Q1 2021 Tufin Software Technologies Ltd Earnings Call
[music].
Please continue to standby for today's tooth and conference the program will begin momentarily.
Again, please continue to standby [music].
Greetings and welcome to <unk> first quarter 2021 earnings call.
At this time all participants are in a listen only mode of.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I'd now like to turn the conference over to your host Jackie Marcus with Investor Relations. Please go ahead.
Thank you operator, and the day, everyone. Kevin released results for the first quarter of 2021 ended March 31, 2021 earlier this morning.
You did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at investors <unk> Hewson dotcom.
With me on today's call are really Quito, two things co founder and Chief Executive Officer, and Jack Lucky Lee <unk> Chief Financial Officer.
This call is being webcast and will be archived on the Investor Relations section of our website.
Before we begin I would like to remind everyone that any statements made in today's webcast at express a belief expectation projection forecast anticipation or intent regarding future events and the company's future performance may be considered forward looking statements as defined by the private Securities Litigation Reform Act. These.
Forward looking statements are based on information available to <unk> management team as of today and involve risks and uncertainties, including those noted in this morning's press release and he was in filings with the SEC.
Such forward looking statements are not guarantees of future performance.
Actual results may differ materially from those projected in the forward looking statements.
Two of them, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law.
Please note that a reconciliation of any non-GAAP number to the most directly comparable GAAP number can be found in the tables of our earnings press release located in the Investor Relations section of our website.
With that I'd like to turn the call over the <unk> CEO and co founder really kicked off really.
Thank you Jackie.
Everyone and thank you for joining us today.
Hope that all of you and your families are well.
Our first quarter of 2021 results were within our provided expectations in what is typically our seasonally slowest quarter.
During the first quarter, we announced our shift to a subscription model.
The portion of our business the close of subscription in the first quarter exceeded our expectations and had an impact on revenue for the first quarter.
And this quarter product revenue grew 4% year over year and total revenue grew 1%.
As we progress of the transition to recurring revenue model, we expect our results to be more consistent and predictable on a quarterly basis.
While we're still in the early stages, the transition is going well and early activity indicates a strong level of customer acceptance of the subscription model from.
For example in Q1, we had subscriptions representing approximately 24% of new business bookings compared to 9% of new business bookings in Q1 of 2020.
As a reminder, we defined on the annual target for 2020, one of having one third of our total new business bookings coming from subscriptions and based on our transition plans in Q1 results. We feel confident that we will meet or exceed this target.
To support this opportunity we continue the work on our transformation and build on the strong momentum carried forward from the second half of last year as we strive to improve execution and remain agile. So we may fully participate in the ongoing recovery and set the stage for long term growth.
As we focus on our transition to recurring revenue model and invest internally. So that we are posed to capture growth. We believe our results for the fiscal year will be back half loaded.
This expectation is also evident in our guidance.
While the full subscription model transition may take some time, we remain confident in our belief that this is the right direction for our business and our value stakeholders.
Let's do a deeper dive on what we've seen so far along in our transition to subscription.
We realize that this is the only one quarter, but our performance indicates early success in converting customers to the subscription model.
We saw Q1 combined subscription and SaaS bookings grew by over 200 per cent compared to Q1 of last year.
In addition, combined subscription and SaaS of license revenue in Q1 grew 125 per cent year over year.
We feel that we're off to a great start in 2021, we're moving in lockstep with our sales team, we're very focused on executing our plan and we're feeling good about our progress.
In addition to the transition efforts will also taken the opportunity to invest in our team and organization to support our path forward and be prepared to meet the increased demand for our products and services.
As we announced earlier this year re brancato joined us as the Chief revenue Officer.
Range experienced fits well with our strategy and a track record provides us great confidence in his ability to lead our sales force.
Another area I'd like to mention is our product innovation and some of the recent announcement, we made since the last earnings call.
In March we announced the general availability of two of an orchestration suite Virgin R. 21, best one enabling users to further automate security policy management and extend the visibility and control across the hybrid cloud.
We added new automation capabilities for Microsoft Azure to secure of both north south axis across on premise data centers and Azure cloud environments, and the east with connectivity within Azure virtual networks.
This was done for and the integration of secure change and secure cloud, which customers are very excited about as it enables visibility control throughout the hybrid environment.
We also extended the automation capabilities of the secure change from an extensible API to include external platforms that are not directly managed by the tubular of prescription suite today.
By incorporating information from external devices and platforms into secure change to from customers can centrally managed security changes for any platform across their hybrid environment.
We also announced two new marketplace apps. The first was our policy change automation app for Cisco ACI, enabling automation of ACI contracts through the integration of the secure change with ansible Playbooks.
The other App is the vulnerability based change automation app or VCA.
The BCA app automatically retrieves data from Bullen, Billy scanners and reflects the results from the risk assessment step of of change request.
The most can ensure there are no risky bone the abilities in either of the source or the destination of the change tickets before provisioning new network axis.
We're very excited about the new version and the new apps as the extend our leadership in security policy automation.
Now turning back to our results for Q1.
The first quarter revenue was $21 4 million and non-GAAP operating loss was $9 $5 million and both of them within our stated guidance range and we're reaffirming our previously provided guidance for the full year of 2021 as we continue to navigate what we believe is the tail end of the pandemic and the beginning of a prolonged recovery.
Demand for secure track secure change and secure act was strong as we continued to see customers looking to gain visibility and compliance automate the network change processes and achieve digital transformation.
Furthermore, we're also pleased by the continued traction we have with the two from cloud offering.
We're encouraged by our sales pipeline and by the value of the customer derived out of our product, which continues to be reflected in our renewal rates of 90 per cent or higher.
This is an important metric and supporting your transition to a subscription model.
We look to gain more traction in the transition through the second quarter and remain optimistic for a strong second half of 2021 and beyond.
I'd like to now turn the call over to Jack for a deeper discussion of our financials.
Jack Thank.
Thank you Ravi.
The eco what do we send them into are making good progress we have a plan that we're executing on in the early indications give us confidence in our strategic direction and the effectiveness of our actions thus far in 2021.
As I outlined during the last earnings call in February we started to shift to a subscription based revenue model beginning of the first quarter of 2021. This.
This shift will allow us to have greater predictability and visibility into other business.
We are pleased with the initial response from our customers in all or most of the subscription.
As I said last quarter, we will be providing all of our on an annual basis. Since it may have variability between quarters that the web scale.
As Ravi mentioned earlier, having the strong close with our sales teams on what they're hearing from customers combined with the increasing percentage of subscription deals that the other than the government or pipeline gives us confidence in all of the ability to execute on our strategy in the coming quarters.
With that let's discuss the first quarter results.
Total revenue was $21 $4 million in Q1 of 2021, which is 1% above Q1 of 2020.
Product revenue increased 4% year over here, the $6 million, while all the maintenance and professional services revenue was $15 $3 million in line with the same quarter of last year.
On the geographical basis Americas, the presented 48% of low revenue Europe represented 46% and the remaining 6% came from Asia Pacific.
We continue to do well with both financial and telco customers as the.
The increasingly complex nature of their businesses require a solution that provides security policy automation.
Let's turn to other module and expensive.
I will discuss some of his thoughts based on non-GAAP financial measures. Please note that the GAAP to non-GAAP reconciliation can be found in the tables of our earnings press release located in the Investor Relations section of our website.
Gross profit for the first quarter was $16 $5 million or <unk> 77 per cent of revenue compared to $16 $2 million or 76% of revenue in Q1 of last year.
Total operating costs for the quarter total of $26 million 12 per cent lower than a year ago, which as a reminder, did not reflect the COVID-19 related cost measures, we implemented in Q2 of last year.
R&D expense for Q1 was $8 5 million or 40% of revenue compared to $8 $8 million and 41 per cent of revenue in Q1 of last year.
We believe investing in R&D is a critical part of the flow of strategy and we will continue to allocate the appropriate level of free sources to this area.
Sales of our marketing expense for Q1 was 12 point, the $8 million or 60% of revenue compared to $16 $6 million or 78% of revenue in Q1 of last year.
G&A expenses for Q1 was $4 $6 million or 22% of revenue compared to $4 million of 19% of revenue in Q1 of last year.
Operating loss for Q1 was $9 $5 million compared to an operating loss of $13 $3 million in Q1 of 2020.
Net loss for this quarter was $9 $8 million compared to the net loss of $13 $2 million in Q1 of last year and net loss per share basic and diluted was <unk> 27 cents for Q1.
Compared to 57 since Q1 of last year.
Turning to the balance sheet and cash flows.
We generated $9 3 million in cash flow from operating activities in the quarter, which is an $8 $9 million improvement from the year ago period.
We closed the quarter with total cash cash equivalents restricted cash and marketable securities of $113 9 million up $9 $9 million from the beginning of the year.
We believe we are at the forefront of significant market opportunities and we will continue to make the appropriate investments to extend our technological leadership to meet the demand for security police of automation in the increasingly complex landscape and which companies face daily threats.
I would like to share of expectations for the second quarter and the full year 2021.
For the second quarter, we expect total revenue between $21 million to $25 million and non-GAAP operating loss of between 12.7 of $9 $3 million.
For the full year of 2021, we continue to forecast total revenue between 105 million and the $115 million and given our ability to capture greater efficiencies in our business and reduce costs. We are revising of our non-GAAP operating loss to now be between the $3 $8 million of $27 million.
With that I'll turn the call back to the movie movie.
Thank you Jack as many of you know we are the security policy company, helping large enterprises manage the network policies to improve business agility, while mitigating security risk.
As these enterprises embrace digital transformation and adopt new technologies, such as cloud SDN and micro services, the it and cloud environments become increasingly complex to.
To counter these challenges enterprises continue to implement additional security controls at the perimeter and the data center and an endpoint.
Most of enterprises still lack of comprehensive security policy around access.
And we're seeing examples of successful of tax carried out on a daily basis keep in mind those are only the breaches the reach the headlines.
As I mentioned earlier the need for automation is paramount for our customers.
With the Ikea department of being tapped to do more with fewer resources <unk> proven track record of automating security policy risk management of compliance across the complex environments is what sets us apart from the competition.
We recently saw this with the multibillion dollar of it services company.
Our helps to help solve their limited visibility and lack of compliance which was largely a result of the inefficient manual processes and the lack of of centralized security policy.
They needed to become PCI compliant and wanted to automate their network change process, but first they have the gain visibility and established basic reported to stabilize the security posture.
The lack of visibility of manual approach caused many of the latent errors and <unk> unified security policy and out of the box of PCI compliance reporting were critical for them and ultimately helped us beat the competition and win this new logo.
Another notable deal in the first quarter was the large global services company, which already spent close to $2 million with us from the past and owns book secure track insecure change profitability compliance and network change automation.
They were expanding into a new data center.
And given the return on investment with two of them over the past six years, the decided to expand the <unk> footprint as well and ensure that the maintained policy compliance and process automation throughout the state.
Even though this customer traditionally bought perpetual licenses the opted for one year subscription and the latest two expansion the.
These are just two examples of where to from was able to demonstrate significant value to large enterprise accounts and help them on their journey to the digital transformation.
In summary, 2021 is the Europe opportunity for two of them.
As an industry leader with products that enable security teams to gain visibility and control through automation, we will continue to invest to grow our business.
We believe we have a very significant opportunity ahead of us, especially as organizations of all sizes are planning to grow their security investment given.
Given the nature of our customer relationships as a trusted partner for the long term.
I believe the transition to a recurring revenue model is an important milestone in supporting the company's long term growth strategy.
While it will take a few quarters for the full results the prove out I'm confident that we're on the right path to deliver sustainable value to all of our stakeholders.
I would now like to turn the call over to the operator and open the line for questions.
Operator.
Thank you.
At this time, we'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
The first question today is from Sterling Auty of Jpmorgan. Please proceed with your question.
Yeah. Thanks, Hi, guys. So a couple of questions from from my side first when you look at the subscription deals that were done in the quarter. What was the overall mix of new versus existing customers that chose subscription.
Oh, Hi, Sterling this is the Jack.
We had the mix.
The new new logos and existing logos I would say, it's pretty much in line with the general split the debt we've been the thing to think towards the best of the quarters.
So no surprise me of I would say you know bottom line, it's in line with other.
We can remix.
Okay, Great and then how about you gave an example of the large customer but.
That was kind of of kind of be the next question is what is the mix between large deals small deals. So in other words are people just kind of dipping their toe in the water.
On the most of or are you seeing serious commitment to that subscription option.
And the.
Go ahead Jack.
Yeah, I'll start moving that didn't make it certainly sterling we have seen.
Wide range of deal sizes.
Again, just like we normally expect in all of that.
Perpetual business in the past, we certainly had the six figure deals large six figure deals being subscription. So there's no surprise there we were seeing good reception in terms of what you call serious deals from serious customers global two thousands of customers Andrew.
And we're happy with the mix of the need of things.
Hi, Sterling I would just add that we're expecting in large deals and the highest speed like we normally do a model transition. Obviously is going to result in fewer mega deals and a higher number of mid size deals.
Overall, I think that's healthy because we want to have a more predictable business.
That makes sense of the last question.
Last question is.
At year end, our see besides just looking at the mix of <unk>.
Bookings that chose subscription what else should we be looking at in terms of your metrics.
Who.
Understand the success of the transition and if the general spend from your customers is continuing to grow.
So it's a good question when Youre looking at the at.
Some of the numbers that we shared.
We look at the transition progress, we're very happy with where we are.
In some ways. We're ahead of the plan, we shared that the 24% of new business bookings were subscription and on the year, we're expecting debt to be a third so we're on target to meet or exceed that and also in general.
The subscription revenues when you look at it.
Subscription plus SaaS significant growth over the last year also when I'm looking at the pipeline.
A good very good percentage of the pipeline right now with subscription.
So I think we're making very good progress on the transition from that perspective.
Yeah.
Understood. Thank you.
The next question is from Katherine terrific of Collier. Please proceed with your question.
Hi, Thanks for taking my question can we talk a little bit about the sales cycle and the productivity.
Productivity of our sales organization.
The Scott that you are seeing larger deals is there any change in the tempo.
Of these larger deals or mid size deals.
Hi, Katherine Thanks for the question so.
Raise onboard now.
We feel that we've made a lot of improvements and we're continuing to make improvements we're focused on executing the transition well overall, we've rolled out a lot of incentive to the sales force. So the very excited but the subscription, especially to the new logos.
Thats gone well overall.
Okay.
Okay. So there's no change in cancer.
Yeah, let's say of large financial institution might take nine to 12 months, yeah, well take nine to 12 months.
Yes.
The only impact I would say is if you're looking at how we the timing of the announcement, we announced this internally.
At the end of January so salespeople looked at a lot of deals. They had in the pipeline that may have been perpetual started shipping them to subscription some of those deals we closed the subscription now in Q1 some of those shifted to later quarters in the working on getting them the subscription because they are heavily incentivized to do so.
Customers that might've budgeted are now changing budgets or going through.
The new signatures, new approval process, because they had perpetual they might've been capex now theyre moving the Opex, which is natural.
The other than that there is no change to.
Deal execution of how long deals stake.
Alright, Thank you very much.
Thanks.
The next question is from second Korea of Barclays. Please proceed with your question.
Okay, Great Hey, guys. Thanks for taking my questions here.
Jack maybe maybe just to start with you understanding it's still early in the transition.
How much of that 24% mix in the quarter, what was with term subscription versus versus SaaS and what is sort of the average duration of those contracts sort of sort of look like.
Hi.
Sure. So we did not break down SaaS and subscription yet I think it's early in the process.
But you should think of subscription being.
Most of the much more significant than SaaS and they think thats something we communicated in the past looking to both set of SaaS. The you know growing the not the comprising that'd be quality flow of business. So think of the majority of being a subscription and then in terms of of subscription deals I think we answered the size of <unk>.
When starting gas.
On the other parts like we said in the past and we expect.
As expected the sort of mix between multi and single use deals in terms of duration and this actually what we've seen we've seen the film.
The balance between what's the use and single use and when we say multi use that cash I mean six months, although we had the couple of deals that were either more or less than 56.
And qualitatively as well I mean, the deals they met our expectations in terms of.
Compliance versus the automation.
They met our plans.
The spread in terms of geographies and in terms of from history.
Got it got it that's helpful. Ruby maybe for you.
Obviously, great hire with Raymond Bronco to the.
Last quarter, but can you just maybe talk about some of the foundational steps you're taking internally. In addition to that to set up the or the sales organization.
The sell subscription more actively as the year progresses.
What does that mean sales.
The incentives or comp or just any changes in the organization just very broad based any other changes that you're making to sort of the.
Pave the path for a higher subscription mix in quarters and years to come.
Hi, good.
Good question. So if you look at some of the investments we've made.
Maybe six or 12 months ago, we've already started investing we knew that we wanted to move the subscription eventually so we sort of investing more and more in sales operations. We're investing in terms of infrastructure and things like the ability to run licenses concurrently somebody that might have perpetual license today existing customer and they buy subscription you want.
The entire system to work with some things timing out in terms of subscription and the perpetual license thing on board. So of all of that work is ongoing in terms of incentives were incentivising subscription deals significantly over perpetual deals. So we've created a plan where sales people make the most money selling subscription deals the new low.
It goes based on PCB.
They followed that with selling subscription to existing logos and the fewest I'd say the low comp from the perspective is selling perpetual deals. So they still make money on perpetual, but they make a lot more money on subscription and especially to new logos.
Got it very helpful. Thanks, guys.
Thank you.
The next question is from Brent Thill of Jefferies. Please proceed with your question.
This is Joe on for Brent really appreciate the question I'd actually love a little color from both of you on that but it's great that you guys are at or ahead of your plans for one third bookings to be subscription for the full year, but given that the lowest percentage was in <unk> of percentage of subscription.
The second half implies sharp acceleration in revenue growth rate. So I'm, just kind of curious given that headwind from subscription what what gives you the confidence the kind of maintain that full year guide what kind of visibility pipeline any color you can kind of given to that visibility would be helpful.
Yeah, Hi, Joe.
So when we forecast and we guide this is based on our.
The planned roll ups and pipeline.
No debt.
The only one I've got to the league, but based on our whole of lump sum got in the pipeline looking into the pipeline. Both elements that you raised exists and it gives us a lot of confidence both of them I mean, one the.
We have a higher subscription mix going forward.
Drilling given zooming get more.
Seeing more large deals coming in later in the year.
Our subscription so net.
The one component and obviously the second component and the fact that we have the supporting pipeline for the numbers of guidance.
In terms of headwinds, we said in the past the debt.
For the full year, we're looking at several millions of dollars.
Impact on the total.
Total the 2021.
We may end up Q1 Q1 of the good start we may end up a little bit more but thats the equivalent of that.
Okay.
The headwind could be more than hypothetically that revenue range might have to be lowered which isn't a bad thing in the long term, but I'm just kind of curious why maintain that revenue range now.
Well, we have just started the transition of Joe.
Too early we May later in the year see the things are moving to a different base in the just the numbers having started announcing it in February the move and we're just a few months from there.
Think we felt the most of them for them.
Look at the the way we evaluated the full year.
And as I said these things change, we will update everything to you.
Okay.
Hi, Joe I'll, just add to that so in general we're comfortable with the current pipeline.
We're confident in our ability to execute better than last year, we of rate on board, we fixed a lot of the sales execution issues that we had and also in general we're expecting customer spending patterns to improve in the back half of the year.
As the pandemic impact is reduced in our industry.
Okay.
Great to hear and that you guys of confidence that's great.
Then on the flip side the bottom line is actually a little bit better for the full year guide. So kind of can you parse that out youre investing for growth Youre, making some changes but then.
You also have a higher mix of subscription, which I would assume would be lower margins. So maybe just kind of walk us through the the improvements to your guidance on the bottom line.
Yes sure.
Let's start with the impact on the gross margin.
You should not expect a lot of impact we modeled the.
The guidance.
And remember of subscription.
And the SaaS subscription.
<unk> dealt with just like perpetual deals.
Accounting wise on the P&L so margin.
The results of the scope of our business, but that's the only right.
The accounting for subscriptions with no change of our merchants.
The one on the bottom line.
You know we did some cuts in 2020 I assume you're looking at 2020 of the comparison.
Just in the past and shouldn't be careful to compared to 2020, we did some.
The cost cutting measures in may the second quarter of last year. So.
If you're looking if you're comparing Q1 of this year with the Q1 of last year, you can see that actually expenses.
Oh down so what's happened through 2021 towards the end of the year, we started bringing back some of those expenses. We gave back salary cuts that we did earlier so expenses have been ramping up.
That's true this year.
We said and we keep saying that we believe in the opportunity. So we're doing.
The more investments you know, we're focusing on the long term.
And we're focusing mainly on growth. So we're doing investments we're growing around the theme of growing sales and marketing team and moving ahead full speed.
While being prudent with spending so this is why we adjusted the.
The guidance.
And I think.
If you're comparing the full year two of the full year last year and accounting for the changes we had in 2020, you can see that we're pretty much growth and how much we're drilling costs.
Okay. Thanks, guys truly appreciate all of the color.
The next question is from Andrew Nowinski of D. A Davidson. Please proceed with your question.
Great. Thanks, guys.
So I wanted to ask a follow up question on the back half of your pipeline.
It sounds like a lot of the pipeline of the large deals that you have in the pipeline are coming back online.
Somewhat related to the opening of the economy in the world of emergence from COVID-19, but I'm wondering if any of the the.
The breach activity that we've seen in the news.
<unk> has actually had an impact on those deals or if youre seeing.
More customers prioritizing policy automation.
Now because of the breaches.
Hey, Andrew Thanks for the question yes.
Yes, so we are seeing demand for our automation and what we do.
Demand is strong across the board Hasnt really changed.
I think when you look at the colonial pipeline and other breaches. This is going to be hopefully tailwind for us it's not an immediate impact in terms of.
In terms of demand so we're not factoring anything like that in our pipeline.
Maybe it will have some effect and we're hoping of will from our perspective, but we're not banking on that.
When we look at pipeline and how things of mood I mentioned that earlier sales.
Sales people in Q1 saw their plans they saw the most of the subscription obviously trying to move some deals the subscription quickly and they are still in the process of doing that now.
And that is shifting some of the pipeline that we had in Q1 and Q2 to the back half.
And now when we're looking at it we feel comfortable with the guidance that we gave and we are reiterating it.
Okay. Thanks, Ravi and then.
My second question just on the services line.
It doesn't look like you've ever really had a year over year decline in the services is that attributable to the shift away from perpetual.
Or is there when you sell it term subscription and SaaS solution is there any revenue that goes into the it services liner and how should we think about services going forward.
This is Jack.
The the.
The flat.
The level of the chips and <unk> are.
Should we think about.
Two the P S. The professional services.
Not to the maintenance.
So.
The subscription does not impact of the maintenance just answering this piece of your question.
The street's at like I said earlier.
The other question excrete, the just like perpetual subscription.
Reside in the books and the split between license and maintenance just like with what you would think of 70 30, if you like for the single use of deal.
We don't have to have for a multiyear deal.
So specifically for Q1.
The being flat is attributable to professional services and professional services. This is not the indicative of whats.
The happening it's not the trend.
Yes.
As the around.
Timing of project timing of delivering projects, sometimes it sits on the a single the paper.
Paperwork approval the either comes in or the most of them in the quarter. So I wouldn't see because of the indicators.
Okay. Thanks.
The next question is from Jonathan Ho of William Blair. Please proceed with your question.
Hi, guys. Good morning, I, just wanted to maybe start with a couple of financial questions is.
Is there a way for you to maybe quantify for us what the impact on revenue was for the quarter from the higher subscription mix that you saw versus your expectations in the original guide.
Yes, Hi, Joe.
When we came out in February we said that we're not going to.
Guide for headwind or share of headwind, we said that headwind for the full year is going to be in the order of several million dollars.
I don't think.
This point of time, we want to start calling out some headwind.
Several of the full year. This is the scope that you should be looking at the as I said before if the surprises us and the number is higher its.
We're happy to have this one of them.
Got it.
And then.
Oh go ahead.
Yeah, I mean does this answer the question.
No. It does it does.
And in terms of your free cash flow of that was very strongest quarter can you talk a little bit about what your free cash flow expectations are for the year.
Okay.
Yes, sure so I wouldn't be looking at quarterly cash flow of two thin because of the seasonality or the flow.
From a business Q1 is typically a stronger.
Cash flow of quarter for us because of having the stronger Q4 Q4 is normally our strongest quarter.
In the year I would look at the like you say on an annual basis.
We're not capital intensive so we you should think about the cash burn or cash flow.
In line with give or take in line with the.
Bottom line results the operating gross.
Great.
And then just maybe one last one from me are you seeing any pent up demand start to materialize from COVID-19, or is this sort of of getting back to more of a normalized cadence. Thank you.
<unk>.
Hi, Jonathan I think theres, some pent up demand but.
Mostly I would say just people are getting back to business getting back to normal so.
Cycles are starting to normalize I think.
There is more optimism.
Buyers are more active so we're seeing some effect.
I'm, not saying like huge sort of pent up demand of people that.
We're waiting to spend a ton of money in.
Coming out of all of sudden but.
People are.
Are now starting to prioritize things that they couldnt prioritize earlier.
Great. Thank you.
Thanks.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question is from Rob Owens of Piper Sandler. Please proceed with your question.
Hey, guys. This is Justin on for Rob, maybe just digging back into the transition I know last quarter. You had mentioned you expect about half of new logo business to be from subscription.
And maybe just digging into that further if that's still the expectation for 'twenty, one and maybe how that's trended in the quarter and then also does this possibly imply an acceleration of new logo business baked into the guidance.
Okay.
Yeah. This.
This is Jack so we did say that we expect half of our subscriptions.
Subscriptions come from beautiful business and we're certainly on track.
With this.
Going forward looking at the pipeline, we think the discipline to continue I can say overall for the year we're still.
The it or anything of this comment in the path of the two things of that come from new logos.
And we're talking dollar of I think you just to be clear, we're talking about the others.
Got it thank you.
As a final reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Yeah.
There appears to be no further questions at this time I would like to turn the call back to Ruby Quito for closing remarks.
Thank you operator as you heard today, while we have a lot of work to do I'm confident that we have the right plan and we are building the right team to deliver value to our shareholders over the course of 2021 and beyond we look forward to updating you on our progress on our next earnings call. Thank you all for joining today Bye bye.
Okay.
Okay.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Okay.
[music].
Yes.
[music].
Okay.
[music].
Okay.
[music].
Yeah.
[music].