Guy Melamed: And when we kind of think about the guidance, our philosophy hasn’t changed. So, we’re definitely thinking about the guidance in the same way that we’ve talked about it throughout the year. I think in terms of where we are in Q3, we definitely saw things stabilize compared to previous quarters. And that’s a good sign for us. But our assumptions in terms of guidance have stayed the same. And we think that we are set up well for having our large Q4 in terms of seasonality. We don’t see any change compared to the on-prem subscription. So, SaaS should be the largest quarter. Q4 should continue to be the largest quarter of the year as it has been in previous years. Obviously, from a revenue recognition perspective, it does change because it’s ratable.
But you’ve heard me talk millions of times about the fact that ARR, free cash flow and ARR contribution margins are the right metrics for this transition. And especially in Q4, they should be viewed as the leading indicators of the business.
Operator: Our next question comes from the line of Shelby Seyrafi with FBN Securities. Please proceed with your question.
Shelby Seyrafi: Yes, thank you. So, your headcount really was flattish in terms of growth in Q1 and Q2 and looks like it grew around 50, which is a decent pace for the first time in like a year. So, my question is, is this a sign that the environment is better for you. You talked about deal scrutiny, et cetera. But at least is it better and therefore you’re hiring more and relate to this, talk about your headcount growth expectations going forward?
Yaki Faitelson: We know how to do this transition and it was very important for us when we did it just to be focused on just the right moving parts to make sure that it will work. We definitely see just more stability in the transition than despite of the economic headwinds, we definitely see that there is just inevitable demand for data security. This is something that organizations need and we have a lot of pipeline in what we can do in terms of a roadmap of features and products in massive total available market. So, we need to cover it with a [self-pose] (ph) and make sure that our customers succeed and keep building the organization. So, the business is performing and we are investing against the massive opportunity.
Guy Melamed: And if you go back to our last quarter’s earning call, you could hear in the commentary that we talked about the fact that we’re hiring. So, obviously, the fact that we grew the headcount was part of our planning. We want to continue to increase the headcount, but we obviously want to do it in the right way, and we want to make sure that we generate increased productivity, and I think we can do that going forward. So, it’s a balancing act of increasing headcount at the right pace, in the right positions, in the right location, but also improving our leverage as we have done when you look at kind of the fact that the ARR contribution margin is now 11.1%, an increase of 750 basis points year-over-year, which is pretty significant.
Operator: Our next question comes from the line of Shrenik Kothari with Robert W. Baird. Please proceed with your question.
Shrenik Kothari: Hey, thanks for taking my question, again, thoughts and prayers to our entire team out there. Just to follow-up to the previous Microsoft question, Yaki you mentioned the tailwinds and the growth runway in implementing the access controls and governing policies. And there was a previous question on the competitive advantage versus Microsoft as well. Just trying to understand, of course, as the significance of data security rises, as you just pointed out and especially in the realm of Generative AI, where you’re anticipating kind of more traction, particularly for data access governance, is it the right way to think that Varonis is kind of focusing on a comprehensive data protection platform, including data security, access control governance, versus what Microsoft is offering, just kind of more narrow kind of DLP.
And this urgency around data security and of course with respect to the data protection tailwinds, like is this the competitive advantage that you guys have and is that the right way to think about the competitive dynamic from your perspective? I have a quick follow-up there as well.
Yaki Faitelson: Yes, it’s essentially completely different. What we just giving you automated outcomes regarding access control classification and fare detection. We have very little pictures that overlap and a lot of very good strategy to work with the way that they can label for DLP. As you mentioned and other stuff, but it’s different. We actually work very well with them and we have a very good partnership regarding Generative AI, which is the foundation, the building blocks. If you want to use Generative AI the right way and not to introduce a lot of risk and can end up in disaster, you need to use our solution to make sure that you are ready. So, this is set of all the AI features that we can deliver using technologies with large language models. We are the foundation to make sure that businesses can use it in order to extract value from the data.
Operator: Our next question comes from the line of Hugh Cunningham with TD Cowen. Please proceed with your question.
Hugh Cunningham: Hey guys, thank you for taking my call, and I’ll echo that, everyone here in our team, our thoughts and prayers are with you and your families, your friends and your co-workers for Varonis.
Yaki Faitelson: Thank you.
Hugh Cunningham: I do have two quick ones. The first one is the 25% to 30% uplift that we’re talking about that’s just on pricing of subscription versus SaaS. That doesn’t include any assumptions that you mentioned before, more licenses, users go up anything like that.
Guy Melamed: Apples to apples only, so yes.
