And what we are seeing now is just the tip of the iceberg. We’re starting to have stability in the overall transition to a completely different usage, able to leverage the unique data that we have to have AI being the foundation for, really, the digital world to make sure that can be prepared and benefit AI in a secure way. And then we decided we are going to monetize this model, but at this point we want to make sure that we have so much to sell to our customer that it will be very easy for them to use it and to gain value.
Matt Hedberg: Thanks, Yaki.
Operator: Our next question comes from the line of Brian Essex with J.P. Morgan. Please proceed with your question.
Brian Essex: Hi, good afternoon. Thank you for taking the question and our thoughts are with you and your families in Israel as well. And just wanted to dig in a little bit towards, maybe for Yaki, what you’re seeing in the pipeline, particularly with regard to previous commentary reflecting elongated sales cycles and the impact of deals in flight as you or as those customers assess moving to SaaS instead of term. Maybe if you can help us understand the impact in the quarter? And then how much visibility into the pipeline, what was growth like and how much confidence that gives you into your ability to execute in the last quarter of the year here?
Yaki Faitelson: You see, they have seen pipeline across the board. And the other thing that we’re starting to see is that organizations understand that data protection is inevitable. It’s actually your first frontier and your last resort. If you don’t protect data, wherever you will be, it will never be protected. And if everything else that you are doing will fail, it’s the only thing that will save you. And I also think that many organizations didn’t attack it heads-on because it was hard to do. And with the robotic value proposition that we are building, they understand that they can do it. And if you look at really enterprise projects, they can gain immediate time to value and ongoing value in a completely automated way.
So, I just think that — I’m spending a lot of time with customers these days, and I definitely see that people understand that they need a sophisticated data security platform, and the only way that they can do it is automation. And we are very well-positioned to take this budget.
Brian Essex: Got it [technical difficulty]
Operator: Our next question comes from the line of Joel Fishbein with Truist. Please proceed with your question.
Joel Fishbein: Thanks for taking my question, and I’m also thoughts and prayers with all of you. I wanted to just follow up on the new SEC reporting rules, and if you are seeing it — your customers starting to ask questions about them? And also, is that there’s a potential driver to your pipeline and new business?
Yaki Faitelson: It’s definitely a potential driver. What position that we see all around is that people understand that they need to protect data. I think that, in the last few years, organizations spend a fortune on security, and a lot of them get not such great return on investment. You have a lot of security on the perimeter. And, at the end of the day, it will be set on most breaches all they are happening from an insider that is a user or someone stole a credential and acting like a user and really inflecting the damage on the data stores. Attacks can come from anywhere on any device, but only going in one direction, and it’s the data that essentially the most valuable assets that most organizations have, and the most vulnerable one. So, and the SEC regulation is another one, it’s just inevitable. You want to have cyber security, you need to protect data. So, this is really where we are. And what we see is definitely every regulation is helping.
Joel Fishbein: Thank you.
Operator: Our next question comes from the line of Roger Boyd with UBS. Please proceed with your question.
Roger Boyd: Great, thanks for taking the question, and congrats on another very strong quarter of SaaS adoption. I don’t think investors should be too surprised to see Varonis outperforming on a transition timeline. But just given the success you’re seeing in the SaaS and meaningful outperformance on mix expectations and conversions, any update to how you’re thinking about the timing of phase 2 of the transition? And why not lean further into a more active plan to covert existing customers? Thanks.
Guy Melamed: So, I think that question can be broken into two. One is the overall timeline and the second part is Phase 2. When we think about kind of the overall timeline, I think with a 5% SaaS increase versus last quarter, when you think about that math and kind of the way it extrapolates going forward, it definitely makes sense to reconsider our timeline. And that’s something that we talked about last quarter that we would revisit our guidance for that at year-end. And we plan to do that. I think overall, when you think about the transition, it’s moving very fast. We’re very happy to have 15% of our ARR coming from SaaS in just three quarters. It’s happening fast because our customers and our Salesforce are adopting it very, very positively.
So, we definitely look forward to providing more color on that part in our next earning call. In terms of Phase 2, when you think about kind of the conversion of the installed base and that’s how we define Phase 2, it hasn’t begun yet. But we are increasing the number that we expect in terms of conversion in Q4 to $12 million. And that’s gone up from $10 million that we guided last quarter. And when you think about the Q3 number, we actually came in at $10 million, which is a really high number as you think about it. And it’s very positive, but still a very small percentage of our existing customer base. So, as much as we’re seeing very strong adoption that’s happening in a natural way, we haven’t prioritized it yet, but we plan to do that next year.
So, I think overall, as we look at the progression of the transition, it’s been really positive. And we hope to continue to move in that pace going forward.
