nyte Software .(US:CGNT)2022-09-28 14:32Financial Data and Key Metrics Changes - Q2 revenue was reported at $81 million, reflecting a significant decline year-over-year and sequentially due to adverse changes in customer behavior [10][28] - The remaining performance obligation (RPO) increased to $534 million, up approximately $20 million from the end of Q1, indicating a significant backlog [11][30] - Gross margin improved to 65.1% on a non-GAAP basis, up approximately 400 basis points sequentially, primarily due to a better software mix [31] Business Line Data and Key Metrics Changes - Software revenue for Q2 was $27 million, a decline of $20.9 million year-over-year but an increase of $2.1 million sequentially [28] - Software services revenue decreased by $8.5 million year-over-year, while professional services and other revenue declined by $5.5 million year-over-year [30] Market Data and Key Metrics Changes - The company experienced longer sales cycles and delays in closing deals across all geographies, attributed to reduced funding and budget constraints faced by customers [18][19] - The company is focusing on geographical priorities, particularly the U.S. government market, which has shown resilience amid budget cuts in other regions [21][22] Company Strategy and Development Direction - The company is implementing three main initiatives: maximizing bookings in high-potential areas, reducing operating expenses to below $70 million in Q3 and below $65 million in Q4, and improving visibility for backlog deployments [21][23][24] - The management emphasized the importance of adapting to changing customer behavior and macroeconomic conditions while maintaining a focus on security solutions [20][26] Management's Comments on Operating Environment and Future Outlook - Management noted that the global economic slowdown is impacting near-term performance, but they are taking actions to focus on territories and use cases with the highest potential [26] - The company expects Q3 revenue to be similar to or lower than Q2, with Q4 revenue anticipated to increase above Q3 levels [25][36] Other Important Information - The company ended the quarter with approximately $55 million in cash and cash equivalents, with cash used in operations amounting to $18.8 million, including a one-time payment of $6.2 million related to a patent settlement [34] - The company has renegotiated some credit facility covenants to provide more future flexibility amid ongoing uncertainties [35] Q&A Session Summary Question: What is the revenue expectation for Q3 and Q4? - Management expects Q3 revenue to be similar or lower than Q2, and Q4 to be better than Q3 [38][39] Question: What is being done to convert the pipeline and drive visibility? - The company is focusing on high-potential areas and has strengthened its management team to adapt to market changes [42][44] Question: Has there been higher sales churn within the sales force? - Yes, the company has experienced higher sales churn this year compared to historical levels [51] Question: Can you provide specifics on cost reduction plans? - Cost reductions are primarily in R&D, with a focus on not impacting customer commitments or growth potential [52] Question: What is the outlook for cash burn in the next quarters? - The company aims to reduce operating expenses to under $70 million in Q3 and under $65 million in Q4, while also accelerating backlog conversion to improve cash flow [54][56]