Q3 2021 Sumo Logic Inc Earnings Call
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All participants are in a listen only mode. A question answer session will follow the formal presentation if anyone.
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Telephone keypad.
This conference is being recorded I would now like to turn this conference over to your host Mr., Paul Thomas Vice President Investor Relations.
Go ahead sorry.
Thank you good afternoon, and welcome to Sumo logic third quarter fiscal 21 earnings conference call.
Paul Thomas Sumo logic, Vice President of Investor Relations joining me on the call today are Rami share President and CEO and Sidney Kerry Chief Financial Officer.
Format. Today will include prepared remarks by Rami and Sydney.
By a question and answer session.
Some of our discussions and responses to your questions will contain forward looking statements, including statements related to the expected impact of the COVID-19 pandemic. The expected performance of our business future financial results guidance strategy and overall future prospects. These.
These statements are subject to risks and uncertainties actual results may differ materially from our forward looking statements at.
A discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, including our risk factors filed but our final prospectus relating to our IPO and the risk factors that will be included in our form 10-Q that will be filed subsequent to this call sumo.
Sumo logic assumes no obligation and does not intend to update or comment on forward looking statements made on this call.
Our discussion today will include non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results may be found in our.
Earnings release, which was furnished with our form 8-K filed today with the FCC and on our Investor Relations website at Investor day that sumo logic Dot com.
For certain forward looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in our earnings release posted on our Investor Relations website.
That let me turn the call over to Rami.
Thanks, Paul and thanks, everyone for joining us today on our first earnings call as a public company. This is something we've been looking for true for quite some time. We are excited to have completed our IPO in September and I want to take a moment to express my sincere gratitude to our employees customers partners and investors.
As for helping sumo logic achieved an important milestone during these unprecedented times.
It was an exciting event at the culmination of over a decade of hard work.
Moving to enhancing sumo logic cloud native multi tenant software as a service offering I'm, especially proud because together with our strong community. We pioneered a new category of software called containers from intelligence, which automates the collection ingestion and analysis of application infrastructure. So.
Journey, and I, all cheated out to derive actionable insights for deficit comps and.
We believe we're still in the early innings average 50 billion dollar market opportunity whereby sumo logic can help enable organizations of all sizes and maturity accelerate their shift to the cloud and modern application architectures.
Before we go into more details I would like to provide a brief summary of the highlights of our quarter.
First again I'm proud of the strong execution, we demonstrated our first quarter as a public company.
While there continues to be macroeconomic uncertainty and volatility we saw strong desire and demand for similar logic more specifically, we saw strong momentum and new customer acquisition upgrades and cross sells from multiple use cases.
In addition, we have continued commitment and momentum from from.
From our channel ecosystem partners and a large community of users.
From a technology perspective, it was a massive quarter for us in terms of product innovation and really since many of which we highlighted at our alumina user conference in September.
Lastly, the opportunity for our differentiated cloud Nadesan continues to increase as cloud migration and digital initiatives accelerate.
Now I would like to provide some more details on each of these points we.
We saw strong revenue performance with total revenue increasing to $51.9 million up 28% year over year revenue growth was supported by improving momentum from both new and existing customers.
This quarter, we landed at over 100, new customers, including a seven figure land at a fortune 50 company.
Well my from also improved with our customers who generated more than 110 annualized recurring revenue or are these.
These customers increased to 349 up 18% year over year.
And our dollar based net retention was again above a 120 per cent for the 11th consecutive quarter.
This quarter, we saw strong momentum and multiple use cases spanning the fortune 50 to mid market and SMB from North America International region.
In the past quarter more than 30% of the opportunities. We won were multi use case, where.
Where we saw strong demand across security I T and business operations, driven by our ease of use.
Increasing demand for security you observe ability capabilities as well as our flexible licensing model allows customers to cost effectively try new use cases.
We are landing in more than one use case and expanding into other use cases as adoption spreads across users team and organization.
Which drives more data into our platform.
Let me share a few examples of the marquee wins, we had this quarter.
This quarter, we want a seven figure land with a fortune 50 customer.
This enterprise customer like many of our other enterprise customers was modernizing their security operations and data platforms from a home grown and legacy systems, which required manual processes and generate an overwhelming amount of false positive alerts, which drove up their mean time to remediation.
Sumo logic, one because of our cloud native son solution, which can dynamically scale to ingest their large variable data volumes with no manual intervention and our ability to eliminate irrelevant alerts to improve automation and remediation times lie.
Lastly, we enable them to consolidate multiple operational security reporting analytics and data warehouse.
The next example demonstrates our land and expand strategy with a fortune 500 media company.
From a logic had been used for several years and one division of the company and an operational intelligence use case for monitoring and troubleshooting wonderful.
When the global she's always looking to reduce cost and required a new sim solution to replace a legacy on premise vendor our cloud Native then wasn't easy choice.
Sumo was also selected because of our scalability ease of use and our credit based licensing model.
This resulted in a six figure cross sell of our cloud Kim.
We continue to see success in the mid market as well.
This quarter, we landed a six figure multi years case deal, what's a fast growing private technology company and also expanded their usage with a cross sell within the same quarter.
For the initial land the old they relied on a combination of open source logging tools.
And separate monitoring tools as they grew the disparate tools made increasingly difficult to scale. That's yeah, the troubleshoot across multiple platforms and that unpredictable pricing from multiple pooled vendors.
Simple was able to provide them with a single platform, where they can seamlessly monitor troubleshoot diagnose across their applications and infrastructure, while providing visibility into usage from our credit based licensing.
As a result, the company chose sumo logic not only for operational intelligence, but also for security intelligence.
Well, we had some great wins this quarter, it's important to point out that we believe we're still in the early innings and greenfield opportunities still make up a substantial portion of our opportunities we see each and every quarter.
As an example, we had a six figure land with an enterprise customer and the logistics industry that operated since inception with a home grown open source tool they built and managed themselves they.
They were in need of a massive upgrade to their security operation and wanted a modern cloud based log management analytics platform as the core Foundation.
We demonstrated that we can future proof their ingestion needs with a dynamic scaling and real time visibility of our platform, which also provided them visibility into licensing and using usage cost.
Partners, such as distributors bars, I see managed security service providers or NSS piece also play an increasingly important role in our global go to market strategy.
This quarter, we signed a six figure expansion with an MSP, who embed sumo logic into their stack in order to position and sell a comprehensive security services to enterprise class great customers.
This customer came into Cmos platform about a year ago, and I continued to expand with us multiple times, including the most recent upgrade this quarter.
And know that we only count this MSP and for that matter all msps as individual customer, even though they are delivering sumo.
Service to thousands of their users.
In addition, we continue to expand our partner relationship with eight W.S.
In August we renewed our agreement with day W. S, which includes enhanced go to market and strategic collaboration programs across your registration marketplace target verticals and geographies.
We recently announced a distributor firewall integration with eight up U.S., which provides real time visibility into network traffic and automates the correlation of threats surface by the in a W. S network firewall service, thereby reducing the time to detect investigate and remediate security issues.
As these customer examples highlight we had some great wins this quarter.
We're seeing success, both with our direct and partner led selling motion as well as our IC ecosystem partners.
We continue to see growing momentum across our data set tops I SB ecosystem reseller called service provider and managed service provider routes to market.
Going forward as a result, we plan to continue to invest in expanding our 275 plus partner ecosystem, including international resellers like recently sign Westcon to expand our routes to market globally.
Now I'd like to move on to innovation.
We had a massive quarter in terms of new product introductions, which we showcased at our fourth annual user conference ILLUMENATE 2020 at the conference we highlighted our broadened sumo logic of sort of ability suite with new additions, including our ADW EPS observe ability solution and our software development absorb ability solution.
As well as our new distributor tracing and open source monitoring capabilities.
Additionally, we provide enhanced analytics from troubleshooting updates to our microservices observe ability solution.
Lastly, we also announced enhancements to our security intelligence suite, including improved automated threat detection and expand its desktops team reporting capabilities.
These new and expanded solutions further position sumo logic as the cloud native intelligence layer from modern application and multi cloud environments in order to drive a unified view of real time analytics across operations security business and customer intelligence use cases.
While we see a lot of Greenfield opportunities. We also see a massive transformation and migration in the security space as you May recall, our cloud data center has been in the market for a couple of years and more recently, we have fully integrated the jas acquisition into our platform. Together. This has helped us further.
Our win significant new business as customers look to secure larger cloud and digital environments. While also improving the automation and intelligence of their security operations Center or Soc.
We will continue to invest to expand our security intelligence, we with new products and features to build on our differentiated cloud native solution, putting us in a position to capture this accelerating opportunity.
We're excited about the opportunity in front of US and believe we are well positioned to win in this large and growing market before I hand, it over to Sydney to discuss some of our financial results I'd like to remind you of some of our Differentiators and why.
Customers choose sumo logic.
Typically there are four simple reasons first our single platform from multiple use cases, which is easy to adopt and expand usage.
Second our ability to scale from megabytes, exabytes with no performance degradation or user limitations.
Third.
I mean, Jeff and analyze all types of data in real time, and don't rely on sampling aggregating or converting data, giving customers the absolute best insights into their data and their processes and finally, we provide an innovative and flexible licensing model given customers full visibility into how they are using the profit.
From without worrying about ingestion limitations or overages or penalties.
While these benefits are clear, it's also important to remember or realize that sumo logic decade of experience operating at scale has enabled us to not only meet the typical challenges and needs of our customers, but also manage their own costs and margins.
We have proven we have been able to make these operational improvements, while delivering exceptional customer satisfaction as well as increasing our innovation and differentiation.
In summary, I'm very pleased with the strong execution, we demonstrated in our first quarter as a public company.
There were many important highlights from new and existing customer deals strength in our growing ecosystem of partners and users and lastly, our powerful innovation engine that delivered some amazing new capabilities and solutions.
As such we are excited about expanding opportunity for us and we're continuing to invest to help customers of all sizes and maturity that are build manage and secure their digital and cloud services.
With that I would now like to have Sydney, Our Chief Financial Officer provide more details of our strong financial results in Q3, and our outlook for Q4.
Yes, I mean I would also like to thank everyone for joining the call today I'm personally very excited and proud of our performance in our first quarter as a public company I'd.
I'd like to start with a brief summary of our financial highlights for the quarter first we delivered compelling customer metrics, both with new logo and expansion wins in our customer base, while continuing to operate in a co that impacted environment.
We had strong operational execution, but compelling topline revenue growth and we demonstrated deficiency with continued improvement in our margin.
We are pleased with the continued momentum we are seeing this year from both our new and existing customers, our new customer lands are growing in size and the average deal size at both quarter over quarter and year over year our.
Our net dollar retention rate, which is about 120 per cent for the 11th consecutive quarter our.
Our total count per customers greater than 100, K Air our continued to increase reaching 349 customers, an 18% increase year over year.
Lastly, our average revenue per customer of $97000 were up 25% from the same period a year ago.
Now I'll provide more details on our third quarter financial performance we.
We delivered a strong performance in our first quarter as a public company Q3 total revenue increased to $51.9 million up 28% year over year as a reminder, because of the ease of use of our platform approximately 99% of our total revenue subscription revenue, which is recognized on a ratable basis.
Calculated billings for the trailing 12 month period totaled $202 million up 21% year over year recall that we look at calculated billings over a trailing 12 month period as this metric can fluctuate from quarter to quarter due to the timing of our renewals and billings duration for larger customers.
Therefore, we believe a 12 month measurement period, that's reflects the fundamentals of our business.
Our remaining performance obligations or RPL increased 51% year over year, driven by the size and duration of new and expansion contracts.
Now, let's review the income statement in more detail as a reminder, and unless otherwise noted all metrics are non-GAAP a reconciliation of GAAP to non-GAAP financials is included in our earnings release and posted on our website.
First we saw a significant improvement in our margin profile this quarter, giving us ample room for future investment in our business as we address the large market opportunity recall that in Q2 at the peak of coated uncertainty we made the decision to pause hiring and take some costs out of the business in.
In Q3, we restarted our recruiting engine, but is not went back to the pre pandemic level.
That combined with lower than expected discretionary spend where the key drivers of our improved margin.
Moving to gross margin in Q3, we saw gross margins improved to 77% up from 73% in the year ago period. The improvement was driven by continued efforts to optimize our pot from efficiency and a onetime benefit from eight of U.S. credit, which will not repeat in future periods.
Sales and marketing expense was $22.2 million or 43% of revenue compared to 70% of revenue in the year ago period.
We benefited from a number of cost saving measures this quarter as a result of kind of that including reduced travel and a decrease in typical marketing program spend as we pivoted from events to digital and online.
Well, we did reach our quota carrying headcount target we were below plan far sale support roles.
Research and development expense was $13 million or 25% of revenue compared to 29% of revenue in the year ago period.
The decline was driven.
[noise], primarily by lower head count cost and discretionary spend in light of cover it.
General and administration expense was $7.3 million or 14% of revenue compared to 16% of revenue in the year ago period. DNA expense includes an increase in a public company costs, including idea no insurance costs, what portion of the quarter.
Taken together the Overperformance in revenue and the improvements we saw in gross margin sales and marketing and R&D drove significant improvement in our operating performance, our operating loss was $2.2 million or an operating loss of 4%.
Improving from an operating loss of 41% in the year ago period.
Net loss in the quarter was 3.3 million or six cents per diluted share based on approximately 55.8 million weighted average diluted shares outstanding.
Turning to our balance sheet and cash flow. We ended the period with $407 million in cash and equivalents largely driven by $343 million net proceeds from our initial public offering in September in Q3, we used 24 million to pay down our revolving credit facility.
Free cash flow in the quarter was negative $18.7 million or negative 36% of revenue compared to negative 40% in the year ago period.
Moving on to guidance.
Let me start by talking about the impact of covered on our business depends on that gets created a mix of headwinds and tailwinds from many companies on the headwind side impacted industries that make up approximately 10% of our total air are continued to be challenged because of headwinds to these industries and generally cobot impacted short term budget incensed.
Ms and geographies, we have seen our net retention ticked down this quarter and anticipate that it will fall below 120% in Q4.
On the tailwind side the momentum in our business outside the impacted areas remains positive billings has improved as new customers begin with annual upfront agreements and while I T budgets are under high scrutiny, we continue to see strong multiyear contracts for both new and expansion deal.
Additionally, we have seen that security spending remains high on the priority list for enterprises of all sizes and therefore, we continue to see the benefit of that spend and our security intelligence wins.
Taking a step back from the near term uncertainty and looking at the bigger picture. We believe the pandemic will accelerate the already disruptive trends in digital transformation security and the cloud migration and we are well positioned to execute on the large market opportunity.
Now moving back to revenue as a reminder, we break out the performance of our revenue, excluding our largest customer in order to increase the visibility into our performance. This.
This customer has variability and seasonality, which can differ from the rest of our business and we want to continue to provide transparency into the trends of our large customer and the rest of our business.
For the fourth quarter fiscal 2021, we expect total revenue $51.8 million to $52.3 million or a growth rate of 17% to 18% year over year.
Revenue, excluding our largest customer a $49.3 million to $49.8 million. This represents a growth rate of 23% to 24% year over year.
Non-GAAP operating loss of 11.4 to 10.9 million or an operating margin of negative 22 to negative 21%.
The decrease in Q4 operating margins are due to increased investment in personnel in R&D and sales marketing program spend public company costs and other discretionary spend.
Non-GAAP loss per share a 13 to 12 cents on approximately 101.5 million weighted average shares outstanding.
For the full fiscal year 2021, we expect.
Total revenue of $200.3 million to $200.8 million, representing a growth rate of 29% to 30%.
Revenue, excluding our largest customer at 185.9 286.4 million, representing a growth rate of 29% year over year.
Non-GAAP operating loss of $35.6 million to $35.1 million or an operating margin of negative 18 to negative 17%.
Non-GAAP operating loss per share of 79 to 78 cents on approximately 49 million weighted average shares outstanding.
In summary, we are excited to have completed our IPO and we're pleased with the results of our first public quarter, we delivered compelling results with marquee customer win positive momentum in our customer base and with our channel and we're continuing to accelerate our investment to cash at the large market opportunity in front of us with that I mean, and I are happy to take any of your question.
Operator.
Before we move on to questions that this is Paul.
But you want to comment on the timing of the earnings release today, while we mistakenly released the results early we hope this does not distract from the strength of the execution of our business and our first quarter as a public company going forward you should expect the releases to come aftermarket on the day of earnings I'll turn the call back to the operator now to start queuing <unk>.
At this time well be conducting a question and answer session. If you would like.
You asked a question. Please press star one on your telephone keypad confirmation somewhat indicate your line is in the question queue. You may price start true if you would like true love your questions from the queue from participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star key.
Oh, we poll for questions.
Our first question comes from the line of Derrick Wood with Cowen and company. You May proceed with your question.
Great. Thanks, and congrats on a strong quarter out of the gate I guess from me can you talk about how you're seen sales productivity trend versus what you saw in the first half of the year and then if you look at enterprise versus commercial business I'm, just any comments on how that mix trended and how you're feeling about the demand going into.
Into Q4.
Great Derrick good here voice yeah.
I think generally we saw a momentum in the quarter be very strong on the enterprise segment. As we've noted before we saw North America enterprise, both with new logo land as well as cross sell and upsell drive a significant portion or from a good portion of our business some of the productivity.
It was higher and North America enterprise as well that led to that obviously.
You know naturally some of the transactional business in the SMB somebody <unk> International business.
And mid market was down just longer sales cycles decision, making process, but overall were really happy with the strong execution and our growth from the quarter.
Great and then I guess, maybe one for Sidney I mean really nice gross margin performance, but it does sound like there were some some onetime credit gains from you could give us a sense for kind of what the what the revenue what the margin run rate looks like going into Q4, and then perhaps just speak to.
The sales hiring and and it sounds like.
All right you hit certain goals that are looking to kind of catch up more on other parts of the fads can can you talk about plans for Q4 hiring thanks.
Sure. So our gross margins were strong in the period, we have been working to optimize our platform to extend those gross margins. This fiscal year and what we saw is that of the strength of the gross margins about two percentage points were due to onetime eat up U.S. credit so were expecting in Q4 to have gross margins in around.
That 75% range moving onto your second question on the sales hiring goals, we did meet our quota rep capacity a goal for the quarter were on track for the year to hit our annual goal. What we did see as we restarted the recruiting engine just a bit more.
Effort to do that in Q3, so we had some other functions such as R&D until supporting roles, where we did not hit those hiring goal.
Okay, well done thank you.
Our next question comes from the line of Matt Hedberg with RBC capital markets. You May proceed with your question.
Oh, Hey, everyone. Thanks for my question and congrats on the IPO.
Maybe I'll start with from me you know you guys, obviously got you're starting logging and you move now into cloud Sam.
Maybe just can you can you start with that and just to remind us about why starting in logging is is is the right place to start and really how that.
You know positions you to extend into other areas of durability and just broadly security monitoring.
[noise], yeah, great, Matt Thank you and grid your voice again.
So in short I think as you look at the operational use case and you look at the security use case and you look at also the other use cases around customer insights from business intelligence. They have one thing in common and that is the need to have all types of data real time and both structured on structure.
True and that's the power of a sumo and that's where we started and so this has been our vision our strategy for well over a decade to bring all that together to address these variable variances and use cases and variable datasets. So.
So I think the importance here is the fact that we're able to without having to take shortcuts like other tools that are very focused on a point solution and terms aggregating or sampling all those other means you used to kind of get around the scalability and ingestion of all data, we pride ourselves on allowing customers to throw all the data.
Okay, and then through algorithms and other means to get meaningful insights without having to be experts in our free language and the like.
So that in itself and the ease of use lends itself to more users more data more use case, and therefore driving cross sells an upsell aster, we land a deal.
Got it that makes a lot of financing then Sydney strong large deal metrics in the quarter nice up tick from last quarter and I think you said you added 100 customers was that a gross number and curious if you have the net if it is growth what the net was a net add.
Yeah. We did we did have strong customer metrics, we added 100 customers growth on a net basis, we were just up slightly in the period, but we feel good about our hunter Kay ads as well, where we added 19 customers sequentially, which was significantly up from the prior two quarters.
Great sounds good congrats on the quarter guys.
Thanks.
Our next question comes from the line of sung Ji sang with Morgan Stanley. You May proceed with your question.
Thank you for taking the questions and my Congrats from me and said me on the most the IPO in the first quarter as a as a public company great to see the results this quarter from.
You mean to maybe start off with you I was wondering if you could sort of.
Draw the trend lines force between sort of P code in the summer and coming into this quarter on two dimensions, one new customer logo acquisition with its I think Sydney sort of addressed and then also the existing customer expansion thats sort of the first to access net on the second axis.
This security versus operational intelligence from observe ability what are the trend lines, you've seen from like the summer going into the current quarter. Thank you.
Well first of all good to your voice again, thanks for participating supporting US you know.
For the first part of your question I think the trend lines on around net new logos, you know I would say that you know overall.
Our average deal size for net new logos was up year over year in fact, our new logo average deal size size was also up significantly quarter over quarter and within a quarter and so while we may talk about new logo ads being north of 100. It's also important to look at the average deal size, there being larger and obviously.
A lot of that was given contribution from our enterprise strength from the business.
As the next part of your question in terms of cross sell and upsell you know we saw a pretty soon.
Pretty similar pattern to what Weve seen free Cove. It in terms of the land and expand you know we gave one example earlier that within the same quarter and ER and enterprise customer actually mid market customer we landed in within the same quarter expanded and then similarly, we see the opportunity to access.
Spanned after we land usually within a quarter after the first quarter land within two to three quarters thereafter.
Some of that we've seen in certain geographies and certain segments flow down naturally because decision, making processes, but you know as it pertains to the PEO sees or the trials and getting new data and we're seeing strong demand and interest there leading indication that you'll see further down the road the cross sells and upgrades as we know.
They do.
I'm just now thank you sorry, Sir.
So in terms of the other party you use case and apologies you you asked about security versus observe ability.
I think we see two distinct trends there.
One there's still a lot of greenfield opportunity in particularly with respect to monitoring troubleshooting observer ability and despite what you know volume you may hear from vendors in the space around their portfolio customers are still predominantly going through this transition large enterprise customers to the cloud and.
Still looking at best of breed.
Two technologies to support that migration and that's where we can provide a single platform or a part of that platform need as they migrate over and so while that's important we also strengthened our own observe ability capabilities. This past quarter with massive improvements and distributor tracing ate up you asked observer ability software development observation and.
Much more so, thereby strengthening our portfolio of offerings allow customers to leverage our licensing model to extend the trial of existing service to new features.
Now in terms of security, we saw strong demand in enterprise again, this quarter similar to previous quarter, because a lot of cases as enterprise customers are accelerating their digital and cloud there guess, what starting with their security needs. They want to make sure. They protect the threat vectors because it's growing value.
Sleep daily as they span the bimiodal on Prem to the cloud world and so that sets us up uniquely to land and security with the C., So and the Saks off steam and then expand into the observe ability the devops lines of business from alike, and we saw that play out exactly in Q3.
Understood and if I could just have one quick follow up which is really sort of give any given the size of the opportunity from you. What is the best go to market motion for sumo logic to attack. This opportunity. Because you are you seeing a couple of different playbooks in the markets sort of that high velocity online.
Net sales motion you have your kind of traditional topped out at a price sales with from your competitors.
For your customer base and kind of the target customer that that's typically going to gravitate towards a sumo logic solution. What does that go to market sales motion look like a year from now two years from now.
Well I mean, I think we've been pretty clear on that all along with you and and others that we have a very direct selling motion.
And that is.
Something that we do across multiple verticals segments theaters and the like it's heavily supported however, with our ecosystem of partners, most notably obviously vars and this these like we just continue to increase the presence and reach <unk>, thereby reduce also cost the sale, but also.
With I.S. visas, we co sell so our strategy hasn't changed it's very much a direct selling model.
I think the thing that we're also making sure that we work on and improve going forward is because the platform. So easy to use and more importantly, we want more users more data more cross selling like we're constantly making investments to drive that self service aspect of our business as well but.
But by and large make no mistake, our business is consistent around a direct selling enterprise and a commercial segment led followed with partners like M.S.P.s Vars and distributors globally.
Appreciate it thank you from me.
Our next question comes from the line of Bobbin Suri with William Blair. You May proceed with your question.
Hey, guys I'm going there.
From my congrats really really solid quarter.
I mean at the gate there <unk>, maybe my first question, a little more strategic here, but but as.
As you talk to customers and you sort of bring the whole platform and all the data you know whether it.
Structure unstructured data on et cetera, and you provide the AI that can read across that which is pretty unique is that part of the conversations you're having today or is that maybe is that probably comes down with new customers. Today, what is new customers very much still about sort of lot of mass and security et cetera, and the existing base, that's starting to understand the value platform, how should we think about that.
And the initial conversations with both new and existing customers given the value of the multi tenancy across that with with your embedded value of course.
Right Great to hear your voice and thank you for the support as usual you know.
I think you're not going to like this initial response, but it depends and it simply depends on a the customers maturity right b, the organizational model and see their pain points, right and where they're starting and so we can't walk in leading to the third point around the pain point and sell everything.
Wants and nor do we lead with that so often times, it's around an acute problem because are struggling with the cost the complexity as they're going through this migration with gen. One tools are gen. Two tools, not keeping up and not be able to deliver on the promises and so it's really more about helping understand what day.
They can get and achieve from sumo without throwing all the resources and cost that it not as evidenced with some of the wins in the security space that we saw this past quarter right I.
I think the other part of your question around their organizational model maturity. If we're talking to platform engineering. The Dev ops folks that are well entrenched and a lot of the capabilities required to build a micro services based multi tenant kind of service or application. Then we go into the details that you're referring.
Into around you know were more than just monitoring the analytics and intelligence derive a lot of these actionable insights that you don't need to necessarily set static thresholds and do everything else weve surface up those things for you some.
Similarly, we do the same on the security side, because they've been so brain trained to write manual rules and correlation and others with legacy Sim tools and once they see the power of what we can surface up we show them that through the intuitive interface, but then we talk about how we achieve that some expense.
Let me that makes a ton of sense and depends [laughter] all that makes sense I guess one other quick question here you touched on partners.
First on Vars, and resellers and you touched on it on sort of the I guess be wherever the guys like expense where did he aside from that in in the longer term strategy here because obviously they are partners with some of the you know call it.
Competitors or the you know the web one dot old Twod auto guys, So where does that sit in terms of tragic. Thank you.
Yeah. So I mean, I think what's interesting here is as you look at the.
Overall service provider space, whether it's a justify the S side the Sps the G.S.S.B. I mean, so they're all starting to converge and do more than one thing right. You have a lot of the GE size or global system integrators, providing their own managed service offerings in lot of cases, historically, they were trying to build and.
Integrate a bunch of despair tools into a service architecture, what's happening more and more as if you look at the M.S.S.P.s. Their expertise is not stitching together integrating disparate tools, it's leveraging cloud native architectures and tools and services from likes a sumo and be able to provide their value add on top of that in terms of consulting.
Versus implementation in terms of best practices and accelerate that journey for those customers. So I personally believe that where we're focusing as a result as those transformational partners that are looking at new ways and new technologies to help accelerate their best practices and their vertical practices to accelerate digital and cloud.
As was modernized security.
So you saw some of the announcements we've made with distributors like Westcon globally, you've seen some things around M.S. piece and we're continuing to work with some of the other just size to get into their practices. As we also addressed some of the fed ramp and other needs for customers.
Got it I really helpful. Thank you guys and congrats again and that's true.
Our next question comes from the line of Mark Murphy with JP Morgan You May proceed with your question.
Thank you I'll add my congrats.
Well I mean are you encountering more prospects who are over.
Overtime kinda growing tired of the limitations in some of your peers that you know the ones that rely on sampling and aggregating data.
Where are they finding that they can't handle the diagnosing and troubleshooting part of the equation and I'm just wondering if any of that sentiment.
Is creeping in with some of these larger lands that you saw.
[noise] Mark good to hear voice, I think generally or it goes back to little bit of bonds question in terms of maturity and experience with some of the prospects and customers.
You know they may start with a home grown or point tool from monitoring and as their architecture, an application needs start to increase because the volume of data the start seeing the inefficiencies of the commercial products or maybe the home grown initiatives and the need to analyze all types of data and it actually makes it.
Much easier qualified opportunity for sumo believe it or not to supplement or replace so I think the point, we try to emphasize all along is time to value ease of use no and well, we don't really necessarily try to rip and replace because there's so much greenfield there and there's so many opportunities as customers are so.
<unk> early in their journey and they see naturally the power and the and the value that sumo delivers as a result of our architecture as a result of our ways that we use M.L. and analytics and other means and a single platform from multiple use cases, they have the flexibility to choose to expand their usage, if still need or that usage.
Okay and in bromine when we when you drill into the ops that 10% of they are [laughter].
Well if you can hear me this there's some noise.
No he's on the line.
When you drill into the covert impacted industries. He I'm curious how the airlines and some of the others are behaving are right. Now today are they cautious to spend because we have this could wave two you know building over the winter or do you see some of them who want to look through it with a little more optimism because the vaccines are right around the corner.
You know I think we were pretty consistent here in the sense of Cove. It has both headwinds and Tailwinds right. You know, obviously travel transportation hospitality you know those verticals.
We're the ones that were impacted the most and some of those are still impacted right and our approach there was simply to support them as a partner and allow them flexibility as they manage their business through this unprecedented time and.
And so we're giving more flexibility to them in terms of usage of features some degree of some payment terms, but generally.
Trying to support their data needs your user needs and value.
I think outside of that you know in terms of those segments. What's also important to understand is generally this pandemic and this macroeconomic circumstances have slow down decision, making because we're all remote and so that's not just in those verticals, but probably more specifically in segments of the market more in the SMB.
The kind of commercial space.
No that we also attached attribute to this pandemic, but those are the headwinds side.
On the tailwind side, if you look at what's happening you know billings was a strong growth for us this quarter as new customers began larger new went up from deals with us and I mentioned, the S.P. comment for average sales price comment from net new logos. This quarter. We also saw strong contribution from multi use cash.
It's out of the gates from new logo lands with our customers. So I think all that tells us that we need to continue to invest in building out our routes to market, our IP and getting prepared for not when necessarily the vaccine is available but when businesses are returning.
From normal big.
Because just because the vaccines available available doesn't mean that all business can can quickly within a quarter or so returned to normal.
Yeah, that's a fair point and then since you mentioned it but I mean on the on the billing side I guess I did want to ask Sydney. The we see this healthy sequential growth in billings is there anything worth mentioning in terms of underlying drivers.
Anything unusual in terms of the annual invoicing mix or early renewals a lead renewals is there anything like that that you're able to comment on.
Yeah, we did see good momentum on our billings this quarter I would characterize it that in Q3, we saw as go back to our historical mix, where we had about 90% of our billings being annual on that front. So that was a good a good indicator as we discussed earlier last quarter that had actually shifted down at <unk>.
Adjusted our billings.
We did have a large billing from one of those cobot impacted industries that slipped from Q2 to Q3. So it build out in Q3 and that was about a five percentage point of growth in the Q3 quarter.
Okay very good thank you I appreciate it.
Our next question comes from the line of Rob.
With Piper Sandler you May proceed with your question.
Great. Good afternoon, and thanks for taking my question could you speak to linearity throughout the quarter given some of the challenges one of your adjacent competitors saw and also the fact that you're out your your Dsos were DBO. However, we calculated but the receivables ticked up pretty meaningfully quarter over quarter. So just curious what the the trends in the quarter it looked like in anything in.
As usual from a receivable perspective.
Yes, so for linear already in the quarter, we actually had fairly good linearity on our booking side, where do you see the D.S. So ticket was primarily due to Ah providing some payment concessions, so a little bit longer payment terms for some of our our larger deals, but as far as money already on closing the business. It was it's pretty.
The typical standard in the quarter, we saw a good momentum you know kind of throughout the quarter.
Will those payment concessions persist. So this is a level we should expect moving forward certainly.
You know I think it's it's it's kinda it yeah deal deal by deal and specific you know I think we've actually done a really good job navigating covered in executing to cove. It without payment terms and collection and so you know I think it's it's a balance between you know <unk> you know what giving it.
Net of the concession and uncertain deals, but at this point in time I don't expect them to continue.
Great and remain you talked about the larger land you guys are seeing these days what's underlying these are people just getting more comfortable around the platform. It is it's a newer projects that are just larger than they once were any color you can give thanks.
We tried to give a few examples during the call with respect to different types of customers illustrating their maturity as well as their pain points with either migrating to the cloud or security transformation and I think the simple answer is we're in the early innings.
And a lot of customers are still shackled by legacy tools processes and inefficient technologies that hold them in the data center and as they move in migrate to the cloud is fundamentally changes their operating model and the fundamental changes how.
And what types of tools and technologies, they need to be able to compete in this new world and so I think given our profit platform breadth of use cases, and our ability to either solve a point problem from logging and monitoring or broader problem for full stack observe ability a.
Audit and compliance problem, a cloud Sim and analytics from a customer analytics from we have a lot of flexibility to have our sellers, both direct and partners be able to provide value quickly to any of our prospects and then look to expand that as they get value.
And usage and budgets on you know potentially come up from more adoption of sumo study.
So I think that's the unique position that we're in now I'll tell you that this past quarter.
Some of the larger opportunities. We saw was from the strong demand for our security and cloud soon and that underscores the investment we made for several years and more importantly, the heritage of our company 10, plus years being security practitioners and experts and so last year. This time, we acquired Jasper we fully.
Integrated jazz on top of the cloud apps and platform, we already had and a combination therefore is very competitive and market lead and so that's where we saw more understanding of the value because it's a couple of quarters under our belt of selling the combined solution and we see in uptake and from our channel partners that are also helping us.
On the security transformation side.
Excellent. Thank you.
Our next question comes from the line of Gray Powell with BTI G. You May proceed with your question.
Okay, great. Thanks for taking the questions and congratulations on the a and the very good results.
Maybe a couple on my side.
I just want to clarify did you say that total ARPU was up 51% year over year and if that's right was there any meaningful change in contract duration or anything unusual that we should think about.
I'm just trying to think how I should how we should reconcile that versus revenue growth in the high twentys.
Yes, we had a strong RPL quarter, it was up 51% year over year and sequentially. It was up 30% and I think again, it's just our customers are making larger commitments and longer term transactions with us and that's reflected in the RPM.
Okay, Great and then I think you hit on this earlier, but I just kind of follow up on it. So did you see any change in behavior late in the quarter with any larger customers any larger deals from the looks of it but it doesn't seem like you did but again one of your peers mentioned that last week that executives that larger customers were more closely scrutinizing deals.
Late in the quarter. So just you know just want to be really sure like but what exactly did you see throughout the quarter.
No we didn't necessarily see that late in the quarter any change I would say that generally and I would say across multiple segments and geographies or theaters, there's been more approval process that we see in some deals right.
And in our case in ours or value selling model, which includes really TCOS. VVA is all upfront is really meant to make sure that you align cost and price with technology and value and so that's been part of our inherent in our selling motion for quite some time.
And so you know we didn't see necessarily a few deals or two or in the late quarter that may have caused any you know differences. Instead overall, we saw strong consistent demand through month, one month to month, three and the heading into back a few days of the quarter as we closed out Q3.
That's perfect. Okay. Thank you very much.
Our next question comes from the line of Kings Lake Crane, Aaron Berg You May proceed with your question.
Hi, good afternoon. Thanks for taking the questions just wanted to touch again on the security space do dozens really clear.
I think back to the acquisitions jobs and recent integrations with VW EPS network firewall is while the addition of Tracey Newell to the board.
Is it fair to say, you're leaning and more aggressively to this market or would you just view this as a continuation of whats been a strength of sumo for a long time.
Hey, things. They you know this is something that we've been building and our strategy is build it and they will come and so you know given our tenure in history and security you know we seen over the last few quarters, but more importantly last couple of years because of our own organic capabilities that customers wanted and needed something.
New with respect to security.
And I think the reason why you are seeing more investment in that and not just organic effort in IP, but also the inorganic effort of the Jas acquisition and even the board reference you made it was because we want a balanced business and we've been building a strategy for addressing multiple use case platform across deficit.
Ops, that's what uniquely positions us and continues to differentiate us. So this is not about us over rotating one way or another this is about having a balanced strategy and predictable growth with durable growth that we want to deliver on to take advantage of this large market.
Right that makes perfect sense. It's a you know such a large market and then one on the financials, great to see 100 customer growth in the quarter.
You know.
On like the total growth is being underrepresented due to some churn, but we expect this dynamic to continue in the near term.
Yeah, I mean, we're focused on on new customers were focused on driving our prospects onto our premium platform and doing that conversion even at that level. So im very much. There's a focus on customers. You know again, we were pleased with the Hunter cash we were pleased with the growth that and we are still seeing some churn with our low.
Our cost are lower air our customers, which kind of reflected into our net customers just increasing slightly period to period, but you know we do believe that you know our focus is really on the enterprise and those enterprise customers that represent over 100 K R.
Right. Okay makes sense, okay. Thanks, guys congrats from quarter.
Thank you.
Ladies and gentlemen, we have reached the end of today's question and answer session. This concludes today's conference you may disconnect. Your lines at this time and thank you for your participation.
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