Q2 2020 Rapid7 Inc Earnings Call
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The most after the speaker presentation, there will be a question answer session asked a question during the session you'll need to press star one on your telephone. Please be advised that today's conference is being recorded you require any further assistance. Please press star zero I would now like and the conference over to your speaker today, She Neil Shah.
President <unk> Investor Relations. Please go ahead Sir.
Thank you operator, and good afternoon, everyone. We appreciate you joining us today, if that's Rapidseven second quarter 2020 financial and operating results. In addition to our financial outlook.
The third quarter and full fiscal year 22.
With me on the call today, our Corey Thomas our CEO and Jeff Klatsky our CFO.
We've distributed our earnings press release over the wire and they need now posted on our web site at investors that Rapidseven Dot com, along with the updated company presentation and financial metrics file.
This call is being broadcast live via webcast and following the call an audio replay will be available at investors that Rapidseven Dot com until August 13 2020.
During this call we may make statements related to our business that are forward looking under federal Securities law.
These statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act like 95 and include statements related to the company's positioning our future goals and financial guidance for the third quarter and full year 2020, the assumptions underlying controls and guidance, including anticipated impacted over 19 on our financial guidance business.
Financial condition results of operations in renewal and our assumptions on the pace of economic recovery in the global economy on our future results of operations in product strategy.
These forward looking statements are based on current expectations and beliefs and on information currently available to them.
Actual outcomes and results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on form 10-Q and in the subsequent reports that we filed with the FCC.
Information provided on this conference call should be considered in light of such risks.
Actual results and the timing of certain events may differ materially from the results are timing predicted or implied by such forward looking statements and reported results should not be considered as an indication of future performance.
Rapidseven does not assume any obligation to update the information presented on this conference call except to the extent required by applicable law.
Our commentary today will be primarily in non-GAAP terms and reconciliations between our historical GAAP and non-GAAP results inside can be found in today's earnings press release.
At times in our prepared remarks were in response to your questions. We may offer incremental metrics provide greater insight into the dynamics of our business for a quarterly results.
Please be advised this additional detail maybe onetime in nature, and we may or may not provide an update in the future hobbies much.
With that I'd like to turn the call over to our CEO Cory Toms Cory.
Thank you for Neil and good afternoon, everyone.
Thank you all for joining us today or second quarter 2020 earnings call.
We're pleased to report solid execution in the second quarter and her team delivered results that exceeded expectations for both growth and profitability.
To to indeed, there are a $380 billion <unk>, 31% over the prior year.
Demonstrating our ability to meet customers by first priority with our insight platform, while operating income of $4 million reflect underlying leverage in our business.
Even amidst an uncertain landscape are consistent first half execution provides us a confidence arranged for your guidance. What's you won't cover during his remarks.
Organizations continue to face it makes economic and operational uncertainty as they navigate a rapid shift and their technology footprint.
Well customers are in various states, we play in digital transformation and cloud migration have walking up the priority list of companies evolve their business and these dynamics times.
During the second quarter, we thought customers return to clinical decision, making process and prioritize security enablement tied to be digital strategy.
Security challenges in the crowd are different.
As an organization in place cloud transformation efforts, adding faster pace.
And so need to quickly prioritize security analytics automation and cloud enablement.
These priorities align directly with our security transformations.
I'd, our App SEC connect cloud with physicians Robin seven to capture the cloud security operations opportunity.
During the second quarter, we saw better than expected momentum led by the security transformation solution with particular strength and IDR insight asset.
Our vision for the insight platform was driven by the belief that cloud adoption with spark the need for organizations in France, and then there's drilling program.
It's companies movie on the initial phase one with spots it depends I mean operationalizing work from home.
We see a fast follow phase two emerging organization increasingly look to digitize their operations over the long run.
This extended wave of cloud transformation as a catalyst and we are entering the early stages of a sustained effort by companies to transform their security operations around the world.
Well, we don't know the pace at which this transformation will play out the trend that drives our increasing confidence in the long term growth opportunity for insight products.
Security teams wasn't able to celebrate secure cloud migration, while navigating a more distributed workforce and ever before for many organizations. This increasing complexity exacerbated by tightening budget due to pandemic related disruptions.
Emits budget uncertainty the knee from productivity in times of volume is critical and ever.
Rapidseven, it's interesting this challenge and closing trying to achieve the gap for our customers in a way that only we can do an integrated insight platform to deliver sophisticated security operation while prioritizing ROI.
For sure consultant share an independent validation of this in a recently commissioned study rebuilding their organizations that the point inside IDR can recognize a 445% ROI or three years.
Study found that rapid sevens cloud native solution provides 79% faster time to value and delivers improved efficiency, 338% reduction in incident management efforts.
During the second quarter, we saw an existing health care customer choose IDR and connect the solved they're going to kick off I'll tell just because of these solutions superior outcomes and value.
Leveraging our single agent in fact, IDR was able to quickly address the customers need for visibility <unk> concept by defined threats in their environment, that's a competing solutions.
The customer purchase in fact connect as a bank time to unlock automated response capability across IDR nvme.
This is a great example of how customers are leveraging our security threats are mission solutions together to deliver better pretty outcome for advanced analytics automation.
Rapidseven platform strategy positions us to me customers, where they are in their secretary.
Whenever they I mean, your priorities are and allows them to expand seamlessly overtime.
Vulnerability management.
Detection response automation and increasingly cloud and application security.
As the pace of technology change accelerates, we see going customer adoption across our platform.
Our security transformation solutions IDR apps that connected TV cloud continue to gain momentum and for the first time represent over 50% of new business in the quarter as customers prioritize security analytics automation and cloud enablement.
These solutions now collectively represent over one third of our total air are growing in over 40% year over year.
This is all the while while we continue to gain share in the vulnerability management market delivering solid year to date, A.R.R. and revenue growth in excess of 20%.
We continue to be a balanced mix of new business coming from new and existing customers with a bias towards existing customers in the second quarter as we expected.
With multiple avenues to land, we saw healthy year over year growth and new customers, but are also focusing on expanding existing relationships in this environment as we help our customers transform their security program.
As a result, we experienced solid expansion in our airport customer ended the quarter at approximately $41600 growth of 20% year over year.
Our success in expanding customer adoption across our insight platform is rooted in rapid seven longstanding commitment to technology investment and innovation.
Let me briefly touch on some of the key achievements from our innovation pipeline in the core.
During the second quarter, we delivered a very successful launch of our enhanced network traffic and else's multiple insight IDR.
India give customers greater visibility to the attack surface by leveraging user and device activity across the network effectively shining a light on even the darkest parts of their network.
To date, India has been successful and driving not only cross sell deals, but also influencing IDR competitive win in the quarter.
To further enable our customers as they shift to work from home with reduce a new customizable dashboard within insight in to better track remote workforce and external placing assets with Disney dashboard customers can identify and monitoring remote assets in the changing environment and leverage information around one ability exposure.
We continue to expand the operational we'd some insight connect and into the second quarter with over 400 people plug ins and workflows.
Moreover, we opened our extension library, allowing customers to create a share their own workloads facilitating deeper customer engagement on the powering security professionals to benefit from the wisdom of their peers.
Turning to a brief update we'll give you file we could not be more fees was early integration efforts do you mean met our expectations in the quarter and we're even more optimistic about our long term growth opportunity in cloud security.
It depends on timing effect spark the need for enterprises to move faster to the cloud Csos are recognizing a different set of security challenges tied to scale and pace of change Gigacloud provides our customers with the visibility in automation necessary and manage their risk exposure, while enabling better team experiences with them out.
This differentiated value was evident in Q2 is difficult so whatever our top 10 largest deals in the quarter.
Cross sell to an existing reference any customer.
Like many organizations this manufacturing customer is embracing the public cloud to drive efficiency in innovation, but was concerned about maintaining continuing a security and compliance.
Additionally, without the right automation, they worried that a growing cloud footprint means growing risk.
This customer chose Didnt cloud because of its real time detection and strict managing multiple cloud environments, coupled with the right product adaptability for their sophisticated approach to Judy operation.
Shifting now to an update on our goals for 2020.
As the near and long term trends reflect the broader shift to both the cloud any more distributed workforce our ability to address customers need to these areas remains a key driver of our opportune.
Our first goal is to be a leader in enabling customers to transform an upgrade their security operation practices around the cloud we are experiencing and enjoying shift in how work is done once we track on corn prioritization of security analytics automation and cloud enablement.
Rapid seventh ability to solve customers challenges across these areas was our best of breed insight platform with a key driver of our success in the second quarter.
Building upon our recent recognition as a leader in the Gartner Magic quadrant for security information in a bit management gardener announced in July that Rapidseven was named a gartner pure insights customers choice for Sam with customers highlighting in fact, I'd ours ease of use integrations and alert accuracy.
With coupled with our longstanding leadership position and vulnerability management and our recent recognition in may as the only challenger and the Gartner Magic quadrant for application security testing reflects our ongoing commitment to delivering a leading cloud enabled SEC platform that empowers our customers success in the file.
Our second goal is to accelerate our platform distribution.
With an expanded set a market leading solutions on our insight platform, we see going interest from customers to acquire multiple insight products together.
This is a part reflected our second quarter sprint in average, a arbor customer, which accelerated to 20% year over year growth.
We remain focused on reducing friction around both our sales and customer purchase motion in a way that drive sustained growth in this metric.
Over the course of the next month, we expect a pilot period insight product bundles as we work to maximize customer adoption and drive improved sales efforts over the long run.
Our third goal is to drive long term operating leverage improvement in our business, while investing for growth.
Our second quarter results were a clear demonstration of both inherent underlying leverage in our business and strong expense controls.
We remain committed to investing behind profitable growth overtime, and now expect to deliver positive non-GAAP operating profit for the current fiscal year.
In addition, assuming a sustained recovery path in the next year, we expect that we will return to the balance growth and profitability framework that we see earlier this year for the full year 2021.
Finally, before I hand over the cost Jeff I would like to take a moment to welcome our newest board member.
As we shared in our earnings press release today, we're privileged to have rating Sunday, who served as Chief Security officer at all of that so in rapid seven board of directors.
As many as an accomplished technology leader with deep expertise across cloud and security and she brings the perspective of our customers to the board.
In closing, we continue to execute on our mission to make the best and security operations achievable to all and I want to thank our rapid seven team for their commitment to helping solve customers challenges. During these uncertain times with that I'll turn the call over to our CFO, Jeff Clocking Jeff.
Thanks, Corey and good afternoon, everyone.
Before I begin a brief reminder, that except for revenue all financial results, we will discuss today, our non-GAAP financial guidance, unless otherwise stated and reconciliations between our GAAP to non-GAAP results can be found in today's earnings press release.
We're pleased to report solid performance during second quarter of 2020 with results that exceeded our guidance on all metrics.
Topline strength was driven by demand for our security transformation solutions, coupled with continued growth on mobility management, while underlying leveraged strong expense controls drove upside to profitability.
Total air our ended the second quarter 307, $9.9 billion growth of 31% over the prior year as customers turned to our insights platform to help facilitate more secure shift.
Second quarter total revenue $98.9 billion was above the high end of our guidance and grew 25% year over year.
This was driven by better than expected year over year products revenue growth, 27% to $92.4 million.
Recurring revenue represented 91% of total revenue second quarter compared with 87% in the prior year period.
Looking at the business geographically North America revenue grew by 25% year over year end comprised 83% of total revenue second quarter, while rest of world grew by 29% representing 17%.
We continue to grow our customer base and ended the second quarter, serving over 9100 customers globally growth of 9% over the prior year period.
At the same time, we're focusing on expanding relationships with existing customers. We're turning to Rapidseven helped transform their security programs as they work to advance securely into the cloud.
As a result air our per customer saw strong year over year growth, 20% of the quarter to approximately $41600.
Turning to margins total gross margin second quarter was 74% and improvements was 73% in Q1 down slightly from 75% a year ago, primarily due to lower professional services gross margin and continued growth of our cloud based offerings.
Sales and marketing expenses improved to 41% of revenue compared to 45% of revenue Q2, 2019 and benefited from reduced TV spend as well as timing of some marketing spend that ship.
Second half.
R&D expenses for the quarter were 20% of revenue consistent with the prior year period and included a partial quarter beauty products.
DNA expenses in the second quarter were 9% of revenue down from 10% to prior year, driven by reduced TD and natural leverage.
For the second quarter, we reported an operating profit $4.3 million head of our guidance range driven by Overachieved on revenue and solid expense.
Adjusted EBITDA for the second quarter to $7.6 million and net income per share was five cents also ahead of our guidance.
Shifting to our balance sheet cash flows we ended Q2 with cash cash equivalents and investments or $321 billion compared to $253.6 million as of Q1 2020.
The increase from Q1 predominantly reflects the net proceeds were approximately $196 million related to our convertible notes offering capped call transaction.
Offset by cash outflow of approximately $126 billion related to our acquisition of giving crop.
We experienced healthy collections activity in the quarter ended Q2 operating cash flow a point $4 million down modestly periods $2.5 billion a year ago period.
Turning now to guide.
Rapidseven strategic offerings and product leadership position us to capture the expanding cloud SEC ops opportunity as organizations leverage security analytics automation and cloud enablement to empower secure digital transformation.
During the quarter, we saw this play out as customers turn to decision, making prioritizing security enablement through our insight platform products.
As we look ahead, our revised 2020 guidance now framed around two fundamental drivers.
Overall demand for our strategic security solutions remains robust.
During the second quarter, we experienced healthy activity engagement as customers look to rapid seven with the transformation initiatives. However.
Customers continue to face an unprecedented period economic uncertainty probably budgets impacting near term visibility around second half trajectory.
Let me share some brief context, how we are balancing optimism around the long term opportunity with near term visibility challenge.
We continue to analyze financial stress durability across our customer base at a micro vertical level to frame arrange Bob pumps for new business structure.
While Q twos better than anticipated demand mitigates, our prior downside expectation.
Continued anticipate a wide range economic scenarios for the second half.
The high end of our revised guidance now contemplates continuation of Q2 trends, reflecting a jacket, but steady economic recovery trajectory.
At the low end our guidance range assumes some additional risk tied to potential brought regional or systemic shutdowns as a result to sustain endemic resurgence that would drive deteriorate deterioration from Q2 correct.
The result is that we are raising modestly tightening our air our guidance range entering the second half while still maintaining a wider the usual rates to account for the variability economic outcomes as a result would be ongoing.
For the full year 2020, we now anticipate air our fee in the range of $404 million to $420 million, an increase of $15 million mid point or growth of 19% to 24%.
We are raising full year revenue guidance, and now anticipate revenue being the range $399 million to $403 million or growth of 20% to 23%.
We continue to invest while focusing on driving sustained long term leverage in our business through strong expense controls and prioritized high ROI invest.
To that end and building off our strong performance in Q2, we now anticipate returning to a non-GAAP operating profit the full year within the range of breakeven to $2 million.
As a result, we're raising our expectations full year non-GAAP loss per share being the range of the loss of 14 cents to loss of 10 cents.
This is based on 51 million basic weighted average shares outstanding for the full year 2020.
We expect cash flow from operations full year be loss of approximately $15 million. This improvement relative to our prior expectation lost $25 billion is a function of improved full year building expectations associated with our revised after our assets coupled with strong expense controls new business.
Additionally, while it remains early in our by 21 budgeting process I will reiterate coreys earlier comment, but assuming a sustained recovery path going forward. We currently expect to returns for our previously communicated balanced growth and profitability framework for 2021.
Moving now to quarterly guidance.
We anticipate total revenue third quarter 2020, being the range of $100.7 million $202.3 billion growth of 21% to 23%.
We anticipate non-GAAP operating income third quarter to be in the range from a loss of a half million dollars to positive half million dollars.
We call. The Q3 includes a full quarter pubic cloud expenses as compared to a partial quarter Q2.
Non-GAAP net loss per share anticipated being the range of loss of six cents to loss of four cents, which is based on anticipated 51.3 million basic weighted average shares outstanding given our projected non-GAAP net loss.
In conclusion as demand accelerates for cog deployments Rapidseven, it's focused on helping make the best security operations achievable for our customers to best of breed security solutions on our site.
With that we appreciate your time and support we'll now open the call for any questions.
Operator.
Thank you.
A reminder, is asking question you'll need to press star one on your telephone.
To address your question first upon Keith please standby, we compile junior roster.
Our first question comes from Saket Kalia with Barclays. You May proceed with your question.
Okay, Great Hey, guys. Thanks for taking my questions here how are you.
Hey, Good weather Avenue, Hey, Hey, Awesome, Corey maybe just to start with you.
Helpful Helpful commentary on that on the air our breakout in terms of a third of a we're kind of coming from non VM products, let's call it and I really want to zero in on the insight IDR are the same part of that equation. I think we were all seen sort of the increase prioritization of VM and these.
Times, but im curious how are your customers approaching Sim in a post kobin world.
Yes, no. Your observation is front on nvme with much clearly much stronger than we originally anticipated and communicate it.
Which is sort of the backbone and so how we think about ratings, but I'll say that context film was even stronger and we saw strong both quality and demand for our sobbing Sem and really have a few different things that actually go to that strength is first and foremost people recognize the need to modest for these modern times as you have work from home as you actually have more.
Cloud based applications, you actually have a different environment that you're monitoring and so we saw has been demand even stronger than the VM demand, which was strong adult.
That's great that's great, Jeff maybe maybe as my follow up for you.
Can you just remind us what the net revenue retention was this quarter and maybe just go a little deeper into it what you're seeing in terms of gross retention versus upsell cross sell anymore anymore. The net revenue venture be helpful.
Sure.
First off on the gross retention it was good and consistently has been in our historical range no different this quarter in Q2.
On the U.R.R.
We declined a little bit from 106% to 5% and I just want to remind everyone that we anticipated that that decline so at came in.
In line with what we were forecasting.
So.
Both Upsells and cross sales were up year over year in particular, the cross sells where we had strong cross sells and that really showed in the growth of our per customer, which increased by 20% year over year.
I also want to point out that we don't really managed to this metric, but we manage the air our growth, which is our key key metric and which we're guiding to over 20% at the midpoint of our air our guidance.
Yes, no absolutely definitely saw thanks, very much guys I'll get back in Q.
Thank you.
Thanks.
Thank you. Our next question comes from Matt Hedberg with RBC capital markets. You May proceed with your question.
Hey, guys. Thanks for taking my questions and congrats on some really strong results. These are certainly uncertain times, so so well done on that front.
Core in your prepared remarks, you noted coated really changes the conversations with Ceos, and really pushing them faster to the cloud.
And maybe previously they would have moved to I guess that at a high level.
Can you talk a little bit urgency of this of Ceos desire for this migration and which of your emerging products, which did well. This quarter can you think could see the strongest long term benefit firmly to sort of this paradigm shift.
Yes, it's a great question and Matt. Thank you.
Joining today as if you think about what's driving this really two populations as one.
CIO can no longer weight to actually digitize their operations.
What's referred to the cloud is that like digital commerce has to be front center that a digital commerce digital engagement and digital operations and so people are logo to assume that you could actually standby into a slow transformations. If you want to go better example, that just looking within the healthcare industry, where somebody else will take 10 years overnight change to tell health.
So you see that same type of RBC across most industries.
Whether the urgency to say how do we actually make sure that we can engage our customers and our partners digitally at the same time, we didn't have the way benefits is that CIO, even boards are no longer under the illusion that you could actually just shift to digital operations.
Are there other than to the cloud and ignore security. So security now part of the conversation and part of an area and so this has got to be a an extensive transformation promotes operations are starting now, but it's got to be sort of a multiyear effort is to boxing really upgrade their core both business operations and technology for the digital.
And then we primarily done in the call.
Yes, we think about why that such a big driver and that way we find that it's also by securing transformation solutions and why that such a big driver. There is there's really a couple of keeping one everyone knows at those environment to those digital environment are going to be under attack and good luck to protect them on environment, we see a master demand driver for insight.
We saw that for this quarter. If you look at other part of our security transformation solution is just like they have offset more with less automating much of the environment, we see strong going forward demand for Inphi connect and we actually saw good healthy demand and execution this quarter and we expect that to be doable also and then of course.
Lastly, probably most importantly speak about the cloud is that people have demand security differently in the cloud and that was a big part of a decent around the difficult acquisition is that security management will be absolutely essential in the cloud and we believe that we acquired the best platform for that within clout and that acquisitions. So those are the core.
Lets payments, it's called applications, because there are people to build the topic, especially to do this detection and response and automation, we see as the core tenants.
Uhhuh a cloud enabled digital transformation.
Super helpful. Thanks, Thanks, Corey incorrectly.
But do.
Your next question comes from girl as with equal you May proceed with your question.
Okay, great. Thanks for taking my questions and congrats on the quarter guys. Cory you talked about phase two of broader security spend I was hoping you could elaborate a bit on that how does that correlate the performance in the quarter and by that I mean did you see trends improve as the quarter progressed.
Yeah. So as you recall last quarter, we expect this things to actually so that we still believe in general that the overall, both security spread and digital sensitized to the economy, but it's not as tightly tied as we expected you know it's quite clear is that people were not as paralyzed around security spend as well.
We expected them to be and we really think about the phase two we knew that we were in a moment of this work from home and what the spans of work from home what was positive that we didn't expect if people fairly quickly moved from the work from home with lots of people got working quickly and then start thinking about like what does this whole environment that will likely the sustained through really mean.
For our operations and people started continuing efforts that will allow that were aligned with the long term technology strategy and the security strategy sport that so efforts that were around.
Improvement and enhancing cyber security for a more technology environment lots of those initiatives continued at a pace much faster I'd also say that.
As a private number of new initiatives got started.
In that same vein and so if you think about how we look at the business look what's happening and also the pipe.
But we actually see building it was definitely much better than we expected when we had discussion I'll ask or.
That's a that's super helpful and then Jeff maybe one for you.
Acceleration in air per customer was really interesting maybe you could elaborate a bit on what drove that it did the growth and b M. Workloads are sounded better growth in new solutions or also reflection of customers I, just perhaps getting bigger here as well. Thank you.
Yes, I think it's.
Across the platform, particularly cross sells.
IDR cross sells its really all all across the broad platform.
No no one specific item curve.
Okay. Thank you.
Thank you are.
Thank you. Our next question comes from Brian Essex with Goldman Sachs. You May proceed in your question.
Hi, guys that are in them on for Brian.
Innovations for the quarter of quoting are starting to look like.
What do you mentioned the introduction of flex program that and if enables customers, it's improving expand their asset coverage at no extra charge. Just wondering if you could provide some color regarding any increasing overall monetizable asset base customer because of the program how customers started deploying more off of more fee.
Deployments for the end solutions going forward some color on that would be where do you have with and then maybe a follow budget.
Yes, so first and foremost as much as well. Thank you. So most of the question as we mentioned so last quarter in the framing is that it was primarily does actually drop customer satisfaction loyalty and we did a good healthy uptake no. It is leading to increased pipeline, which have been positive, but our goal will not monetizing our goal is to really support our customers.
That said, we do expect it to be a positive contribution over time to the business I would not be though the primary driver in this specific quarter in of itself. So we lost in the quarter.
And people responded in the quarter, but it definitely actually helped with actually creating a strong relationship with our customers, which if you think about what really says rapidseven up for the sustained growth and profitability that were pursuing it's actually custom an expanded our IR for customer, which is one of our primary goals.
That's really have for banking and for just for you maybe if you could provide some color on the average contract and that you witnessed this quarter in general have you seen kind of for shortening of the ALCANZA second, especially as we saw customers kind of.
As for can get budgets and flanker brands of cash in this.
On the consent and do so any color on that will be with thank you are so let me start off by saying overall the contract lengths.
Did not meaningfully impact billings this quarter.
But having said that in the bookings, we actually saw them a little longer.
With more payments annually since we.
Since we're focused on air our contract lengths really aren't meaningful as they don't really relate to billings and cash flow. So.
So we're not really collecting the money in other words, if we have a contract length that was 24 months since we've converted to Psas were not really getting two years payments upfront. So you really have to look at air our is the key metric right now.
And contract lengths don't correlate the cash anymore.
That's that's really the net of it right now used to under the perpetual model. Because then when we sold multi years were paid all upfront. So again I'll just reiterate that air ours key metric.
Okay. Thanks.
Thank you.
Thank you. Your next question comes from Robyn Rabo with Piper sand. We appreciate your question.
Hey, guys. This is Justin on for Rob I was just hoping that maybe relative to the market landscape what portion of opportunities nvme and the rest of the platform or would you characterize as greenfield opportunities versus competitive wins and of course, you talk a little bit about the competitive wins in the quarter. If you could maybe just elaborate a little more on that.
Yes.
I would say that I've not heard of a big Delta from our team as you can imagine is that we had strong growth in the cross sell motion.
And we'll continue to add net new customers, but I have not heard from our team that we saw material difference in our greenfield versus be competitive wins there.
Alright, Great and then just for Jeff Real quick I know you mentioned, 10% exposure to the heavily impacted verticals in the last quarter and as maybe if you could dive back into that relative to what you're seeing trends wise our budgets for your than you expected are still pretty tight there.
Yes, we don't see any change in that exposure.
I will point out that we again looked at our when we provide our guidance. We we did look at our verticals and sub verticals and.
Hello.
We explained in our prepared comments.
What what drove the high end of our guidance and low into our guidance but.
No change in the overall composition of our customer base relative to our guidance.
That said I would say that we saw stronger than expected performance across most.
Of the verticals and that's both on the security transformation and B.
Which includes sort of the things are helping people transform to the digital enterprise and on the be upside to.
So much. So if you think about why we have confidence in our forwards sort of like outlook and being back on the model as we actually go into 2021, instead, we see our security transformation portfolio.
Going over 40% this year and we actually in the be upside, we see that sustaining growth. So earlier comments I talked about BM going over 20% in this quarter, which was great.
Prior I talked about going in the 5% air our range, we actually think that thats over 10% a our revenue perspective, we actually think thats in the mid to high teens and so we feel pretty good about what we're seeing from an overall demand that said this company go bankrupt, there's going to be issues as it will respond to cobot, but we look at a higher level of fundamentals.
Man.
That's great. Thanks.
Thank you. Our next question comes from Keith Weiss of Morgan Stanley You May proceed.
Excellent. Thank you guys and thank you next quarter.
Hey, Cory I wanted to dig in a little bit in terms of sort of the changes that you're seeing and the industry.
We talked about sort of digital transformation pushing more people cloud that increase in certain key increasing the priority security analytics in general, but not a big part of the stories getting your customers to buy more broadly across the portfolio are you seeing any any change in that sort of that traditional kind of security mindset.
If we buy just only best of breed solutions to the guys more willing to say listen there's real value add and having this all on one platform to be able to sort of current at the insights across multiple products is that I'm starting to resonate more with your end customer.
Yes, it's cheap it's a great question I would say keep in mind. Our core thesis was that people would only by a integrated solution. If it was best in class. So if you remember our aspiration is to actually be topline and everything that we do you want to talk to solutions every category that we anticipated and we think that we're trying.
And well my goal being in that space and demonstrating that we're a leader and we were leader at IDR.
And we'll lead in our emerging categories now positions us to be a space where customers are responding quite positively on our overall platform.
Packaging bundle distribution model and in fact, we've got to be actually bundling more platforms selling strategies with our salesforce.
Over the course of this year and next year, because we can't will customer intent and demand, but that's because our customers get the fits and they actually feel that they're not having to make us escaped the tradeoff they'll get the benefits of platform talking economics, they're getting sort of deploy technology watts.
Yeah, just that alphabet, a whole bunch of different collectors in their environment get tighter integration, which delivers more productivity, but do that all what's best in class performance on each individual category. That's what's so unique about what we're talking about rapidseven. Its best in class every category, but an integrated experience that lowers the cost of operations.
And get people talk of economics, which is especially important in this time ethical really book from total cost of operations.
Got it got it and it's actually going more and decide on the margins.
The equation, so really nice progress on the profitability said equation this year, but I feel like.
It calendar 2000 comes with an abstract because the extent.
Dynamic, so different, especially with TD and nobody's traveling in the or events change a lot. So when you guys are talking about sort of going back to the down to growth and profitability can counter 21 is there an explicit.
Step up that we should be thinking that interest expenses when that team. He comes back in or sort of when these events come back in and is it possible sort of quantified that looks and because our guys on flying all around we were able to sell save 510 $15 million. It this quarter anything of that.
Hey, guys. This is over so we definitely benefited from Jade I think one maybe give advice is that we have and always have had a heavy inside sales model. So we did not have the same growth see any level as many companies. So it was a benefit not admitted to benefit.
As some of the other players in the market.
Thank you see there the second thing is that we actually focused internal how do we actually drive our own operating leverage so we actually when we look at things internally, we actually look at select strip it out which is one way to think about that when jump when I talk about being back on our model. If you think about selected three your model, where we're looking at so how we actually continue to grow.
Well if sustained growth, but continue to me expand margin each and every year, we're factoring that in the fed by Glisten is the margin expansion has to be in place when do you see any benefit goes away.
And so that allows us to actually make a thoughtfully about how do we actually make investments in the near term, but the gold is when those take any benefits go away and things return to more normal we're still exiting what the same.
Margins strategy that we laid out yes, clearly as the year delayed with the whole could environment on the margin side.
But yes, it's still we'll look at how we actually improve the core underlying operating margin and thats, the permitting that Jeff and I measure our team.
Perfect that's what it really nice quarter guys.
Thank you so much.
Thank you. Your next question comes from Josh will conclude with Bambrick capital. Please proceed with your question.
Hi, guys. This is Andrew Smith on for Josh could you just remind us what you've experienced in the past when a customer would lay off employees.
How long is the lag until impacts rapids business being as you price per asset or app and not necessarily per user. Thanks.
Well I think it's not a someone.
Not something that we look at heavily to be clear, who don't have that many.
I would say employee pricing models.
And what we find is that the underlying asset the companies have.
Tend to go at best away in the employee base and that's always been true and I'll say that.
Secondly, it's probably even more true and this digital cloud bear that we're actually in where the cloud technology assets are likely to actually caught a faster rate than any decline in the employee base.
If you think about what we get paid to underline level. It's the technology infrastructure. This actually there, which I would that simple unpredictable for our customers, but it's still getting paid for the technology infrastructure, we're going to infrastructure in the cloud or whether thats assets.
Thats in the judicial environment.
Great makes sense. Thanks.
Yeah.
Thank you and I'm not showing any further questions. At this time I would now let's turn the call back over to Corey Thomas for any closing remarks.
Well, thank you all for joining us today.
I also want to make our team and our customers. This has been a difficult environment for everyone.
Our team at our customers and we're all working well together thats and make sure that we're delivering the technology that helps will really drive in these times. So thank you all for joining.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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