Cognyte Software Ltd.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognite fourth quarter fiscal year 2024 earnings conference call. After the speaker's remarks, we will conduct a question and answer session. To ask a question at that time, you will need to press star 11. Please note that today's conference may be recorded. I would now like to hand the conference over to your speaker, host Dean Ridlon, head of investor relations. Please go ahead.

Thank you, operator. Hello, everyone. I'm Dean Ridlund, Cognite's Head of Investor Relations. Thank you for joining us today. I'm here with Elad Sharam, Cognite's CEO, and David Abadi, Cognite'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 cognite.com. Click on the Investors tab, click on the webcast link, and select 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. 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, Cognite 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, uncertainties, could cause Cognite's actual results to differ materially from those indicated in these forward-looking statements, please see our annual report on Form 20F for the fiscal year ended January 31st, 2023 and January 31st, 2024, which we expect to file 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. Please see today's presentation slides, our earnings release, and the investor section of our website at cognite.com for a reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from, as a substitute for, or superior to 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'd like to turn the call over to Allat.

Thank you, Dean. Welcome, everyone, to our fourth quarter conference call. The fourth quarter was a strong finish to a productive before-cook night. Market demand stabilized and continue to improve, as bad actors utilize new ways to conduct their business, and the need for advanced technology and actual intelligence continues to grow. We executed well in fiscal 24, delivering top-line growth of approximately 11%, and we entered the new year with an improving momentum that is supported by strong and short and long-term RPOs, which give us confidence in our outlook. Importantly, we have reached an inflection point where we are growing gross profit more rapidly than our revenue, and we expect fiscal 25 to be a year of operating leverage. To be clear, we'll be investing in R&D and our North America expansion efforts to accelerate future growth, but the pace of our operating expense growth is expected to be slower than our revenue ramp, leading to improved profitability. For fiscal 24, we generated non-GAAP revenue of $313.5 million, and increased our SAS adjusted non-GAAP gross profit by more than $39 million on $30 million in increased revenue. Our improving gross profit, expense management, and growing operating leverage enabled our third consecutive quarter of positive adjusted EBITDA at $4.3 million. In fact, we delivered $9 million in positive adjusted EBITDA for the full year, along with $35 million of positive cash from operations and $25 million of free cash flow. Cognite is again generating operating income, and we expect not just to maintain our profitability, but meaningfully expand it in the next year. We believe we now have a stable platform to execute and expect the coming year to be one of further operational improvement as we aim to build on this strong foundation to deliver sustainable and profitable growth. During Q4, we continue to win deals with both new and existing customers, recognize the strength of our innovative technology, and cognize the ability to deliver value. Looking at the full year, we signed contracts with 29 new customers, which is up 70% year-over-year. These new customers present a meaningful opportunity to drive growth. In most cases, new customers start small, and we believe that our land and expense strategy will drive incremental revenue growth, profitability, and cash flow over time. As we look across our addressable market, North America represents a meaningful net-in opportunity for expansion. As previously shared, we are allocating resources to increase our presence in North America. These investments have already started to drive results with several important wins over the past fiscal year. Our strategy to start with state and local has been successful, as our new customers are pleased with the value our solutions deliver and have been providing references to potential new customers throughout the region. Regarding federal customers, we are working with an established partner to penetrate this market, and we believe that we have the right sales approach and superior technology to allow us to win. Initial progress in North America has reinforced our confidence that our strategy is sound, and we have increased our sales efforts further to leverage this momentum. We believe we'll be able to win more new customers and simultaneously increase wallet share with our existing customers over time. We continue to innovate and deliver solutions that we believe demonstrate our technological leadership and generate unique value for our customers. We have a lengthy track record of delivering powerful investigative analytics solutions to hundreds of customers around the globe. Our customers view us as domain experts and we have decades-long relationships with many customers. Our advanced technology, including innovative analytics and AI, allows faster and more effective investigations by fusing data at scale creating digital twins, and detecting patterns, relationships, and other hidden insights that would be nearly impossible to find otherwise. This helps prioritize risk and maximize the productivity of investigators and decision-makers, enabling faster decision-making and creating incremental value for our customers in important missions. Our investigative analytics solutions are sought to national security, law enforcement, national intelligence, and other organizations to enable them to perform more effective investigations. We believe customer references and field trials are very effective ways for us to win deals with both new and existing customers. The first win I would like to highlight is for more than $20 million with an existing national security customer for its mission to combat terrorism. We recently released a new version of our solution with advanced and differentiated capabilities. These capabilities solve challenges brought on by emerging technologies that create new needs for our customers. The customer recognizes the value we deliver and continues to select our solutions to support the evolving needs. We believe you won't because of the demonstrated superior performance of our advanced technology. The second win is for approximately $10 million from an existing national intelligence customer to address border security threats. This is an additional win from this customer that is highly satisfied with our solutions they are using for other use cases. For this use case, we were able to demonstrate the effectiveness of our solution through field trials. The third win is with a new national intelligence customer to help them safeguard their forces. The deal is for approximately $3 million. Previously, we sold solutions to another agency in the country, and this agency served as a reference for us affirming both the performance and the value our solutions generate. This strong reference played a significant role in our ability to sign this new deal. The customer has already deployed their new solution, and it is generating value for them. I would now like to discuss what's driving demand. Customers view Cognite as a strategic, trusted partner, providing innovative solutions that help them to improve the speed, accuracy, and success rate of their investigations, and make timely decisions. In general, customers range from organizations that are focused on relatively small geographies, like law enforcement agencies, all the way up to security and intelligence agencies that are responsible for combating threats on a national level. Our customers are dealing with a wide variety of challenges. The level of sophistication of bad actors continues to increase as they leverage technology to harder activities better. It has become increasingly difficult to connect entities to their digital footprint. In addition, the volume and diversity of data our customers are working with has grown dramatically. Our customers face a challenging situation. More digital data in more places, much of it is unstructured, makes investigating bad actors more difficult. Cognite addresses this challenge using advanced analytics and AI-enabled solutions to analyze multiple data streams to create a holistic picture of bad actors' digital footprint. These new emerging and evolving challenges coupled with increased geopolitical unrest requires our customers to continue investing in the technology to keep them ahead of these threats. We continue to leverage R&D to bring innovations to our customers so that we can maintain our differentiation. Cognize utilizes advanced AI capabilities to rapidly analyze the various desperate and growing data assets to enable our customers to make quick decisions and execute important missions. We believe the strength of our technology, together with our domain expertise in investigative analytics, will continue to enhance the value we provide to our customers, increase our differentiation, and drive demand. The technologies BedActor are utilizing continue to evolve rapidly. For example, advancements in GenAI and cryptocurrency have added significant complexities for our customers. GenAI has provided bad actors with the ability to create fake identities and generate harmful content on open source channels. Customers using our solutions can investigate and reveal with high confidence the potential identity of the bad actor and better understand the intent and risk of its actions. Similarly, the use of cryptocurrency has made it easier for bad actors to transact anonymously. Crypto requires no physical space, and it can be swiftly transferred across borders without currency controls, regulations, or other barriers, making it an ideal asset for illegal transactions. Our decision intelligence platform enables authorities to construct a picture of suspects, organizations, companies, and financial accounts involved. Ultimately, this picture allows authorities to limit the ability of organized criminal groups to fund their operations. These examples illustrate the continually evolving landscape our customers need to address. We expect these trends to continue to generate demand for our solutions and drive long-term growth. Turning to our outlook for FY25. Demand for our solutions is solid. We entered the year with a very strong short-term IPO. We expect to drive operating leverage this fiscal year, and at the same time, we're investing in advancing our capabilities and our go-to-market infrastructure with the aim of creating sustainable and profitable long-term growth. We are expecting revenue for fiscal 25 to be $340 million, plus or minus 2%, representing approximately 8.5% year-over-year growth at the midpoint. We also expect gross profit to grow faster than revenue. As a result of continued expansion and gross margin, we expect gross profit to grow by more than 10% year-over-year. Given the leverage in our financial model, we expect adjusted EBITDA for the year to be about $19 million, more than double what we've generated in fiscal 24, reflecting our ongoing efforts to drive margin expansion. David will provide more detailed guidance during his remarks. To summarize, we believe the market is healthy. Our customers continue to face significant growing and evolving challenges across many use cases. and look to us for solutions that help them accelerate investigations, make decisions faster, and mitigate a wide variety of threats. Cognite is well established as a domain expert and a trusted partner. Our customers frequently tell us that our solutions significantly improve the results, enabling them to effectively perform their missions and make the world safer. Our established long-term customer relationships continue to be a significant asset for us. We are pleased with our execution and financial results for the fourth quarter and full year, and we believe Cognite is well positioned for sustainable growth and continuing improvement in profitability. Before I turn the call over to David, I want to take a moment to thank Cognite Board of Directors members, Carmichaelo and Svikan Nagan, for their significant contributions to Cognite leadership and their strong commitment to our mission over the years. And I would like to welcome Saritza Giv and Ron Shvili, two accomplished executives, to our board. Sarit is a seasoned executive with deep financial and software industry experience in publicly traded companies. Ron brings extensive industry knowledge, including relevant experience from the Israeli Defense Forces, where he was head of research division, specializing in the fields of advanced communications, cyber and AI, and head of an elite technology unit. I'm confident that Ron and Sarit will each provide important additional strengths to our board. Now let me turn the call over to David to provide more details about our results and fiscal 25 outlook. David?