Q2 2022 Varonis Systems Inc Earnings Call
Greetings welcome to Verona systems incorporated second quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.
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. Please note. This conference is being recorded I will now turn the conference over to James Arrester, Vice President of Investor Relations. Thank you you may begin.
Thank you operator good afternoon. Thank you for joining us today to review <unk> second quarter 2022 financial results with me on the call today are Yoki final Sen, Chief Executive Officer, and Guy Melamed, Chief Financial Officer, and Chief operating officer of around Us.
After preliminary remarks, we will open the call to a question and answer session.
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 third quarter and full year ending December 31 2022.
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.
<unk> 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 second quarter 2022 earnings press release, which can be found at www Dot Peronist dot com in the Investor Relations section.
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 Yaqui vital yockey.
Thanks, Jamie and good afternoon, everyone. Thanks for joining us today.
Our Q2 results once again demonstrated the strength of our platform and to do ability also business model highlighted by 70% deals or even close to nil.
Really pleased with the performance in North America, which contributed significantly to this quarter's growth.
Given the uncertainty of the times company around the world continue to recognize the urgency to secure sensitive data.
The needs of our customers have always driven our innovation and fuel our growth.
And as the world moves to more hybrid walking environment <unk> data security platform has become even more critical in protecting sensitive data.
However, it is still today I would like to discuss the trends we are seeing and how we are.
<unk> to capitalize on them so let's jump in.
Looking back we found those bonus because we understood and the capacity to create and share data far exceeded the capacity to protected since then the relentless go and complexity of data is dramatically increase the attack surface all company, making it even harder.
To put it.
Today it is.
Cabos or geographies sectors and sizes, requiring the cause of edge and automated protection that can also provide the pace of innovation as much. This rapid growth and today, we provide our customers a comprehensive solution for protecting sensitive data.
While on claims data continued to grow nearly every company is creating more and more important data in the cloud.
Most organizations that we speak we are deeply concerned that the data isn't fully protected and secure within the new complex cloud environments the utilized independent.
Confound, a click quickly validated and likely escalated during our initial ecosystem.
It goes like this all sales Rep staff, whose two simple questions do you know when you'll sensitive data is still you know we're the only people if occupants to eat food.
No if youre sensitive data being stolen and kept it.
What we find is that most organizations can answer yes to any of these questions at any time.
For any of the data much less all of it in this problem has only become more companies and more data to the cloud.
Why is the first cloud applications will be to create and shelf sensitive data more easily which inevitably push security down is a concern.
This is due to Microsoft 365 in Oslo, where we have seen tremendous customer engagement over the past few years.
As well as additional cloud application like Google drive AWS and Salesforce to name a few.
Second.
The many C stores, we speak with the Sky cloud application is the black boxes. They typically report that because each application different security capabilities and commission model some of which are extremely complex each new application in pieces the risk surface.
In ways that are hard to see.
Think about the data inside of the CRM system like Salesforce not only does it contain sensitive information that must be protected in accordance with regulation like GDP, our CPA in auto but it also holds the key to the sales pipeline and customer record. Please data is clearly Michele J D.
Every organization, losing it or having it stolen kidney damage our reputation costs millions in fines imposed essentially steal business. This would be cut this coffee.
These T cells.
Tell us that without vallone, snapping access finding sensitive data and talking suspicious activity would be impossible.
These data advantage cloud organizations can visualize the biggest cloud we proactively reduced the blast radius and conduct faster cross cloud investigations their advantage cloud significantly expand our market opportunity and provide long term potential.
Their advantage cloud.
In early evening.
<unk> always said that our new license does take time to gain critical mass. Nevertheless, we are pleased with customers' conversations and the pace of selling which improved sequentially in Q2 as we continue building pipeline for the second half of the year and beyond and we are still in on pay.
$45 million are all expectations, we guided for the beginning of the year.
Before I turn the call today I would like to highlight a few customer wins from Q2.
A technology company with more than 7000 employees became a new customer in Q2.
They needed to fix critical open access and data retention issue.
Estimated that's doing so manually take them after.
That's still a risk assessment demonstrated how bournias would automatically shrink.
Australia is in a.
Fraction of the time and at much lower cost they purchased our silver bundle, which contains seven licenses when they intent to expand deployment of our platform. One was the ongoing data, Microsoft 365 and Salesforce.
Turning to our existing customers, who have heard me say that it's the only small mode.
When customers consume more licenses they get higher level of automated value, which in turn leads to additional purchases all moving towards the double digit license target we have for everyone.
The Good example of this is one of the largest telecommunications providers in North America.
First became <unk> customers in 2013, when we were looking to protect their data encore, although the yield the purchase additional subscriptions, including data classification to identify sensitive data and the automation engine to proactively reduce the blast.
During the second quarter, you still organization of over 100000 employees approaches.
And on Prem enterprise license agreements, which give them access to 26, the only licensee to better address ransomware threat.
Tech data in Microsoft 365.
We are already discussing with them the next purchase.
Our data advantage cloud SaaS offering that can help will take the data and AWS.
To recap during the expansion of the attack surface, we believe that the global customers need for strategic data protection is inevitable.
Our unmatched capability to our growth.
Coupled with the ongoing innovation continue to drive value for all of it once it closes.
We remain focused on two things executing against the enormous market opportunity before us and closing in on our $1 billion.
With that let me turn the call over to Guy.
Thanks, Jackie and good afternoon, everyone. Thank you for joining us today highlighted by 30% year over year growth in total <unk> and 31% revenue growth in North America. Our second quarter result demonstrates strong topline performance and continued operating leverage.
Revenue growth for Q2 was 26% and after adjusting for FX in Russia, which I will discuss in a moment total revenue growth was 30%.
And on the expense side accounting for the shekel dollar headwind that we've discussed at length in the past. We are extremely pleased that operating margins improved by 330 basis points in line with our strategy of balancing top line growth and margin expansion.
Before we drill down into the full Q2 results. Let me describe what we're seeing in EMEA, where reported growth was 11% for the quarter.
Given that there are a number of external factors beyond anyone's control. These results do not reflect our true performance and the opportunity ahead of us.
As we all know during the first half of 2022.
U S dollar strengthened significantly against the euro and the pound.
A trend, which accelerated in the second quarter with the euro dropping to a 20 year low.
And second as we reported in the last call exiting the Russia business negatively impacted <unk> revenue by $4 million to $5 million for the full 2022 year.
After adjusting for these headwinds Q2 revenue growth in EMEA was 25%.
These dynamics continue to generate near term uncertainty in the region, regardless, we will continue to focus on the factors. We can control which include our sales investment and strategic growth plan for EMEA, which we believe position us well to capture the vast multiyear opportunity we see.
Turning now to our second quarter results in more detail total revenues grew 26% to $111 4 million.
This includes subscription revenues of $84 4 million, which grew 44% year over year.
Maintenance and services revenues were $27 $1 million with renewal rates again over 90%.
Looking at the business geographically North America had another strong quarter as revenues grew 31% to $88 million or 73% of total revenue as.
As I mentioned EMEA revenues grew 11% to $27 2 million or 24% of total revenues.
Lastly, rest of World revenues grew 47% to $3 5 million or 3% of total revenue.
As of June 32022, 75% of our customers with 500 or more employees purchased four or more licenses up from 68% a year ago and 58% two years ago at.
At the same time, 45% of those customers purchased six or more licenses up from 35% a year ago and 24% two years ago.
Our newer bundled offerings are being well received by both new and existing customers as we progress toward our goal of getting <unk> customers to double digit license.
These trends are also reflected in another strong quarter of AOR growth at 30% year over year.
After adjusting for the FX in Russia headwinds I described earlier <unk> growth was 32%.
Turning back to the income statement I'll be discussing non-GAAP results going forward.
Gross profit for the second quarter was $97 1 million, representing a gross margin of 87, 2% compared to 86, 9% in the second quarter of 2021.
Operating expenses in the second quarter totaled $95 5 million.
As a result second quarter operating income was $1 7 million or an operating margin of one 5% above the high end of our guidance.
This compares to operating income of $1 1 million or an operating margin of one 2% in the same period last year.
After accounting for the 300 basis points of headwinds related to the shekel dollar that I mentioned earlier the expansion was 330 basis points.
Margin expansion through measured responsible cost management has always been at the forefront of how we manage the business as evidenced once again in Q2.
During the quarter, we had financial expense of approximately $68000, primarily due to interest expense on our convertible notes, which was mostly offset by interest income.
Net loss for the second quarter of 2022 was <unk> 1 million.
Or a loss of zero cents per basic and diluted share compared to net loss of <unk> 8 million or a loss of <unk> <unk> per basic and diluted share for the second quarter of 2021.
This is based on $109 7 million and $106 4 million basic and diluted shares outstanding for Q2 2022 in Q2 2021, respectively.
As of June 32022, we had approximately $789 million in cash cash equivalents short term deposits and marketable securities.
For the six months ended June 32022, we generated $10 $1 million of cash from operations compared to $11 $1 million generated in the same period last year.
In the first half of 2022, our cash flow was negatively impacted by FX headwind of approximately $7 million.
We ended the second quarter with 2181 employees, an increase of 54 net new employees from the first quarter. We plan to continue investing responsibly to support the overall growth of the business.
Moving to our guidance we.
We are once again reaffirming our full year guidance for both our RN revenues, while meaningfully raising our expectation for full year operating income despite the following headwinds.
First the significant strengthening of the U S dollar against the Euro and the pound during the first half of 2022, which accelerated in the second quarter as I already discussed.
This is relevant given that we price, both our new business and renewals in local currency and as such this trend impacts.
<unk> and revenue.
Second we exited all of our Russia business, which as previously discussed will impact our full year revenue and <unk> guidance by approximately 4 million to $5 million.
And third is our exposure to the new Israeli shekel, which we have partially mitigated through our hedging program for 2022 and is already factored into our guidance for.
For both the third quarter of 2022 and full year 2022. This headwind is expected to be 200 basis point.
With that impact the midpoint of our operating income guidance now shows year over year expansion of approximately 140 basis points for Q3 and year over year expansion of approximately 260 basis points for the full year.
For the third quarter of 2022, we expect total revenues of $123 million to $125 5 million representing growth of 23% to 25%.
non-GAAP operating income of $8 5 million to $10 million and non-GAAP net income per diluted share in the range of five.
The <unk>.
This assumes a $127 1 million diluted shares outstanding.
For the full year 2022, we expect <unk> of 484 million to $489 million representing year over year growth of 25% to 26%.
Total revenues of 485 million to $490 million representing growth of 24% to 26%.
non-GAAP operating income of $32 5 million to $36 5 million and non-GAAP net income per diluted share in the range of 19.
<unk> to 'twenty two.
This assumes $126 9 million diluted shares outstanding.
In summary, with another quarter of strong topline growth and margin expansion. We are confident in our ability to continue driving durable value creation for all grown risk stakeholders.
Looking ahead, we are well positioned to deliver against the enormous market opportunity before us.
Thanks for joining us today and with that we would be happy to take questions operator.
Thank you if you would like to ask a question. Please press star one on your telephone keypad.
For me should tell will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys in the interest of time, we ask that you. Please limit to one question.
Our first question is from that heat Berg with RBC capital markets. Please proceed.
Great. Thanks, Thanks, guys for taking my question.
One question, Okay Guy you maintained your full year revenue and are archived despite.
Incremental FX headwinds, which was really great to see I guess can you help us with how you thought about or incorporated second half macro uncertainty in your guidance in other words does it assume conditions kind of stay the same does it maybe worse a little bit more.
Thought on kind of the philosophy there.
Absolutely so we take.
A very responsible approach when we look at guidance and factor in what we see in terms of the pipeline. What we saw in terms of the results in Q2 and Q2 was a was a good quarter for US was very strong in what we can control.
And when we look at kind of our ability to execute well we feel very good in our ability to do that in the second part of the year, obviously, we talked a bit about the uncertainties in Europe . When we assume that that will continue in the second part of the year, but overall baking everything together, we feel very good with our guidance.
Thanks, a lot guys.
Our next question is from Joseph Gallo with Jefferies. Please proceed.
Hey, guys. Thanks for the question I think you have about 400 numbers and I greatly appreciate your thoughts that I can really ask for clarification on maybe just a few more regarding revenue and are our headwinds was that total year over year headwinds related to FX and if so what would be incremental headwind to IRR and revenue since the last time, you gave guidance in <unk> and then any.
Sense of what the incremental revenue headwind was for the year for revenue.
So Joe as you mentioned there is a lot of numbers out there so I want to be kind of very thin.
10 sites and make sure that everyone understands that we don't start confusing everyone.
And there is a lot of numbers out there. So when you look at the FX headwind and when you compare that to when we actually gave guidance and I will take that compared to <unk>.
February of 2022, the actual headwind is over $10 million on the FX side and then on top of that you have the Russia impact that we talked about having between $4 million to $5 million.
When you break those two together you have roughly $15 million of that.
Headwinds compared to when we gave our initial guidance.
Obviously in Q2 the currency.
Accelerated the decline the U S dollar.
<unk> and there was obviously an impact there but to try and keep kind of the numbers very certain state not start confusing everyone with all the numbers out there it's important to know that about $15 million of headwind on the topline.
Our against.
When we gave our initial guidance and we're still reaffirming guidance because we feel very good about our ability to execute.
Our next question is from the team at <unk> with Citigroup. Please proceed.
Thank you for taking my questions, Hey, Digest some of your commentary around the observations in the India business climate.
I think you were very clear about things you can control versus things that you can't.
Can you be a little bit more explicit on what you can control.
Give us some examples of things you can't control, whether that be signs of sales cycle elongation signs of.
So our pipeline build anything more tangible on the India front and what Youre observing that is baked into your guidance now that would be really helpful. Thank you.
Absolutely.
Ill start by kind of giving some of the numbers.
When you look at the reported number for EMEA.
We grew 11%, but that truly doesn't reflect the underlying business performance and when we talk about what we can control.
There is the FX headwind and just to remind everyone. We price in local currency in Europe , both our new business and the renewals. So that's why the FX was impacted and on top of that you have the Russia impact that we talked in length in the law.
Last quarter. So when you look at the adjusted number with what we can control the growth in EMEA was actually 25%.
The other thing promote itr.
Fusion.
Hey, just intensely focused about our customers' success.
Despite the economic.
Economic challenges.
Almost a organization data driven data is supercritical.
We believe that we have the most practical way to protect your organization inflammation.
After.
The one one.
Stationary trends is that the data is contemplated in the centers.
In the data center applications and now cloud.
Cloud.
If you're going to dissect any insight.
Acte Wang from our past, it's all about the formation.
<unk> Tung.
The IP security efforts.
So this is what we all do we want to make sure that the customer was a very successful results. So far this is something that we are able to be effective.
Our next question is from Joel Fishbein with <unk> Securities. Please proceed.
Thanks for taking my question guys.
<unk>.
Just ask you about your any changes to your hiring plans going forward.
Versus your initial plan obviously.
You've cut back on some expenses I'd love to dig down a little bit deeper on to where you are hiring are continuing to hire and what the plans are for that throughout the rest of the year. Thanks.
So we're definitely continuing our hiring and making sure that we can truly capitalize on the longer term opportunity I think when you look at our philosophy and its not just in the last you know.
Couple of quarters, but if you look back.
For many many years, we've been very much focused on topline growth, but at the same time, bringing some of it to the bottomline and showing operating margin leverage.
I'm very happy that we continue to do this even in this environment, but at the same time, we want to continue to hire and do that in a prudent and responsible way and that's the way we're thinking about it.
We are not losing sight of the overall opportunity.
So many data reported that the economy in the Florida presents tremendous opportunity for us.
It can really do the three use cases, which is 30 pitching response data protection privacy and compliance very effective all of them. There is a tremendous market.
We need to cohort.
Look at our history, we always do.
As possible way.
We are here for the long tail and we understand how the business is.
Often with scale, we just.
<unk>.
Without investments to make sure that the balances anyway.
Gross loan growth innovation and profitability.
Sure.
Our next question is from Rob Owens with Piper Sandler. Please proceed.
Good afternoon, and thanks for taking my question I was wondering if you could building on <unk> question.
Maybe address deal sizes and on larger transactions are you guys seeing incremental sign offs like other vendors in the market or is it kind of business as usual, especially as you look at that North American market.
Hello, Good North America.
As usual you will see more.
C level scrutiny, but thankfully again.
The signing of a final order yeah, I don't think.
Historically at least work very well for us is when customers.
Thought process at all.
The purchasing groups.
The security product, we usually benefit from it.
Hugh.
When you want to protect.
Detailed information.
We believe as I said before we are the most profitable way to do anything now.
We have much more cohorts can provide much more observation. So when we are doing.
Sales campaign lightweight the PSC cater to our customers.
You can see that in by more and more we are.
Hum.
Our next question is from Shah <unk> with Cowen and company. Please proceed.
Thank you for the color guys I think definitely it does deserve congrats on quarterly performance and guidance in light of everything going on.
I think you might have put many concerns to risks with a set of results and guidance suggest guy I just want to make sure that I get it correctly, if we adjust for constant currency add back the Russian written off contribution.
Our new revenue guidance for the second half.
Would have actually gone higher.
Maybe just a word about linearity trends during the second quarter and maybe just a final word on to relight trends thus far thank you.
And if so when.
Based on today's rates the Q3 adjusted revenue growth is 29% at the midpoint.
In the full year adjusted revenue and <unk> growth was 30% at the midpoint and like you mentioned that includes.
The impact from Russia.
Got it maybe on linearity trends during second quarter anything unusual what about July thus far.
July started strong and we feel very confident with.
With the second part of the year.
Thank you.
Our next question is from second cut out with Barclays. Please proceed.
Hey, Hey, guys. Thanks for taking my question here.
Got it and maybe just maybe just to mix it up a little bit I was wondering if you could just talk a little bit about the bundled pricing a little bit right that really started in earnest last quarter. Maybe the question is what's been the reception from the sales team and just any early reads just understanding it's still it's still early just in bundling, but any early reads that.
That you've seen.
From customers that adopt those bundles.
Absolutely we were very pleased with kind of the bundle adoption in the second in the second quarter.
The salesforce adopted it really well, we see good reception from our customers.
Just to remind you, though all of the bundles that we sold this quarter were already deals in motion because our sales cycles are between three to nine months and up to 12 months on the larger deals. So overall, we're very pleased with.
With the adoption of the bundle this quarter.
Very helpful. Thanks.
Our next question is from Andrew Nowinski with Wells Fargo. Please proceed.
Alright, thank you.
Just want to go back to <unk> I think you just said that the adjusted EBITDA growth for FY 'twenty two.
<unk> is now 30% factoring in FX in Russia, which was about five points lower than it was last year. So you know given all the new licenses you have now.
Which I think I think you are over 40 now new bundles, you launched last quarter and an attraction with DNA clouded I guess I wouldn't have expected.
Five point deceleration from last year. So are there any other headwinds that we should keep in mind as we try to assess maybe how conservative that are our guidance actually might be.
First of all it's on a much larger number I think when you look at our growth <unk>.
Factoring in the headwinds and looking at the rest of the numbers are 30% at.
At the midpoint is a number that we feel very comfortable with and feel very good with.
I think overall the trends of the business and the adoption and licenses and our customers consuming more of the platform is something that we're very happy with when you look at the number of licenses.
Our four or more licenses and six or more licenses.
They indicate on how we're selling the platform. So overall, we're pleased with the results.
With our ability to continue to grow in the years ahead.
Okay got it thanks.
Our next question is from Chad Bennett with Craig Hallum Capital Group. Please proceed.
Great. Thanks for taking my call.
So just on Microsoft's call last week.
What I'm talking about their Microsoft office commercial products and the server based products.
In the quarter, there was a little bit of weakness, especially SMB related and I guess, it's all about how you define it but.
More importantly, going forward there are a little more conservative on.
The expectations around office, especially on Prem and their server based on Prem products.
Kind of how do you guys think about that I know, it's a little bit apples and oranges and youre not as nearly as penetrated.
Into that vast base as anybody would think but just any insight there on just I know you are levered to the Microsoft applications pretty decently on on the outlook there.
No we are underpenetrated in those markets.
Okay.
Our customer base.
And.
The penetration.
And the main customer focused.
<unk> hundred 65.
Pension capabilities.
Yes.
Excuse me.
Try to try to do so.
Overall market penetration.
Sure.
Okay.
Got it and then maybe follow up just on <unk>.
Guy on the on the operating leverage.
<unk> kind of constant currency or back out nature, I mean look looked good and it seems like the messaging is.
There's more to come or expect to see significant operating leverage going forward.
I mean, just looking at and Andrew I appreciate the FX headwinds in Russia and whatnot.
But there's been a pretty significant deceleration on the subscription side of the business from a growth rate standpoint and.
In sales and marketing as a percentage of revenue is barely flinched right and so how should we think about and you don't want to think short term you want to think long term, but how should we think about just generally operating leverage.
On an annual basis or just going forward.
Well I think when you look at the operating margin just being at midpoint.
Just over 7%.
When you think about the US dollar new Israeli shekel headwind that is kind of another 200 basis points of a headwind for us we're showing operating margin leverage I think theres a lot of ability for us to expand but do it doing it at the right pace you don't want to show operating margin that leaves the.
Honesty hanging in and not investing in the right way. So if you look back at our balancing between topline growth and operating margin improvements I think we've done a pretty good job and want to continue to do it in a responsible way.
With the right and necessary investments and when you look at kind of the Q2 results. There is a lot of noise and headwinds, but we're pleased with the underlying performance and it's clearly better than Q1, so very good momentum for us.
This quarter and we want to continue that in the second part of the year.
Our next question is from Hamzah <unk> with Morgan Stanley . Please proceed.
Hey, guys. Thank you for taking my question two quick clarifying questions for me Yoki to follow up on Rob's question earlier did you say that you were seeing more new deal scrutiny in Europe or no.
Yeah, No opiates.
When did that start.
This is part of the system.
During Q2, so more scrutiny.
Thanks for you also.
Scrutiny with customer of a customer.
Oh.
Louis.
Okay.
And then for.
For Guy.
You said that the FX headwind for the and your full year guidance was over $10 million for 2022, when you go back to your <unk>.
Full year guide that you gave back in May.
What were you assuming for FX headwind back then.
If you recall.
The over $10 million is versus the February .
The guidance that we provided and with the Russia.
Impact you get to approximately $15 million of a headwind.
I'm just asking when you when you reported Q1 in May what were you assuming for FX headwind for the full year outlook.
So the additional FX compared to last quarter's reported number is approximately $2 $5 million of additional items.
Thank you.
Our next question is from Shelby, So wrathy with SPN Securities. Please proceed.
Yes, well. Thank you very much so yes. So we're currently in the seasonally stronger federal quarter and I think in the past it was like mid single digits or insignificant can.
Can you give us an update on how large it is now and what are your prospects for federal in the current quarter.
Yes.
Very good pipeline.
During this quarter.
Okay.
Customers.
Perfect.
Okay.
And I'm just.
Just looking at the segmentation.
Your adjusted for FX and Russia.
Europe growth decelerated from 29% Q1 to 25% in Q2, but your North America growth stayed strong at three 1% and you just made a comment that you are seeing additional deal scrutiny in Europe .
I just wanted to be clear because some other companies that have reported about basically stating that they were seeing some incremental softening in the enterprise or you just want to be clear here, you're not seeing any kind of softening in U S enterprise spending.
This partner.
I'm sorry.
No.
Okay. Thank you.
And our next question is from Joshua.
<unk> with Wolfe Research. Please proceed.
Hey, guys. Thanks for taking my question just a clarification for me as well I think you mentioned.
Enterprise license agreement purchased in the quarter, how does the duration of that E. L. A compared to your traditional licenses.
So we've actually seen sales cycles stay the same and if you it's not just with Elas.
Very good and very positive for us is that since we sold.
Licenses under the perpetual model and you kind of look at the additional licenses that we sell under the subscription model a significantly higher number of licenses sales cycles have actually stayed the same which is very positive for us. So we're seeing customers consuming way more licenses.
Both new and existing.
And sales cycles are actually stayed the same.
Just just to follow up on that.
Putting sales cycles aside what about the duration of the actual contract the L a longer duration contract Richard.
We see this we see the same duration.
On the on those contracts.
Thank you.
We have reached the end of our question and answer session I would like to turn the conference back over to James for closing comments.
So thank you everyone for joining Tonight, and we look forward to speaking with you throughout the quarter have a good evening.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Okay.
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