Cognyte Software Ltd. (NASDAQ:CGNT) Q3 2024 Earnings Call Transcript

Cognyte Software Ltd. (NASDAQ:CGNT) Q3 2024 Earnings Call Transcript December 13, 2023

Cognyte Software Ltd. beats earnings expectations. Reported EPS is $0.34, expectations were $0.01.

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognyte Third Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] Please note that today’s conference may be recorded. I will now hand the conference over to your speaker host, Dean Ridlon, Head of Investor Relations. Please go ahead.

Dean Ridlon: Thank you, operator. Hello, everyone. I’m Dean Ridlon, Cognyte’s Head of Investor Relations. Thank you for joining us today. I’m here with Elad Sharon, Cognyte’s CEO; and David Abadi, Cognyte’s CFO. Before getting started, I would like to mention that accompanying our call today is a presentation. If you’d like to view these slides in real-time during the call, please visit the Investors section of our website at cognyte.com. Click on the Investors tab. Click on the webcast link and select today’s conference call. I would also like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws.

These forward-looking statements are based on management’s current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by these forward-looking statements. The forward-looking statements are made as of the date of this call and, except as required by law, Cognyte assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of how these and other risks, uncertainties could cause Cognyte’s actual results to differ materially from those indicated in these forward-looking statements, please see our annual report on Form 20-F for the fiscal year ended January 31, 2023, and other filings we make with the SEC.

The financial measures discussed today include non-GAAP measures. We believe investors focus on non-GAAP financial measures in comparing results between periods and among our peer companies that publish similar non-GAAP measures. Please see today’s presentation slides, our earnings release and the Investors section of our website at cognyte.com for a reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from, as a substitute for or superior to GAAP financial information, but is included because management believes it provides meaningful information about the financial performance of our business and is useful to investors for informational and comparative purposes.

The non-GAAP financial measures that the company uses have limitations and may differ from those used by other companies. Now I would like to turn the call over to Elad.

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Q&A Session

Elad Sharon: Thank you, Dean. Welcome, everyone, to our third quarter conference call. I want to start to thank our employees, customers, partners, investors and friends for standing with Israel and for the inspiring show of solidarity. Our hearts go out to those affected by a horrible attack in Israel and its consequences. Cognyte’s mission is to help make the world a safer place and we strive to meet this commitment every single day. The company knows how to respond to challenging circumstances, and we’ve made the necessary adjustments to continue to effectively run the business. We remain focused on our mission, and we continue to deliver on our commitments to our customers, bringing them the highly advanced technology they need to make the world safer.

Now turning to our results. We are pleased with our continuing improvement in our performance over the last two quarters. In Q3, revenue, gross margin, operating income and adjusted EBITDA came in ahead of our expectations. Revenue grew both year-over-year and sequentially and came in at $79 million. Non-GAAP gross margin came in at 70.2% and gross profit grew faster than revenue, and we delivered positive operating income ahead of our expectations. During the quarter, we continue to win deals with both new and existing customers, recognize the strength of our innovative technology and its ability to deliver to them high value. The visibility we currently have into our business, together with our Q3 performance allow us to raise guidance again for the year.

Now I’ll start with a review of several of our significant wins. Then I’ll elaborate on how AI continues to drive valuable decision intelligence to our customers. And lastly, I’ll further discuss our updated outlook. Let me share a few of our recent wins that help illustrate how our advanced solutions are differentiated and why customers choose Cognyte. Our investigative analytic solutions have national security, law enforcement, national intelligence and other organizations to accelerate and perform more effective investigations. The first win is for approximately $50 million with an existing national security customer for its threat hunting mission to prevent cyberattacks on a national level. We believe we were selected because of our customer successful experience with our previous deployment and our unique ability to fuse and enrich large amounts of data and deliver insights that are vital to identify cyberattacks on a nationwide scale.

The second win is for approximately $50 million from an existing national law enforcement agency to combat criminal activities. It was a single source deal to upgrade the existing solution to address the customers’ evolving needs. We believe we won because of our high value we deliver and track record of strong execution. The third win is with a new federal agency to help them be anonymize the illegal cryptocurrency transactions in real time. The deal is for approximately $3 million and it’s a multi subscription. We believe the customer chose our solution because it quickly provides unique value using our innovative AI and proprietary algorithms for pattern recognition within high volumes of data. We continue our focus on expanding in the U.S. And during Q3, we had two wins with new customers.

Both deals are competitive, and we believe we won because of our superior technology and the high value our solutions deliver. Customer engagement remains a focus area for us. Last month, we participated in Milipol Paris, which is a leading security industry conference. During the conference, we had good customer traction and many productive conversations. We believe that our cutting-edge solutions and deep domain expertise drive our leadership position and help us to continue to win significant deals from both existing and new customers. In our recent calls, I gave a few examples of how our customers leveraging the artificial intelligence that we continue to incorporate into our solutions. I will now further elaborate on how AI helps driving valuable decision intelligence to our customers.

Customers view us as a strategic trusted partner that provides innovative solutions that help them improve the speed, accuracy and success rate of their investigations and make timely decisions by generating critical insights from enormous amounts of diversified data. We help them do this by utilizing decision intelligence capabilities. Decision Intelligence involves advanced analytics and AI, including machine learning technologies along with data fusion, data virtualization and collaboration tools to augment and improve decision-making. The goal is to empower humans to make faster and more accurate decisions. Our Decision Intelligence enabled solutions provide our customers a holistic accessible view of their data and deliver actionable insights that would be virtually impossible to obtain through legacy technology or manual analysis.