Continues to drive revenue growth and strong
margin expansion, raises guidance for Fiscal 2025
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 months ended April
30, 2024 (“Q1 FYE25”).
Q1 FYE25 Financial
Highlights
Three Months Ended April 30,
2024
Three Months Ended April 30,
2023
(in thousands, except per share data)
GAAP
Non-GAAP
GAAP
Non-GAAP
Revenue
$82,714
$82,714
$73,266
$73,378
Gross Margin
70.6%
71.1%
67.9%
68.4%
Basic and diluted EPS*
$(0.07)
$(0.04)
$(0.13)
$(0.11)
*Our non-GAAP income taxes for prior period were adjusted as
detailed further under footnote 3.
“We had a solid start to the year as we continued to deliver
revenue growth and margin expansion,” said Elad Sharon, Cognyte’s
chief executive officer. “Our results demonstrate the leverage we
have built into our business model. Our customers are facing
significant, growing and evolving challenges and look to us for
solutions to effectively perform their missions and make the world
safer. Given our momentum and good visibility, we increased our
outlook for FYE25. We continue to be excited about the
opportunities in front of us and believe we are positioned for
sustainable growth and continuing improvement in
profitability.”
“Our Q1 financial results were strong, and we ended the quarter
with $107 million of cash and no debt,” said David Abadi, Cognyte’s
chief financial officer. “We now expect FYE25 full-year revenue to
be $344 million, plus or minus 2%, representing approximately 10%
year-over-year growth at the midpoint of the range. With the
leverage we have in our business model, we now expect Adjusted
EBITDA to be about $22 million, and to generate about $37 million
of cash from operations.”
FYE25 Outlook
Our non-GAAP outlook for the year ending January 31, 2025
(“FYE25” and “Fiscal 2025”) is as follows:
- Revenue: $344 million at the midpoint with a range of
+/-2%, representing approximately 10% growth from previous year
revenue.
- Adjusted EBITDA: Approximately $22 million at the
midpoint of our revenue outlook.
- Diluted EPS: Loss of $0.07 at the midpoint of our
revenue outlook.
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 $16.0 and $18.0 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 Q1 FYE25 conference call we will conduct on
June 18, 2024.
Our non-GAAP outlook does not include the potential impact of
any business acquisitions that may close after the date hereof,
and, unless otherwise specified, reflects foreign currency exchange
rates approximately consistent with current rates.
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
months ended April 30, 2024, and 2023, respectively, for the GAAP
measures excluded from our non-GAAP outlook appear in Table 4 of
this press release.
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 April 30, 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 Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP
financial measures. For a description of these non-GAAP financial
measures, including the reasons management uses each measure, 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.
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 https://www.cognyte.com/.
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.
Table 1
COGNYTE SOFTWARE LTD.
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended
April 30,
(in thousands except per share data)
2024
2023
Revenue:
Software
$
31,445
$
25,372
Software service
44,355
41,093
Professional service and other
6,914
6,801
Total revenue
82,714
73,266
Cost of revenue:
Software
5,850
3,337
Software service
10,635
11,072
Professional service and other
7,847
9,088
Total cost of revenue
24,332
23,497
Gross profit
58,382
49,769
Operating expenses:
Research and development, net
26,825
27,747
Selling, general and administrative
33,766
28,800
Amortization of other acquired intangible
assets
73
90
Total operating expenses
60,664
56,637
Operating loss
(2,282
)
(6,868
)
Other income, net:
Interest income
568
369
Interest expense
(10
)
(3
)
Other income, net:
198
944
Total other income, net
756
1,310
Loss before provision for income
taxes
(1,526
)
(5,558
)
Provision for income taxes
2,075
1,869
Net loss
(3,601
)
(7,427
)
Net income attributable to noncontrolling
interest
1,516
1,326
Net loss attributable to Cognyte
Software Ltd.
$
(5,117
)
$
(8,753
)
Net loss per share attributable to
Cognyte Software Ltd.
Basic and diluted
$
(0.07
)
$
(0.13
)
Weighted-average shares
outstanding:
Basic and diluted
71,029
68,901
Table 2
COGNYTE SOFTWARE LTD.
Condensed Consolidated Balance
Sheets
April 30,
January 31,
2024
2024
(in thousands)
(Unaudited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
98,803
$
74,477
Restricted cash and cash equivalents and
restricted bank time deposits
8,333
8,666
Accounts receivable, net of allowance for
credit losses of $3 million and $2.7 million, respectively
90,057
113,260
Contract assets, net of allowance for
credit losses of $1.4 million
9,248
8,859
Inventories
22,385
24,584
Prepaid expenses and other current
assets
33,532
35,135
Total current assets
262,358
264,981
Property and equipment, net
24,643
24,384
Operating lease right-of-use assets
32,509
33,833
Goodwill
126,450
126,563
Intangible assets, net
186
258
Deferred income taxes
2,784
2,928
Other assets
18,805
19,135
Total assets
$
467,735
$
472,082
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
18,173
$
20,863
Accrued expenses and other current
liabilities
83,283
75,826
Contract liabilities
96,312
93,778
Total current liabilities
197,768
190,467
Long-term contract liabilities
21,868
29,362
Deferred income taxes
1,977
1,964
Operating lease liabilities
27,016
27,950
Other liabilities
6,582
7,606
Total liabilities
255,211
257,349
Commitments and Contingencies
Stockholders' equity:
Common stock - $0 par value; Authorized
300,000,000 shares. Issued 71,279,157 and 70,996,535 at April 30,
2024 and January 31, 2024, respectively; Outstanding 71,265,540 and
70,996,535 shares at April 30, 2024 and January 31, 2024,
respectively
—
—
Additional paid-in capital
358,988
355,097
Accumulated deficit
(149,708
)
(144,592
)
Accumulated other comprehensive loss
(14,829
)
(12,630
)
Total Cognyte Software Ltd.
stockholders' equity
194,451
197,875
Noncontrolling interest
18,073
16,858
Total stockholders’ equity
212,524
214,733
Total liabilities and stockholders’
equity
$
467,735
$
472,082
Table 3
COGNYTE SOFTWARE LTD.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Three Months Ended April
30,
(in thousands)
2024
2023
Cash flows from operating
activities:
Net loss
$
(3,601
)
$
(7,427
)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization
3,275
3,343
Allowance for credit losses
625
(33
)
Stock-based compensation, excluding
cash-settled awards
3,891
1,915
Provision from deferred income taxes
95
44
Non-cash gains on derivative financial
instruments, net
(200
)
(308
)
Other non-cash items, net
55
37
Changes in operating assets and
liabilities:
Accounts receivable
25,917
16,081
Contract assets
(4,217
)
(476
)
Inventories
1,433
(1,293
)
Prepaid expenses and other assets
(4,585
)
3,940
Accounts payable and accrued expenses
4,600
(3,573
)
Contract liabilities
(4,753
)
6,172
Other liabilities
(867
)
640
Other, net
(214
)
(135
)
Net cash provided by operating
activities
21,454
18,928
Cash flows from investing
activities:
Purchases of property and equipment
(1,299
)
(1,638
)
Purchases of short-term investments
—
(23,935
)
Maturities and sales of short-term
investments
—
17,186
Settlements of derivative financial
instruments not designated as hedges
107
(245
)
Cash paid for capitalized software
development costs
(586
)
(518
)
Proceeds from Business divestiture, net of
cost
4,943
—
Change in restricted bank time deposits,
including long-term portion
259
(1
)
Net cash provided by (used in)
investing activities
3,424
(9,150
)
Foreign currency effects on cash, cash
equivalents, restricted cash, and restricted cash equivalents
(662
)
(61
)
Net increase (decrease) in cash, cash
equivalents, restricted cash and restricted cash
equivalents
24,215
9,717
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, beginning of period
80,396
39,044
Cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of period
$
104,611
$
48,761
Reconciliation of cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period:
Cash and cash equivalents
$
98,803
$
44,499
Restricted cash and cash equivalents
included in restricted cash and cash equivalents and restricted
bank time deposits
5,768
4,162
Restricted cash and cash equivalents
included in other assets
40
100
Total cash, cash equivalents,
restricted cash, and restricted cash equivalents
$
104,611
$
48,761
Table 4
COGNYTE SOFTWARE LTD.
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Three Months Ended April
30,
(in thousands, except per share data)
2024
2023
Revenue
Total GAAP revenue
$
82,714
$
73,266
Revenue adjustments
—
112
Total non-GAAP revenue
$
82,714
$
73,378
Gross profit and gross margin
GAAP gross profit
58,382
49,769
GAAP gross margin
70.6
%
67.9
%
Revenue adjustments
—
112
Stock-based compensation expenses
413
313
Non-GAAP gross profit
$
58,795
$
50,194
Non-GAAP gross margin
71.1
%
68.4
%
Research and development, net
GAAP research and development,
net
26,825
27,747
As a percentage of GAAP revenue
32.4
%
37.9
%
Stock-based compensation expenses
(440
)
(472
)
Restructuring expenses, net
(44
)
(79
)
Non-GAAP research and development,
net
$
26,341
$
27,196
As a percentage of non-GAAP
revenue
31.8
%
37.1
%
Selling, general and administrative
expenses
GAAP selling, general and
administrative expenses
33,766
28,800
As a percentage of GAAP revenue
40.8
%
39.3
%
Stock-based compensation expenses
(3,037
)
(1,130
)
Separation (expenses) income
(5
)
1,024
Other adjustments
(97
)
(172
)
Non-GAAP selling, general and
administrative expenses
$
30,627
$
28,522
As a percentage of non-GAAP
revenue
37.0
%
38.9
%
Operating income (loss), operating
margin and adjusted EBITDA
GAAP Operating loss
(2,282
)
(6,868
)
GAAP operating margin
(2.8
)%
(9.4
)%
Revenue adjustments
—
112
Stock-based compensation expenses
3,890
1,915
Separation expenses (income), net
5
(1,024
)
Other adjustments
214
341
Non-GAAP operating income
(loss)
$
1,827
$
(5,524
)
Depreciation and amortization
3,194
3,248
Adjusted EBITDA
$
5,021
$
(2,276
)
Non-GAAP operating margin
2.2
%
(7.5
)%
Adjusted EBITDA margin
6.1
%
(3.1
)%
Three Months Ended April
30,
(in thousands, except per share data)
2024
2023
Other income reconciliation:
GAAP other income, net
756
1,310
Business divestiture
12
160
Non-GAAP other income , net
$
768
$
1,470
Tax provision reconciliation
GAAP provision
2,075
1,869
Effective income tax rate
(136.0
)%
(33.6
)%
Non-GAAP tax adjustments (footnote 3)
1,498
325
Non-GAAP provision (footnote 3)
$
3,573
$
2,194
Non-GAAP effective income tax rate
(footnote 3)
137.7
%
(54.1
)%
Net loss attributable to Cognyte
Software Ltd. reconciliation
GAAP Net loss attributable to Cognyte
Software Ltd.
$
(5,117
)
$
(8,753
)
Revenue adjustments
—
112
Stock-based compensation expenses
3,890
1,915
Separation expenses (income), net
5
(1,024
)
Non-GAAP tax adjustments (footnote 3)
(1,498
)
(325
)
Other Non-GAAP adjustments
226
501
Total adjustments (footnote 3)
2,623
1,179
Non-GAAP net loss attributable to
Cognyte Software Ltd. (footnote 3)
(2,494
)
(7,574
)
Table comparing GAAP diluted net loss
per share attributable to Cognyte Software Ltd. and Non-GAAP
diluted net loss per share attributable to Cognyte Software
Ltd.
GAAP diluted net loss per share
attributable to Cognyte Software Ltd.
$
(0.07
)
$
(0.13
)
Non-GAAP diluted net loss per share
attributable to Cognyte Software Ltd. (footnote 3)
$
(0.04
)
$
(0.11
)
GAAP weighted-average shares used in
computing diluted net loss
71,029
68,901
Non-GAAP diluted weighted-average
shares used in computing net loss per share attributable to Cognyte
Software Ltd.
71,029
68,901
Table of reconciliation from GAAP Net
loss attributable to Cognyte Software Ltd. to adjusted
EBITDA
GAAP Net loss attributable to Cognyte
Software Ltd.
$
(5,117
)
$
(8,753
)
As a percentage of GAAP revenue
(6.2
)%
(11.9
)%
Net income attributable to noncontrolling
interest
1,516
1,326
GAAP provision
2,075
1,869
GAAP other income, net
(756
)
(1,310
)
Depreciation and amortization
3,194
3,248
Stock-based compensation expenses
3,890
1,915
Separation expenses (income), net
5
(1,024
)
Other adjustments
214
453
Adjusted EBITDA
$
5,021
$
(2,276
)
As a percentage of non-GAAP
revenue
6.1
%
(3.1
)%
Table 5
COGNYTE SOFTWARE LTD.
Calculation of Change in
Revenue on a Constant Currency Basis
(Unaudited)
Three Months Ended
(in thousands)
GAAP Revenue
Non-GAAP Revenue
Revenue for the three months ended April
30, 2023
$
73,266
$
73,378
Revenue for the three months ended April
30, 2024
$
82,714
$
82,714
Revenue for the three months ended April
30, 2024 at constant currency (2)
$
82,945
$
82,945
Reported period-over-period revenue
change
12.9
%
12.7
%
% impact from change in foreign currency
exchange rates
0.3
%
0.3
%
Constant currency period-over-period
revenue change
13.2
%
13.0
%
For more information see "Supplemental Information About
Constant Currency" at the end of this press release.
Footnotes
(1) The actual cash tax paid, net of refunds, was $2.4 million
and $1.0 million for the three months ended April 30, 2024 and
2023, respectively.
(2) Revenue for the three months ended April 30, 2024, at
constant currency is calculated by translating current-period GAAP
or non-GAAP foreign currency revenue (as applicable) into U.S.
dollars using average foreign currency exchange rates for the three
months ended April 30, 2023, rather than actual current-period
foreign currency exchange rates.
(3) The non-GAAP income tax adjustments for the quarter reflects
a change in calculating our non-GAAP income taxes from a cash basis
(income taxes we expect to pay in the current year) to an accrual
basis, as detailed further under "supplemental information about
Non-GAAP financial measures" - "non-GAAP income tax adjustments".
Prior period comparative numbers were adjusted accordingly. The
non-GAAP income tax provision, non-GAAP net loss attributable to
Cognyte Software Ltd. and non-GAAP diluted net loss per share
attributable to Cognyte Software Ltd. under the previous method of
calculation, which was presented in last year’s press release
filing on June 15, 2023, were $10.6 million, $15.9 million and
$(0.23) for the three months ended April 30, 2023,
respectively.
Cognyte Software Ltd. and Subsidiaries
Supplemental Information About Non-GAAP Financial
Measures
The press release includes reconciliations of certain financial
measures not prepared in accordance with GAAP, consisting of
non-GAAP revenue, non-GAAP gross profit and gross margins, non-GAAP
research and development expenses, net, non-GAAP selling, general
and administrative expenses, non-GAAP operating (loss) income and
operating margins, non-GAAP other income (expense), net, non-GAAP
provision for income taxes and non-GAAP effective income tax rate,
non-GAAP net (loss) income attributable to Cognyte, adjusted EBITDA
and adjusted EBITDA margin, non-GAAP diluted net (loss) income per
share attributable to Cognyte and non-GAAP diluted weighted-average
shares used in computing such measure. The tables above include a
reconciliation of each non-GAAP financial measure for completed
periods presented in this press release to the most directly
comparable GAAP financial measure.
We believe these non-GAAP financial measures, used in
conjunction with the corresponding GAAP measures, provide investors
with useful supplemental information about the financial
performance of our business by:
- facilitating the comparison of our financial results and
business trends between periods, by excluding certain items that
either can vary significantly in amount and frequency, are based
upon subjective assumptions, or in certain cases are unplanned for
or difficult to forecast,
- facilitating the comparison of our financial results and
business trends with other software companies who publish similar
non-GAAP measures, and
- allowing investors to see and understand key supplementary
metrics used by our management to run our business, including for
budgeting and forecasting, resource allocation, and compensation
matters.
We also make these non-GAAP financial measures available because
our management believes they provide meaningful information about
the financial performance of our business and are useful to
investors for informational and comparative purposes.
Non-GAAP financial measures should not be considered in
isolation as substitutes for, or superior to, comparable GAAP
financial measures. The non-GAAP financial measures we present have
limitations in that they do not reflect all of the amounts
associated with our results of operations as determined in
accordance with GAAP, and these non-GAAP financial measures should
only be used to evaluate our results of operations in conjunction
with the corresponding GAAP financial measures. These non-GAAP
financial measures do not represent discretionary cash available to
us to invest in the growth of our business, and we may in the
future incur expenses similar to or in addition to the adjustments
made in these non-GAAP financial measures. Other companies may
calculate similar non-GAAP financial measures differently than we
do, limiting their usefulness as comparative measures.
Our non-GAAP financial measures are calculated by making the
following adjustments to our GAAP financial measures:
Revenue adjustments. We exclude from our non-GAAP revenue the
impact of fair value adjustments required under GAAP relating to
software and software service revenue and professional service and
other revenue acquired in a business acquisition, which would have
otherwise been recognized on a stand-alone basis. We believe that
it is useful for investors to understand the total amount of
revenue that we and the acquired company would have recognized on a
stand-alone basis under GAAP, absent the accounting adjustment
associated with the business acquisition. We believe that our
non-GAAP revenue measure helps management and investors understand
our revenue trends and serves as a useful measure of ongoing
business performance.
Amortization of acquired technology and other acquired
intangible assets. When we acquire an entity, we are required under
GAAP to record the fair values of the intangible assets of the
acquired entity and amortize those assets over their useful lives.
We exclude the amortization of acquired intangible assets,
including acquired technology, from our non-GAAP financial measures
because they are inconsistent in amount and frequency and are
significantly impacted by the timing and size of acquisitions. We
also exclude these amounts to provide easier comparability of pre
and post-acquisition operating results.
Stock-based compensation expenses. We exclude stock-based
compensation expenses related to restricted stock awards, stock
bonus programs, bonus share programs, and other stock-based awards
from our non-GAAP financial measures. We evaluate our performance
both with and without these measures because stock-based
compensation is typically a non-cash expense and can vary
significantly over time based on the timing, size and nature of
awards granted, and is influenced in part by certain factors which
are generally beyond our control, such as the volatility of the
price of our ordinary shares. In addition, measurement of
stock-based compensation is subject to varying valuation
methodologies and subjective assumptions, and therefore we believe
that excluding stock-based compensation from our non-GAAP financial
measures allows for meaningful comparisons of our current operating
results to our historical operating results and to other companies
in our industry.
Acquisition expenses (benefit), net. In connection with
acquisition activity (including with respect to acquisitions that
are not consummated), we incur expenses, including legal,
accounting, and other professional fees, integration costs, changes
in the fair value of contingent consideration obligations, and
other costs. Integration costs may consist of information
technology expenses as systems are integrated across the combined
entity, consulting expenses, marketing expenses, and professional
fees, as well as non-cash charges to write-off or impair the value
of redundant assets. We exclude these expenses from our non-GAAP
financial measures because they are unpredictable, can vary based
on the size and complexity of each transaction, and are unrelated
to our continuing operations or to the continuing operations of the
acquired businesses.
Restructuring expenses. We exclude restructuring expenses from
our non-GAAP financial measures, which include employee termination
costs, facility exit costs, certain professional fees, asset
impairment charges, and other costs directly associated with
resource realignments incurred in reaction to changing strategies
or business conditions. All of these costs can vary significantly
in amount and frequency based on the nature of the actions as well
as the changing needs of our business and we believe that excluding
them provides easier comparability of pre- and post-restructuring
operating results.
Separation expenses. On December 4, 2019, Verint announced its
intention to separate into two independent publicly traded
companies: Cognyte Software Ltd., which consists of Verint’s Cyber
Intelligence Solutions business, and Verint Systems Inc., which
consists of its Customer Engagement Business. We incurred
significant expenses to separate the aforesaid businesses,
including third-party advisory, accounting, legal, consulting, and
other similar services related to the separation as well as costs
associated with accelerated depreciation and amortization of assets
which became obsolete following the separation from Verint,
including those related to human resources, brand management, real
estate, and information technology to the extent not capitalized.
These costs are incremental to our normal operating expenses and
incurred solely as a result of the separation transaction.
Accordingly, we are excluding these separation expenses from our
non-GAAP financial measures in order to evaluate our performance on
a comparable basis.
Business Divestiture gains/losses. In certain cases, we may
divest a portion of our business, which may result in a gain or
loss on divestiture. These gains or losses may result from the sale
of a business unit or the termination of a product line or service.
We exclude these gains or losses from our non-GAAP financial
measures in order to provide a more meaningful comparisons of our
ongoing business performance between periods and to other companies
in our industry. On December 1, 2022, as part of our ongoing
strategic plan to simplify and focus the Company on fewer agendas,
we sold our Situational Intelligence Solutions (SIS) business.
Provision for legal claim. We exclude from our non-GAAP
financial measures accrual recorded for the settlement of certain
legal claims related to our business acquisitions.
Other adjustments. We exclude from our non-GAAP financial
measures rent expense for redundant facilities, gains on change in
fair value of equity investment, gains or losses on sales of
property and certain professional fees unrelated to our ongoing
operations.
Non-GAAP income tax adjustments. We exclude our GAAP provision
(benefit) for income taxes from our non-GAAP measures of net income
attributable to Cognyte Software Ltd., and instead include a
non-GAAP provision for income taxes. Cognyte uses a full-year
non-GAAP tax rate to compute the non-GAAP tax provision. This
full-year non-GAAP tax rate is based on Cognyte’s annual GAAP
income, adjusted to exclude non-GAAP items, as well as the effects
of significant non-recurring and period-specific tax items which
vary in size and frequency. This annual non-GAAP tax rate is based
on an evaluation of our historical and projected profit before tax,
taking into account the impact of non-GAAP adjustments, tax law
changes, as well as other factors such as our current tax
structure, existing tax positions and expected recurring tax
incentives. Our GAAP effective income tax rate can vary
significantly from year to year as a result of tax law changes,
settlements with tax authorities, changes in the geographic mix of
earnings including acquisition activity, changes in the projected
realizability of deferred tax assets, and other unusual or
period-specific events, all of which can vary in size and
frequency. We believe that our non-GAAP effective income tax rate
removes much of this variability and facilitates meaningful
comparisons of operating results across periods. We evaluate our
non-GAAP effective income tax rate on an ongoing basis, and it can
change from time to time. Our non-GAAP income tax rate can differ
materially from our GAAP effective income tax rate.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure defined as net income
(loss) attributable to non-controlling interest before interest
expense, interest income, income taxes, depreciation expense,
amortization expense, revenue adjustments, restructuring expenses,
acquisition expenses, and other expenses excluded from our non-GAAP
financial measures as described above. We believe that adjusted
EBITDA is also commonly used by investors to evaluate operating
performance between companies because it helps reduce variability
caused by differences in capital structures, income taxes,
stock-based compensation accounting policies, and depreciation and
amortization policies. Adjusted EBITDA is also used by credit
rating agencies, lenders, and other parties to evaluate our
creditworthiness.
Supplemental Information About Constant Currency
Because we operate on a global basis and transact business in
many currencies, fluctuations in foreign currency exchange rates
can affect our consolidated U.S. dollar operating results. To
facilitate the assessment of our performance excluding the effect
of foreign currency exchange rate fluctuations, we calculate our
GAAP and non-GAAP revenue, cost of revenue, and operating expenses
on both an as-reported basis and a constant currency basis,
allowing for comparison of results between periods as if foreign
currency exchange rates had remained constant. We perform our
constant currency calculations by translating current-period
foreign currency results into U.S. dollars using prior-period
average foreign currency exchange rates or hedge rates, as
applicable, rather than current period exchange rates. We believe
that constant currency measures, which exclude the impact of
changes in foreign currency exchange rates, facilitate the
assessment of underlying business trends.
Unless otherwise indicated, our financial outlook for each of
revenue, operating margin, and diluted earnings per share, which is
provided on a non-GAAP basis, reflects foreign currency exchange
rates approximately consistent with rates in effect when the
outlook is provided.
We also incur foreign exchange gains and losses resulting from
the revaluation and settlement of monetary assets and liabilities
that are denominated in currencies other than the entity’s
functional currency. Our financial outlook for diluted earnings per
share includes net foreign exchange gains or losses incurred to
date, if any, but does not include potential future gains or
losses.
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version on businesswire.com: https://www.businesswire.com/news/home/20240618012218/en/
Investor Relations Dean
Ridlon Cognyte Software Ltd. IR@cognyte.com
Cognyte Software (NASDAQ:CGNT)
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