Mark Zhang

Mark Zhang of Citigroup asked for more detail on the RPO performance, including average deal sizes and contract durations, and inquired about the company's capital allocation strategy, particularly regarding share repurchases.

Answer

CFO Matt Steinfort explained the RPO increase was driven by both core cloud and AI deals, with an average duration of around 19 months. On capital allocation, he outlined the priorities as 1) organic growth investment, 2) addressing the 2026 convertible debt by year-end, and 3) using repurchases to offset dilution. He noted that repurchases have been dialed back to focus on the first two priorities.

Mark Zhang asked how DigitalOcean is achieving operating leverage with steady sales and marketing spend despite new programs and improved NDR. He also inquired about the future expense trajectory and when S&M investment might accelerate.

Answer

CEO Padmanabhan Srinivasan explained that the company is still in the early stages of learning from its new go-to-market motions, such as channel partners and outbound sales. The primary focus is on refining the unit economics and understanding leverage points before committing to larger investments. He stated they are being 'appropriately cautious' given the economic climate but will invest to drive expansion once they have conviction in the ROI of these new motions.

Mark Zhang of Citigroup asked about behavioral differences between 'scalers plus' and 'non-plus scalers' regarding upsell pace, and questioned why the non-plus cohort isn't growing faster given recent product and go-to-market initiatives.

Answer

Executive Matt Steinfort explained the company first focused its innovation on the top-tier 'scalers plus' to address retention, resulting in a dramatic turnaround. He stated they are now applying these learnings to target high-potential customers in the next tier. CEO Padmanabhan Srinivasan added that both cohorts are similar, representing a large opportunity to graduate more customers into the 'plus' category by winning more of their workloads.

Speaking for Fatima Boolani, Mark Zhang asked for more detail on how the SaaS model is creating opportunities with new customers, questioning if this involves new industries, new budgets, or greenfield versus displacement deals.

Answer

CFO & COO Guy Melamed explained that the SaaS offering has significantly increased the company's Total Addressable Market (TAM) by making Varonis accessible to new verticals and company sizes that might not have considered its on-prem solution. He characterized the opportunity as primarily opening new greenfield avenues rather than displacing incumbents.

Mark Zhang from Citigroup asked for specific details on the allocation of the 2025 go-to-market investments and questioned why the 2025 guidance wasn't more aggressive given the positive demand signals and strategic initiatives.

Answer

CRO and EVP of Operations Johnny Hecker stated that investments are primarily for expanding sales headcount, with the impact expected mainly in 2026 and beyond. He also noted a shift of marketing funds from the SoHo channel to corporate marketing programs. CEO R. Turicchi added that the expense impact will ramp up through 2025, being lowest in Q1 and highest in Q4. Johnny Hecker explained the guidance reflects that new investments target upmarket customers, which have much longer sales and implementation cycles, delaying the full revenue impact.