Q3 2021 Varonis Systems Inc Earnings Call
[music].
Greetings and welcome to the Verona systems incorporated third quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host James The rescue director of Investor Relations. Thank you James you may begin.
Thank you operator good afternoon. Thank you for joining us today to review <unk> third quarter 2021 financial results with me on the call today are Yoki fight Olson, Chief Executive Officer, and Guy Melamed, Chief Financial Officer, and Chief operating officer of Arone Us after preliminary remarks, we will open the call to a question and answer.
Got it.
During this call we may make statements related to our business that would be considered forward looking statements under federal securities laws, including projections of future operating results for our fourth quarter and full year ending December 31 2021.
Due to a number of factors actual results may differ materially from those set forth in such statements.
These factors are set forth in the earnings press release that we issued today under the section captioned forward looking statements and these and other important risk factors are described more fully in our reports filed with the Securities and Exchange Commission.
We encourage all investors to read our SEC filings. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date for honest expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward looking statements made herein.
Additionally, non-GAAP financial measures will be discussed on this conference call.
A reconciliation for the most directly comparable GAAP financial measures is also available in our third quarter 2021 earnings press release, which can be found at www dot for Roni <unk> Dot com in the Investor Relations section.
Also please note that all common stock and per share data had been retroactively adjusted for the impact of the three for one stock split effective March 15th 2021.
Lastly, please note that an updated investor presentation as well as a webcast of today's call are available on our website in the Investor Relations section.
With that I'd like to turn the call over to our Chief Executive Officer, Yoki files and Yoki.
Thanks, Jamie and good afternoon, everyone and thank you for joining us to discuss those thank you sleep, which was a major milestone for the audience.
Our first quarter to surpass 100 million in revenues.
Companies around the world became more aware of they need to protect sensitive data. We see this achievement is just scratching the surface.
Normally slipping attunity ahead of us.
Want to thank the entire vonage team for their efforts, which led to the success with that let's jump in as they provide an update on our business I want to focus on the security problem facing go to organization and why did the first approach continues to resonate with new and existing customers.
I will then turn the call to Guy to discuss our Q3 results.
Dated financial guidance, let's start with the current operating environment.
<unk> is more reliant on data than ever before and we can make the objective security efforts is to protect people.
The global digital transformation has led to many collaboration benefits, but it is also fundamentally change how companies must support security as we have said.
Sensitive data stored and accessed for more places the perimeter to be fine and even how to monitor and protect and endpoints now. So most of these access points to large data stores.
And in the cloud.
They shouldn't using dysfunction data stores and critical business applications. So that the employees can more easily collaborate and extract more value from data.
The.
Ease and speed of collaboration has made securing data far more challenging and we continue to see that result, the life protection.
Gifting holiday and how those enterprises managed security without impacting productivity.
Is this part of data continues the attack surface goes and behind it critical digital assets are woefully unprotected.
The potential for damage from just a single compromised user, which we defined as the blast radius is tremendous and it doesn't need to be the case, we see these customers on a daily basis, especially on some will.
Please go ahead Sir.
<unk> is better visibility into risks that go going by the D D.
Addition to these fundamental data protection concerns, we see lease configurations.
Posing sensitive data to many people.
And the Interconnectivity of SaaS applications, increasing the risk that can utilize these conviction to move laterally in the cloud the sophistication of today's hockey cannot be overstated as state actors lead the efforts and the technique spill over into the <unk>.
Sure It does.
Same time, we see how crypto currency makes it easy to monetize as crime without any choice.
Nearly every organization faces these problems and the need to solve these aligned perfectly with the primary use case says we are addressing data protection threat detection and privacy and compliance we have discussed the data protection and threat detection.
And companies.
Can no longer ignore regulations like GDP ovens.
When we are beginning to see enormous fine for noncompliance in short we are unleashing the potential of our platform as companies think most strategically both data centric security.
And we do not expect this momentum to slow down.
We provide a few examples of some key customer wins for this quarter.
One of Europe's most recognized international organization with nearly 20000 employees became the only customer in the third quarter. In addition to auto theft detection needs do you start to skew active directory.
Prepare the data for migration to the cloud and ensure compliance with GDP all.
After we review where they were at risk and show the ability to remediate overexposure to sensitive data the purchase multiple licenses.
And we are currently discussing additional licenses that will broaden the coverage we provide.
As we have said we believe although this customer should be double digit number licenses based on the COVID-19 been going threat landscape.
The higher upfront value, we provide through our subscription offering consistently lead to healthy expansion and ups.
A strong example utility company.
So being a major U S city, which first became if only customer with several years ago under.
Under a perpetual model.
Purchasing three licenses.
In 'twenty 'twenty, they took advantage of both the subscription offering to secure data in the cloud as well as monitor the perimeter and the immediate open access issues in Q3 of the skew the father expanded their deployment to cover additional data stores and easily migrate data across platforms.
In less than three years. This company went from sleep all these licenses to 'twenty and this does not include our recently introduced cloud licenses.
Which leaves room for additional expansion in the future.
These examples illustrate the continuation of strong adoption and engagement trends, we are seeing coupled with a healthy pipeline. We are well positioned to close deal store because we have said we believe our position in the market is unmatched and the team is relentlessly focused on continued execution and cut.
The rising they notice opportunity before us is that let me turn the call over to value Guy.
Thanks, Jackie and good afternoon, everyone. Thank you for joining US today, we are pleased with our third quarter results, which demonstrates the power of our platform and continued need of our customers to secure their sensitive data.
Highlights in Q3 include 31% total revenue growth year over year to surpass the $100 million of revenue for the first time in our history.
This was driven by 36% growth in E. R. R to $354 $2 million, our continued execution against our targets resulted in another strong quarter of growth the.
The confidence we have in our business is reflected in our Q4 guidance, which is the highest growth we have guided to since 2014 that.
That year, our total revenues for the year were approximately $100 million, which is the revenues we delivered this quarter alone.
Looking at our results, we continue to see a healthy balance of new customers, making substantial upfront commitments and existing customers expanding their veronis deployment. After we demonstrate the value of our platform we.
We are pleased that the number of licenses purchased by new customers has increased overtime as this reflects a meaningful increase in customer lifetime value.
As of September 30th 2021, 70% of our total customers with 500 or more employees purchased four or more licenses up from 60% a year ago and 50% two years ago at the same time, 37% of our total customers with 500 or more employees purchased six.
More licenses up from 26% a year ago and more than double the 17% in Q3 2019.
The rapid growth in these metrics demonstrate the strong customer engagement, we see and also illustrate the ongoing opportunity we have to get all grown as customers to a double digit number of licenses.
Turning now to our third quarter results in more detail.
Total revenues grew 31% to $144 million subscription revenues grew 59% to $70 million and maintenance and services revenues were $30 million is our renewal rates remained strong at over 90%.
Looking at our business geographically revenues in North America grew 32% to $75 $6 million or 75% of total revenues in.
In EMEA revenues grew 28% to $22 $8 million or 23% of total revenue rest.
Rest of World revenues were $1 $9 million or 2% of total revenues.
Turning back to the income statement I'll be discussing non-GAAP results going forward.
Gross profit for the third quarter was $88 $3 million, representing a gross margin of 88% compared to 87, 2% in the third quarter 2020.
Operating expenses in the third quarter totaled $82 million as a.
Third quarter operating income was $8 $1 million or an operating margin of eight 1%.
This compares to operating income of $3 $1 million or an operating margin of 4% in the same period last year as we continued to drive operating margin leverage.
During the quarter, we had financial expense of approximately $908000, primarily due to interest expense on our convertible note.
Net income for the third quarter of 2021 was $5 $7 million or income of five cents per diluted share compared to net income of $2 $1 million or income of two cents per diluted share for the third quarter of 2020.
This is based on $119 1 million and $106 1 million diluted shares outstanding for Q3, 2021 in Q3 2020, respectively.
We ended Q3 with $813 $4 million in cash cash equivalents marketable securities and short term deposits.
For the nine months ended September 30th 2021 we generated $6 $8 million of cash from operations compared to negative $13 $5 million used in the same period last year.
We ended the third quarter with 1969 employees, an increase of 99 net new employees from the second quarter of this year.
We continue to invest across departments and geographies as we believe these investments in innovation and capacity will allow us to capture the opportunities we see in the market.
Moving to our guidance.
We believe the strength of our Q4 financial guidance, especially against our outstanding performance. In Q4 2020 reflects our ability to continue capitalizing on the growing demand for our platform.
For the fourth quarter of 2020. One we expect total revenues of 120 million to $123 million representing growth of 26% to 29%.
We expect non-GAAP operating income of $16 5 million to $18 $5 million and non-GAAP net income per diluted share in the range of 12 to 13.
This assumes $119 8 million diluted shares outstanding.
For the full year, we are again meaningfully raising our guidance and now expect total revenues of $383 5 million to $386 $5 million representing growth of 31% to 32%.
We now expect non-GAAP operating income of $19 5 million to $21.5 million and non-GAAP net income per diluted share in the range of 10.
To 11 cents.
This assumes a 118 million diluted shares outstanding.
In summary, we are pleased with our third quarter results as the ongoing execution of our go to market strategy continues to drive top line growth operating margin expansion and cash flow generation, while also resulting in our first quarter with $100 million in revenue. We are proud of this mine.
Stone and we know that continued outperformance in investment in the business positions us for a strong close to the year and the next milestones to come.
Thanks for joining us today and with that we would be happy to take questions operator.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
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The interest of time, we ask that participants limit themselves to one question and one follow up.
One moment, please while we poll for questions.
Thank you. Our first question comes from Sterling Auty with J P. Morgan. Please proceed with your question.
Yeah, Thanks, Hi, guys so guy.
Thank you.
Alluded to the idea of stronger or bigger initial commitments from customers I guess I interpret that as larger initial deal sizes can you give us maybe a quantitative you know look at how much have they grow and maybe a qualitative explanation as to what do you think is driving it.
What do you think the trend from here will look like.
Yes, it's a great question the answer is very much.
Platform consumption of our customers they are buying a way more licenses, they're buying approximately double the number of licenses that we had when we sold perpetual licenses and what we've also seen is that the more licenses they acquire.
The higher the likelihood that they see value in the product and they will come back and buy more so when we price the subscription price list. It was at 45% of perpetual and first year maintenance. When you think about the fact that they're acquiring double the number of licenses you can see how that E. S.
B is much higher than what we initially thought would be when we just initiated the transition and this consumption of that technology is what's driving the growth in the customer lifetime value.
That makes sense and one follow up would be as.
As you look at your sales hiring and sales capacity. What are you doing in terms of current hiring to set you up to capture that what you mentioned as durable demand moving forward.
Hi.
Keep hiring basis tremendous market opportunity.
Goodbye from this Guy said.
There is a very strong understanding from our customers that they need to protect data and data is really concentrated in assumption data repositories on prem in the cloud and we are learning from it.
Sleep, but we need to enable them and you know we need to make sure that we give them. The outfits council. The total available market in terms of what we can how we can go in the basin.
The market opportunity, we can capture is huge and we're just going to go the salesforce just going to do it in the right way to make sure that we can support them with management in place you know we have very diligent enabled named him as Borgwarner and we need to make sure that when people come in here.
We support them and they'll go success.
Makes sense. Thank you guys.
Thank you.
Thank you. Our next question comes from Matt Hedberg with RBC. Please proceed with your question.
Hi, guys. Thanks for taking my questions Congrats on the results.
Yeah do you want to start with you.
I guess I'm curious what is Verona.
Right now sort of returned to work or returned to travel and I guess it is.
As the world opens up a bit here in the next year.
Thank you.
If there is more travel by it by your team could actually help in pipeline generation.
Hi, Mark.
First and foremost you just thank you for employees customers and partners. So we are.
We are just a DD gently boingo the look the health facilities.
HR being the local offices in markets we operate.
Yes, you know we definitely benefited from multiple in terms of at least 65 and everything we are doing the data advantage cloud so the digital transformation.
But as you know very well.
It's a.
For context, both in the sense of that it makes sense to me.
With customers and also with OPM.
So we are gradually moving to just the hybrid welcoming biomarker in places that we can meet customer can meet partners. We are doing it we just built it.
Got it. Thank you and then maybe just a follow up for Guy.
As Air Art Decelerates Youre also of more difficult comparisons.
As you start to think about the model next year, obviously, you're not studies next year, yet, but how is the rate that we should think about sort of revenue and growth rates converging or I mean are we to the point where next year.
We might see more of a convergence between between the two.
And I think Theres a lot of confusion out there on kind of the convergence of <unk> and revenue and I'll start by saying that we're very happy where they are growing at 36%.
<unk> growing at 31%.
And as part of kind of the expectation that we have and when we analyze the E. R. R and revenue obviously, one metric is an annual metric.
And the revenue is accordingly, so there could be some sort of discrepancy.
But when you look at the recurring revenue.
The subscription and maintenance on a 12 month trailing basis.
And analyze that growth, you'll see how the revenue and <unk> have actually converge there both at 36%.
And it really doesn't matter how you look at it on a quarterly metric or an annual metric I think those results are very strong and an indication of the strength of the business and as you mentioned as we enter next quarter in the next earnings call, we'll provide more color for 2020.
Got it thanks guys.
Okay.
Thank you. Our next question is from Brent Thill with Jefferies. Please proceed with your question.
Great.
Just a a R.
<unk> grew nicely, 36%, but only 2% sequentially. So I think there are many questions just trying to understand kind of the trajectory and what what's driving this.
Going forward and maybe if you could also just comment a little bit about it.
From a federal versus commercial perspective, any any color to add to the federal vertical and what you saw this quarter.
So I think when we look at the overall growth.
36%.
Like I said the revenue being at 31%.
Strong numbers.
Most of the growth was driven by the enterprise business.
We feel very good about the pipeline I think it's a great indication when you look at kind of the Q4 guidance and the guidance providing being at 26% to 29% is kind of an indication of how strong we feel about the business because it's again against an outstanding Q4 of <unk>.
2020.
So we definitely feel very good about the business and closing the year strong.
And sorry Guy was there any color on federal in terms of what you're seeing.
As Guy mentioned.
Goldstrike rewards.
Enterprise business.
We saw them further.
It was another focus on remote work in collaboration with 365. So we're still just a lot of opportunities, but it will just be powered to allocate the budget.
What we do see the 365 and the explosion of data is tremendous opportunity for so many opportunities for the next two and a lot of projects related to zero Trust.
We are front and center.
Zero Trust initiative to many of the.
Customers and prospects. So we believe that they can do very well.
And the next in the next year, but the goal was the.
Primarily driven by.
Great. Thanks.
Thank you. Our next question comes from Seth <unk> with Barclays. Please proceed with your question.
Okay, Great Hey, guys. Thanks for taking my questions here.
Maybe maybe for you first yaqui.
The multi product adoption here continues to grow I mean, I think the adoption number speak for themselves.
As long as your focus on larger customers I was curious I mean as as the base sort of gets to a point, where so many more of them have multiple products have you ever thought about enterprise license agreements with with with customers in the future and what are some of the puts and takes as you sort of think about that.
We do what we say definitely that.
Customers understand it and it will take data the perimeter are very hard to define Guam service explosions endpoint like access points. Most of the data is in what we call essentially positive on claim.
In the cloud so when customers are already investing enough.
So the total of investments many times these tremendous in Uruguay.
Security efforts in order to protect your digital assets, but let me see one off destocking.
<unk>.
The top platform.
Definitely the I don't think that we see the small really small when you have more licenses much higher probability for two weeks.
Consume much more licenses overtime customer wants to have the most efficient place to do it. So it's still early stages, but we definitely think about it and we constantly think about what is the right way to make sure that will be easy for customers to consume more products in the daily benefit when we can we will benefit for me, but this is something.
That is in the world and we'll see how we can play out, but we definitely think about it.
Got it that's really helpful.
Guy maybe maybe for you I mean, the question was asked about sort of the convergence of of AOR and revenue growth, maybe maybe I'll ask about a slightly differently.
I mean, it's been.
Pretty nice sort of mid to high 30% AOR growth here for the last few quarters. Several quarters is there anything to think about on the glide path of that AOR growth going forward I mean, you have a <unk>.
Transition is done.
We've had several high profile breaches of course, we have we have had COVID-19 last year understanding that you don't guide to <unk>. What are some of the puts and takes that we should think about when modeling <unk>, let's say for the next couple of years.
The second I think when when we look at kind of the numbers that they are out there and some of the talking points that we have heard about <unk>.
We feel that there is some confusion in how to model those numbers.
And one of the things that we have thought of is providing more color on <unk> as we enter our next.
Earnings call.
And towards 2022, so I think the right metric the leading metric for US right now for this year is revenue, but as we sell more D. A cloud licenses.
And because we recognize we will recognize the cloud on a ratable way.
<unk> will become a kind of a leading indicator for us.
Therefore, we feel that we should provide more color to that as well. So I can pick one thing Paul.
And there are these high level breaches, Bob the way that usually demented spot is that there is high level Richard.
<unk> spending you know organizations a window to react.
Stop, but then the stock a very thoughtful process.
Why do I need to do on doing them in a live what is the best Oh, how long ago.
Going to protect my enterprise Louise.
Just a scarcity of staff this is what will benefit as well.
So I just think what's happened is that when the dust is settling this is where we are benefiting more and more and just becoming more mainstream in the and the customers are standardizing around us and really looking for solutions.
Got it very helpful guys. Thank you.
Thank you.
Thank you. Our next question comes from Rob Owens with Piper Sandler. Please proceed with your question.
Yeah. Thanks for taking my question that was a nice lead into D. A cloud realizing it's still relatively early but any customer feedback you can give us where it's being attached.
Any types of rates or if it's actually providing the the tip of the spear in terms of your selling motion. Thanks.
Oh, we'll not see material contribution this year, but the customer conversations are very positive.
Pipeline, we believe that it's a massive opportunity and really work on simple.
This is these are the business applications.
Regarding your business. So we believe.
The 265 is a good indicator of what we can do with the 8000.
The initial.
The initial indications that it can be very strong.
Yes.
Yeah, and secondly, I don't know if you've given this metric before I apologize if you have but you've talked about getting to double digit license adoption and can you give us an idea of what share of customers or how much of the base of actually reached at are gone there.
So the metrics we started providing.
Last year was number of customers with more than 500 employees that have four licenses and six or more licenses and the numbers. There are actually supporting exactly what we're talking about about customers consuming the platform. We have seen the four or more licenses go from 50% two years ago, 60% last year and 70.
Percent this year and on the six or more licenses.
<unk> licenses.
We're at 37% this year actually more than doubling what we had two years ago. So very strong indication of the customer's consuming the platform and the fact that we are.
Very much in believing that we can get to double digit licenses on average.
We need to understand.
The basis is automation.
One they have more customers that gets much more coming to the bottom.
So this is what you see it's really wanted us watching closely.
And just.
Yes.
The issue focusing automation when they have more licenses.
So yes.
Yes.
Alright, thanks for the color and it almost seems like it's time for another license category given the success you're seeing in the four and the six so thanks guys.
Thank you.
Thank you and the interest of time, we ask the participants limit themselves to one question. Thank you.
Our next question comes from Roger Boyd with UBS. Please proceed with your question.
Hey, Thank you very much and congrats on the results.
Just thinking about one of these tailwind driver's office through 65 wondering if you could provide a little more color about what youre seeing in terms of the strength of this tailwind over the past couple of quarters and how you are thinking about it for Q in calendar 'twenty two.
Okay.
365 inches.
Sweet is geared towards collaboration what we see is that customer capacity to create and showed data file exceeded the capacity to protect.
And just.
It's designed to collaborate in order to protect and this is just the.
It exposes a lot of.
Organization that excuse me.
And with Covid do you see a lot of adoption, there and a lot of adoption teams and our ability to protect data.
And showed the risk is just barely aspect so once the customers get to critical mass.
365.
Or do we see almost all of it we see a lot of value is what we're doing this as a tremendous growth area for us but at the same token. We also believe that the other.
Some.
It's also designed more towards collaboration and very hard for the data protection and it's constantly distension between productivity and security.
Just presenting enrollments.
And we're just uniquely positioned to serve.
This is Jonathan.
You need the elements of the framework and just a lot of very efficient.
Visibility in aviation.
And feature sets.
That's helpful.
Okay. Thank you.
Thank you. Our next question comes from Andrew Nowinski with Wells Fargo. Please proceed with your question.
Great. Thank you for taking the question. So I wanted to ask about maintenance revenue well. If you look at the subscription revenue in isolation you had amazing growth. However, the maintenance continues to weigh on your overall growth rate I guess why is the maintenance revenue declining faster and when should we expect more existing customers to convert over to subscription.
So be.
The percentage that <unk> seen a decline as an indication of strong renewal rates for maintenance.
It's.
Perpetual has that renewal rates that have been consistently over 90%.
We have said all along that we don't go back to our existing customers and try and convert them to subscription, but rather just sell them additional licenses.
Under the subscription so they keep their maintenance of perpetual and they buy additional licenses we have so many more licenses to sell to our customers.
The we can provide more value.
Without recurring component and for them, it's one line item.
Opex line items. So if we if we see customers wanting to convert will be happy to address it but we haven't seen it so far and went up.
So those customers that are buying more licenses or they buy them on a subscription based on survey just because your perpetual licenses.
Uh huh.
No we're not setting per se.
De minimis number that perpetual licenses with selling additional licenses as subscriptions.
Okay.
Thank you. Our next question comes from Mike <unk> with Needham <unk> Company. Please proceed with your question.
Hey, guys. Thanks for taking the question here.
Just trying to get more familiar with the sales cycle and what I'm trying to do is if I'm thinking about the overall environment.
The sense of urgency and the heightened threat environment. We're currently in I I'd imagine that that has some impact maybe in compressing your current sales cycles, but on the other hand or are you seeing sales cycles. In fact elongate as as customers are being more thoughtful in their approach and taking on more licenses.
Front.
It would just be curious if you could help me think about those two.
Those two differences when I'm, putting that all into one bucket for sale cycles. Thank you.
Overall, if you look at the overall deal.
So I can stay stable.
Just to be on a case by case basis.
And it's somewhat.
The closing process, but what we see mainly.
Oh, the sales motion, becoming much more strategic so.
So.
The simple and that customer will just buying the buying more licenses.
All the time.
Additionally, this is really what we see.
C.
Better conversion rate on the pipeline, we see that the since processes much more predictable.
Larger accounts sometimes.
If access to the system.
A larger and larger deals.
Our relationship with the overall relationship with our customer base, becoming more and more.
Thank you. Our next question is from Hamzah firewall with Morgan Stanley. Please proceed with your question.
Hey, guys. Thanks for taking my question I wanted to follow up on some of the New York cloud products that you.
Do you have rolled out earlier this year I know theyre not material to sales today, but just has.
The materiality of pipeline are you seeing.
More interest in the cloud solutions as you look at your pipeline going forward into Q4 into next year, maybe a question for Yoki on that one.
So we definitely see a lot of it is.
A lot of interest just thinking about customer with clinical data sensible, Google Bulks heat.
He Todd Harman customers.
Stock write off.
The.
Huge policy wont be formation.
And contempt to Luis this is where they have gone they don't take a lot of data on a.
New compromising endpoints in order to get to the central Central the positive business application.
Sure. Thanks data. This is what this is exactly what you see out of that.
These all these SaaS applications.
It's really easy to do.
So once you are in.
Hum.
Jim Bill organizations just.
It's huge.
And today, what we are doing the windows Mirasol data protection, Poland, Sweden.
<unk> uniquely positioned to do it we are the only one but at this point.
In doing so we believe that what we sold 65.
Just that we can add value in this business can do with data advantage.
You will see material contribution.
Definitely we believe that we can be the company that sweetie Peck.
Data on the <unk>.
Phonation for the digital transformation.
Got it and maybe just to follow up for Thai not to beat a dead horse on the air or a question, but I think one other way.
People look at.
Here are just on a quarterly basis just looking at.
New air or additions.
And the net new additions grew quite strongly in the first half and in Q1 and Q2.
Q3 was it was somewhat flattish I'm just curious as we think about the seasonality in there or how should we think about that metric into Q4.
Just just generally relative to Q3.
When you look at the seasonality for <unk>.
Scripture, then you compare the seasonality to what we used to see under the perpetual model, we don't see much change so the expectation for Q4.
We've always said, it's the largest.
A quarter of the year.
And so as that expectation under the subscription model so seasonality as we see it stays the same.
Thank you. Our next question comes from Chad Bennett with Craig Hallum. Please proceed with your question.
Okay.
Great. Thanks for taking my question so.
So just in terms of with the introduction of your new cloud cloud products and cloud data store coverage, you have with with polarizing and now that that's been rebranded.
Do you do you have any indication you know what.
Either it's I guess split in two different ways, whether it's you know kind of Microsoft based cloud products penetration or coverage within your your base or it's non Microsoft cloud applications or data stores.
Where your penetration is or maybe asked differently kind of what the opportunity is there in your base now that you've rolled out these new data stores and in cloud data products.
This.
Is most of the cloud.
Let's see.
We'll take the cloud as well as the condition quake.
The 365 HIFU.
Sure.
All of them. This is the beauty with the cloud and has the thing that this is love defense moving.
And always do go through a lot of these.
Applications once the EQT can mask a little bit.
Coming here.
Standout and you need to protect them and as I said.
<unk> said before that much more.
Collaboration API connectivity.
And then security, which is a massive opportunity for us we see huge opportunity in the base to be.
And the biggest potential for infection response supply risk and compliance.
It was pretty consistent.
Got it thanks for taking my question.
Thank you. Our next question is from Chevrolet Sieracki with SPN Securities. Please proceed with your question.
Yes, well. Thank you very much can you talk about the strength of your pipeline currently and now that the month of October is behind us.
Can you just talk about how it went.
Did it beat your expectations.
But I think when we look at the pipeline.
A good indication.
To see how we think about it is the guidance that we provided for Q4 Q4 guidance is that.
Is the highest guidance we've provided since 2014 and thats against an outstanding Q4, as I said before Q4 2020. So I think when you when you look at kind of indication of where we are going at the end of the year.
We're kind of putting guidance out there and were still guiding in the same responsible way so.
I think we feel good about the opportunity that we have we feel good about our ability to continue to sell to our existing customers and acquire new customers and we've done that throughout the year and we intend to do that in Q4 as well.
Thank you. Our next question is from Shaul Eyal with Cowen <unk> Company. Please proceed with your question.
Thank you hi, good afternoon, Ken Congrats on nice quarterly results on any guidance.
Guy or Yaqui.
Supply chain constraint it would appear it's this you've seen none right now also when looking at gross margins, but any commentary any color on your end on this topic, which has been on investors' minds greatly.
At least one child is most relevant for us.
We don't have anything.
No I can say about it.
Thank you.
Thank you. Our next question comes from Jonathan.
Severe with Baird. Please proceed with your question.
Close right.
Hey, guys.
I'm wondering if you could.
The threat detection and response to use case like I understand it's mostly driven by automation, but just trying to get a sense for.
How material that is to the overall business and then just strategically how you're looking at that area going forward, just because we see a growing number of security companies focused on where in fact, the detection path to remediation and and it's not only about the outerwear, but you will see companies moving into user behavior. So.
Activity around file system. So just kind of curious how you look at that area.
What what Youre doing from a product development standpoint to maybe add or capabilities over time.
Yes, we have very strong capabilities.
Currently the way that we're looking really looking at the world and from the data I'll start so everybody of leukemia and bonds net okay.
Trying to Oh.
All of these.
All of these vessels that we know will take data coming from the data we have the most reliable.
Seamless data, which is the two analyze which is access to the data storage services on their real busy.
Paul Feyen user profiles, southern Kansas 10 billion.
Deviation, we classify the use the regular use of service accounts.
Helping the organization in the Ritchie.
The specification of data and the infrastructure.
Closest to the data says.
And phone Bill.
But to generate that has been absolutely.
And problem.
Not only that we can really generate.
You all whether they are stocking sleeping damaging the organization and you all watch.
Some data in their own way.
Data and these swaps extremely well in this part of our response, we are almost at all.
That's helpful. Thank you.
Thank you. Our next question comes from Andrew Smith with <unk> Capital markets. Please proceed with your question.
Hi, guys. Thanks for taking my question just a question on competition for me.
As you move into securing more cloud data stores with data advantage cloud do you expect to potentially run into competition from casualty products.
I understand that organizations are likely not 100% in the cloud so is having the ability to holistically cover both data on Prem and in the cloud an important advantage for you.
Yes, the hybrid.
It's definitely a big advantage, but the other bankers just the focus on data. So it's kathleen here and they'll generate confusion they will not move competition because when you take just the large datasets and want to visualize that occupancy.
Understand the abnormal behavior, not just deal with the mentally auction broke out just completely different.
So one just installed the product and we just show you the immediate.
Okay, just visually very visual stated the customer they immediately understand that it's completely different.
So just the amount of competition confusion, but you see so far we've made advantage power is the same that we see with the enterprise.
But most of them she says.
Okay. Thank you.
Thank you. Our next question is from Joshua Tilton with Wolfe Research. Please proceed with your question.
Alright, thanks, guys.
Given last year's Covid impact to the business are there any guardrails you can provide us to help us think about normal Q4 subscription revenue seasonality aside from it should be the biggest quarter, maybe anything unusual from last year's Q4 to call out.
Well I think when we when we built the guidance we took into consideration slightly higher travel I'm talking about the expense.
Slightly higher travel, but still below pre pandemic levels from a revenue perspective.
The guidance kind of speaks for itself and as indication, indicating how we feel going into the quarter.
If you think about.
<unk> 2021.
We obviously had.
Q1, we had the hiccup just because when Covid hit and then Q2 was.
It was a.
Better quarter, Q3 was even better than that and then Q4 was an outstanding quarter, and we're providing kind of a strong guidance against that outstanding numbers. So we feel good about kind of how we're entering the end of the year and we feel that we can execute on.
And also Linda.
Thanks, guys.
Thank you there are no further questions at this time I would like to turn the floor back over to James the rescue for any closing comments.
So thank you everyone for your interest and for joining Tonight, and we look forward to speaking with you. This quarter. Please don't hesitate to reach out if we can be helpful have a good night.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful evening.