Cognyte Software Ltd. Q3 FY2026 earnings call

• Cognyte delivered strong results in Q3 with mid-teens revenue growth and significant operating income growth. Cash flow from operations was strong.
• Secured major deals and expansions in law enforcement, national security, and military intelligence sectors, including a $5 million follow-on subscription with a tier-one military intelligence organization in EMEA.
• Partnership with LexisNexis Solutions progressing well with technical alignment and joint engagements.
• Received Gartner recognition for predictive analytics and intelligence platforms.
• Revenue for the first nine months of the year was $293.8 million, up 14.7% year over year, with non-GAAP operating income up nearly three times compared to the prior year.

For the third quarter, revenue was $100.7 million, up 13.2% year over year. Software revenue was $88.7 million, representing 88.1% of total revenue, with software revenue consisting of $41.9 million in perpetual licenses, appliances, and term-based subscription licenses, and $46.9 million in software services revenue. Professional service revenue in Q3 was $12 million, about 13% of total revenue. Recurring revenue reached $47.5 million, representing 47.1% of total revenue. Non-GAAP gross margin for the quarter was 73.1%, with gross profit at $73.6 million, up 18% year over year.

• Raised full-year guidance for fiscal 2026: expects revenue of approximately $400 million (14% year-over-year growth), adjusted EBITDA of approximately $47 million (60% year-over-year growth).
• Outlook for fiscal year ending January 31, 2028: expects revenue of about $500 million, gross margin of approximately 73%, and adjusted EBITDA margin of greater than 20%.

Q: When looking at large deal announcements, how does the timing of signing to deployment work and how does it flow through RPO and revenue recognition?

A: The sales cycle for large deals takes a few quarters (2-5 quarters). Deals land in RPO immediately; if scheduled to convert to revenue within 12 months, they land in CRPO. Smaller deals convert faster, larger deals may take longer depending on preparations.

Q: What's the competitive landscape like in the US market compared to other parts of the world?

A: Challenges are similar globally, but in the US, competitors like LP Harris and Noctasik are seen. Focus is on state and local and federal operational units.

Q: Can you comment on the margin outperformance and the trajectory of gross margin expansion and adjusted EBITDA margin?

A: Gross margin was 73% in Q3, driven by customers paying premium for differentiated tech. Adjusted EBITDA is guided at $47 million for FY 2026. Margin improvement is gradual, progressing towards targets for FY 2028.