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Sumo Logic, Inc. (NASDAQ:SUMO)
Q3 2021 Earnings Call
Dec 07, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to Sumo Logic's third-quarter fiscal '21 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Paul Thomas, vice president of investor relations.

Please go ahead, sir.

Paul Thomas -- Vice President of Investor Relations

Thank you. Good afternoon, and welcome to Sumo Logic's third-quarter fiscal '21 earnings conference call. I'm Paul Thomas, Sumo Logic's vice president of investor relations. Joining me on the call today are Ramin Sayar, president and CEO; and Sydney Carey, chief financial officer.

Our format today will include prepared remarks by Ramin and Sydney, followed by a question-and-answer session. Some of our discussions and responses to your questions will contain forward-looking statements, including statements related to the expected impact of the COVID-19 pandemic, the expected performance of our business, future financial results, guidance, strategy, and overall future prospects. These statements are subject to risks and uncertainties. Actual results may differ materially from our forward-looking statements.

A discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, including our risk factors filed with our final prospectus relating to our IPO and the risk factors that will be included in our Form 10-Q that will be filed subsequent to this call. Sumo Logic assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. Our discussion today will include non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.

Information regarding our non-GAAP financial results, including a reconciliation of our historical GAAP to non-GAAP results, may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC and on our investor relations website at investor.sumologic.com. For certain forward-looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in our earnings release posted on our investor relations website. With that, let me turn the call over to Ramin.

Ramin Sayar -- President and Chief Executive Officer

Thanks, Paul, and thanks, everyone, for joining us today on our first earnings call as a public company. This is something we've been looking forward to for quite some time. We are excited to have completed our IPO in September and I want to take a moment to express our sincere gratitude to our employees, customers, partners, and investors for helping Sumo Logic achieve that important milestone during these unprecedented times. It was an exciting event at the culmination of over a decade of hard work, building and enhancing Sumo Logic's cloud-native multi-tenant Software-as-a-Service offering.

I'm especially proud because, together, with our strong community, we pioneered a new category of software called Continuous Intelligence, which automates the collection, ingestion, and analysis of application, infrastructure, security, and IoT data to derive actionable insights for DevSecOps. And we believe we are still in the early innings of a $50 billion market opportunity, whereby Sumo Logic can help enable organizations of all sizes and maturity accelerate their shift to the cloud and modern application architectures. Before we go into more details, I'd like to provide a brief summary of the highlights of our quarter. First, again, I'm proud of the strong execution we demonstrated in our first quarter as a public company.

While there continues to be macroeconomic uncertainty and volatility, we saw a strong desire and demand for Sumo Logic. More specifically, we saw strong momentum in new customer acquisitions, upgrades, and cross-sells for multiple use cases. In addition, we have continued commitment and momentum from our channel ecosystem partners and a large community of users. From a technology perspective, it was a massive quarter for us in terms of product innovation and releases, many of which we highlighted at our Illuminate user conference in September.

Lastly, the opportunity for our differentiated cloud data SIEM continues to increase as cloud migration and digital initiatives accelerate. Now I would like to provide some more details on each of these points. We saw strong revenue performance with total revenue increasing to $51.9 million, up 28% year over year. Revenue growth was supported by improving momentum from both new and existing customers.

This quarter, we landed over 100 new customers, including a seven-figure land at a Fortune 50 company. Momentum also improved with our customers who generate more than $100,000 in annualized recurring revenue or ARR. These customers increased to 349, up 18% year over year. And our dollar-based net retention was again above 120% for the 11th consecutive quarter.

This quarter, we saw strong momentum in multiple use cases, spanning the Fortune 50 to mid-market and SMBs, from North America to international regions. In the past quarter, more than 30% of the opportunities we won were multi-use case where we saw strong demand across security, IT, and business operations driven by our ease-of-use, increasing demand for security, new observability capabilities as well as our flexible licensing model that allows customers to cost effectively try new use cases. We are landing in more than one use case and expanding into other use cases as adoption spreads across users, teams and organizations, which drives more data into our platform. Let me share a few examples of the marquee wins we had this quarter.

This quarter, we won a seven-figure land with a Fortune 50 customer. This enterprise customer, like many of our other enterprise customers, was modernizing their security operations and data platforms from homegrown and legacy systems, which required manual processes and generate an overwhelming amount of false-positive alerts, which drove up their mean times of remediation. Sumo Logic won because of our cloud-native SIEM solution, which could dynamically scale to ingest their large variable data volumes with no manual intervention, and our ability to eliminate irrelevant alerts to improve automation and remediation times. Lastly, we enabled them to consolidate multiple operational and security reporting, analytics, and data warehousing tools.

The next example demonstrates our land and expand strategy with a Fortune 500 media company. Sumo Logic had been used for several years in one division of the company in an operational intelligence use case for monitoring and troubleshooting. When the global CECL was looking to reduce cost and required a new SIEM solution to replace a legacy on-premise vendor, our cloud-native SIEM was an easy choice. Sumo was also selected because of our scalability, ease of use, and our credit-based licensing model.

This resulted in a six-figure cross-sell of our Cloud SIEM. We continue to see success in the mid-market as well. This quarter, we landed a six-figure multi-use case deal with a fast-growing private technology company and also expanded their usage with a cross-sell within the same quarter. For the initial land deal, they relied on a combination of open-source logging tools and separate monitoring tools.

As they grew, the disparate tools made it increasingly difficult to scale as they have to troubleshoot across multiple platforms and add unpredictable pricing from multiple tool vendors. Sumo was able to provide them with a single platform where they could seamlessly monitor, troubleshoot, and diagnose across their applications and infrastructure while providing visibility into usage from our credit-based licensing. As a result, the company chose Sumo Logic not only for operational intelligence but also for security intelligence. While we had some great wins this quarter, it's important to point out that we believe we are still in the early innings, and greenfield opportunities still make up a substantial portion of our opportunities we see each and every quarter.

As an example, we had a six-figure land with an enterprise customer in the logistics industry that operated since inception with a homegrown open-source tool they built and managed themselves. They were in need of a massive upgrade to their security operations and wanted a modern cloud-based log management analytics platform as the core foundation. We demonstrated that we could future-proof their ingestion needs with the dynamic scaling and real-time visibility of our platform, which also provided them visibility into licensing and usage costs. Partners such as distributors, VARs, ISVs, managed security service providers or MSSPs, also play an increasingly important role in our global go-to-market strategy.

This quarter, we signed a six-figure expansion with an MSP who embeds Sumo Logic into their stack in order to position and sell a comprehensive security service to enterprise-class grade customers. This customer came into Sumo's platform about a year ago and have continued to expand with us multiple times, including the most recent upgrades this quarter. And note that we only count this MSP, and for that matter, all MSPs as individual customer, even though they are delivering Sumo service to thousands of their users. In addition, we continue to expand our partner relationship with AWS.

In August, we renewed our agreement with AWS, which includes enhanced go-to-market and strategic collaboration programs across field registration, marketplace, target verticals, and geographies. We recently announced a distributor firewall integration with AWS, which provides real-time visibility into network traffic and automates the correlation of threats surfaced by the AWS network firewall service, thereby reducing the time to detect, investigate and remediate security issues. As these customer examples highlight, we had some great wins this quarter. We are seeing success both with our direct and partner-led selling motion as well as our ISV ecosystem partners.

We continue to see growing momentum across our DevSecOps ISP ecosystem, reseller, cloud service provider, and managed service provider routes to market. Going forward, as a result, we plan to continue to invest in expanding our 275-plus partner ecosystem, including international resellers like recently signed Westcon to expand our routes to market globally. Now I'd like to move on to innovation. We had a massive quarter in terms of new product introductions, which we showcased at our fourth annual user conference, Illuminate 2020.

At the conference, we highlighted our broadened Sumo Logic Observability suite with new additions, including our AWS Observability Solution and our Software Development Observability Solution, as well as our new distributed tracing and open source monitoring capabilities. Additionally, we provided enhanced analytics and troubleshooting updates to our Microservices Observability Solution. Lastly, we also announced enhancements to our security intelligence suite, including improved automated threat detection and expanded SecOps team reporting capabilities. These new and expanded solutions further position Sumo Logic as the cloud-native intelligence layer for modern application and multi-cloud environments in order to drive a unified view of real-time analytics across operations, security, business, and customer intelligence use cases.

While we see a lot of greenfield opportunities, we also see a massive transformation and migration in the security space. As you may recall, our cloud-native SIEM has been in the market for a couple of years. And more recently, we have fully integrated JASK acquisition into our platform. Together, this has helped us further win significant new business as customers look to secure larger cloud and digital environments while also improving the automation and intelligence of their security operation center or SOC.

We will continue to invest to expand our security intelligence suite with new products and features to build on our differentiated cloud-native solution, putting us in position to capture this accelerating opportunity. We're excited about the opportunity in front of us and believe we are well-positioned to win in this large and growing market. Before I hand it over to Sydney to discuss some of our financial results, I would like to remind you of some of our differentiators and why customers choose Sumo Logic. Typically, there are four simple reasons.

First, our single platform for multiple use cases, which is easy to adopt and expand usage. Second, our ability to scale from megabytes to exabytes with no performance degradation or user limitations. Third, we ingest and analyze all types of data in realtime and don't rely on sampling, aggregating or converting data, giving customers the absolute best insights into their data and their processes. And finally, we provide an innovative and flexible licensing model, giving customers full visibility into how they are using the platform without worrying about ingestion limitations or overages or penalties.

While these benefits are clear, it's also important to remember or realize that Sumo Logic's decade of experience operating at scale has enabled us to not only meet the typical challenges and needs of our customers but also manage our own costs and margins. And we have proven we have been able to make these operational improvements while delivering exceptional customer satisfaction as well as increasing our innovation and differentiation. In summary, I'm very pleased with the strong execution we demonstrated in our first quarter as a public company. There are many important highlights from new and existing customer deals, strengthen our growing ecosystem of partners and users, and lastly, a powerful innovation engine that delivered some amazing new capabilities and solutions.

As such, we're excited about the expanding opportunity for us, and we are continuing to invest to help customers of all sizes and maturity better build, manage, and secure their digital and cloud services. With that, I would now like to have Sydney, our chief financial officer, provide more details of our strong financial results in Q3 and our outlook for Q4.

Sydney Carey -- Chief Financial Officer

Thanks, Ramin. I would also like to thank everyone for joining the call today. I'm personally very excited and proud of our performance in our first quarter as a public company. I'd like to start with a brief summary of our financial highlights for the quarter.

First, we delivered compelling customer metrics both with new logo and expansion wins in our customer base while continuing to operate in a COVID-impacted environment. We have strong operational execution with compelling top-line revenue growth, and we demonstrated efficiency with continued improvement in our margins. We are pleased with the continued momentum we are seeing this year from both our new and existing customers. Our new customer lands are growing in size and the average deal size up both quarter over quarter and year over year.

Our net dollar retention rate was above 120% for the 11th consecutive quarter. Our total count for customers greater than 100,000 ARR continued to increase, reaching 349 customers, an 18% increase year over year. Lastly, our average revenue per customer of $97,000 was up 25% from the same period a year ago. Now I'll provide more details on our third quarter financial performance.

We delivered a strong performance in our first quarter as a public company. Q3 total revenue increased to $51.9 million, up 28% year over year. As a reminder, because of the ease of use of our platform, approximately 99% of our total revenue is subscription revenue, which is recognized on a ratable basis. Calculated billings for the trailing 12-month period totaled $202 million, up 21% year over year.

Recall that we look at calculated billings over a trailing 12-month period as this metric can fluctuate from quarter to quarter due to the timing of our renewals and billings duration for larger customers. Therefore, we believe a 12-month measurement period best reflects the fundamentals of our business. Our remaining performance obligations, or RPO, increased 51% year-over-year driven by the size and duration of new and expansion contracts. Now let's review the income statement in more detail.

As a reminder, and unless otherwise noted, all metrics are non-GAAP. A reconciliation of GAAP to non-GAAP financials is included in our earnings release and posted on our website. First, we saw a significant improvement in our margin profile this quarter, giving us ample room for future investment in our business as we address the large market opportunity. Recall that in Q2, at the peak of COVID uncertainty, we made the decision to pause hiring and take some costs out of the business.

In Q3, we restarted our recruiting engine that has not ramped back to the prepandemic levels. That, combined with lower-than-expected discretionary spend, were the key drivers of our improved margins. Moving to gross margins. In Q3, we saw gross margins improve to 77%, up from 73% in the year ago period.

The improvement was driven by continued efforts to optimize our platform efficiency and a one-time benefit from AWS credits, which will not repeat in future periods. Sales and marketing expense was $22.2 million or 43% of revenue compared to 70% of revenue in the year-ago period. We have benefited from a number of cost-saving measures this quarter as a result of COVID, including reduced travel and a decrease in typical marketing program spend as we pivoted from events to digital and online. While we did reach our quota-carrying headcount target, we were below plan for our sales support roles.

Research and development expense was $13 million or 25% of revenue compared to 29% of revenue in the year-ago period. The decline was driven primarily by lower headcount costs and discretionary spend in light of COVID. General and administration expense was $7.3 million or 14% of revenue compared to 16% of revenue in the year-ago period. G&A expense includes an increase in our public company costs, including our D&O insurance cost for a portion of the quarter.

Taken together, the overperformance in revenue and the improvements we saw in gross margin, sales and marketing, and R&D drove significant improvements in our operating performance. Our operating loss was $2.2 million or an operating loss of 4%, improving from an operating loss of 41% in the year-ago period. Net loss in the quarter was $3.3 million or $0.06 per diluted share based on approximately 55.8 million weighted average diluted shares outstanding. Turning to our balance sheet and cash flow.

We ended the period with $407 million in cash and equivalents, largely driven by $343 million in net proceeds from our initial public offering in September. In Q3, we used $24 million to pay down our revolving credit facility. Free cash flow in the quarter was negative $18.7 million or negative 36% of revenue compared to negative 40% in the year-ago period. Moving on to guidance.

Let me start by talking about the impact of COVID on our business. This pandemic has created a mix of headwinds and tailwinds for many companies. On the headwind side, impacted industries that makeup approximately 10% of our total ARR continue to be challenged. Because of headwinds to these industries and generally COVID impacted short-term budgets in some segments and geographies, we have seen our net retention tick down this quarter and anticipate that it will fall below 120% in Q4.

On the tailwind side, the momentum in our business outside the impacted areas remains positive. Billings have improved as new customers begin with annual upfront agreements. And while IT budgets are under higher scrutiny, we continue to see strong multi-year contracts for both new and expansion deals. Additionally, we have seen that security spending remains high on the priority list for enterprises of all sizes.

And therefore, we continue to see the benefit of that spend in our security intelligence wins. Taking a step back from the near-term uncertainty and looking at the bigger picture, we believe that pandemic will accelerate the already disruptive trends in digital transformation, security, and the cloud migration, and we are well-positioned to execute on the large market opportunity. Now moving back to revenue. As a reminder, we break out the performance of our revenue, excluding our largest customer, in order to increase the visibility into our performance.

This customer has variability and seasonality, which can differ from the rest of our business, and we want to continue to provide transparency into the trends of our large customer and the rest of our business. For the fourth quarter of fiscal 2021, we expect total revenue of $51.8 million to $52.3 million or a growth rate of 17% to 18% year over year, revenue, excluding our largest customer of $49.3 million to $49.8 million. This represents a growth rate of 23% to 24% year over year. Non-GAAP operating loss of $11.4 million to $10.9 million or an operating margin of negative 22% to negative 21%.

The decrease in Q4 operating margins are due to increased investment in personnel, in R&D and sales, marketing program spend, public company costs and other discretionary spend. Non-GAAP loss per share of $0.13 to $0.12 on approximately 101.5 million weighted average shares outstanding. For the full fiscal year 2021, we expect total revenue of $200.3 million to $200.8 million, representing a growth rate of 29% to 30%; revenue, excluding our largest customer, of $185.9 million to $186.4 million, representing a growth rate of 29% year-over-year; non-GAAP operating loss of $35.6 million to $35.1 million or an operating margin of negative 18% to negative 17%; non-GAAP operating loss per share of $0.79 to $0.78 on approximately 49 million weighted average shares outstanding. In summary, we are excited to have completed our IPO, and we are pleased with the results of our first public quarter.

We delivered compelling results with marquee customer wins, positive momentum in our customer base, and with our channel. And we're continuing to accelerate our investment to capture the large market opportunity in front of us. With that, Ramin and I are happy to take any of your questions. Operator?

Paul Thomas -- Vice President of Investor Relations

Before we move on to questions -- this is Paul. I just want to comment on the timing of the earnings release today. While we mistakenly released the results early, we hope this does not distract from the strength of the execution of our business in our first quarter as a public company. Going forward, you should expect the releases to come aftermarket on the day of earnings.

I'll turn the call back to the operator now to start Q&A.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from the line of Derrick Wood with Cowen and Company. You may proceed with your question.

Derrick Wood -- Cowen and Company -- Analyst

Great, thanks, and congrats on a strong quarter out of the gate. I guess, Ramin, can you talk about how you're seeing sales productivity trend versus what you saw in the first half of the year? And if you look at enterprise versus commercial business, just any comments on how that mix trended and how you're feeling about the demand going into Q4?

Ramin Sayar -- President and Chief Executive Officer

Great. Derrick, great to hear your voice. I think generally, we saw momentum in the quarter be very strong on the enterprise segment, as we've noted before. We saw North America enterprise both with new logo lands as well as cross-sell and upsell drive a significant portion or a good portion of our business.

Similarly, productivity was higher in North America enterprise as well that led that, obviously. Naturally, some of the transactional business and the SMB, some of the international business and mid-market was down, just longer sales cycles, decision-making process. But overall, we're really happy with the strong execution and our growth in the quarter.

Derrick Wood -- Cowen and Company -- Analyst

Great. And then I guess, maybe one for Sydney. I mean, really nice gross margin performance, but it does sound like there were some one-time credit gain. So if you could give us a sense for kind of what the margin run rate looks like going into Q4.

And then perhaps just speak to the sales hiring, and it sounds like you hit certain goals but are looking to kind of catch up more on other parts of the fence. Can you talk about plans for Q4 hiring?

Sydney Carey -- Chief Financial Officer

Thanks. Sure. So our gross margins were strong in the period. We have been working to optimize our platform to expand those gross margins this fiscal year.

And what we saw is that of the strength of the gross margins, about two percentage points were due to onetime AWS credit. So we're expecting in Q4 to have gross margins in around that 75% range. Moving on to your second question on the sales hiring goals, we did meet our quota rep capacity goal for the quarter. We are on track for the year to hit our annual goal.

What we did see is we restarted the recruiting engine, just a bit more effort to do that in Q3. And so we had some other functions such as R&D and sales supporting roles where we did not hit those hiring goals.

Derrick Wood -- Cowen and Company -- Analyst

OK. Well done. Thank you.

Operator

Our next question comes from the line of Matt Hedberg with RBC Capital Markets. You may proceed with your question.

Matt Hedberg -- RBC Capital Markets -- Analyst

Hey everyone. Thanks for taking my question and congrats on the IPO. Maybe I'll start with Ramin. You guys obviously got your start in logging, and you've moved now into Cloud SIEM.

Maybe just can you start with -- and just sort of remind us about why starting in logging is the right place to start? And really, how that positions you to extend into other areas of durability and, just broadly, security monitoring?

Ramin Sayar -- President and Chief Executive Officer

Yes. Great, Matt. Thank you, and great to hear your voice again. So in short, I think as you look at the operational use case, and you look at the security use case, and you look at also the other use cases around customer insights and business intelligence, they have one thing in common, and that is the need to have all types of data realtime and both structured and unstructured.

And that's the power of Sumo, and that's where we started. And so this has been our vision and our strategy for well over a decade to bring all that together to address these variances in use cases and variable data sets. So I think the importance here is the fact that we're able to, without having to take shortcuts, like other tools that are very focused on a point solution in terms of aggregating or sampling, all those other means you use to kind of get around the scalability and ingestion of all data. We pride ourselves on allowing customers to throw all the data at us, and then through algorithms and other means, to get meaningful insights without having to be experts in a query language and the like.

So that in itself and the ease of use lends itself to more users, more data, more use case, and therefore, driving cross-sells and upsell after we land the deal. 

Matt Hedberg -- RBC Capital Markets -- Analyst

Got it. That makes a lot of sense. And then, Sydney, strong large deal metrics in the quarter, a nice uptick from last quarter. And I think you said you added 100 customers.

Was that a gross number? I'm curious if you have the net -- if it is gross, what the net was -- net add?

Sydney Carey -- Chief Financial Officer

Yes, we did have strong customer metrics. We added 100 customers' growth. On a net basis, we were just up slightly in the period, but we feel good about our 100,000 adds as well where we added 19 customers sequentially, which was significantly up from the prior two quarters.

Matt Hedberg -- RBC Capital Markets -- Analyst

Great. Sounds good. Congrats on the quarter.

Sydney Carey -- Chief Financial Officer

Thanks.

Operator

Our next question comes from the line of Sanjit Singh with Morgan Stanley. You may proceed with your question.

Sanjit Singh -- Morgan Stanley -- Analyst

Thank you for taking the questions and my congrats, Ramin and Sydney, both the IPO and the first quarter as a public company. Great to see the results this quarter. Ramin, to maybe start off with you, I was wondering if you can sort of draw the trend lines for us between sort of peak COVID in the summer and coming into this quarter on two dimensions: one, new customer logo acquisition, what I think Sydney sort of addressed; and then also the existing customer expansion, that's sort of the first axis. Then on the second axis, security versus operational intelligence versus observability, what are the trend lines you've seen from like the summer going into the current quarter? Thanks.

Ramin Sayar -- President and Chief Executive Officer

Well, first of all, good to hear your voice again. Thanks for participating and supporting us. Now for the first part of your question, I think the trend lines around net new logos, I would say that overall, our average deal size for net new logos was up year over year. In fact, our new logo average deal size was also up significantly quarter over quarter and within quarter.

And so while we may talk about new logo ads being north of 100, it's also important to look at the average deal size there being larger. And obviously, a lot of that was contribution from our enterprise strength in the business. As the next part of your question in terms of cross sell and upsell, we saw a pretty similar pattern to what we've seen pre-COVID in terms of the land and expand. We gave one example earlier that was in the same quarter, an enterprise customer -- actually, a mid-market customer, we landed, and within the same quarter, expanded.

And then similarly, we see the opportunity to expand after we land usually within the quarter after the first quarter of land within two or three quarters thereafter. I think some of that we've seen in certain geographies in certain segments slow down naturally because decision-making processes. But as it pertains to the POCs or the trials and getting new data in, we're seeing strong demand and interest there leading to indication that you'll see further down the road, the cross-sells and upgrades as we normally do.

Sanjit Singh -- Morgan Stanley -- Analyst

Understood.

Ramin Sayar -- President and Chief Executive Officer

Now in terms of the other part of your use case -- apologies, you asked about security versus observability. I think we see two distinct trends there. One, there's still a lot of greenfield opportunity, particularly with respect to monitoring, troubleshooting, and observability. And despite what you may hear from vendors in the space around their portfolio, customers are still predominantly going through this transition -- large enterprise customers to the cloud and still looking at best-of-breed technologies to support that migration.

And that's where we can provide a single platform or a part of that platform need as they migrate over. And so while that's important, we also strengthen our own observability capabilities this past quarter with massive improvements in distributed tracing, AWS Observability, Software Development Optimization, and much more. So thereby strengthening our portfolio of offerings to allow customers to leverage our licensing model to extend the trial of existing service to new features. Now in terms of security, we saw strong demand in enterprise again this quarter, similar to previous quarter because in a lot of cases, as enterprise customers are accelerating their digital and cloud, they're, guess what, starting with their security needs.

They want to make sure they protect the threat vectors because it's growing vastly daily as they span this bimodal on-prem to the cloud world. And so that sets us up uniquely to land in security with the CECL and the SecOps team and then expand into the observability, the DevOps lines of business, and the like. And we saw that play out exactly in Q3.

Sanjit Singh -- Morgan Stanley -- Analyst

Understood. And if I could just have one quick follow-up, which is really sort of given the size of the opportunity, Ramin, what is the best go-to-market motion for Sumo Logic to attack this opportunity? Because you're seeing a couple of different playbooks in the market, sort of that high-velocity online sales motion. You have your kind of traditional top-down enterprise sales with some of your competitors. For your customer base and kind of the target customer that's typically going to gravitate toward a Sumo Logic solution, what does that go-to-market sales motion look like a year from now, two years from now?

Ramin Sayar -- President and Chief Executive Officer

Well, I mean, I think we've been pretty clear on that all along with you and others that we have a very direct selling motion. And that is something that we do across multiple verticals, segments, theaters, and the like. It's heavily supported, however, with our ecosystem of partners, most notably, obviously, VARs and MSSPs that we just continued to increase the presence and reach to thereby reduce also cost of sale but also with ISVs as we co-sell. So our strategy hasn't changed.

It's very much a direct selling model. I think the thing that we're also making sure that we work on and improve going forward is because the platform is so easy to use, and more importantly, we want more users, more data, more cross-sell, and like, we're constantly making investments to drive that self-service aspect of our business as well. But by and large, make no mistake, our business is consistent around a direct selling enterprise and commercial segment-led, followed with partners like MSSPs, VARs, and distributors globally.

Sanjit Singh -- Morgan Stanley -- Analyst

I appreciate. Thank you, Ramin. 

Operator

Our next question comes from the line of Amit Suri with William Blair. You may speak with your question. 

Bhavan Suri -- William Blair and Company -- Analyst

Hey guys. Let me add my congrats. Really solid quarter coming out of the gate there. Maybe my first question is a little more strategic here.

But as you talk to customers, and you sort of bring the whole platform and all the data, whether it's structured or unstructured JSON, etc., and you provide the AI that can read across that, which is pretty unique, is that part of the conversations you're having today? Or maybe, is that probably the conversation you're having with new customers today? Or is new customers very much still about sort of log management security, etc., and it's the existing base of starting to understand the value of the platform? How should we think about that? And the initial conversations you're having with both new and existing customers, given the value of the multi-tenancy across that with your embedded AI, of course?

Ramin Sayar -- President and Chief Executive Officer

Right. Bhavan, great to hear your voice, and thank you for the support, as usual. I think you're not going to like this initial response, but it depends. And it simply depends on, A, the customers' maturity, right; B, the organizational model; and c, their pain point, right, and where they're starting.

And so we can't walk in, leading to the third point around the pain point, and sell everything at once, and nor do we lead with that. So oftentimes, it's around an acute problem because they're struggling with the cost, the complexity as they're going through this migration with gen one tools or gen two tools not keeping up and not being able to deliver on the promises. And so it's really more about helping to understand what they can get and achieve from Sumo without throwing all the resources and costs at it. And that is evidence with some of the wins in the security space that we saw this past quarter, right? I think the other part of your question around the organizational model maturity, if we're talking to platform engineering, the DevOps folks that are well entrenched in a lot of the capabilities required to build a microservices-based multi-tenant kind of service or application, then we go into the details that you're referring to around we're more than just monitoring.

The analytics and intelligence derive a lot of these actionable insights that you don't need to necessarily set static thresholds and do everything else. We've surfaced up those things for you. Similarly, we do the same on the security side because they've been so brain trained, the right manual rules in correlation, and others with legacy SIEM tools. And once they see the power of what we can surface up, we show them that through the intuitive interface, but then we talk about how we achieve that.

Does that make sense?

Bhavan Suri -- William Blair and Company -- Analyst

That makes a ton of sense, and all that makes sense. I guess one other quick question here. You touched on partners. You touched on VARs and resellers, and you touched on sort of the ISVs.

Where does the guide like -- where do the SIs fit in, in the longer-term strategy here? Because obviously, they are partners for some of the -- let's call it, competitors or the Web 1.0, 2.0 guys. So where does that have been in terms of strategy? Thank you.

Ramin Sayar -- President and Chief Executive Officer

Yes. So I mean, I think what's interesting here is as you look at the overall service provider space, whether it's a GSI, the SI, the SPs, the GSSP, I mean, so they're all starting to converge and do more than one thing, right? You have a lot of the GSIs or global system integrators providing their own managed service offerings. In a lot of cases, historically, they're trying to build and integrate a bunch of disparate tools into a service architecture. What's happening more and more is if you look at the MSSPs, their expertise is not sticking together integrating spare tools.

It's leveraging cloud-native architectures and tools and services from the likes Sumo and be able to provide their value-add on top of that in terms of consulting versus implementation, in terms of best practices, and accelerate that journey for those customers. So I personally believe that where we're focusing as a result is those transformational partners that are looking at new ways and new technologies to help accelerate their best practices and their vertical practices to accelerate digital and cloud as well as modernized security. So you saw some of the announcements we've made with distributors like Westcon globally. You've seen some things around MSSPs, and we'll continue to work with some of the other GSIs to get into their practices as we also address some of the FedRAMP and other needs of our customers.

Bhavan Suri -- William Blair and Company -- Analyst

Got it. Got it. Really helpful. Thank you, guys.

Operator

Our next question comes from the line of Mark Murphy with JPMorgan. Proceed with your question.

Mark Murphy -- JPMorgan Chase & Co. -- Analyst

Thank you. I'll add my congrats. So Ramin, are you encountering more prospects who are overtime kind of growing tired of the limitations of some of your peers the ones that rely on sampling and aggregating of data, are they finding that they can't handle the diagnosing and troubleshooting part of the equation? And I'm just wondering if any of that sentiment is creeping in with some of these larger lands that you saw.

Ramin Sayar -- President and Chief Executive Officer

Mark, good to hear your voice. I think generally, it goes back to a little bit of Bhavan's question in terms of maturity and experience with some of the prospects and customers. They may start with a homegrown or point tool for monitoring. And as their architecture and application needs start to increase, because of the volume of data, they start seeing the inefficiencies of the commercial products or maybe the homegrown initiatives and the need to analyze all types of data, and it actually makes it a much easier qualified opportunity for Sumo, believe it or not, to supplement or replace.

So I think the point we try to emphasize all along is time to value, ease of use. And we don't really necessarily try to rip and replace because there's so much greenfield there and there's so many opportunities as customers are still early in their journey. And they see naturally the power and the value that Sumo delivers as a result of our architecture, as a result of our ways that we use ML and analytics and other means and a single platform for multiple use cases. They have the flexibility to choose to expand their usage if they need or they choose to.

Mark Murphy -- JPMorgan Chase & Co. -- Analyst

OK. And Ramin, when you drill into that 10% of ARR, Hope you can hear me. There's some noise on the line. When you drill into the COVID impacted industries, I'm curious how the airlines and some of the others are behaving.

Right now, today, are they cautious to spend because we have this COVID wave two building over the winter? Or do you see some of them who want to look through it with a little more optimism because the vaccines are right around the corner?

Ramin Sayar -- President and Chief Executive Officer

Yes. I think we're pretty consistent here in the sense of COVID has both headwinds and tailwinds, right? Obviously, travel, transportation, hospitality, those verticals were ones that were impacted the most, and some of those are still impacted, right? And our approach there was simply to support them as a partner and allow them flexibility as they manage their business through this unprecedented time. And so we're giving more flexibility to them in terms of usage of features, some degree of some payment terms, but generally trying to support their data needs, through their user needs and value. I think outside of that, in terms of those segments, what's also important to understand is, generally, this pandemic in this macroeconomic circumstance has slowed down decision-making because we're all remote.

And so that's not just in those verticals but probably more specifically in segments of the market more in the SMB and the kind of commercial space that we also attach or attribute to this pandemic. But those are the headwind side. On the tailwind side, if you look at what's happening, billings was a strong growth for us this quarter as new customers began larger, new, and upfront deals with us. And I mentioned the ASP comment for -- the average sales price comment for net new logos this quarter.

We also saw a strong contribution from multi-use case out of the gates from new logo lands with our customers. So I think all that tells us that we need to continue to invest in building out our routes to market, our IP, and getting prepared for not when necessarily the vaccine is available but when businesses are returning to normal because just because the vaccine is available, it doesn't mean that our business can quickly within a quarter or so, return to normal.

Mark Murphy -- JPMorgan Chase & Co. -- Analyst

Yes. That's a fair point. And then since you mentioned Ramin, on the billings side, I guess, I did want to ask Sydney. We see this healthy sequential growth in billings.

Is there anything worth mentioning in terms of underlying drivers? Anything unusual in terms of the annual invoicing mix or early renewals, lead renewals, is there anything like that, that you're able to comment on?

Sydney Carey -- Chief Financial Officer

Yes. We did see good momentum on our billings this quarter. I would characterize it that in Q3, we saw us go back to our historical mix where we had about 90% of our billings being annual and upfront. So that was a good indicator.

As we discussed earlier, last quarter, that had actually shifted down, and it impacted our billing. We did have a large billing from one of those COVID impacted industries that slipped from Q2 to Q3. So it billed out in Q3, and that was about a five percentage point of growth in the Q3 quarter.

Mark Murphy -- JPMorgan Chase & Co. -- Analyst

OK. Very good. Thank you. I appreciate it.

Operator

Our next question comes from the line of Rob Owens with Piper Sandler. You may proceed with your question.

Rob Owens -- Piper Sandler -- Analyst

Good afternoon and thanks for taking my question. Could you guys speak to linearity throughout the quarter given some of the challenges one of your adjacent competitors saw and also the fact that you're your DSO or DBO, however, we calculate it, but the receivables ticked up pretty meaningfully quarter over quarter. So just curious what the trends in the quarter look like and anything unusual from a receivable perspective?

Sydney Carey -- Chief Financial Officer

Yes. So for linearity in the quarter, we actually had fairly good linearity on our bookings side. Where you see the DSO tick up was primarily due to providing some payment concessions, so a little bit longer payment terms for some of our larger deals. But as far as linearity on closing the business, it was pretty typical and standard in the quarter.

We saw good momentum kind of throughout the quarter.

Rob Owens -- Piper Sandler -- Analyst

Will those payment concessions persist? So this is a level we should expect moving forward, Sydney?

Sydney Carey -- Chief Financial Officer

I think it's kind of a deal-by-deal and specific. I think we've actually done a really good job navigating COVID and executing through COVID with both payment terms and collections. And so I think it's a balance between what -- giving a bit of a concession on certain deals. But at this point in time, I don't expect them to continue.

Rob Owens -- Piper Sandler -- Analyst

Great. And Ramin, you talked about the larger lands you guys are seeing these days. What's underlying these? Are people just getting more comfortable around the platform? Is it newer projects that are just larger than they once were? Any color you can give? Thanks.

Ramin Sayar -- President and Chief Executive Officer

We try to give a few examples during the call with respect to different types of customers, illustrating their maturity as well as their pain points with either migrating to the cloud or security transformation. And I think the simple answer is we're in the early innings. And a lot of customers are still shackled by legacy tools, processes, and inefficient technologies that hold them in the data center. And as they move and migrate to the cloud, it fundamentally changes their operating model, and it fundamentally changes how and what types of tools and technologies they need to be able to compete in this new world.

And so I think given our platform breadth of use cases and our ability to either solve a point problem for logging and monitoring or a broader problem for a full-stack observability, audit and compliance problem, a Cloud SIEM and analytics problem, a customer analytics problem, we have a lot of flexibility to have our sellers, both direct and partners, be able to provide value quickly to any of our prospects and then look to expand that as they get value and usage and budgets potentially come up for more adoption of Sumo. So I think that's a unique position that we're in. Now I'll tell you that this past quarter, some of the larger opportunities we saw was from the strong demand for our security and Cloud SIEM. And that underscores the investment we've made for several years and, more importantly, the heritage of our company, 10-plus years being security practitioners and experts.

And so last year, this time, we acquired JASK, we fully integrated JASK on top of a Cloud SIEM platform we already had. And the combination, therefore, is very competitive and market-leading. And so that's where we saw more understanding of the value because it's a couple of quarters under our belt of selling the combined solution, and we see an uptake from our channel partners that are also helping us on the security transformation side.

Rob Owens -- Piper Sandler -- Analyst

Excellent. Thank you.

Operator

Our next question comes from the line of Gray Powell with BTIG. You may proceed with your question.

Gray Powell -- BTIG -- Analyst

OK. Great. Thanks for taking my questions and congratulations on the very good results. Yes.

Maybe a couple on my side. I just want to clarify, did you say that total RPO was up 51% year over year? And if that's right, was there any meaningful change in contract duration or anything unusual that we should think about? I'm just trying to think how we should reconcile that versus revenue growth in the high 20s.

Sydney Carey -- Chief Financial Officer

Yes. So we have a strong RPO quarter. It was up 51% year over year. And sequentially, it was up 30%.

And I think, again, our customers are making larger commitments and longer-term transactions with us, and that's reflected in the RPO.

Gray Powell -- BTIG -- Analyst

OK. Great. And I think you hit on this earlier, but I just kind of follow up on it. So did you see any change in behavior late in the quarter with any larger customers or any larger deals? From the looks of it, it doesn't seem like you did, but again, one of your peers mentioned that last week that executives at larger customers were more closely scrutinizing deals late in the quarter.

So I just want to be really sure like what exactly did you see throughout the quarter.

Ramin Sayar -- President and Chief Executive Officer

No. We didn't necessarily see that late in the quarter, any change. I would say that generally and I would say across multiple segments and geographies or theaters, there's been more approval processes that we see in some deals, right? And in our case, our value selling model, which includes really TCO and BVAs, all upfront is really meant to make sure that you align cost and price with technology and value. And so that's been part of our inherent selling motion for quite some time.

And so we didn't see necessarily a few deals or two in the late quarter that may have caused any differences. Instead, overall, we saw strong consistent demand through month one, month two, month three, and heading into the few days of the quarter as we closed out Q3.

Gray Powell -- BTIG -- Analyst

That's perfect. OK. Thank you very much.

Operator

Our next question comes from the line of Kingsley Crane with Berenberg. You may proceed with your question.

Kingsley Crane -- Berenberg -- Analyst

Good afternoon. Thanks for taking the questions. Just want to touch again on the security phase. Enthusiasm is really clear if you think back to the acquisition of JASK and recent integrations with AWS Network Firewall as well as the addition of Tracey Newell to the Board.

Is it fair to say you're leaning in more aggressively to this market? Or would you just view this as a continuation of what's been a strength of Sumo for a long time?

Ramin Sayar -- President and Chief Executive Officer

Kingsley, this is something that we've been building, and our strategy is build it, and they will come. And so given our tenure in history and security, we've seen over the last few quarters, but more importantly the last couple of years because of our own organic capabilities, that customers wanted and needed something new with respect to security. And I think the reason why you're seeing more investment in that and not just organic effort in IT but also the inorganic effort of the JASK acquisition and even the Board reference you made is because we want a balanced business, and we've been building a strategy for addressing a multiple-use case platform across DevSecOps. That's what uniquely positions us and continues to differentiate us.

So this is not about us overreaching one way or another. This is about having a balanced strategy and predictable growth with durable growth that we want to deliver on to take advantage of this large market.

Kingsley Crane -- Berenberg -- Analyst

Right. That makes perfect sense. It's such a large market. And then one on the financials.

Great to see 100 customer gross adds in the quarter. Still up -- like the total growth is being underrepresented due to some churn. Would we expect this dynamic to continue in the near term?

Sydney Carey -- Chief Financial Officer

Yes. I mean, we're focused on new customers. We're focused on driving our prospects onto our premium platform and doing that conversion even at that level. So very much, there's a focus on customers.

Again, we were pleased with the $100,000 adds. We were pleased with the gross ads, and we are still seeing some churn with our lower ARR customers, which kind of reflected into our net customers just increasing slightly period to period. But we do believe that our focus is really on the enterprise and those enterprise customers that represent over $100,000 ARR.

Kingsley Crane -- Berenberg -- Analyst

That makes sense. OK. Thanks, guys. Congrats on the quarter.

Thank you.

Operator

[Operator signoff]

Duration: 13 minutes

Call participants:

Paul Thomas -- Vice President of Investor Relations

Ramin Sayar -- President and Chief Executive Officer

Sydney Carey -- Chief Financial Officer

Derrick Wood -- Cowen and Company -- Analyst

Matt Hedberg -- RBC Capital Markets -- Analyst

Sanjit Singh -- Morgan Stanley -- Analyst

Bhavan Suri -- William Blair and Company -- Analyst

Mark Murphy -- JPMorgan Chase & Co. -- Analyst

Rob Owens -- Piper Sandler -- Analyst

Gray Powell -- BTIG -- Analyst

Kingsley Crane -- Berenberg -- Analyst

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