Q3 2020 Earnings Call
At this time all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance please press star than zero.
No I hand, the conference over to your Speaker today, Mike Melnick director of Investor Relations. Thank you. Please go ahead Sir.
Good morning, Thanks for dialing in today for call to discuss our fiscal third quarter 2020 earnings results before we begin I'd like to remind everyone that statements made during this call, including the question and answer session. At the ended the call may include forward looking statements, including statements regarding financial projections and future perform.
Yes.
All the statements that relate to our beliefs plans expectations or intentions regarding the future or pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and are based on our current expectations actual results may differ materially due to risks and uncertainties such as competitive factors difficult.
These and delays inherent with development manufacturing marketing and sale of software products and related services and general economic conditions for discussion of these and other risks and uncertainties affecting our business. Please see the risk factors contained in our annual report on Form 10-K , and our most recent quarterly report on Form 10-Q in there.
Other FCC filings and then the cautionary statements contained in our press release and on our website. The company undertakes no responsibility to update the information in this conference call under any circumstance.
In addition, the development of timing of any product release as well as features or functionality remain at our sole discretion a press release related to today's announcement was issued over the wire services. Early this morning and has been furnished to the FCC as an 8-K filing. The press release is also available on our Investor Relations website.
On this conference call, we will refer to non-GAAP financial measures reconciliation between the non gap and GAAP measures can be found on our website. This conference call is being recorded and a replay is available for the webcast. An archive of today's webcast will be available on our website following the call.
With me on the call. This morning, our Sanjay Mirchandani, President and Chief Executive Officer of Campbell, and Brian Carolyn Chief Financial Officer of Cobble, Sanjay bridal each share opening remarks, and commissary before we open the call for queuing now I'll turn the call over to Sunday.
Good morning, and thanks for joining us today I'm just a few days away from my first full year, a CEO and couldn't be prouder of the entire cone ball team and all we've accomplished over the last 12 months.
And the company put a return to growth and reaffirmed our place as a leader in the industry.
I want to thank all our employees around the world for their ongoing dedication to which did this exciting journey, which in some ways is just beginning.
I'm also pleased to report that we again delivered results above expectations, all while successfully launching our new SAS offering metallic integrating had big I'll first major acquisition and refreshing, our overall data management portfolio, including Commvault to activate complete and hyper scale.
Our ability of delivered these results is due to be innovation execution and simplification priorities. We established at the start of the fiscal year.
We achieved many milestones, but there is more for us to do.
We continue our journey as a new calm bald I'm confident about the trajectory and I'll return to growth in fiscal 2021.
Brian will provide more context.
On our better than expected results and our outlook, but first let's discuss our strategic priorities and the work underway.
I'll start with innovation the cornerstone of our company for more than two decades, we had been relentless in our pursuit of innovation excellence. This quarter was no exception.
As I've said from day, one our innovation is focused on helping customers that journey to the club.
Today, I'll customers manage more than 800 petrified of workloads in the cloud using combo products and that's based on approximately 60% of our customers reporting.
We're also committed to giving customers ease of use value and choice and how they want to consume our technology beat on premise or in the cloud metallic our software as a service solution exemplifies this customer focused approach the rave reviews from customers analysts and partners Commvault go generated new.
Customers and many initial trials.
Look forward to sharing more with you and the quarters ahead.
Our innovation Doesnt stop there since closing the hectic acquisition on October 1st we have been diligently integrating the technology talent and product.
With combo, let's go to market muscle and growing specialized salesforce, we have added customers expanded our pipeline and put several large proof of concepts in place.
It's early days, but I'm pleased with the progress I'm, even more excited about the future because the data related problems that customers and countering the cloud require a whole new approach.
We believe combo with headache is the only company with division experienced and products to bring data and storage management together for a unique and differentiated solutions, which solution to customers Carlin and evolving needs more to come on that.
And we continue to innovate product set up that our customers have depended on for years during the quarter, we reintroduced an easier to buy and comes due version of combo activate a feature rich product to help customers address that E discovery and sensitive data governance needs.
Tom Bogo, Scott Hunter director of global infrastructure services, but Astrazeneca talked about how he successfully uses combo activate profile surfaces optimization and data governance, including GDP.
Phantom continues to build for this product.
We also introduced innovations to combo complete including.
Cloud to cloud data backup in migration.
Automated disaster recovery validation intelligent elastic storage planning and powerful workload data protection.
These new capabilities simplify recovery readiness and enable customers to take on todays toughest data challenges.
And finally momentum continues to build for a combo hyperscale solutions, which are consistently contributing to our revenues delivering more than 10% year over year growth in the third quarter.
And six of our top 10 customers are now running calm volt hyperscale proof that this technology is enterprise grade and scales and even the largest environments.
As a technology company innovation is always critical but innovation alone will not deliver the results. We also need to execute flawlessly.
Last quarter, our execution focused helped us deliver better than expected results. We added approximately 200 more subscription and utility customers during the quarter, we expect to deliver more predictable and recurring growth as more customers embrace our subscription model and invest beyond our traditional offerings to pursue new value driven use cases.
And we're sitting across all market segments, including seven figure deals the large enterprise customers and small and medium enterprise segments, but deals under $500000 were up approximately 30% sequentially.
Many of these deals will partner led which we believe is the result of our improved execution of the channel. In Q3. These included the Benetton group has to be a city of Edmonton and closer to home Monmouth County Sheriff's office.
Let's take a moment to talk about two of these deals.
First we beat the incumbent vendor and other competitors to provide guaranteed BBB. The second largest bank in Turkey with combo is complete.
This will support all the critical operational elements for the tightly regulated financial services provider, which was one of the largest wins in the EMEA region.
Second in the U.S., we deepened our relationship with longtime customer core FFO.
As a 13 plus billion dollar innovative tech company cohorts chipsets up out in most electronics, including cars on aircraft.
They selected combo Hyperscale software with HP servers, as an economical repository to locally achieve archive two way datasets alpha frontline storage using combo.
Rich gallon Covas, Chief information Security Officer, and head of IP infrastructure recently said quote.
We're excited to build on our long standing success together through the expansion of combo, Hyperscale technology, which allows us to easily scale out protection, the new data volumes, while reducing complexity and cost and quote.
The winning across various customer segments globally, because our robust technology selves multiple problems with customers and our innovation and execution initiatives differentiate us in the marketplace and lay the foundation for growth.
Another key element of this foundation is our people I believe great opportunities attract great people and I'm pleased to say that we are tracking world class talent.
This quarter, we strengthened our global presence and expertise with two veteran sales leaders.
Mark with NFC joined Us as our vice President for EMEA formally an enterprise sales leader at Dell technologies, Marco brings more than 30 years of experience in the enterprise data industry and will drive our growth objectives across Europe Middle East Africa.
Now let me.
Formerly Vice President ATP, Jay for the software defined data center business at Vmware.
Joined as our vice President for a BJ leveraging his extensive sales and business development experience Kalamazoo responsible for driving growth across eight VJ.
And that Keating joins us SVP go to market strategy.
He brings more than 20 years of experience, leading strategy operations corporate development and sales.
These industry Veterans Joint David Boyle America sales leader and round out our World class sales leadership team led by Chief revenue Officer Ricardo Deblasio.
In addition, as we shared last quarter, we continue to invest in expanding our salesforce with Q3 being one of our strongest field recruiting quarters.
And finally, we made substantial progress without third priority simplification.
Internally, we aligned our tools and processes to help us manage and drive better predictability and linear Saturday in the business that's evident in our recent results.
And our new simplified user experience when metallic activate and command center contributed to our strong net promoter score and the addition of new customers.
With that I'll turn it over to Brian to cover our financial results and guidance for the upcoming quarter, Brian . Thanks, Andre and good morning, everyone. I will now cover some financial highlights for the third quarter of fiscal 2020.
Total revenue in the third quarter was $176.3 million, representing a 5% sequential increase.
Our next movements did not significantly impact our results this quarter.
Software and products revenue was $76.6 million, representing a 12% sequential increase.
Revenue from enterprise software deals, which we define as deals over $100000 represented 66% of software and products revenue for the quarter, an increased from 64% in Q2 20.
Revenue from these transactions was up 15% sequentially. Our average enterprise deal size was approximately $279000 during the quarter.
The average tenure of our relationship with these customers those purchasing more than $100000 and software is almost nine years. This is a testament to our technology customer service and the ability of our products to drive value for customers overtime.
Now I'll review our results by geography.
Our largest region the Americas increased 12% sequentially with growth being driven by 26% sequential increase and the number of enterprise revenue transactions.
EMEA was up 36% sequentially that was also driven by higher volume of enterprise revenue transactions. The number these transactions nearly doubled from Q2.
They PJ decreased 36% sequentially coming off a strong quarter for that region in Q2 20.
Total services revenue was approximately $99.7 million remaining flat year over year, and a slight increase sequentially.
We continue to see strong maintenance renewal rates as measured on a weighted average dollar basis.
These renewal rates average approximately 90% for our entire customer base and over 95% for our larger customers in fact over the past five years, 97% of our top 100 customers and 90% of our top 500 customers remain active with Commvault today.
These statistics are evidence of our relentless commitment to our customers and we greatly appreciate their loyalty.
Now I'll touch on our subscription pricing models, and our continued shift to more repeatable revenue.
We see customers continuing to transition to consumption models that provide flexibility to adapt to changes in their business.
We have highlighted to revenue metrics to help investors track the growth and progress of our subscription revenue transition.
These two metrics are repeatable.
Revenue and annual contract value for HCV I'll start with repeatable revenue.
As a reminder, our primary repeatable revenue streams far subscription software and maintenance services.
We consider approximately 70% of our Q3 fiscal 2020 total revenue to be repeatable in nature.
These repeatable revenue streams, which were up approximately 2% year over year continue to outperform our non repeatable revenue and help provide us with more visibility and predictability as they grow as a percentage of the base. We believe this increasing high margin repeatable revenue stream should drive improved profitability.
Free cash flow and increase shareholder value over time.
Our second metric is HCV.
This metric demonstrates the growth of our subscription and utility based pricing models.
As of Q3, HCV has grown to $140 million.
56% year over year end up 16% sequentially.
As Sanjay mentioned earlier, our growth in our subscription and utility customer base drove a 4% sequential increase in these revenues, which represented 42% of software and products revenue up from 37% in Q3 19.
As a reminder, our weighted average subscription contract length is approximately three years in.
In F. Why 21, we expect to start seeing a meaningful impact of the renewals of the subscription agreements that we sold in F 18, which was our first year of adoption of ASV six so six and when we started focusing on more repeatable software and services revenue streams.
The progress, we're making is evident in sequential improvement in all of our key metrics as stated on our prior calls our objective is to grow sequentially in each quarter of fiscal 2020.
Turning to some other key PML metrics.
Total operating expenses were approximately $115 million for the quarter down 4% year over year.
We continue to optimize our overall expense base by reallocating resources towards investments in our go to market strategy innovation and other growth driving initiatives in the third quarter, we began to incur costs associated with filling open field positions.
Operating margins were 16.4% for the quarter, resulting in operating income or EBIT of approximately $29 million.
Net income for the quarter was $21.7 million or 47 cents per share based on a diluted weighted share count of approximately 46.6 million shares.
I'll now shift gears to our balance sheet and cash flows.
As of December 30, Onest, our cash and short term investments balance was approximately $337 million down $138 million from our balance on September Thirtyth 2019.
During the quarter, we closed the head big transaction per the terms of our purchase agreement, we paid approximately $157 million in cash as part of the transaction.
Free cash flow, which we define us cash flow from operations less capital expenditures was approximately $400000 for the quarter.
Fiscal Q3 was an unusual quarter from a cash flow perspective first free cash flow was adversely impacted by approximately $8 million of non routine severance payments related to recent restructuring second we paid $5 million of head Vig transaction costs. Finally, we reach.
Turn to more historical linear already in Q3 versus Q2.
We expect free cash flow to normalize in fiscal Q4.
We did not repurchased any shares during third quarter, but we obtained we intend to remain opportunistic with our repurchase program.
As such last week, our board of directors increased the share repurchase authorization to $200 million and extended the authorization period for another year through March 30, Onest 2021.
As of December 30, Onest 2019, our deferred revenue balance was approximately $333 million, an increase of 2% year over year and 4% sequentially.
On a constant currency basis deferred revenue was up 3% year over year end up 2% sequentially.
Nearly all our deferred revenue is services revenue that has been invoiced to customers.
Now I'll discuss discuss our near term financial outlook.
We're pleased with the progress we have demonstrated in recent quarters, but we have more work ahead of us that said, we're confident in our Q4 outlook and we expect to meet or exceed the current fiscal fourth quarter consensus estimates as always factors such as deal size and timing of close.
As rates can cause variability in our quarter to quarter results.
Before I wrap up let me briefly update you on our share count as a result of stock issued as part of the consideration for the head Big transaction, we expected diluted weighted share count of approximately 47.2 million shares and Q4 20.
Now I'll turn it back to Sanjay for closing remarks subject.
Thank you Brian .
One of my team is fundamentally changing the way organizations deliver value. However, it also introduces massive complexity and data fragmentation with seriously undermines an organization security resiliency and competitiveness.
We're still it increases the risk because a single event could threaten the bottom line.
Aggressively managing the entire data state is vital to future proof and unlock and organizations opportunity.
More than ever I believe calm fault is the most steady trusted and proven vendor to help customers get ahead of this.
We deliver a radically simple infinitely scalable way the store protect manage and extract value from all of your data no matter where list.
We know data management, because we invented data management.
The past 20 years, we've built a rich portfolio of industry recognized solutions and secure of more than 800 patents and 350 pending applications, where our technology.
And we have a laser focused innovative data management roadmap for the future.
That is why I'm confident.
We have to innovation Indians and commitment to make our customers ready to deliver value for years to call.
Now we'll open the call the questions. Thank you.
Thank you as a reminder to ask a question you will need to press Star then one on your touched on telephone to withdraw your question press the pound key.
Please standby, we compile the Q and a roster.
Our first question comes from Jason Ader with William Blair. Your line is now open.
Yes. Thank you good morning, guys.
Let's see here. The first question I had just on the hedge big contribution if you could.
Help us either with the quarter.
Just reported in the guide how much contribution you are you expecting from.
Yes, Hi, Jason it's Brian Carolyn here. Good morning, Yes. So had big is part of the overall numbers nominal revenue contribution consistent with where our expectation.
Obviously the early stages.
And we're not going to get into specific expectations around that but.
We're pleased with the progress of the integration efforts this past quarter and I think we're off to a good star Yeah, sorry, Hi, Jason Good morning, and so it's it's going I'm very pleased I'm pleased with where we are this was our first acquisition like I said last quarter, what we're going to be very diligent about how we integrated it.
Between the people that technology the products, making sure we got everything right, we've been into throws of that and they're very happy in the process. We've also both out of specialized.
Sales organization.
Got some really significant proof of concepts in play we've made some sales we've added some new customers we've added to existing customers. So it's exactly where we want it.
Okay and then.
Sanjay just.
So you can help us kind of frame the future here.
What is the strategy in terms of growth and margins.
As you think out for the next few years do you.
Are you kind of hell bent on getting back to double digit growth.
Maybe at the expensive margins or would you.
Be more satisfied with let's say something like 5% to 10% growth and meaningful margin expansion.
Again I.
I've been consistent of my outlook in the way of sort of a structured the past year coming on a year in a couple of days, it's been about simplification to innovation and execution, what that led us to is predictable quarter on quarter sequential growth and so far so good we've we've been able to deliver against that and it's not been at the necessary the cost of margins.
We've been across the board trying to be as as as whole as we can be in growing the business.
Hectic and metallic and the and the core has got good.
But critical mass, but helguvik and metallic continued businesses, we need to invest in and.
Going into next quarter, we'll have more details, but right now its.
Its focus on focuses on Q4 and making sure we integrate these two technologies.
Okay. Then one quick last one from me just.
What is the let's call it one concrete.
Item that you can point investors to.
In this current quarter that just reported.
That gives you confidence that.
Things are really on the right path.
Let me I'll give you high taken show Brian has some financial underpinning.
I think.
Overall, if you just if you just see the first of all being predictable in being able to really.
Deliver what we said we've got a deliberate internally and otherwise. This is that this has been a this has been a transitional year. It's a growing market. It's a strong market. Our technology has been proven on net promoter scores high repeatability of business is high and the growth drivers around the technology ecosystem and I'll people is solid we've been able to attract more people this quarter and sell them.
Getting than than we can remember like historically, it's one of the strongest we've had.
The the deals we've done so 500 K across the across the planet shows that the partner ecosystem is getting to be more more robust and just some of the use cases and outcomes that customers are using our technology for our incredible 800, petabyte with 60% of a customer's reporting in cloud doesn't mean, they're getting ready for the CLO.
We are the cloud.
And Jason I'll, just carry on with that those statements and echo that but I'll add a couple other financial metrics behind that I am also.
Really pleased with our move to repeatable revenue that we've been on this journey for the past several years. Some you look back to.
Pre adoption of assay six so six way back in Fyseventeen less than 10% of our software products revenue worst subscription based contracts now thats well over 40% you combine that with a rather repeatable revenue streams, and which is north of 70%.
And then further validation is just the the customer loyalty and.
Just the stickiness of our customer retention rates that I mentioned on the call. So all those things are really positive proof points.
That are benefiting us now, but also will benefit us out into the future.
Thank you.
But we're confident folks buckley back to growth.
Thank you. Our next question comes from Aaron Rakers with Wells Fargo. Your line is now open.
Yes, good morning, guys. Thanks for taking the questions.
Kind of building on that last comment.
Brian as as we start to think about the set up and a three year anniversary of your subscription strategy as we move into fiscal 2021, maybe it'd be helpful. Just to kind of if you can at a high level, just remind us or walk us through the mechanics of how we think about subscription assuming that you kind of retain.
That 90% renewal rate and I guess underneath of that as we think about the business model how much of your business.
Today is what would you would say is being new customers.
Versus kind of how that setup going into next year really kind of harvesting that installed base I'm just trying to think about parsing through what we could you should think about in terms of subscription renewals versus the growth on top of that from new customer expansion.
Yes.
Good morning, arent, hoping to well so yes, I think you have to you get the CHMP this up into a couple of different areas Blitz start holistically.
With just repeatable revenue in general, which is greater than 70% of our total revenue.
We obviously have large customer base, a loyal customer base strong renewal rates.
So we're really happy with that stability it adds to our overall.
Underlying revenue. So then the next step in the journey that we've been on is rolling out true subscription arrangements. As you mentioned, we started selling these in earnest in fyeighteen.
Metrics, such as our HCV being up 56% year over year, it's up more than three fold since F 18, and as I mentioned the average contract length is about three years. So we're looking forward to that first true meaningful anniversary coming up enough why 21.
Still work to do because I mean this is obviously, it's a it's a journey where the customer.
It's part of our customer success profile.
We've established.
Customer success teams, we've got leaders in place to make sure that were.
We're approaching them and giving them the choice of what.
They should do and want to do.
And then compounding that we're really excited about metallic and what that offers from.
Some incremental subscription revenue possibilities for Ross, that's our new SaaS products. So it's yet another repeatable and recurring revenue streams. So I think the combination of all those is what gives us confidence heading into what 21.
Okay go ahead.
Obviously is going to say from.
Another another slant on that outside of the numbers, which were down I think as important as I'll be creating new new pathways to new customers. So hedging you set of customers.
Alec new set of customers add on products like activate ptwop core new set of customers workloads moving rapidly going to cloud but.
Integral part of that for our customers brings new customers. So all of these molding mold and more than looking backwards. We're looking forward to creating new avenues to drive that for our customer so process.
So I am sorry to cut and go back to this but but let's say a customer let's just use simple numbers $100 of subscription was signed an 18 they renew at year three the Rev. Rec of that renewal again remind me of the mechanics of that under the.
Thanks.
No problem.
So yes, if it's a customer who signed in original subscription agreement with US back in F. 18 typical contract length would be about three years that entire contract will be up for renewal again.
And that's why 21, we'd actually then recognize that full amount of the software.
Embedded in that contract in the quarter of the sale. It up why 21, the only thing that gets deferred is really the attached maintenance that could spread over three years.
But yes, we have the benefit of recognizing that in the period of sale.
That's perfect and then the final question for me is just you mentioned about filling some sale open sales positions are filling some of the sales capacity can you help us understand any kind of metrics that we would think would be useful around where we stand today on sales capacity.
How much is that expand it how much of sales capacities productive just trying to think about how we think about that ramping as we as we think about the set up in the 21.
And I'll be giving away everything to a competitor. So let me just sell the it's one of the there was I got to keeps as the only pure play data management company, that's public I just need to keep something close to my Jeff.
I would say to you know that we had one of the if not the best in intake of field.
Sales professionals in Q3, Okay, all over the World, we hired new leadership.
New systems in.
These systems engineers, we've really done a good job of intake over the last couple of quarters, particularly in Q3 and the momentum continues into Q4, we're working as I said last quarter as hard as we can.
To fill the physicians, we have and we're wrapping ambitious but with that so and then we've just we've really revamped our internal enablement program to shortcut our productivity dramatic if you put a world class enablement program into play.
In the company, so and for our channel as a matter of fact, as we see them as as an as an absolute part of our selling motion.
Good people bring him.
Great people and really really pleased with that so sort of giving you. The exact numbers I'll tell you that I'm really pleased we've got more open positions. It's a global thing, we've got new leadership, a bit bringing us some amazing talent into the company and we've got some great talent already within.
Great. Thanks, guys.
Thank you. Our next question comes from Alex Kurtz with Keybanc. Your line is now open.
Yes. Thanks, good morning, everyone apologize for the background noise here so.
On the on the renewal Kickoffs here, Brian and Sanjay will there be any changes to how the salesforce is comp.
On Aarons example of $100 arena are they going to be comps on 100 or they can only be comps on on new bookings.
Yes, Alex I don't think we're going to give the all our exact specifics away and our compensation plans.
Just wouldn't be appropriate right now, but I will tell you that were well organized we're aligned internally, it's something that we're squarely focused on its part of our expectations heading into 521 button almost more importantly, bite may almost more importantly is the motion with which we are approaching our subscription business both from a from a from a land and expand.
And in Atlanta expand into new motion with a true customer success, even that we've put in place and growing well integrated into the kardos selling motion and the partner community. We've spent the last two quarters, where they're getting the mechanics of all that.
In place and with the enable enablement initiatives I mentioned, we're well underway, obviously compensation will will align but it's not the primary driver having the right go to market motion is is what we've been focused on.
Hey, John do you just a follow up on that I mean.
From everything you've said this morning, it seems like the organization is that a place where the salesforce to really be focused on incremental bookings on the renewal not just the renewal is that is that a fair way of looking at it given all the new products and.
Okay.
Of course, Salesforce is focused on bringing bringing the composite value to our customers, both new and existing they've got customers got view outcomes that they want me you parts of the journey that Ron.
Out of the cost of existing customers, but definitely focused on your customers as well.
Okay. Then last question for me just.
Hi, Andrew just looking at.
Strong large deal execution, especially I think in Americas stats, you are giving earlier so.
Thank you everybody a couple of deals that really drove Americas.
In large deal flow or was there something else going on the sales force quarter over quarter that help you outperform.
We do have couple large deals, but actually it was more volume driven and we're really pleased by that because it actually disbursements that.
It was a good spread it was actually could spread of.
Of deal sizes across segments.
So yes I was it was.
As a nice breadth.
Thank you.
Thank you. Our next question comes from Brent Thill with Jefferies. Your line is now open.
Hey, guys as Joe on for Brian . Thanks for the question, Brian given you have so many different types of new products SaaS with metallic perpetual with had big Hyperscale, maybe just walk us through the trajectory of gross margin. Both next quarter and next year, just how that kind of think about it.
Sure Good morning, Brent.
So in terms the gross margins I think we've reached a point of stabilization with respect to the gross margins heading into next year I will say things like Hyperscale for example.
Which I think we called out on the call. We're really pleased with that it was strong year over year growth in sequential growth.
In fact songs you mentioned, we're starting to see that resonate even with our largest customers I think something like six out of our 10 largest customers are running hyperscale and their environment Thats part of our gross margin profile I think what you'll see is I think we've reached a point of stabilization for time being.
And as we get to that point 21, and we have more recurring revenues we have no new.
Offerings, such as metallic et cetera, we'll obviously keep you updated on the gross margin profile and any changes.
Okay, great. Thank you and then in turn to see you did.
Said youre going into two quarters in a row now.
To get some consistency maybe just regarding long term targets. When can we expect that we got full year guidance next quarter and then further than that it seems like the renewal opportunity mathematically is the biggest opportunity for fiscal 2001, maybe just ran quarter metallic hyperscale and had big.
So let me just touch on.
Margins and all and longer term guidance and I'll, let sanjit also weigh in here.
Whitelaw, we're focused on delivering kind of one quarter at a time.
I think we're setting hopefully achievable targets for ourselves.
And heading into one let's get through up what 20 and heading into the 21 will provide further commentary at that time, yet it's you know.
Well, it's important I guess it to sort of.
We did this ourselves we remind ourselves given the pace at which we are working that some transitional year, but coming out of a year that has been truly.
One that is gratifying and that Weve turned the corner on many things, but there's still work to do and I don't want to get ahead of myself. This two quarters in a row doesn't.
The job isn't done with that but we feel like we're beginning to turn the corner next year by saying I'm going to return to.
Return to growth in fiscal year 21, more details will follow guys.
We just feeling confident that were the right building blocks are in place and Brian just going back to your your your.
Question just on areas of focus I mean, obviously, we're keenly focused on on everything.
And you know we view this as it presents opportunity for US this is going to be the first meaningful year.
Our renewals, we have new things such as metallic and head big Hyperscale starting to take hold so.
We also have just our core capacity and selling force that we're investing and so.
You've got a lot of areas investment a lot of areas of opportunity. We're obviously trying to keep things keenly focused heading into next year.
You'll get more.
Sounds great. Thanks, guys.
Thank you thanks.
Thank you. Our next question comes from James Fish with Piper Sandler Your line is now open.
Hey, guys congrats on the quarter I.
I don't think it would be a combo quarter somebody domestic competitive questions.
And.
One of your competitors had.
News this quarter is now moving if you ask what do you guys.
From opportunity and how do you feel about this kind of issue longer term as we move into your core backyard.
You know its.
First first things first.
It validate it validates the space, where it validates what customers what we're doing for our customers. It's a growing market, it's a strong market.
They've been around as as a competitor for a while that's not new.
What I focus I don't I don't focus so much identical for the company. So much on what they're doing as much as would be too well, what's really important here is to focus on what comp as really low and deepen our out for over 20 years Damon doubt solving hard problems for our customers like I said over 800 patents over 350 IND filing we are focused on innovation in solving problems and.
The better some competitors go we're going after 20 years left to be up from expiry.
Got it Matt Ryan our commitments dollar attack rate any difference between the term licenses versus the perpetual contracts and also how should we think about professional services as we continue to.
More towards constant scripts.
Sure. So in terms of the maintenance rates I think there they're generally aligned.
Within kind of a rounding difference on perpetual versus subscription.
Professional services business again, this is an area of opportunity for US, we you know and working with our our partner network and also what we can do internally to help our customers on their journey to the cloud and also some unique offerings.
That we're entering especially with had big.
And other new areas of opportunity, we're going to we're going to capitalize on that from a professional services standpoint looking forward.
Got it thanks guys.
Thanks Rich.
Thank you and our next question comes from Ryan Meyers with Lake Street Capital markets. Your line is now open.
Hey, good morning, guys. Thanks for taking my questions first one here can you just give us some detailed on the mid and long term growth initiate initiatives that you guys have plan.
Sure.
Right I think again, we're focused squarely on.
Finishing out this fiscal year.
Again, we're you know our growth drivers are the technology ecosystem the people that were investing yen.
And we'll we want to get past this kind of Europe transition that we've been in its been a lot of hardware I'll, Let Sondra conference comment more this goes back to our execution.
Three initiatives that I keep talking about really the third Pete This is really the therapy. So it's all about execution and what Ricardo and the rest of us at the company instead of taking the lead off is really segmenting.
How weekly.
Looking at the marketplace globally really focusing on the right segments, where we add value, which is natural to us and over the course of the last year, we've invested heavily in our channel and channel ecosystem. So between the partnerships. We've we've hopefully been able to gone and build and create and.
Our focus on how we go to market and the productivity of you're driving in there.
Overlaid with the products, which we've talked extensively about so to be for the richest set of products. I think we've got that is our strategy that is what we've been focused on it. So it's not one size fits all the stopped doing everything for anything it's about being super focused and.
And between the segmentation to products on our end ill go to <unk>.
Our overall go to market strategy.
That's what's going to take us into next.
Okay. That's helpful. Next one so how of the customers responded to the new subscription pricing packages so far.
You talk about our soft spot to pick up on the topic.
Correct.
Yes, no. So so if you recall, we only launched this some point in October .
At our goal conference and then we get we opened it up to an extensive trophy or truck customers, which which we have hundreds of customers embrace the trial, we've got new customer spicing hasn't been an issue I think the offerings are tight they like the straightforward to get.
To get up and running we've got customers that have.
Yes post business with us and matter of days, because it's so easy.
And been up and running so.
So for all systems go and positive.
And the partners are adequate.
Yes, it's all I can keep in mind it hasnt, even been 100 days.
Right right, Okay, and then last one from me so Sanjay now that you've done with the company for almost a year now can you talk about some of the things that you have learned in the past year that you think will help set yourself and the company up for success going forward.
Yeah, Ryan I'm more excited today and I'd say this with complete honesty I'm more excited.
Being here today, a year end.
Then I was coming in I am going excitable, Jeff, Okay, Hi, I'm really excited I think the company has.
Has been built with strong fundamentals great people customers that I've been with us that Brian shared numbers that I, just staggering been with us since the beginning of our.
Being a company.
90% plus renewal rates and this is it they're all they're all testimony to how strong the fundamentals this company.
You know the last year has been transitional it's it's one where I look back and feel like I have put our team through a lot and they have responded and they've responded positively and I feel very confident going into next year that this is going to be able to be returned to growth and.
And delivered to our expectations.
Alright Thats it for me thanks, guys.
Thanks, Ron.
Thank you and at this time Im showing no further questions ladies and gentlemen, Thank you for your participation on today's conference. This does conclude your program and you may all disconnect.
[noise] [noise].
Okay.