Commvault Systems, Inc.

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Commvault First Quarter Fiscal Year 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 followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. I would now like to turn the conference over to Mike Melny, head of investor relations. You may begin.

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 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 Merchandani, for his opening remarks. Sanjay?

Good morning, and thank you for joining today's call. Commvault had a tremendous start to our fiscal year. Some highlights in the quarter include total ARR grew 24% to 996 million. Subscription ARR grew 33% to 844 million. Total revenue grew 26% to 282 million. Subscription revenue increased 46% to 182 million, and we achieved 47 on a rule of 40 basis. Our execution has never been better across the business. We continue to see hyper-grow with our SaaS platform. SaaS ARR soared 63% to 307 million, and in Q1, we surpassed 8,000 customers. And we're set to surpass our 330 million ARR target well ahead of schedule. Those stats also speak to our overall land and expand business. In fact, in Q1, across software and SaaS, we had our best land and expand quarter ever. A few notable wins include Honeywell, Equifax, U-Haul, NTT Data Services, and insurance group, Chow Sir Lloyds. Additionally, we've seen tremendous success in emerging routes to market, including cloud marketplaces. During the quarter, we achieved triple vision growth in marketplace transactions with multiple six-figure and set seven-figure deals. And lastly, in terms of execution, we posted healthy growth across geographies, industries, and customer segments, from enterprise to SMB. Jen will share more details about this later. None of this would have been possible without the trust of our customers and partners and the hard work and dedication of our team members globally. Thank you all. The strength we demonstrated in Q1 provides us with a solid foundation for the rest of the fiscal year. As we reported in previous quarters, there are three critical drivers that continue to underpin our long-term sustainable growth. First, the cyber resilience market is booming. As CIOs and CISOs alike strive to keep their businesses operating continuously in a world of relentless threats and attacks, Commvault is front and center in this market, and we continue to see healthy growth in our engagement with CISOs. Commvault's offerings uniquely fill the preparedness gap that security and IT teams are so concerned about today. CISOs can enhance resilience by proactively assessing risks, scenario planning, and running simulations as part of our platform. That's what we do, and we do it better than anyone else. Case in point, we continuously grow with our clean room recovery offering that enables customers to test their resiliency in good times so they're prepared for the hard times. In Q1, a government institution in the Middle East chose Commvault Cloud and Clean Room Recovery to regularly test their cyber preparedness. The customer also added AirGap Protect, Active Directory, and Cloud Rewind for enhanced security and rapid recovery following an outage of cyber attack. This quarter, we brought cyber preparedness to a new level with the introduction of Recovery Range. This hands-on in-person experience enables security and IT teams to simulate the pressure of real-world attacks in a setting that models their own production environment. And like other simulations, defenders can practice their responses, recovery, and put their preparedness skills to the test. Our second critical market driver is the breadth of our partner ecosystem. Q1 was a phenomenal quarter for Commvault in terms of extending our reach with partners. In addition to doubling down on cloud marketplaces, we announced major partnerships across the ecosystem. We formed a strategic alliance with Deloitte to help end prices around the world, fortify the defenses, and swiftly recover from outages and cyber attacks. We took our partnership with CrowdStrike to the next level, announcing an expanded collaboration that brings together their elite incident response services with our industry-leading recovery expertise. These services help customers improve readiness, respond faster, and achieve cleaner recoveries. From the main stage of HPE Discover Conference, HPE and Commvault announced a strategic partnership to deliver advanced cyber resilience, data protection, and disaster recovery capabilities for enterprise hybrid cloud environments. Lastly, in partnership with Kindle, we announced incident recovery services. This holistic solution helps customers mitigate risk, avoid the high cost of downtime and regulatory fines, improve cyber resilience, and enable continuous business in the face of cyber threats. And finally, our third driver is our market-leading innovation, which continues to receive major accolades. For the 14th consecutive time, Commvault was named a leader in the Gartner Magic Quadrant for backup and data protection platforms. In Gartner's critical capabilities reports, we were ranked number one in five out of six use cases, including multi-cloud and SAS, and received the highest rating for the AI and ML critical capability. Additionally, this year, Gartner recognized Commvault as a sample vendor in the Gartner 2025 height cycle for data security technologies. In Q1, Commvault also won the Outstanding Cyber Resilience Award from Cyber Defense Magazine. We will continue to innovate so our customers can address their most critical resilience challenges. Protecting AI data is part of that. At the Gartner Security and Risk Management Summit in June, panelists reported by 2028, 25% of enterprise breaches will be traced back to AI agent abuse from both external and malicious internal actors. To directly address threats posed by AI and to further advance data security, Commvault recently announced its intent to acquire Satori Cyber, a data and AI security company. This strategic acquisition will add powerful capabilities that strengthen Commvault's data security offerings and empower customers to use AI in a better governed and more responsible way. The transaction is expected to close later this quarter, so we'll share more on our next earnings call. The bottom line, we have an industry-leading cyber resilience platform, an aggressive AI-minded innovation roadmap, and the proven execution customers rely on to keep their businesses uninterrupted. We hope you can join us in New York City at Commvault Shift on November 11th and 12th as we usher in a whole new era of cloud-native and cyber resilience readiness. Now, I'll turn it over to our Chief Financial Officer, Jen Derico, to discuss our results.

Thanks, Sanjay. As Sanjay mentioned, we delivered a strong start to the fiscal year. The momentum in the cyber resilience market remains strong. Our brand message continues to gain traction, customer demand is increasing, and our team is effectively leveraging a record number of opportunities. I would like to express my gratitude to all the Vaulters whose efforts contributed to our outstanding first quarter results, positioning us for continued success throughout the fiscal year. Now, I'll discuss our Q1 results and operating metrics, followed by a discussion of guidance for Q2 and SY26. Please note that all growth rates are on a -over-year basis and less otherwise specified. Total annual recurring revenue increased by 24% to $996 million on a reported basis. On a constant currency basis, applying March 31st FX rates, organic net new ARR grew by 40 million -over-quarter, a new quarterly record. For a comparison of FX adjusted ARR with previous quarters, please refer to our earnings presentation. Subscription ARR grew 33% to $844 million, representing 30% growth on a constant currency basis. This was led by impressive 63% increase in SAS ARR to $307 million, or 60% growth in constant currency. Subscription ARR now constitutes 85% of total ARR, compared to 79% one year ago. As a reminder, we view subscription ARR as the best indicator of the company's growth profile. Now I'll discuss Q1 revenue trends. Total revenue increased by 26% to $282 million, driven by 46% rise in subscription revenue. This growth was supported by an exceptionally strong land and expand quarter for both term software and SAS, with gains across regions, industries, and transaction sizes, including a significant increase in software transactions, exceeding $1 million. Revenue from term software transactions exceeding $100,000 increased by 39%, reflecting robust growth in both transaction volume and average deal size. Also, we acquired approximately 700 net new subscription customers, and total subscription customers are now approaching 13,000. Customer expansion remained robust, with Q1 SAS net dollar retention of 125%, as a result of both successful upsell and cross-sell initiatives. Our leading solutions, M365 and AirGap Protect, continued to achieve double digit quarter over quarter growth, complimented by substantial contributions from new products that support customers' business continuity strategies, such as Cleanroom and Active Directory. During the quarter, we worked closely with a North American aerospace company to modernize its cyber resilience strategy, while remaining audit ready for FAA and aircraft manufacturer compliance. The customer implemented Commvault's autonomous recovery, AirGap Protect, and Active Directory, to back up their critical data and support their regulatory requirements. The number of SAS customers utilizing two or more products increased by 45%. As Sanjay highlighted, SAS continues to be the preferred route to market for many customers. In this quarter, we observed exponential growth through the hyperscaler marketplaces. Another positive development is the 70% increase in customers generating over $100,000 in SAS ARR during Q1. These larger SAS customers now constitute more than 30% of our SAS customer base. Due to the complexity of their requirements, this segment typically demonstrates a higher rate of multi-product adoption than our overall SAS base. For example, a Fortune 500 life insurance company adopted Commvault after experiencing limitations with native tools for cloud application protection and recovery. The organization standardized M365, files and objects, and VMs on Commvault Cloud, resulting in the elimination of silos and changes in recovery time. With the implementation of AirGap Protect, Active Directory, and Cloud Rewind, the company adjusted its data security approach, addressed compliance requirements, and enhanced the process of environment rebuilds. This example underscores the long-term monetization potential of our platform. As I mentioned in previous calls, we will continue to lean into this cross-cell motion in the coming quarters. Now I'll discuss our profitability and free cash flow, which demonstrates our commitment to a responsible growth philosophy. Fiscal Q1 growth margins were 82.4%, consistent with our previously shared expectation for total growth margins to remain in the low 80% range. Operating expenses of $173 million represented 61% of total revenue, consistent with the prior quarter and prior fiscal year. Q1 operating expenses included planned headcount growth, previously disclosed investments to support our strong ongoing growth trajectory, and higher commission and bonuses on record sales results. Non-Gap EVIT grew 21% to $58 million, and Non-Gap EVIT margin was 20.7%. In Q1, we achieved 47 on a rule of 40 basis, which reflects a healthy balance between revenue and profitability. Turning to key balance sheet and cash flow indicators. We ended Q1 with no debt and a cash position of $363 million. Free cash flow was $30 million, primarily driven by continued strength and deferred revenue from SaaS contracts and solid software subscription renewals. During the quarter, we repurchased $15 million of stock and our diluted share count remained flat at 45 million shares. As Sanjay mentioned, we announced our intention to acquire Satori Cyber, a data and AI security company. We believe there are extensive opportunities to help customers responsibly utilize AI in their production environments, and Satori can help Commvault accelerate this vision. The transaction will be funded from our international cash balance. We expect the transaction to close later this quarter and to be modestly diluted to margins for the next several quarters. Now I'll discuss our outlook for Q2 and our updated outlook for fiscal year 26. For fiscal Q2 26, we expect subscription revenue, which includes both the software portion of term-based licenses and SaaS to be in the range of $174 to $176 million. This represents 31% -over-year growth at the midpoint. We expect total revenue to be in the range of $272 to $274 million, with growth of 17% at the midpoint. At these revenue levels, we expect Q2 consolidated gross margins to be in the range of 81 to 82%. We expect Q2 non-GAAP EBIT margins of approximately 20%, including the integration of Satori Cyber. Now I'm happy to share that we are raising our fiscal year 2026 guidance. As a reminder, ARR guidance is in constant currency, using FX rates as of March 31st, 2025. For a historical comparison, please refer to our Q1 earning wants presentation. We expect constant currency FY26 total ARR growth of 18% -over-year. This will be driven by subscription ARR, which we expect to increase by 24% -over-year. From a full year fiscal 26 revenue perspective, we expect subscription revenue to be in the range of $753 to $757 million, growing 28% at the midpoint with strong contributions from both term software licenses and SAS. We expect total revenue of $1.161 to $1.165 billion, an increase of 17% at the midpoint. Moving to our full year fiscal 26 margin, EBIT and cashflow outlook. We continue to expect gross margins to be 81 to 82%. This range reflects continued growth in our SAS platform, which carries a different gross margin profile than software. We now expect non-GAAP EBIT margins of approximately 20.5%, including the dilutive impact of Satori. Non-GAAP EBIT margins also reflect our ongoing investments in additional growth driving initiatives. We continue to expect full year free cashflow of 210 to $215 million. This guidance reflects our transition to a cash taxpayer, following the full utilization of our tax carry forward credits in fiscal 2025. In closing, our Q1 results underscore the strong and accelerating demand for our cyber resilience platform. This momentum combined with our focused investments, positions us well to capture a greater share of the market in FY26 and beyond. While we remain mindful of the broader macro environment, our updated guidance reflects our confidence in the opportunity ahead and our ability to execute against it. Now I will turn it back to the operator to

open the line for questions. Operator?

Thank

you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speaker phone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one. Press star one to join the queue. And our first question comes from the line of Aaron Rakers with Wells Fargo. Your line is open.

Yeah, thanks for taking the question and congrats on the results, continued solid execution. I guess two quick questions for me. I know Jen, you had mentioned the operating margin in both this quarter as well as the full fiscal year does reflect the dilution impact of Satori. I'm curious, from a revenue perspective, are you factoring in any kind of contributions from that acquisition? And then as a second question, a lot of commentary around the cross-sell, up-sell opportunity. I think last quarter you talked about roughly 30% of your SaaS customers purchasing more than one solution. I'm just curious, I know you mentioned 45% growth, but how do we think about that as we move forward? How successful have you been? And where do you think that can ultimately get to? Thank you.

Yeah, thanks so much for the question, Aaron. I'll start with the first one around Satori. So we're incredibly excited about the Satori acquisition. It absolutely adds technology and talent as we think about expanding the breadth and depth of our platform. From an overall top line perspective, it is immaterial and does not factor in any sort of uplift in revenue guidance. As it relates to the cross-sell, we have made really good progress. It's early innings. You heard me say last quarter, this is the first quarter we're actually focused on it as a company. You heard me say in my prepared remarks that we saw an increase of 45% from a customer perspective using two or more. The other things I would add to you is the fact that you heard in my script that we're seeing numerous customers purchase five or six offerings, right? So there's great progress there. Another stat I'll share with you is within the SAS net dollar retention rate, historically, and I've shared with you that that mix has been one third cross-sell. This past quarter, it was 40%. And so ultimately, I think we're seeing really good traction. And then in addition to that, our security skews grew double digits, quarter over quarter, contributing into that cross-sell and made up 20% of our net new ARR.

Thank you.

Our next question comes from the line of Jason Ader with William Blear. Your line is open.

Yeah, thank you. Can you guys talk about the bundling strategy that you have right now? You have a lot of different products, obviously, seeing good success with cross-sell. What is the sort of kind of high level bundling strategy? Is it still a work in progress? Are you feeling good about where you sit with bundles today?

Hey, Jason, it's Andre. Good to hear from you. So there are some logical bundles that we offer customers today that just make sense together, like Teamroom and Active Directory or Office 365 and Active Directory. So we have those sort of packages that customers tend to avail of naturally because they work better together. As our cyber resilience platform continues to evolve, you'll see more of these logical capabilities coming together with the value proposition. And in November, as I said in my prepared comments, we have shift and you'll hear a lot more about how we're looking at our platform there. So hold that question for us for a little longer and you'll see a lot more there.

Thank you.

Our next question comes from the line of Howard Ma with Guggenheim Securities. Your line is open.

Great, thanks and excellent quarter, guys. I have one for Sanjay and then one for Jen. For Sanjay, when you think about supplementing future growth through M&A, what are some of the key categories by which your team evaluates opportunities? And then on the tutorial acquisition, are you seeing strong evidence that customers want to procure governance and policy enforcement for AI training from their data protection vendor as opposed to other infrastructure software providers?

Hey Howard. So, you know, it's gonna be hard for me to tell you what I'm going after, but I'll tell you what I've gone after. So, you know, if you look at the sort of history of acquisitions we've made, they've been really, if you look at TrapX, you know, and what TrapX brought to us, if you look at Appranics, these were core security and cloud native capabilities as the platform evolved. So, as customers started moving more complicated workloads, building cloud native workloads in the cloud, in a multi-cloud environment, we wanted to make sure that the way we protected those and gave resilience, you know, one size doesn't fit all. So, they fleshed out our ability, for example, to be, to keep customers more secure at the front and then in turn, protect them in the cloud native way. Now, when we took on Clumio, Clumio gave us very good large AI data protection capabilities. Now, with Satori, you're seeing that we're bringing those two things together. You got the whole visibility, observability, and policy enforcement across semi-structured and structured data that packs on very well to the unstructured data pieces that our platform has. And also, as customers start training models and using AI internally, policy enforcement and observability on LLMs and other things and the data that trains those models naturally fits that. So, it's not, I'll answer both your questions together. So, it's not about separate policy enforcement on a separate tool set for just AI, you know, and there will be a place for that. But this is really as the models get trained internally and your employees are using the technology, it gets, you know, you have the same level of visibility as to what's being fed, what's being used, what's being queried. So, you get to enforce policy that way. And it'll all be natural. It'll all be part of the platform. So, it'll be, we're gonna integrate it very aggressively so that it's just a natural way to work with the platform. What we do already, we give you policies already. This is an enhancement. That's how I think about it.

Got it, that makes a lot of sense, Sanjay. For Jen, when we look at the full year revenue guidance being raised by more than the Q1 upside, how much do the quality and the size of your renewal base this year versus last year play a factor, including, I guess, potential for seed expansion and security cross-sell?

Yeah, thanks for the question, Howard. Actually, as we think about the overall revenue guidance, the overall renewal base has been already considered. And ultimately, what you're seeing in the guide is the strength of the business, both on the software and the staff side

of things.

Great, thank you.

Next question comes from the line of Rudy Kessinger with DA Davidson. Your line is open.

Great, thanks for taking my questions. Very sharp results all around. I wanna dig in to maybe just the NetNew AR in Q1. Does look like it's skewed much more towards term license relative to SAS, just versus the trend over last year, very strong term license NetNew AR. Anything to call out there in terms of how deal dynamics shaped up or any color on maybe what was a fifth week of a SAS NetNew AR quarter?

Yeah, so first of all, I would say our SAS business performed as expected and in line, and we're very pleased with that. The Delta did come from overperformance in the software side of things. At the very, very end of the quarter, we did benefit from higher close rates on a few software deals. As it relates, as we think about the SAS business overall and overall NetNew AR on a quarterly basis, we believe going forward that you can see north of 20 million in the SAS NetNew AR and then on the go-forward around 40 million total NetNew AR quarter over quarter for the remaining of the year.

Okay, I was gonna ask about kind of the sequencing of NetNew AR for the quarters, that kind of answers that. I guess maybe a follow-up on that comment you just made about some higher close rates towards the very, very end of the quarter. Could you just talk about the linearity of the quarter at large and how things trended month to month?

Yeah, I think first of all, when we started the quarter, we always expected that we'd be between 30 and 35 million of NetNew AR and at the very, very end, close rates kind of improved quite honestly in like the last week or so of the quarter on a few large deals and that's really what you saw from a linearity perspective.

Very helpful, thank you. Yeah, of course, thank you.

Next question comes from the line of Eric Heath with KeyBank Capital Markets. Your line is open.

Hey, thanks for taking the question and congrats Sanjay and Jen as well. I'll ask maybe on Fed if I could Sanjay, just maybe some of the assumptions you're embedding in the guide, both for Sanjay and Jen and feedback you're hearing, because I know it is a big quarter for you guys in Fed for QQ.

Yeah, I'll start and then of course Sanjay, feel free to chime in. From a Federal perspective, we feel incredibly good about our Fed business. It performed in line with our expectations in Q1 and overall we expect to see similar seasonality for the first half of the year because we do know that overall the Fed is stronger in the first half of the year and ultimately I think what we're seeing is that our FedRAMP high certification continues to be a competitive advantage for us.

That's, you summed it up. You were hard to hear Eric, your question was just around Fed, right?

Right.

Okay, yeah, Jen, Jen man.

And if I could ask a follow up Jen, just on the margins, I know you covered some of it, the reasons for OPEX in the quarter, but just anything you can share why we're not seeing more drop to the bottom line and maybe just help a little bit more on granularity on organic operating margins for the year, thanks.

Sure, so let me just start by saying, I think we're incredibly proud of the overall performance. The business performed in line with our expectations. We had a record quarter and that related to not only increased bonus and commissions as well as our regular planned headcount additions associated with the investments we plan to make. Now I would just highlight the fact that we landed at 47 on a rule of 40. So I think overall we are balancing the business and profitability and growth quite well. As we think out for the rest of the year, like I said, the diluted silvery is the only dilutive impact. It's about 50 bits. Other than that, the business is performing exactly how we expected to my original guidance from an overall e-bit perspective.

And just one more element of color on that is a SaaS business is growing. And it's grew 63% year on year on an ARR basis and we're seeing more workloads. And that has a different margin profile which in the overall scheme of things is reflected. So it's goodness. So the growth is there and we're particularly proud of the 47 on a rule of 40.

And I would just close out with saying that from a guidance perspective, our original guidance showed a rule of 36 and a rule of 40. And my updated guidance shows a rule of 38. So there's already performance and strong

balance there.

Great, thanks so much.

Our next question comes from the line of James Fish with Piper Sandler. Your line is open.

Hey guys, I wanted to go back to something Jen, you said Microsoft 365 has been sort of a killer application, the lion's share of Metallic. But what are you seeing there with either number of seats protected or however you wanna talk about it versus what are you seeing with some of those newer solutions like Cloud Rewind? As you mentioned, some of them are certainly come substantial. So in other words, what I'm really asking is, is there a way to slice sort of the contribution of, I think you said Microsoft 365 and AirGap versus some of the other newer products?

Sure, so from an M365 and AirGap protect, right? Those are our oldest products and our most mature. And so they continue to carry the lion's share of the ARR. However, our security offerings, ThreatWise, ThreatScan, CleanRoom, Appranics, Risk Analysis, those grew double digits, quarter over quarter and made up 20% of our net new ARR.

And we're happy with that.

Yep, understood, understood. And then Sanjay, conversation we always have is just shots on goal, I guess. How are you feeling about what you're getting for shots on goal? I know there's been a lot more marketing programs going on and Jen related to that. We're about 85% subscription now. So is there a way to think about how much is left for migrations within the base? You wanna go, Jen?

Sure, so I was first

of all, I'll start by saying we're really pleased with the overall performance of 85% of the business being on the recurring base of subscription. As we think about migrations, right? And overall, like our perpetual business continues to be a small amount of the overall revenue. We saw that come down this quarter. We're focusing the business on subscription, right? But ultimately what we're seeing is more and more of our ARR is coming from our land business, right? And so ultimately the growth is not really coming from the conversion, it's much more about land in particular on the SaaS side.

And from a conversion point of view, we've always held the line that we don't wanna do anything unnatural, that customers have choices and we give them the choice. We lean in towards a subscription platform, be it SaaS or term license, but if for whatever reason customers wish to go perpetual, they have that choice right now.

And then as it relates to your question on more shots on goal, right? We said this year was another year of investment to continue to maintain our momentum and growth. And you're seeing that in the top line because it's absolutely leading to more shots on goal and our execution continues to remain

incredibly high.

Our next question comes from

the line of Tom Blakey with Cantor, your line is open.

Hey guys, thank you for taking my questions and congratulations on a stellar fiscal one queue here. Maybe for starters, two questions. Sanjay, could you maybe give us an update on the potential competitive displacements and maybe consolidating workloads on Commvault? This growth is pretty dynamic and we've been talking about that for a while. I'd love to get a kind of update there in terms of the sustainability of this dynamic growth. And then Jen, thank you for that color on the north of 20 million net new ARR from SAS. Just maybe talk about any maybe changes there in terms of competition or maybe pricing of whatnot. We talked about bundling, I think, in a prior question or is it just kind of net new conservatism because that doesn't imply a lot of growth on a year on year basis from net new ARR that occurred in the last kind of four or five quarters. That'd be helpful. Thank you.

Yeah, so Tom, from a displacement point of view, if you look at just the software on premise out of capability, that's a market that's growing low single digits. So we're growing in a healthy pattern, which means we are taking share. We're taking share because of a few things. One, our technology continues to lead. I mean, if you look at all the new Gartner reports, our technology continues to lead in every way. Our delivery model with the partner ecosystem has evolved and continues to evolve every quarter. In my prepared comments, I shared the new partnerships and the impact they're going to have. The third piece is that the problem we solve, the hard problem we solve for customers goes beyond data protection. We're now looking at entire environments on cloud-native. We're looking at true multi-cloud. We're looking at SAS environments. And so when you, and we make protection for customers be it a SAS workload, a cloud-native workload, or an on-premise workload, completely transparent. So when you take those factors and the customers, customers have, customers are definitely consolidated. More in this case is not better. Having more vendors, more policies, more feet on the street to make things work is actually harder. And so there is a definite direction of consolidation to our advantage because our platform uniquely provides that capability at scale. And does it in a hybrid environment.

And Tom, regarding your overall SAS, ultimately what you're seeing is just strength in our overall organic business. Yes, Sandhya just hit on the competition element. We're not really seeing too many changes there. Ultimately customers want our full platform and our SAS platform absolutely meets the moment. So ultimately it's just growth in the organic business.

Thank you.

And our last question comes from the line of Itai Kejron with Oppenheimer. Your line is open.

Thanks, hey guys, and again, congrats on a great quarter. I had, I guess, a couple for me. First of all, Jen, there's some of the things we've been hearing from the channel that there are customers who are pulling forward calendar 26 budget plans into actually into 25. So I'm kind of wondering, as you look at your strong performance, clearly the market is doing very well, but is there a way for you to tell if there's a pull forward activity within your customers right here right now?

Yeah, thanks for the question. We spent a lot of time with our -to-market team here and we're not seeing any pull forward. It's just strength in the overall market and our product meeting the needs of customers and our team executing incredibly well.

Excellent, then maybe as a follow-up, you started a new year. Can you talk about the comp plans? How have they changed, if anything? What are you incentivizing more or less of this year?

Sure, so we don't give a lot of details around the comp plans, but what I can tell you is our team is incentivized to absolutely go after overall recurring revenue and we are balancing the need between meeting the needs of what customers want. Ultimately, it's all aligned. It's just a paper performance.

Very good, I appreciate it, congrats.

Thank you.

That concludes the question and answer session. I would like to turn the call back over to Mike Melnick for closing remarks.

Thank you everyone for joining this morning. If you have any additional questions, please feel free to follow up with me by email and also as Sanjay mentioned, we encourage everyone to register for the Shift User Event in New York City November 11th and 12th. Visit our website for details. Thanks very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.

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