This article first appeared on GuruFocus .
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Revenue:Approximately $109 million, up 12% year-over-year.
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Total Software Revenue:Grew 20.9% to $100.8 million, representing more than 92% of total revenue.
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Recurring Revenue:Grew 18.4% year-over-year to $56.2 million, representing 51.4% of total revenue.
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Software Revenue (Product):Grew 34.5% year-over-year to $49.2 million.
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Software Services Revenue:Grew 10.3% year-over-year to $51.6 million.
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Professional Services Revenue:$8.4 million, compared to $14.2 million last year.
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Non-GAAP Gross Margin:73.7%, an expansion of 154 basis points.
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Non-GAAP Gross Profit:Grew 14.4% to $80.5 million.
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Non-GAAP Operating Expenses:$68.2 million.
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GAAP Operating Income:Increased 69.7% year-over-year to $4.7 million.
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Non-GAAP Operating Income:Increased 52.5% to $12.2 million.
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Adjusted EBITDA:Increased 35.7% to $14.9 million.
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Non-GAAP EPS:$0.15, compared to $0.08 last year.
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GAAP Diluted EPS:$0.06, compared with $0.02 a year ago.
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Cash Flow from Operations:Positive $1.1 million, compared to net cash used of $6.3 million in Q2 last year.
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Cash Position:$102.2 million in cash and no debt.
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Share Repurchases:Repurchased approximately 1.5 million ordinary shares for $13.5 million in the first six months of fiscal 2027.
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Total RPO:$470.2 million, including $313.4 million of short-term RPO.
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Q2 Billings:$76.3 million.
Release Date: September 09, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Total software revenue grew 21% year-over-year, and recurring revenue grew 18%, both significantly outpacing total revenue growth of 12%.
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Profitability expanded significantly faster than revenue, with non-GAAP operating income up 52.5% and adjusted EBITDA up 35.7% year-over-year.
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Strong commercial traction with 40 new customers in H1, up from 31 in the same period last year, including a tier 1 national security agency in a NATO member nation.
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The company is on track to achieve $20 million of signed deals in the US this year, with progress across federal, state, and local segments.
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High revenue visibility, with approximately 85% of the revenue required to support the plan over the next 12 months already covered by short-term RPO, expected renewals, and contracts signed since quarter end.
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The shift towards subscription-based arrangements is enhancing the quality and predictability of revenue, despite some timing impacts on reported metrics.
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Strong balance sheet with $102.2 million in cash and no debt, providing significant financial flexibility.
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The company is confident in its FY 2027 outlook and on track to achieve its FY 2028 revenue target of $500 million.
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New Chief Revenue Officer Adam Philpott brings deep experience in scaling go-to-market teams in the security industry.
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The company is seeing strong demand driven by AI and sovereignty trends, positioning its platform as a strategic fit for government agencies.
Negative Points
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Total RPO declined sequentially to $470.2 million, reflecting consumption of large multi-year contracts and the exclusion of cancelable subscription portions.
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The shift to subscription-based arrangements is creating a headwind to reported revenue growth, with management estimating growth would be a few percentage points higher if the mix remained perpetual.
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Operating cash flow was only $1.1 million in Q2, impacted by seasonal payments and a deliberate decision to increase inventory levels to support future demand.
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The company did not quantify the full-year cash flow impact of the increased inventory investment, creating uncertainty around cash generation.
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Foreign exchange movements, primarily the weaker US dollar against the Israeli shekel, negatively impacted operating expenses and profitability by approximately $7 million in the first half.
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The company narrowed its full-year revenue guidance range, indicating potential variability in quarterly performance.
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Professional services revenue declined to $8.4 million from $14.2 million year-over-year, reflecting a mix shift that may reduce near-term services revenue.
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The company expects quarterly revenue mix to fluctuate, with Q2's high software mix not expected to persist throughout the second half.
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The company faces competition from in-house built systems and general-purpose AI models, which could limit market share gains.
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The company's reliance on government customers exposes it to budget cycles and procurement delays, which could impact deal timing.
Q & A Highlights
Q: Regarding the US federal pipeline, are the transactions in the procurement phase expected to be awarded during the current fiscal year (ending September 30th), or are they further out on the horizon? A: Elad Sharon (CEO) confirmed that Cognyte has closed deals with federal agencies and conducted successful proof-of-concepts with several federal law enforcement agencies. He expects some deals to be signed within the current fiscal year, reinforcing the company's target of achieving $20 million in signed deals in the US this year.
Q: The total RPO of $470 million was down sequentially from the April and January quarters. Is this expected to trough and recover, and can you provide more insight into the decline? A: Elad Sharon (CEO) explained that while demand is strong, the reported RPO decline is due to several factors: a growing customer preference for subscription-based arrangements (which can shift revenue recognition), the consumption of large multi-year contracts (approximately $30 million), and the exclusion of cancelable subscription portions ($42 million) and expected renewals from the reported figure. He emphasized that when combining short-term RPO with expected renewals and recent contracts, the company has visibility into approximately 85% of the revenue required to support its plan over the next 12 months.
Q: Given that CRP bookings are growing faster than the revenue guidance, should we be mindful of a disconnect between these leading indicators and the 12% revenue growth forecast for this year and next? A: David Abadi (CFO) stated that the company is pleased with the business trends, including the shift toward higher-quality subscription and software revenue. Elad Sharon (CEO) added that if the mix were still predominantly perpetual licenses, the reported growth rate would be a few percentage points higher. The shift to recurring revenue improves long-term visibility and predictability, and management remains comfortable with its guidance.
Q: Can you provide an update on the full-year expectations for operating cash flow, given the previous weakness and the current shift to subscriptions and FX impacts? A: David Abadi (CFO) noted that Q2 cash flow was strong, turning positive at $1.1 million compared to a negative $6.3 million in the same quarter last year, despite seasonal annual bonus payments. However, the company is making a deliberate decision to increase inventory levels to support expected customer deliveries and mitigate supply chain risks. Due to this strategic investment, management did not reiterate the previous $45 million cash flow figure but expects cash flow to remain significantly positive for the full year.
Q: Is there a way to quantify what revenue growth might have been without the headwind from the shift to subscription-based revenue recognition? A: Elad Sharon (CEO) explained that customers are moving to subscription models for flexibility and access to the latest technology without new procurement cycles. He estimated that if the sales mix had remained the same as last year (with a higher proportion of perpetual licenses), the company would have seen a few percentage points more in growth rate. This indicates the underlying market demand is growing faster than the reported numbers suggest, while the business becomes more predictable and profitable.
Q: Can you clarify the impact of the increased inventory purchases on the full-year operating cash flow guidance? A: Elad Sharon (CEO) clarified that the inventory investment is driven by two factors: growing customer demand and a challenging supply environment with longer delivery times and rising prices. David Abadi (CFO) added that while the company cannot quantify the exact impact of the incremental inventory at this stage, it is a deliberate decision to ensure timely delivery and support future growth. The company expects cash flow from operations to be significantly positive, though the exact level will depend on market conditions and inventory needs.
Q: Are you still on track to achieve the $20 million in US bookings for fiscal 2027, and could this number be exceeded? A: Elad Sharon (CEO) confirmed that the company is on track to achieve the $20 million target for signed deals in the US this year. He expects this to come from both state and local customers and some federal contracts that should land within the current fiscal year, highlighting the strong progress being made in the US market.
Q: Can you provide more color on the drivers behind the strong software revenue growth of 21% and the overall quality of the revenue mix? A: David Abadi (CFO) highlighted that total software revenue grew 20.9% to $100.8 million, representing over 92% of total revenue, up from approximately 86% a year ago. Recurring revenue grew 18.4% to $56.2 million, representing 51.4% of total revenue. Professional services revenue declined to less than 8% of total revenue from approximately 15% a year ago, reflecting the increasing software content of the business. This mix shift supports higher-quality revenue, stronger margins, and greater scalability.
Q: What is the expected quarterly revenue cadence for the remainder of the fiscal year? A: David Abadi (CFO) stated that the company expects Q3 revenue to be slightly higher than Q2, followed by sequential growth in Q4, consistent with the seasonality reflected in the full-year outlook. The company narrowed its full-year revenue guidance to approximately $448 million 2%, representing approximately 12% year-over-year growth at the midpoint.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
