CommVault Systems Q3 2026 Commvault Systems Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q3 2026 Commvault Systems Inc Earnings Call
Speaker #1: Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to COMMVAULT Q3 Fiscal 2026 earnings conference call.
Operator: Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to Commvault Q3 Fiscal 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Mike Melnyk, Vice President of Investor Relations. You may begin.
Operator: Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to Commvault Q3 Fiscal 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Mike Melnyk, Vice President of Investor Relations. You may begin.
Speaker #1: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.
Speaker #1: To withdraw your question, press star one again. I would now like to turn the conference over to Mike Melnyk, Vice President of Investor Relations, you may
Speaker #1: Good morning, and welcome to our
Michael John Melnyk: Good morning, and welcome to our Earnings Conference Call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about Commvault's future expectations, plans, and prospects. All such forward-looking statements are subject to risks, uncertainties, and assumptions. Please refer to the cautionary language in today's earnings release and Commvault's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements. Commvault does not assume any obligation to update these statements. During this call, Commvault's financial results are presented on a non-GAAP basis. A reconciliation between the non-GAAP and GAAP measures can be found on our website. Thank you again for joining us. Now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay?
Mike Melnyk: Good morning, and welcome to our Earnings Conference Call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about Commvault's future expectations, plans, and prospects. All such forward-looking statements are subject to risks, uncertainties, and assumptions. Please refer to the cautionary language in today's earnings release and Commvault's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements. Commvault does not assume any obligation to update these statements. During this call, Commvault's financial results are presented on a non-GAAP basis. A reconciliation between the non-GAAP and GAAP measures can be found on our website. Thank you again for joining us. Now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay?
Speaker #2: Earnings conference call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about Commvault's future expectations, plans, and prospects.
Speaker #2: All such forward-looking statements are subject to risks uncertainties and assumptions. Please refer to the cautionary language in today's earnings release and COMMVAULT's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements.
Speaker #2: COMMVAULT does not assume any obligation to update these statements. During results are presented on a non-gap this call, COMMVAULT's financial basis. A reconciliation between the non-gap and gap measures can be found on our website.
Speaker #2: Thank you again for joining us. Now, I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay?
Speaker #3: Good morning. And thank you for joining us. Q3 was another solid quarter for COMMVAULT. We reinforced our position as an innovation leader and garnered accolades from partners and industry analysts.
Sanjay Mirchandani: Good morning, and thank you for joining us. Q3 was another solid quarter for Commvault. We reinforced our position as an innovation leader and garnered accolades from partners and industry analysts. Some financial highlights in the quarter include: subscription revenue grew 30% to $206 million. This was fueled by a record land and expand quarter with the addition of 700 new subscription customers. Subscription ARR increased 28% to $941 million. SaaS ARR increased 40% to $364 million. We achieved the Rule of 40 with a healthy balance between growth and profitability. Our momentum in Q3 and year to date reflects the growing need for next-generation cyber resilience. In an AI-driven hybrid and multi-cloud world, resilience cannot be reactive, manual, or fragmented. It needs to be continuous, always on, and unified through a single control plane. Commvault uniquely delivers this innovation.
Sanjay Mirchandani: Good morning, and thank you for joining us. Q3 was another solid quarter for Commvault. We reinforced our position as an innovation leader and garnered accolades from partners and industry analysts. Some financial highlights in the quarter include: subscription revenue grew 30% to $206 million. This was fueled by a record land and expand quarter with the addition of 700 new subscription customers. Subscription ARR increased 28% to $941 million. SaaS ARR increased 40% to $364 million. We achieved the Rule of 40 with a healthy balance between growth and profitability. Our momentum in Q3 and year to date reflects the growing need for next-generation cyber resilience. In an AI-driven hybrid and multi-cloud world, resilience cannot be reactive, manual, or fragmented. It needs to be continuous, always on, and unified through a single control plane. Commvault uniquely delivers this innovation.
Speaker #3: Some financial highlights from the quarter include subscription revenue grew 30% to $206 million. This was fueled by a record land and expand quarter with the addition of 700 new subscription customers.
Speaker #3: Subscription ARR increased 28% to $941 million, SaaS ARR increased 40% to $364 million, and we achieved the rule of 40 with a healthy balance between growth and profitability.
Speaker #3: Our momentum in Q3 and year-to-date reflects the growing need for next-generation cyber resilience. In an AI-driven, hybrid, and multi-cloud world, resilience cannot be reactive, manual, or fragmented.
Speaker #3: It needs to be continuous, always on, and unified through a single control plane. Commvault uniquely delivers this innovation. I'm proud to share that in Q3, we were awarded our 1,600th lifetime patent.
Sanjay Mirchandani: I'm proud to share that in Q3, we were awarded our 1,600th lifetime patent. I want to thank our engineering and IT teams for their continued commitment to excellence and innovation focused on customers. At our Shift event in November, we took innovation to the next level with the Commvault Cloud Unity platform release. Unity brings together data security, identity resilience, and cyber recovery on one platform, all enabled by the Metallic AI fabric. With Unity, customers are now equipped to drive their ResOps or resilience operations. ResOps is a discipline that unifies operations, security, and infrastructure across the business. By bringing these silos together, organizations can plan, prepare, and recover from a disruption or cyber attack. Customer, partner, and industry feedback has been overwhelmingly positive.
I'm proud to share that in Q3, we were awarded our 1,600th lifetime patent. I want to thank our engineering and IT teams for their continued commitment to excellence and innovation focused on customers. At our Shift event in November, we took innovation to the next level with the Commvault Cloud Unity platform release. Unity brings together data security, identity resilience, and cyber recovery on one platform, all enabled by the Metallic AI fabric. With Unity, customers are now equipped to drive their ResOps or resilience operations. ResOps is a discipline that unifies operations, security, and infrastructure across the business. By bringing these silos together, organizations can plan, prepare, and recover from a disruption or cyber attack. Customer, partner, and industry feedback has been overwhelmingly positive.
Speaker #3: I want to thank our engineering and IT teams for their continued commitment to excellence and innovation focused on customers. At our shift event in November, we took innovation to the next level.
Speaker #3: With the COMMVAULT Cloud Unity Platform release, Unity brings together data security, identity resilience, and cyber recovery on one platform, all enabled by the metallic AI fabric.
Speaker #3: With Unity, customers are now equipped to drive their res ops, or resilience operations. Res ops is a discipline that unifies operations, security, and infrastructure across the business.
Speaker #3: By bringing these silos together, organizations can plan, prepare, and recover from a disruption or cyber attack. Customer, partner, and industry feedback has been overwhelmingly positive.
Speaker #3: Dave Novak, Deloitte Cyber Resilience Lead, said, "The Commvault Cloud Unity Platform brings these elements together in a way we don't see elsewhere in the market."
Sanjay Mirchandani: Dave Novak, Deloitte Cyber Resilience Lead, said, "The Commvault Cloud Unity platform brings these elements together in a way we don't see elsewhere in the market. We're pleased to team with Commvault to help joint customers respond faster, reduce risk, and confidently adopt AI and cloud at scale while advancing resiliency." IDC further validated this approach, stating, "We believe ResOps has an opportunity to resonate with customers as it is concise with powerful implications and operational value." ResOps is a fundamentally different approach from what legacy vendors provide today. Resilience in the age of AI requires us to, one, continuously secure data at the source and monitor for anomalies; two, control the identities, human and non-human, that access and use the data autonomously; and three, predictably recover data, applications, and operations at massive scale with the lowest total cost of ownership.
Dave Novak, Deloitte Cyber Resilience Lead, said, "The Commvault Cloud Unity platform brings these elements together in a way we don't see elsewhere in the market. We're pleased to team with Commvault to help joint customers respond faster, reduce risk, and confidently adopt AI and cloud at scale while advancing resiliency." IDC further validated this approach, stating, "We believe ResOps has an opportunity to resonate with customers as it is concise with powerful implications and operational value." ResOps is a fundamentally different approach from what legacy vendors provide today. Resilience in the age of AI requires us to, one, continuously secure data at the source and monitor for anomalies; two, control the identities, human and non-human, that access and use the data autonomously; and three, predictably recover data, applications, and operations at massive scale with the lowest total cost of ownership.
Speaker #3: We're pleased to team with COMMVAULT to help join customers respond faster, reduce risk, and confidently adopt AI and cloud at scale. While advancing resiliency." IDC further validated this approach stating, "We believe res ops has an opportunity to resonate with customers as it is concise, with powerful implications, and operational value." Res ops is a fundamentally different approach from what legacy vendors provide today.
Speaker #3: Resilience in the age of AI requires us to, one, continuously secure data at the source and monitor for anomalies. Two, control the identities—human and non-human—that access and use the data autonomously.
Speaker #3: And three, predictably recover data applications and operations at massive scale with the lowest total cost of ownership. Let's take a moment to discuss each, starting with data security.
Sanjay Mirchandani: Let's take a moment to discuss each, starting with data security. As enterprises embrace AI and move to the cloud, they must also grapple with evolving and more sophisticated attacks. By combining Commvault's Metallic AI fabric with our multi-point Threat Scan, synthetic recovery, and Clean Room Recovery offerings, customers can secure data at the source, identify, analyze, and quarantine suspicious files, monitor for anomalies, and conduct recoveries with precision so they're ready for an inevitable attack. Case in point: by embracing our Threat Scan and risk analysis capabilities, UNC Health, a longstanding customer, is now able to scale its security with its data growth, saving time, reducing risk, supporting compliance, and advancing cyber resilience. Next, let's talk about identity resilience. According to CrowdStrike, approximately 80% of breaches involve compromised identities. Attackers don't start by encrypting data.
Let's take a moment to discuss each, starting with data security. As enterprises embrace AI and move to the cloud, they must also grapple with evolving and more sophisticated attacks. By combining Commvault's Metallic AI fabric with our multi-point Threat Scan, synthetic recovery, and Clean Room Recovery offerings, customers can secure data at the source, identify, analyze, and quarantine suspicious files, monitor for anomalies, and conduct recoveries with precision so they're ready for an inevitable attack. Case in point: by embracing our Threat Scan and risk analysis capabilities, UNC Health, a longstanding customer, is now able to scale its security with its data growth, saving time, reducing risk, supporting compliance, and advancing cyber resilience. Next, let's talk about identity resilience. According to CrowdStrike, approximately 80% of breaches involve compromised identities. Attackers don't start by encrypting data.
Speaker #3: As enterprises embrace AI and move to the cloud, they must also grapple with evolving and more sophisticated attacks. By combining COMMVAULT's metallic AI fabric with our multi-point threat scan synthetic recovery and clean room recovery offerings, customer scan secure data at the source, identify, analyze, and quarantine suspicious files, monitor for anomalies, and conduct recoveries with precision so they're ready for an inevitable attack.
Speaker #3: By embracing our Threat Scan and Case in risk analysis capabilities, UNC Health, a longstanding customer, is now able to scale its security with its data growth.
Speaker #3: Saving time, reducing risk, supporting compliance, and advancing cyber resilience. Next, let's talk about identity resilience. According to CrowdStrike, approximately 80% of breaches involve compromised identities.
Speaker #3: Attackers don't start by encrypting data. They compromise valid credentials and escalate privileges. Putting identity at the center of cyber risk. COMMVAULT Cloud's growing identity resilience capabilities enable enterprises to easily track and mitigate unauthorized or accidental changes to identity systems like Active Directory and Tri-D, and Okta.
Sanjay Mirchandani: They compromise valid credentials and escalate privileges, putting identity at the center of cyber risk. Commvault Cloud's growing identity resilience capabilities enable enterprises to easily track and mitigate unauthorized or accidental changes to identity systems like Active Directory, Entra ID, and Okta. As Eric Baier of Jazwares, a Berkshire Hathaway company, explained, "Commvault's innovation with identity resilience will allow us to detect and roll back malicious identity changes as they happen so that we can maintain reliable authentication and access control while strengthening our overall cyber resilience." In Q3, hundreds of customers embraced our identity resilience capabilities. An ARR from just our Active Directory offering has more than doubled year over year. In just 2 years, it has become one of our largest SaaS offerings. And finally, we cannot discuss resilience operations without addressing recovery, particularly for cloud-native and cloud-bound enterprises.
They compromise valid credentials and escalate privileges, putting identity at the center of cyber risk. Commvault Cloud's growing identity resilience capabilities enable enterprises to easily track and mitigate unauthorized or accidental changes to identity systems like Active Directory, Entra ID, and Okta. As Eric Baier of Jazwares, a Berkshire Hathaway company, explained, "Commvault's innovation with identity resilience will allow us to detect and roll back malicious identity changes as they happen so that we can maintain reliable authentication and access control while strengthening our overall cyber resilience." In Q3, hundreds of customers embraced our identity resilience capabilities. An ARR from just our Active Directory offering has more than doubled year over year. In just 2 years, it has become one of our largest SaaS offerings. And finally, we cannot discuss resilience operations without addressing recovery, particularly for cloud-native and cloud-bound enterprises.
Speaker #3: As Eric Baer of Jasware, a Berkshire Hathaway company, explained, Commvault's innovation with identity resilience will allow us to detect and roll back malicious identity changes as they happen.
Speaker #3: So that we can maintain reliable authentication and access control while strengthening our overall cyber resilience. In Q3, hundreds of customers embraced our identity resilience capabilities.
Speaker #3: An ARR from just our Active Directory offering has more than doubled year over year. In just two years, it has become one of our largest SaaS offerings.
Speaker #3: And finally, we cannot discuss resilience operations without addressing recovery, particularly for cloud-native and cloud-bound enterprises. In Q3, we saw accelerated momentum with our cloud-native offerings, including Glumio.
Sanjay Mirchandani: In Q3, we saw accelerated momentum with our cloud-native offerings, including Clumio. For example, Clarify, a pioneer in AI-driven predictive health, chose Clumio to safeguard its sensitive AI data that fuels next-generation risk prediction models. Our ongoing innovation with Clumio also speaks to our longstanding collaboration with Amazon Web Services. In Q3, we achieved AWS resilience competency in the recovery category, and we were named the 2025 AWS Global Storage Partner of the Year. Additionally, GigaOm named Commvault a leader in its cloud data protection radar. Commvault Cloud also supports recovery of massive AI workloads and pipelines like object stores, data lakes, analytics platforms, and vector databases. In Q3, we announced a new partnership with Pinecone that will bring greater resilience to the vector databases within enterprise AI stacks. Delivered via Commvault Cloud, the solution will support Pinecone deployments across AWS, Azure, and Google Cloud.
In Q3, we saw accelerated momentum with our cloud-native offerings, including Clumio. For example, Clarify, a pioneer in AI-driven predictive health, chose Clumio to safeguard its sensitive AI data that fuels next-generation risk prediction models. Our ongoing innovation with Clumio also speaks to our longstanding collaboration with Amazon Web Services. In Q3, we achieved AWS resilience competency in the recovery category, and we were named the 2025 AWS Global Storage Partner of the Year. Additionally, GigaOm named Commvault a leader in its cloud data protection radar. Commvault Cloud also supports recovery of massive AI workloads and pipelines like object stores, data lakes, analytics platforms, and vector databases. In Q3, we announced a new partnership with Pinecone that will bring greater resilience to the vector databases within enterprise AI stacks. Delivered via Commvault Cloud, the solution will support Pinecone deployments across AWS, Azure, and Google Cloud.
Speaker #3: For example, Clarity, a pioneer in AI-driven predictive health, chose Glumio to safeguard its sensitive AI data that fuels next-generation risk prediction models. Our ongoing innovation with Glumio also speaks to our longstanding collaboration with Amazon Web Services.
Speaker #3: In Q3, we achieved AWS Resilience Competency in the Recovery category. And we were named the 2025 AWS Global Storage Partner of the Year. Additionally, GigaOm named Commvault a leader in its Cloud Data Protection Radar.
Speaker #3: COMMVAULT Cloud also supports recovery of massive AI workloads and pipelines like object stores, data lakes, analytics platforms, and vector databases. In Q3, we announced a new partnership with Pinecone that will bring greater resilience to the vector databases within enterprise AI stacks.
Speaker #3: Delivered via Commvault Cloud, the solution will support Pinecone deployments across AWS, Azure, and Google Cloud. Its target is for general availability in Q2 of calendar 2026.
Sanjay Mirchandani: It's targeted for general availability in Q2 of calendar 2026. We believe that AI is an emerging tailwind for us. It dramatically increases the volume of data that needs to be protected, introduces new threats that need to be addressed, and requires a solution that brings resilience to the services, models, and databases that power AI. Our Commvault Cloud Unity platform is ideally suited to help customers address these evolving AI requirements. I'd be remiss if I didn't discuss our focus on data and cloud sovereignty. Over the years, we've always met our customers' evolving needs, including their data sovereignty requirements. Now, we're taking it a step further by supporting regional sovereign clouds. In December, we announced that Commvault is a launch partner for the AWS European Sovereign Cloud.
It's targeted for general availability in Q2 of calendar 2026. We believe that AI is an emerging tailwind for us. It dramatically increases the volume of data that needs to be protected, introduces new threats that need to be addressed, and requires a solution that brings resilience to the services, models, and databases that power AI. Our Commvault Cloud Unity platform is ideally suited to help customers address these evolving AI requirements. I'd be remiss if I didn't discuss our focus on data and cloud sovereignty. Over the years, we've always met our customers' evolving needs, including their data sovereignty requirements. Now, we're taking it a step further by supporting regional sovereign clouds. In December, we announced that Commvault is a launch partner for the AWS European Sovereign Cloud.
Speaker #3: We believe that AI is an emerging tailwind for us. It dramatically increases the volume of data that needs to be protected. Introduces new threats that need to be addressed.
Speaker #3: And requires a solution that brings resilience to the services, models, and databases that power AI. Our Commvault Cloud Unity platform is ideally suited to help customers address these evolving AI requirements.
Speaker #3: I'd be remiss if I didn't discuss our focus on data and cloud sovereignty. Over the years, we've always met our customers' evolving needs, including their data sovereignty requirements.
Speaker #3: Now, we're taking it a step further by supporting regional sovereign clouds. In December, we announced that COMMVAULT is a launch partner for the AWS European Sovereign Cloud.
Speaker #3: Together, our plans are to provide European organizations with a secure solution that is purpose-built for cloud, delivering cost-optimized resilience at scale for AWS customers.
Sanjay Mirchandani: Together, our plans are to provide European organizations with a secure solution that is purpose-built for cloud, delivering cost-optimized resilience at scale for AWS customers. We're working closely with other partners on cloud sovereignty as well. This is an emerging space, and we'll have more to say about this soon. Let me close with this: this quarter, we continue to capitalize on strong market growth through innovation leadership and execution excellence, and we're seeing record customer engagement and adoption. We believe Commvault Cloud Unity is the breakthrough platform customers need in the AI era. We anticipate we will finish the year with solid results that reflect both our leadership in the market and the trust our customers place in Commvault. Thank you. Now I'll turn it over to our Chief Accounting Officer, Danielle Abrahamsen, to discuss the financial details. Danielle?
Together, our plans are to provide European organizations with a secure solution that is purpose-built for cloud, delivering cost-optimized resilience at scale for AWS customers. We're working closely with other partners on cloud sovereignty as well. This is an emerging space, and we'll have more to say about this soon. Let me close with this: this quarter, we continue to capitalize on strong market growth through innovation leadership and execution excellence, and we're seeing record customer engagement and adoption. We believe Commvault Cloud Unity is the breakthrough platform customers need in the AI era. We anticipate we will finish the year with solid results that reflect both our leadership in the market and the trust our customers place in Commvault. Thank you. Now I'll turn it over to our Chief Accounting Officer, Danielle Abrahamsen, to discuss the financial details. Danielle?
Speaker #3: We're working closely with other partners on cloud sovereignty as well. This is an emerging space, and we'll have more to say about this soon.
Speaker #3: Let me close with this. This quarter, we continue to capitalize on strong market growth through innovation leadership and execution excellence. And we're seeing record customer engagement and adoption.
Speaker #3: We believe COMMVAULT Cloud Unity is the breakthrough platform customers need in the AI era. And we anticipate we will finish the year with solid results that reflect both our leadership in the market and the trust our customers place in COMMVAULT.
Speaker #3: Thank you. Now I'll turn it over to our Chief Accounting Officer, Daniel Abrahamson, to discuss the financial details.
Speaker #3: Daniel? Thanks, Sanjay.
Danielle Abrahamsen: Thanks, Sanjay. And good morning, everyone. As Sanjay highlighted, our Q3 results reflect the growing demand for our Commvault Cloud platform, as customers continue to rely on us to keep them resilient in the face of attacks while advancing their hybrid cloud and AI journeys. I'll recap our Q3 results and operating metrics, followed by an update on Q4 and Fiscal 26 guidance. As a reminder, all growth rates are on a year-over-year basis unless otherwise noted. For Q3, total revenue growth accelerated 19% to $314 million, driven by a 30% increase in subscription revenue, which reached $206 million. Subscription revenue was led by a robust 44% increase in SaaS revenue and one of our strongest customer acquisition quarters in years. Term software revenue grew a healthy 22% to $119 million. We saw strong growth across all geographies and customer sizes, with notable strength from large enterprise accounts.
Danielle Abrahamsen: Thanks, Sanjay. And good morning, everyone. As Sanjay highlighted, our Q3 results reflect the growing demand for our Commvault Cloud platform, as customers continue to rely on us to keep them resilient in the face of attacks while advancing their hybrid cloud and AI journeys. I'll recap our Q3 results and operating metrics, followed by an update on Q4 and Fiscal 26 guidance. As a reminder, all growth rates are on a year-over-year basis unless otherwise noted. For Q3, total revenue growth accelerated 19% to $314 million, driven by a 30% increase in subscription revenue, which reached $206 million. Subscription revenue was led by a robust 44% increase in SaaS revenue and one of our strongest customer acquisition quarters in years. Term software revenue grew a healthy 22% to $119 million. We saw strong growth across all geographies and customer sizes, with notable strength from large enterprise accounts.
Speaker #2: And good morning, everyone. As Sanjay highlighted, our Q3 results reflect the growing demand for our Commvault Cloud platform, as customers continue to rely on us to keep them resilient in the face of attacks, while advancing their hybrid cloud and AI journeys.
Speaker #2: I'll recap our Q3 results and operating metrics, followed by an update on Q4 and fiscal 26 guidance. As a reminder, all growth rates are on a year-over-year basis unless otherwise noted.
Speaker #2: For Q3, total revenue growth accelerated 19% to $314 million, driven by a 30% increase in subscription revenue, which reached $206 million. Subscription revenue was led by a robust 44% increase in SaaS revenue, and one of our strongest customer acquisition quarters in years.
Speaker #2: Term software revenue grew a healthy 22% to $119 million. We saw strong growth across all geographies and customer sizes, with notable strength from large enterprise accounts.
Speaker #2: Revenue from term software transactions over $100,000 rose 25%, driven by notable gains in both transaction volume and average deal size. Additionally, the volume and dollar value of million-dollar software deals increased year over year.
Danielle Abrahamsen: Revenue from term software transactions over $100,000 rose 25%, driven by notable gains in both transaction volume and average deal size. Additionally, the volume and dollar value of million-dollar software deals increased year-over-year, underscoring our standing as the preferred vendor for enterprise customers. We added approximately 700 new subscription customers, and we ended the quarter with over 14,000 subscription customers. Q3 was our best quarter ever for net new term software customer additions and our second-best ever SaaS customer acquisition quarter. Now I'll discuss ARR. Subscription ARR, which we believe is the best indicator of the company's health and growth, increased 28% to $941 million. This was driven by 40% growth in SaaS ARR to $364 million. Subscription ARR now represents 87% of total ARR, compared to 83% one year ago. Total ARR increased by 22% to $1.085 billion.
Revenue from term software transactions over $100,000 rose 25%, driven by notable gains in both transaction volume and average deal size. Additionally, the volume and dollar value of million-dollar software deals increased year-over-year, underscoring our standing as the preferred vendor for enterprise customers. We added approximately 700 new subscription customers, and we ended the quarter with over 14,000 subscription customers. Q3 was our best quarter ever for net new term software customer additions and our second-best ever SaaS customer acquisition quarter. Now I'll discuss ARR. Subscription ARR, which we believe is the best indicator of the company's health and growth, increased 28% to $941 million. This was driven by 40% growth in SaaS ARR to $364 million. Subscription ARR now represents 87% of total ARR, compared to 83% one year ago. Total ARR increased by 22% to $1.085 billion.
Speaker #2: Underscoring our standing as the preferred vendor for enterprise customers. We added approximately $700 new subscription customers and we ended the quarter with over 14,000 subscription customers.
Speaker #2: Q3 was our best quarter ever for net new term software customer additions, and our second-best ever SaaS customer acquisition quarter. Now, I'll discuss ARR.
Speaker #2: Subscription ARR, which we believe is the best indicator of the company's health and growth, increased 28% to $941 million. This was driven by 40% growth in SaaS ARR to $364 million.
Speaker #2: Subscription ARR now represents 87% of total ARR, compared to 83% one year ago. Total ARR increased by 22% to $1.085 billion. Existing customer expansion was healthy in Q3, with SaaS net dollar retention of $121%, consistent with best-in-class SaaS platforms.
Danielle Abrahamsen: Existing customer expansion was healthy in Q3, with SaaS net dollar retention of 121%, consistent with best-in-class SaaS platforms. Our SaaS net dollar retention reflects a few things: one, a growing install base, which is now over 9,000 customers; two, the impact of rapidly adding new SaaS customers, which is forward-looking and not yet reflected in our net dollar retention; and three, a mixed shift of some product capabilities with certain early adopter customers. We saw solid momentum across our identity and resilience offerings, which collectively represented approximately 30% of net new ARR. Now I'll discuss our profitability and free cash flow. Fiscal Q3 growth margins improved 100 basis points sequentially to 81.5%, which reflects a higher mix of software sales. In addition, we saw improved economies of scale and product efficiencies that we expect to continue in Q4. Operating expenses of $193 million represented 62% of total revenue.
Existing customer expansion was healthy in Q3, with SaaS net dollar retention of 121%, consistent with best-in-class SaaS platforms. Our SaaS net dollar retention reflects a few things: one, a growing install base, which is now over 9,000 customers; two, the impact of rapidly adding new SaaS customers, which is forward-looking and not yet reflected in our net dollar retention; and three, a mixed shift of some product capabilities with certain early adopter customers. We saw solid momentum across our identity and resilience offerings, which collectively represented approximately 30% of net new ARR. Now I'll discuss our profitability and free cash flow. Fiscal Q3 growth margins improved 100 basis points sequentially to 81.5%, which reflects a higher mix of software sales. In addition, we saw improved economies of scale and product efficiencies that we expect to continue in Q4. Operating expenses of $193 million represented 62% of total revenue.
Speaker #2: Our SaaS net dollar retention reflects a few things. One, a growing install base, which is now over 9,000 customers. Two, the impact of rapidly adding new SaaS customers, which is forward-looking and not yet reflected in our net dollar retention.
Speaker #2: And three, a mixed shift of some product capabilities with certain early adopter customers. We saw solid momentum across our identity and resilience offerings, which collectively represented approximately 30% of net new ARR.
Speaker #2: Now, I'll discuss our profitability and free cash flow. Fiscal Q3 gross margins improved 100 basis points sequentially, to 81.5%, which reflects a higher mix of software sales.
Speaker #2: In addition, we saw improved economies of scale and product efficiencies that we expect to continue in Q4. Operating expenses of $193 million represented 62% of total revenue.
Speaker #2: Operating expenses reflect higher commissions and bonuses on strong year-to-date sales performance and the trailing run rate of initiatives to support our ongoing growth trajectory.
Danielle Abrahamsen: Operating expenses reflect higher commission and bonuses on strong year-to-date sales performance, and the trailing run rate of initiatives to support our ongoing growth trajectory. Non-GAAP EBIT was $61 million, reflecting a margin of 19.6%. In Fiscal Q3, we achieved the rule of 40, reflecting a healthy balance between revenue and profitability. Year to date, we're operating at a rule of 41, consistent with our responsible growth philosophy. In line with this approach, at the end of Q3, we initiated a cost optimization program aimed to align our cost structure to the evolving needs of the business. Turning to key balance sheet and cash flow indicators, we repurchased $41 million of stock during the quarter, bringing the year-to-date amount to $187 million. We ended the quarter with a diluted share count of approximately 45 million shares. Year to date, we have generated $105 million of free cash flow.
Operating expenses reflect higher commission and bonuses on strong year-to-date sales performance, and the trailing run rate of initiatives to support our ongoing growth trajectory. Non-GAAP EBIT was $61 million, reflecting a margin of 19.6%. In Fiscal Q3, we achieved the rule of 40, reflecting a healthy balance between revenue and profitability. Year to date, we're operating at a rule of 41, consistent with our responsible growth philosophy. In line with this approach, at the end of Q3, we initiated a cost optimization program aimed to align our cost structure to the evolving needs of the business. Turning to key balance sheet and cash flow indicators, we repurchased $41 million of stock during the quarter, bringing the year-to-date amount to $187 million. We ended the quarter with a diluted share count of approximately 45 million shares. Year to date, we have generated $105 million of free cash flow.
Speaker #2: Non-GAAP EBIT was $61 million, reflecting a margin of 19.6%. In fiscal Q3, we achieved the rule of 40, reflecting a healthy balance between revenue and profitability.
Speaker #2: Year to date, we're operating at a rule of 41, consistent with our responsible growth philosophy. In line with this approach, at the end of Q3, we initiated a cost optimization program aimed to align our cost structure to the evolving needs of the business.
Speaker #2: Turning to key balance sheet and cash flow indicators. We repurchased $41 million of stock during the quarter, bringing the year-to-date amount to $187 million.
Speaker #2: We ended the quarter with a diluted share count of approximately 45 million shares. Year to date, we have generated $105 million of free cash flow.
Speaker #2: Q3 free cash flow of $2 million was impacted by the timing of collections from sales made later in the quarter and an additional payroll cycle for both the US and Canada.
Danielle Abrahamsen: Q3 free cash flow of $2 million was impacted by the timing of collections from sales made later in the quarter and an additional payroll cycle for both the US and Canada. We expect this to normalize in Q4. Now I'll discuss our outlook for Q4 and our updated outlook for Fiscal Year 26. For Fiscal Q4 26, we expect subscription revenue, which includes both the software portion of term-based licenses and SaaS, to be in the range of $203 to $207 million. This represents 18% growth at the midpoint. We expect total revenue to be in the range of $305 to $308 million, with growth of 11% at the midpoint. As a reminder, Q4 Fiscal Year 25 benefited from several multi-year strategic land transactions. At these revenue levels, we expect Q4 consolidated gross margins to be approximately 81%. We expect Q4 non-GAAP EBIT margins of approximately 19%.
Q3 free cash flow of $2 million was impacted by the timing of collections from sales made later in the quarter and an additional payroll cycle for both the US and Canada. We expect this to normalize in Q4. Now I'll discuss our outlook for Q4 and our updated outlook for Fiscal Year 26. For Fiscal Q4 26, we expect subscription revenue, which includes both the software portion of term-based licenses and SaaS, to be in the range of $203 to $207 million. This represents 18% growth at the midpoint. We expect total revenue to be in the range of $305 to $308 million, with growth of 11% at the midpoint. As a reminder, Q4 Fiscal Year 25 benefited from several multi-year strategic land transactions. At these revenue levels, we expect Q4 consolidated gross margins to be approximately 81%. We expect Q4 non-GAAP EBIT margins of approximately 19%.
Speaker #2: We expect this to normalize in Q4. Now, I'll discuss our outlook for Q4 and our updated outlook for fiscal year '26. For fiscal Q4 '26, we expect subscription revenue, which includes both the software portion of term-based licenses and SaaS, to be in the range of $203 million to $207 million.
Speaker #2: This represents 18% growth at the midpoint. We expect total revenue to be in the range of $305 to $308 million. With growth of 11% at the midpoint.
Speaker #2: As a reminder, Q4 fiscal year 25 benefited from several multi-year strategic land transactions. At these revenue levels, we expect Q4 consolidated growth margins to be approximately 81%.
Speaker #2: We expect Q4 non-GAAP EBIT margins of approximately 19%. Now, I'll discuss our updated fiscal year 2026 guidance. As a reminder, ARR guidance is in constant currency, using FX rates as of March 31, 2025.
Danielle Abrahamsen: Now I'll discuss our updated Fiscal Year 2026 guidance. As a reminder, ARR guidance is in constant currency using FX rates as of 31 March 2025. For historical comparison, please refer to our Q3 earnings presentation. We expect constant currency Fiscal 26 total ARR growth to be approximately 18%, driven by an estimated 24% growth in subscription ARR. This guidance reflects the flow-through of our Q3 results and is within our prior range. From a full-year Fiscal 26 revenue perspective, we are raising subscription revenue to be in the range of $764 to $768 million, growing 30% at the midpoint. We are also increasing total revenue to a range of $1.177 billion to $1.18 billion, representing growth of 18% at the midpoint. Moving to our full-year Fiscal 26 margin, EBIT, and free cash flow outlook. We now expect gross margins to be 81% to 81.5%.
Now I'll discuss our updated Fiscal Year 2026 guidance. As a reminder, ARR guidance is in constant currency using FX rates as of 31 March 2025. For historical comparison, please refer to our Q3 earnings presentation. We expect constant currency Fiscal 26 total ARR growth to be approximately 18%, driven by an estimated 24% growth in subscription ARR. This guidance reflects the flow-through of our Q3 results and is within our prior range. From a full-year Fiscal 26 revenue perspective, we are raising subscription revenue to be in the range of $764 to $768 million, growing 30% at the midpoint. We are also increasing total revenue to a range of $1.177 billion to $1.18 billion, representing growth of 18% at the midpoint. Moving to our full-year Fiscal 26 margin, EBIT, and free cash flow outlook. We now expect gross margins to be 81% to 81.5%.
Speaker #2: For historical comparison, please refer to our Q3 earnings presentation. We expect constant currency fiscal 26 total ARR growth to be approximately 18%, driven by an estimated 24% growth in subscription ARR.
Speaker #2: This guidance reflects the flow-through of our Q3 results and is within our prior range. From a full year, fiscal 26 revenue perspective, we are raising subscription revenue to be in the range of $764 to $768 million.
Speaker #2: Growing 30% at the midpoint. We are also increasing total revenue to a range of $1.177 billion to $1.18 billion. Representing growth of 18% at the midpoint.
Speaker #2: Moving to our full-year fiscal 2026 margin, EBIT, and free cash flow outlook. We now expect gross margins to be 81% to 81.5%. This increased range reflects continued growth in our SaaS platform.
Danielle Abrahamsen: This increased range reflects continued growth in our SaaS platform, and we are increasing our non-GAAP EBIT margin guidance to a range of 19% to 20%. We now expect our full-year free cash flow outlook to range from $215 to $220 million. This guidance reflects approximately $12 to $15 million in one-time payments related to our cost optimization program. Finally, from a capital allocation perspective, our Board of Directors approved recommitting our share repurchase authorization back to $250 million. Share repurchases remain an important part of our capital allocation philosophy, and we intend to remain active and opportunistic in the market. To summarize, the scale and product initiatives we undertook over the last 18 months have contributed to our improved momentum and positioned us as the cyber resilience provider of choice for large enterprises.
This increased range reflects continued growth in our SaaS platform, and we are increasing our non-GAAP EBIT margin guidance to a range of 19% to 20%. We now expect our full-year free cash flow outlook to range from $215 to $220 million. This guidance reflects approximately $12 to $15 million in one-time payments related to our cost optimization program. Finally, from a capital allocation perspective, our Board of Directors approved recommitting our share repurchase authorization back to $250 million. Share repurchases remain an important part of our capital allocation philosophy, and we intend to remain active and opportunistic in the market. To summarize, the scale and product initiatives we undertook over the last 18 months have contributed to our improved momentum and positioned us as the cyber resilience provider of choice for large enterprises.
Speaker #2: And we are increasing our non-GAAP EBIT margin guidance to a range of 19% to 20%. We now expect our full-year free cash flow outlook to range from $215 million to $220 million.
Speaker #2: This guidance reflects approximately 12 to 15 million dollars in one-time payments related to our cost optimization program. Finally, from a capital allocation perspective, our board of directors approved recommitting our share repurchase authorization back to $250 million.
Speaker #2: Share repurchases remain an important part of our capital allocation philosophy, and we intend to remain active and opportunistic in the market. To summarize, the scale and product initiatives we undertook over the last 18 months have contributed to our improved momentum and positioned us as the cyber resilience provider of choice for large enterprises.
Speaker #2: Commvault Cloud Unity further extends our innovation leadership, and we are excited to capitalize on the strong customer reception to our enhanced platform in fiscal ’27 and beyond.
Danielle Abrahamsen: Commvault Cloud Unity further extends our innovation leadership, and we are excited to capitalize on the strong customer reception to our enhanced platform in Fiscal 2027 and beyond. Now I will turn it back to the operator to open the line for questions. Operator?
Commvault Cloud Unity further extends our innovation leadership, and we are excited to capitalize on the strong customer reception to our enhanced platform in Fiscal 2027 and beyond. Now I will turn it back to the operator to open the line for questions. Operator?
Speaker #2: Now, I will turn it back to the operator to open the line for questions. Operator. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.
Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Aaron Rakers of Wells Fargo. Your line is now open. Please go ahead.
Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Aaron Rakers of Wells Fargo. Your line is now open. Please go ahead.
Speaker #2: We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Aaron Rickers of Wells Fargo.
Speaker #2: Your line is now open. Please go ahead.
Speaker #2: ahead. Yeah.
Sanjay Mirchandani: Yeah. Thank you very much for taking a question. I have two, if I can, real quick. First, I was wondering if you could unpack the, I guess it's the free cash flow, but particularly the accounts receivable increase and the DSO increase in the quarter. I know you had alluded to, you know, later in the quarter, kind of receivable collection. So can you unpack that? Just help me understand why DSO has gone up so much and what you saw towards the end of the quarter, just given linearity.
Aaron Rakers: Yeah. Thank you very much for taking a question. I have two, if I can, real quick. First, I was wondering if you could unpack the, I guess it's the free cash flow, but particularly the accounts receivable increase and the DSO increase in the quarter. I know you had alluded to, you know, later in the quarter, kind of receivable collection. So can you unpack that? Just help me understand why DSO has gone up so much and what you saw towards the end of the quarter, just given linearity.
Speaker #3: Thank you very much for taking a question. I have two, if I can, real quick. First, I was wondering if you could unpack the— I guess it’s the free cash flow, but particularly the accounts receivable increase and the DSO increase in the quarter.
Speaker #3: I know you had alluded to later in the quarter kind of receivable collection, so can you unpack that? Just help me understand why DSO has gone up so much and what you saw towards the end of the quarter, just given linearity.
Speaker #4: Yeah. Hey, Aaron. This is Danielle. Good to talk to you again. So, I know I talked about this in my prepared remarks, and you kind of hit on it, right?
Danielle Abrahamsen: Yeah. Hey, Aaron. This is Danielle. Good to talk to you again. So I know I talked about this in my prepared remarks, and you kind of hit on it, right? But one of the things we saw this quarter, and it's not uncommon in Q3, I'll be honest. Q3 has a tendency to be one of our most pressured free cash flow quarters. And it's really just because the way the sales cycles work with the calendar year-end, we have a tendency to see more deals close in the last few weeks of the quarter. And this quarter was no exception to that. I can tell you over 60% of our deals actually closed in the last few weeks of the quarter. And so what you see in free cash flow is really the reflection of that.
Danielle Abrahamsen: Yeah. Hey, Aaron. This is Danielle. Good to talk to you again. So I know I talked about this in my prepared remarks, and you kind of hit on it, right? But one of the things we saw this quarter, and it's not uncommon in Q3, I'll be honest. Q3 has a tendency to be one of our most pressured free cash flow quarters. And it's really just because the way the sales cycles work with the calendar year-end, we have a tendency to see more deals close in the last few weeks of the quarter. And this quarter was no exception to that. I can tell you over 60% of our deals actually closed in the last few weeks of the quarter. And so what you see in free cash flow is really the reflection of that.
Speaker #4: But one of the things we saw this quarter—and it's not uncommon in Q3, I'll be honest—Q3 has a tendency to be one of our most pressured free cash flow quarters.
Speaker #4: And it's really just because the way the sales cycles work with the calendar year-end. We have a tendency to see more deals close in the last few weeks of the quarter.
Speaker #4: And this quarter was no exception to that. I can tell you, over 60% of our deals actually closed in the last few weeks of the quarter.
Speaker #4: And so what you see in free cash flow is really the reflection of that. The other thing I'll call out is we had an additional payroll cycle for both the US and Canada that's not normal for us in a quarter.
Danielle Abrahamsen: The other thing I'll call out is we had an additional payroll cycle for both the US and Canada. That's not normal for us in a quarter. And obviously, the US is one of our largest payrolls, right? So both of those things are putting pressure on free cash flow. I do want to highlight our free cash flow guidance for the year. If you normalize for the one-time payments that we're making in Q4 tied to the cost optimization program, it remains unchanged.
Danielle Abrahamsen: The other thing I'll call out is we had an additional payroll cycle for both the US and Canada. That's not normal for us in a quarter. And obviously, the US is one of our largest payrolls, right? So both of those things are putting pressure on free cash flow. I do want to highlight our free cash flow guidance for the year. If you normalize for the one-time payments that we're making in Q4 tied to the cost optimization program, it remains unchanged.
Speaker #4: And obviously, the US is one of our largest payrolls, right? So both of those things are putting pressure on free cash flow. I do want to highlight our free cash flow guidance for the year.
Speaker #4: If you normalize for the one-time payments that we're making in Q4 tied to the cost optimization program, it remains unchanged.
Speaker #3: Yep. And then as a quick follow-up, I can appreciate you're not giving guidance beyond this fiscal year, but I know in your slide deck you highlight again kind of the TAM expectations growing at a 12% CAGR—I think $38 billion, kind of the longer-term total addressable market opportunity.
Sanjay Mirchandani: Yep. And as a quick follow-up, I can appreciate you're not giving a guidance beyond this fiscal year, but I know in your slide deck you highlight, again, kind of the TAM expectations growing at a 12% CAGR, I think $38 billion, kind of the longer-term total addressable market opportunity. I'm curious, when you're asked about kind of the longer-term growth narrative, is the 12% a good underpinning growth rate to think about as we look out beyond this year? How are you thinking about the competitive landscape, the ability to take share in the context of that TAM growth expectation? Thank you.
Aaron Rakers: Yep. And as a quick follow-up, I can appreciate you're not giving a guidance beyond this fiscal year, but I know in your slide deck you highlight, again, kind of the TAM expectations growing at a 12% CAGR, I think $38 billion, kind of the longer-term total addressable market opportunity. I'm curious, when you're asked about kind of the longer-term growth narrative, is the 12% a good underpinning growth rate to think about as we look out beyond this year? How are you thinking about the competitive landscape, the ability to take share in the context of that TAM growth expectation? Thank you.
Speaker #3: I'm curious, when you're asked about kind of the longer-term growth narrative, is the 12% a good underpinning growth rate to think about as we look out beyond this year?
Speaker #3: How are you thinking about the competitive landscape, and the ability to take share in the context of that TAM growth expectation? Thank you.
Speaker #4: Yeah. No. Thanks for the question again. We're not going to talk about next year right now, right? We will obviously alongside the new CFO conversations, we will talk about what we're thinking for next fiscal year at a later time, so.
Danielle Abrahamsen: Yeah. No, thanks for the question again. We're not going to talk about next year right now, right? We will, obviously, alongside the new CFO conversations, we will talk about what we're thinking for next fiscal year at a later time, so.
Danielle Abrahamsen: Yeah. No, thanks for the question again. We're not going to talk about next year right now, right? We will, obviously, alongside the new CFO conversations, we will talk about what we're thinking for next fiscal year at a later time, so.
Speaker #3: Hey, Aaron, and just—this is Sanjay. Again, just to reiterate, the business is in a good place. We had our best land software quarter ever.
Sanjay Mirchandani: Hey, Aaron, and this is Sanjay. Again, just to reiterate, the business is in a good place. We had our best land software quarter ever. We had our second-best land SaaS quarter ever. Our Rule of 40 continues to be consistent. Across the board, the new platform releases bodes really well based on everything we've seen. So we will obviously, at the right time, share more of that. But we have no—I think we will definitely outpace market. Yeah. Yep. Thank you, Sanjay. Thanks.
Sanjay Mirchandani: Hey, Aaron, and this is Sanjay. Again, just to reiterate, the business is in a good place. We had our best land software quarter ever. We had our second-best land SaaS quarter ever. Our Rule of 40 continues to be consistent. Across the board, the new platform releases bodes really well based on everything we've seen. So we will obviously, at the right time, share more of that. But we have no—I think we will definitely outpace market.
Speaker #3: We had our second-best Land SaaS quarter ever. Our Rule of 40 continues to be consistent. Across the board, the platform, the new platform releases bode really well based on everything we've seen.
Speaker #3: So we will obviously at the right time share more of that. So but we are we have no I think we will definitely outpace market.
Operator: Your next question comes from the line of Jason Ader with William Blair. Please go ahead.
Operator: Your next question comes from the line of Jason Ader with William Blair. Please go ahead.
Speaker #2: The question comes from the line of Jason Ader with William Blair. Please go ahead.
Speaker #5: Yeah. Thank you. Just first, on the currency situation—was this in line with your expectations? I know you gave guidance. You had a nice beat on the revenue and the ARR.
[Analyst]: Yeah. Thank you. Just first, on the currency situation, was this in line with your expectations? I know you gave guidance. You had a nice beat on the revenue and the ARR. Was there an extra benefit relative to your expectations from currency?
Jason Ader: Yeah. Thank you. Just first, on the currency situation, was this in line with your expectations? I know you gave guidance. You had a nice beat on the revenue and the ARR. Was there an extra benefit relative to your expectations from currency?
Speaker #5: Was there an extra benefit relative to your expectations from
Speaker #5: currency? Sorry,
Danielle Abrahamsen: Sorry, Jason. I think I'm a little confused by your question. Which metric are you referring to?
Danielle Abrahamsen: Sorry, Jason. I think I'm a little confused by your question. Which metric are you referring to?
Speaker #4: Jason, I think I'm a little confused by your question. Which metric are you—
Speaker #4: referring to?
Speaker #5: Well,
Speaker #5: You gave guidance on a reported basis, right? And I just wanted to know.
[Analyst]: Well, you gave guidance on a reported basis, right? I just wanted to know.
Jason Ader: Well, you gave guidance on a reported basis, right? I just wanted to know.
Speaker #4: You're talking about for revenue?
Danielle Abrahamsen: You're talking about for revenue?
Danielle Abrahamsen: You're talking about for revenue?
Speaker #5: And ARR, both.
[Analyst]: And ARR, both.
Jason Ader: And ARR, both.
Speaker #4: Yeah. So we've.
Danielle Abrahamsen: Yeah. So we.
Danielle Abrahamsen: Yeah. So we.
Speaker #5: And currency in line with your expectations.
[Analyst]: Currency in line with your expectations?
Jason Ader: Currency in line with your expectations?
Speaker #4: Yeah. So on a reported basis for revenue, currency was in line with our expectation. From an ARR perspective, we actually give we don't give we only give annual guidance on ARR, and we do that on a constant currency basis.
Speaker #4: Yeah, so on a reported basis for revenue, currency was in line with our expectation. From an ARR perspective, we actually only give annual guidance on ARR, and we do that on a constant currency basis.
Danielle Abrahamsen: Yeah. So on a reported basis for revenue, currency was in line with our expectation. From an ARR perspective, we actually give—we only give annual guidance on ARR, and we do that on a constant currency basis.
Danielle Abrahamsen: Yeah. So on a reported basis for revenue, currency was in line with our expectation. From an ARR perspective, we actually give—we only give annual guidance on ARR, and we do that on a constant currency basis.
Speaker #5: Okay. I gotcha. All right. And then the net new ARR, I think constant currency was for total net new ARR was 39 million. I believe on the last earnings call, you guys talked about mid-40s.
[Analyst]: Okay. I gotcha. All right. And then the net new ARR, I think constant currency was for total net new ARR was $39 million. I believe on the last earnings call, you guys talked about mid-40s. So just wanted to understand, was that below what your expectations were? And if so, why?
Jason Ader: Okay. I gotcha. All right. And then the net new ARR, I think constant currency was for total net new ARR was $39 million. I believe on the last earnings call, you guys talked about mid-40s. So just wanted to understand, was that below what your expectations were? And if so, why?
Speaker #5: So, just want to understand—was that below what your expectations were? And if so, why?
Speaker #4: Yeah. So let me unpack that a little bit, right? So and as we mentioned on the call, we had a really strong new customer quarter.
Danielle Abrahamsen: Yeah. So let me unpack that a little bit, right? And as we mentioned on the call, we had a really strong new customer quarter. It was actually our top-term software new customer quarter and our second-highest customer acquisition quarter for SaaS. For SaaS in particular, I will tell you, 70% of our net new ARR was driven by SaaS. As a reminder, we land those customers at lower ASPs on average, typically two to three times what we would land a software customer with. And so what you're seeing in the ARR is just a reflection of that math. We're still very happy about that because what that does is give us the opportunity to go out, cross-sell, and gain further value with those customers. The other comment I'll make is going back to the software land piece.
Danielle Abrahamsen: Yeah. So let me unpack that a little bit, right? And as we mentioned on the call, we had a really strong new customer quarter. It was actually our top-term software new customer quarter and our second-highest customer acquisition quarter for SaaS. For SaaS in particular, I will tell you, 70% of our net new ARR was driven by SaaS. As a reminder, we land those customers at lower ASPs on average, typically two to three times what we would land a software customer with. And so what you're seeing in the ARR is just a reflection of that math. We're still very happy about that because what that does is give us the opportunity to go out, cross-sell, and gain further value with those customers. The other comment I'll make is going back to the software land piece.
Speaker #4: It was actually our top term software new customer quarter, and our second highest customer acquisition quarter for SaaS. For SaaS in particular, I will tell you 70% of our net new ARR was driven by SaaS.
Speaker #4: As a reminder, we land those customers at lower ASPs on average typically two to three times what we would land a software customer with.
Speaker #4: And so what you're seeing in the ARR is just a reflection of that math. We're still very happy about that, because what that does is give us the opportunity to go out, cross-sell, and gain further value with those customers.
Speaker #4: The other comment I'll make is, going back to the software land piece, we have a tendency to land those customers at a longer duration, so that does have some modest dilution on ARR.
Danielle Abrahamsen: We have a tendency to land those customers at a longer duration, so that does have some modest dilution on ARR.
We have a tendency to land those customers at a longer duration, so that does have some modest dilution on ARR.
Speaker #5: Okay, I guess what I'm getting at is, what I'm getting at, guys, is just what was the delta versus the $45 million that you guys had talked about?
[Analyst]: Okay. I guess what I'm getting at is what I'm getting at, guys, is just what was the delta versus the $45 million that you guys had talked about? You ended up with $39. Something must have not played out the way you expected.
Jason Ader: Okay. I guess what I'm getting at is what I'm getting at, guys, is just what was the delta versus the $45 million that you guys had talked about? You ended up with $39. Something must have not played out the way you expected.
Speaker #5: You ended up with 39. Something must have not played out the way you
Speaker #5: expected. Yeah.
Sanjay Mirchandani: Yeah. So this is Sanjay. Jason, it's really just we sold a lot of SaaS deals, land deals this quarter. And that's why we have to look at it on an annual basis because there will be variation quarter to quarter. We sell a lot of software, and it was also a big software land quarter for us. So when you take—you take that together, that kind of explains the delta, if you would. But by every stretch of the imagination, it was a very strong quarter.
Sanjay Mirchandani: Yeah. So this is Sanjay. Jason, it's really just we sold a lot of SaaS deals, land deals this quarter. And that's why we have to look at it on an annual basis because there will be variation quarter to quarter. We sell a lot of software, and it was also a big software land quarter for us. So when you take—you take that together, that kind of explains the delta, if you would. But by every stretch of the imagination, it was a very strong quarter.
Speaker #3: So this is Sanjay. Jason, it's really just—we saw a lot of SaaS deals, land deals this quarter. And that's why we have to look at it on an annual basis, because there will be variation quarter to quarter.
Speaker #3: We sell a lot of software, and it was also a big software land quarter for us. So, when you take that together, it kind of explains the delta, if you would.
Speaker #3: But by every stretch of the imagination, it was a very strong quarter.
Speaker #4: And Jason, let me just add a little bit more with the numbers too, which I think might help. Last quarter, for perspective, 61% of our net new ARR was SaaS.
Danielle Abrahamsen: Jason, let me just add a little bit more with the numbers too, which I think might help. Last quarter, for perspective, 61% of our net new ARR was SaaS. This quarter, that's 70%. Again, when you're talking landing these customers at a 2 to 3 times smaller ASP than software, that does have a significant impact on ARR.
Danielle Abrahamsen: Jason, let me just add a little bit more with the numbers too, which I think might help. Last quarter, for perspective, 61% of our net new ARR was SaaS. This quarter, that's 70%. Again, when you're talking landing these customers at a 2 to 3 times smaller ASP than software, that does have a significant impact on ARR.
Speaker #4: This quarter, that's 70%. Again, when you're talking about landing these customers at a two to three times smaller ASP than software, that does have a significant impact on ARR.
Speaker #5: Gotcha. Okay, so the explanation, if I can summarize, is just you're seeing a bigger shift to SaaS than maybe you expected at the beginning when you gave the guidance.
[Analyst]: Gotcha. Okay. So the explanation, if I can summarize, is just you're seeing a bigger shift to SaaS than maybe you expected at the beginning when you gave the guidance, and that had an impact on the number.
Jason Ader: Gotcha. Okay. So the explanation, if I can summarize, is just you're seeing a bigger shift to SaaS than maybe you expected at the beginning when you gave the guidance, and that had an impact on the number.
Speaker #5: And that had an impact on the
Speaker #3: Yes. And
Sanjay Mirchandani: Yes.
Sanjay Mirchandani: Yes.
Speaker #4: Correct. number.
Danielle Abrahamsen: Correct.
Danielle Abrahamsen: Correct.
Speaker #3: larger software deals as well.
Sanjay Mirchandani: And larger software deals as well.
Sanjay Mirchandani: And larger software deals as well.
Speaker #4: Land software deals with longer durations.
Speaker #4: Land software deals with longer durations.
Danielle Abrahamsen: Land software deals with longer durations. Yeah.
Danielle Abrahamsen: Land software deals with longer durations. Yeah.
Speaker #4: Yes. Okay.
[Analyst]: Okay. Thank you.
Jason Ader: Okay. Thank you.
Speaker #3: Thank Thank you.
Speaker #3: you. Thank
Speaker #3: you. Thank
Sanjay Mirchandani: Thank you.
Danielle Abrahamsen: Thank you.
Operator: Thank you. Your next question comes from the line of James Fish with Piper Sandler.
Operator: Thank you. Your next question comes from the line of James Fish with Piper Sandler.
Speaker #2: Your next question comes from the line of James Fish with Piper.
Speaker #2: Sandler. Hey, guys.
Operator: Hey, guys. Appreciate the questions here. First, how much does Unity impact this shift from sort of term to SaaS, if at all? And second, can you just help us understand if SaaS is so strong? And I get it. The base is getting bigger and more anniversary and Clumio, but why the 4% sequential drop in cloud net retention rate this quarter?
James Fish: Hey, guys. Appreciate the questions here. First, how much does Unity impact this shift from sort of term to SaaS, if at all? And second, can you just help us understand if SaaS is so strong? And I get it. The base is getting bigger and more anniversary and Clumio, but why the 4% sequential drop in cloud net retention rate this quarter?
Speaker #3: Appreciate the questions here. First, how much does Unity impact this shift from sort of term to SaaS, if at all? And second, can you just help us understand, if SaaS is so strong...
Speaker #3: And I get it, the base is getting bigger and more anniversary and Clumio, but why the 4% sequential drop in cloud net retention rate this quarter?
Speaker #3: Okay. Jim and Sanjay, so Unity, we announced it in November. So it's, what, shy of three months ago. And what Unity really does, if I could just reiterate, is it brings together workloads, data, wherever they live, under one control plane.
Sanjay Mirchandani: Okay. Jim and Sanjay. So we announced it in November, so it's what, shy of three months ago. And what Unity really does, if I could just reiterate, is it brings together workloads, data wherever they live under one control plane. So we're giving customers the ability to manage anything in what we call in the AI era under one control plane. And that is something that we see as being the future. Now, what we do is we also, as you know, cater to customers with large on-premise software and growing SaaS capabilities. And that is their decision on how they wish to implement and the journey they take. So they work in tandem. So at this point, we're not committing to change the model unilaterally in any way next fiscal year. It's a natural thing. We'll meet customers where they are.
Sanjay Mirchandani: Okay. Jim it's Sanjay. So we announced it in November, so it's what, shy of three months ago. And what Unity really does, if I could just reiterate, is it brings together workloads, data wherever they live under one control plane. So we're giving customers the ability to manage anything in what we call in the AI era under one control plane. And that is something that we see as being the future. Now, what we do is we also, as you know, cater to customers with large on-premise software and growing SaaS capabilities. And that is their decision on how they wish to implement and the journey they take. So they work in tandem. So at this point, we're not committing to change the model unilaterally in any way next fiscal year. It's a natural thing. We'll meet customers where they are.
Speaker #3: So we're giving customers the ability to manage anything in what we call, in the AI era, under one control plane. And that is something that we see as being the future.
Speaker #3: Now, what we do is, we also, as you know, cater to customers with large on-premise software and growing SaaS capabilities. And that is their decision on how they wish to implement and the journey they take.
Speaker #3: So they work in tandem. So, as far as this point, we're not committing to change the model unilaterally in any way next fiscal year.
Speaker #3: It's a natural thing. We'll meet customers where they are. And what we've really done is take away any kind of complexity a customer may face in the journey to the hybrid and multi-cloud, and really make it seamless.
Sanjay Mirchandani: What we've really done is take away any kind of complexity a customer may face in the journey to the hybrid and multi-cloud and really make it seamless.
What we've really done is take away any kind of complexity a customer may face in the journey to the hybrid and multi-cloud and really make it seamless.
Speaker #4: And Jim, I can take the second part of your question. So, as it relates to our SaaS and ARR—and I talked a little bit about this in my prepared remarks—but let me double-click into it, right?
Danielle Abrahamsen: And Jim, I can take the second part of your question. So as it relates to our SaaS NRR, and I talked a little bit about this in my prepared remarks, but let me double-click into it, right? So a couple of things went into our SaaS NRR this quarter. So the first thing, and you kind of briefed this on your question, right, is that we're dealing with a much larger customer base. So our SaaS customer base is now exceeding 9,000 total customers. So from an absolute dollar perspective, right, adding those same numbers of dollars, you're not getting the same level of uplift that you have historically. The second thing, and again, you'll hear this, right? It's a theme this quarter. We had such a strong new SaaS customer quarter. Obviously, those dollars don't show up in our NRR number yet. And I'll remind you, right?
Danielle Abrahamsen: And Jim, I can take the second part of your question. So as it relates to our SaaS NRR, and I talked a little bit about this in my prepared remarks, but let me double-click into it, right? So a couple of things went into our SaaS NRR this quarter. So the first thing, and you kind of briefed this on your question, right, is that we're dealing with a much larger customer base. So our SaaS customer base is now exceeding 9,000 total customers. So from an absolute dollar perspective, right, adding those same numbers of dollars, you're not getting the same level of uplift that you have historically. The second thing, and again, you'll hear this, right? It's a theme this quarter. We had such a strong new SaaS customer quarter. Obviously, those dollars don't show up in our NRR number yet. And I'll remind you, right?
Speaker #4: So a couple of things went into our SaaS and ARR this quarter. So the first thing, and you kind of, you briefed this on your question, right, is that we're dealing with a much larger customer base.
Speaker #4: So, our SaaS customer base is now exceeding 9,000 total customers. So from an absolute dollar perspective, right—adding those same numbers of dollars, you're not getting the same level of uplift that you have historically.
Speaker #4: The second thing, and again, you'll hear this, right, it's a theme this quarter—we had such a strong new SaaS customer quarter. Obviously, those dollars don't show up in our ARR number yet.
Speaker #4: And I'll remind you, right, we have one Salesforce that's doing both, right? So that's number two. The last thing I will call out is there was a modest mix shift in some of our product capabilities among certain early adopter customers, right?
Danielle Abrahamsen: We have one Salesforce that's doing both, right? So that's number 2. The last thing I will call out is there was a modest mix shift in some of our product capabilities among certain early adopter customers, right? We have the benefit of having customers adopt our different innovation early, but with that, we also deal with changes that need to happen over time. That's the beauty of what we offer customers and what Sanjay was describing with the Unity platform that we'll be able to take to a different level next year. But these customers are still our customers. We're not seeing uptick churn. This is really just our business going through natural maturity.
We have one Salesforce that's doing both, right? So that's number 2. The last thing I will call out is there was a modest mix shift in some of our product capabilities among certain early adopter customers, right? We have the benefit of having customers adopt our different innovation early, but with that, we also deal with changes that need to happen over time. That's the beauty of what we offer customers and what Sanjay was describing with the Unity platform that we'll be able to take to a different level next year. But these customers are still our customers. We're not seeing uptick churn. This is really just our business going through natural maturity.
Speaker #4: We have the benefit of having customers adopt our different innovation early, but with that, we also deal with changes that need to happen over time.
Speaker #4: That's the beauty of what we offer customers, and what Sanjay was describing with the Unity platform, that we'll be able to take to a different level next year.
Speaker #4: But these customers are still our customers. We're not seeing uptick in churn. This is really just our business going—
Speaker #4: through natural maturity. There's
Speaker #3: no churn impact here. Any unusual. That's important. You got it. If I could follow up on that 9,000 SaaS as my question here, you have over 9,000 SaaS customers, 14,000 total subscription customers plus.
Operator: There's no churn impact here. Okay. Any unusual. That's important.
James Fish: There's no churn impact here. Okay. Any unusual. That's important.
Sanjay Mirchandani: You got it. If I could follow up on that 9,000 SaaS as my question here. You have over 9,000 SaaS customers, 14,000 total subscription customers plus. Where does SaaS penetration get to, and how much are standalone SaaS customers?
Sanjay Mirchandani: You got it. If I could follow up on that 9,000 SaaS as my question here. You have over 9,000 SaaS customers, 14,000 total subscription customers plus. Where does SaaS penetration get to, and how much are standalone SaaS customers?
Speaker #3: Where does SaaS penetration get to, and how much are standalone SaaS?
Speaker #3: customers? Yep.
Danielle Abrahamsen: Yep. So I think we've said before, but of those over 9,000, roughly 30% of them also have software tied to them.
Danielle Abrahamsen: Yep. So I think we've said before, but of those over 9,000, roughly 30% of them also have software tied to them.
Speaker #4: So, I think we've said before, but of those over 9,000, roughly 30% of them also have—
Speaker #4: software tied to them. On the growing base.
Sanjay Mirchandani: On a growing base.
James Fish: On a growing base.
Speaker #4: Yeah. And one on the growing base.
Danielle Abrahamsen: Yeah. On a growing base.
Danielle Abrahamsen: Yeah. On a growing base.
Sanjay Mirchandani: And one that I look at closely also is that nearly 50% of our enterprise SaaS customers use more than one offering, okay? That's up 8, 9 points from last year. So that also shows you that as the hybrid journey becomes real for our customers, the advantage of our platform becomes apparent, especially in the larger, complicated enterprise journeys, hybrid cloud journeys.
Sanjay Mirchandani: And one that I look at closely also is that nearly 50% of our enterprise SaaS customers use more than one offering, okay? That's up 8, 9 points from last year. So that also shows you that as the hybrid journey becomes real for our customers, the advantage of our platform becomes apparent, especially in the larger, complicated enterprise journeys, hybrid cloud journeys.
Speaker #3: What I look at closely, also, is that nearly 50% of our enterprise SaaS customers use more than one offering, okay? That's up 8 or 9 points from last year.
Speaker #3: So that also shows you that as the hybrid journey becomes real for our customers, the advantage of our platform becomes apparent, especially in the larger, complicated enterprise journeys—hybrid cloud journeys.
Speaker #5: We'll go to the next question, Bella.
Operator: We'll go to the next question, Bella.
We'll go to the next question, Bella.
Speaker #2: Thank you. Your next question comes from the line of Eric. He's with KeyBanc Capital Markets. Please go ahead.
Operator: Thank you. Your next question comes from the line of Eric. He is with KeyBank Capital Markets. Please go ahead.
Operator: Thank you. Your next question comes from the line of Eric. He is with KeyBank Capital Markets. Please go ahead.
Speaker #5: Hey, Sanjay, Daniel. Thanks for taking the question. I just want to follow up on some of the prior questions, but on the SaaS and ARR—is there anything from a go-to-market perspective, incentive-wise, to shift the Salesforce focus over to landing new logos as opposed to expansion?
[Analyst]: Hey, Sanjay, Danielle. Thanks for taking the question. I just want to follow up on some of the prior questions. But on the SaaS NRR, is there anything from a go-to-market perspective, incentive-wise, to shift the sales force focus over to landing new logos as opposed to expansion? Is that some of the reason to potentially explain why the SaaS new logos was maybe a little bit stronger while the NRR was a little bit softer?
Eric Heath: Hey, Sanjay, Danielle. Thanks for taking the question. I just want to follow up on some of the prior questions. But on the SaaS NRR, is there anything from a go-to-market perspective, incentive-wise, to shift the sales force focus over to landing new logos as opposed to expansion? Is that some of the reason to potentially explain why the SaaS new logos was maybe a little bit stronger while the NRR was a little bit softer?
Speaker #5: Is that some of the reason to potentially explain why the SaaS new logos is maybe a little bit stronger, while the ARR was a little bit softer?
Speaker #3: We do our comp plan on an annual basis, Eric, and so there's been no mid-quarter or mid-year change to that. It's just between the fact that what we're delivering to our customers in SaaS as part of the platform, in conjunction with our software capabilities, is what they need.
Sanjay Mirchandani: We do a comp plan on an annual basis, Eric. And so there's been no mid-quarter or mid-year change to that. It's just between the fact that what we're delivering to our customers in SaaS as part of the platform in conjunction with our software capabilities is what they need. And so we're seeing a healthy pickup there. And also, the work we're doing with our ecosystem partners is also making it easy for customers to get access to and use it. So I think the product stands on its own. The SaaS capabilities stand on its own.
Sanjay Mirchandani: We do a comp plan on an annual basis, Eric. And so there's been no mid-quarter or mid-year change to that. It's just between the fact that what we're delivering to our customers in SaaS as part of the platform in conjunction with our software capabilities is what they need. And so we're seeing a healthy pickup there. And also, the work we're doing with our ecosystem partners is also making it easy for customers to get access to and use it. So I think the product stands on its own. The SaaS capabilities stand on its own.
Speaker #3: And so we're seeing a healthy pickup there. And also, the work we're doing with our ecosystem partners is also making it easy for customers to get access to and use it.
Speaker #3: So I think the product stands on its own. The SaaS capabilities stand on its own.
Speaker #5: Got it, thanks. And just one more—maybe a clarification—just to help understand what drove some of the term duration elongation this quarter, after it had been on the shorter side the last quarter or two. And then, just anything on expectations for duration on term for next quarter.
[Analyst]: Got it. Thanks. And just one more, maybe, clarification. Just help understand what drove some of the term duration elongation this quarter, after being on the shorter side the last quarter or two, and then just anything on expectations for duration on term for next quarter? Thanks.
Eric Heath: Got it. Thanks. And just one more, maybe, clarification. Just help understand what drove some of the term duration elongation this quarter, after being on the shorter side the last quarter or two, and then just anything on expectations for duration on term for next quarter? Thanks.
Speaker #5: Thanks.
Speaker #3: Yeah. So the way to think about it is what really affects term within a quarter is the number of large deals. That's the biggest contributor to that.
Sanjay Mirchandani: Yeah. So the way to think about it is what really affects term within a quarter is the number of large deals. That's the biggest contributor to that. And this quarter, the term was heavily influenced with some large new customer deals. So in Q3, we saw a modest pickup and sort of an uptick in the duration quarter on quarter. And we're winning large customers that are multi-year, which is a darn good thing. What's also important for me to underscore is that our median duration remains in a normal range, okay? And I guess we could have done a better job explaining term last quarter.
Sanjay Mirchandani: Yeah. So the way to think about it is what really affects term within a quarter is the number of large deals. That's the biggest contributor to that. And this quarter, the term was heavily influenced with some large new customer deals. So in Q3, we saw a modest pickup and sort of an uptick in the duration quarter on quarter. And we're winning large customers that are multi-year, which is a darn good thing. What's also important for me to underscore is that our median duration remains in a normal range, okay? And I guess we could have done a better job explaining term last quarter.
Speaker #3: And this quarter, the term was heavily influenced by some large new customer deals. So in Q3, we saw a modest pickup, and you said of an uptick in the duration quarter on quarter.
Speaker #3: And we're waiting on large customers that are multi-year, which is a darn good thing. What's also important for me to underscore is that our median duration remains in a normal range.
Speaker #3: Okay? And I guess we could have done a better job explaining the term last time.
Speaker #3: quarter. Your next
Operator: Your next question comes from the line? Yes. Your next question comes from the line of Howard with Guggenheim. Please go ahead.
Operator: Your next question comes from the line? Yes. Your next question comes from the line of Howard with Guggenheim. Please go ahead.
Speaker #2: question comes from the line. Yes. Your next question comes from the line of Howard with Guggenheim. Please go ahead.
Speaker #5: Thanks. I want to follow on the constant currency net new ARR threads, the 39 in the quarter. So. Just given Sanjay and Daniel, given your comments earlier, net as we're strong, I think we have more clarity on the SaaS and ARR decline.
Operator: Thanks. I want to follow on this constant currency net new ARR thread. So, the $39 million in the quarter. So, given Sanjay and Danielle, given your comments earlier, net adds were strong. I think we have more clarity on the SaaS and perpetual decline. But on the term side, the term net new ARR was, I think, was about $17 million. So, it seems like maybe there was a shortfall in term net new ARR. And so, last quarter, average duration compressed. This quarter, average duration, it seemed like it upticked a little bit. So, I'm deducing that maybe its average term expansion ARR was negative in aggregate. And I understand that there were some large multi-year deals, but maybe the expansion was a little weaker than expected. And really, more importantly, how should we think about it? Is $17 million kind of a baseline going forward?
Howard Ma: Thanks. I want to follow on this constant currency net new ARR thread. So, the $39 million in the quarter. So, given Sanjay and Danielle, given your comments earlier, net adds were strong. I think we have more clarity on the SaaS and perpetual decline. But on the term side, the term net new ARR was, I think, was about $17 million. So, it seems like maybe there was a shortfall in term net new ARR. And so, last quarter, average duration compressed. This quarter, average duration, it seemed like it upticked a little bit. So, I'm deducing that maybe its average term expansion ARR was negative in aggregate. And I understand that there were some large multi-year deals, but maybe the expansion was a little weaker than expected. And really, more importantly, how should we think about it? Is $17 million kind of a baseline going forward?
Speaker #5: But on the term side, the term net new ARR was, I think, about $17 million. So it seems like maybe there was a shortfall in term net new ARR, and so last quarter, average duration compressed.
Speaker #5: This quarter, average duration seemed like it upticked a little bit. So I'm deducing that maybe its average term expansion ARR was an aggregate, and I understand that there were some large multi-year deals, but maybe the expansion was a little weaker than expected. And really, more importantly, how should we think about it?
Speaker #5: Is 17 kind of a baseline going forward? What gives you confidence, especially in light of the Unity coming out that you can sustain this level of term
Operator: What gives you confidence, especially in light of Unity coming out, that you can sustain this level of term expansion?
What gives you confidence, especially in light of Unity coming out, that you can sustain this level of term expansion?
Speaker #5: expansion? And I'm sorry, Howard, I want to make
Danielle Abrahamsen: I'm sorry, Howard. I want to make sure I understand the question. You're suggesting that the net new ARR for subscription was 17? I'm just trying to understand where you're getting the 17 from.
Danielle Abrahamsen: I'm sorry, Howard. I want to make sure I understand the question. You're suggesting that the net new ARR for subscription was 17? I'm just trying to understand where you're getting the 17 from.
Speaker #4: sure I understand the question. You're suggesting that the net new ARR for subscription was 17? I'm just trying to understand where you're getting the 17 from.
Speaker #4: Sure, I understand the question. You're suggesting that the net new ARR for subscription was 17? I'm just trying to understand where you're getting the 17 from.
Speaker #5: Yeah, maybe my numbers are incorrect, but whatever that number was, I'm seeing 18. So I guess on a constant currency basis, is that correct—that term constant currency net new ARR was 18? And that average expansion was maybe weaker than you expected?
Operator: Yeah. Maybe my number is incorrect, but whatever that number was, I'm seeing 18. So I guess on a constant currency basis, is that correct, that term constant currency net new ARR was 18 and that average expansion was maybe weaker than you expected? And what to think going forward?
Howard Ma: Yeah. Maybe my number is incorrect, but whatever that number was, I'm seeing 18. So I guess on a constant currency basis, is that correct, that term constant currency net new ARR was 18 and that average expansion was maybe weaker than you expected? And what to think going forward?
Speaker #5: And what to think going forward?
Speaker #4: Oh, I understand what you're saying. So you're just looking at the term software piece. So this isn't about expansion. I'm going to I talked about this before, but maybe let me make sure I'm clear on this.
Danielle Abrahamsen: Oh, I understand what you're saying. So you're just looking at the term software piece. So this isn't about expansion, right? I talked about this before, but maybe let me make sure I'm clear on this. What we saw this quarter is land customers. And again, we had our strongest land term software customer quarter. We saw land customers come in at much longer durations. Now, them coming at a longer duration is part of the business. We've talked about this historically too. Actually, I think if you look at Q4 of last year, we had kind of a similar type pattern here. But that's really what's driving that change. I mentioned already the SaaS, the growth in the new SaaS customers.
Danielle Abrahamsen: Oh, I understand what you're saying. So you're just looking at the term software piece. So this isn't about expansion, right? I talked about this before, but maybe let me make sure I'm clear on this. What we saw this quarter is land customers. And again, we had our strongest land term software customer quarter. We saw land customers come in at much longer durations. Now, them coming at a longer duration is part of the business. We've talked about this historically too. Actually, I think if you look at Q4 of last year, we had kind of a similar type pattern here. But that's really what's driving that change. I mentioned already the SaaS, the growth in the new SaaS customers.
Speaker #4: quarter is land customers. What we saw this And again, we had our strongest land term software customer quarter. We saw land customers come in at much longer durations.
Speaker #4: duration is part of the business. We've Now, them coming at a longer talked about this historically too. Actually, I think if you look at Q4 of last year, we had kind of a similar type pattern here.
Speaker #4: But that's really what's driving that change. I mentioned already the SaaS, the growth in the new SaaS customers. I also want to highlight our subscription ARR, if you look at it, it's actually our second best subscription ARR net new ad that we've had in the history of the company organic, right?
Danielle Abrahamsen: I also want to highlight our subscription ARR; if you look at it, it's actually our second-best subscription ARR net new ad that we've had in the history of the company. Organic, right? You got to look organic. So again, I talked about the pieces with the new customers. But overall, we're really happy with where we're at and where we'll be for the year.
I also want to highlight our subscription ARR; if you look at it, it's actually our second-best subscription ARR net new ad that we've had in the history of the company. Organic, right? You got to look organic. So again, I talked about the pieces with the new customers. But overall, we're really happy with where we're at and where we'll be for the year.
Speaker #4: You’ve got to look organic. So again, I talked about the pieces with the new customers. But overall, we're really happy with where we're at and where we'll be for—
Speaker #4: the year. And we could follow up on the
Sanjay Mirchandani: We could follow up on the one on the callbacks. If that helps.
Sanjay Mirchandani: We could follow up on the one on the callbacks. If that helps.
Speaker #3: one on the callbacks.
Speaker #3: one on the callbacks.
Speaker #5: Okay. Maybe just a quick
Operator: Okay. Thanks. Maybe just a quick follow-up for you, Sanjay. The restructuring efforts that were, I should say, the incremental restructuring efforts, it seems to be entirely focused in your R&D org and perhaps operations. So R&D and operations. So number one, is that true? And what gives you confidence that these cutbacks won't impact your growth prospects?
Howard Ma: Okay. Thanks. Maybe just a quick follow-up for you, Sanjay. The restructuring efforts that were, I should say, the incremental restructuring efforts, it seems to be entirely focused in your R&D org and perhaps operations. So R&D and operations. So number one, is that true? And what gives you confidence that these cutbacks won't impact your growth prospects?
Speaker #6: follow-up for you, Sanjay. The restructuring efforts that were actually, say, the incremental restructuring efforts, it seems to be entirely focused in your R&D org and perhaps operations.
Speaker #6: So, R&D and operations—is that, number one, is that true? And what gives you confidence that these cutbacks won't impact your growth?
Speaker #6: prospects? Okay, Howard.
Sanjay Mirchandani: Hey, Howard. I'm not sure where you're getting that from. No, time and time again, as part of our regular process, as we get closer to the fiscal year and we look at what our priorities for the next year are and align our P&L to prioritize what we think is going to be part of the future, this quarter, this exercise was no exception. Now, without getting into too much of the detail, some of it is recurring. Some of it is not recurring. We ran a voluntary retirement program that was well received. And so it wasn't on one group or another. It was something we offered up to the whole company. And some of the savings you saw on the EBIT line this quarter and beyond, and then others are going to be put back into the business where we need it.
Sanjay Mirchandani: Hey, Howard. I'm not sure where you're getting that from. No, time and time again, as part of our regular process, as we get closer to the fiscal year and we look at what our priorities for the next year are and align our P&L to prioritize what we think is going to be part of the future, this quarter, this exercise was no exception. Now, without getting into too much of the detail, some of it is recurring. Some of it is not recurring. We ran a voluntary retirement program that was well received. And so it wasn't on one group or another. It was something we offered up to the whole company. And some of the savings you saw on the EBIT line this quarter and beyond, and then others are going to be put back into the business where we need it.
Speaker #3: I'm not sure where you're getting that from. No, time and time again, as part of our regular process, as we get closer to the fiscal year and we look at what our priorities for the next year are and align our P&L to prioritize what we think is going to be part of the future.
Speaker #3: This quarter, this exercise was no exception. Now, without getting into too much of the details, some of it is recurring, some of it is not recurring.
Speaker #3: We ran a voluntary retirement program that was well received. And so it wasn't on one group or another; it was something we offered up to the whole company.
Speaker #3: And some of the savings you saw on the EBIT line this quarter and beyond, and then others are going to be put back into the business where we need it.
Speaker #6: Just because I got it from in the press release, it says business technology. Is the unit—so can you just expand on what does business technology, that function, entail?
Operator: Just because I got it from in the press release, it says business technology is the unit. So can you just expand on what does business technology, that function, entail?
Howard Ma: Just because I got it from in the press release, it says business technology is the unit. So can you just expand on what does business technology, that function, entail?
Speaker #4: No, no, no, Howard. Sorry. So, there are two restructuring plans that we have throughout the year. The first one we actually talked about at the beginning of the year, and that was tied to some changes we were making in our Business Technology team.
Danielle Abrahamsen: No, no, no, Howard. Sorry. So there are two restructuring plans that we have throughout the year. The first one we actually talked about in the beginning of the year, and that was tied to some changes we were making in our business technology team. That's not our R&D team. That's our internal business technology team. IT. The second restructure plan, which is really the one that we talked about in the press release this time, and I made the comments on related to some of the cash flow impacts, that one is a company-wide initiative.
Danielle Abrahamsen: No, no, no, Howard. Sorry. So there are two restructuring plans that we have throughout the year. The first one we actually talked about in the beginning of the year, and that was tied to some changes we were making in our business technology team. That's not our R&D team. That's our internal business technology team. IT. The second restructure plan, which is really the one that we talked about in the press release this time, and I made the comments on related to some of the cash flow impacts, that one is a company-wide initiative.
Speaker #4: That's not our R&D team. That's our internal business technology team—IT. The second restructure plan, which is really the one that we talked about in the press release this time, and I made the comments on related to some of the cash flow impacts, that one is a company-wide—
Speaker #4: initiative. Yeah.
Speaker #3: And Howard, actually, to be more direct, what this does is strengthen where we want to go, not weaken. So we're not cutting back on R&D or any such thing.
Sanjay Mirchandani: Yeah. And Howard, actually, to be more direct, what this does is strengthen where we want to go, not weaken. So we're not cutting back on R&D or any such thing. This is really about strengthening where we think the opportunity lies. So just aligning the business. It's a good thing.
Sanjay Mirchandani: Yeah. And Howard, actually, to be more direct, what this does is strengthen where we want to go, not weaken. So we're not cutting back on R&D or any such thing. This is really about strengthening where we think the opportunity lies. So just aligning the business. It's a good thing.
Speaker #3: This is really about strengthening where we think the opportunity lies. So just aligning the business. It's a good thing.
Speaker #6: Okay. Thank you for
Operator: Okay. Thank you for clarifying.
Howard Ma: Okay. Thank you for clarifying.
Speaker #3: No worries. Absolutely.
Sanjay Mirchandani: No worries.
Sanjay Mirchandani: No worries.
Danielle Abrahamsen: Absolutely. Thanks, Howard.
Danielle Abrahamsen: Absolutely. Thanks, Howard.
Speaker #4: Thanks, Howard.
Speaker #1: Your next question comes from the line of Param Singh with Oppenheimer. Please go ahead.
Operator: Your next question comes from the line of Param Singh with Oppenheimer. Please go ahead.
Operator: Your next question comes from the line of Param Singh with Oppenheimer. Please go ahead.
Speaker #7: Yeah. Hi. Thank you. And thanks for taking my questions. I had a couple. First, look, this ARR question has been beaten to death, but I had a slightly different question on it.
Operator: Yeah. Hi. Thank you. And thanks for taking my questions. I had a couple. First, look, this ARR question has been beaten to death, but I had a slightly different question on it. As I look to the future, and again, I'm not asking for guidance, but as I look forward, typically, these lower ARR SaaS customers will scale, right? And then based on historical trends, do you think should we assume that there will be some re-acceleration with these customers as they come back with the potential of higher NRR, different from this lower baseline and potential increase in net new ARR? Or do you think that since there's a systemic shift towards more SaaS customers coming into the ecosystem, that this will kind of be a new baseline for the next few years until you have a larger SaaS base?
Param Singh: Yeah. Hi. Thank you. And thanks for taking my questions. I had a couple. First, look, this ARR question has been beaten to death, but I had a slightly different question on it. As I look to the future, and again, I'm not asking for guidance, but as I look forward, typically, these lower ARR SaaS customers will scale, right? And then based on historical trends, do you think should we assume that there will be some re-acceleration with these customers as they come back with the potential of higher NRR, different from this lower baseline and potential increase in net new ARR? Or do you think that since there's a systemic shift towards more SaaS customers coming into the ecosystem, that this will kind of be a new baseline for the next few years until you have a larger SaaS base?
Speaker #7: As I look to the future—and again, I'm not asking for guidance—but as I look forward, typically these lower ARR SaaS customers will scale, right?
Speaker #7: And then, based on historical trends, do you think we should assume that there will be some reacceleration with these customers as they come back, with the potential of higher NRR, different from this lower baseline, and potentially an increase in net new ARR?
Speaker #7: Or do you think that, since there's a systemic shift towards more SaaS customers coming into the ecosystem, this will kind of be a new baseline for the next few years until you have a larger SaaS base?
Speaker #7: How should we think about it logically longer
Operator: How should we think about it logically in the longer term?
How should we think about it logically in the longer term?
Speaker #7: term? Hi, Param.
Danielle Abrahamsen: Hi, Param. So I think I understand your question, so I'm going to answer it. But if I'm not answering what you're asking, please feel free to clarify, right? So yes. So we land these customers at lower ASPs, as I talked about. And I think we've said this. Historically, we land at roughly $40,000. That's our ASP for these customers. Right now, we see anywhere from 30% to 40%, depending on the quarter, right, of our customers that cross-sell. I will tell you, actually, we're seeing even better traction in our enterprise customers. Our enterprise customers, we're approaching 50% of them having more than one SaaS product. That's up 700 basis points from a year ago.
Danielle Abrahamsen: Hi, Param. So I think I understand your question, so I'm going to answer it. But if I'm not answering what you're asking, please feel free to clarify, right? So yes. So we land these customers at lower ASPs, as I talked about. And I think we've said this. Historically, we land at roughly $40,000. That's our ASP for these customers. Right now, we see anywhere from 30% to 40%, depending on the quarter, right, of our customers that cross-sell. I will tell you, actually, we're seeing even better traction in our enterprise customers. Our enterprise customers, we're approaching 50% of them having more than one SaaS product. That's up 700 basis points from a year ago.
Speaker #4: So I'm going to I think I understand your question, so I'm going to answer it. But if I'm not answering what you're asking, please feel free to clarify, right?
Speaker #4: So, yes. So we land these customers at lower ASPs, as I talked about. Historically, and I think we've said this historically, we land at roughly $40,000.
Speaker #4: That's our ASP for these customers. Right now, we see anywhere from 30 to 40 percent, depending on the quarter, right, of our customers that cross-sell.
Speaker #4: I will tell you, actually, we're seeing even better traction in our enterprise customers. Our enterprise customers—50%—we're approaching 50% of them having more than one SaaS product.
Speaker #4: That's up 700 basis points from a year ago. Without giving you specific guidance for next year, what I can tell you is we have a history of growing the lifetime value of these customers, and we aspire to continue to do that.
Danielle Abrahamsen: Without giving you specific guidance for next year, what I can tell you is we have a history of growing the lifetime value of these customers, and we aspire to continue to do that.
Without giving you specific guidance for next year, what I can tell you is we have a history of growing the lifetime value of these customers, and we aspire to continue to do that.
Speaker #3: And I think, Param, that with the unity platform, it will make it even easier for customers to absorb new capabilities seamlessly. That is part of the design of the technology.
Sanjay Mirchandani: I think, Param, that with the Unity platform, it will make it even easier for customers to absorb new capabilities seamlessly. That is part of the design of the technology. We think that being able to cross-sell over time is definitely part of our strategy, as we've shared before.
Sanjay Mirchandani: I think, Param, that with the Unity platform, it will make it even easier for customers to absorb new capabilities seamlessly. That is part of the design of the technology. We think that being able to cross-sell over time is definitely part of our strategy, as we've shared before.
Speaker #3: So, we think that being able to cross-sell over time is definitely part of our strategy, as we've shared.
Speaker #3: before. So let me segue into my
Operator: So let me segue into my second. Yeah. Go ahead, Danielle.
Param Singh: So let me segue into my second. Yeah. Go ahead, Danielle.
Speaker #7: second yeah, go ahead,
Speaker #7: Daniel: No, I just wanted to add one more.
Danielle Abrahamsen: No, I just wanted to add one more thing, which I thought would maybe be helpful. Our SaaS customers over $100,000 are actually up over 45%.
Danielle Abrahamsen: No, I just wanted to add one more thing, which I thought would maybe be helpful. Our SaaS customers over $100,000 are actually up over 45%.
Speaker #4: Thing, which I thought would maybe be helpful. Our SaaS customers, over 100,000, are actually up over 45%.
Speaker #7: Great. So let me segue into my second part of my question, which is on the Unity. Obviously, it's very early days, but if you could share some feedback and how we should think about, based on that feedback, the adoption of Unity driving a higher, basically, SaaS ARR over time?
Operator: Great. So let me segue into my second part of my question, which is on Unity. Obviously, it's very early days, but if you could share some feedback. How should we think about, based on that feedback, the adoption of Unity driving a higher, basically, SaaS ARR over time? Is there any way to conceptualize that?
Param Singh: Great. So let me segue into my second part of my question, which is on Unity. Obviously, it's very early days, but if you could share some feedback. How should we think about, based on that feedback, the adoption of Unity driving a higher, basically, SaaS ARR over time? Is there any way to conceptualize that?
Speaker #7: Is there any way to conceptualize
Speaker #7: that? We
Speaker #3: We have conceptualized many things around that platform. We're very excited about it, Param, as you can imagine. At Shift, you saw how much we shared.
Sanjay Mirchandani: We have conceptualized many things around that platform. We're very excited about it, Param, as you can imagine. At Shift, you saw how much we shared. The platform is just literally. We announced it in November. Most of it was broadly available end of the year. We're in the early days of it. The pipeline looks great. The feedback from industry, I shared some on my prepared comments, is very positive. It's early days to put out any pattern matching on it. Everything in the product, especially around its AI capabilities and our ability to bring together data security, identity resilience, and true recovery, is second to none. My goal, our goal when we built and designed this product, was to make it super easy for customers to embrace logical extensions of their resilience capability. Translated into a go-to-market piece, cross-sell becomes friction-free.
Sanjay Mirchandani: We have conceptualized many things around that platform. We're very excited about it, Param, as you can imagine. At Shift, you saw how much we shared. The platform is just literally. We announced it in November. Most of it was broadly available end of the year. We're in the early days of it. The pipeline looks great. The feedback from industry, I shared some on my prepared comments, is very positive. It's early days to put out any pattern matching on it. Everything in the product, especially around its AI capabilities and our ability to bring together data security, identity resilience, and true recovery, is second to none. My goal, our goal when we built and designed this product, was to make it super easy for customers to embrace logical extensions of their resilience capability. Translated into a go-to-market piece, cross-sell becomes friction-free.
Speaker #3: The platform is just—literally, we announced it in November. Most of it was broadly available by the end of the year. We're in the early days of it.
Speaker #3: The pipeline looks great. The feedback from industry—I shared some in my prepared comments—is very positive. And it's early days to put out any pattern matching on it, but everything in the product, especially around its AI capabilities and our ability to bring together data security, identity, resilience, and true recovery, is second to none.
Speaker #3: My goal, our goal when we built and designed this product, was to make it super easy for customers to embrace logical extensions of their resilience capability.
Speaker #3: So translated into a go-to-market piece, cross-sell becomes friction-free.
Speaker #7: Right. Okay. And do you feel you need to update your sales team a little bit to pivot to some of these expanding capabilities, or do you feel?
Operator: Right. Okay. And do you feel you need to update your sales team a little bit to pivot to some of these expanding capabilities, or do you feel?
Param Singh: Right. Okay. And do you feel you need to update your sales team a little bit to pivot to some of these expanding capabilities, or do you feel?
Speaker #3: They just delivered.
Sanjay Mirchandani: They just delivered.
Sanjay Mirchandani: They just delivered.
Speaker #7: That's right. They just delivered an
Operator: The right.
Param Singh: The right.
Speaker #3: Part of the go ahead.
Sanjay Mirchandani: Param, go ahead.
Sanjay Mirchandani: Param, go ahead.
Operator: They just delivered an amazing quarter. These guys are doing a great job. We're executing well. And of course, enablement of our team is job one. They're only as good as how confident they are with the technology. So we continue to invest in our people. It's a big part of how we do things. And I'll be honest with you, I'm very proud of our sales team. Okay. I'll get back in line. Thank you so much for asking my questions today.
They just delivered an amazing quarter. These guys are doing a great job. We're executing well. And of course, enablement of our team is job one. They're only as good as how confident they are with the technology. So we continue to invest in our people. It's a big part of how we do things. And I'll be honest with you, I'm very proud of our sales team.
Speaker #7: Amazing quarter. These guys are doing a great job. We're executing well. And of course, enabling our team is job one. They're only as good as how confident they are with the technology.
Speaker #7: So, we continue to invest in our people. It's a big part of how we do things. And I'll be honest with you, I'm very proud of our sales team.
Param Singh: Okay. I'll get back in line. Thank you so much for answering my questions today.
Speaker #7: Okay, I'll get it back in line. Thank you so much for answering my questions.
Speaker #3: Thanks.
Sanjay Mirchandani: Thanks.
Sanjay Mirchandani: Thanks.
Speaker #4: Thanks, today.
Danielle Abrahamsen: Thanks, Param.
Danielle Abrahamsen: Thanks, Param.
Speaker #1: Your next question comes from the line of Rudy Kizinger with DA Davidson. Please go ahead.
Operator: Your next question comes from the line of Rudy Kessinger with DA Davidson. Please go ahead.
Operator: Your next question comes from the line of Rudy Kessinger with D.A. Davidson. Please go ahead.
Speaker #1: ahead. Hey, guys.
[Analyst] (DA Davidson): Hey, guys. Thanks for taking my question. So on the net new ARR, last quarter, you said the expected 60% of net new ARR to come from SaaS. And 60% of $45 million would be $27 million. And you did $27.1 million of SaaS net new ARR in Q3. And so from that lens, it would look like SaaS net new ARR is kind of in line with expectations. And then back to Howard's point, it would thus look like term license net new ARR was below expectations or the primary reason for the $6 million delta versus the $45 million kind of baseline that was expected. So could you just, again, follow up on maybe the term net new ARR? Was that below expectations? What was the impact of maybe longer duration on some deals than expected that resulted in some price compression, thus ARR compression?
Rudy Kessinger: Hey, guys. Thanks for taking my question. So on the net new ARR, last quarter, you said the expected 60% of net new ARR to come from SaaS. And 60% of $45 million would be $27 million. And you did $27.1 million of SaaS net new ARR in Q3. And so from that lens, it would look like SaaS net new ARR is kind of in line with expectations. And then back to Howard's point, it would thus look like term license net new ARR was below expectations or the primary reason for the $6 million delta versus the $45 million kind of baseline that was expected. So could you just, again, follow up on maybe the term net new ARR? Was that below expectations? What was the impact of maybe longer duration on some deals than expected that resulted in some price compression, thus ARR compression?
Speaker #8: Thanks for taking my question. So, on the net new ARR, last quarter you said we expected 60% of net new ARR to come from SaaS.
Speaker #8: And 60% of 45 million would be 27 million. And you did $27.1 million of SaaS net new ARR in Q3. And so.
Speaker #4: You got.
Speaker #8: Through that lens, it would look like SaaS net new ARR is kind of in line with expectations. And then, back to Howard's point, it would thus look like term license net new ARR was below expectations, or the primary reason for the $6 million delta versus the $45 million kind of baseline that was expected.
Speaker #8: So could you just, again, follow up on maybe the term net new ARR? Was that below expectations? What was the impact of maybe longer duration on some deals than expected that resulted in some price compression, thus ARR compression?
Speaker #8: I'm just not understanding how, based on these numbers, term was not below
[Analyst] (DA Davidson): I'm just not understanding how, based on these numbers, term was not below expectations?
I'm just not understanding how, based on these numbers, term was not below expectations?
Speaker #8: expectations. No, I understand
Danielle Abrahamsen: No, I understand what you're asking, Rudy. And you're spot on with the SaaS net new ARR. So I'm glad you called that out specifically. So what we were assuming for term is that duration would remain consistent with Q2. What we saw is because of these large multi-year, quite frankly, just long-duration new software customers, we did see some pressure on term ARR tied to that. You are correct.
Danielle Abrahamsen: No, I understand what you're asking, Rudy. And you're spot on with the SaaS net new ARR. So I'm glad you called that out specifically. So what we were assuming for term is that duration would remain consistent with Q2. What we saw is because of these large multi-year, quite frankly, just long-duration new software customers, we did see some pressure on term ARR tied to that. You are correct.
Speaker #4: What you're asking, Rudy—and you're spot on with the SaaS net new ARR, so I'm glad you called that out specifically. So what we were assuming for term is that duration would remain consistent with Q2.
Speaker #4: What we saw is, because of these large, multi-year—quite frankly, just long-duration—new software customers, we did see some pressure on term ARR tied to that.
Speaker #4: You are correct.
Speaker #3: And Rudy, I've shared this over repeatedly. We have to look at this on a broader term basis. Quarter to quarter, because of the type of business we do, the kinds of customers we cater to, the complexity of the projects that they embark upon, the mix of software versus SaaS, there will be a little bit of variability in how this stuff gets lands.
Sanjay Mirchandani: And Rudy, I've shared this over repeatedly. We have to look at this on a broader term basis. Quarter to quarter, because of the type of business we do, the kinds of customers we cater to, the complexity of the projects that they embark upon, the mix of software versus SaaS, there will be a little bit of variability in how this stuff gets landed. The good news is we're adding a ton of new customers in SaaS, which bodes well for the long term. And we had a record, absolute record quarter of software-land customers with longer durations. So yes, the numbers are off a little bit, but we need to expect a little bit of variability in this over time because this is an annualized thing. Now, if you look at overall ARR for the year, we're talking 22% rough-tough growth on a $167 million year-on-year increase.
Sanjay Mirchandani: And Rudy, I've shared this over repeatedly. We have to look at this on a broader term basis. Quarter to quarter, because of the type of business we do, the kinds of customers we cater to, the complexity of the projects that they embark upon, the mix of software versus SaaS, there will be a little bit of variability in how this stuff gets landed. The good news is we're adding a ton of new customers in SaaS, which bodes well for the long term. And we had a record, absolute record quarter of software-land customers with longer durations. So yes, the numbers are off a little bit, but we need to expect a little bit of variability in this over time because this is an annualized thing. Now, if you look at overall ARR for the year, we're talking 22% rough-tough growth on a $167 million year-on-year increase.
Speaker #3: The good news is we're adding a ton of new customers in SaaS, which bodes well for the long term. And we had a record, absolute record quarter of software-land customers with longer durations.
Speaker #3: So yes, the numbers are off a little bit, but we need to expect a little bit of variability in this over time, because this is an annualized thing.
Speaker #3: Now, if you look at overall ARR for the year, we're talking about 22% rough, tough growth on our $167 million year-on-year increase. So it's actually very handsome.
Sanjay Mirchandani: So it's actually very handsome. I just feel like there will be a little bit of quarter-to-quarter variability because we sell hybrid solutions for customers. And they have the option of being able to deploy it in the manner in which they want. So I guess we could have done a better job explaining that last quarter. It comes back to the term and that stuff, but I'll keep explaining it till we get it right.
So it's actually very handsome. I just feel like there will be a little bit of quarter-to-quarter variability because we sell hybrid solutions for customers. And they have the option of being able to deploy it in the manner in which they want. So I guess we could have done a better job explaining that last quarter. It comes back to the term and that stuff, but I'll keep explaining it till we get it right.
Speaker #3: I just feel like there will be a little bit of quarter-to-quarter variability because we sell hybrid solutions for customers, and they have the option of being able to deploy it in the manner in which they want.
Speaker #3: So, I guess we could have done a better job explaining that last quarter. It comes back to the term and that stuff, but I'll keep explaining it till we get it right.
Speaker #4: Yeah, the only other thing I would call out—the only other thing I would call out, Rudy, to your point—is, and we've talked about this, other ARR, right?
Danielle Abrahamsen: Yeah. The only other thing I would call out, Rudy, to your point is, and we've talked about this other ARR, right? Other ARR, the last couple of quarters has been consistent. We actually saw it decline. The decline almost doubled quarter-over-quarter, and that's really tied to some of our conversions. So that was the other piece, just to kind of bring it all together.
Danielle Abrahamsen: Yeah. The only other thing I would call out, Rudy, to your point is, and we've talked about this other ARR, right? Other ARR, the last couple of quarters has been consistent. We actually saw it decline. The decline almost doubled quarter-over-quarter, and that's really tied to some of our conversions. So that was the other piece, just to kind of bring it all together.
Speaker #4: Other ARR the last couple of quarters has been consistent. We actually saw it decline—the decline almost doubled quarter over quarter. And that's really tied to some of our conversions.
Speaker #4: So that was the other piece, just to kind of bring it all.
Speaker #4: together. Okay.
[Analyst] (DA Davidson): Okay. And then as a follow-up, I'm curious. There was some commentary about you sold maybe more SaaS deals, and I seem to maybe interpret that as meaning that prohibited you from also selling some term deals. So I guess I'm curious, in your pipe for the quarter, did you have a lot of customers where reps were working with them on both potential SaaS and term deals, and more of the land tilted towards SaaS than term in the quarter? And then, sorry for a two-parter here, but on your SaaS ARR, what percentage of your SaaS ARR comes from or is calculated from consumption in the current quarter times four versus TCV over duration?
Rudy Kessinger: Okay. And then as a follow-up, I'm curious. There was some commentary about you sold maybe more SaaS deals, and I seem to maybe interpret that as meaning that prohibited you from also selling some term deals. So I guess I'm curious, in your pipe for the quarter, did you have a lot of customers where reps were working with them on both potential SaaS and term deals, and more of the land tilted towards SaaS than term in the quarter? And then, sorry for a two-parter here, but on your SaaS ARR, what percentage of your SaaS ARR comes from or is calculated from consumption in the current quarter times four versus TCV over duration?
Speaker #7: And then, as a follow-up, I'm curious—there was some commentary about you sold maybe more SaaS deals, and I seemed to maybe interpret that as meaning that prohibited you from also selling some term deals.
Speaker #7: So, I guess I'm curious—in your pipe for the quarter, did you have a lot of customers where reps were working with them on both potential SaaS and term deals?
Speaker #7: And more of the land tilted towards SaaS than term in the quarter? And then, sorry for a two-parter here, but on your SaaS ARR, what percentage of your SaaS ARR comes from, or is calculated from, consumption in the current quarter times four versus TCV over duration?
Speaker #7: And I'm curious, if you were to look at the quarter, your SaaS, and the ACV bookings standpoint relative as opposed to ARR, how much stronger might that number have been if you were calculating all of your SaaS ARR as TCV over—
[Analyst] (DA Davidson): I'm curious if you were to look at the quarter, your SaaS and the ACV bookings standpoint relative as opposed to ARR, how much stronger might that number have been if you were calculating all of your SaaS ARR as TCV over duration?
I'm curious if you were to look at the quarter, your SaaS and the ACV bookings standpoint relative as opposed to ARR, how much stronger might that number have been if you were calculating all of your SaaS ARR as TCV over duration?
Speaker #7: duration? Yeah, that's a tough
Sanjay Mirchandani: Yeah. That's a tough question. Maybe give us a little time to get the exact number on that. But let me take the first part of your question. Our sales team, the reason we have our go-to-market team the way it is is because our platform delivers two sets of capabilities. So you can't segment them and say, "Do this versus that or that versus that." It really depends on where the customer is and how we meet them where they are. So if a customer wants to start with Air Gap Protect and Clean Room and then move backwards into our on-premise capabilities, that's what we'll do. So the sales team is absolutely aligned to the customer buying model, and they're buying capabilities and their needs. So we internally don't trade off one license type versus another. That's not ever what we do.
Sanjay Mirchandani: Yeah. That's a tough question. Maybe give us a little time to get the exact number on that. But let me take the first part of your question. Our sales team, the reason we have our go-to-market team the way it is is because our platform delivers two sets of capabilities. So you can't segment them and say, "Do this versus that or that versus that." It really depends on where the customer is and how we meet them where they are. So if a customer wants to start with Air Gap Protect and Clean Room and then move backwards into our on-premise capabilities, that's what we'll do. So the sales team is absolutely aligned to the customer buying model, and they're buying capabilities and their needs. So we internally don't trade off one license type versus another. That's not ever what we do.
Speaker #3: question. Maybe give us a little time to give you the exact number on that. But let me take the first part of your question.
Speaker #3: Our sales team, the reason the way we—the reason we have our go-to-market team the way it is, is because our platform delivers two sets of capabilities.
Speaker #3: So, you can't segment them and say, 'Do this versus that, or that versus that.' It really depends on where the customer is, and how we meet them where they are.
Speaker #3: So if a customer wants to start with Air Gap Protect and Clean Room and then move backwards into our on-premise capabilities, that's what we'll do.
Speaker #3: So the sales team is absolutely aligned to the customer buying model, and they're buying capabilities and their needs. So we internally don't trade off one license type versus another.
Speaker #3: That's not ever what we do. It's what the customer needs and how we best align to it. Could you repeat the second part of your question?
Sanjay Mirchandani: It's what the customer needs and how we best align to it. Can you repeat the second part of your question?
It's what the customer needs and how we best align to it. Can you repeat the second part of your question?
Speaker #7: The second part of my question, again: if I just take your $364 million of SaaS ARR, how much of that is calculated from Plumio products that are just consumption times four, versus how much is just TCV over duration, the same way you calculate your term license ARR?
[Analyst] (DA Davidson): The second part of my question, again, if I just take your $364 million of SaaS ARR, how much of that is calculated from Clumio products that are just consumption times four versus how much is just TCV over duration the same way you calculate your term license ARR? Because I'm trying to, you're talking about the ASPs being much lower and the ARR not necessarily showing up yet from some strong bookings. And so I'm trying to understand how much of your net new SaaS bookings come from products that are going to have ARR calculated on a consumption basis as opposed to TCV over duration.
Rudy Kessinger: The second part of my question, again, if I just take your $364 million of SaaS ARR, how much of that is calculated from Clumio products that are just consumption times four versus how much is just TCV over duration the same way you calculate your term license ARR? Because I'm trying to, you're talking about the ASPs being much lower and the ARR not necessarily showing up yet from some strong bookings. And so I'm trying to understand how much of your net new SaaS bookings come from products that are going to have ARR calculated on a consumption basis as opposed to TCV over duration.
Speaker #7: Because I'm trying to—you're talking about the ASPs being much lower, and the ARR not necessarily showing up yet from some strong bookings. And so I'm trying to understand how much of your net new SaaS bookings come from products that are going to have ARR calculated on a consumption basis, as opposed to TCV over duration.
Speaker #4: Yeah. So I'm not going to give the exact breakout, Rudy. What I can tell you, though, is it's small. It's immaterial on the whole ARR number.
Danielle Abrahamsen: Yeah. So I'm not going to give the exact breakout, Rudy. What I can tell you, though, is it's small. It's immaterial on the whole ARR number. So it's not overly meaningful in the percentage.
Danielle Abrahamsen: Yeah. So I'm not going to give the exact breakout, Rudy. What I can tell you, though, is it's small. It's immaterial on the whole ARR number. So it's not overly meaningful in the percentage.
Speaker #4: So, you're not—it's not overly meaningful. In the—
Speaker #1: Your next question comes from the line of Rudy Michael Romanelli with Mizuho Securities. Please go ahead.
Operator: Your next question comes from the line of Michael Romanelli with Mizuho Securities. Please go ahead.
Operator: Your next question comes from the line of Michael Romanelli with Mizuho Securities. Please go ahead.
Speaker #1: ahead. Yeah.
[Analyst] (Mizuho Securities): Yeah. Hi. Yeah, thanks for taking the question. So yeah, I guess I was just wondering if there are any regions and/or verticals that perform better than your internal expectations this quarter, and maybe conversely, were any more challenged than you were anticipating?
Michael Romanelli: Yeah. Hi. Yeah, thanks for taking the question. So yeah, I guess I was just wondering if there are any regions and/or verticals that perform better than your internal expectations this quarter, and maybe conversely, were any more challenged than you were anticipating?
Speaker #8: Hi. Thanks for taking the question. So, yeah, I guess I was just wondering if there are any regions and/or verticals that performed better than your internal expectations this quarter, and maybe conversely, were any more challenged than you were anticipating?
Speaker #3: What was the second part? Sorry, Michael?
Sanjay Mirchandani: What was the second part? Sorry, Michael.
Sanjay Mirchandani: What was the second part? Sorry, Michael.
Speaker #8: Yeah. If any regions or verticals were perhaps more challenged than you were anticipating?
[Analyst] (Mizuho Securities): Yeah. If any regions or verticals were perhaps more challenged than you were anticipating?
Michael Romanelli: Yeah. If any regions or verticals were perhaps more challenged than you were anticipating?
Speaker #3: Yeah, actually, as a quarter, it's very evenly distributed—and almost by design. Over time, we've worked to de-risk the business in both geography as well as in particular verticals.
Sanjay Mirchandani: Yeah. Actually, as a quarter, it's very evenly distributed and almost by design. Over time, we've worked to de-risk the business in both geography as well as in particular verticals. This quarter, our international business did very well, as did our US business. It was very even. Our SaaS business did well. Our software business did well. So there was no particular callout. I think overall, a well-delivered quarter from my point of view.
Sanjay Mirchandani: Yeah. Actually, as a quarter, it's very evenly distributed and almost by design. Over time, we've worked to de-risk the business in both geography as well as in particular verticals. This quarter, our international business did very well, as did our US business. It was very even. Our SaaS business did well. Our software business did well. So there was no particular callout. I think overall, a well-delivered quarter from my point of view.
Speaker #3: This quarter, our international business did very well, as did our U.S. business. It was very, very even. Our SaaS business did well. Our software business did well.
Speaker #3: So there was no particular callout. I think, overall, a well-delivered quarter from my point of view.
Speaker #3: view. Got it.
[Analyst] (Mizuho Securities): Got it. Okay. That's helpful. And then maybe just building on a prior question, and apologize if I missed it, but you guys have obviously noted that you expect SaaS to comprise about 60% of total net new ARR for the fiscal year. Just how should we be thinking about that mix shift for the forward year, too? Thanks.
Michael Romanelli: Got it. Okay. That's helpful. And then maybe just building on a prior question, and apologize if I missed it, but you guys have obviously noted that you expect SaaS to comprise about 60% of total net new ARR for the fiscal year. Just how should we be thinking about that mix shift for the forward year, too? Thanks.
Speaker #8: Okay, that's helpful. And then, maybe just building on the prior question—and I apologize if I missed it—but you guys have obviously noted that you expect SaaS to comprise about 60% of total net new ARR for the fiscal year.
Speaker #8: Just how should we be thinking about that mixture for the 4Q?
Speaker #8: Thanks. Yeah.
Speaker #4: I would even this quarter, we talked about this, I think Rudy called this out, right? From a SaaS perspective, we're still about 60%. So I think that 60% baseline is the right way to think about it.
Danielle Abrahamsen: Yeah. Even this quarter, we talked about this. I think Rudy called this out, right? From a SaaS perspective, we're still about 60%. So I think that 60% baseline is the right way to think about it.
Danielle Abrahamsen: Yeah. Even this quarter, we talked about this. I think Rudy called this out, right? From a SaaS perspective, we're still about 60%. So I think that 60% baseline is the right way to think about it.
Speaker #8: Got it. Okay. All right. That's helpful. Thanks.
[Analyst] (Mizuho Securities): Got it. Okay. All right. That's helpful. Thanks.
Michael Romanelli: Got it. Okay. All right. That's helpful. Thanks.
Speaker #4: Yep.
Danielle Abrahamsen: Yep.
Danielle Abrahamsen: Yep.
Speaker #1: Your next question comes from the line of Tom Blakey with Kantor. Please go
Speaker #1: Your next question comes from the line of Tom Blakey with Kantor. Please go ahead. Hey,
Operator: Your next question comes from the line of Tom Blakey with Cantor. Please go ahead.
Operator: Your next question comes from the line of Tom Blakey with Cantor. Please go ahead.
Speaker #9: Guys, thanks for squeezing me in here. Just a couple of quick ones. On this duration topic, Danielle, what is the—oh, I guess just bluntly, what is the expectation for duration in the guide for fiscal—
[Analyst]: Hey, guys. Thanks for squeezing me in here. Just a couple quick ones. On this duration topic, Danielle, what is the, oh, I guess just bluntly, what is the expectation for duration in the guide for fiscal for Q?
Tom Blakey: Hey, guys. Thanks for squeezing me in here. Just a couple quick ones. On this duration topic, Danielle, what is the, oh, I guess just bluntly, what is the expectation for duration in the guide for fiscal for Q?
Speaker #9: 4Q? Yeah.
Danielle Abrahamsen: Yeah. So we're continuing to assume that duration remains. Specifically, and Sanjay called this out in his earlier remarks, right? Median duration will remain in normal range. So that's what we're assuming in our guide.
Danielle Abrahamsen: Yeah. So we're continuing to assume that duration remains. Specifically, and Sanjay called this out in his earlier remarks, right? Median duration will remain in normal range. So that's what we're assuming in our guide.
Speaker #4: So we're continuing to assume that duration remains specifically in Sanjay called this out in his earlier remarks, right? Median duration will remain in normal range.
Speaker #4: So that's what we're assuming in our
Speaker #4: guide.
Speaker #9: So
[Analyst]: So basically, just quarter to quarter, a downtick in duration, so to speak. And then, go ahead.
Tom Blakey: So basically, just quarter to quarter, a downtick in duration, so to speak. And then, go ahead.
Speaker #9: quarter, a downtick in basically, just quarter over duration. So to speak. And
Speaker #9: then go ahead. No, no.
Danielle Abrahamsen: No, no. Yeah. I would say, again, that the duration median will remain the same. And the guide is neither aggressive nor conservative, right? We wanted to give you where we feel like we can meet.
Danielle Abrahamsen: No, no. Yeah. I would say, again, that the duration median will remain the same. And the guide is neither aggressive nor conservative, right? We wanted to give you where we feel like we can meet.
Speaker #4: Yeah. I would say, again, that the duration median will remain the same. And the guide is neither aggressive nor conservative, right? We wanted to give you where we feel like we can meet.
Speaker #3: And frankly, we're getting better at this. As customers deploy more complex scenarios, we have to internally be spending a lot of time really finessing how we look at this.
Sanjay Mirchandani: Frankly, we're getting better at this. As customers deploy more complex scenarios, we have to internally be spending a lot of time really finessing how we look at this. We've been completely transparent about that.
Sanjay Mirchandani: Frankly, we're getting better at this. As customers deploy more complex scenarios, we have to internally be spending a lot of time really finessing how we look at this. We've been completely transparent about that.
Speaker #3: And we'll be completely transparent about that.
Speaker #9: No, no. Always, Sanjay. Just that duration was an impact too.
[Analyst]: Yeah. No, you're always Sanjay. I just said duration was an impact to ARR this quarter. So I was just trying to understand.
Tom Blakey: Yeah. No, you're always Sanjay. I just said duration was an impact to ARR this quarter. So I was just trying to understand.
Speaker #9: ARR this quarter. So I was just trying to understand.
Speaker #3: I
Speaker #3: know because it's a tale of two cities, right? Here we get larger duration, more land deals, and it affects the other side. So and then we got a lot of new SaaS deals and smaller duration.
Sanjay Mirchandani: I know because it's a tale of two cities, right? Here we get larger duration, more land deals, and it affects the other side. And then we got a lot of new SaaS deals and smaller duration. And so a little bit of a variability is to be expected. We're getting better, I hope, at being able to tell you what that is.
Sanjay Mirchandani: I know because it's a tale of two cities, right? Here we get larger duration, more land deals, and it affects the other side. And then we got a lot of new SaaS deals and smaller duration. And so a little bit of a variability is to be expected. We're getting better, I hope, at being able to tell you what that is.
Speaker #3: And so, a little bit of variability is to be expected. We're getting better, I hope, at being able to tell you what that—
Speaker #3: is. Yeah.
[Analyst]: Yeah. And this goes hand in hand with the complexity and the expanding kind of sales motion that you guys are going to market with in terms of adding cyber resiliency the last year or so, a year or two, Sanjay. So maybe if you could talk about these increasing hybrid deals, the sales cycles, maybe talk about on a like-for-like basis, where are sales cycles going this last fiscal quarter or maybe going forward in your mind? Are they expanding? And maybe if you could touch on discounting for everybody on the call, is there an element of discounting just to address that topic with the extended durations? And that's it for me. Thank you so much.
Tom Blakey: Yeah. And this goes hand in hand with the complexity and the expanding kind of sales motion that you guys are going to market with in terms of adding cyber resiliency the last year or so, a year or two, Sanjay. So maybe if you could talk about these increasing hybrid deals, the sales cycles, maybe talk about on a like-for-like basis, where are sales cycles going this last fiscal quarter or maybe going forward in your mind? Are they expanding? And maybe if you could touch on discounting for everybody on the call, is there an element of discounting just to address that topic with the extended durations? And that's it for me. Thank you so much.
Speaker #9: And this just goes hand in hand with the complexity and the expanding kind of sales motion that you guys are going to market with in terms of adding cyber resiliency the last year or so.
Speaker #9: A year or two, Sanjay. So maybe if you could talk about these increasing hybrid deals, the sales cycles—maybe talk about, on a like-for-like basis, where are sales cycles going this last fiscal quarter? Maybe going forward, in your mind, are they expanding?
Speaker #9: And maybe if you could touch on discounting for everybody on the call, is there an element of discounting just to address that topic with the extended durations?
Speaker #9: And that's it from me. Thank you so much.
Speaker #3: No worries. No worries. So hybrid deals—if you start on the software side, you look at large enterprise customers, and they have technology that goes back, sort of legacy technology.
Sanjay Mirchandani: No worries. No worries. So hybrid deals, if you start on the software side, you look at large enterprise customers, and they have technology that goes back, sort of legacy technology. The process of getting that conversation going where it becomes a combination now in resilience terms of really looking at data security of all data types, looking at identity resilience, and then attaching that to world-class recovery, that becomes a fairly sophisticated conversation, and that takes time. And when we get into it, then you realize that some of the workloads, they want to start in the cloud. They want to keep on-premises. They have a timeline in which to move it to the cloud. So then you start working through that. And we've gotten good at it because we've been doing this now, the cyber resilience conversation, security conversation for a couple of years.
Sanjay Mirchandani: No worries. No worries. So hybrid deals, if you start on the software side, you look at large enterprise customers, and they have technology that goes back, sort of legacy technology. The process of getting that conversation going where it becomes a combination now in resilience terms of really looking at data security of all data types, looking at identity resilience, and then attaching that to world-class recovery, that becomes a fairly sophisticated conversation, and that takes time. And when we get into it, then you realize that some of the workloads, they want to start in the cloud. They want to keep on-premises. They have a timeline in which to move it to the cloud. So then you start working through that. And we've gotten good at it because we've been doing this now, the cyber resilience conversation, security conversation for a couple of years.
Speaker #3: The process of getting that conversation going where it becomes a combination now, resilience terms of really looking at data security of all data types looking at identity resilience and then attaching that to world-class recovery, that becomes a fairly sophisticated conversation and that takes time.
Speaker #3: And when we get into it, then you realize that some of the workloads want to start in the cloud. They want to keep on-premise.
Speaker #3: They have a timeline in which to move it to the cloud. So then you start working through that. And we've gotten good at it because we've been doing this now the cyber resilience conversation security conversation for a couple of years.
Speaker #3: We think the new platform and the bringing together of the capabilities under one pane of glass will just allow customers, especially with our discovery capabilities, to quickly get up and understand what they have and what is protected, what isn't, at what level, what policy.
Sanjay Mirchandani: We think the new platform and the bringing together of the capabilities under one pane of glass will just allow customers, especially with our discovery capabilities, to quickly get up and understand what they have and what is protected, what isn't, at what level, what policy. So I think the new platform in time will help shrink our ability and the customer's decision points, I think, to do things. Now, the sales force is taking this to market comprehensively. Okay? We try not to go and talk about workloads because that's not a resilient solution. Resilience, in my simple way of thinking about it, is only as good as the entirety of the workloads you protect. And so that's kind of how we look at it. These deals, when you start, it's a very sophisticated sales process, and you have to, but customers are open to it. Cyber threats aren't going down.
We think the new platform and the bringing together of the capabilities under one pane of glass will just allow customers, especially with our discovery capabilities, to quickly get up and understand what they have and what is protected, what isn't, at what level, what policy. So I think the new platform in time will help shrink our ability and the customer's decision points, I think, to do things. Now, the sales force is taking this to market comprehensively. Okay? We try not to go and talk about workloads because that's not a resilient solution. Resilience, in my simple way of thinking about it, is only as good as the entirety of the workloads you protect. And so that's kind of how we look at it. These deals, when you start, it's a very sophisticated sales process, and you have to, but customers are open to it. Cyber threats aren't going down.
Speaker #3: So I think the new platform in time will help shrink our ability and the customer's decision points. I think to do things. Now, the Salesforce is taking this to market comprehensively.
Speaker #3: Okay? We try not to go and talk about workloads because that's not a resilient solution. Resilience, in my simple way of thinking about it, is only as good as the entirety of the workloads—the workloads you protect.
Speaker #3: And so that's kind of how we look at it. These deals, when you start, can it's a very sophisticated sales process and it's a very and you have to but customers are open to it.
Speaker #3: Cyber threats aren't going down. AI in a good way generates more data and that data needs to be protected. And we're good at that.
Sanjay Mirchandani: AI, in a good way, generates more data, and that data needs to be protected, and we're good at that. Okay? So that's kind of how we think about it. Go ahead.
AI, in a good way, generates more data, and that data needs to be protected, and we're good at that. Okay? So that's kind of how we think about it. Go ahead.
Speaker #3: Okay, so that's kind of how we think about it. Go ahead.
Speaker #9: You saw that, Sanjay. Sorry, as a follow-up to that. Sorry. I thought I was done there. But you saw that in your net new term, record additions.
[Analyst]: You saw that, Sanjay. Sorry, as a follow-up to that. Sorry. I thought I was done there, but you saw that in your net new term record additions. Again, I just wanted to just triple-click on, is this maybe, in addition to all these records and solid results, is there an element of pipeline building related to this, possibly a sales elongation going on?
Tom Blakey: You saw that, Sanjay. Sorry, as a follow-up to that. Sorry. I thought I was done there, but you saw that in your net new term record additions. Again, I just wanted to just triple-click on, is this maybe, in addition to all these records and solid results, is there an element of pipeline building related to this, possibly a sales elongation going on?
Speaker #9: Again, I just wanted to just triple-click on is this maybe in addition to all these records and solid results, is there an element of pipeline building related to this possibly a sales elongation going on?
Speaker #3: Yeah. So, I was going to—I think that, firstly, you said 'discounting' earlier in your earlier part of your question. There is no—we keep a very tight control on that.
Sanjay Mirchandani: Yeah. So I was going to—I think that, firstly, you said discounting earlier in your earlier part of your question. There is no—we keep a very tight control on that. Our chief commercial officer was our chief financial officer. So there's a very high degree of discipline that goes into discounting inside of a company. So that, I don't worry about day in and day out. That's not my concern at all. The sales cycle, we believe, and it's early days. So we can talk about it over the quarters to come. We believe that our Commvault Cloud Unity platform will reduce the time it takes for customers to understand resilience the way we've designed it and get up and running with us faster. And then we also released a framework for them to sort of look at to operationalize it. We call that ResOps.
Sanjay Mirchandani: Yeah. So I was going to—I think that, firstly, you said discounting earlier in your earlier part of your question. There is no—we keep a very tight control on that. Our chief commercial officer was our chief financial officer. So there's a very high degree of discipline that goes into discounting inside of a company. So that, I don't worry about day in and day out. That's not my concern at all. The sales cycle, we believe, and it's early days. So we can talk about it over the quarters to come. We believe that our Commvault Cloud Unity platform will reduce the time it takes for customers to understand resilience the way we've designed it and get up and running with us faster. And then we also released a framework for them to sort of look at to operationalize it. We call that ResOps.
Speaker #3: Commercial Officer was our Chief Financial, our Chief Officer. So there's a very high degree of discipline that goes into discounting inside of the company.
Speaker #3: So that, I don't worry about day in and day out. That's not my concern at all. The sales cycle, we believe, and it's early days.
Speaker #3: So, we can talk about it over the quarters to come. We believe that our Cloud Unity platform will reduce the time it takes for customers to understand resilience the way we've designed it and get up and running with us faster.
Speaker #3: And then we also released a framework for them to sort of look at to operationalize it. We call that ResOps. We released that. We announced that in tandem with the platform.
Sanjay Mirchandani: We announced that in tandem with the platform. The collective capabilities in there, we think, will allow our team, our partners, and our customers, our prospects, in this case, to truly understand how fast they can get up and running with true resilience. I'm very hopeful about where the platform is.
We announced that in tandem with the platform. The collective capabilities in there, we think, will allow our team, our partners, and our customers, our prospects, in this case, to truly understand how fast they can get up and running with true resilience. I'm very hopeful about where the platform is.
Speaker #3: And the collective capabilities in there, we think, will allow our team, our partners, and our customers—or prospects, in this case—to truly understand how fast they can get up and running with true resilience.
Speaker #3: So, I'm very hopeful about where the platform is.
Speaker #9: Thank you very much,
[Analyst]: Thank you very much, Sanjay.
Tom Blakey: Thank you very much, Sanjay.
Speaker #9: Sanjay. Thank
Sanjay Mirchandani: Thank you.
Sanjay Mirchandani: Thank you.
Speaker #1: Your next you. question comes from the line of Shanik Kasari with Baird. Please go ahead.
Operator: Your next question comes from the line of Shrenik Kothari with Baird. Please go ahead.
Operator: Your next question comes from the line of Shrenik Kothari with Baird. Please go ahead.
Speaker #10: Hey, yeah. Thanks for taking my question. So Daniel, you noted, of course, strong new SaaS customers this quarter, but that these dollars, of course, haven't flowed into NRR yet.
Operator: Hey, yeah. Thanks for taking my question. So Danielle, you noted, of course, strong new SaaS customers this quarter, but that these dollars, of course, haven't flowed into NRR yet. Can you just clarify? And I believe Sanjay was getting to that in terms of that lag effect. Is it purely a function of how you recognize your SaaS ARR, sort of ramping off actual usage consumption versus potentially some of the peers who use and kind of used as linearity around duration and TCV? So that's part one. And I had a follow-up on Unity. Thanks.
Shrenik Kothari: Hey, yeah. Thanks for taking my question. So Danielle, you noted, of course, strong new SaaS customers this quarter, but that these dollars, of course, haven't flowed into NRR yet. Can you just clarify? And I believe Sanjay was getting to that in terms of that lag effect. Is it purely a function of how you recognize your SaaS ARR, sort of ramping off actual usage consumption versus potentially some of the peers who use and kind of used as linearity around duration and TCV? So that's part one. And I had a follow-up on Unity. Thanks.
Speaker #10: Can you just clarify? And I believe Sanjay was getting to that in terms of the lack of fact. Is it purely a function of how you recognize your SaaS ARR sort of ramping off actual usage consumption versus potentially some of the peers who use and kind of used as linearity around duration and TCV?
Speaker #10: So that's part one, and I had a follow-up on Unity things.
Speaker #2: Yeah. So I just want to make sure I understand because I think you're asking two different things. So you mentioned SaaS NRR, right? And I had made the comment one of the things we saw is we had a really strong SaaS new customer quarter.
Danielle Abrahamsen: Yeah. So I just want to make sure I understand because I think you're asking two different things. So you mentioned SaaS NRR, right? And I had made the comment. One of the things we saw is we had a really strong SaaS new customer quarter. And so obviously, the way that we calculate NRR is we take that same customer cohort from last year and look at where they are this year. So any new customers would not be considered in that calculation. Does that help answer your question? I think that's what you were getting at, but if I'm missing it, let me know.
Danielle Abrahamsen: Yeah. So I just want to make sure I understand because I think you're asking two different things. So you mentioned SaaS NRR, right? And I had made the comment. One of the things we saw is we had a really strong SaaS new customer quarter. And so obviously, the way that we calculate NRR is we take that same customer cohort from last year and look at where they are this year. So any new customers would not be considered in that calculation. Does that help answer your question? I think that's what you were getting at, but if I'm missing it, let me know.
Speaker #2: And so, obviously, the way that we calculate NRR is we take that same customer cohort from last year and look at where they are this year.
Speaker #2: So any new customers would not be considered in that calculation. Does that help answer your question? I think that's what you were getting at, but if I'm missing it, let me
Speaker #2: know. No, no.
Operator: No, no. That was it. Yeah. Thanks. Yeah.
Shrenik Kothari: No, no. That was it. Yeah. Thanks. Yeah.
Speaker #10: That was it. Yeah.
Speaker #10: Thanks. Yeah. So it's
Speaker #2: Okay. Perfect.
Danielle Abrahamsen: Okay. Perfect.
Danielle Abrahamsen: Okay. Perfect.
Sanjay Mirchandani: So it's all future value, lifetime value of the customer.
Sanjay Mirchandani: So it's all future value, lifetime value of the customer.
Speaker #3: all future value. Future value, lifetime value of the customer.
Speaker #10: Yeah. Got it. And Sanjay, so my follow-up then is, of course, you have the SaaS ARR recognition due to this kind of ramps. And I was just curious in that case, kind of a SaaS ACV bookings offer a much cleaner, better lens into your true mind.
Operator: Yeah. Got it. And Sanjay, so my follow-up then is, of course, you have the SaaS ARR recognition due to this kind of ramps. And I was just curious, would, in that case, kind of a SaaS ACV bookings offer a much cleaner, better lens into your—to my mind, I think you were getting to that, and with Unity gaining traction, should help improve your overall TCV and ARR dynamics. Just curious, and also net new ARR coming from SaaS, just has there been any internal discussion around looking at some of those metrics, kind of ACV or backlog RPO? Yeah.
Shrenik Kothari: Yeah. Got it. And Sanjay, so my follow-up then is, of course, you have the SaaS ARR recognition due to this kind of ramps. And I was just curious, would, in that case, kind of a SaaS ACV bookings offer a much cleaner, better lens into your—to my mind, I think you were getting to that, and with Unity gaining traction, should help improve your overall TCV and ARR dynamics. Just curious, and also net new ARR coming from SaaS, just has there been any internal discussion around looking at some of those metrics, kind of ACV or backlog RPO? Yeah.
Speaker #10: I think you were getting to that. And with Unity gaining traction, it should help improve your overall TCV and ARR dynamics. Just curious, and also, net new ARR coming from SaaS.
Speaker #10: Just, has there been any internal discussion around looking at some of those metrics, kind of ACV or backlog?
Speaker #10: RPO? Hey, sorry.
Danielle Abrahamsen: Hey, sorry. This is Danielle again. So I just want to make sure it's clear, right? So we do have some consumption and some utility. It's a small portion of our ARR. Most of our ARR is tied to what I'll say is true subscription SaaS customers in that they buy a fixed amount for one year, and then that amount is annualized. So I don't know if there's-I hope that answers your question.
Danielle Abrahamsen: Hey, sorry. This is Danielle again. So I just want to make sure it's clear, right? So we do have some consumption and some utility. It's a small portion of our ARR. Most of our ARR is tied to what I'll say is true subscription SaaS customers in that they buy a fixed amount for one year, and then that amount is annualized. So I don't know if there's-I hope that answers your question.
Speaker #2: This is Danielle again. So I just want to make sure it's clear, right? We do have some consumption and some utility—it's a small portion of our ARR. Most of our ARR is tied to what I'll say are true subscription SaaS customers, in that they buy a fixed amount for one year and then that amount is annualized.
Speaker #2: So I don't know if there's I hope that answers your question.
Speaker #10: Your last question comes from the line of Michael Melnyk.
Operator: Your last question comes from the line of Junaid Siddiqui with Truist. Please go ahead.
Operator: Your last question comes from the line of Junaid Siddiqui with Truist. Please go ahead.
Speaker #1: Janai Jasidic with Truist. Please go ahead.
Speaker #1: ahead. Great.
[Analyst] (DA Davidson): Great. Good morning, and thank you for taking my question. I just wanted to ask about Satori, Sanjay. I know it's in the early days, but could you just discuss how Satori is influencing customer adoption and deal sizes in these ransomware-driven evaluations? And what specific capabilities within Satori are proving most differentiating in these competitive wins? And how do you think about its contribution to growth over the next, let's say, 12, 18 months?
Junaid Siddiqui: Great. Good morning, and thank you for taking my question. I just wanted to ask about Satori, Sanjay. I know it's in the early days, but could you just discuss how Satori is influencing customer adoption and deal sizes in these ransomware-driven evaluations? And what specific capabilities within Satori are proving most differentiating in these competitive wins? And how do you think about its contribution to growth over the next, let's say, 12, 18 months?
Speaker #11: Good morning, and thank you for taking my question. I just wanted to ask about Satori. Sanjay, I know it's in the early days, but could you just discuss how Satori is influencing customer adoption and deal sizes in these ransomware-driven evaluations?
Speaker #11: And what specific capabilities within Satori are proving most differentiating in these competitive wins? And how do you think about its contribution to growth over the next, let's say, 12 to 18 months?
Speaker #9: Okay, sounds good. So, where we are with Satori is we're in the throes of integrating the product into our platform. And when we acquired Satori, we were, I think, very clear that this would not be a standalone capability, but the value—the true value—of Satori was giving our customers the ability to inspect and look at their data, structured, unstructured, and really have a policy-related compliance capability.
Sanjay Mirchandani: Okay. Sounds good. So where we are with Satori is we're in the throes of integrating the product into our platform. And when we acquired Satori, we were, I think, very clear that this would not be a standalone capability, but the true value of Satori was giving our customers the ability to inspect and look at their data structured, unstructured, and really have a policy-related compliance capability. So that was the premise. That work, we are in the throes of incorporating into the platform. Our belief is the customers need that capability as part of the platform, unlike some others in the business, because standalone, it's another integration point. And with us, it's a feature you just turn on, and then you are protected, and you're looking at the compliance requirements and policies across the board. So it's an implicit part of the platform. Okay?
Sanjay Mirchandani: Okay. Sounds good. So where we are with Satori is we're in the throes of integrating the product into our platform. And when we acquired Satori, we were, I think, very clear that this would not be a standalone capability, but the true value of Satori was giving our customers the ability to inspect and look at their data structured, unstructured, and really have a policy-related compliance capability. So that was the premise. That work, we are in the throes of incorporating into the platform. Our belief is the customers need that capability as part of the platform, unlike some others in the business, because standalone, it's another integration point. And with us, it's a feature you just turn on, and then you are protected, and you're looking at the compliance requirements and policies across the board. So it's an implicit part of the platform. Okay?
Speaker #9: So, that was the premise. That work, we are in the throes of incorporating into the platform. Our belief is that customers need that capability as part of the platform, unlike some others in the business, because standalone, it's another integration point.
Speaker #9: And with us, it's a feature you just turn on, and then you are protected, and you're looking at the compliance requirements and policies across the board.
Speaker #9: So, it's an implicit part of the platform, okay? We believe that the value comes from customers being better protected out of the box, without having to do more in-field integrations with third-party products.
Sanjay Mirchandani: We believe that the value comes for customers being better protected out of the box without having to do more in-field integrations with third-party products. And we think that's going to raise the value. And it is already raising the value in conversations that we're having. So it's early days, but kind of where we expected it to be.
We believe that the value comes for customers being better protected out of the box without having to do more in-field integrations with third-party products. And we think that's going to raise the value. And it is already raising the value in conversations that we're having. So it's early days, but kind of where we expected it to be.
Speaker #9: And we think that's going to raise the value. And it is already raising the value in conversations that we're having. So, it's early days, but kind of where we expected it to be.
Speaker #9: And we think that's going to raise the value. And it is already raising the value in conversations that we're having. So it's early days, but kind of where we expected it to be.
Operator: Great. Thank you.
Junaid Siddiqui: Great. Thank you.
Speaker #11: Thank you.
Speaker #9: Thank Great.
Sanjay Mirchandani: Thank you.
Sanjay Mirchandani: Thank you.
Speaker #1: All right. There you are. No questions at this time, ladies and gentlemen. That does conclude our conference call for today. Thank you all for joining, and you may now disconnect.
Operator: All right. There are no questions at this time. Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.
Operator: All right. There are no questions at this time. Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.
