Increases Full-Year Outlook
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, 2023 (“Q2 FYE24” and “H1 FYE24”).
Q2 FYE24 Highlights
Three Months Ended July 31,
2023
(in thousands, except per share data)
GAAP
Non-GAAP
Revenue
$77,053
$77,053
Gross Margin
68.7%
69.2%
Diluted EPS
$(0.13)
$(0.09)
H1 FYE24 Highlights
Six Months Ended July 31,
2023
(in thousands, except per share data)
GAAP
Non-GAAP
Revenue
$150,319
$150,431
Gross Margin
68.3%
68.8%
Diluted EPS
$(0.26)
$(0.32)
“I’m pleased to report solid Q2 results and that our positive
momentum continues. We won deals with existing and new strategic
customers who recognize the strength of our innovative technology
and the value it delivers. Given the Q2 results, we are raising our
outlook for the year for non-GAAP revenue, gross margin and EPS.
Looking beyond FYE 24, we believe that our innovative technology,
combined with recent AI developments and our large customer base,
position us well for continued growth,” said Elad Sharon, Cognyte’s
chief executive officer.
“For the full year, we expect gross profit to grow faster than
revenue, at more than 15 percent year over year on an SIS Adjusted
non-GAAP basis. We also expect to have annual positive Adjusted
EBITDA of about $2M at the mid-point of the revenue range, as a
result of Q2 positive Adjusted EBITDA and our expectations for the
second half of the year,” said David Abadi, Cognyte’s chief
financial officer.
Updated FYE24 Outlook
Our non-GAAP outlook for the year ending January 31, 2024
(“FYE24” and “Fiscal 2024”) is as follows:
- Revenue: $307 million at the midpoint with a range of
+/- 2%, approximately 8.5% growth from previous year SIS Adjusted
non-GAAP revenue.
- Diluted EPS: Loss of $0.33 at the midpoint of our
revenue outlook.
Our non-GAAP outlook for FYE24, 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 $0.4
million.
Our non-GAAP outlook for FYE24 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 $11.0 million and $13.0 million, assuming market
prices for our ordinary shares are generally consistent with
current levels.
For additional information about our expectations for FYE24,
please refer to the Q2 FYE24 conference call we will conduct on
September 12, 2023.
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, 2023, and 2022, 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, 2023. 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 the impact of inflation
and related volatility on our financial performance; risks related
to the impact of disruptions to the global supply chain; risks
relating to the global regulatory constraints to which we are
subject; risks associated with political and reputational factors
related to our business or operations; risks related to claims by
third parties that our solutions infringe their terms of use or
other propriety rights; risks that our products or services, or
those of third-party suppliers, partners, or original equipment
manufacturers (“OEMs”) which we use in or with our offerings or
otherwise rely on, including third-party hosting platforms, may
contain defects, develop operational problems, or be vulnerable to
cyber-attacks; risks associated with larger orders and customer
concentration; risks associated with our ability to keep pace with
technological advances and challenges and evolving industry
standards; risks related to our relationships with and reliance on
third parties for certain components, products, or services; risks
due to aggressive competition in all of our markets; challenges
associated with selling sophisticated solutions, risks associated
with customer concentration, including risks related to significant
amounts of our business coming from government customers around the
world; risks associated with our ability or costs to retain,
recruit, and train qualified personnel in regions in which we
operate; risks relating to our ability to properly manage
investments in our business and operations; 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 anti-corruption,
trade compliance, anti-money-laundering and economic sanctions laws
and regulations; 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; risks associated with our significant international
operations; risks associated with market volatility in the price of
our shares; 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 related to our limited operating history as an
independent public company; risk that the spin-off does not achieve
the benefits anticipated, does not qualify as a tax-free
transaction, or exposes us to unexpected claims or liabilities or
that it negatively impacts our operations or stock price; risks
associated with different corporate governance requirements
applicable to Israeli companies; 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, which has been
filed with the Securities and Exchange Commission (the “SEC”),
along with other documents submitted to the SEC, on April 11, 2023.
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 share and per share
data)
2023
2022
2023
2022
Revenue:
Software
$
51,892
$
51,903
$
26,520
$
27,019
Software service
81,313
91,269
40,220
45,437
Professional service and other
17,114
24,375
10,313
8,649
Total revenue
150,319
167,547
77,053
81,105
Cost of revenue:
Software
7,217
9,017
3,880
4,099
Software service
22,641
25,397
11,569
13,254
Professional service and other
17,745
29,720
8,657
12,151
Amortization of acquired technology
—
341
—
170
Total cost of revenue
47,603
64,475
24,106
29,674
Gross profit
102,716
103,072
52,947
51,431
Operating expenses:
Research and development, net
54,850
76,526
27,103
38,547
Selling, general and administrative
60,110
82,445
31,310
39,043
Amortization of other acquired intangible
assets
181
502
91
251
Total operating expenses
115,141
159,473
58,504
77,841
Operating loss
(12,425
)
(56,401
)
(5,557
)
(26,410
)
Other income (expense), net:
Interest income
763
340
394
193
Interest expense
(10
)
(789
)
(7
)
(340
)
Other income (expense), net
836
202
(108
)
(827
)
Total other income (expense),
net
1,589
(247
)
279
(974
)
Loss before provision for income
taxes
(10,836
)
(56,648
)
(5,278
)
(27,384
)
Provision for income taxes
5,105
447
3,236
312
Net loss
(15,941
)
(57,095
)
(8,514
)
(27,696
)
Net income attributable to noncontrolling
interest
2,238
2,147
912
1,178
Net loss attributable to Cognyte
Software Ltd.
$
(18,179
)
$
(59,242
)
$
(9,426
)
$
(28,874
)
Net loss per share attributable to
Cognyte Software Ltd.:
Basic and diluted
$
(0.26
)
$
(0.88
)
$
(0.13
)
$
(0.43
)
Weighted-average shares
outstanding:
Basic and diluted
69,528
67,494
70,134
67,677
Table 2
COGNYTE SOFTWARE LTD.
Condensed Consolidated Balance
Sheets
July 31,
January 31,
2023
2023
(in thousands)
(Unaudited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
48,472
$
34,579
Restricted cash and cash equivalents and
restricted bank time deposits
4,362
4,359
Short-term investments
23,996
17,507
Accounts receivable, net of allowance for
credit losses of $2.3 million and $1.6 million, respectively
97,809
113,201
Contract assets, net
11,728
17,476
Inventories
26,683
25,263
Prepaid expenses and other current
assets
32,463
39,339
Total current assets
245,513
251,724
Property and equipment, net
25,633
25,874
Operating lease right-of-use assets
14,648
17,559
Goodwill
126,658
126,487
Intangible assets, net
469
650
Deferred income taxes
702
823
Other assets
19,937
19,961
Total assets
$
433,560
$
443,078
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
21,042
$
20,677
Accrued expenses and other current
liabilities
76,467
78,297
Contract liabilities
98,207
94,882
Total current liabilities
195,716
193,856
Long-term contract liabilities
13,902
14,382
Deferred income taxes
3,123
3,031
Operating lease liabilities
7,176
10,368
Other liabilities
11,023
11,667
Total liabilities
230,940
233,304
Commitments and Contingencies
Stockholders' equity:
Common stock - $0 par value; Authorized
300,000,000 shares. Issued and outstanding 70,317,792 and
68,842,601 at July 31, 2023 and January 31, 2023, respectively
—
—
Additional paid-in capital
347,558
338,465
Accumulated deficit
(147,201
)
(129,022
)
Accumulated other comprehensive loss
(15,364
)
(15,314
)
Total Cognyte Software Ltd.
stockholders' equity
184,993
194,129
Noncontrolling interest
17,627
15,645
Total stockholders’ equity
202,620
209,774
Total liabilities and stockholders’
equity
$
433,560
$
443,078
Table 3
COGNYTE SOFTWARE LTD.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Six months ended July
31,
(in thousands)
2023
2022
Cash flows from operating
activities:
Net loss
$
(15,941
)
$
(57,095
)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization
6,855
9,092
Allowance for credit losses
769
415
Loss from business divestiture
23
—
Stock-based compensation, excluding
cash-settled awards
4,628
11,463
Provision from deferred income taxes
124
(60
)
Non-cash losses on derivative financial
instruments, net
(291
)
(222
)
Other non-cash items, net
646
(326
)
Changes in operating assets and
liabilities:
Accounts receivable
23,300
44,733
Contract assets
(3,826
)
(4,409
)
Inventories
(2,463
)
(7,715
)
Prepaid expenses and other assets
6,545
(2,535
)
Accounts payable and accrued expenses
1,683
(23,809
)
Contract liabilities
2,666
1,911
Other liabilities
785
1,395
Other, net
(258
)
(330
)
Net cash provided by (used in)
operating activities
25,245
(27,492
)
Cash flows from investing
activities:
Purchases of property and equipment
(3,618
)
(4,795
)
Purchases of short-term investments
(38,904
)
(28,438
)
Maturities and sales of short-term
investments
32,156
21,210
Settlements of derivative financial
instruments not designated as hedges
(359
)
153
Cash paid for capitalized software
development costs
(1,108
)
(1,695
)
Proceeds from Business divestiture, net of
cost
386
—
Change in restricted bank time deposits,
including long-term portion
(105
)
150
Other investing activities
—
2
Net cash used in investing
activities
(11,552
)
(13,413
)
Cash flows from financing
activities:
Repayment from credit facility - presented
as short term loan
—
(80,000
)
Net cash used in financing
activities
—
(80,000
)
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
35
(101
)
Net increase (decrease) in cash, cash
equivalents, restricted cash and restricted cash
equivalents
13,728
(121,006
)
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
$
52,772
$
37,214
Reconciliation of cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period:
Cash and cash equivalents
$
48,472
$
32,884
Restricted cash and cash equivalents
included in restricted cash and cash equivalents and restricted
bank time deposits
4,200
4,146
Restricted cash and cash equivalents
included in other assets
100
184
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
52,772
$
37,214
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)
2023
2022
2023
2022
Revenue
Total GAAP revenue
$
150,319
$
167,547
$
77,053
$
81,105
Revenue adjustments
112
488
—
244
Total non-GAAP revenue
$
150,431
$
168,035
$
77,053
$
81,349
Gross profit and gross margin
GAAP gross profit
102,716
103,072
52,947
51,431
GAAP gross margin
68.3
%
61.5
%
68.7
%
63.4
%
Non-GAAP adjustments
803
2,616
378
1,511
Non-GAAP gross profit
$
103,519
$
105,688
$
53,325
$
52,942
Non-GAAP gross margin
68.8
%
62.9
%
69.2
%
65.1
%
Research and development, net
GAAP research and development,
net
54,850
76,526
27,103
38,547
As a percentage of GAAP revenue
36.5
%
45.7
%
35.2
%
47.5
%
Stock-based compensation expenses
(1,098
)
(3,702
)
(626
)
(1,877
)
Other adjustments
(143
)
(931
)
(64
)
(933
)
Non-GAAP research and development,
net
$
53,609
$
71,893
$
26,413
$
35,737
As a percentage of non-GAAP
revenue
35.6
%
42.8
%
34.3
%
43.9
%
Selling, general and administrative
expenses
GAAP selling, general and
administrative expenses
60,110
82,445
31,310
39,043
As a percentage of GAAP revenue
40.0
%
49.2
%
40.6
%
48.1
%
Stock-based compensation expenses
(2,945
)
(6,290
)
(1,815
)
(3,667
)
Restructuring expenses, net
(1,483
)
(2,666
)
(1,364
)
(692
)
Other adjustments
680
(180
)
(291
)
(32
)
Non-GAAP selling, general and
administrative expenses
$
56,362
$
73,309
$
27,840
$
34,652
As a percentage of non-GAAP
revenue
37.5
%
43.6
%
36.1
%
42.6
%
Operating loss, operating margin and
adjusted EBITDA
GAAP Operating loss
(12,425
)
(56,401
)
(5,557
)
(26,410
)
GAAP operating margin
(8.3
)%
(33.7
)%
(7.2
)%
(32.6
)%
Amortization of other acquired intangible
assets
181
502
91
251
Stock-based compensation expenses
4,628
11,463
2,713
6,358
Restructuring expenses, net
1,732
3,915
1,534
1,908
Separation (income) expenses, net
(921
)
42
103
10
Business divestiture
186
—
186
—
Other adjustments
167
965
2
436
Non-GAAP operating loss
$
(6,452
)
$
(39,514
)
$
(928
)
$
(17,447
)
Depreciation and amortization
6,502
8,211
3,255
4,305
Adjusted EBITDA
$
50
$
(31,303
)
$
2,327
$
(13,142
)
Six Months Ended July
31,
Three Months Ended
July 31,
(in thousands, except per share data)
2023
2022
2023
2022
Non-GAAP operating margin
(4.3
)%
(23.5
)%
(1.2
)%
(21.4
)%
Adjusted EBITDA margin
0.0
%
(18.6
)%
3.0
%
(16.2
)%
Other income (expense)
reconciliation
GAAP other income (expense),
net
1,589
(247
)
279
(974
)
Change in fair value of equity
investment
—
(1,660
)
—
—
Business divestiture
165
—
4
—
Non-GAAP other income (expense),
net
$
1,754
$
(1,907
)
$
283
$
(974
)
Tax provision reconciliation
GAAP provision for income taxes
5,105
447
3,236
312
Effective income tax rate
(47.1
)%
(0.8
)%
(61.3
)%
(1.1
)%
Non-GAAP tax adjustments
10,291
12,325
1,597
(17,060
)
Non-GAAP provision for income taxes
(1)
$
15,396
$
12,772
$
4,833
$
(16,748
)
Non-GAAP effective income tax
rate
(327.7
)%
(30.8
)%
(749.3
)%
90.9
%
Net loss attributable to Cognyte
Software Ltd. reconciliation
GAAP Net loss attributable to Cognyte
Software Ltd.
$
(18,179
)
$
(59,242
)
$
(9,426
)
$
(28,874
)
Revenue adjustments
112
488
—
244
Amortization of acquired technology
—
341
—
170
Amortization of other acquired intangible
assets
181
502
91
251
Stock-based compensation expenses
4,628
11,463
2,713
6,358
Restructuring expenses, net
1,732
3,915
1,534
1,908
Non-GAAP tax adjustments
(10,291
)
(12,325
)
(1,597
)
17,060
Other Non-GAAP adjustments
(515
)
(1,482
)
295
32
Total adjustments
(4,153
)
2,902
3,036
26,023
Non-GAAP net loss attributable to
Cognyte Software Ltd.
$
(22,332
)
$
(56,340
)
$
(6,390
)
$
(2,851
)
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.
$
(0.26
)
$
(0.88
)
$
(0.13
)
$
(0.43
)
Non-GAAP diluted net loss per share
attributable to Cognyte Software Ltd.
$
(0.32
)
$
(0.83
)
$
(0.09
)
$
(0.04
)
GAAP weighted-average shares used in
computing diluted net loss per share attributable to Cognyte
Software Ltd.
69,528
67,494
70,134
67,677
Additional weighted-average shares
applicable to non-GAAP diluted net income per share attributable to
Cognyte Software Ltd.
—
—
—
—
Non-GAAP diluted weighted-average
shares used in computing net loss per share attributable to Cognyte
Software Ltd.
69,528
67,494
70,134
67,677
Table of reconciliation from GAAP net
loss attributable to Cognyte Software Ltd. to adjusted
EBITDA
GAAP Net loss attributable to Cognyte
Software Ltd.
$
(18,179
)
$
(59,242
)
$
(9,426
)
$
(28,874
)
As a percentage of GAAP revenue
(12.1
)%
(35.4
)%
(12.2
)%
(35.6
)%
Net income attributable to noncontrolling
interest
2,238
2,147
912
1,178
GAAP provision for income taxes
5,105
447
3,236
312
Six Months Ended July
31,
Three Months Ended July
31,
(in thousands, except per share data)
2023
2022
2023
2022
GAAP other (income) expense, net
(1,589
)
247
(279
)
974
Amortization of acquired technology
—
341
—
170
Amortization of other acquired intangible
assets
181
502
91
251
Depreciation and amortization
6,502
8,211
3,255
4,305
Revenue adjustments
112
488
—
244
Stock-based compensation expenses
4,628
11,463
2,713
6,358
Acquisition expenses (benefit), net
(10
)
97
—
12
Restructuring expenses, net
1,732
3,915
1,534
1,908
Separation (income) expenses, net
(921
)
42
103
10
Provision for legal claim
—
37
—
7
Business divestiture
186
—
186
—
Other adjustments
65
2
2
3
Adjusted EBITDA
$
50
$
(31,303
)
$
2,327
$
(13,142
)
As a percentage of non-GAAP
revenue
0.0
%
(18.6
)%
3.0
%
(16.2
)%
Table 5
COGNYTE SOFTWARE LTD.
Reconciliation of Non-GAAP to
SIS Adjusted Non-GAAP Measures
(Unaudited)
Six Months Ended July
31,
Three Months Ended July
31,
(in thousands)
2023
2022
2023
2022
Revenue
Total non-GAAP revenue
$
150,431
$
168,035
$
77,053
$
81,349
SIS revenue adjustments
—
(17,668
)
—
(8,492
)
Total SIS Adjusted non-GAAP
revenue
$
150,431
$
150,367
$
77,053
$
72,857
Gross profit and gross margin
Non-GAAP gross profit
103,519
105,688
53,325
52,942
Non-GAAP gross margin
68.8
%
62.9
%
69.2
%
65.1
%
SIS adjustments
—
(11,833
)
—
(5,798
)
SIS Adjusted non-GAAP gross
profit
$
103,519
$
93,855
$
53,325
$
47,144
SIS Adjusted non-GAAP gross
margin
68.8
%
62.4
%
69.2
%
64.7
%
Research and development, net
Non-GAAP research and development,
net
53,609
71,893
26,413
35,737
As a percentage of non-GAAP
revenue
35.6
%
42.8
%
34.3
%
43.9
%
SIS adjustments
—
(5,837
)
—
(2,813
)
SIS Adjusted non-GAAP research and
development, net
$
53,609
$
66,056
$
26,413
$
32,924
As a percentage of SIS Adjusted
non-GAAP revenue
35.6
%
43.9
%
34.3
%
45.2
%
Selling, general and administrative
expenses
Non-GAAP selling, general and
administrative expenses
56,362
73,309
27,840
34,652
As a percentage of non-GAAP
revenue
37.5
%
43.6
%
36.1
%
42.6
%
SIS adjustments
—
(4,883
)
—
(2,195
)
SIS Adjusted non-GAAP selling, general
and administrative expenses
$
56,362
$
68,426
$
27,840
$
32,457
As a percentage of SIS Adjusted
non-GAAP revenue
37.5
%
45.5
%
36.1
%
44.5
%
Operating loss and operating
margin
Non-GAAP operating loss
(6,452
)
(39,514
)
(928
)
(17,447
)
Non-GAAP operating margin
(4.3
)%
(23.5
)%
(1.2
)%
(21.4
)%
SIS adjustments
—
(1,114
)
—
(791
)
SIS Adjusted non-GAAP operating
loss
$
(6,452
)
$
(40,628
)
$
(928
)
$
(18,238
)
SIS Adjusted non-GAAP operating
margin
(4.3
)%
(27.0
)%
(1.2
)%
(25.0
)%
Table 6
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 and six months ended
July 31, 2022
$
167,547
$
81,105
$
168,035
$
81,349
Revenue for the three and six months ended
July 31, 2023
$
150,319
$
77,053
$
150,431
$
77,053
Revenue for the three and six months ended
July 31, 2023 at constant currency (2)
$
149,500
$
76,000
$
149,500
$
76,000
Reported period-over-period revenue
change
(10.3
)%
(5.0
)%
(10.5
)%
(5.3
)%
% impact from change in foreign currency
exchange rates
(0.6
)%
(1.3
)%
(0.6
)%
(1.3
)%
Constant currency period-over-period
revenue change
(10.9
)%
(6.3
)%
(11.1
)%
(6.5
)%
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 $3.1 million
and $2.1 million for the six and three months ended July 31, 2023,
respectively and $7.8 million and $4.8 million for the six and
three months ended July 31, 2022, respectively.
(2) Revenue for the three and six months ended July 31, 2023, 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, 2022, 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 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 attributable to Cognyte, adjusted EBITDA and adjusted
EBITDA margin, non-GAAP diluted net loss 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/20230912937289/en/
Investor Relations Dean
Ridlon Cognyte Software Ltd. IR@cognyte.com
Cognyte Software (NASDAQ:CGNT)
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