NASDAQ:CGNT Cognyte Software Q4 2024 Earnings Report $9.78 0.00 (0.00%) Closing price 04:00 PM EasternExtended Trading$8.70 -1.08 (-11.08%) As of 04:25 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Cognyte Software EPS ResultsActual EPS-$0.28Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ACognyte Software Revenue ResultsActual Revenue$83.69 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ACognyte Software Announcement DetailsQuarterQ4 2024Date4/9/2024TimeN/AConference Call DateTuesday, April 9, 2024Conference Call Time8:30AM ETUpcoming EarningsCognyte Software's Q1 2026 earnings is scheduled for Tuesday, June 17, 2025, with a conference call scheduled on Tuesday, June 10, 2025 at 12:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Earnings HistoryCompany ProfilePowered by Cognyte Software Q4 2024 Earnings Call TranscriptProvided by QuartrApril 9, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognite 4th Quarter Fiscal Year 20 24 Earnings Conference Call. After the speakers' remarks, we will conduct a question and answer session. Please note that today's conference may be recorded. Operator00:00:17I would now like to hand the conference over to your speaker, host Dean Ridlawn, Head of Investor Relations. Please go ahead. Speaker 100:00:25Thank you, operator. Hello, everyone. I'm Dean Ridlun, Cognite's Head of Investor Relations. Thank you for joining us today. I'm here with Elad Shiram, Cognite's CEO and David Abadi, Cognite's CFO. Speaker 100:00:38Before getting started, I would like to mention that accompanying our call today is a presentation. If you'd like to view these slides in real time during the call, please visit the Investors section of our website at cognite.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 on this call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward looking statements are based on management's current expectations and are not guarantees of future performance. Speaker 100:01:21Actual results could differ materially from those expressed in or implied by these forward looking statements. The forward looking statements are made as of the date of this call and except as required by law, Cognite assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward looking statements. For a more detailed discussion of how these and other risks, uncertainties could cause Cognite's actual results to differ materially from those indicated in these forward looking statements, please see our annual report on Form 20 F for the fiscal year ended January 31, 2023 and January 31, 2024, which we expect to file today and other filings we make with the SEC. The financial measures discussed today include non GAAP measures. Speaker 100:02:12We believe investors focus on non GAAP financial measures in comparing results between periods and among our peer companies that publish similar non GAAP measures. Please see today's presentation slides, our earnings release and the Investors section of our website at cognite.com for a reconciliation of non GAAP financial measures to GAAP measures. Non GAAP financial information should not be considered in isolation from, as a substitute for, or superior to GAAP financial information, but is included because management believes it provides meaningful information about the financial performance of our business and is useful to investors for informational and comparative purposes. The non GAAP financial measures that the company uses have limitations and may differ from those used by other companies. Now, I'd like to turn the call over to Allat. Speaker 200:03:05Thank you, Dean. Welcome everyone to our Q4 conference call. The Q4 was a strong finish to productivity for Cognite. Market remains stabilized and continue to improve as bad actors utilize new ways to conduct their business and the need for advanced technology and actionable intelligence continues to grow. We executed well in fiscal 2024 delivering top line growth of approximately 11% and we entered the New Year with an improving momentum that is supported by strong and short and long term RPOs, which give us confidence in our outlook. Speaker 200:03:38Importantly, we have reached an inflection point where we are growing gross profit more rapidly than our revenue and we expect fiscal 2025 to be a year of operating leverage. To be clear, we will be investing in R and D and our North America expansion efforts to accelerate future growth, but the pace of our operating expense growth is expected to be slower than our revenue ramp, leading to improved profitability. For fiscal 2024, we profitability. For fiscal 2020 4, we generated non GAAP revenue of $313,500,000 and increased our SaaS adjusted non GAAP gross profit by more than $39,000,000 on $30,000,000 in increased revenue. Our improving gross profit, expense management and growing operating leverage enabled our 3rd consecutive quarter of positive adjusted EBITDA at $4,300,000 In fact, we delivered $9,000,000 positive adjusted EBITDA for the full year, along with $35,000,000 of positive cash from operations and $25,000,000 of free cash flow. Speaker 200:04:39Cognite is again generating operating income and we expect not just to maintain our profitability, but meaningfully expand it in the next year. We believe we now have a stable platform to execute and expect the coming year to be one of further operational improvements as we aim to build on this strong foundation to deliver sustainable and profitable growth. During Q4, we continued to win deals with both new and existing customers who recognize the strength of our innovative technology and Cognite's ability to deliver value. Looking at the full year, we signed contracts with 29 new customers, which is up 70% year over year. These new customers present a meaningful opportunity to drive growth. Speaker 200:05:23In most cases, new customers start small and we believe that our land and exchange strategy will drive incremental revenue growth, profitability and cash flow over time. As we look across our addressable markets, North America represents a meaningful netting opportunity for expansion. As previously shared, we are allocating resources to increase our presence in North America. These investments have already started to drive results with several important wins over the past fiscal year. Our strategy to start with Staten Local has been successful as our new customers are pleased with the value our solutions deliver and have been providing references to potential new customers throughout the region. Speaker 200:06:03Regarding federal customers, we are working with an established partner to penetrate this market, and we believe that we have the right sales approach and superior technology to allow us to win. Initial progress in North America has reinforced our confidence that our strategy is sound and we have increased our sales efforts further to leverage this momentum. We believe we'll be able to win more new customers and simultaneously increase wallet share with our existing customers over time. We continue to innovate and deliver solutions that we believe demonstrate our technological leadership and generate unique value for our customers. We have a lengthy track record of delivering powerful investigative analytics solutions to hundreds of customers around the globe. Speaker 200:06:46Our customers view us as domain experts, and we have decades long relationships with many customers. Our advanced technology, including innovative analytics and AI, allows faster and more effective investigations by fusing data at scale, creating digital twins and detecting patterns, relationships and other hidden insights that would be nearly impossible to find otherwise. This helps prioritize risk and maximize the productivity of investigators and decision makers, enabling faster decision making and creating incremental value for our customers in important missions. Our investigative analytics solutions are sold to national security, law enforcement, national intelligence and other organizations to enable them to perform more effective investigations. We believe customer references and field trials are very effective ways for us to win deals with both new and existing customers. Speaker 200:07:43The first win I would like to highlight is for more than $20,000,000 with an existing national security customer for its mission to combat terrorism. We recently released a new version of our solution with advanced and differentiated capabilities. These capabilities solve challenges brought on by emerging technologies that create new needs for our customers. The customer recognizes the value we deliver and continues to select our solutions to support their evolving needs. We believe you won because of the demonstrated superior performance of our advanced technology. Speaker 200:08:15The second win is for approximately $10,000,000 from an existing National Intelligence customer to address broader security threats. This is an additional win from this customer that is highly satisfied with our solutions they are using for other use cases. For this use case, we were able to demonstrate the effectiveness of our solution through field trials. The 3rd win is with a new national intelligence customer to help them safeguard their forces. The deal is for approximately $3,000,000 Previously, we sold solutions to another agency in the country, and these agencies served as a reference for us, affirming both the performance and the value our solutions generate. Speaker 200:08:55This strong reference played a significant role in our ability to sign this new deal. The customer has already deployed their new solution and it is generating value for them. I would now like to discuss what's driving demand. Customers view Cognite as a strategic trusted partner providing innovative solutions that help them to improve the speed, accuracy and success rate of their investigations and make timely decisions. In general, customers range from organizations that are focused on relatively small geographies, like law enforcement agencies, all the way up to security and intelligence agencies that are responsible for combating threats on a national level. Speaker 200:09:36Our customers are dealing with a wide variety of challenges. The level of sophistication of bad actors continues to increase as they leverage technology to harder activities better. It has become increasingly difficult to connect entities to their digital footprint. In addition, the volume and diversity of data our customers are working with has grown dramatically. Our customers face a challenging situation. Speaker 200:09:58More digital data in more places, much of it is unstructured, makes investigating bad actors more difficult. Cognite addresses this challenge using advanced analytics and AI enabled solutions to analyze multiple data streams to create a holistic picture of Bad Actor's digital footprint. These new emerging and evolving challenges, coupled with increased geopolitical unrest, requires our customers to continue investing in the technology to keep them ahead of these threats. We continue to leverage R and D to bring innovations to our customers so that we can maintain our differentiation. Cognite utilizes advanced AI capabilities to rapidly analyze the various desperate and growing data assets to enable our customers to make quick decisions and execute important missions. Speaker 200:10:48We believe the strength of our technology, together with our domain expertise in investigative analytics, will continue to enhance the value we provide to our customers, increase our differentiation and drive demand. The technologies that Atos are utilizing continue to evolve rapidly. For example, advancements in Gen AI and cryptocurrency have added significant complexities for our customers. GenAI has provided bad actors with the ability to create fake identities and generate harmful content on open source channels. Customers using our solutions can investigate and reveal with high confidence the potential identity of the bad actor and better understand the intent and risk of its actions. Speaker 200:11:30Similarly, the use of cryptocurrency has made it easier for bad actors to transact anonymously. Crypto requires no physical space and it can be swiftly transferred across borders without currency controls, regulations or other barriers, making it an ideal asset for illegal transactions. Our Decision Intelligence platform enables authorities to construct a picture of suspects, organizations, companies and financial account involved. Ultimately, this picture allows authorities to limit the ability of organized criminal groups to fund their operations. These examples illustrate the continually evolving landscape our customers need to address. Speaker 200:12:10We expect these trends to continue to generate demand for our solutions and drive long term growth. Turning to our outlook for FY 'twenty five. Demand for our solutions is solid and we entered the year with a very strong short term RPO. We expect to drive operating leverage this fiscal year and at the same time, we are investing and advancing our capabilities and our go to market infrastructure with the aim of creating sustainable and profitable long term growth. We are expecting revenue for fiscal 2025 to be $340,000,000 plus or minus 2%, representing approximately 8.5 percent year over year growth at the midpoint. Speaker 200:12:50We also expect gross profit to go faster than revenue. As a result of continued expansion in our gross margin, we expect gross profit to grow by more than 10% year over year. Given the leverage in our financial model, we expect adjusted EBITDA for the year to be about $19,000,000 more than double what we've generated in fiscal 2024, reflecting our ongoing efforts to drive margin expansion. David will provide more detailed guidance during his remarks. To summarize, we believe the market is healthy. Speaker 200:13:24Our customers continue to face significant growing and evolving challenges across many use cases and look to us for solutions that help them accelerate investigations, make decisions faster and mitigate a wide variety of threats. Cognite is well established as domain expert and a trusted partner. Our customers frequently tell us that our solutions significantly improve their results, enabling them to effectively perform the missions and make the world safer. Our established long term customer relationships continue to be a significant asset for us. We are pleased with our execution and financial results for the Q4 and full year, and we believe Cognite is well positioned for sustainable growth and continuing improvement in profitability. Speaker 200:14:06Before I turn the call over to David, I want to take a moment to thank Cognite Board of Director members, Kamichi Lo and Sveen Nagan, for their significant contributions to Cognite leadership and their strong commitment to our mission over the years. And I would like to welcome Sarit Sagif and Ron Shwili, 2 accomplished executives to our Board. Sarit is a seasoned executive with deep financial and software industry experience in publicly traded companies. Ron brings extensive industry knowledge, including relevant experience from the Israeli Defense Forces, where he was Head of Research Division specializing in the fields of advanced communications, cyber and AI and Head of an Elite Technology Unit. I'm confident that Ron and Sarit will each provide important additional strength to our Board. Speaker 200:14:53Now let me turn the call over to David to provide more details about our results and fiscal 2025 outlook. David? Speaker 300:15:01Thank you, Elad, and hello, everyone. We delivered 4th quarter financial results that exceeded our expectations, reflecting stabilized market demand and solid execution. With a combination of highly differentiated solutions, healthy demand and the large and lower customer base, we were able to overachieve our expectation each quarter in fiscal 2024 and we entered fiscal 2025 with positive momentum. We ended the year with a strong balance sheet and a solid foundation for profitable growth. Our cash balance increased significantly during the year, primarily due to the $34,600,000 of cash flow from operations and $25,500,000 of free cash flow we generated during FY 2024. Speaker 300:15:51At the end of the year, our cash balance was 83.3 $1,000,000 and we had no outstanding debt. During Q4, we extended our credit facility and we now have $65,000,000 available to borrow until the end of January 2026. Revenue for the full year was $313,500,000 an increase of approximately 11% year over year. The vast majority of the revenue growth was driven by $28,000,000 increase in software revenue. Our software revenue was 89% of total revenue, close to our long term target of 90%. Speaker 300:16:35Recurring revenue for the full year was $168,000,000 representing 54% of total revenue. Gross margin for the year was 69.2%, up about 6 50 basis points year over year And full year gross profit grew twice as fast as revenue and was $217,000,000 an increase of 22% year over year. The main driver for our gross profit improvement are the value our customer see in our innovative technology, our competitive differentiation and improved cost structure. As Elad mentioned, we continue to win significant deals from both existing and new customers, reflecting the demand for and the value of our cutting edge investigative analytics solutions. During fiscal 2024, we won 29 new customers, an increase of 12 new customers compared to last year. Speaker 300:17:39Let me now share with you how we perform against each of our major KPIs. Our short term RPO continues to be strong, a result of healthy demand for our solution and deals we have won. We ended the year with a short term RPO of 302 $500,000 Total RPO at the end of Q4 was $591,900,000 As a reminder, RPO or remaining performance obligations represent contracted revenue that is expected to be recognized as revenue in future periods. Q4 revenue grew by 17.6% year over year and was $83,700,000 Our software revenue in Q4 grew by 14.9% year over year and was $73,800,000 We were also able to improve our gross margin significantly. Q4 gross margin was 69%, an improvement of more than 4 20 basis points year over year. Speaker 300:18:57Our gross profit continued to grow meaningfully faster than revenue. In Q4, gross profit was up 25% year over year. We've been focused on executing our goals to improve our financial model further and drive margin expansion. The combination of revenue growth, better margins and effective cost structure drove improved profitability. During Q4, we delivered $4,300,000 of adjusted EBITDA, bringing full year adjusted EBITDA to $9,000,000 We have delivered positive adjusted EBITDA for each of the last three quarters and we expect to continue delivering positive adjusted EBITDA going forward. Speaker 300:19:46All the metrics I have discussed so far are on SAS adjusted non GAAP basis. For fiscal 2025, we expect full year revenue of approximately $340,000,000 plus or minus 2%. This present approximately 8.5% year over year growth at the midpoint of the revenue range. We believe that our strong short term RPO of $302,500,000 and the positive demand environment support this outlook. We also believe that the seasonality of our revenue will be similar to previous years. Speaker 300:20:25We expect Q1 revenue to be slightly below the Q4 level we are reporting today and to increase sequentially each quarter throughout the year. We believe that our outlook of top line growth and continuing improvement in our gross margin will drive more than 10% year over year gross profit growth. We expect the non GAAP gross margin to improve year over year and to be about 70.5%, an improvement of 130 basis points year over year. Gross margin may fluctuate between quarters based on our revenue mix. For the full year, we expect our non GAAP operating expenses to grow meaningfully slower than revenue and be approximately $233,000,000 an increase of about 5%. Speaker 300:21:20Our quarterly OpEx may fluctuate slightly throughout the year. Because of the leverage we have in our model, we expect adjusted EBITDA to be about $19,000,000 more than doubled compared to last year. We expect our cash taxes to be about $10,000,000 and non controlling minority interest to be about $5,000,000 As a result, we expect annual EPS loss to come in at 0.13 dollars at the midpoint of the revenue range. For share count, we assume about 72,000,000 weighted average fully diluted shares in FY 2025. Turning to cash flow. Speaker 300:22:04In a typical year, cash from operation is similar to adjusted EBITDA. This year, we plan to generate about $34,000,000 of cash from operation, significantly higher than the expected adjusted EBITDA. We have recently extended our lease agreement in our headquarter facility in Israel for an additional 10 years. We decided to renovate and change it to a more open work environment and reduce the amount of space we occupy. The renovation is expected to drive an incremental CapEx investment of about $6,000,000 and will result in future OpEx savings. Speaker 300:22:46We also expect additional proceeds of about $5,000,000 from the divestiture of SIS related to price adjustment. For the full year, we expect a total CapEx net of SAS expected proceeds of approximately $12,000,000 To summarize, we executed well during FY 2024 and produced strong results. The market has stabilized and new and existing customers recognized our advanced solutions and the values we generate for them. We continue to add capabilities and increase the value of our solution delivered to our customers by leveraging the latest technologies including AI. As a result, we expect FY 2025 to be a year of continued growth, significant profitability improvement and strong cash flow from operations. Speaker 300:23:43We believe we are well positioned for sustainable growth and have leverage in our model, so we can generate additional improvement in profitability and cash flow in future years. With that, I would like to end the call over to the operator to open the line for questions. Operator? Thank Operator00:24:12you. Our first question comes from Mike Sicos with Needham. Your line is open. Speaker 400:24:20Great. Thank you, guys. Thanks for taking the questions here. I think the first question I wanted to ask you about was with respect to this past quarter or the year actually. I know the company said that you landed 29 new customers, which is up 70% year over year, which is a great statistic. Speaker 400:24:40Just trying to see, are these new customers when they land, are they actually landing larger or has the initial land remains relatively unchanged if I look at customers coming to Cognex this year versus the customers who landed with Cognite last year? Speaker 200:25:01Hi, Mike. So, yes, it's a good number of new customers for the year. Maybe I'll give you some more color. It's a variety of customer types. It's coming from different areas, law enforcement, national security, national intelligence. Speaker 200:25:14Also, geographic wise, it's spread globally. So it's a good indication. The demand across the world is healthy. Usually, new customers start small, and this is the case also now. We had one large deal last year with a new customer of more than $20,000,000 but the other deals, most of them are small and actually grow over time. Speaker 200:25:39And this is actually the land and expand strategy that we are following, acquiring new customers, starting small with either few use cases and relatively limited capacity. And when they see the value, they go with us with expansions, upgrade, more functionality. And the wallet share is usually growing over the years. And this is the case also here. Speaker 400:26:06That's great to hear. And if I could just build on that comment around the land and expand. I know that you guys have the in your slide deck, those 3 customers that you're citing to are existing customers who decided to renew or increase their spend with Cognite. I just think it might be helpful, but let's say for that national security customer who signed over a $20,000,000 deal, Is there any way you could provide some additional color as far as what the deal size was before that? We're seeing for the $10,000,000 national intelligence deal that you guys signed? Speaker 400:26:42Like are these customers expanding at a rate of is it 3% a year? Is it 5% a year? Just trying to get a sense of how quickly they're expanding their usage of Cognite over time when they come to renew with you. Speaker 200:26:58Yes. So maybe I'll give you some more color about each one of them and then I'll answer the quantification side because quantification side is quite difficult because varying a lot between one customer to the other with one one lead to the other. But the first customer actually faced new technology that came in their territory and created more data that they need to address, which they didn't have the capabilities before. And given that we have this solution and this customer is with us for many years, actually more than 2 decades, they came to us and they actually upgraded their capabilities with the new solution. And this happened a lot over the years with this customer. Speaker 200:27:42The second one is related to a use case. It's a border control solution for an existing customer that we had before. Actually, we sold already to this customer for border control also, but actually they have large borders and different concerns and different challenges in different areas of the border. And they actually expanded with capability that they didn't have before for a different border challenge. And the last one is actually a result of reference of a existing customer that worked with us, was very happy and actually was a very strong reference for us to another organization in the same country. Speaker 200:28:29About the quantification, it's very difficult to quantify because it might be that customers start very large like the other one that I mentioned earlier, dollars 20,000,000 plus new customer that can fit into the capacity and functionality for a few years and not upgrading or it could be small deals that can come and grow quickly. So it really varies between one deal to the other, between one customer to the other. So statistics is not something that would be helpful here. And also, I believe that given that we have hundreds of customers in many countries and that we are able to actually engage with customers frequently and understand their current and future needs, it help us a lot to be prepared with the technology they need in order to upgrade and address their new challenges, which happened in one of the examples I gave earlier. So land and expand is very important for us. Speaker 400:29:37Great. Thank you for that. And then just one final question if I could, but I'm just trying to get a better understanding. I know that you guys gave some great color around CRPO exiting fiscal 2024. If I look at the fiscal 2025 revenue guidance that we have, this outlook, It looks like there's a decent amount of incremental revenue you guys are looking to add in this coming year in comparison to the CRPO growth. Speaker 400:30:05And I just wanted to get a better understanding of what's driving the confidence in driving that incremental dollar to Cognite above and beyond the CRPO balance that we have today? Speaker 200:30:19Actually the coverage of the RPO, the short term RPO for the year is similar to last year. So it's not far from what it was before in terms of the coverage. And this gives us high confidence that we can deliver on the outlook and also we have the confidence given that we have the mix of the deals in the RPO that we are going to see improved profitability. So the confidence level in our outlook is high. Speaker 400:30:48Well, if I could just push back on that for one second, but if we go back a year ago, you guys Cognite had a CRPO balance of $281,000,000 and then guided the full year to $300,000,000 in revenue. So you're talking about $20,000,000 increase. And I look at where we are today, we have $303,000,000 or so in CRPO and then a guide of $340,000,000 So the incremental dollars above and beyond the CRPO balance has gone up from $20,000,000 to almost $40,000,000 if I look at the guidance that we have today. And I'm just trying to get a better understanding of, again, that doubling of the incremental dollars above the CRPO balance. Does that make sense? Speaker 400:31:30I just want to make sure I'm clear on that. Speaker 300:31:34Yes. So if you look at the previous current RPO of the $280,000,000 versus the initial guidance of the $300,000,000 we were like in that period in a different environment from our perspective. During this year, we saw significant demand and we saw that the RPO is growing quarter over quarter, which first increase our confidence and second allow us to increase the guidance over the year. When you look at next year, Speaker 200:32:03we are Speaker 300:32:04starting the year with $302,500,000 of RPO, short term RPO and guiding $340,000,000 which is from a coverage perspective, it's the same percentage that you will see very similar percentage versus the $280,000,000 and the $213,000,000 that we actually guided. The main difference that we have, if you compare this year versus last year, is that over the last few quarter, we work closely with our customers and we know that our short term RPO is very strong and allow us to predict in a good way where we're going to land. And actually we are very pleased Speaker 200:32:45in the last from Speaker 300:32:46the last few quarters that we were able also to overachieve quarter over quarter. Is that understood your question? Speaker 400:32:54No, it does. It does. I really do appreciate the incremental color from both you and Elad. So thank you very much. I'll turn it over to other analysts on the line. Speaker 400:33:03Thank you. Speaker 300:33:03Thank you. Speaker 500:33:04Thanks, Mike. Operator00:33:06Thank you. Our next question comes from Shaul Eyal with TD Securities. Your line is open. Speaker 600:33:14Thank you. Hi, good afternoon, guys. Congrats on the ongoing consistent outperformance. My question is around AI, Gen AI, which has been the topic de jure in recent quarters. Elad, in your prepared remarks, you did mention latest AI development as a driver for the market and the company. Speaker 600:33:34Can you maybe double click on this point, maybe provide us with some insights and how should we be thinking about Gen AI impacting Cognite's near and long term? Thank you. Speaker 200:33:49Sure. Hi, Sharon. So AI is becoming more important for customers over time. And actually, it's a race. And maybe it's important that we understand that it's a race between our customers who are trying to make the world safer and the bad guys who are trying to hide better. Speaker 200:34:07So if you look on the bad guys, they're using GenAI and advanced technology to hide their identities. I gave an example earlier in the call about Gen AI and using fake entities and cryptocurrency that actually they use in order to anonymize who they are. And actually, this makes our customers' challenges much more complicated and difficult to address. As if you want to put your hands on the bad guys or investigate them, you need first to know who they are. And this is one challenge that is growing over time. Speaker 200:34:47On the other hand, our customers, they have more data coming in, structured and unstructured from different sources. And in order for them to be able to actually unhide, uncover hidden insights, they need more capabilities in the analytics and AI areas in order for them to be able in high probability to identify who is actually the identity behind something that happens. So it's a race between those 2. And it's important to remind everyone that Air has been part of our solutions for quite a long time. We view it as an integral part of our present and future product. Speaker 200:35:37And it's important to note that actually when we implement AI into our solution, we implement it into the process and the workflow of our customers. So it's part of the overall investigation process. It's not a standalone solution, but it's part of the workflow our customer is using, which is highly important. And also some of our customers or most of our customers are government customers and they have a unique environment. So we feed the AI into the environment. Speaker 200:36:09So we give them actually a holistic benefit of using our AI technology. So we will leverage AI to continually generate incremental value for our customers. For this purpose, we have a dedicated AI research team that we established long ago. And that's all they're focused on, to give more value out of the existing data sets that customers have in order to be able to unhide insights in a much quicker and accurate manner. And you view it as one of the demand drivers for the short and for the long term. Speaker 200:36:44It's something that is evolving over time. Speaker 600:36:47Thank you for that. Appreciate it. Speaker 500:36:50Thanks, John. Speaker 300:36:51Thank Operator00:36:56you. Our next question comes from Peter Levine with Evercore. Your line is open. Speaker 500:37:03Great. Thanks guys for taking my question. Maybe just one follow-up to that AI question. Given the privacy of your customers, the governments you work with, are there any restrictions in terms of maybe the data pools that you can pull from? Just curious how you guys navigate that given the secrecy of some of your customers? Speaker 200:37:26Yes. So I want to remind you that we do not provide managed services to our customers. And the data customers have is their own data. It's not data that we deliver to them. So given that they are government customers and that they are regulated customers in their countries, it's their responsibility to put their hands on the data that they are allowed to and do the investigation process themselves without our interference. Speaker 200:37:55So we are not exposed to customers' data. Speaker 500:38:00Okay. And then if you think about Is Speaker 200:38:02there a revenue there? Speaker 500:38:04Yes. Can you hear me? Speaker 200:38:07Yes. Yes, please. Speaker 500:38:09And then maybe if you think about the guidance, let me help us what's baked in there. Obviously, 17 net new customers in fiscal 2025. What are the assumptions for fiscal 2025? I'm sorry, 2017 for fiscal 2024 and then if you think about fiscal 2025, what are your assumptions, meaning is it more of an upsell motion? Do you still need to are you assuming that you're going to be hitting, call it, net new customer growth north of 2017 versus what you saw in 2024? Speaker 500:38:39So just give us an idea of kind of the assumptions behind the guide and what that entails? Speaker 200:38:48Yes. So I mean, I said you asked about this in the direction of the guidance. So if you look at the guidance, the guidance is built primarily on the existing RPO. So we are not relying much on new customers for the guidance. But if you look at existing new customers, we do have investments in order to accelerate growth over time, including acquiring new customers. Speaker 200:39:17One example is the U. S. Market that we are focusing on. Actually, most of the customers that we'll acquire, they will be new customers. I mentioned earlier in the call that we focus on state and local first and started recently with the federal. Speaker 200:39:34So we do expect new customers to lend for us. And also, as I mentioned earlier about the land and expand strategy, we expect those customers to stay with us for quite a long time and continue and buy from us again and again. Actually, I can tell you that I was in the U. S. In January this year meeting customers. Speaker 200:39:57And I can tell you that we already have follow on order from customer after the meeting and actually one customer that already put a second deal with us. So it's important for us to continue and win new customers and we are focused on that primarily in the U. S. And if you think about the expansion into the U. Speaker 500:40:19S, is that direct? Is that through partners? Help us understand the investments that you're making today to expand further in the U. S. Thank you. Speaker 200:40:30Sure. So for this we started with the standard local. We started direct. And actually, we have a sales team a local sales team with everything he needs, including demo and POC capabilities and marketing efforts and participating relevant conferences. And the investment given that it's a penetration mode, the investment in sales efforts in the U. Speaker 200:40:55S. Is proportional to the current business level. As a federal, we are using established partner who has the relevant clearance and market access and know how and relationships with relevant federal customers. So state and local is primarily direct and federal is primarily by an established partner that we have. Speaker 500:41:22Great. Thank you for the color. Speaker 200:41:27Sure. Thanks, Peter. Operator00:41:32Thank you. Our next question is a follow-up from Mike Sicos with Needham and Company. Your line is open. Speaker 400:41:39Hey, not a follow-up question here, more of a comment, just to make sure everyone was clear, at least based on what I heard and management, if you guys, a lot of David just sanity check the numbers I have on my side because I know Peter had referenced 17 incremental new customers. Just for perspective and the numbers I have and I know we're all digesting this in real time, you added 29 new customers in fiscal 2024, which is up from 12 in fiscal 2023. And so there's a 70% year on year increase from 12% to 29% from fiscal 2023 to fiscal 24, is that correct? Speaker 300:42:17It is from 17 to 29. So 12 new and increment From 17% to 29%. Speaker 200:42:2512% more, which is up 70%. Yes. Speaker 400:42:28Got it. Thank you for clarifying. I appreciate that. Speaker 500:42:32Sure. No problem. Operator00:42:34Thank you. There are no further questions at this time. Speaker 200:42:37I'd like Operator00:42:37to turn the call back over to Dean Ridlawn for any closing remarks. Speaker 100:42:43Thank you, Michelle, and thank you everyone for joining us on today's call. We will be attending several conferences in May and hope to speak with some of you then. Should you have any questions in the meantime, please feel free to reach out to me and we look forward to speaking with you again next quarter. Thank you.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCognyte Software Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K) Cognyte Software Earnings HeadlinesCognyte 2025 Threat Landscape Report Reveals Global Trends in Cyberattacks, Ransomware and Stolen CredentialsApril 10, 2025 | businesswire.comCognyte Software Unveils Agenda for Virtual Analyst & Investor DayApril 7, 2025 | tipranks.com$2 Trillion Disappears Because of Fed's Secretive New Move$2 trillion has disappeared from the US government's books. The reason why is a new, secretive move being carried out by the Fed that has nothing to do with lowering or raising interest rates... but could soon have an enormous impact on your wealth.April 29, 2025 | Stansberry Research (Ad)Cognyte Announces Agenda for Virtual Analyst and Investor Day on April 8April 7, 2025 | businesswire.comNeedham Sticks to Their Hold Rating for Cognyte Software (CGNT)April 4, 2025 | markets.businessinsider.comCognyte Software (CGNT) Defies Expectations with Spectacular Revenue SurgeApril 4, 2025 | markets.businessinsider.comSee More Cognyte Software Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cognyte Software? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cognyte Software and other key companies, straight to your email. Email Address About Cognyte SoftwareCognyte Software (NASDAQ:CGNT) provides an investigative analytics software to governments and enterprises worldwide. Its Actionable Intelligence for a Safer World, an open software designed to help governments and enterprises accelerate and enhance the effectiveness of investigations. The company offers network intelligence analytics, threat intelligence analytics, decision intelligence analytics, and operational intelligence analytics solutions. Its solutions are designed to support various use cases and support a range of users, including data analysts, investigation managers, and security operations center operators, as well as operational field teams. In addition, the company provides customer support, professional, and integration services. Its government customers include national, regional, and local government agencies. Cognyte Software Ltd. was incorporated in 2020 and is headquartered in Herzliya, Israel.View Cognyte Software ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings Automatic Data Processing (4/30/2025)Equinix (4/30/2025)KLA (4/30/2025)Meta Platforms (4/30/2025)Microsoft (4/30/2025)QUALCOMM (4/30/2025)Aflac (4/30/2025)Allstate (4/30/2025)Caterpillar (4/30/2025)Canadian Pacific Kansas City (4/30/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognite 4th Quarter Fiscal Year 20 24 Earnings Conference Call. After the speakers' remarks, we will conduct a question and answer session. Please note that today's conference may be recorded. Operator00:00:17I would now like to hand the conference over to your speaker, host Dean Ridlawn, Head of Investor Relations. Please go ahead. Speaker 100:00:25Thank you, operator. Hello, everyone. I'm Dean Ridlun, Cognite's Head of Investor Relations. Thank you for joining us today. I'm here with Elad Shiram, Cognite's CEO and David Abadi, Cognite's CFO. Speaker 100:00:38Before getting started, I would like to mention that accompanying our call today is a presentation. If you'd like to view these slides in real time during the call, please visit the Investors section of our website at cognite.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 on this call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward looking statements are based on management's current expectations and are not guarantees of future performance. Speaker 100:01:21Actual results could differ materially from those expressed in or implied by these forward looking statements. The forward looking statements are made as of the date of this call and except as required by law, Cognite assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward looking statements. For a more detailed discussion of how these and other risks, uncertainties could cause Cognite's actual results to differ materially from those indicated in these forward looking statements, please see our annual report on Form 20 F for the fiscal year ended January 31, 2023 and January 31, 2024, which we expect to file today and other filings we make with the SEC. The financial measures discussed today include non GAAP measures. Speaker 100:02:12We believe investors focus on non GAAP financial measures in comparing results between periods and among our peer companies that publish similar non GAAP measures. Please see today's presentation slides, our earnings release and the Investors section of our website at cognite.com for a reconciliation of non GAAP financial measures to GAAP measures. Non GAAP financial information should not be considered in isolation from, as a substitute for, or superior to GAAP financial information, but is included because management believes it provides meaningful information about the financial performance of our business and is useful to investors for informational and comparative purposes. The non GAAP financial measures that the company uses have limitations and may differ from those used by other companies. Now, I'd like to turn the call over to Allat. Speaker 200:03:05Thank you, Dean. Welcome everyone to our Q4 conference call. The Q4 was a strong finish to productivity for Cognite. Market remains stabilized and continue to improve as bad actors utilize new ways to conduct their business and the need for advanced technology and actionable intelligence continues to grow. We executed well in fiscal 2024 delivering top line growth of approximately 11% and we entered the New Year with an improving momentum that is supported by strong and short and long term RPOs, which give us confidence in our outlook. Speaker 200:03:38Importantly, we have reached an inflection point where we are growing gross profit more rapidly than our revenue and we expect fiscal 2025 to be a year of operating leverage. To be clear, we will be investing in R and D and our North America expansion efforts to accelerate future growth, but the pace of our operating expense growth is expected to be slower than our revenue ramp, leading to improved profitability. For fiscal 2024, we profitability. For fiscal 2020 4, we generated non GAAP revenue of $313,500,000 and increased our SaaS adjusted non GAAP gross profit by more than $39,000,000 on $30,000,000 in increased revenue. Our improving gross profit, expense management and growing operating leverage enabled our 3rd consecutive quarter of positive adjusted EBITDA at $4,300,000 In fact, we delivered $9,000,000 positive adjusted EBITDA for the full year, along with $35,000,000 of positive cash from operations and $25,000,000 of free cash flow. Speaker 200:04:39Cognite is again generating operating income and we expect not just to maintain our profitability, but meaningfully expand it in the next year. We believe we now have a stable platform to execute and expect the coming year to be one of further operational improvements as we aim to build on this strong foundation to deliver sustainable and profitable growth. During Q4, we continued to win deals with both new and existing customers who recognize the strength of our innovative technology and Cognite's ability to deliver value. Looking at the full year, we signed contracts with 29 new customers, which is up 70% year over year. These new customers present a meaningful opportunity to drive growth. Speaker 200:05:23In most cases, new customers start small and we believe that our land and exchange strategy will drive incremental revenue growth, profitability and cash flow over time. As we look across our addressable markets, North America represents a meaningful netting opportunity for expansion. As previously shared, we are allocating resources to increase our presence in North America. These investments have already started to drive results with several important wins over the past fiscal year. Our strategy to start with Staten Local has been successful as our new customers are pleased with the value our solutions deliver and have been providing references to potential new customers throughout the region. Speaker 200:06:03Regarding federal customers, we are working with an established partner to penetrate this market, and we believe that we have the right sales approach and superior technology to allow us to win. Initial progress in North America has reinforced our confidence that our strategy is sound and we have increased our sales efforts further to leverage this momentum. We believe we'll be able to win more new customers and simultaneously increase wallet share with our existing customers over time. We continue to innovate and deliver solutions that we believe demonstrate our technological leadership and generate unique value for our customers. We have a lengthy track record of delivering powerful investigative analytics solutions to hundreds of customers around the globe. Speaker 200:06:46Our customers view us as domain experts, and we have decades long relationships with many customers. Our advanced technology, including innovative analytics and AI, allows faster and more effective investigations by fusing data at scale, creating digital twins and detecting patterns, relationships and other hidden insights that would be nearly impossible to find otherwise. This helps prioritize risk and maximize the productivity of investigators and decision makers, enabling faster decision making and creating incremental value for our customers in important missions. Our investigative analytics solutions are sold to national security, law enforcement, national intelligence and other organizations to enable them to perform more effective investigations. We believe customer references and field trials are very effective ways for us to win deals with both new and existing customers. Speaker 200:07:43The first win I would like to highlight is for more than $20,000,000 with an existing national security customer for its mission to combat terrorism. We recently released a new version of our solution with advanced and differentiated capabilities. These capabilities solve challenges brought on by emerging technologies that create new needs for our customers. The customer recognizes the value we deliver and continues to select our solutions to support their evolving needs. We believe you won because of the demonstrated superior performance of our advanced technology. Speaker 200:08:15The second win is for approximately $10,000,000 from an existing National Intelligence customer to address broader security threats. This is an additional win from this customer that is highly satisfied with our solutions they are using for other use cases. For this use case, we were able to demonstrate the effectiveness of our solution through field trials. The 3rd win is with a new national intelligence customer to help them safeguard their forces. The deal is for approximately $3,000,000 Previously, we sold solutions to another agency in the country, and these agencies served as a reference for us, affirming both the performance and the value our solutions generate. Speaker 200:08:55This strong reference played a significant role in our ability to sign this new deal. The customer has already deployed their new solution and it is generating value for them. I would now like to discuss what's driving demand. Customers view Cognite as a strategic trusted partner providing innovative solutions that help them to improve the speed, accuracy and success rate of their investigations and make timely decisions. In general, customers range from organizations that are focused on relatively small geographies, like law enforcement agencies, all the way up to security and intelligence agencies that are responsible for combating threats on a national level. Speaker 200:09:36Our customers are dealing with a wide variety of challenges. The level of sophistication of bad actors continues to increase as they leverage technology to harder activities better. It has become increasingly difficult to connect entities to their digital footprint. In addition, the volume and diversity of data our customers are working with has grown dramatically. Our customers face a challenging situation. Speaker 200:09:58More digital data in more places, much of it is unstructured, makes investigating bad actors more difficult. Cognite addresses this challenge using advanced analytics and AI enabled solutions to analyze multiple data streams to create a holistic picture of Bad Actor's digital footprint. These new emerging and evolving challenges, coupled with increased geopolitical unrest, requires our customers to continue investing in the technology to keep them ahead of these threats. We continue to leverage R and D to bring innovations to our customers so that we can maintain our differentiation. Cognite utilizes advanced AI capabilities to rapidly analyze the various desperate and growing data assets to enable our customers to make quick decisions and execute important missions. Speaker 200:10:48We believe the strength of our technology, together with our domain expertise in investigative analytics, will continue to enhance the value we provide to our customers, increase our differentiation and drive demand. The technologies that Atos are utilizing continue to evolve rapidly. For example, advancements in Gen AI and cryptocurrency have added significant complexities for our customers. GenAI has provided bad actors with the ability to create fake identities and generate harmful content on open source channels. Customers using our solutions can investigate and reveal with high confidence the potential identity of the bad actor and better understand the intent and risk of its actions. Speaker 200:11:30Similarly, the use of cryptocurrency has made it easier for bad actors to transact anonymously. Crypto requires no physical space and it can be swiftly transferred across borders without currency controls, regulations or other barriers, making it an ideal asset for illegal transactions. Our Decision Intelligence platform enables authorities to construct a picture of suspects, organizations, companies and financial account involved. Ultimately, this picture allows authorities to limit the ability of organized criminal groups to fund their operations. These examples illustrate the continually evolving landscape our customers need to address. Speaker 200:12:10We expect these trends to continue to generate demand for our solutions and drive long term growth. Turning to our outlook for FY 'twenty five. Demand for our solutions is solid and we entered the year with a very strong short term RPO. We expect to drive operating leverage this fiscal year and at the same time, we are investing and advancing our capabilities and our go to market infrastructure with the aim of creating sustainable and profitable long term growth. We are expecting revenue for fiscal 2025 to be $340,000,000 plus or minus 2%, representing approximately 8.5 percent year over year growth at the midpoint. Speaker 200:12:50We also expect gross profit to go faster than revenue. As a result of continued expansion in our gross margin, we expect gross profit to grow by more than 10% year over year. Given the leverage in our financial model, we expect adjusted EBITDA for the year to be about $19,000,000 more than double what we've generated in fiscal 2024, reflecting our ongoing efforts to drive margin expansion. David will provide more detailed guidance during his remarks. To summarize, we believe the market is healthy. Speaker 200:13:24Our customers continue to face significant growing and evolving challenges across many use cases and look to us for solutions that help them accelerate investigations, make decisions faster and mitigate a wide variety of threats. Cognite is well established as domain expert and a trusted partner. Our customers frequently tell us that our solutions significantly improve their results, enabling them to effectively perform the missions and make the world safer. Our established long term customer relationships continue to be a significant asset for us. We are pleased with our execution and financial results for the Q4 and full year, and we believe Cognite is well positioned for sustainable growth and continuing improvement in profitability. Speaker 200:14:06Before I turn the call over to David, I want to take a moment to thank Cognite Board of Director members, Kamichi Lo and Sveen Nagan, for their significant contributions to Cognite leadership and their strong commitment to our mission over the years. And I would like to welcome Sarit Sagif and Ron Shwili, 2 accomplished executives to our Board. Sarit is a seasoned executive with deep financial and software industry experience in publicly traded companies. Ron brings extensive industry knowledge, including relevant experience from the Israeli Defense Forces, where he was Head of Research Division specializing in the fields of advanced communications, cyber and AI and Head of an Elite Technology Unit. I'm confident that Ron and Sarit will each provide important additional strength to our Board. Speaker 200:14:53Now let me turn the call over to David to provide more details about our results and fiscal 2025 outlook. David? Speaker 300:15:01Thank you, Elad, and hello, everyone. We delivered 4th quarter financial results that exceeded our expectations, reflecting stabilized market demand and solid execution. With a combination of highly differentiated solutions, healthy demand and the large and lower customer base, we were able to overachieve our expectation each quarter in fiscal 2024 and we entered fiscal 2025 with positive momentum. We ended the year with a strong balance sheet and a solid foundation for profitable growth. Our cash balance increased significantly during the year, primarily due to the $34,600,000 of cash flow from operations and $25,500,000 of free cash flow we generated during FY 2024. Speaker 300:15:51At the end of the year, our cash balance was 83.3 $1,000,000 and we had no outstanding debt. During Q4, we extended our credit facility and we now have $65,000,000 available to borrow until the end of January 2026. Revenue for the full year was $313,500,000 an increase of approximately 11% year over year. The vast majority of the revenue growth was driven by $28,000,000 increase in software revenue. Our software revenue was 89% of total revenue, close to our long term target of 90%. Speaker 300:16:35Recurring revenue for the full year was $168,000,000 representing 54% of total revenue. Gross margin for the year was 69.2%, up about 6 50 basis points year over year And full year gross profit grew twice as fast as revenue and was $217,000,000 an increase of 22% year over year. The main driver for our gross profit improvement are the value our customer see in our innovative technology, our competitive differentiation and improved cost structure. As Elad mentioned, we continue to win significant deals from both existing and new customers, reflecting the demand for and the value of our cutting edge investigative analytics solutions. During fiscal 2024, we won 29 new customers, an increase of 12 new customers compared to last year. Speaker 300:17:39Let me now share with you how we perform against each of our major KPIs. Our short term RPO continues to be strong, a result of healthy demand for our solution and deals we have won. We ended the year with a short term RPO of 302 $500,000 Total RPO at the end of Q4 was $591,900,000 As a reminder, RPO or remaining performance obligations represent contracted revenue that is expected to be recognized as revenue in future periods. Q4 revenue grew by 17.6% year over year and was $83,700,000 Our software revenue in Q4 grew by 14.9% year over year and was $73,800,000 We were also able to improve our gross margin significantly. Q4 gross margin was 69%, an improvement of more than 4 20 basis points year over year. Speaker 300:18:57Our gross profit continued to grow meaningfully faster than revenue. In Q4, gross profit was up 25% year over year. We've been focused on executing our goals to improve our financial model further and drive margin expansion. The combination of revenue growth, better margins and effective cost structure drove improved profitability. During Q4, we delivered $4,300,000 of adjusted EBITDA, bringing full year adjusted EBITDA to $9,000,000 We have delivered positive adjusted EBITDA for each of the last three quarters and we expect to continue delivering positive adjusted EBITDA going forward. Speaker 300:19:46All the metrics I have discussed so far are on SAS adjusted non GAAP basis. For fiscal 2025, we expect full year revenue of approximately $340,000,000 plus or minus 2%. This present approximately 8.5% year over year growth at the midpoint of the revenue range. We believe that our strong short term RPO of $302,500,000 and the positive demand environment support this outlook. We also believe that the seasonality of our revenue will be similar to previous years. Speaker 300:20:25We expect Q1 revenue to be slightly below the Q4 level we are reporting today and to increase sequentially each quarter throughout the year. We believe that our outlook of top line growth and continuing improvement in our gross margin will drive more than 10% year over year gross profit growth. We expect the non GAAP gross margin to improve year over year and to be about 70.5%, an improvement of 130 basis points year over year. Gross margin may fluctuate between quarters based on our revenue mix. For the full year, we expect our non GAAP operating expenses to grow meaningfully slower than revenue and be approximately $233,000,000 an increase of about 5%. Speaker 300:21:20Our quarterly OpEx may fluctuate slightly throughout the year. Because of the leverage we have in our model, we expect adjusted EBITDA to be about $19,000,000 more than doubled compared to last year. We expect our cash taxes to be about $10,000,000 and non controlling minority interest to be about $5,000,000 As a result, we expect annual EPS loss to come in at 0.13 dollars at the midpoint of the revenue range. For share count, we assume about 72,000,000 weighted average fully diluted shares in FY 2025. Turning to cash flow. Speaker 300:22:04In a typical year, cash from operation is similar to adjusted EBITDA. This year, we plan to generate about $34,000,000 of cash from operation, significantly higher than the expected adjusted EBITDA. We have recently extended our lease agreement in our headquarter facility in Israel for an additional 10 years. We decided to renovate and change it to a more open work environment and reduce the amount of space we occupy. The renovation is expected to drive an incremental CapEx investment of about $6,000,000 and will result in future OpEx savings. Speaker 300:22:46We also expect additional proceeds of about $5,000,000 from the divestiture of SIS related to price adjustment. For the full year, we expect a total CapEx net of SAS expected proceeds of approximately $12,000,000 To summarize, we executed well during FY 2024 and produced strong results. The market has stabilized and new and existing customers recognized our advanced solutions and the values we generate for them. We continue to add capabilities and increase the value of our solution delivered to our customers by leveraging the latest technologies including AI. As a result, we expect FY 2025 to be a year of continued growth, significant profitability improvement and strong cash flow from operations. Speaker 300:23:43We believe we are well positioned for sustainable growth and have leverage in our model, so we can generate additional improvement in profitability and cash flow in future years. With that, I would like to end the call over to the operator to open the line for questions. Operator? Thank Operator00:24:12you. Our first question comes from Mike Sicos with Needham. Your line is open. Speaker 400:24:20Great. Thank you, guys. Thanks for taking the questions here. I think the first question I wanted to ask you about was with respect to this past quarter or the year actually. I know the company said that you landed 29 new customers, which is up 70% year over year, which is a great statistic. Speaker 400:24:40Just trying to see, are these new customers when they land, are they actually landing larger or has the initial land remains relatively unchanged if I look at customers coming to Cognex this year versus the customers who landed with Cognite last year? Speaker 200:25:01Hi, Mike. So, yes, it's a good number of new customers for the year. Maybe I'll give you some more color. It's a variety of customer types. It's coming from different areas, law enforcement, national security, national intelligence. Speaker 200:25:14Also, geographic wise, it's spread globally. So it's a good indication. The demand across the world is healthy. Usually, new customers start small, and this is the case also now. We had one large deal last year with a new customer of more than $20,000,000 but the other deals, most of them are small and actually grow over time. Speaker 200:25:39And this is actually the land and expand strategy that we are following, acquiring new customers, starting small with either few use cases and relatively limited capacity. And when they see the value, they go with us with expansions, upgrade, more functionality. And the wallet share is usually growing over the years. And this is the case also here. Speaker 400:26:06That's great to hear. And if I could just build on that comment around the land and expand. I know that you guys have the in your slide deck, those 3 customers that you're citing to are existing customers who decided to renew or increase their spend with Cognite. I just think it might be helpful, but let's say for that national security customer who signed over a $20,000,000 deal, Is there any way you could provide some additional color as far as what the deal size was before that? We're seeing for the $10,000,000 national intelligence deal that you guys signed? Speaker 400:26:42Like are these customers expanding at a rate of is it 3% a year? Is it 5% a year? Just trying to get a sense of how quickly they're expanding their usage of Cognite over time when they come to renew with you. Speaker 200:26:58Yes. So maybe I'll give you some more color about each one of them and then I'll answer the quantification side because quantification side is quite difficult because varying a lot between one customer to the other with one one lead to the other. But the first customer actually faced new technology that came in their territory and created more data that they need to address, which they didn't have the capabilities before. And given that we have this solution and this customer is with us for many years, actually more than 2 decades, they came to us and they actually upgraded their capabilities with the new solution. And this happened a lot over the years with this customer. Speaker 200:27:42The second one is related to a use case. It's a border control solution for an existing customer that we had before. Actually, we sold already to this customer for border control also, but actually they have large borders and different concerns and different challenges in different areas of the border. And they actually expanded with capability that they didn't have before for a different border challenge. And the last one is actually a result of reference of a existing customer that worked with us, was very happy and actually was a very strong reference for us to another organization in the same country. Speaker 200:28:29About the quantification, it's very difficult to quantify because it might be that customers start very large like the other one that I mentioned earlier, dollars 20,000,000 plus new customer that can fit into the capacity and functionality for a few years and not upgrading or it could be small deals that can come and grow quickly. So it really varies between one deal to the other, between one customer to the other. So statistics is not something that would be helpful here. And also, I believe that given that we have hundreds of customers in many countries and that we are able to actually engage with customers frequently and understand their current and future needs, it help us a lot to be prepared with the technology they need in order to upgrade and address their new challenges, which happened in one of the examples I gave earlier. So land and expand is very important for us. Speaker 400:29:37Great. Thank you for that. And then just one final question if I could, but I'm just trying to get a better understanding. I know that you guys gave some great color around CRPO exiting fiscal 2024. If I look at the fiscal 2025 revenue guidance that we have, this outlook, It looks like there's a decent amount of incremental revenue you guys are looking to add in this coming year in comparison to the CRPO growth. Speaker 400:30:05And I just wanted to get a better understanding of what's driving the confidence in driving that incremental dollar to Cognite above and beyond the CRPO balance that we have today? Speaker 200:30:19Actually the coverage of the RPO, the short term RPO for the year is similar to last year. So it's not far from what it was before in terms of the coverage. And this gives us high confidence that we can deliver on the outlook and also we have the confidence given that we have the mix of the deals in the RPO that we are going to see improved profitability. So the confidence level in our outlook is high. Speaker 400:30:48Well, if I could just push back on that for one second, but if we go back a year ago, you guys Cognite had a CRPO balance of $281,000,000 and then guided the full year to $300,000,000 in revenue. So you're talking about $20,000,000 increase. And I look at where we are today, we have $303,000,000 or so in CRPO and then a guide of $340,000,000 So the incremental dollars above and beyond the CRPO balance has gone up from $20,000,000 to almost $40,000,000 if I look at the guidance that we have today. And I'm just trying to get a better understanding of, again, that doubling of the incremental dollars above the CRPO balance. Does that make sense? Speaker 400:31:30I just want to make sure I'm clear on that. Speaker 300:31:34Yes. So if you look at the previous current RPO of the $280,000,000 versus the initial guidance of the $300,000,000 we were like in that period in a different environment from our perspective. During this year, we saw significant demand and we saw that the RPO is growing quarter over quarter, which first increase our confidence and second allow us to increase the guidance over the year. When you look at next year, Speaker 200:32:03we are Speaker 300:32:04starting the year with $302,500,000 of RPO, short term RPO and guiding $340,000,000 which is from a coverage perspective, it's the same percentage that you will see very similar percentage versus the $280,000,000 and the $213,000,000 that we actually guided. The main difference that we have, if you compare this year versus last year, is that over the last few quarter, we work closely with our customers and we know that our short term RPO is very strong and allow us to predict in a good way where we're going to land. And actually we are very pleased Speaker 200:32:45in the last from Speaker 300:32:46the last few quarters that we were able also to overachieve quarter over quarter. Is that understood your question? Speaker 400:32:54No, it does. It does. I really do appreciate the incremental color from both you and Elad. So thank you very much. I'll turn it over to other analysts on the line. Speaker 400:33:03Thank you. Speaker 300:33:03Thank you. Speaker 500:33:04Thanks, Mike. Operator00:33:06Thank you. Our next question comes from Shaul Eyal with TD Securities. Your line is open. Speaker 600:33:14Thank you. Hi, good afternoon, guys. Congrats on the ongoing consistent outperformance. My question is around AI, Gen AI, which has been the topic de jure in recent quarters. Elad, in your prepared remarks, you did mention latest AI development as a driver for the market and the company. Speaker 600:33:34Can you maybe double click on this point, maybe provide us with some insights and how should we be thinking about Gen AI impacting Cognite's near and long term? Thank you. Speaker 200:33:49Sure. Hi, Sharon. So AI is becoming more important for customers over time. And actually, it's a race. And maybe it's important that we understand that it's a race between our customers who are trying to make the world safer and the bad guys who are trying to hide better. Speaker 200:34:07So if you look on the bad guys, they're using GenAI and advanced technology to hide their identities. I gave an example earlier in the call about Gen AI and using fake entities and cryptocurrency that actually they use in order to anonymize who they are. And actually, this makes our customers' challenges much more complicated and difficult to address. As if you want to put your hands on the bad guys or investigate them, you need first to know who they are. And this is one challenge that is growing over time. Speaker 200:34:47On the other hand, our customers, they have more data coming in, structured and unstructured from different sources. And in order for them to be able to actually unhide, uncover hidden insights, they need more capabilities in the analytics and AI areas in order for them to be able in high probability to identify who is actually the identity behind something that happens. So it's a race between those 2. And it's important to remind everyone that Air has been part of our solutions for quite a long time. We view it as an integral part of our present and future product. Speaker 200:35:37And it's important to note that actually when we implement AI into our solution, we implement it into the process and the workflow of our customers. So it's part of the overall investigation process. It's not a standalone solution, but it's part of the workflow our customer is using, which is highly important. And also some of our customers or most of our customers are government customers and they have a unique environment. So we feed the AI into the environment. Speaker 200:36:09So we give them actually a holistic benefit of using our AI technology. So we will leverage AI to continually generate incremental value for our customers. For this purpose, we have a dedicated AI research team that we established long ago. And that's all they're focused on, to give more value out of the existing data sets that customers have in order to be able to unhide insights in a much quicker and accurate manner. And you view it as one of the demand drivers for the short and for the long term. Speaker 200:36:44It's something that is evolving over time. Speaker 600:36:47Thank you for that. Appreciate it. Speaker 500:36:50Thanks, John. Speaker 300:36:51Thank Operator00:36:56you. Our next question comes from Peter Levine with Evercore. Your line is open. Speaker 500:37:03Great. Thanks guys for taking my question. Maybe just one follow-up to that AI question. Given the privacy of your customers, the governments you work with, are there any restrictions in terms of maybe the data pools that you can pull from? Just curious how you guys navigate that given the secrecy of some of your customers? Speaker 200:37:26Yes. So I want to remind you that we do not provide managed services to our customers. And the data customers have is their own data. It's not data that we deliver to them. So given that they are government customers and that they are regulated customers in their countries, it's their responsibility to put their hands on the data that they are allowed to and do the investigation process themselves without our interference. Speaker 200:37:55So we are not exposed to customers' data. Speaker 500:38:00Okay. And then if you think about Is Speaker 200:38:02there a revenue there? Speaker 500:38:04Yes. Can you hear me? Speaker 200:38:07Yes. Yes, please. Speaker 500:38:09And then maybe if you think about the guidance, let me help us what's baked in there. Obviously, 17 net new customers in fiscal 2025. What are the assumptions for fiscal 2025? I'm sorry, 2017 for fiscal 2024 and then if you think about fiscal 2025, what are your assumptions, meaning is it more of an upsell motion? Do you still need to are you assuming that you're going to be hitting, call it, net new customer growth north of 2017 versus what you saw in 2024? Speaker 500:38:39So just give us an idea of kind of the assumptions behind the guide and what that entails? Speaker 200:38:48Yes. So I mean, I said you asked about this in the direction of the guidance. So if you look at the guidance, the guidance is built primarily on the existing RPO. So we are not relying much on new customers for the guidance. But if you look at existing new customers, we do have investments in order to accelerate growth over time, including acquiring new customers. Speaker 200:39:17One example is the U. S. Market that we are focusing on. Actually, most of the customers that we'll acquire, they will be new customers. I mentioned earlier in the call that we focus on state and local first and started recently with the federal. Speaker 200:39:34So we do expect new customers to lend for us. And also, as I mentioned earlier about the land and expand strategy, we expect those customers to stay with us for quite a long time and continue and buy from us again and again. Actually, I can tell you that I was in the U. S. In January this year meeting customers. Speaker 200:39:57And I can tell you that we already have follow on order from customer after the meeting and actually one customer that already put a second deal with us. So it's important for us to continue and win new customers and we are focused on that primarily in the U. S. And if you think about the expansion into the U. Speaker 500:40:19S, is that direct? Is that through partners? Help us understand the investments that you're making today to expand further in the U. S. Thank you. Speaker 200:40:30Sure. So for this we started with the standard local. We started direct. And actually, we have a sales team a local sales team with everything he needs, including demo and POC capabilities and marketing efforts and participating relevant conferences. And the investment given that it's a penetration mode, the investment in sales efforts in the U. Speaker 200:40:55S. Is proportional to the current business level. As a federal, we are using established partner who has the relevant clearance and market access and know how and relationships with relevant federal customers. So state and local is primarily direct and federal is primarily by an established partner that we have. Speaker 500:41:22Great. Thank you for the color. Speaker 200:41:27Sure. Thanks, Peter. Operator00:41:32Thank you. Our next question is a follow-up from Mike Sicos with Needham and Company. Your line is open. Speaker 400:41:39Hey, not a follow-up question here, more of a comment, just to make sure everyone was clear, at least based on what I heard and management, if you guys, a lot of David just sanity check the numbers I have on my side because I know Peter had referenced 17 incremental new customers. Just for perspective and the numbers I have and I know we're all digesting this in real time, you added 29 new customers in fiscal 2024, which is up from 12 in fiscal 2023. And so there's a 70% year on year increase from 12% to 29% from fiscal 2023 to fiscal 24, is that correct? Speaker 300:42:17It is from 17 to 29. So 12 new and increment From 17% to 29%. Speaker 200:42:2512% more, which is up 70%. Yes. Speaker 400:42:28Got it. Thank you for clarifying. I appreciate that. Speaker 500:42:32Sure. No problem. Operator00:42:34Thank you. There are no further questions at this time. Speaker 200:42:37I'd like Operator00:42:37to turn the call back over to Dean Ridlawn for any closing remarks. Speaker 100:42:43Thank you, Michelle, and thank you everyone for joining us on today's call. We will be attending several conferences in May and hope to speak with some of you then. Should you have any questions in the meantime, please feel free to reach out to me and we look forward to speaking with you again next quarter. Thank you.Read morePowered by