Release Date: September 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rubrik Inc (RBRK, Financial) delivered an outstanding second quarter, outperforming across all guided top-line and profitability metrics.
- Subscription ARR reached $919 million, growing 40% year over year, and subscription revenue was $191 million, growing 50% year over year.
- The company’s subscription NRR remained strong above 120%, indicating robust customer retention and expansion.
- Rubrik Inc (RBRK) improved its subscription ARR contribution margin by over 1,300 basis points year over year, showcasing enhanced business efficiency and profitability.
- The company is winning the majority of deals in head-to-head competition, with notable wins in various sectors including automotive, financial services, and healthcare.
Negative Points
- Despite strong performance, Rubrik Inc (RBRK) reported a negative free cash flow of $32 million for the quarter, compared to negative $13 million in the same period last year.
- The company’s non-GAAP gross margin remained at 77%, which is at the lower end of its long-term target of 75% to 80%, due to higher cloud hosting costs.
- Subscription ARR contribution margin was still negative at 8%, although it showed significant improvement from the previous year.
- The broader macro environment remains uncertain, which could impact future performance despite current strong execution.
- Rubrik Inc (RBRK) faces competition from both legacy and new-gen vendors, and the market landscape is evolving with new entrants and acquisitions, such as Salesforce acquiring a backup and recovery company.
Q & A Highlights
Q: Can you talk about what customers are saying about cyber resilience in the wake of the CrowdStrike outage?
A: Cloud resilience is top of mind for every organization. Despite investing millions in cyber prevention tools, businesses are unsure if they can continue operating during a cyber breach. The CrowdStrike incident, though unfortunate, has triggered discussions about resilience, with Boards of Directors asking about strategies to keep businesses running. This focus on resilience is reflected in our 40% year-over-year subscription ARR growth.
Q: Can you comment on the market landscape, particularly in the data security posture management (DSPM) space?
A: The Salesforce acquisition of a backup and recovery company validates our strategy of protecting SaaS data. We offer cyber resilience across enterprise, cloud, and SaaS landscapes, providing a single policy engine and security control. Our unique architecture, combining DSPM and cyber recovery, is winning in the marketplace. We now have over 50 customers using our DSPM product, driven by the need for data security and Generative AI trust.
Q: How will the Veritas and Cohesity merger impact Rubrik?
A: The merger may prompt Veritas customers to explore other options, creating opportunities for Rubrik. Our superior product and unique platform, combining DSPM and cyber recovery, position us well to capture these customers. The merger's uncertainty around product roadmaps and features will likely drive more customers to consider Rubrik.
Q: Can you elaborate on the increased contribution to NRR from additional security products?
A: We are not seeing any slowdown in customer demand for our data security products. Over 50% of new customers adopt our enterprise edition, which includes these products. We continue to expand our platform to cover more SaaS apps, providing a single security control across all applications. This strategy is driving strong demand and expansion.
Q: Has the CrowdStrike IT outage led to an increase in pipeline build or velocity for Rubrik?
A: It's too early to gauge the full impact, but we are hearing more from Boards of Directors about resilience strategies. The outage highlighted the importance of being prepared for cyber incidents, and we believe it will drive more focus on cyber resilience in the coming months.
Q: Can you discuss the progress on margins and where we might see further leverage?
A: We have made significant progress on margins, particularly in sales and marketing and R&D. Sales efficiency is improving through greater productivity, targeted marketing, and partner leverage. Our global R&D centers allow us to innovate with greater cost efficiency. We expect continued leverage from these areas as we scale.
Q: How is the evolution of DSPM driving engagement with customers?
A: DSPM is driving more conversations with CISOs and CIOs. Customers are looking to understand data security risks and threats to ensure cyber resilience. We are seeing strong traction with over 50 customers using DSPM, and we continue to refine our packaging to meet customer needs.
Q: How do you view the Mandiant threat intelligence collaboration and its impact on your partnerships?
A: The Mandiant partnership enhances our threat intelligence and incident response capabilities, providing comprehensive cyber resilience. We aim to build multi-partner strategies with Microsoft, Google, AWS, and others to deliver value to our customers. This collaboration is a significant step in that direction.
Q: What impact is the current economy having on enterprise spending and your pipeline?
A: We are not seeing any change in demand for our products. Cyber resilience remains a top priority for customers, and our market momentum is strong. We are confident in our ability to execute and deliver strong results.
Q: Can you comment on the confidence level and visibility to the guidance for the back half of the year?
A: We have strong momentum and outperformed in the first half, giving us confidence to raise our outlook. Despite an uncertain macro environment, we are confident in our pipeline and ability to execute, and we have been prudent in our guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
