Cognyte Software (CGNT) 15 Jun 232024 Q1 Earnings call transcript

Good day and thank you for standing-by. Welcome to the Cognyte First Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Dean Ridlon, Head of Investor Relations.

begin. may You

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

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

select during webcast Investors of conference If at our today's you'd real-time cognyte.com, like link, tab, visit please click these view call, to the click website the on the and in on slides the Investors call. section

I draw fact would may on are based future attention that These other the Securities your certain statements expectations and current not of call guarantees management's of XXXX Private meaning provisions forward-looking laws. like forward-looking this Litigation the also statements to of securities performance. and to Reform of the are matters the discussed contain Act within on federal

differ could revise call, law, undue The no forward-looking results are implied statements. in expressed forward-looking to Cognyte the Actual of these to not on of cautioned statements. are Investors reliance from by or these required update by materially as obligation except as date statements or forward-looking them. assumes those place made and this

XXXX, risks For those XX-F to for of these a annual and other Form on forward-looking fiscal we our actual and report in how filings the more SEC. statements, Cognyte's the uncertainties ended these differ and detailed cause indicated other could make from XX, January discussion results materially with please year see

among companies publish financial Please presentation and measures believe non-GAAP in section measures. earnings results non-GAAP slides, measures the measures. measures a of discussed comparing peer see our investors measures. at today that and focus periods our reconciliation financial website include cognyte.com GAAP on non-GAAP of to today's release, We for The non-GAAP Investors similar between financial our

of provides financial meaningful business in because and useful Non-GAAP to financial information GAAP substitute from it limitations as financial is is The management informational non-GAAP information, the investors or included companies. but measures financial uses by differ our the have for be should purposes. a from, other not superior used may performance believes information company those and isolation comparative considered for and to about

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

profit Welcome, Thank key quarter report sequentially the a pleased Dean. grew everyone, across our ahead [XXX our to you, expectation compared call. at metrics. to results year with I'm $XX Revenue a several points] X% adjusted non-GAAP first of start network increasing conference basis. by gross on basis solid I'm million. our gross good QX increasing came QX [ph] pleased very year-over-year and year margins last to with in for

in expectations. flow wins coming quarter strong our review of was at I'll significant ahead start also a $XX dynamics. Today, Free very of first million cash in of our with market

how technology year. I'll customer Next, increase I'll we're believe to the we innovations the for well-positioned discuss our differentiated value. lastly, updated discuss outlook to AI our leverage and latest And

in I some our significant highlight would now and the differentiated deep wins quarter relationships. our to like of review technology customer that

enforcement, law security and national national investigations. intelligence, organizations analytics investigating Our security, to solutions accelerate help other

vendors consistently million impact high for selected this during activities and trafficking We of believe operational crimes drug of that customer. around national performed intelligence borders. its is variety solutions we're with to outperformed cutting $X from combat for the by deal our first The customer approximately other technology edge an the mission existing because other

with due believe ability and the our customers' and relationship country. national The we an capabilities to expansion long-term investigations approximately with functionality second It to an security million. this our mission activities existing an have $X security to the deal address selected we're customer. criminal its for terror in of customer We and increase for represents accelerate of is

from million see to existing based activities. $X is wins these The customers an our effectively ability on believe capabilities The more third their expand operational our investigating is solutions We security combat and for create and customer. selected innovative national of the successfully to we're long solution track widen differentiated deal The is our capacity approximately our analytic record volume. we common in and value of through to success creation. help operational deal thread

ability saw current A year. expressing suffered confidence uncertainties, impacted a ahead. in from versus we visibility budget to customers plans. customers Looking budgets see the change at year, dynamics, This more ago, the last many market noticeable year what and which are the and plan we

is into our for needs. year, future expectations about discussions Our the translating customers support more confidence, and increase

we example, to industry returning what see normal to of customers. recent a year compared year, behavior ago. Overall, happening from interest and For was attendance clearly conference, more this customers level at saw higher a we

I discuss would Next, innovation to our like differentiation. and

of objective in making. Our hidden decision is and when customers a connections variety sources. face analytics comes challenges and have data to to inside investigations. unique investigating analyze different accelerate sensitive The investigating including from uncover uncover is insights sources, Cognyte it They on quickly order analytics data. large data fuse at diverse scale to focused to to large

developments doing for improving with new years intelligence in AI many been by artificial this incorporating the models in solutions. continuously and our [ph] The opportunities. provide have [investment We analytics] recent us

focused enable from currently data. derive even greater our on the latest value leveraging to are customers innovation the We to

globe are face across AI We investigating our expansion innovation our in strength well market our that with believe drive leverage market and long-term believe analytics position technological that good investigating with challenges and that present time. our growth. us customer combined with analytics over leadership segments long-term strong relationships new We to base there opportunities the us large

outlook representing the for are the guidance we year or SIS our given non-GAAP this $XXX basis. on year, minus improved visibility, raising our revenue fiscal midpoint plus for X% at at the growth Looking million, to year-over-year Adjusted an X%,

by grow revenue than grow expect With more to we year-over-year. X%, expected to at profit now gross faster XX%

full-year. expecting now are the flow, cash cash for operations positive we flow from for As

have in and well technology existing beyond large recent both expand Looking that our AI, we opportunities growth. the global positive industry customer to trends, potential with of We business new position customers. for base us combination this innovative year, our believe given and long-term identified innovations

our customers cases. across face significant summarize, many continue investigative used To to challenges

to our threats accelerate they investigations mitigate mission view Our us as of customers partner. And help unfold. is experts before trusted range wide them and a domain and

with and pleased and are positive growth target our quarter expansion. for and we guidance results raising We first the year. continued are Long-term, current margin momentum

to over Now, to turn our call and about provide me outlook. let the results details more David? David

Elad, hello everyone. and you, Thank

and between in Our website. section discussion today will release in GAAP our non-GAAP measures is available the Investors our earnings include measures. The and Dean reconciliation mentioned of financial financial our non-GAAP as

Our includes with historical the a financial our website solutions. a results, excluding intelligence also dashboard details tab situation divested that

financial continued during we add gross cash of and results continue to across QX flow, We strong are a edge pleased we margin, solid investigative and bookings. be win The analytics with cutting revenue, customers. our as performance the for solutions variety ongoing our to demand from quarter deals

year-over-year. revenue was year-over-year up growth. and QX from growth QX, million, X% revenue at revenue $XX,XXX,XXX, software in Gross and up and was XX% grew $X,XXX,XXX $XX X% faster in sequentially Total than gross XX% and profit came our year-over-year profit representing sequentially at up and came XX% software X% sequential

primarily and XXX basis in points XX.X%, due software QX an revenue. basis gross XXX increase QX points last was to from from margin up year, up QX

differentiation our competitive value our reflects margin and customers. ability gross to for create Our

gross the margin Adjusted profit, of just non-GAAP All growth gross are basis. discussed revenue, on I and rates, SIS

Our $XX.X QX non-GAAP were level. the expenses operating QX higher than slightly million,

[cost] resulting the structure and in sequential Over better higher the improved our [ph]. growth, execution, last cost reduced and focused few operating quarters, organization, we gross margin improved significant our revenue a

QX non-GAAP was Our million $X.X loss loss and million. was non-GAAP adjusted operating EBITDA $X.X

million positive was driven results significant cash to by and We flow cash cash from during The Turning QX. our cash. improved flow generated positive strong collection. of operation a $XX financial

no of terms the million the In debt. quarter $XX cash with we sheet, entered of about and balance

outlook current strong. Our as the the and short-term RPO at to QX. our again $XXX for million, healthy was of us This long to allow IPO RPO and same $XXX be the approximately QX was increase level year. continued continued and of million, short-term backlog end demand Total

to fiscal XXXX. Turning

the raising range. at the on the revenue Adjusted approximately non-GAAP SIS year-over-year $XXX full-year, minus an X%, outlook plus reflecting our For midpoint of to basis or we are X% million, growth

outlook of and deployment similar backlog the for in this by schedule driven is assumes year view revenue our current macro Our environment conditions.

see Let we me with how the the share of year color evolving. remainder on more you

For to revenue, similar second short half. on revenue expect than and current based backlog schedule, QX deployment the to and first the higher be we QX half

booking, on of our outlook our an quality Adjusted basis and and gross recent and SIS XXX basis. non-GAAP increasing non-GAAP points strength backlog, to basis XX.X%, the margin our of previous of points versus expectation an XXX improvement full-year we're of improvement result year-over-year a As

the on revenue based fluctuate will margin between Gross quarters, mix.

non-GAAP full-year to expenses relatively million about the to and For of total $XXX our expenses, we throughout continue flat operating be for the year. expect

with growth structure revenue and cost will over gross Our improved higher operating allow improve us to time. margins combined margins

goal positive We QX to track remain achieve drive non-GAAP this adjusted year. EBITDA of to fiscal on during our

versus now we of revenue outlook. expecting we EPS expecting midpoint annual previous smaller are $X.XX a $X.XX are range, loss, a The improvement result, EPS our annual an the a As loss. now of non-GAAP

fluctuate will tax Our partially our non-GAAP quarter-to-quarter, to expenses. due EPS non-GAAP

EPS non-GAAP result QX to than tax non-GAAP our be primarily QX, We methodology. expect loss of a as our larger

flow outlook, and we cash for operations from flow the financial the from to flow, cash operation given we now Turning QX strong positive are cash generate expecting in full-year. improved

expect the continue SIS We during by partially which receipts to of payment of CapEx, to price from year. we holdback additional million adjustment, expect divestiture the $XX second half receive related about to the and for offset the

are customer lengthy market world. we summarize, a with track a analytics investigative strong leader the records To have in and around and

We technologies, help believe by and our the solution demand. performance customers add operational technological intelligence. We the innovation this generate leveraging increased latest of innovation for continue and emerging our the capabilities solution improve including value in artificial our drive to

and cash expecting for about million We results. or We're for quarter We the X% FY flow year. improving operations margin plus gross of from are first our revenue, pleased XXXX. minus now profitability positive expect $XXX and with

and address edge base, believe position customer needs the XXXX, well FY long-term of us opportunity beyond our technology, combination of new for loyal the Looking and to we that customers the cutting growth. large

would to for Operator? questions. over to line the open operator With the that, the I to like end call

And from will Instructions] Mike Cikos question first of [Operator our Needham.. come

open. line Your is

there, had I'd over were here. the on but Cikos about of deliver? you what that if quarter pronunciation Mike like the to with me deliver know and anticipated. was upside sequentially was then for to you can Appreciate us question the name last that First, up, I couple talking on guys guys revenue I guys. have we this Wanted That's think of So, and Hey, And how thanks itself to together to into. above the help the follow-ups. outperformance quarter able start able getting the versus you you a some out in then here. delve going guys came flat the right? were about outperformance? revenue first help obviously

Yes.

So, we That's win the to last significant hi The a Mike. we're reason Yes, of demand able and ahead to already mainly – is deliver the in indeed, momentum] [positive the continuing [ph] within the more expectations related two market being QX for quarters to over we're backlog the deals. scheduling. reasons quarter. healthy for see conversion

current you million pull calling that as that couple interpret sequentially? climb I from And the to RPO XQ So, bookings, you anticipated backlog the a came to were of XQ had on I earlier that current disclosures and with guys still RPO should you're climbing, like just dollars, provided able fact when balances it that your today conversion, out guys you backlog out? those right? can think right, out to and based RPO because by about Like backfill if than like and in tease backlog you that RPO

Yes.

accelerated results QX quarter. customers market momentum, before bit the confident the more So, see discussed it's in you convert that derived want also about think into backlog And I more long demand, by And we budgets and within the discussed being customer and with more – us plans. positive short-term, I able actually that's the readiness little more the the to we dynamics what for but we and today a what, are have maybe revenue the are backlog active share important. because We talking RPO, about and strong see. the

outlook reason more see also to the for is we and Actually, in the customers better [XXX] in deliver QX able year this for more And [ph]. position. and we were raise the more

I guys appreciate RPO, Got up of And sequentially. notes, go you back again, second. it. it back million guys said it's to that had current and a know dollars. I and RPO the The to RPO for actually flat coming you If that's a by couple also, my

XQ a grow percentage it it flat the did – you XQ. call from basis, but on So, to

the to Like, what year of hear, sequentially year, go from that, been? things I to XQ to climbing cadence like One if QX no? and last the RPO the traditionally, that is has I'd typical before current from XQ QX or RPO

our the growth solid. convert that in QX outlook reflected our the could to very RPO is improve by multiple have, the that total. like, gave There's short-term giving pattern can elements, overall support that it's backlog see and like future more in RPO we general other I us specific impact and on the that can the support our the RPO RPO but from quarter-on-quarter, very QX So, we contract ability to including and for our the result long-term the year multiple ability elements grow and year. is believe overall strong and no

Thank about outperformance guys do conversion customer balances this appreciate you backlog current you RPO and but strong. remain time, are XQ the readiness, and the that RPO the same both I that, fact David. for with talking at

So, for that calling thank you out.

But know wanted turn my that's at to the gross guys I look quarter. I over color I we that I OpEx you appreciate item wanted before on of margins, the talk you, you're that able and the with the had latest last to maintain it I which about fact year, to QX really if flat hit remainder on spoken colleagues. the last think that to item really the I the for to

With obviously, of guys well ahead you gross expectations. margins, were

year And had we can First, bps we questioning just I second, with provides what do what up QX? So, what XXX then of what line versus margin, the revenue? a did helped drive guess the gross similar, outperformance anticipated gross to margin, we you now for for that previously? confidence take versus in

Yes.

see then and will continue. start I'll David We maybe quality Mike, the So, of do higher bookings.

better the when this We revenue that better. want Mix About time. overall. So, margin means up, more you gross in do specifics, drives the softer we that revenue also over margin to also expect see mix is higher the mix. goes will And do add? David, gross the improve do

elaborate will that. Yes. on I

margin is give with basis more to and for looking So, the will the backlog with the year. overall obviously with the we was confidence also we almost main for in margin and we is gross the main gross said in very it. to points basis XXX X.X%, The And mix be quality to revenue, are which trend that premium are outlook total in performance that ability are our deliver in solution QX year-over-year QX now be QX and XX% we pleased of continue the the booking year reason almost the able believe mix, improvement. reason with us our drive we'll and year improve total continue In our we last our see XXX points, over able revenue. that to high it behind drive revenue the of margin our our software the it also – that software were time. a higher and This the we

I And great. talking know the we're mix. about That's

just So, put point it. a final on to

QX So, QX. to the the fair normalize why through we that of overall But QX Is a the from the that gross mix for bookings XX% is year come assumption rest the benefiting will same what's should time level I expect that characterization? a little margin. guess is and down in that's quality the the bit at

fair. that's Yes,

Thank turn it much. it. my so you colleagues. to over Terrific. I'll Appreciate

Thank you.

Mike. you, Thank

next question Peter from And Levine question. moment will Evercore. come for our of one our next And

open. is line Your

taking your throughout the year guys earlier rates discussions to my little funnel to your on impacting of Thanks on the think, macro reaccelerate? seeing conversion kind call, of the dive terms explain the I rest said here. the the returning and in for like seems what bit deeper, us, Can you question last then of customers are of Elad, just of year. kind a that our your into ability budget top of commentary you're to maybe further expectations, better behavior you Great. normal

sure. Yes, Peter. Thanks,

healthy we momentum it's quarters over see a and two demand positive already. and So, last the

there solutions win are large and also and actually before our our increase that drivers customers for and strong actually they to saying of we deals. that. backlog are for continue discussed about the saying to – most We expect we The is confident few more and as customers budgets are demand our plans. And the the continue also

call becoming and First are earlier of challenges it complex customers discussed all, more the in growing. we that

the to for to them be more [ph] do with it's related they this get and capabilities job, order in for dealing them more big really [monolithics] to data technology. able and to So, need important

this Also, our one. being accelerate customer's to the objective investigation, able in time is is

successful. accuracy reach to to the And of third, Second, improve the it means Make investigation. successful to conclusive make outcome. it

of insight more more from to are them, So, about and for over it's investigations. generate even actually time. capabilities strength that conclude the value present and solution, able AI being time, analytics And greater and extremely important they the

saw ago that more So, industry big recent reason, used We participated believe give well than a the to to will color. we that the more one. I just demand you an generate weeks participants And can is of an tradeshow couple before. we more actually, anecdote in see improving you give attended the see that of for customers Europe, way. we we demand. developments And also along

future side about able the in are talking more accelerate to now current needs demos, year done were of needs. to pressing last their performance. customers be else and in talking and They analytics, order what lots interest in meetings to that needs were their them unlike for us for be about they technology requests to modernizing AI, Many with more

very those signs. of all are So, encouraging

I good in and about dynamics So, we continue are to the where of feel I gives being some this you good the feel long-term. about about color today hope market. growing I able the

more maybe the pulling side, Maybe off? Yes. And higher. a last terms is talk just Thanks efficient levers the on, the trade tick the the still that and talk where in one you're side, going just, free I the about while for growth? is, internally flow to maybe you're again, color. emphasize Thank sales R&D just what's cash costs or marketing deliver see good leverage, about kind of on cutting bit if little trade-off what you're of to mean, being maybe you.

we to the is about that actually, just So trade-off investment increased the our correct? make sure that to ability question, the OpEx understood growth. expansion question Is margin versus between and on

Correct.

to at, last a So, that cost we look opportunity had decision make lot here. the the our and when about And versus is year we like of we opportunity. structure believe

in a long are a for market leader. our We're this know customer time. for We playing time. long market base We

and customer cost innovative and Our balance like thing love solutions between your what long-term. to is We provide you structure and short-term we do, need to need are very to about what think right them. the

build the to when us I well will growth be that there we organization capture think allow very that a organized come it. and

think then look time. you are continue results we growing, can margin, that we and see that it I our improving in will we QX the that are over

for the you guys. Thank Perfect. color

will Our I'm of come from Eyal Shaul TD Cowen. next question [Operator sorry. Instructions]

Your open. line is

presentation, opportunities displacement these that clients afternoon or you've you're all mentioned three are clients? you. your Of that Any morning, out the during existing there? seeing Thank new these are contracts Hi, guys. also good good

Yes.

the few upgrades also So, quarter did there clients. this new It’s and in have capacity customers large the are quarters. that we deals functionality. previous logos We in from give examples quarter, examples did I new and existing coming used of

they but existing changing existing customers, reason that examples from is solution, time-to-time from And it they comes is value have are the those or with customers. need. new the timing have whether they upgrade So, that the they

able functionality, need more accelerate do And order adding them the AI what they dealing to or with data. they're drivers for in to either to expansions more and are for analytics, be upgrades more

as the are more expanding are those with is more we that and So, and given greater it further now the see customers with value analytics. drivers large

that. Maybe next for was internally? ready to alluding you when to maybe have be reacceleration? double-click for taken on prior fact stability might What [indiscernible] to the what you growth be want Thank Peter, you cycle the even to I taken it. and What not Got steps reply internal maybe seeing steps the returns. have

we situation, So, year, environment given several the steps. macro last the took

one that highest are We The should focus restructured needs, is adjusted the the opportunities pressing countries conditions, to to first be. have have where of market was it organization in expenses more to but and This second. where operating also going the organizations on budget. terms to one and

focuses environment, now. And in more the hand, organization. are countries disruption, it in market is we other analytics David mentioned the capture more one able that customers that of recovering in focusing to modernize the to actually when to and opportunities. actually the flattened we us overcome and sales this we We macro hand, [indiscernible] to the that's roadmap that infrastructure order and way able We temporary be and balanced continuing see to for to what where force growth conditions a but down a realign the more on on was value actually slowed and more to innovate

on the I one to and one summarize, markets we the and in have we we have focused they see focus potential where market. on So, hand. is higher countries hand If budgets, that

the last now see other the this modernizing their On working that value platforms. the highlights is the I activities we were right customer I see now decision. actually increase year. Those prioritizing OpEx to I And adjusting and for for took think versus hand, us. the that

the Thank you. Appreciate color.

would I the to now And back turn for closing Shaul. call Dean to like you, Ridlon remarks. Thank

with today's quarter. call. to forward to we you feel speaking and you. to me Thank again any on questions, and out everyone joining Thank Should reach you next you, free operator, additional for you please thank have us look

call. conference today's concludes for you This participating. Thank

You disconnect. now may