Q4 2021 Kaltura Inc Earnings Call
Good morning, everyone and welcome to the Couch, where fourth quarter and full year 2021 earnings conference call. All material contained in the webcast is the sole property and copyright of Couch War.
All rights reserved for opening remarks, and introductions I will now turn the call over to Eric.
At Sapphire Investor Relations. Please go ahead.
Thank you and good morning with me today from Couch War, Iran. You could tell.
Co founder Chairman and Chief Executive Officer, and Ron <unk>, Chief Financial Officer.
Ron will begin with a summary of the results for the fourth quarter and full year ended December 31, 2021, and the trends and areas of focus that are expected to impact 2020 to you. Ron will then review in greater detail the financial results for the fourth quarter and for the full year, followed by the company's outlook for the first quarter and full year of 2020.
We will then open the call for questions.
Please note that this call will include forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding <unk> expected future financial results and management's expectations and plans for the business.
These statements are neither promises no guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here.
Factors that could cause actual results to differ from forward looking statements can be found in the risk factors section of <unk> quarterly report on Form 10-Q for the quarterly period ended September 32021, and other periodic SEC filings, including the annual report on Form 10-K for the year ended December .
Remember 31 2021 to be filed with the SEC.
Any forward looking statements made in this conference call, including responses to your questions are based on current expectations as of today and <unk> assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.
Please note, we will be discussing a non-GAAP financial measure adjusted EBITDA during this call.
For a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metric. Please refer to our earnings release, which is available on our website at www dot investors Dot <unk> Dot com now I will turn the call over to Ron.
Thank you Erica and thanks to everyone for joining us on the call. This morning.
We reported today that our revenue for the fourth quarter was $42 7 million.
21% year over year, and our subscription revenue for the quarter was $38 5 million up 33% year over year and represented approximately 90% of total revenue.
Our annualized recurring revenue or <unk> for the fourth quarter was $150 8 million up 29% year over year.
Our net dollar retention rates for the fourth quarter was 120% up from 103% in the same quarter in 2020.
We also continued improving our gross margin year over year, achieving 63% in the fourth quarter.
60% in the same quarter in 2020, and our adjusted EBITDA for the fourth quarter was negative $7 7 million.
This quarter wraps up a fiscal year, where we grew our total revenue by 37% and our subscription revenue by 39%. We also posted 75% year over year growth in the number of customers with over $1 million ALR.
And 25% growth in the number of customers with over $100000.
Growth in 2021 was driven by our expansion from our leading position in the video content management market into the virtual events Webinars and virtual classroom market.
Expansion was enabled by the recent addition of real time conferencing chat capability.
Earlier, a video on demand and live broadcast technology stack.
It was also marked by a shift towards more external used cases in the enterprise.
<unk> are the buyers as well as an expansion down market broadens our target customers to include Smes and departments within large organizations through more low touch and self serve product.
We're in the very early days of this strategic expansion to new product markets and the broad enterprise space.
Adds to our vertical market activity currently in the education and media and telecom market.
With key Differentiators and strong initial demand for all of our new products. We aim to reach a leadership position in these markets.
As video based experiences continue to drive critical interaction.
The opportunity ahead of us as bountiful.
But before we discuss further our plans and growth engine for 2022.
I want to address our recent growth deceleration and why we expect this trend to reverse this year.
And the second half of 2021, we experienced the slowdown in the growth of our subscription revenue and a decrease in our professional services revenue.
The headwinds on both revenue sources continued also into Q1 'twenty two.
The following are the three driving forces behind us.
First.
We experienced lower than planned E&C new bookings.
We kicked off a very strong 2020, and first half of 2021, which were fueled by higher levels of demand caused both by our Uli introduced products and coal.
After a multiyear increase in our E&P average sales force productivity.
Started seeing a decline in productivity, mainly due to the lengthening of new business sales cycles.
This softness was felt across the industry is also underscored by organizations shifting from rapidly purchasing a virtual events product along with many professional services to conduct a few flagship events remotely during COVID-19 .
Two more slowly and diligently purchasing a low touch enterprise wide platform that will cater to all of their future event.
<unk> small both virtual and hybrid.
We were expecting this trend and recently launched the second version of our events offering that caters to this broader need which represents a bigger market opportunity.
And in regard to the number of salespeople.
In Q4, we had over 40% more ramp quota carrying salespeople compared to the same quarter of the year before.
We were still below our plan.
This is due to the very competitive hiring and retention environment.
We discussed this in our last earning call and have been further accelerating our hiring.
But we expect that during 2022, we will see average sales force productivity increasing backup fueled.
Fueled also by the new version of our events offering.
As well as the continued material growth in the number of salespeople.
Second.
The need for less professional services.
We've been modifying our offerings for both E&C and MLP to be more transactional and require fewer professional services in order to appeal to more customers and accelerate our sales and deployment cycles.
Part of this trend was already planned and expected with the expansion of our self service offering and our shifting <unk> from focusing primarily on large telcos to also targeting mid sized media company.
This trend was however, further accelerated with the recent evolution of our events offering, but I consume significant professional services into a low touch platform that requires far less of them.
While this reduction in professional services slow down our short term total revenue growth.
We believe it is beneficial in the longer term as it helps boost subscription revenue growth rates and gross margins.
It is also not expected to affect our longer term growth rate as opposed to transition the proportion of professional services revenue of our total revenue is expected to settle down on the new lower level.
Third.
One of our major customers reduced part of their business and revenue with us during the fourth quarter of 2021.
They have since renewed various existing projects and have partnered with us a new one.
So our business with them is picking up again and they are expected to remain a major customer this year.
Outside of this specific customer our gross retention metric in 2021 was close to our historical average and as mentioned our net dollar retention rate remained high in this quarter and in 2021 as compared to 2020.
As we look into 2022 weeks.
We expect the three factors that I noted to affect primarily the beginning of the year.
We expect our growth to be fueled throughout the year and beyond by the following three main engines.
The first is our continued sales force ramp.
Our plan. This year is to continue ramping our enterprise sales force by more than 40% year over year.
After many years of not growing our sales force will be able to enjoy the contribution of both the new recruits are 2021 and 2022.
The second is the expansion of our events platform capability.
As mentioned during 2020 in 2021, we primarily focused on high profile flagship event.
We were ideally suited for this use case as we power all types of video experiences on demand live in real time at great scale with tightened integrations into other enterprise systems and workflows.
Flexibility for customization and branding unique engagement features and advanced analytics and tracking.
Towards the end of last year.
Expanded our events platform capabilities to address not just large flagship events, but all events of all sizes, allowing organizations to easily and rapidly create manage analyze and duplicate virtual and hybrid events.
By using automated event templates and not by consuming coal towards professional services.
This easy to use platform still offers our unparalleled breadth of video experiences engagement features insightful analytics and a high degree of flexibility and brand.
We've deployed to our meetings and events solutions for many exciting customers in Q4, including checkpoint and loads.
Loans is not providing nickel tour powered live virtual goods yourself workshop experience for customers called low DIY you were.
Were those experts provide live video instructions and engage an interactive Q&A and supportive loan customers engaged in various DIY project.
Checkpoint, a leading software security company conducted its recent checkpoint experience event series uncle Tomorrow.
The third driver.
These are low touch and self serve products and go to market vehicle.
Towards the end of last year. We finished developing are you experience for the self serve purchase of our webinar virtual classroom immediate services offerings through our website.
We are now optimizing and scaling our digital operations to support efficient online sales and are continuing to improve these products and to add to the mix more self serve product.
We also recently started building an inside sales team for E&P low touch commercial sales.
To augment our main sales team by also focusing on transactional sales for smaller organization.
In <unk>, we're continuing to expand our market from large telcos towards lower touch midsized media company.
With an easier to deploy end to end cloud TV platform that includes our front end user experience and content syndication and monetization tools.
In Q4, two such new media customers went live.
And I'll Panda and AMC network channels.
And CAH media a swift broadcaster.
Both of these customers launched in only a few months.
Our faster and with far fewer professional services than our typical large telco deployment.
In addition to these three main growth engine.
We're also growing our investment in our channel partners, we announced in 2021, our expanded relationship with partners like AWS Oracle.
We plan to continue to invest in these partnerships and others in 2022 and further grow our revenues from wholesale retail and OEM partnerships.
We're also launching this year, our new M. T deals from 2021, which was a record new bookings year for MMC.
Due to their lengthy deployment time many of these deals will contribute revenue only starting from the second half of 2022.
Several other MSP customers from prior years have also planned expansion projects in 2022.
Lastly, we're continuing to grow our strong presence in the education market and to expand to cater also to smaller institutions.
So in summary.
All of our offering including our newer one events webinars and virtual classroom are growing in importance.
Our brands are relying on <unk> across each of our markets to engage our customers and users.
Retention rates remained strong and we believe we are well positioned to increase our market penetration in all of our markets in the coming year and beyond.
We were expecting a certain slowdown as we shift from growing sales force productivity.
Scaling the sales force, we did however encounter greater headwinds in the last few months by way of industry wide sales cycle slowness delayed hiring and a partial loss of business from one customer that's already growing back we.
Also temporarily delayed our revenue growth by reducing our professional services and their associated revenue in order to increase our target market.
<unk> sales and deployment cycles and increase our gross margins.
While we are disappointed with our slower short term growth.
Our confidence that the headwinds we encountered are short lived and that they will soon be offset by our strong growth engines, including the new products that we have brought to market in their modification to cater to lower touch and self serve use cases.
The ramp up of our sales force is strengthening of our go to market partnerships.
And of course, the continued growth and success of our customers.
These engines, we expect to Reaccelerate, our revenue growth in the second half of 2022.
With that ill.
I'll turn it over to your own our CFO to discuss our financial results in more detail you are wrong.
Thank you Ron and good morning, everyone.
We view the fourth quarter.
And our fiscal year results today. Please note that I will be referring to non-GAAP metric adjusted EBITDA.
Reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is available on our website at www dot investors that can do unnatural.
Total revenue for the fourth quarter ended December 31st 2021 was $42 7 million up 21% it will succeed.
Subscription revenue was $38 5 million up 33% <unk>, while professional services revenue contributed $4 2 million down 31% year over year.
The remaining performance obligations were $185 5 million up 32%.
Of which we expect to recognize 57% as revenue over the next 12 months.
Annualized recurring revenue was $150 8 million up 29% year over year.
Revenue benefited from our continued to yield.
And net dollar retention rate, which was 120% in the fourth quarter compared to one of the 10, 3% in the fourth quarter of 2020 within our E&P segment total revenue for the fourth quarter was 31 million up 21, 8% Eagle very subscription revenue was $59 seven.
Up 40% year over year.
While professional services revenue contributed $1 three meal down 60% deal very well.
Within our MSP segment total revenue for the fourth quarter was $11 7 million up 7% Elo barrier subscription revenue was $8 8 million up 13% year over year, while professional services revenue contributed $2 9 million down 3% it will vary.
GAAP gross proceeds for the quarter was $26 8 million, representing a gross margin of 63% up from 68% gross margin in Q4 'twenty 'twenty.
Within our E&P segment gross profit for the fourth quarter was $22 1 million, representing a gross margin of 71% compared to the same 71% gross margin in Q4 2020.
We've been our MLP segment gross profit for the fourth quarter was $4 6 million, representing a gross margin of 13, 9% up from 36% gross margin in Q4 of 2020 R&D.
R&D expenses for the fourth quarter were $38 3 million or 31% of revenue compared to 26% in Q4 2020. The increase was driven by additional headcount and payroll expenses as we continue to invest in our technology and innovation.
Sales and marketing expenses for the fourth quarter were $13 8 million.
<unk> 30.
2% of revenue compared to 23% in Q4 2020.
This increase was driven by additional sales and marketing investments, including headcount and personnel related expenses, we intend to continue to invest in our sales and marketing as we extend our sales.
And marketing efforts to leverage our position in the market and capture the significant opportunity in front of us.
G&A expenses for the fourth quarter with $12 million or 28% of revenue compared to 16% in the fourth quarter of 2020. The increase was driven by additional public company head count and third party related expenses.
GAAP net loss for the quarter was $16 9 million co 0.12 per diluted share adjusted EBITDA was a negative of $7 $7 million decreasing for $1 5 million in Q4, 2020 one.
This will result in line with our plan to increase our spend in order to further fuel our growth as discussed earlier.
And now for the full fiscal year results.
Total revenue for the year ended December 31st 2021 was 165 million offset the 7% Evo variable.
Revenue was $145 million up 39% year over year, while professional services revenue contributed $20 million up 22% <unk> gap.
GAAP gross profit for 2021 was $102 7 million representing a gross margin was 62% up from the 60% gross margin in 2020.
GAAP net loss in 2021 was $59 4 million.
95 per diluted share.
Adjusted EBITDA in 2021 was a negative of $12 2 million decreasing $4 3 million in 2020.
Turning to the balance sheet and cash flow.
We ended the quarter with $143 9 million in cash and short term investments net cash using operating activity was $10 7 million in the quarter and 20.
$1 million in 2021.
I would now like to turn to our outlook for the first quarter and the full year 2022 in the first quarter, we expect subscription revenue to grow by 12% to 16% to between $36 2 million and $37 2 million in total revenue to grow by five 8% to between 13 nine <unk>.
$6 million and $40 7 million as.
As Ron mentioned these take into consideration and expected material decline in our professional services revenue.
We expect a negative adjusted EBITDA to be between $9 million and $12 million.
For the full year, we expect subscription revenue to grow by 10% to 13% to between $159 5 million and $163 8 million and the total revenue grew by five 8% to between $173 3 million and $178 2 million.
Again, as Ron mentioned, we expect to accelerate our subscription and total revenue in the back half of the EU.
And focused our revenue for professional services to remain there on slate for the rest of the year.
We expect for the full year and negative adjusted EBITDA between $27 million and $32 million.
Will the expense both our investment plans and priorities for 2200 people have not changed we plan to continue investing across both R&D and sales and marketing to drive growth and expect our gross margin to continue growing moderately towards achieving our long term goal and.
In summary, as Earl mentioned, we believe that our acceleration new product and the strong retention rates will enable us to accelerate our revenue growth rate in the second half of 2022 .
We will open the call to questions operator.
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We ask that you limit your questions to one and a follow up so that others may have an opportunity to ask questions as well you may re enter the queue by pressing star one.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please I'll we poll for questions.
Yeah.
Our first question comes from Gabriela Borges with Goldman Sachs. Please proceed with your question.
Good afternoon, and thank you for taking my question Ron I wanted to come back you did not comment.
On the change in buying motion.
And our customers to one and a pipeline that.
I think we'll be back.
And a second generation of that platform and maybe talk a little bit about one of the leading indicators I E.
That leads us to believe that the expansion is here on that platform, what's right for the company in the second half and how do you get comfortable with that that's not in person.
Some competition. Thank you.
Thank you Gabriel for the question and thank everybody for joining the call.
I'm going to give you a few examples of things that we've been seeing.
Seeing over the last quarter that are supporting the notion of starting to see sales cycles are longer.
At a top tier company, that's been a 20 year Costar customer Im sorry, you are talking about 'twenty kotor customer for more than nine years with us.
Awarded us their event business for the tier two and tier three events, meaning the smaller and intermediate size events not the flagship events.
But that's going to take them a while until they physically contract that we have already a verbal and it goes through the motions on their expected out later in the year. Another example is a very well known technology company has not been our customers today. They joined us that they've done two smaller events with us are defined as <unk> the fund or one of the two final candidates to do other events we're discussing.
The potential events and they go through a prolonged process as we go through these initial event to assess the quality of the product that make final decisions.
And where it's going to be deployed by the way. The reason for the first one for choosing US was the enterprise ability of our platform. The fact that we could address integrated workflows across the entire organization. The reason for the second.
Bleeding position that we are right now is the fact that we could address complex event templates, which could be easily replicated for example, they run training events that required robust content management abilities. We're the only platform that could support. These names. If you could give you a couple of more a new tech company customer for this past quarter the ramp with us our annual customer event received their users.
Highest scores in five years with virtual event experiences.
For both physical and virtual events and the rating was off the charts in our health care organization, that's been a customer of ours for E. Tiers are starting to do stuff. So we're seeing definitely the pipeline build and the need to come in.
But the decision making process of a platform that caters not two very large flagship events that need to happen immediately and happened one rather many many intermediate size event is just a longer process and so we are seeing the market state that we are a very strong offering there and their interests.
The cycles are just longer does that address your question.
Yes, Thank you and maybe a little more detail on what you see.
<unk> existing fitness he mentioned the one.
The way its being a partial loss.
Are you seeing additional kaufman, perhaps downsize that contact with you.
I think that longer term plan that has perhaps.
Perhaps the nature bare event.
Changing maybe.
Maybe just a little more on weather.
<unk> taken a different customer pattern or any other examples that parallel from one customer that you called out.
Yes happy to address that so first of all we did discuss one of our major customers have reduced part of their business.
As well as the revenue during the quarter, they've since renewed various projects et cetera.
We will see first and for most of that they have multiple projects and they are growing the other side of the project.
There were some projects that were canceled and the rest of our ongoing for it as for the other ones as we did state outside of this specific customer.
Gross retention metrics in 2021 were close to our historical average both in 2020 and in 2019 and a net dollar retention rate remains high. So we're not seeing any massive change in our gross retention or in the net retention behavior of all states that as it pertains specifically going forward into the flagship events.
Is there a possibility that some of the other folks that just use us for flagship might either replace to the fall or do a partial that's potential but that's not a huge part of our revenue and we are seeing that migration into additional bigger project as well. So we're not expecting a major change in our gross retention metrics.
Does that address your question.
Yes.
Thank you Gabriel.
Our next question is from DJ Hynes with Canaccord. Please proceed with your question.
Hey, Brian Hey, Ron Thanks.
Thanks for all the color on <unk>.
Current trends I appreciate the transparency.
Ron I wanted to ask if youre seeing sales productivity declines within your existing team.
What makes you think throwing more resources at the problem.
Is the right solution now.
Yes.
Great question and thank you P. J, so first and foremost this has not been a very prolonged process I remind you that we've seen increasing productivity before COVID-19 during COVID-19 and that sustained all the way through kind of the end of last year. We know that Q4 was a bit of a different duck, even through Q3 that there was a mild reduction we're just still forecast.
For the year based on the actual pipeline that we should be fine for the year. So that change really was a few deals that slipped at the end of the year that just took longer than most of them almost all of them. The statement is we're absolutely doing this you've got a verbal this just takes longer so we're not feeling that there is the slowness overall and the demand nor in the underlying market the other.
One as I mentioned, we've been adding the types of products will enable us to continue to address this trend and this change in this elongated of these deals and where it's not that deals are stopping just the closing of the deals take more time, so bringing more salespeople to work on the likes of the deals that I mentioned as well as many others.
Its something Thats absolutely worthwhile.
Does that necessarily mean that the translated into closing the business immediately last thing I would state is that even if you look at the productivity.
Still higher than 2019 on average for 2021, and even if you take the run rate in the second half of the year. It's a portion of that that's built from a kind of an LTV to CAC, it's still a favorable number on the second half of the year and so we're not at the levels that we would argue that it's not an efficient operation, but we're keeping an eye very closely on it and we're not going.
To add all the people in one Sunny day, and as we ramped up throughout the year, we're going to continue to make decisions on it.
One more one more point that I want to add these days.
When we look at pipeline, obviously, we are not sharing pipeline numbers.
Definitely we see a nice development in the pipeline.
Especially around the new offerings alone mentioned, so will we.
Do feel that we will be able to convert.
Into booking using danielson stupid.
Yes, yes, okay.
The other question I suspect I'm going to get it.
<unk> had four straight quarters I think net revenue retention has been kind of 115 to $1 21.
You're guiding 12% to 15% subscription growth in Q1, I think the bridge is probably this large customer attrition that you talked about.
Can you just give us a little more clarity on what's happening there like what did they not renew what are they now adding what is the financial impact I think that would help folks get comfortable there.
Sure happy to do that and thanks for asking look.
This is a customer and again, we're trying to keep the privacy of our customers and confidentiality of the submission. So we can get into the Nitty gritty like I said, it's a major customer.
Fair amount of business with us they do quite a few of events. It's a lot of events focus situation.
From our understanding for internal reasons with conversations with their teams they decided to switch to another option on part of their business. It is not related to our immediate products or services altogether. It's a few of the big events that we support them if it translates to a fair amount.
A reduction by the way more on the nonrecurring than it is on the recurring but them both but it is important to note that we're anticipating any way of drop in professional services from them given all the trends that we have stated that we are currently forecasting to catch up on the subscription revenue from additional deals that we're doing with them and so there are remaining a law.
And important customer we are renewing projects with them, we're discussing additional ones with them.
Some of it you Ron you want to add something about yeah, and one thing that we are not show booking numbers, but I can tell you that even in the first quarter of <unk>, we definitely so a very nice momentum in bookings.
Around the specific customer.
So.
Looking into the rest of 'twenty, two and the conversion into revenue.
We do feel that this customer who is going to be continue to be a very very significant customers for us.
Okay I appreciate the color. Thank you guys.
Thank you teacher.
Our next.
Comes from Michael Funk with Bank of America. Please proceed with your question.
Yes, hi, good morning. Thank you for taking the question I wanted to go back to your comment about the sales cycle and that lengthening and just wondering if this is the new normal in your view or if its a reflection of customers maybe shifting course mid negotiation.
Around uncertainty on kind of the product and the use cases and what they actually need.
To get a sense of what's driving that lengthens the sales cycle and if this is the new normal.
Yes, Michael.
Michael Thanks for asking so.
We always thought that post COVID-19 the cycles are going to be longer than during over that that's not the question because again a lot of it was spur of the moment decisions that people needed to have done very quickly.
We are seeing now some of the cycle is taking a bit longer than what we would anticipate I think part of that is that quarter four coming out of this crazy year in some people, taking more time off might be longer than usual potentially macro situations around budgets, but I think beyond that it's really a point of that transition of the type of product.
Into a more thoughtful longer term strategic decision around events for the entire organization and I think the two things are going to happen number one if the beginning of a gate that gets delayed it's like a traffic jam the year at the beginning of it once it starts Rolling then you have the flux of the deals that we do close now so that interim period of that delay is probably creating a bigger impact than <unk>.
Later on even if sales cycles remain a bit longer but I do expect that they're going to become quicker for various reasons number one I think people are going to understand exactly what they're looking for it's still rather new shift. The second thing is that we are going to have more of that product available. We just launched it in Q4. The addition to the modifications and we're going to do more.
More of it and more and more success stories like I said, we have quite a few initial success stories and I think we'll be in a position to sell these things quicker I will note again that even if you look at productivity is and where they're at it's decent productivity is and so we're hoping that if it's following on what happened in the second half of the year, it's still going to do well, we're hoping it's going to do better.
It's hard for US we are a long sales cycle company, it's not a transactional SMB quick sale, albeit that we are coming down market. We cannot look at one specific quarter and be able to say for sure exactly how things are going we're going to need to monitor. This in next few quarters and up to you.
Great and just to clarify I think you mentioned that although the sales cycles are lengthening the deal sizes are actually getting larger.
Customers think about it in a direct kind of a coal company needs is there any way to quantify that change in deal size and is that just going out to your point add more potential lumpiness the quarters, but like the pig in the Python once it works through you end up at the same point at the end of the year was at <unk>.
Point.
I would hope I mean, it's so first of all over the years, we've increased our ARPA and average MLR.
We've seen an increase also in the past a year the average recurring revenue per customer quite significant we did post the number of customers that are over $1 million and $100000 growing respectively by 75% and 25% in the past year and so we are getting bigger ticket items. Some of the deals that I mentioned the other in play for thousands of it.
Rents across our organization are quite large so yes. The expectation is for this to grow the other thing is not just the size of the deals but also the structure from a recurring subscription versus professional services.
<unk> flagship events were also requiring a fair bit of nonrecurring professional services, because they would come alongside our ability to provide branding and very close work with a very very large deals in part also because we didn't have the automated product to support that.
Just by way of our product now.
Now, we're going to have more recurring more subscription and less professional services. So I think hopefully what we're going to see us.
<unk> back to faster sales cycles more demand as we strengthen our product larger ticket items and higher gross margins and faster at transactions with more transactional product again, we will monitor this in the quarters ahead and update.
That's all great color. Thank you so much.
Well thank you Michael.
Our next caller.
Michael <unk> with Wells Fargo has a question. Please proceed.
I think this was just Michael right.
Hey, guys the stock not for Michael.
Just wanted to touch on <unk> and <unk>. It looks like both were up double digits sequentially, but was down sequentially can understand customers downsizing might result in a downtick in IRR, but what's driving the divergence between those two metrics there.
Yes first of all debate the big increasing the IPO.
Mostly not just but mostly related.
So the fact that we added some of the big deals that we have in media and telecom, which are definitely contributing to the growth IPO.
By the way some of these deals will be converted into revenue just the second part of the year.
2022, but it's definitely going to push.
Growth rate up hopefully in terms of the sequential and what's happening is that in this quarter.
Yes.
Slowness that we saw in productivity and the specific reduction of this specific customer, which as I mentioned and Ron mentioned, it's mostly for the short term and not so much for the rest of the year as these customers continue to renew and book more.
Both transactions during Q1, there was a pressure short term pressure that we felt in Q4 going into beginning of the year on the appeal.
Okay. That's great. Thank you.
And then just as a follow up just wanted to unpack the revenue performance on a geographic basis, where there were there any callouts related to specific geos that that might have driven the wider performance on revenue during the quarter.
No no. The short answer is no. The trends are basically the same trends that North America is still our biggest region.
Followed by Europe , and then Asia Pacific.
There are some small tweaks in shape, but.
We remain mostly the same.
Our next question is from Matt <unk> with Deutsche Bank. Please proceed with your question.
Hey, guys. Thank you for taking the question.
Maybe two if I could first on churn.
Maybe if we can get any more color.
On how customer churn striping.
More focused on customers.
Within E&P that may have joined sort of earlier on.
And the pandemic. So if theres any color you can give us in terms of how is that cohort. They joined roughly two years ago, how churn has been trending there.
And then secondly, if we tried to sort of unpack the.
Revenue guide for subscription within 2022.
Is the implication here that subscription revenue growth stays relatively flat in the second quarter, and then sees a little bit more of a ramp in two weeks.
You start to see some more bookings from new salespeople I'm, just trying to sort of figure out the trajectory during the year.
Yeah. Thanks, Matt so on the on the churn side again, we do not see any specifics other than that individual customer that we discussed and.
Any behavior that is.
Significantly south like as mentioned, it's aligned with the last couple of years and some of the departures.
Our new but I think.
Bit of them or not and at the end of the day the gross churn number, albeit we don't represent it and we don't discuss it doesn't API, we just do the math.
Net dollar retention is within best practice for the enterprise. So we're not seeing yet I did put that caveat that we need to keep our eye open on what's going to happen with these flagship events like I said there is a good potential for us to move from flagship to full event platform. We are seeing with some in some other cases it might change we're going to keep our eyes open over the next few quarters and it is not a.
Big chunk of our revenue if it was big it was mainly that single customer that had the biggest piece of it.
As for guidance for subscription go ahead, you want yes.
As we say the most of the headwinds that we felt we felt it was an impact for the short term and it did create some pressure on the growth of <unk>.
Subscription revenue, especially the specific customer that as we mentioned, we solar pressure on top line, but at the same time, we are booking more and more deals with them. So we see that turnaround point happening as we speak and at the same time.
We believe that also most of the impact of the productivity is going to turnaround in the second part of the EU and by adding the multiple.
We do believe that we will see very nice acceleration in the growth of subscription revenue willing into the second part of deal.
Yes, if you look if you look on the guidance that we've provided to Q1.
Which.
Yeah.
You can see that the remaining of deal you know that even to reach the guidance. Even if we are not going to beat the numbers.
You can get very nice sequential growth in also.
Mostly subscription revenue and as we say the pressure on the professional services will continue its going to be mostly flat for <unk>. So most of the upside and the impact it will see the second part of the year.
Quarter to quarter and on a sequential basis is going to come from subscription revenue and we do see it in our internal model like milk.
Yeah.
That's great. Thank you both.
Thank you Amanda.
Our next question comes from Steve Enders with Keybanc capital markets. Please proceed with your question.
Great. Thanks for taking the questions here.
I guess just from a vertical perspective, I guess is there anything to break down and kind of what the demand environment looks like across each of the <unk>.
The segments here.
Yes, particularly on the E&P side I think it sounds like Ed Tech has been a little bit more.
Impacted.
But what we've heard in the market, but just any kind of any kind of breakdown from a vertical perspective on later, but you are seeing out there.
Yeah sure Steve So first of all contribution was coming from all segments order and the largest contributor continues to be enterprise.
We spoke about geography.
To give you a few examples of things you are asking about it.
Yes, but we have a large multi campus private university that serves over 20000 students a year.
Basically selected us from very highly competitive test out there around the different options.
There is all around the world and large university in the Netherlands, but serving 35000 students took us to replace the full video technology stack.
We got another very large prestigious privately owned university in the Philippines are serving 30000 students that's leveraging our capabilities to do all of their on Prem are local and hybrid remote classroom work, we have up sells across our organizations a large, California based engineering University double down.
<unk> transcription capabilities with us so we're still seeing a good action coming from education.
Do I think that the tick up in education will continue at the same velocity that it jumped up at the height of Covid with some more consumption might be lower but the good thing is that we have a good hedge across all the different elements.
So one example of that for example, with media and Telecom you remember that in 2021. It was a record jump in bookings grew by 100% in the second half of this year, we're going to get a lot of that benefit on the revenue side. So a good portion of the growth by the way is already in pocket with stuff that happens so.
Enterprises running forward with events education is doing well it might do another big jump one of the things that we're looking at is selling the event platform for education, a lot of folks are coming to us and theyre, saying they want to use that for various events of universities are using so we're keeping an eye on that one.
I guess, maybe asked a little bit differently.
The impact on the AD Tech space.
Classes going back in person or anything anything on that front.
No because we're not without a usage based charger on that site. So to remind you the content management systems, we've been selling for education for years, including plug ins to LMS and electric capture where an FTE based model and so the more people.
Leaves us we didn't necessarily get paid more so.
So far as whats happening if there is a bit less consumption. After COVID-19 doesn't affect our revenue our universities, even more clear that they need to use the systems. Yes. One thing is that during COVID-19 people needed to use us very quickly for COVID-19 , but they didn't rethink about their strategy going forward for a full flip classroom experience where people could come to the <unk>.
<unk> to do their drills and training, but really consumed the actual lecture content back home Scott flipping the classroom and we're seeing more and more universities, saying, okay. We understand the new standard and we need to start preparing for more video capabilities of this new standard. So no I mean companies that really popped or consumption based companies incorporate that went.
Then they go down we didn't have that they need to use so that's not a problem for us.
That address your question to that.
Yes.
Helpful and then I guess just on.
The cloud go to market partners have said.
AWS Oracle just kind of any update on how those are high.
How those are ramping versus your expectations.
And have any contributions that.
Started in the quarter.
Yes happy to address that so we're continuing forward with both partnerships, both with Amazon and with Oracle to remind you of Amazon has been a long term partner for us and we are in their marketplace and working on selling more <unk>.
A bit of deals that are coming in opportunities that are coming through the Amazon.
Our partnership and their continuing forward.
The Oracle front, but we made.
That extended partnership earlier this year was first and for most around moving our OEM relationship into OCI, we're making headway on converting and enabling to run our OEM relationship on OCI and doing more things, but we have go to market together, so I think that the.
The impact will be building up throughout the year of 2022, I think that towards the latter part of the year once the OEM in OCI are running stronger we could expect a lot of good things from there as well.
Okay perfect. Thanks for taking the questions.
Okay.
Yeah.
Our next question is from Ryan Koontz with Needham <unk> Company. Please proceed with your question.
Hey, good morning, guys.
On the timing of your large customer churn was that more of an impact to Q4 or Q1, how should we think about the kind of step down there and that impact on the numbers.
Yeah in terms of the revenue.
It's obviously an annual contract.
On the specifics.
Event or situation, but most of the impact was on Q4 and Q1.
It's going to turnaround because of the fact that as we mentioned we are signing and closing more deals we've done with these specific customers.
With specific customers so.
The end of the day the bottom line.
Most of the impact is on Q1, and Q Q4, and Q1 of this year and then.
Going into the second part of deal, we already see discussed them ramping up and.
As we mentioned, it's still going to be a very significant customer for us.
From a professional services revenue of the bigger reduction was in Q4, albeit that theres, a nice reduction in Q1 and from.
Subscription because it kind of builds up from the end of Q4, the bigger impact was in Q1 than it was in Q4, but the run rate on subscription revenue that we see with this key customer with the second part of the year is basically the levels that we had before the specific situation.
Got it that's helpful. Thanks.
Great I hear you on the longer sales cycle, but on your on your hiring plans in <unk>.
Head count productivity can you help us out there as far as.
How you feel like you're positioned now and how much more you need to see.
Ron.
More kind of color you can give us there subtle thank you.
Sure. So we ramped that we noted.
More than 40% year over year growth in the total count of ramp salespeople from Q4, 'twenty to Q4 'twenty one.
We're expecting to do the same this year when we count that ramped as in is six months after for sales in four months after for CSM for customer success managers and obviously at this point and given longer sales cycles. It doesn't mean that there are 100% yielding already and for share revenue.
It comes in gradually after because this is the beginning of bookings.
And so that's 40% is a nice increase for years, it's been a zero and then within one year. It grew by 40%, but it's under the number that we were planning and we're catching up on the Delta I think that in the coming year 2022, we're going to enjoy both so the increase that we had in 2021 is going to bear fruit because theyre going.
In place for longer Theyre going to be addressing all these cycles that they're sitting now are selling against but we're also going to have the new guys that are coming in 2022 last thing I'd say is that we've launched also the inside sales last commercial sales initiative.
And ramping people there to address low touch products as well as without supposed to help us as well.
Got it thank you.
Thank you.
Our next question is from patent law.
<unk> Securities. Please proceed with your question.
Oh, great. Thank you.
Do you have to.
First of all I guess I wonder is the hybrid world playing out sort of the way you thought it would so for example in my Kid's School.
I would have expected that.
Yeah.
They have the classroom setup. So that if you if you have to stay home you can still watch class, but in fact not.
Not what theyre doing in the public schools. They went all the way back to in person and if you Miss classroom as class.
Likewise, if you look at our industry a lot of these investor conferences, you would have thought would have been hybrid, but a lot of or actually going back Goldman.
Goldman person, so they're either all hybrid or are all virtual or all in person.
I just wonder if maybe our expectations around hybrid were overblown, what do you think.
Yes, that's a good question I think first of all that.
Talking about K 12 school I, assuming when you say your Kid's school.
Great No that's a great yeah.
Yes, So I think first of all K 12 takes longer than the higher Ed just by the nature of.
Things I think that higher Ed is changing quicker in house change prior and K 12 will continue to do so.
I think that so far as the large events and investor events et cetera, I think that the game in town is not so much hybrid with mix. So that when people are consuming regardless of where they are it doesn't really matter theyre going to be consuming the same content because many of them might not be coming so it's not.
One of the other it's both.
And I think that.
There's going to be more of that that there'll be this ubiquitous solution that regardless, where you said that youre sitting on stage, if youre not going to be able to consume the exact same things that you can do one day of homeland appear for the second day, where it could be out for the entire days in both the networking.
<unk>.
Follow ups and everything else will be equally done for all and I think of that as the future I think that while people don't know if 20% are going to show up physically or 80% are going to sell physically people don't want to disqualify those up with not becoming physically.
And I do think that that is the future I think that for a long time in technology people are trying to build a faster horse not a car and now where people are thinking how you do this better so it's going to take a bit of time, we're still very close but it's shifting.
Okay.
Second question would be.
I mean look it at one five times EV to revenue.
Obviously people are going to be knocking on your door. So what what are the what are the key points that you would want to share with investors in terms of how you guys are going to respond to.
And how you think about strategic interests from from other people, who would want to buy it.
Got it.
Look I mean, the reason I'm not going to get into price and what's a fair price or not.
I think that this.
Necessarily is in line with our forecast and where we're going and definitely not for the strategic value of the company.
Been growing and bringing certain business theres, a certain shift for a short period, then it is going to change yet again.
It's more reacting to the very short term quarter next quarter, but pertaining to your general question about reaction to strategic interest.
We'll be sitting with folks and having whatever discussions we need to do it the best represent the value for shareholders.
But we are absolutely looking forward to what this company is worth not in this quarter not next quarter, but in the quarters to come.
And it has nothing to do sometimes with a short term situation.
We're very bullish and very excited about the general direction of video and above the general direction of the company and there is a lot of growth drivers in place to support our growth.
Great. Thank you very much.
Thank you.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Param Singh with Oppenheimer. Please proceed with your question.
Hi, Thank you. Yes. This is part of them, saying on behalf of the ticket Rod and thank you for taking my question.
And thank you.
So much for all the color and sorry to beat a dead horse, but really want to understand the dynamic into subscription revenue what I would just look at your guide it looks like you know your 12% to 15% in one year is higher than your full year 2014, and given all the color that you've given one would expect that it would pick up for the year. It accelerates a wide this type of guide.
And what are the dynamics that we're missing here and how do you reconcile your productivity in the sales coming back with this type of subscription growth that is decelerating.
Yes. Thank you program, it's not so much is already I mean, one thing to be careful about is these are looking at year over year growth rates I think the best way to try to look at this is on sequential.
Sequential has come down and we got a nice hits from the departure of projects with one of the customers.
Like I said is doing more business with us and is growing again and we have the partial slowdown, but if you look at what we're expecting throughout the four quarters of the year, we're expecting sequential to gradually pick up.
And so we're not slowing down it's just that when you superimpose that on last year's revenue and the behavior of last year, there could be various levels of growth with the beginning of the year will show some slowdown on a year over year, they were going to see a big jump in year over year.
I think what we need to keep our eye on is what this means but we have sequentially grown you want out.
I will not get into specifics because obviously, we're not going to give guidance for the second part of the definitely we will see a very nice acceleration in the sequential basis.
Based on the fact that as you can see the first part of the year is basically flat.
Almost flat and therefore, the second part is definitely accelerating the quarter.
After quarter on a sequential basis.
Got it. Thank you and then again following up on one of the other questions.
The work from home dynamic that's changing I mean have you seen any of the companies.
The way to think about those number of virtual events as they are doing the dollar spend that theyre going to do anything you could share that would be really helpful.
I think that people understand that the spend on a virtual event is far far lesser than on a physical event by order of magnitude.
And there is an eagerness we use these platforms in order to increase our ROI on these events, but I think it goes far beyond that is just the increase in reach and the quality of the engagement. The degree of analytics and that's one of the things that we win by again coming back to why kokura winds on VR.
Actual events, it's a degree of integration that we have into the different systems. The quality of the analytics that we could generate and of course, the quality of video being a leader from the video space as folks at this industry, but didn't have really video capabilities. So we're doing physical events and we've come with this extremely powerful video side coming back into the statement.
Around not just ROI and reach but the degree of data and analytics that could come out of it is really really high so yes.
Very little doubt that theres going to be a lot of these events.
Just a question of where do we fit within the sequel system and this shift from flagship into full events medium and small sized sales cycles that are associated with it I think that's a good question.
Got it. Thank you so much for showing that much appreciate it.
Thank you Pam.
Ladies and gentlemen, we have reached the end of the question answer session. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Okay.