Cognyte Software (CGNT) 12 Sep 232024 Q2 Earnings call transcript

Good day and thank you for standing-by. Welcome to the Cognyte Q2 FYE ‘24 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

to Ridlon, conference Head like speaker to now Dean today, of would hand over the your I Investor Relations. ahead. go Please

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

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

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

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

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

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

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

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

Thank you, Dean. our to that quarter pleased positive report second Welcome, momentum continues. everyone call. conference our to I'm

strategic quarter strengths win with the and existing as we During continue of innovative new the customers, to customers, the delivers. well it as deals technology our recognize with value

well solid very another results. of and had Our we quarter team executed

sequentially Revenue in non-GAAP million. expectations an grew year-over-year $XX our adjusted both and on SIS basis ahead came at and of

further margin, gross also And was basis. in points an profit over up SIS last on adjusted We which gross non-GAAP QX increased saw year. year-over-year basis XX% XXX improvements

and quarter, the cash positive and positive for positive collections. flow earlier than was continuing EBITDA projected to the this was again Adjusted free EBITDA quarters two quarter strong due

cost on in business AI. we As we structure, including last the agendas, a potential improved the SIS, divested and challenges many reminder, opportunities our took We investment put year capital sales, the focused focused and fewer to back on the business on address in and adjusted our structure, R&D investing high actions track. faced

regained We on are year three visibility, We believe the in execution. for continue are raised we actions and benefits a improved and sustainable path of row. will the our momentum realizing the and have outlook positive of We guidance, our quarters growth. resumed a

a And solutions outlook our a share our year. will with value significant wins, with cases the updated innovations discuss you then significant how lastly, a of use of to and I'll and Now, I review other our customers. that our use for few illustrate our AI delivers start I'll differentiates

technology. differentiated recent our of our market-leading I will some review now wins significant highlight that

solutions investigative effective law security investigations. national national organizations perform and Our security, more and enforcement, to intelligence, analytics accelerate other help

first is for $XX its security million than and mission new customer with to national a for national more threats. win The combat terrorism

we technology, We results. consistently artificial operational of the intelligence, how scenarios. leverage edge our including We from variety believe which vendors delivers selected cutting we of real-world outperform are other a because impactful solutions during

address customer In help a evolving deep addition, partner valued views we strategic believe needs. domain the expertise to and our us as long-term them their

activities. inside is win vendor enabling users believe to by an to incumbent investigation new million higher existing value unit address varying selected solution the a of value. to maximize sets a approximately combat state-of-the-art second evolving The intelligence of group because an skill a intelligence are expertise seeking and delivered. $X the with The we terror from needs broader customer was We national customer and our for replaced

The us we we our better over operational third in operational replaced Also, for customer national had in during recently new expanding competitive approximately to trial identify delivered results the million technology. a process operations. continue win in a we customer vendor and chose after threats field is intelligence scenarios. win bid, prevent The superior on time. $X.X due incumbent new to and U.S., our We with an comprehensive during customer different for focus the an another market competitive U.S.

us us expertise Customers that win provides partner a domain and existing view leadership Our to deals our as drive solutions both continue trusted strategic that talked insights our and position significant help cutting-edge improve to them their artificial speed their In intelligence and from innovative of customers. accelerate new solutions in decision-making. and the deep the reuse I solutions. help from call, accuracy critical of generate our last and about timely investigations, data,

Now examples by the cases. their innovative analytics our help generating use timely data and is insights. focus and to and of more Cognyte’s I'll speed technology customers amounts our on impactful of unstructured customer a few rate success enormous improve investigative effectively on of drill analyzing structured a and bit down investigations

innovations AI analytics. as us in differentiated recent a believe have technology in We doing market. the and and this and analytics investigating developed our that leader years positions investigative been We highly for investments expertise a accelerating is in many domain vast unique technology

insights We have improve embedded data. models of solutions accuracy from customers' and our AI in to velocity

AI technology For and introduction bad customers for these recent improves previously entities success undiscoverable as down to and technological such the reacting rates reveal of connections example, investigation enables among financial recognition Customers advancement to our to actors positively transactions. under pattern investigation, accelerates cutting-edge This resolution. are advancements.

solutions, illustrate help our benefits To for customers' security use two look cases. let's at

attempt of is drug detecting for legitimate conceal illicit major as Law international master illegal activities exploit well-established first The combating use involves that preventing and often ones. groups trafficking This enforcement and activities routes, better organized drug their units case responsibility borders. along trafficking. trade to identities,

a Within analysis play sources. our AI data expediting role models the solutions, in customers' pivotal of our

for alerts by Our recognition. using suspicious helps customers pattern behavior, AI identify software such and automatically as unusual activities, users trigger

units In valuable AI smuggling of investigation insights drug our help faster for effectively. activities. solutions closing addition, and our to enables more use routes more Those and cases predict quickly hotspot in potential

purchasing transactions, that The in masked intelligence The laundering, donations, illicit with second and terrorist and terror often funds of are activities. activities. that flow detecting disrupting detection tasked fraudulent goods. of Financial Terror of transactions fact use these case is and related to the facilitate units to financial involves covert funding organizations. prevention activities as and are terror the challenge charity, lies money other

exchanges. records, transaction the from data Our money sources, including solution and bank cryptocurrency services, utilizes of various to customer amounts transfer algorithm financial analyze data vast

recognition their part anomalies algorithms may The streams in potential system continuously monitor identify utilizes financial to that to terror-funding patterns data activities. of these transactions and indicate

lab. available research and continue to for our own development AI commercially We leverage models AI the latest

investigating we ahead, together our customers. our expertise our in believe Looking embed differentiation quickly, ability latest the enhance AI to will value and provide the analytics, innovations further our we domain with to

demand to long-term We to growth. continue and in to invest AI driving contribute generate

plus the on XX% an SIS grow fiscal expected at X.X% than year our on non-GAAP to midpoint grow outlook to or performance revenue With our by this at important QX, year, basis. faster now to for during the are gross more $XXX and guidance SIS raising minus non-GAAP for X%, representing to the our given year-over-year adjusted we year-over-year Turning adjusted growth profit we revenue visibility expect million, X.X%, an basis.

Given for are adjusted profitability, QX positive in and revenue positive we outlook year. expecting EBITDA improved EBITDA our and adjusted the our now

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

last down Earl to Before forward board growth decades support three personally asset Dan advice. all rest over Cognyte’s made spin-off I great roles growth tremendous new Cognyte. impact years, Chairman on of I'm a as and Cognyte. the as looking Chairman, Director, his continue his the profitability and a had Dan the the and Shank then in after a We business our to our at knowledge summarize, wisdom in significant and recognize I Cognyte and the would like appreciative Verint of with creation collaborating to for Board. and the to over his the were CEO Bodner and as with as stepping role of our contributions I’m drive his I to to had

our the many of them help significant investigations challenges use and accelerate face threats. looked customers across mitigate to summarize, to to variety continue us To right and cases

significant These as a relationships us. for asset customers many trusted of continue and us a established view domain have relationships long-term our We they be with partners. to will and experts

are current results growth Long-term, positive pleased guidance and second continued year. stability. quarter we the We and momentum raising with improved our expect for are and

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

Elad, everyone. and you, Thank hello

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

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

with and from pleased margin, ahead over In performance in gross our of expectation. adjusted revenue, our last quarters. EBITDA, came very are operation QX, We few the improved cashflow

the win to for solutions. demand existing both reflecting cutting-edge deals customers, and analytics our investigative continue from We new

the revenue million, X.X% sequentially up About QX million grew software. was and was year-over-year. Gross coming from revenue due revenue. XX.X%, in margin was grew software sequentially from XX% points our year. of to and faster QX QX basis and QX XXX up $X.X million both in revenue increase up $X.X XX.X% QX at than year, and from profit $XX primarily year-over-year, last gross last

gross gross software services our with XX.X% of and professional pleased our margin of margin XX.X%. are We

customer. the and Our gross on SIS metrics create discussed margin for to basis. just non-GAAP continuously are differentiation adjusted I competitive value our ability inflates our All

QX similar level. million, Our operating were non-GAAP expense $XX.X to QX

the the structure, our EBITDA few resulting growth, gross quarters, in cost and positive last margin, operating to organization and improve sequential loss. higher and adjusted return revenue we reduced Over focused significantly

year the $X.X ahead of loss We EBITDA adjusted positive and million operating for was first-half non-GAAP break-even adjusted was million. generated QX of expectations. EBITDA our Our the $X.X

cash. to Turning

QX, During from we positive delivered million. of operation $X.X flow cash

For by operation cash had improved million. The of flow positive the strong of was $XX.X collection. and we operation our the financial driven cash results first-half year, positive flow from from cash

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

the continued third at continuous million, solid healthy $XXX This Our backlog the was short-term RPO coupled year be long results allows as consecutive the approximately end level Total and short-term for to outlook of million, for QX increase our QX. to was RPO strong. the RPO $XXX same current quarter. our and with

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

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

of we on our improvement outlook the based revenue, versus may margin QX full-year our points similar revenue expectation previous QX. basis. and non-GAAP fluctuate basis to to quarters be between Gross increasing XXX-basis an on to We're XXX For an growth at mix. of SIS non-GAAP improvement adjusted points level XX%, year-over-year a expect margin

non-GAAP the approximately our we full-year. for expenses expense, of expect For operating million total $XXX

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

the expectations of a revenue QX EBITDA range. Given about the our performance million we midpoint strong have the positive adjusted now in full-year $X at our to second-half the year, for of for and expect of the

on our payment. optimizing continue to cash We work tax

million. are a record provision to As for of we $X about work, tax the a year $XX of our expecting million versus initial of this result non-GAAP estimation

of of versus an revenue terms are we annual non-GAAP expecting outlook. improvement the previous EPS now the at of In $X.XX a midpoint $X.XX range, EPS, our loss

tax to similar second-half of EPS fluctuation EPS be QX in expected is our zero, be about positive the by EPS non-GAAP due QX. non-GAAP for currently to slightly the expect negative to Our we non-GAAP year and in expenses, offset non-GAAP

last the pleased performance over To summarize, with we our are few improved very quarters.

revenue drive and to results financial margin growth continue leverage expansion. our and We

Our year quarter. for increase the healthy third to solid backlog coupled with results for allow current our outlook consecutive us continuing the our

We are a with track strong and customers the have market legacy investigative analytics and leader a world. records in around

add to leveraging generate intelligence. help including from the in our believe innovations our customers by innovation and improve the demand. operational continue of We solutions artificial the these our technologies, drive performance increase capabilities value and solutions We technological latest emerging

FY momentum. and position large ‘XX, financial The to cutting-edge believe will to and growth. positive benefit loyal opportunity the beyond recent we customer our result new from of needs the technology, the Looking our for a base, combination of address customer existing us well continue

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

Our Instructions] Thank Needham. you. from with Cikos comes [Operator first question Mike

open. is Your line

two the questions me for getting thanks here I on Q&A. Needham. from Cikos have here. Mike Hey, And

went customer, $XX wanted know that additional use like you as trafficking Elad, specifically, cases $XX win to far some Elad, some very two, discussed that versus as the as new AI, you for the million customer capabilities you on comments cases for out have ask, be an of first the market. I AI this The for solutions or you would to over give can also And this which new new how us on I that that of That but any was million. example, competitive has other have insight, customer Cognyte maybe competition congratulations drug so that helpful. allowed customer? there use

Yes, sure. Mike. Thanks,

insights of entities mainly the bidders. need bid patterns time competitive actually and and it and success with to The is of anomalies mission here. is and uncover few a of this essence investigations accuracy And out customer's the hidden actually, increase data. our rate relations able speed, the So be in was a between to behavior was to

last over competitors over technical the to able of demonstrate actually, the POC, to same. were we the time, one the did competitive both disqualified meet Over and the them capabilities, we're our And process, were needs.

a win deal they'll with. hidden accelerate investigate to he National And with legacy related actually win, the be amount large was that be investigation technology. was the is terror and data a idea and to able So to done to relations customer, activities risks. a data a new His challenge able to behaviors and -- hidden is in cannot One. main be has a of find way that terror The competitive Security predict is that --

major So this role. case, AI, in a playing was

able efficient addition data and to being user a able do with In terms flows. deal of this in a amount very large to of data diversify and to manner also in being

others a So wins of one one. have another pleased is this is also new another the new the for new very customer, and a department to we one large is are us, important are -- them And customers. customer, existing other from from of win

differentiation and good the very our technology it's So to see appreciate advanced customers that technology.

to of here? professional might second this. of of at and I jump get the the during quarter Or an think incremental you say, professional that Cognyte one let's have professional it service And a here? we customer to where just the is what just something turn revenues services that customers. follow-up benefit services customer you, tied reflection play going here servicing, that existing But as great. again kind well the talking that That's for help If see as that, new revenue financials probably Thank second wins on is is about and wanted to better large we David. potentially benefited Is Can that for Elad sense, I congratulations a fair revenue? win. spike were a me serve us that when when the think like pro there in this to to you things through a struck is

Yes.

revenue more the that you perspective, coming numbers, -- in When actually, had again, software. they that's at H came can the from trend of But from services, a or QX, a you revenue of we So at see majority of and given the software. XX% from the will margin. revenue XX% the from slightly quarter we with if have like XX% look of looking professional little came professional total a came XX% you almost also the services. gross bit revenue more But

peak it's place don't take fluctuation may I that or So between it’s think that a a just quarter-over-quarter.

over deals As place for quarters. the the recognize the that deals wins, can took wins but revenue future recognized this type this obviously, large will of be quarter, a Usually, period. multiple over are

So it QX didn't the impact revenue.

margins from software be as doing full-year side that the your procurement would improvement to tighter solutions seeing, the it. engineering be Got then it And well? up And That delivering Anything these gross that margins on you, it's as that well. of drive way help in doing internally to software revenue just mix. you guys taking growing Thank the guys you guys. improvement on colleagues. own matter one over the my are wondering I'm in efficiencies a if software to Thank guys to well. that you. seems a that for gross your out as else a of know anything to cost there are follow-up drive vendors I'll And better I beneficial quick gross to we're reflection Is figure to turn and your your or you there margin? what it customers? are

And XX% are increase are pleased are represents than we it margin and in our points full-year, the pleased to we initial able to for we the with plan. XXX more that very margin actually, gross basis and QX. So HX very gross our

the in provided. but we’ve margin, deals appreciate mentioned differentiated I the consist gross revenue, solution not will and think us are what that customer the that how seeing but value evidence allow and see Looking been, we to backlog Elad at the We're the margin the in the quality with is high we our and the the backlog trends margin. gross of drives the market the looks. that clear those with a what how they’re good gross drive

will that be this future. perspective, also So from in impact an the

monitoring When we're position. structure and be a professional result took changed but the cost major cost services like ability better of it's impacts the actions to that that this when premium the right the that it's we that demonstration gross improve that thing perspective, margin the at our I we for margin, looking as solution, basically sell one this to quarter carefully the from services what customer sell it in we're us of to as changed, us you professional that value a allow the appreciation see our think Overall, could our pricing. to to is a in a if gross is allow solution things look of

Thank you very much.

turn [Operator I'm time. Dean. over at questions call And the any Instructions] to I'd further back showing not like to this

Thank us should are and then. can and you, me, In next speaking you look for York operator, joining early you you forward the next to hope call. feel to to and some on visit with meantime, everyone, see month Elad, and today's New have out planning David thank questions, we of you, I to again quarter. and please Boston reach any we

gentlemen, this Thank conclude you. today's and Ladies does presentation.

and wonderful day. disconnect, have now a may You