KnowBe4, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Know Before Third Quarter 2021 Results Conference Call. Please be advised that today's conference call is being recorded. 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, press the pound key. Thank you. Now, it is my pleasure to turn the call to Ken Telanian, know-before Vice President of Investor Reporting.

As a reminder, our commentary today will include non-GAAP financial measures, information regarding our non-GAAP financial results, the limitations and reconciliations of our GAAP and non-GAAP results, can be found in our earnings release, which was furnished with our form 8K today with the SEC. It may also be found in the supplemental financial information available on our investor relations website at investors.knowbefore.com. In addition, Some of the comments today, including those related to our guidance, may contune forward-looking statements that are subject to risks, uncertainties, and assumptions. Should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from those projected or implied during this call. These risks are described in our Form 10-Q that will be filed following this call. These documents can be found on the SEC's website, sec.gov, and on our investor relations website. During today's call, you will hear prepared remarks from our founder and CEO, Stu Schauerman, and CFO and co-president, Krishnankaraman. Lars Latinoff, our chief revenue officer and co-president, will join our question and answer session. And with that, I will turn the call over to Stu.

Thank you, Ken, and thank you all for joining us today. We're excited to share our results with you this morning. Building on last quarter's strong performance, we exceeded our guidance. We had a record quarter with over 40% year-over-year annual recurring revenue growth. As many of you know, I started KnowBe4 to help organizations manage the ongoing problem of social engineering. We are the only public company dedicated to securing the human layer. The emphasis in cybersecurity has traditionally been on legacy controls. However, the exponential growth in cyber attacks and their relative success proves that we cannot solely rely on security software infrastructure. According to the newest Verizon 2021 data breach investigations report, 85% breaches involved a human element. Ignoring the human element of this equation leaves organizations of all sizes vulnerable, which is why we are dedicated to helping our customers transform their employees into a successful last line of defense against cyber attacks. This problem is not going away. It is escalating. Just last week, in fact, the Wall Street Journal reported that the group behind the SolarWinds attack is actively targeting the global supply chain, by exploiting the human layer with social engineering attacks. The regulatory environment continues to evolve in response to the growing threat landscape as well. In fact, a director at the NSA recently stated that the US will have to contend with ransomware attacks every single day for the next five years. We believe these actions help validate our market opportunity and provide a catalyst for new business growth. I will start by summarizing key results and activities for the quarter. Third quarter results exceeded our expectations across the board with continued growth and strong free cash flow generation. Our inside sales motion continues to win both new enterprise and SMB customers across all industry verticals. This resulted in $262 million in ARR ahead of our expectations and up 44% year over year. We have established a market-leading position in the human-centric cybersecurity space and remain focused on continuing to innovate to meet the needs of our customers. Our vision for the security awareness market defines Nobifor's product roadmap. and this includes both exciting new features and new products. Our recently announced acquisition of Security Advisor is yet another example of our commitment to our vision of the market. With the acquisition of Security Advisor and future integration into the KnowBe4 platform, we are making a big bet to transform alerts from other leading cybersecurity layers into real-time opportunities to change human behavior. With this, we believe we are creating a new category in cybersecurity called Human Detection and Response or HDR. How this works is we connect to these other security layers through their cloud interface and pull in their alerts so we can analyze them and then take real-time action. We believe the new SKU we plan to create with this acquisition should give us an incredible upsell and cross-sell opportunity given the estimated $5 billion TAM associated with this new category. The next several months will be spent integrating the product into the core OB4 platform, building in automation capabilities, and extending the ecosystem. We anticipate solid traction with this product over the next few years. The Security Advisor team's maximum earn-out payment is based on sales of the new product, reaching 40 million in ARR by the end of 2024. Our organic product development remains strong as well. During our inaugural KB4Con EMEA conference, which had in excess of 5,000 registrations, we announced the beta release of a product codenamed PasswordIQ. This is another exciting product that we expect to be of interest to customers of all sizes and all industries. To be clear, this is not a password manager. PasswordIQ is used to mitigate the risk around password hygiene issues, such as weak or breached passwords. The product continuously monitors your organization for any issues detected with users' passwords. It organizes this data on an easy-to-read dashboard and allows for automatic employee training based on detection of any password risk. As with our prior product launches, we expect this product to further expand our cross-sell capabilities. We will provide an update on our expectations for this product during our Q4 earnings call. Given the backdrop of state-sponsored threat actors who continue to take advantage of bad password hygiene, we believe this product will be a welcome addition to our customers' defenses and an additional cross-sell opportunity. Our technology leadership is a key factor in the strong momentum in our new business wins, represented by further penetration in the enterprise markets. We also continue to see strength and best-in-class retention across our existing customer base. Customer growth remains strong across both SMB and enterprise with our total number of customers now reaching over 44,000. Our current customers are investing in our KM-SAT platform and adopting our additional VCR, ACM GRC, and now Compliance Plus products at record levels. As of the end of Q3, 19% of customers now have subscriptions to multiple products. That is up from 12% at the end of Q3 20. Organizations across all verticals and sizes continue to see value in our free tools and thought leadership webinars, which we utilize to generate leads for our inside sales teams. As in previous quarters, we also saw customers buy both KM-SET and Fisher together to leverage the immediate risk reduction that Fisher brings to their organization. Though we do not report the growth for Fisher Compliance Plus and ACM GRC separately, the combined local growth and revenue growth was close to triple digits year over year for the quarter, the continuation of the cross-sell success seen last quarter. In terms of new business, most of our wins continue to be greenfield, but we also saw a number of competitive displacements. The greenfield wins continue to show that the value of security awareness is resonating with customers and our platform stands out from the competition. We believe our competitive wins are further proof that our platform and customer support rank well above our competition. We continue to see success in our enterprise segment, which had several big wins. And to give you some examples of mega enterprise wins, we had an 80,000 seat win with a global bank based in Europe. Also in Europe, we closed a 60,000 seat deal with a multinational consumer electronics store chain. We closed a 45,000 seat deal with a large US retailer that was an existing MediaPro customer. and we closed a 40,000-seat deal with a global transportation services company. This was a great example of a deal we won by having an internal champion. Our key contact at this account brought us to the RFP at her previous company, and we were one of the first calls she made upon arrival at her new job. In Europe, we closed a 19,000-seat deal with a multinational chemical company. This is a customer who turned away from us, used a competitor, and saw the value in coming back to our platform. In Japan, we closed a 16,000 seat deal with a multinational electronics company. In the Middle East, we closed a 15,000 seat deal with a national oil company in a competitive bake-off against two competitors. We believe these wins and others demonstrate that our customers continue to embrace not only the considerable risk reduction our platform brings, but also the thousands of hours we save the IT department in triaging security events. Given the current shortage in skilled IT workers, our strategy of building time-saving features into our platform has paid off. This also remains a critical focus for our product roadmap. Outside of the commercial space, the government segment continues to be a strong vertical for us. In the US, the cyber division of one of the largest cities in the world purchased 150,000 seats in a deal where we displaced multiple vendors. In the same city, a large public healthcare organization purchased 65,000 seats. We also sold an 80,000 seat deal to a federal government agency in a competitive displacement where they favored our automation capabilities. We continue to see traction in the education sector as well. In a greenfield opportunity, a public university system in the US purchased 76,000 seats. Across the globe, we closed a 12,000 seat deal with an Australian university. Before I turn the call over to Krish, I would like to thank our employees and partners for the dedication, commitment, and customer focus that has brought KnowBe4 to its market-leading position today. I'm incredibly proud not only of our financial results, but the great group of people driving this company and are contributing to our communities. We are as focused as ever on bringing high-quality and diverse talent in the door, and this has not gone unnoticed. We were recently included in Fortune's best places to work for millennials, and moguls list the top 100 workplaces with the best diversity and inclusion programs. And even more recently, we received the Reader's Choice Award from Security Insider Magazine in Germany. OB4 was selected as the winner in the category security awareness, which we believe clearly shows our position as a top-rated security awareness provider in EMEA. And those are just a few examples of the great work we're doing behind the scenes. And I look forward to giving you an update in the quarters to come. And with that, I would like Krish to discuss our financial trends.