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Cognyte Reports Strong Second Quarter Fiscal 2025 Financial Results

Empowering customers with AI-driven solutions to confront evolving threats, driving follow-on orders and new customer acquisition

Raises fiscal 2025 guidance once again

Cognyte Software Ltd. (NASDAQ: CGNT) (the “Company,” “Cognyte,” “we,” “us” and “our”), a global leader in investigative analytics software, today announced results for the three and six months ended July 31, 2024 (“Q2 FYE25” and “H1 FYE25”).

Q2 FYE25 Financial Highlights

 

Three Months Ended

July 31, 2024

 

Three Months Ended

July 31, 2023

(in thousands, except per share data)

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

Revenue

$84,413

 

$84,413

 

$77,053

 

$77,053

Gross Margin

70.6%

 

71.3%

 

68.7%

 

69.2%

Basic and diluted earnings (loss) per share (“EPS”)*

$(0.03)

 

$0.05

 

$(0.13)

 

$(0.03)

H1 FYE25 Financial Highlights

 

Six Months Ended

July 31, 2024

 

Six Months Ended

July 31, 2023

(in thousands, except per share data)

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

Revenue

$167,127

 

$167,127

 

$150,319

 

$150,431

Gross Margin

70.6%

 

71.2%

 

68.3%

 

68.8%

Basic and diluted EPS*

$(0.10)

 

$0.02

 

$(0.26)

 

$(0.14)

 

*Our non-GAAP income taxes for prior period were adjusted as detailed further under footnote 3.

“We delivered strong second quarter results as we continued to execute on our growth strategy and business plan,” said Elad Sharon, Cognyte’s chief executive officer. “A healthy market and the tangible operational outcomes our solutions generate for customers are resulting in follow-on orders and driving new customer acquisitions.”

He added, “At the core of our work is our mission to make the world a safer place. Our leading AI-driven solutions empower customers to confront significant, evolving threats, accelerate investigations, enable faster decision-making and mitigate a wide range of security challenges.”

“Cognyte has grown revenue by more than 11% in the first six months of fiscal 2025,” said David Abadi, Cognyte’s chief financial officer. “We delivered $13.3 million in Adjusted EBITDA, marking a meaningful improvement compared to almost breakeven results in the first half of the prior fiscal year. Our advanced solutions deliver significant value to our customers, driving demand. As a result of market conditions and our strong execution, we are once again raising our full year outlook.”

FYE25 Outlook

Our non-GAAP outlook for the year ending January 31, 2025 (“FYE25” and “Fiscal 2025”) is as follows:

  • Revenue: $347 million at the midpoint with a range of +/-2%, representing approximately 11% growth from previous year revenue.
  • Adjusted EBITDA: Approximately $25 million at the midpoint of our revenue outlook.
  • Diluted EPS: Loss of $0.03 at the midpoint of our revenue outlook.

Our non-GAAP outlook for FYE25 excludes the following GAAP measures which we are able to quantify with reasonable certainty, as described further below under “Supplemental Information About non-GAAP Financial Measures and Operating Metrics”:

  • Amortization of intangible assets of approximately $0.3 million.

Our non-GAAP outlook for FYE25 excludes the following GAAP measures for which we are able to provide a range of probable significance:

  • Stock-based compensation is expected to be between approximately $17.0 and $19.0 million, assuming market prices for our ordinary shares are generally consistent with current levels.

For additional information about our expectations for FYE25, please refer to the Q2 FYE25 conference call we will conduct on September 10, 2024.

Our non-GAAP outlook does not include the potential impact of any 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 effort, 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 and six months ended July 31, 2024, and 2023, respectively, for the GAAP measures excluded from our non-GAAP outlook appear in Table 4 of this press release.

Conference Call Information

We will conduct a conference call today at 8:30 a.m. ET to discuss our results for the three months ended July 31, 2024. A real-time webcast of the conference call with presentation slides will be available in the Investor Relations section of Cognyte’s website. Those interested in participating in the question-and-answer session need to register here to receive the dial-in numbers and unique PIN to access the call seamlessly. It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call). An archived webcast of the conference call will also be available in the “Investors” section of the company’s website.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of non-GAAP financial measures presented for completed periods to the most directly comparable financial measures prepared in accordance with GAAP, please see the tables below as well as “Supplemental Information About Non-GAAP Financial Measures” at the end of this press release.

About Cognyte Software Ltd.

Cognyte Software Ltd. is a global leader in investigative analytics software that empowers a variety of government and other organizations with Actionable Intelligence for a Safer World™. Our open interface software is designed to help customers accelerate and improve the effectiveness of investigations and decision-making. Hundreds of customers rely on our solutions to accelerate and conduct investigations and derive insights, with which they identify, neutralize and tackle threats to national security and address different forms of criminal and terror activities. Learn more at www.cognyte.com.

Caution About Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the United States Securities Exchange Act of 1934. Forward-looking statements include statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Cognyte. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. These forward-looking statements do not guarantee future performance and 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 or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions; risks related to government contract dependency, including procurement risks, risks associated with operational challenges amid the Hamas and other terrorist organizations’ attack on Israel on October 7, 2023 and Israel’s war against them; risks related to geopolitical changes and investor visibility constraints; risks related to the impact of inflation and related volatility on our financial performance; risks relating to adverse changes to the regulatory constraints to which we are subject; risks related to the impact of disruptions to the global supply chain; risks resulting from health epidemics or pandemics or actions taken in response to such pandemics; risks associated with customer concentration and challenges associated with our ability to accurately forecast revenue and expenses; risks associated with political and reputational factors related to our business or operations; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; risks relating to proprietary rights infringement claims; risks relating to defects, operational problems, or vulnerability to cyber-attacks of our products or any of the components used in our products; risks related to the strengths of our intellectual property rights protection; risks that we may be unable to establish and maintain relationships with key resellers, partners, and system integrators and risks associated with our reliance on third-party suppliers for certain components, products or services; risks due to the aggressive competition in all of our markets; challenges associated with our long sales cycles and with the sophisticated nature of our solutions; risks associated with our ability or costs to retain, recruit and train qualified personnel; risks relating to our ability to properly manage investments in our business and operations, execute on growth or strategic initiatives; risks associated with acquisitions, strategic investments, partnerships or alliances; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures or disruptions; risks associated with the mishandling or perceived mishandling of sensitive, confidential or classified information; risks associated with our failure to comply with laws; risks associated with our credit facilities or that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms; risks associated with changing tax laws and regulations, tax rates, and the continuing availability of expected tax benefits in the countries in which we operate; risks associated with our significant international operations, including due to our Israeli operations, fluctuations in foreign exchange rates, and exposure to regions subject to political or economic instability; risks associated with complex and changing regulatory environments relating to our operations and the markets we operate in; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls and personnel for our current and future operations and reporting needs; risks associated with our limited operating history as an independent public company; risks related to the tax treatment of our spin-off from Verint; and risks associated with different corporate governance requirements applicable to Israeli companies and risks associated with being a foreign private issuer. ; and other risks set forth and in Section 3.D - “Risk Factors” in our latest annual report on Form 20-F for the fiscal year ended January 31, 2024, filed with the Securities and Exchange Commission (the "SEC") on April 9, 2024, and in our subsequent filings with the SEC. In addition, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time. It is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements that we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this release are inherently uncertain and may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely upon forward-looking statements as predictions of future events. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason.

 

Table 1

COGNYTE SOFTWARE LTD.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Six Months Ended

July 31,

 

Three Months Ended

July 31,

(in thousands except per share data)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenue:

 

 

 

 

 

 

 

 

Software

 

$

58,377

 

 

$

51,892

 

 

$

26,932

 

 

$

26,520

 

Software service

 

 

89,693

 

 

 

81,313

 

 

 

45,338

 

 

 

40,220

 

Professional service and other

 

 

19,057

 

 

 

17,114

 

 

 

12,143

 

 

 

10,313

 

Total revenue

 

 

167,127

 

 

 

150,319

 

 

 

84,413

 

 

 

77,053

 

Cost of revenue:

 

 

 

 

 

 

 

 

Software

 

 

10,036

 

 

 

7,217

 

 

 

4,186

 

 

 

3,880

 

Software service

 

 

21,888

 

 

 

22,641

 

 

 

11,253

 

 

 

11,569

 

Professional service and other

 

 

17,197

 

 

 

17,745

 

 

 

9,350

 

 

 

8,657

 

Total cost of revenue

 

 

49,121

 

 

 

47,603

 

 

 

24,789

 

 

 

24,106

 

Gross profit

 

 

118,006

 

 

 

102,716

 

 

 

59,624

 

 

 

52,947

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development, net

 

 

53,005

 

 

 

54,850

 

 

 

26,180

 

 

 

27,103

 

Selling, general and administrative

 

 

68,528

 

 

 

60,110

 

 

 

34,762

 

 

 

31,310

 

Amortization of other acquired intangible assets

 

 

145

 

 

 

181

 

 

 

72

 

 

 

91

 

Total operating expenses

 

 

121,678

 

 

 

115,141

 

 

 

61,014

 

 

 

58,504

 

Operating loss

 

 

(3,672

)

 

 

(12,425

)

 

 

(1,390

)

 

 

(5,557

)

Other income, net:

 

 

 

 

 

 

 

 

Interest income

 

 

1,100

 

 

 

763

 

 

 

532

 

 

 

394

 

Interest expense

 

 

(39

)

 

 

(10

)

 

 

(29

)

 

 

(7

)

Other income (loss), net:

 

 

284

 

 

 

836

 

 

 

86

 

 

 

(108

)

Total other income, net

 

 

1,345

 

 

 

1,589

 

 

 

589

 

 

 

279

 

Loss before provision for income taxes

 

 

(2,327

)

 

 

(10,836

)

 

 

(801

)

 

 

(5,278

)

Provision for income taxes

 

 

2,129

 

 

 

5,105

 

 

 

54

 

 

 

3,236

 

Net loss

 

 

(4,456

)

 

 

(15,941

)

 

 

(855

)

 

 

(8,514

)

Net income attributable to noncontrolling interest

 

 

2,595

 

 

 

2,238

 

 

 

1,079

 

 

 

912

 

Net loss attributable to Cognyte Software Ltd.

 

$

(7,051

)

 

$

(18,179

)

 

$

(1,934

)

 

$

(9,426

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to Cognyte Software Ltd.

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.10

)

 

$

(0.26

)

 

$

(0.03

)

 

$

(0.13

)

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

71,425

 

 

 

69,528

 

 

 

71,800

 

 

 

70,134

 

 

Table 2

COGNYTE SOFTWARE LTD.

Condensed Consolidated Balance Sheets

 

 

 

July 31,

 

January 31,

 

 

 

2024

 

 

 

2024

 

(in thousands)

 

(Unaudited)

 

(Audited)

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

91,741

 

 

$

74,477

 

Restricted cash and cash equivalents and restricted bank time deposits

 

 

7,811

 

 

 

8,666

 

Accounts receivable, net of allowance for credit losses of $3 million and $2.7 million, respectively

 

 

91,563

 

 

 

113,260

 

Contract assets, net of allowance for credit losses of $1.4 million

 

 

8,885

 

 

 

8,859

 

Inventories

 

 

23,151

 

 

 

24,584

 

Prepaid expenses and other current assets

 

 

33,488

 

 

 

35,135

 

Total current assets

 

 

256,639

 

 

 

264,981

 

Property and equipment, net

 

 

27,013

 

 

 

24,384

 

Operating lease right-of-use assets

 

 

34,803

 

 

 

33,833

 

Goodwill

 

 

126,242

 

 

 

126,563

 

Intangible assets, net

 

 

113

 

 

 

258

 

Deferred income taxes

 

 

2,688

 

 

 

2,928

 

Other assets

 

 

19,520

 

 

 

19,135

 

Total assets

 

$

467,018

 

 

$

472,082

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

25,916

 

 

$

20,863

 

Accrued expenses and other current liabilities

 

 

75,113

 

 

 

75,826

 

Contract liabilities

 

 

91,410

 

 

 

93,778

 

Total current liabilities

 

 

192,439

 

 

 

190,467

 

Long-term contract liabilities

 

 

19,995

 

 

 

29,362

 

Deferred income taxes

 

 

2,006

 

 

 

1,964

 

Operating lease liabilities

 

 

29,499

 

 

 

27,950

 

Other liabilities

 

 

6,824

 

 

 

7,606

 

Total liabilities

 

 

250,763

 

 

 

257,349

 

Commitments and Contingencies

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock - $0 par value; Authorized 300,000,000 shares. Issued and outstanding 71,894,969 and 70,996,535 at July 31, 2024 and January 31, 2024, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

364,052

 

 

 

355,097

 

Accumulated deficit

 

 

(151,643

)

 

 

(144,592

)

Accumulated other comprehensive loss

 

 

(15,627

)

 

 

(12,630

)

Total Cognyte Software Ltd. stockholders' equity

 

 

196,782

 

 

 

197,875

 

Noncontrolling interest

 

 

19,473

 

 

 

16,858

 

Total stockholders’ equity

 

 

216,255

 

 

 

214,733

 

Total liabilities and stockholders’ equity

 

$

467,018

 

 

$

472,082

 

 

Table 3

COGNYTE SOFTWARE LTD.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six months ended

July 31,

(in thousands)

 

 

2024

 

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(4,456

)

 

$

(15,941

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

7,179

 

 

 

6,855

 

Allowance for credit losses

 

 

1,456

 

 

 

769

 

Gain from business divestiture

 

 

 

 

 

23

 

Stock-based compensation, excluding cash-settled awards

 

 

8,955

 

 

 

4,628

 

Provision from deferred income taxes

 

 

105

 

 

 

124

 

Non-cash gains on derivative financial instruments, net

 

 

(113

)

 

 

(291

)

Other non-cash items, net

 

 

1,061

 

 

 

646

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

25,958

 

 

 

23,300

 

Contract assets

 

 

(5,940

)

 

 

(3,826

)

Inventories

 

 

(475

)

 

 

(2,463

)

Prepaid expenses and other assets

 

 

(6,182

)

 

 

6,545

 

Accounts payable and accrued expenses

 

 

464

 

 

 

1,683

 

Contract liabilities

 

 

(11,134

)

 

 

2,666

 

Other liabilities

 

 

(982

)

 

 

785

 

Other, net

 

 

(100

)

 

 

(258

)

Net cash provided by operating activities

 

 

15,796

 

 

 

25,245

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(2,861

)

 

 

(3,618

)

Purchases of short-term investments

 

 

 

 

 

(38,904

)

Maturities and sales of short-term investments

 

 

 

 

 

32,156

 

Settlements of derivative financial instruments not designated as hedges

 

 

141

 

 

 

(359

)

Cash paid for capitalized software development costs

 

 

(1,385

)

 

 

(1,108

)

Proceeds from Business divestiture, net of cost

 

 

4,943

 

 

 

386

 

Change in restricted bank time deposits, including long-term portion

 

 

1,389

 

 

 

(105

)

Net cash provided by (used in) investing activities

 

 

2,227

 

 

 

(11,552

)

Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents

 

 

(289

)

 

 

35

 

Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

17,734

 

 

 

13,728

 

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period

 

 

80,396

 

 

 

39,044

 

Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period

 

$

98,130

 

 

$

52,772

 

 

 

 

 

 

Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents at end of period:

 

 

 

 

Cash and cash equivalents

 

$

91,741

 

 

$

48,472

 

Restricted cash and cash equivalents included in restricted cash and cash equivalents and restricted bank time deposits

 

 

6,382

 

 

 

4,200

 

Restricted cash and cash equivalents included in other assets

 

 

7

 

 

 

100

 

Total cash, cash equivalents, restricted cash, and restricted cash equivalents

 

$

98,130

 

 

$

52,772

 

 

Table 4

COGNYTE SOFTWARE LTD.

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited)

 

 

Six Months Ended July 31,

 

Three Months Ended

July 31,

(in thousands, except per share data)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenue

Total GAAP revenue

$

167,127

 

 

$

150,319

 

 

$

84,413

 

 

$

77,053

 

Revenue adjustments

 

 

 

 

112

 

 

 

 

 

 

 

Total non-GAAP revenue

$

167,127

 

 

$

150,431

 

 

$

84,413

 

 

$

77,053

 

 

 

 

 

 

 

 

 

Gross profit and gross margin

 

 

 

 

 

 

 

GAAP gross profit

 

118,006

 

 

 

102,716

 

 

 

59,624

 

 

 

52,947

 

GAAP gross margin

 

70.6

%

 

 

68.3

%

 

 

70.6

%

 

 

68.7

%

Revenue adjustments

 

 

 

 

112

 

 

 

 

 

 

 

Stock-based compensation expenses

 

976

 

 

 

585

 

 

 

562

 

 

 

272

 

Restructuring expenses, net

 

 

 

 

106

 

 

 

 

 

 

106

 

Non-GAAP gross profit

$

118,982

 

 

$

103,519

 

 

$

60,186

 

 

$

53,325

 

Non-GAAP gross margin

 

71.2

%

 

 

68.8

%

 

 

71.3

%

 

 

69.2

%

 

 

 

 

 

 

 

 

Research and development, net

 

 

 

 

 

 

 

GAAP research and development, net

 

53,005

 

 

 

54,850

 

 

 

26,180

 

 

 

27,103

 

As a percentage of GAAP revenue

 

31.7

%

 

 

36.5

%

 

 

31.0

%

 

 

35.2

%

Stock-based compensation expenses

 

(880

)

 

 

(1,098

)

 

 

(439

)

 

 

(626

)

Restructuring expenses, net

 

(123

)

 

 

(143

)

 

 

(79

)

 

 

(64

)

Non-GAAP research and development, net

$

52,002

 

 

$

53,609

 

 

$

25,662

 

 

$

26,413

 

As a percentage of non-GAAP revenue

 

31.1

%

 

 

35.6

%

 

 

30.4

%

 

 

34.3

%

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses

 

68,528

 

 

 

60,110

 

 

 

34,762

 

 

 

31,310

 

As a percentage of GAAP revenue

 

41.0

%

 

 

40.0

%

 

 

41.2

%

 

 

40.6

%

Stock-based compensation expenses

 

(7,099

)

 

 

(2,945

)

 

 

(4,062

)

 

 

(1,815

)

Restructuring expenses, net

 

(85

)

 

 

(1,483

)

 

 

(33

)

 

 

(1,364

)

Separation (expenses) income

 

(92

)

 

 

921

 

 

 

(87

)

 

 

(103

)

Other adjustments

 

(544

)

 

 

(241

)

 

 

(499

)

 

 

(188

)

Non-GAAP selling, general and administrative expenses

$

60,708

 

 

$

56,362

 

 

$

30,081

 

 

$

27,840

 

As a percentage of non-GAAP revenue

 

36.3

%

 

 

37.5

%

 

 

35.6

%

 

 

36.1

%

 

 

 

 

 

 

 

 

Operating income (loss), operating margin and adjusted EBITDA

 

 

 

 

GAAP Operating loss

 

(3,672

)

 

 

(12,425

)

 

 

(1,390

)

 

 

(5,557

)

GAAP operating margin

 

(2.2

)%

 

 

(8.3

)%

 

 

(1.6

)%

 

 

(7.2

)%

Revenue adjustments

 

 

 

 

112

 

 

 

 

 

 

 

Amortization of other acquired intangible assets

 

145

 

 

 

181

 

 

 

73

 

 

 

91

 

Stock-based compensation expenses

 

8,955

 

 

 

4,628

 

 

 

5,063

 

 

 

2,713

 

Restructuring expenses

 

208

 

 

 

1,732

 

 

 

112

 

 

 

1,534

 

Separation expenses (income), net

 

92

 

 

 

(921

)

 

 

87

 

 

 

103

 

Other adjustments

 

544

 

 

 

241

 

 

 

499

 

 

 

188

 

Non-GAAP operating income (loss)

$

6,272

 

 

$

(6,452

)

 

$

4,444

 

 

$

(928

)

Depreciation and amortization

 

7,022

 

 

 

6,502

 

 

 

3,828

 

 

 

3,255

 

 

Six Months Ended July 31,

 

Three Months Ended

July 31,

(in thousands, except per share data)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Adjusted EBITDA

$

13,294

 

 

$

50

 

 

$

8,272

 

 

$

2,327

 

Non-GAAP operating margin

 

3.8

%

 

 

(4.3

)%

 

 

5.3

%

 

 

(1.2

)%

Adjusted EBITDA margin

 

8.0

%

 

 

0.0

%

 

 

9.8

%

 

 

3.0

%

 

 

 

 

 

 

 

 

Other income reconciliation:

 

 

 

 

 

 

 

GAAP other income, net

 

1,345

 

 

 

1,589

 

 

 

589

 

 

 

279

 

Business divestiture

 

12

 

 

 

165

 

 

 

 

 

 

4

 

Non-GAAP other income , net

$

1,357

 

 

$

1,754

 

 

$

589

 

 

$

283

 

 

 

 

 

 

 

 

 

Tax provision reconciliation

 

 

 

 

GAAP provision

 

2,129

 

 

 

5,105

 

 

 

54

 

 

 

3,236

 

Effective income tax rate

 

(91.5

)%

 

 

(47.1

)%

 

 

(6.7

)%

 

 

(61.3

)%

Non-GAAP tax adjustments (footnote 3)

 

1,544

 

 

 

(2,268

)

 

 

45

 

 

 

(2,592

)

Non-GAAP provision (footnote 3)

$

3,673

 

 

$

2,837

 

 

$

99

 

 

$

644

 

Non-GAAP effective income tax rate (footnote 3)

 

48.1

%

 

 

(60.4

)%

 

 

2.0

%

 

 

(99.8

)%

 

 

 

 

 

 

 

 

Net income (loss) attributable to Cognyte Software Ltd. reconciliation

 

 

 

 

 

 

GAAP Net loss attributable to Cognyte Software Ltd.

$

(7,051

)

 

$

(18,179

)

 

$

(1,934

)

 

$

(9,426

)

Revenue adjustments

 

 

 

 

112

 

 

 

 

 

 

 

Stock-based compensation expenses

 

8,955

 

 

 

4,628

 

 

 

5,063

 

 

 

2,713

 

Restructuring expenses, net

 

208

 

 

 

1,732

 

 

 

112

 

 

 

1,534

 

Separation expenses (income), net

 

92

 

 

 

(921

)

 

 

87

 

 

 

103

 

Non-GAAP tax adjustments (footnote 3)

 

(1,544

)

 

 

2,268

 

 

 

(45

)

 

 

2,592

 

Other Non-GAAP adjustments

 

701

 

 

 

587

 

 

 

572

 

 

 

283

 

Total adjustments (footnote 3)

 

8,412

 

 

 

8,406

 

 

 

5,789

 

 

 

7,225

 

Non-GAAP net income (loss) attributable to Cognyte Software Ltd. (footnote 3)

 

1,361

 

 

 

(9,773

)

 

 

3,855

 

 

 

(2,201

)

 

 

 

 

 

 

 

 

Table comparing GAAP diluted net loss per share attributable to Cognyte Software Ltd. and Non-GAAP diluted net income (loss) per share attributable to Cognyte Software Ltd.

GAAP diluted net loss per share attributable to Cognyte Software Ltd.

$

(0.10

)

 

$

(0.26

)

 

$

(0.03

)

 

$

(0.13

)

Non-GAAP diluted net income (loss) per share attributable to Cognyte Software Ltd. (footnote 3)

$

0.02

 

 

$

(0.14

)

 

$

0.05

 

 

$

(0.03

)

GAAP weighted-average shares used in computing diluted net income (loss) per share attributable to Cognyte Software Ltd.

 

71,425

 

 

 

69,528

 

 

 

71,800

 

 

 

70,134

 

Additional weighted-average shares applicable to non-GAAP diluted net income per share attributable to Cognyte Software Ltd.

 

1,388

 

 

 

 

 

 

1,391

 

 

 

 

Non-GAAP diluted weighted-average shares used in computing net income (loss) per share attributable to Cognyte Software Ltd.

 

72,813

 

 

 

69,528

 

 

 

73,191

 

 

 

70,134

 

 

 

 

 

 

 

 

 

Table of reconciliation from GAAP Net loss attributable to Cognyte Software Ltd. to adjusted EBITDA

GAAP Net loss attributable to Cognyte Software Ltd.

$

(7,051

)

 

$

(18,179

)

 

$

(1,934

)

 

$

(9,426

)

As a percentage of GAAP revenue

 

(4.2

)%

 

 

(12.1

)%

 

 

(2.3

)%

 

 

(12.2

)%

 

 

 

 

 

 

 

 

 

Six Months Ended July 31,

 

Three Months Ended

July 31,

(in thousands, except per share data)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income attributable to noncontrolling interest

 

2,595

 

 

 

2,238

 

 

 

1,079

 

 

 

912

 

GAAP provision

 

2,129

 

 

 

5,105

 

 

 

54

 

 

 

3,236

 

GAAP other income, net

 

(1,345

)

 

 

(1,589

)

 

 

(589

)

 

 

(279

)

Depreciation and amortization

 

7,022

 

 

 

6,502

 

 

 

3,828

 

 

 

3,255

 

Stock-based compensation expenses

 

8,955

 

 

 

4,628

 

 

 

5,063

 

 

 

2,713

 

Restructuring expenses

 

208

 

 

 

1,732

 

 

 

112

 

 

 

1,534

 

Separation expenses (income), net

 

92

 

 

 

(921

)

 

 

87

 

 

 

103

 

Other adjustments

 

689

 

 

 

534

 

 

 

572

 

 

 

279

 

Adjusted EBITDA

$

13,294

 

 

$

50

 

 

$

8,272

 

 

$

2,327

 

As a percentage of non-GAAP revenue

 

8.0

%

 

 

0.0

%

 

 

9.8

%

 

 

3.0

%

 

Table 5

COGNYTE SOFTWARE LTD.

Calculation of Change in Revenue on a Constant Currency Basis

(Unaudited)

 

 

 

GAAP Revenue

 

Non-GAAP Revenue

(in thousands)

 

Six Months Ended

 

Three Months Ended

 

Six Months Ended

 

Three Months Ended

Revenue for the three months ended July 31, 2023

 

$

150,319

 

 

$

77,053

 

 

$

150,431

 

 

$

77,053

 

Revenue for the three months ended July 31, 2024

 

$

167,127

 

 

$

84,413

 

 

$

167,127

 

 

$

84,413

 

Revenue for the three months ended July 31, 2024 at constant currency (2)

 

$

167,956

 

 

$

85,011

 

 

$

167,956

 

 

$

85,011

 

Reported period-over-period revenue change

 

 

11.2

%

 

 

9.6

%

 

 

11.1

%

 

 

9.6

%

% impact from change in foreign currency exchange rates

 

 

0.6

%

 

 

0.8

%

 

 

0.6

%

 

 

0.8

%

Constant currency period-over-period revenue change

 

 

11.7

%

 

 

10.3

%

 

 

11.6

%

 

 

10.3

%

For more information see “Supplemental Information About Constant Currency” at the end of this press release.

Footnotes

(1) The actual cash tax paid, net of refunds, was $1.6 million and $4.0 million for the three and six months ended July 31, 2024, respectively and $2.1 million and $3.1 million for the three and six months ended July 31, 2023, respectively.

(2) Revenue for the three and six months ended July 31, 2024, at constant currency is calculated by translating current-period GAAP or non-GAAP foreign currency revenue (as applicable) into U.S. dollars using average foreign currency exchange rates for the three and six months ended July 31, 2024, rather than actual current-period foreign currency exchange rates.

(3) The non-GAAP income tax adjustments for the quarter reflects a change in calculating our non-GAAP income taxes from a cash basis (income taxes we expect to pay in the current year) to an accrual basis, as detailed further under “supplemental information about Non-GAAP financial measures” – “non-GAAP income tax adjustments”. Prior period comparative numbers were adjusted accordingly. The non-GAAP income tax provision, non-GAAP net loss attributable to Cognyte Software Ltd. and non-GAAP diluted net loss per share attributable to Cognyte Software Ltd. under the previous method of calculation, which was presented in last year’s press release filing on September 12, 2023, were $15.4 million, $22.3 million and $(0.32) for the six months ended July 31, 2023 and $4.8 million, $6.4 million and $(0.09) for the three months ended July 31, 2023, respectively.

Cognyte Software Ltd. and Subsidiaries 

Supplemental Information About Non-GAAP Financial Measures

The press release includes reconciliations of certain financial measures not prepared in accordance with GAAP, consisting of non-GAAP revenue, non-GAAP gross profit and gross margins, non-GAAP research and development expenses, net, non-GAAP selling, general and administrative expenses, non-GAAP operating (loss) income and operating margins, non-GAAP other income (expense), net, non-GAAP provision for income taxes and non-GAAP effective income tax rate, non-GAAP net (loss) income attributable to Cognyte, adjusted EBITDA and adjusted EBITDA margin, non-GAAP diluted net (loss) income per share attributable to Cognyte and non-GAAP diluted weighted-average shares used in computing such measure. The tables above include a reconciliation of each non-GAAP financial measure for completed periods presented in this press release to the most directly comparable GAAP financial measure.

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 software 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 our management believes they provide meaningful information about the financial performance of our business and are useful to investors for informational and comparative purposes.

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.

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 software and software service revenue and professional service and other revenue 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. 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 ordinary shares. 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.

Acquisition expenses (benefit), 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.

Separation expenses. On December 4, 2019, Verint announced its intention to separate into two independent publicly traded companies: Cognyte Software Ltd., which consists of Verint’s Cyber Intelligence Solutions business, and Verint Systems Inc., which consists of its Customer Engagement Business. We incurred significant expenses to separate the aforesaid businesses, including third-party advisory, accounting, legal, consulting, and other similar services related to the separation as well as costs associated with accelerated depreciation and amortization of assets which became obsolete following the separation from Verint, including those related to human resources, brand management, real estate, and information technology to the extent not capitalized. These costs are incremental to our normal operating expenses and incurred solely as a result of the separation transaction. Accordingly, we are excluding these separation expenses from our non-GAAP financial measures in order to evaluate our performance on a comparable basis.

Business Divestiture gains/losses. In certain cases, we may divest a portion of our business, which may result in a gain or loss on divestiture. These gains or losses may result from the sale of a business unit or the termination of a product line or service. We exclude these gains or losses from our non-GAAP financial measures in order to provide a more meaningful comparisons of our ongoing business performance between periods and to other companies in our industry. On December 1, 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.

Provision for legal claim. We exclude from our non-GAAP financial measures accrual recorded for the settlement of certain legal claims related to our business acquisitions.

Other adjustments. We exclude from our non-GAAP financial measures rent expense for redundant facilities, gains on change in fair value of equity investment, gains or losses on sales of property and certain professional fees unrelated to our ongoing operations.

Non-GAAP income tax adjustments. We exclude our GAAP provision (benefit) for income taxes from our non-GAAP measures of net income attributable to Cognyte Software Ltd., and instead include a non-GAAP provision for income taxes. Cognyte uses a full-year non-GAAP tax rate to compute the non-GAAP tax provision. This full-year non-GAAP tax rate is based on Cognyte’s annual GAAP income, adjusted to exclude non-GAAP items, as well as the effects of significant non-recurring and period-specific tax items which vary in size and frequency. This annual non-GAAP tax rate is based on an evaluation of our historical and projected profit before tax, taking into account the impact of non-GAAP adjustments, tax law changes, as well as other factors such as our current tax structure, existing tax positions and expected recurring tax incentives. 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. 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.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure defined as net income (loss) attributable to non-controlling interest 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.

Supplemental Information About Constant Currency

Because we operate on a global basis and transact business in many currencies, fluctuations in foreign currency exchange rates can affect our consolidated U.S. dollar operating results. To facilitate the assessment of our performance excluding the effect of foreign currency exchange rate fluctuations, we calculate our GAAP and non-GAAP revenue, cost of revenue, and operating expenses on both an as-reported basis and a constant currency basis, allowing for comparison of results between periods as if foreign currency exchange rates had remained constant. We perform our constant currency calculations by translating current-period foreign currency results into U.S. dollars using prior-period average foreign currency exchange rates or hedge rates, as applicable, rather than current period exchange rates. We believe that constant currency measures, which exclude the impact of changes in foreign currency exchange rates, facilitate the assessment of underlying business trends.

Unless otherwise indicated, our financial outlook for each of revenue, operating margin, and diluted earnings per share, which is provided on a non-GAAP basis, reflects foreign currency exchange rates approximately consistent with rates in effect when the outlook is provided.

We also incur foreign exchange gains and losses resulting from the revaluation and settlement of monetary assets and liabilities that are denominated in currencies other than the entity’s functional currency. Our financial outlook for diluted earnings per share includes net foreign exchange gains or losses incurred to date, if any, but does not include potential future gains or losses.

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