Cognyte Software Ltd. Q4 FY2025 earnings call

• Q4 came in ahead of expectations with 13% y-o-y revenue growth to $94.5M, non-GAAP gross profit up 17% y-o-y, adjusted EBITDA over $9M (114% y-o-y growth), cash flow from operations ~$19M.
• Full fiscal 2025: revenue up ~12% to $351M, non-GAAP gross profit up ~15%, adjusted EBITDA $29M (over three times last year), cash flow from operations $47M.
• Secured significant deals in Q4 across diverse customer base, including over $10M tech upgrade deal and multi-year support agreement with EMEA law enforcement agency, plus five deals worth $5M or more.
• Added over 60 new customers in 2025, twice as many as last fiscal year.
• Strengthening position in US market, signed new customers and follow-on deals, actively pursuing US federal law enforcement market.
• Welcome new board members Matthew O'Neill and Nurit Benjamini, with Matthew bringing US federal agency expertise and Nurit software sector experience.
• Invite to virtual Analyst and Investor Day on April 8 to delve into customer challenges, market dynamics, and long-term financial targets.

In Q4, revenue grew by 13% year-over-year to $94.5 million. Non-GAAP gross profit increased by 17% year-over-year. For the full fiscal year 2025, revenue grew by approximately 12% year-over-year to $351 million. Non-GAAP gross profit increased by approximately 15% year-over-year. Total software revenue was $306.7 million, representing about 87% of total revenue. Recurring revenue for the full year was $186.6 million, representing 53% of total revenue. Geographic revenue mix for the year was 55% from EMEA, 31% from APAC and 14% from the Americas. Non-GAAP gross margin for the year was 71%, expanding by 180 basis-points year-over-year. Q4 software revenue was $37.4 million, software services revenue was $45.9 million, total software revenue was $83.3 million (about 88% of total revenue). Recurring revenue in Q4 was $47.3 million (50% of total revenue). Professional services revenue in Q4 was $11.2 million. Non-GAAP gross margin for Q4 was 71.5%, total software non-GAAP gross margin improved to 78.9% (150 basis points year-over-year improvement), professional services non-GAAP gross margin was 16.3% (vs 6.8% last year).

• Fiscal 2026 expected revenue: approximately $392 million plus or minus 2% (~12% y-o-y growth at midpoint).
• Total software revenue expected to be about $340 million (~87% of total revenue), professional services revenue ~13% of total revenue.
• Q1 revenue expected similar to Q4 levels with sequential growth throughout the year.
• Non-GAAP gross margin expected to increase to ~71.5% (50 basis points improvement year-over-year).
• Non-GAAP operating expenses expected to grow meaningfully slower than revenue, reaching ~$250 million (+7% increase).
• Non-GAAP operating income expected to be about $30 million (nearly doubling y-o-y).
• Adjusted EBITDA expected to be about $43 million (45% y-o-y growth).
• Non-GAAP EPS expected to be $0.16 at midpoint of revenue range.
• Cash flow from operations expected to be $45 million in fiscal 2026.

Q: Mike Cikos from Needham asked about U.S. demand trends, sales cycles in the U.S., and billings/cash flow from operations.

A: Elad Sharon said U.S. presents good opportunity, sales cycles in U.S. are longer but efforts continue; David Abadi said billing in Q4 was $95M, cash flow from operations in 2025 was strong due to working capital efficiencies, forecasting $45M in 2026 with continued benefits from working capital and collections.

Q: Peter Levine from Evercore asked about U.S. demand drivers related to immigration and cartels, investments to accelerate U.S. sales cycles, and durability of double-digit growth.

A: Elad Sharon discussed common demand drivers globally and increased investments in U.S. sales/marketing; David Abadi said to wait for Investor Day for details on long-term growth but highlighted healthy business fundamentals.

Q: Shaw Yale from TD Cowen asked about market dynamics outside of the U.S.

A: Elad Sharon said global demand drivers remain healthy due to growing data volumes/diversity, need for technology tools to convert data to insight, and advancements like AI creating both opportunities and risks for customers, with Cognyte well-positioned for continued growth.