Delivers Revenue Growth and Strong Margin
Expansion in Both Fourth Quarter and Full Year
Guides to Fiscal 2025 Revenue of Approximately
$340 Million with Faster Gross Margin Growth and Doubling of
Adjusted EBITDA
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 months and year
ended January 31, 2024 (“Q4 FYE24” and “FYE24”).
Q4 FYE24 Financial
Highlights
Three Months Ended January 31,
2024
(in thousands, except per share data)
GAAP
Non-GAAP
Revenue
$83,691
$83,691
Gross Margin
68.5%
69.0%
Basic and diluted EPS
$(0.04)
$(0.23)
FYE24 Financial
Highlights
Year Ended January 31,
2024
(in thousands, except per share data)
GAAP
Non-GAAP
Revenue
$313,404
$313,516
Gross Margin
68.7%
69.2%
Basic and diluted EPS
$(0.22)
$(0.21)
“The fourth quarter was a strong finish to a productive year for
Cognyte,” said Elad Sharon, Cognyte’s chief executive officer.
“Market demand has stabilized and continues to improve. Our
customers are facing evolving challenges and recognize the strength
of our differentiated technology and the value it delivers. We
expect FYE25 to be a year of continued growth and significantly
improved profitability, further strengthening our foundation for
driving top-line growth and continued operating leverage, supported
by the demand for our solutions and our competitive
advantages.”
“For FYE25, we expect revenue to grow to $340 million, plus or
minus 2%, with gross profit growing faster than revenue,” said
David Abadi, Cognyte’s chief financial officer. “We have leverage
in our financial model and are focusing on driving margin
expansion. We expect adjusted EBITDA for the year to be about $19
million, more than double what we generated in FYE24. We also
expect $34 million of cash flow from operations for the year.”
FYE25 Outlook
Our non-GAAP outlook for the year ending January 31, 2025
(“FYE25” and “Fiscal 2025”) is as follows:
- Revenue: $340 million at the midpoint with a range of
+/-2%, approximately 8.5% growth from previous year non-GAAP
revenue.
- Diluted EPS: Loss of $0.13 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 $16.0 and $18.0 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 Q4 FYE24 conference call we will conduct on
April 9, 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
months and the year ended January 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 and year ended January 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, 2023, filed with the Securities
and Exchange Commission (the "SEC") and in our subsequent filings
with the SEC, including our annual report on Form 20-F for the
fiscal year ended January 31, 2024 which will be filed 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
Year Ended
January 31,
Three Months Ended
January 31,
2024
2023
2024
2023
(in thousands except share and per share
data)
(Audited)
(Audited)
(Unaudited)
(Unaudited)
Revenue:
Software
$
113,541
$
98,288
$
31,440
$
24,151
Software service
165,027
175,690
42,314
41,661
Professional service and other
34,836
38,084
9,937
7,449
Total revenue
313,404
312,062
83,691
73,261
Cost of revenue:
Software
18,919
19,975
6,565
6,628
Software service
43,305
48,400
10,407
11,856
Professional service and other
35,776
50,941
9,366
9,822
Amortization of acquired technology
—
619
—
107
Total cost of revenue
98,000
119,935
26,338
28,413
Gross profit
215,404
192,127
57,353
44,848
Operating expenses:
Research and development, net
107,283
140,324
27,035
30,669
Selling, general and administrative
125,784
154,347
33,052
35,074
Amortization of other acquired intangible
assets
391
779
120
26
Total operating expenses
233,458
295,450
60,207
65,769
Operating loss
(18,054
)
(103,323
)
(2,854
)
(20,921
)
Other income (expenses), net:
Interest income
1,896
774
563
240
Interest expense
(16
)
(1,597
)
(4
)
(212
)
Other income (expenses), net:
2,915
7,151
(3,696
)
5,709
Total other income (expenses),
net
4,795
6,328
(3,137
)
5,737
Loss before provision for income
taxes
(13,259
)
(96,995
)
(5,991
)
(15,184
)
(Benefit) provision for income
taxes
(1,614
)
12,956
(4,114
)
10,867
Net loss
(11,645
)
(109,951
)
(1,877
)
(26,051
)
Net income attributable to noncontrolling
interest
3,925
4,181
737
1,053
Net loss attributable to Cognyte
Software Ltd.
$
(15,570
)
$
(114,132
)
$
(2,614
)
$
(27,104
)
Net loss per share attributable to
Cognyte Software Ltd.
Basic and diluted
$
(0.22
)
$
(1.68
)
$
(0.04
)
$
(0.40
)
Weighted-average shares
outstanding:
Basic and diluted
70,081
67,924
70,905
68,614
Table 2
COGNYTE SOFTWARE LTD.
Condensed Consolidated Balance
Sheets
January 31,
2024
2023
(in thousands)
(Audited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
74,477
$
34,579
Restricted cash and cash equivalents and
restricted bank time deposits
8,666
4,359
Short-term investments
—
17,507
Accounts receivable, net of allowance for
credit losses of $2.7 million and $1.6 million, respectively
113,260
113,201
Contract assets, net of allowance for
credit losses of $1.4 million and $0 million, respectively
8,859
17,476
Inventories
24,584
25,263
Prepaid expenses and other current
assets
35,135
39,339
Total current assets
264,981
251,724
Property and equipment, net
24,384
25,874
Operating lease right-of-use assets
33,833
17,559
Goodwill
126,563
126,487
Intangible assets, net
258
650
Deferred income taxes
2,928
823
Other assets
19,135
19,961
Total assets
$
472,082
$
443,078
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
20,863
$
20,677
Accrued expenses and other current
liabilities
75,826
78,297
Contract liabilities
93,778
94,882
Total current liabilities
190,467
193,856
Long-term contract liabilities
29,362
14,382
Deferred income taxes
1,964
3,031
Operating lease liabilities
27,950
10,368
Other liabilities
7,606
11,667
Total liabilities
257,349
233,304
Commitments and Contingencies
Stockholders' equity:
Common stock - $0 par value; Authorized
300,000,000 shares. Issued and outstanding 70,996,535 and
68,842,601 at January 31, 2024 and January 31, 2023,
respectively
—
—
Additional paid-in capital
355,097
338,465
Accumulated deficit
(144,592
)
(129,022
)
Accumulated other comprehensive loss
(12,630
)
(15,314
)
Total Cognyte Software Ltd.
stockholders' equity
197,875
194,129
Noncontrolling interest
16,858
15,645
Total stockholders’ equity
214,733
209,774
Total liabilities and stockholders’
equity
$
472,082
$
443,078
Table 3
COGNYTE SOFTWARE LTD.
Condensed Consolidated
Statements of Cash Flows
(Audited)
Year ended January
31,
(in thousands)
2024
2023
Cash flows from operating
activities:
Net loss
$
(11,645
)
$
(109,951
)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization
13,816
18,050
Allowance for credit losses
2,508
2,763
Gain from business divestiture
(4,768
)
(5,764
)
Stock-based compensation, excluding
cash-settled awards
12,167
25,246
Provision from deferred income taxes
(3,196
)
45
Non-cash losses on derivative financial
instruments, net
330
426
Other non-cash items, net
(685
)
681
Changes in operating assets and
liabilities:
Accounts receivable
12,436
59,186
Contract assets
(7,340
)
8,517
Inventories
(960
)
(13,101
)
Prepaid expenses and other assets
5,307
(2,364
)
Accounts payable and accrued expenses
4,332
(37,885
)
Contract liabilities
13,897
18,000
Other liabilities
(2,904
)
174
Other, net
1,266
(1,010
)
Net cash provided by (used in)
operating activities
34,561
(36,987
)
Cash flows from investing
activities:
Purchases of property and equipment
(7,035
)
(8,274
)
Purchases of short-term investments
(58,695
)
(55,150
)
Maturities and sales of short-term
investments
75,906
48,765
Settlements of derivative financial
instruments not designated as hedges
(977
)
201
Cash paid for capitalized software
development costs
(2,034
)
(3,408
)
Proceeds from Business divestiture, net of
cost
4,975
37,635
Change in restricted bank time deposits,
including long-term portion
(2,782
)
358
Net cash provided by investing
activities
9,358
20,127
Cash flows from financing
activities:
Repayment of credit facility - presented
as short term loan
—
(100,000
)
Dividends paid to noncontrolling
interest
(2,452
)
(2,934
)
Net cash used in financing
activities
(2,452
)
(102,934
)
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
(115
)
617
Net increase (decrease) in cash, cash
equivalents, restricted cash and restricted cash
equivalents
41,352
(119,176
)
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, beginning of period
39,044
158,220
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of period
$
80,396
$
39,044
Reconciliation of cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period:
Cash and cash equivalents
$
74,477
$
34,579
Restricted cash and cash equivalents
included in restricted cash and cash equivalents and restricted
bank time deposits
5,825
4,302
Restricted cash and cash equivalents
included in other assets
94
163
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
80,396
$
39,044
Table 4
COGNYTE SOFTWARE LTD.
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Year Ended
January 31,
Three Months Ended
January 31,
(in thousands, except per share data)
2024
2023
2024
2023
Revenue
Total GAAP revenue
$
313,404
$
312,062
$
83,691
$
73,261
Revenue adjustments
112
1,043
—
311
Total non-GAAP revenue
$
313,516
$
313,105
$
83,691
$
73,572
Gross profit and gross margin
GAAP gross profit
215,404
192,127
57,353
44,848
GAAP gross margin
68.7
%
61.6
%
68.5
%
61.2
%
Non-GAAP adjustments
1,633
6,661
421
2,927
Non-GAAP gross profit
$
217,037
$
198,788
$
57,774
$
47,775
Non-GAAP gross margin
69.2
%
63.5
%
69.0
%
64.9
%
Research and development, net
GAAP research and development,
net
107,283
140,324
27,035
30,669
As a percentage of GAAP revenue
34.2
%
45.0
%
32.3
%
41.9
%
Stock-based compensation expenses
(2,232
)
(8,047
)
(483
)
(3,004
)
Restructuring expenses and other
adjustments, net
(160
)
(2,259
)
—
(932
)
Non-GAAP research and development,
net
$
104,891
$
130,018
$
26,552
$
26,733
As a percentage of non-GAAP
revenue
33.5
%
41.5
%
31.7
%
36.3
%
Selling, general and administrative
expenses
GAAP selling, general and
administrative expenses
125,784
154,347
33,052
35,074
As a percentage of GAAP revenue
40.1
%
49.5
%
39.5
%
47.9
%
Stock-based compensation expenses
(8,520
)
(13,884
)
(3,072
)
(4,692
)
Restructuring expenses and other
adjustments, net
(883
)
(4,040
)
253
(584
)
Non-GAAP selling, general and
administrative expenses
$
116,381
$
136,423
$
30,233
$
29,798
As a percentage of non-GAAP
revenue
37.1
%
43.6
%
36.1
%
40.5
%
Operating (loss) income, operating
margin and adjusted EBITDA
GAAP Operating loss
(18,054
)
(103,323
)
(2,854
)
(20,921
)
GAAP operating margin
(5.8
)%
(33.1
)%
(3.4
)%
(28.6
)%
Intangible write-off
—
559
—
559
Amortization of acquired technology
—
619
—
107
Amortization of other acquired intangible
assets
391
779
120
26
Stock-based compensation expenses
12,167
25,246
3,976
8,986
Restructuring expenses (income), net
1,424
6,900
(484
)
2,399
Separation (income) expenses, net
(892
)
324
(11
)
272
Other adjustments
729
1,243
242
(184
)
Non-GAAP operating (loss)
income
$
(4,235
)
$
(67,653
)
$
989
$
(8,756
)
Depreciation and amortization
13,238
16,186
3,342
3,995
Adjusted EBITDA
$
9,003
$
(51,467
)
$
4,331
$
(4,761
)
Non-GAAP operating margin
(1.4
)%
(21.6
)%
1.2
%
(11.9
)%
Adjusted EBITDA margin
2.9
%
(16.4
)%
5.2
%
(6.5
)%
Year Ended
January 31,
Three Months Ended
January 31,
(in thousands, except per share data)
2024
2023
2024
2023
Other income (expense)
reconciliation
GAAP other income (expenses),
net
4,795
6,328
(3,137
)
5,737
Change in fair value of equity
investment
—
(1,660
)
—
—
Business divestiture
(4,789
)
(5,776
)
(365
)
(5,776
)
Non-GAAP other income (expense),
net
$
6
$
(1,108
)
$
(3,502
)
$
(39
)
Tax provision reconciliation
GAAP (benefit) provision for income
taxes
(1,614
)
12,956
(4,114
)
10,867
Effective income tax rate
12.2
%
(13.4
)%
68.7
%
(71.6
)%
Non-GAAP tax adjustments
8,380
(1,672
)
17,214
(9,696
)
Non-GAAP provision
$
6,766
$
11,284
$
13,100
$
1,171
Non-GAAP effective income tax
rate
(160.0
)%
(16.4
)%
(521.3
)%
(13.3
)%
Net loss attributable to Cognyte
Software Ltd. reconciliation
GAAP Net loss attributable to Cognyte
Software Ltd.
$
(15,570
)
$
(114,132
)
$
(2,614
)
$
(27,104
)
Intangible write-off
—
559
—
559
Amortization of acquired technology
—
619
—
107
Amortization of other acquired intangible
assets
391
779
120
26
Stock-based compensation expenses
12,167
25,246
3,976
8,986
Restructuring expenses (benefit), net
1,424
6,900
(484
)
2,399
Separation (income) expenses, net
(892
)
324
(11
)
272
Change in fair value of equity
investment
—
(1,660
)
—
—
Business divestiture
(4,559
)
(5,776
)
(371
)
(5,776
)
Non-GAAP tax adjustments
(8,380
)
1,672
(17,214
)
9,696
Other Non-GAAP adjustments
499
1,243
248
(184
)
Total adjustments
650
29,906
(13,736
)
16,085
Non-GAAP net loss attributable to
Cognyte Software Ltd.
(14,920
)
(84,226
)
(16,350
)
(11,019
)
Table comparing GAAP diluted net loss
per share attributable to Cognyte Software Ltd. and Non-GAAP
diluted net loss per share attributable to Cognyte Software
Ltd.
GAAP diluted net loss per share
attributable to Cognyte Software Ltd.
$
(0.22
)
$
(1.68
)
$
(0.04
)
$
(0.40
)
Non-GAAP diluted net loss per share
attributable to Cognyte Software Ltd.
$
(0.21
)
$
(1.24
)
$
(0.23
)
$
(0.16
)
GAAP weighted-average shares used in
computing diluted net loss
70,081
67,924
70,905
68,614
Non-GAAP diluted weighted-average
shares used in computing net loss per share attributable to Cognyte
Software Ltd.
70,081
67,924
70,905
68,614
Table of reconciliation from GAAP Net
loss attributable to Cognyte Software Ltd. to adjusted
EBITDA
GAAP Net loss attributable to Cognyte
Software Ltd.
$
(15,570
)
$
(114,132
)
$
(2,614
)
$
(27,104
)
As a percentage of GAAP revenue
(5.0
)%
(36.6
)%
(3.1
)%
(37.0
)%
Net income attributable to noncontrolling
interest
3,925
4,181
737
1,053
GAAP (benefit) provision for income
taxes
(1,614
)
12,956
(4,114
)
10,867
GAAP other income, net
(4,795
)
(6,328
)
3,137
(5,737
)
Amortization of acquired technology
—
619
—
107
Amortization of other acquired intangible
assets
391
779
120
26
Year Ended
January 31,
Three Months Ended
January 31,
(in thousands, except per share data)
2024
2023
2024
2023
Depreciation and amortization
13,238
16,186
3,342
3,995
Intangible write-off
—
559
—
559
Stock-based compensation expenses
12,167
25,246
3,976
8,986
Restructuring expenses (benefit), net
1,424
6,900
(484
)
2,399
Separation (income) expenses, net
(892
)
324
(11
)
272
Other adjustments
729
1,243
242
(184
)
Adjusted EBITDA
$
9,003
$
(51,467
)
$
4,331
$
(4,761
)
As a percentage of non-GAAP
revenue
2.9
%
(16.4
)%
5.2
%
(6.5
)%
Table 5
COGNYTE SOFTWARE LTD.
Reconciliation of Non-GAAP to
SIS Adjusted Non-GAAP Measures
(Unaudited)
Year Ended January
31,
Three Months Ended
January 31,
(in thousands)
2024
2023
2024
2023
Revenue
Total non-GAAP revenue
$
313,516
$
313,105
$
83,691
$
73,572
SIS revenue adjustments
—
(30,064
)
—
(2,375
)
Total SIS Adjusted non-GAAP
revenue
$
313,516
$
283,041
$
83,691
$
71,197
Gross profit and gross margin
Non-GAAP gross profit
217,037
198,788
57,774
47,775
Non-GAAP gross margin
69.2
%
63.5
%
69.0
%
64.9
%
SIS adjustments
—
(21,172
)
—
(1,588
)
SIS Adjusted non-GAAP gross
profit
$
217,037
$
177,616
$
57,774
$
46,187
SIS Adjusted non-GAAP gross
margin
69.2
%
62.8
%
69.0
%
64.9
%
Research and development, net
Non-GAAP research and development,
net
104,891
130,018
26,552
26,733
As a percentage of non-GAAP
revenue
33.5
%
41.5
%
31.7
%
36.3
%
SIS adjustments
—
(9,080
)
—
(770
)
SIS Adjusted non-GAAP research and
development, net
$
104,891
$
120,938
$
26,552
$
25,963
As a percentage of SIS Adjusted
non-GAAP revenue
33.5
%
42.7
%
31.7
%
36.5
%
Selling, general and administrative
expenses
Non-GAAP selling, general and
administrative expenses
116,381
136,423
30,233
29,798
As a percentage of non-GAAP
revenue
37.1
%
43.6
%
36.1
%
40.5
%
SIS adjustments
—
(8,329
)
—
(806
)
SIS Adjusted non-GAAP selling, general
and administrative expenses
$
116,381
$
128,094
$
30,233
$
28,992
As a percentage of SIS Adjusted
non-GAAP revenue
37.1
%
45.3
%
36.1
%
40.7
%
Operating (loss) income and operating
margin
Non-GAAP operating (loss)
income
(4,235
)
(67,653
)
989
(8,756
)
Non-GAAP operating margin
(1.4
)%
(21.6
)%
1.2
%
(11.9
)%
SIS adjustments
—
(3,763
)
—
(12
)
SIS Adjusted non-GAAP operating (loss)
income
$
(4,235
)
$
(71,416
)
$
989
$
(8,768
)
SIS Adjusted non-GAAP operating
margin
(1.4
)%
(25.2
)%
1.2
%
(12.3
)%
Table 6
COGNYTE SOFTWARE LTD.
Calculation of Change in
Revenue on a Constant Currency Basis
(Unaudited)
Year ended
Three Months Ended
(in thousands)
GAAP
Revenue
Non-GAAP
Revenue
GAAP
Revenue
Non-GAAP
Revenue
Revenue for the three months and year
ended January 31, 2023
$
312,062
$
313,105
$
73,261
$
73,572
Revenue for the three months and year
ended January 31, 2024
$
313,404
$
313,516
$
83,691
$
83,691
Revenue for the three months and year
ended January 31, 2024 at constant currency (2)
$
310,500
$
310,500
$
83,000
$
83,000
Reported period-over-period revenue
change
0.4
%
0.1
%
14.2
%
13.8
%
% impact from change in foreign currency
exchange rates
(0.9
)%
(0.9
)%
(1.1
)%
(1.1
)%
Constant currency period-over-period
revenue change
(0.5
)%
(0.8
)%
13.1
%
12.7
%
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 $2.4 million
and $6.8 million for the three months and year ended January 31,
2024, respectively and $1.8 million and $11.3 million for the three
months and year ended January 31, 2023, respectively.
(2) Revenue for the three months and year ended January 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 months and year ended January 31,
2023, rather than actual current-period foreign currency exchange
rates.
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, determined by applying a
non-GAAP effective income tax rate to our income before provision
for income taxes, as adjusted for the non-GAAP items described
above. The non-GAAP effective income tax rate is generally based
upon the income taxes we expect to pay in the reporting year. Our
GAAP effective income tax rate can vary significantly from year to
year as a result of tax law changes, settlements with tax
authorities, changes in the geographic mix of earnings including
acquisition activity, changes in the projected realizability of
deferred tax assets, and other unusual or period-specific events,
all of which can vary in size and frequency. We believe that our
non-GAAP effective income tax rate removes much of this variability
and facilitates meaningful comparisons of operating results across
periods. 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.
SIS Adjusted Non-GAAP
SIS Adjusted Non-GAAP is a non-GAAP financial measure used by
Cognyte that excludes SIS non-GAAP direct business contribution
(which was divested on December 1, 2022) on financial measures such
as 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.
We believe these SIS Adjusted non-GAAP financial measures, used
in conjunction with the corresponding GAAP and non-GAAP measures,
provide investors with useful supplemental information about the
financial performance of our business.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240409238745/en/
Investor Relations Dean
Ridlon Cognyte Software Ltd. IR@cognyte.com
Cognyte Software (NASDAQ:CGNT)
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