Q3 2019 Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to the third quarter 2019, Rapidseven earnings Conference call.
At this time, all participants are no listen only mode. After the speaker presentation, there won't be a question answer session.
The question. During this session you want me to press Star one on your telephone if you're acquiring any further assistance. Please press star Zero I would now with the hand, the conference or what's your speaker today garage Mahajan with Rapidseven. Please go ahead Sir.
Distributable earnings press release, all the war and if it's down plus you're on the website at investors start dropping seven taught called along with the updated company presentation at financial metrics.
This call is being broadcast live via webcast and falling to call an audio replay will be available at investors are private seven dot com until November 12, 2019 as a reminder, our discussion today contains forward looking statements about events and circumstances that have not yet a code, including without limitation statements regarding our objective so future operations censorship.
This is performance. These forward looking statements are based on a current expectations and beliefs. It already situation currently available to us.
True outcomes that results may differ materially from expectations contained in these statements future number precedent uncertainties, including those contained in our most recent quarterly report on Form 10-Q , and subsequent reports I'd be pleased with the FCC the insulation for water on this conference call. It should be considered in light of such risk actual results or the timing of a certain events may differ.
Surely from there so it's what tonic predicted or implied by such forward looking statements and as reported results should not be considered as an indication of future performance.
At seven disorders in any obligation to update the information presented on this conference call except to the extent required by applicable law. Our commentary today will primarily be non-GAAP terms and reconciliations between GAAP and non-GAAP results and guidance can be found in today's earnings press release.
China in her prepared comments on response your questions. We may offer incremental metrics for wide greater insights into I dive into the dynamics of the bezos or a quarterly results. Please be advised that this additional detail maybe onetime in nature, and we may or may not provide an update and into future on these metrics what that I like to turn the call over to our CEO .
Cory tallest cory.
Thank you know Ross and good morning, everyone. Thank you all for joining us today on our third quarter 2019 earnings call.
I'm pleased to announce the rapid seven had a great third quarter.
Year over year are they are grew by 43% and again, we exceeded the high end ever guidance with revenue growth of 33% and a non-GAAP operating profit of half a million dollars.
The main highlights this quarter is that we once again accelerated our customer growth what all of our platform products contributing.
We will customers rose, 17% and ended Q3 with more than 8600 customers.
Average a opera customer increased by 22% year over year to $36000.
Karim revenue expanded to 88% into their core.
These results reflect a good demand about [laughter], great access control and excellent execution across the board.
The strong focus will talk innovation and a well diversified portfolio, we see a large opportunity in front of us and are well positioned for future growth.
As a result, we're raising our total revenue and a non-GAAP operating income guidance for the full year 2019, now let's review the third quarter results.
We delivered strong growth in the third quarter, where they are growth of 43% and revenue growth of 30%.
We will continue to make investments in our business and focus our teams on driving customer adoption, which has resulted an exceptional cost for growth.
In addition, our team has done a good job of maintaining strong retention rates, resulting in strong air our and topline growth.
We believe customer growth today is key to our long term sustainable growth because every customer we have today generate significant expansion opportunities over time.
Our results reflect consistent strong performance across our insight platform.
We're gaining market share, but it really match with its customers appreciate our platform roadmap and tightly knit integration with the broader security ecosystem.
In addition, our results were driven by the significant strength of inside IDR as our second suspicion resonates with resource constrained organizations of all sizes.
Most organization to try to scale the management of their security practices with limited resources. The task of finding potential threats is difficult, but when combined with the efforts are prioritizing these tasks and respond to them efficiently in partnership with our key security practitioners are overwhelmed.
We believe our unrelenting focus on our customers productivity and our strong product roadmaps truly differentiates rapid separate from the competition.
As our customers IP infrastructure moves away from an on premise to a hybrid environment, we're hoping to identify prioritize remediate and automate vulnerabilities and attacks across their evolving digital environment.
This focus for stricter yet again name inside B M. A leader in its Q4 2019 vulnerability risk management Forrester wave.
Enforces words Rapidseven is focused on helping clients understand the vulnerability risk their best in space and rapid seven is a strong choice for any company looking 40, Bam tool that can streamline the decision making processes.
Our results and momentum are driven by strong technical innovation that folks is not just on delivering insights.
Well leveraging those insights to drive collaboration and operational productivity.
And then cbm customers see this in our remediation management workflows with goals escalated automation.
And insight IDR customers see this was our integrated investigations and automated containment.
And the cloud we have a significant focus on not just analyzing cloud environments, but also trying to scale and productivity a pile security management.
Our platform strategy allows us to collect customer insights more holistically what customers are really demanding these insights we turned into operational excellence and productivity.
Once we achieve both grew integrations and our platform automation capabilities.
An example of our focus on innovation and customer activity is our recent win with one of the largest discount store operators in Europe .
This customer understood there potential risk exposure from the very beginning limited security resources and has needed a highly efficient be of solution and it's a detection and response capability. This customer decided to build a new security program around both inside and insight IDR, leveraging our alia Bhatt seamless park integrate.
Sure.
Finally, we continue to drop leveraging our business.
In the third quarter, we generated another quarter of non-GAAP operating profit of approximately half a million dollars.
Hey, confident about our path to normal growth and profitability and intend to continue investing our resources to at long term value to our customers.
In conclusion, 2019 is shaping up to be great year for Rapidseven, our continuous focus on innovation has allowed us to roll topline in excess of 3% while significantly improving profitability with that let me turn the call over to our CFO Jeff Koloski.
Yes.
Thanks, Corey and good morning, everyone.
We're very pleased with our strong performance in the third quarter with results that again exceeded our guidance on all metrics.
Total revenue for third quarter was 83.2 million above the high end of our guidance and an increase of 33% year over year.
The strong revenue growth was driven by better than expected product revenue growth.
Total air our grew to 310 billion at the end of the third quarter of 43% increase year over year as Corey mentioned air our growth was primarily driven by strong customer growth our customer count increased by 17% year over year, and we ended Q3 with over 8600 costumers global.
Yes.
The quality of our customer base continues to improve as higher growth in our product customers more than offset the decline in our service only customers.
Our customer economics remain strong with average share our per customer increasing to $36000 up 22% year over year.
Strong growth in there are over the past year drove 44% growth and recurring revenue and recurring revenue now constitutes 88% of total revenue compared to 82% a year ago.
Our focus on recurring revenue drove a 54% increase in our product revenue year over year. This was partially offset by decline in maintenance and support revenue as nexpose customers migrate to the insight platform, resulting in reclassification of maintenance revenue to product revenue.
Therefore, similar to prior quarters, we believe it's more useful to look at product and maintenance and support revenue together, which collectively grew 40% year over year.
In line with our expectations and consistent with our commentary on previous earnings calls a renewal rate declined during the quarter by 2%.
I also want you mentioned that we adjusted our renewal rate calculation Q1, 28 cheap to exclude certain upselling and cross sells with a customer was less than a year old and therefore not directly attributable to the renewal customers. While this slightly lowers our historical renewal rate between one and 3% it's important to note at the year over year.
Trends are largely at the same previous calculation.
Underlying retention rates remain strong.
Our professional services business declined by 16% year over year and is now 80% of our total revenue for Q4 2019, we expect professional services revenue to continue to decline on a year over year basis.
Looking at the business geographically revenue from North America grew by 31% year over year and comprised 84% of total revenue.
The rest of the world revenue grew by 45% year over year and comprised 16% of total revenue in the third quarter.
Turning to margins total non-GAAP gross margin was 74% similar to Q3 last year and our combined product and maintenance non-GAAP gross margin was flat year over year at 80%.
During the third quarter sales and marketing expense improved 44% of revenue will compare to Q3 2018 expense of 46%.
R&D expenses were 90% of revenue in Q3, 2019 down compared to 23% in Q3 2018, but similar to that of Q2 2019.
DNA expenses in Q3, 2019 were stable at 10% of revenue when compared to Q3 last year.
For Q3, 2019, we generated non-GAAP operating profit of approximately half a million dollars well ahead of our guidance.
non-GAAP operating margin was 1% compared to a margin of negative 5% in Q3 2018.
Adjusted EBITDA for the third quarter was 3.4 billion and diluted non-GAAP net income per share was one cents also well ahead of our guidance.
We ended Q3 with cash cash equivalents and investments of $258 million compared to 264 billion as of Q2 2090.
The decrease was mainly driven by the ongoing investments in our global headquarters.
Contract going for Q3, 2019 was 15 months down from 17, once a year ago, but increased by a month from Q2 2090.
During the quarter operating cash flow was 1.8 million as compared to negative 4.1 billion in the prior year.
As we outlined throughout 2019, we have continued to reinvest or excess profits to drive sustainable growth and profitability. The timing of these investments has resulted in a revised cash flow from operations estimate of approximately negative $5 million for 2090.
Now moving on to the guidance.
For Q4, 2019, we anticipate total revenue to be in a range of 87.4 million to 89 million.
This guidance reflects the strength of product revenue growth. Despite the decline in professional services revenue.
We anticipate non-GAAP operating loss in Q4 2019 to be in the range of 1.6 million 2.6 million.
We anticipate non-GAAP net loss per share for Q4 to be in the range of two cents to zero cents, which is based on anticipated 49.6 million weighted average shares outstanding.
For the full year 2019, we're raising our guidance and now anticipate total revenue to be in the range of 322.7 million to 324.3 million, which is 33% growth over 2018 at the midpoint.
Given our significant outperformance an operating profit year to date, we're now projecting our full year non-GAAP operating income to be in the range of zero to 1 million.
We anticipate non-GAAP net income per share to being a range of three to five cents, which is based on an estimated 52.1 million diluted weighted average shares outstanding.
The weighted average shares outstanding for the fourth quarter of 2019 represent basic shares outstanding given our projected non-GAAP net loss the weighted average shares outstanding for full year 2019 represents a diluted shares outstanding given our projected non-GAAP net income.
non-GAAP income for full year 2019, largely represents interest income our projected cash and investments on a GAAP basis, we expect to full year net loss for 2019.
In conclusion, Rapidseven had a strong third quarter and we look forward to delivering a strong fourth quarter with that we appreciate your time and support and we'll now open the call for any questions operator.
Thank you as a reminder.
Jeff.
Star one on your telephone.
Question Crest Apache please standby will be compiled the county roster.
And our first question comes from.
Barclays Capital your line is that.
Hi, guys. Thanks for taking my questions here, Paul just the background can you hear me okay.
Yes, just fine.
Okay excellent excellent well hey, maybe for first for you Corey.
Just assuming out a little bit can you just talked about the overall health of spending on vulnerability management tools, especially with some of the macro concerns out there what are customers, telling you about their willingness to invest here and in areas like seven just broadly.
Yes, so we feel very positive about the overall spend environment or end dynamics.
And that's primarily because when we look at the broad customer base, we still see plenty of greenfield opportunities, we see lots of customers upgrading their programs and we see the priority really about how the operationalize. The overall security program. So people want not just data and insights and analytics prioritizations, but they also want to figure out how translate that data into action.
And collaboration across their security and Ikea Dev ops teams and so we see incredibly strong demand for that.
Got it makes sense, Jeff maybe just for my follow up for you.
Really solid year, thus far on a ARR last year's strength is obviously this year's tough comparable and I think you'll see the tough comparable on air are in Q4.
So I guess I guess the question is are there any guardrails that you want to give us just in terms of how you think about that tough comp in error here in Q4 in particular.
Yes so.
Remember last year, we grew 53% in Q4, it's our largest quarter of a year and remember that the two year transition started in Q2 17. So Q4 18 to Q4 17.
Our favorable comp with respect to the model shift because we were still we still had a lot of perpetual in Q4 17, so the our our year over year change was greater in 18.
Having said that we it is an annual metric and we don't change quarter over quarter, we don't want to guide to a specific air or not air our number but we're comfortable with where we are on saying over 30%, but I would keep in mind that some color on on really the difference between Q4. This year in Q4 of a year.
Adult.
That's very helpful. Thanks, guys.
Thank you.
Yes.
<unk> head of RBC capital markets.
Hey, guys, great. Thanks for taking my questions.
Yes first of all congrats on the the acceleration new customer growth. That's a that that was pretty impressive and I guess corey digging into that a little bit when we think about the variables for customer ads.
Can you help us with how quickly you think about growing sales capacity relative to the customer growth.
Yes, it's a very good question. So at the top model, we've talked about is that.
Clearly, our sales and marketing overtime with you and actually continue to get more and more productive and so we're always looking about how do we actually add productive capacity and really the way to think about that is because we're a platform. We have existing businesses that are scale like viom, which saw very healthy growth dynamics, especially around the world and system, which is both ace.
Well business, but also a massive growth that part of it and the productivity, especially our send business is continuing to escalate as we actually scale and then we're actually bringing on new technologies and hopefully that allow us actually continue to scale the business over the next several years and so what we're really managing too is a model that actually thats how do we.
The increase our productivity in our contribution and our profitability from our sales and marketing agent each and every year and what that is up translating to is that we're adding new customers for new segments, and new offerings and for existing businesses were actually adding more and more customers and a our four sales reps. That's how you actually get to the fellows.
We should there.
Got it and then you know I guess, even with a strong customer as they are our per customer saw nice uptick.
When you think about you know average mods per customer I mean, I assume you're getting a lot of up sell but but it even seems like maybe you know newer customers are making larger initial purchases with you can can you talk a little bit about that dynamic.
Yes. So early we are seeing very good growth dynamics and customers that are actually if not buying multiple products, but they are actually starting to play in 40, Multiproduct strapped warm strategy and thats. The qualitative feedback that were actually given to.
Our sales teams overall I would say be the one thing that we're actually managing to is that we have a strong focus I'll just adding customers now because we're at this stage, where we have very high confidence that we'll be able to cross sell into more upscale overtime. So our core focus today with our sales teams of incentivizing the focus on adding new customers may.
Let me now future sales, though you know, we really don't care, whether the future sales happen and the you know at the time of the initial deal within six months or within 18 months or the two years. We're just looking to add a customer today and that gives us a multiple of the initial deal over the next several years and Thats the way, we sort of playing for an operational as our model.
Got it thanks, a lot guys.
Thank you very much.
Thank you.
Hello.
No.
Great. Thanks for taking my question Cory.
Switching to 2020 and beyond you've made a lot of investments products like access and connect how should we think about your comfort with the pipeline for those solutions and know how do you think about there tends to be contributors.
In the future 2020, and looking and even beyond that.
Yes, so the way that we actually set up our dynamic is you can think about as a rolling pipeline is clearly we have much there are our strongest both established offering which has a very healthy overall market dynamics. So.
We have incredible.
We've seen brand recognition, we have a great market opportunity and we're also not just building pipeline, but we're executing quite well that so you see the growth of that but the opportunity or that is massive overtime and then what we've actually put stakes in the ground rounded application and store, which weve starts and wrap up this year. It will be rapid even more next year, but we look at those are the primary contributors.
Ended 2020 to 2024 timeframe that allows us to continue maintained growth over a longer term time horizon. If you take a step back to when we actually did our original sort of like analyst day in 17.
We actually had the offerings and the Big question was when we ended what position where we ended the how would that affect our growth and our opportunity in 20 to 24, well the great position that we're in today is that we're clearly going strong I believe in our team believes.
Strong growth opportunities at a strong demand environment over the next three to four years and we have excellent expense controls and so as we actually look forward. It's really we are in this really unique position with a strong demand environment in great expense control, where we're investing at the pace of growth and the opportunity that we actually see and right.
Now, we see significant opportunity and we're going to be investing in that opportunity and will that be growing its kelly and the position that we put ourselves in is that what we both expanding margin and growing but we're going to be investing to actually maximize the growth opportunity over that time, even as we are actually expanded margin and you can think about our margin expansion would be.
Highly tied to basically the rate of overall topline growth, which has been tied to basically how much traction we're getting from our core offerings over time.
That's that's really helpful. Thanks for that and then Jeff maybe just one for you recurring revenue here as a percentage of total it's starting to level out.
Obviously.
Lastly, how should we think about that going forward I think an assay talking about sort of certain.
The poster business as we push into future periods, but I'll be sort of look at the overall business mix. How do you think about the leveling out of recurring revenue as a percentage of total mix. Thanks a lot.
Yes so.
Sure professional services will probably be flattish next year to where it is now so that's that's kind of leveled out I believe it was less than 10% of the of of total revenues right now.
We were 88% this quarter next quarter, we'll probably be about the same and should tick up.
Too you know over 90% next year sometime next year.
And it's really the real big change is the professional services revenue. There's the perpetual is declining each quarter USCIS rolling out based on the amortization.
That's helpful. Thank you.
Thank you.
Yes.
Rob.
No.
Yes, good morning, guys.
I guess building on that question, Jeff how long should we see this perpetual tail last year I know its.
A couple of years left maybe just a little more color because it is rolling off and not probably not rolling off as fast as I might have thought.
Yes so.
We have to spread that over five years, so we recast.
Everything as of January 1st 2018, so it will still roll off up most of the roll off will.
The material amount of the roll off would be through 2020. After 2020, it will be essentially it's insignificant right now it's anywhere from about $2.5 million to $3 million a quarter of it's rolling off so that should tail off.
Pretty much after 2020.
Okay, Great and then shifting gears a little bit Korean maybe you can touch on your competitive position.
It's become.
Quite the noisy space.
Across the space, whether its cloud Sim on Prem Sam It seems like there's some offerings from quite a few vendors out there. So what you see relative to competition why you when and where your differentiated thanks.
Yes, it's a great question I would say its noisy I think one thing to keep in mind as that ramps up as always thrive in noise the competitive.
Market and it's really because our value proposition is relatively straightforward is we allow people to incredibly sophisticated things with extraordinary ease of use which allows us to both expand and open up markets, but also serve the largest companies who actually productivity and resource constrained that's our product that's our primary depreciate or costs.
All of our product and is this something thats incredibly hard to do doing something that complex sophisticated and making it easy and accessible is incredibly hard to do but that is our core capability and it allows us to actually differentiate that said and Tim We you know you're seeing really.
A win win I think in terms of what I think has got to be long term players of course, you US look we're continuing with the grain more and more ground.
Every day, and we're invited into more and more opportunity to everyday and we have an amazing important demand.
For our Sim technology that we're building capacity to really expand into partners that actually coming to us and asking for that opportunity.
You see Microsoft entered the phase, which will have a great offering but again they are really as far as my awareness the only other cloud based.
In the market today, and it's a massive market opportunity and I think most of this if you just look at the core dynamics will help them will shift to cloud based offerings.
So the set up that you actually see today is rapidseven is incredibly well positioned.
In the market and our value proposition both it resonates allows us to expand the market is incredibly difficult for our competitors anyway.
Thank you.
Thank you.
Yes.
Comes from Michael Turits.
No.
Hey, guys good morning.
First I want to come back towards sockets.
On vulnerability management can you give us a central.
Traded for it.
Overall, if you think you're gaining share and.
Yes.
<unk>.
Yes.
Yes.
So the value proposition I had the value proposition in first and foremost.
All of us into space are making investments in analytics.
Prioritization visualization those a table stakes where referenced that was really just presented itself is we have an intense focus on workflow and automation.
And for most of our customers, they're really concerned about we're from from customers. All time I have more vulnerabilities that I know what to do with and before I can you expand our coverage I got to figure out how to actually worked through the vulnerabilities that I have today and this is where the work will focus the I T collaboration focus and the automation and orchestration.
Focus really comes into play Andros preference for Rapidseven, because our proposition isn't just that you can actually.
Analyze and prioritize the thing is that we will actually help to drive the velocity of how you operationalize and remediate.
These vulnerability and that just stands out to our customers more than anything so thats the differentiation based on the overall market.
The data clearly suggest that we're taking share in the overall market, we are going well above the overall market.
We have high confidence in our position as far as the market growth rates, that's more about detailed understanding about how others are doing.
And you know, we're not situated to actually look at the.
Competitor by competitor, but if you look at our growth rates.
For not just referenced in general, but mobility management and you compare that to the overall market. The data that we Havent Charlie said that we're continuing to takes extensive share and the broader market and again thats driven by both the greenfield opportunity because also driven because people upgrading their systems with a focus on how they actually operationalize, which work flow.
The integration to collaborations and the automation or core contributors to that ability.
Thanks.
Jeff I want to figure to bridge for us the growth rates between billings.
Total on current which for 25 percentish versus revenue.
As we get through this transition we start to see billings converging.
Metrics.
Yeah.
So Michael the I know the calculation you're doing on short term billings your.
Basically taking the revenue plus the change in short term deferred the problem.
In that calculation is it doesn't capture the reclass of long term to short term deferred so that 20, 425% is actually higher.
You know if you go back to.
Q3 of a year ago.
Up from Q2 to Q3 and 18, you had more long term reclassifying to short term remember we had more perpetual back then so it's really not the same apples to apples comparison, so with respect to you're right that they should converge so with respect to how to look at it going forward so on and so our ERP.
Guidance is really on an annual basis year over year. So if you look at if you back out the services and you take our guidance of the growth rate and there are that should translate to the growth and billings.
Okay. Thanks.
Yes.
One comes from.
Okay, great. Thank you very much and good morning, guys. I guess first question. So the net retention of 111%.
I did want to ask Jeff do you continue to expect net retention to stabilize around the 110 level or is there any change just in light of though modest.
Adjustment in methodology around Upselling and cross sells.
Yes in the previous call. We said it would end around 110% by the end of the year. So on an apples to apples basis, we saw or a change in the calculation of between one and 3% so that that rate could that 110 could be affected by that 1% to 3%.
That's what we're seeing right now.
Okay that makes sense. Thanks, Jeff and then just them on the Q2 call. You you did in answer to your question I think provide a high level overview of revenue and air our growth in 2020 I realize of course, there's no specific guidance for next year at this point I'm just wondering if youve any update.
To your comments from last quarter.
Yes, I think I was in one that.
Made a passing comment about it really the focus of the comment then the view hasn't changed now is that if you think back to where we have said before one of the who are aware of is the question about like how we ended the year what does that mean for the future well, we're exiting the year as a growth company and we see ourselves as a growth company the future tumor primarily primarily by the frankly, we have a man.
The demand environment and so the way the I think about in the way that our team takes about things going forward is you have a great demand environment, we have great expense controls and so as we go into next year and as we go to all analysts say you know we're in the good position to have a model that says as we grow faster and as we actually continued to actually expanded market take market share.
We will actually be investing more if the growth is lower you can expect a much faster.
Growth in the overall profit that we're going to be generating but we're in a great position because we have great access control and get the demand environment say invest for growth as long as a growing and if the growth is sort of not as high as we believe it can be than we actually invest in growing our profit margins.
We are uniquely positioned to really have this balance and right now we've been investing into investment it actually generated substantial growth, while we're going margin and so our commitment as we're going to continue to actually both grow focused on growth and expand margin.
It is really what's the rate of one versus the other and keeping that in balances our core focus area, but again, we'll walk through everyone. In the model next year, but what I wanted to deal with me extraordinarily clear is that.
We are exiting not just a much higher level, we're exiting at a higher growth rates than what we originally.
Well sure several years ago, and so we're really focused on this balance position.
Investing in growth.
While still actually growing profitability at the commensurate rate.
That's helpful. Thanks Corey.
Yeah.
<unk>.
Hi, good morning.
Can we maybe start with the international growth opportunity and are you seeing any macro challenges are regionally you know what are sort of the opportunities to invest and I, just don't understand a little bit better the dynamics there.
Oh, yes definitely impacted my observation is that we're not seeing challenges outside of geopolitical challenges that we're a cloud based company and so we've had to really focus in on areas in regions, where we've made cloud infrastructure investments as everyone wants the data in their own.
Regions, so thats been sort of like one overall change.
But that said, we haven't very healthy growth continue internationally and overall and thats continuing the scale of the overall business scales.
Got it and then just as a follow up.
How did your U.S. federal government business through this quarter and you know what opportunities are you seeing there any any concerns over potential shutdown just wanted to.
I get a sense there. Thank you.
Yes, I think it did well, let's just keep in mind that federal government fill small part of our business and is not one that we're heavily dependent on it to one that will continue to invest and expand over time, but if you think about our two public sector practices, we have a massive investment it slid what's is performing well.
Oil and then we have a federal practice, which is early stages that we have an incredible team there and they're doing quite well and over the multi year horizon, we expect that too.
Grow into healthy contribute more over time, but its you know it performed in line.
I want to be clear, it's sort of like it to a relatively small business for us.
Yeah.
Our next question.
Cowen and company your line is open.
Great. Thanks for taking my question maybe building on our prior question.
Cool clearly tracking well ahead of your expectations of 350 million of there are by the end of 2020, but could you highlight areas or products, where you've seen the most upside relative to your initial expectations.
Yes, it's interesting so the if you just look at a dollar basis overall, it's clear that basically both VM and IDR are the largest dollar contributions to the upside.
And from the strong demand environment. So that's the primary contributions and then we're seeing good adoption and expansion in the application security and the store areas, but if you think about like ourselves focus we have so much demand in both the b and the IDR side, that's consumed a lot of ourselves resources.
So some of our incubation and somebody other areas are rolling out this year, but we'll be accelerating the expansion next year.
Okay great.
I think you're clearly building more automation into the core offerings, but beyond that IDR, how do you find the right Alex.
The automation functionality you embedded into those products for selling as a separate product.
On that.
Yes, it's a great question I mean, the way the simple way that we actually think about it is the we're building.
Integrations any integration into our core platform product into insight IDR inside.
You can connect any other security tool IP tool into those tool for workloads.
We see the insight connected value proposition.
Is allowing the other tools to actually connect with one another and the drought overall workflow processes. You know said another way is that.
We look at the overall per customer mom, it and we see hundreds of potential workflows.
And we're seeing and making it easier for our customer fees benefit and say, we given away 10% to 15% of those workloads, yes, absolutely, but that allows customers to experience. It but we still think we have a massive upselling cross sell opportunity because its customers experience those workloads and what they can do with the power of automation. It allows them to automate all the other core.
Process is a thought the operation.
Excellent. Thank you.
Thank you.
Yes.
Comes from.
Thanks for taking my question.
<unk>.
No.
Next year.
Based on conversations.
<unk>.
<unk>.
Hello.
Hi.
Opposition.
<unk>.
Yes. It is great question. So on the first part of the question is we think is going on ramps similar to the insight IDR from the time that we actually make investment I would say that need to keep in mind. This year is that because we were focused on getting into profitability. We had to make some hard choices about where we put our sales and marketing investments and we clearly invested.
More heavily into the insight IDR area versus some of our emerging that's just next year. So from the place where we're investing we expect to right now it's similar cycle to what we saw from the IDR investors, that's primarily because the feedback that we've gotten so far even for the limited investment has been quite positive on the overall.
All demand environment, you see a pretty strong use case right now around Soc automation, but we see that even expanded from there to broader security automation and then into aspects of IP automation to your second question. I think you nailed. It is that part of the reason that were so bullish is that this is one of the few areas insecurity weakest.
And ROI and it's more critical than ever because almost every organization regardless of size is still feels like the resource constrained. So even very sophisticated organizations feel the need to figure out how they accelerate their productivity and many organizations are looking at automation as a key way to actually drive productivity up in their organizations.
Very helpful.
A follow up on the discussion on.
Her cost.
To what extent.
Hi.
Yes.
Getting some traction enterprise.
Hi.
Customers, just coming in and buying more products.
I think right now it's fairly evenly split if you zoom out and look at it over like a 12 month basis, we're still going our traction in our presence in the enterprise and large enterprise accounts and we're still growing the midmarket customer base was it will be split because if you think about it we incentivized all of our sales teams in which we.
I have mid sized sellers and large enterprise sellers to really focus on new customer adds which allows us to sustain growth will be long term. So it makes sense that you would actually see the new customer contributions coming in from both of those areas. Now I mean, you can also do the math the other way and say that.
Customers Midmarket customers, there is more of them at smaller Asap and so from a dollar basis.
Adding you may have fewer large enterprise customers is a fewer of them, but what I would say is those customers. So after they have significant upsell and cross sell an air our assess opportunities into the future and so it's worthwhile to actually folks on the expense in both areas.
Thank you very much.
Yeah, and again, ladies and gentlemen.
At this time.
Hello.
And our next question comes from Chris.
No.
Hey, guys great job in the quarter.
Could you guys just give us some.
Insight into.
What percentage of total irrs coming from.
The him at this point.
Well I don't think we so we don't break it down on a quarterly basis, what I'd say is that we give snapshots overtime and you know one way to think about it is that.
Roughly a little bit over half of our business is coming from PM today, but the expansion of the other areas is quite high and when you think about our focus is that PM is still the going business worse, which is positive. It's just at our other businesses that are scaling and growing at a faster rate and I think this is something you will see periodic snapshots for either at or.
Analyst day or at one of our annual halt, but we just don't break it down on a quarterly basis in detail.
Just on that is that if you look at our 43% growth rate.
And if the amis over half the business.
Clearly it had a healthy growth rate.
In the quarter, but of course, so we don't break it down specifically by product each quarter, but at a high level.
It's still healthy growth.
Got it.
And I think historically you guys you talk about IDR its percentage of net new air are can you give us an update on that this quarter.
Yes, it's still over 30%.
It's still growing nicely and it's about triple digit again on a cumulative basis, but in the quarter. The net new was still over 30%.
Got it and should we assume the other 70% is it is split evenly split among the other three.
Absolutely.
Yes, I thought what else is that if you think about the growth engines today, because he is hard to translate between the new and then the totally on how that translates revenue, but the key takeaways that being the largest healthy. It's also of the scale businesses, it's doing very well and it's going fast on the overall market, but it's going.
In the slowest of our scope is our portfolio. That's it will be able broad based where the benefits of raw based portfolio, you're going to grow we had a massive investment in IDR any extraordinarily good return in IDR. This year that we think sustains across multiple years and then this year, we had a healthy but our application in our solar inverter.
Estimates are still in the early investment phases, and we're going to be accelerating those investments next year as we have more investment capacity, which is the primary focus right. This year.
Great got it thanks.
Thank you.
Yeah, and ladies and gentlemen, this stuff.
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