Q2 2025 Rubrik Inc Earnings Call

September 9, 2024

At this time all participants are in a listen only mode.

Operator: Conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note, today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melissa Franchi, Vice President, Head of Investor Relations. Please go ahead.

Later, you will have the opportunity to ask questions. During the question and answer session.

Speaker Change: Please note today's call will be recorded and I will be standing by should you need any assistance.

Speaker Change: It is now my pleasure to turn the conference over to Melissa Franke, Vice President head of Investor Relations. Please go ahead.

Melissa Franke: Hello, everyone welcome to <unk> second quarter fiscal year 2025 financial results Conference call.

Melissa Franchi: Hello, everyone. Welcome to Rubrik's Q2 fiscal year 2025 financial results conference call. On the call with me today are Bipul Sinha, CEO, Chairman, and Co-founder of Rubrik, and Kiran Choudary, Chief Financial Officer. Our earnings press release was issued today after the market closed and may be downloaded from the investor relations page at www.ir.rubrik.com. Also on this page, you'll be able to find a slide deck with financial highlights that, along with our earnings release, includes a reconciliation of GAAP to non-GAAP financial results. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the Q3 and full fiscal year 2025. Our expectations regarding market trends, our market position, opportunities, including regarding generative AI and growth strategy, product initiatives, and expectations regarding these initiatives and our go-to-market motions.

Melissa Franke: On the call with me today are <unk>, CEO, chairman and co founder of rubric.

Speaker Change: Aaron <unk> Chief Financial Officer.

Speaker Change: Our earnings press release was issued today after the market closed and may be downloaded from the Investor Relations page at Www Dot IR Dot <unk> dot com.

Speaker Change: Also on this page you'll be able to find a slide deck with financial highlights that along with our earnings release includes a reconciliation of GAAP to non-GAAP financial results.

Speaker Change: During this call we will make forward looking statements, including statements regarding our financial outlook for the third quarter and full fiscal year 2025, our expectations regarding market trends or market position opportunities, including regarding generative AI and growth strategy product initiative and expect.

Speaker Change: Patients regarding these initiatives and our go to market motion.

Speaker Change: These statements are only predictions that are based on what we believe today and actual results may differ materially.

Melissa Franchi: These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC. Rubrik assumes no obligation to update any forward-looking statements we may make on today's call. With that, I'll hand the call over to Bipul.

Speaker Change: These forward looking statements are subject to risks and other factors that could affect our performance and financial results, which we discussed in detail in our filings with the SEC.

Speaker Change: Rubric assumes no obligation to update any forward looking statements we may make on today's call.

Speaker Change: With that I'll hand, the call over to <unk>. Thank.

Thank you Melissa and thank you everyone for joining us today.

Bipul Sinha: Thank you, Melissa, and thank you everyone for joining us today. Now let's get started. We delivered an outstanding Q2. We outperformed across all guided top-line and profitability metrics and are raising our annual guidance. Here are a few numbers that highlight the quarter. Our subscription ARR reached $919 million, growing 40% year-over-year. Our subscription revenue was $191 million, growing 50% year-over-year. Our subscription NRR remained strong above 120%. Finally, our all-important profitability measure, subscription ARR contribution margin, improved by over 1,300 basis points year-over-year. We continue to focus and make great strides in improving our business efficiency and profitability. Now, let me give you the broader context of our business that enables these great results. Rubrik is winning in the cyber resilience market.

Speaker Change: Now, let's get started.

Speaker Change: We delivered an outstanding second quarter, we outperformed across all guided topline and profitability metrics.

Speaker Change: Our annual guidance.

Speaker Change: Few number that highlight the quarter, our subscription at least 919 million growing 40% year over year.

Speaker Change: Our subscription revenue was 191 million growing 50% year over year.

Speaker Change: Our subscription <unk> remained strong at 120%.

Speaker Change: And finally, our all important profitability measure subscription contribution margin improved by over 300 basis points year over year.

Continue to focus and make great strides in improving our business efficiency and profitability now let me give you the broader context of our business that really great results.

Speaker Change: <unk> living in the cyber resilience market.

More and more organizations realize that cyber attacks and breaches are inevitable cyber resiliency is becoming the number one topic in cyber security in my conversations with CIO and feasible that around the world. What is clear is in spite of the spending millions of dollars since I would attack prevention boom. It does not a quirk.

Bipul Sinha: As more and more organizations realize that cyberattacks and breaches are inevitable, cyber resilience is becoming the number one topic in cybersecurity. In my conversations with CIOs and CSOs around the world, what is clear is, in spite of spending millions of dollars in cyberattack prevention tools, it is not a question of if, but when they will experience a successful cyberattack. Every board of directors is asking for a cyber resilience strategy to ensure that their business gets back up and running as fast as possible. The recent global IT outage is a great reminder that resilience is required in an interconnected digital economy that can easily be disrupted by human error or a threat actor. What is driving Rubrik's results is our highly differentiated platform, purpose-built to deliver complete cyber resilience.

Speaker Change: <unk>.

Speaker Change: But when they will experience a successful cyber attack.

Speaker Change: Every board of directors is asking for cyber resilience strategy.

Speaker Change: Ensure that their business gets back up and running as fast as possible. The recent global IPO base is a great reminder, that resilience is required in an interconnected digital economy that can easily be disrupted by Humana auto threat actor.

Speaker Change: Is driving all this result is our highly differentiated platform purpose built to deliver complete cyber resilience.

Speaker Change: Rubric security cloud combined DSP M. Our data security posture management mid cycle recovery in.

Bipul Sinha: Rubrik Security Cloud combines DSPM or Data Security Posture Management with cyber recovery in a Zero Trust data security platform. We are the only vendor in the market to offer integrated DSPM plus cyber recovery, which enables cyber resilience. Our unique AI-powered architecture delivers data risk, data set, and rapid cyber recoveries at scale, enabling our customers to deal with situations before, during, and after cyberattacks. Other products in the market generally make cyber recovery time up to 100 times longer because they can't natively deliver four things needed for fast cyber recovery. Number one, the scope of the attack. Number two, time of infection. Number three, sensitivity of impacted data. And finally, number four, malware hunting and quarantining. These are complex problems to solve. We solve these because our architecture leverages AI and machine learning inside our integrated data set engine.

Speaker Change: Zero Trust data security platform.

Speaker Change: The only vendor in the market to offer integrated DSP amplifier recovery, which enables cyber resilience.

Speaker Change: Our unique AI powered architecture delivers data risk dataset and roughly cyber recoveries at this scale.

Speaker Change: Our customers who deal with situations before during and after the cyber attack.

Speaker Change: Our products in the market generally mid cycle recovery time up to 100 times longer.

Speaker Change: The con natively delivered 14 needed for fast cycle recovery.

Speaker Change: Number one the scope of the attack.

Speaker Change: Number two diagnose infection number three sensitivity of impacted data and finally number four malware hunting and quarantining. These are complex problems to solve we solve these because our architecture leverages AI and machine learning inside our integrated data engine.

Speaker Change: This is how we delivered cyber resilience natively not with bolt ons security tools.

Bipul Sinha: This is how we deliver cyber resilience natively, not with bolt-on security tools or third-party integrations. Our customers choose Rubrik because we can confidently meet their cyber recovery time objectives. We transform cyber recovery from a long, drawn-out existential affair to a simple, short operation, so organizations can continue running their businesses. As a result, we win the vast majority of deals in head-to-head competition. This quarter, a Fortune 500 European automotive supplier selected Rubrik as its de facto cyber resilience platform, replacing their complex legacy data protection solution, which they believed left them vulnerable in case of a cyber event. Another example, an American multinational investment bank and financial services organization replaced a competing new gen vendor solution with Rubrik, given our superior cyber recovery, speed at scale, and our more robust and integrated security capabilities.

Third party integrations.

Speaker Change: Our customers choose rubric, because we can confidently meet these fiber recovery time objective.

Speaker Change: Transform ciber the company from a long drawn out existing shell a fib.

Speaker Change: A simple short operation so organizations can continue running their businesses.

Speaker Change: As a result, we win the vast majority of deals in head to head competition.

Speaker Change: This quarter, a fortune 500 European automotive suppliers selected rubric Agnes de facto cyber resilient platform, replacing their complex legacy data protection solution, which they believed left in vulnerable in case of a cyber event.

Another example, and American multinational investment Bank and financial services organization replaced a competing new Gen vendor solution with rubric, given our superior cyber recovery speed at the scale and our more robust and integrated security capabilities.

Speaker Change: We've been in the marketplace because of our differentiated single management and security controls across enterprise cloud and SaaS workloads, while delivering incredible simplicity performance and scalability.

Bipul Sinha: We've been in the marketplace because of our differentiated single management and security controls across enterprise, cloud, and SaaS workloads, while delivering incredible simplicity, performance, and scalability. This quarter, a US insurance company replaced its existing data backup and recovery vendor with RSC, or Rubrik Security Cloud Enterprise Edition, and SaaS data protection for Microsoft 365. This customer was dissatisfied with their current vendor provider, a competing new gen vendor, as it could not operate at the scale and speed the business required, nor protect their Microsoft 365 environment. During the proof of concept, we demonstrated a recovery time of about 35 seconds, compared to over 5 hours for the incumbent. The customer security team also endorsed Rubrik for our suite of native security features, such as anomaly detection, threat hunting and monitoring, and sensitive data discovery, which their existing vendor lacked.

Speaker Change: This quarter, our U S insurance company replaced its existing data backup and recovery vendors with RSC Rubric security Cloud Enterprise edition and SaaS data protection for <unk> hundred 65.

Speaker Change: This customer was dissatisfied with their current events provider.

Speaker Change: Ah competing museum vendor as it could not operate at the scale and speed the business required not protect the RMC 65 environment.

Speaker Change: During the proof of concept, we demonstrated a recovery time of about 35.

Speaker Change: Compared to over five hours for the incumbent.

Speaker Change: The customer security team also endorsed rubric for our suite of lithium security feature such as anomaly detection threat hunting and monitoring and sensitive data discovery, which via an existing vendor or lack.

Speaker Change: We are also striking a chord with customers operating in the public cloud due to our ability to drive immediate cloud cost savings, while delivering fast cyber recovery times.

Bipul Sinha: We are also striking a chord with customers operating in the public cloud due to our ability to drive immediate cloud cost savings while delivering fast cyber recovery times. A Fortune 500 global leader in prestige beauty expanded their RSC footprint by purchasing cloud-native protection for Azure, extending Rubrik for complete cyber resilience across both data centers and cloud workloads. This customer selected Rubrik for our ability to deliver complete cyber resilience in addition to significant cloud cost savings. We also significantly expanded our cyber resilience footprint at Aria, the innovation company in Italy, across cloud native and unstructured workloads to secure the company's digital transformation. Aria manages sensitive healthcare data of 10 million Lombardy citizens. In addition, we have helped hundreds of customers quickly come back online after the recent global IT disruption. Our customers were grateful for our ability to get their business back up and running quickly.

Speaker Change: 500 global leader in prestige beauty expanded their odyssey footprint by purchasing cloud native protection for <unk> extending rubric.

Speaker Change: Complete cyber resilience across both data center and cloud workloads.

This customer selected rubric for our ability to deliver complete cyber resilience. In addition to significant cloud cost savings.

Speaker Change: We also significantly expanded our cyber resilience footprint at ARIA The innovation company in Italy across cloud native and unstructured workloads to secure the company's digital transformation.

Speaker Change: Manages sensitive healthcare data of $10 million Lombardi citizens.

Speaker Change: In addition, we have helped hundreds of customers quickly come back online after the recent global disruption our.

Speaker Change: Our customers, we are grateful for our ability to get the business back up and running quickly and IP leader at a large hospital network growth.

Bipul Sinha: An IT leader at a large hospital network wrote, quote, "Rubrik was instrumental in helping the hospital continue services during this massive outage. We did not have to cancel any appointments, and we were able to provide all services to patients. It would have been a different story with our previous solution." Unquote. What Rubrik does matters. Now moving on to DSPM. Our view is that cyber resilience not only requires cyber recovery but also data security posture. Cyber recovery is about wartime, while data posture is about before and during cyber-attack preparation. DSPM gives visibility into sensitive data exposure to minimize surface area of attack and the risk of data exfiltration. This quarter, a large European agricultural company expanded Rubrik cyber resilience footprint by adding Rubrik DSPM to reduce the risk of data exposure and exfiltration.

Speaker Change: CT rubric was instrumental in helping the hospitals continue services during this massive outage.

Speaker Change: Did not have to cancel any appointments.

Speaker Change: And we've been able to provide all services two basins.

Speaker Change: It would have been a different story with our previous solution.

Speaker Change: Good.

Speaker Change: What rubric does matters.

Speaker Change: Now moving onto <unk>, our view is that cyber resilience not only require cyber recovery, but also data security posture.

Speaker Change: Cyber recovery is about one time, while data posture is about before and duty cyber attack preparation.

Speaker Change: <unk> gives visibility into sensitive data exposure to minimize surface area of attack and the risk of data exploration.

Speaker Change: This quarter, a large European agricultural company expanded rubric cyber resilience footprint by adding Rubig PSTN.

Speaker Change: To reduce the risk of data exposure and exploration discussed.

Speaker Change: This customer displaced their existing DSP vendors, noting rubric superior ease of use and greater visibility across multi cloud environments.

Bipul Sinha: This customer displaced their existing DSPM vendor, noting Rubrik's superior ease of use and greater visibility across multi-cloud environments. Another example, a US consumer services company added Rubrik DSPM to provide visibility into where its sensitive data resides and reduce its attack surface. Rubrik automated the discovery and classification of the company's sensitive data in only a few hours, which would have otherwise taken months of manual work across 10 full-time employees, according to the customer. In addition, what we are seeing is that generative AI brings urgency to DSPM. Before an organization's proprietary data gets fed into LLM, data sensitivity and user access must be managed. AI trust, safety, and preparation must be established, and DSPM plays a critical role in this. Now let's talk about our partnerships across security and data landscape. These relationships are a key part of our go-to-market motion.

Another example of U S consumer services company added rubric DSP to provide visibility into very sensitive data device and reduces the attack surface.

Speaker Change: The rubric automated the discovery and classification of companies sensitive data in only a few hours, which would have otherwise taken months of manual work.

Speaker Change: 10, full time employee according to the customer.

Speaker Change: In addition, what we are seeing is that generating AI brings urgency to DSP M.

Speaker Change: Before an organization's proprietary data gets fed into LLM data sensitivity and user access must be managed.

Speaker Change: AI Trust safety and preparation must be established and BSP and plays a critical role in this.

Speaker Change: Now, let's talk about our partnership across security and data landscape.

Speaker Change: These relationships are a key part of our go to market motion. We recently made a few notable announcements that deepen and widen our partner relationships.

Bipul Sinha: We recently made a few notable announcements that deepened and widened our partner relationships. Last month, we announced a new partnership and technology integration with Mandiant, part of Google Cloud. This collaboration offers our customers a tightly integrated end-to-end solution spanning cyber threat detection, incident response, and data recovery. Through this partnership, joint customers will be able to ensure that in an event of an attack, the Mandiant and Rubrik team will work together to help the business get back up and running as fast as possible. We continue to strengthen our partnership with cloud providers as well. As an example, this quarter, Rubrik was named Microsoft Healthcare and Life Sciences Partner of the Year for 2024.

Speaker Change: Last month, we announced a new partnership and technology integrations with mundane.

Speaker Change: Part of Google Cloud.

Speaker Change: This collaboration offers our customers a tightly integrated end to end solution.

Speaker Change: Banning cyber threat detection incident response and data recovery.

Speaker Change: Through this partnership joint customers will be able to ensure that in an event of an attack the mandate and rubric team will work together to help the business get back up and running as fast as possible.

Speaker Change: We continue to strengthen our partnership with cloud providers as well as.

As an example, this quarter rubric was named Microsoft's healthcare and life Sciences partner of the year for 2024.

Speaker Change: This award comes on the heels of our wins last year at Microsoft partner of the year in the U S and the UK.

Bipul Sinha: This award comes on the heels of our wins last year as Microsoft Partner of the Year in the US and in the UK. This accolade represents our commitment to protecting all data, including patient data, while enabling seamless operations in healthcare organizations and driving innovative solutions in partnership with Microsoft. Now let's turn to business efficiency and profitability. This quarter, we improved our subscription ARR contribution margin by over 1,300 basis points year-over-year. We are pleased with the margin improvement, and we are relentlessly focused on opportunities to continue these improvements. While we invest in our innovation platform and go-to-market engine to capture the cyber resilience opportunity, let me be very clear, we are equally focused on delivering leverage and profitability in our business model. These are key components to building an enduring business, and we are executing well on that path.

Speaker Change: This accolade represents our commitment to protecting all data, including patient data, while enabling seamless operations in healthcare organization and driving innovative solutions in partnership with Microsoft.

Speaker Change: Now, let's turn to business efficiency and profitability. This quarter, we improved our subscription contribution margin by over 100 basis points year on year.

We are pleased with the margin improvement and we are relentlessly focused on opportunities to continue these improvements.

Speaker Change: While we invest in our innovation platform and go to market engine to capture the cyber resilience opportunity. Let me be very clear, we are equally focused on delivering leverage and profitability in our business model.

Speaker Change: A key component to building, an enduring business and we are executing well on desktop.

Speaker Change: A big Thank you to all of <unk> around the world for their hard work and diligent focus.

Bipul Sinha: A big thank you to all Rubrikans around the world for their hard work and diligent focus. In closing, I will leave you with three takeaways. First, cyber resilience is where the cybersecurity market is going, and we are a leader in cyber resilience. Second, we are winning against the competition because of our highly differentiated and unique architecture. This is why our customers can rapidly recover from cyberattacks at scale. Finally, in addition to growth at scale, we believe our path to profitability is clear, and we continue to make great strides in building a durable business. With that, I'm pleased to pass it over to our Chief Financial Officer, Kiran Choudary.

Speaker Change: In closing I will leave you with three key takeaways first.

Speaker Change: Cyber resilience is where the cyber security market is growing and we are a leader in cyber resilience.

Speaker Change: We are winning against our competition because of our highly differentiated and unique architecture. This is why our customers can rapidly recover from cyber attacks that the scale and finally in addition to growth at scale. We believe our path to profitability is clear and we continue to make great strides.

Speaker Change: And building a durable business with.

Melissa Franke: With that I am pleased to pass it over to our Chief Financial Officer, Karen chartering.

Karen: Thank you ripple good afternoon, everyone and thank you for joining us today.

Kiran Choudary: Thank you, Bipul. Good afternoon, everyone, and thank you for joining us today. As Bipul shared, we've had a very strong Q2 all around. Notwithstanding the broader macro environment, our team continues to execute very well and take advantage of the market opportunity, which is reflected in our results. The quarter was highlighted by continued prioritization of cyber resilience amongst our customers, momentum in large deals, and notable improvement in profitability. This drove results ahead of the high end of our guidance across all of our key operating metrics, including subscription ARR and subscription ARR contribution margin. Today, I will briefly recap our Q2 fiscal 2025 financial results and key operating metrics, and then provide guidance for the Q3 and full year fiscal 2025. All comparisons, unless otherwise noted, are on a year-over-year basis.

Karen: As <unk> said, we've had a very strong second quarter all around.

Not withstanding the broader macro environment, our team continues to execute very well and take advantage of the market opportunity, which is reflected in our results.

Karen: The quarter was highlighted by continued prioritization of cyber resilience amongst our customers.

Karen: <unk> in large deals and notable improvement in profitability.

Karen: This drove results ahead of the high end of our guidance across all of our key operating metrics, including subscription IRR and subscription are our contribution margin.

Today, I will briefly recap our second quarter fiscal 2025 financial results and key operating metrics and then provide guidance for the third quarter and full year fiscal 2025.

Karen: All comparisons unless otherwise noted are on a year over year basis.

Karen: As a reminder, our key top line metric and subscription IRR, which we believe best illustrates our success in acquiring new customers and maintaining and expanding our relationships with existing customers.

Kiran Choudary: As a reminder, our key top-line metric is subscription ARR, which we believe best illustrates our success in acquiring new customers, maintaining, and expanding our relationships with existing customers. Our highly differentiated platform combining DSPM and cyber recovery drives our leadership in the cyber resilience market. This is highlighted by our Q2 performance. Subscription ARR was $919 million in Q2, up 40%. We continue to drive adoption of our Rubrik Security Cloud, which resulted in $678 million of cloud ARR, up 80%. Our subscription ARR growth benefited a couple of percentage points from transitioning our declining maintenance base to RSC. Our strong results were driven by a combination of new logo lands to Rubrik and existing customer expansions. We have a compelling land and expand model that allows for a significant expansion opportunity after our initial contract.

Karen: Our highly differentiated platform, combining the SPM and cyber recovery drives our leadership in the cyber resilience market.

Karen: This is highlighted by our second quarter performance subsea.

Karen: Subscription air was $919 million in the second quarter up 40%.

Karen: We continue to drive adoption of our rubrics equity cloud, which resulted in $678 million of cloud era up 80%.

Our subscription air growth benefited a couple of percentage points from transitioning our declining maintenance base to RSV.

Karen: Our strong results were driven by a combination of new logo, lamster rubric and existing customer expansions.

We have a compelling land and expand model that allows for a significant expansion opportunity after our initial contract.

Karen: The three main vectors that drive expansion with our customers are.

Kiran Choudary: The three main vectors that drive expansion with our customers are 1, the growth of data from applications already secured by Rubrik. 2, additional applications secured on our platform. 3, adoption of additional data security products. As an example, adoption of additional security functionality now contributes over 1/3 of our subscription net retention rate, up from approximately 1/4 in the year ago period. This land and expand motion drove another quarter of greater than 120% average subscription net retention rate. We ended Q2 with 1,969 customers with subscription ARR of $100,000 or more, up 35%. These larger customers now contribute 81% of our subscription ARR, up from 78% in the year ago period, as we become an increasingly strategic partner to our enterprise customers.

Karen: One the growth of data from applications already secured by rubric to additional applications secured on our platform and three adoption of additional data security products.

Karen: As an example adoption of additional security functionality now contributes or one third of our subscription net retention rate up from approximately a quarter in the year ago period.

Karen: This land and expand motion drove another quarter of greater than 120% average subscription net retention rates.

We ended Q2 with 1969 customers with subscription <unk> of $100000 or more up 35%.

Karen: These larger customers now contribute 81% of our subscription <unk> up.

Karen: Up from 78% in the year ago period, as we become an increasingly strategic partner to our enterprise customers.

For our second quarter and fiscal 2025 subscription revenue was $191 million up 50%.

Kiran Choudary: For our Q2 in fiscal 2025, subscription revenue was $191 million, up 50%. Total revenue was $205 million, up 35%. Turning to the geographic mix of revenue from the Americas grew 36% to $147 million. Revenue from outside the Americas grew 34% to $58 million. Before turning to gross margins, expenses, and profitability, I would like to note that I'll be discussing non-GAAP results going forward. We are committed to balancing strong growth at scale with improving profitability. We are focused on delivering strong gross margins, improving our subscription ARR contribution margin, and growing free cash flow. Our non-GAAP gross margin was 77% in the second quarter, in line with the year ago period and up from 70% in fiscal 2023.

Karen: Total revenue was $205 million up 35%.

Karen: Turning to the geographic mix of revenue revenue from the Americas grew 36% $247 million Rev.

Karen: Revenue from outside the Americas grew 34% to $58 million.

Before turning to gross margins expenses and profitability I would like to note that I'll be discussing non-GAAP results going forward.

Karen: We are committed to balancing strong growth at scale with improving profitability. We are focused on delivering strong gross margins improving our subscription there are contribution margin and growing free cash flow.

Karen: Our non-GAAP gross margin was 77% in the second quarter in line with the year ago period and up from 70% in fiscal 2023.

Karen: Gross margin benefited from changing product mix and improved efficiency of our customer support organization.

Kiran Choudary: Gross margin benefited from changing product mix and improved efficiency of our customer support organization. These benefits were offset by higher cloud hosting costs due to the development in and growth of our cloud solutions, which we expect to continue to scale in the future. We anticipate total gross margin to stay at the lower end of our long-term target of 75% to 80%. As a reminder, we look at subscription ARR contribution margin as the key measure of operating leverage supporting our path to profitability. This is calculated as subscription ARR, less non-GAAP cost of subscription revenue, and less non-GAAP operating expense, and then divided by subscription ARR. We find this to be a more relevant metric to demonstrate improvement in operating leverage than operating margins or free cash flow, because it removes the impact from our cloud transformation as well as evolving contract duration and payment terms.

Karen: These benefits were offset by higher cloud hosting costs due to the development and growth of our cloud solutions, which we expect to continue to scale in the future.

Karen: We anticipate total gross margin to stay at the lower end of our long term target of 75% to 80%.

Karen: As a reminder, we look at subscription are our contribution margin as a key measure of operating leverage supporting our path to profitability.

Karen: <unk> calculated as subscription era, less non-GAAP cost, our subscription revenue and less non-GAAP operating expense and then divided by subscription IRR.

Karen: We find this to be a more relevant metric to demonstrate improvement in operating leverage then operating margins our free cash flow because it removes the impact from our cloud transformation as well as evolving contract duration and payment terms.

Karen: We believe the improvement in our subscription contribution margin demonstrates our ability to drive operating leverage and profitability at scale.

Kiran Choudary: We believe the improvement in our subscription ARR contribution margin demonstrates our ability to drive operating leverage and profitability at scale. Subscription ARR contribution margin was negative 8% in the last 12 months compared to negative 22% in the year-ago period, an improvement of over 1,300 basis points. Last 12 months operating expenses in this calculation includes the $23 million in employer payroll taxes we accrued in Q1. Adjusting for this one-time expense, our subscription ARR contribution margin for Q2 would be negative 6%, an improvement of 1,600 basis points from last year. The improvement in subscription contribution margin was driven by our growing scale and continued focus on driving efficiencies across the organization.

Karen: Subscription are our contribution margin was negative 8% in the last 12 months compared to negative 22% in the year ago period, an improvement of over 800 basis points.

Karen: Last 12 months operating expenses in this calculation includes the $23 million in employer payroll taxes, we accrued in Q1.

Karen: Adjusting for this onetime expense our subscription contribution margin for Q2 will be negative 6% an improvement of 6800 basis points from last year.

Karen: The improvement in subscription contribution margin was driven by our growing scale and continued focus on driving efficiencies across the organization.

Karen: We are pleased to see the leverage in our go to market spend in particular with sales and marketing expense as a percent of revenue moving down several hundred basis points year over year as we see the benefits of increasing productivity from our sales force are ramping renewal base organizational efficiencies and improving effectiveness and our cost of acquisition.

Kiran Choudary: We are pleased to see the leverage in our go-to-market spend in particular, with sales and marketing expense as a percentage of revenue moving down 1,200 basis points year-over-year as we see the benefits of increasing productivity from our sales force, a ramping renewal base, organizational efficiencies, and improving effectiveness in our cost of acquisition. However, we believe we are still in early innings of these benefits. In particular, as our renewal base continues to scale and becomes a bigger part of the revenue, we expect to see further improvements in sales and marketing expenses as a percentage of sales. Free cash flow is negative $32 million compared to negative $13 million in Q2 of fiscal 2024.

However, we believe we are still in early innings of these benefits in particular as our renewal base continues to scale and becomes a bigger part of the revenue we expect to see further improvements in sales and marketing expenses as a percentage of sales.

Karen: Free cash flow was negative $32 million compared to negative $13 million in the second quarter of fiscal 2024.

Karen: The decrease in free cash flow relative to last year was primarily due to an increasing mix of annual as well as monthly consumption payments due to the growth in our cloud and SaaS products.

Kiran Choudary: The decrease in free cash flow related to last year was primarily due to an increasing mix of annual as well as monthly consumption payments due to growth in our cloud and SaaS products. Also related to last year, we incurred expenses associated with the acquisition of Laminar, which was completed in August 2023. Despite these headwinds, we improved free cash flow margin year-over-year during the first half of this fiscal year, excluding the impact of one-time employer payroll taxes related to the IPO. Turning to our balance sheet. We ended Q2 in a strong cash position with $607 million in cash equivalents, restricted cash, and marketable securities, and $307 million in debt. Turning now to our outlook.

Also related to the last year, we incurred expenses associated with the acquisition of <unk>, which was completed in August 2023.

Karen: Despite these headwinds we improved free cash flow margin year over year. During the first half of this fiscal year, excluding the impact of onetime employer payroll taxes related to the IPO.

Karen: Turning to our balance sheet, we ended the second quarter in a strong cash position with $607 million in cash cash equivalents restricted cash and marketable securities and $307 million in debt.

Karen: Turning now to our outlook.

Karen: We remain confident about the demand for our differentiated offerings and the powerful secular cyber resilience trends fueling our growth.

Kiran Choudary: We remain confident about the demand for our differentiated offerings and the powerful secular cyber resilience trends fueling our growth. We expect to continue to execute well and deliver strong subscription ARR growth ahead. Revenue and revenue growth can fluctuate due to a number of variables, including the pace at which we add new RSC customers and the pace at which we continue to migrate our existing customers to RSC. In terms of operating investments, we plan to continue to make focused high ROI investments in R&D and go-to-market to drive innovation and momentum in the large and growing market we operate in. We assume contract duration and payment terms continue to contract modestly through the second half with the growth in our cloud and SaaS products, which will be headwinds to free cash flow. Hence, we point to subscription ARR contribution margins to measure operating leverage and profitability.

Karen: We expect to continue to execute well and deliver strong subscription growth ahead.

Karen: Revenue on revenue growth can fluctuate due to the number of variables, including the pace at which we add new RSC customers and the pace at which we continue to migrate our existing customers to RSV.

Karen: In terms of operating investments, we plan to continue to make focused high ROI investments in R&D and go to market to drive innovation and momentum in the large and growing market we operate in.

Karen: We assume contract duration and payment terms continue to contract modestly through the second half with the growth in our cloud and SaaS products, which will be headwinds to free cash flow hedge.

Karen: <unk> three point per subscription are our contribution margins to measure operating leverage and profitability.

Karen: Now turning to guidance for third quarter fiscal 2025.

Kiran Choudary: Now turning to guidance for Q3 fiscal 2025. In Q3, we expect revenue of $216.5 million to $218.5 million, up 31% to 32%. In terms of profitability, we expect non-GAAP subscription ARR contribution margins of -8% to -7%. We expect non-GAAP EPS of -$0.41 to -$0.39 based on approximately 185 million weighted average shares outstanding. For the full year fiscal 2025, we are pleased to raise our guidance across both our top line and profitability metrics. We now expect subscription ARR in the range of $1.026 billion to $1.032 billion, reflecting a year-over-year growth rate of 31% to 32%.

Karen: In Q3, we expect revenue of $216 5 million to $218 5 million up 31% to 32%.

Karen: In terms of profitability, we expect non-GAAP subscription contribution margins of negative eight to negative 7%.

Karen: We expect non-GAAP EPS of negative 41 to negative 39 base.

Karen: Based on approximately 185 million weighted average shares outstanding.

Karen: For the full year fiscal 2025, we are pleased to raise our guidance across both our top line and profitability metrics.

Now expect subscription they are in the range of 1.06 billion to 1.032 billion, reflecting a year over year growth rate of 31% to 32% to help with modeling seasonality for the year. We expect net new subscription there are in the third and fourth quarter to be roughly equal.

Kiran Choudary: To help with modeling seasonality for the year, we expect net new subscription ARR in Q3 and Q4 to be roughly equal. We expect revenue for the full year fiscal 2025 in the range of $830 to 838 million, implying 32% to 33% growth. We plan to continue to invest into this enormous opportunity ahead of us while delivering efficient growth at scale. We expect non-GAAP subscription ARR contribution margins between -7% and -6%, reflecting further margin improvement from Q2. We expect non-GAAP EPS of -$2.12 to -$2.06 based on approximately 155 million weighted average shares outstanding for the full year.

Karen: We expect revenue for the full year fiscal 2025, and the range of $830 million to $838 million, implying 32% to 33% growth.

Karen: We plan to continue to invest into the enormous opportunity ahead of us while delivering efficient growth at scale.

Karen: We expect non-GAAP subscription contribution margins between negative, 7% and negative 6%.

Karen: Afflicting further margin improvement from Q2.

Karen: We expect non-GAAP EPS of negative $2 12 to negative $2 six.

Karen: Based on approximately 155 million weighted average shares outstanding for the full year.

Karen: We expect free cash flow negative 67 million to negative $57 million or negative 44 million to negative $34 million, excluding the $23 million in one time payroll tax associated with our IPO.

Kiran Choudary: We expect free cash flow of negative $67 million to negative $57 million or negative $44 million to negative $34 million, excluding the $23 million in one-time payroll tax associated with our IPO. This implies positive free cash flow in the second half of the fiscal year. In closing, the large and growing market for cyber resilience, our vision for this category, unique strength of our product offerings, and proven go-to-market motion collectively support our subscription ARR growth outlook. We are proud of our performance this past quarter and look forward to continuing the momentum into year-end and beyond. We look forward to seeing many of you on the road in the coming months, including at the upcoming Goldman Sachs Technology Conference. With that, we'd like to open up the call for any questions.

Karen: This implies positive free cash flow in the second half of the fiscal year.

Karen: In closing the large and growing market for cyber resilience our vision for this category unique strength of our product offerings and proven go to market motion collectively support our subscription <unk> growth outlook.

Karen: We are proud of our performance this past quarter and look forward to continuing the momentum into year end and beyond.

Karen: We look forward to seeing many of you on the road in the coming months, including at the upcoming Goldman Sachs Technology Conference.

Karen: With that we'd like to open up the call for any questions.

Karen: Okay.

Speaker Change: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad.

Operator: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. In the interest of time, please limit yourself to one question. We'll move to Saket Kalia with Barclays. Your line is open.

Speaker Change: You may withdraw yourself from the queue at any time by pressing star two.

Speaker Change: In the interest of time, please limit yourself to one question.

Speaker Change: We'll move to <unk> Kalia with Barclays. Your line is now open.

Speaker Change: Okay, Great Hey, guys. Thanks for taking my questions here and nice result.

Saket Kalia: Okay, great. Hey, guys. Thanks for taking my questions here and nice result.

Speaker Change: Thank you.

Speaker Change: We are excited absolutely for sure before maybe maybe for you.

Bipul Sinha: Thank you, Saket. We are excited.

Saket Kalia: Absolutely. For sure. Bipul, maybe for you. Can you just talk a little bit about what customers are saying about cyber resilience in the wake of the CrowdStrike outage? I mean, you know, you mentioned some interesting things in your prepared remarks about how well-protected your customers were. I'm sure it's early to see any financial benefit from CrowdStrike, but I'm just kinda curious how this is changing customer thinking about cyber resilience, if at all.

Speaker Change: Ken can you just talk a little bit about what what customers are saying.

Speaker Change: <unk> cyber resilience in the wake of the crowd strike Alan edge I mean, you mentioned some interesting things in your prepared remarks about how well protected your customers were bud.

Speaker Change: I'm sure. It's early to see any financial benefit from from Carl trick, but I'm just kind of curious how this is changing customer thinking about cyber resilience if at all.

Speaker Change: That's the resilience is top of mind for every organization around the world because what folks have realized is they've invested millions of dollars in cyber prevention to move and they are still not sure whether they can continue operating their business in an event of cyber breach or statistical side would attack every.

Bipul Sinha: Cyber resilience is top of mind for every organization around the world because folks have realized they have invested millions of dollars in cyber prevention tools, and they still are not sure whether they can continue operating their business in an event of cyber breach or successful cyberattack. Every board of director, every CEO is thinking about how they keep their businesses up and running. Our results reflect that. If you look at our subscription and ARR growth, we grew 40% year-over-year to over $900 million. If you look at our total revenues, they grew 35%. The subscription revenue, which is the real indicator of our business, grew 50% year-over-year. These are the trends that are helping our business. In fact, this CrowdStrike event was a little unfortunate, a human error.

Speaker Change: The board of directors every CEO.

<unk> is thinking about how do they keep their businesses up and running and our results reflect that if you look at our subscription growth, we grew 40% year over year to $900 million. If you look at.

Speaker Change: Total revenues grew 35%, but the subscription revenue, which is the real indicator of our business grew 50% year over year.

Speaker Change: And these are the trends that are helping our business.

Speaker Change: In fact, this SCOTUS strike event was little unfortunate human data cloud a strike is a great partner and we jointly helped hundreds of customers recovered.

Bipul Sinha: CrowdStrike is a great partner, and we jointly helped hundreds of customers recover. This particular incident, people saw this as a preview of what could happen if you have a real cyber incident or real cyberattack that can take down global economy, that can have massive global impact on the IT systems and everything else that goes with it. This particular issue has triggered a lot of discussion. A lot of board of directors is asking questions about resilience, and that is one of the many factors that in the coming months and quarters will help bring more focus to this particular market segment. We believe that there will be much more momentum around cyber resilience.

Speaker Change: This particular incidence people saw this as a preview of what could happen. If you have a real cyber incident on real cyber attack that can take down global economy that can have massive massive global impact on the on the it.

Speaker Change: Systems.

Speaker Change: And everything else that goes with it. So so this particular issue has triggered a lot of discussion a lot of board of directors is asking the question about resilience and that is one of the many factors that in coming months and quarters will help bring more focus to this particular market segment and we believe that they will be much more momentum.

Speaker Change: Cyber resilience.

Speaker Change: Super helpful. Thanks, Michael.

Saket Kalia: Super helpful. Thanks, Bipul.

Speaker Change: We'll move next to Fatima <unk> with Citi. Your line is open.

Operator: We'll move next to Fatima Boolani with Citi. Your line is open.

Speaker Change: Yeah.

Speaker Change: Good afternoon, and thank you for taking my question.

Fatima Boolani: Oh, good afternoon. Thank you for taking my question. Bipul, just a question for you about the market landscape and a little bit from a competitive lens, but just kind of broadly speaking. You know, we've seen a lot of activity in the Data Security Posture Management space, both in the private markets from newer companies, but also certainly, you know, customers voting with their wallets in driving better attach rates for you and your products around DSPM. I'm just wondering if you can sort of comment and maybe give us a little bit more quantitative granularity as to how much better those products are tracking with one year in with Laminar.

Fatima: Paul just a question for you about the market landscape and a little bit from a competitive one but just kind of.

Speaker Change: Broadly speaking.

Speaker Change: We've seen a lot of activity in the data security posture management space, both in the private market.

Newer company, but also certainly customer is voting with their wallets in driving better attach rates for you and your products around <unk>. So I'm just wondering if you can just.

Speaker Change: Comment and maybe give us a little bit more quantitative granularity at Q, how much better is products are tracking which.

One year in with Willamette arch and then Relatedly.

Speaker Change: Our large enterprise SaaS company.

Fatima Boolani: Relatedly, you know, a large enterprise SaaS company that you do have a partnership with just kind of you know acquired a backup and recovery company. I was hoping you could kind of set the record straight on, you know, how this doesn't diminish your advantages and your differentiation when there are potentially, you know, call it embedded options in some of the data stores that you do actively protect. Thank you.

Have a partnership with just kind of.

Speaker Change: Acquired backup and recovery company. So I was hoping you could kind of set the record straight on.

Speaker Change: It doesn't diminish your advantages in your differentiation when there are potentially color embedded options in some of the data storage that you do actively protect thank you.

Speaker Change: Thank you for three months.

There are like three questions in that question.

Bipul Sinha: Thank you, Fatima. There are like three questions in that question. Let me first give you my sense of this Salesforce issue, and then I'll come back to competition and DSPM. Look, this Salesforce acquisition of Own actually validates our strategy. We are telling customers, organizations, and governments around the world that SaaS data is important to protect. SaaS is becoming mission-critical. A SaaS vendor buying a SaaS data security, SaaS cyber resilience company validates our whole strategy. But we are focused on all the applications across enterprise, cloud, and SaaS landscape. Salesforce is one of the 20-plus applications that we actually provide cyber resilience on. Businesses want a single policy engine, a single security control across all of their application landscape.

Speaker Change: And then just one.

Speaker Change: Let me first give you my sense of Av.

Speaker Change: This salesforce issue and then I'll come back to competition in the SPM look this salesforce acquisition of own actually validates our strategy.

We are telling customers and organizations and governments around the world that SaaS data is important to protect that.

Speaker Change: <unk> is becoming mission critical and a SaaS vendor Bonnie.

Speaker Change: Our SaaS.

Speaker Change: Data security SaaS cyber resilience company validates.

Speaker Change: Call It strategy, but we are focused on all the applications across enterprise cloud and SaaS landscape Salesforce is one of the 20 plus applications that we actually provide cyber resilience on and businesses want a single policy engine, a single security control across <unk>.

Speaker Change: All of the application landscape otherwise, they're turning 30 40 knots to make sure that the business is running.

Bipul Sinha: Otherwise, they are turning 30, 40 knobs to make sure that the business is running. This actually is very positive for us, and it brings the focus into why cyber resilience is important. Salesforce is our partner. In fact, we jointly created solutions with them. What we are hearing from our customers, I'll give you an example. A large health insurance company, Fortune 500 health insurance company, called us and said they wanna consolidate their data protection cyber resilience landscape on a single platform. It's very positive for us. If you look at our results, coming back to the competition, if you look at our results and our success in the marketplace, we are winning the cyber resiliency market. If you look at our...

Speaker Change: So this actually is very positive for us.

Speaker Change: And it brings the focus into Wi cyber resilience is important than Salesforce is our partner in fact, we jointly created solution with them and what we are hearing from our customers and give you. An example, a large delta influenced company Fortune 500 Health insurance company called US and said they wanted to consolidate.

Yeah.

Speaker Change: The data protection side, what is the new landscape on a single platform.

Speaker Change: So it's very positive for us.

Speaker Change: If you look at our results coming back to the competition. If you look at our reserves and our success in the marketplace. We are winning the cyber resiliency market.

Speaker Change: And if you look at it.

Speaker Change: Again.

Speaker Change: Win rates, we are really vast majority of deals across both our legacy competition as well as new Gen competition.

Bipul Sinha: Again, win rate, we are winning vast majority of deals across both our legacy competition as well as new gen competition. In fact, a very large financial data company we had a more than a $1 million ACV land, which replaced a new gen vendor over their cyber recovery capabilities, and they saw Rubrik as a native cybersecurity platform that delivers cyber resilience. Architecture matters when you are talking about cyber resilience. What Rubrik did, we natively built data risk, data threat, and cyber recovery capability into an integrated platform across all the data landscape. We have, again, a very unique product in a very large market, and that's what is leading to our wins. You talked about DSPM.

Speaker Change: In fact, a very large financial data company, and we had a more than a $1 million ACB land, which replaced a new gen render overdue cyber recovery capabilities and this solid rubric as a native cyber security platform that delivers cyber resilience.

Speaker Change: And architecture matters. When you are talking about cyber resilience and what will be bid to be natively built data risk data and cyber recovery capability into an integrated platform across all the data landscape.

Speaker Change: So we have again, a very unique product and a very large market and that's what is leading to our venues.

Speaker Change: You talked about BSD and <unk>.

Speaker Change: In fact <unk>.

<unk> is an integral piece of the cyber resilience strategy, because data risk and data threat isn't maybe ESPN and which is our expanded view of the ESPN and generative AI is also accelerating the demand for ESPN because before people feed.

Bipul Sinha: In fact, DSPM is an integral piece of the cyber resilience strategy because data risk and data threat is essentially DSPM, which is our expanded view of the DSPM. Generative AI is also accelerating the demand for DSPM because before people feed their data into LLMs or RAG models, they wanna understand what is the risk, who has access to this data? Are we feeding data that falls in the wrong hands? GenAI trust, GenAI security, GenAI responsibility depends upon the data that gets fed into it, and we see interesting traction in that space. Obviously, DSPM is a new product for us, but we now have more than 50 customers using our DSPM product. In fact, a leading cybersecurity company brought cloud cyber resilience with combination of DSPM plus cyber recovery.

Speaker Change: Data into Llm's or lag models, they want to understand what is the risk who has access to this data and were feeding data that falls in the wrong hands.

Speaker Change: Jamie I Trust, Jimmy I security DNS responsibility it depends upon the data that gets fit into it.

And we see interesting traction in that space, obviously, <unk> is a new product for us, which we now have more than 50 customers using our DSP product in fact, a leading cyber security company.

Speaker Change: Rod.

Speaker Change: Cyber resilience this combination of DSP.

Speaker Change: Yes cyber recovery.

Speaker Change: And we are seeing this in a number of cases around the world.

Bipul Sinha: We are seeing this in a number of cases around the world.

Speaker Change: Thank you for the detail I appreciate it.

John DiFucci: Thank you for the detail. I appreciate it.

Fatima Boolani: Thank you for the detail. I appreciate it.

Speaker Change: Okay.

Well move next to Andrew Nowinski with Wells Fargo. Your line is open.

Operator: We'll move next to Andrew Nowinski with Wells Fargo. Your line is open.

Great. Thank you congrats on another great quarter poster IPO.

Andrew Nowinski: Great. Thank you. Congrats on another great quarter post your IPO. I guess I wanna ask you a question about, you know, the pending Veritas acquisition, or merger, I should say. You know, once the deal is closed and they're merged with Cohesity, it sounds like they'll be able to migrate most of those customers, those Veritas customers, over to the Cohesity platform using an automated tool. Won't it be harder to convince those former Veritas customers to switch to Rubrik since they'll be on a much better platform than they were previously on?

Speaker Change: Hum.

Andrew Nowinski: I guess I wanted to ask a question about the.

Speaker Change: The pending.

Speaker Change: Veritas acquisition. So we're a merger I should say once the deal is closed and they're merged with <unk>.

Speaker Change: It sounds like you'll be able to migrate most of those customers those veritas customers over to the cohesive platform using an automated tool. So one of the harder to convince those.

Former veritas customers to switch to Rick since they'll be in a much better platform than they were previously on.

Speaker Change: Thank you Andrew in fact.

Bipul Sinha: Thank you, Andrew. In fact, when we first heard the Cohesity-Veritas merger, we actually had that discussion within our company. What we concluded was that Veritas product is a single product in the customer environment. Unlike Cisco or Microsoft or one of those large companies with a lot of products in the customer environment, where they have, in some ways, relationship and durability with the account. When you have a single product, and if you're trying to replace that single product, the customer will naturally ask what else exists out there in the marketplace. Cyber resilience is the number one concern of every business. If they are looking around in the marketplace, they will definitely give Rubrik a chance.

Speaker Change: When we first heard the acquisitive Veritas merger.

Speaker Change: And then we actually had that discussion within our company and what we concluded was that.

<unk> product is a single product in the in the customer environment, Unlike Cisco or Microsoft or one of those large companies with a lot of products in the customer environment.

Speaker Change: They have in some ways of relationship and and durability with the account when you have a single product and if you are trying to replace that single product the customer will naturally ask what else exist out there in the marketplace.

Speaker Change: And cyber resilience is the number one concern of every business and if theyre looking around in the marketplace. They will definitely give rubig a chance.

Speaker Change: And if you look at our win rate against both legacy and new Gen competition, we are winning fast vast majority of deals. So in fact.

Bipul Sinha: If you look at our win rate against both legacy and new gen competition, we are winning vast majority of deals. In fact, Cohesity prodding Veritas customers for change is actually going to set a lot more customers loose, in terms of them looking around to find what else is out there, and that we believe is a tremendous opportunity. Moreover, whenever you have two companies merging, there is a lot of rationalization that needs to happen, both in terms of products, people, and roadmap. If I'm a Veritas customer today, I'm thinking all my products, like promised roadmap, will they be delivered? It's an open question. It's a good question, and that creates opportunity for us.

Speaker Change: KCP broadening.

As a customer for change is actually going to set a lot more customers lose.

Speaker Change: In terms of them looking around to find what else is out there and that we believe is a tremendous opportunity moodle.

Speaker Change: Whenever you have two companies merging there's a lot of rationalization that needs to happen both in terms of products people and roadmap.

Speaker Change: If and when it does customer today I'm thinking all my Prada.

Speaker Change: Thomas roadmap will be delivered.

Speaker Change: It's an open question, it's a good question and that creates opportunity for us.

Speaker Change: Thank you so much.

Andrew Nowinski: Thank you so much, Bipul.

Speaker Change: Yes.

Speaker Change: Well move next to John <unk> with Guggenheim Securities. Your line is open.

Operator: We'll move next to John DiFucci with Guggenheim Securities. Your line is open.

Speaker Change: Great. Thank you and good afternoon, everyone. This is Howard MA on for John.

Howard Ma: Great. Thank you, and good afternoon, everyone. This is Howard Ma on for John DiFucci. On Rubrik's Security Cloud, it's either for Bipul or Kiran. You called out the increased contribution to NRR from adoption of additional security products. You know, that's obviously positive, but can you comment more on the two other pieces, so workload expansion or upsells and additional apps secured by Rubrik? This is kind of a two-parter. The first part is, are you seeing any signs of slowdown in these two other drivers, or do you still see a lot of white space in, you know, in both cloud data protection and cyber resilience? The second part is, can you remind us of your product roadmap related to the first?

Howard Ma: On rubric security cloud.

Howard Ma: Either for people at work Karen you called out the increased contribution to <unk> from the adoption of additional security products. That's obviously positive but could you comment more on the two other pieces, so workload expansion or upsell and additional apps secured by real breaking this is kind of a two parter, but the first part is.

Howard Ma: Are you seeing any signs of slowdown in these two other drivers or do you still see a lot of white space.

Howard Ma: In both cloud data protection and cyber resilience.

Howard Ma: And the second part is can you remind us of your product roadmap related to the FERC. If there is a lot of white space out there with traditional applications are you adding.

Howard Ma: You know, if there is a lot of white space out there, which additional applications are you adding, you know, in the near term? Thank you.

Howard Ma: And then near term thank you.

Speaker Change: Thank you Howard.

Speaker Change: If you look at the <unk>.

Bipul Sinha: Thank you, Howard. If you look at the Rubrik's offspring, we have a very comprehensive data security platform. What we are doing is we are going to customers and saying that, "Hey, you have a legacy backup and recovery architecture. How do we transform that architecture into a data security platform to deliver cyber resilience?" In our data security platform, we have a comprehensive suite of data security products. That we attach as part of our Enterprise Edition as well as Business Edition. If you look at our product expansion, 1/3 of our NRR is contributed by data security product that we attach on our platform. We are not seeing any slowdown in terms of the customer demand or attachment of our data security product.

Speaker Change: The rubik's offering.

Speaker Change: We have a very comprehensive data security platform and what we are doing is we agreed to customers and saying that hey, you have a legacy backup and recovery architecture, how do we transform that architecture into a data security platform to deliver cyber resilience and in our data security platform, we have a comprehensive suite of.

Speaker Change: Data security products that we attach as part of our.

Speaker Change: Enterprise edition as well as business initiatives and if you look at our product expansion a third of our energy is.

Speaker Change: Muted, but data security product that we attach on our platform.

Speaker Change: So we are not seeing any slowdown in terms of the customer demand for the attachment of our data security products in fact more than 50% of our new customers again this quarter came in to adopt enterprise edition at the first purchase.

Bipul Sinha: In fact, more than 50% of our new customers, again, this quarter, came in to adopt Enterprise Edition at the first purchase. So we are continuing to see strong demand and strong expansion on our platform. Obviously, you saw us announce Salesforce as the cyber resiliency target for us as the next SaaS. As these SaaS platforms becoming more and more critical in the enterprise, we will continue to expand our platform to cover more and more SaaS apps. Our strategy is, which by the way, our customers really love, the consolidation of cyber resilience across all apps, all the apps that are in their data center, all the apps that are across AWS, Azure, GCP as native cloud apps, as well as all the apps in their SaaS landscape.

Speaker Change: So we're continuing to see strong demand strong expansion.

Speaker Change: On our platform obviously.

Speaker Change: You saw us announce salesforce dot com as the as the cyber resiliency target for us as the next SaaS and <unk> SaaS platforms, becoming more and more critical in the enterprise, we will continue to expand.

Platform to cover more and more certain apps and our strategy is which by the way our customers really love is the consolidation of cyber resilience across all apps all the apps that are in the data center all the apps that are across AWS Azure GCB as native cloud apps as well as <unk>.

Speaker Change: All of the apps in the SaaS landscape.

Speaker Change: And a single policy engine, a single security control across all apps. So that when chips are down when you are under attack and you have to go recover you'll not only 2013 months as I said before.

Bipul Sinha: A single policy engine, a single security control across all apps so that when chips are down, when you are under attack and you have to go recover, you are not turning 20, 30 knobs, as I said before. That's the Rubrik's native advantage of a unique platform in a large and growing market with cyber resilience emerging to be the number one category within cybersecurity.

Speaker Change: That's where that's the rubrics native advantage of our unique platform and our large and growing market with cyber resilience emerging to be the number one category within on our cyber security.

Okay.

Speaker Change: Next to Gregg Moskowitz with Mizuho Your line is open.

Operator: We'll move next to Greg Moskowitz with Mizuho. Your line is open.

Gregg Moskowitz: Okay. Thank you very much and good afternoon, guys I had a follow up the sockets question just regarding.

Greg Moskowitz: Okay, thank you very much, and good afternoon, guys. I had a follow-up to Saket's question just regarding the CrowdStrike IT outage. Bipul, from what you can ascertain, I was just wondering if the outage has led to an increase in pipeline build or velocity for Rubrik, or is that simply too difficult to gauge? Secondly, curious about how the usage has been looking for Ruby AI, if you could give us an update there as well. Thank you.

Gregg Moskowitz: The strike it outage before from what you can ascertain.

Gregg Moskowitz: Just wondering if the outage has led to an increase in pipeline build or velocity for rubric or is that simply too difficult to gauge and then secondly, a cure.

Gregg Moskowitz: Curious about how the usage has been looking for Ruby AI, if you could give us an update there as well thank you.

Speaker Change: Thank you Greg.

In fact, our window.

Bipul Sinha: Thank you, Greg. In fact, when that global IT meltdown happened, we were also discussing the ramification of such an outage. In fact, CrowdStrike and us together, as I was saying before, recovered hundreds of customers, and it showed the power of Rubrik platform, that we could isolate a single file and recover at scale a large number of systems. Obviously, it's too early to gauge the impact of this particular outage, but anecdotally, we are hearing a lot about board of directors calling their security and IT leaders saying that, What's the plan to bounce back upon such an incident? And if this is a preview to what could happen in a cyberattack, how do we keep our business ongoing operations? They have all spent a lot of money in preventive solutions, but you can't prevent the unpreventable.

Speaker Change: That global Meltdown happened, we were also discussing that amplification of such an outsized impact.

Speaker Change: Quota strike and US together as I was saying before recovered hundreds of customers and ensure the power of Bluetooth platform that we could isolate a single file and recovered at scale.

Speaker Change: A large number of systems.

Speaker Change: Obviously, it's too early to gauge the impact of of this particular outage, but anecdotally we are hearing a lot about board of directors, calling.

Speaker Change: Security and it leaders, saying that what's the plan to bounce back upon such an incident and if this is a preview to what could happen in the cyber attack how do we keep our business ongoing operations. They have only spent a lot of money in preventive solutions.

Speaker Change: With regard to prevent preventable.

Speaker Change: And what we saw was a small human error can really take a global digital economy downs in such a rapid pace and with such significant scale.

Bipul Sinha: What we saw was a small human error can really take a global digital economy down in such rapid pace and with such significant scale. We believe that it will be one of the many factors that will only propel this market going forward. Your second question is around Ruby. Just as to set this up, Ruby is the Rubrik's generative AI agent, and we are focused on increasing productivity of IT and security operations team because more and more IT teams are being asked to do cybersecurity work such as threat hunting, threat quarantining, IOC management, which they are not equipped with or they have not been trained on. We have created Ruby as our multi-year strategy to really bring productivity to cyber resilience work.

Speaker Change: So we believe that it can be one of the many factors that will only propelled this market going forward.

Speaker Change: The second question is owned Ruby.

Speaker Change: Just as to set this up.

Speaker Change: Rubrics generative AI agent.

Speaker Change: And we are focused on increasing productivity of IP and security operations team because more and more IP teams are being asked to do cyber security work such as threat hunting.

Speaker Change: Quarantining, IOC management, which theyre not equipped with so they have not been trained on <unk>.

And so we have created Ruby as our multi year strategy to really bring productivity to cyber resilience work.

Speaker Change: And what we have done is we have created this is a standard offering as part of our enterprise edition because all the capabilities that will be supportive supported on enterprise edition and our goal is to really extend that will be a skills going forward and we will continue to evolve the rubric lattes.

Bipul Sinha: What we have done is we have created this as our standard offering as part of our Enterprise Edition because all the capabilities that Ruby support is supported on Enterprise Edition. Our goal is to really extend the Ruby skills going forward, and it will continue to evolve the Rubrik platform as we, as the advancement in generative AI, agentic system and everything else happens around it. Our ultimate goal is that if you can use Facebook, you should be able to do complete cyber resilience. Ruby is. Think of Ruby as somebody that we are shipping, a person that we are shipping with our product, quote-unquote, where that person is handholding our customers to a cyber resilience outcome. You'll see us do a lot more in terms of really building this platform and continue to add skill sets to it.

Speaker Change: Form as the as the advanced metering generative AI.

Speaker Change: <unk> system and everything else happens around it.

Speaker Change: Our ultimate goal is that if you can use Facebook used to be able to do complete cyber resilience.

Speaker Change: And so it will be single booby it somebody that youre shipping a person that we are shipping with our product quote unquote, where that person is hand, holding our customers to our cyber resilience.

Speaker Change: And you'll see us do a lot more in terms of really building. This.

This platform and continue to add the skill sets to it but it's not in a separately monetize able event for us.

Bipul Sinha: It's not a separately monetizable event for us because we believe that all the productivity gain amounts to our customers.

Speaker Change: We believe that all the productivity gain amongst our customers.

Speaker Change: Terrific. Thank you.

Greg Moskowitz: Terrific. Thank you.

Speaker Change: We'll go next to Joel Fishbein with <unk> Securities. Your line is now open.

Operator: We'll move next to Joel Fishbein with Truist Securities. Your line is open.

Joel Fishbein: Thanks for taking the question and congrats on the strong execution Karen one for you. Obviously you made some significant progress on the <unk>.

Joel Fishbein: Thanks for taking the question and, congrats on the strong execution. Kiran, one for you. Obviously you made some significant progress on the, on the margin side of the business. I just would love to drill down a little bit deeper maybe on where will we see leverage come from, you know, moving forward. I know you talked about sales and marketing, but if you could give us a little bit more granularity, that would be really helpful. Thank you.

Joel Fishbein: Margin target business I, just would love to drill down a little bit deeper maybe on where will we see leverage come from moving forward I know you've talked about sales and marketing, but if you could give us a little bit more granularity that would be really helpful. Thank you.

Speaker Change: Hi, Joe Thanks for your question. So yes, we have made significant progress on margin and as you know the key margin metrics for us are subscription IR contribution margin because we run the business on air are given our cloud transformation and improve that metric quarter over quarter by 240 basis points on a few.

Bipul Sinha: Hi, Joel. Thanks for your question. Yes, we have made a significant progress on margin. As you know, the key margin metric for us is subscription ARR contribution margin because we run the business on ARR given our cloud transformation. You know, we have improved that metric quarter-over-quarter by 240 basis points. If you remove the impact of the payroll tax rate of the IPO, that is a 160 basis point improvement year-over-year. The key areas of driving efficiency here are the big investment areas, which is primarily sales and marketing, and R&D. We've been at it working for some time and continue to make progress. I'll just highlight a few areas. In sales efficiency, it's primarily coming from more productivity.

Kiran Choudary: Hi, Joel. Thanks for your question. Yes, we have made a significant progress on margin. As you know, the key margin metric for us is subscription ARR contribution margin because we run the business on ARR given our cloud transformation. You know, we have improved that metric quarter-over-quarter by 240 basis points. If you remove the impact of the payroll tax rate of the IPO, that is a 160 basis point improvement year-over-year. The key areas of driving efficiency here are the big investment areas, which is primarily sales and marketing, and R&D. We've been at it working for some time and continue to make progress. I'll just highlight a few areas. In sales efficiency, it's primarily coming from more productivity.

Speaker Change: You remove the impact of the payroll tax rate of the IPO. There was a 600 basis point improvement year over year.

Speaker Change: And the key areas of driving efficiency here are the big investment areas, which is primarily sales and marketing and R&D and we've been at work for some time and continue to make progress I'll just highlight a few areas and sales efficiency, it's primarily coming from more productivity.

Speaker Change: We are generating multiple covering multiple products, which allow our sales force.

Bipul Sinha: We are delivering multiple products which allow our sales force to land and expand. With greater productivity, we are doubling down on enablement and leadership development and also getting more return on investments in some of our growing markets like international and federal. We are also continuing to work hard on lowering the cost of acquisition in terms of marketing efficiency, targeting, account focus, and more partner leverage as well. The last area I would say is a natural leverage for us with scale is renewals. It's still a minority in our business, but as we grow and the renewals base grows, we get natural leverage in our model.

Kiran Choudary: We are delivering multiple products which allow our sales force to land and expand. With greater productivity, we are doubling down on enablement and leadership development and also getting more return on investments in some of our growing markets like international and federal. We are also continuing to work hard on lowering the cost of acquisition in terms of marketing efficiency, targeting, account focus, and more partner leverage as well. The last area I would say is a natural leverage for us with scale is renewals. It's still a minority in our business, but as we grow and the renewals base grows, we get natural leverage in our model.

Speaker Change: We're going to expand.

Speaker Change: With greater productivity, we are doubling down on enablement and leadership development.

Speaker Change: So getting more return on our investments in some of our growing markets like international and federal.

Speaker Change: We're also continuing to work hard on lowering the cost of acquisition in terms of marketing efficiency.

Speaker Change: Targeting account focus and more partner leverage as well.

Speaker Change: And the last thing I would say is a natural leverage for us with scale as renewables, it's still a minority of our business, but as we grow in our renewal base grows we get natural leverage in our model.

Speaker Change: And then on R&D, the second largest area for investment.

Bipul Sinha: In R&D, the second-largest area of investment, we've continued to innovate really well, using our global R&D centers, which gives us the ability to innovate with data leverage or cost leverage as well. Those are the two areas I would say we are very focused in driving efficiency in the business.

Kiran Choudary: In R&D, the second-largest area of investment, we've continued to innovate really well, using our global R&D centers, which gives us the ability to innovate with data leverage or cost leverage as well. Those are the two areas I would say we are very focused in driving efficiency in the business.

Speaker Change: We continue to integrate really well are using our global.

Speaker Change: R&D centers, which gives us the ability to innovate with the elaborate a cost leverage as well.

Speaker Change: So those are the two areas I would say we are very focused on driving efficiency in the business.

Speaker Change: Thank you for the color.

Joel Fishbein: Thank you for the color.

Speaker Change: We'll move next to Eric Heath with Keybanc capital markets. Your line is open.

Operator: We'll move next to Eric Heath with KeyBanc Capital Markets. Your line is open.

Speaker Change: Yes.

Speaker Change: Great. Thanks for taking the question on really strong set of results here, sorry, I just wanted to come back to the conversation on data security DSP.

Eric Heath: Great. Thanks for taking the question and really strong set of results here. I just wanted to come back to the conversation on data security and DSPM. Bipul, maybe if you could just share kind of how the evolution is going in terms of your engagement with customers. Is this driving more conversations and engagement with the CISO or the chief information security officer in that organization? And then maybe just given some of the early proof points with the adoption of 50 customers, what kind of uplift you're seeing with the adoption of the enterprise proactive tier? Thanks.

Speaker Change: Well, maybe if you could just share kind of how the evolution is going in terms of your engagement with customers is this driving more conversations and engage with the CSO.

Speaker Change: <unk>.

Speaker Change: <unk> information Security Officer.

Speaker Change: And that organization and then maybe just given some of the early proof points with the adoption of 50 customers what kind of uplift you are seeing with the adoption of the enterprise proactive here. Thanks.

Speaker Change: Thank you so much for your for your question.

Bipul Sinha: Thank you so much for your question. Let me first talk about what I'm hearing from the customers. A large multinational fast food company, which is an existing customer, CISO, who is looking at DSPM, really said Rubrik is the secret sauce because they are confident that he can go to the board and say, "Company is able to withstand a cyber attack." The reason they are looking at DSPM is because they wanna understand data security risk and data security threat. Risk is what is the sensitivity of the data and who has access to the data, and threat is who is doing what to the data. Unless they understand the data and being able to again deliver cyber recovery, they will not have peace of mind.

Speaker Change: Let me first talk about what are we getting from from the customers.

Speaker Change: So a large multinational.

Speaker Change: Fast food company, which is an existing customer.

Speaker Change: So who is looking at ESPN really said rubric is the secret sauce, because they are confident that he can go to the board and say come.

Company is able to withstand a cyber attack.

Speaker Change: And the reason we're looking at ESPN is because they want to understand data security risk and data security risks.

Speaker Change: Risk is what is the sensitivity of the data and who has access to the data and threat is who is doing what to the detail unless they understand the data and being able to.

Speaker Change: Again delivered favorable recovery, they will not have peace of mind.

Speaker Change: Another example is a fortune 50 oil and gas company.

Bipul Sinha: Another example is the Fortune 50 oil and gas company. In my CISO conversations, they actually had major focus on cyber resilience, like really overhauling cyber resilience by replacing legacy vendors. Another Fortune 500 healthcare company CIO conversation was all about strategic partnership to deliver cyber resilience because that was a board mandate. See, in all of these cases, the data security, DSPM, and cyber recovery is emerging to be a very, very strong use case. That's why we are focused on cyber recovery plus DSPM on our platform to deliver complete cyber resilience. Obviously, it is very early in refining our packaging and how we package and how we bring all of these key capabilities together. We are seeing a strength in attaching DSPM with our Enterprise Edition.

Speaker Change: It might be useful conversation conversations they actually had immediate focus on cyber resilience.

Speaker Change: Really overhauling cyber resilience by legacy by replacing legacy vendors.

Another fortune 500 healthcare company CIO conversation was all about the strategic partnership to deliver cyber resilience because that was a board mandate.

Speaker Change: Sales in all of these cases.

Speaker Change: The data security DSP M and Siloed.

Speaker Change: Everybody is emerging to be a very very strong use case and thats why we are focused on cyber recovery plus the ESPN on our platform to deliver complete cyber resilience. Obviously it is very early in refining our packaging is how how we package and how we bring all of these capabilities together we are.

<unk> seen this trend in attaching DSP M with our enterprise edition.

Speaker Change: And as I mentioned before over 50 customers now with DSP M.

Bipul Sinha: As I mentioned before, over 50 customers now with DSPM. We are seeing interesting traction. Obviously, how we package and how we put these things together will evolve, but we are seeing a strong traction in DSPM plus Enterprise Edition.

Speaker Change: So we are seeing interesting traction obviously, how we package and hopefully put these things together will evolve, but youre seeing strong traction in ESPN plus enterprise edition.

Speaker Change: Thanks, Paul.

Speaker Change: Yes.

Eric Heath: Thanks, Bipul.

Speaker Change: Well move next to lead.

Speaker Change: Lee with Cantor Fitzgerald Your line is open.

Operator: We'll move next to Yifu Li with Cantor Fitzgerald. Your line is open.

Speaker Change: Congrats on the strong back to back to fiscal <unk>.

Yifu Li: Congrats on the strong back-to-back fiscal Q2. Thank you for taking my question. For Bipul or Kiran, my question revolves around the Mandiant threat intelligence collaboration. It does make total sense for us that you're joining first-class Mandiant incident response with Rubrik's ransomware response team together. The question around, you know, my question revolves around the penetration in the low cloud sector. How do you think about that, Bipul and Kiran? We understand you're very strong with the Microsoft partnership, Microsoft Azure Cloud, and any color on the AWS as well, later on in a future roadmap. That's it for me.

Yi Fu Lee: Congrats on the strong back-to-back fiscal Q2. Thank you for taking my question. For Bipul or Kiran, my question revolves around the Mandiant threat intelligence collaboration. It does make total sense for us that you're joining first-class Mandiant incident response with Rubrik's ransomware response team together. The question around, you know, my question revolves around the penetration in the low cloud sector. How do you think about that, Bipul and Kiran? We understand you're very strong with the Microsoft partnership, Microsoft Azure Cloud, and any color on the AWS as well, later on in a future roadmap. That's it for me.

Speaker Change: Thank you for taking my question for Paul.

Speaker Change: My question revolves around the mandaean threat intelligence collaboration it does make total sense for us that Youre, joining first class mandate incident response with Rubik's rational response teams together so the question about.

Speaker Change: My question has to do around the penetration low power sector.

How do you think about that that we understand very sure with the Microsoft partnership Microsoft Azure cloud.

Speaker Change: And any color on the AWS as well.

Speaker Change: Later on.

Speaker Change: That's it for me.

Speaker Change: Look we love all our partners were not partial to one and we want to build.

Bipul Sinha: Look, we love all our partners. We are not partial to one, and we wanna build a multi-partnership strategy where we create win-win partnerships across Microsoft, Google, AWS, and all other vendors. Because we are a Switzerland solution, we deliver cyber resiliency across numerous platforms, whether it's on-premises data center platforms or cloud platforms or SaaS platforms. Our Mandiant partnership is a significant step in that direction. If you think about Rubrik's data security intelligence, the data security capabilities, and Mandiant's cyber defense solution, two of us has come together to give our customers complete threat intelligence, comprehensive incident response, and clean room recovery on Google Cloud. If you think about Rubrik's customers overlap with Mandiant, our customers can now integrate the threat feed that they are getting from Mandiant and use it on Rubrik.

Speaker Change: Our multiyear partnership with strategy, where we'd create win win partnership.

Speaker Change: <unk>, Microsoft Google AWS and all other vendors because we are in Switzerland solution, we deliver cyber resiliency across.

Speaker Change: Numerous platforms, whether it is on premises data center platforms with cloud platforms for SaaS platform and our <unk> partnership is a is a significant step in that direction. If you think about the rubrics data security intelligence data security capabilities and <unk>.

Speaker Change: Cyber defense solution to offer has come together to give our customers complete threat intelligence.

Speaker Change: Comprehensive incident response, and clean room recovery on Google Cloud.

Speaker Change: If you think about the rubrics customers overlap with Monday, and our customers can now integrate the tip fee that they're getting from <unk> and use it on rubric now think about it.

Speaker Change: Calculating as water what is the tech exist back in the data by taking the feed as we are running the operations.

Bipul Sinha: Now think about it, we're pre-calculating as what is the threat that exists in the data by taking the feed as we are running the operations. That's the power of these relationships. Together, we are delivering unparalleled level of cyber resilience. Look, I will continue to do more of these partnerships. Trust starts with product at the customer. If we are creating value for our customers, if it is a true product engineering integration and one plus one is equals to five, it completely makes sense to us to create more partnerships, deliver more value to the customer. Ultimately, we want to be a generational company, and we wanna create value in our ecosystem.

Speaker Change: And that's the power of these relationships together, we are delivering unparallel level of cyber resilience.

Speaker Change: And look I will continue to do more of these partnership group. It starts with product at the customer if you are creating value for our customers. If it is a true product engineering integration and one plus one because it goes to five it completely makes sense to us to create more partnership deliver more.

Speaker Change: Due to the customer ultimately, we want to be a generation company and we want to create value in our ecosystem.

Speaker Change: Thanks for that Paul Congrats again.

Kiran Choudary: Thanks for that, Bipul. Congrats again.

Yi Fu Lee: Thanks for that, Bipul. Congrats again.

Speaker Change: We'll move next to Todd Copeland with CIBC.

Operator: We'll move next to Todd Coupland with CIBC. Your line is open.

Speaker Change: Line is open.

Yes, good evening.

Todd Copeland: <unk> added two part question.

Todd Coupland: Yeah, good evening. I had a two-part question. One, I just will follow up on the Veritas Cohesity question. You talked about how it's opening up a window. Has that started yet? And when would you expect it to ramp up, over what time period? And then I had a quick follow-up.

Todd Copeland: One I just to follow up on the Veritas Cohesively question, you talked about how it's opening up a window has that started yet.

When would you expect it to to ramp up over what time period, and then I had a quick follow up.

Speaker Change: We are definitely seeing customer, calling us more and being worried about cyber resilience have the questions around.

Bipul Sinha: We are definitely seeing customers calling us more and being worried about cyber resilience, have the questions around the uncertainty of the Veritas Cohesity coming together. There's a lot of noise in the marketplace, and they're worried about their roadmap of their stability of the roadmap and the features they need. This is definitely we are starting to hear more and more about it, and we are definitely responding to those calls. Obviously, we have a superior product and a unique platform that combines DSPM and cyber recovery that includes before cyber attack, during cyber attack, and post cyber attack capabilities to be really prepared for assumed breach posture that everybody is thinking about. That's what we are delivering in the marketplace, and we believe that will open up more opportunities for us.

Speaker Change: The uncertainty of the of the Veritas scarcity.

Speaker Change: Coming together there is lot of noise in the marketplace.

And they're worried about this.

Speaker Change: The roadmap of the stability of the roadmap and the features that need. So this is definitely we are starting to hear more and more about it and we are definitely.

Wanting to those those calls obviously, we have a superior product and a unique platform that combines <unk> and fiber recovery that includes before cyber attack during cyber attack and post cyber attack capabilities to be really prepared for assumed breached posture.

Speaker Change: Everybody is thinking about.

Speaker Change: And Thats, what we are delivering in the marketplace and we believe that will open up more opportunities for us.

Speaker Change: Great. Thank you and then the follow up is we haven't really talked about the economy and impact on enterprise spending I understand cyber is a priority and crowd strikes incidents certainly raises that point is an obvious.

Todd Coupland: Great. Thank you. The follow-up is, we haven't really talked about the economy and impact on enterprise spending. I understand cyber is a priority, and CrowdStrike's incident certainly raises that point as an obvious conclusion. But what impact, if any, is the current economy having on, you know, pipeline size of deals, time to close, et cetera? Just give us an update on that. Thanks a lot.

Speaker Change: Conclusion, but what impact if any is.

The current economy, having on.

Pipeline size size of deals time to close et cetera, just give us an update on that thanks a lot.

Speaker Change: So I am a fiscally conservative guy.

Bipul Sinha: I'm a fiscally conservative guy, and I always think about what am I missing. I always look around and see are there leading indicator that we can read the tea leaves on and try to adjust. We are not seeing any change, particularly for our product and our demand. Our market momentum remain unchanged. We are not seeing any change in macro in our segment. Cyber resilience is top of mind for our customers, for all the board members around the world. Our biggest worry is that what are the conversations that we are not part of because those are the only deals we are losing because we are winning vast majority of deals. We are excited about what's ahead of us. We delivered an outstanding first half.

Speaker Change: And I always think about what am I missing.

I always look around and see is there are the leading indicator that we can read the tea leaves on and try to adjust.

Speaker Change: But we are not seeing any change but.

Speaker Change: Clearly for our product and our demand.

Speaker Change: Market momentum remain unchanged.

Speaker Change: We are not seeing any change in macro in our segment.

And.

Speaker Change: Cyber resilience is top of mind for us for our customers for all the board members around the world. Our biggest worry is that what are the conversations that we are not part of because those are the only deal we are losing because we're getting vast vast majority of the year.

Speaker Change: So we're excited about what's ahead of US we delivered an outstanding first half.

Speaker Change: Confident about.

Bipul Sinha: We are confident about the rest of this year, and we are looking forward to finishing strong.

Speaker Change: The rest of this year and we're looking forward to finishing strong.

Speaker Change: Very much.

Todd Coupland: Thank you very much.

Speaker Change: Okay.

Speaker Change: We'll move next to Brad Zelnick with Deutsche Bank. Your line is now open.

Operator: We'll move next to Brad Zelnick with Deutsche Bank. Your line is open.

Great. Thanks, so much for taking my question and congrats on a great first half and raising our full year guidance. Kieran I was just wondering if you can comment on the confidence level that you have and the visibility.

Brad Zelnick: Great. Thanks so much for taking my question, and congrats on a great first half and raising the full year guidance. Kiran, I was just wondering if you can comment on the confidence level that you have and the visibility to the guidance here that we have implied for the back half. Maybe if you can frame it in terms of just the methodology that you've been using thus far. Anything that we should know. I know the prior question asked about macro, but any factors and key assumptions that we should be thinking about or changes would be helpful. Thank you.

Speaker Change: To the guidance here that we have implied for the back half and maybe if you can frame. It in terms of just the methodology that you've been using thus far.

Speaker Change: That we should know the prior question asked about macro but any factors and key assumptions that we should be thinking about or changes would be helpful. Thank you.

Speaker Change: Hi, Brian Thanks for the question. So a couple shed we had strong momentum and outperformed the quarter.

Kiran Choudary: Hi, Brad. Thanks for the question. As Bipul shared, we had strong momentum and outperformed the quarter. You know, the first half when you look at the growth rate, we had double-digit growth in net new ARR, and that's really given us the confidence to raise the outlook for the second half. If you look at the implied guidance, the second half net new ARR, we have raised by over 5% heading into this half. Obviously, our execution has been strong, but there is still a you know, uncertain macro environment, and we are being prudent and thoughtful with the guidance. We feel pretty confident in the outlook, based on the pipeline we see and our ability to execute this market.

Speaker Change: We are in the first half when you look at the growth rate, we had double digit growth in net gorilla.

Speaker Change: And that's really given us the confidence to raise the outlook for the second half.

Speaker Change: And if you look at the implied guidance the second half of <unk>, we have raised by over 5% heading into this half.

Speaker Change: Our execution has been strong but there is still.

Speaker Change: Uncertain macro environment, and we are being prudent and thoughtful with.

Speaker Change: The guidance, but we feel pretty confident in the outlook based on the pipeline, we see and our ability to execute in this market.

Yes.

Makes perfect sense and I'm glad to hear you say that thanks for taking my question.

Brad Zelnick: Makes perfect sense, and I'm glad to hear you say that. Thanks for taking the question.

Speaker Change: Thank you Brad.

Speaker Change: Well move next to Dan Ives with Wedbush Securities. Your line is open.

Kiran Choudary: Thank you, Brad.

Operator: We'll move next to Dan Ives with Wedbush Securities. Your line is open.

Speaker Change: Hi, This is John Kip fingers on for Dan Ives, Congrats in the quarter.

John DiFucci: Hi, this is John DiFucci on for Dan Ives. Congrats on the quarter. Given the strong subscription ARR growth seen throughout the quarter and the addition of new customers, a more bird's eye view on strategic initiatives that are in place to sustain or accelerate growth, looking really into the remainder of the year and maybe into fiscal year 2026. Thank you.

[Analyst] (Guggenheim Securities): Hi, this is John DiFucci on for Dan Ives. Congrats on the quarter. Given the strong subscription ARR growth seen throughout the quarter and the addition of new customers, a more bird's eye view on strategic initiatives that are in place to sustain or accelerate growth, looking really into the remainder of the year and maybe into fiscal year 2026. Thank you.

Speaker Change: Given the strong subscription growth seen throughout the quarter and the addition of new customers.

Speaker Change: More bird's eye view on our strategic initiatives strategic initiatives that are in place to sustain or accelerate growth looking really into the remainder of the year and maybe into 2020 I play with 26. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you so much for the question as I was saying before I always.

Bipul Sinha: Thank you so much for the question. As I was saying before, I always think about what am I missing and where do we go next. If you look at, we are already coming up to a 1 billion ARR, and that's a big milestone for us. I'm thinking about 3 billion as the next major milestone and beyond. What are the things that we need to put in place to continue to, like, grow the business at a high speed and continue to scale and provide diversity of products in the marketplace to go 3 billion and beyond. That has been the core focus. Although we have not lost sight of the fact that many software vendors without a strategic vision are struggling in the market.

Speaker Change: Think about what am I missing and where do we go next.

Speaker Change: And if you look at.

Speaker Change: We are already coming up.

Through a $1 billion add up.

Speaker Change: And Thats.

Speaker Change: A big milestone for us, but I'm thinking about three.

Speaker Change: <unk> 3 billion is the next major milestone and beyond and what are the teams that we need to put in place to continue to grow the business at at the high speed and continue to scale and provide diversity of products in the marketplace to grow at $3 billion and beyond.

Speaker Change: And that has been that has been the focus although we have not lost sight of the fact that many software vendors without a strategic vision are struggling in the market. If you look at the growth rate. They have diminished. So we always think about where we are today and what's the next milestone and how do we build that mixed milestones with <unk>.

Bipul Sinha: If you look at their growth rate, they have diminished. We always think about where we are today and what's the next milestone and how do we build to that next milestone so that we continue to grow and give Rubrik the best opportunity to reach its highest potential.

Speaker Change: Continue to grow and give rubric, the best opportunity to reach its highest potential.

Speaker Change: Great. Thank you.

John DiFucci: Great. Thank you.

[Analyst] (Guggenheim Securities): Great. Thank you.

Speaker Change: Well move next to Shannon Kotare with Baird. Your line is open.

Operator: We'll move next to Shrenik Kothari with Baird. Your line is open.

Shannon Kotare: Hey, yes, thanks for taking my question and congrats on a great quarter.

Speaker 15: Hey. Yeah, thanks for taking my question and congrats on the great quarter. Hey, Bipul. With Rubrik being named Microsoft Healthcare and Life Sciences Partner of the Year, and as you are set to host your first healthcare summit coming up this week, can you just elaborate like how Rubrik is uniquely positioned to first address the unique healthcare challenges, and what is driving the success in the vertical? How the strong relationship with key partners like Microsoft, as the recognition seems to suggest, can be central to your go-to-market in this particular vertical? Thank you.

Shrenik Kothari: Hey. Yeah, thanks for taking my question and congrats on the great quarter. Hey, Bipul. With Rubrik being named Microsoft Healthcare and Life Sciences Partner of the Year, and as you are set to host your first healthcare summit coming up this week, can you just elaborate like how Rubrik is uniquely positioned to first address the unique healthcare challenges, and what is driving the success in the vertical? How the strong relationship with key partners like Microsoft, as the recognition seems to suggest, can be central to your go-to-market in this particular vertical? Thank you.

Shannon Kotare: So with rubric being named Microsoft.

Shannon Kotare: Health care and life science background, the euro and as it is set to host our first healthcare summit coming up this week.

Could you just elaborate like how is the rubric are uniquely positioned to first address the unique health care challenges.

Shannon Kotare: And what is driving the success in the vertical and how the strong relationship with the key partners like Microsoft.

Shannon Kotare: The recognitions seems to suggest kind of a central to our go to market in this particular vertical thank you.

Thank you Frank.

Speaker Change: Look what we're seeing in the marketplace today, we have been working on it for last three years.

Bipul Sinha: Thank you, Srini. Look, what you are seeing in the marketplace today, we have been working on it for last 3 years. That's why we always think ahead, where the market is moving, how the market would respond, and how do we build product and solutions today to go and really create an impact in the marketplace. If you look at healthcare market segment, I call it protected/unprotected. The healthcare market segment is going through tremendous digital transformation to gain efficiencies because cost of healthcare is always high. If you look at the result of that digital transformation, average healthcare organization has 3 times more sensitive content than any other organization in the economy and in the marketplace. As a result, it is a very target-rich environment.

That's why we always think ahead, where the market is moving how the how the market will respond and how do we build product and solutions today to go and really create an impact in the marketplace.

Speaker Change: If you look at healthcare market segment I call it protects them protected.

Speaker Change: The healthcare market segment is going through tremendous digital transformation to gain efficiencies because cost of care.

Speaker Change: As always high and.

Speaker Change: And so if you look at the result of that digital transformation average <unk> has three times more sensitive content than any other organization in the in the economy and in the.

Speaker Change: In the marketplace.

Speaker Change: As a result, it is a very target rich environment and attackers are going off good healthcare market segment because number one.

Bipul Sinha: Attackers are going after healthcare market segment because, number one, they still have not gained the maturity that you need to be able to deliver cyber resilience. As a result, they are looking for solutions to keep hospitals up and running, to be able to admit patients, to be able to deliver healthcare outcome even when they have a successful cyberattack. In fact, one of the largest healthcare system in the US partnered for cyber resilience with Rubrik and doing a massive migration to Azure.

Speaker Change: They still have not gained the maturity that you need to be able to deliver to be able to deliver.

Speaker Change: Cyber resilience and as a result, they are looking for as a result, they are looking for.

They are looking for solutions to keep hospitals up and running to be able to admit patients to be able to deliver.

Speaker Change: Hence get outcome, even when they have a successful cyber attack in fact, one of the largest healthcare system in the U S partners.

Speaker Change: For cyber resilience with rubric and doing a massive migration to azure.

Speaker Change: Our ability to deliver health care outcome across all the mission critical health care system.

Bipul Sinha: Our ability to deliver healthcare outcome across all the mission-critical healthcare system, whether it's electronic health record, whether it's cloud transformation, whether it's their email systems, whether it is their Active Directory or other user management system or authentication system, we have a most comprehensive solution in the marketplace. I was saying before, we have been working on it for last many years to be able to have this position that we have a unique offering for this unique market.

Speaker Change: Electronic health record with its cloud transformation, whether it's via email systems, where it is the active directory or other.

Speaker Change: User management system.

Speaker Change: Communication system, Yeah, we have a most comprehensive solution in the marketplace and as I was saying before.

<unk> been working on it for the last many years to be able to have this position that we have a unique offering for this unique market.

Speaker Change: I appreciate it thanks.

Speaker 15: Appreciate it. Thanks.

Shrenik Kothari: Appreciate it. Thanks.

Speaker Change: And we'll take our last question from James Fish with Piper Sandler Your line is open.

Operator: We'll take our last question from James Fish with Piper Sandler. Your line is open.

James Fish: Hey, guys.

James Fish: Thanks for the questions here circling back actually on the team of around Salesforce first how are you guys. How should we think about rubrics exposure to salesforce today within that expansion driver.

Speaker 16: Hey, guys. Thanks for the questions here. Circling back actually on to teams around Salesforce. First, how should we think about Rubrik's exposure to Salesforce today within that expansion driver of applications? And second, you guys talked about a lot of wins in which you really consolidated down vendors. I guess, what type of TCO benefits are customers seeing on consolidating down to Rubrik, and how many backup solutions are typically in these environments that you're replacing? Thanks, guys. Good quarter.

James Fish: Hey, guys. Thanks for the questions here. Circling back actually on to teams around Salesforce. First, how should we think about Rubrik's exposure to Salesforce today within that expansion driver of applications? And second, you guys talked about a lot of wins in which you really consolidated down vendors. I guess, what type of TCO benefits are customers seeing on consolidating down to Rubrik, and how many backup solutions are typically in these environments that you're replacing? Thanks, guys. Good quarter.

James Fish: Applications and second you guys talk about a lot of wins in which you really consolidated down vendors I guess, what type of GTO benefits, our customers seeing on consolidating down the rubric and how many backup solutions are typically in these environments that you're replacing thanks guys good quarter.

Speaker Change: Thank you. So if you look at our offering we are consolidating cyber resilience for over 20 distinct apps onto rubric and Salesforce is one of the 20-F, and we just announced a support for Salesforce.

Bipul Sinha: Thank you. If you look at our offering, we are consolidating cyber resilience for over 20 distinct apps onto Rubrik. Salesforce is one of the 20 apps, and we just announced the support for Salesforce. Obviously, when we sell Rubrik platform, we are consolidating many, many tools. Tools around, like your enterprise data protection, tools around your native cloud data protection, tools around your SaaS data protection. We are consolidating tools around your database data protection. We are consolidating tools around unstructured data security. We are doing data security posture management for cloud. We are doing data security posture management for data center. We have cyber resilience for Active Directory or Entra ID.

Speaker Change: Obviously, when we sell it.

Speaker Change: Platform, we are consolidating many many tools so cool surround.

Speaker Change: Like your enterprise data protection tools at all on your native cloud data protection tools around the SaaS data protection, where consolidators inputs around your database.

Data protection via the consolidated includes around unstructured data security than we are doing data security posture management for cloud, we're doing due to security policy management for data Center and then we have.

Speaker Change: Cyber resilience for active directory or <unk>. So.

Speaker Change: So we are consolidating six or seven categories.

Bipul Sinha: We are consolidating 6 or 7, 8 categories of products into our platform, and our customers enjoy over 25% TCO saving when they adopt Rubrik in totality. Customers don't have to start everything on Rubrik day one. If they just adopt our cloud native solution, we deliver them significant cloud cost savings, hard cloud cost savings. Same thing when we start with their SaaS or on-prem solution. We have this platform strategy, and as I was saying before, we have been working on these platforms for many, many years. This is not something that two person in a garage can build it in a quick time. These are very deep and wide solutions that has a lot of technology built into it, and we have been on it for over 10 years.

Speaker Change: Products into our platform and our customers enjoy we're 25% this year savings when.

Speaker Change: <unk> dot rubric in totality, but customers don't have to start everything on rubric day, one if they're just adopt our cloud native solution, we deliver them significant float cost savings hard cloud cost savings same thing when we start with the SaaS or on Prem solution. So we have this platform strategy and as I was saying.

Speaker Change: Before we have been working on these platforms for many many years. This is not something that 2% and a garage can build it in a quick time. These are very deep and wide solution that has lot of technology built into it and we have been on it for over 10 years.

Speaker Change: Thank you ladies and gentlemen, this does conclude the rubric second quarter fiscal year 2025 results Conference call. We appreciate your participation and you may disconnect at any time and have a wonderful evening.

Operator: Thank you, ladies and gentlemen. This does conclude the Rubrik Q2 fiscal year 2025 results conference call. We appreciate your participation, and you may disconnect at any time. Have a wonderful evening.

Speaker Change: Yeah.

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