Yaki Faitelson: Yes. The channel reaction is usually just in direct correlation to the customer reaction. So, definitely they understand it’s much easier to sell, and it requires significantly less professional services, and this is something that they will need to adapt to. The whole thing of this platform is tremendous automation, but we’re definitely getting a lot of help with the channel to take this platform to market.
Operator: Our next question comes from the line of Jason Ader with William Blair. Please proceed with your question.
Jason Ader: Yes. Hi, guys. I wanted to ask you on first the clarification. You said a 12% headwind to revenue growth in Q3, I believe. That’s 12 percentage points, correct?
Guy Melamed: Correct.
Jason Ader: Okay. And then, just on the kind of following up on the channel question, can you remind us how you go to market, how much is direct, how much is indirect, and then where are you seeing the most success right now in terms of finding new customers?
Guy Melamed: So, we sell 100% through channel, but our outside sales force really does all of the heavy lifting of doing the risk assessment, talking to the customers, explaining where the risks are. So, the channel helps us in getting the meeting and they help us in closing the deal, but all the hard work in between is done by our outside sales force. When we look at the opportunity with our SaaS offering, it opens up new markets, it opens up new territories, it opens up new industries to basically new customer opportunities that we didn’t have before. And all of the reception that we have to-date received on the SaaS offering has been positive. And we expect that to continue as we kind of really went through the toughest part of the transition, kind of clearing through the pipeline, and now introducing every new customer with a quote that is SaaS only, and not really on-prem subscription as we had in the past.
So, I think overall, we’re very well positioned to take advantage of that opportunity going forward.
Operator: Our next question comes from the line of Joseph Gallo with Jefferies. Please proceed with your question.
Joseph Gallo: Hey guys, thanks for the question. And I appreciate the AI commentary. You guys have a large M365 footprint. Can you just give us an updated size and growth profile of that business? And then maybe just to be clear, given the rollout of copilot this week, does your existing solution capture that opportunity now, or is it more just that you guys are perfectly positioned to capture that opportunity long-term? Thanks.
Yaki Faitelson: Regarding the product, in terms of preparing an organization for AI, it’s already here. So, it’s just the basic value proposition. Understand what data is critical. Make sure that only the right people can access the right data. Alert and stop any abnormal behavior. It’s the basics. Without it, you can’t use it in a secure way. And this is 100% us.
Guy Melamed: Just to touch on the first part of the question, when we look at the Office 365 contribution, it’s definitely become a significant tailwind for us going forward. But if you go back to our Investor Day in March, we actually showed in one of the slides there that our penetration within the overall 365 opportunity was, at the time in March, it was 1%; hasn’t grown too much since then. So, when you think about the opportunity going forward, there’s so much for us to capitalize on. And we see the reception of our customers very positive when we sell that license.
Operator: Our next question comes from the line of Rudy Kessinger with D.A. Davidson. Please proceed with your questions.
Rudy Kessinger: Hey, great. Thanks for taking my question. Guy, what was SaaS as a percentage of the mix if you exclude federal in Q3? And then just how much higher is federal as a percentage of new and upsell ARR in Q3 relative to Q4 in the other quarters?
Guy Melamed: So, like I said before, the actual driver this quarter was the enterprise business. And that’s really what drove the 59%. To remind you, we’re not FedRAMP certified yet. So, we didn’t have SaaS sales that were sold under the federal business, but we do expect to have FedRAMP for next year’s cycle, which can become a significant opportunity for us. And when you think at the overall opportunity from a new business and an upsell in that market, we fit like a glove to that type of use case. The amount of malicious actors that have happened only the last couple of months has been tremendous and our product fits their very, very nicely. And we feel that we can capitalize on that opportunity and grow our ARR coming from that industry going forward.
Operator: Our next question comes from the line of Joshua Tilton with Wolfe Research. Please proceed with your question.
Joshua Tilton: Hey guys, thanks for sneaking me in and I’ll just say my thoughts and prayers with your employees and just all the people of Israel. I’m actually going to sneak in two-and-a-half questions really quickly. My first question is just how should we think about the implied Q4 net new ARR seasonality and are the macro impacts baked into 4Q worse than they were a quarter ago? And on the AI front, which is my second question, why won’t Microsoft offer these capabilities? And if so, do you expect this to bring you into more competition with them going forward?
Yaki Faitelson: So, in terms of Microsoft, we are the only duly company in the world today that taking three streams of Metadata, the permissions, the content, and the activity to build this robot for tri-size access. So, we need to build completely different type of solutions in order to do that. So, I just think that we can for a long time leverage our mode and maintain a tremendous competitive advantage in this space.
