Q1 2023 SentinelOne Inc Earnings Call
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Good afternoon.
Thank you for attending but didn't know why Q1 fiscal year 2023 earnings call. My name is Matt and that'll be your moderator for today's call all lines will be muted during the presentation portion of the call.
With Investor Relations.
Please go ahead.
Good afternoon, everyone and welcome to touch the one's earnings call for the first quarter of fiscal year 'twenty.
2023 ended April 30th.
With us today are Tom Hawaiian Garden, CEO , Nicholas Warner President of security and Dave Bernhardt CFO , Our press release from the shareholder letter issued earlier today and are posted on our website. This call is being broadcast live via webcast and following the call an audio replay will be available on the Investor Relations section of our website before we.
We begin I would like to remind you that during today's call, we will be making forward looking statements regarding future events and financial performance, including our guidance for the second fiscal quarter and the full fiscal year 2012 reflect our best judgment based on factors currently known to us and the actual.
Events or results could differ materially.
Please refer to the documents we file from time to time at the SEC in particular, our annual report on Form 10-K, and our quarterly report on Form 10-Q that we will file for Q1. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward looking statements any forward looking.
<unk> made during this call are being made as of today. If this call is replayed or reviewed after today the impaired information.
Except as <unk>.
Acquired by law, we assume no obligation to update these forward looking statements publicly or to update the reasons actual.
Anticipated in the forward looking statements, even if new information becomes available in the future during this call.
Unless otherwise stated we will discuss non-GAAP financial measures. These non accordance with generally accepted accounting principles.
The GAAP and non-GAAP results is provided.
And as in today's press release and in our shareholder letter and with that.
A central one.
Good afternoon, everyone and thank you for joining our fiscal first quarter earnings call I'm pleased to announce we had another excellent quarter with strengthened.
Our results reflect two important dynamics first the demand environment.
We continued to achieve significant margin expansion stemming from a more platform based land and expand.
Strategy high quality revenue growth and operational efficiencies, let me start.
Start with a few highlights from the quarter.
Q1 marks our fifth consecutive quarter of triple digit revenue many of our growth and we expect that to continue next quarter it would be.
The outlook for cyber security remains strong and we're also raising our full year with power of our business model we've built.
Delivering growth and significant margin improvement our gross margin reached a new high of 68%.
Eight percentage points year over year expansion in our operating margins expanding 54 percentage points year over year, we expect to achieve the rule of 40 for the full year.
Our land and expand strategy is working extremely well we added a record number of new customers in the quarter EBIT more than our seasonally strong fourth quarter, we're consistently winning with large enterprises in major cities.
And <unk> among others.
With a record 131%.
And finally.
We continue.
To extend the breadth and diversity of our business fueling growth and expansion opportunities we closed.
As a leader in a bid to be secure.
Sure.
We now cover.
Bring essential attack surfaces across endpoint cloud identity, all of which offer significant growth potential.
Thank you for your dedication and execution of Olson.
We delivered another.
Once again welcome to the <unk>.
Okay.
As always please read our shareholder letter that we published on our Investor.
Our relations website, which provides a lot more detail.
On today's call I'll focus on three key topics related to our business one the strong demand environment.
Our path to profitability, driven by our suites and operational efficiency gains and three the superiority of our autonomous security platform, which delivers leading.
Protection detection as evidenced by our leadership in this year's Mitre, it's accurate valuation for a third year in a row.
Let's start with the demand environment and opportunities demand for our mission critical security has never been ambitions. Many secular trends are driving strong demand for cyber security and expanding attack surfaces.
And data proliferation.
The consequences of any risks of not being protected by a leading cyber security solution are just too high.
Our teams are executing.
Extremely with our Q.
Since the close geographies products and customers.
Endpoint remains the engine that fuels our growth.
In addition, we're seeing significant growth from our <unk> capabilities. For example, our cloud workload protection solution continues to reach new Heights.
It was our fastest growing module approaching 10% of Q1 HCV.
Clive.
Some workloads to the cloud which requires.
Our solution is a cloud native indirectly integrating physical brenneke protection.
Protection customers are choosing.
So the end points and on a standalone basis.
Hey, Chris this scalable cloud footprint and early view sizes indicate the much larger future.
I mentioned earlier, we added a record.
Number of new customers in the quarter, even more than our seasonally strong Q4.
We continue to engage and win win organizations across the world, which demonstrates the power of our solution and competitive processes against our largest competitors.
Automation ease of use and platform breadth.
As we look forward, we expect these very strong macro trends within our competitive strength to persist fueling our growth.
But within future share gains.
When global via excellent sales results, we generated our largest ever pipeline in Q1.
With this as the demand backdrop, we expect revenue in Q2 to grow 100.
Cutting through the second topic.
Since all of our business model and an increased focus on both growth and profitability.
We fully expect to deliver strong revenue growth with continuous margin expansion as we scale the business.
Business.
The progress is evident in our Q1 results our platform unit economics and business model enable us to grow efficiently in several ways for instance, we're increasing our market share in Kuwait one.
Adding new customers and to expanding our footprint with our installed base in the first quarter our win rates remain high as we continued to secure wins across a significant majority of competitive situations I'm pleased that our win rates improved among larger deals and.
Once we start predicting a customer they remain a customer and customers are choosing central wanted to predict more and more of their network. Our net retention rate reached a new high of 131%. Our total addressable market is that going to over 50 billion significantly larger than just a year ago, we've expanded our singularity.
Dr platform to cover more attack surfaces, Denver, including endpoint cloud identity, and an increasing number of emerging capabilities.
When you're expanding breadth and depth of our singularity platform, we can efficiently scale to a growing base of enterprise customers.
Our platform approach is driving meaningful gross margin improvement were able to collect data once and reasonable multiple security applications all enhanced by our data center decade.
Customers are adopting more of the singularity platform every quarter, who sold their enterprise need with notable growth from our cloud data retention and Ranger modules. These.
These capabilities deliver a high incremental margin.
Same time, our increasing scale and data optimization is improving our cost efficiency over the past year, our footprint expansion has far outpaced the growth of our cost.
Our business model is designed for operational efficiency. Our partners supported go to market and global footprint are delivering meaningful operating leverage our magic number is above one demonstrating our high sales efficiency and rapid payback periods are.
Our sales team are ramping faster and becoming more productive compounding.
Compounding this our channel and alliance partnerships to expand our reach in a highly scalable manner. For example in Q1, our channel helped create a record amount of deal registrations, which directly lead to pipeline opportunities and accelerated customer wins.
Finally, we're scaling our global R&D footprint, attracting high end talent across multiple continents, enabling us to grow in a cost efficient manner.
Given the massive market opportunity and our share gain trajectory. We will continue investing for the long term success of the business. This is the optimal strategy and its leading us closer to our profitability targets you can see on slide five consecutive quarters of triple digit growth and consistently expand our operating margin year over year in Q1, we deliver.
<unk> 15 percentage points of gross margin expansion to a new high of 68% and our operating margin also improved dramatically expanding 54 percentage points year over year, our business has never been stronger and we expect these positive trends to continue which brings me to the third main topic.
Logical depreciation of our singularity VR platform.
It can be hard for one of those to sift through all the marketing and corporate messaging found in cyber security and in my opinion, the best way to evaluate the technical performance of an endpoint platform is to the micro attack evaluation framework and emulation of real tricks produced for each industry participant.
This year's Mitra executive valuation results again paint a very compelling picture for the third year in a row centered on one leads to test results with superior visibility.
And then automation you cannot reverse engineered this type of performance out of all of the vendors evaluated our singularity. Dr platform achieved 100% prevention of 100% attack detection the highest political coverage in zero detection delays, we are incredibly proud of the team and our.
Technology that makes results like this happen in real life for our customers every single day, the results demonstrate our commitment to preventing and protecting against the most sophisticated threats and keeping our customers safe <unk> at machine speed.
Our technology paved the way for a whole new experience of running a separate screening.
Program across an organization, one which enables fewer people to do more leveraging the power of data and AI to deliver autonomous and automated cyber security.
Taking a look at our shareholder letter, where we visually show with performance comparison across all major quadrant leaders. It may surprise, you to see how wide. The gap is between our singularity platform and some of our closest competitors when it comes to predictions delays and configuration changes.
One thing is for certain attackers will militate pause or IV set by waiting for a human powered service to detect and eventually respond to an alert.
We're delivering autonomous protection through AI and machine learning.
That's one represents one of the largest operationally implementations of AI in the real World. This means that every customer is predicted by all this technology every day.
<unk> patented technology core of our singularity <unk> platform and its underscores all of the transformative decisions. We've made in the past few years to bring this vision to life a year ago, we acquired dataset to become the unifying data backend to address the speed scale and scope of modern security needs dataset, it's performing well.
In security and non security use cases, we just introduced kubernetes explorer, which helps manage the health and performance of kubernetes clusters deployed applications and underlying infrastructure and month ago, We added identity protection to our portfolio.
Folio through the acquisition of upheaval, our platform has expanded dramatically in the past year alone, creating an even more diverse business with multiple growth drivers and customer engagement opportunities are HDR platform addresses the major attack surfaces that enterprises need in addition to end.
These emerging capabilities like cloud out Ranger data and vigilant are delivering growth.
<unk> grew to nearly 10% of our Q1 HPV and identity security will further diversify our business starting in Q2.
Before I hand, the call to Nick I want to talk about our people and culture.
A key competitive advantage in the past year, we've almost doubled our head count even with such rapid growth, we remain committed to fostering a dynamic and inclusive culture, which has been consistently recognized by several best workplace Awards.
We conducted recent employee survey and 99% of centered unknowns said, they're proud to work at Central one we're focused on protecting our digital way of life from threats and attacks are mission combined with disruptive technology creates a compelling destination for talent.
Im also excited as we've extended our leadership team at central winning and executing the business as we move towards a $1 billion in <unk> and profitability. He will oversee our operational efficiency initiatives at the same time I'm thrilled that Nick Warner becomes president of security.
Taking a wider focus across security product management and go to market Nick's executive sponsorship will enable even stronger customer engagement and deepen long term relationships again, thanks to all centered on wholesale trust and collaboration our momentum and our <unk>.
Platform has never been stronger and the margin progress, we're making is a true Testament to go over to Nick Warner President of security.
Thank you Tamara and welcome everyone. We delivered an outstanding first quarter across every geography, tolerating flywheel of sales market.
Yes, more enterprises are selecting <unk> than ever before automation ease of use.
And differentiated xdr.
<unk> and.
In Q1, or a growth of 110% was driven by a healthy mix of new and existing customers demand was also strong among both.
With large and medium sized enterprises, we added about 750, new customers setting a quarterly record even more than our seasonally strong Q4 aberration between sales marketing and our channel partners, we delivered healthy growth across all.
Geographies, including in EMEA, a testament to the resilience and durability of cyber security during a variety of economic conditions, our momentum with large enterprises continue to build our customers with <unk> over.
Over $100000 grew 113%. In addition, our win rates in these large deals increased here just a few examples of the broad based strength, we're seeing with.
We extended our success in state and local government into the federal arena by securing a major federal agency in partnership with Cisco to date, we were selected based on it.
And because of our cost effective.
We have extended data retention and model.
Multi tenant capabilities. This showcases why we're winning against the competition time and time again, we continue to secure large enterprises from our route.
How the world across all verticals for major North American Telecom, operator to iconic media brands and multinational conglomerates. These wins demonstrate the global adoption of singularity Xdr and continued to elevate our position in the market. In addition to growing our enterprise.
Footprint, we're seeing strong retention and expansion within our customer base gross retention rates remain extremely high consistent with prior quarters and our <unk> reached a new record of 131% above our target of over 120%. This was driven by license expansion module adoption.
And platform tier up sells.
Singularity cloud was our fastest growing module, followed by data retention and Ranger.
Let me double click into the strength of cloud security, which grew over 50% sequentially in Q1 off a record Q4, we're landing large seven figure cloud security deals today over time cloud footprint can be as large or even larger than the endpoint. So there is significant expansion potential still to come and.
We're already seeing that with several customers many of the cloud wins were securing today are just a fraction of the full deployment potential for example, the full cloud a state of our global e-commerce customer could easily be 10 times or even larger than the initial deployment.
More interestingly, we're seeing customers buy cloud security both in conjunction with traditional endpoints as well as on a standalone basis, our prowess in cloud security allows us to engage with more accounts, even those that may be currently using an alternative endpoint solutions.
Cloud security is a greenfield opportunity with significant growth potential next let me share updates on our <unk> and our entry into identity security a new growth driver for our platform and an important layer of protection for enterprises identity is critical in delivering the most complete xdr platform by adding identity where health.
Enterprises, embracing zero Trust security model by reducing the open attack surface.
Not only is it a natural fit within our platform that complements our network of strategic service providers extremely well, especially for incident responders, where one of the few vendors in the industry to offer identity security. We believe that Tivo is the best and most comprehensive identity security solution in the market today recently.
Tested and validated by Mitre being.
Being able to offer real time identity protection active directory vulnerability insights and deception techniques are a real differentiator.
We closed the acquisition in early May and are making good progress integrating the business for both go to market and technology alignment, we're already offering identity security as part of singularity toward joint and prospective customers technologically our goal is to deliver a unified <unk> platform that provides seamless identity security.
Central one end of Tivo are better together as an example, we're outpacing the competition by pairing range of network control and visibility with a tivo is active directory assessment to deliver robust attack surface management capabilities, let's.
Let's turn the discussion to our partner centric go to market strategy that helps magnify our reach and efficiency Q1 was our largest pipeline generation quarter, we crossed a milestone with over 10000 partner accreditations across our sales and technical training courses after launching the program just a year ago.
This flywheel drives more channel engagements more deal registrations and stronger pipelines as we continue to expand our brand and platform digging deeper our strategic partnerships with incident response providers and MSS Tees remained robust contributors to our growth. We're now involved with a record number of engagements with our <unk>.
IR partners. These engagements are creating hundreds of high value and fast moving opportunities each quarter significantly more coverage than any single product vendor could hope to gain on its own our growing partnerships with MSP to give us large and expanding enterprise and mid market coverage. We're also enabling our MSP partners to.
Deploying more of our xdr modules like Ranger vigilance remote script orchestration among others.
This creates expansion opportunities for us and our partners.
Finally, our spend our labs team discover cyber attacks that are of keen interest to global organizations.
Upon Russia invasion of Ukraine, setting the labs discovered the hermetic wiper and acid rain attacks to cyber campaigns that accompany grounded patient.
Our research reached major global news outlets and government agencies.
<unk> leadership in cyber security threat research demonstrates our technological leadership and ability to help the global community in times of crisis, establishing trust and building our enterprise security as prep.
President of security I'm looking for.
Keeping our customers at the center of everything we do continuing to out innovate our competitors.
Next to Thomas Thank you.
So I'd like to thank call participants and listeners for joining us today.
I will discuss our quarterly financial highlights.
Provide additional context around our guidance for Q2 and full year fiscal 'twenty three.
As a reminder, all margins discussed are non-GAAP , unless otherwise stated we delivered another strong quarter of revenue and <unk> growth, both well into the triple digits, we achieved Europe .
Year over year revenue growth of 109%, reaching $78 million and AOR growth of 110% to $339 million.
We added net new IRR of $47 million in the quarter Alts environment remains incredibly strong and the strength of our performance was broad based coming from a healthy mix of new customer additions existence.
AGA fees Rev.
Revenue from International markets grew 129.
Including continued strength in EMEA.
Turning to our costs and margins.
Our non-GAAP gross margin in Q1.
68%, reflecting a double digit increase of 15 percentage points year over year.
8% represents a new high for our company and demonstrates the significant progress we've made in a short amount of time since our IPO.
Our margin progression really showcases the benefits of our land and expand strategy and platform unit economics, where we collect data once and enable more and more capabilities.
We're seeing benefits from economies of scale data processing efficiencies module cross sell <unk>.
Detail Lynch paint the path towards our long term gross margin target of 75% to 80% or higher the impact of customer migrations to our data set back ambulance immaterial to our gross margin in the quarter. We've migrated all of our largest customers and remain on track to largely complete the migration. This summer.
We do not expect any material impact to our gross margin in the future from us.
<unk> are now realizing profound benefits of using the <unk> improvements.
Yes.
Looking at the rest of our P&L margin was negative 73%.
And a negative 127%.
54 percentage points, our strategy is to invest efficiently.
Our magic number was over.
One on this quarter were achieved.
Getting scale from our market share expansion, improving our sales productivity.
Globalizing, our talent pool into new areas like the Czech Republic in India.
Moving to our guidance for Q2 in fiscal 'twenty three.
We're excited to welcome and integrate the Tivo team based on the strong demand environment.
And then for our business, we're increasing our organic growth outlook and layering on expectations for Akiva.
I'll provide details.
Surround a key vehicle help with initial modeling purposes, but we do not intend to break this out specifically going forward.
In Q2, we expect revenue of $95 million to $96 million.
<unk>, 109% growth at the midpoint, we expect organic growth in the low to mid 90% range.
For the full year, we are significantly raising our outlook to $403 million to $407 million. This reflects 98% growth at the midpoint as part of our improved guidance, we have increased our organic growth expectations to mid 80% from 80% previously.
While we don't stability.
And revenue growth tracked very closely.
Therefore based on our Q2 revenue guidance net new IRR should grow at or slightly above 20% sequentially.
This is consistent with last year's Q2 seasonal growth and still comes on top of our Q1 outperformance. In addition, we expect to chemo to contribute approximately $35 million in Q2 total IRR in over $45 million for the full year, reflecting about 50% growth for the year.
Our guidance reflects our confidence and optimism around cyber security demand as well as our business on mountain, we exited Q1 with our largest ever pipeline and.
Endpoint security is a must buy for the enterprise in all economic conditions, and we are seeing increasing demand for our cloud security solutions and other capabilities.
Turning to gross margins.
We've taken a major step forward as a company the impact of the dataset migration is behind US and you can see how powerful our platform model can be at increasing scale. We expect Q2 gross margin to be between 68% to 61% holding the significant progress we made in Q1, and reflecting 6% to seven sort of improvement year over year the progress.
Does not stop here, we're increasing our full year gross margin guidance of 69% to 70% up from prior guidance of $65 to 67, 7%.
A key takeaway here is that we now expect to exit the year in Q4 at or slightly above 70%, we're marching towards our long term target of 7%.
5% to 80% or higher.
Palmer mentioned earlier, we're benefiting from data efficiencies inherent in our business model and our platform approach.
Finally, I will discuss our operating margin outlook and give some color around our longer term path to profitability.
We expect Q2, non-GAAP operating margins of negative <unk> 75 to negative <unk>, 73%. This incorporates several million dollars of planned investments for another year of nearly 30 percentage points.
Margin expansion, even with planned investment in the integration of Akiva.
We expect to achieve the rule of 40 for the full year.
Year, we're committed to investing in talent and technology, given the tremendous opportunity in front of us we're delivering excellent growth.
And at the same time, we are delivering excellent margin improvement.
We have a strong balance sheet with over $1 2 billion in cash and investments. After the <unk> acquisition. This was more than adequate for investments in the business and additional runway and should take us to positive cash flow generation.
I want to provide an illustrative example around the timing of potential profitability.
If you consider our fiscal 'twenty three guidance, we're on track to deliver an average of about 30 percentage points of operating margin in fiscal 'twenty five on a quarterly basis, we can see positive cash flow generation even sooner.
During fiscal 'twenty, three we plan to continue investing efficiently for growth while making.
We're expecting that momentum to continue.
Thank you all for attending our earnings call.
We can now take questions. Operator can you. Please open up the line. Thank you.
Bye bye.
Keith.
If for any reason you like they needed a question. Please press star followed by group again to ask a question press Star one.
As a reminder, if youre using a speakerphone please.
Question.
To ensure that all questions are answered please limit yourself to one question.
Okay.
Our first question is from Tyler <unk> with Bank of America. Your line is now open.
Hi, guys.
Great results.
I would like to know sorry, I have clarification on the question. So the clarification part.
What's your full year growth expectations exit Tivo.
And.
On the question I wanted to focus on the margins.
74%.
<unk> was <unk> 73.
The full year guidance.
So what drives the expected.
Okay. Thanks.
Yes, excluding a chemo, we increased our guidance from 80% to mid Eighty's, So our organic.
Got it.
And then in regards to.
So the EBIT margin, we're making we're continuing to make significant investments during the year.
One of the things that I think we're proud of is that we're able to.
To integrated Tivo and to build.
And then all the integration cost this year and maintain our current guidance and our plan is to spend between 1% and 2% of the actual.
Purchase price.
Obviously, our organic guidance Sandy the T Mo what it would've been more.
What has been approved.
That's what drives the improvement you are guiding.
Thanks are basically second half improvement over first half right.
It's quite a quite a sharp improvement in the second half.
What drives it is economies of scale or or finishing the integration.
Integration of the Tivo or.
Do you expect yes, I think what youre seeing.
Yes, I think what youre seeing.
Obviously, our gross margins have improved.
And in this quarter were 68%.
Put a lot of.
The dual costs behind us in terms of the integration.
For chemo back and we're also just seeing continued scale within the business and I think this is.
One step in the right direction to show.
As we continue to grow larger so.
Awesome.
Great. Thank you.
The next question.
And that's from the line of Brian Essex Your.
Your line is now open.
Great. Thank you. Thank you for taking the question and congrats on the results.
Nice to see the incremental progress here I guess.
One question and this is around margins as well.
And maybe.
Okay.
Could you dig in a little bit too.
Expectations around gross margin how much.
Evo was margin accretive.
How much guarantees state will be contributed by our key though.
Our scale across dataset, and then how much by pricing increases.
Better attach rates on the platform just so we can get a sense of.
Economic spine code.
Yes.
Yes, I think it's really a balance of all three.
Expansion so obviously.
The revenue outperformance in the revenue growth that we're expecting strong adjuvant.
<unk> is a big piece of it the data processing efficiencies are a piece of it and yes, a tivo is accretive from a gross margin standpoint, but obviously they are inadequate.
It is still mostly led from our organic work.
They are accretive to us.
It's not a significant driver for the step up in our gross margin.
And if you were to rank them.
Most impact.
The leaked impact how should we anticipate.
The impact on the gross margin side alright.
Yes, I think in terms of contribution to the overall company thibeault will be number three.
I had to think about it.
I would say the revenue outperformance in the efficiencies in our product.
<unk>.
Okay.
Thank you for your question.
The next question is from the line of Alex Henderson with Needham. Your line is now open.
So really around.
The collection business.
Stock prices that have happened.
How you adjust for stock compensation to your employees.
Particularly given the.
The challenges of.
Bringing on new employees.
With stock compensation.
Based on where the stock is in all of our employees potentially having stock.
Significantly under water.
How do you.
Balance that problem and what is your thought.
Our processes around it.
Thanks.
Yes, yes, it's a good question and I think relatively good about how we structured our entire stock based compensation strategy.
We encourage everybody to look at stock grants that we see something thats over a four year period. So we grouped wound.
I think to really go into any specific adjustment with that said I mean, we're obviously constantly monitoring.
We're looking for ways to tool obviously.
Any any.
Justice is but generally speaking we feel pretty good about it and we don't feel like anything material will be changing in the way that we compensate.
Within the next 12 months or so.
Yes, I think stock based comp is obviously something we're focused on with our peers. If you look at it.
Revenue.
So it's something we expect to decline.
Over time as we achieve scale.
Obviously, we've been we've been higher.
Turning into revenue.
And we're seeing that start to anticipate over time will fall within industry norms.
It's something we're we're very cognizant of we pay attention to it.
But yes, I think Tom hit it right.
Employees are coming here, because we are a destination because we're going to offer a lot of value to employees over a four year fortunate what's happened recently with the stock performance in the entire market, but we believe.
Yes.
Strong.
We expect to restate.
Re cast existed.
Stock compensation too.
Employees would have been there for a year or two or three or longer.
If <unk> been an employee here for a few years year still well up in your stock.
The next question is from the line of Trevor Webb Walsh with JMP Securities.
Great.
And thanks for taking my question, maybe for either Tom or Nick you mentioned in the prepared remarks.
Thank you can you just comment and provide a little color around the competitive landscape.
When it's maybe.
Cloud purchase within the context of an ever larger endpoint.
It's just a standalone purchase loans.
That module without kind of the legacy endpoint.
Products entering employees.
Sierra incumbent tools our guard.
Customers doing a kind of multi vendor.
Okay approach with respect to the cloud security piece. Thanks.
I think youre seeing pretty much older vehicles.
And best of breed solution for Cliff.
Cloud workload protection is one of the big.
Needs right now when you think about security cloud footprint, and we have a superior product.
And what endpoint security, but it doesn't have to be deployed alongside the same vendor. So we're seeing a good number of opportunities sizable opportunities, where we're actually deploying competitors on the endpoint side when we take over the cloud side.
Needless to say that opens up the opportunity.
Plenty to then cross sell and upsell into the endpoint environment, and we really like that mode of operation that allows us to a local many more accounts that otherwise would not have been able to grow it into just on our ability to secure the endpoint, but obviously when you look at our installed base.
Plenty of opportunity to grow from that same footprint and into the cloud cloud is a greenfield opportunity as there is no incumbent vendor in cloud that were set to replace utilities and expansion Houston divest majority of cases that we see so talk to us represents not only a growth Victor.
State side.
But again in another piece of our strategy to unlock more and more accounts alongside endpoint.
And again it all comes on the back of technological superiority the ability.
So just cloud workload.
It's just something that we feel it is a major strength of the business here and we are continually investing in it and the results are there today in Q1, we actually grew cloud sales, 50% quarter over quarter off of a record Q4.
And where that shows how far we've come in a year.
That's literally 30 ex growth year over year from Q1 to Q1 so.
We're at the early stages of what we feel like it is going to be a very big market.
Great. Thank you both congrats on the quarter.
The next question is from the line the second Kelly with Barclays. Your line is now open.
Keep it to one and maybe directed.
Tomer.
Can you just talk a little bit about how much trend.
Endpoint.
Does that include Edr.
And maybe just illustrative Lee or just anecdotally I mean, how much of a lift to some of the lower end ones.
Of course, yes.
I think we kind of talked about it in the past as well.
The vast majority of customer adds.
I think we've had this quarter closer to the past quarter, especially in the enterprise segment Youre talking only about the highest tier.
At the beginning point of any one of these deals and then on top of that you actually see very strong module attach in the form of Ranger cloud security or vigilance. These are our three top module data retention.
Is right there with them so to us really the dynamics shifted away from these bundles into just selling complete.
Top of complete attaching our module design or platform.
In the next 12 months or so again to reflect that shifts chrome based packages around endpoint and really a more inclusive approach to store and xdr platform with attachments modules.
Got it very helpful. Thanks Tomer.
Sure.
The other well.
Morgan Stanley .
Alright.
The one two.
Okay.
Yes.
Strong growth in Europe , I'm wondering if you could give us a sense of.
To what degree you're seeing placements again.
Given the.
Thanks.
Russia and.
Do you expect to see more displacement.
Carbon black.
In light of the <unk>.
<unk>.
Broadcom acquisition.
Yes, great question. Indeed, we are seeing an immense amount of demand traditionally had done vendor perspective in EMEA.
Latin America parts of Asia.
Really a wholesale move.
Either by mandate.
Or because folks want a better a better security platform.
Typically we're seeing really a comment.
Combination of both so that represents.
An amazing opportunity for us I think.
The recent news around Broadcom and Vmware, we've seen that movie before with Symantec and if you look at our new markets.
So we.
We have already begun in earnest to replace carbon black in a variety of <unk>.
And mid sized businesses.
We have a technology platform that can literally automate the transition away from carbon black and we expect that to come.
Post Broadcom acquisition.
Okay.
Thank you.
Just one small thing to add there I mean thats differently than a case on the endpoint side a single window on the cloud.
Outside.
That's also true I mean, we feel like Vmware represents.
Pretty much.
A complete new greenfield to predicting workloads and again, we feel that's again.
Something that works in our favor in this case.
Thank you for your question. The next question is from the line of Fatima Rami.
With Citi. Your line is now open.
Okay.
Thank you and good afternoon. Thank you for taking my question.
Can you just given some of your commentary on that channel partner traction in some of the voluminous deal registration that you saw in the quarter.
The channel Thank you.
Thank you can share with us or give us a refresher.
When you OEM with some of the MLP.
We sell into a large enterprise.
Sure and.
We're really proud of what we built from an MSP and MSS perspective.
And a lot of that also dovetails into.
Our dominance with IR incident response partners because many of them are doing both what they're realizing now.
So in your help clean up clean up and do incident response, and remediation and customers commonly want that new solution to be managed by experts those experts being intimately aware of the environment that they will call them to help us save and protect and so I think from a contribution perspective.
That directly it's over 20% coming from MSP I think one important note is what we've recently done is unlock the ability of our MST SP partners to be cross selling upselling complete and other modules.
Like data retention like Ranger into that MSP base. So we expect that contribution from an overall macro.
We expect that to continue to grow as well.
And.
Like I've said before it's a fantastic way to consume a cloud native platform is to have it managed by experts and we think of no better way to do that but to partner with the best and brightest who all they do is provide manner and it services and give our.
Our customers and abundance of choice. So they can find the right MSP partner for them and.
And have them manage central one.
Okay.
Okay.
Thank you for your question.
Your line is now open.
Alright, thank you.
Congrats on a.
Very healthy set of numbers can I ask about the.
Contribution to your fiscal 'twenty three guidance.
If I'm not mistaken the guidance has increased from 368 million at the midpoint four or five years.
Many of them.
As a $37 million increase.
<unk> done the math correctly, you said that organically.
The growth has gone from 80% to mid Eighty's.
About 10 million Bucks since IMAX since correct.
We achieve a contribution I should kind of baked into my numbers is roughly kind of 27 million books something.
I stand by that logic is correct in terms of how much you're kind of baking for tivo.
For fiscal 'twenty three.
Thank you so much.
I think there's some rounding in there but directionally.
Directionally around $30 million.
For the year about $8 million for Q2, if you are updating your models.
Thank you for your question.
The next question is from the line of Joseph.
Mr Gallo with Jefferies.
Your line is now open hey, guys.
Hey, guys I appreciate the question.
This one's for Tom or Nick you guys mentioned improved win rates among larger opportunities in your shareholder letter is that first next gen. Players are more legacy vendors and then maybe what's driving that is that products led with a larger number of modules or is that more of a refinement on the go to market side.
Yes, I mean, its both but I think what we're seeing out there, especially as we engage with more and more into this response partners.
Or just folks getting a bit disillusioned with celgene nextgen offerings, I mean, maybe even Microsoft specifically.
We're seeing this barrage of exploiting vulnerabilities.
And again customers are looking for ways.
To clean up their environment and deploy best of breed security. So we're seeing improved win rates in these scenarios I think all in all if you take the sum total of one of our components.
Okay.
So on cloud offering and incredibly strong endpoint offering as reflected by Mitre, you're starting to see platform, that's quite hard to compete with and I think that that is again reflected in the way.
Is that we acquire customers.
Yes, and I think directly we've talked before about having high win rates.
We continue to be at or above 70% and that is absolutely against.
Our closest peer company public competitors.
The vast majority of enterprise deals that were closing.
It's safe to assume that in the vast majority of those those are against other so called Nextgen competitor and our win rates remain high and in fact are growing in that in that area as well.
Great to hear thank you.
Thank you for your question.
The next question is from the line of Gray Powell with <unk>. Your line is now open.
Okay.
Okay, great. Thanks for taking the question and congratulations on the really strong results.
So maybe just a high level question.
My understanding is that Edr penetration is somewhere in the 45% range give or take.
Just curious where do you think that peaked out over the next few years and then how do you feel about your competitive positioning.
Just given that the next leg of adoption is probably going to be more mid market focused versus large enterprise.
Yes.
I'd really encourage you all to mill take about this very linear in the I think what we're seeing is transition from 40 to Edr from Edr Griggs VR. Each one of those represents a different set of opportunities and different set of challenges and different set of products and capabilities. So all in all I don't know what the number is 45% or explorer.
Different number.
There is plenty of opportunity out there again generating record pipeline in Q1.
One indeed macro condition should tell you something but again all in all when we look at our pipeline. When we look at the types of customers that are looking to augment edr to expand for edr xdr or changing their requirements, we're putting cloud.
Product mix that just represents a massive opportunity across multiple times. So I think it really depends on how you want to define it the way we look at it.
Broad based <unk> platform displays across multiple times and that's even before touching on which we believe is going to be the next opportunity here, which is really data analytics security data analytics and security data lakes.
One thing I would also add is there's really only two xdr players and a point solution either ETP or edr vendors. Those are all falling to the wayside data themselves are getting replaced by xdr platforms and what we feel like is we're really just at the beginning stages of growing massively.
And to this identity security market, which you know again, one thing we definitely seen in the last several quarters from a threat research perspective is identity is becoming front and center all the attacks that has really become and a lot of attacks the crown drop an enormous market and it's.
It really changes everything in terms of how customers are perceiving what they need from an edr xdr vendor.
That's really helpful. Okay. Thank you.
Thank you for your question.
The next question is from the line of Andrew <unk> with.
Wells Fargo. Your line is now open.
Alright, Thanks, I'll ask about the large federal deal that you mentioned in the quarter can you give us any more color around the size of that deal whether it's already reported in <unk>.
<unk> rolling into <unk> in future quarters.
On their Q2 beat and that.
When.
Thanks.
Yeah.
It was a large multimillion dollar deal.
And I think for us what it really points to us.
The federal opportunity is beginning now.
Typically in cyber security federal and fair organizations have that moves slowly, but I think there's been a really good pushing movement by SASSA.
Pushing these agencies for to begin evaluating and purchasing Xdr solutions I think our results and mitre.
Really.
Proven.
A lot of federal prospect on that we're the best choice from a technology perspective, and certainly the work that we put in from a fed ramp perspective in the last couple of years is really beginning to pay off.
Thanks.
Thank you for your question.
The next question is from the line of Joshua Tilton with <unk>.
Line is now open.
Hey, guys. Thanks for taking my question.
Is there any way you can give maybe some more color on what led to more customer addition in <unk> over <unk> was it something in the marketplace or is it more about your execution in the quarter.
I think a little bit towards lower execution I mean, we.
We're doing as Nick mentioned, the better job with enabling our MSP partners. As an example, so we're starting to see that flywheel, creating more and more opportunities for US you see more traction with our partners ramping up you see Doug showing contribution back into the quarter.
100 K deals.
And above grew faster than the overall 1 million dollar deals enables grew faster than the overall to us I mean, it really is a broad based strength across everything we do.
And again, we obviously wish for that to be the case every quarter and we worked hard to make sure to replicate itself in Q2 as well, yes, and one thing I would add in the Ni I spoke to this in the prepared comments was we.
Sellers.
Yeah.
In our various channel programs around the world.
That that flywheel is spinning fast.
Increasing velocity and so I think the risk.
And materials strength across all sizes.
All geographies of our business.
That underscores.
Is.
While we built is really a durable business model.
That provides technology to incident response partners to MSP to <unk> and to channel partners and we don't compete with them we enable them.
And what we found in businesses if you treat your partner as well they will puts you very much at the center of their go to market and we're going to continue to see that contribution accelerate in the quarters to come.
It makes a lot of sense and then just one clarification question for me in the shareholder letter you characterized the net new IRR as being exceptionally strong at a seasonal basis is there anything.
Anything about it that was unusually strong for <unk> that we should know about with anything kind of pulled in from <unk> or may be closed from <unk> that should have closed last quarter, but flows this quarter were.
Mostly mostly broad based but once again I think we're we're lapping one year.
And the public markets, and we're just getting better and our ability to drive the business. So I think some of it might be that.
But all in all we were just very pleased to overachieve in Q1, which.
Our seasonality is typically.
The one that is the most difficult for us and this was a pleasant surprise.
Thanks, guys I really appreciate it.
Thank you for your question. The final question is from the line of Roger Ballou.