Board Comments on Value Base’s Campaign to
Replace Cognyte’s Chairman or its CEO Without Offering Any
Recommendations for Business or Governance Improvement
Urges Shareholders to Vote “FOR” Cognyte’s Two Candidates, Both of Whom
Have Been Instrumental in Driving the Company’s Business
Improvement Efforts
Cognyte Software Ltd. (NASDAQ: CGNT) (“Cognyte”), a global
leader in investigative analytics software, today issued a letter
to its shareholders regarding its 2024 Annual Meeting of
Shareholders to be held on September 4, 2024. The Cognyte Board of
Directors (the “Board”) encourages shareholders to reject Value
Base Fund’s director nominee and to vote “FOR” the
re-election of Earl Shanks, Cognyte’s independent Chairman
of the Board, “FOR” Elad Sharon, the Company’s Chief
Executive Officer and “FOR” the CEO compensation plan.
In the letter to shareholders, Cognyte’s Board highlights the
Company’s recent operational advancements, improved financial
performance, refreshed Board composition and commitment to ongoing
enhancement of corporate governance and financial disclosure.
The full text of the letter follows:
Dear Fellow Shareholders:
This year’s Annual Meeting of Shareholders (the “Annual
Meeting”) of Cognyte Software Ltd. (“Cognyte” or the “Company”)
will be held on September 4, 2024, and is particularly important.
At this year’s Annual Meeting, shareholders will have the
opportunity to vote to reelect two of Cognyte’s key leaders: the
Company’s independent Chairman, Earl Shanks, and its CEO, Elad
Sharon, both of whom have been instrumental in driving the
Company’s strategy and business improvement.
In our proxy statement, you will find important information
highlighting the Company’s strategy, governance and recent
progress, all of which have been driven by our leadership team and
Board of Directors. We encourage you to read these materials
carefully and vote today using the instructions on the enclosed
proxy card.
Cognyte’s Board of Directors and Management Are Executing on
a Strategy that Is Delivering Results for Shareholders
The execution of Cognyte’s current innovation and expansion
strategy, led by CEO Elad Sharon, is working. We are leveraging our
reputation for best-of-breed technological solutions with customers
around the world and improving our competitive position.
Over the last year, these actions have returned Cognyte to
growth, delivering sustained and expanding profitability, and
strengthening our capital structure. The Company has generated
three consecutive quarters of year-over-year Revenue and Adjusted
EBITDA1 growth while expanding Gross Margins. Our prospects for
continued growth are evident in our strong short- and long-term
remaining performance obligations (RPOs). And, in fact, we are
projecting continued growth in FY 2025 and recently raised our
guidance for the year, reflecting our confidence in our business
and execution.
Importantly, shareholders returns have improved. Cognyte’s stock
has appreciated by more than 50% since Mr. Shanks was appointed
Chairman – less than one year ago – significantly outperforming
market and industry benchmarks as well as the stock performance of
our peers.2
In a relatively short period of time, the Cognyte Board and
management team have taken decisive actions to stabilize the
business and improve the Company’s financial performance, putting
Cognyte on the right path. The Board expects fiscal 2025 to be a
year of continued growth and improved operating leverage, enabling
improved profitability and cash flow.
Cognyte Has Actively Sought, Received and Addressed
Shareholder Feedback
Our Board believes that effective corporate governance includes
regular, constructive dialogue with shareholders.
Over the past year, the Board and executive team have expanded
our shareholder outreach program to improve corporate transparency
and gather direct shareholder feedback. In 2023 and 2024, we
proactively reached out to our top 20 institutional shareholders
(and many others), representing approximately 60% of the
outstanding shares.
We have engaged in extensive dialogue with our shareholders on
topics ranging from business strategy, corporate governance,
executive compensation, communications and disclosures, and other
important topics.
Based on the feedback we received during these discussions, the
Board has refined and advanced the Company’s strategy, refreshed
its own composition and leadership, and improved transparency and
disclosures. For example, the Board:
- Established a Strategy Committee to work closely with
management to identify and evaluate opportunities to accelerate
Cognyte’s growth;
- Appointed Earl Shanks, an accomplished former CFO of three
multi-billion-dollar U.S. public companies with global operations,
as independent Chairman;
- Added three new independent directors – Avi Cohen, Sarit Sagiv
and Ron Shvili – all of whom possess highly relevant experience and
valuable skills, with subject matter expertise in capital markets,
financial reporting, governance and the security analytics
market;
- Accepted the retirement of two of our directors, whose
departure helped to facilitate the addition of new directors
without the board’s size becoming unwieldy;
- Enhanced disclosures regarding the Company’s financial
performance, including, for example, disclosures regarding new
customer wins and recurring revenue, and corporate governance
practices and policies, adding, for example, a skills matrix to our
proxy statement to highlight the diverse skills and backgrounds of
our directors and clarifying the Board’s responsibilities,
practices and role in overseeing the Company’s management and
strategy; and
- Enhanced disclosures to provide additional detail regarding the
Board’s approach to and philosophy for compensation of executive
officers, including disclosure of the peer group we use as a
benchmark and the criteria used in determining performance-based
compensation. Our enhanced disclosures make clear that our
compensation is predominantly at-risk, based on performance against
key financial metrics that support long-term growth and
profitability, and aligned with the interests of our
shareholders.
This Year’s Annual Meeting
At this year’s Annual Meeting, Cognyte is nominating two
candidates to the Board, both of whom serve in key leadership
positions at the Company and both of whom possess skills and
expertise critical to our strategy: Earl Shanks and Elad Sharon. We
are also seeking the approval of our CEO’s updated compensation
plan, which reflects our pay-for-performance culture and the
continued evolution of the plan.
Mr. Shanks, the independent Chairman of Cognyte’s Board, has
significant U.S. public company experience, including CFO roles
with multiple global organizations. He has led many of the Board’s
interactions with shareholders recently and has been driving the
Company’s governance and disclosure enhancements.
Mr. Sharon, Cognyte’s CEO, has significant experience in the
intelligence and security industry, having previously served in
senior operating, product development and R&D roles at Verint’s
Cyber Intelligence Solutions business before being appointed
President of that business in 2016. He leads our management team in
executing our strategy.
Despite the Company’s recent progress and the critical role
played by each of the Company’s nominees for the Board, one of our
shareholders, Value Base Fund (“Value Base”), is demanding a seat
on the Board and has nominated one of its investment managers, Tal
Yaacobi, to replace Mr. Shanks or Mr. Sharon on the Board.
We have engaged constructively with Value Base several times
over the past few months to understand their perspectives and
concerns and explore any insightful suggestions they may have to
enhance Cognyte’s strategy, or to improve value. To date, however,
Value Base has not offered any meaningful recommendations. Instead,
we were told that Mr. Yaacobi’s American education, brief
experience as an associate with a consulting firm, and knowledge of
accounting would enhance our Board. But, there is no evidence to
suggest Mr. Yaacobi can help support our global expansion efforts,
nor has he provided any concrete suggestions for improving our
strategy, operations, governance or disclosure.
Cognyte’s Nominees Are Best Positioned to Continue to Drive
the Company Forward
To deliver on Cognyte’s full potential, the Company needs Board
and executive leadership that has a deep understanding of global
market opportunities and that is focused on global expansion rather
than localizing the business. In addition, we need leaders that
understand the Company’s current strengths (and challenges),
customers, technology, people, assets and opportunities, along with
software industry expertise.
The Cognyte Board and management team fully reflect these
important attributes, and are comprised of engaged, diverse and
dynamic leaders, whose skillsets are closely aligned with the key
drivers of our business. Mr. Shanks and Mr. Sharon are central to
Cognyte’s continuing business improvement and are dedicated to
enhancing value for all shareholders. They know our business, and
our customers, competitors, employees and shareholders, well.
Removing either of them to elect Mr. Yaacobi, would substantially
weaken the Board and threaten the Company’s recent progress and
global ambitions.
The CEO compensation plan has been designed to align Mr.
Sharon’s interests and incentives with those of our shareholders.
The plan reflects feedback we have received from shareholders and
practices that are common in our market.
To ensure Cognyte’s strong momentum and progress continues, the
Board urges shareholders to support the current strategy and Board.
Please vote “FOR” Earl Shanks and Elad Sharon and “AGAINST” the
election of Tal Yaacobi, and “FOR” the proposal to approve the
amendments to our CEO’s compensation plan, using the instructions
on the enclosed proxy card.
Sincerely,
The Cognyte Software Ltd. Board of Directors
Shareholders can find out more about the 2024 Annual Meeting by
visiting the Cognyte investor relations website at
https://www.cognyte.com/investors/
If you have any questions or
require any assistance with voting your shares, please contact our
proxy solicitor, Saratoga, at (888) 368-0379 or (212) 257-1311 or
by email at info@saratogaproxy.com
Advisors
Spotlight Advisors is serving as financial advisor, Paul
Hastings LLP and Meitar are serving as legal advisors, Saratoga
Proxy Consulting, LLC is serving as proxy advisor and FNK IR is
serving as communications advisor to Cognyte Software.
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.
Cautionary Statement Regarding Forward-Looking
Statements
Any statements contained in this press release that do not
describe historical facts may constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements are identified by use of the words
“anticipates,” “believes,” “estimates,” “expects,” “intends,”
“plans,” “predicts,” “projects,” “should,” “views,” and similar
expressions.
Any forward-looking statements contained herein are based on
current expectations, but are subject to risks and uncertainties
that could cause actual results to differ materially from those
indicated, including, but not limited to, the impact and
contributions of the slate of director nominees Cognyte has
nominated, the projected growth of Cognyte’s business, and
Cognyte’s ability to achieve its financial and business plans,
goals and objectives and drive shareholder value, including with
respect to its ability to successfully implement its strategy, and
other risk factors discussed from time to time in Cognyte’s filings
with the SEC, including those factors discussed under the caption
“Risk Factors” in its most recent annual report on Form 20-F, filed
with the Securities and Exchange Commission (“SEC”) on April 9,
2024, as amended on April 19, 2024 and in subsequent reports filed
with or furnished to the SEC. Cognyte assumes no obligation and
does not intend to update these forward-looking statements, except
as required by law, to reflect events or circumstances occurring
after today’s date.
Endnotes: __________________ 1 This letter includes
certain financial measures not prepared in accordance with
generally accepted accounting principles (“GAAP”), such as adjusted
EBITDA. For a reconciliation of the non-GAAP financial measures to
the most directly comparable GAAP financial measures, please refer
to Cognyte’s Notice and Proxy Statement for the Fiscal 2025 Annual
Meeting of Shareholders.
2 Source: FactSet. Data as of August 8, 2024. “Peers” refer to
the companies disclosed in Cognyte’s Notice and Proxy Statement for
the Fiscal 2025 Annual Meeting of Shareholders and include
AvePoint, BigCommerce Holdings, C3.ai, Cellebrite DI, Consensus
Cloud Solutions, Domo, Enfusion, Everbridge, Kaltura, MeridianLink,
Rapid7, Rimini Street, Riskified, SecureWorks, SimilarWeb, WalkMe
and Zuora. Peer data refers to median.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240812335856/en/
Investor Relations: Rob Fink FNK IR on behalf of Cognyte
Software cgnt@fnkir.com
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