Cognyte Software Ltd. (NASDAQ:CGNT) Q2 2024 Earnings Call Transcript

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Mike Cikos: Got it. Thank you. And one quick follow-up as well. I know that you guys are taking up the gross margins for the full-year as well. That improvement that we’re seeing, it seems to be a reflection of the growing software revenue mix. Is there anything else that you guys are doing internally to help that software gross margin? And I’m wondering if it’s just a matter of tighter procurement from your vendors or engineering on your side to figure out a better way to drive efficiencies in your own cost in delivering these solutions to your customers? Anything there on the software gross margins and what you guys are doing to drive that improvement would be beneficial as well? And then I’ll turn it over to my colleagues. Thank you, guys.

David Abadi: So we are very pleased with the gross margin in H1 and Q2. And actually, we are very pleased that we are able to increase our gross margin to 68% for the full-year, and it represents 520 basis points more than our initial plan. Looking at the trends and what drives the gross margin, I think the gross margin is the clear evidence of our differentiated solution and how the customer appreciate the value we provided. Elad mentioned the deals that we’ve been, but those that are not in the revenue, but they’re consist with what we see in the market and how the backlog looks. We’re seeing good backlog with the high quality that will allow us to drive a gross margin. So from that perspective, this will be also an impact in the future.

When we’re looking what changed, you could see that one of the things that changed this quarter is the professional services and it’s basically as a result of actions that we took to improve our professional services cost structure to allow us to be in a better position. Overall, when we look at the gross margin, we’re monitoring carefully if it’s like from a cost perspective, but I think that the major thing that impacts gross margin is the ability to sell our solution as a premium solution, the customer demonstration of our appreciation for this value that allow us to sell it in the right pricing.

Mike Cikos: Thank you very much.

Operator: [Operator Instructions] And I’m not showing any further questions at this time. I’d like to turn the call back over to Dean.

Dean Ridlon: Thank you, operator, and thank you, everyone, for joining us on today’s call. Elad, David and I are planning to visit Boston and New York early next month and hope we can see some of you then. In the meantime, should you have any questions, please feel to reach out to me, and we look forward to speaking with you again next quarter.

Operator: Thank you. Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect, and have a wonderful day.

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