Matt Dezort

Matt Dezort of William Blair, on for Maggie, asked about the new business pipeline for the second half, the cause of elongated sales cycles, and the status of pricing and renewals with CSG's top two customers.

Answer

CEO Brian Shepherd reiterated that the sales pipeline remains strong but that cautious customer behavior and some reduction in discretionary spending are causing slightly lower growth, leading to the 2-3% revenue growth expectation. He confirmed a recent 'best ever' renewal with Comcast extending to 2030 with no price discount, and noted the Charter contract runs through about 2028. He emphasized that both top customers have grown at a 2.6% CAGR since 2017.

Matt Dezort from William Blair & Company followed up on margin pressures, asking about specific actions being taken to protect margins and whether the company's guidance assumes these pressures will stabilize or deteriorate further.

Answer

Acting CEO Jason Macdonnell stated the goal is to stabilize and improve margins over time. He detailed a multi-pronged strategy that includes more accurate pricing, optimizing workforce management, leveraging AI for administrative and operational efficiency, and pursuing performance-based outcome contracts. He emphasized a focus on both direct and indirect cost reduction to combat price intensity and labor inflation.

Matt Dezort of Needham & Company inquired about the Gen AI pipeline, asking about the balance of Copilot-related demand between new and existing customers and the typical uplift seen when Copilot and MDDR offerings are bundled in a deal.

Answer

CEO Yaki Faitelson explained that Copilot is a driver across the board—for both new prospects and existing customers—because as organizations roll out AI, the data security problem becomes unavoidable. He believes nearly every knowledge worker will eventually use such tools, making Varonis a foundational requirement for secure AI deployment. He noted that while it's still early innings for Microsoft's rollout, the need for Varonis is evident everywhere.

Asked about the go-to-market and competitive landscape for the AI opportunity, as well as broader competitive trends and the impact of price increases.

Answer

The AI go-to-market leverages existing sales teams and products with large enterprises, where F5's hybrid portfolio is a key differentiator. The company feels its competitive position in the core ADC market is very strong, while its distributed cloud offering is gaining traction as an attacker. Price increases are not expected to impact its competitive standing.

Matt Dezort of Needham & Company inquired about any go-to-market changes for fiscal 2025, specifically regarding sales compensation incentives for cross-selling and potential adjustments to the partner program.

Answer

President & CEO François Locoh-Donou confirmed that the partner program remains strong and that sales incentives for fiscal 2025 will continue to emphasize cross-selling the portfolio, particularly to customers who currently use only one F5 product family. He added that R&D efforts are focused on creating technical synergies to facilitate this cross-selling motion.

Matt Dezort asked about the sustainability of momentum in large enterprise displacements, pricing behavior in those competitive deals, and the company's ability to win against legacy AV providers.

Answer

CEO Tomer Weingarten confirmed the pipeline supports continued momentum in the enterprise segment. He stated that pricing remains a strength, allowing them to compete effectively while maintaining best-in-class gross margins. He emphasized that wins are driven by clear technology leadership, particularly in AI, not just by competitor outages.

Asked about the revenue composition of the HCP cloud platform between Terraform and Vault and how that mix is expected to evolve.

Answer

Currently, both Terraform and Vault are significant contributors to HCP revenue. Due to new sales incentives favoring Terraform Cloud for new lands, its share of new cloud business is expected to increase in the near term. A similar push for Vault will be evaluated later in the year, pending customer readiness for a managed offering of such a critical service.