“As a reminder, we set a long-term target of 20% ARR contribution margins by 2027 at our investor day in March 2023 and ended 2024 at 16.6%, so we are well ahead of that plan.”

In context

“f time and effort for our sales team, and yet we still had strong results, despite this temporary productivity headwind. Our view is that when almost all of our customers are converted, we expect that our teams will become more productive primarily due to increased customer satisfaction with the SaaS platform and also a simpler selling process once a customer is on a SaaS contract. Because of this, we’re making a strategic decision to accelerate Phase 2 and now expect 78%, or approximately $580 million of our total ARR will come from SaaS by year-end, completing the transition two years earlier than our initial target and one year earlier than what we said last year. The strength of our business and the inherent leverage in our model have allowed us to show significant margin improvement. As a reminder, we set a long-term target of 20% ARR contribution margins by 2027 at our investor day in March 2023 and ended 2024 at 16.6%, so we are well ahead of that plan. The leverage of our model allows us to continue to show margin improvement, while making strategic investments to reaccelerate our top-line growth back to 20-plus-percent and capture the larger opportunity that we see developing. We expect these investments, coupled with sustained new logo momentum, will also enable us to continue to grow ARR at healthy levels this year despite the conversions taking more time and effort to do. In addition, we believe that accelerating the transition will better position us to accelerate our growth post-transition and will provide us with several benefits over time including, one, better sales productivity; two, better ability to upsell these SaaS customers; and three, further increases to our already healthy gross retention due to MDDR and the automation”