Q1 2021 Zuora Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the door first quarter fiscal 2021, earning conference call.

At this time, all participants are in listen only mode.

After the speakers presentation, there will be a question and answer session.

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I would now like the hand, the conference over to your Speaker today June.

Your finance. Thank you. Please go ahead Sir.

Thank you good afternoon, and welcome to doors first quarter fiscal 2021 earnings Conference call. Joining me today is changed though so as chief Executive Officer. The purpose of today's calls for us to provide some color on our first quarter results as well provide or financial outlook for the upcoming quarter.

Some of our discussion our responses today will include forward looking statements as a reminder, or actual results could differ materially as a result, a variety of factors you can find information regarding those factors in the earnings release, we issued today and our most recent filings that they see.

Finally, we'll be referring to several non-GAAP financial measure today and reconciliations related GAAP measure are included in our earnings release for a copy of our earnings release linked <unk> SEC filings, a replay of today's call or to learn more about Dora.

He said visit our Investor Relations website at Investor about Florida, calm and with that let me turn it over to tier.

Thank you. Thank you and welcome to source first quarter earnings call for fiscal Twentytwenty one.

Before we begin let me see it is worth unequivocally stands with the block likes mattered.

Individually and collectively we is worth stand up against and Justice, we condemn intolerance systemic racism must be bought.

Awareness understanding empathy for these injustices must happen before meaningful deliberate change can occur now whenever we must support one another ad dollars.

I also want expressed on behalf of every deal our gratitude to the health care in a central workers, who continue to be on the front line battling the krona fires taking care of those affected keeping a C through these unprecedented times.

Over 19 is first and foremost <unk> public health crisis, but it's also a massive forcing function changing our society in economy profound ways.

We will get through this crisis.

We also all recognize our world has irresponsibly change.

And so while I plan to spend some time talking about the corner.

I'm going to focus on answering the question.

What does he post who bid 19 world look like for Zora.

So far we learn three things.

Thanks.

The foundation of our business is solid.

Subscription models are proving incredibly resilient during this crisis.

Not only are we subscription business, but our customers our subscription businesses.

[laughter].

There's never been a time when the importance of what we do is more apparent.

More and more companies are realizing that direct to customer business models in other words subscription models are the future.

This crisis has only highlighted the strategic value our technology in this new world.

And third our business continued to execute through this challenging environment, while coping 19 has impacted our business. We believe we are adopting well to the new environment not the underlying demand for our technology remains solid.

We're drilling into these three areas. Let me quickly highlight our Q1 performance overall, we had another healthy corner group. That's revenue operating income in free cash flow all came in ahead of expectations.

In addition.

We launched Zora revenue.

Updated version, so retro fully integrated resort billing need hires were a fourth quarter to revenue suite of applications.

We have 42 customers go lives on our solutions.

We launched this described strategy group to provide customers with guidance on how to win in the subscription economy.

Working with our philanthropic arm Zohr Dot work, we opened our first public grant cycle two were $250000 two organizations focused on creating more equitable inclusive local communities.

Recently, we announced a news release of our platform North Central which includes all of our data query cut them objects sandbox tools and audit trail functionality.

And finally last week.

We announced the hiring of pod Mikkel Haddon, that's our new CFO, starting just a few weeks.

Brings an incredible depth of knowledge and experience having skilled multiple multibillion dollar how businesses. Most recently as CFO Sep cloud business, which includes the concur call streaks successfactors business units in more.

Touch track record of the celebrating enterprise growth makes him a tremendous addition to our team and we're excited to have them onboard.

The global economy is changing in our company is a net beneficiary of these changes.

Why because it's uncertain times companies are discovering that subscription business models are proving to be incredibly resilient.

How do we know it's what our data tells us over the last few years, we publish the subscription economy index twice a year, China revenue from subscription businesses the from five to eight times faster than traditional businesses.

Our data is telling US now is in the months of March April and May.

Half of our customers have not seen your subscriber growth rates materially affected by the current crisis.

20% of our customers, we've actually seen their subscriber growth rates accelerate.

And 17% of our customers are still growing just at a slower rate.

Putting all this together within eat out of 10, zohr customers see or grew their customer base over this time period. So that's a pretty remarkable statistic even more so we compare to what we're seeing non subscription businesses. For example in Q1 2020 sales from the S&P five.

The companys constructed at a negative 2% annual rate well revenues from companies in our subscription index grew at 9.5% in the same quarter continuing the outperformance even through this crisis.

So subscriptions are a significant driver.

Both market growth.

These moments of time tend to celebrate underlying trends, we believe that the current crisis will only to celebrate the shift of the modern global economy towards digital services and subscription models.

I think time to value with our technology has never been more apparent why because we provide the agility that helps companies drive superior business results and the last few months, especially the latter half is March and April we topped our customers launched new offerings to capture explosive demand we too.

Other services to match rapidly changing market conditions.

Thanks, billing and payment to their customers needs.

Quick actions to hold onto their subscribers.

Let me give you some examples.

Get hub when premium opening up the developer platform to millions.

Yes, I open to all 7000 of their tech classes for free for the entire month that April and enough over a million users E money a platform from fidelity keep a penny tools free to help the financial advisors build stronger client relationships. During this time of financial indicted.

Vendor settlement offer free classes defender play their online it's hard lessons.

We're really hoping to sign up 100000, you folks they had a shut it off after 1 million sign ups essentially indexing user base just under six weeks.

Of course zoom.

It's been an extraordinary exercise, helping customers skill in response to demand of 300 million, meaning participants.

On either side, we enable ready to restaurant reservation after credit March and April invoices for all of their customers and they we launched are up for takeout and delivery, that's a pretty meeting could.

We have helped membership organization suspend accounts for millions of members to prevent customers from training outright.

Now imagine having to do this with a homegrown system built around a payment gateway matching let me tell you developers that in addition to launch pivoting your service. They would have to go in and blow up your hard coded billing system would you I T organization to retool Sep Oracle.

Or to rewrite the million lines of apex code in Salesforce just to issue. Some credits were spin up the new freemium offer you simply cannot do this effectively.

This is why over the last 12 weeks, we really bear hug our customers to show them how to best utilize our platform. During this time. The crisis. For example, we made our I've been training free we've announced last week, there were giving our customers six months a free access to key parts of our platform tools, enabling them to rapidly customized automatic key kobin Nike.

They did processes.

We set of webcast with our customer success teams and we brought our customers into zoo communities to share ideas and best practices.

Has been an incredibly rewarding experience for all of our the goes to be able to help our customers and such important ways, but more significantly. This moment has validated the strategic mission critical nature of our solutions.

No.

We've always believed that the long term trends to be in our favor.

And what we've seen over the last few months, it's only validated our phase.

Companies are realizing the importance of new customer centric revenue streams as well as the superiority of the subscription model in the recurring revenue direct customer relationships that they enable.

Our deployments continue to proceed at a healthy pace with 42 last quarter.

We're seeing a restart projects that were pause when the crisis for said.

We saw one $7 billion company indefinitely stent their CRM deployment, but they're moving forward with our subscription billing in revenue deployment, we've seen a large manufacturing company that well its furloughing employees, they're still moving forward with our connected device project.

We continue to see steady month over month improvement throughout the quarter and the quality of our pipeline.

There were some really concerns about how the crisis, which significantly hinder our ability to sell and deployed enterprise solutions.

But those concerns of not proven to be true.

Everyone is at home right now, including our prospects and zoom has been the big equalizer.

That being said many companies are still in the state of change at all sorting through their internal prior even processes it into a lot more noise in the system.

The result is it can take longer to finalize some deals, causing them to slip out of the quarter. The good news is of those Q1 deals that slipped 75% of them closed in may.

We've also been helping some of our longstanding customers industries like sports and travel with volume credits and payment deferrals in certain situations. We're intentionally targeting lighter deals we need to faster deployments and we know that once we get operational with real revenue flowing through our system will have the ability to expand now although.

This means that in the short term there will be some impact on billings for the next quarter, but we expect to see the long term growth trends to stay intact.

The vision for our company has not changed we remain focused on building a durable business for them on Ron if anything the current crisis has only emphasized the importance of subscription business models.

Just look at her our lives of dramatically changed over just the last 12 weeks, we now live in a world on demand digital services for work Entertainment Transportation Health Media. The list goes on Zora is the market leader in remains committed to helping our customers in.

Prospects accelerate into the subscription cotton.

Now, let me turn it over back to June to go through our financial details.

Thanks, Dan as Tim mentioned, the World is very different since we reported earnings three months ago. Most of US are working remotely meeting virtually and fulfill dispensing as a part of our daily lives.

But what does not change is our commitment to our employees customers and partners around the world. We still have a great opportunity ahead of us to help companies succeed in the subscription economy.

Looking at Q1, we came in ahead of expectations for subscription revenue at 56.9 million and total revenue of 73.9 million.

We came in well ahead on non-GAAP operating loss of 7.7 million as we saw lower expenses, resulting from limited travel and events and the lower expenses combined with the beneficial timing of payments led to better than expected results for free cash flow of negative 2.2 million for the quarter.

Now digging into the detailed let's start with the key operating metrics and then I'll move to the transaction volume process on a platform in Q1.

Starting with our customer number we added a net Nike more customers with over $100000 in HCV in the quarter, resulting in an 18% growth year over year.

Despite the virtual sales motion for part of the quarter. The majority of the increase was from new customers. This customer group continues to represent the vast majority of our business as it makes up 90% of our annual recurring revenue.

Turning to our second see operating metrics dollar based retention ticked down to one or 3% in Q1. This was driven by lower volume upsell and cross sell activity compared to the prior year.

As expected in the current environment.

We're expecting some downhill from customers impacted sectors that will affect this metric.

Dollar based retention is a very important metric for us. So let me talk about what we're doing to improve this trend.

First we're investing in our customer success efforts, we've introduced benchmark initiatives with our customers to show, how they're doing versus their peers and providing recommendations on how to improve.

Second, we're making changes to our systems and plan to rightsize, our initial land with customers that allows us to naturally grow into future expansion opportunities.

Sure.

We're wrapping arts cross sell motion for our fully integrated door revenue product with 10 customers now operational live on integrated product, we're talking to a number of billing customers about automating the revenue recognition process.

We know that it'll take a few quarters for these changes to get reflected given the rolling 12 month measurement for dollar base retention.

We're optimistic that these initiatives will lead to improved expansion metric.

Moving on to transaction volume our systems process $12.3 billion on transaction volume in the quarter represent 27% growth year over year.

On a trailing 12 month basis.

Transaction volume growth with also 27%.

As a reminder, our revenue does not tracked in line with transaction volume because our customers realized pricing efficiencies as they buy larger blocks of volumes.

Turning to our financial results for the quarter subscription revenue grew 20% to 56.9 million in the quarter professional services revenue increased to 17 million as customers continue to deploy our mission critical solutions.

Together this resulted pull revenue of 73.9 million in Q1 ahead of expectations.

Looking at our Q1 margins non-GAAP subscription gross margins increased to 79%.

Hi efficiencies in our data center spread.

In addition, we managed our non-GAAP professional services gross margin to operate on a breakeven basis.

This resulted in total non-GAAP gross margin of 60% an increase of three percentage points compared to the prior quarter.

Non-GAAP operating loss was 7.7 million as we realize lower expense in areas, including kidney and data center cost.

We continue to manage our cost base, while making the appropriate investments to match our revenue growth. This led to a five percentage point improvement of our non-GAAP operating margin quarter over quarter or negative 10%.

Now, let's turn to our billing to free cash flow calculated subscription billings for Q1 was 53.7 million representing 10% growth year over year.

While we saw some notable deals push into Q2 will also we've already close the number of those deals today looking ahead, it's difficult to predict billings growth with the on economic uncertainties quarterly fluctuations. We do believe it's prudent to expect a lower growth rate in subscription billings for Q2 versus Q1.

Turning to our cash flow Q1 free cash flow was negative 2.2 million compared to negative 4.5 million in Q4.

This improvement was primarily driven by lower expenses favorable timing of payments and a tailwind SPP related cash receipts, which we see in the first and third quarters each year.

Paul Capex for the quarter was for 5.2 million with 3.4 million related to the move our headquarters for Q2, we expect free cash flow to be approximately negative 10 million, which includes the quarter over quarter impact of 4.5 million from yet pp related payments and 3 million related to timing of payments and fees.

Analogy in our business.

With the full year, we expect free cash flow to be better than negative 18 million.

We're maintaining our target to be cash flow breakeven run rate as we exit Q4 this year.

It's important that we continue to manage our business and drive efficiencies to deliver on this target while investing in our growth.

We ended the quarter with $173 million cash and cash equivalents and remain fully funded against our current operating plans.

Our fully diluted share count as of the end of quarter April Thirtyth 2020 was approximately 126.6 million using the treasury stock method.

Now a few comments before we get to our guidance first subscription business models are proving to be resilient.

And we have two levels of resiliency of our business.

We operate a subscription business and likewise, our customers also run subscription business model.

Second given our shift up market over the last few years, our customer base today is better positioned to weather the economic storm of the current pandemic.

Majority of our revenue comes from medium and large businesses that are relying on our agile solutions to meet the demands of this rapidly changing market.

Third our solutions are driving the future growth of our for our customers.

While companies with onetime product sales are struggling connected services around subscribers are thriving. This is why in nearly all of our patients continue to move forward, while other projects have been canceled.

Fourth we're very focused on investing prudently in our business. We plan to continue supporting the long term success of our customers, while maintaining our financial discipline.

This concludes balancing our costs and meeting our free cash flow targets for the year.

Now turning to our guidance for Q2, we currently expect total revenue of 72.5 million to 75 million.

Subscription revenue of 58 million to 59 million.

Non-GAAP operating loss of 8 million to 7 million.

Non-GAAP net loss per share of eight cents to seven cents, assuming weighted average shares outstanding of approximately 116.6 million.

For the full year 521, we are withdrawing our outlook given the current economic environment Prudence dictates that we think about our financial outlook on a quarterly basis.

But despite the macro uncertainty we have a great opportunity ahead of us and we feel confident and our ability to execute.

And with that we're happy to take your questions operator.

That's a reminder to ask the question you will need to press star one on your telephone.

To withdraw your question press, the pound or hash key.

Please standby loan compile the community roster.

Your first question comes from the line of Scott Berg with Needham Your line is open.

Hi can engine.

Definitely good quarter and thanks for taking my questions here.

I guess 10 lots of out lots of things to digest, there, let's start with the comments around billing set for the second quarter that I think both you and June.

Discussed is when we think about lower billings in the quarter.

How should we think of it in terms of whatever that number ends up being is a certain percentage from current sales environment has a certain percentage from down cells comedy is at a certain percentage of baby other buckets out there I'd be super helpful. Thank you.

Yeah.

Maybe I'll start engine you can you can add some color here, but we've always signal that fillings.

This is a complicated number right. There's there's there's typically a bunch of factors, there's a mix of annual versus quarterly there's the always impact that we call. It can pull in deals from one quarter to another early renewals if you will that affects fillings.

And I would say right now in this environment billings is even more complicated and and so there are certainly situations, where we're we're restructuring contracts for our customers where.

Longer term contract the TCV values the same.

Given the current environments red and given the industry is that they're in the mining some short term relief that were trading off with more long term relationships.

And certainly we you know you would expect tick up and down sales as well and so we're we're trying to signal is the long term picture really does not change, but it's definitely a lot of short term variability that's going on right now and we thought.

Typically the best thing of possible for Q2.

We wanted to provide that commentary.

Yeah got it could just added our Scott is that we want to be prudent here right add we want to do what's right for the customer. So there are some relief programs that we had in place that as he mentioned that will.

Lately impact that number but the important thing is that we feel great about the long term view here and the long term growth and so hopefully I don't have the prevailing view is that Q2, Q3, potentially or the lower quarters, but hopefully it comes back quicker than that and the overall economy coming back quicker than that.

Hi quite helpful. Thank you and then from a follow up perspective, there was a Tom Mitchell around targeting later deals right now.

So we like that approach in general hopefully quicker smaller deals get a foothold get a foot craze allow you to show value and Upselling expansion that we can you help us kind of understand if you had the traditional sales process brings in a dollars' worth of.

Maybe a our for you what does this slighter sailed mean is at 50% of that number 75% of that number and then a follow up to that of course is how quickly do you think you can upsell those out later contracts to bring that up to a normalized level. Thank you.

Yeah. So.

No that can bring you back to the last quarter, we had talked about Robbie trial joins me.

He is now about two quarters under his belt and last quarter. As we ended the year you talked about some of the sales restructuring you really to the to have long term to have a a mine for that long term ownership of the customer relationship right and so versus a hunter the close the deal mentioned over the fence to a farmer and so now that that structures in place.

Yes, right, we want the reps willing to do what's right for the customer and in this situation. If the customers, saying look this project is really important this is our future.

But help us out some cash situation, we want the flexibility to do that right and we don't want the rest of the penalized.

And and we want and line in between but we're doing with the customers doing and so I would say in the first part of this is part of the long term trend a longer term trying to making sure that we're always focused on long term customer relationships. Hopefully that does is one of the things that you talked about that should lead to higher net dollar retention, it's hard to put a specific number on it.

All right because it really depends on the deal depends on the region depends on the person, but we what we're saying that this this really just makes sense in this environment. We've got the flexibly to do that it's one of the benefits of having a subscription model, where you can take the long term customer view and and it's one of the things that might put some some some short term.

Pressure on on the billings number, but it's going to lead to a much much better long term business.

Super helpful. Thanks for taking my questions guys.

Thanks Scott.

Your next question comes from the line Brent Thill with Jefferies. Your line is open.

Oh, Hi, Hey, guys.

From the good print this as luck soda on for Brian So.

Okay.

Two questions from me one was maybe.

You made some commentary around how the pipeline is holding up and it's improved sequentially month over month.

So maybe maybe if I could ask like you know what what are you seeing out there.

Versus what being implied in the billings guidance that you guys gave.

Yeah absolutely.

You guys talked a lot of companies out there I would say that what we're experiencing and I'd be something a little bit different and certainly the BBB cokemaking in economics situation impacts people differently.

But what we're seeing is is pipeline generation.

It's good and I might be.

The effect of lot of people are at home right their online right. There they're looking at channels, it's easier to make calls if you think about our STR is that our genuity pipe. They can actually do more conversations today.

Now that everybody's at home on Zoom, then they could before and so the pipeline generation is good I think with a difficulty is it's hard to take the historical conversion metrics that you see.

And in previous quarters in years, and simply applied to the current situation and just because it's a new situation and so while we feel good about the pipeline generation I think we're just being mean you know.

Cautious very cautiously optimistic we're cautious nevertheless to say hey, let's just watches pipeline carefully and let's see how evolves as as these deals moved through the system.

And if I could just add their love.

When we looked at the quarter and how we had progressed I mean, when the krona virus impacts for Ted We obviously saw some.

Request from our customers and we obviously want to be that partners for them. So things like payment deferral term changes those came in.

What we've noticed that yeah. The pipeline has gotten better throughout the quarter in terms of velocity in quality and so those things are in our favor.

But and we were able to close the number of the slipped deals from Q1 Q2.

And Matt is does.

I had mentioned so I mean, we have good good trends and good momentum I think the but we want to do the prudent thing here in terms of thinking about the next quarter.

[music].

Got it and maybe another one if I may on the margin side.

It sounds like you guys had a healthy b.

Relative to.

Where expectations were and even where guidance was sort of.

Yes, there is there a wait for this.

To be a more material step up going into the future.

In terms of what profitability you guys can deliver over a longer period of time or.

Would you categorize this is more like a short term beat.

Yeah.

No.

What do I take this one thing.

So in terms of the margin and our costs you know like many other companies we came into little bit better on on cost because of that limited peony and travel and virtual events and things like that so that's certainly help the real question is how long does a slot and how long you know this sort of lower cost structure.

Sure does it stay in place and so we'll have to see I.

I think every company probably going through this is seeing savings here and we certainly see that and we expect color that to continue for that for the year, but it's hard to tell when this will get back to normal right. Because next year. Hopefully we are traveling hopefully we are doing events and hopefully we are meeting in person and then.

Those cost would go up so we're factoring all that in but the important thing is that we are trying to match our revenue and expenses in terms of how much we grow and how much we invest and so that's why it's important for us to maintain our margins and actually improved them over time and maintained that free cash flow target by than Didier.

Got it great.

Pass it on nice shelf space.

Thanks look.

Thank you.

And again, if you would like to ask a question press star one on the telephone.

Your next question comes from line of Joseph Baffi Canaccord. Your line is open.

Hey, guys. Good afternoon, nice quarter, just I know there isn't.

A few moving parts to to revenue growth here I just thought maybe we will talk about how how should we should think about dollar based retention versus.

Say I'm, signing new customers above a 100 Kaye of HCV.

You know from here, if perhaps you're gonna be focusing a little bit on.

More of a land and expand strategy with with new customers and.

And then secondly, I know you're not providing guidance, but how should we think about that dollar based retention for for the rest of year do we think it stays above 100 or when we think it may start inflecting up and then maybe of a follow up thanks.

Sure Yeah what.

There was no 13 and I'll add on.

Sure, let's do that.

So.

The macro level picture for us is.

It is.

Every quarter there are more companies are moving into the subscription economy. You can you can feel that in the technology is driving customers driving it either economies really really talking to the environment and we actually.

Our hope is is the current cobot, making situation is going to celebrate that trend. It. So we can't take or pay off the ball on engaging with new logos and so we try to run a balanced environment, where where we are simultaneously looking and engaging with new companies looking to shift in its just subscription economy.

Obviously, we want a business model that allows us to grow as we continue to provide more value to our customers as well and so you're going to see a balance of that I mean, what we saw in Q1 was was given the situation.

Customers had a strong need and and so we we just spend a lot of times their customers right, making sure they're unlocking mutually that our system provides and trying to drive the changes that they needed to driving the business.

There's a couple of things about the net dollar retention number that you will cover it right. One is because it it's a fourth quarter effect on that.

We suspect what you're gonna see is some of the shorter term.

Downward pressures you have net dollar retention related to down sales and things like that will will affect us no probably take a few quarters that to kind of work. It out through this work through the system from a a numbers perspective, maybe jr. Can add some color to that.

And so I would say the trailing 12 month metric. So just keep in mind it'll take some time some quarter to sort of lap over that if you think of it that way, but I talked a little bit about some of things that we're doing in the field.

Investing in our comfort customer success Rightsizing, our initial land and ramping up our cross sell so we're very focused on improving not.

That said there are some industries that are impacted right. So if you look at even our SMB.

We don't have a kind of exposure.

It's about 10% or less than 10% of our recurring revenue. So we don't have a ton of small business exposure, but we do have some of those customers and and so that's going to impact some of the balance though that we talked about but the idea is that it would moderate or see some pressure for the near term, but overall through these initiatives.

And grew these.

Things that we haven't place that it would get better.

Okay. That's helpful. And then just given you know we're kind of moved into kind of a steady state gold environment or whatever you want to call. It at this point.

How does that kind of changed what.

I'm coming into the pipeline in terms of <unk>.

The types of opportunities to size. The industries, you know any color there may be helpful.

Yeah, I would say ER I I know after a couple of months.

The human ability adopting view newer to change it starts to kick in but it takes a little hard to say that we're in a steady state just yet right, there's still quite a bit of unknowns machine ripple effects.

In the U.S., you're seeing what does it 40 million unemployment and so there has to be other ripple effects that are going to come about.

Resurgence is a virus things like that so it's hard to say, it's a steady state, but I would say this I I would say what we're seeing in we try to share some of the anecdotes. When we're seeing that companies are pausing or CRM deployment, but continuing with ours. We're seeing manufacturing companies. There you know quite frankly are having a hard time selling because of what they do.

But they have you know a million 2 million threemillion assets in the field that all connected and they're seeing new revenue streams related to their existing purchased in end market connected products.

And they're continuing with our projects and you're seeing other companies, saying gosh, we wish we had a subscription business. If we did we would have been able to two to two took to weather. The storm just a little bit better we think that really bodes well and then we're seeing it play out in the early conversations with these companies, but I would say you know cobot sheltering place really hit mid March and.

And we're still fairly early through this.

And so you know we're going to be the same voted other companies in terms of understanding.

The short term future just does have a lot of uncertainty Inc.

They also associated with it.

Sure sure that makes sense, thanks, very much for taking my question Doug.

Great. Thanks, Joe.

Your next question comes from the line Outstand Blocky Morgan Stanley lines open.

Hi, This is it fair I understand.

I don't think you guys mentioned during the call, but I want to double check on did you ask him.

Percentage of your total revenue that you have exposure to covert related verticals that being travel.

Retail hospitality.

We didnt actually give a number for the specific.

Industries, but.

The overall number right. If you look at it on it on an aggregate, it's less than 5% of our overall business. So that includes travel retail hospitality, they're the ones that office space.

Transportation those are those would be the category, but in aggregate, it's less than 5% of our overall business. If you look at on a recurring revenue basis.

Got it I also had a quick follow up.

Do you guys had continued traction in growing that greater than 100, and K ACB cohort.

I guess, how should we be thinking about that are you seeing existing customer it's growing their contracted that larger net new customers coming in on just the dynamics and how that cohort is growing.

Since you are wondering.

Mark what I think this one so.

The customer group as a growing pretty much inline with last quarter.

18% growth year over year net out of 19 and the majority of those were actually new logos. So.

I'll be trial and his team they've done a really good job of landing new customers.

You know because the majority are or new customers coming onboard versus one third graduating from below 100002 above the other point that I would make is that this goes to show I mentioned that 90%. This customer group represents 90% the bar.

Of our business or ACB. So if you think about our customers. They are much more of the medium and larger customers that were going after but we're seeing nice growth here and I think hopefully that continues.

Got it thank you.

Your next question comes from the line, Chris Merwin with Goldman Sachs Your lines.

Hey, Thanks, very much for taking my question I.

I wanted to ask about as there were a revenue it sounds like it's an update to the right for a product that you've already had out there in the market in Cincinnati functionality. So.

What can you say about the initial customer feedback to that so far and does this introduced any new set of potential competitors or is this kind of like.

Mainly going to be a net new deployment for the customers that take it just just I'm curious any color you could share there. Thank you.

Yes, so that is a we used to call retro we pushed out a major release of our pro.

Center piece of that was a prototype integration that we've been talking about multiple quarters on on these calls.

We felt pretty good about it and I think you ought to be honest I still slipping call a rep for all the time product folks get Mad at me, but we're just trying to harmonize name. We absorbed billing is more revenue now and invest name of the product going forward, but it's the same product as as Bret Pro now fully integrated with filling that innovation continues to go well I think we're up to 10.

Customers that are life closing their books running things through.

The company comes to US and say look you told us have the time it takes to close the books.

I'd now running integrated solution, so we're feeling pretty good.

About that joint offering.

Got it and then I guess when we look at the transaction revenue growth and apologies. If this was touched on before but looks like it picked up tick up a bit this quarter I know in asking you sort of think discouraged analysts from reading too much into quarter to quarter trends in that metric, but I'm just wondering how we should contextualize that number.

Relative to the prior quarter and anything we should take away about.

The potential for the end market.

Yeah, I mean, that's another number that has a trailing 12 month impact to it right. So aspect to it and so we just want to continue to show that number to show.

That that companies are getting value from our system right. The way we monetize as you mentioned is not a street.

Quarter, one to one translation between the number in our revenues and so there's a lot of.

Things that have that that that are in the mix in terms of how how those two things are related but we feel pretty good we feel good pretty good about if you remember that we have a similar number but we talked to really about just the growth in subscription businesses. You know like twice a year, we publish a subscription economy indexed and given all the changes are going on we went to a monthly.

Mode to try to help companies see that I think youre for has been.

You can share that information as well.

But but the contract. So we wanted to show there was subscription businesses continue to grow even as you see the GDP shrinking and you see refuse to the S&P 500, shrinking and so it's just really shows the resiliency of models and it shows that this this is the growth engine of the future.

Got it thank you very much.

Okay.

Great. Thank you.

There are no further questions at this time.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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