Cognyte Reports Third Quarter Fiscal 2025 Financial Results

HERZLIYA, ISRAEL, December 11, 2024 – 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, 2024 (“Q3 FYE25” and “YTD FYE25”).

For the full Press Release, click here.

Financial Summary for Three Months Ended October 31, 2024

• Q3 FYE25 Revenue was$89.0 million, up 12.1% compared to the same period last year.
• Q3 FYE25 GAAP operating loss was $2.2 million, compared to a loss of $2.8 million in the same period last year.
• Q3 FYE25 Non-GAAP operating income was $3.4 million, compared to an operating income of $1.2 million in the same period last year.
• Q3 FYE25 GAAP Net loss was$2.6 million, compared to a net income of $6.2 million in the same period last year.
• Q3 FYE25 Adjusted EBITDA increased by 41.9%to $6.6 million, compared to $4.6 million in the same period last year, demonstrating the leverage we have in our financial model.

Financial Summary for Nine Months Ended October 31, 2024

• YTD FYE25 Revenue was $256.1 million, up 11.5% compared to the same period last year.
• YTD FYE25 GAAP operating loss was $5.8 million, compared to a loss of $15.2 million in the same period last year.
• YTD FYE25 Non-GAAP operating income was $9.7 million, compared to an operating loss of $5.2 million in the same period last year.
• YTD FYE25 GAAP Net loss was$7.0 million, compared to a net loss of $9.8 million in the same period last year.
• YTD FYE25 Adjusted EBITDA increased by 324.9%to $19.9 million, compared to the same period last year, demonstrating the leverage we have in our financial model.

Balance Sheet and Net Cash Provided by Operating Activities

• As of October 31, 2024, cash, cash equivalents and short-term investments were $107.3 million, compared to $83.1 million at January 31, 2024.
• During the three and nine months ended October 31, 2024, net cash provided by operating activities was $12.3 million and $28.1 million, respectively, compared to net cash used in operating activities of $0.4 million and net cash provided by operating activities of $24.8 million in the same periods last year.

Management Commentary

“This quarter further demonstrated the progress Cognyte has made in executing our business strategy, driving growth initiatives and enhancing profitability,” said Elad Sharon, Cognyte’s chief executive officer. “The market for our solutions continues to grow as organizations confront an increasingly complex range of threats. Leveraging cutting-edge AI, Cognyte is uniquely equipped to empower customers to mitigate these challenges and is aligned with our mission to make the world a safer place. Our year-to-date performance, combined with sustained demand and solid visibility reinforces our confidence in the business. As a result, we are increasing our full-year outlook.”

“We delivered financial results that reflect our disciplined execution and strategic focus,” said David Abadi, Cognyte’s chief financial officer. “In the third quarter of fiscal 2025, we achieved double-digit revenue growth. The inherent leverage in our business model drove significant year-over-year improvements in profitability, underscoring our ability to scale efficiently. Non-GAAP operating income was $3.4 million in the quarter and Adjusted EBITDA was $6.6 million, both well above last year. Year-to-date revenue reached $256.1 million, up 11.5% year over year, with non-GAAP gross profit growing 13.9%. We also turned a year-to-date non-GAAP operating loss of $5.2 million last year into operating income of $9.7 million for the first nine months this fiscal year. Adjusted EBITDA for the same period also improved from $4.7 million to $19.9 million. We anticipate continued growth, stronger profitability and robust cash flow for the full year. With additional leverage in our business model, we are confident in our ability to deliver sustained profitability improvements in the years ahead. Specifically, we expect revenue and gross profit to continue growing faster than operating expenses, while continuing to generate significant positive free cash flow.”

FYE25 Outlook

Based on our strong year-to-date performance combined with solid visibility and sustained demand, we are raising our full-year outlook. Our updated outlook for the year ending January 31, 2025 (“FYE25”) is as follows:

• Revenue: $349 million at the midpoint with a range of +/-1%, representing approximately 11% growth from previous year revenue.
• Adjusted EBITDA: Approximately $26 million at the midpoint of our revenue outlook.
• Non-GAAP Diluted EPS: $0.05 at the midpoint of our revenue outlook.

Additional Financial and Operational Data for the Third Quarter and Nine Months ended October 31, 2024

• Q3 FYE25 Total Software revenue, which is the combination of software and software services revenue, increased by $3.7 million to $75.3 million, compared to the same period last year. Approximately 40% of our total software revenue growth came from incremental subscription revenue, underscoring the strength of our strong recurring revenue base.
• YTD FYE25 Total Software revenue increased by $18.5 million to $223.3 million, compared to the same period last year.
• Q3 FYE25 and YTD FYE25 Software revenue decreased by $0.2 million and increased by $6.3 million, respectively, compared to the same periods last year. In Q3 FYE25, we had more subscription revenue than we had in the same quarter last year.
• Q3 FYE25 and YTD FYE25 Software services revenue increased by $3.9 million and $12.2 million, respectively, compared to the same periods last year.
• Q3 FYE25 Professional services and other revenue increased by $5.9 million, compared to the same period last year, as result of revenue recognition timing.
• YTD FYE25 Professional services and other revenue increased by $7.9 million, compared to same period last year.
• Q3 FYE25 Recurring Revenue⁽¹⁾  increased by 11.8% to $46.9 million, compared to the same period last year.
• Q3 FYE25 Non-GAAP Gross profit and margin were $62.4 million and 70.1%, respectively, an increase of $6.7 million and slightly down compared to the same period last year.
• Q3 FYE25 Billings⁽²⁾ were $104.7 million, significantly higher than our revenue for the quarter, and reflecting the signing of several significant deals and achieving key billing milestones. This strong performance reflects the impact of both ongoing business and a few larger deals that may not occur every quarter, making this figure higher than what might typically be expected.
• Total Backlog⁽³⁾ at the end of Q3 FYE25 was $435.4 million and short-term Backlog was $212.4 million. Total RPO⁽⁴⁾ was $567.6 million at the end of Q3 FYE25.
• Short-term RPO⁽⁴⁾ at the end of Q3 FYE25 increased to $325.9 million, providing solid visibility into revenue over the next 12 months.
• Secured four significant orders from existing customers. Two deals valued at more than $20 million. The other two valued at over $10 million.
• Hosted Global Cognyte Intelligence Summit in Europe, where security leaders explored the intersection of intelligence and technology and our latest AI-powered innovation.

For information about the non-GAAP financial measure or key metric, please see “Supplemental Information About Non-GAAP Financial Measures and Other Key Metrics” at the end of this release.

(1) Recurring Revenue – Recurring revenue is comprised primarily of revenue from support contracts as well as revenue from subscription offerings.

(2) Billings – Revenue plus the change in contract liabilities, contract assets and unbilled balances.

(3) Backlog represents unbilled amounts contracted under contracts deemed certain to be invoiced.

(4) RPO, or remaining performance obligations, represents contracted revenue that has not yet been recognized that will be invoiced and recognized as revenue in future periods.

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, 2024. A real-time webcast of the conference call with presentation slides will be available in the Investor Relations section of Cognyte’s website. Those interested in participating in the question-and-answer session need to register here to receive the dial-in numbers and unique PIN to access the call seamlessly. It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call). An archived webcast of the conference call will also be available in the “Investors” section of the company’s website.

About 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.

About Non-GAAP Financial Measures and Other Key Metrics

This press release and the accompanying tables include non-GAAP financial measures and other key metrics. For a description of these non-GAAP financial measures and other key metrics, including the reasons management uses each measure and metric, 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.

Our non-GAAP outlook for FYE25 excludes the following GAAP measures which we are able to quantify with reasonable certainty, as described further below under “Supplemental Information About non-GAAP Financial Measures and Operating Metrics”:

• Amortization of intangible assets of approximately $0.3 million.

Our non-GAAP outlook for FYE25 excludes the following GAAP measures for which we are able to provide a range of probable significance:

• Stock-based compensation is expected to be between approximately $18.0 and $19.0 million, assuming market prices for our ordinary shares are generally consistent with current levels.

For additional information about our expectations for FYE25, please refer to the Q3 FYE25 conference call we will conduct on December 11, 2024.

Our non-GAAP outlook unless otherwise specified, reflects foreign currency exchange rates approximately consistent with current rates, and does not include the potential impact of any business acquisitions that may close after the date hereof.

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, 2024, and 2023, respectively, for the GAAP measures excluded from our non-GAAP outlook appear in Table 4 of this press release.

Caution About Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the United States Securities Exchange Act of 1934. Forward-looking statements include statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Cognyte. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. These forward-looking statements do not guarantee future performance and are based on management’s expectations that involve a number of known and unknown risks, uncertainties, assumptions and other important factors, any of which could cause our actual results or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions; risks related to government contract dependency, including procurement risks, risks associated with operational challenges amid the Hamas and other terrorist organizations’ attack on Israel on October 7, 2023 and Israel’s war against them; risks related to geopolitical changes and investor visibility constraints; risks related to the impact of inflation and related volatility on our financial performance; risks relating to adverse changes to the regulatory constraints to which we are subject; risks related to the impact of disruptions to the global supply chain; risks  resulting from health epidemics or pandemics or actions taken in response to such pandemics; risks associated with customer concentration and challenges associated with our ability to accurately forecast revenue and expenses; risks associated with political and reputational factors related to our business or operations; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; risks relating to proprietary rights infringement claims; risks relating to defects, operational problems, or vulnerability to cyber-attacks of our products or any of the components used in our products; risks related to the strengths of our intellectual property rights protection; risks that we may be unable to establish and maintain relationships with key resellers, partners, and system integrators and risks associated with our reliance on third-party suppliers for certain components, products or services; risks due to the aggressive competition in all of our markets; challenges associated with our long sales cycles and with the sophisticated nature of our solutions; risks associated with our ability or costs to retain, recruit and train qualified personnel; risks relating to our ability to properly manage investments in our business and operations, execute on growth or strategic initiatives; risks associated with acquisitions, strategic investments, partnerships or alliances; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures or disruptions; risks associated with the mishandling or perceived mishandling of sensitive, confidential or classified information; risks associated with our failure to comply with laws; risks associated with our credit facilities or that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms; risks associated with changing tax laws and regulations, tax rates, and the continuing availability of expected tax benefits in the countries in which we operate; risks associated with our significant international operations, including due to our Israeli operations, fluctuations in foreign exchange rates, and exposure to regions subject to political or economic instability; risks associated with complex and changing regulatory environments relating to our operations and the markets we operate in; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls and personnel for our current and future operations and reporting needs; risks associated with our limited operating history as an independent public company; risks related to the tax treatment of our spin-off from Verint; and risks associated with different corporate governance requirements applicable to Israeli companies and risks associated with being a foreign private issuer. ; and other risks set forth and in Section 3.D – “Risk Factors” in our latest annual report on Form 20-F for the fiscal year ended January 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on April 9, 2024, and in our subsequent filings with the SEC. In addition, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time. It is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements that we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this release are inherently uncertain and may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely upon forward-looking statements as predictions of future events. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason.

For the full Press Release, click here.

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Contact:

Investor Relations
Dean Ridlon
Cognyte Software
[email protected]