Cognyte Issues Letter to Shareholders Highlighting Recent Progress and Momentum

Rhea-AI Summary

Cognyte Software (NASDAQ: CGNT) has issued a letter to shareholders highlighting recent progress and reaffirming commitments. The Board urges shareholders to vote 'For' Chairman Earl Shanks and CEO Elad Sharon, as well as 'For' the proposal to approve amendments to the CEO's compensation plan at the upcoming Annual Meeting on September 4, 2024.

Key points include:

• 55% total shareholder return over the last 12 months
• Raised guidance for fiscal year 2025
• Commitment to add a U.S.-based director with relevant experience
• Plans to enhance disclosure of key performance indicators
• Support from Institutional Shareholder Services (ISS) for Board recommendations
• CEO compensation program is approximately 80% at-risk

The Board opposes Value Base Fund's attempt to replace Mr. Shanks with Tal Yaacobi, citing concerns about disrupting the company's momentum.

Positive

• 55% total shareholder return over the last 12 months, outperforming peers and broader market
• Raised guidance for fiscal year 2025, indicating increased confidence in business prospects
• Support from leading proxy advisory firm ISS for Board recommendations
• Commitment to add a U.S.-based director with relevant experience
• CEO compensation program is approximately 80% at-risk, aligning with shareholder interests

Negative

• Shareholder Value Base Fund is seeking to replace Chairman Earl Shanks, potentially disrupting company momentum

Insights

Financial Analyst

Cognyte's letter to shareholders highlights positive momentum but lacks concrete financial figures. The company reports a 55% total shareholder return over 12 months, outperforming peers and the market. They've raised guidance for fiscal year 2025, suggesting improved business prospects. However, the lack of specific financial metrics makes it challenging to quantify this progress.

The focus on board composition and CEO compensation indicates corporate governance concerns. The commitment to add a U.S.-based director with relevant experience could strengthen the board's expertise. The CEO's compensation plan, with 80% at-risk pay, aligns with shareholder interests but requires scrutiny of performance metrics.

Investors should note the ongoing proxy contest with Value Base Fund, which could impact short-term stock volatility. Overall, while the tone is positive, the lack of concrete financial data suggests caution in interpreting the company's progress.

Corporate Governance Expert

Cognyte's letter reveals significant corporate governance developments. The company is facing a proxy contest from Value Base Fund, indicating potential shareholder dissatisfaction. However, Cognyte has secured support from ISS, a leading proxy advisory firm, which lends credibility to their current board and CEO.

The commitment to add a U.S.-based director with relevant experience is a positive step towards board diversity and expertise enhancement. This move could improve the company's governance profile and potentially attract U.S. investors.

The CEO's compensation plan, with a high proportion of at-risk pay, aligns with best practices in executive compensation. However, shareholders should closely examine the specific performance metrics tied to this compensation.

The increased transparency in disclosures is commendable, but there's room for improvement. Investors should monitor the company's follow-through on these commitments to gauge management's responsiveness to shareholder concerns.

Reaffirms Commitment to Adding a U.S.-Based Director with Relevant Experience and Making Further Disclosure Enhancements

Board Urges Shareholders to Vote Today “For” Chairman Earl Shanks and CEO Elad Sharon, and “For” the Proposal to Approve the Amendments to Cognyte’s CEO Compensation Plan

HERZLIYA, Israel--(BUSINESS WIRE)-- Cognyte Software Ltd. (NASDAQ: CGNT) (the “Company” or “Cognyte”), a global leader in investigative analytics software, today publicized a letter to shareholders highlighting the actions the Board and leadership team have taken to strengthen and reposition the business. In the letter, the Board of Directors also reaffirmed the Company’s commitment to enhance its disclosures of key performance indicators and to identify a new independent director with relevant experience in the United States.

The full text of the letter follows:

Dear Fellow Shareholders:

This year’s Annual Meeting of Shareholders (the “Annual Meeting”) of Cognyte Software Ltd. (“Cognyte” or the “Company”) is fast approaching. The meeting will be held on September 4, 2024. To help ensure Cognyte’s momentum and progress continues, the Board of Directors (the “Board”) urges shareholders to vote “FOR” Earl Shanks and Elad Sharon, and “FOR” the proposal to approve the amendments to Cognyte’s CEO’s compensation plan.

Both Mr. Shanks, who was appointed independent Chairman of the Board in 2023, and Mr. Sharon, Cognyte’s CEO, are key leaders who have been instrumental in driving Cognyte’s business repositioning and improved execution. These efforts have helped Cognyte return to growth, delivering sustained and expanding profitability. Investors are recognizing our improvement, and over the last 12 months, we have delivered a total shareholder return of 55%, significantly outperforming our peers and the broader market.¹ We also recently raised guidance for fiscal year 2025, reflecting increased confidence in our business prospects.

Despite our recent progress, one of Cognyte’s shareholders, Value Base Fund (“Value Base”), is demanding a seat on our Board and is seeking to replace Mr. Shanks with one of its investment managers, Tal Yaacobi.

Value Base’s motives are unclear; to date, it has not offered any meaningful suggestions for improving our strategy, operations or governance, nor has Mr. Yaacobi been able to articulate how his brief experience as an associate at a consulting firm or his knowledge of Israeli-focused investment management would improve Cognyte’s business. He has no experience in software, defense, intelligence, or any other relevant industry, and we believe electing Mr. Yaacobi in place of Mr. Shanks – an engaged and experienced independent director – would disrupt the Company’s momentum and unquestionably weaken our Board.

We Are Pleased to Have the Support of a Leading Proxy Advisory Firm

We are very pleased with the support we have received from Institutional Shareholder Services (“ISS”), one of the leading proxy advisory firms, who has recommended Cognyte shareholders vote for the reelection of Mr. Shanks and Mr. Sharon and for the CEO compensation plan. After carefully reviewing our improved performance and the strength of the Company’s director candidates, ISS concluded that Value Base "has failed to provide a compelling rationale in support of the proposed candidate or to establish that board change is warranted."

In its report, ISS commented on the strength of Cognyte’s nominees, noting that Mr. Shanks “brings to the board… significant public company experience as director and as officer,” and that Mr. Sharon has extensive “experience and knowledge regarding the company’s business and significant experience in the intelligence and security industry.”

That is not to say that we are satisfied with the status quo.

We Are Taking Action to Support Our Continued Progress

To deliver on Cognyte’s full potential, the Board is committed to identifying a new independent director over the coming months with relevant software or security-related experience and strong relationships in the United States.

We are also committed to evolving our disclosures over time to provide current and prospective shareholders with even more transparency.

Our Compensation Program Is Aligned with Shareholders

The Board is committed to ensuring that our compensation program supports the Company’s strategy and is aligned with the interests of our shareholders. To that end, the Board has developed a compensation program that is approximately 80% at-risk, with the vast majority of our CEO’s compensation dependent (either as a condition of vesting or as a determinant of value) on key business drivers of our stock price.

The Board has also taken action to improve transparency, introducing several new compensation disclosures in this year’s proxy statement, including a detailed description of executive compensation plan design, with short- and long-term incentive metrics and their weightings. Our Chairman, Mr. Shanks, has played a key role in that effort, engaging extensively with shareholders to gather their feedback on disclosures and other important topics.

In making its recommendation that shareholders vote “FOR” the proposal to approve the amended employment terms of CEO Elad Sharon, ISS highlighted the alignment of our pay with business performance and shareholder interests, stating that “short-term incentives are linked to improved performance” and that the CEO’s performance-based stock grants support “improved alignment between the interests of officers and those of shareholders.”

We Ask for Your Support

We encourage you to review the information on our website https://www.cognyte.com/investors/ that describes our progress and results. We welcome your thoughts for continued improvement and ask that you support Mr. Shanks, Mr. Sharon and the proposal to approve the amended CEO compensation plan, which we believe will support our objective of protecting and enhancing value at Cognyte.

Shareholders who have any questions or need assistance voting their shares should contact the Company’s proxy solicitor, Saratoga Proxy Consulting, at +1 (888) 368-0379 or +1 (212) 257-1311 or by email at info@saratogaproxy.com.

We thank you in advance.

The Cognyte Board of Directors

Advisors

Spotlight Advisors is serving as financial advisor, Paul Hastings LLP and Meitar are serving as legal advisors, Saratoga Proxy Consulting, LLC is serving as proxy advisor and FNK IR is serving as communications advisor to Cognyte Software.

About Cognyte Software Ltd.

Cognyte Software Ltd. is a global leader in investigative analytics software that empowers a variety of government and other organizations with Actionable Intelligence for a Safer World™. Our open interface software is designed to help customers accelerate and improve the effectiveness of investigations and decision-making. Hundreds of customers rely on our solutions to accelerate and conduct investigations and derive insights, with which they identify, neutralize, and tackle threats to national security and address different forms of criminal and terror activities. Learn more at www.cognyte.com.

Cautionary Statement Regarding Forward-Looking Statements

Any statements contained in this press release that do not describe historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are identified by use of the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “should,” “views,” and similar expressions.

Any forward-looking statements contained herein are based on current expectations, but are subject to risks and uncertainties that could cause actual results to differ materially from those indicated, including, but not limited to, the impact and contributions of the slate of director nominees Cognyte has nominated, the projected growth of Cognyte’s business, and Cognyte’s ability to achieve its financial and business plans, goals and objectives and drive shareholder value, including with respect to its ability to successfully implement its strategy, and other risk factors discussed from time to time in Cognyte’s filings with the SEC, including those factors discussed under the caption “Risk Factors” in its most recent annual report on Form 20-F, filed with the Securities and Exchange Commission (“SEC”) on April 9, 2024, as amended on April 19, 2024 and in subsequent reports filed with or furnished to the SEC. Cognyte assumes no obligation and does not intend to update these forward-looking statements, except as required by law, to reflect events or circumstances occurring after today’s date.

¹ Source: FactSet. Data as of August 23, 2024. “Peers” refer to the companies disclosed in Cognyte’s Notice and Proxy Statement for the Fiscal 2025 Annual Meeting of Shareholders and include AvePoint, BigCommerce Holdings, C3.ai, Cellebrite DI, Consensus Cloud Solutions, Domo, Enfusion, Everbridge, Kaltura, MeridianLink, Rapid7, Rimini Street, Riskified, SecureWorks, SimilarWeb, WalkMe and Zuora. Peer data refers to median. “Broader market” refers to Nasdaq Composite Index.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240827418872/en/

Investor Relations:

Rob Fink

FNK IR on behalf of Cognyte Software

cgnt@fnkir.com

Source: Cognyte Software Ltd.

FAQ

When is Cognyte's (CGNT) Annual Meeting of Shareholders?

Cognyte's Annual Meeting of Shareholders is scheduled for September 4, 2024.

What is Cognyte's (CGNT) total shareholder return over the last 12 months?

Cognyte (CGNT) has delivered a total shareholder return of 55% over the last 12 months.

What percentage of Cognyte's (CGNT) CEO compensation is at-risk?

Approximately 80% of Cognyte's (CGNT) CEO compensation program is at-risk.

Who is opposing Cognyte's (CGNT) Board recommendations for the upcoming shareholder vote?

Value Base Fund is opposing Cognyte's (CGNT) Board recommendations and seeking to replace Chairman Earl Shanks with Tal Yaacobi.