48 COGNYTE SOFTWARE LTD. 5.A. OPERATING RESULTS This operating and financial review should be read together with the section “Item 4, Information on the Company—4.B. Business Overview” and our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report. Among other things, those financial statements include more detailed information regarding the basis of preparation for the following information. Our consolidated financial statements have been prepared in accordance with GAAP. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Form 20-F, our actual results may differ materially from those anticipated in these forward-looking statements. Please see “Special Note About Forward-Looking Statements and Risk Factor Summary” in this Annual Report. Background and Recent Developments Separation from Verint On February 1, 2021 we completed our spin-off from Verint and the related distribution. As a result, we have transitioned to an independent, publicly traded company. The SIS Divestiture In December 2022, as part of our ongoing strategic plan to simplify and focus the Company on fewer agendas, we sold our Situational Intelligence Solutions (SIS) business. Demand Trends We believe that the following trends are driving demand for our solutions: •Data is Growing Rapidly and is Highly Fragmented. The growing volume and diversity of structured and unstructured data require not only advanced analytical tools but also innovative approaches to manage and analyze this data effectively. Organizations face challenges in consolidating data from diverse sources. As data ecosystems become increasingly complex, there is a growing need for solutions that can seamlessly aggregate, interpret and derive actionable intelligence from highly fragmented information, while maintaining security and governance. As artificial intelligence capabilities continue to evolve, organizations increasingly expect platforms that can not only aggregate and analyze data, but also uncover hidden relationships, surface high-risk signals, and strengthen operational decision-making across large and dynamic intelligence environments. In addition to improving operational efficiency, AI-driven capabilities are increasingly viewed as essential to achieving intelligence advantage and enhancing mission outcomes in complex threat landscapes. •Security Threats Are Becoming More Difficult to Detect and Mitigate. Organizations face increasingly complex investigation challenges, as threats from well-organized and well-funded adversaries continue to evolve. Bad actors are leveraging advanced technologies to avoid detection, making it more difficult to identify and mitigate threats. To stay ahead, organizations must address threats that are more sophisticated and global in scale. Advanced investigative analytics software can help organizations uncover the unknown by revealing patterns and anomalies, providing near real-time insights, and accelerating decision-making. These capabilities are increasingly important as agencies face resource constraints and shortages of experienced analysts, driving demand for AI-driven tools that can reduce time to gain insight and amplify human expertise. The shortage of skilled investigative personnel further increases demand for AI-enabled systems that can reduce cognitive load, automate routine analytical tasks, summarize complex findings, and recommend next investigative steps, while maintaining human oversight and accountability. We are witnessing an ongoing shift toward data-driven intelligence where scalable, easily integrated platforms are essential, especially in areas such as signals intelligence and open-source intelligence, where organizations must process vast and complex data sets with speed and precision. In addition, as generative and AI-assisted technologies become more broadly accessible, organizations increasingly require governed and secure AI capabilities embedded directly within investigative workflows, rather than relying on standalone or general-purpose tools. •Organizations Are Transitioning to Modern, Industry-Standard Platforms. Historically, some organizations relied on proprietary solutions supported by integrators and internal development resources. However, these solutions often struggle to keep pace with rapid technological evolution, limiting adaptability and effectiveness. Moreover, tailor-made, one-off solutions are often more expensive, less flexible, and prevent organizations from benefiting from the collective feedback and continuous improvements that industry-leading platforms incorporate. As digital transformation accelerates, organizations are increasingly shifting to modern, open interface software that adheres to 49 COGNYTE SOFTWARE LTD. industry standards and seamlessly integrates into existing environments. This shift extends to areas like lawful interception where advancements are driving the need for modernization, enabling faster resolution times, improved intelligence extraction, and greater operational efficiency. To remain effective in an evolving landscape, organizations benefit from adopting scalable platforms that support agility, efficiency and compliance with regulatory and operational requirements. This transition also reflects a growing preference for solutions that embed advanced analytics and AI capabilities within standardized architectures, enabling continuous enhancement through real-world operational feedback while maintaining governance, auditability and regulatory compliance. •Geopolitical Complexity, Advanced Analytics and AI, Are Driving Demand for Our Products. The rapidly shifting geopolitical environment, marked by heightened global tensions, emerging threats, and increasingly complex security challenges, is fueling the demand for advanced analytics solutions. Governments and other entities face the pressing need to monitor, predict and respond to dynamic scenarios with greater speed and precision. As geopolitical uncertainties intensify, organizations require advanced analytical tools to improve decision-making, and maintain security in an increasingly volatile world, including solutions that can correlate data across domains and jurisdictions. As AI technologies continue to advance, organizations also increasingly require solutions that combine advanced analytics with domain expertise, explainability, and governance controls, ensuring that AI-driven insights are reliable, defensible and aligned with operational and regulatory requirements. This trend favors purpose-built investigative platforms that integrate AI within established investigative methodologies and secure environments. Basis of Presentation For further information on the basis of presentation of the consolidated financial statements see “Note 1. Organization, Operations and Basis of Presentation” to our consolidated financial statements included elsewhere in this Annual Report. Critical Accounting Estimates An appreciation of our critical accounting policies is necessary to understand our financial results. The accounting policies outlined below are considered to be critical because they can materially affect our operating results and financial condition, as these policies may require us to make difficult and subjective judgments regarding uncertainties. The accuracy of these estimates and the likelihood of future changes depend on a range of possible outcomes and a number of underlying variables, many of which are beyond our control, and there can be no assurance that our estimates are accurate. Revenue Recognition We derive and report our revenue in three categories: (a) software revenue, including the sale of subscription (i.e., term-based) or perpetual licenses, and appliances that include software that is essential to the product’s functionality, (b) software service revenue, including support revenue and revenue from cloud-based SaaS subscriptions, and (c) professional service and other revenue, including revenue from installation and integration services, customer specific development work, resale of third-party hardware, and consulting and training services. We account for revenue in accordance with Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” Our revenue recognition policies require us to make significant judgments and estimates. In applying our revenue recognition policy, we must determine which portions of our revenue are recognized at a point in time (generally software revenue, and the resale of third-party hardware) and which portions have to be deferred and recognized over time (generally software service revenue and professional service revenue). We analyze various factors including, but not limited to, the selling price of undelivered services when sold on a stand-alone basis, our pricing policies, the creditworthiness of our customers, and contractual terms and conditions in helping us to make such judgments about revenue recognition. Changes in judgment on any of these factors could materially impact the timing and amount of revenue recognized in a given period. Our contracts with customers often include obligations to transfer multiple products and services to a customer. In contracts with multiple performance obligations, we identify each performance obligation and evaluate whether the promised goods or services are distinct within the context of the contract at contract inception. Promised goods or services that are not distinct at contract inception are consolidated. Contracts that include software customization and development services may result in the combination of the customization and development services with the software license as one distinct performance obligation. The transaction price is generally in the form of a fixed fee at contract inception, and excludes taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer. 50 COGNYTE SOFTWARE LTD. We allocate the transaction price to each distinct performance obligation based on the estimated stand-alone selling price (“SSP”) for each performance obligation. Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we estimate the SSP of each performance obligation based on an adjusted market assessment approach. We may have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. We then look to how control is transferred to the customer in order to determine the timing of revenue recognition. Software revenue is typically recognized when the software is delivered and/or made available for download as this is the point the user of the software can direct the use of, and obtain substantially all of the remaining benefits from the functional intellectual property. We do not recognize software revenue related to the renewal of software licenses earlier than the beginning of the renewal period. Subscription license revenue is recognized when the software is delivered to the customer over the term of the subscription period. In contracts that include customer substantive acceptance, we recognize revenue when we have delivered the software and received customer acceptance. We recognize support revenue, which includes software updates on a when-and-if-available basis, telephone support, and bug fixes or patches, over the term of the customer support agreement, which is typically between one to three years. Revenue related to professional services is typically recognized over time as the services are performed. Revenue related to the resale of third-party hardware is typically recognized at the point in time control is transferred to the customer, generally upon shipment or delivery. Some of our customer contracts require specific customer development work to meet the particular requirements of the customer. The contract pricing is stated as a fixed amount and generally results in the transfer of control of the applicable performance obligation over time. We recognize revenue based on the proportion of labor hours expended to the total hours expected to complete the performance obligation. The determination of the total labor hours expected to complete the performance obligation on fixed-fee contracts involves significant judgment. We incorporate revisions to hour and cost estimates when the causal facts become known. We measure our estimate of completion on fixed-price contracts, which in turn determines the amount of revenue we recognize, based primarily on actual hours incurred to date and our estimate of remaining hours necessary to complete the contract. Our products are generally not sold with a right of return and credits have been minimal in both amount and frequency. Shipping and handling activities that are typically bundled in the total sale price billed to customers and occur after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of revenue. Historically, these expenses have not been material. Income Taxes We account for income taxes under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus deferred taxes. Deferred taxes result from differences between the financial statement and tax bases of our 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 or rates are not anticipated. We are subject to income taxes in Israel, the United States and numerous foreign jurisdictions. The calculation of our income tax provision involves the application of complex tax laws and requires significant judgment and estimates. We evaluate the realizability of our deferred tax assets for each jurisdiction in which we operate at each reporting date, and establish valuation allowances 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 is dependent upon the generation of future taxable income of the same character and in the same jurisdiction. We consider all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning 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 a tax return by assessing whether they are more-likely-than-not sustainable, based solely on their technical merits, upon examination and including resolution of 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 is more-likely-than- 51 COGNYTE SOFTWARE LTD. not realizable. Differences between the amount of tax benefits taken or expected to be taken in our income tax returns and the amount of tax benefits recognized in our financial statements represent our unrecognized income tax benefits, which we either record as a liability or as a reduction of deferred tax assets. Our policy is to include interest (expense and/or income) and penalties related to unrecognized income tax benefits as a component of the provision for income taxes. Business Combination In accordance with ASC Topic 805, “Business Combination”, we allocate the fair value of purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. In the Company recent acquisition, intangible assets represented the majority of the assets acquired. Assessing fair values of intangible assets acquired in a business combination involves significant judgment about future events and uncertainties and depends on estimates and assumptions. Significant estimates utilized in valuating intangible assets include discount rates and future expected cash flow, which rely upon assumptions such as the useful life of the assets, revenue growth rates and margins projections, technological obsolescence and income tax rate assumptions. Contingent consideration incurred in a business combination is included as part of the consideration transferred and recorded at fair value as of the acquisition date. Estimating the fair value involves significant judgment and is based on significant assumptions relating to the estimate, such as discount rates, internal cash flows forecast for the relevant period during which the financial metrics should be achieved and the timing and amounts of the contingent payments. Amounts recorded in a business combination in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date, as additional information about conditions existing at the acquisition date may become available. In addition, each reporting period thereafter, the Company revalues the contingent consideration payments which are classified as liabilities and records the changes in their fair value in the Consolidated Statements of Operations. During the year ended January 31, 2026, Cognyte acquired 100% of the equity of GroupSense, Inc., a digital risk protection services company, for total consideration of approximately $4.4 million. For more information about the acquisition please refer to “Item 5.B. Liquidity and Capital Resources”. Components of Results of Operations Impact of Inflation and Currency Fluctuations on Results of Operations, Liabilities and Assets Our financial results, which are reported in U.S. dollars, are affected by changes in foreign currency. Most of our revenue and expenses, primarily labor expenses, are denominated in Euros, New Israeli Shekels, Singapore dollars and U.S. dollars. Additionally, certain assets, especially cash, trade receivables and other accounts receivables, as well as part of our liabilities are denominated in Euros, New Israeli Shekels, Singapore dollars and U.S. dollars. As a result, fluctuations in rates of exchange between the U.S. dollar and non-U.S. dollar currencies may affect our operating results and financial condition. The U.S. dollar cost of our operations in Israel may be adversely affected by the appreciation of the New Israeli Shekel against the U.S. dollar. In addition, the value of our non-U.S. dollar revenue could be adversely affected by the appreciation of the U.S. dollar against Singapore dollars and Euros. Conditions in Israel We are incorporated under the laws of Israel, and our principal executive offices and research and development facilities are located in, the State of Israel. See “Item 3. Key Information—3.D. Risk Factors—”Conditions in Israel, including Israel’s conflicts with Iran and other hostile actors in the region, as well as political and economic instability, may adversely affect our operations and limit our ability to produce, market and sell our products, which would lead to a decrease in revenues” for a description of governmental, economic, fiscal, monetary and political policies or factors that have materially affected or could materially affect our operations. Results of Operations The following discussion includes a comparison of our results of operations and liquidity and capital resources for the years ended January 31, 2026 and 2025. A discussion regarding our financial condition and results of operations for the year ended January 31, 2025 compared to the year ended January 31, 2024 can be found under Item 5 in our Annual Report on Form 20-F for the fiscal year ended January 31, 2025, filed with the SEC on April 2, 2025, which is hereby incorporated by reference herein and considered part of this Annual Report on Form 20-F only to the extent referenced and is available free of charge on the SEC’s website at www.sec.gov and our website at www.cognyte.com/investors. 52 COGNYTE SOFTWARE LTD. Overview of Operating Results The following table sets forth a summary of certain key financial information for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, (in thousands) 2026 2025 2024 Revenue $ 400,041 $ 350,632 $ 313,404 Operating (loss) income $ 13,261 $ (5,126) $ (18,054) Net loss attributable to Cognyte Software Ltd. $ (638) $ (12,051) $ (15,570) Our revenue increased approximately $49.4 million, or 14.1%, from $350.6 million in the year ended January 31, 2025 to $400.0 million in the year ended January 31, 2026. The increase consisted of a $35.9 million increase in software revenue, a $6.7 million increase in software service revenue and a $6.7 million increase in professional service and other revenue. For additional details on our revenue, see “Software Revenue, Software Service Revenue, and Professional Service and Other Revenue.” Revenue from end users located in the Americas, EMEA and APAC represented approximately 12%, 54% and 34% of our total revenue, respectively, in the year ended January 31, 2026, compared to approximately 14%, 55% and 31%, respectively, in the year ended January 31, 2025. Operating profit was $13.3 million in the year ended January 31, 2026 compared to operating loss of $5.1 million in the year ended January 31, 2025. This increase in operating profit was due to $42.8 million increase in gross profit offset by $24.4 million increase in operating expenses, which primarily consisted of a $14.1 million increase in net research and development expenses and a $10.1 million increase in selling, general and administrative expenses . Net loss attributable to Cognyte was $0.6 million in the year ended January 31, 2026, compared to net loss attributable to Cognyte of $12.1 million in the year ended January 31, 2025. The decrease in net loss attributable to Cognyte in the year ended January 31, 2026 was primarily due to a $18.4 million increase in operating income, as described above, partially offset by a $3.9 million increase in our provision for income taxes, and a $2.7 million decrease in total other income, net. 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 fluctuations in applicable foreign currency exchange rates. When comparing average exchange rates for the year ended January 31, 2026 to average exchange rates for the year ended January 31, 2025, the U.S. dollar depreciated relative to the Euro, New Israeli Shekel and Singapore dollar and appreciated relative to the Indian Rupee. For the year ended January 31, 2026, had foreign exchange rates remained unchanged from the average rates in effect for the year ended January 31, 2025, our revenue would have been approximately $6.6 million lower, and the unhedged operating expenses on a combined basis would have been approximately $7.8 million lower, which would have resulted in about $1.3 million increase in operating income. As of January 31, 2026, we employed approximately 1,700 professionals, including part-time employees and certain contractors, compared to approximately 1,600 as of January 31, 2025. Revenue Software Revenue, Software Service Revenue, and Professional Service and Other Revenue We derive and report our revenue in three categories: (a) software revenue, including the sale of subscription (i.e., term-based) or perpetual licenses, and appliances that include software that is essential to the product’s functionality, (b) software service revenue, including support revenue and revenue from cloud-based SaaS subscriptions, and (c) professional service and other revenue, including revenue from installation and integration services, customer specific development work, resale of third-party hardware, and consulting and training services. The following table sets forth revenue for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Software $ 161,760 $ 125,815 $ 113,541 29% 11% Software service 187,589 180,872 165,027 4% 10% Professional service and other 50,692 43,945 34,836 15% 26% Total revenue $ 400,041 $ 350,632 $ 313,404 14% 12% 53 COGNYTE SOFTWARE LTD. Software Revenue Software revenue increased approximately $35.9 million, or 29%, from $125.8 million for the year ended January 31, 2025 to $161.8 million for the year ended January 31, 2026. The increase was primarily driven by higher appliance software deliveries and increased perpetual license revenue, reflecting continued customer investments in expanding and upgrading their investigative analytics capabilities. Appliance software revenue increased by $28.6 million while perpetual license revenue increased by $8.6 million. Software Service Revenue Software service revenue increased approximately $6.7 million, or 4%, from $180.9 million for the year ended January 31, 2025 to $187.6 million for the year ended January 31, 2026. The increase reflects support revenue due to a larger installed base and support price increases. Professional Service and Other Revenue Professional service and other revenue increased approximately $6.7 million, or 15%, from $43.9 million for the year ended January 31, 2025 to $50.7 million for the year ended January 31, 2026. The increase was primarily driven by higher deployment services revenue of $5.7 million reflecting the timing and scale of customer implementations associated with increased software deliveries. Cost of Revenue The following table sets forth cost of revenue by software, software service and professional service and other, as well as amortization of acquired technology for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Cost of software revenue $ 24,935 $ 19,988 $ 18,919 25% 6% Cost of software service revenue 44,420 45,184 43,305 (2)% 4% Cost of professional service and other revenue 40,985 38,538 35,776 6% 8% Total cost of revenue $ 110,340 $ 103,710 $ 98,000 6% 6% Cost of Software Revenue Cost of software revenue increased approximately $4.9 million, or 25%, from $20.0 million for the year ended January 31, 2025 to $24.9 million for the year ended January 31, 2026, the increase is driven by $5.0 million higher appliance‑related costs, consistent with increased appliance software revenue. Software revenue gross margins increased from 84% in the year ended January 31, 2025 to 85% in the year ended January 31, 2026 primarily due to improved gross margins on appliance software resulting from scaling, cost efficiencies and a higher perpetual license revenue, which has a significantly high gross margin. Cost of Software Service Revenue Cost of software service revenue decreased approximately $0.8 million, or 2%, from $45.2 million in the year ended January 31, 2025 to $44.4 million in the year ended January 31, 2026 remaining approximately on the same level. Our software service gross margins increased from 75% in the year ended January 31, 2025 to 76% in the year ended January 31, 2026, reflecting improved operating leverage mainly due to efficiency and scale - while the revenue increased by 4%, the cost structure decreased by 2% year over year. Cost of Professional Service and Other Revenue Cost of professional service and other revenue increased by approximately $2.4 million, or 6%, from $38.5 million in the year ended January 31, 2025 to $41.0 million in the year ended January 31, 2026. The increase was primarily due to $2.6 million related to deployment services and $1.3 million related to third-party reselling. The increase is a result of incremental professional service revenue. This increase was offset by $1.5 million decrease related to customer-specific development work costs. Our professional service and other gross margins increased from 12% in the year ended January 31, 2025 to 19% in the year ended January 31, 2026, primarily due to improved deployment efficiency and scale. 54 COGNYTE SOFTWARE LTD. Research and Development The following table sets forth research and development for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Research and development $ 122,336 $ 108,274 $ 107,283 13% 1% Research and development increased, by approximately $14.1 million, or 13%, from $108.3 million in the year ended January 31, 2025 to $122.3 million in the year ended January 31, 2026. The increase was primarily driven by $11.5 million in higher personnel‑related expenses and a $2.3 million reduced capitalized software development cost. Selling, General and Administrative Expenses The following table sets forth selling, general and administrative expenses for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Selling, general and administrative $ 153,651 $ 143,516 $ 125,784 7% 14% Selling, general and administrative expenses increased approximately $10.1 million, or 7%, from $143.5 million in the year ended January 31, 2025 to $153.7 million in the year ended January 31, 2026. The selling and marketing expenses increased approximately $11.6 million, or 12%, from $95.0 million in the year ended January 31, 2025 to $106.6 million in the year ended January 31, 2026. The increase is driven by a strategic decision to expand sales and marketing initiatives. The increase was primarily related to $6.1 million of personnel costs, $2.8 million related to sales and agent commissions mainly due to increase in revenue and regional mix and $3.1 million increase related to other sales and marketing activities such as travel, demos and exhibition costs. The general and administrative expenses decreased approximately $1.5 million, or 3%, from $48.5 million in the year ended January 31, 2025 to $47.1 million in the year ended January 31, 2026. This decrease is driven by absence of certain non‑recurring costs incurred in the prior year, primarily legal expenses in respect of shareholder‑related matters and provision for taxes other than income taxes. Amortization of Other Acquired Intangible Assets The following table sets forth amortization of other acquired intangible assets for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Amortization of other acquired intangible assets $ 453 $ 258 $ 391 76% (34)% Amortization of other acquired intangible assets increased approximately $0.2 million, or 76%, from $0.3 million in the year ended January 31, 2025 to $0.5 million in the year ended January 31, 2026. The increase was attributable to a newly recognized customer relationship intangible asset as part of a business acquisition during the year ended January 31, 2026. See “Item 5.B. Liquidity and Capital Resources—Overview”. 55 COGNYTE SOFTWARE LTD. Other Income, Net The following table sets forth total other income, net for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Interest income $ 2,033 $ 2,470 $ 1,896 (18)% 30% Interest expense (194) (100) (16) 94% 525% Other (expense) income, net: Gains on business divestiture $ — $ — $ 4,768 — (100)% Foreign currency losses (3,817) (1,398) (846) 173% 65% Gains (losses) on derivatives 595 178 (330) 235% 154% Other expense, net (536) (394) (677) 36% (42)% Other (expense) income , net (3,758) (1,614) 2,915 133% (155)% Total other (expense) income, net $ (1,919) $ 756 $ 4,795 (354)% (84)% Total other income, net, decreased by $2.7 million from income of $0.8 million in the year ended January 31, 2025 to $1.9 million expense in the year ended January 31, 2026. This decrease was mainly due to a net increase in foreign currency losses of $2.4 million resulting from fluctuations in U.S. dollar relative to other foreign currencies, primarily related to the New Israeli Shekel, Euro, Brazilian real and Singapore dollar. Provision for Income Taxes The following table sets forth our provision for income taxes for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Provision (benefit) for income taxes $ 6,729 $ 2,864 $ (1,614) 135% (277)% Our effective income tax rate was 59.3% for the year ended January 31, 2026, compared to an effective income tax rate of (65.5)% for the year ended January 31, 2025. For the year ended January 31, 2026, our change in effective income tax rate compared to the U.S. federal statutory income tax rate of 21.0% is primarily due to $3.1 million increase in valuation allowances related to Israeli entities, $4.4 million U.S. cross-border taxes, $1.0 million of stock-based compensation, and $1.0 million of foreign withholding taxes, net of $4.8 million of tax credits and other taxes, and the release of $0.9 million of tax contingencies. For the year ended January 31, 2025, our change in effective income tax rate compared to the U.S. federal statutory income tax rate of is primarily due to $7.6 million increase in valuation allowances related to Israeli entities and $1.0 million of stock-based compensation, net of $3.7 million of non-U.S. tax rate differential, and the release of $2.0 million of tax contingencies. Net income attributable to noncontrolling interest The following table sets forth the net income attributable to noncontrolling interest for the years ended January 31, 2026, 2025, and 2024: Year Ended January 31, % Change (in thousands) 2026 2025 2024 2026-2025 2025-2024 Net income attributable to noncontrolling interest $ 5,251 $ 4,817 $ 3,925 9% 23% Total net income attributable to noncontrolling interest, increased by $0.4 million from $4.8 million in the year ended January 31, 2025 to $5.3 million income in the year ended January 31, 2026. This increase was mainly due to higher profit in the relevant joint venture. 56 COGNYTE SOFTWARE LTD. 5.B. 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 periodically collected 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 and benefits, as well as general operating expenses for material suppliers, travel, marketing, facilities, overhead costs, taxes and capital expenditure. Cash generated from operations, along with our existing cash, cash equivalents, and short-term investments, are our primary sources of operating liquidity. On December 1, 2022 we completed the sale of our SIS business to Volaris group (“Volaris”).As consideration for the sale, we received $42.4 million in cash and $4.7 million in hold back which was paid during the year ended January 31, 2024. The sale included equity interests, assets and liabilities attributable to the SIS business, for a total consideration of $47.1 million, plus a performance based earn-out which was not achieved. The sale price was subject to adjustment based on changes in actual closing net working capital. The sale price was adjusted during the year ended January 31, 2024 based on changes in actual closing net working capital and the completion of asset transfer which resulted in an additional pre-tax gain of $4.8 million recorded within other income. For proceeds received during the year ended January 31, 2025 please refer to our “Consolidated Statements of Cash Flows”. Based on past performance and current expectations, we believe that our cash, cash equivalents, short-term investments and cash generated from operations will be sufficient to meet anticipated operating costs, working capital needs, ordinary course capital expenditures, research and development spending, share repurchase programs, and other commitments for at least the next twelve months. We have historically expanded our business in part by investing in strategic growth initiatives, including acquisitions of products, technologies, and businesses. We have used cash as consideration for all of our historical business acquisitions. There were no business acquisitions during the year ended January 31, 2025. During the year ended January 31, 2026, Cognyte acquired 100% of the equity of GroupSense, Inc., a digital risk protection services company, for total consideration of approximately $4.4 million, consisting entirely of cash paid at closing. The acquisition agreement also includes contingent consideration of up to $5.0 million, payable upon the achievement of specified post‑closing performance targets. The fair value of the contingent consideration was assessed as zero at the acquisition date and remained zero as of January 31, 2026, as achievement of the relevant targets was not expected. Our off-balance sheet purchase obligations totaled approximately $76.5 million as of January 31, 2026. These obligations are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transactions. Agreements to purchase goods or services that have cancellation provisions with no penalties are excluded from these purchase obligations. In the normal course of business, we provide certain customers with financial performance guarantees, which are generally backed by bank guarantees and, in certain cases, by standby letters of credit. At January 31, 2026, we had approximately $31 million of outstanding bank guarantees and letters of credit relating primarily to these performance guarantees. In addition, the Company provided bank guarantees in the amount $4.3 million related to its offices in Israel and exports transaction towards the Israeli Chamber of Commerce. We have two revolving credit facilities that are effective through January 31, 2028 which provide for up to $65.0 million in total borrowings. As of January 31, 2026 and 2025, we do not have any withdrawn funds from the revolving credit facilities. Interest rates on both facilities are based on Term SOFR plus a margin of 3.26% - 3.31%. We did not incur interest expenses related to our revolving credit facilities for the years ended January 31, 2026, 2025 and 2024. In addition, we are required to pay a non‑utilization fee with respect to unused credit under the credit facilities. For the years ended January 31, 2026, 2025 and 2024 the non‑utilization fee rate was 0.75% per annum. Following the extension of the credit facilities signed in December 2025, the non‑utilization fee rate were reduced to 0.3% - 0.35% per annum. The non‑utilization fee incurred with respect to unused credit under the credit facilities was $0.5 million, $0.5 million and $0.7 million for the years ended January 31, 2026, 2025 and 2024, respectively. 57 COGNYTE SOFTWARE LTD. On November 12, 2024, we announced the adoption of our share repurchase program in an aggregate amount of up to $20 million, which was authorized for a period of 18 months, through June 12, 2026, and was completed during the fiscal year ended January 31, 2026. On July 14, 2025, we announced that our board of directors approved a new share repurchase program authorizing the repurchase of up to an additional $20 million of our ordinary shares over a period of 18 months, through January 14, 2027, which may be executed in compliance with Rule 10b-18 and Rule 10b5-1 under the Exchange Act. During the fiscal year ended January 31, 2025, we repurchased 585,728 ordinary shares for an aggregate purchase price of approximately $5.3 million. During the fiscal year ended January 31, 2026, we repurchased additional 2,253,200 ordinary shares for an aggregate purchase price of approximately $21.4 million. For more information about the share repurchase programs, see “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.” We continually examine our options with respect to terms and sources of existing and future short-term and long-term capital resources to enhance our operating results and to ensure that we retain financial flexibility. Our consolidated balance sheet at January 31, 2026 included $5.7 million of non-current tax reserves, including interest and penalties of $1.4 million, net of related benefits for uncertain tax positions. We regularly assess the adequacy of our provisions for income tax contingencies. As a result, we may adjust the reserves for unrecognized tax benefits for the impact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of expiration. Our cash balances as of January 31, 2026 include cash and cash equivalents held by our consolidated subsidiaries, including a joint venture where our partner holds a noncontrolling interest. The distribution of dividends to us by our consolidated subsidiaries may be subject to restrictions on the payment of dividends in the jurisdiction in which such subsidiaries are incorporated. In addition, the distribution of dividends by the foregoing joint venture is subject to the consent of our joint venture partner, and upon the distribution of any dividends by such joint venture, a portion of such dividend will be paid to the partner holding the noncontrolling interest. See “Item 5.B. Liquidity and Capital Resources—Financing Activities” and our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report. Our future capital requirements will depend on many factors, including our rate of revenue growth, timing of collection, the expansion of our sales and marketing activities, the timing and extent of spending to support product development efforts and expansion into new geographic locations, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our offerings, and our use of cash to pay for acquisitions and share repurchase plan, if any. Our liquidity could be negatively impacted by a decrease in demand for our products and service and support, including the impact of changes in customer buying behavior due to circumstances over which we have no control. If we determine to make additional business acquisitions or otherwise require additional funds, we may need to raise additional capital, which could involve the issuance of equity or debt securities or expansion of our current credit facility. As of January 31, 2026, we did not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a significant future effect on our changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Cash Flow Activity for the Years Ended January 31, 2026 and 2025 The following table summarizes our total cash, cash equivalents, restricted cash, cash equivalents, and bank time deposits, and short-term investments, as of January 31, 2026 and 2025: January 31, (in thousands) 2026 2025 Cash and cash equivalents $ 116,878 $ 112,719 Restricted cash and cash equivalents, and restricted bank time deposits — 381 Total cash and cash equivalents, restricted cash and cash equivalents, and restricted bank time deposits $ 116,878 $ 113,100 58 COGNYTE SOFTWARE LTD. A summary of the sources and uses of cash, cash equivalents, restricted cash and restricted cash equivalents for the years ended January 31, 2026, 2025, and 2024 is as follows: Year Ended January 31, (in thousands) 2026 2025 2024 Net cash provided by operating activities $ 40,331 $ 46,782 $ 34,561 Net cash (used in) provided by investing activities (14,091) (5,691) 9,358 Net cash used in financing activities (24,846) (7,952) (2,452) Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents 2,580 (631) (115) Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 3,974 $ 32,508 $ 41,352 Operating Activities Net cash generated by operating activities decreased by $6.5 million, from $46.8 million generated during the year ended January 31, 2025 to $40.3 million generated during the year ended January 31, 2026. This decrease was primarily due to unusually high collections of overdue account receivables and accelerated timing of certain customer collections during the year ended January 31, 2025. Our cash flows from operating activities may vary from period to period as a result of several factors, including fluctuations in operating results; the timing of billings and collections, particularly the collection of overdue receivables; the timing of payments to suppliers and other service providers; the timing of employee bonus payments; and cash tax payments. These factors may cause our operating cash flows to differ materially from our operating income in any given period. Investing Activities During the year ended January 31, 2026, our investing activities used $14.1 million of net cash, including $10.6 million of payments for purchases of property and equipment, capitalized software development costs and $4.3 million of payment for acquisition of business, net of cash acquired. During the year ended January 31, 2025, our investing activities used $5.7 million of net cash, including $13.2 million of payments for purchases of property, and equipment, capitalized software development costs. The cash used in these investing activities was partially offset by $5 million of proceeds received from the divestiture of our SIS business , net of cost, and $2.4 million cash provided by restricted bank time deposits, including long-term portion. We had no significant commitments for capital expenditures as of January 31, 2026. Our cash flow from investing activities can fluctuate from period to period mainly due to purchases of property and equipment and our short-term investment policy. Financing Activities For the year ended January 31, 2026, our financing activities used $24.8 million of net cash, including $21.4 million related to repurchase of ordinary shares, please see “Item 16.E. Purchases of Equity Securities by The Issuer and Affiliated Purchases”, and $3.1 million related to dividends paid to noncontrolling interest holders in our joint venture. For the year ended January 31, 2025, our financing activities used $8.0 million of net cash, including $5.3 million related to repurchase of ordinary shares, please see “Item 16.E. Purchases of Equity Securities by The Issuer and Affiliated Purchases”, and $2.6 million related to dividends paid to noncontrolling interest holders in our joint venture. Foreign Currency, Derivatives, and Hedging 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 payroll and payroll-related expenses denominated in New Israeli Shekels. These contracts are generally limited to durations of approximately twelve months or less. We have also periodically entered into foreign currency forward contracts to manage exposures resulting from forecasted customer collections denominated in currencies other than the respective entity’s functional currency and exposures from cash, cash equivalents, short-term investments and accounts payable denominated in currencies other than the applicable functional currency. 59 COGNYTE SOFTWARE LTD. During the years ended January 31, 2026 and 2025, we recorded a $0.6 million net gain and $0.2 million net gain, respectively, on foreign currency forward contracts not designated as hedges for accounting purposes. We had $8.6 million of net unrealized gains for the year ended January 31, 2026 and $2.3 million of net unrealized gains for the year ended January 31, 2025 on outstanding foreign currency forward contracts. The notional amounts of our forward contract totaled $43.1 million and $60.9 million for the years ended January 31, 2026 and 2025, respectively. The counterparties to our foreign currency forward contracts are major commercial banks. While we believe the risk of counterparty nonperformance is not material, past disruptions in the global financial markets have impacted some of the financial institutions with which we do business. A sustained decline in the financial stability of financial institutions as a result of disruption in the financial markets could affect our ability to secure creditworthy counterparties for our foreign currency hedging programs. 5.C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC. Our gross research and development spending totaled $122.3 million, $108.3 million and $107.3 million for the years ended January 31, 2026, 2025 and 2024 respectively. As described in the “Risk Factors” section and elsewhere in this Form 20-F, government regulations and policies can make developing or marketing new technologies expensive or uncertain due to various restrictions on trade and technology transfers. See “Item 3. Key Information—3.D. Risk Factors” and “Item 4. Information on the Company—4.B. Business Overview—Government Regulations.” For further information on our research and development policies and additional product information, see “Item 4. Information on the Company— 4.B. Business Overview.” 5.D. TREND INFORMATION Please see “—5.A. Operating Results” and “Item 4. Information on the Company—4.B. Business Overview—Demand Trends” for trend information. 5.E. CRITICAL ACCOUNTING ESTIMATES Please see “—5.A. Operating Results—Critical Accounting Estimates” for critical accounting estimates.