Q3 2021 Walkme Ltd Earnings Call
Good day, everyone and welcome to the walk in the third quarter earnings call. Today's call is being recorded at this time I would like to turn the conference over to Mister John Stripper head of Investor Relations.
Please go ahead.
Hello, everyone and welcome to walk my third quarter of 2021 earnings conference call on the call with me today or Dan <unk>, CEO and co founder Walk me Rockies weary, President and co founder of Walk me and Andrew Casey The company's Chief Financial Officer.
Certain statements we make today may constitute forward looking statements and information within the meaning of section 27, a of the Securities Act of 1933 section 21 E of the Securities Exchange Act of 1934, and the Safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
That relate to our current expectation that abuse of future events. These forward looking statements are subject to risks uncertainties and assumptions some of which are beyond our control. In addition, these forward looking statements reflect our current views with respect your future events and are not guaranteed a future performance.
Actual outcomes may differ materially from the information contained in the forward looking statements as a result of a number of factors, including those set forth in the section titled risk factors in our prospectus filed with the Securities and Exchange Commission on June 16th 2021, and other documents filed with four foreigners to the SEC.
These statements reflect management's expectations regarding future events and operating performance and speak only as of the date of this press release, you should not put undue reliance on any forward looking statements. Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee that future results level of activity.
<unk> performance and events and circumstances reflected in the forward looking statements will be achieved or will occur except as required by applicable law. We undertake no obligation to update or revised publicly any forward looking statements whether as a result of new information future events or otherwise after the date on which the statements are made or.
To the reflect the occurrence of unanticipated event.
See our press release dated November 10th 2021 for additional information and.
In addition, certain metrics, we will disclose today are non-GAAP metrics. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision, making and as a means to evaluate period to period comparisons. We believe that these measures provide useful information about operating results enhance the overall understanding of past financial performance and future prospects and allow for greater transparency.
With respect to key metrics used by management and its financial and operational decision, making for more information of the non-GAAP financial measures. Please see the reconciliation tables provided in our press release dated November 10th 2021.
And with that I'll pass it over to Dan.
Thanks, John and thank everyone for joining us on our call today to discuss our third quarter results, we have a strong third quarter, which exceed our guidance on all metrics as well the signing of two strategic partnership agreement with are important for the company's future growth.
We continued to execute dwell on accelerate our growth and I can share a quick summary of all the achievement subscription revenue continued to accelerate to 37% year over year 246.1 million up from 31% growth in Q2 total revenue grew 31% year over year 256.
<unk> at the end of the quarter total at 201.7 million up 31% over here, we're seeing continued growth from our dop customer sweet AOR growth of 120% year over year, representing 35% of total AOR up from 21% in Houston Me last year non.
Non-GAAP operating the loss was $10 1 million margin negative, 20% I'm excited to announce another huge milestone in the continued growth of our go to market approach with the signing of two strategic alliances one with Deloitte U S where they have created the digital adoption services.
Injunction, which walkman we've.
We believe that this partnership UW bank of the growing market Nagel Phoebe call adoption and will support our accelerated growth for years to come.
On the <unk> front, FCP and welcoming as entering the strategic partnership to Alonza concur user interface for all global Fcap Concord user.
Once again these shows the underlying power off our technology to drive success in business outcome for our partners on customer.
I am sure more details about the agreement and strategic importance of these partnerships later in the call.
As market leader, we continue to reveling working our platform and technology with over 20, New features launched each quarter and new data capabilities aligned to our data expansion strategy.
At the high level, we continued directly keeps well and are excited about the growth of our park are channeling innovation, but I wanted to take a step back and highlights why we believe in the long term future of Walkman, we believe that our digital adoption platform can help every organization achieve their digital transformation growth by connecting data in action.
To improve business processes and outcomes.
When I talk to leading CIO. The two problems a consistently face when driving digital adoption is the lack of visibility into their deck and decor user experience for their employees in customer we felt both of those problems.
Understanding the business processes and software Houston are fundamental to developing kayla in the jewelry to fulfill the promise of technology.
Whether technology itself is nothing without the adoption.
Organization needs to adapt to new industry macro trends of digital workforce in remote hybrid ecosystem as lane.
Currently.
With no clear view.
On the CIO or studio part and no clear enterprise user experience strategy deployed the two clash this class and causing over 70% of organization to fail at reaching their design crust formation goals.
Welcome you have the unique ability to take action on the data unlocking deliver a global scalable digital experience on top of any of the box.
Welcoming platforms help solve the gap digital adoption by offering deep data and insights decision matrix and improve business processes to end users through our no code editor, which can be deployed on top of any enterprise software.
Imagine every employee in the world starting to enterprise software journey through a personalized user user interface and can get things done leveraging automation and guidelines at their fingertips.
No frustration no delays widely organizations leadership, a complete control and visibility alternative technology asset and can scale change management. So he saved up and this is why walk me to changing the way people interact with technology and how organizations work.
We have that I'm excited to share. Some recent company development I will start with are part of our strategy.
Im humbled to have the privilege to share that we have signed a strategic alliance agreement with the like you us.
Through this agreement the logging investing and dedicated team in the us to advance technology adoption best practices.
<unk> of the community created digital adoption service businesses can now leverage Deloitte knowhow and what can the technology to gain the rapid results with digital transformation strategies are expected to deliver.
The knowledge expertise any investments of Deloitte will expose walk me adapt to additional three most customers and ensure their expansion and success.
I am thrilled to have them as partner and look forward to signing more agreements with other global leaders soon.
With the main point Doc continues to grow with more enterprises realize there cannot be digital transformation without digital adoption.
Across suggest client base. The logo has been observing this hand in glove relationship between between you should do.
Through this align walking into logs or making digital transformation, except the reality or more enterprises in.
In case, we were making about the readily available complement to digital project.
We believe that this type of partnership with Geocide will help drive acceptance of stop as a new way of doing business and help walk me diversify and accelerate our go to market strategy and drive meaningful growth over time.
Next is an extraordinary partnership with SSB concur Isps is always has a vested interest in implementing welcoming into to remain offering to ensure the success and adoption of their customers and their end users weekday.
Equal Corps, but can you walk me customer leveraging our platform to do exactly what.
Today I am excited to share with you a massive customer demand.
For customization of business processes, we have signed an agreement to launch a joint offering for their customer base named encore user assistant avail.
Available today concur user assisting by walking comes in the premium version to all come core user by a newly released user interface.
This version provide the basic workflow assistance, new user profile set up onscreen held directory and <unk> introduction the.
The premium version available through the solid program program provide the full license of walking from which clients can create and deploy custom guidance for training and ongoing.
Getting insight regarding the user experience in business was completion support custom children workflows and create organization specific messages.
Unlucky customization and the full utilization of walkman for every Fcap conclude customer is a breakthrough in our ISP strategy and will enable us to operate our London expand motion to grow each account into a full dark customer.
Thinking about the bigger picture strong ecosystem are important the most valuable companies in the world have them.
Our ecosystem, we call. It walk me beyond is about expanding beyond walking with core platform, a bringing together two key elements.
And technology.
Nsdap are important in addition to this ecosystem and further validate both our vision and our ability to execute against our vision.
We're also pleased to announce our new Chief customer Officer, Wayne Mcculloch, who joined us during Q assuming way.
<unk> expert, giving a trucking more value from the technology investment and use their experiences of global enterprises, why leading the industry's most customer centric clients success seems to making the perfect executive for neutral Wayne.
Weighing join us from Google, where you oversell customer success for Google clouds entire such portfolio of seven 1 million customers.
Prior to Google.
Hello, Senior leadership roles within the customers, except group of snooker and Salesforce Dot Com at walk me the willies, all postal function, including customer success services support and the digital adoption Institute.
Our success can be best measured by the success of our customer and I wonder if they can another moment to thank all of our customers for their true partnership with us.
For us our customers are key to growing the market and potential of.
Driving higher ROI deliver englander digital transformation initiative is critical while expanding and deepening the relationship with our products throughout the organization.
Let's look at some specific evidence of customer success.
A number of our customers receive awards this quarter towards your successful digital adoption initiatives powered by walking for example, Christmas health and Red hat, each to home God and Brendan halls anything on the human Capital Management Award, winning the best advance in business automation and best approach to HCM innovation, respectively.
And lastly, the world's largest food and beverage company was name of wintering constellation Research annual Supernova award in the category of future off work an employee experience that took place recently in October.
Welcome to even appeared with a customer in a magic wondering this quarter I am referring to a fortune 50 enterprise customer with further implementation of walk me called out by Gardner as a contributor to one of their three primary strength and their major clothing for.
For he's a few the report said that the company partner with walk me to include our digital adoption platform thing it's brought up there.
Disintegration health idea administrator learned and used a product in the context and flow of work rather than offline we.
We don't expect it to be the last time, you see welcoming in this kind of report.
Moving on to that category as the creator and leader of this category welcoming us more than 45% market share according to ever bye.
By far the highest among the 18 vendors that qualified to be in the ever speak metric.
Is the market leader woke me as more than 900 million unique users 21 billion user interaction and 38 million information triggered on the platform on a yearly basis.
We have customers going over 42 countries.
This demonstrates his number demonstrates not only the significant demand for digital adoption platform, but for the walk me formula statistically.
And the ever speak report what can be demonstrated the strongest year to year movement on both market impact and vision and capability category. This is yet another proof points of the progress we're making in both creating the Doc category in establishing ourselves as the leader in the market.
This recognition is happening because of the positive changes were driving business outcomes for our customer.
This strength the Doc category further aside mainly other achievements include gardener. Shortly of welcome you as a composable technology vendor amongst some of the world's largest meeting technology company.
Strategic theme for Gartner analyst and the top priority for CIO with worldwide game.
Gaining more momentum with research analysts turn is a strong indicator adapt categories growing and impacting many organization globally.
Moving on to the product innovation will continue to invest a lot in our core technology and our platform in Q3, we focused heavily on our biggest differentiator our ability to start to the data were released over 20 features just in Q3, but I would like to focus on a new UI intelligence technology as well as our automated.
Insect technology.
Which walk me discovery capability CIO will have.
Viewing their textbooks, they can analyze adoption business processes and utilization across application.
Users and department and can manage and track digital transformation initiative by defining kpis and lie to their business growth.
From their organizations can analyze you can tell the behavior usage and experienced as across workflows to see exactly where user dropped off in the process, which capabilities are not being adopted in general behavior across application and business.
Finally, welcoming you our intelligence and machine learning algorithm, which understand you why in the underlying application takes over to provide actionable insights to be addressed with walk me contest.
Have you seen any innovation organization when for the first time and fully visibility into their textbooks and the insight into our users are struggling so that they can ensure full adoption and usage of software.
In other words, they would be able to ensure that their business stakeholders will be able to drive software users to achieve the business Golfs were with the software was intended to do in the first place for.
For example, with you I-i technology, our customers can see exactly where their employees or customers have error, which airs they got and how much time it took to complete the process.
All of it being down completely automatically without any set that poor configuration of the process from the customer site. This is a complete game changer and UI process of discovery.
The challenge for digital transformation in digital adoption is similar to what has been seen in other disciplines like service management or governance, risking compliance where the first roadblock is just to figure out.
What you have in the environment. This is especially difficult in the medium of digital transformation when is a CIO or a studio you're trying to manage the situation where literally anyone who uses software and keyboard to do their job can bring your application into the environment.
This can be done without the CIO or your team knowing about it or employees might just be building new app using no-code platform tools that were given to them by their very own Fame CIO now grasping for control either way if yours is the CIO to manage now.
So just like Ikea, Salmon's, ERC, where an efficient and accurate discovery mechanism was a requirement. The same is true with digital adoption.
This is why we are excited to bring this innovation to our customers and are looking forward to telling the world more about them than we have a strong plan to further advance the digital adoption platform category as a whole and our leadership position.
Or a skin in the early stages of new opportunity and look forward to discussing are accelerating progress with you in future earnings call.
With that I am trying to call over to Andrew to walk through our financial results.
Thanks, Dan and thanks to everyone for joining us.
Before I get into the results from the quarter I want to provide a quick overview of our business model and remind you of the key metrics that we look at to measure our business.
We deliver our digital adoption platform for a subscription sass offering in the cloud which represents our subscription revenue.
Our services revenue includes professional services and training.
In terms of key metrics, we focus on remaining performance obligations or R. P O as well as annual recurring revenue or IRR, which we believe provide a better view of our current business momentum relative to revenue growth.
As a reminder, I'll be referring to some non-GAAP numbers in my remarks by the reconciliation to gap is available in our press release and the investor deck on our website.
Moving on to the third quarter results.
Suzanne discussed we had a strong third quarter that exceeded our guidance with continued customer momentum.
We are seeing is reflective of strong value proposition of our platform the horizontal application of our solutions and strong operational focus.
And the third quarter total revenue was $56 million, an increase of 31% year over year, but.
Subscription revenue grew 37% year over year $246 1 million.
Continue to acceleration from growth in the second quarter.
The remaining performance obligations or RPM ended the quarter at $272 $2 million, representing a growth of 49% year over year.
Encouraged harpo, which is contracted subscription revenue expected to be recognized over the next 12 months through 32% year over year to 157 million.
Long term RVO grew 79% year over year to $115 million, an acceleration of growth from 68% in the second quarter of 2021.
<unk> at the end of Q3 was $201.7 million representing growth of 31% year over year, showing consistent growth from two two.
These strong topline metrics are reflective of the growing importance of digital adoption with the world's largest organization.
Are you seeing continued momentum with large enterprises, which we measure as organizations with more than 500 employees.
Looking at AOR from customers with more than 500 employees. This grew 36% year over year in Q3, two $173 5 million.
Representing 86% of total IRR up from 83% in Q3 of 2020.
In addition, we look at enterprise wide gap customer additions as a sign of the growing strategic nature of our platform across our customer base.
Added nine new dot customers in the third quarter to to reach 112, representing customer count growth of 93% year over year.
<unk> from these dot customers grew up 120% year over year and represent 35% of total IRR up from 21% in Q3 of last year.
Taking a look at dollar based on that retention their natural land expansion motion of our platform translates into a strong net retention rate, we look at solar basement retention with our enterprise customers, who are notably stickier throughout the disruption that COVID-19 cause then smaller businesses last year.
Our enterprise dollar basement retention, which remeasure customers with more than 500 employees was 118% as of the end of Q3 on a trailer for quarter basis and remained above 120% on a quarterly basis for the second straight quarter. After bottoming out in the fourth quarter of 2020.
Before turning to gross margin expenses and profitability I would like to note that I will be discussing non-GAAP results going forward.
Gross margin was 78% of 470 basis points year over year.
Profit was 39 5 million up 39% year over year the improvement in gross margin. This quarter was largely driven by the acceleration of broken and our subscription revenue, which carries a higher gross margin profile.
We expect our overall gross margin will increase over time as we continue to optimize our hosting operation and improve our services engagement model, primarily by leveraging partners where feasible.
Turning now to operating expenses, we remain focused on investing for growth to capture sure as the category recreated continues to grow and expand.
Sales and marketing expenses for Q3 was $29.6 million compared to $21.3 million in Q3 last year. This represents 59% of total revenue compared to 55% in the third quarter last year.
The year over year increase in sales and marketing expense as a direct result of the hiring for you to put into place at the onset of whole pandemic last year, followed by an acceleration in hiring at the business activity returned to more normalised levels and the subsequent quarters.
We also continue to invest aggressively in our go to market teams to address increasing opportunities we see in the U S federal market partner expansion and broader coverage was across all geography.
R&D expense in Q3 was $10.7 million compared to $7.5 million in Q3 last year.
This represents 21% of total revenue versus 19% from the same period last year.
Been making investments in our platform and plan to continue to invest in R&D as we build out our product and invest in our ecosystem in the quarters ahead.
Gina expense was $9.3 million for the third quarter compared to $5 $9 million in the third quarter last year.
<unk> was 18% of revenue versus 15% of revenue last year, we continue to invest in the infrastructure of our business to drive long term scale.
Going forward the primary areas of investment for us will be in R&D and sales and marketing as you look to capitalize on our large market opportunity.
Operating loss in the quarter was $10 $1 million compared to a loss of $6.3 million last year.
Operating margin of negative, 20% was down 370 basis points compared to the same period last year.
We held back on spending and investing meaningful last year. During the pandemic is we chose to preserve cash.
We will continue to hire aggressively and I'll go to market operations as appropriate to support our goal.
Looking forward, we expect to see ongoing improvements in operating leverage as we scale and restructuring our investments in sales or marketing and R&D accordingly.
Net loss per share in Q3 was 13, using 83 3 million weighted average shares outstanding.
Free cash flow was negative $12 $9 million in Q3 compared to a negative point 2 million in Q3 last year.
The cash flow margin was negative 25, 5% down from negative 0.5% for Q3 last year.
In the near term, we expect to see fluctuations in cash flow.
Longer term, we expect that increasing operating leverage result in positive free cash flow.
Low margins will fluctuate on a quarterly basis in the near term an improvement will not be linear.
Turning to the balance sheet, we enter the quarter with $361 $9 million in cash cash equivalent in short term deposits.
Turning now to guidance for the fourth quarter of 2021, we expect revenue in the range of $51.5 million to 52.5 million representing growth of 32% to 35% year over year.
Non-GAAP operating locked in the range of $19 million to 17 million.
For the full year of 2021, we expect revenue in the range of $191.5 million to $192.5 million representing growth of 29% to 30% year over year.
Non-GAAP operating loss in the range of $53 million to 48.3 million.
With that band Rafi and I will take your questions.
And at this time, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad, if you're calling from a speaker phone. Please make sure you meet function is off to ensure your signal can reach our equipment again star wanted to take a question to ask a question.
And we will take our first caller.
Scott Berg from need your line is open.
Everyone Jack did eat out for Stafford.
Correct and the great quarter, especially with partnerships first question for me just wondering if you could give us an update on Alzheimer's or direct sales fell apart.
The past few quarters have been rafting.
You guys doing any criteria tiger hired environment.
<unk> sales.
Yeah.
So I'll take it down and then then.
Jump in so thanks for the question the certainly.
Just like every other company right now in the U S and frankly across the World view.
Dealing with.
Difficult hiring market, having said that we did make the really smart choices early on in higher than most of the sales reps.
Divested in four.
Four 2021 at the beginning of the year and so that put us at a really good position to have sales reps ramping throughout the year and really getting to that to that point, where they're getting fully ramped by the end of the year that are are ramping period somewhere between nine and 12 months. So it's always going to be a tough environment is we're starting to look for other enterprise reps that fit or.
Bold and understand our market and can really go after these those enterprise large enterprise clients, but I'd say, we're executing on our plan and we're happy with the progress we've made.
Awesome and then just a quick follow up your car. The Keker partnership those are you guys thinking about reorientate.
Positioning your authority market plan, there as far as looking to drive.
Spansion from the freezers, Thank you [laughter].
And then I will take it to a great question. So when we're looking at the concourse partnership we're seeing two major opportunities.
One.
Concourse.
Walking customer they implemented walking on their product to help to our customers to onboard and future adoption.
Got a lot of requests from their customers to customize those guidance and experiences because as we said.
Any times, it's nothing above the UI, it's about the business processes and each company has their own business classes.
So now we have a channel to actually go with that the concourse through the solid agreement and stem to every at the peak encore customer welcoming so they can go and customize their business processes on top of phone calls. So this is one the second which for US is the bigger opportunity each cuss.
Or that we'll buy it and create those experiences in total, especially peak encore.
Tension expansion for us to go and expand on other systems.
PM CRM and so on so two things and two drivers that now we're going to focus on so obviously, we already have customers that using walking on at the peak encore. So we will work with them to extend it and put our extension motion into place. So we're very excited with these partnerships.
Next still got Ya Keith back money from Bank of Montreal. Your line is open.
Yes. Thank you I'd like to also ask about go to market activities. You mentioned you hired.
Waned to help on go to market related things I was wondering if you could identify some of the key activities whether he.
Already surface some opportunities, but what's most important you think next year.
As we look at 2022 four year go to market activities.
If you could just give us some.
Some of the key ones.
And in particular could you also address.
Where you think.
Direct capabilities will land towards I know you've done a bunch of hiring on your website. It looks like you are still trying to hire.
A number of.
Internal sales position as well, but how do you see that changing in other words, where do you think you'll land in terms of direct capabilities at the end of 21, and what do you think that looks like at the end of 22 is up 30% is up 40 is there any kind of dimensions, you could give us.
On how you see the ongoing efforts associated with the direct touch models. We think not only were we are at the end of this year, but as we look at.
Next year. Thank you.
Yeah. So I will start then I within them over to Andrew So when's, our chief customer officer, So enthralling customer success services support.
So everything that these posts selectivity.
And a lot of effort there because.
Walk me has a massive expansion.
With our existing customer so when will focus on death, and obviously, we are lending more customers and now we have more partnerships. So.
Making sure they're getting the value they get the full potential of walking and at the end, becoming adapt customer and as we're and just published we still hundred 20% increase you may are are from the customers and 95 per cent increase the number of custom so we're pushing forward the value and that will be.
Wayne main main focus.
Regarding where we land in queue for in the hiring activity. So obviously, we're now doing and Matthew hiring companion and we are succeeding as I relented over to Andrew to talk about the number.
Yeah, so keep the <unk>. So the thing I would really point too is when when you think about the expansion of the partner business within our overall revenue framework I think I mentioned before that this was a very nascent part of our business to date and that most of our IRR is generated from our direct relationships but.
The profile of how the partnership evolves over the next call it.
Few years as you start with these big Big partnership agreements restructure a foundation through how we're going to go to market and how we plan with one another the partners typically start using and developing on the technology that they're taking to market. So that they become very strong experts and advocates for their customers and then you start seeing things like <unk>.
Join account planning works with the the vendors and you start to see things around joint announcements on customer success and that's some of the milestones I see they should look at as priest predictors towards our future revenue from partner stream and I in.
In the past I've said that that I believe that could be 40% to 45% of our total business over time and and certainly the initial steps down that path on with sappy and Deloitte should be looked at our first forays into really expanding with many many more partners.
Okay and any comments on the direct site Andrew as we look at next year like how much you think you could ramp your direct site.
So we haven't really started talking about next year's guidance teeth out with something we will share with you, but I will tell you that the if there's.
Certainly has continued opportunity for us to go higher additional director ups.
That's that's the mainstay of our current revenue profile today, and we certainly intend to continued growth in the future. So it's it's logical that will continue to add towards our sales and marketing investments as we go forward.
Okay, great any thanks.
Your next Bill got Ya, Michael Cerone from Wells Fargo Securities. Your line is open.
Hey, there thanks good afternoon.
The subscription revenue growth numbers, certainly impressive at 37% the delta between <unk> and that 37% Andrew anything you can add on what's driving that would you expect those growth rates that end up more tightly coupled as we kind of role model forward over time and then the last part of the question is just their seasonality on the greater than 500.
Segment, we should be mindful of padding into Q4.
So I would say that over time, yeah, they should be more tightly kupper coupled from a modeling perspective I do think that there's there's nuances in that and how and how <unk> is is recorded versus the way revenue was actually recognized and that and that has implications on how you do your segmentation and other issues but.
Generally, yes, I would agree that it gets closer and tighter over a period of time I think the thing that I would increasingly focused investors on though is is our remaining performance obligations and the growth for saying there.
It's a great it's not only a great indicator of future revenue, but also showcases the movements that were seen in the more.
The broader importance, we have with customers and that we're not seeing just single year engagement smaller and gains we're seeing these larger longer term engagements and that profiles through our long term RPI and Additionally, I would point right back to our Doc customer growth rate, which is continue to show great promise and growth.
Both from a customer perspective on it and on a year over year basis from error.
And one last thing in that category.
The average dollar size of those contracts is also increasing so.
We're very happy with the progress we've made as a strategy to put in place well over a year ago now and it's really great to see that they are starting to take shape and and show up in the results.
Oh very helpful. Since he did such a great job ticket through some of the matrix one more on the retention rate. It looks just from the chart you'll have the benefit of the trailing 12 month basis at least of rolling off a flask you for what.
Would you expect the trailing 12 months metric to transpire and is that the 120% you're operating out on a on a on a quarterly basis is that a good target level for the business from your view.
Certainly I think that as we see the largest customers for us are the ones that expand the most and the routine.
Really don't see any major churn in our larger customers and it's because they're getting value from us and we're continuing to deliver value to them.
So you're right from a mathematical perspective that low point in queue for 20 of 112% is going to drop off next year's our next quarter's we we do our trailing four and I would tell you that we're not we're not just going to stop at 120 were certainly shooting for a much much higher percentages and expansion of.
Dan was mentioning earlier will drive a lot of that so.
You are right that our expectations are for an increase in the minimum.
Good to hear thank you.
Your next still got you Tyler Radke from city. Your line is open.
Hey, good afternoon, Dan and.
Andrew I wanted to ask you about a R. R. I mean it seemed like.
The net new was down a little bit from Q2 and.
Totally IRR might've been a little bit lower than.
Where the street was modeled just anything to call out obviously subscription revenue was was was strong but.
Did you see any any deals kind of pushing the queue for just given you target the enterprising and we've heard that from another a number of companies just kind of more pronounced Q for seasonality any anything you could add though it would be helpful. Thank you.
Hey, Tyler it's Andrew Thanks for the question I would tell you that our Q2 and Q3 look pretty similar in profile.
And Ah.
Absent any major changes in U S. Federal growth, we see as we start to invest in that space I would say that's kind of our expectations for the Q2 two three periods.
It's all your right to think about seasonality and the way our business profiles Q4 is typically our largest quarter and as we target enterprise are Jennifer clients the timing associated with windows deals get done sometimes isn't always under our control. It's it's somewhat dependent upon customer availability of budget and a whole host of other factors but.
I think we feel very strong about.
The position we're in for two four we raised our guidance.
Is reflective of the strong subscription business, we see the pipelines were saying some of the large engagements we're working on so.
I wouldn't I wouldn't pay too much attention to it I thank them for us.
The better future predictor of revenue is <unk> and I'm, pushing our internal teams to focus on that and so far they're executing well so.
Where I put my focus and we're certainly is it organization I with what we were very focused on executing the queue for timeframe.
Okay and maybe.
Maybe just a total customers I'm not sure. If you gave an update on on that that number and I know you have some moving pieces between some of the smaller customers that.
Some of those you kind of intentionally moving away from servicing and the capacity that you did the can you just help us understand where that total customer number is and then if there were any headwinds to call out on on that small.
Customer size, just given the focus on the the large enterprise.
Well I tell you that the F&B business, which is certainly one that we focused as we've given our metrics on companies have greater than 500 employees and does that intentionally because there is there is certainly headwinds with the small medium sized clients and and by the way.
The the pandemic is an over for them and a lot of them are still struggling.
And it's still reflective in our business, but.
Over time, I think it becomes less and less important.
For our total business it's.
One of the reasons were disclosing the percentage of our era that comes from a greater than 500 employees as a point to the fact that as we as we get more and more relevant for those larger customers that the F&B business. It can become smaller and smaller and smaller so it's it's.
I wouldn't say, we are intentionally trying to move away, it's just that.
The F&B clients have had a lot of struggles over the last year and where the big expansions existence with enterprises, who have lots of software applications and lots of employees that are dealing with the problems that result.
Okay. Thank you.
And next Bill got you Michael.
Hum Keybanc your line is open.
You got the right person I'm sure it.
Anyway. Thanks.
So Andrew just a couple more financial questions.
Yeah. The <unk> growth is awesome and shows that expansion multiyear deals the crts growth decelerated, a little bit 36, 32 and was pretty much in line with subscription growth and so we'd like to look at that obviously is a forward looking annualized indicators, so any thoughts on that as well as on.
Quarterly view quarterly.
And are having dropped 121 120.
Like I said before I don't think I've <unk> too much on that I would look at the overall the overall trend miles. So I think we're we're confident enough in our queue for.
That we're raising guidance and I do think that the.
Timing on on engagements isn't always something we can control. So it's but the pipelines. We've got to focus we got for the teams in queue for that's what we're driving towards and it's given us the right level of confidence to raise guidance. So that's what I'm focused on I wouldn't I wouldn't.
Focus too much on a single point in time.
And if I could ask you big picture strategic question.
Does it fascinated since you're not pulling digital adoption, but more broadly and product and there's some overlaps with some other approaches to the product space and people and products analytics first for example overlap.
With what you're doing.
In external customer adoption as well.
So I was just one and then I was.
I was wondering if you view others as moving into your space or perhaps you broadening out into other areas that are.
Within that.
A broader scope of product focus.
Yeah, I would take it though.
Walter.
We are now focusing on data any signs of relief that we're doubling down data and what we understood is that we digital transformation and digital adoption you need to start with data and we have a unique keep.
Keep the ability to actually understand the user interaction so.
So we basically have another dimension of data that no one has.
If you are looking at your entire digital deck.
Welcome. These non just giving you basically today to like who logged in we can actually understand their business processes.
So we have the data, but that data is capital to to the action.
When you take data in action together this is what creates true adoption because.
When you see something is wrong you can easily go back to the welcome guidance and welcome your information and drive the action and this is a very unique to work with so.
So yes, we are broadening the way we're looking at digital transformation in our capabilities by adding more data pieces.
Now on top of it what we release is what we call automated insight I know we're not.
<unk> a lot about it but this is true game changer, because we are able to actually understand.
Crosses says that they have and actually give them insights automatically without them actually need to go in that unlike other on the needed skills that you need to create the question or create aquarium. So overall.
It's very exciting for us and we see something that we're leaving and recreating while we're getting a lot of great feedback from our existing customer.
With the next day I would just like to that Oh, Hi, Roger This is lucky.
Hi, how are you.
I would just like to have that one of the core and very hard things to do is that we're able to do it on post market. So products and software we already bought and you don't have an integration too.
Most analytics products do require to be installed in to have access and we're able to do it from the U I.
So very hard to do.
Perfect. Thanks, Thanks, everybody.
And next still got a cute cashback for Morgan Stanley. Your line is open.
Great. Thanks for the question I wanted to ask one on John and use cases, just any any commentary on.
On the difference in performance across and turn on external use cases.
And then I guess separately.
What what types of use cases are.
Are you typically landing with us it's still a lot of Onboarding and just wondering how how to think about the.
More strategic maybe digital.
Transformation use cases.
Yeah, I would start and then you'll feel free to add so we're lending based on the use cases, and mainly CRM and HCM today.
And these teachers are are very diversified and it can be onboarding, but it can be data data currency and it can be an employee productivity and so on but usually we're starting with high profile applications like a CRM or like.
In addition, what we're starting to see and this is why we're focusing on the data in.
We're actually coming to the CIO then we can give them visibility. So now we're actually starting to sell to it and CIO as as well.
Always getting there eventually and.
But the land is usually on the business side and then we're actually expanding into more application now on the difference between external and internal obviously internally the strongest suit here and there were focusing on the digital transformation, mainly but we are seeing very great cases off for external use pieces as well.
Well.
And obviously those are tied together, both internally and externally with our customer, but I would say that we can get new data capability, who will be able to have more persona that we're starting with because we're not gonna go in immediately land on the Onboarding as you as.
You called it we would be able to actually go and start with the data and we that we needed something that would be super easy to install two clicks and you actually get the value and this is where automated inside coming into play imagined that you're coming into an organization you put walk me and literally leading five clicks you're good.
This is something that we didn't have before and now we're super excited about it.
Great. Thank you.
And next will go to the node Srinivasan Voka Fry from Barclays. Your line is that okay.
Thanks for taking my question Congrats on the results I just had a question on an enterprise that customers I just wanted to get a better idea of who is an enterprise that customer I. They mostly fortune 500 repeat UK customers orange hair.
I'm kind of SMB presence in the mix and then also sorry, if I missed a spot on did you close to disclose the number of that million dollar customers this quarter.
Hi, It's Andrew I will take that and then.
The on the DAP customers in particular is customers, who have four more applications or the license on our departmental level or enterprise wide and a lot of cases that would obviate many of the SMG customers being considered so hopefully I don't think there's any of them in our in our total list and it's because they're the average size of those engage.
<unk> 631000, so it's a it's a relatively large.
Investment that our customers, making and one that they are typically using work being the the full capability as a platform to really drive their transformation processes. So.
You see the ability for them to actually use it across multiple multiple different applications throughout the enterprise. So that's the type of customer reconsider adapt customer.
And.
We're increasingly seeing we haven't disclosed anything on the number of types I mean, the names of the DAP customers, but I will tell you that we're very pleased that they that the types of customers represent a lot of different industries and we had one customer that was brand new this quarter was a fast growing fintech company and they're a showcase for how they're trying to be digital.
First as they're bringing their services to market and so and they landed with us as a new customer annuity up customer.
At a really really great level. So many that are consistent with that that average that we're seeing.
So that customers are really customers that are you say, there's a lot of overlap with fortune 500, there's a lot of overlap with the enterprise large enterprise clients because it was the ones that have those the broad array of problems that we can really address and are are willing to pass that level of a fee because the value of their getting.
Got it. Thanks, I'm sorry did you have disclosed the number of million dollar air our customers this quarter.
We didn't we didn't.
Got it and then just last time.
Just wanted to talk about Deloitte, you're expanding your relationship with them, but you know it usually does take some time to hire and train their team up get them up to speed. When do you think they could start getting meaningfully contribute.
Pipeline.
Well I think in some cases, you're right those types of relationships you I think I'd like design wins in a take awhile to foster and and really it really you're going I will tell you that our partnership with Deloitte didn't begin when we signed the contract we've actually been been working with them for awhile and what I'll call.
And an opportunistic level and we're very enthusiastic about some of the the new opportunities. They are bringing forward and I don't think we'll have to wait a long time for one for them to start using us more broadly internally or for us to start working on join account plan. So I'm not going to prognosticate for you at the level of Red.
<unk>, that's going to come from them I'll, let you talk to them about how much. They are excited about this.
This service tower for them, but they but at the end of the day, we're very excited about it and we think it can be.
Very material to our overall results.
And the thing that is exciting about it is.
Just how quickly and how readily there they're jumping in and partnering with us on different engagements. So we're excited about it.
Okay, great things and good luck.
And our last question comes from Pat Walraven JMP. Your line is open.
Oh, great. Thank you and can.
Gratulation as you guys. So can we talk a little bit more about the.
Concur partnership.
And the reason is I mean, I use that app, all the time and I think most of the people on this call do so.
Dan while I was waiting to ask this question I took up they open my concur App.
The expensive function to take a picture of my parking receipt.
It asked me was the amount 31 O five.
Ed correct.
And then it figured out the rest from there and then that all goes up into.
My save expenses and a couple of weeks from now my poor associate ask the spent a couple hours turning it into a report.
But so I'm, just wondering where where is the friction in that process that you guys are addressed.
Yeah sure. So few things one I'm not familiar with the exact same process, but I will tell you.
And walking for example, and you cannot some blinds.
You too.
Submitting expense or sometimes you know we can deviating from the process in which is where walk me comes up and show you what to do.
What we did we.
Cause the recipe concur was already a customer so they use locked me for feature adoption onboarding users and so on.
And not necessarily on every flavor process and the reason is that every customer customize that process, but it's about what we're seeing across on the platform.
It's not about the rights about across it.
So now you can actually go and get walked me and build your own experiences.
So may be just a meeting and expenses seem both but maybe booking a flight are doing it.
That exceeding the policy, that's starting to be a little bit more complex you need to get more approval and so on and so on on top of it. Obviously there was a lot of data issues people are not categorizing. It correctly and this is obviously were walk me can can call me. So we will be happy that you wouldn't be a customer now with our joint fr.
At the peak encore.
You can customize their own experiences so next corner I got it all about it.
Oh maintenance you didn't quite follow up and sorry go ahead go ahead.
That this is rob the actually it might be easy also because walk means that you just don't realize it somebody looked at her journey. So what people are struggling with and build the experience. So it's simple and intuitive.
Alright, you don't necessarily all the time no didn't walk me is that.
It makes it intuitive and in different ways.
Yeah. The other thing I would add to there's a lot of customers actually have different types of processes and Scott just about learning how to use concur. It's actually had about use the expense policies associated with their business do they have an expense request process do they actually have limitations are there specific requirements. So they asked 222.
Do in order to process the expense in the right way. So it's it's not always just about the app, sometimes it's about the business processes and how difficult they are to navigate.
One other point I wanted to make sure I made a mistake. There we did actually have a disclosure on a million grade the million customers, where we did at 27 for the quarter.
And that's in our industrial presentation.
And at this time I will turn it back to Dan Annika for closing remarks.
Yep. Thank you everyone for being on the call today, we're really looking forward to keep you posted on our progress in quarter ahead, and thank you so much.
And that does conclude our call for today. Thank you for your participation you may now disconnect.
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