Mimecast Limited
Q1 2021 Earnings Call Transcript

Published: 3 Aug 2020

[Robert Sanders:]

Good evening. Welcome to Mimecast's Earnings Call for the Fiscal First Quarter 2021 Ended June 30 2020. I'm Robert Sanders, Director of Investor Relations. With me on the call tonight are Peter Bauer, our Co-Founder, Chairman and CEO; and Rafe Brown our CFO. Tonight's conference call is being broadcast live. A replay of this call will be available after the live call has ended. We will make forward-looking statements regarding future events and the future financial performance of the company. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

[Peter Bauer:]

Good evening and thank you all for joining us. On tonight's call, I'll begin with an overview of our first quarter results and discuss the cybersecurity landscape as we continue to see attackers applying their craft causing impactful business disruptions. Next, I'll discuss our cyber resilient site that we recently hosted with partners and customers. Then I'll take you through some exciting new identity graft technology, we have added to our platform with the acquisition of MessageControl. And finally we'll look at some examples of how Mimecast is protecting customers and the types of solutions the market is demanding before I hand over the call to Ray to cover our financial results in more detail. So we began our fiscal year 2021 with solid financial performance exceeding the high end of our guidance for both revenue and adjusted EBITDA. First quarter revenue totaled $115.2 million exceeding the high end of our guidance by $1.4 million. This outperformance during difficult economic conditions is a testament to Mimecast's durable subscription-based business model and the highly valued services that we deliver. 600 net new customers joined Mimecast during this first quarter as we experienced some COVID related headwinds in the lower end of the market mainly sub-100 seat customers. Among our new customers this quarter was a U.S. retailer who purchased our Email Security 3.0 platform for 165,000 employees representing a seven-figure engagement and among the largest deals to date for Mimecast. This is further evidence that our move up-market is finding traction with some of the most demanding security organizations in the world. And I'm extremely proud of the way our organization has overcome the challenges of working remotely to continuously support our customers through these difficult days of the global COVID-19 pandemic.

[Rafe Brown:]

Thank you, Peter. As Peter mentioned, we had a very productive first quarter, despite the COVID-19 headwinds we all faced. I'm pleased to report that for the first quarter of fiscal 2021, we exceeded the high end of our guidance for both revenue and adjusted EBITDA, continuing to deliver a balanced scorecard of growth and expanded margins. In the first quarter, we generated revenue of $115.2 million, which represents growth of 16% over the prior year in absolute dollar terms. Adjusting for the $4.5 million of currency headwind we faced, our constant currency growth rate over the prior year stood at 21% for the quarter. Note, that since providing guidance in May foreign currency fluctuations positively impacted our first quarter results by $300,000.

[Operator:]

Our first question or comment comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.

[Dan Bergstrom:]

Hey. It's Dan Bergstrom for Matt Hedberg. Thanks for taking our questions. You called out a number of Symantec customer wins in the prepared remarks. It sounds like they're purchasing additional products from you. How should we think of that opportunity unfolding in fiscal year 2021? It seems like you've had good success there over the last several quarters. And I guess it sounds like the opportunity could be accelerating here. Is that the case?

[Peter Bauer:]

Yes, Dan thanks for the question. It's Peter here. Yes, I think the way to think about it Symantec has a pretty large -- they were a pretty substantial player in the cloud e-mail security business probably between $100 million and $200 million of cloud e-mail security business and then some on-premise business as well. In the last year or so since the Broadcom acquisition the migration away from Symantec has certainly picked up a little bit. But we think it's -- these are large enterprise organizations in many cases with multiyear contracts. So, there is some friction in terms of them migrating off. But we have certainly had success for many years in migrating Symantec customers over onto our platform and I think the anecdotal examples that I called out in the prepared remarks, as you say, illustrate that we got some really nice wins in. We think it's an opportunity that will continue to work for us for quite a few quarters still to come.

[Dan Bergstrom:]

Thanks. And then I don't know if you had any thoughts on business trends or activity in July here. Any way to think about July relative to June perhaps or July relative to prior Julys in terms of activity or pipeline build?

[Peter Bauer:]

Yes. And I'm sorry just maybe trying to make sure -- can you just repeat the question? I didn't quite understand it correctly.

[Dan Bergstrom:]

The quarter was strong. Just curious about any initial thoughts around flow through to July.

[Peter Bauer:]

So, I think we're not going to break down specific details on the month. It's very clear that the crisis is still going on in a number of parts of the world that are quite important to us. And so I think we're still dealing with that economic headwind out there more broadly. That said, it is very clear that the world is figuring out how to work in a remote environment. So, I think we're kind of pleased with the demand out there. Certainly, very pleased with our team and the way they're executing in this environment. And so we've taken all that account as we gave our guidance for the year.

[Dan Bergstrom:]

Thank you.

[Operator:]

Thank you. Our next question or comment comes from the line of Brent Thill from Jefferies. Your line is open.

[Joe Gallo:]

This is Joe on for Brent. I appreciate the question. I also appreciate the extra color on the customer account increases. So, just to be clear the weakness was in the smaller customer segment. Was that below 1,000 seats? And otherwise the larger customers was in line with seasonal. And then I think last quarter that you had noted 200 customers were buying stand-alone products or the next gen products. Did that trend continue this quarter?

[Peter Bauer:]

So, on the smaller account, it was even on the smaller end of the sub 1,000 group by customer count where we saw the most volatility that was the numbers that I highlighted. As you can imagine, a crisis like this just hits those customers quite a bit harder and directly impacts the customer count number because they're smaller not as much on the dollar side if you will. In terms of customer on-ramps this quarter we certainly saw the trend continuing. Not quite at the pace that we saw in the prior quarter in terms of those single on-ramp customers. But that trend does continue where we think of it as additional on-ramps to using Mimecast where you might come on for a particular solution one of our emerging products. But that of course sets up the relationship where we hope to expand down the road.

[Joe Gallo:]

Awesome, that's helpful. And then glad to hear about the strength in Central Europe. I think last quarter you had noted some geo weakness in U.K. and South Africa. How do those regions do this quarter? Any further context?

[Peter Bauer:]

Yes. Very much -- those two regions are very much in the midst of the corona crisis. As I've noted in my prepared remarks South Africa is probably particularly challenged and worthy of taking note of just because they were having some economic challenges coming into the COVID crisis. It is certainly quite complex there in terms of both the double whammy between a tough economy and the virus really having significant strength. And that without a doubt is going to make doing business there harder. On the U.K. side, it was much like North America which wasn't the best quarter in the world in terms of environments to sell into just with all the changes afoot. But again people are really figuring out how to do their business from home.

[Joe Gallo:]

Good to hear. Thanks guys.

[Operator:]

Thank you. Our next question or comment comes from the line of Terry Tillman from Trust Securities. Your line is open.

[Unidentified Analyst:]

Hey guys. This is actually Nick on for Terry. Thanks for taking our questions. First, I had was actually kind of pivoting back towards the Cyber Resilience Summit. We heard you guys mention some capabilities such as safe score and then case review and threat intelligence. How have these newer capabilities resonated with customers so far? And how do you fell these capabilities potentially help you move further upmarket and land some larger enterprise accounts? Thanks.

[Peter Bauer:]

Yes. Thanks for calling those out. Yes, so, those are really exciting new capabilities that we're delivering definitely resonating with customers. It was a strong reception to those new features in the platform as we showcased what we're working on there. Certainly, as we've talked to larger customers, it's not just those features it's the broader strategy that they fit into and the way the particularly on the Email Security 3.0 strategy how concepts like safe score and threat intelligence and our API integration strategy how they work in concert across all three of the zones the perimeter zone, inside the perimeter and beyond the perimeter. So as a collective we think it's very powerful and definitely creates a value multiplier for customers as they adopt more of the suite and very appealing upmarket in the enterprise space.

[Unidentified Analyst:]

Got it. That's helpful. And then just as a follow-up given the recent acquisition of MessageControl even the acquisitions you guys did last year in Segasec and DMARC Analyzer. I guess how should we think about product development moving forward in terms of buy versus build? Thank you.

[Peter Bauer:]

Yes. So if you recall our history, we've spent a lot of time. In fact, almost the first decade-and-a-half of our company's history building an organic cloud-first multi-tenant multiproduct microservices platform and really getting those foundations in that design ideology right. And what we've done in the past few years is really build out with some very selective technology and talent tuck-ins to build out our portfolio. So if you think about Email Security 3.0, we've really been able to build out those zones over the last couple of years with acquisitions that brought us into the awareness training market that gave us more advanced malware detection and efficacy capabilities with Segasec out of Israel. We've built our zone three capabilities with DMARC Analyzer and -- sorry Solebit was the malware fighting technology. Segasec was the Zone 3 Brand Exploit Protect offering that we now have. So I think a very effective strategy for layering in capabilities that capitalize our ability to move into some of these adjacencies and provide a more broad-based strategy that is really I think expanded from our original Email Security and email archiving value proposition which landed very well in the mid-market and below up into a more broad-based value proposition that now traverses all the way from SMB right up into the large enterprise space.

[Unidentified Analyst:]

That’s helpful. Thank you, guys.

[Operator:]

Thank you. Our next question or comment comes from the line of Sterling Auty from JPMorgan. Your line is open.

[Matt Melotto:]

Hi, guys. This is Matt on for Sterling. So the first question around the -- in terms of the headwinds that you talked about on the smaller end and even just in general your customer base, is that more a function of downsizing or outright cancellations? Is that from business closures? Have you seen customers moving to absolutely no Email Security or even to some Microsoft solutions? Thanks.

[Peter Bauer:]

Yes. I think the earlier days of the crisis, I think it's playing out more that we saw a downsizing where customers would stay with Mimecast, but it was more of a reduction in the number of seats. And obviously, some of the industries were really directly and very quickly impacted by the crisis, I think travel or retail. And we called out in last quarter's call, we have about 14% of our overall customer base that we had in that really heavily impacted areas. And so that's where we saw down sell in the earlier period of time. Frankly, our kind of running hypothesis is that some of the business is going or people closing their businesses and things of that nature will play out over a longer period of time. In that first three months, it was certainly very sudden and there was a lot of companies that had to shrink their workforces, but we're still in the fight in a big way. As I mentioned, particularly in South Africa, we're aware of a couple of accounts there that are being restructured rather significantly. And so you do worry that some of those won't make it through the crisis.

[Matt Melotto:]

Great. That's very helpful. And then one follow-up. In terms of billings could you remind us are there any large contracts in terms of the first quarter, second quarter of last year just looking at billings over the last two quarters have been in that 9% to low double-digit range. How should we think about that? Thanks.

[Peter Bauer:]

Yes. We always do caution people with the calculated billings that everybody does go through that. They can be quite inaccurate just because they do have the FX, they don't reflect shifts in billing cycles and whatnot. I would say that the measure that you should take into account is in this first quarter, we were engaged with a lot of these companies that were having a tough time and we allowed some of them to shift from annual upfront contracts to quarterly for a shorter period of time, but it certainly would impact the billings calculation for that first quarter. So again, billings I think is quite an interesting measure when you're trying to recalculate it and back into it. And that's why we tend to just point people towards our issued revenue guidance as the best measure to look at.

[Matt Melotto:]

Okay. Thanks guys. Appreciate it.

[Operator:]

Thank you. Our next question or comment comes from the line of Brian Essex from Goldman Sachs. Your line is open.

[Brian Essex:]

Hi, good afternoon. Thanks for taking my question. I was wondering if you can maybe just comment on I kind of tracking it every quarter just the traction from Office 365. How much penetration was there this quarter? And are you seeing any kind of a pause there as enterprises maybe are a little bit less reluctant to migrate from on-premise into the cloud?

[Peter Bauer:]

So we talked a couple of quarters back. We've crossed that threshold where more than half of our base is on Office 365 and so that continues to gradually drift upwards. We haven't been breaking out the same number because it's breaking out the details of that number quarter-to-quarter. But certainly, the trend is there where Office 365's broader dominance in the market exists. And we find a lot of Office 365 customers coming to us each quarter. It's one of the lead sources from where we gather customers, as people who tried to go as we say, naked on Office 365 and realize they needed the added projection of Mimecast. So that trend very much still continues. I think we're aware of that broadly in these tougher financial times, the finance guys might push back harder on solutions than they would in more lucrative times. But the value that Mimecast brings to an Office 365 implementation just cannot be ignored and given the risks that are out there and the increasing risk because of the crisis, it's more important than ever to have Mimecast in conjunction with the Office 365 implementation.

[Brian Essex:]

Got it. That's super helpful. And maybe just a follow-up on some of the large enterprise wins. Any way to put a little bit more color around how many of those are Symantec-related? How many of those are other vendors, where you have competitive displacements? And any other substantial trends like vendor consolidation playing out in the market, is maybe a little bit of a tailwind for you?

[Peter Bauer:]

Yes, great question. So, I think, a number of the stories that I called out in the prepared remarks, a number of those were Symantec -- not all of them, but a number of them were Symantec displacements, which was exciting. I think the competitive landscape or the displacement landscape is fairly broad, still. So there's naked on Office 365. There's Symantec. There's Cisco. There's a number of other vendors. And the vendor consolidation opportunity I think, sort of, shows up in two ways. The one is, customers looking at a broad cyber resilience strategy and looking to deploy a suite of solutions that can cover off a number of the risks around a concentrated dependency on Office 365 and it's not just an individual company's dependency on Office 365. It's the global dependency of almost all companies going forward that are dependent on Office 365 and the inherent risks of a homogenous security environment and extremely compelling attack surface. So mitigating those risks comprehensively with an integrated suite, but it's also really looking at how to simplify IT and save costs going forward. With an economic downturn and we learned through the economic downturn of 2008 and 2009 as well, that the organizations are going to have smaller budgets, leaner teams. And as Rafe mentioned, there’re greater risks in the cybersecurity landscape right now and those need to be addressed. And so, our ability to consolidate solutions and offer customers an opportunity to have less complexity in the environment because of our architecture, we're finding to be very compelling in the marketplace.

[Brian Essex:]

Great. Very helpful. Thank you.

[Operator:]

Thank you. Our next question or comment comes from the line of Saket Kalia from Barclays. Your line is open.

[Saket Kalia:]

Okay, great. Hey, guys. Thanks for taking my question here. And apologies if these have already been addressed. Maybe, first for you Peter, can we just talk a little bit about the increased usage on average? I think, the -- I think, the users there is going from 3.2 products per customer up to 3.4. I guess the question is, what products are moving that needle the most? And which ones do you think you're sort of getting ready to contribute more to that metric going forward? Does that make sense?

[Peter Bauer:]

Yes. Saket -- yes, thank you. Yes, you're absolutely right. So, year-over-year 3.2 products moving up to 3.4, which considering the size of the base now 38,600 customers, making those movements is exciting for us and it's great to see, particularly as we built out this expanded product portfolio since going public four-and-a-half years ago, almost five years ago, now. We've really expanded from what was seven-ish products, six to seven products up to about 11, 12 products now in the portfolio. So as Rafe mentioned, TTP runaway success and we've built a fair amount of saturation in the customer base there, of course, a lot of new customers out there in the market that we can still sell that to. Well we're really finding great traction with now, is what we talk about as our Zone 2 play. So that's really the IEP product and the awareness training product. Those are really strong sellers and gaining good traction for us. We've also found -- we were just looking at the numbers the other day, secure messaging has been a really strong grower for us in the mix. We don't talk about it secure very often. But with data leak prevention and compliance requirements that organizations have, the ability to have a really slick well-integrated encryption solution for e-mail has grown increasingly important. I think the main stage of archiving, those are bigger numbers that continues to be a driver of demand for us. And then, going forward, we're excited about Zone 3. We think that is a market that is going to start to pick up. And, obviously, those two acquisitions in that space, we think we have really good offerings there. And then, longer term, the direction that the web security market is going in and growing in, we see that as a very big opportunity, but we've got to very much burn our space in that market and continue to develop capabilities. You probably saw we recently announced browser isolation as part of that solution. But the real secret sauce here is that all of these capabilities are delivered as part of an integrated suite that's really simple to manage and we offer really easy to consume subscription plans for customers to get on board and start taking things off there to-do list in a really slick way.

[Saket Kalia:]

Got it, got it. That's really helpful. Maybe, for my follow-up for you Rafe. Great to see the revenue go up by about $10 million for the year at the midpoint. And again, apologies if this was addressed in the prepared remarks. But how much of that is perhaps the better -- it sounds like better bookings performance here in Q1 and for the rest of the year versus perhaps some FX tailwinds versus inorganic? Is there a way to sort of parse out that kind of delta in guide?

[Rafe Brown:]

Yes you bet Saket and thank you. And first just as a reminder for everyone we use the FX rates as of July 23 for our guide. So just to set that, so the total raise at the midpoint was $10.6 million and that's comprised of $1.9 million that is from the Q1 beat as well as the additional $400,000 that of acquired revenue that's coming in from the acquisition of MessageControl and then $8.7 million of FX tailwind. So it's the $1.9 million, plus the $8.7 million of FX tailwind.

[Saket Kalia:]

That makes us understand. Thanks so much guys.

[Rafe Brown:]

Thanks Saket.

[Operator:]

Thank you. Our next question or comment comes from the line of Keith Bachman from BMO. Your line is open.

[Keith Bachman:]

Hi, thank you. I wanted to go back to the net retention rate for a second. You indicated some -- a couple of different herbs associated with perhaps lower retention and less upsell. So it sounds like it could be call it a 104 number this quarter. But how should we think that -- what's implicit in your guidance as you look out for the subsequent quarters thereafter. Do you anticipate that net retention will be in the mid 105-ish kind of range, or do you anticipate with some improvement in the economy that might go up. So what's embedded in your expectations as it relates to the rev guide you just gave?

[Rafe Brown:]

Yes. No thank you for that clarification. It's a bit detailed. So, one of the things to remember with all of these numbers for the net revenue retention numbers that they are on a trailing 4-quarter basis. And so it does take some time for the numbers to reflect the full measure of the crisis as we're going through that. So just to hit on the components when we're modeling this we're looking at what we think is going to play out over the course of the year. So it will take some time perhaps for the numbers to move. And we've assumed that the crisis and the economic recovery are going to drag on, perhaps even a little bit longer than we had hoped just three months ago as we're seeing resurgences in some places. And so, I wanted to break down and give you a bit more detail. So on the downsell and churn side, we believe that rate may rise to approximately 8% as the crisis drags on 8% as we move through the year. And then on the upsell, we think in our overall upsell rate might come down to between 11% and 12%. Now this is not necessarily for this next quarter. We're thinking that will be -- reflect the economic crisis dragging on and playing out over the rest of the year.

[Keith Bachman:]

Okay, okay. Thanks for the clarification. Okay. Yes. So it's probably going to tick down as we run through the year because of the forces you mentioned is essentially how we should be thinking about it?

[Rafe Brown:]

If the crisis continues to drag on, yes I'm afraid we'll have some additional headwinds there. But very much naturally if we get -- if the economy starts to bounce back I think that has probably the single biggest most dramatic effect. But also to remember we are out to market with a lot of new product and new offerings. And so again some of the just tendencies of business returning more to normal even if there is tougher environment out there. It certainly gives us a lot of opportunity to get back in there and drive sales of additional products even if the seat count numbers are somewhat suppressed.

[Keith Bachman:]

Yes. Understand. Okay. Well that leads into my second question then because I want to return to competition and just to make sure, I poke this more directly in that, it's understandable that your attrition rate is going up because you do have some exposure to the SMB community. So lower seat count South Africa things along those lines. So I think it's totally understandable that your seat count is getting a little bit of pressure. But to ask it more directly are you seeing customers migrate away from Mimecast to a competitive offering in the course of this crisis. In other words, are you losing share directly that's impacting the attrition, or is the vast, vast super majority the seat count and things like that?

[Rafe Brown:]

Certainly what we've seen thus far in the crisis, it's been really seat count driven is the biggest driver for where we've felt the crisis. And I think that was particularly so in that first quarter. As I called out earlier, we're worried about some of the companies making it through the crisis that are really directly impacted industries. So those are our two biggest concerns by far.

[Keith Bachman:]

Okay. So in other words, you're not seeing more customers just go native with Microsoft. And that's crowding you guys out at all.

[Rafe Brown:]

I called out a little bit in the net customer numbers on the very, very low end of the business but the real dollars and the big trend are as I described.

[Keith Bachman:]

Okay, fair enough. Many thanks. Best of luck.

[Operator:]

Thank you. Our next question or comment comes from the line of Daniel Bartus from Bank of America. Your line is open.

[Daniel Bartus:]

Hey guys, thanks for taking the question. Maybe just one is a little bit more for you Rafe first. Your exposure to the impacted industries I think was 14% to 20% last quarter. Wondering if you've guys seen any notable improvement in any vertical sense you gave that metric? And if you think the 14% to 20% is still the right way to think about your revenue exposure right now?

[Rafe Brown:]

Yes. And that's right. The 14% just to make sure we're all on the same page as our hospitality, transportation, retail and oil and gas was in there. It's a relatively small amount. Then we have approximately an extra 7% and 7.5% in the medical space. So not surprisingly that especially within that 14% group was the group very directly hit during the quarter. And so, that's playing out as you would expect. And no real change is there. I would say the -- on the hospital side or the medical side, it's been a bit of a mixed bag. There's instances where people were looking for better security responding to new attacks that were coming their way. But then likewise a lot of medical groups are under some severe financial pressure whereas elective surgeries and whatnot dried up. So that was been a bit more of a complicated read. It's kind of differs on a case-by-case basis.

[Daniel Bartus:]

Got you. Got you. That makes sense. And then just on the churn, it's good to see it was flat at 7%. It sounds like it's going to 8% in your assumptions. But can you just talk a little bit about the improvements you guys have made to customer success? Are you guys starting to see those investments bear fruit? And could that be a potential offset to the COVID headwinds in the second half of the year perhaps? Thanks.

[Rafe Brown:]

Yes. No, I think that's a great point. One of the things that we've talked about over the last few quarters is Pete brought in a new leader to run the customer success group. She's implemented and is continuing to implement improvements in the group, a lot of which we're really focused on making sure we are properly matched having our very best people working on the big enterprise accounts, make sure they weren't -- those enterprise accounts weren't siphoning off too many resources from other parts of the business. And then really getting to know the accounts and get the early warning mechanisms if you will built into the system. So we can get out in front of potential churn risk. And I think that is starting to pay off. We've seen a notable improvement in enterprise large account level downsell and churn over the last couple of quarters. So that has certainly been encouraging. So I think to answer your question, and as this plays out, I do think that there are fruits of that labor out there for us. It's unfortunate that it's perhaps playing out in this environment. So it's not as readily apparent broadly.

[Daniel Bartus:]

Got it. Makes sense. Thanks guys.

[Operator:]

Thank you. Our next question or comment comes from the line of Jonathan Ruykhaver from Baird. Your line is open.

[Jonathan Ruykhaver:]

Yes. Good afternoon. I just have one question. It's regarding the security awareness training service and the synergies you see with the e-mail gateway products. How important is that in competitive situations, or is it the content that is the prime differentiator? Would you go-to-market?

[Peter Bauer:]

Yes, Jonathan, great question. So I think both of them are quite important. Certainly, we're a big believer in the power of content and the power of really well put together content, and its ability to change and shift the culture inside an organization towards being much more security savvy and away from being the weakest link in the security chain. So content is really important and we've put a lot of emphasis on that. Having said that, we think there are real advantages for us as a gateway provider in delivering the service. So couple of examples, the opportunity for us to take actual live attacks that are being targeted at the customer defang those and have those used by the customer as phishing simulation tests, we think is really compelling. So this capability that we talk about now is as safe phish, which will be coming out in our product shortly we think is really compelling. The other thing is that we have really good telemetry on what customers -- what the customers end users are actually clicking on. So, for example, we rewrite all of the URLs that come through e-mails on an inbound basis. And we can monitor what the clicking behavior is on those URLs, regardless of whether the URL is bad or not. When an end user clicks, we're going do that real-time lookup. So we know that the person has clicked something bad. And we can stop them from going there, but we can record the fact that they behaved in a risky fashion. One of the things that we've seen, which we thought was really interesting was our customers that have bought our awareness training product, which is about 2,300 across our base. The propensity of their users to click bad links is 5.2 times lower than the propensity of the users in our broader user base. So that shows us some really good evidence of the power not just of our awareness training product, but the value of being able to show that telemetry through the integration of the gateway service and the awareness training platform.

[Jonathan Ruykhaver:]

That's interesting. That's very helpful too, Peter. Thank you very much.

[Peter Bauer:]

Great, Jonathan.

[Operator:]

Thank you. I'm afraid, we have time for just one more question. Our final question will come from the line of Joshua Tilton from Berenberg. Your line is open.

[Joshua Tilton:]

Hi, guys. Thanks for taking my question. I just wanted to follow-up on Saket's question. Has the momentum around the Zone two products slowed at all in the current environment? And if so, how do we think about their contribution to upsell and cross-sell today relative to what bakes into your full year guide and even the long-term growth targets that you presented at the Investor Day?

[Rafe Brown:]

So of our emerging products the more mature of the set live in Zone 2. And that's the internal e-mail protection solution as well as the awareness training solution. The other emerging solutions are just a little bit newer and working off a smaller base. I think what we benefit from with the Zone 2 solutions is that they've been out there a bit longer. The sales team is just much more accustomed at presenting them to customers. They know the ins and outs. They know how to help make people successful. And so I think that gives us quite a bit of confidence in their future in the organization. And in the investor deck, you'll see in particular IEP had a strong quarter in terms of just the number that have been deployed out there. Awareness training is continuing to grow. So I think we have quite a bit of runway from those products. And certainly, as we look forward, whether it's just the short-term or the midterm, they're going to be an important part of that story.

[Peter Bauer:]

Yes. What I would add to that is that we have some seasonality with this having been our Q1. So we have a peak of momentum that comes through in our Q4 typically and this is just one of the rhythms of our business. And then our Q1 has had seasonally lower and it builds up through the year. So I think COVID probably compounds that a little bit as we look back at it. But I would definitely factor that in to our observations as well.

[Joshua Tilton:]

That was helpful. And then if I could just follow-up. You guys highlighted that very large U.S. retail customer win in the quarter. Could you call out any specific reasons, why that customer chose Mimecast over the incumbent solution in the space?

[Peter Bauer:]

Yes. I think dissatisfaction with the incumbent was one factor. But I think they really liked our cloud-native platform. And the fact that this is built from the ground up with the inherent scalability and reliability and the open APIs and the future-proof nature of the way our platform is built and architected and the kind of agility that it offers them as a very large and distributed and dynamic organization. So I think the technological superiority of what we offer, the focus and attention of what we demonstrated to them during the sales cycle. Of course, efficacy is a key factor for these larger organizations. So it was a number of factors, but we were selected, I believe because we can solve the problems as they see them going forward in a far better way than the incumbent was able to convince them.

[Joshua Tilton:]

That was helpful. Thanks for sneaking me in.

[Peter Bauer:]

Thank you.

[Operator:]

Thank you. I'd like to turn the conference back over to the management team for any closing remarks.

[Peter Bauer:]

Thanks. Thanks for joining our Q1 FY '21 earnings call. We've enjoyed presenting our results to you. And stay safe and healthy out there.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.