For joining us today. I'm Mike Cikos, lead analyst covering infrastructure software here. With me, I'm pleased to say that we have the management team from Cognyte, CEO Elad, as well as the CFO, David. So thank you to both of you guys for joining us today. Thank you. Thank you, Mike. I know at least the way that we have this set up, this is gonna be a 40-minute fireside. I'm already seeing there's a number of attendees here, but there should be a chat box feature on your side. So if you do have questions, please feel free to send those in. We'll do our best to make sure that we get those questions over to the Cognyte management team while we have them. Again, thank you for joining us, to Elad, David. Just for a quick intro here. For those who are maybe newer to the Cognyte story, when thinking about the audience, can you please give, like, a quick intro to Cognyte, as far as what problems you are helping organizations solve today? Yeah. So thank you, Mike. Cognyte is a vendor in investigative analytics industry. We are offering software that helps customers to improve the speed, accuracy, and success rate of investigations. We're operating globally. We have a customer base in around 100 countries with hundreds of customers. Our customers are primarily security agencies like law enforcement, national security, and national intelligence. And we are global leader with strong domain expertise and vast technology. We are in the market for three decades now, and three years as an independent, publicly traded company. Actually, we celebrated those two anniversaries this year, this is in our job. Terrific. And yeah, I know we were just talking about the three-year relationship we've had since you guys were spun out of Verint, right? So maybe one thing that would also be helpful for folks is you obviously have this portfolio of solutions that you're providing to customers. Are you able to discuss, like, what are some of those key products to the portfolio, and maybe some of the specific use cases that have resonated best with your customer base today? Yes. So maybe, to make it easier for the audience to understand- Sure. ... let me start with the challenges our customers are facing. So our customers have to improve investigations and identify and neutralize threats, whether it's criminal activities or terror activities, and they are facing a more challenging environment. The bad actors are more sophisticated themselves. They also use technology. They better hide. They do it with encrypted traffic, so it's very difficult or more difficult for security agencies to find them. The second challenge our customers are facing is the data. The volumes and diversity of structured and unstructured data is growing, and our customers have to deal with more data, which means it's even more difficult for them to convert raw data into insights and timely. And time is of essence for security industry. In addition to that, there are new technologies that are coming in, which can be helpful to customers, but also helpful to the bad guys. For example, AI is used by the bad guys to better hide, to generate fake identities. And for our customers, it's a challenge in one hand. On the other hand, if we use it in a clever way, they're able to convert data to more insights or to uncover hidden insights. So, it's a race between the two, the two areas. So leveraging technology is crucial for our customers to be able to address their growing challenges, and that's what our solutions are helping our customers do. So our customers have different units within their organizations. Let's take national security Agency. So they have the investigation unit that is sitting like us in rooms with air condition. They have their operational units. They have the cyber intelligence units. The similarity is that for all of them, we are helping to them to fuse and analyze data and convert it into insights timely. But the use cases are different. For example, the investigation units will investigate organized crime, organized terror activities, funding resources, and this kind of stuff. Operational units will focus more on putting their hands on the bad guys on the field, so they need different use cases, but it's similar in a way that they use data in order to generate more insights. It also comes to national cybersecurity threats that are also something that, in terms of technology, is similar in a way that the process is fusion and analyzing data at scale, but the use case will be to find threats that are related to cybersecurity in nationwide area. So we offer our solutions for different units within different organizations, law enforcement, national security, national intelligence. The idea is using the data and convert it into insights for different purposes and use cases. Got it. Okay, thank you for that. I guess if we just shift over to David for a second to talk through the most recent quarter, which you guys have already announced, right? And this is going back a couple of months now, but when you reported earnings back in April, you gave guidance for fiscal 2025. I know you're on a January fiscal year end for 8.5 points of revenue growth, right? But at the same time, we did expect Q1 revenues to be down sequentially, right? So can you help us think about the seasonality to this business and how much of that might be impacted by customers, whether it's their purchasing decisions or just budgeting cycles? Yeah. So our business is mainly driven by customers' budget allocation and the readiness for them like to deploy. Absolutely. From one perspective, we have strong RPO that allow us to plan ahead. On the other perspective, there is always, you know, order that came in the same quarter and deployed on the same quarter. Usually, what you see from seasonality perspective is that in the end of the year, there is certain budget that came in, that you can deploy them relatively fast, related, you know, to more, I would say, small-sized deals that the customers remain with budget and ask us for deployment, deployed it relatively fast. And this is the season that... This is the reason that you see usually strong Q4, and the sequential quarter, Q1, will be slightly below. This year, it's typical year like last year, and we expect that Q1 will be slightly below Q4. This is the same way that we guided for the year, and then you will see some sequential growth quarter-over-quarter. As you mentioned, in our last earnings call, we guided for a top line increase of 8.5%. Yeah. Okay, terrific. And I think one of the other things that I'd like to delve into, and we highlight to clients on our side, is just the large amount of visibility that you guys have, right? And so maybe you could talk about the CRPO that you have in backlog, how that provides you with visibility. As well as I know last year you guys put in place a number of different processes when speaking with customers to really get close with customers and understanding deployment cycles and timing. So can you talk about that CRPO on the, and the visibility that you have over the course of the year, and how that informs your confidence in the guide? Yeah, definitely. So, first, RPO is a proxy for backlog, and it represent customers' commitments. Our short-term RPO, which in which the RPO that's planned to complete converted into revenue in the next 12 months, is, as you mentioned, very strong. It's covering 89% of our total guided revenue. At the beginning of the year, it was $300 million. We have a very strong relationship with our customers. The fact that we working with the customer on a regular basis, and they share with us their plans and give us a very good visibility, so we are able to schedule the deployment ahead. And, as a reminder, more than 90% of our business is driven by repeat business from existing customers, so we have a very strong relationship with them. So the combination of the strong, you know, absolute number of the current RPO, plus the valuable customer base and the know-how that we have with our customers, gives us a very strong visibility into the year. Great. And it makes, it makes sense. I think one of the other things as we are shifting through fiscal 2025, it might be great to recap what are some of the top priorities for the management team here at Cognyte when thinking about strategic initiatives on the roadmap? Yes. So of course, there are the obvious ones, which is executing our plans, which means to deliver our commitments to our customers and acquire new customers. But, let me focus on three main areas, for this fiscal year. The first one is to maintain market leadership, which means to continue and innovate, adding more functionalities, including more AI capabilities to our solutions. And, leadership is something... Technology leadership is something that is very important for us. We maintain differentiation, and we are in a position that, usually, most of the times when we demonstrate or POC our solutions that we have with competition, we are winning, and we are winning, and so sometimes with premium prices. The second focus area for us is to continue our investments to expand our presence in the US market, which we started about two years ago and want to continue. It's a journey, and we are doing a good progress there. And the last one is to drive margin expansion and generate cash from operations. So margin expansion is also an important component for us. So those are the three areas that are in higher focus for this fiscal year. That's great. That's actually bleeding into my next question, right? Especially on that piece around the margins. But, obviously, in this environment, investors are thinking about the balance between profitability and growth. Can you comment on how you guys are approaching that balance when you think about investing for growth while still showing, I guess, leverage through the income statement? Yes, obviously, there is correlation between, you know, sales and marketing investments and growth, and there are certain areas that we can dial up or down as we set annual goals. As I mentioned before, profitability is an important component of our model, and our focus remains on sustainable growth and margin expansion. And we make the investments we believe are consistent with this approach. So on one hand, to invest, on the other hand, to maintain the potential for margin expansion, and that's our focus. The investment plan for this year is designed, of course, first of all, to support this strategy of the company and to maximize the market opportunity... and it's more on the area of the sales. Sales efforts and market reach is where we are putting more focus this year. We expect these investments to drop profitability in fiscal 2025, but also to continuously help us grow in fiscal 2026 and beyond. Okay. Makes sense. And from an investment standpoint too, I know you had commented on the expansion in the US and broader North America, right? So maybe you can help us think about what investments have been taking place to help Cognyte's expansion in the US and North America at this point? And have we started to see benefits from those investments? Yes. So, when we started the focus on the U.S., we realized that it's a journey. It's a journey because we didn't have brand recognition. We had to come up with superior technology, and we know that every deal we want to win in the U.S., first of all, someone has to decide that he is going to us instead of the incumbents, and this means to push incumbents out. When we started this journey, we decided that we want, first of all, to ensure that we have superior technology that can present better results compared to competition, and I think we have this confidence now. I visited the U.S. back in January this year, met customers. Some are already existing customers, new ones, others are potential customers, and the feedback I got from existing customers is very good. Another element in the plan was to go with a separate go-to-market to state and local and to federal. And for the state and local, we decided that we go direct, and we want to sense the market ourselves with our own sales force. And we did have success stories already, which means customers were willing to listen to us, to try our solutions, and actually, some of them already took the decision to replace their incumbents. And we are focusing on this as well. We are going to expand investments in the sales and sales efforts in the US. Actually, we're investing proportionally in the US in terms of sales efforts. And in the federal, we decided that we start late, after we see some success stories in the state and local, and we started. And in the federal, we do it with a partner, an established partner. And there, the main mission for this year will be to let them try our solutions and convince them that we have superior technology. Engagement's already started with some federal agencies, and some of them are willing to test our equipment, and now we are doing some logistics work to make it happen as soon as possible this year. So we are on track with this journey. We believe that the potential of the US market for us is there. We believe that we have the technology to make it happen, and now we have to push very hard in sales efforts and marketing efforts and brand recognition and acquiring new customers as references. But this is something that we knew that we'll have to do. So overall, we are happy with what we achieved so far, and we'll continue to invest in the US market. Right. And on the state and local, again, given some of the success you've seen, I imagine there's water cooler talk. You can leverage those customer wins as testimonials and references for potentially winning other accounts over time as well, which is great. Yeah, correct. Actually, some customers are already willing to become references, and they share the rumors about us by their own willingness. By the way, not all of them we push them, but some of them took the liberty to do that, which is great. It means that they're happy with us. Some new customers from last year actually had follow-up, follow-on orders recently. So this is another indication that when they start with us, they want to continue, which is another sense of confidence in our solution. And for others, actually, they're willing to get other agencies to come to them and present to them specifically what's the value of our solution. So we do have the cooperation of new customers to help us penetrate into this market faster, and this is very good progress so far. Right. And I think in the last couple of weeks, Cognyte had actually announced that they had a deal with the national intelligence organization in EMEA, for about $5 billion, and that this was actually the third order the customer had placed over the past year, which is also a great proof point as far as the land and expand that you guys continue to drive. To the extent that you can, can you help us think about details of the relationship and how it has grown, to maybe help punctuate that land and expand go to market that Cognyte has? Yeah. So, sure. Before I answer, I want to update that we got feedback from investors that want to hear more about us, about Cognyte, and we are planning to share more information with investors, and you should expect to see more press releases going forward, including the one that you just saw last week. And to the answer, we signed our first deal with this customer during Q2 last year. It's an important win for us because it's a very acknowledged, very knowledgeable and advanced customer. They chose us after a competitive process, which means that it was other competitors were there, and they also presented their capabilities. Since the award and the delivery, the customer is using our solution to identify and prevent threats during operations. Indeed, we had to follow on orders, and it's, I think, it's the best testament that we generate lots of value with our technology to our customers. And it's also, I think, a good example of land and expand strategy. David mentioned before the RPO and existing customers, and actually, most of our business come from existing customers. And the way it happens is that usually new customers start small with us, and they expand over time. And for that reason, we see that existing customers business from existing customer is growing. And we are already in discussions. We discussed specific customer for additional future expansion, maybe this year already. So this is something that works well for us, and we'll continue to maintain leadership and innovate and generate value for our customers so they come to us again and again. All right. And if I think about some of the recent trends in the business, given the current macro, how are customer budgets changing? Especially, are you guys seeing a push for vendor consolidation? Is that maybe a secular tailwind for you guys over the longer term? Yeah. So our customers are primarily government security agencies. Currently, we don't see any meaningful impact on our customers' budgets. So, nothing that we see. Okay. And on the vendor consolidation? Yeah, both of them. I mean, the current macro situation and also the push for consolidation, we don't see this relevant for the market that we are operating in, which is investigative analytics for government agencies. We don't see any meaningful impact on both, either, of these factors. Okay. And what about, I know you had alluded to it earlier, but AI, how is that changing the opportunity for you? Yeah. Recent AI developments have a potential to significantly improve the investigation process and results. We discussed earlier in this fireside chat the challenges our customers are facing, which is more complicated for them to convert data into insights. AI helps to uncover more hidden connections between entities and across a variety of data types that actually cannot be done manually or by legacy technology. It also helps to improve investigations efficiencies and focus the investigator and analyst on the high-risk activities, and also make it easier and simple for, I would say, normal users and not data scientists, to query the solution, the technology. It also classifies and rank results, and allowing users to focus on the most likely threats before they unfold. So if you remember the challenges I mentioned before, actually, AI is a power multiplier for our customers to generate more value and more insights out of their same data sets in a much better and efficient way. And it's also a race between the bad guys and the security agencies. We discussed before that, you know, AI helps also the bad guys. They better hide. They use environment that is different. For example, they use cryptocurrency environment, which is anonymized, which is virtual, so it's very difficult to track. Customers who have the ability to use AI and actually going for the advanced technology tools that have strong AI within it, they can overcome those challenges, and being able actually to uncover those hidden insights, and then actually to find the bad guys in a much better and efficient way. It's important for me to re-remind everyone that AI. I know that AI is a huge buzzword these days. I want to remind everyone that AI has been part of our solutions for a long time. It's not new. We view it as an integral part of our products, and it's also important to note that we integrate AI in a way that fits the specific needs of our customers, which means the investigation is a process, it's a workflow. It starts with data, and then the fusion, and then the analytics, and then the AI on top of the analytics, and also the governance is part of the platform. So AI is implemented into our solutions in an integrated way that is a very strong contributor for our customers in terms of value, but in terms of the process itself. And we continue to view AI as one of the drivers for future growth. We believe that customers will find it more and more beneficial over time. Great. Great. And so, like, again, on the criminal activity side, we're talking about generation of potentially harmful content, use of fake identities, in the cat and mouse game, and then what your solution is doing is actually helping deliver quicker insights, as well as potentially using AI to broaden the potential user base, right? And so maybe you can kind of elaborate on how that expands your opportunity versus maybe depending on data scientists or data engineers to write complex queries. ... Yes, so AI has two ways that it can help customers. The first one is in the analytics side. We discussed, for example, the cryptocurrency that I gave earlier. Funding of bad activities is moving more and more to cryptocurrency, and the reason is very clear. It's virtual, you can do it from anywhere, it's anonymized, and with AI, you can analyze and give in high probability the idea to customers who is the real entity behind the transaction or behind an event or behind a process. So this is something that AI can help with in a very sophisticated and efficient way, and timely. Timing is critical when it comes to security, because sometimes if somebody wants to do something bad, if you don't find it or being able to identify it on time, it's too late. So this is one element of AI, actually being able to uncover more hidden insights out of the same data sets faster. Now, it's better than you know, data scientist is very important role in such organizations that are dealing with data. However, it's very expensive, there are not many of them, and usually have many normal users, or I would say regular users that have to operate the solution. So the other element of AI is being able to query the solution, the technology, in a much simpler way. Ask a simple question and not being able, required to, you know, to ask very sophisticated queries that data scientists can do, but, you know, an investigator, a usual investigator can't. So it helps with uncovering more insights, it helps with faster conclusions, and it also helps to utilize better the human resources that an organization has, and not relying too much on data scientists that are very difficult to find and also fund because it's very expensive. So AI has many different values that it actually helps customers to address these challenges in a much better way. With your investments in AI, I imagine most of that's in the R&D department, right? So can you give us an update on progress in building that out? Is it really just a function of infusing AI throughout the broader platform, or how are you looking to leverage that technology? Yes. So the way we do it is the following: First of all, we have in different teams, in the R&D, knowledge in AI. But in addition to that, we decided to establish a centralized AI research lab that are actually coming with new innovative ideas that help all different use cases, that we are trying to overcome for our customers. And this lab was created, was established, a few quarters ago. It has very skilled experts in AI that actually work together with the different R&D teams and feed them with new capabilities that can be implemented later on in the process and in the technology for the different use cases. So this is something that we established a few quarters ago. We see the progress and also the benefits and some of the wins that we had. It's not that AI is the only thing customers need, but it's an important element and an important contributor to what to the value they generate. What we see is sometimes AI is the the game changer, which means with certain AI capabilities, you can present superior technology in a very easy way. It's important for us in order to increase the value for our customers, but also in order for us to be able to differentiate even more and also maintain premium prices, which is something that we are doing. Great. And if we shift gears, David, I know in the current environment, we'd just like to get your view of capital allocation or strategy there, right? Especially, you guys are now free cash flow positive, continuing to generate free cash flow on a sustainable basis. As the CFO, how do you think about the different priorities there? Whether it's organic investment, potential for tuck-in M&A, buybacks. How do you balance those different pieces? Yeah. So, so obviously, it's something that we are all the time considering. It's, you know, it's capital allocation, it's a topic that you need to assess on a regular basis, including M&A and buyback. And, so from an M&A perspective, our strategic view that as long it's can accelerate our strategy, we will consider an M&A. So this is the way we look at M&A. On the other perspective, given the flexibility that we have from a financial flexibility, and, you know, we generate, I would say, strong cash last year, and, we're also aiming for this year to continue to generate cash. So, we're pleased with this flexibility, but we will consider on a regular basis to review and assess what will be the right thing to do, you know, between buyback, M&A, or other elements that we may find relevant. Okay. If I go over to the go-to-market, I mean, each year, I feel like there's probably tweaks to try and see if we can get better at incentivizing the sales force. But curious, like this year, have there been any changes in how sales reps are compensated, or what kind of deals the company is incentivizing them to push for? Yeah. So the word, the philosophy is to incentivize people to drive the strategy of the company. And the strategy of the company is profitable growth, and the sales team is focused on driving profitable growth, which means growing the top line, but also the profitability. And the plans are aligned with this strategy. There are no significant changes in sales comp plans recently, but it remains aligned with the company goals. I know you guys have also said or guided to improving profitability this year. How do you manage or how do you think about hiring this year, in the context of appropriately hiring for longer term growth versus delivering that profitability we're talking to? Yes. So, we of course want to maintain leadership in the technology side, but our focus now, as I mentioned earlier in the call, is to hire more in the sales side and invest more in the sales side, which means actually increasing investments in sales and marketing and expanding the sales force, and also the demo and POC capacity. The market reach and the efforts in the U.S. are influencing this decision. This year, what you'll see is more sales and marketing increase and less the R&D side. Is it fair to think that most of that hiring for the U.S., again, is falling behind state and local? Just because federal, I know you do... You've cited that established partner that you're working with, right? Yes. So when it comes to state and local forces, yes, we are increasing also sales force there, but in the federal, we want to make sure that we have a strong support with the partner. This is one. So we maintain also investments there. And also, not just hiring, but investing more on demo and POC capacity, which is relevant for both areas, for the federals and state and local, and state and local. From a competitive standpoint, has there been any change at all as far as potential new entrants or even existing players that may be willing to discount to a greater price, or for the most part, are players behaving rationally? We are trying not to go to the areas of price wars, and the way we are trying to do that is actually to make sure that the superior technology is known to the customers. And what we are trying to usually do is to convince new customers or new potential customers to go for POCs and demos. And when it comes to POCs and demos, it's easier for us to show that we are better than competition. So we don't want to go there to the price wars. In terms of a competitive landscape, it's a fragmented market. We do see, you know, the large ones, the global ones, like Rohde & Schwarz. We do see the smaller ones that are either local or focusing on specific use cases. There was no much change in the competitive landscape, and our pricing policy remains actually to to make sure that we improve margins. And of course, in order to improve margins, we need to make sure that customers appreciate the value we deliver to them and are willing to pay more. So that, that's, that's the how we think about things. Right. As a reminder to folks, if you do have questions, please feel free to submit those. We probably have time for maybe one or two more questions here. I think the first question, last time that you guys reported earnings, there was also another announcement as far as some new additions or replacements to the board of directors. Can you help us think about what these new directors bring to their roles in helping Cognyte continue to build for the future? Yeah, sure. So, actually, we announced that, two new board members will join us. One of them is, Ron. Ron, brings a vast experience, a strong understanding for customers and their needs. Actually, he had many years in IDF. He was head of an elite, technology unit in IDF, in the areas we are dealing with, so he has very relevant experience in terms of technology and domain expertise. After IDF, he also had some, other roles. For example, he was an advisor in Phoenix Holdings, and he was the CTO in, a leading telco in Israel. But his main contribution to the board is domain expertise, actually understanding and knowing customers' needs. When it comes to, Sarit, Sarit, brings a strong financial expertise and also software industry know-how. She was involved in running business. She was a GM at Amdocs, and later on, she was a CFO of a publicly traded companies like NICE and Retalix. So each of them provides, I think, important additional strengths to our board, and I think the board composition today is very strong. Great. I guess the last question here would be, is there anything to the Cognyte story that you think is currently underappreciated, or anything that you would want investors to leave this fireside with, as far as things that the management team is highlighting today? Yes. So, I believe, an important area we have to look into is the leverage we have in the model that will drive improvement of stability and cash operations over time. I think this one is something that might be underappreciated. We are focusing on profitability and margin expansion. We did a good progress so far, and we'll continue to focus on that going forward. Terrific. All right. With that, we'll leave it. Thank you very much for the time, guys. I definitely appreciate it today, and thank you to everyone for tuning in. Thank you. Thank you. Thank you all. Bye. Take care. Bye-bye.