Q4 2020 Earnings Call

Ladies and gentlemen, thats, what the helping her today's conference calls goods to begin momentarily until that time. Your lives will again be placed on hold thank you for your patience.

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<unk> earnings conference call joining us for today's call, our medallions CEO Leslie stretch and CFO Roxanne Oldman at this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone to withdraw your question. Please press the pound Keith if you.

Require any further assistance. Please press star zero. Thank you with that I would like to turn the call over two bucks enrollment for introductory remarks Roxanne.

Thank you Josh welcome to medallion fourth quarter and fiscal 2020 yearend earnings call. We issued our earnings release, a short time ago and furnish the related 8-K to the FCC to access the press release, please see the Investor relations ever website with me on the call today as Leslie stretch President and CEO.

Medallia before we begin please remember during the course of this call. We may make forward looking statements about the operation and future results of medallions that may vary and involve many assumptions risks and uncertainties. If any of these risks or uncertainties develop or any of the assumptions prove incorrect actual results.

Could differ materially from those expressed or implied by our forward looking statements.

For a discussion about risk factors associated with the forward looking statements. Please refer to the checks in the company's press release issued today and you are periodic reports filed with the FTC.

Including our prospectus dated July 18th 2019, and form 10-Q dated December 11th 2019, we disclaim any obligation to update any forward looking statements.

On today's call, we will refer to both GAAP and non-GAAP financial measures. The non revenue financial figures discussed today, our non-GAAP unless stated that that measure is a GAAP number. Please refer to todays press release for the reconciliation of GAAP to non-GAAP financial performance and additional disclosures regarding these measures.

Additionally, in conjunction with the release of earnings report, we have posted on our website medallion dotcom under the Investor Relations section additional charge that identify trends metric performance that we believe will aid and understanding and evaluating our performance over time now I'll turn the call over to Leslie.

Thank you also.

I'd like to begin a bar thanking everybody all your for their hard work in Q4, and therefore trends, you've got especially well their customer focus it was drawn so.

The customer employee experience his job number one for every CEO on leader in today's world.

Okay. So at this time.

It's all the health and safety boast offered on making sure. We are set up for the long term.

Well first year as a public company, we accelerated our SaaS revenue growth not at a record number of customers.

Each of our Q4 report I was very pleased with our execution of results and you before we had record shops revenues record chalk library.

Lee we met our goal of accelerating south revenue from 22% enough why 19% to 26% growth and that's why 20.

Here, we deliver top line growth of 28% worse is 20% abroad to year significant acceleration of growth. That's a much higher base. We added over 50, new enterprise logos, our Midmarket seems contributed nicely and we made progress across verticals.

The culture with a trailing 12 month net revenue retention rates of 119%.

34% increase in our total remaining performance obligations.

Today less than 20% of our signal data simple survey data nearly 70% of Boston list the buckets sent via mobile.

It's hard to their IPO, we shared with you the medallion analyze 4.9 billion experiences on doing today I'm pleased to report will be closed fiscal 2000 26.1 billion experiences on <unk>.

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This will 2020 uses of our platform increased more than 30 cents wall Street captured nearly 50% back signals our customer care has grown nearly 40% year over year, new business wins in Q4 included OXXO noble Cloudera, Freddie Mac Brushy most of the Canada rider Smashburger.

XP Investimento, Brazil, Samsung UK, we continued with Mowbray bronze headquarters under cumbersome to TJ National Resort arc, your copper CRM Lovebots under Charlie.

We signed a major expansion would woolworths your watch that retail customer in Australia. We also had several significant retail expansions in the U.S. in Q4 in the quarter. We were recognized again as a leader in the Forster customer feedback weighed on the reps Fred's employee experience review.

We comfortably extended our lead over the legacy market research and survey players.

Today, I'll talk a little verticals, our financing banking retail in automotive technology and manufacturing communications media and so.

Well this quarter I've chosen heart check manufacturing as our focus vertical that text analytics platform, our new video capabilities as product areas to review with you all.

Turning to the manufacturing vertical this report.

Customer feedback and insights are critical part of the product development and support process HP.

Thanks, Pete as part of the medallions to build a customer listening system that integrates multiple sources of feedback, including surveys service support cases, and the online product reviews I Hope H. These people understand what customers think about their products and services. That's it's a key actions what up reviews for all the sites like Amazon target Walmart can all be combined.

Good feedback data to produce comprehensive insights on customer sentiment intentions.

We recently won another contract with Samsung Electronics America, U.S. Division of one of the world's largest and most successful manufacturers. We are helping Samsung run an innovative customer experience program and its care division supporting more than 5000 care agents and field technicians in the U.S. and Canada across digital phone and in person channels.

Samsung has achieved significant improvement in net promoter score and other key operating metrics as of Q4. We're also beginning to deploy our employee experience solution in their care Division, but also as of Q4 received a commitment from Samsung's European business.

Turning to pull up themes for this report our technology can access many types of unstructured data elements from voice and video to survey and digital interactions, placing all customer feedback elements. One platform for complete analysis visualization I predicted auctions is a central capability of the Medallia experience club.

Today, we have 60 customers are using theme explored the unwise over 80 non survey data sources. These sources include social web sites, such as Facebook messaging services, such as walks up and reach out data from silent signal vendors and social and survey SMS text contact center data a much more.

In the context of the current health crisis, we have set up especially text analytics topics to help over 20 modality customers monitor and otherwise the impacts of Corona bars. For example, the list of customers include a broad range of verticals retail E Commerce financial services that you'd expect hospitality and drop.

Turning to an update on our latest acquisition of living ones. We're now the only experienced management technology company. The owns video and capture technology. This is a new rich and powerful source of feedback signals for our customers companies using living lens include every and be Colgate SC Johnson Red Bull Subaru Hyundai.

The combination of living lens on crop this city leapfrogs traditional market research, we believe the face to face fuel market research business is being digitally disruptive.

Steve. This is a 12 billion dollar market spent around them, but can go to digital platforms like living lines across the city, we're getting inbound interest from universities organizations like the National Health service and others looking to digital communication and Crowdsourcing solutions, not just because of the current prices.

Let me update you on our partner strategy, our collaboration deals with Adobe Salesforce Servicenow workday executed in the past six months Medallia out as the only open partner of choice for feedback management.

We have seen positive activity in Q4, and you already had a Q4, we launched the medallion sales and service up on the sales force I've exchange.

Well the only enterprise ready open partner for these players when it comes to customer on employee experience capabilities at scale.

We've also extended our partner efforts to focus on new vertical software partners in life Sciences manufacturing I'm sure.

Turning to our go to market efforts I'm pleased to report, we achieved our 40% increase and productive sales capacity at once one thing.

We continue to focus on a vertical go to Mark organization, our vertical market best practices packages or can be purchased by 70% of new customers. These popular vertical specific packages help customers speed up implementation on foreign to value.

Thank you for medallions achieved bedrock certification further validating our depth and delivery delivering highly secure leading solutions were cuffs and for consumer employee and citizen experienced management.

That's about how significant is beyond the U.S. market as it is seen as a benchmark equality by governments around the world.

Also made the decision to pursue federal Hi, Hi Trust for health care.

And just yesterday, we announced that lead Becker former chief of staff for the veterans experienced softness U.S. Department of Veterans Affairs has joined the company to service the head of solutions for the public sector.

Let me update good our geographic expansion and therefore 20, we added strong leadership to our EMEA Asia Pac and less on businesses. All these geographies made strong contributions in Q4 roofing my thesis that upgrading leadership with proven sales coaches pays off and I expect solid contributions in Q1 and beyond.

On my recent Apacs, who I've visited some of the biggest brands in the world one have done a very large Australian retailer recently renewed for a five year term.

Before the global headquarters they display medallia source customer feedback and lifetime.

Placing their customers front and center in using this data to make decisions about store and ecommerce operations.

In light of Corona virus, and it's affecting global travel locks congregations, we already turned our attention and resources towards virtual events.

Conditions permitting a repeat of our very successful and sense of one day City tour series, the late summer and fall.

In my opinion these targeted digital in local events are more effective than one is local them.

It's interesting to interesting to note that in retail we took pharmacy travel and hospitality. We've seen recent significant spikes in usage by our customers. One retail business. For example, we serve saw 300% increase in feedstock activity just last weekend alone.

We believe customer employed by becomes even more critical in challenging times.

As I've mentioned already.

I believe the customer employee experience his job number one barrels Ceos no more than ever.

Despite the global health crisis, our confidence in our current outlook is based on several key boxes.

Since forming customer an employee experience as a top digital province.

A report sponsored by our customer cone cost just published 76% of organization surveyed said they are feeling pressure from multiple sources in the organization to deliver digital customer experience.

We see no customer actually behavior to change our assumptions and it's too early to tell what can happen in the second half a year.

With a very strong book of business with the leading brands across industries. Our total remaining performance obligations up 44% year over year, while the current IPO has increased 31% as I mentioned.

It is 50% of our renewals enough whites. Once you are multiyear contracts, mostly obviously do increasing to it all signs from the prior year.

Our productive sales capacity is increased 40% year over year, our cross sell thesis is bearing fruit three modules on average in our top accounts now.

They implementation costs that we do today, the physical presence on customer sites, our balance sheet to strong mode that we do not rely on any physical supply chain.

We expect digital transformation to become digital disruption, which plays into our product portfolio digital video brought signal couch are fed brown success opens up the global citizens experience market not just the U.S.

We don't charge customers consumption like traditional survey players.

We have known intense focus on stayed home industries, including Telco Entertainment home automation local retail retail pharmacy read out financial insurance and others.

Unless the 10% of our book of business is in the hospitality sector Airlines are one so.

Make no mistake, though we intend to support those businesses through thick and thin I.

Ill now hand over the raw sand to cover our financial performance and outlook.

Thank you Leslie and good afternoon, everyone across the board, we posted strong financial results in Q4, including record total revenue and record SaaS revenue.

A quick reminder, unless otherwise noted all numbers, except revenue mentioned during my remarks today. Our non-GAAP you can find a reconciliation from GAAP to non-GAAP results in today's press release.

Turning to secure some key metrics, our new customer growth was strong we ended the year with 757 enterprise customers, an increase of 39% year over year. Our trailing 12 month dollar we net retention rate continues to be very healthy coming in at a 119% in Q4, an improvement from 116%.

In Q4 of the prior year, we believe this strong retention rate underscores our ability to retain and steadily expand business within our existing customer base.

We're also beginning to see traction in our cross sell initiatives. These initiatives began in earnest midway through fiscal 2020 as the average module attach rate has increased from two to three we're pleased to see this cross sell motion gaining traction in fact, nearly 25% super customers are using.

Or more modulus.

Total revenue for fiscal 2020 was 402.5 million an increase of 28% year over year.

As we communicated on our IPO Roadshow, our goal is to what's to accelerate SaaS revenue growth on an annual basis and we're pleased to report that we clearly achieved this call.

That's revenue for fiscal 2020, with 312.2 million up 26% year over year, demonstrating strong growth at scale and an acceleration. This compares to the prior year SaaS revenue growth of 22%.

For the year, we generated 76% of total revenue from North America.

In terms of vertical diversity, our top four vertical our finance and banking retail in automotive technology, and manufacturing communications media and telecommunications.

And lastly noted less than 10% over businesses derived from hospitality.

Total revenue for Q4 was 110.1 million increase of 23.7 million or 27% over Q4 fiscal 2019.

Total revenue exceeded our expectations due to solid contribution from subscription managed services and implementation services revenue.

In Q4, SaaS revenue was 86.2 million, an increase of 18.3 million or 27% year over year, our SaaS revenue growth rate improvement benefited from the timing of new bookings in the quarter as we experienced a stronger than expected December.

Recurring revenue consisting of staff and managed services continues to be at 90% of total revenue.

Professional services revenue was 23.9 million for the quarter, which increased 29% year over year. Our services revenue benefited from strong customer demand recurring managed services accounted for more than 50% of our total professional services revenue as a reminder services revs.

New ebbs and flows based on a variety of factors.

I will now turn to our non-GAAP gross margin and operating expenses.

That's revenue gross margin with 82% we believe our fast margins are among the best in class for SaaS companies in Q4 professional services gross margin was 19% compared to 13% in Q4 of the last year due to higher than expected utilization rates, we continue to focus on driving more.

Professional services to our partner channel along with sub contracting some additional services.

Sales and marketing expenses in Q4 were 43.3 million or 39% of revenue our sales and marketing expenses increased in Q4 due to our large presence at dreamforce.

<unk> expenses were 20.5 million for the quarter or 19% of revenue R&D Erie remains an important investment area as we expand our platform with new features and capabilities each quarter.

[noise] DNA expenses were 11.9 million or 11% of revenue, we expect additional leverage on the Gionee line over the longer term.

Non-GAAP operating income in the fourth quarter was $3000 compared to 2.4 million in Q4 fiscal 2019. Similarly, non-GAAP operating margin in the quarter was breakeven compared to 3% in the year ago quarter non-GAAP net income was $491000 compared to one point.

7 million in Q4 last year.

Non-GAAP operating loss in fiscal 2020 was 2.4 million compared to a loss of 47.7 million in fiscal 2019. This significant improvement of over $45 million reflects our focus on balancing growth and profitability, while we continue.

You to invest in go to market initiatives.

We incurred a tax expense of $67000 in non-GAAP income taxes in Q4, this was lower than prior quarters due to lower foreign withholding taxes and foreign income taxes.

Our GAAP income tax benefit of $555000 include the benefit due to stock option exercises in Q4.

During the quarter, our weighted average basic share count was 129.4 million shares and are fully diluted share count was 171.4 million shares.

Turning to the balance sheet, we ended Q4 with $343.7 million in cash and equivalents an increase of 24.4 million from the prior quarter driven primarily by cash generated from operations.

Thats deferred revenue was 222.9 million an increase of 27% over SaaS deferred revenue in Q4 of the prior year.

Let's move on to discuss that calculated billings, which we define a SaaS revenue plus change in sequential SaaS deferred revenue and contract.

As you know there are wide variety of factors that influence this metric therefore quarter to quarter fluctuations in calculated billings should not be taken as an indication of changes in future revenue.

For example, billings will fluctuate quarter to quarter due to the timing of renewals an annual contracted billings as we have communicated to you. We believe that the 12 month trailing billings growth rate is a more meaningful measure of our performance.

For Q4 fiscal 2020, our trailing 12 month billings growth rate was 25% compared to 24% in Q4 of the prior year moving onto RPL, our remain or remaining performance obligations as I have shared with you before RPL metrics may be impacted by contract duration.

An extension as well I mean every walls of large multiyear contract. So well RPL provides for strong visibility it may fluctuate from quarter to quarter at the ended the year. Our total remaining performance obligation or total RPL was 679 million an increase of 44% year over year.

Current RPL, which is the amount we expect to recognizes revenue over the next 12 months totaled 344 million an increase of 31% year over year, we expect to recognize 51% of total archeo over the next 12 months.

In addition, Noncurrent RPL grew 62% year over year. This is the result of the large number of multiyear contract signed this year as we have professional lines are operations as a public company.

We generated positive $19.5 million in cash from operations for the quarter for the year cash used in operations was 1.6 million compared to $15.2 million used in operations in the prior year from a cash flow perspective, or operating cash flow fluctuate based on seasonal patterns.

That we've experienced historically due to the timing of bookings and cash collection.

As a reminder, we've historically experienced seasonality our cash flow from operations given that over 40% of our billings occur in the fourth quarter as a result, our cash collections in Q4 in Q1 are higher than other quarters. We anticipate the seasonality will continue in fiscal 2021.

Now, let me turn to our financial outlook for Q1 in fiscal two year 2021.

For Q1, we are projecting total revenue to be between 100 $911 million, representing 16% to 19% growth rate over last year for Q1, we are projecting fast revenues to be between 80 $788 million representing growth of 21% to 23% over last year. Please keep in mind.

That Q1 has two fewer days than all other quarters in fiscal 2021.

For Q1, we expect non-GAAP operating loss to be in the range of 1.3 million to $2.3 million.

This includes nearly $3 million in fees related to the cancellation never annual customer conference.

We expect other income and expense to be roughly $500000, an income taxes to be in the range of 750 to $1.250 million, we expect basic weighted shares outstanding to be approximately $134.5 million.

Now, let me turn to our guidance for fiscal 2021.

While we haven't seen any changes in buying behaviors. Thus far we want to set ourselves up prudently as we take time to see how the current macroeconomic client climate plays out. Therefore, we are maintaining our full year revenue guidance for fiscal 2021.

For 2021, we are projecting total revenue to be between 474 million and $483 million representing growth of 18% to 20% year over year.

We expect SaaS revenue to be between 382 million and $387 million representing growth of 20% to 24% year over here we.

We expect revenue to follow a similar pattern to this year with more than 50% of annual revenue to be recognized in the seasonably stronger second half.

For fiscal 2021, we expect non-GAAP operating profit to be in the range of $1 million to $5 million. We expect other income to be roughly $2 million and income taxes to be in the range of $4 million to $5 million, we expect diluted weighted shares outstanding to be in the range of 174.

Point 5 million to 175.5 million.

Finally, we anticipate our capital expenditures will be slightly ahead of last years level, which was approximately $22 million primarily related to the expansion of our data center capabilities to meet increased customer demand.

We are committed to investing for growth, while balancing growth and profitability. We are taking a financially disciplined approach.

On an annual basis, we maintain our goal to be operating cash flow positive for the full year fiscal 2021.

In conclusion, we're very pleased with our fourth quarter in fiscal 2020 results Leslie and I will now take your question operator.

At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone and your first question comes from Phil Winslow with Wells Fargo. Please go ahead.

Hey, I think that's for taking my question to congrats on great close the year, just harder focus on that through the newer initiatives first obviously the customer count was very strong again this quarter. So wonder if you could update us on just the moved down market and how you're feeling about the investments there and also you obviously find a significant number of new partnerships you over the course of last fiscal year how are you.

Thinking about those impacting.

The numbers this year, how how do those roll on anymore.

Great question I think early early days still in the partnership deals that were signed at the back into the year, but we've seen some progress in some deals. So I think you know small number. So we are pretty optimistic there. The midmarket has delivered we added.

Group of salespeople there.

You almost all view into the company and they've been book and you know good decent contribution in Q3, and then a better one in Q4.

Scrappy, London exciting module deals, but we've been selling experience clog. There you know is low touch cost efficient sales.

Most of them.

Greetings good initially Bob Burton please.

Great. Thanks.

Thank you.

Your next question comes about answering with William Blair. Please go ahead.

Hey, guys can hear me okay.

Yes.

Hello.

Yeah go ahead.

Echo settlements quick withdrawal.

I want to talk more about the partner ecosystem bridge. So in Q3, you've talked about does have partners globally as far as advisory technology.

Just a little more color on sort of Adobe service now how those progressing how are those initiatives. So of course, all those kind of helping played out in terms all reach out adoption and then obviously deal.

Okay. So I just to sort of prior response, it's really early days I did my prior life I'm really work with Adobe or service knows I'm actually quite pleased with the progress there we are seeing deals and traction.

Salesforce is a great partner, we're seeing some really significant campaigns, so without getting into too much detail. We know the politics of the landscape really play itself.

We all the open partner.

And we're actually but the most credible scaled platforms signal play so those will be working very well for us not to say, we held the old to ourselves well I'm very pleased with up I'm also excited about the vertical partners, you're obviously, we've got to interesting market situation unfolding here, but.

There's some great vertical partners and and financial services and some other sectors that we started to form.

Forms would but I think is going to be part of the story this year.

And we'll update you as we signed deals as we as we move along with those companies and I think that could be those top companies tend to be a little bit smaller on big companies in life Sciences, and insurance and financial services.

To be more of our size and so that's going to be an interesting.

Partnership.

Some of them are customers too. So we'll give you more color as we go through the year.

Sure.

Helpful and that touches on two questions among last one so.

Touched on though.

Large property.

And they're working with you. This is the future and we think through that process moving about implementation on sale cycles and we've been true currently coated.

And oil and macro concerns you think about dogs that mode on the process. So eight sales process looking forward. Because this is a complex. So it's not a support to young service product. This is a much more customer experience product month to implementation, but.

There's definitely an impact are you guys go there or is there.

You know utilization.

Pat we can't get to the slide you can't deliver so I'm not going to see on two things one how are the sales cycle being.

Impacted by the current situation and then how the delivery being affected by concentration. Thank you.

Yes, sure when you go back to the.

Part of the question was large look a lot father player.

Our deal count there and our activity is so small and sort of new but it's hard to you know it's hard to say I mean, there were relatively small I think there's upside in terms of implementation is one of the things we've been doing in recent days is working out what is really essential to do the customers slight I'll give you a couple of examples.

The second.

I think we can do lots of depending on the scale of an implementation. We can do a great deal without having to visit customer site gone are the days from we have to go to connect physically software and hardware and other technologies. So I feel pretty good about where people can work, we have fabulous bond with and technology.

Video Combs has been Super for US just arms in a park I got stuck in Sydney couldn't go to Singapore couldn't go to Korea or Japan.

We did not Miss a single meeting we did webex soon but cetera on it works seamlessly beautifully every meeting went to deliver over an hour or over so people were engaged on just the technology. So much better today I actually so I feel pretty good about it we got everything done that we wanted to get done.

The same is true and collaboration of implementation and were encouraging our people were concerned about welfare first and foremost nothing else matters. We're encouraging that work for both places locations that are comfortable home or ever supporting their bandwidth requirements and implementations can be conducted there. So it's it's for us.

That's the way, we're approaching it and I personally feel.

No I look is difficult times book.

Personally through quite a lot of truck productivity gains for me.

Because I can get so much done by spending not spending 50% of my time.

Yes that will return as index I think there's nothing like personal engagement, especially since our buyer the person we won't behind everything that we do as CEO right on those tend to be pretty short short meetings by did one leasing in Q4, we did one.

Great. So almost a seven figure HCV view in Q4, where we did the meetings engagements with the CEO overseas.

First one from our second one for an hour so I actually didnt meet the CEO until after we think the contrast, alright. So we're going for we're using digital but keeping everybody safe at the same sorry.

Okay.

So that's really helpful. Thank you guys I appreciate the color. Thank you.

Thank you.

Next question comes from Tom Roderick Stifel. Please go ahead.

Yes, Thank you for taking my questions.

Works and I was hoping we could just go a little bit deeper on bonds question. There on professional services and I. Appreciate you pointing out on the on the script there that.

50% of his professional services. Our managed services can you just talk a little bit more to to let these part point there on how.

The bulk of services are are deployed it engaged and when you think through some of the larger.

Sales deals that you signed during the fourth quarter talk us through just the process around how you get those customers up and running how often you actually do need to have implementation onsite or tell at this point can you actually do the vast majority of the majority of it remotely would just love to hear a little bit more about that thank you.

So Tom that's a great question, we can do beyond the vast majority remotely. We've obviously spent time looking at how much time, or we actually onsite or need to be on site with the customers and with the product in the way that we deploy the product that's a very small portion where we actually need to go and have face to face meetings.

And be on site. So what our professional services team has been doing is we are utilizing video conferencing and we had done that historically in the past them. There how do we have not seen a significant change in going in working with the customers on site and we don't see that you know the need to be.

On site will prevent us from doing implementations or delay implementations now that's what we see at this point in time and that's consistent with historical practice that we've had.

Excellent that's helpful. Leslie just a quick follow up for you you made the he made the point about living lens. The in a nice tuck in acquisition can you just spend a minute here talking about what your customers are art or thinking about seeing from the usage of video is yet another another signal that they can they can think through in any sort of.

Comparable.

Customer references that are using your platform and and living lens as well would love to hear about that thank you.

Great question so.

We're really excited about living lens on also about the other technologies probably this is again so.

And then when you combine the crowd sourcing of ideas with video capture piece. It really does lead from traditional market research and all that was always a thesis now we've started to see inbound inquiries rod replacing traditional people based.

Laborious small sample market research with mass scale digital market research and the shape of ideas and Crowdsourcing video technology. So that's a real very well defined play for us and we're going after about LIBA living lines can be set up and you can be invited to a living loan survey or video.

Harpy, it's not a big implementation on so that really all sectors are excited and encouraged you to actually walk through living loans show real customer feedback the ability to see picture tells a thousand words go to see the context of where the individual is to sense their emotions.

Sentiment around the feedback that are leaving.

Concerned on its very powerful it really is the way the future.

I'd encourage you to look to the I did mentioned in my prepared remarks, a number of customers that if you go to the website you can actually see some great customer use cases will start drilling, but some great customers who are all using video so very excited when I look to.

Pipeline activity with living loans, it's very encouraging very exciting.

Outstanding. Thank you for the detail I appreciate it thanks Chuck.

Your next question comes from Kash Rangan with Bank of America. Please go ahead.

Hi, Good question. This is actually Jacqueline show on free cash.

Congratulations on the quarter as well you had another very strong quarter of net new customer adds that 59, new customers. This quarter and this this represents a continual acceleration of net new AD on an organic basis.

Can you double click on this like is this just a result of sales people hired six to nine months' ago ramping up and should we expect this trend to continue and then secondly.

How is your sales hiring plans for this fiscal year changed at all in light of the cone of our situation.

So great question so.

I think boots.

The result of that the number of book.

Surprise logos is good pleased with it it's very good it's very early days in the store I would expect you know put aside the current.

So cared courses for a second I would be starting to move.

Nicely we've already added.

40% salespeople fall.

You know low number on the prior year, we need to absorb them onboard them and make them effective.

We're focused on focused on execution. This year, we're day by day, taking the growing the virus crisis very seriously and day by day, we're assessing how to think about out for the future, but we're a recurring revenue business us business.

So we always have to think about building up our go to market for the future debatable. If you followed and all of those things and we're just balancing update today, but we've got a much bigger salesforce that we had a year ago, they're very welcome.

Reducing.

Well there attainment level was last year was higher even with a higher number.

As you pointed out and so.

We're happy with that ticket day to day, you know things are changing.

Rapidly as we go but they're busy and once again digitally focused highly productive able to get things done less time.

Spend on long road trips more times than home video telecommunications and so on which for this period I see we welcome.

Awesome, that's good to hear I think you so much.

Your next question comes from Chad Bennett with Craig Hallum. Please go ahead.

Great. Thanks for taking my questions are PEO numbers look outstanding so nice job there.

So just maybe roxanne or Leslie for that matter. The net expansion continues to improve I think you said, 119% Roxanne and lastly.

Do you expect that to continue to improve throughout this fiscal year.

So you're right our net expansion rate is solid at 119%.

And we would always like to see it be higher you know I think that we can be above 120% and thats one of the things. We focus me what you need to look at and consider it a number of modules that we've added this year. So we've added over seven additional modules. So now we have 12 module that we can sell through our customer base, so not only to be the up to free up sell.

And expand from a business perspective in multiple business and multiple divisions, which we do very effectively we also have the opportunity to really go out and sell additional products and we've seen that as I shared in the remarks now the average module that our customer uses three and we have over 25% of our customers are approximately 25%.

Our customers that are using for more modules and we have customers that are using as many as 10 module. So there's a great opportunity for us to continue to expand you know we're very focused on the products that we bring to our customers to ensure that they are continuing to help our customers expand their customer experience and.

Get additional feedbacks feedback from their customers said that they can continue to focus and improve the overall customer relationships that they have.

Got it and I know I think number of people are asking this in different ways.

The current a virus and the impact on the macro and so forth.

And I think just the fact you know if you look at your guide in the Reiteration of the guide I'm not sure you know maybe if the guide would have been different three weeks go or not but if you assume net retention improved to let's just say 120.

And your new logo activity has been outstanding if not accelerating.

I know, it's not straight forward math, but you know you're guiding to 22% to 24%.

Fast growth.

And if you net expansion or net retention is 120 plus.

That's not a lot of revenue coming from you know net new so to speak you know if you look back I think you said net retention was 116 same time last year trailing 12 last year and you put up 26% SaaS revenue growth. So.

Just if I am I thinking about that correctly and and maybe.

Who knows what's going to happen right day to day like Leslie said, but maybe there is some level of conservatism in the guide thanks.

Thanks, Chad So one thing I would highlight is that approximately 40% over bookings came from new customers a share enough relatively consistent with what we've seen in previous years. So you do you highlighted good point. However, when we give you our guidance. It's important that we take all factors into consideration now we haven't seen an impact on our.

Business than we really think that customer experience to center and foremost in digital transformation and there can be an opportunity for us here. However, with that said I don't think that we would be prudent at this current time says things are so early not to factor in all consideration all considerations at all factors going on from a global.

Economic basis into our guidance. So that's what we've done.

Understood. Thanks Nice work.

Thank you Chad.

Your next question comes from Brian Schwartz with Oppenheimer. Please go ahead.

Yes, hi, Thanks for taking my question on again, good job here on the quarter.

I got a few questions here, so I'm the person Leslie I just wanted to get your color, what you're saying on the uptick in terms of the option of some of those newer acquired products cried density and they know and then if I'm not at all was the driver in terms of the acceleration that we saw not quarterly subscription revenue growth and that trailing 12 month.

Ask billings growth.

A little bit you know, they're very small businesses, there technologies, but growing false.

On the uptake in acceptance and interest and excitement and the customers. This phenomenal I see that myself you I'm on the road a lot as you know.

It's a great time to test the validity of some of the thesis Bob If you look at each one of those small technologies. They came with some great customer logos and great proof points. In these cases, so they're not hard to sell is what I'm trying to say.

Our field are very excited about them is really phenomenal the field and hear them are positioned the proposition and how it fits together with the core feedback proposition on modality experienced blog.

So good good contributors you know.

Good high growth and those jobs is that we're putting together some of them are a big stories. You know video is a big story I think to properly with integrity ethically and these customer data ethically requires a big investment platform, which we've already made.

I expect that to be a big story grows.

Thank you and then second question I wanted to ask it was just on the on the cross selling out activity I think frac sand gave us the number clearly the product up penetrations, increasing in the customer base.

Wanted to ask elite lastly is just the speed at which these add on deals are starting to come into the business. If you are saying a shrinkage.

Between say the initial sale and when these add on expansion start to roll into the business first maybe.

The middle of last year or at the beginning of last year, and then I have one more Carla.

Yeah, I know that's a good question I think.

I don't I don't know we are seeing Dod do we have enough data.

I would suggest that but keep in mind, we did.

A fair bit of sales capacity, we added the partnerships as I think those things are role in the mix of well I think.

It's pretty straightforward once you've got to be bought platform in place to add digits olds.

Video, so privacy and ideation is a very straight forward.

Cool stuff for a customer so no reason they should deny themselves.

With that but it's still early days you know some of these properties, we pod for less than.

Four months.

So far very positive.

Great and then the last question I had less like you did touch on mess up just a little bit in the call was just about it sounds like some the excitement about these newer vertical practices that are starting to ramp and I'm sort of course I. Just wanted to ask you and rock fan you know for yourself you know what is your expectation.

Non.

How long, it's gonna take to ramp these newer vertical practices and partnerships to and then for Roxane on should we even should we expect because of these investments that you know we could see a rise in not the sales and marketing percentage as a revenue next fiscal year along with these are deepening.

Opportunity in the verticals. Thanks.

So.

We are already underway with.

Our evolution, we'd already gone added some vertical focus the prior year on that started this year, we turn the we would.

Our go to market organization behind the verticals Midmarket as geographic outside the U.S. geographic. So here, we have a nice mix of geographic territory and verticals.

I think is essential we host essential to be intimate with new customers in district of business in order to penetrate quickly I think it speeds up.

Deals increases the volume increases the valeant the pipe, we chewed into vertical market partners and also we choose to vertical.

Organizations Birdie cool events and vertical markets I think that's just way more powerful and I think were early stages of vertical marketing see more about through the year nicely right no great opportunity to refocus money and time, we would have spend on physic big physical events and congregations he said.

Focus on vertical market messaging.

Messaging and so on that really resonates I feel we've got a great story to tell I'm not as our chance.

And I think that the vertical alignment of the sales organization in the vertical alignment of our marketing organization actually allows us to do things in a more cost effective manner, because we can do it in a more targeted fashion and we've made a significant investment in our productive sales capacity and we will continue to evaluate make the investments we need for the future years, but with that said.

Could you know what we're looking at is that we'll be able to maintain our relatively maintain our sales and marketing percentage expense percentage as a percentage of revenue.

That's real helpful. Thanks for answering all my questions. This afternoon.

Thank you.

Your next question comes from that should Belge with Roth capital. Please go ahead.

Thanks, you had a pretty rapid pace of tuck in acquisitions over the past six or nine months some sort of curious.

What's your comfort level is to pursue acquisitions in a world, where maybe little tough to meet face to face or whether you've had a pipeline ongoing and ones that you kind of through moving down the pipe on that those might be easy enough to cause consummate side looking at new one might be tough for a short period of time.

Well I think thats a good discussion so for me personally.

The diligence process and what are two of the team here. There are very experienced about it was a small meetings one to onto their small groups are not big congregations.

So that's my point or not so in my personal commitment is to go where are needed.

Within you know CDC Whr government guidelines of course so.

Up seriously I mean that you know, it's taking a very seriously.

I don't feel that that's an issue for us in our pipeline that we have them up but we'd be very direct spot that we do have a pipeline opportunities and secondly.

You know I spawn frankly, I see opportunity here I smell opportunity and I think that we should be continuing.

I'd like about our approach is the platform and signal framework lenses, so beautiful beautifully to smart M&A in my opinion by acquiring signals that in many cases, we've already worked with we already had single with our customer base, we were already using and working with living lens and other video technology. So.

Oh, yes. These targets of approaches is what you should expect from as you are working with signals that we all the work with.

So I think that does one dimension of the business, where we're going to continue.

Plenty of cash we have no debt on our tuck ins strategy has proved to be a good good approach. So I see no change there.

How about from an opposite cost perspective, what do you think about I would there be some challenges to in a world where people are flying around less to recruiting.

The meeting people face to face, bringing them onboard onboard training et cetera. So is there a possibility that your head count growth might be more maybe second half weighted than normal.

As you kind of push off some of those things.

Then what would typically be the pattern.

Well I think thats, a very thoughtful discussion and we have been thinking about the cost few weeks on days.

We don't have a process, where we need to bring people into California for big Paolo interviews recruitment, we really do like video interaction on in our we have great locations around the world and I mean, you US particular, where we can bring people in for ones. The ones you know so far.

I think about US we can continue to do that.

Within guidelines and in a sensible way, what we want to avoid all unnecessary large.

Long trips on necessary large congregations. So I feel that we do have the tools and approach on the understanding of what we're looking for.

He was digital technology and use our local contact.

Where necessary to keep things moving us to tell you. The my travels and let me talk I talked to every.

Executive but on the every CEO Andy about this.

People want to run the business you know the an offering and that's all we want to run their business and they expect the demands will be placed on them and they expect to execute and saying that we're no different.

As to be as you really approaching now more of a suite sale then a point solution. So are you seeing any change in the new logo wins in terms of how many are just greenfield when people approaching this as a new.

Process within the company versus how many are competitive displacements because of the breadth of what you can do versus point solution.

No there was a great discussion. So my view is that the Boston majority of the market is still tuning into customer experience in the Biotrue Survey technology, an old school market research technology, what we provide as an operator operationalization of pizza in a platform.

We seek to consume individual silos are very closely for customers. So one of our propositions and the current market is to go in and say the customers you're buying a social listening service over there survey surface over here at digital service over there and it never nothing they never me in the Middle data doesn't end the platform we can.

Operationalize the feedback we analyze it we can visualize it and we contacts on it and modality those all of that and that's a really powerful position of the current sign but all of our salespeople are being trained on it we're asking them to take the customers consolidate silo days of pools from.

School, social listening old School survey get rid of rollout nordsons right and put it into.

Platform, where we can operationalized customer experience that swap modality does better than anybody else, so get feedback where it matters. So we can act on it you know machinery feedback massive scale right docs, where modality really comes into its own. So this is this is an exciting.

Metrics were many people obviously tough situation, but this is a very exciting opportunity for us really disrupt digitally and I think most of the market still it's sees customer experience as simple survey and stuff like that are enlighten customers. Some of the biggest best brands in the world see.

The value of operational analysis.

Distribution of feedback at scale machine learning and so on and these are the things that were made drill.

Thanks, Congrats on a great quarter.

Thank you.

Your next question comes from Brad Zelnick with Credit Suisse. Please go ahead.

Hi, its five an on for Brad Congrats again on the quarter and thanks for taking my question.

Great to see the metrics on module will adoption can you just diving a bit deeper here that modules are seeing the most attraction with your customer base and then just one in playing Asia and what is the pipeline look like here.

Perfect. So from a module perspective, we see obviously our platform and our theme explore text analytics product use the most and then beyond that we see our digital we see our social product being used and then it starts to vary based on vertical in regards to.

What's most important from them from a single catch a signal capture so Chris. This is a great example singles a great example.

Our customer success platform, which is strike deck is another great example for our business.

Business company. So you know it really varies but we're seeing a sick we're pleased with the uptick that we're seeing.

And the other half international.

No just pipeline on employee engagement.

Yes. So you know employee engagement is really important and employee engagement has a direct impact on customer experience and we think you based on where the world is right now at this moment in time employee experienced is extremely important for all the companies to we've seen a significant uptick we've talked about.

Some of our large customers who have been a customer experience customer who has now you know deploy.

He acts products do we have won a very large retailer in United States, who was who has employed.

Sorry rolled out yet and they rolled out there he acts product in about three to four month timeframe and now they're bringing on another country every two to three weeks. So we've seen that happen. We we've seen other large deployments of he actually we've seen companies who have come to us for yet and then they choose to deploy CX afterwards.

That's very helpful. Roxanne and then just to follow for lastly, I appreciate the color on the vertical exposure, maybe can you just give us an insight into what some of your hospitality customers are saying to you more recently and have you been seeing in terms of the user engagement trends trending for this industry.

Yes, I thought I just this is one of our great hostile bid customers.

The Midwest last week.

Obviously is challenging for them, especially because of properties.

Hey pack in China. So there's no doubt it's a challenging time. This is also a good talking to regroup and think about you know get a breadth and set up the digital feedback environment. The way they want it so that was kind of the bulk of one of the recent discussions.

But I have.

But we're going to serve them, but you know it's a relatively we're very well known for hospitality because people see a survey from a hotel or an airline or whatever but actually you know it's a combined it's about 10, 11% of our business. So we'd like to be bigger there overtime, so keeps being bigger there over time as little as crisis.

I am as to serve them and help them and look at opportunities to explore new digital initiatives you know so navigate through this with them and that's what we're doing so the intensity of communication with those customers to me at this time is more important.

I never it's no doubt.

It's tough for them they have they have the most direct effect, but some thus bus how I see it.

Fortunately, we have some of the biggest bode us brands in the space and we have good long term contract. So we intend to continue to support them.

I appreciate all the color and congrats again.

Thank you.

Your next question comes from Rob Oliver with Baird. Please go ahead.

Great. Thank you guys very much for taking my question to from me one.

Just a congrats you guys made a higher I saw the lebeck or high which you announced a leslie are the fed side.

And I know you guys just got fed ramp approval.

And coming from V.A., I think particularly interesting we spent some time in DC last year in VA has been a real thought leader in terms of digital transformation in government. So much so that I think other gradual government agencies.

You know kind of beat them up to put their specs on line and let everyone else know how they did it so just curious.

What do you guys are thinking about from.

That said vertical there's been a lot to talk about verticals on this call. So I figured I'd I'd touch on one that hadn't been touched on yet and then I had a quick follow up.

Yeah, Great I think it's a long term fun and government. So you've got to be in both the all in all out we are all that.

He is an outstanding exact number I'm pleased that he chose medallia great proceeds.

So the our efforts.

This does significance beyond the U.S. my thing because the army arm of us citizens at American but.

Originally as a European than it might take career in Europe and.

So in public sector bedrock was always a checking the box needed to others.

No.

In Europe in the UK or wherever so thus very significant I think our commitment to federal highway.

It's a small talk of people to actually execute on federal are you don't commit to doing that unless you're confident.

Your platform I think the other thing is what we learn from the B.A. is the early warning signal Veterans' health and medical help in particular picked up in the feedback platform is a really powerful.

Offer for other verticals and so we have a healthcare vertical that's really Brian you a euro for AWS.

We really need to look out patient experience alongside citizen experience and then if you think of the UK two biggest employers in Europe are as the world inside the Euro are in the UK National Health service on the 11 in line revenue on so we haven't even scratched the surface about market. So that is absolutely.

Brian need for AWS and were going up all in.

You can see from lease higher and we have a great team. We have we are the next.

Next government got an exit CIA Guy who is an absolute absolutely.

Dynamite leader, Brian Michael with the business, we have mic Thomas leading it.

We also great players going onto a global market very excited is a long term plus you've got to how the three year plan minimum.

And a three year view of the world, both getting through federal positions as well.

Great. Thanks, Leslie that's helpful and then Rocky and just a follow up on the previous question on employee experience just wanted to just follow up on that a little bit I know, it's still very very early you know in the ramp per employee experience as you get more.

Traction with the Sweet sale, how is that resonating and then you know obviously a lot of questions around.

David and the impact on the business, but the strikes me as potentially one that.

Good couldn't part benefit I think there's probably a lot of.

Companies that you know are concerned about about blank spots now on their employee base as they suddenly send their their employees out into the world. The remote work and just curious to get more color. There. Thank you got very much.

Yes, Rob I completely agree with you every customer we talk to we always talk about six point, we experienced platform in how the employee experience not only impact customer experience, but impacts the overall company and really where we are today, it's more to your point it is more important than ever for arc.

Customer our customers to really be able to see how their employees are being impacted by this and.

Be able to see some early warning signs and that they can you know I'll call alleviate some of the anxiety that may be out there specifically for their employees. So I think not only is employee experience a great opportunity for US also some of our digital products were you able to gather.

Signal feedback is an opportunity and also see acts as an opportunity you in a time of uncertainty, it's really important not only to hear from your employee but also to hear from your customers.

And we do have time for one more question or your last question comes from Terry Tillman with Suntrust Robinson. Please go ahead.

Hey wasn't rocks and a lot of great questions have been asked and I'm pretty much run out of all of them now because of all those great questions, but I did have one question, maybe rocks and in terms of as we're thinking about our model.

Anything that you could call out that could be different from a seasonality standpoint, or some particularly large renewals is worth thinking about our subscription billings are current RPL for the year and thank you and nice job.

So Terry I think that's a great question no from a seasonality perspective, when I look at the key metrics overall, there's not anything that I see particularly that would drive any material differences in the seasonality.

That is all the time, we have a questions I'll turn the call back to management for closing remarks.

Great. Thanks, very much for joining us hope to see you on the road or to talk too soon.

This concludes today's conference call you may now disconnect.

Good bye.

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