KNBE - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the KnowBe4 Third Quarter 2021 Results Conference Call. [Operator Instructions] Now, it is my pleasure to turn the call to Ken Talanian, KnowBe4, Vice President of Investor Reporting.

Ken Talanian

As a reminder, our commentary today will include non-GAAP financial measures. Information regarding our non-GAAP financial results, the limitations and reconciliations of our GAAP and non-GAAP results can be found in our earnings release, which was furnished with our Form 8-K today with the SEC, may also be found in the supplemental financial information available on our Investor Relations website at investors.knowbe4.com.

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

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

Stu Sjouwerman

Thank We you, results today. with you a over with had we last annual for our We're morning this joining performance, building on record revenue quarter Ken, us and year-over-year growth. thank you quarter's XX% share guidance. excited recurring our to strong all exceeded

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

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

the cyberattacks. leaves escalating. According of problem their is equation element. proves solely software against involved helping report, human that breaches our line security their human rely is the sizes Verizon on growth we infrastructure. employees last It is relative vulnerable, success customers not away. XX% into in However, which the Data Breach This cannot we newest this a of organizations' defense of transform XXXX are all Investigations going why dedicated cyber-attacks to element a successful Ignoring to and exponential

well. the to response solar The social targeting human is Wall regulatory Street by layer as attacks. Journal with last to threat that the environment exploiting fact, group chain actively reported Just attack landscape growing in continues week, behind the the the evolve winds engineering global supply in

our help Director We ransomware by activities next contend these new summarizing key quarter. the growth. actions the start for day and U.S. fact, a provide have every that In opportunity, the attacks believe the and results five market stated catalyst NSA with years. validate will business recently at will single a to for I for

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

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

market remain established to focused and in innovate have of We meet needs centric space a the leading cybersecurity on human continuing position customers. to our the

market exciting and finds Our includes vision roadmap, both features KnowBeX's and awareness new for products. the this security product new

is commitment another Our of to the our vision acquisition yet recently example SecurityAdvisor of of our market. announced

next building create the to reaching into new million traction this give product the upsell or should We and this believe can few with in product We capabilities next over automation real the through sales earn-out cybersecurity ARR the SecurityAdvisor layers spent from billion TAM XXXX. and this $X by How of based payment making and of the we teams to security change given we The integrating SecurityAdvisor extending the HDR. leading them other acquisition new take connect so works? pull are a the Response Detection their anticipate time with the interface new platform, the plan KnowBeX XX to is on solid product in in ecosystem. we their called are KnowBeX human With this, and other SKU, transform bet category. cross-sell big associated and we alerts this real into end time into us layers creating future years. category maximum of alerts, With opportunity cybersecurity integration As an these in new then believe, opportunities incredible the behavior. action. estimated a we The we Human core be months platform acquisition and analyze with will to several cloud

development strong well. product remain organic as Our

X,XXX Password continuously and an used based your on IQ another passwords. the for of users be such detection excess interest During organizes we which in a around had automatic weak allows this to any risk. employee manager. product we is all any monitors registrations, expect for this organization or PasswordIQ. The detected Conference, all announced is passwords. is risk To with exciting This issues issues, customers data easy-to-read EMEA on as beta of our that product not the sizes to release KBX-CON industries. dashboard mitigate password to be hygiene It inaugural of of and password code of named password clear, training a breached product

As product capabilities. to prior our further we with cross-sell this product expand launches, our expect

provide will our an this for update products We expectations our QX on earnings call. during

opportunity. of be to hygiene, an Given the welcome threat actors, state password believe who product will a advantage take backdrop to this cross-sell bad sponsored continue we our customers and of additional defenses addition

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

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

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

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

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

awareness be wins to The that show to our continue our of our greenfield, value support that of the platform terms but are also is of security displacements. and our new number from competition. customers, well In customer stands above a wins We we resonating out continue competitive believe greenfield of saw further business, the and competitive our most proof platform with competition. wins rank

We wins. several XX,XXX you a consumer store a with closed transportation win was see global services closed based electronics And to our success champion. a XX,XXX having great a internal an to deal Also This And with a bank XX,XXX a mega had deal seat Europe. continue as seat existing an we trial which deal examples big won with with wins, multinational of U.S. give company. example segment, had deal in Europe, global of we some in XX,XXX media Enterprise we enterprise closed we a retailer, seat customer. We large an well as a a chain. by seat in

two company, Our our multinational deal our first This oil wins closed value seat who XX,XXX and one arrival seat key a the deal contact the a with We the with East, we and the XX,XXX made company. us, of deal the job. competitors. off closed customer, national believe in we competitive we seat In these use multinational against company Middle electronics bake from our our brings, away new back In at XX,XXX she we with RFP a a call, discount previous embrace the not also churned of a X,XXX Japan, events. In is company. the and to platform. closed brought to continue only a save the in chemical platform competitor coming were the customers risk in our considerable that but we demonstrates at IT us to triaging the others upon department Europe, reduction security saw hours,

largest the XX,XXX for one the for us. where organization Outside in Given skilled the multiple division the our IT seats off. product in roadmap. a current paid of segment to public world vertical saving commercial cyber XXX,XXX deal, building has our purchased city, space, purchased the focus U.S., seats. workers, our time into in same strategy In platform a displaced remains Government cities the healthcare vendors. continues critical features be strong a large In also This a we shortage of the the of of

also then a a government seat where our they in federal favored deal saw XX,XXX displacement, automation competitive We to agency capabilities.

greenfield as across XX,XXX system seat globe. a the seats deal purchased the a in the University. with an U.S. see sector XX,XXX Public We In education continue closed traction University We to in well. opportunity, Australian

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

work rated those the awareness, Readers' in EMEA. and our diversity talent workplaces we And Millennials shows Insider the Fortune's this few provider believe and ever awareness the to on bringing financial and we're look Award would And come. like I even trends. And as to update recently, Work quality to inclusion discuss programs. focused you that, received doing KnowBeX which great in winner a best category to as were forward Mogul's the of recently the XXX Places clearly We scenes. And included as gone are list, in Germany. the security security not the with unnoticed. our giving door, quarters the Krish from has position, and We Magazine a top an more Choice examples Best for diverse as was in selected I top behind are in in security the with we high just

Krish Venkataraman

to Stu, everyone. you, and good Thank morning

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

QX heard to growth with and ARR existing of of enterprise have strong by business additions QX this year. on XX% accelerating across over quarter you to logo cross-sell and quarter year-over-year This growth growth. in of continued XX% driven strong the and to of continue heels another performance new versus SMB, was As Stu, year global for from and is expansion second in QX the logos. this we see QX the first organically

all channel industry. with to to to to model partners platform addressed served customers X,XXXs employees customers from and hybrid Our continues organizations pillar sales model. inside remind ability by sizes of want scale efficiently geographies than seats by I with XXX and our a all customers key XXXs well of our of to of that to the everyone sizes, across perform is all

expansion of in and the We on saw is we have expansion.. and expansion, pillars QX four continued a of in channel it We customers, logo QX, growth throughout success QX and existing international of these continuation each cross-selling to experienced XXXX. areas new to growth, of focus

the over about SMB as Our which organizations growth first we logo the of significant we in with than XX% logos define our is in few space, X,XXX are define which There, with and employees we are space, have X,XXX employees. as seen greater less past years. growth organizations the new XX% pillar of Today expansion. enterprise than

very are given execution XXXX the year, We year the what already pleased customer built for that for the we cohort has this XXXX. with sales surpassed full

is only our platform. continues some traction our enterprise market penetrating the with organizations not a world trend years. last move strategic place to the largest enterprise market on the ability up market model, Our of now of couple the importance current but over of in the proof go-to This our of the

XXX very of in have saw We that have in with ARR by and the In to robust a venue. make enterprise XXXX. the number we evident examples, balanced customers. QX, Fortune and the was between SMB U.S. companies, are global you made enterprise progress into growth inroads This strong global is continuing we selling shared into

performed strong balanced particularly towards To to saw SMB SMB this growth drive AR segments, and evenly everyone, we between remind an always enterprise. mix across Although, trying well are all we quarter.

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

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

customers customers QX, we XX,XXX have about our give perspective QX, about within customers of customers among had products. X% about to of purchase. about products, over XXXX, As To see products. strong or first customers and continue Today, multiple X,XXX now we purchasing some approximately have with XX,XXX XX% multiple their our multiple of or customers interest at X,XXX of multiple in XX% to subscribed new products you

have see, can here. XXX% a you CAGR, made tremendous with we As progress

seeing to SMB, Our of which of our capability. the the base is value to quick due platform of value large of customers are multiple global part see purchasing products, our enterprise in success many and

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

enterprise As with approximately a ARR SMB KMSAT represent sale. increase on and in XX% an PhishER standalone example, XX% year-to-date for a

Our with combination GRC Plus. multi-product strategy PhishER, KCM the of addition now is the and seeing considerable of with traction Compliance

closed have and products, We Compliance are record seen deals KCM few logo nearly a triple customers also without digit Year-over-year, products. even triple PhishER, Plus that a are combined have a These of GRC digit with revenue having growth. and to seeing all products. levels three four and bundle

motion AR cross-sell expand retention. continues help increase to Our but not base, only also

that innovative products KMSAT both our as result, found have from more a who We The remain customers get add a customers, customer. and value. to innovate bring stickier platform. platform, early We much example bought to to and and PhishER our committed ultimately in launch and complementary shareholder June, products ability is another to Plus human our layer our the of of driving Compliance yet value on

very its So it's we to months. indication seen for its has similar first with four saw the in our in Plus positive the motion. Compliance initial of post PhishER results Plus was the a the The in launch what launch. we trend PhishER early This total power in four cross-sell still launch, Compliance saw first from to to similar ARR months

We As we reflects six enhancing recognition capability. of expect trended from customers, this existing large that KnowBeX the result have to to new our and deals believe the next products as half have platform are organization, as clarity enterprise with business, Stu to a third customers as mentioned we well domestic signing sell by and received year, of research have party particularly international our customers our public. going have in of noticing towards to the is some cross-sell multi-year us. What we second further

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

SMB year-over-year that to breaking we Domestically, record quarter. grew yet we triple markets, XX% growth, momentum see to do enterprise digits versus another revenue go-to-market plus started Our strong we the about continue the year-over-year with in first close more revenue international see international with U.S. motion to motion

On and talent the investments to content focus international in marketing, key on sales, support. our hiring expansion, we customer continue

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

add a team pleased based India We in also will onboarded. when that team are the SecurityAdvisor we strong R&D is

is our fourth growth of pillar Lastly, channel expansion.

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

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

witnessed some have and year. of you details last quarter. worsen Now the over Both problem engineering to give new the customers on social existing the ongoing

and quarter, We security capabilities continue support reached the our and our to recurring XXX year-on-year. with revenue compliance. annual platform which third reach, customers includes integrating million, around awareness, XX% automation total security In orchestration up

Our expansion and strong for logos, as retention. existing cross-sell quarter was logo AR by new driven strong continued as to another of additions growth well

each remind to quarters growth seen in we our year. this Just you, XX% have in over ARR of

mentioned, This to global phenomenal Logo on all we total cross-sell QX part of levels have we the have added the a This of very which more QX, rate months than and Gross and highest multi-product as concerning is the customers XXXX. seen. grew mix levels demonstrated has the our SMB quarter sales in our I first a percentage believe well our very our this Our was from to effect retention marketing through expectations. teams and enterprise the been the Hence, That's in and comparable which in XX% year. in strong been revenue case our ever. has retention reached our million, XX year. the on our GAAP value at are quarter is the drive of We efforts proposition capabilities Furthermore, dollar over our highest levels platform. increased And in now we success out to up XXXX just and beat levels. of by customer churn was for one a this historical achievement even platform. the of positive every XXXX. and year total cross-sell count increased QX, retention, reaching strong and In XX,XXX, retention of nine lower QX, of XX,XXX ahead year-over-year, due XX% grew in customer count in increase year. about have last

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

still base. of While our the we in is investing in client and to are global XX to adding strategy of brands early have producing our heads our approximately XXXX, international international QX KnowBeX marquee markets Since we result, we expansion, team. are these added new

two opened center our also clients sales team. the help we long-term Over Netherlands in We've completed offices Dubai. Norway drive past and service years, for our the in Australia, shared building Japan, and have our to support

our With resources in product SecurityAdvisor, are another we R&D execute India. Investments have of the place investment expansion. of on our key adding We to and will to to be ensuring international excellence addition committed one a remain center strategy. continue this right in the we part in of

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

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

for year. million business, continue about for to mid was we versus expense Total the last same quarter about long-term. in XX% XX.X As margins low expect non-GAAP our the the operating international to million XX.X we quarter scale gross non-GAAP

the quarter. expense the headcount in majority vast We increase invest of continue business, across the to which drove the this

the working. to and to market expect developed both due continue to seen in U.S. remote see condition dynamic the inflation We that is wage current and to labor due have

world, of we we As to scale will as invest labor lower diversify condition. some the revenue as building percentage were of of sales and Non-GAAP tight excellence the centers market assume expenses, year-over-year, we continue marketing a around we globally by these business.

continue to still deploy we this We are support market. expansion, sales expect in to growth to early in core invest stages resources while and international our market, of capacity additional in we

in an KnowBeX-CON Conference in EMEA As we example, our hosted first September.

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

across investing HR foundation capabilities way audit finance, KnowBeX business. an are to is legal, and We we This of internal building run teams. ensure the efficient first

Second, debt costs but have absolute stable, in a remained percentage increased as revenue, term. dollar of

expand to to we talent invest the our continue continue product globe. we As will key technical breadth, in across

third Our of net technology with launch are developing in operating SKU launch Non-GAAP million. operating future million the income was X a of new roadmap. in about all was approximately margin investment above Quarterly was income Plus upcoming examples evolving Compliance quarter of SecurityAdvisor and X.X%. non-GAAP product X.X our and PasswordIQ, non-GAAP

Our integrated excludes of compensation amortization intangibles costs. stock related acquisitions expense, income acquired and non-GAAP net and

balance have our with sheet was million, cash. September and and on for go-to-market. of cash a and capital of cash, well we sheet quarter a collection, flow of see, top balance results, an XX balance our line can high efficiency driven approximately SaaS strong strong ahead and maintaining as We free model, by a resilient profitability. and cash Free cash From supporting approximately cash performance and representing Turning efficient generating flow of cash items. sales expanding growth cash as XXX you the plan and use focus to finished million, continued of equivalent level

new with customer our we capabilities segments We our to suitable invest and momentum pillars fourth cybersecurity. to products market across is maintaining this inorganically, momentum. and and guidance. quarter key enter international profitable growth. as seen This and on our in the continuing strong and resource four being business of all new in both all category organically are And lead growth, pool, We expand in while

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

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

flow XX% be full cash free to for expect to than margins year. greater continue We the

lower flow, reminder, companywide typically which quarter-to-quarter. Fourth cash to driven. there levels our annual the pay As out quarter. generation you cash We free vary in of can quarter is flow a to performance cause bonus seasonality free results during tends see

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

on layer and the the forward QX, that, we to continued and line we questions. the in business, remain to laser will around We we market As we innovation dedicated leadership the momentum see confident in XXXX look are focused HDR. human we in and will most finish that our driving endpoint growth security, strong. open With important maintaining to

Operator

[Operator Instructions] with Essex Your first question Goldman comes from Sachs. Brian

Brian Essex

Yes, Question on maybe Krish. ARR.

It expand market, existing. of in looks that as ARR new of lot from is logos, quarter. coming incremental increased both penetration progress opposed kind a new you up great to internationally as like as As the well there expand

regard So products as existing platform, within to new maybe with existing potential And is do in your bit you you what base? your think some net your could increasing customers a functionality the you is retention about And penetration expanding the into. on that your of rate rates. feature little from for reception expand how improvement talk you're installed

Krish Venkataraman

different want ways. talk about two actually I So AR in to

ARR. customers, growth existing by same with seen added associated new mentioned. which rates attachment are of being driven and multiple existing as have cross-sell seeing AR AR time we logo we Firstly, especially drives we But the to high products, as the with logos, seats is grow growth our new also addition, in significantly additional course, you our logo base at also

existing growth an So strong we new ARR are well as perspective. customers, seeing across both as from

this seeing, we the terms same look but and at, you of in especially QX year, continuing time, this of if Now color some this what retention, I are year provide don't comment at QX of we QX of in dollar year. into on can net

Given from we a KMSAT sales with sale. always go motion, first our

both have a a highest one from year. is of We and substantial XX.X% as percentage, extremely increase retention seen the which rate seen of a have has right, base is you reached a we the ever over cross-sell strong see which logo now just perspective,

two put together, we're into they and points you and seeing if very So to we QX. retention, key are - from in dollar the strong growing seeing seeing those momentum what growth are QX QX net is

have In mentioned this growth seen in all including fact, every - metrics, year well in net quarter both growth, we terms varieties as of all as both our retention our dollar. of

Brian Essex

I if Maybe follow-up. just could

remarks, In are towards penetration, does - of enterprise where some you and mix international SMB, internationally. particularly Europe terms tend the guess you finding as expand how to noted nice in prepared know to what I to skewed, you I be that large more in is wins traction, your tend initial the seeing penetration be. or most but you're

Lars Letonoff

that take I'll Lars. is This Brian.

We're expanded SMB, that into really in initially initially that in international with started U.S., It's little doing the in we markets. bit finding up and we're we selling the market. enterprise. starting are then, And as we're SMB. here SMB enterprise but So it's large a strong moved and - different

Operator

Sandler. comes Rob next question Piper with Your from Owens

Rob Owens

as you mentioned those strength good in expand Thanks. broader wins Thanks the you in my wonder multiple and you SLED, taking for on could if and public guys morning. sector seeing the question, opportunity are for both and theaters? I Fed

Stu Sjouwerman

great Good question Rob. Yes. for morning, Lars. That's a

Lars Letonoff

kind things we're is, penetrating one-on-one - of we seeing the one We're federal basis of seeing those on especially Yes. government. a were markets

particular state names, consolidation or departments. university You which really at that for state after the hitting up or And individual where entire organization growing entire where and now, entire signing individual have seeing to go entire the into seeing organizations different system in we're we with going entire that's the that in, are whole is the three this actually the we the we then, the from our systems, of those, coming And fast, at states deals moving and comes the once top initially is or at - letter in We're organization. local now university the offices. when they're we're them all now competitors, this we're wants. competing were and those huge acronym in once What levels goes a the or for and broad. level, we're KnowBeX universities state that for displacing

Operator

with Your question Morgan comes Hamza from next Stanley. Fodderwala

Hamza Fodderwala

morning. Good

Just from one for my Maybe question Krish. end.

where near talked type given or some you're see multiple larger yet? hasn't milestone to cross-sell are traction, I'm quite lot point, starting a been get you customer figure of Just seven to that about the crossed products, the starting momentum curious, where enterprise the of the you deals is ARR a that

Krish Venkataraman

that I pretty definitely doing they you if Hamza, deals becoming think look at are large. the are we

the mid-size the enterprise. In we fact, we I'll couple penetrating and this, and back on also were seeing size smaller add relatively say, of years were can actually, Lars some more color

the penetrate at a Now the deals the pace. XXXX more in, a in and noticing quarter, Global strong large literally the we're also is, to we enterprise really, are started in at U.S., thing are clip importantly, really XXX Fortune seeing segment. every coming one relatively we And decent

they they we pretty much So seeing really - every quarter. deals, Lars, on are yes, other any and have large that? happening additional are color

Lars Letonoff

Yes.

coming I think seeing again a into of Rob. all the government that process, Hamza, one previously we're through and process. again, day. sales a have little more interest at each business with to we of take companies. global us those But lot different I We're answered units strength, on deals multiple lot ton of the the a part of sale. a large consolidation question seeing right move big of And longer Again, in the now also with that these the sector, pipeline

Stu Sjouwerman

in Yes. available our is a Global been have materials user that XXXX we of platform in languages, us training there, can that other, language in and now interface huge series of their and over like the call add artifact, amount to in content a what significant truly local out I global, type XX one companies the things we of roll the gets have and including we investing can traction all that thing users world and organizations. global making

Operator

next from Canaccord. Hynes question with Your comes DJ

David Hynes

Congrats on the strong results.

So significantly. about if the right, of solutions, it's expanded I think portfolio pretty

we're going be look the bundles, SKUs, at idea have have you SKUs, selling some year. when going hate of to can a Krish, so bunch here think word. you to a self-serve in add that six motion But I complexity I the to point I'm know process. buy-in they next avoid of

client to expect would love that about So you are products thoughts get over takes - we time some some guys how packaging get thinking friction behavior, just the Should of multi-product this? there? out

Krish Venkataraman

So I'll a add Stu think Lars color. little first will actually I the either bit take and part, and

are the is a shared word think You it's maybe or but I right. and do equally even by absolutely higher. that I Lars Stu bundle, hate sentiment

us for incremental on always ARR. which been value building in drive has the turns platform, helps focus the additional So

Now one concept philosophy point, help been more I we Stu's that and Lars of of terms give drive pricing actually towards and salespeople in you things non-bundling can those how additional train think how color ARR. our Stu and has has evolved, -

Stu Sjouwerman

Yes.

And well or compromise a suite the much more prefer as to at the other strong a add problem can we a those manage have there. customer, integrated present that or we Lars combination or at we something provide we of of you or point feel that to in way an they than way, always a like is, to IT products the products, because environment. we points in out and are maximum better product we have that would that he talk the right one Maybe suite If of and problems are. in look find And bundle what do that professional to to discovery pain are another able where than identify single that some they value. products upsell we time, in -

Lars Letonoff

touch they create no-brainer the mentioned. sales they just They in actually important train know, I'll team pricing lives. all And we Yes. on pricing. our very something Krish can pricing. to their pretty you everything know inch fully the much, again, an value do product they're need is of We and to that our justify about the

what is the some for together. we're feels that to the where than KMSAT. need customer lot budget And the like a especially we're not for budget deal discounting put is they seeing bundling the there CMP, CMP different often then there, room or completely So a with cases, in finding of in budget, order

against not the budget. each having other products two same we're exact for compete So

Operator

next comes Fishbein Joel question from Truist. with Your

Joel Fishbein

quick I to billion just - looks a have I $X actually Krish. and see one SecurityAdvisor revenue start know for you, what you wanted just when that you'll TAM? an to think start penetrate do amazing like to that acquisition.

Stu Sjouwerman

it. take You

Krish Venkataraman

Yes.

So take part. I'll first the

about would product I be think perfect talk person evolution. to Stu the

which think high upfront we we motion, sales the first Now product because is, the our high this helps with would automation lot have velocity is on level a say thing doing how are we sales of I built is case really in and I it our integrating company this focus itself motion. a

platform. into For core the the so next next be part to we going year, integrated are focusing year SecurityAdvisor for KMSAT it's and of that the product, this

ready is in Stu be place. can that, this have more to a a product product think the on But next provide expect as to investment terms of color into second we the acquisition, put I be lot long-term as into well half of shipped. year. we Now that And

time really spend to to integration in So and we're our before product the get we market. investing going

Stu Sjouwerman

Yes.

This technology detection take amplify really and me brand as just that Let transaction. going a time. are we human position is M&A new and our a bit. to strategic we response is This

and QX. pretty even until said expect We year much purpose, the it next be we have revenue don't on half might second

that and ASPs, we team why XX for this based is the is of start. huge do an going platform. KMSAT increased price is also the a potential point somewhat gave earn-out So the - mill to And existing be simply SecurityAdvisor on end see similar to We conservative it's XXXX. because upsell in

Operator

next Your from Cikos comes with question Needham and Mike Company.

Mike Cikos

the here. for questions Thanks taking

regarding strong we drivers were versus Can help core bringing quarter? just as details to guys with to out in just lot a you light us you I to the And as results versus you upside Just think out estimates. put like you the months guess all are the upside the the factor revenues trying consensus where three about to the ago there we QX have guidance, far different, out starting were operations QX I'm there. when

Stu Sjouwerman

one give could Any take to kick I the think be But off. it of us would best Krish, that. a

Krish Venkataraman

Yes.

I think, Mike, you are perfectly right.

the color possible. to growth, capability them, the the look multi-product terms at that's back think of new capabilities considerable vision them. four We a and SKUs, adding capabilities additional we includes if on is absolutely key firing this all a provide of strategic progress important to look add in have this in suite human the expansion, around cross-sell, you customers layer. channel Stu of seen cylinder adding overall our those our This we adding a on pillars the and platform, and progress more across further product, - in are strength go that little every in with I to create And of at of additional all the actually can logos that made platform have

Stu Sjouwerman

Yes.

mostly especially at gives is us able provide your If being years being conservative, then days. particular some XX%, you're And I only international, what for or believe years. cross-sell looking to so early that this next you what Mike, still and greenfield we internationally. the term, to a really at Does question is if a look - is it's only see platform we This the degree. answer potential huge X upsell, XX am very

Mike Cikos

bringing the far. customer the this for Coming how for the for timeline remark some - of so It tack does. us broadly? is just It more. feedback Thanks sense the then? could give if gone pilots And on PasswordIQ, I what's does. what prepared back you the there. to more market What the a is testing, then, have And can just around to color one

Stu Sjouwerman

just Krish is This in early announced in our an it beta. Sure. like, We EMEA. KBX-CON

users, We early guess to our because is bit Month. finished Awareness but very what looking too just have things Cybersecurity it a early have we say how are

them. hygiene. was end is everyone the What will the password and fully customer monitor - product focused bad our users training this for So do on

an weak breach. back also and And get penetrated that that users passwords, being moreover by, at looking will we for data of to currently instance, but essentially be are able infected we're risk and immediate So broken have the passwords credentials that high meaning, already been using being sit enterprise to in ransomware. a

upsell. this a expect of we'll testing, more be color the addition a And a product serving customers. good But we're be to the we our So process still able next earnings good little call in in year. and QX you to get

Operator

comes Your Wolfe Research. Joshua with next question from Tilton

Joshua Tilton

questions Thanks results. taking my on the congrats for and

segment maybe you the just this was well quarters? I'm I SMB customer very guys trend did that there enterprise. of how a noticeable quarter. additions pretty in think prior and it's versus the curious, And enterprise the in clear mix change mix does between

Stu Sjouwerman

Why don't you that. take

Krish Venkataraman

Yes.

Lars. color So, hey, I'll and or part, from take the Joshua, acquired additionally if first Stu

on and or capabilities coming international Now on already I are is the definitely time. business are we built very The have you on power now, shows going what markets expansion trend good by are all strong platform, just some a SMB What think the terms of enterprise into which customers. entered, seeing we been our for the that at that are very, enterprise in expansion And brands driver for more mentioned scale extremely this seen. and global encouraged the has platform global capabilities is Stu the we platform strong of the that enterprise started as international are we recently noticing product enterprise of it the market, internationally. the which is of

are private see, of but to especially see level of The in strength for actually third expansion you're of platform is it's questions its which important seeing and understand international, your motion length of available not public, of are course, everybody sales companies have finally, answered. terms it's anything strength you the the of because out financial capabilities. that Lars also it's financial company in see the a terms public if when have don't in what And Stu, to the to in community second terms and is in because become the now guys thing research you that drives else. the enterprise helps be available, thing those you that U.S., in once coming reduction a especially, in you terms information or

Stu Sjouwerman

a add see to to don't more whole No. I that. lot

Krish Venkataraman

Okay.

Stu Sjouwerman

That's it.

Another question -

Joshua Tilton

That was helpful. Yes.

Just the to calculated question wanted today talk differently. you in it, Could retention the maybe SX, pre-pandemic is but give follow-up. you don't guys us little ask as NRR. as level rate? relative rate enough of did I of of possibly you disclose understand the kind where I breadcrumbs revenue to a directionally, to kind net to just a sort that

Krish Venkataraman

Yes.

similar answer maybe So it think a to Brian asked I'll I question upfront.

tends our terms for important it's to for of of people motion, in sales XXX% is, motion KMSAT. understand upfront Now, our getting to seats be core sales the

added thing, maybe KMSAT available of last, seen the terms motion have strong the with base, that growth this and I you you of momentum in the continued years, is in sell. terms products see of our you add honestly one especially for retention. we impressed customer couple multiple the on of And of you layers extremely Now, our is of extremely and of our you which we net ever the other dollar XX.X% can retention, can When to say, the are are one trend logo of best is core cross-product in in platform add the would that terms penetration, in have total now positive see we see in core terms which cross-sell, retention. logo customers

So and than the QX higher net higher QX in and greater is definitely dollar retention is than definitely was than QX. QX QX,

So are strong every we metric key with every momentum quarter, seeing in retention. associated

Operator

with question Your Jonathan next Baird. from comes Ruykhaver

Jonathan Ruykhaver

case? how or challenges is seen new just how this Hey Compliance could is once on I'm you some Yes. curious little that ARR capturing the, point color the if some bit of it's the SAT that progress? sale you've buys the just a about also Plus relative not maybe talk and performance relatively module, And again. guys, you're on and that at maybe strong congrats guess, I the to

Stu Sjouwerman

and take quite half, the Compliance I'll Plus second is well. at performing first stab the grab Lars a half. will

Plus of sense internal monthly have an our on the product beat sales. great to PhishER of actually out And roll We contest the early to Compliance PhishER. beat in initial surprise

quick. relatively up So it's ramping

Plus and that that the is by next stick. about domestic, encouraged still moment very hockey It's are We we expanding literally direction. year which content, at are to Note is the modules XXX Compliance international. U.S.

expansion be and international domestic we we're like next preparing with did So road, will KMSAT the first year. U.S.

is encouraging very we're provide selling color on some to. And this So of first months. Lars exactly who couple can maybe

Lars Letonoff

Yes.

that pretty So guy. sales entered well, to the it's we've SMB first the so Compliance is the which a immediately disruptive very in What we're and simple for pricing, market a seeing involved us, is to with sale. the conversations - we're great sale person door for talking space, Plus, when opens the in

other into because it having becomes to complicated we sell have stakeholders and we're move more that to pull budgets sale upstream, then we the little as other a As well.

into with pricing, and So disruptive people - to just and that Does pull door but that deal. again open tech people quickly the help? the make those the our we're that talking referrals

Jonathan Ruykhaver

a is bit better historically KCM base cross-sell could KCM, help been sales it Yes. see It less that a But Yes. Thank just quick That's here. to for fantastic. how maybe influencing successful if relative correct motion? follow-on, you And little does. and be just may it's PhishER. it Compliance a off Plus I'm wondering me, facilitate you. seems I'm then like -

Stu Sjouwerman

KCM. That's actually feed good lead will team. those SKU a for And strong referral the who internal picking Compliance leads up have into KCM a is system, very a anyone Plus, as would Obviously, observation. Yes. which we additional an be

Operator

from Your Tyler with Instructions] next question Radke [Operator comes Citi.

Tyler Radke

it most? question. to just adds that kind international saw the the my upside, record the I surprised what kind what driver the for about of of was taking just the in biggest Thanks or Maybe wanted ask of you whether channel you you new quarter. was logo unpack

Stu Sjouwerman

for with and team, they program, from see you, by that annuity, one is know, them actually us as they starting much driving channel they're us, I partner just as ramp question once just our But start month. the additional that strong selling, as ramping up. sales where board. seeing very of products very think they it an effort channel them business But every really month. partner, drivers that's get less sales to - of of you a is we which have across deals will tell trained, our get the And build channel zero you our the it's what a that direct I up, team, great with well. bringing every adding Tyler, they that And creates way, well some continuing is that

Tyler Radke

labor bit And shortages facing hiring, aren't that follow-up are help a talked know how about geos ones and deliver maybe in And a the managing bit for how you guess, thinking through that of upside you us some more guys you're front? detail, in. mean, trends the standpoint some terms the little to that in of only understand continuing I But how of of little from through Krish. I the you're investing on I the and cost margin just you pressures.

Krish Venkataraman

Yes.

geographical a think it's now in built important to strong understand we that I have multiple base places. So

heard You SecurityAdvisor locations. especially centers of are now of excellence multiple we the a And about R&D footprint India, with now team, addition excellence we've of that now built, the in in for me team. got our we now centers speak building

our strength the have by our we international diversifying given think sense, a emphasis of on actually the growth hiring. to workforce lot of our and of and business, that I makes started nearly international put

comp very like very, U.S. a talent, using multi-language we teams, price the that has terms strong company in especially support to perspective and great shared increases some G&A a and cushion in in Amsterdam is we that because help service built every our from are the of Now strength the center facing. basis Amsterdam, of outside just capabilities, got attraction

to we you, feel or same core been we running those of from actually have I wage this are that's us pressures. software the which great up the think helps and the And a I at are strategy. centers But time, some really is, thing are inflation perspective. margin So in at industry year, can and coming our steam, going any full of into tell all

Operator

comes Roger question next with Boyd from Your UBS.

Roger Boyd

of front, distracted security on training, good the as how vendors up maybe, with has taking competitive out my congrats rates? late Thanks question, gateway and seeing of I'm public what the you're if win see brownfield bundle in for results. on email Wondering traction wondering shown awareness that that maybe the and you dynamic opportunities. more some they did competitive

Krish Venkataraman

Yes.

we - very anyone. the much the we So coming with really the SMB don't in competition compete without greenfields market, That's into much still first deals.

majority bundling customers. other a And struggling - that's is, to us, where vendors, almost business time. where where bundling If and will case, keep the seeing pretty of kind enterprise deals. new different there's looking a you that us enterprise, approach for discounting, those we win typically in bake-off product and our large and strategy from that it's of at Where just case, situation, that kind and out companies actually going that they that much we win the we're last-ditch the be the one coaching multiple coming effort, just half we again of typically those that into competitive our go competitors' against of and customer product, angles, go are every and the they're on into would But side, in actively two really there. the in, stuff

Stu Sjouwerman

advanced as are the your KMSAT literally - in than number because those, Does Roger? on of question, have and any But a platform one Yes. whereas much so is bake-offs that's don't comparisons, practically the there and color just The we done they effort nothing. increase - and all all Gartner the wind in Forrester, we product, in for that like capabilities, me-too especially the answer additional to that really competitor. necessarily spend and up we time, slot them, platform we further

Roger Boyd

for you've about there. talked prior so? Thank the on how both. new showing It growing just that up and security And in you demand How are Maybe awareness customer And year over and does. you, pretty strong, awareness seems that the the or with thinking environment general is about emphasis tailwind quick quarters regulatory much conversations? follow-up. a security next

Stu Sjouwerman

are a look phishing caused and ransomware percentage of at by ransomware engineering. to getting infections really you worried customers, really if social infrastructure whole about their Well, and are new are lockdown large up they very and geared

particular stopping. So is is driver, that strong not which a

the the said NSA expects my that comments have ransomware day. to for earlier, deal in years I next we As five every literally with attacks

that, line a they with is us. do having strong critical that that defense, their organization usually firewall now and has And really any understood last then they human there, so wind and research by up getting of

Operator

At closing this to over call will I remarks. time, there are for questions. further turn no Stu any the

Stu Sjouwerman

much your forward do we speaking Thank with attending. We you appreciate very look in to for KnowBeX, you and interest soon. again,

Operator

you participating. Thank for

You may disconnect at this time.

KnowBe4 (KNBE) 3 Nov 212021 Q3 Earnings call transcript