nyte Software .(CGNT) - 2023 Q3 - Quarterly Report

Cognyte Q3 FYE24 Earnings Release Cognyte reported strong Q3 FYE24 results, surpassing expectations and raising its full-year outlook, fueled by strategic deal wins and AI innovations Financial Highlights Cognyte reported Q3 FYE24 results that surpassed expectations, with revenue of $79.4 million and a significant turnaround in profitability, achieving a Non-GAAP diluted EPS of $0.34 compared to a loss in the prior year. Year-to-date performance also showed improvement, though still at a net loss on a GAAP basis - The company announced third-quarter results that were ahead of expectations and raised its full-year outlook[36] Q3 FYE24 Financial Highlights (Three Months Ended October 31, 2023) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Revenue | $79,394 | $79,394 | | Gross Margin | 69.7% | 70.2% | | Diluted EPS | $0.07 | $0.34 | YTD FYE24 Financial Highlights (Nine Months Ended October 31, 2023) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Revenue | $229,713 | $229,825 | | Gross Margin | 68.8% | 69.3% | | Diluted EPS | $(0.19) | $0.02 | Management Commentary The CEO highlighted strong execution, significant deal wins driven by differentiated technology, and the potential for future growth through AI innovations. The CFO confirmed that Q3 results were ahead of expectations and noted that full-year revenue is expected to grow by approximately 10% and gross profit by over 20% on an SIS Adjusted non-GAAP basis - CEO Elad Sharon stated the company is executing well, winning significant deals due to its differentiated technology, and is well-positioned for future growth and profitability by leveraging AI innovations[38] - CFO David Abadi noted that Q3 revenue, gross margin, operating income, and Adjusted EBITDA exceeded expectations. For the full year, the company anticipates revenue growth of about 10% and gross profit growth over 20% (YoY on an SIS Adjusted non-GAAP basis)[39] Updated FYE24 Outlook Cognyte raised its full-year guidance for fiscal 2024, projecting revenue of approximately $311 million, representing about 10% year-over-year growth on an SIS Adjusted non-GAAP basis. The company now expects an adjusted EBITDA of about $8 million for the year and a non-GAAP diluted loss per share of $0.24 FYE24 Non-GAAP Outlook | Metric | Outlook | | :--- | :--- | | Revenue | $311 million at the midpoint (+/-1%) | | Diluted EPS | Loss of $0.24 at the midpoint | - Adjusted EBITDA for the full year is now expected to be about $8 million[39] - The non-GAAP outlook for FYE24 excludes expected stock-based compensation of $11.5 to $12.5 million and amortization of intangible assets of approximately $0.4 million[15][60] Consolidated Financial Statements Consolidated financial statements detail Cognyte's improved Q3 FYE24 performance, reflecting increased revenue, net income, and strengthened cash flow Consolidated Statements of Operations (Unaudited) For the three months ended October 31, 2023, Cognyte reported total revenue of $79.4 million, an increase from $71.3 million in the prior-year period. The company recorded a net income attributable to Cognyte of $5.2 million, a significant improvement from a net loss of $27.8 million in Q3 2022. For the nine-month period, revenue was $229.7 million, and the net loss was $13.0 million Statement of Operations Highlights (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $79,394 | $71,254 | $229,713 | $238,801 | | Gross Profit | $55,335 | $44,207 | $158,051 | $147,279 | | Operating Loss | $(2,775) | $(26,001) | $(15,200) | $(82,402) | | Net (Loss) Income to Cognyte | $5,223 | $(27,786) | $(12,956) | $(87,028) | | Diluted EPS | $0.07 | $(0.41) | $(0.19) | $(1.29) | Consolidated Balance Sheets As of October 31, 2023, Cognyte had total assets of $445.6 million and total liabilities of $239.1 million. Total stockholders' equity stood at $206.5 million. Key current assets include $49.6 million in cash and cash equivalents and $110.6 million in accounts receivable Balance Sheet Highlights (in thousands) | Metric | Oct 31, 2023 | Jan 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $49,594 | $34,579 | | Accounts receivable, net | $110,571 | $113,201 | | Total current assets | $261,366 | $251,724 | | Total assets | $445,594 | $443,078 | | Liabilities & Equity | | | | Total current liabilities | $206,450 | $193,856 | | Total liabilities | $239,105 | $233,304 | | Total stockholders' equity | $206,489 | $209,774 | Consolidated Statements of Cash Flows (Unaudited) For the nine months ended October 31, 2023, net cash provided by operating activities was $24.8 million, a substantial improvement from the $46.1 million used in the same period last year. Net cash used in investing activities was $9.5 million. The company ended the period with $53.8 million in total cash, cash equivalents, and restricted cash Cash Flow Summary (Nine Months Ended, in thousands) | Metric | Oct 31, 2023 | Oct 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $24,798 | $(46,137) | | Net cash used in investing activities | $(9,531) | $(13,199) | | Net cash used in financing activities | $0 | $(51,443) | | Net increase (decrease) in cash | $14,796 | $(111,262) | | Cash, cash equivalents, restricted cash at end of period | $53,840 | $46,958 | Reconciliation of GAAP to Non-GAAP Measures The company provides a detailed reconciliation from GAAP to Non-GAAP results, adjusting for items like stock-based compensation, amortization of intangibles, and restructuring expenses. For Q3 FYE24, this reconciliation transformed a GAAP operating loss of $2.8 million into a Non-GAAP operating income of $1.2 million. Adjusted EBITDA for the quarter was $4.6 million, compared to a loss of $15.4 million in the prior year Reconciliation to Adjusted EBITDA (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP Net (loss) income to Cognyte | $5,223 | $(27,786) | $(12,956) | $(87,028) | | Adjusted EBITDA | $4,623 | $(15,403) | $4,673 | $(46,706) | | Adjusted EBITDA margin | 5.8% | (21.5)% | 2.0% | (19.5)% | Reconciliation to Non-GAAP Operating (Loss) Income (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP Operating loss | $(2,775) | $(26,001) | $(15,200) | $(82,402) | | Non-GAAP operating (loss) income | $1,229 | $(19,383) | $(5,223) | $(58,897) | | Non-GAAP operating margin | 1.5% | (27.1)% | (2.3)% | (24.6)% | Reconciliation to Non-GAAP Diluted EPS | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP diluted net (loss) income per share | $0.07 | $(0.41) | $(0.19) | $(1.29) | | Non-GAAP diluted net income (loss) per share | $0.34 | $(0.25) | $0.02 | $(1.08) | Supplemental Information Supplemental information provides adjusted financial metrics, including SIS-adjusted and constant currency figures, for clearer insights into underlying business performance SIS Adjusted Non-GAAP Measures To provide a clearer comparison of ongoing business performance, the company presents SIS Adjusted Non-GAAP measures, which exclude the contribution from the Situational Intelligence Solutions (SIS) business divested on December 1, 2022. For Q3, SIS Adjusted non-GAAP revenue was $79.4 million, compared to $61.5 million in the prior year, showing strong underlying growth - SIS Adjusted Non-GAAP measures are used to provide better comparability by excluding the financial contribution of the Situational Intelligence Solutions (SIS) business, which was divested on December 1, 2022[28][33][83] SIS Adjusted Non-GAAP Revenue and Gross Profit (in thousands) | Metric | Q3 2023 | Q3 2022 (SIS Adj.) | | :--- | :--- | :--- | | Total SIS Adjusted non-GAAP revenue | $79,394 | $61,477 | | SIS Adjusted non-GAAP gross profit | $55,744 | $37,574 | | SIS Adjusted non-GAAP gross margin | 70.2% | 61.1% | Constant Currency Analysis The company provides a constant currency analysis to isolate underlying business performance from foreign exchange rate volatility. For Q3 FYE24, reported GAAP revenue growth was 11.4%, while constant currency growth was 9.9%, indicating a positive impact from currency fluctuations of 1.5% - Constant currency measures are calculated by translating current-period foreign currency results into U.S. dollars using prior-period average exchange rates to facilitate assessment of underlying business trends[57][72] Q3 Revenue Change vs. Prior Year | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Reported period-over-period revenue change | 11.4% | 11.0% | | % impact from change in foreign currency | (1.5)% | (1.5)% | | Constant currency period-over-period revenue change | 9.9% | 9.6% | Explanation of Non-GAAP Measures Management believes non-GAAP measures provide useful supplemental information by facilitating period-to-period and peer comparisons. Key adjustments include excluding stock-based compensation, amortization of acquired intangibles, restructuring costs, acquisition expenses, and certain other non-recurring items to better reflect ongoing operational performance - The company uses non-GAAP financial measures to facilitate comparison of its financial results between periods and with other software companies, and to allow investors to see key supplementary metrics used by management[24][73] - Key adjustments to GAAP measures include the exclusion of: * Revenue adjustments from fair value accounting in acquisitions * Stock-based compensation expenses * Amortization of acquired technology and other intangible assets * Acquisition expenses and restructuring costs * Separation expenses related to the spin-off from Verint * Gains or losses from business divestitures[80][54][25]