CGNT

Core Market Demand Drivers

• The global intelligence environment is growing more complex, with faster-moving threats, rapidly expanding data volumes, fragmented information across domains, and increasingly sophisticated interconnected adversaries, requiring agencies to produce actionable intelligence faster in dynamic environments.
• Public sector agencies (law enforcement, national security, defense, public safety) are expanding their intelligence and investigative capabilities, investing in advanced technologies for use cases including border security, multi-domain investigations, financial crime, and cyber threats.
• AI is reshaping intelligence work, with customers demanding AI embedded in operational workflows (with required governance, explainability, and accountability for mission-critical use) rather than standalone tools, which improves speed, uncovers hidden connections, and enhances decision-making.

Customer Growth & Traction

• The quarter delivered solid double-digit year-over-year revenue growth, driven by stronger-than-expected adoption of subscription offerings, which has boosted recurring revenue momentum and long-term visibility.
• Significant large deals were secured in the quarter, including a new $20 million+ three-year subscription agreement and a $10 million+ existing customer expansion. New logo activity remains robust across all geographies.
• In the U.S. market, multiple new state and local logos were secured, and federal opportunities are advancing through proof-of-concepts and live operational demonstrations with positive feedback. The company expects $20 million in U.S. deals this year, with a large long-term opportunity in this market.

Product & Innovation Highlights

• The unified Cognite platform benefits from strong pull from the existing install base, with customers expanding from single use cases to cross-domain, multi-workflow deployments, demonstrating high platform stickiness.
• New capabilities for financial investigations were launched to address growing demand for countering transnational illicit financing, with the platform already deployed successfully by a European military intelligence agency to counter terror financing, earning a national defense innovation award.
• Cognite is displacing incumbent solutions and in-house built systems, as customers recognize fragmented manual workflows cannot keep pace with modern investigative requirements.

Financial & Operational Discipline

• Profitability is improving faster than revenue growth, demonstrating operating leverage in Cognite's business model. The company proactively manages macro pressures including foreign exchange movements and rising hardware costs.
• The company maintained a disciplined capital allocation strategy, repurchasing 1 million ordinary shares for $8.2 million in Q1, with $35 million in total repurchases completed since November 2024 out of $60 million in total authorized capacity.

• Full-year FY27 total revenue guidance is reaffirmed at approximately $448 million (plus or minus 3%), representing ~12% year-over-year growth at the midpoint of the range. Management expects sequential quarterly growth through the remainder of the year aligned with historical seasonality.
• Recurring revenue growth expectations are lifted, with management now projecting recurring revenue will grow faster than total revenue (greater than 12% year-over-year) and become a larger contributor to overall growth.
• Full-year FY27 non-GAAP gross margin guidance is maintained at approximately 73.5%, a 50 basis point year-over-year increase, with gross profit expected to grow faster than total revenue.
• Non-GAAP operating income guidance is maintained at ~$56 billion, representing more than 50% year-over-year growth, following proactive hedging against foreign exchange headwinds. Adjusted EBITDA guidance is maintained at ~$68 million, ~40% year-over-year growth.
• Full-year FY27 non-GAAP EPS guidance is unchanged at $0.47 at the midpoint of the revenue range. Full-year operating cash flow guidance is maintained at ~$45 million, with cash generation expected to be back-weighted to the second half of the year.
• The FY28 adjusted EBITDA target is updated to reflect exchange rate changes, but the company remains on track to hit the target on a constant currency basis. The FY28 total revenue target of approximately $500 million is reaffirmed.

Total Q1 FY27 revenue was $105.5 million, growing 10.4% year-over-year. Software revenue (comprising perpetual licenses, appliances, and some term-based subscriptions) reached $47.3 million, increasing 26.5% year-over-year, accounting for 44.8% of total revenue. Software services revenue (primarily support contracts and minority cloud SaaS subscriptions) was $50.1 million, growing 12.1% year-over-year, contributing 47.5% of total revenue. Combined total software revenue grew 18.6% year-over-year to $97.4 million. Professional services revenue was $8.2 million, down from $13.5 million year-over-year, accounting for 7.8% of total revenue, with quarterly fluctuations attributed to revenue recognition timing. Recurring revenue grew 10% year-over-year to $51.9 million, representing 49.2% of total revenue. Non-GAAP gross profit reached $76.9 million, growing 12% year-over-year, with non-GAAP gross margin of 72.9%, an expansion of 100 basis points year-over-year. GAAP operating income was $4.4 million, doubling year-over-year, while non-GAAP operating income hit $10.7 million, growing 41.5% year-over-year. Adjusted EBITDA was $13.6 million, up 31.5% year-over-year. Q1 billings grew 31.2% year-over-year to $102.7 million. Total remaining performance obligations (RPO) stood at $528.8 million, with short-term RPO (revenue to be recognized over the next 12 months) at $363.4 million. The company ended Q1 with $109.2 million in cash and no debt. Operating cash flow was negative $4.7 million, and free cash flow was negative $6.1 million.

• Foreign exchange volatility, specifically recent weakness of the U.S. dollar relative to the Israeli shekel, has increased operating expenses and created negative impacts on operating cash flow in Q1, and ongoing movements represent a continued headwind.
• Rising hardware-related costs are a current macro pressure that the company is actively monitoring and managing, and required inventory build-up to meet forecast demand negatively impacted Q1 operating cash flow.
• Increasing adoption of subscription offerings changes the timing profile of revenue recognition, billings, remaining performance obligations, cash generation, and collections, creating near-term cash flow volatility.
• RPO can experience quarter-to-quarter fluctuations driven by changes in sell cycles, deployment timing, contract duration, renewal timing, and seasonality, which can impact near-term revenue visibility.

Q: Given the 68% acceleration in RPO bookings this quarter, why maintain the full-year total revenue guide rather than raising it? Is this conservatism or a sign of underlying headwinds? / A: The unchanged guidance reflects the timing of deployment cycles and revenue recognition for contracted RPO, not conservatism or hidden headwinds. While keeping total revenue guidance steady, the company is raising its expectations for recurring revenue growth, which is outperforming prior forecasts. The 10% year-over-year Q1 growth in recurring revenue is expected to continue for the full year, which management views as a positive dynamic for the business.

Q: Q1 operating cash flow came in below market expectations, what drove the shortfall, and why maintain the full-year $45 million operating cash flow guidance? / A: Three factors drove the Q1 shortfall: U.S. dollar weakness against the Israeli shekel created FX-driven costs, subscription sales shift cash collection timing relative to perpetual license deals, and the company built $3 million in additional inventory to offset rising hardware costs and meet expected demand. Management maintains full-year guidance because the year's collections are expected to be back-weighted to the second half, consistent with historical seasonality where Q2 is usually negative and Q3/Q4 generate strong positive cash flow, and they expect to hit the full-year target.

Q: Is the company still on track for $20 million in U.S. business this year, as guided previously, and what is the current traction in the U.S. market? / A: Management's confidence in the U.S. target has actually increased, with stronger visibility and market traction than earlier in the year. The company has received strong positive feedback from operational customers and proof-of-concept prospects at the state, local, and federal levels, is scaling marketing efforts and leveraging partners more effectively. The $20 million figure refers to deal bookings this year, with a significant portion expected to convert to revenue, and management sees potential for overachievement against this target.

Q: Why maintain the expected 87% software / 13% professional services full-year revenue mix after very strong software growth in Q1, which implies a software growth deceleration for the rest of the year? / A: The stable mix guidance reflects a shift within software revenue towards faster-growing recurring revenue rather than a deceleration in underlying software demand. Recurring revenue is growing faster than total revenue (over 12% year-over-year), even as total top-line guidance remains unchanged, which reflects a healthy transition to a more recurring business model. The Q1 professional services shortfall is in line with the long-term goal of shifting revenue mix towards higher-margin software, and the full-year mix may end up slightly better than the 87/13 guide.