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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognyte Fourth Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] Please be advised 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.

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 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 as 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, 2026, being filed today 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.

Thank you, Dean. Hello, everyone, and thank you for joining us today. Before we begin, I want to acknowledge and thank our employees, customers, partners and investors for their continued support over the past month. Cognyte's mission is to help make the world a safer place. That mission is constant and our teams continue to execute. We delivered strong results in the fourth quarter and closed fiscal '26 with another year of consistent execution. Revenue grew by double digit with strong gross margin, profitability improved significantly, and we continue to generate solid cash flow. Fiscal '26 played out largely as we expected with strong repeat business from our installed base, continued new customer momentum and strengthening profitability. We expect this growth to continue into fiscal '27 and today provided revenue guidance of $448 million at the midpoint of the revenue range, and we are on track to achieving our targets for the fiscal year ending January 2028. We'll share more details later in this call. We operate in a market environment where the underlying drivers continue to strengthen, threats are becoming more complex, adversary is more sophisticated and the volume of data continues to grow exponentially. At the same time, decisions need to be made faster than ever. This is driving sustained demand for mission-critical intelligence technology, exactly where Cognyte is positioned. Our solutions operate in extremely demanding environment across national security, military intelligence and law enforcement. In these environments, performance is not optional. Our customers are not experimenting. They are deploying systems that must work consistently in real operational conditions. Over time, our value becomes deeply embedded in our customers' workflows and operational systems. This creates durable relationships, high switching costs and a strong competitive position. Over the past year, we executed against our 3 primary growth pillars. First, installed base expansion. Customers continue to expand deployments, upgrade functionality and are also extending into new use cases and operational domains. For example, border intelligence. Repeat business continued to represent a significant portion of our revenue, reflecting the trust our customers place in us and the operational value we consistently deliver. Second, new logos. We added 61 new customers this year as our solutions continue to prove themselves globally and deliver real operational value. This important new business is driven by our proven track record and customer references and is aligned with our land and expand strategy. We increased our footprint within military intelligence agencies, including in NATO countries. And third, North America. This is a key market for us. We recently strengthened our North American leadership, bringing in a seasoned sales executive with deep experience and track record in the federal market. We also added a new channel partner, Carahsoft, who will provide access to federal, state and local procurement channels and will support broader deployments of our solutions. Together, these steps reinforce our commitment to scaling our U.S. presence and aligning with long-term federal modernization programs. Our growth is driven by a balanced approach, installed base expansion, new customer acquisition and U.S. market scaling. In Q4, we secured several significant deals across geographies and customer segments. One example is with a long-standing national security customer in EMEA, where we amended the perpetual agreement into a 5-year subscription at a new annual value of $6 million. This reflects both a significant expansion in scope and a shift in commercial model. The transition to subscription was driven by the customers' need for continuous access to new capabilities, AI-driven functionality and faster upgrade cycles. While most agencies still prefer perpetual deployments, we are seeing a gradual increase in the adoption of subscription models. We also signed several multimillion dollar deals across multiple regions, including new solution deployments, expansions and support contracts. In addition, this morning, we announced an about $5 million deal with one of the largest state law enforcement agencies in the United States. This is a new customer win, replacing an incumbent provider. The deployment will support mission-critical field operations, including fugitive apprehension, missing children cases, criminal investigations and search and rescue. It represents an important step in expanding our footprint in the U.S. Security and intelligence agencies globally are accelerating efforts to address increasingly complex threat environments. Today's challenges extend beyond traditional crime and national security. Agencies must respond to hybrid threats, cross-border activity, cyber-enabled and organized crime, all of which increase the volume and complexity of data they must analyze. This is driving sustained demand for platforms that can fuse, correlate and analyze data to deliver actionable intelligence for real-time decision-making. Across regions, we see a consistent shift toward more integrated proactive intelligence models with greater emphasis on cross-unit collaboration and faster time to decision. Our platform is purpose-built to support exactly this type of complex operational environment. As agencies continue to modernize and scale, our positioning is directly aligned with their immediate and long-term priorities. Today, we are seeing growing adoption and reliance on artificial intelligence. AI is embedded in our platform, shaped by real-world investigative use cases and years of operational experience. AI also plays a part in our customers' growing challenges. It increases the scale and the sophistication of the threat to our customers address. In our market, access to AI models and Gen AI is not the main constraints, operationalizing them is. Having access to advanced AI is not enough for an analyst to process sensitive communication data, correlate it with financial and behavioral signals or generate outputs that meet legal and evidence standards. The challenge is everything required to make AI usable in real investigated environments. That includes integrating fragmented and sensitive data, applying domain-specific intelligence methodologies, operating in strict security and compliance frameworks and embedding AI into investigative workflows that produce actionable, auditable outcomes. As AI capabilities continue to advance, this infrastructure becomes more, not less critical. Customers are not buying AI features. They are buying operational outcomes powered by AI. This is what makes our advanced AI operationally useful, and it's not easy to replicate. We believe AI is a structural tailwind for our business. Earlier this month, we hosted our Intelligence Summit, bringing together senior intelligence and law enforcement leaders from across the globe. The level of participation and engagement reinforced Cognyte's strong leadership position within the investigation and intelligence communities. The conversations were direct and forward-looking. Leaders are not discussing theory. They are executing modernization programs now. They are confronting real operational challenges and sharing practical approaches between them and with us. Across panels and closed door discussions, agencies emphasized 3 priorities: connecting fragmented data into a unified intelligence picture, reducing time from data to decision in live investigations, enabling collaboration across units, agencies and even countries. We were honored to host Jürgen Stock, former Secretary General of INTERPOL and former Vice President of Germany's Federal Criminal Police Office as our keynote speaker. He spoke about the importance of sharing fragmented intelligence across domains and the need to partner with the private sector, specifically in technology to accelerate innovation and operational effectiveness. The summit once again confirmed why customers choose to partner with Cognyte, access to advanced proven technology and methodologies, solutions that translate directly into real-time operational outcomes and the quality, support and long-term trust they can rely on. In summary, we delivered strong results. We operate in a growing high barrier mission-critical market. We are expanding with both new and existing customers. AI is a structural tailwind. We remain focused on execution and long-term value creation and are well positioned for continued growth. We operate where the hardest problems live. This is not a coincidence. It reflects 30-plus years of connecting advanced technology to operational realities. Ultimately, we help eliminate the unknown, so our customers can act with clarity, speed and confidence. With that, I'll turn the call over to David for a deeper review of our results. David?

Thank you, Elad, and hello, everyone. As Elad outlined, Q4 ends a year of continued strong execution across the business. Our results this quarter and throughout FY '26 demonstrate our durable business proposition, the value of our differentiated solutions and the operational discipline that all drive these strong results. Let me begin with our fourth quarter results. Revenue for Q4 FY '26 was $106.2 million, up $11.7 million or 12.4% year-over-year, reflecting a healthy demand environment and the value of our solutions. Breaking down the revenue mix. Software revenue was $45.9 million, an increase of $8.5 million or 22.6% year-over-year. Software revenue is comprised of perpetual licenses, appliances and some term-based subscription licenses. Software services revenue grew by $3.4 million to $49.3 million. Software services revenue comes mainly from support contracts and to a lesser extent, cloud-based SaaS subscriptions. Total software revenue, which includes the combination of software and software services revenue, grew by $11.9 million year-over-year or 14.2%. Professional services revenue was similar to Q4 of the prior year. Fluctuation in professional service revenue between quarters is expected and are a result of revenue recognition timing. Recurring revenue increased by 5.6% to $50 million, representing 47.1% of total revenue. Note that recurring revenue is calculated from GAAP revenue, driven primarily by support contracts and sub time-based and SaaS subscription offerings that enhances our visibility in both the near and long term. Looking at gross margin, we continue to make significant improvements. Q4 non-GAAP gross margin reached a record of 74.7%, an expansion of 320 basis points year-over-year. Non-GAAP gross profit grew much faster than revenue and increased by $11.8 million or 17.4% year-over-year to $79.4 million. It's important to mention that all the incremental year-over-year increase in revenue flow through to gross profit. This again demonstrates how our differentiation translates into strong gross margins. On profitability, Q4 non-GAAP operating expenses were $67.3 million. GAAP operating income was $5.2 million, up from $697,000 last year. Non-GAAP operating income reached $12.1 million, doubling year-over-year. Adjusted EBITDA continues to expand significantly faster than revenue. It was $15 million, up 62.5% from the $9.3 million generated in Q4 last year. GAAP net income was $5.1 million compared to a net loss of $0.2 million in the same period last year. The improvement is largely due to the significant increase in operating income. Our Q4 performance again highlights the scalability of our model as software revenue grows and the leverage in our model generates significantly higher profitability. While most of our government customers buy through perpetual licenses, we offer both models and have seen some recent wins in subscription. Subscription agreements support greater visibility over time and align with broader software market trends. RPO or remaining performance obligations represents contracted revenue to be recognized in future periods, influenced by factors such as sales cycles, subscription deals, deployment time lines, contract lens, renewal timing and seasonality. The strength of our RPO remains an important pillar of our near- and long-term visibility. While fluctuations are expected in RPO, current levels support our growth expectations. At the end of Q4, total RPO was $557.2 million. Total RPO is a sum of contract liabilities of $123.7 million and backlog of $433.4 million. Short-term RPO rose to $369.5 million, providing solid visibility into revenue over the next 12 months. It's worth noting that had we included cancelable periods of subscription deals in total RPO, it would have increased by approximately $42 million. Q4 billings grew 15.6% year-over-year to $109.9 million. Turning to our full year FY '26 results. Revenue for FY '26 was $400 million, up 14.1% year-over-year. Full year non-GAAP gross margin increased to 73%, up 200 basis points year-over-year, primarily driven by scale and operational efficiencies. We achieved our FY '28 gross margin target 2 years ahead of our plan. Profitability continued to improve significantly, reflecting the leverage we have in our business model. GAAP operating income reached $13.3 million, a significant turnaround from a $5.1 million GAAP operating loss last year. Non-GAAP operating income was $36.7 million, more than double year-over-year. Out of the $49.4 million year-over-year increase in revenue, $21 million flowed through to non-GAAP operating income. Adjusted EBITDA was $48.2 million, up from $29.1 million, a 65.7% year-over-year increase. GAAP net income was $4.6 million compared to net loss of $7.2 million last year. Across the board, FY '26 showcases a disciplined operating model that scales effectively with our strategy. Turning to cash performance. In Q4, net cash from operating activities was $20 million, slightly above the same quarter last year, benefiting from both increased profitability and strong collections. For the full year, operating cash flow totaled $40.3 million, reflecting consistent execution and disciplined working capital management. Cash flow from operations came in below our expectation of $45 million due to delays in collecting certain receivables in the quarter. These receivables were collected early in Q1. We ended the year with $116.9 million in cash and no debt, providing significant strategic flexibility. Our capital allocation is consistent and return focused. We maintain the liquidity and working capital necessary to run the business. Above this operating baseline, we allocate excess cash to areas that can generate the highest long-term return, such as acquisitions and share repurchase programs. Earlier this month, the Board of Directors approved an additional $20 million to our existing share repurchase program. This increase brings the total authorized for share repurchases to $40 million and reflects the Board's ongoing commitment to long-term shareholder value creation and confidence in our growth prospects. During Q4, we bought approximately 592,000 ordinary shares for an aggregate purchase price of approximately $5.5 million. For the full year, we repurchased approximately 2.3 million ordinary shares for an aggregate purchase price of approximately $21.4 million. Since the initiation of our first repurchase program in November 2024 until the end of Q4, we have repurchased a total of approximately $26.7 million worth of shares out of the total program authorized for $60 million. Throughout the year, we remain focused on balancing investment in innovation and market expansion, while improving operating efficiency. Our financial model is scaling, and we believe there is an opportunity for additional leverage as revenue continues to grow. And now looking ahead, for fiscal '27, we expect full year revenue of about $448 million, plus or minus 3%. This represents approximately 12% year-over-year growth at the midpoint of the revenue range. We believe the mix between total software revenue and professional services revenue to remain similar to last year. We believe that our strong short-term RPO of $369.5 million and the continuing favorable demand environment support this outlook. We expect Q1 revenue to be slightly below the Q4 levels we are reporting today with sequential growth each quarter throughout the year, aligned with the seasonality of previous years. We expect non-GAAP gross margin to increase year-over-year to approximately 73.5%, above our target for FY '28. This reflects improvement of 50 basis points. Gross margin may fluctuate between quarters based on our revenue mix. This improved gross margin allow us to partially offset the foreign exchange headwinds related to the recent strength of the Israeli shekel versus the U.S. dollar. As a result of the improved gross margin, we expect gross profit to increase at a faster rate than revenue growth. For the full year, we expect our non-GAAP operating expenses to grow slower than revenue, reaching approximately $273 million, an increase of about 7%. A significant portion of the increase is due to strengthening of the Israeli shekel against the U.S. dollar. Operating expense seasonality should be similar to last year with slight fluctuations throughout the year. We expect non-GAAP operating income to be about $56 million, more than 50% year-over-year growth. We expect adjusted EBITDA to be about $68 million, representing about 40% year-over-year growth, all at the midpoint of the revenue range. We expect our non-GAAP taxes to be about 27% or $15 million and noncontrolling minority interest of about $5 million. As a result, we expect annual non-GAAP EPS to come in at $0.47 at the midpoint of the revenue range based on a weighted average of approximately 75 million fully diluted shares in FY '27 and we expect to generate GAAP net income again this year. Turning to cash flow. We expect to generate $45 million of cash flow from operations in fiscal '27. For the full year, we expect total CapEx of approximately $11 million. Regarding our FY '28 targets, given the business momentum, expanding profitability and visibility, we believe we are on track to meet our targets for the fiscal year ending January 31, 2028, revenue of approximately $500 million and adjusted EBITDA margin of over 20%. To conclude, Q4 capped a year of strong performance. We delivered strong growth, expanding margins and strong cash generation. Our AI-driven investigative analytics solutions are built on decades of domain expertise and designed for mission-critical environments. Our balance sheet is strong. Our backlog provides visibility and our execution remains focused and consistent, and we are well positioned to deliver sustained profitable growth and long-term value creation. Thank you again for joining us today and for your continued support of Cognyte. Operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Taz Koujalgi with ROTH Capital.

A couple of questions from my side. So if I look at -- if I'm doing my math right, very strong bookings growth this year based on RPO, the RPO number that you disclosed. Can you just give us some puts and takes on the bookings number being so strong? How is the duration? Were there is some large contracts that closed early in this quarter?

If you look at the market, one way to think about this is actually to see firsthand what our customers told us during the Intelligence Summit. We had 2 weeks ago. Actually, we do see that across geographies and customer segments, the demand drivers are very consistent. And actually, we give answers to all of those, which is increasing sophistication of the bad actors, growing volume in fragmented data, AI and also the need to move much, much faster. And given the demand drivers are significant and growing and healthy across domains and across territories, we do see that actually the demand is very healthy. In terms of the large deals that you've mentioned, we had a few of them. I gave an example earlier this call. We had a few more multimillion dollar deal. One example is $10-plus million deal with Tier 1 national security customer in EMEA, which is an expansion and upgrade with functionality. We have these customers with us for over a decade. We had another $5 million order from top NATO member, military organization. So you can see that one national security, the other one is military intelligence, and we had another one in APAC of $5-plus million subscription deal, another customer that is with us for [ 2 ] decades. So actually, what you see is that the need is there. Customers are going to the same direction globally and across segments, law enforcement, national security and national intelligence. And actually, this is what drives the demand. And as you mentioned, the RPO is strong. The cRPO is nearly $370 million. The total RPO is over $0.5 billion, and this gives us the visibility into fiscal '27.

Got it. Very helpful. And then you mentioned about the strong -- the addition of new partners in the U.S. market. As you think about your goals going forward from $400 million this year to $448 million and then $500 million in fiscal '28, maybe some more color on what is the mix of the U.S. business today, either from a revenue or bookings perspective? And then what are you expecting, I guess, for the next 2 years for the U.S. mix to be to reach that $500 million target in the next 2 years? What is assumed in the guide of the $500 million? How much should the U.S. be, broadly speaking, of that $500 million in the next 2 years? What is assumed in the guide for U.S.?

Yes, sure. So U.S. is one of the largest and most advanced intelligence and law enforcement agency market globally. They face actually similar problems. We had some customers joining us for the Intelligence Summit. So we actually do see that they suffer same problems and they need similar technology. And actually, we do believe that we have a very strong fit into their needs. In terms of fiscal '28, between fiscal '26 and '28, we need incremental $100 million. We do believe that about 50% of it will come from expansions and upgrades of existing customer base. About 25% will come from new customers outside of the U.S. And we believe about 25%, the rest 25% should come from the U.S., and we are taking actions in order to continue and expand presence in the U.S. Including partners, including hiring a new general manager for North America that came from Cellebrite. He was leading the federal sales in Cellebrite, including a lot of sales and marketing efforts. So generally speaking, they do believe that we take the right actions, and that's the assumption. The 25% incremental out of the $100 million will come from the U.S.

Got it. Very helpful. Just one for David. So David, you've seen -- you've shown strong leverage in the model. Your adjusted EBITDA margin this year was 12%. You outperformed your guidance. I think there's a little bit of a -- if I'm looking -- if I'm doing the math right, the free cash flow seems a little bit, I guess, lighter than the guide. So maybe just help us understand the gap between the EBITDA and the free cash flow number this year.

Yes. Thank you, Taz. We had a strong year with the cash collection and cash from operation and free cash flow. During this year, we were able to generate $40 million of cash from operations and $30 million of free cash flow. We came short versus our initial expectation of $45 million, mainly because of certain collection that took place early in this quarter. But if you look at the overall picture, we were able to generate $40 million on a $36 million of non-GAAP operating income. So actually, we were overachieving the operating income. And obviously, you have more things under the line like taxes and things that you paid. So in general, we are pleased with where we are from a cash from operation and free cash flow. And going forward, we guided for next year for $45 million.

Got it. Very helpful. And then if I look at the adjusted EBITDA guide for next year, you're guiding to 15% and I think that jumps to 20% in fiscal '28. Maybe just remind us what are the sources of leverage. You're guiding from 12% to 15% for next year, but then the guide goes from 15% to 20% in fiscal '28. So maybe just some remind us on what the sources of leverage are for the next 2 years?

So actually, we are very pleased with the leverage that we had with the gross margin. As you saw, we achieved 73% gross margin 2 years ahead of our initial plan. So this is one of the area that we believe that we'll continue to create leverage. We guided for FY '27 to 73.5% -- so this is an area -- the gross margin itself, it's a place that we think that will create -- continue to create for us leverage. And obviously, we have also some OpEx leverage. We -- OpEx will grow this year at 7%, while top line will grow 12%. So that creates for us the leverage. And we believe that it will continue with us into FY '28.

Our next question comes from Matthew Calitri with Needham & Company.

Matt Calitri over at Needham here. I'm curious on what the puts and takes are to the initial FY '27 guide, particularly as it relates to the ramp in the U.S., but I would also love to hear any color on why you widened that range by a point versus previous guides and then expectations on new customers versus expansions, group sense contribution, AI, anything of that nature?

So fiscal '27 guidance actually presents double-digit top line growth, 12% with an adjusted EBITDA growth of 40%. So it means that we expect another strong year in terms of leverage and top line growth. In terms of the range, we added plus/minus 1% to each side, given the volatility and uncertainty in the market, it can grow in both directions, upside and downside, but we feel comfortable with the midpoint. But the reason for the plus/minus 3% is related to the market environment. In terms of what drives the guidance, the way we look at it is we look at the cRPO, we look at our performance, we look at the market environment. We also look at the anticipated conversion timing of the cRPO to revenues. And taking all of those together, we have a very good visibility into the year. So overall, I think that we should expect another strong year. And we're also on track to meet the target for fiscal '28. So we are on track.

Okay. Great. Sticking there for a second, how would you categorize the size of the cohort of customers you expect to renew or expand this year compared to prior years? I know there aren't set dates with the perpetual model, but what are your assumptions based on what you're seeing for pipeline or historical customer trends?

Yes. So the history shows that unlike commercial stuff that you buy and you stick with it in our domain, the challenges are much, much higher and the pace is very fast. Just a few examples, customers that have a certain deployment today, they'll have to support data that is growing. They'll have to support more functionality. They'll have to catch up with technology, including AI-powered analytics and Gen AI. They'll have to address new use cases that are coming, whether it's financial crime or others. We do see that in military intelligence, there are new concerns related to border control and others. So generally speaking, this is a very dynamic environment and customers have to continue and upgrade and expand. And we expect that the upgrades and expansions are actually what we call repeat business, or leverage of our customer base will continue to be strong also going forward. So this is something that is a significant, I would say, baseline for our business. On top of it, we have, of course, the new logos, which is primarily land and expand strategy. Usually, they start small and grow over time with us and the U.S. business, which I discussed earlier, which is a strategic and important market for us and another growth pillar. So overall, I do believe that the repeat business will continue to be very strong, given that the environment is changing and customers have to adapt and run and catch up with this.

Awesome. Great to hear. And then, David, on the cash flow from operations, what caused the delay in collections? And how are you thinking about that conversion rate of adjusted EBITDA to cash flow as you scale towards the '27 and '28 targets?

So actually, we had certain delays that took place due to, I would say, customer delays, and we collect everything in the beginning of the quarter. So this is something that may happen. And then you are relying on customer when they pay. And if we look ahead, you need to take into consideration that on top of the adjusted EBITDA, you need to take other items like tax payment and other expense below the line that may take a place. For this year, we guided for $45 million of cash flow from operation, while the guidance for the adjusted EBITDA is $68 million. I think this is something that you can take as a going-forward view about how it will convert over time.

Okay. Great. And then -- it was also cash flow in '26, the cash flow from operations was very heavily weighted towards the second half. Is that seasonality expected to repeat or any commentary on that?

So actually, there is some seasonality in cash flow from operation. Usually, Q2 cash flow operation is negative due to actually expenses and less about collection. You may have some seasonality related to the size of the deal. So meaning that if there is a large deal that's taking place in a certain quarter, you will see an impact on that quarter. But it's not a given part. It's not seasonality on the nature of between Q1 to Q3. It's more about the specific deal and the mix of the deal in a given quarter, except for Q2, which usually is impacted by certain expenses that are taking place in Q2.

Our next question comes from Eric Martinuzzi with Lake Street Capital Markets, LLC.

Congrats on the good finish to FY '26. Your comment about the seasonality of the Q1 revenue would point towards kind of the lower end of the overall full year guided growth range. Just curious to know, if you expect that to reverse? Is that more of a second half reversal to get to the midpoint? Or is it maybe Q2, Q3, Q4 will kind of grow to offset that slightly lower growth rate in Q1?

So usually, from a seasonality perspective, Q1 is slightly below Q4. It really depends on certain things that are taking place, certain dynamics that usually takes from Q4. If you look year-over-year, it may create some fluctuation between the quarters from a growth perspective. But when we look at the overall year and the pattern of the year, usually, you start in Q1 slightly below Q4 and then growing over quarters. This was a typical year. It's not different versus other years.

Okay. And then the -- you talked about a slight preference for subscription versus perpetual. Is that also part of the slightly wider guided range for FY '27, just not being able to predict how customers are expecting to buy? Are you -- are bids being responded to with both a subscription and a perpetual and you just don't know, which the customer is going to choose?

So obviously, when you convert certain deals into subscription, it do have an impact on revenue and over time. But given the fact that we have such a strong cRPO, it gives us more confidence about how the year will look like. So you need to remember that we have $370 million of cRPO. So a big portion of our guidance is covered already. Subscription can play a role, but given the plus or minus of 3% that we gave, it's more about what we see in the market and there is upside and downside that can play a role given the geopolitical situation and what we see in the overall environment, and we thought that this is the right approach for this year.

Okay. And then lastly, more of a macro question. But historically, you have talked about pipeline or top of funnel activity increasing with increased global conflict. Any signs with regard to the Iran war impact on pipeline?

Yes. So actually, if you look at the market, generally speaking, when there are security concerns, usually, it will translate into demand in certain areas, certain territories, certain use cases. It takes time because it's government agencies, it takes certain time to respond. But what I can give you as an anecdote for this question today is for the example, the military intelligence. We do see demand growing in military intelligence, including in NATO countries. The reason is that they have to use this technology with their special forces and also have to improve their broader security. Usually, it's military intelligence. So we do see that certain areas with certain use cases have tailwinds related to the geopolitical situation today in the Middle East. So the answer is that usually security concerns, it create some more demand. Of course, it depends on the territory and depends on the use case. But generally speaking, the answer is yes.

Our next question comes from Charlie Zhou with Evercore ISI.

This is Charlie for Peter, Evercore. I have 2 questions for you guys. Firstly, with the incremental buyback authorization now in place, how should we think about the cadence of buybacks in FY '27? And then maybe just walk through how are you balancing buybacks relative to ongoing investments in growth and expansion?

Thank you, Charlie. So actually, we are very pleased that early this March, we were able to announce additional $20 million, which gave us a total plan since November '24 of $60 million. The remaining capacity under this plan is around $33 million remains for us to execute. Looking in the overall picture, we ended the year with $117 million of cash with a very strong balance sheet and continue to generate cash. What we are trying to do is to take a balanced approach between investing in our value creation for our shareholders and creating a buyback. And this is why we are placing all these plans. Actually, the Board ongoing commitment to long-term shareholders value creation and confidence in our growth prospects allow us to do that. Going forward, we will continue to assess on a regular basis. Now we have enough capacity for the upcoming quarters, and we'll continue to execute that. We are executing it technically under -- we have 2 ways to do it, regular purchase in the market when we are not black out and using a 10b5 plan during the blackout period. So by doing -- using these 2 tools, we're able to execute.

Got it. That makes sense. And second one, maybe for you, David. Both gross and operating margins came in very nicely this quarter. And as you mentioned on the call, the incremental gross margin this quarter came in at around 100%. And based on your gross margin guide, it seems that the incremental gross margin will be around 83% for next year. And maybe can you just help us think about the key drivers of that outperformance first and then how sustainable are those benefits as we move through FY '27?

So we are very pleased with the gross margin improvement. If you look at the last few years, we improved on a regular basis our gross margin, it's a continued improvement. It's actually another indication and validation for us about the value perceived by our customers. Our customers are buying premium solution and willing to pay for that, and we invest a lot on R&D. And the way that you get a return on that is by being able to sell our solution to Tier 1 customers that appreciate this value that we provide them. Looking at the overall trend, you can see that the total software is crossing the 80% gross margin and the professional service continue to increase above 20%. The combination of the 2 of them allow us to improve more margin when the scale is coming. So overall, we believe that this trend will continue. We already guided for this year to be at 73.5%. And we believe that in the long run, we leave more room for improvement on gross margin.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Dean for any further remarks.

Thank you, Kevin, and thank you all for joining us today. Should you have any questions, please feel free to reach out to me, and we look forward to speaking with you again next quarter.

Thank you. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Cognyte Software Ltd. Third Quarter Fiscal Year 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. 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.

Hello, everyone. I'm Dean Ridlon, Cognyte Software Ltd.'s Head of Investor Relations. Thank you for joining us today. I'm here with Elad Sharon, Cognyte Software Ltd.'s CEO, and David Abadi, Cognyte Software Ltd.'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 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 Software Ltd. 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 Software Ltd.'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, 2025, 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'd like to turn the call over to Elad.

Hello, everyone, and thank you for joining us. Cognyte Software Ltd. delivered another strong quarter in 2026. Revenue grew in the mid-teens, and operating income grew significantly faster. Cash flow from operations was strong, and the team continued to execute well. These results underscore the strength of our value proposition and the healthy demand for AI-powered investigative and decision intelligence solutions. Momentum continues to build. We are raising our full-year guidance and are making strong progress towards achieving our targets for the fiscal year ending January 31, 2028. Let me walk you through the key drivers of the quarter. We executed with clarity on purpose, helping our customers make the world safer and delivered meaningful customer wins in the law enforcement, national security, and military intelligence sectors. In Q3, we secured several major deals and expansions. This included a $5 million follow-on subscription agreement with a tier-one military intelligence organization in EMEA, building on an earlier about $10 million perpetual award from this year. This marks another important win in the military intelligence domain, reinforcing the momentum we have established with defense organizations. We also saw continued momentum with long-standing national intelligence customers, renewing and expanding multimillion-dollar contracts, reflecting the strength of our repeat business and the trust our existing customer base places in us. While government customers typically procure through perpetual licenses, we continue to see strong patterns of recurring demand driven by capacity expansions, new functionality, new use cases, and coverage of additional units within agencies. This repeatability in our perpetual business has the potential to drive revenue durability, provide multi-visibility, and support our long-term growth. The US market continues to present a significant opportunity for us, and we continue to invest accordingly, expanding our partner ecosystem, strengthening our team, and increasing field activities. Our new partnership with LexisNexis Solutions is progressing well with deepening technical alignment, expanding joint engagements, and strengthening our traction in both federal and state and local stakeholders. Over the past quarter, we participated in joint events and delivered solution training to their sales organization. This is one example of the multiple partnerships we are building to broaden our reach and grow our business in this region. We continue to see increased interest from military intelligence organizations, including from several NATO countries, reflecting the growing relevance of our capabilities to multi-domain defense missions. At the same time, momentum across law enforcement and national intelligence markets remains strong. Recent industry events reinforce this trend, with meaningful customer conversations and expanding engagement across all regions. Today's threat environment is more connected, fluid, and complex than ever. Our customers face adversaries that cross borders, mandates, and restrictions while the data needed to understand threats remains augmented in silos. Our customers and we are increasingly seeing threat vectors evolving to hybrid and transnational scenarios. Let me share what this actually looks like in the real world. First, a case involving sophisticated transnational criminal networks. Opioids move across borders. Violent crime rises in metro cities. Unusual cryptocurrency flows are detected by financial intelligence units. On paper, these appear unrelated. Border Police focus on drugs, local police center the violence, and financial intelligence units investigate the illicit finance. Each operates within its own mandate and its own systems. But when you correlate the signals, trafficking routes, communication metadata, financial flows, and travel patterns, it becomes clear these activities are being conducted by the same criminal network. Another example, a case involving hybrid activity driven by state-backed actors. Online personas incite social unrest. Protests turn violent in major cities. A hospital is hit by ransomware. Again, these appear unrelated. The intelligence agency tracks the online activity, public order units deal with the unrest, and a subunit handles the hospital. Each operates within its own mandate and its own systems. But when you correlate the signals, cyber indicators, financial flows, travel patterns, and online behaviors, it becomes clear it is one coordinated campaign. The adversaries see the whole picture. For the agencies, it's a significant challenge. And whether the threat is criminal, financial, terror, or hybrid, the root problem is always the same. The threat is unified, the data is not. This is exactly where Cognyte Software Ltd. creates the most value. We help the good guys close the gap by giving them a clearer picture of the threats they need to predict and prevent. We help agencies eliminate the unknown by revealing the hidden connections adversaries rely on. Our AI-driven multi-domain, multi-source, cross-restrictions decision intelligence platform fuses data across silos, uncovering hidden insights that allow agencies to resolve identities and relationships, detect hybrid behavior and criminal patterns, and enable faster, higher confidence decisions. And while our platform can uncover insights across silos, its value begins inside each individual agency unit and mission. Every day, we power investigative, tactical, and analytical workflows for financial intelligence, border security, organized crime investigations, counter-terror, and more. This strong foundation inside each agency is ultimately what makes wider collaborations possible. I mentioned earlier that threats are unified and data is not. We operate in one of the most complex data environments in the world. Massive volumes, high velocity, fragmented systems, and dozens of structured and unstructured formats. We see data differently, enabling agencies to analyze massive, diverse datasets that no human or point solution could process alone. Our platform ingests, normalizes, enriches, and correlates all of it, creating a coherent, connected operational picture of actionable intelligence. This is why we continue to win. Decision intelligence is becoming the foundation of modern investigations. And our technology leadership in this domain continues to be recognized. This quarter, we again received strong Gartner recognition for predictive analytics and intelligence platforms for improved decision making. All I've just discussed is reflected in our financial results. We delivered another quarter of profitable growth with strong year-over-year gains across revenue and profitability. Our financial leverage remains strong. With 13% top-line growth, we nearly tripled non-GAAP operating income year over year. Given our performance and momentum, we are raising our full-year outlook for the fiscal year ending January 2026. We now expect revenue of approximately $400 million, which represents year-over-year growth of approximately 14%, and adjusted EBITDA of approximately $47 million, which represents overall growth of approximately 60%. As we look ahead, we see a future defined by opportunity. Demand for our capabilities is healthy and continues to grow. Our AI-driven technology gives us a clear edge, and our team is executing with precision and purpose. With the deep trust of our growing global customer base, we're excited about the future and well-positioned for the road ahead. We remain committed to delivering sustained value for our customers, our partners, our employees, and our shareholders. David, over to you.

Thank you, Elad, and hello, everyone. We continue to make strong progress and have exceeded our business expectations with the support of healthy demand and good visibility. For the third quarter, revenue was $100.7 million, up 13.2% year over year, driven by ongoing demand for our software solutions. Software revenue was $41.9 million, an increase of $11.9 million or 39.6% year over year. Software revenue is comprised of perpetual licenses, appliances, and some term-based subscription licenses. Software service revenue was $46.9 million, up $1.6 million from last year. Software services revenue comes mainly from support contracts and, to a lesser extent, cloud-based SaaS subscriptions. Our total software revenue for the quarter, which is the sum of software and software services revenue, was approximately $88.7 million, a year-over-year increase of 17.9% and represents 88.1% of total revenue. Professional service revenue in Q3 was $12 million, a decrease of $1.7 million over last year. We are on track to have professional service revenue be about 13% of total revenue on an annual basis. Recurring revenue reached $47.5 million, representing 47.1% of total revenue. It's worth noting that recurring revenue as reported in our GAAP financials is driven primarily by support contracts, and some term-based and SaaS subscription offerings, and enhances our visibility in both the near and long term. As Elad discussed, the majority of our revenue continues to come from the sales of perpetual licenses with recurring behavior. Non-GAAP gross margin for the quarter was 73.1%, expanding by 297 basis points year over year. A meaningful achievement that reflects the continuing revenue growth and efficiencies related to COGS. Throughout the year, gross profit has grown significantly faster than revenue, and this continued in the third quarter. Gross profit was $73.6 million, an increase of 18% year over year. The sustained improvement in our gross profit demonstrates the willingness of our loyal global customers to pay a premium for our differentiated technology. As we go, the meaningful operating leverage we have in our model is delivering steady material year-over-year improvements in profitability. Once again, non-GAAP operating income and adjusted EBITDA both grew significantly faster than revenue. In Q3, we generated $9 million of non-GAAP operating income, nearly triple the $3.4 million generated in Q3 last year. Adjusted EBITDA for the third quarter was $11.9 million, 81.4% higher than the $6.6 million generated last Q3. Put another way, we converted approximately $12 million in incremental revenue into approximately $5.3 million incremental adjusted EBITDA, reflecting the operational leverage we have in our business model. Q3 non-GAAP operating expenses were $64.6 million, aligned with our expectations. The global macroeconomic environment led to a weakening of the US dollar against the Israeli shekel and several other currencies, resulting in evaluation expenses of $1.9 million. Turning to tax, Q3 tax expenses were relatively higher due to increased pretax income, our global tax structure, and regional revenue mix. However, this does not affect our full-year tax outlook or annual guidance. We continue to expect our annual non-GAAP tax expenses to be about $11 million. Non-GAAP net income for the quarter was about $2 million, resulting in non-GAAP EPS of $0.03. GAAP net loss for Q3 was $3.4 million compared to a loss of $2.6 million in Q3 last year. The dialogue this quarter was primarily driven by increased tax expenses and FX impacts, as I discussed earlier. Our Q3 GAAP EPS loss was $0.07. Looking at our results for the first nine months of the year, our revenue was $293.8 million, up 14.7% year over year, and our non-GAAP gross profit grew even faster at 17.2% year over year. This performance highlights the operating leverage we have in our model, which continues to drive meaningful year-over-year improvements in profitability. Our GAAP operating income for the first three quarters of this year was $8.1 million versus an operating loss of $5.8 million during the same period last year. Non-GAAP operating income was $24.6 million, up nearly three times from the $9.7 million generated during the same period last fiscal year. Our adjusted EBITDA for the first nine months of this fiscal year was $33.2 million compared to $19.9 million in the same period last year, representing an increase of 67.2%. Non-GAAP EPS was $0.18 in the first nine months of this fiscal year compared to $0.04 in the same period last year. Turning to our balance sheet, our short and long-term contract liabilities, commonly referred to as deferred revenue, remain robust at about $117.9 million at the end of Q3. During Q3, we had strong cash flow from operations of $25 million and had free cash flow of $23.2 million for the first nine months of fiscal 2026. Net cash flow from operations was $20.4 million and free cash flow of $11.9 million. During Q3, we continued to execute our share repurchase program, which the Board approved in July 2025, repurchasing approximately 152,000 ordinary shares for a total of about $1.3 million. During the quarter, we further strengthened our cash position, which increased to $106.6 million with no debt, reflecting disciplined working capital management. Turning to capital allocation, we maintain sufficient working capital to run the business. Above this operating baseline, we regularly evaluate where we can deploy excess cash, including making targeted acquisitions that strengthen our strategic position and returning capital to shareholders. Now let me walk you through our execution against some of our key performance indicators. RPO, or remaining performance obligations, represent contracted revenue to be recognized in future periods. RPO is expected to continue to fluctuate, as it is influenced by factors such as health cycles, seasonality, deployment timelines, contract plans, and renewal timing. It is worth noting that the cancelable portion of subsequent deals is excluded from RPO. At the end of Q3, total RPO was $576.6 million versus $567.6 million at the same period last year. Total RPO is the sum of deferred revenue of $117.9 million and backlog of $458.7 million. Short-term RPO at the end of Q3 increased to $358.9 million, which we believe provides solid visibility into revenue over the next twelve months. This healthy RPO level validates the strength and resilience of our business. Q3 billings were $107.7 million, an increase of 2.9% versus the same period last year. We remain focused on driving strong results. Given the strong foundation we've built and the momentum of the business, we are raising our outlook for this fiscal year. We now expect revenue of $400 million, plus or minus 1%, which represents approximately 14% year-over-year growth at the midpoint of the range. We expect total software revenue to be approximately 87% of total revenue, aligned with our strategic goals. Annual non-GAAP gross margin to be 72.3%, reflecting an improvement of 130 basis points over the last fiscal year. Adjusted EBITDA of $47 million at the midpoint, representing about 60% year-over-year growth. This increased outlook for revenue, profitability, and our continuing execution is expected to generate non-GAAP diluted EPS of $0.24 at the midpoint of the revenue range. And we remain confident in our ability to generate $45 million of operating cash flow in FY 2026. We are very pleased with our consistent execution and the progress we are making towards achieving our targets for the fiscal year ending January 31, 2028. Revenue of about $500 million, gross margin of approximately 73%, adjusted EBITDA margin of greater than 20%. In closing, Q3 was another quarter of strong performance for Cognyte Software Ltd. We delivered meaningful revenue growth, expanded margins, and generated robust cash flow, all while continuing to invest in innovation. We believe we are delivering against all our growth pillars, increasing wallet share with existing high-value customers, adding new logos, and further expanding our market reach in the US. The combination of installed base expansion, strong contracted backlog, and execution of our growth strategy gives us confidence in our ability to generate sustained, profitable growth. We believe we are well-positioned to deliver on our commitment and create long-term value for shareholders. Thank you for your continued support. We will now open the call for questions.

Thank you. Our first question is from the line of Matthew Kalitri with Needham and Company. Your line is now open.

Great. Hey, guys. This is Matt Colicchio over at Needham. Thanks for taking our questions. When I look at some of the large deal announcements, year to date, you've announced customer wins totaling over $65 million in ACV. Can you help break down how much of this amount is currently RPO and revenue?

Yes. So, actually, what is in the RPO is the software license part. I'm checking whether you want to understand how we convert it to revenues. What exactly is the question?

I'm just trying to understand, like, when you announced these deals, how it works from signing to deployment and along that, like, how long usually elapses there and also, like, how does that flow through RPO and then start to be recognized in revenue? Just from a timing perspective.

Okay. So, usually, when we talk about large deals, the sales cycle takes a few quarters, between two, three to five, four quarters. And if it's a very significant deal, it takes a little bit longer. When it comes to the backlog conversion to revenue, it depends on the size of the deal. If it's a relatively small deal and the customer is ready, it could take a few months. If the deal is a larger deal and requires cost preparations and environment integrations, so it may take a few quarters. When a deal is landed, it's immediately on the RPO. If the scheduled timing to convert to revenue is within the next twelve months, it will land also in the CRPO. If we believe the portions of the deal are scheduled beyond twelve months, you'll see that in the RPO, but not in the CRPO. The relevant portion, of course. So that's usually how it works.

Got it. And maybe Okay. And that Oh, sorry.

Maybe to add on that, when you have a deal with the only the nonconstant bill element is included in the RPO.

Understood. Okay. Very, very helpful. Thank you. And then what portion of the license deals are being recognized upfront and how does that impact recognition in revenue versus RPO?

So we have multiple types of revenue recognition. In certain cases, we recognize over a percentage of time, meaning, like, or that we recognize the deal on a percentage of completion. Sorry. Or it could be upon delivery or upon SAT, which is acceptance criteria. It's really dependent on the contract with the customer. If you want to look, you can see that when we share the CRPO, it's based on the planning that when we believe the delivery will take place and they will be able to recognize revenue. So that is taken into consideration in our planning, and this is the reason that we are sharing the CRPO to give you an idea of what will happen in the next twelve months. You can see that we have a lot of wins, and everything is covered on the RPO. And we take that as a total number, and we'll be able to have very strong visibility, and that gives us the ability to plan efficiently. And that also allows us to see that our margin is even improving because we are able to deploy in a more efficient way, and that gives us also some benefits.

Okay. Awesome. Turning to US Federal, what are overall conversations like there? How did they change during the government shutdown we just went through, and have they picked up since it ended?

Yes. So maybe I'll give an overview of where we are in the US. So agencies in the US face similar problems that other agencies are facing and that we are serving worldwide. So we see that the demand drivers and the needs are very similar to other territories. And for that reason, we also believe that our technology is an excellent fit for the US needs. We discussed in previous calls that we started with certain local. We're able to acquire new customers. We got also follow-on orders and already have a lot of confidence from customers that there is a very good fit. In terms of the federal agencies, first of all, we started later, and then the shutdown came. Of course, the shutdown disrupted the engagements for a certain amount of time. Having said that, it doesn't change the fact that those agencies are facing challenges, new technology, and for that reason, I believe that they'll come back to the table. Some of the federal customers that we are engaging with already came to us after the shutdown relief and asked to resume discussions. I can also tell you in the US that, regardless of the shutdown, we continue to do a lot of efforts in order to expand our market access and brand awareness. We enhanced the sales and marketing activities. We participated in relevant industry conferences that I shared in previous calls. An example is Napier. We're expanding our partner's network. We signed with LexisNexis in Q3. So we have a lot of activities running federal agencies in the US. So if I have to summarize it, I really believe our opportunity is significant, and it's not a matter of if. It's a matter of when, and we'll continue to be very focused on this territory and continue to invest, and I believe the fruits will come.

Okay. Great to hear. And then, last one for me. I believe you'd said in the prepared remarks that you've delivered structured training to LexisNexis. Are they ready to start selling now, or where are you at in that training process?

Yes. So with LexisNexis, we signed last quarter. The partnership is focused on helping with access expansion to the state and local and federal areas. We conducted trainings to their sales force, and we also had joint meetings and events with the LexisNexis team. We are educating them. Some of their sales force are already ready to go to customers and discuss our offerings. In certain cases, we go together. So the progress is very good, and I believe it will progress very fast.

Awesome to hear. Thanks so much.

Thank you. Our next question comes from the line of Taz Kajolgi with Roth Capital. Your line is now open.

Hey, guys. Thanks for taking my question. I just want to follow-up on the US market. I know this is very early for you guys in terms of entering the US market. But just a little bit of color on how the US market differs from other parts of the world in terms of competitive landscape that you guys see in bake-offs? When you look at US deals in the US market, what does the competitive landscape look like? Who do you guys normally see in those scenarios versus other parts of the world?

Yeah. So first of all, the challenges are similar. In the US market, we've started with operational units within law enforcement agencies, first state and local, and also federal. And that's the market we are focusing on. And the competitive landscape is a little bit different, but with similar technologies. Actually, operational units are using similar solutions globally. But in the US, we do see LP Harris, for example, and Noctasik as companies that are focused in the US territory.

Got it. Very helpful. Then maybe for David. David, can you comment on the duration, the contract duration this quarter? If I look at the mix of RPO versus CRPO, it looks like the duration probably went down year over year slightly. Maybe just clarify if that was the case and what do you think about the duration contract duration trends going forward?

So if you think if you look at the overall RPO, it's very strong. Short term and long term, both of them give us the confidence that we will continue to grow over time. If you look at the CRPO, it grew year over year, I would say, in about 10% year over year growth. And given what we see from a demand perspective and how deals are flowing, we are very comfortable with this RPO.

Got it. Just a few more for me. So, strong numbers from you guys overall this quarter looks very good. But if you look at the professional services line, the PS line, I think it was a little bit lighter versus last quarter. Any comment on if deployments were pushed out or anything to help us understand why that services line seems a little bit lighter than what was last quarter?

So, actually, professional services, when we started the year, actually, we mentioned that professional services will be around 13% of total revenue. This is what we saw that...

Ladies and gentlemen, please stand by. Your conference will resume momentarily. Speakers, you may resume your conference. Thank you.

So, unfortunately, there was a problem with the line, so I will repeat my answer from the beginning because I don't really know where we stopped. So...

And you mentioned that you gave us a guide of 13% of full-year revenues for the services. Right? So that's where I guess we got cut off.

Okay. So I would just remind everyone, like, what I was going to say is the professional services. The professional services, it could be deployment services. It could be some development work, training, or artery selling. And we actually deliver it because that creates a faster adoption by the customers. And also allows us to bring to the table faster the, I would say, the cross-sell and the upsell. So overall, the situation within professional services between quarters is mainly related to revenue recognition criteria. And, actually, I'm very pleased with where we are. And we are aligned with our target to be in 13% of total revenue on the professional services. I think that you also asked about software and software services. So you can see that first overall software revenue, which is the combination of total, of software and software services grew by 18%. If you look at the way that we acquired customers, most of the customers are once we acquired them, they're staying with us for a long period. Usually, they acquired perpetual licenses with support contracts. This is the majority of them. And if you think about it, it's a recurring nature in behavior. So meaning that the customer continues to buy with you on a regular basis. So we do have certain cases that the customer does an upgrade of existing licenses, which was under support and it's moved to be a software. So from our perspective, the right metrics to look at the business is the total software, which combines the software and the software services. And when you look at that, you can see that it's also growing very, very well.

Got it. Very helpful. Last one for me, David. I know you gave us a guide for the full revenue for the year. But if you can give us some more details or some more color on how to think about that mix between software, software service, and PS. Because I know last if I look at Q4 of last year, I think we had a big jump in software revenue. I think Q3 to Q4, there's a big jump. Seasonally. In software revenues. I just want to make sure that we don't end up mismodeling the different line items for revenue. So maybe if you can, some more color or some more clarity on how to think about the mix of the revenue between software, software services, and PS.

Oh, so let me start with the general comment. You can see that the software revenue grew this quarter significantly, almost 40% versus the previous period. So we are very pleased with the way that the software revenue grew. As I mentioned, our view is that we need to look at the total software revenue, which should mean a combination of the software and the software services. And to give you some color, I believe that it will be 87% of the total revenues. If you look at our guidance, you can say that out of the 400, 87% will come from the software and the software services.

Got it. Very helpful. Thank you.

Thank you. As a reminder to ask a question at this time, please press 11 on your touch-tone telephone. Our next question comes from the line of Charlie Zhou with Evercore. Your line is now open.

Awesome. Thank you very much for taking our question. This is Charlie for Peter at Evercore. Just a quick one for me. This quarter, we obviously saw a very impressive margin outperformance both on gross margin and operating margin. And I know you guys have provided a gross margin target of 73% by FY '28, which you guys have already achieved this quarter. Could you please just help us to maybe break down the primary drivers of the margin outperformance and also, like, how should we think about the gross margin expansion trajectory from here? And, also, any updated color on the adjusted EBITDA margin as well. Thank you.

Thank you. So, actually, we are very pleased with our 73% gross margin this quarter. And as you can see, there are different dynamics that are taking place over time. So there is a fluctuation between the quarters. But if you look at the overall, you see that the trend is in the right direction, and we are getting to the 73 already in this quarter. And we guided for this year to be at 72.3%, which is almost 130 basis points higher than last year. What we do see within our mix is that overall, when you look at the software, which is software and software services, we are above 80% of total gross margin. If you look at the professional services, we're also improving the professional services. Actually, Q3 was about 20%. But, again, I don't think that it's stable. I would say that if you think about it on an annual basis, it should be in the mid-teens. What the dynamic behind it is, first, customers are willing to pay premium prices for our solution. We have a very strong solution based on our advanced analytics, which customers are willing to pay premium prices, and we talk about it a lot that we are not fighting or competing with pricing. We are investing a lot in R&D because we believe that once you acquire a customer and you provide the customer with a premium solution and addressing their evolving needs, they will continue to stay with you and be willing to pay the right level of pricing. So it's all about the value, and that drives incremental gross margin. And, also, there are some efficiencies that are taking place with our COGS, mainly related to our capability to improve cost structure if it's the fact that we are applying AI capability within the organization that also drives better profitability. So overall, it's driven by the value we provide to our customers. About adjusted EBITDA, we are guiding for this year to be $47 million. It's almost 60%, I think it talks about the leverage. When you think about us as a company, look at our financials over the last few years, we are on a regular basis delivering leverage in our model. We believe in profitable growth. We structure the business in a way that while we are growing, we drive more profitability, and I'm very pleased that we're able to drive it to the bottom line and to create value for shareholders. This is what we are trying to do. This is what we are delivering, and I believe that we'll continue to do so.

Thank you very much. Maybe just to follow-up on the adjusted EBITDA margin. Based on your guidance, you're basically projected to achieve around 12% adjusted EBITDA margin by fiscal 2026. And you guys have provided a greater than 20% target for fiscal 2028. Should we think about the 800 basis points expansion from here as more linear, like, 400 basis points in '27 and maybe 400 basis points in '28? Is that the correct way to think about it?

Actually, I think, you know, we shared the target for FY 2028 in April. And we are very pleased with where we are getting. We are progressing towards our targets. Obviously, it would be a gradual improvement over time. We are not in a position now to give the plan for the next year, but it would be over time a gradual improvement.

Awesome. Sounds good. Thank you very much.

Thank you. And I'm currently showing no further questions at this time. I'd like to turn the call back over to Dean Ridlon for closing remarks.

Thank you, Shannon, and thank you, everyone, for joining us on today's call. 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.

This concludes today's conference. Thank you for your participation. You may now disconnect.