Q2 2020 Blackline Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the second quarter 2020 back line earnings Conference call. At this time, all participants' lines are in listen only mode. After the speakers presentation will be a question and answer session to ask a question during the second only to press star one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
I would now like turn the conference over to your Speaker today, Mr., Alex Geller, Vice President of IR.
You may begin.
Good afternoon, and thank you for your participation today.
With me on the call is treat Tucker founder and Chief Executive Officer Black line, Marc Hoffman, President and Chief Operating Officer, and Mark Party, Chief Financial Officer before we get started I would like to know that certain statements made during this conference call that are not historical facts.
Putting those regarding our future plans objectives and expected performance in particular, our guidance for Q3 and the full year a forward looking statements within the meaning of the private Securities Litigation Reform Act.
Key 95. These forward looking statements represent our outlook for me as of the date of this call. While we believe any forward looking statements, we make a reasonable actual results could differ materially because these statements are based on our current expectation as of today and are subject to risks.
Uncertainty.
No stated in our periodic reports filed with the Securities and Exchange Commission in particular, our form 10-K, and form 10-Q, as well as risks related to the ongoing who've been 19 pandemic never leave it at responses by government and private industry, including macro and regional economic risk we do.
Undertake an expressly disclaims any obligation to update or alter our forward looking statements, whether as a result of new information future events or otherwise except as required by applicable while also unless otherwise stated all financial measures disclosed on this call.
Oh, well be non-GAAP, a discussion of why we use non-GAAP financial measures and information regarding reconciliation that were GAAP versus non-GAAP results.
Certainly available in our press release, which may be found on our Investor Relations website at investors that Black line Dotcom for an hour form 8-K filed with the FTC today.
Now I will turn the call over to treat cubicin.
Good afternoon, everyone and thank you for joining us today.
As you know the last several months have been unusual for companies and people everywhere.
Given the challenges our customers and employees have been facing in this difficult environment I was very pleased by our team's ability to stay focused execute and drive performance in Q2.
We saw the demand environment improve throughout the quarter as companies around the world. Once again begin to fund their mission critical initiatives.
We believe the demand for backend finance automation will benefit black line as a market leader during this difficult cold it environment as a result, black white performance for the quarter was better than expected.
As the pandemic continues it is becoming increasingly clear there is a new normal for a distributed workforce. These circumstances have expose the limitations of traditional then you'll probably see and put a spotlight on the back office and area that has historically been overlooked and under invested in.
This new environment is particularly challenging for accounting and finance professionals, who are now forced to manage manual and paper based processes in a remote world.
Legacy counting processes, what's sustainable in a pre coded world at this pandemic has made them even less so.
Last quarter, many accounting and finance professionals under went there first ever remote close at that time I dealt many of them thought we would still be operating in a distributed workforce and even you were considered the possibility that their year end close would be remote as well.
Today that outcome has become a likely reality, creating a sense of urgency for their technology initiative.
That's priorities continue to shift and budgets contract companies must figure out how to automate and transform we believe these challenges presented an opportunity for finance leaders to look beyond the legacy accounting processes and prepare their organizations for the future of work with changes.
<unk> outlast the pandemic Mark husband will touch on this in more detail shortly.
[laughter] black when customers are considerably better prepared for a remote close then those companies that do not have black line.
I do know however that many of our customers in certain industry has been negatively impacted by the pandemic.
To support our customers and these challenging times, our customer outreach continued throughout the second quarter. These outreach efforts have been supported by nearly every department in Black line and span a variety of programs from education training and development coaching sessions with subject matter experts.
Really programs and even some complementary products and services.
Our newest outreach effort remote audits, it's just solutions and services package composed of subject matter expertise and best practice processing.
Lee named it focuses on the external auditor, an incredibly important rule and the world of accounting.
Similar to the accounting and finance organization auditors are traditionally onsite and heavily reliant on manual processes.
Remote audit, which became available in may improve the process of auditing the company's financials and give the auditors the ability to verify and validate financials within the black line platform. Many black line customers already grant their auditors direct access which has been which has benefited greatly.
And the sudden shift to remote work we offered this outreach package on a complementary basis to a number of customers to help those who have not yet taken advantage of this capability.
I am proud that we are able to support and lead our customers through this pandemic and I am encouraged by the uptake we have seen with ease outreach efforts. In addition to enabling companies to close their books and distributed world. It is also driving goodwill and generating significant praise from our customers.
Before I turn the call over to Mark I wanted to talk about the other news we announced today effective January one I'll be transitioning the CEO role to Mark I'll remain involved as executive chair with the goal of helping Mark take Black line to the next level. This is part of a succession.
Plan, we've been working toward for sometime and I'm. So pleased with all the work that Mark is done to help scale and grow our company since he joined Black line in 2018. He's fantastic. This change will allow me in the executive chair role can focus on my passion.
Product and customers I'm excited about black line future and look forward could this next phase.
And now I'll turn it over to Mr. Hoffman to discuss our recent business performance in more detail.
Thank you treat and good afternoon, everyone.
Right. So I didn't humbled to kinda goal of CEO with the start of the next year.
Well he could lead you to recent I've worked so well together is relying on the core values that make black line. So special.
I look forward, you're continuing to work with this experience can talented management team to execute on our largely untapped market opportunity and growth strategy.
That's true lease mentioned, we were pleasantly surprised.
Due to demand environment approved <unk> core.
On the last call I discussed our biggest challenge from Tobin would be impacted company budget and the ability for customers and prospects to win budget amongst a long list of other mission critical priority.
I'm happy to say that despite a slow start in April.
Just began to free up with increasing momentum in May and June resulting in better than expected performance for the quarter.
If you recall Threeq 2019, and really Q1, our growth strategy benefited from strong demand.
Great kills execution and a growing partner ecosystem.
Following the elsewhere to coded as you might expect we did not achieve our original pre Toby.
Q2.
The market, where it today has not yet we're trying to that level.
Early indications give us confidence.
Financial backing automation will remain a priority and possibly even accelerate when the economy begins to recover.
That's it's challenging to identify when that will happen and what success he missed hernan barn.
I want to get online what well in the quarter and how we're defining that success.
At the top end of the market, we were pleasantly surprised that we were able to close large strategic transformation deals in the quarter.
Our initial view would that these types of deals would be on hold because organizations, we're ready to commit to long term projects with significant resources in capital.
Please caliber you see positive movement in these deals with some closing in the quarter.
There's good are progressing nicely.
At the other end of the market. We were also pleased by our Midmarket business, which delivered a record number of new logos import to our recently introduced modern accounting playbook for map offering.
If a customer outreach effort specifically designed for the Midmarket and is resonating with Midmarket cfos because its purpose built for well proven beating Brexit with a quick time to value and speedy implementation.
At the start of the tenant gimmick, we focused are still get for its first of all their customer success.
Bridging our partner ecosystem, and our largest curious account management and customer success.
They're strong relationships combined with Blackwing leadership position hoped destroyed growth within our existing customer base into Q.
So lets was another bright spot in the quarter with continued improvement in the number of selection.
It's clear that Black line has become increasingly relevant actually pcls team goodness cobot pandemic.
This change is attributed to being included a CPT code with response to customers and more importantly, delivering on our reputation as a subject matter expert in financial close.
That's a key account execs have successfully been able to use our position and messaging around the remote close to create value for their customers and generate sales opportunities.
As a result, our value proposition is getting more catching across a wider actually p. audience driving greater alignment across our target accounts globally, and resulting in more joint enablement engagement.
What's even more exciting.
It all their remote close is opening the door to many of these still looks opportunities our reps, who founded sep prospects or equally interested in the past four Honda and the close benefits Rad automation visibility and control that black line for book.
We delivered stronger than expected services revenue with our services team working closely with our customer base to execute well working remotely resulting in minimal disruption to implementation projects.
In addition to continued progress on existing projects, many customers wash union implementations to accelerate the time to value from their ongoing finance transformation.
And of course, they like the intangibles. These are harder to measure what areas, where we have gained strength.
It includes our competitive positioning where we saw strong winter wheat customer relationships and goodwill as evidenced by a 97% renewal rate and positive customer feedback in uptick or customer outreach programs.
We view these sukiyaki good early indicators and can market is moving into right direction with plans for accelerated digital transformation.
Now I wanted to share some examples of how we're driving success.
For our customers.
We closed a large digital transformation deal with one of the worlds largest organizations. This company has been challenged from an accounting perspective with 23 ERP systems multiple I'm grown systems autonomous subsidiaries and massive data volumes.
As a highly competitive deal it gets their incumbent your p. vendor.
Solution provider at all.
Both competitors tried to compete on price, but the company chose black line due to a proven track record and ability to deliver.
During this customer purchased or finance transformation solution transaction matching and could plants. The steel had begun to work since the spring of 2019, the kids coping hit we feared this deal would be significantly deployed.
The fact that this deal closed in the mix of the pandemic with great validation of our value proposition the business case and our team here.
Among our existing customers allergic aviation company has been a black line customer since 2008.
They were only using a cat reconciliation and also had two subsidiaries with separate Blackline instances.
In early 2019, they decided to embark on a multiyear strategic transformation with black line consolidate and optimizing retired recorder pork process and eliminate the efficiencies within their complex intercompany transactions.
As we all know the aviation industry has been hit, particularly hard by the pandemic and this customer was no exception.
They had to navigate tough decisions and financial hardships and push the part Bobby on every single Finance project they had.
We had every reason to believe their journey with black and we'd be delayed as well.
They are executive to realize the strategic value a black line and helping them navigate through this challenging time and in Q2, they added more users and purchase intercompany hub transaction matching journals variance and compliance.
Once all of the optimizations in additional capabilities are enabled it is estimated at this company could save millions of dollars per year.
Moving down market a regional bank went from introduction to close in a short 90 days.
We had a very manual close using excel with almost no visibility into their month and close process is highly motivated by the challenges over the near workforce. They purchased our mining or go any playbook in June to provide visibility and automation.
These companies growth strategy was heavily dependent on M&A.
In addition to solving for their near term challenges. He chose black line as their strategic partner for the long term and they continue to grow.
From a go to market perspective, our sales and marketing teams continue to focus on building pipeline and closing deals.
Not much has really changed on that front outside of the virtual sales motion. We continue to tweak our go to market efforts to optimize this motion in a line or messaging with the most pressing matter at hand.
I wouldn't know close.
As a result, our marketing team has been very busy ensuring that we deliberately <unk> reputation as the thought leader in remote close.
We continue to successfully shift online customer complications to virtual events in the quarter.
Combined or isn't a black Sydney and Singapore back into a bushel finance transformation series pre packed with specific tracks for prospects.
Customers and Solex event was a huge success with 900 attendees and already resulted in some Q2 wins.
One of the immediate benefits of digital marketing efforts, because the ability to reach a broader audience.
We've been able to more than double or marketing touch points in the quarter with record attendance at Webinars and other virtual events.
While we're pleased by this degree of engagement and awareness, it's too early and we don't have enough data points to determine a consistent trend for how new pipeline generated through virtual sales and marketing will convert into sales.
We're seeing a similar benefit from our customer success teams, we've been very effective that engaging with a large number of customer accounts to the digital wanted to many of them.
As a result, our customer success teams remain busier than ever and continue to be a huge differentiator for us.
Our customer support teams have been more responsive and flexible to accommodate customer is impacted by coke.
Customer success and accounting innovation teams.
With the help of our outreach programs continue to lead our customers to get deployed and realize full utilization from their black line solution.
All of these teams are aligning to focus on quick relevant offers an activities targeted at specific tactical challenges.
Our customer base is very receptive to this and we believe this will continue to drive expansion and adoption within our customer base in the future.
Moving forward.
It's difficult to predict what will happen what the macro economy for the remainder of the year and how that will impact demand.
We believe some of the challenges we saw in Q2 will carry forward into the rest of the here.
International deals are lagging those in North America.
Companies and impacted industries continue to delay projects and many deals require additional qualifications for in process and final.
With that said black one is focusing on helping our customers succeed and we firmly believe that we will be the beneficiary of accelerated digital transformation spend once we emerge from this pandemic.
And with that I'll turn the call over to Mark Hurd.
Thank you to recent Mark and good afternoon, everyone.
On the Q1 earnings call, we discussed a number of content related impacts to both the demand and risk side of our business.
We were pleased to see the demand environment ramp and build momentum throughout the quarter strengthening in May and June.
While these demand drivers did not returned to normal levels, they beat or internal scenario expectations driving positive results in key financial metrics.
In the quarter. We're also pleased with performance on the risk side.
We had less attrition and fewer customers requesting relief than modeled resulting in better than expected renewal and retention rates.
Total second quarter revenue grew 20% year over year to reach $83.3 million.
Revenue was positively impacted by strong sales execution with large deals.
Better than anticipated services revenue and a consistent renewal rate despite the economic challenges from many of our comp it impacted customers.
A few other notes on revenue include.
Services revenue came in above our expectations at $5.4 million or 6% of total revenue.
This represents 50% growth year over year and is greater than our previous guidance of $3 million to $4 million.
Our international business represented 25% of total revenue in Q2 up from 23% in the prior year. Despite this increase the pace of growth slowed with the onset of the pandemic throughout Q2 international demand was not as strong as North America.
Revenue from our Sep partnership was 24% of total revenue in Q2 inline with the prior year.
Almost 90% of our large deals in the quarter included a partner.
Strategic products represented 23% of sales for the quarter and higher than our anticipated range of 15% to 20%.
In Q2, our renewal rate remained steady at 97%.
As we had predicted or dollar based net revenue retention rate came down slightly from 100 intend to 100, an 8%.
And we added 82 net new customers in the quarter, bringing our total customer count to 3138.
We remain committed to our long term initiatives continued investment in black lines future.
Following a record hiring quarter in Q1, we had another strong hiring quarter in Q2.
With the addition of global leadership across key areas of the organization, including senior leaders and strategy alliances go to market product and technology.
In Q2, we realize cost savings in the quarter predominantly due to the mandatory work from home regulations, including lower acuity rent facility related cost and virtual marketing.
Combined with higher than expected revenue, we generated net income attributable to black line of $11.9 million.
We generated $9.6 million and operating cash flow and $3.5 million in free cash flow for the quarter.
We finished the quarter with approximately $626 million in cash cash equivalents and marketable securities.
Before I move to our outlook I wanted to provide an update on our customer relief program that provides financial relief to customers impacted by the pandemic.
To date, the total number of customers seeking relief represent a very small percent of our base, but the majority of those requests coming from customers and hospitality and transportation and to a lesser extent energy retail and apparel.
In Q2, this negatively impacted calculated billings by approximately 4% on a year over year basis, which is better than we anticipated.
We will continue to offer this release program in Q3, which will impact free cash flow and other key metrics such as revenue and calculated billings.
With that said based on the customer reaction to this relief program. We are incrementally more positive on our churn and attrition risk throughout this pandemic.
Despite the improving demand environment and better than expected sales execution in Q2.
We expect Cove, and we'll continue to weigh on the demand and risk environment for the remainder of the year an impact billings growth.
Our assumptions remain pragmatic for Q3, and the second half and are based on continued macro uncertainty for our customers and prospects and low visibility on the continued pace of demand growth.
Turning now to guidance for the third quarter of 2020.
Total GAAP revenue is expected to be in the range of 84, and a half to $85.5 million.
On the bottom line, we expect to report net income attributable to Black line in the range of $6.5 million to $7.5 million for 11 to 12 cents on a per share basis.
Our share count will be approximately 61.5 million diluted weighted average shares.
For the full year 2020, total GAAP revenue is expected to be in the range of $335.5 million to $338.5 million.
And on the bottom line, we expect to report net income attributable to Black line in the range of $27.5 million to $29.5 million for 45 to 49 cents on a per share basis.
Share count will be approximately 60.8 million diluted weighted average shares.
And now we will take your questions.
Thank you as a reminder, if he would like to ask a question press. The Star then one key on your Touchtone telephone withdraw your question press the pound key.
And our first question comes from Koji Ikeda with Oppenheimer. Your line is open.
Great. Thank you for taking my questions treat congratulations on your news and congratulations Mark.
The CEO.
Recently, we have you may have you.
I think we May have you for at least one more earnings calls I'm not going to say.
Yes.
I do have a question on the net new customer adds the 82 number you know really great number there to top selling environment. So congratulations on the sales execution, there and thinking about the strong yet.
To get against the billings in the quarter, you know how should be really be thinking about that delta there isn't because the deals where you know more back end loaded following that April the deal mostly coming from smaller mid market customers were there any enterprise customers out there that are starting at much much smaller a contract value now.
Starting with shorter contract durations and I just had one follow up.
Yeah, Great that I think you hit it on a nail on ahead with this was a record quarter for mid market Midmarket deals tend to be smaller or average enterprise deal is in the six figures in mid market isn't five figure. So that's in large measure the reason for it. So yes, we we were very.
I'm pleased with the number of the call and the quality of the logos, but the vast majority of them. We're in the mid market.
Great and then my follow up question is for Unister parts and Oh, He's just want to be absolutely clear here on the customer really to be billings calculation. You said it was up 4% negative effect is I'd for 4.0 growth negative effect or is that 4%.
Absolutely negative effect to calculated billings. Thanks for taking the tranches of course, I think because you yeah. It would have been 14% year over year, notwithstanding that billings relief and the village release came in the form of delayed billing and reduce billing. So that's the impact.
Got it. Thank you. Thank thank you. Thank you.
Thank you. Our next question comes from Rob Oliver with Robert W. Baird. Your line is open.
Great. Thanks, very much for taking my question I'll just also echo my congratulations to both due to recent and to Mark and I look forward speaking with both of you I'm just a couple of questions. Just so I'm on the dollar based net revenue retention all been number. It was you know kind of the lower end of the range I know.
As expected to just curious it it seems you know the linear during the quarter was more backend loaded as Koji I think you asked about but it also seems like you guys were doing a lot more work with existing customers. So you know with you know cross selling to up sell being kind of natural mm in.
Coping environment, just curious if there was any pressure or what some of the dynamics were on that number and then not just had a follow up thanks.
Yeah of course.
Look that was within our expectation primarily given the demand environment, but we were pleased with what we thought but it hasn't returned to normal and not just the new logos, but in our existing customer base.
So we also saw though a slight impact from the risk side.
We did have slightly higher attrition and churn a within our range of expectations, but that also weighed on that number.
Okay. Thanks, Mark and then my follow up was you know it just came to a juicy you go because it's not the swing it but the up yeah. The large customer win a in the quarter. Obviously very exciting you know racking my brain here or even having better run wild to named 23 ERP systems. So it seems like a very large meaning.
For wind in real sweet spot.
For black like any other color you could provide you know on the land. There you know which products were taken I know you mentioned the sales process and competing on price makes sense. So.
So congrats on that would appreciate any other color. Thank you.
Sure and thank you for the congratulations to both reason I, Rob I appreciate it's Rob.
So we haven't.
As you might expect when you know in the face of a pandemic you expect some of these things to sort of pause.
And we had previously had that expectation as well the companys reassessed like this one example, and you know I would say, they're a larger we're well positioned global company with a very complex environment as our promote prepared remarks state.
And they looked across that and their positioning and said hey, we we continue to want to invest in something that this trust strategic especially during this difficult time, when it's sort of makes you aware of how fragile environment can be when you have a distributed workforce and so I would say that you know there was a pause companies reassess.
Those that were really strong companies and had big strategic plans executed on those we saw a couple of those in the quarter and we see a couple of those in our current pipeline moving along a as well.
Thanks, Mark Thanks, guys.
Thank you.
Our next question comes from Matt Stotler with William Blair. Your line is open.
Hi, guys. Congrats on results. Thanks for taking my questions and Theresa Congrats on the the announcement and Mark congratulations as well rushes for Uh Huh.
So I guess the first question Oh I thought it was interesting you guys mentioned obviously the.
Customer adopting I see h. and transaction matching in the quarter.
And strategic products as a whole kind of remaining above that expected ranges as they have for you know quarters now.
You know figured in this tough environment that would be one area, maybe where you might see some weakness just given the size those deals, especially by situation that complexity there well if you just an update as you move through.
Through Q2, all kinda demand, there and any progress with strategic products in terms of interest or deal flow in the quarter.
Sure Matt. Thank you to great question, and I think it speaks to some of the investments that we had been making in the past the recent history.
Specifically investments in customer success.
And then some process process expertise are becoming innovation team combined with building, what I'm really proud of and sales organization.
I really high performance account management function and so we think of our strategic products are the things that drive the most value and the most automation.
And just really dramatically change your customers environment, and where are you able to bring together the great technology, great process expertise our experience of 3100 companies that are two business on Black line with account management I think it its part of the reason why we continue to see strong performance in that area.
Got it that's helpful.
And then just one more you know it's great to hear the problems as safety, obviously, you guys had been.
Punished for something that they've been increasingly prioritizing in this environment love to get an update on what you're seeing outside of a safety and the rest of your partner channel progress, there, especially kind of looking at other big or in your accounting from partners. Thanks again.
Yeah, you know, it's been really interesting, Matt because we've seen sort of our partners are positioning a a quick start to things like tasks and reporting and and they really come along side, our customer relief program to help our customers sort of you know.
Ill get their remote closes in a place that's actually manageable and so there you know working on.
That seems sort of nimbleness that our customers need right now and I really I really love, what I see out of them because they've been oriented towards serving their customers Weve had some great projects with them this last quarter.
Got it thanks again for the questions.
Thank you. Our next question comes from Alex Sklar with Raymond James Your line is open.
Great. Thank you Mark pardon me I wanted to ask about all the second that implied second half guidance or basically looks like that you'd <unk> fourth quarter with kind of a high single digit growth rate, which is basically in line with your net retention.
Given the billing so far in first half the year and renewal rate you you addressed the continued to be really healthy I was just wondering if you would help walk through the puts and takes there.
Yeah of course, a look we we are happy to reinstitute our guidance, we've given a incrementally more visibility in the full year and felt we could do that however, we still have a very pragmatic approach to it consistently with what we've always done and the.
Demand environment is gonna be driven by the macro economy from most of the customers. So we've taken a pragmatic approach for the demand.
For the remainder of the year, yeah, particularly given that Q.
Q3 has a tendency over the last several years to be seasonal for us.
Q4 last year was one of the strongest quarters on record and creates a a bit of a tough comparable so that's really as we factored into our guidance what we're looking at for the remainder of the year.
Okay, Great and then I just another question on a on the partner Channel I think you said partners were involved in 90% of large deals that that's a little bit higher than the I think 70% plus I remember historically has anything changed there in terms of kind of the the relationships there with your partners or what what drove that.
Our success. Thank you.
<unk>.
Oh, it's just a real strong focus.
You know.
Those larger deals obviously are more transformative have a lot more process for quantity of change requirements.
And then the distribution organization as a whole and that would be our customer team as well as our sales team had a real heightened focused on making sure. We have the right set of resources, including our partners involved in those larger more transformative opportunities. So I think it reflects just good partnerships skills and.
Focus by our team.
Great. Thank you and I also will echo my congratulations to you interest.
Thank you.
See we even talk at the same time [laughter].
Thank you and as a reminder, if he would like to ask a question press the star than the one key on your Touchtone telephone.
Next question comes from Josh Beck with Keybanc. Your line is open.
[noise] congrats team on on the new roles and thank you for for taking the question you know I wanted to ask just a bit about sales efficiency. It's one of those metrics, it's really difficult.
To see you know, what's happening with a with covidien everything, but it sounded like within that bid market you had some really good momentum in what you're done with map resonated really well. So if you looked just didn't ended bid market segment I'm. Just curious if you actually see maybe an improvement or maybe a new tactics.
You would you know what to keep in kind of the postcode world.
Yeah, So I'll talk about sort of the observations of the business and if there's any financial metrics and I'll, let mark I'm sort of jump in but.
Yes. So we did have a record number of new customer wins and the Midmarket and if you recall, we were concerned about that specific segment, perhaps having difficulties in the face of Cove. It and then the economy.
We accelerated some of our plans around our modern accounting playbook, which we've talked about being this proven method based on our 3100 clients experiences to get people up. So we're focused on quicker time utility, which I think a lot of people are recognizing.
Valued in this particular economy in market space, and we focused on efficiency and what we've developed developed and started to deliver their our sales team has really become proficient Uh huh.
Positioning and collaboration with our services organization.
And it's really resonated with Midmarket Cfos and so we're really pleased with it.
Okay. Great I also wanted to ask some like there was some nice upside on the strategic products versus plan. We are there certain ones you know that stood out where there may be certain cohorts, where maybe the adoption was better.
Or just any any color you can share there.
Yeah look the transaction matching and I see age where both very strong in the quarter and transaction matching has been trending very positively at both the high end and low end of the market and in existing customers a new customers. It is a great.
Tool for so many of our customers can drive.
You know value and efficiency in there.
In their software so for US it was really just a very robust around those two.
Sales for the quarter.
Okay, great if I could just squeeze one last one and I'm not sure. If you can comment on it but it sounded like things progressed positively throughout the quarter.
As July looking a lot like June or July maybe.
Better or worse than any other color you can share there.
Yeah, we well what we did see you're right is that we saw an improving trend in the quarter. In Q2. So we finished up the quarter very strong and we're pleased with that it's still too early to take that experience in that limited dataset and apply it to our guidance in Q3 in Q4, So we have.
I haven't done that and instead, what we're doing as being very pragmatic about what we think might be a continued cove. It overhang you know on the demand side and on the risk side, So weve factored that into our guide.
[noise] make mixed kind of sense. Thank you everyone appreciate it.
Yes, Josh.
Thank you and our last question comes from Mark Murphy with JP Morgan Your line is open.
Hi, Good afternoon. This is Matt costs on behalf of Mark Murphy. Thanks for taking my questions and again, congrats a true treason marks on the new roles.
Quick question for Mark Parton was there any change in contract duration.
And also you know as we think about paid user adds I know in the past few said, they're less critical for your growth given or an improvement or increase in the sale a strategic products or any change in the thinking on that paid user at.
Yeah got it our average contract length remains consistent at about 23 months.
And on the user adds it is one a proxy for growth. It's one measure when we sell strategic products and have a have a a strong quarter like we did in Q2, those don't add add user so we pay attention to it and we reported because it's key to the expansion within our core platform.
And we did see good sales in Q2, but if you go back over the last two to three or four quarters. This number can vary on a quarterly basis and we've been pleased with the last sort of you know six to nine months, it's tough to look at Q2 on a standalone given the demand environment.
Got it that's helpful. No one fewer trees.
Since next year, you'll be getting a more into full time.
Product development and customer focus what do you think your areas of focus will be on the product side and is there anything out there.
From an M&A standpoint that potentially looks attractive if you were to them.
No not exactly what you're gonna by but if you were going I think.
Buying a technology what sort of.
Technology might that be.
Well, you know I'm, Matt we serve the controller and the opposite the CFO and so that is always going to be our focus whether we build or buy.
And is how do we best serve the customer base that we have in our future customers that work in this industry.
I actually think a big part of my role going forward is not just sort of whats available now, but also you know how can technology change the entire industry of accounting and finance right. How can you actually use some of the newer tools that are coming out how can you show.
Yeah.
So that you know the pain that companies are feeling today from they're trying to do our remote audit for the first time that and so much more can be automated for them, it's pretty exciting to think about what the future can hold and so I actually get to work on that and that's pretty cool.
Thank you very much.
Thank you thanks, Ben Thank you Matt.
Thank you and there are no further questions in the queue I'd like to turn it back to trust Tucker founder and CEO for closing remarks.
Thank you everyone for joining us today, please stay safe.
And stay well thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect everyone have a great day.
[noise].