Q3 2022 Anaplan Inc Earnings Call
Good afternoon. My name is Emma and I will be your conference operator today at this time I would like to welcome everyone to the Aetna plan third quarter 2022 fiscal earnings conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad, if you'd like to withdraw your question again press star. Thank you alluded to chip Coe you may begin your conference.
Yeah.
Good afternoon, and thank you for joining us on today's conference call to discuss our plans third quarter fiscal year 2022 financial results. Joining me on the call are Frank held Rooney, our Chief Executive Officer, and the cost Smith, our Chief Financial Officer.
On today's call, we will review, our third quarter fiscal year 2022 financial results and discuss our financial guidance for the fourth quarter and fiscal year 2022.
Note that some of the information discussed on the call, particularly our guidance is based on information as of November 23, 2021 and contains forward looking statements that involve risks uncertainties and assumptions, including those related to the continued impact of COVID-19 on our business and global economic conditions. The guidance. We will provide today is based on our.
Assumptions as to the macroeconomic environment in which we will be operating those assumptions are based on the facts we know today.
Many of these assumptions relate to matters that are beyond our control and changing rapidly, including but not limited to the scope and effectiveness of the cautionary measures designed to contain and prevent the spread of COVID-19. The continued impact of COVID-19 on customer purchasing decisions and the length of our sales cycle, particularly for customers in certain geographies.
Please refer to documents, we filed with the SEC, including the form 8-K filed with today's press release those documents contain risks and other factors that may cause our actual results to differ from those contained in our forward looking statements.
These forward looking statements are being made as of today and we disclaim any obligation to update or revise these statements. If this call is reviewed after today. The information presented during this call may not be current are accurate we.
We will also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles unless otherwise stated during the call all references to our gross margins expenses and operating results are on a non-GAAP basis for historical periods. A reconciliation of GAAP and non-GAAP results is provided in the press release and in supplemental financial information.
<unk> on our website.
And with that I will now turn the call over to Frank Calderone.
Thank you meta leader good afternoon, everyone and thank you for joining us today.
We delivered a solid quarter driven by healthy deal volume pipeline growth and increasing interest in our platform are.
Q3 revenue grew 35% year over year, and we saw 67% of new bookings from existing customers.
We now have over 1800 total customers.
Which includes half of the Fortune 50, and we continue to invest in innovation that positions Ana plan as the preferred enterprise planning platform of choice.
From a new customer perspective, we grew over 50% year over year and welcomed customers such as GNC issuer Aten networks killings, Financo and all value holdings. They represented a wide range of industries from insurance financial services and <unk>.
Professional services to retail and technology.
One of our new customers is Royal London asset management, which is a leading fund management company in the UK.
In response to the company's impressive growth and new regulations around profitability reporting they needed a robust and flexible platform for revenue and assets under management analysis.
Hannah plan offered enhanced reporting capabilities ability to run scenarios and fast calculation performance using granular data.
I'm also pleased to share that one of our partners is a customer as well Deloitte in the U S and Canada has selected and a plan to enhance their financial planning processes to increase time spent on strategic analysis of our process management.
Our customers are quickly realizing the value of our platform in fact, our newest customer cohort from a year ago has increased its initial <unk> over 30%.
Companies continue to expand with Ana plan for their digital transformations to support its finance evolution and drive business agility.
Multinational food company leverage Tanner plan.
They chose our platform for its scalability performance flexible scenario modeling and partnership with Google Cloud.
This customer will connect operational planning with financial outcomes to drive productivity gains and cost savings.
Eliminate duplicate systems of record and identify rapidly market opportunities.
Another expansion this quarter was with Equinix, the world's largest digital infrastructure company and longtime Ana planned customer.
2016, Equinix began its planning transformation journey with sales performance management, a year ago in response to strong market demand for data center capacity, they expanded into supply chain and procurement planning.
Last month <unk> selected us for their workforce planning initiative to prepare for our labor force at the right cost and time.
In addition, a longtime customer of Vmware expanded this quarter to sales segmentation and finance.
Integrating more of their planning across the company demonstrates greater agility and precision which leads to better outcomes.
Finally, a French manufacturer so seed pay Pik began their Anna plant journey with F. P&A in 2019, they expanded into supply chain with S. N O P and demand planning.
Vic will leverage and a plan for its trade promotion planning to maximize performance across product lines. They will manage promotions at aggregate and detailed levels in a single environment.
Providing better visibility and flexibility to optimize plants.
With these land and expand examples the common element is how customers are leveraging planning as a competitive advantage they understand the need for strategic planning across their enterprises, and we are helping them with our investments and partner ecosystem and customer success as well as our expand motions are.
Our retention rate was the highest it has been in nine quarters and with customer loyalty comes an increasing need for Ana plan resources, our ecosystem of certified Anna plant experts continues to grow with the total number of certified model builders, increasing 84% year over year.
We also capitalized on our cloud partnerships. These relationships have been instrumental for us to scale quickly and this quarter, we launched Ana plan on Google Cloud in Japan. This.
This technology partnership enables our customers to quickly deploy and access and a plan on Google cloud platform infrastructure with low latency adherence to data residency and access to AI and ml capabilities.
G C P in Tokyo launched with our first customer a leading financial services institution.
Overall, I am excited about the market opportunities and the feedback from our customers about how our innovative platform is solving the complex challenges.
Being the leader in the planning space continues to work in our favor.
To further extend our lead earlier this month at Ana plan lives, we introduced the Ana plan Autonomous enterprise.
Five years ago, we disrupted traditional planning and pioneered connected planning this was validated by Gardner's market guide.
Now we are experiencing another paradigm shift today.
Today's environment is in constant change supply chain disruptions, the future of work inflation et cetera.
As organizations operate with distributed teams they need a dynamic planning solution.
This requires a real time scalable intelligent approach to plan analyze and act.
And our plan autonomous enterprise starts with modeling and accessing external data to make real time decisions, which we integrate into our platform via Ana planned cloud works. This is an easy no code feature that enables business users to import data from many sources, including Amazon.
On web services S III, Azure blob storage and Google Big query.
Together with our partner ecosystem more than 250 enterprises have already embraced cloud works and they have executed more than 32000 integrations.
Next we extend our platform with embedded intelligence capabilities like and a planned plant IQ with Amazon forecast. This joint effort provides our customers with automated easy to use intelligent forecasting using Amazon AI ml capabilities.
After that we simplify the most complex problems across the largest enterprises with scale.
We recently introduced and a planned Polaris our next generation calculation engine with unparalleled multi dimensionality, including exceeding 10 quit Chilean sales, while efficiently managing spar city.
Early access with select customers is underway and we expect to make it generally available in 2022.
Our autonomous enterprise strategy is simple develop the most innovative planning platform to power the fastest decisions with this investment in the next stage of planning I am confident we can further our customer success with greater agility and intelligence within one sophisticated platform.
In summary, we are well positioned with our go to market and product efforts, especially as we head into our biggest quarter.
We couldnt do this without our talented employees and I'm also proud that we have been recognized on inks inaugural top 250, best led companies list for 2021.
To our employees for making and a plan the company it is today.
Now, let me turn over the call to <unk>, who will discuss our third quarter financials and provide our outlook for the fourth quarter.
In fiscal year 2022, as well as a preliminary guide for fiscal year 'twenty three.
Thank you Frank I'm pleased to report our third quarter results.
We beat the high end of our revenue billings and operating margin guidance total revenue was $155 million up 35% year over year.
Within this subscription revenue grew 33% and comprised 90% of total revenue.
Service revenue of $16 million was 10% of the total which is within the expected range.
From a geographic perspective international operations, which we define as our EMEA and APAC businesses represented approximately 45% of total revenue.
We saw broad based year over year growth across all regions with Americas revenue up 34%, EMEA up 36% and APAC up 41%.
We had healthy new customer growth deal volume and strong renewal rates, our linearity improved sequentially. This quarter, we had fewer deals over $1 million compared to last quarter.
Given the longer enterprise sales cycle, we expect variability in the timing of large deals is the athene in the past.
We now have 528 customers with <unk> over 250000, representing 27% growth year over year.
Additionally, the number of customers with over 500001 million increased 32% and 39% year over year, respectively.
Dollar based net expansion rate or <unk> was 119% demonstrating the customer need to extend planning to other areas beyond finance.
In addition to delivering year over year growth in the volume of expand deals customer retention rate remains healthy.
Looking at our performance metrics calculated billings for the third quarter was $183 million up 26% year over year.
Our remaining performance obligations or RVO exiting the third quarter was $923 million up 25% over last year.
Current portion of <unk> that is expected to be recognized as revenue over the next 12 months is $490 million up 28% year over year.
As discussed last quarter, we expect to see continued variability in calculated billings NCR IPO bookings growth rates based on differences in the timing of billing versus booking early renewals and off cycle renewals.
We recommend looking at both billings and CRP or bookings metrics on a trailing 12 month basis, which will help normalize for these timing differences.
On a trailing 12 month basis billings grew 32% and CRP or bookings grew 30% year over year and is a clear indicator of the underlying growth in our business.
Turning to margins total non-GAAP gross margin was 75% less than 1% lower year over year, driven by higher services revenue mix and investments in our data centers and public cloud.
Within this subscription gross margins were 83% and services gross margins were approximately 4%.
What are the New York, though our gross margin will include the initial impact of a gradual increase in the cost of hosted services to reflect the impact of ramping our public cloud usage.
Non-GAAP operating margin for the third quarter was negative four 4%, reflecting an approximately 1% improvement compared to negative five 3% in the same period last year.
Operating margin beat our expectations, reflecting solid revenue results and shifting of expenses from Q3 to Q4.
Net loss per share in the third quarter was negative five.
Based on 147 million weighted average shares.
Turning to the balance sheet and cash flow free cash flow for the third quarter was negative $1 million and we exited the quarter with $312 million in cash and cash equivalents.
Moving to our outlook, we expect fourth quarter of fiscal 2022 revenue in the range of $154 million to $155 million.
Within this we expect subscription revenue to be approximately 143 million and services revenue to be in the range of $11 million to $12 million and we'll continue to managed services revenue within our target range of approximately 10% of total revenue.
Non-GAAP operating margin for the fourth quarter is expected to be in the range of negative 10 to negative 11%.
Billings for the fourth quarter are expected to be in the range of $213 million to $214 million.
This implies a year over year growth rate in the range of 23% to 24%.
Billings from a trailing 12 month basis, the midpoint of our Q4 billings guidance would represent 28% year over year growth.
As mentioned last year billings in Q4 of the prior year included a four point foreign currency tailwind as well as a large upfront payment for a multiyear contract, which was a three point tailwind.
As you can see there is a lot more behind the billings metric and understandably. It can become confusing as a reminder, we introduced billings as a guidance metric at the beginning of FY 'twenty, one due to the uncertainty of the environment.
We withdrew the annual revenue guidance and started providing billings guidance as an interim practice.
Now almost two years later, we believe this is a good time to replace quarterly billings as a guidance metric we.
We believe CRP all reflect the underlying operating growth and is a better leading indicators.
Billings, if normalizes timing and duration noise that can impact quarterly billings.
Next quarter, we will start providing quarterly <unk> guidance for Q1, FY 'twenty three.
For the full year, we are raising revenue guidance to be in the range of $583 5 million to $584 5 million up from 571 5 million to $573 5 million.
We expect non-GAAP operating margin for the full year to be 50 basis points better than our previous guidance in the range of negative seven 5% to negative eight 5%.
Finally weighted average share count for the fourth quarter and fiscal year.
<unk> to be approximately 148 million shares and 146 million shares respectively.
While we have yet to conclude over fiscal year 2023 planning cycle, we would like to provide a preliminary view as we remain confident in our long term ability and the value that we bring to our customer base as.
As such we are currently planning for preliminary fiscal year, 2023 revenue of $730 million, representing 25% year over year growth.
We continue to monitor the pace of global recovery and the impact labor and supply chain shortages could have on our customers.
We remain focused on helping them deliver productivity gains a critical focus for our businesses as we operate in an inflationary environment.
In summary, with our vision for the autonomous enterprise, we are uniquely positioned as the leading enterprise platform that empowers businesses to constant change into our strategic advantage.
Frank and I, Thank our employees for their hard work and commitment as we look ahead to closing out this fiscal year with that let's now open it up for questions.
Okay.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from the line of Kirk <unk> with Evercore. Your line is now open.
Yeah. Thanks, Thanks, very much and happy holidays to everyone.
Frank I was just wondering if you could start by talking about sort of the.
I guess the bookings this quarter, obviously I think the quarter on a revenue basis was strong but I think.
Given the aftermarket reaction there is some that would view sort of the billings number is maybe a little bit weaker than expected given the professional services outperformance. So can you just walk through that I know of the cost walk through some of the permutations that impact that but yeah from your view how did you think the quarter went from an execution perspective. Thanks.
So Kurt Thanks for the question and happy holidays to everyone as well, let me start let me just give an overview on the quarter and then I'll turn it over to the cost to kind of go through a little bit more on the billings for your question.
If I look back over the third quarter.
As we said in the prepared remarks, we had healthy deal volume and we also saw improved linearity quarter on quarter.
We also had and I would say I really feel pleased with this new customer growth.
In the quarter, just a couple of additional highlights I'd put about the new customer growth as far as our net new lands in the third quarter. As we said we saw a 50% increase year over year. This is the highest quarterly growth of additions that we've had in 11 quarters.
And it's also the highest.
Overall customer growth when we look at this if you look at total customers in.
In the last six quarters and then also as we mentioned if we look at the FY 'twenty one cohort so the new customers the new lands that we had last year.
So far we've seen a 30% expansion of <unk> for them in this current fiscal year. So it really kind of shows that as we bring on.
These new customers were able to convert them pretty quickly.
To realizing additional benefits with Ana plan going on a couple of more points I just want to mention before it turns into cost health.
Healthy expand I know, we had healthy expand business last quarter, we continued to see healthy expand this quarter with <unk>, 119%.
And the other thing, which we called out as strong renewals.
It was a high renewal rate in the third quarter and it's the lowest churn that we've had in nine quarters. So again, some good performance across the board.
And we feel good about.
Let's say the guide that we provided for Q4 as they look at Q4.
We're looking at a healthy pipeline.
We see larger transactions in the pipeline.
As we're looking at Q4 in Q4, right now and I would say they are in later stage.
We're focused on linearity again, this quarter to make sure, especially with the holidays in the middle to make sure that we can have a good linearity projection throughout the next few months.
And also we have which typically is in the fourth quarter.
Higher productivity as we close out the fiscal year and then we continue to see strong demand from our customers and partners.
Good good feedback I just wanted to provide as we look at Q3 and as we go into Q4 and have a cost you want to talk about the billings absolutely. So thanks, Thanks, Kurt Kirk and.
Just building on Frank your commentary so.
What we typically see is that over or <unk>.
It generally takes six to 12 months in terms of sales cycles.
And that is why we have recommended looking at trailing 12 months as a much better indicator of the underlying growth.
Talked about that in the prepared remarks also but if you look at it from that perspective of our billings growth was 32% and oversee our PEO bookings growth was 30% on a trailing 12 month basis. So overall.
And we remain confident in.
In terms of our pipeline and the outlook and that is the reason why we even have eased over guide going into FY 'twenty, three as well as ending the year FY 'twenty two.
Thank you all.
Your next question comes from the line of Raimo <unk> with Barclays. Your line is now open.
Thank you.
Firstly, thanks for that move towards <unk> should take a lot of the noise away.
Frank a question for you if you we talked about the six to 12 month sales cycle, there now and we've talked about.
New customer business getting better expansion getting better.
Can you talk a little bit about the evolution of your pipeline, especially around the top of the formula how that changed this year coming out of transitioning there is a lot of talk about digital transformation et cetera do you.
See that in terms of new customer engagements getting better people talking about more broader project et cetera, just trying to understand how this is evolving for you and then I have one follow up Topeka.
Sure Raimo, that's a great question I'm glad you brought that up and as I've said before.
A big part of what I do.
On a regular basis as reach out to senior leaders.
Either existing customers or new prospects that we're looking at so I get enough great opportunity start to CFO CIO Ceos.
And I would say that the especially this year.
The number one objective that they are all concerned about is just all of that what is going on in the in the marketplace is how do they plan and how they get more.
Information so that they can make better decisions respond faster have the agility and so they're much more interested now more than ever to really engage with myself, but also others on the team and talk about <unk>.
How they are going to transform.
Say as far as to answer your question as far as the pipe.
We are focused on building with our partners as well we are focused on building pipe in.
In early stage, and then seeing that pipe progressed throughout the five stages, we have contingency make progress every quarter this year, including <unk>.
Where we currently stand and as I, just mentioned a few minutes ago as far as how we feel about the healthy pipeline, we have going into Q4.
And we've been aggressively working on.
With our partners, how best and our customers how best to bring them through that process. You mentioned, the six to 12 months cycle.
With enterprise customers.
That is a standard cycle that they go through as you get them into an early stage of the phase stage, one and progressed through the five stages.
But I feel good about.
How that's been progressing primarily around transformations in finance, but also more extensively how they are trying to connect the.
The financial processes with other parts of the business.
And that's the strength that I think Anna plant brings with the with the connected planning and how we differentiate ourselves in the marketplace and so the more that I think we can continue to do that.
And then we can get customers some of which we just announced on the call customers like Vmware, who has been a customer of ours for several years and it's continuing to expand our equinix.
We've had a few deals even in the second quarter or the third quarter, I mean that were over a $1 million.
One of which was several million dollars. So we're seeing the level of investment that our customers are making.
In their transformation journeys and I think thats a great sign.
And as we think about <unk>.
Going forward I think that will continue to be important as customers think about.
What more they need to do to be agile in there in their business and drive the right type of change that they need.
Thank you and then one quick one for me if you think about gross margins, obviously doing using.
The public clouds will kind of create some and.
Some pressure there.
Where are we on that journey in terms of trying to model that going forward. Thank you.
Yeah. Thanks, Thanks, very much first of all thanks for your positive feedback on the CRP metric.
As we think about the gross margin and the investment in cloud first of all we are broadening.
The customer choice and we are already seeing it resonates really well with our customers.
As we think about the journey I would say we are still in the early phase.
All of the shift.
Shifting to the public cloud.
And we will continue to see battle costs.
We do our initial onboarding and overtime.
<unk> seen economies of scale.
And improvement.
In terms of overall cost profile there. So overall, we feel confident about economies of scale.
And the ability to offer our customers broader choice.
Okay. Thank you.
If I can just add on that I mean, the key thing we've talked about it last quarter and we do mentioned again this quarter, we're already starting to see some traction with our cloud infrastructure providers.
Now just going live this month with.
AWS and the U S and having already gone live.
Several months ago with Google cloud in the U S and now Google Cloud in Japan. So that's starting to increased going back to the question that you had before allowing US to now also increased pipeline of opportunities with those cloud providers.
Thank you.
Your next question comes from the line of Taylor Mcguinness with UBS. Your line is now open.
Yeah, Hi, Thanks for taking my question, so just going back to the large deal activity you talked about earlier and potentially not being more <unk> weighted than I think you also mentioned labor shortages in the prepared remarks. So we're either of those impactful and deal close timing in the quarter versus expectation then.
Maybe you can talk about what's embedded in the guide in the <unk> guide for each of those and when do you expect to see more broad based improvement there.
Okay.
Yeah. So dealer first of all thank you. Thank you for the question.
As we think about overall enterprise sales cycles as Frank mentioned it is.
A six to 12 months cycle and we see variability so we don't.
Guide Our project award a particular quarter will have in terms of the.
Large deals, but overall, we are seeing good activity and have good visibility in terms of those larger deals as you think about just the secular tailwind that we have been seeing.
Through post pandemic as well as the overall economic shifts with the rising labor costs supply chain shortages. The conversations that we're having externally clearly resonating I had two conversations with.
<unk> CFO of retail Slash E Commerce companies last week and both off the CFO is we're really interested in understanding how they could use planning as a strategic advantage.
As we think about our guide.
We are not insulated by those.
The macro econ.
Economic forces in terms of inflation and we continue to monitor the impact for our own operating margin impact in terms of the revenue guide as I said, we feel confident about the demand outlook and our ability to execute against that.
One of the things I believe you asked at the beginning was as far as just hiring.
And whether or not that has any impact.
I would say every company around today is not insulated from the global trends and the pressures from the labor market.
But for US if I look at where we are right now it did not impact us as it relates to our sales performance.
One of the things that we are doing which I think is advantageous for us.
Is that we are leveraging our platform just thinking about labor and how best to manage labor and.
And specifically our own product of plan IQ to bring intelligence into how we're looking at.
How that market could unfold, what our needs are let's say over the next couple of quarters and we're using more predictive insights.
That is allowing us the intelligence to in some cases higher ahead.
And some of the evergreen wrecks that we've opened and been able to.
To be able to provide in the marketplace and so that forward thinking I think is allowing us to <unk>.
Mitigate as best we can.
Some of those market pressures around the labor market.
And the more that we can drive.
The better we are going to be able to continue to focus on.
On our customers and our partners in meeting the demand that they have and as I said before really pleased about the continuous.
Investment that theyre, making in and a plan to continue to drive their transformation.
Great. Thank you.
Your next question comes from the line of Stanislawski with Morgan Stanley. Your line is now open.
Perfect. Thank you so much guys.
Maybe I'll start with <unk>.
Thanks.
Frank what are you guys seeing as far as.
Just the continuing <unk> within the sales organization and we.
We started to hear some.
Some murmurings of a little bit of a pickup in churn within your sales organization.
What are you guys seeing internally.
And overall, how you're seeing the sales organization ramping and then I have a follow up for <unk>.
Okay.
So Stan again, good question I think it ties to the previous question. So let me expand a little bit more so one of the things as I said all companies are dealing with I would say some level of churn in the market just based on where things are and the dynamics of how thats playing out.
We're leveraging as I said, our platform our technology to be a better plan. So we can try to stay ahead of that as best we can and I think we're seeing signs of progress in that.
Couple of things I, just share with you just kind of looking at because I think what youre getting at two with our capacity.
And I'm really feeling good about our capacity right now.
Confident first of all from an Anna plant perspective.
Quota carrying we have a fully ramped reps are the highest.
We've had in several quarters, which is a good sign goes back even to tell his question about being able to meet our.
Current demand.
Secondly, with our partners.
We continue to work with them to.
To expand the.
The ecosystem and invest in the ecosystem.
We had if you look at our partners to certified model builders are up 70% year on year, which is a good indication I recently, even have a conversation.
With one of the senior leaders at Deloitte will.
We're partnering together to continue to invest in that so that they have the ability to continue to expand.
And then from a customer perspective.
Third of our customers currently have a center of excellence.
And the number of customers with the.
Center of excellence as far as the number of Coa has grown about 100% year on year. So all of those dynamics, even while this there is churn I would say all over and there is an increased need for talent, we're investing in that and I think overall, if you think about certified.
Talent around and a plan thats up about 84% year on year.
So again, we're trying to manage that as best we can.
It's great to have bill on board he's coming up on his.
Annual first anniversary and another this quarter actually and he is continuing to drive.
Improvement in focus as you can see with the linearity he's providing further discipline as far as the execution. The comments I mentioned earlier about the healthy deal volume and new customer growth and then he is also working on the customer.
Attention overall customer success with the extend business as well as with our renewal business and the strength that we're seeing there and the other thing I would say just to close out. This is what I found bill has been able to do so effectively and the time. He's been here is to continue to drive.
A further emphasis on sales culture.
One of accountability execution, and recognition and I think that goes a long way because it spends a lot of time investing in the people in the organization and that's going to help mitigate especially with the labor dynamics that I mentioned before.
Got it that's very helpful. Thank you Frank.
Because.
Two part question for you.
In the quarter anything to call out as far as FX impacting but I noticed that there is a little bit of a delta between deferred revenue on the balance sheet versus cash flow statement.
And then also.
You know you noted there is some timing impacts on billings and <unk> in the quarter.
Any kind of quantification you can.
Give us to help us understand what the actual impacts were in the quarter. Thank you.
Yeah. So first of all thank you Stan.
On FX, there was no material impact this quarter as it relates to FX.
As you think about the second part of your question in terms of just.
Why do we even shifted to <unk>, what we were seeing.
<unk>.
Renewables are the timing of renewals as well as the duration create noise and Thats why we shifted and that's why we highly recommend to look at the trailing 12 months metrics.
As it relates towards billings as well as <unk> bookings. So if you look at it from that perspective, you'll get to see trailing 12 month billings growing at 32%.
Well as the IPO bookings growing at 30%, which is a clear indicator. So again, there will always be those fluctuations and looking at trailing 12 month is the best approach to think about business.
Got it got it thank you.
Your next question comes from the line of Brent Thill with Jefferies. Your line is now open.
Thanks, Frank I think the one thing we're all trying to reconcile is if your quota carrying team is kind of.
At a high and partners are plugging.
Your <unk> comp was actually easier yet a decelerated five points. So many have been asking or some of these supply chain issues, causing companies to defer their decision to act this quarter as they are dealing with bigger issues and perhaps it's just pushed deals into Q4 I think you were asked earlier, but.
Don't know if we got a clear answer so I wanted to circle back on that and just see if there's something going on because what youre seeing versus what's happening with the numbers is somewhat of a disconnect and everyone's trying to reconcile what you think happened in the quarter.
So Brett I appreciate the question.
While deal volume was solid and we mentioned this on the call. We didn't have as many large dollar deals this past quarter in Q3 as we did in the previous quarter I know last quarter, we talked about having 6 million dollar deals when I talk about large deals. So the key thing that we're calling out here, which the dry that it's really driven.
Variation between Q2 <unk>.
And Q3 is driven by the timing of and the enterprise cycles not necessarily a change in demand trends. So I just wanted to be clear on that and I think <unk> stated this earlier, but as you know with enterprise sales our sales cycle. It goes back to like six to 12 months and we have historically seen.
<unk> variations in those cycles as far as.
Let's say deals that are over $1 million.
Which is just something we want we just called out.
And the other thing, which I'll also mention as I said.
Earlier, if you look at the million dollar deals, even though there were fewer of them than last quarter.
Ah was still up 39% year on year. So again similar to the comments I mentioned before we feel good about.
The pipe the.
The quality of deals that we have in the pipe.
Those that are working on transformations, the conversations that I'm, having with executives that are increase.
Increasing because of the need and focus that they have on driving agility in their business and then the last thing, which I'll close on the question, which is what I said early about Q4.
How we sit today.
We feel we have healthy pipe for the quarter, we are seeing the larger transactions.
Let's say more of them in later stage, which is a good sign.
<unk> continued to be focused on our linearity.
And then also productivity tends to be higher in Q4 from.
From a seasonality perspective, and then as I said before the strong demand from customers and partners is there. So don't want to give any indication of anything other than just some of the variability that we see from time to time with some of the over $1 million deal.
Okay. That's great. Thanks for the color Frank.
Okay.
Your next question comes from the line of Dan Church with Goldman Sachs. Your line is now open.
Hey, Thanks for taking my question I guess.
When we think about that 119% net expansion rate.
Can you kind of help us break that down that strengthen and think through either from a new logo and expenses standpoint, what youre seeing in the market with respect to our supply chain and sales performance management.
Particularly in the context of the macro environment with it with supply chain and labor shortages that we're seeing today and then as we look into kind of next year. How are you thinking about.
The durability of about 119% in the kind of net expansion rates into into 'twenty three 'twenty two excuse me.
So let me start and then I'll have the cost add some additional commentary.
So I'll start with the comment.
That I've talked about many times, which is.
How we differentiate and a plan in the marketplace and that is the ability to offer connected planning solution to our enterprise customers, where they can be.
Begin in any function and start to connect it processes and I think your question goes into with the current environment.
Are we seeing even more activity as it relates to supply chain and sales performance management and the answer to that question is yes.
But I would also say that we see a continuation of the connection back into finance.
Through a lot of those processes I don't know if you.
We're able to some of you watched and plan live a few weeks ago.
But I got a chance to interview two of our customers.
What has us sales for Americas and services now as well as finance executive and Johnson <unk> Johnson both of those customers have been.
Looking at finance align with sales as it relates to service now and finance aligned to supply chain as it relates to Johnson <unk> Johnson and I think those are two areas are two great. Examples.
Pretty good strong customers that have invested in our platform that are looking for the extended nature of that when you look at the overall mix of our business.
Outside of finance, it's still in that 40%, 45% range, that's in supply chain and sales performance management, which we feel good about the showing that the whole pie is growing but each in each of them are growing probably at similar type rates are rates as I just talked about the connecting points.
Yes, just to build on that Frank.
We see.
819% this quarter.
This was driven by strong expand motion, where 67% of our net new bookings.
<unk> from expands.
Secondly retention rate as Frank mentioned earlier was the highest over nine quarters and as we look forward then into the next year, while we don't guide.
Not at the definitely aspire to steady improvement and we think about that 120% as a good benchmark for us.
And just a real quick follow up for me.
Looking back I guess relative to this time last year and any kind of commentary as to what youre seeing from some verticals that may have been heavily impacted from the pandemic.
Are we back to or above pre pandemic levels or are you still seeing some.
Some struggle errors from.
From the overall demand environment.
We mentioned last quarter and I would say it again this quarter.
We're starting to see some of the verticals like hospitality.
Entertainment, which were significantly impacted at the start of Covid for us.
To come back into the pipeline I mentioned that last quarter and they are still progressing through the pipeline. So we're seeing more of that.
I wouldn't say that those are back to pre COVID-19 levels, but.
It's promising as far as the early stage development and how it is starting to progress.
Alright, Thank you very much.
The strength has been in technology and retail and healthcare.
So that those businesses just continue that goes back to the MLR point as far as how we're continuing to see.
Expand opportunities progress.
That's helpful. Thank you.
Your final question today comes from the line of Michael <unk> with Wells Fargo Securities. Your line is now open.
Thanks, Good afternoon I appreciate you squeezing me in.
Got a question on the expansion rate, that's holding consistent of 119% more new bookings for the past couple of quarters until towards the existing basin than historically was the case I'm just wondering if theres anything you can add on the net new side of the business.
Does that look from your perspective is there anything you can add to help compare average deal size for new land versus either last year or what you were seeing pre pandemic levels.
Yes.
Yes, Michael Thank you for the question.
So as Frank mentioned this was a strong land quarter for us as.
As well as we saw good retention rates, so as we dive deeper into the call as the new customer growth. The number of deals that we had this quarter was high mark for us.
Overall customers.
<unk> <unk> hundred.
And 50% of Fortune 50 is a customer Thats also just shows the strength of our platform as you think about <unk>.
New customer growth just a net new additions.
As Brian shared we had a 50% plus growth in that particular metric and this is the highest we have seen in Boston nine quarters also as we shared earlier.
So your million dollar deals compared to what we have seen before.
Overall rich.
Read on the ESP, but overall I would say a strong land quarter for us from a deal volume perspective.
And a very healthy quarter from a retention rate.
Well as an expense perspective.
Thank you for that cost if I can just squeeze one more and youre guiding for revenue slightly down sequentially. It's not something we've typically seen from the model. The additional subscription disclosure does help but is there anything different in terms of how you're framing guidance as you take over the CFO role.
And you mentioned no FX impact this quarter, but is that also consistent with what youre expecting into Q4.
So Mike great questions. There so I'll break it into three first I would just highlight.
From my perspective.
As I think about the future I believe in creating more transparency trust and credibility.
Second specifically if you look at <unk>.
Q4 revenue guide as you rightly mentioned.
Looking at subscriptions.
Separately is very important and from that perspective.
We had our Q3 subscription revenue at $139 3 million and we are guiding $243 million. So definitely an increase over there and that's what we would guide you to look at in terms of just the underlying strength of the platform and finally I would say that.
Even in terms of looking out.
As strength shared we feel confident about our pipeline and our capacity from a sales execution perspective.
Thank you.
Okay.
This concludes today's Q&A, Frank Calderone, I'll turn the call back over to you.
Thank you operator, I'd like to thank our employees, our customers and our partners and investors and other key stakeholders as we value the strategic partnership.
Please join US again next quarter for our Q4 and FY 'twenty two earnings release.
Have a great afternoon. Thank you.
This concludes today's conference call you may now disconnect.
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