Cognyte Software Ltd

NASDAQ:CGNT

Earnings Call Analysis

Cognyte Reports Strong Q3 with Updated Revenue Guidance

Cognyte reported a robust 12% revenue growth year-over-year, reaching $89 million in Q3, while adjusted EBITDA surged by 42% to $7 million. The company is optimistic about the year ahead, raising full-year revenue guidance to approximately $349 million, reflecting an 11% year-over-year increase. Notably, total software revenue is expected to be about $304 million, comprising 87% of total revenue. The firm also announced a $20 million share buyback program. With a strong cash position of $107.3 million and robust demand across various sectors, Cognyte is well-poised for sustained growth.

Consistent Growth Amid High Demand

Cognyte's latest earnings call highlighted their robust performance, reflecting a growth story that potential investors should watch closely. The company reported a 12% year-over-year revenue increase in Q3, amounting to $89 million. This strong performance underscores their effective execution of growth strategies and the resilience of the demand for their solutions. With the market for their technology evolving and expanding, Cognyte's revenue growth is expected to continue in the coming quarters.

Expansion of Profitability

Alongside revenue growth, Cognyte achieved significant profitability improvements. The non-GAAP adjusted EBITDA reached $6.6 million, marking a 42% increase year-over-year. More impressively, non-GAAP operating income soared by 180% to $3.4 million. This increase in profitability is attributed to a favorable revenue mix and optimized cost structure, hinting at the company's strong financial model.

Revenue Diversification and Recurring Income

The company generates revenue from various streams including software licenses and professional services. Notably, recurring revenue, primarily from support contracts, comprised 53% of total revenue in Q3, reflecting a solid foundation for sustainable growth. The growth in subscription revenue indicates a successful shift toward a more predictable income model, reinforcing the company's stability and the potential for further expansions.

Strong Backlog and Future Revenue Visibility

Cognyte's strong backlog provides visibility into future revenue. The total remaining performance obligations (RPO) stood at $567.6 million at the end of Q3, consistent with previous quarters. This includes deferred revenue and contract liabilities, illustrating the company's healthy demand and operational efficiency. The growing RPO reflects the increasing trust and reliance of customers on Cognyte’s solutions, indicating potential revenue realization in the upcoming periods.

Raising Guidance: A Positive Outlook

Driven by strong year-to-date performance and positive market conditions, Cognyte raised its fiscal 2025 guidance. The company now anticipates total revenue of approximately $349 million, translating to an 11% year-over-year growth rate. Additionally, expected adjusted EBITDA is projected to be around $26 million, nearly triple the amount generated in the previous fiscal year. Such optimism regarding future performance could inspire confidence in potential investors.

Key Customer Wins Reflecting Market Confidence

During the quarter, Cognyte secured significant contracts, including four notable orders from existing clients, significant enough to highlight their value proposition. These included two agreements valued at over $20 million and two others exceeding $10 million. Furthermore, the company added nine new customers, illustrating its expanding market presence, particularly in North America, a region identified as a critical growth opportunity.

Innovation at the Forefront of Strategy

Innovation remains a cornerstone of Cognyte's strategy. The ongoing development of advanced analytics, notably in AI and big data management, positions the company favorably to address the skyrocketing data demands from customers. The transition to 5G technology is accelerating mobile data traffic growth by over 20% annually, necessitating advanced analytics solutions that Cognyte is actively developing, indicating their forward-thinking approach to evolving market needs.

Strategic Market Position and Future Growth

Cognyte's strong positioning in the market is backed by ongoing investments in customer engagement and technology advancements. With a focus on the North American market, including significant responses from federal clientele and targeted outreach efforts, the company aims to capture a larger share of emerging opportunities. Their recent initiatives, including promoting industry events and leveraging strong customer feedback, reinforce their growth trajectory.

Conclusion: A Compelling Investment Opportunity

In conclusion, Cognyte is demonstrating solid growth, increased profitability, and a strategic focus on innovation—all factors that contribute to a compelling investment narrative. Investors should pay attention to the company's ability to sustain this momentum, capitalize on expanding markets, and leverage their established customer relationships to drive future growth. The enhanced fiscal guidance signals management's confidence in continuing to deliver value, supporting a positive outlook for the company's stock.

Earnings Call Transcript 2025-Q3

[Operator]

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognyte's Third Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions]Please note that today's conference may be recorded. I will now hand the conference over to your speaker host Dean Ridlon, Head of Investor Relations. Please go ahead.

[Dean Ridlon, executive]

Thank you, operator. Hello, everyone. I'm Dean Ridlon, Cognyte's Head of Investor Relations. Thank you for joining us today. I'm here with Elad Sharon, Cognyte's CEO; and David Abadi, Cognyte's CFO. Before getting started, I would like to mention that accompanying our call today is a presentation. If you'd like to view these slides in real-time during the call, please visit the Investors section of our website at cognyte.com. Click on upcoming events, then the webcast link for today's conference call.

I would also like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and and other provisions of the federal securities laws. These forward-looking statements are based on management's current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by these forward-looking statements.

The forward-looking statements are made as of the date of this call, and except as required by law, Cognyte assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of how these and other risks and uncertainties could cause Cognyte's actual results to differ materially from those indicated in these forward-looking statements, please see our annual report on Form 20-F for the fiscal year ended January 31, 2024, and other filings we make with the SEC.

The financial measures discussed today include non-GAAP measures. We believe investors focus on non-GAAP financial measures in comparing results between periods and among our peer companies that publish similar non-GAAP measures. Please see today's presentation slides, our earnings release and the Investors section of our website at cognyte.com for a reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from, as a substitute for or superior to GAAP financial information, but is included because management believes it provides meaningful information about the financial performance of our business, and is useful to investors for informational and comparative purposes.

The non-GAAP financial measures that the company uses have limitations and may differ from those used by other companies. Now I would like to turn the call over to Elad.

[Elad Sharon, executive]

Thank you, Dean. Welcome, everyone, to our third quarter conference call. This was another quarter of solid execution for Cognyte. We continue to deliver on our business plan advanced our growth initiatives and drive improved profitability. The market for our solutions remain robust and is evolving as anticipated, driving predictable and sustainable growth. Our execution resulted in another quarter of double-digit revenue growth with adjusted EBITDA expanding more rapidly than revenue.

Our re-to-date performance, combined with solid visibility and sustained demand, reinforces our confidence in the business. As a result, we are pleased to again raise our full year outlook. During Q3, we grew revenue by 12% year-over-year to $89 million. Non-GAAP gross profit increased by 12% year-over-year. We generated approximately $7 million of positive adjusted EBITDA for the quarter, representing 42% year-over-year growth, highlighting the strength of our financial model, and we believe our momentum remains strong, fueled by significant deal wins during the quarter.

These results and deal wins validate the strength of our technology, the differentiated value we provide to our customers and the substantial opportunities that we believe lie ahead. A key pillar of our growth strategy is deepening and broadening engagements with our existing customers. We achieved this by increasing the number of groups and the number of users leveraging our solutions and by offering additional capabilities to address emerging trends and evolving priorities.

One of the trends that is driving expansion is enabling our customers to handle the rapidly growing volume and variety of data they need to analyze. An example is the explosion in mobile data driven by the transition to 5G, which has significantly increased the complexity and scale of their challenges. According to a report recently issued by Erixon, mobile data traffic is growing at an annual rate exceeding 20%. This surge in data volumes and diversity underscores the need for advanced analytics, including AI-powered solutions to extract accessable and timely insights from the expanding data landscape.

By delivering the solutions that address this need, we strengthened our customers' relationships and drive sustained demand. In Q3, we secured 4 significant orders from existing customers. Two deals valued at more than $20 million. The other 2 were valued at over $10 million. We issued press releases announcing these notable deals over the past few weeks. These long-standing customers have consistently drive substantial value for our solutions over the years.

We believe this demonstrates that indispensable role our solutions play in addressing our customers evolving challenges delivering the quality, reliability and power such customers require to operate effectively in complex environments. We continue to expand our customer base, signing 9 new customers this quarter alone. This includes 5 contracts valued at over $1 million each and 1 significant contract worth $5 million.

These new customers spend across different regions and segments, highlighting the broad opportunity in the market. Additional in North America underscores our steady progress in establishing our foothold in this market. A few weeks ago, we announced a follow-on order valued at over $2 million from a highly respected and influential North American loan agency. This agency initially selected our solution just over a year ago to replace their incumbent provider solution. Since then, the agency has recognized a superior operational intelligence value our solutions deliver.

With this latest order, the customer's total investment exceeds $3 million, highlighting the trust in Cognyte and our solutions' ability to meet our critical operational needs. We anticipate that future potential North American customers will likely follow a similar trajectory, starting with smaller initial orders and expanding the investment over time as the realized measurable improvements in efficiency and outcomes.

We continue to actively pursue opportunities in North American federal market. Federal customers, explore and rigorously test potential new solutions for a long period of time to validate the effectiveness before making the purchase. As a result, the sales cycle with these customers is expected to be longer than what we have experienced with state and local on facet agencies.

Nonetheless, we are pleased with the level of engagement we have with these potential customers in this important market segment. To further strengthen our effort in the U.S. we recently welcomed Timoty Callahan, a retired U.S. Marshall brand chief to help lead our initiatives aimed at expanding our presence. His extensive experience and deep understanding of operations will be invaluable as we build our momentum in this market.

We continuously engage with our customers around the globe to understand better and help them address their challenges. Recently, we hosted our Global Cognyte Intelligence Summit in Europe, a landmark event where we introduced our latest air-powered innovations. Over 300 attendees from about 70 countries, representing law enforcement, national intelligence and national security agencies, explore today's critical security challenges and a transformative role of our technology. The event featured a keynote by retired admiral -- former Commander of the United States Caterommand, Director of the NSA and Chief of the Central Security Service, who shared the insights into the intersection of intelligence and technology.

The Admiral underscore that challenges agencies face are not getting any easier. However, adversaries must engage with a broader environment. They need to communicate, they need to move and they need to access and transfer money. He highlighted that with the right technology, these interactions present opportunities. And this is recognize Advantage lives, leveraging technology to transform these interactions into actionable intelligence. We also know that Age is work to generate deep knowledge about the environment and operational landscape, transforming information into actionable outcomes. We emphasize 2 things, excelling in addressing present challenges while proactively positioning themselves for future success with the right tools and technology.

These are the exact principles that we use to align our focus in product development, advanced tools, pro actional insights and future readiness. At the summit, we also hosted 10 external speakers, including former head of agencies, counterterrorism experts and representatives from global think tanks both reinforcing our position as a thought leader and fostering discussions on the evolving threat landscape.

The key insights from the summit underscores how the world's challenges are becoming more complex and the lines between different types of crime are increasingly blurred. Criminals and terrorists adopting each other's tactics, creating diversified and globalized networks that every traditional defenses. Bad actors exploits advanced technologies like encrypted communications, darked networks and futocurrency to Eva detection. Increasingly, they are leveraging AI to obscure the operations creating unprecedented challenges for security agencies, tasked with protecting citizens and competing crime.

This quarter, I want to highlight how our technology addresses the critical challenges posed by organized crime. Agencies faced the task of identifying members of criminal organizations and mapping their networks, including leadership structures, funding sources and intentions. Despite our efforts to concile activities, this group inevitably live behind valuable digital footprint.

However, as the volume and diversity of digital information grow exponentially, extracting actional insights becomes increasingly complex. This is where leveraging advanced technology is no longer optional. It is essential. With the right solutions like ours, agencies can efficiently analyze vast amounts of structured and unstructured data, uncovered hidden connections and accelerate investigations to achieve successful outcomes.

To illustrate, a few months ago, in Central America, our solutions enabled authorities to dismantle 1 of the continent's largest drug trafficking network by providing the right insights at the right time security agencies intercepted 7 tons of cocaine off the coast. This example demonstrates the decisive impact our solutions have been combating organized crime on a global scale.

We are making a meaningful difference for our customers, empowering them to address significant and evolving threats. Our mission to make the world a safer place drives everything we do. By combining cutting-edge technology with proven methodologies, we enable faster decision-making, accelerate investigations and help mitigate a wide range of threats. This is why customers around the globe continue to place their trust in our solutions.

In summary, we continue to grow by introducing new advanced capabilities deepening our relationships with existing customers as well as expanding our reach with new ones. These accomplishments strengthen our ability to deliver growth. With solid execution during the first 3 quarters of fiscal '25 we are once again in a position to raise our full year outlook for revenue and adjusted EBITDA. We now expect revenue to be approximately $349 million, plus or minus 1% representing about 11% year-over-year growth at the midpoint of the range.

Given the leverage in our financial model, we increased our adjusted EBITDA guidance and we now expect it to be about $26 million at the midpoint of the revenue range, almost 3x what we generated in fiscal '24. Looking beyond this year, our focus remains on driving resilient growth for the long term, increased profitability, operational excellence and deepening our market leadership.

We believe that our strategy positions us well to capitalize on the favorable market conditions and create value for both our customers and shareholders. Now let me turn the call over to David to provide more details about our Q3 results and updated fiscal '25 outlook. David?

[David Abadi, executive]

Thank you, Elad, and hello, everyone. We continue to deliver results that underscore our disciplined execution and strategic focus. Q2 revenue grew by 12.1% year-over-year and was $89 million. This quarter, software revenue was $30 million, flat year-over-year with more subscription revenue than we had in the same quarter last year.

Software service revenue was $45.3 million, an increase of $3.9 million over the last year -- software revenue, which includes software and software services of $75.3 million, an increase of $3.7 million compared to last year, representing about 85% of total revenue. It is noteworthy that approximately 40% of total software revenue growth came from incremental subscription revenue, underscoring the strength of our strong recurring revenue base.

Recurring revenue remains a key strength and was $46.9 million or 53% of total revenue in Q3 compared to $42 million in the same period last year. Recurring revenue comprised primarily of support contracts and some subscription offering is the cornerstone of our business. It provides strong visibility and support long-term growth. Professional services revenue was $13.7 million, an increase of $5.9 million over last year.

Professional services as a percentage of revenue in Q3 was high due to the timing of revenue recognition. We expect that its share on an annual basis will be lower and land at about 13% of total revenue. Later on this call, I will provide additional insight into our different revenue streams and our FY '25 revenue mix outlook.

Non-GAAP gross margin for the quarter was 70.1%. Our total non-GAAP software gross margin improved to 80.3% versus 78.9% last year, a year-over-year improvement of 140 basis points. Our non-GAAP professional services gross margin was 14.4% versus negative 9.7% last year. Our strong gross margin highlights the value and competitive differentiation of our solutions as well as the benefit of an optimized cost structure.

Non-GAAP operating income and adjusted EBITDA grew faster than revenue, reflecting the strength of our financial model. In Q3, we generated $3.4 million of non-GAAP operating income, an increase of 180% versus last year and $6.6 million of adjusted EBITDA, an increase of about 42% versus last year, resulting in positive non-GAAP EPS of $0.02.

Looking at our year-to-date results, our revenue was $256.1 million at 11.5% year-over-year, with non-GAAP gross profit growing 13.9%, outpacing revenue growth. Software revenue year-to-date was $88.4 million, an increase of 7.6% versus last year. Software Services revenue year-to-date was $135 million, an increase of 10% versus last year. About 30% of total software revenue growth of $18.5 million or 9% was driven by incremental subscription revenue supporting our kind revenue growth.

Professional services and other revenue year-to-date was $32.8 million, an increase of 31.7% versus last year. Total software revenue was 87% of our revenue during the first 9 months of the year. The inherent leverage in our business model drove significant year-over-year improvements in profitability underscoring our ability to scale efficiently while delivering strong financial results. Our year-to-date non-GAAP operating income was $9.7 million, an improvement of $14.9 million compared to a non-GAAP operating loss of $5.2 million during the first 9 months of last fiscal year.

Similarly, our year-to-date adjusted EBITDA was $90.9 million, an increase of $15.2 million compared to $4.7 million in the same period of the previous year. The strong performance this year, combined with the leverage in our business model has enabled us to strengthen our balance sheet. Our short- and long-term contract liabilities commonly referred to as deferred revenue remained robust at $132.2 million at the end of Q3, reflecting a significant increase versus previous periods, driven by strong billings performance during the quarter.

Our cash position remained strong at $107.3 million, an increase of over $24 million since year-end with no debt. This growth in our cash balance was primarily fueled by cash flow from operations during the first 9 months of the year. During Q3, we generated $12.3 million in cash from operations and $7.6 million in free cash flow, reflecting the strength of our financial model and operational efficiency.

Over the past few quarters, we have introduced new KPIs to provide greater transparency and demonstrate how our business is progressing. Let me walk you through our performance against each of these key indicators. Apio, our remaining performance obligations which represents contracted revenue to be recognized in future periods are influenced by factors such as sales cycle, deployment time lines, contract lengths, renewal timing and seasonality.

Total RPO is a sum of deferred revenue of $132.2 million and backlog of $435.4 million. At the end of Q3, total RPO was $567.6 million consistent with previous quarter. Long-term RPO, which also includes multi-year support contracts is expected to continue to fluctuate due to renewal timing. And just in RPO in a given quarter are not necessarily indicative of future revenue growth rates. Total RPO at the end of Q3 increased to $325.9 million, providing solid visibility into revenue over the next 12 months. We believe these healthy RPO levels support our growth expectations, further validating the strength and the resilience of our business model.

During Q3, we secured several significant deals and achieved key billings milestones resulting in billings of $104.7 million, significantly higher than our revenue for the quarter. This strong performance reflects the impact of both ongoing business and a few larger deals that may not occur every quarter, making this figure higher than what might typically be expected. Billings are calculated as revenue plus the change in contract liabilities, contract assets and unbilled balances.

This strong billing performance contributed to an increase in deferred revenue, which stood at $132.2 million at the end of the quarter, products strengthening our financial foundation and revenue visibility. Our non-GAAP gross profit for the quarter was $62.4 million, an increase of $6.7 million or 12% year-over-year. Q3 non-GAAP operating expenses were $59 million, aligned with our expectations.

The combination of revenue growth, improved margins and effective cost structure drove a notable increase in profitability. During Q3, we achieved $6.6 million of adjusted EBITDA and $3.4 million in non-GAAP operating income. We remained focused on driving further financial improvements and continuing to expand our margins. Before I turn to our improved FY '25 outlook, I want to provide additional insight into our revenue stream.

We generate revenue from 3 main streams. Software revenue is primarily perpetual licenses and appliances with some term licenses subscription. Software Services which is largely support contracts and to a lesser extent, cloud-based SaaS subscription offering. And professional services and other revenue, reflecting mainly deployment, development, hardware selling and training. All revenue streams can fluctuate from quarter-to-quarter, mainly due to timing of revenue recognition related to customer readiness and percentage of completion accounting.

In addition, the signing of new or immune support of subscription contracts may impact revenue recognition timing. We manage and evaluate the business by focusing on total software revenue, which combines software and software services. This holistic approach reflects the value we deliver through our technology and the services that support and enhance its reduction. This metric better reflects sales performance as its capture the full revenue contribution from a customer. It includes perpetual licenses, appliances and subscription as well as support contracts.

On an annual basis, we expect total software revenue to continue to be a growth driver. Professional services revenue which we target to be in the low teens as a percentage of total revenue is crucial. These services help customers extract greater value from our solutions and enable them to operationalize more quickly, ultimately driving additional opportunities with those customers.

It's important to point out that professional services revenue varies quarter-to-quarter due to several factors, including the timing and the scale of deployments. These fluctuations are natural and we look at the overall share of professional services revenue on an annual basis to ensure it aligns with our strategic and financial goals.

Turning to guidance. Based on our strong year-to-date performance and favorable market conditions, we are raising our full year outlook for fiscal 2025. We now expect full year revenue to be approximately $349 million, plus or minus 1%, representing year-over-year growth of approximately 11% at the midpoint of the range.

Out of this revenue outlook, we expect total software revenue to be about $304 million, representing approximately 87% of total revenue and Professional services revenue to represent about 13% of total revenue, aligned with our strategic goals. We now expect adjusted EBITDA to be about $26 million at the midpoint of the revenue range, up from $9 million last year, reflecting the inherent leverage in our business model.

We have made progress with our strategic tax planning and now expect non-GAAP tax expenses to be about $6 million, an improvement from our initial estimate of $10 million. With this updated improved outlook, we now project on -- to be positive $0.05 at the midpoint of the revenue range. Finally, we continue to expect to generate about $37 million of cash from operations for this year, reflecting the strong cash-generating capability of our business.

In November, our Board of Directors approved a share buyback program of up to $20 million in ordinary shares over the next 18 months, reaffirming our commitment to delivering value to shareholders. Following the required 30-day notice period that they easily low, share repurchases can begin on Friday, December '15. To summarize, we have demonstrated consistent execution, delivering strong results through the first 9 months of the year. Our ongoing commitment to innovation and expanding our advanced solutions, leveraging the latest technologies, including AI, continues to enhance the value we provide for customers.

Reflecting this progress, we have again raised revenue and profitability outlook for fiscal '25. Looking beyond this year, we anticipate meaningful growth, significant improvement in profitability and strong cash flow from operations. We believe that we are well positioned for sustainable growth with additional leverage in our business model, we expect revenue and gross profit to continue growing faster than operating expenses. We also expect to continue to generate meaningful positive free cash flow.

In closing, this quarter's result driven by positive momentum across key indicators reflect the half of our business and the opportunities that lie ahead. Our visibility into future revenue and robust balance sheet, including a solid cash position ensure financial flexibility. With this strong foundation, we are well positioned to seize opportunities ahead and deliver sustainable growth. With that, I would like to turn the call over to the operator to open the line for questions. Operator?

[Operator]

[Operator Instructions] Now first question coming from the line of Mike Cikos with Needham & Company.

[Michael Cikos, analyst]

Congrats on the quarter as well. I wanted to the first come back to the large customer announcements that came through the quarter, you announced some $10 million and $20 million agreements with some of these customers. Can you just talk about the profile of these customers? If a customer is signing a $10 million or $20 million deal with you guys, do the features or products that they're looking at from Cognyte differ materially from other customers or not necessarily?

[Elad Sharon, executive]

Yes. Thanks, Mike. So actually, the the complexity customers are facing similar to in the market. So if you look at the demand drivers, the demand drivers are related to the complexity of finding the bad guys, which is related to them being able to better high. It's related to the data that is growing in volume and diversity. And actually, it's more difficult now to put your hands on them. So customers have to do 2 things. The first 1 is to expand in terms of capacity to allow more users to use the solution, which means more licenses and also to increase capacity in terms of data volumes and diversity, and also to improve functionality, which means that if you increase data sources, and you have to uncover more hidden insights.

You also need to modernize the solution with more analytics, including driven capabilities. And by that, uncover even more than insight, some of them are predictive insights to allow you actually not just to investigate backward, but to find anomalies that are going into the future and intentions and prevent and neutralize threats. So this is something that is relevant for many customers, not only for those. Obviously, national security customers sometimes are larger than on force, for example. So in certain segments, it is more relevant. And it depends also in the capacity of the data customers have. We don't expect it to come every quarter this kind of 4 large deals, but we do expect the demand drivers to continue to intensify and more and more customers to upgrade either in expansion or in functionality or both. So this is something that we expect also in the future.

[Michael Cikos, analyst]

And I just wanted to build on that last point, starting to touch on macro there. But can you help us think -- it sounds like the the secular demand drivers remain intact, if not accelerating from where we stand today. But what are you hearing from customers as far as budgets? Are these budgets significantly expanding from where we stand today? Or is there incremental dollars flowing into this area from other pockets? Can you help us think about that budget item?

[Elad Sharon, executive]

Yes, sure, Mike. So maybe I'll give you a wider view on what we see in the market. So it will give you a data point and also our judgment on how we see the market. So first of all, we see a very healthy demand from existing and new customers. If you look at the new logo year-to-date, we added about 30 new customers compared to 29 in full fiscal '24. So we do see more new logos this year already. We see that more customers are budgeting with higher budget, and this is reflected in the larger upgrades and expansions that we see.

We also discussed the intensified demand drivers that I've just mentioned earlier. And we continuously get with customers and what we hear is that the challenges are growing and increasing and they are asking for budgets, and we do see that the momentum is healthy, and we see a tailwind in terms of demand. Another data point that can help you understand where we stand is the Cognyte Intelligence Summit, which we discussed earlier in the call and also in the press release.

This is not an industry general event. This is an event for Cognyte only. And you can imagine that 300 attendees from almost 70 countries, about 70 countries came to listen to what we have to say to see the solutions, to see the innovation, to see the drive new solutions that we have. So it means that the demand is there, customers are willing to listen and to get more insights of what's new. They're willing to put orders for expansions and upgrades and new logos are coming to us.

So overall, we feel very good about the market health. And if you look overall, the demand drivers, combined with our advanced technology and high value and what we hear from the customers that we engage frequently in general and also in the summer that we recently had and recent large deals, all of you together give us a very high confidence that we have our position for future growth.

[Operator]

[Operator Instructions] Next question coming from the line of Peter Levine with Evercore.

[Peter Levine, analyst]

You mentioned in your prepared remarks, mobile data traffic becoming top of mind, meaning the need for advanced data analytics. I know there's a lot you can't say around your product, but maybe talk about like some of the R&D initiatives from your summit, like what are your customers asking? What are you building and I'll start with that one.

[Elad Sharon, executive]

Yes, Sure. So I mentioned 5G as a demand driver because actually what our customers are doing is trying to convert certain activities of the adversaries into insights. So adversaries, they have to move, they have to transfer money and to get money. They have to put their hands on material. They have to communicate between themselves. And all of it is actually digital data. So 5G in this respect, actually is increasing the bandwidth of data. So customers have to deal with vast amounts of data that are increasing.

And I also mentioned that Eric shared with us that actually in the report that the data is growing more than 20% year-over-year. So this is a significant change for our customers because when the bandwidth is growing, it means that they have to do with more data. It means that new applications will be launched that now the bandwidth is increasing, so new applications will come. So they can communicate in different and more varied ways.

They have to -- they can hide better. And for our customers, this is a challenge. So in order for them to be able to address it, first of all, they need to expand the capacity of the solutions to get more data. And second thing, they have to improve the AI capabilities and analytics in order to uncover more hidden insights out of the same data sets that they have. And by that, being able, first of all, to prioritize, to predict and later on to neutralize threats before they unfold.

So 5G is 1 example of how the demand drivers are evolving in the market, driving demand for expansions and functionality upgrades and analytics.

[Peter Levine, analyst]

David, you mentioned you didn't give a guide for fiscal '26 next year, but you mentioned meaningful growth, faster than operating expenses, call it, I think operating expense growth in Q3 here was 7%. Can you just kind of provide some guardrails around how you're thinking about next year? Could we see double-digit growth? Are you on track to do that? Kind of just walk us through how you're thinking about next year, obviously, factoring in the environment, but would love to know if you can give us a little bit more guidance on how you're thinking about it a year.

[David Abadi, executive]

Thank you, Peter. So if you look at about our performance, you can see that in the last quarter, quarter-over-quarter, we were able to drive more and more profitability. If you look at the year-to-date results, we grew our top line by 11.5%. Our gross profit grew by 14% on a 9-month basis, and the OpEx only grew by 4.5%. So you can see that there is a lot of leverage. We started the year with certain guidances and we increased incremental $9 million to the top line in $7 million out of the $9 million went to profitability. So the leverage existing the model. Looking ahead, we are very well positioned for the future.

We have very strong CRPO and total RPO which are giving us the confidence that we can go in the future. And we believe that we'll be able to grow faster than revenue and gross profit and the profitability, meaning that the revenue and the gross profit we go will go in a much faster pace versus OpEx, and that will drive a strong result and better profitability also next year.

[Peter Levine, analyst]

Sorry, if I can squeeze 1 last 1 in. Last quarter, you talked a lot about U.S. expanding to the U.S. go to market. Can you maybe just give us an update on how that kind of trended in the quarter? And then maybe plans for calendar '25 in terms of further evolving or expanding your reach here in the U.S.

[Elad Sharon, executive]

Yes, sure. So first of all, we continue to believe the America market presents a growth opportunity for us. Obviously, there are many potential customers, and it's a healthy market. So we are focusing on expanding presence there. And we execute our plan, we make progress. I can tell you that I continue visiting existing and potential customer in the U.S., and they get very, very good feedback on our technology. Some of the customers became already reference customers. For some customers, we just -- we got already follow-on orders, which is another testimonial that it's not just a honeymoon. They don't just come to us for the first deal, but are happy what they get.

They generate a lot of value compared to competition. And for that reason, they come to us and expand and I mentioned it also in the -- earlier on the call. I can also tell you that a few weeks ago, I visited another loan for that agency, a very significant 1 in the U.S. And I got very good feedback also in a very significant success story using our technology. So given the execution so far, the recent wins we see, customers' feedback that I get. I do expect that the North American business will continue to grow in fiscal '26 and beyond. It become a more significant business for Cognyte.

[Operator]

[Operator Instructions]I'm showing no further questions in the queue at this time. I will now turn the call back over to Dean for any closing remarks.

[Dean Ridlon, executive]

Thank you, operator, and thank you, everyone, for joining us on today's call. Elad, David and I will be in New York in January to meet with investors and hope to see some of you then. In the meantime, please feel free to reach out to me should you have any questions. And we look forward to speaking with you again next quarter. Thank you all for joining us.

[Operator]

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation, and you may now disconnect.