Q1 2021 Rapid7 Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Q1 2021 rapid seven earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session. You Day Press Star one on your telephone if you require any further assistance. Please press star zero I would now like to introduce.
Your hosts Sunil Shah VP Investor Relations you may begin.
Thank you operator, and good afternoon, everyone. We appreciate you joining us today to discuss rapid Seven's first quarter of 2021 financial and operating results and addition to our financial outlook and the second quarter and full fiscal year 2021.
With me on the call today are Corey Thomas our CEO and Jeff <unk> our CFO.
We have distributed our earnings press release over the wire and it is now posted on our website at investors day, Kevin Dot Com, along with the updated company presentation and financial metrics file.
This call is being broadcast live via webcast and following the call and audio replay will be available at investors that rapid Kevin Dot com until May 13 2021.
During this call we may make statements related to our business that are forward looking under federal Securities laws. These statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act and 995 and include statements related to the company's positioning our future goals and financial guidance for the second quarter and full year 2021, and the assumptions underlying.
Such goals and guidance. These forward looking statements are based on our current expectations and beliefs and on information currently available to us and.
Actual outcomes and results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on form 10-K, and and Institute Sequent reports that we filed with the SEC.
The information provided on this conference call should be considered in light of such risks.
Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward looking statements and.
Reported results should not be considered as an indication and future performance.
<unk> seven and does not assume any obligation to update the information presented on this conference call except to the extent required by applicable law.
Commentary today will primarily be and non-GAAP terms and reconciliations between our historical GAAP and non-GAAP results and guidance can be found in today's earnings press release.
<unk> and our prepared remarks or in response to your questions. We may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that the additional detail maybe onetime in nature, and we may or may not provide an update and the future on these metrics with that I'd like to turn the call over to our CEO.
Corey Thomas Corey.
Thank you Sunil and good afternoon, everyone. Thank you all for joining us for our first quarter 2021 earnings results call.
And I'm thrilled to reported strong start to the year for rapid and seven as we accelerated year over year AOR growth to 30%, while demonstrating strong free cash flow dynamics and our business.
We continue to execute against our goal of delivering best in class security that meet customers, where they are and Theyre SEC ops journey.
Our performance and the quarter was driven by accelerated momentum and security transformation solutions, coupled with durable growth and our vulnerability management offerings.
These results are a great validation of the vision, we laid out and our recent investor day, and demonstrate ongoing progress and our effort to help customers codes and a security achievement gap.
Our strong start to the year also positions us to deliver a notable raise to our full year outlook, which Jeff will cover in his remarks.
I'll begin today with some perspective on how we're executing against our core strategy to drive durable growth while scaling profitability.
And then share a brief update on our innovation and goals before turning it to Jeff to detail, our financial results and guidance.
And March we share with you the incredibly exciting journey about how rapid <unk> insight platform is helping customers all over the world accelerate the pace of innovation securely custom.
Customers are facing and fundamentally new dynamic if COVID-19 exacerbates, what was already and rapid pace of adoption for digital and remote experiences.
<unk> technologies and SaaS consumption.
Amidst this technology acceleration, we're finding that customers and challenge to manage a call and risk book print across their enterprise.
In fact, many are seeing a widening gap between the revenue and they can effectively manage and the risk borne from this rapid pace of innovation.
As a result customers and trying to rapid seven and fact platform to help close the security achievement gap.
We're delivering for our customers with a focus not just on industry, leading and forward leaning capabilities, but with a unique focus on world class accessibility or our technology platform.
This combination of best in class capability and.
And accessibility is the magic formula that makes rapid seven so successful and is what enables us to continually disrupt the market.
The accelerating demand we've seen for our detection and response offering and user quarters demonstrates our success and disrupting the market.
Customers are increasingly turning to <unk> because of its ability to deliver market, leading technology, coupled with best in class usability and time to value that ultimately helps them achieve better security outcomes.
I am pleased to report that this vision is resonating with customers not just within our insight platform pillars of detection and response, one ability and risk management and cloud security.
And also across them.
In March our Chief Innovation Officer, Lee Weiner spoke about our focus on delivering a unified accounts experience and the cloud.
It's clear that customers are beginning to see the better together value of our integrated best in class platform suite and experience.
We continue to grow our mix of multi product customers and in fact seven of our top 10 deals. This quarter included multiple platform customers.
A great validation of this trend was a six figure deal and the quarter with the enterprise consumer goods company, who purchased our inside and one platform up and.
<unk> one is one way, we're lowering barriers to broad based platform adoption and by making it easier for customers to purchase all of our insight products and its IBM and <unk> and <unk> and in fact connect to deliver a unified tick off experience.
This customer initially came to us looking for detection face them with advanced user behavior analytics capabilities, but upon seeing how seamlessly our insight products work together they chose to unify on inside and one displaced and existing point vendors and the profit.
We remain and the early days for this platform opportunity, but are excited about our progress to date and see sustainable path to execute and against the four durable growth drivers that Jeff share with you at our Investor day.
So let me take a moment to update you on our first quarter results demonstrate progress across all four of these growth drivers.
First our platform opportunity.
The grow and urgency to be true cloud and digital investments is driving strong demand for our insight platform today.
Hello, Andrew Burton spoke and March about how we're working to make it easier for customers to consume more capabilities across our entire platform.
This is highlighted by our recent six figure deal with one of the largest domestic energy suppliers and the U K.
This existing and represent a customer was black and security visibility and coverage across their total infrastructure footprint as they expand into the cloud. Additionally, as recognizing what was possible from a small insight connect deployment. They wanted to automate everything they could as a result this customer.
<unk> and to a larger platform deal, adding on DB cloud, while expanding their existing VM, DNR and automation and coverage positioning and rapid seven as one of their most critical security partners.
This is yet another example of how our expanding product set is driving deeper engagement with our customers.
Which leads to our second growth driver.
Our land and expand it.
We remain very early and penetrating our $420000 average sized customer opportunity.
During the first quarter, we saw strong execution with accelerated growth and our upsell and cross sell motions as we expand within our existing customer base.
This drove ongoing strength and on a per customer.
And which grew 17% year over year to eclipse the $50000 milestone for the first time.
Our platform value is resonating with customers and we see a long runway for growth here.
Third our focus on growing high value customers.
We had a great start to the year desktop accelerate customer growth during Q1.
We added over 200, net new customers and a quarter and ended with over 8900 customers globally.
Early as it relates to penetrating our overall customer and market opportunity.
Moreover, total customer growth and the only part of our story and our high value platform customers grew faster than total customers and continues to grow as a percentage of the base.
And finally, our international growth opportunity, we have a long runway for international growth given our best in class products, our focus on accessibility and more greenfield opportunity internationally.
<unk> remains a core growth driver during the first quarter, and we saw and accelerating trends and our security transformation solutions internationally.
We continue to invest and our international teams and growth in international and <unk>.
Once again outpaced total <unk> growth.
So as you can see we have multiple paths to deliver our long term growth objectives, and I'm pleased to share strong execution across the board and we began 2021.
Of note we are executing on these growth drivers, while also ramping profitability and scale and free cash flow.
And we remain on track to deliver on our growth and profitability framework. This year.
I'd like to highlight that these strong results are booted and rapid <unk> long standing commitment to technology investment and innovation.
We are investing aggressively to remain on the leading edge and making the best and security operations available to all.
Let me share a brief update on some of our current initiatives.
We continue to invest and scaling enterprise readiness and detection and response building upon recent enhancements to network and endpoint visibility with newer capabilities that enhanced role based access and approve alert customization and tuning for sophisticated security teams.
But innovation is not a final effort.
And rapid seven we've always value the collective wisdom of the security research community and I'm. So excited to welcome the velocity rapid team and the open source community to the rapid southern family, what we've learned and the same market is that it's not enough and just to collect data and detect threats, but rather than respond.
<unk> is increasingly more important and today's dynamic threat landscape.
Our recent announced acquisition of a loss of revenue moves up another step forward and helping customers better respond to threats and attacks by leveraging <unk>, leading community driven digital forensics and incident response technology to monitor and malicious activity across the endpoints.
We continue to push the envelope and B M with our recent integration to kubernetes container environments that allow customers to aggravate container and traditional asset information and enables alive container visibility.
Looking ahead, we're also advanced and our cloud capabilities as we unify and traditional <unk> asset risk visibility with cloud configuration and insights from Dewey cloud and should provide more holistic infrastructure responsibility that improves risk intelligence for better remediation and outcomes.
Turning to cloud security and our ongoing efforts to integrate our feeds kubernetes container security technology accelerates, our path to delivering and integrated cloud Native security platform that combines best in class CSP M cloud identity management, and now cloud workload protection.
Combining and risk assessment runtime monitoring and threat detection and the cloud is a critical component for our for ourselves and our customers security Roadmaps, which is why we continue to invest heavily and cloud security.
Overall, we're excited about our insight platform innovation pipeline as we work to make the best and security operations Assessable to all.
I'll conclude my remarks today with a with a brief review of our enduring goals.
I'll go and investment and delivering a unified set off experience and the cloud is resonating with customers.
And progress on our first goal to be the leader and enabling customers to transform their security operations around the cloud.
Second our efforts and lower barriers to broad based insight platform adoption and delivering on our goal and accelerating our platform distribution engine. This can be seen by our strong results and our growth customer growth and <unk> per customer during the first quarter.
And finally, our balanced execution demonstrated by strong topline growth, coupled with underlying leverage and our business is and enabling us to deliver on our third goal of scale and profitably while investing for growth.
And clothing rapid seven and remains focused on securing the digital experience on behalf of our customers' median and where they are and Theyre SEC ops journey by delivering and unified platform experience with best in class capabilities alongside World class accessibility.
I want to thank our entire team for all of their contributions and working to help our customers close security achieving GAAP.
Thank you all and I will now turn the call over to our CFO, Jeff Colosky Jeff.
Thanks, Corey and good afternoon, everyone.
Before I begin a brief reminder, that except for revenue all financial results. We will discuss today are non-GAAP financial measures unless otherwise stated and reconciliations between our GAAP and non-GAAP results can be found in today's earnings press release.
Rapid seven had an outstanding start to the year.
And acceleration driven by strong execution across our business, while underlying leverage drove upside to Q1 profitability.
Total <unk> ended the quarter at $455 8 million growth of 30% year over year, driven by accelerating demand for security transformation solutions and sustained growth and our own ability management offering.
This strong <unk> performance and our associated billing strength also drove strong free cash flow generation start per year.
The massive market opportunity, we see ahead of us coupled with ongoing strength and our business fuels, our confidence and continuing to invest for durable growth and margin expansion ahead.
As Corey shared in his remarks, we're executing well against the growth initiatives, we laid out in March as we work to close the security achieving GAAP on behalf of our customers let.
Let me briefly review the three fundamental financial goals, we shared at our Investor day, and how our strong start to 2021 positions us to deliver on these objectives over time.
The first of all we spoke about was multiple paths for rapid seven to drive durable growth and the backroom on large and expanding market opportunity.
Strong Q1 results and hear our growth era per customer customer growth and our international business demonstrate progress across all four of these growth rates.
Our multi product platform opportunity is resonating a security transformation solutions represent over 40% of our total <unk> mix growing over 40%.
We saw continued success and our land to expand margin with strong cross and upsell performance driving Q1, <unk> per customer up 17% year over year to $51000.
Our customer centric innovation focus is paying off as we ended the quarter with over 8900 customers and acceleration to 11% year over year growth.
And as a quick reminder, this is based on the updated customer count methodology, we presented at our Investor day, which better aligns our quarter and customer count and a quarter and arrow and metrics.
And finally for and we continue to execute well across geographies and during Q1, North America revenue grew 22% year over year and represented 82% of revenue.
Rest of World grew 35% year over year, increasing to 18% and revenue.
And a multitude of growth drivers and gives us confidence and executing against our durable growth strategy as we look ahead.
However, we recognize the importance and also delivering value to the bottom line over time as we continue to grow our business.
This leads me to our second financial goal to scale profitability and free cash flow over time.
Rapid Seven's first quarter results once again demonstrated our ability to scale efficiently.
Non-GAAP operating profit, which included a partial quarter and al sheet expenses exceeded the midpoint of our guidance range by approximately $2 million as topline over performance flow through the bottom line.
As is our typical approach we will look to reinvest this over performance throughout the year to support long term growth and the business.
Which leads to our third financial goal to become a $1 billion rule 40 business, which we define as are our growth plus free cash flow margin.
We see a huge long term opportunity scale, our business and we believe we are well positioned to execute on the mid and long term targets, we set out at our Investor day.
Turning now to some specifics on our Q1 financial results.
First quarter revenue of $117 $5 million was above the high end of guidance and grew 24% year over year.
Strong demand across our insight platform drove upside to products revenue, which grew 25% year over year to $109 $3 million.
Total gross margin for the quarter was 73% consistent with Q4 as well as the year ago period.
Sales and marketing expenses and improved to 42% of revenue compared to 47% of revenue in Q1, and 2020 and benefited from improving sales efficiency combined with lower annual kickoff and tea.
Any cost.
R&D expenses for the quarter were 22% of revenue up modestly from 21% and the prior year as we continue to invest and innovation.
G&A expenses and the first quarter was 8% of revenue down from 10% from the prior year.
First quarter operating profit from $1 9 billion and ahead of our guidance range driven predominantly by over achievement on revenues.
Adjusted EBITDA for the first quarter was $5 $8 million and net income per share was a loss of <unk> <unk>.
Also ahead of guidance.
Shifting to our balance sheet and cash flows. We ended Q1 with cash cash equivalents and investments of $616 $9 million compared to $322 $6 million at the end of Q4 2020.
The increase from Q4 predominantly reflects the net proceeds of approximately $511 million related to our convertible notes offering and capped call transactions offset by the repurchase of approximately $183 million aggregate principal amount of our 2023 convertible notes.
And the cash outflow of approximately $50 million related to our acquisition of <unk>.
I will also note that our ending debt balance for Q1 reflects early adoption of the new accounting standard ASU 2020, National six which as we shared last quarter results and a reclassification of our debt discount from shareholders equity back to that.
We delivered strong cash flow results to start the year with free cash flow of approximately $18 million first quarter, driven by strong billings and collections activity in the period.
Moving now to our updated guidance for the year.
Our strong start to 2021 reflects ongoing momentum with the growth and innovation strategy, we laid out at our Investor day in March.
Our investments and building a unified <unk> platform and the cloud are clearly resonating with customers, enabling us to meet them, where they are and the satcom is true.
As customers purchase more of our insight platform products, and we're well positioned to drive durable growth and MLR over time.
Additionally, the dynamic nature of today's cyber risk landscape is once again per security investments squarely back and focus rewards and leadership teams.
While it remains early in the year these trends fuel our confidence and raising our full year <unk> expectations for 2021.
As a result, we now expect to deliver full year <unk>.
<unk> $530 million per growth.
A 22% compared to our prior guidance of approximately 20% growth just a quarter ago.
This guidance accounts from the solid momentum, we see and our business today or contemplating ongoing uncertainty as it relates to the timeframe for broad based resolution.
And at global Health challenges and Easter.
Delineated economic risks.
Building off of our strong start to the year, we're raising our full year revenue guidance by $11 million at the midpoint and anticipate revenue to be and the range of 500 million to $506 million or growth of 22% to 23%.
Consistent with our typical methodology and given the multitude of growth drivers. We see ahead of US we plan to reinvest our year to date operating profit over performance to support our long term growth objectives.
And as a result, we continue to anticipate non-GAAP operating income for 2021 to be and the range of 12 million to $16 million for the full year.
We anticipate non-GAAP net income per share for the full year to be and the range of a loss of <unk> two.
<unk> to positive <unk> <unk> per share, which is based on an estimated $55 2 million basic and $57 4 million diluted weighted average shares outstanding.
Turning to cash flow, we remain focused on investing for growth, while scaling free cash flow generation over time.
I am pleased to report that we're raising our full year free cash flow expectations to approximately $15 million from our prior expectation of approximately $10 million.
This is driven by our strong free cash flow performance in Q1, offset in part by and upcoming IP transfer tax payment related to the recent acquisition of <unk>.
Moreover, we experienced very strong collections activity in Q1 and are not forecasting. This will continue at the same pace for the balance of the year.
Closing now with our quarterly guidance for the second quarter of 2021, we anticipate total revenue to be and the range of $121 7 million to $123 3 million growth of 23% to 25%.
We anticipate non-GAAP operating income second quarter to be and the range of $4 3 million and $5 $3 million and.
And expect timing of incremental investments tied to our Q1 over performance to be more back half weighted.
We anticipate non-GAAP net income per share from second quarter to be and the range of <unk> to <unk>.
Which is based on and anticipated 57 7 million diluted weighted average shares outstanding.
Note that our second quarter and full year 2021 guidance includes the impact from the recently announced acquisition and philosophy Raptor, which is expected to be immaterial to our financials.
So in summary, a strong start to 2021 demonstrates continued execution against our fundamental goals to drive durable growth and our business, while scaling profitability and free cash flow to become a $1 billion rule of 40 company over time.
With that we appreciate your time and support and we'll now open the call for any questions operator.
Ladies and gentlemen, if you have a question or a comment at this time. Please press Star then the one key on your Touchtone telephone. If your question has been answered you were still move yourself from the queue. Please press the pound key and.
Our first question comes from Rob Owens with Piper Sandler.
Great. Thanks for taking my questions guys wanted to drill and a little bit around the acceleration that you saw and also new customer acquisition first.
First off was there any contribution there even minimal.
Eight and that maybe you could drill down a little bit more to what youre seeing from a nuc and us from our perspective, especially given since we're still.
So and I'm going to be kind of running ramping.
Yes, Rob I'll start out.
With respect to outside it was immaterial and there was no.
No contract there is no material contribution to <unk> and the quarter or for that matter for the year.
Yeah and.
And just a follow up I would say the performance that we saw was really just breakdown both strong demand.
And strong execution by our teams across the overall portfolio and.
So we saw.
<unk>, new customers coming in which was healthy.
But we also saw good performance across customer segments, we have one of our stronger quarters.
And Lawrence field strength.
Over 50% there. So we feel very good about that and I think it just validates our investment strategy and the path that we've been over the last few years.
Great and then secondarily.
And secondarily.
And to ask you about xdr versus next generation Sim.
And the value proposition that they are talking about is consistent with where you've been three years and especially when the version of RSA here and a couple of weeks, which is obviously the noisiest debenture around security and are you starting to see the xdr proposition, especially from the and thank guys converge relative to what you're offering and newer space.
And so you'd see these as discrete and different opportunities.
And what we're talking about what people are talking about extra day is sort of a trend that we observed years ago and one of our core thesis areas and.
Around.
In fact, ADR platform, which was the idea that you could not tackle security and especially security monitoring and silos.
And so we were a pioneer and bringing uba log analysis.
Attacker based analytics, but also endpoints vis.
Ability into the fold, we accelerated that without velociraptor acquisition and this quarter and so when we look at it Holistically. We think do you actually need a holistic very advanced and sophisticated but easy to deploy strategy for monitoring and managing their environment, absolutely is our strategy of overlap.
And are they greater areas of xdr sure, but theres still distinct needs, what you get with a platform like inside <unk> and films as you get a complete logging and forensics platform you get a platform, especially with our expenses and allows you to actually will be monitored and extend into the cloud and have more visibility about whats going on and cloud environments and monitor those.
And automated remediation and so their strategy about how you manage the modern stock absolutely is aligned around the <unk> and that's why you have guard and others talk about it but theres still some rather unique needs that you still need logging and platforms and assume they bring to bear.
Operator, we'll take the next question.
Thank you and next question comes from Matt Hedberg with RBC capital markets.
Stripes, and they're continuing to actually renew it very favorable range.
That's that's great and then I think you've and the other compelling as part of the stories <unk> International It seems like a huge opportunity as well and I guess.
How do you approach you know thoughtful investments overseas and I'm gonna have to assume you know all of the issues that we see domestically are are are going on and national but but how do you sort of allocate your resources to go after that and apart from them.
You're absolutely right about the international opportunity I would say that one of the benefits and as you are.
Call, we started investing last year as we start to see the momentum and responses and may and and that set us up well for this year and what I would say, it's like a team and dropped or a model of growth and profitability and what that will continue to invest.
And international the different story and each region of the world, but overall within very very good demand from my International region, especially we still go and to me and for security transformation solutions.
Thanks, a lot guys.
Our next question comes from <unk> with Barclays.
Hey, guys. Thanks for thanks for taking my questions here.
Maybe maybe first for you.
Could you just talk a little bit about the overall customer demand environment, mainly and vulnerability management market and and when do you feel like some of the breach activity from last quarter.
Even even.
And was this quarter is maybe starting to drive some more pipeline or or more deal activity.
And so I would say your specific question, we're seeing very healthy demand across the board vulnerability management and.
Those areas and it has seemed to visit and demand and we saw improve and demand. This quarter. We feel that we have good visibility that if we fail with sort of like roughly 10 per cent before that are going to be over 10% and we have confidence and that for this year I think but most importantly, what you see and the story of the total value proposition and especially the strength of security confirmation and solution.
And I also have the efficacy of our field now that they can actually go out and talk to customers about the problems and they're on their mind off the top of their list and start wherever customers and want to start on that journey and so when we look at them and we really think about our respective about what's going on with customers and customers are looking into enhanced and upgrade their security and we're incredibly well position.
And to do that with the investments and execution and we made over the last few years.
Got it got it that makes sense, Jeff maybe maybe for you.
That's 17% growth and AOR per customer, it's been very consistent but.
Just.
Really nice to see I think I think we've touched on a few of the drivers you are kind of kind of through the call. But can you just maybe maybe sort of summarize what some of the most meaningful drivers are and that AOR per customer and I imagine somebody is mix shift and the business, but anything else that you would sort of point to that sort of driving that consistent growth and Arab per customer.
Sure first off with respect to mix shift clearly R. US security transformation solutions are very big driver and.
<unk> and it's growing and grew over 40% again this quarter and also represented over 50% of our new way are are those tend to have more.
Archer Esp's as well you heard quite and talk about seven.
Seven of our 10 largest deals.
Where a bulky product multiple products on the platform, we have very strong cross cells and Upsells this quarter.
I'll also point out that we had a modest and.
Prove and sequentially and our net retention rate. So overall all of the for growth drivers that we laid out and investor Analyst day.
We've executed on all of them customer growth growth and platform customer strategic customers. So I would I would say overall very strong quarter.
Got it thanks very much guys.
Thank you.
Our next question comes from Brian Ethics with Goldman Sachs.
Hi, good afternoon, and thanks for taking the question and it.
Maybe corey or Jeff whichever wants to kill this one. So you you took your guide and stuff by greater magnitude and the level of be relative to the midpoint of and once you guys. So.
And if you could talk to what's driving that confidence is at pipeline is it maybe the economy opening up better than better than expected is it or is it just.
Old fashion execution, how would you kind of great.
The increase.
Confidence and higher level of growth this year.
Clearly when we look at guidance are pipeline as a major factor from it.
Thought they like pipeline from here to give him factor.
Overall follow because we're going to periods of uncertainty.
And what we're expecting but most importantly, what we're hearing from our customers.
In terms of their certainty their confidence and they're budgeting process keep in mind and last year, we haven't lack pipeline, what we could accomplish and lots of our customers about what they're all budgetary profit star and we're not out there was there at all by any means arcade customers, having more clarity into their profit and that's point and through to our.
Our ability to better forecast time, and when it comes to our pipeline with day go through the guidance.
Got it and maybe just to follow up on that and where do you anticipate too and reinvest the upside and they've been operating performance relatively flat in spite of the revenue range. So what are you what are your priorities and and how do you kind of per.
<unk>, where that spending will go.
Yes.
If you think about our strategic framework.
While driving Leverages scale and the first day gets sort of like relevant so we continue to invest and our innovation platform and art.
Technology and R&D, because that goes a long term returns of our customers and natural for to our investors.
Over time, the second thing is that we will continue to actually make investments.
That our near term investments and give us a long from until you will call and our Investor Analyst day, we talked out lots of the work that we're doing almost packaging and pricing and how we actually position and skill the platform and do land and expand as we actually go forward and we still have near term investment opportunity that we believe that we can invest in achieve.
Are are balanced view of growth and profitability. This year, they give us a more scale and more efficiency overtime.
Got it very helpful. Congrats from me as well and the results nice quarter and.
Thank you.
Our next question comes from Jonathan Hart with William Blair.
Afternoon. So I just wanted to maybe start with one of your comments and what you said that you were making it easier for your.
Your consumers are your customers to consume your products and you talk a little bit about how you are making it easier and it's just a bundling and approach or is this in terms of the technical integrations and I'm just trying to understand all of it better you know what you mean by making it easier to consume.
Yes.
Great question.
So there's a couple of different idea of what the first of all day.
Point about the technology.
Is we're going to and lots of things as customer star to actually look at us more for their platform level security and hiding by the security overall to actually make it seamlessly move from one problem from the other problem without having to think about the context of what package do not purchase and so I have a cloud security offering.
And <unk> and I want to actually monitor what's happening.
<unk> that's.
Painless thing I could do with efficiency without having to think about do I need to go get a notice film how may have a time and place, but I maybe wanted to really monitor this area.
Focus on this area Likewise is that I'll do applications and security and I wanted to say like what's happening with the clouds that under the specific application and maybe I wanted to do a whole day declared employment, but maybe I just want to get more depth and visibility. There. So there's lots of work that our team during the process of doing and I'll just continue to improve the ability for our customers and.
Dynamically expand.
Their security and response to what's happened and the environment and keep them and their environment and changing fast and the attack of the change and fast and so we want to minimize theaters now and the second aspect that we've talked about a lot.
And we're doing both lots of research and lots of pilots on package and the price and the same what eases the consumption bar that makes it easier for customers and can so we talked about and one of those and find more this quarter and extraordinary and well received by customers.
We talking last quarter about our modern stock and allow people to that just inside and itr, but to get enhanced and point telemetry and networks, how come out and the sore together extraordinarily popular but these are things that allow customers to really either upgrade or actually fire together things that are logical and efficient.
And that's resonated quite a loyal customers.
Got it got it and then can you also talk a little bit about sort of the demand that you're seeing on the cloud side and potentially how that impacts. Your upsell are are are potential. Thank you.
Yes look with cloud is a hot area right now.
And we love by as early stages and market overall, but with the and extraordinarily strong demand for customers. Both near term demand, but also longer term demand and we will get lots of validation customers that these are strategic.
Strategic focus areas and things.
We focused in overtime and so we're not Muslim and executioner perspective, and from and how the perspective, we're extraordinarily confident and bullish about what's happened and across dirty market.
Thank you.
Thanks and that's.
And the next question comes from Adam tender with Raymond James.
Hi, Thanks is alexon per Adam I, just kind of curious how the adoption of the good better best strategies going and just how the channels reacting to that and also it formulaic and that is to say once you identify customer and the good bracket do you have a kind of a roadmap and how long it will take things get better and the best bucket.
I would say it's way too early I mean, it's a great question of it's just way too early have conclusive I would say the feedback that we've gotten from customer. So far is actually positive is just way too early and evolution from.
To have any deterministic feedback I would not expect the assistance and expectations. So late this year at the earliest.
Because it's really it's about sort of like and and a quantitative feedback.
And if you asked about it and by the way the good better best notions are like talk moving out there you just have to make sure you actually got the exact price levels right.
And the exact balance of west and each bucket right and those are the things you actually get with a lot more volume of engagement.
Okay perfect. Thanks, and then secondly, when you go into a bank off what is the driving and they're driving product lead with VM or <unk> or our customers, meaning to kind of evaluate rapid seven as a as a platform and adopting a broad portfolio and thank you also just speak to the number of new logo Windsor, taking multiple products and once versus.
And just kind of a point solution.
Yeah, and so on.
And your question is that part of our strategy and we believe the customers will not compromise on quality and so the best of Sweet concept me, but we can lead and we do to day successfully lead.
With.
Any of our products and our sales and now the confidence and they can go ahead, and do a bagel and cloud and BM.
And the same category, even xdr category, and when and be successful and so and that will be key criteria, what you're starting to emerge and that's what we actually got from the price is that we now have more and more customers that are coming in pop into us from a platform perspective about how to think about managing their complete security operations and that's still a new motion.
Fourth, but it's one that's actually quite promising and we're seeing more deals.
Okay, <unk> and that vein, but it's still very very very early days.
Thanks, and then I may have missed it did you did you give the renewal rate this quarter.
No we did not as we talked about and analyst day, it's not a key metrics that we're managing to what we did say is and terms some contest and vindicate improved sequentially, but we're not disclosing that metric going forward.
Okay. Thank you.
Okay.
Our next question comes from home, so a photo Rawleigh with Morgan Stanley.
Hey, guys. Thank you so much for taking my questions Uhm Corey.
And I had a question for you on the.
Velociraptor acquisition cool name by the way.
As far as.
How do you see what is the C. I a daily play and that this is day open source tool, that's bringing and obviously a lot of third party data.
Is it more of a R.
Since we're getting better and automation on the incident response and can you really dig into that a little bit and then also how.
How do you kind of.
Integrate that acquisition just given the fact that there's probably partners that lost the doctor might have that may also be competitor of yours.
Yes, so be we think about this velociraptor his book a brand and open source community and frankly companies all over the World is D.
Reading and points.
Platform and if you think about what we're doing and the itr space. So if you think about the topic xdr is having to leave and open source sort of technology embedded into our heads itr platform give our customers that was more capability and response, especially combined with our auto and platform. So that's the book is I would say instead of a <unk>.
Box and alteration and center only and would still one of the primary attack.
Vectors and the response capability pitcher actually need are different and what you actually get and a lot of other platforms and on the market. So again. This is a simplifying solution for us how do you allow customers to do advanced.
Have advanced capabilities, so they're easy to use and this fall into that bucket as far as the overall velociraptor ecosystem, it's and ecosystem, the primarily companies and enterprises all around the world and those companies and enterprises can continue to use velociraptor for their internal use.
Don't have a big focus on like Oh, you mean, our core technology is you know that said we've talked before about we have huge demand and we have a billing and demanded service rates and so there's opportunity from and service partners day actually leverage and use the technology.
Thank you.
That's true.
Our next question comes from Alex understood and with need them and company.
He came yet Mike Sickos here on file it's thanks for taking the questions.
I wanted to touch on the E R or acceleration and strong demand environment that you guys are talking to I'm interested if you could touch on how much of this you would attribute maybe the budget coming from the market now that there have been a couple of months between us and solar Windsor and Microsoft Exchange server Heck and is it fair to assume when I think about the solo and as heck.
Maybe demonstrating to the mid more cabinets and be that they'll company is too small to worry about being hacked right. So are these segments of the market, maybe moving towards you and a way that they hadn't before.
It's a good question.
And we had good performance and I would say the mid enterprise.
What we focus.
Visual small, but I would say our best performance I think and also a very very strong performance and a large scale strength.
Over 50% growth and to deal with the over 100 K.
And so I would say say he was probably balance and and one of the characterization and I give you. This quarter is that we had good performance across product categories for security saturation solutions with higher and we are good performance across segments. Although I think the mid market was actually strong, but without great performance and the large deal side of the equation and to your.
The first part of your question about what's the impact of the beaches look when you actually have an environment, where people are more aware of security and they focus more on security that makes it easy I think what is especially critical right now the two combinations.
Is or three together, one and digital transformation and the big parties and people awareness, but the second one is that because of some of the.
You actually talked about is the security of the higher profile with a company and the leadership teams, but the third was just and important and the organizations are getting a better handle and visibility on their own finances, we'd still allows us actually financed the things that they actually think are important I think all of those things will come together and again, it's not perfect, but we're still not been company.
And have their full 12 months, but it's like it'd be a free pandemic, but we are seeing if people and moss have lots and lots more visibility into their budgets overall.
That's very helpful. Thank you for that and one more if I put on the on the competitive from.
Just interested if you guys are seeing any changes and the work and I know, obviously, you're making these and vessels from the platform, making it easier to consume for customers.
And to the extent that you can come and.
When I think about someone like a quality or tenable health and are you guys actually seen them and the market when it comes to competitive vehicles.
Thank you but.
Premium specifically, we're in the market.
Keep in mind, we actually have point and we are now a range of build that some of them are competitive and some of them are uncompetitive because people will talk to us and what about our platform of and while I think that the competitive dynamics and the VA market and that changed substantially.
For pretty long and while that you still the same transit you've actually always here.
And for next question comes from Joshua Chilton with Burton per capital markets.
Hey, guys. Thanks for taking my question from my first one.
When you guys talk about the security transformation solutions growing north of 40 per cent can.
Can you just give us some color on the growth is this growth accelerating and to demand disc loose will pick up and how should we think about the pay per growth throughout the remainder of the year.
Yeah.
We've only talked about so that might be what the growth rate was above flavor.
40 per cent when I would say is that we have very very healthy demand overall.
We have a quick and confidence and visibility and to this which was part of the reason that we're able to actually give the guy.
And ways that we did but we're not actually give and detailed breakdown of the numbers about the specific sort of numbers for each part portfolio.
And.
Have you ever thought that it was over and we do expected to go over 40% this year and we start.
Be able to go over 10% will give you the high level characterization and so if you have some visibility.
That was helpful and when you guys mentioned that deal for insight one you got a customer and that basically bought the entire inside platform can you give us a little insight into kind of which vendors you replace with that deal.
The cost and I don't have a specific vendors that will replace all of the tip of my tongue.
Okay.
The problem is simple and we believe novell alone.
You can actually upgrade for security and you are not have it actually makes tradeoff and you have to get dressed and class technology.
And at the same time, you actually get economics, and you actually get sort of like a equate support experience and that's compelling overall and so while we did replace some competitors there I can't remember what specific one and right now.
Alright, okay.
Thanks.
And I'm not showing any further questions at this time electric and the call back over to our house for any closing remarks.
Well. Thank you all so much for joining us today on the call and.
And we wish you all.
Good weekend with the coming up.
Ladies and gentlemen, and so is conclude today's presentation. You may now disconnect and have a wonderful day.
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