Varonis Systems, Inc.

Greetings and welcome to the Verona Systems Incorporated First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, James Areschia, Vice President of Investor Relations. Thank you, James. You may begin.

Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' first quarter 2022 financial results. With me on the call today are Yaki Feidelson, Chief Executive Officer, and Guy Melamed, Chief Financial Officer and Chief Operating Officer of Varonis. After preliminary remarks, we will open the call to a question and answer session. During this call, we may make statements related to our business that would be considered forward-looking statements under federal security laws, including projections of future operating results for our second quarter and full year ending December 31st, 2022. Due to a number of factors, actual results may differ materially from those set forth in such statements. These factors are set forth in the earnings press release that we issued today under the section captioned forward-looking statements, and these and other important risk factors are described more fully in our reports filed with the Securities and Exchange Commission. We encourage all investors to read our SEC filing. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date. Varonis expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward-looking statements made herein. Additionally, non-GAAP financial measures will be discussed on this conference call. A reconciliation for the most directly comparable GAAP financial measures is also available in our first quarter 2022 earnings press release, which can be found at www.barones.com in the investor relations section. Lastly, please note that an updated investor presentation, as well as a webcast of today's call, are available on our website in the investor relations section. With that, I'd like to turn the call over to our Chief Executive Officer, Yaki Feidelson. Yaki?

Thank you, Jamie, and good afternoon, everyone. Thanks for joining us today. Driven by 32% year-over-year ARR growth and a record quarterly operating cash flow, 2022 is off to a solid start for warrants, even with the steps we have taken stemming from the war in the Ukraine, which Guy will discuss in more detail. Our thoughts are with our employees, customers, partners, and all of those impacted by the war, and we are hoping for a peaceful resolution soon. Our mission of protecting sensitive data has never been more important as we continue to see a threat landscape that becomes more dangerous by the day. As a result, our pipeline is healthy and the demand environment is strong. I will discuss these trends and how we are well positioned to capitalize on them. So let's jump in. As we have been saying for many quarters, we believe that the current environment underscores the need for a platform To remind you, Varonis addresses three premium use cases that our customer view is increasingly interconnected. These are data protection, threat detection and response, and privacy and compliance. Given the current threat landscape, I want to focus today on our threat detection capabilities, data growth, The dependence on critical data and the increased profitability of stolen data has led to threat actors continuing to refine and sharpen their strategies. And as cyber attacks continue to increase in frequency, sophistication, and severity, the need for companies around the world to protect their sensitive data only becomes more urgent. Between state actors and commercial groups, Cyber attacks are in the headlines on a constant basis, and the target is always sensitive data. As a result, our data-first approach continue to resonate, validating most of strategy and what we have been saying for many years, that the perimeter is essential but isn't enough. A risk assessment show that once perimeter defenses are bypassed, critical data stores are wide open to attackers and insiders, and insiders can be the biggest threats of all. In short, any system, account, or person can be a potential attack vector, and all it takes is one. Companies need to assume attackers will breach at least one vector if they haven't done so already. And once, their attackers will go straight for critical data stores to maximize their profits. Specifically, we see them establish remote control, exploit any weakness they can find, go after accounts with higher level access, and use these accounts to steal data. Unfortunately, unless Veronikis is in place, attackers rarely counter any resistance once they are inside. This is why we say that every cybersecurity leader and company should assume breach. It's not a question of if, but when they will be compromised. When you assume breach, the first step is to assess the blast radius, all the data that an attacker could steal if one employee or vector is compromised, and then make the blast radius as small as possible. A smaller blast radius makes the attacker's job harder and gives our detective controls more chances to catch them as they work to overcome stiffer resistance. Our unparalleled ability to reduce the blast radius, to take inventory of sensitive data, to ensure that only the right people have access, and to put go-forward detective and corrective controls in place to keep it locked down is why customers continue to describe our platform as a must-have. Before I turn the call to Guy, I want to briefly discuss some key customers in the first quarter. A multinational media conglomerate with 35,000 employees became a new Voronis customer in Q1. They had massive amount of sensitive information in Microsoft 365 and no way to accurately classify it, see whether it was at risk and understand who was using it. After proving that we could provide these abilities for their data in Microsoft 365 and help them mediate critical open access issues, they purchased seven Voronis licenses and we are already discussing additional licenses to further protect their data on-prem and in AWS. At the same time, the opportunity to get our existing customers to double-digit number of licenses is clear, and the team had another strong quarter closing significant expansion deals. One of the largest toy companies in the world significantly broadened their Voronis deployment in Q1. Originally a perpetual customer with a more tactical view of data protection, they needed classification and alerting across multiple on-prem and cloud environments. The ability to clean up stale and risky data from acquisitions and automation to help them maintain a secure state. Today, we utilize more than 20 Varonis licenses, and we are discussing how our newer DA cloud offering can address risks stemming from their data in AWS. These are just two examples of how we are helping our customers solve their biggest data protection challenges, which has been our mission since we founded Voronis in 2004. We are focused on continuous execution and capitalizing on the enormous market opportunity before us. And we are excited for another strong year. With that, let me turn the call over to Guy.

Thanks, Yaki. Good afternoon, everyone. Thank you for joining us today. Our first quarter results were solid, highlighted by 32% year-over-year growth in ARR to $404.5 million and by record quarterly operating cash flow of $24.5 million. Total revenue growth of 29% was at the high end of our guidance range, and our first quarter operating margin improved versus last year despite the 350 basis point FX headwinds we discussed on our last earning call. Before I discuss results, I want to briefly comment on the impact to our first quarter performance by the Russia-Ukraine war. Historically, Russia has represented only about 1% of our business. As a result of the sanctions imposed by the U.S. and other countries, the write-off of that business in Q1 impacted ARR by approximately $3 million. For the full year, we are assuming zero contribution from the region, and consequently, The impact to our original revenue and ARR expectations will be in the $4 to $5 million range. Though the sanction write-down is the current reality, we see a strong demand environment, and therefore, we are reaffirming our original full-year guidance for both ARR and revenues. Highlighted by the examples Yaki just discussed, we continue to see strong adoption trends from new customers, as well as healthy expansion from existing customers who are eager to consume even more of the Ruronis platform. Let me give you a few data points that support the higher customer lifetime value we see today, which in turn positions us for sustainable future growth. As of March 31st, 2022, 74% of our customers with 500 or more employees purchased four or more licenses, up from 66% a year ago and 55% two years ago. And even more powerful is that 42% of those customers purchased six or more licenses, up from 32% a year ago and twice the 21% in Q1 of 2020. Our new customers are trending toward more and more Varonis licenses. leading the way to double-digit purchases, a clear validation of our strategic transition and the greater value we provide. And as companies around the world take an increasingly strategic approach to securing their sensitive data, both on-prem and in the cloud, we expect to see a continued increase in customer lifetime value. Turning now to our first quarter results in more detail. Total revenues grew 29% to $96.3 million. This includes subscription revenues of $69 million, which grew 53% year-over-year. Maintenance and services revenues were $27.3 million, with renewal rates, again, over 90%. Looking at the business geographically, North America revenues grew 31% to $69.1 million, or 72% of total revenues. In EMEA, revenues grew 20% to $24.2 million, or 25% of total revenues. Rest of world revenues grew 67% to $2.9 million, or 3% of total revenues. Turning back to the income statement, I'll be discussing non-GAAP results going forward. Gross profit for the first quarter was $82.4 million, representing a gross margin of 85.6%, compared to 85.4% in the first quarter of 2021. Operating expenses in the first quarter totaled $90.3 million. As a result, first quarter operating loss was $7.9 million, or an operating margin of negative 8.2%. This compares to operating loss of $6.3 million, or an operating margin of negative 8.4% in the same period last year. The strength of our model continues to prove itself as we were able to show year-over-year leverage, even with the 350 basis points of FX headwind that I mentioned earlier. During the quarter, we had financial expense of approximately $858,000, primarily due to interest expense on our convertible note. Net loss for the first quarter of 2022 was $10.2 million, or a loss of $0.09 per basic and diluted chair, compared to net loss of $7.7 million, or a loss of $0.08 per basic and diluted chair for the first quarter of 2021. This is based on $108.2 million and $100.2 million basic and diluted chairs outstanding for Q1 2022 and Q1 2021, respectively. As of March 31, 2022, we had approximately $804 million in cash cash equivalents, and marketable securities. And as I mentioned, for the three months ended March 31st, 2022, we generated a record $24.5 million of cash from operations compared to $20.4 million generated in the same period last year. We ended the first quarter with 2,127 employees, an increase of 62 net new employees from the end of 2021 as we continue to invest across the company to support the overall growth of the business. Moving to our guidance. As mentioned, we are reaffirming our full-year guidance for both ARR and revenue. I also want to remind everyone that our 2022 full-year operating margin guidance reflects the 200 basis points headwind related to our hedging program for our FX exposure to the new Israeli shekel. On a constant currency basis, the midpoint of our guidance shows expansion of approximately 140 basis points year over year. In the second quarter of 2022, the impact is a 300 basis point headwind, and on a constant currency basis, The midpoint shows expansion of approximately 225 basis points year over year. For the second quarter of 2022, we expect total revenues of $110.5 million to $112 million, representing growth of 25% to 27%. I would point out this excludes approximately $1 million of revenues from Russia, which we previously expected. non-GAAP operating income of breakeven to $1 million, and non-GAAP net loss per basic and diluted share in the range of 2 cents to 1 cent. This assumes 109.7 million basic and diluted shares outstanding. For the full year 2022, we expect ARR of $484 million to $489 million, representing year-over-year growth of 25% to 26%. Total revenues of $485 million to $490 million, representing growth of 24% to 26%. Non-GAAP operating income of $27 million to $30 million. And non-GAAP net income per diluted share in the range of 16 cents to 18 cents. This assumes 127.3 million diluted shares outstanding. In summary, we intend to capitalize on the strong demand environment we see which will enable us to further expand our market leadership as we execute on our long-term strategy to drive top-line growth, margin expansion, and cash flow generation. Thanks for joining us today, and with that, we would be happy to take questions. Operator?

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that participants limit themselves to one question.

One moment, please, while we poll for questions. Thank you.

Our first question comes from Matt Hedberg with RBC Capital Markets. Please proceed with your question.

Hey, guys. Thanks for taking my questions. So I appreciate the color on Russia. I just wanted to ask, maybe just to double-click on that a little bit. It sounds like Europe overall was strong. I just wanted to make sure that, excluding Russia, there was no other sort of Eastern Europe exposure that you thought was also at risk. And then if I could just squeeze in just a quick follow-up. You didn't really talk about DA Cloud this quarter, and I know there was some early traction in 4Q. Curious if that had any positive uplift on 1Q results. Thanks, guys.

Hi, Matt. Overall, we see a strong pipeline in Europe. We have strong customers and prospect engagement. We have very good teams. Very good partners there. And just overall, we believe that the long-term market opportunity is big. You know, yes, everything is related to Russia, you know, but in general, war can generate some uncertainty. But also in our case, it also can be a catalyst to elevated cybersecurity crime. Very hard to predict how it is going to play out. But for the long term, we don't see just any changes in the opportunity, and we see very healthy pipeline. Regarding DA Cloud, we're very happy with what we see, and primarily extremely excited with the version that we just released on Salesforce.com. So we think that all the DA Cloud licenses can be very successful. But if you look at just Salesforce, think about just the magnitude of this business, all the data there is critical. And you have so many applications that are connected to it. It's a lot of collaboration in this platform and a very, very complex permission structure. So we believe what we have done with 365 and the on-prem data is very relevant there. And the cadence of us releasing a new product is working according to plan. And with this just major release, we just believe that over time the DA Cloud can be a big, very important business for us.

Thank you. Our next question comes from Joseph Gallo with Jefferies. Please proceed with your question.

Hey, guys. Really appreciate the question. Has there been any change in the competitive landscape, especially now that you're selling cloud? And then just any sense of discounting in the quarter? And then can you just speak to the familiarity of your sales force and the channel with cloud?

Yes. So in terms of the competitive landscape, nothing changed. And regarding DA Cloud, it's just the same thing like the other Voronis platform. When you're talking about big data sets and the infrastructure that has the closer proximity to the data sets, You know, we really, the only complete solution in the marketplace, it's, you know, the way that it works, there is our functionality, which is very similar to everything that Voronis is doing. This was really part of our roadmap, and we shortened our time to market with the purchase of, with the acquisition of Polyrise. So, you know, you need, it's like 365. It's a business that is exploding for us. The teams need to understand the platform that we support. Salesforce is big. S3 in the cloud is big. Okta is big. But it has a lot of similarity. And then the overall Varun's functionalities are relatively the same. But we always have cadence. They need to learn how to sell it. We're always doing everything with a POC, but we are very bullish. We are very excited about the opportunity.

And regarding kind of the discount levels, our discount levels have been holding very nicely, especially when you look at the number of license, additional number of licenses we've been selling with the move to subscription. The amount of additional licenses we have been selling is significant. We recently introduced bundles that are in an attempt to simplify the selling process and we have a silver, gold and platinum bundles that are part of our offering now. There are basically seven licenses, 13 licenses, and 15 licenses, and they appear as one line item. As I said, we recently introduced them, and we hope that this will provide some simplicity as part of the selling process. But overall, as we look at the discounts right now, they've been holding very, very firmly.

Thank you. Our next question comes from Fatima Boulani with Citi. Please proceed with your question.

Hey, good afternoon. Thank you for taking my questions. Guy, this one's for you on Russia. I really appreciate the quantification of the impact there as you wind down that business. But I was hoping you could help me with some math. So you talked about an aggregate $4 million to $5 million headwind on the top line. But $3 million of that was basically realized as a headwind in the first quarter. So I guess my question is, why so front-end loaded for that write-down? And how should we think about that, I guess, linearity being affected on a full-year basis for the remainder of the year for both ARR as well as total revenue? Thank you.

So just like I said in the prepared remarks, Russia has an immaterial impact, but it still has an impact on our KPI. So if you think about it in a simplistic way, the impact is 1% to both our revenue and ARR. Like I said, there's approximately $3 million of headwind to ARR. But when you think about the full year in 2022, we expect approximately $4 to $5 million headwind for both ARR and revenue. as we're really assuming zero contribution from that region going forward. So when you think about kind of the impact, the majority of the impact is happening in Q1, but obviously when you look at the comparable numbers in Q2 throughout Q4, you'll have that impact as well.

Thank you. Our next question comes from Joel Fishbein with Truce. Please proceed with your question.

Hi, thank you. Can you just comment, Guy, on hiring plans going into 22? I know in Q1 it looks like you were on plan, but I'd love to hear what the plans are going into the remainder of the year and where most of those resources will be allocated. Thanks.

So very similar to what we've done last year, the majority of our hires are coming in both the sales and marketing department and the R&D department. Very balanced in our plans to increase Both are footprints of additional engineers there and sales capacity. You know, we're very focused on both managing top-line growth and profitability, so we want to do it at the right pace.

And so far, we're very focused on executing according to plan.

Thank you. Our next question comes from Andrew Nowinski with Wells Fargo. Please proceed with your question.

All right, thank you. I just had a question as it really relates to new logo growth. So I was wondering if you could talk about just what you saw in terms of the year-over-year growth in new logos in Q1. And then if you look at your net new ARR in Q1, it looks like it was down year-over-year. And if you add back that $3 million, it was basically flat. So I'm wondering if you could just provide any more color on the net new ARR as it relates to new logos as well. Thanks.

So I'll start kind of with a second question. When you factor in that $3 million headwind coming from Russia, that really changes the picture in terms of the net new ARR contribution. And that has to be taken into consideration. And can you just remind me what was the first question?

I'm just wondering if you could provide any color on your new logo growth. I know a lot of existing customers are adding more licenses, but I'm wondering how your new logo growth fared in Q1.

Absolutely. So you're right in the fact that the majority of our revenue still comes from the base. We have a lot to sell to the base, and you can see that in terms of the number of licenses that we have, both the four or more licenses and the six or more licenses. We definitely have a lot more to sell, but when you look at the new logo contribution, we had positive growth of new customers. But even more importantly, it's the size of those customers that we are bringing in. We're focusing on the larger enterprises. We have done very well on focusing on those. And we continue to focus on customers that can generate significantly higher customer lifetime value.

It's also important to understand it's just a big platform and most of the products are relevant to all of the customers. And this is just the evolution of the business. It's a complete platform play. This is a real lend and expand with key use cases. And thankfully, when customers are buying over time, they are buying more and more. And this is just how it works.

Thank you. Our next question comes from Matt Saltzman with Morgan Stanley. Please proceed with your question.

Hey, guys. This is Matt Saltzman from Morgan Stanley. I'm subbing in for Hamza Fadawal tonight. So thanks for taking the question. As you've mentioned, this year is a difficult year for pursuing margin expansion. You've got a number of external factors, whether it be FX, competitive hiring environment, wage inflation, really you name it, yet your operating income guide is going up. So I'm just curious kind of how you're thinking about balancing profitability and flexing some of that operating leverage in the S&M line with the growth opportunities that you're seeing on the DA Cloud side and just net new customer ads. Thanks.

So you're absolutely right in terms of our focus on profitability, and that really hasn't changed compared to the way we've run the business over the last many years. We're very focused on growing top-line growth, but we are very conscious and focused on bringing some of it to the bottom line. If you look at the things that we can control on a constant currency basis, the fact that we ended Q1 with basically 370 basis points of margin improvement kind of shows you that we are able to manage through the wage inflation and through the other factors that are part of what we need to deal with. But I think there's a lot of leverage in our model, especially with our ability to expand within our existing customer base and the fact that we can continue to sell more and more licenses the fact that we're keeping our discount levels in a very firm way. And when you look at that expansion and when you look at the expansion in the past, exiting the transition, moving from perpetual to subscription, and the way we've managed the business to date and the way we plan to continue to manage the business is focusing on the top line and the bottom line with those margin expansions.

Thank you. Our next question is from Chad Bennett with Craig Hallam. Please proceed with your question.

Great. Thanks for taking my question. So, Guy, could you provide, you know, in the $4 million to $5 million headwind from the Russia exposure in ARR, if we were to look at that from a revenue standpoint, can you provide a rough estimate of maintenance versus subscription?

So, maintenance is about half.

And then, you know, just circling back on the EMEA question before, you know, and understand, obviously, the Russia impact there. But, I mean, by my math, you know, your EMEA business showed a pretty decent growth deceleration, I think was probably the weakest growth quarter in five. So I guess I want a little more detail into, you know, I don't care if it's Eastern Europe, Western Europe, your confidence level that that business performed expectation from a bookings and billing standpoint in the quarter, and that you're going to see some growth acceleration from here in EMEA throughout the year.

You're absolutely right. When you look at EMEA, and just for clarity purposes, Russia is part of EMEA. And when you look at those numbers, EMEA grew at 20% in Q1. But on top of the Russia impact, we had close to 400 basis points of currency headwind versus last year. So when we look at the pipeline and when we look at the conversations and when we look at the activity, we feel very good about our ability to continue to grow kind of the European business. And when you put all of this together, both the Russia and the currency headwind, it paints a very different picture.

Thank you. Our next question comes from Jason Adder with William Blair. Please proceed with your question.

Hey, guys. This is Billy Fitzsimmons for Jason Adder. Yaki, for you. First, any anecdotes from customers as you roll out DA Cloud or any feedback from customers for the newer features for Salesforce you announced in the quarter? And then I'd also – sorry. Then I'd also ask –

Any feedback on kind of the effectiveness of the free risk assessment?

It's the same thing as our other platform. It's the same features. But now definitely with just the release of the new functions for Salesforce, we see a lot of momentum in the pipeline and customers are just getting a lot of value. You know, it's much more than just the platforms themselves. I think that one of the most stationary trends after COVID is that the endpoints are like access points and you saw tremendous adoption of SaaS applications, but they are really the sanctioned data repositories. This is where you have the digital information of organization and the data on-prem is not going anywhere. So the combination between the on-prem data and the SaaS application is very strong, and some of these SaaS applications are just enormous, you know, like Salesforce, with just so much critical data and they're geared towards collaboration. So when you give this ability and data-oriented alerts, it has just a massive, massive value. And this is the biggest blind spot for most organizations. So just think about, you know, Salesforce, the sheer size of the revenues and the install base. And take even a fraction of it and think that this can be a security business. This can be a massive business. So for each and every platform from open repositories on GitHub and data that is open to the world in G Drive and Vox and just vast misconfiguration in Okta that opened the whole status state to the whole world, we believe that it's just increased the time massively. Most of our customer base are using this SaaS platform, which is so much just meat on the bone. There is so much innovation ahead of us that we can really build this feature set with a lot of clarity based on everything we have done on-prem and 365. So we just believe that it's a massive opportunity and we are in the right direction.

Thank you. Our next question comes from Sakek Khalia with Barclays. Please proceed with your question.

Awesome. Hey guys, thanks for taking my question here. Guy, I'd love to dig into the bundles that you talked about a little bit more. So maybe just a couple parts to this question, all on bundles. Maybe the first one is, what are some of the most differentiated products when you compare gold to silver and then compare gold to platinum, right? You gave a number of products. I'm curious kind of what the products are that differentiate those. And then can you just remind us when those bundles were made generally available, anything that you think is particularly compelling on pricing, just any more on the bundles, because that's interesting.

So first of all, when we thought about the bundles, it really came from the fact that we have so much to offer to our customers. And we're seeing customers wanting to purchase more of the platform upfront. We've seen that throughout the transition. When you go back to kind of our selling perpetual, we used to sell data advantage, data alert, data classification engine. That was kind of the security sale. And with the Office 365 licenses and the automation engine and the fact that we have so many more licenses geared towards automation, we just realized. that there's more that the customers want to consume. And it really depends on their platform. So, you know, when you think about the different bundles and who uses them and how they fit within the customer needs, they would include some sort of Office 365 if that customer has it. They want to protect those platforms. It includes the automation engine. There's just more licenses that we can offer. And when you think about the exact date that we introduced it, we started that process a couple of quarters ago, but I can tell you that really only last quarter, it was like the first real quarter that we were making sure that they're fully available for our reps and making sure that they're fully in the know of having them available. So only recently... we started pushing that. I think it's for the benefit of our customers and also can simplify the selling process in terms of selling the platform and not selling additional functionality within the platform.

Thank you. Our next question comes from Shaul Eyal with Cowen & Company. Please proceed with your question.

Thank you. Good afternoon, guys. Yaki, I think it was last quarter or the quarter before that I've asked about potential supply chain constraints. I understand the business model. I see how well you've done this quarter. I think all the guidance for the year is absolutely encouraging in light of the right of out of Russia. But again, I just want to revisit this question, given that it is a hot topic in tech and software land. And I know you guys are not specifically an appliance-based name, but I want to get some more color or maybe even a similar definitive no response as was the case last quarter or the quarter before last. So what's the thinking along these lines?

Hi, Charles. We don't see direct impact because if you want to install our on-prem, it can be virtual machines or you can install it in AWS, Azure, or Google. So, you know, these machines are available to our customers and everything that's related to DA Cloud is our SaaS solution. So we don't see a direct impact at this point.

Thank you.

Our next question comes from Shabeli Ferrisley with FBM Securities. Please proceed with your question.

Yes, thank you very much. So my question is on the gross margin line. It declined by 400 basis points sequentially, which is a little bit steeper than last year. And just talk to the factors which drove that decline and whether you expect in the last three quarters of this year, the gross margin metric to decline year to year or to stabilize.

Well, first of all, I think when you look on a non-GAAP basis, operating margins are basically flat year over year. when we look at kind of the leverage we have in the model, and I talked about that in one of my previous answers, we see a lot of leverage in the model. And obviously, there is the regular seasonality within the year. So when you think about Q1, historically, Q1 has been the lowest quarter of the year from a revenue perspective, and Q4 is historically has been the highest quarter of the year in terms of top line, where our expenses are relatively flat. Therefore, you have that seasonality on a sequential basis. But when you look year over year, the non-GAAP operating margin is relatively flat.

Thank you. Our next question is from Joshua Tilton with Wolf Research. Please proceed with your question.

Hi, guys. Thanks for taking my question. Your new subscription dollars were essentially flat on a year-over-year basis. So I'm just wondering, is there anything from a bookings perspective outside of Russia worth highlighting in the corridor? And how should we expect new subscription dollars to sort of trend for the remainder of the year?

So when you look at the new subscription, one thing to point out is that we added the perpetual line item because it's immaterial this year. We added it as part of the subscription line item. And when you look at the year-over-year numbers, you just need to factor that in. The subscription overall has been strong. We feel very good about our pipeline and our ability to grow and overall feel very good about the business.

Thank you. There are no further questions at this time. I would like to turn the floor back over to James Orestia for any closing comments.

So thank you, everyone, for joining. We look forward to speaking with you this quarter, and please don't hesitate to reach out if we can be helpful. Thanks, and have a good night.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.