Third Quarter Results Ahead of
Expectations Increasing 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 nine months
ended October 31, 2023 (“Q3 FYE24” and “YTD FYE24”).
Q3 FYE24 Financial
Highlights
Three Months Ended October 31,
2023
(in thousands, except per share data)
GAAP
Non-GAAP
Revenue
$79,394
$79,394
Gross Margin
69.7%
70.2%
Diluted EPS
$0.07
$0.34
YTD FYE24 Financial
Highlights
Nine Months Ended October 31,
2023
(in thousands, except per share data)
GAAP
Non-GAAP
Revenue
$229,713
$229,825
Gross Margin
68.8%
69.3%
Diluted EPS
$(0.19)
$0.02
“We are executing well and are pleased to deliver another solid
quarter. Our customers recognize the strength of our differentiated
technology and its ability to deliver high value to them, and we
continued to win significant deals. As a result, we are raising
guidance again for the year. Looking ahead, we believe our ability
to leverage the latest AI innovations, together with our domain
expertise in investigative analytics, will further enhance our
differentiation and the value we provide to our customers, and
position us well for future growth and improving profitability,”
said Elad Sharon, Cognyte’s chief executive officer.
“In the third quarter, revenue, gross margin, operating income
and Adjusted EBITDA came in ahead of our expectations. For the full
year, we expect revenue to grow by approximately 10 percent, and
gross profit to grow faster, at more than 20 percent year over year
on an SIS Adjusted non-GAAP basis. We now expect adjusted EBITDA
for the year to be about $8 million,” 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: $311 million at the midpoint with a range of
+/-1%, approximately 10% growth from previous year SIS Adjusted
non-GAAP revenue.
- Diluted EPS: Loss of $0.24 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 $11.5 and $12.5 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 Q3 FYE24 conference call we will conduct on
December 13, 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 nine months ended October 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 October 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 effects of the
current war between Israel and Hamas in Gaza, as well as any
related larger regional conflict, on our operations; 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)
Nine Months Ended
October 31,
Three Months Ended
October 31,
(in thousands except share and per share
data)
2023
2022
2023
2022
Revenue:
Software
$
82,101
$
74,137
$
30,209
$
22,234
Software service
122,713
134,029
41,400
42,760
Professional service and other
24,899
30,635
7,785
6,260
Total revenue
229,713
238,801
79,394
71,254
Cost of revenue:
Software
12,354
13,347
5,137
4,330
Software service
32,898
36,544
10,257
11,147
Professional service and other
26,410
41,119
8,665
11,399
Amortization of acquired technology
—
512
—
171
Total cost of revenue
71,662
91,522
24,059
27,047
Gross profit
158,051
147,279
55,335
44,207
Operating expenses:
Research and development, net
80,248
109,655
25,398
33,129
Selling, general and administrative
92,732
119,273
32,622
36,828
Amortization of other acquired intangible
assets
271
753
90
251
Total operating expenses
173,251
229,681
58,110
70,208
Operating loss
(15,200
)
(82,402
)
(2,775
)
(26,001
)
Other income, net:
Interest income
1,333
534
570
194
Interest expense
(12
)
(1,385
)
(2
)
(596
)
Other income, net:
6,611
1,442
5,775
1,240
Total other income, net
7,932
591
6,343
838
(Loss) income before provision for
income taxes
(7,268
)
(81,811
)
3,568
(25,163
)
Provision (benefit) for income
taxes
2,500
2,089
(2,605
)
1,642
Net (loss) income
(9,768
)
(83,900
)
6,173
(26,805
)
Net income attributable to noncontrolling
interest
3,188
3,128
950
981
Net (loss) income attributable to
Cognyte Software Ltd.
$
(12,956
)
$
(87,028
)
$
5,223
$
(27,786
)
Net (loss) income per share
attributable to Cognyte Software Ltd.:
Basic
$
(0.19
)
$
(1.29
)
$
0.07
$
(0.41
)
Diluted
$
(0.19
)
$
(1.29
)
$
0.07
$
(0.41
)
Weighted-average shares
outstanding:
Basic
69,803
67,692
70,345
68,081
Diluted
69,803
67,692
70,732
68,081
Table 2
COGNYTE SOFTWARE LTD.
Condensed Consolidated Balance
Sheets
October 31,
January 31,
2023
2023
(in thousands)
(Unaudited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
49,594
$
34,579
Restricted cash and cash equivalents and
restricted bank time deposits
4,348
4,359
Short-term investments
19,756
17,507
Accounts receivable, net of allowance for
credit losses of $2.8 million and $1.6 million, respectively
110,571
113,201
Contract assets, net
15,471
17,476
Inventories
24,427
25,263
Prepaid expenses and other current
assets
37,199
39,339
Total current assets
261,366
251,724
Property and equipment, net
24,633
25,874
Operating lease right-of-use assets
13,006
17,559
Goodwill
126,511
126,487
Intangible assets, net
378
650
Deferred income taxes
653
823
Other assets
19,047
19,961
Total assets
$
445,594
$
443,078
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
18,663
$
20,677
Accrued expenses and other current
liabilities
82,074
78,297
Contract liabilities
105,713
94,882
Total current liabilities
206,450
193,856
Long-term contract liabilities
14,500
14,382
Deferred income taxes
3,032
3,031
Operating lease liabilities
5,467
10,368
Other liabilities
9,656
11,667
Total liabilities
239,105
233,304
Commitments and Contingencies
Stockholders' equity:
Common stock - $0 par value; Authorized
300,000,000 shares. Issued and outstanding 70,373,809 and
68,842,601 at October 31, 2023 and January 31, 2023,
respectively
—
—
Additional paid-in capital
351,121
338,465
Accumulated deficit
(141,978
)
(129,022
)
Accumulated other comprehensive loss
(20,840
)
(15,314
)
Total Cognyte Software Ltd.
stockholders' equity
188,303
194,129
Noncontrolling interest
18,186
15,645
Total stockholders’ equity
206,489
209,774
Total liabilities and stockholders’
equity
$
445,594
$
443,078
Table 3
COGNYTE SOFTWARE LTD.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Nine months ended
October 31,
(in thousands)
2023
2022
Cash flows from operating
activities:
Net loss
$
(9,768
)
$
(83,900
)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization
10,346
13,502
Allowance for credit losses
1,258
867
Gain from business divestiture
(4,566
)
—
Stock-based compensation, excluding
cash-settled awards
8,192
16,260
Provision from deferred income taxes
159
(31
)
Non-cash losses on derivative financial
instruments, net
(586
)
(759
)
Other non-cash items, net
263
1,819
Changes in operating assets and
liabilities:
Accounts receivable
11,949
45,045
Contract assets
(10,118
)
2,844
Inventories
(199
)
(11,598
)
Prepaid expenses and other assets
6,185
(190
)
Accounts payable and accrued expenses
1,592
(22,374
)
Contract liabilities
11,069
(6,815
)
Other liabilities
(925
)
1,951
Other, net
(53
)
(2,758
)
Net cash provided by (used in)
operating activities
24,798
(46,137
)
Cash flows from investing
activities:
Purchases of property and equipment
(5,143
)
(6,649
)
Purchases of short-term investments
(58,695
)
(42,641
)
Maturities and sales of short-term
investments
55,642
38,218
Settlements of derivative financial
instruments not designated as hedges
(147
)
433
Cash paid for capitalized software
development costs
(1,427
)
(2,710
)
Proceeds from Business divestiture, net of
cost
386
—
Change in restricted bank time deposits,
including long-term portion
(147
)
150
Net cash used in investing
activities
(9,531
)
(13,199
)
Cash flows from financing
activities:
Repayment of credit facility - presented
as short term loan
—
(50,000
)
Dividends paid to noncontrolling
interest
—
(1,443
)
Net cash used in financing
activities
—
(51,443
)
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
(471
)
(482
)
Net increase (decrease) in cash, cash
equivalents, restricted cash and restricted cash
equivalents
14,796
(111,262
)
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
$
53,840
$
46,958
Reconciliation of cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period:
Cash and cash equivalents
$
49,594
$
42,643
Restricted cash and cash equivalents
included in restricted cash and cash equivalents and restricted
bank time deposits
4,146
4,132
Restricted cash and cash equivalents
included in other assets
100
183
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
53,840
$
46,958
Table 4
COGNYTE SOFTWARE LTD.
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Nine Months Ended
October 31,
Three Months Ended
October 31,
(in thousands, except per share data)
2023
2022
2023
2022
Revenue
Total GAAP revenue
$
229,713
$
238,801
$
79,394
$
71,254
Revenue adjustments
112
732
—
244
Total non-GAAP revenue
$
229,825
$
239,533
$
79,394
$
71,498
Gross profit and gross margin
GAAP gross profit
158,051
147,279
55,335
44,207
GAAP gross margin
68.8
%
61.7
%
69.7
%
62.0
%
Non-GAAP adjustments
1,212
3,734
409
1,118
Non-GAAP gross profit
$
159,263
$
151,013
$
55,744
$
45,325
Non-GAAP gross margin
69.3
%
63.0
%
70.2
%
63.4
%
Research and development, net
GAAP research and development,
net
80,248
109,655
25,398
33,129
As a percentage of GAAP revenue
34.9
%
45.9
%
32.0
%
46.5
%
Stock-based compensation expenses
(1,750
)
(5,043
)
(651
)
(1,341
)
Other adjustments
(160
)
(1,327
)
(17
)
(396
)
Non-GAAP research and development,
net
$
78,338
$
103,285
$
24,730
$
31,392
As a percentage of non-GAAP
revenue
34.1
%
43.1
%
31.1
%
43.9
%
Selling, general and administrative
expenses
GAAP selling, general and
administrative expenses
92,732
119,273
32,622
36,828
As a percentage of GAAP revenue
40.4
%
49.9
%
41.1
%
51.7
%
Stock-based compensation expenses
(5,448
)
(9,192
)
(2,503
)
(2,902
)
Restructuring expenses and other
adjustments, net
(1,136
)
(3,456
)
(334
)
(610
)
Non-GAAP selling, general and
administrative expenses
$
86,148
$
106,625
$
29,785
$
33,316
As a percentage of non-GAAP
revenue
37.5
%
44.5
%
37.5
%
46.6
%
Operating loss, operating margin and
adjusted EBITDA
GAAP Operating loss
(15,200
)
(82,402
)
(2,775
)
(26,001
)
GAAP operating margin
(6.6
) %
(34.5
) %
(3.5
) %
(36.5
) %
Revenue adjustments
112
732
—
244
Amortization of acquired technology
—
512
—
171
Amortization of other acquired intangible
assets
271
753
90
251
Stock-based compensation expenses
8,192
16,260
3,563
4,797
Acquisition (benefit) expenses, net
(10
)
656
—
559
Restructuring expenses, net
1,908
4,501
176
586
Separation (income) expenses, net
(881
)
52
40
10
Business divestiture
236
—
51
—
Other adjustments
149
39
84
—
Non-GAAP operating (loss)
income
$
(5,223
)
$
(58,897
)
$
1,229
$
(19,383
)
Nine Months Ended
October 31,
Three Months Ended
October 31,
(in thousands, except per share data)
2023
2022
2023
2022
Depreciation and amortization
9,896
12,191
3,394
3,980
Adjusted EBITDA
$
4,673
$
(46,706
)
$
4,623
$
(15,403
)
Non-GAAP operating margin
(2.3
) %
(24.6
) %
1.5
%
(27.1
) %
Adjusted EBITDA margin
2.0
%
(19.5
) %
5.8
%
(21.5
) %
Other income (expense)
reconciliation
GAAP other income, net
7,932
591
6,343
838
Change in fair value of equity
investment
—
(1,660
)
—
—
Business divestiture
(4,424
)
—
(4,589
)
—
Non-GAAP other income (expense),
net
$
3,508
$
(1,069
)
$
1,754
$
838
Tax provision reconciliation
GAAP provision (benefit) for income
taxes
2,500
2,089
(2,605
)
1,642
Effective income tax rate
(34.4
) %
(2.6
) %
(73.0
) %
(6.5
) %
Non-GAAP tax adjustments
(8,833
)
8,024
(19,124
)
(4,301
)
Non-GAAP (benefit) provision for income
taxes (1)
$
(6,333
)
$
10,113
$
(21,729
)
$
(2,659
)
Non-GAAP effective income tax
rate
369.3
%
(16.9
) %
(728.4
) %
14.3
%
Net (loss) income attributable to
Cognyte Software Ltd. reconciliation
GAAP Net (loss) income attributable to
Cognyte Software Ltd.
$
(12,956
)
$
(87,028
)
$
5,223
$
(27,786
)
Revenue adjustments
112
732
—
244
Amortization of acquired technology
—
512
—
171
Amortization of other acquired intangible
assets
271
753
90
251
Stock-based compensation expenses
8,192
16,260
3,563
4,797
Acquisition (benefit) expenses, net
(10
)
656
—
559
Restructuring expenses, net
1,908
4,501
176
586
Separation (income) expenses, net
(881
)
52
40
10
Change in fair value of equity
investment
—
(1,660
)
—
—
Business divestiture
(4,188
)
—
(4,538
)
—
Non-GAAP tax adjustments
8,833
(8,024
)
19,124
4,301
Other Non-GAAP adjustments
149
39
84
—
Total adjustments
14,386
13,821
18,539
10,919
Non-GAAP net income (loss) attributable
to Cognyte Software Ltd.
$
1,430
$
(73,207
)
$
23,762
$
(16,867
)
Table comparing GAAP diluted net (loss)
income 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) income per
share attributable to Cognyte Software Ltd.
$
(0.19
)
$
(1.29
)
$
0.07
$
(0.41
)
Non-GAAP diluted net income (loss) per
share attributable to Cognyte Software Ltd.
$
0.02
$
(1.08
)
$
0.34
$
(0.25
)
GAAP weighted-average shares used in
computing diluted net income (loss) per share attributable to
Cognyte Software Ltd.
69,803
67,692
70,345
68,081
Additional weighted-average shares
applicable to non-GAAP diluted net income per share attributable to
Cognyte Software Ltd.
677
—
388
—
Non-GAAP diluted weighted-average
shares used in computing net income (loss) per share attributable
to Cognyte Software Ltd.
70,480
67,692
70,732
68,081
Nine Months Ended
October 31,
Three Months Ended
October 31,
(in thousands, except per share data)
2023
2022
2023
2022
Table of reconciliation from GAAP Net
(loss) income attributable to Cognyte Software Ltd. to adjusted
EBITDA
GAAP Net (loss) income attributable to
Cognyte Software Ltd.
$
(12,956
)
$
(87,028
)
$
5,223
$
(27,786
)
As a percentage of GAAP revenue
(5.6
) %
(36.4
) %
6.6
%
(39.0
) %
Net income attributable to noncontrolling
interest
3,188
3,128
950
981
GAAP provision (benefit) for income
taxes
2,500
2,089
(2,605
)
1,642
GAAP other income, net
(7,932
)
(591
)
(6,343
)
(838
)
Amortization of acquired technology
—
512
—
171
Amortization of other acquired intangible
assets
271
753
90
251
Depreciation and amortization
9,896
12,191
3,394
3,980
Revenue adjustments
112
732
—
244
Stock-based compensation expenses
8,192
16,260
3,563
4,797
Acquisition (benefit) expenses, net
(10
)
656
—
559
Restructuring expenses, net
1,908
4,501
176
586
Separation (income) expenses, net
(881
)
52
40
10
Business divestiture
236
—
51
—
Other adjustments
149
39
84
—
Adjusted EBITDA
$
4,673
$
(46,706
)
$
4,623
$
(15,403
)
As a percentage of non-GAAP
revenue
2.0
%
(19.5
) %
5.8
%
(21.5
) %
Table 5
COGNYTE SOFTWARE LTD.
Reconciliation of Non-GAAP to
SIS Adjusted Non-GAAP Measures
(Unaudited)
Nine Months Ended
October 31,
Three Months Ended
October 31,
(in thousands)
2023
2022
2023
2022
Revenue
Total non-GAAP revenue
$
229,825
$
239,533
$
79,394
$
71,498
SIS revenue adjustments
—
(27,689
)
—
(10,021
)
Total SIS Adjusted non-GAAP
revenue
$
229,825
$
211,844
$
79,394
$
61,477
Gross profit and gross margin
Non-GAAP gross profit
159,263
151,013
55,744
45,325
Non-GAAP gross margin
69.3
%
63.0
%
70.2
%
63.4
%
SIS adjustments
—
(19,584
)
—
(7,751
)
SIS Adjusted non-GAAP gross
profit
$
159,263
$
131,429
$
55,744
$
37,574
SIS Adjusted non-GAAP gross
margin
69.3
%
62.0
%
70.2
%
61.1
%
Research and development, net
Non-GAAP research and development,
net
78,338
103,285
24,730
31,392
As a percentage of non-GAAP
revenue
34.1
%
43.1
%
31.1
%
43.9
%
SIS adjustments
—
(8,310
)
—
(2,473
)
SIS Adjusted non-GAAP research and
development, net
$
78,338
$
94,975
$
24,730
$
28,919
As a percentage of SIS Adjusted
non-GAAP revenue
34.1
%
44.8
%
31.1
%
47.0
%
Selling, general and administrative
expenses
Non-GAAP selling, general and
administrative expenses
86,148
106,625
29,785
33,316
As a percentage of non-GAAP
revenue
37.5
%
44.5
%
37.5
%
46.6
%
SIS adjustments
—
(7,523
)
—
(2,640
)
SIS Adjusted non-GAAP selling, general
and administrative expenses
$
86,148
$
99,102
$
29,785
$
30,676
As a percentage of SIS Adjusted
non-GAAP revenue
37.5
%
46.8
%
37.5
%
49.9
%
Operating (loss) income and operating
margin
Non-GAAP operating (loss)
income
(5,223
)
(58,897
)
1,229
(19,383
)
Non-GAAP operating margin
(2.3
) %
(24.6
) %
1.5
%
(27.1
) %
SIS adjustments
—
(3,751
)
—
(2,637
)
SIS Adjusted non-GAAP operating (loss)
income
$
(5,223
)
$
(62,648
)
$
1,229
$
(22,020
)
SIS Adjusted non-GAAP operating
margin
(2.3
) %
(29.6
) %
1.5
%
(35.8
) %
Table 6
COGNYTE SOFTWARE LTD.
Calculation of Change in
Revenue on a Constant Currency Basis
(Unaudited)
GAAP Revenue
Non-GAAP Revenue
(in thousands)
Nine Months Ended
Three Months Ended
Nine Months Ended
Three Months Ended
Revenue for the three and nine months
ended October 31, 2022
$
238,801
$
71,254
$
239,533
$
71,498
Revenue for the three and nine months
ended October 31, 2023
$
229,713
$
79,394
$
229,825
$
79,394
Revenue for the three and nine months
ended October 31, 2023 at constant currency (2)
$
227,500
$
78,500
$
228,000
$
78,500
Reported period-over-period revenue
change
(3.8
) %
11.4
%
(4.1
) %
11.0
%
% impact from change in foreign currency
exchange rates
(0.9
) %
(1.5
) %
(0.9
) %
(1.5
) %
Constant currency period-over-period
revenue change
(4.7
) %
9.9
%
(4.9
) %
9.6
%
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 $4.4 million
and $1.3 million for the nine and three months ended October 31,
2023, respectively and $9.5 million and $1.8 million for the nine
and three months ended October 31, 2022, respectively.
(2) Revenue for the three and nine months ended October 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 nine months ended October 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) 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/20231213282477/en/
Investor Relations Dean
Ridlon Cognyte Software Ltd. IR@cognyte.com
Cognyte Software (NASDAQ:CGNT)
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