Cognyte Software has entered into a definitive agreement to sell its Situational Intelligence solutions, which are part of Cognyte’s Threat Intelligence Analytics offering, to the Volaris Group (“Volaris”) for US$47.5 million plus a performance based earn-out, if and to the extent earned.
The transaction is expected to close in Cognyte’s fourth quarter, subject to customary closing conditions, including obtaining regulatory approvals.
“Cognyte is addressing many security use cases with investigative analytics software, including Threat Intelligence Analytics. The portion of our Threat Intelligence Analytics offering that we are divesting is focused on physical security implementations which we refer to on our website as Situational Intelligence Solutions, including the Symphia brand. Our strategy is to continue to address a broad set of security use cases which require sophisticated investigative analytics software. Given the overall environment this year, we decided to increase our focus on fewer use cases in order to accelerate growth and improve margins, and we believe we will benefit from sharpening our focus,” said Elad Sharon, Cognyte’s Chief Executive Officer.
For the fiscal year ended January 31, 2022, excluding the divested assets in all periods, our revenue would have been US$439.5 million, representing 9.9% year-over-year growth. In the first half of the current fiscal year, the divested assets represented around 10% of our total revenue. The divested assets include products and intellectual property, customer contracts and employees.
Situational Intelligence products help organizations to guard against disruption and attacks targeting their physical facilities and employees. The products are generally sold into the enterprise, retail, healthcare, education, transportation and public safety verticals and typically generate deals that are substantially smaller in size compared to other Cognyte solutions. Approximately 10% of our employees are expected to be transferred with the business across R&D, Sales and Marketing, Operations and Services and G&A.
Mr. Sharon added, “We believe Volaris will provide a great home for our customers, partners, and employees that will be transferred as part of the divestiture.”
“We are excited about the long-term opportunity for Cognyte’s Situational Intelligence solutions, and we look forward to welcoming the transferred employees and customers as part of our growing Volaris community,” said Carl Bruce, Group Leader at Volaris Group.
At closing, Cognyte will receive US$47.5 million in cash with a customary holdback to secure customary post-closing price adjustments and indemnification claims subject to release following the later of 180 days after the closing and settlement of the customary price adjustments. In addition, Cognyte may receive earn-out payments in cash of up to approximately US$35.0 million, net of certain earn-out related expenses, subject to the achievement by the divested assets of certain performance metrics over three years after the closing.
Following the divestiture, other than some transition services for a limited period of time, Cognyte will not be involved in operating the assets and the achievement of the earn-out is not in Cognyte’s control. As such, at this time, we cannot be certain whether, and to what extent, any earn-out will eventually be earned.
Houlihan Lokey acted as financial advisor to Cognyte with respect to this transaction.
