Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the fourth quarter 2019, Rapidseven earnings Conference call.
This time, all participants' lines are in listen only mode. After the speakers presentation. There will be a question answer session to ask a question. During this session you need to press star one on your telephone. Please be advised so today's conference is being recorded if you require any further assistance. Please press star Zero I would now like 10 the conference over to your speaker today.
No Rush Mahajan, Vice President Investor Relations. Please go ahead Sir.
Thank you operator, and good afternoon, everyone. We appreciate you joining us today to discuss Robertson's fourth quarter inform your 20 emerging financial and operating results. In addition to approach allowed to put a bolus corn.
Fiscal year 2020 with me on contradictory to almost CHF two lots kids here for we've distributed earnings press release older why I noticed cell culture in the website at investors will drop it sort of dot com along with the updated company presentation financial metrics for this call is being broadcast I feel that catch a falling to called an audio replay will be available that investors are purposes.
And dot com onto February 18, 2020, as a reminder, discussion today contains forward looking statements about events and circumstances that have not yet a code, including without limitation statements regarding object to such future operations and future partially business performance diesel. We're living statements are based on a current expectations and beliefs based on information currently available to us.
Oh outcomes results may differ materially from expectations contained to these statements are to a number of risk and uncertainties, including goes contained in our most recent quarterly report on form 10-Q, and subsequent reports a deposit here to see the information for water on this conference call. It should be considered in life such words actual results and its audio seven events may differ materially from there's also taught me.
Protected on play for such forward looking statements and reported results should not be concerned as an educational future performance Rapidseven does artisan any obligation to update information presented on this conference call except to the extent required by applicable law or commentary today will primarily be non-GAAP tones and reconciliations between GAAP and non-GAAP results and guidance can be found into.
He is going so that's really at times in our prepared remarks orange responses to questions. We may offer incremental metrics to provide greater insight into the dynamics of the business or quarterly results. Please be advised that this additional detailed maybe onetime in nature and we may or may not provide an update in the future on these metrics with that I'll like to turn the call owed to us CEO Cory.
Almost cory.
This new laws and good afternoon, everyone. Thank you all for joining us today on our fourth quarter, a four year 20, Nike, earning call reference. Some example, another great year 20, Nike what stall for your operating result.
Our our library Harper said and we again exceeded the high end of our guidance with revenue growth of 34% loved them every day nine point improvement in non-GAAP operating margin year over year.
Customers about the paper it into 20 that he was more than 9000 customers and I would say all for close to <unk> increased by 60% to over $37. It Bob.
These results again reflect a healthy demand environment and consistent execution.
Well, they leading well diversified portfolio, we see large opportunity it brought about and believe we're well positioned for future growth.
As a result between 20 Whistler, so our goal of 25 with it at the midpoint, while continuing to deliver operating leverage.
Two years ago at our Investor day, we allies instead of ambitious goals for Rapidseven through toys way.
We got into revenue and they are a $350 million by 2020 and break even now your profitability employee Nike we.
We comfortably met our profitability targets between Nike and we're on pace to exceed our revenue and they are target for quickly.
Now before we talk about ways. When you go let's quickly review a clean I can go.
Our first goal was to grow a our by 30% plus if we got team and we delivered strong growth of 35%.
Our second goal was to make it easier for customers to adopt our platform and optimize our customer economics.
All right, you're all per customer grew by 16% last year and by 60% from two years ago, but when they are all for customer currently at $37500 against the potential of $200000, we have plenty of room to grow.
Our third goal was to achieve non-GAAP operating profitability, it's way Nike.
He mentioned before we continue to invest business over the course of last year.
And even wouldn't even back then we delivered significant operating margin improvement, while delivering strong way Argo between that he said he ourselves for continued growth 21.
We have strong momentum entering 2020.
Oh. It was also flat that the markets. We operate in are healthy and our platform strategy is working with all four Park Hill is driving growth.
These product for a different stages, a maturity, but each one was a significant opportunity and together they provide us with the foundation for meaningful levels of long term growth.
Inside me I'm remains our flagship product and we like the vulnerability management market to grow at a healthy rate, but slower than the groping grants in the last few years.
Our investments it inside me up primarily focused on helping customers increased their productivity by improving barterization remediation and automation.
It is this focus on customer satisfaction productivity and its best holiday through the Forster total economic impact study I mean its idea.
Which is a recent commission to study conducted by Porsche consulting on behalf of Rapidseven.
Forced or highlights that went inside him customers could potentially realize more than 300% ROI over a three year period.
Over 20% reduction in false positives and 60% reduction in patching efforts when compared to their incumbent VM solution.
What is the success in winning new customers and recognition by existing customers that really matters.
Great example, Apollo platform strategy is resonating with customers.
We expect to deal with one of the world's largest Italian body with operations in more than a host of it could be country.
We initially engage them in early 2000, I'd hate to help before the applications insight aspect.
But over time, we also began to understand the challenges these paid what their legacy vulnerability management solution.
As they realize the impact in value of our insight platform. They ended up adoptee, our complete platform, leaving we fixed the multiple of the original deal in terms of they are.
Inside our Youre RCM solution continues to grow at an exceptional away without maniacal focus on providing the won't get powerful cloud only solution, we're well positioned to gain market share in this critical segment of the cyber security market.
We have momentum not yes without established product, but also with our emerging products.
Over the last two years, we have developed and refine broken workloads and optimistic ability for us I connect.
This year, we will be increasing our investments to accelerate growth.
The market opportunity per store is huge and we believe we're uniquely positioned to be the Austin industry.
It is this dedication to focusing on the needs of resource go straight into part was the last fall consultant to recognize rapidseven, what the twins our team Global store company of your award.
These recognition by customers industry expert give us a confident that we're on track to build it durable growth company.
Now, let's turn to our three main goals to 20 point.
Our first goal is continue to drive sustainable topline growth, we are forecasting a our growth of 24% to 26% and revenue growth of 20, 124% Quicklink way.
Our second goal.
He used to optimize our customer economic engine.
We're focused on delivering strong customer growth and we'll be investing heavily in improving our existing customer economics.
While our customer acquisition costs is stable it will approve it will be significant increases in customer lifetime value.
Driven by three key factors.
Increasing customers more or insight platform, which we retain at a higher rate.
If we fail at Costco efficiently and introducing our emerging products to our broad customer base.
We're already seeing evidence of this for insight platform customers, which have substantially higher achievement of a opera customer driven by higher products per customer and a more efficient cross sell engine.
Our third goal, it's because he or drop leverage in our business.
Weird Darby for non-GAAP operating income of $7 million to $11 million for school year 20 point.
A 1% to 2% margin improvement over 20 Nike.
Before I hand over to Jeff I would like to close out, but surely perspective, how we think about how long composite.
First and foremost are set off the vision is resonating with customers and we will continue to refocus on scaling and deliberate decisions that we always important.
Secondly, we're seeing the benefits of our platform engine and we believe that we'll be able to deliver sustainable growth will continue leveraging profitability.
Specifically.
We are confident today that we can deliver a three year revenue CAGR over at least 20% through 2022.
Additionally, you should expect us to deliver operating margin improvement a 2% to 3% if we grow air are in the low to mid Twentys.
We expect an operating margin improvement a 1% to 2% for air our growth of mid to high Twentys and expect an operating margin improvement of less than one person for over 30% air our growth.
This model and our operational focus allows us to aggressively pursue customer value creation, while the memory onboard value for our shareholders as well.
In conclusion.
Rapidseven is very well positioned at del Sol Cyber security challenges for enterprises of all sizes and.
Our customers are embracing our platform and our multi part of strategy puts us on a path to sustainable growth and profitability.
We look forward to the Liberal Arts Weeklys Artemis with that let me turn the call over to our CFO Jeff color.
Yeah.
Thanks, Corey and good afternoon, everyone.
We're pleased with our strong performance in the fourth quarter in full year 2019 with results that again exceeded our guidance on all metrics.
Before I begin I want to remind everyone that except for revenue all financial results, we will discuss today, our non-GAAP financial measures unless otherwise stated.
Reconciliations between GAAP and non-GAAP results and guidance can be found in today's earnings press release.
Total there are grew to 338.7 million, a 35% increase year over year.
We ended 2019 with revenue of 326.9 million a growth of 34% exceeding the high end of our guidance. Our recurring revenue grew by 45% in 2019 and constituted 87% of total revenue in 2019 as compared to 81% in 2018.
Strong topline performance helped us deliver significant beat on our operating income guidance as well and we reported non-GAAP operating income of 2.4 million for 2019, a nine point margin improvement over 2018.
Our customer count increased by 16% to approximately 9000, a result of our continued focus on new customer acquisition, while maintaining our traditionally high retention rates.
In 2019, we also started program to accelerate the migration over a long entries customers to the insight platform. During this transition we have successfully migrated about 600 customers. So far which are not included in our customer count today as their contract value is less than $2400 per year.
Let's turn to our fourth quarter results.
Total revenue for the fourth quarter was 91.6 million, an increase of 33% year over year and above the high end of our guidance.
This strong growth was primarily driven by better than expected product revenue.
Average air our per customer increased to approximately 37500 up 16% year over year.
As Corey mentioned one of our goals for 2020 is to continue to optimize our customer economic engine.
Will significantly increase our investments to improve cross sell and upsell efficiencies, bringing us closer to our air our per customer potential.
Our focus on recurring revenue drove a 47% increase in our product revenue year over year. This was partially offset by decline and maintenance and support revenue as nexpose customers continue to not 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 revenues together, which collectively grew 37% year over year.
In fact from 2020 onwards, we will be reporting product and maintenance and support revenue together.
Looking at the business geographically in the fourth quarter revenue from North America grew by 30% year over year comprised 83% of total revenue.
Rest of the World revenue grew by 50% year over year and comprised 17% of total revenue.
Turning to margins total non-GAAP gross margin was 75% slightly better than Q4 last year and was primarily driven by mix shift towards higher gross margin product revenue.
During the fourth quarter, our sales and marketing expense remained flat at 45% of revenue when compared to Q4 2018 as we've mentioned in our previous earnings calls, we increased our spending to not only expand our market share in our core markets, but also ramped up investments in our hyper growth businesses to meet the 2020 goals the Corey mentioned.
R&D expenses were 19% of revenue in Q4, 2019 down compared to 22% in Q4 2018, but similar to that of Q3 2090.
We expect R&D spending excluding the effect of capitalization of internally developed software to be in the range of 20% to 22%.
DNA expenses in Q4, 2019 were 10% of revenue down from last years level of 11%.
For Q4, 2019, we generated non-GAAP operating profit of point 8 million well ahead of our guidance operating margin was approximately 1% compared to a margin of negative 4% in Q4 2018.
Adjusted EBITDA for the fourth quarter was 3.7 million and diluted non-GAAP net income per share was three cents also well ahead of regards.
We ended Q4 with cash cash equivalents and investments of $262.5 billion compared to 257.7 million as of Q3 2019.
Contract length for Q4, 2019 was 16 months, a slight increase from 15 months last quarter, we expect contract lengths to stabilize around these levels.
During the quarter operating cash flow was 7.8 billion as compared to 11.9 million in the prior year for the full year 2019 operating cash flow was negative 1.4 million, we exceeded our guidance from last quarter of negative $5 million due to strong Q4 collections, which drove a significant decline in our days billing I'll stand.
Okay.
Now moving onto the guidance first the annual guidance for the full year. We expect air are to be in the range of 420 million to 427 million, which is 25% growth at the midpoint.
We anticipate total revenue to be in the range of 396 million to 404 million, which is 22% growth at midpoint.
We expect non-GAAP operating income to be between seven to 11 million for 2020.
As Corey mentioned at the higher end of air our growth will be investing back in the business to drive growth on a sustainable basis.
We expect cash flow from operations to be approximately 10 million for 2020.
We anticipate non-GAAP net income per share to be in the range of 11 to 18 cents, which is based on an estimated 55 million diluted weighted average shares outstanding.
The weighted average shares outstanding for full year 2020 represent the diluted shares outstanding given our projected non-GAAP net income.
Now moving onto the quarterly guidance.
For Q1, Twentytwenty, we anticipate total revenue to be in the range of 91.6 billion to 93.2 million.
We anticipate non-GAAP operating loss in Q1 2020 to be in the range of negative 6.3 million to negative 5.3 million, which reflects frontloading of certain onetime expenses.
We anticipate non-GAAP net loss per share for Q1 2020 to the range of 13 cents to 11 cents, which is based on anticipated 50.2 million basic weighted average shares outstanding.
The weighted average shares outstanding for the first quarter of 2020 represent basic shares outstanding given our projected non-GAAP net loss.
In conclusion 2019 was another strong year for Rapidseven, where we delivered 35% error our growth and non-GAAP profitability, we look forward to delivering another strong year in 2020.
With that we appreciate your time and support and we'll now open the call for any questions operator.
Thank you.
If you would like to ask question Press Star then one key on your Touchtone telephone.
If you would like to withdraw your question press the pound.
And our first question comes from Rob Owens with Piper Salmon. Your line is open.
Great. Good afternoon. Thanks for taking my question Corey what do you get a bit of a broader view on kind of your go forward cloud strategy and while you have.
A lot of capabilities to support workloads in the cloud just how you plan on expanding that and then to dovetail that question a little bit Jeff. Thanks for all the guidance that you gave but how does the M&A fit into the picture you know I know you guys have done tuck ins in the past does that current guidance include any potential transactions or could we see some dilution. If you guys where do you get acquisitive.
Sure. Thanks.
That's great question, Rob on first and foremost as you indicated we have a very strong started to this and we think about the cloud all of our core technology include the ability to consume data workloads.
Have a strong and strengthen in partnership with both Amazon and Microsoft Azure and secondly, we actually are going deeper into Carlo summers and you think about our T cell product is already looking at application designed for the cloud, which enabled us not just to have a stand alone last solution, but that capability enables us to do detection Friday article.
While it also enables our broader aspect store. So we'll start with a very small thought but as you indicated we have to continue to strengthen an evolving the cloud is one of the most relevant areas. We continue to grow over time that is definitely heavily focused on organic investments, which we already had an plan and where we plan to make and that's part of our long term outlook, but.
Could also includes strategic M&A, if the right opportunities come along for the right price that said our plan. When we think about long term growth a sustainable growth and that take over the next few years of over 20 for said it does not factor in M&A being a significant part of that without a doubt.
Sure will do.
Again, but we may do other thing if they make sense and follow our strategy at the time, but right now were heavily heavily focused on executing our strategy that we've already laid out we have an organic plan to do that and we're very disciplined around looking for the right opportunity at the life point by point, if it for a long franchise.
Great. Thanks.
Thank you Rob.
Thank you. Our next question comes from Matt Hedberg with RBC. Your line is open.
Okay, great. Thanks, guys.
I wanted to follow up on the 2020 to guide.
Obviously, you know there's there's you got some smaller products IDR excuse real fast up second connect well above the corporate averages, but just wanted to kind of get your your your thoughts Korean on how.
Sort of your core VM business should trend over the next several years I think you guys have been growing above market rates, but what are the components. There that allow you to continue to to deliver that kind of quarterly.
Yeah, I mean, so one of these came on we look at the end is one of the healthiest sectors. If you think about the overall technology marketing security market, we set for a while now that we believe the sustainable growth rate in the PM market at the low to mid teens. We continue to have that you and we think is driven by a couple of fundamentals.
The most important fundamental and he is still lots of companies around the world that don't have them coverage and that's our heavy focus on expanding that mid market and that global base of customers. Secondly, the number assets that customers have in an environment continues to grow and explain so even established customers. That's still at a couple of points of growth every year and then we still.
I'll have companies that are underpenetrated overall, and so our long term view is that you'd have to curious along the way we have really high rates of you think about upgrade cycles like staff and cycles, where customers drastically enhance or grow the number of assets under management, but we think the steady state growth rates still supports one of the best technology sectors.
And that low to mid teens for the 1 billion as a market winning that's a great core position, especially when you look at that in the context of our other hypergrowth defences around IDR insulin.
That's great and then maybe a follow up to that sort of building up to that growth profile. Obviously, you guys had been methodical and how you add sales headcount in on an annual basis, and obviously count on cross sell up sell to take growth well, but you know when we're looking out several years.
Should the cadence of quarter to quarter reps continue I think you know kind of low double digits.
Yeah, you can think about the.
The sale being tightly tied to opex expansion overtime, and well continue to get leverage sales and marketing, which reflected the grow roughly in line with our total opex growth and so when you think about the model that we outlined earlier is a bit lower Argo. He got keep aftermarket expansion was I think is reasonable where people would expect but uh huh.
Oracle, you'll still see some expansion, but it'll be expanding for rate of growth and what that really needs at the end of the day is our sales expansion I sales calls really is tied to growth, but regardless, we're looking to expand the leverage them getting business year over year.
Thanks, So well done this your guys.
Thank you very much appreciate it.
Thank you and our next question comes from Michael Turits with Raymond James Your line is open.
Hey, Corey and Jeff how are you gave a couple of ranges of a our growth. It what you were.
Tying to where margins would be but some of them weren't.
Collateral ones are ones were above the current range of guidance for next year. So what are the things that you see that are the toggled catch it you hey are above the 2020 God.
Yes, I mean, consistent with our path, we tend to think about businesses that actually have scale to be more predictable. So specifically if you look at it.
Both our store business, especially as the business that we are likely start to accelerate the indefiniteness here, we've got amazing customer feedback this great fundamental demand in the market, but our three year plan that we actually laid out has some of the cost of before but doesn't fully half the benefits of because that would that be reasonable and that's not our approach to fully baked in things that aren't field and.
No.
So to the extent that that business takes off with expected that actually gives us upside to the current plan if they're equally things about the current plan really heavily focused on the stable growth that we happen to be at business and the continued spread that we see in that we continue to see any overall IDR business augmented by healthy after closing.
And then emerging store business and will continue for the previous questions to make investments in the cloud, which allow us to have ongoing upside over time, but thats the core where we think about the overall business.
Thanks.
<unk> for you thank God for cash flow from option. This years, it's pretty much in light of the operating income guide so considering it.
He said that duration should be built stable. So I would imagine billing should be a contributor to working capital no. What is it just keeping cash from ops pretty much that same level as you as even.
Oh.
Excuse me, we're forecasting about 10 billion in operating cash flow.
Which is you know if you look at our it's not really about duration, but we're we're now normalized so if you really if you take our last year's billings.
And you adjust for services and you apply the growth rate at the midpoint of 25%.
To.
That billings number.
You're going to get to our approximate billings number for you'll be directionally correct for that billings number for this year in 2020 and based on our.
Net income <unk> I'm, sorry, our operating income guidance is 711 that should get you to that 10 million dollar number.
Okay. Thanks, Jeff.
Thank you.
Thank you. Our next question comes from the girl's tops with Stifel. Your line is open.
Okay, great. Thanks for taking my question.
If I look at the presentation, you kept airclic customer potential at about 200, K, but if I think about all the beacon endeavors, you Mitch connect and the ability to push upstream here for the enterprise could this number ultimately prove conservative if you think about the push out the 2022.
Yeah, absolutely we tend to take a more conservative approach for things that are unknown and so if you think about both the application security and insight connect.
We've taken a fairly modest approach when we actually think about those businesses and there's some businesses that we are partially and we saw organic investments focused on like our cloud businesses, but again, we've taken a fairly measure view when we look at an overall, we think thats the right thing when they do we talked about before is while we are starting to approach the 40 K. Mart.
We have line of sight and visibility with fairly good confidence to the 60 day and then we think about it as a steady margin expansion of what's the addressable line of sight, we can actually get there at the same time, how do we brought the overall perpetual and so what's your what I hope you'll see over time is us continuing to show progress as having a path a lot of fight.
To grow the actual current air opera customer, but has also expanded the potentially ARPA customer steadily over time, because really what I focus on what I look at just like we did three years ago is what's the overall character of the company the organization that customer base as we exit the next three year period.
And when we exit that next reappear you want to make sure that we have a good growth opportunity what helped the economics and part of US just like we have today.
That's a that's really helpful and then you'll get IDR, specifically on as the product matures have you seen any shifts within the potential customers have you like it sort of make a broader push upstream and at the product itself gets better and then I think beyond that have you seen any shift in the competitive space as well within that market.
Yeah look similar to how wrapped up in approaches that we always tend to focus on and narrow set of customers early in a market evolution and then with the steadily at more and more customer segments, what the IDR that's been happening on one basis.
I talked about last year, when we acquire net for the in 2020 2021, just expect us to see us starting to move deeper into the larger accounts in a passports and went out and segment. We've already sold we started that move and we're seeing some success. There. We also are starting to expand around the world. So some of the pickup that we start to see less.
Last year was IDR being addressable in more markets around the world and I think that that'll continue as we go forward again for context, where audio has been successful we still have relatively small market share of the overall market, but we have great momentum and so we look at this as lots of potential economists.
That's helpful. Thanks, again, congrats and results.
Thank you very much.
Thank you. Our next question comes from Jonathan Ho with William Blair.
<unk>.
Hi, Good afternoon, I, just wanted to touch on the 108% high renewal rates I think you guys said that you're expected to take sort of plateau in around these levels can you just maybe give us a an updated view on maybe what you're expecting here and if there's any but then I've been any change in underlying churn. Thanks.
It's out at the last year in that roughly where we expected within.
Our overall, if you think about the renewal rates sort of really doing some parts of sort of two core things is one of them is the retention rate of hobble, we retained dollars over a lot customers and we continue to perform quite strong there and we're seeing healthy improvement there. The second day is how much do we actually focused on up sell for cross sell versus adding net income.
Summers as you are familiar lastly, we had a heavy focus on adding net new customers and that with wildly successful as were selected by our 16% customer growth in the last quarter. So overall, we indeed, what we thought we would last year.
We're set up well this year, because it's not a primary metrics, it's not something that we're actually forecasting are targeting for this year, we're really focused on our overall our target, but when we have our analyst day, we're going to spend some time talking about the overall economic model and how we continued actually grow.
In the segments of growth as we actually before.
Got it got it and then you're just in terms of your air our outlook for 2020, I know you guys have have shown some conservatism at the beginning of the year in in the past just given you know I guess, there's lots of a focus right now on showing the same degree of operating leverage you should we expect there to be sort of similar levels of.
Performance or has there been any shift in terms of that that guidance strategy.
Yeah, I think you'll expect to see as we've actually moved to a more normalized model, where we don't have the shipped some subscription which is like the unknown. If you think about why we had some of the conservatism in the athletes that more unknowns, we were actually go up and seeing across most product we're shifting from perpetual to subscription.
You just have to be more thoughtful in more conservative here post when you actually have more on a known the good thing is today, we actually sit what's a much much higher degree of base. There are no enter at scale.
So what I would expect is much more typical or alive, so not as big as gap as we actually had in the past and in fact, we even saw that last year Oh, we told people asking like we saw feels that listen you expect 30% plus we ended at 35%, which we considered I'm extraordinarily strong performance. We gave this year not a plus range that we gave a tighter range of 20.
The 4% to 26% because we expect this year to actually be much more normalized versus past years, when we had a much higher degree of unknowns.
Thank you that's very helpful.
Thank you.
Thank you our next question comes from.
Greg Macau.
With the cell line is open.
Hi, guys quick math with how are you.
Correct.
Hi, So Cory I think a if I heard correctly, you mentioned that IDR continues to grow it an exceptional rate approximately I guess, what was IDR as a percentage of net new bookings this quarter and I'm curious if you're having more success landing with IDR today as compared with 612 months ago.
Greg It's Jeff It was again over 30% of the of the new bookings.
You know, which we started out disclosing what it was over 10 of the new is over 28 and you know the next data point is will be it gets over 40%.
And.
With respect to the air our growth in total was about 75% for the year.
Okay that were pretty fantastic.
Yeah. It to your question is that yes, we are very successfully landing new customers into accounts is one of our stronger land engines within the company, which is part of what gives us confidence as we go forward.
Terrific and then just a clarification to follow up two out of my first question, Oh and by the way very helpful to kind of get the fiscal 22 outlook. So appreciate that and I did want to just confirm because two out of the three scenarios do reflect an acceleration in the third scenario contemplates maintaining an air our growth rate in the mid Twentys.
This does not even if you look at the the higher end assumptions on gross it does not include any sort of heroic assumptions for store another emerging products is that correct.
Yeah. So do you think about like our growth. This year you can think about this the growth this year, it's sort of a 24% to 26%.
To be an area, where we feel comfortable but there was primarily driven off the IDR MBM. The reason that we actually communicate it because we have parts of applications cloud and software, but we're starting to invest and what their unknowns and so wanted to make it we want to be clear all is that if we're seeing a return of the form it we will be investing in those basic.
We actually have the potential, but because they're unknowns, they're not deeply baked into the revenue and air our guidance that we have over the next three years well if we see good performance. They do represent upside, but it will be also not correct to say that it's upside that we should bank on today, because it's an unknown, but if we see the performance then we are communicating that we'll continue to.
Invest behind performance, but we see.
Okay. Thanks, a lot of fans thanks, guys.
Okay.
Thank you. Our next question comes from Melissa Frenchie with Morgan Stanley. Your line is open.
Thanks for taking my question I'm, sorry, I Wonder if you could and talk a little bit more about the app second product, particularly that the investments you're making them moving forward in that portfolio and then how it's performing relative to your expectation.
Yes, so insight aspect is a dominant product in the market. That's our cloud based destination and is performing extraordinarily well in comparison to expectations. As you know the asset market has great potential, but it's a massively fragmented market.
So we have to be very thoughtful about our expansion we have both organic investments, especially thing about that market and the cloud market together and it also has the opportunity for M&A, but we also to be very thoughtful to make sure that M&A makes sense for us. So you saw us apart T cell two years ago, we're seeing good demand that's an area that we are moving.
Can you to land and it's an area that will continue to expand upon over the coming year, Oh, we're having good customer momentum, but it's very very early on for the rest market and I would say ethic also represent the market that has potential for M&A, but you will find us fairly consistently thoughtful strategic and patient when it comes to long term.
M&A and so ethic is an area of opportunity we're seeing great success in the parts of the market and we participate into today or will that continue to expand our efforts there overtime.
Okay helpful. Thank you and then a quick one for John if we're thinking about a our growth next year relative to revenue growth. The difference I would assume is just on a slower services revenue growth next year I'm. Just wondering if that's correct and then how we should think about the services business and in terms of the next moving forward.
Yeah.
That's correct. That's the difference is solely due to the services.
I would assume that this services will be about flattish from this year and if you combine if you take the product revenues and the maintenance and support revenues and combine them together those will be directionally is in the same area as the air our gross.
Okay.
5% of them it but that would that would be about that the same [noise].
Suits closely related to the air our growth.
Right. Okay. That's helpful. Thank you.
Thank you Melissa.
Thank you and as a reminder, if you would like to ask a question Press Star then one key on your Touchtone telephone.
And we have a question Nick Jacko with Cowen and company. Your line is open.
Hey, guys. Thanks for taking my question I wanted to ask about about international and I'm. Just wondering if you could discuss some of the the key investments you're making on the international front and then any any of those investments that you would highlight that that could cause that international business to inflect over over the next year or so.
I would say there's to coordinate one we're still scaling our data centers around the world. We continue to add more data centers in more countries and that's a steady pace, but as we asked those it allows us to actually fully address the market. As you know you know what are the unfortunate things at the cloud company is it more more countries will acquire their data.
[music] exists within the country's boundaries. It's only been steadily expanded the number of countries that we actually have data centers and around the world are the second thing to keep in mind is one of the things that you fees for some of the momentum last year and as we enter this year around international is that typically when we have new products, we do start selling them in the U.S.
Because it's easier to actually target customer segment, and a local market, but as we get momentum we actually start selling more more market. So you saw that dynamic, especially with the IDR last year is it for the first year Billy became much more of a global business and we think there's lots of growth in IDR over the next couple of years enough the catalyst.
Likewise with store, it's heavily focused right now in the early stages in North America, but over the next several years, we do expect some momentum if we continue to see progress on a global basis, there and so those are two catalyst is we actually think about the overall international expansion as we go forward.
Okay. That's helpful. In it and then Jeff I do want to ask if theres any any additional color.
You can provide around just the mix of air or by products, finishing 2019.
Thank you.
Yeah, well the air are still over 50% of the total a our our but it's becoming a less percentage.
As I'm sorry, we have is over 50%, it's becoming less of a percentage as the IDR grows IDR is now over 20% of the business and of the totally are and then App second others are make up the difference.
Okay helpful. Thank you.
Thank you very much.
Thank you and I'm showing no further questions at this time. This concludes today's conference call in thank you for participating you may now disconnect everyone have a great day.
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