Q4 2022 Coupa Software Inc Earnings Call

March 14, 2022

Good day, ladies and gentlemen, and welcome to the Cooper software fourth quarter fiscal year 2022 earnings release conference call.

At this time all participants are in a listen only mode.

At the conclusion of our prepared remarks, we will conduct a question and answer session.

I would like to ask a question you May press star one on your Touchtone bad at any time, if anyone should require assistance. During the conference. Please press star zero on your Touchtone, but at any time as a reminder, this call is being recorded although like to introduce your host for today's conference call. Mr. Stephen.

Horowitz VP of Investor Relations. Mr. Horowitz, you may begin your conference.

Thank you very much good afternoon, and welcome to <unk> Software's fourth quarter and year end conference call. Joining me today are Rob Bernstein, CEO and Tony just wondering <unk> CFO . Our remarks today include forward looking statements about guidance and future results of operations strategies market size products competitive position and potential growth opportunities. Our actual results may be materially different.

Forward looking statements involve risks and uncertainties and assumptions that are described in our most recently filed 10-Q. These forward looking statements are based on our beliefs and assumptions today and we disclaim any obligation to update any forward looking statements. If this call is replayed. After today. The information presented may not contain current or accurate information. We also present, both GAAP and non-GAAP financial measures a reconciliation of certain of these measures.

It is included in today's earnings release, which you can find on our Investor Relations website. A replay of this call will also be available unless otherwise stated growth comparisons are against the same period in the prior year with that I will now turn the call over to Rob.

Thanks, Steven and welcome everyone.

Before I share our business results for the quarter, Let me first convey how saddened we all are by what's happening in Ukraine and throughout the region.

Our hearts are with everyone impacted by this crisis and we hope for a speedy resolution and certainly for PS.

Our business is very limited direct exposure in the region. Nonetheless, we are first and foremost focused on supporting the safety and wellbeing of the small team of contractors. We do have there. We're also working with our customers that have suppliers in Ukraine, Russia, and Belarus to reroute supply basis to keep business moving forward.

As best as possible.

Obviously, none of US know how long this conflict will last but we all know the humanitarian crisis that will be with us for a long time to come.

Because of this we're matching employee contributions to appropriate global humanitarian organizations, and we're making a sizable donation to the international committee of the Red Cross.

Turning to look for ways to do more both in terms of financial support and through various avenues across our global Cooper community.

Now.

As we look to the results of our business, let me start by sharing a few financial highlights from the fourth quarter, our 52nd quarter of execution as a company in Q4, we delivered record results in multiple areas, including $193 million of total revenue and $318 million of calculated billings. We also achieved record adjusted.

That free cash flows of 61 million for Q4 and $156 million for fiscal 2022.

Looking back at fiscal 'twenty, two our core business is healthy and strong and our new business grew more than 60% compared to fiscal 'twenty one.

By new business I'm, referring to recurring revenue from new logos and add ons and new add ons from existing customers.

Digital and back office transformation continues to be at the forefront as companies strive to build a digital lead agility and resiliency in their businesses amid current and future uncertainty as a result business spend management is squarely in the spotlight.

Amidst these market dynamics, we have grown our community to include well over 2500 customers more than 3000 employees and over 7000 trained consultants all working together to unlock vast amounts of business efficiency are fully cloud highly scalable core transactional platform is unmatched.

And the market will continue to capitalize upon our market leadership position to create a platform the likes of which has never existed in our industry. This is exactly how it is now not how it might be.

Before I dive further into our business updates, let me take a moment to expand on the opportunity. We believe lies ahead we.

We have a massive total addressable market.

We have a clear vision and strategy, we have a history of successful execution and finally, we have a rich portfolio of untapped growth vectors that we're maniacally focused on addressing let.

Let me lay them out for you.

First is our enterprise business many of the largest companies in the world have partnered with Cooper and are seeing incredible success.

We have strong retention rates, we have an incredibly rich library of customer advocacy and we frequently see business leaders, who have used Cooper and then bring cooper to their new employers when they change companies.

Even with incredible organizations, such as Amazon BMW, Procter <unk> Gamble, Unilever and Walmart already among our community of customers our core penetration into the global 2000 is still below 20%.

Net we have our mid market segment tens of thousands of mid market companies around the globe are in the process of taking their first steps into the world of digital transformation, we're seeing meaningful growth in our mid market business over the last two years and with less than 2000 mid market customers and our community. Thus far we're in the.

Very early stages of penetration in this segment.

Another exciting growth area is geographic and sector expansion, we're already have a strong presence in the U S and in Europe to build on our presence we have been meaningfully investing in Latin America, and Asia Pacific and are starting to see some early success and momentum in these regions. We've also been investing in the public sector, which we estimate has tremendous upside.

And is also in its early stages.

And there are many other expansion opportunities across our broad business spend management platform.

As we highlighted in our analyst day, our current customers are subscribing to less than a fifth of our total platform and new customers are landing with increasingly more modules some of the growth areas I'll highlight.

Here, our supply chain Cooper, PE treasury as well as travel and expense all of which are in the very early stages in their respective journeys.

We anticipate all of these sectors to be accelerators for our long term growth rate now.

Now, while we can't predict the future we have deep conviction in our value proposition and is growing need in the marketplace. Therefore coming off fiscal 'twenty, two where we saw greater than 60% new business growth, we plan to invest assertively this year to capitalize on our opportunity to win and on the market.

We intended for a fiscal 'twenty three investments to result in accelerated growth in fiscal 'twenty four and beyond.

Now.

Never hesitant, we continue executing on our path to becoming one of the world's best Enterprise cloud software companies by remaining focused on our vision areas as exemplified by the letters and the named Cooper.

C O Upa stands for comprehensive open user centric prescriptive and accelerated in all aspects.

And it's through the consistent execution of our three wave strategy of one capturing all spend to optimizing every dollar spent and three amplifying community value that we will continue to drive into this market let.

Let me share an example from each of our three ways.

For the first wave capturing all spend let me highlight Cooper peg with Cooper Se, we are transforming the world of payments by delivering a fully unified solution that leverages. The Cooper business spend management platform to centralize and streamline payments for organization.

We continue to see strong customer growth momentum Q4 was yet another quarter, where the attach rate on new customer deals was meaningfully above 30%.

But mid market, specifically, the Q4 attach rate was well over 50%.

Though we are still in the early stages of the Cooper page trajectory, we laid out that we laid out at our analyst day, we're starting to see noticeable increases.

And our total payment volume or PPV.

Being processed through our payments hub as more and more customers go live.

We expect our cumulative TPB, which includes <unk> wires and virtual card usage to eclipse 10 billion in the first quarter and fiscal 'twenty two TPB grew more than forex compare to fiscal 'twenty one.

Relative to our spend under management levels numbers. These TPB figures are still very modest and the fiscal 'twenty two growth is on a small basis.

This early traction is very encouraging we believe it shows the demand for our payment solutions and the need for organizations to make payments from the same single cloud instance that houses theyre supplier master record all of their peers and older invoices and expense reports.

The second wave of our strategy is to optimize every dollar spent through suite synergy. Let me highlight this with a supply chain design and planning customer example, where the integrated experience between our supply chain solution and our strategic sourcing solution is yielding differentiated knowledge and savings.

We have a large south American company and the gas station and convenience store business, who is using our supply chain offering to design their delivery network and to identify their transportation needs.

These insights are then being used to execute sourcing events using the Cooper sourcing optimization solution.

This customer has a distribution centric business the margins are thin and every bit of savings account.

By using our supply chain and sourcing solutions in tandem theyre seeing clear optimization of their supply chain related quality as well as spend.

And other supply chain example is that of on semi a $6 billion semiconductor manufacturing company is using our supply chain solutions to improve efficiency.

On semi reduce their supply chain decisions from about two five weeks to just a few days, while also generating 10% to 15% improvements in capital efficiency and savings.

This reminds me of a story of key it told at our Accenture event last summer by using Cooper's platform to unsigned low their supply chain and sourcing teams to shorten the time it takes to make actionable decisions.

<unk> was able to reduce their average decision, making time from five days all the way down to five minutes.

These are great examples of how having access to the right data to drive business decisions increases efficiency and reduces cost spend.

Spend optimization, our second wave in action.

Our third wave is all about amplifying community value community Dot AI combines the power of AI with human connections the key to unlocking business value.

With our cumulative spend under management now at more than three three trillion.

Real time spend data is being analyzed the prescribed ways for our customers to be more efficient profitable and sustainable let.

Let me share some examples.

Saint Gobain, a global multibillion dollar manufacturing company is leveraging community data to reach its goal of being carbon neutral by 2050, they have reduced transport emissions by an average of 13% and in some cases by as much as 60%.

Jeff a pallet and container pooling company has used Cooper to help improve the efficiency of their supply chain, reducing cotwo <unk> per unit of delivery by 33%.

The American Red Cross is using context aware prescriptions to increase spend with diverse suppliers, thus far by 37%.

Community Dot AI represents the third wave of our company strategy and is unlike anything ever contemplated at scale within the enterprise software industry, a truly unites businesses like never before to better discover decide and deliver success, making all of our customers smarter together.

To tie it all together, let me finally share a great example that elegantly incorporates all three waves of our strategy simultaneously lets look at Cooper travel and expense.

Historically companies have relied on cumbersome siloed travel tools that don't provide any real insight into their travel spend.

With our new traveling expense release last month, we have given our customers a user centric solution designed to maximize program adoption.

In line with our first wave of capturing all spend this solution scales for companies with high volumes of expense report transactions, while giving finance significantly increased visibility into the control of their travel spend.

Our <unk> offering also incorporates our second wave of maximizing every dollar spent by delivering a unified program to a single BSM platform. The solution can be used to search for travel booked to travel and provide a seamless transactional experience with one click expense reports and credit card.

<unk> matching cut.

Customers can also ensure they have best pricing to travel saver or by leveraging pre negotiated prices from Cooper advantage.

All of these capabilities are further enhanced through our third wave of amplifying through community Dot AI, where our customers can make smarter decisions with community powered insights.

Using spend coach customers are able to influence behavior by providing employees that book travel outside of Cooper insights into how much they could have saved by using the travel solution.

We're also changing the way employees think about travel with context aware suggestions.

Rather than searching for travel to JFK airport employees can input their final destination for example, Cooper's New York Office.

And Cooper, who will help us quickly guide them to the optimal means of transportation to get there in line with their company policies.

With the power of insights driven by our global community Cooper delivered a radically different solution that transforms corporate travel to be simpler smarter and more sustainable.

To summarize our three wave strategy when working together solutions across all the waves yield exponential value for customers as each wave builds upon the other.

The value of the service we are delivering for our customers is totally different than anything thats ever been offered before in our industry.

Let me now share some updates on our federal business.

I'm pleased to announce that we recently became fed ramp authorized.

It is no easy task to complete the authorization process.

Are appreciative of the partnership we've had with our agency sponsor and customer the Federal Reserve system Board of Governors.

We believe this along with some of the key partnerships, we've announced and our continued investment in driving new business. In this sector will increase the pace of deals in this marketplace in the coming quarters and years.

To share a few more highlights new customers in the federal and more broadly the public sector includes the department of energy supply chain Management Center, and the Suffolk County in New York.

We're also proud to have the house of Representatives live on the Cooper BSM platform with the members of the house and their staff now using coupons.

All of these highlights of share today help illustrate that Cooper is creating an opportunity for finance procurement and it leaders to be incrementally strategic and elevate their standing within their own organizations.

On that note, we couldnt be more excited about welcoming them and many others to our upcoming inspire conference, which will be in Las Vegas from April <unk> through April seven.

There the business spend management community will have the opportunity to share best share case studies interact brainstorm strategize and partner on driving valuable transformational change.

Due to the Covid pandemic this will be our first inspire conference in three years and our eight overall.

It will also be the first time that procure to pay supply chain Treasury and payments all part of the Cooper platform will be unified at the same conference.

We're excited to be welcoming three fantastic keynote speakers to the event in Las Vegas.

Barbara Corcoran to speak about innovation, John <unk> to discuss teamwork, and then Sylvester stallone to inspire us.

We look forward to welcoming them.

Before I share our MVP Awards, let me provide you with an update on our supply chain design and planning integration.

We continue to be excited by the significant value that we're bringing to our customers through this offering as I mentioned before oftentimes deals that don't currently include supply chain now are still being influenced by the fact that we have supply chain as part of our portfolio, especially for large enterprise deals.

It's been just over a year since we closed this acquisition and during this time, we've been largely focused on customer alignment and strategy converting existing on premise customers to SaaS Army partners with the expertise to deploy the solution <unk>.

Connecting the supply chain solution with our strategic sourcing solution and of course, integrating our people and processes.

As we look ahead, we plan to focus on integrating supply chain with our risk solutions and our community AI capabilities were.

We're also working with our customers to unlock the value that our core PDP and our supply chain customers can achieve through suite synergy.

As we continue on pace along the timeline of integration for supply chain that we originally shared at the time of the acquisition. We're excited about our progress to date and most importantly, the clear growth opportunity, we see in the coming quarters and years.

Now, let's move on to this quarter's MVP Award winners, who best exemplify our values as voted by our colleagues across the world.

I'll begin with Mathias kind, who personifies, our first core value of ensuring customer success.

<unk> leads by example, taken on issues outside of his direct responsibility, but necessary for our customer success.

<unk> outstanding leadership through the transition to Cooper treasury, enabling his team to grow and drive incremental success for our customers.

Nest Anton Wall was recognized by minimizing our second core value focusing on results Anton is an absolute expert in finding and delivering the best solution. He has been an incredible asset to our customers and bringing together different departments and teams by applying his knowledge to improve processes and ensure customers get optimal.

<unk> from the change is upon us.

And finally, Angie eventual Lisa exemplifies our third core value striving for excellence, Angie goes above and beyond to deliver excellence, both internally and with customers. She is eager to dive headfirst into complex task and find solutions. She has successfully taken on some of our larger implementations, leading the United healthcare.

BMO and United Airlines projects, Congratulations and thank you Ts Anton and energy.

These mvpds are obviously just a few of the people that represent the immense talent throughout our organization.

To further cultivate this talent we have started a new program called Cooper Rising stars. This program is focused on elevating employees, who model our core values have already demonstrated stellar execution in their current role and are clearly capable of broader impact.

Providing an additional level of Mentorship for these colleagues, we're both improving their careers and the value that they deliver for Cooper and all stakeholders I am very excited to begin this program.

It kicked off.

Before we close let me share some interesting observations that we're seeing from our Cooper spend Institute data, we analyze data across our Cooper community to give us insights as to what's happening in the global economy, specifically around what's happening with Ukraine and the global community.

While it's still early.

Some of the indications we're seeing.

Our data is on the ground proof of international economic support for Ukraine businesses outside of Russia, and Belarus are accelerating their shipments to Ukraine, especially in key supporting sectors.

And just one month within our Cooper community warehouse and distribution services jumped 300% health care services climbed 189% manufacturing and industrial processing shipments increased 44%.

Again these are early data points, but they show a singular truth business spend is powerful and when we are United by the power spend we can drive tremendous change.

We will of course continue to look at these numbers and share them as we go forward.

In summary, we have what it takes to win this massive business that management market, we have a wide portfolio of rich growth vectors, many of which are very early in their journey.

We have a winning three wave strategy.

Our vision is comprehensive open user centric prescriptive and accelerated in a way that has never been attempted let alone achieved in our industry and we're proud to have some of the most talented thoughtful professionals in the world as colleagues and partners with these pieces in place. It's all about continuing our proven track record.

Of execution and reaching new Heights.

With that let me hand, the call over to our CFO Tony <unk>.

Thank you, Rob and good afternoon, everyone.

As Rob highlighted we delivered strong top and bottom line financial results for the quarter and year.

Our core business across enterprise and mid market is healthy strong and growing rapidly.

During the fiscal year, we grew new business in excess of 60%.

Which we define as new recurring revenue from new customer logos and add on transactions.

We also continued to deliver strong margins and cash flows.

Our free cash flow margin for both fiscal 'twenty, two and fiscal 'twenty, one was 21%.

We also delivered 12% non-GAAP operating margins for the year.

As we look ahead to fiscal 'twenty, three and beyond we have a large total addressable market the market leading solution.

Broad portfolio of levers to drive rapid growth.

With the year well underway, we are excited about our business and our future.

With that let's discuss our Q4 and fiscal 'twenty two results.

Calculated billings for Q4 were $318 million a year over year increase organic increase of 25%.

After backing out the $15 million of one time opening deferred revenue from the Lama after acquisition.

Total revenue for the quarter was $193 million.

And subscription revenue was $173 million up 28% year over year.

Okay.

non-GAAP gross margin was 75%.

In the range of our midterm target of 74% to 75%.

Q4, non-GAAP operating income was $28 million or 14% of total revenue and non-GAAP net income was $14 million.

Or <unk> 19 per share.

On approximately 77 million diluted shares.

Okay.

Q4, operating cash flows were $64 million and adjusted free cash flows were $61 million.

Cash at quarter end was $729 million.

An increase of $62 million from last quarter.

For fiscal 'twenty to calculated billings were $855 million, an increase of 33% versus the prior year.

Total revenue was $725 million, an increase of 34% versus last year.

And subscription revenue was $634 up 35% from last year.

non-GAAP gross margin was 72% for the year non-GAAP operating income was $89 million.

Or 12% of total revenue.

non-GAAP net income was $63 million or <unk> 83 per share on approximately 76 million diluted shares.

Fiscal 'twenty to operating cash flows were $168 million.

<unk> to $78 million last year and.

And adjusted free cash flows were $156 million.

Compared to $114 million last year.

In fiscal 'twenty, two we delivered rule of 40 result of 55%.

We continue to demonstrate our ability to drive rapid growth with strong cash flows.

As a reminder, we define rule of 40 as the trailing 12 month revenue growth rate plus the trailing 12 months adjusted free cash flow margin.

Growth in our core business is healthy and strong let me share a few key data points.

For fiscal 'twenty, two as we noted new business grew more than 60% compared to fiscal 'twenty one.

The number of customers with annualized subscription revenue greater than $100000 was 1370 at the end of the year.

Compared to 1082, a year ago, an increase of 27%.

Also we ended the year with $1 3 billion and total RPM of 35% increase over last year.

Of that current <unk> growth was approximately 33%.

Compared to a year ago.

Our robust <unk> growth metrics are illustrative of the strength in our core business and new business growth.

We continue to see robust engagement in partnership with enterprise sized customers and prospects coming out of Covid and our deal sizes continue to increase.

We also continue to be increasingly excited about our mid market business, which represents about 40% of our total addressable market and has been growing rapidly the last two years.

With that let's now turn to guidance.

Let me start by sharing a few key items of note that should be considered with our guidance first.

As we head into fiscal 'twenty, three with strong new business momentum in our largest pipeline ever we plan to continue investing across our business to drive increased topline growth in fiscal 'twenty four and beyond.

non-GAAP sales and marketing expense as a percentage of revenue.

Was 32% for Q4 and 31% for fiscal 'twenty to <unk>.

Compared to our midterm target range of 36% to 38%.

Our strong sales efficiency metrics and the overall leverage and scale and our agile financial model give us degrees of freedom to invest for growth, while continuing to deliver strong margins and cash flows.

Net.

We believe the revenue metric that investors should focus on is subscription revenue when we acquired Lama saw five quarters ago professional services and other revenue spike.

<unk> historically perform their own customer deployment and generated a significant amount of license revenue associated with our legacy products.

We are primarily focused on the subscription aspect of the business.

And we are also continuing to enable our GSI partners to perform supply chain deployments and alignment with our partner led model, which is a key element of our strategy.

Therefore by design and in keeping with our stated intent professional services and other revenue will continue to decrease as a percentage of total revenue.

With that I'll now share guidance for Q1 and fiscal 'twenty three.

For Q1, we expect subscription revenues of between 171 and $173 million.

And professional services and other revenue of approximately $18 million.

Yielding a total revenue expectation of between 189 and $191 million for Q1.

Note that we recognize subscription revenue using the daily method.

Q1 has three fewer days than Q4, which represents approximately $6 million in impact for Q1.

This impact is incorporated in our Q1 guidance.

We expect Q1 calculated billings of $175 million.

Moving down the income statement.

We expect non-GAAP gross margin of approximately 71% lower than Q4 in part due to the $6 million impact of having three fewer days in the quarter.

We expect non-GAAP operating income of $6 million to $8 million and non-GAAP net income of $3 million to $5 million, resulting in non-GAAP net income per share of $3 <unk>.

On approximately $86 5 million diluted shares for the quarter.

Now with regards to the share count.

Please note that compare to Q4, the significant increase in the number of diluted shares used to calculate non-GAAP EPS is driven by the adoption of a new accounting standard which requires a new methodology for calculating dilution associated with our convertible notes.

Until now we were previously using the Treasury stock method.

Pursuant to the new pronouncement will be using the if converted method.

This is purely a go forward accounting change.

We expect Q1 adjusted free cash flows of approximately $15 million coming off of strong collections finished we had in Q4.

From a cost perspective for Q1 keep in mind that we will be hosting our in person inspire conference in April in Las Vegas are first in three years.

This will increase opex on a year over year basis for Q1 and also for the year as we return to hosting customers prospects and partners in our offices and our colleagues to begin to travel more frequently for business.

Now, let's move on to the full year fiscal 'twenty three guidance.

We expect subscription revenue of between 756% to $760 million.

This guidance represents a 20% increase in subscription revenue for fiscal 'twenty three.

We also expect professional services and other revenue of approximately $80 million or 10% of total revenue.

Does it feel as expected total revenue between 836 and $840 million for fiscal 'twenty three.

As we continue to invest in our business to drive growth, we expect our non-GAAP gross margin for the year of approximately 71%.

And non-GAAP operating income for the year of 25% to $29 million.

<unk> and non-GAAP net income per share of 15% to 19.

On approximately 88 million weighted average diluted shares.

That concludes our prepared remarks, we'd now be happy to take your questions operator.

Thank you Mr. Ladies and gentlemen, if you have a question. Please press star one on your <unk>.

Touchtone telephone.

First question comes from the line of Gabriela Borges from Goldman Sachs. Your line is now open.

Good afternoon. Thanks for taking my question either for soft Rob on for Tony help us understand the disconnect that were seeing in terms of the strong pipeline and the commentary that you gave on the core business being healthy.

It looks to be.

These toleration in organic growth for fiscal year 'twenty three so maybe just a little bit of color on what youre seeing on the brown in terms of additional transformation and competition. Thank you.

Sure Gary Heller. Thanks, Thanks for the question so when we look at new business.

That in.

Let's say the Covid year.

From the Covid year to last year grew in excess of 60%.

So we feel like we have a really strong core business, particularly as it pertains to subscriptions themselves, we see more and more customers adding on.

Subscriptions at higher price points.

Around the world. So we feel really good about that when we look at the pipeline we have the largest pipeline we've ever had.

As we go into as we go through the year, having said that there's obviously plenty of uncertainty out there and we really pride ourselves on saying something and delivering on it and we're not going to change that that approach, but generally we feel really good about the health of the business and all the vectors that I shared.

Thank you for the color.

Excellent excellent on our Q is Ryan will then show from Barclays. Your line is now open.

Hey, Thank you.

Chris for you told me that if you if you think about the strong growth you saw in ERP.

<unk> et cetera, and then also thinking a little bit about the guidance like can you talk a little bit about your guidance philosophy, changing because it's becoming more and more mature company now is there something maybe that we should be aware of.

In terms of like how we should think about your approach to guidance going forward and then I have a follow up for Rob.

Sure. Thanks Raimo.

Yes.

As Rob noted an hour certainly bullish about accelerating overall revenue and calculated billings growth in fiscal 'twenty four and beyond.

Subscription revenue guidance for this year it was a few points lower than our pre COVID-19 guides.

And we reiterate confidence in mid twenties organic billings growth near term code. It had an impact on our enterprise business, but as we mentioned earlier new business last year grew very strong in the mid market business is growing rapidly even through Covid. We have many vectors for growth. This is why we're continuing to make.

Investments in sales and marketing and really across the business to capitalize on our opportunity that were seeing.

But also we will continue to be responsible with our investments for profitable we have a strong balance sheet. We have a strong margin profile and we're in line for our midterm targets.

With regards to.

Guidance philosophy naturally as we grow we have more data to sharpen our forecast.

Additionally, fine tune our guidance based on the data that we have but there's really no overall major change in our philosophy.

Okay. Thank you.

Robert can you talk.

In the past you talked a lot about Cooper.

Yeah.

What I hear from the field is still kind of there's a lot of momentum there can you just speak to that.

Okay. Thanks for me, yes, sure Raimo.

The encouraging data points, we thought it would be worthwhile to share with the group is just the total payment volume that we're seeing it's one thing to sell an offering it's only going to get it implemented and see it really start to take off in the attach rates continue to be incredibly strong.

And then 30% overall in mid market well over 50% we began pay.

Kind of in the mid market and moving up and the.

The total payment volume exceeding 10 billion, so and largely largely through ACTH digital payments, but that's that's just fine for us we're seeing customers using it across a whole host of different.

Methods and the other thing I think worth mentioning is just ecosystem continues to grow we added HSBC <unk> Air plus build trust as partners. So we're seeing this footprint really start to take off and.

It's measured thoughtful growth, but it's still very very early in the trajectory of because the pay no doubt.

Okay. Thank you.

Next one on the line is Brian Peterson from Raymond James Your line is now open.

Hi, gentlemen, thanks for taking the question. So first off we saw the margins come in nicely above expectations this quarter last quarter.

It looks like the guidance is maybe a little bit lower than we had modeled but I'd be curious how did the hiring trends compare.

Last year versus what you're expecting in fiscal year 'twenty, three any way to kind of stack order rank some of the investment priorities for next year.

It seems like there's two components of that question, Brian . So so in terms of hiring continues to be measured thoughtful. There is obviously a major game of let's call musical chairs that's happening in the in the world at the moment and we're using that as an opportunity.

Track.

The very best talent, that's going to be with us for the longer term.

As we build up our team and that goes across all departments from sales marketing services.

I'll, let Tony.

On the margins point, thanks, Bryan so with regards to gross margins.

First as I noted in my prepared remarks for Q1, we had the impact of three fewer days, which reduces the steady state subscription revenue by $6 million. We have this every year.

You look at the full year, we delivered 72% gross margins for fiscal 'twenty two.

Given the agility and resilience resiliency of our P&L, we're giving ourselves degrees of freedom to invest for accelerated growth in fiscal 'twenty four and beyond.

Of course, we update our models each quarter and we have levers that we can push and pull on depending on the progress we're seeing from our investments, but that's really the logic there.

Alright, again, if you would like to ask a question. Please press star one and please limit yourself to only one question. Thanks, one on the Q is Alex Zukin from Wolfe Research. Your line is now open.

Hey, guys. Thanks for taking the question. So I guess I think the disconnect here is that we are.

Hearing some really positive momentum around new business growth we're seeing.

Some solid billings numbers.

In the quarter and I think everybody is trying to figure out is there something in the retention dynamics of the core business that we just didn't account for that.

It's getting level set is there a higher degree of conservatism that we need to account for it because.

There's kind of some.

We're all trying to figure out the guide and I think for the margins you talked about clearly this is an investment year clearly theres, a reopening impact to the expense profile and you talked about accelerating growth in fiscal 'twenty four.

<unk> has the potential to come from this investment but is there also kind of a commitment that we're this is trough.

<unk> from a margin perspective, and we will start to meaningfully go up from here.

Thanks for the question Alex This is Tony.

So yes, you are right I mean, if you look at our numbers our total RPM numbers, new business growth really what that illustrates I think is core Cooper new business subscription deals have performed very strongly in this last year on top of that Rob laid out all the different vectors for growth that we're focused.

As we go into next year.

There is certainly is not any issue with retention rate our gross renewal rate was still in that range of 94% to 96% and our dollar based expansion was a little bit north of the 110 to 112 range.

I think really.

A dynamic here, where in the Europe Covid in calendar 'twenty and fiscal 'twenty, one, especially in the enterprise it was a difficult year right.

And when you when youre going along with the totality of the installed base and the run rate of calculated billings and revenue and a larger and larger size. When you have a year like the assets a bit depressed because of the circumstances. It takes multiple years of outsized.

New business growth in order to kind of recover and get back onto the original track right. In fact earlier today, we did a little bit of a mass proof on the whole thing and I think it makes a lot of sense. So we also saw that with some other companies looking back historically as we have done our homework.

Like around the 2008 financial crisis. So certainly we're focused on investing in our business and our margin profile and cash flow profile is very very durable and strong.

It takes a couple of years to come out of the come out of that year that we had.

And I think ultimately to us.

That's the story.

Excellent on acute is Brad sills from Bofa Securities. Your line is now open.

Oh, great. Thanks for taking my question.

Wanted to ask Rob Youre thoughts on reopening and what impact that might have on the business is that something that you feel could be a positive tailwind for the PSM category as employees get back to the office a key use case for procurement.

As to purchase <unk>.

<unk> computer equipment furniture et cetera for employees that are in the office potentially.

Just curious to get your thoughts on as we get into reopening what impact that might have on the business. Thank you sure sure. Thanks, Brad I think the answer is yes, I don't think it's as much about the office supplies in those categories and the three three trillion dollars in spend volume.

Auto suppliers and one that represents a relatively small portion, but overall control of spend in office.

A demand perspective is something we are looking forward to I would also say in.

On.

Feet on the street perspective, right, so being able to close some of our larger transformational deals in the enterprise does in fact call for shaking real hands in arriving at relocations and Havent communications around how to set up centers of excellence in how to deploy best practices solutions. We think it's also going to help us continue to scale R. R.

Our mid market business.

We're putting the right we believe the right sales capacity in place against this.

Post COVID-19 .

Kind of re platforming that we're anticipating and we're also pushing for a tipping point in the overall category awareness of business spend management.

To the earlier question of people that we're hiring.

This last quarter, a significant amount of people came to us because they've heard of the category and us being a leader in the category. So we're working towards that one as well and Thats of course not to mention the.

Armies of systems integrators that we want to continue working with on the ground.

To get larger scale deployments and our overall.

Assessments are evaluations of such the planets back back on the ground. So.

Both push and pull we anticipate some positive things happening from the reopening.

Alright next one on the line is Michael <unk> from Wells Fargo. Your line is now open.

Hey, there. Thanks. Good afternoon. Thanks for taking the question you pressed pause on M&A, given the size and scale of Lama soft, but having now lapped that transit transaction with valuations more broadly coming back across the technology could you maybe refresh for us what your overall approach to M&A looks like and maybe some of the things you look for an <unk>.

<unk> areas to expand into thank you.

Yeah sure and I'll. Thank you for that question our acquisition M&A strategy really remains very much the same.

Always looking at options for power applications or components of functionality that will broaden or deepen the platform and get more about help our customers get more value out of their trillions of dollars in spend.

And we will always consider the right opportunities that meet our filter of culture technology domain expertise criteria. The strategy. The state of strategy has always been to increase this share of the the CFO his wallet and individuals that just doesn't have a primary platform.

Manage all of their off their business spend.

Designing and planning solutions around that so that's very much the same strategy and we continue to monitor the marketplace for the right types of things, we can consider as we build out the business.

Thanks, one on the line is bad Chipotle from William Blair. Your line is now open.

Alright, Thank you and good afternoon, and a follow up question on <unk>. It seems like Youre, having a lot of success in the mid market.

With Cooper pay over 50% attach rate.

I Wonder if you could give us a little color on the growth of Cooper pay.

Maybe as it relates to bid market.

It seems that that.

Mid market could be a lot more profitable than enterprise for Cooper and selling Cooper pay.

Directly I'm not sure how often youre selling it with a number of other products, but is there an opportunity to accelerate the growth of Cooper pay in the mid market by going more direct and more focused on.

Distribution in that channel.

Sure. Thank you for the question I think there is an opportunity both both accelerating.

The adoption of Cooper pay a mid market, while simultaneously continuing to go upmarket with the solution.

Along with offering more capabilities around Cooper pay we have a pretty robust roadmap with Cooper pay to really be the payment hub for organizations for all key categories of their off their expenditures that they need to pay for so very similarly to many of the modules we've built over the last.

Decade, plus we begin in mid market and we continue to stretch and pull the application based on customer requirements building 80, 20 highly user centric capabilities leveraging all three waves of our strategy.

Have them integrate all of the other apps as well as unlock community value and we think we have plenty of different vectors of growth around pay with that spirit and approach.

Next question comes from the line of Terry Tillman from truly Securities. Your line is now open.

For taking my question.

In terms of the softer 2000, our FY 'twenty three sub revenue growth youre talking about growth, maybe accelerating into FY 'twenty four can you frame what kind of step up in growth there would be potentially or just any kind of guideposts and if you think about the second part of that question is what are some of the areas, where you could see more lively or grow.

Upside as we move out into the next year is it international mid market Cooper pay kind of emerging products et cetera, just if you could help frame that thank you.

Sure.

<unk>.

Let me answer it this way we've tried to do in building. This business has created a wide wide portfolio of growth vectors. So it's very difficult to predict whether it'll be geographic whether it will be.

Category, whether it'll be product, whether it will be.

Net new customers add on within existing customers, but with this portfolio effect we are.

Significantly shoring up the opportunity set to maximize the resolved right and then looking at whatever the time interval. It is whether it's fiscal 'twenty four 'twenty five or any given quarter any one of those vectors can be the contributor to help us in the continued reacceleration.

As we move our way past COVID-19 and into.

The growth years that we're anticipating yes, let me answer the first part of your question. So nothing's really changed for us from our commentary from last quarter last quarter. We stated that we're confident in mid twenties organic calculated billings growth in the near term and we'd reiterate that.

As for guidance, we strive to execute and achieve a beat and raise each quarter, it's a little bit tough to know with all the things going on in the world.

That is quite an terminal moel at this time.

Bullish about accelerating our growth with the investments, we're making subscription revenue guidance, we talked about services and other guidance and why that is trending downward. If you look at the total but the core of this business is subscription.

Subscription revenue guidance for fiscal 'twenty, three is a few points lower than our typical pre COVID-19 guidance.

So you take all those things into consideration and then on kind of shaping up the year, we would expect for the most part typical seasonality for the year Q1, Q3, a little bit lighter Q2 larger in Q4 is really the biggest quarter for all enterprise software companies and the notion of getting back to work quote unquote increased business travel as the year.

Progresses.

It become an incremental tailwind for the back half of the year and we'll keep you updated on that on a quarter by quarter basis.

Next question comes from the line of Ryan Macdonald from Needham. Your line is now open.

And thanks for taking my question I wanted to dig deeper into the largest pipeline ever commentary, maybe you can parse out sort of what youre seeing in terms of mix between late stage and early stage pipeline and then how do you think the return of inspire being in person can help unlock more pipeline or help maybe accelerate the conversion of that.

That large pipeline into <unk>. Thanks.

Thanks, Ryan it's really thoughtful question. Its still is the largest overall pipeline that we've ever had and particularly interesting when you look at the Q4 pull in.

Tens and tens of millions of volume and.

Subscription revenue, we closed just in Q in Q4.

We're seeing stronger increased customer and prospect engagement on our calls our actions online and we're seeing what we believe is a certainly a lease instead of gravitational pull as it pertains to us and our category winner in business spend management and without making a direct prediction I would certainly like to see.

<unk> conference, where we anticipate a reasonable amount of folks coming out of.

Of Covid and wanting to be together across all areas.

From procurement to treasury to supply chain to so all the other areas, we support coming together.

To help move that pipeline from early stage, all the way through to pre close and close so I think it bodes well for us.

You're right I can't wait for the conference.

Welcome everyone on the line to join Us in Las Vegas.

Next question comes from the line of Steve Koenig from SMB.

Your line is now open.

Hi, gentlemen, thanks for taking my question.

Rob I'm wondering.

How you might think about in terms of what youre seeing.

How inflation is affecting the customer imperatives for back office investments and particularly the procure to pay investments either positive or negative kind of what are the puts and takes here as you talk to customers. Thanks very much.

Yes. Thank you for that question I honestly can't point to anything as I, often say statistically significant as it pertains to that.

<unk>.

When I think back to the fourth quarter and the momentum and interactions we had in our deal closes they were all oriented toward helping companies get back to controlling their spend maximizing every dollar spent resiliency sustainability older key initiatives and how we map to that.

Inflation is obviously a factor for all of us.

But I can't say that there was anything significant that came up.

In the dozens of interactions ahead.

That would be worth calling out here.

Okay. Thanks, Rob.

Next one on acute as Brent <unk> from Piper Sandler Your line is now open.

Good afternoon, and thanks for taking the question here I wanted to zoom out a little bit on the subscription growth outlook I think the five year averages 40% two year average is 35% youre guiding to 23% in Q1 and the full year guide it implies further moderate moderation to 20%.

The closed environment shifted in the last two weeks post post Ukraine I ask this because gartner is actually forecasting the supply chain management software industry to actually accelerate this year versus your guidance of a further slowdown so just trying to understand.

What's changed.

And how we should think about those levers to driving acceleration.

Sure. Thanks for the question Brian So.

First of all I would say nothing has changed I mean, if you look at our subscription revenue guidance for Q1, it's actually in the 19% to 20% range right and Thats consistent with 20% for the year on top of that you layer on the fact that it's tough for us to predict the future, especially as especially in a tumultuous.

<unk> World that we're in.

We historically model to try to achieve a beat and raise.

We were talking last quarter about mid 'twenty organic calculated billings growth and obviously calculated billings comes in advance of revenue so consistent for Q1 and the year.

In our model hasn't changed our approach hasn't changed.

And I think with supply chain.

We're well along the path of our stated kind of integration timelines that we discussed I mean.

Certainly in the near term when you consider for total revenue for.

Professional services going down or going to partners, our GSI partners to keep out of our strategy, we're being very successful in.

In converting licensees contract to SaaS contracts.

That's certainly a part of the near term.

The impact on revenue and billings that we're building into our model and on top of that as I called out earlier. It takes several years of outsized new business performance to get the overall calculated billings and revenue growth back on track because of the dip here in <unk>, but that doesn't take away from the fact that at the tip of the spear. This last year, we saw really robust new business growth.

Thanks, one on the line is Peter Levine from Evercore. Your line is now open.

Alright, thanks for taking my questions.

Concern for investors as it relates to software at the risk of a deteriorating economic downturn.

In Europe due to the geopolitical environment, Unfortunately to yourselves and so I think international makes up 40% of your business can you dissect that further to let us know what your exposure is to EMEA.

Europe , specifically and what kind of assumptions are baked into the guide we're looking at your European segment longer sales cycle sales assumptions churn any color would be great. Thanks.

Thanks, Peter I mean, I think the first thing I'd point out is that.

As long as the businesses are continuing on with our endeavor to succeed in their business they need maybe to follow and that's first and foremost and we're.

We're seeing incredible engagement from customers large and small across the world.

In and of itself EMEA is about 25% of our business and then rest of world gets us up into that 40% range.

On the margin I think.

There might be a bit.

Bit more sensitivity to COVID-19 and to the ongoing situation of course.

In the eastern part of Europe , right, now, but nothing meaningful from a pipeline perspective, a customer interaction perspective, so all of our best estimates on the impact of these items are baked into our guidance but.

We don't foresee a meaningful impact now that could change of course, depending on what happens in the world but.

From where we sit now we feel pretty good about that.

Next question comes from the line of CD plenty Cry from Mizuho. Your line is now open.

Thanks for taking my question I, just wanted to ask about landmass of transitioning from on Prem to.

SaaS, what sort of trained you have seen in terms of customer churn or anything.

Any color.

Sure. Thanks for the question.

Obviously, we're in the process of converting customers from term licenses to SaaS upon renewal and had great success with that.

In fact, the majority of these term licenses have converted.

SaaS and customers are beginning to really understand the value proposition of an integrated business spend management offering now theres a lot of work that goes into making this a special as we want to make it we have now it's truly extensible cloud offering in the market. We're building on top of this common data model.

That supports a wide range of use cases.

'twenty type applications that we can go to market with overcoming years. They can really unlock the power of SaaS in the area of supply chain design and planning there is a largely a services based market. That's dying for an 80 20 solution to address the needs of the masses and at the same time, we're training consultants on developing best practices around.

Our supply chain design and planning approach.

I mentioned in my prepared remarks, as well, we're looking to integrate that solution into our supplier risk area in my mind, most importantly, unlocking the power of community.

As it pertains to the supply chain design, so folks can be smarter and smarter about the way they plan their agile supply chains in real time to maximize dollars and maximize efficiency and fulfill demand that they have for their own customers in the marketplace. So very early and the trajectory here, but we feel like we're in a really good spot.

With the offering we have and the approach that we're taking.

Alright at this time there are no further questions. This concludes the conference for today, we do thank you all for joining US you may now disconnect.

Yes.

Okay.

Thank you.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Thanks Charles.

Okay.

Yes.

Okay.

[music].

Good day, ladies and gentlemen, and welcome to the Cooper software fourth quarter fiscal year 2022 earnings release Conference call. At this time, all participants are in a listen only mode.

At the conclusion of our prepared remarks, we will conduct a question and answer session. If you would like to ask a question you May press star one on your Touchtone Fad at any time, if anyone should require assistance during the conference. Please press star zero on your Touchtone pad at any time.

A reminder, this call is being recorded.

I would like to introduce your host for today's conference call.

Steven Horwitz VP of Investor Relations. Mr. Harris, you May begin your conference.

Thank you very much good afternoon, and welcome to <unk> Software's fourth quarter and year end conference call. Joining me today are Rob <unk> CEO and Tony just wondering our CFO . Our remarks today include forward looking statements about guidance and future results of operations strategies market size products competitive position and potential growth opportunities. Our actual results may be materially different.

Included in today's earnings release, which you can find on our Investor Relations website. A replay of this call will also be available unless otherwise stated growth comparisons are against the same period of the prior year with that I will now turn the call over to Rob.

Stephen welcome everyone.

Before I share our business results for the quarter, Let me first convey how saddened we all are by what's happening in Ukraine and throughout the region.

Our hearts are with everyone impacted by this crisis and we hope for a speedy resolution and certainly for peace.

Our business is very limited direct exposure in the region.

Nonetheless, we are first and foremost focused on supporting the safety and wellbeing of the small team of contractors would you have there. We're also working with our customers that have suppliers in Ukraine, Russia, and Belarus to reroute supply basis to keep business moving forward as fast as possible.

Obviously, none of US know how long this conflict will last but we all know the humanitarian crisis, there will be with us for a long time to come.

Because of this we're matching employee contributions to appropriate global humanitarian organizations, and we're making a sizable donation to the international committee of the Red Cross.

We need to look for ways to do more both in terms of financial support and through various avenues across our global Cooper community.

No.

We also achieved record adjusted free cash flows of 61 million for Q4 and $156 million for fiscal 2022.

Looking back at fiscal 'twenty, two our core business is healthy and strong and our new business grew more than 60% compared to fiscal 'twenty one.

New business I'm, referring to recurring revenue from new logos and add ons and new add ons from existing customers.

Our fully cloud highly scalable core transactional platform is unmatched in the market will continue to capitalize upon our market leadership position to create a platform the likes of which has never existed in our industry. This is exactly how it is now not how it might be.

Before I dive further into our business updates, let me take a moment to expand on the opportunity. We believe lies ahead we.

We have a massive total addressable market.

We have a clear vision and strategy, we have a history of successful execution and finally, we have a rich portfolio of untapped growth vectors that we're maniacally focused on addressing let.

Let me lay them out for you.

First is our enterprise business many of the largest companies in the world have partnered with Cooper and are seeing incredible success, we have.

Strong retention rates, we have an incredibly rich library of customer advocacy and we frequently see business leaders, who have used Cooper and then bring cooper to their new employers when they change companies.

Next we have a mid market segment tens of thousands of mid market companies around the globe are in the process of taking their first steps into the world of digital transformation, we're seeing meaningful growth in our mid market business over the last few years and with less than 2000 mid market customers and our community. Thus far we're in the very.

Early stages of penetration in this segment.

Another exciting growth area is geographic and sector expansion, we're already have a strong presence in the U S and in Europe to build on our presence we have been meaningfully investing in Latin America, and Asia Pacific and are starting to see some early success and momentum in these regions. We have also been investing in the public sector, which we estimate has tremendous ups.

And it is also in its early stages.

And there are many other expansion opportunities across our broad business spend management platform as.

On the very early stages in their respective journeys.

We anticipate all of these sectors to be accelerators for our long term growth rate.

Now, while we can't predict the future we have deep conviction in our value proposition and is growing need in the marketplace.

Therefore, coming off fiscal 'twenty, two where we saw greater than 60% new business growth, we plan to invest assertively this year to capitalize on our opportunity to win and all in the market.

We intended for a fiscal 'twenty three investments to result in accelerated growth in fiscal 'twenty four and beyond.

Now.

Never has it been we continue executing on our path to becoming one of the world's best Enterprise cloud software companies by remaining focused on our vision areas as exemplified by the letters and the named Cooper.

C O Upa stands for a comprehensive open user centric prescriptive and accelerated in all aspects.

Let me share an example from each of our three ways.

For the first wave capturing all spend let me highlight Cooper peg with Cooper pay we are transforming the world of payments by delivering a fully unified solution that leverages. The Cooper business spend management platform to centralize and streamline payments for organizations, we continue to see strong customer growth momentum Q4.

It was yet another quarter, where the attach rate on new customer deals was meaningfully above 30%.

But mid market, specifically, the Q4 attach rate was well over 50%.

Though we are still in the early stages of the Cooper pay trajectory, we laid out that we laid out at our analyst day, we're starting to see noticeable increases.

And our total payment volume or PPV.

Being processed through our payments hub.

As more and more customers go live.

We expect our cumulative TPB, which includes <unk> wires and virtual card usage eclipsed $10 billion in the first quarter in fiscal 'twenty, two TPB grew more than four X compared to fiscal 'twenty one.

Relative to our spend under management levels numbers. These TPB figures are still very modest and the fiscal 'twenty two growth is on a small basis.

This early traction is very encouraging we believe it shows the demand for our payment solutions and the need for organizations to make payments from the same single cloud instance that houses their supplier master record all their peers and all their invoices and expense reports.

These insights are then being used to execute sourcing events using the Cooper sourcing optimization solution.

This customer has a distribution centric business the margins are thin and every bit of savings accounts by using our supply chain and sourcing solutions in tandem theyre seeing clear optimization of their supply chain related quality as well as spend.

And other supply chain example is that of on semi a $6 billion semiconductor manufacturing company is using our supply chain solution to improve efficiency.

On semi reduce their supply chain decisions from about $2 five weeks. So just a few days, while also generating 10% to 15% improvement in capital efficiency and savings. This.

This reminds me of a story of key it told at our Accenture of that last summer by using <unk> platform to <unk>, the supply chain and sourcing teams to shorten the time it takes to make actionable decisions.

He was able to reduce their average decision, making time from five days all the way down to five minutes.

These are great examples of how having access to the right data to drive business decisions increases efficiency and reduces cost.

Spend optimization, our second wave in action.

Okay.

Our third wave is all about amplifying community value.

<unk> Dot AI combines the power of AI with human connections the key to unlocking business value.

With our cumulative spend under management now at more than three three trillion.

Real time spend data is being analyzed to prescribe ways for our customers to be more efficient profitable and sustainable.

Let me share some examples.

Jeff a pallet and container pooling company has used Cooper to help improve the efficiency of their supply chain, reducing cotr missions per unit of delivery by 33%.

The American Red Cross is using context aware prescriptions to increase spend with diverse suppliers, thus far by 37%.

Community got AI represents the third wave of our company strategy and is unlike anything ever contemplated at scale within the enterprise software industry. It truly unites businesses like never before to better discover decide and deliver success, making all of our customers smarter together.

To tie it all together, let me finally share a great example, that elegantly incorporates all three waves of our strategy simultaneously.

Look at Cooper travel and expense.

Historically companies have relied on cumbersome siloed travel tools that don't provide any real insight into their travel spend.

With our new traveling expense release last month, we have given our customers a user centric solution designed to maximize program adoption.

Our <unk> offering also incorporates our second wave of maximizing every dollar spent by delivering a unified program to a single BSM platform. The solution can be used to search for travel book, the travel and provide a seamless transactional experience with one click expense reports and credit card.

<unk> matching cut.

Customers can also ensure that best pricing to travel saver or by leveraging pre negotiated prices from Cooper advantage.

All of these capabilities are further enhanced through our third wave of amplifying through community Dot AI, where our customers can make smarter decisions with community powered insight.

Using spend coach customers are able to influence behavior by providing employees that book travel outside of Cooper insights into how much they could have saved by using the travel solution.

We're also changing the way employees think about travel with context aware suggestions.

Rather than searching for travel to JFK airport employees can input their final destination for example, Cooper's New York Office.

And Cooper will help prescriptive guide them to the optimal means of transportation to get there in line with their company policies.

With the power of insights driven by our global community Cooper delivers a radically different solution that transforms corporate travel to be simpler smarter and more sustainable.

To summarize our three wave strategy when working together solutions across all the waves yield exponential value for customers as each wave builds upon the other.

The value of the service we are delivering for our customers is totally different than anything that's ever been offered before in our industry.

Let me now share some updates on our federal business.

I'm pleased to announce that we recently became fed ramp authorized.

It is no easy task to complete the authorization process.

And are appreciative of the partnership we've had with our agency sponsor and customer the Federal Reserve system Board of Governors.

To share a few more highlights new customers in the federal and more broadly the public sector includes the department of energy and supply chain Management Center, and the Suffolk County in New York.

We're also proud to have the house of Representatives lives on the Cooper BSM platform with the members of the house and their staff now using coupons.

All of these highlights our share today help illustrate that Cooper is creating an opportunity for finance procurement and it leaders to be incrementally strategic and elevate their standing within their own organizations.

On that note, we couldnt be more excited about welcoming them and many others to our upcoming inspire conference, which will be in Las Vegas from April 3rd through April seven.

There the business spend management community will have the opportunity to share best share case studies interact brainstorm strategize and partner on driving valuable transformational change.

Due to the Covid pandemic this will be our first inspire conference in three years and our eight overall.

It will also be the first time that procure to pay supply chain Treasury and payments all part of the Cooper platform will be unified at the same conference.

We're excited to be welcoming three fantastic keynote speakers to the events in Las Vegas.

Barbara Corcoran to speak about innovation, John <unk> to discuss teamwork, and then Sylvester Stallone since virus.

We look forward to welcoming them.

Before I share our MVP Awards, let me provide you with an update on our supply chain design and planning integration with.

We continue to be excited by the significant value that we're bringing to our customers through this offering.

As I mentioned before oftentimes deals that don't currently include supply chain now are still being influenced by the fact that we have supply chain as part of our portfolio, especially for large enterprise deals.

It's been just over a year since we closed this acquisition and during this time, we've been largely focused on customer alignment and strategy converting existing on premise customers to SaaS arming partners with the expertise to deploy the solution.

Connecting the supply chain solution with our strategic sourcing solution and of course, integrating our people and processes.

As we look ahead, we plan to focus on integrating supply chain with our risk solutions and our community AI capabilities.

We're also working with our customers to unlock the value that our core PDP and our supply chain customers can achieve through suite synergy.

As we continue on pace along this timeline of integration for supply chain that we originally shared at the time of the acquisition. We are excited about our progress to date and most importantly, the clear growth opportunity, we see in the coming quarters and years.

Now, let's move on to this quarter's MVP Award winners, who best exemplify our values as voted by our colleagues across the world.

I'll begin with <unk>.

Who personifies, our first core value of ensuring customer success with.

<unk> leads by example, taken on issues outside of his direct responsibility, but necessary for our customer success.

<unk> outstanding leadership through the transition to Cooper treasury, enabling his team to grow and drive incremental success for our customers.

Nest and Tom Wall was recognized by minimizing our second core value focusing on results anthem is an absolute expert in finding and delivering the best solution. He has been an incredible asset to our customers and bringing together different departments and teams by applying his knowledge to improve processes and ensure customers get optimal.

<unk> from the changes apply.

BMO and United Airlines projects, Congratulations and thank you Ts and time and energy.

These mvpds are obviously just a few of the people that represent the immense talent throughout our organization.

It kicked off.

While it's still early.

Some of the indications we're seeing.

And just one month within our Cooper community warehouse and distribution services jumped 300% healthcare services climbed 189% manufacturing and industrial processing shipments increased 44%.

Again, these early data points, but they show a singular truth business spend is powerful and when we are United by the power spend we can drive tremendous change.

We will of course continue to look at these numbers and share them as we go forward.

In summary, we have what it takes to win this massive business that management market, we have a wide portfolio of rich growth vectors, many of which are very early in their journey.

We have a winning three wave strategy. Our vision is comprehensive open user centric prescriptive and accelerated in a way that has never been attempted let alone achieved in our industry and we're proud to have some of the most talented thoughtful professionals in the world as colleagues and partners with these pieces in place it's all about <unk>.

<unk>, our proven track record of execution and reaching new Heights.

With that let me hand, the call over to our CFO Tony <unk>.

Thank you, Rob and good afternoon, everyone.

As Rob highlighted we delivered strong top and bottom line financial results for the quarter and year.

Our core business across enterprise and mid market is healthy strong and growing rapidly.

During the fiscal year, we grew new business in excess of 60%.

Which we define as new recurring revenue from new customer logos and add on transactions.

We also continued to deliver strong margins and cash flows.

Our free cash flow margin for both fiscal 'twenty, two and fiscal 'twenty, one was 21%.

We also delivered 12% non-GAAP operating margins for the year.

As we look ahead to fiscal 'twenty, three and beyond we have a large total addressable market the market, leading solution and a broad portfolio of levers to drive rapid growth.

With the year well underway, we are excited about our business and our future.

With that let's discuss our Q4 and fiscal 'twenty two results.

Calculated billings for Q4 were $318 million a year over year increase organic increase of 25% after backing out the $15 million of one time opening deferred revenue from the <unk> acquisition.

Total revenue for the quarter was $193 million.

And subscription revenue was $173 million up 28% year over year.

non-GAAP gross margin was 75%.

In the range of our midterm target of 74% to 75%.

Q4, non-GAAP operating income was $28 million or 14% of total revenue and non-GAAP net income was $14 million.

Or <unk> 19 per share.

On approximately 77 million diluted shares.

Sure.

Q4, operating cash flows were $64 million and adjusted free cash flows were $61 million.

Cash at quarter end was $729 million, an increase of $62 million from last quarter.

For fiscal 'twenty to calculated billings were $855 million, an increase of 33% versus the prior year.

Total revenue was $725 million.

An increase of 34% versus last year.

And subscription revenue was $634 up 35% from last year.

non-GAAP gross margin was 72% for the year non-GAAP operating income was $89 million or.

Or 12% of total revenue.

And non-GAAP net income was $63 million or <unk> 83 per share on approximately 76 million diluted shares.

Fiscal 'twenty to operating cash flows were $168 million.

Compared to $78 million last year.

And adjusted free cash flows were $156 million compared.

Compared to $114 million last year.

In fiscal 'twenty, two we delivered rule of 40 result of 55%.

We continue to demonstrate our ability to drive rapid growth with strong cash flows.

As a reminder, we define the rule of 40 as the trailing 12 month revenue growth rate plus the trailing 12 months adjusted free cash flow margin.

Growth in our core business is healthy and strong let me share a few key data points.

For fiscal 'twenty, two as we noted new business grew more than 60% compared to fiscal 'twenty one.

The number of customers with annualized subscription revenue greater than $100000 was 1370 at the end of the year.

Compared to 1082, a year ago, an increase of 27%.

Also we ended the year with $1 3 billion and total RPM of 35% increase over last year.

Of that current <unk> growth was approximately 33%.

Compared to a year ago.

Our robust <unk> growth metrics are illustrative of the strength in our core business and new business growth.

We continue to see robust engagement in partnership with enterprise sized customers and prospects coming out of Covid and our deal sizes continue to increase.

We also continue to be increasingly excited about our mid market business, which represents about 40% of our total addressable market and has been growing rapidly the last two years.

With that let's now turn to guidance.

Let me start by sharing a few key items of note that should be considered with our guidance first.

non-GAAP sales and marketing expense as a percentage of revenue.

Was 32% for Q4 and 31% for fiscal 'twenty two.

Compared to our midterm target range of 36% to 38%.

<unk>.

We believe the revenue metrics that investors should focus on is subscription revenue when we acquired Lama five quarters ago professional services and other revenue spike.

<unk> historically perform their own customer deployments and generated a significant amount of license revenue associated with our legacy products.

We are primarily focused on the subscription aspect of the business.

And we are also continuing to enable our GSI partners to perform supply chain deployments and alignment with our partner led model, which was a key element of our strategy.

Therefore by design and in keeping with our stated intent professional services and other revenue will continue to decrease as a percentage of total revenue.

With that I'll now share guidance for Q1 and fiscal 'twenty three.

For Q1, we expect subscription revenues of between 171 and $173 million.

And professional services and other revenue of approximately $18 million.

Yielding a total revenue expectation of between 189 and $191 million for Q1.

Note that we recognize subscription revenue using the daily method Q.

Q1 has three fewer days than Q4, which represents approximately $6 million and impact for Q1.

This impact is incorporated in our Q1 guidance.

We expect Q1 calculated billings of $175 million.

Moving down the income statement.

We expect non-GAAP gross margin of approximately 71% lower than Q4 in part due to the $6 million impact of having three fewer days in the quarter.

We expect non-GAAP operating income of $6 8 million and non-GAAP net income of $3 million to $5 million.

Resulting in non-GAAP net income per share of $3 <unk>.

On approximately $86 5 million diluted shares in the quarter.

Now with regards to the share count please.

Please note that compared to Q4, the significant increase in the number of diluted shares used to calculate non-GAAP EPS is driven by the adoption of a new accounting standard which requires a new methodology for calculating dilution associated with our convertible notes.

Until now we were previously using the Treasury stock method.

Pursuant to the new pronouncement will be using the if converted method.

This is purely a go forward accounting change.

We expect Q1 adjusted free cash flows of approximately $15 million.

Coming off a strong collections finished we had in Q4.

From a cost perspective for Q1 keep in mind that we will be hosting our in person inspire conference in April in Las Vegas are first in three years.

This will increase opex on a year over year basis for Q1 and also for the year as we returned to hosting customers prospects and partners in our offices and our colleagues begin to travel more frequently for business.

Now, let's move on to the full year fiscal 'twenty three guidance.

We expect subscription revenue of between 756% to $760 million.

This guidance represents a 20% increase in subscription revenue for fiscal 'twenty three.

We also expect professional services and other revenue of approximately $80 million or 10% of total revenue.

As expected total revenue of between 836 and $840 million for fiscal 'twenty three.

As we continue to invest in our business to drive growth, we expect our non-GAAP gross margin for the year of approximately 71%.

And non-GAAP operating income for the year of $25 to $29 million.

<unk> and non-GAAP net income per share of 15% to 19 on.

On approximately 88 million weighted average diluted shares.

That concludes our prepared remarks, we'd now be happy to take your questions operator.

Thank you Mr forward, ladies and gentlemen, if you have a question. Please press star one on your <unk>.

Such stone telephone.

First question comes from the line of Gabriela Borges from Goldman Sachs. Your line is now open.

Good afternoon. Thanks for taking my question either for a soft Rob off of Tony help us understand the disconnect that were seeing in terms of the strong pipeline and the commentary that you gave on the core business being healthy versus what looks to be <unk>.

Deceleration in organic growth for fiscal year 'twenty three so maybe just a little bit of color on what you're seeing on the ground in terms of additional transformation and competition. Thank you.

Sure Gary Heller. Thanks, Thanks for the question so when we look at new business.

That in.

Let's say the Covid year.

From the Covid year to last year grew in excess of 60%.

So we feel like we have a really strong core business, particularly as it pertains to subscriptions themselves, we see more and more customers adding on.

Subscriptions at higher price points.

Around the world. So we feel really good about that when we look at pipeline, we have the largest pipeline we've ever had as.

As we go into as we go into the year, having said that there's obviously plenty of uncertainty out there and we really pride ourselves on saying something and delivering on it and we're not going to change that that approach, but generally we feel really good about the health of the business and all the vectors that I shared.

Thank you for the color.

Excellent excellent on our Q is Ryan <unk> from Barclays. Your line is now open.

Hey, Thank you.

Chris for you Tony if you if you think about the strong growth you saw in.

The ERP.

Apio et cetera, and then also thinking a little bit about the guidance like can you talk a little bit about your guidance philosophy and changing the crazy, becoming more and more mature company now is there something maybe that we should be aware of.

In terms of like how we should think about.

Our approach to guidance going forward and then I have a follow up for Rob.

Sure. Thanks Raimo so.

As Rob noted an hour certainly bullish about accelerating overall revenue and calculated billings growth in fiscal 'twenty four and beyond.

Subscription revenue guidance for for this year. It was a few points lower than our pre COVID-19 guys.

And we reiterated confidence in mid twenties organic billings growth near term Covid had an impact on our enterprise business, but as we mentioned earlier new business last year grew very strong in the mid market business is growing rapidly even through Covid. We have many vectors for growth. This is why we're continuing to me.

Investments in sales and marketing and really across the business to capitalize on our opportunity that were seeing.

But also we will continue to be responsible with our investments were profitable we have a strong balance sheet. We have a strong margin profile and we're in line for our midterm targets.

With regards to.

Guidance philosophy naturally as we grow we have more data to sharpen our forecast.

Distantly fine tune our guidance based on the data that we have but you know theres really no overall major change in our philosophy.

Okay. Thank you.

Robert can you talk like you know.

In the past you talked a lot about Cooper PE like.

What I hear from the field is still kind of there's a lot of momentum. There can you just speak to that a little bit.

Okay. Thanks for me, yes, sure Raimo.

Greater than 30% overall in mid market well over 50% we began pay.

Kind of in the mid market will be up and.

Total payment volume exceeding 10 billion, so and largely largely through ACTH digital payments, but that's that's just fine for US right, we're seeing customers using it across a whole host of different.

Methods and the other thing I think worth mentioning is just ecosystem continues to grow we added HSBC <unk> Airpods build trust as partners. So we're seeing this footprint really start to take off and.

It's measured thoughtful growth, but it's still very very early in the trajectory of because the pay no doubt.

Okay. Thank you.

Next one on the line is Brian Peterson from Raymond James Your line is now open.

Hi, gentlemen, thanks for taking my questions. So first off we saw the margins come in nicely above expectations this quarter last quarter.

It looks like the guidance is maybe a little bit lower than we had modeled I'd be curious how did the hiring trends compare.

Last year or versus what youre expecting in fiscal year 'twenty, three any way to kind of stack order rank some of the investment priorities for next year.

It seems like it's two components to that question, Brian . So so in terms of hiring continues to be measured thoughtful. There is obviously a major game of let's call. It musical chairs that's happening in the in the world at the moment and we're using that as an opportunity.

Track.

Very best talent, that's going to be with us for the longer term.

As we build up our team and that goes across all departments from sales marketing services.

I'll, let Tony.

On the margins point, thanks, Bryan so with regards to gross margins.

First as I noted in my prepared remarks for Q1, we had the impact of three fewer days, which reduces the steady state subscription revenue by $6 million. We have this every year.

You look at the full year, we delivered 72% gross margins for fiscal 'twenty two.

Given the agility and resilience resiliency of our P&L, we're giving ourselves degrees of freedom to invest for accelerated growth in fiscal 'twenty four and beyond.

Of course, we update our models each quarter and we have levers that we can push and pull on depending on the progress we're seeing from our investments, but that's really the logic there.

Hey, guys. Thanks for taking the question. So I guess I think the disconnect here is that we are.

Hearing some really positive momentum.

I'm around new business growth, we're seeing some solid billings numbers.

In the quarter and I think everybody is trying to figure out is there something in the retention dynamics of the core business that we just didn't account for that.

That's getting level set is there a higher degree of conservatism that we need to account for it because.

There's kind of some.

<unk> has the potential to come from this investment but is there also kind of a commitment that we're this draw from a margin perspective.

We'll start to meaningfully go up from here.

Thanks for the question Alex This is Tony.

So yes, you are right I mean, if you look at our numbers our total RVO numbers, new business growth really what that illustrates I think is core coupon new business subscription deals have performed very strongly in this last year on top of that Rob laid out all the different vectors for growth that we're focused.

On.

As we go into next year.

Theres, certainly theres not any issue with retention rate our gross renewal rate was still in that range of 94% to 96% and our dollar based expansion was a little bit north of the 110 to 112 range.

I think really the <unk>.

Dynamic here, where in the Europe Covid in calendar 'twenty and fiscal 'twenty one.

Especially in the enterprise it was a difficult year right and when you when youre going along with the totality of the installed base and the run rate of calculated billings and revenue a larger and larger size. When you have a year like the assets a bit depressed because of the circumstances. It takes multiple years of outsized.

New business growth in order to kind of recover and get back onto the original track rates. In fact earlier today, we did a little bit of a mass group on the whole thing and I think it makes a lot of sense. So we also saw that with some other companies looking back historically as we were doing our homework.

Around the 2008 financial crisis. So certainly we are focused on investing in our business and our margin profile and cash flow profile is very very durable and strong.

It takes a couple of years to come out of the come out of that this year that we had.

And I think ultimately that.

Thus the store.

Excellent on acute is Brad sills from Bofa Securities. Your line is now open.

Oh, great. Thanks for taking my question.

To purchase supplies computer equipment.

Furniture et cetera for employees that are in the office potentially.

Just curious to get your thoughts on as we get into reopening what impact that might have on the business. Thank you.

Sure. Thanks, Brad I think the answer is yes, I don't think it's as much about the office supplies in those categories and the three three trillion dollars in spend volume.

Office supplies and one that represents a relatively small portion, but overall control of spend in office.

A demand perspective is something we are looking forward to I would also say and then.

On.

Our mid market business.

We're putting the right we believe the right sales capacity in place against this.

Post COVID-19 .

Kind of re platforming that we're anticipating and we're also pushing for a tipping point in the overall category awareness of business spend management.

To the earlier question of people that we're hiring.

This last quarter, a significant amount of people came to us because they've heard of the category and us being a leader in the category. So we're working toward that typically one as well and Thats of course that Dave mentioned.

The armies of systems integrators that we want to continue working with on the ground.

To get larger scale deployments and our overall.

Assessments of our valuations of such the planets back back on the ground. So.

Both push and pull we anticipate some positive things happening from the reopening.

Alright next one on the line is Michael <unk> from Wells Fargo. Your line is now open.

Hey, there. Thanks. Good afternoon. Thanks for taking the question you pressed pause on M&A, given the size and scale of Lama soft, but having now lapped that transit transaction and with valuations more broadly coming back across the technology could you maybe refresh for us what your overall approach to M&A looks like and maybe some of the things you look for in <unk>.

<unk> areas to expand into thank you.

Sure now thank you for that question you know our acquisition M&A strategy really remains very much the same.

We're always looking at options for power applications or components of functionality that will broaden or deepen the platform and get more about help our customers get more value out of their trillions of dollars in spend and.

And we will always consider the right opportunities that meet our filter of culture technology domain expertise criteria. The strategy. The state of strategy has always been to increase this share of the CFO his wallet and individuals that just doesn't have a primary platform.

To manage all of their off their business better.

Dining and planning solutions around that so very much the same strategy and we continue to monitor the marketplace.

With the right types of things, we can consider as we build out the business.

Thanks, one on the line is bad Chipotle from William Blair. Your line is now open.

Alright, Thank you and good afternoon, and a follow up question on Cooper pay.

Looks like you are having a lot of success in the mid market.

With with Cooper pay over 50% attach rate.

I Wonder if you could give us a little color on the growth of Cooper pay.

Maybe as it relates to mid market.

It seems that that is.

Mid market could be a lot more profitable than enterprise for Cooper and selling Cooper pay.

Directly I'm not sure how often youre selling it with a number of other products, but is there an opportunity to accelerate the growth of Cooper pay in the mid market.

By going more direct and more focused on <unk>.

Distribution in that channel.

Sure and I'll. Thank you for the question I think there is an opportunity in both both accelerating the.

The adoption of Cooper pay a mid market, while simultaneously continuing to go up market with the solution.

Along with offering more capabilities around corporate pay we have a pretty robust roadmap with.

With Cooper pay to really be the payment hub for organizations for all key categories up there off their expenditures that they need to pay for so very similarly to many of the modules we've built over the last.

To have them integrate all of the other apps as well as unlock community value and we think we have plenty of different vectors of growth around pay with that spirit and approach.

Next question comes from the line of Terry Tillman from <unk> Securities. Your line is now open.

For taking my question.

The softer 2000, our FY 'twenty three sub revenue growth youre talking about growth, maybe accelerating into FY 'twenty four can you frame what kind of step up in growth there would be potentially or just any kind of guideposts and if you think about the second part of that question is what are some of the areas, where you could see more lively your growth up.

Side as we move out into the next year is it international mid market Cooper pay kind of emerging products et cetera, just if you could help frame that thank you.

Sure let me let.

A category, whether it'll be product, whether it will be.

Net new customers add on within existing customers, but with this portfolio effect we are.

Significantly shoring up the opportunity set to maximize the result, right and then looking at whatever the time interval. It is whether it's fiscal 'twenty four 'twenty five or any given quarter any one of those vectors can be the contributor to help us in the continued reacceleration as.

As we move our way past COVID-19 and into.

The growth years that we're anticipating yes, let me answer the first part of your question. So nothing has really changed for us from our commentary from last quarter last quarter. We stated that we're confident in mid twenties organic calculated billings growth in the near term and we'd reiterate that.

As for guidance, we strive to execute and achieve a beat and raise each quarter, it's a little bit tough to know with all the things going on in the world.

That is quite an terminal moel at this time.

Bullish about accelerating our growth with the investments, we're making subscription revenue guidance, we talked about services and other guidance and why that was trending downward. If you look at the total but the core of this business is subscription.

Subscription revenue guidance for fiscal 'twenty, three is a few points lower than our typical pre COVID-19 guidance.

The notion of getting back to work quote unquote increased business travel as the year progresses.

It become an incremental tailwind for the back half of the year and we'll keep you updated on that on a quarter by quarter basis.

Next question comes from the line of Ryan Macdonald from Needham. Your line is now open.

Thanks for taking my question I wanted to dig deeper into the largest pipeline ever commentary, maybe you can parse out sort of what youre seeing in terms of mix between late stage and early stage pipeline and then how do you think the return of inspire being in person can help unlock more pipeline or help maybe accelerate the conversion of that.

That large pipeline into <unk>. Thanks.

Thanks, Ryan it's really thoughtful question. It's certainly is the largest overall pipeline that we've ever had and particularly interesting when you look at the Q4 pull in the <unk>.

Tens and tens of millions of dollars in.

Subscription revenue that we closed just in Q in Q4.

We're seeing stronger increased customer and prospect engagement on our calls our actions online and we're seeing what we believe is a certainly a lease and set a gravitational pull as it pertains to us and our category winner in business spend management and without making a direct prediction I would certainly like to see.

<unk> conference, where we anticipate a reasonable amount of folks coming out of.

Of Covid and wanting to be together across all areas.

From procurement to treasury to supply chain to so all of the other areas, we support coming together to help move that pipeline from early stage all the way through to pre close and close so I think it bodes well for us and I would tell you Ryan I can't wait for the conference and again welcome everyone on the line to join Us in Las Vegas.

Next question comes from the line of Steve Koenig from SMB see your line is now open.

Hi, gentlemen, thanks for taking my question.

Rob I'm wondering.

How you might think about in terms of what youre seeing.

Now in place.

Affecting the customer imperatives for back office investments and particularly the procure to pay investments either positive or negative kind of what are the puts and takes here as you talk to customers. Thanks very much.

Yes. Thank you for that question I honestly can't point to anything as I, often say statistically significant as it pertains to that.

When I think back to the fourth quarter and the momentum interactions. We had in our deal closes they were all oriented toward helping companies get back to controlling their spend maximizing every dollar spent resiliency sustainability all their key initiatives.

How we map to that inflation.

Inflation, obviously, a factor for all of us.

But I can't say that there was anything significant that came up.

Dozens interactions ahead that would be worth calling out here.

Okay. Thanks, Rob.

Next one on acute as Brent <unk> from Piper Sandler Your line is now open.

Good afternoon, and thanks for taking the question here I wanted to zoom out a little bit on on the subscription growth outlook I think the five year averages 40% to your average is 35% youre guiding to 23% in Q1 and full year guide it implies further moderate moderation to 20%.

What's changed relative to the growth outlook. This year are the acquisitions not contributing to growth as much as expected is the is this just all large enterprises stalling and not seeing it come back as the closed environment shifted in the last two weeks post post Ukraine I ask this because gartner is actually forecasting the supply.

Change management software industry to actually accelerate this year versus your guidance of a further slowdown so just trying to understand what's changed.

And how we should think about those levers to driving acceleration.

Sure. Thanks for the question Brian So.

First of all I would say none.

That has changed.

If you look at our subscription revenue guidance for Q1, it's actually in the 19% to 20% range right and Thats consistent with 20% for the year on top of that you layer on the fact that it's tough for us to predict the future, especially it's especially in a tumultuous environment in the world that we're in.

We historically model to try to achieve a beaten read.

We were talking last quarter about mid <unk> organic calculated billings growth and obviously calculated billings comes in advance of revenue so consistent for Q1 and the year.

In our model hasn't changed our approach hasn't changed.

And I think with supply chain.

We're well along the path of our stated kind of integration timelines that we discussed I mean, certainly in the near term when you consider for total revenue.

Professional services going down or going to partners right. Our GSI partners a key part of our strategy, we're being very successful in.

In converting licensees contract to SaaS contracts.

That's certainly a part of the near term.

Thanks, one on the line is Peter Levine from Evercore. Your line is now open.

Great. Thanks for taking my question. So I think our concern for investors as it relates to software is the risk of a deteriorating economic downturn.

In Europe due to the geopolitical environment, we unfortunately to yourselves. So I think international makes up 40% of your business can you dissect that further to let us know what your exposure is to EMEA.

Europe , specifically and what kind of assumptions are baked into the guide we're looking at your European segment longer sales cycle sales disruptions churn any color would be great. Thanks.

Thanks, Peter I mean, I think the first thing I'd point out is that.

As long as the businesses are continuing on with our endeavor to succeed in their business they need to maybe two thirds, so thats first and foremost and we're.

We're seeing incredible engagement from customers large and small across the world.

In and of itself EMEA is about 25% of our business and then rest of world gets us up into that 40 ish percent range.

On the margin I think.

There might be a bit.

Bit more sensitivity to COVID-19 into the ongoing situation of course.

We don't foresee a meaningful impact now that could change right of course.

Depending on what happens in the world but.

From where we sit now we feel pretty good about that.

Next question comes from the line of CD <unk> from Mizuho. Your line is now open.

Thanks for taking my question I, just wanted to ask about landmass of transitioning from on Prem to.

SaaS, what sort of trained you have seen in terms of customer churn or anything.

Any color but helpful.

Sure. Thanks for the question well look obviously, we're in the process of converting customers from term licenses to SaaS. Upon renewal has had great success with that.

In fact, the majority of these term licenses have converted.

To SaaS and customers are beginning to really understand the value proposition of an integrated business spend management offering now theres a lot of work that goes into making this a special as we want to make it.

We have now it's truly extensible cloud offering in the market. We're building on top of this common data model.

It supports a wide range of use cases.

80, 20 type applications that we can go to market with.

Overcoming years, they can really unlock the power of SaaS in the area of supply chain design and planning there is a largely a services based market. That's dying for an 80 20 solution to address the needs of the masses and at the same time, we're training consultants on developing best practices around our supply chain design and planning approach I meant.

In my prepared remarks, as well where.

Looking to integrate that solution into.

So far our risk area in my mind, most importantly, unlocking the power of community that AI as it pertains to the supply chain design, so folks can be smarter and smarter about the way they plan their agile supply chains in real time to maximize dollars and maximize efficiency and fulfill demand that they have for their own.

Customers in the marketplace, so very early and the trajectory here, but we feel like we're in a really good spot with the offering we have and the approach that we're taking.

Alright at this time there are no further questions. This concludes the conference for today, we do thank you all for joining US you may now disconnect.

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