Q4 2019 Earnings Call
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[music]. Thank you good afternoon, and welcome to girls sites fourth quarter and full year 2019 earnings conference call with me today, our earrings gone and co founder and CEO and James but yes.
Some of my remarks will include forward looking statements within the meaning of the federal Securities laws actual results may differ materially from those contemplated by these forward looking statements.
Factors that could cause results to differ materially are included in todays press release and in our FCC filings.
Any forward looking statements that we make on this call are based on information and assumptions as of today and we assume no obligation to update these statements.
During this call we may present, both GAAP and non-GAAP financial measures, except for revenue balance sheet amounts cash from operations and billings all financial amounts discussed or non-GAAP growth rates are compared to the prior year comparable period, unless otherwise stated.
Reconciliation of GAAP to non-GAAP measures is included in todays earnings press release. The press release is available on our website and investors doctoral site dotcom.
[music] before we hear from here and I'd like to know that we're holding our second annual well site.
In London coming up next month or and you use write them. So the EMEA region will be held on March 23rd through 24th Park Plaza, Westminster breach hotels in London.
The event will provide an excellent opportunity for investors and analysts in Europe to connect with their customers and partners will hold a short breakout session on March 20, Threerd for investors and analysts that joined us at life.
Please send an email to <unk> IR website, <unk> dot com reach out to me directly if you're interested in attendance.
Now I'll turn the call over to air.
Thanks, Mark and thanks to everyone for joining our Q4 earnings call.
We're all sides fourth quarter capped off a strong second half.
Further demonstrating that the operational improvements we implemented during the second half of 2019 are working and laying the foundation for durable long term b to b billings growth above 30%.
We ended the year with 37% revenue growth above the high end of our guidance and we also produced 33% b to B billings growth.
We've now achieved 30% or greater B to B billings growth in 10 out of the last 11 quarters.
We began in 2020 with nearly a million business users and 18000 business customers and a new integrated product line to carry the momentum for it from the second half of 2019 through 2020.
We made several improvements to our go to market in the second half of 2019, which can be boil down to three primary areas.
Sales leadership sales operations and capacity.
We added a world class sales leader Ross Meyercord, who has already made key hires and customer success and professional services leadership.
You'd also brought additional rigor to our sales operations, including a more frequent and thorough forecast to review process and more discipline to ensure we consistently channel our efforts on investments toward our most strategic customers segment end markets.
We've also added considerable capacity to our sales and customer success organization to expand our coverage within our customer base.
We now have over 330 quota bearing sales rep.
Who recently participated in a world class sales kick off and specialized product training.
Giving us confidence that we have sufficient ramp and enabled capacity as we proceed through 2020.
I'll share more later in the call about our progress with customers partners and product.
First I'd like to turn the call over to James to review the numbers James.
Thanks, John.
In Q4 continued momentum drove billings growth of 28% to 128.4 million.
Our largest quarter in the history of the company.
And b to B billings increased by 30% to 113.2, Mike.
Revenue grew by 32% to 88.8 million.
For the full year total total billings were 379.1 million up 29%.
And b to B billings increased by 33% to 330.1 billion.
2019 revenue was above the high end up our range at 316.9 million.
For 37% growth for the year.
Other brand grows the size of running new yield continues to expand.
Landing and expanding is one of the strongest aspects of our business as we work with customers to become a solution that is prioritized organizational instead of just a few departments.
The evidence that this is working is our growing number of customers with larger deal size.
Well the end of Q4, we cite 41% increase in customers with annual billings of over 100000.
He 78% increase in customers with annual billings exceeding 500000.
Yeah, they 63% increase in customers with annual billings exceeding 1 million.
How do the end of Q4, our top 25 customers have now expanded to 18 times their initial purchase.
This strong sustained growth in our largest accounts demonstrates the value we continue to provide.
And can and combined with the investment we've made in our customer success organization.
We experienced less logo churn in Q4 than any other quarter in 2019.
Which resulted in our net revenue retention remaining above 120% on a trailing 12 month Allergan.
In addition to our increasing deal sizes, our total BW user count increased to almost a million by the end of 2019.
Need to be customers represent 87% of our total billings.
Our b to C. Billings grew 13% in Q4, which is not unusual for us in fourth quarter, we still expect mid single digit growth for B to C going forward.
Our Q4 gross margin was 80% up from 77% and our full year 2019 gross margin was 79% up from 76%.
Net loss per share in Q4 was nine cents in our full year 2019 net loss per share was 30 cents.
A significant improvements compared to net loss per share in 2018 60 cents.
We accelerated investment in our go to market teams in the second half on 2019 and in turn we used 11.7 million an operating cash flow for the year only 3% a billing.
We closed the quarter with total cash and investments of $558 million and our on balance sheet backlog is expressed bar deferred revenue was 235 million.
Turning now to guidance for Q1 2020, we expect revenues to be in the range of 80 to 89 billion an increase of 27% at the midpoint of the range.
We expect Q1 net loss per share to be in the range of 13 to 14 cents, assuming weighted average shares outstanding of approximately a 141 million.
Well the full year 2020, we expect revenue to be in the range of 390 to 400 million.
An increase of 25% at the midpoint of the range.
We expect our overall IBW billings growth to accelerate gradually over 2020.
And consistent with any business with annual billing that are primarily subscription based our 2020 revenue growth rate each quarter will run we follow the trend of billings growth rates from 2019.
Meaning solid revenue growth to start the year slowing a bit in Q2 in Q3 before re accelerating in the fourth quarter and continuing into 2021.
Regarding gross margin, we expect the 80% gross margins from Q3 in Q4 to be relatively consistent through 2020.
80% gross margin as our long term target.
And we are pleased to achieve a years ahead of plan.
And to achieve a while nearly doubling our production of new content in 2019, and increasing our author NPS scores the record high isn't accomplishment worth celebrating.
We expect 2020 net loss per share it'd be in the range of 45, [laughter], assuming weighted average shares outstanding approximately 143 million.
And we expect gradual improvements in our net loss per share as we moved through the year consistent with our gradual improvement in billings growth all helping to create a positive operating cash flow in the fourth quarter.
In summary, we finished the year with strong momentum and we expect to carry forward through 2020 without I'd like to turn the call back over to Aaron Aaron Thanks James.
We have a lot to be proud of what our Q4 results. Let me start with a few observations from over 120 customer visits I made during the second half of 2019.
It is clear to me that tech transformation is in high demand and as a board level topic in virtually all large enterprises.
As I met with customers I saw a clear demand and opportunity to continue expanding our offerings in three key areas.
First there is real appetite for flow.
Our fully integrated developer productivity offering from our gift Prime acquisition earlier in 2019.
Every customer I visited requested to see the flow demo and the actionable insights that he can produce.
We're excited about the possibilities of cross selling flow to our existing customer base and have a strong pipeline to accelerate growth into 2020.
Second our customers want our health as a strategic advisor for their tech skilled transformation, which should you on increased demand among C level executives for our high margin professional services.
We see opportunities to continue expanding these offerings to drive topline growth and further strengthen customer retention.
And third there's a growing demands health businesses develop digital literacy in their non tech workforce.
Leaders want their entire company to understand the technologies that are critical to the future success of their business regardless of role.
Because of these requests from our customers and the opportunity to expand our Tam we have piloted a news skew that will likely release later in the year to address the growing demand for tech literacy and our largest enterprise customers.
I'm confident the combination of these products and services with our existing best in class platform will continue to meet the growing demands for tech transformation.
Accenture as an example of how these product offerings can work at scale.
With over 500000 people, serving some of the largest businesses in the world Accenture drives innovation to improve the way the world works and live.
We've been working with Accenture on a companywide initiative to improve the digital literacy up their workforce.
This curated therell site experience well it has every employees ability to think critically across multiple technologies and add value to their clients.
We anticipate we will be able to replicate this strategy with many of Accentures customers.
An example from Q4, where Accenture is influenced was helpful was Verizon.
Where we teamed up to align tech rolls enrolled base skill development pathway.
The Verizon deal was one of our largest to date and demonstrates the type of scale, we can reach with outstanding partners like Accenture, Fujitsu and others.
Speaking of partners, we continue to be encouraged by our progress with Microsoft Google and Amazon.
With Microsoft we completed the content for the five newest Azure roll Ikea.
Our platform now includes eight azure roll like is.
Our 40 skill ideas and over 200 courses that all aligned with Microsoft role based Azure certifications.
In 2019. These courses were access over 1.4 million times with over 750000 hours of content watched and over 100000 skilled assessed using scale like you.
We continue to invest in our sales collaboration with our cloud partners deepening our relationship with existing customers by aligning with important cloud initiatives as well as expanding to new customers to support them on their cloud journey.
Our unmatched content and strong partnership reinforce our leadership position in clubs skills.
Now, let me give you an update on our progress with flow.
Gift Prime was our ninth acquisition and our fastest integration today.
Given the complex technology, we integrated into our platform achieving a unified product offering just seven months. After the acquisition is a remarkable achievement by need and his team.
Our combined skills on flow offering give tech leaders the same level of metrics actionable data and insights that other functions like sales and HR have been able to rely on for years with systems like Salesforce and workday.
Flow as a product that shows developer productivity metric.
Such as coat impacting co churn.
The insights from these metrics, our market, leading and I've never been available to technology leaders, but for now.
This also helps developers remove roadblocks and become more efficient.
We're excited about how you're helping lead on improve and the growing and critically important area of developer productivity.
With skills and flow our customers understand how their teams are working and kind of identify and focus on the technical work that matters most to create the best outcome.
Previously uninformed conversations now turn into debate free data driven discussions.
And the results speak for themselves.
Hello exceeded our internal beliefs expectations for the year growing well over 100%.
In the short time says you have to position. The team has increased the number of flow customers by over 40%.
We fully integrate our go to market teams in January and we're excited to sell skill and flow globally. In 2020, we already have several seven figure deals in the pipeline.
Before I close I'd like to provide a brief update on something I'm very passionate about our social enterprise portals I want.
We now have over 25% of the top 15, nonprofits and Ngls as chloral site one customers.
In total over 500 nonprofit Ngls in Q3 12 organizations around the world are learning through pleural sides platform.
We're proud of the impact Pearl site, one is creating in providing underserved communities the opportunity to acquire skills critical to the current and future economy.
To close I'm pleased with the progress we made as a company in 2019.
Particularly with the learnings from Q2 applied to the second half that made us a better and stronger company.
We've now been public for about 20 months and all the trends we saw at the time as the IPO are accelerating.
The market continues to grow and companies understand that is easier to re skill and upscale their existing team members then to hire from the outside.
The bottom line is that.
There is still a massive global skills gap and its whitening.
The January 2020, assessing online learning platforms for technical skills development report by Gartner States that renewing technical proficiency is essential to reduce the digital disparity gap between the rapid influx of new technology and the ability to exploit it.
Floral site remains committed to helping our customers closed is critical gap.
Which should fuel durable long term growth.
And I'm as excited as ever to kick off a new decade, as CEO and with that I'll turn the call back over the operator for some today.
Ladies and gentlemen, if you had a question at this time, please press star and the number one on your spectrum telephone.
If your question has been answered or you wish to remove yourself from the Q. Please press the pound key.
Your first question comes kind of line of the key Kaleo with Barclays.
Hey, guys. How are you doing thanks, Hey, Jay I'm, saying, Aaron Thanks for taking my questions here Yeah.
Hey, Eric maybe maybe first for you.
Can you just talk a little bit about the competitive environment.
We've talked about horizontal platforms like linked in learning before but can you just touched on maybe some of the others in the stays like the Coursera is unskilled solves for example, and what you're seeing from them as well as the horizontal platforms and some competitive situations.
Yeah, you bet.
In almost every large enterprise.
Count, we see a horizontal solution.
Like the linked and learning a skillsoft et cetera, yes, who are providing a more broad learning solution for the non tech skills and we come in and provide that vertical solution, that's very strategic it wanted and and valued by the CTO the CIO.
And can be integrated with the horizontal solution. So.
We're very compatible and complimentary to those horizontal product offerings and it doesn't end up usually being a competitive dynamics in those cases.
In the lower end of the market. The smaller accounts, we are seeing a little more competition.
From the content only solutions that are really focused on low price.
And content only experiences they don't have.
The skill assessment capabilities that we have the analytics solutions that drive insights to technology leaders and of course, they have nothing like slow.
So as we continue forward I think our competitive positioning further strengthens.
As our differentiation becomes crystal clear with with the new offering that flow provides as we can now not only major learning activity and skilled progression metrics. We can now also measure the application of those skills in their actual work.
Okay that makes a lot of sense.
Maybe maybe for my follow up.
The pipeline was mentioned.
A couple of times during the prepared parts.
But.
Hi, I sort of changing qualitatively, yeah, we've talked about potentially larger deals and of course longer sales cycles with those larger deal but are you seeing those types of deals in your pipeline as you enter fiscal 20 or is it maybe a little bit more balanced across large and mid sized deals anything you could do then you can provide just on the quality the pipe.
Once the the the diversity of pipeline would be helpful.
Yeah sure. The simple answer is we have so we have.
Ever growing list of large deal that we talked about the size of deals over 1 million continues to increase.
Aaron mentioned, the lowest skills combo deals several seven figure deals in the pipeline. So that's good and you're right that does take a little bit longer to get across the finish line. Some of the midsized deals which is why words why did the pipeline in the in the mid market. The lower end of the big of the enterprise market and even in the small market. It continues to expand so I'd say.
We are doing quite well as we go into 2020 on all fronts.
Got it might be helpful. Thanks, guys.
Thank you.
Your next question comes from Brad Sills with BLE security.
Oh, Hey, great. Thanks, guys I wanted to ask about flow.
You know it sounds like you're seeing some great early traction there. There is there any color you can provide on some of the use cases, there what our customers using flow for.
And maybe some trends you've noticed on I'd use cases.
Yeah, you bet. This is a wide open space because today technology leaders and specifically engineering leaders have have no way to to objective Lee major developer productivity.
So like like sales leaders you sales force to measure.
Sales rep productivity, there's really nothing like this in the engineering realm to help leaders I understand the differences between teens and different.
Different productivity outcomes. So this is something that all of our customers need to help drive better efficiency across their teams.
And and they really don't have any way to do it today. So as we're showing up with this new product offering we're seeing cleared demand from at the sea level from from our customers I mentioned, how in my customer visits.
We have yet to be declined a demo because everyone wants to see how it works they want something like this to be able to start understanding differences and in developer productivity across teams.
So initial traction is really positive like we mentioned in the call over 100% billings growth.
You know this last year, a 40% logo growth since the acquisition and that was without an integrated salesforce.
And the cross selling motion is going to be is going to be really strong we've actually built some new capabilities into each product skills and flow to start showing what the other product Hindu through the data.
So thats going to be the hub that helps our reps introduce the other products each with their existing accounts.
Great. Thanks, Aaron and then just on the sales operational changes on the sales hiring how do you feel about kind of where you are.
Switching up on on the capacity.
Like you are there and at this point, it's related to function of getting some of these new hires to productivity with some of the changes you've made it sales job training.
Or you still kind of catching up on hiring front. Thank you.
That's great I feel really good compared to particularly compared to where we were a year ago, where we were about 20% under the heads that we needed right now we're right out where we want to be and it's not just that we have a number of bodies, but all of the bodies and great people have gone through a really fantastic sales kick off that Aaron mentioned.
Unlike last year they have their territories. They have their accounts. The other quota plants Commission plans in hand, and they can really focused on selling for the balance of the quarter, So really integrate spot compared to where we were a year ago and in Q4, we ran all of our existing teen apparel side, a ease through a very in.
Yes, up low boot camp, which which started preparing them for selling flow well before the started the year and all of our reps have now gone through that boot camp on are ready to hit the ground running here in early 2020.
Great. Thanks, guys.
Yeah.
Your next question comes from the line of Terry Tillman with Suntrust Robinson Humphrey.
Gentlemen, can you hear me, okay, Yeah Gary.
Hey are in James the Mark Aaron It sounds like you've been busy hundred 20 meetings.
Keep ramping that up applying a lot [laughter].
But as you know the first question just relates to kind of leadership additions and then just the focus on operational excellence.
If I'm in Investor, where do I see a bigger potential impact in 20.
I'm just like it go to market perspective is it is the more optimizing on new logos or is it just getting a lot more water wall expansion and getting a lot more out of existing customers could you kind of.
Segment, those two and see what could be bigger for the model.
Sure I'll start out of than James can follow up on look since Ross is shown up we made a few quick changes we hired a chief customer officer, who will be really focused on retention and also that wall to wall expansion you referred to.
We've also gone all in on Hunter and farmer in 2020, we started experimenting with it in 2019 throughout the year. We've now fully onto that covers mall in 2020, which will drive the new customer acquisition, while also bringing down the cost of renewal. So we're really excited about all of that and just our our continue.
New continual improvement with our sales.
Operational rigor I think is also opening up new opportunities that we didnt see before and.
More insights around where we need to really focus in flex our executive muscle to drive bigger in larger accounts.
I'll, let James pickup throughout.
Yeah, maybe the only thing I'd add there its areas from a just a pure dollars perspective the.
Majority of our billings has come and we'll continue to come from renewals in expand emotions that we have but I'd say the biggest opportunity you have for improvements in 2020, probably comes from the new logo.
Spansion that we have so we've added a lot of reps that go into Aaron mentioned, the 100 farmer model. We experimented with in 2019 were all in on that in 2020 really ramped up those teams that I think we'll see a lot of good growth in the in the new billings motion that we have in 2020.
Awesome and that's just my follow up question relates the partners you guys have been close with Microsoft for a long, while but whether it relates to other tech partners like Google or ADW us.
Or this potential ESI channel, what do you see the emerging potential in the partner side that could actually be a good influence or revenue. Thank you.
Hey, but.
Yes, we see all of those partners continuing to influence revenue in a positive way moving forward.
We're continuing our work with Microsoft, Google and Amazon and see a bright possibilities with each of them as we continue to deepen those partnerships so that that looks really strong.
We're also seeing a lot of promising.
Results from our early experiments with Accenture like we mentioned in today's call.
And fujitsu's another partner, who we've been doing similar experiments with on I think you know we're likely to see more go to market opportunities from those relationships in the near term just based on what we started to see with these large accounts like Verizon.
And longer term it'll be interesting to see which of those whether it's the tech vendors or these outsized delivers the the bigger impact, but both are very promising.
Your next question comes from the line of Sterling Autry with JP Morgan.
Yes, Thanks, Hi, guys wanted to follow up on that on your comment about the all in on Hunter farmer.
So how many reps end up coming in to 2020 with kind of a different focus different set of relationships as you move to 100 Barber's before just trying to gauge any risk tier of disruption as you ship from previous model hotter farmer.
Yeah, that's fair I'd say the experimentation phase in 2019 pushed us to about 20 to 25 hunters than we had as we exited the as we began to exit the year, we will have that ramped up to probably 60 to 70 by the end of the first quarter and around 75 by the end of the year, we'll have about 400.
Yes, as we exit 2020.
So thats kind of the size and magnitude will be quite a bit more farmers than we have in 2019 it will be.
Even more on a percentage basis higher on the Hunter side.
Got it and then one follow up you talked about the increase scrubbing and scrutiny around the pipeline under your new head of sales Wonder if you could just describe what did you learn as you kind of moved to that more or let's say that higher scrub model.
Yes, if you think.
One the cadence in the frequency is ER has certainly been helpful work is a pretty rigorous process. Once a week one I think many of us are used to where we have.
The the district managers, if you will rolling up to the vps and the various regions.
Ross invites all of us to join his call on a weekly basis. When we go through each territory, we have and talking about the upsides and downsides to each area where executives can get involved.
And it all the big accounts as well as spend plenty of energy on the on the mid size as well and sort of more of the of the high frequency deals that typically come in so just a lot more rigor and conversation would be the biggest factor that I would note and then roster the great job.
Bringing in the executive team Influencers like Aaron and need to can really go out and make a difference at many of these customers to kind of bring them over the finish line by the end of the quarter. So that's the biggest thing for me, but I don't know Aaron you want to have anything else I was just add that I think we've learned that the.
That the importance of that weekly routine is what ensures the quality of the predictability of our forecast.
We like the more we look at the deals talked about the deals between Ross and his leaders and eventually the frontline route the more we're able to understand the tree size of the opportunity. What we can do to go influenced at like James was speaking to and and really how to predict what's going to happen you know a few quarters out so I'd say our.
Our our because of those learning is our ability to see more accurately further out is strengthening.
Got it thank you.
Your next question comes from the line of Brian Peterson with Raymond James.
Hi, gentlemen, thanks for taking the question. So it sounds like some of the investments that you've made and they customer success area.
Really helped improve the retention this quarter can you just talk about maybe headcount investments or some of the systems or processes you put in place in how we should think about that impacting retention numbers next year.
Yes, sure about middle of last year, we had around 40 to 45 customer success managers.
And we embed up I think we exited the year around 75, it'll probably moves around 90 by the end of the first quarter. So within a relatively quick timeframe six nine months roughly doubling of that team I.
I think we've talked about in the past, where we that that incremental amount of team has allowed us to expand our coverage motion, where we now have many more customers that have a CSM speaks to them on a regular basis and I think.
As you mentioned, we've seen already pretty quickly maybe a little bit ahead of what we expected kind of the fruits of that labor, which is in the fourth quarter, we got less retention or less more retention less churn in logos than we had at any point in 2019.
And the that's allowing us to maintain a pretty high now retention and our grocery mentioned actually improved in the fourth quarter relative to the previous quarter. So it feels like we're already back on the upswing there when it comes to retention that churn.
That's good to hear a James maybe a follow up on flow. It sounds like I did better than expected this year or any help on how we should think about that other from a revenue were billings contribution in 2020. Thanks guys.
Yeah, Yeah, I'd say, we're in the same spot we were when we bought them, which is always a great place to be seven months. After you buy something oftentimes, there's always something that wasn't quite as incredible as you might have thought and everything is turning out to be about as good or better than what we expected in what we said at the time that we acquired get prime is that it would produce about.
$25 million to $30 million billings in 2020 and here we are in 2020 and that's the same expectation. We have so yes 25 to 30 is what you should expect from that.
Part of our business from flow billings in 2020.
Great. Thank you.
Yeah.
Your next question comes from the line of Scott Berg with Needham.
Hi are unchanged, congrats and good quarter and thanks for taking my question.
I guess, probably for Erin air in your commentary on the sales capacity increases and you're in a much better position this year versus last year, we can you talk but.
Kevin do you have those reps, yes, you're going to higher by the third.
Your capacity this year or increased capacity by a third but should we see some I productivity increases during the temporary thanks.
Yes, we expect that you will see improvements in productivity, we've invested significantly in our sales enablement capability as a company about a year ago, we only had about four or five people in that function and today, it's up to 12 to 14.
So, it's it's grown pretty significantly and there the key driver behind the excellent sales kick off we just did last month on Andes. These boot camp training that I referred to for flow and there's ongoing enablement that set of that's operating at a much higher and more effective level than it did in the past.
All of that will produce better productivity, we expect those metrics to can do you continue to improve in the future given the investment we're now making.
Your next question comes from the line of Corey Greendale went from now.
Hey, good afternoon graduations on the quarter I just had a couple of questions I apologize for the background noise and an airport but.
I guess.
It sounds like good news on the logo churn I hope you can just comment a little bit on either churn or down sell it at the high end I think you said that.
25, right 18 times or initial purchase I think last quarter. It was 23. So is it down fairly because your new logos in the top 25 that had bigger nickel purchases or were there any like down cells in the top 25.
Yeah, Great question, Thanks for taking that out, but you're right. It is down a little bit that's more of a function of the ebb and flow. The top 25, so different customers have come into that 25 and when they came in the came in a bigger initial purchases so not as much expand after the fact of the overall aggregate amount per year from the top 20.
Five is quite a bit bigger than what it was last quarter or any quarter before that but it's just a function of what I just mentioned on the logo churn. We continue very little logo, ensuring that the high Angela Mark and I think as we noted last quarter, we were beginning to see a little bit more logo churn at the lower end of the market for some of the reasons that Aaron mentioned we've done.
We've seen that stabilizing in the mid to high end of the market. The enterprise, we've definitely seen or reduction in churn from a logo perspective in both of those parts of our business.
Great and other questions, Jeff on as you're ready to go into new year with that being integrated flow. It sounds like there's some very large opportunities how should we think about the sales cycle given.
I would think there may be more change management involved than potentially in implementing that just a panel apparel side does that mean, there are more decision makers involved in a longer sales cycle.
Yeah, it's not a bad way to think about inquiry, but.
On the flip side, there's actually some amazing pilot capabilities and proof of concepts that we can put out in immediately show benefit like tangible benefit to technology leader, so that kind of offsets that a little bit and I think when you add it all up it creates a sales cycle this not meaningfully different from our skills capabilities, it's still probably in the.
Six to nine months, when you're looking at big enterprise more in the four to six months when you're into our commercial segment and probably not hugely different between our skills capability in our flow and just a reminder, corey that when we sell in the enterprise.
At scale with our skills product, we're selling to the tech leader, we're selling to the CTO. The CIO. So is the same person we would bring flow too.
And they're ultimately the one who would be the decision maker. So it does especially in the in the large enterprise scenarios. We're finding that we can actually get to that that level of influence we need to close the deal much faster with low than we were able to do with skills Standalone.
Great looking for looking forward to think about your other companies like never having a better R&D efficiency after they adopt flow.
Yeah, I do feel free to references in there.
Your next question comes from the line of Jeff Mueller with Baird.
Yes. Thanks, just as you kind of tend to go through and fix for the sales challenges and I know you list to three areas, but it sounds like you've made a lot of progress and had a really good sales kickoff and you've caught up a lot on the hiring across most sub departments in the go to market motion. So what are the key kind of.
Steps left that or are you have to implement are yet to be fully implemented as you look to address the prior sales challenges.
I would say that were mostly there at this point I mean, its be continued operational rigor and discipline that we need to continue to demonstrate as a company across all of our segment that all of our sales leaders, but in terms of the big changes I would say all the big changes that we talked about back at after the end of Q2 EPS.
When fully implemented we have the key leadership positions filled.
And a new muscle in place developing now we just need to strengthen it.
Okay, and then James just any comment on.
Cash flow and I I know you kind of dialed back the cash what expectations a quarter or two ago, but.
The account receivable ramp in the quarter look outsized relative to prior Q4's, just is that a timing factor at all or any change in payment terms, which are extending thanks.
Oh definitely not change in payment terms, but you're right. The dsos, probably went through and calculated and accounts receivable increases a little bit.
Higher than we typically would have a that's reflective of just a really big fourth quarter and we're seeing it everywhere in our business that the enterprise segment in bigger deals as they become more of our percentage of our overall business. Those just take a little bit longer. They may negotiate a 45 day term as opposed to typical 30 days terminal.
The more you have those it just extended out a bit longer also and then when you get into enterprise selling.
More and more enterprise selling a lot more of those deals are going to come in the last third in the quarter in the final month, which makes it difficult to collect up before the quarter ends the combination of those couple of things I see I think you'll see that come right back down again in the first quarter, because we'll be collecting all those good receivables. We have you in the fourth quarter.
Thank you.
Yep.
Your next question comes from the line of Stephen Sheldon with William Blair.
Hi, Thanks, you talked about creating a new tackle literacy SKU for non tech employees, which I think would represent.
Significant expansion potential users to your platforms I guess, how far along are you in creating that product and with the go to market there'd be any different relative to your other two main product lines.
Yeah, we're really close.
The release of this new offering if you can too but also I live in Europe next month, we'll be talking about up there in more depth.
And you know we've been experian, many with it and really co developing and it with a lot of our large enterprise customers today, who had been asking us to move in this direction. So close on timing in terms of the go to market motion similar to how were cross selling from skills to flow, we see a very natural way.
The cross sell from skills to the digital literacy offering in most of those large enterprise accounts were selling said the tech leader and the corresponding Ellen de leader, who is responsible for these types of initiatives.
So we were developing a clear sales play on how to take it from ours are full skills offering to this digital literacy offering that will then expand across the entire organization no longer well, we'd just be restricted to the tech population will now be available to the entirety of the organization so to your point.
This does represent a pretty incredible Tam opportunity Tam expansion opportunity for us as a company.
Got it.
And then wanted to ask about your progress in filling more directly to IP leaders did you see more traction there in the fourth quarter and is there anyway to quantify.
Roughly how much of your billings is coming through or flowing through IP departments versus HR and just the general trend there.
Yes, I see the spread if I go back three years. He was probably 70 30 HR versus a tech leader that's flipped to where.
Prior to flow or get prime sitting in how you want to think about start thinking about a more as slow going forward.
So our rebranding it but prior to that we were probably flipped to where we were more 60 40 Tech leader versus HR leader in you're going to see that percentage grow even higher towards the tech leader because flow is it solution for a tech leader. So we I think as you get the into 2020 will probably start to look like 70, 30, maybe 75.
25 Tech leader versus H. earlier that will just continue to expand rolling into the into the following years.
Great. Thank you.
Yes.
Your next question. Your next question comes from the line up right now, but I'm sorry in capital markets.
Hi, guys. Thanks for taking my question. The first one was just from the your commentary comparing cells or parents flow to salesforce with Salesforce kind of a quantifiable ROI for things like increased lead generation Howard businesses looking at flow from an ROI perspective.
Yeah, Great question, you know there's any yen.
But one of the biggest.
Black boxes, and most organizations is how do I am major the ROI from all of the engineering investments, but I'm, making.
It's a really difficult thing for them to answer so similarly, like with Salesforce you want to understand you know how by investing more dollars and salespeople how does that produce more billings and revenue for the company here. It's about okay. If I'm investing more dollars in engineers.
How does that produce more impact it might actually producing.
You know a faster progress towards our our product outcomes in my producing less churn in my code base, you know, our we actually developing.
More efficient and more effective work styles.
And are we able to.
Work through large transformation is re factories and things like that that actually drive the food based Florida positive direction. So these are all things that are really hard for a tech leader to measure today, because there's really no metrics no metrics exists around the around these things that make it easy to quantify so leaders sort of look at everything.
Got it subjectively and they tried to make these determinations and they think about maybe maybe you know pair programming better than mob programming et cetera. These are these are different styles of how teams work, there's really no wafer for leaders to look at those differences and understand if one's actually producing better outcomes in terms of the slow.
All of value in the code.
So our our entire.
Objective here is to get leaders the tools in the data to start having those conversations to be able to start seeing it and we'll continue to innovate and provide even better metrics and dashboards to to better quantify it and and that's why I think we're seeing such a warm reception here because.
This is a very common need and something that people are struggling to figure out and our solution is the best one on the market today.
Okay and it did you talk or give a price point for the new flow skill or a combo flow.
Okay, that's not too different price per user for flows not meaningfully different from what we have from skills the realized.
Price per user right now is just over 300 dollar per user and that's roughly equivalent to what low has been able to capture.
And that's in the that combined skew, you're saying of 300 hours user for both flow and.
No no need 300 for one and 300 for the other if you wanted to combine it would be closer to double.
Okay and.
And then maybe when you start selling the combined scale I was that like Jan one or was that you know.
Starting up in Q4.
Well it combined operating just came out maybe a week two weeks ago, So and the combined go to market teams came together beginning of the year. So is were roughly go to market on an integrated basis about a month now.
Okay, great. Thanks, guys.
Yeah.
And your final question comes on line of Josh Bear with Morgan Stanley.
Thanks, a quick question on on B to C I've noticed.
Have you are discounting on personal skews.
Like $100 on annual 150 on premium and then we saw the acceleration and B to C. Billings growth this quarter and I think one of the highest in several years just wondering if there's any change to the strategy around be to see if it's a response at all to the competition at the smaller customer and or is it away for.
Apparel side skin in the hands of more individuals that could eventually help the the land and expand as they become.
Those individuals I'm going to be to be.
Yeah, Yeah, I think I got Josh, but if I if I missed the here. Then then please come back but generally do you see though so I know you notice that goes to the individual as opposed to selling to a business that pays us.
And the fourth quarter has historically been our biggest quarter by far of the year will actually do several million dollars less in aggregate in the first quarter here than we did in the fourth quarter of 2019, and that's no different from the trend of Q4 of 18 into Q1 of 19, so fairly consistent the Q4 of them very big quarter for us there.
Sure. It's also a good quarter of growth and to your point on the discounting we always have had on Black Friday, just now we have had it every year in the past we continued to have one in 2019 and I think that's the discounting that you're mentioning.
We're also seeing.
We're also seems a little bit more turn to your point about moving into B to B, we're seeing good churn in our opinion, which is more and more of our Buda see customers moving into the Buda be world, which gives better stickiness more longevity.
The LTV piece of that as much better once you move into a b to b relationship. So all of that is goodness that I went to the very first point you made again I would just said that the extra discounts we give towards the middle of the fourth quarter around Black Friday kind of events is pretty pretty common for us.
Got it that's that's perfect and just a follow up on the digital literacy offering.
I'm, just saying that you're close to release on the new offering is is there any of that that's embedded in the 2020 outlook. Thanks.
Very very little tiny small little being not even worth sharing the number. It's so small so if it hits like we expect with some of the opportunity we see in front of us we'd.
We'd see goodness to the model for sure.
I don't know Josh like that answer an outbreak anyway.
[laughter] thanks, Okay.
And I'm showing there no further questions at this time I would now like to turn the conference back to Aaron.
Thank you to close I'd, just like to thank all of our customers partners and our expert authors for your trust him for on site and our team. We're Super excited about what 2020 will bring and look forward to speaking with all of you again next quarter. Thanks.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and you have a wonderful day you may all disconnect.