“As we look out into remainder of the year, we expect some of the pressure from this dynamic to ease because more of the pipeline expected to close in the second half has started as SaaS rather than as on-prem deployments.”

In context

“n margin are trending in a positive direction, which highlights the encouraging progress of our SaaS transition. The momentum seen in Q2 is being driven by Varonis SaaS, which is resonating with our customers and our salesforce. Our second quarter SaaS mix represented 58% of new business and net new upsell ARR versus our guidance of 35%. After only 2 quarters into the transition, SaaS now represents approximately 10% of the total company’s ARR. The average deal sizes realized in Q2 gives us incremental confidence in the 25% to 30% pricing uplift and margin structure that we previously provided. In the quarter, we once again saw reps introduce Varonis SaaS to customers where an on-prem subscription quote had already been provided, which interrupted the sales cycle for some of these deals. As we look out into remainder of the year, we expect some of the pressure from this dynamic to ease because more of the pipeline expected to close in the second half has started as SaaS rather than as on-prem deployments. This is already factored into our guidance. In the second quarter, a significant amount of SaaS deals were sold to new customers, but we did see an increase in existing customers converting to our SaaS offering. This was in line with the commentary that we provided last quarter on our increased pipeline but was well ahead of the amount that we factored into guidance. In the second quarter we had approximately $6 million in conversions of existing customers impacting our Q2 revenue. These conversions are being driven by both customers and our salesforce. Customers want the automated protection of Varonis SaaS and our sales reps can earn commission dollars on the incremental dollars sold because SaaS deal sizes are larger. To be clear this positive momentum in converting customers is happe”