Cognyte Software (CGNT) 21 Dec 212021 Q3 Earnings call transcript

Welcome to the Cognyte Third Quarter Earnings Conference Call. My name is John, I'll be your operator for today's call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions]. is conference the note being recorded. Please turn I'll the call Ridlon. Dean to over And

Hello, Ridlon, today. I'm of you, CEO everyone. Thank operator. Cognyte's Abadi, Dean a Sharon, Thank CFO. for and David with Investor you Cognyte's, joining here us I'm Elad Cognyte's Relations. Head new

our started, I accompanying to a is mention like getting today WebEx Before that would call with slides.

investor and investors date to attention undue the Federal the statements forward-looking cognyte.com, are are on these implied by differ view to this and provisions them. made are discussed management's The of revise These these forward-looking link forward-looking today's the would draw update also expectations the of click certain visit could may in the within to no during required results of or Cognyte these materially that statements of current of Actual click statements Securities forward-looking Laws. statements. webcast slides the call, performance. at expressed website Private matters Securities those from the real-time like to guarantees this based section in contain like and as as not or other call, our forward-looking and obligation call not your you'd cautioned conference tab, XXXX Investors to reliance Litigation by meaning law. on are place except If assumes statements. fact future Reform the on on call. on of of Act please select I

forward-looking our investors between and fiscal GAAP XXXX. ended today's actual of results for financial those believe materially other peer non-GAAP to Non-GAAP from on at the not information our investors we presentation uncertainties financial isolation among results filings SEC. non-GAAP in measures of financial from and limitations SEC similar cause purposes. the management of publish cognyte.com non-GAAP non-GAAP provides We risks earnings for considered indicated comparing comparative statements. about GAAP financial should filed financial our information because But business companies those a a the included for Cognyte year see detailed measures. differ website the today our annual with measures. measures. other information. it's measures of see from reconciliation the as meaningful discussion XX-F to report more financial the by April XX, superior or For XXXX periods in XX, focus The and investors believes differ Please Form and on January with how measures slides, financial may in for used these other our these have uses Please and release and discussed substitute to to The make section and include on that non-GAAP it and is company companies. performance measures informational useful be could

the Now, over to like Elad. I would to turn call

coming third come in in Adjusted I’m Non-GAAP you you, million million. was We're report $X.XX. third EBITDA conference high-end EPS $XX and guidance. revenue pleased our non-GAAP have Thank excited quarter to join above was EPS revenue quarter Welcome to Cognyte. everyone our also to strong call. diluted and the the of at Dean. $XXX

security many eight assumed our the large by multiple platform. driven During analytics quarter, we including seven and digital deals,

execution sequential experienced guidance or in with as David QX we EPS We finish $XXX and strong around software $X.XX an independent approach of profit with later strategy. sequential are midpoint weeks expectations. I’m QX at on our we call. million X.X% year year-over-year in As completing of year the the overall expect growth, the revenue the the of growth of We and the our growth growth in outlook. revenue expect our year, we gross refining With company, six XX% revenue, now will and left QX. to pleased our in first elaborate

security Our review start security discussion growth the would in strategy. empower strategy cases. the to of to like help an address use with them my QX organization reflect is I some today deals execution with of open to platform of that large many [indiscernible] different analytics this

accelerate The help first functionality. with a platform complex agency $XX a analytics. latest customers innovations in our million needs national added security a address our is example security approximately their new how can that good is from of growing deal This to investigations

evolving threats. address security to our artificial data our deals our good with they third The scale connection to These analyze and focus in of of two $XX believe solutions data of are the expansion the different two cases. analytics, we are of and platform. deals amount examples customers to how each and increasing laser many capacity these reflect and examples deals, ability million in intelligence leverage second platform large We the address capture our of approximately use customers' innovation help

ecosystem, a example, of seek is members before the of to it's world, can use funding available difficult to case growing they In happen. to Security diverse ultimately agencies organized find platform useful [indiscernible] digital is order crime also leadership, The in actionable agencies insights. identify the digital behind analyze and crimes But or that very prevent digital sources rapidly. and For organizations, today's very many information criminals that including in organizations leave accelerating security and accelerating investigation. be to criminal footprints of amount our investigations. intentions is

of investigations analyzing by wide with quick built agencies we address I cases customers to help a our fusing and and how Our is security crime and many platform leverage use evolving of our example enable sources. analytics connect platform organized to a security domain expertise to believe from footprints reach digital good challenges. dots support the is of data significant conclusions variety the

platform recognize we that from diversity. generate and and open a and range growth keep customers market partner before analytics data high-quality Many homegrown in that is better They we the security longer to multiple analytics are with insights support early fully in long-term trusted faster can use wide sources that we solutions forward, can cases, different believe of for from positioned no at mitigate solutions threats look volume they the As growth. can its well feel security seek pace stages unfold. scale

have continuing With tools long Israel, market primarily history committed has in We in to example for establish R&D Cognyte a of XXXX innovation security developing lead leading that software. highly a people are the customers. for based enabled we to to our as analytic sophisticated us of nearly

on our results address value And just summary, to third by as intend with we In we to also cutting previous with the Our customers quarter security corporate our needs customers and agencies. record our expect collaborate market pleased execution the profit evolving of of about ability based world's in for innovation confidence of the We on and gross for deliver most are track public year maintain solid of year. continuing our the to our technology, on a have first to track strong security strategy, artificial market and sophisticated company. growth independent an XX% edge analytics is to our deployments. not our to leadership intelligence deliver with stay leadership

forward, growth. are trends for we positioned with positive are and large well growing industry long-term Looking and in market a

results Now, David? over in let call QX the me and discuss outlook detail. to more turn David to our

everyone. Elad and you, hello Thank

was GAAP non-GAAP mentioned include and measures the our ahead as new With available results will between our EPS customers. and in a today the comments non-GAAP section ongoing from with solutions financial and our measures, coming revenue, our quarter expectations. reconciliation and of financial in both solid is our third Behind adjusted demand investor for our website. earnings EBITDA existing Our being release of

During diluted million our will came at the Adjusted $XXX.X security in strategy adjusted came intelligence in $X.XX. update in EBITDA at platform. million behind us, to is $XX.X like XXX.X was our mend impacting was how $XX.X in EBITDA it on provide positively came and orders and results. three cutting-edge and large software QX, analytics quarters an diluted With artificial revenue quarter, In at I $X.XX. by financial Year-to-date came would we revenue EPS at and EPS million our driven million.

Our drove percentage growth our profit services. report drive and the our mix. basis. Cognyte. software we increasing mix gross gross We've The during the and both this as profit improve hardware few to last from of been our to is an professional our a revenue less year full that strategy increasing pleased software for quarters, that of year continue and software we the the expect execution steadily XX% continue double-digit as metric three sell benefits to over customers higher I for strategy we a software non-GAAP first software believe this generated I’m year, important years. on

installation easier our and technology deploying platform, software by from customers, benefit updates. they innovation, faster frequent For

competitive is For and Cognyte, growth differentiation. our higher financial model, to shifting improving mix software opportunities

me guidance. discuss overall now Let our

outlook of solutions 'XX with to is reflecting approximately the countries outlook range certain of pandemic. affecting components Recent of reflects Our restriction to third-party worsening including timing deliver This shortage X.X% certain deployments, software FY travel factors. revised in a growth. our new for or relating certain required of and of a other revenue, million events non-GAAP recent $XXX plus the minus of year-over-year X%,

finance, public synergies in to grow spin-off We other and legal for continue with compliance expect than to public company profit and XX% grow profit standalone addition normalized growth, to double-digit year-over-year to the revenue. And to functions. IT, adjusted expect faster infrastructure related EBITDA growth, we company establishing the primarily

to at finance, midpoint the those as company built Relations We functions revenue and also EPS Dean Investor to expect including welcome come legal expanding pleased our operate our IT range. to at our our Executive. of the spin-off, teams. I'm $X.XX independently, Along we've the non-GAAP lines, diluted Since public in

public year on We year profit to with our during deliver to expect company solid a XX% are and gross growth. as results standalone the finish first track

being for Cognyte innovation is cases with as range customers, pace use impressed evolving challenges. and security market, hand security growing long-term addresses and a With to a wide positioned leader allows keep growth. the platform to in well like open to the of is to for Operator? would Our the we a it operator I by large over questions. and call for that, lines open are sustained fast

Thank Our Cikos Company. begin will question is you. first I Instructions] session. question-and-answer Mike [Operator now Needham from the & from

from help think it about you much shortages? that about at are Can worsening the the reduction third-party up guidance pandemic. And component circle did the talking Hey, guys questions is the today. this the XX:XX are us guys, is component it or think How for $XX about. XX? around want to of on here. I taking we a $XX should travel we shortages on midpoint thanks the Understand you split based restrictions that? the million million that pandemic versus seeing revenue how Is

Mike, the for Hi, thanks question.

give to try I'll So the about guidance. more color

our develop we a of So number guidance. take we are into when that there factors account

there Omicron quarter, several of COVID mentioned the certain This have more are persistence variant. Delta related to as you consider, and we related developments including, of are that restrictions recent the travel in to countries the emergence

we as without are Just countries a global reminder, trouble. and software deploy a can for company we most

of COVID right by However, [indiscernible] there are are now. customers are and impacted those certain that being some

as the majority comes of you third-party Another solution. certain we of factor, required the to recent remind is Also components our that our revenue software software. mentioned, that want deliver to from is of shortage you

there However, software. margin their outlook, company, us and year that very outlook is expect the profit on goal gross public margin our overachieve our high the while EPS. profit lower first to In meet like normalize growing XX% to grow require proprietary I our solutions by that XX% our for EBITDA certain revenue enable although would move And gross initial gross also we as are towards point EBITDA. we to And deliver to little we a hardware revenue there of out because software, to and expected year-over-year. by a impact and is the used

the of one few the itself. million, speaking, As is a millions But by it's and we difficult Mike. can reach. elements of guidance, different impact factor many call itself. quantification, uncertainties I have the we upsides. quantify very so down difficult there an quite in guidance took individual assume But elements of you to And by the into each generally factors of if we the to of answers, by hope this it's each that $XX

sounds not the for site can or some installation Is customers it want Yes, the you color not And clear to it's this. I this. government government part? pandemic, It related on on being make on caution like I'm on restrictions It's sure just right? out mandates, Yes. almost it primarily does around Or provide maybe helps. actually is entirely like It help. to their you travel mandates? it the perform letting to of

Yes.

governments. to related mainly It's right. you're So

For we remotely are regulations because allowed we governments, sometimes of not certain have. to work

we presence. So global either use our

around the offices employees and world many around the as world, many know. have you We

But comes bit local of either side cannot do And the to it's we timeline. because other us little restrictions. because in the when get easier. have or when we not lone of that forces, delay our So restrictions, this deployment a customers in fly it let creates of

And that an experiencing how component wanted turn shortages Okay. I'm on I you long the then, has for issue for final I this seeing, it the components And you can over, curious, touch to which in? thing been that we're guys? you're explain those shortages before

Yes.

of deal. some our The there embedded And global their the are is a small from third-party. software value appliances of in components. appliances in cases, of that deliver use are of we So a certain the shortage part network acquired

these so becoming to in see we this inventory delays software far. recognize some were we need order with vendors future and However, respect, needs. and everything to for we we are have see this currently, that development And our a until is we from working we in shortages recent have make are appliances didn't both our sure we And able the can't available. revenue before

last And for to on you topic. the question be that was my going

understand for we quarter couple lead Sorry, us gotten help recently of but with working with be, vendors, Or potential now, anticipate do this at follow have if a you And understand with facing are they the this a you're I So the being up to shortages is extend times vendors? you're this one investors? quarters getting that working can since better or time? would your you the then, your worse phenomenon?

Yes.

it's to hard whether it doesn't development, our sure So recently remind are of speaking, said is months development. to is again, tell make generally it as huge. I It's a appliance you to but we that, business recent the term. not that with working affect or recent for that the within overall weeks Having want portion the starting business them, it's longer a our

something departments over vendors overcome components. this So to with to we to in help time. able believe the I necessary working again, our that short-term, be missing the find with taking and purchasing them And is steps clients we'll are the

Great, thank I'll it colleagues. any turn you. to Thank of you, my over guys.

you. Thank

is Our Materne from next question Kirk from Evercore.

is Great, Peter Levine for in my thanks taking This for question. Kirk.

you builds you that travel of just but also implementation, reps Can question, seeing considering about a the slowdown, can't site? perhaps terms deal last site restrictions, in new delays? a you you the I looks the of off on piggyback kind of on to your getting implementation reps So that decipher kind while versus of get nature because are in the see data when of with, maybe pipeline talked slowdown, what go like you

is strong say growing, all that, Yes, only The so solution. challenges to we are our see obviously, as deployments. issue we we and see security do of more for demand timing related

customers for efforts years those marketing we running now us doing also quite two remotely far. I for are so Of think harder successfully already activities. make restrictions areas, approach to those about for course, flight and it But

answers question, So mainly timing. related to the it's I this now deployment your Kirk. hope

to what then And you based kind you into for, sure enough. yet I what fiscal guided flow Fair we'll and give kind year? thinking for a you. going that us you on just next insight impact for brief that's know deal you're 'XX quarter, today maybe haven't of but how of Thank next get can I'm see pipelines,

for our share -- our next So, call. David, QX year you Peter, will mentioned, as it's you we during as mentioned guidance

showed January, for years double-digit you beginning of As year plan three that growth. you back the remember revenue in we all the that in

this the but year to be call. in with expect XX% share the growth, and profit we XX% growth, revenue under growth, default, guidance we'll As QX

my Great, thank you taking very questions. much for

Thank you.

question Ruttenbur next Capital. is from Our Brian from Imperial

very you much. Yes, thank

So issue the regional travel, it like into, is it's shortages there seems a is like than because looking more anything is related. where at 'XX, it travel rather it you all your is fiscal about equipment, a you're it more Is is sounds of rather talk of it can regionally, than everywhere, that pandemic Africa, and, correct? it a or U.S., that selling is it pandemic is pandemic it's

It's again, countries. when so guidance, have we in it's generally not speaking offices time more us. to elements. all certain about it's But in we global or it's, sales territories, presence, the issue difficult global wide we engineers is and and changing again, the the because pandemic, different other temporary most it's different to build changing Yes, quite one have the for in changing, also so actually, we to dynamics globe, separate around the the the the have of do force from a territories

full it's its people physically work where to site. country So territory traveling present also related, by or related, related it's our are not we with have we to and to the

it's something and So time specific that to pandemic changes. according is time country say I changing would from the to

COVID Okay. we up as and even X% reasonable I'm see X% I this asking continue higher of for everything current looking growth and directional that guidance? you're some have And a Is on or 'XX guidance, that general kind in as be should else seeing or as but lower, to, to 'XX in year. we I'm want or at state just I then just follow growing 'XX to this know that of

Yes.

year. like, you growth are and years at will QX revenue again guidance will strong out three this So FYXX last in growth, our profit I the thing, plan, we during but that call year, for it's growth, X.X% when QX January the share double-digit. we guidance as we David our And with we the currently, myself in lay but mentioned again. provide will we call, repeat

you. Okay, thank

Reback is Brad question from Stifel. from next Our

'XX. just one Maybe more Great. on fiscal

I that? a comp, to trend-line the the difficult sort that for it's lead XQ? year, up this current first think fiscal hardest April, of could a about there against at impacted should below positively XQ How you Were be As one-time growth Thanks. we just items pretty the year. situation think quarter, where of might which look

you, Brad. Thank

remotely, years components two when long mentioned actually, the to compassing last we deploy guidance impacted And business, way like really perfect how deliver our do evolving side some a digital for we the our our of like millions. this have the I to year very of we clearly the certain QX, before, their software continue to how our which also see And in be as we'll with the it's look time. together, we look story, we As and Elad COVID were the have layout ability time in relevant of we for the part all other at and a shorter do is may well that see the for the able us as the position, but year, able we -- like see put it aspects, that elements next believe color to the successfully. -- on to will we'll impact year is over share that few and

That's great. And then just one quick follow-up.

As any about you that potential you to execute in the 'XX? think of what's for M&A, guys Thanks.

Yes.

plans, results, of by first organic all, of as relying we're on M&A, way, the and growth. So mainly historical this, our

to offerings, the and in we'll something relevant, case-by-case look we're history the in to decisions. be it M&As, our is When people, of We a and said most course, in well a for of have we the more this not able relying M&As on we find order area. one consider other order to basis. tuck-in execute it area M&As we're we to as take that, value And customers our innovating, create us plans. accelerate X,XXX have Having R&D at strategic is

story the M&As, strategic more relevant, term, is those, in the not always make long when it something have we it, look find to to So summarize, that do we we for the for and pipeline tuck-in shorter shorter for M&As term. we longer

much. very you thank Great,

you. Thank

from Company. a & we Mike from question have Needham Cikos And

couple for thanks just me a questions. guys, more did of Hey, on. I getting have back

The component sole-sourced? any first, coming shortages, these to are those back of components

take it, Mike. would I

it's is past like do you difficult common or and is vector two looking, or we And we few but few be this we sole-sourced, see components a months recollecting versus something would like time up. a not things two that happening, think the actually, going I are is that at are that like or months the it. pressures may the that very -- So we months, it's challenge, we say could few can It like, have you that when like of work the a reason that becoming be on something that. timing the change even could weeks we is like, it have the now look

hardware, require software it's in overall, specification that. in is on So but prototype because our but certain the working again, end -- that cases, only

provide from So something from it's manageable. challenge or magnitude the that's is relatively a it even to

Yes.

the to those shortages. our hardware, elaborate on we certain components Mike, on shelf some of quite this, have face of software certain And running that appliances, is Just appliances. we most off running is on for it few

not It's So of our helps. is something portion limited. hope that that is this I major business. -- reflects it's major something

It that implies components gross I'm margins is looking think why for you decline XX% can these wondering would does. margins at guidance guidance, declined profit that about it why seeing costs your based -- from the be to if increasing on we QX. QX or we embedded gross sequential that's declined help the I'm And does, in year from gross the And be QX us would it QX? for actually of year-to-year, the

mix, estimation, that margin like we're of the pleased and can shared months a So, see over you first, depends a slight gross we Obviously, to going general, strong And we're are we decline, Mike, year, as gross where we and from delivering first nine at gross we're XX% it's quarter-over-quarter, best overall it's that, lend. very perspective. were looking that the providing and where our of high this on target, of profit. like, David. level is the mainly In profit and we're from

just fiscal thinking that and Maybe question. 'XX. you still were one belt independent you but back other as an given about 'XX now initially your or nearly at then those that put out guys expects fiscal all guidance the not of attain out, and referenced three-year time specific we're year me, know the we've have a those And willing under I Great. of spin. targets to at the excuse that laid fact the Cognyte spin? time to Is that reiterate did the guys targets it company,

lay QX, to look from adjust shared now everything So to to ability again, plan change impact see January, the strong a invest evolve. the the margin, in we that and going over that plan of in consider we the detailed everything we and way the is as if successfully our out part continue Obviously, which gross have business. and things in We've we also how to we our annual have at required. purchases, scratch year,

overall, in So, take QX. guidance will place the

Okay, thank you.

Thank you, Mike.

And question Blair. from we have from a William Louie DiPalma

Good afternoon.

afternoon. good morning. Louie, Hi, Good

appliance you and in percentage revenue is overall quarter the of the revenue of that what separately, What recurring, was those percentage general referenced hardware during through Thanks. shortages? component

Okay.

So, for Louie, Thanks David. question. the it's

much And over the is look smaller is it total revenue revenue. around of to the of be if if at XX% revenue, delivered you the you revenue overall, that revenue. at XX% that recurring portion. on of appliances But shortage Our look total is the the elements may want overall

do of shortage. I are the revenue we put kind product, so -- can with a it's it, We are limitation but like want where of splitting we not not to so something the it's quantify that per

we level it's we like is our revenue and this most and and the software of the we're specific level that ensure that inventory of that at of for costs, is it's inventory like things products, very the will picture, with cases, within the level But is all high of that appliances deal majority of within see are that's we the very costs are and relevant in relatively limited. are its shortage. something on are very you see deployed increasing in cases certain also over, So again, not we the solutions. working to we In the have is our and of deployment products, big on level we on and shortage, shortages it group this is which that certain are monitoring to can certain we the that solution low, appliances, have not software using small facing

Great. but months, the the to increase to revenue, nine has in believe And there percentage? over been I it goal true has recurring months company related the the increase that of the the I think nine the XX%. any of flat-lined year that over recurring has first or revenue, a level Is the revenue percentage past recurring been for at

are in back for we shared -- revenue in the present we So we recurring that XX% way this, January we years, correctly we believe where when shared our outlook the and will the upcoming of offering. are

this impact it's is issue. subscription short revenue, have more a long-term but -- will that on not term, positive are We more something which time shared some plans impact, over will to work the

my were of that $XX deals do your and that, is forever in visibility question, or gone when And expectation pushed you in million guidance thanks. reduction, have those the canceled? deals been million back for is last terms that have you Okay, specific recognize the $XX will that

canceled, take One no, I'll when only so Yes, of it's it's the lend say can pandemic, and have and complex. only -- challenges we to deploy, deals the customer our solutions, that this of more is it's And, security to customers, to becoming the needs deployment one. countries so a exactly hard are matter the but specific in to a we timing. so related, to value provide we lot not tell are there again,

need disappeared. And timing. for -- the matter of that is that not need has only there, it's reason, a So the is it's

to something to we'll deliver again as vendors our proactively inventory, shortage, hands the the that us help how for do months, approach say areas is software of to terms few our In weeks, believe, something something to it's And certain we order I can mentioned, the this our within part. way, appliances a one. but our What purchasing deploy people that David help them this need so, in trying we missing of able that be to put that we is to is the by And second, a this in specific the we it. or we is and is is use which increase overcome. on them believe to order couple

solutions, whatever hope in So as will the order again, that we'll be to deploy allow waiting, But conditions us. the this is to resolve are customers this they I we needs ecosystem give something this and done do answer. soon matter. need the as the you and

Okay.

have in say you terms deliver don't proper in the $XX that you you of will did receive visibility So million revenue? to these components when

it's again, David. So,

monitoring We the the have of of we're this to overall, are need a in referencing like, but this next do. components that is daily would our relevant timeline just thing inventory, because weeks. like what the like on, few the see right say, is on to between I getting And, almost to basis, missing level we'll we increase

short As Elad it, but now mentioned, very it's weeks that a two one. believe issue, it's hard a issue to term four weeks predict or a we it's

on that control, think something us think period. we that's don't it's solution for serving. longer and a that to a with that currently I it's that have under going specific impact So are this they specific stay We do

sorry, by also entire related right, million shortage, same And flight page, way, not related we to attention et not your the are to are restrictions, -- way, to just to sure $XX the on by it's the turn it's that the cetera. all make the

make we understand the facts. that sure just So to

any it's timing right, said like cancellations? there you all related, ultimately, that been haven't But

Correct, cancellations. no

Great, me. it thanks. That's for

Thank you.

at we this no further And have time. questions

you Thank all.

for concludes now this And thank you ladies may And you, today's gentlemen, you Thank and participating. disconnect. call.