“On a trailing twelve months basis, our guidance also assumes revenue will cross the $1 billion mark in 2026, with Q3 revenue of $270 million, an increase of 15% year-over-year, making our year-to-date revenue growth rate 23%.”

In context

“Brian Carolan (CFO): Thank you, Mark, and good morning, everyone. Thank you for joining us today. Fiscal Q2 2026 was another strong quarter with robust demand for our leading identity security platform. We believe the depth and breadth of our platform set us apart and make us uniquely positioned to govern and secure complex enterprise environments, which is evident in our results. We ended fiscal Q2 with ARR of $982 million, an increase of 28% year-over-year, with SaaS ARR of $623 million growing 37% year-over-year. Total Q2 revenue increased 33% year-over-year, and adjusted operating margins expanded 980 basis points to 20.4%. We also generated a record $50 million of cash flow from operating activities. Let's dive in. We continue to see many durable growth drivers across the business and across industry verticals. While our ARR growth remained largely balanced between new logos and existing customer extension, Q2 was our largest new logo ARR quarter ever, primarily driven by SaaS. Notably, we saw a 30% increase in average ARR per new SaaS customer. More and more often, new customers are landing with our most fully featured offerings, which include advanced AI and automation features as well as cloud infrastructure entitlement management, which helps customers understand the identity context of their cloud workloads. Many of these new logos are also buying our emerging add-on modules, which include Non-Employee Risk Management, Machine Identity Security, and Data Access Security. In fact, new SaaS customers had a 40% attach rate of add-on modules compared to 25% in the same quarter last year. Our add-on modules are also driving expansion within our existing customer base. Once again, the ARR from our emerging add-on modules more than doubled year-over-year, contributing nicely to our NRR of 114%. Overall, we continue to see good balance across all four of our primary NRR drivers, including cross-sell, upsell, suite upgrades, and platform modernizations inclusive of migrations. Turning to revenue. In Q2, we delivered revenue of $264 million, an increase of 33% year-over-year, with subscription revenue growing 36% year-over-year. This better-than-expected result was due to strong bookings and SaaS term mix. We also benefited from the timing of term contract renewals, most materially in the Fed sector. This resulted in $7 million more upfront revenue recognition in Q2 versus what was originally expected in Q3. Please note, there was no material impact to ARR because these were renewals. In Q2, we delivered strong incremental operating leverage, which resulted in adjusted operating income of $54 million or 20.4% margin, which increased 980 basis points year-over-year. Our strong top-line growth with the increasing size of new customer wins is leading to economies of scale and strong margin expansion. In Q2, we generated cash flow from operating activities of $50 million and free cash flow of $46 million or 17.4% margin. This is a reflection of our robust growth profile, disciplined expense management, and strong collection efforts. Turning now to guidance. For simplicity, I will refer to the midpoint of our guidance ranges. Full details can be found in this morning's press release and supplemental earnings deck. For 2026, we expect ARR to cross the $1 billion mark at $1.029 billion, up 26.5% year-over-year. For our fiscal year 2026, we are increasing our ARR outlook by $10 million to $1.11 billion, up 26.6% year-over-year compared to our prior guidance of 25.5% growth. On a trailing twelve months basis, our guidance also assumes revenue will cross the $1 billion mark in 2026, with Q3 revenue of $270 million, an increase of 15% year-over-year, making our year-to-date revenue growth rate 23%. We expect adjusted subscription gross profit margin to be approximately 82% due to a higher mix of SaaS revenue versus last Q3, with adjusted operating margin of 16%. We expect our diluted share count to be approximately 562 million shares and adjusted EPS to be approximately $0.06. As I mentioned earlier, our Q2 results benefited from the timing of term renewals, which flow through our P&L at a high margin rate. Our Q3 revenue and adjusted operating margin guidance reflect the $7 million quarterly timing dynamic as well as future investments. As Mark mentioned, we'll be sharing much more about our exciting innovation and product initiatives at our Navigate conference in three weeks. For fiscal year 2026, we are increasing our revenue outlook by $16 million to $1.055 billion, up 22.4% year-over-year compared to our prior guidance of 20.6% growth. We are also increasing our adjusted operating income by $16 million to $179 million or 17% margin compared to our prior guidance of 15.7% margin. We expect our diluted share count to be approximately 565 million shares and adjusted EPS to be $0.21. Additionally, we remain comfortable with the second half consensus estimates for free cash flow of approximately $85 million, with roughly one-third generated in Q3 and two-thirds in Q4. Please note, we included additional modeling notes in our supplemental earnings deck. In summary, we believe we are well-positioned to win the next generation of identity security because of the depth and breadth of our platform, our continued product innovation, and our relentless focus on execution. With over 125 million identities with deep and fine-grained entitlements created over our twenty-year history, we believe we have a strong competitive position and the right to win as we combine identity, security, and data into a modern platform. We look forward to providing a deep dive into our new innovations and customer testimonials at our Navigate conference in September. With that, let's invite Matt Mills, our President, to join us and open the call for questions.”