Q4 2020 ON24 Inc Earnings Call
Good afternoon and welcome please note that day.
Live webcast of todays call may be accessed through the Investor Relations section on the company's website at investors day on.
On 24 dotcom and.
Completion of the prepared remarks, we will open the call for questions. Please note that this call is being recorded.
At this time and I'd like to turn the conference over to mildly Bergman the Brushy Blue shirt group. Please go ahead.
Thank you Hello, and good afternoon, everyone and welcome to on 24, its fourth quarter 2020 earnings Conference call.
On the call with me today are shot show on the founder and CEO of on 24 and.
Chief Financial Officer, Steve thought you all day.
I would like to remind everyone that some information provided during this call may include forward looking statements, including without limitation statements about on 24 its feature of that expected financial and operating results. This is training global economic trends and the expected timing of the benefits and other such trend.
These forward looking statements may contain such words as project outlook future expectations, well anticipates believes intends or referred and shoes.
These forward looking statements reflect beliefs estimates and predictions other day.
And on 24 expressly assumes no obligation to update any such forward looking statements.
These forward looking statements are only predictions and are subject to substantial risks and.
Factors that could cause or contribute to such differences include but are not limited to risks associated with our ability to attract new customers and expand sales to existing customers.
Fluctuation and our performance competition, and our markets and any decline in demand for such solution.
Our ability to expand our sales and marketing capabilities and otherwise manage our ground and the impact of the COVID-19 pandemic and other risks identified and the company's SEC filings.
For each other description of risks and uncertainties, which could impact. These forward looking statements you should review on 24th periodic SEC filings, including the risks identified in today's financial press release.
We'd also like to point out that on today's call. We will report both GAAP and non-GAAP results. We use these non-GAAP financial measure to evaluate our ongoing operations and for internal planning and forecasting purposes.
Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP debt.
The reconciliation of these non-GAAP financial measures. Please refer to today's financial press release.
With that I will now turn the call over to shop and shop.
Thank you Mollie and welcome everyone to on 24 fourth quarter and full year, 2020 financial results Conference call. Our first as a publicly traded company.
Thank you for joining us on.
I also want and thank all of our employees customers partners and investors from being a part of a great fourth quarter, 2020 and successful IPO debut on this.
And there's been a tremendous journey and we are excited for the future.
Since this is of course skull together and we have many listeners who are just getting to know on 24 of course share a quick summary of our financial results for Q4 and 21 day.
And then spend on little more time than usual on our platform.
Differentiators and vision for the future.
We had a very strong force score, which GAAP the Europe tremendous growth we're on slide four in.
In Q4.
And we deliberate on our growth.
Growth of 100 per cent year over year, ending our fiscal year 2020.
$153 $4 million and yeah.
Our fourth quarter revenue for.
On our digital experience platform business grew 137% year over year for total of 50 $311 billion and.
At the same time, we demonstrated the significant leverage which drove non-GAAP operating income of $11 million and $10 million and free cash flow and the fourth quarter.
For the full fiscal year for our digital experience platform business, we achieved revenue growth of 92 per cent.
The other thing a year with hundreds of people on $8 million and revenue.
Now I'd like to take a step back and share our story well.
Or people, who don't know US let me tell you how we got here.
Seven years ago, I had and the person.
Social media and digital experience platforms, like Facebook Youtube and Instagram, we're transforming BDC market.
These platforms deliver a highly engaging experiences which is why consumers enjoy spending so much time on debt.
As a result these companies not so much about us and they are.
We're able to deliver highly personalized and effective advertising.
I'm sure all of you can relate to the experience of scrolling too on your favorite social media feed and seeing ads for precisely the products and what you are most interest and.
And seeing that the merger between highly engaging digital experiences and the ways in which platform companies would use data to understand consumer buying and pet.
I realize there was nothing like this the BW Walt.
And that's why we decided to go all in.
The digital experience platform that creates deep engagement.
First person data and.
Yeah drew and personalization for me to be college.
Basketball working today on.
On 24 delivers the digital experience platform that enables thousands of businesses and the convert millions and stopped prospects into customers.
These digital experience and that includes interactive webinars experiences virtual conferences, and always on and multimedia content and experiences allow companies to deeply engage with their prospects at scale.
On <unk>.
On takes that audience engagement converts that into first sports and data.
Personal lives as debt to RPI and platform.
Platform and makes the data actionable, but integrating that within our customers' sales and marketing ecosystem.
To date, we got on some of the world's largest and most recognized businesses and the world.
Tumors, including.
Do you have the five largest global technology companies.
Five largest U S banks three of five largest global health care companies.
You have the five largest global manufacturing and industrial and companies.
We have a very large tam that'd be currently estimate to be over $42 billion and worldwide annually and expect this opportunity grow as digitally and increasingly the call.
We've been enabling digital transformation and digital engagement for our customers for several years.
And now the market has come to us.
And part of the global pandemic Somebody's has gone through 10 years of digital transformation and months, they've been able to see the reach the engagement and the richness of the data to get to our platform and now it's clear to them and to US and there is no going back to business as usual.
There are other tectonic shifts.
And also and day for additional sales and marketing strategies.
Gartner predicts that by 2025, almost 80% LBW sales interactions between suppliers and buyers than other and digital channels.
In addition, the BCP by itself and you get.
Just like that because she loves and when.
And you saw per car you do all your research and choose them on even colors and other options before you ever speak to on sales force.
This is the same transformation is happening and the BW world and companies are raising to adapt their go to market strategies and made the prospective customers where they are.
The archaic and automated technologies need to be companies use and the best and engage these buyers spelling them and endless emails and and that lack of course location simply don't work.
And offer a full return on their sales and marketing investment.
This is creating endless spam clickbait and Jacques.
Marketing at scale has become synonymous with automation and spend.
And so much so that countries are stepping into it and stopped with regulations like GDP on.
And on 24, we believe it's time for a new era, and <unk> sales and marketing that is led by engagement.
They're all on automation is over the air.
Engagement is here.
Our.
<unk> come to us to solve two problems.
Engagement and.
And data.
If you look across different kinds of sales and marketing tactics.
We're engaging some provide data.
We don't believe there is a solution that.
And that can match our ability to do both.
Physical events are engaging and direct.
Spencer and provide almost no data about prospects.
Email marketing skills, but creates and less bad.
Click a view a down book that does not engagement.
That is where on 40 book comes in.
We believe our cloud based map on a stand alone when it comes to driving engagement and delivering data.
That's because we've designed the system of engagement that delivers experiences purpose built for marketing and sales.
In 2020 on.
Our platform powered over 200000 lives digital experiences totaling more than 2 billion.
Billion minutes of engagement per year.
Over 4 million professionals engage there'll be on 24, net book monthly, 170% increase year over year.
A single on 24 live experience average is 50 minutes.
Audiences that average more than 200 attendees and delivering over 20 data points of engagement from each attendee.
And two days worth of short retention stats and you can create a platform that engages prospects and customers for 15 minutes on average you are doing something right.
And that's just a single experience.
Most of our customers deliver hundreds or even thousands of experiences per year, because the more experienced and you do and.
And the more people you engage the more data you capture.
And that creates a multiplier effect.
Every single one of our customer.
And that also creates a multiplier effect.
And that's our entire network on the experiences.
Now, let's talk more specific on that quite a platform and products.
On a pre components beyond 'twenty about experiences.
On 24 intelligence and on 44 connect.
Or RV on 24 and experiences.
The other suite of four products on 24 elite.
Our flagship line interactive Webinars experienced broad.
On 'twenty from virtual Congress and more.
Our scalable digital events per hour.
On 24 engagement.
A few rays and always on and multimedia content experience product and on 24 target and personalized hyper relevant rich media content experience.
Every on 24 experienced product is backed by our analytics there on 24 intelligence.
As customers engage with these experiences they generate for sports and data, which is on truly on 24 analytics platform.
This is the secret sauce, we develop a free 60 day review every individual from.
From the question that they ask the board and the answer to the go on.
And they don't book, all clues that through our customer engagement into rich insights.
And those insights fueled our AI and <unk>.
Recapture prospects lifetime activity.
The history of business interest to automatically recommend relevant content and personalize the next experience.
And those buyers forward taken.
Taking them from one relevant experience to the next reducing friction and accelerating conversion and Blake.
Finally.
And so on putting coconut and you make the data available and the sales and marketing ecosystem of our customers.
We have built near real time.
Deep integrations with all the leading CRM and marketing automation and business intelligence tools.
And as an aside some of you are using our platform right now listening to our earnings webcast through our alliance with people and systems.
It is important to note that investor relations on these type of calls on a small fraction of our revenues and many of them do not demonstrate the true power of our platform.
Now looking forward, we believe the future is all about hybrid engagement.
While the physical events will come back and some for this will be used to complement and on a digital first strategy.
Why is that.
That'd be the case.
And listen to what our customers have learned over the last year.
One of the largest cloud networking and infrastructure companies is generating five times more pipeline from <unk>.
And in person events.
Another fortune 100 Global software company is increasing the average deal size by 10% and comparison of the results from in person events.
And a large professional services firm has increased its number of engaged prospects by seven times and.
And just one third of the cost.
Let me share some information about our growth vectors.
First we are adding sales capacity to drive new customer acquisition and customer expansion.
Second we are entering new international markets, including Japan and dock.
And finally, we're investing and our R&D organization and continuing to develop new products to add to our overall platform offering.
Now, let me share with you a few customer wins from Q4.
One of our enterprise customers, a top global and European pharmaceutical company selected to be on 24 digital experience platform and that's worldwide solution to engage and health care professionals through ongoing webinar series that share their scientific research and we are being used by other organizations across the world.
From Europe to North America, South America, the Middle East.
A big differentiator for us and.
Landing the customer was a purpose built platform global support and integration with the lifestyle from C. L.
And this contract is over $100000 and.
At the start and there is tremendous growth potential as we continue to expand across geographies and product lines.
And other customer win in Q4 comes from Japan.
On top multinational venture capitalists and investment from is it.
Is using our platform to achieve global reach from multi lingual digital events and Webinars.
Oh, I believe and support 50.
50, plus languages and provide 24 by seven and support across multiple geographies is a big differentiator for us and winning factor with large multinational enterprises.
One of our customers adopt fortune 500, and insurance and financial services something users on 24, the power of the go to market for every line of business across the globe from consumer insurance commercial risk.
And the fourth quarter, they expanded from using a webinar solution to a full product portfolio.
And leverage that platform from multiple sales and marketing use cases.
This customer chose to make us the global standards because of other enterprises glad and holistic platform that provides the security scale and data driven engagement their entire organization needs. As a result, the customer has increased their spend with us by 300%.
Since originally landing gear business in 2016.
At the highest figure are on debt.
To wrap up.
Excited about the customer momentum, we are seeing for both new customer acquisition and existing customer expansion and upsell.
The business benefits that our customers on achievement with our platform.
And generating sales and pipe line are impressive and undeniable.
As we move forward into a hybrid world. We believe that we are ideally positioned with a data rich digital force system of engagement and enables business growth for our customers.
Finally.
I invite all of us and join US on April 24 on 24 Sports World Congress.
And on 24 experience.
You can learn more about that from vision.
He and from our customers.
And explore our product portfolio.
With that.
And I'll hand, it over to our CFO, Steve <unk> to walk you through our Q4 results and more detail.
Thank you.
Thank you Charlotte and good afternoon, everyone.
Before I get into our results for the fourth quarter I would like to spend a minute discussing our financial model and he metrics. So we'll look at to measure of our business. The majority of our revenues are generated from subscriptions that we sell to our digital experience platform, which is delivered through cloud based software.
And also recognize overage fees as part of this platform revenue, which are build in conjunction with our customers usage of our platform.
Revenue on our subscription and related overage fees is recognized ratably over a customer's contract term.
Contracts are generally one to three years in line and the majority are billed annually and advance as is typical with SaaS businesses. Many of our contracts have built and auto renewals and annual price increases.
And so generate revenue from professional services, which primarily consist of implementation and support services.
Bulk of these services are sold as part of our subscription bundle and are often recurring in nature.
This revenue is recognized at the time the services are performed.
Our professional services revenue was seasonal in nature, which I'll elaborate a bit more on and the moment.
Overall, we focus on digital experience platform revenue, which includes subscription professional services and other revenue associated with our software and popcorn.
And travel experience platform revenue excludes our legacy revenue, which consists of revenue from fully managed events and associated services, we stopped selling this offering to new customers and 2018. So it's a very small and shrinking portion of our revenue per day.
And finally, we focus on annual recurring revenue or a R. R. As a key indicator of our business momentum and future revenue potential. We believe <unk> growth reflects our ability to both land and customers and expand our footprint within existing customers.
They had additional users capacity and products and our platform becomes more strategic across their businesses.
We also believe the growth and our a R reflects our ability to win larger customers, who are signing multiyear agreements with us.
As of December 31st, 29% and they are from customers with multi year agreements.
Now turning to our results as Rob mentioned, we are very pleased with our fourth quarter results, which capped a year of very strong growth on 24.
Total revenue for the fourth quarter was $53 3 million and increase of 123 per cent compared to Q4 of 2019.
Total digital experience platform revenue was $53 1 million and increase of 137% year over year subscription.
Subscription and other platform revenue for the fourth quarter of 'twenty, and 'twenty was $41 2 million and increase of 115% compared to the fourth quarter of 2019.
As a reminder, this includes overages, which are generally around three to four per cent of revenue and can be higher depending on customer usage of our platform.
Professional services revenue and the fourth quarter was $12 million and increase of 155% year over year, representing 23 per cent of total revenue.
The fourth quarter is typically seasonally very strong for services revenue is on our customers are utilizing our professional services more frequently with more usage of our platform. We saw this materialize on the fourth quarter, particularly with the number of new customers. We have using the platform and we expect Q1 will be seasonally lighter.
Total services revenue.
Moving on a on a day.
<unk> represents the annualized value of all subscription contract at the end of the period and excludes professional services and Overages.
Total <unk> as of December 31 was $153 4 million and increase of 100 per side year over year.
The growth of our E. R is underpinned by four primary drivers.
First is our expansion opportunity within our existing customer base as they increase usage of our platform with additional users and capacity.
And second is the increasing number of customers, we see purchasing more than one of our products.
And as of the end of the fourth quarter, 30% of our customers have purchased two or more products compared to 17% at the end of 2019.
Third is the increase and share of customers, who are entering into multiyear agreements with us, which I discussed a moment ago and.
And fourth new customer acquisition is a key driver and they are growth.
And we finished the fourth quarter with approximately 2000 customers representing growth of 42 per cent year over year. In addition, we added 158 customers with a greater than $100000 representing growth of 110% year over year, which demonstrates our ongoing traction with <unk>.
Larger enterprise customers.
These factors give us confidence and our ability to upsell our suite of experienced it to existing customers and demonstrates the significant runway we have within our existing customer base.
Moving on to net retention.
And our our as of Q4, 2020 was 149 per cent compared to 108% as of Q4 2019, we saw an exceptionally high net retention rates and closeout 2020, due to the rapid adoption and expansion of our platform amid the pandemic.
We are pleased with the strong net retention and expansion, we expect to see some normalization and on all of ours and we got these COVID-19 quarters over the course of 2021.
Before turning to expense items and profitability I would like to point out that I will be discussing non-GAAP results moving forward.
Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results can be found in our earnings release.
Gross margin in Q4 was 81% up approximately 10 percentage points year over year.
And Q4 and throughout 2020, we experienced very rapid revenue growth and our pace of hiring head count and customer success and services was much slower.
As a result, we demonstrated very high gross margins in 2020 and specifically in Q4.
As we scale our business to support our growth and the quarters ahead, we expect this to reduce gross margins and the near term.
Turning now to operating expenses.
Sales and marketing expenses in Q4 was $19 5 million compared to $11 9 billion and Q4 of last year. This represents 37% of total revenue and improvement compared to 50% and the fourth quarter last year.
And we intend to invest and sales and marketing as we expand our sales force to support increased demand for digital experiences post COVID-19.
R&D expenses in Q4 was $5 8 million compared to 4.0 million and Q4 of last year. This represents 11% of total revenue versus 17% and the same period last year.
Given that our R&D efforts drive our competitive advantage and we plan on increasing our current R&D spend relative to revenue versus what we invested in Q4.
G&A expense was $6 9 million for the quarter compared to $3 5 million from the fourth quarter last year.
G&A was 13% of revenue versus 15% of revenue last year.
Operating income and the quarter was $11 1 billion compared to a loss of $2 3 million last year.
Operating margin was 21% and improvement of more than 30 points compared to negative 10% from the same period last year.
Net income per share and Q4 was 57 cents per share using 91 million diluted shares outstanding. This compares to a net loss in Q4 of last year of 31 cents per share using $8 9 million basic and diluted shares outstanding.
Free cash flow was $10 3 million and Q4 compared to negative four 4 million last year.
Free cash flow margin was 19%.
A 30 plus percent quite improved debt compared to negative, 18% and Q4 last year.
Turning to the balance sheet, we ended the year with $61 2 million and cash cash equivalents and short term investments.
And this balance does not include the $348 million and net proceeds from our IPO, which occurred in the first quarter.
In terms of head count we ended the year with 547 and full time employees.
Which reflects growth of 49 per cent compared to the 368 full time employees, we had at the end of 2019.
This demonstrates the continued investments, we're making and head count as we scale the business.
And finally, turning now to guidance.
As Sean discussed, we feel extremely well positioned to continue benefiting from the trends driving the need for a data rich digital engagement platform and we are.
Our confidence and our ability to drive sustainable growth and the quarters ahead at the same time.
We're coming off a year of explosive expansion for our business and it.
And we'd like to offer some context on our guidance before getting into the numbers.
Well, we are already seeing strong momentum across our business at the beginning of 2020 Covid became an accelerator for us as more businesses turned the onto plenty for us to engage with potential customers like physical meetings came to a halt.
We began adding new clients at a rapid pace and expanding our footprint with existing customers driving exceptional growth and they are and revenue look.
Looking ahead and this year, we will be getting lapping these quarters of exceptional growth and a more normalized rate.
Well, we continue to see fantastic engagement from our customers and the early stages 2021, our guidance reflects our expectation that we will see some normalization and growth.
In addition, as I discussed earlier, we see meaningful seasonality and our professional services revenue.
Services revenue has historically been and the mid teens as a percentage of total revenue versus 23% and Q4, we expect to see sequential decrease and our professional services revenue and the first quarter.
Looking at the first quarter, specifically, we aren't providing guidance and a much tighter range than we will be going forward given the timing of this call relative to the end of the quarter.
With that background for the first quarter of 2021, we.
We expect revenue and the range of $48 5 million to 49 billion, which represents year over year growth of approximately 96 to 98 per cent.
Non-GAAP operating income and the range of <unk> five.
And $5 million to $1 million or a margin of 1% to 2%.
And non-GAAP EPS and zero to one side.
And 43 million diluted shares outstanding.
And for the full year 2021, we.
And we expect revenue and the range of 205 5 million to $208 5 million, which represents year over year growth of approximately 31% to 33%.
Non-GAAP operating loss and the range of 2 million to $5 million.
Or a margin of negative 1% to 2%.
And non-GAAP loss per share of seven per share to <unk> 14 per share using $44 4 million basic and diluted shares outstanding.
In summary, we are very pleased with our results and the fourth quarter and look forward to building on this momentum and our first year as a public company with that shot and I will open the call up for questions operator.
Yeah.
Thank you if you'd like to ask a question. Please sit and by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to why your signal to reach our equipment.
Moving to the star one if you'd like to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions.
We'll take our first question from Sterling Auty with Jpmorgan. Please go ahead.
Yeah. Thanks, Hi, guys I'm I'm curious how would you characterize your new customer adoption during the quarter and what are your strategies to drive further new customer adoption and especially as you get post pandemic.
Yeah.
Hey, Sterling.
This this is this and show up.
You know, our corpus Sterling and 90% of our business is and enterprise and commercial business and we've got very focused teams on enterprise and commercial sterling so like within the quarter, we significantly enhanced the number of people on those schemes and we saw.
Tremendous momentum on new logos are from both new and and commercial not only from North America, but also from EMEA and I'll give you. One example.
One other company that we brought on was the enterprise business is a 3 billion dollar consumer electronics company based out of.
Out of Chicago and.
They bought three of our products elite engagement and target their focus was really pipe line for 2020, one but also to expand their.
They use other products and their key accounts so again.
Strong momentum both on and on the news side of the business is strong on the enterprise and commercial side and we generated close to 600 customers last year Sterling and these become really key expansion potential for us as we go into 2020 one.
Alright, great. Thank you very much.
And we'll now take our next question from Chris Merwin with Goldman Sachs.
Okay. Thanks, so much for taking the question I just wanted to ask about and existing customers and as we go through renewals can you talk a bit about what you're seeing from these existing customers with an eye towards 2021 and be on you're assuming there's some state of.
On normalcy as it relates to the pandemic and how are your customers talking about any changes and their plans to host one of ours versus conferences and what does that strategy look like and ultimately what does that mean for you all and so think about renewing the relationship. Thank you.
Thank you, Chris and then because quit like just for everyone and Steven and different location. So I'll call. It takes on the questions and answers.
And and moved them to do that.
And Steve also so.
Why don't I take the first part of the question about how our engagement with customers and all of this is feeling and then I'll give I'll give it to see if you can talk about normalcy and like what's.
The second part of question.
S. So.
Overall, we are very pleased with our continued momentum we are seeing fantastic engagement from our customers.
Based on what our customers are telling us.
They see a future.
Often future, which is about hybrid engagement. This is a permanent change there is no going back companies. Other companies. They go on to 10 years of transformation and 10 months. Once you once it seemed to reach the engagement, which be it the other day.
And it did they get out of this lab for them. It's hard to go back and I'll give you. An example of one of the CMO of one of the largest software and cloud company, a fortune 100 company and he said to me and he said shrunk.
We're generating more pipe line more conversion of deals.
And the deal sizes, and also 10% higher and I'm spending one toward the money that I spend on physical events.
How do I go back. So so overall you know we are convenient and see trends.
Customer signing multiyear deals with us at the end of Q4. It was 21 per cent multiyear expansion and upsell are doing well and we're also seeing pretty strong growth coming out of international markets.
Would that Steve do you want to add any color to it.
And yeah, I mean, what where are you know on.
Yeah and.
And and all our.
And I was very strong and Q4 hundred and 49% and we expect that at all and Q1 to be strongest walnuts factored into guidance.
We provided we will see some volatility themselves and lots of public quarters, but at this point.
And I'm seeing much and production and.
We're seeing very strong customer engagement are contingent on.
Perfect. Thanks, so much.
Okay.
Thank you and then move on to my next question from Rob Oliver with Baird. Please go ahead.
Great. Thank you good evening guys. Thank you very much for taking my question on.
Sharon and I had one for you and then a very quick follow up for you Steve Schott.
You mentioned and I thought that was helpful color because you mentioned, how you guys see the world as hybrid and then in response to Rob and Chris Merwin question. There you said that you know that's because your customers are talking to you about that and I was curious you know I mean, one of the.
Key studies that we loved with Schneider electric where they talked about 230 per cent conversion took quality leads from virtual attendees of hybrid events before the pandemic. So I'm just curious.
As you guys have gotten into more negotiations with current customers and expansion.
And how those on Oh, why use cases are resonating and just how those customers youre thinking about on monetization of hybrid.
Yeah.
Okay.
Rob.
Thank you for the question I mean, if I was to grow.
Just want to make sure you mentioned smart Schneider electric their numbers before the pandemic right.
Yeah that that really caught our attention because I if I recall, they said that they saw.
They were they were hosting these.
Live events, where they had virtual events on top of them and they were getting these customer conversions on the virtual events to quality leads and a very very high rate, which seemed quite encouraging to US you know because obviously that was pre pandemic.
Yeah and and.
And Rob.
Thank you for the question. So let me let me take that.
And as you know Rob I mean, we were doing very well pre pandemic and Q1 last year, we grew at 31 per cent.
We had 73 per cent gross margins and we were operating profitable and you know.
On the premise of the foundation of our business was we've been working with companies for years and working with them on their digital engagement strategy and their digital transformation.
As this pandemic as it is.
Break the customers into two different parts that goes on.
There are those who have been who have been using the platform before and have been able to see the results.
And and then the new ones, who are probably more going to physical events I think the ones who are doing that and the.
They're doing a lot more because they know the reach and engage with and the data, but the new ones. That's all been exposed to it and.
And then once you get exposed to the fact that you get like the example, I gave on the cloud and networking company. Once you get five times more reach and you get 10 times more debt 10.
<unk> 10 per cent more deal size and close more deals there is no going back. So that's why the people who are doing debt are going to do more stuff as we move forward, but also we have the whole well.
Cohort of new customers people, who have really seen.
Uh huh.
The value of the digital platform and are going to use it more and I want to also highlight one other thing theres a major trend here that I talked about and in my remarks and.
And the trend is according to Gartner by 2020 five.
80% of sales and marketing is going to be done over and digital channels and that was happening pre pandemic and all that.
And that's only going to get accelerated so it's not that they're supposed to not happened before I think you'll see significant acceleration as the world moves towards more of a hybrid engagements.
That's really helpful. Thanks, and then Steve just a quick one for you you made a comment.
And you know.
I guess, the cadence or trajectory of the normalization and and all are and I missed it throughout 2021 could you talk about how that might look like look throughout the year. Thank you guys very much.
Yeah, Yeah, I mean, we're not really giving specifics on forward looking guidance, but and I wont sales moves the ball fall 2021 guidance, we provided we were being called.
Paul on a conservative and prudent and on modeling and on the way to think about it and pre pandemic MLR was about 100 and tempered a bit on.
More than 115% for enterprise business and 70% of volume.
And so, especially on a price.
So that should give you some guideposts to think about it as well.
And part of equivalents and get through.
And a year ago, and you know, if there's upside to that and others.
With that group and modernized.
And for Us.
Great. Thanks again guys.
Yeah.
Thank you, we'll now move on to our next question from Glyn with Piper Sandler. Please go ahead.
Thank you and and good afternoon, and I guess, one for sure Rod if I could as a follow up for Steve.
Sure Rod if you look at the pipeline and if I look back on the last year.
Strong net new logos and obviously, it's kind of post COVID-19, but if you look at the pipeline going into this year with only 30% of customers, having two or more products and it seems like the bulk of the opportunity is getting on the pipelines that are tied to upsells.
Installed base could you just walk us through what the visibility is like there what's resonating with enterprises around additional products and engagement hub that's the real.
New opportunity to upsell existing customers and then if you could just touch on and sort of new customer logos and if the pipeline there is healthy as well thanks.
Yep.
So that's that was Brentwood.
Brent, Yes, Yeah, Hey, Hey, Hey, how are you.
Good so Brent.
We are seeing continued momentum and our pipeline are both on the line on the side of.
Total pipeline quarter to quarter, and we track of course, and you could imagine a net new bike line every week. So we are seeing very strong.
Very strong momentum on debt and one of the things that we did last year as we significantly focused on increasing capacity sales.
Sales capacity, both for enterprise and and per our commercial business and at the same time. We also kind of added more sales capacity and do our expansion and upsell business and added a lot and the leadership capability there to and as you said. So we are we are attacking on all fronts.
And we ended last year with close to 30 per cent of all of our customers having multiple products is up.
As you know elite is about over 70% of our air are I think it's followed by engagement hub and virtual conferences and almost around the same and followed by target a lot of our focus this year is to continue to increase the expansion.
On the other products I mean, just to give you a variety of perspective and I talked about.
70%, plus and elite last year, there was a 10% degrees and the and.
And and elite as a percentage of total because the New York on extra golf pretty significantly and we expect the newer products well and will continue to increase debt because they are new or they're going to grow faster, but elite is also doing well doing very very well.
I gave you an example, without and multiple product R. R.
Mhm acquisition team is getting more and more focused and bringing multiple products. I gave you. The example of this consumer electronics company based out of Chicago that bought three Bucks right off the gate. There's another mid market company that bought elite and engage them and how right off the bat and within a month.
And our virtual summit spark virtual conferences. So we are seeing that kind of momentum at the same time and be able to also basically attacking a true on our expansion and upsell channel.
Got it got it sounds like those yeah, absolutely helpful. There it sounds like the the capacity adds on the sales side or are helping both sides of the business, both new logos and expand which is certainly encouraging I guess, Steve a follow up for you is really around.
Your ability to hire I mean, you generated 24 million of operating profits. This year, you're guiding to kind of a slight operating loss as you make those investments and on my question here is how and how difficult has it been and the hiring and Onboarding new employees. It sounds like you're having some good success on the sales.
Side, but love to get an update just around your ability to hire and and how aggressively are you hiring right now and the current environment. Thanks.
Yes.
Sure Yeah.
Okay.
You can see from net head count numbers that we've been very successful and growing the business and higher and this past year and Q1 is shaping up to be another.
Successful quarter for us in terms of going up higher on on.
And on boarding new employees and that we're on.
Really happy with how it's going on and roll out on that.
And if that's helpful.
Yeah, absolutely so Justin just to add to Wuxi, and Brent, what Steve and saying.
You know we got on this thing pretty early on.
How about hiring both sales capacity and product.
We saw the momentum last year or so so we're doing quite well and the other thing that we also focus really hasn't be on was on enablement and so so far.
And I know, it's a challenge, but so far we are quite pleased with what we are saying.
Great well, that's a that's good to hear and and glad that the momentum here continues into Q1. Thanks.
Yeah.
Thank you all knew Nevertheless, our next question from Scott Berg with Needham.
I tried and Steve Congrats on a good first quarter. Other the sheets are I guess I got two for me and I can start.
Right.
And pre scripted remarks, you highlighted two problems like we saw warmer.
And obviously, it looks like and scatter.
Engagement side, how do you look at it.
And engage with your.
Customers on your platform or other usage on the platform and I guess, what I'm, specifically looking at us and even at levels of usage levels, and Q4 or the same or better on a per customer base and says the worst day of the first couple of months after.
After the pandemic or did you notice any notable change.
Yeah.
Let me, let me make sure I understand the question, but I think the question is compared to Q4, how do we see the engagement this quarter.
Correct.
And so.
I think we are seeing significant momentum and continued strong engagement on the platform.
And both Q4 and Q1.
Q1 thing.
But just just call. It call. It Q4 is generally are seasonally our strongest quarter and.
And would expect for many companies and there is because and Q1 is our weakest.
Seasonally the slowest quarter and the reason that is is because as you know people come back from January but we see we see people pretty ramped up and.
And and and.
And the engagement on the platform is growing very very strong so other than seasonality, it's a it's business as usual and and maintaining momentum and.
And I don't want to make I also want to make it make one comment you average them, which I think is important.
And there is generally a tendency when people think about debt.
Post pandemic.
And there's a tendency on thinking about the world being all physical events and physical trade shows going back to physical I just want to highlight that.
Virtual conferences other virtual trade show.
It's been 12% of on so.
And so that's a small portion of our business.
We have a much larger bids and experience back on dish and it's been suite that has been doing very well pre pandemic and we expect there's going to continue to do well.
Yeah.
Got it helpful. And then from a follow up perspective share. It you talked about adding sales capacity. This year, obviously, you've seen a big NAV increase hum of demand here, but on a nuanced more nuanced travel outside of just blunt force, you've got a big pipeline and we need to address it are there kind of new opportunities.
New channels, you mentioned, Japan, a little bit, but is there anything else to really call out from a maybe a new sales opportunities. This year that kind of target that you did not last year.
Aye.
I think let.
Let me talk about the four or five areas and we all we are focused on and we started focusing on and last year, you talk about international markets and let me start with debt.
Oh.
Is our international momentum and EMEA and APAC is good but we also we entered Japan and Germany at the end of last year and this year early this year, we had also and from southern Europe, and we are seeing some really good momentum from early deals I think.
Proof of course, and we as we as we sustained debt, but really strong.
Second part of our focus as the new customer acquisition of really focusing on enterprise team, which is more land and expand and commercial but just more velocity, so adding capacity there expansion and upsell that talked about and then the fourth thing and just go ahead and get up yet.
We're significantly investing and our product and engineering organization and we're very much focused on new product features modules and others just to give you. An example this.
Just this.
And this quarter, we launched and enterprise edition for our unique product, which is our flagship on it. What this does is it adds accessibility and advanced data and insight so things like live and on the net captioning.
Advanced data and insight features we've added back bundled and for enterprise customers on a global basis.
Those other three or four areas that youre going to keep seamless adapt pretty aggressively.
Great that's all and thanks.
Thanks for taking my questions.
And thank you and then move on to our next question from Bob on Siri with William Blair. Please go ahead.
Great, Thanks, Charles and Steve.
Oh My God.
Congrats on a really good quarter on Dave here.
And I haven't touched on.
Investment priorities and touch on sales and R&D.
But one other things you've talked about in the past.
As we ramped the.
Partner mushrooms, and how you think about partners today, and which are de Minimis I feel like in terms of the contribution that and where that plays out in the next day three to five years and the importance of the types of problems you might have and you look to scale the business.
Across all the product set and so citizen.
Okay.
Uh huh.
Good luck with the Jack up.
I think and you have you.
You said 98 per cent of most of our business right now is direct and that's frankly.
It's a major area of focus for me and it shows you the leverage and are in and our business. I think we are focused on two categories here both on the force category as you know.
The sales and marketing.
The third party integrations that we have and it does very deep integration so the debt.
It'd be adobe market and it was the the Ela gloves and now we are adding the life science and C O N E.
But.
We are very focused right now and driving more pipeline from that from that channel. So that's one I've I've gotta be be focused on just driving debt.
So again and in its infancy, but that's an area of focus on pipeline and the other one is but we are focused on building and the agency channel and as many companies are really looking for this virtual experience.
And sort of engagement platform, we wanted to basically get in and then expand debt platform. So one of the smaller agencies are.
Mid level marketing and sales agencies, that's and increased area of focus again very early stages, but has significant level and as we move forward.
Yeah, and I'll try and attempt to agree I think the availability of the price.
On up into these more complex digital experiences will be amazing and I think department Fortunately debt.
I wanted to touch on customer accounts I know, it's been brought up a couple of times, but if I look at it.
Sales for you and your attitude and somebody gets up and this quarter 100 billion and last quarter average adds last year like Ford and.
How do we think about that going forward do you think will trend towards the average out yesterday and now you've got more salespeople and want more productivity and get more.
And focus on that but what was left on the processing tool.
Debt level set expectations in terms of new.
New customer adds.
Yeah, I don't want to pay debt.
And now we.
Yeah, I also had to take that and we.
We don't really disclose forward looking guidance on on customer count per Se and we'll report that at the end of Q1, and I will say, we've got great things and how it's going and it's trending in line with our expectations.
Got you got you alright, Thanks, gentlemen, appreciate and planning and taking my questions.
[laughter].
Thank you and then move on to our next question from DJ Hynes with Canaccord.
Okay.
Hey, Suraj and Steve Congrats.
Congrats on the results.
So sure on colleague asked about.
Scott asked about engagement with the platform right, which I took to me and kind of how many webinars are being run by our customers I want to ask if you've seen any change and webinar participation rates over the last three to six months I think because.
And some investors wonder if theres any virtual fatigue, setting in and and what that might mean for future spend at among your customers, So and any color on thoughts there would be helpful.
And.
Yeah, I was going to be like.
With the chat with you.
I think if you look at last year D day, if you look at what happened in Q2 and Q3 last year.
Bush and physical world desktop and.
And people, who are in panic mode, and other stuff right and so of course, you saw the very highest spikes and.
Spikes in demand.
Now as Q4 happened and SKU, what happened and it's hard to sustain that level of intensity just not possible and so you know.
If you have conversion conversion changed that and those cubic and three ballpark.
100 people.
You know registered as many as 60 and 65 people joined I think that's not a sustainable number on outback on Germany senior debt about.
People based on registration and about 40 to 50 per cent.
Somewhere around 45 per cent is it is a really good conversion rates for people I think we are beginning to see that what's very clear by the end of the other people. They would have what people call. The zoom fatigue and other things. So some of that is there a bad debt, but we're not seeing any impact on the activity of things that people are doing.
Conversion rates of course have normalized and only compared to what it was and the beef costs COVID-19.
Yep Yep and it makes sense helpful. And then maybe a more strategic question. So today you guys integrate into all the leading marketing automation platforms out there is there any aspirations to build out any of that workflow functionality in house and how are you guys thinking about the evolution on that front.
Uh huh.
We have not thought about it that much.
D J.
That business has become.
I wanted to say.
Commodity, but that's kind of widely available a little I think more and more so you'll probably see us focus on more engagement platforms are strategically that really adds to the experience there how can we drive more and more engagement more buying signals.
And then you'll see us also and invest them up and on.
On 24, and intelligence layer more and be up and the data and artificial intelligence and also the more the platform and the bogie of other integrate for example, currently we are integrating very deeply with the leading life science and CRM and that's gonna be important for us as we as we close a lot more life science and the deals so from a marketing automation.
On CRM.
And our art strategy, there is to really integrate more and more deeply with them. We're also focused on things like sales enablement platform companies like outreach and sales work and others. We are providing are you looking at integrating our customer profiles right into those platforms also so our focus really is wider.
Integration deeper integration of our engagement data and in.
Both snap on as opposed to go will go on with our own up there.
Yes that makes perfect sense and I don't know if that was I was hoping you would answer and thanks very much.
Thank you.
Thank you and then take on.
Final question from Alex Kurtz with Keybanc capital markets.
Yeah. Thanks for taking the question and congrats on the quarter and the outlook on it.
And I just wanted to have you take a minute to talk about your data and strategy. It's obviously, such a key differentiator and what you do relative to some of the other competitive products and the market. What are the plans for this year and investments in data and when should investors expect to see as you ramp up that the key.
On a piece of functionality on the platform.
Hi.
And I'll have Alex good to hear from you.
So.
Two parts well, let me talk about investments, we're making and and and the areas. So first of all we are significantly focused on on adding more engineering head count data scientists on the one point per intelligence and there are two key parts to it it's the analytics and I keep the integration and separately and Olympics.
And the AI driven platform. So there are two or three things that we're doing day, Alex first of all when we talk about logistics and supply from the whole glad from elite engagement target virtual conferences and one thing that we're trying to do is as we provide the cheap debt.
The profiles of people and others, one we're trying to make sure that.
And that's the profile across all the different back from right now there may be a little more siloed and making sure. There's one profile office shallot, Toronto dos and engagement across all the platforms. That's that's the Forest Park secondly, you're adding these buying signals across all of that from if you want and took a meeting directly with it.
Customer how how can you book that meeting so we are and that's it that's a major area of focus for us.
It is our AI and they are the machine learning and it would be.
Margin of data on our platform I want to make sure that every line of experience a webinar you go through you have recommended content. The day based on your interest you take you through the next few other docs could take you to that part of the engagement and making sure making sure that that becomes ubiquitous and a black Swan. So those three things again.
And integrating the data across the different platforms the.
And the buying signals and making sure that there are no debt and that goes from one one recommendation to another and opinions to enhance the engagement on the platform.
Thank you.
Yeah.
Thank you and that does conclude today's question and answer session and I'd like to turn the conference back over to management for any additional or closing remarks.
Thank you everyone for being on the call today it has been and.
You know a transfer made its last 12 months on 24 and.
And I want to take the opportunity to personally thank all of our employees.
And quite a hard work and dedication and to all of our customers really appreciate the trust and put in us and I'm going to continue to focus on owning that every day and thank you very much.
And again that does conclude today's conference. We thank you for your participation and you may now disconnect.
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