CGNT - Earnings call transcript Q4 2020

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Matthew Frankel

Hello, everyone, and thank you for joining our first conference call as an independent public company. My name is Matthew Frankel, and I'm here with Elad Sharon, Cognyte CEO; and David Abadi, Cognyte CFO.

Before getting started, I'd like to mention that accompanying our call today is a WebEx with slides.

If you'd like to view the slides in real-time during the call, please visit the IR section of our website at cognyte.com, click on the investors tab, click on the webcast link, and select today's conference call. I would also like to draw your attention to the fact that certain matters discussed in this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions like Federal Securities Laws. based future current performance. are not and statements of guarantees forward-looking on expectation, management's are These Actual expressed by in could or results differ implied these materially forward-looking from those statements. this made Cognyte law, no obligation revise the statements required or assumes as update forward-looking except as are date The of them. call, to and by of cautioned not reliance Investors place are on these undue to forward-looking statements.

company other operating used investors have believes provides informational those useful website at financial the a to to our information included to be financial results limitations statements. or indicated before of financial and non-GAAP risks from section report as XX-F and uncertainties filed other substitute results see of release meaningful Cognyte's non-GAAP considered management XX, results in actual and investors for, but presentation [ph]. For among in annual as GAAP Non-GAAP not should measures measures, financial we other could earnings and those financial a filings believe Please differ information by XXXX because slides, from forward-looking and comparative our regarding more to investors our usage how superior supplemental peer between The detailed on materially business, our information these isolation reconciliation for it our Please period year discussion our companies. measures those of from, measures. we GAAP of measures see for assessing comparing may the one with SEC. these differ focus when in today's the today ended and cause in is is companies purposes. Form fiscal non-GAAP the discussed include on made Jan The cognyte.com measures

to Now, I the to Elad. call over like turn would

Elad Sharon

and public Matt, call welcome an first conference our everyone company. as you, to Thank independent

and addressing the with today's from our Quarter would our the and customers, company, needs of than for on accelerating for Full mechanics discussion separation came higher On bringing Year to Results, view place our securing of In we growth. we non-GAAP market slightly in Verint $XXX by revenue call QX, year and revenue software expected, begin a $XXX respectively. at at laser a to million, $XXX million, now us, was revenue outlook. of Fourth million few our non-GAAP focused the basis, behind the GAAP I With $XXX million. [ph] followed are and trends like

improved the was half of business The by higher FY global environment year, with quarter, a we impacted experienced revenue and sequential pandemic. restrictions drivers The throughout 'XX last entered software due mix. first year the every to and other growth

to first the are With year. almost strong a the we off to quarter completed, start

I'm now back of strategy and as we significant our FY it Looking software model expectations, progress to on that complete. ahead being view announce we with 'XX, made pleased

We expect rate. future growth benefit that the completion of our this transition will

to the win continue dollar well discuss eight-figure the XX%. year, strategy is will driving and driving deals, multi-million customers them call. I in revenue of we full with wins. came few In believe of platform in including competitive many our deals, and We our later margin from QX, of two our is analytics For a XX% gross our security resonating excess of software

we our the for $XX billion, review We to analytic total behind XX% demand [ph] the approximately like addressable growing our would I believe market be software. Next, security year; to market opportunity. appeasement estimate per

more organizations to detect. threats enterprise First, more complex becoming government and are security challenges and difficult face

can pick existing at to insights solutions; for high-quality structured Cognyte data, continue our new volume and unfold. based positioned diversity and fuse value. they customers and mitigate And growing delivering solutions different analytic our strength open platform, deals well leading scale reputation and third, data segmented is from Second, silos. data of there that a and across spread of before is organizations generate and is unstructured organizational threats our security from on large faster to and to sources win security

portfolio, a wide include range and ability the insights strengths open real-time for broad used a or to technological near Our real-time of generate cases. an platform, security

Our strong record, customers than is two leadership X,XXX world countries in more with brand than based more decades. a on XXX over the around track for

win. examples Let of you me with share a few why we

$XX came They them platform, deliver to deployment. a The with ability record existing our that ability customer, from modernize of threats. our are in National powers The selected a technology the expectation the order confidence them year first is example dollar in than an based They show of customers customer; our value track platform. and was revenue investigation order needed is to due looking more challenges recognizes on the consistent good This existing an and security open that Cognyte evolving, pace our of give technology reoccurring. also our to keep Security each analytics is open with analytics with had powers an the realized the QX example that that investigation. a Agency from time emerging the to XX% million they constantly to that need investigations to previous

winning due leadership are new to We also our position. customers global

solution. that order their Security of million Ministry the capabilities The second example Public by customer, a homegrown is replacing looking a from was upgrade new $X.X to a

insights, solution and and today solutions, solutions, including benefits this organizations still for use ability security significant refreshment. as that openness, over believe quick has many real-time we see opportunity Our homegrown homegrown to Cognyte. technology many a We the implement

to them with analytics and and our an believe ability our Law the with to large data reflect win achieve better multiple differentiation security Enforcement new The third to multiple connect platform. fuse from data mandate. to customer; million example silos organizational wins strategic Behind win a this customers. recognized the is is $X.X customers grow apply help silos, to cases our ability large new these need advanced used from address existing We win open another Agency this and

we to accelerating focus our have behind expanding activities growth related Now our that spin-off and leadership. the to shifted the market are us,

We with platform. very our innovation exciting market to in analytics deliver are a leader rapid well we are open positioned continue a and to

For the growth in growth improve revenue current our rate 'XX without further 'XX. and year, end expect revenue and it around FY margins FY XX% to we

Now, let results to discuss outlook our in call David to the over more QX turn me David? and detail.

David Abadi

you, Thank everyone. Elad, and hello,

IR in include Our consolidation discussion in financial [ph] of measures, today financial non-GAAP our earnings and a and will website. as non-GAAP measures release, Mark our available the GAAP our is section between mentioned

per a As finish with year expectations. we to slightly Elad mentioned, revenue had in came the as our strong that

came was XX%, up at million Non-GAAP basis million. margin in non-GAAP revenue QX $XXX points about gross $XX came For in at XXX adjusted year-over-year. and EBITDA

software During from and our demand new customer existing won driven eight seven QX, we multiple ongoing our digit analytic by for strong differentiation. and orders and

the Adjusted allocation at $XX year XXX at a of non-GAAP year-over-year. $XXX difference basis the when of compared million points million sequential XX%, methodology we gross Verint's came For Cognyte revenue, in revenue was this by Verint's came was achieving to reporting for in still quarter. year coast of driven million; up generated growth $XX $X million each part Verint. margin EBITDA Non-GAAP

FY meaningful for part 'XX, was as we year. view EPS Cognyte last in of don't As Verint

revenue a model; focused made we're investments Over to us years, to we are behind model report points last that with generated revenue completed our the up investment transition year margin growth system our this from to now We're we XXX two years expansion. pleased accelerating few have as the was software of from ago. gradual from XX% integrator a on software, last basis transition,

XX% level objective the mix approaching to of revenue. a up to software gradually Our increase is long-term

on Over the last have improvement few FY non-GAAP basis reaching nearly in points seen XX% since we a dramatic years, 'XX, a margin gross FY XXXX 'XX. basis in

in mix. with expect margins forward, gross software gradually Going improvement expected our improve our we consistent to the

ends, 'XX; for share with pleased is $XXX between and a to first growth. days started the left that and XX% of XX% FY million, quarter. I'm before There to to our current forecast Turning $XXX representing one have year-over-year couple a revenue million strong are we year QX

We of profitability EPS QX $X.XX. at with also least strong expect

growth minus the approximately year, million revenue, at For we or midpoint. the $XXX full plus reflecting XX% expect X%, year-over-year of

expect at the range. to of revenue come midpoint $X.XX in We EPS annual at the

Our to of cycle a a gradual confidence a and revenue. steady improved outlook as strong QX, in transition recurring and result to model, has due in the our software increase faster delivery

share color we me more how see with you on a little the Let year progressing.

year-over-year approximately For with revenue, expect 'XX below growth XX% we total million. over in in $XXX to XX% XX% throughout and QX, slightly of bringing QX, revenue FY increase sequential QX and QX in

fluctuation to XX.X% approximately We to margin mix. gross revenue based with be expect on quarter-to-quarter our up gross year-over-year margin

be year. For followed fiscal throughout to expenses, below sequential we slightly QX year the increases 'XX operating by QX expect

to due discussed, we full million expect of separation-related to the primarily previously for increase dis-synergies. As XX% their $XX OpEx year,

to rate above tax we For our cash taxes, expect slightly XX%. be

present weighted $X.XX of for share on 'XX a saw around increasing EPS we in full taking in calculation this $X.XX fully in Based QX, expect the effect Verint. sequentially the full total and QX, we diluted shares of QX For for of count average spin-off the assumption, QX million both, year. XX.XX from and FY

Verint, favorable a reflects security record, $XX following Our driven separation adjusted and of In a for we company. large well positioned edge we pure-play track With EBITDA and guidance analytics, journey in are XX% ahead trends. the market growth analytics year-over-year in summary, million dis-synergies. from adjusted strong excited grow normalized EPS technology, by of AI $X.XX as cutting to the spin-off addressable the or are about EBITDA,

For growth. revenue the current normalized and year, adjusted XX% EBITDA expect XX% growth we

to to that, expand over for we With Looking to execute current open line Operator? beyond expect the year, operator the questions. we margins would like and as continue growth our revenue to to hand on strategy. our the I accelerate growth

Operator

you. Thank

from now first from begin question will Instructions] [Operator Wedbush. comes our the session. Dan question-and-answer And Ives We

Daniel Ives

congrats great company. Yes, thanks. And quarter, a as standalone

can a you that of homegrown the terms as give us in you of much dynamics little Thanks. replacement some can solution there? on provide detail more of So the

Elad Sharon

you, Yes, Thank Dan, question. for the sure.

help have organizations of their system the years integrator. homegrown the organizations many with their a developed or IT over solutions So either

growing. and required, However, hard And of sophisticated, maintain, using to and even customized overtime. potential hard threats advanced with refresh, damage a up systems customer and becoming are the the a isn't also value are the abductors are for is customers unable for is to this because anymore. [ph] more cost-effective, usually innovation keep and it's systems declining technology, These more rigid, are hiding issue at it's is bigger simply the pace the better to our closed solutions

and platform our with can it and means ecosystem innovative that and pace. refreshed it our customer integrated advanced technology be can keep is So easily which security with analytics it's frequently data sources, open be

and three you to quickly. wanted who the customer customer with advanced it's one to second hope So, in data presents demonstration opportunity. gave technology. that sources still results, insights the the solutions things ability example them again with with earlier, address had a to I with the it's exactly a happy using was quickly and security cannot our replace replacing helps frame shared us I with And this situation. our being for solution new our given connect security was you. generate technology to homegrown was a the the examples, with up I We and evolving related successful that organizations to to challenges, significant this able are platform many fact homegrown

Daniel Ives

No, then, It's last question. great. great. it's the just And

to talk talk optimistic of think the and You're walk about these pipeline? Is you more conviction. and some of Thanks. through outlook? just deals. level that visibility Just -- just more when just term given just about longer that forecasts; like about color it on seeing Can 'XX getting give you pretty

Elad Sharon

to this take one? want you do David,

David Abadi

you, Yes. I it. Dan. will take Thank

we yes, strong confidence year. the -- have So for

a expect stronger QX. we First,

are like be with As to between I aiming million. $XXX million shared $XXX we to you,

and of confidence high customers the and we of industry. existing with want customers. that good we see our business on the I demand new and customer top coming level trends that increase to And a are in looking expansions, our have year. of continue from coming to about And base remind open have we discussion on customers win this our we an our of you XX% Second, for growth discussion third, our kind confidence, and

these we about year. we overall, very So this dynamics feel good

Daniel Ives

thanks. Great,

Operator

Mike comes Company. & next from from [ph] question Our Needham

Unidentified Analyst

Hey touch morning. I guys, taking question a thanks couple just to had of for quick I wanted the on. this questions

that the just behind know and from market? largely with first, had we you where the us does Are some The seeing a is maybe away you are that your the I in from and sense improving get today. that then, things spring conjunction at that; to we seeing further this as in front mentioned deal time? you're demand guys I in to affect COVID-XX, ability how better And move of wanted that these of backdrop get maybe pipeline with customers accelerate up;

Elad Sharon

Yes.

is COVID; are to COVID let working, the positive, customers way our So which and is me changing why. explain related

soul customers the in We to market, high deployment on to cycles the created insisted working COVID reason as traverse a deployment is And they be and an this is that we and everything are good us yes, remotely; cycle dependency longer. everybody making historically cycle. and continue; a -- and shorter our [ph] do security that and this can a differently on-site; shown that behave the and positive impact. And are trends and these overall COVID forced will sales it see and think created lot I the done sales for so

we was but moment tough saw sequential improvement throughout growth do FY to along position as continue everybody well. 'XX at know the quarter-over-quarter, the to had last and we've expect and this the year, related relief globally, the COVID, you -- As for year that of we QX

Unidentified Analyst

Thank question. it back And just guess to you recording, ties then, you're for I quarter I guess that. right. that most another recent as this

you'd customers upside? quicker Was drove some expected. anticipated just I And mentioned wanted well. coming actually to maybe as revenue your ability existing had upside what customers earlier think I'm you what that better certainly than I or better expected in previously that a it than came understanding to that drove [ph]? or had renewal curious, in get win than you So

David Abadi

So David. -- it's

than we QX that. the of a allow were it and So, we us demand deploy we able to there arriving had mentioned, expected, couple is as higher with more we faster mainly we with million; to execute drive and and slightly -- that what were revenue, pleased to

Unidentified Analyst

I beyond I last thinking maybe drive able guys if you I'm about revenues and could. be should have what to fiscal expectation comment it Is forward just that that the you can 'XX right, was acceleration? internally these in -- guess, with accelerate. is All provided open outlook just the are of to on question, expected platform keep evolving and have anything with among changing recognition homegrown to with recognizing or solution need up built evolve you they some threat? it go-to-market motion your guys with go they to organizations the that what an these that

Elad Sharon

Yes.

of growth the and market analytic to XX% and complex for is the more software; updates became the even we a see easier a transition faster us. year and to adoption related more crucial of allows So we faster open we security benefits model On that, and value are demand challenges growing plan to good growing deployments and And drivers is customers. over we main when security for go first opportunity analytics solutions that previously a the top at overtime. all, of for in high discussed analytics our And homegrown that discussed faster platform, maintain software overtime. very the

to driving our have customer The -- ongoing innovation, XX% more to one mentioned, we deeper comes market, from our innovation big value we the can go David as to related and about we And bringing customers, and existing of wider. business existing base. innovation doing third is are so

we differentiation value solutions expand offering, address And start to are new come us customers, the learn with every provide more go-to-market and buy So, learn for have continue going the same the of demand, they to X,XXX and of wider and we've our and growing for tends in more the more when customers. and about with and drivers the and we used them to and to develop professionals with for advanced expand; and new customers summarize, and customers, of our existing innovate growth for new doing order gain customers, to And history cases. new that. year goes we growing combination and deeper more

Unidentified Analyst

Thank cede floor. much. the you I'll very

Operator

next comes Kirk ISI. question from Our Evercore Materne from

Kirk Materne

Peter is This you. for thank in Kirk. Great, Levine

mix target? And has off fiscal wrong? can fiscal piggyback fiscal would of your how And FY know trended hit think your curious to seems expectation dissect you what 'XX what are just throughout [indiscernible] have the wrong the trends strength, might 'XX? to pipeline to like, favor like and to not Thanks. 'XX on your that for perhaps, much So upsell? comment of percentage maybe your have but prior into go you It be then how in go to would that that I shift,

David Abadi

was There few try Peter. one so like Thanks, questions let there, me and view. to by share one our take

FY improvement were over meaning So to during in our around that XX% FY 'XX, the 'XX us as from better from mix almost you time, drive into also from mix, -- trends from a with like our continue software; and profitability. can the our we to and we in 'XX result, more able sell and more we XX% 'XX allow in improved into FY software FY see this

like us but allow do a more forward the to us the As -- there, allow color? the the you the demand that from and in growth, that Has we the for more open overall, or our solutions deployed to by I question and that actually and taking the this that see is customers addressed Elad FY for way software confidence need growth was in in our question it more previous and market versus can your achieve looking in 'XX address on will the be solutions, targets. faster past. also we demand this believe repeat And

Kirk Materne

questions, quarter. different and maybe just and is relates curious that? estate; for just thank for profile it expense, No, you the And the on that's more again, sales expense real know materially you, congrats as to then, take David? Cognyte post-COVID Do fine. one And to you, your a for what see on travel marketing,

David Abadi

Thank you.

the dis-synergies perspective. to from we 'XX related IT, Taking million adjusted an $XX allow by incremental again, function. compliance that in being have will year-over-year. we that synergies these year to XX% next of FY cost the by that how part an and having lay for expect normalized grow a Due will into legal OpEx which operating to out approximately of leverage the the consideration, that spin mainly EBITDA we independence to look from us finance, as do see believe XX% we represents -- that So an OpEx

drive the positive As margin with there overall any allow see better to with that we question okay are Is gross of work margin, margins for overall and do on on organization. our customers which us and an remotely effectively more the the COVID and you follow-up benefit OpEx, impact level or that? of our is

Kirk Materne

Yes, my thank taking questions. you. Thanks for

Operator

Our comes next question [indiscernible]. from

Unidentified Analyst

drive penetration give as can into idea did function it each want hadn't? could revenue customer commented well deeper to Is from outlined I we us understand a just just it ingestion as XX% your or more customers. Thanks know clarity. I again that because customers? cases where circle orders previously are existing greater help get that have year existing for the us is of cases earlier, within better customers, you And the used to that rate? what you but platform, up I comes see penetration driving a you these from data better you your if of would you guys existing -- these can used maybe some And addressing wanted you

Elad Sharon

within technology in team also there need the and capabilities, addressing is So take specific I customers, changes, analytics expansions customer buyers, can and the and within cases to later so you And about the in is we different And data is organization. can small, go deeper growing expansions expand teams, scale, used mentioned, grow etcetera. address overtime, you then operational existing the and can some start organization can existing wider. the strategy into investigation the for consideration the address go as and a on and

So existing you see this within as is the works how customers, grow this and numbers. in well we quite can

customer what we trying always deals earlier today. we which new the small, For is, and give expand, the will the business used go can and examples and learn strategy the and sometimes that new our becomes then the to penetrate the is specific like large a start other and it way have, used customers customers, try customers, that, two not with it's customer the to That's existing more our might when we trust But solutions. means usually I case with confidence give them we win and they learn overtime. repeat and cases it's within like platform more build customer the address and address that expand; and relationship with the base. organization we and do And

Unidentified Analyst

Great. for you that. Thank

Operator

question Stifel. next Rebeck comes Our from from Brad

Brad Rebeck

we software? Great, between much. [ph] more let $XXX recent to about Thanks. similar most Should year a respect to are the be revenue the various should breakout very think or the fiscal how the With line million, items? little heavily thanks it towards you

David Abadi

The we So, assume the in of already into software is for achieve perspective, our and around would we and continuous. the the But with FY long-term revenue of the slightly to from I trend of with will that significant 'XX the software. XX%. ended I XX% able from progress -- expectation is were would to software. XX% Obviously, FY level coming as we 'XX modeling get improve

Brad Rebeck

high And maybe then, Great. level question. one

going now company? you public forward, about business As the are what Thanks. that you changes the think most a

Elad Sharon

and main I are benefits now pure-play software few analytics security you. there company, can Yes, a a so are we with share

reputation; one get well brand customers, and is that. as partners, and explaining created to from we very campaigns first a we as our vision strategy The customer response good

brand attract to our better company is talents to the with second this specific so cutting-edge align for market the leading objectives focus The that best for the the compensation the also driving of and we been on have able business And continue we and have one management help technology. this the in us with objectives. the will plans employees employer market; of

from market. very a get we feedback overall, the So good

benefits are new presents us chapter We excited our the with. spin about and very the

far. so feedback good very So,

Brad Rebeck

Excellent. Thanks very much.

Elad Sharon

Thank you.

Operator

next & Your comes question Cowen from from Company. Shaul Eyal

Shaul Eyal

And I congrats or and on you status your Elad, about Congrats quarter follow-up on some traded to analytics predictive of thinking guys. with a publicly the what front? on us performance. you. the now afternoon, publicly good that AI you wanted you're traded Thank what's can morning, Good product solutions; strategies? entity, be, you. that will entity; first M&A ask Thank a share my about David pursuing as

Elad Sharon

Yes, thank you, Shaul.

with the well first In with in security [indiscernible] start all entities that read take the I'll the becoming they We years, technologies newspapers AI. harder hide So, advantage the to as organized to have increasingly one challenges illegal the become are recent of latest shadows. in complex. detect

with is core. platform as components it's Our designed several

first intuitive patterns heavily and models; about statistical tools; actually such is to video machine real-time fusion amounts different unstructured use The equipped massive platform our sources; as for our data with and data for including example, of investigations. data learning And to is foundation analysts workflow enrich and advanced with social without many our at-scale. data able involvement. visualization have one as find configure analytics, deal customers lister and structured is component it go sources, interface, The so drag being and last able hidden tools ability The we next to data coding workflows layer and accelerate to AI and drop the a different images, need in example, in have modeling for to help our and such advanced aggregate data. travel our customers platform the and that is for to then the and [ph], data next data being -- that's is media from diversify for technologies related

and and learning and using AI security real-time produces and to machine summarize, events, real-time, to crucial insights insights and organizations. of near they the might platform analytics is where the or course, our in for predict take place; those when generating So

fragmented, security many are in security many know, capabilities, M&A; including them Regarding are is way, to course, highly about Israel, the that -- there our startups be of different and software so of there companies synergistic other the some companies by business. can second security offering question analytics the market and are you

that said We for we case professionals acquisition is big to will Having we have now we'll basis, developing us, the will opportunistically something opportunities but don't have in-house; take an again, we find decisions accordingly. by also have for on are that to we case. evaluating if fill gaps XXXX but technologies acquire and -- suddenly as about interesting we make so innovative ongoing that, is decision taking

Shaul Eyal

Thank you much. so Good luck.

Elad Sharon

Thank you, Shaul.

Operator

We at time. this have no further questions

Matthew Frankel

a Great. us look you we speaking for day. to Have you forward everyone good Well, thank to soon. joining And today.

Cognyte Software (CGNT) 1 May 212020 Q4 Earnings call transcript