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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240910079172/en/
Investor Relations Dean
Ridlon Cognyte Software Ltd. IR@cognyte.com
Cognyte Software (NASDAQ:CGNT)
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