“We expect non-GAAP loss per share for the full year to be a loss of approximately $0.07 per share, which is based on an anticipated 55.2 million basic weighted average shares outstanding.”

In context

“Jeff Kalowski (CFO): Thank you, Corey, and hello to everyone on the call this afternoon. Before I begin, a reminder that except for revenue, all financial results we will discuss today are non-GAAP financial measures, unless otherwise stated, and reconciliations between our GAAP and non-GAAP results can be found in today's earnings press release. Turning to results. We are pleased to report strong performance as we ended the third quarter with $550 million of annualized recurring revenue. ARR grew 38% over the prior year driven by organic acceleration in our security transformation solutions and sustained growth in vulnerability management, as well as the contribution from our newly-acquired threat intelligence software. Third quarter revenue of $139.9 million grew 33% over the prior year and exceeded the high end of our guidance range on strong underlying demand trends for our Insight platform. Revenue performance was led by upside in product revenue, which grew 33% to $131.2 million. There was also a modest outperformance on the professional services side, which naturally varies quarter-to-quarter. We continue to execute well on our international growth strategy, which when combined with a higher mix of Insight customers outside North America drove 58% year-over-year growth, bringing international revenue to 20% of total revenue in the quarter. North America revenue grew by 28% year-over-year and comprised 80% of total revenue in the quarter. We ended the third quarter with over 9,900 customers globally, which represents 17% growth from the prior year. The customer count includes slightly over 300 net new customers acquired as part of the Insights acquisition. We continue to see strong upsell and cross-sell activity on our Insight platform, with just over 50% of our new ARR coming from existing customers in the quarter. This driven ongoing strong expansion in ARR per customer during the quarter, which grew 18% to $55,500. Strong secular tailwinds across the security operations market fueled our ability to both land new customers and expand within our existing base. Third quarter ARR growth was driven by a healthy balance of growth between these land versus expand dynamics. Turning to operating and profitability measures for the third quarter. We came in ahead of our guidance on these metrics primarily due to revenue overachievement. Most of that incremental revenue flowed through directly to profitability, highlighting the strong leverage profile of our subscription software business. As has been our typical cadence, this positions us well to reinvest the overperformance in future quarters to support our goal of driving durable growth over the long term. We continue to balance high-return investments in growth with our focus on delivering consistent annual improvement in operating margin and free cash flow. Total gross margin for the quarter was approximately 74%, consistent with the prior year and in line with our range of expectations. As we've shared before, we expect gross margin to vary within the mid-70s at the product gross margin level and in the low 70s at the consolidated level. Sales and marketing expenses grew 27% year-over-year, reflecting continued growth in headcount and improved to 40% of revenue compared to 42% in the third quarter of 2020. R&D expenses grew 35% over the prior year driven in part by the acquisition of Insights and represented 21% of revenue consistent with the prior year. G&A expenses grew 24% and were approximately 8% of revenue, down slightly from 9% in the prior year period. All in all, we delivered strong operating profit in the third quarter with operating income of $5.7 million, well above our prior guidance. We generated $9.9 million of adjusted EBITDA and $0.06 of net income per share, also above our guidance. Moving to our balance sheet, we ended Q3 with cash, cash equivalents and investments of $310 million compared to $613 million at the end of Q2 2021. The reduction was primarily driven by July's Insights acquisition with a net amount of $306 million paid at closing. Turning to the cash flow statement. You can see we benefited from ARR outperformance and strong operating results in the quarter. These dynamics, coupled with stronger-than-expected collections trends led to third quarter cash from operations of $19 million and we generated $14 million in free cash flow. This brings us to our guidance for the remainder of the year. We delivered strong third quarter results and feel confident about demand trends and our ability to continue to execute on these opportunities. As we succeed in meeting customers where they are in their security journey, we continue to expect that organic security transformation solutions ARR will grow over 40% year-over-year in 2021, with vulnerability management continuing to grow over 10%. Given these dynamics, we are raising our outlook for the year. We now expect full year ARR to be approximately $586 million, growth of 35% over the prior year, up 2 points from our prior expectation of 33% growth. We also expect higher revenue for the full year in the range of $528.7 million to $530.3 million or 29% growth over the prior year at the midpoint, up from our prior expectation of 27% growth at the midpoint. Our full year operating income outlook remains unchanged at $7 million. Our strong year-to-date performance, combined with high visibility and confidence in the demand environment, supports our reinvestment of year-to-date upside and the compelling growth opportunities in front of us. We plan to do this while remaining committed to our growth and profitability framework. We expect non-GAAP loss per share for the full year to be a loss of approximately $0.07 per share, which is based on an anticipated 55.2 million basic weighted average shares outstanding. I'm pleased to report that we are once again raising our free cash flow expectations and now anticipate full year free cash flow of approximately $25 million, an increase from our prior expectation of approximately $20 million, driven by our strong ARR performance. As we've said, we remain focused on investing in durable growth while maintaining our commitment to delivering consistent free cash flow and operating margin improvement on an annual basis. Now turning to quarterly guidance. For the fourth quarter of 2021, we expect revenue in the range of $144.9 million to $146.5 million, growth of 28% to 29% over the prior year. We expect an operating loss of approximately $6.7 million, a non-GAAP loss of $0.18 per share, which is based on an anticipated 57 million basic weighted average shares. In summary, our third quarter results highlight the strong demand for our best-in-class security transformation and vulnerability management solutions, as well as our ability to execute on our strategy and unique set of opportunities.”