So we’re getting it from all ends. Just in summary, we’re getting that mature rental motion. We’re getting the upsell, getting them adopted, so we can get expand on more of the same products. And now we’re starting to see the cross-sell start to kick-in as well.
Howard Ma: Okay. Thank you.
Sanjay Mirchandani: And Howard, I’d like to add a little bit on just overall, some color on the SaaS business. It is the driver of growth. It is growing well. It’s a vehicle by which we land hundreds of new customers a quarter. Our security capabilities that we’ve integrated the Security IT, which is our delivery platform inside of Metallic for our customers is doing well. Gary talked about the go-to-market capabilities. And we’re investing for the future with mission-critical workloads. We thought — I quoted — I think it was Giga [ph] that talked in this one report about having — we had more hyper cloud and more mission-critical workloads out there, there are two TVs to compete. It’s — you have to be one step ahead of the customer.
You have to be ready for the workhouse they want to protect. And that is exactly what we’ve been doing. And we — the NRR, we sort of — we mentioned last quarter that it was — we thought it was an anomaly and we would get it back to normal sort of pattern. And I think we got that, and we’ll keep — we’ll keep focusing on it. So it’s still a young business. It’s three years old in effect, we’re very happy with where it is, but there’s a lot to do.
Howard Ma: Sanjay, it’s great to see the Metallic growth engine kicking in and congrats on the strong quarter.
Sanjay Mirchandani: Thank you, Howard.
Gary Merrill: Thanks, Howard.
Operator: Your next question comes from the line of James Fish from Piper Sandler. Please go ahead.
James Fish: Hey guys. Thanks for the questions. Maybe building off of the past couple here. I guess, how should we be thinking about net retention rate for Metallic this year and sustainably, like what are you guys internally kind of targeting for the next couple of years? Just trying to understand if some of this material boost in net retention rate is just catch up from like last quarter, for example, or sustainable. And two kind of the points you both have made here, what makes you confident that some of the Metallic strength here isn’t due to substitution of your term business, especially if we’re talking more mission-critical workloads moving on to Metallic?
Gary Merrill: Yes. Hey Jim, it’s Gary. I’ll start at all. I think the — we’re not guiding explicitly to this asset. I think if you see what’s kind of at our level of majority of our SaaS business, meaning in that $130 million-ish of NRR. I think world-class NRR rates are somewhere between 120% to 130%. I think 130% is a little on the high-end on a sustainable piece that we delivered this quarter, especially as the base continues to grow every quarter. If we’re somewhere in that range of 100 to 125, right, so bracketed somewhere between last quarter and this quarter on a consistent basis and working towards that, I think that’s probably — I think that’s a good measure. We are seeing —
Sanjay Mirchandani: We have – less than 120 to 125.
Gary Merrill: Yes. Sorry, 120 to 125. Sorry, just to clarify that Jim. And then from more of the hybrid cloud mission-critical workloads, we are start seeing some very good growth on that — on the SaaS business. Now, that growth right now is incremental. It’s not enough to be truly cannibalizing the term-based software licenses from an actual deal perspective. Though customers are in the early innings of their cloud journey, right? So, they are taking the time, and that shows up in ASPs and the length of deals were in the early part of their cloud journey and cloud innings of migration. They’re taking the time to make sure they measure their spending, and they’re only committing to periods right to measure it with what they see in the near-term.
James Fish: Got it. Helpful. And just remind me here. What really happened at the end of the quarter that essentially SaaS ARR accelerated, but we saw a deceleration secondly, in Metallic revenue that now revenue is actually outpacing ARR. Was it more of a back-end loaded quarter for Metallic? Should — with it being about 77% ARR growth, should we be expecting stable Metallic revenue growth for fiscal Q3 essentially versus fiscal Q2?
Sanjay Mirchandani: No, I think stable. Any Metallic contracts that we signed in the second half of the quarter have very, very little revenue impact. So, linearity has less of an impact because you just don’t get anything — not much of anything, sorry, not much of anything, once you get past the first half of the quarter or linear to Metallic was relative to prior quarters. So, nothing unusual there.
James Fish: Okay. Thanks guys.
Operator: Your next question comes from the line of Rudy Kessinger from D.A. Davidson. Please go ahead.
Rudy Kessinger: Hey thanks for taking my questions guys. It’s great to see the dollar-based net retention rate rebound on Metallic. I guess the flip side of that is when I look at the growth in Metallic ARR from new customers, both on a dollar basis or as a percentage point of growth basis, it was down this quarter versus last quarter. I know your subscription customer adds continue to be about five quarter. But if you look at your new customers on Metallic, are you seeing customers start smaller just given the macro conditions and financial constraints that customers have, or what are you seeing from a new perspective on Metallic?
Gary Merrill: Hey Rudy, it’s Gary. I’ll hit that and good to hear from you. At the first half of the year, we’re in a good shape Metallic on the new customer. I think probably somebody your math hit it on. We were probably a little stronger in Q1 on new customer. And then in Q2, existing customer was relatively a little stronger than new. But over the first half, that’s kind of now evened out. And a business this young, it’s hard to look at just one quarter as a long-term trend. We look back over two, three, four, five quarters to make sure that our trajectory on both our new existing or happening, and we’re pleased with where that is. So, we’re not reading into the one quarter. We still saw over 500 subscription new customers added during the quarter, and the vast majority of those are SaaS.
So, we’re still seeing it. Now, yes, the deal sizes and the ASPs are smaller. They’re smaller, but we’re okay with that because if I go back to the commentary I made on the net dollar retention and that focus on adoption, time to first backup recovery and then driving expansion and workload expansion, we’re betting on the future and our ability to drive that expansion as well.
Sanjay Mirchandani: And — and this is Sanjay, Rudy. The smaller ASPs is kind of part of the plan because we have a velocity business where we land smaller deals. We have marketplace business, which a smaller deal. We have MSPs that bring in smaller deals that we expand over time. So, it’s a mix. We sell to the enterprise and we sell through MSPs. We said we’ve got the whole range.
