Q4 2021 Docebo Inc Earnings Call
Good morning, everyone and welcome to <unk>, Inc, fourth quarter and year end 2021 earnings call all participants actions late in the listen only mode.
The presentation, we will open the line for a question and answer session for analysts.
Instructions will be provided at that time for research analysts to ask questions. We ask that analysts please limit themselves to two questions and rejoin the queue for any follow up.
I'd like to turn the call over to dough chip as Vice President of Investor Relations, Mike Mccarthy. Please go ahead Mike.
Thank you operator before we begin the table I would like to remind listeners that certain information discussed today may be forward looking in nature such forward looking information reflects the company's current views with respect to future events.
Any such information is subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements.
For more information on the risks uncertainties and assumptions relating to forward looking statements. Please refer to <unk> public filings, which are available on SEDAR and Edgar.
During the call we will reference certain non <unk> financial measures. Although we believe these measures provide useful supplemental information about our financial performance. They are not recognized measures and do not have standardized meanings under ifr S. Please see our MD&A for additional information regarding our non <unk>.
<unk> financial measures, including reconciliations to the nearest rns measures. Please note that unless otherwise stated all references to any financial figures are U S dollars now.
Now I'd like to turnover the call to Dr. Cable's CEO Claudio are about.
Hello, everybody and thank you for joining gosling, our 2021 and earning call with me today, Jeff <unk>, our president and CMO as well as the shipyard on makeup.
I'm happy to share that you've got on what has been an incredibly valuable to me that as the chatbot since prior to our <unk> IPO in 2019 has been promoted to CFO from interim CFO congratulations forgot them.
Before I begin my prepared remarks. This morning, I wanted to first take a few moments to express our concern and support for the people of your claim while our business presence in the Ukraine or Russia is extremely more as a global company with a European habits age and many of them.
Yes, including me.
Deep dives into the people of the region. We have made the call for Indonesia, and we are matching employee donations to the International Committee.
At the trough, which is helping people affected by the conflict and these are supporting the work of the Ukraine and the Red Cross when we continue to support them well we are stable.
While we find ourselves in this volatile times, we understand the importance of continuing to believe that a consistent operating results and I think we successfully accomplished these in 'twenty one.
Revenue for the full year ago, 66%, a significant improvement from the also strong with 52% growth in revenue we generated in 2020.
Big reason for our success has been as a result of the nature of our platform, which is the industry context agnostic. We are winning new logos that is both employee and customer support.
Setting the stage, just what our land and expand strategy.
We had great new logo performance, which included 169 net new customer and the sales momentum we saw from enterprise customers in the third quarter continued during the quarter.
At the same time, our traditional sweet spot of midsized enterprises, and departmental wins continued to be steady growth engine accounting for more than half of our new logo business.
Sparkles have been setting the stage for our land and expand strategy.
In Q4, we signed a new customer agreement with a global medical device company align technology, allowing them to be able to provide standardized training for the orthodontics trauma and also create customized experience for their internal team.
Dine brands Global the company behind IHOP, and Applebee's franchisees, so, let's take let's say able to train the team members I Cross Dayrates are unchanged.
In the fourth quarter, we signed with a new customer agreements with <unk>.
The AE to deliver a solution to scale and get them there.
So loveland programs for up to 40000 athletes coaches and school administrators large implementation like the proved the scalability of our platform at the enterprise level, allowing us to service some of the leading organization in the sport work.
In addition to the strong new logo performance, we are seeing great success.
Doesn't extend strategy by leveraging our content offering including the trouble shape, we expanded our relationship with BMW to train all departments and if they have money factoring facility in Greensboro North Carolina.
We are pleased to have extended our agreement with United Nations Global compact the world's largest talk persistent Abitibi next initiative.
This expanded agreement will drive the training for more than 30000 of its mandates.
We are also signed me the Newcastle I'm in agreement with the seller.
I believe that is Martha energy technology, and develop better Alban inteligentes in their set of solutions that change the way solar power is out of actually getting money.
They will be using the table for both employees and customer training.
In January we signed a strategic partner with the world's leading private membership community for hydro a professional.
As part of our partnership that's the Trimble will provide supervision if pool that you wish to meet have brought that to create deliver analyze and measure the impact for each of the 7000 members.
In 2020 , one we introduced a new product models as part of the Blue Chip on learning suite, many of which were allowed sort of in the second half of the year. Some of those new products have exceeded expectation out of the gate and with others.
And the Formula.
Those are the types of learning you expected and we are pleased to see new product now starting to contribute nicely to all.
HCV without.
Our product innovation I have also received with great recognition. This year from a number of independent third parties. We were ranked first in the categories of enterprise corporate LMS and leave that Europe and the last on digital crowd Winter report, which is basically all rent due from our customers.
We won nine Brian another whole group of Sellers in Technology Award, including awards for the learning suite.
Millimeters shape learning going on it is a learning impact with six of them.
They can go.
With the addition of blue devote that if all else the whole last fall, we continue to state that our team in a way that more closely align our co product development.
And development cost in January we announced the addition of a new Chief product Officer, who had the change in personal circumstances, and we'd love to be joining gas leadership of our product development will continue to be the joins there is possibility of ILUVIEN and our CTO and co founder publicly in Albany and.
We will continue to invest in top talent to remain at the forefront of learning innovation.
The general turnover in the lumber market has presented us with challenges as well as opportunities and he has been able to harvest season. It saves them marketing professionals that we like elevated the next leg of blah blah blah.
North America was more than 70% of our saves me plenty of 'twenty, one and grew more than 70% year over year.
It is our largest market and continued to be our biggest source of growth, but we also see expansion opportunities for good shape all around the world that we intend to capture.
In plenty plenty once we establish a new office in Germany, which is just showing the early traction. We then in Germany in particular can become one of our largest markets outside of the U S. In January we have also quite a excuse me live in Australia and <unk>.
Book value hasn't been assigned let's see 2018 that accelerates our time to market by immediately adding specialized talent and infrastructure to address the APAC region.
Lastly, <unk> talked about the importance of AMG on past conference calls, we hope to have our first ESG report partnership by the time, we speak to you on our next earning call that very fast when shadow some of the work we do to empower our people Monte.
Integrity for our stakeholders manage our environmental footprint and contribute to the community.
The turbo has an opportunity to make the greatest impact as a corporate citizen to innovate and provide technologies that other organization achieve some of their own ESG objectives. This is work we already do for many of our customers and we will provide additional color of time.
With that I will now pass the call to seek out and to speak about the financial.
Thank you Claudia and good morning, everyone.
Those interested a detailed breakdown of our financial results for the three months and fiscal year ended December 31, 2021 can be found in our press release MD&A and ask.
The statement.
Which are now available on our website and also filed on SEDAR and Edgar.
The slide deck accompanying this earnings call was made available on our Investor Relations website. This morning.
We were very pleased with our strong results for the fourth quarter and fiscal year 2021.
This performance sets us up for another year of strong growth with a natural transition to positive adjusted EBITDA as we exit 2022.
Total revenue for the fourth quarter grew to $29 8 million, an increase of 59% from the prior year subs.
Subscription revenues were $27 5 million.
Representing 92% of total revenue for the quarter.
Equating to growth of 64% from the prior year.
Net new <unk> was $14 2 million in the fourth quarter and approximately 40% higher than the net yeah are we added in the third quarter of 2021.
Continuing the robust trend of quarterly net new additions.
On slide four.
We exited 2021 with $117 7 million in air or an increase of 59% over the 74 million reported at.
The end of 2020.
With over 2800 customers at the end of fourth quarter of 2021, our companywide average contract value R. A T V.
Approximately 42000 up 24% from 34000 at the end of the fourth quarter of 2020.
As Claudia noted we continue to see traction from enterprise customers at the table is being selected for more complex multiple use case deployment.
As reflected in the HDD for new logos and cross sell either in the fourth quarter, which was close to 60000.
In addition, approximately 45% of the air are generated from new and cross sell logos.
This quarter came from deals valued at over $100000 with no single transactions being recorded in excess of a million dollars.
This growth in ACD from new logos tells only the beginning of the story with our customers because it captures the size of the religious relationship we had at the onset.
So lets say unless you will tell you once we establish a relationship with a great new logo, we are very well positioned to expand E V by demonstrating value over time.
The metric that best highlights ACD expansion after we land a customer if the net dollar retention rate.
In 2020 , one we reported a net dollar retention rate of 113% an increase from 108% in 2020.
The investments we've made in our account executives and customer success teams are bearing fruit as the MTR cut and the IRR continues to expand but I would like to make two additional points on the endear are.
First we have continued to add more enterprise customers to our base and these accounts naturally have more divisions and opportunities for up sells and cross sells.
Second our upsell cross sell motion has been historically driven by expansion of the use cases for industrial but learn LMS and now with the launch of the learning suite. There are other avenues for expansion.
Gross profit margin for the fourth quarter was 80% of revenue, which compares to 79% for the third quarter and 84% for the prior year Peter.
As we have said in previous quarters, we made investments this year in our customer success and professional services team to facilitate the rollout of our multi product strategy and to further enhance customer support.
We're starting to see leverage on these investments, resulting in sequential improvement from the third quarter and we expect to maintain low 80% gross margin profit levels overtime.
On slide six you can see a summary of our operating expense lines.
Total operating expenses for the fourth quarter increased to $26 7 million compared to $20 2 million for the prior year period.
G&A has continued to decline as a percentage of revenue to 24, 4% for the fourth quarter compared to 25, 2% for the third quarter as we continue to realize efficiencies from increased scale.
Sales and marketing expense increased as a percentage of revenue to 42, 4% from 41, 2% for the third quarter.
The sequential increase was in part the result of seasonal investments in marketing activities. During the fourth quarter that included our annual disable inspire conference.
R&D expenditure was $5 5 million or 18, 5% of revenue compared to 22% in the third quarter.
In the fourth quarter of 2021, we also recognized a one time year end benefit from R&D tax credits of approximately $800000.
We reported an adjusted EBITDA loss of $1 5 million for the fourth quarter of 2021 compared to income up quite $1 million in the prior year period.
We reported a net profit of $1 4 million for the fourth quarter of 2021 compared to $4 1 million net loss for the prior year period.
Finally free cash flow was essentially neutral in the fourth quarter and we continue to have a very healthy balance sheet net cash and cash equivalents of $215 million.
Looking forward into 2022, we continue to focus on growing this business as fast as we responsibly can and we're continuing to recruit the high performing talent, we need to support our growth targets.
However, like every other technology company, we find ourselves in a competitive market and are experiencing the same pressures from wage inflation.
Notwithstanding this we expect to reach a point, where the growth in our revenue will naturally transition us into positive adjusted EBIDTA and free cash flow as we exit 2022.
As you would expect in a maturing company, we will continue to see operating leverage in G&A improve.
In terms of R&D, we expect our expenditure to remain within the 18% to 20% of revenue.
Sales and marketing is an area that we will continue to invest as long as our unit economics remain attractive.
Near term, we will likely run in the low 40% range.
At these levels, our CAC ratio continues to be best in class with one dollar invested in sales and marketing generating $1 in Iraq.
For the full year 2021, we invested $43 3 million in sales and marketing and added $43 7 million in air are with nearly 80% of our new logo and cross sell contracts being multiyear deals.
That concludes my prepared remarks, I'd like to turn it over to the operator now to take some questions from the analysts.
Thank you, Sir ladies and gentlemen, we now conduct a question and answer session. She was extra ask a question. Please press Star then the number one on your telephone keypad. If you would like to withdraw your question Press Star two if you're using a speaker phone. Please lift the handset before pressing any keys. We also ask that you limit your time to one <unk>.
Plus one follow up before cycling back into the queue.
Please for your first question.
Your first question comes from Robert Young with Canaccord Genuity. Please go ahead.
Hi, Good morning, My first question would be around sustainability of this.
Strong incremental.
Add in the quarter.
There were no transactions over a million.
So I guess, that's implying that there's no.
A really large deals, but I'm curious.
Larger deals were a big driver behind the incremental they are ours sustainable did that come in here at the end of the quarter.
And.
And that's the question.
Yes.
Hum.
Hello, Rocco I'll, let's just stick Ingo.
The mix of deals in quarter four was according to plan what were seeing good.
Rob There is the continued success in our strategy of adding a healthy mix across our three main commercial segments, those being commercial or small business mid market and enterprise.
It is no secret that we are seeing growth in opex trending success in the enterprise segment.
But our strategy has never been there.
<unk> two <unk>.
Try and do the necessarily the very very large deals upfront because as stated multiple times. Our goal is to win the customer and grow it over time with our new products.
On a point of the a C D mix for.
For the past consecutive quarters.
Four consecutive quarter, so for the entire fiscal year 2021 .
Our deals exceeding $50000 in ACD remained well above 50% of our AUR or in terms of units.
That to me is the metric that shows the incredible consistency and execution and an alignment of the entire go to market machine towards the average customer size the debt.
That we'd really like which is that.
50 to 100 K average ACB.
Still.
We're investing heavily in enterprise.
And we're seeing a tremendous market fit and you should expect in the future. The deals above 100 K in a C. D continues to become a a recurring event.
And those that we will continue to grow over time.
Thanks to multi use case and multi product.
Yeah, Rob and Rob I'll, just speak to a lets just point just around that if you.
The number we talked about it almost half of the year are coming in the quarter is from deals of 100 gig and a T V. So we're moving nicely up the enterprise market, Yeah, and we while we also like the consistency right. Because there are no seven figure deals, but theres a lot of deals that are about 100 kids are adding almost 50% of what we have in the quarter.
And so.
For me I and as we think about consistency that this continues to show traction that to penetrate the enterprise segment of the market.
Okay, great. So nothing nothing out of the ordinary for the quarter just strong demand.
And then my second question would be around the.
The sales efficiency that you were talking about you said it was a dollar for dollar but that was lower this quarter. Despite.
Despite I think you said that those are seasonally higher level of sales and marketing spend and so I get around 90 cents for each incremental dollar of Bayer are and so is that why you're trending towards positive.
Free cash flow in 2022 or is there actually a little bit of a.
A lower level of investment in sales and marketing or should we expect that the bump up through the year a little bit.
I'll speak to it first and then I'll ask you to jump in.
Yeah right. So if you look at Q4 in isolation, you know the CAC ratios.
More efficient, but on overall for the full year the calculations in around $1 spent to generate $1 ear are you got to take into account as you think about CAC ratios that seasonality right. So you have you have you know sales and marketing expense coming in but you may have a seasonality in terms of ear our performance would be in the quarters. So I prefer to look at it on and on.
From an annual perspective.
As we think about 2022, we would say that there are certainly investments we will continue to make to support.
This initiative as we penetrate the enterprise segment of the market.
As well as the things that we're doing and unless you can speak to it around making sure that the 2800 book of business that we have the customers that we have we have the right strategy and the right team.
In place from an account management and customer success effective.
Let's see I'll leave it to you to kind of expand a bit more on that.
The strategy around extracting the maximum amount of value from the customer base along with the staying.
With high levels of performance of customers happiness is core for our growth strategy. We've said it multiple times, a happy customers renew happy customers grow with US we have made investments to ensure a good level.
It really good mature level of relationship and ratio between our customers and our account management organization and this is going to bear fruit in the future because as we get the battery picture of our customers' needs are we're also gonna see and return.
The level of penetration of these customers not only from an up sell standpoint, but also from a cross sell standpoint. So in summary, better ratios means better presence means better intimacy and better unit economics in the future.
Yeah.
Thanks for taking the questions.
Thank you. Your next question comes from Daniel Chan with TD Securities. Please go ahead.
Hi, Good morning, I thought I'd like to discuss your geographic expansion plans you acquired skills life's a tool to accelerate your APAC presence can you talk about your organic expansion plans internationally.
What role partners playing this I think some of your partners are also focused on expanding geographically.
Yeah, Daniela gateway to cloud.
First of all of our service.
Model Kit that is North America, and then Europe , and Australia New Zealand.
Those are the core markets, we are investing England for several reasons, especially because we can leg at age yet a lot of marketing and now what I'm saves machine in countries that have they can chose to bring this is assuming that two hour.
Our culture to bring that we can use in North America and in Europe , and let's say that Germany also geopolitical easy stepping a dean.
With a lot of additional investment in almost everything in these geopolitical bylaws and disease.
And you know that we have opened up an office in Germany six months ago in Nordics are interesting market.
Alright.
Other markets, especially in Asia Pacific.
Corporate is by bottleneck.
But I want to stress that most of our revenues comes from Western countries, and Australia, New Zealand and the disease, where we are investing in it especially in direct sales and then do you want to add something on that.
Sure.
In addition to that.
We believe the latest acquisitions.
Acquisition of skills life.
Gives as an acceleration.
We've learned a lot.
Cleaning up offices.
Regionally our initially in the U K after of course, their North American presence and then Germany, and then Hum even before then during the <unk> acquisition, which also gave us the opportunity to establish a physical presence in France.
We've learned that organic building open net new office takes time hiring leadership onboarding them ramping them up and having them understand our product our culture and everything takes time the skills like team was just the tremendous opportunity of E. <unk>.
I'm going to have people be great learning and development professionals with a in an incredible network in the region and see like I said before gave us access to already onboard the people that are already out of network here and and relationships. So in just a matter of a couple of months, we have done with radio.
And our sales force is this.
That already reporting on pipelines that are already developing business. We have a sales leader in place. This would have taken years.
And on the support and implementation flip side. It gives us the ability to spin up quickly at 24 seven coverage there remains a.
A critical objective for our goals of the and global expansion and supporting enterprise clientele. The frankly expect to 24 seven support as part of our capabilities and we're now in a position to offer that.
Yeah.
Thanks, that's very helpful. I wanted to to change gears, a little bit throughout the pandemic. You you provided some metrics that showed customer engagement was elevated just wondering if you can give us an update on some of those metrics have customer engagement with the platform remained at that level, even as things start to normalize. Thank you.
So I'll just speaking.
I I'm not sure we can shatter live data.
On the number of babies.
Because what's not.
We we shattered and adopt equally.
During the pandemic I'm not sure if we share it with the specific numbers that say that they're.
They're using the system ease of becoming the more.
Sophisticated because all our users now ive used that up.
To use the learning of more than three.
And there is the pre pandemic level up more use cases more ways to learn more the synchronization and.
Data exchange with other systems or so.
It's not only a matter on our many users logging in to see similar but the way. They use. It for example, they use age of a looming impact system to us and so not only they use Egypt, but the quality impact <unk>.
Is it an extent Paula on the hour.
We measure.
The adoption of the learning that not only from the quantity perspective, but also the quality of the training that our customers believe it let's say that we can provide the Pascal launch.
If the data if necessary.
Thanks, that's helpful.
Thank you. Your next question comes from Richard Tse with National Bank Financial. Please go ahead.
Yes. Thank you.
As you guys make incremental gains into the enterprise does it change how you operationally organize the business when it comes to functions like R&D and sales and marketing.
Yes.
Oh, Yeah cloud just speaking to 100% I mean.
The more we create new products so the more we approach.
Different markets different industries with different needs.
Rick why our it transformation was a continuous transformation inside the organization and when they say continuous transformation Elisha he's working hard on the sales and marketing team.
On the on better Colbert in gift basket Cal or use cases that you can even just to him better tickled products. Because you can imagine and you do something but we are also learning on our own that sell linger and learning analytics products that require different skill that selling learning management system.
The other side the same werent quite as deep trends that lead them.
In derma or different skills.
Different that's why manager for different products, because they require different expertise and it isn't the same time, our unique you imagine that those two main clustering organization mean silence.
Sales and marketing and product.
Communication channels between them in order to you know.
Oh.
Work better together catch the market needs are and being able to synchronize with the line.
On the walk to prioritize that.
And what not to prioritize there so absolutely, yes, and I think that was we have reshaped.
And shape the organization up to cover the multi product.
The industry needs, but we will have a shape again the organization because there will be another layer of complexity.
I don't know if you want to add something.
Yeah, Claude just just in addition to that you know the question for Richard was about sales and marketing and R&D I would add to that Richard also our general posture with regard to support and implementation.
Which are just part of the overall supply chain. There's there's certainly E adjustment methodology of selling their specific investment the techniques and marketing say a b M. As a reference but then when it comes to implementing the customer you have to have methodologies there adapt to.
Renting large, Oregon, which may have a different phased approach than you would do on a more turnkey and if you will accelerated that small customer we understand that and we have to develop playbooks to satisfy that in addition, an enterprise organization you know a fortune 1000 level of support expectation.
It's just different from a smaller sized one we all understand that what we're doing there to support. This trend is also creating best in class support services as incremental value too.
To our professional services that will allow us to also improve our unit economics for these customers are similar to you know the best in class companies like Salesforce, Oh, we're designing a dedicated elite support services, which not only provide 24 seven but go to a deeper.
Level of support to customers. We certainly expect this service to be a paid service in the future and we're working hard to staff for that and the work is well in progress.
Okay great.
My second question, maybe it's a bit related to that you guys are obviously offering adding.
Adding a lot of new logos here.
Could you maybe talk about.
The source of these new wins are they you know traditionally you've been extremely effective you know with your web campaigns, but as you get bigger enterprise customers like how are these logos finding U and.
In terms of.
Generating these wins.
It is it is a mix or our strategy, we look really quarterly at the balance of our channels of sourcing.
And then those theory frankly across the various segments and the strategy of a demand and believe the generation varies depending on the markets on the G was on the commercial segments. However.
You can we can oversimplify it by saying that they are a significant portion of our traffic remains inbound which is what youre, referring to them, but we're we're boosting significantly.
Our outbound efforts.
That means that we're growing our outbound capabilities and integrating those capabilities, we'd more account based marketing logics our.
Those are more fruitful and calibrated to target accounts, specifically in the enterprise segment.
<unk> is another great contributor of Oh, the pipeline of sourcing as we continue to work with organizations to to grow our OEM book of business. We also add the eight a rather large referral and bar programmer and that allows us to become very granular.
Geographically, even where our brand may not be a stronger new regions, where we're not physically present and to gain market advantage and to position our brands and finally there are certain.
Alliances that we announced pavilion for quarter four mm there aren't extremely strategic in certain markets. I mean pavilion is a phenomenal organization that has established itself as the point of reference for every revenue grows the professional in North America, and possibly really worldwide.
So you know it is no secret that we were very interested in that partnership because the large majority of the thousands of members are buyer personas for us and and so you can see how the mix of the sourcing is very varied our marketing strategy has been pretty complex and north Italia.
And any ranges across all all market sizes.
Ali I think that's another point here.
The chip during these last two years.
I've been recognized if more and more as best of breed in the industry. So I'm not saying that we recognize that there's a big need. There are is there something that makes a lot of skills life E Z I can't imagine he's space now when I say, when I say names, but.
No I think the price are.
And usually buying the best of breed I mean, the most recognized brand and actually we are competing with the warm weather.
Recognize that in the past that's best of breed and there is optically in the past six months, we have been reached by big vendors are in other spaces.
Stinker for integrations with us.
Based on the fact that many of our customers they say.
Are your customers as well and we need deep integration these are happening.
More and more and more and more over the past six months and these are good feed note. It is also proven by the fact that our enterprise segment that is growing faster than others.
That's great guys.
Thank you. Your next question comes from Christian Escrow with eight capital. Please go ahead.
Hey, Good morning, everyone. My first question today I wanted to ask.
When you think about let's say a typical or ideal enterprise win mm 100, K are larger and a C. V. You know what's the best.
Type of win that you guys like that sets you up for land and expand is that just one department at the beginning or is that just the core.
Hello, Nice like what what's the best way to get in with the gates for to set you guys up for expanding.
Hi, Chris.
Christian Thank you for the question.
Well there are a couple of answers to your question. So when we enter an enterprise customer.
Where we believe we have a unique approach.
Proposition and where our products to them.
Wins hot at a very high win rate is when the organization wants to implement what we call a and I breathed use case or blended use case strategy.
Weird the goal is to consolidate efforts or platforms and technologies that may already exist or don't exist yet to satisfy both internal and external use cases that capability.
I'm, giving you.
Both capabilities in one platform.
The data shows that we are incredibly strong at that.
So when we enter a customer our goal is to understand what the state of their technology is that from a learning delivery standpoint.
And understand if there is a possibility to at time zero approach, both use cases or to approach one that Mike.
By positioning are ready from day, one or capability of satisfying too.
Cause and that gives the Greek level of comfort to buyers knowing that they can grow with us.
The second answer is and organization and this is more recent and that's what we're working on that.
The ability to position our products the new products from the get go.
They may not be ready to adopt.
A more sophisticated views are of the learning programs that for example impact and analytics officer.
But knowing that we can grow with them in that direction. He's it just gives them. The comfort that we are the provider of choice for the long run.
Finally, I will add were seeing recently that too.
Add on product like the Trimble connect.
And the cable content.
Give us the opportunity to tell our story of the integration there.
That other competitors don't tell us in the same way.
The chip content gives us the opportunity to not have to establish another them contra.
Contract with another content vendor.
And how are they single Hum.
Relationship.
With the table the Trimble connect it gives you the opportunity to know that when you buy the table you can grow with it and integrate it with multiple systems without the hassle of custom integrations are expensive and mechanic as two w's.
I hope that answers.
Yes, that's very helpful. So I'll ask just one more question this morning.
And so when we think of the OEM partner program and maybe I'll ask about that channel I'm just any update from your end, it's something that I think you've tempered us all on it it's going to grow over time with a lot of new partners this past year, but.
Is there an update you gave us on how some of the newer partners are trending and thanks for taking my question.
Yeah.
Oh, Yeah, I'm, a remains a growth vector for us and we've said this multiple times with double down our investment.
In building, the OEM and strategic alliances and we're extremely confident in them.
That there will be a steady pipeline of partnership business in the future.
One thing that we've learned the in in the past.
12 months in particular is not really surprising.
Is that very small organizations can be very excited to integrate them and new capability and new SKU.
It becomes harder for the smaller organization to bring it to market because they have two jumbo many priorities at once.
So.
Our strategy with our bigger OEM team.
Is to focus on more mature organizations that have either already OEM before would have the resources to get going and execute them on a joint market plans with us.
With that said.
The region, and then HR not only continue to deliver incredible performance.
But we are confident that we're going to be able to grow that performance in the future by giving them access to capabilities. There in the meantime, we have developed that's one.
Two and finally, we have made a lot of exciting leads in the OEM sector.
They are more aligned with our ideal OEM, a profiler and I believe that we will be able to report to you once that material.
And results come to the table more information in the future.
Perfect. That's all very helpful. Thanks, a ton.
Thank you. Thank you. Your next question comes from Paul steep with Scotia Capital. Please go ahead, yes. Good morning, I'll be quick here just on staff growth sooner and you talked about growing staff can you, maybe just give us a little bit of our thoughts around the balance between wage inflation as well as maybe the.
Pace of hiring we've seen strong hiring performed by the company over the last couple of years and then I've got one quick follow up.
Yeah.
Morning, Paul I would say you know that that there's no secret out there anyway, and wage inflation and probably one of the most competitive labor market out there and every other tech company. We're facing the same out here I would say that.
In terms of adding you know, adding folks into the organization will continue to invest.
You know as we spoke about earlier in the sales and marketing engine to support the enterprise account management space.
We expanded to the enterprise segment, we have doubled down it lets you talked about in the OEM side of the business, but then if you think through you know the the support.
The organization, whether its professional service to our.
Customer support we need to continue to stop that.
As we grow the business so you know well.
We'll continue to add you know maintaining our I would say maintaining D. They kind of they are the ratios that have kind of spoken to in my prepared remarks.
And.
All that said as much as it is a competitive comparator landscape from a talent perspective. It also gives us a tailwind.
Customer perspective, where you know it is it is the elements being one of the best tools to do it you know engage their employees retaining employees and continue to use our platform to make sure that they can manage attrition in that market. So.
Challenges from a labor perspective that we manage but also you know we have some momentum as a result of what's going on in the labor market right now.
Sorry, I'll tried a different way and I'll skip the other follow up should we think a R. R. You know growth in employees was below in sort of 2020 are our year on year growth. If we look to 'twenty. One we saw you slightly over index unemployed growth versus <unk> growth.
Should we just think of 'twenty, one more as a catch up year in terms of big investment you're going to sustain that growth, but it's not going to maybe match AOR growth going forward that that was a better way to maybe phrase it yeah. That's it.
The point, though I would say you're right in 2020, we did pause that as you know I've called it started and then there was a catch up perhaps with probably the word you use it is it is.
While we started in terms of hiring in late 2020 early 2021, as we think about 2022, where it shouldn't be at the same level, but I would say there is certainly a majority.
No level of hiring that we're doing in terms of stopping them.
At the right levels, whether it's V P E and F B piece.
At the at the sales marketing R&D organization, where we will need to make sure that the company as it is.
Structured in the right fashion to move forward and continue to grow.
For the next leg of our journey, though to.
To answer your question, specifically, yet I mean, 2020, 2021 was much higher growth hiring.
Compared to what was in the future.
Push my luck with one last clarification just on.
The older cohorts. So currently now actually had the data to be able to capitalize the contract cost for sales over five years, which we didn't have in the past can you just and I know we've got net expansion, but can you maybe just speak to the experience that you've seen in those early cohorts and and how you're thinking about the long term.
Uptake in renewal and I'll leave it there. Thank you.
I'm I'm part of the question is about renewal rates, sorry, just want to clarify that yeah. It's just the renewal on those early early cohorts because obviously you've now got the data before you Werent able to you just did it over the initial term of a contract for the sales sales capitalized sales.
On trucks and now you're saying, it's at least five years I'm just going back to what have you seen in those cohorts in terms of renewals and how that sort of plays out as weak.
Look at the waterfall going forward.
Yeah, I mean, I think we we don't specifically break out renewals, but I'll give you some color on it and we've talked about net dollar retention ratio, but then it also gives you a flavor on renewals and.
Net dollar retention ratio is the number that.
Includes expansion with churn in downgrade embedded in it and so as that it at that and that has improved which includes the cohort of customers historically as well as the one we had oh come.
Come on board in 2021, you are seeing that book of business continue to expand which effectively telling you that the renewal of our renewal or the churn rate of the business is below.
Continuous improvement is below industry standards, I mean that probably gives you enough color, but we don't specifically break out renewal rate.
Thank you.
Yeah.
Thank you. Your next question comes from Sudan, So Kumar with Stifel. Please go ahead.
Good morning, Jeff a couple of questions for me first I just wanted to kind of touch on the pipeline and some of the momentum that you're seeing in the enterprise segment has there been any change in the type of profile of the prospects that you are seeing now and what they're looking for.
I think you guys said in the opening remarks, I think you could talk about seeing more complex requirements come in so I'm just kind of curious on what youre seeing with respect to how demand is evolving here for you guys.
Hello.
Got it okay to think about it I think you take it.
Hello.
With regards to pipeline that of course, we don't we don't provide financial guidance at this time, but I'm happy to share a few thoughts with regards to forward looking pipeline at a high level.
In terms of the momentum and demand we remain extremely confident in our ability to deliver in the future we continue to see demand.
Being stronger and are meeting our expectations.
In terms of complexity already few wheel type of customer we're dealing with in your reference to our messaging of more complex use cases is very consistent with what I was sharing before in my explanation of multi use cases will be.
We're seeing particularly in the enterprise segment is that organizations are in need of consolidating their learning strategy.
And in some instances the reducing the amount of vendors they work with us towards a more holistic solution that is capable of a drastic addressing both internal and external needs. When this happens we're uniquely positioned because our product is so modular and so designed to meet it.
Multi use case capability and we find that our win rates in that scenario are incredibly positive.
Well above any industry standard.
And with regards to complexity and changes in the makeup of constitution of the pipeline nothing really specific to signal.
Other than that and this is a result of it and it's a managed to a consequence of our focus on enterprise segment. Our commercial segment remains strong our mid market segment faced pressure from Oh, the commoditize the point solutions.
There are in the market to our enterprise segment grows wonderfully and we are well positioned to win the business there and I believe we are leading right now and probably see net adds at the strongest vendor in that very market for.
For the needs of external and internal training combined.
Yeah.
Yeah, and this is a kind of self fulfilling prophecy I mean Islam.
After that our customer also.
The more we go up market the more of the use cases complex.
The customer is choosing does it because we are capable to support the very complex use cases.
It's a little bit of the opposite.
Okay, great. Thanks, guys. That's that's helpful.
Last question for me quickly is I'm, just kind of curious how.
You know really on the expansion opportunities with the with the new product suite can you talk about I mean, it's it's you know it's clear that if this is helping influence demand and you are seeing.
I guess, good uptake from your new customers, but Oh and I know, it's early days, but can you speak about.
What the traction has been like with the expansion opportunity within your existing base from the new product suite, just curious what the attach rates have looked like with your existing customers.
Sure. So Dan as you know, we don't disclose attach rates. However, I can't give you a general sense Oh go where we are you know satisfied where.
We're we're ecstatic and we're we feel like we have more work to do.
And those really reflect that then you know have an impact on the attach rates itself for that you were asking about.
We're we're satisfied with most of the product in them that we have released and by Saudi side. I mean, we had the hypothesis and then possibly this is holding true.
We're ecstatic with regards to.
Capabilities and add on products established ones like the extended enterprise suite of use case coverage, that's doing wonders for our company.
And you should expect our intent to bolster that even further.
Additionally, we believe that the maturity of our product called the cable content is giving Gaza incredibly.
Good metrics from an attach rate standpoint, along with it but it's early days and early signal. So the table connector as I mentioned before we're extremely satisfied.
For what we're seeing but gosh, we only have one quarter of data.
In our history data and you understand how little that is.
We have more work to do on our learning analytics product.
That doesn't mean that things are not going well, but this is a more complex solution. It has been in the market.
Only six months and we but we're very you know our focus on product market fit and only bump in the road map and learning what we hear from the customers in adopting it we believe that once we do that our attachment rates even on that product will continue to grow exponentially.
Oh, I don't know Kelly and I don't think you have to remember that.
The chip Moore culture, Oh, sorry, no chemical change Uh huh.
All of the name of them.
Discover coach Asia took us two years to ramp up well after we launch it in 2016, so launching new products.
Germany is a learning journey.
Joining the offsetting fine tuning the position in <unk>.
And it's not something that you can get in like two quarters.
Gotcha, Great guys. Thank you for all the color here and congrats again on another solid quarter.
That's one.
Thank you.
Thank you. Your next question comes from Gavin Fairweather with Cormack. Please go ahead.
Oh, Hey, good morning, I, just wanted to chat for a second on net dollar retention rate, we saw a nice five point acceleration in 'twenty 'twenty, 1% to 113% given your you know enhance focus on customer success and enterprise customers I'm curious if you see some nice headroom to accelerate that further in the years ahead.
Yeah I'm sorry.
When you look back on it you have never happy.
We have a we have grown these before three of them at all and thanks, David Bouchey of over the limit and kitting.
I've got a net debt that's on the net dollar I come in first so you know I think if you think about 2021 net dollar retention rate right that you know we've talked about in past is primarily being driven through the land and expand learn LMS being.
Being the engine that continues to grow the business and we expand our book of business with whether it's.
You know increasing monthly active users, whether it's landing expand subdivisions of other companies et cetera.
Today, the new products and modules that we are.
Launched in 2021 that were more towards the latter part of the year I know are not meaningfully contributing to that number.
To your point as we move into the.
Posture all of helping our customers through those people learning, Sweden, helping their learning needs with the new products and modules over time.
Including 2022 we would expect and the IRR to our you know our expectation that the MTR should move up as we do both not only land and expand and help.
I felt the other subsidiaries of the company as well as the new products and modules, adding to that expansion story.
Thank you and just to clarify I am very happy Claudio.
Thank you Kim.
Maybe just secondly, it seems to be more buzz about you know software user training and embedding training for users inside software can you just maybe.
Speak specifically around Dolce Buffalo and and how you view your competitive positioning is as this trend starts to take off and that's it for me. Thank you.
So philosophically speaking.
I I I see mainly in the technology as well as the building blocks, so that they can be and using the old the old school water Instyle and the implemented deployed inside every single softer I mean training is everywhere training has been.
You know you are a partner portal training have been are in your customer Academy training get then.
Because companies want to train our students.
Two new store of the future employees of pipeline and so on and so and there are many ways to do this.
We are now implementing it in three main ways. One is the elements as centric platform and when people can't login alerts.
Yeah, well I Shouldnt say geez.
Uh huh.
And then the inside another software, but it's still an independent this page and independent function and independent feature the third part of the ease the chip workflow, which is a building block that can be installed led the inside that.
There are five shows all the pages on apps, let's say our comfort zone is the LMS plus Oh yeah.
Our technology is a you know have been proven to be successful and scalable.
Did you must know is a new product and we are learning how to implement oh to deploy it and so on I'm sorry did.
Did you have a floor even know its substitution, albeit at a mess, but given that and know that options are all now to consume and digest content.
Which is which is an alternative of entering inside the merits of all alerted medium side they've got to page.
Thank you you did shine constraints, we are taking the last question from my from China with a T V capital. Please go ahead.
Hi.
Thanks, very much gentlemen.
Congrats on another good quarter.
The comments around free cash flow EBITDA positive by end of year.
Is that in.
And indicate a philosophical change.
Martin Good morning, I'll take that first part of your.
I think it is there's no philosophical change the way you want to think about it is that the business is naturally and.
And as we position previously that naturally transitioning through the revenue growth that we have and the operating leverage we're seeing them with N. G. N N others areas, specifically that I talked about will just get us to a point where as.
As we exit 2022.
We will just transition into feed athlete, but the part that I saw.
No change in philosophy, more just a business driving it to that point.
Okay.
Excellent. Thank you very much and I was hoping clubs.
Claudio might be willing to expand on the comment that our new product launches. It is an art I'm just wondering what you mean by that.
Well I mean that when you have an idea and you build one for all that you can do all the market validation do you want to but the product lines and organization to support the visa product will not be over there to react the same way that you have.
In the day, you have launch of the product I mean, launching broad that's required of fine tuning going from a product perspective from a pricing perspective from a sales model perspective on the deal.
You don't find something that Steve.
Way better than the idea you've ever had in day, one and then really what do we add value. We do chaebol discover culture, we have long said that price it in a way that we change the need to beat them at the end of the day, we are bundling the completely inside the chamber.
In fact vishay bottlenecks.
Thanks, so much.
Okay.
Thank you there are no further questions at this time Mr. <unk> you May proceed.
Yeah. Thank you everyone for staying with US again in this quarter. This is our probably nine.
Or eight earning call.
Thank you for staying with us and stay safe.
Peak in me Bye bye.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a great day.