Q4 2024 Varonis Systems Inc Earnings Call
Sophia and Lija Mangin An M. Night Shyamalan Film
These factors are set forth in the earnings press release that we issued today under the section captioned forward looking statements and these and other important risk factors are described more fully in our reports filed with the Securities and Exchange Commission.
We encourage all investors to read our SEC filings. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date.
<unk> expressly disclaims any application or undertakings released publicly any updates or revisions to any forward looking statements made herein. Additionally, non-GAAP financial measures will be discussed on this conference call. A reconciliation for the most directly comparable GAAP financial measures is also available in our fourth quarter.
2024 earnings press release, and our Investor presentation, which can be found at <unk> dot com in the Investor Relations section.
Lastly, please note that a webcast of today's call is available on our website in the Investor Relations section with that I'd like to turn the call over to our Chief Executive Officer Yoki vital yockey.
Speaker Change: Thanks, Dean and good afternoon, everyone. Thank you for joining us today to review, our fourth quarter and full year 2020 full results today I would like to update you on the progress of SaaS transition into review like Barneys is best positioned to capitalize on the <unk>.
Speaker Change: The opportunity to secure new all the data.
Speaker Change: We introduced the army sauce to do a little over two years ago.
Speaker Change: We are excited by the progress that has been made in the time during 2020 full we've added the $200 million Sofia.
Speaker Change: <unk> ended the year with approximately three.
Speaker Change: $340 million of obsessed to yellow.
Speaker Change: Oh, 53% of total company a L M D.
Speaker Change: This is happening so fast because those subtle feeling he's a better product that allow customers to better secure their data with less.
Speaker Change: While these numbers suggest that providing better quality easy there has been a lot of hard to going on behind the scenes to make that happen.
Speaker Change: And I would like to take a moment to thank our team for their.
Speaker Change: If folks.
We still have many existing customers to convert to a SaaS platforms, but it is clear that we are well on our way to becoming soft company. Although we have started to realize some of the benefits of US there are so many more to realize.
Speaker Change: Once the transition is complete.
Speaker Change: For example, once we are fully transitioned to SaaS customers would enjoy greater level of security is much less so now we expect to see better retention rates.
Speaker Change: And all the time in market into which we can.
Speaker Change: Hillary upsell motion. This is a key reason why we plan to accelerate our transition time.
Speaker Change: And now we expect to complete by the end of 2025, a year earlier than our previous outlook into the U L.
Speaker Change: Our initial expectations.
Speaker Change: Turning to our fourth quarter results are all grew 18% to 641 9 million and for the first time Sofia, Although it was that the majority of Oh holidays.
Speaker Change: New customer momentum, what's the single biggest driver of these results and this is due to the simplicity of our SaaS platform and a M. D. D. All of them is what it.
Speaker Change: As customer interest in deploying <unk>, which requires them to fortify their data secure these thoughts.
Speaker Change: Well I was existing customer convergence continue in a healthy way during the first quarter. These conversions.
Speaker Change: Our time and resource intensive we believe.
Speaker Change: Says efficiency and ability to drive growth from our base.
Speaker Change: Actually accept eight post transition.
Speaker Change: Once our reps are able to focus on upsell and cross sell of hotter than belting self hosted customers in.
Speaker Change: In 2024, we continue to balance the wrong broke.
Speaker Change: Like golf.
Speaker Change: Improved cash flow generation, and we generated $185 million or free cash flow versus $54 3 million during all of last year.
Speaker Change: The 100 million of free cash flow is an important milestone for our company and we plan to continue to generate meaningful free cash flow going forward Guy who will review our results and initial guidance in more detail shortly.
Speaker Change: Not to take a step back and discuss the growing need for data security and why we are best positioned to win in this market.
Speaker Change: Oh, all the time as data and because of its importance everyone know that they need to securely when.
Speaker Change: When we created Bologna sauce, we had the benefit of more than a decade of experience securing large complex environments.
Speaker Change: We used those learnings and our considerable resources to transform vonage into an automated data security platform.
Speaker Change: Just on a world class scalable cloud architecture.
Speaker Change: It was critical that we do this in the right way because every day more data he's created more places become harder to see Q D.
Speaker Change: This means well.
Speaker Change: Automation and scalability.
Speaker Change: I'll just call it differentiation voice, but also the only way to stay ahead of today's threat environment.
Speaker Change: As time passes they need for automated platform and the value we give to our customers to go stronger.
Speaker Change: For many years.
Speaker Change: You have to evangelize our approach, but now the market gets it.
Speaker Change: Data is a little bit damage happens in stopping breaches is not only about avoiding fun, it's about keeping the lights on.
Speaker Change: The Angel thing I, securing data has never been more important but data. He has never been more trees today with octave don't braking B Yogi tacos.
Speaker Change: Simply become insider and can easily collect data because the blast radius ease and managed and everything is connected.
Speaker Change: AI mixed talking to job, even easier and inside those much more dangerous.
Speaker Change: They just have to ask the data and AI will compile it for them.
Speaker Change: Companies understand these and spend a lot of perimeter technology.
Speaker Change: But we just keep happening.
Speaker Change: We show this.
Speaker Change: <unk>, okay, but they are insufficient. Many organizations are also times to address data security with mangled walk and point solutions and they'll say.
Speaker Change: But one is automatically secure data.
Speaker Change: Our unified platform.
Speaker Change: East to make data security is reliable and all this is owning a credit card that will take few against school.
Speaker Change: Our cloud native unified data security platform is it wide coverage in deep functionality to secure data at scale will easily please.
Speaker Change: Magically locate and classify sensitive data and because we understand why didn't identity can access and what it should.
Speaker Change: Be able to access we are able to automatically reduce the blast radius.
Speaker Change: We monitor and understand data related behavior. So we are able to detect suspicious behavior.
Speaker Change: And if the bad actor gets in.
Speaker Change: Oh, and Instyle emerges, we help minimize the damage.
Speaker Change: Our platform has allowed us to bring a Nick functionality.
Speaker Change: Enterprise data domain well.
Well claims data store to SAS pause in Hyperscale things like AWS as you.
Speaker Change: And Google cloud expand your coverage into these additional data store.
Speaker Change: In Laos, our total available market and brought us into new projects, where we sometimes compete in Rfps and P. O sees these punk than those that do discovery and basic posture management, whereas these windows help us to build the market for data security in most cases.
Speaker Change: We still do not face direct competition when it comes to actually securing large datasets.
Speaker Change: In the cloud or in the data center.
Speaker Change: When we do the risk assessment, all differentiated value becomes clear.
Speaker Change: Finding sensitive data.
Speaker Change: Does not ensure that it is Q1 sensitive data is located.
Speaker Change: Well the mediating although exposure at scale is not possible.
Speaker Change: Ooh Manitowoc Bonnie is unique that we've discovered and classify sensitive data.
Speaker Change: Magically fix issues and then detecting stope present data, which is the only way to secure data.
Speaker Change: Switching gears.
Speaker Change: A year ago, we went through this M D D O, which is the first manage salaries for monitoring and securing critical data.
Speaker Change: Offering is built on top of our SaaS platform and Leverages.
Speaker Change: Nic data centric telemetry alongside the AI and machine learning embedded into our platform to deliver automated data security.
Speaker Change: B D out it's been the fastest adopted new product launch in the history of voice.
Speaker Change: <unk> already seen these drive meaningful new business and existing customer conversions.
Speaker Change: And we are still just scratching the surface of this massive opportunity.
Speaker Change: The proliferation of AI is also expanding our technical moat is.
Speaker Change: Leverage our unique data sets to help to prevent data breaches. This get stronger as we add more coverage in automation in the network effect goes as we add more customers.
Speaker Change: That's cool.
Speaker Change: Customers want to deploy AI.
Speaker Change: Which also bleeding data security conversation front and center.
Speaker Change: So going impact during the fourth quarter Fu Jen AI initiatives.
Speaker Change: That I would like to briefly discuss a couple of key customer wins from Q4.
Speaker Change: New logos are the driver of our business momentum in this quarter.
Speaker Change: A large hospital system with 10000 employees became a customer.
Speaker Change: They're looking to deploy co pilot, but knew the data security and privacy would be a big concern.
Speaker Change: And this was confirmed but at least assessment as a result, they purchase the only source for hybrid N V. The Allen co pilot in one week, they automatically lock down 43000 exposed files.
Speaker Change: And labelled 98%.
Speaker Change: Their sensitive data.
Speaker Change: Paul automation Barney stuff.
Speaker Change: Success empowered the C suite.
Speaker Change: A commendable that the company could safely deploy co pilots all the organization and enable these hospital being a leader in Jennie O adoption.
Speaker Change: We continue to see strong demand from existing customers.
Speaker Change: Looking to convert.
Speaker Change: That's cool.
One of those was a large bank with 6000 employees that first became a customer out in 2019, well regionally using voice full visibility into their five ships.
Speaker Change: Understanding data only sheep and automating entitlement reviews of the time they have significantly expanded their deployment to include data because it vacation a little thing, but it's automatically.
Speaker Change: Coal Hill on claim and then doing all of this.
Speaker Change: In the cloud before one intimately converting to SaaS this quarter.
Speaker Change: Conversion they purchased Bourn SaaS I believe these M D D. All co pilot and sales force.
Speaker Change: This will allow them to safely deploy copilot and find and fix overexposed sensitive data and salesforce.
Speaker Change: In summary, we are excited by the approximately 50% increasing at all from new customers, which was driven by the simplicity of <unk>.
Speaker Change: And then b, the al as well as generate evi raising awareness for our solution.
Speaker Change: We look forward to continuing our momentum and completing a SaaS transition in 2025, which will unlock many more benefits if we capture a massive opportunity with that let me turn the call over to Guy <unk>.
Speaker Change: Got it.
Speaker Change: Thanks Kaki good afternoon, everyone. Thank you for joining us today.
Speaker Change: We are pleased with our fourth quarter results, which reflect the story of two companies one our momentum with new SaaS customers driven by the simplicity of the platform and copilot, which for the first time saw a meaningful contribution from AI related purchases and to our existing self hosted customers.
Speaker Change: Which despite seeing very healthy conversions activity is currently diluting our growth rate, which I will expand on shortly.
Speaker Change: As a result of the strong new customer momentum and sizable existing customer conversions. We ended Q4 with 53% of total company a or are coming from SaaS.
Speaker Change: Historically, the majority of our air our growth was driven by expansion within our base, but with the move to staff, our new business has been exceptionally strong.
Speaker Change: And is the number one driving force behind the momentum in our results.
Speaker Change: This is happening because of the simplicity of fast and M. D. D R as well as Gen AI raising awareness for the need to secure your data.
Speaker Change: <unk> is also increasing the size of and our ability to penetrate our Tam is we're leveraging our platform to expand into new data storage.
Speaker Change: We feel very good that the success, we have seen selling to new customers will continue going forward.
Speaker Change: Conversions of self hosted customers were also very strong because customers see the value of assassin M. D. D R, which help customers achieve their go with very little effort as we do almost all of the work for them at the same time. These conversions require a lot of effort due to legal and procurement work.
Speaker Change: And SaaS security check this requires to get customers to convert to SaaS from self hosting.
Speaker Change: Despite the healthy uplift we recognize upon conversion the amount of time spent on this part of the sales cycle is greater than a traditional upsell or cross sell.
Speaker Change: In addition, our growth for many years was driven by Epsilon and until we convert customers to sign the upsell motion is on hold.
Speaker Change: This means that conversions are diluted to self sufficiency during the transition and serve as a headwind to our growth and expansion motion when compared to historical levels in the fourth quarter. We had a huge volume of conversions and these took a lot of time and effort for our sales team and yet we still have.
Speaker Change: <unk> strong results. Despite this temporary productivity headwind.
Speaker Change: Our view is that when almost all of our customers are converted we expect that our teams will become more productive primarily due to increased customer satisfaction with a SaaS platform and also a simpler selling process. Once a customer is on SaaS contract.
Speaker Change: Because of this we're making a strategic decision to accelerate phase two and now expect 78% or approximately $580 million of our total E. R. R will come from SaaS by year in completing the transition two years earlier than our initial target in one year or.
Speaker Change: Or then what we said last year.
Speaker Change: The strength of our business and the inherent leverage in our model have allowed us to show significant margin improvement as.
Speaker Change: As a reminder, we set our long term target of 20% a or our contribution margin by 2027 at our Investor Day in March 2023, and ended 2024 at 16, 6%. So we are well ahead of that plan.
Speaker Change: The leverage of our model allows us to continue to show margin improvement.
Speaker Change: Making strategic investments to Reaccelerate, our top line growth back to 20 plus percent and capture the larger opportunity that we see developing.
Speaker Change: We expect these investments coupled with sustained new logo momentum will also enable us to continue to grow a or are at healthy levels. This year. Despite the conversion is taking more time and effort to do.
Speaker Change: In addition, we believe that accelerating the transition will better position us to accelerate our growth post transition and will provide us with several benefits over time, including one better sales productivity to better ability to upsell. These SaaS customers and three further increases.
Speaker Change: To our already healthy gross retention due to M. D D R and the automation of our SaaS platform, and allowing a customer to be better protected with very little effort on their part.
Speaker Change: To summarize we're thrilled with the momentum of the new business and we're accelerating phase two of our transition from a position of strength. We now expect to complete the SaaS transition a full year earlier than what we told you a year ago and we expect our business to remain strong in 2025 with continued commitment to improve leverage.
Speaker Change: Although at a slightly slower pace than last year as we see a much greater opportunity we wanted to take advantage of them.
In the fourth quarter, <unk> was $641 $9 million, increasing 18% year over year and this year, we generated $108 $5 million of free cash flow up from $54 $3 million last year. These.
Speaker Change: These metrics illustrate the ability to drive topline growth margin leverage and cash flow generation, while transitioning to that.
Speaker Change: We ended the year with 5600 subscription customers, which grew 13% year over year.
<unk> per new customer grew approximately 20% year over year as we are successfully moving upmarket to larger organizations and also selling more of the platform in the initial deal.
Speaker Change: Dollar based net retention rate for subscription customers was 105% at the end of 'twenty 'twenty four adjusted for FX, which reflects steady gross retention and more limited upsell and cross sell activity as reps prioritize converting self hosted customers decide.
Speaker Change: In the fourth quarter total revenues were $158 $5 million up 3% year over year.
Speaker Change: During the quarter as compared to the same quarter last year, we had approximately an 18% headwind to our year over year revenue growth rate as a result of having increased <unk> sales and our bookings, which are recognized ratably versus the upfront recognition of our on Prem subscription problem.
Speaker Change: <unk> revenues were $72 $2 million.
Speaker Change: License subscription revenues were $66 $8 million in maintenance and services revenues were $19 $5 million as our renewal rates were again over 90%.
Speaker Change: Moving down the income statement I'll be discussing non-GAAP results going forward.
Speaker Change: Gross profit for the fourth quarter was $133 8 million, representing a gross margin of 84, 4% compared to 88, 5% in the fourth quarter of 2023, despite significant revenue headwinds, which were largely offset by fast platform efficiency.
Speaker Change: Operating expenses in the fourth quarter totaled $118 $4 million as a result fourth quarter operating income was $15 $3 million or an operating margin of nine 7%. This compares to an operating income of $27 $2 million or an opera.
Speaker Change: <unk> margin of 17 seven in the same period last year.
Speaker Change: During the quarter as compared to the same quarter last year, we had approximately a 13% headwind to our operating margin as a result of adding increased ourselves in our booking mix, which I recognize fully ratable versus the upfront recognition of our on Prem subscription products.
Speaker Change: Fourth quarter contribution margin was 16, 6% up from 13.4% last year.
Speaker Change: The significant leverage improvement reflects our ability to drive strong incremental margins, while growing <unk> and transitioning to SaaS.
Speaker Change: During the quarter, we had financial income of approximately $11 $6 million driven primarily by interest income on our cash deposits and investments in marketable securities.
Net income for the fourth quarter of 2024 was $23 9 million or 18 cents per diluted share compared to net income of $34 $3 million or net income of 27 cents per diluted share for the fourth quarter of 2023.
Speaker Change: This is based on $135 1 million and $126 1 million diluted shares outstanding for Q4 of 2024 in Q4 of 2023, respectively.
Speaker Change: As of December 31, 2024, we had $1 2 billion in cash cash equivalents short term deposits and marketable securities.
Speaker Change: For the 12 months ended December 31, 2024, we generated $115 2 million of cash from operations compared to $59 4 million generated in the same period last year, and Capex with $6 7 million compared to $5 1 million last year.
Speaker Change: I will now briefly recap our full year 2024 results.
Speaker Change: It'll revenues grew 10% to $551 million in 2024 as compared to 2023, we had approximately a 10% headwind to our year over year revenue growth rate as a result of having increase that sales in our booking mix, which are recognized ratably versus the upfront.
Speaker Change: <unk> of our on Prem subscription program.
Speaker Change: Our full year operating margin was two 9% compared to five 8% for 2023.
Speaker Change: In 2024 as compared to 2023, we had approximately an 8% headwind to our operating margin as a result of having increased that sales in our booking mix, which I recognize fully ratable versus upfront recognition of our on Prem subscription products.
Speaker Change: Turning now to our initial 2025 guidance as a reminder, our initial guidance reflects flat net new <unk> as the starting point for the year similar to the approach that we used last year for the first quarter of 2025, we expect total revenues of 130 million.
Speaker Change: Two $135 million representing growth of 14% to 18%.
Speaker Change: non-GAAP operating loss of negative $14 million to negative $11 million and non-GAAP net loss per basic and diluted share in the range of negative six cents than negative four thing.
Speaker Change: This assumes $113 6 million basic and diluted shares outstanding.
Speaker Change: For the full year 2025, we expect.
Speaker Change: Or are a $737 million to $745 million representing growth of 15% to 16%.
Speaker Change: Free cash flow of $120 million to $125 million total revenues of $610 million to $625 million representing growth of 11% to 13%.
Speaker Change: non-GAAP operating income of <unk> 5 million to $10 $5 million.
Speaker Change: non-GAAP net income per diluted share in the range of 13 to 17 cents. This assumes 137 5 million diluted shares outstanding.
Speaker Change: In summary, we are excited to finish 'twenty 'twenty four with the majority of our air are coming from SaaS for the first time and are encouraged by the step function change in the new customer momentum. We are seeing we look forward to completing our SaaS transition in 2025, which we believe will better position the company to.
Speaker Change: Rate growth and show continued free cash flow improvement on our way to our $1 billion, a or our target with that we would be happy to take questions operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
Speaker Change: We also ask that each person in the queue to only limit themselves to one question to allow others a chance to ask their question.
Speaker Change: One on and poll for questions.
Speaker Change: Our first question comes from the line of Matthew Hedberg with RBC capital markets. Please proceed with your question.
Speaker Change: Hey, guys. This is Mike Richards on for Matt. Thanks for taking my question and congrats on the results in an accelerated timeline here.
Speaker Change: Maybe if we were sitting here a year from now and we're talking about upside to that flat net new aircrafts now could you talk about maybe where there might be some conservative assumptions around either co pilot uptake or.
Speaker Change: You know conversions of the base and and how are you accelerating that phase two is that a is that going to be through a carrot and stick approach or we're looking at sales incentives.
Speaker Change: Any detail around that would be great. Thanks.
Speaker Change: Yeah.
Speaker Change: Alright. Thanks for the question I think I'd put primarily they've coloration. We resumed debate is that customer wants to avoid a data breach make sure that we don't have compliant sides and protect everything effortlessly and this is what we are doing so just natural expansion you know and the way that we have these deep functionality.
Speaker Change: Tunisia.
Speaker Change: In our platform is covering a lot of data stores. Many times its household customers, who get everything out of the back end.
Speaker Change: But with time, they understand that they need everything and we just provided.
Speaker Change: Formation and a I just make the data security problem inevitable, you see what's going on on a daily basis.
Speaker Change: That's copilot, there's a lot of them, but you can see many copilot and you know and everybody we work with these agents.
Speaker Change: Primarily what we do by the widen to take all the database that they can get to reduce the orbitz would not be able to get all the data that they need to get it will end up in a while.
Austin: Austin, So we just see the demand in all fronts.
Austin: In terms of the conversions, we saw a lot of success in 2020 for converting our existing customers to SaaS.
Austin: And during the process of doing so we learned a lot. So when we look at those learnings, we're making some strategic investments in sales and customer success support and legal to support the transition and when you really plan to start a renewal process. Even earlier this year to allow for more time for <unk>.
Austin: The additional paperwork associated with moving to SaaS. So overall, we feel very good about the opportunity to accelerate our SaaS transition and enable our company to realize the benefit of SaaS a year earlier than our previous expectations and two years earlier than our initial plan.
Austin: Thanks, guys.
Austin: Thank you.
Speaker Change: Our next question comes from the line of Hamzah firewall or with Morgan Stanley. Please proceed with your question.
Hamzah Firewall: Hey, Thanks for taking my question guys.
Hamzah Firewall: I am little confused by your earlier comments on the renewal process are you talking about.
Hamzah Firewall: Pulling forward renewal deals so that way you can get more.
Hamzah Firewall: For conversion to SaaS from the existing customer base and then.
Hamzah Firewall: It's more on a high level it seems like youre going to be a frenzy.
Hamzah Firewall: Transition.
Hamzah Firewall: This year are largely complete.
Hamzah Firewall: Complete.
Hamzah Firewall: That's two years ahead of your initial plan.
Hamzah Firewall: But as we think about the durability of this mid teens growth rate. Once you you know.
Hamzah Firewall: Surpass this.
Hamzah Firewall: Broadly yes.
Hamzah Firewall: How do we get confidence in India.
Hamzah Firewall: And the ability to sustain that isn't going to come from.
Hamzah Firewall: More momentum on the AI front is there a sort of another product cycle.
Hamzah Firewall: I'm quite confident about because I think that's really one of the.
Speaker Change: Key areas of investments or focus on thank you.
Speaker Change: So first of all in terms of their nose were talking about the actual renewals.
Speaker Change: Fire within the year, we want to make sure that we're ahead of the game and we're talking to customers about the benefits of SaaS, It's a no brainer for them to move.
Speaker Change: Sometimes there's additional paperwork that that is part of the process and obviously when you move from on Prem to SaaS, It's a different checklists from a security perspective.
Speaker Change: There's a lot of documentation, it's not a technological challenge it's more of a documentation will challenge, but we want to we want to be a hurdle and that.
Speaker Change: That's why we wanted to start the conversation with customers that are about the Renault earlier than what we did last year, so that that kind of takes care of that component.
Speaker Change: When we look at kind of a growth within 2020 for the growth of new customers with outstanding we were really pleased with the ACB new customer growth are growing at 50% and the actual.
Speaker Change: The actual conversions and kind of a lack of upsell because none of our reps are really dealing with the with the upsell opportunity when you're an on prem subscription customer you want to make sure that you move them first attack and only then you.
Speaker Change: You'll start talking to them about additional platforms to sell so there's a lot of goodness that can happen once we move through.
Speaker Change: And become a fully SaaS company and that's what we're planning on doing in 2025, it's important to understand that the discrepancy in value between the self hosted in the southeast that you're talking about 10% of the total.
Speaker Change: Talk to them all of them really well because you know tenant small valley Danville.
Speaker Change: The speed that you get in the way that you are protected when you're talking about a customer insights that will protect the data in the cloud and on Prem all the data repositories policy DNA expense.
Speaker Change: I look at <unk> 24.
Speaker Change: 24 by seven you know labor and classify isn't people to moderately reduce the velocity and you look at the intent of these co pilot like second to none and once we have all the customers there because I think what we want them to go ahead, and you will have more and more data repository database and snowflake everything that you have on iOS and what you want to do eventually.
Speaker Change: If all these data breaches.
Speaker Change: But the way the value proposition.
Speaker Change: It can make sure that you understand any abnormal behavior, you understand any identity human and nonhuman LDL Oxazine data. There's just so much to do in the data space and our ability on this very unique.
Speaker Change: The architecture that we built to innovate very thoughtful very well I don't think that works extremely well for Washington and Baltimore.
Speaker Change: We believe these architectural and it can scale. So we really believe that everything that we have in terms of innovation is extremely relevant for customers and believe that is what we call pipe high probability innovation that we can innovate and talking to customers and organically stemming from what we bought just to extend to more and more.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Cat carrier with Barclays. Please proceed with your question.
Okay, Great Hey, guys. Thanks for thanks for taking my question here.
Speaker Change: Guy maybe for you just dovetailing off that off that last topic.
Speaker Change: It's interesting to hear the team sort of bring up the idea of.
Speaker Change: Of getting back to 20% plus AOR growth someday.
Speaker Change: Can you just maybe unpack that a little bit.
Speaker Change: In terms of what needs to happen to accomplish that maybe how much of that is coming from conversions versus new obviously, you're very new new a very successful new logo component. This year, maybe there's new products like M. D D or any additional color on that goal what would be super helpful.
Speaker Change: Absolutely.
Speaker Change: When you look at kind of or discussion about going back to that 20 plus percent and if you look at the behavior.
Speaker Change: And the performance in 2024, and we talked about it in the prepared remarks, you really see kind of a tale of two companies you see how the new business is performing do you see the increase in ISP as you see the fact that new business.
Speaker Change: Grew 50% in HCV and all of that is trending very well, we're very pleased with that type of performance. When you look at the MLR number the MLR came in at 105% and we believe that should improve post transition. So really when you look at kind of the behavior of where we are.
Speaker Change: Or are we kind of put ourselves.
To try and move as quickly as we can in 2025, and that's why we're kind of speeding up the transition and we believe that as we complete the transition we're better set up not only to provide value to our customers, but also to go to those customers. Once we show them the value and sell them additional licenses, which we believe can increase.
Speaker Change: The N of our and with the simplicity of the M. D. D. R and the fact that co pilot and there's a lot of tailwind and are working that we expect them to continue and be durable and that kind of gets us to where we expect to be as a company growing 20 plus percent.
Speaker Change: Very simple if incentive from our perspective, they're not in New York, the bleach, which can happen on your cellphone that's call it 65%.
Speaker Change: Sure.
Speaker Change: So snowflake.
Speaker Change: The databases and what's happened with SASSA cookie that we completely reduce friction almost the only thing that the customer needs to do is to buy and we will do everything folding in the AI walking philosophy. So many level one level is protecting AI and you know TV first.
Speaker Change: Normal behavior and their intent.
Speaker Change: But this is one thing that is supercritical, but the other thing that is happening is that what we are doing it.
Speaker Change: The Nvidia and the wallboard.
Speaker Change: Hence the D I b.
Speaker Change: To the extent people can be so much more pullback.
Speaker Change: Getting to a place that.
Speaker Change: There is no. There is just no reason to say no. We can't do everything for the customer. It was just super fast deployment in full day, one with just what we're doing he automatically.
Speaker Change: The data monitoring to make sure nothing bad is happening to meet without stopping any business bosses and this is a very very very strong local position.
Speaker Change: Very helpful. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Brian Essex with J P. Morgan. Please proceed with your question.
Brian Essex: Hi, good afternoon, and thank you for taking my question and great to see the reacceleration of customer growth here.
Speaker Change: So all of that either you are the guy or Yaqui.
Speaker Change: Yeah, we think it's pretty.
Speaker Change: He talked about you know phase one versus phase two and phase two being kind of the stick phase, where you push customers or incentivize them, a little more aggressively to convert.
Speaker Change: Could you help us understand as you're pursuing more.
Speaker Change: You know more aggressive incentives to two.
Speaker Change: To bring customers over to the SaaS platform, how should we get comfortable or hydro investors get comfortable that you won't see accelerated.
Speaker Change: Attrition from the platform and what are those conversations like I think you've talked about learnings from what you've seen over the past year or so.
But how can we kind of maybe get some a little bit of insight from those learnings to get us comfortable for taro.
Speaker Change: Durability of customer base on your platform. Thank you.
Speaker Change: So we definitely took a lot of the learnings from our from our previous transition and I can tell you that one of the things that we have put at the forefront of everything we do is the benefit for the customer and and how what is better for them and I'm. One of the things that we're seeing is that the SaaS product is is by far.
Product for them gives them better protection and the MTR offering is not there with the on Prem subscription. It's only there was a SaaS offering.
Speaker Change: Just to do a lot of the work for them and make sure that.
Speaker Change: R.
Speaker Change: Our platform is the one that's provided in an automated way a lot of those benefits.
Speaker Change: So when we think about kind of a move we want to make sure that we do it in the right way.
Speaker Change: And with that customer and in kind of the way we're thinking about it we've also.
Speaker Change: For 2025 and made sure that from a commission perspective, we're incentivizing our sales team on the conversions.
Speaker Change: Neglecting new business. So the new business is at the forefront of everything, but we're absolutely making sure that it's in everyone's best interest and it's a win win.
Speaker Change: Make sure that they are we complete the transition in 2025.
Speaker Change: It was a very hard undertakings BBB very robust scalable architecture, because data is a massive problem with scale as you know.
But then what's happened out innovations just moving so fast for us.
Speaker Change: Paying monthly dividends for customers.
Speaker Change: You know you have all these new features in this new world of AI almost.
Security problem became orbits against global.
Speaker Change: And it just makes sense for our customers to move them all the automation humans money, we cannot solve this problem.
Speaker Change: We just have everything in the cloud to make sure that most probably customers.
Speaker Change: You know just.
Speaker Change: Bleach and protect them at all.
Speaker Change: Yeah. That's helpful. I mean have you seen resistance from customers or is it a lack of resistance. Maybe it gives you confidence that you can maybe go more aggressively about converting them to the SaaS platform an M. D D R.
Speaker Change: Okay.
Speaker Change: As you can see it move much faster than we thought and the MDT all in such a strong offering in all the remediation automation that we have in the cloud and you know values everything customers get value with Frictionless way then you can expand and you see all these massive data stalls and you know almost every big breaches a data breach and this is.
Speaker Change: A lot of organizations wants to avoid you go to a system today would tell you one thing, which you don't have a data breach or to make sure that our compliant fine they want to.
Speaker Change: Make sure movies in an airport next language, we're gonna be billing team and this is what we are doing for them, but in order to do this we need to do it in the cloud. This is why we just you know really accelerating it you want to make sure that we're already well into all of our customers in order to do that.
Okay. That's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Joel Fishbein Fishman with Jewish Securities. Please proceed with your question.
Speaker Change: Thanks for taking the question guys.
Speaker Change: Got it and just for you.
Speaker Change: Love some more color and if you can quantify it in any.
Speaker Change: The way the.
Speaker Change: Backlog that you currently have and how the pipeline is I understand you're having.
Speaker Change: Some challenges.
Speaker Change: The conversion so I just wanted to understand the health around that pipeline.
Speaker Change: And and the backlog thanks.
Speaker Change: Yeah.
Speaker Change: I wouldn't say that you know when we talk about the conversions I think they're waiting on on the growth. When you look at kind of the new business behavior, but I wouldn't say that it's not something that we can deal with them. When you look at the pipeline. We have a healthy pipeline, we have a lot of conversations with our existing customers on the conversion to SaaS.
Speaker Change: Trying to start the process as I mentioned before earlier than what we would otherwise and I think in terms of setting setting ourselves up for 2025, we feel very good with where we are today both.
Speaker Change: Both on the new customer side and on the existing customer conversion.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Joseph <unk> with Jefferies. Please proceed with your question.
Speaker Change: Hey, guys. Thanks for the question you guys have done a nice job of innovating and adding protection for different data stores, whether its sales force surface now data breck snowflake et cetera, any quantitative disclosures you can provide on just traction you're seeing there and then which of those buckets you expect to see the most benefit to <unk> in 2025, just trying to see outside of co pilot.
Speaker Change: As you can see the most growth them. Thanks.
Speaker Change: Yeah.
Speaker Change: I think that's all of them.
Speaker Change: We just released the coverage, but overall in terms of the balance sheet.
Speaker Change: Because you see that this is where breaches are happening I think that the organization that we seek for many of the marketplaces.
Speaker Change: There is a.
Speaker Change: And acute need Foley.
Speaker Change: So data security and data security to make sure that we don't have a breach and just thinking about the shield data side.
Speaker Change: They can do it automatically.
Speaker Change: And by itself will not work with the mentally posture most of the time they didn't value you really need to make sure that you get a standard where the clinical data the immediate automatically and comfortable.
Speaker Change: We see that the demand is coming from all over the.
Speaker Change: Repository. If you are doing to try to once we can apply all the feature Washington aside the automated remediation.
Speaker Change: The uba everything at all but we.
Speaker Change: We see interest in most of these data skills. So scoping positively a little Kitty cat data books excuse me cause Snowflake is key because if you look at salesforce as well.
Speaker Change: Hi.
Speaker Change: Most of the ransomware attacks can happen even find shows on claim.
Speaker Change: He said I don't think that the works extremely well for us it sounds like everything that we're doing there on.
Speaker Change: Identity is the out of three so when you look at our MVD out most of the bad actor, we catch them before they get to the data once they get compromised identities are top.
Speaker Change: Today that the Doctor was that we're not breaking them down below the knee.
Speaker Change: You know we get them in one thing.
Speaker Change: There is a compromise that identity. There is no perimeter anymore, obviously inside of a big freight. So we just many times catching the most time actually before they get to the data and this is also something that's getting a lot of traction for us.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Roger Boyd with UBS. Please proceed with your question.
Speaker Change: Great. Thanks for taking the question Guy I wanted to come back to conversions and I get the dynamic there of wanting to focus on that conversion now and the increased effort required to sell that conversion, but it felt like a couple of quarters ago. There was more optimism around attaching more of the platform at the time of conversion I guess am I getting that right and if so have you seen any.
Speaker Change: Change cheap that ability to attach more of the platform or Conversely is there been any change to how you're pricing those SaaS conversions. Thanks.
Speaker Change: No we don't see any change in terms of the pricing, where we're seeing healthy uplift on the conversions themselves. We talked a lot about the fact that the price list that is 25% to 30% higher than the on Prem subscription, where we're seeing very healthy conversions in terms of pricing.
Speaker Change: We feel good about the ability to convert our customers, but keep in mind.
Speaker Change: We only announced the transition two years ago at the beginning of 2023, and we're already at 53% SaaS as they are so when you think about the magnitude and the dollar value that's involved in order to get so many of our customers.
Speaker Change: Hi.
Speaker Change: You have to take that into consideration, 53% getting to the majority of our a R coming.
Speaker Change: Coming from fast within two years is something that we feel very proud of.
Speaker Change: And if and with our decision to kind of complete the transition.
Speaker Change: In 2025, and if we can execute the way we believe we can and will be completing the transition in three years that that's two years quicker than what we initially thought and a year shorter than than kind of what we talked about a year ago. So we're very pleased with our ability to convert the pricing is holding very well.
Speaker Change: Well, we feel that once we convert our customers, there's an additional opportunity to sell them more platform.
Speaker Change: And their benefit.
Speaker Change: Our move to SaaS there'll be better protected and it's also better for us. So it's a win win for everyone and that's why we're so happy with that with where we are so far and where.
Speaker Change: We're very optimistic with our going into 2025.
I appreciate the color. Thanks.
Speaker Change: Thank you. Our next question comes from the line of Sean <unk> with TD Cowen. Please proceed with your question.
Sean: Thank you good afternoon, yeah kind of Guy congrats.
Sean: Our checks indicate that youre seeing no headwinds whatsoever from Microsoft per view.
Sean: I would even characterize that you guys are seeing tailwind when compared with air products can.
Sean: Can you talk to us about your Microsoft relation with also as we think about it from a co pilot perspective and in the potential growth it could be seeing in 2025 and beyond.
Sean: So if you ever we've ever had we have a good partnership with primarily floating on a case by case basis.
We have you know maybe 20% overlapping features purview, but bite out of it's completely completely different value proposition in terms of the automated remediation.
Sean: Everything that's related to fair detection accurate classification scale.
Sean: But anything that shouldnt work extremely well together.
Sean: We are using the label doesn't work very well with customers and what is the Microsoft one plus one equals fight it works very very well.
For customers and you hear that.
Sean: Good partnership with them, but primarily very good value proposition together.
Sean: Yeah.
Sean: Thank you.
Speaker Change: Our next question comes from the line of Rob Owens with Piper Sandler. Please proceed with your question.
Rob Owens: Yeah. Good afternoon. Thanks for taking the question I was hoping you can elaborate a little bit more around the AI contribution comments that you made saying it was meaningful for the first time. This quarter can you quantify it or talk about anything that maybe changed quarter over quarter that made it become more meaningful.
Rob Owens: Absolutely when we look at our new customer growth it really accelerated to approximately 50% in Q4 and this was driven both by M. DVR and co pilot and when we look at kind of a N DDR and co pilot and the way we price it and the way we allow them kind of the packaging of it.
Rob Owens: It could be sold individually, but the packaging really incentivize selling both as part of a platform sale with one SKU.
Rob Owens: And when we look at kind of the behavior of our packaging throughout 2024, it's worked really well and it worked so well that it's really hard to pinpoint exactly which one of these two strong growth vectors is driving our business and we've said in the past that M. DDR could be like data alert is every customer should have it.
Rob Owens: And we talked about Gen. AI is raising awareness for our solution and driving demand for Microsoft 365, and copilot offering so.
Rob Owens: So we really try to be as transparent as we can and provide as much information as possible. So we spend a lot of time trying to provide a metric and we have one that I think can really stand out.
Rob Owens: When we look at 2024, we added nearly 100% more new users.
Rob Owens: Protected by Microsoft 365, offering when you compare that to 2023, which we think is driven by the increased customer interest in protecting Microsoft 365, and co pilot. So really at the end of the day, it's clear that the new customer momentum is working really well and both M. D D R and co pilot.
Rob Owens: The key drivers of that and we believe this trend is very durable.
Thanks Scott.
Thank you.
Speaker Change: Our next question comes from the line of Jason Ader with William Blair. Please proceed with your question.
Rob Owens: Yeah. Thank you good afternoon guys.
Speaker Change: I guess the first.
Speaker Change: First thing I wanted to make sure. So the revenue Miss in the quarter relative to your guidance that was purely a function of.
Speaker Change: The faster than expected transition to SaaS or was there some other elements that with your FX or anything else.
Speaker Change: When when you go back to our guidance for Q4, we talked about SaaS mix of 49% for.
Speaker Change: For Q4, and we actually got 50.
Speaker Change: 53%.
Speaker Change: So there was $11 million of headwind, which is 7%.
Speaker Change: A headwind to our guy. So we're very happy that we were able to move quicker and we talked so many times about the fact that the quicker we move no more headwind we get on revenue because of the revenue recognition difference between on Prem subscription that is recognized upfront versus.
Speaker Change: On the SaaS revenue recognition, which is which is ratable and so if we continue to miss on revenue because of the fact that we're moving quicker I think all of us will be happy investors would be happy and that's what happened in Q4.
Speaker Change: Alright, great and then the.
Speaker Change: So I understand the revenue headwind, but.
Speaker Change: I'm struggling a little bit on the E. R. R headwind. So just wanted to make sure I fully understand because there is an uplift.
Speaker Change: In a normal SaaS conversion correct like a price uplift when you convert somebody.
Speaker Change: Can you just talk about sort of the puts and takes there because.
Speaker Change: It seems like even with the price uplift, you're you're you're hitting some headlines.
Speaker Change: So we talked a lot about the fact that when you look at kind of the uplift is 25, 30%.
Speaker Change: When we do the conversions.
Speaker Change: But the one thing to keep in mind is that we're approximately a third of our existing customers that converted over a two year period. So if you take that 25% to 30% uplift and you extrapolate that over a two year period.
Speaker Change: That could get you somewhere in that MLR number which is the 105 mm and we talked about.
Speaker Change: Kind of the conversion being somewhat of a.
Was a drag on the business, especially when you look at how simple the messages to new customers and how the <unk> and now we saw in Q4. The co pilot is resonating so well and to a point, where we saw a significant increase in new customers.
Speaker Change: So yes, we are getting that uplift and we are we're seeing very strong pricing from from the uplift, but at the end of the day, we only converted approximately a third of our customers over a two year period and that's part of the reason we want to accelerate our conversion in 2025 and beat.
Speaker Change: Done with the transition in one in one more year.
Speaker Change: Understood. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Fatima.
Speaker Change: <unk> with Citi. Please proceed with your question.
Speaker Change: Hey, Good afternoon, guys. This is mark <unk>. Thanks for taking my questions, maybe just digging into the behavior of our customers have converted.
Speaker Change: No.
Speaker Change: And well into the transition can you maybe share some of the expansion behaviour and cadence of converted install base in year, one and what are some of the patterns of adoption you're seeing in year. Two and then Additionally, what is absurd learnings and the accelerated transition timeline, how should we think of the trajectory of and there are two calendar 'twenty five.
Speaker Change: Very good questions and I'll try and address them one by one.
Speaker Change: First of all when you look at.
Speaker Change: When you look at kind of the behavior, we only announced the transition at the beginning of 2023. So we're only two years there we don't have a full set of data.
Speaker Change: Analyzing how the behavior of SaaS customers progresses, because really there's not enough history, there, but from the from the numbers that we have analyzed we have seen that the 2024 and all our numbers are actually higher.
Speaker Change: Nicely higher than the 105.
Speaker Change: That we reported for the for the full for the for existing customer base. So that gives us a lot of confidence that as we complete the transition.
Speaker Change: Have the ability to sell additional licenses to our existing customers with the richness of the platform is great. There's a ton of opportunity to sell to debate, we just need to make sure that we move them to that they get the M. D. D. R that we talk about the automation and they feel the automation and without automation, we can come back and sell them additional <unk>.
Speaker Change: That's one.
Speaker Change: So overall, we feel very optimistic and that's part of the reason that we want to move as quickly as we kind of in 2025.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Andrew Nowinski with Wells Fargo. Please proceed with your question.
Andrew Nowinski: Alright. Thank you for taking my question I just wanted to ask about.
Speaker Change: May.
Speaker Change: Maybe the size of this conversion I mean, it looks like you added about 215 million in SaaS. They are in 2024 and your guidance assumes about another 362 minutes, so significantly more air or I think you just said.
Speaker Change: Still about two thirds of your customers left to convert to SaaS. So it's.
Speaker Change: A pretty big chunk of customers as well I guess, what gives you confidence that you can.
Speaker Change: Massively increase.
Speaker Change: Yes.
Speaker Change: The conversions to SaaS this year versus what you saw in 2024.
Speaker Change: So if you remember when we did our Investor day in March of 2023, we've kind of outlined the plan to complete our transition in 2027 and we defined.
Speaker Change: Completing the transition when we get to 70% to 90% of total company, a or coming from SaaS.
Speaker Change: Now we expect to complete obviously in 2025, and we talked about kind of the number that we see at the end of the year being 78%.
Speaker Change: Of ALR coming from stuff. So from a numbers perspective. The assumption is that that they are it's going to be approximately $580 million by year end and as you mentioned, it's a significant increase it as we as we sit here today. The assumption is $240 million in fact, they are in 2025.
Speaker Change: A meaningful increase versus the $2 15 that we had in 2024, but you're thinking about it.
Speaker Change: Completing the transition by getting to a 100 and we're talking from a numbers perspective, and where we sit here today of completing the transition when you get anywhere between 70 to 90 and our starting point for the year is 78% I actually think we can do better than that but as we sit here today, that's the starting point for us because it's very important.
Speaker Change: To understand that we really know the lotto.
Speaker Change: The part of the gap between.
Speaker Change: Okay.
Speaker Change: Stock platform.
Speaker Change: Sure.
Speaker Change: Sure that we could not get past.
Speaker Change: Yeah.
Speaker Change: Once we can ensure that the migration itself.
Speaker Change: We work in a frictionless motivated.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Rudy Kissinger with D. A Davidson. Please proceed with your question.
Rudy Kissinger: Hey, Thanks for taking my question guys.
Speaker Change: So you know as the conversions I guess start to.
Speaker Change: Wind down and I guess, it's not really winding down this year, but more so next year.
Speaker Change: Obviously, you're going to have to have cross sell upsell <unk> new logo are our net new <unk> start to simultaneously pick up if you're going to sustain this kind of growth profile going back to <unk> question earlier, so how do we ensure that happens like if your reps are so heavily focused on conversions. This year. How do you at the same time make sure you're building up.
Speaker Change:
Speaker Change: That cross sell and up sell pipeline heading into 2006 to make sure that pipeline is there to support that sustainable growth profile.
Speaker Change: So first of all let's talk about 'twenty 'twenty four we finished the year with a growth of 18% and our MLR was at 105. So when you do the math you basically see that the driver the what drove the business in 2024 was the new business. So.
Speaker Change: So I actually think that when we complete the transition it puts us in a better position to do the upsell and if we can continue to sell to new customers and with the platform that we have and the simplicity and the MTBE or in the co pilot and there's a lot of tailwind or working in our favor when you when you bake that in and you've kind of eliminate the headwind that that the convert.
Speaker Change: They are generating it puts you in a much better position.
Speaker Change: So look at the results in 2024 and kind of understand where the growth whether the drivers came from and I think that if you look at how this company can look post transition it's in a much healthier.
Speaker Change: Much healthier position with the richness of the platform that allows you to go back to a much better and all of our numbers that we believe we can get to post transition.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of authentic Oh, sorry, with Robert W. Baird. Please proceed with your question.
Speaker Change: Hey, guys. Thanks for taking my question Oh, Yeah, you mentioned that a key benefit of <unk>.
Speaker Change: I created this SaaS transition and of course, the backfill freeing up of sales and engineering resources to concentrate on features and expansion I'm presuming AI security all of that's part of that rather than focusing on conversion and in logistics around that.
Speaker Change: Could you help us better understand the resource reallocation comment in plants, some spasm breaks.
Speaker Change: Are you anticipating kind of repurposing cause sales pre sales force into more specialized roles focusing on like advanced AI and doctor on demand our securities since since the mindshare about AI seeing inflection and then just like how do you see this intersect with the phase two and your transition.
Speaker Change: Particularly around converting these large on prem accounts, which might have pretty specific data residency regulatory requirements.
Speaker Change: I really appreciate your thoughts there thanks.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: So when when you look at kind of.
Speaker Change: 2025 comp plan each rep has a specific target to convert their self hosted customers with that and that's something that we didn't have in 2024 with that said, we're not losing our focus on new customers and new customers is what drove us in 2024, and we believe that with the tailwind that we have in.
Speaker Change: The simplicity of the platform. We can continue seeing that in the years ahead. So I think the it's not that that some of the resources that we're getting are on top of them.
Speaker Change: We already did some hiring and we're also doing additional hiring.
Speaker Change: For the purpose of making sure that we can cater to the documentation or challenges that we're seeing with the conversion.
Speaker Change: But at the end of the day, it's not like we're changing the framework of the Salesforce everything staying the same.
Speaker Change: We're doing things in a very prudent way when.
Speaker Change: When you look at the expense and the contribution margin and we've progressed very well over the last two years since we started the transition and we're at 16, 6% of our contribution margin. So everything we're doing we're doing with thinking very well about the leverage bringing some of it to the bottom line and.
Speaker Change: The free cash flow, so think about where we are two years into the transition to free cash flow being at 108, five at doubling that number wrong from last year I think all that we're doing is trying to make sure.
Speaker Change: But the experience that a customer is as easy and smooth as possible and some of the lessons that we took from 'twenty to 'twenty four we're trying to implement in 2025.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Joshua Tilton with Wolfe Research. Please proceed with your question.
Joshua Tilton: Hey, guys can you hear me.
Recap.
Joshua Tilton: Oh, great. Thanks for sneaking me in at the end I just have a maybe a two parter I'm. The first one is and I apologize to beat a dead horse here, but on this decision to kind of accelerate the transitions.
Joshua Tilton: You know many times on the call you pointed out you guys are already tracking ahead of your initial plan to convert to SaaS. So I guess I'm trying to understand did something change this quarter, that's making conversions more challenging than they were previously used at a point where he felt.
Speaker Change: Like you needed to incentivize and acceleration in the rest of the transition and then Mike My second part of the question is just.
Speaker Change: How contingent or or or how necessary is it for you to actually accelerate the transitions in 2025 in order for you to hit the IRR guidance.
Speaker Change: That you gave us Tonight.
Speaker Change: I think when you look at let's start with our guidance first so I think when you look at the guidance that we gave to them for 2025.
Speaker Change: Based on the same philosophy that we had in 2024, meaning that the net new <unk>.
Speaker Change: Our contribution from previous year is kind of a starting point and and as we sit here today. There's a lot of benefits that we think can become tailwind for us whether it's the regulation M D D or the threat environment.
Speaker Change: Hi, Beth.
Speaker Change: The increased demand for grown as a whole so I think it's a it's a.
Speaker Change: When you look at the guidance it.
Speaker Change: A good starting point for the year and as we have done in the past will be more than happy to update our guidance as the year progresses. So that kind of takes care of the of the guidance question I think when you look at the conversions or not.
Speaker Change: If there's anything new and what we're saying now versus what we said versus what we said over the last two quarters you heard us talk a lot about the fact.
Speaker Change: That conversion are not what is.
Speaker Change: Leading the company, we've got a lot of questions over the last couple of months.
Speaker Change: Investors thought that what's driving the business and what's driving a R is kind of the conversions and what's going to happen. When the company finished finishes the conversion process and I think when you look at the numbers in 2024 and you look at the E. R. R. A number and you look at the NRO number you understand everything that we've said.
Speaker Change: Last couple of.
Speaker Change: Quarters actually is reflected in the numbers, what's driven the growth in 2024 with new business I think it's in everyone's best interest that we accelerate the transition in our customers' best interest it's in our investors' best interest it's in the company's best interest and we're making sure that we're doing it the right way and.
Speaker Change: The prudent way, but in a very strategic way to make sure that our customers could be better protected them much quicker than if they stayed on on Prem subscription.
Speaker Change: The value is just is the functionality on top of Starbucks.
Speaker Change: I'll start with <unk>.
Way that it works is that we need to bring their customers to SaaS to realize value once they are there.
Speaker Change: The only thing they need to do in order to get the volumes to buy the software.
Speaker Change: Nothing yet and this is everything we want to put our customers once it's there.
Speaker Change: No to data breaches and it can be in compliance for the time and due to the billing team as I've said before this is what we are trying to do and we want to make sure that they own.
Speaker Change: It's really you know 10% of the Apple 10 times more than one many many many cases.
Speaker Change: What we want to be.
Speaker Change: So this is once everything.
Speaker Change: Everything is much easier for our customers and everything is much easier for us.
Speaker Change: Super helpful guys makes sense. Thank you.
Thank you Anna.
Speaker Change: And our next question.
Speaker Change: From the line of Matt <unk> with Needham <unk> Company. Please proceed with your question.
Matt: Alright, Thanks for squeezing me in and congrats on the quarter guys I wanted to ask about the journey II pipeline just curious how your balances for co pilot across new and existing customers, what the opportunity looks like and since it sounds like it's being bundled in more and more with sports M DDR, what sort of uplift.
Matt: Are you seeing with those two when included in a deal.
Matt: Okay.
Matt: Co pilot is something that we believe that almost every knowledge worker that eventually will hit and I think that's so far talking exactly as we expected as you roll it out.
Speaker Change: Oh pilot more within the organization.
Speaker Change: The data security probably becomes more evident you can't even though he's orbital.
Speaker Change: I didn't hear a lot of data that you shouldn't get in many time.
Doing things they shouldn't do so but what is the foundation.
Speaker Change: <unk> secured deployment.
Speaker Change: Yeah.
Speaker Change: You can also see for Microsoft, but it's still in the early innings for them, but I believe that eventually it will be in the haynesville.
Speaker Change: If every knowledge worker.
Speaker Change: So it's everywhere with me.
Speaker Change: Every organization that in using it out.
Speaker Change: It will lead us to.
Speaker Change: Protective and you can see these existing customers post break all over.
Speaker Change: Thank you.
Speaker Change: And this concludes the <unk>.
Tim Paris: Question and answer session. Therefore, I would like to turn the call back over to Tim Paris for closing comments.
Speaker Change: Yeah.
Speaker Change: Thanks for the interest in her own itself towards meeting everyone. This quarter at the Investor conferences.
Speaker Change: Goodbye, Thank you and ladies and gentlemen. This concludes today's conference and you may disconnect. Your lines at this time.
Speaker Change: You for your participation.
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