Financial Data and Key Metrics Changes - The company reported an 18% year-over-year increase in Annual Recurring Revenue (ARR), reaching $718.6 million [6][19] - Total revenues for the third quarter were $161.6 million, reflecting a 9% year-over-year growth [19] - Gross profit was $128.3 million, resulting in a gross margin of 79.4%, down from 85% in the same quarter last year [20] - Net income for the third quarter was $8.4 million, or $0.06 per diluted share, compared to $13.8 million, or $0.10 per diluted share, in the same period last year [21] Business Line Data and Key Metrics Changes - The SaaS business now accounts for 76% of total company ARR, indicating a successful transition to SaaS ahead of schedule [5][15] - SaaS revenues for the third quarter were $125.8 million, while term license subscription revenues were $24.8 million [19] - The company experienced weaker than expected renewals in both federal and non-federal on-premises subscription businesses, impacting overall performance [7][16] Market Data and Key Metrics Changes - The federal business has historically contributed around 5% of total ARR, with recent renewals showing a decline [81] - The company noted that the decline in renewal rates was observed in both federal and non-federal sectors, leading to adjustments in guidance [81] Company Strategy and Development Direction - The company plans to end-of-life its self-hosted solution by December 31, 2026, to focus entirely on its SaaS offerings [7][15] - Investments in partnerships, particularly with Microsoft, and acquisitions like Cyral and SlashNext are expected to drive future growth [12][56] - The company aims to enhance its SaaS platform's capabilities, particularly in data security and compliance, to meet evolving customer needs [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with the performance of the on-prem business but remains confident in the SaaS business's growth potential [23] - The company is taking a conservative approach to guidance, reflecting recent underperformance and the decision to phase out on-prem solutions [8][22] - There is a strong demand for the SaaS platform, driven by automation and the need for enhanced data security in the age of AI [11][12] Other Important Information - The company generated $111.6 million of free cash flow year-to-date, up from $88.6 million in the same period last year [19] - A $115 million share repurchase program has been authorized by the board, supported by a strong balance sheet [23] Q&A Session Summary Question: What led to the decision to reduce the federal team? - Management indicated that the federal business has not performed as expected, prompting a reevaluation of strategy and a reduction in team size to focus on SaaS transitions [26] Question: What were the reasons for lower on-prem renewals? - Management noted that there was no single theme for the non-renewals, but issues with account management and a focus on SaaS customers contributed to the decline [30][42] Question: How does the company plan to address the churn in the on-prem business? - The company is focusing on improving account management and ensuring that customers understand the value of transitioning to SaaS [30][69] Question: What is the expected contribution from recent acquisitions? - Management expressed confidence that acquisitions like SlashNext and Cyral will enhance the company's offerings and drive growth [56] Question: Is there a risk of alienating customers with the push to SaaS? - Management believes that moving to a 100% SaaS model is essential for operational efficiency and customer value, despite potential pushback from some customers [59][63]

Financial Data and Key Metrics Changes - The company reported an 18% year-over-year increase in Annual Recurring Revenue (ARR), reaching $718.6 million [6][19] - Total revenues for the third quarter were $161.6 million, reflecting a 9% year-over-year growth [19] - Free cash flow for the year-to-date was $111.6 million, up from $88.6 million in the same period last year [19][22] - Gross profit for Q3 was $128.3 million, with a gross margin of 79.4%, down from 85% in Q3 2024 [20] Business Line Data and Key Metrics Changes - The SaaS business now accounts for 76% of total company ARR, indicating a successful transition to SaaS [5][15] - SaaS revenues for the third quarter were $125.8 million, while term license subscription revenues were $24.8 million [19] - The company experienced weaker than expected renewals in both federal and non-federal on-premises subscription businesses [7][16] Market Data and Key Metrics Changes - The federal business has historically contributed around 5% of total ARR, but faced headwinds in renewals during Q3 [78] - The company noted strong demand for its SaaS platform, particularly in cloud environments, which represents a significant growth opportunity [9][15] Company Strategy and Development Direction - The company plans to end-of-life its self-hosted solution by December 31, 2026, to focus entirely on its SaaS offerings [7][15] - Investments in partnerships, particularly with Microsoft, are aimed at enhancing integration and capitalizing on AI-related data security needs [11][12] - The company is focusing on upselling existing SaaS customers and expanding its market potential [9][18] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with the performance of the on-prem business but remains confident in the SaaS business's growth potential [23] - The company is taking a conservative approach to guidance for Q4, reflecting the recent underperformance in renewals [17][22] - Management highlighted the importance of addressing customer needs and ensuring effective account management to improve renewal rates [30][44] Other Important Information - The company has authorized a $115 million share repurchase program, supported by a strong balance sheet with over $1 billion in liquidity [23] - The company is implementing a 5% reduction in headcount to reallocate resources more effectively [8][23] Q&A Session Summary Question: What led to the decision to terminate some federal team members after receiving FedRAMP High authorization? - Management indicated that the federal business has not performed as expected, leading to a reevaluation of strategy and a reduction in team size to focus on SaaS transitions [26] Question: What were the reasons for lower than expected renewals in the on-prem business? - Management noted that there was no single common theme for the non-renewals, but identified issues with account management and customer engagement as contributing factors [30][67] Question: How does the company plan to address the churn in the non-SaaS ARR base? - Management is baking in conservatism in guidance and will evaluate Q4 performance to determine if the recent trends are isolated or indicative of a larger issue [38][75] Question: What is the expected contribution from recent acquisitions like SlashNext and Cyro? - Management expressed confidence that these acquisitions will enhance the company's offerings and contribute positively to growth [55] Question: Is the push to migrate to SaaS alienating some customers? - Management believes that moving to SaaS is essential for long-term value and efficiency, despite potential short-term challenges with some customers [58][61]

Financial Data and Key Metrics Changes - The company reported an 18% year-over-year increase in Annual Recurring Revenue (ARR), reaching $718.6 million [4][19] - Total revenues for Q3 were $161.6 million, reflecting a 9% year-over-year growth [19] - SaaS revenues accounted for $125.8 million, while term license subscription revenues were $24.8 million, and maintenance and services revenues were $10.9 million [19] - Gross profit for Q3 was $128.3 million, resulting in a gross margin of 79.4%, down from 85% in Q3 2024 [19] - Net income for Q3 was $8.4 million, or $0.06 per diluted share, compared to $13.8 million, or $0.10 per diluted share in Q3 2024 [20] Business Line Data and Key Metrics Changes - The SaaS business now represents 76% of total company ARR, indicating a successful transition to SaaS completed ahead of schedule [4][16] - The on-premises subscription business has underperformed, particularly in the federal sector, leading to a reduction in team size and a more conservative outlook for renewals [5][16] Market Data and Key Metrics Changes - The company experienced weaker-than-expected renewals in both federal and non-federal on-premises subscription businesses during the final weeks of Q3 [5][17] - The federal business has historically contributed around 5% of total ARR, and recent renewals in this segment have faced challenges [78] Company Strategy and Development Direction - The company plans to end-of-life its self-hosted solution by December 31, 2026, to focus entirely on its SaaS offerings [5][16] - Investments in partnerships, particularly with Microsoft, and acquisitions like Cyro and SlashNext are expected to enhance the company's product offerings and market position [10][54] - The company aims to capitalize on the growing demand for data security solutions, especially in the context of AI and cloud environments [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with the on-prem business performance but remains optimistic about the strong demand for the SaaS platform [15][23] - The company is taking steps to manage expenses, including a 5% reduction in headcount, to reallocate resources effectively [6][23] - Future guidance has been adjusted to reflect conservatism due to recent performance issues, particularly in the on-premises segment [17][23] Other Important Information - The company generated $111.6 million of free cash flow year-to-date, up from $88.6 million in the same period last year [19] - A $115 million share repurchase program has been authorized by the board, supported by a strong balance sheet with over $1 billion in liquidity [23] Q&A Session Summary Question: What led to the decision to reduce the federal team? - The company lacks empirical evidence to justify continued investment in the federal sector due to ongoing underperformance, prompting a reevaluation of strategy [26] Question: What were the reasons for the lower on-prem renewals? - There was no single theme identified; issues included account management and a lack of comprehensive engagement with on-prem customers [28][44] Question: How does the company plan to address the non-renewal of on-prem customers? - The company is focusing on improving account management and ensuring that customers understand the value of transitioning to SaaS [28][44] Question: What is the expected contribution from recent acquisitions? - The company anticipates that acquisitions like SlashNext and Cyro will enhance its product offerings and contribute positively to growth [54] Question: Is there a risk of alienating customers with the push to migrate to SaaS? - The company believes that moving to SaaS is essential for operational efficiency and customer value, despite potential concerns from some customers [58][60]