Q2 2023 Commvault Systems Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the Commvault Q2 fiscal year 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to grow star one on your telephone.
Then here an automated message advising you hand as race.
Be advised that today's conference is being recorded I would now like to hand, the conference over to Mike Melnyk head of Investor Relations. Please go ahead.
Thanks Andrea.
Welcome to our earnings conference call I'm, Mike Melnyk head of Investor Relations and I'm joined by Sanjay Mirchandani Commvault CEO , Gary Mirror Commvault CFO .
And info graphic with key financial and operating metrics is posted on the Investor Relations website for your reference.
Statements made on today's call will include forward looking statements about commvault future expectations plans and prospects.
All such forward looking statements are subject to risks uncertainties and assumptions. Please refer to the cautionary language in today's earnings release and Commvault. Most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the actual results to be materially different from those contemplated in these forward looking statements Commvault does.
Not assume any obligation to update these statements. During this call Commvault financial results are presented on a non-GAAP basis, a reconciliation between the non-GAAP and GAAP measures can be found on our website. Thanks again for joining US now I'll turn the call over to Sanjay for his remarks Sanjay.
Thanks, Michael Good morning, I'm pleased to share that we delivered record fiscal Q2 results, which I'll discuss in constant currency software and products revenue increased 16%.
Growth was driven by strength in the Americas and our continued success in winning large transactions are best in class technology continues to resonate with the enterprise, where data protection and ransomware remain top of mind.
Our growth continues to be strong increasing 18% year over year combined subscription and SaaS <unk> grew over 40% year over year and now represents a healthy 66% of our total IRR.
Metallic continues to fuel this growth also have more shortly.
These results are proof that our strategy is working in three ways.
First over the past three years, we've been focused on transforming the business and have returned the company to responsible growth our focus on driving our now over $600 million. It gives us a predictable model for future growth.
Second.
Our unified software and SaaS portfolio is a differentiator and a competitive advantage because customers want and need.
This is helping us land marquee customers.
Some examples in a minute.
In addition to transitioning to a subscription software model, we organically funded and delivered a hyper growth and world class SaaS platform.
As a reminder, metallic launched commercially in October of 2020.
We see this as a marker against which to measure its success because in two years, we have achieved phenomenal growth.
Metallic is a logo acquisition machine that is complementary to our software business we ended the quarter.
With over 2500 metallic customers.
In Q2, 70% of metallic customer additions were new to Commvault.
Half of those have another combo product and one third <unk>.
Multiple metallic offerings reinforcing that in today's world customers need both software and SaaS.
Microsoft 365, and metallic recovery reserve part of a ransomware offering continued to drive adoption and our other offerings are gaining traction.
Our metallic SaaS offering surpassed $75 million in <unk> and less and less in approximately two years. This makes metallic one of the fastest growing SaaS offerings. In this industry. It's very clear that we're outpacing benchmarks and reinforces that metallic will be a big part of our future.
The third proof point that our strategy is working as a go to market execution.
Through our investments in talent and operational excellence combined with our partner ecosystem and a lot of smart work, we have reinvigorated growth materially improved our efficiency and reinforced our leadership position.
The number one ranked vendor in data center cloud and edge environments.
We're not done in fact, I'm, even more excited and confident that the opportunity in front of us because we offer elegant solutions to our customers hard data problems in an increasingly difficult world.
After all our customers are relying on data to modernize and build their businesses Davis fluid moving from on Prem to the edge to the cloud and back again and it is remote fragmented and exposed to new threats every day.
As a trusted and proven provider, we offer customers a future proof data protection strategy to ensure that data is always available.
This begins before the data is compromised.
While an organization's ability to recover from a ransomware attack or other threats is only as good as the quality of the backup.
Which is why we launched metallic threat wise built on the trap X technology that we acquired in February .
<unk> is a SaaS delivered.
Intelligent early warning system that proactively surfaces unknown and zero day threats to help ensure youre backup copies uncompromised.
We believe that data security is non negotiable.
Which is why it is implicit in our offerings Commvault is the only data protection provider with these proactive and responsive protection security and recovery capabilities today.
And customers see the value for example, woodworking a multinational fortune 1000 company turned to Commvault software and metallic to consolidate multiple data protection products to better protect its data and increase efficiencies Commvault now handles all of the company's data at all locations, while meeting its recovery point and.
Recovery time objectives.
Another Great example of how customers are leveraging both software and SaaS for their data protection needs with a recent win with a fortune 500 manufacturer.
This company decided to choose its global sorry to close its global data centers and fully adopt a multi cloud strategy.
While multiple vendors, including the incumbent <unk>.
<unk> for the business only commvault could deliver an elegant solution to migrate workloads to cloud and support a zero loss strategy.
Loan platform.
Both examples demonstrate how providing comprehensive enterprise grade software and SaaS data protection across all workloads and environments is a distinct competitive advantage.
Now I'll turn it over to Gerry for a discussion of our financial results Gary.
Thanks, Sanjay and good morning, everyone.
I'll start with a quick recap of the quarter with growth rates on a year over year basis, unless otherwise stated.
Total revenues for the quarter increased 6% to $188 million.
On a constant currency basis total revenue growth was 12%.
Our growth in the quarter was driven by strong execution in the currency and the macro continued to be headwinds.
Continued strengthening of the U S dollar since our first quarter call adversely impacted Q2 revenue by approximately $3 million.
Software and products revenue for the quarter with $82 million.
Increasing 10% year over year.
And 16% on a constant currency basis.
From a geographical perspective, both of our Americas and international regions delivered strong year over year constant currency growth.
Specifically, our Americas region increased 20%, which was driven by large new customer transactions.
Data protection and related security concerns are key spending priority for organizations and our ability to support large enterprise workloads across a mix of environments is a key driver for our growth.
On a constant currency basis, our international region drove 9% year over year growth in software and products revenue.
The increase was also driven by strength in larger enterprise transactions.
On a consolidated basis revenue from software transactions over $100000 increased 18% year over year and represented 72% of software revenue.
We were pleased to see both a 6% increase in the volume of such transactions.
Combined with an 11% increase in average deal size, reaching $346000.
Our technology continues to resonate with enterprise customers.
Looking to modernize their data protection approach to enable a hybrid cloud strategy.
Subscription software revenue increased 32% year over year to $63 million and.
76% of total software revenue, which compares to only 63% of total software revenue in Q2 of the prior year.
Our progress towards subscription led software business has given more predictability and resilience to our business model.
Moving from reported revenue results I will now give some insight to our annualized recurring revenue or <unk> metrics.
Our total <unk> increased 11%.
$604 million as reported.
And accelerated to 18% year over year growth in constant currency.
<unk> growth is being driven by metallic and subscription software.
The combination of only subscription and metallic IRR is now $400 million.
With growth of 44% and representing two thirds of our total <unk>.
As Sanjay mentioned metallic recently crossed $75 million in IRR, which is about 50% higher since the start of the fiscal year.
Now I will discuss expenses and profitability.
Gross margin for the second quarter were 83, 5%.
This is consistent with the prior quarter, despite the foreign exchange pressure.
Total operating expenses were $119 million.
Versus the prior year and down 3% sequentially.
We are managing our people facilities and third party expenses by focusing investment on our most critical priorities.
non-GAAP EBIT was $35 million, resulting in an EBIT margin of 19%.
Free cash flow for the quarter were $49 million.
In Q2, we repurchased 703000 shares of our common stock for $40 million.
Through the first half of the year.
We repurchased 1 million shares of common stock.
Returning $59 million to our shareholders.
These first half repurchases represented 83% of our first half free cash flows.
We ended the quarter with no debt and $262 million in cash on the balance sheet.
Of which 60% is located outside of the United States.
Our foreign cash balances support the operating needs of the business spread across over 35 countries.
I would now like to give a brief update on the progress against our Investor day objectives from January 2021.
As a reminder, those objectives included.
Compounded annual total revenue growth.
In the range of 6% to 7%.
And the combination of total revenue growth and EBITDA margin up 32 by the end of fiscal 2023, which is our current fiscal year.
When measured on a constant currency basis I am pleased to report that we've achieved these objectives six months ahead of the expected timeline.
Over the last four quarters on a constant currency basis.
Total revenues increased 11%.
And we delivered an EBITDA margin of 22, 6%.
Resulting in a rule of calculation of 34, which is two points ahead of our original target of 32.
Continued progress against the rule of 40 over the long term will remain a key objectives.
Now I will discuss our financial outlook for the fiscal third quarter.
With the stronger U S dollar since our July call.
We expect an additional $4 million of headwind on total revenues.
As a result, we now expect fiscal Q3 total revenues to be in the range of $202 million to $205 million.
At the midpoint of guidance.
This represents 7% constant currency total revenue growth.
Considering current foreign exchange rates.
We expect Q3 software revenue to be in the range of $97 million to $100 million.
On a constant currency basis.
The midpoint of our software revenue guidance would be up 7% year over year.
As I mentioned earlier, we are winning net new business.
Including competitive displacement.
We continue to closely monitor customer spending patterns.
Changes in budget priorities and.
And other potential risks to our business due to the ongoing macroeconomic uncertainty.
As a result, we are aware of this new business may take longer to close, especially if part of larger it transformation projects.
In light of global uncertainty, we continue to be maniacally focused on managing expenses.
Balancing profitability, while investing in growth initiatives such as metallic.
At these revenue levels, we expect Q3 consolidated gross margin to be up slightly on a sequential basis.
Approximately 84%.
Q3 operating expenses are expected to be approximately $125 million.
One 2% year over year.
At the midpoint of our revenue guidance.
Q3, EBIT margins will be approximately 21, 5%.
Our projected share count for Q3, it's approximately 45 5 million shares.
One item I would like to point out.
Is that second half free cash flow will include approximately $7 million of incremental federal tax payments.
Related to the capitalization of research and development provisions enacted as part of 2017 tax reform.
Our team is focused on execution, we will maintain a responsible growth operating philosophy and expect to continue to return at least 75% of free cash flow to our shareholders through repurchases.
All while continuing to accelerate our metallic business.
I will now turn the call back to Sanjay for his closing remarks, Sanjay Thanks, Gary before.
Before we turn to questions I want to invite you to join us at our upcoming connections event over the next few days, we will be virtually hosting thousands of customers prospects and partners as we highlight our portfolio.
<unk>, many new offerings and announcements I hope you tune in.
Now, let's open it up for questions.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced please standby, while we compile the Q&A roster.
Our first question comes from Jim Fish with Piper Sandler. Please go ahead.
Hey, guys nice looking quarter on a constant currency basis.
<unk>.
Gary you just mentioned that it's taking a bit longer to close new business. I guess, what are you guys seeing with the customers desire to consolidate more onto one data management vendor and what do you guys see at the white space opportunity specifically within your installed base stay poor, replacing multiple solutions and kind of the customer.
Barbara including with metallic.
Hey, Jim It's Sanjay let me take let me take a stab at it so one of the examples I gave was.
A fortune company that that took out several products over the year is a bit that they had and replace it with one.
One architecture ours, using both metallic and software we do this every day.
Over the course of last quarter, roughly 50% of our metallic customers also have commvault technology. So it's both and we see this every day and with ransomware.
With ransomware our premises.
Less is more.
The less layers of technology different technologies that you put in the paper you can be because you have a single pane of glass and the other thing that singular way of dealing with it and that's what we're seeing we're seeing our technology being pulled in.
To unify.
To bring one layer of visibility and protection into into customers. We see this every day, that's how we win.
Gary Good to hear from me a couple of qualifications from a land perspective, we saw.
One of our best land, a new customer on the software side in over six quarters, So really strong results in the land.
In the Americas, driven by some of that some of that consolidation. We've had a really strong focus on landing net new customers and those efforts and that pipeline is building and the larger deals on the on the larger deals that also helps bend the deals are getting longer larger sorry, and as a result, that's because where we're <unk>.
Forming across multiple products.
That's helpful guys.
What are you guys seeing with customers' willingness to sign multi year durations I understand the typical duration on the term subscription side roughly three years, but really what I'm asking is if youre seeing any desire to move that three years down actually closer to two just given the macro environment and just also confirming here that.
Really on a billings basis here was primarily just FX.
Issues on the deferred revenue because if I take.
Off the cash flow statement for the change in deferred revenue.
You actually end up where the billings beat was there any pressure on the duration side of things. Thanks Scott.
Jim It's Gary I'll handle I'll handle both of those.
From a term perspective on subscription.
We're holding pretty steady.
We're seeing some a little bit term pressure, but we're managing we're managing for ROIC in the range of our term.
With the growth metrics in the term metrics that you mentioned.
Your second your second point was on.
Correct me, if I'm wrong, a deferred revenue the deferred revenue was actually up 18% constant currency. So if you look at deferred revenue I think deferred revenue generally on a constant currency basis more aligned with <unk> growth and both of them on a constant currency basis was 18% strongly driven by metallic on both sides.
Thanks, guys.
Thank you one moment for our next question.
Our next question comes from Eric Martin <unk> from Lake Street Capital markets. Please go ahead.
I was hoping to get a perspective.
Where the macro is now versus where it was.
No.
One you talked about the slowdown in June .
At four months under our belt. Since then how do you compare now versus 12 months ago, and Joey Ravin audio problems with Eric's question, Eric can you redial in where we aren't able to understand the questions in the audio.
Sure.
One moment please.
As a reminder to ask a question. Please press star one on your telephone please standby for the next question.
Andrew I'm not seeing any more questions, we'll give eric one more minute and if not we will we will end the call and deal with those questions offline.
We have Eric Martin Nitze, calling right back in one moment please.
Perfect. Thank you.
Eric Your line is open. Please go ahead.
Okay is the audio any better much better thank you.
Okay.
Yes. My question was regarding the macro color that you gave now versus kind of the initial slowdown that you saw the end of June you got four months.
Since then just wondering if you could juxtapose the two or if theres been no change.
Eric It's Sanjay.
Sure Gary will have a point of view.
We've been Super focused on what we control which is execution.
And really looking at everything we're doing we learned a lot from the supply chain.
Earlier last year and applied those best practices to Javier we're looking at the pipeline close rates.
And things like that so there's a lot of inspection and refocus on it.
And we're getting that right as part of our execution.
I will say to you that between the two quarters, we saw we probably saw.
Deals taking longer to close.
Just across the board a lot more scrutiny a lot more conversation challenging some of our our data science models on close rates and predictability, but we will focus on execution.
Through I will say it got harder over the course of the quarter.
Europe in particular got harder over the course of the quarter. The Americas had a strong had a strong quarter, but against scrutiny was across the board. So I'll say that was a common.
A common theme Gary anything you want to add.
As we look out even Eric into fiscal our fiscal Q3, we're expecting some of that to continue and that's somewhat reflected into our outlook for Q3 fiscal Q3 is our strongest seasonal quarter generally for commvault tied to year end budget timing, but we're factoring some of those macro headwinds we see on timing the demand is there.
<unk>, it's really time to close on time to close factored into our outlook yeah. The pipeline is good.
It's just the timing.
Yes, and then as you are.
Anticipating.
<unk> continued better in the U S is anticipated to continue in worse in EMEA is expected to continue.
I think Eric.
We're not expecting necessarily works it would be I think continued as what we've seen and on a relative basis relatively stronger in the U S. Yes.
Okay got it alright.
Yes, and then I saw the.
<unk>.
You've kind of stepped up the repurchase program here in Q2 with that simply tied to the better cash flow in Q2 or is that just.
Opportunistic on the price point.
Eric.
Good highlight on the cash flow, we had very strong free cash flows during the quarter and even for the first half of the year. Our free cash flows were up double digits, I think approximately 15% and our commitment to return at least 75% of free cash flows.
Back to our shareholders and at the first half Mark we're at 83%. So we've aligned our Q2 repurchases. It make sure work we stay ahead of our objectives.
Okay.
Okay and final question for me it comes on the services gross margin I did notice there.
Relatively flat sequentially, but a slight downtick on the gross margin whats behind that.
Yes, Eric when you think about services gross margin Theres two pieces in that gross margin. The first piece is our customer support revenue, okay. The customer support revenue and the biggest driver on the headwind there is actually FX. If you look at our press release, we disclosed the customer support revenue.
And it was down approximately 12% year over year, but FX adjusted it is only down about five down about 5% so currency being the biggest on the services and customer support that's being really fully offset by the other services, which includes our metallic revenue, so thats, where youll see major growing.
Year over year and quarter over quarter, as we start to accelerate metallic.
Okay understand thanks for taking my questions.
Thank you one moment for our next question.
Our next question comes from Jim Fish with Piper Sandler. Please go ahead.
Hey, guys can resist asking another just quickly with over 2500 customers now on metallic.
My math would kind of imply we're actually seeing a deal size uplift for metallic versus the last few quarters, I guess I'm trying to understand what's causing that specifically.
Hey, Jim Jim It's Gary.
I wouldn't say a deal uplift.
Up lift I think it depends on the segment, where we're seeing really good strength in focusing on is building a velocity business right. So there'll be some timing quarter to quarter or maybe some of the larger metallic deals.
But our real focus is driving velocity and really getting that tailwind going tied to both the renewal cycle and landing net new customers. So at times were a little less focused on the actually A&P overall, but making sure we're building that repeatable expansion and driving kind of.
Best in class net dollar retention.
One of the things Jim we're most proud of is this quarter alone on a units basis, 70% of the new metallic customers were new to Commvault.
Which doesn't show up necessarily in the financial statements. This quarter wholesale over time, as we onboard and expand and really drive that drive that growth.
Okay.
Thanks Kurt.
Thank you one moment for our next question.
Our next question comes from Aaron Rakers with Wells Fargo. Please go ahead.
Yes, thanks for taking the questions congrats on the solid execution.
I apologize I apologize if I missed this but the 2500 customers on metallic can you just help us appreciate what that was maybe exiting the last fiscal year just to kind of think about the trajectory of that and I think in addition.
I'm just curious is like as you compete with metallic and the market who do you see.
It's Gerry I'll start with the first question and maybe <unk> you can talk maybe about the competitive side from the standpoint, yes. As we mentioned we're at this point, we're well over 2500 at this point exiting the fiscal year, we were at less well less than 2000.
You kind of give you a benchmark I think clip, we're kind of growing at kind of broad strokes.
Yes, yes.
That's a big partner.
<unk>.
Again, Eric.
Darren coming it's actually coming back to how we win it.
It's the.
Our ability to bring a common platform a unified platform software and SaaS that allows us to win every time.
Yes.
When you look at when you look at just point small point SaaS players. They can't do the enterprise workloads that came to the left or right on ransomware and if you look at the traditional software players. They don't extend their architecture to extend into the cloud into SaaS.
Leave much to be desired for customers Thats why we have been winning and this has been our strategy now for two years, we've said, it's bringing the two together thats going to.
Allow customers to make natural choices on their journey to the cloud not unnatural choices. So.
In and off itself metallics and incredibly powerful next generation SaaS offerings combined with us software architecture.
It's pretty unbeatable.
I think if you think about the financial implications. So about half of them are tailored customer today also have commvault software.
Driving that software growth today through that installed base.
<unk> building at <unk>, now $75 million growing AC touring our visibility future on future revenue growth.
When I talk to a CIO is when I talk to Ceos, and Cmos should be go fast or should we go software and I'll go back to the most unnatural choice you need bolt and depending where you are in your journey unique bulk and any any provided that makes you choose a naturally.
In doing so much of a service. So we go in with an architecture and customers can start with software or start with vast change back and forth move workloads back and forth change their mind and in our software and SaaS are offering allows them to do that transparency.
And that's the that's why we went and that's why we win every time.
Yes, that's very helpful.
That's about 50% of metallic customers, having in other commvault product.
Where do you think that you can ultimately drive that two do you think that 75% of those customers ultimately over time.
<unk> purchased Commvault products do you think it stays at 50, just curious of how you think about that monetization kind of flywheel of expanding your customer base.
Honestly I expect every customer to add overtime need both okay. It's super.
We're on a journey I was the CIO on the journey. When you are on a journey, that's multi year, whether it's been accelerated or not because of the pandemic or.
Our supply chain or anything else. If you are on that journey, you need that youll need the optionality and what we give our customers is that optionality. So.
There isn't there is no reason to believe that our customer base.
More traditional software customer base and the SaaS base doesn't don't be bulk okay, now 70% of our customers the last quarter for metallic with new to the company.
Every one of them becomes a potential.
The poll software.
So that's our play that's our playbook and that's how we go to market.
Yes, that's helpful. And then a final question and I'll cede the floor is on the partnership ecosystem any kind of update.
If theres been any changes that youre excited about.
On the partner side, it's Microsoft with Azure, just curious of how that evolves.
And it's been a huge focus area for us over the past six months, starting with we brought in a new a very seasoned industry leader Alan Atkinson.
Into the team and.
He has been singularly focused on really building a next generation ecosystem. We've got we've strengthened our relationships with the cloud providers in particular, Microsoft and Oracle, we had very strong showing up there at that customer.
Events recently very strong showing I mean this is the first trade show I've been at in person the Oracle one.
Since the pandemic and our booth was overrun overrun with folks who wanted to know more about how we're doing how we work with OCI with Oracle workloads ransomware with Oracle. These are all relevant things and our partner ecosystem.
I would say to you we are more focused today on our partner ecosystem than we probably ever been as a company.
Our success with metallics.
Is and will continue to be largely with partners.
And just to give you. An example, just to give you. One example that to me that's a very important one.
Our connections event that I that I shamelessly plugged in my close.
In the prepared comments that starts tomorrow.
As we have incredible sponsorship from our partner community.
Okay incredible spots sponsorship, so thats testimony to the to the strength of the relationships.
We are very committed we've never been more committed to partnerships that we have today.
Yeah very good thanks, guys.
Thank you one moment for our next question.
Our next question comes from Thomas <unk> of Keybanc capital markets. Please go ahead.
Hey, guys. Thanks for taking the questions I have a few.
I believe Gary you mentioned that the metallic.
Gross margin headwinds.
Should be abating.
Great Great numbers here I was just wondering if you can just maybe comment from an update perspective on metallic gross margin I had a couple follow ups after that.
Hey, Tom good to hear from you. So we're making great progress on metallic gross margins.
Im really pleased that our gross margin for metallic is improving every quarter quarter over quarter. So we're on the trajectory that we need to be at we're probably still another as we said before one or two years out from best in class.
SaaS margins, but we are on our path and we're making we're making the progress we need to make this to stay on track. So from a consolidated gross margin. The comment I think I made last quarter as I thought we were at the low point for the year on consolidated gross margins.
And that's continuing to hold even for the guidance I gave for fiscal Q3, I'm expecting some modest gross margin improvement on the consolidated standpoint, and I expect that to continue through fiscal Q4 as well.
Alright, very clear, Gary and solid progress on Metallica ahead of expectations here.
On the.
On the <unk> on the maintenance MLR it looks like maybe exiting last year.
Maybe like a negative number it looks like it might have accelerated to the.
Negative, 20% kind of levels, if I'm doing my math correctly with your disclosures on metallic and subscription and metallic IRR.
Just again looking for kind of a bottom there or any update you can kind of talk about there on the maintenance to subscription trends.
The transition will be helpful.
Absolutely its all FX. So let me give you a little quantify for you. If you just look at our maintenance revenue for fiscal Q2.
Contained in the tables to our earnings release on an actual basis were down 11% year over year FX adjusted were down 5%, 5%, though it is 5% down the last two quarters. It's also been roughly 5% to be thinking about what you should expect to see from a go forward perspective.
<unk>.
We're in that low single digit decline.
On maintenance revenue, which is reflective of some of the strategic choices, we're making up converting our customers up into our new modern subscription offerings.
Very very helpful and clear as usual Gary and then the last question and thank you for taking all the questions is on large deals continued success there understanding the macro headwinds that might be creeping up here.
Is the large deal kind of metrics you shared with us they actually maybe being cap.
Alex It's interesting that you say half for metallic customers are also taking commvault software.
As I understand it those are like relatively smaller deals for metallic deals I mean, maybe I'm wrong in that characterization, but maybe maybe the large deals are actually larger and that's my final question. Thanks Scott.
Let me let me just give you the more business point of view on it.
Tom the way the way.
The workloads, where mark right now for us with it between software and.
And metallic actually very complementary.
In fact part of our Ransomware protection, we call up Metallics recovery reserve is delivered through metallic but from our software. So you can invoke it through the software, but it gets delivered that immutable copy gets delivered in the cloud through metallic silver intrinsically tying these as complementary capabilities.
And so in most cases customers will look at an on premise solution and then say.
We'd like to be we'd like the ransomware protection at that point it kicks into metallic.
Delivery and sometimes 30% 30, 30 plus percent of our customers have more than one metallic offerings. So that we may start with ransomware protection and then add on office 365, or virtual machines or something else. So it works.
Thus far it works really in tandem and they complement each other.
It makes sense.
Awesome.
Okay.
Driving the deal size up.
It actually does I mean, they complement each other.
Obviously not to the same level of software, but more and more we're seeing that the attach it to me that's the most important motion.
For the future as being customers naturally attached both things depending on workload.
Excellent very helpful guys. Thank you.
Thank you I'm viewing this as being any more any more hands in the Q I think we've been we can end the call. Please.
Participation in today's conference. This concludes the program you may now disconnect.
The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
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