Cognyte at TD Cowen Conference: Strategic Growth Plans

On Wednesday, 28 May 2025, Cognyte Software Ltd (NASDAQ:CGNT) presented at TD Cowen’s 53rd Annual Technology, Media & Telecom Conference 2025, showcasing its robust performance and strategic initiatives in the investigative analytics market. While the company reported strong financial growth and outlined ambitious future targets, it also acknowledged challenges such as growing data volumes and sophisticated adversaries.

Key Takeaways

• Cognyte achieved a 12% increase in revenue for fiscal year 2025, reaching $355 million.
• The company plans to leverage AI and expand its presence in the U.S. market.
• Fiscal year 2026 revenue is projected at $392 million, with a 45% increase in adjusted EBITDA.
• Long-term goals include reaching $500 million in revenue by fiscal year 2028.
• The company is transitioning from perpetual licenses to subscription-based models.

Financial Results

Cognyte reported a successful fiscal year 2025, with:

• Revenue growth of 12%, totaling $355 million.
• A significant increase in profitability, with adjusted EBITDA tripling to $29 million.
• Non-GAAP gross profit rising by 15%.
• Fiscal year 2026 revenue guidance set at $392 million, maintaining a 12% growth rate.
• A targeted adjusted EBITDA of $43 million for fiscal year 2026, marking a 45% year-over-year increase.

Operational Updates

The company is focusing on expanding its market presence and improving customer retention:

• Increasing its footprint in the U.S. by targeting state and local law enforcement agencies.
• Recent acquisition of GroupSense to enhance market reach in the U.S.
• Acquired over 60 new customers in the past year, emphasizing innovation and R&D.
• Leveraging AI, including GenAI, to enhance technology and uncover hidden insights.
• Encouraging a shift from perpetual licenses to subscription models.

Future Outlook

Cognyte has set ambitious targets for the coming years:

• Revenue for fiscal year 2028 is projected to reach $500 million.
• The company aims for an adjusted EBITDA margin exceeding 20% and a gross margin of approximately 73%.
• Continued focus on innovation and customer satisfaction to address growing security challenges.

Q&A Highlights

During the Q&A session, key insights included:

• The interconnected nature of data growth, adversaries, and technology advancements.
• A gradual industry shift from on-premises perpetual licenses to cloud-based subscription models, though timelines remain uncertain.

For a detailed review of the conference call, readers are encouraged to refer to the full transcript below.

Full transcript - TD Cowen’s 53rd Annual Technology, Media & Telecom Conference 2025:

Shaul Eyal, Research Analyst, TD Cowen: Good morning, everybody. Thank you for joining us. My name is Shaul Eyal. I’m a TD Cowen’s research analyst covering the cybersecurity universe. We are joined this morning and delighted to host Alexeyron, CEO of Cognite.

We also have David Abadi, the CFO, sitting here in the front. Halek, thank you so much for joining us this morning. Thank you for hosting us. Maybe for the benefit of the audience slightly less familiar with Cognite, can you briefly outline for us the company’s mission and the market it addresses?

Alexeyron, CEO, Cognite: Yes. So Cognite is a global leader in investigative analytics. Our customers are primarily government security agencies, such as law enforcement, national security, national intelligence, and military intelligence. And with our technology, they can fuse and analyze growing data volumes and diversity at scale and convert it into hidden insights. So what we call we help them to actually make the unknown known or eliminate the unknown.

They have to be able to identify, investigate, and prevent any forms of terror and crime, and that’s exactly what we’re helping them to do. We’re in this market for three decades now. We have hundreds of customers in nearly 100 countries, and we support many different use cases such as drug trafficking, border border controls, terror activities, etcetera. And the the market is actually a market of security, and we all witnessed that the world, unfortunately, is not getting suffered this day, and the need continues to grow over time.

Shaul Eyal, Research Analyst, TD Cowen: So with that in mind, as we think about, on the one hand, the world is not becoming safer, some would even say, better place, How should we be thinking about the supporting drivers of Kugnai and its industry?

Alexeyron, CEO, Cognite: Yes. So our customers are facing many different challenges. But if I have to focus, there are primarily three challenges that customers must address. The first one is related to data. Data is growing in volumes and diversity.

And in order for our customers to be able to generate very accurate and smart intelligence in real time and being able to prevent, bad things from happening, they need to be able to quickly fuse and analyze data at scale. So when data is growing and it’s growing fast, they need more capacity and more technology in order to to be able to convert it into insights. And by the way, we help them also uncover hidden insights, including from encrypted metadata. So it’s very strong tools that we provide them with. The second element we have to remember is related to adversaries.

Adversaries are also becoming more and more sophisticated. They also use technology in order to evade detection. They’re hiding much better. They, of course, don’t use regular communication channels. They find themselves in very specific ways, and it’s very difficult for security agencies to put their hands on them.

And the last one is related to technology. Technology is running really fast. AI is one element, but it’s not the only one. And customers have either to advance themselves and refresh technology and be one step ahead. And if not, the bad guys will be the ones to have the advantage, and they are also using technology.

For example, the user in order to create fake identities. This is one very simple example. So we help customers to address all these three demand drivers and, of course, maintain advantage among the mission, the critical mission they have to deal with.

Shaul Eyal, Research Analyst, TD Cowen: You’ve recently reported solid set of results, revenue, EPS, bidding those. Talk to us about that performance. Maybe talk to us also what you have been seeing from a geographical perspective.

Alexeyron, CEO, Cognite: Yes. So we finished fiscal twenty twenty five strong with revenue growing double digit and with a significant increase in profitability. Revenue came in at $355,000,000 representing 12% year over year growth. Profitability grew faster. Non GAAP gross profit grew at 15%.

And adjusted EBITDA was $29,000,000 more than 3x what we delivered in previous year. So generally speaking, a very healthy business. In terms of geographies, we are global. We address many different use cases across many security agencies in nearly hundred countries, And the revenue split is more or less 55% coming from EMEA, about 30% is coming from APAC, and about 15% is coming from Americas.

Shaul Eyal, Research Analyst, TD Cowen: And and when we think about the guidance, the initial guidance that you have projected, do you see the drivers you see kind of results and drivers supporting that as fiscal twenty twenty six unfolds?

Alexeyron, CEO, Cognite: Yes, we do. Actually, we gave guidance for fiscal twenty twenty six in which we expect to continue and grow double digit and improve profitability and increase it even faster than top line growth. We all witnessed the unrest around the world. We all witnessed that the world is not getting safer. We all witnessed that security agencies have more missions and more challenges to to address.

And we believe that our technology is very helpful and and valuable. Actually, customers are with us for more than two, three decades, some of them. So this is, I believe, a vote of confidence in the way we we serve this market, and I think we’re highly appreciated by our customers. If you look at fiscal twenty six guidance, we guided 12% top line growth, more or less, which is $392,000,000 for the year, for this year, with non GAAP gross profit growing faster and adjusted EBITDA to be $43,000,000 which is a year over year growth of about 45%. So the demand drivers out there, I believe we do have a very strong technology to address customers’ needs, and we also have the appreciation of our customers, which was reflected, by the way, in the intelligence summit we had last year back in November.

We participate industry conferences, but also we have our own. And last year, in November 24, we had hundreds of customers joining us from nearly 70 countries, and you can see that the demand and the need and the traction with our customers is is very good. So the market drivers are healthy. The need is there. I believe we are well positioned with our strong technology, and we have very good visibility into fiscal twenty twenty six.

Shaul Eyal, Research Analyst, TD Cowen: As we think about your expansion and probably growing focus on The U. And you touched before on the geographic spread, what are the strategies that you’re putting in place and implementing in order to broaden your current U. S. Exposure? What’s the thinking along these lines?

Alexeyron, CEO, Cognite: Sure. So I’ll start and say that historically, we were not present in The US by decision. Whatever the reason is, we focused mostly on the rest of the world, and US was not a focused market for us. I said before that 15% is coming from Americas, but only a few percent, 3%, something like this, is coming from The US. And we had a decision we made a decision to expand presence in The US.

We’ve started focusing on law enforcement agencies in the state and local level, primarily operational units. And later, have decided that we want also to expand into the federal units. And so we started. It’s a penetration mode. The way we drive this penetration is by hiring local sales teams, is by participating industry conferences in The US.

We are expanding our network presence. Last week, we announced on a small acquisition for MarketReach, and we acquired the GroupSense. And we have already in the state and local level customers that joined us. We acquired new customers. Some of them became very strong references for us.

Some of them already put follow on orders, which is, I believe, a vote of confidence in the value we deliver to them. So the progress is very good. In federal, we started a little bit later, and the sales cycle with federal and the penetration process is more complicated than it take long time. It’s not a big surprise. We knew that.

Having said that, we also see there a very good engagement, interaction. We had POCs with them, proof of concepts with them, very successful ones. The feedback is very strong, and I believe that The US market presents a significant growth opportunity for us over time. Will take some time. Penetration is a process.

You have to create brand recognition, brand awareness, have more critical mass of more customers with you. But we are in the right direction, and we’ll continue this initiative in the next few years.

Shaul Eyal, Research Analyst, TD Cowen: So maybe in that respect, looking at it from a customer perspective, how is the company how is Cognite addressing customer retention? What strategies are in place to attract also new logos into your platform?

Alexeyron, CEO, Cognite: Yeah. Sure. So if you look at our growth initiatives, there are three. One of them is to expand with the existing customer base. Unlike usual commodity product that you buy for yourself and until it’s broken, you don’t have to replace it, in our business, it’s a very dynamic environment.

We mentioned it before. Data is growing. There is more new technology that is coming in, and customers have to expand, to upgrade, to refresh, to increase capacity, to add more capabilities. And so there are expansions, upgrades, and also selling to other departments within the same customer base that we have today. So this is one pillar, and it’s a very strong one.

Customers stay with us for many years. The reason is, by the way, our solutions, most of them are sticky. But the reasons customers stay with us is it’s not because the solutions are sticky, but because we continuously innovate and deliver to them very high value, and they are very happy with us. Actually, the customer success or the customer survey results are extremely high. So this is one pillar.

The second pillar is new customers, acquiring new customers. I mentioned it how we do it in The US. We do it exactly the same in the rest of the world, participating industry conferences, having customers’ references opening door for us. We have global Salesforce that is available for customers. We have partners network.

We have our own regional and global summits in order for customers to be able to come to the same place, first talk to each other. Actually, one of the customers told me something very strong that we became the intelligence community the intelligence community orchestrator for law enforcement agencies to talk to each other. So it was a very nice compliment for me. And we are able to acquire new customers. Last year, we acquired over 60 new customers.

And those customers, potentially, in in the future, will buy more and more of our solutions and our technology and expand and upgrade. So this is the how we attract new customers, how we acquire them, and how we maintain them. We invest a lot in innovation and r and d and make sure that our customers stay one step ahead of the adversaries or the bad guys and solve and identify and prevent threats before they unfold.

Shaul Eyal, Research Analyst, TD Cowen: Understood. Let’s talk for a second on the competitive landscape. So maybe a two part question. On the one hand, who is your head to head competition that you’re seeing out the most? That’s on the one hand.

And on the other hand, it would appear as if given there’s like very high barriers kind of to enter kind of this arena, given the advanced technologies. Are you seeing new start ups emerging in this field, in this category or not?

Alexeyron, CEO, Cognite: Yes. So if you look at our competitive landscape, actually, because we are global and because we address many different use cases to different security agencies, our landscape is fragmented. We have we are competing against large global companies like BAE, like others. We do have local competitors that we compete on certain territories that local there are some local competitors that are focused only on one or two use cases, so it’s very fragmented. If you take The US as an example, we are focusing on operational units.

So the local vendors that compete against us are l three Harry’s and Jacobs, just as an example. In in Germany, we’ll see someone else. In in Europe, we will see Rhodes Schwerts. So it’s it’s it’s different between one territory to the other and between one use case to the other. But generally speaking, they’re the global ones and the local ones or the ones that are focused on specific use case.

Our way to maintain leadership is to heavily invest in r and d, innovate, and make sure that the value we generate for our customers is significantly higher versus competition, but also in absolute way, address the real challenges and the real security pressure that they have to deal with. And we do it successfully for for many years. So the landscape has not changed recently. We do not have, I would say, one on one competitor that I can tell you this is number one competitor that compete with us globally and with all use cases. It’s fragmented, and we are able to maintain leadership.

The one way we’re trying to win competitors by the way, in certain cases, it’s becoming a single vendor. Customers that are with us for many years, including the one we announced last week that we had a subscription large deal subscription deal with one of the customers for 10 plus million dollars for three years. This is a single vendor. It’s not always So so they come to us.

But if it’s an a competitive bid, we usually encourage the customers to go through a POC. Because on the paper, everybody’s checking the box, and everybody’s complying with everything. But when eventually, when you come to the field, it’s not it’s not that way. So we encourage customers to go for POCs, to test and try the technology in their own hands, and usually, this help us win.

Shaul Eyal, Research Analyst, TD Cowen: It’s a bold statement. Gen AI, agentic AI, without a doubt, top of the jaws over the course of the past twelve, twenty four months or so. How is Cognite addressing this trend from a product perspective?

Alexeyron, CEO, Cognite: Yes. So if you look at AI in general, first of all, it’s it’s not new. It’s in the market for many years. It became more, I would say, attractive buzzword in the the in the last two years, but it exists for quite a long time. And then it presents a risk and an opportunity for our customers.

A risk because also the bad guys are using it to evade detection, to to anonymize themselves, to spike identities, to hide better. So if customers will not be able to address it in a very strong way, actually, there’ll be in a gap. The opportunity is in two ways. The first one is related to being able to uncover more hidden insights out of the same datasets. What we call actually well, I mentioned before that we help customers to eliminate the unknown.

What is to eliminate the unknown? Our customers need to understand who intends to do what, when, with whom, what is the funding source, those kind of WHO questions accurately and quickly in order for them to be able to respond to this to this threat. So AI, in one hand, can help customers to unlock more insights out of the same datasets, including from encrypted data, which is a very strong capability that we have. I don’t know of any others that have this capability, but we do have capabilities to de anonymize and uncover hidden insights out of metadata that is encrypted. So this is one element of AI.

The second element of AI is the Gen AI, actually being able to improve dramatically the efficiency of using the technology, being able to ask questions in natural language rather than being a super technical guy that queried the solution with many sophisticated fields and databases. So this is another layer of of opportunity for our customers. We offer them both, the AI for stronger analytics and better uncovering of hidden insights, but also in order to to use we call it Cognite Copilot or Cogi. This is the layer that allows natural language interface with with the users that improves dramatically the the efficiency of of utilization of the of the technology. So it’s I see it as a as an opportunity for us.

And it’s important to understand that, first of all, we leverage the AI capabilities that are in the market. Second, we do innovate AI algorithms and machine learning capabilities that are specifically required for customers like ours. And the most important part is that we integrate all of it into the investigation process. So we look at it holistically with the required governance and security that customers need. So we do leverage AI, and I do believe that AI will continue to be developed and actually present more and more opportunities for customers to improve their results.

Shaul Eyal, Research Analyst, TD Cowen: How I know one of the questions that we’ve been getting, the various companies we cover, do you price on Gen AI right now or the capabilities? Is it part of the ELA company depending? Is it part of the subscription? Is it per seat, per head?

Alexeyron, CEO, Cognite: Yeah. So actually, agencies historically and also today purchase solutions like ours in perpetual license. So it’s the deal is perpetual license plus support contracts. I believe personally that eventually they’ll move to subscription. We did have some good news from last week with the large deal I mentioned before, but today, we offer our solutions in a dual way.

Customers that want perpetual, we continue to deliver to them perpetual, but we encourage them to move to subscription, encouraging them by the fact that if you’re in subscription, your tech refresh and value that you derive from the solution is much higher. So there is a benefit for them. So we they do have the option to move to subscription. Having said that, I believe it will take some time because first, they have CapEx and not OpEx. And second, sometimes the benefit to move to subscription is to move to cloud, and they are not prepared for that.

So while I eventually I believe they’ll move, I think that it’s very hard to predict how fast. In terms of pricing, its capacity, its users, and its functionality. So data capacity, how many users using it, and the functionality, how many how much analytics, how many engines are involved in this data processing, that’s the way we price our solutions.

Shaul Eyal, Research Analyst, TD Cowen: Got it. Cash utilization strategy, what’s the philosophy behind it? I know you mentioned the small tuck in that you’ve just announced. Yes. But how do you guys think about capitalization and maybe build versus buy?

Alexeyron, CEO, Cognite: Yes. So when we look at capital allocation, we always think about value creation for investors. So this is always in our in our mind. And we actually took a balanced approach. First, we want to make sure that we have operational flexibility in order to continue and invest and innovate and grow in the business organically.

Second, we announced a share buyback back in November of $20,000,000 of over twenty eighteen months. So this is another layer that we believe will create value for investors. And the third one is tuck in m and a’s. We do not have plans for transformational m and a at this time, and we are focusing on looking at potential m and a’s that are aligned with our strategy to expand presence in in certain territories and actually expand our market reach. We don’t think we need more technology.

Technology will have a a very strong one. Of course, if we find something that will pop up and be very attractive, we’ll consider it. But but the focus is tuck in m and a’s that are primarily for market reach. And we look at capital allocation periodically. Actually, we have no debt, and we have a very healthy and strong balance sheet.

And, yes, last week, we announced a small tuck in for the same reason, to expand presence, in this case, in The US.

Shaul Eyal, Research Analyst, TD Cowen: Questions from the audience before we proceed?

Unidentified speaker: So two questions. One, so Elad, you mentioned sort of these three drivers. You talked about data, adversaries and technology as those three drivers. If you have to rank those, my sense is that the adversaries drive the technology or help drive the technology. So that’s the first question.

Your thoughts on those three? And then for David, what’s the mix of you talked about customers preferring on premises government customers preferring on premises. And you were saying you think they’ll move to the cloud. Where’s the mix now? And do you see that impetus from your customers to say, hey, we need to start looking at cloud for for the government customers?

Mhmm.

Alexeyron, CEO, Cognite: So for the first question, I think all three drivers are combined with each other. And while I’m saying that, if data is growing, you need more technologies, stronger technology in order to be able to analyze huge amounts of data. It’s not linear. So if you have piece of data and you have 10,000 pieces of data, you need different technology in order to address this jump. If adversaries are now moving to cryptocurrency rather than using cash or going to fake bank accounts, you need now to de anonymize Bitcoin transactions, for example.

Okay? So the drivers are combined. It’s not just one driver sits for itself. If data is growing in new technology, if adversaries are moving to a new environment and you need a new technology in order to address it, I mentioned before that we uncover hidden insights out of encrypted metadata. When encryption became very popular, they moved to encrypted applications in order to communicate.

And when we are able now to deanonymize it, it helps our customers with a new technology to be able to do that, in this case, AI. So I don’t think you can separate between the three. I think all are feeding each other. In terms of perpetual versus subscription, most of our business today is perpetual. Very minor portion, marginal portion is subscription.

The reason I do believe the move is that a few things. First of all, even if you don’t want to move to public cloud, moving to cloud technology gives you benefits. For example, no downtime. For example, easy upgrades, etcetera. So this is one element.

Second element is tech refresh. It will be much faster for customers that are in subscription. Because if one customer today is buying perpetual license and he wants now new capabilities, he’ll have to have another perpetual license purchasing. So it’s another new deal that he has to deal with. If it’s subscription, he will get a tech refresh.

And I also believe, and that’s my personal view, is that the cloud services will eventually support the governance and security requirements of of security agencies. So all in all, today, everybody or not everybody, most of the customers still stick to the current CapEx on prem perpetual license. We do see some customers starting start talking about moving. We do see one customer that took the decision and wanted to move to subscription without moving to cloud. So I do believe this process will happen eventually.

How to predict how fast? But but I do believe that it will happen. Thank you. You’re welcome.

Shaul Eyal, Research Analyst, TD Cowen: Elad, any closing remarks before we finish kind of the session?

Alexeyron, CEO, Cognite: Yes. So maybe a very short summary of what I said. The market is there. The world is not getting safer. Our customers have new challenges every day.

They need technology in order to address it. We do have domain expertise and technology expertise and and reputation in the field for over three decades. Customers are with us and loyal for many years. We did have very good results in fiscal twenty five. We gave guidance for fiscal twenty six and also target for fiscal twenty eight.

So there is also a long term target that is available for you. We expect to be in half a billion dollar revenue by fiscal twenty eight with adjusted EBITDA to be beyond 20% and the gross margin to be in the 73 area percent area. So generally speaking, the market is healthy. We are in a very good position technical wise. And I encourage the form, all of you, everyone who hasn’t seen yet the IR day video.

We had an IR day in April late this year, a very fresh one. It’s only one hour video, so you don’t need to spend half a day for that. It’s only one hour, very focused. And there you’ll see not just the business and the market, which I gave you some, you know, briefing here, but also the technology. The CTO is there.

The chief product officer is there in this video. You’ll be able to get a lot of more color about Cognite market, technology as well as opportunity into the future.

Shaul Eyal, Research Analyst, TD Cowen: Thank you so much. That great.

Alexeyron, CEO, Cognite: Thank you. Thanks a lot. Thank you, guys.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.