MobileIron, Inc.
Q2 2020 Earnings Call Transcript

Published: 30 Jul 2020

[Operator:]

Welcome to the MobileIron Second Quarter Fiscal Year 2020 Financial Results Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Erik Bylin. Please go ahead.

[Erik Bylin:]

Thank you, Christine. Good afternoon. And welcome to MobileIron’s second quarter 2020 financial results conference call. Joining us from the company are Simon Biddiscombe, CEO; and Scott Hill, CFO. The format of the call will be remarks by Simon, then Scott will provide details on the financials. We will then have time for questions. If you have not received a copy of today’s press release, please go to MobileIron’s Investor Relations website at investors.mobileiron.com. Today’s conference call contains forward-looking statements that involve risks and uncertainties, including statements regarding MobileIron’s revenue, operating expenses, GAAP and non-GAAP financial metrics, product releases, projections, and trends. All of these forward-looking statements are subject to a number of significant risks, uncertainties and assumptions. Actual results could differ materially from the statements made on this call. Please see the Risk Factors section of our SEC filings. All statements made on the call are made as of today. We assume no obligation and do not currently intend to update such forward-looking statements. If this call is reviewed after today, the information presented during this call may not be current or accurate. With regard to non-GAAP financial metrics, while we believe them to be helpful in understanding MobileIron’s financial performance, they are not meant to be considered in isolation or as a substitute for comparable GAAP metrics. They should only be read only in conjunction with MobileIron’s consolidated financial statements, prepared in accordance with GAAP. A reconciliation of the non-GAAP financial metrics to the GAAP metrics can be found in our press release and on the Investor Relations page of our website. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project certain charges and expenses. Unless otherwise stated, results shared today will be non-GAAP. At this time, I would now like to turn the call over to Simon. Please go ahead.

[Simon Biddiscombe:]

Thank you, Erik, and good afternoon. In my remarks today, I will provide a brief overview of our second quarter financial performance, comment on our recently added anti-phishing capabilities, speak to our expanding relationship with Apple and then share some recent customer successes. First and most importantly, I am happy to report that the team of MobileIron remains largely safe and healthy. Our company remains in work-from-home mode and I am extremely proud of how resilient our team has been. MobileIron is executing at a very high level and that can be seen across all aspects of our business. Now, I will provide a brief overview of our results. Revenue in the second quarter was $58.9 million, a record for MobileIron, a growth of 16% year-over-year. Importantly, this is the first quarter in four years that both the U.S. and international revenues grew in double-digits. Our revenues benefited from both the end of sale of perpetual licenses and from incremental demand for work from home use cases. Leveraging our revenue and operating discipline, we delivered record non-GAAP operating profit of more than $5 million were 9% operating margin. We exceeded our AAR guidance coming in with 9% growth year-over-year. And just one more comment on our work-from-home program. We drove millions of dollars in opportunities in Q2 and brought in many new logos. While our free trial ended in June, the work-from-home program is still a strong sales play and we have significant opportunity to for this quarter and next. The end of perpetual licenses for MobileIron marks the culmination combination of our transition to a subscription led recurring revenue model. This aligns with what we have seen in the market at large and is clearly reflected in our customer interactions over the years. Preferences have shifted toward our subscription model. We are excited about the next chapter, and the simplicity that this brings to our business, both for our customers, internal teams and investors. While uncertainties around the pandemic will persist for some time, one thing is clear. Remote work is part of the new normal or as Gartner has stated, the age of the Everywhere Enterprise is upon us, for customers, workers and infrastructure converge from anywhere to connect. And Everywhere Enterprise requires an IT operating model that supports customers everywhere, enables employees everywhere and it manages the deployment of business services across distributed infrastructure. Early forecast suggest that three quarters of organizations plan to permanently shift to more remote work post-pandemic. Companies to succeed in this new environment, security is critical to the safe and seamless operation of remote work force. Hackers are exploiting enterprise security gaps that have only become wider amid this pandemic and are increasingly targeting mobile devices and applications. The burgeoning source of security breaches is phishing. In fact, 60% of IT decision makers believe that phishing is the most significant mobile security threat faced by their organizations. The 2020 Verizon Data Breach Investigation Report backed this. It found that credential threat and social attacks caused the majority of breaches and nearly one quarter of data breaches now involve phishing specifically. As the innovation leader in mobile security, we were thrilled to recently announce multi-vector, mobile phishing protection to help defend against these prominent cyber security threats. Built on our leading UEM product, our solution offers immediate on-device phishing protection drove a Threat Defense product even when it is not connected to the Internet. As with access and Threat Defense, there is no end-user action required to deploy phishing protection on managed devices, so companies can ensure 100% user adoption without impacting productivity. This is extremely important as other solutions that require end-user action where an app needs to be downloaded, installed and activated only achieve around 27% user adoption success rate. However, as we saw recently with the Twitter hack to create a truly secure organization employees and IT organizations need to take that extra step to completely liberate themselves from passwords. Our zero sign-on solution deploys password-less multi-factorial authentication to make your device your identity and removes passwords from threat landscaping entirely. In the Twitter hack the vulnerability was the log-in and password combination. With Twitter using our zero sign-on approach the only means to access the service would be through a verified device that it performed biometric verification and confirmed that the right person, with the right app and the right location is trying to access the information. Given that, we are confident our zero sign-on capability could have stopped this attack as there is no ability to share log in credentials. Additionally, Twitter experienced a follow on phishing attack. With the phishing protection in our Threat Defense solution, we again are confident we could have mitigated this aspect of the attack. As a testament to the great progress we have made on another front, our macOS solution, we are also excited to share that MobileIron has been invited to participate in Apple’s Partner Program for unified employee management. This is very special for MobileIron as we joined in a very small set of partners that Apple endorses and promotes. We have been working for a long time to get to this point and we see this is tremendous validation of our best-in-breed technology from the very manufacturer of the devices we are helping to secure. Previously, Apple was only able to endorse scan [ph] for native support of macOS environments through the program. And given how, given our stronghold in iOS and increasing momentum in the macOS market, we are excited about the opportunities this will create for MobileIron. I am also pleased to share that we had a solid first quarter with incapptic Connect, the company we acquired last quarter. incapptic Connect is the leader in mobile app release software, a critical component of app development and distribution that automates the process of validating that the app is ready for publishing and then publishing it for use. With the same buyer as UEM, this is an extremely synergistic acquisition and our sales team is excited to have another leading product to share with our customers. And now I’d like to share some details on a recent update to our leadership team. Last week I was thrilled to appoint Christof Baumgärtner to the position of Chief Revenue Officer of MobileIron. Christof joined MobileIron in 2010 and has built a deep understanding of our products and our customer’s needs and during his years leading the European sales team, did an incredible job, building a team and driving growth. Over the last several months, it has been exciting to see him step up and bring a new level of enthusiasm and passion to the worldwide sales team. I look forward to seeing him continue to shape the success of the global go-to-market team moving forward. And with that, I would like to touch on some customer wins from the quarter. I am pleased to tell you that AllianceBernstein, a leading global investment management firm with over $500 billion in assets under management chose to expand their relationship with our broader portfolio to enable their work from home requirements. Our customer since 2010, they needed to ensure their employees can work remotely in a safe and seamless way with high confidence that they wouldn’t compromise the security of their clients’ financial data. With thousands of employees spread over 25 countries, the solution had to be easy to deploy. Even MobileIron status as a trusted partner coupled with our platform superb functionality and expanding customer support, it was an easy decision for AllianceBernstein to grow with MobileIron. I believe this expanded partnerships speaks volumes, the combination of our best-in-breed security offerings with superior customer support and the impact we can have with customers, a secure and remote work becomes increasingly important. We won a new logo in a rep from a competitor of Trafikverket, the Swedish Transport Administration. Trafikverket is responsible for not only the long-term planning of Swedish Transport system across road, rail, shipping and aviation, but also building and managing these connected systems. Dissatisfied with their prior mobile security provider, the agency was eager to find an efficient way to secure and manage dozens of devices for a workforce that is constantly on the move without disrupting productivity or functionality. MobileIron not only demonstrated value from the seamless functionality and reliability with our offerings, but also through the responsiveness of our team. As Trafikverket directive is to develop and run an efficient and sustainable transport system for all modes of transport, we at MobileIron are similarly aligned, now the goal of providing a better mobile work experience for their employees across any device. We also continue to make strides in the government vertical domestically and I am pleased to share that we secured a deal with the United States Department of Agriculture or USDA, the government agency that forms policies on farming, agriculture, forestry and food. The USDA was looking for the optimal solution to maintain employee productivity, while ensuring confidential federal data stay secure. The 29 agencies across more than 4,500 locations worldwide, the USDA is well aware of the challenges of deploying and securing apps across different devices, operating systems and locations, which made MobileIron a clear choice to deliver an optimal solution. Thanks to our innovative and comprehensive platform, USDA field agents will be able to access productivity apps on their mobile devices to do their jobs securely and from anywhere. And with that, I will turn the call over to Scott. Scott?

[Scott Hill:]

Thank you, Simon, and good afternoon. Today, we will be discussing non-GAAP financial measures unless otherwise noted. Our press release, Form 8-K, and website, investors.mobileiron.com, provide a reconciliation of GAAP to non-GAAP financial results. Now, I will review the financials. Revenue in the second quarter was $58.9 million, a record for MobileIron, a growth of 16% year-over-year and exceeding the high end of our guidance range by $6.9 million. The second quarter marked the end of perpetual license sales and we saw strong demand for perpetual licenses incremental to our forecast as the quarter came to a close. In addition, we saw strong demand for our cloud services with revenue growing 20% year-over-year. We ended the second quarter with ARR of $187 million, a growth of 9% year-over-year above the high end of our guidance. Our ARR results clearly benefited from our work-from-home initiative. Our subscription ARR was $120 million, up 13% year-over-year and our maintenance ARR was $67 million, up 2% from last year. Our dollar-based net retention came in again at 103%. Gross margin in the second quarter was 82.3% above the high end of our guidance aided by strong perpetual license sales and operating expenses came in on target at $42.9 million. For the second quarter we reported a record operating profit of $5.6 million for an operating margin of 9.4%. We delivered net income of $5.1 million or $0.04 on a per share basis. Moving to the balance sheet, we ended the quarter with $87.7 million in cash and short-term investments and continued to have no debt. In Q2, cash used in operating activities was $5.8 million, reflecting normal seasonality. As a reminder in the beginning of the second quarter, we paid approximately $6 million to acquire incapptic Connect. We did not repurchase any shares in the quarter. In Q3, we expect to increase our cash balance by about $3 million. Unearned revenue was $113 million at the end of June, up 6% from $106 million a year ago. Next, I will cover our outlook. But first I’d like to provide a reminder on how removing perpetual licenses from the mix will affect our revenue moving forward. Starting this quarter, we expect customers who would have previously purchased new perpetual licenses to instead buy new seats in on-premise subscription form. The in-quarter revenue recognition for on-premises subscriptions is considerably lower than perpetual licenses. So given that we recognize $6 million in perpetual license in Q3 last year, we will see a revenue headwind of approximately $4 million to $5 million in the third quarter. By Q3 of next year, we believe our ARR and revenue growth should align tightly as the perpetual headwind disappears. Given that, our ARR growth just reflects the true rate of growth of the business. For the third quarter of 2020, our guidance is as follows. We are projecting revenue in the range of $48 million to $51 million or down 5% year-over-year at the midpoint. The decline is almost entirely due to the removal of perpetual licenses. We expect non-GAAP gross margin to be approximately 78%. We expect non-GAAP operating expenses to be in the range of $43 million to $44 million. Also as business activity stabilizes, our visibility into deal flow has improved, given that we are comfortable raising our revenue guidance and reinstating our ARR guidance for the year. For the full-year 2020, our guidance is as follows. We expect revenue to be in the range of $203 million to $210 million, up 1% at the midpoint. We expect ARR to grow between 9% and 11% by the year-end. We expect our non-GAAP operating margin to be between negative 5% and negative 7%. I would also like to highlight that with $88 million in cash and no debt, we believe we have sufficient liquidity to navigate the current environment and our transition to a subscription led business. And with that, we can open up the line for questions.

[Operator:]

[Operator Instructions] And your first question comes from the line of Scott Searle with Roth Capital. Please go ahead.

[Scott Searle:]

Hey. Good afternoon. Thanks for taking my question. Guys, really nice job on the quarter in a difficult operating environment. Maybe just to dig in quickly, on the core business, could you give us an idea about what the churn was looking like in the quarter certainly had good numbers, but what that was looking like in the core base? And then if you could quantify a little bit for us, the work-from-home adoption trends or attach rates that you are seeing with some of those customers will be very helpful on that front? Then I have had a couple of follow-ups.

[Simon Biddiscombe:]

Yeah. I will let Scott take the first part that relative to the dollar retention, as you know, Scott you no longer talk about June as such, we are just talking about dollar retention. So I will let Scott take that on and then we can to double click.

[Scott Hill:]

Yeah. So thanks Scott for the question. Our net dollar retention did improve in the quarter, you don’t see it in the rounding, but it improve -- it’s improved by about a point in the quarter, so it definitely more favorable this quarter over last.

[Scott Searle:]

Yeah. And then on the work-from-home, could you just give us some color in terms of what’s the early data looking like in terms of conversion rates, the opportunity, pricing to help us kind of quantify that going into the second half of this year?

[Simon Biddiscombe:]

Yeah. I will think that perhaps Scott. So as I look at -- I will start with the overall trend, okay? There’s no doubt that for companies to succeed in this new environment security and management are critical to being the seamless operation of that remote workforce that’s what we thought for an extended period of time and the recent quarter has continued to demonstrate that. What I said in my prepared remarks was, the work-from-home program had actually driven many millions of dollars in opportunities in Q2, some of which closed in Q2 and some of which have rolled into Q3 and some are even rolling into Q4 at this point in time. So we see incremental opportunity from the work-from-home scenario across both existing customers and across new logos as well. In terms of the impact to Q2, you really have to think about it on an ARR perspective at that point in time, given that many of those customers didn’t close transactions, especially if they were part of the use it for free until June 15th program. There was very little revenue contribution in the quarter obviously. So if you think about it within the context of the value-added to ARR by far and so if you look at where we came in routed to the guidance that we provided, we were about $4 million above the midpoint of the guidance. The vast majority of the upside associated with them was driven by the work-from-home program and call it stronger demand for the base set of technologies broadly, okay? What we have talked about is that we expect certainly that set of technologies to continue to experience benefit as we work through the second half of the year, where we have seen just a little bit of a slowdown is with some of the more transformational projects. So for example, when we were trying to take a customer from on-prem solution to a cloud solution, which has ARR upside attached to it. Some of those programs have slowed a little, primarily because our customers want to be 100% confident that there will be no impact on their remote workforce, as they are trying to perform their tasks on a day-to-day basis. So, most of our customers ahead of time focused on making sure employees can do their jobs on a day-to-day basis and not necessarily taking on more transformational projects that could introduce risk into that. But we are seeing significant opportunity and impact in the business from people just working from home and broadly from that remote worker use case.

[Scott Searle:]

Got you. And two last quick questions, if I could and then I will jump back in line. The guidance of $203 million to $210 million, if I assume the midpoint this quarter, at the lower end of that range, could be down as much as, I think, 10% sequentially into the December quarter versus kind of up seasonally in line, kind of wonder what the thought process is there, if there’s something that you are seeing that you have included that scenario really into the forecast or if you are being conservative? And then just real quickly Simon on zero sign-on, could you just kind of give us an update in terms of how you are thinking about it in terms of, moving it into the marketplace, pricing, adoption, et cetera, and how we should be thinking about that going into 2021? Thanks and nice quarter.

[Simon Biddiscombe:]

So let’s go…

[Scott Hill:]

Yeah.

[Simon Biddiscombe:]

…with the guidance report first.

[Scott Hill:]

Yeah. Let me take the first one here. So the decline in revenue was really about the lack of perpetual license. So eliminating perpetual license from our mix is going to bring that revenue growth rate down for a period of time, as we transition over the next four quarters. That’s really the dynamic there.

[Scott Searle:]

Hey, Scott. My apologies. Just to clarify, I meant, from third quarter into fourth quarter, I am looking at the guidance, there’s a wide range there kind of given that you framed the third quarter outlook already. So just kind of what your thought process is then going specifically into the December quarter, if there’s something that we should be aware of?

[Scott Hill:]

No. Nothing in particular. It’s just the further we get out of the less visibility we have in terms of, in terms of what business is actually going to close six months from now or five months from now.

[Simon Biddiscombe:]

And Scott, we always want to be conservative as it relates to thinking about some guidance as uncertainty as it relates to every quarters, right, so always our mode of operation in that regard. Zero sign-on, okay, so, yes, we actually saw a significant traction of zero sign-on in the most recent quarter. You have to think about it within the context of use cases. So if you think about managed mobile devices, the iOS and Android got a whole series of different customers using our solution for a passwordless authentication that gets you to the various different services you need to be able to do your job. So you think of the trusted user and trusted device, trusted applications. For managed iOS and Android devices, we have got those solutions in the market. We also have our first customers for unmanaged PCs in that case so we have got a handful of customers we use now with technology, zero sign-on on unmanaged devices and they are PC scenarios in that case. So we are seeing exactly as I’d expected to, as you know, the products were going to be rolled into the market over an extended number of quarters based on those specific use cases. We delivered for the use case for unmanaged PCs in the most recent quarter. We have got customers up and running on that platform at this point in time. In terms of the pricing for that solution, the pricing is that list price, $36 per user and that’s obviously an upside to the UEM capability that we may already have on that device and the pricing is somewhat consistent with what you might expect from a list price perspective in the MFA market, Scott, so that’s kind of how we thought about the pricing attached to those products. So still, obviously, very early days, but I am pleased with where we are both on unmanaged devices and managed devices, and more to use as more use cases is helpful in the coming quarters.

[Operator:]

Your next question comes from the line of Chad Bennett with Craig-Hallum.

[Chad Bennett:]

Great. Thanks for taking my questions and kudos on the quarter in this environment. Nice job. And then it’s great also to see the, obviously, the overall rev guide increased for the year, but also the reinstatement of ARR. So I just want to follow-up on some questions on ARR in the 9% to 11% growth rate implied in the guide. Just kind of thinking about puts and takes to that, I mean, we effectively put up I think 9% ARR growth you said in the June quarter, it grew around 8% the March quarter, so kind of towards the bottom end of that range or a little bit below. Considering you know the struggles we had in bookings in EMEA second half of last year starting in that September quarter that has to be a bit of a kind of tailwind so to speak this year. Then also we have work-from-home and then we have the free users that we are hopefully monetizing in the second half here. So what would be the -- in a roundabout way I guess, what would be the headwind to ARR in the second half of the year and why wouldn’t ARR growth accelerate -- and accelerate pretty decently?

[Scott Hill:]

Yeah. So the headwind as we talked about last quarter, as we were seeing kind of strength upside which obviously materialized in the results around the UEM platform. But we were seeing challenges on our transformational opportunities, which have more ARR in them. So the adoption of DSO, conversion to the cloud, some of those initiatives and the things that would be holding us back relative to you know our original expectations. But the other parts of the business, obviously, did well this quarter continue to drive the business forward from an ARR perspective, we were going to have in the second half as a pure subscription company, we get more ARR out of every seat sold. So those are some tailwinds that are going to happen. But there are still some headwinds in the business as a result of the COVID-19 work-from-home situation.

[Chad Bennett:]

Okay. And then, Simon, maybe for you, can you expand and give us maybe a real time update on the monetization efforts around the free offer to the existing base. And then, I think, frontline potential new customers, obviously, only had a couple of weeks at the end of June to really monetize that. But can you give a kind of end of July update on conversions there?

[Simon Biddiscombe:]

Yeah. So the conversion rate is very high and part of the reason for that is that a significant amount of that activity was with existing customers, right? So if you think about our business broadly, roughly two-thirds of our expansion typically comes from existing customers and then one-third of our new business comes from new logos, right? So for us the relationships with those customers that we have had in many cases for years-and-years, is that much more critical as it relates to monetizing those opportunities. Now, there’s a whole series of those customers who didn’t take advantage of the actual free campaign, so more of that attached to new logos than we did to existing customers, for existing customers that we just buy more product and roll it out as quickly as you can. So being able to separate the capacity that exists from the was free for the first 60 days of the quarter or 60 days of the campaign and then customers had to pay for it versus the millions of dollars of incremental pipeline that continues to exist is a little bit difficult chat. So, when I look at it just, okay, how much total, how much total pipeline exists, relative to the work-from-home program not just the campaign or activities that we attach to work from home. And that continues to be many, many millions of dollars of incremental activity that we have the opportunity to close in Q3 and then in Q4. There is even one deal believe it or not goes all the way to Q1 at this point in time.

[Chad Bennett:]

Okay. And then maybe one last one for me, just digging into a little bit regarding the Apple Mac opportunity and your new partnership there. I guess, first question would be, Simon, could you give us a sense in the existing base what the makeup would be of Mac or iOS devices if you have kind of a rough number or range?

[Simon Biddiscombe:]

Oh! Yeah.

[Chad Bennett:]

And then secondly, just real quick, the Apple partner program that you are now involved in, can you just describe what it took to get you over the finish line there and maybe how exclusive that program is? Thanks.

[Simon Biddiscombe:]

Yeah. Yeah. So if you think about the install base of devices that we have under management of security at this point in time, well more than half is iOS devices at this point in time, obviously, and then you have got a significant part of the remainder, that’s made up of Android devices. And then when you look at Windows and Mac, they tend to be a much smaller part of the total pie of devices that we have got under management at any point in time, okay? So for us, the iOS relationship with Apple’s always been strong, been back in their Preferred Partner program and I was obviously critical to making sure that we have everything we would expect from an access to the field, from an access -- early access to technology and so on respectively, okay? So on just iOS there’s benefits attached to it. But for us it’s also the case that macOS becomes that much more critical and Apple was completely willing to embrace what we are thinking about from a macOS perspective. And obviously, when we think about that different even that really the only competitor we have got in the market and things like about that. So for us, that market is, it’s not just about Apple, it’s about all forms of operating systems that the vast majority of our customers have in operation. We got very few customers that I would characterize as being Apple only. So we have been able to make sure that you can manage other operating systems across all types of endpoints becomes that much more critical. And frankly, we win, we win because of the great out of the box experience new employees who win, because the security framework that we apply across different employees. We win ease and update. We win key and compliance and so on and so on. So on, because the solution is ultimately cheaper. In many instances these are per user licenses, the per device or per user, I mean, in some cases people take advantage to use that when they want to manage macOS, as well as iOS, right? So for me it’s about making sure we continue to broaden that relationship with Apple, making sure that we deal with the Apple sellers, making sure that, its I/O product that is being thought of at the same time as other solutions that are in the market. What did it take to get there, making sure you have got to little test product. But at the end they will come back to the product and for us having the world-class macOS product in that case was critical to being able to get in mind shape we want [ph].

[Chad Bennett:]

Great. Great to hear sounds like a phenomenal opportunity for you guys. Thanks so much.

[Simon Biddiscombe:]

We are excited about it.

[Operator:]

Your next question comes from line of Nehal Chokshi with Northland Capital Markets.

[Nehal Chokshi:]

Thank you and congratulations on a strong result.

[Simon Biddiscombe:]

Thanks.

[Nehal Chokshi:]

Yeah. Absolutely. On the surface, it’s looks like all of the upside relative to consensus was on a perpetual license sales, which is a small pause has been with our cloud based. So, I am wondering if the incremental demand from the work-from-home programs -- program was largely all perpetual or did you see a significant portion of that actually contributing to the cloud process as well?

[Scott Hill:]

Yeah. So, let me take that one. So, first off, the upside we saw when we focused on ARR, right? As we said in our prepared remarks, we are focusing on ARR going forward given where share subscription, primarily subscription based company. So our ARR upside was about $4 million from the midpoint of our guidance, right? That was mostly driven by work-from-home and stronger demand. And so that, at the midpoint, we would have been $2.2 million, we are at $6.3 million. So, there wasn’t that much perpetual license revenue from the work-from-home campaign that was delivered in the quarter. Now obviously on the revenue side, we did have a strong performance in perpetual licenses that did drive that piece. But when it comes to ARR growth, that was much more grounded in work-from-home and just general demand for the product.

[Nehal Chokshi:]

Okay.

[Simon Biddiscombe:]

I think the thing I’d add to that that just helps build on what Scott said, Nehal, if you think about it within the context is dollar retention, right? As Scott, he don’t quite see it because it’s lost in the reign and the dollar retention actually increased about a point. And we saw both increases in ASP and increases in seats, obviously, we see that every quarter, but in seats -- increases in seats as well. So now that the program remains strong, you got to focus on ARR. That’s the critical message. If you focus on revenue, then the contribution from the work-from-home component programs, plural, is that much harder to isolate, if you focus on ARR, it’s much easier to isolate, given that much of that stacked up at the very end of the quarter from a contribution perspective.

[Nehal Chokshi:]

Okay. Okay. And talking about ARR, can you breakdown the 9% to 11% ARR growth guidance between net seat ads and upsells?

[Scott Hill:]

They are both contributing meaningfully in our outlook. So, I think, that -- but that’s only the detail I can give.

[Simon Biddiscombe:]

We are not going to break those eggs. Yeah, we don’t give that level of granularity.

[Nehal Chokshi:]

Okay. Could you talk about what drove the improvement in the net dollar retention rate?

[Scott Hill:]

I would say the upsell of -- we had a good quarter for MTD and then we had significant expansions. So those were the two drivers that were most material for the improvement.

[Nehal Chokshi:]

Okay. Great. And then my last question here is that, I believe Simon you -- when you were talking about the Twitter breach, you mentioned that you guys could have helped Twitter protect against it. Hey, did I hear that correctly? Is that -- first, is that, did I hear that correctly?

[Simon Biddiscombe:]

Yeah. We believe so is the answer, when we have looked into what we believe happened with the actual protect itself. We believe our technologies would have solved the challenge for Twitter, yes. But as with these things, typically there’s layers of complexity to what really happened and what we believe our technologies would have prevented it. I -- well, we are confident that our technologies would have prevented it. You are going to get to the reads of the detail.

[Nehal Chokshi:]

Okay. And are you aware of how they -- presumably they have remediated and are you aware of how they went about it? How they contacted you guys?

[Simon Biddiscombe:]

No. No. No. We wouldn’t ever expect somebody like that to talk to us about having remediated. It just opens up the risk profile again, right?

[Nehal Chokshi:]

Sure. All right. Thank you.

[Operator:]

And your last question comes from the line of Frank Sirius [ph] with Barclays.

[Unidentified Analyst:]

Hey, guys. This is Frank on for Raimo. Congrats on the quarter. Just one quick one for me. I was wondering if you could provide some color on to how the EU region is evolving from the issues a few quarters ago, kind of what drove the outperformance on international? Thank you.

[Simon Biddiscombe:]

So, the European region or international region broadly speaking is where we still have the majority of our perpetual license sale. So, the upside you saw there was from the end of sale prep was concentrated there. That being said, the region is performing better than it was in the past and so it’s kind of coming back. Has the same work-from-home challenges that we talked about with regards to our more transformational projects, right, we are not immune from that. But, when it comes to the overall demand of the UEM and that it is -- it has been improving and that is reflected in the numbers as well and a good bit of our work from home campaign activity came from the international regions.

[Unidentified Analyst:]

Great. Thank you, guys.

[Operator:]

Thank you. I will now hand it back to Simon for any further remarks.

[Simon Biddiscombe:]

Thank you, Christine, and thank you all for attending today’s call. We look forward to updating you on our progress again next quarter. Once again, thank you for attending. Be safe and healthy. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating and you may now disconnect.