Q4 2021 Walkme Ltd Earnings Call
Please standby we're about to begin.
Good day and welcome to the walk me fourth quarter Earnings Conference call. Today's conference is being recorded at.
At this time I'd like to turn the conference over to Mr. John Stripper head of Investor Relations. Please go ahead Sir.
Hello, and thank you for joining our fourth quarter and full year 2021 earnings call I'm, John Strep, a head of Investor Relations at walk me and today I'm joined by Dan <unk>, CEO and co founder Rafi swear he president and co founder and Andrew Casey Our Chief financial.
Certain statements we make today may constitute forward looking statements and information within the meaning of section 27, a of the Securities Exchange Act of 1933 section 21 E of the Securities Exchange Act of 1934, and the Safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1990.
Five that relate to our current expectations and views of future events. These forward looking statements are subject to risks uncertainties and assumptions some of which are beyond our control.
Actual outcomes may differ materially from the information contained in the forward looking statements as a result of a number of factors, including those set forth in the section entitled risk factors in our prospectus filed with the Securities and Exchange Commission on June 16th 2021, and other documents filed with or furnished to the SEC.
Please see our press release dated February 16th 2022 for additional information.
In addition, certain metrics, we will discuss today are non-GAAP metrics. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to financial information prepared and presented in accordance with GAAP.
Use these non-GAAP financial measures for financial and operational decision, making and as a means to evaluate period to period comparisons.
We believe that these measures provide useful information about operating results enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.
Further throughout this call we will provide a number of key performance indicators used by our management and often used by competitors in our industry.
For more information on the non-GAAP financial measures and key performance indicators, including the reconciliation tables see our press release dated February 16th 2022 with that I'll hand, it over to Dan. Thank you Joe and thank you for joining us today.
Family proud to share that we had the best quarter in welcoming history, which was an amazing way to end and historic year for the company. We they are approaching $220 million and continued acceleration in our subscription revenue, which was up 39% in this quarter compared to the prior year and a record quarter in our <unk>.
And as we mentioned I wanted to take a moment and thank our amazing employees customers and partners for I know outstanding year, we've seen an amazing growth from customers, who deployed walk me on for more application, adding 49 customers in 2020 . One we now have 31 customers with over $1 million.
And 454 customers with over 100, K and they are our customers are trusting us with their long term digital goals and it's showing in our numbers. Our long term RPM grew by 84% year over year, reflecting the execution of our go to market strategy. We've put in place last year are strong sales X.
<unk> is working with a focus on land and expand motion our customers are embracing our platform and real business outcomes are being realized specifically our customers are expanding their spending with us customers that have 500 or more employees. Our dollar based net retention increased to 125% for the fourth quarter, putting our.
Trailing four quarter dollar base retention from this cohort to 121% our vision for achieving better business outcomes is realized when our customers use welcoming to create amazing user experiences, including automating business processes and ensuring that they are completed correctly.
Is another siloed approach and can be applied to every business. The parkman off our customer welcoming customers are achieving unique business goes in every sector from ensuring compliance to ever changing regulation to driving revenue growth as business adapts to shifting priorities change is constant business problems are already there.
Following and our platform is the digital adoption solution needed to drive effective change I would like to share with you today a great example of that customer is dear to my heart one of the largest technology hardware and software among the sectors on the planet with 150000 employees around the world as they've grown and embrace digital transformation.
Automation and adoption welcoming has become central to their strategy and the platform they use to drive organizational and process changes Denison.
Dennis introducing walk me through their sales workforce deck in 2017, the quickly and continuously deployed walk me throughout the business from supply chain, So learning and development totaling over 60 application. The rib many benefits from million in direct revenue gain including using walk me content to empower reps to drive more often operate.
Unity to operational excellence saving millions of dollars due to accelerated onboarding time, and ongoing employee productivity and efficiency. Additionally, they've seen a dramatic reduction in the amount of hours saved on training 80000 hours per year to put it in perspective and cost associated with traditional onboarding programs and ongoing upscale.
These build the core center of excellence equipping all business units with guidelines and processes to create walk me content that reduced friction and drive adoption throughout the business.
And we're continuing to partner with them to deliver solution that impact employees across the globe. This customer initially joined up with 100, K <unk> contract and today, it's well over $4 million. This is an example of a great customer journey with walk me one that I expect to deliver to every company in the world.
A little challenge for organization is complex and welcome your vision for adopt is the key to unlocking the real potential in Boswell digital transformation.
Bottom line is that the market and organization are flooded with software the purchasing power has shifted to the department trying to solve with tactical mean and the business outcome for the organization like increase revenues improve operating margin better UX and unified productive workforce is often overlooked.
Companies invest significant capital and therefore in the implementation stage of software hiring consultants, having dedicated team, but fail to acknowledge the user experience. We are deferring digital dexterity among the hybrid workforce the need for user first approach is greater than ever.
Zelle out for a second and think about what happens when NASD rollout the new product.
And the product manager, we plan out the entire user experience will use multiple analytic tool to ensure adoption user retention and conversion the same should apply to employees entering the software organizations need to take a user first approach to software implementation to employee experience and through digital transformation.
User experience and adoption are the heart of success.
Our unique approach is through three key element data excellent and experienced user experience is the goal and the path together is through data in action.
Let's dive deeper starting with data.
To start with your digital journey organization must unlock visibility into the tech stack and into the workflow specifically the steps required to complete the business process throughout the use of the software.
You need to understand first what exist how people engage with software and the degree to which workflows get completed or not so they know exactly what action they need to take in order to fix the points of friction.
This takes us to action data his knowledge and with knowledge comes power the power to take immediate action on the same platform, creating a direct tie between the data and the user experience organizations today struggled to take immediate action and on top of their existing workflow and software they choose to reap and replace and by other source.
We're hoping for a different result.
With walk me organizations are able to take action right on top of any application with our no code editor leveraging our solution accelerators with best practices from thousands of implementation and they can fire up automation to take repetitive desk away. So the user can focus on what's most valuable to work for.
Which leads us to the experience why does experience really mean employees and customers expect a perfect experience everywhere.
I just wanted to work and help together jumped on with welcoming organization can design and deploy a perfect unified user experience on top of any enterprise software website Dave.
Data excellent experience with welcoming we believe that enterprise organization now finally have why they need to help them realize the potential of their technology and therefore drive.
Business outcomes.
And if you want to see this in action and learn more I am very excited to invite all of our customers partner prospect investors anomaly to welcome you realize our annual adoption user conference this coming April 5th and six.
We anticipate more than 2000 attendees this year and more than 40 sessions and nearly 2000 customers presentation, joining us in the world's biggest digital adoption event on.
On the partner front, we love our customers and our technology is driving meaningful change for them.
As organizations realize they need a solution to help with digital adoption, we're seeing a great progress from our partners continuing to invest in our ecosystem as well last quarter, we shared the announcements of two great partners SAP and Deloitte.
Partnerships are already showing progress with a strong pipeline growth.
Building on that momentum I am very pleased to share today, a strategic partnership with a longtime customer of our Accenture. This new partnership is expected to bring together accenture expertise of driving technological change with Walgreens the ability to drive adoption and give our shared customers the tools needed to measure and rapidly iterate under our business.
Processes to drive adoption and realize our goals of digital transformation with this partnership accessories investing and expanding our capabilities to deploy our technology on a global scale alongside investing in your employee base with plans to increase the number of certified resources over the next year, our partnership with SAP.
Concur is already sold welcoming to thousands of their customers since program launched in early November we were already seeing early success with our partnership with S&P, especially in the federal market last quarter welcoming partner with S&P Concord provide support under the recently awarded seven year Prime contract with the U S Department of defense.
As part of the Dod's defense driving modernization effort. The government seeks to improve traveler performance by utilizing Seb Coe core industry, leading commercial travel as a service solution capabilities for the entirety of the organization.
Welcome you will facilitate travel the adoption on this capability of our integrated adaptive learning platform.
Its full deployment the Dod anticipate processing up to $3 8 million annual transaction, you can concur travel and expense.
Welcoming as excited about this opportunity and stands ready to provide services to S&P encore in accordance with the Vod operational security requirement.
We believe that our solution can greatly aid the federal market and we plan to continue to invest in our go to market R&D and operational capabilities to capitalize in 2022, we are all underway pursuing bedroom status and we will be building out the team to support these initiatives.
Our approach to digital transformation is in direct alignment to President <unk> management agenda, and the newly develop executive order on the customer service.
Our federal prospect of already communicator.
With our alignment with these initiatives the federal market and our partners channels are two expected growth driver for us in 2022, and we will continue to invest in the channel to support that growth.
While I'm excited with all the progress we've made as an organization I know it wouldn't be possible without all the welcoming employees around the world I want to thank them for all their hard work in 2021, and I'm looking forward to seeing the amazing innovation and the value we can deliver to our customers in 2022 from 2021, we continue.
To invest in our team and brought in World class Executive leaders to bring walk me to the next level for wind Mcculloch building, our customer success organization propulsion, helping to lead our legal efforts in preparing as we went public.
As we work to optimize our sales organization to take walk me through the next level, we've mutually parted ways with chain link our chief revenue officer is pursuing the opportunity I wanted to take this opportunity to personally thank Shane for all the hard work and good time spent in the past four and a half years I wish you a lot of success.
And best of luck in your next venture.
In this quarter, we announced the hiring of Chelsea presents key our chief people officer, She brings vast experience and drive success with our most important asset our people.
We're thrilled with the talent, we have and look forward to continue to invest in our people in 2022. We believe we are well positioned to continue our momentum with great leadership across every vertical of our organization on our product side, we had a great 2021 with many major milestone accomplishment, we launched a breakthrough technology.
Intelligence to our Salesforce lightning and Microsoft dynamic customer.
<unk> is an automated insight engine that automatically detects inefficiency data errors and poor user experience on CRM forms that technology is powered by machine learning and AI and completely automated way pulling this insight without any human setup or configuration, helping our customers pizza deployment.
And process simplification.
In addition, we fully integrated just our enterprise search acquisition to our core product, we launched our digital transformation Kpis that allows a CIO or an it leaders to track and measure their digital transformation project in order to maximize the ROI. In addition, we made huge progress in our multi cloud strategy.
With vendors like Azure and TCP, we're excited about 2022 as we're expanding upon the most advanced <unk> platform, which we believe is well ahead of our competition because of technology like <unk> and our ability to connect data in action.
Please give enterprises the power to make data driven decision when it comes to their enterprise software and product. We've made a huge progress in our business in 2021, but are most excited about what lies ahead of us and the opportunities we are eager to explore for the success of our customers.
We believe that our growth opportunities are in our strong technology position momentum of that category and our ecosystem, including partner channels and our federal practice.
We believe that the progress we made in 2021 position us to accelerate our business in 2022, and we're laser focused on giving our customers the tool visibility and actions to be able to realize the growth of digital transformation.
Our pipeline of new and expansion opportunity is robust and we plan to invest capitalize on those opportunities.
Focus for investments, including R&D building, our international presence and operationalized and expanding our partner and federal channels.
I am thrilled with the progress we made and I know this is just the beginning and so excited to continue driving the future of digital adoption together.
And with that I'm moving it over to Andrew.
Thanks, Dan and thanks to all of our customers and partners, who have helped us to achieve success in 2021.
As Dan mentioned our results for Q4 2021 are the culmination of focused execution on our growth strategies over a year ago, we put in place significant changes in your sales go to market strategy to focus on large commercial and enterprise customers, who often struggle with their digital transformations.
These customers, who are cross organizational and multi application business processes that benefit most from the walgreen platform.
This is exemplified by the <unk> growth of our DAP customers, which reached $83 million, an increase of 92% versus Q4 'twenty.
We also embarked on an ambitious plan to expand our relationships with key strategic partners with Deloitte.
Salesforce, Microsoft now Accenture, we're executing on these strategies and it's showing up in the accelerated growth of our business.
Our investments are paying off and that gives us confidence that continued investments in R&D and sales and marketing will enable our business growth in 2022 and beyond.
Now, let's review the numbers.
Total revenue for the fourth quarter was $53 3 million, an increase of 37% year over year.
Full year revenue was $193 3 million up 30% year over year.
Subscription revenue in the fourth quarter accelerated again growing 39% year over year to $48 6 million.
Remaining performance obligations are <unk> ended the quarter at $316 million, representing a continued acceleration of growth of 54% year over year.
Current RVO, which is contracted revenue expected to be recognized over the next 12 months grew 37% year over year to $178 million.
Long term RPI grew 84% year over year to $138 million and acceleration of growth from 79% in the third quarter of 2021.
<unk> at the end of Q4 was $219 6 million representing growth of 34% year over year, showing an acceleration from the third quarter of 2021.
We saw expansion of our current customers at the highest level ever and we are increasingly being positioned as partners in driving success for our largest customers.
Momentum in large enterprises continues as evidenced by our IRR growth from customers with more than 500 employees, which continues to outpace the rest of our business.
One note, we updated and enhanced our third party data sources for identifying customers with more than 500 employees.
And as a result, we now capture a greater number of customers in this category than we did previously.
With this additional data source the amount of IRR from customers with more than 500 employees increases which is reflected in our investor presentation.
In order to isolate the impact of the new data source, we will continue to disclose the AOR growth year over year and the percentage of totally our Atlas calculated without this new data source for the next three quarters without the new data source <unk> from customers with more than 500 employees was up 40% year over year and was 87% of total IRR.
With the new data source <unk> from customers with greater than 500 employees is now greater than 92% of total error.
In addition, we look at that customer additions as a sign that the growing strategic nature of our platform across our customer base, we define DAP customers as those customers, who have an enterprise department wide contracts or are deployed on for more applications. We added 14, new customers in the fourth quarter to reach 102006.
Our focused execution was also evident in our dollar based net retention where customers over 500 employees was 121% for the trailing four quarters and was greater than 125% for the fourth quarter.
Turning to gross margins expenses and profitability I would like to note that I will be discussing non-GAAP results going forward.
Gross margin was 77, 5% in the fourth quarter up 450 basis points year over year in.
In the fourth quarter gross profit was $41 3 million up 45% year over year.
We continue to see improvement in gross margin due to a large portion of our revenue coming from subscription revenue, which carries a higher gross margin profile.
We expect our overall gross margins will increase over time as we continue to optimize our hosting operations and improve our services engagement model leveraging partners where feasible.
Turning now to operating expenses, we remain focused on investing for growth to capture share in the category. We created continues to expand.
Sales and marketing expenses for Q4 was $37 4 million compared to $22 4 million in Q4 last year.
This represents 70% of total revenue in the fourth quarter compared to 58% in the fourth quarter of 2020.
The year over year increase in sales and marketing expense is a direct result of a hiring freeze we put in place at the onset of the global pandemic in 2020.
Following an acceleration in hiring as the business activity returned to more normalized levels in the subsequent quarters.
We also continue to invest aggressively in our go to market teams to address increasing opportunities we see in the U S federal market partner expansion and broader coverages across all geographies.
R&D expense in Q4 was $12 9 million compared to $8 5 million in Q4 last year. This represents three 4% of total revenue versus 22% in the same period last year.
We continue to make investments in our platform to drive innovation and we will invest in R&D as we extend our product and invest in our ecosystem in 2022.
G&A expense was $9 8 million for the fourth quarter compared to 7 million in the fourth quarter last year.
G&A was 18% of revenue similar to the fourth quarter last year.
We are investing in the infrastructure of our business to drive long term scale in our business going forward. The primary area of investment for us will be in R&D and sales and marketing as we look to capitalize on our large market opportunity.
Operating loss in the quarter was $18 9 million compared to a loss of $9 5 billion last year operating margin of negative 35% compared to negative 24% from the same period last year.
We held back on spending and investing meaningfully in 2020 during the pandemic as we chose to preserve cash.
We will continue to hire aggressively in our go to market operations as appropriate to support our goals.
Looking forward, we expect to see ongoing improvements in operating leverage as we scale and are structuring our investments in sales and marketing and R&D Accordingly.
Net loss per share in Q4 was 20, <unk> using $83 6 million weighted average shares outstanding.
Free cash flow was $16 4 million in Q4 compared to negative $2 6 million in Q4 last year.
Free cash flow margin was negative 37% down from negative six 6% for Q4 last year.
In the near term, we expect to see fluctuations in cash flow longer term, we expect the increasing operating leverage will result in positive free cash flow, though margins will fluctuate on a quarterly basis in the near term and improvement will not be linear.
Turning to the balance sheet, we ended the quarter with 342 4 million in cash cash equivalents and short term deposits.
Turning now to guidance first I want to remind you about the inherent seasonality of our business seasonality in our revenue reflects a classic enterprise sales model with the first calendar quarter being the smallest proportion of annual revenue in the fourth calendar quarter seeing the greatest proportion of our annual revenues.
Meanwhile, our expense structure typically grows more linearly as we invest in head count early in the year with the expectation that those investments will be productive as we approach the fourth quarter.
As we move up market and focus on larger enterprises, we expect to see the seasonality more pronounced with assets for the first quarter of 2022, we expect revenue in the range of $55 5 million to $56 5 billion, representing growth of 30% to 32% year over year and non <unk>.
GAAP operating loss in the range of $19 4 million to $20 4 million.
For the full year of 2022, we expect revenue in the range of $251 million to $255 million, representing growth of 30% to 32% year over year and non-GAAP operating loss in the range of 75 million to $81 million, reflecting a gradual improvement in operating leverage in the second half of 2022 as we see continued returns from.
Our investments.
To summarize we had a great year of growth in 2021, and we are well positioned to accelerate our growth in 2022 with that Dan Ralph and I will take your questions.
Thank you if you'd like to ask a question. Please taking my pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again that is star one if you would like to ask a question.
We'll take our first question from Scott Berg with Needham <unk> Company. Please go ahead.
Hi, everyone. Congrats on the very strong sales metrics here.
I have one and a follow up Dan I wanted to start with the $4 million.
Large hardware software company that you talked about obviously, a $4 million of big contracts.
A big contract, but you specifically called out a $1 million or.
Our revenue that they were able to generate from your platform that seems like a newer use case to meet that I don't recall are you seeing customers actually try to.
Deploy your platform and other maybe similar areas to actually drive revenue versus just a cost savings opportunity around support of enterprise wide applications.
Yeah.
Okay. Thanks, Scott and I think that's exactly what we do right, we're helping companies realize value from their technology.
So in that example that company.
The new CRM.
CRM that the.
With one theyre rabbits direction using it.
It's really more the problem one of adoption.
It's only 40% adoption.
But when they start using <unk>.
We increased that adoption to almost 90%.
Secondly, help them sell more.
So the idea is that companies are buying technology in order to improve the bottom line.
That technology is not being adopted breaking those issue.
I would say thats exactly what work you're doing.
Now, we're able to show Mark.
Revenue gains to our customers therefore drive larger contract.
So that's the example here.
Yes.
Got it helpful. And then from a follow up Andrew I wanted to talk about the guidance a little bit for the year.
Revenue guidance very solid, especially after the strong bookings quarter.
But your operating losses, not quite double what consensus was modeling here previously.
Should we think about those investments because of an extra call it $35 million to $40 million of operating loss is a pretty big number is that.
Mainly coming in sales and marketing or is there going to be some new product opportunity and there help us kind of walk through kind of what that dynamic for the year. It looks like thank you sure. Thanks, Scott. Thanks for the question I think it's a really good point because the reflection of the investments and the returns we're seeing now in our Q4 results are really the reflection of the.
Investments in our strategic priorities you put for the company and so we're getting a lot of confidence that the trends, we're seeing the secular trends and demand from customers the demand from our partners the expansion and the whole notion of what's required for achieving return on your digital transformation investments, we're seeing these trends come.
Light and it's given us a lot of confidence that we should not be worried about short term margin implications are really investing for growth not just for 2022, but for the long term as well. So we approach every one of these strategic investments with a very focused.
And specific area that we wanted to have targeted returns and we're seeing the results whether you track that in our in our performance on IRR or you track that on the improvements with our partners.
And with our partners at this methodical we get we get through our agreement on partnership we work with them on a joint account selling and then you start seeing the pipeline showing up at these early leading indicators that are giving us a lot of confidence that we should continue to invest now having said that what I think what youll see is given the profile in our guidance.
In first half versus second half is that.
The net loss, we've given you in Q1 looks a lot like that from a percentage break it looks a lot similar to what you've seen in Q4, but over the term of 2022, you see us getting more and more operating leverage and by the way that's reflective of investments we've made in our gross margin lines Thats investments we've made in the.
<unk> of our sales and go to market efforts. So.
When you invest and you try to create a category leading technology that drives durable growth long term you can't have short term myopic investment thoughts you've got to think in long term investments and we're making those and they are starting to pay off so that's the way I'd really characterize this as think about in terms of we've made some re.
Key strategic investments, we're excited about the returns, we're getting and that motivates us to continue the progress.
Very helpful. Congrats on the strong bookings quarter. Thank you.
Okay.
Thank you, we'll now take our next question from Michael <unk> with Keybanc.
Hi, This is Michael Vick backfill tourists.
The share of customers deploying walk me or internal versus external facing applications has been trending over the last few quarters and if youre seeing any change here. Thanks.
I can take that so really no no material change in the percentage breakdowns I think what you see as some of the larger deals that we're talking about are typically the walk me for internal use cases that Dan was mentioning one I can tell you a few others really large customers that start.
And that and Thats standpoint back a number of DAP customers, we landed for the quarter were brand new customers. So really large deals and there are big deployments, but.
So there wasn't any substantial change in the walk me for employees versus walk me customers breakdown, but I will say that where we see the biggest business process automation.
<unk> and where we see the biggest customers are seeing the biggest returns on investment with walk me isn't that walk me for employee space.
Okay.
Got it very helpful and just if I could I have one follow up what are you seeing any impact of large deal closings for this quarter I think you've talked about that previously.
So we entered the entered Q4 with a really strong pipeline position and.
I think when we had indicated in our guidance back in the Q3 earnings process. We we really tried to focus investors on that this is our biggest quarter of any calendar period and that we had a good pipeline to go execute now when you look at the numbers. We obviously did that and I would tell you that our posture is quite similar with respect to as we enter.
2022, the opportunities for us are our our expanding our pipelines look strong and the investments we're making right now in some cases are actually starting to show show up early I mean, the Dod deal that Dan mentioned in his script. It was a really good indication it was both a partnership.
The result of the partnership with SAP.
Agreement as well as an early indicator of a federal demand associated with our solution. So it's those types of things that those those bits of evidence that really give us the confidence that the things. We're doing are really correct and that they are driving the growth in our business.
Great. Thanks for taking my questions.
Thank you we'll take our next question from Michael <unk> with Wells Fargo.
Hey, there. Thanks, good afternoon I appreciate you taking the questions.
You mentioned the federal opportunity multiple times in the prepared remarks is there anything you can add around initial observations around that segment, what's driving the increased focus there and is that one of the incremental areas thats driving some of the near term investments you were just talking about Andrew as well.
So I will take it.
Dan So obviously walking.
You talked about some platform is suitable for any larger than mutation organization because digital transformation government has the exact same problems than Q, and theyre actually expanding and accelerating their digital transformation across all agencies.
Obviously in order to get into the government when it can be fed ramp.
Five we need partners, so getting with Dod through the FTP partnership. This is huge for US and this is just the beginning that was the seven year contract.
Pecan Court.
<unk> travel and management's thinking about how many more opportunities in the Vod alone.
Which is why we're very excited and we're highlighting.
That's helpful.
Subscription revenue accelerated RPI up more than 50% var number picks up the one metric that looks at touch out of step is just billings and the trends on deferred revenue. So can you just remind us if theres anything specific to call out in terms of billings impacts or what the best leading indicators of the business or from your perspective I think that's helpful. Here is.
Well thank you.
Yes, I'd say.
In some cases, when you have really large deals when they come together sometimes.
The related billing.
Billing processes and something that we would necessarily point to as a key indicator and it's not even when we we track and measure and give any guidance around Michael So I would really use our IRR would use.
The IPO figures that we put out there.
I wouldn't draw any big conclusions from the calculated billings.
Okay. Thank you.
Thank you we'll take our next question from Raimo <unk> with Barclays.
Hi. This is the notes to MSR argument on for Ryan. Thanks for taking my question I have two first.
First can you just talk about the retention rate ticked up to 125 on a quarterly basis can.
Can you talk about some of the drivers behind that and are you seeing some early impact from partners in this number.
Sure. So obviously, we're seeing greater expansion with our customers that's driving that number is up.
And customers that starting with walk me, one or two application actually expanding to a multi million dollar deal. So obviously that drives the retention up.
As you saw the RPM grateful direction investment three year deal so overall that momentum.
Making the retention goes up and we believe that even will grow further as we have more and more and more strategic deals like that.
And I would just add.
Yes.
Yes, sorry, Andrew.
Just because that I would add that.
DAP customer metric that we disclose that that's reflective of those really big large expansions in some cases, we actually land large deals we saw.
Five new customers this last quarter of Atlanta.
Customer, but they are often where customers do is they start off with a smaller implementation and then they expand quite rapidly. So that's why that DAP customer number is so important for us to point to and disclose.
Yes exactly.
Yeah.
As I am on the partner side on the partner side.
We announced last quarter as APM Deloitte this quarter Accenture.
Just getting started we are seeing great indicators, both in building pipe and getting and starting to get deals.
But we're very excited on the potential for 2022.
Not huge and so the main driver for increasing very content.
Long term deals and drops.
Actually the customer is assignable.
Got it that's helpful. And then just for my second question can you give us an update on walk me beyond IC on your website.
New enhancements coming to the platform such as glass solution in the marketplace and apps and more marketplace. How can that kind of extend to what you already do with partners and the integrations you already have in place. Thank you sure sure. So one we're getting a lot of.
Solution. So for example, with the second core there is a lot of pre build content, so customers can be up and running much much faster.
In addition, we opened it completely so we have even smaller partners, creating content and distributing content at the end of the day.
Alright.
Time to value how fast our customers can see value and when we're sharing that knowledge. When we bring in partners that can already build solutions that we know that's shown great Rois, which is exactly where our equity system shine.
So we added that capability, we opened 'til now everybody can actually plug in and start getting benefit from walk me on top of it we launched many products all of them connected to that so not just content, but data and kpis projects and a lot of things that at the end of the day.
<unk> com and they want to actually start to measure an impact longer bema and.
And five they can get a quick walk.
So thats, what we do with beyond and obviously as we're getting more and more partners like Accenture Deloitte, we wouldn't see anything Brian .
<unk> faster and with much much more content.
Got it.
Significant amount of our customers starting to use it so.
A really good adoption from our customers from our top customer using <unk>.
Beyond component.
I think thats, great to hear I appreciate it.
Thank you, we'll now take our next question from Josh Baer with Morgan Stanley .
Great. Thanks for the question I was hoping you could give an update on sales productivity and how that's trended.
And perhaps I'll look.
Look at how many sales reps you are up to now and in your 22 investments how many do you expect to add.
I will start and Andrew can chime in with the Saar.
That number but we.
We think Q4 very very strong with high attainment.
In all segments. So overall, we're very pleased.
Large deal very happy reps at the end of the year. So we're pleased with that as we're getting into 2022, we want to see more rep getting fully ramped and drive that.
<unk> be up.
And we're looking forward regarding the numbers of reps in the investment in Roanoke, Virginia.
Yeah, what I'd say is the investments that we're making in the sales and go to market inside are not always profile.
And the number of reps. So we are increasing the number of reps as we move into 2022, especially in areas, where we had very light coverage a little coverage in the past federal is a great example of that but the really important areas, where we're making investments as Dan alluded to is surrounding the reps in our go to market efforts and really driving the technical competence in the field.
We're able to show and demonstrate when customers use walking platform.
And they really break down their core processes that they're trying to understand that we can demonstrate to them the value they're going to receive if they continue to follow the patterns in the guidance that we're giving them.
It's not always about just the reps a lot of times, it's about surrounding the reps to with the right resources to drive those efficiencies and those improvements and I would tell you that.
We're very happy with the progress of the reps that we hired throughout 2021.
And the and the leverage and the returns are starting to show. So that once again is that early indicator that we're doing the right things. We're focused on the right markets were pulling the right levers and our strategy there, resulting in our returns and our IRR.
Okay. Great. That's helpful. And then I was hoping you could just kind of review and talk a little bit about your partnership with Microsoft.
Yeah.
Sure so with Microsoft we have.
So the partnership basically.
Microsoft dynamic customer can install walking on top of their Microsoft dynamics through the Microsoft App store.
And last quarter, we launched something we call UI as I mentioned in the script you are intelligent.
Automated insight mechanism so through that partnership obviously, all their customers can enjoy it.
And every Microsoft obviously rep can sell that solution or we can actually market or what's the.
So that's how we partner with them.
Okay. Thank you.
Thank you once again Thats Star one we'll take our next question from Keith Bachman with BMO.
Hi, Good evening, Andrew I wanted to direct this to you.
And I want to focus on the operating margin guidance for <unk> 'twenty two.
If you look at the numbers you basically versus street estimates raising revenues by $4 million to $5 million, but you are raising the operating loss by 35% to $40 million. So it's a pretty tough.
Pretty tough to comprehend.
<unk>.
And Thats versus street models have existed heading into this and so theres a couple of questions underneath that no.
When you see situations like this when a company.
Essentially guys a little bit on revenue more on expenses you know one of the first questions investors are going to ask is it.
More competitive landscape or is the sales whats happening in the sales process. So it kind of competition context would be number one number two is could you give us.
Some sense on the exit rate for Q4 margins in other words, you mentioned that was a front end loaded investment cycle, which I think is.
So investors can understand but is it by.
By Q4 are you getting back to something below a 10% type of loss. If you could give us any context for what the Q4 exit run rate is to help pacify investors.
On this pretty dramatic change on operating loss and then finally.
You did say something about <unk> 23.
In your previous comments and I have to ask us.
Investors be expecting this type of loss.
These negative significant negative margins and see why 'twenty, three or did things get better any kind of context, you could provide to help clarify what your previous point was on slide 23. Thank you.
Sure and thanks for the question Keith I, certainly want to be clear about it.
The the investments, we're making and I want to be careful but people understand when we're making investments we're doing it for long term durable growth and that the investments, we're making a lot of times don't always show up in the same.
Period in which they are deployed and a great example of that is we've been making investments in our platform and in our sales and go to market team for the federal space, but those really aren't going to show up in returns until the second half of 2022 and similar aspects, we're making investments in our go to market and in our platform to really drive what we see is accelerating.
Growth into a multi year framework and it's not just one that would be existing only in 2022. So that's the way, we think about it and and but.
But thats not growth without leverage so as I mentioned.
Each quarter as we go through 2022, we're expecting to improve upon that that operating loss position, meaning that by the time, we reached Q4, we're expecting to call. It.
Nearly half of what we've got for the last quarter of Q4, so that percentage will increasingly go down into 2020 'twenty. Three we would expect to continue to drive towards that long term operating margin return of 2025%. So I.
I understand the point I understand the thought process that we are thinking and multi year framework and one that make it investments we will continue to accelerate our growth throughout 2022 and beyond as we move into 2023, and 'twenty 'twenty four and as we get closer and closer to the May timeframe, we're going to be showcasing more of.
That we're in an analyst day, and we'll break out some of those long term thought processes or how we're going to drive towards our business.
Creasing towards that $1 billion, Mark, but you don't do it without making investments for the long term and that's really what we're trying to highlight.
On the competitive front I'll, let Dan lean in a little bit, but I wouldn't tell you that the investments we're making in are at a negative response to competition. It's quite the opposite it's because we're getting very excited about the response to customers that have had to our platform and our capabilities. Because we're just really at the starting point for some of these.
Really great engagements, we've shown where we are reorganizing and re architect and some of the basic business processes are quote to cash or procure to pay every CFO . It looks at their core processes breaks those down and ask the question. How can we be more efficient how can we drive a better return and that's the type of discussions we're having now.
And when they are using the walk me platform to go drive that Theyre getting real results and that gives us confidence that we should continue.
Okay, and then can I just ask a clarification is just you mentioned that the Q4 loss would be half of and I wasn't sure. What you meant was it half of where you see Q1 landing or half of where you see Q4 of this year at Atlanta I wasn't sure what the context was on behalf. So if you think you think about in terms of our operating losses of <unk>.
<unk> in Q4 guidance that we've put out it looks very similar to from an operating percentage perspective, and I would tell you that as we move closer and closer to Q4 'twenty. Two we're expecting that that will be kind of 50% of that level, so showing up creating leverage throughout the year and by the way.
Our plans the way, we think about our plans internally as we grow with leverage and that's how we'll continue to think about it from a multiyear perspective as well.
Okay. Thank you for that clarification.
Oh.
Dan did you want to add anything on the competitive standpoint.
Sure.
I would guess that would be what Andrew said some of the investments are one time investments obviously on the fed.
If you're thinking about the go to market that one one spend but to be fed ramp within that.
Other expense right, we need to go through the fed to the Gulf.
Gov cloud and so on so a lot of one time investment in order to create a new revenue stream for us.
So that would be most of the investments right.
One partner or new regions that we're expanding into and regarding the.
Competition.
Landscape.
More or less the same as before and the quarter before.
We are we are leading the market by far we are seeing competitors, but nothing that.
<unk> or creating.
The result of us investing more money.
Okay. Okay. Many thanks.
Yeah.
We have a very significant competitive moat.
Really ahead of everyone.
Okay.
Thank you and that does conclude today's question and answer session I would like to turn the conference back over to management for any additional or closing remarks.
Thank you everyone for joining us.
Right.
For the results of Q4 and the accelerated growth.
2022.
As Andrew mentioned, we are putting a lot of <unk>.
Our research and investment for long term growth.
So excited to share more information in our analyst day, and looking forward to share the next quarter results with you.
Thank you that does conclude today's conference. We thank you all for your participation and you may now disconnect.
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