Q2 2023 SentinelOne Inc Earnings Call
And in our shareholder letter and with that let me turn it over to Tomer Weingarten CEO Juan.
Good afternoon, everyone and thank you for joining our fiscal second quarter earnings call.
I'm pleased to share that we delivered another excellent quarterly performance exceeding our expectations across the board, we delivered our sixth consecutive quarter of triple digit growth with new customer growth records and continue to push the boundaries of autonomous security through innovation.
Our results demonstrate strong execution against our strategy and success in delivering hyper growth with substantial margin improvement.
As always please read our shareholder letter published on the Investor relation website, which provides a lot more detail.
So on today's call I'll focus on two key areas, one details of our quarterly performance, including customer growth and expansion as well as execution against our strategy and do an update on the demand environment and how we are optimally positioned to enterprises with our economist Dr platform.
Let's turn the discussion to our performance, we once again delivered substantial revenue and EBITDAR growth.
Both grew over 120% year over year, driven by strong demand for our <unk> platform across endpoint cloud and identity.
Outperformed all of our expectations in the quarter two strong focus in execution platform innovation and our partner friendly go to market strategy.
Looking forward, we are raising our full year revenue growth guidance to a 103% from prior at 19%.
We're combining this rapid growth with meaningful margin improvement showcasing strong unit economics and operational efficiencies, we exceeded the rule of 60 in the quarter. Our gross margin expanded by 10 percentage points year over year and reached a new high of 72% our operating margin improved.
<unk> 42 percentage points compared to just a year ago, our extraordinary performance reflects increasing scale and leverage in our business model. We expect to achieve the rule of 40 for the full year and are making meaningful progress towards profitability.
For customer growth and retention, our lend and expense strategy is reaching new heights in the second quarter. We once again added a record number of new customers on an organic basis and.
And we're excited to engage with hundreds of additional and people customers.
Top of this our net retention rate reached a new record of 137%, we're seeing outsized growth from our strategic channel partners as well as many of our expansion modules.
We're protecting a growing number of the world's largest organizations.
Among the new customers, we secured an eight figure multi year deal the largest new customer contracting centered on one's history.
This multinational industrial company wanted to consolidate legacy product and selected a broad range of our singularity platform capability from endpoint and cloud protection two modules, such as Ranger data retention and Dr services, and others Singularity Xdr clearly stood out among all evaluated vendors for leading efficacy.
Automation and ease of use this as a great example of our large enterprises are selecting more centered on one platform translating into larger deals and higher <unk> per customer.
As an example of expansion with existing customers a major American retail chain significantly expanded its endpoint and cloud footprint by fully replacing Microsoft Cyber security products.
Customer preferred to full deployment of Sentinel ones unified Xdr platform instead of needing to manage multiple consoles and disjointed products.
These examples demonstrate how our differentiated AI based autonomous cyber security platform is becoming the solution of choice for enterprises around the world.
We remain in a position of competitive strength and maintained extremely high win rates across all the competition.
Turning to our platform capabilities beyond the endpoint.
We're seeing strong growth in customer adoption of our expanding platform. We're still in the early innings and our platform approach should continue to fuel growth for years to come.
Singularity cloud remained our fastest growing solution in Q2, followed by data retention and Ranger.
Let me dig deeper into cloud security, where we're seeing tremendous demand for our best of breed cloud runtime protection.
Enterprises are rapidly shifting workloads to the cloud, creating an emerging you had critical attack surface and therefore, a significant greenfield opportunity for protection.
<unk> companies in particular are choosing singularity cloud.
Even being selected in situations, where the incumbent endpoint coverage may be from our closest competitors.
Let me provide two examples.
A new customer and leader in global ride hailing selected singular cloud despite having deployed a competitive nextgen edr solution Andre footprint reinforcing the superiority of our cloud architecture workload protection.
We closed the deal through the AWS marketplace, which is opening new opportunities for growth, we see meaningful expansion potential with the customer, making cloud multiple times larger than the endpoint opportunity.
This is frequently the case with cloud native companies.
An example of an existing customer expansion, a global e-commerce giant more than doubled the size of its cloud security coverage just one quarter. After its initial deployment there.
There remains significant expansion potential beyond this.
Our momentum in cloud security is strong and we're encouraged by the early adoption from cloud native enterprises, and our strong competitive position.
Shifting gears to innovation and platform breath Im pleased to say that we've completed the integration and customer migration to the data send back and we're now delivering a one of a kind unified xdr platform offering a seamless experience from the backend to the user interface.
This is a significant milestone and an important competitive differentiator for a few reasons first we have a single unified platform.
We stand out from the crowd for being the only cyber security vendor that covers the essential attack surfaces, we'll endpoint cloud and identity powered by our proprietary data ingestion and analytics technology.
That means an even more powerful user experience with complete security visibility across the enterprise all in one place.
Second our platform is purpose built to process all types of data at significant scale.
We're living independent bike era and data processing at scale is a must have our singularity platform is already running multiple petabytes of data every day and lot of environments, while other vendor and merely handle the fractional stocks scale in test or benchmark scenarios.
Finally, we offer unmatched data retention capabilities enterprises need to cost effectively retain an increasing amount of data for long periods, we're helping them reduce operational and storage costs, while maintaining access to critical information.
In the past quarter, we've announced transformative innovations like xdr, ingest skylite and a new process graphics utilization we.
With these new capabilities, we continue to lead the xdr experience consolidated data and security actions into a single platform with a single query language and hunting interface move.
Moving on we completed the acquisition of upheaval in the main by adding a tivo comprehensive identity security capabilities of our platform, we're not protecting customers. Both at the device and end user level identity is one of the critical attack surfaces, commonly leveraged by bad actors to breach enterprises.
Ah Kee will puts us in the form of the identity security market and helps enterprises adopt a holistic zero trust strategy.
We're delivering on our mission to autonomously protect customers by harnessing the power of data analytics machine learning and artificial intelligence the market opportunity in front of us remains massive across endpoint cloud and identity is what our security data analytics.
Testing in our technology people and strategic partnerships, we remain agile and our balanced approach is continuing to drive high growth and progress towards profitability.
Let's turn to the discussion to the demand environment for our xdr platform and the trends we're seeing in our market.
Cyber security remains a top priority for enterprise, it spending and must buy for all enterprises.
We're encouraged by the broad based strength across customers geographies and capability in Q2, our pipeline grew sequentially reinforcing our conviction around the SaaS future opportunity demand is strong and we remain extremely well positioned.
At the same time enterprises across all sectors of the economy are being impacted in different ways by evolving macro conditions like other software companies. We've seen some signs of cost consciousness and prudence around IP budgets. This has resulted in margin a longer sales cycle and more budgetary approvals.
The impact has been quite motor so Paul the risks of not being protected by a leading security solutions are too costly.
<unk> FBR, we deliver our customers meet their most best in class protection and superior platform value or.
Our platform delivers leading efficacy speed and scale superior to legacy incumbents and competitors alike.
Led to migrate that evaluation for years, and we further enhanced our API platform with a unified proprietary data backend.
We envision cyber security could be a catalyst for product consolidation factor cost reduction and operational efficiency.
Leading enterprises to do more than ever before to automation and data analytics, while driving down operational costs.
In closing there has never been a greater enterprise need for a modern cyber security platform like singularity, Xdr, which means a tremendous business opportunity ahead. Our growth journey continues I want to thank all of <unk> customers and partners centered on one remains well positioned for continued success and market share expansion even in today's economic.
Environment, our outstanding performance speaks for itself triple digit revenue and <unk> growth paired with double digit margin expansion.
With that I will turn the call over to Nick Warner President of security.
Thank you Tamara and welcome everyone. Our go to market flywheel of sales marketing and channel partners resulted in record quarterly performance across the board.
In the second quarter, we set a new organic customer growth record by adding over 750 customers. In addition to over 350 customers from the acquisition of a tivo, bringing total customer adds to over 1100 today, we are protecting over 8600 customers around the globe.
Our momentum with large enterprises continues to be a bright spot our customers with IRR over $100000 grew 117% year over year to 755, much faster than our total customer count.
Our strength was balanced across geographies, we're seeing strong momentum as we expand our presence and brand in international markets. As an example, among many international deals we closed one of the largest telecommunications companies in Asia Pacific Another platform win spanning endpoint cloud data Ranger.
And other capabilities.
Beyond rapidly, adding new customers, we're seeing strong retention and expansion within our customer base.
Our net retention rate reached 137% this quarter, a new record for Sentinel won.
Our NR was driven by significant subscription expansion, especially from our channel ecosystem and cross sell of adjacent solutions, we continue to balance customer growth with cross selling new capabilities our strategy for long term success.
Let's talk more about our partner ecosystem achievements, we've cultivated an extensive and diverse network of channel partners, that's unlocking meaningful scale reach and strengthening our market position.
We're both adding new partners and enabling more of our existing partners to deploy the full breadth of our expanding singularity xdr platform.
Digging deeper into our strategic partnerships with incident response providers and MSS piece.
Our growing network of IR partners engaged with a record number of new breaches in the second quarter. These partnerships continue to create high value and fast moving opportunities every quarter.
Shifting to MSP enterprises are increasingly turning to strategic partners to address talent shortages and improve their security posture, our partners and customers want automated solutions that reduce reliance on human intensive processes. We designed to differentiate the architecture that makes us a partner of choice for MSP.
Across the globe, such as multi tenancy fully customizable role based access control and a full set of open and documented Apis.
In Q2, our partner supported go to market model helped us achieve record customer additions and our.
As an example, our MSP partners are rapidly, adding subscriptions and are just beginning to deploy many of our modules. We don't compete with our partners, we enable them to win with our singularity xdr.
Finally, let me share updates on a tivo networks, we're making good progress on integrating a tivo technology and go to market. It remains early customers and partners are engaged across the entire identity portfolio, including active directory assessment identity security and threat deception.
At the Black Hat Security conference in August nearly every customer and partner conversations indicated interest in a tivo solutions.
<unk> and one deal example, a large transportation company that selected singularity Xdr also added identity security and rates are.
To further reduce the risk of credential based attacks.
Securing against identity theft addresses critical enterprise vulnerabilities that are frequently exploited by bad actors kicked.
Take the recent Cisco Haq, which was yet again trace to credential theft.
Since the breach occurred we have demonstrated how a tivo is identity security could have prevented this breach. This is a clear example of how important identity security for all enterprises.
We remain focused on execution and listening to our customers and partners I am proud to work with this global team of relentless center malls.
Thank you again for joining us and let me turn it over to Dave Bernhardt, our CFO .
Nick Tomer, Thank you Aldo.
Thus, our quarterly financial highlights and provide additional context around our guidance for Q3 and fiscal year 'twenty three.
A reminder, all margins discussed are non-GAAP unless otherwise stated.
We once again delivered high growth combined with meaningful margin expansion showcasing the efficiency of our business model and strong unit economics.
Raising our full year revenue guidance above and beyond our Q2 outperformance and also increasing our full year gross margin and operating margin expectations.
<unk> and revenue both grew well into the triple digits.
<unk> grew 124% year over year, and <unk> grew 122% to $439 million.
We added net new <unk> of $100 million in the quarter.
The upside in the quarter was driven by seasonally strong growth from the organic business, which delivered triple digit year over year growth.
Our largest ever customer win and strength from our channel ecosystem also elevated our performance.
Our financials now incorporate the acquisition of the Tivo, which performed in line with our expectations and is on track for our full year target of $45 million or more.
We do not intend to breakout of Tivo financials going forward as it becomes part of a broader platform offering as our identity suite.
The strength of our performance was broad based coming from a healthy mix of new customer additions existing customer renewals and up sells.
I am extremely pleased that we delivered record customer growth and a record expansion rates in the quarter.
We're seeing a per customer rise, reflecting our success with large enterprises and the adoption of the broader singularity xdr platform.
Turning to our cost of margins, we achieved a meaningful improvement in gross margin exceeding 70% two quarters earlier than our previous expectation.
Q2 gross margin increased to 72%. This is tremendous progress in just the past year, we've improved our gross margin in the low.
Over 70%.
Our land and expand strategy is working underscored by our platform unit economics, where we collect data once and enable more and more capabilities.
Q2 gross margin included a little over one percentage point of onetime benefits from our cloud hosting provider.
Most importantly, we are seeing continued benefits from economies of scale data processing efficiencies and module cross sell.
We completed the migration of our back into dataset, which was a meaningful undertaking that we completed in just over a year I'm extremely proud of our team's focus on delivery on this transformative project.
Positions us extremely well in the future of Xdr, a unified scalable and efficient data back and it gives us a significant competitive advantage.
Evident by our Q2 gross margin, it's already supporting our path towards our long term gross margin targets.
Looking at the rest of our P&L, we delivered substantial operating margin improvement expanding 14 percentage points year over year to a negative 57%.
Our strategy to invest sufficiently for growth continues and it's working well, we're achieving scale leveraging our channel and globalizing our talent pool.
Magic number was well over one again and we exceeded the rule of 60 for the quarter.
Moving to our guidance.
We're raising our full year revenue and growth expectations above and beyond our Q2 outperformance.
We exited Q2 with our largest ever pipeline and so far we continue to see strong and durable demand at.
At the same time, we want to be prudent about the evolving macro environment is.
These trends can potentially impact sales cycles, and Ikea budgets, though the impact has been modest to date.
Cyber security remains a top priority and our AI based autonomous singularity platform is optimally positioned to deliver enterprise value and superior protection.
Taking all that into account in Q3, we expect revenue of about $111 million, reflecting 98% growth in a high growth company at this point guidance reflects our best estimate for the business and shouldn't be interpreted as the high end of our range.
For the full year, we are raising our revenue outlook of $415 million to $417 million up $11 million at the midpoint versus our prior guidance.
103% growth at the midpoint versus 98% previously.
While we don't specifically guide for Ah I do want to provide some context given the uplift we got from incorporating a chemo in Q2.
We expect net new IRR in Q3 to be in the high $50 million range.
<unk> incorporates the macro factors I, just mentioned, which we believe is prudent in this environment.
Bring IRR to nearly half a billion dollars once again growing in the triple digits.
Our guidance reflects our confidence and optimism around cyber security demand as well as our business momentum.
Turning to the outlook for margins, we've taken a major step forward as a company operating about 70% gross margin, we're benefiting some platform data efficiencies inherent in the business model.
We expect Q3 gross margin to be about 71% and we are increasing our full year gross margin guidance of 75% to 71%. This was up from prior guidance of 69, 5% at the midpoint and up about 7% year over year.
By extension, we currently expect Q4 gross margin to be relatively consistent with Q3 levels.
Finally for operating margin.
We expect Q3 operating margin of negative, 57% up 11 points year over year.
At the same time, we're improving our full year range to negative 58% to 55% a one point improvement at the midpoint from our prior range.
While the timing of expenses can vary from quarter to quarter. We're on track to deliver about 30 points of margin improvement for the full year showcasing pronounced progress towards profitability.
Given the vast opportunity in front of us and the structural tailwind from cyber security our strategy remains to invest in the technology on business.
We plan to continue delivering high growth and margin improvement.
Have an incredibly strong balance sheet with $1 2 billion in cash and investments, which provides us the flexibility to make quarter to quarter investments in the business, depending on near and long term priorities.
In summary, Q2 was another excellent quarter with strong execution companywide and we're expecting that momentum to continue.
You all for attending our earnings call. We can now take questions. Operator can you. Please open up the line.
Thank you.
Alright.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
We ask participants to limit themselves to one question today.
As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question we'll pause here briefly as questions are registered.
The first question is from the line of Roger Boyd with UBS. Please proceed.
Oh, great. Thanks for taking my questions and congrats on a nice quarter, maybe just starting with the.
The macro conversation can you just talk a little bit more in depth about.
So some of the budget scrutiny youre seeing and then how youre actually factoring that into the guidance are you assuming sales cycles stay the same or maybe potentially get worse.
But any color on the pipeline until the efficiency in the back half of it would be great. Thanks.
Yes, I mean, let's start with sales efficiency I mean, we're actually very encouraged our magic number is in excess of $1 three and we think that's just a great result for us.
When we look specifically at what we seen this quarter.
More scrutiny definitely more belt tightening, but at the end of the day, we haven't seen something significantly change in the way that people, who volume procure even sales cycles that were prolonged we're not.
Superbly prolonged so all in all we still feel pretty good about demand.
I think what you see reflected in our guidance is the level that we feel.
We need to be conservative and prudent and all in all again, if things remain incredibly strong.
Great color. Thanks.
Thank you.
The next question is from the line of Honda Firewall with Morgan Stanley . Please proceed.
Hey, guys. Thanks for taking my question just one from me.
Maybe for.
<unk>.
The net retention rate. This quarter was really strong you spoke to a lot about how youre seeing that growing.
Partner pipeline can you talk a little bit about how the sales cycles have trended since you've expanded your partner network and really deepen your relationship with those MSP and can you talk a little bit about what the deal sizes for these MSP look like relative to perhaps overall.
Central one thank you.
Sure Great question, and I think one of the one of the very most exciting things about our business is the incredible demand that we're seeing.
From Msp's Msp's and incident response partners, many of which have become.
<unk> or managed detect and respond providers themselves and I think there's a couple of fascinating elements to this part of the business one it really lets us in a very efficient way cover a tremendous part of the market too it absolutely fits amazingly well in today's macro environment, where folks are.
Looking to efficiently protect their networks efficiently protect their data and their users.
And expand their security prowess without having to make a lot of capital investments and managed services do exactly that third is incredible velocity in terms of deal cycles and to one part of your question I think as we've unfolded and allowed.
<unk> of modules within our managed service providers, we're starting to see incredible traction in terms of cross sell and upsell and again, we're able to do this in a very efficient way.
We have a very.
Capable and global managed service team, but the the outsized impact they are having on our business I think really speaks to one the architectural advantage that we have that has lent itself to real domination in that space from a vendor perspective and to the absolute growing macro demand for managed.
<unk> as.
As it relates to security so we feel like we're incredibly well positioned in that way.
Alright, Thank you very much.
Thank you.
The next question is from the line of Josh that telephone with Wolfe Research. Please proceed.
Hey, this is Patrick on for Josh I, just wanted to dig in.
Little bit more on the operating margins in the quarter and the guide as well.
Obviously outperformed in the quarter significantly.
<unk> asked a lot of that onto the guidance is that just due to timing of expenses in the quarter or was there any impact from the acquisition specifically in <unk>, just a little more color on that would be great.
Yes, I think one of the things Youll see in our results. This quarter is just due to the market conditions. I think we were really looking at it spending that wasn't essential and having some controls over that as we sort of waiting to see how the market was going to work its way through Q2.
If you look we increased our guidance for the year.
Our guidance for the year rather.
So I think there is some shift between Q2 Q3 expenses or expenses from Q2 into the second half as we felt a bit better about the about the market conditions. So all in all I would encourage you to look at it on a full year basis, we took it from 55% to 60% range to any.
To a range, where we've improved 1% at the midpoint. So I would look at it that way.
We're excited about what we're seeing in terms of the top line. We know that expenses are something we can control.
And we're just trying to be prudent around the expenses that we have to make sure we make the right investments at the right time.
Great. Thank you.
Thank you.
The next question is from the line of Cynthia Ronnie with Citi. Please proceed.
Good afternoon. Thank you for taking my questions Hey, Nick just for you on the MSP channel as your route to market clearly, a very differentiated and robust.
Go to market happening for you, but what I'm curious about it if there is any delineation from a unit economics perspective.
Between a direct deal that you would sell to an enterprise customer versus a deal that you would sell through and MSP and what I'm getting at is is there sort of a call. It a wholesale element to it when you sell.
Large volumes.
Protective all endpoints and modules are along those lines I hope that's clear if that makes sense.
Yes.
Good question <unk>, So I think.
It's actually the inverse if you look at the unit economics of our managed service deals.
They actually are higher and trending higher.
Then direct deals through channel partners. So there's a couple of reasons for that one.
There is monthly and quarterly billing, which.
Lends itself to higher ppm too. There is there is wrapped in services three it's a relatively captive audience.
Typically they're already onboard with either an RMM.
Remote management platform or they are getting some other bundled set of services from that provider and and I think are really important.
<unk> an interesting element to this is largely those deals once we set up these partnerships they are noncompetitive. So.
We become the platform of choice within these managed service partners and I think the last thing I would leave you with it from a customer satisfaction perspective.
We tend to see a very high customer sat scores.
For our solution delivered through third party managed service providers and I think what that really speaks to is the way that we've enabled these partners. We've given them the best technology in the market that allows them to shine to their customers.
I appreciate the color. Thank you Nick.
Thank you.
The next question is from the line of Joseph <unk> with Jefferies. Please proceed.
Hey, guys really appreciate the question just a quick clarification first did you guys give via Tivo <unk> number for <unk> I realize it's going to be the final time, you talk about it and then.
Also appreciate that it hasnt hit the business, yet, but are there any similarities in those extra levels of scrutiny as an SMB enterprise any geo regions stuff outside of core cyber.
Any color there it would be I appreciate it thanks.
Okay.
Yes.
In terms of IRR.
I think we'd said it was going to be around.
I was at 35% for the quarter.
In general around that I think the <unk>, if you're trying to focus on where the significant beat we had was it was driven from the organic business.
I think a tivo being new to the company has just performed in line with expectations.
What I would add in terms of levels of scrutiny in the macro environment. What we have seen back to my commentary around managed services, we've absolutely seen a number of deals.
That have gone managed service.
Instead of direct.
Again to the to the earlier question around unit economics, that's actually a good thing for US. It's also a great thing for our managed service partners. What we're really starting to see is a push upstream from just SMB being the consumers of managed services.
As we've gone through an evolution of MTR and other more sophisticated security service providers, we are starting to see.
Small medium and large enterprises go with a managed service and so.
We've seen from an overall global trend perspective.
I think.
The scrutiny around spend has lent itself to an upswell in that in that type of business. The only area that we've seen.
Deals get scrutinized heavily as larger deals, but we have not seen any material impact on.
On sales cycles et cetera, and I think that really speaks to the durability of cyber security and the criticality of the type of security that we provide to our customers and partners.
Awesome to hear thanks.
Thank you.
Next question is from the line of Paul Leone with Bank of America. Please proceed.
Hey, Thanks for taking my question. This is John on for Kyle.
Can you just please help us understand the momentum and opportunity youre seeing with the Tivo and overall and identity.
Was there anything any meaningful cross sell in the quarter as well.
Thanks.
Yes.
Nick mentioned I mean, we're just getting the tivo integrated into our business and its showing great signs of success I mean, we're building in critical pipe.
The <unk> offering that will be.
In holistic part of our identity suite.
We're seeing the ability to sell into a <unk> account I mean, they have been fairly strong and are fortunate 500 front.
That's incredibly promising for us we're seeing are sellers know talk about identity in pretty much every.
Classic Edr deal that we have a mixed talked about enabling our emphasis vehicle system to know also carry our identity protection offering that's a differentiator in itself. So all in all just just a lot of Kronos.
Especially as you see the attack landscape really shifting towards more identity borne attacks.
Obviously, if you look at what I, what identity has been throughout the years, it's been through that evolution that started with just predicting users to predicting credentials not predicting the overall identity forest and active Rick your okta.
People really comes with propositions across all these different fronts. So once again, we're seeing really great by building up we're very encouraged by the ability to now carry a tivo and they're offering the sort of the overall Edr suite is a great complement.
So again all in all as we go through the year and into next year.
Feel really good about the identity security is one of our leading modules.
Got it thank you.
Okay.
Thank you.
The next question is from the line of Keith <unk> with Barclays. Please proceed.
Okay, Great Hey, guys. Thanks for taking my question here as well.
Tom or maybe maybe for you.
Great to see the AUR for customer growth and of course, the net retention I was wondering if you could just talk a little bit about the singularity complete bundle how much of your base has adopted that high end bundle and how much opportunity is there still to go out there out to that base and cross sell further.
Yes.
As we kind of said before the vast majority of people that go into platform today, they start with complete.
It really becomes our baseline even if you look into the estate complete is really what we would we see the most in our installed base.
But the ability for us to now go in with additional 15 different modules that through the expansion opportunity is that's where you see our net retention rate really going up we're incredibly underpenetrated to even do with a 137% net retention rate.
Opportunities large within our state you produce the duties are so large with attaching and landing bigger accounts.
If you kind of look at our revenue mix about 30% of our revenue comes from these adjacent modules. So even 250 day really seeing meaningful traction with cloud with Grainger, obviously, what identity Goodyear people acquisition, but once again highly underpenetrated. This is just the first innings for us will be.
Coming better and better and really providing the entire portfolio for our entire customary state. So I'd encourage you again to kind of look at what we have.
Kind of in our portfolio outside of the complete offering it's a bit misleading completed and fully complete.
Got it a lot more offering outside of that and again, if you look at our cloud cloud prospect I mean, it's incredibly promising.
And I think we have a lot of room to grow.
Very helpful. Thanks Tomer.
Sure.
Thank you.
The next question is from the line of Rob Owens with Piper Sandler. Please proceed.
Hey, guys. This is Justin on for Rob just wanted to follow up on commentary around when you guys are running alongside an incoming endpoint vendor in the cloud are you guys typically seeing opportunities to eventually displaced that vendor later on in the whole environment or is the focus on these accounts primarily on the cloud opportunity.
Yes.
Looking at this is almost.
As kind of a back door to the account right I mean, it allows us to invoke many accounts that might have already went at some point in the past with another.
Endpoint provider.
All of us to really go in on the merits Sagar.
Cloud protection platform and then obviously people are always looking for ways to consolidate further that opens the door for that important conversation, but to be honest I mean, when we look at some of these cloud opportunities, especially with the cloud native companies, they're probably Forex five X 10.
<unk> the size of the endpoint footprint and the endpoint of opportunity. So we don't we don't really feel bad about going deeper into cloud and we treat the ability to then expand over to dental footprint that is more opportunistic but with that obviously, it's a strategic vector for us to continue and look more and more accounts.
Both on the cloud side, but also on the endpoint side.
Got it thanks Tomer.
Thank you.
The next question is from the line of Andrew Nowinski with Wells Fargo. Please proceed.
Hi, Thanks for taking our questions. This is Justin on for Andrew.
Just one quick one for me.
I have my numbers right it looks like.
Count doubled.
Doubled.
Since last year. So I was just wondering if you could talk a little bit about your plans for hiring.
Is this the pace that you are expecting to continue at and especially how that plays into.
Your extended partnerships. Thank you.
Yes.
We almost doubled our workforce and we continue to invest in a balanced way like Dave mentioned I mean, obviously there is still a degree of uncertainty in the market and we're taking that into consideration, but again when we see traction we see clear ROI on the investments that we're doing that gives us the conviction that we need to continue and invest and we will keep one.
Going to head count.
Obviously, when you see a company growing triple digits I mean, it can't happen without also investing in the head count and in the people so that will continue.
I think I'd remind you too that that was also a quarter that included the Tivo acquisition. So that was 300 300 plus employees that we picked up in one shot so that was a huge accelerator within the quarter.
Thank you.
The next question comes from the line of Shaul Eyal with Cowen. Please proceed.
Thank you good afternoon, guys congrats on results and improved outlook.
Nick or tomer.
When you look at your channel partner.
Contribution.
Are there a handful of partners that maybe stood out during this quarter.
Andy one partner any handful of partners that are generating 10, 15% of total revenue.
We really have.
Kind of balanced ecosystem partners I mean, as Nick mentioned in their <unk> give more color, but we really have the vars and won an integrator IR partners <unk> MSP. So it's a very balanced portfolio of different avenues to market that we leverage we're absolutely also in the journey of enabling.
A lot of these partners do not sell their components in our portfolio like cloud as an example, so we anticipate even more growth from our partner ecosystem going forward, but to your question. There's no real concentration into one partner we have.
A very balanced portfolio of partners across the globe.
I would add is what we've seen in Q1 and through Q2 is a real acceleration from a couple of very nationally known security resellers in North America, who had previously partnered largely with a couple of other nextgen companies and I think what's really starting to resonate even at the national.
Level with with large resellers is how we don't compete with our partners. We enable them. So we don't have competing lines of business. We don't try to compete with them on IR, we don't try to compete with them.
As it relates to MSP in MSP and that matters and that really matters in a world where resellers are really looking to then subsequently manage many of the products that they're reselling to their customers and what they see and certainly one is the best technology, but also the best partner to enable their business.
<unk>.
That's been really really encouraging because that's how we're going to continue to unlock our way into very large enterprises, particularly in the Americas.
Thank you very helpful.
Thank you.
My last question is from the line of Yung Kim with loop capital markets. Please proceed.
Alright, great. Thank you first congrats on a strong quarter.
Heard a lot about positive feedback regarding your xdr xdr analytics technology at the RSA imply cat Oh by the way congrats on a couple of strategic hires Terry and that team.
Obviously, you are executing very well on the xdr platform strategy, but given that in the marketplace Xdr is somewhat of a common buzzword.
Hello understand or better understand.
What are some specific marketing initiatives and go to market.
Are you doing to get the word out regarding the product differentiation.
Yes, it's a great question and I think maybe just to kind of levels that we really look at Dx deal opportunity as it pertains to data and data ingestion.
We announced that the <unk> is really something that's more of a decade long opportunity. So what youre seeing now is just the first inning of what the xdr market will be.
The first 40, we had and that started about a year ago was really around data retention and that became I think our second growing module, especially this quarter. So our ability to process more data for our customers our ability to retain it for longer and REIT vehicle saver for customers obviously in this macro.
So environment that speaks volumes when you can go into some of these accounts and actually create cost savings.
That's our sales facilitator, so to us when we look at xdr.
We look at predicting more surfaces in the enterprise and you see that through our ability to cover cloud services, our ability to cover the user element true identity protection, but also to now start ingesting data from other third party products in the ecosystem, we do all of that into one singular platform.
Norm.
Very different in the market. There is no other provider that can that can really.
Do all of that within one console within one platform.
That is a long term opportunity for the company our focus right now is absolutely.
Diving, our cloud portfolio, our identity portfolio, a ranger asset management portfolio, our MBR portfolio through vigilance, we got a lot of different capabilities that we focus on today and xdr is unlocking that opportunity for the next years to come and that's what you see us.
Pushing the envelope on innovation on.
That to US is really what will fortify the success for the company.
In the years to come.
Okay, great. Thank you for that.
Thank you.
That concludes the question and answer session I will now turn the call over to Tomer Weingarten.
For closing remarks.
Yeah.
Thank you everybody for joining I appreciate your time and attention and talk to you next quarter.
This concludes the <unk> Q2 fiscal year 2023 earnings call. Thank you for your participation you may now disconnect your lines.