#1VERINT. Investor Presentation Actionable Intelligence® July 2019 Confidential and proprietary information of Verint Systems Inc. © 2019 Verint Systems Inc. All Rights Reserved Worldwide.#2Disclaimers Forward Looking Statements This presentation contains "forward-looking statements," including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint Systems Inc. These forward- looking statements are not guarantees of future performance and they are based on management's expectations that involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, any of which could cause our actual results to differ materially from those expressed in or implied by the forward-looking statements. The forward-looking statements contained in this presentation are made as of the date of this presentation and, except as required by law, Verint assumes no obligation to update or revise them, or to provide reasons why actual results may differ. For a more detailed discussion of how these and other risks, uncertainties, and assumptions could cause Verint's actual results to differ materially from those indicated in its forward-looking statements, see Verint's prior filings with the Securities and Exchange Commission. Non-GAAP Financial Measures This presentation includes financial measures which are not prepared in accordance with generally accepted accounting principles ("GAAP"), including certain constant currency measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please see the appendices to this presentation, Verint's earnings press releases, as well as the GAAP to non-GAAP reconciliation found under the Investor Relations tab on Verint's website www.verint.com. 2#3Actionable Intelligence Global Leader MEETING CRITICAL CUSTOMER NEEDS CLEAR GROWTH STRATEGY SIGNIFICANT OPPORTUNITY Actionable Intelligence Automation and Cloud Market Inflection Point $1,073 $1,150 $2.51 FY17 FY18 FY19 FY20F $2.81 Strong Momentum $1,375 $1,245 il $3.21 $3.65 FY17 FY18 FY19 FY20F 1 Non-GAAP $ in millions, except per share data. FY20F based on May 29, 2019 guidance Note: GAAP revenue for FY17 was $1,062 million, FY18 was $1,135 and FY19 was $1,230. GAAP Diluted EPS for FY17 was ($0.47), FY18 was ($0.10) and FY19 was $1.00 Accelerating Revenue Growth¹ Double Digit EPS Growth¹ 3#4Actionable Intelligence Platform Recent Momentum Automation and Cloud 1 Gartner research and Verint estimates MASSIVE DATA CAPTURE ANALYTICS AND ARTIFICIAL INTELLIGENCE ACTIONABLE INSIGHTS Accelerating Innovation 1,000 Patents and Applications 150 in Automation Filed in Last 24 Months STRONG DEMAND FOR ACTIONABLE INTELLIGENCE $10 BILLION TAM GROWING DOUBLE DIGITS¹ 4#5Growth Strategy ACTIONABLE INTELLIGENCE FOR A SMARTER ENTERPRISE Sir Elevating the Customer Experience and Driving Operational Efficiency ACTIONABLE INTELLIGENCE FOR A SAFER WORLD Accelerating Security Investigations to Prevent and Neutralize Crime, Terror and Cyber Threats ACTIONABLE INTELLIGENCE PLATFORM 01 5#6Si Actionable Intelligence for a Smarter Enterprise V NUP#7Enterprises Face Escalating Customer Engagement Challenges Need New Technology to do More Without Increasing Headcount CHALLENGE 1 People Demand Better Customer Experience CHALLENGE 2 Digital Transformation Driving Interaction Growth Response: Boards Demand CX Improvement Response: Organizations Hire More Staff 1 Sources: Pelorus Associates, US Bureau of Labor Statistics and Verint estimates WORKFORCE COST ALREADY >$1 Trillion¹ 7#8Customer Engagement: Elevating CX and Reducing Operating Cost Verint Brings Automation to Customer Engagement Processes Across the Enterprise Enterprise Functions Verint Software CONTACT CENTER BACK OFFICE HYBRID WORKFORCE ENGAGEMENT DIGITAL/MOBILE AUTOMATED SELF SERVICE MARKETING VOICE OF THE CUSTOMER INSIGHTS Automation Infused Throughout the Enterprise ACTIONABLE INTELLIGENCE PLATFORM FRAUD AND COMPLIANCE FRAUD AND COMPLIANCE AUTOMATION 8#9Customer Value Financial Services FUNCTION: Contact Center OBJECTIVE: Improve quality and consistency of customer experience VERINT SOLUTION Deployed Verint Hybrid Workforce Engagement solution to automatically capture and analyze interactions and recommend next best actions in real-time Ensured adherence to processes across millions of interactions to improve operational efficiencies Healthcare FUNCTION: Digital Operations OBJECTIVE: Elevate customer experience and build loyalty in competitive pharmaceutical market VERINT SOLUTION Deployed Verint Automated Self Service solution to automatically answer patient's medical questions intelligently Provided a better patient experience and elevated patient relationship without adding headcount Retail FUNCTION: Marketing OBJECTIVE: Leverage the voice- of-the-customer to increase revenue on their digital assets VERINT SOLUTION Deployed Verint Voice-of-the- Customer Insights solution to transform digital interactions into valuable insights to automatically identify lost revenue opportunities Improved digital customer journeys to increase purchases and drive revenue Telecom FUNCTION: Compliance OBJECTIVE: Ensure customer data protection and avoid penalties VERINT SOLUTION Deployed Verint Fraud and Compliance solution to automatically evaluate 10 million+ customer interactions per year to detect compliance issues Enabled analysis of 100% of interactions without additional headcount - prior manual method only covered 3% of interactions and created significant financial exposure 9#10Cloud Revenue Acceleration Next Three Years Cloud Growth 30% to 40% CAGR $135 $165 $250 (>40% growth) 7 FY18 FY19 Non-GAAP Cloud Revenue ($ in millions)¹ FY20F Competitive Differentiation ● FY19 ARR of $200m² (~40% growth) driving >40% growth in FY20F Maintenance revenue over $300m, opportunity to convert at 2x Multi-tenant SAAS gross margins of 80% Broadest customer engagement cloud portfolio Flexible hybrid cloud model with global reach Strong scalability from SMB to enterprise 1 GAAP cloud revenue during FY18 and FY19 was $122 million and $151 million, respectively 2 Represents cloud ARR calculated using non-GAAP cloud revenue as of Q4 FY19. Cloud ARR calculated using GAAP cloud revenue as of Q4 FY19 was $177 million 10#11Leading Organizations Partner with Verint Simplify. Modernize. Automate. MERCK HSBCX AVIVA Allianz Liberty Mutual. INSURANCE Cigna T Deutsche Telekom Nationwide Humana BMW Walmart AIG GROUP State Farm NISSAN Capital One NEW YORK LIFE Cardinal Health™ ups ❤CVS HealthⓇ COMCAST Verizon Uber MassMutual TESCO FINANCIAL GROUP Santander EXPRESS SCRIPTS P&G charles SCHWAB J.P. Morgan GEICO 11#12SMB Opportunity Driven by Cloud and Channel Partners Cloud Portfolio Purpose-Built for Small to Medium-Sized Businesses SMB GROWTH OPPORTUNITY 15% of Customer Engagement Revenue Cloud Facilitates SMB Growth Leading SMB Cloud Portfolio Strong Partners for SMB and Enterprise GROWING PARTNER ECOSYSTEM AVAYA CISCO. amazon Fíve?? salesforce zendesk servicenow ConvergeOne BT ttec 12#13Recap: Automation and Cloud Strategy Drive Growth Automation Cloud ● Automation is critical to elevating C/X while managing headcount costs Robotics process automation purpose-built for customer engagement Verint solutions infuse automation across the enterprise Elevated demand for cloud across all customer engagement buyers Maintenance conversion: expected to contribute a few points of growth per year in FY21 and FY22 Verint cloud is differentiated across applications, go-to-market and operations#14Actionable Intelligence for a Safer World V mnou 100 14#15Security Threats are More Pervasive and Complex Organizations Find it More Challenging to Detect, Investigate and Neutralize Threats on Pincel pla #11g STR275 TR/103 TR/B POLAND WAS/ROSETH YO 1 Based on Verint estimates S EXPONENTIAL DATA GROWTH MAKES DERIVING INSIGHTS MORE CHALLENGING SALT LAS **** 1444 CUP HAD RECTOR S BOGD www. een ********** INCREASING NEED FOR ADVANCED DATA MINING SOLUTION $4 Billion TAM -Sustainable Double Digit Growth Opportunity¹ 15#16Verint Automates and Shortens Investigations Advanced Data Mining Software Differentiated by Automation and Domain Expertise End Markets Verint Software GOVERNMENT CYBER INTELLIGENCE CYBER SECURITY ENTERPRISE SITUATIONAL INTELLIGENCE Automation and Domain Expertise Infused Throughout Our Portfolio ACTIONABLE INTELLIGENCE PLATFORM 16#17Customer Value Government Cyber Security Authority LOCATION: APAC OBJECTIVE: Centrally protect multiple government agencies from cyber attacks VERINT SOLUTION Deployed Verint's Cyber solution to help identify malware and automate SOC operations for better identification, prioritization and remediation of attacks Reduced time-to-detect (from 1 week to 4 hours) and saved 40% SOC staff Law Enforcement Organization LOCATION: Europe OBJECTIVE: Fight organized crime, drug trafficking and other criminal activities VERINT SOLUTION Deployed Verint's Web, Social and Fusion Intelligence solution to capture and analyze social media/web data and unearth critical insights to expedite complex investigations Reduced average case resolution time by 50% (from 1 week to 3.5 days) Leading Semiconductor Company LOCATION: U.S. with locations globally OBJECTIVE: Improve employees and assets protection without increasing costs VERINT SOLUTION Deployed Verint's Situational Intelligence solution to capture and analyze loT data across multiple locations around the world Solution designed to improve employee safety, protect assets, and speed response without increasing security personnel. 17#18Growing Customer Base Across Government and Enterprise Added 100 New Customers Last Year GOVERNMENT 400 Customers Global Presence 100+ Countries 80% of Cyber Intelligence Revenue Diversified Government Agencies Walmart U.S.Cellular ENTERPRISE 600 Customers intel BANK OF TAIWAN THE HOME DEPOT T-Mobile Sprint TIFFANY & CO. Santander CenturyLink® Morgan Stanley 20% of Cyber Intelligence Revenue Industry Leaders Partner with Verint 18#19Strong Revenue Growth and Margin Expansion Opportunity FOR F 12.8% DATA MINING SOFTWARE LEADERSHIP Software Model Transition wwww.comme 13.6% FY18 15.5% FY17 FY22F Fully Allocated Estimated Adjusted EBITDA Margin(1) >20% FY19 ● Double digit growth opportunity Broad portfolio powered by differentiated data mining software Growing customer base and improved visibility Software model transition started FY17 to drive margin expansion Achieved -300bps margin improvement through FY19 Targeting additional ~500bps margin improvement within 3 years (1) Please see the reconciliation for Fully Allocated Estimated Adjusted EBITDA Margin in the appendices. 19#20Recap: Automation and Software Model Drives Growth Automation V Software Model Data Mining software is critical to detect, investigate and neutralize security threats Automation helps address shortage of data scientists and analysts Verint infuses automation across portfolio Significant benefits to customers from software productization and frequent refreshes Software model makes our portfolio even more competitively differentiated Verint offers customers the flexibility to shift from integrator model to software model 20#21Financial Review 2#22FY2019 Financial Highlights Strong Performance Across Every Key Metric GAAP Revenue Gross Margin Operating Income Operating Margin Diluted EPS Operating Cash Flow ($ in millions, except per share data) $1,230 63.5% $114 9.3% $1.00 $215 Note: Please see appendices for GAAP to Non-GAAP reconciliations. GROWTH FROM PRIOR YEAR +8.3% +290bps +134.9% +500bps ΝΑ +22.1% Non-GAAP Revenue Gross Margin Operating Income Operating Margin Adjusted EBITDA Adjusted EBITDA Margin Diluted EPS ($ in millions, except per share data) $1,245 66.6% $267 21.4% $297 23.8% $3.21 GROWTH FROM PRIOR YEAR +8.2% +120bps +18.0% +180bps +15.6% +150bps +14.2% 22#23Q1 Financial Highlights Strong Start to FY20 GAAP Revenue Gross Margin Operating Income Operating Margin Diluted EPS Operating Cash Flow ($ in millions, except per share data) $315 63.8% $14 4.6% $0.02 $93 Note: Please see appendices for GAAP to Non-GAAP reconciliations. GROWTH FROM PRIOR YEAR +9.0% +320bps +85.9% +190bps ΝΑ +54.7% Non-GAAP Revenue Gross Margin Operating Income Operating Margin Adjusted EBITDA Adjusted EBITDA Margin Diluted EPS ($ in millions, except per share data) $324 67.4% $62 19.2% $70 21.6% $0.73 GROWTH FROM PRIOR YEAR +11.0% +350bps +35.0% +340bps 29.1% +300bps +38.0% 23#24Accelerating Revenue Growth with Margin Expansion FY20 Guidance and Three Year Targets: 10% Revenue CAGR and 14% EPS CAGR Non-GAAP Revenue ($ in millions) $1,073 $1,150 $1,245 FY17 FY18 FY19 GAAP Revenue $1,062 $1,135 $1,230 $1,375 FY20 Guidance $1,650 FY22 Three Year Target Note: FY19 actual, FY20 guidance and FY22 three year targets reflect the adoption of ASC 606. $2.51 FY17 Non-GAAP EPS $2.81 $3.21 GAAP EPS ($0.47) ($0.10) FY18 FY19 FY20 Guidance $3.65 $1.00 $4.70 FY22 Three Year Target 24#25Positive Dynamics in Both Segments Customer Engagement Cloud First Strategy Cyber Intelligence Software Model Strategy 25#26Si Customer Engagement Cloud First Strategy V NUP 26#27Cloud First Strategy Positive Impact to Financial Model - Recurring Revenue Growth with Margin Expansion $ in millions, Non-GAAP Recurring Revenue % Growth Nonrecurring Revenue % Growth Total Revenue % Growth Fully Allocated Estimated Gross Profit Gross Margin Fully Allocated Estimated Operating Income % of Revenue Fully Allocated Estimated Adjusted EBITDA % of Revenue FY2018 $440 7.0% $315 3.3% $755 5.4% $515 68.2% $183 24.2% $203 26.9% FY2019 $481 9.1% $330 5.1% $811 7.5% $560 69.0% $210 25.9% $229 28.3% FY2020 Guidance ~61% of Total -39% of Total -$900 ~11.0% ~70.0% Up-50bps ~28.5% FY2022 Three Year Targets ~70% of Total -30% of Total ~$1,080 -10.0% CAGR ~70.0% ~27.5% ~30.0% 27#28Cloud Definitions ● ● Recurring Revenue - cloud and maintenance revenue Cloud Revenue - SaaS and Optional Managed Services SaaS - software deployed in the cloud (predominately offered as bundled SaaS) Bundled SaaS - software sold together with standard managed services ● ● Unbundled SaaS - software sold separately from managed services Optional Managed Services - recurring services to address technical and business customer requirements Maintenance Revenue - recurring customer support revenue from on-premise deployments ● Cloud ARR - the value of cloud revenue contracts normalized to a one-year period 28#29Cloud First Strategy Drives Cloud Revenue Growth Growth Generated by New SaaS Deals and Maintenance Conversion ($ in millions, Non-GAAP) $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 GAAP Cloud Revenue $135 FY18 Cloud ARR $200 $122 $165 FY20 Guidance Minimal Maintenance Conversion FY19 Cloud Revenue $151 ~$250 ~$450 FY22 Three Year Target Note: $450 million of FY22 non-GAAP cloud revenue assumes the high end of our 30% to 40% CAGR target range Maintenance Conversion Opportunity Expect FY20 maintenance revenue >$300 Million Opportunity for 2x revenue uplift Expect conversion to contribute a few points to FY21 & FY22 growth 29#30Cloud First Strategy - Three Year Model Recap Revenue Mix Margins (4) (Non-GAAP unless otherwise noted, $ in millions) Total (@ 10% CAGR) Recurring Revenue (Cloud and Maintenance) (2)(3) Cloud (@ 40% CAGR) (1) % SaaS % Optional Managed Services (¹) Maintenance Nonrecurring Revenue (On-Premise and Services) % Cloud % Recurring Gross Margin Recurring Revenue Gross Margin SaaS Gross Margin Optional Managed Services Gross Margin Maintenance Gross Margin Nonrecurring Revenue Gross Margin Operating Margin Adjusted EBITDA Margin FY19 (1/31/19) $811 $481 $165 ~75% ~25% $316 $330 20% 59% 69.0% Mid to High 70%s Mid 70%s Mid 30%s Mid 80%s Mid 50%s 25.9% 28.3% 1 GAAP and Non-GAAP. 2 Cloud guidance 30% to 40% CAGR; 40% assumed for Cloud revenue target. 3 SaaS revenue includes bundled SaaS, software with standard managed services and unbundled SaaS where managed services are purchased separately. 4 Margins are estimated Note: Our FY22 targets are on a non-GAAP basis. FY22 Three Year Targets (1/31/22) ~$1,080 ~$750 ~$450 ~85% ~15% ~$300 Similar Level >40% ~70% ~70% Similar Level 80% for new deals Similar Level Similar Level Similar Level ~27.5% ~30% 30#31Cyber Intelligence Software Model Strategy V mnou 100 31#32Transition to Software Model Positive Impact to Financial Model - Revenue Growth with Margin Expansion $ in millions, Non-GAAP Revenue % Growth Fully Allocated Estimated Gross Profit Gross Margin Fully Allocated Estimated Operating Income % of Revenue Fully Allocated Estimated Adjusted EBITDA % of Revenue FY2018 $395 10.9% $238 60.1% $43 11.0% $54 13.6% FY2019 $434 9.7% $269 62.0% $57 13.1% $67 15.5% FY2020 Guidance -$475 ~10.0% Approaching Mid 60%s ~14.0% -16.5% FY2022 Three Year Targets ~$575 -10.0% CAGR Approaching 70% >17.5% >20.0% 32#33Software Model Strategy Productization Drives Customer Benefits and Better Margins Traditional Integrator Model Integrator model (bundled software, hardware, customizations and integration services) Verint CIS Gross Margin: currently low 60%s Customer Benefits: single vendor accountability ▪ Software model (unbundle and productize software) ▪ Verint CIS Gross Margin: approaching 70% in 3 years Customer Benefits: accelerate software refresh cycles ■ Software Model Drives On-going Margin Improvements ▪ Software productization drives margin expansion ▪ Over 700bps of improvement expected from FY17 to FY22 (1) Please see the reconciliation for Fully Allocated Estimated Adjusted EBITDA Margin in the appendices. New Software Model 12.8% FY17 13.6% 15.5% FY18 FY22 Three Year Target Fully Allocated Estimated Adjusted EBITDA Margin(1) >20% FY19 33#34Efficient Capital Structure Cash Net Debt (Term B and Convertible, net of Cash) Ratings Average Interest Rate Net Debt/LTM Adjusted EBITDA Notes: Moody's upgraded Verint's corporate family rating to Ba2 from Ba3 on June 24, 2019. Convertible senior notes due June 1, 2021 and term loan due June 29, 2024. ● ● ● ● ● As of 4/30/19 $516 million $301 million Moody's: Ba2; S&P: BB 2.8% 1.0x Financial data is non-GAAP. See appendices for reconciliation. Cash includes cash, cash equivalents, short-term restricted cash and cash equivalents and restricted time deposits, short-term investments, long-term restricted cash, and long-term restricted investments. Net Debt includes long-term restricted cash and long-term restricted investments, and excludes convertible note discounts and other unamortized discounts and issuance costs associated with our debt, which are required under GAAP. See appendices for reconciliation. Average interest rate excludes the impact of amortization of discounts and deferred financing fees. 34#35Three Year Non-GAAP Targets (FY22) Verint Customer Engagement Cyber Intelligence Revenue: ~$1.65 Billion Revenue: -$1.08 Billion Revenue: ~$575 Million Adjusted EBITDA Margin: ~27% Adjusted EBITDA Margin: -30% Adjusted EBITDA Margin: >20% Diluted EPS: $4.70 Cloud Revenue Mix: >40% Recurring Revenue Mix: -70% Gross Margin Expansion from Software Model Transition 35#36Thank You 36#37Appendices 37#38About Non-GAAP Financial Measures The following tables include reconciliations of certain financial measures not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), consisting of non-GAAP revenue, non-GAAP cloud revenue, non-GAAP gross profit and gross margin, non-GAAP operating income and operating margin, non-GAAP other income (expense), net, non-GAAP provision (benefit) for income taxes and non-GAAP effective income tax rate, non-GAAP net income attributable to Verint Systems Inc., non- GAAP net income per common share attributable to Verint Systems Inc., adjusted EBITDA, net debt, constant currency measures, estimated GAAP and non-GAAP fully allocated gross margins, and estimated non-GAAP fully allocated operating margins and estimated fully allocated adjusted EBITDA to the most directly comparable financial measures prepared in accordance with GAAP. We believe these non-GAAP financial measures, used in conjunction with the corresponding GAAP measures, provide investors with useful supplemental information about the financial performance of our business by: facilitating the comparison of our financial results and business trends between periods, by excluding certain items that either can vary significantly in amount and frequency, are based upon subjective assumptions, or in certain cases are unplanned for or difficult to forecast, facilitating the comparison of our financial results and business trends with other technology companies who publish similar non-GAAP measures, and allowing investors to see and understand key supplementary metrics used by our management to run our business, including for budgeting and forecasting, resource allocation, and compensation matters. We also make these non-GAAP financial measures available because a number of our investors have informed us that they find this supplemental information useful. ● ● ● Non-GAAP financial measures should not be considered in isolation as substitutes for, or superior to, comparable GAAP financial measures. The non-GAAP financial measures we present have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, and these non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures. These non- GAAP financial measures do not represent discretionary cash available to us to invest in the growth of our business, and we may in the future incur expenses similar to or in addition to the adjustments made in these non-GAAP financial measures. Other companies may calculate similar non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures. V 38#39About Non-GAAP Financial Measures Our non-GAAP financial measures are calculated by making the following adjustments to our GAAP financial measures: Revenue adjustments. We exclude from our non-GAAP revenue the impact of fair value adjustments required under GAAP relating to cloud services and customer support contracts acquired in a business acquisition, which would have otherwise been recognized on a stand-alone basis. We believe that it is useful for investors to understand the total amount of revenue that we and the acquired company would have recognized on a stand-alone basis under GAAP, absent the accounting adjustment associated with the business acquisition. Our non-GAAP revenue also reflects certain adjustments from aligning an acquired company's revenue recognition policies to our policies. We believe that our non-GAAP revenue measure helps management and investors understand our revenue trends and serves as a useful measure of ongoing business performance. Amortization of acquired technology and other acquired intangible assets. When we acquire an entity, we are required under GAAP to record the fair values of the intangible assets of the acquired entity and amortize those assets over their useful lives. We exclude the amortization of acquired intangible assets, including acquired technology, from our non-GAAP financial measures because they are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. We also exclude these amounts to provide easier comparability of pre- and post-acquisition operating results. Stock-based compensation expenses. We exclude stock-based compensation expenses related to restricted stock awards, stock bonus programs, bonus share programs, and other stock-based awards from our non-GAAP financial measures. We evaluate our performance both with and without these measures because stock- based compensation is typically a non-cash expense and can vary significantly over time based on the timing, size and nature of awards granted, and is influenced in part by certain factors which are generally beyond our control, such as the volatility of the price of our common stock. In addition, measurement of stock-based compensation is subject to varying valuation methodologies and subjective assumptions, and therefore we believe that excluding stock-based compensation from our non-GAAP financial measures allows for meaningful comparisons of our current operating results to our historical operating results and to other companies in our industry. ● ● ● Unrealized gains and losses on certain derivatives, net. We exclude from our non-GAAP financial measures unrealized gains and losses on certain foreign currency derivatives which are not designated as hedges under accounting guidance. We exclude unrealized gains and losses on foreign currency derivatives that serve as economic hedges against variability in the cash flows of recognized assets or liabilities, or of forecasted transactions. These contracts, if designated as hedges under accounting guidance, would be considered "cash flow" hedges. These unrealized gains and losses are excluded from our non-GAAP financial measures because they are non-cash transactions which are highly variable from period to period. Upon settlement of these foreign currency derivatives, any realized gain or loss is included in our non-GAAP financial measures. 39#40About Non-GAAP Financial Measures Amortization of convertible note discount. Our non-GAAP financial measures exclude the amortization of the imputed discount on our convertible notes. Under GAAP, certain convertible debt instruments that may be settled in cash upon conversion are required to be bifurcated into separate liability (debt) and equity (conversion option) components in a manner that reflects the issuer's assumed non-convertible debt borrowing rate. For GAAP purposes, we are required to recognize imputed interest expense on the difference between our assumed non-convertible debt borrowing rate and the coupon rate on our $400.0 million of 1.50% convertible notes. This difference is excluded from our non-GAAP financial measures because we believe that this expense is based upon subjective assumptions and does not reflect the cash cost of our convertible debt. ● ● ● ● ● Losses and expenses on early retirements or modifications of debt. We exclude from our non-GAAP financial measures losses on early retirements of debt attributable to refinancing or repaying our debt, and expenses incurred to modify debt terms, because we believe they are not reflective of our ongoing operations. Acquisition expenses, net. In connection with acquisition activity (including with respect to acquisitions that are not consummated), we incur expenses, including legal, accounting, and other professional fees, integration costs, changes in the fair value of contingent consideration obligations, and other costs. Integration costs may consist of information technology expenses as systems are integrated across the combined entity, consulting expenses, marketing expenses, and professional fees, as well as non-cash charges to write-off or impair the value of redundant assets. We exclude these expenses from our non-GAAP financial measures because they are unpredictable, can vary based on the size and complexity of each transaction, and are unrelated to our continuing operations or to the continuing operations of the acquired businesses. Restructuring expenses. We exclude restructuring expenses from our non-GAAP financial measures, which include employee termination costs, facility exit costs, certain professional fees, asset impairment charges, and other costs directly associated with resource realignments incurred in reaction to changing strategies or business conditions. All of these costs can vary significantly in amount and frequency based on the nature of the actions as well as the changing needs of our business and we believe that excluding them provides easier comparability of pre- and post-restructuring operating results. Impairment charges and other adjustments. We exclude from our non-GAAP financial measures asset impairment charges (other than those associated with restructuring or acquisition activity), rent expense for redundant facilities, gains or losses on sales of property, gains or losses on settlements of certain legal matters, and certain professional fees unrelated to our ongoing operations, including $1.9 million of fees and expenses for the three months ended April 30, 2019 related to a shareholder proxy contest, all of which are unusual in nature and can vary significantly in amount and frequency. 40#41About Non-GAAP Financial Measures Non-GAAP income tax adjustments. We exclude our GAAP provision (benefit) for income taxes from our non-GAAP measures of net income attributable to Verint Systems Inc., and instead include a non-GAAP provision for income taxes, determined by applying a non-GAAP effective income tax rate to our income before provision for income taxes, as adjusted for the non-GAAP items described above. The non-GAAP effective income tax rate is generally based upon the income taxes we expect to pay in the reporting year. Our GAAP effective income tax rate can vary significantly from year to year as a result of tax law changes, settlements with tax authorities, changes in the geographic mix of earnings including acquisition activity, changes in the projected realizability of deferred tax assets, and other unusual or period-specific events, all of which can vary in size and frequency. We believe that our non-GAAP effective income tax rate removes much of this variability and facilitates meaningful comparisons of operating results across periods. Our non-GAAP effective income tax rates for the year ending January 31, 2020 is currently approximately 10%, and was 11.0% for the year ended January 31, 2019. We evaluate our non-GAAP effective income tax rate on an ongoing basis and it can change from time to time. Our non-GAAP income tax rate can differ materially from our GAAP effective income tax rate. ● Customer Engagement Cloud, Recurring and Nonrecurring Revenue Metrics Recurring revenue, on both a GAAP and non-GAAP basis, is the portion of our revenue that we believe is likely to be renewed in the future, and primarily consists of initial and renewal post contract support and cloud revenue. Nonrecurring revenue, on both a GAAP and non-GAAP basis, primarily consists of our perpetual licenses, consulting, implementation and installation services, and training. Cloud revenue, on both a GAAP and non-GAAP basis, primarily consists of SaaS and optional managed services. SaaS revenue includes bundled SaaS, software with standard managed services and unbundled SaaS that we account for as term licenses where managed services are purchased separately. Optional Managed Services is recurring services that are intended to improve our customers operations and reduce expenses. We believe that recurring revenue, nonrecurring revenue, and cloud revenue provide investors with useful insight into the nature and sustainability of our revenue streams. The recurrence of these revenue streams in future periods depends on a number of factors including contractual periods and customers' renewal decisions. Please see "Revenue adjustments" above for an explanation for why we present these revenue numbers on both a GAAP and non-GAAP basis. V 41#42About Non-GAAP Financial Measures Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before interest expense, interest income, income taxes, depreciation expense, amortization expense, revenue adjustments, restructuring expenses, acquisition expenses, and other expenses excluded from our non-GAAP financial measures as described above. We believe that adjusted EBITDA is also commonly used by investors to evaluate operating performance between companies because it helps reduce variability caused by differences in capital structures, income taxes, stock-based compensation accounting policies, and depreciation and amortization policies. Adjusted EBITDA is also used by credit rating agencies, lenders, and other parties to evaluate our creditworthiness. Net Debt Net Debt is a non-GAAP measure defined as the sum of long-term and short-term debt on our consolidated balance sheet, excluding unamortized discounts and issuance costs, less the sum of cash and cash equivalents, restricted cash, restricted cash equivalents, restricted bank time deposits, and restricted investments (including long- term portions), and short-term investments. We use this non-GAAP financial measure to help evaluate our capital structure, financial leverage, and our ability to reduce debt and to fund investing and financing activities, and believe that it provides useful information to investors. 42#43Financial Outlook Our non-GAAP outlook for the year ending January 31, 2020 excludes the following GAAP measures which we are able to quantify with reasonable certainty: Amortization of intangible assets of approximately $55 million. Amortization of discount on convertible notes of approximately $12 million. Our non-GAAP outlook for the year ending January 31, 2020 excludes the following GAAP measures for which we are able to provide a range of probable significance: Revenue adjustments are expected to be between approximately $24 million and $26 million. Stock-based compensation is expected to be between approximately $73 million and $77 million, assuming market prices for our common stock approximately consistent with current levels. ● ● ● • Our non-GAAP outlook does not include the potential impact of any in-process business acquisitions that may close after the date hereof, and, unless otherwise specified, reflects foreign currency exchange rates approximately consistent with current rates. We are unable, without unreasonable efforts, to provide a reconciliation for other GAAP measures which are excluded from our non-GAAP outlook, including the impact of future business acquisitions or acquisition expenses, future restructuring expenses, and non-GAAP income tax adjustments due to the level of unpredictability and uncertainty associated with these items. For these same reasons, we are unable to assess the probable significance of these excluded items. While historical results may not be indicative of future results, actual amounts for the three months ended April 30, 2019 and years ended January 31, 2019 and 2018 for the GAAP measures excluded from our non-GAAP outlook appear in the GAAP to Non-GAAP Reconciliation Tables contained in this presentation. 43#44Financial Outlook Our non-GAAP Consolidated, Customer Engagement, and Cyber Intelligence three-year targets exclude various GAAP measures, including: ● ● ● ● Amortization of intangible assets. Stock-based compensation expenses. Revenue adjustments. Acquisition expenses. Restructuring expenses. Our non-GAAP Consolidated three-year targets also reflect income tax provisions on a non-GAAP basis. We are unable, without unreasonable efforts, to provide a reconciliation for these GAAP measures which are excluded from our non-GAAP Consolidated, Customer Engagement, and Cyber Intelligence three-year targets, due to the level of unpredictability and uncertainty associated with these items. For these same reasons, we are unable to assess the probable significance of these excluded items. Our non-GAAP Consolidated, Customer Engagement, and Cyber Intelligence three-year targets reflect foreign currency exchange rates approximately consistent with current rates. 44#45GAAP to Non-GAAP Reconciliations ($ in millions) Revenue Reconciliation GAAP revenue Revenue adjustments Non-GAAP revenue Gross Profit Reconciliation GAAP gross profit GAAP gross margin Revenue adjustments Amortization of acquired technology Stock-based compensation expenses Acquisition expenses Restructuring expenses Non-GAAP gross profit Non-GAAP gross margin V LA $ Note: Amounts may not cross foot due to rounding. April 30, 2018 289.2 $ 2.8 292.0 $ 175.1 60.6% 2.8 7.4 0.8 0.4 186.5 $ 63.9% Three Months Ended July 31, 2018 October 31, 2018 January 31, 2019 306.3 $ 2.2 308.5 $ 193.0 $ 63.0% 2.2 5.5 1.9 0.7 203.3 $ 65.9% 304.0 $ 4.0 308.0 $ 192.7 63.4% 4.0 5.9 1.4 0.1 204.1 66.3% $ 330.2 6.5 336.7 219.7 66.5% 6.5 6.5 1.6 0.3 0.3 234.9 69.8% Year Ended January 31, 2019 $ 1,229.7 15.4 1,245.1 780.5 63.5% 15.4 25.4 5.7 0.4 1.5 828.9 66.6% Three Months Ended April 30, 2019 315.3 8.9 324.2 201.1 63.8% 8.9 6.7 1.4 0.5 218.6 67.4% 45#46GAAP to Non-GAAP Reconciliations ($ in millions) Operating Income Reconciliation GAAP operating income As a percentage of GAAP revenue Revenue adjustments Amortization of acquired technology Amortization of other acquired intangible assets Stock-based compensation expenses Acquisition expenses, net Restructuring expenses Other adjustments Non-GAAP operating income As a percentage of non-GAAP revenue Other Expense Reconciliation GAAP other expense, net Unrealized (gains) losses on derivatives, net Amortization of convertible note discount Acquisition expenses, net Non-GAAP other expense, net V Note: Amounts may not cross foot due to rounding. April 30, 2018 7.8 $ 2.7% 2.8 7.4 7.7 16.4 2.3 1.1 0.6 46.1 15.8% (8.7) (0.5) 2.9 - (6.3) $ Three Months Ended July 31, 2018 October 31, 2018 January 31, 2019 29.2 $ 9.5% 2.2 5.5 7.4 17.5 0.1 0.9 0.6 63.4 $ 20.6% (10.0) 0.4 2.9 0.3 (6.4) $ 33.7 $ 11.1% 4.0 5.9 7.6 16.6 1.9 1.0 (1.5) 69.2 $ 22.5% (7.8) $ 0.4 2.9 (4.5) $ 43.6 13.2% 6.5 6.5 8.3 16.1 5.7 1.9 (0.4) 88.2 26.2% Year Ended January 31, 2019 $ (9.9) 0.9 3.0 0.1 (5.9) $ 114.2 9.3% 15.4 25.4 31.0 66.7 9.9 4.9 (0.6) 266.9 21.4% (36.5) 1.1 11.9 0.4 (23.1) Three Months Ended April 30, 2019 14.5 4.6% 8.9 6.7 7.7 17.1 3.9 1.4 2.1 62.3 19.2% (9.3) 0.7 3.1 (0.1) (5.6) 46#47GAAP to Non-GAAP Reconciliations ($ in millions, except share and per share data; shares in thousands) Tax Provision (Benefit) Reconciliation GAAP provision (benefit) for income taxes GAAP effective income tax rate Non-GAAP tax adjustments Non-GAAP provision for income taxes Non-GAAP effective income tax rate GAAP diluted net (loss) income per common share attributable to Verint Systems Inc. Non-GAAP diluted net income per common share attributable to Verint Systems Inc. GAAP weighted-average shares used in computing diluted net (loss) income per common share Net (Loss) Income Attributable to Verint Systems Inc. Reconciliation GAAP net (loss) income attributable to Verint Systems Inc. $ Total GAAP net (loss) income adjustments Non-GAAP net income attributable to Verint Systems Inc. Additional weighted-average shares applicable to non-GAAP net income per common share attributable to Verint Systems Inc Non-GAAP diluted weighted-average shares used in computing net income per common share V $ Note: Amounts may not cross foot due to rounding. $ $ $ April 30, 2018 $ 0.3 $ -28.8% 4.0 4.3 $ 10.7% (2.2) $ 36.7 34.5 $ (0.03) $ 0.53 $ 63,928 1,203 65,131 Three Months Ended July 31, 2018 (3.7) $ -19.4% 9.7 6.0 $ 10.5% 22.0 28.1 50.1 October 31, 2018 January 31, 2019 65,840 $ 0.33 $ 65,840 $ 0.76 $ $ 5.6 21.7% 1.4 7.0 $ 10.8% 18.9 $ 37.5 56.4 $ 0.29 $ 0.85 $ 66,200 66,200 5.4 16.0% 4.2 9.6 11.7% 27.3 44.4 71.7 0.41 1.08 66,504 66,504 Year Ended January 31, 2019 $ $ $ $ $ $ 7.5 9.7% 19.4 26.9 11.0% 66.0 146.7 212.7 1.00 3.21 66,245 66,245 Three Months Ended April 30, 2019 $ $ $ $ GA $ $ GA 1.4 27.3% 4.0 5.4 9.5% 1.6 47.5 49.1 0.02 0.73 67,088 67,088 47#48GAAP to Non-GAAP Reconciliations ($ in millions) Adjusted EBITDA Reconciliation GAAP net (loss) income attributable to Verint Systems Inc. $ As a percentage of GAAP revenue Net income attributable to noncontrolling interest Provision (benefit) income taxes Other expense, net GAAP depreciation & amortization (1) Revenue adjustments Stock-based compensation expenses Acquisition expenses, net Restructuring expenses Other adjustments Adjusted EBITDA As a percentage of non-GAAP revenue 1 Adjusted for patent financing fee amortization, Note: Amounts may not cross foot due to rounding. $ April 30, 2018 (2.2) $ -0.8% 1.0 0.3 8.7 23.3 2.8 16.4 2.3 1.1 0.6 54.3 18.6% $ Three Months Ended July 31, 2018 22.0 $ 7.2% 0.9 (3.7) 10.0 20.3 2.2 17.5 0.1 0.8 0.6 October 31, 2018 January 31, 2019 70.7 22.9% $ 18.9 6.2% 1.3 5.6 7.8 20.6 4.0 16.6 1.9 1.1 (1.5) 76.3 $ 24.8% $ 27.3 8.3% 1.0 5.4 9.9 22.0 6.5 16.1 5.7 1.9 (0.4) 95.4 28.3% Year Ended January 31, 2019 $ 66.0 5.4% 4.2 7.5 36.5 86.2 15.4 66.7 9.9 4.9 (0.6) 296.7 23.8% Three Months Ended April 30, 2019 $ $ 1.6 0.5% 2.2 1.4 9.3 22.3 8.9 17.1 3.9 1.3 2.1 70.1 21.6% 48#49Revenue by Segment Reconciliations ($ in millions) GAAP Revenue by Segment: Customer Engagement Cyber Intelligence GAAP Total Revenue Revenue Adjustments: Customer Engagement Cyber Intelligence Total Revenue Adjustments Non-GAAP Revenue by Segment: Customer Engagement Cyber Intelligence Non-GAAP Total Revenue V Note: Amounts may not cross foot due to rounding. April 30, 2018 GA LA 186.5 $ 102.7 289.2 $ GA 2.7 0.1 2.8 $ 189.2 $ 102.8 292.0 Three Months Ended July 31, 2018 200.8 105.5 306.3 October 31, 2018 January 31, 2019 $ 2.2 $ 2.2 $ GA 203.0 105.5 308.5 $ 197.5 106.5 304.0 4.0 $ 4.0 201.5 $ 106.5 308.0 $ 211.5 118.7 330.2 $ 6.3 0.2 6.5 217.8 118.9 336.7 GA LA $ Year Ended January 31, 2019 796.3 433.4 1,229.7 15.0 0.4 15.4 811.3 433.8 1,245.1 Three Months Ended April 30, 2019 $ 207.1 108.2 315.3 8.8 0.1 8.9 215.9 108.3 324.2 49#50Table of Reconciliation from Gross Debt to Net Debt, including Long-Term Restricted Cash, Cash Equivalents, Time Deposits and Investments ($ in millions) As of January 31, Current maturities of long-term debt Long-term debt Unamortized debt discounts and issuance costs Gross debt Less: Cash and cash equivalents Restricted cash and cash equivalents, and restricted time deposits Short-term investments $ Long-term restricted cash, cash equivalents, time deposits and investments Net debt, including long-term restricted cash, cash equivalents, time deposits, and investments $ 2019 4.3 777.8 36.6 818.7 370.0 42.3 32.3 23.1 351.0 As of April 30, 2019 $ 4.3 780.3 33.0 817.6 412.0 39.7 39.4 25.1 301.4 50#51Reconciliation of GAAP to Non-GAAP Customer Engagement Recurring Revenue and Nonrecurring Revenue ($ in millions) Table of Reconciliation from GAAP Recurring Revenue to Non-GAAP Recurring Revenue Customer Engagement Recurring revenue - GAAP As a percentage of GAAP revenue Estimated revenue adjustments Recurring revenue - non-GAAP As a percentage of non-GAAP revenue Table of Reconciliation from GAAP Nonrecurring Revenue to Non-GAAP Nonrecurring Revenue Customer Engagement Nonrecurring revenue - GAAP & Non-GAAP Year Ended January 31, 2018 (1) $ $ 425.6 57.5% 15.0 440.6 58.4% 314.4 April 30, 2018 (1) $ $ $ 107.8 57.8% 2.7 110.5 58.4% Three Months Ended July 31, 2018 (1) October 31, 2018 (1) $ $ 78.7 $ 117.7 $ 58.6% 2.2 119.9 59.1% $ 83.1 $ 116.9 59.2% 4.0 120.9 60.0% $ $ 80.6 $ January 31, 2019 123.1 58.2% 6.3 129.4 59.4% 88.4 Year Ended January 31, 2019 $ Three Months Ended April 30, 2019 $ 465.7 58.5% 15.0 480.7 $ 59.3% 330.6 $ V₁₁ (1) To conform with the presentation described in footnote 2 of our April 30, 2019 Form 10-Q, the classification of Customer Engagement unbundled SaaS revenue for the three months ended April 30, 2018, July 31, 2018, October 31, 2018 and January 31, 2019 and the year ended January 31, 2018 has been updated to reflect recurring revenue which had previously been presented within nonrecurring revenue. 51 123.4 59.6% 8.8 132.2 61.2% 83.7#52Reconciliation of GAAP to Non-GAAP Customer Engagement Cloud Revenue ($ in millions) Table of Reconciliation from GAAP Cloud Revenue to Non-GAAP Cloud Revenue Customer Engagement SaaS revenue - GAAP Managed Services - GAAP Cloud revenue - GAAP Estimated SaaS revenue adjustments Estimated managed services revenue adjustments Estimated cloud revenue adjustments SaaS revenue - non-GAAP Managed Services - non-GAAP Cloud revenue - non-GAAP Note: Amounts may not cross foot due to rounding. $ April 30, 2018 24.1 8.7 32.8 $ 2.1 0.4 2.5 26.2 9.1 35.3 $ Three Months Ended July 31, 2018 26.7 9.9 36.6 1.4 0.7 2.1 28.1 10.6 38.7 $ $ $ October 31, 2018 27.6 $ 10.1 37.7 3.4 0.5 $ 3.9 31.0 10.6 41.6 $ January 31, 2019 31.3 12.3 43.6 5.6 0.6 6.2 36.9 12.9 49.8 Year Ended January 31, 2019 $ $ 109.6 41.1 150.7 12.5 2.2 14.7 122.1 43.3 165.4 Three Months Ended April 30, 2019 $ 33.6 13.5 47.1 8.0 0.6 8.6 41.6 14.1 55.7 52#53Estimated GAAP to Non-GAAP Fully Allocated Gross Margins For Year Ended January 31, 2018 Cyber Intelligence ($ in millions) GAAP Product revenue GAAP Service revenue Total GAAP revenue Product costs Service expenses Amortization of acquired technology Stock-based compensation expenses (1) Shared support service allocation (2) Total GAAP cost of revenue GAAP gross profit GAAP gross margin Revenue adjustments Amortization of acquired technology Stock-based compensation expenses (1) Acquisition expenses, net (3) Restructuring expenses (3) Non-GAAP gross profit Non-GAAP gross margin $ $ Customer Engagement 184.2 $ 555.9 740.1 34.7 197.6 22.2 6.9 9.2 270.6 469.5 $ 63.4% 14.9 22.2 6.9 0.1 1.5 515.1 68.2% $ 215.5 $ 179.6 395.1 92.3 61.5 16.0 1.6 4.8 176.2 218.9 55.4% 0.4 16.0 1.6 - 0.7 237.6 60.1% $ $ Note: Amounts may not cross foot due to rounding. Please refer to notes on bottom of Slide 54. Consolidated 399.7 735.5 1,135.2 127.0 259.1 38.2 8.5 14.0 446.8 688.4 60.6% 15.3 38.2 8.5 0.1 2.2 752.7 65.4% GAAP Product revenue GAAP Service revenue Total GAAP revenue Product costs Service expenses Amortization of acquired technology Stock-based compensation expenses (1) Shared support service allocation (2) Total GAAP cost of revenue GAAP gross profit GAAP gross margin Revenue adjustments Amortization of acquired technology Stock-based compensation expenses (1) Acquisition expenses, net (3) Restructuring expenses (3) Non-GAAP gross profit Non-GAAP gross margin $ $ $ Customer Engagement 221.7 $ 574.6 796.3 35.0 208.1 18.0 4.4 9.7 275.2 For Year Ended January 31, 2019 Cyber Intelligence 521.1 65.4% 15.0 18.0 4.4 0.3 1.0 559.8 69.0% $ $ 232.9 $ 200.5 433.4 90.6 69.6 7.4 1.3 5.1 174.0 259.4 $ 59.9% 0.4 7.4 1.3 0.1 0.5 269.1 62.0% $ Consolidated 454.6 775.1 1,229.7 125.6 277.7 25.4 5.7 14.8 449.2 780.5 63.5% 15.4 25.4 5.7 0.4 1.5 828.9 66.6% 53#54Estimated GAAP to Non-GAAP Fully Allocated Gross Margins - Cont'd ($ in millions) GAAP Product revenue GAAP Service revenue Total GAAP revenue Product costs Service expenses Amortization of acquired technology Stock-based compensation expenses (1) Shared support service allocation (2) Total GAAP cost of revenue GAAP gross profit GAAP gross margin Revenue adjustments Amortization of acquired technology Stock-based compensation expenses (1) Acquisition expenses, net (3) Restructuring expenses (3) Non-GAAP gross profit Non-GAAP gross margin $ $ $ For Three Months Ended April 30, 2019 Customer Engagement Note: Amounts may not cross foot due to rounding. 54.0 $ 153.1 207.1 8.5 57.5 5.4 1.1 2.4 74.9 132.2 63.8% 8.8 5.4 1.1 0.3 147.8 68.4% $ $ Cyber Intelligence 50.2 58.0 108.2 17.9 18.5 1.3 0.3 1.3 39.3 68.9 63.7% 0.1 1.3 0.3 $ 65.4% $ 0.2 70.8 $ Consolidated 104.2 211.1 315.3 26.4 76.0 6.7 1.4 3.7 114.2 201.1 63.8% 8.9 6.7 1.4 0.5 218.6 67.4% (1) Represents the stock-based compensation expenses applicable to cost of revenue, allocated proportionally to our year ended January 31, 2019, annual operations and service expense wages for each segment, and the stock-based compensation expenses applicable to cost of revenue, allocated proportionally to our year ended January 31, 2018 annual operations and service expense wages for each segment, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our two businesses. (2) Represents the portion of our shared support expenses (as disclosed in footnote 16 to our January 31, 2019 Form 10-K) applicable to cost of revenue, allocated proportionally to our year ended January 31, 2019 annual non-GAAP segment revenue, and our shared support expenses (as disclosed in footnote 15 to our January 31, 2018 Form 10-K) applicable to cost of revenue, allocated proportionally to our year ended January 31, 2018 annual non-GAAP segment revenue, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our two businesses. (3) Represents the portion of our acquisition expenses, net and restructuring expenses applicable to cost of revenue, allocated proportionally to our year ended January 31, 2019, annual non-GAAP segment revenue, and our acquisition expenses, net and restructuring expenses applicable to cost of revenue, allocated proportionally to our year ended January 31, 2018 annual non-GAAP segment revenue, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our two businesses. 54#55Reconciliation of Estimated GAAP to Non-GAAP Fully Allocated Gross Margins ($ in millions) Customer Engagement GAAP gross profit GAAP gross margin Revenue adjustments Amortization of acquired technology (1) Stock-based compensation expenses (1) Acquisition expenses, net (1) Restructuring expenses (1) Non-GAAP gross profit Non-GAAP gross margin ($ in millions) Customer Engagement GAAP gross profit GAAP gross margin Revenue adjustments Amortization of acquired technology (1) Stock-based compensation expenses (1) Acquisition expenses, net (1) Restructuring expenses (1) Non-GAAP gross profit Non-GAAP gross margin $ Nonrecurring SaaS 176.1 53.3% 7.3 1.8 0.1 0.4 185.7 56.2% 75.7 $ 69.1% 12.5 2.7 0.7 0.0 0.1 91.8 75.1% Year Ended January 31, 2019 Recurring $ $ 345.0 $ 74.1% 15.1 10.7 2.6 0.1 0.6 374.1 77.8% Optional Managed Services $ Year Ended January 31, 2019 10.6 25.9% 2.2 1.0 0.2 0.0 0.1 14.1 32.6% $ Total $ 521.1 65.4% 15.1 18.0 4.4 0.2 1.0 559.8 69.0% Maintenance 258.6 82.1% 0.4 7.0 1.7 0.1 0.4 268.2 85.1% Total Recurring $ $ 345.0 74.1% 15.1 10.7 2.6 0.1 0.6 374.1 77.8% Note: Amounts may not cross foot due to rounding. (1) Represents the portion of our amortization of acquired technology, stock-based compensation expenses, acquisition expenses, net and restructuring expenses applicable to cost of revenue, allocated proportionally to our year ended January 31, 2019, annual non-GAAP nonrecurring and recurring revenues, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins. 55#56Estimated Non-GAAP Fully Allocated Operating Margins and Estimated Fully Allocated Adjusted EBITDA ($ in millions) Non-GAAP segment revenue Segment contribution (1) Estimated allocation of shared support expenses Estimated non-GAAP operating income Depreciation and amortization (3) Estimated adjusted EBITDA Segment contribution margin Estimated non-GAAP fully allocated operating margin Estimated fully allocated EBITDA margin V Customer Engagement $ 716.2 $ 269.0 100.3 168.7 19.3 188.0 37.6% 23.6% 26.2% Note: Please refer to notes on bottom of Slide 57. Amounts may not cross foot due to rounding. For Year Ended January 31, 2017 Cyber Customer Intelligence Consolidated Engagement $ 356.5 $ 1,072.7 $ 85.8 49.9 35.9 9.6 45.5 24.1% 10.1% 12.8% $ 354.8 150.2 204.6 28.9 233.5 $ For Year Ended January 31, 2018 Cyber Intelligence 755.0 $ 395.5 $ 33.1% 19.1% 21.8% 286.2 103.5 182.7 20.0 202.7 $ 37.9% 24.2% 26.8% 94.6 51.2 43.4 10.5 53.9 23.9% 11.0% 13.6% Consolidated 1,150.5 380.8 154.7 226.1 30.5 256.6 33.1% 19.7% 22.3% 56#57Estimated Non-GAAP Fully Allocated Operating Margins and Estimated Fully Allocated Adjusted EBITDA ($ in millions) Non-GAAP segment revenue Segment contribution (1) Estimated allocation of shared support expenses (2) Estimated non-GAAP operating income Depreciation and amortization (3) Estimated adjusted EBITDA Segment contribution margin Estimated non-GAAP fully allocated operating margin Estimated fully allocated EBITDA margin $ Customer Customer Engagement Intelligence Consolidated Engagement $ For Year Ended January 31, 2019 Cyber 811.3 $ 433.8 $ 1,245.1 $ 215.9 316.8 106.9 209.9 19.4 229.3 39.0% 25.9% 28.3% $ 114.0 57.0 57.0 10.4 67.4 $ 26.3% 13.1% 15.5% 430.8 163.9 266.9 29.8 296.7 $ 34.6% 21.4% 23.8% Three Months Ended April 30, 2019 Cyber Intelligence 78.8 28.6 50.2 5.1 55.3 36.5% 23.3% 25.6% $ $ 108.3 $ 27.3 15.2 12.1 2.7 14.8 $ 25.2% 11.1% 13.6% Consolidated 324.2 106.1 43.8 62.3 7.8 70.1 32.7% 19.2% 21.6% Note: Amounts may not cross foot due to rounding. (1) See footnote 16 to our Form 10-K for the year ended January 31, 2019, 2018 and 2017, and footnote 16 to our April 30, 2019 Form 10-Q. (2) When determining segment contribution, we do not allocate "Shared support expenses" which are provided by shared resources or are otherwise generally not controlled by segment management, the majority of which are expenses for administrative support functions, such as information technology, human resources, finance, legal, and other general corporate support, and also include occupancy expenses, procurement, manufacturing support, and logistics expenses. For the year ended January 31, 2017 expenses are allocated proportionally to our year ended January 31, 2017 annual non-GAAP segment revenue. For the year ended January 31, 2018 expenses are allocated proportionally to our year ended January 31, 2018 annual non-GAAP segment revenue. For the year ended January 31, 2019 and three months ended April 30, 2019 expenses are allocated proportionally to our year ended January 31, 2019 annual non-GAAP segment revenue which we believe provides a reasonable approximation for purposes of understanding the relative non-GAAP operating margins of our two businesses. (3) Represents certain depreciation and amortization expenses, which are otherwise included in our non-GAAP operating income, allocated proportionally to our non-GAAP segment revenue for the years ended January 31, 2019, January 31, 2018 and January 31, 2017, respectively, which we believe provides a reasonable approximation for purposes of understanding the relative adjusted EBITDA of our two businesses. 57