Q4 2021 Qualtrics International Inc Earnings Call
Ladies and gentlemen, thank you for standing by your conference calls have again momentarily again. Thank you for standing by your conference closer to getting all metallic thank you.
[music].
Okay.
Okay.
Thank you for standing by and welcome to the <unk> fourth quarter and fiscal year 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question at that time. Please press Star then one on your Touchstone telephone.
As a reminder, today's conference call is being recorded.
I would now like to turn the conference over to your host Mr. Stephen will hit of P&A and Investor Relations. Please go ahead.
Thank you and welcome to <unk> fourth quarter and fiscal year 2021 earnings conference call on the call. We have <unk> been CEO , Chris backed that president and Rob Bachman CFO . Following our prepared remarks, we'll open the lineup to answer your questions. Our results press release and a replay of today's call can be found on the <unk> investor real.
<unk> web site.
During today's call, we will make statements that represent our expectations and beliefs concerning future events that may be considered forward looking under federal securities laws. These statements reflect our views only as of today and should not be relied upon as representative of our views as of any subsequent date.
We disclaim any obligation to update any forward looking statements or outlook.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to the press release and the risk factors and MD&A sections of our SEC filings, including our most recent 10-Q and our 10-K that will be filed for.
For the fiscal year 2021 word.
We'd also like to point out that the company presents non-GAAP measures. In addition to and not as a substitute for financial measures calculated in accordance with GAAP do you see the reconciliation between these non-GAAP and GAAP measures. Please refer to our press release filed earlier today and our Investor Relations presentation, both of which are posted on our Investor Relations website.
With that I will turn it over to <expletive> .
Thank you for joining us today.
Q4 was.
It was an outstanding quarter.
So off a record year for Quadrex.
Revenue for the quarter was $316 million up 48% year over year.
And this was our fourth consecutive quarter of robust growth.
Our annual revenue for fiscal year, 'twenty, one to $1 1 billion and.
And not only did we passed the $1 billion revenue milestone.
We're accelerating through it.
Q4 subscription revenue was up 61% year over year in annual subscription revenue in 2021.
Was up 51% year over year.
$871 million.
And this is phenomenal growth at our size and our scale.
Because of the strong momentum we expect total revenue in fiscal year 'twenty two.
One 402 billion to $1 $4 6 billion.
Representing 31% growth year over year at the midpoint.
Experienced management.
Is becoming as critical to business success, as any CRM or HR system.
And the ability to understand how your customers and your employees are feeling.
And then take action on that data is.
It is just Goldman.
We have a 10 year head start on this market.
And as our growth demonstrates we also have a significant opportunity ahead.
A world, where it's easier than ever for customers to change service providers, and where employees are leaving their jobs at record rates.
The experience is the company's deliver have never been more important.
Our 128% net retention rate.
In Q4 illustrates.
We are quickly becoming a strategic partner for enterprises.
Our <unk> operating system is a single.
Secure cloud native platform that.
That enables organizations to bring together all of their experience data customer employee product and brand.
And then analyze it and take automated action.
To continually improve the experiences that they deliver and with our acquisition of Clare Bridge.
The leader in Omnichannel conversational analytics, we're changing the game again Clare bridge adds a critical new layer to our platform that helps organizations discover everything that their customers and employees are saying wherever they are saying that including in social media E Mail support calls chats and product reviews.
Our customers are designing products services and experiences.
Their customers want next by acting on customer feedback from anywhere.
And theyre designing new ways of working by listening to their employees.
Amid the great resignation.
We're seeing strong growth in our employee experience product line as companies look to attract and retain the best talent.
Increased employee engagement and improved productivity.
I'll give you example at least a couple of examples of what we saw from this quarter.
It's travel reset.
Southwest Airlines.
As an ambitious goal of adding a significant number of employees to its workforce in 2022, which is a challenge for any company in this labor market.
Southwest expanded its relationship with <unk> and.
<unk> invested in our candidate experience solution.
So from the interview process, all the way through to Onboarding.
They can understand and act on the most important moments along our candidates journey to the company.
We also formed an exciting new relationship with Comcast.
They are investing.
To create a culture of feedback across all of their customer facing teams in Q4 <unk>.
They chose quadrex to get closer to their advertisers and publishers I understanding their experiences with the company and then training their teams based on that data.
<unk> will help them strengthen these critical relationships and empower their sales and service teams to deliver greater results.
We're seeing a groundswell of customer adoption across all of our product lines in Q4.
We expanded or formed new relationships with leading organizations like Axa comments BP Mitsubishi Motors, HSBC and the state of Maryland.
At the end of 2021.
We had 143 customers spending $1 million or more annually.
And that is the 93% increase year over year.
And we added 3000 customers in 2021.
And today more than 16750 organizations around the globe are using <unk> to build deeper relationships with their customers and employees.
And we continue to innovate with an intense focus on our customer success.
Because all of our products are built on our <unk> operating system.
We can innovate faster and enable our customers to unlock more value than ever before in Q4.
We launched experience.
This is a major platform innovation.
The single unified view of everything that people are sharing within organization.
Experience <unk> enables organizations to zoom in on the detailed preferences of individual customers.
Personalize their experiences.
And then maybe zoom out to get powerful abused by segments, such as teams or geographies to identify new market opportunities.
Ultimately.
We're helping them build deep trusted relationships at scale.
And now we have more than $5 billion.
Experience ideas in our system.
Our platform is a system of action.
And when it's connected with systems of record such as their CRM or our customers HR systems or systems of engagement, such as e-commerce or mobile apps anyone can turn insights into action with clicks not code using our powerful workflow engine.
As we rapidly grow our ecosystem, we have more than 275 integrations with companies like SAP Salesforce.
Salesforce Zen desk and service now.
Nearly three times more at this time last year.
That lets organizations collect experience data and quickly act on it in the systems that they use every day.
We continue to invest in areas that will supercharge, our growth and deliver greater value to our customers.
One of those areas is in key verticals in November .
We acquired healthcare analytics companies survey vitals.
Extending our leadership in healthcare the company has approved to administer all 11 cap standards, which are standards that assessed the patient experience.
In Q4.
Trinity Health chose us as its experienced management platform across 88 hospitals, and hundreds of health and well being services.
With quadrex there'll be able to gather feedback and take action.
To deliver better experiences for providers patients and their families both in person and virtually.
International is another key growth key growth lever for us.
And the investments that we're making to support increasing demand for experienced management outside the U S are paying off.
In the quarter, 30% of revenue came from international which is a company first.
Finally.
We've already received a tremendous response to our acquisition of Clearbridge.
Particularly because companies are looking to replace point solutions with a single experience management platform.
They can meet all of their needs. Clair Ridge is one of the most advanced intense emotions and sentiment understanding systems and it's now uniquely part of our platform.
And as part of it is clear, which is creating opportunities for us to expand rapidly into digital voice and social media analytics.
Great example was Barclays Bank.
Barclays has been using <unk> for many years and in the quarter.
Added Clare bridge technology to enable analysis of unstructured customer feedback for their retail bank.
So now Barclays will have a single system to.
To get a 360 degree view of everything that customers are saying, whether it's in social in the call Center.
Wherever they are saying.
And this will help them uncover opportunities across financial segments, and ultimately power their digital or any experience that they provide.
As a driver for growth and efficiency.
At the beginning of 2021, and we strengthened our leadership team with executives from growth companies like Microsoft Salesforce Twilio and Adobe.
We made another strategic hire in Q4 with a deep rightful joining to lead our global sales organization DP comes from Salesforce.
Where he was most recently global Chief revenue Officer of Salesforce Health, a multibillion dollar business unit.
And today.
We are announcing the appointment of two incredible new board members.
Marketing Executive Omar Johnson.
Who has led marketing teams that Apple and beats by Dre.
And Ritu.
Bhargava, our longtime technology leader from SAP and Salesforce.
Attracting and retaining talent like this has helped us build an incredible foundation for our company.
And Q4.
It was another great hiring quarter with more than 400, new employees joining quadrex.
Q4 is a powerful finish to our first year as a public company and I couldnt be more proud of the results. Our team is driving and I want to thank them for their hard work.
We are clearly building politics for long term durable growth and with that I'm going to hand, it over to Rob to discuss more detailed results.
Thanks, <expletive> and good afternoon, everyone. As <unk> noted, we had an excellent finish to 2021.
I'll now touch on some of the Q4 highlights and then go into our outlook for Q1, and the full calendar year 2022.
<unk> revenue was $316 million in the fourth quarter up 48% year over year, and one point <unk> seven 6 billion for fiscal year, 2021 up 41% year over year fourth quarter and full year total revenue contribution from Clearbridge was $21 million net.
Net of recognized purchase accounting adjustments.
Subscription revenue for the fourth quarter was $259 million up 61% year over year for the full year subscription revenue was $871 million representing.
Representing growth of 51% year over year.
<unk> contributed $20 million of subscription revenue in the fourth quarter and full year 2021.
Professional services revenue was $57 million for the fourth quarter and $205 million for the full year, representing 7% and 9% growth year over year, respectively.
Clearbridge contributed $1 million of services revenue in the fourth quarter and full year 2021.
Calculated billings for Q4 were $514 million up 54% year over year and $1 $2 93 billion for the full year up 47% compared to last year calculated billings included approximately $55 million from Clair ridge in the fourth quarter.
Which had an opening deferred revenue balance of $36 million.
After being subject to a one time purchase accounting write down.
The seasonality in the Clearbridge business is such that almost half of the annual calculated billings occur in Q4.
Our remaining performance obligation representing all future revenue under contract ended the year at one 7 million $3 3 billion up 51% year over year. This metric includes both new and renewal software contracts along with our professional services business.
Remaining performance obligations, which is all future revenue under contract that is expected to be recognized as revenue in the next 12 months was $1 <unk> 2 billion.
57% year over year.
Our Standalone dollar based net retention rate increased to 128% in the fourth quarter, which reflects the strong upsell motion we are seeing in our existing customers as they expand their usage across different experience pillars and deeper within each product family.
We will begin including Clearbridge in this metric in Q4 of 2022 after the one year anniversary of the acquisition.
Customers spending more than $100000 in annual recurring revenue grew 45% year over year to 1940 customers and as <expletive> mentioned earlier, our customers spending more than $1 million in annual recurring revenue grew even faster at 93% to.
Our reach 143 customers from 74 customers at the end of 2020.
Turning to margins as we discussed on our last call gross and operating margins will be negatively impacted by the purchase price accounting write down in the Clair Ridge acquisition because for a period of time, we will incur 100% of the expense, but won't recognize 100% of the revenue.
Our Q4 non-GAAP gross margin was 76, 6% consistent with the year ago period.
Subscription revenue continues to increase as a percentage of total revenue from 75, 1% of our total revenue in Q4 of 2020 to 81, 9% in Q4 of 2021 as we focus on driving software growth on our platform.
Our non-GAAP operating profit for the fourth quarter was zero point $3 million, resulting in a non-GAAP operating margin of 0.1% compared to negative two 2% in Q4 of 2020, we delivered a non-GAAP operating profit in each quarter of 2021.
Purchase price accounting related to the Clearbridge acquisition negatively impacted our non-GAAP operating margin by approximately 200 basis points in Q4.
Operating cash flow for Q4 was $14 million compared to negative $98 million in the year ago period free cash flow in the quarter was negative $60 million compared to negative $145 million in Q4 of 2020.
This year over year improvement is due to operating margin expansion and significantly lower cash payouts for SAP.
Equity based awards in Q4, 2021 $3 million of cash outflows was related to the cash settlement of stock based payment liabilities compared to $105 million in the year ago period Q4, 2021 was also impacted by the purchase of our Provost headquarters for $67 million.
As a reminder, free cash flow may fluctuate on a quarterly basis due to the timing of cash collections and we believe it's best to assess our cash flow performance over a longer term.
We ended the year in a strong cash position with approximately $1 <unk> 5 billion in cash and cash equivalents.
Moving now to our Q1 and fiscal year 2020 to business outlook. We expect total revenue for the first quarter to be 324 million to $326 million.
Representing 36% growth year over year at the midpoint within this we expect subscription revenue to be in the range of $270 million to $272 million, representing 45% growth year over year at the midpoint, we expect non-GAAP operating margin in the range of 1% to 2% and non-GAAP net loss.
Loss per share of <unk> to zero sense, assuming 580 million weighted shares outstanding.
For the fiscal year 2022, we expect total revenue in the range of $1 four O 2 billion to $1 $4 $6 billion and subscription revenue in the range of $1 177 billion to $1 $181 billion at the midpoint of the ranges. This represents total revenue growth of <unk>.
31% and subscription revenue growth of 35% year over year, respectively.
<unk> is expected to contribute $100 million in subscription revenue and $110 million in total revenue in 2022.
We expect non-GAAP operating margin in the range of 1% to 3% and a non-GAAP net loss per share between <unk> and zero cents, assuming 595 million weighted shares outstanding.
In closing and as <expletive> said, we had an outstanding quarter and are extremely excited about the significant and attractive market opportunity ahead of us <unk> is well positioned to build on our strong foundation and market leadership position, which gives us continued confidence in our 2022 outs.
Look.
With that Chris and I are happy to take your questions and we'll turn it back to the operator.
Thank you again, ladies and gentlemen, if you'd like to ask questions. Please press Star then one on your touch tone telephone.
One moment please for our first question.
Yes.
Our first question comes from Kirk <unk> of Evercore ISI. Your line is open.
Hi, yes, thanks, very much congrats on a great ended the fiscal year Zig I was particularly struck by just the jump in net retention rate.
Over quarter and obviously the large deals this quarter can you just talk about what's maybe driving that in terms of expansion within one product use case or are you really starting to see companies expand to a broader adoption of the platform as a whole I was just wondering if you got some more color on that front in terms of what's impacting those two particular metrics.
Yes.
Yeah. Thank you Kirk for the question and Great call out look I think that that metric in the update there actually reinforces what's happening around the use of our platform customers are deepening their relationships with us.
We're consolidating point solutions.
At the same time whats happening is <unk>.
<unk> levels, including Ceos are getting involved in making quadrex.
A mission critical component of their overall strategy to understanding their customer.
Really around understanding the 360 view of the customer and how they are serving the customer across different channels, whether it's digital.
Whether it's the in store experience, whether it's people working in the field serving another business for example, whether its call center activity of just bringing all of that together and standardizing on one system and of course, they're coupling that with.
Our capability set around product product experience and our entire employee experience suite, which is another extremely important differentiating aspect of what we do as a company.
Combination of these things that are really important in how they ended up taking effect inside of a company.
And we continue to see strong demand based on those dynamics as well. So that's factoring into the metrics that you saw there in Q4, but frankly, the fundamentals that continue to play out.
Given the nature of how we built our technology as well as the way that we engage with customers.
That's super helpful and maybe just one follow up for Rob Rob.
It could be giving.
The contribution from Clearbridge on a quarterly basis I was wondering if you or we can just get that for <unk> and then how should we think about the guide for this year it looks great, but based on sort of the momentum in the core businesses.
A little bit of a detail on the core business I was just wondering if theres anything you call out on that I realize comps get tougher for you guys, but but anything out.
To sort of speak to on that front. Thanks, Yeah, Yeah happy to chat on those topics were quickly as we've talked about in the past working to integrate clearbridge into the business and Thats, a key priority and a known success factor for US as we go forward. We wanted to give some color to you and to the market around <unk>.
Rich for the forthcoming year, but going forward, we'll see the results integrated in how we report them out.
And then in regards to the guidance going forward I'm incredibly pleased with the guidance I would reiterate our focus on driving that long term durable growth you see that in the guidance in particular I'd call out 35%.
Growth in subscription on an annual basis in our guidance as we go this significant growth at our size and scale and it represents our forward looking view of the business.
Super Thanks, guys congrats.
Thank you.
Thank you. Our next question comes from DJ Hynes of Canaccord. Your line is open.
Hey, guys congrats on a great quarter here and finished the year.
Just curious what your view is going to be the biggest business benefit from the evolution from Exxon directory to experience I'd just help us help me understand that.
Look I think there if you.
You look at the market landscape of technology that people use to try to understand the human being that an organization of serving there's nobody that has truly been able to go and create a different call. It think of it as an authentic.
Real time view of how people feel and what their sentiments are and frankly know what to go do with that is it.
A result of that type of data and so.
What used to be called XM directly to us now with the experienced I E.
The companies to be able to build out an understanding of who their customers are mapped that data based upon different demographics preferences trends.
<unk> and then use that data set.
To make some of the most business critical decisions for example, how do you shore up a particular segment with customers in six problems that might be contributing to revenue churn or how do you end up that are shaping our product experience that the product seems to be paying attention to.
Beautiful thing about X sight is not only have we created a very unique way of capturing that type of data.
Load into the organization through any channel that someone is providing that data through structured unstructured a call center that social experience.
The research that you might be conducting any of us not only can you do that but the idea that you can now actually action on it and a relevant and contextually oriented way is a game changer.
Our approach here is to build a unique technology capability.
<unk> helps to move the ball forward.
<unk>.
Then manifest in the way that our products are connected to that every one of our products.
If you look at the employee experience portfolio you can read our product experience portfolio. If you look at our customers free portfolio every one of those product built on the <unk> side.
And that's very unique because what it means is across the enterprise across marketing across customer care.
Across HR people are able to tap into that type of data set they can look at the relationship between what's happening with the customer and then the ultimate output on the behavior of that customer where they can look at for example, how that employee is interacting with the customer. So there is some very unique properties not just capturing that data and how you do so.
Do you do with it Youre action on it.
Part of the workflow, what the company's doing and everything that I'm describing here.
We are built to be a platform.
Because of the platform that's extensible.
Can be information that you end up pulling into other system instead of a company. Its information you can pull it from other systems that exist inside of a company into our platform.
And of course, the ecosystem can build upon that platform right and that's really how we think about that into the.
Powerfully unique capability that we're building.
And youre going to continue to see us focus on that we've got a lot of momentum behind it.
Yeah, that's great Super helpful color there maybe.
Maybe just a follow up I'll direct it Rob.
Can you give us a sense for the magnitude of spend uplift youre seeing when an existing customer layers Clara bridge on top of their existing QUADRA excuse I mean, it's going to be a while before we.
We see this included in net revenue retention, so would be helpful. Just to get some context there.
Yes, the context I would give you D. J is I think similar to some of what we talked about when we closed the acquisition Clearbridge has about 400 customers and as we indicated at the time were coming up on or approximate $200 million run rate. So you can get an average spend per customer.
There just based on those numbers and overtime, we would expect to see and new ad exist.
Existing <unk> customers add on Clair ridge, it will be at a similar type of spend and potentially upwards of that as they leverage the power of the culture platform, but that will directionally give you an idea of what their average spend is yes.
Perfect. Okay. Thanks, guys Congrats again.
Thank you.
Thank you. Our next question comes from Mark Murphy of JP Morgan Your line is open.
Yes, Thank you very much and I'll add my congrats as well.
So.
Maybe for all of you know there is some consideration in the investment community of whether software spend.
It might have been pulled forward as a category in the last 12 months I'm just curious what crosses your mind when when you hear that debate because you are you're exceeding your guiding above the retention improved.
It kind of looks like all systems go.
So I'm just curious if you are seeing something different or perhaps.
Extra tailwind through the pipeline from reopening activity.
You've got activity with airlines and hotels or maybe the employee experience and HR side because of because of all the dynamics with hybrid work in tight labor markets or something else.
Hey, Mark perspective.
And then I appreciate the congrats.
We're seeing really strong demand in the fourth quarter.
Which was just continued strengthening over the course of the year as you recall, we had a really tough compare in the fourth quarter and the type of growth that we experienced.
In a balanced way.
<unk> indicated.
Positive way for us that we're in a strong demand environment for our particular solutions and the value that our customers are getting from experienced management when.
When you look at the combination of customer adds that we had in the year over 3000 customers added in the year, coupled with the customers that we have growing their spend the number of million dollars tough customers almost doubling over the prior year.
And really across the product portfolio overall, I'm really pleased with the dynamic that we're seeing.
And continued strong pipeline as we start into 2022 as reflected in our guidance.
Just to add to this this is Greg here I mean look number one companies that.
We engage with which is a very strong and growing market are looking at experienced management as a competitive differentiator.
Know how vital it is now to operate your company based on experience both on the employee side given how much the world has changed in the last two years.
And especially on the customer side right and this is really really important and I think when we entered into the pandemic people started to use our platform to be able to make some of the most business critical decisions as we're exiting or sort of entering into the post pandemic phase we're seeing people.
Heightened desire to use our platform and frankly to use it in a much more concentrated matter, where they're consolidating these point solutions that have existed across companies and so these are some of the factors that we're seeing playing into the robust demand that we see ahead of us.
Yes.
Yeah.
Thank you.
Our next question comes from Keith Weiss of Morgan Stanley . Your line is open.
Perfect. Good afternoon, everybody and this is actually Stan <unk> sitting in for Keith.
Maybe just.
A high level question, obviously, <unk> seems to be having a very good momentum.
And especially in this first quarter under the cost with some barela may.
Maybe what are some of these early proof points that youre seeing of the combined platform that led you to.
Tick up the guidance for Clara Bridge for 2022, and then I have a quick follow up.
Sure Dan Thanks for the question.
And I'll start this and Chris might have a few points to add to this.
I mean look what we're seeing is.
A very.
Strong level of demand as a result of what we've done with Clare bridge, combining that into our platform and in fact, if anything it's rocket fuel for how people are looking at standardizing on our XM platform.
You asked about some examples one of them would be what we're doing with HSBC.
It was Barclays as an example, so Barclays.
This is a bank thats been working with us for a number of years, but on the retail bank side in Q4. They basically said look let's create a 360 view everything that their customers are telling them. Okay. So whether its call center, whether it's social chat wherever it might be happening and be able to use this.
System combined with Clearbridge to uncover opportunities across different financial segments, and ultimately use that data to be able to power digital already experienced the driving for better growth and efficiency in the way that they're engaging with their customers.
And part of this is actually more broadly speaking where customers.
Storage really use point solutions for social media monitoring for example, or to do voice analytics and the call center or to analyze the chat screen and what we're doing now is we're creating the ability to.
Save call on the combination of a quite solutions now being consolidated but secondly, even more importantly is create one strong.
<unk> of data.
What customers are wanting your organization to know to make stronger decisions on a day to day basis.
Lots of how theyre engaging right. So now youre, bringing together the whole today to the call center to the chat data product to view data youre, combining that with structured information and youre, putting that into the experienced idea as part of a single repository of understanding the customer.
Other examples would be like Expedia, there were an upsell and and the team.
As people to sort of expand the opportunity there and so there's been a number of customers like that that we've got coming through but thats whats the larger theme here.
As I said, it's like rocket fuel being brought into the combination of what our platform has to offer for customers in the market, but that expand the center.
Yes, I'll just add a couple of additional thoughts.
In terms of the confidence in the guidance Q4 is a really important quarter for Clara bridge and they do a lot of deals in that quarter that certain largest quarter and as you can see in the results. It was an outstanding quarter for the first quarter as part of contracts. So that definitely contributed to our confidence and then really exceeding expectations on early momentum with the two sales organization.
Working together, we had an opportunity in the quarter, where the clever team was unaware of an opportunity with a customer within the existing <unk> customer base that was right in their sweet spot and we were able to close that deal in the quarter.
Which is very encouraging considering clearbridge typically has had longer deal cycles, historically than we've had and the ability to close that quarter that deal in quarter. It gives us some confidence that we're going to be able to shorten their deal cycles and be able to get strong early momentum and then just the excitement around how the sales organizations are getting <unk>.
We just had our sales kickoff.
Statement in an energy level.
Fantastic a lot of enablement getting the pitch together of what the combined companies can bring to our customers and our sales organization is geared up ready to go and expand <unk> into the broader customer base.
Perfect. That's very helpful. Thanks, guys.
Follow up on.
On the inorganic contribution in the quarter. Thank you for calling out the $55 million from Clearbridge and billings, but.
Could you give us some sense for how much it added to <unk> and <unk>.
Yes, it's similar in regards to the growth rate impact actually is very similar to <unk> to the impact of head to calculated billings.
Perfect. Thank you so much.
Thank you.
Thank you. Our next question comes from Bob <unk> of Deutsche Bank. Your line is open.
Great. Thanks for taking my question and Echo My Congrats you guys talked a lot today about the strong adoption you've seen and in player engagement.
It's not only today, but over the last several quarters, but in terms of prioritization of employee experience relative to your other products, namely customer experience are you seeing any changes in how customers are prioritizing one category over the other.
I would say if anything they're prioritizing a single platform.
And that's a major differentiator advantage because of just the superior architecture that we built with the system over many years and if you just take a step back and look at how companies operate.
You say, okay, why don't I do with my customers are doing my employees every single day.
Am I doing with my products and do they make sense for the market that I'm trying to attract and how does it show up in my brand I mean, these are the four core experiences of business and.
As we find more and more.
And your executives at the C level of including CEO of engaging in making a decision to consolidate and create one platform.
Extremely well positioned for that just because of the nature of our technology and how we built it and how we ended up engaging and partnering with customers nobody else in the marketplace as a system like this so what happens is a customer might start with us on the employee experience side, and then pretty quickly I want to get going on the customer experience side, where they might be going on the product side and that continues.
We've seen that as the trend and if anything the NR rate that we highlighted in Q4 is evidence of the fact that that's taking place including the number that Chris also highlighted earlier on the number of 1 million plus customers and the rate of growth that we've had in that in the last year.
Got it Super helpful and just a quick follow up for Rob just if I'm looking at your guidance for margins next year and in terms of your investments over the course of the year can you maybe just provide any additional context into the impact of weather is clearbridge write down versus kind of return to the office costs or maybe additional investments that you're going to make into the product and go to market.
And just on top of that like any specific regions that are focal points over the questions.
Coming here.
Yes.
There is clearly a very robust market opportunity ahead of us.
And as we've said before we will continue to invest to capture that there will continue to be some headwinds relative to the purchase price accounting for Clearbridge as you know those those normally last for about a year post acquisition, maybe 15 months. So youll see that for a period of time and we're certainly hopeful.
And believe that in office and travel will come back to some degree now at the same time, we will continue to manage this business with discipline. We're nimble in the way that we manage our spend and do so to focus it on areas for that growth that we've talked about so really happy with the guidance, which again reiterate.
Our comfort level with our non-GAAP operating margin profit and positivity so.
That's how we're thinking about those things will be smart, but clearly invest for the growth that is ahead those investments as you indicated we'll come in product you've heard us talk about some of those but it is across that expanding the platform and the capabilities that exist and then in region, you'll hear us continue to talk about this.
Amongst the significant opportunity that still lies ahead of us in the EMEA region, we continue to partner with SAP closely internationally and in that region as well as the P. J region as well as further expansion into the Latin America market. So it really is a global push.
Super helpful. Congrats again.
Thank you.
Thank you. Our next question comes from Brian Peterson of Raymond James Your line is open.
Congrats on the quarter and thanks for taking the questions. So just one for me.
Mentioned point solutions, a couple of times in the call and I'm. Just curious what are you looking at a fortune 500 customer how many point solutions would they typically have and if you guys are coming in and it's a net new logo for you how many point solutions or are you displacing.
Barry, but what's important is there are different budget centers that our go to market engine is optimized sport.
So if you go into the call center there are outdated approaches to voice analytics. For example, if you go into the team that might run the chat interaction system.
That might involve yet a different analytics tool or they might even have one as an example, but they've got budget for it they're thinking about how to.
Connect the dots between what's going on and how they make their decisions.
If you go into the customer care area or if you go into the.
The marketing department, you'll find there's a whole another area, which is around social monitoring, but also social care.
And these are just.
Scratching the surface of.
Point solutions that are often outdated and the approach or they are limited in their capability set.
And if you also go onto the side of market research on how people do studying of.
What market segments are important or where to take their brand as a whole another set of vendors that people end up using.
What's important is not only recognizing that these budget pools exist.
But what we do uniquely done as we have designed this system.
Individual departments want to opt in to be a part of using our system inside of a company.
And we have a structural advantage as a result of that because of the fact that we built a single code base. We've got the workflow engine that can help a company to operate across departments. We can help a CEO to be able to get a single view of the entire customer experience that they have going.
Not looking at it and charge and then get stuck and ultimately playing guessing games on where to go next.
These are extremely important properties.
We didn't build overnight.
As I've mentioned, we've got about a 10 year advantage. It takes a long time to go build this and so.
As a consequence of that we do end up consolidating point solutions that are existing in the marketplace and that's to our advantage and that's partly what shows up in.
Our numbers that we've talked about where in the <unk>.
Rate of growth that we have on $1 billion plus customers are the 100000 plus customers that you saw as well.
Thank you.
Our next question comes from Gabriele <unk> of GFS. Your line is open.
Good afternoon. Thanks for taking my question. Thank you Mitchell Quain solutions, a couple of times.
On the competitive environment more holistically.
And if you're seeing any changes with one or two competitors that maybe bank M&A, let's say with potentially taking projects that had been previously allocated to consulting company. Thank you.
Sure Hi, Gabrielle Thanks for the question, so I'll add on to my.
My last answer a little bit and just expand a bit just given that you provided a different lens on that question.
<unk>.
This interesting and important to note is when Youre building, a new technology category. This is not a marketing exercise.
Fundamentally rewiring the way things work by building, a new way of solving problems that actually.
Based in the game and the value that customers get out of it it starts with technology and connects with the services and experiences that we deliver it has deeply.
Our connection to the nature of the dataset that we ended up creating and creating for customers and then what you do with it given the nature of action and workflow.
So if you look at the larger market whether.
Customers the companies that build customer engagement tools or whether it's research vendors or whether it's <unk>.
Companies that might be delivering components for customer care.
The list is long.
Naturally as you are building a new market.
You will find people react and say well I'm going to participate in that market one of the things that they might try to do is do some M&A and they'll try to stitch together.
Build out a new marketing positioning approach to it.
The end of the day, that's quite welcomed because it creates more awareness around the technology category.
But in the end when it comes down to its unique value is being created for customers and so it's very difficult to stick your way into a new category through.
X number of acquisitions, and say Hey, I have the same thing.
Fundamentally it comes down to the technology architecture.
Built a superior software architecture XM as an operating system.
We have created a platform that allows ecosystem an ecosystem to be able to come in and creating a vibrant new solutions on top of that system.
And we are uniquely taking advantage of that single software platform by <unk>.
Innovating with product capabilities.
In ways and then the pace at which competitors are not able to keep up to it. If you look at for example on our guidance the level software R&D that we are going to be investing in in 2022, Theres nobody else out there that we'll be able to match that but it's not important but not as important as the number itself as the rate in which we ended up unlocking new use.
Cases, new product capabilities that are on top of that system.
And so when customers engage with us they expect us to be able to innovate at that rate because it changes the game relative to the point solution vendors or maybe the services and consulting oriented vendors.
And in so doing we unlock an even larger addressable market.
You all have noted that like we participate both in the traditional research marketplace, which is a multi multi multibillion dollar market, but we're also engaging in.
The market around continuous everyday improvement in how you engage with employees and how you end up engagement with customers and that's a significant market as well and we're bringing those markets together under one umbrella as far as how we think about Pam <unk>.
Unlocking that requires both the software technology architecture.
And the go to market engine, which was very well questioned earlier. These questions were asked which is hey, what are you doing about it we have a very unique about it the combination of the go to market system and how that works with our software architecture and Thats whats contributing to the metrics that Republic today.
First of all just one follow up for Rob Rob how are you thinking about longer term operating leverage in the model of pounds by 2020, you have a little bit of an investment on the integration of <unk> and maybe just give us a little bit off the long Mckenzie and small accounts.
Thank you Martin.
Yes.
Certainly consistent with the long range model that we produced a year ago around the time of the IPO and we will we expect to see trending towards that model over time I think you've noted.
Correctly on 2022, how we're investing in and continuing to drive that growth and then when you get in the out years youll see trending towards that long range model.
Thank you.
Thank you.
Thank you. Our next question comes from Terry Tillman of Twist Securities. Your line is open.
Yes, good afternoon, everyone and congrats from me as well I have just two quick questions first on just the partner ecosystem that you've talked a lot in the past and we've seen lots of press releases both for.
CX product experience et cetera, you clearly have a lot of momentum in the business. How much benefit are you getting from a lot of these kind of stakes in the ground with these go to market partners or is that still more into the future and then I had a follow up on the international.
Chairman I'd like to start with that and then I'll just tack on to keep a couple of points.
Yes, it's been a major focus for us as we've thought about scaling the business and being the leader in this space the importance of having having that ecosystem, having the right partners. Both from a technology perspective, but also from a consulting and other services and we're really pleased with the progress we made in 2021 for laying the foundation, but as we think about the relative.
<unk> contribution from some of those both from a lead gen as well as involvement.
A lot of opportunity ahead for those to continue to expand and grow and we've talked about what we've done with SAP extending that with service now.
And others, great great momentum on all those fronts as well as with with some of the major service providers and so it's.
Going to be a key for us as we as we get to the scale and size breakfast have this long term durable growth that we've talked about for this to continue to contribute on a more significant basis going forward and the foundations. We made in 2021. We expect continued continued growth from those efforts well that's a big differentiator.
I can't overstate, how important that is because.
In my comments I noted that there is more than 275 integrations today, but we have more than three times more than what we had at this time last year.
And what's important is not just that we have a larger growing vendor universe of companies, who are connecting to us or for example, those companies who end up enabling the implementations or build strategy in consulting around our system. What's important is that theyre getting deeper okay. So the nature of for example, the integration that might take place.
For an employee facing use case, an employee facing systems.
Creating for example, more time and context sensitive ways of.
Enabling an experience or taking a corrective action and so.
Is there a pathway toward.
Becoming a deeper part of the way that companies operate.
And the fact that customers are customers are pulling in these other vendors and saying Hey, you got to integrate with Quadrex. There's also another important sign.
The fact that we're building this platform right and again to Chris's point too. We also think there's a significant opportunity ahead of US. We're just at the very early innings of that relative to what we think the possibility will be there and that's partly why we're staying focused around how because of.
The way that we designed our platform is not only an advantage for us the adult of advantage for the partners that we're working with.
Got it and just the other part of my question. Thanks for the answer there and Chris on the international business sided hit a major milestone of 30% curious from what Youre seeing in the pipeline and just all the things you have focused on go to market investments should this continue to step up I know, it's a race against.
It's in a race here with North America that appears to be doing very well and then you have like international Latam and APAC.
On the different parts of the business, but I'm just kind of curious about international because I get to like 40% of the business by the end of 'twenty two just trying to understand its proportion of the total thank you.
Yeah, Yeah, Great question then.
Really pleased with what happened internationally in 2000, 22021, and the investments that we've been speaking about that we've made there are are paying off and continuing to pay off especially excited about the EMEA performance.
In the fourth quarter and the year was just absolutely phenomenal and as we've talked about.
One exciting thing about that growth leverage in the long term international is a huge market opportunity right in the long long term.
There's no reason why it couldnt be behalf.
Take time to get there as you mentioned right, our North American business continues to exceed expectations and perform.
Formerly well and it's hard to grow too fast as a percentage given how fast north American business is growing but the trend we expect to continue with international going there, we're continuing to make significant investments.
Upcoming year to continue to grow there, we love our international leadership and the hires we've made there are phenomenal and continuing that growth and.
And then and then with Claret Rich Clearbridge has a has a significant presence in Europe and that will give us another kind of differentiation and expansion.
Internationally as well so.
Definitely going to be a continued theme for us as we think about the long term sustained growth and a lever for years to come.
Thanks.
Thank you. Our next question comes from origin by fear of William Blair. Your line is open.
Perfect. Thanks for taking my questions on automatic congrats maybe to start off with the.
Longer term I, just want to hear how you're thinking about the opportunity to expand further into customer engagement right, whether it's proactive customer service or marketing or social response et cetera.
Certainly seems like.
And adjacent market for you and it seems like there may be some natural synergies. There just just help me understand how strategically you are viewing that opportunity for contracts.
R. J. Thanks for the question I mean look I'll I'll put it.
Sort of briefly which is yes.
And more if you look at the dynamic of how our system is being used.
People are connecting us with call it customer engagement systems of record et cetera et cetera.
But we're going to watch for the high growth opportunities exist a lot of what we do is customer led.
And frankly today, if you were to double click on our customer experience business.
The multiple product modules the way that those modules worked together.
Across different budget centers inside of our company.
Apparel combo, but it's also lining us up very closely with other systems that are quite complementary and we're going to we're going to we'll look at the market in much in the same way that you just described.
Perfect. Thank you and then one follow up if I can I noticed you.
Opened a new office in the DC area, and obviously Clearbridge is based out of there and can you just talk about the presence that you have in the public sector.
What is the opportunity there look like.
When do you expect.
Meaningful contribution.
From federal from a better opportunity.
Yeah.
Got it on <unk>.
We increased our focus on different industry verticals and one of them that we're exceptionally excited about is the public sector. As you know our initial roots were in the academic market and we've been at it.
In the public sector for for years with our progress in fed ramp and other investments we've made in that space and we've been increasing our presence in that area in D C and with Clearbridge, having their headquarters out there was a tremendous opportunity for us to double down within that market go after talent and grow we've got aggressive hiring plans in that market to expand <unk>.
Grow and as I think about the key verticals for us going going forward public sector.
Is going to be a super important.
Organizations state local federal or focus on the voice of the citizen and improving their processes and interaction.
It's a great opportunity for us huge growth lever along with the health care that we've talked about and that focus we have a dedicated and focused public sector team that sells into that organization can speak the language and build the relationship than it was a great year in that area, but as you know thats an area that can can drive.
Large deal.
And is that is an area that you focus on for the long term because it takes time to build.
That's very helpful. Congrats guys.
Thank you.
Okay.
Okay.
Okay.
Yeah.
Operator.
Are there any more questions operator.
One moment please.
Our next question comes from Raimo <unk> with Barclays. Your line is open.
Hey, Thank you thanks for squeezing me in.
Congrats from me as well that it wasn't a meaningful quarter.
I wanted to ask about the vertical opportunity. Obviously, we saw the acquisition of survey final close for health care in Q4.
Can you just talk a little bit about.
If you think about the evolution of the company going more vertical is something that usually kind of represent extend the next leg of the story as well, we just talked about the public sector as well, but like how do you see the different vertical.
How do you see the virtualization of.
<unk> overtime that as a growth opportunity. Thank you.
Hi, Raimo. Thank you for the question.
First off I can't overstate the importance of the word platform.
When we were in this very special place, where we get to build a new market category.
We are building a new technology category.
The approach that we're taking is a platform that can scale across many different industries and we're constantly watching how well we're doing across a broad universe of vertical markets.
Really important.
There are companies that we can all look at and history of attack.
<unk> ended up getting overly focused on specific verticals and they end up building something that doesn't scale over time, right and they end up chasing down very deep deep pathways that are difficult to get out of.
Our approach has been to build a highly extensible scalable flexible platform again. It goes back to my point about the fact that we have about a 10 year advantage in the way that we built the system and we're going to continue to invest against that platform very aggressively.
Now as we go into the go to market side to Chris's point you highlighted two examples there are the other example, so those are not the only examples of industries that are effectively pulling us in to go and leverage the platform to create unique differentiating capabilities for members in those industries.
So again the beautiful thing about it is we can.
Nailed down and go deep, but yet leveraging the properties of the platform such that any innovation that we might end up creating within a specific industry.
Often end up also accruing to the advantage of many other industries as well.
In total actually contributes to the ability for us to scale the company and ultimately create the kind of business results that we were talking about so that's how we think about it.
Okay perfect. Thank you.
Thank you. Our next question comes from Brent Rifle and AR Piper Sandler Your line is open.
Good afternoon.
Celebrating new logo adds accelerating <unk> accelerating net retention no doubt that youre seeing a lot of momentum in the business Sig I wanted to drill down into just the durability of the growth specifically around employee experience.
Obviously with the labor shortage it feels like outside looking in that there was a clear tailwind to the business around cross selling employee experience and the installed base, but could you just walk us through how much runway is left or we did you see a huge adoption cycle where 2022.
You would be more of a digestion year.
Now the half or two thirds of the employees of the customer base has now adopted employ experienced or are we still very early days just frame maybe the the opportunity of durability of of the employee experience kind of cross sell and potential new land opportunities would be helpful. Thanks.
Alright, Thanks Brent.
But I'll say this very carefully.
We are in Super early days.
And the reality of it is we're also seeing strong demand.
And that's partly what's guiding us north of $1 $4 billion in 2022.
But when you think about it.
Or your experience just as an example, since you called that out.
The nature of how we built a purpose built system.
It's not like we went in and said, okay, let's pull repurpose some other technology and say we're in that market, okay, because I've seen that happening.
We went from scratch built a set of product capabilities partnering with some of the worlds, leading HR practitioners and Chr OS.
And in ways, which.
Is tapping into HR budgets.
We're getting significantly greater allocation of how people think about their strategy and their budgets around overall HR systems.
That isn't because we're going to go replace HRS, that's actually because we are becoming <unk>.
Hand in hand, highly complementary to the way that people are looking at connecting with the lifecycle of their employees from whether it's.
How they improve their recruitment tactics to how they end up Onboarding a candidate.
The way that they look at their technology systems, and how those technology systems actually affecting shape engagements inside of our company to how do they actually end up optimizing choices and benefits for people to make sure they've got the right comp packages and incentive systems to how they think about inclusivity and diversity and how the accident.
Up running a company at scale for the reality of the modern workforce that people need to be able to go and support and engage and how they think about the well being of people in the law.
Just as long, but what we've done is we have built a set of product capabilities and we're innovating.
After and better than anybody else in the marketplace right now and I think it's important to pay attention because that part of that business.
It can often be understated in sort of the impact that we're actually making on companies and it's going hand in hand, with what we're doing in some of these other businesses.
Customer experience product experience brand.
So we're in early days on that particular, one, but yet we see a very robust opportunity ahead of us and look what's happening in that employee experience area.
Helpful color. Thank you.
Yes.
Thank you I'm showing no further questions at this time, ladies and gentlemen. This does conclude today's conference. Thank you all for participating you may now disconnect have a great day.
Yeah.
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