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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects a positive outlook with strong financial performance, particularly in EPS and billings growth. The acquisition of GroupSense and strategic U.S. expansion provide additional growth avenues, despite current budget headwinds. The company's confidence in increasing software revenue and improving margins further supports a positive sentiment. The Q&A reveals management's focus on overcoming challenges and leveraging advanced technology to displace incumbents. Overall, the positive financial results and strategic initiatives are likely to drive a stock price increase of 2% to 8% over the next two weeks.
Revenue Revenue for Q2 was $97.5 million, an increase of 15.5% year-over-year. This growth reflects solid execution against strategy and constant demand for solutions.
Software Revenue Software revenue was $36.6 million, an increase of $9.7 million or 35.9% year-over-year. This growth is attributed to perpetual licenses, appliances, and some term-based subscription licenses.
Software Services Revenue Software services revenue was $46.7 million, up $1.4 million from last year. This growth is mainly driven by support contracts and, to a lesser extent, cloud-based SaaS subscriptions.
Professional Services Revenue Professional services revenue in Q2 was $14.2 million, an increase of $2 million over last year. This fluctuation is due to revenue recognition timing.
Recurring Revenue Recurring revenue for Q2 was $47.4 million, representing 48.7% of total revenue. This is driven primarily by support contracts and some term-based and SaaS subscription offerings.
Non-GAAP Gross Margin Non-GAAP gross margin for the quarter was 72.1%, expanding by 81 basis points year-over-year. This improvement is due to the significant value customers derive from innovative solutions, competitive differentiation, and improved cost structure.
Gross Profit Gross profit in the second quarter was $70.3 million, an increase of 16.8% year-over-year. This growth is attributed to revenue growth and improved cost structure.
Non-GAAP Operating Income Non-GAAP operating income for Q2 was $8 million, nearly twice as much as the $4.4 million generated in Q2 last year. This reflects operational leverage and improved profitability.
Adjusted EBITDA Adjusted EBITDA for the quarter was $11 million, about 33% higher than the $8.3 million generated last Q2. This growth is due to revenue growth and operational leverage.
GAAP Net Income GAAP net income for the quarter was $2.7 million, versus a loss of $0.9 million in Q2 last year. This improvement reflects better profitability.
Non-GAAP EPS Non-GAAP EPS for Q2 was $0.08, compared to $0.02 in the same period last year. This reflects improved profitability.
Cash Flow from Operations Cash flow from operating activities was a negative $6.3 million, primarily due to expected seasonal expenses, including bonus payments.
RPO (Remaining Performance Obligations) Total RPO at the end of Q2 was $574.5 million, versus $567.7 million at the same period last year. This reflects contracted revenue to be recognized in future periods.
Billings Q2 billings were $93 million, an increase of about 20% versus the same period last year. This reflects strong demand and sales execution.
Operational Intelligence Suite: Highlighted as a key offering, including tactical intelligence solutions for real-time operations in complex environments. Demonstrated success in a U.S. city pilot, leading to arrests and outperforming incumbent solutions.
AI-Powered Predictive Analytics: Recognized by Gartner as a Sample Vendor in the 2025 Hype Cycle for Public Safety and Law Enforcement, showcasing transformational benefits.
U.S. Market Expansion: Strengthened presence through a strategic alliance with LexisNexis Risk Solutions, targeting federal market growth. Participated in key U.S. events to showcase capabilities.
Global Market Engagement: Secured significant deals in Asia Pacific ($10M follow-on deal) and EMEA ($10M competitive win), reflecting trust in tactical intelligence solutions.
Revenue Growth: Achieved 16% year-over-year revenue growth in Q2, reaching $98M. Software revenue grew by 35.9% year-over-year.
Profitability Improvements: Non-GAAP gross profit increased by 17% year-over-year, with adjusted EBITDA growing by 33%.
Long-Term Financial Targets: Set goals for FY 2028: $500M revenue, 73% gross margins, and 20%+ adjusted EBITDA margins.
Capital Allocation: Completed $20M share repurchase program and initiated a new $20M program.
U.S. agency procurement delays: The company is facing atypical U.S. agency procurement delays, which limit near-term visibility into budget timing. This creates challenges in planning and executing their U.S. market strategy.
Cash flow challenges: The company reported negative cash flow from operating activities of $6 million for the quarter, attributed to expected seasonal expenses. This could impact short-term liquidity and operational flexibility.
Competitive pressures: In the EMEA region, the company faced competition from several global vendors, including regional incumbents, in securing a $10 million deal. This highlights the competitive intensity in the market.
Dependence on government agencies: The company’s reliance on law enforcement, military intelligence, and national security agencies exposes it to risks related to government budget constraints, policy changes, and procurement delays.
Economic uncertainties: Global economic uncertainties and heightened security challenges could impact customer budgets and spending priorities, potentially affecting demand for the company’s solutions.
Revenue concentration: A significant portion of the company’s revenue is derived from software, which represents 85.5% of total revenue. This concentration could pose risks if there are disruptions in software sales or changes in customer preferences.
Revenue Guidance for FY 2026: Cognyte expects revenue of approximately $397 million, plus or minus 2%, representing about 13% year-over-year growth at the midpoint of the range.
Adjusted EBITDA Guidance for FY 2026: The company projects adjusted EBITDA of approximately $45 million at the midpoint of the revenue range, representing approximately 55% year-over-year growth.
Gross Margin Outlook: Cognyte anticipates an annual non-GAAP gross margin of 72%, reflecting an improvement of 100 basis points over the previous fiscal year.
Revenue Growth Expectations: Sequential revenue growth is expected in Q3 and Q4 of FY 2026, with Q3 revenue slightly higher than Q2 levels.
Long-Term Financial Targets for FY 2028: Cognyte aims to achieve $500 million in revenue, gross margins of about 73%, and adjusted EBITDA margins above 20% by the fiscal year ending January 31, 2028.
Cash Flow Projections: The company expects to generate $45 million of operating cash flow in FY 2026.
Market Trends and Demand: The company observes a favorable demand environment driven by increased investment in modern, AI-enabled intelligence platforms, particularly in the U.S. market.
U.S. Market Strategy: Cognyte is focusing on further penetration into the U.S. market, despite temporary procurement delays, and has entered into a strategic alliance with LexisNexis Risk Solutions to expand its footprint and sales power in the region.
Share Repurchase Program Completion: The company completed the previously authorized share repurchase program, repurchasing approximately 2.1 million ordinary shares for a total of $20 million.
New Share Repurchase Program: The Board approved a new share repurchase program of up to $20 million in ordinary shares over the next 18 months, through January 14, 2027. Share repurchases could commence on Friday, August 13, following the required 30-day notice period under Israeli law.
The earnings call summary and Q&A reveal strong financial guidance with a 13% revenue growth expectation and a 55% increase in EBITDA. The strategic alliance with LexisNexis and focus on the U.S. market are positive indicators. Despite some minor concerns about contract duration and professional services revenue, the overall sentiment is positive, driven by strong software revenue growth and margin expansion.
The earnings call reflects a positive outlook with strong financial performance, particularly in EPS and billings growth. The acquisition of GroupSense and strategic U.S. expansion provide additional growth avenues, despite current budget headwinds. The company's confidence in increasing software revenue and improving margins further supports a positive sentiment. The Q&A reveals management's focus on overcoming challenges and leveraging advanced technology to displace incumbents. Overall, the positive financial results and strategic initiatives are likely to drive a stock price increase of 2% to 8% over the next two weeks.
The earnings call summary reflects strong financial performance, with significant growth in revenue, EBITDA, and gross margin. The acquisition of GroupSense enhances market reach and capabilities. The share repurchase program is a positive signal for shareholder returns. While there are some risks and uncertainties, such as regulatory issues and integration challenges, the overall sentiment is positive due to optimistic guidance and strategic initiatives. The Q&A section highlights healthy demand drivers and sequential growth expectations, further supporting a positive outlook.
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