Q4 2020 Ooma Inc Earnings Call
And ladies and gentlemen, thank you for standing by and welcome to the Ummah, Inc. Fiscal fourth quarter and year, sorry to the fiscal fourth quarter and year 2021 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, because there'll be a question and.
The recession and to ask a question during the session you will need to press star one on your telephone keypad.
Please be advised that today's conference is being recorded and if you require any further assistance. Please press star zero and.
Now like to hand, the conference over to your Speaker today, Mr. Matt Robison. Please go ahead.
Thank you Gabriel and good day, everyone and welcome to the fourth quarter and fiscal year 2021 earnings call of Houma, Inc. My name is Matt Robison and was director of IR and corporate development on the call with me today are on a CEO, Eric Stang, and CFO Robin and a ruler.
After the market closed today on the issued its fourth quarter and fiscal year 2021 earnings press release via business wire release is also available on the company's website ummah Dot com. This call is being webcast live and is accessible from a link on the events and presentations page of the Investor Relations section of our website.
Mike will be active for replay of this call for at least one year and telephonic replay will also be available for a week. Starting this evening about eight P. M. Eastern time dialing information for it is included in today's press release.
During today's presentation, our executives will make forward looking statements within the meaning of the federal securities laws forward looking statements generally relate to future events or future financial or operating performance.
Our expectations and beliefs regarding these matters may not materialize and actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth and the press release, we issued earlier today and those risks are more fully described in our filings with the Securities and Exchange Commission.
The forward looking statements in this presentation are based on information available to us and that's what the date hereof and we disclaim any obligation to update any forward looking statements, except as required by law.
Please note that other than revenue or as otherwise stated the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered and isolation or as a substitute for results prepared in accordance with GAAP.
And the discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed on this call to the most directly comparable GAAP financial measures are included in our earnings press release, which is up and go out available on our website.
And on this call, we will give guidance for first quarter and full year of fiscal 2022 on and non-GAAP basis. Also in addition to our press release and 8-K filing the events and presentations page on the investors section as well as the quarterly results page of the financial information section of our website.
Includes links and expenses non.
Included in our links to costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses. These are titled supplemental financial disclosure, one and supplemental financial disclosure. Two Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation that also provides resolution of GAAP expenses there.
Excluded from non-GAAP metrics now I will hand over the call to M. A C.
And you Eric Stang.
Thank you Matt Hi.
Hi, everyone and welcome to whom as Q4 fiscal year 'twenty 'twenty, one and earnings call. Thank you for joining US today I look forward to reviewing with you our fiscal 'twenty 'twenty, one accomplishments and our plans and outlook for this coming year.
I'm pleased to report that Q4 was another strong quarter and capped off a strong year for <unk>.
And we again outpaced our guidance in Q4, but delivering $44 3 million and revenue.
$2 8 million and non-GAAP net income and $3 6 million and EBITDA.
For the full 2021 fiscal year.
We achieved a $168 9 million and revenue, while also generating 14 million and EBITDA Mauro.
Moreover, we exited Q4 with $165 million in annual recurring revenue up from 143 million a year ago, driven primarily by 27% year over year growth and subscription services revenues from business customers.
Oh, and I'm proud of our performance and excited as I look forward to the year ahead.
Diving, a little deeper into our progress and Q4 I can share that we again increased the percentage of new customers, who adopt our office pro higher tier of service in.
In Q4, 45% of New office customers selected office pro.
We believe our feature additions during the year, including the launch of video meetings and enhancements to our desktop and mobile apps helped drive this adoption.
Adoption of office pro as a driver of our increasing revenue per user strategically.
Strategically we intend to continue to expand the capabilities of Boomer office to attract larger customers and we.
We have new service enhancements planned for fiscal 'twenty and 'twenty two.
I can also share that our sales through channel resellers was our highest yet in Q4 and represented 43% of our business sales.
Developing and growing channel resellers and partners as a long term strategy to expand our sales and marketing reach.
This will continue to be a strategic priority for us in fiscal 'twenty and 'twenty two.
As we pursue strategies to expand our services and our channel and market reach and we intend to grow our business not only with small business customers, where we believe we are the market leader today, but.
But also with increasingly larger customers.
And I'm pleased to share that we won a customer and the health care industry and Q4 that is over 700 users.
This customer chose our enterprise solution, because it fit well with their business needs and we will enable them to manage their business more productively across a large number of locations.
For whom on office, we want a customer and the auto industry and Q4 debt is over 175 users spread across 16 locations.
This customer valued discipline city ease of use and value afforded by whom office.
As a solution designed specifically for a small business environment.
And then my office simply fit their needs better.
This is a larger customer than is typical for whom office, but it helps demonstrate that office can be a strong solution for larger companies.
Already today, approximately 20% of our Ummah office users are in businesses with 10 or more employees.
Now regarding our largest overall customer, which as youll recall entails more than 25000 users.
And I'm pleased to share that over the course of Q3 and Q4, we enabled the direct trunking services to more than 450, new locations in North America.
This represents important growth with our largest customer.
That also lays the foundation for future expansion of our services to them.
Internationally. We also grew with this customer and now have expanded our activities with this customer to four European countries.
On the services front, we made a major announcement in Q4 that we now offer direct routing for Microsoft teams.
Through our global data network, we can connect teams users to external phone lines and <unk>.
Transport and teams into a highly reliable business phone system.
With more than 2 million users, we have the scale advantage to do this reliably and efficiently.
And unlike some direct routing solutions on the market.
Our offering runs through our core platform, allowing us to deploy deploy our ucas functionality to complement teams and a hybrid model.
Currently we primarily see demand for teams with larger businesses of 100 users or more.
According to ribbon research, 70% of businesses deploying teams indicate they will use direct routing.
We believe direct routing for teams represents a significant new market opportunity for us going forward.
And finally regarding Q4 on the residential side of our business.
We received the Great news and November that consumer reports once again ranked Umar the number one home phone service and America.
This result comes from user surveys performed by consumer reports and which we were ranked four or five out of five on all four metrics, namely reliability.
Call quality and customer support and value.
This is the eighth time, we've won this honor and couldn't be more proud.
With more than 50 million home phones and operation in North America.
Residential phone service remains a significant opportunity and its own right.
And the vast majority of cases, we believe consumers can get both better phone service and less expensive phone service by switching to Uber.
Our corporate focus today is of course on building our business customer base, but we also delivered on the residential front and fiscal 'twenty 'twenty, one by achieving 3% year over year growth and residential subscription service revenues.
Looking ahead, we see favorable market trends.
The research firm IDC reported recently that their surveys indicate increased work from home trends will continue post COVID-19.
Specifically they report that pre COVID-19, 37% of respondent organizations indicated part time or full time work from home practices at their company.
Now 52% of responded organizations not only report such practices, but expect them to continue post COVID-19.
Along with this.
D. C also reported that 55% of respond and organizations say they will increase their spending this coming year and Universal communications and collaboration services.
Similarly it.
Survey by Ribbon research indicates two and a half times more interest by small businesses and investing in IP based communications solutions versus a year ago.
They also report that 76% of small businesses defined as less than 100 employees.
They have yet to invest and IP based communications solutions.
As we look ahead to the coming year, we are optimistic about the market trends and the sizable opportunities in front of us.
Our plans for fiscal 'twenty and 'twenty two includes several initiatives to grow our business at.
At the core is continued execution of our strategies to serve small businesses with unique solutions designed specifically for them.
To serve larger businesses with customizable solutions to satisfy better their individual needs.
To continue expansion of our sales and marketing efforts, both direct and through channel partners.
And to grow internationally, serving our largest customer.
Yeah.
In fiscal year 2022, we intend to one offer additional features with whom our office to continue our momentum serving larger businesses and further increase our average revenue per user.
To capitalize on the market demand for teams direct routing as well as our other activities to grow them and enterprise.
Three increase our sales and marketing significantly through investments and digital marketing and inside sales and to attract and support more channel resellers.
For evolve our ummah connect and image Uber managed Wi Fi solutions, which are part of our longer term strategy to provide a more complete solution for small businesses.
And five expand.
Geographically to serve users and the number of new countries and the focus on countries in Europe.
This effort will be ongoing throughout the year and driven by adding new users with our largest customer.
By the end of fiscal 2022, we anticipate having expanded to more than a dozen new countries.
Overall, the strong market environment and the success, we're seeing with our solutions and our strategy make us excited for the coming year.
I'll now turn the call over to Ravi to discuss our results and outlook in more detail and then return with some closing remarks.
Thank you, Eric and good afternoon, having Matt.
I'll start with a review of our fourth quarter and full year fiscal 'twenty one zone.
And then provide our outlook for the first block.
And according to.
He once again delivered a strong financial department and keeping.
Record revenue of 44th line.
And then.
And above the high end of our EBIT guidance range of $43 million to $43 8 million.
On a yearly EBITDA.
Total revenues grew 9% driven by the strength of my business, which grew 16%.
On a full year basis.
Current revenue was 168 9 million on them.
On page 151 6 million.
'twenty, reflecting 11% growth.
Including 24% growth.
Fourth quarter and fiscal 'twenty, one net income was $2 8 million.
Above our previously issued guidance range of $2 million to $2 $6 million.
And net income for quarterly and fiscal 'twenty, one was a record $11 5 million and.
And net loss of 700000 on our fiscal 'twenty.
Largely driven by increased subscription.
And services revenue improved gross margin and expense management.
With that and I'll provide some details about our revenue and cash.
And I met with my business subscription and services revenue for Q4 grew 19% on a year over year basis, and 7% sequentially from Q3 and.
In spite of the pandemic revenue from all my business subscription and services for fiscal 2021 grew 27% year over year driven by user.
Well my residential subscription and services revenue for both fourth quarter and for full year fiscal 'twenty. One grew 3% year over year. We are pleased with the resiliency of our net debt.
<unk> business, which demonstrates the value proposition we offer to other customers.
Our residential business generates a good amount of cash flow, which enables us to invest that cash back to growth.
And when that business now accounts for 45% of total revenue as compared to 42% and the price yet.
Given this book you believe my business to be generating majority of our revenues within the next 12 to 18 months.
Subscription and services revenue as a percentage of total revenue increased to 93% compared to 92% in the priority and whatnot.
Product and other revenue for the fourth quarter was people and $1 million.
7% total revenue and.
Paired with people and $2 million and the priority and what.
Other core users at the end of the fiscal 'twenty, one our 1 million 74 up.
Up from 1.048 million and the end of the loss.
25% of on call users and now business users up from 22%.
Our blended average monthly subscription and services revenue per users on <unk>.
<unk> increased 3% sequentially and 9% yet.
This increase from $11 and 38%.
Quarter.
$12 and 46 and in.
In the fourth quarter was due to growth of business users.
As it is higher day rate up.
We expect it and output trend to continue as well my business growth as a percentage of total revenue.
Given the increase and core users and Hyatt <unk> and our annual.
Recurring revenue on.
<unk> grew $265 million, a clarify and increased year over year.
Driven by the strong performance of all my business and the stabilization of our customer churn rate. Our net dollar subscription retention rate for Q4 was 96% and up from 95% sequentially.
Let me now provide some color on COVID-19.
<unk> and services gross margins for the fourth quarter on fiscal 'twenty one.
72% up from 70% and the same period last year.
This gross margin improvement is driven by the growth in that business as well as and when debt and management.
Product and other growth margins were negative 58% for the fourth quarter of fiscal 'twenty, one compared to negative 36% same day did not.
This decline in product gross margins was primarily due to increased promotional activities over the holiday season.
As well as higher shipping costs and increased debt.
Given increased and lead times for procurement of some component as well as longer shipping times, and we had been building up inventory to meet growing need product.
And back.
Overall gross margins in the fourth quarter increased to 63% from 61% and the same period last year.
Driven by growth in subscription and services revenue, which has higher gross margins.
Now onto operating expenses for the quarter.
Fourth quarter of fiscal 'twenty, one operating expenses were 24 9 million.
Up 3%, Italy.
And instead of marketing expenses were $12 8 million.
At 29% of total revenue.
And yet over yet.
Increase was driven by additional marketing programs.
But on my business.
And the effectiveness of these programs, we intend to continue investing and some of these channel enabled part of that revenue growth.
Research and development expenses were $8 2 million or 18% of total revenue and up 8% on a year over year.
Going forward, we will continue to develop new product and features and plan to add resources towards deploying and services in a number of international locations with our largest customer.
G&A expenses, let's see for $9 million on 9% of total revenue down $400000 on again and again.
With that net income for the fourth quarter was $2 $8 million at close and diluted earnings per share compared to.
Compared to <unk> income per share and the prior year quarter.
And adjusted EBITDA profit for the fourth quarter was $3 6 million compared.
Compared to $1 4 million for the same.
Adjusted EBITDA profit for full year fiscal 'twenty, one and you can.
And frequently to $14 million as compared to 1 million and fiscal 'twenty and increase of $13 million.
And this increased profitability was driven by economies of scale, especially subscription and services revenue and.
Both gross margin and due to lower travel and pension.
Now some color on our cash and investment.
We ended the fiscal year with total cash and investments of 28 and $3 million with no debt.
Reflects a $2 $2 million increase and cash for the year.
Cash generated from operations for the fourth quarter of fiscal 'twenty one.
So $2 2 million.
<unk> cash and Houston up of $800000 the same period last year.
Cash generated from operations and so full year fiscal 'twenty. One was at an all time high of $4 $4 million and we generated $1 $2 million of free cash flow for the.
With that and I'll provide some financial guidance for first quarter and full year fiscal 'twenty, two and again our guidance is non-GAAP and has been adjusted for expenses, such as stock based compensation and amortization of intangibles.
First quarter fiscal 'twenty two guidance.
We expect total revenue for the first quarter of fiscal 'twenty to be in the range of $44 million and $44 8 million.
We expect non-GAAP net income to range between 1 million and $2.
4 million.
Non-GAAP diluted EPS is expected to be between <unk> and Tencent.
We've assumed $24 4 million weighted average diluted shares outstanding for Q1.
Our full year fiscal 'twenty two.
Total revenue for fiscal 'twenty, two is expected to be and the range and then a $2 5 million.
And then $85 5 million.
This guidance includes a year over year subscription and services growth rate of 20% volume of business and between one and 3% for our residential business.
We expect non-GAAP net income for fiscal 'twenty two to be in the range of $6 5 million.
On April and $5 million.
After incorporating cost to it.
Enable significant expansion of services and international.
Though our fiscal 'twenty two guidance include some revenue from destroying loans, but since the services will be launched throughout the year.
We'll benefit from this international use that expansion is expected to be realized in fiscal 'twenty three and beyond.
Longer term this expansion should help us achieve meaningful revenue from international locations.
Non-GAAP diluted EPS is expected to be in the range of 26 and 34.
We have assumed approximately 25 million weighted average diluted shares outstanding for fiscal 'twenty two.
From a cash flow perspective, we expect to continue generating positive cash flow.
Subject to certain seasonality.
And this seasonality driven by timing of annual payments can cause cash growth to fluctuate throughout the year with the first quarter typically resulting in higher cash with it.
But are there other planned international expansion is expected to result in higher capital expenditures Buzzy.
Accordingly, we expect our fiscal 'twenty, two capital expenditures to range between $5 million and $6 million.
In closing fiscal 'twenty, two was an outstanding year for Roma driven by solid execution, while we achieved a number of all time record on Mike.
Including revenue gross margin and AE on us.
Given our fiscal 'twenty one performance I believe we are well positioned for a strong fiscal 'twenty two and.
And remain committed to our midterm EBITDA target of at least five.
With that I'll pass it back to Eric for some closing remarks, Eric.
Thank you Ravi.
Like all companies at the start of this year, we had to adapt quickly to the changes caused by the pandemic.
I want to take this moment to compliment the entire <unk> team for their hard work and success doing so.
Our strong results for fiscal 2021, along with our enduring strategy to differentiate our solutions and the marketplace position.
Position us well for fiscal 2022.
We believe we have and exciting outlook and can't wait to execute on our plans this year to drive further growth and.
And international expansion and build a stronger company for all of our stakeholders.
Thank you operator, we can take questions.
Absolutely and as a reminder to ask a question and you will need to press star one on your telephone keypad to withdraw your question simply press the pound key.
Our first question will come from the line of Mike Latimore of Northland. Please go ahead.
Yes, great congratulations on the strong year there.
Thank you I guess.
In terms of you gave you gave I think business guidance growth rates for the year of 20% does that include hardware or is that subscription only.
It's a subscription only Mike okay.
Okay got it great and.
Also.
And you.
You highlighted and Microsoft teams direct as the opportunity I guess.
If you're successful there, how and how meaningful could that be could it be 10% of bookings at some point and just trying to get a sensitive price how meaningful that could be.
So that's a good question and I'll, let Ravi and maybe approach it from a numbers perspective, but.
Teams with larger organizations is.
And it's doing well and the marketplace and most companies find value and getting a separate direct routing solution. We can bring some extra features to teams through that process as well. So we see a lot of opportunity for it.
We're new to it of course, we launched it in Q4, we're just getting going but but we think it can be meaningful and we also did have some.
The scale, we're at with over 2 million users total gives us some real advantages to.
Versus some of the other companies trying to do this.
Ravi do you want to give a sense on.
Nope.
It's the things I think added color on it.
A meaningful opportunity for us our goal is not on lead to focus on Microsoft teams on large enterprises, but also other businesses too. So I think this has a potential but obviously no work on growing.
On my office.
And is it my enterprise along with Microsoft teams.
Okay, Great and then just last on the your large customer I think at one point you had.
Highlighted the opportunity to sort of double the size of that customer.
With an international effort I guess is that still what you're thinking here.
So is it still kind of the same.
Maybe 12 month horizon, or how should we think about that relative to prior comps.
Sure.
Yes, we are.
And what we believe we can achieve this year.
By adding a dozen or more countries internationally too where we serve them well.
And we've that has the potential to double the users we have from where we're at today with this customer I think it's a little early to exactly know we've got a lot of rollout to do and and.
And it'll take through the year for the growth to happen, but yes, we certainly see the potential for that and more if we look out even longer term.
Great. Thanks.
Thanks, a lot and good luck.
And thank you.
And your next question comes from the line of Matthew Harrington of benchmark. Please go ahead.
Well thank you.
Have a pretty.
Skiing, and analytic and we're looking at the Tam domestically The Bureau of Labor Statistics information on all of that when you look at Europe, and how do you think the relative opportunity as you know based on the.
Characteristics of the economy over there I mean, I guess, you've got the middle starts and.
And Germany famously that would be right within your your niche and.
Are there any issues in terms of achieving scale and on the cost side or or other issues. When you don't really have it tacked on to a residential business. If you do make a major endeavor and Europe over a period of time. Thank you.
Yeah.
So.
Where we're focused this year, primarily on expanding to serve the needs of this of this customer that we have and we believe we can do that very successfully.
And there is gonna be investment through the year to do that and those investments can be leveraged to do even more but but we feel comfortable having a large customer opportunity gives us the scale we need to go do this.
Well.
We are already in.
And a small way in.
<unk>.
Three or four countries in Europe, and we are.
We can bring a lot of what we do on our network and the design of our network.
On to this for scale, but you are right as we get even bigger we will have we will have.
Our scale economies that we can drive further, but but we feel we feel it's very doable and it.
It will give us the beachhead to build from.
To even go further.
And I guess a quick follow on when you look at how much Covid has worked and maybe the economy.
Sorry to change and some areas when you look at the product or customer verticals.
Is there any been any.
No real change in terms of where you perceive the opportunities.
Over a period of time and Matt I think was almost Cal you weren't very hurt hurt very badly at all obviously on the restaurant and bar side, that's not your cash.
Two on city, but just.
Apart from just the overall growth and the market are there any vertical.
And particularly excited about.
There are some verticals that were I would call it more excited about.
But.
I don't want to focus too much on them because in general and smaller sized businesses are not well served today by the solutions that most have and.
Most of our competitors have have design solutions for larger sized company implementations and tend to focus more on larger businesses and our smaller business solutions are really applicable to just about every small business out there and we don't find we need to think vertically too much with those solutions to be successful so.
I did mention that one of our large customers. This last quarter was and health care and other one was in the automotive space.
Those are certainly areas that do well for us as do many others professional services generally.
But even even and restaurants and things that new businesses are getting formed every day and and and we found just tremendous opportunity with our small business solution because it's so well designed for the needs of that segment.
So, yes, COVID-19 hasn't really caused us at the small business level too.
And have to change much from the market.
And those sales and marketing efforts that we were pursuing.
Thanks, Eric.
Sure.
Your next question will come from the line of Brian <unk> of Alliance. Please go ahead.
Great. Thanks, so much and you mentioned a couple of large customer wins, clearly the health care and automotive clients.
First can you talk about the average number of users per customer raised today and.
And is there a different sales cycle in terms of length for customers like this that are larger and if so can you quantify how long they take versus the.
The smaller deals.
Sure I'll say, a little bit of that let Ravi jump into so when you move up to and what we might what we would call and enterprise customer which is.
Often.
Tens of users if not over 100 users.
There is definitely a sales cycle.
You are making a more youre selling to a more educated customer with probably and in house. It Department and it is a more technical and more.
Feature oriented sale.
And when you're selling to a small business.
Our tagline for those customers does sound like a big business at a small business price I mean, these are customers that have and often haven't had the advantage of IV ours, and and mobile apps and.
Desktop apps and some of the other things, we do with our small business solution and.
We bundle and effects and conferencing to the solution all in one.
Great value price and so for those customers. It is a lot of those customers do.
Make their purchase decision quickly with us.
So it is different between the two.
<unk>.
And our average users per customer are and the tens of users for enterprise. If you look across our overall, but we have customers who go up much much larger and.
On the.
Small business side, it depends a little bit on how you count we have.
Sometimes we have a lot of smaller locations that are part of a larger business entity, I guess, I'll say but per location.
We're.
And the single digits users per location with our small business solution.
Right.
And then one thing and I'll go around that one thing Eric.
Explained.
You look at the tier four years ago.
Literally had very very few more than 10 years.
And now Eric mentioned earlier on.
And on 20%.
And more than 10 users so our highest net.
Users have been going up but obviously the focus on small businesses, but it's five and play businesses are quantified and play business as they are pretty happy with any other out of them.
Great and then clearly you have been upfront about the investments, we're making and it looks like profits will be down this year on.
Purposely can you.
Specifically first talk about Eric mentioned and.
Additional investments and sales and marketing can you maybe quantify what that is versus how much does.
On average.
The company at least this year or is it going to to open a new geographic location.
Yes.
And so there are a couple of things, which we have incorporated into our guidance for the year, obviously, we want to keep investing and adding into our sales and marketing to grow faster.
And then the other aspect is obviously the new geographic location and then we have also incorporated and.
Thanks.
And we picked up and there will be more travel there'll be some more employee related expenses. So those are the three major factors, which we have included into our guidance how much to quantify if at all of those I think.
All of them, probably will have a meaningful amount.
Yes.
Net.
Travel expenses and price related expenses could be one or $2 million for fiscal 'twenty, one and fiscal 'twenty two and Jimmy.
And not everything will open up on day, one and then large customer opportunities and one time cost initially.
And that could also be and.
A couple of million dollars.
And so I think it's a combination of sales and marketing large customer launch as well as some expenses on the employee side.
Great last question just quick numbers question, Yes, I did.
1200 business jobs can you quantify how many of that were from and this quarter were from your largest customer and you're able to quantify that.
And I think you mentioned 12000 I believe in Q, and then 12000 net 12, sorry excuse me the euro.
Yeah, Yeah, vishal thousands of salary and that's a big difference.
And how many yeah.
1000, <unk> net of churn rate net.
Net new users and <unk>.
Significant put on.
And the significant majority of that is coming from.
Regular organic business knock on the large customer large customer launch is expected to happen throughout the year. So youll see user growth coming from that in fiscal 'twenty. Two more there was a small number and as Eric mentioned.
450, and fronting Inc.
But the numbers and the 12000 plus debt is long.
Got it and it's interesting.
Thank you so much.
Next question will come from Josh Nichols of B Riley. Please go ahead.
Yes, Thanks for taking my question Eric.
Eric if you could dive into a little bit more on the Companys strategy I know, you're expanding the bar partnerships that seems to be going.
Well on the reseller channel, but a little bit more about you mentioned digital marketing and and what the company's plans are maybe ramp that spend a little bit.
Yeah, I can say a few words.
I think I think we're up and operating executing if you will very well on our sales and marketing fronts right now and.
And <unk>.
Growing nicely and just about all of the areas in which we try to grow and some of those some of that growth is direct some of it is through channel partners.
And it's just doing more of what we do well we spent about 29% of revenue in Q4 on on sales and marketing and that's low for our industry.
We would like to just dial up and be more aggressive and.
We.
And it's kind of a stair step process as you bring on personnel and you invest more in Europe.
Online marketing methods and your other.
Channel support activities.
There is no there is no.
Major change and what we're trying to do for fiscal year 'twenty. Two we're just want to do more of it and.
Uh huh.
Grow grow grow grow commensurately with it.
And so that is excited I think we go into the year already executing well.
The big additional thing this year on the sales and marketing front is expanding internationally with our largest customer and that also impacts the R&D front with the effort to put in the capabilities for that.
So I hope that I hope that answers your question.
Okay.
Yeah. Thanks, Thanks for that and then I did want to talk a little bit about good to see.
Churn seems to be subsiding and after the original spike with the pandemic.
And you have net dollar subscription retention revenue improving quarter over quarter.
And what's left for potential improvement on that front I know historically, if you go back a few quarters to complete and been able to achieve a 100% or even a little bit better than that.
It could also kind of help support the company's growth.
What's left to be done on that front and central improvement for 'twenty two.
I'm, sorry on which firm.
And then the net dollar.
Subscription and retention revenue.
Yeah.
We.
That's.
That's got two components to it as you know it has to do with.
Our growth rate growth rate for existing users and churn.
With the launch of office Pro we've made great headway.
But we will continue to focus on that as we.
As we go forward and we see more and more potential there still.
And as we add more features and services to office, which we talked about.
And I talked about in my prepared remarks.
You'll see additional.
Elements to what we do with whom office that I think can also helped drive this metric.
And as we move to little bit larger customers, we do tend to sell more of our business on contract as opposed to just month to month and.
And that might have a little bit of impact on this although I think.
My view is always is is you just have to serve the customer really really well and it doesn't matter, whether you have a contract or not.
But but that's a dimension as well we have seen.
Churn stabilize and come down some from the peak of the pandemic, but it is and all the way back to where it was pre pandemic. So there is a little bit of potential there too.
Which I think is maybe somewhat a little bit out of our control, but more just with time through the year. So.
All of that is part of how we look at trying to see that number go up further.
But.
The core of it.
And frankly is doing a good job for your customer and win and a consumer report strength since number one on the residential side or the readers.
PC magazine ranked US number one solution for business I mean, that's the key.
That's what really drives and drives that metric and augment.
I'll admit that with additional services you can come back and sell to your existing customer base.
Including <unk> connect and potentially <unk>, Wi Fi and and you've got you've got that going the right direction.
Thanks, and then last question for me.
I know the company's debt.
Good job transitioning and generating healthy cash flow this year record cash flow.
But I did notice like the company and just took other revolving line of credit just wanted to ask a little bit your thoughts on like high level capital allocation strategy given that you already have a pretty strong balance sheet is that just out of some additional caution after the pandemic or potential bolt on M&A opportunities I know the company has done it before.
Hey, Josh this is Ravi and Youre right we.
We had a pretty solid fiscal 'twenty, one and cash flow perspective free cash flow and.
The mission and this revolver of $25 million is housekeeping.
Ill remind you that during the pandemic if in case, we would average need something how well we are prepared.
Not any specific reason and we got the revolver, but other.
And M&A opportunity comes up we want to be able to look at debt, but the purpose.
Italy was how do we get prepared if something was to happen, although our day to day needs of our business, we are pretty pretty positive cash flow from operations. So I'm not worried about hey, what's happening and we have actually added cash.
Generally speaking good housekeeping.
Thanks, guys.
Thank you Josh.
Just as a reminder, and in order to ask a question. Please press star one.
Next question will come from the line of Matt Stotler of William Blair. Please go ahead.
Hey, Eric Ravi Matt. Thanks for taking the question just a couple quick ones here I guess, one on the partnership front, obviously partner channels, becoming an increasingly meaningful part of the.
The overall go to market and increasing portion of our bookings there I think you've mentioned north of 40% at this point you guys, obviously have pretty.
Pretty solid representation on the retail side of the partner channel.
Net and update just how youre thinking about <unk>.
Expanding go to market partnerships going forward, what that pipeline looks like and where you're most focused in terms of building out those new relationships with and Thats resellers Master agents sub region.
And <unk> carriers, how do you think about that.
Sure.
<unk>.
Youre right, we see a lot of potential on this front kind of in two respects one is.
There is a large reseller community out there and generally Umar hasnt.
Focused on net community that much up until the last couple of years and so we're not very penetrated into it yet and we have some very close partners that we work very well with but.
The vast majority of say master agents or others and the industry, we really haven't gotten involved with them yet so it's a longer term direction for us to just continue expanding.
And in that regard and I see a lot of potential going forward for us.
For that.
Second respect though is.
We do also work with partners who are.
And they might be a reseller or they might just be somewhere and we work in conjunction with but.
It could be a company that does something particularly and a vertical critical space.
And finds theres value and being able to marry up what our solutions do with what they do or otherwise.
And.
We don't really talk about who those partners are but they're and <unk>.
<unk> and investment area for us and we.
We do have a handful on board today.
And.
Overtime.
These efforts should show up and are intended to show up and the growth of the overall.
Revenues that we drive so we.
We found that debt, our small business solution fits well with what some others are doing and the small business space and Thats the second dimension for us.
This is.
This is just an untapped opportunity for us to keep pursuing all through the year and frankly longer than that.
Great Yeah, absolutely.
And then just one more on quick follow up on meetings.
And just get.
And we'll give an update there on early interest and traction obviously still relatively early there but.
Embedding this offering and office pro do you plan to offer a standalone and meetings or collaboration product Knight point would that make sense, just any commentary around that product and how youre thinking about how to factset going forward would be helpful.
Sure.
Well first of all I'll say, whom and meetings works great.
And.
We've had very positive feedback from those of our customers that are that are using it and having uber meetings and some of the other things and our office pro tier.
It also helped to drive the adoption of office pro.
We.
So far and what we've done with whom our meetings and is working great for our customer base, but we will consider enhanced features and new meetings that might even be a higher level tier of service as we look out over time.
But we don't have plans today to offer Moody's Houma meetings standalone.
It's not a direction, we're taking at the moment.
We're using it to help drive the step up to the premium.
Level of services that we bring our customers and I think that's working great.
Uh huh.
Great. Thanks again.
And we have no further questions I will turn the call back over to the presenters.
Great well. Thank you everyone for joining us today, it's been an exciting fiscal year 2021 and we.
We're even.
Even more excited as we look forward to 2022, and we've got a lot of good things happening and.
And we look forward to updating you through the year on how things develop thank you.
This concludes today's conference call. Thank you for joining you may now disconnect.
And in total revenue.
And.
And on board.
And then.
And.
And with that.
And then as well.
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