Q4 2021 SecureWorks Corp Earnings Call
[music].
Good morning, and welcome to the secure works fourth quarter and full year fiscal 'twenty 'twenty, one financial results conference call.
Following prepared remarks, we will conduct a question and answer session if.
If you have a question simply press Star then one on your telephone keypad at any time during the presentation.
At this time all participants are in a listen only mode.
We are webcasting this call live on the secure works Investor Relations website.
After the completion of the call a recording of the call will be made available on the same site.
Now I will turn the call over to Paul Parrish, Chief Financial Officer you.
You may begin.
Thanks, everyone for joining us with me today is Mike Kelly, our CEO and Wendy Thomas our president of customer success, who will join us for questions at the end of our prepared remarks. During this call we will reference non-GAAP financial measure.
Including non-GAAP revenue gross margin operating expenses operating income net income earnings per share EBITDA, adjusted EBITDA and cash flow from operations.
A reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and press release, which are available on our iron ore website. Please also note that all growth percentages refer to year over year change unless otherwise specified.
Finally, I'd like to remind you that all statements made during this call that relate to future results in advance are forward looking statements based on current expectations actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our press release web deck and SEC filings we assume.
No obligation to update our forward looking statements now ill turn it over to Mark. Thanks, Paul our fourth quarter marked a solid end to an unprecedented year. Despite the macro uncertainty our path remains clear.
We leaned into our strategy of becoming the cloud native security analytics platform of choice and broaden our reach with the partner community to deliver our holistic approach to security at scale.
Our security analytics platform.
We are now calling cages is differentiated by intellectual property developed over more than 20 years as the managed security services leader, we have deep experience across tens of thousands of environments, allowing us to create detectors and security analytics that work in an integrated way.
We also see how threat actors tactics techniques and procedures avoid point product security controls on a daily basis.
And embed this understanding of the threat landscape and behaviors into our platform.
Furthermore, our approach to security is vendor inclusive we use telemetry from both our sources and third parties to create the most comprehensive effective security analytics platform customer.
Customers are consistently telling us about the value they are realizing with pages.
And initial results are promising.
<unk> has grown to $55 million up from approximately $15 million at the beginning of the year and now accounts for 13% of total IRR. Additionally, we drove robust tejas customer growth up 390% and increase the average revenue per customer to approximately one.
$140000. This lifted the total average revenue per customer to the highest in our company history.
Thank my teammates who are undeterred by the challenges presented this past year and I continue to be incredibly proud of the resiliency and adaptability, they've shown and protecting our customers every day day.
Done a terrific job, but we know in the security business. Our work is never done we must continue to defend our customers and get better each day to outpace and outmaneuver and ever evolving adversary.
Cyber threats continue to rise and cyber crime continues to accelerate with the explosion of data and devices expanding the vulnerable attack surface from the core to the edge recent well publicized breaches have once again demonstrated the capability of nation states.
Coordinate and execute a sophisticated attack in response to this we've leveraged the visibility of our global threat intelligence to keep all customers informed and apprised of their vulnerability status events. Like these also underscore the importance of our strategic focus we believe that the ability to outpace the adversary.
At scale requires an integrated inclusive analytics platform, one that works with point products from across the industry, allowing the community to come together and defend against the threat. Historically, we delivered our security platform and software applications as an integrated part of our managed security services with.
The decoupling of our software we can now meet the needs of more customers regardless of their security strategy, our security analytics platform positions us to compete in a total addressable market of $37 billion.
Growing in the mid teens, and we are well positioned to capture this market spend.
Take a few minutes now to discuss the three key focus areas outlining why we win starting with our portfolio.
<unk> was built from the ground up by our World class team of engineers and product developers using our decades of experience as the foundation, we have been viewed as the software with best practice investigation and remediation workflows leaning on our leadership in security operations to understand how to best defend and support our customers.
The pages brand signals, our evolution offering best in class cloud native software and higher value to our customers.
It extends beyond detection to automated investigation and response taken in context with each customers risks and vulnerabilities.
And with cloud native software, we rapidly build scale and deploy the additional capabilities our customers seek to secure their organizations.
In an industry that requires constant innovation.
Here are two examples.
In early December we announced improvements in our extended detection and response application directly addressing customers' needs for a compelling sem alternatives with the addition of log retention reporting and search capabilities security operations teams can now detect investigate and respond to security incidents with greater visibility.
They can also proactively hunt and gain actionable insights on both known and unknown threats.
Customers have told us with these additions they have a view to displacing some if not all of their legacy spend and you will see us extend this approach to additional use cases in the future.
We also expanded the pages platform with the vulnerability detection and response application demonstrating our intent to use both organic and inorganic strategies to layer on the additional capabilities our customers need.
Additionally, our managed security services incident response engagements and proactive research enhanced our software capabilities with the latest threat intelligence of workflow improvements.
Our counter threat unit tracks global threat groups, creating an extensive list of countermeasures rules and analytics to provide broad visibility and coverage. This allows us to improve our workflow design and automation as the combination of delivering both security services and building software in house creates a cycle.
Rapid continuous improvement this unique combination of strength, our deep experience as the global MSP leader paired with our software enabled threat intelligence that is constantly evolving distinguishes us in the marketplace.
Turning to customer success, we are actively working with existing customers to migrate their solutions to pages, while also expanding our customer base with new logos. We ended the year with nearly 400 customers on the platform and are seeing continued success with both new and existing customers realizing the value of our security analytics.
Customers see a significant benefit when deploying pages xdr.
<unk> ROI over a three year period in terms of total economic impact is north of 400% base.
Based on a study conducted by Forrester consulting.
Let me give you two examples a large European steel manufacturer selected pages managed xdr to help streamline the identification and investigation of the threats in their environment by.
By leveraging pages this new customer gain full visibility across their environment with high fidelity alerts that are automatically enriched with threat intelligence from our Cte research team.
And this is a repeatable use case our platform allows us to extend our security intelligence and operations expertise to customers of all sizes no matter the scale of their environment they need to protect.
Additionally, an existing regional bank customer was looking for a solution to integrate the visibility and coordination of their disparate security point products.
Day, two turn to pages as their central security hub, given the platforms inclusive approach to data sources and integrated workflows. The customer now has comprehensive visibility and security management through a single pane of glass stories like these emphasized the value proposition of our expanded software platform to both customers.
And our business.
Finally, our go to market acceleration and expansion.
We are investing in our channel strategy and building momentum in the secure its partner community. Most recently launching an MSP track for our partner program. This pushing to the channel provides two key benefits.
First a robust partner program will help us accelerate pages sales.
We are growing our broad community of service providers that mutually benefit from the expanded use of our platform at the heart of their security operations.
MSP is get to add our leading software capabilities to their portfolio, while managed service providers, who aspire to extend into security services can accelerate their journey by leveraging the <unk> platform and applications are best practices and our training programs.
In addition, our MSP program addresses one of the fundamental challenges in our industry.
Lack of security talent.
Extending our security expertise to partners creates a larger force of well trained security experts that benefit from our know how in defending and securing customers around the globe.
Our platform is designed to connect the security community, creating a force for good by leveraging secure works IP, we transformed the way security is done for the benefit of both our and our partners customers and.
In closing I am pleased with the progress we are making as we strengthen the security community to beat the adversary at scale.
There is power in democratizing, our security expertise and services leadership.
We are using our deep security operations experience understanding of threat intelligence and advancements in technology to re imagine how security should be done.
As a broader set of customers embrace stages. There is a network effect through this connected community more customers means more visibility increasing our ability to outmaneuver threat actors through collaboration to better protect all customers.
We are making great progress and remain laser focused on three goals first innovating and expanding the <unk> platform.
Ensuring the protection and success of our customers and finally accelerating our go to market.
We recognize this year will be an important one and are committed to providing incremental disclosures on pages as the year progresses I'm confident we have the right strategy to help our customers partners and teammates while creating long term value for our investors I'll now turn it back to Paul Thanks, Mike We've made meaningful progress on our <unk>.
<unk> platform, which had a strong first year of growth changes IRR ended the year at $55 million contagious.
Contagious revenue grew to approximately $30 million for the year.
Our margins remain healthy, while we balance the right investments for our future and strengthened our overall financial position, we generated more than $60 million in cash flow from operations per year and ended with a record cash balance of $220 million.
For our total results fiscal 'twenty, one revenue grew 1% to $561 million gross margin was up 6% from $335 million or approximately 60% of revenue and EPS of <unk> 22.
Up from one in the prior year, reflecting our team's solid execution as we position the company for future growth.
Moving to our Q4 performance, we're excited about the momentum of our intelligence platform revenue.
Revenue was $11 2 million.
And demonstrated consistent quarter over quarter growth throughout the year.
Can you just now represents 400 customers from 35% sequential growth and $55 million of IRR with 31% sequential growth.
These results reinforce our conviction that we can accelerate <unk> growth and scale the platform in the coming years total Q4 revenue of $139 7 million was.
It was down 2%, primarily driven by a reduction in non strategic areas of the business as we pivot towards pages growth opportunities.
Gross profit was $84 $2 million translating to 62% gross margin.
For Q4, and the full year, our gross margin percentage is up nearly 300 basis points from fiscal 'twenty, reflecting pandemic related cost benefits flow.
The flexibility required to navigate past years' environment also created new learnings and we expect some of these efficiencies will continue to benefit us in the long term.
Operating expense was $84 3 million up 2%, primarily driven by strategic investments in R&D.
Research and development expenses increased to 20% of revenue up from 15, 7% from Q4 fiscal 'twenty as we accelerate our security analytics platform development sales and marketing expenses were 25, 8% of revenue down 340 basis points, primarily due to a severance related cost impact.
Included in the prior year period, and lower travel costs General and administrative expenses totaled 14, 5% of revenue modestly above the prior year period operating loss was $100000 up 1% and EPS was breakeven adjusted EBITDA was $3 2 million up from $2 three.
On gross margin gains fiscal 'twenty, one adjusted EBITDA was $33 2 million turning to cash performance and the strength of our balance sheet cash flow from operations was $32 2 million down from last year's Q4 performance of $43 million with the decrease reflecting our investments from the <unk> platform.
<unk>, along with channel and marketing we ended the year in a strong liquidity position with record cash of $220 million up from $182 million. Despite navigating through these uncertain times. Additionally, we have an untapped $30 million credit facility with an expansion provision of up to 60 million.
<unk>.
Now from our outlook starting with changes as Mike mentioned, we are focused on increasing the level of disclosure for this business.
Current year, we expect Tejas IRR of at least $150 million up from a base of $55 million at the end of fiscal 'twenty. One this translates to revenue of $90 million to $100 million.
Up from approximately $30 million this past year.
We plan to drive new customer acquisitions by ramping our sales and marketing investments.
And we anticipate an accelerating portion of existing customers will transition in fiscal 'twenty two as we look to benefit from the additional capabilities offered by the platform.
Looking at the overall business in Q1, we expect GAAP revenue of $134 million to $136 million and a net loss per share of <unk> 16 to 17.
We expect our non-GAAP revenue to be in line with the GAAP range and our non-GAAP loss per share of two to four.
For the full fiscal year, we expect GAAP revenue of $535 million to $545 million.
Our net loss of $63 million to $71 million and a loss per share of <unk> 76 to 86.
We expect our fiscal 'twenty, two non-GAAP revenue to be consistent with the GAAP range. Our revenue outlook reflects our shift towards partner delivered services as we scale. Our MSP program. Our non-GAAP net loss range is $18 million to $26 million with a non-GAAP loss per share of 22% to 31.
Reflecting several factors first an incremental $25 million in R&D to extend the tightest platform second an additional $15 million in sales and marketing related to the expansion of our partner program and promotion of changes and finally, a portion of the pandemic related cost savings coming back into the P&L.
Adjusted EBITDA is expected to be negative for the full year in the range of $13 million to $23 million, we expect cash flow from operations to range from breakeven to a 10 million use of cash. This includes a use in Q1 driven by our annual performance payouts offset by cash generation in the later quarters Capex for the full year.
To be in the range of $3 million to $4 million.
Finally, we will compete effectively in the security software market that is growing double digits, leveraging our differentiated expertise and approach, including our leading position as the trusted MSP vendor of choice our understanding of the constantly evolving threat landscape and our vendor inclusive approach to preliminary this won't.
A pivotal transition period, where we've already laid the foundation for compelling long term model, which we outlined at our December Investor Day, a replay of the event is available on our industrial relations page. We've also added an abbreviated presentation, along with our quarterly web deck that highlights the key tenants of our vision and multiyear strategy as a reminder.
The next three to five years, we expect to generate 100% of IRR and 90% of revenue on the changes platform unlock partner growth scaling our channel business to 50% of our mix and migrate gross margins to the mid <unk> as a result of increased software sales our journey to an integrated SaaS platform with <unk>.
Rapid Lee expanding go to market capabilities will provide compelling future economics, including a highly reoccurring revenue model significant margin expansion and strong cash flow ultimately, creating sustainable long term value for our shareholders by Mike and with you to join me now for Q&A. Operator can you. Please introduce the first question.
Thank you I will now open the call for your questions.
If you have a question. Please press Star then one on your telephone keypad as a courtesy to others. Please ask no more than two questions.
We will take our first question from.
Key Kalia with Barclays. Your line is now open.
Hey, good morning folks.
Thanks for taking my questions here.
Good morning socket.
Hey, good morning.
Mike maybe maybe first for you.
Can we just talk about the traditional MSS business to start.
I believe <unk> products like <unk> for example, could supplement or even convert customers from kind of the traditional MSS business that way.
No to something more automated and higher value to your point can you just talk about how thats going and what customers what MSS customers are saying about that shift to pages.
Socket. Thanks for the question happy to do that I'll I'm going to Tee. This up and then ill, let Wendy jump in since she has been integral in.
Kind of moving forward with that effort. So we started the process.
To.
Migrators.
Show our customers the capabilities on the pages platform in fiscal 'twenty, one and we were selectively putting customers in cohorts with regard to the capabilities that we had and the incremental value we show them as we expanded the process.
The rest of the activity and the incremental value. They are seeing has been very strong its fixed tremendously well with the majority of our customers and we accelerated that process into Q4 and expect that acceleration to continue through fiscal 'twenty, two and quite frankly into fiscal 'twenty three.
I do want to touch on one thing and then I'll pass it over to Wendy from the perspective of there is however, a portion of our customer base that we're doing much more customized solutions really relating to other platforms and some of that business quite frankly won't fit in what we're doing from a pages perspective, but having the capability.
On the on over on the underlying pages platform with regard to the xdr capabilities. The DVR capabilities the log retention capabilities, we've talked about.
Some targeted threat hunting capabilities and incremental features and functions, we're going to add over time through through this fiscal year. We're excited about.
About the progress in that.
And the evolution of the progress we've had to date. So let me know if you want to go into a little more depth and maybe touch on to <unk> question, a little bit of the pulp claim and the things we're doing from a customer's perspective sure absolutely and good morning.
It's absolutely a great opportunity to.
Take customers, particularly like current MSS customers to really as Mike said extend from.
Primarily detection and channel more automated investigations and and respond to support.
And thats really the incremental value that our MSS customers day in moving to the to the new platform as part of the what we call a re lease loosening process. When we engage those customers, we absolutely want to existing customers, because we know them to feel that as a as an upgrade experience than it has been a great opportunity to just make.
Sure that they've got full coverage and great security hygiene in place.
And so their reaction, but really the time to visibility and value to that Ms is incredibly fast and thats kind of in the reaction.
The ability to see things and move them through an investigation quickly.
Tremendous.
At the time saved by my team.
Has been.
Also tremendous effect.
We've got a lot of anecdotal customer customer comments around.
The hours that we saved but we did do a study with Forrester I think that Mike mentioned around it not only reduced software by about 85% for our average customer they'll see productivity gains of about 500 K over three years from just the automation of the work in this space. So it's the.
That's the real value for customers is speed to value in.
Inefficient touch on two other things the OND touch on with the technology.
Cloud native system and the capability it leads to training.
Oh sure Fran training the customer because we've got a lot of feedback on that and as well as the network effect.
Incremental aspect of the network effect one of the key features over the new platform also is integrated chat, but in a way that lets.
Customers teams really work seamlessly with our security experts through an investigation. They can see the same thing they can actively chat they can confirm.
Threat actor activity was this a targeted attack commodity attack in real time, so that it really extends our supplements the expertise on their teams as well and kind of has their back and again just makes that process faster.
And higher fidelity and.
And of course in terms of the ability to quickly benefit all customers sweat with a cloud native approach to security the speed of our ability to.
Improve the platform seamlessly for the customers to constantly add detection that we learn from our.
Our incident response engagements.
And investigations with current customers, our ability to deploy protections for them.
Is so rapid that they can they can feel the improvements each week.
We help our sales team kind of position that with customers as well I guess the only other thing I would add and then cyclical highs from mortgage.
As the user group capability, which is different because of the way the debt.
Architected right, we set up a user group where people are able to customers in our.
Yes Super uses our employees are all able to work together in the environment to kind of drive that platform forward.
That's great guys Thats Super helpful.
Paul maybe from my follow up for you.
First of all I appreciate the additional transparency and disclosure on pages, maybe just kind of thinking top down as you look at that 2022 revenue guide can you just talk broad brush I guess, we've got a guide as part of that in terms of $90 million to $100 million in revenue, but if you look at.
How much of that revenue guide is going to be coming from.
From Tejas versus traditional MSS vs versus Src.
Yeah. Thanks for the question Sarah.
I'm glad you appreciate the additional disclosures we're excited about what we're doing around our new product pages product and we won't be providing more and more disclosures through the year as evidenced by our revenue low.
Guidance that we gave around pages. So if you take that debt revenue guidance with non each of 100 million potatoes, which is <unk>. The revenue that we had this year.
<unk> Src is going to be somewhat flattish, even though the mix within the Src will be leaning more toward IRR as we go through the year, we see the benefits of our IRR.
<unk> and our customers are seeing that and we see that is continuing to grow in that mix within Src and then the remaining number will shake out to be the.
It would be all MSL platform.
So you just fall through that logic, there you can get to the mix.
That's super helpful. Thanks, a lot thanks very much guidance.
Right.
Thanks.
Our next question comes from the line of Hamzah <unk> with <unk>. Your line is now open.
With secure work.
Thank you guys.
The employee level.
Yeah.
Yeah, I guess, I'm, I guess I'm changing job, but.
Thank you guys for taking my question and likewise.
Likewise really appreciate the incremental disclosure there.
Maybe just a first question from from a from a macro standpoint for you Michael.
Obviously, we've had some pretty significant breaches recently.
Given secure work sort of focus on.
Great hunting in response, I'm curious whether that.
Drove any incremental pipeline or.
Raising any customer awareness towards your platform I know you've had some events around the incident.
Helping customers who respond to this so just curious if theres anything that debt.
You saw in the most recent quarter.
Yes first of all thank you for the question.
I think.
Unfortunately anytime there are incidents, particularly when we've seen kind of the announcements that have happened back to back to back over the last couple of months it increases and validates the risk that exists out there and.
I think it's it's.
It's created a heightened desire from the board level down because we are having a lot of conversations with boards.
Figure out an insurer.
Net processes and controls they can put in place in.
And that they can work with their management teams to ensure that they're getting the appropriate prevention detection response, and so and prediction. If you will of where the hackers are going so we did see an uptick.
And did do some incremental.
IR engagements, which are continuing quite frankly at this point and we it did create opportunities for us to open the door and have some some increased conversations.
And show people, what we're doing from a quality from a cost from our pages perspective on our platform and where we are.
Where we're trying to go and driving things.
I guess, the other thing I'd sort of touch on from that perspective.
Yeah.
Is that I think it's highlighted in what we've seen is an interest from our customers perspective, and a lot of conversations and not just trusting a single point product.
And there's been an uplift in looking at how do they have checks and balances throughout their whole system. Some are even looking at putting in multiple layers of defense either at the network at the endpoint layer or ensuring that they've got the full environment covered but in a duplicative manner or controls and <unk>.
Checking manner.
Got it and just.
A quick follow up.
Paul.
Around.
I think correct me, if I'm wrong, but some initial headwinds just around the debt.
The transition as you ship some of the revenue.
To your partners.
Any sense, you could give us sort of normalized revenue growth in Q4 looking ahead.
Given that dynamic as you try to become more of an IRR focused company.
And are you looking at Q4 of FY 'twenty two is when you say that.
I'm, sorry, just that most.
Most recent quarter.
From a revenue standpoint.
2022 from a revenue standpoint, any color on sort of.
A transition.
<unk> or headwinds that we should think about when we think about normalized Bryan Bryan.
So we took that in consideration when we set the guidance for FY 'twenty, two and so that guidance is reflecting some headwinds from the switch over to partners are taking some of the services as we continue to sell the software and then they take on the services and that impact.
Impact will start to shift more as we travel through FY 'twenty. Two so look at that growing mainly Q3 Q4 that type of volume.
Growth in the <unk> and the shift over to the MSR space. It can I add to what you said, Paul just to make sure.
So.
In the instances, where we are.
Moving customers existing customers over there has typically been an uplift in the.
Or that they pay us roughly 20% sort of uplift and it.
It is what it is the key component of what has caused our overall.
The increase in our IRR on our overall customer base to $138000.
Internally and then I think just to make sure where we where we're partnering with an MSP or an MSP and they pick up the services component. We in those instances are getting just the <unk>.
Software revenue and they are doing the services component of the work and we expect that.
A component of that but very small component at this point, we expect that to increase and thats whats in the guidance that I think.
As Paul referred to it sorry, I stopped as pulp is shaking his head yes.
Yeah.
That helps.
Yeah. That's helpful. Thank you guys so much.
Thank you. Our next question comes from the line of Sterling Auty with Jpmorgan. Your line is now open.
Yes, thanks, so I'd like to start by asking what kind of compensation as homes are getting now the switched over.
[laughter], so Jed I'll kick all those business practices.
Yes exactly exactly.
There's a lot of different types of of MSP.
Out there so when you talk about kind of the the partner model I'm kind of curious for Tejas, what what is the type of partner.
You see resonate this resonating most with.
So sterling first of all thank you great question.
Actually we started our pilot program last month on the MSP.
Partner program, we have signed up bulk.
Current MSP and we have signed up managed service providers, who would like to become MSS fees and.
And are working with both.
Regional players in those two categories and global players in those two categories.
And if sort of.
Going through the learning process of which ones are taking a little bit longer.
To really get to where they want to move along and become part of the program.
And they're both going through to understand the value proposition. So it's really a.
Process around.
When when the acceptance will happen with regard to their internal capabilities. Today. For example in MSP is has very little capabilities. They are really excited to move forward in our process. We have created a created a training program at a training certification program for one to become you can't just sign up and put your hand in the air.
So we can see through that through that program and who has passed the certification who is really interested in making the investment to do this in many cases MSS msp's, particularly those that are focused on our target market.
Which tend to be what we would say.
Mid sized if you will market.
Tend to move quicker because they see the value of the increased revenue stream the opportunity and are excited about it than we've been going through the program with the larger <unk>.
Companies, who understand it but it is a little bit heavy of a lift to then move they're incremental.
Existing infrastructure and the training is not just trading on our platform, but it is actually training certified to show them our experiences the workflows the processes and all the things we've learned over the last 10 years, we've put into training system.
Help sterling.
It does and on my follow up Im really curious what is the gross margin for tejas through that type of opportunity look like today and what do you think as you scale that business what the gross margins will look like for it.
So let me start and then I'll jump over to Paul in our partner program and then I'll get to your specific question. There's three types of partners. We have signed up there are referral partners.
Fit into the normal aerie normal margins that we provide but they would be referring to us.
<unk> sales were the xdr at DDR software application alone. So its typical software margins you would expect or the management of it.
And we could do that management or as we continue to expand the MSP program. The objective would be to two.
To move the management to our partners in many cases, where it makes sense there is resell solutions, where the end customer.
Vs referrals, so beyond the partner paper and then there's the example of the MSP program, we just talked about and in the MSP program in those cases, the MSP partner would be doing the services component. So to US we would expect to see software margins.
Yes.
Our debt discussed this during the analyst day and in the long term as we get more and more of the mix of software you'll see that.
Flow through our overall margins and as we continue to grow the <unk> platform. We're exploring when is the time for the appropriate disclosures on segments from Youll start seeing that when we start disclosing segments as size and scale of that product continues to mature.
Understood. Thank you.
Thanks Sterling.
Thank you once again, if you do have a question.
Press Star one on your telephone keypad.
Thats Star one to ask a question.
Our next question comes from the line of Alex Henderson with Needham. Your line is now open.
Thank you very much.
Talk to you guys again.
I was hoping you could talk a little bit about the mechanics around what youre spending on sales and marketing to what extent you are adding.
Additional reps, whether you're putting additional.
Capabilities to support them.
Can you flush out.
Net sales and marketing spend where it is going how it's being orchestrated.
Yeah.
Sure Alex This is Mike Thanks for the thanks for the question.
Net.
I think I have it but let me try and address it and then if I don't.
Just let me know so we are basically investing in various reps around the markets.
Round, the globe's into different geographies. So we are continuing to expand we are investing heavily in the go to market side of that I mean in the channel side of the house in our efforts as we're expanding the channel through the MSP program that we just talked about a few moments ago.
We are also spending heavily from increasing the amount from a marketing perspective.
And I guess Thats a really good example.
A really good example.
One of the collaborative efforts. We are doing is the self service demo and trial, which is on our website, which we released about a month ago and are seeing.
Very strong acceptance of it and people that are that are in the process of actually in a 30 day trial free trial of looking at what pages does and how it operates.
So, it's probably I would say a level amount of increased sales level amount of spend over the prior year in our direct sales organization.
An increased amount in the channel organization and an increased amount in the marketing organization year over year.
Okay.
Going back to the frictionless version.
Im a little confused why that requires an additional spend if it's already been launched.
Chris.
How how you're expanding that or what what needs to be addressed in order to.
To improve it.
It's cost around the self service demos and trials.
That was just an example, so the self service demo and trial. The Frictionless version. If you will that you referred to is there is no incremental cost. It's just purely an example of the types of things that we are doing to kind of drive forward from a demand Gen perspective.
As a as a software company to give people the opportunity thats not I was trying to give an example.
Right.
It's exactly right I got it okay and it wasn't it wasn't a cognizant.
One more question if I could could you talk a little bit about what's going on with Dell, what's going on with their integration of carbon black whether that impacts you guys at all.
Now all of that debt those relationships are developing.
Sure. This is Mike again, so I guess, the first thing I'd say is.
Talk about before we're we're really proud and it works great being a part of the Dell technologies family.
<unk> is a part of the Dell safeguard and response as well as we're integrated into the Dell safe Bios prevention detection and remediation of passive threats at the OS.
Level we.
Are continuing to explore expansion of our relationship across the Delaware organization in relation to some of the.
Discussions that I was talking about earlier in our in our partner program and how we can accelerate.
The opportunities for us to work together between secure works and Dell.
Within the within the Vmware side of the house as you touched on carbon black.
I would say that.
A couple of things one is our secure works xdr in just the carbon black cloud platform data. So we work closely with the carbon Black organization as we do the other market leading endpoints in the marketplace that our customers may choose since we're vendor inclusive.
And we incorporate the endpoint controllability from carbon black into our xdr.
<unk>.
And as we sort of said over time, our experience shows that point product security alone is not necessarily sufficient. So we are looking and we've seen how the adversaries avoided those point products.
Our updated those point products and where we're looking to bring in the carbon black aspect of things as well as the other leading products at the cloud network endpoint and business systems into the tedious xdr platform.
Great. Thank you very much I appreciate the detail.
Yes, Thanks, Jeff.
Thank you, we'll now take our final question from the line of Brian Essex with Goldman Sachs. Your line is now open.
Hi, great. Thank you good morning, and thank you for taking the question.
I was wondering maybe if I could dig in a little bit on the okay.
On the tedious customers I guess as of last quarter, you had over 5000 total customers and I just wanted to understand what percentage of those I guess, it's nearly 400 customers on the <unk> platform where migration.
In of existing customers, how many net new and what that addressable.
Installed base for incremental conversion might look like over time.
Yes about half of the.
Customers on pages will represent existing customers.
So of that 400, roughly 200 ish.
Our existing customers that moved over and.
We see overtime that net new logos is very important and that's why we've got so much emphasis on marketing spend and channel as Ken stated low after net new logos and we see that growing in importance as we continue to.
<unk> developed the tightest part the other part of the question, maybe one day, you could address which was effectively how many of our existing base of <unk>.
Managed security service customers as well as the 5000 includes consulting customers are either an opportunity to migrate over moved to the new platform or if they are not in that relationship for example, with the consultant only customers the ability to.
To cross sell or upsell them into what we're doing from a tedious perspective and show them the incremental value.
Sure from the from the consulting perspective of course, we view that as continuing to be an important part of both.
Lead generation opportunities for the platform, especially on the incident response side and even on our adversarial testing side of the house and.
And the second is frankly, the benefit of the learnings that we get from those engagements and making the overall.
Hey, just platform and an ex CRM DDR products smarter in terms of so that will that will continue going forward in terms of the existing MSS space as Mike mentioned, while there is a portion of that base that is I'd say more bespoke and not necessarily strategic to the go forward approach the majority of the MSS.
<unk> as we were talking about earlier are a great <unk>.
Dr transition play in the future and.
As Mike said, we really started that that transition program in earnest back in third quarter and are seeing that accelerate as the.
We built the muscle memory, we've enabled our sales team.
A lot of tools and support for that process.
You'll see that continue going forward actually think it's a little more.
Granular than that to some extent Wendy and that some of those customers. There is a service that we're performing for them that doesn't necessarily fit where we're going longer term that a partner somebody may pick up but the customer may stay with us.
For the core.
It was a quarter of what we're looking to do absolutely.
Some partners are very interested in that.
Got it that's helpful and maybe.
To follow up on that within your within your sales and marketing organization I get that Youre kind of in a profit building channel strategy, but.
Direct reps, how different are those customers and what percentage of your sales force is kind of up to speed.
On pages at this point.
So great question. The customers are the same the buyer is the same the sales process is slightly different which is why we've gone through a lot of training and enablement on our in our sales organization and we basically have the sales team.
Divided between sales consultants, who are really our if you will hunters and almost all of our sales consultants have closed a deal or more on the pages.
In the.
Account executives side of the house again, the vast majority of those.
Individuals have been involved in moving customers are re solution and customers.
To the to the new platform and on the channel side of the House our channel account managers are working closely with.
Our account reps and our sales consultants in the process and are actively engaged.
Intelligent excellent.
Excellent. Thank you that's great color I appreciate it.
Thank you very much.
Thank you I will now turn the call back to Mr. Paris for closing remarks.
Perhaps the Q&A I want to thank everyone for all.
Listening to us this morning, and asking the questions.
The relationships that we have with our investors a replay of this webcast will be available on our Investor Relations page of secure works Dot com, along with our Q4 and full year fiscal 'twenty, one web deck with additional financial tables. Thanks.
Thanks again for joining us today.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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