MIME - Earnings call transcript Q1 2021

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Robert Sanders

Good evening. Welcome to Mimecast's Earnings Call for the Fiscal First Quarter 2021 Ended June 30 2020. I'm Robert Sanders, Director of Investor Relations. With me on the call tonight are Peter Bauer, our Co-Founder, Chairman and CEO; and Rafe Brown our CFO. Tonight's conference call is being broadcast live. call available this call the of ended. has replay will after be live A

forward-looking future the release statements statements future from make materially and consider that most could could will with this defined We in regarding cause those differ the to in Commission. results We of risks Exchange uncertainties factors differ company. caution to contained cause to to actual financial those events the further These the statements. subject Securities risk the These important today's recent forward-looking call. results in are press on conference from and are that filed risk statements forward-looking performance forward-looking actual the and Form factors and XX-Q Mimecast's you in

call, superior GAAP reconciliation included intended considered to result These forward-looking call be representation our both non-GAAP website. GAAP in During this will obligation for update information reasonable be section date. found reasons new undertake a Relations X, this release, are our or We of be or today's of is a A on make information we these measures of to no present August to we GAAP not the our in and XXXX, of date which is can believe to today The the future statements any of substitute non-GAAP non-GAAP events. are based this statements that Investor assumptions to financial as as we non-GAAP for and measures the from, press in isolation measures. results. of

the turn to over call like Bauer. to I'd Peter Now

Peter Bauer

attackers results I'll overview first us. thank of business and evening see cybersecurity we applying call, for quarter joining the with their craft an impactful tonight's disruptions. discuss as causing to you landscape begin continue our Good On and all

how we site Then some have of hand is market the I'll new the identity is of recently partners finally take results types we'll that technology, our before our I call solutions Next, to hosted customers of graft cover exciting platform and Mimecast more the detail. MessageControl. our resilient protecting we with over in with through examples at you look the I'll acquisition discuss added Ray cyber to to and financial some customers. demanding And

began we both performance for revenue with year our the end fiscal So of EBITDA. XXXX adjusted exceeding guidance solid and high our financial

platform proud retailer who traction up-market of COVID-XX extremely employees way largest XXX,XXX remotely days among This overcome pandemic. these seven-figure is Mimecast. evidence most of working challenges the the the move purchased our million. Email Mimecast of a with deals Security COVID deliver. model new quarter market valued U.S. XXX new quarter $XXX.X joined the First customers revenue net customers exceeding as we testament This during services the during our highly the totaled lower economic in headwinds was is seat customers. to difficult end Among some our sub-XXX and we is to of representing for for and end $X.X X.X the our some finding guidance further this that business date high subscription-based durable this quarter million that of a the conditions our mainly by difficult of first through a global support I'm outperformance Mimecast's related the experienced continuously world. organization in security our organizations customers And the demanding has to engagement

research out the disrupting cause adversaries During against high-profile commerce, several attackers vigilance communications, for and need attacks looking harm. carrying witnessed the quarter, we to illustrating continued

specific complex targeted deployment. a of pandemic. report attacks intelligence sectors phishing We threats their and during notes combination repeatedly campaigns threats and with incorporating threat saw Our vast generic Trojan latest more of a array delivery other preceding the

notable their and retail of continuous indeed shift nature attacker and essential in due prior crisis, businesses these a periods. the manufacturing, to from focus the insurance possibly example, operations For during

we cyber of disinformation. volumes vehicle to impersonation the potentially attacks, suffering spread as media for a high sector criminals Additionally witnessed publishing and

our often noted Finally, exploitation less researchers to in brands who have organizations brand place. defenses sophisticated campaigns global target smaller moving beyond

the we we do recent test Labs work threats. software, score we have blocking their As We're threats security landscape, Mimecast e-mail reminded ICSA a customers awarded of this ever-changing threat our efficacy defenses is observe XXX% presented. support pleased these been of we recently important as by against in to with at most perfect

CEO, bringing Crowdstrike second Steve customers, practices icon Annual and best and our partners Kurtz. Wozniak Now to collaborate from in June, Cyber and including Summit share industry prospects together we George presentations hosted Resilience keynote

success attendees prospects received X,XXX Central from our the and engaging good humor XXX and strategy. We X,XXX all was Summit, that praise Now the face more today. learning to complex partners Cyber of the media tackling organizations building X.X content Mimecast's Email in while Security both challenges for first Resilience to event this including year's partners and Mimecast. interested over our on customers, about we welcomed XXXX discussion

Our helped such attack defenses solution covers And that that that and perimeter you the success. exploit delivers on of Mimecast This range insider detection to protection. unified including increases all of exposed thank solutions of make framework platform awareness today our primary organizations to everybody broad this brand surfaces services. are a event threat the who impersonation, the

the MessageControl's into further framework, strategic our details and another communications to we're and that furthers e-mail benefit innovation layer security open building of enables technology trust. X.X acquisition organizations an solution around threat to MessageControl, This from tuck-in our most defenses I'd in and continue underwriting is component platform the one to graph e-mail Mimecast intelligence Now, enhance electronic Zone identity as some our share most Mimecast's to detection. and perimeter with identity like which platform. trusted the incorporating that you recent bolster

addition come to communications innovate communications defenses. financial have is from e-mail solutions those digital selected become suite understand important former we've to months, full security have that our We've to we customers employees have and trust efficacy through to more persistent and incorporate moving further found of that are our acquisitions, closely In drive legacy our benefit to be we have attackers. company, Mimecast's and to engineers how lockdown, R&D technology less platform. with technology a Mimecast effective. the to as against we e-mail from, engineers including be it Several leader determined ensure to Operating the failed observed how away of that U.K.-based important networks. able to last fabulous teams customers our COVID-XX innovation business X,XXX the our diverse to X.X will Mimecast's Symantec a three invest security added during in leading-edge of the platform team a customers quickly ranks, In on XX remains effective, institution more

this the comply customer extension while with Additionally, of requirements. regulation adopted training, vector to operations. solutions leverage our inside can our another solutions about point to awareness consolidating and Mimecast's services purchased of defenses American-based platform IT. service. with Mimecast their Seeking breadth and the have a financial away This of our who simplifying in also risks archiving Then, our one most our recently our North Protection moved not service, supervision tech that recent to devastating microblogging found customer with more our adopted North services effective their sending organization. Then services. Zone offerings and Analyzer up to media at secure a less adopted employees, Large their A and from strengthen XX,XXX Mimecast than found also Brand messaging American File serious consequences Australian perimeter and customer, two solution is DMARC an two integrated favor Security Zone company, originating retailer, Symantec a with includes full Exploit and Symantec and employees, X.X XX,XXX E-mail set threat

to platform features, of leader capabilities, Additionally, Mimecast with in finding equipment this Zone awareness training a ease responding be and a their with to And data legacy Symantec cloud the of cloud customer strategy. to to threat part employees. among adopt and X,XXX ineffective exceeded requirements. an resilience for that purchased overall Data to communication. ability first modern at Zone care our organization ensure and examples, integrate guidance our to be continue footing two technologies value outlook customers their In integral our their as and the Infotech a and defenses, best-in-class others. and to first customers employees They raising North cyber our industry-specific example American our recognize dynamically needs requirements. the unified XXXX. summary, of continue other Mimecast's of well an created, of most Data solutions named desire health landscape continuity In final a we and July, delighted range is the our provider added to a address are of archiving reduce Underscores full comply financially including communications of service simplicity our solid a one these our on Quadrant efficacy, with enabling support customers with privacy year of ranking to point including archiving business vendor industry-specific on rely to product are all of ensure number to service vendors. we're the the availability customer find quarter Analysts e-mail pack in alike we the Archiving archiving for broad We our implementation, were important published across

and continue our to with strengthen attract to We customers our and partners our relationships organizations platform. new

for review offerings areas. over offerings. we for Rafe? of is we and our indicator right the invest more of the behind by our to With Rafe turn innovation I'll financials. a The needs. targeting strategy our pace in-depth as working it's meeting that, additional are our And and customer future excited the rapid newest current of an Finally, of adoption it's call

Rafe Brown

Peter. you, Thank

$XXX.X a of quarter $XXX,XXX. the first the $X.X we first represents expanded productive report compared year headwind results I'm guidance for of by over quarter. since in to that quarter providing positively the terms. million both Note, continuing all of Adjusted the in XX.X% generated As same the EBITDA we currency margin first absolute an growth the to high the over in foreign very prior our our adjusted XX.X% had prior which impacted dollar exceeded year the to a scorecard million rate Peter XX% year. that and stood of million, headwinds growth balanced EBITDA, of first first XX% representing revenue at despite May XXXX, for faced. the fiscal quarter totaled mentioned, In pleased currency quarter margins. we EBITDA prior million, we currency deliver we or of faced, $XX.X of of guidance revenue for and constant fluctuations end Adjusting the for for quarter, the our adjusted quarter, COVID-XX $XX.X growth

are our realities crisis COVID the me year-over-year pay make materially fiscal measurable we less meetings. impacts companies, a But many Like ways. are in of great the and further. We large-scale drove about ability efficiencies bit conduct learning a and these this work the changes a operational to ability discipline in focus line pleased of quarter. number the first travel off deal continue remotely, into to dive to that our savings comparison, on online A bottom since let

had annual sales we by kickoff travel across all significant the board, club example, an 'XX our event in the our For in fiscal the company augmented of virtual conducting savings cancellation environment. quarter and

virtual can As teams Summit, Cyber rate it was though closely Resilience and hiring be event. auto earlier, generated internal which fraction for customers markets. It repurposed a cost training and the year, environment environments events. this successful. of in-person future mentioned year, event of fabulously done We've our content an And our our as each of at Pete we last than examine economic the that the in a far slowed more and prospects in-person to was easily conducted continued our reached has overall was expand marketing in

benefit net approximately changes result a as million of a our realized we together, sudden to of $X environment. the Taken operating

the year we to environment in of hopefully reinvest of look expect the the half in portion we to return the across planning year normalized in half. entirety, savings are more first As the a a we to as business we its second see

events pipeline marketing are virtual and an broadly in basis. on generation, example, we investing the For our additional importance given digital end-to-end more experience of

able be there encounters, be online months will that prospects success travel customers. We of and the are coming despite and the assuming demand to we in to that believe visit significant will

are part the visits infection In our now customer that the their have to virus central is that in return fact, European team world. reporting of already rates improved beginning

on savings using driving focus the will also short-term are to throughout We longer-term projects greater organization. and that efficiency accelerate systems customer success the

two see favorable order prior in to customers average of to for to Turning order attributable average $XX,XXX, average stand values, continue This we values at order shifts company. up is values increases. year constant XX% approximately improvement currency over Currently, within in terms. all trend the the

impressive Further success this our serve expansion demonstrates revenue world. the up more of now quarter than to XX% the Currently, Pete's market our in of companies some has seats, our the this X,XXX enterprise biggest year. First, undertaken with the customers to from the team continued XX% time up-market. work comments, from in last comes

to first we net an the of to the last of our base, basis first more the X.X see I year. of In services customer XXX per since this to a point our which quarter in compared we to new services year customers continue XX% rose XXX customer at bringing quarter customers total in uptick customer year. average Second, XXX QX X.X from time. is the customers customers that, with customer make of last in which base, customer services our up four new quarter, per point account improvement out up worldwide to last also want XX,XXX across added net now or services number

appears the customers solely impacting and related you fewer The year. customers. on new noted lower churn our can challenges, comparing largely acquire Focus of smaller when the a bright uptick note segment efforts larger the end would XXX quarter, to segmentation. I customers, Despite we customers Symantec saw these spot in approximately smaller As our customer expect, net of on year-on-year COVID-XX be customers, approximately last COVID-XX XXX the customers, same significantly of to be would than smaller of to QX additions of peers. the to more to crisis treated seat change their an

a revenue basis MessageLabs And retention, consider over sell the XXX% stayed give of the on four-quarter row, terms so For evaluating noted me bit XXX%. as first at upsell more we the steady a the you year in a prior at insurance X%. platform. few totaled attributable which bookings we meaningful to quarter customers second its a when uptick of totaled down trailing in met There looking this new end are leaving numbers, Net quarter, approximately the components, at while points to color. let

upsell we impacted overall ability and First, to the to this basis to been figures customer are crisis, clearly upsell customer particular are in our both and on per numbers seat employment base. COVID-XX license a by are customers downsell. to our downsell seeing Unsurprisingly, as we within related sensitive headwinds

the continuing stayed from to Second, while steady our downsell and of the world. fallout churn the rates across play is COVID-XX QX, QX out crisis to economic

We reducing number are aware currently customers of a workforces. of their restructuring and their business

very short-term we call, sell As is to the rate create progresses. on may discussed churn in downturn the economic additional pressure this as our down likely and

Finally, and turning upsell. to

been We the of a in are product that midst fact we have transition. the discussing

of base targeted Our all threat great of protection has penetrated by been has accounts and offering Zone now customer in our a success terms product XX% upsell. one driving

customers by of In addition, purchase. as an higher of new portion TTP part initial their even

limited. drive As such, now upsell to is ability TTP's

to among, products significant seeing our and across e-mail engagements we're protection which is all traction. products successful sales two to of new solution our have five internal we these introduce finding customers Zone Fortunately, existing

to COVID-XX rise challenges our our churn, by As now fiscal trends push modeling current I and granularity revenue of financial which a the we we year. the economic estimates will anticipating examine believe retention, economic on. crisis and as more want second caused to approximately of we maintaining the bit half drags are you for may give into the crisis downsell on net X% the

XX% have there for of that will are rate We performance a rates. headwinds better upsell scenarios product-driven and at to economic play pushing between do the challenge stress further it factors aspects of year. in the XX% both drive the that to ultimately continue believe seat number upsell, and we the modeled Assuming and our improvement these

retention. a better have would impact economic environment significant revenue First, net on

macro, of the a to our zone significant that e-mail and two offerings protection important training portion base reach Beyond thus upsell. are are confident potential we and solutions installed awareness drive internal the have our that

Zone of momentum markets the South all these perspective, as becomes newest From presenting U.K. are our struggling crisis. web major solutions. in geographic our and Africa sales offerings to America, addition, still the are three North team gaining and a with In our accustomed coronavirus

economic would XX% the of our revenues business, are in of the segments challenges we Africa, all and acute I from derive note However, South across that being which including enterprise. particularly felt

We are revenue. the which with in Central fastest-growing pleased continued is Europe, progress in region of our terms

Turning to gross margins.

QX our our XX% the organization and basis quarter driven prior achieving non-GAAP our XXX up towards XXXX, gross grid year, progress customer points For we continues of the gross margins. of by finding long-term XX% non-GAAP recognized we from a operations. efficiencies support This first are of within goal margin,

Our quarter $XX.X profit quarter income terms, a XXX XX.X profit points revenue, $X.X bottom million or GAAP year. prior of fully of diluted non-GAAP first was an line our per for net operating average outstanding. the million weighted improvement shares diluted on In the share-based of first million from XX.X% basis was $X.XX or

$XXX,XXX. Our GAAP totaled tax approximately charges

tax be and be expense is our million. is GAAP to full $X estimated quarter expected approximately $X.X expense to Second million approximately tax year

Our outstanding. income million for share-based the weighted non-GAAP XX.X quarter shares diluted million fully on $X.XX was net $XX.X per diluted average or

the Our non-GAAP rate quarter. was for tax XX.X%

cash to flows. Turning

U.K. incentive the free million. offered of the U.S. approximately VAT free XXXX. Our that enacted U.K. by for for cash Free served cash $X Please flow benefited and XX.X% March totaled of million cash This flows COVID-XX VAT million to flow until certain first revenue. increase defers The the $XX.X cash from $XX.X a note governments. quarter related payments totaled or by quarter. that quarter operating QX incentives

in remitted fourth be be funds our However, take these to please note that will due quarter.

delay U.S., government. benefited by $XXX,XXX, approximately the net tax benefit remittances year. to to will to the So In free be flow the an ability due to payroll there cash no

see tax through fiscal to deferred to and this fiscal XXXX continue will QX. benefit payments We XXXX. These are

XX, $XXX of sheet. of June had million balance As Mimecast on the cash

MessageControl, the forward. to differentiator approximately are important will team Mimecast. another The for go have remainder After the pleased adjustments XXXX. MessageControl MessageControl $XXX,XXX acquisition be expected Turning we range over their revenue to our deferred to part talent is acquired fiscal accounting of we of the of total as of services competition as customer acquisition and revenue

will platform, the terms onto future of MessageControl first the to taking will in business we which of believe marketing, years. to be our market fully MessageControl significant order In opportunity integrate fiscal the solution product drive

will limited. FY such, XXXX benefit revenue be As additional

turn now me Let guidance. to

are quarter in range of the second For to in growth million $XXX.X of XXXX revenues XX% or be to currency expected to the million terms. XX% $XXX.X constant

Our rates year. as be U.S. estimated an exchange range the includes to and in guidance dollar of XXXX Adjusted expected resulting negative million. for million. is based is to be prior $XXX,XXX, $XX.X second the the July impact to of for compared from approximately million of of on XX, strengthening flow EBITDA cash to the is $XX.X expected $XX QX Free quarter the

COVID-XX Given operating of persistence in our recover, the The opportunity. short-term global the crisis, remains will to recover. will virus the the pushing our resurgence difficult quickly geographies us expect the and which it how will global quickly is impact directly economy economy to how ongoing cautious growth assess we now about remain

recurring can the model our which we base However, said disciplined of as we our to before, revenue our gives business. and baseline us expense on solid management a approach have nature

of in in our to the Full currency range guidance following: million are to we revenue the or $XXX.X to XX% XXXX updating expected growth terms. $XXX.X million XX% to year is constant such, reflect be As

million the for in early guidance an impacting rate guidance year. $XXX midpoint. in at year are rates effect to prior provided fluctuations prior negatively XXXX $X.X fiscal in exchange by Foreign the May compared was million estimated the this The

the full guidance us Our revenue the in our acquired by terms. QX to of year our overachievement guidance raised reflect to raise MessageControl is midpoint in $X.X company. million the also is midpoint $XXX,XXX the constant by bringing currency leading to of We've

$XX.X the million million impacted of has in of midpoint raised May adjusted positively resulting that $XX.X exchange In the to million expectations increasing free XXX raise, being EBITDA this even terms with midpoint our rates year. $XX.X from year by we in in at would $XXX after being of raise over since basis XXX range million. to free million, flow margin million at to tailwind $X.X XXXX costs of call prior million the over revenue XX.X% $XXX.X to a used basis flow dollar and XXXX are absorbing cash $X.X million which is midpoint, the guidance by of expectations a absolute addition, moving by would full This this MessageControl. cash our of our Full adjusted million guidance arisen foreign $X.X With of to reflect Full year raised prior year. to $XX up are guidance are the being EBITDA a associated point million. equate operating range our the improvement $XX point year improvement the a

We team's are our past performance truly quarter. of proud this

the based are our attacks, on Given depending in than Mimecast customers email increases ever. more

team, we that are We and times. goals our uncertain by let on remaining please now able questions. to to achieve us our that during financial the With our these be line operator, open confident customers will even focused

Operator

first Capital question line or Hedberg [Operator Matt from Our RBC Markets. comes from of comment the Instructions]

open. Your line is

Dan Bergstrom

taking questions. Dan our Thanks Matt for for It's Bergstrom Hedberg. Hey.

over customer You last should case? could quarters. year you. think called XXXX? the they're fiscal Is sounds purchasing the Symantec accelerating seems like you've success additional be there good sounds here. several the guess unfolding How in that prepared of opportunity it the in I products had And wins like It opportunity a that out number of remarks. we from It like

Peter Bauer

-- it's million cases large little in question. from and million or picked e-mail business some with bit. so migration It's cloud substantial large business these for were of multiyear Dan it contracts. between security -- the here. thanks organizations Peter player cloud $XXX think away last has about think In Yes, the to in the and we has e-mail a business on-premise security think year then Symantec Symantec many well. pretty a Yes, the since they enterprise up probably a the I the pretty way are acquisition But as certainly Broadcom $XXX

them is have and platform in migrating think that had But anecdotal I I customers So, of some over there terms off. our years Symantec remarks, that in many say, examples the you success friction we some for really for for nice onto certainly illustrate called wins to few come. out still we quite to will work as We opportunity it's got prepared a in. in the us that think quarters migrating an continue

Dan Bergstrom

don't if July Thanks. you to trends or build? or think of July And then in I know or had about terms July any thoughts activity way to in on perhaps prior Any relative to June activity relative pipeline business here. Julys

Peter Bauer

just repeat you I'm make can maybe to quite trying And Yes. question? I understand sure correctly. didn't -- it the sorry just

Dan Bergstrom

The quarter was strong.

flow thoughts about through initial to curious any July. Just around

Peter Bauer

think us. to are important going on world number clear of still a that I not month. down going details that It's So, the we're the quite parts specific very to the break of in on is crisis

out work And That so there remote that to we're that world figuring how still broadly. the is more think said, I environment. clear headwind out in a dealing with economic very is it

with think team and I pleased executing the out environment. with Certainly, way this they're So, in the kind we're demand our of pleased very there.

we for we've so all as the our taken gave account And that year. guidance

Dan Bergstrom

you. Thank

Operator

Thank you.

Thill the of from comment or comes line Brent Jefferies. question from next Our

Your line is open.

Joe Gallo

on is also color appreciate for question. account the I appreciate increases. on Brent. the customer This Joe I the extra

in last stand-alone was noted seasonal. the trend And was with this Did XXX quarter? you had customers segment. X,XXX weakness Was that products that customers buying continue smaller that quarter the line in or customer larger clear otherwise And be next to then the below products. the gen were just I seats? think So,

Peter Bauer

end X,XXX account, that it most of by customer the numbers count So, highlighted. saw on was group I even where the the sub the smaller volatility smaller the on we was that

customers imagine, harder much you because they're will. smaller those this the and just the impacts as you not customer As bit like a on crisis directly side count number if dollar quite a can hits

for trend where customers. it particular certainly hope continuing. up at Mimecast that the quite to trend quarter But to on in of pace on-ramps this in sets of Not as down solution on-ramps single using the those our we where we saw additional continue the terms one emerging But that terms quarter customer the products. think a In on-ramp expand might course come of that does relationship you we the prior where we road. of of saw

Joe Gallo

about Awesome, that's to in hear then And strength Central the Europe. glad helpful.

think some you geo further weakness context? do do noted and Africa. had Any I U.K. last this quarter? in those South quarter How regions

Peter Bauer

Yes. much regions Very much corona -- are those very the midst in of crisis. the two

business a there whammy the complex going make the doubt noted particularly terms double probably of is harder. note COVID to I've between economy without just Africa is in economic challenged prepared worthy a both having South my in there coming taking doing quite tough of remarks into that and As virus they It challenges and really the of significant some is having certainly And because strength. were crisis.

out just side, are again environments the from it world business to was wasn't On America do of into in to the terms U.K. North the how But home. figuring changes their really which with much the best afoot. quarter people all in like sell

Joe Gallo

guys. Good hear. Thanks to

Operator

you. Thank

Our Trust comes Securities. from Terry or line of next comment question Tillman from the

line Your open. is

Unidentified Analyst

Hey guys. Terry. This actually taking for Thanks is questions. Nick on for our

First, these help I do and and capabilities customers score how you fell safe land further back potentially Cyber some capabilities some How Thanks. had and so larger case was then upmarket resonated far? such capabilities these of guys We And as heard actually move you Summit. towards intelligence. pivoting you Resilience threat with have the newer mention kind review enterprise accounts?

Peter Bauer

the that exciting fit and it's the in customers, a intelligence across what customers. they strategy the zones those as platform API talked they X.X and strategy features safe with and It new those the perimeter so, calling delivering particularly new of out. the perimeter. into like in those showcased we're was just resonating on not capabilities all our as are threat way Thanks those we broader Security working integration the the we're Yes. on concert beyond larger reception score for there. Certainly, really and the it's that three the definitely zone, to inside Yes, concepts how to strong how we've work perimeter Email strategy features

collective and enterprise a as adopt value we the customers very it's powerful more So of creates think in space. very upmarket they the multiplier and for as definitely suite appealing a

Unidentified Analyst

even development buy Got as guess follow-up a And acquisition in we MessageControl you That's think recent you. about versus given just moving did last build? Thank Segasec Analyzer. and acquisitions product the it. forward DMARC helpful. should then year I of how terms guys of in the

Peter Bauer

Yes.

if history, a lot we've So you our of spent recall time.

fact, first microservices few in multiproduct organic to foundations the past done company's building years with right. really in out some technology And build platform out the tuck-ins those getting cloud-first very we've talent really multi-tenant selective and our our is build ideology In design history and almost of that decade-and-a-half portfolio. what an

the X.X, Segasec the Protect us Email think now X advanced we So -- training gave was zone been acquisitions have. into those and about DMARC you malware Segasec if Israel. efficacy with was capabilities out the to able that malware really we've more with couple brought over detection of us last market build zones with awareness sorry Security capabilities out Brand years fighting Exploit of Solebit three offering Zone that technology. built our the We've Analyzer that and

up broad-based below archiving in which proposition from and really space. for mid-market our landed all way that original very well enterprise ability the strategy So up these and strategy a think adjacencies proposition our large that I to provide layering capitalize I into more Email some Security value of traverses that capabilities more move into think is the expanded into a now a the right effective from broad-based very SMB in value and email

Unidentified Analyst

That’s you, helpful. guys. Thank

Operator

Thank you.

Auty or question comes line Sterling JPMorgan. next the Our comment of from from

open. Your is line

Matt Melotto

Matt This is Hi, guys. on Sterling. for

seen question you downsizing -- the function that first customer a the that end even outright So your some on terms Email of in no around to Have business the the general or solutions? that or of is headwinds base, absolutely Thanks. Security closures? Is from about moving smaller Microsoft cancellations? even you just customers in to more and talked

Peter Bauer

Yes.

we travel seats. that it's was the our the of saw quickly the where more a we of of have think industries but downsizing obviously, very think retail. playing of in quarter's crisis, XX% were we impacted in areas. that more really in stay base last the heavily I a some customers overall I days think or would reduction number called crisis, it And customer out that Mimecast, with and the about I And really had we of out call, by impacted directly earlier

or had longer a people a Frankly, we their so earlier running of and a some that the saw in shrink that kind is months, where things of businesses period companies play our business period that In hypothesis is down nature will of in And very fight closing in the was the over of time. their out and that's going time. lot big of of sudden that to way. was there but three still it first certainly we're workforces, sell

being rather I restructured Africa, particularly there of significantly. that we're of are South in As mentioned, aware accounts couple a

that the worry crisis. it do through of some you those won't And so make

Matt Melotto

That's follow-up. Great. then helpful. one And very

In range. just remind year two been of to Thanks. double-digit billings quarter, last of think large are about us we quarter that? could the quarters in second looking the X% terms low of last in there have terms first How that at should billings you contracts over any

Peter Bauer

that. do be do in take into that you does I Yes. because that can quite FX, we people account We certainly reflect calculated don't of cycles and but should the have calculation that they of of we just them companies inaccurate with quarterly to say always They in period would they whatnot. time, having for billing caution impact that measure to engaged would shifts allowed the were billings this these everybody lot with the go a the is from shorter quarter. contracts for some and shift time first annual first billings a it upfront tough quarter, were through a that

point think you're So people that's an we guidance to the just issued our And measure is and again, billings it why quite revenue recalculate measure interesting to as when towards best look at. I into to tend trying it. back

Matt Melotto

guys. Appreciate Thanks Okay. it.

Operator

you. Thank

from comes the comment or of Essex Goldman question Brian next from Our line Sachs.

is Your open. line

Brian Essex

to question. Office traction good from How quarter there can if a cloud? I pause into there enterprises as was on for tracking Hi, from every of quarter? afternoon. Thanks of just seeing I comment less penetration reluctant on-premise much maybe just a are the was the XXX. kind are And it kind migrate any this wondering taking you maybe my you bit little

Peter Bauer

quarters crossed to and continues so drift a talked XXX We've half of of our upwards. more we gradually back. So couple than that threshold where is that Office base on

XXX that us same gather realize XXX's where the a lot But and number the the is And added go as sources dominance because one each it's the exists. find the of naked the trend details of of haven't who Mimecast. lead of been needed we It's Office there to breaking in broader out say, projection we certainly, to tried customers, quarter-to-quarter. where Office coming We customers Office quarter. they out market number on as XXX from people we breaking

very still trend much So that continues.

XXX the push lucrative XXX finance than cannot out ever in we're Mimecast aware in more these But guys conjunction Office and an times. tougher of risk to harder with than the be there brings think that of are broadly implementation. back it's they financial solutions I the that given might implementation important risks more the that crisis, would value the ignored times, Mimecast increasing have to because in Office just the and on

Brian Essex

of other where a like vendors, around more the just Any it. any Symantec-related? those color Got bit put little a other And is bit trends substantial vendor a many a competitive are tailwind of wins. super you? helpful. for those consolidation to That's you playing have maybe are market, on in of little enterprise some How large And the maybe follow-up way of many how out displacements?

Peter Bauer

great Yes, question.

Symantec think, the number I were displacements, a remarks, called of Symantec exciting. that in was prepared I number of -- the were a of which those So, out stories them but of a number not them, all

broad, the displacement think the still. is competitive landscape landscape fairly I or

a sort not the all and individual environment number and XXX a opportunity think, at Office consolidation the company's it's Office looking deploy It's strategy a inherent And I vendors. going So cover the companies Cisco. of homogenous cyber that vendor is, the XXX. broad and extremely just The dependency on risks are can two of ways. almost There's there's that other number an XXX. dependent looking There's Symantec. solutions on dependency There's one on a around off concentrated and naked risks XXX to a of surface. of, of Office resilience suite shows compelling on forward Office customers dependency global in security up attack of a

an teams. those With as the XXXX greater simplify now organizations integrated addressed. cybersecurity in really downturn to XXXX looking economic comprehensively to with also mitigating learned but leaner So well, budgets, costs save downturn right landscape need and suite, it's risks at there’re of IT an mentioned, that forward. economic and and how going and And through going Rafe to smaller risks are have the be those the as we

ability our consolidate complexity very customers and less have to we're finding so, the the to offer And marketplace. an to environment be compelling our of solutions opportunity architecture, in because in

Brian Essex

you. Thank helpful. Very Great.

Operator

you. Thank

from the comes line or of next Kalia Saket Barclays. Our comment from question

Your line is open.

Saket Kalia

products bit my I -- we the question already addressed. sort per increased you Does to make talk Okay, a here. question can X.X what Maybe, the think, which the on contribute great. average? of And customer X.X. that there are most? sense? about And think moving to guys. up Thanks ones guess I have forward? more Peter, to first you're if Hey, do the I that just for usage the for is apologies from needle you is, think, metric little these products been ready getting going users going taking that

Peter Bauer

you. right. thank Yes. Saket you're -- absolutely yes, Yes,

movements public and almost what up years X.X out five since to to now this see, was great product seven-ish We've as products making considering built years particularly expanded products ago, which X.X, the of customers, products, about six really in now year-over-year those us is base expanded moving up going seven it's now. to size to four-and-a-half from So, XX,XXX ago, the products we XX the exciting portfolio XX, for portfolio.

still with mentioned, new now, So we've market that talk of in customers we there, Zone a can runaway we're course, sell there amount Well play. of traction lot to. saturation fair base great we our is a and as really X that success customer the out as the of in built what about Rafe TTP finding

secure good a has -- the requirements [ph] messaging a talk training were has secure the and us the that's been have, that We the really product have increasingly don't just and for gaining e-mail We've really we for important. to slick So found it about traction Those really product. us. IEP day, But really strong looking sellers are awareness mix. also the very at numbers strong grown grower with encryption leak prevention often. well-integrated data compliance organizations and for in the ability solution other

that a main that that going the think develop the are acquisitions capabilities. pick big start driver a very space about a market much in that going numbers burn in stage we is I think to we but excited is We obviously, see And in, direction market archiving, those bigger term, continues up. growing two then, think those really of in is of that us. be that And, market web very to space, for to and to we're demand we longer continue we've Zone have to X. And opportunity, and that security good offerings as going the there. then, our forward, got

recently are way. off to-do list of really that probably and really we really board that's offer to to consume the You sauce isolation an subscription part is get saw browser simple and things taking start to of part manage as there But that a suite real secret easy capabilities delivered announced on slick customers as in we solution. for of here these integrated all plans

Saket Kalia

guide? That's better for that kind way delta is inorganic? in of it of that perhaps And But here in it, rest midpoint. tailwinds how million -- some apologies my $XX remarks. parse QX FX the about for for sort bookings and the follow-up by like versus if perhaps Maybe, it. Is performance again, better the go there sounds revenue to the Got a up prepared to the much of this for the you out year in versus was of at year got see really helpful. Great the addressed Rafe.

Rafe Brown

just as for Yes FX the our use everyone you. we you thank July a XX and of bet reminder rates first Saket guide. And for as

midpoint of FX beat total revenue well at the set that raise the the is the MessageControl acquired as from as of $X.X tailwind. acquisition $X.X of that's So that's million that, and additional and QX from million $XXX,XXX was $XX.X just to that comprised in then of the coming so million

So it's million of plus tailwind. FX the the million, $X.X $X.X

Saket Kalia

guys. understand. makes That Thanks much so us

Rafe Brown

Saket. Thanks

Operator

you. Thank

comment from Bachman or the next Keith Our question from comes line of BMO.

Your line open. is

Keith Bachman

I back retention rate you. second. to a go net to thank the wanted for Hi,

lower couple and a with associated perhaps upsell. retention -- herbs some indicated different less of You

XXX the what's you should So subsequent it call we XXX-ish a quarter. some of go Do up. be that do retention how mid kind could the thereafter. in net you like anticipate you sounds it number implicit might in But out be look with range, the quarters that anticipate will improvement or economy for guidance think this your in it that -- as

it to your expectations embedded relates So just rev what's the gave? in as you guide

Rafe Brown

you Yes. detailed. that for No clarification. It's bit a thank

retention these a X-quarter remember trailing are for the numbers of they on one numbers net to that the basis. things all revenue with So, of

And take crisis time numbers measure some does we're full reflect for the the the as to of going through it that. so

what at the just looking year. of the play we So we're components out to the when hit to on over course is modeling going this think we're

resurgences the assumed perhaps time it little And So to we're than numbers for longer some going months had just will recovery the in bit a that as the three move. to and we've some ago perhaps even seeing crisis on, economic take hoped are places. drag we

you I And give and bit detail. down a break to so, more wanted

downsell to year. XX%. down may on upsell that the the rate drags XX% and upsell, through approximately to move then on X% as as on churn the our we between X% side, And think the we believe rate So might in crisis come rise we overall and

reflect quarter. is not of will out the year. for this rest Now this crisis be -- necessarily and playing economic the thinking next that over the on dragging We're

Keith Bachman

Thanks for clarification. okay. Okay, the

Okay. Yes.

should down tick be year of the thinking as to how we about we mentioned the you going because essentially probably through it's forces run So is it?

Rafe Brown

starts if If the single has get most biggest the on, -- additional product we dramatic out afraid are probably very remember But the I some there. we offerings. market I'm to to headwinds crisis if yes with new and continues new have to lot that to bounce we'll also much drag think naturally a economy back But of effect.

there somewhat normal so to out even count a again suppressed. certainly of of opportunity And the products is in numbers business get to us some more and the tougher environment even seat of just there sales if returning tendencies It lot there. are back of gives if drive additional

Keith Bachman

Yes. Understand.

and to that, Okay. it's leads community. Well competition your I to do some this that going return to want understandable the more just my into poke make because have directly I SMB second to in because question sure, you up is then attrition exposure that rate

things seat lower Africa So those lines. along South count

like count is understandable you the or of impacting crisis. majority words, migrate that's ask more things course other In vast, it's seat customers to the away seeing attrition, I Mimecast the that? So pressure. vast directly your share in the and to a offering seat are that count little getting are this But it bit super think a totally losing you is competitive directly from of

Rafe Brown

in was count biggest particularly Certainly far what the the crisis. thus that driver really it's quarter. seen I where that first crisis, driven for we've is in And seat think been the felt we've so

are As it that the I some we're industries. companies impacted called the of earlier, through directly crisis really making about worried out

those So biggest by two our are concerns far.

Keith Bachman

Okay.

native with out that's at words, And you Microsoft. guys you're seeing all. customers not go crowding just other in So more

Rafe Brown

a net very, are dollars I end the of the numbers out low big on trend very called little the and I the the in customer real described. as business bit but

Keith Bachman

Many Okay, Best of fair luck. thanks. enough.

Operator

you. Thank

Bank of of Our line the question comes or from comment next from Daniel Bartus America.

Your line is open.

Daniel Bartus

for more Maybe guys, one Rafe for thanks first. the taking question. bit a is Hey just you little

exposure vertical to still XX% any think right last think exposure to guys if way think gave notable industries about the impacted the in seen metric? XX% Your you've if right revenue was to the your And improvement you any sense that quarter. you Wondering XX% I to XX% is now?

Rafe Brown

we're and gas page XX% space. It's the oil as an X.X% right. make transportation, just all and to relatively the on And sure amount. X% we there. was extra hospitality, in Yes. a medical that's retail Then approximately The have in small and same our

XX% very surprisingly during that within the group not So was the especially hit directly group that quarter.

some expect. There's as better on and financial mixed hospital the And side, so, that's the would it's way. lot responding bag. attacks to whereas for playing groups likewise are say I new you then been where But dried medical looking their of that were or out pressure no bit change were people there. medical a of -- a coming a the under elective real And severe would whatnot up. instances is security side surgeries

been more complicated on So a differs read. case-by-case a of was that kind of It's basis. bit a

Daniel Bartus

fruit? have you X% customer see Are sense. investments a half improvements And the of to the potential Thanks. headwinds guys second be perhaps? a just you. you. you flat going then made Got COVID on to That the good And can to success? But like Got makes starting bit the bear it in just you offset sounds churn, talk at it's your was guys see it's the those year could X%. assumptions. in little It about that to to

Rafe Brown

point. great a that's think I No, Yes.

weren't will lot the over in in we're are and big off And know warning on mechanisms then quarters accounts of early few you about implemented continuing siphoning really run weren't that system. getting matched parts customer the accounts, sure properly if group, She's is on people built -- to the leader last One very of implement making is get the working of and to success really things brought those accounts talked from resources the having Pete enterprise our to business. other make enterprise which new the the best focused a we the the we've into sure group. a many improvements they too

large last out quarters. churn couple of improvement potential off. level we the downsell account in can front a I is pay of get notable over think churn to So that seen and risk. And starting in enterprise We've

certainly has encouraging. been that So

of question, I do are this think playing plays that I answer as there in to think it's fruits out and for out, So this out that environment. there us. that It's your labor unfortunate perhaps

it's apparent broadly. So as readily not

Daniel Bartus

Got it. sense. Makes guys. Thanks

Operator

Thank you.

Ruykhaver from Our or Jonathan comes comment question Baird. next line of the from

open. is line Your

Jonathan Ruykhaver

just service or see differentiator? regarding that and the It's that Would go-to-market? Good gateway it prime synergies in Yes. is the the training I with is How competitive the products. question. have the important afternoon. security content you you is one awareness situations, e-mail

Peter Bauer

Yes, Jonathan, great question.

well I put are So together savvy of think being the both organization quite from we're big much in inside change of security away the the content, towards chain. shift being content and them link in security culture important. and more power an ability and Certainly, a the to its of power believer and the really weakest

a us delivering a is that. emphasis lot really the important in provider are put of content think So we've and we advantages on there that, said Having real for service. as gateway

being live as actual take is us that used we those attacks to So simulation tests, compelling. think are those examples, couple customer of the opportunity have by at the targeted defang customer phishing and the for really

our that capability product we is will in phish, this really which So is now compelling. coming safe shortly we be think talk out as about

what have that we really The are other on. customers actually thing telemetry good clicking end what customers -- is on the users

And that not. end example, or When come we URLs we're what going behavior is the regardless bad of all basis. can the clicks, monitor we real-time that inbound is e-mails rewrite an lookup. URL an clicking those on URLs, the user for So, on of do through whether

can that And risky that going can the them we bad. we there, a record in behaved know we fact So from fashion. person the has they something clicked but stop

across we've to product, our training customers was have seen, is our of we base. awareness propensity about users their the which that times in users X.X links bought our really of One things broader the the click that user of interesting X,XXX lower than base. bad which propensity was our thought is The

value good us able but of service integration that show the of and shows the not really of being platform. through just gateway awareness telemetry that the power evidence the of training awareness to the our So product, training some

Jonathan Ruykhaver

interesting. too, That's very you Peter. much. very Thank helpful That's

Peter Bauer

Great, Jonathan.

Operator

for one question. we Thank you. afraid, time just have more I'm

Our from final line question Berenberg. will from the Tilton of come Joshua

Your line open. is

Joshua Tilton

the to if to all on current upsell just And into full do relative at the about for we guys. I Day? two so, Zone to the Has growth bakes their Hi, Thanks long-term my momentum products and the question. the wanted that question. how cross-sell even and what environment? presented your in targets taking at guide follow-up think around contribution Saket's today Investor year you slowed

Rafe Brown

the set live So of X. of the internal our as solution. products the Zone e-mail that's well the protection emerging awareness more And solution in mature as training

other newer base. a bit solutions and are little working off The smaller emerging just a

They I people think help what we just them with to presenting bit the outs. Zone make longer. is more the a team there and they've much benefit ins solutions from They know accustomed that at successful. been is how customers. sales The X know to out

continuing Awareness future is quarter investor strong the deployed And And have so just IEP in to their you'll see a a confidence gives out there. think number particular deck, in in I that in us been in organization. had grow. the of that training terms of bit quite the

it's runway think I we quite certainly, we as important the a short-term midterm, So bit of they're to be an story. And part of forward, have just products. from going that the whether look or those

Peter Bauer

we with our that been seasonality is Yes. What some to have that I add having QX. this would

have the QX is a one builds So year. seasonally our our that had peak through And in and and then QX rhythms lower it the this of our up we just of has through typically momentum of comes business.

it. back as So to I in observations look we think bit probably definitely our COVID factor as that compounds a would at little But I that well.

Joshua Tilton

That I then And was could follow-up. if just helpful.

the You in customer that any guys Mimecast over quarter. highlighted retail incumbent Could U.S. why in space? you out reasons, large the customer very the chose win call solution that specific

Peter Bauer

Yes.

scalability and reliability the But And the a think dissatisfaction and and distributed the the really them our ground and way they the our I very one cloud-native with with offers built is agility incumbent fact kind that organization. is up as APIs platform liked of and was platform. inherent this think open from and dynamic and future-proof I the large built of architected the that nature it factor. the

offer, we we the them what of attention what of during superiority and cycle. technological the demonstrated think sales the to I So focus

larger key Of is efficacy a organizations. factor these course, for

a better than them. convince was can incumbent they So them see a far were of number forward able factors, we the it way was but because I problems selected, going in believe the solve as to we

Joshua Tilton

Thanks helpful. in. was sneaking That for me

Peter Bauer

you. Thank

Operator

you. management to over the like for Thank I'd to turn conference back team closing the any remarks.

Peter Bauer

joining stay call. Thanks 'XX earnings Thanks. for healthy our results QX to We've safe enjoyed And FY out there. presenting our you. and

Operator

the thank participating you in conference. for Ladies and concludes today's gentlemen, program. This

have wonderful may Everyone now You disconnect. day. a

Mimecast (MIME) 3 Aug 202021 Q1 Earnings call transcript