Q1 2022 Medallia Inc Earnings Call
The gambling conglomerate and the U K rail new true, Italy biggest mutual insurer.
On the ground and holdings and the U K.
The bank and Sweden, Victoria and University of Melbourne, The offshore building Society, <unk> and Asia Pacific Versace, again, and Italy, it's on.
And Japan, and childhood group of leading luxury retail and distribution business and Dubai.
And Avianca air the flag carrying Colombia and airlines.
The of special note is our progress from Q1 with several breakthrough deals and the technology sector and Oracle Hewlett Packard enterprise and the Linkedin, all very significant weighted for our company.
<unk> will leverage medallions and technology to provide real time feedback and insights to its global sales force and partner network and the Oracle will use the value platform to help drive engagement within the customer base at the same time, we're collaborating on and integration between the value.
And the article CX service.
I also want to report that we are breaking through and public sector, but our experience cloud is there and certified status of information security by High Trust the.
This achievement places out of an elite group of organizations worldwide that have earned the certification reinforcing the medallion is the most capable and secure platform for feedback data capture and privacy and security on the market.
And the same quarter, we achieved fed ramp high authorization.
And 1 of a handful of SaaS companies the whole goods certification.
This allows us to provide medallion the all agencies and the U S government enabled and the U S Department of Defense for example to promptly invest and their first program with medallion.
The University of Minnesota, leveraging private equity or chronic closely and ibs platform to accelerate the collaboration between parents and students and teachers and.
They re imagined the 'twenty 'twenty, 1 'twenty 2 school year.
While on the topic of education. The third good Marshall College fund another new logo public sector is leveraging the value more effectively connects students and employers facilitating job creation and the advancement of our collective mission to prioritize.
What's the and diversity.
We continue to see the once the company purchases and the value of the use of extensively and expand quickly before authority of New York, New Jersey expanded their use of the medallion last quarter. After only 90 days of results of their first program.
The United States Postal service renewed their multi year contract with us as a provider of value of services to USPS on employees and customers the vet.
Entrance administration is another example ill give the day.
<unk> client for several years, where our price contribute to their record levels of trust among veterans.
Last quarter. The VA further expanded their use of medallion. The VA will now leverage medallion strides the crowded city across their entire organization, including VA medical centers to ensure their accounts and valuable ideas from the broad network of constituents.
Just 2 weeks ago, we held our annual customer conference experienced 21, we've had over 65000 views of our experienced content so far.
And we're on live interact and feedback and modality of experienced cloud during the balance on our ratings improved 30% of the prior year.
Our celebrities are our customers and we have fabulous keynotes cameos and interactive sessions and some of the best brands and the world.
Our product and crude.
And the wave of new announcements, including adaptive text analytics next generation insights the power of our customer success, the medallion digital suite, which now captures and processes omni channel digital behavior through machine learning and automatically calculates the digital experience score for every virtual visits.
The virtual contact centers, becoming the frontline of customer experience contact centers witnessed an increase of 300% book holds the usual during the pandemic and a corresponding increase in digital interactions chat and email has occurred.
First of all happened, while 90% of global contact center agents to of course, the work from home.
And with 72% of consumers likely to switch companies as a result of per service. Despite of what we coach individuals and our customers virtual contact centers to be high performing and representative of brands of our best experience.
We have 2 key technologies to address the needs of the virtual contact center the value of speech and spell of connect as.
As long as great partnerships with companies like $5 items to help us build the contact center solutions of the future.
Turning to our employee experience capability.
Our employee experience customer count grew to nearly 150 and increase of approximately 50% and less than a year.
Please the employees like customers and creating the same high fidelity understanding of the employee experience has never been more crucial on.
The new employee micro pulse physical <unk> solution allows companies to capture and the moment feedback through any outgrew all employees of the same time on a new employee bulk repulse diversity and inclusion solution helps organizations understand our company culture and inclusion positively impacts of the work environment.
Our new industry employee experience benchmarks for HR leaders powered by our partnership with decision wise gives our customers the ability to compare important internal metrics with peers.
We also announced our new market research leader experience of fully self service AD hoc survey platform with a variety of market research question types and the ability to capture video feedback all in 1 you can launch the research project on the survey and minutes.
We announced total experience profiles powered by modality of experience data platform total experience profiles leveraging signals from 100% of experiences to provide a complete locked timeline of every interaction with the company whether online phone via chat or in person.
The experienced profiles enabled and <unk>.
Formed actions and sales marketing and service by delivering lifetime access the sentiment and feedback history. This enables the ultimate personalization context for optimized customer interaction.
We continue to make progress with our all important ecosystem as I previously reported to be rewarded America's top app developer partner of the year by service now and.
And the value was named the fastest growing ISP partner of the year for sales Force. Just recently, we were also awarded digital experience global ISP partner of the year for Adobe.
In addition, we just launched early availability of upcoming new applications from Microsoft dynamics, Salesforce marketing cloud and Oracle service cloud.
At the same time, we just announced the modality of developer network, a complete suite of open API and a no code low code development platform with Congress and developers to easily build connectors and applications, which they can then published on the value of exchange our application directory.
We have also intensified our focus on environmental and social goals and employees are taking a stand and expecting their executives to listen and that today employee activism is shaping the C level of agenda and ways, we've never really seen before.
And the value of putting this front and center by bringing on Brent and Carryall as the leader to focus on our environmental social and governance policies and goals.
We just released our first global impact report that adopted the FASB sustainability accounting standards Board.
Porting framework.
Now looking forward Q2 has started well with the top showing and the Forrester wave as I mentioned, we also had a record number of attendees that are on your experience conference with superb and the moment feedback assess the accessible for all sections of our opportunity pipeline is healthy.
Heard me talk before about the importance of connecting insights of action and the Spain, we'd already executed in Q2, our largest ever and messaging to deal with a major hotel chain delivering of completely touchless matches. The messaging service to over 1000 global hotels, giving guests the ability to order services checkout and communicate with the hotel personnel and <unk>.
Items, whilst at the same time preserving the presaging data as well as feedback for insight discovery.
I'm very excited about our prospects we're focused on execution for the rest of this year. So the larger team of quota bearing salespeople and growing channel capability with more product to sell down of arrivals and and unmatched reputation as the innovation leader backed up by the opinions of the most credible industry analysts and partners.
And we're well positioned to reaccelerate on subscription growth and FY 'twenty 2.
I'll now hand over to Ross on to cover our financial performance and more detail.
Thank you Rodney and good afternoon, everyone and reported strong Q1 financial results, including record total revenue and record and subscription revenue.
Quick reminder, unless otherwise noted all numbers, except revenue mentioned during my remarks today of our non-GAAP and you can find a reconciliation of GAAP to non-GAAP results in today's press release.
Total revenue for Q1 was 131.4 million and increase of $18.7 million of 17% of the Q1 of fiscal 2021 and <unk>.
Q1 subscription revenues were $106.1 million and increase of $17.1 million or 19% year over year.
Revenue generated outside of North America, and Q1 represented 23% of total revenue.
And we've shared with you on the past few calls we have modified subscription terms flexible payment of invoicing terms and exchange for extensions of existing contract price.
Certain customers trying to check on the pending.
Nick.
The average day extension period was for 1 additional year consistent with what we projected on our prior earnings call. The modified terms has negatively impacted our subscription revenue in Q1 by approximately $1 million and by approximately $4 million over the past 12 months.
Looking ahead, we expect that this is the last quarter and we will have serious.
And there is headwind.
As a reminder, the majority of our contracts are multiyear very welcome all include contracted minimums and we.
And your customers to honor their agreement.
Professional services revenue of $25.3 million per the quarter, which increased 7% year over year, and we continue to build on our partner ecosystem.
Turning to some key metrics.
We continue to see strong growth and new logos.
Ended the quarter with over 1240 enterprise customers and increase of 59% year over year.
In addition, we have over 875 mid market customers.
Sorry, the 12 months ended April 32021, our dollar based net retention rate of 111% over the past 3 quarters, we have seen strength in bookings from net new customers. We believe will bode well for the future of our land and expand strategy. Our dollar based net retention rate was negatively impacted by the.
1 percentage point due to the concessions I discussed earlier.
Turning to IPO of remaining performance obligations as I have shared with you before our IPO metrics are impacted by contract duration and extension as well as timing of rewards for large multiyear contracts. So while RPM provides for strong visibility it may fluctuate.
As of April 30, total RTL with $798 million and increased from 26% year over year.
Turning to our PEO, which is the amount we expect to recognize as revenue over the next 12 months totaled $397 million and increase of 23% year over year.
The 2 recognize 50% of total IPO and the next 12 months.
I'll now turn to our non-GAAP gross margins and operating expense.
Subscription gross margin was 81% compared to 83% in the year ago quarter, the decline and subscription gross margin is primarily due to investments in infrastructure and we have made as new scale, both organically and inorganically.
In Q1 professional services gross margin of 16% compared to 18% and the use of quota. We continue to focus on building out our partner ecosystem. So we expect professional services gross margin will be approximately.
The 10% Inc Q2.
Sales and marketing expenses in Q1 of our $66 million of 46 percentage of revenue, we continue to invest and productive sales capacity R&D expenses were $25.8 million for the quarter or 20% of revenue our go to market initiatives and R&D. Both remain an important investment area as we expand.
And the platform.
G&A expenses were $13.8 million from 10% of revenue on the quarter.
We expect additional leverage on the G&A line over time non.
Non-GAAP operating loss and the quarter was $10.5 million compared to operating income of $3.5 million and the year ago quarter non-GAAP net loss.
<unk> 1 million compared to income of $3.1 million and Q1 of last year now turning to the balance sheet. We ended Q1 with $545 million of cash and marketable securities.
Subscription deferred revenue was $232.7 million and increase of 21% year over year.
Let's move on to discuss subscription billings, which we define and subscription revenue plus change and sequential subscription deferred revenue and contract assets. As you know there are a wide variety of factors that may influence the metric therefore quarter to quarter fluctuations and billing should not be taken as an indication of changes and future revenue.
For Q1 of fiscal 2022 on a trailing 12 month subscription billings growth rate was 18%.
Adjusted ADESA, both the prior deferred revenue the billings growth rate would have been 17%.
As a reminder, on a trailing 12 month basis subscription billings were negatively impacted by approximately $10 million, primarily due to new bookings of invoicing terms that ramp over a multiyear period.
Now turning to cash flow, we generated $14.3 million and cash from operations during the quarter, representing an operating cash flow margin of 11%.
As a reminder, we have historically experienced seasonality and cash flow from operations given that over 40% of our billings occur in the fourth quarter as a result, our operating cash flow and positive in Q1, and Q4, followed by cash flow from operations. The negative in Q2 and Q3 are there hasnt been in the past few years we.
The paint the seasonality to continue.
Now moving to guidance for Q2, we expect subscription revenue to be on the range of $113 million to $114 million representing growth of 22% to 23% year over year, we are projecting total revenue to be between 137% of $139 million.
Representing growth of 19% to 20% year over year.
And 2 we expect non-GAAP operating loss to be and the range of 12 and half to $11 million.
Looking ahead, we expect other income and expense can be a quarterly expense between 5 and $800000, primarily due to interest expense associated with our convertible debt.
And we project income tax to be a quarterly expense and the range of 600000 per $1.1 million and.
And Q2, we anticipate basic weighted shares outstanding to the approximately $160 million and fully diluted weighted shares outstanding to be on the range of $184 million to $185 million.
Finally, we anticipate our capital expenditures in Q2 to be approximately $8 million.
Primarily related to enhancing our data centers to meet customer demand.
Perfect for 2022, we are increasing our guidance for subscription revenue from $465 million to $469 million to a range of $467 million to $471 million.
Representing the subscription growth rate of 22, the 23% over the prior year.
We are also increasing our guidance for total revenue from $563 million to $567 million to a range of $566 million to $570 million, representing a growth rate of approximately 19%.
We continue to expect revenue to follow a similar pattern for this year with more than 50% of annual revenue to be recognized in the seasonally stronger second half price.
First on services revenue growth is projected to be and the low single digits and we have significantly expanded and plan to continue to expand the number of Si partners for the share.
For fiscal 2022, we expect non-GAAP operating loss to be and the range of $22 million to $20 million from.
The fiscal 2022, we expect the basic weighted shares outstanding to be approximately $164 million and fully diluted weighted shares outstanding to be and the range of $185 million to $187 million.
Finally, we continue to expect our capital expenditures and fiscal 2022 to be a little over $38 million.
Leslie and I will now take your questions operator.
As a reminder to asking the question you will need to press the star 1 on your telephone to withdraw your question press the pound key please stand up and we can now of the Q&A roster.
Your first question is from Rob Oliver with Baird.
Great. Thank you guys very much and I apologize if <unk>.
The connection if it's not great.
And lastly, a question for you.
Just on the fed opportunity, obviously very exciting.
And we've been tracking the VA for awhile and and the nice expansion. There you also mentioned Dodd.
Do you have all of those defeat on the ground the you need and fed to execute on the opportunity now or is that still a part of the sales hiring ramp and then is it going to be of normal fed spend year.
A lot of employees are going to be at home and does that also create an opportunity for you guys on the employee experience sales side.
So while a lot of it and there I appreciate that and I had quick follow up for Roxanne.
Separate question.
And I've got all of our team of probably listening to this sort of if I told him we'd go and I'll see you on the street the will be shaking their heads and theres a lot of opportunity and so I think the answer is no we need to keep.
Putting the quality of expertise and value.
And we've got a great quality team and government actually around the world and that where both of the October et cetera, but obviously.
The dominant group as of the U S. But we're emboldened by the fact that we're the only company with fed ramp federal antitrust Nobody can talk shows and terms of scalability and security of the survey software vendors really are just not there and its going to take that made massive investments together took us plenty of time.
We know that the smart way.
So the big investment and so short answer is the room for more and we.
We are about getting that and then and then in terms of the employee experience piece and employee experience is so important.
Your employees like customers and the government case true your employees. The way you won't citizens to be treated I think and connecting them and it's Greg.
The opportunity and definitely the major agencies do see that and they are engaged so it's an exciting time to be present and that market.
Great. Thanks, a lot of it I appreciate it and then Roxanne and just 1 follow up for you.
Appreciated the details around the.
And the modification of the billing terms and obviously market improvement relative to last quarter and I know you said. This is the last quarter, where that would be and impact is that just purely because of the improvement and the end markets is there anything else that you guys have done from a product perspective, or bundling or anything else that debt and you guys have done to address that or is it is.
And that just year end markets, getting better, which it sounds like with Avianca and.
The hotel deal it sounds like on your end markets are decidedly improved but just curious on that thanks guys.
The the <unk>.
Sessions that we made were early on and the pandemic and some of our customers had been impacted now as we've progressed forward. We have seen the overall markets and for example, and Houston leisure travel and leisure travel is coming back I will say on the bold and say with a vengeance.
But the.
What we've seen at the from the concessions early on we have seen overall improvement.
And overall demand, especially and travel and hospitality as I sat around the leisure side, but as I say that I want us to think about corporate travel and corporate travel has not recovered.
To the levels it was before and I'm not sure when corporate travel will recover and to what level. However, I don't expect that the corporate travel.
And will result in any additional concessions based on what I've seen at this point in time so.
And I am pleased with what I see from the change over the last several quarters.
Great. Thank you guys again, thanks, Rob.
Your next question is from Daniel Bartus with Bank of America.
Hi, This is actually Dan and Colin for Dan. Thanks for taking my question on.
My question is on our new logos. Congrats on your new rules have been growing really strongly so I wanted to understand is that more of the greenfield opportunities or do you see and just me.
AC existing vendors and have the competitive dynamics changed and Ali.
Thanks, so much.
Yes, good question.
The replacement is not.
The.
That exciting thing for us the when we are replacing technology, we're replacing survey software with much broader signal capture with a much richer digital capability, it's really digital transformation of the traditional survey. So it's not quite of replacement like for like is no. None of the way the we think about it.
So we're doing something different and we're capturing video voice and messaging ideas the broad spectrum of.
The feedback that our customers need a much much richer data pool and.
And much more sophisticated the operational system for the distribution of lifetime feedback that the others don't and so we're just doing a very different thing and that is resonating and has now implemented will very quickly and we've got much more self service and ease of use and automation of the cleanup and and the platform. The doggedly invested and that we've continued and persistence.
Over on the <unk>.
And I'll give you 2 examples where you have the container store going live and under 3 weeks and we have <unk> just go live and Canada, Great Learning company and 30 days they sign the contracts and went live and the same quarter.
And so that's a testament to how quick it is to get this rich digital platform up and running way beyond the traditional survey vendors capability and Ken.
Your next with Great day here.
Alright. Thank you is from Chad Bennett with Craig Hallum.
Great. Thanks for taking my questions and nice job coming out of the gates on the year.
So I mean, if I look at the new customer accounts.
And mid market was very good, but even even your enterprise new customer accounts I thought.
Especially maybe for a first quarter looked very good and Roxanne you sound and certainly more constructive on on the impacted verticals.
And then you have for pretty much of year.
So I guess, what would you attribute the.
And the new logo on the enterprise front.
The well my perceived strength there and also are we to a point now where.
We can think about.
Moving to kind of existing business, but we can think about.
Net expansion.
And kind of accelerating more aggressively I understand that the 12 month look back, but do you of any kind of near term data points that could.
Lee do you believe we're going to see kind of improvement there.
Well, that's a great question Jonathan.
When you stand back and look.
<unk> thousand 800, or so total customers with our new contracts of wherever it is.
It's a small number relative to the illnesses grades because it's good it's very solid they are great. It's great quality, but there is a massive market. There is a massive market we've invested and.
And go to market and our fee within marketing and to capture that and so that's where my focus is I do think the the net retention of resolve nicely.
Overtime, but right now it's about net new to be honest and you've seen on the last 6 months.
Not winning that battle of the new is fantastic, it's great for the confidence of the team and the company is greater.
Reassures was around our product strategy, which is absolutely spot on on target and so that's really the focus but I think over time.
He'd like to be in the higher place on the on the net retention, but as we said, let's focus on winning of landing and expanding over time.
Right.
And then Roxanne any any any other follow up just in terms of.
Yes.
The again, the expansion potential or maybe kind of nearer term metrics youre seeing.
Around that.
And chat and you're right. When you look at our net retention rate. It is a backward looking metric and and really has the impacted by a couple of things 1 has been impacted by the profession to although our overall gross retention rate has increased slightly over the last 12 months.
The customers that were and these impacted industry and did not expand at the same levels that they had historically prior to the omnicare. So when I look at it.
Hey, Darren.
And Dr rate will be consistent in Q2, and then we will have.
The non purchase orders.
And we move forward and we may see some uptick on the.
Thanks Nice job.
Thanks Chuck.
Your next question is from Matt.
And with BTG.
Yes, hi, thanks for taking the question.
I wanted to focus in on the contact center opportunity that.
And that you've talked about and you've really been investing heavily around.
At this point even at the customers that you are providing services to do you have a sense of sort of how much of the total spend.
Youre, capturing now versus what the platform is ultimately capable of doing.
And then also as you look out are you primarily in cloud based contact centers now or have you been able to penetrate some of the legacy larger on Prem versions as well.
Yes, great question, it's really a new focus for the company and the technical capability that comes from modality of speech, which is the voice transcription and strength.
Analytics combined on <unk>.
And so the Fabulous technology that we acquired with Star connect our new the couple of quarters old and our hands of couple of quarters, and we've made some fantastic deals and great strides with the technology, but what's become clear and we've got some best of class.
Recall Williams Sonoma, Inc.
On my best in class of implementation all of lifetime coaching of the contact center personnel of use instead of connect and got some fabulous brands, leading brands out there.
A huge number of opportunities for us to show what can be done connecting feedback to the cloud contact center and yes, we do have customers where is sort of more traditional what you said more of legacy on Prem contact center capabilities. So we're agnostic as to whether it's cloud or know the REIT.
And the nice partnership 5 nines that we're very excited about its only a few months and so that.
And as a massive opportunity, though to your point, it's just it's huge for us.
The survey companies are not there is something very different being aware of the tough hold review of the cloud contact center and something that is very important to us and we see great opportunity there.
Okay. That's helpful and then Brexit and in terms of the ramp up in sales hiring and in particular.
And we sort of reached a.
Good cadence there were out here or is there still more builds likely.
And kind of on levels Youre expecting.
Net we're only 1 month into the ramp up that we've talked about of 1 quarter excuse me into the ramp up that we've talked about from a sales hiring perspective. So we have started to make some of the hiring we are on path and regards to our hiring plan. We do anticipate that we will continue to make some addition.
And on hiring.
This year, specifically in the market and in certain markets and our enterprise space, where we have seen strength.
And for some of the verticals.
And also.
Some of the geography perspective, we've seen a lot of strength in EMEA. So that's another area and the like I said the vertical from North America.
Alright, thank you.
Our next question is from Richard Baldry with Roth Capital Partners.
Thanks wondering if you could do a little bit of a deep dive into the mid market segment sort of as.
The newer area for you and how you feel about.
The current utilization sort of the marketing execution to support it for lead generation now maybe contrast that to your enterprise and how much room and you think you have to both the dials on those things.
Yes.
The mid market is has been a super opportunity for us.
The company as you probably know that really play and we were on.
Surprised the exclusive.
On great land and expand deals Fabulous new verticals.
And we're very excited about it we've invested significantly and our virtual sales force, that's very capable and productive.
And based on land and expand where the dozen or so of modules.
But we've been very pleased with modality of experience of CECO.
Good.
And the mid market and some of the deals of insignificant.
From mid 6 figure deals and also the channel dimensions of the mid market, but we're just getting started on with some new resell of capability that will probably talk about and more detail in coming days and weeks, where we have some great global footprint instead of come over to us from the survey software World.
We really want to get into this omni channel digital transformation and we deliver through our platform our hub and spoke model platform signal as we call. It and so very excited for the day the growth of a mid market very pleased with the performance of the team they did very well and Q4 on the gain in Q1.
And you've actually continued to be active in M&A hagan of while COVID-19 of turbine overhang portability.
Portability, how do you think that changes the environment is changing with the.
The COVID-19 sort of easing at least domestically as a headwind and then.
I think the our M&A.
And then bringing and signals that were part of the plant from already helping customers get that solution without them having to integrator on their site.
From us they can get voice video messaging ideas that can go to a full spectrum of capability or you can buy of survey software products on that and on voice and somebody else out on video from somebody else and new to the integration on it which way I would go just doesn't make any sense to do the and that has captured the imagination of the industry on this.
She has really been important for us we had a great showing from Forrester based on the execution of the strategy.
But I think we've also taken the law of medicine around acquisitions and so.
But I think we're going to be proven to be right as things unfold here, we can see the decisive and our enterprise wins to have all of that signal capture some of the other technology that we would have of course we've.
And we've acquired for now this year of execution here. This is all about execution. We've got enough we might do the of tuck ins here and there nothing like.
The last acquisition that we did of decibel, which would sum.
A significant 1 for us but the.
The rest of this year is execution, we had enough we've got plenty of that and we need to focus on our channel.
Evolution and build focus on global and.
Vertical expansion, we have relatively small footprints and APAC and Latin America, EMEA is getting bigger and so the fantastic from here.
So that's what we're focused on execution for the rest of the year.
The last thing of the if we think about your guide for sequential growth.
Very strong sorry about that of what we've seen for quite a while now and there.
There anything unusual and that or do you feel like this is sort of getting back to normal.
But from an overall perspective thanks.
No.
There's nothing unusual in that guide and what our guide reflects the overall strength that we see and the pipeline. The overall strength that we see and the business.
And as you know rich when we provided guidance whether its the quarterly guide or whether it is an annual guidance. It is going to be of guide that we feel comfortable with so this is purely a reflection of what we see going on in our guidance.
Great Congrats on a good start to the year.
Thank you.
Your next question is from David the CRE with William Blair.
Hey, guys can you hear me okay.
Yes.
Congratulations on the.
Great set of the <unk>.
And on the record go lives is great too I guess, let me start there with the record go lives.
You gave us some color on a couple of quarters ago about sort of average number of modules adopted I'd love to understand and Youre seeing the initial.
Number of modules of the deal sizes change with the new customers, especially sort of towards the end of the pandemic I.
And I know when you come in and Leslie you had broken it down per million dollar deals will take a small deal size and will grow but are you seeing the small deal size of expand as you've added so much more product to the base from an initial land perspective.
Yeah. It's a great question I think we are seeing some of that we saw a little bit and Q4 and again in Q1, but we really are focused on giving our sales force of the ability to meet the customers where they are.
We come up against companies that are selling survey 1 of the company wants the customer wants is digital.
Unsolicited digital sort of the new decibel capability voice of the silent majority of either 1.
And so we are we're really focused on landing customers first and.
Adding on products later, but we have had some great wins that are a combination of single digits also interactive digital and unsolicited digital survey.
For example, we've had a lot of customers taking ideas and video independently and then coming back for sort of a laser so we've got the opportunity through the <unk> accounts from many different angles with our <unk>.
Buyer population of this really hungry for digital transformation versus just the liquid paper simple survey stuff is out there. So that's really what's going on.
Gotcha Gotcha Gotcha, and then I wanted to touch on sort of this idea of AI and automation.
Tied to different dataset. So you could obviously automate like and that's all.
And on complains about the menu and you'll get directly on the food and beverage director at a hotel and they can solve that problem and you've got that technology got partially AI, partially routing partially works on and there but does this concept of sort of observing of user and.
Watching where they get stuck in a process and.
And understanding that without having people looking at sort of and AI based computer vision and learning process.
The helping think through where that fits in and the data scheme, maybe the customer experience of our employee experience scheme. The training scheme and how does the medallions sort of absorb that data to drive the better outcomes.
Well, that's a great question and there's so many dimensions to that if we take the digital experience piece first and that's why we wanted to own decibel, rather just be a partner with debt of about 1 and others. So we look at some of the stood spectrum that you talk about and we wanted to own and they have.
That capability and we have the capability to understand the behavior of cohorts of customers.
Just simple things like the breakdown and navigation on the web site abandoned transactions what reasons why the 1 of the reasons.
Using the machine learning capabilities to understand and circle and infer let's turn out to be and valuable to our customers. When you combine that with interactive feedback and combine that with digital and direct to the feedback on combine that with physical behavior of a customer requests and channels digital and physical the insides.
<unk> gold and for our customers.
Gotcha Gotcha.
And I'll jump back and go out of couple of false and I'll jump back in queue. Thank you the congrats.
Thanks.
Your next question is from Brian Schwartz with Oppenheimer.
Yes, hi, thanks for taking my questions. This afternoon I just wanted to ask you a question on the partner channel.
Actually 2 on it 1 if you're seeing any meaningful change with the partner velocity of the deals or and the execution and the second question on the partner Channel is just on the Oracle announcement.
Did I hear you right that you are starting out with sort of us with Oracle is that corrected it and not sales or employee and then I guess the follow up would be is if there's opportunities to expand that partnership down the road.
Yes, I think with Oracle with that's where we're starting out of there is opportunity for us too.
Obviously and expand and of course, they've also become of customers. So their knowledge of the platform and its.
It's value across the spectrum of sales and service and marketing, it's just kind of get better and better so early days and Thats, where the restocking.
And then the other question was putting on our cost side of what Youre seeing in general from the partner Channel channel.
<unk> been scaling that over the last couple of years I'm. Just wondering if this thing is employees are getting back to work and the economy is opening up more of you are staying and meaningful change and the velocity of deals and the execution on that side of the business.
And I think it's 1 quarter I mean, just to give you color and we look at we're looking at.
Third of immunity and vaccination rates on the around the world and we're looking again today to all of the major countries around the world So focusing our efforts on those reopening the economies.
And so are our channel the the.
Different segments of the channel really starting to become a volume for the ASP side certainly.
A major upside upon of any loan loss expenses and the UK for example, but also the independent software vendors. The other major cloud vendors of turned out to be a good source of opportunity for us and then lastly.
<unk>.
Energy is a big opportunity.
And we're just able to bring over.
Our survey survey vendors largest on the largest international resellers.
And to our fold because they won't do more access to the full spectrum of technology. The we'd have a lot of more sophisticated powerful capability, which is understandable and so I think the resell of piece, particularly in the mid market is going to be important for us.
Going forward and we've got a great team and the company leading that initiative for us.
Thank you and then my last question just on the sales and hiring comments and a lot of color on the call. Thank you for all of that my question is on the process and I'm just wondering new fiscal year. Here Lastly, if you've made any noticeable and material change as beyond the capacity to the sales organization or til.
The go to market.
And that is on a very simple question because actually.
We have bill of come on but the message process that our chief revenue officer and her team.
It will be put in place the.
I think is fabulous.
And any measure across the industry as the superb approach and it makes sense for our customers' customers. It's about meeting customers, where they are and about giving them and showing them value from all of the fabulous and best in cost use cases that we have so certainly process.
<unk> everything so that we can enable people to quickly bring them on quickly people don't want to be brought on as well.
And for months and months to hit the first do we brought on people that are doing their day.
The big numbers and the quarter, but they are right and the company and also sales Hungary salespeople warm and.
And I think the enablement process and it's been implemented this year has helped us.
Okay I'll hop back in the queue. Thanks for answering my questions. This afternoon.
Thank you.
Your next question is from drew foster with Citigroup.
Hey, thanks for taking the questions.
The thing I wanted to get your view on a theme we've been hearing a lot of and our field work.
<unk> are telling us they are using various point solutions for different.
Pieces of the customer experience puzzle today, and I'm really hoping to consolidate those vendors and 2021.
And that something Youre hearing from customers, just generally and I'm curious if that was the dynamic that played out as billings, we accelerated here in Q1.
Yes, it is something that we're hearing from customers consistently.
The customers that of golf 3 of 4.5 or the doses and some cases more.
On a survey solutions, but have been implemented departmental.
Around the organization and also where our customers have had survey fatigue and low historic response rates, which is 1 of decision for the retailer on the very low response rate from a major survey play of it doesn't kind of the spectrum that we have so it's a very consistent message.
And if theyre going to consolidate and then that implies a massive amount of on structured data on which platform should we go we're.
Having fed ramp and around volume high trust and valuable beyond the public sector market just give so much credibility to what we've already sort of our platform, having the ability to operationalize feedback and distributor and lifetimes of the people that need it.
Something that no 1 can talk shows and nobody can touch and this will come close and so.
The people want to consolidate those first generation liquid paper survey market research oriented solutions and to the modern digital platform and we're seeing some of the still early days, but we're definitely seeing the action out of there.
Got it and then Roxanne how should we think about your assumptions for the back half of the year I would think that.
Given the ratable nature of the SaaS revenue of the $2 million upside in Q1 would also benefit the quarters thereafter, but it doesn't seem like that based on the full year guide on that.
That's the case anything you have visibility into that's giving you more caution or how should we think about that.
Well if you look at our full year guide that's all of your guided 22, and 23% and if you will get that from the back half of the year not only do you see an acceleration in the Q1 guidance. We've given you over sorry, the Q2 guidance. We've given you. The Q1, you'll also see that the acceleration.
The gross subscription growth rate in Q3, and Q4 over the first half of the yet.
Thank you.
Thank you.
Okay.
Your next question is from Brett Knoblauch with bear and Baird.
Hi, guys. Thanks for taking my question and you look at subscription zone.
How should we think about the growth rate there.
And of the year.
Can we expect it to grow faster than the other subscription revenues.
And any color on that.
So I apologize, but you broke up a little bit with new at Youre, asking about the growth rate of subscription what.
Subscription billings for the rest of the year.
Relative to the.
And the growth.
But we don't we don't guide to billings and Theres multiple metrics that we look at all of it.
We all look at rate and you look at CRT, Eric will strengthen our CFO and the total RPM this quarter and you can.
And Joe highlighted in his comments the.
The acceleration and our billings growth rate and we will look at it on the 12 month trailing basis, but when you look at where we are from the billings growth rate on a 12 month trailing basis.
And you look at what we're giving you from the guide perspective.
That implies that you will also see an acceleration and are the only Scott right.
So the Red House.
And then maybe on back half of the year of profitability.
The $21 million non-GAAP operating loss guidance is really for the first half and do what it should expect back half of the year operating income to the about breakeven.
And I guess sequential improvement as we enter the next year or how should we think about the cadence of profitability improvements.
So, but that's of great question. When you look at let's start with the share. So when you look at this year.
The spot on right, obviously that we would see the profitability to breakeven and the back half of the year on power.
However, I do anticipate that in Q3, we will continue to be and a loss position and then we will be profitable and the Q4 timeframe now.
And as we move forward the FY 'twenty 3 we haven't given guidance, but there are a few things that you should think about the things that we're considering.
We are monitoring on investments that we're making very closely and benchmarking them again the return that we are anticipating.
And we will continue to measure because of what we're really focused on is we want to accelerate our subscription growth rate. So when you look at next year and you look at it from a quarter and we think this 1.
You know I would not assume the that we would have the significant.
The next year.
But we have not given your guidance for this year for next year at this point, but when you also think about next year I would think about the same seasonality as the here.
That would be the the.
The income on losses would be.
Higher and higher slash lower and the first half of the year than they would be and the second half of it will follow and seasonal.
And does that make sense of on site.
We don't have that on X.
Thanks.
Thank you.
Your next question is from Scott Berg with Needham and company.
Hi, Brian and thanks for taking my questions I guess Leslie.
Leslie the start off with your customer concentration and what kind of takeaways did you have this year versus last year, maybe over the last 2 years and guests and then what.
And how did you view, maybe customer engagements and the virtual format versus the more on person and what you're certainly more used to.
Simple question and scope.
You can see that we're adding more and more logos and see the progress and the mid market's net runoffs from me, but it's strong.
Our coverage of the.
The ramping of the new people that we brought on.
And I'm all in on the virtual selling.
While someone's flying.
To go into the customer for 30 minutes, you can call them to their prospects and customers 5 or 6 times over.
And we can get a great deal done and this medium and it's working very well.
<unk> also implemented during the 240 go lives and a quarter, albeit we're getting to go a lot of a sponsor matter and we've got more automation more self service. So that's what we are starting to.
And we're getting to that number of day loss for our size of the business virtually is phenomenal.
And so I think.
And the virtual way of working for us.
As a software company as of cloud software company is highly successful and we're still going on the change they are still going to collaborate and coordinate whereas the hybrid physical virtual worlds pendulum swing book.
The team.
And ourselves and we're working from.
Through the hard in some cases, we are working very hard and there are some.
And being successful and the confidence.
And.
We spend a lot of time with 1 another virtually making sure of their needs and that we're supporting them on an hour and we've got a great season and.
And they really Joe virtually as well as physically.
So we're very confident about their ability to use this medium successfully and the future on.
And also take advantage of the physical world.
When it comes got uniform the around the world.
Got it and then from the from a follow up perspective.
And your deferred revenue.
On the there's quite a difference between the balance sheet and the.
Cash flow statement this quarter of roughly $7 million and round numbers can you help us understand the difference I see what was ex acquisition base, but it is the bigger difference and what we've seen historically.
Okay.
And that's a great question Scott.
When I look at the acquired deferred implication on of the 12 month trailing billings growth rate was about 1%.
And was not that significant.
I don't have anything that specifically comes to mind.
That would.
The couch.
And that deferred revenue.
On the balance sheet is obviously total deferred and then we do provide you and our supplemental schedule of the SaaS deferred and.
The subscription deferred and then.
12 month trailing Collins growth rate of both the calculated on the subscription.
Great. That's all I have thanks for taking my questions. Thank you.
And.
Your next question is from Terry Tillman with true Securities.
Yes, thanks for taking my questions and I'll Echo the earlier comments in terms of the nice improvement in the quarter Leslie and maybe the first question relates to looking at software and technology companies you had some great logos there HP linked them and Oracle could you remind us is this 1 of the kind of more emerging parts of your business I mean, how does the tech stack for you all in terms of.
Mix of business and these 3 in particular, what would the landings like where are they sizable or were they more kind of.
Bite size, but the future potential and then I have a question for Roxanne.
These were significant.
And we're not buying zones.
Which is why we called them out.
So I think it will stay about of your question is the software companies in particular, the technology companies think they can do this on a go.
And when they discover the sophistication and capability and power of our platform.
They realize that there's a lot more to it so actually I think the team is in place now that is winning and the technology space.
And has done a phenomenal job I think is 1 of the harvest space.
The spaces to zone, 2 because people think of youre, bringing bringing some of the beach. They can do it the software companies, what's the little bit of feedback is just the reserve it while the snow is it.
The so much more to it and so I think this is an important beachhead for us actually.
You should think of the 7 figure types of small volume.
Or are otherwise a very big bite, maybe okay and.
And maybe Roxanne for you in terms of you may have mentioned this but it was really good to see the CRP of growth I think of 23% that's kind of like about 5 points or so higher than the the billings growth on a TTM basis is the difference there is that just the.
More periodic billing so there's just more activity around the non annual prepay or was it just timing of when invoices were sent.
Sent out the made the difference of anything more you can add on the difference and the billings growth and CRP of thank you.
Yes.
Larry as we've.
Shared with you and historically.
We have had a history over the last few quarters of peering and data brand spend well, we will have the benefit and our current therapies.
And where you will see it in and a billing and then you were also flexible with customers even though.
The nearly all of our customers.
And have annual invoicing and they all have all of the customer accounts and they share with you on annual contracts and we do with all of our customers from time to time.
And kind of mirror focused on is our subscription revenue growth rate and making sure that we have the appropriate.
<unk> backlog and the RPI to support that growth rate.
Okay. Thank you.
Thank you.
Your final question is from Parker Lane with Stifel.
Yeah. Thanks for taking my question and this is part of that on for Tom Roderick Leslie and so you think about the largest messaging deal that you signed with the global hotel chain and this quarter and could you just talk about why now was the right time for them to lean in.
And what they're getting on and incremental basis from a technology perspective, and I guess, what the competitive landscape looks like there and the messaging of space considering that that's not of technology Thats a lot of the competitors the normally bump up with hard today.
Well lots of Great question, and I think that kind of review of the story of where we are.
And as a country that side of the world.
And as Roxanne mentioned leisure travel coming back faster.
Think of it speaks to a couple of things number 1 of the competence of that particular business.
And the opportunity the way the data to meet the needs of the traveler.
Today, and todays world, which is so much more sophisticated and complicated by the pandemic.
But think about sumptuous messaging.
Thank you just even without the pandemic the convenience of trucks. The messaging the I can ask the message for any of any of my needs on site or oxides and think about the value of thinking about the way to think about revenue per available room revenue per available room can be affected positively by messaging because the client can stay on the resource play and the <unk>.
So the message for everything they need they don't have to interact with people to keep the book off site.
News from from the SEC.
Secondly, the connection of messaging the feedback so understanding the function of that messaging.
And the associated with any feedback is the potential here.
And the understanding the customer and.
And the entirety of and so to do that you need way more of and survey.
<unk> spectrum that we have really the messaging capability the Holy Grail is combining messaging the feedbacks and create this pool of gold and data for these organizations and it applies and we got messaging deals growing and retail we got the message Judy was going and restaurants throughout not just of hospitality think about it and the travel context the fewer reduced.
Physical interactions to high quality of central interactions everything else I can do on my phone, but not messaging needs to be captured as a corporate asset for our customers.
Left to dwindle away as the personal messaging service and that's why and messaging.
As we have book.
<unk> is the right way to go from a corporate corporations and a major opportunity per ounce and I.
Back to report more success and this business as we go through the year.
Got it maybe 1 last 1 on the public sector side of things and just given the scale of those organizations I mean, how big of an opportunity do you see for employee experienced on the line and would it be fair to say the most of these new deals you've had and public sector have been CX so far.
Yes, that's the right commentary they have there's 1 or 2 employee of implementations and they are only going to increase again increasing.
And you use like citizens of public sector case III of employees like customers. This is the efficiency of the pandemic on <unk>.
That you'd need the same digital capability as you give to your customers on mass medallion. So I see a massive opportunity for us and public sector, not just stuff that rule state and local and the U S book globally as well on to.
And to the earlier question point, we need to continue to increase our investment and that too.
Got it very helpful. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
And.
Okay.
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Okay.
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