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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 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.
Revenue $100.7 million, up 13.2% year-over-year, driven by ongoing demand for software solutions.
Software Revenue $41.9 million, an increase of $11.9 million or 39.6% year-over-year, driven by perpetual licenses, appliances, and some term-based subscription licenses.
Software Services Revenue $46.9 million, up $1.6 million from last year, mainly from support contracts and cloud-based SaaS subscriptions.
Total Software Revenue $88.7 million, a year-over-year increase of 17.9%, representing 88.1% of total revenue.
Professional Service Revenue $12 million, a decrease of $1.7 million year-over-year, attributed to a shift in revenue mix.
Recurring Revenue $47.5 million, representing 47.1% of total revenue, driven by support contracts and term-based/SaaS subscription offerings.
Non-GAAP Gross Margin 73.1%, expanding by 297 basis points year-over-year, reflecting revenue growth and efficiencies related to COGS.
Gross Profit $73.6 million, an increase of 18% year-over-year, demonstrating customer willingness to pay a premium for differentiated technology.
Non-GAAP Operating Income $9 million, nearly triple the $3.4 million generated in Q3 last year, reflecting operational leverage.
Adjusted EBITDA $11.9 million, 81.4% higher than the $6.6 million generated in Q3 last year, showcasing operational efficiency.
Non-GAAP Net Income $2 million, resulting in non-GAAP EPS of $0.03, driven by increased profitability.
GAAP Net Loss $3.4 million compared to a loss of $2.6 million in Q3 last year, primarily due to increased tax expenses and FX impacts.
Cash Flow from Operations $25 million, reflecting strong cash generation and disciplined working capital management.
Free Cash Flow $23.2 million, showcasing efficient cash utilization.
Deferred Revenue $117.9 million, indicating robust short- and long-term contract liabilities.
RPO (Remaining Performance Obligations) $576.6 million, up from $567.6 million last year, validating business strength and resilience.
Short-term RPO $358.9 million, providing solid visibility into revenue over the next 12 months.
Billings $107.7 million, an increase of 2.9% year-over-year, reflecting healthy business activity.
AI-powered investigative and Decision Intelligence solutions: Revenue grew in the mid-teens, operating income grew significantly faster, and cash flow from operations was strong. The company secured several major deals and expansions, including a $5 million follow-on subscription agreement with a Tier 1 military intelligence organization in EMEA and multimillion-dollar contract renewals with national intelligence customers.
Decision intelligence platform: The platform fuses data across silos, uncovering hidden insights that allow agencies to resolve identities and relationships, detect hybrid behavior and criminal patterns, and enable faster, higher confidence decisions. It is recognized for predictive analytics and intelligence platforms for improved decision-making.
U.S. market expansion: The company is expanding its partner ecosystem, strengthening its team, and increasing field activities. A new partnership with LexisNexis Risk Solutions is progressing well, with joint engagements and structured solution training delivered to their sales organization.
Military intelligence and NATO countries: Increased interest from military intelligence organizations, including NATO countries, reflects the growing relevance of the company's capabilities to multi-domain defense missions.
Revenue and profitability growth: Revenue for Q3 was $100.7 million, up 13.2% year-over-year. Software revenue increased by 39.6% year-over-year, and non-GAAP gross margin expanded by 297 basis points to 73.1%. Non-GAAP operating income nearly tripled year-over-year, and adjusted EBITDA grew by 81.4%.
Cash flow and financial leverage: Strong cash flow from operations of $25 million in Q3, with free cash flow of $23.2 million. The company has no debt and a cash position of $106.6 million.
Raising full-year guidance: The company raised its full-year revenue outlook to $400 million, representing 14% year-over-year growth, and adjusted EBITDA to $47 million, representing 60% year-over-year growth.
Long-term targets: The company aims to achieve revenue of $500 million, gross margin of 73%, and adjusted EBITDA margin of greater than 20% by the fiscal year ending January 31, 2028.
Regulatory and Compliance Risks: The company operates in sectors like law enforcement, national security, and military intelligence, which are subject to stringent regulatory and compliance requirements. Any failure to meet these could adversely impact operations and reputation.
Currency Exchange Risks: The weakening of the U.S. dollar against the Israeli shekel and other currencies led to valuation expenses of $1.9 million in Q3, highlighting exposure to foreign exchange fluctuations.
Revenue Dependency on Perpetual Licenses: A significant portion of revenue comes from perpetual licenses, which, while showing recurring behavior, may lack the predictability and stability of subscription-based models.
Geopolitical Risks: The company’s operations and customer base in regions like EMEA and NATO countries expose it to geopolitical uncertainties that could disrupt business activities.
Data Complexity and Integration Challenges: The company operates in a highly complex data environment with massive volumes and fragmented systems. Failure to effectively manage and integrate this data could hinder operational efficiency and customer satisfaction.
Macroeconomic Environment: The global macroeconomic environment, including currency fluctuations and regional revenue mix, has impacted tax expenses and could continue to pose challenges.
Revenue Expectations: Cognyte has raised its full-year revenue guidance for fiscal year 2026 to approximately $400 million, representing a year-over-year growth of approximately 14%. The company also expects revenue to reach about $500 million by the fiscal year ending January 31, 2028.
Profitability Projections: Adjusted EBITDA for fiscal year 2026 is projected to be approximately $47 million, representing a year-over-year growth of approximately 60%. The company aims for an adjusted EBITDA margin of greater than 20% by fiscal year 2028.
Gross Margin: Annual non-GAAP gross margin for fiscal year 2026 is expected to be 72.3%, reflecting an improvement of 130 basis points over the last fiscal year. By fiscal year 2028, gross margin is projected to be approximately 73%.
Market Trends and Demand: The company anticipates healthy and growing demand for its AI-driven investigative and decision intelligence solutions, particularly in the U.S. market and among military intelligence organizations, including NATO countries.
Strategic Partnerships: Cognyte is expanding its partner ecosystem, including a new partnership with LexisNexis Risk Solutions, which is expected to strengthen its traction with federal and state local stakeholders in the U.S.
Recurring Revenue: Recurring revenue is expected to enhance visibility and support long-term growth, driven by support contracts, term-based subscriptions, and SaaS offerings.
Capital Allocation: The company plans to maintain sufficient working capital for operations while evaluating opportunities for targeted acquisitions and returning capital to shareholders.
Share Repurchase Program: During Q3, we continued to execute our share repurchase program, which the Board approved in July 2025, repurchasing approximately 152,000 ordinary shares for a total of about $1.3 million.
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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