Q1 2025 Cognyte Software Ltd Earnings Call
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Operator: Good day, ladies and gentlemen. Thank you for standing by.
Operator: Good day, ladies and gentlemen. Thank you for standing by.
Speaker Change: Good day, ladies and gentlemen, thank you for standing by welcome to the cognate first quarter fiscal year 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one.
Operator: Welcome to the Cognyte first quarter fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode.
Operator: Welcome to the Cognyte First Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please note that today's conference is being recorded. I would now like to hand the conference over to your host, Dean Ridlon, Head of Investor Relations. Please go ahead.
Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message, advising you your hand is raised. To withdraw your question, please press star 1-1 again.
Speaker Change: One on your telephone you will then hear an automated message advising you. Your hand, just raised to withdraw your question. Please press star. One again. Please note that today's conference is being recorded I would now like to hand, the conference over to your host Dean Ridlon head of Investor Relations. Please go ahead.
Operator: Please note that today's conference has been recorded.
Dean Ridlon: I would now like to hand the conference over to your host, Dean Ridlon, Head of Investor Relations. Please go ahead.
Dean Ridlon: Thank you, operator.
Dean M. Ridlon: Thank you, operator. Hello, everyone. I'm Dean Ridlon, Cognyte's Head of Investor Relations. Thank you for joining us today.
Speaker Change: Thank you operator, Hello, everyone and Dean Ridlon Cognex head of Investor Relations. Thank you for joining us today.
Dean Ridlon: Hello everyone. I'm Dean Ridlon, Cognyte head of Investor Relations. Thank you for joining us today. I'm here with a large Jerome, Cognyte CEO, and David Abadi, Cognyte CFO.
Dean M. Ridlon: I'm here with Elad Sharon, Cognyte CEO, and David Abadi, Cognyte CFO. Before 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 Investor section of our website at Cognyte.com. Click on the Investors tab, click on the webcast link, and select today's conference call. I would also like to draw your attention to the fact that certain matters discussed 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 Law.
Speaker Change: I'm here with a lot Sharon cognate CEO and David body cosmetics CFO.
Dean Ridlon: Before getting started, I would like to mention that our company and our call today is a presentation. If you'd like to view these slides in real time during the call, please visit the Investor section of our website at Cognyte.com. Click on the Investor's tab, click on the webcast link, and select today's conference call.
Speaker Change: Before getting started I would like to mention that accompanying our call today is a presentation.
Speaker Change: If you'd like to view these slides in real time during the call. Please visit the investors section of our website at Cognex Dot com.
Speaker Change: Click on investors tab click on the webcast link and select today's conference call.
Dean Ridlon: 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. Act for 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, Cognyte assumes no obligation to update or revise them.
Dean M. Ridlon: These forward-looking statements are based on management's current expectations and are not guarantees of future performance. actual 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, Cognyte assumes no obligation to update or revise.
Speaker Change: I 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 1095.
Speaker Change: And other provisions of the federal Securities laws.
Dean M. Ridlon: Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of how these and other risks and uncertainties could cause Cognyte'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 31st, 2024 and other filings we make with the SEC. The financial measures discussed today include non-GAAP measures. We believe investors focus on non-GAAP financial measures in comparing results between periods and among our peer companies that publish similar non-GAAP measures.
Speaker Change: These forward looking statements are based on management's current expectations and are not guarantees of future performance.
Dean M. Ridlon: Please see today's presentation slides, our earnings release, and the investor section of our website at cognyte.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 it 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.
Elad Sharon: Now, I would like to turn the call over to Elad.
Speaker Change: Actual results could differ materially from those expressed in.
Speaker Change: Or implied by these forward looking statements.
Elad Sharon: Thank you, Dean. I welcome everyone to our first quarterly conference call. We delivered a strong start to our fiscal year as we continue to generate consistent and profitable financial results. QM Revenue and Gross Profit both grew by double digits over year. We delivered Q1 revenue of $83 million, up approximately 13% over a year. Gross profit increased 17% over the year, growing faster than revenue, consistent with our focus on margin expansion. We also generated $5,000,000 of positive adjusted EBITDA in the quarter, along with about $21,000,000 of positive cash flow operations.
Speaker Change: The forward looking statements are made as of the date of this call and except as required by law.
Speaker Change: <unk> assumes no obligation to update or revise them.
Dean Ridlon: Investors are cautioned not to place undue reliance on these forward-looking statements.
Speaker Change: Investors are cautioned not to place undue reliance on these forward looking statements.
Dean Ridlon: For a more detailed discussion of how these and other risks, uncertainties could cause Cognyte's 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 31st, 2024, and other filings we make with the SEC.
Speaker Change: For a more detailed discussion of how these and other risks uncertainties could cause cognex or 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, 2024, and other filings we make with the SEC.
Dean Ridlon: The financial measures discussed today include non-GAAP measures. We 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 investor section of our website at Cognyte.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 financial measures discussed today include non-GAAP measures we.
Speaker Change: We believe investors focus on non-GAAP financial measures and comparing results between periods and among our peer companies that publish similar non-GAAP measures.
Speaker Change: Please see todays presentation slides our earnings release in the investors section of our website at Cognex Dot com.
Speaker Change: A reconciliation of non-GAAP financial measures to GAAP measures.
Speaker Change: non-GAAP financial information should not be considered in isolation from.
Speaker Change: 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.
Dean Ridlon: The non-GAAP financial measures that the company uses have limitations and may differ from those used by other companies.
Speaker Change: The non-GAAP financial measures that the company uses have limitations and may differ from those used by the companies.
Elad Sharon: Now, I would like to turn the call over to a lot.
Speaker Change: Now I would like to turn the call over to allot.
Elad Sharon: Thank you, Dean. Welcome, everyone, to our first quarter conference call. We deliver the strong start of fiscal year as we continue to generate consistent and profitable financial results. Q1 revenue and rose profit both grew by WDGT over here. We delivered Q1 revenue of $83 million, up approximately 13% over here. Rose profit increased 17% over here, going faster than revenue, consisting of a focus on margin expansion. We also generated $5 million of positive adjusted debular in the quarter, along with about $21 million of positive cash operations. We remained focused on delivering sustainable and post-evalent growth.
Speaker Change: Thank you Dan and welcome everyone to our first quarter conference call.
Speaker Change: We delivered a strong start of our fiscal year as we continue to generate consistent and profitable financial results.
Speaker Change: Revenue and gross profit was growth by double digit year over year.
Speaker Change: We delivered Q1 revenue of $43 million up approximately 13% year over here.
Speaker Change: Profit increased 17% year over year growing faster than revenue consistent with our focus on margin expansion.
Speaker Change: We also generated $5 million of positive adjusted EBITDA in the quarter, along with about $21 million of positive cash from operations.
Elad Sharon: We remain focused on delivering sustainable and profitable growth. We have a lengthy track record of delivering powerful investigative analytics solutions to hundreds of customers in more than 100 countries around the world. Our customers view us as domain experts, and we have ongoing dialogues across our global customer base about their growing needs and how our solutions can help them. We continue to innovate and build on our technology leadership. We believe our advanced technology, including artificial intelligence, enables faster and more effective investigations across a wide variety of use cases by fusing data at scale and detecting patterns, relationships, and other hidden insights that would be nearly impossible to find otherwise. These capabilities generate unique value for our customers and are generating increased interest in our solution. We continue to expand our presence in North America, securing competitive deals anddisplacing incumbent providers.
Speaker Change: We remain focused on delivering sustainable and profitable growth.
Elad Sharon: We have a Lensley-Turk record of delivering powerful investigative on 80 solutions to hundreds of customers in more than 100 countries around the globe. Our customers use as domain experts, and we have ongoing dialogues across our global customer base about their growing needs and how our solutions can help them. We continue to innovate and build on our technology leadership. We believe our advanced technology, including artificial intelligence, enables faster and more effective investigations across the wide variety of use cases by using data at scale and detecting patterns, relationships, and other hidden insights that would be nearly impossible to find otherwise.
Speaker Change: We have an answer at a record of delivering powerful investigative analytics solutions to hundreds of customers and more than 100 countries around the globe.
Our customers view us as domain experts and we have ongoing dialogues across our global customer base about their growth needs and how our solutions can help them.
Speaker Change: We continue to innovate and build on our technology leadership, we believe advanced technology, including artificial intelligence enabled faster and more effective investigations across a wide variety of use cases by fusing data at scale and detecting patterns relationships at other hidden insights that would be nearly impossible to find otherwise.
Elad Sharon: These capabilities generate unique value for our customers and are generating increased interest in our solutions. We continue to expand our presence in North America, securing competitive deals and distressing incumbent providers. Our ongoing investment in sales and marketing includes growing our demonstration and proof of concept capacity. Our experience shows that when customers use our solutions in real-world settings, they recognize the high value of technology delivered. Further testimonial of solutions high value and customer satisfaction is evident in the repeat business from customers who signed deals in previous quarters and have returned to place following orders. In addition, some of these customers are becoming valuable reference sets and enhancing our brand with other agencies.
Speaker Change: These capabilities generate unique value for our customers and are generating increased interest in our solutions.
Speaker Change: We continue to expand our presence in North America, securing competitive deals are displacing an incumbent providers.
Elad Sharon: Our ongoing investments in sales and marketing include growing our demonstration and proof-of-concept capacity. Our experience shows that when customers use our solutions in real-world settings, they recognize the high value our technology delivers. Further testament to our solution's high value and customer satisfaction is evident in the repeat business from customers who signed deals in previous quarters and have returned to place follow-on orders. In addition, some of these customers are becoming valuable references and enhancing our brand with others. I'll now talk about other significant wins we had during the quarter.
Speaker Change: Our ongoing investments in sales and marketing include growing our demonstration of proof of concepts capacity.
Speaker Change: Our experience shows that when customers use our solutions in real world settings, They recognize the high value our technology delivers.
Speaker Change: Further testament to our solutions high value and customer satisfaction is evident in the repeat business from customers, who signed deals in previous quarters, and therefore tend to place follow on orders.
Speaker Change: In addition, some of these customers are becoming valuable references and enhancing our brand with other agencies.
Elad Sharon: I'll now talk about other significant wins we had during the quarter. We want several North-Rothed deals during the quarter, including three following orders from existing national security and national intelligence customers. While none of these wins were related and each obviously had its own unique characteristics, all are $5 million or more in value and were driven by customers who wanted more capacity and functionality to improve outcomes. These wins continue to demonstrate our strong position with our customers and our ability to draw significant repeat business. Our investigative analytic solutions are sought by national security, national intelligence, law enforcement, and other organizations to enable them to perform more effective investigations.
Speaker Change: I'll now talk about the other significant wins, we had during the quarter.
Elad Sharon: We won several no-fraud deals during the quarter, including pre-follow-on orders from existing national security and national intelligence customers. While none of these wins were related, and each obviously had its own unique characteristics, all were $5 million or more in value, and were driven by customers who wanted more capacity and functionality to improve outcomes. These wins continue to demonstrate our strong position with our customers and our ability to drive significant, rapid business.
Speaker Change: We won several noteworthy deals during the quarter, including three follow on orders from existing National security and intelligence customers.
Speaker Change: While none of these wins were related and each obviously had its own unique characteristics all of our $5 million or more in value and why.
Speaker Change: Driven by customers, who wanted more capacity and functionality to improve outcomes.
Speaker Change: These wins continue to demonstrate our strong position with our customers and our ability to drive significant repeat business.
Elad Sharon: Our investigative analytic solutions are sold to national security, national intelligence, law enforcement, and other organizations to enable them to perform more effective investigations. We believe our customers view Cognyte as a strategic, trusted partner, providing innovative solutions that help them improve the speed, accuracy, and success rate of their investigations and make timely and high-quality decisions. The long-term relationships we have with our customers gives us insights into the challenges they are facing, which helps us optimize our technology roadmap. We regularly meet with our customers at their or our facilities, industry conferences, and other events to maintain close relationships.
Speaker Change: Our investor monolithic solution or sell to answer Q&A National intelligence law enforcement and other organizations to enable them to perform more effective investigations.
Elad Sharon: We believe our customers who have united the strategic process partner providing innovative solutions that help them improve the speed, accuracy, and success rate of their investigations and make timely and high quality decisions. The long-term relationships with our customers give us insight into the challenges they are facing, which helps us optimize our technology role. We regularly meet with our customers that there are a lot of facilities, industry conferences, and other events to maintain close relationships. Recently, we participated in a key industry conference in Europe where we engage with many customers and prospects to discuss with them current and future needs and demonstrated our new capabilities.
Speaker Change: We believe our customers recognize the strategic trusted partner, providing innovative solutions that help them improve the speed accuracy and success rate of the investigation and make timely and high quality decisions.
Speaker Change: We announced our relationships, we have with our customers gives us insight into the challenges they are facing which helps us optimize our technology roadmap.
Speaker Change: Regularly meet with our customers.
Speaker Change: Facilities industry conferences, and other events to maintain close relationships.
Elad Sharon: Recently, we participated in a key industry conference in Europe where we engaged with many customers and prospects to discuss their current and future needs and demonstrated our new capabilities. Customers continue to appreciate our market-leading position and innovative technology and find frequent touchpoints with customers highly valuable and contribute to our growth. In addition to our ongoing regular marketing initiatives, we occasionally perform more formal research, and we recently commissioned a survey of law enforcement agencies referred to in the industry as LIAD, such as police, financial intelligence units, border police, and others.
Speaker Change: Recently, we participated in a key industry contract in Europe, we're engaged with many customers and prospects to discuss with them current and future needs and demonstrated our new capabilities.
Elad Sharon: customers continue to appreciate our market leading position and innovating technology. We find frequent touch points with customers highly valuable and contribute to our Google.
Speaker Change: Customers continue to appreciate our market, leading position and innovative technology.
Speaker Change: We find frequent touch points with customers highly vulnerable and contributor who go.
Elad Sharon: In addition to our ongoing regular marketing initiatives, we occasionally perform more formal research, and we recently commissioned the survey of law enforcement agencies referred to in the industry and Zliad, such as police, financial intelligence units, border police, and others. We issued a press release about the survey last week, and the summary of the result is available on our website. The M of the survey was to validate some of our rocking assumptions regarding the challenges faced by the Leo stakeholders around data analytics, as well as to learn more about their current priorities and future needs and plans for dealing with them.
Speaker Change: In addition to our ongoing regular marketing initiatives. We're casually performed more formal research and we recently commissioned a survey of law enforcement agencies referred to in the industry such as police financial intelligence unit border police and others.
Elad Sharon: We issued a press release about this survey last week, and a summary of the results is available on our website. The aim of this survey was to validate some of our working assumptions regarding the challenges faced by the LIAO stakeholders around data analytics, as well as to learn more about their current priorities and future needs and plans for dealing with them. Here are a few of the key findings from the survey.
We issued a press release about the survey last week and a summary of the result is available on our website.
Speaker Change: The end of the survey was to validate some of our working assumptions regarding the challenges faced by the Leo stakeholders around data analytics as well as to learn more about their current priorities and future needs and plans for dealing with them.
Elad Sharon: Here are a few of the key findings from the survey. First, about 75% of leaders utilized more than one solution for analyzing the data. This makes it harder for them to connect the dots between desperate data sources and uncover crucial insights for resolving cases. Second, approximately half of the leaders claim that their current solutions' lack of support for unstructured data is one of the top challenges. This is a significant issue given that many of the data sources leaders need to analyze are and include, among others, images, texts, and videos. Third, existing data analytics solutions from law enforcement organizations are often limited and outdated, making it difficult for investigators and analysts to keep up with changes in data format and volumes.
Speaker Change: Here are a few of the key findings from the survey.
Elad Sharon: First, about 75% of leaders utilize more than one solution for analyzing the data. This makes it harder for them to connect the dots between disparate data sources and uncover crucial insights for resolving cases. Second, approximately half of the LIAs claim that their current solution's lack of support for unstructured data is one of the top challenges. This is a significant issue, given that many of the data sources we need to analyze are unstructured and include, among others, images, text, and video.
Speaker Change: First about 75% of Leer utilized more than one solution for analyzing the data. This makes it harder for them to connect the dots between desperate data sources and uncover crucial insights for resolving cases.
Speaker Change: Yeah.
Speaker Change: Second approximately half of the <unk> claim that their current solution is lack of support for unstructured data is one of the top challenges. This is a significant issue given that many of the data sources leaders need to analyze our structured and include among others images text and video.
Elad Sharon: Third, existing data analytic solutions from law enforcement organizations are often limited and outdated, making it difficult for investigators and analysts to keep up with changes in data format and volume. Therefore, it's no surprise that about 75% of flow-frost organizations indicated they are planning to expand, upgrade, or replace their existing data analytics solutions. The findings also show there is a correlation between the number of siloed solutions within Lialt and the plans to change them.
Speaker Change: Third existing data analytic solutions for Roswell asset organizations are often limited in all data, making it difficult for investigators and analysts to keep up with changes in data format and volumes.
Elad Sharon: Therefore, it's no surprise that about 75% of law enforcement organizations indicated they are planning to expand, upgrade, or replace the existing data analytics solutions. The findings also show there is a correlation between the number of solid solutions within Leo's and the plans to change them. The most solutions used by the organizations, the higher the need for a comprehensive investigative analytics solution in an effort to streamline and optimize their investigation process. Lastly, 99% of respondents consider we rely to be beneficial for unfortunate data analysis, and 85% believe that they are either critical or very important to the future of law enforcement investigation.
Speaker Change: Therefore, it is no surprise that about 75% of flow swaps that organizations indicated they are planning to expand upgrade or replace their existing data analytic solutions.
Speaker Change: The findings also show there is correlation between the number of Siloed solutions within the us and the plans to change them. The most solutions used by organizations the higher the need for a comprehensive investigative analytic solution and therefore to streamline and optimize the investigation process.
Elad Sharon: The more solutions used by the organizations, the higher the need for a comprehensive investigative analytic solution in an effort to streamline and optimize the investigation process. Lastly, 99% of respondents consider AI to be beneficial for law enforcement data analysis, and 85% believe that AI is either critical or very important to the future of law enforcement investigations. The most important of their pilot capabilities include pattern recognition, image analysis, and risk assessment.
Speaker Change: Lastly, 99% of respondents considered myriad to be beneficial for law enforcement data analysis.
Speaker Change: 85% believe that AI is a critical are very important to the future of law enforcement investigations.
Elad Sharon: The most important data power capabilities include pattern recognition, image analysis, and risk assessment. The outcome of this research with law enforcement is consistent with what we hear from our national security and national intelligence customers and validates our market opportunity and roadmap. Our solution is directly addressed customer needs around fusion and analyzing structures and after-opted data at scale to uncover hidden insights. We continue to leverage R&D, including implementing advanced-to-ake capabilities to bring innovations to our customers, maintain our differentiation, generate demand, and drive long-term growth.
Speaker Change: The most important they're powered capabilities include pattern recognition image analysis and risk assessment.
Elad Sharon: The outcome of this research with law enforcement is consistent with what we hear from our national security and national intelligence customers and validates our market opportunity and roadmaps. Our solutions directly address customer needs around fusing and analyzing structured and unstructured data at scale to uncover hidden insights. We continue to leverage R&D, including implementing advanced AI capabilities, to bring innovations to our customers, maintain our differentiation, generate demand, and drive long-term growth. Now, turning to our outlook for Fiscal 25,
Speaker Change: The outcome of this research with law enforcement is consistent with what we hear from our National security and National intelligence customers and validate our market opportunity and roadmap.
Our solutions directly address customer needs around fusing of analyzing structured and unstructured data at scale to uncover hidden insights.
Speaker Change: We continue to leverage R&D, including implementing advanced AI capabilities to bring innovation to our customers maintain our differentiation January demand and drive long term growth.
Elad Sharon: Turning to our outlook for fiscal 25, given our momentum and good visibility, we are now expecting revenue to be approximately $344 million, plus or minus 2%, representing about 10% to very growth at the midpoint. Given the leverage in our financial model, we increased our adjusted EB-DAR guidance, and we now expect it to be about $22 million at the midpoint of the variant range, more than double what we generated in fiscal 24. David will provide more detailed guidance during his remarks. To summarize, we started a strong, continued to deliver consistent financial performance and demonstrate the leverage we have in our model.
Speaker Change: Turning to our outlook for fiscal 'twenty, five given our momentum and good visibility. We are now expecting revenue to be approximately $344 million plus or minus 2% representing about 10% growth at the midpoint.
Elad Sharon: Given our momentum and good visibility, we are now expecting revenue to be approximately $344 million, plus or minus 2%, representing about 10% growth at the meeting. Given the leverage in our financial model, we increased our adjusted EBITDA guidance, and we now expect it to be about $22 million at the midpoint of the revenue range, more than double what we generated in fiscal 2014. David will provide more detailed guidance during his remarks.
Given the leverage in our financial model, we increased our adjusted EBITDA guidance and we now expect it to be about $22 million at the midpoint of the revenue range more than double what we generated in fiscal 'twenty four.
Speaker Change: David will provide more detailed guidance during his remarks.
David Abadi: To summarize, we started really strong, and we continue to deliver consistent financial performance and demonstrate the leverage we have in our model. Our visibility is stronger, and the market is healthy. Our customers continue to face significant growing and evolving challenges and look to us for solutions that help them accelerate investigations, make decisions faster, and mitigate a wide variety of threats. We believe Cognyte is well established as a market leader, domain expert, and trusted partner.
David Abadi: To summarize we started very strong continued to deliver consistent financial performance and demonstrated the leverage we are having a model.
Elad Sharon: Our visibility is stronger, and the market is healthy. Our customers continue to face significant growing and evolving challenges and look to us for solutions that help them accelerate investigations, make decisions faster, and mitigate what rightful threats. We believe Cognyte is well established as market leader, domain and expert and trusted partners. Our customers frequently tell us that our solutions significantly improve the results, enabling them to effectively perform the missions and make the world safer. Our long-term customer relationships continue to be a significant asset for us as the head-drive repeat business.
David Abadi: Our visibility is stronger and the market is healthy.
David: Our customers continue to face significant raw gaming volume challenges and look to us for solutions that help them accelerate investigations make decisions faster and mitigate the wide variety of threats.
Speaker Change: Political ignite is well established as a market leader domain expert and trusted partner.
David Abadi: Our customers frequently tell us that our solutions significantly improve results, enabling them to effectively perform their missions and make the world safer. Our long-term customer relationships continue to be a significant asset for us as they help drive repeat business. Given our momentum and good visibility, we increased our outlook for the year. We believe Cognyte is positioned for sustainable growth and continuing improvement in profitability. Now, let me turn the call over to David to provide more details about our Q1 results and updated Fiscal 2025 Outlook. David?
David: Yes.
David: Our customers frequently tell us that our solutions significantly improve the results, enabling them to effectively perform the emissions and make the world safer.
David: Our long term customer relationships continue to be a significant asset for us as it helps drive repeat business.
Elad Sharon: Given our momentum and good visibility, we increased our outlook for the year. We believe Cognyte is positioned for sustainable growth and continuing improvement in profitability.
Speaker Change: Given our momentum and good visibility we increased our outlook for the year. We believe cognizant is positioned for sustainable growth and continuing improvement in profitability.
David Abadi: Now let me turn on the call over to David to provide more details about our Q1 results and updated fiscal 25 outlook.
Speaker Change: Now, let me turn the call over to David to provide more details about our Q1 results and updated fiscal 'twenty five outlook.
David Abadi: David? Thank you, Elad, and hello everyone. Our momentum is continued, and our first quarter financial result came ahead of our expectations, reflecting solid execution. Our balance sheets remain strong with $107 million of cash at $24 million from year-end and no debt. The increase in our cash balance was primarily due to $21.5 million of cash reform operation we generated during the quarter. We continue to execute and drive revenue growth. Q1 revenue was $82.7 million and increase of approximately 13% year-over-year. The vast majority of the revenue growth was driven by a $9.2 million increase in software revenue.
Speaker Change: David.
David Abadi: Thank you, Elad, and hello everyone. Our momentum has continued, and our first quarter financial results came ahead of our expectations, reflecting solid execution. Our balance sheet remains strong, with $107 million of cash, up $24 million from year-end, and no debt. The increase in our cash balance was primarily due to $21.5 million of cash flow from operations we generated during the quarter. We've continued to execute and drive revenue growth. Q1 revenue was $82.7 million, an increase of approximately 13% year-over-year. The vast majority of the revenue growth was driven by a $9.2 million increase in software revenue. Recurring revenue is a contributor to visibility and long-term growth. We present many support contracts, revenue, and some subscription offerings.
David: Thank you <unk> and Hello, everyone.
David: Mental has continued and our first quarter financial results came in ahead of our expectations, reflecting solid execution.
David: Our balance sheet remained strong at $107 million.
David: Cash up $24 million from year end and no debt.
Speaker Change: The increase in our cash balance was primarily due to 21 in the afternoon.
Speaker Change: Cash flow from operations, we generated during the quarter.
Speaker Change: Continue to execute and drive revenue growth.
Speaker Change: Q1 revenue was $82 7 million, an increase of approximately 13% year over year.
Speaker Change: The vast majority of the revenue growth was driven by a $9 2 million.
Speaker Change: Increase in software revenue.
David Abadi: Retiring revenue is a contributor to visibility and long-term growth and represents many support contracts revenue and some subscription offerings. We continue to grow our recurring revenue quarter-over-quarter, and in Q1 we generated $45.8 million, or 55% of total revenue. We expect to continue to deliver a long-term growth in recurring revenue. That said, support contracts revenue may fluctuate between quarters. Due to some customer discovering support on their older solution, so they can free up budget to invest in upgrades and respond to evolving needs and technology changes. We delivered the revenue growth and were able to drive growth profit growth even faster.
Speaker Change: Yes.
Speaker Change: Recurring revenue as a contributor to visibility and long term growth.
Speaker Change: This represents many support contract revenue and some subscription offerings.
David Abadi: We continued to grow our recurring revenue quarter over quarter, and in Q1, we generated $45.8 million, or 55% of total revenue. We expect to continue to deliver long-term growth in recurring revenue. That said, support contract revenue may fluctuate between quarters due to some customers discontinuing support on their older solution so they can free up budget to invest in upgrades and respond to evolving needs and technology changes. We delivered revenue growth and were able to drive gross profit growth even faster. Gross margin for the quarter was 71.1 percent.
Speaker Change: We continue to grow our recurring revenue quarter over quarter and in Q1, we generated $45 8 million or 55% of total revenue.
Speaker Change: We expect to continue to deliver long term growth and recurring revenue.
It said support contract revenue may fluctuate between quarters due to some customer discussing support on their older solution. So they can free up budget to invest in upgrades and respond to evolving need and technology changes.
Speaker Change: Okay.
Speaker Change: We delivered the revenue growth and we are able to drive gross profit growth even faster.
David Abadi: Growth margin for the quarter was 71.1%. Our growth profit for the quarter was 58.8 million dollars and increase of 8.6 million dollars or 17% year-over-year. The margin expansion and the resulting cash generation demonstrate the leverage we have built into our business model. This leverage is largely driven by higher software revenue and the improved cost structure of our professional services organization. Our strong growth margin reflects the value our customer recognized in our innovative technology and our competitive differentiation. The leverage we have in our model helps us generate meaningful improvement in profitability year over year.
Speaker Change: Gross margin for the quarter was 71, 1%.
David Abadi: Our gross profit for the quarter was 58.8 million dollars, an increase of $8.6 million or 17% year over year. The margin expansion and the resulting cash generation demonstrate the leverage we have built into our business model. This leverage is largely driven by higher software revenue and the improved cost structure of our professional services organization. Our strong gross margin reflects the value our customers recognize in our innovative technology and our competitive differentiation.
Speaker Change: Our gross profit for the quarter was $58 $8 million in.
Speaker Change: An increase of $8 6 million or 17% year over year.
Speaker Change: The margin expansion and the resulting cash generation demonstrate the leverage we have built into our business model.
Speaker Change: This leverage is largely driven by higher software revenue.
Speaker Change: The improved cost structure of our professional services organization.
Speaker Change: Our strong gross margin reflects the value our customer recognize.
Speaker Change: Our innovative technology and our competitive differentiation.
David Abadi: The leverage we have in our model helps us generate meaningful improvement in profitability year over year. Let me now share with you how we performed against each of our major KPIs. RPO, or Remaining Performance Obligations, represent contracted revenue that is expected to be recognized as revenue in future periods. As a reminder, a few factors primarily impact RPO in a given period. Self-Sacrifice, Deployment Cycles, Length of Contracts, Renewal Timing, and Seasonality
Speaker Change: The leverage we have in our model help us generate meaningful improvement in profitability year over year, Let me now share with you how we performed against each of our major kpis.
David Abadi: Total RPO was $566.3 million at the end of Q1. The decrease from last quarter is related to the reason I just discussed. Short-term RPO at the end of Q1 increased to $312.4 million, providing solid visibility into revenue over the next 12 months. We believe these levels of RPO are healthy and support our growth.
David Abadi: Let me now share with you how we performed against each of our major KPIs. IPO or remaining performance obligations represent contracted revenue that is expected to be recognized as revenue in future periods. As a reminder, a few factors primarily impact our PO in a given period. Sales cycle, deployment cycles, length self-contracts, renewal timing, and seasonality. Total IPO was $566.3 million at the end of Q1. The decrease from last quarter is related to the reason I just discussed. Shorten our PO at the end of Q1 increased to $312.4 million, providing solid visibility into revenue over the next 12 months.
Speaker Change: Our remaining performance obligations represent contracted revenue that is expected to be recognized as revenue in future periods.
Speaker Change: As a reminder, a few factors primarily impact our apio in a given period.
Speaker Change: Sales cycle deploy.
Speaker Change: Deployment cycles lengths of contract renewal timing and seasonality.
Speaker Change: Total IPO was $566 3 million at the end of Q1.
Speaker Change: Chris from last quarter is related to the reason I just discussed short term IPO at the end of Q1 increased to $312 4 million.
Providing solid visibility into revenue over the next 12 months.
David Abadi: We believe these levels of our PO are healthy and support our growth. Turning to revenue, Q1 revenue grew by 12.7% year over year and was $82.7 million. Our software revenue in Q1 grew by 13.9% year over year and was $75.8 million. Our current revenue was $45.8 million. The vast majority of our revenue was from repeat business in Q1, similar to previous periods. A testament to the high value our customers generate from our solutions and their high confidence level in us for helping them succeed in the critical missions. Growth margins continued to improve and in Q1 was 71.1% and increased of 270 basis points year over year.
We believe this level of <unk> are healthy and support our growth.
David Abadi: Turning to revenue, G1 revenue grew by 12.7% year-over-year and was $82.7 million. Our software revenue in Q1 grew by 13.9% year-over-year and was $75.8 million. Our current revenue was $45.8 million.
Speaker Change: Turning to revenue.
Q1 revenue grew by 12, 7%.
Speaker Change: Year over year and was $82 7 million.
Speaker Change: Our software revenue in Q1 grew by 13, 9% year over year and was $75 8 million.
Speaker Change: Our recurring revenue was $45 8 million.
David Abadi: The vast majority of our revenue was from repeat business in Q1, similar to previous periods, a testament to the high value our customers generate from our solutions and their high confidence level in us for helping them succeed in the critical mission. Gross margin continues to improve, and in Q1, it was 71.1%, an increase of 270 basis points year over year. Our gross profit continues to grow meaningfully faster than revenue. In Q1, gross profit was up 70% year over year.
Speaker Change: The vast majority of our revenue was from repeat business in Q1 similar to previous periods.
Speaker Change: A testament to the high value our customers generate from our risk solutions.
And they are high confidence level in us for helping them succeed in their critical missions.
Speaker Change: Gross margin continued to improve and in Q1 was 71, 1% an increase of 270 basis points year over year.
David Abadi: Our growth profit continues to grow meaningfully faster than revenue. Q1 growth profit was up 70% year over year. The combination of revenue growth, greater margins, and effective cost structure drove improved profitability. In Q1, we delivered $5 million of adjusted EBDA and land gap operating income of $1.8 million. Q1, like in the recent quarter, was another quarter in which we demonstrated the leverage we have in our model and our financial strengths. We have been focused on executing our goal to improve our financials and continue to drive margin expansion.
Speaker Change: Our gross profit continues to grow meaningfully faster than revenue.
Speaker Change: Q1, gross profit was up 70% year over year.
David Abadi: The combination of revenue growth, greater margins, and an effective cost structure drove improved profitability. During Q1, we delivered $5 million of adjusted EBITDA and land-gap operating income of $1.8 million. Q1, like in recent quarters, was another quarter in which we demonstrated the leverage we have in our model and our financial strength.
Speaker Change: The combination of revenue growth.
Speaker Change: Greater margins and effective cost structure.
Speaker Change: Growth improved profitability.
Speaker Change: During Q1, we delivered $5 million of adjusted EBITDA and non-GAAP operating income of $1 8 million lines.
Speaker Change: Q1 like in recent quarter was another quarter in which we demonstrated the leverage we have in our model and our financial strengths.
David Abadi: We have been focused on executing our goal to improve our financials and continue to drive margin expansion. Turning to guidance, even Q1 dynamics, our momentum, and visibility, we are sharing an increased outlook for the year. For fiscal 25, we now expect full-year revenue to be approximately $344 million, plus or minus 2%. $4,000,000, higher than our previous expectations. This outlook represents approximately 10% year-over-year growth at the midpoint of the revenue range. We believe that our strong short-term RPO of 312.4 million dollars and the demand environment support this outcome. We also believe that the seasonality of revenue will be similar to historical patterns.
Speaker Change: We have been focused on executing our goal to improve our financials.
Speaker Change: <unk> continued to drive margin expansion.
David Abadi: Turning to guidance, even Q1 dynamics, our momentum and visibility, we are sharing an increased outlook for the year. For fiscal 25, we now expect full year revenue to be approximately $344 million, plus or minus $4 million, higher than our previous expectations. This outlook represents approximately 10% year-over-year growth at the midpoint of the revenue range. We believe that our strong short-term IPO of $312.4 million and the demand environment support this outlook. We also believe that this is an alternative revenue will be similar to historical patterns. We expect Q2 revenue to be slightly above the Q1 level and increase sequentially each quarter throughout the year.
Speaker Change: Turning to guidance, even Q1 dynamics, our momentum and visibility.
Speaker Change: We are sharing an increased outlook for the year.
Speaker Change: For fiscal 'twenty five we now expect full year revenue to be approximately $344 million plus or minus 2%.
Speaker Change: 4 million.
Higher than our previous expectations.
Speaker Change: This outlook represents approximately 10% year over year growth at the midpoint of the revenue range.
Speaker Change: We believe that our strong short term, our apio of trend and a $12 4 million.
Speaker Change: And the demand environment support this outlook.
Speaker Change: We also believe that this seasonality of revenue will be similar to historical patterns.
David Abadi: We expect Q2 revenue to be slightly above the Q1 level and increase sequentially each quarter throughout the year. Because of the leverage we have in our model, we increased our adjusted EBITDA guidance by approximately $3 million from the outtake provided during our last earnings call, and we now expect it to be about $22 million at the midpoint of the revenue range, compared to $9 million last year. In the recent reporting period, our non-gap tax expenses significantly fluctuated between quarters, which impacted our NADGAP EPS results.
Speaker Change: We expect Q2 revenue to be slightly above the Q1 level and increased sequentially each quarter throughout the year.
David Abadi: Because of the leverage revenue model, we increase our adjusted EBDI guidance by approximately $3 million from the outlook provided during our last earnings call. And we now expect it to be about $22 million at the midpoint of the revenue range compared to $9 million last year. In recent reporting period, our non-GAAP tax expenses significantly fluctuated between quarters, which impacted our non-GAAP EPS results. In Q1, we adapted a more common methodology that uses gap expected effective tax rate and applied it to the non-gap results. This methodology will increase the correlation on a quarterly basis between non-GAAP pre-tax income and non-GAAP income.
Speaker Change: Because of the leverage within our model, we increased our adjusted EBITDA guidance by approximately $3 million from the outlook provided during our last earnings call and.
Speaker Change: And we now expect it to be about $22 million and the midpoint of the revenue range compared to $9 million last year.
Speaker Change: In recent reporting period, our non-GAAP tax expenses significantly fluctuated between quarters, which impacted our non-GAAP EPS results.
David Abadi: In Q1, we adapted a more common methodology that uses GAAP-expected effective tax rates and applied it to the non-GAAP results. This methodology will increase the correlation on a quarterly basis between non-GAAP free tax income and non-GAAP income. We continue to expect cash tax payment to be about $10 million and expect annual NAMGAP tax expenses to be also about $10 million. A full disclosure note, including the impact on the comparative period, is provided in our press release issued today.
Speaker Change: In Q1, we adopted a more common methodology that uses <unk>.
Speaker Change: GAAP expected effective tax rate and applied it to the non-GAAP results.
Speaker Change: This methodology will increase the correlation on a quarterly basis between non-GAAP pre tax income and non-GAAP income.
David Abadi: We continue to expect cash tax payment to be about $10 million and expect non-GAAP tax expenses to be also about $10 million. Full disclosure note, including the impact to the comparative period, is provided in our press release issued today. As a result of our increased outlook, we now expect non-GAAP EPS loss to come in at $7.00 at the midpoint of the revenue range. As a result of our strong collection in Q1 and improved outlook, we are increasing our forecast for this year, and we now expect to generate about $37 million of cash from operations.
Speaker Change: We continue to expect cash tax payment to be about $10 million and expect <unk> NAND.
Speaker Change: non-GAAP tax expenses to be also about $10 million.
Speaker Change: Full disclosure note, including the impact to the comparative period is provided in our press release issued today.
David Abadi: As a result of our increased outreach... We now expect annual non-GAAP EPS losses to come in at $0.07 at the midpoint of the revenue range, as a result of our strong collection in Q1 and improved outcomes. We are increasing our forecast for this year, and we now expect to generate about $37 million of cash from operations. To summarize... We have been executing consistently well and producing strong results. We continue to add capabilities and increase the value our advanced solutions deliver to new and existing customers by leveraging the latest technologies, including AI.
Speaker Change: As a result of our increased outlook, we now expect annual non-GAAP EPS loss to come in at 7% and.
Speaker Change: At the midpoint of the revenue range.
As a result of our strong collection in Q1 and improved outlook, we are increasing our forecast for this year and we now expect to generate about $37 million of cash from operations.
David Abadi: To summarize, we have been executing consistently well and producing strong results. We continue to add capabilities and increase the value our advanced solution deliver to new and existing customers by leveraging the latest technologies, including AI. We increase our revenue and profitability outlook for the current year and expect $6.25 to be a year of continued growth, significant profitability improvement, with strong cash flow from operation. We believe we are well-positioned for sustainable growth and have leveraged in our model so we can generate additional improvement in profitability and cash flow in future years.
Speaker Change: To summarize we are.
Speaker Change: <unk> been executing consistently well and producing strong results.
Speaker Change: We continue to add capabilities and increase the value our advanced solutions deliver to new and existing customers by leveraging the latest technologies, including AI.
David Abadi: We increased our revenue and profitability outlook for the current year and expect Fiscal 25 to be a year of continued growth, significant profitability improvement, and strong cash flow from operations. We 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 hand the call over to the operator to open the line for questions.
Speaker Change: We increased our revenue and profitability outlook for the current year and expect fiscal 'twenty five to be a year.
Speaker Change: <unk> growth significant profitability improvement.
Speaker Change: With strong cash flow from operation.
Speaker Change: We 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 and future of the year.
Operator: With that, I would like to end the call over to the operator to open the line for questions.
Speaker Change: With that I would like to end the call over to the operator to open the line for questions.
Operator: Thank you, Edward.
Speaker Change: Thank you operator.
Operator: Thank you, Ezra, Minder. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment; will we compile our Q&A roster.
Speaker Change: Okay.
Operator: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment while we compile our Q&A roster. And our first question is going to come from the line of Mike Cikos with Needham. Your line is open. Please go ahead.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.
Michael Cikos: Our first question is going to come from the line of Mike Cikos with Needham. Your line is open; please go ahead. Great, thanks for taking the question, guys, and great quarter here as far as the execution. I wanted to come back to some of the prepared remarks, and I think David had might have been you who was talking about the recurring revenue contribution. I really appreciate the 55% of total revenue statistic, which I think is new for investors. Can you just help give us a better sense as far as the sources for the recurring revenues?
Speaker Change: And our first question is going to come from the line of Mike <unk> with Needham. Your line is open. Please go ahead.
Michael Joseph Cikos: Great, thanks for taking the question guys and a great quarter here as far as the execution goes. I wanted to come back to some of the prepared remarks, and I think David, it might have been you who was talking about the recurring revenue contribution. I really appreciate the 55% of total revenue statistic, which I think is new for investors. Can you just help give us a better sense as far as the sources for the recurring revenues are concerned?
Speaker Change: Great. Thanks for taking the question guys and great quarter here as far as the execution.
I wanted to come back to some of the prepared remarks.
Dave: I think Dave.
Dave: David It might've been new who is talking about the recurring revenue contribution really appreciate the 55% of total revenue statistic.
Dave: Which I think is new for investors can.
Dave: Can you just help give us a better sense as far as the sources.
Michael Joseph Cikos: And then I know that we have 55% of total revenue today. Can you help us think about how that 55% was maybe a year ago or a quarter ago, just so we have something to compare it to for maybe a bit more of an apples-to-apples comparison?
For the recurring revenues and then I know that we have a 55% of total revenue today can you help us think about how that 55% was maybe a year ago or a quarter ago. Just so we have something to compare it to.
Michael Cikos: And then I know that we have a 55% of total revenue today.
David Abadi: Can you help us think about how that 55% was maybe a year ago or a quarter ago, just so we have something to compare it to for maybe a bit more of an apples-to-apples comparison? Yes, thank you, Mike. The recurring revenue is important to contribute for our growth, and the main pillar to generate this revenue are support contract and some offering of subscription. And the majority, I would say even the vast majority of this revenue is coming from support contracts, which our customer we knew in a regular basis. If you look about the numbers, actually, we shared it on the dashboard that we presented, and the number we're increasing from, we're currently from $42 million in Q1 last year to $45.8 million on this quarter.
Dave: For maybe a bit more of an apples to apples comparison.
David Abadi: Yes, thank you, Mike. Recurring revenue is an important contributor to our growth, and the main pillars that generate this revenue are support contracts and some offering of subscriptions. And the majority, I would say even the vast majority of this revenue is coming from support contracts, which our customers renew on a regular basis. If you look at the numbers, we shared them on the dashboard that we presented, and the numbers were increasing from 42 million dollars in Q1 last year to 45.8 million dollars this quarter.
Speaker Change: Yes, Thank you Mike.
Speaker Change: Recurring revenue is the important contributor for our growth and the main pillar to generate this revenue our support contract and some offering.
Speaker Change: Our subscription and the majority of which even the vast majority of the.
Mike: This revenue is coming from support contracts, which our customer renew on a regular basis.
Mike: If you look about the numbers actually we shared that on the board that we represented in the number of ever increasing for marine for a quick correctly from $42 million in Q1 last year to $45 million this quarter, so the trend quarter over quarter, and we had secretion.
David Abadi: So you have the trend quarter-over-quarter and the rate of secretion growth. In the long term, we think that it will continue to grow. It provides us with good visibility, and it's another indication of repeat business from existing customers.
David Abadi: So you have the 2nd quarter of a quarter and where it's a Christian growth. And in the long term, we think that you'll continue to grow. It's a provider's good visibility, and it's another indication of the repeat business from existing customers.
Mike: <unk> and <unk>.
Mike: In the long term, we think that will continue to grow.
<unk> provides us good visibility and it's another indication of the repeat business from existing customers.
Michael Cikos: God, thank you for that. And I wanted to just highlight two other pieces here. So first, the CRPO remains strong for the organization, right? And I think that's, if I'm reading the T-leaves here, that's probably what gives you the confidence to be taking up the full year guidance.
Michael Joseph Cikos: Got it. Thank you for that.
Speaker Change: Got it thank you for that.
Speaker Change: I wanted to just highlight two two other pieces here so first.
Elad Sharon: And I wanted to just highlight two other pieces here. So first, the CRPO remains strong for the organization, right? And I think that's, if I'm reading the tea leaves here, that's probably what gives you the confidence to be taking up the full year guidance. I guess the question that I have is more around the RPO and the sequential decline we saw. So, first, the sequential decline, can you remind us, is that more of a... based on seasonality for the business, and then the second piece on RPO.
Speaker Change: <unk> remained strong for the organization right and I think that's it.
Speaker Change: I'm reading the tea leaves here Thats, probably what gives you the confidence will be taking up the full year guidance.
Elad Sharon: So first, is it tied to seasonality and then second with RPO? Are you seeing customers, maybe? increasingly shift towards shorter-term contract durations. Does that in any way come into play when we think about that RPO metric?
David Abadi: I guess the question that I have is more around the RPO and the sequential decline we saw. So first, the sequential decline, can you remind us of that more of a based on seasonality for the business? And then the second piece on RPO. So first, is it tied to seasonality in the second with RPO? Are you seeing customers maybe increasingly shift towards shorter-term contract relations? Is that in any way common to play when we talk about that RPO metric?
Speaker Change: I guess the question that I have is more around the RPM and the sequential decline we saw.
Speaker Change: So first the sequential decline can you remind us is that more of a.
Speaker Change: Yeah.
Speaker Change: Okay based on seasonality for the business and then the second piece on <unk>. So first is it tied to seasonality and the second with OPO.
Speaker Change: Are you seeing customers, maybe increasingly shift towards.
Speaker Change: Shorter term contract durations would that in any way come into play when we think about that metric.
Elad Sharon: Yeah, hi, Matt. This is a lot. So, as David mentioned in the call, the RPO is a proxy for backlog and the factors that impact RPO.
Elad Sharon: Hi Matt, this is Elad. So, as David mentioned in the call, RPO is a proxy for backlog, and the factors that impact RPO are primarily sale cycle, deployment cycle, length of contract, renewal timing, and seasonality, and RPO may fluctuate due to those reasons, and you've seen similar behavior in the past of RPO going up and down. In Q1, it was mainly related to three out of the five factors. It was related to renewal timing, sales cycle, and seasonality.
Lance: Yes, Hi, Mark this is lance.
Speaker Change: No.
Speaker Change: David mentioned in the call the appeal as a proxy for backlog and the factors that impact our apio I, primarily sell cycle deployment cycle length of contracts.
Elad Sharon: I primarily sell cycle, deployment cycle, a lens of contracts, a reunion time in the end seasonality. And the RPO may fluctuate due to those reasons. And you have seen similar behavior in the past of RPO and going up and down. In Q1, it was mainly related to three out of the five factors. It was related to renewal timing, self-cycle end seasonality.
David: A renewal timing and seasonality and that appeal. It may fluctuate due to those reasons and you've seen similar behavior in the past for beyond going up or down.
David: In Q1, it was mainly related to three out of the five factors it was related to renewal timing sales cycle and seasonality.
Elad Sharon: And yet, both of the RPOs, the short and the total RPOs, are very strong. And, in addition, given what we hear from customers on the evolving challenges. You know, demand is very solid, the market is healthy, and RPO may fluctuate from quarter to quarter, but the overall market conditions are very healthy, and we believe we can continue and grow the business in a healthy manner.
Elad Sharon: and yet both of our IPOs, the show and the total IPOs are very strong and in addition given what we hear from customers on the evolving challenges you know the demand is very solid the market is healthy and the IPO may afflicts may be fluctuated from quarter to quarter but the overall market conditions are very healthy and we believe we can continue and go to business in the healthy manner that's great really appreciate the color from both of you today thank you I'll turn it over to my colleagues thanks Michael thank you and one moment as we move on to our next question and our next question is going to come from online of Peter Levine with Evercore ISI your line is open please go ahead thank you yes thank my question you know Elad you made a comment earlier on in your script around investments in North America maybe just help us understand who you're replacing what is the go-to-market is it any different in North America than it would be in other markets that you can feed in just kind of give us an understanding of the investments you're making today in North America the replacements and or the sales cycles buying processes any different yeah it should be there so we continue to invest in that looks like presence in the North America this method the incremental investments DC are primarily related to the sales side which means the sales force capacity for demos and POCs and marketing and we see a lot of interest in our products we continue to win competitive deals we are placing incumbents customers that already use our solutions operationally are generating high value and we were able first of all to get very good feedback seconds because some customers became a very good reference for us and also we got already fall on orders this quarter in Q1 actually we got a new seven deals from North America two of them were new customers the others were fall on orders so overall we continue and making good progress in terms of the go-to market it's a little bit different in North America we are focusing on two different markets tells the state and local and federal for the state and local we approach directly with our own sales force for the federal side we approach with an established partner and the deals we want so far and we started first was we state and local later on we initiated the go-to-market for the federal for the federal it takes with expected to take a in terms of sales cycle given that we are a new comer into this market and almost in every deal we have to replace incumbents we have a longer sales cycle compared to other territories when we have fall on orders it may take about four to five quarters to acquire a new customer and fall on orders came so far after two to three quarters so when we acquire a new customer actually the fall on orders come much faster it's a journey and we continue to make progress I don't know if you could down.
David: And yet both of our appeal as the short end total appealed are very strong.
Speaker Change: And in addition, given what we hear from customers on the evolving challenges.
Speaker Change: The demand is very solid the market is healthy.
Speaker Change: And.
Speaker Change: I'll feel may reflects may be fluctuated from quarter to quarter, but the overall.
Speaker Change: Market conditions are very healthy and we believe we can continue and grow the business and healthy manner.
Michael Joseph Cikos: That's great. I really appreciate the color from both of you today. Thank you. I'll turn it over to my colleagues. Thanks, Mike.
Speaker Change: That's great really appreciate the color from both of you today. Thank you I'll turn it over to my colleagues.
Michael: Thanks, Michael.
Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Peter Levine with Evercore ISI. Your line is open. Please go ahead.
Speaker Change: Thank you and one moment as we move onto our next question.
Speaker Change: And our next question is going to come from the line of Peter Levine with Evercore ISI. Your line is open. Please go ahead.
Peter Marc Levine: Thank you guys for taking my question. You know, Elad, you made a comment earlier in your script about investments in North America. Maybe you could just help us understand who you are replacing?
Peter Marc Levine: Great. Thank you guys for taking my questions.
Peter Marc Levine: You made a comment earlier on in your script around investments in North America, maybe just help us understand who are you replacing.
Elad Sharon: What is the go-to market? Is it any different in North America than it would be in other markets that you compete in? Just kind of give us an understanding of the investments you're making today in North America, the replacements, and are the sales cycles, and buying processes, any different?
Speaker Change: What is the go to market as with any different in North America.
Speaker Change: And it would be in other markets that you compete in just kind of give us an understanding of the investments we're making today in North America. The replacements and are the sales cycles buying process is any different.
Elad Sharon: Yeah, sure, Peter. So we continue to invest in that to extend our presence in North America. And these incremental investments in DC are primarily related to the sell side, which means the sales force capacity for demos and POCs and marketing. We see a lot of interest in our products. We continue to win competitive deals. We are placing incumbents.
Speaker Change: Yes, sure Peter So we continue to invest in that to extent presence in North America.
Speaker Change: These incremental.
Speaker Change: Incremental investments in D. C are primarily related to the cell sites, which means our sales force capacity for demos NPL season and marketing.
And we see a lot of interest in our products, we continue to win competitive deals where play.
Elad Sharon: Customers that already use our solutions operationally are generating high value, and we were able, first of all, to get very good feedback. Second, some customers became very good references for us. And also, we got already follow-on orders. This quarter, in Q1, actually, we got seven new deals from North America. And two of them were new customers. The others were follow-on orders.
Speaker Change: Incumbents.
Speaker Change: Customers.
Speaker Change: <unk> reduced our solutions operationally.
Speaker Change: Generating high value and we were able to first of all to get very good feedback because some customers became a very good reference for US and also we got already follow on orders.
Speaker Change: This quarter in Q1 actually we got a new seven deals from in North America.
Speaker Change: Two of them are new customers the others follow on orders. So overall, we continue.
Elad Sharon: So overall, we continue to make good progress. In terms of the go-to market, it's a little bit different. In North America, we are focusing on two different markets, state and local and federal. For the state and local, we approach it directly with our own sales force. For the federal side, we approach it with an established partner. And the deals we want so far, and we started first, were with state and local. Later on, we initiated the go-to-market for the federal government.
Speaker Change: Making good progress in terms of the go to market, it's a little bit different in North America. We are here for.
Speaker Change: Focusing on two different markets.
Speaker Change: State and local and federal for the state and local.
Speaker Change: <unk> approach directly with our own sales force for.
Speaker Change: For the federal side, we approach.
Speaker Change: <unk> partner.
Speaker Change: And the deals we won so far.
Speaker Change: And we started first was we state and local later on we are in.
Speaker Change: <unk> the go to market for the first of all for the first of all it takes we expect it to take a little bit longer.
Elad Sharon: For the federal government, we expect it to take a little bit longer. In terms of the sales cycle, given that we are a newcomer to this market, and in almost each and every deal, we have to replace incumbents. We have a longer selling cycle compared to other territories when we have follow-on orders. It may take about four to five quarters to acquire a new customer, and follow-on orders come so far after two to three quarters. So when we acquire a new customer, actually, the follow-on orders come much faster. It's a journey, and we continue to make progress.
Speaker Change: In terms of sales cycles, given that we are and newcomers to this market and almost in each and every deal we have to replace incumbents.
We have.
Speaker Change: A longer sales cycle compared to other territories when we have follow on orders.
Speaker Change: It may take about four to five quarters to acquire a new customer and follow on orders came so far.
Speaker Change: After a two to three quarters, so when we acquire a new customer actually the follow on orders come in much faster.
Speaker Change: It's a journey and we continue to make progress.
Peter Marc Levine: I don't know if you could, maybe it's a two-part question, is can you share with us what your net retention rates look like, and then second, on the investigative analytics side. In terms of AI, help us understand how you monetize? AI. Is it an upsell? Is it a retention tool? Just kind of walk us through the new AI innovations that you're coming out with, how you're pricing that, and then second, if you could share with us your net retention rate.
Speaker Change: Okay.
Unnamed: Maybe it's a two-part question.
Speaker Change: So if you take out maybe a two part question is can you share with us what your net retention rates look like.
Unnamed: Do you share with us what your net retention rates look like? And then second, you know, on the investment battle of excited.
Speaker Change: And then second on the.
Speaker Change: <unk> analytics side.
Elad Sharon: In terms of AI, help us understand how you monetizing AI. Is it more as an upsell? Is it a retention tool? Just kind of walk us through with the new AI innovations that you're coming out with. How you're pricing that.
Speaker Change: In terms of AI helps us understand how are you monetizing.
Speaker Change: AI is it more is it a upsell is it a retention tool just kind of walk us through with the new AI innovations that youre coming out with how your pricing that and then second if you could share with us net retention rates.
Elad Sharon: And then second, if you could share with us net retention rates.
Elad Sharon: So about Net Retention, this KPI is more relevant for subscription model and SaaS companies. We sell our solutions primarily in perpetual license and support contracts. In terms of AI, AI is an incremental demand factor for our customers. There are a few reasons for that.
Elad Sharon: So about net retention, it's this KPI is a more relevant for subscription model and tough companies.
Speaker Change: So we're both net retention needs.
These kpis are more relevant for our subscription model and tough companies.
Elad Sharon: We sell our solutions primarily in perpetual license and support contracts. In terms of AI, AI is an incremental demand factor for our customers. There are a few reasons for that. The first one is that AI is used by the bad actors as well. They are better hiding. They create fake identities, and it's more complicated and difficult to find them. So our customers have increasing challenges in this respect. In terms of our customers' benefits, AI is a contributor for accelerating investigations and make it the most successful. And there are two dimensions or areas where AI helps our customers.
Speaker Change: Sell our solutions, primarily in perpetual license and support contracts in terms of.
Speaker Change: Is the incremental demand for our customers.
Speaker Change: And there are a few reasons for the first one is that AI is used by the bad actors as well better.
Elad Sharon: The first one is that AI is used by bad actors as well. They are better at hiding, they create fake identities, and it's more complicated and difficult to find them. So our customers have increasing challenges in this respect. In terms of our customers' benefits, AI is a contributor to accelerating investigations and making them more successful. And there are two dimensions or areas where AI helps our customers. The first one is Gen AI.
Speaker Change: Better hygiene, they create fake identities in it.
Speaker Change: More complicated and difficult to find them. So our customers have increasing challenges in this respect.
Speaker Change: And in terms of our customers' benefits.
Speaker Change: AI is is.
Speaker Change: Contributor for accelerating investigations and make it the most.
Speaker Change: Most successful.
Speaker Change: And there are two dimensions.
Speaker Change: Areas, where AI helps our customers. The first one is gen AI.
Elad Sharon: The first one is Gen AI. Gen AI helps customers to utilize the system in the most efficient way. They don't have to rely on technical experts and data scientists. Actually, every user can ask simple questions in natural language and get much faster and higher quality answers. So the benefit here is efficiency and quality. And the second area where AI can help is with a stronger analytic sentence. For example, if customers have to uncover hidden insights or hidden relations, AI makes it much faster and actually can uncover more hidden insights and actually increase the value of the customers.
Elad Sharon: Gen-AI helps customers to utilize the system in a more efficient way. They don't have to rely on technical experts and data scientists. Actually, every user can ask a simple question in natural language and get much faster and high-quality answers. So the benefit here is efficiency and quality. And the second area where AI can help is with stronger analytic sentences. For example, if customers have to uncover hidden insights or hidden relations, AI makes it much faster and can actually uncover more hidden insights and actually increase the value of the customers. So AI is an incremental demand generator, and I expect it to continue and be that way along the way.
Speaker Change: Jim.
Speaker Change: Customers to utilize the system in a more efficient way they don't have to rely on.
Speaker Change: Our technical experts and data.
Speaker Change: The data scientists actually.
Speaker Change: Every user can ask a simple question in natural language and get much faster in high quality answer. So the benefit here is efficiency and quality and the secondary on where I can help.
Speaker Change: With the stronger analytic center for example lease customers as to uncover hidden insights reading relations.
Speaker Change: It makes it a.
Speaker Change: And much faster and actually can uncover more hidden insights.
Speaker Change: And should increase the value of the of the of the customers. So.
Elad Sharon: So AI is an incremental demand generator, and they expect it to continue and be that way along the way.
Speaker Change: Is an incremental.
Speaker Change: Demand generator and they expect to to continue and be that way along the way.
Unnamed: Thank you.
Peter Marc Levine: Thank you guys for taking my question.
Operator: Yes, take my question. Thank you. And again, ladies and gentlemen, if you would like to ask a question at this time, please press star 1-1 on your telephone.
Speaker Change: Great. Thank you guys for taking my question.
Speaker Change: Thank you.
Operator: Thank you. And again, ladies and gentlemen, if you would like to ask a question at this time, please press star 11 on your telephone. One moment, as we move on to our next question. And our next question comes from the line of Shaul Eyal with TD Cal, and your line is open, please go ahead.
Speaker Change: Thank you.
Speaker Change: Again, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone number one moment as we move on to our next question.
Operator: One moment as we move on to our next question.
Shaul Eyal: And our next question comes from the line of, shall we all with TD Cal, and your line is open, please go ahead. Thank you. Hi, good afternoon, guys. Congrats on execution and improved result. A lot, we have seen the majority of Keith's companies under coverage; those that are slightly more cyber security focused, really reporting healthy government and federal related vertical results. And I'm considering that to your improved results, scenes of this were seeing a little bit of the spending coming ahead of the seasonally strong September federal quarter.
Speaker Change: And our next question comes from the line of Shaul Eyal with Cowen. Your line is open. Please go ahead.
Shaul Eyal: Thank you. Hi, good afternoon guys.
Shaul Eyal: Thank you hi, good afternoon, guys, congrats execution and improved results.
Elad Sharon: Congratulations on execution and improved results. Elad, we've seen the majority of these companies under coverage, those that are slightly more cyber security focused, really reporting healthy, and Federal-related vertical results, and I'm conceding that to your improved results. It seems as if we're seeing a little bit of the spending coming ahead of the seasonally strong September federal quarter. So just maybe help us understand how you see the market and what has been driving what seems to be an across-the-board healthy federal spending thus far? Yeah, thanks.
Speaker Change: A lot.
Speaker Change #100: We've seen the majority of companies under coverage.
Shaul Eyal: Like you more cyber security focused really reporting healthy.
Shaul Eyal: Government and federal related vertical results.
Shaul Eyal: And I am conflating that to your improved result.
Shaul Eyal: The lift we're seeing a little bit of the spending coming ahead of the seasonally strong September federal quarter. So.
Shaul Eyal: So just maybe help us understand how is it that you're seeing the market and what has been driving what seems to be in across-the-board healthy federal spending this far? Yeah, thanks, Shaul. So first of all, I was starting to say that our engagement with our customers is very high, and we get insights into their evolving needs on an ongoing basis. About the demand drivers, there are a few of them. The first one is that investigations become more difficult and more complex for customers. The bad guys are also using technology, better hiding, creating fake identities, hiding their relationships and networks, and hiding their ideas and plans.
Speaker Change #101: So just maybe help us understand how would how is it that youre seeing the market and what has been driving what seems to be an across the board healthy federal spending thus far.
Elad Sharon: Yeah, thanks, Shaul. So first of all, I will start and say that our engagement with our customers is very high, and we get insights into the revolving needs on an ongoing basis. The demand drivers are there are a few of them. The first one is that investigations are becoming more difficult and more complex for customers as the bad guys are also using technology, better hiding, creating fake identities, hiding their relationships and networks, and hiding their ideas and plans. So it becomes more difficult to put your hand on them and to neutralize threats before they unfold. This is just one second.
Speaker Change #102: Yes, Thanks Jones so.
Speaker Change #103: First of all I'll start and say that our engagement with customers is very high and we get insights into their evolving needs and ongoing basis.
Speaker Change #103: About the demand drivers there are few of them. The first one is that.
Speaker Change #103: Investigations become more difficult and more complex for our customers. The bad guys are all of the also using technology better hiding, creating fake identities heightening the relationships and networks and hiding there.
Speaker Change #103: The ideas and plans. So this becomes more difficult to put your hands on them and to neutralize threats. We saw then.
Elad Sharon: So this becomes more difficult to put your hands on them and to neutralize threats before they unfold. This is one second. In order for customers to be very effective, they have to deal with more data volumes and diversity. So actually they have to analyze more and more and more data, and this requires, first of all, strong fusion capabilities, and the second is more analysis and AI capabilities in order for them to convert it into insights quickly. And this continues and goes dramatically.
Speaker Change #103: Unfold. This is one second.
Elad Sharon: In order for customers to be very effective, they have to deal with more data volumes and diversity. So, actually, they have to analyze more and more and more data. And this requires, first of all, strong fusion capabilities, and the second is more analysis and AI capabilities in order for them to turn data into insights quickly. And this continues and grows dramatically, and the next driver is related to technological disruption. Technology disruptions work both ways. If you have it, you're winning. If you don't have it, you might lose.
Speaker Change #103: In order for customers to be very effective they have to deal with more data volumes and diversity. So actually that has to analyze more in more and more data and this requires first have a strong fusion capabilities and the second is more analysis and AI capabilities and in order for them to convert it into it.
Speaker Change #103: <unk> quickly.
Speaker Change #103: This continues to grow dramatically and they're in that driver is related to technology disruption.
Elad Sharon: And technology disruption, one example is AI. As I mentioned earlier, AI helps with efficiency, with generation AI, and also with sophisticated machine learning engines. So, those demand drivers were reflected in many engagements we had with our customers. One example is in ISS, at the conference in Europe that I discussed earlier in the call. We had customers talking about exactly those demand drivers, and we also actually demonstrated our co-pilot capability, an AI-driven, Gen-AI capability in co-pilot.
Elad Sharon: And then the next driver is related to technology disruption. Technology instructions are both ways. If you have it, you're winning; if you don't have it, you might lose. And technology instruction, one example is AI. As I mentioned earlier, AI helped with efficiency, with reflected in many gadgets we had with our customers. One example is in ISS, the conference in Europe that we discussed earlier in the call. We had the customers talking about exactly those demand drivers. And we also actually demonstrated our co-pilot capability, AI-driven, GNI capability in co-pilot. We also heard it in the LIA survey results.
Speaker Change #104: The disruptions both ways if you have it.
Speaker Change #104: Youre, winning if you don't have it you might lose and define interruption and one example is AI as I mentioned earlier and it.
Speaker Change #104: It helps with deficiency with Gen <unk> and also at.
Speaker Change #104: Sophisticated machine learning engines.
Speaker Change #104: So those demand drivers are reflected in many engagements we have with our customers. One example is in ISS.
Speaker Change #105: The conference in Europe that were discussed earlier on the call.
Speaker Change #105: Had the customers talking about those exactly those demand drivers.
Speaker Change #105: And we're also.
Speaker Change #105: Actually demonstrated the copilot capability.
Speaker Change #105: AI driven.
Speaker Change #105: <unk> capability.
Speaker Change #105: In copilot.
Elad Sharon: We also heard it in the layer survey results, and I also mentioned it earlier in the call. And we hear it also from other customers, not only law enforcement; we hear it from national security and intelligence customers that we have, that we are engaging with and have had them as our customers for many, many years. So overall, we feel the same, that the market is healthy, demand drivers are solid, and the need for technology is going to continue and grow over time. We continue to make investments, of course, to keep pace and to maintain leadership and to expand our presence in certain territories, including the US, and we feel good about the great opportunity ahead of us.
Also heard it.
Speaker Change #105: In the.
Speaker Change #105: February results.
Elad Sharon: I also mentioned it earlier in the call. And we hear it also from other customers, not only on enforcement. We hear it from national security and intelligence customers that we have, that we are engaging and having them as our customers for many, many years. So overall we feel the same that the market is healthy, demand drivers are solid, and the need for technology is going to continue and grow over time. We continue to make investments, of course, to keep pace and to maintain leadership and to expand presence in certain territories, including the US. And we feel good about the growth opportunity ahead of us.
Speaker Change #105: I also mentioned it earlier in the call.
Speaker Change #105: And we hear it also from other customers not only law enforcement adherence from National Securities have diligence customers that we have.
Speaker Change #105: That's very engaging and having them as our customers for many many years. So overall, we feel the same that the market is healthy demand drivers are solid and the need for technology is going to continue and grow over time.
Speaker Change #105: We continue to make investments of course too.
Speaker Change #106: To keep pace and to maintain leadership and to expand presence in certain territories, including the U S.
Speaker Change #106: And we feel good about the growth opportunities ahead of us.
Unnamed: Thank you very much.
Speaker Change #107: Thank you very much.
Dean Ridlon: Thank you, and I'm showing no further questions, and I'd like to hand the comments back over to Dean Riland for any further remarks. Thank you, Michelle, and thank you, everyone, for joining us on today's call. Should you have any questions, please feel to reach out to me, and we look forward to speaking with you again next quarter. Thank you very much.
Operator: Thank you, and I'm showing no further questions, and I'd like to hand the conference back over to Dean Ridlon for any further remarks.
Speaker Change #107: Okay.
Speaker Change #108: Thank you and Im showing no further questions and I'd like to hand, the conference back over to Dean Ridlon for any further remarks.
Dean M. Ridlon: Thank you, Michelle, and thank you, everyone, for joining us on today's call. Should you have any questions, please feel free to reach out to me, and we look forward to speaking with you again next quarter. Thank you very much.
Dean M. Ridlon: Thank you Michelle and thank you everyone for joining us on today's call should you have any questions. Please feel to reach out to me and we look forward to speaking with you again next quarter. Thank you very much.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #110: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change #110: Okay.
Speaker Change #110: [music].
Speaker Change #110: Okay.
Speaker Change #110: Okay.
[music].
Speaker Change #110: Okay.
Speaker Change #110: [music].