Cognyte Software program Pronounces This fall and Fiscal Yr Ended January 31, 2021 Outcomes

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Cognyte Software Announces Q4 and Fiscal Year Ended January 31, 2021 Results

HERZLIYA, Israel, April 29, 2021 /PRNewswire/ — Cognyte Software Ltd. (NASDAQ: CGNT), a global leader in security analytics software today announced results for the three months and year ended January 31, 2021 (FYE21). 

“With the separation from Verint behind us, we are now a pure play security analytics software company laser-focused on addressing the needs of our customers and accelerating our growth. We are pleased with our fourth quarter results and the large wins from existing and new customers. With the first quarter of our new year almost completed, we are also pleased to start the year strong reflecting the momentum from our security analytics platform,” said Elad Sharon, Cognyte’s Chief Executive Officer.

Q4 Highlights

  • Revenue: $124.0 million (GAAP) and $124.6 million (non-GAAP)
  • % of Revenue from Software: 86% (up 370bps year-over-year)
  • Gross Margin: 69.8% (GAAP) and 70.9% (non-GAAP, up 400bps year-over-year)

FYE21 Highlights

  • Revenue: $443.5 million (GAAP) and $447.0 million (non-GAAP)
  • % of Revenue from Software: 85% (up 330bps year-over-year)
  • Gross Margin: 70.1% (GAAP) and 71.1% (non-GAAP, up 530bps year-over-year)

Preliminary Q1 FYE22 Results

Our non-GAAP outlook for the quarter ending April 30, 2021 is as follows:

  • Revenue: $113$115 million
  • Diluted EPS: At least $0.15

FYE22 Outlook

Our non-GAAP outlook for the year ending January 31, 2022 is as follows:

  • Revenue: $490 million with a range of +/- 2%
  • Diluted EPS: $0.80 at the midpoint of our revenue outlook

Our non-GAAP outlook for the three months ending April 30, 2021 and year ending January, 2022 excludes the following GAAP measures which we are able to quantify with reasonable certainty:

  • Amortization of intangible assets of approximately $0.5 million and $1.8 million for the three months ending April 30, 2021 and year ending January, 2022, respectively.
  • Revenue adjustments are expected to be approximately $0.5 million and $1.8 million for the three months ending April 30, 2021 and year ending January, 2022, respectively.

Our non-GAAP outlook for the three months ending April 30, 2021 and year ending January, 2022 excludes the following GAAP measures for which we are able to provide a range of probable significance:

  • Costs to complete separation of Cognyte from Verint Systems Inc. (Verint) and establish Cognyte as an independent public company of between approximately $6.5 million and $7.5 million and between approximately $7 million and $8 million for the three months ending April 30, 2021 and year ending January, 2022 respectively.
  • Stock-based compensation is expected to be between approximately $7.5 million and $8.5 million and $33 million and $36 million, for the three months ending April 30, 2021 and year ending January, 2022, respectively, assuming market prices for our common stock generally consistent with current levels.

Our non-GAAP outlook does not include the potential impact of any in-process business acquisitions that may close after the date hereof, and, unless otherwise specified, reflects foreign currency exchange rates approximately consistent with current rates.

We are unable, without unreasonable efforts, to provide a reconciliation for other GAAP measures which are excluded from our non-GAAP outlook, including the impact of future business acquisitions or acquisition expenses, future restructuring expenses, and non-GAAP income tax adjustments due to the level of unpredictability and uncertainty associated with these items.  For these same reasons, we are unable to assess the probable significance of these excluded items. While historical results may not be indicative of future results, actual amounts for the three months and year ended January 31, 2021 and 2020 for the GAAP measures excluded from our non-GAAP outlook appear in Table 2 to this press release.

Conference Call Information

We will conduct a conference call today at 8:30 a.m. ET to discuss our results for the three months and year ended January 31, 2021, outlook and long-term targets. An online, real-time webcast of the conference call and webcast slides will be available on our website at www.Cognyte.com. The conference call can also be accessed live via telephone at (800) 708-4540 (United States and Canada) and (847) 619-6397 (International) and the passcode is 50154360. Please dial in 5-10 minutes prior to the scheduled start time.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of non-GAAP financial measures presented for completed periods to the most directly comparable financial measures prepared in accordance with GAAP, please see the tables below as well as “Supplemental Information About Non-GAAP Financial Measures and Operating Metrics” at the end of this press release.

About Cognyte Software Ltd.

We are a global leader in security analytics software that empowers governments and enterprises with Actionable Intelligence for a safer world. Our open software fuses, analyzes and visualizes disparate data sets at scale to help security organizations find the needles in the haystacks. Over 1,000 government and enterprise customers in more than 100 countries rely on our solutions to accelerate security investigations and connect the dots to successfully identify, neutralize, and prevent national security, personal safety, business continuity and cyber threats. Our government customers consist of governments around the world, including national, regional, and local government agencies.  Our enterprise customers consist of commercial customers and physical security customers.

Cautions About Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Cognyte Software Ltd. These forward-looking statements are not guaranteed of future performance and they are based on management’s expectations that involve a number of known and unknown risks, uncertainties, assumptions and other important factors, any of which could cause our actual results or conditions to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause our actual results or conditions to differ materially from current expectations include, among others: uncertainties regarding the impact of changes in macroeconomic and/or global conditions, including as a result of slowdowns, recessions, economic instability, political unrest, armed conflicts, natural disasters or outbreaks of disease, such as the novel coronavirus (“COVID-19”) pandemic, as well as the resulting impact on information technology spending and government budgets in both developed countries and developing countries, on our business; risks that our customers may delay, cancel, or refrain from placing orders, refrain from renewing subscriptions or service contracts, or are unable to honor contractual commitments or payment obligations due to liquidity issues or other challenges in their budgets and business, due to the COVID-19 pandemic or otherwise; risks that continuing restrictions resulting from the COVID-19 pandemic or actions taken in response to the pandemic adversely impact our operations or our ability to fulfill orders, complete implementations, or recognize revenue; risks associated with our ability to keep pace with technological advances and challenges and evolving industry standards, to adapt to changing market potential from area to area within our markets; and to successfully develop, launch, and drive demand for new, innovative, high-quality products that meet or exceed customer needs, while simultaneously preserving our legacy businesses; risks due to aggressive competition in all of our markets, including with respect to maintaining revenue, margins, and sufficient levels of investment in our business and operations, and competitors with greater resources than we have; risks relating to the regulatory constraints to which we are subject, including our dependency on export and marketing licenses from the governments of Israel and other countries where we operate; risks relating to our ability to properly manage investments in our business and operations, execute on growth or strategic initiatives, such as our software model transition, and enhance our existing operations and infrastructure, including the proper prioritization and allocation of limited financial and other resources; risks associated with our ability to identify suitable targets for acquisition or investment or successfully compete for, consummate, and implement mergers and acquisitions, including risks associated with valuations, reputational considerations, capital constraints, costs and expenses, maintaining profitability levels, expansion into new areas, management distraction, post-acquisition integration activities, and potential asset impairments; challenges associated with selling sophisticated solutions, including with respect to longer sales cycles, more complex sales processes, and assisting customers in understanding and realizing the benefits of our solutions, as well as with developing, offering, implementing, and maintaining a broad solution portfolio; risks associated with larger orders and customer concentration, including risk of volatility of our operating results from period to period, and challenges associated with our ability to accurately forecast revenue and expenses; risks associated with a significant amount of our business coming from government customers around the world and associated procurement processes, and limitations on investor visibility due to classification or contractual restrictions; risks associated with political and reputational factors related to our business or operations, including with respect to the nature of our solutions or our Israeli identity, and our ability to maintain security clearances where required; risks that we may be unable to establish and maintain relationships with key resellers, partners, and systems integrators and risks associated with our reliance on third-party suppliers for certain components, products, or services, including companies that may compete with us or work with our competitors; risks associated with our ability to retain, recruit, and train qualified personnel in regions in which we operate, including in new markets and growth areas we may enter; risks associated with our significant international operations, including due to our Israeli operations, fluctuations in foreign exchange rates, and exposure to regions subject to political or economic instability; risk of security vulnerabilities or lapses, including cyber-attacks, information technology system breaches, failures or disruptions; risks that our products or services, or those of third-party suppliers, partners, or original equipment manufacturers which we use in or with our offerings or otherwise rely on, including third-party hosting platforms, may contain defects, develop operational problems, or be vulnerable to cyber-attacks; risks associated with the mishandling or perceived mishandling of sensitive, confidential or classified information, including personally identifiable information or other information that may belong to our customers or other third parties; risks associated with complex and changing regulatory environments relating to our operations, the products and services we offer, and/or the use of our solutions by our customers, including with respect to applicable classification and confidentiality restrictions, and data privacy and protection; risks associated with our failure to comply with anti-corruption, trade compliance, anti-money-laundering and economic sanctions laws and regulations; risks that our intellectual property rights may not be adequate to protect our business or assets or that others may make claims on our intellectual property, claim infringement on their intellectual property rights, or claim a violation of their license rights, including relative to free or open source components we may use; risks associated with our credit facilities or that we may experience liquidity or working capital issues and related risks that financing sources may be unavailable to us on reasonable terms or at all; risks associated with changing tax laws and regulations, tax rates, and the continuing availability of expected tax benefits in the countries in which we operate; risks relating to the adequacy of our existing infrastructure, systems, processes, policies, procedures, internal controls, and personnel for our current and future operations and reporting needs, including related risks of financial statement omissions, misstatements, restatements, or filing delays; risks that the spin-off does not achieve the benefits anticipated, does not qualify as a tax-free transaction, or exposes us to unexpected claims or liabilities, or that it negatively impacts our operations or stock price, including as a result of management distraction from our business or costs associated with transitioning to a standalone public company; risks associated with the agreements with Verint entered into in connection with the spin-off, including our reliance on the transition services agreement (as defined below) and our indemnification obligations to Verint; risks associated with market volatility in the price of our shares based on our performance, third-party publications or speculation, future sales or dispositions of our shares by significant shareholders or officers and directors, or factors and risks associated with actions of activist shareholders; and risks associated with different corporate governance requirements applicable to Israeli companies and risks associated with being a foreign private issuer and an emerging growth company. We assume no obligation to revise or update any forward-looking statement, except as otherwise required by law. For a detailed discussion of these risk factors, see our annual report on Form 20-F when filed and other filings we make with the SEC.

Table 1
COGNYTE SOFTWARE LTD. AND SUBSIDIARIES
Condensed Statements of Operations
(Unaudited)




Three Months Ended
January 31,


Year Ended

 January 31,

 (in thousands, except per share data)


2021


2020


2021


2020

Revenue









Total revenue


$

124,020



$

129,147



$

443,458



$

457,109











Cost of revenue









Total cost of revenue


37,413



46,124



132,669



164,005


Gross profit


86,607



83,023



310,789



293,104











Operating expenses









Research and development, net


36,528



28,252



128,705



111,297


Selling, general and administrative


49,360



44,796



162,590



153,901


Amortization of other acquired intangible assets


305



213



1,218



593


Total operating expenses


86,193



73,261



292,513



265,791


Operating income


414



9,762



18,276



27,313











Other (expense) income, net









Interest income


172



553



1,347



3,509


Interest expense


(48)



(121)



(185)



(481)


Other income (expense), net


2,043



(1,248)



5,286



(404)


Total other income (expense), net


2,167



(816)



6,448



2,624


Income before (benefit) provision for income taxes


2,581



8,946



24,724



29,937


(Benefit) provision for income taxes


(2,962)



3,609



4,414



2,567


Net income


5,543



5,337



20,310



27,370


Net income attributable to noncontrolling interest


1,199



1,715



6,107



7,179


Net income attributable to Cognyte Software Ltd.


$

4,344



$

3,622



$

14,203



$

20,191











Net income per share attributable to Cognyte Software Ltd. business of Verint Systems Inc.

Basic and diluted EPS


$

0.07



$

0.06



$

0.22



$

0.31


Ordinary shares outstanding









Basic and diluted shares


65,773



65,773



65,773



65,773


Table 2
COGNYTE SOFTWARE LTD. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)




Three Months Ended
January 31,


Year Ended
 January 31,

(in thousands, except per share data)


2021


2020


2021


2020

Revenue









Total GAAP revenue


$

124,020


$

129,147


$

443,458


$

457,109

Revenue adjustments


546


5,557


3,569


5,708

Total non-GAAP revenue


$

124,566


$

134,704


$

447,027


$

462,817










Gross profit and gross margin









Software, software service, professional service and other costs


$

35,168


$

43,190


$

124,282


$

151,693

Amortization of acquired technology


226


362


943


2,405

Stock-based compensation expenses (1)


481


1,115


2,127


2,917

Shared support expenses allocation (2)


1,538


1,457


5,317


6,990

Total GAAP cost of revenue


37,413


46,124


132,669


164,005

GAAP gross profit


86,607


83,023


310,789


293,104

    GAAP gross margin


69.8%


64.3%


70.1%


64.1%

Revenue adjustments


546


5,557


3,569


5,708

Amortization of acquired technology


226


362


943


2,405

Stock-based compensation expenses (1)


481


1,115


2,127


2,918

Acquisition expenses, net (3)


358


1


358


1

Restructuring expenses (3)


22


1


20


250

Separation expenses (6)


26



32


Non-GAAP gross profit


$

88,266


$

90,059


$

317,838


$

304,386

    Non-GAAP gross margin


70.9%


66.9%


71.1%


65.8%










Research and development, net


$

30,670


$

23,450


$

105,514


$

90,430

Stock-based compensation expenses (4)


1,325


2,058


5,621


6,298

Shared support service allocation (5)


4,533


2,744


17,570


14,569

GAAP research and development, net


36,528


28,252


128,705


111,297

   As a percentage of GAAP revenue


29.5%


21.9%


29.0%


24.3%

Stock-based compensation expenses (4)


(1,325)


(2,058)


(5,621)


(6,298)

Acquisition expenses, net (6)


(11)


(149)


(204)


(299)

Restructuring expenses (income) (6)


20


(1)


(336)


(170)

Separation expenses (6)


(123)



(123)


Other adjustments (6)


(21)



12


Non-GAAP research and development, net


$

35,068


$

26,044


$

122,433


$

104,530

   As a percentage of non-GAAP revenue


28.2%


19.3%


27.4%


22.6%










Selling, general and administrative expenses


$

23,108


$

27,882


$

82,535


$

89,205

Stock-based compensation expenses (4)


5,183


6,996


19,794


21,817

Shared support service allocation (5)


21,069


9,918


60,261


42,879

GAAP selling, general and administrative expenses


49,360


44,796


162,590


153,901

   As a percentage of GAAP revenue


39.8%


34.7%


36.7%


33.7%

Stock-based compensation expenses (4)


(5,183)


(6,992)


(19,794)


(21,813)

Acquisition expenses (income), net (6)


(1,164)


367


1,508


4,766

Restructuring expenses (6)


(832)


(89)


(2,412)


(374)

Separation expenses (6)


(8,384)


(1,575)


(19,355)


(2,204)

Other adjustments (6)


(144)


3


309


(2,731)

Non-GAAP selling, general and administrative expenses


$

33,653


$

36,510


$

122,846


$

131,545

   As a percentage of non-GAAP revenue


27.0%


27.1%


27.5%


28.4%










Operating income, operating margin and adjusted EBITDA

GAAP operating income


$

414


$

9,762


$

18,276


$

27,313

   GAAP operating margin


0.3%


7.6%


4.1%


6.0%

Revenue adjustments


546


5,557


3,569


5,708

Amortization of acquired technology


226


362


943


2,405

Amortization of other acquired intangible assets


306


213


1,218


593

Stock-based compensation expenses (4)


6,988


10,165


27,541


31,029

Acquisitions expenses (income), net (6)


1,533


(216)


(947)


(4,466)

Restructuring expenses (6)


835


91


,768


794

Separation expenses (6)


8,534


1,574


19,512


2,203

Other adjustments (6)


165


(3)


(321)


2,731

Non-GAAP operating income


$

19,547


$

27,505


$

72,559


$

68,310

Depreciation and amortization (7)


4,109


3,561


16,395


14,184

Adjusted EBITDA


$

23,656


$

31,066


$

88,954


$

82,494

Non-GAAP operating margin


15.7%


20.4%


16.2%


14.8%

  Adjusted EBITDA margin


19.0%


23.1%


19.9%


17.8%










Other income (expense) reconciliation

GAAP other income (expense), net


$

2,167


$

(816)


$

6,448


$

2,624

Change in fair value of equity investment




(3,768)


Other adjustments, net





Non-GAAP other income (expense), net(1)


$

2,167


$

(816)


$

2,680


$

2,624










Tax (benefit) provision reconciliation

GAAP (benefit) provision for income taxes


$

(2,962)


$

3,609


$

4,414


$

2,567

Effective income tax rate


(115.5)%


39.9%


17.9%


8.6%

Non-GAAP tax adjustments


(146)


11


(3,323)


7,055

Non-GAAP (benefit) provision for income taxes


$

(3,108)


$

3,620


$

1,091


$

9,622

Non-GAAP effective income tax rate


(14.3)%


13.6%


1.5%


13.6%










Net income attributable to Cognyte software Ltd.  reconciliation

GAAP net income attributable to Cognyte Software Ltd.


$

4,344


$

3,622


$

14,203


$

20,191

Revenue adjustments


546


5,557


3,569


5,708

Amortization of acquired technology


226


362


943


2,405

Amortization of other acquired intangible assets


306


213


1,218


593

Stock-based compensation expenses


6,988


10,165


27,541


31,029

Acquisition expenses (income), net (3)


1,533


(216)


(947)


(4,466)

Restructuring expenses (3)


835


91


2,768


794

Separation expenses


8,534


1,574


19,510


2,204

Other adjustments


165


(3)


(321)


2,731

Change in fair value of equity investment




(3,769)


Non-GAAP tax adjustments


146


(11)


3,323


(7,055)

Total adjustments


19,279


17,732


53,835


33,943

Non-GAAP net income attributable to Cognyte Software Ltd.  common shares


$

23,623


$

21,354


$

68,038


$

54,134


Table comparing GAAP diluted net income per common share attributable to Cognyte Software Ltd. business of Verint Systems Inc. to Non-GAAP diluted net income per common share attributable to Cognyte Software Ltd. business of Verint Systems Inc.

GAAP diluted net income per share attributable to Cognyte Software Ltd. business of Verint Systems Inc.


$

0.07


$

0.06


$

0.22


$

0.31

Non-GAAP diluted net income per share attributable to Cognyte Software Ltd. business of Verint Systems Inc.


$

0.36


$

0.32


$

1.03


$

0.82

Non-GAAP ordinary shares outstanding









Basic and diluted shares


65,773


65,773


65,773


65,773










Table of reconciliation from GAAP net income attributable to Cognyte Software Ltd. to adjusted EBITDA

GAAP net income attributable to Cognyte Software Ltd.


$

4,344


$

3,622


$

14,203


$

20,191

 As a percentage of GAAP revenue


3.5%


2.8%


3.2%


4.4%

Net income attributable to noncontrolling interest


1,199


1,715


6,107


7,179

GAAP (benefit) provision for income taxes


(2,962)


3,609


4,414


2,567

GAAP other income (expense), net


(2,167)


816


(6,448)


(2,624)

Depreciation and amortization


4,641


4,136


18,556


17,182

Revenue adjustments


546


5,557


3,569


5,708

Stock-based compensation expenses (4)


6,988


10,165


27,541


31,029

Acquisitions expenses (income), net (6)


1,533


(216)


(947)


(4,466)

Restructuring expenses (6)


835


91


2,768


794

Separation expenses (6)


8,534


1,574


19,512


2,203

Other adjustments (6)


165


(3)


(321)


2,731

Adjusted EBITDA


$

23,656


$

31,066


$

88,954


$

82,494

As a percentage of non-GAAP revenue


19.0%


23.1%


19.9%


17.8%

Table 3
COGNYTE SOFTWARE LTD. AND SUBSIDIARIES
Calculation of Change in Revenue on a Constant Currency Basis
(Unaudited)





GAAP Revenue



Non-GAAP Revenue

(in thousands)


Three Months
 Ended

Year
 Ended


Three Months
 Ended

Year
Ended

Revenue for the three months and year ended January 31, 2020


$

129,147

$

457,109


$

134,704

$

462,817

Revenue for the three months and year ended January 31, 2021


$

124,020

$

443,458


$

124,566

$

447,027

Revenue for the three months and year ended January 31, 2021 at constant currency (8)


$

123,000

$

444,000


$

124,000

$

448,000

Reported period-over-period revenue change


(4.0)%

(3.0)%


(7.5)%

(3.4)%

% impact from change in foreign currency exchange rates


(0.8)%

0.1%


(0.4)%

0.2%

Constant currency period-over-period revenue change


(4.8)%

(2.9)%


(7.9)%

(3.2)%
















For further information see “Supplemental Information About Constant Currency” at the end of this press release.

Table 4
COGNYTE SOFTWARE LTD. AND SUBSIDIARIES
Condensed Balance Sheets
(Unaudited)




January 31,

 (in thousands)


2021


2020

Assets





Current Assets





Cash and cash equivalents


$

78,570



$

201,090


Restricted cash and cash equivalents, and restricted bank time deposits


27,042



43,813


Short-term investments


4,713



6,603


Accounts receivable, net of allowance for doubtful accounts of $4.6 million and $4.1 million, respectively


175,001



180,441


Contract assets, net


20,317



28,873


Inventories


14,542



14,893


Prepaid expenses and other current assets


30,051



36,486


Total current assets


350,236



512,199


Property and equipment, net


37,595



41,579


Operating lease right-of-use assets


32,126



34,152


Goodwill


158,183



158,143


Intangible assets, net


5,299



7,868


Deferred income taxes


3,303



2,015


Other assets


42,076



49,155


 Total assets


$

628,818



$

805,111







Liabilities and equity





Current liabilities





Accounts payable


$

41,552



$

43,389


Accrued expenses and other current liabilities


91,692



85,947


Contract liabilities


127,012



143,695


Due to parent, current


38,772



7,025


Total current liabilities


299,028



280,056


Long-term contract liabilities


22,037



23,305


Operating lease liabilities


24,135



24,446


Deferred income taxes


4,049



4,732


Other liabilities


9,198



17,401


Total liabilities


358,447



349,940


Commitments and contingencies





Equity





Net parent investment


273,006



458,467


Accumulated other comprehensive loss


(15,505)



(13,923)


Total Cognyte business of Verint Systems Inc. equity


257,501



444,544


Noncontrolling interest


12,870



10,627


Total equity


270,371



455,171


Total liabilities and equity


$

628,818



$

805,111


Table 5
COGNYTE SOFTWARE LTD. AND SUBSIDIARIES
Condensed Statements of Cash Flows
(Unaudited)




Year Ended
 January 31,

(in thousands) 


2021


2020

Cash flows from operating activities





Net income


$

20,310



$

27,370


Adjustments to reconcile net income to net cash provided by operating activities





Depreciation and amortization


22,519



17,325


Provision for doubtful accounts


1,850



1,355


Stock-based compensation, excluding cash-settled awards


27,423



31,028


(Benefit) provision for deferred income taxes


(2,195)



5,603


Non-cash losses (gains) on derivative financial instruments, net


95



(395)


Change in fair value of contingent consideration for business combinations


(3,665)



(5,392)


Other non-cash items, net


(2,964)



1,747


Changes in operating assets and liabilities, net of effects of business combinations:





Accounts receivable


1,496



(24,140)


Contract assets


8,442



17,658


Inventories


(1,142)



(392)


Prepaid expenses and other assets


5,119



7,032


Accounts payable and accrued expenses


8,668



1,307


Contract liabilities


(16,770)



9,321


Other liabilities


210



(20,847)


Other, net


1,915



(1,394)


Net cash provided by operating activities


71,311



67,186







Cash flows from investing activities





Cash paid for business combinations, including adjustments, net of cash acquired




(18,693)


Purchases of property and equipment


(14,199)



(13,691)


Purchases of investments


(48,585)



(29,099)


Maturities and sales of investments


51,174



53,527


Settlements of derivative financial instruments not designated as hedges


213



212


Cash paid for capitalized software development costs


(5,132)



(7,638)


Other investing activities


1,863




Change in restricted bank time deposits, including long-term portion


31,084



(14,159)


Net cash provided by (used in) investing activities


16,418



(29,541)







Cash flows from financing activities





Net transfers to parent


(189,047)



(72,057)


Repayments of parent borrowings


(7,025)



(6,000)


Dividends paid to noncontrolling interest


(4,176)



(4,253)


Payments of contingent consideration for business combinations (financing portion)


(4,877)



(3,419)


Other financing activities


(492)



(244)


Net cash used in financing activities


(205,617)



(85,973)


Foreign currency effects on cash, cash equivalents, restricted cash, and restricted cash equivalents


(864)



(985)


Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents


(118,752)



(49,313)


Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period


233,409



282,722


Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period


$

114,657



$

233,409







Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period

Cash and cash equivalents


$

78,570



$

201,090


Restricted cash and cash equivalents included in restricted cash and cash equivalents, and restricted bank time deposits


25,904



24,513


Restricted cash and cash equivalents included in other assets


10,183



7,806


Total cash, cash equivalents, restricted cash, and restricted cash equivalents


$

114,657



$

233,409


Footnotes 


(1)

Represents Verint stock-based compensation expenses applicable to cost of revenue, allocated to Cognyte based on specific identification where possible, with the remainder being allocated on the basis of revenue as a relevant measure, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our business.

(2)

Represents the portion of Verint shared support expenses applicable to cost of revenue, allocated to Cognyte on the basis of revenue as a relevant measure, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our businesses.

(3)

Represents the portion of Verint acquisition expenses, net and restructuring expenses applicable to cost of revenue, allocated to Cognyte based on specific identification where possible, with the remainder being allocated on the basis of revenue as a relevant measure, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margins of our business.

(4)

Represents Verint stock-based compensation expenses applicable to research and development, net and selling, general and administrative, allocated to Cognyte based on specific identification where possible, with the remainder being allocated on the basis of revenue as a relevant measure, which we believe provides a reasonable approximation for purposes of understanding the relative non-GAAP operating margins of our business.

(5)

Represents a portion of Verint shared support expenses, including general and administrative shared services acquisition expenses, net and restructuring expenses, separation expenses and other adjustments, allocated to Cognyte based on specific identification where possible, with the remainder being allocated on the basis of revenue as a relevant measure, which we believe provides a reasonable approximation for purposes of understanding the relative non-GAAP operating margin of our business.

(6)

Represents the portion of Cognyte’s acquisition expenses, net, restructuring expenses, separation expenses and other adjustments, allocated to Cognyte based on specific identification where possible, with the remainder being allocated on the basis of revenue as a relevant measure, which we believe provides a reasonable approximation for purposes of understanding the relative GAAP and non-GAAP gross margin of our business.

(7)

Represents certain depreciation and amortization expenses, which are otherwise included in Cognyte’s non-GAAP operating income, allocated to Cognyte based on specific identification where possible, with the remainder being allocated on the basis of revenue as a relevant measure, which we believe provides a reasonable approximation for purposes of understanding the relative adjusted EBITDA of our business.

(8)

Revenue for the three months and year ended January 31, 2021 at constant currency is calculated by translating current-period GAAP or non-GAAP foreign currency revenue (as applicable) into U.S. dollars using average foreign currency exchange rates for the three months and year ended January 31, 2021 rather than actual current-period foreign currency exchange rates.

Cognyte Software Ltd. and Subsidiaries
Supplemental Information About Non-GAAP Financial Measures and Operating Metrics

The press release includes reconciliations of certain financial measures not prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), consisting of non-GAAP revenue, non-GAAP software and software services revenue, non-GAAP professional services and other revenue, GAAP and non-GAAP gross profit and gross margins, non-GAAP software and software services gross profit, non-GAAP professional services and other gross profit, GAAP and non-GAAP research and development, net, GAAP and non-GAAP selling, general and administrative expenses, GAAP and non-GAAP operating income and operating margins, GAAP and non-GAAP other income (expense), net, GAAP and non-GAAP provision (benefit) for income taxes and non-GAAP effective income tax rate, GAAP and non-GAAP net income attributable to our common shares, adjusted EBITDA and adjusted EBITDA margin. The tables above include a reconciliation of each non-GAAP financial measure for completed periods presented in this press release to the most directly comparable GAAP financial measure.

We believe these non-GAAP financial measures, used in conjunction with the corresponding GAAP measures, provide investors with useful supplemental information about the financial performance of our business by:

  • facilitating the comparison of our financial results and business trends between periods, by excluding certain items that either can vary significantly in amount and frequency, are based upon subjective assumptions, or in certain cases are unplanned for or difficult to forecast
  • facilitating the comparison of our financial results and business trends with other software companies who publish similar non-GAAP measures, and
  • allowing investors to see and understand key supplementary metrics used by our management to run our business, including for budgeting and forecasting, resource allocation, and compensation matters.

We also make these non-GAAP financial measures available because investors have informed us that they find this supplemental information useful.

Non-GAAP financial measures should not be considered in isolation as substitutes for, or superior to, comparable GAAP financial measures. The non-GAAP financial measures we present have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, and these non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures. These non-GAAP financial measures do not represent discretionary cash available to us to invest in the growth of our business, and we may in the future incur expenses similar to or in addition to the adjustments made in these non-GAAP financial measures. Other companies may calculate similar non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

Our non-GAAP financial measures are calculated by making the following adjustments to our GAAP financial measures:

Revenue adjustments. We exclude from our non-GAAP revenue the impact of fair value adjustments required under GAAP relating to software and software services revenue and professional services and other revenue acquired in a business acquisition, which would have otherwise been recognized on a stand-alone basis. We believe that it is useful for investors to understand the total amount of revenue that we and the acquired company would have recognized on a stand-alone basis under GAAP, absent the accounting adjustment associated with the business acquisition. We believe that our non-GAAP revenue measure helps management and investors understand our revenue trends and serves as a useful measure of ongoing business performance.

Amortization of acquired technology and other acquired intangible assets. When we acquire an entity, we are required under GAAP to record the fair values of the intangible assets of the acquired entity and amortize those assets over their useful lives. We exclude the amortization of acquired intangible assets, including acquired technology, from our non-GAAP financial measures because they are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. We also exclude these amounts to provide easier comparability of pre- and post-acquisition operating results.

Stock-based compensation expenses. We exclude stock-based compensation expenses related to restricted stock awards, stock bonus programs, bonus share programs, and other stock-based awards from our non-GAAP financial measures. We evaluate our performance both with and without these measures because stock-based compensation is typically a non-cash expense and can vary significantly over time based on the timing, size and nature of awards granted, and is influenced in part by certain factors which are generally beyond our control, such as the volatility of the price of our common stock. In addition, measurement of stock-based compensation is subject to varying valuation methodologies and subjective assumptions, and therefore we believe that excluding stock-based compensation from our non-GAAP financial measures allows for meaningful comparisons of our current operating results to our historical operating results and to other companies in our industry.

Acquisition expenses, net. In connection with acquisition activity (including with respect to acquisitions that are not consummated), we incur expenses, including legal, accounting, and other professional fees, integration costs, changes in the fair value of contingent consideration obligations, and other costs.  Integration costs may consist of information technology expenses as systems are integrated across the combined entity, consulting expenses, marketing expenses, and professional fees, as well as non-cash charges to write-off or impair the value of redundant assets.  We exclude these expenses from our non-GAAP financial measures because they are unpredictable, can vary based on the size and complexity of each transaction, and are unrelated to our continuing operations or to the continuing operations of the acquired businesses.

Restructuring expenses. We exclude restructuring expenses from our non-GAAP financial measures, which include employee termination costs, facility exit costs, certain professional fees, asset impairment charges, and other costs directly associated with resource realignments incurred in reaction to changing strategies or business conditions. All of these costs can vary significantly in amount and frequency based on the nature of the actions as well as the changing needs of our business and we believe that excluding them provides easier comparability of pre- and post-restructuring operating results.

Separation expenses. On December 4, 2019, Verint announced its intention to separate into two independent publicly traded companies: Cognyte Software Ltd., which consists of Verint’s Cyber Intelligence Solutions business, and Verint Systems Inc., which consists of its Customer Engagement Business.  We incurred significant expenses to separate the aforesaid businesses, including third-party advisory, accounting, legal, consulting, and other similar services related to the separation as well as costs associated with the operational separation from Verint, including those related to human resources, brand management, real estate, and information technology to the extent not capitalized. These costs are incremental to our normal operating expenses and incurred solely as a result of the separation transaction. Accordingly, we are excluding these separation expenses from our non-GAAP financial measures in order to evaluate our performance on a comparable basis.

Other adjustments. We exclude from our non-GAAP financial measures rent expense for redundant facilities, gains on change in fair value of equity investment, gains or losses on sales of property, gains or losses on settlements of certain legal matters, and certain professional fees unrelated to our ongoing operations.

Non-GAAP income tax adjustments. We exclude our GAAP provision (benefit) for income taxes from our non-GAAP measures of net income attributable to Cognyte Software Ltd., and instead include a non-GAAP provision for income taxes, determined by applying a non-GAAP effective income tax rate to our income before provision for income taxes, as adjusted for the non-GAAP items described above.  The non-GAAP effective income tax rate is generally based upon the income taxes we expect to pay in the reporting year. Our GAAP effective income tax rate can vary significantly from year to year as a result of tax law changes, settlements with tax authorities, changes in the geographic mix of earnings including acquisition activity, changes in the projected realizability of deferred tax assets, and other unusual or period-specific events, all of which can vary in size and frequency. We believe that our non-GAAP effective income tax rate removes much of this variability and facilitates meaningful comparisons of operating results across periods. Our non-GAAP effective income tax rate for the year ended January 31, 2021 was 2%, and for the year ended January 31, 2020 was 14%. We evaluate our non-GAAP effective income tax rate on an ongoing basis and it can change from time to time. Our non-GAAP income tax rate can differ materially from our GAAP effective income tax rate.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before interest expense, interest income, income taxes, depreciation expense, amortization expense, revenue adjustments, restructuring expenses, acquisition expenses, and other expenses excluded from our non-GAAP financial measures as described above. We believe that adjusted EBITDA is also commonly used by investors to evaluate operating performance between companies because it helps reduce variability caused by differences in capital structures, income taxes, stock-based compensation accounting policies, and depreciation and amortization policies. Adjusted EBITDA is also used by credit rating agencies, lenders, and other parties to evaluate our creditworthiness.

Supplemental Information About Constant Currency

Because we operate on a global basis and transact business in many currencies, fluctuations in foreign currency exchange rates can affect our consolidated U.S. dollar operating results. To facilitate the assessment of our performance excluding the effect of foreign currency exchange rate fluctuations, we calculate our GAAP and non-GAAP revenue, cost of revenue, and operating expenses on both an as-reported basis and a constant currency basis, allowing for comparison of results between periods as if foreign currency exchange rates had remained constant.  We perform our constant currency calculations by translating current-period foreign currency results into U.S. dollars using prior-period average foreign currency exchange rates or hedge rates, as applicable, rather than current period exchange rates. We believe that constant currency measures, which exclude the impact of changes in foreign currency exchange rates, facilitate the assessment of underlying business trends.

Unless otherwise indicated, our financial outlook for revenue, operating margin, and diluted earnings per share, which is provided on a non-GAAP basis, reflects foreign currency exchange rates approximately consistent with rates in effect when the outlook is provided.

We also incur foreign exchange gains and losses resulting from the revaluation and settlement of monetary assets and liabilities that are denominated in currencies other than the entity’s functional currency. Our financial outlook for diluted earnings per share includes net foreign exchange gains or losses incurred to date, if any, but does not include potential future gains or losses.

SOURCE Cognyte

Related Links

http://www.cognyte.com