Varonis Systems (VRNS) 29 Jul 242024 Q2 Earnings call transcript

Greetings, and welcome to the Varonis Systems, Inc.'s Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Tim Perz, Investor Relations. Thank you, sir.

You may begin.

operator. you, Thank Good afternoon. today results. us review second joining Varonis' to financial for quarter you Thank With Yaki Chief today Officer; call me the on are Varonis. Melamed, Financial of and Chief Faitelson, Officer Officer and Operating Guy Executive Chief After preliminary call question-and-answer session. open to a we remarks, will the

considered call, projections be Due of quarter results our statements this future that forth make we and related securities of statements. factors, differ number in may those third ending a XXXX. may operating to to During under December full business federal our statements results would such forward-looking including XX, from year laws, for actual materially set

These our factors should as We factors upon as encourage These or more Securities filings. only to of publicly fully section earnings the views undertaking SEC captioned subsequent Commission. release to are any Forward-Looking made filed read and of representing and today disclaims as in Statements, Exchange or statements our are that Varonis described reports release and the with here. date. statements any risk our press we and the all any revisions updates issued important expressly application under forth set to today these investors relied be in our reflect any not forward-looking views other

measures and release found Relations section. measures also press Investor available is which financial this conference second most financial GAAP XXXX www.varonis.com call. presentation discussed earnings at non-GAAP will Additionally, on the can the in be comparable A reconciliation in directly for investor quarter be our

our Investor section. website a webcast of the Lastly, call Relations today's available that please on is note in

over Faitelson. Officer, that, like Yaki? call to Chief our Executive turn Yaki With I'd to the

our today our everyone. and impacting joining for quarter our to tailwinds and good results, Tim, you Thank transition progress, SaaS Thanks, business. discuss the second afternoon, us

of the customers. aren't to date, perimeters. protect like sensitive any data, important, it These Varonis' access and To to data. visualize technologies would their are and they their but helps attack locate automatically you to respond we it. organizations most purpose is their a cyber remind security how who threats steal detect To solutions are you of on the the I deploy but help and purpose have Varonis protect to why and very data-first exists it, enough has down, and our must almost endpoints protect solution data-first companies approach. data, data-first a to approach data, then to lock First,

credit card card actors keep To they but give know for will a still sometimes stolen. harder be numbers, example, it simple card making your get companies credit numbers credit bad to

So they detect also watch and to card normal transactions looks usage to and the they know transaction. them fraudulent like credit stop compare what

and MDDR companies offering, while a platform time This little protect released their to it like with Varonis automated effort. to data With abnormal, our and spot very monitor recently same solution sophisticated make to managing also that SaaS customers uses for it, and allows safely enable collaborate data the approach we risks. threats data, AI transactions the harder access the to insider ransomware, and for people anything stop and or wrong protecting have abuse.

to provide like been always federal towards at our moment government we to has to Process SaaS represents an take which In platform of late I the in Varonis. in everyone process. a us thank the important achieved Innovation June, federal the involved enabling core designation, to customers. our benefit would And step of the

customers. SaaS growing activity MDDR from These turn like quarter recently would and I offerings of are reflect which offering. introduced convergence customer our and to platform addition driving strong momentum Now results, our existing second to new the healthy

will approximately million year-to-date, review XX% we our ARR million $XX generated ARR. results versus SaaS to million, of ARR $XXX.X free represents last our shortly. Guy detail updated year. flow guidance more and in grew QX generated now XX% $XX.X of and cash total

our customers can personal and of the transition means the little of to protected to strong to operationalize model but by significantly is maintain infrastructure achieve is has automated to progressing SaaS SaaS because with a that delivery ensure that environment upgrade. elevated benefits realize. The data quarter [indiscernible] quickly team can risen our which because very of easier execution and Customers This a many that stable of of scrutiny. is SaaS lower outcomes, investments, with quicker challenging and levels effort. challenge is they in bill still deploy

lens time. cycle, Additionally, there and sales are X over initial margin They [ ] shorter are larger benefits key benefits realized. that we

a I would turn in we drive our momentum will like believe to that to now couple tailwinds of business.

already which our The the visibility is this of service built key believe and the existing we offering, conversion first SaaS available SaaS in protecting driver MDDR. Detection SaaS. call introduced critical managed scratching our and Data MDDR is of and only opportunity. is the wins customers business is we Managed that monitoring only becoming into to And our we platform. with new Response for surface that data QX and customer just because for a and and is This first are automation was

With customer stop We continue problem. the If threat, has simply been see a spread it fast the neutralized. see CISOs resources after can that and MDDR, we notify the monitor we to ended and have investigate we to don't enough. alerts this

pioneered models. user We machine use the build behavior learning analysis highly threat of accurate perform and to

early for MDDR. that leverages excited the about telemetry automation to future under plus proof others. efficiently what holds threats our Our are catch is unique are and to if detect points us line, by we leaves attack significant data missed that seeing team this Bottom the

benefits is are AI we access is mind second already data a conversations top organizations of theme productivity nearly Gen many see The customers. prospects but that and AI generative also all understood, worsened companies for this The tailwind, brings AI, widely technology key Gen and risk in faced. the with

social were turned wasn't numbers, and off XXX(k) names, in account tool to sensitive those extremely The make traders piloting and to answers what productive data bank AI on employees face major started questions immediately use to earn acting They that research. a started because is Gen in. They trading going was do up it the They tool bank trade with wanted more they positions use opened their because and and it and to that the The mistakenly team on tool The numbers. a traders like company. finding more showing was started invest the everybody example, for our for maliciously. for trying searching security security problem users Take, to stocks ended it [indiscernible] the money. were flow. were just sanctions,

Varonis adoption believe catalyst built as data And Gen enterprises underlying serve AI very within We security the risks. will a solve. problem their that that that is to was this exposes

is result, data Varonis, top these companies adopt control we people rightsizing that, access they necessary only priority. a addressing risks challenging. automatically expect Gen right We will risks AI, function. a to for mitigate job their Without As by can be access as forced the those extremely make the ensuring

with we in feedback Companies this are customers into opportunity. are to strengthen risks to pilots from build enormous tailwinds, healthy thoughtfully and are we The considering secular conviction benefit these the continue before ability respect seeing a we to pipeline our have from broad from hearing expanding rollouts.

QX. would customer about organization became Midwest to this data a like how discuss that, who A located, a concerned it, hospital had large access briefly where was attack. Varonis of wins sensitive a respond will With I This quarter. from to to system customer was couple and its key they ransomware

prevent their attack already detected risk progress, assessment, the The on and organization. it account outside the an able that we in CEO to was attacks was including ensure coming from During account secured. company

would attack malicious a link accessing e-mail, that occurred an files and compromise second before any came from an able and this accessed. detect confirm stop geolocation. a to our business that email data when team The the account began clicked was from that unusual employee on sensitive was was Luckily, phishing compromise started they

Because breach were being require SaaS that environment publicly we they disclosures. and transaction data of their to any purchased and could conclusive done, MDDR data for them a protection, any Varonis able have to from with record hybrid breach avoid material damage prevent file the

continue is They example spent to SaaS. converting that reduce customer software. We real the firm Varonis estate from demand upgrading Varonis from our spend decrease their see time this a maintaining wanted commercial One customers to XXXX. their since multinational to existing been healthy of and a has and self-hosted platforms infrastructure

Moving to reduce Varonis SaaS and server ongoing allowed them to immediately footprint cut their requirements. maintenance their

also In they process. these to purchased the overexposure Microsoft automatically savings, which Azure to hybrid their procurement They Marketplace, XXX. SaaS the Varonis package remediate addition simplified in will operational

our business adoption driving In momentum. our summary, are platforms of long-term offering the scratching And and the MDDR SaaS positive we are opportunity. just of surface

position strong to excited Gen regulation. XXXX increasing half AI the are to of on compliance second a enter MDDR tailwind in the capitalize from data-centric of We

that, to me Guy. over let With turn

us Good Thanks, afternoon, Yaki. today. joining everyone. you Thank for

cash new logos year driven our and customer existing us gives of XX% our performance SaaS ARR million our our allows company in quarter flow conversions. strong the momentum, to $XXX to second with our coupled full increased of and driven ARR raise free approximately trajectory, tailwinds MDDR increase total QX, end At and platform SaaS or mentioned, by offering. contribution from Our SaaS the ARR expectations. ARR, to and by us This guidance also full confidence increased year Yaki

removes platform. alerts strategic With count for hardware quarter, simplifies review X to The And MDDR for the simpler maintenance That wanting people not obviously and SaaS the our key or customers. and eliminates we of do the hardware less biggest each and MDDR. the becomes drivers need of our for were it upgrades. business head story all more this quarter meaningfully and to manage them. passing SaaS since having prospects requires

with subscription our proposition that to of when shortening of compared seeing deals. platform, together We're cycles value simplicity on-prem deal our the story, is the

and remains in secular conversation a will that a view reinforces AI become customer every are tailwind. our having Generative theme we this nearly

metrics past, a be Our are contribution the in we our discussed of to we as with it. Consistent the not healthy our pipeline from prior guidance. AI to Gen comments, material reported result. we seeing have adoption still material in our And as impact included derived not continues

enter we increase consume continues of Pricing customers in see sizes as second SaaS SaaS of in our to price XX%. of platform. forward our the of the excess our to platform. that cases, increase half conversion upon be converting customers to base line more list look XX% more we the we of platform And As to with to installed in on-prem deal of year, subscription some the

of that dollar and expect each not XXXX. XXXX terms linear with ramp-up further in the We this in grow and quarter, be momentum should will acceleration phase in

metrics These to ARR up flow, over cash our million second to free grew the line same of with transition. million period $XX.X cash last and $XXX.X quarter, year. generated flow growth which generated improving XX% year-over-year $XX the we generation demonstrate million, In was year-to-date, from commitment top balancing the during

our to quarter detail. in now second results Turning more

indicators a free As margin. transitions and the flow ARR, contribution are cash ARR leading of reminder, our

have a view this headwinds said light. times, we our progress faster As we But traditional the metrics. income we many more transition, statement to will experience the the through we in positive

As the ago, quarter of compared business to months second increasingly feel results. confident our trajectory in we following X the

and While SaaS are drive business and macro challenging, remains market the positive to this well environment momentum. resonating it in also stable, is MDDR

revenues year-over-year. total XX% were $XXX.X QX up million,

upfront recognized quarter, revenue increased subscription are as approximately a headwind the SaaS our year, same rapidly of had our the versus quarter having as During sales year-over-year a of result to in products. we compared mix, the our last to on-prem rate booking which recognition growth X%

In million. license again as maintenance Term million renewal revenues million. and subscription over revenues were rate revenues were And second our quarter, were $XX.X $XX.X were the $XX.X XX%. SaaS services

change strong, the year-over-year be due increased associated is mix forward. to margin head the $XXX.X to continued hosting the discussing going I'll support results count to of headwind statement, higher quarter a revenue XXXX. Moving margin with Gross quarter second costs. of was income XX.X%, to down sales, representing second and XX.X% a increased for be of SaaS gross and Gross compared the the the non-GAAP transition, profit million, in

in Operating quarter totaled second million. expenses $XXX.X the

$X.X was million $X.X an of margin income This in operating operating same or income of an year. last quarter operating compares the period to second margin of million, result, a As X.X%. X.X% operating or

subscription the same X% During we the increased as result mix, products. approximately of versus ratably sales had margin to a recognition having which operating our of a SaaS in as compared the to on-prem year, our booking second upfront recognized last quarter are headwind our quarter,

growing Second XX.X%, to of year. from the ARR quarter significant improvement up while during even was transitioning SaaS. and to drive strong The ARR contribution leverage the reflects early margin margins our last transition ability stages incremental X.X%

per $X.X approximately income deposits $X.XX of securities. of million quarter income compared Net in $X.X diluted on million and for financial driven or $X.X is share on million net million had to diluted income investments second we shares was XXXX. the net respectively. of the $X.XX million, based income QX cash This XXXX and primarily quarter, for QX share, for our the of or diluted income of XXX XXX.X second During quarter XXXX marketable per outstanding by interest and XXXX,

As cash, cash had million securities. $XXX.X in equivalents, of deposits June XX, we marketable XXXX, and short-term

For the period last XXXX, X $XX.X million cash last million, CapEx months was from same year. of ended compared to And $X.X million generated we million year. compared June operations, XX, $X.X generated to in $XX.X the

come will note year-end. our XXXX our updated more guidance our that XX% now platform to now Turning SaaS in total important is by It ARR to assumes of guidance from company detail.

revenue our renewals are largest quarterly our we have expect guidance a from QX we quarter, versus in there our the that and QX in federal's guidance And vertical. third quarter sell guidance, to embedded relates on-prem QX it more more still perspective. seasonal subscription in is conversions because As to

the assumes $X income million $X.XX the XXXX, million, representing $XXX XXX.X XX%; total we of to $X million; This share net diluted $XXX quarter of growth non-GAAP million shares to $X.XX. outstanding. million income in of to For operating and of revenues range third to XX% of non-GAAP per diluted expect

million, $XXX $XX $XXX For of Non-GAAP XX% This to representing Total $X.XX. share expect operating flow $X.XX ARR million. $XXX outstanding. the year million, the XXXX, of million. X% to million to now of Non-GAAP shares XX%. XXX.X growth diluted revenues $XX net $XX to XX%. of million of in income income per full representing $XXX million to Free we diluted million range cash $XX of to of to growth million assumes

with look as raise for and our second In and summary, We our to value forward transition to gives phase ARR our the us through our cash SaaS and shareholders. our move in business, continued second also year increase performance, the expectations. our we full coupled meaningful SaaS quarter momentum flow to and tailwinds of our many customers, driving confidence ARR unlocking free our guidance, company

to take questions. we happy With that, be will Operator?

Saket Instructions] Kalia Our from [Operator first question with Barclays. comes

done Okay. Great. Nicely this quarter.

you. Thank

you. Thank

in-line to in And So of talk it as us here. talked past. I'll an some that of you on that are about how think, uplift little you're sort those Yaki, can about, on-prem done your of keep talked the economics it's looking you just anecdotally could you through mean, maybe I you it -- a just Guy, that converting to better. maybe the in having But part about sounds customers like I conversions. talk just X success SaaS? Maybe maybe as the bit discussion,

very well the offering. SaaS The are working because conversions of

completely about outcomes. talking You're automated

of If SaaS are benefits. on you top you breach probably, we have is operations the just not data on have us, us. and most loss, a a taking will lot of the data a This and regular

and the very us of the are SaaS. to ongoing works the immediate for and [indiscernible] well, moving customers value easy while tremendously to XX% [indiscernible] value. extremely it's customers The and benefiting demonstrate Literally,

proposition is for move So this fairly platform. a them SaaS easy to to

recognizing rates And at from XX%, the of discount assume when like-for-like XX% features pricing with look on so perspective, the a price uplift. are when uplift firms, But of basis, pricing functionality. there's lift line really the we and kind data, that so we same a a you health in

And increase more that seeing they're in is that have really excess what's packaging we desire we're of for to actually the what was to And SaaS, uplift. kind the our of customers of interesting that. deal is doing that We're consuming seeing built sizes very platform. when see

really that's us. well for working So

to QX, positive maintenance coming what was customer, saw When the of ARR you A us. And the that or in from really in of helped for really which SaaS, us look at conversions a get perpetual from XX% we came million. an increase lot is really approximately total conversion. them sign actually $XXX

of we're the with far. and the progress, focus ARR, look metrics, of done the we of happy leading kind the really pace on at kind progress when we've the the SaaS transition, so measured So is is

Hamza Our comes question from Fodderwala. next

on I not contribution Congrats question you to interest more about Varonis at think when when wanted of to this do Yaki, about SaaS could AI from will You're to enterprise deployments, to the seeing generative already continued I get talked prudent. Gen which these deployments wanted these And think mainstream expecting you on just talking of momentum. AI in what that as a you some ask start be with benefit serve. I pipeline. more you you right? sense a timing think to year, is your the

So out maybe wondering opportunity the timing . I flesh for if was you us. this could of

the question. for Thanks

Before permissions Copilot is tools, this the program the time exploring of we and customers that seeing these and are [indiscernible] [indiscernible] the immediately opportunity, excessive of [indiscernible].

the [indiscernible] need to things an platform you hands wrong it just badly. a to So get that is goes over starting to use lot you get. the lot people it's and like to And starting can of you are harm don't do mine you attack organizations [indiscernible]. of [indiscernible] the a and that available And [indiscernible] hours, even And by and if in that before this go that, data. all data

of starting the that material And be pipeline. also a just think slowly, will it's [indiscernible] if data it user. definitely organizations to impact it's every of And But use to see a not don't the behavior, on eventually starting a we're way But material major business you're end-user. that start see a breach. I will -- are in that problem we lot going have solve just it. to to to predict. you will it's like protection eventually inevitable and believe know, I in something hands I be the [indiscernible] hard

I think organization. are use a it it's productivity is normal losing to proposition people tool you as the without the that do. because behavior, to if But will you classify gains this inevitable data, understanding say this going your for that do of that of permissions, is to the can ability fixing

in that will believe the surely the and something we be of or but hands benefit the over believe time, So that that we we way it, slowly it will this hands in is in will from be believe other, we [indiscernible]. every one

to you strong. a really that's were Hamza, when what just add Copilot said, results of And being add to And quarter, and of the look contributor numbers they the a Yaki from to perspective without yet. at material kind

look kind So assumptions when guidance the before to at we we support assumptions we bake in of any in data see our there, the and don't guidance trend. the enough optimistic

So in yet to baked Copilot. related we haven't contribution any

to talked update We're seeing that you the that similar healthy time what any pipeline done happy we'll when on right. is about. And have in be past, to Yaki we changes the

guidance, current business. So it's we the part the bottom serve it not think as line, but a of to tailwind should

from question JPMorgan. Our with next comes Essex Brian .

margin the in well. in of for particularly Congrats I out, your guess the to to profitability might transition that here should better in slight how question, with it, from And level cash profitability me as flow, Guy. expansion potential along acceleration terms both expect? and process. of ARR the early sustainability Sustainability on so about think acceleration Nice and on cash and see flow that or we of leads maybe we me

the focused line generation. it very philosophy kind growth, of we're bottom coming increasing in the top terms that growing meaningful and generating sure on making our that been top sure investments When line, making cash of to the but some more we've and always at is of you look line

well. we've done very I think that

that As a the of do you transition. at to mentioned, beginning it's not easy

that free things can of the managed flow quarter, us But and very going at well. of a look of quarter, drive kind there growth help contributed, the I think kind think top and of the strength forward. that couple really when you were we I line cash

proposition is not better also healthy activity. enough to people value That's and logo X the on fact wanting shorter not And that new them customers. We're the and much seeing solution. and we're being by sales definitely wanting biggest seeing eliminating have that -- buy driven pushbacks hardware. cycles SaaS the they the don't to to to second the one One, support SaaS

and look meaningful grow really ahead. to and really you that in those with happy X. the kind the generate in free the the of sure that momentum with quarter, we And So want line drove in that we're the years the when outperformance make more cash overall, top quarter flow at factors progress

Securities. Our next question comes from Joel Fishbein Truist with

the great for on you. Congrats Yaki, execution.

You be parameters dynamics. the Varonis that the And the deal competitive the mentioned also, deployed system that would of primers around landscape maybe would you helpful during quarter. or I could Guy, as that deal. competitive if And understand the around love to hospital Any share well. size really

Yes.

the we pipeline. So overall, more don't see competition in

case essentially use hundreds big and different we few modern of For what EDR usually have is modern I security this others, understand, staff, firewall years, see and important [indiscernible]. different think and that saw to deal regarding breaches they sales, last But very companies. and the I in world-class

an identity, a data-first have serve is no need order But perimeter And to problem. in this solution anymore. you once you there

the the in a can you people going make to at data to thing do world-class you, breach security your You you lot get data, thing have we a really save and this are is protect last and sure SaaS that order or don't that's -- without benefit. we the solution, it first to Without invest getting looking [indiscernible] need the loss.

with thing coverage, us, is more and more and all just use and to automation into to common This ways enterprises. have the more deals, cases we get a more

So sales well. working the whole is value very the motion just proposition and

MDDR. the itself, And the of bought about deal in full they that was is package, what the very the terms interesting including deal

we that other can to against make any we obviously, in many them protecting take sure with with them, do breaches what And customers. place. So do we they help wanted that can

bought X,XXX several hundred So They is in users. dollars just size. over this whole had package. deal about thousand the They

ASP platform were there. able what very perspective that So in and we the to a consume they healthy from get a deal

with question from Matt RBC. Hedberg next comes Our

focus earlier Office Gen to questions AI I were on Copilot, on but some wanted and XXX. There about

in 'XX. I think had you believe of was I Analyst it an Day, March

about penetrated XXX X% maybe base. talked You in Office the

of that to or you think maybe equated cloud said the SaaS ARR. million $XXX I of time

I'm seems just such update you how opportunity. about give a like curious, could It us huge that's that's an progressing?

think Just the that if you an within sort how penetration of opportunity. about wonder there's update on

the laid absolutely kind coming with seen very of increase more right, that them about when more as together to from you're we platform Office are it conversation at XXX. which in out what's of of that's how helps a interesting is ARR, contributing this is customers appealing now XXX X%. MDDR, penetration, kind customer. you and of whole the So the that's with total the we've consuming steady see was ARR when the actually in Office kind total But look terms And the of a percentage for making the the of extremely

opportunity, So where far we're close point in I wouldn't of even It's to say surface. that gets of a to kind improved getting slightly. the so But the terms it from we've been percentages. obviously the to mid-single-digit scratching

how forward. the away can advantage far that of that. we're So we essence just take And of the kind of shows opportunity from going

Our next with Fatima Citi. comes from question Boolani

influencing numerical around velocity, deal velocity, transaction driving wanted I the you around made customer contours you if and ask MDDR can comments the sizes. of some Guy, better about to you help solution new

add little color quantitative around Just wondering you that. if bit can more a

whereas innings MDDR, very monetization for year early do. transition, a didn't formalized this and have model in you And time is year, the were your reason SaaS of I really you asked you this last

the could influenced positively compare So and wondering contract metrics. I'm and much you MDDR how broader momentum the SaaS if has

Absolutely.

think I question. great that's a

at year. Just this beginning to actually remind everyone, of MDDR we the introduced

sales the customers quarters. has way the force simplicity So embraced it's X seeing been really phenomenal. adopt it we're full been our They've even them. things both for not doing and us the But of

been that's received. well very So

that with pay then terms get of a to and or we're additional MDDR lot package price licenses buy price. we in the remember, we the way you how seeing you higher much go if a the fact say, MDDR you ASP a as is price, of talked up. it's kind of increasing I'd would terms about you in you the But buy reduced if then exactly quantifying that the either In of, stand-alone MDDR plus, kind want a ASP,

less seen I that actually that of early, than in so adopted, of buying don't from is But platform I you the towards is want are adoption, in. selling I platform MDDR. to X we've ASP. which it's in terms perspective helping the behavioral of it the tell call extended quarters customer we're it's what because us going the it And quantify can a terms with one is fastest the been package, actually because

been fastest it's So one of the adopting platform.

that's And It's every that going only but of part take should go that, to this kind we truly be believe offering the customer. through. time, that not of every obviously journey we believe customer should

customers bypass the catastrophe, the like saving that of user in weekly customers is effectively, from from amount can on -- people a way have the massive an they how identity, with perimeter, working. damage is many basis this like a they do surprised also are offering analytics We behavior that and attacks

the of that stoplight data data, layer, on data. also If DNS of And behavior, stop we most sure that they the they arguably the to directory, from their times, have know what the [indiscernible] and doing make effective [indiscernible] get even taking see We get forensics active they them. are happens. the to very we immediately the don't abnormal exactly

to just it brings and to value amazing effective how much So it customers. how it's is see

with Shaul TD comes next Our Eyal from Cowen. question

or since CrowdStrike about been guidance. Guy, outperformance days the on XX IT improved Yaki and the global outage. it's Congrats

heightened Yaki, over course period? interest very, maybe of curious, for interest Just past your the views. increased And seen you any this very short have --

can wrong, here. what CrowdStrike in updates to have understand a a completely company, are care need It's a unrelated is taking that see softer that general, organizations are of really. -- platform. and Not this happened data can go it. But what great they they -- we security CrowdStrike sometimes

any I the manage bad not think it enough. breach. but [indiscernible] up security way, be and have And important, that in general, in XX.X% like is can end but you with they something understand to will it actors okay, you whole then us, don't if very that it's bypass

this to a So the this market, they that the in is we protect understand the need what is way valuable data-first see solution, just and organizations information.

Our Andrew next with question comes from Fargo. Wells Nowinski

Okay.

steep a the suggests talked what growth. QX, headwind. prompted quarter conversions I'm may for assumptions which what have more deceleration in obviously QX a expecting in prompted you about year and this the that wondering you in guidance fairly creates saw revenue this that. the But So now Because revenue in change results in QX

-- what what or the change. what prompted maybe changed wondering Just

don't QX. change way different we're QX in I of think in any definitely looking the anything not putting there's in light kind and

think is the of a to I note about couple conversion. there things

First QX quarter. the of is largest all,

we're them into taking desire as any an and to So SaaS. renewal attempt advantage of convert

And of QX, I a had And to you at revenue a beat. there if couple with do revenue had that it. beat it mechanics was think large look behind that

of the it's in was all, with business. this of leading to the I momentum really indicator First good think kind that note quarter ARR is important and strong

clear. I that's very think

clear I of really is indicate that on been And company. our I revenue we've health the would that as indicator During on not well. think the very transition, the think

see cause metrics. had we've that factors what at the and for there from that to statement conversions actually conversion the quarter, took income X look didn't our said revenue on-prem headwind past, SaaS, more the this place we were we headwinds. greater when subscriptions traditional in And strong positive we And really the

recognized we convert platform. is to maintenance Since the is that of a to perpetual perpetual revenue the was SaaS just because there customers convert one first like did, those saw customers tailwind when tax ratably, SaaS maintenance our choose uplift. The

plan didn't when Investor our Day customers we during for out convert remember, we those year, So as last to laid the transition offering. plan on SaaS initially you the

is this for So business. way natural the in a happen seeing we're that fact a positive huge the

headwind the an is have revenue in ahead kind the serve saw And factor choosing QX increase our impact of second impacted will as in future that which [indiscernible] revenue of but actual a that to an we to quarter, this doesn't customers quarters. convert on

customer QX. of health be revenue summarize, it because that impact the the quarter for look early of reason and measure and at business, conversions perpetual strong. was on-prem it's momentum of of revenue So really And when customer to you should maintenance the business, not QX the the is although in the conversion the the kind stronger this really will

Our next with from Roger comes question Boyd UBS.

Congrats on results. good the

beginning those Snowflake. database the data concerns the about with you for pipeline of the security uptake momentum You the out year, Can stemming that including product? number talk there you're or seeing of benefited particularly with at the the incident SKU, Snowflake have launched of a just the SKUs And of products?

in starting much very and to model, the one a concerns every is lot have, of property starting and we lot that complicated them. very see think is I we products. [indiscernible] a to permission of a collaboration, [indiscernible] from data see is definitely lot we see of that We're also that have, momentum these for the And that intellectual needed big see there. we of the technology Snowflake

protect data, that data. is I we exactly the said to that other you you to thing is what need if The protect see want about perimeter,

once once have need You their said, that it, the take have [indiscernible] seriously. Because data-first I have organizations to very think you right a don't And solution. you the as in identity product, an I are data. just starting you if security

next comes Joe Jefferies. Our with Gallo from question

logo on that Just business whether can total new quarter? business. the Copilot expect the this customers addition How that And have we or wanted to should Any to double-click of was sales metrics, that now MDDR accelerate in the comp side quantitative it's you and you it growth to changes? share?

was in new pushbacks And deals. don't used X said we biggest for new or new by the One before, cycles up I SaaS definitely ACV eliminates, opening sales hardware. get. majority of markets that seeing really people So shorter logos. have to the the SaaS the is us they it because is driven the QX want don't as on We're the

talk So good at strong. to was when the value very and about growing continue our kind forward. opportunity customers customer the of of talked we SaaS I conversation, that for the QX, a proposition you at MDDR when new way. tell indicators simplistic you to QX think that I the the new would look in in and results obviously a have business I the going business, we easier talk kind can the hope But kind sales and of and you it simplifying lot teams about combined, look new of making

comes Our next Blair. question William from Jason with Ader

obviously the a how about beyond about SaaS a growing surprised second rising was you mix mix, kind little are there specific at half talk of are impact? negative which margin? the it SaaS. I the I year and of just just just around the gross guess idiosyncrasies Can the margin. into for strong margin And wanted in given to gross next year quarter has expectations ask any for the gross your of what

were strong. right. of the kind you're were really Yes, We happy They gross XXX% with margins. very

it were the I think that at year, of on you'll based do we look at percentage contribution ARR we that is which COGS, see when really last the had same margin kind and you XX%. that

happy So with we that. were extremely

want If make you to convert look customers that our sure we ahead, the to SaaS. is one thing

convert to transition them, top support a we have headwind really that, more -- on from revenue of we'll some the get we investments quicker the support So perspective. the make in transition. the And to

the So can you of we picture, kind slightly. especially where with that I somewhat with initial bigger this in look need when gross should to see investments happening at to are, we you But happy gross we're say we the to that transition. margins declining support the make really margins

the years see to expect We further in even coming the leverage ahead.

was? to gross QX, QX So Guy, expect QX below margin clear, just where be and to the be for you

the talk see you last guide margin, contribution look year, margins really on when this kind conceptually we didn't basis. you about much quarterly of gross a overall, that, ARR don't quarter I'll the So But on gross of change. on the fact a versus at margins

the investments we're the might of overall, product. the are from bit a the really because healthy. on But really SaaS in You big making. that And margins gross a the we're see with picture, seeing of kind margins of we're change what happy

in And of that see on leverage departments. there's the that, different top you

get X you supporting when on stop There's road the leverage R&D leverage and down the You the sales the marketing. in types of codes.

making So on and last bottom success the showing committed the support investments those the really in at And improvement. margin to transition the the the we doesn't fact ARR look contribution you operating saw overall support And a really margin, we're very versus kind of line. customer year. that impact team nice when we're increase team

Sandler. with Next question Owens comes Rob Piper from

compressing traditional standpoint. that maybe you're could I could your what from little was on around hoping cycles guess, a cycles sales you And quantify seeing sales And maybe secondarily, if are. I versus elaborate a bit the you renewal SaaS front. where

into definitely can dig I So this.

sales the that the SaaS versus are shorter really subscription. what they're we're in think I seeing cycles on on-prem the

it subscription call really even cycle much X on-prem that it subscription our that because cycles XX%, the us together think I to that the it of it's the the simplicity. to enough out on-prem platform, the deal point. story, is XX% or expect sales the and said comes about we're be to today. causing How fact with day versus the point we shouldn't it when XX% reduction them of for significant deals. And the came value be you compare a SaaS we to seeing a shorter, talk focus shortening really down Whether is from proposition simplicity that shorter of on

think gives we benefit the that fact that lot it's the of it we talked transitioned that critical a lot and and I really momentum, us a a benefits generates. that on to about SaaS So

renewal with time rates also we we've SaaS said increase over a In that offering. And very we're healthy rates, renewal to rates. terms seeing them. of happy have with We're renewal very expect

Tilton next with Josh Our from question Wolfe Research. comes

congrats that is on change that your in understand durable positive. understand how great quarter back, on And just, ARR, the time. I'm all, ARR, this I is going what of this And I'm trying some quarter. guess exactly beats best of look just drove is to a think I of to total if quite forward? to one changed First trying what probably that rate I

but how know start the up to is you conversion durable just of of your that going Did yet, maintenance model this more Gen in change and it way maybe than you've is just help mentioned us is you I Or exactly do not that MDDR today the quarter? So contributing function rates? AI what to just seen a conversions on you think just did rate prior showing numbers? SaaS drove forward. this much uplift higher you what is outperformance understand delivered just this

is thank results quarter. strong First really quarter kind without We're And the Copilot a contributor you. of of the really being as of the material with you happy all, yet. the mentioned,

was were them helped factors drove logo of at look kind much on the of you I X was and other shorter this underlying think SaaS, that that. Those better one of when of elements new sales the cycles one activity. kind that the drive quarter, the

to kind making fact that it I of our think is SaaS consume. MDDR, things together much our the with ties easier to offering, for customers

the business, cycles So saw on that are. at conversion QX of business. the I on Obviously, But new drove the the focused look is you the execution. wouldn't kind where what sales really What SaaS. in overall shorter when business was we with that we health that say drove the happy of very logo we're we're and continuing in the activity

Kessinger with Davidson. comes question Our from D.A. Rudy next

SaaS some it cycles about on what sales If guess combine material said you've about healthier deals, should your faster talked thinking that we that I I'm would to deals way should Copilot, pipeline. being imply I Copilot, guess, it? business you've Is probably we of start on quarters right new some contributor now. and, we becoming out from to those these that obviously, the curious, see a SaaS several about material benefit to be from with

out deal those are given how them these typical of how seeing your or -- Copilots? you faster than some companies with Or slower just Copilot, pace rolling progress the deals are around of

we about do much of be data from to one enough confidence to sales So that talk the it shorter on we gives that expectation thing only comment day we feel call And is us on transition. would heard the X it try gone SaaS you've kind out. us XX cycles the quarter first it. support out calling But that data we and transition the of of have that months by announcing to confident announced kind in have is since this because

But or Copilot perspective, transparency call from I data. out a XXXX. kind in really changes of you to how we've -- can clear see can you know I that, kind providing that be It the promise promise What in we've data it that if that. and been contribute, I color contribute year don't don't think this we that Copilot is data we very when you we'll tried materializes. supports I at to you later starting know. once look provide we that, of see

we believe of is point, Copilot to it, And the believe, security doubt, in if will the to the product inevitable. be the a best at users, The way knowledge hands think that this in going market. have the we we this to for are understand almost be -- about tools without security need

in So protect heads believe LLMs, that if will there be will to evolution it. a the you of this tool need Varonis based in order real we is solution users, on and AI like

Our next with question comes Shrenik Robert Baird. W. Kothari from

the increase by you've was customers continues to to maintenance sizes the seen moving this of firm excess and be real job highlighted sight, field -- the able shorter as a Yaki, the the Great estate In to and quarter. highlighted, platform but strong. footprint so course, upon more result pricing uplift SaaS. some you customers what the conversion, cases, in reduce of deal that immediately of of consuming then

the sensitive and Just that's might that kind transition I'm hearing. you been on-prem all of to more bit we But since more long of tail great. price still base, a a be bit just curious, which averse a have [indiscernible] have

on a sales with a platform quick existing uplift But have just you cohort can Guy. customers the for demonstrate this plan bit have You price upon. that for working this justifies the elaborate And on value I on-prem? incentives proposition you SaaS of touched follow-up how to you of these

Yes.

to our move majority with I outcome. to SaaS think compelling of very the of it's customers, that automated because vast the just

any -- So these very attention it's that well. you works without just it are We and hard avoid But need a We great customers can you effort, details, this different, demonstrate. execution. of they understand make want that transitions the to completely X sure a to almost to you breach that make something is and lot need product, and to go use sure to that need work.

and But a it's this and But exactly is of we we that how what the to see effectively. transition. you are But do know every can how and results. day know just do to tell you diligently do need lot doing can you it I work, to it, we

we have the It floor no like closing at to further appears this time. over now to Tim back questions turn for comments. would I Perz

Varonis. We the look forward you to all interest this for with in speaking Thanks at conferences quarter.

This concludes today's teleconference.

time. your You disconnect at you Thank for may this your lines participation.