Ladies and gentlemen, thank you for being here. My name is Desiree, and I will be your conference operator today. I would like to welcome everyone to the Commvault Second Quarter Fiscal Year 2026 Earnings Conference Call. I will now turn the conference over to Michael Melnyk, Head of Investor Relations. You may begin.

Good morning, and welcome to our earnings conference call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about Commvault's future expectations, plans and prospects. All such forward-looking statements are subject to risks, uncertainties and assumptions. Please refer to the cautionary language in today's earnings release and Commvault's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements. Commvault does not assume any obligation to update these statements. During this call, Commvault's financial results are presented on a non-GAAP basis. A reconciliation between the non-GAAP and GAAP measures can be found on our website. Thank you again for joining us. And now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay?

Good morning, and thank you for joining today's call. Commvault had another strong quarter and an excellent start to the first half of the fiscal year. Highlights include: in constant currency, we added a record $47 million net new ARR. Subscription ARR rose 30% to $894 million. Total revenue grew 18% to $276 million. Additionally, we hit a major milestone earlier than expected. Total ARR grew 22%. And with that, we achieved $1 billion in total ARR 2 quarters earlier than our original March 2026 target. In Q2, SaaS ARR grew 56%, hitting $330 million. This was also 2 quarters earlier than projected. And for the fiscal first half, we achieved 42 on a rule of 40 basis. We couldn't have done it without the support of our customers and partners and the unwavering commitment to innovation and excellence from the Commvault team. Looking ahead, there are 3 key business drivers that continue to fuel our growth. One, strong demand for our Commvault Cloud Cyber Resilience platform from our hybrid cloud customers. Two, as I mentioned in prior quarters, the continued move to the cloud, which our platform is tailor-made to support. And three, customers rely on our innovation engine to meet their complex and evolving readiness and resilience requirements. I'll discuss each in more detail. First, hybrid cloud customers are embracing our Cyber Resilience platform. New attack vectors are constantly emerging. And with AI, data is more distributed and is being used in new ways which introduce more threat vectors for organizations to grapple with. The need for best-in-class detection, protection and recovery is paramount. Traditional data protection approaches don't cut it. Customers need a platform that makes them ready to withstand the worst to keep their business continuous. We do this better than anyone else. This quarter, we saw strong momentum across our identity and data security focused offerings which grew double digits sequentially and represented nearly 40% of net new ARR. Our fastest-growing SaaS offering this quarter rapidly restores Active Directory and Entra ID to identity protection services. In Q2, a large bank in Asia Pacific chose Commvault's Active Directory offering to quickly recover its identity operations after a cyberattack. They also leveraged ThreatScan to validate clean recovery points and unified its hybrid workloads to close gaps and meet its regulatory requirements. This is cyber resilience in action. As we shared last quarter, we also continue to invest in our partner ecosystem, which makes our platform even stronger. This quarter, we announced a new partnership with BeyondTrust, a global leader in identity security. By integrating their capabilities with the Commvault Cloud platform, we can help joint customers advance recovery while reducing unauthorized access to credentials, systems and data. We believe the momentum we're seeing across our identity and data security focused offerings will continue in the second half of the year, which brings us to our second growth driver, the continued move to the cloud. Cloud-borne and cloud-bound data is accelerating at a tremendous pace, and this is only going to increase with the rapid proliferation of AI. Today, Commvault has moved and protects approximately 8 exabytes of customer data into the cloud. This represents a greater than 40% CAGR over the past 5 years. We expect this rapid pace of growth to continue fueled by the fact that customers are increasingly storing AI data in the cloud. It makes our Clumio portfolio of offerings for AWS more relevant than ever. Over the past year, we introduced Clumio backtrack for F3 and brought Clumio's unique recovery capabilities of DynamoDB and Apache Iceberg. We are transforming the speed, scale and efficiency in which cloud data can be restored. This quarter, we saw healthy sequential growth in ARR from Clumio and continue to add new customers to the platform, including 3 Fortune 1000 customers and 2 Fortune 500 customers. And BBVA, one of the world's largest financial institutions chose Commvault to reduce its cloud-native complexity, strengthen its DORA compliance requirements, and protect its mission-critical AWS data. Commvault cloud unified its data protection across 3 major hyperscalers, and Clumio unlocked a 40% cost savings. Additionally, we made tremendous progress with cloud-bound enterprises. In Q2, the number of SaaS customers grew nearly 9,000, representing a 40% increase year-over-year. Net dollar retention remains healthy at 125%. And we continue to see strong adoption of our SaaS offerings from existing customers. A global Fortune 1000 system manufacturer chose Commvault to support its hybrid cloud journey. Today, Commvault safeguards its virtual machines, databases, file systems, and Microsoft 365 data. The customer also leverages Air Gap Protect and our integration with Azure Government Cloud to streamline operations and support its compliance initiatives, which brings me to our third growth driver, Commvault's Innovation Engine. Our innovation engine has never been better. Time and again, we've been first-to-market with unique capabilities that address our customers' most critical use cases. Innovations like Cleanroom Recovery, Active Directory, and Cloud Rewind are closing the gap for customers' evolving readiness and resilience requirements. Top industry analysts are taking notice. We are one of the few companies to be named a leader in the Forrester Wave, the Gartner Magic Quadrant, and just this quarter, the IDC Marketscape on cyber recovery. The IDC MarketScape report highlighted our platform's comprehensive cyber recovery architecture, broad workload support, and deep data security integrations for delivering enterprise-grade resilience. This is why customers choose Commvault. As enterprises embrace AI, we will help them address evolving resilience requirements. That's why we acquired Satori Cyber, which closed during the quarter and is being integrated into our Commvault Cloud platform. This acquisition is timely as it provides monitoring and front protection for large language models as well as automated discovery, classification, and access management for structured data. We will discuss the evolution of resilience in the age of AI and introduce a richer set of innovations at Shift, our premier customer event on November 12 in New York City. I hope you can join us. And with that, I would like to turn the call over to our CFO, Jen DiRico, to discuss our results in more detail. Jen?

Thanks, Sanjay. Good morning, and thank you for joining us today. Our solid Q2 results confirm that data is moving to the cloud at an accelerating pace. Our Commvault Cloud platform is well situated to benefit from this shift. Case in point, in Q2, we set new records by adding $47 million in net new ARR and $29 million in net new SaaS ARR on a constant currency basis and we exceeded $1 billion in total ARR, reaching this milestone 2 quarters earlier than our initial target. Now I'll discuss our Q2 results and operating metrics followed by an update on Q3 and FY '26 guidance. Please note that all growth rates are on a year-over-year basis unless otherwise specified. On a reported basis, total annual recurring revenue increased by 22% to $1.04 billion or 21% on a constant currency basis. Subscription ARR increased 30% to $894 million, representing 29% growth on a constant currency basis. This was led by 56% growth in SaaS ARR to $336 million. And I'm excited to share that we exceeded our original $330 million SaaS ARR target 2 quarters earlier than planned. Subscription ARR now constitutes 86% of total ARR compared to 81% 1 year ago. Subscription ARR is the best indicator of the company's growth. Now I'll discuss Q2 revenue trends. Total revenue grew by 18% to $276 million led by a 29% increase in subscription revenue, including 61% growth from our SaaS platform. Term software revenue rose 10% to $93 million. Strong double-digit growth in transaction volume was tempered due to a shift in term duration, which reduced average deal size. In Q2, customers chose shorter contract duration to maintain flexibility between software and SaaS as they evaluate the timing of their transition to cloud. Q2 SaaS net dollar retention was steady at 125%, benefiting from both successful up-sell and cross-sell initiatives. We saw solid momentum across our identity and resilience offerings such as Air Gap Protect, Active Directory, Cleanroom, Cloud Rewind, Risk Analysis, and ThreatScan, which collectively grew double-digit percentages sequentially and represented almost 40% of net new ARR. Active Directory, a mission-critical identity tool for an effective resilient strategy saw usage more than triple year-over-year as IT leaders adopt our data and identity recovery solution. In just 2 years, Active Directory is on pace to become one of our largest SaaS offerings. For example, we expanded our footprint with a large U.S.-based health care services customer who sought to address concerns around identity and resilience as one of its largest competitors suffered a crippling cyberattack. With the addition of Cleanroom, Active Directory enterprise, and M365 backup, we are securing this customer against accidental deletion and corruption and providing peace of mind in being able to rapidly recover in case of an event. Additionally, we closed several 7-figure SaaS transactions during the quarter. Further evidence that Commvault Cloud is the gold standard for enterprise-grade resilience at scale. SaaS customers over $100,000 in ARR grew 55% year-over-year outpacing growth of the overall SaaS base. Due to the complexity of their requirements, this segment typically demonstrates a higher rate of multi-product adoption than our overall SaaS base. Now I'll discuss our profitability and free cash flow. Fiscal Q2 gross margins were 80.5%, which reflects the acceleration in the mix of SaaS and the shift in average software duration. Operating expenses of $170 million represented 61% of total revenue, consistent with the prior quarter and prior fiscal year. Q2 operating expenses reflected continued investments to support our strong ongoing growth trajectory. Non-GAAP EBIT was $51 million, resulting in a margin of 18.6%, which reflects the increased mix of SaaS bookings and the integration costs from Satori. For the first half of fiscal '26, we achieved a 42% on a rule of 40 basis, reflecting a healthy balance between revenue and profitability. Turning to key balance sheet and cash flow indicators. On September 5, we closed a private offering of $900 million of convertible senior notes with a coupon of 0%. This capital raise allows us to optimize our balance sheet and provide additional flexibility for capital allocation decisions. We achieved very favorable terms on this financing, reflecting strong investor demand against a solid market backdrop. We repurchased $131 million of stock during the quarter, of which $118 million was executed in conjunction with the convert. We ended the quarter with a diluted share count of approximately 45 million shares. Q2 free cash flow grew 37% year-over-year to $74 million primarily driven by continued strength in deferred revenue from SaaS contracts and strong cash collections against Q1 sales. We ended Q2 with over $1 billion in cash. Now I'll discuss our outlook for Q3 and our updated outlook for fiscal year '26. For fiscal Q3 '26, we expect subscription revenue which includes both the software portion of term-based licenses and SaaS to be in the range of $195 million to $197 million. This represents 24% growth at the midpoint. We expect total revenue to be in the range of $298 million to $300 million with growth of 14% at the midpoint. At these revenue levels, we expect Q3 consolidated gross margins to be in the range of 80% to 81%. We expect Q3 non-GAAP EBIT margins of approximately 18% to 19%, which reflects continued strong growth from our SaaS platform and ongoing shift in term software duration. Now I'll discuss our updated fiscal year 2026 guidance. As a reminder, ARR guidance is in constant currency using FX rates as of March 31, 2025. For a historical comparison, please refer to Page 30 of our Q2 earnings presentation. We now expect constant currency fiscal '26 total ARR growth of 18% to 19% year-over-year. This will be driven by subscription ARR, which we now expect to increase by 24% to 25% year-over-year. That represents an increase of 50 basis points at the midpoint for both metrics. From a full year fiscal '26 revenue perspective. We continue to expect subscription revenue to be in the range of $753 million to $757 million, growing 28% at the midpoint. Our guidance assumes a continued shift in term duration during the second half of the year. We reiterate total revenue of $1.161 billion to $1.165 billion, an increase of 17% at the midpoint. Moving to our full year fiscal '26 margin, EBIT, and cash flow outlook. We now expect gross margins to be 80.5% to 81.5%. This range reflects continued growth in our SaaS platform, which carries a different gross margin profile than software. We now expect non-GAAP EBIT margins of approximately 18.5% to 19.5%. Non-GAAP EBIT margins reflect our ongoing investments in additional growth-driving initiatives. We are raising our full year free cash flow outlook to a range of $225 million to $230 million. This guidance reflects benefits from recent federal tax law changes. To summarize, our first half results are evidence of strong market demand that we believe will continue throughout the year. Thanks to our leadership in innovation, our growth-focused investments, and strong execution, we are well-positioned to continue taking share of the expanding Cyber Resilience market. Now I will turn it back to the operator to open the line for questions.

Our first question comes from the line of Aaron Rakers with Wells Fargo.

I would like to start by asking Jen to elaborate on the shift in term duration. Looking at the guidance we've provided for the full year, it suggests a slowdown in growth, estimated to be around 11%. Could you explain why we expect to see this deceleration in growth for fiscal fourth quarter? And is this related to the shift in term?

Absolutely. Thanks for the question, Aaron. First, let me just start by saying, I would say this is our second-best term software ARR quarter and that was coupled by the fact that we saw strong volume as well. So this is the second-best net new customer addition quarter for term software. When we unpack the kind of variance in subscription revenue, it really came down to that shift in term duration and effectively back to the levels that we saw a couple of quarters ago. And so when we double-click, what we really saw was customers wanting to maintain their flexibility as they considered the anticipation of their move to the cloud. But ultimately, what we were really pleased with was the volume that we saw in our software term business. From a volume perspective, deals greater than $100,000 actually increased 17%. So ultimately, that's really where we see the strength coming from an ARR perspective, and we do believe that is the best indicator of growth. As we zoom out and think about the second half of the year, right, what we have seen is the continued acceleration of SaaS really meeting the moment from where customers are, and we have the best platform to do that. And ultimately, when we look at the pipeline for the second half of the year, we've been prudent as we think about the pipeline and ultimately have carried through the same trends that we saw in Q2 throughout the rest of the year. But I would just end by saying the growth in our business really is dictated by the ARR that we see, and we've raised both the subscription ARR and total ARR by 50 basis points.

Yes. And then as a quick follow-up, I'm curious, kind of sticking on the growth theme a little bit. The slide deck highlights your expectations on a TAM growing, I think it's 12% CAGR over the next couple of years. I guess as we think forward, I mean, Commvault seems to be in a pretty good position to still possibly be a share taker. Can you talk about the competitive landscape and whether or not we should think of 12% kind of as a baseline, and there's the ability to continue to grow above that?

Sure. Aaron, it's Sanjay. Let me just address the competitive landscape. So when you look at our growth, healthy double digits have been the trend for a few quarters. This quarter included overall both SaaS and software, and when you break down the TAM at least on the more classic data protection side, you'll see that the SaaS market is growing double digits and we're fast outpacing it at around 55% ARR growth this quarter on just our SaaS product. And when you look at the software TAM, that's probably growing at 0% to low single digits and has been that way for a while. Our software business is growing at a healthy double digit, which indicates that we're taking share and we continue to take share. So I would say that the way we're growing, at least on the software side, is our customers are consolidating desperate platforms over the years. They're rethinking their resilience strategy with us in the wake of all the ransomware and cyber attacks, and we continue to innovate on our platform. I'll let Jen flesh out the rest of your question.

Yes, sure. And in response to the TAM growing 12%, I would point you back to our overall ARR growth and our subscription ARR. So fundamentally, we still believe we have the continued opportunity to take share in the market and grow faster than the TAM.

Our next question comes from the line of Jason Ader with William Blair.

So some investors have asked whether we might be seeing the backup modernization cycle kind of winding down after a few years of elevated investments. How do you respond to that, Sanjay? Do you feel like we are sort of, call it, in the back 9 of some of that modernization activity in response to ransomware?

I don't think so, Jason. I think we haven't seen a slowdown in cyber attacks or new threat vectors and/or the scale at which this is happening. So there's a lot of work to do. We're working with customers around the world on very similar types of cyber resilience programs. I don't think so. You may see different implementations as we go into what I'm affectionately calling the AI era. There will be different needs and different threat factors. We're working really hard to ensure that we're one step ahead of what customers are going to encounter. In fact, at our Shift event on the 12th of November, we're going to unveil probably the most significant set of capabilities on our platforms ever. You'll see a lot more of where we believe the world is headed, and I don't want to give anything away.

Okay. Okay. Good. And then just as a follow-up for you, Sanjay. Could you offer any comments on the deal announced last week between Veeam and Security AI?

I believe Anand would be the best person to answer that question. However, we've been stating for some time that for true cyber-resilience, data security and data protection must come together. I've been reiterating this for the past three years. Our recent acquisition of Satori Cyber is an example of this approach. Identity, observability, and policy enforcement regarding data within the enterprise need to work in tandem. As cyberattacks become more advanced, any disconnect between data security and data protection can leave you vulnerable. This integration is essential, and we announced our acquisition last quarter.

Next question comes from the line of Eric Heath with KeyBanc Capital Markets.

Yes, I would say just looking at some of the net new ARR, it does look like it's still accelerating over the last quarter. So it doesn't really seem like a slowdown, but maybe a question for you Jen. Just curious what's giving you the confidence to increase investments and how you're considering the trade-off between what is a 50 basis point increase to growth and a 150 basis point reduction in margin compared to your prior guidance?

Yes. Thanks for the question, and it's the right one. Ultimately, what we look at is what has and hasn't changed for the year as we think about guidance and our ability to continue to invest. And fundamentally, what has not changed is our ability to continue to take share. We see that in the fact that the volume of ARR is up, the volume number of customers and our overall rep productivity continues to increase. We're also seeing that our net new offerings continue to contribute more and more to our ARR. So across the board, when I think about the opportunity to invest, when we started this year, there were a couple of key things that we needed to see. Effectively, we're continuing to see them. Ultimately, we said '26 is going to be a year of investment, and we're going to continue on that path because all signals say that the market has not changed.

And Eric, this is Sanjay, it's a very competitive landscape. We have to be ahead of what is going on in the market. We run a responsible business, as you're probably tired of hearing me say, where we worry about the top and the bottom, and we want to ensure that we build a sustainable company. So within those constraints, we continue to invest both in product. We're seeing a lot of accolades for our platform, and you haven't seen what we're bringing out yet. We have to be where the customers are.

And just on that point, I mean, and a follow-on to Jason's earlier question, but do you perceive the competitive landscape getting more competitive? And how do we think about that high in terms of legacy displacement opportunities? Is it starting to shrink, and that's driving a more competitive environment?

It's always been competitive, and it's becoming even more so now with cybersecurity gaining prominence in boardrooms and AI becoming a key focus. This increased visibility makes the landscape more competitive. Our success for the past 30 years comes from our ability to innovate more than our competitors. This approach has proven effective for us as we meet our customers wherever they are, whether on-premise, at the edge, or in the cloud. We aim to provide the technology that keeps our customers secure, which is our winning strategy. I believe there is still significant potential for consolidation and for us to assist customers in becoming more resilient.

Next question comes from the line of Howard Ma with Guggenheim.

Congrats on reaching the $1 billion ARR milestone earlier than you expected. For Sanjay, can you remind investors of the drivers of your term subscription business? You mentioned the share gains and the TAM earlier, but I imagine on-premise data growth is still the single biggest driver and perhaps underappreciated by investors. You gave the 40% CAGR for data growth in the cloud. Not sure if you have a sense of the on-prem data growth? And one more piece, too, is the identity and data security stat you gave, that's 40% of net new ARR. I wonder to what extent is that also benefiting the on-premise part of your business?

Yes. So Howard, good to hear from you. Our play has always been from the day we launched Metallic, our SaaS offering. Our dream has always been to have the singular platform for hybrid customers. I don't know how fast the dial will turn on where they move things to the cloud, but we want to give them that complete flexibility. As the platform has evolved, we continue to see customers whose primary disposition is on-premise. We work with our partners, whether it be HPE, Pure, or NetApp, to continue to work with our customers on-premise for their essential workloads there. As they start moving more workloads or doing more with the public cloud, our platform is the natural journey, the way in which they move things over and protect them on the other side. On-premise continues to be a growth driver, and we're very proud of it. If you look at your second part of your question, on identity and security, that must be closely integrated. You don't have separate operations going on in the cloud versus on-prem, especially when there's a hybrid environment. Our offerings allow customers to have an integrated protection capability for their identities as they move more workloads into the hybrid growth. It’s critical because when your identity is integrated with your protection, resilience is significantly enhanced. We're seeing our AD and Entra ID and identity capabilities starting to contribute to net new ARR, which is a positive sign.

A follow-up for Jen, given the appreciation for Commvault's hybrid strength, are you seeing increased cross-sell between your term customers and SaaS customers? I recall you all gave us that it's probably from 2 years ago, I think it was like 40% of SaaS customers are also term customers. So I wonder if that percentage has gone up. And then specifically with respect to the change in term duration with compression, are a higher mix of SaaS customers influencing those that also use term and dragging down the contract duration?

Yes. So first, let me answer your first question about the mix between software customers also using SaaS. The stat we gave a little while ago was about 30% that continues to tick up slowly, right, but we're seeing that traction. As Sanjay and I shared in our script, customers are really wanting to maintain their flexibility. Whether they're starting with us on software or SaaS, the most important thing is that as customers continue to transition their workloads, we have that opportunity. So I think we're seeing that in the numbers.

We assist customers with their workloads in a logical manner. There is some overlap, such as with virtual machines, between cloud-driven, SaaS-driven, or on-premise options, which allows us to offer choices to our customers. However, protecting Microsoft 365 is entirely cloud-based. As we collaborate closely with customers on their journey, their workloads, priorities, and timing, we meet them where they are. Occasionally, they may shift their focus towards cloud rather than on-premise solutions, but the positive aspect is that they commit to our platform, and we support them in all areas.

Next question comes from the line of Rudy Kessinger with D.A. Davidson.

Congrats on a strong quarter. When I look at ARR which obviously matters much more than revenue. Obviously, record net new ARR, and by my math, organic ARR growth at constant currency accelerated a point to 19%. Jen, you talked about ongoing investments in growth initiatives as part of the reason for the EBIT margin guidance coming down in addition to the gross margin compression. Could you just talk about where you're making those incremental investments? And could we see further ARR growth acceleration over the next year or so as a result of those investments?

Yes, sure. So let me start by saying what we did was continue to keep operating expenses at about 61% of revenue. That has been consistent with prior quarters and prior years. The overall gross margin pressure that we saw really came down to the acceleration of our SaaS business, which as we all know has a different margin profile. As we think about the back half of the year, the investments we started out with at the beginning of the year in terms of accelerating our SaaS motion, we're still committed to those plays. Our guidance for the back half of the year implies a $45 million of net new ARR on a constant currency basis, which is above the $40 million that I mentioned at the start of the year. Our investments are paying off, and we'll continue to execute on that.

Got it. And then any parameters, I guess, for the second half? Obviously, you have the total implied net new ARR guidance. But just any parameters in terms of what we should expect from SaaS? I think the prior commentary was $20 million plus. Obviously, you did, I think, $29 million in Q2. Should we expect $25 million plus in SaaS net new ARR now in the second half? Or just any kind of guardrails around the SaaS and term license split in the second half?

Yes. As you think about the split, the best way to think about it is approximately 60% of our net new ARR will be SaaS.

Next question comes from the line of James Fish with Piper Sandler.

I wanted to go back on the contract duration. Is the shorter contract duration seen more on the existing installed base or are you seeing it on new deals as well, a combination of the two? Jen, is there a way to think about where we're at on average duration at this point? Is there a vertical or two that's standing out with this such as, obviously, we're talking federal generally this quarter, but now we're talking about it even more so given the shutdown?

Yes. So first, what I would say is it's actually across the board, where customers want to maintain that flexibility as they think about either accelerating or just anticipating their journey to the cloud. Quantifying that, we were down 9% from a shift in term quarter-over-quarter. I would say that normalizes back to levels that we saw a couple of quarters ago. That's how we are quantifying the impact.

James, this is Sanjay. One second, I just want to add to that. I understand that the other metric that I look at very closely or that we track very closely is the number of new deals we're bringing into the business. This was the second-largest number of new deals we brought in for term software in this quarter. So if you look at that volume, it's significant. As customers move to hybrid, it’s logical that they have different implementation plans, and you have to meet them where they are. I see this transition as something we've been expecting and something that we're prepared for as we help customers through on the on-premise side, and we pick it up completely on the cloud side.

So look, I understand that there's a greater SaaS mix and some term duration headwind here. But if I look at the gross margin, SaaS margins are in sort of mid-60s at this point, while the other parts of gross margin were down decently sequentially. Why isn't this just competitive pressures or further discounting in the space?

Really, I would just go back to what I shared. It really is around the fact that the bulk of this is very much the acceleration of SaaS and the shift to terms. There's really nothing else to discuss there.

Nothing major.

Next question comes from the line of Junaid Siddiqui with Truist Securities.

Great. Sanjay, as the pace of innovation increases and the cadence of new products that you launch accelerates, and I'm sure we're going to hear a lot more in a couple of weeks at Shift. What are some of the things that you are doing on the pricing and packaging front that can help customers consume more of that platform?

Junaid, great question. Without giving too much away, we have a lot of work underway to make it super easy for customers to consume additional services and capabilities as they receive the core. It's a logical approach. If they start with software, we want to make it effortless for them to consume any service within the platform, whether delivered through the cloud, on-premise, or on the edge. We have always provided customers because of our architecture the ability to run our control plane the way they prefer. What's implicit in what we're doing is we are building substantial testing tasks that customers must do to prepare in the face of a cyberattack or an event, and we're incorporating that capability and automation into the product platform and packaging. This will be vital.

Great. And Jen, just in terms of capital allocation, I know you mentioned you bought some shares, especially in conjunction with the convert. But historically, I think you've talked about allocating north of 75% of free cash flow to buybacks. Is that still the case? How should we think about buybacks?

Yes. Thanks for the question. Our capital allocation strategy remains consistent, built on the 3 pillars of share buybacks, M&A, and organic investment back into the business. As it relates to share buybacks, you're right, we purchased $118 million in share buybacks with the convertible. Year-to-date, that's been $146 million. We have not provided a specific guide, but we expect to be opportunistic and active. We indicated that from a modeling perspective, that share count should remain approximately flat at around 45 million shares.

There are no further questions at this time. I would like to turn the call over to Mr. Michael Melnyk for closing remarks.

Thanks, Desiree. I just want to remind everyone that the invitations to Shift, which is happening on November 12 in New York City, have been emailed. If you didn't have a chance to register or need assistance, please email me at [email protected]. We look forward to seeing you. You'll be able to experience an innovation-rich day and hear from our customers, partners, as well as spend some more time with management. So we encourage you to attend, and we look forward to seeing you in New York. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.