Cognyte Software Ltd. Reports Strong Q3 Earnings

Cognyte Software Ltd. ((CGNT)) has held its Q3 earnings call. Read on for the main highlights of the call.

Cognyte Software Ltd. recently held its earnings call, revealing a generally positive outlook for the company. The call highlighted strong revenue growth and increased profitability, with the company raising its full-year guidance. Despite these positive trends, challenges such as a decrease in professional service revenue and temporary disruptions in the US federal market due to a government shutdown were noted.

Strong Revenue Growth

Cognyte Software Ltd. reported a robust 13.2% year-over-year increase in revenue, reaching $100.7 million in the third quarter. This growth underscores the company’s successful strategies in expanding its market presence and enhancing its product offerings.

Significant Software Revenue Increase

The company saw a substantial increase in software revenue, which rose by 39.6% year over year, totaling $41.9 million. This significant growth in software sales highlights the increasing demand for Cognyte’s solutions and its ability to capture market share.

High Gross Margin Achievement

Cognyte achieved a non-GAAP gross margin expansion of 297 basis points year over year, reaching 73.1%. This improvement reflects the company’s operational efficiencies and its focus on high-margin products.

Improved Profitability

The company’s non-GAAP operating income nearly tripled year over year to $9 million, while adjusted EBITDA increased by 81.4% to $11.9 million. These figures indicate a strong financial position and effective cost management.

Raised Full-Year Guidance

Cognyte raised its full-year guidance, now expecting revenue of approximately $400 million, representing a 14% year-over-year growth, and adjusted EBITDA of approximately $47 million, representing a 60% growth. This optimistic outlook is driven by strong demand for its AI-powered solutions and significant customer wins.

Strong Cash Flow

The company reported strong cash flow from operations of $25 million in the third quarter, with a free cash flow of $23.2 million for the first nine months. This solid cash flow position supports Cognyte’s strategic investments and growth initiatives.

Decrease in Professional Service Revenue

Despite overall growth, professional service revenue decreased by $1.7 million from the previous year, totaling $12 million. This decline points to potential challenges in the professional services segment.

FX Impacts and Increased Tax Expenses

The weakening of the US dollar against the Israeli shekel and other currencies resulted in valuation expenses of $1.9 million. Additionally, higher tax expenses were incurred due to increased pretax income and a global tax structure.

US Federal Market Challenges

The company faced temporary disruptions in its engagements with federal agencies in the US due to a government shutdown. This situation posed challenges but is expected to be a short-term issue.

Forward-Looking Guidance

Cognyte’s forward-looking guidance remains optimistic, with expectations of approximately $400 million in revenue and $47 million in adjusted EBITDA for the full year. The company emphasized strong demand for its AI-powered solutions and highlighted significant customer wins, including a $5 million follow-on subscription with a tier-one military intelligence organization in EMEA. Additionally, Cognyte continues to expand its partnership with LexisNexis and its presence in the US market.

In summary, Cognyte Software Ltd.’s earnings call reflected a positive sentiment, driven by strong revenue and profitability growth, alongside raised full-year guidance. While challenges such as decreased professional service revenue and US federal market disruptions were acknowledged, the company’s strategic initiatives and market expansion efforts position it well for future growth.