NET (LOSS) INCOME PER COMMON SHARE ATTRIBUTABLE TO VERINT SYSTEMS INC.

6 Months Ended

Jul. 31, 2021

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 three and six months ended July 31, 2021 and 2020:


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands, except per share amounts)	2021		2020		2021		2020
Net income (loss) from continuing operations	$	5,316	$	(9,370)	$	6,410	$	(23,788)
Net income from discontinued operations, net of tax	—		19,957		—		30,400
Net income	5,316		10,587		6,410		6,612
Net income attributable to noncontrolling interests from continuing operations	316		327		611		567
Net income attributable to noncontrolling interests from discontinued operations	—		1,766		—		3,565
Net income attributable to Verint Systems Inc.	5,000		8,494		5,799		2,480
Dividends on preferred stock	(5,200)		(2,484)		(8,522)		(2,484)
Net (loss) income attributable to Verint Systems Inc. for basic net income per common share	(200)		6,010		(2,723)		(4)
Dilutive effect of dividends on preferred stock	—		—		—		—
Net (loss) income attributable to Verint Systems Inc. for diluted net income per common share	$	(200)	$	6,010	$	(2,723)	$	(4)

Net (loss) income attributable to Verint Systems Inc. common shares
Net (loss) income from continuing operations attributable to Verint Systems Inc. common shares	(200)		(12,181)		(2,723)		(26,839)
Net income from discontinued operations attributable to Verint Systems Inc. common shares	—		18,191		—		26,835

Weighted-average shares outstanding:
Basic	65,194		64,954		65,417		64,670
Dilutive effect of employee equity award plans	—		895		—		—
Dilutive effect of 2021 Notes	—		—		—		—
Dilutive effect of 2014 Notes	—		—		—		—
Dilutive effect of warrants	—		—		—		—
Dilutive effect of assumed conversion of preferred stock	—		—		—		—
Diluted	65,194		65,849		65,417		64,670

Basic (loss) net income per common share attributable to Verint Systems Inc.:
Continuing operations	$	—	$	(0.19)	$	(0.04)	$	(0.42)
Discontinued operations	—		0.28		—		0.42
Total basic net (loss) income per common share attributable to Verint Systems Inc.	$	—	$	0.09	$	(0.04)	$	—

Diluted net (loss) income per common share attributable to Verint Systems Inc.:
Continuing operations	$	—	$	(0.18)	$	(0.04)	$	(0.42)


	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands, except per share amounts)	2021		2020		2021		2020
Discontinued operations	—		0.27		—		0.42
Total diluted net (loss) income per common share attributable to Verint Systems Inc.	$	—	$	0.09	$	(0.04)	$	—

We excluded the following weighted-average potential common shares from our diluted per share calculations during the applicable periods because their inclusion would have been anti-dilutive:


	Three Months Ended July 31,		Six Months Ended July 31,
(in thousands)	2021	2020	2021	2020
Common shares excluded from calculation:
Stock options and restricted stock-based awards	2,209	392	2,034	1,329
2021 Notes	5,074	—	3,196	—
2014 Notes	9,541	6,137	9,541	6,171
Warrants	9,865	6,205	9,865	6,205
Series A Preferred Stock	5,498	3,495	5,498	1,747
Series B Preferred Stock	3,980	—	2,573	—

In 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 are identical since the effect of all potential common shares is anti-dilutive and therefore excluded.

Upon our adoption of ASU No. 2020-06 on February 1, 2021, use of the if-converted method is required for calculating any potential dilutive effect of convertible instruments. For the three months ended July 31, 2021, the average price of our common stock, did not exceed the $62.08 per share conversion price of our 2021 Notes (as defined in Note 7, “Long-Term Debt”), and other requirements for the 2021 Notes to be convertible were not met. The 2021 Notes will have a dilutive impact on net income per common share at any time when the average market price of our common stock for a quarterly reporting period exceeds the conversion price.

The Capped Calls (as defined in Note 7, “Long-Term Debt”) do not impact our diluted earnings per common share calculations as their effect would be anti-dilutive. The Capped Calls are intended generally to reduce the potential dilution to our common stock upon any conversion of the 2021 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2021 Notes, in the event that at the time of conversion our common stock price exceeds the $62.08 conversion price, with such reduction and/or offset subject to a cap of $100.00.

There is no impact on our calculation of the dilutive effect of our 2014 Notes (as defined in Note 7, “Long-Term Debt”) upon adoption of ASU No. 2020-06 as we were obligated to settle the principal amount of our 2014 Notes in cash and settled the conversion spread with shares of our common stock in connection with the maturity of the 2014 Notes. Following the completion of the Spin-Off on February 1, 2021, the strike prices of the conversion features of our 2014 Notes and Warrants (as defined in Note 7, “Long-Term Debt”) were reduced to $40.55 per share and $47.18 per share, respectively, which increased the equivalent number of underlying common shares to 9,541,000 and 9,865,000, respectively.

Our Note Hedges (as defined in Note 7, “Long-Term Debt”) did not impact our diluted earnings per common share calculations because their effect would be anti-dilutive. However, in connection with the maturity of the 2014 Notes, the common shares delivered to us under the Note Hedges neutralized the dilutive effect of the common shares that we issued under the 2014 Notes to settle the conversion premium. As a result, the settlement of the outstanding 2014 Notes did not increase our outstanding common stock.

Our Warrants (as defined in Note 7, “Long-Term Debt”) would have a dilutive effect on our diluted per common share calculations to the extent that we earned income for the applicable period and the average market value of our common stock exceeds the strike price of the Warrants. As of July 31, 2021, up to 9,865,000 common shares could be issued upon exercise of the Warrants.

Further details regarding the 2021 Notes, Capped Calls, 2014 Notes, Note Hedges, and the Warrants appear in Note 7, “Long-Term Debt”.

On December 4, 2019, we announced that the Apax Investor would invest up to $400.0 million in us, in the form of convertible preferred stock. On May 7, 2020, the purchase of $200.0 million of our Series A Preferred Stock closed. On April 6, 2021, in connection with the completion of the Spin-Off, the Apax Investor purchased $200.0 million of our Series B Preferred Stock. The weighted-average common shares underlying the assumed conversion of the Series A Preferred Stock and Series B Preferred Stock, on an as-converted basis, were excluded from the calculation of diluted net (loss) income per common share for the three and six months ended July 31, 2021 as their effect would have been anti-dilutive. Further details regarding the Preferred Stock investment appear in Note 9, “Convertible Preferred Stock”.