Q4 2020 Earnings Call
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Good day, ladies and gentlemen, and welcome to Cooper software fourth quarter fiscal year 2020 earnings release Conference call. At this time all participants are in listen only mode. At the conclusion of our prepared remarks, we will conduct a question answer session. If you will like to ask a question. You May proceed Taiwan on your telephone keypad at any time.
Thank you.
If anyone should require assistance during the conference. Please press Star Zero you touched on pad at any time as a reminder, this call is being recorded I would now like to introduce your host for today's conference call Mr., Stephen core VP of Investor Relations Mr. Jorge you May begin your conference. Thank you.
Good afternoon, and welcome to <unk>.
Fourth quarter conference call.
Joining me today are robbery, she could be CEO and Todd.
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Remarks today include forward looking statements about guidance and future results of operation strategy Marketsite products competitive position in potential growth opportunities.
Our actual results may be materially different forward looking statements involve risks and uncertainties and assumptions that are described in our most recently filed 10-Q.
Forward looking statements are based on our beliefs and assumptions today, and we disclaim any obligation to update any forward looking statements. If this call is replaced after today. The information presented may not contain card were accurate information. We also present, both GAAP and non-GAAP financial measures.
Reconciliations of certain of these measures is included in todays earnings release, which you can find on our Investor Relations website.
Replay of this call will also be available.
And if you prefer to access the replay via phone you can find that information in the earnings release.
Unless otherwise stated growth comparisons are against the same period of the prior year with that I will turn call over Gerard.
Thank you Steven Hello, everyone and thank you so much for joining us.
Before we again, let's acknowledged the topic of the crown the virus.
Thoughts and prayers are with anyone and everyone affected globally.
At Cooper.
Our top priority has been and we'll continue to be ensuring the health and safety of all our colleague customers and partners around the.
We're meeting daily and taking guidance and trusted health organizations, such as the C.D.C. and the World World Health organization, everyone's health and safety and implementing safeguard accordingly.
As one global community, let's hope that the return to normalcy as soon as possible.
As far as our business, we have and will continue to execute assertively, despite any and all obstacles in our path.
We're back in California, after another busy year and well into a new one.
Lumpy on a year on behalf of all my colleagues I myself I'm proud to share that for full fiscal year, we delivered it revenue growth rate of 50% and will once again non-GAAP profitable.
It is my strong sense that these annual results demonstrate the value that business been management is able to offer companies around the world that support the strength of our undisputed leadership position in this rapidly evolving space, which is still in its early stages of maturity.
Speaking of our business, we here at Cooper had been successfully delivering value as a service to our customers in virtually every vertical around the world for over a decade.
This fiscal year marks the first time that we had customer go lives on virtually every single confident.
Let me now highlight one exciting Q for example for each.
It's only appropriate that the first one I mentioned be a company that has been deeply impacted by recent events.
In North America, United Airlines, one of the world's largest and best known Airlines has recently gone live with Coupe of Vietnam.
Let's go to the United is providing its employees inefficient intuitive user experience. It gives them more time to serve their customers, while delivering control and visibility third party spent.
Within the first three month, United was 2.5 times has 2.5 times the amount of spend going through Cooper compared to the previous 12 month with their legacy system.
They now have spent visibility.
And the agility and spend control.
In Asia go check leading on demand multi service platform and digital payments Technology Company also group is first customer in Indonesia has gone live up to the B S out.
Using coop as the single platform to manage that spans across the region go Jack is increasing spend under management and Peel back the invoices.
Their first year as they streamline and standardize processes to support their international expansion across Asia.
In Europe.
Well, Yes company and new generation Telco is providing communication services help millions of people be connected communicate do business and be entertain.
Hellier recently replaced seven systems and fragmented manual processes with Cooper.
In addition to enhancing value from suppliers, improving cost and optimizing cash flow Hooper is helping telia work towards this is its sustainability goals, but she brings euros feel to zero waste within its operations and across its entire supply chain by 2030.
As we move into the southern Hemisphere first in South America, Let me highlight braskem the largest producer thermoplastic resins in the Americas and polypropylene in the United States.
Recently went live with Cooper BSM for both direct and indirect purchases.
<unk> coupon that's come had seen rapid user adoption and within the first four month. They successfully completed more than 8000 sourcing event covering services raw material and maintenance.
Moving on to Africa, the Banja Stillwater and international precious metals mining company now live on Coupe of Vietnam in South Africa.
The coupon bond is the water is focusing on enhancing contract coverage standardizing spend proxies and improving their overall affect them that's their business spend environment.
Let's finish up in the land down under Australia.
Volkswagen Group, Australia known as VJ.
So importer and distributor of Volkswagen passenger and commercial vehicles in Australia, which also includes top brands to just go to.
BJ recently went live at the comprehensive Cooper platform, and then are getting deeper visibility into their spend while maintaining sustainable control around budget and delivering a great user experience.
He just leveraging Cooper to maximize pre approved contract back then and the electronically exchange Peos invoices with their consolidated supplier base.
BJ is also using cooper to achieve automation and efficiencies within Boise contract lifecycle management and supplier management, while using analytics to report on all these areas within Cooper.
These go lives that I've highlighted are indicative of the broad application of our comprehensive platform also known as the literacy Cooper.
The more customers utilize the platform the more returned they're able to yield back to their stake holders invisibility control compliant automation not to mention savings.
In addition to these go lives we finished the year strong welcoming some wonderful new customers into our rapidly growing and expanding community is now more than 1300 customer strong.
Q4 wins include American signature Astra Zeneca.
Loose fear a Singapore.
The MW group Rack Fox Corporation Ruple Planeta.
John Lewis partnership Lucid Energy group Orangetheory fitness Walter.
Shinsei Bank Sky service business Aviation, the University of Texas system and went to solve that.
In Q4, we were excited to welcome these and dozens of other new customers to our community.
Now, let's talk about what I believe is one of them most exciting innovations in enterprise software community intelligence.
Within Cooper over 30% of our customers visited there prescriptive insights page the p. in Cuba.
On average approximately once a week during the fourth quarter.
And the number of views and prescriptive actions are growing.
All these prescriptions are of course powered and driven by community intelligence.
Let me give you a real World example of how these insights can help drive and sometimes influence accompanies spend strategy for the better.
Cool up it's one of the world's largest customer co-operative driving value for millions of members and employing 70000 people.
Well its supplies food insurance legal services evil funeral services, and even funeral services to local communities the more than 2500 stores in the UK.
In 2018 co-op launched fuel for growth strategic initiative to reduce costs in order to fund ambitious growth agenda called stronger co-op stronger community.
The success of this initiative hinged on creating a leaner and more agile operating model.
But if they turn to Cooper to identify what would drive the greatest process improvements across its BSM activities.
Initially their focus was to reduce approval cycle times requisitions in invoices, well also introducing greater spend control.
Cooper community intelligence insights illustrated that their approval cycle times are actually in line with community standards, but there was a sizable opportunity to increase savings by driving a higher percentage of spend the free negotiated contracts.
Many of the intelligence showed co op. The best in class peers at Uncontracted spent percentages that were 28 times higher than theirs.
It also prescribed which specific items they could move to cattle.
These prescriptions were based on what club buyers were searching for and best practices from our expansive Cooper community.
Based on these insights co-op is increasing usage of preferred supplier and taking advantage of prenegotiated saving.
As a result.
Co op is better able to meet its fuel for growth goals and service members and communities more effectively.
As I said in the path we are in the early innings of the value creation that community intelligence provides our customers now powered by nearly 1.7 trillion in cumulative spend under management with over one half a trillion in the past year alone.
We will continue to expand upon the power of our technology and our community in this area to bring our customers more and more of the value that no other company in the world could provide.
Now, let's move onto Cooper pay.
So were still quite early on with pay we have seen strong momentum in the addition of new customers ended in early deployment.
We're excited about what pay will bring to Google customers as a core transactional module in our BSM platform.
Today I want to highlight one new coupe of pay customer from the enterprise World and one from mid market.
Then a price company I'd like to highlight is aptly named enterprise holding.
Enterprise leases the transportation services industry with a world class portfolio of brands like enterprise National Alamo rent a car and other.
They are hundred thousand team members operate in 100 countries with a fleet of over 2 million vehicles.
Enterprises currently implementing Cooper's comprehensive platform to drive global BSM transformation.
To pay will connect enterprises supply base to readily available working capital.
Also hooper pay virtual card optimization will improve credit card control visibility and reconciliation.
And the Midmarket Redfin is also cupet pay customer that we're excited to be working with.
Retsinas or brokerage that redesigned real estate with map based technology and a different set of values that customers first.
The launch in 2006, they've helped customers buy or sell more than 235000 homes worth more than $115 billion.
Similar to what we are experiencing with many group of customers Redfin originally looked to us improve their overall BSM process.
And also decided to include the pay.
Last month Redfin went live with Cooper pay using both our virtual card and invoice payment solutions. There now because they've now begun to digital transformation their payment process with 3500 active suppliers across eight subsidiary and expect to increase their credit card rebates reduce inboard invoice price.
I think costs and increased P to P process efficiency.
No other payments offering in the market is able to leverage Cooper's core competencies in BSM and EAP automation combined with widespread adoption within our customers ecosystem.
Using Cooper pay customers can take advantage of every payment rail within a single interface.
We also uniquely allow customers to leverage their existing bank relationships and one fully integrated platform.
Our rich partner ecosystem allows us to provide our customers with a truly open platform the letter a coupon.
We will provide we will continue to provide more updates as the Cooper pay story evolve.
Now, let's move on to the Cooper business spend index or be ESI, a leading indicator of economic growth based on analyzing hundreds of billions of dollars, an aggregated and anonymized business spend.
Today, we publish the Q1 2020 group would be ESI.
Before getting into the results I'd like to once again reiterate that the B S. I data is not indicative of the trends, we're seeing in Cooper's business.
Our Q1 B S. I suggest that similar to the previous quarter that unsurprisingly U.S. businesses continue to remain cautious about the economy.
At an industry level spend sentiment in the retail sector remained above trend, but decline compared to recent quarters.
At the same time spent sentiment in the manufacturing sector continued to below trend and declined compared to recent quarters.
Given the global emergence of the front of our if we also analyzed purchase patterns on potentially impact the categories over the last several weeks.
Our results predictably showed and more than 30% year over year increase in office Sanitizing FINMA equipment.
Similarly, we saw in more than 75% year over year over year increase on personal protective equipment, such as masks and gloves.
At the same time, we saw a 45% year over year decrease in business travel spend and a 21% year over year decrease in purchases from the characters from the category representing durable goods.
We will continue to closely monitor these trends both at an overall, yes, I level as well as that a category level and make the data available on www Dot spend index dotcom over the coming up.
Let's move on to M&A.
During Q4.
We acquired travel optimization leader Yapta.
That is now Cooper travel saver.
Let me illustrate how Cooper travel Saver works with a simple real life example.
<unk> book, your flight and hotel for business trip.
Prices subsequently drop however, rarely wouldn't employee check to see if prices have dropped.
And look to get rebuilt.
The idea of employees with waste their time like this is a complete and total hub.
This is where Cooper travel favorite comes in.
The solution uses technology to dynamically monitor airfare and hotel prices and takes the action of Rebooking deep booking and rebooking virtually identical reservation when prices dropped to a point, where there will be worthwhile net savings to the customer.
It's all happens on the backend without any distraction effort.
Well work by the employee themselves.
Savings are automatically delivered to the customer with a percentage going to Cooper as revenue.
Most of you probably heard me say many times that the best you I know you why.
To that end Hooper travel saver is the pit to me if our of our user centric vision. The letter you in Cooper.
Historically on average Cooper travel favour has saved companies.
2% to 4% of their corporate travel budget.
Resulting in hundreds of millions of dollars of savings for customers.
Furthermore, with our customers, having the ability to turn on travel saver functionality immediately that's about as accelerated as you can get it real representations of the letter a in Cuba.
As you likely expect this acquisition fits very well into our overall M&A strategy.
As I've noted before.
Anytime we look at a potential acquisition.
We focus that we focus on adding technology component components that maximize and enhance the value of our organic transactional core engine and augmenting. This action. This engine with key advanced power applications to maximize the value of these transactions.
This acquisition accomplishes both goals.
Most importantly, the acquired companies culture and values are in close alignment with ours, and we are already well into working as one.
Now speaking of culture and values, let me share conversation I had at a recent profit meeting prospect meeting.
When discussing their interesting Cooper was set to me you guys are known to getting the job done.
And I thought for a moment about what a wonderful complement this was hoopers known forgetting the job done.
I was filled with a sense of pride and appreciation regarding all my fellow colleagues around the world.
For their hearts into delivering meaningful measurable value to our customers every day to the embodiment of our core values and their work.
So when that spirit, let me take a moment to recognize a few of them today, they're expanding outstanding accomplishment.
Let me start with Philippe Lemos trouble Hayden.
Has recently been recognized by his peers for embodying our number one core value of ensuring customer success.
Always willing to help a colleague or customer at the drop a dime and is committed to making other successful.
Next I'd like to call out Jerome just say rain.
Was recently recognized for focusing on results.
Your own takes real real ownership for delivering the most meaningful results to our customers.
Dan Andy out he exemplifies with strong leadership is all about.
And when we talk about striving for excellence, our third for value.
With that Kumar from our analysts relations team was recognized.
She manages some very complex relationships with integrity, she's always collaborating educating and transparently showcasing cooper to the analyst community.
These these kinds of characteristics that helps met this as the undisputed leader in our space.
Congratulations and thank you for leap day to Rome and Rebecca.
Now.
Last quarter, we talked about a few instances in which industry analysts have publicly recognized to this platform.
This is this is the end of the fiscal year I want to highlight that could that participated in 19 analyst reports in calendar 2019 and was named a leader all 19 times.
For the reports covering every area of business than management.
Adding to the many accolades that we received during the year the farthest away free procurement named Cooper the leader in Q4 for the third consecutive time.
Dating.
Cooper continues to set the bar where customer success for the entire business applications industry.
We could not be more proud.
Now in closing, let me say this.
There are thousands of organizations out there who don't have spent visibility spend compliance spend control in automation.
And many of them don't even realize that they need it.
Who has been solving that problem for well over a decade, regardless of economic conditions.
Now more than ever we believe this value proposition should be an even higher priority for all companies globally.
With that let me, let me now hand, the call over so our chief financial Officer.
Got it.
Thanks, Rob and good afternoon, everyone.
We finished the year strong that's we continued to deliver on the commitments we've made to our stakeholders.
And our strong execution is reflected in our key metrics and financial results.
In fiscal 2020.
Total revenue for Q4 with $111 million up 49% year over year and for the year total revenue was $390 million.
50% year over year.
Description revenue was up 46% year over year for Q4 and up 48% for the four year.
Professional services and other revenue for Q4 was 13 million dollar.
Which includes the benefit of a few strategic direct services arrangement that continued into Q4 and are now nearing completion.
For fiscal year 2020.
Full year calculated billings were up 49% over the prior year.
In Q4 calculated billings were $181 million by far our largest ever quarter. The strong result, with deliver despite a difficult year over year compare.
Due to the $6 million acquired deferred revenue from the hyper growth acquisition at the end of Q4 fiscal 2019.
Let's now turn to margins and results of operations.
Our Q4 non-GAAP gross margin was 73%.
This was comprised of subscription non-GAAP gross margin, 81.2% and professional services and other non-GAAP gross margin of 10.4%.
For the year non-GAAP gross margin was 72.6%.
In Q4, we delivered non-GAAP operating income or $13.3 million or 12% of revenue and non-GAAP. Net income was $15 million were 21 cents per share on 72.2 million diluted shares.
For the year non-GAAP operating income was $31.9 million were 8% of revenue non-GAAP net income was $36.6 million were 52 cents per share on 69.9 million diluted shares.
Cash and investments at year end were $767 million, which included approximately $100 million paid in Q4 for Yapta.
Operating cash flows in Q4 were $22 million and free cash flows were $20 million.
Making this our second consecutive quarter over $20 million and operating and free cash flows.
For the fiscal year operating costs were were $68 million were 17% of total revenue.
Free cash were were $56 million or 14% total revenue.
Our Q4 cash flow result, significantly exceeded our original expectations.
This was driven by great execution across the board in particular, I like to call out Rick Helane, Rachel Kathy Kathy Aereo, Andrew in South for their contributions for the strong Q forecast where results.
Before moving onto guidance, let me touch on Coupe of pay.
As Rob noted in his remarks, we're still early on the Cooper pay journey with invoice payments, having been made generally available just a few quarters ago.
We have a strong pipeline of prospects and current customer progressing through sale cycle.
We added many new customers in Q4 in both enterprise and Midmarket and Cooper pay has become a more value component of the core BSM platform.
This is evidenced by the fact that in fiscal 2020 on average annual subscription fee for new business deals that included group of pay where more than 20% higher versus deals that did not include Cooper pay.
Now that early Cooper pay customers are going live transaction about volumes are beginning to occur while it's still too early to drive differences.
From the transactional data as Cooper paid continues to evolve we were we will share additional metrics as they become relevant and statistically significant.
Now, let's turn to guidance.
As you consider Q1 guidance, we'd like to remind you that we recognize revenue based on the number of days in the quarter and since there are fewer days in Q1 due to February steady state subscription revenues are seasonally lower by several million dollars from Q1.
Her to Q4.
For the first quarter, we expect total revenue of between 111.5 and 112.5 million dollar.
This includes subscription revenue of between 101.5 and $102.5 million take into account if your number days in February.
And professional services revenue of approximately $10 million.
Our Q1 guidance contemplates $1 million to $2 million from Cooper travel favour formally known as Yapta.
As Rob discussed travel sabre identify savings opportunities for customers right dynamically rebooking travel and taken a share the real life savings as revenue.
Well, it's uncertain at this time, we expect that the Corona virus outbreak.
Could negatively impact <unk> travel favorites revenue due to a reduction in global travel activity that was factored into our guidance.
We expect Q1, non-GAAP gross margins, 70% to 71% non-GAAP operating income for $5.5 million and non-GAAP net income.
68 cents per share on 72.5 million weighted average diluted shares for the quarter.
Furthermore, after generating in excess of $20 million and free cash flow in each of the past few quarters. We expect Q1 cash was to be breakeven or slightly better.
For calculated billings, we expect to exit Q1, with a trailing 12 month growth rate of 45%.
This includes an approximate 5% pull forward from Q2 due to timing of renewals and contracted billings.
As you roll your models forward for the year. Please also remember that Q2 will be a difficult compare due to the exactly acquisitions, we completed in Q2 last year.
We now like to share our initial expectations for the fiscal year ending January 30, Onest 2021.
From a revenue visibility perspective going into the year remaining performance obligations or arpaio. After fiscal at the end of fiscal 20 was $725 million up from $499 million at the end of fiscal 19, representing a year over year increase of 45%.
As a reminder, our RPL excludes customer contracts with a duration or one year or less.
Nok incorporate any contribution from travel saver as revenues are typically recognized outfield.
For the full year, we expect total revenue of $488 million to $490 million. This range assumes that professional services will be flat to slightly up year over year with lower contribution from direct services engagements compared to the prior year.
We expect non-GAAP gross margins, 70% to 71% non-GAAP operating income.
$21 million to $23 million.
As a reminder, our sales and marketing expenses Spike in Q2 by approximately $3 million to $4 million due to our annual inspired user conference.
For the full year, we expect non-GAAP net income of 30 to 33 cents per share on 73.5 million weighted average diluted shares.
Although our customer collections at the end of fiscal 2000 significantly exceeded our expectations, we still expect operating and free cash flow to be up year over year on an absolute dollar basis.
Not conclude our prepared remark.
Move to Kunaev. Please be mindful that we have a long queue of question in order to accommodate everyone. Please limit your questions to one and we'll circle back time permitting.
Now we would be happy to begin fielding your questions operator [laughter].
Thank you Mr. Floyd.
Ladies and gentlemen, if you have a question. Please press star one on your attention tone.
Telephone.
The first question comes from the line of Chris Marilyn.
Hi, Thanks, so much for taking my question and congrats on another great quarter.
Robin just wanted to ask about the nature of discussions with customers at the moment, obviously, we're in a pretty unique time here and I think you could definitely also unique vantage point into business spend particularly for I.T. So maybe you can you comment at a high level about those discussions and then in particular, how it relates to group and as it relates to sell cycles and everything else.
Thanks.
Well those conversations continue as you as you would expect our value proposition is our value proposition and in many ways. The greater focus in on controlling spend having the agility and they can Charles you need at the end at this difficult time. Unfortunately, many of them are being done over phones and videoconferences, but that is proving to be.
Fairly effect if everyone.
At the moment.
Our demos are being done the same way and all of our correspondences is being done the same way.
I'm feeling pretty good about about that and.
As you know as the weeks and quarter of a continues we'll we'll see if that how that evolves.
Great. Thank you.
The next question comes from the line of Michael tone.
Hey, there. Thanks, good afternoon, Todd any change in terms of capital allocation framework given the recent downturn in the markets does does M&A remain a core piece and the strategy with valuations coming in here or is there any more focus on just keeping the war workshops stocks here for now.
Nothing has changed from that perspective, it's business as usual, obviously valuations may be going down but.
M&A strategy has always been first and foremost is it a cultural fit.
Time to market by versus no significant input from our engineering team and and clearly value as part of that component as well, but right now I would say our strategy. There has remained the same.
Got it thank you.
The next question comes from the line, how Stan Galanski.
Perfect. Thank you so much guys.
Just going back to a couple of pain for a second.
What do you guys have baked in as far as contribution would pay in your fiscal 2001 revenue guidance.
Dan This is Todd so our guidance is very much consistent with what we've done things in the path. We look yacht pipeline, we look at adoption of our business spend management platform and as we noted on the call the deals with group had a significant.
The increase in the average deal sizes and so when we look at our pipeline and we kind of roll that into our guidance for the year, we look at as one bucket and it's not something that we're going to break out separately.
Got it thank you.
The next question comes from the line of Allen Clinton.
Hey, guys. Thanks for taking my question. So I guess, Rob maybe first if you think about Holistically I remember, having a conversation where you've talked about.
Basically prioritizing new logo acquisition over installed based selling over the last few years Im wondering if you're given the market conditions does that start to change.
And then Todd maybe just help us how do you think about the dollar based net written expansion as you scale and continue to sell koubei into the into the customer base.
Thanks, very much of the cousins, Alex I would say, that's a wait and see on that we'll see if we shipped a strategy there at the moment, it's business as usual we haven't we don't have any <unk>.
Physically significant signs in front of US. This suggests we can continue exactly the way we've been doing with logo acquisition as well as organic expansion into the core in fact, I think there's not a bad times to tell you that in terms of the core.
And frankly, given the situation that's out there now where.
We're looking at ways to help folks, particularly suppliers that don't have a great deal of of cash flow may may need cash flow. So what we're offering now as our customers the ability to.
Use cupet digital checks at no charge.
Through April Twentyth. So we think these small supply cash flows can be an issue.
While we have speed of payments maybe critical at this time and as you know with millions of suppliers that our customers interface with.
We believe it's our responsibility to try to make an impact here. So we've actually made that public at Cooper Dot Com Flash payments. That's just an example of really the power of having you know over 1300 customers transacting with millions and suppliers around the world managing their business spending in our opportunity to get into that environment and.
I have more and more value whether it's free in this case to support a cause or whether it's a it's needed for us to continue to our business via an ultra and strategy than for example.
And Alex on the dollar based expense.
Right.
Dollar based expansion has continued to go up as people are adopting more and more of the platform with respect you payments in the impact we do believe over time when you look at.
Well take rate there has been of our current products and the ability to sell into the installed base. As we noted before that we think over time, we can get back closer to 120%.
In Q4, I won't say was meaningfully above historical range, but just given the strength of Q4, I'm not quite ready to call and arrangement the trend is definitely up.
Perfect. Thank you guys.
The next question comes from the line up you living.
Great Congrats on a quarter and thanks for taking my question. So just one on the on the partner channel I mean, obviously they play a big role.
That you've seen up market. So any difference in the conversation or conversations you're having with your customers versus kind of what you're hearing from your partner channel and then just any impact I guess, you know for Q1 from from partners or anything that they're seeing over the past couple of days would be great. Thank you.
Well I can't really comment that I anything meaningful from the last couple of days, but broadly speaking our customers continue to see as this standard in the space. They are building very meaningful services revenue businesses around coop, Oh, we see more and more deals where were being recommended as the preferred provider by multiple.
Systems integrators, and even some of the management consulting firms that continues to be very very healthy for us and and that's encouraging given.
How many referenceable customers, we now have in virtually every industry and the renewal rate that we are we're able to deliver so very very encouraging continued.
Growth in our partnership community and the impact of that that growth on on the future.
Great. Thank you.
Your next question comes from the line of Brad Sills.
Oh, Thanks, guys for taking my question just wanted to ask John Cooper pay it sounds like you're seeing some good early success here with the the uplift you're describing is there any color you could provide on just cases, though.
Action ties that you're seeing go through Cooper at this point or even verticals.
Thank you very much.
Yes sure no. Thank you for the question, we're really seeing three types of transaction types, and they really map pretty well too.
Our ordering of launch a product so the first as virtual credit card usage.
You know we came out with that first we're seeing good uplift in that area. It's just a no brainer type of approach to get rid of physical cards and maintain control and minimize the need for back office reconciliation just an obvious no brainer that leverages, our core competencies and our customers are adopting that swiftly or the second area.
As in a dynamic discounting effectively so the collaboration between a buyer and supply around when payment is made and have made earlier, perhaps made at a lower amount such that the supplier can have the cash flow needs that they need and so we're seeing good uplift there and then most recently with invoice payments that I share. Just one example, here would redfin, but.
Leveraging cooper for the entire process of procure to pay directed the request.
The order the receipt the invoice and then ultimately the payment done in batch a four invoice payments across virtually any rail. So all three are seeing good adoption and their adoption waves are coming effectively sequenced the same way in which we launched products.
Sure.
The next question comes from the line of Romeo Lynch.
Thank you well can you talk a little bit it may not everyone is hopefully focusing on lumpy, but you kind of extend that to put our portfolio quite a bit into contract lifecycle management et cetera, and then well always obviously driving the strength and the.
Can you talk a little bit about like how these.
XPO NLM softer portfolio have been integrated and what you see in terms of cross selling up selling them. Thank you.
Yes, absolutely I, let me take that come to perspective, both the business side as well the technology times I think what you're asking my money on the technology side, where we are well underway with the technical integration. The the user interfaces common the business logic layer has been streamlined the hosting environments are common the enough.
Faces between the power user application that is CLM may what we call contract lifecycle management advanced and our transactional engine has been able.
And our sales team has it been empowered with integrated demos integrated production instances that showcase how the completion of a contract leads to a transactional purchasing activity and that is playing out as well in our business. We are seeing more more deals where the customer is understanding in lock.
Arms, the less around the vision of business by management.
Purchasing more modules upfront and setting in place in deployment path that hits the areas that are most opportune for them first and then deploys a outward from there so very very healthy.
Despite any challenges that anyone would anticipate and taken on M&A and we hope to continue that Pat.
And ran with everything I would say if you look at it holistically. The other element about our average deal size is continuing to grow at meaningful.
More more people are adopting the platform our competitive leadership position expense.
We saw some of our larger transactions in Q4 as well so it's all coming together nicely.
Well done congrats.
The next question comes from the line.
Yes, Hi, gentlemen, thanks for taking my question, a tremendous ending to the year, so nice job on that.
Maybe a question for you Rob is just the to me as I look back over to all the years. We've been cover in the story is this concept of community intelligence being kind of the secret sauce. All this is that transaction volume built.
Could you help us that investors just understand community intelligent going forward and you talked about like the prescriptive nature of it people looking at the prescription.
Is it going to be something that just over time as part of that secret sauce and creates stickiness around the rest of all the work flow and software modules and or do you see it actually becoming a revenue engine on its own. Thank you.
Sure Terry Thank you for the question so absolutely it's already beginning impact to impact a a revenue as well because people want to stay on the power of that our customers understand the power of it our community is galvanizing around it.
If you're a a customer why would you go to any other information technology provider. When we're able to tell you what are the best practices of doing any business process related to spending in real time and prescribed for you right there on the screen.
Ways that you can improve why would you go to any of the other supplier. When we can showcase for you areas, where you have supply risk and allow you to seamlessly hot Swappable one supplier to another to avoid it particularly in these turbulent times why would you think about working with anybody else. When you can work with us and understand your commodity areas understand all your supply.
Hot spots areas, where you need to improve in areas that you can optimize and save and removed risk.
So with every area of our enterprise application community intelligence is being.
Showcased through prescriptions that appear right there for users to improve the way that they do their business spending it's not only a huge MOIC on our business, but it creates a value proposition that is very very difficult to replicate we've been designed to build it. This way from the start we've contracted with our customers to do it in.
This way and we're driving a lot of value them already so we will continue to see this both from a defensive mode perspective, as well as a meaningful continued growth and value perspective that will play out in our revenue for the quarters in years to come.
Thank you.
The next question comes from the line Sep plan.
Thanks for taking my question, Rob I mean this is the unprecedented time I mean every day every hour CJR. Some changes I'm wondering a in all what Holly you'll go to market started you will change.
In this environment you talked about you know business as usual and also some of their customer also you know.
Except critical employees. They are working from home how does it impact youre being closing out even implementation in this environment.
Well, let me first say very clearly sale is very important but number one is our employee safety. That's our number one priority, let let me be clear on that.
As far back as March 9th we encourage everybody to work from home.
Last Thursday March 12th we made it mandatory from everybody work from home, but I'll tell you where first of all 100% cloud the only physical things, we need our windows into the internet, whether they're on phones or Pcs or other access points. We are very tech savvy company and I've been on many many zoom meetings over the last.
Seven.
The eight days just two today some with a individuals in the sales team thinking about how to manage the sales account some with our safety committee talking about an amount of some of the some of the decisions that were making their someone men are somewhat members of <unk> of the management team to think through other initially.
So this is not the way was maybe 5678 years ago was very hard to manage through this type of process. We think were very very well equipped we're very agile.
And we're committed to the costs, so whether it's raining outside or sleeping you know there's no rain delay here, we're going to battle, each and every day to build this business.
Thank you.
The next question comes from the line of Ryan Macdonald.
Hi, Good afternoon, gentlemen, thanks for taking my question, Rob can you talk about sort of the mix, you're seeing between enterprise and Midmarket and particularly as you've been refocusing again, a in terms of packaging and the go to market strategy for the mid market and as we move into fiscal 2001 year, you expect any shifts in the mix mid March.
<unk> versus enterprise given that mid market tends to be a little bit more low touch. Thanks.
Sure no. Thank you very much for that question. You know there are two very encouraging patterns that we've seen historically, taking the enterprise first we continue to see.
Larger deals and more importantly from a qualitative perspective, we're seeing greater vision lock with prospects around the comprehensive businessmen management footprint and the fact that we have the vast majority of that footprint already functionally well integrated and aligned with their strategy for both rollout and many years to calm that's a really really proud.
Missing part of the enterprise value proposition, there, we're seeing unfold as well in the mid market.
How about for.
I would say is now about a four to six quarters ago. I believe we had started seeing this.
Really nice mapping of cost of customer acquisition, and the speed of that acquisition as well as the lifetime value of those customers with a really measured and nice renewal rate, where we thought that we could really begin to press into that business and scale. It both cost effectively but also in a way.
That that would be mindful of of of our long term growth aspirations that is happening a and the number of logos, we're seeing the market. The mid market continues to increase.
The quality of those logos continuous increase and the stickiness of those deployments.
Continues to be really really strong so we feel really good about both the portfolio effect of having those businesses as well as the potential of both of those businesses in coming quarters in years.
The next question comes from the line up Bob Napoli.
[noise] slow.
Bob Napoli from William Blair.
Question on just supply chains, and what you're seeing.
Day to day in supply chains, and where it anyway that you are seeing concerns and you all supply chains and if I could be on just on a business mix.
Two years ago procurement was 80% of your business.
Today, I think it's only about a third what would what do you think that mix will look like five years from now.
The care meant an invoice.
The pay et cetera. Thank you.
Sure. So let me take the a the second question.
The second question first so procurement actually now represent.
5%.
Have a of the business the recurring business it in that and in the last quarter. So as as we continue we're seeing it fan out more and more widely as more and more modules and capabilities offered to our customers I can't necessarily predict what that number will be a few years out, but I would absolutely anticipate with customers buying.
Broader suite that the numbers of procurement and every incremental module as a percentage will decrease but the overall pie will obviously get larger and larger and larger.
From a supply chain perspective, there are very early data and it's probably not material enough to get into on this call but.
Held a number of our customers most recently source and procure safety equipment.
Protective equipment, sanitization equipment face masks and other needs.
Very very quickly so they could address their obvious concerns.
So our platform allows for that in our community you can now come together with source together activities to get these things source.
And at their doorstep very very quickly.
Thank you.
The next question comes from the line of Daniel Jester.
Yes. Thanks, Thanks for taking my question so.
It sounds like from the sale the perspective, you've done a lot on the virtualization to keep to keep the business going I'm. Just wondering you might be a little bit early but you know given your success in managing this disruption does that change how you view sort of the opportunity for for business business travel management.
And is this as good an opportunity today as it was maybe six months ago and just is there anything else you can do to sort of help your customers from that perspective through the time.
Well you know I'm not sure I fully understand a question are you referring to the the gapped acquisition and travel are you, referring more broadly to business by management.
I think for travel specifically given that you've done a pretty good job yourself, so far managing through the if travel restrictions to become more substantial or something that you've noticed and they can get through that through more virtualization. We travel out do you see as good an opportunity here in the future.
Yeah, absolutely I'm not sure the opportunity changes that much for the longer term I mean, as you know our our story here at Cooper has been playing the long game for as I mentioned, well over a decade nuts, we're applying they're gonna be there's going to be less travel on any given quarter as maybe a lot more under given quarter, we'll be there to help our customers manage that have agility and changing that.
That recognize savings in re.
Re re planning their travel as need be but it's still longer opportunity that we're focused on regardless of travel gyrations on any given quarter or or even given the current contact.
The next question comes from the line of Koji Ikeda.
Great. Thank you for taking my questions question for you Rob started date you here, but you joined the company over a decade ago in 2009.
During the fiscal the great recession, I'm curious to hear thoughts on how Kupol started back in those days I mean, I totally get that the business was much smaller assume more the midmarket versus enterprise that we see today, but spend management really cost saving doesn't initiative must have been top of mind of all organizations back then so I guess I'm getting added.
Hi level any thoughts there would be helpful to better understand the end market mindset for tools like who bought in volatile times that we're seeing right now thanks for taking my question.
Sure no. Thank you. Thank you for the question <unk> I would say that the priority of visit spend agility and spend control tends to get elevated on the list of digital print digital transformation initiatives no even though they weren't call that back in 2009, but I T initiatives, let's say.
In time in times like these having said that of course for every technology provider. There is some a win a in the face of of technology providers in addressing those with customers, but we're in a very different position than we were 10 years ago, where the undisputed industry leader in this area we have approved.
<unk> set a reference customers all over the world across every major industry.
And we believe that as the priority of some of the things were focused on is raised on the list of initiatives, we should be able to.
Gain ground from that especially with the massive moat, we have an incoming intelligence and the spirit and culture that we've built here over the last decade plus.
The next question comes from the line of Mark Murphy.
Yes, Thank you Rob.
This spend categories that you mentioned relating to Corona virus.
Very helpful and I appreciate it the ones that are increasing sounds like very small categories. I think you mentioned sanitizing equipment rubber gloves.
The ones that are decreasing sound like enormous categories, where I think you called out business travel and durable goods I'm just trying to understand.
What was the influence there or how is that netting out in terms of.
The growth of your spend under management.
Well I'm not sure yet how its going and out net out on growth and spend a management because date I shared there is really just a four weeks of data right. The February it data around the conduct of a person protective equipment sanitizing clip and things that nature, but you're right. It is concerning if you look at something I'll give you. Another statistic, we look at something like.
Property building energy and engineering services. These are the types of things that are more long term type investments and if you look at this february year over year, so 62.1% decrease and spend in that area.
So it is concerning and when we get to next quarter, we'll have another quarter of spend data and we'll have a better sense for and well reported.
On a spend index dot com, but I think you raise a very very important point mark.
Thank you.
The next question comes from the line of feed Cohen.
Hi, gentlemen, thanks for taking my question.
Good timing, it's kind of a follow up from the prior question.
So I get up by investors, sometimes about how is Cooper.
Sensitive or not sensitive to the business spend trends and so you have the index and you've been indicating what you're seeing there recently, but can you just I know you don't have transactional fees for suppliers like a rebid does but what is your sensitivity to business spending trends and how would you characterize any linkage there are lot or lack thereof. Thank you.
Sure well I think part of that actually ties into pricing strategy. You know our theory of the entire time has been to sit on try to try to sit on the exact same side of the table with our customers. We don't charger transactional fee for the amount of spend that they're running through the system. Sometimes we've been criticized for that but the same rate the value.
Proposition is much more than a percentage of spend it's the ability to control that spend its ability to route that spend to preferential suppliers is the ability to wrap that spends a non risky suppliers the ability to stop that spend from happening on a mobile phone by clicking reject with a click of a button.
So we think that a cloud based platform like ours that is offered in the values of service subscription approach for customers.
Is a very very thoughtful way for them to get this visibility control and agility that many of them didn't even know they needed until they are faced with times, where they realize they don't habit and.
And because of that it's our belief that given on certain times these areas become a greater priority.
And as per the prior question, we've experienced that's a decade ago, but we experienced it in a very very different position.
Of.
Right size growth and proven leadership.
And we think that in this environment, we're better positioned to deliver for our customers in the environment.
Thanks, Bob.
The next question comes from the line of Brent pricing.
Thank you and good afternoon, one for Rob and one for Tom I could Rob as you just think about.
The change environment clearly appreciate the long game approach you have completely appreciate the business as usual approach, but if I look at what hardly business could be at risk. The one thing that stands out to me is implementation time. This is a.
Yes, Jim software platform that can be implemented over 60 month timeframe.
Is that the right way to quantify the rest im not short run is potentially the risk of longer implementations is that right right I mean, a frame it and then one quick follow up for Todd.
That's it that's a very thoughtful question and obviously something that where were thinking about as as we are with all areas of our business I would say that the ability to do these implementations virtually is absolutely. There in fact, many of the implementations that we do cross a host of our customers I've done completely virtually having said.
That people like to see people.
And if there are situations, where implementations are slowed down because of the customers desire to do that we'll manage our way through it but I think we will be first to showcase our our number one core value, which is which is ensuring customer success and if it can be done over the web and it can be done over email if he can.
To be done over phone calls, we'll be able to do it as I mentioned earlier, our team is very tech savvy, and we have a lot of experience and doing it that way so while that might be a bit of a headwind we'll work our way through that so the best our ability.
Hi makes sense and then and then Todd here as we think about the guide you're guiding to 25, 26% growth, which is what we essentially had modeled for the business prior to the global outbreak of of the virus here you did talk about yeah hair cutting the a the app Dev travel.
We'll see where kind of business did you hear CAD in other parts of the business on the DSMB or Cooper pay side because of the current a virus or at this point yeah. The close rate assumptions that you are using all the saying that you use last quarter.
First let me say, great all of our guidance.
During the same methodology as weve used in the past and you're looking at all the key drivers that drive our model and as you would expect we're obviously monitoring developments with across the virus very closely.
Situation continues to unfold and if you look over the past several years from a guidance perspective, you know we've tended to put a mid twentys and then update that as we've continued to execute and I guess one of the other things to that's maybe maybe even more important highlights is there we have annual plans and we modulate based upon what we're seeing in.
Recently, we had our higher literally our largest new higher sales boot camp and then we modulate on a quarterly basis and if you look at the deferred revenue and RPM. So we have very high visibility into the this initial guidance.
No the the free cash flows and ability to generate free cash flow. So there's no the ability to sustain roller 40 is very strong on a go forward basis.
Thats helpful. Thank you.
The next question comes from the line of Brian Peterson.
Oh, Thanks, gentlemen, and glad to hear the team is safe and back in Cali. So Todd just wanted to hit on the Opex for fiscal year 21, I know, there's some acquired company expenses in that but anything you could share around investment intensity, maybe where you guys are spending there and then a follow up was yapta big factor in the net customer adds in the fourth quarter. Thank you.
Yeah no.
With respect to the customer adds very very minimal impact there with respect to the operating expense.
As I mentioned, we modulator that on a quarterly basis, but if you look at the investments for the upcoming year.
Clearly continuing to invest in our support team and.
Professional services, given the number of new customers and significant implementations that are currently going on.
We're going to continue to invest in R&D one of our things we have done as the we have enough to technology centers in India went into an anyone in Hyderabad. So we're still adding a lot of people, but it may not show up in the expenses much and then clearly have all the category still investing heavily in sales and marketing and DNA is starting to show some.
Scale, but we've got more room to do there and you know will moderate data.
Your progress as we do every year.
Thanks.
The next question comes from the line of Joseph Foreseen.
Hi, another question from Todd if the numbers start to show up a little bit lighter because of all the friction in the economy. What area would you be most likely to address from the spend perspective for maybe a pull back and how do you you kind of look at the numbers or think about the numbers.
From that perspective, I guess, I'm basically asking what's the financial downside scenario that you might be implemented thanks.
At the highest level I mean, we were always looking at all of the key business processes, whether its lead to cash whether it's new product introductions, whether its post deal support and some of the surrounding infrastructure around that and literally we look at each one of those on a quarterly basis, you know where to invest more.
Maybe pull back a little bit but at this time its way premature to one make that color to indicate what it might be because it's not something we've looked at yet.
But in spirit I would add that if we feel at any point, the we can't make a new hire productive we have the ability to control hires at the individual level.
Higher still roll up to me and I approve them individually. So we have controls in place for that equally we have controls around all of our spending through our own my Cooper implementation.
So we feel like we have on squarely on on the steering wheel in navigating through whatever lies in front of us.
Thanks.
Our final question comes from the line of Patrick Walravens.
Oh, great. Thank you.
Rob looking back in you know eight I think your thoughts Successfactors and I pulled out one of my old notes so.
The billings growth rate for success factors.
April O. eight was over 100% and then it went 68, 50% to 2%.
Negative six in Q1 about nine.
I guess my question is when do you know that things are really starting to go downhill.
And then when do you know when their.
When they are getting better.
That's an extremely extremely difficult question, Pat that can't be answered a very very briefly I think it's one of the things that.
History, typically states or some of the best Ceos or some of the more typical ones. So we take that very very seriously and tried very very hard.
To see around corners, as much as humanly possible.
I would also tell you that the wave we've built as business over the last 10 years has been very very mindful.
Run it so hot.
If something presents itself in front of us It will burn us up we've been very very mindful and the talent that in the culture in the systems in the customer base in the value we're delivering for them. So we think we're sitting in a good position from which.
To try to see around corners.
And you have our commitment.
As a management team to do exactly that matter what presents itself in front of us in coming months and in coming quarters.
Great. Thank you.
[laughter].
I would now I'll turn it back although for closing remarks.
Thank you. Thank you.
Thank you for joining us here for the fourth quarter earnings call.
He said the replay is available on website you can get the information for telephonic replay in the press release and we look forward just begun do you next quarter. Thank you.
This concludes the conference for today, we thank you all for joining US you may now disconnect.