Q2 2021 Zuora Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to absorb second quarter fiscal Twentytwenty, One earnings conference call.
At this time all participants are in listen only mode. After the speaker's presentation, there will be a question answer session.
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Please be advised that todays conference is being recorded and if you require any further assistance. Please press star zero now like to hand, the conference over to your Speaker today Mr. June Hall, Vice President of Investor Relations. Please go ahead.
Thank you good afternoon, and welcome to doors second quarter fiscal 2021 earnings conference call. Joining me today, our teams, though so as chief Executive Officer and Cod Mcelhatton.
George Chief Financial Officer, the purpose of today's call, it's Russ to provide some color.
In the quarter result, as well as provider of financial outlook for the upcoming quarter.
Some of our discussion that responses today will include forward looking statements. So as a reminder, our 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 with the FCC finally, we'll be referring to several non-GAAP financial measures today and record.
Delineations.
Related GAAP measures are included in our earnings release.
Please note that in Q2, we began to exclude litigation charges and benefits outside of the ordinary course of business from our non-GAAP financial measures for a copy of our earnings release links to our SEC filings a replay of today's call or to learn more about Dora. Please visit our investor relations website at Investor outdoor dot com and with.
Let me turn it over to pin.
Thanks, Jim.
Thank you everyone for joining us today <unk> second quarter earnings call for fiscal 2021.
Let me start the call I've seen that we hope you are staying safe and healthy the current pandemic is creating a challenging environment for lots of people.
Trying to manage jobs families from home.
Here in California.
We are also very grateful to all the first responders on the front lines or the fires in the Bay area.
As a company.
Zohr remains committed to supporting our customers partners employees and other stakeholders through these times.
So against this backdrop I am pleased with our second quarter results, we performed well compared to expectations from a quarter ago.
We came in at the high end of our revenue guidance it well ahead on profitability.
We effectively managed our cash spend driven partially by strong collections activity.
We helped 41 of our customers to go live in the quarter, indicating our customers continued to adopt our platform during the cold bid crisis.
We had to new customers in our core markets at high Tech media in manufacturing well also see interest from industry, such as education in the public sector at the subscription economy continues to expand.
And we strengthened our leadership team with the addition to Todd Mcelhatton as our CFO.
Personally incredibly excited to have them on board and joining me on this call.
Going beyond the immediate results when I look at Q2.
I would offer up for observations.
First it's clear that the subscription business model is thriving during this time of cobot companies are increasingly waking up to the power This model.
Second the power of our technology has never been more apparent and given companies the agility insights in automation that they need to adopt in growth in this new environment.
Third given the market.
I believe our growth can be better we continued to make good progress to set the foundation for Zohr to lead in this market for years to come.
I will go through later on this call we've taken definitive actions across product go to market in administration through new hires in his processes.
Enforce well it does seem like shelter in place will continue for some time, albeit on evenly throughout the world. We're optimistic that the worst of the Cobi impact is behind us.
That's the last point increasingly we're finding that the data. We have is one of our unique differentiators. We know what it takes for companies to win in the subscription economy, and you're going to start to see us leverage that data more and more as we continue to improve our solutions.
Let me drilling them, what we're seeing the market overall in the real our technology in particular.
Six much into the corporate crisis more compete are waking up to the power of the subscription business model. Many subscription companies aren't just proving to be resilient.
You are actually thriving.
In fact, our next description economy index reported to be released shortly will show that well the S&P 500 companies full revenue contract at an annual run rate of 10% last quarter.
So were customers included in the report actually expanded at a rate of 12%.
We have clearly moved into a whole new world. The current environment is completely wired our expectations as customers.
We want Washington, Mr. CT like experience, we expect things to happen instantly from anywhere.
Monies that have a direct relationship with their customers have been able to adopt.
A copy that are still locked in an old product centric retail store model are hurting. This is why the subscription business model is clearly the future.
Second the power of our technology has never been more parent well, hoping we're helping some of the most successful companies and the subscription economy and over the last six months, it's been a very inspiring experience to enable these companies to adopt can thrive.
This is where it gets interesting we now have over a dozen years of experience with subscription businesses.
Last amounts of data, which we've been mining over the last few years, including in our subscription economy Index report and more recently our could impact reports.
This data shows us with the winters are doing to separate themselves from the rest of the pack and it gives us a unique advantage in are helping customers grow their subscription businesses.
Subscription economy, all stores like Zoo Wix Docusign Honeywell.
There are all leveraging our platform to do three things.
To deliver agility.
Gain insights into drive automation, let me give you some examples.
But there is one word that captures why subscription companies have thrived over the past six months, it's agility with our solutions our customers are able to quickly spin up new services capture new demand and react to the market in days not months last or any color, we talked about how companies like vendor zoom in poor site.
We're able to react quickly creatively to coated.
Of course I for example give away three courses for the entire most of April.
Shelter in place only happened mid March I showed you the kind of speed they were able to operate at.
Here's a few examples this quarter that kind of agility, the Seattle times with EBIT growth subscriber base by 35% in just me month, the spring by executing new subscriber acquisition campaigns to capitalize on its excellent free local coverage of the Cokemaking crisis.
Despite the work from home restrictions Honeywell one of the largest industrial manufacturers in the world was able to grow its software businesses fiercely last quarter and is on track to achieve its stated goal growing its software business by 20% a year for the foreseeable future.
In Australia.
Foxtels sports streaming service Kyle sports was faced with the lack of sporting events due to coated.
Foxtel quickly responded by moving up the launch of their Netflix competitor streaming service called binge the Washington in May and they already have a 185000 subscribers in the meantime, a sporting events were turned in its really a Kyle has come back significantly adding more than 200000 subscribers as the hunger for sports during shelter in place.
Has not decided.
Finally, when electric vehicle sales started to soar during quarter, one big three auto manufacturer move fast when he was able to include prepaid easy charging plans along with their upcoming fleet of electrical vehicles.
And what is living all this agility to put us simply it's zohr billing as more revenue.
Instead of adopting legacy left to right architectures are hard coating, a bunch of business logic into homegrown systems, we're creating a real connection directly between their CRM ERP systems. Some of the most successful companies in the subscription economy have chosen a different approach they're using.
<unk> as a central system that orchestrate older customer events pricing orders upgrade provisioning. It's this architecture that gives them. The agility. This is the same architecture the telecom industry used for decades and it helps separate the winners and losers in that space and we believe the same thing that's happening.
No.
So that's agility, what about insights well, it's fantastic to be the move fast, but how do you know what to do well. We now have robust data 13 years of history that help us identify benchmarks and best practices in all sorts of areas pricing and packaging subscription changes usage base building invoice payment rates E payments success.
And we're pushing all these insights to our customers through our launch last month of Zohr analytics, which comes with prebuilt metrics. So there's more of a brain Trust then a dashboard. Let me give you a couple of examples the feel EFO Colville marketing analytics companies checks is where analytics every morning to track is top keep you guys.
You can now slice and dice assist the subscription data all sorts of waste product line vertical lesion rate plans, all things that will be really difficult to calculate with the generic beyond solution.
Speaking of benchmarking best practices, we had another customer that was calculating all their subscription metrics manually.
Thought that the at a pretty healthy net retention rate of well above 100%, but when they ran those net retention numbers and zohr analytics decathlete at a rate closer to 80%.
Catalytic helping to uncover a problem they didn't know they had enabling them to make better business decisions when our customers use our analytics capabilities. There taking advantage of the collective intelligence our entire user base. It gives me foundation of data that they can feed into all their operations.
Finally, let's talk about automation, which is important for two reasons first.
The obvious Sweden scale, our customers like zoom and vendor have been able to take advantage of this unprecedented time.
Without having to worry about their billing system scaling to that demand.
But more steadily without automation it turns out you can't deliver that immediate experienced a customers are demanding these days, whether you are a consumer looking for some shows the watch or a professional Kentucky business for your company you want what you want when do you want it you don't want to have to go through layers of people.
For contracts.
Here's some other examples of our customers have used our products to audited.
Hoping to BT online education companies response to be significant new demand for subscription services for digital textbooks, they're able to closer books faster without adding additional headcount and resources and deliver a better experience for their customers.
Last quarter extreme networks launched absorbed billing complementing its existing use absorbed revenue and implementation. It was primed for our services partner Tcs.
As hardware providers shift to a subscription software model for future growth, you're recognizing the need for a very different order to cash architecture.
Over the last few months. We've also helps companies like Telegraph media yellow pages and seek software reduce their build time runs substantially sometimes from ours to minutes. So they can focus on strategy and not process in fact.
While many of our customers are grown their subscriber base in response to demand.
The time it takes them to get built out has actually declined by 40%, 95% as just one example, zoom is actually getting all their builds up faster today than six months ago. Despite these growth that they've experienced which I think it's pretty amazing because of our history in our data we can now actually apply.
AI techniques to continually optimize performance and throughput.
So to wrap up our mission is where it's pretty simple we help companies when in the subscription economy and in doing so the unique powered our technology has never been more parent we provide agility insights automation. These are the competitive advantages of our platform and we're going to continue to invest in these areas.
Given that our market is expanding I do believe our growth can be better the leadership, we've added to the company in the improvements we made sure internal processes over the past year have helped us make good progress on building the foundation to scale for years to come well, it's increasingly apparent that could be it will be with us for sometime.
We are optimistic about the future for the following reasons, we made some great new hires and completed our management team.
We're seeing good overall demand with double digit pipeline growth quarter over quarter, our sales productivity per rep continues to improve as they get more comfortable in the go to market motion.
We're retooling, our pricing and deal structures to right size, our additionally, and enable us to grow with our customers.
And we see our near term business, improving and expect gutter billings growth next quarter.
Now let me welcome Todd haven't go through the financial details.
Thanks, Kane and thank you everyone for joining the call I look forward to the day like you meet everyone in person.
Im excited to be part of this or team to drive our vision for the subscription economy I am here, because I can see huge opportunity in front of us and that we have work to do to capitalize on that.
Let me go over some initial thoughts and actions that we're taking to improve performance first we are absolutely focused on growth.
We have a huge opportunity in helping companies transform to subscription based model the shifts happening today and will continue for many years to comp we will invest in the right areas to drive long term growth going forward, we'll be focused on customers primarily in three verticals, Hi Tech media and manufacturing.
We know from experience and our internal data that these companies are growing much faster pace than our other verticals. We started this transition at the beginning of the fiscal year and the results are beginning to show. However, this is a multi quarter journey.
Second we will be focused on product innovation, we have a leading product in the market as cited by ITC Forrester and others. It's important that we continue to innovate and invest in this point a strength through new products add ons and enhancements.
Third will be disciplined in our investments and focused on creating leverage in our operating model. We've made some improvements over the past few quarters, and we'll look to drive additional margin improvements and build a more efficient company.
So with that said, let's run through our Q2 business performance.
Total revenue came in ahead of expectations at $75 million, consisting of subscription revenue of $58.3 million and professional services revenue of $16.7 million.
Non-GAAP operating loss came in well ahead as we continue to realize savings in TV and cost benefits from virtual events.
The lower than expected costs combined with strong collections activity in the quarter led to outperformance on free cash flow to negative point $7 million for Q2.
We knew that this would be a tough economic environment for companies coming into the quarter and is challenging environment had an impact on our Q2 operating metrics.
Looking at customers over 100000, ACB, we ended with 645 customers, reflecting 14% year over year grow this customer group continues to represent 90% of our business.
While we added a total of 35 new customers in the quarter, we saw a number of customers leave our platform due to business failure bankruptcy and M&A as a result dollar based retention decreased to 99% compared to 103% in Q1.
This was our highest level of churn more than twice our historical average. So let me give you some additional color for customer churn contributed two percentage point of this decline with a leading causes including M&A and product bit.
Down cells were nearly three times higher quarter over quarter and contributed another one percentage point of this decline as we provided relief to customers related to cobot.
Let me be specific on the changes, we're making to improve this metric.
First we recognize we were too reliant on upfront volume sales historically, so we were unable to capture the natural expansion opportunities for volume in later quarters with changing satisfy our sales team to rightsize, our initial deals with customers.
Second as I mentioned earlier, we've adjusted our targeted to capture the key high growth verticals of technology media and manufacturing we've been successful, helping these companies grow and win on our platform.
Third we have introduced new features and capability and our central platform, including audit Trail sandbox and more recently analytics. This gives us more products and tools for upsell activity.
We believe this was our toughest quarter for churn and we expect Q3 to return to normal levels with additional improvements over time, but dollar based retention is a trailing 12 month metric. So we'll take a few quarters to lap the negative impact from Q2.
As a result, we expect dollar based retention will not change significantly in the near term.
Turning to transaction volume our system process $12.7 billion of volume in the quarter, which represents 26% year over year growth and also on a trailing 12 month basis.
Prospects transaction volume is helpful. In understanding how much of a customer's business is running through our platform, but as a reminder, it does not track linearly with quarterly revenue as customers gain efficiencies as they scale.
Now digging deeper into our financial details for the quarter subscription revenue grew 15% to 58.3 million.
Professional services revenue decreased 13% to 16.7 million, partially driven by shifting of the services work to our GSK partners. This is in line with our strategy to improve our mix toward the higher margin subscription revenue, which kicked up to 78% revenue contribution in the quarter.
This resulted in total revenue growing to 75 million for the quarter and at the high end of our guidance.
Looking at our margins, we continued to make improvements non-GAAP gross margins increased another three point to 63% quarter over quarter as we maintain healthy non-GAAP subscription gross margins at 79%, while improving non-GAAP services gross margin to 7%. We're pleased with the improvement to the non-GAAP services gross.
Over the last two quarters and plan to operate this on a breakeven basis going forward.
Non-GAAP operating loss was 1.6 million in the quarter, reflecting an 8.5 million improvement over the previous year, we continue to realize benefits from limited TV events and office span.
We also had some investment shift in the second half of the year and identified other cost savings the combination of effective cost management, coupled with our improving gross margins led to non-GAAP operating profit margin of negative 2% well ahead of expectations.
Now, let's turn to billing and free cash flow.
Calculated subscriptions billing growth was 3%, resulting in $49.7 million in Q2.
The Kobin crisis had an impact on our quarterly billings. In addition to contract changes to support our long term customers. We saw extended sales cycles in some areas.
Given these headwinds in Q2, this was an especially tough quarter for billings growth moving forward, we're planning for modest improvements to billing growth next quarter.
Moving to our cash flow numbers Q2 free cash flow was negative point $7 million driven by lower than expected cost and strong collections activity in the quarter.
With the current economic environment. Our questions team was very effective following up on payment schedules and closing out receivables as a result, our accounts receivable balance decreased by nearly $10 million.
Total capex for the quarter was $4.6 million.
For Q3, we expect cash flow to be approximately negative $5 million with most of the quarter over quarter differences driven by business seasonality and capital spending delays. We also expect collections activities to track closer to historical averages in Q3.
For the full year, we expect free cash flow to be approximately negative $8 million as I mentioned before it's important we improve our operating leverage and create efficiencies in the business, we're making good progress on our cash flow metric and expect to be cash flow breakeven by Q4 this year.
In terms of cash balance we ended the quarter with $179 million in cash and cash equivalents I'm pleased we have actively manage their span and to maintain healthy cash position for the business.
Our fully diluted share count as of the end of quarter was approximately 131 million shares using the treasury stock method.
Overall, we're pleased with the progress we're making we've completed our second quarter of our new go to market initiatives and we feel good about the traction we're seeing in the market.
Our quarter over quarter, bill or quarter over quarter pipeline is growing we're becoming very disciplined in our investments and going after customers in the high growth verticals and we expect billing growth to improved this quarter. Our subscription business model continues to be resilient, but we continue to see economic uncertainty in the market, we're making a number of change to the business and working to shift more so.
Services to our partners given the number of unknowns, we believe it's prudent to provide guidance one quarter at a time.
So for Q3, we currently expect total revenue of $73 million to $75 million.
Description revenue of $59 million to $60 million.
Non-GAAP operating loss of $5.5 million to $4.5 million.
Non-GAAP net loss per share of five to four cents, assuming a weighted average share outstanding of approximately 119.3 million.
As I said at the beginning I'm excited to be here based on the huge opportunity I see ahead of us and driving the subscription economy over the upcoming quarters, we'll be working to implement the changes required to reach our long term growth objectives and with that we're happy to take questions operator.
Thank you and as a reminder to ask a question you will need to press star one on your telephone to withdraw your question simply press the pound.
First question will come from the line of Joseph Vafi, Ken Canaccord. Please go ahead.
Hey, guys good afternoon and Todd.
Come I think two to your first earnings call here, just wanted to kind of circle back on on the churn in the quarter.
I think it sounded like you said, maybe this is the trough on churn.
I was wondering if you could kind a give us some highlights.
Turn was kind of.
More focused and kind of some of them more affected verticals from the pandemic and maybe if there's any kind of update you could give us here for you know for the month of August on churn and then maybe how about a quick follow up.
Alright, Thanks, Joe.
So I thought okay. So look I think on churn we absolutely do think this was going to be the toughest quarter for us.
When we take a look at what we had so two points of the churn than we had came from bankruptcy M&A activity and product fit and then whether about point.
[music].
Sorry about that we had another about one point churn that came from.
Gallons cells, and we've really been working with customers make sure. We do the right thing and keep him in the long run as a customer. So we put those two things are those were the main drivers that we saw we're definitely expect the churn to go back to our historical levels.
But you as we mentioned in the script. The net dollar retention is kind of a lagging metric. So I don't expect to see significant changed on that in the near term.
Yes.
I would say, yes, I would just added during tuition is right. So that's what I said.
Okay Fair enough and then.
It's kind of would be interested in.
The analytics stuff that you mentioned.
Relative to if you kind of looked around to your customer base some of them are more sophisticated than others.
You know, how sophisticated our customers and being able to calculate some of their metrics on their subscription products at this point relative to their internal tools versus what you're starting to sell right now.
Yeah, I assume you look at the analytics is the data and then there's the tool.
And we've actually set of analytics tools, but we also another customers sometimes need to have their own tools, whether its click or anything else and.
To be to integrate access the data is really important where the system of record for so much of their information right subscribers churns billing voices payments and so and so forth and moving that we have.
Over a decade worth of history, now, where it's not just the data itself for the interpretation of the data and so we're starting to sell customers that says look where we go head and segment our customers in a high growers medium growers slower growers.
The key stops. So for example companies that do some level usage based billing actually grow faster cost so customers that companies that have a higher degree of customer engagement, where they're coming back every year, making modifications to their subscription contracts they tend to grow faster and so I would say our goal isn't just two to two you know too.
To be a tool we really not just wanted to have access to the data that gives them the ability to understand what to do but we also want to go a step further and actually translate that data into actionable insights for them.
Okay fair enough in May I, just sneak one quick one in on on the payment side I saw the.
The relationship with a goal Cardless a couple of weeks ago I was just hearing.
From a payments angle, how you're looking at the opportunity there teen and how that could evolve over time into maybe potentially theoretically a new revenue stream for you. Thanks a lot.
Yeah, I would say that the starting point is really our customers. Our mission is to meet customer successful and that's why we support I think over 35 different payment gateways around the world, we want to companies to be able to choose and support any type of payment method that their customers want to use two to two to settle that invoices.
Good morning that we're starting to get much deeper into how to help them maximize collections, whether its its percentage of electronic payments success, where the fees that they pay on each one of these transactions go car. This is one of our great partners as a specialty.
And I'd say non credit card type of electronic payment methods rise seems like a CH seems like direct debit and there's just shoot benefits to be had to move some percentage you have your credit card customers over to an ace CH direct debit environment, both for us for cost front transactions and recognizing these numbers don't.
Changes much right and so the payment.
Access rates tend to be higher and so we partner with them really to two to two had better joint success with our with our joint customers.
You talked about the financial relationship depletion relationship with them Theres pretty typical if theres something sort of standard revenue maybe sure involved but our primary focus is delivering customer success to our joint customers.
Great. Thanks, very much guys.
Your next question will come from the line of Scott Berg of Needham. Please go ahead.
Scott Scott.
Sorry, I was on mute hi, everyone. Thanks for taking my questions. Yeah, I guess, you got a couple here.
Let's talk about kind of the you focus around sales and in those three core verticals you how should we think about the impact on maybe your Tam going forward what that does maybe in the short to intermediate term. How you think about maybe growth over the next three to five years as we come out of the.
You know the low point in the economic cycle with the re tooled salesforce and that maybe the follow up to that would be the impact of the operating model, maybe around sales and marketing as you become more focused in those three areas.
Those are great great questions. So.
These three years of the seems to be as we've been talking about for some time right. It's the high tech sectors and media sector and its manufacturing sector. I mean, Scott we have data right and we're trying to make decisions based on data and so we can see and you see this in our in our Sci studies, which of the industries are actually faster growing and so.
We're trying to say hey, if our aspiration is to be an index to the subscription economy, and we have data to help us choose which are the best companies, which are the best industry is a focus on and we have the insights into consulting.
To to help companies become the best companies and their space that ultimately is give us a portfolio that that is highly valuable and so you're seeing us really doing that so you're absolutely right. We think that there will be natural improvements to the operating model with with the ability to focus on instead of companies and with the ability to.
Pick and choose if you will the winners and losers and making sure that we've worked with them now that's not to say, we're going to ignore the other sectors right. We mentioned off and that we're seeing expansion the subscription economy into spaces like education, and the spaces like public sector and so we're always going to have a foot in some of these other areas.
But we want to make sure that we're doing the right thing, we're being the most efficient or sales marketing and staying focused and really be the pick the industries in the companies are growing the fastest is I think a key part of our strategy.
So maybe I'll just give maybe a little more color Scott on that on a go to market on the changes I think we feel like we're really making good progress and so when I look to things that would want to see his house pipeline developing we've seen double digit increase quarter over quarter I would take a look at sales velocity, that's improving how as our sales rep productivity.
It's also improving and we're also getting that pipeline in those areas, where we know we can be successful and grow and retain customers. So look we're just two quarters into it we're seeing the right leading indicators of where we want to go and I also expect as we're able to do this year. This will help us gain more operating leverage out of our model.
Great helpful. And then I just wanted to touch on on pricing some of the changes you're making they're trying to right size. Some of these contracts moving forward.
And I believe this is something we probably spoke about in the past.
It's always kind of been a little bit of a challenge trying to find the balance between customers think they need what they really need you know how how do we think about that process going forward to kind of ensure I guess that some of these initial deals don't get don't get out too far ahead of themselves.
Yeah, I think the lesson that.
Given what we do.
We work alive with our customers on pricing strategies, and we do that ourselves, we do that through our partners with companies like Simon couture companies like profit well and and the lesson. If you want to bring it down to a single thing is customers want to pay for valley.
Customers I want to be on the clock alright, so a pure metered model that might not make any sense, what customers want to pay for value in the best way to do that is to tie.
Your pricing models to the value that theyre experiencing and that's something that we certainly believe and.
It is a balancing act right. The customers also want predictability, but you've seen us really say well how do we do a lot more to that and you're seeing some companies in our customer base and is it some high profile pricing model changes really follow the same. This this is the future right. This is what what each of US is teaching us this is what.
Netflix is teaching us and but more and more.
The world is moving towards consumption based business models, which of course benefits us because that creates incredibly strong need for for sophisticated billing system.
Great. Thanks for taking my questions.
Your next question will come from the line of Stan Zlotsky of Morgan Stanley. Please go ahead.
Perfect. Thank you so much guys in my apologies if my questions have already been and I'm asked and answered just jumping between calls here.
Just on on the churn.
When.
If somebody.
Turns off I mean, the M&A in the bankruptcy.
Makes makes a ton of sense, but on product fit.
Where do customers going what do they do when they if they do turn off.
Zamora and especially considering the environment, where we are now and then have a quick follow up.
Yes, I think if you look at what we do our sweet spot is really companies to have.
Some level of volume.
And some level of complexity into their business and we do believe that as businesses grow their ultimately going to go in that area right, they're going to have more volume because they're going to do more usage based building models are going to pursue a wider market maybe go down market and whatnot, but there are some companies are saying look our growth is not what we expected to be we only have a.
200 customers.
Does it make sense for is simply to do this stuff by hand, and and given their business situation.
They might choose to do to adopt pads like that and so.
No. That's why we get with all the data that we have we can we can predict some leasing we can predict which companies in which industries are going to be the fast growers are I have a chance to be the next zoom, where the idea of doing by hand are doing manually just just just wouldn't make any sense and so.
So historically, we might have signed up a few customers that have aspirations.
But just for whatever reason to Didnt work out for them. Those are the ones that you're going to see really really move towards a more where manual based model.
Got it does that make sense.
As far as just a sales productivity that you guys mentioned you've seen improvements in sales productivity.
How are you thinking about actual sales hiring.
For the remainder of this year and potentially anything that you're thinking about as far as maybe changes or tweaks.
To your sales organization as we head into.
Fiscal 22.
So look I'll take that I think we pretty much happened model, where we want it to be we're taking a look at from a standpoint of what the capacity of that current team is and where we want to get you from a growth perspective. So I will say, we do have head count that we will be hiring during the second half of this year and I would certainly expect that we would have growth next year.
And the and the quota carrying headcount.
Okay perfect. Thank you so much.
As a reminder to ask a question. Please press star one on your telephone keypad. Your next question will come from line of Brent fill of Jefferies. Please go ahead.
Hey, guys.
So down for Brent So thank you for taking my questions and welcome to Todd.
I had a couple of questions. One was I wanted to dig into the pipeline improvement that you guys cited.
In terms of this by say improvement could you give us some color around.
Bear the pipeline is improving is that small deals that large deals or is it like add on sales from the the initial sale.
That would be helpful. And then I have a follow this fall.
Yeah.
Oh I wish you the simple answer to the pipeline is interest level the subscription business has never been higher.
And when you hear these stories when you hear these stories resumed when you hear these stories of the SaaS companies thriving when you hear these stories of these media companies driving.
And you're hearing that companies that have a direct relationship there customers and you forget sometimes that most companies do not have a direct relationship the customers rise CPG companies don't auto Madden manufacturers traditionally don't right you sell through distributors you sell through retailers you sell through wholesalers you sell through dealers and.
Those companies have not been able to.
Due to adapt as quickly getting the last six months in so companies are saying look we need to have a direct relationship with our customers and we need to pivot our business models to so that it's based on our direct relationships with our customers and that is what we call a subscription based business model and so it's not a surprise that arent fees are up year over year demand is up year over year over year.
Sure we're trying to make sure though that that we're focused on generating this pipe into three core verticals that.
We know our our where the growth is going to be in the short term, even as we pursue racy via the meters and other industries I want to basically.
Be the first movers in endeavor industries into the subscription economy I.
I guess the other thing I would maybe add Bob as you know in addition to just where teams have we're growing in the areas that we want to grow the quality is better from a standpoint of seeing how pipeline is progressing through the system. So we're really pleased with that and again the customers that we are seeing are in that core.
Good sized for large companies that are the back one of our revenue.
Perfect and maybe one more on.
And just follow up on the sort of billings and revenue.
Integration I am guessing that.
That is behind you. So could we expect the cross sell to resume and does that have an up from there on your.
On the retention rates that you're seeing out there.
Thank you yeah.
Yeah. So were the integration is actually behind US it's now been in marketplace caution effort, what six months and.
And the product continues to be evolves to try to continues to get better and better, but we're really happy it's helping our customers shrink time to close to close books.
Thats, helping them really reduce all the manual effort required to do revenue recognition and we feel really good end to cross sell motion is absolutely.
Is happening not just to cross sell motion, but but.
Well the costs almost in a boat size right selling billings and revenue customers and vice versa also pursuing new customers with integrated joint solution for a full.
In order to revenue solution in those things are all happening right now.
Perfect. Thank you changed I'll pass it on.
We have no further questions at this time I'll now turn the call back over to the presenters for closing remarks.
Great. Thank you so much for joining the call with US today, we look forward to catching up with you throughout the quarter and we'll talk to you next time. Thank you.
This concludes today's conference call you may now disconnect or.
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