Cognyte Announces Fourth Quarter and Fiscal Year Ended January 31, 2022 Results

HERZLIYA, Israel–(BUSINESS WIRE)–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 and year ended January 31, 2022 (“Q4 FYE22” and “FYE22”).

“In the fourth quarter, revenue was $125 million, up about $7 million sequentially from the third quarter, but several million dollars below the midpoint of our guidance. Our results reflect continued supply chain issues, as well as a lower conversion of our pipeline than we expected at the time of our last earnings conference call. We are proactively addressing these issues, but our ability to forecast with any level of precision is currently limited. As a result, we are unable to provide FYE23 guidance and long-term targets at this time,” said Elad Sharon, Cognyte’s Chief Executive Officer.

“Looking forward, we believe we are well positioned for sustained growth over the long-run,” Sharon continued. “The market’s fundamentals have not changed. Security threats are increasing, and governments are seeking innovative analytical solutions. We are a market leader with a long history of growth and innovation and will continue to help our customers address their evolving security challenges.”

Q4 Highlights

• Revenue: $125.0 million (GAAP, up 0.8% y-o-y) and $125.3 million (non-GAAP, up 0.6% y-o-y)
• Gross Margin: 71.8% (GAAP, up 200 bps y-o-y) and 72.7% (non-GAAP, up 180 bps y-o-y)
• Diluted EPS: $(0.19) (GAAP) and $0.16 (non-GAAP)

FYE22 Highlights

• Revenue: $474.0 million (GAAP, up 6.9% y-o-y) and $475.6 million (non-GAAP, up 6.4% y-o-y)
• Gross Margin: 72.1% (GAAP, up 200 bps y-o-y) and 73.1% (non-GAAP, up 200 bps y-o-y)
• Diluted EPS: $(0.22) (GAAP) and $0.74 (non-GAAP)

Conference Call Information

We will conduct a conference call today at 8:30 a.m. ET to discuss our results for the three months and year ended January 31, 2022, outlook, and long-term targets. An online, real-time webcast of the conference call and webcast slides will be available on our website at www.Cognyte.com. The conference call can also be accessed live via telephone at +1 (833) 562-0165 (United States and Canada) and +1 (661) 567-1247 (International) and the passcode is 7593488. Please dial in 5-10 minutes prior to the scheduled start time. 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.

We are a global leader in investigative analytics software that empowers governments and enterprises with Actionable Intelligence for a Safer World™. Our open software is designed to help governments and enterprises accelerate and improve the effectiveness of investigations. Over 1,000 government and enterprise customers rely on our solutions to accelerate and conduct investigations and derive insights, with which they identify, neutralize, and tackle threats to national security, personal safety, business continuity and various forms of criminal activity. Our government customers consist of national, regional, and local government agencies in more than 100 countries around the world. Our enterprise customers consist of commercial customers and physical security customers.

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: risks that our customers may delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or may be unable to honor contractual or payment obligations; risks related to the impact of disruptions to the global supply chain; uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of military actions involving Russia and Ukraine and COVID-19; risks related to the effects of the COVID-19 pandemic on our business and results, including customer readiness, deployment, marketing and sale abilities; risks relating to the global regulatory constraints to which we are subject; risks associated with larger orders and customer concentration; risks related to claims by third parties that our solutions infringe their terms of use or other propriety rights; risks associated with political and reputational factors related to our business or operations; risks that we may not be able to establish and maintain relationships with key resellers, partners, systems integrators and third-party suppliers; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards; risks due to aggressive competition in all of our markets; challenges associated with selling sophisticated solutions, including with respect to longer sales cycles and more complex sales processes; risks associated with significant customer and significant partners concentration, including risks related to significant amounts of our business coming from government customers around the world; risks associated with our ability to retain, recruit, and train qualified personnel in regions in which we operate; risks relating to our ability to properly manage investments in our business and operations; risks associated with acquisitions, strategic investments, partnerships or alliances; risks associated with our significant international operations, including geopolitical risks, the relationship to Israel and fluctuations in foreign exchange rates; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures or disruptions; risks that our products or services, or those of third-parties contain defects, develop operational problems, or are vulnerable to cyber-attacks; risks associated with the mishandling or perceived mishandling of sensitive, confidential or classified information; risks associated with complex and changing regulatory environments relating to our operations and solutions; risks associated with our failure to comply with anti-corruption, trade compliance, anti-money-laundering and economic sanctions laws and regulations; risks related to the complex and evolving regulatory requirements that we are subject to, which may be difficult and expensive to comply with; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use; risks associated with changing tax laws and regulations; risks associated with our credit facilities, liquidity and the discontinuation of LIBOR; risks associated with exchange rate fluctuations between the U.S. dollar and the New Israeli Shekel and other non-U.S. currencies; 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; risk that the spin-off does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities; risks associated with the agreements with Verint entered into in connection with the spin-off, and our indemnification obligations to Verint; risks associated with market volatility in the price of our shares; risks associated with different corporate governance requirements applicable to Israeli companies; risks related to our limited operating history as an independent public company and risks associated with being a foreign private issuer; and other risks detailed from time to time in filings that we make with the Securities and Exchange Commission (the “SEC”). For a detailed discussion of these risk factors, see our annual reports on Form 20-F for the fiscal years ended January 31, 2021 and January 31, 2022, and our other SEC filings. In addition, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, 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
		Year Ended								Three Months Ended
		January 31,								January 31,
(in thousands except share and per share data)			2022				2021				2022				2021
		(Audited)				(Audited)				(Unaudited)				(Unaudited)
Revenue:
Software		$	209,988			$	187,236			$	60,468			$	55,807
Software service			201,563				190,013				46,809				50,409
Professional service and other			62,491				66,209				17,680				17,804
Total revenue			474,042				443,458				124,957				124,020
Cost of revenue:
Software			28,955				35,647				8,175				13,120
Software service			46,413				44,893				11,048				11,324
Professional service and other			56,349				51,186				15,785				12,744
Amortization of acquired technology			682				943				170				225
Total cost of revenue			132,399				132,669				35,178				37,413
Gross profit			341,643				310,789				89,779				86,607
Operating expenses:
Research and development, net			143,360				128,705				38,291				36,528
Selling, general and administrative			185,867				162,590				46,848				49,360
Amortization of other acquired intangible assets			1,455				1,218				250				305
Total operating expenses			330,682				292,513				85,389				86,193
Operating income			10,961				18,276				4,390				414
Other (expense) income, net:
Interest income			177				1,347				73				172
Interest expense			(196	)			(185	)			(178	)			(48	)
Other (expenses) income, net			(2,681	)			5,286				(1,414	)			2,043
Total other (expense) income, net			(2,700	)			6,448				(1,519	)			2,167
Income before provision for income taxes			8,261				24,724				2,871				2,581
Provision (benefit) for income taxes			18,517				4,414				14,394				(2,962	)
Net (loss) income			(10,256	)			20,310				(11,523	)			5,543
Net income attributable to noncontrolling interest			4,634				6,107				909				1,199
Net (loss) income attributable to Cognyte Software Ltd.		$	(14,890	)		$	14,203			$	(12,432	)		$	4,344
Net (loss) income per share attributable to Cognyte Software Ltd.:
Basic		$	(0.22	)		$	0.22			$	(0.19	)		$	0.07
Diluted		$	(0.22	)		$	0.22			$	(0.19	)		$	0.07
Weighted-average shares outstanding:
Basic			66,570				65,773				67,093				65,773
Diluted			66,570				65,773				67,093				65,773

Table 2
COGNYTE SOFTWARE LTD.
Condensed Consolidated Balance Sheets
(Audited)
		Year Ended
		January 31,
(in thousands)			2022				2021
Assets
Current assets:
Cash and cash equivalents		$	152,590			$	78,570
Restricted cash and cash equivalents and restricted bank time deposits			3,597				27,042
Short-term investments			10,434				4,713
Accounts receivable, net of allowance for credit losses of $2.1 million and $4.6 million, respectively			179,198				175,001
Contract assets, net			27,908				20,317
Inventories			14,366				14,542
Prepaid expenses and other current assets			31,970				30,051
Total current assets			420,063				350,236
Property and equipment, net			30,839				37,595
Operating lease right-of-use assets			25,031				32,126
Goodwill			158,233				158,183
Intangible assets, net			3,162				5,299
Deferred income taxes			1,548				3,303
Other assets			25,729				42,076
Total assets		$	664,605			$	628,818
Liabilities and stockholders’ equity
Current liabilities:
Short term loan		$	100,000				—
Accounts payable			36,664				41,552
Accrued expenses and other current liabilities			99,774				91,692
Contract liabilities			83,158				127,012
Due to former parent			—				38,772
Total current liabilities			319,596				299,028
Long-term contract liabilities			14,520				22,037
Deferred income taxes			3,447				4,049
Operating lease liabilities			17,179				24,135
Other liabilities			10,774				9,198
Total liabilities			365,516				358,447
Commitments and Contingencies
Stockholders’ equity:
Common stock – $0 par value; Authorized 300,000,000 shares. Issued and outstanding 67,217,688 and 65,773,335 at January 31, 2022 and January 31, 2021, respectively			—				—
Additional paid-in capital			316,706				—
Accumulated deficit			(14,890	)			—
Former net parent investment			—				273,006
Accumulated other comprehensive loss			(16,679	)			(15,505	)
Total Cognyte Software Ltd. stockholders’ equity			285,137				257,501
Noncontrolling interest			13,952				12,870
Total stockholders’ equity			299,089				270,371
Total liabilities and stockholders’ equity		$	664,605			$	628,818

Table 3
COGNYTE SOFTWARE LTD.
Condensed Consolidated Statements of Cash Flows
(Audited)
		Year Ended January 31,
(in thousands)			2022				2021
Cash flows from operating activities:
Net (loss) income		$	(10,256	)		$	20,310
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			21,278				22,519
Allowance for credit losses			432				1,850
Stock-based compensation, excluding cash-settled awards			32,865				27,423
Provision (benefit) from deferred income taxes			5,860				(2,195	)
Non-cash (losses) gains on derivative financial instruments, net			(133	)			95
Change in fair value of contingent consideration for business combinations			(134	)			(3,665	)
Other non-cash items, net			766				(2,964	)
Changes in operating assets and liabilities:
Accounts receivable			(5,718	)			1,496
Contract assets			(7,115	)			8,442
Inventories			(363	)			(1,142	)
Prepaid expenses and other assets			8,465				5,119
Accounts payable and accrued expenses			4,885				8,668
Contract liabilities			(51,314	)			(16,770	)
Other liabilities			1,761				210
Other, net			1,351				1,915
Net cash provided by operating activities		$	2,630			$	71,311
Cash flows from investing activities:
Cash paid for business combinations, including adjustments, net of cash acquired			—				—
Purchases of property and equipment			(11,759	)			(14,199	)
Purchases of short-term investments			(58,973	)			(48,585	)
Maturities and sales of short-term investments			52,978				51,174
Settlements of derivative financial instruments not designated as hedges			(138	)			213
Cash paid for capitalized software development costs			(6,033	)			(5,132	)
Change in restricted bank time deposits, including long-term portion			5,561				31,084
Other investing activities			513				1,863
Net cash (used in) provided by investing activities		$	(17,851	)		$	16,418
Cash flows from financing activities:
Net transfers to former parent			—				(189,047	)
Withdrawal from credit facility – presented as short term loan			100,000				—
Dividend paid to former parent			(35,000	)			—
Repayments of parent borrowings			—				(7,025	)
Dividends paid to noncontrolling interest			(3,338	)			(4,176	)
Payments of contingent consideration for business combinations (financing portion)			(2,738	)			(4,877	)
Other financing activities			(181	)			(492	)
Net cash provided by (used in) financing activities		$	58,743			$	(205,617	)
Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents			41				(864	)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents			43,563				(118,752	)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period			114,657				233,409
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period		$	158,220			$	114,657
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents at end of period:
Cash and cash equivalents		$	152,590			$	78,570
Restricted cash and cash equivalents included in restricted cash and cash equivalents and restricted bank time deposits			3,486				25,904
Restricted cash and cash equivalents included in other assets			2,144				10,183
Total cash, cash equivalents, restricted cash, and restricted cash equivalents		$	158,220			$	114,657

 

Table 4
COGNYTE SOFTWARE LTD.
Reconciliation of GAAP to Non-GAAP Measures
		Year Ended January 31,								Three Months Ended January 31,
(in thousands, except per share data)			2022				2021				2022				2021
		(Audited)				(Audited)				(Unaudited)				(Unaudited)
Revenue
Total GAAP revenue		$	474,042			$	443,458			$	124,957			$	124,020
Revenue adjustments			1,526				3,569				348				546
Total non-GAAP revenue		$	475,568			$	447,027			$	125,305			$	124,566
Gross profit and gross margin
GAAP gross profit			341,643				310,789				89,779				86,607
GAAP gross margin			72.1	%			70.1	%			71.8	%			69.8	%
Revenue adjustments			1,526				3,569				348				546
Amortization of acquired technology			682				943				170				226
Stock-based compensation expenses (1)			3,842				2,127				751				481
Acquisition expenses, net (2)			—				358				—				358
Restructuring expenses, net (2)			1				20				—				22
Separation expenses, net (2)			30				32				—				26
Non-GAAP gross profit		$	347,724			$	317,838			$	91,048			$	88,266
Non-GAAP gross margin			73.1	%			71.1	%			72.7	%			70.9	%
Research and development, net
GAAP research and development, net			143,360				128,705				38,291				36,528
As a percentage of GAAP revenue			30.2	%			29.0	%			30.6	%			29.5	%
Stock-based compensation expenses (1)			(7,792	)			(5,621	)			(1,778	)			(1,325	)
Acquisition expenses, net (2)			—				(204	)			—				(11	)
Restructuring (expenses) benefit, net (2)			(189	)			(336	)			—				20
Separation expenses, net (2)			(67	)			(123	)			—				(123	)
Other adjustments			40				12				—				(21	)
Non-GAAP research and development, net		$	135,352			$	122,433			$	36,513			$	35,068
As a percentage of non-GAAP revenue			28.5	%			27.4	%			29.1	%			28.2	%
Selling, general and administrative expenses
GAAP selling, general and administrative expenses			185,867				162,590				46,848				49,360
As a percentage of GAAP revenue			39.2	%			36.7	%			37.5	%			39.8	%
Stock-based compensation expenses (1)			(21,196	)			(19,794	)			(3,852	)			(5,183	)
Acquisition (expenses) benefit, net (2)			(438	)			1,508				(6	)			(1,164	)
Restructuring expenses, net (2)			(934	)			(2,412	)			(505	)			(832	)
Separation expenses, net (2)			(11,464	)			(19,355	)			(477	)			(8,384	)
Provision for legal claim			(4,638	)			(259	)			(3,226	)			(60	)
Other adjustments			(699	)			568				46				(84	)
Non-GAAP selling, general and administrative expenses		$	146,498			$	122,846			$	38,828			$	33,653
As a percentage of non-GAAP revenue			30.8	%			27.5	%			31.0	%			27.0	%
Operating income, operating margin and adjusted EBITDA
GAAP operating income			10,961				18,276				4,390				414
GAAP operating margin			2.3	%			4.1	%			3.5	%			0.3	%
Revenue adjustments			1,526				3,569				348				546
Amortization of acquired technology			682				943				170				226
Amortization of other acquired intangible assets			1,455				1,218				250				306
Stock-based compensation expenses (1)			32,830				27,542				6,381				6,989
		Year Ended January 31,								Three Months Ended January 31,
(in thousands, except per share data)			2022				2021				2022				2021
Acquisition expenses (benefit), net (2)			438				(946	)			6				1,533
Restructuring expenses, net (2)			1,124				2,768				505				834
Separation expenses, net (2)			11,561				19,510				477				8,533
Provision for legal claim			4,638				259				3,226				60
Other adjustments			659				(580	)			(46	)			105
Non-GAAP operating income		$	65,874			$	72,559			$	15,707			$	19,546
Depreciation and amortization (3)			16,206				16,395				4,614				4,109
Adjusted EBITDA		$	82,080			$	88,954			$	20,321			$	23,655
Non-GAAP operating margin			13.9	%			16.2	%			12.5	%			15.7	%
Adjusted EBITDA margin			17.3	%			19.9	%			16.2	%			19.0	%
Other (expense) income reconciliation
GAAP other (expense) income, net			(2,700	)			6,448				(1,519	)			2,167
Change in fair value of equity investment			(729	)			(3,768	)			—				—
Non-GAAP other (expense) income, net		$	(3,429	)		$	2,680			$	(1,519	)		$	2,167
Tax provision reconciliation
GAAP provision for income taxes			18,517				4,414				14,394				(2,962	)
Effective income tax rate			224.1	%			17.9	%			501.4	%			(114.8	) %
Non-GAAP tax adjustments			(10,284	)			(3,323	)			(12,048	)			(146	)
Non-GAAP provision for income taxes		$	8,233			$	1,091			$	2,346			$	(3,108	)
Non-GAAP effective income tax rate			13.2	%			1.5	%			16.5	%			(14.3	) %
Net (loss) income attributable to Cognyte software Ltd. reconciliation
GAAP net (loss) income attributable to Cognyte Software Ltd.		$	(14,890	)		$	14,203			$	(12,432	)		$	4,344
Revenue adjustments			1,526				3,569				348				546
Amortization of acquired technology			682				943				170				226
Amortization of other acquired intangible assets			1,455				1,218				250				306
Stock-based compensation expenses (1)			32,830				27,542				6,381				6,989
Acquisition expenses (benefit), net (2)			438				(946	)			6				1,533
Restructuring expenses, net (2)			1,124				2,768				505				834
Separation expenses, net (2)			11,561				19,510				477				8,533
Provision for legal claim			4,638				259				3,226				60
Other adjustments			659				(580	)			(46	)			105
Change in fair value of equity investment			(729	)			(3,768	)			—				—
Non-GAAP tax adjustments			10,284				3,323				12,048				146
Total adjustments			64,468				53,838				23,365				19,278
Non-GAAP net income attributable to Cognyte Software Ltd.		$	49,578			$	68,041			$	10,933			$	23,622
Table comparing GAAP diluted net loss per share attributable to Cognyte Software Ltd. to Non-GAAP diluted net income per share attributable to Cognyte Software Ltd.
GAAP diluted net (loss) income per share attributable to Cognyte Software Ltd.		$	(0.22	)		$	0.22			$	(0.19	)		$	0.07
Non-GAAP diluted net income per share attributable to Cognyte Software Ltd.		$	0.74			$	1.03			$	0.16			$	0.36
GAAP weighted-average shares used in computing diluted net (loss) income per share attributable to Cognyte Software Ltd.			66,570				65,773				67,093				65,773
Additional weighted-average shares applicable to non-GAAP diluted net income per share attributable to Cognyte Software Ltd.			603				—				349				—
Non-GAAP diluted weighted-average shares used in computing net income per share attributable to Cognyte Software Ltd.			67,173				65,773				67,442				65,773
		Year Ended January 31,								Three Months Ended January 31,
(in thousands, except per share data)			2022				2021				2022				2021
Table of reconciliation from GAAP net loss attributable to Cognyte Software Ltd. to adjusted EBITDA
GAAP net (loss) income attributable to Cognyte Software Ltd.		$	(14,890	)		$	14,203			$	(12,432	)		$	4,344
As a percentage of GAAP revenue			(3.1	) %			3.2	%			(9.9	) %			3.5	%
Net income attributable to noncontrolling interest			4,634				6,107				909				1,199
GAAP provision for income taxes			18,517				4,414				14,394				(2,962	)
GAAP other expense (income), net			2,700				(6,448	)			1,519				(2,167	)
Amortization of acquired technology			682				943				170				226
Amortization of other acquired intangible assets			1,455				1,218				250				306
Depreciation and amortization (3)			16,206				16,395				4,614				4,109
Revenue adjustments			1,526				3,569				348				546
Stock-based compensation expenses (1)			32,830				27,542				6,381				6,989
Acquisition expenses (benefit), net (2)			438				(946	)			6				1,533
Restructuring expenses, net (2)			1,124				2,768				505				834
Separation expenses, net (2)			11,561				19,510				477				8,533
Provision for legal claim			4,638				259				3,226				60
Other adjustments			659				(580	)			(46	)			105
Adjusted EBITDA		$	82,080			$	88,954			$	20,321			$	23,655
As a percentage of non-GAAP revenue			17.3	%			19.9	%			16.2	%			19.0	%

Contacts

Investor Relations
Dean Ridlon

Cognyte Software Ltd.

IR@cognyte.com

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