Q1 2026 Cognyte Software Ltd Earnings Call
Unknown Executive: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognite First Quarter Fiscal Year 2026 Earnings Conference Call.
Okay.
Speaker Change: Good day, ladies and gentlemen, thank you for standing by.
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First quarter fiscal year 2026 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. Just a question. During the session you will need to press star one on your telephone.
Operator: At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press Star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference may be recorded.
Speaker Change: We'll then have an automated message advising yohanan space.
Dean Ridlon: I will now hand the conference over to your speaker host, Dean Ridlon, Head of Investigations. Please go ahead. Thank you, operator. Hello, everyone. I'm Dean Ridlon, Cognite's Head of Investor Relations. Thank you for joining us. I'm here with Elad Sharon, Cognite CEO, and David Abadi, Cognite CFO.
Today's conference maybe recorded.
Speaker Change: Now under conference I'll, let you speak of house doing with one head of Investor Relations. Please go ahead.
Dean Ridlon: Thank you operator, Hello, everyone and Dean Ridlon Cognex head of Investor Relations. Thank you for joining us today.
Speaker Change: I'm here with a lot of strong cognex, CEO and David a body Cognex CFO.
Dean Ridlon: Before getting started, I would like to mention that accompanying our call today is a presentation like to view these slides in real time during the call, please visit the investor section of our website at Cognyte.com. Click on Upcoming Events, then the webcast link for today's conference.
Speaker Change: 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 investors section of our website at Cognex Dot com.
Speaker Change: Click on upcoming events.
Speaker Change: Webcast link for 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. 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 accept as required by law. Cognyte assumes no obligation to update or revise. Investors are cautioned not to place undue reliance on these forward-looking states.
Speaker Change: 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 <unk> five and.
Speaker Change: Other provisions of the federal Securities laws.
Speaker Change: These forward looking statements are based on management's current expectations and are not guarantees of future performance.
Speaker Change: Actual results could differ materially from those expressed in or implied by these forward looking statements.
Speaker Change: The forward looking statements are made as of the date of this call and except as required by law cognate assumes no obligation to update or revise them.
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 and uncertainties could cause Cognyte's actual results to differ materially from those indicated in these forward-looking For more information visit www.fema.gov Please see our annual report on Form 20-F for the fiscal year ended January 31st, 2025, and other filings we make with the SEC.
Speaker Change: A more detailed discussion of how these and other risks and uncertainties could cause cognex actual results to differ materially from those indicated in these forward looking statements.
Speaker Change: Please see our annual report on form 20-F for.
Speaker Change: The fiscal year ended January 31, 2025, 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 gap 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.
Speaker Change: The financial measures discussed today include non-GAAP measures.
Speaker Change: We believe investors focus on non-GAAP financial measures and comparing results between periods and among our peer companies that published 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 for 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.
Speaker Change: And its useful to investors for informational and comparative purposes.
Elad Sharon: The non GAAP financial measures that the company uses have limitations and may differ from those used by other Now, I would like to turn the call over to Elad.
Speaker Change: The non-GAAP financial measures that the company uses have limitations and may differ from those used by other companies.
Speaker Change: Now I would like to turn the call over to a lot.
Elad Sharon: Thank you, Dean. Welcome, everyone, to our first quarter fiscal 26 conference call. We are pleased to report a strong start to the year. Our Q1 performance reflects consistent execution against our strategy, strong customer engagement, and healthy demand for our solution. In the first quarter, we grew revenue by approximately 16% over a year to $95.5 million. Non-GAAP growth profit increased by about 17% over a year. We generated approximately $10 million for just the DBDA for the quarter, more than double what we generated in Q1 last year. And cash flow for operations was approximately $1.7 million. These results underscore the strength of our business, the value of our technology, and the increasing relevance of our offerings in a rapidly evolving threat environment.
Speaker Change: Thank you Dan and welcome everyone to our first quarter fiscal 'twenty six conference call.
Speaker Change: We are pleased to report a strong start to the year.
Speaker Change: Our Q1 performance reflects consistent execution against our strategy strong customer engagement and healthy demand for our solutions.
Speaker Change: In the first quarter, we grew revenue by approximately six 7% year over year to $95 $5 million.
Speaker Change: non-GAAP gross profit increased by about 17% year over year.
Speaker Change: We generated approximately $10 million of adjusted EBITDA for the quarter more than double what we generated in Q1 last year and cash flow from operations was approximately $1 7 million.
Speaker Change: These results underscore the strength of our business the value of our technology and the increasing relevance of our offerings in the rapidly evolving threat environment.
Elad Sharon: Let me share a few examples of our Q1 customer wins, high impact deals that demonstrate the strength of our technology and the solid progress we are making in deepening our relationships with customers. We signed a multi-use support agreement with a long-standing national security customer we have had a partnership with for over two decades. This three-year agreement, valued at over $20 million per year, reinforces the critical role our investigative analytics solutions play in helping the agency protect national interests and secure public safety. We also signed a new three year subscription agreement valued at over $10 million per year with another long standing national security customer.
Speaker Change: Let me share a few examples of our Q1 customer wins high impact areas that demonstrate the strength of our technology and the solid progress you are making in deepening our relationships with customers.
Speaker Change: We signed a multi year support agreement with long standing National security customer, we have had a partnership with for over two decades.
Speaker Change: History was agreement valued at over $20 million per year reinforces the critical role our investigative analytic solutions play in helping the agency protect national interests and secure public safety.
Speaker Change: We also signed a new three year subscription agreement valued at over $10 million per year with another long standing national security customer.
Elad Sharon: By moving to a subscription model, the agency gains faster access to our latest AI powered capabilities, continuous innovation, and an expanded suite of solutions. This shift enhances their operational agility and ensures they run ahead of emerging threats in a rapidly evolving landscape. In addition, we closed five more deals valued at approximately $5 million each from new and existing customers. These included new solutions and upgrades. Together, these wins reflect our ability to deliver enduring value, respond to evolving customer needs, and solidify our position as a trusted partner in the intelligence and security space. We continue to see strong customer engagement as agencies turn to us to help address their most complex intelligence and investigative challenges.
Speaker Change: By moving to a subscription model the agency against faster access to our latest AI powered capabilities continuous innovation and an expanded suite of solutions.
Speaker Change: This shift enhances their operational agility and I'm sure. They ran ahead of emerging threats in a rapidly evolving landscape.
Speaker Change: In addition, we closed five more deals valued at approximately $5 million each from new and existing customers.
Speaker Change: These include our new solutions and upgrades.
Speaker Change: Together these wins reflect our ability to deliver enduring value respond to evolving customer needs and solidify our position as a trusted partner in the intelligence and security space.
Speaker Change: We.
Speaker Change: To see strong customer engagement as they just has turned to us to help address their most complex intelligence investigators challenges.
Elad Sharon: This was especially evident during our participation just last week at ISS World Prague. This is one of the premier global events for the intelligence and security community. The event brought together senior representatives from nearly 100 countries, including law enforcement, national security, and government intelligence agencies. We showcased mission-critical solutions, including sharing a preview of our new investigation co-pilot, a generative AI-powered capability designed to accelerate investigations and deliver faster, smarter investigations. The response across all solutions was extremely positive, with around 80 live demonstrations and meaningful conversations with both existing and prospective customers. Meeting customers in person at events like ISS, other industry events, as well as our own intelligence summit, are core parts of our go-to-market strategy.
Speaker Change: This was especially evident during our participation just last week Italia Seth Woolf drug.
Speaker Change: This is one of the Premier global events for the intelligence and security community.
Speaker Change: The event brought together a senior representatives of nearly 100 countries, including law enforcement National Security and government intelligence agencies.
Speaker Change: We showcased mission critical solutions, including sharing a preview of our new investigation copilot generative AI powered capability designed to accelerate investigations and deliver faster smarter insights.
Speaker Change: The response across all solutions was extremely positive with around 80 allowed demonstrations and meaningful conversations with both existing and prospective customers.
Speaker Change: Meeting customers in person events like ISS other industry events as well as our own intelligence summit, a core part of our go to market strategy.
Elad Sharon: They allow us to validate existing and future needs, deepen relationships, and further solidify our leadership position in investigating our leading.
Speaker Change: They allow us to validate existing and future needs deepen relationships and further solidify our leadership position in investigating analytics.
Elad Sharon: When meeting customers and prospects, we consistently hear the same three challenges. First, they must analyze ever-growing volumes of data from an increasingly diverse set of sources. Second, they are facing adversaries who are highly sophisticated and constantly adapting their tactics to avoid detection. Third, they must navigate a rapidly changing technology landscape while staying mission ready at all times. These challenges are global, urgent, and precisely the ones we were built to solve.
Speaker Change: When meeting customers and prospects, we consistently hear the same three challenges first they must analyze ever growing volumes of data from an increasingly diverse set of sources.
Speaker Change: Second the first thing the adversaries, who are highly sophisticated and constantly adapting their tactics to avoid detection.
Speaker Change: And third they must navigate the rapidly changing technology landscape, while staying mission ready at all times.
Speaker Change: These challenges our global urgent and precisely the ones we were built to solve.
Elad Sharon: As part of our US growth strategy, we recently acquired GroupSense, a cyber threat intelligence company that combines automated and human capabilities to deliver customer specific intelligence. This acquisition adds a highly experienced team with strong domain expertise and a solid U.S. customer base.
Speaker Change: As part of our U S growth strategy, we recently acquired group sense, a cyber threat intelligence company that combines automated and human capabilities to deliver customer specific intelligence.
Speaker Change: This acquisition adds a highly experienced staying with strong domain expertise and a solid U S customer base.
Elad Sharon: By integrating GroupSense's intelligent services with our investigative analytics technology, we'll be able to deliver even greater value to customers, providing broader visibility, faster insights, and enhanced threat detection. We are pleased to welcome the Gupstance team to Cognyte.
Speaker Change: By integrating <unk> sensors intelligence services with our investigative analytics technology, we'll be able to deliver even greater value to customers, providing broader visibility faster insights and enhanced threat detection.
Speaker Change: We are pleased to welcome. The groups are still took ignite together, we are expanding our reach and deepening our impact in the U S market advancing our mission to empower our customers to stay ahead of rapidly evolving threats.
Elad Sharon: Together, we are expanding our reach and deepening our impact in the US market, advancing our mission to empower our customers to stay ahead of rapidly evolving Looking ahead, we are encouraged by the healthy demand and the continued validation of our technology through customer wins and engagement. Our strong execution combined with a clear focus on innovation position as well to drive long-term growth and expand profitability.
Speaker Change: Looking ahead, we are encouraged by the healthy demand and the continued validation of our technology through customer wins and engagements.
Speaker Change: Our strong execution combined with a clear focus on innovation position us well to drive long term growth and expand profitability.
Elad Sharon: For Fiscal 26, we are updating our guidance to primarily reflect the recent group sense acquisition and now expect revenue of approximately $395 million, plus or minus 2%, representing about 13% year-over-year growth at the mean point of the range, and adjusted EBITDA of approximately $44 million at the mean point of the revenue range, representing approximately 50% year-over-year growth.
Speaker Change: For fiscal 'twenty six we are updating our guidance to primarily reflect the recent group since acquisition and now expect revenue of approximately $395 million plus or minus 2% representing about 13% year over year growth at the midpoint of the range and adjusted EBITDA of approximately $44 million at the midpoint.
Speaker Change: The revenue range.
Speaker Change: Approximately 50% year over year growth.
Elad Sharon: Before handing it over to David, I want to briefly highlight a recent Investor Anomalist Day. We shared our strategic priorities, demonstrated the technology behind our solutions and explored the real world challenges we are helping customers solve every day. This wasn't just a regular CEO CFO update, it was an opportunity to hear directly from our broader management team, especially the business and technology leaders who are shaping our roadmap and driving execution across the company. It offers a valuable window into the depth of leadership behind our strategy. If you haven't yet watched the one hour long replay, I strongly encourage you to do so.
Speaker Change: Before I hand, it over to David I want to briefly highlight our recent investor and analyst day.
Speaker Change: We shared our strategic priorities demonstrated the technology behind our solutions and explore the real world challenges, we are helping customers solve everyday.
Speaker Change: It wasn't just a regular CEO CFO update it wasn't an opportunity to hear directly from our broader management team, especially the business and technology leaders, while shaping the roadmap and driving execution across the company.
Speaker Change: It offers a valuable window into the depth of leadership behind our strategy.
Speaker Change: If you haven't yet what's the one hour lung replay.
Elad Sharon: It's a great way to see how we are positioning Cognyte for long-term growth.
Speaker Change: I strongly encourage you to do so.
Speaker Change: It's a great way to see how we are positioning ignite for long term growth.
Elad Sharon: As we look ahead, we do so with confidence, driven by healthy demand, powerful technology, and a clear sense of purpose. At Cognyte, we see data differently, and we are committed to helping eliminate the unknown by empowering our customers with the solutions they need to make the world a safer place.
Speaker Change: As we look ahead, we do so with confidence driven by healthy demand powerful technology and a clear sense of purpose.
Speaker Change: Echo ignite, we see that differently and we are committed to helping eliminate dye known by empowering our customers with the solutions they need to make the world a safer place.
David Abadi: Now, let me turn the call over to David to provide more details about our Q1 results. Thank you, Elad, and hello, everyone. With consistent execution, healthy demand, and large, loyal customer base, we delivered strong financial results in the first quarter of Fiscal 2022. Revenue for Q1 was $95.5 million, an increase of 15.5% year over year. Software revenue was $37.4 million, an increase of $5.9 million, or 19% year over year. Software service revenue was $44.7 million, roughly even with last Our total software revenue for the quarter was approximately $82 million, representing about 86% of total revenue.
David: Now, let me turn the call over to David to provide more details about our Q1 results.
David: David.
David: Thank you allowed and Hello, everyone.
David: Our consistent execution healthy demand and large loyal customer base, we delivered strong financial results in the first quarter of fiscal 2026.
David: Revenue for Q1 was $95 5 million.
David: Increase of 55% year over year.
David: Software revenue was $37 $4 million, an increase of $5 $9 million or 19% year over year.
David: Software services revenue was $44 $7 million, roughly even with last year.
Speaker Change: Our total software revenue for the quarter was approximately $82 million.
Speaker Change: Presenting about 86% of total revenue.
David Abadi: We continue to expect software revenue to be about 87% of total revenue on an annual basis. Professional service revenue in Q1 was $13.5 million, an increase of $6.6 million over last year. Professional services revenue is expected to fluctuate between quarters due to revenue recognition timing. We continue to expect professional service and revenue to be about 13% of total revenue on an annual basis. The current revenue for Q1 was $47.2 million, representing 49% of total revenue. Recurring revenue, primarily from support contract and subscription offering, improves our visibility, both near and long-term. Nangab growth margin for the quarter was 71.9%, expanding by 80 basis points year-over-year.
Speaker Change: We continue to expect software revenue to be about 87% of total revenue on an annual basis.
Speaker Change: Professional service revenue in Q1 was $13 $5 million, an increase of $6 $6 million over last year.
Speaker Change: Professional services revenue is expected to fluctuate between quarters due to revenue completion timing.
Speaker Change: We continue to expect professional services revenue to be about 30% of total revenue on an annual basis.
Speaker Change: Recurring revenue for Q1 was $47 2 million.
Speaker Change: Presenting 49% of total revenue.
Speaker Change: Current revenue primarily from support contract and some subscription offering.
Speaker Change: <unk> proved our visibility both near and longer term.
Speaker Change: non-GAAP gross margin for the quarter was 71, 9% expanding by 80 basis points year over year.
David Abadi: Gross margin may fluctuate between quarters based on our revenue. Gross profit in the first quarter outpaced revenue growth and was $68.7 million, an increase of about 17% year-over-year. We believe the steady improvement we have made in gross profit is the result of the significant value customers derive from our innovative solutions, our competitive differentiation, and our improved cost structure. The combination of revenue growth and our business model continue to deliver meaningful year-over-year improvement in profitability, showing our ability to continue to drive operational leverage. Once again, non-gap operating income and adjusted EBITDA both grew significantly faster than revenue.
Speaker Change: Gross margin may fluctuate between quarters based on our revenue mix.
Speaker Change: Gross profit in the first quarter outpaced revenue growth and was $68 $7 million, an increase of about 17% year over year.
Speaker Change: We believe the steady improvement we have made in gross profit is the result of the significant value customer derived from our innovative solutions, our competitive differentiation and our improved cost structure.
Speaker Change: The combination of revenue growth and our business model continued to deliver meaningful year over year improvement in profitability, showing our ability to continue to drive operational leverage.
Speaker Change: Once again.
Speaker Change: non-GAAP operating income and adjusted EBITDA, both grew significantly faster than revenue.
David Abadi: Q1, we generated $7.6 million of NAMGAP operating income. over four times higher than the $1.8 million we generated in Q1 last year. Just the dbda for the quarter was $10.3 million, more than double the $5 million we generated last Q1. resulting in first quarter fiscal 26 NANDA GPS of $0.07.
Speaker Change: In Q1, we generated $7 $6 million of non-GAAP operating income.
Speaker Change: Over four times higher than the one $8 million.
Speaker Change: <unk> generated in Q1 last year.
Speaker Change: Adjusted EBITDA for the quarter was $10 $3 million.
Speaker Change: More than double the $5 million, we generated last Q1.
Speaker Change: Resulting in first quarter fiscal 'twenty six non-GAAP EPS of seven.
David Abadi: Turning to our boss. Our short and long-term contract liabilities, commonly referred to as deferred revenue, remain robust at about $113 million at the end of Q1, down modestly versus last year's balance due to the timing of billing. During Q1, we generated $1.7 million in cash flow from operations and a negative free cash flow of $2.5 million. Q1 cash generation was relatively modest, primarily due to the timing of collection, as we had strong collection in Q4 last year. full year, we continue to expect cash flow from operations to be about $45 million. We continue to execute our share repurchase program, buying about 952,000 ordinary shares for an aggregate purchase price of approximately $9 million.
Speaker Change: Turning to our balance sheet.
Speaker Change: Our short and long term contract liabilities, commonly referred to as deferred revenue remained robust at about one of the $13 million at the end of Q1.
Speaker Change: Down modestly versus last year balance due to the timing of billing.
Speaker Change: During Q1, we generated $1 $7 million in cash flow from operations and the negative free cash flow of $2 $5 million.
Speaker Change: Q1 cash generation was relatively modestly primarily due to the timing of collection as we had strong collection in Q4 last year.
Speaker Change: For the full year, we continue to expect cash flow from operations to be about $45 million.
Speaker Change: We continue to execute our share repurchase program.
Speaker Change: About 952000 ordinary share for an aggregate purchase price of approximately $9 million.
David Abadi: As a reminder, last November, our Board of Directors approved a share repurchase program of up to $20 million in ordinary shares over 18 months. Since we began the repurchase program in December, we repurchased shares valued at. approximately $14.2 million through April 30, 2025. Our cash position remains strong at $102.9 million with no debt.
Speaker Change: As a reminder, last November our board of directors.
Speaker Change: <unk> share repurchase program of up to $20 million in ordinary shares over 18 months.
Speaker Change: Did you began the repurchase program in December we repurchased shares valued at.
Speaker Change: Proximately $14 2 million through April 32025.
Speaker Change: Our cash position remains strong at one of the $2 9 million with no debt.
David Abadi: Let me share with you some additional context on the Group Sense Acquisition. Transaction closed on May 20, 2025 for approximately $4 million in cash.
Speaker Change: Let me share with you some additional context on the group since acquisition.
Speaker Change: <unk> closed on May 22025 for approximately $4 million in cash.
David Abadi: In addition, there is an air out of up to $5 million contingent on group sensibility to meet defined post-closing performance targets. Groupsense offering is sold on a subscription basis and adds approximately 50 customers to Cognite.
Speaker Change: In addition to that.
Speaker Change: And out of up to $5 million contingent.
Speaker Change: Contingent on group sensibility to meet defined post closing performance targets.
Speaker Change: Group since offering is sold on a subscription basis and adds approximately 50 customers to Cook night.
David Abadi: Let me walk you through our execution against some of our key performance indicators. RPO, or Remaining Performance Obligations, represents contracted revenue to be recognized in future periods, influenced by factors such as sales cycles, deployment timelines, contract lengths, renewal timing, and seasonality. RPO fluctuations are not necessarily indicative of future revenue growth. Total RPO is a sum of deferred revenue of $412.9 million and backlog of $484.9 million. At the end of Q1, total RPO was $597.8 million, up $52 million versus the end of fiscal 25.
Speaker Change: Let me walk you through our execution against some of our key performance indicators.
Speaker Change: I appeal or remaining performance obligations represents contracted revenue to be recognized in future periods influenced by factors such as cell cycle deployment timelines.
Speaker Change: Glimpse renewal timing and seasonality.
Speaker Change: I feel fluctuations are not necessarily indicative of future revenue growth rate.
Speaker Change: Total RTL.
Speaker Change: He's a sum of deferred revenue of $112 $9 million and backlog of $484 $9 million.
Speaker Change: At the end of Q1.
Speaker Change: Total appeal was $597.8 million.
Speaker Change: $52 million versus the end of fiscal 'twenty five.
David Abadi: As Elad mentioned, during the quarter, we signed a three-year, over $10 million annual subscription agreement. Deliver of this agreement is scheduled to begin in early calendar 2026. Currently, only the first year of the deal is included in our total RPO. Total RPO, which also includes multi-year support contracts, is expected to continue to fluctuate due to renewal timing. Short-term RPO at the end of Q1 increased to $346.9 million. which we believe provides solid visibility into revenue over the next 12 months. These healthy RPO levels reinforce our growth expectations and validate the strength and resilience of our business model.
Speaker Change: As <unk> mentioned during the quarter, we signed a three year over $10 million annual subscription agreement.
Speaker Change: Delivery of this agreement is scheduled to begin in early calendar 2026.
Speaker Change: Currently only the first year of the deal is included in our total IPO.
Speaker Change: Total IPO, which also includes multi year support contracts is expected to continue to fluctuate.
Speaker Change: Renewal timing.
Speaker Change: Yeah.
Speaker Change: Short term appeal at the end of Q1 increased to $346 $9 million.
Speaker Change: Which we believe provide solid visibility into revenue over the next 12 months.
Speaker Change: This healthy IPO levels reinforce our growth expectations and validate the strength and resilience of our business model.
David Abadi: Q1 Billings were $78.3 million, consistent with last year. Q1 NandGaP operating expenses were $61.2 million dollars, aligned with our expectations. We remain focused on driving continued financial improvement and sustained margin expansion.
Speaker Change: Q1, billings were $78 3 million.
Speaker Change: Consistent with last year.
Speaker Change: Q1, non-GAAP operating expenses were $61 2 million in line with our expectations.
Speaker Change: We remain focused on driving continued financial improvement and sustained margin expansion.
David Abadi: Today, we are updating our guidance for FOA 22. Many to reflect. For fiscal 26, we're expecting full year revenue of approximately $395 million, plus or minus 2%. This represents approximately 13% year-over-year growth at the midpoint of the revenue rate. We expect total software revenue to be about $344 million, representing approximately 87% of total revenue. and Professional Service Revenue to represent about 13% of total revenue, aligned with our strategic goals. We believe that our strong short-term RPO of $346.9 million and a favorable demand environment support this outcome. We expect Q2 revenue to be slightly higher than the Q1 levels we're reporting today, with sequential growth each quarter throughout the year.
Speaker Change: Today, we are updating our guidance for FY 'twenty six.
Speaker Change: Mainly to reflect that.
Speaker Change: The group since the acquisition.
Speaker Change: For fiscal 'twenty, six we're expecting full year revenue of approximately $395 million plus or minus 2%.
Speaker Change: This represents approximately 13% year over year growth at the midpoint of the revenue range.
Speaker Change: We expect total software revenue to be about $344 million.
Speaker Change: Representing approximately 87% of total revenue.
Speaker Change: And professional service revenue to represent about 13% of total revenue.
Speaker Change: Aligned with our strategic goals.
Speaker Change: We believe that our strong short term appeal of trend into $46 $9 million.
Speaker Change: And the favorable demand environment support this outlook.
Speaker Change: We expect Q2 revenue to be slightly higher than the Q1 levels were reporting today.
Speaker Change: With sequential growth each quarter throughout the year.
David Abadi: We continue to expect annual net gap growth margin to be 71.5%, reflecting an improvement of 50 basis points over last fiscal year. Gross margin may fluctuate between quarters based on our revenue mix. As a result of the improved gross margin, we expect annual gross profit to increase at a faster rate than revenue. For the full year, we expect our non-gap operating expenses to grow meaningfully slower than revenue, reaching approximately $252 million, an increase of about 8%. Operating expenses and annuality should remain in line with prior years, with slight fluctuations throughout the year. We expect annual adjusted EBITDA to be about $44 million, representing 50% year-over-year growth.
Speaker Change: We continue to expect annual non-GAAP gross margin to be $71.
Speaker Change: 5%, reflecting an improvement.
Speaker Change: A 50 basis point over last fiscal year.
Speaker Change: Gross margin may fluctuate between quarters based on our revenue mix.
Speaker Change: As a result of the improved gross margin, we expect gross profit to increase at a faster rate than revenue growth.
Speaker Change: For the full year, we expect our non-GAAP operating expenses to grow meaningfully slower than revenue reaching.
Speaker Change: Switching to approximately $252 million, an increase of about 8%.
Speaker Change: Operating expenses analogy should remain in line with prior years.
Speaker Change: Slight fluctuations throughout the year.
Speaker Change: We expect annual adjusted EBITDA to be about $44 million, representing 50% year over year growth.
David Abadi: As a result of the execution of our share repurchase program, we reduced our expected weighted average fully diluted shares for the year to be approximately $75 million. We now expect annual manga PPS to come in at 19 cents at the midpoint of the revenue. Turning to cash flow, we continue to expect to generate $45 million of cash flow from operations in fiscal 26.
Speaker Change: As a result of the execution of our share repurchase program.
Speaker Change: <unk>, our expected weighted average fully diluted shares for the year to be approximately.
Speaker Change: $75 million.
Speaker Change: We now expect non-GAAP EPS to come in at 19%.
Speaker Change: At the midpoint of the revenue range.
Speaker Change: Turning to cash flow, we continue to expect to generate $45 million of cash flow from operation and physical 26th.
David Abadi: Summarized, we delivered a strong start to fiscal 26. continue to execute against our strategic priorities. The combination of healthy demand, revenue visibility, and a robust balance sheet give us financial flexibility to invest in growth while also improving profitability. We are encouraged by ongoing customer wins and positive feedback across our portfolio. Reinforcing Our Leadership Position.
Speaker Change: To summarize we delivered a strong start fiscal 2016.
Speaker Change: Continue to execute against our strategic priorities.
Speaker Change: The combination of LTE demand wherever your visibility and the robust balance sheet give us financial flexibility to invest in growth while also improving profitability.
Speaker Change: We're encouraged by ongoing customer wins and positive feedback across our portfolio.
Speaker Change: Green first thing our leadership position.
David Abadi: With this strong foundation, we believe we are well positioned to capitalize on the opportunities ahead and continue to deliver profitable growth this year and beyond, while providing our customers with tools to make the world a safer place.
Speaker Change: With this strong foundation, we believe we are well positioned to capitalize on the opportunities ahead and continue to deliver.
Speaker Change: Profitable growth this year and beyond while providing our customers with tools to make the award.
Operator: With that, I would like to hand the call over to the operator to open the line for questions. Operator. Thank you.
Speaker Change: Fair place.
Speaker Change: With that I would like to hand, the call over to the operator to open the line for questions.
Speaker Change: Operator.
Operator: Ladies and gentlemen, to ask a question at this time, you will need to press star one one on your touchtone telephone and wait for your name to be announced.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen to ask a question at this time, you will need to press star one on your touched on telephone and wait for your name to be announced.
Mike Cikos: Please stand by while we compile the Kineros We have a question coming from the line of Mike Cikos from Needham. Your line is now open. Great, thanks for taking the questions here, guys. And congrats on the solid start to the year. I just wanted to come back to the guidance for a second, and we'll work, I guess, revenue first, but. Just to make sure I'm clear, Q1, obviously you guys outperformed the sell-side projection, but how did the quarter itself play out versus plan? Was there anything to call out? It sounds like you guys struck a positive tone on macro and the demand, but can you just speak to those points specifically?
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And we have a question coming from the line of Mike see comes from Amit <unk>.
Speaker Change: <unk> is now open.
Mike: Great. Thanks for taking my questions here guys.
Speaker Change: And congrats on the solid start to a year.
Speaker Change: Wanted to come back to the guidance for a second and we'll work I guess revenue first but.
Speaker Change: Just to make sure.
Speaker Change: Clear Q1 have you see you guys outperformed.
Speaker Change: The sell side projections, but how did the quarter itself play out versus plan.
Speaker Change: Was there anything to call out as it sounds like we got cut off.
Speaker Change: Positive tone on macro and the demand.
Speaker Change: Can you just speak to those points specifically.
Speaker Change: Yeah.
Elad Sharon: Hi, Mike. So in Q1, the top line came a little bit ahead of expectation. But this can happen between quarters. We still expect the sequential growth quarter over quarter along the year. As of the demand and market environment, we do see similar momentum as we shared before. We do see very good traction with customers. It's evident also in conferences we are participating, including the recent one. The demand drivers remains very healthy. The data is growing in volume and diversity. The adversaries are more sophisticated, better hide, and the technology is running fast. So we do see the momentum continues, and we continue to expect to continue and grow along the year, quarter over quarter, and improve of stability for the year.
Speaker Change: Hi, Mike.
Speaker Change: In Q1, we the topline came a little bit ahead of expectations, but this can happen between quarters, and we still expect the sequential growth quarter over quarter along the year.
Speaker Change: As of the day Monday marketing environment, we do see a similar momentum as we.
Speaker Change: Sure before we do see very good traction with customers. It's evidenced also in conferences, we're participating in a recent one.
Speaker Change: The demand drivers remains very healthy data is growing volume and diversity and the adversaries almost sophisticated better hide and the technology is running fast.
Speaker Change: We do see the momentum continues and we continue to expect AR to continue and grow.
Speaker Change: What a quarter and a.
Speaker Change: Improved profitability for the year.
Mike Cikos: And for the, I know you guys incited some of these recent contract signings, right? I think we have more than $40 million in TCB you guys have announced in press releases. So just just a question, if we're seeing the volume of contract value that's being signed, again, 40 million, call it about 20 million is reflected in financials today based on some of these investments, which were not captured in today's numbers. Why isn't that necessarily impacting fiscal 26 to a greater extent? Is it the timing of some of these renewals or expansions? Maybe they're a little bit further out.
Speaker Change: And for the.
Speaker Change: I know you guys insight into some of these recent contract signings right I think we have more than $40 million in PCB you guys have announced in press releases.
Speaker Change: And so just just a question if we're seeing the volume or contract value. That's being signed again 40 million call. It about $20 million is reflected in financials today based on some of these losses, which were not captured.
Speaker Change: These numbers.
Speaker Change:
Speaker Change: Why isn't that necessarily impacting fiscal 2006 to a greater extent is it the timing of some of these.
Speaker Change: Duals or expansion as big as they are a little bit further out.
Elad Sharon: and you provide us an update on that front.
Speaker Change: Can you.
Mike Cikos: Yeah, sure. So we mentioned actually two large deals. One is related to a renewal of very large support contracts. We expected this to come in. So it was already backed in our guidance. And the second one is a larger subscription deal of over $10 million per deal, and the deployment is planned to take place in Q1 next year, fiscal 27. And that's the reason it's not relevant in terms of a top line for this year. I see. Thank you for that. And on that 10 million plus deal. If I heard correctly in David's prepared remarks, that's a three-year deal?
Speaker Change: As an update on that front.
Speaker Change: Yes, sure. So we mentioned actually too large deal is one is related to a renewal of very lots of control contracts. We expect this to come in so it was already baked in our guidance.
Speaker Change: And the second one is the largest subscription deal of over $10 million per deal and the deployment is planned to take place in Q1 next year fiscal 'twenty seven and.
Speaker Change: The reason, it's not relevant in terms of top line for this year.
Speaker Change: I see thank you for that.
Speaker Change: On that $10 million plus deal.
Speaker Change: If I heard correctly in David's prepared remarks.
Elad Sharon: and the other Pete, you know, again. So I was just gonna say, so it's a three year deal, but only the first year of the deal is currently included in total RPO. Can you just help us think about like, why isn't the remaining duration of that contract reflected in the RPO? Yes, it's correct. It's a three year deal with annual value of $10 million. The deal from an RPO perspective, only the first year is included. It's related to the terms and conditions within the deal, which only the first year is qualified for RPO at the I see.
Speaker Change: Three year deal.
Speaker Change: And then the other piece yes.
Speaker Change: Yeah.
Speaker Change: So I was just going to say so it's a three year deal, but only the first.
Speaker Change: Year of the deal is currently included in total RPM.
Speaker Change: Can you just help us think about like why isn't.
Speaker Change: Remaining duration of that contract is reflected in the RPM.
Speaker Change: Yes.
Speaker Change: Correct, it's a three year deal with.
Speaker Change: And our value of $10 million.
Speaker Change: The deal from an IPO perspective, only the first year is included is ready to the terms and condition within the deal which only the first area is qualified for a P O definition.
Mike Cikos: Okay. Thank you for that.
Elad Sharon: I see okay. Thank you for that and the final question I have here.
Mike Cikos: And the final question I have for your topic is GroupSense with the acquisition here. I know that you're seeing the The updated guidance today, primarily attributable to the group sense acquisition. Can you help us think about What is the revenue impact when we think about the $3 million raise here for full year? What is the associated OPEX increase by taking on the employee base from Groups? So in general, it's a small transaction. It's a breakeven business. We added the three million dollars to the top line. The model that they are selling is a subscription model.
Speaker Change: Topic is.
Speaker Change: <unk> with the acquisition here.
Speaker Change: I know that Youre seeing.
Speaker Change: The updated guidance today were primarily attributable to the group since acquisition can you help us think about.
Speaker Change: What is the revenue impact when we think about the $3 million raised here for full year.
Speaker Change: What is the associated.
Speaker Change: Opex increased by taking on the employee base from from group.
Speaker Change: So in general it's a small transaction.
Speaker Change: The breakeven business, we added the $3 million to the topline the model there.
Elad Sharon: So it's a recurring revenue of three million dollars that were added to the top line. And this is something that we also saw through the guidelines. From an OPEX perspective, we have additional two million dollars because of some other savings that come from a different area. So in general, it's a breakeven. We believe that over time, due to synergies and other elements, we can create profitability and it will allow us to grow in the U.S. Great, and that US piece, loud and clear on the increased exposure there, I know you're talking about the, call it 50-ish customers being brought over as a result of GroupSense.
Speaker Change: Selling is a subscription model. So it's a recurring revenue of $3 million that were added to the top line and then something that will sell to the guidelines.
Speaker Change: And Opex perspective.
Speaker Change: We have additional $2 million because of some other savings that came from a different area. So in general it's a breakeven we believe that over time due to synergies and the other elements, we can create profitability and it will allow us to.
Speaker Change: To grow in the U S.
Speaker Change: Great.
Speaker Change: Peace loud and clear on the increased exposure there I know you're talking about call. It 50 ish customers being brought over as a result of the group.
Elad Sharon: Are all 50 of those customers in the US or is it just the vast majority? Is there any customer overlap with Cognyte's traditional customer base? All customers are in the U.S. and the solution actually GroupSense provides to those customers is in the domain of cyber threat intelligence. We do believe that for some of the customers, and this was also the main rationale for the deal, we can leverage with our technology and being able to deliver to them Cognite technology in addition to what Group Sense delivers to them today, and by that expand presence, continue to expand our presence in the U.S.
Speaker Change: Or are all 50 of those customers in the U S or is it just the vast majority is there any customer overlap with cognate traditional customer base.
Speaker Change: All customers that are in the U S.
Speaker Change: And the solution actually transfer.
Speaker Change: Just provide to those customers in the domain of cyber threat intelligence.
Speaker Change: We do believe that for some of the customers and this was also the main rationale for the deal.
Speaker Change: And we can leverage that with technology and being able to deliver to them Cognex technology. In addition to what.
Speaker Change: Group since delivers to them today.
Speaker Change: And by that extent presence continuing to extend our presence in the U S. This is one more element in our strategy to to increase business in the U S.
Elad Sharon: This is one more element in our strategy to increase presence in the U.S.
Mike Cikos: Thank you. I'll turn it over to my colleagues. Thank you guys. Thanks, Mike. Thank you. And as a reminder, to ask a question, please press star 11 on your touchtone telephone. We'll give it a moment. Thank you, and I'm showing no further questions in the queue at this time.
Speaker Change: Terrific. Thank you I'll turn it over to my colleagues. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And as a reminder to ask a question. Please press star one on your Touchtone telephone.
Speaker Change: We'll give it a mummy.
Dean Ridlon: Thank you and I'm showing no further questions in the queue at this time I'll turn the call back to Dean for any closing remarks.
Dean Ridlon: I'll turn the call back to Dean for any closing remarks.
Dean Ridlon: Thank you, Livia, and thank you, everyone, for joining us on today's call. Please feel free to reach out to me should you have any questions, and we look forward to speaking with you again next quarter. Have a good day.
Dean Ridlon: Thank you Olivia and thank you everyone for joining us on today's call.
Speaker Change: Please feel free to reach out to me should you have any questions and we look forward to speaking with you again next quarter have a good day.
Unknown Executive: This concludes conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Okay.
Speaker Change: This conclude today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yes.
Unknown Executive: Thank you for watching!
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Speaker Change: Yes.
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