Tufin Software Technologies Ltd.
Q4 2020 Earnings Call Transcript

Published:

  • Ryan Burkart:
    Good morning, everyone and thank you for joining Tufin’s Fourth Quarter and Full Year 2020 Earnings Webcast. I’m Ryan Burkart, Director of Investor Relations. And with me today is Jack Wakileh, our Chief Financial Officer and Ruvi Kitov, our Chief Executive Officer. Before we begin, I would like to remind everyone that any statements made in today’s webcast that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company’s future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Tufin’s management team as of today and involve risks and uncertainties, including those noted in this morning’s press release and Tufin’s filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Tufin specifically, disclaims any intent or obligation to update these forward-looking statements, except as required by law.
  • Ruvi Kitov:
    Thanks, Ryan and good morning, everyone. Thank you for joining us today. I hope that all of you and your families are safe and healthy. I’m happy to be here with you today to review our strong Q4 results, reflect on 2020 overall and share our strategy for 2021 and beyond, as we work to drive durable long-term growth and expand our leadership in the security policy management market. As we achieve these goals, we will also create enhanced long-term value for our shareholders, as well as other stakeholders. To launch this effort, I’m very excited to announce that we begin a transition to subscription revenue model at the start of 2021, which we believe will dramatically improve the quality of our business when complete. Before I get into further details about subscription and other strategic initiatives, let’s review Q4 and the full year 2020 results. We finished the year on a strong note. Q4 revenues were a record $31 million, up 21% sequentially compared to Q3 of 2020 and up 3% year-over-year. Product revenue in Q4 was $15 million, up 50% sequentially and 5% year-over-year. It was very encouraging to see product revenues returned to growth and hit record quarterly revenues in Q4 following a challenging start to 2020. Demand for SecureTrack and SecureChange was strong and we started to see larger deals come back. We launched SecureCloud early in the year and its momentum continued to build. In fact in Q4, we closed our largest SecureCloud deal to-date. Renewals will remain strong, which will be increasingly important as we transition to a subscription model and our maintenance revenue grew 6% year-over-year. Overall, I’m pleased with our Q4 results. Our focus on improving sales execution throughout the year is starting to bear fruit. And last month, we announced that Ray Brancato has joined us as Chief Revenue Officer. Ray’s experience fits well with our strategy with several transitions to subscription in his track record. Stepping back and looking at the full year 2020, it was really a tale of two halves. The first half was one of the most challenging in our history as our business was severely impacted by the pandemic. Historically, most of our businesses closed in the last month of the quarter. So when COVID lockdowns spread in March, and our customers and end-users were tasked with securing a newly remote workforce, it was very difficult for us to close deals and our product revenues were impacted significantly. We responded to the environment quickly by reducing our cost to position the business to manage through the uncertainty. In addition to the overall challenging environment, we were in the midst of making significant changes to our sales execution processes to allow us to scale up the business over time.
  • Jack Wakileh:
    Thanks, Ruvi. Good morning, everyone, and thanks for joining us today. As a reminder, we issued a press release earlier today that contains our detailed financial results, which you can find on our Investor Relations website. I will only cover some of the highlights in my commentary this morning.
  • Ruvi Kitov:
    Thanks, Jack. This is an exciting time for Tufin as we embark on a new chapter of our journey and I want to talk about our vision for the next few years. Through 2024, as well as some of the key strategic initiatives that we’re working on in 2021, including our transition to a subscription model, which will help us achieve that vision. Before I get into our strategy, I want to remind you all of our mission, which drives our actions and decision-making at Tufin every day, simply put we help the world’s largest organizations, significantly improve their security and agility, and the way we do that is with security policy orchestration. Our value proposition goes beyond risk avoidance and compliance benefits typically associated with most security companies. With our automation of network change processes, we deliver a very significant ROI in terms of business agility. We ask customers, what does it worth to your business to be able to deploy application changes on the network in minutes, instead of days more securely and accurately than ever before. The network change process has been a security driven bottleneck. With Tufin’s policy driven automation, each change can be implemented in minutes, instead of days removing the chance of human error of opening security flows. This can massively accelerate the development and deployment of revenue, generating apps, providing tangible business value. As I mentioned earlier, we believe that our value proposition will become increasingly important for customers in the post-COVID era. Building on that, I want to talk about how we see the world of connectivity and access evolving over the next few years through 2024. We believe that most large organizations will have a hybrid network and use multi-cloud for infrastructure-as-a-service and platform-as-a-service. We see this already with some customers today, but we think this approach will become nearly ubiquitous with larger enterprises over the next three to five years.
  • Jack Wakileh:
    Thanks, Ruvi. I’m also excited about our shift to a subscription business model and believe that it will have a positive impact on our business in the long-term. Now, I would like to walk you through the key takeaways of this transition process and how we should think of its impact on our business in 2021 and beyond. first, we expect the transition to be gradual. as Ruvi noted, while we are driving over sales force to prefer subscription over perpetual, we are not forcing new or existing customers to move to subscription. We expected the transition of the vast majority of our business will occur over a period of three years. to clarify when we refer to subscription, that includes both term licenses and SaaS though keep in mind that the SaaS portion is not very significant currently, as these products were just launched in 2020. in 2021, we will focus on selling subscriptions to new logos initially. Our goal is to transition at least half of the new business from new logos into subscription for this year. overall, including the transitioning of some of our existing customers, new business with us, we are targeting approximately one-third of our total new business to come from subscription in 2021. Generally, we expect that the existing customers will take longer to transition and some like government and defense customers; for example, may prefer to remain on perpetual licenses for the longer-term. Traditionally, a majority of our business comes from our existing customer base. Second, we expect subscription to have a significant mix of multi-year deals. This is consistent with the nature of our business as large complex IT infrastructure projects like ours tend to be budgeted for more than one year. This may result in a lower impact on revenue from the subscription transition than you may have seen with other companies, including our peers. Third, as Ruvi mentioned, we began incentivizing our sales force to sell subscription over perpetual at the beginning of 2021. This represents a significant change in our sales incentives as prior to 2021. Our incentive structure was such that our sales force generally preferred selling perpetual deals. Finally, we will be reporting an ARR metric to help you follow our progress in building our recurring revenue, including subscription, which we are focused on as a management team. We define ARR as the annualized value of all recurring revenue related contracts in place at the end of the reporting period. as such, ARR includes the annualized value of active term-based subscription license contracts, SaaS contracts, and maintenance contracts related to perpetual licenses in effect at the end of that period. please refer to the detailed definition of our ARR in the footnote of this slide, which is posted on our Investor Relations website. The chart on the right shows our ARR for the last few years. And as you can see, it has been growing steadily, including 13% growth in 2020. I’m excited to provide you with this metric as I think it will serve as a good indicator of the growth of our business overtime. Initially, we will update this metric annually and provide you with qualitative commentary on our progress on a quarterly basis. Moving on to profitability. we see a large market opportunity in front of us, and we will continue to invest for growth to capture this opportunity during our transition. There are a few elements to this. first, we’re making a strategic investment in the model transition itself, which we believe will drive improved long-term growth and operating leverage. We expect to see these benefits as we are exiting the transition period. we will continue to invest in R&D to maintain and extend our technological leadership position. As Ruvi mentioned, we are building our next generation SaaS enabled platform and security policy management for the cloud. Our sales force and marketing efforts will continue to grow to capture the opportunity we see and our G&A is now scaled to support the business needs as a public company. moving on to our financial guidance for Q1 and for the full year. for the first quarter of 2021, we expect revenue of $20.6 million to $24.6 million, and we expect non-GAAP operating loss of $10.6 million to $7.2 million. for the full year 2021, we expect revenue of $105 million to $113 million and we expect non-GAAP operating loss of $38.4 million to $31.6 million. Please keep in mind that our guidance for Q1 and for the full year 2021 reflects our expectation that approximately one third of our total new business bookings will come from subscription in 2021. With that, I’ll turn the call back to Ryan and we’ll open the line for questions, Ryan.
  • A - Ryan Burkart:
    Thanks, Jack. We’ll open the call for Q&A now to indicate that you have a question, please click on the raise hand icon at the bottom of your screen. I’ll announce your name when it’s your turn to ask you a question and you opt to meet yourself at that point. Please limit yourself to one question and one follow-up initially, and then get back in the queue. I’ll pause for a second now to give people a chance to raise hands. Okay. Our first question comes from Sterling Auty at JPMorgan. Sterling?
  • Sterling Auty:
    Yes. Thanks, guys and thanks for doing it in this format. I think it’s very helpful. Just curious, in terms of the discussions that you’ve probably had with your customers – your existing customers around the shift, what’s been some of feedback that you’ve gotten in terms of interest and perhaps, even could you see some of those customers decide to move some of their existing based over subscription, even though you’re not actively looking to force that move.
  • Ruvi Kitov:
    Hi, Sterling. thanks for the question. So, when we look at customers, they’ve shifted predominantly to buy software on a subscription basis, right. Virtual software, I think has become an anomaly today. There’s a lot of benefits to customers. Obviously, there’s less risk, they’re buying one or two years at front. A lot of them are budgeting the OpEx versus CapEx already. And I think, also it’s a little bit more nuanced, but the subscription model really forces the vendors to pay a lot more attention to customers and provide a high level of customer satisfaction. And typically, I think customers are learning that vendors that are in subscription work harder to earn their trust and ensure that they’re satisfied.
  • Sterling Auty:
    Yes. That makes perfect sense. By in chance, is Ray on the call with us?
  • Ruvi Kitov:
    not today, but we might have on our future call.
  • Sterling Auty:
    All right. That would be great, because I’m curious and maybe, you can give a sense now. But when a new sales leader comes in, obviously the first thing they do is go and kind of inspect the troops if you will, see the research that they have that to work with, kind of curious what you’re thinking about in terms of maybe, a level of turnover that might be experienced in any potential disruption from that as he kind of takes the reins.
  • Ruvi Kitov:
    So, Ray’s been on board for a few weeks now. He hit the ground running. We have been working on sales process improvement throughout 2020. So, I think we’re going to a good place from that perspective. And from comments I heard from Ray is he’s pretty happy with the team that he has here. The team has been executing well and they had a very good performance in Q4 and I’m happy with that. So, I don’t think we’re going to see huge changes in the sales organization. I think we’re set up well and with right now, we’re ready for the move to transition – annual transition to subscription.
  • Sterling Auty:
    All right. Sounds good. Thanks, guys.
  • Ruvi Kitov:
    Thank you.
  • Ryan Burkart:
    Our next question comes from Saket Kalia with Barclays. Saket, are you there?
  • Saket Kalia:
    I’m. Can you hear me? Can you see me?
  • Ruvi Kitov:
    Yes, yes, yes.
  • Saket Kalia:
    Okay, excellent. Hey, thanks for taking my questions here and thanks for holding it in this format as well. Maybe, I’ll start with you, Jack. Very helpful disclosure, just on some of the mechanics of the transition. We’d just love to dig a little bit deeper into the accounting if we can. I think you said in your remarks that this is probably going to be a little bit more of a term license transition as opposed to SaaS, right. SaaS is still very small. So maybe, you could just clarify that for us. And perhaps just as importantly, around the term license contracts, can you just remind us around the accounting? What’s the carve out can be like, is there a – are there any cancellation clauses, especially since these are multi-year, any detail just sort of the accounting behind term that you can sort of level set for us?
  • Jack Wakileh:
    Yes. Absolutely, Saket. So, when you’re looking at SaaS and subscription, the accounting treatment is different. SaaS, which is a small piece, like you mentioned, is recognized over the period of the contract, right over the term of the agreement and its revenue is recognized over that period – periodically, monthly or whatever the agreement says. subscription that’s more like perpetual right, based on ASC 606, which we have adopted perpetual – sorry, subscription is going to be recognized product upfront. And then the support piece is going to be recognized over the term of the contract. So, pretty much like perpetual Saket, for subscription deals. Obviously, the piece that’s going to make a difference is that the scope of subscription deals may be smaller than perpetual deals to begin with. But in terms of accounting, like a one-year deal subscription, there’s the product, which is the majority of that contract – of the value of the contract. That’s going to be recognized upfront, just like perpetual. And if you have multiyears and we do expect some multiyears for subscription in our planning. again, that’s expectation, the same thing, even if it’s a three-year deal, then you’re going to take product out of the three years, recognize it completely upfront. And then the remaining support piece is going to be recognized over those three years just like answer in the respondent.
  • Saket Kalia:
    Got it. That’s really helpful. Ruvi, maybe, for you, a lot of helpful detailed some sort of the vision here, one of the things that we’ve seen with other subscription transitions in the past as customers more willing to buy additional product or perhaps vendors maybe dabbling in bundling, right to sort of encourage adoption of more product, anything that that’s factored into your plan or anything that’s sort of on the horizon just around building adoption of kind of different Tufin products, if you will, as part of the transition.
  • Ruvi Kitov:
    Thanks, Saket. So, when you think of our products, we have four main products, right; SecureTrack, SecureChange, SecureApp and SecureCloud. We charge an optional license for provisioning that enables customers to put changes automatically from securechange. Historically, we added more and more functionality for free within the products for any customer that had a valid support contract. moving forward, I think it makes sense that any significant and differentiated capabilities that we have that are new, will be separately licensed features or products, and we will build a much wider suite of products. Over time, I think it’s going to drive higher lifetime value from customers and it’s going to strengthen the lining spend model for sure.
  • Saket Kalia:
    Very helpful. Thanks, guys.
  • Ruvi Kitov:
    Thank you.
  • Ryan Burkart:
    Our next question from Andrew King with Collier’s. Go ahead, Andrew.
  • Andrew King:
    Can you hear me?
  • Ryan Burkart:
    Yes.
  • Andrew King:
    Great. Thanks, guys. So with your transition to subscription, can you talk a little bit as to how that might have any impacts on one-year sales cycle, then also your engagement level with your current customers?
  • Ruvi Kitov:
    Sure. so, we have already now, when we’re looking at subscription, we’re incentivizing the sales force to move to subscription and they’re working on transitioning some of their deals to subscription. So, we’re expecting some of the perpetual deals that we have in the pipeline to move to subscription that might impact some of the bookings that we have in Q1 and throughout the year, and we’re factoring that into our guidance.
  • Andrew King:
    Great. And then can you just talk a little bit as to really where the customer demand is coming in for SecureApp and SecureCloud, primarily within industries or any particular threat areas?
  • Ruvi Kitov:
    Sure. So when you think of SecureApp and SecureCloud, SecureApp enables application connectivity management for customers to be able to visualize what their apps look like on the network. And SecureCloud really gives visibility in policy management for workloads that are in the cloud or in Kubernetes. It’s not driven by any specific vertical or industry. It’s really any large organization that is moving infrastructure as a service or platform as a service to the cloud or to Kubernetes on premise. They’re going to need policy management within those environments. So it’s really customers taking a look at their entire state, understanding that they can’t really run a fragmented policy one for the on-prem and another one for the cloud. That’s a key driver for SecureCloud. And for SecureApp, the driver is primarily a visualization of application connectivity.
  • Andrew King:
    Great. Thank you.
  • Ruvi Kitov:
    Thanks.
  • Ryan Burkart:
    Our next question comes from Joe Gallo with Jefferies. Joe, are you there?
  • Joe Gallo:
    Yes, I’m here. Can you guys hear me?
  • Ryan Burkart:
    Yes.
  • Joe Gallo:
    Sorry about that. So, Jack, I have two questions for you. Really appreciate all the detail today, but I’m looking for a little more granularity when it comes to revenue recognition. So if we assume a three-year term license deal, how does the in-quarter recognition compared to the typical first-year perpetual deal plus maintenance?
  • Jack Wakileh:
    It’s pretty much the same, Joseph. If you have a $300,000 deal, let’s say, $100,000 deal is a one-year subscription, and then you’re selling upfront $300,000 for a three-year deal. So for that deal, let’s start with the $100,000. For the $100,000 deal one-year, the subscription suppose just on the numbers, suppose product is mid-70%s and support is mid-20%s, right, that’s 100% of the deal. Then you’d recognize all of the mid-75% if you like product upfront, just like we’re doing perpetual, and the remaining 25% is going to be spread over the term of the contract, which is one-year, right? If it happens in December, there’s going to be zero revenue for that year. If it happens in January, then all of the services – supports also would be recognized in the same year. When you go to our $300,000 deal three years prepaid upfront, actually it doesn’t have to be prepaid upfront. There are criteria in accounting, which qualify a deal to be committed enough to be recognized upfront. And this is the case in a $300,000 for three years, you would – the same level assume that all of the product right in this case, $200,000-plus is going to be recognized upfront in the quarter on the date of closing the deal. And then the remaining $100,000 if you like or less is going to be recognized over a period of 36 months.
  • Joe Gallo:
    Okay, awesome. That’s helpful. And then just in regards to the maintenance associated with those deals, is that recognized in the product line or in the maintenance line? And then maybe just help us think about how you see the maintenance line trending over the next couple of years.
  • Jack Wakileh:
    So in terms of revenue, that’s maintenance, right? It’s different than SaaS. Some companies have this as a product, once a part of SaaS. For subscription, that’s going to be maintenance just like perpetual.
  • Joe Gallo:
    Okay. So subscription’s maintenance will be allocated to the maintenance bucket still?
  • Jack Wakileh:
    Correct.
  • Joe Gallo:
    And then are you trying to transfer maintenance contracts, current existing maintenance contracts to subscription? Or is it just maintenance is recurring, so you’re fine with the existing customers staying on maintenance?
  • Jack Wakileh:
    So that goes back to the move, the transition itself. Currently, I think Ruvi mentioned that earlier, we’re focusing on transitioning new business, new business bookings that are coming in. We’re less focusing going back to existing contracts and trying to transition them. So we’re focusing primarily on new logos this year. We’re expecting transition to come from existing customers for their new expansion business, if you like, but not for their installed base. At some point, we may consider this as well.
  • Joe Gallo:
    Makes sense. Very helpful, guys. Thank you.
  • Ryan Burkart:
    Our next question comes from John Weidemoyer with William Blair. John, you there?
  • John Weidemoyer:
    I am. Can you hear me okay?
  • Ryan Burkart:
    Yes.
  • John Weidemoyer:
    Great. So I just wanted to start out with maybe the impact to cash flow from a shift to subscription and whether or not you think there’s anything that could have effect on that side.
  • Jack Wakileh:
    Hi, John. So just like I answered the revenue question, the impact on revenue or bookings, if you like, that would be a similar impact on cash flow, namely perpetual deals for us are paid upfront. Single year perpetual, sorry, subscription deals are going to be paid upfront. So they are pretty much similar as a perpetual deal would behave in terms of cash. We’re going to collect it upfront, no impact on cash flow in this sense. The impact on the cash flow is obviously going to come from the fact that subsequent deals may be smaller in size and reflect less – lower revenue and that’s going to roll down to the cash flow.
  • John Weidemoyer:
    Got it. And then I guess one thing I’m trying to understand a little bit better is that you’ve talked about all of these major trends, like zero trust, digital transformation, shift to cloud automation. And these are clearly top of mind investment areas for a lot of the companies and enterprises out there. I guess, given your size and scale, like why can’t Tufin grow even faster. Like what’s sort of holding back that growth? And just – like, I can’t imagine these areas are slowing down or not being prioritized. Like, can you just help us understand why? Just given your guidance and given there isn’t that much of a revenue headwind from the shift to subscription, you’re not going to see even faster growth in 2021.
  • Ruvi Kitov:
    All right. So I think when you look at Sunburst hack, really demonstrates the depth and breadth of malicious hacking in spying. No one is safe in every large company. It’s potentially a target. So I agree with you, it’s going to put more emphasis on security investment for large organizations and companies. They’re going to invest in security across the board, from endpoint to identity to access control. I expect that to be a tailwind. And I expect that to be more so when economic recovery starts. So that’s on the one hand. On the other hand, we’re coming off of a tough year within COVID, and also a lot of changes that we made to sales process and our move to subscription. So we’re taking all those factors into our guidance and we’re comfortable with the guidance that we gave.
  • Ryan Burkart:
    Hey, Jonathan, do you have another one? Good.
  • John Weidemoyer:
    I’m all set. Thank you.
  • Ryan Burkart:
    Okay, great. All right. Next question comes from Rob Owens at Piper Sandler. Rob, do we have you? Hey, Rob, are you there?
  • Rob Owens:
    I am. Can you hear me now? Sorry.
  • Ryan Burkart:
    Yes, yes.
  • Rob Owens:
    Technology. Couple of things with regard to the transition. I guess, first of all, did you quantify what the headwind on Q1 estimates might be relative to the transition? Understanding it’s small, but just try to put it in perspective.
  • Jack Wakileh:
    Yes, I think staying small is maybe a good way to put it for Q1. for us, Rob, it’s difficult to estimate the headwind like UT companies, more mature into the transition would provide. And for us, there are a few factors here to look at right before we try and estimate the so-called headwind. So, the pace of the transition of our existing customers is something that we feel still be too early for us to try and predict, right. And this – and if you remember the larger piece of our businesses is based on existing customers, so that small changes in the rest of the material can have a big impact on that headwind. That’s one factor. Another factor is the fact that we are expecting multi-year deals for subscription committed, and this can also have an impact – a different impact on revenue, right. I just explained to the colleagues that we’re going to recognize full revenue for three years, and if it’s committed upfront. So, that’s another moving target year. So as you can see, there are a few layers of estimates for a company like us at this early stage of the transition to come up with enough vision – sorry, visibility into the headwind. But having said that, like you were saying, we are expecting several million dollars for this year and a smaller piece in Q1. You have to remember the Q1, in the pipeline, we have deals that are – have been opened as perpetual from previous years, right. So, Q1 is going to have a smaller impact, but for the full year, you should expect the order of several million dollars.
  • Rob Owens:
    Sure. And just to level set, can you break out pro services either for the fourth quarter of 2020 as a percentage of sales, so we can understand what the actual maintenance component is in the line?
  • Jack Wakileh:
    I’m not sure we have – we provided that professional services. We’re showing product and services, I’d rather stay with what we’re providing, so that I don’t have to take actions with 6-Ks and if I’m going to be, but pretty much if you’re looking at our previous filings, perspectives and 20-F if you take the percentage there, it’s pretty much the same over the past years.
  • Rob Owens:
    Okay, great. And Ruvi maybe, quantify just where the pipeline sits as you look at 2021 versus where we were last year in terms of size of deals, quality, maybe, just give us some anecdotal color, that’d be great. Thanks.
  • Ruvi Kitov:
    Sure. We feel comfortable with the pipeline at this point in the year. I think it’s difficult to compare to pre-COVID. But it’s been improving steadily since the business began recovering the second half of 2020.
  • Rob Owens:
    All right. Thank you.
  • Ruvi Kitov:
    Thanks.
  • Ryan Burkart:
    Our next question comes from Andrew Nowinski with D.A. Davidson. Andrew, if you’re there, go ahead.
  • Andrew Nowinski:
    Great. Thank you. So number one, I guess I just want to start with a clarification. I think on one of the prior questions you had talked about cash flow, I didn’t catch it though. Will this transition have a negative impact on your cash flow?
  • Jack Wakileh:
    It may have a negative impact, Andrew, to the extent – just to accommodate the factor of subscription deals being smaller than perpetual deals, right. In terms of selling and collecting revenues that’s not going to have an impact. I explained earlier that a subscription deal be 20 year or committed three years, it’s going to be collected upfront. So that’s just the same as a perpetual deal of cash would behave. The impact is going to come from the fact – from the headwind deflect, from the fact that the piece that will transition to subscription is going to create less business for us this year.
  • Andrew Nowinski:
    Okay. So, you’re not concerned with cash position and the impact it would have on your cash coming, because you were burning cash for the last few quarters. I’m just want to make sure that you’re comfortable with the – where we’re at with cash position.
  • Jack Wakileh:
    Yes. I mean accounting for the cash expected, we’re accounting for the impact of the cash from the transition. But like I explained, it’s only relating to the part, where subscription deals are smaller than perpetual deals.
  • Andrew Nowinski:
    Okay. And then you had a – you did have a good Q4 as it relates to product revenue. I assume most of that was perpetual. Just wondering if you could parse out the contribution from the large $1 million deals in Q4 from that product line and maybe, compare that to prior quarters?
  • Jack Wakileh:
    Yes. So Q4, like you’ve seen, we experienced a good quarter and this was coming from large deals that we started to see coming back. It’s still not at the level that we were in the good quarters of earlier 2019 or even end of 2018. We still are not there, but certainly, compared to a week seven-figure deals at the beginning half of 2020, we certainly are seeing a recovery and we still have more to expect on multiyear deals – sorry, on seven-figure deals.
  • Ruvi Kitov:
    I just want to add to that. I think with the move to subscription over time, I would expect that reliance on very large deals to be smaller, because the average subscription deal is going to be smaller than the average perpetual deal. So, I see this actually is another benefit of the move to subscription that we will have fewer large binary deals every quarter, and that will lead to lower variability as a result.
  • Andrew Nowinski:
    Understood. Just one more quick question. Other vendors like Palo Alto have tried to; it looks like they’re trying to extend some of their capabilities with Panorama to manage other vendor firewalls, which seems to be more competitive to Tufin, being more of a neutral vendor that then integrates with all vendors. If I’m just wondering if you view them more as a competitor now going forward with that additional integration.
  • Ruvi Kitov:
    Not really. It’s not capability that enables them to really manage all their vendors’ firewalls. So, I don’t think they’re entering into our space and we don’t see them as a competitor. They’re a partner to us.
  • Andrew Nowinski:
    Got you. Thank you.
  • Ryan Burkart:
    All right. It looks like there are no further questions at this point. Thank you everyone. So, I’m going to turn the call back to Ruvi now for his closing remarks. Ruvi?
  • Ruvi Kitov:
    Thanks, Ryan. Just want to thank everyone for joining the call today. Really appreciate you spending a little bit more time with us than usual. I’m very excited about the opportunities ahead and our transition to subscription. I hope you’ll find today’s call to be a good overview and I look forward to speaking with all of you very soon. Thanks again, and have a great day.