748,871 Consolidated Cash Flow Activity The following table summarizes selected items from our consolidated statements of cash flows for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 2016Net cash provided by operating activities $176,327 $172,415 $156,903Net cash used in investing activities (144,481) (156,028) (75,600)Net cash used in financing activities (5,503) (56,919) (10,204)Effect of exchange rate changes on cash and cash equivalents 4,236 (4,210) (4,066)Net increase (decrease) in cash and cash equivalents $30,579 $(44,742) $67,033Our operating activities generated $176.3 million of cash during the year ended January 31, 2018, which was partially offset by $150.0 million of net cashused in combined investing and financing activities during this period. 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 $176.3 million of net cash during the year ended January 31, 2018, compared to $172.4 million generated during the yearended January 31, 2017. Our improved operating cash flow in the current year reflects, in part, $3.6 million of lower combined interest and net income taxpayments, compared to the prior year.Operating activities generated $172.4 million of net cash during the year ended January 31, 2017, compared to $156.9 million generated during the yearended January 31, 2016. Our operating cash flow improved, despite reporting a net loss in the year51Table of Contentsended January 31, 2017, compared to net income in the prior year, and despite $12.4 million of higher net income tax payments.Our cash flow from operating activities can fluctuate from period to period due to several factors, including the timing of our billings and collections, thetiming and amounts of interest, income tax and other payments, and our operating results.Net Cash Used in Investing ActivitiesDuring the year ended January 31, 2018, our investing activities used $144.5 million of net cash, including $103.0 million of net cash utilized for businessacquisitions, $38.7 million of payments for property, equipment, and capitalized software development costs, $3.2 million of net purchases of short-terminvestments, and $1.7 million of net cash used by other investing activities. Partially offsetting those uses was a $2.1 million decrease in restricted cash andbank time deposits during the period. Restricted cash and bank time deposits are typically short-term deposits used to secure bank guarantees in connectionwith sales contracts, the amounts of which will fluctuate from period to period.During the year ended January 31, 2017, our investing activities used $156.0 million of net cash, including $141.8 million of net cash utilized for businessacquisitions, $29.9 million of payments for property, equipment, and capitalized software development costs, and a $36.6 million increase in restricted cashand bank time deposits during the period. The increase in restricted cash and bank time deposits during the year ended January 31, 2017 reflected increasedrestricted cash associated with several large sales contracts. Partially offsetting those uses were $52.6 million of net proceeds from sales, maturities, andpurchases of short-term investments.During the year ended January 31, 2016, our investing activities used $75.6 million of net cash, the primary components of which were $31.4 million of netcash utilized for business acquisitions, $30.3 million of payments for property, equipment, and capitalized software development costs, and $21.4 million ofnet purchases of short-term investments during the year. Partially offsetting those uses was $7.5 million of net cash provided by other investing activities,consisting primarily of decreases in restricted cash and bank time deposits during the period.We had no significant commitments for capital expenditures at January 31, 2018. Net Cash Used in Financing Activities For the year ended January 31, 2018, our financing activities used $5.5 million of net cash. Under the 2017 Credit Agreement, we received net proceeds of$424.5 million from the 2017 Term Loan, the majority of which was used to repay all $406.9 million that remained outstanding under the 2014 Term Loans(both the 2017 Term Loan and the 2014 Term Loans are as defined in Note 6, “Long-Term Debt” to our consolidated financial statements included underItem 8 of this report) at June 29, 2017 upon termination of the Prior Credit Agreement. In addition, under the 2018 Amendment, $19.9 million of the 2017Term Loan was considered extinguished and replaced by new loans. We also made $5.1 million for repayments of borrowings and other financing obligationsduring the year. Other financing activities during the year included payments of $7.5 million for the financing portion of payments under contingentconsideration arrangements related to prior business combinations, $7.1 million paid for debt issuance costs related to the 2017 Credit Agreement, anddividend payments of $3.3 million to the noncontrolling interest holders in a joint venture which serves as a systems integrator for certain Asian markets.For the year ended January 31, 2017, our financing activities used $56.9 million of net cash, the most significant portions of which were payments of $46.9million for stock repurchases under our share repurchase program, $3.3 million for repayments of borrowings and other financing obligations, $3.2 million forthe financing portion of payments under contingent consideration arrangements related to prior business combinations, and dividend payments of $2.4million to the noncontrolling interest holders in our joint venture. For the year ended January 31, 2016, our financing activities used $10.2 million of net cash, including payments of $7.2 million for the financing portion ofpayments under contingent consideration arrangements related to prior business combinations, and dividend payments of $3.2 million to the noncontrollinginterest holders in our joint venture. 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 operationswill be sufficient to meet anticipated operating costs, required payments of principal and interest, working capital needs, ordinary course capitalexpenditures, research and development spending, and other52Table of Contentscommitments for at least the next 12 months. Currently, we have no plans to pay any cash dividends on our common stock, which are not permitted under our2017 Credit Agreement.Our liquidity could be negatively impacted by a decrease in demand for our products and service and support, including the impact of changes in customerbuying behavior due to circumstances over which we have no control. If we determine to make additional business acquisitions or otherwise requireadditional funds, we may need to raise additional capital, which could involve the issuance of additional equity or debt securities.On March 29, 2016, we announced that our board of directors had authorized a common stock repurchase program of up to $150 million over two years. Thisprogram expires on March 29, 2018. We have made a total of $46.9 million in repurchases under the program.Financing Arrangements1.50% Convertible Senior NotesOn June 18, 2014, we issued $400.0 million in aggregate principal amount of 1.50% convertible senior notes due June 1, 2021, unless earlier converted bythe holders pursuant to their terms. Net proceeds from the Notes after underwriting discounts were $391.9 million. The Notes pay interest in cashsemiannually in arrears at a rate of 1.50% per annum.The Notes were issued concurrently with our public issuance of 5,750,000 shares of common stock, the majority of the combined net proceeds of which wereused to partially repay certain indebtedness under our Prior Credit Agreement.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 inright of payment to our indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to theextent of the value of the assets securing such indebtedness; and structurally subordinated to indebtedness and other liabilities of our subsidiaries.The Notes are convertible into, at our election, cash, shares of common stock, or a combination of both, subject to satisfaction of specified conditions andduring specified periods, as described below. If converted, we currently intend to pay cash in respect of the principal amount of the Notes.The Notes have a conversion rate of 15.5129 shares of common stock per $1,000 principal amount of Notes, which represents an effective conversion price ofapproximately $64.46 per share of common stock and would result in the issuance of approximately 6,205,000 shares if all of the Notes were converted. Theconversion rate has not changed since issuance of the Notes, although throughout the term of the Notes, the conversion rate may be adjusted upon theoccurrence of certain events.Holders may surrender their Notes for conversion at any time prior to the close of business on the business day immediately preceding December 1, 2020,only under the following circumstances:•during any calendar quarter commencing after the calendar quarter which ended on September 30, 2014, if the closing sale price of our commonstock, 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 theimmediately 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 eachsuch 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 corporate events, as described in the indenture governing the Notes, such as a consolidation, merger, or bindingshare exchange.On or after December 1, 2020 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may surrendertheir Notes for conversion regardless of whether any of the foregoing conditions have been satisfied. Holders of the Notes may require us to purchase for cashall 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 beingpurchased, plus accrued and unpaid interest.As of January 31, 2018, the Notes were not convertible.53Table of ContentsNote Hedges and WarrantsConcurrently with the issuance of the Notes, we entered into convertible note hedge transactions (the “Note Hedges”) and sold warrants (the “Warrants”). Thecombination 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 Hedgesand Warrants are each separate instruments from the Notes.Note HedgesPursuant to the Note Hedges, we purchased call options on our common stock, under which we have the right to acquire from the counterparties up toapproximately 6,205,000 shares of our common stock, subject to customary anti-dilution adjustments, at a price of $64.46, which equals the initialconversion price of the Notes. Our exercise rights under the Note Hedges generally trigger upon conversion of the Notes and the Note Hedges terminate uponmaturity of the Notes, or the first day the Notes are no longer outstanding. The Note Hedges may be settled in cash, shares of our common stock, or acombination thereof, at our option, and are intended to reduce our exposure to potential dilution upon conversion of the Notes. We paid $60.8 million for theNote Hedges, which was recorded as a reduction to additional paid-in capital. As of January 31, 2018, we had not purchased any shares of our common stockunder the Note Hedges.WarrantsWe sold the Warrants to several counterparties. The Warrants provide the counterparties rights to acquire from us up to approximately 6,205,000 shares of ourcommon 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, ifthe 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 avalue 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 stockexceeds 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 ofJanuary 31, 2018, no Warrants had been exercised and all Warrants remained outstanding.Credit Agreements On June 29, 2017, we entered into the 2017 Credit Agreement with certain lenders, and terminated our Prior Credit Agreement. The 2017 Credit Agreementprovides for $725.0 million of senior secured credit facilities, comprised of the $425.0 million 2017 Term Loan maturing on June 29, 2024 and a $300.0million revolving credit facility maturing on June 29, 2022 (the “2017 Revolving Credit Facility”), subject to increase and reduction from time to timeaccording 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 thatremained outstanding under the 2014 Term Loans at June 29, 2017 upon termination of the Prior Credit Agreement. There were no borrowings under ourPrior Revolving Credit Facility (as defined in Note 6, “Long-Term Debt” to our consolidated financial statements included under Item 8 of this report) at June29, 2017.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 remainoutstanding.The 2017 Term Loan was subject to an original issuance discount of approximately $0.5 million. This discount is being amortized as interest expense overthe term of the 2017 Term Loan using the effective interest method.Interest rates on loans under the 2017 Credit Agreement are periodically reset, at our option, at either a Eurodollar Rate or an ABR rate (each as defined in the2017 Credit Agreement), plus in each case a margin.We are required to pay a commitment fee with respect to unused availability under the 2017 Revolving Credit Facility at a rate per annum determined byreference to our Consolidated Total Debt to Consolidated EBITDA (each as defined in the 2017 Credit Agreement) leverage ratio (the “Leverage Ratio”).The 2017 Term Loan requires quarterly principal payments of approximately $1.1 million, which commenced on August 1, 2017, with the remaining balancedue on June 29, 2024. Optional prepayments of loans under the 2017 Credit Agreement are generally permitted without premium or penalty.On January 31, 2018, we entered into the 2018 Amendment to our 2017 Credit Agreement, providing for, among other things, a reduction of the interest ratemargins on the 2017 Term Loan from 2.25% to 2.00% for Eurodollar loans, and from 1.25% to54Table of Contents1.00% for ABR loans. The vast majority of the impact of the 2018 Amendment was accounted for as a debt modification. For the portion of the 2017 TermLoan which was considered extinguished and replaced by new loans, we wrote off $0.2 million of unamortized deferred debt issuance costs as a loss on earlyretirement of debt during the three months ended January 31, 2018. The remaining unamortized deferred debt issuance costs and discount will continue to beamortized over the remaining term of the 2017 Term Loan.For loans under the 2017 Revolving Credit Facility, the margin is determined by reference to our Leverage Ratio.As of January 31, 2018, the interest rate on the 2017 Term Loan was 3.58%. Taking into account the impact of the original issuance discount and relateddeferred debt issuance costs, the effective interest rate on the 2017 Term Loan was approximately 3.80% at January 31, 2018.On February 11, 2016, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to partially mitigaterisks associated with the variable interest rate on the term loans under our Prior Credit Agreement, under which we pay interest at a fixed rate of 4.143% andreceive 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. Althoughthe Prior Credit Agreement was terminated on June 29, 2017, the interest rate swap agreement remains in effect, and serves as an economic hedge to partiallymitigate the risk of higher borrowing costs under the 2017 Credit Agreement resulting from increases in market interest rates. The interest rate swapagreement 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 consolidated statement of operations, not within interest expense.Our obligations under the 2017 Credit Agreement are guaranteed by each of our direct and indirect existing and future material domestic wholly ownedrestricted subsidiaries, and are secured by a security interest in substantially all of our assets and the assets of the guarantor subsidiaries, subject to certainexceptions.The 2017 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The 2017 Credit Agreement alsocontains a financial covenant that, solely with respect to the 2017 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50to 1. At January 31, 2018, our Leverage Ratio was approximately 2.7 to 1. The limitations imposed by the covenants are subject to certain exceptions asdetailed 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.Contractual ObligationsAt January 31, 2018, our contractual obligations were as follows: Payments Due by Period(in thousands) Total < 1 year 1-3 years 3-5 years > 5 yearsLong-term debt obligations, including interest $944,103 $25,741 $51,055 $441,347 $425,960Operating lease obligations 116,632 21,497 32,223 25,786 37,126Capital lease obligations 4,699 1,171 2,053 1,475 —Purchase obligations 109,383 104,398 4,983 2 —Other long-term obligations 660 374 94 94 98Total contractual obligations $1,175,477 $153,181 $90,408 $468,704 $463,184The long-term debt obligations reflected above include projected interest payments over the term of our outstanding debt as of January 31, 2018, assuminginterest rates consistent with those in effect for our 2017 Term Loan as of January 31, 2018.Operating lease obligations reflected above exclude future sublease income from certain space we have subleased to third parties. As of January 31, 2018,total expected future sublease income was $0.4 million and will range from $0.1 million to $0.3 million on an annual basis through May 2019.We entered into leases for infrastructure equipment that qualify as capital leases during the year ended January 31, 2018.55Table of ContentsOur purchase obligations are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legallybinding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and theapproximate timing of the transactions. Agreements to purchase goods or services that have cancellation provisions with no penalties are excluded from thesepurchase obligations.Our consolidated balance sheet at January 31, 2018 included $41.0 million of non-current tax reserves, net of related benefits (including interest andpenalties of $5.6 million) for uncertain tax positions. However, these amounts are not included in the table above because we are unable to reasonablyestimate the timing of payments for these obligations. We do not expect to make any significant payments for these uncertain tax positions within the next12 months. Contingent Payments Associated with Business Combinations In connection with certain of our business combinations, we have agreed to make contingent cash payments to the former owners of the acquired companiesbased upon achievement of performance targets following the acquisition dates.For the year ended January 31, 2018, we made $9.4 million of payments under contingent consideration arrangements. As of January 31, 2018, potentialfuture cash payments under contingent consideration arrangements, including consideration earned in completed performance periods which is still to bepaid, total $123.6 million, the estimated fair value of which was $62.8 million, including $13.7 million reported in accrued expenses and other currentliabilities, and $49.1 million reported in other liabilities. The performance periods associated with these potential payments extend through January 2022. Off-Balance Sheet Arrangements As of January 31, 2018, we did not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a current or future effect onour financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that arematerial to investors. Recent Accounting Pronouncements See also Note 1, “Summary of Significant Accounting Policies” to our consolidated financial statements included under Item 8 of this report for additionalinformation about recent accounting pronouncements recently adopted and those not yet effective.Item 7A. 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 tomarket risk related to changes in interest rates and foreign currency exchange rate fluctuations. To manage the volatility relating to interest rate and foreigncurrency risks, we periodically enter into derivative instruments including foreign currency forward exchange contracts and interest rate swap agreements. Itis our policy to use derivative instruments only to the extent considered necessary to meet our risk management objectives. We use derivative instrumentssolely to reduce the financial impact of these risks and do not use derivative instruments for speculative purposes.Interest Rate Risk on Our DebtIn June 2014, we issued $400.0 million in aggregate principal amount of 1.50% convertible senior notes due June 1, 2021. Holders may convert the Notesprior to maturity upon the occurrence of certain conditions. Upon conversion, we would be required to pay the holders, at our election, cash, shares ofcommon stock, or a combination of both. Concurrent with the issuance of the Notes, we entered into the Note Hedges and sold the Warrants. These separatetransactions were completed to reduce our exposure to potential dilution upon conversion of the Notes. The Notes have a fixed annual interest rate of 1.50% and therefore do not have interest rate exposure. However, the fair values of the Notes are subject tointerest rate risk, market risk and other factors due to the convertible feature. The fair values of the Notes are also affected by our common stock price.Generally, the fair values of Notes will increase as interest rates fall and/or our common stock price increases, and decrease as interest rates rise and/or ourcommon stock price decreases. Changes in the fair values of the Notes do not impact our financial position, cash flows, or results of operations due to thefixed nature of the debt obligations. We do not carry the Notes at fair value on our consolidated balance sheet, but we report the fair value of the Notes fordisclosure purposes.56Table of ContentsOn June 29, 2017, we entered into the 2017 Credit Agreement with certain lenders and terminated our Prior Credit Agreement. The 2017 Credit Agreementprovides for $725.0 million of senior secured credit facilities, comprised of the $425.0 million 2017 Term Loan maturing on June 29, 2024 and the $300.0million 2017 Revolving Credit Facility maturing on June 29, 2022, subject to increase and reduction from time to time according to the terms of the 2017Credit Agreement.The interest rate on borrowings under our 2017 Credit Agreement is variable. On January 31, 2018, we entered into the 2018 Amendment to the 2017 CreditAgreement providing for, among other things, a reduction of the interest rate margins applicable to term loan borrowings from 2.25% to 2.00% for Eurodollarloans, and from 1.25% to 1.00% for ABR loans. As of January 31, 2018, we have $422.9 million of outstanding term loan borrowings and no outstandingborrowings under the revolving credit facility. As of January 31, 2018, the interest rate on our term loan borrowings was 3.58%.Because the interest rates applicable to borrowings under our 2017 Credit Agreement are variable, we are exposed to market risk from changes in theunderlying index rates, which affect our cost of borrowing. To partially mitigate risks associated with the variable interest rate on the term loan borrowingsunder our Prior Credit Agreement, in February 2016, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financialinstitution 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 aspread 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 remains in effect, and serves as an economic hedge to partiallymitigate the risk of higher borrowing costs under the 2017 Credit Agreement resulting from increases in market interest rates. The interest rate swapagreement 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 consolidated statement of operations, not within interest expense. As of January 31, 2018, the fair value of the interest rate swapagreement was a gain of $2.6 million. Settlements with the counterparty under the interest rate swap agreement occur quarterly, and the agreement will terminate on September 6, 2019.The periodic interest rates on borrowings under the 2017 Credit Agreement are currently a function of several factors, the most important of which is LIBOR,which is the rate we elect for the vast majority of our periodic interest rate reset events.Excluding the impact of the interest swap agreement, upon our borrowings as of January 31, 2018, for each 1.00% increase in the applicable LIBOR rate, ourannual interest expense would increase by approximately $4.3 million.Interest Rate Risk on Our InvestmentsWe invest in cash, cash equivalents, bank time deposits, and marketable debt securities. Market interest rate changes increase or decrease the interest incomewe generate from these interest-bearing assets. Our cash, cash equivalents, and bank time deposits are primarily maintained at high credit-quality financialinstitutions around the world, and our marketable debt security investments are restricted to highly rated corporate debt securities. We have not invested inmarketable debt securities with remaining maturities in excess of twelve months or in marketable equity securities during the three-year period ended January31, 2018.The primary objective of our investment activities is the preservation of principal while maximizing investment income and minimizing risk. We haveinvestment guidelines relative to diversification and maturities designed to maintain safety and liquidity.As of January 31, 2018 and 2017, we had cash and cash equivalents totaling approximately $337.9 million and $307.4 million, respectively, consisting ofdemand deposits, bank time deposits with maturities of 90 days or less, money market accounts, and marketable debt securities with remaining maturities of90 days or less. At such dates we also held $61.7 million and $63.8 million, respectively, of restricted cash and restricted bank time deposits (including long-term portions) which were not available for general operating use. These restricted balances primarily represent deposits to secure bank guarantees inconnection with customer sales contracts. The amounts of these deposits can vary depending upon the terms of the underlying contracts. We also had short-term investments of $6.6 million and $3.2 million at January 31, 2018 and 2017, respectively, consisting of bank time deposits and marketable debtsecurities of corporations, all with remaining maturities in excess of 90 days, but less than one year, at the time of purchase.57Table of ContentsTo provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine theimpact a change in interest rates would have on the value of the investment portfolio assuming, during the year ending January 31, 2018, average short-terminterest rates increase or decrease by 50 basis points relative to average rates realized during the year ended January 31, 2017. Such a change would cause ourprojected interest income from cash, cash equivalents, restricted cash and bank time deposits, and short-term investments to increase or decrease byapproximately $2.0 million, assuming a similar level of investments in the year ending January 31, 2019 as in the year ended January 31, 2018.Due to the short-term nature of our cash and cash equivalents, time deposits, money market accounts, and marketable debt securities, their carrying valuesapproximate their market values and are not generally subject to price risk due to fluctuations in interest rates.Foreign Currency Exchange RiskThe functional currency for most of our foreign subsidiaries is the applicable local currency, although we have several subsidiaries with functional currenciesthat differ from their local currency, of which the most notable exceptions are our subsidiaries in Israel, whose functional currencies are the U.S. dollar. We areexposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars for consolidated reportingpurposes. If there are changes in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars results in anunrealized gain or loss which is recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity.For the year ended January 31, 2018, a significant portion of our operating expenses, primarily labor expenses, were denominated in the local currencieswhere our foreign operations are located, primarily Israel, the United Kingdom, Germany, Australia, and Singapore. We also generate some portion of ourrevenue in foreign currencies, mainly the euro, British pound sterling, Australian dollar, and Singapore dollar. As a result, our consolidated U.S. dollaroperating results are subject to potential material adverse impact from fluctuations in foreign currency exchange rates between the U.S. dollar and the othercurrencies in which we transact.In addition, we have certain monetary assets and liabilities that are denominated in currencies other than the respective entity’s functional currency. Changesin the functional currency value of these assets and liabilities result in gains or losses which are reporting within other income (expense), net in ourconsolidated statement of operations. We recorded net foreign currency gains of $6.8 million, and losses of $2.7 million and $8.0 million, for the years endedJanuary 31, 2018, 2017, and 2016, respectively.From time to time, we enter into foreign currency forward contracts in an effort to reduce the volatility of cash flows primarily related to forecasted payrolland payroll-related expenses denominated in Israeli shekels. These contracts are generally limited to durations of approximately 12 months or less. We havealso periodically entered into foreign currency forward contracts to manage exposures resulting from forecasted customer collections denominated incurrencies other than the respective entity’s functional currency and exposures from cash, cash equivalents and short-term investments and payablesdenominated in currencies other than the applicable functional currency.During the year ended January 31, 2018, net losses on foreign currency forward contracts not designated as hedges for accounting purposes wereinsignificant. For the year ended January 31, 2017, we recorded net losses of $0.3 million on foreign currency forward contracts not designated as hedges foraccounting purposes, and net gains on such contracts of $0.4 million for the year ended January 31, 2016. We had $2.4 million of net unrealized gains onoutstanding foreign currency forward contracts as of January 31, 2018, with notional amounts totaling $153.5 million. We had $0.4 million of net unrealizedlosses on outstanding foreign currency forward contracts as of January 31, 2017, with notional amounts totaling $144.0 million.A sensitivity analysis was performed on all of our foreign exchange derivatives as of January 31, 2018. This sensitivity analysis was based on a modelingtechnique that measures the hypothetical market value resulting from a 10% shift in the value of exchange rates relative to the U.S. dollar, and assumes nochanges in interest rates. A 10% increase in the relative value of the U.S. dollar would decrease the estimated fair value of our foreign exchange derivativesby approximately $6.2 million. Conversely, a 10% decrease in the relative value of the U.S. dollar would increase the estimated the fair value of thesefinancial instruments by approximately $7.6 million.The counterparties to our foreign currency forward contracts are multinational commercial banks. While we believe the risk of counterparty nonperformanceis not material, past disruptions in the global financial markets have impacted some of the financial institutions with which we do business. A sustaineddecline in the financial stability of financial institutions as a result58Table of Contentsof disruption in the financial markets could affect our ability to secure creditworthy counterparties for our foreign currency hedging programs.59Table of ContentsItem 8. Financial Statements and Supplementary DataVERINT SYSTEMS INC. AND SUBSIDIARIESIndex to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm61Consolidated Balance Sheets as of January 31, 2018 and 201762Consolidated Statements of Operations for the Years Ended January 31, 2018, 2017, and 201663Consolidated Statements of Comprehensive Income (Loss) for the Years Ended January 31, 2018, 2017, and 201664Consolidated Statements of Stockholders’ Equity for the Years Ended January 31, 2018, 2017, and 201665Consolidated Statements of Cash Flows for the Years Ended January 31, 2018, 2017, and 201666Notes to Consolidated Financial Statements6760Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Verint Systems Inc.Melville, New YorkOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Verint Systems Inc. and subsidiaries (the “Company”) as of January 31, 2018 and 2017,the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows, for each of the three years in the periodended January 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, inall material respects, the financial position of the Company as of January 31, 2018 and 2017, and the results of its operations and its cash flows for each of thethree years in the period ended January 31, 2018, in conformity with accounting principles generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of January 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our report dated March 28, 2018, expressed an unqualified opinion on theCompany’s internal control over financial reporting.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew York, New YorkMarch 28, 2018We have served as the Company’s auditor since 2001.61Table of ContentsVERINT SYSTEMS INC. AND SUBSIDIARIESConsolidated Balance Sheets January 31, (in thousands, except share and per share data)2018 2017Assets Current Assets: Cash and cash equivalents$337,942 $307,363Restricted cash and bank time deposits33,303 9,198Short-term investments 6,566 3,184Accounts receivable, net of allowance for doubtful accounts of $2.2 million and $1.8 million, respectively296,324 266,590Inventories19,871 17,537Deferred cost of revenue6,096 3,621Prepaid expenses and other current assets82,090 64,561 Total current assets782,192 672,054Property and equipment, net89,089 77,551Goodwill1,388,299 1,264,818Intangible assets, net226,093 235,259Capitalized software development costs, net9,228 9,509Long-term deferred cost of revenue2,804 5,463Deferred income taxes 30,878 21,510Other assets52,037 76,620 Total assets$2,580,620 $2,362,784 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable$84,639 $62,049Accrued expenses and other current liabilities220,265 213,224Current maturities of long-term debt4,500 4,611Deferred revenue196,107 182,515 Total current liabilities505,511 462,399Long-term debt768,484 744,260Long-term deferred revenue24,519 20,912Deferred income taxes 35,305 25,814Other liabilities114,465 94,359 Total liabilities1,448,284 1,347,744Commitments and Contingencies Stockholders' Equity: Preferred stock - $0.001 par value; authorized 2,207,000 shares at January 31, 2018 and 2017, respectively; none issued. — —Common stock - $0.001 par value; authorized 120,000,000 shares. Issued 65,497,000 and 64,073,000 shares; outstanding63,836,000 and 62,419,000 shares at January 31, 2018 and 2017, respectively65 64Additional paid-in capital1,519,724 1,449,335Treasury stock, at cost - 1,661,000 and 1,654,000 shares at January 31, 2018 and 2017, respectively(57,425) (57,147)Accumulated deficit(238,312) (230,816)Accumulated other comprehensive loss(103,460) (154,856)Total Verint Systems Inc. stockholders' equity1,120,592 1,006,580Noncontrolling interests11,744 8,460 Total stockholders' equity1,132,336 1,015,040 Total liabilities and stockholders' equity$2,580,620 $2,362,784See notes to consolidated financial statements.62Table of ContentsVERINT SYSTEMS INC. AND SUBSIDIARIESConsolidated Statements of Operations Year Ended January 31, (in thousands, except per share data) 2018 2017 2016Revenue: Product $399,662 $378,504 $455,406Service and support 735,567 683,602 674,860 Total revenue 1,135,229 1,062,106 1,130,266Cost of revenue: Product 131,989 123,279 145,071Service and support 276,582 261,978 248,061Amortization of acquired technology 38,216 37,372 35,774 Total cost of revenue 446,787 422,629 428,906Gross profit 688,442 639,477 701,360Operating expenses: Research and development, net 190,643 171,070 177,650Selling, general and administrative 414,960 406,952 412,728Amortization of other acquired intangible assets 34,209 44,089 43,130 Total operating expenses 639,812 622,111 633,508Operating income 48,630 17,366 67,852Other income (expense), net: Interest income 2,477 1,048 1,490Interest expense (35,959) (34,962) (33,885)Losses on early retirements of debt (2,150) — —Other income (expense), net 5,902 (6,926) (12,277) Total other expense, net (29,730) (40,840) (44,672)Income (loss) before provision for income taxes 18,900 (23,474) 23,180Provision for income taxes 22,354 2,772 952Net (loss) income (3,454) (26,246) 22,228Net income attributable to noncontrolling interests 3,173 3,134 4,590Net (loss) income attributable to Verint Systems Inc. $(6,627) $(29,380) $17,638 Net (loss) income per common share attributable to Verint Systems Inc.: Basic $(0.10) $(0.47) $0.29Diluted $(0.10) $(0.47) $0.28 Weighted-average common shares outstanding: Basic 63,312 62,593 61,813Diluted 63,312 62,593 62,921 See notes to consolidated financial statements.63Table of ContentsVERINT SYSTEMS INC. AND SUBSIDIARIESConsolidated Statements of Comprehensive Income (Loss) Year Ended January 31,(in thousands) 2018 2017 2016Net (loss) income $(3,454) $(26,246) $22,228Other comprehensive income (loss), net of reclassification adjustments: Foreign currency translation adjustments 49,810 (42,130) (28,180)Net increase (decrease) from available-for-sale securities — 110 (211)Net increase from foreign exchange contracts designated as hedges 3,042 2,750 6,919Net (decrease) increase from interest rate swap designated as a hedge (1,021) 1,021 —Benefit (provision) for income taxes on net increase (decrease) from foreign exchange contracts andinterest rate swap designated as hedges 85 (693) (798)Other comprehensive income (loss) 51,916 (38,942) (22,270)Comprehensive income (loss) 48,462 (65,188) (42)Comprehensive income attributable to noncontrolling interests 3,693 2,854 4,179Comprehensive income (loss) attributable to Verint Systems Inc. $44,769 $(68,042) $(4,221) See notes to consolidated financial statements.64VERINT SYSTEMS INC. AND SUBSIDIARIESConsolidated Statements of Stockholders’ Equity Verint Systems Inc. Stockholders’ Equity Common Stock AdditionalPaid-in Capital AccumulatedOtherComprehensive Loss Total VerintSystems Inc.Stockholders’Equity TotalStockholders’Equity(in thousands) Shares ParValue TreasuryStock AccumulatedDeficit Non-controllingInterests Balances as of January 31, 2015 60,905 $61 $1,321,455 $(10,251) $(219,074) $(94,335) $997,856 $7,047 $1,004,903Net income — — — — 17,638 — 17,638 4,590 22,228Other comprehensive loss — — — — — (21,859) (21,859) (411) (22,270)Stock-based compensation - equityportion — — 58,028 — — — 58,028 — 58,028Exercises of stock options 6 — 232 — — — 232 — 232Common stock issued for stockawards and stock bonuses 1,355 2 7,743 — — — 7,745 — 7,745Dividends to noncontrolling interest — — — — — — — (3,199) (3,199)Tax effects from stock award plans — — 497 — — — 497 — 497Balances as of January 31, 2016 62,266 63 1,387,955 (10,251) (201,436) (116,194) 1,060,137 8,027 1,068,164Net (loss) income — — — — (29,380) — (29,380) 3,134 (26,246)Other comprehensive loss — — — — — (38,662) (38,662) (280) (38,942)Stock-based compensation - equityportion — — 55,123 — — — 55,123 — 55,123Exercises of stock options 1 — 7 — — — 7 — 7Common stock issued for stockawards and stock bonuses 1,458 1 6,952 — — — 6,953 — 6,953Treasury stock acquired (1,306) — — (46,896) — — (46,896) — (46,896)Dividends to noncontrolling interest — — — — — — — (2,421) (2,421)Tax effects from stock award plans — — (702) — — — (702) — (702)Balances as of January 31, 2017 62,419 64 1,449,335 (57,147) (230,816) (154,856) 1,006,5808,460 1,015,040Net (loss) income — — — — (6,627) — (6,627) 3,173 (3,454)Other comprehensive income — — — — — 51,396 51,396 520 51,916Stock-based compensation - equityportion — — 57,414 — — — 57,414 — 57,414Common stock issued for stockawards and stock bonuses 1,424 1 12,975 — — — 12,976 — 12,976Treasury stock acquired (7) — — (278) — — (278) — (278)Initial noncontrolling interestrelated to business combination — — — — — — — 2,300 2,300Capital contributions bynoncontrolling interest — — — — — — — 595 595Dividends to noncontrolling interest — — — — — — (3,304) (3,304)Cumulative effect of adopting ASUNo. 2016-16 — — — — (869) — (869) — (869)Balances as of January 31, 2018 63,836 $65 $1,519,724 $(57,425) $(238,312) $(103,460) $1,120,592 $11,744 $1,132,336 See notes to consolidated financial statements.65Table of ContentsVERINT SYSTEMS INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows Year Ended January 31,(in thousands) 2018 2017 2016Cash flows from operating activities: Net (loss) income $(3,454) $(26,246) $22,228Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 105,730 114,257 106,300Provision for doubtful accounts 559 1,791 669Stock-based compensation, excluding cash-settled awards 69,296 65,421 64,387Amortization of discount on convertible notes 11,243 10,668 10,123Benefit from deferred income taxes (7,533) (16,941) (5,640)Excess tax benefits from stock award plans — (6) (523)Non-cash losses (gains) on derivative financial instruments, net 17 323 (394)Losses on early retirements of debt 2,150 — —Other non-cash items, net (428) 7,666 12,343Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable (23,512) (353) 3,433Inventories (2,865) (286) (3,258)Deferred cost of revenue 282 7,124 6,187Prepaid expenses and other assets (2,030) 4,941 (2,886)Accounts payable and accrued expenses 10,158 (9,521) (15,260)Deferred revenue 9,686 8,705 (12,364)Other liabilities 8,599 4,987 (28,515)Other, net (1,571) (115) 73Net cash provided by operating activities 176,327 172,415 156,903 Cash flows from investing activities: Cash paid for business combinations, including adjustments, net of cash acquired (102,978) (141,803) (31,358)Purchases of property and equipment (35,530) (27,540) (25,265)Purchases of investments (11,875) (36,761) (92,808)Maturities and sales of investments 8,721 89,342 71,457Settlements of derivative financial instruments not designated as hedges (1,558) (349) 766Cash paid for capitalized software development costs (3,126) (2,338) (5,027)Change in restricted cash and bank time deposits, including long-term portion 2,075 (36,579) 11,133Other investing activities (210) — (4,498)Net cash used in investing activities (144,481) (156,028) (75,600) Cash flows from financing activities: Proceeds from borrowings, net of original issuance discount 444,341 — —Repayments of borrowings and other financing obligations (431,888) (3,308) (309)Payments of equity issuance, debt issuance and other debt-related costs (7,137) (249) (239)Proceeds from exercises of stock options — 7 232Dividends paid to noncontrolling interest (3,304) (2,421) (3,199)Purchases of treasury stock — (46,896) —Excess tax benefits from stock award plans — 6 523Payments of contingent consideration for business combinations (financing portion) and other financing activities (7,515) (4,058) (7,212)Net cash used in financing activities (5,503) (56,919) (10,204)Effect of exchange rate changes on cash and cash equivalents 4,236 (4,210) (4,066)Net increase (decrease) in cash and cash equivalents 30,579 (44,742) 67,033Cash and cash equivalents, beginning of year 307,363 352,105 285,072Cash and cash equivalents, end of year $337,942 $307,363 $352,105See notes to consolidated financial statements.66Table of ContentsVERINT SYSTEMS INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Unless the context otherwise requires, the terms “Verint”, “we”, “us”, and “our” in these notes to 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 growthbecause it empowers organizations with crucial insights 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, over 10,000organizations in more than 180 countries, including over 85 percent of the Fortune 100, use Verint solutions to optimize customer engagement and make theworld a safer place.Verint delivers its Actionable Intelligence solutions through two operating segments: Customer Engagement Solutions (“Customer Engagement”) and CyberIntelligence Solutions (“Cyber Intelligence”).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 850 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 ofservices, such as strategic consulting, managed services, implementation services, training, maintenance, and 24x7 support. Additionally, we offer a broadrange of deployment options, including cloud, on-premises, and hybrid, and software licensing and delivery models that include perpetual licenses andsoftware 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.Principles of Consolidation The accompanying consolidated financial statements include the accounts of Verint Systems Inc., our wholly owned or otherwise controlled subsidiaries, anda 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. Noncontrollinginterests in less than wholly owned subsidiaries are reflected within stockholders’ equity on our consolidated balance sheet, but separately from ourstockholders’ equity. We hold an option to acquire the noncontrolling interests in two majority owned subsidiaries and 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 notrecognize noncontrolling interests in these subsidiaries.We include the results of operations of acquired companies from the date of acquisition. All significant intercompany transactions and balances areeliminated.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 U.S. generally accepted accounting principles (“GAAP”) requires our management to makeestimates and assumptions, which may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date ofthe consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from thoseestimates.Restricted Cash and Restricted Bank Time Deposits67Table of ContentsRestricted cash and restricted bank time deposits are pledged as collateral or otherwise restricted as to use for vendor payables, general liability insurance,workers’ compensation insurance, warranty programs, and other obligations.InvestmentsOur investments generally consist of bank time deposits, and marketable debt securities of corporations, the U.S. government, and agencies of the U.S.government, all with remaining maturities in excess of 90 days at the time of purchase. As of January 31, 2018, we held $2.0 million of marketable debtsecurities. As of January 31, 2017, we held no marketable debt securities. Investments with maturities in excess of one year are included in other assets.Accounts Receivable, NetTrade accounts receivable are recorded at the invoiced amount and are not interest-bearing.Accounts receivable, net, includes unbilled accounts receivable on arrangements recognized under contract accounting methods, representing revenuerecognized on contracts for which billing will occur in subsequent periods, in accordance with the terms of the contracts. Unbilled accounts receivable onsuch contracts were $65.9 million and $39.7 million at January 31, 2018 and 2017, respectively.Under most contracts, unbilled accounts receivable are typically billed and collected within one year of revenue recognition. However, as of January 312018, we had unbilled accounts receivable on certain complex projects for which the underlying billing milestones are still in progress and have remainedunbilled for periods in excess of one year, and in some cases, for several years. Unbilled accounts receivable on these projects have declined significantlyover 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 year.The application of our revenue recognition policies sometimes results in circumstances for which we are unable to recognize revenue relating to salestransactions that have been billed, but the related account receivable has not been collected. For consolidated balance sheet presentation purposes, we do notrecognize the deferred revenue or the related account receivable and no amounts appear in our consolidated balance sheets for such transactions. Only to theextent that we have received cash for a given deferred revenue transaction is the amount included in deferred revenue on the consolidated balance sheets.Concentrations of Credit RiskFinancial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, bank time deposits, short-term investments, and trade accounts receivable. We invest our cash in bank accounts, certificates of deposit, and money market accounts with majorfinancial institutions, in U.S. government and agency obligations, and in debt securities of corporations. By policy, we seek to limit credit exposure oninvestments through diversification and by restricting our investments to highly rated securities.We grant credit terms to our customers in the ordinary course of business. Concentrations of credit risk with respect to trade accounts receivable are generallylimited due to the large number of customers comprising our customer base and their dispersion across different industries and geographic areas. There aretwo customers in our Cyber Intelligence segment that accounted for a combined $99.7 million and $99.3 million of our accounts receivable (including bothbilled and unbilled amounts), at January 31, 2018 and 2017, respectively. These customers are governmental agencies outside of the U.S. which we believepresent insignificant credit risk.Allowance for Doubtful AccountsWe estimate the collectability of our accounts receivable balances each accounting period and adjust our allowance for doubtfulaccounts accordingly. Considerable judgment is required in assessing the collectability of accounts receivable, including consideration of thecreditworthiness of each customer, their collection history, and the related aging of past due accounts receivable balances. We evaluate specific accountswhen we learn that a customer may be experiencing a deteriorating financial condition due to lower credit ratings, bankruptcy, or other factors that may affectits ability to render payment. We write-off an account receivable and charge it against its recorded allowance at the point when it is considered uncollectible.The following table summarizes the activity in our allowance for doubtful accounts for the years ended January 31, 2018, 2017, and 2016:68Table of Contents Year Ended January 31,(in thousands) 2018 2017 2016Allowance for doubtful accounts, beginning of year $1,842 $1,170 $1,099Provisions charged to expense 559 1,791 669Amounts written off (482) (1,484) (933)Other, including fluctuations in foreign exchange rates 298 365 335Allowance for doubtful accounts, end of year $2,217 $1,842 $1,170InventoriesInventories are stated at the lower of cost or market. Cost is determined using the weighted-average method of inventory accounting. The valuation of ourinventories requires us to make estimates regarding excess or obsolete inventories, including making estimates of the future demand for our products.Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand, price, ortechnological developments could have a significant impact on the value of our inventory and reported operating results. Charges for excess and obsoleteinventories are included within cost of revenue.Property and Equipment, netProperty and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method basedover the estimated useful lives of the assets. The vast majority of equipment, furniture and other is depreciated over periods ranging from three to seven years.Software is depreciated over periods ranging from three to four years. Buildings are depreciated over periods ranging from ten to twenty-five years. Leaseholdimprovements are amortized over the shorter of their estimated useful lives or the related lease term. Capital leased assets are amortized over the related leaseterm.The cost of maintenance and repairs of property and equipment is charged to operations as incurred. When assets are retired ordisposed of, the cost and accumulated depreciation or amortization thereon are removed from the consolidated balance sheet and any resulting gain or loss isrecognized in the consolidated statement of operations.Segment ReportingOperating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by theenterprise’s chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance.We conduct our business through two operating segments, which are also our reportable segments, Customer Engagement and Cyber Intelligence. Organizingour business through two operating segments allows us to align our resources and domain expertise to effectively address the Actionable Intelligence market.We determine our reportable segments based on a number of factors our management uses to evaluate and run our business operations, including similaritiesof customers, products, and technology. Our Chief Executive Officer is our CODM, who regularly reviews segment revenue and segment operatingcontribution when assessing financial results of segments and allocating resources.We measure the performance of our operating segments based upon segment revenue and segment contribution.Segment revenue includes adjustments associated with revenue of acquired companies which are not recognizable within GAAP revenue. These adjustmentsprimarily relate to the acquisition-date excess of the historical carrying value over the fair value of acquired companies’ future maintenance and serviceperformance obligations. As the obligations are satisfied, we report our segment revenue using the historical carrying values of these obligations, which webelieve better reflects our ongoing maintenance and service revenue streams, whereas GAAP revenue is reported using the obligations’ acquisition-date fairvalues. 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 anddevelopment and selling, marketing, and 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 supportexpenses” in our table of segment operating results, the majority of which are expenses for administrative support functions, such as information technology,69Table of Contentshuman 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 canvary significantly in amount and frequency, are based upon subjective assumptions, or in certain cases are unplanned for or difficult to forecast, such asrestructuring expenses and business combination transaction and integration expenses, all of which are not considered when evaluating segmentperformance.Revenue from transactions between our operating segments is not material.Goodwill, Other Acquired Intangible Assets, and Long-Lived AssetsFor business combinations, the purchase prices are allocated to the tangible assets and intangible assets acquired and liabilities assumed based on theirestimated fair values on the acquisition dates, with the remaining unallocated purchase prices recorded as goodwill. Goodwill is assigned, at the acquisitiondate, to those reporting units expected to benefit from the synergies of the combination. We test goodwill for impairment at the reporting unit level, which can be an operating segment or one level below an operating segment, on an annual basisas of November 1, or more frequently if changes in facts and circumstances indicate that impairment in the value of goodwill may exist. As of January 31,2018, our reporting units are Customer Engagement, Cyber Intelligence (excluding situational intelligence solutions), and Situational Intelligence, which isa component of our Cyber Intelligence operating segment.In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of areporting unit is less than its carrying amount. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-stepimpairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of thereporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill isimpaired, a second step is performed to compute the amount of impairment as the difference.For reporting units where we perform the two-step process, we utilize some or all of three primary approaches to assess fair value: (a) an income-basedapproach, using projected discounted cash flows, (b) a market-based approach, using valuation multiples of comparable companies, and (c) a transaction-based approach, using valuation multiples for recent acquisitions of similar businesses made in the marketplace. Our estimate of fair value of each reportingunit is based on a number of subjective factors, including: (a) appropriate consideration of valuation approaches (income approach, comparable publiccompany approach, and comparable transaction approach), (b) estimates of future growth rates, (c) estimates of our future cost structure, (d) discount rates forour estimated cash flows, (e) selection of peer group companies for the public company and the market transaction approaches, (f) required levels of workingcapital, (g) assumed terminal value, and (h) time horizon of cash flow forecasts.Acquired identifiable intangible assets include identifiable acquired technologies, customer relationships, trade names, distribution networks, non-competition agreements, sales backlog, and in-process research and development. We amortize the cost of finite-lived identifiable intangible assets over theirestimated useful lives, which are periods of ten years or less. Amortization is based on the pattern in which the economic benefits of the intangible asset areexpected to be realized, which typically is on a straight-line basis. The fair values assigned to identifiable intangible assets acquired in businesscombinations are determined primarily by using the income approach, which discounts expected future cash flows attributable to these assets to present valueusing estimates and assumptions determined by management. The acquired identifiable finite-lived intangible assets are being amortized primarily on astraight-line basis, which we believe approximates the pattern in which the assets are utilized, over their estimated useful lives.Fair Value MeasurementsAccounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservableinputs when measuring fair value. An instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant tothe fair value measurement. This fair value hierarchy consists of three levels of inputs that may be used to measure fair value: •Level 1: quoted prices in active markets for identical assets or liabilities;70Table of Contents•Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets orliabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can becorroborated by observable market data for substantially the full term of the assets or liabilities; or•Level 3: unobservable inputs that are supported by little or no market activity.We review the fair value hierarchy classification of our applicable assets and liabilities at each reporting period. Changes in the observability of valuationinputs may result in transfers within the fair value measurement hierarchy. We did not identify any transfers between levels of the fair value measurementhierarchy during the years ended January 31, 2018 and 2017. Fair Values of Financial InstrumentsOur recorded amounts of cash and cash equivalents, restricted cash and restricted bank time deposits, accounts receivable, investments, and accounts payableapproximate fair value, due to the short-term nature of these instruments. We measure certain financial assets and liabilities at fair value based on theexchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset orliability in an orderly transaction between market participants.Derivative Financial InstrumentsAs part of our risk management strategy, when considered appropriate, we use derivative financial instruments including foreign currency forward contractsand interest rate swap agreements to hedge against certain foreign currency and interest rate exposures. Our intent is to mitigate gains and losses caused bythe underlying exposures with offsetting gains and losses on the derivative contracts. By policy, we do not enter into speculative positions with derivativeinstruments.We record all derivatives as assets or liabilities on our consolidated balance sheets at their fair values. Gains and losses from the changes in values of thesederivatives are accounted for based on the use of the derivative and whether it qualifies for hedge accounting.The counterparties to our derivative financial instruments consist of several major international financial institutions. We regularly monitor the financialstrength of these institutions. While the counterparties to these contracts expose us to credit-related losses in the event of a counterparty’s non-performance,the risk would be limited to the unrealized gains on such affected contracts. We do not anticipate any such losses.Revenue RecognitionWe derive and report our revenue in two categories: (a) product revenue, including licensing of software products and sale of hardware products (whichinclude software that works together with the hardware to deliver the product’s essential functionality) and (b) service and support revenue, includingrevenue from installation services, post-contract customer support (“PCS”), project management, hosting services, cloud deployments, SaaS, applicationmanaged services, product warranties, business advisory consulting and training services.Our revenue recognition policy is a critical component of determining our operating results and is based on a complex set of accounting rules that require usto make significant judgments and estimates. Our customer arrangements typically include several elements, including products, services, and support.Revenue recognition for a particular arrangement is dependent upon such factors as the level of customization within the solution and the contractualdelivery, acceptance, payment, and support terms with the customer. Significant judgment is often required to conclude whether collectability of fees isreasonably assured and whether fees are fixed or determinable.For arrangements that do not require significant modification or customization of the underlying products, we recognize revenue when we have persuasiveevidence of an arrangement, the product has been delivered or the services have been provided to the customer, the sales price is fixed or determinable andcollectability is reasonably assured. In addition, our multiple-element arrangements must be carefully reviewed to determine the selling price of eachelement.Our multiple-element arrangements consist of a combination of our product and service offerings that may be delivered at various points in time. Forarrangements within the scope of the multiple-deliverable accounting guidance, a deliverable constitutes a separate unit of accounting when it has stand-alone value and there are no customer-negotiated refunds or return rights for the delivered elements. For multiple-element arrangements comprised only ofhardware products containing software71Table of Contentscomponents and non-software components and related services, we allocate revenue to each element in an arrangement based on a selling price hierarchy.The selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”) if available, third-party evidence (“TPE”) if VSOE is notavailable, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. The total transaction revenue is allocated to the multiple elements basedon each element’s relative selling price compared to the total selling price. We limit the amount of revenue recognized for delivered elements to an amountthat is not contingent upon future delivery of additional products or services or meeting of any specified performance conditions.Our policy for establishing VSOE for installation, consulting, and training is based upon an analysis of separate sales of services. We utilize either thesubstantive renewal rate approach or the bell-shaped curve approach to establish VSOE for our PCS offerings, depending upon the business segment,geographical region, or product line.TPE of selling price is established by evaluating largely similar and interchangeable competitor products or services in stand-alone sales to similarly situatedcustomers. However, as most of our products contain a significant element of proprietary technology offering substantially different features andfunctionality, the comparable pricing of products with similar functionality typically cannot be obtained. Additionally, as we are unable to reliablydetermine what competitors products’ selling prices are on a stand-alone basis, we are typically not able to determine TPE.If we are unable to determine the selling price because VSOE or TPE does not exist, we determine ESP for the purposes of allocating the arrangement’srevenue by considering several external and internal factors including, but not limited to, pricing practices, similar product offerings, margin objectives,geographies in which we offer our products and services, internal costs, competition, and product life cycle. The determination of ESP is made throughconsultation with and approval by our management, taking into consideration our go-to-market strategies. We have established processes to update ESP foreach element, when appropriate, to ensure that it reflects recent pricing experience.For multiple-element arrangements comprised only of software products and related services, a portion of the total purchase price is allocated to theundelivered elements, primarily installation services, PCS, application managed services, business advisory consulting and training services, using VSOE offair value of the undelivered elements. The remaining portion of the total transaction value is allocated to the delivered software, referred to as the residualmethod. If we are unable to establish VSOE for the undelivered elements of the arrangement, revenue recognition is deferred for the entire arrangement untilall elements of the arrangement are delivered, unless the only undelivered element is PCS, in which case, we recognize the arrangement fee ratably over thePCS period.For multiple-element arrangements that contain software and software-related elements for which we are unable to establish VSOE of 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 andservice revenue for financial reporting purposes.For multiple-element arrangements that are comprised of a combination of software and non-software deliverables, the total transaction value is bifurcatedbetween the software deliverables and non-software deliverables based on the relative selling prices of the software and non-software deliverables as a group.Revenue is then recognized for the software and software-related services following the residual method or ratably over the PCS period if VSOE for PCS doesnot exist, and for the non-software deliverables following the revenue recognition methodology outlined above for multiple-element arrangements thatcontain tangible products and other non-software related services.PCS revenue is derived from providing technical software support services and unspecified software updates and upgrades to customers on a when-and-if-available basis. PCS revenue is recognized ratably over the term of the maintenance period, which in most cases is one year.Under the substantive renewal rate approach, we believe it is necessary to evaluate whether both the support renewal rate and term are substantive andwhether the renewal rate is being consistently applied to subsequent renewals for a particular customer. We establish VSOE under this approach throughanalyzing the renewal rate stated in the customer agreement and determining whether that rate is above the minimum substantive VSOE renewal rateestablished for that particular PCS offering. The minimum substantive VSOE rate is determined based upon an analysis of renewal rates associated withhistorical PCS contracts. For multiple-element software arrangements that do not contain a stated renewal rate, revenue associated with the entire bundledarrangement is recognized ratably over the PCS term. Multiple-element software arrangements that have a renewal rate below the minimum substantive VSOErate are deemed to contain a more than insignificant discount element, for which VSOE cannot be established. We recognize aggregate contractual revenuefor these arrangements over the period that the customer is entitled to renew its PCS at the discounted rate, but not to exceed the estimated economic life ofthe product. We evaluate many factors in determining the estimated economic life of our products, including the support period of the product,72Table of Contentstechnological obsolescence, and customer expectations. We have concluded that our software products have estimated economic lives ranging from five toseven years.Under the bell-shaped curve approach of establishing VSOE, we perform VSOE compliance tests to ensure that a substantial majority of our actual PCSrenewals are within a narrow range of pricing.Some of our arrangements require significant customization of the product to meet the particular requirements of the customer. For these arrangements,revenue is recognized under contract accounting principles, typically using the percentage-of-completion (“POC”) method. Under the POC method, revenuerecognition is generally based upon the ratio of hours incurred to date to the total estimated hours required to complete the contract. Profit estimates on long-term contracts are revised periodically based on changes in circumstances, and any losses on contracts are recognized in the period that such losses becomeevident. If the range of profitability cannot be estimated, but some level of profit is assured, revenue is recognized to the extent of costs incurred, until suchtime that the project’s profitability can be estimated or the services have been completed. In the event some level of profitability on a contract cannot beassured, the completed-contract method of revenue recognition is applied.Our SaaS multiple-element arrangements are typically comprised of subscription and support fees from customers accessing our software, set-up fees, and feesfor consultation services. We do not provide the customer the contractual right to take possession of the software at any time during the hosting period underthese arrangements. We recognize revenue for subscription and support services over the contract period originating when the subscription service is madeavailable to the customer and the contractual hosting period has commenced. The initial set-up fees are recognized over the longer of the initial contractperiod or the period the customer is expected to benefit from payment of the up-front fees. Revenue from consultation services is generally recognized asservices are completed.Our application managed services revenue is derived from providing services that enhance our customers IT processes and maximize the business benefits ofour solutions. Application managed services revenue is recognized ratably over the applicable term which, in most cases, is at least one year. Whenapplication managed services is included within a multiple-element arrangement, we utilize the substantive renewal rate approach to establish VSOE. Inaddition, we perform a budget versus actual time analysis to support our initial estimate of effort required to provide these services.If an arrangement includes customer acceptance criteria, revenue is not recognized until we can objectively demonstrate that the software or services meet theacceptance criteria, or the acceptance period lapses, whichever occurs earlier. If an arrangement containing software elements obligates us to deliver specifiedfuture software products or upgrades, revenue related to the software elements under the arrangement is initially deferred and is recognized only when thespecified future software products or upgrades are delivered, or when the obligation to deliver specified future software products expires, whichever occursearlier. We record provisions for estimated product returns in the same period in which the associated revenue is recognized. We base these estimates of productreturns upon historical levels of sales returns and other known factors. Actual product returns could be different from our estimates, and current or futureprovisions for product returns may differ from historical provisions. Concessions granted to customers are recorded as reductions to revenue in the period inwhich they were granted. The vast majority of our contracts are successfully completed, and concessions granted to customers are minimal in both dollarvalue and frequency.Product revenue derived from shipments to resellers and original equipment manufacturers (“OEMs”) who purchase our products for resale are generallyrecognized when such products are shipped (on a “sell-in” basis) since we do not expect our resellers or OEMs to carry inventory of our products. We havehistorically experienced insignificant product returns from resellers and OEMs, and our payment terms for these customers are similar to those granted to ourend-users. If a reseller or OEM develops a pattern of payment delinquency, or seeks payment terms longer than generally accepted, we defer the recognitionof revenue until the receipt of cash. Our arrangements with resellers and OEMs are periodically reviewed as our business and products change.In instances where revenue is derived from sale of third-party vendor services and we are a principal in the transaction, we record revenue on a gross basis andrecord costs related to a sale within cost of revenue. Though uncommon, in cases where we act as an agent between the customer and the vendor, revenue isrecorded net of costs.Multiple contracts with a single counterparty executed within close proximity of each other are evaluated to determine if the contracts should be combinedand accounted for as a single arrangement. We record reimbursements from customers for out-of-pocket expenses as revenue. Shipping and handling fees andexpenses that are billed to customers are recognized in revenue73Table of Contentsand the costs associated with such fees and expenses are recorded in cost of revenue. Historically, these fees and expenses have not been material. Taxescollected from customers and remitted to government authorities are excluded from revenue.Cost of RevenueOur cost of revenue includes costs of materials, compensation and benefit costs for operations and service personnel, subcontractor costs, royalties andlicense fees, depreciation of equipment used in operations and service, amortization of capitalized software development costs and certain purchasedintangible assets, and related overhead costs.Where revenue is recognized over multiple periods in accordance with our revenue recognition policies, we have made an accounting policy electionwhereby cost of product revenue, including hardware and third-party software license fees, are capitalized and recognized in the same period that productrevenue is recognized, while installation and other service costs are generally expensed as incurred, except for certain contracts that are accounted for usingcontract accounting principles. Deferred cost of revenue is classified in its entirety as current or long-term based on whether the related revenue will berecognized within twelve months of the origination date of the arrangement.For certain contracts accounted for using contract accounting principles, revisions in estimates of costs and profits are reflected in the accounting period inwhich the facts that require the revision become known, if such facts become known subsequent to the issuance of the consolidated financial statements. Ifsuch facts become known before the issuance of the consolidated financial statements, the requisite revisions in estimates of costs and profits are reflected inthe consolidated financial statements. At the time a loss on a contract becomes evident, the entire amount of the estimated loss is accrued. Related contractcosts include all direct material and labor costs and those indirect costs related to contract performance.Customer acquisition and origination costs, including sales commissions, are recorded in selling, general and administrative expenses. These costs areexpensed as incurred, with the exception of certain sales referral fees in our Cyber Intelligence segment which are capitalized and amortized ratably over therevenue recognition period.Research and Development, netWith the exception of certain software development costs, all research and development costs are expensed as incurred, and consist primarily of personneland consulting costs, travel, depreciation of research and development equipment, and related overhead and other costs associated with research anddevelopment activities.We receive non-refundable grants from the Israeli Innovation Authority (“IIA”), formerly the Israel Office of the Chief Scientist (“OCS”), that fund a portionof our research and development expenditures. We currently only enter into non-royalty-bearing arrangements with the IIA which do not require us to payroyalties. Funds received from the IIA are recorded as a reduction to research and development expense. Royalties, to the extent paid, are recorded as part ofour cost of revenue.We also periodically derive benefits from participation in certain government-sponsored programs in other jurisdictions, for the support of research anddevelopment activities conducted in those locations.Software Development CostsCosts incurred to acquire or develop software to be sold, leased or otherwise marketed are capitalized after technological feasibility is established, andcontinue to be capitalized through the general release of the related software product. Amortization of capitalized costs begins in the period in which therelated product is available for general release to customers and is recorded on a straight-line basis, which approximates the pattern in which the economicbenefits of the capitalized costs are expected to be realized, over the estimated economic lives of the related software products, generally four years.Internal-Use SoftwareWe capitalize costs associated with software that is acquired, internally developed or modified solely to meet our internal needs. Capitalization begins whenthe preliminary project stage has been completed and management with the relevant authority authorizes and commits to the funding of the project. Thesecapitalized costs include external direct costs utilized in developing or obtaining the applications and expenses for employees who are directly associatedwith the development of the applications. Capitalization of such costs continues until the project is substantially complete and is ready for its intendedpurpose. Capitalized costs of computer software developed for internal use are generally amortized over estimates useful lives of four years on a straight-linebasis, which best represents the pattern of the software’s use.74Table of ContentsIncome TaxesWe account for income taxes under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected futuretax consequences of events that have been included in our consolidated financial statements. Under this approach, deferred taxes are recorded for the futuretax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes representsincome taxes paid or payable for the current year plus deferred taxes. Deferred taxes result from differences between the financial statement and tax bases ofour assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws orrates are not anticipated.We are subject to income taxes in the United States and numerous foreign jurisdictions. The calculation of our income tax provision involves the applicationof complex tax laws and requires significant judgment and estimates. On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted inthe United States. The 2017 Tax Act significantly revises the Internal Revenue Code of 1986, as amended, and it includes fundamental changes to taxation ofU.S. multinationals. Compliance with the 2017 Tax Act will require significant complex computations not previously required by U.S. tax law. It is unclearhow certain provisions of the 2017 Tax Act will be applied absent further legislative, regulatory, or accounting clarification and guidance. In addition, it isuncertain if and to what extent various states will enact legislation to conform to the 2017 Tax Act. It is also uncertain if and to what extent foreigngovernments may enact tax legislation in response to the 2017 Tax Act. Also, on December 22, 2017, the staff of the Securities and Exchange Commissionissued Staff Accounting Bulletin No. 118 (“SAB No. 118”). SAB No. 118 provides guidance on accounting for the tax effects of the 2017 Tax Act and allowsregistrants to record provisional amounts for a period of up to one year from the date of enactment of the 2017 Tax Act. We consider amounts related to the2017 Tax Act to be reasonably estimated as of January 31, 2018. We expect to refine and complete the accounting for the 2017 Tax Act during the yearending January 31, 2019 as we obtain, prepare, and analyze additional information and as additional legislative, regulatory, and accounting guidance andinterpretations become available.We evaluate the realizability of our deferred tax assets for each jurisdiction in which we operate at each reporting date, and establish valuation allowanceswhen it is more likely than not that all or a portion of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependentupon the generation of future taxable income of the same character and in the same jurisdiction. We consider all available positive and negative evidence inmaking this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planningstrategies. In circumstances where there is sufficient negative evidence indicating that our deferred tax assets are not more-likely-than-not realizable, weestablish a valuation allowance.We use a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate tax positions taken or expected to be taken in atax return by assessing whether they are more-likely-than-not sustainable, based solely on their technical merits, upon examination and including resolutionof any related appeals or litigation process. The second step is to measure the associated tax benefit of each position as the largest amount that we believe ismore-likely-than-not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of taxbenefits recognized in our financial statements represent our unrecognized income tax benefits, which we either record as a liability or as a reduction ofdeferred tax assets. Our policy is to include interest (expense and/or income) and penalties related to unrecognized income tax benefits as a component ofincome tax expense.Functional Currencies and Foreign Currency Transaction Gains and LossesThe functional currency for most of our foreign subsidiaries is the applicable local currency, although we have several subsidiaries with functional currenciesthat differ from their local currency, of which the most notable exceptions are our subsidiaries in Israel, whose functional currencies are the U.S. dollar.Transactions denominated in currencies other than a functional currency are converted to the functional currency on the transaction date, and any resultingassets or liabilities are further translated at each reporting date and at settlement. Gains and losses recognized upon such translations are included withinother income (expense), net in the consolidated statements of operations. We recorded net foreign currency gains of $6.8 million for the year ended January31, 2018, and net foreign currency losses of $2.7 million and $8.0 million, for the years ended January 31, 2017 and 2016, respectively.For consolidated reporting purposes, in those instances where a foreign subsidiary has a functional currency other than the U.S. dollar, revenue and expensesare translated into U.S. dollars using average exchange rates for the reporting period, while assets and liabilities are translated into U.S. dollars using period-end rates. The effects of foreign currency translation adjustments are75Table of Contentsincluded in stockholders’ equity as a component of accumulated other comprehensive (loss) income in the accompanying consolidated balance sheets.Stock-Based CompensationWe recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of the award. Werecognize the fair value of the award as compensation expense over the period during which an employee is required to provide service in exchange for theaward.For performance stock units for which vesting is in part dependent on total shareholder return, the fair value of the award is estimated on the date of grantusing a Monte Carlo Simulation. Expected volatility and expected term are input factors for that model and may require significant management judgment.Expected volatility is estimated utilizing daily historical volatility for Verint common stock price and the constituents of the specific comparator index overa period commensurate with the remaining award performance period. The risk-free interest rate used is equal to the implied daily yield of the zero-couponU.S. Treasury bill that corresponds with the remaining performance period of the award as of the valuation date.Net (Loss) Income Per Common Share Attributable to Verint Systems Inc.Shares used in the calculation of basic net (loss) income per common share are based on the weighted-average number of common shares outstanding duringthe accounting period. Shares used in the calculation of basic net income per common share include vested but unissued shares underlying awards ofrestricted stock units when all necessary conditions for earning those shares have been satisfied at the award’s vesting date, but exclude unvested shares ofrestricted stock because they are contingent upon future service conditions.We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion of our 1.50%convertible senior notes due June 1, 2021 (the “Notes”), further details for which appear in Note 6, “Long-Term Debt”. We currently intend to settle theprincipal amount of the Notes in cash upon conversion and as a result, only the amounts payable in excess of the principal amounts of the Notes, if any, areassumed to be settled with shares of common stock for purposes of computing diluted net income per share.In periods for which we report a net loss, basic net loss per common share and diluted net loss per common share are identical since the effect of potentialcommon shares is anti-dilutive and therefore excluded.Recent Accounting PronouncementsNew Accounting Pronouncements Recently AdoptedIn March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation—StockCompensation (Topic 718), which amends the accounting for stock-based compensation and requires excess tax benefits and deficiencies to be recognized asa component of income tax expense rather than stockholders’ equity. This guidance also requires excess tax benefits to be presented as an operating activityon the consolidated statements of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to accountfor 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 retainedearnings, and in accordance with the new guidance, we recorded certain tax effects from stock-based compensation awards as components of the provision forincome taxes for the year ended January 31, 2018, whereas such tax effects were previously recognized in stockholders’ equity. These tax effects were notmaterial for the year ended January 31, 2018. Our accounting for forfeitures of stock-based compensation awards has not changed because we have elected tocontinue our current policy of estimating expected forfeitures. The effects of adopting the other provisions of ASU No. 2016-09 were not material to ourconsolidated financial statements.In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entitiesto recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effectivefor annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the beginning of an annual reporting period. The newstandard must be adopted using a modified retrospective transition method, with the cumulative effect recognized as of the date of initial adoption. Weelected to early adopt this standard as of February 1, 2017, resulting in a $0.9 million cumulative charge to accumulated deficit, a $1.3 million reduction toother current assets, and a $0.4 million increase in other assets.New Accounting Pronouncements Not Yet Effective76Table of ContentsIn August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities.This update better aligns risk management activities and financial reporting for hedging relationships, simplifies hedge accounting requirements, andimproves disclosures of hedging arrangements. ASU No. 2017-12 is effective for fiscal years beginning after December 15, 2018, with early adoptionpermitted. We are currently reviewing this standard to assess the impact on our 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 beaccounted 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 withinthose 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 ourconsolidated financial statements.ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reportingunit’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 goodwillimpairment tests in fiscal years beginning after December 15, 2019. While we are still assessing the impact of this standard, we do not believe that theadoption of this guidance will have a material impact on our 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 cashflows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cashequivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalentswhen reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This update also requires an entity todisclose 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 amountsused 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 willchange that presentation. We are currently reviewing this standard to assess other potential impacts on our 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 thestatement of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal yearswith early adoption permitted, including adoption in an interim period. We do not expect this standard to materially impact our consolidated financialstatements.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). This new standard changes the impairment model formost financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for lossesfor trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, thelosses will be recognized as allowances rather than as reductions in the amortized cost of the securities. The new standard is effective for annual periods, andfor interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. We are currently reviewing this standardto assess the impact on our 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 leaseterms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a leaseby a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to berecognized 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 forall periods beginning after December 15, 2018 and we are currently evaluating the effects that the adoption of ASU No. 2016-02 will have on ourconsolidated financial statements, but anticipate that the new guidance will significantly impact our consolidated financial statements given ourconsiderable lease obligations.77Table of ContentsIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognitionrequirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of theAccounting 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 ofpromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods orservices. As originally issued, this guidance was effective for interim and annual reporting periods beginning after December 15, 2016, and early adoptionwas not permitted. In July 2015, the FASB deferred the effective date by one year, to interim and annual reporting periods beginning after December 15,2017. Early adoption was permitted, but not before the original effective date of December 15, 2016. The standard allows entities to apply the standardretrospectively to each prior reporting period presented (“full retrospective adoption”) or retrospectively with the cumulative effect of initially applying thestandard recognized at the date of initial application (“modified retrospective adoption”). We adopted ASU No. 2014-09 under the modified retrospectiveoption effective February 1, 2018.We have completed several key accounting assessments related to the standard and are in the process of finalizing our remaining assessments and quantifyingthe required cumulative effect adjustments upon adoption. We continue to evaluate and implement changes to related processes, systems, and internalcontrols. Our evaluation has included determining whether the unit of account (performance obligations) will change as compared to current GAAP, as wellas determining the standalone selling price of each of our performance obligations. We believe our performance obligations will remain substantiallyunchanged from current guidance.We currently allocate revenue to our software licenses under the residual method when VSOE exists for the remaining undelivered elements. The residualmethod allocates any future credits or significant discounts entirely to the software license. The adoption of ASU No. 2014-09 will result in future credits,significant discounts, and material rights under this guidance to be allocated to all performance obligations based upon their relative standalone sellingprices. Under the new standard, additional software license revenue from the reallocation of such arrangement considerations will be recognized when controlis transferred to the customer, which is generally upon delivery of the license. We have not been required to defer a significant amount of revenue due toinsufficient VSOE and do not anticipate the updated standard’s requirement to establish or estimate a standalone selling price, rather than defer revenues inthe absence of VSOE, will have a significant impact on our consolidated financial statements. We do not expect the new standard to materially impact theamount or timing of the majority of revenue recognized in our consolidated financial statements.However, we have identified certain arrangements where revenue may be recognized earlier than under current GAAP, in particular term licenses and sales- orusage-based license arrangements that include minimum guaranteed amounts. We expect to recognize license revenue from term licenses upon delivery ofthe software, rather than over the term of the arrangement and the minimum guaranteed amount related to sales- or usage-based arrangements when thecustomer obtains control of the license. Further, under current rules, the amount of revenue recognized is limited to the amount that is not contingent uponthe delivery of additional items or meeting other specified performance conditions (i.e. the non-contingent amount). Under the new standard, the amountsallocated to delivered items and recognized upfront could be higher if it is probable that a significant reversal in the amount of revenue recognized will notoccur in future periods upon the delivery of additional items or meeting other specified performance conditions. Due to the complexity of certain CyberIntelligence arrangements with governmental entities, the actual revenue recognition treatment required under the new standard will depend on contract-specific terms and in some instances may vary from recognition under current guidance. We are still in the process of quantifying the impact of the newstandard on these arrangements.In addition, the timing of cost of revenue recognition for certain customer contracts requiring significant customization will change, because unlike currentguidance, the new guidance precludes the deferral of costs simply to obtain an even profit margin over the contract term. Upon adoption of the new standard,we also expect to begin deferring commissions earned by our internal sales force and subsequently amortizing these deferred commissions over the expectedbenefit period, which may be the estimated life of the customer relationship, if renewals are expected, and the renewal commission is not commensurate withthe initial commission. We are still in the process of quantifying the impact of the new standard on these costs related to our customer contracts.For sales transactions that have been billed, but for which the recognition of revenue has been deferred and the related account receivable has not beencollected, we currently do not recognize deferred revenue or the related accounts receivable on our consolidated balance sheet. Under the new standard, wewill record accounts receivable and related contract liabilities for noncancelable contracts with customers when the right to consideration is unconditional,which will result in increases in accounts receivable and contract liabilities (currently presented as deferred revenue) on our consolidated balance sheet,78Table of Contentscompared to our current presentation. As of January 31, 2018, our accounts receivable and deferred revenue were offset by approximately $124.0 million forunpaid amounts. Historically, this adjustment to offset unpaid deferred revenue against accounts receivable was highest in the fourth quarter, due to theseasonality of our business. The right to consideration in exchange for goods or services that we have transferred to a customer when that right is conditionalon something other than the passage of time will be reclassified from accounts receivable to contract assets under the new standard. Our unbilled accountsreceivable at January 31, 2018 was $65.9 million. Billings in excess of costs and estimated earnings on uncompleted contracts and deferred revenue will becombined and reclassified as contract liabilities under the new standard. Billings in excess of costs and estimated earnings on uncompleted contracts atJanuary 31, 2018 was $46.1 million.There will be a corresponding tax effect in relation to the above noted impacts, which is still being evaluated.2.NET (LOSS) INCOME PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC. The following table summarizes the calculation of basic and diluted net (loss) income per common share attributable to Verint Systems Inc. for the yearsended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands, except per share amounts) 2018 2017 2016Net (loss) income $(3,454) $(26,246) $22,228Net income attributable to noncontrolling interests 3,173 3,134 4,590Net (loss) income attributable to Verint Systems Inc. $(6,627) $(29,380) $17,638Weighted-average shares outstanding: Basic 63,312 62,593 61,813Dilutive effect of employee equity award plans — — 1,108Dilutive effect of 1.50% convertible senior notes — — —Dilutive effect of warrants — — —Diluted 63,312 62,593 62,921Net (loss) income per common share attributable to Verint Systems Inc.: Basic $(0.10) $(0.47) $0.29Diluted $(0.10) $(0.47) $0.28We excluded the following weighted-average potential common shares from the calculations of diluted net (loss) income per common share during theapplicable periods because their inclusion would have been anti-dilutive: Year Ended January 31,(in thousands) 2018 2017 2016Stock options and restricted stock-based awards 1,187 1,097 5961.50% convertible senior notes 6,205 6,205 6,205Warrants 6,205 6,205 6,205In periods for which we report a net loss attributable to Verint Systems Inc., basic net loss per common share and diluted net loss per common share areidentical since the effect of all potential common shares is anti-dilutive and therefore excluded.Our 1.50% convertible senior notes will not impact the calculation of diluted net income per share unless the average price of our common stock, ascalculated in accordance with the terms of the indenture governing the Notes, exceeds the conversion price of $64.46 per share. Likewise, diluted net incomeper share will not include any effect from the Warrants (as defined in Note 6, “Long-Term Debt”) unless the average price of our common stock, as calculatedunder the terms of the Warrants, exceeds the exercise price of $75.00 per share.Our Note Hedges (as defined in Note 6, “Long-Term Debt”) do not impact the calculation of diluted net (loss) income per share under the treasury stockmethod, because their effect would be anti-dilutive. However, in the event of an actual conversion of any or all of the Notes, the common shares that would bedelivered 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, actualconversion of any or all of the Notes would not increase our outstanding common stock. Up to 6,205,000 common shares could, however, be issued uponexercise of the Warrants. Further details regarding the Notes, Note Hedges, and the Warrants appear in Note 6, “Long-Term Debt”.79Table of Contents3. CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTSThe following tables summarize our cash, cash equivalents, and short-term investments as of January 31, 2018 and 2017: January 31, 2018(in thousands) Cost Basis Gross UnrealizedGains Gross UnrealizedLosses Estimated FairValueCash and cash equivalents: Cash and bank time deposits $337,756 $— $— $337,756Money market funds 186 — — 186Total cash and cash equivalents $337,942 $— $— $337,942 Short-term investments: Corporate debt securities (available-for-sale) $2,002 $— $— $2,002Bank time deposits 4,564 — — 4,564Total short-term investments $6,566 $— $— $6,566 January 31, 2017(in thousands) Cost Basis Gross UnrealizedGains Gross UnrealizedLosses Estimated FairValueCash and cash equivalents: Cash and bank time deposits $307,188 $— $— $307,188Money market funds 175 — — 175Total cash and cash equivalents $307,363 $— $— $307,363 Short-term investments: Bank time deposits $3,184 $— $— $3,184Total short-term investments $3,184 $— $— $3,184Bank time deposits which are reported within short-term investments consist of deposits held outside of the U.S. with maturities of greater than 90 days, orwithout specified maturity dates which we intend to hold for periods in excess of 90 days. All other bank deposits are included within cash and cashequivalents.As of January 31, 2018, all of our available-for-sale investments had contractual maturities of less than one year. Gains and losses on sales of available-for-sale securities during the years ended January 31, 2018, 2017, and 2016 were not significant.During the years ended January 31, 2018, 2017, and 2016, proceeds from maturities and sales of available-for-sale securities were $8.7 million, $52.8 million,and $71.5 million, respectively.4.BUSINESS COMBINATIONSYear Ended January 31, 2018During the year ended January 31, 2018, we completed seven business combinations:•On February 1, March 20, October 3, November 3, December 19, and December 21, 2017, we completed acquisitions of businesses in our CustomerEngagement operating segment. One of the transactions was an asset acquisition that qualified as a business combination, and another of which retaineda noncontrolling interest.•On July 1, 2017, we completed the acquisition of a business in our Cyber Intelligence operating segment.These business combinations were not individually material to our consolidated financial statements.80Table of ContentsThe combined consideration for these business combinations was approximately $136.0 million, including $106.0 million of combined cash paid at theclosings. For five of these business combinations, we also agreed to make potential additional cash payments to the respective former shareholdersaggregating up to approximately $47.7 million, contingent upon the achievement of certain performance targets over periods extending through January2022. The fair value of these contingent consideration obligations was estimated to be $27.6 million at the applicable acquisition dates. Cash paid for thesebusiness combinations was funded by cash on hand.The purchase prices for these business combinations were allocated to the tangible and intangible assets acquired and liabilities assumed based on theirestimated fair values on the acquisition dates, with the remaining unallocated purchase prices recorded as goodwill. The fair value assigned to identifiableintangible assets acquired were determined primarily by using the income approach, which discounts expected future cash flows to present value usingestimates and assumptions determined by management.Included among the factors contributing to the recognition of goodwill in these transactions were synergies in products and technologies, and the addition ofskilled, assembled workforces. Of the $81.8 million of goodwill associated with these business combinations, $78.0 million and $3.8 million was assigned toour Customer Engagement and Cyber Intelligence segments, respectively. For income tax purposes, $14.5 million of this goodwill is deductible and $67.3million is not deductible.Revenue and the impact on net loss attributable to these acquisitions for the year ended January 31, 2018 were not significant.Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to these acquisitions, totaled $4.9million for the year ended January 31, 2018. All transaction and related costs were expensed as incurred and are included in selling, general andadministrative expenses.The purchase price allocations for the business combinations completed during the year ended January 31, 2018 have been prepared on a preliminary basisand changes to those allocations may occur as additional information becomes available during the respective measurement periods (up to one year from therespective acquisition dates). Fair values still under review include values assigned to identifiable intangible assets, contingent consideration, deferredincome taxes and reserves for uncertain income tax positions.The following table sets forth the components and the allocations of the combined purchase prices for the business combinations completed during the yearended January 31, 2018, including adjustments identified subsequent to the respective valuation dates, none of which were material:81Table of Contents(in thousands) AmountComponents of Purchase Prices: Cash $106,049Fair value of contingent consideration 27,605Other purchase price adjustments 2,380Total purchase prices $136,034 Allocation of Purchase Prices: Net tangible assets (liabilities): Accounts receivable $4,184Other current assets, including cash acquired 15,108Other assets 2,765Current and other liabilities (12,462)Deferred revenue - current and long-term (4,424)Deferred income taxes (8,660)Net tangible liabilities (3,489)Identifiable intangible assets: Customer relationships 24,444Developed technology 30,952Trademarks and trade names 2,322Total identifiable intangible assets 57,718Goodwill 81,805Total purchase price allocations $136,034For these acquisitions, customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of fromthree years to ten years, from three years to eight years, and from one year to seven years, respectively, the weighted average of which is approximately6.8 years.Year Ended January 31, 2017Contact Solutions, LLCOn February 19, 2016, we completed the acquisition of Contact Solutions, LLC (“Contact Solutions”), a provider of real-time, contextual self-servicesolutions, based in Reston, Virginia. The purchase price consisted of $66.9 million of cash paid at closing, and a $2.5 million post-closing purchase priceadjustment based upon a determination of Contact Solutions’ acquisition-date working capital, which was paid during the three months ended July 31, 2016.The cash paid for this acquisition was funded with cash on hand.The purchase price for Contact Solutions was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fairvalues on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assetsacquired were determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates andassumptions determined by management.Among the factors contributing to the recognition of goodwill as a component of the Contact Solutions purchase price allocation were synergies in productsand technologies, and the addition of a skilled, assembled workforce. This goodwill was assigned to our Customer Engagement segment and is deductible forincome tax purposes.In connection with the purchase price allocation for Contact Solutions, the estimated fair value of undelivered performance obligations under customercontracts assumed in the acquisition was determined utilizing a cost build-up approach. The cost build-up approach calculates fair value by estimating thecosts required to fulfill the obligations plus a reasonable profit margin, which approximates the amount that we believe would be required to pay a third partyto assume the performance obligations. The estimated costs to fulfill the performance obligations were based on the historical direct costs for deliveringsimilar services. As a result, in allocating the purchase price, we recorded $0.6 million of current and long-term deferred revenue, representing the estimatedfair value of undelivered performance obligations for which payment had been received, which is being recognized as revenue as the underlying performanceobligations are delivered. For undelivered performance obligations82Table of Contentsfor which payment had not yet been received, we recorded a $2.9 million asset as a component of the purchase price allocation, representing the estimatedfair 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 includedin other assets. We are amortizing this asset over the underlying delivery periods, which adjusts the revenue we recognize for providing these services to itsestimated fair value.Transaction and related costs directly related to the acquisition of Contact Solutions, consisting primarily of professional fees and integration expenses, were$0.2 million, $1.4 million and $0.1 million for the years ended January 31, 2018, 2017 and 2016, respectively, and were expensed as incurred and areincluded in selling, general and administrative expenses.OpinionLab, Inc.On November 16, 2016, we completed the acquisition of all of the outstanding shares of OpinionLab, Inc. (“OpinionLab”), a leading SaaS provider ofomnichannel Voice of Customer (“VoC”) feedback solutions which help organizations collect, understand, and leverage customer insights, helping drivesmarter, real-time business action. OpinionLab is based in Chicago, Illinois.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 cashreceived in the acquisition, resulting in net cash consideration at closing of $50.0 million. We also agreed to pay potential additional future cashconsideration 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 purchase price was subject to customary purchase price adjustments related tothe final determination of OpinionLab’s cash, net working capital, transaction expenses, and taxes as of November 16, 2016. The acquired business has beenintegrated 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 onthe acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquiredwere determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates and assumptionsdetermined by management.Among the factors contributing to the recognition of goodwill as a component of the OpinionLab purchase price allocation were synergies in products andtechnologies, and the addition of a skilled, assembled workforce. This goodwill was assigned to our Customer Engagement segment and is not deductible forincome tax purposes.In connection with the purchase price allocation for OpinionLab, the estimated fair value of undelivered performance obligations under customer contractsassumed in the acquisition was determined utilizing a cost build-up approach. The cost build-up approach calculates fair value by estimating the costsrequired to fulfill the obligations plus a reasonable profit margin, which approximates the amount that we believe would be required to pay a third party toassume the performance obligations. The estimated costs to fulfill the performance obligations were based on the historical direct costs for delivering similarservices. As a result, in allocating the purchase price, we recorded $3.1 million of current and long-term deferred revenue, representing the estimated fairvalue of undelivered performance obligations for which payment had been received, which is being recognized as revenue as the underlying performanceobligations are delivered. For undelivered performance obligations for which payment had not yet been received, we recorded a $5.4 million asset as acomponent of the purchase price allocation, representing the estimated fair value of these obligations, $3.4 million of which was included within prepaidexpenses 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 $0.9million and $0.6 million for the years ended January 31, 2018 and 2017, respectively, and were expensed as incurred and are included in selling, general andadministrative expenses.The following table sets forth the components and the allocation of the purchase price for our acquisitions of Contact Solutions and OpinionLab. During theyear ended January 31, 2018, there were immaterial adjustments recorded to the OpinionLab purchase price allocation.83Table of Contents(in thousands) Contact Solutions OpinionLabComponents of Purchase Price: Cash paid at closing $66,915 $56,355Fair value of contingent consideration — 15,000Other purchase price adjustments 2,518 —Total purchase price $69,433 $71,355 Allocation of Purchase Price: Net tangible assets (liabilities): Accounts receivable $8,102 $748Other current assets, including cash acquired 2,392 10,625Property and equipment, net 7,007 298Other assets 1,904 2,036Current and other liabilities (4,943) (1,600)Deferred revenue - current and long-term (642) (3,082)Deferred income taxes — (9,877)Net tangible assets (liabilities) 13,820 (852)Identifiable intangible assets: Customer relationships 18,000 19,100Developed technology 13,100 10,400Trademarks and trade names 2,400 1,800Total identifiable intangible assets 33,500 31,300Goodwill 22,113 40,907Total purchase price allocation $69,433 $71,355For the acquisition of Contact Solutions, the acquired customer relationships, developed technology, and trademarks and trade names were assignedestimated useful lives of ten years, four years, and five years, respectively, the weighted average of which was approximately 7.3 years.For the acquisition of OpinionLab, the acquired customer relationships, developed technology, and trademarks and trade names were assigned estimateduseful lives of ten years, six years, and four years, respectively, the weighted average of which was 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 was 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 areutilized, over their estimated useful lives.The purchase price allocations for business combinations completed during the year ended January 31, 2017 are final.Revenue and the impact on net loss attributable to the acquisitions of Contact Solutions and OpinionLab for the year ended January 31, 2017 were notsignificant.Other Business CombinationsDuring the year ended January 31, 2017, we completed two transactions that qualified as business combinations in our Customer Engagement segment.These business combinations were not material to our consolidated financial statements individually or in the aggregate.Year Ended January 31, 2016During the year ended January 31, 2016, we completed three business combinations:84Table of Contents•On February 12, 2015, we completed the acquisition of a business that has been integrated into our Customer Engagement operating segment.•On May 1, 2015, we completed the acquisition of a business that has been integrated into our Cyber Intelligence operating segment.•On August 11, 2015, we acquired certain technology and other assets for use in our Customer Engagement operating segment in a transaction thatqualified as a business combination.These business combinations were not individually material to our consolidated financial statements.The combined consideration for these business combinations was approximately $49.5 million, including $33.2 million of combined cash paid at theclosings. For one of these business combinations, we also agreed to make potential additional cash payments to the respective former shareholdersaggregating up to approximately $30.5 million, contingent upon the achievement of certain performance targets over periods extending through April 2020.The fair value of these contingent consideration obligations was estimated to be $16.2 million at the applicable acquisition date.Included among the factors contributing to the recognition of goodwill in these transactions were synergies in products and technologies, and the addition ofskilled, assembled workforces. Of the $28.7 million of goodwill associated with these business combinations, $7.7 million and $21.0 million was assigned toour Customer Engagement and Cyber Intelligence segments, respectively. For income tax purposes, $5.1 million of this goodwill is deductible and $23.6million is not deductible.Revenue and the impact on net income attributable to these acquisitions for the year ended January 31, 2016 were not significant.Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to these acquisitions, totaled $0.7 million,$0.6 million, and $1.4 million for the years ended January 31, 2018, 2017 and 2016, respectively. All transaction and related costs were expensed as incurredand are included in selling, general and administrative expenses.The following table sets forth the components and the allocations of the combined purchase prices for the business combinations completed during the yearended January 31, 2016, including adjustments identified subsequent to the respective valuation dates, none of which were material:(in thousands) AmountComponents of Purchase Prices: Cash $33,222Fair value of contingent consideration 16,237Total purchase prices $49,459 Allocation of Purchase Prices: Net tangible assets (liabilities): Accounts receivable $992Other current assets, including cash acquired 4,274Other assets 395Current and other liabilities (3,037)Deferred revenue - current and long-term (1,872)Deferred income taxes (2,922)Net tangible liabilities (2,170)Identifiable intangible assets: Customer relationships 1,212Developed technology 20,300Trademarks and trade names 300In-process research and development 1,100Total identifiable intangible assets 22,912Goodwill 28,717Total purchase price allocations $49,45985Table of ContentsFor these acquisitions, customer relationships, developed technology, and trademarks and trade names were assigned estimated useful lives of from five yearsto ten years, from four years to five years, and three years, respectively, the weighted average of which was approximately 4.4 years.Other Business Combination InformationThe pro forma impact of all business combinations completed during the three years ended January 31, 2018 was not material to our historical consolidatedoperating results and is therefore not presented.The acquisition date fair values of contingent consideration obligations associated with business combinations are estimated based on probability adjustedpresent values of the consideration expected to be transferred using significant inputs that are not observable in the market. Key assumptions used in theseestimates include probability assessments with respect to the likelihood of achieving the performance targets and discount rates consistent with the level ofrisk of achievement. At each reporting date, we revalue the contingent consideration obligations to their fair values and record increases and decreases in fairvalue within selling, general and administrative expenses in our consolidated statements of operations. Changes in the fair value of the contingentconsideration obligations result from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood ofachieving the performance targets.For the years ended January 31, 2018, 2017, and 2016, we recorded a benefit of $8.3 million, a charge of $7.3 million, and a benefit of $0.9 million,respectively, within selling, general and administrative expenses for changes in the fair values of contingent consideration obligations associated withbusiness combinations. The aggregate fair value of the remaining contingent consideration obligations associated with business combinations was $62.8million at January 31, 2018, of which $13.7 million was recorded within accrued expenses and other current liabilities, and $49.1 million was recordedwithin other liabilities.Payments of contingent consideration earned under these agreements were $9.4 million, $3.3 million, and $7.4 million for the years ended January 31, 2018,2017, and 2016, respectively.5.INTANGIBLE ASSETS AND GOODWILL Acquisition-related intangible assets consisted of the following as of January 31, 2018 and 2017: January 31, 2018(in thousands) Cost AccumulatedAmortization NetIntangible assets with finite lives: Customer relationships $438,664 $(281,592) $157,072Acquired technology 273,156 (212,571) 60,585Trade names 26,820 (18,570) 8,250Non-competition agreements 3,047 (2,861) 186Distribution network 4,440 (4,440) —Total intangible assets $746,127 $(520,034) $226,093 86Table of Contents January 31, 2017(in thousands) Cost AccumulatedAmortization NetIntangible assets, all with finite lives: Customer relationships $403,657 $(244,792) $158,865Acquired technology 233,982 (168,653) 65,329Trade names 23,493 (14,187) 9,306Non-competition agreements 3,047 (2,499) 548Distribution network 4,440 (4,329) 111Total intangible assets with finite lives 668,619 (434,460) 234,159In-process research and development, with indefinite lives 1,100 — 1,100Total intangible assets $669,719 $(434,460) $235,259The following table presents net acquisition-related intangible assets by reportable segment as of January 31, 2018 and 2017: January 31,(in thousands)20182017Customer Engagement$213,963$207,436Cyber Intelligence12,13027,823Total$226,093$235,259 Total amortization expense recorded for acquisition-related intangible assets was $72.4 million, $81.5 million, and $78.9 million for the years endedJanuary 31, 2018, 2017, and 2016, respectively. The reported amount of net acquisition-related intangible assets can fluctuate from the impact of changes inforeign 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,Amount2019$53,733202042,265202134,434202230,578202324,795Thereafter40,288Total$226,093 During the year ended January 31, 2018, we recorded $3.3 million of impairments for certain acquired customer-related intangible assets, which is includedwithin selling, general and administrative expenses. During the year ended January 31, 2016, we recorded a $3.2 million impairment of an acquiredtechnology asset, which is included within cost of product revenue. No impairments of acquired intangible assets were recorded during the year endedJanuary 31, 2017.As discussed in Note 15, “Segment Information”, effective in August 2016, we reorganized into two businesses and now present our results in two reportablesegments. We reallocated $51.8 million of goodwill, net of $25.3 million of accumulated impairment losses, from our former Video Intelligence segment toour Customer Engagement segment, and $22.2 million of goodwill, net of $10.8 million of accumulated impairment losses, to our Cyber Intelligencesegment, using a relative fair value approach. In addition, we completed an assessment for potential impairment of the goodwill previously allocated to ourformer Video Intelligence segment immediately prior to the reallocation and determined that no impairment existed.Goodwill activity for the years ended January 31, 2018, and 2017, in total and by reportable segment, was as follows: 87Table of Contents Reportable Segment(in thousands) Total CustomerEngagement Cyber IntelligenceYear Ended January 31, 2017: Goodwill, gross, at January 31, 2016 $1,274,041 $1,131,249 $142,792Accumulated impairment losses through January 31, 2016 (66,865) (56,043) (10,822)Goodwill, net, at January 31, 2016 1,207,176 1,075,206 131,970Business combinations 91,209 91,209 —Foreign currency translation and other (33,567) (34,436) 869Goodwill, net, at January 31, 2017 $1,264,818 $1,131,979 $132,839 Year Ended January 31, 2018: Goodwill, gross, at January 31, 2017 $1,331,683 $1,188,022 $143,661Accumulated impairment losses through January 31, 2017 (66,865) (56,043) (10,822)Goodwill, net, at January 31, 2017 1,264,818 1,131,979 132,839Business combinations, including prior year adjustments 81,180 77,345 3,835Foreign currency translation and other 42,301 41,769 532Goodwill, net, at January 31, 2018 $1,388,299 $1,251,093 $137,206 Balance at January 31, 2018: Goodwill, gross, at January 31, 2018 $1,455,164 $1,307,136 $148,028Accumulated impairment losses through January 31, 2018 (66,865) (56,043) (10,822)Goodwill, net, at January 31, 2018 $1,388,299 $1,251,093 $137,206 As a result of the segment reorganization discussed above, we concluded that, for purposes of reviewing for potential goodwill impairment, wehave three reporting units, consisting of Customer Engagement, Cyber Intelligence (excluding situational intelligence solutions), and SituationalIntelligence, which is a component of our Cyber Intelligence operating segment. Based upon our November 1, 2017 goodwill impairment reviews, weconcluded that the estimated fair values of all of our reporting units significantly exceeded their carrying values.No changes in circumstances or indicators of potential impairment were identified between November 1 and January 31 in each of the years endedJanuary 31, 2018 and 2017.No goodwill impairment was identified for the years ended January 31, 2018, 2017, and 2016.6.LONG-TERM DEBTThe following table summarizes our long-term debt at January 31, 2018 and 2017: January 31,(in thousands) 2018 2017 1.50% Convertible Senior Notes $400,000 $400,000February 2014 Term Loans — 130,060March 2014 Term Loans — 278,978June 2017 Term Loan 422,875 —Other debt 250 404Less: Unamortized debt discounts and issuance costs (50,141) (60,571)Total debt 772,984 748,871Less: current maturities 4,500 4,611Long-term debt $768,484 $744,26088Table of ContentsCurrent maturities of long-term debt are reported within accrued expenses and other current liabilities on our consolidated balance sheets.1.50% Convertible Senior NotesOn June 18, 2014, we issued $400.0 million in aggregate principal amount of 1.50% convertible senior notes due June 1, 2021, unless earlier converted bythe holders pursuant to their terms. Net proceeds from the Notes after underwriting discounts were $391.9 million. The Notes pay interest in cashsemiannually in arrears at a rate of 1.50% per annum.The Notes were issued concurrently with our public issuance of 5,750,000 shares of common stock, the majority of the combined net proceeds of which wereused to partially repay certain indebtedness under our Prior Credit Agreement, as defined and further described below.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 inright of payment to our indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to theextent of the value of the assets securing such indebtedness; and structurally subordinated to indebtedness and other liabilities of our subsidiaries.The Notes are convertible into, at our election, cash, shares of common stock, or a combination of both, subject to satisfaction of specified conditions andduring specified periods, as described below. If converted, we currently intend to pay cash in respect of the principal amount of the Notes.The Notes have a conversion rate of 15.5129 shares of common stock per $1,000 principal amount of Notes, which represents an effective conversion price ofapproximately $64.46 per share of common stock and would result in the issuance of approximately 6,205,000 shares if all of the Notes were converted. Theconversion rate has not changed since issuance of the Notes, although throughout the term of the Notes, the conversion rate may be adjusted upon theoccurrence of certain events.Holders may surrender their Notes for conversion at any time prior to the close of business on the business day immediately preceding December 1, 2020,only under the following circumstances:•during any calendar quarter commencing after the calendar quarter which ended on September 30, 2014, if the closing sale price of our commonstock, 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 theimmediately 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 5 consecutive trading-day period in which the trading price for the Notes for each suchtrading 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 corporate events, as described in the indenture governing the Notes, such as a consolidation, merger, or bindingshare exchange.On or after December 1, 2020 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may surrendertheir Notes for conversion regardless of whether any of the foregoing conditions have been satisfied. Holders of the Notes may require us to purchase for cashall 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 beingpurchased, plus accrued and unpaid interest.As of January 31, 2018, the Notes were not convertible.In accordance with accounting guidance for convertible debt with a cash conversion option, we separately accounted for the debt and equity components ofthe 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 asan increase to additional paid-in capital. The excess of the principal amount of the debt component over its carrying amount (the “debt discount”) is beingamortized as interest expense over the term of the Notes using the effective interest method. The equity component is not remeasured as long as it continuesto meet the conditions for equity classification.89Table of ContentsWe allocated transaction costs related to the issuance of the Notes, including underwriting discounts, of $7.6 million and $1.9 million to the debt and equitycomponents, respectively. Issuance costs attributable to the debt component of the Notes are presented as a reduction of long-term debt and are beingamortized as interest expense over the term of the Notes, and issuance costs attributable to the equity component were netted with the equity component inadditional paid-in capital. The carrying amount of the equity component, net of issuance costs, was $78.2 million at January 31, 2018.As of January 31, 2018, the carrying value of the debt component was $354.0 million, which is net of unamortized debt discount and issuance costs of $42.1million and $4.0 million, respectively. Including the impact of the debt discount and related deferred debt issuance costs, the effective interest rate on theNotes was approximately 5.29% for each of the years ended January 31, 2018, 2017, and 2016.Based on the closing market price of our common stock on January 31, 2018, the if-converted value of the Notes was less than the aggregate principalamount of the Notes.Note Hedges and WarrantsConcurrently with the issuance of the Notes, we entered into convertible note hedge transactions (the “Note Hedges”) and sold warrants (the “Warrants”). Thecombination 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 Hedgesand Warrants are each separate instruments from the Notes.Note HedgesPursuant to the Note Hedges, we purchased call options on our common stock, under which we have the right to acquire from the counterparties up toapproximately 6,205,000 shares of our common stock, subject to customary anti-dilution adjustments, at a price of $64.46, which equals the initialconversion price of the Notes. Our exercise rights under the Note Hedges generally trigger upon conversion of the Notes and the Note Hedges terminate uponmaturity of the Notes, or the first day the Notes are no longer outstanding. The Note Hedges may be settled in cash, shares of our common stock, or acombination thereof, at our option, and are intended to reduce our exposure to potential dilution upon conversion of the Notes. We paid $60.8 million for theNote Hedges, which was recorded as a reduction to additional paid-in capital. As of January 31, 2018, we had not purchased any shares of our common stockunder the Note Hedges.WarrantsWe sold the Warrants to several counterparties. The Warrants provide the counterparties rights to acquire from us up to approximately 6,205,000 shares of ourcommon 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, ifthe 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 avalue 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 stockexceeds 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 ofJanuary 31, 2018, 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 remeasuredand adjusted as long as these instruments continue to qualify for stockholders’ equity classification.Credit AgreementsPrior Credit AgreementIn April 2011, we entered into a credit agreement with certain lenders, which was amended and restated in March 2013, and further amended in February,March, and June 2014 (as amended, the “Prior Credit Agreement”). The Prior Credit Agreement 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 “2014Term Loans”), the outstanding portion of which was scheduled to mature in September 2019, and a $300.0 million revolving credit facility (the “PriorRevolving Credit Facility”), scheduled to mature in September 2018, subject to increase and reduction from time to time, in accordance with the terms of thePrior Credit Agreement.90Table of ContentsIn 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 ofcommon stock to retire $530.0 million of the 2014 Term Loans, and all $106.0 million of then-outstanding borrowings under the Prior Revolving CreditFacility.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 CreditAgreement, plus a margin of 2.75%.2017 Credit AgreementOn 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 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 toincrease and reduction from time to time according to the terms of the 2017 Credit Agreement. The maturity dates of the 2017 Term Loan and 2017Revolving 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 that remained outstanding under the 2014 Term Loans at June29, 2017 upon termination of the Prior Credit Agreement. There were no borrowings under the Prior Revolving Credit Facility at June 29, 2017.The 2017 Term Loan was subject to an original issuance discount of approximately $0.5 million. This discount is being amortized as interest expense overthe term of the 2017 Term Loan using the effective interest method.Interest rates on loans under the 2017 Credit Agreement are periodically reset, at our option, at either a Eurodollar Rate or an ABR rate (each as defined in the2017 Credit Agreement), plus in each case a margin.On January 31, 2018, we entered into an amendment to the 2017 Credit Agreement (the “2018 Amendment”) providing for, among other things, a reductionof the interest rate margins on the 2017 Term Loan from 2.25% to 2.00% for Eurodollar loans, and from 1.25% to 1.00% for ABR loans. The vast majority ofthe impact of the 2018 Amendment was accounted for as a debt modification. For the portion of the 2017 Term Loan which was considered extinguished andreplaced by new loans, we wrote off $0.2 million of unamortized deferred debt issuance costs as a loss on early retirement of debt during the three monthsended January 31, 2018. The remaining unamortized deferred debt issuance costs and discount will continue to be amortized over the remaining term of the2017 Term Loan.For loans under the 2017 Revolving Credit Facility, the margin is determined by reference to our Consolidated Total Debt to Consolidated EBITDA (each asdefined in the 2017 Credit Agreement) leverage ratio (the “Leverage Ratio”).As of January 31, 2018, the interest rate on the 2017 Term Loan was 3.58%. Taking into account the impact of the original issuance discount and relateddeferred debt issuance costs, the effective interest rate on the 2017 Term Loan was approximately 3.80% at January 31, 2018.We are required to pay a commitment fee with respect to unused availability under the 2017 Revolving Credit Facility at a rate per annum determined byreference to our Leverage Ratio.The 2017 Term Loan requires quarterly principal payments of approximately $1.1 million, which commenced on August 1, 2017, with the remaining balancedue on June 29, 2024. Optional prepayments of loans under the 2017 Credit Agreement are generally permitted without premium or penalty.Our obligations under the 2017 Credit Agreement are guaranteed by each of our direct and indirect existing and future material domestic wholly ownedrestricted subsidiaries, and are secured by a security interest in substantially all of our assets and the assets of the guarantor subsidiaries, subject to certainexceptions.The 2017 Credit Agreement contains certain customary affirmative and negative covenants for credit facilities of this type. The 2017 Credit Agreement alsocontains a financial covenant that, solely with respect to the 2017 Revolving Credit Facility, requires us to maintain a Leverage Ratio of no greater than 4.50to 1. The limitations imposed by the covenants are subject to certain exceptions as detailed in the 2017 Credit Agreement.91Table of ContentsThe 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 Term LoansAt the June 29, 2017 closing date of the 2017 Credit Agreement, there were $3.2 million of unamortized deferred debt issuance costs and a $0.1 millionunamortized term loan discount associated with the 2014 Term Loans and the Prior Revolving Credit Facility. Of the $3.2 million of unamortized deferreddebt issuance costs, $1.4 million was associated with commitments under the Prior Revolving Credit Facility provided by lenders that are continuing toprovide commitments under the 2017 Revolving Credit Facility and therefore continued to be deferred, and are being amortized on a straight-line basis overthe term of the 2017 Revolving Credit Facility. The remaining $1.8 million of unamortized deferred debt issuance costs and the $0.1 million unamortizeddiscount, 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 July31, 2017.2017 Credit Agreement Issuance CostsWe incurred debt issuance costs of approximately $6.8 million in connection with the 2017 Credit Agreement, of which $4.1 million were associated with the2017 Term Loan and $2.7 million were associated with the 2017 Revolving Credit Facility, which were deferred and are being amortized as interest expenseover the terms of the facilities under the 2017 Credit Agreement. As noted previously, during the three months ended January 31, 2018, we wrote off $0.2million of deferred debt issuance costs associated with the 2017 Term Loan as a result of the 2018 Amendment. Deferred debt issuance costs associated withthe 2017 Term Loan are being amortized using the effective interest rate method, and deferred debt issuance costs associated with the 2017 Revolving CreditFacility are being amortized on a straight-line basis.Future Principal Payments on Term LoansAs of January 31, 2018, future scheduled principal payments on the 2017 Term Loan were as follows:(in thousands) Years Ending January 31, Amount2019 $4,2502020 4,2502021 4,2502022 4,2502023 4,2502024 and thereafter 401,625Total $422,875Interest Expense92Table of ContentsThe following table presents the components of interest expense incurred on the Notes and on borrowings under our respective Credit Agreements for theyears ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 20161.50% Convertible Senior Notes: Interest expense at 1.50% coupon rate $6,000 $6,000 $6,000Amortization of debt discount 11,244 10,669 10,123Amortization of deferred debt issuance costs 1,060 1,007 955Total - 1.50% Convertible Senior Notes $18,304 $17,676 $17,078 Borrowings under Credit Agreements: Interest expense at contractual rates $15,412 $14,682 $14,590Impact of interest rate swap agreement 254 259 —Amortization of debt discounts 65 58 56Amortization of deferred debt issuance costs 1,839 2,211 2,166Total - Borrowings under Credit Agreements $17,570 $17,210 $16,8127.SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION Consolidated Balance Sheets Inventories consisted of the following as of January 31, 2018 and 2017: January 31,(in thousands) 2018 2017Raw materials $9,870 $9,074Work-in-process 6,269 4,355Finished goods 3,732 4,108Total inventories $19,871 $17,537 Property and equipment, net consisted of the following as of January 31, 2018 and 2017: January 31,(in thousands) 2018 2017Land and buildings $10,276 $9,543Leasehold improvements 29,793 29,247Software 54,032 61,810Equipment, furniture, and other 135,548 93,968 229,649 194,568Less: accumulated depreciation and amortization (140,560) (117,017)Total property and equipment, net $89,089 $77,551Depreciation expense on property and equipment was $26.0 million, $25.2 million, and $20.3 million in the years ended January 31, 2018, 2017, and 2016,respectively.Other assets consisted of the following as of January 31, 2018 and 2017: January 31,(in thousands) 2018 2017Long-term restricted cash and time deposits $28,402 $54,566Deferred debt issuance costs, net 3,668 1,929Long-term security deposits 4,139 4,123Other 15,828 16,002Total other assets $52,037 $76,62093Table of ContentsAccrued expenses and other current liabilities consisted of the following as of January 31, 2018 and 2017: January 31,(in thousands) 2018 2017Compensation and benefits $83,216 $73,998Billings in excess of costs and estimated earnings on uncompleted contracts 46,062 59,810Income taxes 14,464 11,410Contingent consideration - current portion 13,187 9,725Distributor and agent commissions 12,255 10,384Taxes other than income taxes 11,424 8,564Professional and consulting fees 8,752 8,020Other 30,905 31,313Total accrued expenses and other current liabilities $220,265 $213,224Other liabilities consisted of the following as of January 31, 2018 and 2017: January 31,(in thousands) 2018 2017Unrecognized tax benefits, including interest and penalties $41,014 $28,204Contingent consideration - long-term portion 49,149 42,708Deferred rent expense 12,168 13,805Obligations for severance compensation 3,028 2,880Capital lease obligations - long-term portion 3,315 68Other 5,791 6,694Total other liabilities $114,465 $94,359Consolidated Statements of Operations Other income (expense), net consisted of the following for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 2016Foreign currency gains (losses), net $6,760 $(2,743) $(8,037)(Losses) gains on derivative financial instruments, net (17) (322) 394Other, net (841) (3,861) (4,634)Total other income (expense), net $5,902 $(6,926) $(12,277)Consolidated Statements of Cash Flows The following table provides supplemental information regarding our consolidated cash flows for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 2016Cash paid for interest $24,402 $21,892 $20,734Cash payments of income taxes, net $23,450 $29,582 $17,165Non-cash investing and financing transactions: Liabilities for contingent consideration in business combinations $27,605 $26,400 $16,238Capital leases of property and equipment $4,350 $151 $—Accrued but unpaid purchases of property and equipment $2,367 $2,868 $4,562Inventory transfers to property and equipment $437 $552 $1,142Leasehold improvements funded by lease incentives $— $82 $1,72194Table of Contents8.STOCKHOLDERS’ EQUITYCommon Stock DividendsWe did not declare or pay any dividends on our common stock during the years ended January 31, 2018, 2017, and 2016. Under the terms of our 2017 CreditAgreement, we are subject to certain restrictions on declaring and paying dividends on our common stock.Share Repurchase ProgramOn March 29, 2016, we announced that our board of directors had authorized a common stock repurchase program of up to $150 million over two years. Thisprogram expires on March 29, 2018.Treasury Stock Repurchased shares of common stock are recorded as treasury stock, at cost, but may from time to time be retired. At January 31, 2018, we held approximately1,661,000 shares of treasury stock with a cost of $57.4 million. At January 31, 2017, we held approximately 1,654,000 and shares of treasury stock with a costof $57.1 million.During the year ended January 31, 2018 we received approximately 7,000 shares of treasury stock in a nonmonetary transaction valued at $0.3 million.During the year ended January 31, 2017 we acquired approximately 1,306,000 shares of treasury stock with a cost of $46.9 million under the aforementionedshare repurchase program. We did not acquire any shares of treasury stock during the year ended January 31, 2016.From time to time, our board of directors has approved limited programs to repurchase shares of our common stock from directors or officers in connectionwith the vesting of restricted stock or restricted stock units to facilitate required income tax withholding by us or the payment of required income taxes bysuch 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 ifa 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 containssimilar terms. Any such repurchases of common stock occur at prevailing market prices and are recorded as treasury stock. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) includes items such as foreign currency translation adjustments and unrealized gains and losses on certainmarketable securities and derivative financial instruments designated as hedges. Accumulated other comprehensive income (loss) is presented as a separateline item in the stockholders’ equity section of our consolidated balance sheets. Accumulated other comprehensive income (loss) items have no impact onour net income (loss) as presented in our consolidated statements of operations.The following table summarizes changes in the components of our accumulated other comprehensive income (loss) by component for the years endedJanuary 31, 2018 and 2017:95Table of Contents(in thousands) Unrealized Gains(Losses) onDerivativeFinancialInstrumentsDesignated asHedges Unrealized Gain onInterest Rate SwapDesignated asHedge Unrealized Gains(Losses) onAvailable-for-SaleInvestments ForeignCurrencyTranslationAdjustments TotalAccumulated other comprehensive loss at January 31,2016 $(1,871) $— $(110) $(114,213) $(116,194)Other comprehensive loss before reclassifications 3,585 632 110 (41,850) (37,523)Amounts reclassified out of accumulated othercomprehensive income (loss) 1,139 — — — 1,139Net other comprehensive income (loss) 2,446 632 110 (41,850) (38,662)Accumulated other comprehensive loss at January 31,2017 575 632 — (156,063) (154,856)Other comprehensive income (loss) before reclassifications 8,867 (341) — 49,291 57,817Amounts reclassified out of accumulated othercomprehensive income (loss) 6,130 291 — — 6,421Net other comprehensive income (loss) 2,737 (632) — 49,291 51,396Accumulated other comprehensive income (loss) atJanuary 31, 2018 $3,312 $— $— $(106,772) $(103,460)All amounts presented in the table above are net of income taxes, if applicable. The accumulated net losses in foreign currency translation adjustmentsprimarily reflect the strengthening of the U.S. dollar against the British pound sterling, which has resulted in lower U.S. dollar-translated balances of Britishpound sterling-denominated goodwill and intangible assets.The amounts reclassified out of accumulated other comprehensive income (loss) into the consolidated statement of operations, with presentation location, forthe years ended January 31, 2018, 2017, and 2016 were as follows: Year Ended January 31, Financial Statement Location(in thousands) 2018 2017 2016 Unrealized gains (losses) on derivative financialinstruments: Foreign currency forward contracts $621 $108 $(718) Cost of product revenue 599 115 (672) Cost of service and support revenue 3,577 651 (4,556) Research and development, net 2,016 383 (2,205) Selling, general and administrative 6,813 1,257 (8,151) Total, before income taxes (683) (118) 1,038 (Provision) benefit for income taxes $6,130 $1,139 $(7,113) 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 taxes9. RESEARCH AND DEVELOPMENT, NETOur gross research and development expenses for the years ended January 31, 2018, 2017, and 2016, were $192.6 million, $174.6 million, and $181.7million, respectively. Reimbursements from the IIA and other government grant programs amounted to $2.0 million, $3.5 million, and $4.0 million for theyears ended January 31, 2018, 2017, and 2016, respectively, which were recorded as reductions of gross research and development expenses.96We capitalize certain costs incurred to develop our commercial software products, and we then recognize those costs within cost of product revenue as theproducts are sold. Activity for our capitalized software development costs for the years ended January 31, 2018, 2017, and 2016 was as follows: Year Ended January 31,(in thousands) 2018 2017 2016Capitalized software development costs, net, beginning of year $9,509 $11,992 $10,112Software development costs capitalized during the year 3,126 2,338 5,027Amortization of capitalized software development costs (3,338) (3,341) (2,976)Impairments, foreign currency translation and other (69) (1,480) (171)Capitalized software development costs, net, end of year $9,228 $9,509 $11,992During the year ended January 31, 2017, we recorded impairment of capitalized software development costs of $1.3 million reflecting strategy changes incertain product development initiatives, due in part to acquisition of technology associated with business combinations. There were no material impairmentsof such costs during the years ended January 31, 2018 and 2016.10.INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act was enacted in the United States. The 2017 Tax Act significantly revises the Internal Revenue Code of1986, as amended, and it includes fundamental changes to taxation of U.S. multinational corporations.The key provisions impacting our January 31, 2018 year include a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% andthe Transition Tax, which is a one-time tax on previously untaxed earnings of foreign subsidiaries at reduced rates regardless of whether the earnings areactually repatriated. As a result of the reduction of the corporate tax rate we recorded a benefit of $5.4 million related to the estimated revaluation of U.S.deferred tax items. The Transition Tax results in an estimated increase to taxable income of $230.5 million, but no impact to the tax provision. We expect toutilize a portion of our net operating loss carryforward and release the valuation allowance on the deferred tax asset for that net operating loss carryforwardfor a net impact of $0. Foreign earnings subject to the Transition Tax will not be subject to further U.S. taxation upon repatriation. Therefore, we mayrepatriate certain foreign cash, a portion of which will be subject to a withholding tax estimated to be $15 million. Additional provisions effective beginning after January 31, 2018 which may significantly impact our effective tax rate include new limitations on the taxdeductions for interest expense and executive compensation, elimination of the alternative minimum tax (“AMT”) and the ability to refund unused AMTcredits over a four year periods, and new rules related to uses and limitations of net operating loss carryforwards. New international provisions add a newcategory of deemed income from our foreign operations, eliminates U.S. tax on foreign dividends (subject to certain restrictions), and adds a minimum tax oncertain payments made to foreign related parties. We are still assessing the impact of these changes.On December 22, 2017, the staff of the Securities and Exchange Commission issued SAB No. 118, which provides guidance on accounting for the tax effectsof the 2017 Tax Act. SAB No. 118 allows registrants to record provisional amounts for a period of up to one year from the date of enactment of the 2017 TaxAct when the registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to completethe accounting for certain income tax effects of the 2017 Tax Act. Compliance with the 2017 Tax Act will require significant complex computations notpreviously required by U.S. tax law. In addition, it is uncertain if and to what extent various states will enact legislation to conform to the 2017 Tax Act.Because the 2017 Tax Act was passed late in the fourth quarter of our year ended January 31, 2018, and because legislative guidance and accountinginterpretations are expected in the future, we consider the accounting of the Transition Tax, deferred tax remeasurement, deferred taxes on earnings of foreignsubsidiaries that may be repatriated in the future, unrecognized tax benefits related to the 2017 Tax Act, and additional provisions under the 2017 Tax Actthat are effective beginning after January 31, 2018 to be incomplete and therefore only consider amounts related to these items to be reasonably estimated asof January 31, 2018. We expect to refine and complete the accounting for the 2017 Tax Act during the year ending January 31, 2019 as we obtain, prepare,and analyze additional information and as additional legislative, regulatory, and accounting guidance and interpretations become available.The components of income (loss) before provision for income taxes for the years ended January 31, 2018, 2017, and 2016 were as follows:97Table of Contents Year Ended January 31,(in thousands) 2018 2017 2016Domestic $(44,502) $(60,722) $(43,471)Foreign 63,402 37,248 66,651Total income (loss) before provision for income taxes $18,900 $(23,474) $23,180The provision for income taxes for the years ended January 31, 2018, 2017, and 2016 consisted of the following: Year Ended January 31,(in thousands) 2018 2017 2016Current provision (benefit) for income taxes: Federal $4,364 $604 $(2,997)State 1,215 989 1,300Foreign 24,308 18,120 8,289Total current provision for income taxes 29,887 19,713 6,592Deferred provision (benefit) for income taxes: Federal 4,734 (8,179) 2,244State (58) (842) 12Foreign (12,209) (7,920) (7,896) Total deferred benefit for income taxes (7,533) (16,941) (5,640)Total provision for income taxes $22,354 $2,772 $952The reconciliation of the U.S. federal statutory rate to our effective tax rate on income (loss) before provision for income taxes for the years ended January 31,2018, 2017, and 2016 was as follows: Year Ended January 31,(in thousands) 2018 2017 2016U.S. federal statutory income tax rate 33.8% 35.0 % 35.0% Income tax provision (benefit) at the U.S. federal statutory rate $6,394 $(8,215) $8,115State income tax provision (benefit) 1,792 (312) (79)Foreign tax rate differential (9,434) (5,794) (3,068)Tax incentives (3,891) (3,507) (12,293)Valuation allowances 14,539 (3,640) (7,767)Stock-based and other compensation (8,656) 2,522 3,562Non-deductible expenses (2,091) 5,315 6,061Tax credits (307) (112) (482)Tax contingencies 5,017 5,566 (6,281)Tax effects of reorganizations and liquidations — 975 6,136U.S. tax effects of foreign operations 8,591 9,542 7,574Impact of the 2017 Tax Act 9,641 — —Other, net 759 432 (526)Total provision for income taxes $22,354 $2,772 $952Effective income tax rate 118.3% (11.8)% 4.1%The table above reflects a January 31, 2018 U.S. federal statutory income tax rate of 33.8% due to the 2017 Tax Act. The 2017 Tax Act includes a reductionof the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%. Section 15 of the Internal Revenue Code stipulates that our fiscal year endingJanuary 31, 2018 will have a blended corporate tax rate of 33.8% which is based on the applicable tax rates before and after the 2017 Tax Act and the numberof days in the year.Our operations in Israel have been granted “Approved Enterprise” (“AE”) status by the Investment Center of the Israeli Ministry of Industry, Trade and Labor,which makes us eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. Under the terms of the program, incomeattributable to an approved enterprise is exempt from income tax for a period of two years and is subject to a reduced income tax rate for the subsequent fiveto eight years (generally98Table of Contents10% - 25%, depending on the percentage of foreign investment in the company). In addition, certain operations in Cyprus qualify for favorable tax treatmentunder the Cypriot Intellectual Property Regime (“IP Regime”). This legislation exempts 80% of income and gains derived from patents, copyrights, andtrademarks from taxation. These tax incentives decreased our effective tax rate by 17.8%, 12.4%, and 51.0% for the years ended January 31, 2018, 2017, and2016, respectively. The current and prior year benefits are lower than the January 2016 benefit as a result of the Company’s taxable loss position in ourCyprus entity in the last two years. At the lower IP Regime tax rate, the deferred tax benefit of the net operating losses generated by those companies is lessthan it would be under the higher statutory tax rate.Deferred tax assets and liabilities consisted of the following at January 31, 2018 and 2017: January 31,(in thousands) 2018 2017Deferred tax assets: Accrued expenses $7,637 $10,627Deferred revenue 2,421 3,953Loss carryforwards 47,009 125,986Tax credits 11,935 7,972Stock-based and other compensation 17,568 20,187Capitalized research and development expenses 10,316 4,146Other, net 3,749 2,672Total deferred tax assets 100,635 175,543Deferred tax liabilities: Goodwill and other intangible assets (36,977) (50,679)Unremitted earnings of foreign subsidiaries (12,257) (18,215)Other, net (712) (2,344)Total deferred tax liabilities (49,946) (71,238)Valuation allowance (55,116) (108,609)Net deferred tax liabilities $(4,427) $(4,304) Recorded as: Deferred tax assets $30,878 $21,510Deferred tax liabilities (35,305) (25,814)Net deferred tax liabilities $(4,427) $(4,304)As of January 31, 2018 we remeasured our U.S. federal deferred tax assets and liabilities, and related valuation allowances, using a rate of 21% in accordancewith the 2017 Tax Act. The January 31, 2018 deferred tax asset for loss carryforward reflects the use of U.S. federal NOL carryforwards to offset the TransitionTax imposed under the 2017 Tax Act. The reduction of the corporate rate caused an estimated reduction in net deferred tax assets of $65.4 million and areduction to valuation allowance of $70.8 million. As of January 31, 2018 we continue to record U.S. federal alternative minimum tax credit carryforwards asdeferred tax assetsAt January 31, 2018, we had U.S. federal NOL carryforwards of approximately $428.0 million. This amount reflects a reduction for the utilization of U.S.federal NOL carryforwards of $230.5 million to offset the Transition Tax imposed under the 2017 Tax Act. These loss carryforwards expire in various yearsending from January 31, 2028 to January 31, 2037. We had state NOL carryforwards of approximately $242.5 million, expiring in years ending from January31, 2019 to January 31, 2036. We had foreign NOL carryforwards of approximately $68.0 million. At January 31, 2018, all but $11.0 million of these foreignloss carryforwards had indefinite carryforward periods. Certain of these federal, state, and foreign loss carryforwards and credits are subject to InternalRevenue Code Section 382 or similar provisions, which impose limitations on their utilization following certain changes in ownership of the entitygenerating the loss carryforward. As a result of the adoption of ASU No. 2016-09, which amends the accounting for stock-based compensation, as of January31, 2018 there is an increase of the recorded NOL of $49.7 million. We had U.S. federal, state, and foreign tax credit carryforwards of approximately $16.2million at January 31, 2018, the utilization of which is subject to limitation. At January 31, 2018, approximately $8.0 million of these tax creditcarryforwards may be carried forward indefinitely. The balance of $8.2 million expires in various years ending from January 31, 2019 to January 31, 2034.We currently intend to indefinitely reinvest a portion of the earnings of our foreign subsidiaries to finance foreign activities. Except to the extent of the U.S.tax provided under the 2017 Tax Act and withholding taxes of $15.0 million accrued on certain99Table of Contentsidentified cash that may be repatriated to the U.S., we have not provided tax on the outside basis difference of foreign subsidiaries nor have we provided forany 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 amountof income and withholding taxes that would have to be provided on such earnings.As required by the authoritative guidance on accounting for income taxes, we evaluate the realizability of deferred tax assets on a jurisdictional basis at eachreporting date. Accounting for income taxes guidance requires that a valuation allowance be established when it is more likely than not that all or a portionof the deferred tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not morelikely than not realizable, we establish a valuation allowance. We have recorded valuation allowances in the amounts of $55.1 million and $108.6 million atJanuary 31, 2018 and 2017, respectively.Activity in the recorded valuation allowance consisted of the following for the years ended January 31, 2018 and 2017: Year Ended January 31,(in thousands) 2018 2017Valuation allowance, beginning of year $(108,609) $(115,756)(Benefit from) provision for income taxes 2,868 3,640Adoption of ASU No. 2016-09 (17,407) —Impact of 2017 Tax Act 70,832 —Additional paid-in capital — 3,204Business combinations (2,061) —Currency translation adjustment (739) 303Valuation allowance, end of year $(55,116) $(108,609)In accordance with the authoritative guidance on accounting for uncertainty in income taxes, differences between the amount of tax benefits taken orexpected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements, determined by applying the prescribedmethodologies of accounting for uncertainty in income taxes, represent our unrecognized income tax benefits, which we either record as a liability or as areduction of deferred tax assets.For the years ended January 31, 2018, 2017, and 2016, the aggregate changes in the balance of gross unrecognized tax benefits were as follows: Year Ended January 31,(in thousands) 2018 2017 2016Gross unrecognized tax benefits, beginning of year $148,639 $142,271 $159,648Increases related to tax positions taken during the current year 12,260 11,034 9,465Increases as a result of business combinations 43 — 985Increases related to tax positions taken during prior years 9,226 585 2,514Increases (decreases) related to foreign currency exchange rates 2,449 648 (741)Reductions for tax positions of prior years (8,266) (5,094) (13,613)Reductions for settlements with tax authorities (140) (145) (13,811)Reduction for rate change due to the 2017 Tax Act (48,004) — —Lapses of statutes of limitations (498) (660) (2,176)Gross unrecognized tax benefits, end of year $115,709 $148,639 $142,271As of January 31, 2018, we had $115.7 million of unrecognized tax benefits, of which $105.4 million represents the amount that, if recognized, would impactthe effective income tax rate in future periods. We recorded $1.5 million of tax expense, $0.5 million of tax expense, and $4.4 million of tax benefit forinterest and penalties related to uncertain tax positions in our provision for income taxes for the years ended January 31, 2018, 2017, and 2016, respectively.Accrued liabilities for interest and penalties were $5.6 million and $3.9 million at January 31, 2018 and 2017, respectively. Interest and penalties (expenseand/or benefit) are recorded as a component of the provision (benefit) for income taxes in the consolidated financial statements.Our income tax returns are subject to ongoing tax examinations in several jurisdictions in which we operate. In Israel, we are no longer subject to income taxexamination for years prior to January 31, 2014. In the United Kingdom, with the exception of years which are currently under examination, we are no longersubject to income tax examination for years prior to January 31,100Table of Contents2016. In the U.S., our federal returns are no longer subject to income tax examination for years prior to January 31, 2015. However, to the extent wegenerated NOLs or tax credits in closed tax years, future use of the NOL or tax credit carry forward balance would be subject to examination within therelevant statute of limitations for the year in which utilized.As of January 31, 2018, income tax returns are under examination in the following significant tax jurisdictions:Jurisdiction Tax YearsCanada January 31, 2011 - January 31, 2012United Kingdom December 31, 2006; January 31, 2008India March 31, 2007 - March 31, 2008; March 31, 2010 - March 31, 2013Israel January 31, 2014 - January 31, 2016We regularly assess the adequacy of our provisions for income tax contingencies. As a result, we may adjust the reserves for unrecognized tax benefits for theimpact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxingauthorities, and lapses of statutes of expiration. We believe that it is reasonably possible that the total amount of unrecognized tax benefits at January 31,2018 could decrease by approximately $6.9 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 taxes, the adjustment of certain deferred taxes including the need for additional valuation allowancesand the recognition of tax benefits.11.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 January 31, 2018 and 2017: January 31, 2018 Fair Value Hierarchy Category(in thousands) Level 1 Level 2 Level 3Assets: Money market funds $186 $— $—Short-term investments, classified as available-for-sale — 2,002 —Foreign currency forward contracts — 3,682 —Interest rate swap agreement — 2,580 —Total assets $186 $8,264 $—Liabilities: Foreign currency forward contracts $— $1,308 $—Contingent consideration - business combinations — — 62,829Option to acquire noncontrolling interests of consolidated subsidiaries — — 2,950Total liabilities $— $1,308 $65,779 101Table of Contents January 31, 2017 Fair Value Hierarchy Category(in thousands) Level 1 Level 2 Level 3Assets: 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 — — 52,733Option to acquire noncontrolling interests of consolidated subsidiaries — — 3,550Total liabilities $— $1,654 $56,283The following table presents the changes in the estimated fair values of our liabilities for contingent consideration measured using significant unobservableinputs (Level 3) for the years ended January 31, 2018 and 2017: Year Ended January 31,(in thousands) 2018 2017Fair value measurement, beginning of year $52,733 $22,391Contingent consideration liabilities recorded for business combinations 27,604 26,400Changes in fair values, recorded in operating expenses (8,324) 7,255Payments of contingent consideration (9,412) (3,313)Foreign currency translation and other 228 —Fair value measurement, end of year $62,829 $52,733 Our estimated liability for contingent consideration represents potential payments of additional consideration for business combinations, payable if certaindefined performance goals are achieved. Changes in fair value of contingent consideration are recorded in the consolidated statements of operations withinselling, 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 optionwithin other liabilities and do not recognize noncontrolling interests in these subsidiaries. The following table presents the change in the estimated fair valueof this liability, which is measured using Level 3 inputs, for the years ended January 31, 2018 and 2017: Year Ended January 31,(in thousands) 2018 2017Fair value measurement, beginning of year $3,550 $—Acquisition of option to acquire noncontrolling interests of consolidated subsidiaries — 3,134Change in fair value, recorded in operating expenses (600) 416Fair value measurement, end of year $2,950 $3,550There were no transfers between levels of the fair value measurement hierarchy during the years ended January 31, 2018 and 2017. Fair Value Measurements Money Market Funds - We value our money market funds using quoted active market prices for such funds.Short-term Investments, Corporate Debt Securities, and Commercial Paper - The fair values of short-term investments, as well as corporate debt securities andcommercial paper classified as cash equivalents, are estimated using observable market prices for identical securities that are traded in less-active markets, ifavailable. When observable market prices for identical securities are not available, we value these short-term investments using non-binding market pricequotes from brokers which we review102Table of Contentsfor 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 counterpartiesthereto. These quotes are reviewed for reasonableness by discounting the future estimated cash flows under the contracts, considering the terms and maturitiesof 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 theestimated amount we would receive or pay to settle the agreement, taking into consideration current and projected future interest rates as well as thecreditworthiness of the parties, all of which can be validated through readily observable data from external sources. Contingent Consideration - Business Combinations - The fair value of the contingent consideration related to business combinations is estimated using aprobability-adjusted discounted cash flow model. These fair value measurements are based on significant inputs not observable in the market. The keyinternally developed assumptions used in these models are discount rates and the probabilities assigned to the milestones to be achieved. We remeasure thefair value of the contingent consideration at each reporting period, and any changes in fair value resulting from either the passage of time or events occurringafter 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 orunfavorable changes in expectations of achieving performance targets would result in corresponding increases or decreases in the related fair valuemeasurements. We utilized discount rates ranging from 3.0% to 5.0% in our calculations of the estimated fair values of our contingent considerationliabilities as of January 31, 2018. We utilized discount rates ranging from 3.0% to 20.0% in our calculations of the estimated fair values of our contingentconsideration liabilities as of January 31, 2017.Option to Acquire Noncontrolling Interests of Consolidated Subsidiaries - The fair value of the option is determined primarily by using the incomeapproach, which discounts expected future cash flows to present value using estimates and assumptions determined by management. This fair valuemeasurement is based upon significant inputs not observable in the market. We remeasure the fair value of the option at each reporting period, and anychanges in fair value are recorded within selling, general, and administrative expenses. We utilized discount rates of 13.5% and 14.0% in our calculation ofthe estimated fair value of the option as of January 31, 2018 and 2017, respectively.Other Financial Instruments The carrying amounts of accounts receivable, accounts payable, and accrued liabilities and other current liabilities approximate fair value due to their shortmaturities. The estimated fair values of our term loan borrowings were $425 million and $410 million at January 31, 2018 and 2017, respectively. The estimated fairvalues of the term loans are based upon indicative bid and ask prices as determined by the agent responsible for the syndication of our term loans. Weconsider these inputs to be within Level 3 of the fair value hierarchy because we cannot reasonably observe activity in the limited market in whichparticipations in our term loans are traded. The indicative prices provided to us as at each of January 31, 2018 and 2017 did not significantly differ from parvalue. The estimated fair value of our revolving credit borrowings, if any, is based upon indicative market values provided by one of our lenders. We had norevolving credit borrowings at January 31, 2018 and 2017.The estimated fair values of our Notes were approximately $389 million and $381 million at January 31, 2018 and 2017, respectively. The estimated fairvalue of the Notes is determined based on quoted bid and ask prices in the over-the-counter market in which the Notes trade. We consider these inputs to bewithin 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 anonrecurring basis. Our non-financial assets, including goodwill, intangible assets and property, plant and equipment, are measured at fair value when there isan indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows. These assets are recorded at fair value only whenan impairment charge is recognized. Further details regarding our regular impairment reviews appear in Note 1, “Summary of Significant AccountingPolicies”.103Table of Contents12. DERIVATIVE FINANCIAL INSTRUMENTS Our primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk, when deemedappropriate. We enter into these contracts in the normal course of business to mitigate risks and not for speculative purposes. Foreign Currency Forward ContractsUnder our risk management strategy, we periodically use foreign currency forward contracts to manage our short-term exposures to fluctuations in operationalcash 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 alsoperiodically utilize foreign currency forward contracts to manage exposures resulting from forecasted customer collections to be remitted in currencies otherthan the applicable functional currency, and exposures from cash, cash equivalents and short-term investments denominated in currencies other than theapplicable functional currency. These foreign currency forward contracts generally have maturities of no longer than twelve months, although occasionallywe 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 $153.5 million and $144.0 million as of January 31, 2018 and 2017,respectively.Interest Rate Swap AgreementTo partially mitigate risks associated with the variable interest rates on the term loan borrowings under the Prior Credit Agreement, in February 2016, weexecuted a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution under which we pay interest at a fixed rateof 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 $200.0million. Although the Prior Credit Agreement was terminated on June 29, 2017, the interest rate swap agreement remains in effect, and serves as an economichedge to partially mitigate the risk of higher borrowing costs under the 2017 Credit Agreement resulting from increases in market interest rates. The effectivedate of the agreement was November 1, 2016, and settlements with the counterparty began on February 1, 2017 and occur on a quarterly basis. The agreementwill terminate on September 6, 2019.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 inaccumulated other comprehensive income (loss) in the consolidated balance sheet and were reclassified into the statement of operations within interestexpense in the period in which the hedged transaction affected earnings. Hedge ineffectiveness, if any, was recognized currently in the consolidatedstatement 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 swapagreement was no longer designated as a cash flow hedge for accounting purposes, and because future occurrence of the specific forecasted variable cashflows which had been hedged by the interest rate swap agreement was no longer probable, the $0.9 million fair value of the interest rate swap at that date wasreclassified from accumulated other comprehensive income (loss) into the 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 consolidated statement ofoperations.Fair Values of Derivative Financial Instruments The fair values of our derivative financial instruments and their classifications in our consolidated balance sheets as of January 31, 2018 and 2017 were asfollows: 104Table of Contents January 31,(in thousands) Balance Sheet Classification 2018 2017Derivative assets: Foreign currency forward contracts: Designated as cash flow hedges Prepaid expenses and other current assets $3,682 $927Not designated as hedging instruments Prepaid expenses and other current assets — 719Interest rate swap agreement: Designated as a cash flow hedge Other assets — 1,429Not designated as a hedging instrument Prepaid expenses and other current assets 1,330 — Other assets 1,250 —Total derivative assets $5,012 $3,075 Derivative liabilities: Foreign currency forward contracts: Designated as cash flow hedges Accrued expenses and other current liabilities $— $288Not designated as hedging instruments Accrued expenses and other current liabilities 1,061 958 Other liabilities 247 —Interest rate swap agreement: Designated as a cash flow hedge Accrued expenses and other current liabilities — 408Total derivative liabilities $1,308 $1,654Derivative Financial Instruments in Cash Flow Hedging Relationships The effects of derivative financial instruments designated as cash flow hedges on accumulated other comprehensive loss (“AOCL”) and on the consolidatedstatement of operations for the years ended January 31, 2018, 2017, and 2016 were as follows: Year Ended January 31,(in thousands) 2018 2017 2016Net gains (losses) recognized in Other comprehensive (loss) income: Foreign currency forward contracts $3,312 $575 $(1,871)Interest rate swap agreement (341) 632 — $2,971 $1,207 $(1,871)Net gains (losses) reclassified from Other comprehensive (loss) income to theconsolidated statements of operations: Foreign currency forward contracts $6,813 $1,257 $(8,151)Interest rate swap agreement (254) — — $6,559 $1,257 $(8,151)For information regarding the line item locations of the net gains (losses) on derivative financial instruments reclassified out of AOCL into the consolidatedstatements of operations, see Note 8, “Stockholders’ Equity”.There were no gains or losses from ineffectiveness of these cash flow hedges recorded for the years ended January 31, 2018, 2017, and 2016. All of the foreigncurrency forward contracts underlying the $3.3 million of net unrealized gains recorded in our accumulated other comprehensive loss at January 31, 2018mature within twelve months, and therefore we expect all such gains to be reclassified into earnings within the next twelve months.Derivative Financial Instruments Not Designated as Hedging Instruments (Losses) gains recognized on derivative financial instruments not designated as hedging instruments in our consolidated statements of operations for theyears ended January 31, 2018, 2017, and 2016 were as follows: 105Table of Contents Classification in ConsolidatedStatements of Operations Year Ended January 31,(in thousands) 2018 2017 2016Foreign currency forward contracts Other (expense) income, net $(2,546) $(323) $394Interest rate swap Other (expense) income, net 2,529 — — $(17) $(323) $39413.STOCK-BASED COMPENSATION AND OTHER BENEFIT PLANS Stock-Based Compensation PlansPlan SummariesWe issue stock-based incentive awards to eligible employees, directors and consultants, including restricted stock units (“RSUs”), performance stock units(“PSUs”), stock options (both incentive and non-qualified), and other awards, under the terms of our outstanding stock benefit plans (the “Plans” or “StockPlans”) and/or forms of equity award agreements approved by our board of directors.Awards are generally subject to multi-year vesting periods. We recognize compensation expense for awards on a straight-line basis over the requisite serviceperiods of the awards, which are generally the vesting periods, reduced by estimated forfeitures. Upon issuance of restricted stock, exercise of stock options,or issuance of shares under the Plans, we generally issue new shares of common stock, but occasionally may issue treasury shares.Amended and Restated Stock-Based Compensation PlanOn June 22, 2017, our stockholders approved the Verint Systems Inc. Amended and Restated 2015 Long-Term Stock Incentive Plan (the “2017 AmendedPlan”), which amended and restated the Verint Systems Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”). As with the 2015 Plan, the 2017Amended Plan authorizes our board of directors to provide equity-based compensation in the form of stock options, stock appreciation rights, restrictedstock, restricted stock units, 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 2017Amended Plan. Subject to adjustment as provided in the 2017 Amended Plan, up to an aggregate of (i) 7,975,000 shares of our common stock (on an option-equivalent basis), plus (ii) the number of shares of our common stock available for issuance under the 2015 Plan as of June 22, 2017, plus (iii) the number ofshares of our common stock that become available for issuance as a result of awards made under the 2015 Plan or the 2017 Amended Plan that are forfeited,cancelled, exchanged, withheld or surrendered or terminate or expire, may be issued or transferred in connection with awards under the 2017 Amended Plan.Each stock option or stock-settled stock appreciation right granted under the 2017 Amended Plan will reduce the available plan capacity by one share andeach other award will reduce the available plan capacity by 2.47 shares.The 2017 Amended Plan expires on June 22, 2027.Stock-Based Compensation ExpenseWe recognized stock-based compensation expense in the following line items on the consolidated statements of operations for the years ended January 31,2018, 2017, and 2016: 106 Year Ended January 31,(in thousands) 2018 2017 2016Component of (loss) income before provision (benefit) for income taxes: Cost of revenue - product $1,561 $1,290 $1,466Cost of revenue - service and support 6,904 7,297 5,719Research and development, net 13,144 11,637 9,195Selling, general and administrative 47,757 45,384 48,169Total stock-based compensation expense 69,366 65,608 64,549Income tax benefits related to stock-based compensation (before consideration ofvaluation allowances) 16,504 15,752 14,385Total stock-based compensation, net of taxes $52,862 $49,856 $50,164Total stock-based compensation expense by type of award was as follows for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 2016Restricted stock units and restricted stock awards $57,188 $55,123 $58,028Stock bonus program and bonus share program 12,108 10,298 6,359Total equity-settled awards 69,296 65,421 64,387Phantom stock units (cash-settled awards) 70 187 162Total stock-based compensation expense $69,366 $65,608 $64,549 Awards under our stock bonus and bonus share programs are accounted for as liability-classified awards, because the obligations are based predominantly onfixed monetary amounts that are generally known at inception of the obligation, to be settled with a variable number of shares of our common stock. Effective with our adoption of ASU No. 2016-09 effective February 1, 2017, we recorded $0.5 million of net excess tax deficiencies resulting from our StockPlans as a component of income tax expense for the year ended January 31, 2018. Net excess tax deficiencies of $0.7 million and net excess tax benefits of$0.5 million resulting from our Stock Plans were recorded as a decrease or increase to additional paid-in capital for the years ended January 31, 2017 and2016, respectively.Restricted Stock Units and Performance Stock Units We periodically award RSUs to our directors, officers, and other employees. The fair value of these awards is equivalent to the market value of our commonstock on the grant date. RSUs are not shares of our common stock and do not have any of the rights or privileges thereof, including voting or dividend rights.On the applicable vesting date, the holder of an RSU becomes entitled to a share of our common stock. RSUs are subject to certain restrictions and forfeitureprovisions prior to vesting.We periodically award PSUs to executive officers and certain employees that vest upon the achievement of specified performance goals or market conditions.We separately recognize compensation expense for each tranche of a PSU award as if it were a separate award with its own vesting date. For certain PSUs, anaccounting grant date may be established prior to the requisite service period.Once a performance vesting condition has been defined and communicated, and the requisite service period has begun, our estimate of the fair value of PSUsrequires an assessment of the probability that the specified performance criteria will be achieved, which we update at each reporting date and adjust ourestimate of the fair value of the PSUs, if necessary. All compensation expense for PSUs with market conditions is recognized if the requisite service period isfulfilled, even if the market condition is not satisfied.RSUs and PSUs that are expected to settle with cash payments upon vesting, if any, are reflected as liabilities on our consolidated balance sheets. Such RSUsand PSUs were insignificant at January 31, 2018 and 2017.The following table (“Award Activity Table”) summarizes activity for RSUs, PSUs, and other stock awards that reduce available Plan capacity under the Plansfor the years ended January 31, 2018, 2017, and 2016:107 Year Ended January 31, 2018 2017 2016(in thousands, except grant datefair values) Shares or Units Weighted-Average Grant-Date Fair Value Shares or Units Weighted-Average Grant-Date Fair Value Shares or Units Weighted-Average Grant-Date Fair ValueBeginning balance 2,742 $45.20 2,649 $54.57 2,545 $40.96Granted 1,804 $40.19 1,870 $35.33 1,729 $62.62Released (1,403) $45.96 (1,433) $47.98 (1,312) $39.75Forfeited (335) $48.92 (344) $52.20 (313) $50.56Ending balance 2,808 $41.18 2,742 $45.20 2,649 $54.57With respect to our stock bonus program, activity presented in the table above only includes shares earned and released in consideration of the discountprovided under that program. Consistent with the provisions of the Plans under which such shares are issued, other shares issued under the stock bonusprogram 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 granteeat 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 shareprogram. Further details appear below under “Stock Bonus Program” and “Bonus Share Program”.The following table summarizes PSU activity in isolation under the Plans for the years ended January 31, 2018, 2017, and 2016 (these amounts are alreadyincluded in the Award Activity Table above): Year Ended January 31,(in thousands) 2018 2017 2016Beginning balance 438 332 497Granted 204 312 195Released (50) (159) (239)Forfeited (86) (47) (121)Ending balance 506 438 332Excluding PSUs, we granted 1,600,000 RSUs during the year ended January 31, 2018.As of January 31, 2018, unrecognized compensation expense related to unvested RSUs and PSUs expected to vest subsequent to January 31, 2018 wasapproximately $63.6 million, with remaining weighted-average vesting periods of approximately 1.6 years, over which such expense is expected to berecognized. The unrecognized compensation expense does not include compensation expense of up to $1.1 million, related to shares for which a grant datehas been established but the requisite service period has not begun. The total fair values of RSUs and PSUs vested during the years ended January 31, 2018,2017, and 2016 were $64.5 million, $68.7 million, and $52.2 million, respectively.Stock OptionsWe did not grant stock options during the years ended January 31, 2018, 2017, and 2016, and activity from stock options awarded in prior periods was notmaterial during these years.Phantom Stock UnitsWe have periodically issued phantom stock units to certain employees that settle, or are expected to settle, with cash payments upon vesting. Like equity-settled awards, phantom stock units are awarded with vesting conditions and are subject to certain forfeiture provisions prior to vesting.Phantom stock unit activity for the years ended January 31, 2018, 2017, and 2016 was not significant.Stock Bonus ProgramOur stock bonus program permits eligible employees to receive a portion of their earned bonuses, otherwise payable in cash, in the form of discounted sharesof our common stock. Executive officers are eligible to participate in this program to the extent108that shares remained available for awards following the enrollment of all other participants. Shares awarded to executive officers with respect to the discountfeature 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 annualcap 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 isdetermined using a five-day trailing average price of our common stock when the awards are calculated, reduced by a discount to be determined by the boardof directors each year (the “discount”). To the extent that this program is not funded in a given year or the number of shares of common stock needed to fullysatisfy employee enrollment exceeds the annual cap, the applicable portion of the employee bonuses will generally revert to being paid in cash. Obligationsunder this program are accounted for as liabilities, because the obligations are based predominantly on fixed monetary amounts that are generally known atinception of the obligation, to be settled with a variable number of shares of common stock determined using a discounted average price of our commonstock. The following table summarizes activity under the stock bonus program for the years ended January 31, 2018, 2017, and 2016 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. Othershares issued under the program do not reduce available plan capacity and are therefore excluded from the Award Activity Table above. Year Ended January 31,(in thousands) 2018 2017 2016Shares in lieu of earned cash bonus - granted and released 21 25 43Shares in respect of discount: Granted — — 7 Released — — 5Awards under the stock bonus program for the performance period ended January 31, 2018 will consist of shares earned in respect of executive officerincentive plans and will be awarded without a discount, and are expected to be issued during the first half of the year ending January 31, 2019.In March 2018, our board of directors approved up to 125,000 shares of common stock, and a discount of 15%, for awards under our stock bonus program forthe year ending January 31, 2019. Executive officers will be permitted to participate in this program for the year ending January 31, 2019, but only to theextent that shares remain available for awards following the enrollment of all other participants. Shares awarded to executive officers with respect to the 15%discount will be subject to a one-year vesting period. Bonus Share ProgramUnder our bonus share program, we may provide discretionary year-end bonuses to employees or pay earned bonuses that are outside the stock bonusprogram 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 tothe accounting for the stock bonus program, obligations for these bonuses are accounted for as liabilities, because the obligations are based predominantlyon fixed monetary amounts that are generally known, to be settled with a variable number of shares of common stock.During the year ended January 31, 2017, approximately 171,000 shares of common stock were awarded and released under the bonus share program inrespect of the performance period ended January 31, 2016.During the year ended January 31, 2018, approximately 293,000 shares of common stock were awarded and released under the bonus share program inrespect of the performance period ended January 31, 2017.For bonuses in respect of the year ended January 31, 2018, our board of directors has approved the use of up to 300,000 shares of common stock under thisprogram, reduced by any shares used under the stock bonus program in respect of the performance period ended January 31, 2018.For bonuses in respect of the year ending January 31, 2019, our board of directors has approved the use of up to 300,000 shares of common stock under thisprogram, reduced by any shares used under the stock bonus program in respect of the performance period ending January 31, 2019.The combined accrued liabilities for the stock bonus program and the bonus share program were $9.2 million and $10.0 million at January 31, 2018 and2017, respectively.109Other Benefit Plans401(k) Plan and Other Retirement PlansWe maintain a 401(k) Plan for our full-time employees in the United States. The plan allows eligible employees who attain the age of 21 beginning with thefirst of the month following their date of hire to elect to contribute up to 60% of their annual compensation, subject to the prescribed maximum amount. Wematch employee contributions at a rate of 50%, up to a maximum annual matched contribution of $2,000 per employee.Employee contributions are always fully vested, while our matching contributions for each year vest on the last day of the calendar year provided theemployee remains employed with us on that day.Our matching contribution expenses for our 401(k) Plan were $2.5 million, $2.6 million, and $2.2 million for the years ended January 31, 2018, 2017, and2016, respectively.We provide retirement benefits for non-U.S. employees as required by local laws or to a greater extent as we deem appropriate through plans that functionsimilar to 401(k) plans. Funding requirements for programs required by local laws are determined on an individual country and plan basis and are subject tolocal country practices and market circumstances.Severance PayWe are obligated to make severance payments for the benefit of certain employees of our foreign subsidiaries. Severance payments made to Israeli employeesare considered significant compared to all other subsidiaries with severance payment arrangements. Under Israeli law, we are obligated to make severancepayments to employees of our Israeli subsidiaries, subject to certain conditions. In most cases, our liability for these severance payments is fully provided forby regular deposits to funds administered by insurance providers and by an accrual for the amount of our liability which has not yet been deposited.Severance expenses for the years ended January 31, 2018, 2017, and 2016 were $7.1 million, $6.4 million, and $7.2 million, respectively.14. COMMITMENTS AND CONTINGENCIESOperating and Capital LeasesWe lease office, manufacturing, and warehouse space, as well as certain equipment, under non-cancelable operating lease agreements. We have alsoperiodically entered into capital leases. Terms of the leases, including renewal options and escalation clauses, vary by lease.Rent expense incurred under all operating leases was $26.1 million, $25.6 million, and $19.4 million for the years ended January 31, 2018, 2017, and 2016,respectively.As of January 31, 2018, our minimum future rent obligations under non-cancelable operating and capital leases with initial or remaining terms in excess ofone year were as follows:(in thousands) Operating CapitalYears Ending January 31, Leases Leases2019 $21,497 $1,1712020 16,788 1,0812021 15,435 9722022 13,583 8752023 12,203 600Thereafter 37,126 —Total $116,632 4,699Less: amount representing interest (349)Present value of minimum lease payments $4,350110Table of ContentsWe sublease certain space in our facilities to third parties. As of January 31, 2018, total expected future sublease income was $0.4 million and will range from$0.1 million to $0.3 million on an annual basis through May 2019.Unconditional Purchase ObligationsIn the ordinary course of business, we enter into certain unconditional purchase obligations, which are agreements to purchase goods or services that areenforceable, legally binding, and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable priceprovisions; and the approximate timing of the transaction. Our purchase orders are based on current needs and are typically fulfilled by our vendors within arelatively short time horizon.As of January 31, 2018, our unconditional purchase obligations totaled approximately $109.4 million, the majority of which were scheduled to occur withinthe subsequent twelve months. Due to the relatively short life of the obligations, the carrying value approximates the fair value of these obligations atJanuary 31, 2018.Warranty LiabilityThe following table summarizes the activity in our warranty liability, which is included in accrued expenses and other current liabilities in the consolidatedbalance sheets, for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 2016Warranty liability, beginning of year $962 $826 $633Provision (credited against) charged to expenses (165) 797 473Warranty charges (260) (658) (278)Foreign currency translation and other 14 (3) (2)Warranty liability, end of year $551 $962 $826We accrue for warranty costs as part of our cost of revenue based on associated product costs, labor costs, and associated overhead. Our CustomerEngagement solutions are sold with a warranty of generally one year on hardware and 90 days for software. Our Cyber Intelligence solutions are sold withwarranties that typically range in duration from 90 days to three years, and in some cases longer.Licenses and RoyaltiesWe license certain technology and pay royalties under such licenses and other agreements entered into in connection with research and developmentactivities.As discussed in Note 1, “Summary of Significant Accounting Policies”, we receive non-refundable grants from the IIA that fund a portion of our research anddevelopment expenditures. The Israeli law under which the IIA grants are made limits our ability to manufacture products, or transfer technologies, developedusing these grants outside of Israel. If we were to seek approval to manufacture products, or transfer technologies, developed using these grants outside ofIsrael, we could be subject to additional royalty requirements or be required to pay certain redemption fees. If we were to violate these restrictions, we couldbe required to refund any grants previously received, together with interest and penalties, and may be subject to criminal penalties.Off-Balance Sheet RiskIn the normal course of business, we provide certain customers with financial performance guarantees, which are generally backed by standby letters of creditor surety bonds. In general, we would only be liable for the amounts of these guarantees in the event that our nonperformance permits termination of therelated contract by our customer, which we believe is remote. At January 31, 2018, we had approximately $92.5 million of outstanding letters of credit andsurety bonds relating primarily to these performance guarantees. As of January 31, 2018, we believe we were in compliance with our performance obligationsunder all contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees willnot have a material adverse effect on our consolidated results of operations, financial position, or cash flows. Our historical non-compliance with ourperformance obligations has been insignificant.Indemnifications111Table of ContentsIn the normal course of business, we provide indemnifications of varying scopes to customers against claims of intellectual property infringement made bythird parties arising from the use of our products. Historically, costs related to these indemnification provisions have not been significant and we are unableto estimate the maximum potential impact of these indemnification provisions on our future results of operations.To the extent permitted under Delaware law or other applicable law, we indemnify our directors, officers, employees, and agents against claims they maybecome subject to by virtue of serving in such capacities for us. We also have contractual indemnification agreements with our directors, officers, and certainsenior executives. The maximum amount of future payments we could be required to make under these indemnification arrangements and agreements ispotentially unlimited; however, we have insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid. We arenot able to estimate the fair value of these indemnification arrangements and agreements in excess of applicable insurance coverage, if any.Legal ProceedingsOn March 26, 2009, legal actions were commenced by Ms. Orit Deutsch, a former employee of our subsidiary, Verint Systems Limited (“VSL”), against VSLin the Tel Aviv Regional Labor Court (Case Number 4186/09) (the “Deutsch Labor Action”) and against Comverse Technology, Inc. (“CTI”) in the Tel AvivDistrict Court (Case Number 1335/09) (the “Deutsch District Action”). In the Deutsch Labor Action, Ms. Deutsch filed a motion to approve a class actionlawsuit on the grounds that she purported to represent a class of our employees and former employees who were granted Verint and CTI stock options andwere allegedly damaged as a result of the suspension of option exercises during the period from March 2006 through March 2010, during which we did notmake periodic filings with the Securities and Exchange Commission (“SEC”) as a result of certain internal and external investigations and reviews ofaccounting matters discussed in our prior public filings. In the Deutsch District Action, in addition to a small amount of individual damages, Ms. Deutsch wasseeking 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 allegednegligence by CTI in its financial reporting. The class certification motions did not specify an amount of damages. On February 8, 2010, the Deutsch LaborAction 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 inthe Tel Aviv District Court (Case Number 1334/09) (the “Katriel District Action”). In the Katriel Labor Action, Ms. Katriel was seeking to certify a class ofplaintiffs who were granted CTI stock options and were allegedly damaged as a result of the suspension of option exercises during an extended filing delayperiod affecting CTI’s periodic reporting discussed in CTI’s historical SEC filings. In the Katriel District Action, in addition to a small amount of individualdamages, Ms. Katriel was seeking to certify a class of plaintiffs who were allegedly damaged due to their inability to exercise CTI stock options as a result ofalleged negligence by CTI in its financial reporting. The class certification motions did not specify an amount of damages. On March 2, 2010, the KatrielLabor Action was transferred to the Tel Aviv District Court, based on an agreed motion filed by the parties requesting such transfer.On April 4, 2012, Ms. Deutsch and Ms. Katriel filed an uncontested motion to consolidate and amend their claims and on June 7, 2012, the District Courtallowed Ms. Deutsch and Ms. Katriel to file the consolidated class certification motion and an amended consolidated complaint against VSL, CTI, andComverse Limited. Following CTI’s announcement of its intention to effect the Comverse Share Distribution, on July 12, 2012, the plaintiffs filed a motionrequesting that the District Court order CTI to set aside up to $150.0 million in assets to secure any future judgment. The District Court ruled at such time thatit would not decide this motion until the Deutsch and Katriel class certification motion was heard. Plaintiffs initially filed a motion to appeal this ruling inAugust 2012, but subsequently withdrew it in July 2014.Prior to the consummation of the Comverse Share Distribution, CTI either sold or transferred substantially all of its business operations and assets (other thanits equity ownership interests in us and its then-subsidiary, Comverse, Inc.) to Comverse, Inc. or unaffiliated third parties. On October 31, 2012, CTIcompleted the Comverse Share Distribution, in which it distributed all of the outstanding shares of common stock of Comverse, Inc. to CTI’s shareholders. Asa result of the Comverse Share Distribution, Comverse, Inc. became an independent company and ceased to be a wholly owned subsidiary of CTI, and CTIceased to have any material assets other than its equity interest in us. As of February 28, 2017, Mavenir Inc. became successor-in-interest to Comverse, Inc.On February 4, 2013, we merged with CTI. As a result of the merger, we have assumed certain rights and liabilities of CTI, including any liability of CTIarising out of the Deutsch District Action and the Katriel District Action. However, under the terms of the Distribution Agreement between CTI andComverse, Inc. relating to the Comverse Share Distribution, we, as112Table of Contentssuccessor to CTI, are entitled to indemnification from Comverse, Inc. (now Mavenir) for any losses we suffer in our capacity as successor-in-interest to CTI inconnection with the Deutsch District Action and the Katriel District Action.Following an unsuccessful mediation process, the proceeding before the District Court resumed. On August 28, 2016, the District Court (i) denied theplaintiffs’ motion to certify the suit as a class action with respect to all claims relating to Verint stock options and (ii) approved the plaintiffs’ motion tocertify the suit as a class action with respect to claims of current or former employees of Comverse Limited (now Mavenir) or VSL who held unexercised CTIstock 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 evaluatedunder New York law.On December 15, 2016, CTI filed with the Supreme Court a motion for leave to appeal the District Court’s August 28, 2016 ruling. The plaintiffs did not filean appeal of the District Court’s August 28, 2016 ruling. On February 5, 2017, the District Court approved the plaintiffs’ motion to appoint a newrepresentative plaintiff, Mr. David Vaaknin, for the current or former employees of VSL who held unexercised CTI stock options at the time CTI suspendedoption exercises, in replacement of Ms. Deutsch.On August 8, 2017, the Supreme Court partially allowed CTI’s appeal and ordered the case to be returned to the District Court to determine whether a causeof action exists in this case under New York law, based on CTI’s previously submitted expert opinion and the opinion of any expert the plaintiffs elect tointroduce.On November 28, 2017, the plaintiffs submitted an expert opinion regarding New York law. On January 3, 2018, CTI filed a motion to dismiss the motion tocertify the class action on the basis that the New York law opinion submitted by the plaintiffs does not directly address the causes of action in question, oralternatively, to dismiss the portions of the opinion that do not specifically relate to CTI’s expert opinion. On January 22, 2018, the court ruled that theplaintiffs should submit a motion to amend their class certification motion and that CTI’s motion to dismiss would remain pending. Based on input from thecourt, the parties have agreed to enter into a further round of mediation in an effort to settle the matter.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 theoutcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any current claims will have a material effect on ourconsolidated financial position, results of operations, or cash flows.15. SEGMENT, GEOGRAPHIC, AND SIGNIFICANT CUSTOMER INFORMATION Segment InformationOperating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by theenterprise’s CODM, or decision making group, in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer is ourCODM.In August 2016, we reorganized into two businesses and now report our results in two operating segments, Customer Engagement and Cyber Intelligence.Comparative segment financial information provided for prior periods has been recast to conform to this revised segment structure.We measure the performance of our operating segments based upon segment revenue and segment contribution.Segment revenue includes adjustments associated with revenue of acquired companies which are not recognizable within GAAP revenue. These adjustmentsprimarily relate to the acquisition-date excess of the historical carrying value over the fair value of acquired companies’ future maintenance and serviceperformance obligations. As the obligations are satisfied, we report our segment revenue using the historical carrying values of these obligations, which webelieve better reflects our ongoing maintenance and service revenue streams, whereas GAAP revenue is reported using the obligations’ acquisition-date fairvalues. 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 anddevelopment, selling, marketing, and certain administrative expenses. When determining segment contribution, we do not allocate certain operatingexpenses which are provided by shared resources or are otherwise generally not controlled by segment management. These expenses are reported as “Sharedsupport expenses” in our table of segment operating results, the majority of which are expenses for administrative support functions, such as informationtechnology,113Table of Contentshuman 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 canvary significantly in amount and frequency, are based upon subjective assumptions, or in certain cases are unplanned for or difficult to forecast, such asrestructuring expenses and business combination transaction and integration expenses, all of which are not considered when evaluating segmentperformance.Revenue from transactions between our operating segments is not material.Operating results by segment for the years ended January 31, 2018, 2017, and 2016 were as follows: Year Ended January 31,(in thousands) 2018 2017 2016Revenue: Customer Engagement: Segment revenue $755,038 $716,163 $698,298Revenue adjustments (14,971) (10,266) (3,441) 740,067 705,897 694,857Cyber Intelligence: Segment revenue 395,420 356,533 436,343Revenue adjustments (258) (324) (934) 395,162 356,209 435,409Total revenue $1,135,229 $1,062,106 $1,130,266 Segment contribution: Customer Engagement $286,236 $269,017 $264,378Cyber Intelligence 94,585 85,777 133,186Total segment contribution 380,821 354,794 397,564 Reconciliation of segment contribution to operating income: Revenue adjustments 15,229 10,590 4,375Shared support expenses 154,673 150,170 153,350Amortization of acquired intangible assets 72,425 81,461 78,904Stock-based compensation 69,366 65,608 64,549Acquisition, integration, restructuring, and other unallocated expenses 20,498 29,599 28,534Total reconciling items, net 332,191 337,428 329,712Operating income $48,630 $17,366 $67,852With the exception of goodwill and acquired intangible assets, we do not identify or allocate our assets by operating segment. Consequently, it is notpractical to present assets by operating segment. In connection with our August 2016 change in segmentation, we reallocated goodwill previously assignedto our former Video Intelligence operating segment to the Customer Engagement and Cyber Intelligence operating segments. There were no other materialchanges in the allocations of goodwill and acquired intangible assets by operating segment during the years ended January 31, 2018, 2017, and 2016. Further details regarding the allocations of goodwill and acquired intangible assets by operating segment appear in Note 5, “Intangible Assets andGoodwill”.Geographic InformationRevenue by major geographic region is based upon the geographic location of the customers who purchase our products and services. The geographiclocations of distributors, resellers, and systems integrators who purchase and resell our products may be different from the geographic locations of endcustomers.Revenue in the Americas includes the United States, Canada, Mexico, Brazil, and other countries in the Americas. Revenue in Europe, the Middle East andAfrica (“EMEA”) includes the United Kingdom, Germany, Israel, and other countries in EMEA. Revenue in the Asia-Pacific (“APAC”) region includesAustralia, India, Singapore, and other Asia-Pacific countries.114Table of ContentsThe information below summarizes revenue from unaffiliated customers by geographic area for the years ended January 31, 2018, 2017, and 2016: Year Ended January 31,(in thousands) 2018 2017 2016Americas: United States $445,406 $438,034 $430,626Other 150,993 134,111 150,435Total Americas 596,399 572,145 581,061EMEA 354,495 322,130 350,217APAC 184,335 167,831 198,988Total revenue $1,135,229 $1,062,106 $1,130,266Our long-lived assets primarily consist of net property and equipment, goodwill and other intangible assets, capitalized software development costs, deferredcost of revenue, and deferred income taxes. We believe that our tangible long-lived assets, which consist of our net property and equipment, are exposed togreater geographic area risks and uncertainties than intangible assets and long-term cost deferrals, because these tangible assets are difficult to move and arerelatively illiquid. Property and equipment, net by geographic area consisted of the following as of January 31, 2018 and 2017: January 31,(in thousands) 2018 2017United States $45,942 $37,751Israel 27,089 25,421Other countries 16,058 14,379Total property and equipment, net $89,089 $77,551Significant Customers No single customer accounted for more than 10% of our revenue during the years ended January 31, 2018, 2017, and 2016.16. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)Summarized condensed quarterly financial information for the years ended January 31, 2018 and 2017 appears in the following tables: Three Months Ended April 30, July 31, October 31, January 31,(in thousands, except per share data) 2017 2017 2017 2018Revenue $260,995 $274,777 $280,726 $318,731Gross profit $150,192 $164,103 $169,321 $204,826(Loss) income before (benefit) provision for income taxes $(19,932) $(1,314) $9,010 $31,136Net (loss) income $(19,040) $(5,766) $3,066 $18,286Net (loss) income attributable to Verint Systems Inc. $(19,786) $(6,427) $2,489 $17,097 Net (loss) income per common share attributable to Verint SystemsInc. Basic $(0.32) $(0.10) $0.04 $0.27 Diluted $(0.32) $(0.10) $0.04 $0.26115Table of Contents Three Months Ended April 30, July 31, October 31, January 31,(in thousands, except per share data) 2016 2016 2016 2017Revenue $245,424 $261,921 $258,902 $295,859Gross profit $144,730 $159,460 $155,696 $179,591(Loss) income before provision for income taxes $(15,863) $(10,020) $(4,075) $6,484Net (loss) income $(16,193) $(11,078) $(7,434) $8,459Net (loss) income attributable to Verint Systems Inc. $(17,456) $(11,705) $(8,237) $8,018 Net (loss) income per common share attributable to Verint SystemsInc. Basic $(0.28) $(0.19) $(0.13) $0.13 Diluted $(0.28) $(0.19) $(0.13) $0.13Net (loss) income per common share attributable to Verint Systems Inc. is computed independently for each quarterly period and for the year. Therefore, thesum of quarterly net (loss) income per common share amounts may not equal the amounts reported for the years.During the three months ended January 31, 2018, we recognized provisional deferred income tax withholding expense of $15.0 million on foreign earningsthat may be repatriated to the U.S., in connection with the 2017 Tax Act, which was enacted into law in December 2017. The quarterly operating results forthe year ended January 31, 2017 did not include any material unusual or infrequently occurring items.As is typical for many software and technology companies, our business is subject to seasonal and cyclical factors. In most years, our revenue and operatingincome are typically highest in the fourth quarter and lowest in the first quarter (prior to the impact of unusual or nonrecurring items). Moreover, revenue andoperating income in the first quarter of a new year may be lower than in the fourth quarter of the preceding year, in some years, potentially by a significantmargin. In addition, we generally receive a higher volume of orders in the last month of a quarter, with orders concentrated in the later part of that month. Webelieve that these seasonal and cyclical factors primarily reflects customer spending patterns and budget cycles, as well as the impact of compensationincentive plans for our sales personnel. While seasonal and cyclical factors such as these are common in the software and technology industry, this patternshould not be considered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, alsohave an impact on our business and financial results. See “Risk Factors” under Item 1A of this report for a more detailed discussion of factors which mayaffect our business and financial results.Item 9. Changes In and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. 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 theeffectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of January 31, 2018. Disclosure controls and procedures are those controls and other procedures that are designed to ensure that information required to be disclosed in reportsfiled or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified by the rules and formspromulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information isaccumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure. As a result of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controlsand procedures were effective as of January 31, 2018. Management’s Report on Internal Control Over Financial Reporting116Table of ContentsOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and ChiefFinancial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 31, 2018 based on the 2013framework established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission. Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of January 31, 2018. Wereviewed the results of management’s assessment with our Audit Committee. Our independent registered accounting firm, Deloitte & Touche LLP, has audited the effectiveness of our internal control over financial reporting as stated intheir report included herein.Changes in Internal Control Over Financial ReportingThere 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 occurredduring the three months ended January 31, 2018, that materially affected, or are reasonably likely to materially affect, our internal control over financialreporting.Inherent Limitations on Effectiveness of ControlsOur management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control overfinancial 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 resourceconstraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation ofcontrols can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include thepossibility that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can becircumvented 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 isbased in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving itsstated goals under all possible conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree ofcompliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occurand not be detected.117Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Verint Systems Inc.Melville, New York Opinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Verint Systems Inc. and subsidiaries (the “Company”) as of January 31, 2018, based oncriteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2018, based oncriteria established in Internal Control - Integrated Framework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedfinancial statements as of and for the year ended January 31, 2018, of the Company and our report dated March 28, 2018, expressed an unqualified opinionon those financial statements. Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control based on that risk, and performing such other procedures as we considered necessary in the circumstances. We believe thatour audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLPNew York, New YorkMarch 28, 2018118Table of ContentsItem 9B. Other InformationNot applicable.119Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceExcept as set forth below, the information required by Item 10 will be included under the captions “Election of Directors”, “Corporate Governance”,“Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for the 2018 Annual Meeting ofStockholders to be filed with the SEC within 120 days of the year ended January 31, 2018 (the “2018 Proxy Statement”) and is incorporated herein byreference.Corporate Governance GuidelinesAll of our employees, including our executive officers, are required to comply with our Code of Conduct. Additionally, our Chief Executive Officer, ChiefFinancial Officer, and senior officers must comply with our Code of Business Conduct and Ethics for Senior Officers. The purpose of these corporate policiesis to ensure to the greatest possible extent that our business is conducted in a consistently legal and ethical manner. The text of the Code of Conduct and theCode of Business Conduct and Ethics for Senior Officers is available on our website (www.verint.com). We intend to disclose on our website any amendmentto, or waiver from, a provision of our policies as required by law.Item 11. Executive CompensationThe information required by Item 11 will be included under the captions “Executive Compensation” and “Compensation Committee Interlocks and InsiderParticipation” in the 2018 Proxy Statement and is incorporated herein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersExcept as set forth below, the information required by Item 12 will be included under the caption “Security Ownership of Certain Beneficial Owners andManagement” in the 2018 Proxy Statement and is incorporated herein by reference.Securities Authorized for Issuance Under Equity Compensation PlansThe following table sets forth certain information regarding our equity compensation plans as of January 31, 2018.Plan Category (a)Number ofSecurities to beIssued uponExercise ofOutstandingOptions, Warrants,and Rights (b)Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights(1) (c)Number of SecuritiesRemaining Availablefor Future Issuanceunder EquityCompensation Plans(Excluding SecuritiesReflected in Column(a)) Equity compensation plans approved by security holders 2,809,672(2)$10.09 9,528,772(3)Equity compensation plans not approved by security holders — — Total 2,809,672 $10.09 9,528,772 (1) The weighted-average price relates to outstanding stock options only (as of the applicable date). Other outstanding awards carry no exercise price and aretherefore excluded from the weighted-average price.(2) Consists of 1,569 stock options and 2,808,103 restricted stock units.(3) Consists of shares that may be issued pursuant to future awards under the Verint Systems Inc. 2015 Long-Term Stock Incentive Plan as amended andrestated on June 22, 2017 (the “2015 Plan”). The 2015 Plan uses a fungible ratio such that each option or stock-settled stock appreciation right granted underthe 2015 Plan will reduce the plan capacity by one share and each120Table of Contentsother award denominated in shares that is granted under the 2015 Plan will reduce the available capacity by 2.47 shares. Prior to the plan amendment, thefungible ratio was 2.29.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by Item 13 will be included under the captions “Corporate Governance” and “Certain Relationships and Related PersonTransactions” in the 2018 Proxy Statement and is incorporated herein by reference.Item 14. Principal Accounting Fees and ServicesThe information required by Item 14 will be included under the caption “Audit Matters” in the 2018 Proxy Statement and is incorporated herein by reference.121Table of ContentsPART IVItem 15. Exhibits, Financial Statement Schedules (a) Documents filed as part of this report(1) Financial StatementsThe consolidated financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements in Part II, Item 8 of thisForm 10-K.(2) Financial Statement SchedulesAll financial statement schedules have been omitted here because they are not applicable, not required, or the information is shown in theconsolidated financial statements or notes thereto.(3) ExhibitsSee (b) below.(b) ExhibitsNumber Description Filed Herewith /Incorporated byReference from 2.1 Agreement and Plan of Merger, dated August 12, 2012, by and among ComverseTechnology, Inc., Verint Systems Inc. and Victory Acquisition I LLC* Form 8-K filed on August 13, 20122.2 Agreement and Plan of Merger, dated January 6, 2014, by and among Verint SystemsInc., Kiwi Acquisition Inc., Kay Technology Holdings, Inc. and Accel-KKR CapitalPartners III, LP* Form 8-K filed on January 6, 20142.3 Distribution Agreement, dated as of October 31, 2012, by and between ComverseTechnology, Inc. and Comverse, Inc. Comverse, Inc. Current Report on Form 8-Kfiled with the SEC on November 2, 20122.4 Tax Disaffiliation Agreement, dated as of October 31, 2012, by and between ComverseTechnology, Inc. and Comverse, Inc. Comverse, Inc. Current Report on Form 8-Kfiled with the SEC on November 2, 20123.1Amended and Restated Certificate of Incorporation of Verint Systems Inc.Form S-1 (Commission File No. 333-82300)effective on May 16, 20023.2 Amended and Restated By-laws of Verint Systems Inc. (as amended as of March 19,2015) Form 8-K filed on March 25, 20153.3Amended and Restated Certificate of Designation, Preferences and Rights of the SeriesA Convertible Perpetual Preferred Stock of Verint Systems Inc.Form 10-Q filed on September 6, 20124.1Specimen Common Stock certificateForm S-1 (Commission File No. 333-82300)effective on May 16, 20024.2 Indenture, dated as of June 18, 2014, between Verint Systems Inc. and WilmingtonTrust, National Association, as trustee. Form 8-K filed on June 18, 20144.3 First Supplemental Indenture, dated as of June 18, 2014, between Verint Systems Inc.and Wilmington Trust, National Association, as trustee. Form 8-K filed on June 18, 201410.1Form of Indemnification AgreementForm S-1 (Commission File No. 333-82300)effective on May 16, 200210.2Verint Systems Inc. 2010 Long-Term Stock Incentive PlanForm S-8 (Commission File No. 333-169768)effective on October 5, 201010.3 Amendment No. 1 to Verint Systems Inc. 2010 Long-Term Stock Incentive Plan Form 8-K filed on June 19, 2012122Table of Contents10.4Vovici Corporation Amended and Restated Stock PlanForm 10-K filed on April 2, 201210.5 Amended and Restated Comverse Technology, Inc. 2011 Stock IncentiveCompensation Plan Form S-8 (Commission File No. 333-189062)effective on June 3, 201310.6 Verint Systems Inc. 2015 Long-Term Stock Incentive Plan Form 8-K filed on June 26, 201510.7 Verint Systems Inc. Amended and Restated 2015 Long-Term Stock Incentive Plan Form 8-K filed on June 26, 201710.8 Verint Systems Inc. Stock Bonus Program** Filed herewith10.9 Form of Time-Based Restricted Stock Unit Award Agreement for Grants Subsequent toMarch 2016** Form 10-K filed on March 30, 201610.10 Form of Time-Based Restricted Stock Unit Award Agreement for Grants Subsequent toMarch 2018** Filed herewith10.11 Form of Performance-Based Restricted Stock Unit Award Agreement for GrantsSubsequent to March 2015** Form 10-K filed on March 27, 201510.12 Form of Performance-Based Restricted Stock Unit Award Agreement for GrantsSubsequent to March 2016** Form 10-K filed on March 30, 201610.13 Form of Performance-Based Restricted Stock Unit Award Agreement for GrantsSubsequent to March 2017** Form 10-K filed on March 28, 201710.14 Form of Performance-Based Restricted Stock Unit Award Agreement for GrantsSubsequent to March 2018** Filed herewith10.15 Credit Agreement, dated June 29, 2017, among Verint Systems Inc., as borrower, thelenders from time to time party thereto, and JPMorgan Chase Bank, N.A., asadministrative agent and collateral agent Form 8-K filed on July 6, 201710.16 Amendment No. 1, dated January 31, 2018, to the Credit Agreement, dated June 29,2017, among Verint Systems Inc., as borrower, the lenders from time to time partythereto, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent Form 8-K filed on February 1, 201810.17Employment Agreement, dated February 23, 2010, between Verint Systems Inc. andDan Bodner**Form 8-K filed on February 23, 201010.18Amended and Restated Employment Agreement, dated July 13, 2011, between VerintSystems Inc. and Douglas Robinson**Form 8-K filed on July 14, 201110.19Second Amended and Restated Employment Agreement, dated July 13, 2011, betweenVerint Systems Inc. and Elan Moriah**Form 8-K filed on July 14, 201110.20Second Amended and Restated Employment Agreement, dated July 13, 2011, betweenVerint Systems Inc. and Peter Fante**Form 8-K filed on July 14, 201110.21 Summary of the Terms of Verint Systems Inc. Executive Officer Annual Bonus Plan** Form 10-K filed on March 27, 201510.22Summary of the Terms of Verint Systems Inc. Executive Officer Annual Bonus Plan Forthe Fiscal Year Ending January 31, 2019 and Subsequent**Filed herewith10.23 Federal Income Tax Sharing Agreement, dated as of January 31, 2002, betweenComverse Technologies, Inc. an Verint Systems Inc. Form S-1 (Commission File No. 333-82300)effective on May 16, 200212.1 Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined FixedCharges and Preference Security Dividends Filed herewith21.1Subsidiaries of Verint Systems Inc.Filed herewith23.1Consent of Deloitte & Touche LLP, Independent Registered Public Accounting FirmFiled herewith31.1Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith31.2Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith32.1Certification of the Chief Executive Officer pursuant to Securities Exchange Act Rule13a-14(b) and 18 U.S.C. Section 1350 (1)Filed herewith32.2Certification of the Chief Financial Officer pursuant to Securities Exchange Act Rule13a-14(b) and 18 U.S.C. Section 1350 (1)Filed herewith101.INSXBRL Instance DocumentFiled herewith123Table of Contents101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith(1) These exhibits are being “furnished” with this periodic report and are not deemed “filed” with the SEC and are not incorporated by reference in any filingof the company under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.* Certain exhibits and schedules have been omitted, and the Company agrees to furnish supplementally to the SEC a copy of any omitted exhibits orschedules upon request.** Denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(b) of this report. (c) Financial Statement SchedulesNone124Table of ContentsItem 16. Form 10-K SummaryNone.125Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. VERINT SYSTEMS INC. March 28, 2018/s/ Dan BodnerDan BodnerChief Executive Officer March 28, 2018/s/ Douglas E. RobinsonDouglas E. RobinsonChief Financial OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated.Name Title Date /s/ Dan Bodner Chief Executive Officer, and Chairman of the Board March 28, 2018Dan Bodner (Principal Executive Officer) /s/ Douglas E. Robinson Chief Financial Officer March 28, 2018Douglas E. Robinson (Principal Financial Officer and Principal Accounting Officer) /s/ John R. Egan Director March 28, 2018John R. Egan /s/ Penelope Herscher Director March 28, 2018Penelope Herscher /s/ William H. Kurtz Director March 28, 2018William H. Kurtz /s/ Richard Nottenburg Director March 28, 2018Richard Nottenburg /s/ Howard Safir Director March 28, 2018Howard Safir /s/ Earl Shanks Director March 28, 2018Earl Shanks 126EXHIBIT 10.08Verint Systems Inc.Stock Bonus ProgramOriginally Adopted: September 1, 2011Revised: March 22, 2018This document outlines the Verint Systems Inc. Stock Bonus Program (the “Stock Bonus Program”), under which participating employees are eligible toreceive a portion of their earned bonus otherwise payable in cash in shares of Verint common stock.Eligibility: The Stock Bonus Program is only being offered to selected employees at the discretion of management, and may include employees on pre-established bonus plans and/or employees eligible to receive discretionary cash bonuses (discretionary bonus plans). For the avoidance of doubt, in the caseof discretionary cash bonuses, it is solely in management’s discretion whether or not such bonuses are eligible to be included in the Stock Bonus Program.Executive officers may participate in the program, subject to the approval of the Company’s Board of Directors (the “Board”), and subject to a one yearvesting period (measured from the Value Date), solely with respect to the shares issued over and above the number that would have been issued if the officerhad purchased the shares at market price on the Value Date (the “Incentive Shares”).Summary: The program will allow eligible employees to make an election to receive a specified portion of their earned annual bonus payout (otherwisepayable in cash) in the form of shares of Verint common stock.Management will have discretion as to whether or not eligible employees on discretionary bonus plans will be required to make an election. In the event anelection is not made, management will have discretion to pay up to 75% of an employee’s earned discretionary bonus (otherwise payable in cash) in shares ofVerint common stock.The percentage elected by an employee (or designated by management, in the case of employees on discretionary plans) is referred to herein as the “ElectionPercentage”.If a participating employee changes to a non-bonus role after enrolling (or being enrolled) in the program for a given program year, the Election Percentagewill apply to any bonus earned by the employee prior to such change in role, with the timing of the share delivery to be in accordance with the other termsand conditions of this document.Incentive: As an incentive to participate in the program (including for eligible employees who do not make an election), the stock price at which anemployee’s bonus payout will be converted into shares of Verint common stock will be at a discount to market price (as described below). The discount willbe established by the Board on a year by year basis in conjunction with its annual funding decision (as described below). The discount may fluctuate fromyear to year (the discount for a given year, expressed as a percentage, the “Program Year Discount”) and will be reflected on the enrollment forms for eachprogram year and also communicated to participating employees who do not make an election.Funding: Each year, the Board will consider an allocation of shares of Verint common stock to fund the Stock Bonus Program. This allocation may fluctuatefrom year to year and in some years may be zero. As a result, the availability of the program in any given year is subject to the Board’s decision to fund theprogram.Maximum Number of Shares: In addition to (and subject to) the Board’s decision to fund the program in a given year, the Board will also establish amaximum number of shares that are permitted to be delivered to participants in the program for that year (the “Share Cap”). As a result, the Company reservesthe right to reduce the number of shares delivered to each participant in order to remain under the Share Cap, notwithstanding a participant’s ElectionPercentage. The Company will determine the manner in which the Share Cap is applied, if needed.Any amounts due to a participant that are not paid in shares due to the Board’s decision not to fund the program or due to the Share Cap will instead bepaid in cash at the original cash amount.1 Process: Prior to the scheduled delivery date of the shares, the HR and/or Finance departments will determine the amount of earned bonus available to beconverted into shares for each participant based on the participant’s Election Percentage. The number of shares to be delivered to the participant will becalculated on the “Value Date” using the Company’s discounted stock price as of the Value Date (rounded down to the nearest whole share.•The scheduled delivery date will be specified on the enrollment form for the program year and is subject to change by the Company. Please notethat the scheduled delivery date may be different from (earlier or later than) the date that cash bonuses are paid in such year. The scheduleddelivery date will also be communicated to participating employees who do not make an election.•The Value Date will be the 5th trading day prior to the scheduled delivery date and will be specified on the enrollment form for the program year(subject to change). The Value Date will also be communicated to participating employees who do not make an election.•The discounted stock price to be used for the conversion described above on the Value Date will be the average of the closing prices of Verint’scommon stock over the five trading days preceding the Value Date, minus the Program Year Discount.•Subject to the requirements of local law and any other written agreement that may exist between the participant and Verint:2 (1) the participantmust be employed by Verint Systems Inc. or a subsidiary thereof on the Value Date to be eligible to receive the shares scheduled to be delivered onthe delivery date and (2) executive officers must be employed by Verint Systems Inc. or a subsidiary thereof on the vesting date to be eligible toreceive the Incentive Shares. Notwithstanding the foregoing, if a participant is terminated without cause between the date the participant receiveshis or her cash bonus for the program year (generally in April or May) and the Value Date (generally in June or July), the Company will pay theparticipant the unpaid portion of his or her bonus in cash at the original cash amount.3Enrollment and Elections: Eligible employees (other than eligible employees on discretionary bonus plans who do not make an election) wishing toparticipate in the Stock Bonus Program must complete and return the enrollment form for the program year (which will be provided to eligible employees) tothe Equity Administration team by the deadline specified in the enrollment form, pursuant to the instructions on the enrollment form. Eligible employees(other than eligible employees on discretionary bonus plans who do not make an election) who do not return the enrollment form by the specified deadlinewill not be enrolled for that program year. Enrollment in the program will be done on a year by year basis and each year will require the completion of aseparate enrollment form. Employees may not enroll in the program while subject to a trading blackout. Please note that once enrolled in the program for aparticular year, participants may not cancel their enrollment or change their Election Percentage for that year (unless the Company elects to re-open theenrollment window to permit changes to the Election Percentages).The Company may, at its option, choose to provide for multiple enrollment windows during the course of the year based on the number of shares available,however, employees who submit their enrollment forms during the first enrollment window of the year will generally be given priority with respect tothe Share Cap in the event the Company chooses to offer subsequent enrollment windows.________________________________1 This provision is not applicable to UK and Hong Kong employees. Please see the Country Specific Addenda below.2 The preceding clause is not applicable to UK and Hong Kong employees. Please see the Country Specific Addenda below.3 This provision is not applicable to UK and Hong Kong employees. Please see the Country Specific Addenda below.In some countries, participants other than executive officers will be required as part of the enrollment form to make an irrevocable election about whetherthey prefer, in the event they are subject to a trading blackout on the Value Date, to receive the shares as scheduled or to revert to their original cash payment.If the enrollment form does not provide for such an election, or for executive officers, subject to the other terms and conditions of the program, the participantwill receive the shares as scheduled irrespective of any trading blackout.Eligible employees on discretionary bonus plans who do not make an election will not receive an enrollment form. Other than for any such employees in theUK or Hong Kong (who will, subject to the other terms and conditions of the program, continue to receive shares as scheduled), such employees willautomatically revert to their original cash payment in the event they are subject to a trading blackout on the Value Date.Delivery and Taxes: Shares will be delivered to participants’ E*TRADE accounts on or about the scheduled delivery date (or following the applicablevesting date, in the case of Incentive Shares for executive officers), subject to satisfaction of applicable withholding taxes, if any. An account will beestablished at E*TRADE for participants who do not already have an account.For employees subject to withholding taxes upon delivery of stock, the Company will automatically issue a net number of shares to participants following (i)the sale of the required number of shares on the participants’ behalf for employees who are not in blackout at such time or (ii) the withholding of the requirednumber of shares from employees who are in blackout at such time. There is no other option for paying withholding taxes under this program in connectionwith the delivery of shares. Withholding taxes, if any, will be calculated based on the closing price of the Company’s common stock on the Value Date.All shares will be issued under the Company’s Amended and Restated 2015 Long-Term Stock Incentive Plan (the “2015 Plan”), or a successor plan ifapplicable, and will be subject to the terms and conditions thereof, including the administrative provisions thereunder, as applicable. A copy of the 2015Plan and related S-8 prospectus is available in the library on E*trade.com or upon request from the Equity Administration team. Consistent with theCompany’s Insider Trading Policy, participants who are subject to a trading blackout at the time the shares are delivered will not be able to sell such sharesuntil the blackout has been lifted.Other Terms and Conditions: Enrollment in the Stock Bonus Program is not a guaranty of eligibility for the program in a subsequent year or a guaranty offuture employment. A participant’s right to receive a payment in shares under this program is subject to the terms and conditions of the participant’s bonusplan and/or employment agreement, if any, and the requirement that the participant be employed by Verint Systems Inc. or a subsidiary thereof on the ValueDate and/or vesting date (as applicable). Subject to the requirements of local law and any other written agreement that may exist between the participantand Verint,4 participants who terminate their employment prior to the Value Date (or vesting date, if applicable) for any reason will forfeit any shares orcash payment otherwise payable hereunder on the corresponding delivery date or vesting date (if applicable). Notwithstanding the foregoing, as notedabove, if a participant is terminated without cause between the date the participant receives his or her cash bonus for the program year (generally in Aprilor May) and the Value Date (generally in June or July), the Company will pay the participant the unpaid portion of his or her bonus in cash at the originalcash amount.5 The Company and employee hereby acknowledge that each has requested that the present document be drafted in the English language. Les partiesreconnaissent avoir requis que le présent document soit rédigé en anglais.________________________________4 The preceding clause is not applicable to UK and Hong Kong employees. Please see the Country Specific Addenda below.5 This provision is not applicable to UK and Hong Kong employees. Please see the Country Specific Addenda below.Country-Specific Addenda – applicable to UK and Hong Kong employees onlyIn order to enroll in the Stock Bonus Program, employees in the UK and Hong Kong will be required to waive their right to receive the portion of theirbonus that they wish to receive in stock. This waiver is included in the UK and Hong Kong enrollment form.It will be solely at the Board or Company’s discretion whether or not to (1) accept an employee’s application to waive the applicable portion of his or herbonus and pay it in stock and (2) pay any portion of the waived amount in cash if there is an insufficient share pool available due to the Board’s decisionnot to fund the program or due to the Share Cap.WA R N I N GThe contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to theoffer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.Verint Systems Inc.Stock Bonus ProgramEnrollment FormProgram Year: FYE January 31, 2019Value Date: June 14, 2019Scheduled Delivery Date: June 21, 2019Vesting Date (for executive officers only): One year anniversary of the Value DateEnrollment Deadline: April 13, 2018Program Year Discount: 15%Subject to the terms and conditions of the Verint Systems Inc. Stock Bonus Program, in connection with the payment of my earned annual bonus for theprogram year indicated above, I choose to participate in the Stock Bonus Program and to receive the following portion of my annual bonus payout (otherwisepayable in cash) in shares of Verint common stock:o 25% of my bonus payouto 50% of my bonus payouto 75% of my bonus payoutFor employees other than executive officers:In the event I am subject to a Verint trading blackout on the Value Date, I elect:o To receive my shares as scheduled. I understand that I will be required to hold these shares until such trading blackout is lifted.o To revert to my original cash bonus.I understand that the availability of the program in any given year is subject to the Board’s decision to fund the program and a cap on the maximum numberof shares that may be delivered to participants in the program for such year. As a result, the Company reserves the right to reduce or eliminate the number ofshares delivered to me based on the Board’s funding decision and/or in order to remain under such Share Cap.Any amounts due to me that are not paid in shares due to the Board’s decision not to fund the program or due to the Share Cap will instead be paid in cash(at the original cash amount).Enrollment in the Stock Bonus Program is not a guaranty of eligibility for the program in a subsequent year or a guaranty of future employment. I understandthat my right to receive a payment in shares under this program is subject to the terms and conditions of my bonus plan and/or employment agreement, if any,and the requirement that I be employed by Verint Systems Inc. or a subsidiary thereof on the Value Date (or vesting date, if applicable). Subject to therequirements of local law and any other written agreement that may exist between me and Verint, if my employment is terminated prior to the Value Date (orvesting date, if applicable) for any reason, I will forfeit any shares or cash payment otherwise payable to me hereunder on the corresponding delivery dateor vesting date (if applicable). Notwithstanding the foregoing, if I am terminated without cause between the date I receive my cash bonus for the programyear and the Value Date, I understand I will receive the unpaid portion of my bonus in cash at the original cash amount. Defined terms are contained in theStock Bonus Program document.The parties hereby acknowledge that they have requested that the present document be drafted in the English language. Les parties reconnaissent avoir requisque le présent document soit rédigé en anglais.Signature:____________________Name: ______________________Date: _______________________If you wish to participate in the Stock Bonus Plan, you must return this completed and signed form by scanning and emailing to equity_assistance@verint.com by the enrollment deadline specified above.Verint Systems Inc.Stock Bonus ProgramUK and Hong Kong Employee - Enrollment FormProgram Year: FYE January 31, 2019Value Date: June 14, 2019Scheduled Delivery Date: June 21, 2019Vesting Date (for executive officers only): One year anniversary of the Value DateEnrollment Deadline: April 13, 2018Program Year Discount: 15%Subject to the terms and conditions of the Verint Systems Inc. Stock Bonus Program, in connection with the payout of my earned annual bonus for theprogram year indicated above, I choose to participate in the Stock Bonus Program. I therefore waive my right to receive the following portion of my earnedannual bonus payout (otherwise payable in cash) and request to instead receive it in shares of Verint common stock:o 25% of my bonus payouto 50% of my bonus payouto 75% of my bonus payoutI understand that the availability of the program in any given year is subject to the Board’s decision to fund the program and a cap on the maximum numberof shares that may be delivered to participants in the program for such year. As a result, the Company reserves the right to reduce or eliminate the number ofshares delivered to me based on the Board’s funding decision and/or in order to remain under such Share Cap.I understand that it will be solely at the Board or Company’s discretion whether or not to accept my application to waive the portion of my bonus indicatedabove and pay it in stock and whether to pay any portion of the waived amount in cash if there is an insufficient share pool available due to the Board orCompany’s decision not to fund the program or due to the Share Cap. I further understand that if my application is accepted and I am subject to a tradingblackout at the time the shares are delivered, I will not be able to sell such shares until the blackout has been lifted.Enrollment in the Stock Bonus Program is not a guaranty of eligibility for the program in a subsequent year or a guaranty of future employment. I understandthat my right to receive a payment in shares under this program is subject to the terms and conditions of my bonus plan and/or employment agreement, if any,and the requirement that I be employed by Verint Systems Inc. or a subsidiary thereof on the Value Date (or vesting date, if applicable). If my employment isterminated prior to the Value Date (or vesting date, if applicable) for any reason, I will forfeit any shares or cash payment otherwise payable to mehereunder on the corresponding delivery date or vesting date (if applicable). Defined terms are contained in the Stock Bonus Program document.Signature:____________________Name: ______________________Date: _______________________If you wish to participate in the Stock Bonus Plan, you must return this completed and signed form by scanning and emailing to equity_assistance@verint.com by the enrollment deadline specified above.EXHIBIT 10.10___________ __, 20__[Name of Recipient][Address]Notice of Grant of Restricted Stock UnitsDear [Name]:Congratulations! You have been granted a restricted stock unit award (the “Award”) pursuant to the terms and conditions of theVerint Systems Inc. Amended and Restated 2015 Long-Term Stock Incentive Plan, as modified by any sub-plan, addendum, orsupplement applicable to you under Section 16 of the Agreement (as defined below) (the “Plan”) and the attached Verint Systems Inc.(the “Company”) Restricted Stock Unit Award Agreement (the “Agreement”). The details of your Award are specified below and in theattached Agreement. Capitalized terms used in this Notice of Grant and not otherwise defined shall have the meanings given in the Planor the Agreement.Granted To: [Name]ID#: [ID Number]Grant Date: [__________]Units Granted: [Number] Price Per Unit: U.S.$0.00Vesting Schedule: The restricted stock units granted hereby shall vest on each of the following dates:(a) [1/3] on [______________];(b) [1/3] on [______________]; and(c) [1/3] on [______________].Verint Systems Inc. By my signature below or my electronic acceptance hereof (if provided to me electronically), I hereby acknowledge my receiptof this Award granted on the date shown above, which has been issued to me under the terms and conditions of the Plan and theAgreement. I agree that the Award is subject to all of the terms and conditions of this Notice of Grant, the Plan, and the Agreement.If I am a resident of Canada, I also acknowledge having requested that this Notice and all documents referred to herein bedrafted in the English language. Je reconnais également avoir exigé que ce document ainsi que tout document auquel ce document faitréférence, soient rédigés en langue anglaise.Signature: _______________________________ Date: ______________VERINT SYSTEMS INC.RESTRICTED STOCK UNIT AWARD AGREEMENTThis Restricted Stock Unit Award Agreement (this “Agreement”) and the Verint Systems Inc. Amended and Restated 2015 Long-TermStock Incentive Plan, as modified by any sub-plan, addendum, or supplement applicable to you under Section 16 of this Agreement(the “Plan”) govern the terms and conditions of the Restricted Stock Unit Award (the “Award”) specified in the Notice of Grant ofRestricted Stock Units (the “Notice of Grant”) delivered herewith entitling the person to whom the Notice of Grant is addressed(“Grantee”) to receive from Verint Systems Inc. (the “Company”) the number of restricted stock units indicated in the Notice of Grant.1RESTRICTED STOCK UNITS; VESTING1.1 Grant of Restricted Stock Units.(a)The Award of the restricted stock units (as may be further defined under the terms of the Plan, “Restricted Stock Units”) is madesubject to the terms and conditions of the Plan, this Agreement and the Notice of Grant.(b)If and when the Restricted Stock Units vest in accordance with the terms of the Plan, this Agreement and the Notice of Grantwithout forfeiture, and upon the satisfaction of all other applicable conditions as to the Restricted Stock Units, one Share shall beissuable to Grantee for each Restricted Stock Unit that vests on such date, which Shares, except as otherwise provided herein orin the Notice of Grant, will be free of any Company-imposed transfer restrictions. Notwithstanding any other provision of thisAgreement, the Company reserves the right to settle the Award in cash or cancel the award for cash, based on the Fair MarketValue of the Shares on the applicable vesting dates, subject to required withholding and in accordance with the customarypayroll practices of the entity employing Grantee.1.2 Vesting.(a)Subject to the terms and conditions of this Agreement, the applicable percentage or fraction (per the Notice of Grant) ofRestricted Stock Units awarded hereunder shall be deemed vested and no longer subject to forfeiture under this Agreement onthe applicable vesting date in accordance with the schedule set forth in the Notice of Grant. Any fractional Restricted StockUnits resulting from the vesting of the Award shall be discarded and shall not be converted into a fractional Share.(b)Vesting shall cease upon the date Grantee’s Continuous Service terminates for any reason, unless otherwise determined by theBoard or the Committee in its sole discretion or otherwise provided in a separate written agreement between the parties.1.3 Forfeiture.(a)Except as otherwise provided herein, Grantee’s right to receive any of the Restricted Stock Units is contingent upon his or herremaining in the Continuous Service of the Company or a Subsidiary or Affiliate through the respective vesting dates specifiedin the Notice of Grant and hereunder. If Grantee’s Continuous Service terminates for any reason, all Restricted Stock Unitswhich are then unvested shall, unless otherwise determined by the Board or the Committee in its sole discretion or subject to aseparate written agreement between the parties, be cancelled and the Company shall thereupon have no further obligationthereunder. For the avoidance of doubt, subject to a separate written agreement between the parties, Grantee acknowledges andagrees that he or she has no expectation that any Restricted Stock Units will vest on the termination of his or her ContinuousService for any reason and that he or she will not be entitled to make a claim for any loss occasioned by such forfeiture as partof any claim for breach of his or her employment or service contract or otherwise.1.4 Delivery.(a)Subject to Section 1.6 and any other applicable conditions hereunder, as soon as administratively practicable following thevesting of Restricted Stock Units in accordance with the terms of this Agreement and the Notice of Grant (but in no event laterthan the date the short-term deferral period under Section 409A of the Code expires with respect to such vested Shares), theCompany shall issue the applicable Shares and, at its option, (i) deliver or cause to be delivered to Grantee a certificate orcertificates for the applicable Shares or (ii) transfer or arrange to have transferred the Shares to a brokerage account of Granteedesignated by the Company.(b)Notwithstanding the foregoing, the issuance of Shares upon the vesting of a Restricted Stock Unit shall be delayed in the eventthe Company reasonably anticipates that the issuance of Shares would constitute a violation of U.S. federal securities laws, otherapplicable law, or Nasdaq rules. If the issuance of the Shares is delayed by the provisions of this paragraph, such issuance shalloccur at the earliest date at which the Company reasonably anticipates issuing the Shares will not cause such a violation. Forpurposes of this paragraph, the issuance of Shares that would cause inclusion in gross income or the application of any penaltyprovision or other provision of the Code or other tax legislation applicable to Grantee is not considered a violation of applicablelaw.1.5 Restrictions.(a)Except as provided herein, Grantee shall not have any rights as a stockholder with respect to any Shares to be distributed underthis Agreement until he, she, or it has become the holder of such Shares as provided in this Agreement. Until delivery of suchShares (or other settlement of the Award hereunder), Grantee will have only the rights of a general unsecured creditor of theCompany.(b)The Award is subject to the transferability restrictions under the Plan.1.6 Tax; Withholding.(a)The Company shall determine the amount of any withholding or other tax required by law to be withheld or paid by theCompany or its Subsidiary with respect to any income recognized by Grantee with respect to the Restricted Stock Units or theissuance of Shares pursuant to the terms of the Restricted Stock Units.(b)Neither the Company nor any Subsidiary, Affiliate or agent makes any representation or undertaking regarding the treatment ofany tax or withholding in connection with the grant, vesting or settlement of the Award or the subsequent sale of Shares subjectto the Award. The Company and its Subsidiaries and Affiliates do not commit and are under no obligation to structure theAward to reduce or eliminate Grantee’s tax liability, and none of the Company, any of its Subsidiaries or Affiliates, or any oftheir employees or representatives shall have any liability to Grantee with respect thereto.(c)Notwithstanding the withholding provision in the Plan:(i)If in the tax jurisdiction in which Grantee resides, a tax withholding obligation arises upon vesting of the Award(regardless of when the Shares underlying the Award are delivered to Grantee), or for non-employee directors of theCompany in any jurisdiction, on each date that all or a portion of the Award actually vests, if (1) the Company does nothave in place an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) andthere is not a Securities Act exemption available under which Grantee may sell Shares or (2) Grantee is subject to aCompany-imposed trading blackout, then unless Grantee has made other arrangements satisfactory to the Company, theCompany will (x) with respect to employees of the Company, withhold from the Shares to be delivered to Grantee suchnumber of Shares as are sufficient in value (as determined by the Company in its sole discretion) to cover the minimumamount of the tax withholding obligation and (y) with respect to non-employee directors of the Company, settle 40% oftheportion of the Award then vesting in cash by paying Grantee cash (in accordance with the Company’s normal payrollpractices) equal to the Fair Market Value of one Share for each Restricted Stock Unit being settled in such manner.(ii)If in the tax jurisdiction in which Grantee resides, a tax withholding obligation arises upon delivery of the Sharesunderlying the Restricted Stock Units (regardless of when vesting occurs), then following each date that all or a portionof the Award actually vests, the Company will defer the delivery of the Shares otherwise deliverable to Grantee until theearliest of (1) the date Grantee’s employment with the Company (or a Subsidiary or Affiliate) is terminated (by eitherparty), (2) the date that the short-term deferral period under Section 409A of the Code expires with respect to suchvested Shares, or (3) the date on which the Company has in place an effective registration statement under the SecuritiesAct or there is a Securities Act exemption available under which Grantee may sell Shares and on which Grantee is notsubject to a Company-imposed trading blackout (the earliest of such dates, the “Delivery Date”). If on the Delivery Date(x) the Company does not have in place an effective registration statement under the Securities Act and there is not aSecurities Act exemption available under which Grantee may sell Shares or (y) Grantee is subject to a Company-imposed trading blackout, then unless Grantee has made other arrangements satisfactory to the Company, the Companywill withhold from the Shares to be delivered to Grantee such number of Shares as are sufficient in value (as determinedby the Company in its sole discretion) to cover the minimum amount of the tax withholding obligation.(d)Grantee is ultimately liable and responsible for all taxes owed by Grantee in connection with the Award, regardless of anyaction the Company or any of its Subsidiaries, Affiliates or agents takes with respect to any tax withholding obligations thatarise in connection with the Award. Accordingly, Grantee agrees to pay to the Company or its relevant Subsidiary, Affiliate oragent as soon as practicable, including through additional payroll withholding (if permitted under applicable law), any amountof required tax withholding that is not satisfied by any such action of the Company or its Subsidiary, Affiliate or agent.(e)The Committee shall be authorized, in its sole discretion, to establish such rules and procedures relating to the use of Shares ofcommon stock to satisfy tax withholding obligations as it deems necessary or appropriate to facilitate and promote theconformity of Grantee’s transactions under this Agreement with Rule 16b-3 under the Securities Exchange Act of 1934, asamended, if such rule is applicable to transactions by Grantee.1.7 Detrimental Activity. In the event the Company determines or discovers during or after the course of Grantee’s employment orservice that Grantee committed an act during the course of employment or service that constitutes or would have constituted Cause fortermination, the Committee shall have the right, to the maximum extent permissible under applicable law, to cancel all or any portion ofthe Award (whether or not vested).1.8 Erroneously Awarded Compensation. The Award, if and to the extent subject to the Dodd-Frank Wall Street Reform andConsumer Protection Act of 2010 or any regulations promulgated thereunder (collectively, the “Dodd-Frank Act”) may be subject to aclaw back policy or other incentive compensation policy established from time to time by the Company to comply with such Act.2CERTAIN DEFINITIONSDefined terms not defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan. For the avoidance ofdoubt, in each instance that the term “Company” is used in the Plan, “Company” shall mean Verint Systems Inc.3REPRESENTATIONS OF GRANTEEGrantee hereby represents to the Company that Grantee has read and fully understands the provisions of this Agreement, and Granteeacknowledges that Grantee is relying solely on his or her own advisors with respect to the tax consequencesof the Award. Grantee acknowledges that this Agreement has not been reviewed or approved by any regulatory authority in his or hercountry of residence or otherwise.4NOTICESAll notices or communications under this Agreement shall be in writing, addressed as follows:To the Company:Verint Systems Inc.175 Broadhollow RoadMelville, NY 11747-3201U.S.A.+(631) 962-9600 (phone)+(631) 962-9623 (fax)Attn: Chief Legal OfficerTo Grantee:as set forth in the Company’s payrollrecordsAny such notice or communication shall be (a) delivered by hand (with written confirmation of receipt) or sent by a nationallyrecognized overnight delivery service (receipt requested) or (b) sent certified or registered mail, return receipt requested, postageprepaid, addressed as above (or to such other address as such party may designate in writing from time to time), and the actual date ofreceipt shall determine the time at which notice was given. Grantee will promptly notify the Company in writing upon any change inGrantee’s mailing address or e-mail address.5BINDING AGREEMENTThis Agreement shall be binding upon and inure to the benefit of the heirs and representatives of Grantee and the assigns andsuccessors of the Company.6ENTIRE AGREEMENT; AMENDMENTThe Plan, this Agreement and the Notice of Grant represent the entire agreement of the parties with respect to the subject matter hereof.Subject to the terms of the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend,discontinue, cancel or terminate, the Award; provided that any such waiver, amendment, alteration, suspension, discontinuance,cancellation or termination that would impair the rights of Grantee or any holder or beneficiary of the Award previously granted shallnot be effective as to Grantee without the written consent of Grantee, holder or beneficiary, but further provided that the consent ofGrantee or any holder or beneficiary shall not be required to an amendment that is deemed necessary by the Company to ensurecompliance with (a) the Dodd-Frank Act, including, without limitation, as a result of the implementation of any recoupment policy theCompany adopts to comply with the requirements set forth in the Dodd-Frank Act and (b) Section 409A of the Code as amplified byany Internal Revenue Service or U.S. Treasury Department regulations or guidance, or any other applicable equivalent tax law, rule, orregulation, as the Company deems appropriate or advisable.7GOVERNING LAWThe rules and regulations relating to this Agreement shall be determined in accordance with the laws of the State of New York, appliedwithout giving effect to its conflict of laws principles. Each party to this Agreement hereby consents and submits himself, herself oritself to the jurisdiction of the courts of the state of New York for the purposes of any legal action or proceeding arising out of thisAgreement. Nothing in this Agreement shall affect the right of the Company to commence proceedings against Grantee in any othercompetent jurisdiction, or concurrently in more than onejurisdiction, or to serve process, pleadings and other papers upon Grantee in any manner authorized by the laws of any suchjurisdiction. Grantee irrevocably waives:(a) any objection which he, she, or it may have now or in the future to the laying of the venue of any action, suit orproceeding in any court referred to in this Section; and(b) any claim that any such action, suit or proceeding has been brought in an inconvenient forum.8SEVERABILITYIf any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to anyperson or this Agreement, or would disqualify this Agreement under any law deemed applicable by the Committee, such provision shallbe construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in thedetermination of the Committee, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction,person or this Agreement and the remainder of this Agreement shall remain in full force and effect.9ONE-TIME GRANT; NO RIGHT TO CONTINUED SERVICE OR PARTICIPATION; EFFECT ON OTHER PLANSThe Award evidenced by this Agreement is a voluntary, discretionary bonus being made on a one-time basis and it does not constitute acommitment to make any future awards, even if awards have been made repeatedly in the past. Further, the Award is made outside thescope of Grantee’s employment or service contract, if any, unless otherwise expressly provided therein. Neither this Agreement nor theNotice of Grant shall be construed as giving Grantee the right to be retained in the employ of, or in any consulting or other servicerelationship to, or as a director on the Board or board of directors, as applicable, of, the Company or any Subsidiary or Affiliate of theCompany. Further, the Company or a Subsidiary or Affiliate of the Company may at any time dismiss Grantee from employment ordiscontinue any consulting or other service relationship, free from any liability or any claim under the Plan or this Agreement, unlessotherwise expressly provided in the Plan, this Agreement or any applicable employment or service contract or agreement. In the eventthat Grantee is not an employee of the Company, the grant of the Award will not be interpreted to form an employment contract orrelationship with the Company or any Affiliate or Subsidiary of the Company. Payment received by Grantee pursuant to this Agreementand the Notice of Grant shall not be considered part of normal or expected compensation or salary for any purpose, including, but notlimited to, calculation of any overtime, severance, resignation, termination, redundancy, end of service payments, bonuses, long-serviceawards, pension or retirement benefits or similar payments and shall not be included in the determination of benefits under any pension,group insurance or other benefit plan of the Company or any Subsidiary or Affiliate in which Grantee may be enrolled, except asprovided under the terms of such plans, or as determined by the Board.10NATURE OF THE GRANTIn accepting the Award, Grantee acknowledges that:(a)the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified,amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;(b)Grantee’s participation in the Plan is voluntary;(c)the future value of the underlying Shares is unknown and cannot be predicted with certainty;(d)if Grantee receives Shares upon vesting of the Award, the value of such Shares may increase or decrease invalue; and(e)in consideration of the grant of the Award, no claim or entitlement to compensation or damages arises fromdiminution in value of the Award received upon vesting of the Award or, except as otherwise provided herein or under a separateagreement between the parties, from the termination of the Award resulting from termination of Grantee’s Service to the Company or aSubsidiary or Affiliate (for any reason whatsoever and whether or not in breach of local labor laws) and, subject to the foregoing,Grantee irrevocably releases the Company and its Subsidiaries and Affiliates from any such claim that may arise; if, notwithstanding theforegoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Grantee shallbe deemed irrevocably to have waived his, her or its entitlement to pursue such claim.11NO STRICT CONSTRUCTIONNo rule of strict construction shall be implied against the Company, the Committee, or any other person in the interpretation of any ofthe terms of this Agreement, the Notice of Grant or any rule or procedure established by the Committee.12USE OF THE WORD “GRANTEE”Wherever the word “Grantee” is used in any provision of this Agreement under circumstances where the provision should logically beconstrued to apply to the executors, the administrators, or the person or persons to whom the Restricted Stock Units may be transferredby will or the laws of descent and distribution, the word “Grantee” shall be deemed to include such person or persons.13FURTHER ASSURANCESGrantee agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additionaldocuments, instruments and agreements which may be reasonably required by the Company or the Committee, as the case may be, toimplement the provisions and purposes of this Agreement.14CONSENT TO TRANSFER PERSONAL DATAThe Company and its Subsidiaries hold certain personal information about Grantee, that may include Grantee’s name, home addressand telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, anyShares of stock held in the Company, or details of any entitlement to Shares of stock awarded, canceled, purchased, vested, orunvested, for the purpose of implementing, managing, and administering the Award, the Plan, or this Agreement (collectively “Data”).Grantee hereby agrees that the Company and/or its Subsidiaries may transfer Data amongst themselves as necessary for the purpose ofimplementation, administration, and management of Grantee’s participation in the Award, the Plan, or this Agreement, and theCompany and/or any of its Subsidiaries may each further transfer Data to any third parties assisting the Company in theimplementation, administration, and management of the Award, the Plan, or this Agreement. These recipients may be locatedthroughout the world, including, without limitation, outside Grantee’s country of residence (or outside of the European Economic Area,for Grantees located within the European Economic Area). Such countries may not provide for a similar level of data protection asprovided for by local law (such as, for example, European privacy directive 95/46/EC and local implementations thereof). Granteehereby authorizes those recipients - even if they are located in a country outside of Grantee’s country of residence (and/or outside ofthe European Economic Area, for Grantees located within the European Economic Area) - to receive, possess, use, retain, and transferthe Data, in electronic or other form, for the purpose of implementing, administering, and managing Grantee’s participation in theAward, the Plan, or this Agreement, including but not limited to any transfer of such Data as may be required for the administration ofthe Award, the Plan, or this Agreement and/or the subsequent holding of Shares of stock on Grantee’s behalf by a broker or other thirdparty with whom Grantee or the Company may elect to deposit any Shares of stock acquired pursuant to the Award, the Plan, or thisAgreement. Grantee is not obliged to consent to such collection, use, processing and transfer of personal data and may, at any time,review Data, require any necessary amendments to it, or withdraw the consent contained in this Section by contacting the Company inwriting. However, withdrawing or withholding consent mayaffect Grantee’s ability to participate in the Award, the Plan, or this Agreement. More information on the Data and/or theconsequences of withholding or withdrawing consent can be obtained from the Company’s legal department.15GOVERNING PLAN DOCUMENTThis Agreement is subject to all the provisions of the Plan, the provisions of which are hereby made a part of this Agreement, and isfurther subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adoptedpursuant to the Plan. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of thePlan control.16CERTAIN COUNTRY-SPECIFIC PROVISIONSFor residents of the UK only:Your Award is subject to the UK Sub-Plan under the Plan.Grantee agrees, as a condition to its acceptance of the Award, to satisfy any requirement of the Company or any Subsidiary that, priorto vesting of all or any part of the Award, Grantee enter into a joint election under section 431(1) of the UK Income Tax (Earnings andPensions) Act 2003, the effect of which is that the Shares issued on vesting will be treated as if they were not restricted securities.Tax withholding obligations under this Agreement shall include, without limitation:(i) United Kingdom (UK) income tax; and(ii) UK primary class 1 (employee's) national insurance contributions.For residents of Canada only:Your Award is subject to the Canadian Sub-Plan under the Plan.I acknowledge having requested that this Agreement and all documents referred to herein be drafted in the English language. Jereconnais également avoir exigé que ce document ainsi que tout document auquel ce document fait référence, soient rédigés en langueanglaise.Tax withholding obligations under this Agreement shall include federal and provincial income tax, Canadian Pension Plancontributions, and Employment Insurance premiums (including the provincial equivalents) as applicable.For residents of Hong Kong only:a) The Data Protection Principles specified in the Personal Data (Privacy) Ordinance (Cap. 486 of the Laws of Hong Kong) will apply toany Data upon its transfer to any place outside of Hong Kong.b) Hong Kong Securities Law Notice. The Restricted Stock Units and any Shares issued pursuant to the Awards do not constitute apublic offering of securities under Hong Kong law and are available to any eligible person under the Plan. The Agreement, the Planand other incidental communication materials (together, the “Award Agreement”) have not been prepared in accordance with and arenot intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. The Restricted Stock Units and any related documentation are intended only for the personal use of each eligible person under the Planand may not be distributed to any other person. The contents of the Award Agreement, including the Plan, have not been reviewed byany regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about anyof the contents of the Award Agreement or the Plan, you should obtain independent professional advice.For residents of Russia only:You acknowledge that the grant of Restricted Stock Units, the Plan and all other materials you may receive regarding participation inthe Plan do not constitute an advertising or offering of securities in Russia. The issuance of securities pursuant to the Plan has not andwill not be registered in Russia and therefore, the securities described in any Plan-related documents may not be used for offering orpublic circulation in Russia. You further acknowledge that in no event will Shares that may be issued to you with respect to the Restricted Stock Units be deliveredto you in Russia; all Shares issued to you with respect to the Restricted Stock Units will be maintained on your behalf in the UnitedStates.For residents of Argentina only:Neither the award under the plan nor the underlying shares are publicly offered or listed on any stock exchange in Argentina. The offeris private and not subject to the supervision of any Argentine governmental authority.For residents of Israel only:By my signature on or electronic acceptance of this Agreement, I acknowledge that the Award is granted under and governed by (i) thisAgreement, (ii) the Plan, a copy of which has been provided to me or made available for my review, (iii) the Israeli Supplement (“theSupplement”), a copy of which has been provided to me or made available for my review; (iv) Section 102(b)(2) of the Income TaxOrdinance (New Version) – 1961 and the Rules promulgated in connection therewith, and (v) the Trust Agreement, a copy of whichhas been provided to me or made available for my review. Furthermore, by my signature on or electronic acceptance of this Agreement,I agree that the Awards will be issued to the Trustee to hold on my behalf, pursuant to the terms of the Section 102, the Section 102Rules and the Trust Agreement.In addition, by my signature on or electronic acceptance of this Agreement, I confirm that I am familiar with the terms and provisions ofSection 102, particularly the Capital Gains Track described in subsection (b)(2) thereof, and I agree that I will not require the Trustee torelease the Awards or Company shares to me, or to sell the Awards or Company shares to a third party, during the Holding Period,unless permitted to do so by applicable law.All capitalized terms in this undertaking shall have the meaning granted to them under the Supplement.For residents of India only:Your Award is subject to the India Addendum to the Plan.For residents of Australia only:Securities Law Information. Australian law may impose certain holding period requirements on the Shares following vesting. Inaddition, if Grantee offers Shares for sale directly (as opposed to indirectly via the public markets) to a person or entity resident inAustralia, the offer may be subject to certain disclosure requirements under Australian law. Please consult with your own advisorregarding the applicability of these requirements to your holdings or sales of the Shares.END OF AGREEMENTEXHIBIT 10.14___________ __, 20__[Name of Recipient][Address]Notice of Grant of Performance-Based Restricted Stock UnitsDear [Name]:Congratulations! You have been granted a performance-based restricted stock unit award (the “Award”) pursuant to the termsand conditions of the Verint Systems Inc. Amended and Restated 2015 Long-Term Stock Incentive Plan, as modified by any sub-plan,addendum, or supplement applicable to you under Section 16 of the Agreement (as defined below) (the “Plan”) and the attached VerintSystems Inc. (the “Company”) Performance-Based Restricted Stock Unit Award Agreement (the “Agreement”). The details of yourAward are specified below and in the attached Agreement. Capitalized terms used in this Notice of Grant and not otherwise definedshall have the meanings given in the Plan or the Agreement.Granted To: [Name]ID#: [ID Number]Grant Date: [____________], 20__Target Numberof Units Granted: [Number] (with the opportunity to earn up to [Number]1 additional Restricted Stock Units).2 TheRestricted Stock Units eligible to be earned under this Award will be divided one-third into“Revenue Units”, one-third into “EBITDA Units”, and one-third into “TSR Units”, which willvest independently based on the Performance Matrix attached as Exhibit A. Price Per Unit: U.S.$0.00Performance Period: As specified in the Performance Matrix attached as Exhibit A.________________________1 Not to exceed 100% of the target number of Restricted Stock Units (or such lower percentage as specified by the grant resolutions).2 Note that the maximum number of Restricted Stock Units granted is subject to the approval of the Compensation Committee.1Vesting Schedule: The Restricted Stock Units granted hereby shall vest on the dates or at the times set forth in theAgreement, following the achievement of specified performance goals, but in any event, noearlier than [_______], 20__ for the Revenue Units and for the EBITDA Units, and no earlierthan [______], 20__ for the TSR Units.3 Verint Systems Inc. By my signature below or my electronic acceptance hereof (if provided to me electronically), I hereby acknowledge my receiptof this Award granted on the date shown above, which has been issued to me under the terms and conditions of the Plan and theAgreement. I agree that the Award is subject to all of the terms and conditions of this Notice of Grant, the Plan, and the Agreement.If I am a resident of Canada, I also acknowledge having requested that this Notice and all documents referred to herein bedrafted in the English language. Je reconnais également avoir exigé que ce document ainsi que tout document auquel ce document faitréférence, soient rédigés en langue anglaise.Signature: _______________________________ Date: ______________________________________3 Dates to be specified in the applicable grant resolutions, with the first date to be after the filing of the Company's 10-K covering the final year of the performance period applicableto the Revenue and EBITDA Units (and the release of the related blackout period) and with the second date to be after the filing of the Company's 10-K covering the final year of theperformance period applicable to the TSR Units (and the release of the related blackout period).2VERINT SYSTEMS INC.PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENTThis Performance-Based Restricted Stock Unit Award Agreement (this “Agreement”) and the Verint Systems Inc. Amended andRestated 2015 Long-Term Stock Incentive Plan, as modified by any sub-plan, addendum, or supplement applicable to you underSection 16 of this Agreement (the “Plan”) govern the terms and conditions of the Performance-Based Restricted Stock Unit Award (the“Award”) specified in the Notice of Grant of Performance-Based Restricted Stock Units (the “Notice of Grant”) delivered herewithentitling the person to whom the Notice of Grant is addressed (“Grantee”) to receive from Verint Systems Inc. (the “Company”) thetarget number of performance-based Restricted Stock Units indicated in the Notice of Grant and the opportunity to earn additionalRestricted Stock Units (if provided for in the Notice of Grant), as described herein, subject to the terms and conditions of thisAgreement.1RESTRICTED STOCK UNITS; VESTING1.1 Grant of Performance-Based Restricted Stock Units.(a)Subject to the terms of this Agreement, the Company hereby grants to Grantee the target number of performance-basedrestricted stock units (as may be further defined under the terms of the Plan, “Restricted Stock Units”) indicated in the Notice ofGrant, and if provided in the Notice of Grant, the opportunity to earn additional Restricted Stock Units4 (if applicable, the“Overachievement Units”).(b)Subject to the terms of this Agreement, Grantee’s right to receive all or any portion of the Restricted Stock Units will becontingent upon the Company’s achievement of one or more performance goals specified in the performance matrix attached asExhibit A to this Agreement (the “Performance Matrix”) measured over the performance period(s) specified in the PerformanceMatrix.(c)If and when the Restricted Stock Units vest in accordance with the terms of the Plan, this Agreement, and the Notice of Grantwithout forfeiture, and upon the satisfaction of all other applicable conditions as to the Restricted Stock Units, one Share shall beissuable to Grantee for each Restricted Stock Unit that vests on such date, which Shares, except as otherwise provided herein orin the Notice of Grant, will be free of any Company-imposed transfer restrictions. Notwithstanding any other provision of thisAgreement, the Company reserves the right to settle the Award in cash or cancel the award for cash, based on the Fair MarketValue of the Shares on the applicable vesting dates, subject to required withholding and in accordance with the customarypayroll practices of the entity employing Grantee.________________________4 Note that the maximum number of Restricted Stock Units granted is subject to the approval of the Compensation Committee.31.2 Vesting.(a)Generally. Vesting of the Restricted Stock Units shall be in accordance with the Performance Matrix. If the calculationsspecified on the Performance Matrix would result in the vesting of a fraction of a Restricted Stock Unit, the result of thecalculation will be rounded down to the nearest whole Restricted Stock Unit.(b)Determination of Earned Award. Not later than 60 days following the Board’s receipt of the Company’s audited financialstatements covering the final year of the performance period applicable to a given category of Restricted Stock Units, theCommittee will determine (i) whether and to what extent the performance goal(s) have been satisfied, (ii) the number ofRestricted Stock Units vesting hereunder pursuant to the terms hereof, and (iii) whether all other conditions to receipt of theShares have been met. The Committee’s determination of the foregoing shall be final and binding on Grantee absent a showingof manifest error. Notwithstanding any other provision of this Agreement, no Restricted Stock Units for a given category shallvest (x) until the Committee has made the foregoing determinations and (y) prior to the date or dates discussed in the nextparagraph.(c)Time Vesting Limitation. For the avoidance of doubt, notwithstanding the determination of the Board or the Committee pursuantto the previous paragraph, no Restricted Stock Units will vest prior to the date or dates specified in the Notice of Grant.(d)Other Vesting Provisions. Any Restricted Stock Units that do not become vested based on the foregoing provisions will beautomatically forfeited by Grantee without consideration. Vesting shall cease upon the date Grantee’s Continuous Serviceterminates for any reason, unless otherwise determined by the Board or the Committee in its sole discretion or otherwiseprovided in a separate written agreement between the parties.1.3 Forfeiture.(a)Except as otherwise provided herein, Grantee’s right to receive any of the Restricted Stock Units is contingent upon his or herremaining in the Continuous Service of the Company or a Subsidiary or Affiliate through the respective vesting dates specifiedin the Notice of Grant and hereunder. If Grantee’s Continuous Service terminates for any reason, all Restricted Stock Unitswhich are then unvested shall, unless otherwise determined by the Board or the Committee in its sole discretion or subject to aseparate written agreement between the parties, be cancelled and the Company shall thereupon have no further obligationthereunder. For the avoidance of doubt, subject to a separate written agreement between the parties, Grantee acknowledges andagrees that he or she has no expectation that any Restricted Stock Units will vest on the termination of his or her ContinuousService for any reason and that he or she will not be entitled to make a claim for any loss occasioned by such forfeiture as partof any claim for breach of his or her employment or service contract or otherwise.41.4 Delivery.(a)Subject to Section 1.6 and any other applicable conditions hereunder, as soon as administratively practicable following thevesting of Restricted Stock Units in accordance with the terms of this Agreement and the Notice of Grant (but in no event laterthan the date the short-term deferral period under Section 409A of the Code expires with respect to such vested Shares), theCompany shall issue the applicable Shares and, at its option, (i) deliver or cause to be delivered to Grantee a certificate orcertificates for the applicable Shares or (ii) transfer or arrange to have transferred the Shares to a brokerage account of Granteedesignated by the Company.(b)Notwithstanding the foregoing, the issuance of Shares upon the vesting of a Restricted Stock Unit shall be delayed in the eventthe Company reasonably anticipates that the issuance of Shares would constitute a violation of U.S. federal securities laws, otherapplicable law, or Nasdaq rules. If the issuance of the Shares is delayed by the provisions of this paragraph, such issuance shalloccur at the earliest date at which the Company reasonably anticipates issuing the Shares will not cause such a violation. Forpurposes of this paragraph, the issuance of Shares that would cause inclusion in gross income or the application of any penaltyprovision or other provision of the Code or other tax legislation applicable to Grantee is not considered a violation of applicablelaw.1.5 Restrictions.(a)Except as provided herein, Grantee shall not have any rights as a stockholder with respect to any Shares to be distributed underthis Agreement until he, she or it has become the holder of such Shares as provided in this Agreement. Until delivery of suchShares (or other settlement of the Award hereunder), Grantee will have only the rights of a general unsecured creditor of theCompany.(b)The Award is subject to the transferability restrictions under the Plan.1.6 Tax; Withholding.(a)The Company shall determine the amount of any withholding or other tax required by law to be withheld or paid by theCompany or its Subsidiary with respect to any income recognized by Grantee with respect to the Restricted Stock Units or theissuance of Shares pursuant to the terms of the Restricted Stock Units.(b)Neither the Company nor any Subsidiary, Affiliate or agent makes any representation or undertaking regarding the treatment ofany tax or withholding in connection with the grant, vesting or settlement of the Award or the subsequent sale of Shares subjectto the Award. The Company and its Subsidiaries and Affiliates do not commit and are under no obligation to structure theAward to reduce or eliminate Grantee’s tax liability, and none of the Company, any of its Subsidiaries or Affiliates, or any oftheir employees or representatives shall have any liability to Grantee with respect thereto.5(c)Notwithstanding the withholding provision in the Plan:(i)If in the tax jurisdiction in which Grantee resides, a tax withholding obligation arises upon vesting of the Award(regardless of when the Shares underlying the Award are delivered to Grantee), or for non-employee directors of theCompany in any jurisdiction, on each date that all or a portion of the Award actually vests, if (1) the Company does nothave in place an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) andthere is not a Securities Act exemption available under which Grantee may sell Shares or (2) Grantee is subject to aCompany-imposed trading blackout, then unless Grantee has made other arrangements satisfactory to the Company, theCompany will (x) with respect to employees of the Company, withhold from the Shares to be delivered to Grantee suchnumber of Shares as are sufficient in value (as determined by the Company in its sole discretion) to cover the minimumamount of the tax withholding obligation and (y) with respect to non-employee directors of the Company, settle 40% ofthe portion of the Award then vesting in cash by paying Grantee cash (in accordance with the Company’s normalpayroll practices) equal to the Fair Market Value of one Share for each Restricted Stock Unit being settled in suchmanner.(ii)If in the tax jurisdiction in which Grantee resides, a tax withholding obligation arises upon delivery of the Sharesunderlying the Restricted Stock Units (regardless of when vesting occurs), then following each date that all or a portionof the Award actually vests, the Company will defer the delivery of the Shares otherwise deliverable to Grantee until theearliest of: (1) the date Grantee’s employment with the Company (or a Subsidiary or Affiliate) is terminated (by eitherparty), (2) the date that the short-term deferral period under Section 409A of the Code expires with respect to suchvested Shares, or (3) the date on which the Company has in place an effective registration statement under the SecuritiesAct or there is a Securities Act exemption available under which Grantee may sell Shares and on which Grantee is notsubject to a Company-imposed trading blackout (the earliest of such dates, the “Delivery Date”). If on the Delivery Date(x) the Company does not have in place an effective registration statement under the Securities Act and there is not aSecurities Act exemption available under which Grantee may sell Shares or (y) Grantee is subject to a Company-imposed trading blackout, then unless Grantee has made other arrangements satisfactory to the Company, the Companywill withhold from the Shares to be delivered to Grantee such number of Shares as are sufficient in value (as determinedby the Company in its sole discretion) to cover the minimum amount of the tax withholding obligation.(d)Grantee is ultimately liable and responsible for all taxes owed by Grantee in connection with the Award, regardless of anyaction the Company or any of its Subsidiaries, Affiliates or agents takes with respect to any tax withholding obligations thatarise in connection with the Award. Accordingly, Grantee agrees to pay to the Company or its relevant Subsidiary, Affiliate oragent as soon as practicable, including through additional payroll withholding (if permitted under applicable law), any amountof required tax6withholding that is not satisfied by any such action of the Company or its Subsidiary, Affiliate or agent.(e)The Committee shall be authorized, in its sole discretion, to establish such rules and procedures relating to the use of Shares ofcommon stock to satisfy tax withholding obligations as it deems necessary or appropriate to facilitate and promote theconformity of Grantee’s transactions under this Agreement with Rule 16b-3 under the Securities Exchange Act of 1934, asamended, if such rule is applicable to transactions by Grantee.1.7 Detrimental Activity. In the event the Company determines or discovers during or after the course of Grantee’s employment orservice that Grantee committed an act during the course of employment or service that constitutes or would have constituted Cause fortermination, the Committee shall have the right, to the maximum extent permissible under applicable law, to cancel all or any portion ofthe Award (whether or not vested).1.8 Erroneously Awarded Compensation. The Award, if and to the extent subject to the Dodd-Frank Wall Street Reform andConsumer Protection Act of 2010 or any regulations promulgated thereunder (collectively, the “Dodd-Frank Act”), may be subject to aclaw back policy or other incentive compensation policy established from time to time by the Company to comply with such Act.2CERTAIN DEFINITIONSDefined terms not defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan. For the avoidance ofdoubt, in each instance that the term “Company” is used in the Plan, “Company” shall mean Verint Systems Inc.The performance goals specified in the performance matrix shall be measured by the Committee (for calculation purposes) on a non-GAAP basis, consistent with the Company’s Board-approved budget and 2-year plan, with the Committee having the discretion, but notthe obligation, to adjust any such performance goals and/or the associated vesting levels to reflect the impact of: •extraordinary transactions or unbudgeted Company merger/acquisitions or similar activity,•changes in applicable tax or other laws, rules, or regulations,•changes in applicable revenue recognition or other accounting rules, requirements, or standards, or•stock repurchases or dividends paid to stockholders,in order to prevent unintended enlargement or dilution of benefits to the Grantee as a result of such activity.3REPRESENTATIONS OF GRANTEEGrantee hereby represents to the Company that Grantee has read and fully understands the provisions of this Agreement, and Granteeacknowledges that Grantee is relying solely on his or her own advisors with respect to the tax consequences of the Award. Granteeacknowledges that this Agreement has7not been reviewed or approved by any regulatory authority in his or her country of residence or otherwise.4NOTICESAll notices or communications under this Agreement shall be in writing, addressed as follows:To the Company:Verint Systems Inc.175 Broadhollow RoadMelville, NY 11747-3201U.S.A.+(631) 962-9600 (phone)+(631) 962-9623 (fax)Attn: Chief Legal OfficerTo Grantee:as set forth in the Company’s payrollrecordsAny such notice or communication shall be (a) delivered by hand (with written confirmation of receipt) or sent by a nationallyrecognized overnight delivery service (receipt requested) or (b) sent certified or registered mail, return receipt requested, postageprepaid, addressed as above (or to such other address as such party may designate in writing from time to time), and the actual date ofreceipt shall determine the time at which notice was given. Grantee will promptly notify the Company in writing upon any change inGrantee’s mailing address or e-mail address.5BINDING AGREEMENTThis Agreement shall be binding upon and inure to the benefit of the heirs and representatives of Grantee and the assigns andsuccessors of the Company.6ENTIRE AGREEMENT; AMENDMENTThe Plan, this Agreement and the Notice of Grant represent the entire agreement of the parties with respect to the subject matter hereof.Subject to the terms of the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend,discontinue, cancel or terminate, the Award; provided that any such waiver, amendment, alteration, suspension, discontinuance,cancellation or termination that would impair the rights of Grantee or any holder or beneficiary of the Award previously granted shallnot be effective as to Grantee without the written consent of Grantee, holder or beneficiary, but further provided that the consent ofGrantee or any holder or beneficiary shall not be required to an amendment that is deemed necessary by the Company to ensurecompliance with (a) the Dodd-Frank Act, including, without limitation, as a result of the implementation of any recoupment policy theCompany adopts to comply with the requirements set forth in the Dodd-Frank Act and (b) Section 409A of the Code as amplified byany Internal Revenue Service or U.S. Treasury Department regulations or guidance, or any other applicable equivalent tax law, rule, orregulation, as the Company deems appropriate or advisable.87GOVERNING LAWThe rules and regulations relating to this Agreement shall be determined in accordance with the laws of the State of New York, appliedwithout giving effect to its conflict of laws principles. Each party to this Agreement hereby consents and submits himself, herself oritself to the jurisdiction of the courts of the state of New York for the purposes of any legal action or proceeding arising out of thisAgreement. Nothing in this Agreement shall affect the right of the Company to commence proceedings against Grantee in any othercompetent jurisdiction, or concurrently in more than one jurisdiction, or to serve process, pleadings and other papers upon Grantee inany manner authorized by the laws of any such jurisdiction. Grantee irrevocably waives:(a) any objection which he, she or it may have now or in the future to the laying of the venue of any action, suit or proceedingin any court referred to in this Section; and(b) any claim that any such action, suit or proceeding has been brought in an inconvenient forum.8SEVERABILITYIf any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to anyperson or this Agreement, or would disqualify this Agreement under any law deemed applicable by the Committee, such provision shallbe construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in thedetermination of the Committee, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction,person or this Agreement and the remainder of this Agreement shall remain in full force and effect.9ONE-TIME GRANT; NO RIGHT TO CONTINUED SERVICE OR PARTICIPATION; EFFECT ON OTHER PLANSThe Award evidenced by this Agreement is a voluntary, discretionary bonus being made on a one-time basis and it does not constitute acommitment to make any future awards, even if awards have been made repeatedly in the past. Further, the Award is made outside thescope of Grantee’s employment or service contract, if any, unless otherwise expressly provided therein. Neither this Agreement nor theNotice of Grant shall be construed as giving Grantee the right to be retained in the employ of, or in any consulting or other servicerelationship to, or as a director on the Board or board of directors, as applicable, of, the Company or any Subsidiary or Affiliate of theCompany. Further, the Company or a Subsidiary or Affiliate of the Company may at any time dismiss Grantee from employment ordiscontinue any consulting or other service relationship, free from any liability or any claim under the Plan or this Agreement, unlessotherwise expressly provided in the Plan, this Agreement or any applicable employment or service contract or agreement. In the eventthat Grantee is not an employee of the Company, the grant of the Award will not be interpreted to form an employment contract orrelationship with the Company or any Affiliate or Subsidiary of the Company. Payment received by Grantee pursuant to this Agreementand the Notice of Grant shall not be considered part of normal or expected compensation or salary for any purpose, including, but notlimited to, calculation of any overtime, severance, resignation, termination, redundancy, end of service payments, bonuses, long-serviceawards, pension or retirement benefits or similar payments and shall not be included in the determination of benefits under any pension,group insurance or9other benefit plan of the Company or any Subsidiary or Affiliate in which Grantee may be enrolled, except as provided under the termsof such plans, or as determined by the Board.10NATURE OF THE GRANTIn accepting the Award, Grantee acknowledges that:(a)the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified,amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;(b)Grantee’s participation in the Plan is voluntary;(c)the future value of the underlying Shares is unknown and cannot be predicted with certainty;(d)if Grantee receives Shares upon vesting of the Award, the value of such Shares may increase or decrease invalue; and(e)in consideration of the grant of the Award, no claim or entitlement to compensation or damages arises fromdiminution in value of the Award received upon vesting of the Award or, except as otherwise provided herein or under a separateagreement between the parties, from the termination of the Award resulting from termination of Grantee’s Service to the Company or aSubsidiary or Affiliate (for any reason whatsoever and whether or not in breach of local labor laws) and, subject to the foregoing,Grantee irrevocably releases the Company and its Subsidiaries and Affiliates from any such claim that may arise; if, notwithstanding theforegoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, Grantee shallbe deemed irrevocably to have waived his, her or its entitlement to pursue such claim.11NO STRICT CONSTRUCTIONNo rule of strict construction shall be implied against the Company, the Committee, or any other person in the interpretation of any ofthe terms of this Agreement, the Notice of Grant or any rule or procedure established by the Committee.12USE OF THE WORD “GRANTEE”Wherever the word “Grantee” is used in any provision of this Agreement under circumstances where the provision should logically beconstrued to apply to the executors, the administrators, or the person or persons to whom the Restricted Stock Units may be transferredby will or the laws of descent and distribution, the word “Grantee” shall be deemed to include such person or persons.13FURTHER ASSURANCESGrantee agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additionaldocuments, instruments and agreements which may be reasonably required by the Company or the Committee, as the case may be, toimplement the provisions and purposes of this Agreement.1014CONSENT TO TRANSFER PERSONAL DATAThe Company and its Subsidiaries hold certain personal information about Grantee, that may include Grantee’s name, home addressand telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, anyShares of stock held in the Company, or details of any entitlement to Shares of stock awarded, canceled, purchased, vested, orunvested, for the purpose of implementing, managing, and administering the Award, the Plan or this Agreement (collectively “Data”).Grantee hereby agrees that the Company and/or its Subsidiaries may transfer Data amongst themselves as necessary for the purpose ofimplementation, administration, and management of Grantee’s participation in the Award, the Plan or this Agreement, and theCompany and/or any of its Subsidiaries may each further transfer Data to any third parties assisting the Company in theimplementation, administration, and management of the Award, the Plan or this Agreement. These recipients may be locatedthroughout the world, including, without limitation, outside Grantee’s country of residence (or outside of the European Economic Area,for Grantees located within the European Economic Area). Such countries may not provide for a similar level of data protection asprovided for by local law (such as, for example, European privacy directive 95/46/EC and local implementations thereof). Granteehereby authorizes those recipients – even if they are located in a country outside of Grantee’s country of residence (and/or outside ofthe European Economic Area, for Grantees located within the European Economic Area) – to receive, possess, use, retain, and transferthe Data, in electronic or other form, for the purpose of implementing, administering, and managing Grantee’s participation in theAward, the Plan or this Agreement, including but not limited to any transfer of such Data as may be required for the administration ofthe Award, the Plan or this Agreement and/or the subsequent holding of Shares of stock on Grantee’s behalf by a broker or other thirdparty with whom Grantee or the Company may elect to deposit any Shares of stock acquired pursuant to the Award, the Plan or thisAgreement. Grantee is not obliged to consent to such collection, use, processing and transfer of personal data and may, at any time,review Data, require any necessary amendments to it, or withdraw the consent contained in this Section by contacting the Company inwriting. However, withdrawing or withholding consent may affect Grantee’s ability to participate in the Award, the Plan or thisAgreement. More information on the Data and/or the consequences of withholding or withdrawing consent can be obtained from theCompany’s legal department.15GOVERNING PLAN DOCUMENTThis Agreement is subject to all the provisions of the Plan, the provisions of which are hereby made a part of this Agreement, and isfurther subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adoptedpursuant to the Plan. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of thePlan control.16CERTAIN COUNTRY-SPECIFIC PROVISIONSFor residents of the UK only:Your Award is subject to the UK Sub-Plan under the Plan.11Grantee agrees, as a condition to its acceptance of the Award, to satisfy any requirement of the Company or any Subsidiary that, priorto vesting of all or any part of the Award, Grantee enter into a joint election under section 431(1) of the UK Income Tax (Earnings andPensions) Act 2003, the effect of which is that the Shares issued on vesting will be treated as if they were not restricted securities.Tax withholding obligations under this Agreement shall include, without limitation:(i) United Kingdom (UK) income tax; and(ii) UK primary class 1 (employee's) national insurance contributions.For residents of Canada only:Your Award is subject to the Canadian Sub-Plan under the Plan.I acknowledge having requested that this Agreement and all documents referred to herein be drafted in the English language. Jereconnais également avoir exigé que ce document ainsi que tout document auquel ce document fait référence, soient rédigés en langueanglaise.Tax withholding obligations under this Agreement shall include federal and provincial income tax, Canadian Pension Plancontributions, and Employment Insurance premiums (including the provincial equivalents) as applicable.For residents of Hong Kong only:a) The Data Protection Principles specified in the Personal Data (Privacy) Ordinance (Cap. 486 of the Laws of Hong Kong) will apply toany Data upon its transfer to any place outside of Hong Kong.b) Hong Kong Securities Law Notice. The Restricted Stock Units and any Shares issued pursuant to the Awards do not constitute apublic offering of securities under Hong Kong law and are available to any eligible person under the Plan. The Agreement, the Planand other incidental communication materials (together, the “Award Agreement”) have not been prepared in accordance with and arenot intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. The Restricted Stock Units and any related documentation are intended only for the personal use of each eligible person under the Planand may not be distributed to any other person. The contents of the Award Agreement, including the Plan, have not been reviewed byany regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about anyof the contents of the Award Agreement or the Plan, you should obtain independent professional advice.For residents of Russia only:You acknowledge that the grant of Restricted Stock Units, the Plan and all other materials you may receive regarding participation inthe Plan do not constitute an advertising or offering of securities in Russia. The issuance of securities pursuant to the Plan has not andwill not be registered in Russia and therefore, the securities described in any Plan-related documents may not12be used for offering or public circulation in Russia. You further acknowledge that in no event will Shares that may be issued to you with respect to the Restricted Stock Units be deliveredto you in Russia; all Shares issued to you with respect to the Restricted Stock Units will be maintained on your behalf in the UnitedStates.For residents of Argentina only:Neither the award under the plan nor the underlying shares are publicly offered or listed on any stock exchange in Argentina. The offeris private and not subject to the supervision of any Argentine governmental authority.For residents of Israel only:By my signature on or electronic acceptance of this Agreement, I acknowledge that the Award is granted under and governed by (i) thisAgreement, (ii) the Plan, a copy of which has been provided to me or made available for my review, (iii) the Israeli Supplement (“theSupplement”), a copy of which has been provided to me or made available for my review; (iv) Section 102(b)(2) of the Income TaxOrdinance (New Version) – 1961 and the Rules promulgated in connection therewith, and (v) the Trust Agreement, a copy of whichhas been provided to me or made available for my review. Furthermore, by my signature on or electronic acceptance of this Agreement,I agree that the Awards will be issued to the Trustee to hold on my behalf, pursuant to the terms of the Section 102, the Section 102Rules and the Trust Agreement.In addition, by my signature on or electronic acceptance of this Agreement, I confirm that I am familiar with the terms and provisions ofSection 102, particularly the Capital Gains Track described in subsection (b)(2) thereof, and I agree that I will not require the Trustee torelease the Awards or Company shares to me, or to sell the Awards or Company shares to a third party, during the Holding Period,unless permitted to do so by applicable law.All capitalized terms in this undertaking shall have the meaning granted to them under the Supplement.For residents of India only:Your Award is subject to the India Addendum to the Plan.For residents of Australia only:Securities Law Information. Australian law may impose certain holding period requirements on the Shares following vesting. Inaddition, if Grantee offers Shares for sale directly (as opposed to indirectly via the public markets) to a person or entity resident inAustralia, the offer may be subject to certain disclosure requirements under Australian law. Please consult with your own advisorregarding the applicability of these requirements to your holdings or sales of the Shares.END OF AGREEMENT13EXHIBIT APerformance MatrixPerformance Equity Award Granted [_______], 20__The Restricted Stock Units eligible to be earned under this Award are divided into three categories: one-third “Revenue Units”, one-third “EBITDA Units”, and one-third “TSR Units”, with each category of Restricted Stock Units vesting independently based on thetable below.No Restricted Stock Units of a given category will be earned if performance falls below the threshold for such category. Vesting levelsbetween points on the table below will be on a linear basis between such points. If the Notice of Grant makes Overachievement Unitsavailable, the maximum payout (for performance at or above the maximum level) will be at the maximum percentage specified in thetable below for such category. If the Notice of Grant does not make Overachievement Units available, the maximum payout (forperformance at or above the target level) will be at the target percentage specified in the table below for such category.The performance period for the Revenue Units and for the EBITDA Units will be from [__________] to [__________].5 The performance period for the TSR Units will be from [__________] to [__________].6 Revenue Achieved in Performance Period7Payout Percentage for Revenue UnitsThreshold ([__]% of Revenue Target)[__]%Target (100% of Revenue Target)[__]%Maximum ([__]% of Revenue Target) [__]%8EBITDA Achieved in Performance Period9Payout Percentage for EBITDA UnitsThreshold ([__]% of EBITDA Target)[__]%Target (100% of EBITDA Target)[__]%Maximum ([__]% of EBITDA Target) [__]%10 5 Two year performance period.6 Three year performance period.7 May include more than three data points.8 If the Notice of Grant does not make Overachievement Units available for over-performance, replace this line of the table with “Maximum: Not Applicable”.9 May include more than three data points.10 If the Notice of Grant does not make Overachievement Units available for over-performance, replace this line of the table with “Maximum: Not Applicable”.14Relative TSR Achieved in Performance Period11Payout Percentage for TSR Units< 25th percentile Relative TSR)[__]%Threshold (25th percentile Relative TSR)[__]%Target (50th percentile Relative TSR)[__]%Maximum (75th or > percentile Relative TSR) [__]%12“Relative TSR” means the Company’s total stockholder return, on a percentile basis, relative to the companies comprising the S&P1500 Information Technology Sector Index (the “Index”) with respect to the performance period for the TSR Units, weighted equallyand based on the applicable 90-day volume-weighted trailing average closing prices of such constituent companies as of the beginningand end of such performance period (adjusted for dividends); provided that members of the Index will only be taken into account forpurposes of the calculation of Relative TSR if they constitute part of the Index at both the beginning and the end of the performanceperiod.Notwithstanding the foregoing table, in the event the Company’s total stockholder return on an absolute basis is negative for theperformance period, then the Payout Percentage for TSR Units will be capped at 100%. 11 May include more than four data points.12 If the Notice of Grant does not make Overachievement Units available for over-performance, replace this line of the table with “Maximum: Not Applicable”.15EXHIBIT 10.22Summary of the Terms of Verint Systems Inc. Executive Officer Annual Bonus PlanVerint Systems Inc. (the “Company”) maintains an annual bonus program (the “AIP”) for its executive officers. Under the AIP, each executive officeris eligible to receive an annual cash bonus upon the satisfaction of pre-determined performance goals, however, the Company may reserve the right to paysome or all of the bonus in shares of our common stock. The target bonus under the AIP is established annually by the Compensation Committee of theCompany’s Board of Directors (the “Committee”) as part of the Committee’s regular compensation review process and is paid following certification by theCommittee of the achievement of the underlying performance goals. In establishing target bonuses, in addition to the factors considered as part of thecompensation review process generally, the Committee also considers the target bonus set forth in the executive officer’s employment agreement (ifapplicable), as well as special achievements, promotions, and other facts and circumstances specific to the individual officer.The performance goals under the AIP are based on revenue, a measure of profitability, and a measure of cash generation and are expressed on a non-GAAP basis. In the case of executive officers with direct responsibility for a specific operating unit, unit revenue and unit profitability goals may also beincorporated into the executive officer’s performance goals. The financial performance goals established by the Committee generally come in the form of arange, wherein the executive officer may achieve a percentage of his or her target bonus at the low end of the performance range (or threshold), 100% of histarget bonus towards the middle of the performance range (target performance), and up to 200% of his target bonus at the high end of the performance range.EXHIBIT 12.1Verint Systems Inc. and SubsidiariesRatios of Earnings to Fixed ChargesandRatios of Earnings to Combined Fixed Charges and Preference Security Dividends Year Ended January 31,(in thousands, except ratios) 2018 2017 2016 2015 2014Earnings: Income (loss) before provision (benefit) for income taxes $18,900 $(23,474) $23,180 $21,403 $63,315Add: Fixed charges 44,589 43,302 40,218 42,151 34,330Subtract: Noncontrolling interest in pre-tax income of subsidiaries (3,693) (3,616) (5,526) (6,293) (6,081) $59,796 $16,212 $57,872 $57,261 $91,564 Fixed Charges and Preference Security Dividends: Interest expense, including amortization of discounts $21,750 $21,018 $20,586 $27,529 $27,119Amortization of deferred debt-related costs 14,309 13,944 13,300 9,133 2,662Interest component of rent expense 8,530 8,340 6,332 5,489 4,549 Total Fixed Charges 44,589 43,302 40,218 42,151 34,330Dividends on convertible preferred stock (pre-tax) — — — — 211 Total Fixed Charges and Preference Security Dividends $44,589 $43,302 $40,218 $42,151 $34,541 Ratio of Earnings to Fixed Charges 1.3 * 1.4 1.4 2.7 Ratio of Earnings to Fixed Charges and Preference Security Dividends 1.3 * 1.4 1.4 2.7* Earnings were deficient in covering fixed charges by $27.1 million for the year ended January 31, 2017.Earnings consists of our consolidated net income before income taxes, plus fixed charges, reduced by the non-controlling interest in the pre-tax income of aconsolidated subsidiary that did not incur fixed charges. Fixed charges consist of interest expense (including only interest expense on third partyindebtedness and excluding interest expense accrued on uncertain tax positions), amortization of debt discounts and capitalized expenses related toindebtedness as well as a portion of rental expense deemed by us to be representative of the interest factor within rental payments under operating leases.Preference security dividends represent the estimated amount of pre-tax earnings necessary to pay dividends on our previously outstanding Series AConvertible Preferred Stock. Dividends on our Series A Convertible Preferred Stock were cumulative. Our Series A Convertible Preferred Stock was canceledon February 4, 2013, in connection with our merger with CTI. No dividends had been declared or paid on our Series A Convertible Preferred Stock.EXHIBIT 21.1Subsidiaries of Verint Systems Inc.(as of March 1, 2018)Name Jurisdiction of Incorporation orOrganizationAndrew Reise Services, LLC (1) DelawareBPA Corporate Facilitation Ltd. (1) United KingdomBPA International, Inc. (1) New YorkCiboodle (Land and Estates) Ltd. United KingdomCIS Comverse Information Systems Ltd. IsraelEG Solutions EBT Limited United KingdomEG Solutions Group Limited United KingdomEG Solutions International Limited United KingdomEG Solutions Limited United KingdomEG Solutions Operations Management Solutions (Pty) Ltd. South AfricaEG Solutions (SG) Pte Ltd. SingaporeEG USA Inc. DelawareFebrouin Investments Ltd. CyprusFocal Info Israel Ltd. IsraelGita Technologies Ltd. IsraelGlobal Management Technologies, LLC DelawareIontas Limited IrelandKANA Software Ireland Limited IrelandMultiVision Holdings Limited British Virgin IslandsNxtera Limited United KingdomPermadeal Limited CyprusPT Ciboodle Indonesia IndonesiaRontal Engineering Applications (2001) Ltd. IsraelSuntech S.A. BrazilSyborg GmbH GermanySyborg Grundbesitz GmbH GermanySyborg Informationsysteme b.h. OHG GermanyTriniventures BV NetherlandsUT Techeng Limited CyprusUTX Technologies Limited CyprusVerba Technologies Asia Pacific Pte Ltd. SingaporeVerba Technologies Kft HungaryVerba Technologies Limited United KingdomVerint Acquisition LLC DelawareVerint Americas Inc. DelawareVerint CES Ltd. IsraelVerint CES India Private Limited IndiaVerint Cyber Intelligence Solutions India Private Limited IndiaVerint Netherlands BV NetherlandsVerint Security Intelligence Inc. DelawareVerint Systems (Asia Pacific) Limited Hong KongVerint Systems (Australia) PTY Ltd. AustraliaVerint Systems Belgium N.V. BelgiumVerint Systems Bulgaria BulgariaName Jurisdiction of Incorporation orOrganizationVerint Systems B.V. The NetherlandsVerint Systems Canada Inc. CanadaVerint Systems GmbH GermanyVerint Systems (India) Private Ltd. IndiaVerint Systems Japan K.K. JapanVerint Systems Ltd. IsraelVerint Systems New Zealand Limited New ZealandVerint Systems (Philippines) Corporation PhilippinesVerint Systems Poland sp.z.o.o. PolandVerint Systems (PTY) Ltd. South AfricaVerint Systems SAS FranceVerint Systems (Shanghai) Company Limited People's Republic of ChinaVerint Systems (Singapore) Pte. Ltd. (2) SingaporeVerint Systems (Software and Services) Pte Ltd. SingaporeVerint Systems (Taiwan) Ltd. Taiwan (Republic of China)Verint Systems UK Ltd. United KingdomVerint Systems (Zhuhai) Limited People’s Republic of ChinaVerint Technology Cyprus Ltd. CyprusVerint Technology Inc. DelawareVerint Technology UK Limited United KingdomVerint Video Solutions SL SpainVerint Witness Systems LLC DelawareVerint Witness Systems S.A. de C.V. MexicoVerint Witness Systems Servicios S.A. de C.V. MexicoVerint Witness Systems Software, Hardware, E Servicos Do Brasil Ltda BrazilVerint WS Holdings Ltd. United KingdomVictory Acquisition I LLC DelawareWitness Systems Software (India) Private Limited IndiaXTAQ Limited United Kingdom___________________(1) We own a 51% equity interest in this entity.(2) We own a 50% equity interest in this entity and do not have the power to unilaterally direct or cause the direction of the management and policiesof this entity.EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of DirectorsVerint Systems Inc.Melville, New YorkWe consent to the incorporation by reference in Registration Statement Nos. 333-167618, 333-169005, 333-169768, 333-171006, 333-173421, 333-173454,333-174820, 333-182032, 333-182755, 333-189062, 333-198575, 333-205658, and 333-219502 on Form S-8 and Registration Statement No. 333-196612on Form S-3 of our reports dated March 28, 2018, relating to the consolidated financial statements of Verint Systems Inc., and the effectiveness of VerintSystems Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Verint Systems Inc. for the year ended January 31,2018./s/ DELOITTE & TOUCHE LLPNew York, New YorkMarch 28, 2018EXHIBIT 31.1 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002 I, Dan Bodner, certify that: 1. I have reviewed this annual report on Form 10-K of Verint Systems Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting. Dated:March 28, 2018By:/s/ Dan Bodner Dan Bodner President and Chief Executive Officer Principal Executive OfficerEXHIBIT 31.2 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002 I, Douglas E. Robinson, certify that: 1. I have reviewed this annual report on Form 10-K of Verint Systems Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting. Dated:March 28, 2018By:/s/ Douglas E. Robinson Douglas E. Robinson Chief Financial Officer Principal Financial OfficerEXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Verint Systems Inc. (the “Company”) on Form 10-K for the period ended January 31, 2018 (the “Report”), I, DanBodner, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002, that to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Dated:March 28, 2018/s/ Dan Bodner Dan Bodner President and Chief Executive Officer Principal Executive Officer This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extentrequired by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act,except to the extent that the Company specifically incorporates it by reference.EXHIBIT 32.2 CERTIFICATION REQUIRED BY 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Verint Systems Inc. (the “Company”) on Form 10-K for the period ended January 31, 2018 (the “Report”), I, DouglasE. Robinson, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Dated:March 28, 2018/s/ Douglas E. Robinson Douglas E. Robinson Chief Financial Officer Principal Financial Officer This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extentrequired by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act,except to the extent that the Company specifically incorporates it by reference.

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