KNBE - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the KnowBe4 Second Quarter 2021 Results Conference Call. Please be advised that today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

my KnowBeX turn Reporting. Vice is to call Ken Talanian, President pleasure it the to over Now, of Investor

Ken Talanian

at a our financial today Information commentary and non-GAAP reconciliations reminder, non-GAAP be GAAP As measures. found supplementary the may also can website be financial in of earnings release, our will with our regarding Investor and furnished investors.knowbeX.com. available Form X-K our the on SEC results, our include non-GAAP financial which results was limitations filed information and on today with found our our Relations

differ today, In SEC's prove sec.gov documents those or to those described addition, some this our during to Form company These results be filed website. call. be of that can these our projected found of our forward-looking any call. are Should to in comments this contain guidance, website following incorrect, subject risks actual will statements and materialize the assumptions. that be including may on are could XX-Q Investor or Relations assumptions These our our materially and uncertainties, risks, from implied related should on

Stu. Letonoff, and CFO session. remarks During Stu Chief and CEO, hear Venkataraman. that, I and with our And call Co-President Officer Lars to today's Co-President, the prepared from Revenue will over Sjouwerman, join Krish question-and-answer call, will you our our turn will

Stu Sjouwerman

thank Ken. And you all for you, today. Thank us joining

Building you annual our morning. year-over-year quarter with We growth. over guidance. record results a on quarter's revenue are had with strong recurring excited share to we We this last performance, exceeded our XX%

social manage help the I know, you engineering. As many of to KnowBeX organizations ongoing of problem started

traditionally human securing company dedicated cybersecurity emphasis We controls. are the legacy on in to layer. the been The public only has

vulnerable, report, on in growth investigations According software infrastructure. of XXXX of last this which rely human are equation our element. all the security their the success breaches However, successful leaves cyberattacks. solely data to is a against helping cyberattacks newest and transform human organizations breach sizes customers line Verizon we dedicated defense of XX% involved we a to relative element cannot proves their Ignoring of the why into employees exponential

quarter, last threat have world This examples professionals attacks. social security has on increased of of the engineering the around edge. the Over countless you seen

In IASCA of fact, as from a surveyed survey in wake their Colonial that of to the recent two-thirds cybersecurity recent improve the companies the found one the such Pipeline. attacks, on plan defenses

to In the The level, continues look We with to from controls. organizations the their Biden landscape. KnowBeX. administration seen environment at human executive expect on growing regulatory threat a US, many the match orders improve to security evolve of layer have federal these securing to we

programs. York we opportunity New the On market business I actions awareness organizations, the will growth. the start Services, provide seen and state have These State of such level, our security summarizing the and Department for of activities quarter. mandate use key catalyst results validate help a Financial as new by for

quarter free across continued flow cash results our the with exceeded generation. board strong growth Second expectations and

across customers ahead motion continues both expectations in This XX% win Our new SMB industry up and in all ARR, million $XXX inside and sales year-over-year. to our verticals. enterprise resulted of

to space, market-leading on cybersecurity customers. meet the focus We centric our in innovate enhanced of by established which is needs our position have human the continuing a to

both includes markets new security the awareness for defines product products. exciting and new vision features KnowBeX's Our roadmap. This

strong KnowBeX, whole developed behavior, users which Compliance new improve connection product shows expand improve school This reach platform in-house acquired their TAM power released security product training helps already compliance behavior. Plus. much security This we behavior. a our will is quarter, property for adjacencies. platform users like modules compliance additional our well as to and between reach help the a the their Compliance Plus called as is behavior This into there to intellectual the MediaPRO, believe important segment. compliance $X new from of new We leverages our billion a

While exceeded expectations, of ease the the greatly Plus our so in upsell. has Compliance given far, early ramp

in is Our with in business strong momentum leadership enterprise wins, a the technology key in new factor the penetration our market. further

our also our reaching and strength of both see best-in-class XX,XXX. and We customer base. growth enterprise, customers across across SMB remains over retention Customer existing strong number with total

now Our Compliance levels. in platform and at additional record GRC KCM adopting our current KMSAT investing Plus are customers our KKR, products and

As of multiple tools utilize leads see now webinars, in products. free QX, inside to and and we sales Organizations team. continue all our thought customers leadership generate end of our have XX% value which sizes for the across of verticals to

KMSAT As quarter, a was also Plus and reduction KCM digits cross and both immediate triple not for continuation growth growth to together and saw PhishER their risk success the Though we we Compliance quarters, the for leverage in separately, QX. PhishER do sell buy growth in that organization. the customers combined of PhishER, report logo revenue brings the the to previous GRC

well that wins In security The terms value of as both the number a new business, greenfield of we competition. the awareness resonating stands is wins from our displacements. as customers, competitive continue of and out with saw greenfield platform to show

well that proof customer competitive competition. Our and wins our platform ranks further above our are support

we XX,XXX expects A competitor of based win segment, to some which and overall a SoC. XX,XXX company industrial with using of wins. competitor their To give We company had KMSAT a continue favoring also hours deal automation examples this use. insurance our companies one at of XX,XXX in in PhishER a a world's you gaming seat in swapped win, the customer largest with success XX,XXX wins, a enterprise out UK. save large mega enterprise included both in and seat displaced global we man ease several And seats. and had to the see Additionally, our big greenfield PhishER

These embrace and only security automation and considerable demonstrate had brings, also but risk customers to hours platform platform's large with also the triage save in a our we that We XX,XXX others events. favored the IT reduction capabilities. seat wins a that the company thousands of not our technologies department our displacement competitive medical continue

skilled Given saving time critical has IT our workers, a paid for remains the in strategy off. of platform our our building products focus product This into also shortage roadmap.

continues of with with a over large for Japan, support a global Our continues strong in customers. won US vertical the XX multinational US based great a our XX,XXX with in new seat state be seats faced company a selling manufacturing based company oil a as multinational for multiple To point XX,XXX to force. be languages the gas supplier this competitive deal using seat you breaches Austria. parts our the we a quarter examples, automotive XX,XXX government displacement few Outside to a seat in that a a a One XX,XXX their defense. global the segment platform deal in of give and greenfield deal and commercial with primary purchased greenfield intent space,

are of We the traction seeing outside well. US as

an seat XX,XXX a Australia. example, in As deal department a greenfield landed we police with

pond, system XXXX internal We in purchased the seat sector. across to In the deal also see school sold in inadequate XX,XXX a system US upgrade continue a education their traction a to we And greenfield public seats Zealand. the training. to New opportunity, school

here too. Our well is working cross sell motion

saw this organization. employee quarter, large an XX,XXX university we research As its for PhishER purchase public use managing a example, in

people the to of our thank results, turn commitment I to focus would I'm to employees the Krish, for great only driving KnowBeX and the company and like brought leading that but over financial call I group dedication, proud of partners its position Before communities. and not to market contributing today. customer has incredibly our our this

bringing ever and This recently Mogul's for and with talent were Workplaces Places Best XXX list as has gone focused the in We to are and included diverse high of unnoticed. the millennials as Programs. Diversity the on Best quality Inclusion Fortune's not We Work in Top door.

a also clean use During sustainability and off energy globally the become XXXX. as to we by neutral including quarter, pledge an increase climate our organization our XXXX kicked of by to XX% carbon program,

three few financial scenes. we're climate our come. These countries with first the an would doing great our trends. look of took like discuss of just update the work quarters weeks, Krish that, XX I across giving XX% I you the the to to a behind examples in staff to the forward pledge. are And Within

Krish Venkataraman

Thanks, And good everyone. Stu. morning,

reminder, all remarks numbers my noted, non-GAAP. during revenue As otherwise are a mentioned except unless quick

with As by continued and driven logo you heard for expansion. from QX to to performance business versus sell and cross global strong quarter AR actually accelerating XX% and the for in Stu, addition first quarter the existing we enterprise across definitely SMB, was see This another logos year-over-year. new strong

sales all sizes channel remind hybrid We the one, thousands XXX of and selling several hundreds saw efficiently logo well of customers with customers inside growth want channel Our cross organizations geographies, all seats less our on areas to with to platform that focused I and model. to by a in continues of across is sizes our customers everyone of Since expansion. quarter. industry. scale success partners to of throughout served all perform of finally, international addressed each day ability to key new pillar a existing to these we expansion, pillars employees – of model four expansion, are customers, than from to by the

as in X,XXX enterprise XX% clients few of was XX% customer SMB saw our In greater a balanced X,XXX than a is base, are and well years. of which segments under employees we sense customers. we give define To employees. few new X,XXX space, was you XQ, these pillar logo the customer we in logos first enterprise AR ago, growth which customers. X,XXX space our enterprise where growth that between about the XX,XXX SMB saw represents worldwide growth robust just past now define than our about for up the enterprise from evenly considerably less over Our are Today, count years expansion. of Both as significant and logos magnitude,

in are deals the the over of of with provided close model, market we is the the strategic enterprise market up we mega enterprise penetration our than last at This of space but of enterprise significant have organizations couple ability the This world our move the our success go-to-market proud importance the greater current trend a of We continues seen many platform. of market to largest the in particularly Stu our proof years. only a of this not of seats. XX,XXX some the few of the end place mega now quarter.

pillar is of second customers. cross growth existing selling to Our

strong continue of customers existing new platform. and our global power in interest We the both to see among

of of with among multiple within or now first we customers our XX% customers or X,XXX approximately XXXX, Today, of have XX,XXX X,XXX products. XX,XXX customers about multiple about products. multiple had customers about in over perspective, X% with XX% purchasing our the products about customers purchase. some QX, multiple in of have you new As To give customers products [indiscernible] our strong interest

a As you have can see, we progress tremendous here.

first Compliance Plus needs. round It's Plus surpassed to are the our another value. PhishER Plus out to our products as to customers the bringing in is an still to by has seen adding innovative also committed platform. add driving example and, We in global ability TAM. human customers easy of our innovate saw from we approximately early of our on ultimately, to Compliance results many in $X products compliance on it's early sales. launch yet shareholder and is to of Though launch, Compliance the layer an add billion complementary The month June organization's

versus As discounting. products. in prefer to product, a our results reminder, as cross premium products it we sell We the for pricing don't add-on bundle

XX% XX% sale. increase As versus a a and standalone KMSAT a for result, represents PhishER enterprise AR SMB in for approximately customers

combined is PhishER, strategy Year-over-year and the with multi-product both KCM of Compliance Plus growth. now seen combination the triple-digit PhishER, Plus. GRC revenue seeing have and traction and of and addition logo triple-digit Our KCM considerable Compliance GRC

markets of pillar growth of Our third international pillars Penetrating expanding remains of strategy. internationally. growth key the is our one

Domestically, in another customer quarter. focus Our and growth XX% also with marketing, strong momentum our we about see to content investment XX% expansion, continue year-over-year hiring growth. international we key sales, yet reached revenue year-over-year international record talent to support. On on breaking

of foundation in the made several Australia key scale to talent Japan, laying and have UK, hires across Germany, We globe. the the

Lastly, is our of channel fourth expansion. pillar growth

expanding focus presence growth to as channel on as internationally our accelerate continue both well domestically. also We to

progress and partners team channel We and are deal volume channel in have made through of a of great distribution number invested in both hiring our channel growing capabilities Throughout quarter, the for we our key marketing number partner. them. and generated resources the building our in

second security compliance. $XXX year-over-year. orchestration around In which quarter. reach, last the total the quarter, to have Now awareness, existing security give of and ongoing the integrated and some up reached on platform customers our or details automation, ARR, customers problem you social Both year. includes annual currently worsen engineering and support revenue, over capabilities new We million, our witnessed with XX% recurring the

strong continued was driven to Our sell existing ARR quarter growth of by logos. and logo additions cross for expansion another new

count customer quarter enterprise, in considering to in historical have were Lower has class from total over levels for the ahead our grew and of reaching levels. revenue highest and Our SMB churn grew reached QX QX, of In case for we of been XX,XXX dollar seen. about last expectations. up both our our Gross world retention total was the gross mix retention, with million, which comparable XX,XXX, year. quarter dollar which $XX.X well the XX% year-over-year, GAAP

America. we from of in a both high now of Geographically, and believe our to four is representing the continue remain personnel majority the for international expanding our derived same internationally, a on was revenues Approximately year-over-year. to in North from channel in addressable KnowBeX invest and we XX% time, relationships. APAC and increase sizable EMEA of there derived our international pillars revenue the markets, KnowBeX at our continue growth. vast and both XX% is a market We execute level At focused revenue

strategy added expansion, While is we represents TAM, approximately markets team. results. heads executable in have very XXXX, new our a and QX international these Since XX large which our it's investing still to international producing KnowBeX in the clearly, early of

past two Norway, and in have Over Australia, we the Japan, Dubai. offices opened years,

Netherlands sales service long-term for center completed the to teams. also support and building We our clients drive our help shared in

on accelerated hiring also our resources ensure plans international to to the we execute right in have place our have expansion. We

the philosophy on margins. part growth As business, high focused with of of running our remain a we strong sustaining rate

margins a to XX% gross non-GAAP as improved from gain ago, quarter scale. year XX.X% efficiency we Second with

expenses scale low term. margins the for continue about businesses, quarter in year. our Total for we the long expect quarter the same $XX.X international million operating we $XX.X million mid non-GAAP As XXs to to about were last gross non-GAAP versus

expense While to drove we the as business, as of percentage IPO April this business. Sales of the invest was lower quarter. increase we headcount revenue in year-over-year in scale across continue the majority marketing our and a vast

expect stages in early of we know, and see to resources that still you deployed As additional expansion, are the support growth. should international to you

September. As be our an we will in in example, hosting first conference KnowBeX EMEA

to G&A our marketing to reflects the invest internationally and upcoming a We international expect support public sales in as life both and assist our company to increase over expansion. quarters. cost continued effort

internal are investing We HR across and legal, finance, audit teams.

our As you see, we have made considerable platform. investment technology in

our of another Compliance of launch roadmap. product Our Plus yet example is evolving

the Although we're still for demand the on, early seeing strong product.

In PhishER second its and million fact, in was income in up same process. income surpassed was approximately Quarterly operating was X.X%. where was $X.X we quarter the net operating time the have Non-GAAP $X.X about non-GAAP at non-GAAP margin already million. ramp

integration compensation acquisition expenses, costs. acquired and Our non-GAAP related and stock net income excludes amortization intangibles, of

approximately have and half a of as performances the and collection see continued and highly From focus $XXX strong of IPO. Turning efficiency maintaining equivalents an you of SaaS recent use and includes model. $XXX sheet, of can a to of this by proceeds million, profitability. high capital cash first approximately line net with our approximately that cash was finished No, with the driven representing supporting of strong We million, on sheet growth cash from a as expanding cash go-to-market the $XX.X plan cash Free and of million our items. generating efficient year we flow ahead level flow cash. for June balance result, balance our well and cash top balance resilient model sales balance

while entered on expand new momentum international cybersecurity. profitable we third business maintaining as We customer segments sustainable, and our resource strong with new products in all We our category invest guidance. across This in and and this And growth to lead continue markets. seen is capabilities, pool, to quarter momentum. the

million $XX.X million to For the expect we range or of third to quarter XX% of revenue XX% approximately year-over-year the $XX.X in XXXX, growth. total

we up our original $XXX is XX% guidance or full-year raising growth. to million million $XXX.X quarter. XXXX, our year-over-year total revenue from approximately million guidance the are of to last $XXX issued $XXX.X guidance revenue XX% to This For million to

margins year. XX% previous full for We quarter. expect flow guidance the up to This last of free to XX% from cash is issued XX% greater our than also be

cash seasonality which As our quarter a reminder, vary can free there's flow in results cause to to quarter.

shares modeling between For you assume for diluted share can a purposes, average and XXX weighted million non-GAAP of million XXX count QX.

counts and were by of GAAP class our weighted the dual timing As share average the QX structure of a adaptation IPO. impacted our reminder,

in are seeing in the growth market most forward to endpoint. of our security momentum important the on leadership are human the continued year, to we maintaining focused rest the business, As we dedicated and look and is laser we layer

Operator

[Operator Instructions].

of Piper Sandler. first comes Our from Rob Owens with question line

Rob Owens

new unpack is the little seeing but some you Just can to most but talk seeing displacements specifically, greenfield, want the those into acquisition overall. are about I in bit Stu, strength customers, And you expand logo on a the channels enterprise than you're competitive that, likely more be sense if of those my great. what that'd market? rather you're

Stu Sjouwerman

Rob, question a over to throw very for actually, sales. Lars is in that a I'll second. good it

on there still But international. of the trenches. enterprise that Lars well, is Lars, me a could significant you and as just in? in Let those a has He especially hop enterprise greenfield better amount view sales. comment is

Lars Letonoff

Plus Or and are you products? was talking Question, in just it Compliance adjacent specifically general?

Rob Owens

in that'd the expand the relative more you general Plus, great. whole on to I But want set. it be to was product think Compliance

Lars Letonoff

opportunity, is competition much enterprise. areas go two we really greenfield us pretty that for with still There's SMB occasional after.

leads after. probably be Plus, With we're to actively that's greenfield business the for A ton space. of that our team after go provides our going to competitive of going then, part a more marketing is Compliance a strong from displacement than competitors. And enterprise in sales very go-to-market Our a teams

greenfield same in SMB, I will trends being the follow again, it opportunity. as think probably

Rob Owens

could I've a governments a Maybe, you, touch SLED this to of quarter. on activity. got you state, It education momentum related your there since local Lars, lot was little truly feels bit like and Thanks.

Lars Letonoff

Obviously, market, But a horizontal. against size market. vertical us relevant organization SLED our our any news, to and in helps is the product the been with always there's It's of that any XXX% products. and then attacks lot

have don't really we specific So, concentration any in vertical. any

Operator

Truist. with comes Joel Your the from next question Fishbein of line

Joel Fishbein

just Plus. I just – the on new have about Compliance the one, product, Stu, the bit a talk little

bit color and the And KCM about give Plus? between you looks us little the a what of If sell and there? differences also, opportunity can like GRC Compliance cross go-to-market

Stu Sjouwerman

GRC specific KCM a tool track really the is all you a regulation. use of that keep for controls to

training through. training things Let's was raft protection, gives the Plus, of employees month test industry, need controls. and like and those they at yes, done, contrary, that a different the firewalls need do look example, that take privacy, are law to once And harassment, a That's essentially is KCM manages. your compliance sexual have payment that a what is correctly Compliance organization the so these – through. card to have evidence, done. all in XXX that literally data there's on modules can upload step check easy PCI, the they It's by you auditors and compliance step people

super sell and So, Compliance Plus to also deploy. easy is

You a and turn the out. literally it on minute, can existing within it roll in platform,

Joel Fishbein

would go-to-market, the of helpful. be terms and in sell then, that opportunities And cross really

Stu Sjouwerman

bid. just XX,XXX training. at was for easy back it heard, the these are hey, is be not Then for was look vendor come compliance a to you market to was as people of to up lot you Compliance now, And quite plus, go say, what customer base, relatively who and positioned based hard an a very for us us is with on is existing Plus that you doing to disruptive. currently research If pricing existing expensive. and it's competitive often, which that

customer So, moving. that an and it's say, to wow, very existing at easy for we're look

Operator

Sachs. of Essex line comes with Goldman Your next question Brian the from

Brian Essex

you a wondering if bit. I just was maybe Krish, ARR touch on can for

if parts bit and catch on I to And have that seasonality, cross upsell, that dig comments embedded have whether that? linearity, mix sell, it, was affected the your was compared it linearity guess, in last not there wondering some maybe we little underneath to in or quarter. deals could moving of large that a revenue – I might maybe is Given size, but might customer

Krish Venkataraman

Let part answer me the latter question first.

ARR you're our in growth, in at our I look at of especially especially the a look year, QX as seeing acceleration if And you real XX%. the in you if shutdown said, COVID excess So, ARR. since last trend, year, last

to ARR has pillars been growth, go that of contributing back unpack them key each four I growth because Now growth. our significantly of ARR to to the

years, accelerated. ARR. stories platform, enterprise AR First, of the the a half on you has One the the couple multi-language the at our embedded world the a within let's course, enterprise talk the the of two mega been platform. platform, One significantly now as And more attraction for of enterprise, platform, is, power emerging. last to about especially the last reasons the you if are of year-and-a-half that, of And can international of are a is that the lot there enterprise. capabilities enterprise side. our distinct in the of the towards that has comes real driver drive capabilities the Brian. couple side itself, And story, now mega But enterprise look see, in almost years, of in two

holistically, we as that enterprise also international a our as of itself are as the combination into expanding now APAC. On well is growth, EMEA significantly

product are we platform of to to the I sell single is say, were you're story. clients, would providing the of largely remind G the on platform. product course, drives now and a our capabilities this more Right? has PhishER, platform have a only is And testimony customers sell on launch well in contributed other XXXX done which ARR part, incredible quarter. couple an cross our plus the in at the great everybody, seeing scale. we've of capability. the have sell a significant Brian, channel think key just lot selling back, the that international global as and second platform's but capabilities seeing strength, Plus, Now, tenant the motion. expansion which And last really what uprising interest multi growth that KCM And to is I the now cross job, we cross the of finally, ARR unpacking cross really not thing, just to platform, with in years got really expansion, really The as of you're RC, And Compliance we

is last Now, seasonality. of the your part question

seasonality largely Now, the early think SMB way I an is about on in KnowBeX's shop. history, were we

with the level KnowBeX, there two Lately, SMB with we you So, atypical year-and-a-half, we companies largely or was expect face, after very got seasonality don't the ARR, opportunity, enterprise got now, right at they're were mix see overall greenfield strong that us. last now evenly little and have to now, but motion see a the and do given given we more that which less ahead will business, in in that's don't right but in going do large believe a to some especially SMB. growth have of enterprise, any sales balanced software seasonality seasonality seat years, today, of between sitting really But we them. robust

Brian Essex

and us rates, you sell/upsell, of I improvement large of what on touch mix your net there. might and to Maybe can an rates understanding of impacting the churn increase as improve give maybe the trying get you there? understanding and don't that or net retention sell percentage but be foreseeing of cross is it, the rate just cross how you're could retention I understand consistent your if disclose an upsell enterprise you improvement just and regularly

Krish Venkataraman

the mentioned, think two The of to important attention. every one the any is, retention course, – retention. don't of dollar on is net is I ingredients the But second cross two of ability part, growth/logo there's dollar sell. And dollar you key most as comment component net components quarter. we your Right?

Now, let's the first to talk part.

in case Now, reached that a world have in levels KnowBeX. number SMB and of have, class we the highest mix growth/logo our seen we given is the retention, which enterprise

that on progress side. excellent So

The second just is motion sales motion always land cross our part the because, is everybody, of to it a large. sell remind from perspective to KMSAT

employees we So, the upfront. any client of XXX% get at

dollar one of sell And drivers global an cross the net cross as you now, XX% see customers in So, after have got has execution. capabilities. your but quarter, Right quarter been is of growing attention. nothing the sell that our amazing trend, of case, it key sales XX,XXX

are you I of two ingredients, seeing that in of attention net given direction. are said, a dollar momentum. a these is And as that, both positive So them component trending

Operator

next line of comes David from question Canaccord. Your with the Hynes

David Hynes

result. as at land? Congrats in of and you seeing I to attach And of what about ask on PhishER the strong terms you're initial touch part maybe in want trends ASPs. that, could on

Stu Sjouwerman

one That for question sales. Lars. I'm this going is a to to give straight

Lars Letonoff

sales gains and out. a our increasing lot team speak attachment with that. drive lot rates, And on a but a we've can drive attachment specific numbers. can't been talk product our I rate since Krish rates. success the specific about had lot increase of And on has attachment the ever each month for little we a incentive of more to those of we Maybe put initially

Krish Venkataraman

in of the terms add rates. color more to just think some attachment I

motion motion. as think I well the across ARR both upliftment as sell attachment the rates of cross Now, on

talking ranges accounts whether between, seeing, at enterprise, size, rates the PhishER buy we're of say, seats look you actually the attachment if very the we SMB enterprise plus, that and is of compare you Now, given anywhere than customers and course, depending And together. you're and seeing we what both KMSAT when are strong PhishER are very, ARR XX% on size the actually larger much about. and or SMB

trending very, and cross sell given been motion, So, also has and growing, have very been think the attachment attachment overall, rates the rate I up. strong the encouraging ARR and

David Hynes

is go-to-market Or to As then the will to you be the always an an as think model, compliance? there work cross – with or to of is sell to compliance effort lead there about of security and standalone be effort playbook vis-à-vis going well? compliance kind sell

Stu Sjouwerman

grab me that one. Let

would and you For just this it's that separate start and a have save check say, go we doing marketing that in campaign, we go-to-market huge separate is probably management/HR existing will, to testing as and because are drive can expensive. to back customers we Ultimately, mine, as also efficient if and compliance we customer drag go and base vendor this specifically the existing your the twice a the simply money moment, strategy. leads some through out as most to initial this since A

For enough the the we existing busy. work keep customer us moment, base have in to

Operator

Fodderwala comes Hamza Your next question line from Morgan Stanley. with of the

Hamza Fodderwala

of we're coming exactly, would – that year Stu. down maybe to shutdown? I'm have growth, weakness for spending off you recent recent you the that just more a particularly I from some perhaps of First this but these question coming a say maybe acceleration the or environment modest to kind due seen last more of break in stronger of curious, in ARR it's what know is might from hard of some acceleration, middle the COVID of cyberattacks seeing the to natural the extent

Stu Sjouwerman

in. Generally speaking, emails, aware the really XX% of as first grab to what successful vector – bad the scaled these the fact by get phishing we're of more of and than looking humans very caused is market sophisticated, that are highly them phishing. simply attack actors one their try That's and to essentially at becoming is send days

employees for defense, currently a absolutely money line that organizations their airplay being Colonial been enormous start the time guys, looking And last toes need Pipeline is and us like there. things with understand it's top of for just it, and which mind, here is have at So, is giving security on too. we're strong – ransomware, that media the then for is significant to tailwind and they bad what of

Hamza Fodderwala

your mentioned you My your a Krish, over that enterprise. base XX% follow-up of ARR. of And is little then customer Krish. XX% accounts now for for

in about do over If can can over a you you potential the the in cohorts, this has $XX,XXX? per that the math, And ARR $XX,XXX large terms ARR go? per You or past of customer times $XX,XXX that's Kind there? where really the couple grown what's this of little of among four to to enterprise go think do think years? $XX,XXX How five about overall. that customer

Krish Venkataraman

XXXX is customers. from, question. the the our would be are story, would small say, to size. parts I our story trying started migrate understand not to, We look to we of moving that, enterprise to it two a there's enterprise to mid-size only. really if over One, the last you at helpful think story towards I up two enterprise initially the course, And years, mega SMB QX year-and-a-half,

been of So, and and but plus given of excess we enterprise not mega-sized trend side, customers international been trend the have, a – enterprise two positive. the And you trend has is as has enterprise has enterprise the been US. the the mix now logos in where between the that XXXX perspective, because reasons. first first it's were One, enterprise we moving towards are SMB said, the a positive customers. the I also the more end motion the of than in of only upper said, trend course, as of addition the smaller than growing From customers, average also we the already

the the year-and-a-half. cross midsize and of products we ARR for internationally, been upside domestically your also mega-size customers year, as enterprise. ARR course, not every And that a last The you're sell the more enterprise Hamza, that, but that for sell we're has of base. adds overall the that question lot early to to growing still average only get But quarter do an or three motion motion, cross average enterprise space. in second to in ability definitely seeing but part we on now motion, is, see additional additional enterprise And

Operator

Your Shaul question from comes Cowen. from next Eyal

Shaul Eyal

of results. first. start wondering in Europe, Amazon you if any for I there's those quick are really set seeing compliance channel, on GDPR regulatory from or with large light Stu front. related of related questions. benefits flow the to or through Maybe In was Two fine recent hearing strong the Congrats Stu,

Stu Sjouwerman

necessarily the Not channel. directly from

component the it, And requirement, you need we is view come track visibility. and organizations internationally, we And employees to actually on focus if with simple on forced remember at then, the bit this privacy, of point XXX% Europe However, to it and a be the KCM check day gives compliance report data will in literally box compliance more their are training viewing operations. a instead that, product, the that GRC to begin to in of as do to the channel. with as especially that day with for you a time, where with in GDPR,

Shaul Eyal

My yourself, or has Proofpoint, KnowBeX Lars last opportunity they reported that, the noise lately? seeing are week, even or of is follow-up I taken is question maybe Krish question of jump-off you wondering if was any guess, change controls

Stu Sjouwerman

for question Krish, This correct? was a

Shaul Eyal

or or be yourself, could It even Yeah. Stu. Krish Lars

Stu Sjouwerman

just can comment. I related. with It's Proofpoint a general start

the KnowBeX are the are We're the multi=lingual. of moving international, investing in to. currently still is cutting. generally on where We as platform, opposite [ph] cost spectrum on Proofpoint's PE focused heavily

more Proofpoint we So, I exactly and on little see and then, can Lars see where how now today. think expand but a them we

Lars Letonoff

on speak can't I'll this really specific competitor, way. any but answer I

First, SMB. It's mostly competition we rarely in see greenfield.

lose bake We we're hands in in that On side, type involved a in the we to off case, enterprise those when business competitors. win scenario, rarely new down.

in other mentioned existing customers. before, after our The part go-to-market I actively enterprise, our as of is going we're that competitors'

when that we'll also we're the the the house. we're a sometimes, scramble And only do we're not bundling keep a where cases, them losing. those product, going as a So, in of more go-to-market, And But lose our occasionally business kind as after but we business, opportunity. we'll lot winning competition in to just that's the with than view those we competition, view competition of see sale.

Operator

Baird. from the with Ruykhaver Jonathan comes of question line Next

Jonathan Ruykhaver

monetizable. Obviously, talk directly nice is out I'm like PhishFlip emphasis new just I question. SKUs? products placing have strong at a about the maybe not as the improvement you on wondering look you product something development, versus performance. on product Congrats if improving but to When a could PhishER, building you're existing

So, look of just and that trade curious dynamic you off? kind that at how

Stu Sjouwerman

Absolutely.

with it. it into up a have And hey, features if. That the be We would they us existing on PhishFlip feedback customers to see. our really great insight example base strong like is customer gives if coming with, of would that a loop will, you great stream, great data

our have also We giving a own at competitive product fantastic platform on our team a that very focused is customers price. super

know who phishing template So, clicks, everyone can for sees an into for in is, email exactly come few people what with email PhishFlip they a particular else. a turn that a malicious and administrator malicious don't

handy you for So, fallen would particular It's can very and who super see have immediately popular this feature. attack.

Jonathan Ruykhaver

be is curious AI roadmap a differentiating. in any recently. somewhat update And follow-up. an to that But some along product could intelligence provide have introduced on color It maybe the artificial the lines. future. I'm core you that I hear KMSAT how you leverages same there. you capabilities then, product interesting It'd into the see

Stu Sjouwerman

Absolutely.

suggested and things training their we For on the will enabled. think that, so can AI also learning last we you present features, they employees, security five you'll for Apart the users. to the have what focused now more patents modules focused we years, roll like, we've training you platform been Netflix, see see from machine very that similar driven are them and administrator, out to of the lot XX like suggested to making related modules on it more a And AI awareness. to on AI-driven,

and that more investing platform particular direction, are provide very we AI-enabled in So, heavily will in core itself. and functionality the more

Operator

from line Citi. Radke Next comes with question of the Tyler

Jonathan Ruykhaver

you of last headcount that strength couple in the seen the of your particularly in understand seen we the plans well kind you've the kind you've quarters business? us on growth cross in and the business channel? Just in terms based strength strength where given seen? the more year, given at just quota sell increased that are you're curious, carrying in strength reps? this as the leaning Are the making, as investments into of of you've that the Have was you I help accelerated upsell, those kind

Stu Sjouwerman

increasing the stab And In in similar outreach can give I'm outreach, where detail. are salesforce different our rule definitely so KnowBeX, as and we our exactly are we But how Lars? that more more in opportunity to the quick going especially of a some and half Lars groups. hiring recruiting for international. employees take give more our expand has then area. We're sales. the I'll even Lars on recruiters, detail to much we have

Lars Letonoff

international really much in And along, markets coming Because, acceleration our then, those. in the introduction been grow as adjacencies pretty that say, consistent you're more Plus, with sell far easily just of efficient just to us well CSMs can as or some I very going base. just Plus, see Compliance really Compliance really flipping up ARR. that new that into turning the headcount matches we more growth that on add a like it, is sell a headcount instance, another our lot see delivering a and with on console. lot plan as you're we are to need switch to skew a We've the the growth going don't delivering then, the would as for headcount. And to then of cross a existing on sale. as to product. the It's the CMP add And it

So, customer we're additional success that. to not going deliver need managers to

Operator

UBS. of from Boyd the Your Roger comes next line with question

Roger Boyd

upside there. results. was through Congrats on on on free if takes and cash can you I puts the wondering flow, the the talk

part maybe maybe year differently office talk as PPE if relates space think the you're about rest for wondering again. plan a of remote you and I spending anything it late long-term. thinking of – if work and could CapEx came the your I'm in little to about

Krish Venkataraman

color little bit on free add cash a I can flow. our

thing always is basically every strong think think FCF. DNA, that between beginning, to the into the desk growth founded that, the a ingrained understand to since I is CEO. wanted this whether he's balance you maintain Stu one at And or are you I employee's since front are company, and

going So, will forward. that continue

half time, the intensive if at some CapEx anticipation of facilities been FCF, a in we do significant going back HX employees level Now, see of in for FCF, terms hybrid be you actually year. to versus couple create some increase as some But to especially our none the last never out to the is QX. mode But in in really very our if expense this HX any over in of of the imbalance large our PPE come actually a build years. into seasonality of we business, later are right? same have you you to at of in look into CapEx going look seasonality We

Operator

Mr. over for at closing call this turn the I'll time, And CEO, Sjouwerman, back to remarks.

Stu Sjouwerman

forward to year. the you appreciate in KnowBeX. much of your Thank an for very attending. exciting We back interest half look We

Operator

concludes you. today's Thank That conference call.

now disconnect. may You

KnowBe4 (KNBE) 2 Aug 212021 Q2 Earnings call transcript