Cognyte Software (NASDAQ: CGNT) has entered into a definitive agreement to sell its Situational Intelligence solutions to the Volaris Group for $47.5 million. 

In addition, Cognyte may receive earn-out payments in cash of up to approximately $35 million, net of certain earn-out related expenses, subject to the achievement by the divested assets of certain performance metrics over three years, post closing. 

For the fiscal year ended January 31, excluding the divested assets in all periods, Cognyte said its revenue would have been $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 the company’s total revenue. The divested assets include products and intellectual property, customer contracts and employees. 

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. 

The Situational Intelligence solutions are part of Cognyte’s Threat Intelligence Analytics offering. 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 Cognyte employees are expected to be transferred with the business across R&D, sales and marketing, operations and services and G&A, according to an announcement. 

“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,” said Cognyte CEO Elad Sharon. 

Sharon added, “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.” 

Based in Mississauga, Ontario, Canada, Volaris Group is a buy-and-hold acquirer of software businesses.

The transaction is expected to close in Cognyte’s fourth quarter. The deal is subject to customary closing conditions, including obtaining regulatory approvals. 

Houlihan Lokey acted as financial advisor to Cognyte.