Q3 2019 Earnings Call
Productions will be provided at that time for you to queue up for questions.
I'd like to remind everyone that this call is being recorded today Friday November 1st 2019.
I'll now turn the call over terrific Wadsworth, Vice President of Investor Relations Economics as Sig. Please go ahead Mr. watts.
Thanks for rest James.
Good morning, and welcome to the can access earnings calls today, we will be discussing our third quarter results, which we issued after close of markets yesterday with me on the color John's a card or President and Chief Executive Officer, and Richard Martin, Our Chief Financial Officer.
Before we get started I want to emphasize that some of the information discussed in this call is based on information as of today November one 2019 contains forward looking statements that involve risks and uncertainties.
Actual results may differ materially from those set forth in such statements for a discussion of these risks and uncertainties you should review the forward looking statements disclosure in the earnings press release as well as in our SEDAR filings during.
During this call, we'll discuss I Afras result, and non I FRS financial measures reconciliation between the two is available in our earnings press release and interim DNA, both of which can be found in the IR section of our website Conexus dot com and on SEDAR.
Participants are advised that the webcast is live and is also being recorded for playback purposes, an archive of the webcast will be made available on the Investor Relations section of our website.
This call there the webcast archive, maybe recorded or otherwise reproduced or distributed without prior written permission from can access to begin or call. John will discuss the highlights of our quarter as well as recent business developments pulled by Richard Who'll review, our financial results. Finally, John will make some closing statements before opening up to one for questions I'll now turn the call over to John .
Thank you Rick good morning, Thank you for joining us today.
I'm very pleased to report our third quarter results, which includes SaaS revenue growth of 28% to 31.2 million total revenue growth of 29% to 47.1 million and adjusted EBITDA of 26% of revenue, which includes a 2.5 million dollar one time charge we took following.
In the amicable resolution of our previously disclosed arbitration with a former is your customer adjusted EBITDA was 31% prior to this chart.
Our strong results in Q3 were driven by several new customers, we closed in the second quarter, including British American tobacco, Honda Yamaha Motors, and Teva Pharmaceuticals to name a few additional net new customers and expansions in Q3 have given.
I have been instrumental and further driving our backlog to new heights, which provides exceptional visibility into the remainder of 29 team.
Based on this success, we are increasing all aspects of our guidance with higher expectations for subscription revenue term license and total revenue as well as a higher EBITDA target for the year.
Richard will provide these details in a few minutes.
Our business performance demonstrates traction from our strategy to expand our global sales team in 2018 and again earlier this year.
Momentum in digital supply chain transformations continues and I am I believe can access holds a unique leadership position using rapid response, our powerful concurrent planning platform as a vehicle to solve modern day supply chain planning challenges.
Since our last call. We also announced several new strategic partnerships designed to both scale our implementation capabilities.
Advise new prospects when they're considering their own digital supply chain transformation.
We recently announced a very unique partnership with one of our long term customers flux.
They are demonstrating the power of rapid response to their extended customer base from their global Flex pulse centers. We've already had a couple of initial wins. Thanks in part to their support of referrals.
We also announced the JMP systems of Japan, a subsidiary of one of the world's largest steel companies joined our partnership enablement program to accelerate opportunities in that region.
We have worked closely with JMP over the past decade, and have joint customers in high Tech automotive and consumer products industries.
Crimson in cohort specialist <unk> global supply chain management consulting.
Were added to our growing partner ecosystem this past quarter.
They serve clients in a number of vertical markets, we share, including consumer products, Hi Tech I know, what tronics industrial equipment and life Sciences.
Why or why we are thrilled with our growing customer base and partners I'm equally excited by the increased pace and depth of our product innovation within the first half of 2020, we will dramatically increase the extensibility of rapid response with the launch of our development platform.
Partners and customers will be able to harness the power concurrency by building new capabilities and applications that are tailored for their specific needs.
These extensions will plug directly into and leverage all the power of rapid response is unique always on concurrent planning engine all without customization of the core rapid response code.
For customers and partners. The benefits are obvious for can access it means that we can better position to offer our leading SaaS based supply chain plank platform to a broader market.
As part of our latest product announcement, we also introduced a compelling new data visualization, including a unique interactive supply chain network Visualizer with a patented way to present performance data on different screen formats, Randy ranging from desktop to mobile devices. These innovations will any.
We will planners to shrink the time it takes to gain insight from hours to seconds.
These innovations were extremely well received by customers prospects and partners when we announced them at our recent and record breaking connections user conference.
Our success this quarter and to date is driven by our focus on investing for sustained long term growth.
Expanding sales teams leveraging partnerships and accelerating product innovation, all take significant time investment and focus.
As shareholders can access we appreciate your supporting our long term view.
With that I'll turn the call over to Richard for an overview of the financials for the quarter. Richard Thank you John and good morning, as a reminder, unless otherwise noted all figures reported on todays call are in U.S. dollars under I FRS.
Got a comparative basis total revenue in a third quarter increased 29% to 47.1 million driven primarily by SaaS revenue, which grew 28% to 31.2 million.
This growth was due to contract secured with new customers as well as the expansion of existing customer subscriptions.
We recorded 3.3 million of subscription term license revenue in Q3, consistent with our previous comments regarding the expected cadence of this year's customer hosted subscription renewals.
As we have previously noted subscription term license will vary quarter to quarter in line with the timing of the individual customer renewal terms.
Professional services grew by 8% to 9.3 million compared to Q3 2018.
Professional services revenues driven by a number of factors, including the number.
Hi, guys and timing of customer projects as well at the level of deployment engagements supported by our partner network.
Overall, we remain pleased with the diversity and strength of our revenue base.
A year to date basis, our 10 largest customers accounted for 33% of our total revenues with no individual customer accounting for greater than 10% of total revenues.
Gross profit grew 36% to 33.3 million or 71% of revenue compared to 67% in Q3 2018.
This increase resulted from the growth in SaaS revenue and other revenue, partially offset by an increase in cost of revenue such as the related headcount partner third party costs and expanded data center capacity.
Profit grew by 70% during the quarter to 4.5 million or 17 cents per diluted share compared to 710 cents per share in Q3 2018.
Adjusted EBITDA for the third quarter grew 29% to 12.1 billion or 20, 726% of revenue in line with Q3 2018.
These results were due to an increase in revenue and gross profit, partially offset by an increase in operating expenses, including investments to support the company's long term strategic growth initiatives.
Included in the third quarter GE in a expense with the write off of 2.5 million in receivables booked in 2017 related to the resolution of the arbitration proceeding with the former Asian customer.
Excluding this charge adjusted EBITDA was 14.6 million or 31% of revenue and profit was six point threemillion or 23 cents per diluted share.
This matter is now fully resolved.
Well up 34% on a year to date basis Q3 cash from operating activities of 1.1 million was 41% lower than Q3, 2018, largely due to fluctuations in operating assets and liabilities.
As of September Thirtyth 2019 cash.
Cash equivalents, a short term investments totaled 202.2 million an increase of 20.7 million from 181.5 million as at December 31st 20, a team.
Our minimum contracted revenue backlog continued to strengthen.
As of September Thirtyth 2019, it was 289.7 million as detailed in no 12 to our financials.
This amount is driven by the 246.9 billion of future contracted SaaS revenue as well as bookings for maintenance support and subscription term license revenue.
The backlog will be recognized over the following periods.
$46.6 million will be recognized in the fourth quarter of 2019.
How much 31.2 million relates to SaaS business, and 12.1 million relates to subscription term license.
111.9 million will be recognized and 2020 .
Of which 97.4 million relates to SaaS business.
And 131.2 million will be recognized in fiscal 2020, and thereafter of which 118.3 million relates to SaaS business.
Total bookings in Q3 were 80.2 million.
Which SaaS bookings were 48.9 million.
We're very pleased with his performance.
As you know bookings will vary between periods as they depend upon the timing of the closing of the underlying subscription and other contracts.
Based on these results at our business outlook, we're pleased to increase our revenue and adjusted EBITDA guidance for fiscal 2019.
We now expect total revenue will be hundred 88 to 190 million.
SaaS revenue will grow approximately 22% over fiscal 2018.
Full year subscription term license revenue would be approximately 26 million.
With their ongoing accelerate investments in sales and marketing, we now expect sales and marketing will be between 23% to 25% of total revenue.
Continuing our product team expansion and new product innovation investments, we expect that research and development will be in the range of 18% to 19% of total revenue.
Based on these revenue at invests investment expectations, we now expect full year adjusted EBITDA margin between 27 and 29% of revenue.
Finally, our business model is supported capital expenditures in the range of 11 to 12 million the majority of which we have already invested in Q2 unplanned data center.
Expansion in R&D investments.
Thank you for your continued support of can access and with that I will turn the call back over to John .
Thank you Richard in summary, we are pleased with our meaningful progress so far in 2019 and believed that we are well positioned to deliver on our increased full year targets.
I'm encouraged by market conditions and ongoing sales activity.
Growth in our stable of top tier partners and their level of engagement and are accelerating product innovations.
Most of all I'm humbled and encouraged by the top quality brands continue to trust can access with their supply chain transformation initiatives.
On behalf of can access I would like to thank you for your support and as always for taking the time to join US on the call today with that I'll turn the line over to the operator for QNX.
At this time I'd like to advise everyone in order to ask a question. Please press star followed by the number one on your Touchtone keep Todd. If your question is been answered or you wish remove yourself from the Q. Please press the pound <unk>. Thank you and we'll pause for a moment compiled the human a roster.
[noise]. Your first question comes from the line of Richard Tse from National Bank Financial go ahead. Please your line is open.
Yes. Thank you are you guys is being very conservative here with the guidance because your implied Q4 numbers on the revenue pretty much seem like they're already in backlog. So maybe you can kind of give us the commentary on that please.
Thank you rich for the question, we are very confident with regards to the guidance that we have provided.
The the nature of this description does provide the long term visibility.
And the as as thank you I appreciate Richard sometimes is the timing with in a year that that can vary and so while our model has really been predicated for many years and still is on that 80% of the far visibility of the next 12 months a with regards to within the next.
Three months, it's in the it's traditionally being in a very high 90% range. So this guidance is consistent with that type of model.
As we now disclose the backlog you you as a reader have greater insight. So I'll just say that we're very confident and you know our goal is to continue this not only secure business, but to secure it on a timely basis during the quarter and you know any of that Oh performance Uh Huh will.
The impact ultimate results.
Okay, and John you guys had some great product announcements that connections recently I'm kind of curious to see where they can kind of give us some post a conference feedback in terms of the reception obviously, some good but I'm more curious to see your sense that that interest level cascades into incremental revenue in 2020 from those.
Those new products here.
Yeah, what were we were thrilled obviously I think I.
Connections.
At least in recent memory I can't remember another connections that was that successful and I can't remember ever announcing that many innovations in one of one event like we did.
And it was.
Obviously, the work we've done around self healing and.
You know machine learning auto ml and other elements related to those those math functions as well as the they use the new user experience and obviously I'm I've been talking over the past couple of years about preparing for rapid response as a platform. So.
These are all I'm slated for you know I'd say general availability inside of the first half of 2020, and obviously everything we do in R&D gets monetized in some way.
On the on the rapid response as a platform initiative, we have early adopters I will say.
In a beta program working with us already and working on.
Customer initiated.
You know applications and so that is absolutely thrilling to me it's exactly what I was dropped off if you will not having that kind of mass runtime configurability. So it's no longer just the visualizations, but the ability to build.
Customer specific IP safely in a SAS environment.
Something that is safe from.
Upgrades, you upgrade safely and even though you have those extension. So the adoption has been very strong. The obviously, we we had the the demo boots that the at the event and they were.
Very highly busy I would say so we're really excited with what we what we've launched.
Okay and just the last one from me in terms of partner Channel you got a bunch of partners.
Kind of use a baseball analogy what inning would you say you hear again.
The broad partner group when it comes to that groups are reaching critical mass here for can access and that's it for me. Thanks.
Yes. So you know I I have consistently said the same words were in chapter one book one we.
At the event itself.
We announced than we showed we had 25 partnerships now.
All at varying stages of maturity and so no I you know for me, it's not so much about the quantity it's about their maturity as they as they continue to work with us.
And so frankly I don't look at it is okay. We're done.
We can slow down the partnership initiative.
There are some of our greatest partners are boutiques and.
Different parts of the world in Europe , and so where are we are thrilled with the uptake.
And in that space, where we continue to see more and more consultants get certified and batched.
You know as as consultants and ready for implementation services and so I don't look at it as being deepen the game whatsoever, It's still early days for us.
That's great. Thanks, Congrats on core.
Thank you.
Your next question comes from the line of Thanos Moschopoulos from BMO capital markets. Go ahead. Please your line is open hi, good morning.
John can you update us on what you're seeing a with respect to spending environment I mean, clearly it didn't seem like there any macro issues this quarter, but as you talk to customers. Currently are there any concerns that might be affecting pipelines and sales cycles or not at this point.
I'm not I'm not seeing any any negative effect of the pipeline remains very very strong.
You know the pipeline is very diverse continues to be I said the same words, you know at the last earnings call, but we're looking at the pipeline today very strong very diverse both in and geography, Europe Asia North America, all very very healthy and then you know a great.
You should across the market segments, we serve as well we're seeing particular.
Increased interest in the in the CPG and the consumer packaged.
Goods arena.
And so yeah, we're not seeing a negative effect whatsoever at this at this point.
Maybe in terms of Asia, I mean, clearly you've had some wins there if you could buy some more color. It is the cadence of us sales cycles in Asia comparable to other regions or the industries that you're.
Targeting there.
But you're having traction there similar to the other geographies and has that people are progressing.
Yes, so I would say.
There's a slight acceleration if you will in Asia and Europe .
Predominantly we're investing heavily in those regions and we talked about that you know a year ago.
Putting our foot on the gas and and so we're seeing the fruits of that labor.
As a result, and obviously, we can't announce every single account we win.
Obviously thrilled to be able to announce Honda Mohan in Japan almost back to back you know this is this is very very.
Significant for us in the automotive space.
Japan and.
And again you know the work that we've done in Europe around CPG with BT and others.
This is really strengthening those verticals in that region as well. So so we're continuing our investments in those regions and again as color I would say we're seeing.
Perhaps a slight acceleration in though in Europe and Asia.
Predominantly but I think it's reflective of.
Our investment in those regions.
Great and two quick ones. Richard you raised your term license guidance for 2019 did that reflects the extension of existing on premise customers or did you signed new one.
The hub with subscription tariff that they have been on a renewal basis said, it's not a common to see expansion and growth on renewal. So that that really was the driver for the higher than anticipated.
Performance and then finally Youd previously given US a term license guidance for 2020 sounds like those in the city of 11 million term licenses for next year or is that still your expectation.
Well with regards just the guidance and general we're still going through our development.
Planning initiatives and so we're going to be providing that.
When we comment on Q4, but in terms of the broad range, yes that that holds because that is you know those would be.
Renewals that we would look forward to completing throughout 2020 and then and then obviously in the out year 2021.
Okay. Thanks, guys I'll Echo Richards congratulations on the quarter.
Thank you.
Your next question comes from the line of Daniel Chan with TD Securities Go ahead. Please your line is open hi, good morning, guys. So you saw a nice acceleration in the backlog building up there can you provide some color on the seasonality of the deal closures and should we expect the backlogs continue to accelerate as we get through Q4.
Well our goal. Thank you down our goal is absolutely to cease sustained.
Growth and the backlog now it's as you think appreciate the timing of the deals others, what goes into that amortization schedule that that long term subscription revenue is going to.
Be dependent upon the timing of the arrangement I, we don't really see seasonality so much with regards to.
The subscription side of things. It's just continues to be building. It is.
Fairly I would say more than calm and that those transactions occur later in the a and the quarter and hence my earlier comments about contribution with in the quarter within even sometimes the fiscal year.
But.
You know as John commented the health of the funnel is very strong the the investment we've made in sales and marketing is considerable and continues and so that our coverage of represented representatives.
Both not only in sales, but in marketing and related support.
Global It continues to expand so our expectation and focus is to.
Turning to drive that backlog.
Okay great.
And then for the large deals that will take multi multiple years is deployed such as the BHP three year deployment.
Deals fully reflected in the backlog or do you add it in phases as you complete parts of the deployment.
Well, the our backlog yeah fair just to clarify as the minimum firm contracted revenue and at is it is it follows as disclosed the corresponding revenue type so, albeit subscription or are they on premise.
Description term.
License it is not comment for professional services to to be.
Really committed in the long term in fact, most of our arrangements and deployments are at a much shorter period of time in a term.
Time and material basis, so they're not they're not reflected in in the backlog. They are reflected in our broader guidance, but not and the backlog so.
Really the focus is the ongoing subscription license revenue is as noted in that as the driver for US as we noted the 80 million bookings and total in 48 million related to a SaaS.
Great. Thank you.
Your next question comes from the line of Depop Shaw from GMP Securities Go ahead. Please your line is open.
Hi, Good morning, guys. Thanks for taking my question I have a quick follow up on Santos. His question on the term licenses. So did you guys see that you're expecting it to drop next year and kind of whats intuitive sense of growth.
Yes, as or so so yes and broad ranges.
You know our arrangements our longer term as you can appreciate Deepak and generally speaking the most of them average around three years and so subscription the range Vince you know a number of whom we actually.
Have been working with well over 10 years in some cases, even you know converted to subscription when we went to subscription model in 2005.
I continue to be.
Deploy and continue in a number case to expand on a customer hosted basis and those are though those are the remains even though pay as you know and annual installments over three years under IRS, we do have too.
Bifurcate and.
At present that revenue as subscription term license and maintenance support and it just happens that the cadence is.
It's really higher and and this year and would also be higher or our expectation and 2022.
And as we have indicated previously you know that level is going down to about 50% level and 2020, and then going down a further and and 2021 and our goal is then to be on the renewal cycle. So that would again.
The increase.
Cash the business everything else remains.
Consistent throughout that period, if we just have that.
That bit of.
Have a curve and and obviously depends upon a number of factors the extent to which.
Customers renew and expand and you know it's not a.
We have and never cases actually.
Worked with the customer to help them understand the additional benefit of a bus hosting them in the cloud and we've we've converted their customer premise arrangements to the cloud in which case then they follow into that broader SaaS model that you can see is just the casino the sequential revenue growth.
Okay excellent Richard that's very helpful. Thank you. So I have a couple of questions for John John Flextronics. So I asked him a couple of years ago. If there were seeing a network effect with their downstream supply chain partners by using rapid response, they kind of smiled, but they didn't say yesterday. They didn't say no clearly if their partner now they're seeing some kind of benefit can you give us a sense.
Well, what the benefit to Oh, maybe not in specific terms, what what's a benefit to a major.
Company to push rapid response to its partners what are the partner see what is the.
I mean I disagree great question, Thank we'll be back it's.
When when you think about the macro level value that we're providing.
We're essentially collapsing time.
You know cycle time, the speed to detect the speed to correct.
It's really one of the core tenets of rapid response, it's one of the Cork tenants of what we call concurrency concurrent planning and obviously our customers focus inside their walls first and you know the speed at which they can connect.
Demand forecasting demand planning.
You know to their master schedule and capacity playing in inventory and so on.
Yes, it is where they achieve tremendous tremendous value, it's not uncommon for them to say hey, what used to take two weeks now takes less than two hours or what used to take two hours now takes.
30 seconds is a giant leap forward now when you start thinking about extending that speed that concurrency outside your four walls.
You know therein lies.
A level of in direction value. If you will so the speed at which.
Either the customers are suppliers of a contract manufacturer could be.
[noise] connected.
Right. So if there is a demand change from one of you know.
Next is customers for example, the speed that flex can absorb that.
Having been connected having a rapid response to rapid response connected environment.
Collapses tremendously right you eliminate a lot of that lead time.
And the same is true the other way around.
Right. So if you're a brand owner leveraging a contract manufacturer the speed at which you can see downstream.
Effects of the supply chain.
Is directly correlated to the speed at which you can course, correct when those adverse conditions occur and so it's all about speed and time.
The speed at which you can connect a learning and therein lies the the network effect. If you will end so.
Flex has been a great customer of ours for many many years well well past decade, maybe even closing in on 20 years, we know them extremely well there that are wildly mature.
Especially in the world concurrency and so I think they obviously.
Benefit internally through the use of concurrency, but you know they see the potential.
Oh, extending that concurrency beyond their own four walls to include.
They are partners and and the same is true for that for the partners themselves their customers. It's a it's extremely valuable to have that absolute transparency and high speed.
Hi, speed visibility up and down the supply chain.
Thanks, John that's that's great insight just on that or not network effect.
What I'd heard is that there was some concerns around data sharing data privacy and there's general hesitancy of the broader supply chain external supply chains to do that.
Did you guys solve the problem or do the benefits that we not problem and customers are over it.
Which path kind of have you got yeah. It's a funny thing technology is never the burden, if you will or the or the friction.
Connecting these partners.
The technology doesn't really get in the way the relationships.
Our what needs to get solved and the trust between partners is what needs to get solved so.
You know I would say.
So that.
In terms of in terms of the ultimate decisions. If you will having that network effect occur the funny thing when you're a brand on are you still own a number to the street you still own quality you still owned every promised you've made to every customer even if you don't manufacturer your goods.
You own all of that you on quality you own brand you own promises.
And if your public venue certainly on a number two the street. So there's a there's a terrific need to have that transparency and visibility downstream.
Absolutely terrific need for it and so you know I don't think it is uncommon and you know it's not an uncommon occurrence today you know to have.
You know to have that visibility through subcontractors, we're seeing a lot of what we call the glass factory effect.
As more common place and then the result is really the reason is really that they need that transparency in order to maintain.
The promises they've made to the street the promises they've made to customers and to understand.
Everything from Ontime in full in inventory disposition and other elements like that.
Okay excellent no I appreciate the detailed answers thanks for taking some ill jump back in the cuda tickets. Thanks.
Your next question comes from the line of Robert Young with Canaccord. Genuity go ahead. Please your line is open.
Hi, Good morning, you reported very strong EBITDA margin and raise your EBITDA guidance for the year. So looks like Q4 will also have strong margins and so.
Without giving guidance to 2020, how should investors think about your margin structure going forward are the initiatives you have planned going to hold margins back.
Or should we be thinking about.
Operating leverage going forward and then maybe if you could weve into your answer how does the dropdown and subscription term license impact that.
Lot of questions there, Rob, but thank you for a further for those those questions and.
First and foremost it is with regards to the subscription we're very pleased by not only the success of of the recent quarters, but as John said by by what our future holds and as I sort of touched on very briefly we are as a management team.
Right now reviewing.
Number of additional growth initiatives and activities and we're in the process of completing our appropriate budget cycle and our longer term.
Investment.
And so.
We look forward to providing that wholesome.
Guidance of not only the from a future revenue perspective, but also the a the margin perspective and and.
When we when we provide our Q4 call absolutely.
From a a from a a an income statement perspective, the change in subscription term license revenue being lower well have.
And impact on the the margins, but we are quite unique in that we consistently drive out very very strong margins, while we drive out that growth and so the.
No directionally, yes, as most as Europe and other analysts model are projecting we'll see.
Still strong margins, but at a lower level.
That macro trend would and.
Would be there, but then as I noted with regards to that subscription term cycle on on really on a three year basis. One would also expect seeing through to 2020 to that.
You'll also see expansions and margins so for us it's really all about the long term. It's all about you know continue this growth and initiatives to actually further accelerate the the core business, which is the fastest corruption growth.
And that continue to drive a cash so that's about the directional statement that we can provide a again.
When we complete our year end call, we'll we'll have we'll provide that broader.
Okay, I guess love to wait for that the.
12 million in the backlog for term license in Q4.
I'd like you said that's from contracted can you talk about and are there any scenarios where that could push beyond a year or.
Is your confidence there very high that that'll come through in Q4.
Well, because it's disclose in backlog Rob It is contracted and so you know again in terms of subscription.
For the customer hosted arrangements. Once again, there's we we were required to break that into two components. One the right to use which is a subscription term license was recognized on the commencement of the renewal term and then the residual which is the maintenance support will recognize over say that three year that three year term basis.
So.
And the number cases within the quarter. So in other words they'll sign the renewal maybe they signed a renewal on hypothetically on July 2nd and the term starts in September so it's all within.
The quarter, so you won't see that and backlog, but you know in other cases, you know maybe sign on September 15 for.
November 1st start in which case it would be as we've disclosed in the backlog in fact or 26 million.
The number that we provided is simply the year to date number plus that.
At 12 million so.
I would say we're extremely confident I mean, it is it's contracted and yes and loaded I don't know what else I can say in that.
And that you know renewal terms again, a little three year terms or they're going to start date do not want to.
Interrupt their use of the rapid response.
Okay, that's great.
And then like is there any hesitation that you think might happen in front of the you announced a lot of new products and new.
Genthree into software and is or is it realistic to think that.
There would be hesitation from customers waiting to see how this turns out to make sure that theres no issues with that or is your.
Funnel moving just as normally as it would without that.
Yeah, I know, it's a it's a great question and we have a pretty robust.
Alpha Beta program.
With customers well in advance of by the time, we hit GA of any product it has seen its pace.
So we.
We've been added quite a long time and again its SaaS based software. So obviously the burden is on can access to upgrade the customer and so you know there there.
They are excited to take to take up new releases as they as the as they come out now certainly.
We have we're on a monthly cycle of releases, we which is common in SAS. It doesn't mean every customer takes every release every month.
But but we do have a pretty.
Strong upgrade program.
That keeps our customers up today, and so I wouldnt say theres any friction there whatsoever and.
And then the relationships that we have with our customers.
Bring a lot of confidence to the releases that when they hit GA.
Okay last question, just maybe a broader when like you said the connections was very well attended and it seems as though can access has a profile that's growing the referenceability is maturing, but a great companies using their sort of products and so are you seeing any change in buyer behavior.
Always asked about an update on sales cycle is that changing is there more functionality being taken up front has or less pushback on price is there anything you could talk about buyer behavior as connections matures as a company and I'll pass line.
Thanks, Rob So yeah we're.
It was great seeing new at the event, it's great for you to witness what we witness.
You know at connections and for sure. It was definitely a record breaker across the board and.
So that.
I would say, we're seeing a lot more maturity.
In our prospects as it relates to what concurrency means and I think some of this is you know there's a lot of discussion around it theres peers.
And so I would say, there's a lot of maturity around the potency of concurrency and when we and so the conversations when we meet a prospect.
Lets say much more fluid.
I'd say, there's a bit of an acceleration in terms of understanding what does it mean for me to transform.
Into a concurrent type of the modeled for my supply chain.
And as it relates to shrinking sales cycles, and I think we started that discussion probably five years ago. We've been monitoring that closely and these are still you know generational decisions that these customers are making there there literally changing the business fabric of their process and so.
There were still seeing that 18 month pipe sales site, plus or minus some have been faster.
But sound quite frankly take longer and so I wouldn't be prepared and necessarily say that.
You know deal cycles are shrinking.
I will say the pipeline is quite healthy and quite broad.
Hello.
Something I study every week and it's great to see activity.
Every vertical we serve and so.
I'd say, there's a if I were to put some color on it.
Say, there's a maturity around what concurrency means there's a there's a.
I think people are becoming a week to what that Theres, a new ways to solve supply chain problems.
And you're right then we just being able to announce these great customer names.
Last year, we announced.
As you know Unilever and others you saw PNG speak at our conference.
It lends a lot of credibility.
So what it means to join the you know the concurrency.
Approach. So we're we're thrilled with where we are obviously and the.
If and when we start seeing deal cycles shrink that will certainly manifest in the in guidance.
Thanks.
Your next question comes in line of Stephanie price with see IVC go ahead. Please your line is open.
Thanks.
Can you talk a bit about where you are in the rollout of the sales team and kind of what inning you are in in terms of fully ramping that sales team.
Yes, so were we announced last year as we said 2018.
You know, we announced an acceleration on that team and ended marketing quite frankly, and then again in Q1 this year.
We made that announcement that we were going to further accelerate even beyond what we had thought just three months prior.
We have opened head count.
In sales and marketing today, we're continuing had acceleration.
So to give us the coverage that we see in the pipeline and so.
With that I'd say, a an emphasis on on Asia and Europe .
But as well as North America, I mean, all regions are growing we're hiring in all regions and I wouldn't say that you know.
There is aligned in the San somewhere in the future, whereas where I'm going to say that the Salesforce is now at capacity you know every quarter I see a healthier and healthier pipeline and so as the quarters manifest we're going to grow to make sure we have appropriate coverage in sales.
Okay, Great and then can you talk about it but the implementation process for recent client wins, how does it change versus a year ago and can you talk a little bit about that timeline for implementation.
Yes, so we continue to see a lot of partner involvement. So this is where we talked earlier, we now at 25 partners formal partner arrangements. These aren't just marketing arrangements.
And so we continue to see the vast majority of our net new.
Wins coming in through partner influence and we're also seeing more and more partners pick up the prime position for professional services, which is exactly what we would hope hope to see.
You know and so so that is that is becoming more common place. It's not certainly not every single deal where you know a partners from but I'd say the majority of them, we're starting to see that behavior.
You know, we're we're we're playing a supporting rule.
We'll also say and this is I just think its best practice one of the things. We tell every single customer is not to boil the ocean, Okay and so the project plans that we look out that we work on their journeys.
It's not uncommon to have.
Multiple phases of rollout because again this is transforming business fabric and business process.
And so the way we look at things is there has to be you know what I would say a go live stage inside of that six to nine month window, it's not uncommon.
Doesn't mean that you're done the full transformation for these large large corporations, but they are experiencing a concurrent environment.
With significant value accretion of the solution right inside of that window and then they build it from there. That's that's how I would characterize the way deployments.
Traditionally rollout.
Great. Thank you.
Your next question comes on line of Paltry <unk> with RBC capital markets Go ahead. Please your line is open.
Thanks, You mentioned good morning, but this question John .
Earlier, you had months you mentioned that you're encouraged by the macro conditions are environment, you previously tariff uncertainty could lead to delays.
Last year.
We still obviously a fluid environment in terms of terrorists.
But just given the customer momentum that you're seeing as shown in the backlog what's changed from a customer perspective in terms of how they're trying to address the changes in their environment.
Yes.
No.
At the event, we had one of our CPG customers, obviously talking about what how how large scale global manufacturers absorb catastrophe like a global a weather condition or weather event that is impending and.
No without concurrency.
You generally run out of time to absorb those types of unexpected events now.
That's a weather condition, but you know I would say that.
You know the terror situations that occur.
The regulatory.
Adjustments that occur in life Sciences et cetera.
You know can happen in a moment's notice and so I would say.
Just drawing on what I previously stated about the maturity of concurrency and the potency of that approach versus the cascaded planning that people suffer today.
You know I would say that it's the recognition of.
The importance of time.
I made statements like this before we are last 20 years manufacturers have been attempting to optimize their things and not optimized time.
And to me I think time as the new oil it's a it's incredibly valuable.
The speed to detect is directly related to the speed you can correct and.
And so I'd say, there's there's definitely a maturity related to that people are open to looking at the problem.
Very very different way.
Thank you.
As regards the increase in backlog can you clarify if there was a customer that was disproportionate.
Driver that increase or decrease was relatively evenly spread across a number of customers are our bridge when was in line with the date historical trends we've seen.
Well as yes, just so on a test on the SaaS side again it was.
Passport 48 million and bookings, but that was a across a number of of customers the combination of new and quite frankly expansion.
Activities as as we noted we do not have.
The customer concentration.
The situations.
But deals will vary in size or you know, it's sometimes its multimillion dollars a year, sometimes as several hundred thousand a year. So individual deals will continue to vary but.
We're pleased to report that that backlog was a number of transactions across all our key geographies and verticals.
Hey, Thanks, taking my questions.
Your next question comes from the line of Paul steep with Scotia Capital Go ahead. Please your line is open.
Great. Thanks.
The them more but you're hiring trends, maybe where the numbers staff is today and then just what that trajectory looks like into 19 and 20, and then finally, where we think about adding those staff and maybe some of the opportunities that you're seeing in terms of getting people to join can access as you continue to gain scale. Thanks.
Thank you. Thank you Paul we are very very pleased with a a the team and.
Both you know our 30 year employees as well as our 30 day employs the way we've been able to continue to expand.
In fact, I think as John noted about a year ago that we had a milestone whereby the the number of new roles created.
And the company, we're actually in aggregate higher outside of Canada that then with within Canada, and that's primarily because of the sales the support and other professional services groups that we've hired.
We continue to to have to attract very very strong candidates. They they welcome the ability to contribute to.
The concurrent.
Current planning.
Model.
We currently are with a very strong co op program about 700 individuals' sub.
And the work, we we expect to to continue to grow that.
Have primarily in Europe , and Asia as well as throughout to continue to expand in the state the exact level, though Paul.
Again as part of that.
Mid and longer term planning that the management team is currently.
Working through and so that type information will be disclosed gave when we provide our full year results.
Great one final follow up one.
John could you talk maybe but how you and polar thinking but the sales structure in terms of not only driving a number the new wins that youve secured but maybe you existing clients and how we should think about.
The expansion in those accounts not only in terms of numbers seats, but maybe in terms of module adoption as well. Thanks.
So great question, obviously, we've been scaling up pretty dramatically over the last 18 months.
The entire sales engine and with that by the way it is a commensurate to scale up of marketing.
And so both functions have actually been growing quite.
No.
Quite a healthy pace.
And the obviously, that's fueling a lot of great activity.
And.
As I said, some some degree of momentum in Asia and Europe as a result.
You know as it relates to.
You know I would I would say the separation between selling net new and expanding into the base that is.
An area that Paul and I have been working on.
As we achieve scale it sales it starts to make sense to have.
Dedicated focus on on the base itself and.
Ensuring a very very strong relationship continues well past the initial the initial deal. So we are looking at.
Sales structure, if you will as well as.
Marketing support.
By.
Looking at it with that kind of a separation looking at it from a net new account versus.
Versus the.
The base itself.
Obviously, we have leadership in every geography.
So we have sales leadership in Asia sales leadership in Europe and.
Specific sales leadership in north so that's the way we're looking at it as we scale up.
Thank you.
Your next question comes from line of Gus Papageorgiou from P.I. Financial go ahead. Please your line is open hi, thanks, and congrats on nice quarter.
The customer concentration I wonder if you can give us an update on your customer count you used to say you have around 100 customers I'm wondering kind of if you could give us a direct a sense of year over year, which has the customer count on it.
And on the customer concentrations, you're saying your top 10 this 33% of revenue I'm wondering if you remove professional services, which.
I assume is heavily biased towards new customers. So look at revenue ex professional services could you give us a sense of what the top 10 would account for in terms of revenue not a specific number just.
How much higher or lower than the 33%.
Yes, so I guess thanks. Thanks for the question. So yes. The model is and what we're following under IRS is that disclosure of the total revenue and total revenue as you rightly noted consist of a number of elements so that would be.
Professional services and say the SaaS subscription fee and and you know our engagement with that customer.
And year, one if we are the prime on that professional services, rather than one of our of our partners.
Well actually probably be higher in year, one than in year, two and in some instances they may come in at the top 10 because of that and then.
Move out of the top 10, and the second year. So you do have that variance.
We we're not disclosing sort of the south the components of that and so I can't really address here. Your part two question other than just comment on that general.
Trend.
We.
We have seen that percentage continue to decrease as we've pulled on a you know and secure the confidence of new customers. So directionally, yes, our customer account is a is increasing.
And we can appreciate the value of of the sub metrics, but you know with a with with the current customer level, it's difficult to truly regress sort of the future trends and so we're not.
We're not going to be providing guidance into the actual customer count other than to say that.
Continues to grow and we're very pleased with the the names that.
The new customers as well as our long term experience with existing customers.
Okay would it be trying to say, though if you look if you've heard me move.
You remove professional services that your top 10 customers would account for less than 33% of revenue.
Well, what this year one of the key drivers as description term license revenue so.
If you if you were to remove that than you would see.
You know if that was.
The old model I think you would see a little bit of different trend, but you know the rally is that's what it is so that is not a customer concentration is not a customer concentration in any geography is not a customer concentration and.
And then a vertical and so I think the main takeaway that investors should take is that this is a very robust.
And growing customer base.
Great. Thank you.
Your next question question comes from the line of Susan Scicluna from eight capital go ahead. Please your line is open.
Good morning, guys and congrats on the strong quarter just wanted to touch on backlog. What was the makeup of the backlog increased quarter over quarter by vertical and how does that kind of compared to what you're seeing the pipeline today in terms of strength.
So again, thanks for the kind comments on the core and thank you for notice, saying the the growth in the backlog. They know the bookings again that total an aggregate were $80 million 48 million on SaaS. What we can what you can see is the of the growth in the.
And overall backlog and in fact, it's it's stronger than would appear if you just.
Simply looked at the June Thirtyth, two September thirtyth growth, because obviously at June Thirtyth.
I would have had Q3 numbers Hana, which have now been clear clearly recognized so our focus has always been on the incremental growth in the go forward periods.
We're not.
At this juncture contemplating.
Breaking that out into a geo basis, we are pleased to see the increased growth, though as you as you will read as well and.
In Europe and Asia.
And.
And that continues to be a very strong.
In them.
As to verticals the growth in automotive and CPG is very strong but.
Right now its.
Hi Tech and life Sciences that are still that the two strongest.
Verticals, but again, there's not a concentration there because individually they're both sort in that 30% range. So very good dynamics overall very pleased with the broad distribution I think it's just really reinforcing the him the message that rapid response.
As so applicable across the supply chain and as you know concurrent planning the same customer code can be used and different jarvis different verticals.
Great. Thank you that's that's a that's that's helpful and that's just one quick one from me on the rapid response the platform.
What.
What new markets or verticals do you see the biggest opportunity in and given that you know obviously partners will be leading the charge here.
Her role you guys expect to play from I guess, the field and Port perspective.
Well I've been let John comment further on the platform initiatives and the and the broader base, but you know again assets. It's great that you know of Unilever PNG are using the same.
Rapid response code as for her to our our Merck or any other of our flex or any of our other great customers.
It is.
Well, we can do go into a new vertical it has generally been with the support up a marquee customer and add to develop those unique analytics in the end the and with a platform.
It's going to beef is going to be a increasingly.
Easier for customers as well as our partners to take those in unit unique embedded analytics and and really extend the use of of rapid response.
As we move forward John .
Yes, certainly a you know our partners when I when I'm thinking about the platform the.
I think the greatest way to describe it is to think about.
What happened when Salesforce Dot Com announced forced dot com, which is a platform in which you can build extensions to salesforce.
It opened up a you know it opened up the market to extend salesforce into applications and new areas and so I like and what we're doing.
It's not like we invented the model, it's a great model and.
As Richard said already rapid response is being used to support six different verticals plus a few 'cause there's always some that were experimenting with we haven't yet announced but.
You know as it relates to extending rapid response into new market verticals. This platform initiative will be.
We will be key.
This is sort of in combination in concert with our partners.
We were not in every every vertical that matters.
But our partners our.
So with this with rapid response as a platform.
At their disposal it will.
My opinion is at least my thesis is that it will accelerate our entry into new market verticals overtime.
And that's obviously is very exciting for our partners very exciting for us for existing customers.
Especially the larger ones that have unique IP in their business process.
Rapid response as a platform will allow us to codify that unique IP safely in a SaaS environment.
Safe from.
Safe with upgrades and so again that the value to our customers is obvious and for our partners. It gives them the opportunity to to develop that unique IP for specific customers in a very safe SaaS manner and so we've been asked this a long long time.
We have all rapid response is always operated as a platform. Our latest announcement connections was around the ability to extend the brain function. If you will have rapid response.
With profitable analytics and essentially that is what is going to fuel.
More and more partner engagement.
As we as we go forward.
And with that that concludes today's Q and a portion of the call I'd like to turn the call back over to Mr. was first for some closing remarks.
Thank you I understand some you may have more questions yet and please reach out to me.
With those and I'll get them answered for you, but Oh, we appreciate your questions on call a there good as always injure ongoing interest and support of Tenaxis. We look forward to speaking with you again, when we report our Q4 results. So goodbye for now.
This concludes todays conference call. We thank you for your participation you may now disconnect.