Q4 2026 Cognyte Software Ltd Earnings Call

March 25, 2026

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognyte Q4 fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference may be recorded. I will now hand the conference over to your speaker host, Dean Ridlon, Head of Investor Relations. Please go ahead.

Dean Ridlon: Thank you, operator. Hello, everyone. I'm Dean Ridlon, Cognyte's Head of Investor Relations. Thank you for joining us today. I'm here with Elad Sharon, Cognyte's CEO, and David Abadi, Cognyte's 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 Upcoming Events, then the webcast link for today's conference call. I would also like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward-looking statements are based on management's current expectations and are not guarantees of future performance.

Then the webcast link for today's conference call.

I would also like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

And other provisions of the federal securities laws.

Dean Ridlon: 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 them. Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of how these and other risks 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 31, 2026, being filed today 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.

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, except as required by law.

Cognite assumes no obligation to update or revise them.

Investors are cautioned not to place undue reliance on these forward-looking statements.

For more detailed discussion of how these and other risks and uncertainties could cause Cognyte 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, 2026, being filed today, and other filings we make with the SEC.

The financial measures discussed today include non-GAAP measures.

Dean Ridlon: Please see today's presentation slides, our earnings release, and the investor section of our website at cognyte.com for reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from, as a substitute for, or superior to GAAP financial information, but is included because management believes it provides meaningful information about the financial performance of our business and is useful to investors for informational and comparative purposes. The non-GAAP financial measures that the company uses have limitations and may differ from those used by other companies. Now, I would like to turn the call over to Elad.

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 Cognite.com.

For reconciliation of non-GAAP financial measures to GAAP measures.

Non-gaap financial information should not be considered in isolation from.

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: Thank you, Dean. Hello, everyone, and thank you for joining us today. Before we begin, I want to acknowledge and thank our employees, customers, partners, and investors for their continued support over the past month. Cognyte's mission is to help make the world a safer place. That mission is constant, and our teams continue to execute. We delivered strong results in Q4 and closed fiscal 2026 with another year of consistent execution. Revenue grew by double-digit with strong gross margin. Our profitability improved significantly, and we continue to generate solid cash flow. Fiscal 2026 played out largely as we expected, with strong repeat business from our install base, continued new customer momentum, and strengthening profitability.

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

Thank you, Dean. Hello, everyone, and thank you for joining us today.

Before we begin, I want to talk to our employees, customers, partners, and investors for their continued support over the past month.

Cognitive mission is to help make the world a safer place.

That mission is constant, and our teams continue to execute.

We delivered strong results in the fourth quarter and closed fiscal '26 with another period of consistent execution.

Revenue grew by double digits with strong gross margin.

Profitability improved significantly, and we continue to generate solid cash flow.

This call, Q4 '26, played out largely as we expected, with strong repeat business for the install base.

Continued new customer momentum and strengthening profitability.

Elad Sharon: We expect this growth to continue into fiscal 2027, and today we provided revenue guidance of $448 million at the midpoint of the revenue range, and we are on track to achieving our targets for the fiscal year ending January 2028. We'll share more details later in this call. We operate in a market environment where the underlying drivers continue to strengthen. Threats are becoming more complex, adversaries more sophisticated, and the volume of data continues to grow exponentially. At the same time, decisions need to be made faster than ever. This is driving sustained demand for mission-critical intelligence technology, exactly where Cognyte is positioned. Our solutions operate in extremely demanding environment across national security, military intelligence, and law enforcement. In these environments, performance is not optional. Our customers are not experimenting. They are deploying systems that must work consistently in real operational conditions.

We expect this growth to continue into fiscal '27, and today provided revenue guidance of $448 million at the midpoint of the revenue range.

And we are on track to achieving our targets for the fiscal year, ending January 2028.

We will share more details later in this call.

We operate in the market environment where the underlying drivers continue to strengthen.

Threats are becoming more complex adversaries, more sophisticated, and the volume of data continues to grow exponentially.

At the same time, the decisions need to be made faster than ever.

This is driving sustained demand for mission-critical intelligence technology. Exactly recognize its positioned.

Our solutions operate in extremely demanding environments, across national security, military intelligence, and law enforcement.

In this environment, the performance is not optional. Our customers are not experimenting, they are deploying systems that must work consistently in real operational conditions.

Elad Sharon: Over time, our value becomes deeply embedded in our customers' workflows and operational systems. This creates durable relationships, high switching costs, and a strong competitive position. Over the past year, we executed against our three primary growth pillars. First, install base expansion. Customers continue to expand deployments, operate functionality, and are also extending into new use cases and operational domains. For example, border intelligence. Repeat business continue to represent a significant portion of our revenue, reflecting the trust our customers place in us and the operational value we consistently deliver. Second, new logos. We added 61 new customers this year as our solutions continue to prove themselves globally and deliver real operational value. This important new business is driven by our proven track record and customer references, and is aligned with our land and expand strategy.

Over time our value becomes deeply embedded in our customers workflows and operational systems.

This creates durable relationships.

High switching costs and a strong competitive position.

Over the past year, we executed against our three primary growth pillars.

First. Install based expansion.

Customers continue to expand deployments, operate functionality, and also extend into new use cases and operational domains.

for example, border intelligence

Repeat business continues to represent a significant portion of our revenue, reflecting the trust our customers place in us and the operational value we consistently deliver.

Second new logos.

We added 61 new customers this year as our solutions continue to prove themselves globally and deliver real operational value.

This important new business is driven by our proven track record and customer references.

Elad Sharon: We increased our footprint within military intelligence agencies, including in NATO countries. Third, North America. This is a key market for us. We recently strengthened our North American leadership, bringing in a seasoned sales executive with deep experience and track record in the federal market. We also added a new channel partner, Carahsoft, who will provide access to federal, state, and local procurement channels and will support broader deployments of our solutions. Together, these steps reinforce our commitment to scaling our US presence and aligning with long-term federal modernization programs. Our growth is driven by a balanced approach, install base expansion, new customer acquisition, and US market scaling. In Q4, we secured several significant deals across geographies and customer segments. One example is with a long-standing national security customer in EMEA, where we amended a perpetual agreement into a five-year subscription at a new annual value of $6 million.

And is aligned with our land and expense strategy.

We are increasing our footprint within military intelligence agencies, including in NATO countries.

And third North America.

This is a key market for us.

Recently, we strengthened our North American leadership by bringing in a seasoned sales executive with deep experience and a proven track record in the federal market.

We also added a new channel partner. Kerasoft who will provide access to federal state and local procurement channels and will support broader deployments of our Solutions.

Together, these steps reinforce our commitment to scaling our U.S. presence and aligning with long-term federal modernization programs.

Our growth is driven by a balanced approach instilled in this expansion, new customer acquisition, and US market scaling.

In Q4, we secured several significant deals across geographies and customer segments.

One example is with a long-standing National Security customer in the mayor.

Elad Sharon: This reflects both a significant expansion in scope and a shift in commercial model. The transition to subscription was driven by the customer's needs for continuous access to new capabilities, AI-driven functionality, and faster upgrade cycles. While most agencies still prefer perpetual deployments, we are seeing a gradual increase in the adoption of subscription models. We also signed several multi-million-dollar deals across multiple regions, including new solution deployments, expansions, and support contracts. In addition, this morning, we announced an about $5 million deal with one of the largest state law enforcement agencies in the United States. This is a new customer win replacing an incumbent provider. The deployment will support mission-critical field operations, including fugitive apprehension, missing children cases, criminal investigations, and search and rescue. It represents an important step in expanding our footprint in the US.

Where we amended the perpetual agreement into a 5-year subscription at a new annual value of $6 million.

This reflects both a significant expansion in scope and a shift in commercial model.

Is AI-driven functionality and faster cycles.

While most agencies still prefer perpetual deployments, we are seeing a gradual increase in the adoption of subscription models.

We also signed several multi-million dollar deals across multiple regions, including new solution, deployments expansions and support contracts.

In addition, this morning we are announcing about a $5 million deal with one of the largest state law enforcement agencies in the United States.

This is a new customer win, replacing the incumbent provider.

The deployment will support mission-critical field operations.

Including fugitive apprehension, missing children cases, criminal investigations, and search and rescue.

It represents an important step in expanding our fortune in the US.

Elad Sharon: Security and intelligence agencies globally are accelerating efforts to address increasingly complex threat environments. Today's challenges extend beyond traditional crime and national security. Agencies must respond to hybrid threats, cross-border activity, cyber-enabled, and organized crime, all of which increase the volume and complexity of data they must analyze. This is driving sustained demand for platforms that can fuse, correlate, and analyze data to deliver actionable intelligence for real-time decision-making. Across regions, we see a consistent shift toward more integrated, proactive intelligence models with greater emphasis on cross-unit collaboration, and faster time to decision. Our platform is purpose-built to support exactly this type of complex operational environment. As agencies continue to modernize and scale, our positioning is directly aligned with their immediate and long-term priorities. Today, we are seeing growing adoption and reliance on artificial intelligence.

The queue and intelligence agency is globally accelerating efforts to address increasingly complex threat environments.

Today's challenges extend beyond traditional crime and national security.

Agencies must respond to habitats' cross-border activity. Suburban-enabled and organized crime, all of which increase the volume and complexity of data, they must analyze.

This is driving sustained demand for platforms that can fuse, correlate, and analyze data to deliver actionable intelligence for real-time decision making.

Across regions, we see a consistent shift toward more integrated, proactive intelligence models, with greater emphasis on cross-unit collaboration and faster time to decision.

Our platform is purpose-built to support, exactly, this type of complex operational environment.

As agencies continue to modernize and scale, our positioning is directly aligned with their immediate and long-term priorities.

Elad Sharon: AI is embedded in our platform, shaped by real-world investigative use cases and years of operational experience. AI also plays a part in our customers' growing challenges. It increases the scale and the sophistication of the threats our customers address. In our market, access to AI models and GenAI is not the main constraint. Operationalizing them is. Having access to advanced AI is not enough for an analyst to process sensitive communication data, correlate it with financial and behavioral signals, or generate outputs that meet legal and evidence standards. The challenge is everything required to make AI usable in real investigative environments. That includes integrating fragmented and sensitive data, applying domain-specific intelligence methodologies, operating in strict security and compliance frameworks, and embedding AI into investigative workflows that produce actionable, auditable outcomes. As AI capabilities continue to advance, this infrastructure becomes more, not less, critical.

Today, we are seeing growing adoption and reliance on artificial intelligence.

AI is embedded in our platform, shaped by real-world investigative use cases and years of operational experience.

AI also plays a part in our customers' growing challenges. It increases the scale and the sophistication of the threat to our customers' address.

In our market, access to AI models and generative AI is not the main constraint.

Operationalizing them is.

Having access to advanced AI is not enough for an analyst to process sensitive communication data correlated with financial and behavioral signals, or generate outputs that meet legal and evidence standards.

The challenge is everything required to make AI usable in real investigative environments.

That includes integrating fragmented and sensitive data.

Applying domain specific intelligence methodologies.

Operating in strict security and compliance frameworks, and embedding AI into investigative workflows that produce actionable, auditable outcomes.

Elad Sharon: Customers are not buying AI features. They are buying operational outcomes powered by AI. This is what makes our advanced AI operationally useful, and it's not easy to replicate. We believe AI is a structural tailwind for our business. Earlier this month, we hosted our Intelligence Summit, bringing together senior intelligence and law enforcement leaders from across the globe. The level of participation and engagement reinforced Cognyte's strong leadership position within the investigation and intelligence communities. The conversations were direct and forward-looking. Leaders are not discussing theory. They are executing modernization programs now. They are confronting real operational challenges and sharing practical approaches between them and with us. Across panels and closed-door discussions, agencies emphasized three priorities, connecting fragmented data into a unified intelligence picture, reducing time from data to decision in live investigations, enabling collaboration across units, agencies, and even countries.

As AI capabilities, continue to advance this infrastructure becomes more, not less critical.

Customers are not buying features; they are buying operational outcomes powered by AI.

This is what makes our advanced operational use so useful, and it's not easy to replicate.

We believe AI is a structural tailwind for business.

Earlier this month, we hosted our Intelligence Summit, bringing together senior intelligence and law enforcement leaders from across the globe.

The level of participation and engagement reinforced Cognyte’s strong leadership position within the investigation and intelligence communities.

The conversations were direct and forward-looking.

Leaders are now discussing theory. They are executing modernization programs now.

They are confronting real operational challenges and changing practical approaches between them.

and with us,

A correspondence in closed or discussions agencies emphasized three priorities.

Connecting fragmented data into a unified intelligence picture.

Reducing time from data to decision in life investigations.

Enabling collaboration across units, agencies, and even countries.

Elad Sharon: We were honored to host Jürgen Stock, former Secretary General of Interpol and former Vice President of Germany's Federal Criminal Police Office, as our keynote speaker. He spoke about the importance of sharing fragmented intelligence across domains and the need to partner with the private sector, specifically in technology, to accelerate innovation and operational effectiveness. The summit once again confirmed why customers choose to partner with Cognyte. Access to advanced proven technology and methodologies, solutions that translate directly into real-time operational outcomes, and the quality, support, and long-term trust they can rely on. In summary, we delivered strong results. We operate in a growing high-barrier mission-critical market. We're expanding with both new and existing customers. AI is a structural tailwind. We remain focused on execution and long-term value creation and are well-positioned for continued growth. We operate where the hardest problems live. This is not a coincidence.

We were honored to host Jürgen Stock, former Secretary General of Interpol and former Vice President of Germany's Federal Criminal Police Office, as our keynote speaker.

Professional effectiveness.

The summit once again confirmed. Why customers choose to partner with cognite?

Access to Advanced Improvement, technology and methodologies.

To solutions that translate directly into real-time operational outcomes.

And the quality support and long-term Trust.

They can rely on.

In summary.

We delivered strong results.

We operate in a growing High barrier Mission critical Market.

We're expanding with both new and existing customers.

AI is a structural Tailwind.

We remain focused on execution and long-term value creation.

And are well positioned for continued growth.

We operate with the hardest problems live.

Elad Sharon: It reflects 30-plus years of connecting advanced technology to operational realities. Ultimately, we help eliminate the unknown so our customers can act with clarity, speed, and confidence. With that, I'll turn the call over to David for a deeper review of our results. David?

This is not a coincidence. It reflects 30-plus years of connecting advanced technology to operational realities.

Ultimately, we help eliminate the unknown, so our customers can act with clarity, speed, and confidence.

With that, I'll turn the call over to David for a deeper view of our results.

David Abadi: Thank you, Elad, and hello, everyone. As Elad outlined, Q4 ends a year of continued strong execution across the business. Our results this quarter and throughout FY 2026 demonstrate our durable business proposition, the value of our differentiated solutions, and the operational discipline that all drive these strong results. Let me begin with our Q4 results. Revenue for Q4 FY 2026 was $106.2 million, up $11.7 million or 12.4% year over year, reflecting a healthy demand environment and the value of our solutions. Breaking down the revenue mix. Software revenue was $45.9 million, an increase of $8.5 million or 22.6% year over year. Software revenue is comprised of perpetual licenses, appliances, and some term-based subscription licenses.

David.

Thank you a lot, and hello, everyone.

It's a lot of outlined Q4 ends a year of continued strong execution, across the business.

Our results, this quarter and throughout Q4 2026, demonstrate our durable business proposition.

The value of our differentiated solutions and the operational discipline—that all drive these strong results.

Let me begin with our fourth quarter results.

Revenue for Q4 FY26 was $106.2 million.

At $11.7 million, or 12.4% year-over-year.

And the value of our solutions.

Breaking down the revenue, mix.

Software Revenue was 45.9 million and increase of 8.5 million or 22.6% year-over-year.

Revenue is comprised of perpetual license appliances and some term-based subscription licenses.

David Abadi: Software services revenue grew by $3.4 million to $49.3 million. Software services revenue comes mainly from support contracts and, to a lesser extent, cloud-based SaaS subscriptions. Total software revenue, which includes the combination of software and software services revenue, grew by $11.9 million year over year or 14.2%. Professional services revenue was similar to Q4 of the prior year. Fluctuations in professional services revenue between quarters are expected and are a result of revenue recognition timing. Recurring revenue increased by 5.6% to $50 million, representing 47.1% of total revenue. Note that recurring revenue is calculated from GAAP revenue, driven primarily by support contracts and some term-based and SaaS subscription offerings that enhance our visibility in both the near and long term. Looking at gross margin, we continue to make significant improvements.

Software Services revenue grew by $3.4 million to $49.3 million.

Software services. Revenue comes mainly from support contracts and, to a lesser extent, cloud-based subscriptions.

Total software revenue, which includes the combination of software and software services revenue,

Grew by $11.9 million year-over-year, or 14.2%.

Professional Services revenue was similar to Q4 of the prior year.

Fluctuation in Professional Service revenue between quarters.

Is expected.

And our result or revenue recognition timing.

Current revenue increased by 5.6% to $50 million, representing 47.1% of total revenue.

Note that we kind revenue is calculated from gaap revenue during primarily by support contracts and sometime based and S subscription offerings. That enhances our visibility in both the near and long term.

David Abadi: Q4 non-GAAP gross margin reached a record of 74.7%, an expansion of 320 basis points year over year. Non-GAAP gross profit grew much faster than revenue and increased by $11.8 million or 17.4% year over year to $79.4 million. It's important to mention that all the incremental year over year increase in revenue flows through to gross profit. This again demonstrates how our differentiation translates into strong gross margins. On profitability, Q4 non-GAAP operating expenses were $67.3 million. GAAP operating income was $5.2 million, up from $697,000 last year. Non-GAAP operating income reached $12.1 million, doubling year over year. Adjusted EBITDA continues to expand significantly faster than revenue.

Looking at gross margin, we continue to make significant improvements.

Gross margin reached a record of 74.7%, an expansion of 320 basis points year-over-year.

Now.

It is important to mention that all the incremental year-over-year increase in revenue flows through to gross profit.

This again, demonstrates how our differentiation translates into strong growth margins.

On profitability.

Operating expenses were $67.3 million.

Gap. Operating income was $5.2 million, up from $697,000 last year.

Nagga operating income reached $12.1 million, doubling year-over-year.

David Abadi: It was $15 million, up 62.5% from the $9.3 million generated in Q4 last year. GAAP net income was $5.1 million compared to a net loss of $0.2 million in the same period last year. The improvement is largely due to the significant increase in operating income. Our Q4 performance again highlights the scalability of our model as software revenue grows and the leverage in our model generates significantly higher profitability. While most of our government customers buy through perpetual licenses, we offer both models and have seen some recent wins in subscription. Subscription agreements support greater visibility over time and align with broader software market trends. RPO, or remaining performance obligations, represents contracted revenue to be recognized in future periods influenced by factors such as sales cycles, subscription deals, deployment timelines, contract lengths, renewal timing, and seasonality.

To expand significantly faster than revenue.

It was $15 million, up 62.5% from the $9.3 million generated in Q4 last year.

GAAP net income was $5.1 million compared to a net loss of $0.2 million in the same period last year.

The improvement is largely due to the significant increase in operating income.

Our Q4 performance, again, highlights the scalability of our model.

As software Revenue growth and delivered in our model, generates significantly higher profitability.

While most of our government customers buy through perpetual licenses, we offer both models and have seen some recent wins in subscriptions.

Subscription agreement support creative visibility over time and the line with broader software market trends.

RPO, or remaining performance obligations, represents contracted revenue to be recognized in future periods.

influenced by Factor such as

sales Cycles.

Subscription deals.

David Abadi: The strength of our RPO remains an important pillar of our near and long-term visibility. While fluctuations are expected in RPO, current levels support our growth expectations. At the end of Q4, total RPO was $557.2 million. Total RPO is a sum of contract liabilities of $123.7 million and backlog of $433.4 million. Short-term RPO rose to $369.5 million, providing solid visibility into revenue over the next twelve months. It's worth noting that had we included cancelable periods of subscription deals in total RPO, it would have increased by approximately $42 million. Q4 billings grew 15.6% year over year to $109.9 million. Turning to our full year FY 2026 results.

Deployment timelines. Contract claims renewal timing and seasonality.

The strength of our RPO remains an important pillar of our near- and long-term visibility.

While structures are expected in RPO, current levels support our growth expectations.

At the end of Q4, total RPO was $557.2 million.

Total RPO is a sum of contract liabilities of $123.7 million and backlog of $433.4 million.

Short MPO was to $369.5 million, providing solid visibility into revenue over the next 12 months.

It's worth noting that, had we included cancellable periods of subscription deals in total RPO,

It would have increased by approximately $42 million.

Due for Billings grew 15.6%.

Year-over-year to 109.9 million.

David Abadi: Revenue for FY 2026 was $400 million, up 14.1% year over year. Full year non-GAAP gross margin increased to 73%, up 200 basis points year over year, primarily driven by scale and operational efficiencies. We achieved our FY 2028 gross margin target 2 years ahead of our plan. Profitability continued to improve significantly, reflecting the leverage we have in our business model. GAAP operating income reached $13.3 million, a significant turnaround from a $5.1 million GAAP operating loss last year. Non-GAAP operating income was $36.7 million, more than double year over year. Out of the $49.4 million year over year increase in revenue, $21 million flowed through to non-GAAP operating income.

Turning to our full-year FY26 results.

Revenue for FY26 was $400 million, up 14.1% year-over-year.

Growth margin, increase to 73%.

Up 200 basis points year-over-year.

To driven by scale and operational efficiencies.

We achieved our FY. 28. Gross margin Target. 2 years ahead of our plan.

Profitability continues to improve significantly, reflecting the leverage we have in our business model.

GAAP operating income reached $13.3 million—a significant turnaround from a $5.1 million GAAP operating loss last year.

Nanga operating income was $36.7 million, more than double year over year.

Out of the $49.4 million year-over-year increase in revenue.

$21 million float through to non-GAAP operating income.

David Abadi: Adjusted EBITDA was $48.2 million, up from $29.1 million, a 65.7% year over year increase. GAAP net income was $4.6 million compared to net loss of $7.2 million last year. Across the board, FY 2026 showcases a disciplined operating model that scales effectively with our strategy. Turning to cash performance. In Q4, net cash from operating activities was $20 million, slightly above the same quarter last year, benefiting from both increased profitability and strong collections. For the full year, operating cash flow totaled $40.3 million, reflecting consistent execution and disciplined working capital management. Cash flow from operations came in below our expectation of $45 million due to delays in collecting certain receivables in the quarter. These receivables were collected early in Q1.

Just a DBA was 48.2 Million up from 29.1 million a 65.7% year-over-year increase?

GAAP net income was $4.6 million, compared to a net loss of $7.2 million last year.

Across the board, FY26 showcases a disciplined operating model.

That scales effectively with our strategy.

Benefiting from both increased profitability and strong collections.

For the full year, operating cash flow totaled $40.3 million, reflecting consistent execution and disciplined working capital management.

Cash flow from operations came in below our expectation of $45 million due to delays in collecting certain receivables in the quarter.

These civils were collected early in Q1.

David Abadi: We ended the year with $116.9 million in cash and no debt, providing significant strategic flexibility. Our capital allocation is consistent and return-focused. We maintain the liquidity and working capital necessary to run the business. Above this operating baseline, we allocate excess cash to areas that can generate the highest long-term return, such as acquisitions and share repurchase programs. Earlier this month, the board of directors approved an additional $20 million to our existing share repurchase program. This increase bring the total authorized for share repurchases to $40 million and reflects the board's ongoing commitment to long-term shareholder value creation and confidence in our growth prospects. During Q4, we bought approximately 592,000 ordinary shares from an aggregate purchase price of approximately $5.5 million.

We ended the year with $116.9 million in cash and no debt, providing significant strategic flexibility.

Our capital allocation is consistent, and we don't focus.

We maintain the liquidity and working capital necessary to run the business.

Above this, operating baseline, we allocate excess cash to areas that can generate the highest long-term return, such as acquisitions and share repurchase programs.

Early this month, the board of directors approved an additional $20 million to our existing share repurchase program.

This, in Greece, brings the total authorized for share repurchases to $40 million, and reflects the board's ongoing commitment to long-term shareholder value creation and confidence in our growth prospects.

David Abadi: For the full year, we repurchased approximately 2.3 million ordinary shares for an aggregate purchase price of approximately $21.4 million. Since the initiation of our first repurchase program in November 2024 until the end of Q4, we have repurchased a total of approximately $26.7 million worth of shares out of the total programs authorized for $60 million. Throughout the year, we remained focused on balancing investment in innovation and market expansion while improving operating efficiency. Our financial model is scaling, and we believe there is an opportunity for additional leverage as revenue continues to grow. Now looking ahead. For fiscal 2027, we expect full-year revenue of about $448 million ±3%. This represents approximately 12% year-over-year growth at the midpoint of the revenue range.

During Q4, we bought approximately 592,000 ordinary shares for an aggregate purchase price of approximately $5.5 billion.

For the full year, we purchased approximately 2.3 million ordinary shares for an aggregate purchase price of approximately $21.4 million.

Since the initiation of our first repurchase program in November 2024, until the end of Q4,

We have repurchased a total of approximately

26.7 million dollars worth of shares out of a total programs, authorized for 60 million dollars.

Throughout the year, we remain focused on balancing investment in innovation and market expansion while improving operating efficiency.

Our financial model is scaling, and we believe there is an opportunity for additional leverage as revenue continues to grow.

and now looking ahead for fiscal 27, we expect fully revenue of about 448 million

plus, or minus 3%.

This represents approximately.

12% year-over-year growth at the midpoint of the revenue range.

David Abadi: We believe the mix between total software revenue and professional services revenue to remain similar to last year. We believe that our strong short-term RPO of $369.5 million and the continuing favorable demand environment support this outlook. We expect Q1 revenue to be slightly below the Q4 levels we are reporting today, with sequential growth each quarter throughout the year aligned with the seasonality of previous years. We expect non-GAAP gross margin to increase year-over-year to approximately 73.5% above our target for FY 2028. This reflects improvement of 50 basis points. Gross margin may fluctuate between quarters based on our revenue mix. This improved gross margin allows us to partially offset the foreign exchange headwinds related to the recent strength of the Israeli shekel versus the US dollar.

We believe the mix between total software revenue and Professional Services revenue will remain similar to last year.

We believe that our strong short-term RPO of $369.5 million and the continuing favorable demand environment support this outlook.

We expect Q1 revenue to be slightly below the Q4 levels. We are reporting today with sequential growth each quarter throughout the year, aligned with the seasonality of previous years.

We expect non-GAAP gross margin to increase year-over-year to approximately 73.5%.

Above our target for FY28.

This reflects an improvement of 50 basis points.

Gross margin may fluctuate between quarters based on our revenue mix.

This improved growth margin allows us to partially offset a foreign exchange rate headwind related to the recent trends of the Evolution versus the US dollar.

David Abadi: As a result of the improved gross margin, we expect gross profit to increase at a faster rate than revenue growth. For the full year, we expect our non-GAAP operating expenses to grow slower than revenue, reaching approximately $273 million, an increase of about 7%. A significant portion of the increase is due to strengthening of the Israeli shekel against the US dollar. Operating expense seasonality should be similar to last year, with slight fluctuations throughout the year. We expect non-GAAP operating income to be about $56 million, more than 50% year-over-year growth. We expect adjusted EBITDA to be about $68 million, representing about 40% year-over-year growth, all at the midpoint of the revenue range. We expect our non-GAAP taxes to be about 27% or $15 million, and non-controlling minority interest of about $5 million.

As a result of the improved growth margin, we expect gross profit to increase at a faster rate than Revenue growth.

for the full year, we expect our non-gaap operating expenses to grow, slower than Revenue, reaching approximately, 273 million and increase of about 7%,

A significant portion of the increase is due to strengthening of the Israeli shekel against the US dollar.

Throughout the year.

We expect non-GAAP operating income to be about $56 million, more than 50% year-over-year growth.

We expect adjusted DBA to be about 68 million representing about 40% year-over-year, growth.

All at the midpoint of the revenue range.

We expect our non-GAAP taxes to be about 27%, or $15 million.

And non-controlling minority interest of about $5 million.

David Abadi: As a result, we expect annual non-GAAP EPS to come in at $0.47 at the midpoint of the revenue range, based on weighted average of approximately 75 million fully diluted shares in FY 2027. We expect to generate GAAP net income again this year. Turning to cash flow. We expect to generate $45 million of cash flow from operations in fiscal 2027. For the full year, we expect total CapEx of approximately $11 million. Regarding our FY 2028 targets. Given the business momentum, expanding profitability, and visibility, we believe we are on track to meet our targets for the fiscal year ending 31 January 2028. Revenue of approximately $500 million and adjusted EBITDA margin of over 20%. To conclude, Q4 capped a year of strong performance. We delivered strong growth, expanding margins, and strong cash generation.

As a result, we expect Anna Naga PPS to come in at 47 cents.

The midpoint of the revenue range.

Based on a weighted average of approximately 75 billion fully diluted shares in FY '27.

And we expect to generate GAAP net income again this year.

Turning to cash flow, we expect to generate $45 million of cash flow from operations in fiscal '27.

For the full year, we expect total capex of approximately $11 million.

Regarding our FY 28 targets, given the business momentum.

Spending, profitability, and visibility. We believe we are on track to meet our targets for the fiscal year ending January 31, 2028.

Revenue of a process, $500 million, and adjusted DBA margin of over 20%.

To conclude, Q4 capped a year of strong performance.

David Abadi: Our AI-driven investigative analytics solutions are built on decades of domain expertise and designed for mission-critical environments. Our balance sheet is strong, our backlog provide visibility, and our execution remains focused and consistent. We are well positioned to deliver sustained, profitable growth and long-term value creation. Thank you again for joining us today and for your continued support of Cognyte. Operator, we are ready to take questions.

We delivered strong growth, expanding margins, and strong cash generation.

Our AI driven investigative analytics Solutions are built on Decades of domain expertise, and design for Mission critical environments.

Our balance sheet is strong.

Our backlog provide visibility and our execution remains focused and consistent.

And we are well positioned to deliver sustained profitable growth and long-term value creation.

Thank you again, for joining us today and for your continued support of cognite.

Operator.

We are ready to take questions.

Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Taz Koujalgi with Roth Capital. Your line is open.

Thank you, ladies and gentlemen, if you have a question or a comment at this time, please press star 1, 1 1 on your telephone. If your question has been answered, you wish to move yourself from the queue. Please press star 1 1 again, we will pause for a moment while we compile, our Q&A roster.

Our first question comes from Taz Kalgi with Roth Capital. Your line is open.

Taz Koujalgi: Hey, guys. Thanks for taking my question. Couple of questions from my side. As I look at, if I'm doing my math right, very strong bookings growth this year based on RPO, the RPO number that you disclosed. Can you just give us some puts and takes on the bookings number being so strong? How's the duration? Were there some large contracts that closed early in this quarter?

Hey guys, thanks for taking my question. Um, couple of questions from my side. So as I look at, if I'm doing my math, right? Very strong bookings growth this year, based on RPO, the RP number that it is closed, can you just give us some some puts and takes on the booking summer being so strong. How is the duration, uh, whether some large contracts, that that closed early, in this in this quarter?

Elad Sharon: Yeah. Hi Taz. Good morning. If you look at the market, one way to think about this is actually to see firsthand what our customers told us during the Intelligence Summit we had two weeks ago. Actually, we do see that across geographies and customer segments, the demand drivers are very consistent. Actually we give answers to all of those, which is increasing sophistication for the bad actors, growing volume and fragmented data, AI, and also the need to move much, much faster. Given the demand drivers are significant and growing and healthy across domains and across territories, we do see that actually the demand is very healthy. In terms of the large deals that you've mentioned, we had a few of them. I gave an example earlier this call.

Yeah, how it does, uh, good morning. Uh, if you look at the market, one way to think about this is actually to see, uh, firsthand what our customers told us during the, uh, Invest Intelligence Summit.

We had two weeks ago, actually, we do see that the gross geographies and customer segments—the demand drivers are very consistent.

And actually we give answers to all of those which is increasing sophistication for the bed. Doctors growing volume and for granted data

Ai and also the need to move much, much faster, and given the demand drivers,

Elad Sharon: We had a few more multimillion dollar deals. One example is a $10+ million deal with one of the security customers in EMEA, which is an expansion and upgrade with functionality. We have these customers with us for over a decade. We had another $5 million order from a top NATO member military organization. You can see that one is national security, the other one is military intelligence. We had another one in Asia Pacific of a $5+ million subscription deal. Another customer that is with us for over two decades. Actually what you see is that the need is there. Customers are going in the same direction globally and across segments, law enforcement, national security, and national intelligence. Actually, this is what drives the demand. As you mentioned, the RPO is strong. The cRPO is-

Are significant, and growing, and healthy across domains and across territories. We do see that actually the demand is very healthy in terms of the large deals that you've mentioned. We had a few of them. Uh, I gave an example earlier this call; we had a few more multi-million dollar deals.

Elad Sharon: Another customer that is with us for over two decades. Actually what you see is that the need is there. Customers are going in the same direction globally and across segments, law enforcement, national security, and national intelligence. Actually, this is what drives the demand. As you mentioned, the RPO is strong. The cRPO is nearly $370 million. The total RPO is over half a billion dollars, and this gives us the visibility into fiscal 2027.

Uh, another customer that is with us forward to get decades. So actually, what you see is that the need is there. Uh, customers are going to the same direction globally and across segments—law enforcement, national security, and intelligence. It's actually this that drives...

Taz Koujalgi: Yeah.

Elad Sharon: Nearly $370 million. The total RPO is over half a billion dollars, and this gives us the visibility into fiscal 2027.

Taz Koujalgi: Got it. Very helpful. You mentioned about the addition of new partners in the US market. As you think about your goals going forward from $400 million this year to $448 million and then $500 million in fiscal 2028, maybe some more color on what is the mix of the US business today, either from a revenue or bookings perspective. What are you expecting, I guess, for the next two years for the US mix to be to reach that $500 million target in the next two years? What is assumed in the guide for the $500 million? How much should the US be, broadly speaking, of that $500 million in the next two years? What is assumed in the guide for US?

Uh the demand and uh as you mentioned, the lpo is strong. The crpo is newly 370 million. The total lpo is half a billion dollar and this gives us the visibility into fiscal 27.

Right, real? And then you mentioned about the strong—the addition of new partners in the US, in the US market. As you think about your goals going forward for $400 million this year, to $448 million, and then $500 million in fiscal '28.

Maybe some more color on what is the mix of the US business today. Either from a revenue or booking perspective. But then what are you expecting? Um, I guess for the next 2 years for the US mixed to be to reach that 500 million Target in in the next 2 years.

What is assumed in the guide for the $500 million? How much should the U.S. be?

Elad Sharon: Yeah, sure. US is one of the largest and most advanced intelligence and law enforcement agency market globally. They face actually similar problems. We had some customers joining us for the Intelligence Summit. We actually do see that they suffer same problems, and they need similar technology. Actually, we do believe that we have a very strong fit into their needs. In terms of fiscal 2028, between fiscal 2026 and 2028, we need incremental $100 million. We do believe that about 50% of it will come from expansions and upgrades of existing customer base. About 25% will come from new customers outside of the US. We believe about 25%, the rest 25% should come from the US.

Uh, broadly speaking, of that $500 million, uh, in the next two years—what is the assumption that the guide for us? Yeah, sure. So, uh, US is one of the largest and most advanced intelligence and law enforcement agency, uh, uh, markets globally.

They face actually similar problems. We had some customers joining us for the intelligence Summit. So we actually do see that the sufferer, same problems and they need similar technology. And actually, we do believe that we have a very strong uh, uh, fit into their needs.

And in terms of, uh, uh, fiscal '28, uh, between, uh, fiscal '26 and '28, we have—we need incremental $100 million. We do believe that about 50% of it will come from expansions and upgrades of existing customer base.

Elad Sharon: We're taking actions in order to continue and expand presence in the US, including partners, including hiring a new general manager for North America that came from Cellebrite. He was leading the federal sales in Cellebrite, including lots of sales and marketing efforts. Generally speaking, we do believe that we take the right actions and that's the assumption, that 25% incremental out of the 100 will come from the US.

Taz Koujalgi: Got it. Very helpful. Just one for David. David, you've shown strong leverage in the model. Your adjusted EBITDA margin this year was 12%. You outperformed your guidance. I think, if I'm doing the math right, the free cash flow seems a little bit, I guess, lighter than the guide. Maybe just help us understand the gap between the EBITDA and the free cash flow number this year.

About 25%, will come from a new customers outside of the us. And we believe about 25% the rest 25% should come from the, the us, and we're taking actions in order to to continue and expand process in the US including, uh, Partners including hiring a new, uh, general manager for North America that came from celebrate. He was leading the federal uh sales in Crites including lots of um sales and marketing efforts. So generally speaking, I do believe that we take the right actions and uh uh that's the, that's the assumption that 25% increment. A lot of the 1 0 0,

Got it pretty helpful, just 1 for David. So David uh you've seen you've shown strong leverage in the model. Uh your adjusted ebida margin this year was was 12%. You outperformed your, your guidance. Uh, I think this there's a little bit of a. If I'm looking if I'm doing the math, right? The free cash flow. Seems a little bit.

I guess uh lighter than than the guy. So maybe just help us understand the gap between the Evan and the free cash flow number this year.

David Abadi: Yes, thank you, Taz. We had a strong year with the cash collection and the cash from operation and the free cash flow. During this year, we were able to generate $40 million of cash from operation, then $30 million of free cash flow. We came short versus our initial expectation of $45 million, mainly because of a certain collection that took place early in this quarter. If you look at the overall picture, we were able to generate $40 million on a $36 million of non-GAAP operating income. Actually, we were overachieving the operating income and obviously you have more things under the line like taxes and things that you pay.

David Abadi: In general, we are pleased with where we are from a cash from operations, free cash flow. Going forward, we guided for next year for $45 million.

Taz Koujalgi: Got it. Very helpful. As I look at the adjusted EBITDA guide for next year, you're guiding to 15%, and I think that jumps to 20% in fiscal 2028. Maybe just remind us what are the sources of leverage. You're guiding from 12% to 15% for next year, but then the guide goes from 15% to 20% in fiscal 2028. Maybe just some reminders on what the sources of leverage are for the next two years.

Yes, thank you. Um, we had the stronger year with the cashier cash collection, and the cash from operation and the free cash flow. During this year, we were able to generate 40 million dollar of cash from operation then 30 million dollar, FFA cash flow. Um, we came short versus our initial expectation of 45 mainly because of certain collection that took place, uh, early in this quarter. Uh, but if you look at the overall, uh, picture, we were able to generate 40 million dollar on a 36 million of non-gaap operating income. So, actually, we were over achieving the operating income and, and obviously, you have more things on the line like taxes and things that you've paid. So, in general, um, we are pleased with the where we are from a cash from a customer operation, free cash flow and going forward, we guided for next year for 45 million dollars.

David Abadi: Actually, we are very pleased with the leverage that we had with the gross margin. As you saw, we had achieved-

David Abadi: Actually, we are very pleased with the leverage that we had with the gross margin. As you saw, we had achieved 73% gross margin 2 years ahead of our initial plan. This is one of the area that we believe that will continue to create leverage. We guided for FY 2027 to 73.5%. This is an area, the gross margin itself, it's a place that we think that will continue to create for us leverage. Obviously, we have also some OpEx leverage. OpEx will grow this year 7%, while top line will grow 12%. That creates for us the leverage, and we believe that it will continue with us into FY 2028.

For next year, regarding the 15%, and I think that jumps to 20% in fiscal '28, maybe just remind us: what are the sources of leverage? Uh, you're guiding from 12% to 15% for next year, but then the guide goes from 15% to 20% in, in fiscal '28. So maybe just some, uh, some reminders on what the, what the sources of leverage are for the next two years.

Elad Sharon: 73% gross margin 2 years ahead of our initial plan. This is one of the area that we believe that will continue to create leverage. We guided for FY 2027 to 73.5%. This is an area, the gross margin itself, it's a place that we think that will continue to create for us leverage. Obviously, we have also some OpEx leverage. OpEx will grow this year 7%, while top line will grow 12%. That creates for us the leverage, and we believe that it will continue with us into FY 2028.

Office we go. This year, 7%, while top line will go 12%. So that creates for us the leverage, and we believe that you will continue with us into FY28.

Taz Koujalgi: Very helpful. Thanks, guys.

Very helpful. Thanks guys.

Elad Sharon: Thank you, Dov.

Elad Sharon: Thank you, Taz.

Operator: One moment for our next question. Our next question comes from Matthew Calitri with Needham & Company. Your line is open.

Thank you. One moment for our next question.

Our next question comes from Matthew Kalri with Native & Company. Your line is open.

Mike Cikos: Hey. Hey, guys, how are you? I'm Mike Cikos over at Needham here. Thanks for taking our questions. I'm curious on what the puts and takes are to the initial FY 2027 guide, particularly as it relates to the ramp in the US, but would also love to hear any color on why you widen that range by a point versus previous guides, and then expectations on new customers versus expansions, gross margin contribution, AI, anything of that nature.

Hey, hey guys. How are you? I'm Matt K. You over at NM here. Thanks for for taking our questions. Um, I'm curious, I'm on what the puts and takes are to the initial FY 27 guide, uh, particularly as it relates to, to the ramp in the US. But but would also love to hear any color on on why you you widen that range by a point versus previous guides and then expect expectations on new customers versus expansions groups and contribution AI at anything of that nature.

Elad Sharon: Yeah. Hi, Matt, good morning. Fiscal 2027 guidance actually presents double-digit top line growth, 12%, with an adjusted EBITDA growth of 40%. It means that we expect another strong year in terms of leverage and top line growth. In terms of the range, we added ±1% to each side, given the volatility and uncertainty in the market. It can go in both directions, upside and downside, but we feel comfortable with the midpoint. The reason for the ±3 is related to the market environment.

Elad Sharon: Yeah. Hi, Mike, good morning. Fiscal 2027 guidance actually presents double-digit top line growth, 12%, with an adjusted EBITDA growth of 40%. It means that we expect another strong year in terms of leverage and top line growth. In terms of the range, we added ±1% to each side, given the volatility and uncertainty in the market. It can go in both directions, upside and downside, but we feel comfortable with the midpoint. The reason for the ±3 is related to the market environment.

Yeah, hi M. Good morning. So, uh fiscal, 27 guidance, actually presents, uh, double digit, Topline growth 12%, uh, with an adjusted DB Dugout of 40%.

Well, so it means that we expect another strong gear in terms of uh, leverage and and Topline growth.

Elad Sharon: In terms of what drives the guidance, the way we look at it is we look at the cRPO, we look at our performance, we look at the market environment, we also look at the anticipated conversion timing of the cRPO to revenues. Taking all of those together, we have a very good visibility into the year. Overall, I think that we should expect another strong year. We're also on track to meet the targets for fiscal 2028. We're on track.

Uh, in terms of the, uh, the range, uh, uh, we added plus minus 1% to each side given the, uh, volatility and uncertainty in the market. It can go in both directions, upside and downside. But we feel comfortable with the midpoint, uh, but the reason for the, for the plus minus 3 is related to, to the market environment. Uh, in terms of, uh, uh, what drives the, the, the guidance, uh, the way we look at it is, we look at the CRPO. We look at our performance. We look at the market, uh, environment. We also look at the, uh, anticipated conversion timing of the CLP to revenues and, uh, taking all of those together, we have a very good visibility into the year. So, overall, I think that, uh, we should expect another strong year.

Uh, and uh, we’re also on track to, uh, meet the targets for fiscal ’28. So we’re on track.

Mike Cikos: Okay, great. Sticking there for a second. How would you categorize the size of the cohort of customers you expect to renew or expand this year compared to prior years? I know there aren't set dates with the perpetual model, but what are your assumptions based on what you're seeing for pipeline or historical customer trends?

Elad Sharon: Yeah. The history shows that, unlike, you know, commercial stuff that you buy and you stick with it, in our domain, the challenges are much higher, and the pace is very fast. Just a few examples, customers that have a certain deployment, today, they'll have to support data that is growing. They'll have to support more functionality. They'll have to catch up with technology, including AI-powered analytics and GenAI. They'll have to address new use cases that are coming, whether it's financial crime or others. We do see that in military intelligence, there are new concerns related to border control and others. Generally speaking, this is a very dynamic environment and customers have to continue and upgrade and expand.

Okay, great. Sticking there for a second—how would you categorize the size of the cohort of customers you expect to renew or expand this year compared to prior years? I know there aren't set dates with the perpetual model, but what are your assumptions based on what you're seeing for pipeline or historical customer trends?

Elad Sharon: We expect that the upgrades and expansions are actually what we call repeat business or leverage of our customer base will continue to be strong also going forward. This is something that is a significant, I would say baseline for our business. On top of it, we have, of course, the new logos, which is primarily land and expand strategy. Usually, they start small and they grow over time with us. The US business, which I discussed earlier, which is a strategic and important market for us and another growth pillar. Overall, I do believe that the repeat business will continue to be very strong given that the environment is changing and customers have to adapt and run and catch up with this.

Yes. So, uh, the history shows that, uh, unlike, you know, commercial stuff that you buy and uh, you you stick with it, uh, in our domain. Uh, the challenges are much, much higher. And the pace is very fast, just a few examples, uh, customers that have a certain deployment today. Uh, they'll have to support data that is growing. They have to support more. More functionality, they'll have to catch up with technology, including AI powered analytics. And gen AI. Uh, they'll have to address new use cases that are coming, whether it's Financial crime or others. Uh, we do see that in Military Intelligence, uh, there are new concerns related to border control and others. So, generally speaking, this is a very Dynamic environment and customers have to continue and upgrade and expand and we expect that uh the upgrades and expansions are actually what we call repeat business. So leverage of our customer base will continue to be a strong. Also

So going forward. So uh, this is something that uh, is a significant. Uh uh uh I would say Baseline for business on top of it. We have, of course, the new logos, uh, which is, uh, primarily land and expense strategy. Usually they start small and grow over time with us and use business, which I discussed, uh, earlier which is a strategic and important, uh, market for us and another growth pillar. So, overall, I do believe that the repeat business will continue

To be very strong, given that the environment is changing and customers have to adapt and run and catch up with this.

Mike Cikos: Awesome. Great to hear. Then David, on the cash flow from operations, what caused the delay in collections, and how are you thinking about that conversion rate of adjusted EBITDA cash flow as you scale towards the 2027 and 2028 targets?

Elad Sharon: Actually we had certain delays that took place due to, I would say, the customer delays. We collect everything in the beginning of the quarter. This is something that may happen. Then you are relying on customer when they pay. If you look ahead, you need to take in consideration that on top of the adjusted EBITDA, you need to take other items like tax payment and other expense be below the line that may take place. For this year, we guided for $45 million of cash flow operation, while the guidance for the adjusted EBITDA is $68. I think this is something that you can take as a going forward view about how it will convert over time.

Awesome. Great to hear. And then David on on the cash flow from operations. What caused the delay in collections? And how are you thinking about that conversion rate of adjusted ebit out of cash flow as you scale towards the 27 and 28 targets?

so actually,

And if we look ahead, um, you need to take in concession that on the, on top of the, just the, the you need to take, uh, other items like tax payment and, um, other expense be below the line that may take place. Uh, this for this year, we guided for 45 billion of, uh, cash for operation. While the guidance for the, for the just 68, I think this is something that you can take as, as as a going forward, uh, view about how it will convert over time.

Mike Cikos: Okay, great.

Mike Cikos: It was also cash flows in 2026, the cash flow from operations was very heavily weighted towards H2. Is that seasonality expected to repeat or any commentary on that?

Okay. Great. And then it was also casuals in 26. The cash flow from operations was very heavily. Weighted towards the second half. Is that seasonality expected to repeat or, or any commentary on that?

David Abadi: Actually there is some seasonality in cash flow from operation. Usually cash Q2 cash flow from operation is negative due to actually expenses and less about collection. You may have some seasonality related to the size of the deal. Meaning that if there is a large deal that taking place in a certain quarter, you will see an impact on that quarter. But it's not a given pattern. It's not seasonality on the nature of between, you know, Q1 to Q3. It's more about the specific deal and the mix of the deal in a given quarter, except from Q2, which usually is impacted by certain expenses that are taking place in Q2.

David Abadi: Actually, there is some seasonality in cash flow from operation. Usually cash Q2 cash flow from operation is negative due to actually expenses and less about collection. You may have some seasonality related to the size of the deal. Meaning that if there is a large deal that taking place in a certain quarter, you will see an impact on that quarter. But it's not a given pattern. It's not seasonality on the nature of between, you know, Q1 to Q3. It's more about the specific deal and the mix of the deal in a given quarter, except from Q2, which usually is impacted by certain expenses that are taking place in Q2.

So actually, there is some seasonality in capital from fresh and usually cash Q2 cash flow from Russian is the negative you 2 actually expenses and less about collection.

Uh, you may have some seasonality related to the size of the deal. So, meaning that if there is a large deal that's taking place in a certain quarter, you will, uh, see an impact on that quarter. Um, but it's not a given part, and it's not seasonality in the nature of between, you know, Q1 to Q3. It's more about the specific deal and the mix of the deal in a given quarter, except for Q2, which usually is impacted by a certain expense.

Is the taking place in Q2?

Mike Cikos: Okay, that makes sense. Thanks so much, guys.

Elad Sharon: Thank you, Matt.

Elad Sharon: Thank you, Mike.

Okay, that makes sense. Thanks so much, guys.

Operator: One moment for our next question. Our next question comes from Eric Martinuzzi with Lake Street Capital Markets, LLC. Your line is open.

Thank you, man.

One moment for our next question.

Eric Martinuzzi: Yeah, congrats on the good finish to FY 2026. Your comment about the seasonality of the Q1 revenue would point towards kind of the lower end of the overall full year guided growth range. Just curious to know if you expect that to reverse. Is that more of a H2 reversal to get to the midpoint, or is it maybe Q2, Q3, Q4 all kinda grow to offset that slightly lower growth rate in Q1?

Yeah, congrats on the good finish to FY26. Your comment about the seasonality of the Q1 revenue would point towards, uh, kind of the lower end of the overall full-year guided growth range. Just curious to know if you expect that to reverse—is that more of a second-half reversal to get to the midpoint, or is it maybe Q2, Q3, Q4 all, uh, kind of growing to offset that slightly lower, um, growth rate in Q1?

David Abadi: Usually from seasonality perspective, Q1 is slightly below Q4. It really depends on certain things that are taking place, certain dynamics that usually takes from Q4. If you look year over year, it may create some fluctuation between the quarters from a growth perspective. When we look at the overall year and the pattern of the year, usually you start in Q1, slightly below Q4, and then growing over quarters. This is a typical year. It's not different versus other years.

So, usually From seasonality perspective Q, my 1 is slightly below a Q4 it. Really depend on the certain, um, things that taking place certain dynamics that usually take some queue for. Uh, if you look at your view, it may create some fluctuation between the, the quarters from a growth perspective. But when we look at the overall a year and the pattern of the Year, usually you start in queue, uh, 1 below Q4 and then growing over a quarter. This is a typical year, it's not a different versus other years.

Eric Martinuzzi: Okay. Then you talked about slight preference for subscription versus perpetual. Is that also part of the slightly wider guided range for FY 2027, just not being able to predict how customers are expecting to buy? Are you know, are bids being responded to with both a subscription and a perpetual, and you just don't know which the customer is going to choose?

David Abadi: Obviously when you convert certain deals into subscription, it do have an impact on revenue and over time. Given the fact that we have such a strong cRPO, it give us more confidence about how the year will look like. You need to remember that we have $370 million of cRPO. A big portion of our guidance is covered already. Subscription can play a role, but given the ±3% that we give, it's more about what we see in the market and the upside and downside that can play a role given the geopolitical situation and what we see in the overall environment. We saw that this is the right approach for this year.

Okay, and then the, uh, you talked about slight preference for subscription versus perpetual. Is that also part of the slightly wider guided range for FY27, just not being able to predict how customers are expecting to buy? Are you, you know, are bids being responded to with both a subscription and a perpetual, and you just don't know which the customer is going to choose?

So, obviously, when did you you convert second div into subscription, do have an impact on revenue and, uh, over time. But uh, given the fact that we have such a strong crpo, it give us more confidence about how the year will look like. So, you need to remember that we have 370 million dollar of, uh, crpo. Uh, so a big portion of our guidance is covered already. Um, subscription can't play a role, um, but given the plus or minus of 3% that we give it's more about the what we see in the market and the, these upside and downside that can play a role, giving the geopolitical situation and the what we see in the overall environment. And we saw that this is the right uh, approach for this year.

Eric Martinuzzi: Okay. Then lastly, more of a macro question, but historically you have talked about pipeline or top of funnel activity increasing with increased global conflict. Any signs with regard to the Iran war impact on pipeline?

Elad Sharon: Yeah. Actually, if you look at the market, generally speaking, when there are security concerns, usually it will translate into demand in certain areas, certain territories, certain use cases. It takes time because it's government agencies. It takes for them time to respond. But what I can give you as an anecdote for this question today is, for example, the military intelligence. We do see demand growing in military intelligence, including in NATO countries. The reason is that they have to use this technology with their special forces and also have to improve their border security. Usually, it's military intelligence. We do see that certain areas with certain use cases have tailwinds related to the geopolitical situation today in the Middle East.

Okay, and then lastly, more of a macro question. But, uh, historically, you have talked about, uh, pipeline or top-of-funnel activity increasing with increased global conflict. Any signs, uh, with regard to the, uh, Iran war impact on pipeline?

Test for them, time to respond.

Elad Sharon: The answer is that usually security concerns create some more demand. Of course, it depends on the territory and depends on the use case, but generally speaking, the answer is yes.

Uh, but what I can, uh, give you is an anecdote. Uh, for this question today is, for the example, the military intelligence — we do see demand growing in military intelligence, including in NATO countries. The reason is that they have to, to use this technology with their special forces. And also, uh, have to improve their border security. Usually, it's military intelligence. So, we do see that certain areas with certain use cases have tailwind related to, to the geopolitical situation today in the Middle East. So, the answer is that usually security concerns create some, some odd demand. Of course, it depends on the territory and depends on the use case, but generally speaking, the answer is yes.

Eric Martinuzzi: Thank you.

Thank you.

Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. Our next question comes from Charlie Zhu with Evercore ISI. Your line is open.

Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. Our next question comes from Charlie Zhou with Evercore ISI. Your line is open.

Again, ladies and gentlemen, if you have a question or a comment at this time, please press star, one, one, one on your telephone.

Our next question comes from Charlie Zoo with Evercore ISI. Your line is open.

Charlie Zhu: Hi, guys. Thank you very much for taking my question. This is Charlie for Peter, Evercore ISI. I have two questions for you guys. Firstly, with the incremental buyback authorization now in place, how should we think about the cadence of buybacks in FY 2027? Maybe just walk through how you are, you know, balancing buybacks relative to ongoing investments in growth and expansion.

Charlie Zhou: Hi, guys. Thank you very much for taking my question. This is Charlie for Peter, Evercore ISI. I have two questions for you guys. Firstly, with the incremental buyback authorization now in place, how should we think about the cadence of buybacks in FY 2027? Maybe just walk through how you are, you know, balancing buybacks relative to ongoing investments in growth and expansion.

Thank you very much for taking, my question, this is Charlie for Peter, uh, bore. Um, I have 2 questions for you guys. Um, firstly, um, what the um, incremental buyback authorization now in place, how shall we think about the Cadence of our accent and FY 27 and and maybe just

Can you walk through how you are balancing buybacks relative to ongoing investments in growth and expansion?

David Abadi: Thank you, Charlie. So actually we are very pleased that early this March, we were able to announce additional $20 million, which gave us a total plan since November 2024 of $60 million. The remaining capacity under this plan is around $33 million remain for us to execute. Looking in the overall picture, we ended the year with $170 million of cash with a very strong balance sheet and continue to generate cash. What we are trying to do is to take a balanced approach between investing in our value creation for our shareholders and creating a buyback. This is why we are placing all these plans.

Thank you. Sean Charlie. Um,

So actually, we are very pleased that early this March, we were able to announce an additional $20 million, which gave us a total plan since November 24th of $60 million. Uh, the remaining capacity under this plan is around $33 million remaining for us to execute, uh.

Looking in the, you know, in the overall picture, we ended the year, we ended the year with 1 and 117 million of cash with a very strong balance sheet, and continue to generate cash.

What we are trying to do is to take a balanced approach between, um, investing in, um, our

David Abadi: Actually, the board's ongoing commitment to long-term shareholder value creation, and confidence in our growth prospects allow us to do that. Going forward, we will continue to assess on a regular basis. Now we have enough capacity for the upcoming quarters, and we'll continue to execute that. We are executing it. Technically, we have two ways to do it, regular purchase in the market when we are not blackout and using a 10b5-1 plan during the blackout period. By doing this using these two tools, we're able to execute.

value creation for our shareholders and creating a buyback. And this is why we are placing all these, uh, uh, plans actually the boarding going going commitment to long-term shareholders value creation, and confidence in our growth prospects. Allow us to to do that. Um, going forward, we will continue to assess on the regular basis. Now, we have enough Capac capacity for the upcoming, uh, quarters and we'll continue to execute that, we are executing it technically under, we have 2 ways to do it, regular purchases, and the market when we are not black out and uh, using a 10 B 5 plan, um, during the

Back off beard. So, by doing this using these two tools, we are able to execute.

Charlie Zhu: Got it. That makes sense. Second one maybe for you, David. Both growth and operating margins came in very nicely this quarter, and as you mentioned on the call, the incremental growth margin this quarter came in at around 100%. Based on your growth margin guide, it seems that the incremental growth margin will be around 83% for next year. Maybe can you just help us think about the key drivers of that outperformance first, and then how sustainable are those benefits as we move through, you know, FY 2027?

Charlie Zhou: Got it. That makes sense. Second one maybe for you, David. Both growth and operating margins came in very nicely this quarter, and as you mentioned on the call, the incremental growth margin this quarter came in at around 100%. Based on your growth margin guide, it seems that the incremental growth margin will be around 83% for next year. Maybe can you just help us think about the key drivers of that outperformance first, and then how sustainable are those benefits as we move through, you know, FY 2027?

David Abadi: We are very pleased with the gross margin improvement. If you look at the last few years, we improve on a regular basis our gross margin, and it's a continued improvement. It's actually another indication and validation for us about the value perceived by our customers. Our customer buying premium solution and willing to pay for that, and we invest a lot on R&D. The way that you get a return on that is by able to sell our solution to tier one customer that appreciate this value that we provide them. Looking at the overall trend, you can see that the total Software is crossing the 80% gross margin, and the Professional services continue to increase above 20%.

both growth and operating margins came in very nicely this quarter. And as you mentioned on the call, um, the incremental growth margin is quarter came in at around 100% And based on your gross margin guidance. Seems that the incremental growth margin will be around 83% for next year and, uh, and maybe can you just help us to think about the key drivers of that? Um, outperformance and then how sustainable are those, um, benefits as we move through, um, you know, a 2027.

So we are very pleased with the growth margin Improvement. If you look at the the last few years we improve on a regular basis. Our gross margin is a continued Improvement. Uh, and it's actually another indication is validation for us about the value perceived by our customers. Our customer buying premium solution and willing to pay, uh, for that. And, uh, we invest a lot on R&D, and the way that you, um, uh, get get a return on that is by able able able to sell, um, uh, our solution to Tier 1, customer that appreciate this, uh, value that we provide them. Uh, looking at the overall trend, you can see that the total software is crossing, the 80% gross margin and the professional service continue to

David Abadi: The combination of the two of them allow us to improve more margin when the scale is coming. Overall, we believe that this trend will continue. We already guided for this year to be at 73.5%, and we believe that in the long run, we leave more room for improvement on gross margin.

Increase above 20%. The combination of the two of them allows us to improve, uh, more margin when, um, the scale is coming. Uh, so overall, we believe that this trend will continue. We already guided for, uh, this year to be at 73 and a half percent, and we believe that in the long run, we leave more room for improvement on, on gross margin.

Charlie Zhu: Got it. Thank you so much.

Charlie Zhou: Got it. Thank you so much.

Got it. Thank you so much.

David Abadi: Thank you, Charlie.

Operator: I'm not showing any further questions at this time. I'd like to turn the call back over to Dean for any further remarks.

Dean Ridlon: Thank you, Kevin, and thank you all for joining us today. Should you have any questions, please feel free to reach out to me, and we look forward to speaking with you again next quarter.

So this time like turn the call back over to Dean for any further. Remarks.

Uh, thank you Kevin and thank you all for joining us today. Um should you have any questions? Please feel free to reach out to me and we look forward to speaking with you again, next quarter.

Operator: Thank you, ladies and gentlemen. This concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Thank you, ladies and gentlemen. Let's conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Q4 2026 Cognyte Software Ltd Earnings Call

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