Q4 2022 E2open Parent Holdings Inc Earnings Call
Currency into their operations.
Supply chain complexity is actually increasing.
Globalization is increased.
In response to global a global macro environment that has proven to be subject to rapid and dramatic change.
Enterprise grade scalable cloud native five nines reliable software is required and necessary to resolve this complexity.
The digital infrastructure that supports today's supply chains are largely on premise siloed and largely legacy.
We are in the very early innings of.
The replacement of that infrastructure.
With our cloud native infrastructure.
Either open sits at the epicenter of that digital transformation.
That transformation will last for the foreseeable future.
Each opened as the largest provider of reliable enterprise grade highly scalable cloud native software exclusively focused.
An end to end supply chain for the largest and most complex enterprises in the world.
We are very global.
We have an end to end platform. We are built upon a network of over 400000 partners and.
And we have 600 of the world's largest companies that rely on US every single day.
We are in the best position possible to capitalize on this very large market opportunity.
Each of open is ideally positioned to take center stage for large enterprises.
As the need to improve their supply chains intensifies.
The demand environment for you to open has never been better and we are leaning in to further accelerate our growth.
We attribute our market strength to three areas.
Industry fundamentals.
We have a massive overall tam of over $50 billion for our current product set.
The secular tailwind are reflecting that industry growth from high single digits.
10%.
Our supply chain issues are now affecting sales and top line revenue the board and the C suite are paying closer attention.
That enables larger transactions for you to open and shorter sales cycles.
Company fundamentals.
We're a cloud based SaaS company.
With $550 million in annual projected subscription revenue we are at scale.
There is a white space of over $1 billion within our own client base of 600 large enterprises.
Our new logo typically starts with us at around $400000.
But that new client represents a 10 X growth opportunity over the following three to five years, we've seen this pattern repeat over and over again.
We have very long relationships with blue chip clients across a wide range of industries.
We have an average.
Tenure.
Of 15 years with our top 100 clients.
Net retention in fiscal 'twenty two was 108%.
We have a very attractive financial profile as well that allows us to invest with great unit economics, 80% gross margin of our core business.
<unk> software.
Over 70% gross margins overall, our growth rate is accelerating as we scale.
We were nine 8% organic subscription in fiscal 'twenty two.
Projecting 11, 4% for 'twenty three on a much larger base.
We generate high EBITDA margins in the mid thirties.
With very high free cash flow of nearly 82% of EBITDA on an unlevered basis.
We are for fiscal 2003, our rule of 45 company and are now taking aim.
To be a rule of 50 companies.
We believe this level of growth at <unk>.
Margin performance the state is sustainable over time due to the long term nature of our client relationships.
Exceptional unit economics.
And the industry and company fundamentals.
Because of our competitive advantage the secular tailwind and a financial profile that allows us to invest we have the ability.
And desire to further invest and accelerating our growth.
We can produce that level of growth for the foreseeable future.
At the current investment levels in sales and marketing.
We are increasing our longer term growth algorithm from 10% plus 12% plus and expect to reach that level within two to three years.
At our current level of sales and marketing as a percent of revenue.
We can produce this trend line, the accelerating growth and overall profitability for the foreseeable future.
That said and because of the massive market opportunity. We see we have made a strategic decision to further bend the growth curve upwards.
By making incremental investments in growth in fiscal 'twenty, three we will invest an incremental $20 million in sales marketing and channel development.
That will position us to reach 12% more quickly and.
Increase the pace of growth acceleration to become a rule of 50 business more quickly over the past two quarters. We have done significant analysis on the strategic towards choice to use $20 million of what would've been EBITDA expansion in FY 'twenty three to position us to further inflect.
Our growth rate upwards, as we look towards fiscal 'twenty four and beyond.
Our analysis found to follow.
Given the very long duration relationships, we have decades of our largest clients.
Term profile is extremely favorable for incremental investment and growth the best analysis for incremental growth.
Is the long term value or LTV, the customer acquisition cost ratio forecast.
Yeah.
Given our expectation that new logos grow to $5 billion over a three to four year period.
We retain customers for decades.
And those customers generate 80% gross margin for subscriptions.
LTV to CAC ratio is extraordinarily favorable.
We are taking share and I believe we can take more share by expanding our brand our sales team our channel partners.
Lastly, the time is now there has never been a time in my 20 year career in supply chain software.
<unk> supply chain and the infrastructure to help them.
Has been more of a board issue.
Now is the time to invest not to pull back.
For clarity, we expect our business to increase this growth rate to 12% over the next coming two to three years without this incremental investment.
We are making the strategic choice to reach that goal sooner.
As well as to bend the growth curve toward mid teens organic growth once we pass the 4% Mark and focus on the next milestone to be a rule of 50 companies.
The vessels, we made of three areas.
One investments in our brand to support incremental new logo sales.
We found a new logo program, which we started last year was much more successful than we had even thought.
Incremental sales personnel associated infrastructure beyond what we would normally add each year.
Additional training support and staff for the partner ecosystem to drive incremental sales that are influenced by the integrator community.
In the final analysis, what we found was that long term shareholder value.
Is generated by having more subscription revenue as soon as we possibly can we are metering the investment to make sure we use the money wisely.
On the $20 million investment was the amount of <unk>, we felt that could be spent and used in FY 'twenty three.
To get the most value for shareholders.
<unk> is a bigger business today, we are growing faster organically.
Our more profitable.
We have significant competitive advantage and we are at the epicenter of a very long transformative cycle.
<unk> largest and most complex supply chains.
We cannot be more thrilled to be in a position we are.
Allow me a few minutes to expand on our sustainable competitive advantage.
Each open has built a differentiated supply chain platform.
That create sustainable competitive advantage for three important concepts first.
We are one operating platform.
We provide the greatest number of functional capabilities, where our clients can use each open for multiple areas of their supply chain.
Versus other solutions that are largely disparate single point solutions.
Fulfill a need and only one area of supply of our client supply chain.
We eliminate the significant integration problem, our clients have when they deploy multiple solutions from multiple providers.
Our platform generates more value for our clients by allowing them to focus on orchestrating and optimizing the end to end supply chain from one platform from supply to sales versus optimizing one function at that time.
Second we bring real time data from our client partner community to our platform through our proprietary network, where 400000 reusable connections.
Our network connects the thousands of trading partners, our clients need to orchestrate their complex supply chains to a platform, enabling alive and connected supply chain.
Operation Center.
This compares to the current alternative a siloed applications connected with frankly.
Spreadsheets and emails.
Lastly.
Because we are both broad and deep.
We are increasingly attracting more integration partners that want to build their growth.
Along with ours.
A great example of this is our recent announcement that KPMG is building a practice around it open.
We are the largest provider of cloud software for supply chain we.
We have the most functional capabilities.
We have a large network.
Eat open grows faster as we get larger.
As you remember in October each open published its inaugural ESG report highlighting the company's commitment to environmental social.
In governance practices, including sustainability.
Workforce diversity ethics and compliance.
And how we help our clients improve agility and resiliency in their supply chains.
Let me provide some details regarding our ESG initiatives.
Last year either.
Demand for <unk> solutions, which enables our clients to extend their supply chain capabilities.
By improving efficiency and effectiveness of logistics operations, we can directly reduce emissions as well.
<unk> global trade application utilizes our proprietary global knowledge repository.
To empower teams not only to reduce costs improve efficiency.
But also ensure timely decisions to ensure governance adherence to the changing environment of global trade.
Clients like Air France KLM.
Jordan, a growing network as well.
By implementing a multi enterprise inventory optimization strategy.
Utilizing our business planning and supply chain management solutions, we are proud to support Jaguar land Rovers re imagine strategy, which incorporate sustainability.
Having a more connected supply chain not only will help them achieve sustainability goals.
But also the value that Jaguar originally found when they implemented our solutions.
We held our first user conference connect in March.
It's sold out two weeks ahead of the conference.
I have to tell you I've been doing this for a long time that rarely happens I can't remember ever happen.
We are holding our European conference in two weeks that sold out we.
We are experiencing robust demand.
From new clients and existing clients.
We're also very proud the continued recognition we receive from analysts we.
We were named a leader in the IDC market scale.
Worldwide Global trade management applications.
This is the industry's only assessment for global trade management.
We were named a leader in the Foster wave channel incentive management Q1 report.
We're four states of heat opens CIM solution continues to capture your attention and win rate of technology industry manufacturing. Finally, <unk> was named a leader in the nucleus research supply chain planning technology value matrix for the third year in a row.
Lastly in March we announced that <unk>, our CFO will be retiring.
I want to thank Jack for his dedication over the past four years, completing six acquisitions with us and guiding us from a high private company through an IPO answered a global technology company, we are today.
Sure, it's a great brand.
Terrific partner, we will miss him greatly.
We announced this morning that Murray Armstrong.
We will take over as CFO on May 16.
Murray's incredibly well rounded financial experience cuts across several key areas.
Her.
Perfect strategic partner to help we are open to the next level driving growth as we scale the business.
From finance leadership positions at public and private SaaS and <unk> software companies to extensive water experience.
<unk> is the ideal fit particularly at this pivotal stage in our growth as a public company.
We're excited to welcome Marine So these are a family of giant will remain with us.
Through the second quarter to ensure a smooth transition.
In summary.
Our fourth quarter and fiscal year results were exceptional.
On their own merits, but.
But we delivered these results.
As we successfully integrated the business, 50% of our size in less than six months.
This is a testimony to the exceptional team we have.
We are excited about the multiple growth opportunities in front of us.
We remain focused on executing our core strategy.
With that I'll turn of Jarrett to provide more detail regarding our financial results.
Sure.
Thank you Michael I wanted to start by thanking all my colleagues at eat opened particularly EU, Michael the rest of the executive team and most especially my team in accounting finance and corporate development.
I believe you opened is in great hands with Maria Armstrong is the new CFO .
Working with the extraordinarily talented people at this great company for the last four years has been the highlight of my career.
It's also my pleasure to round out my 10 year here reporting on such a strong finish to our first full year as a public company.
As well as the title of the performance we have relative to the financial year, We just entered.
Let's start quickly by touching on our longer term growth trends and remind everyone. What we said last year.
And how we are progressing towards spend today.
Because of our momentum and progress we exceeded our long term organic revenue growth target more quickly than expected and are raising our long term organic revenue target to 12%.
We believe we can grow at this rate for a very long time and that said. We also believe we can improve the trajectory beyond 12%, which is why we're making the strategic decision to invest in growth.
We have operating leverage in our business, which you can see in our margins. We will operate in the mid Seventy's for gross margin and mid thirty's or greater for our EBITA margin.
We will continue to invest in our ability to grow faster as we grow larger balanced with the appropriate return on those investments we will continually reevaluate these targets and update you as our business expands and as we continue to invest in the company to accelerate our growth rate.
I wanted to provide a brief update of our recent acquisitions. We are near the tail end up the execution phase of our integration of Bluejay solution that closed on September one 2021.
Total synergies related to the recent bluejay combination are now projected to be better than the 25 billion. We previously stated.
And we have realized over 80% of those synergies as of our fiscal year end.
Total synergies related to the recent logistics combination are projected to be just over 10 billion.
The company expects to achieve between 70% and 80% of run rate savings by the end of fiscal 2023.
Realized synergies, we expect to be 30% to 50% complete in fiscal 2023 and to remind you. Those represented a portion of those action synergies that have been recognized in earnings during the period presented.
Although profitable last year logistics EBITDA wasn't significant in the vast majority of their EBITDA contribution comes from acquisition related synergies.
While absorbing the natural headwinds of the return from Covid on our expense base and slightly higher employee costs to the current labor market conditions, EBITDA would have reached $240 million or an expansion to 35% to 36% of revenue.
As we previously discussed we are making a strategic investment to further inflect our growth rate beyond 12% in the coming years.
This comes at a cost of $20 million in fiscal 2023 that will result in an EBITDA of 32% to 33% inclusive of those additional strategic investment.
More on this topic in a few minutes.
As Michael mentioned, we are pleased with our performance and delivered another solid quarter to end the year.
Next I'll review, our fiscal fourth quarter and fiscal year 2022 results and then I'll comment on our full fiscal year 2023 financial outlook.
Thereafter, we will open the call to your questions.
Yeah.
Moving to our P&L I'll talk about our results on a non-GAAP basis, we show a reconciliation to GAAP measures in the press release, which is available in the Investor Relations section of our website at E. Two open dot com.
We generated subscription revenue in the fiscal fourth quarter of $122 million, reflecting an organic revenue growth rate of 11% on a pro forma basis and as a result of additional sales from both new logos as well as cross sell up sell across our client portfolio.
The principal non-GAAP adjustments to revenue in the period is related to the amortization of the fair value adjustment to deferred revenue, resulting from the business combination in February 2021, which was material in fiscal 2022, but will be immaterial in fiscal 2023.
So that we can provide clear and transparent organic growth comparisons year to year. We will continue with this approach for the remainder of fiscal 2023 and will end the practice as we enter fiscal 2024.
Our fiscal year 'twenty three revenue will be strictly on a GAAP basis, and we will provide the non-GAAP revenue in the prior period, so as to maintain proper comparability.
As Michael mentioned earlier, our subscription growth rate is accelerating faster than our services growth rate due to the planned expansion of our channel ecosystem.
Professional services and other revenue was $28 million, reflecting an organic growth rate of over 7% on a pro forma basis.
We reported total revenue in the fiscal fourth quarter of $151 million, reflecting a total organic revenue growth rate of 10, 2% on a pro forma basis.
Our gross profit was $107 million in the fiscal fourth quarter, reflecting a 12, 7% increase in gross profit on a pro forma basis.
The increase in gross profit was primarily related to new subscription sales from prior periods. Our gross margin was 71, 1% for the fourth quarter of fiscal 'twenty two.
<unk> to 69, 5% in the comparable period in fiscal 'twenty one.
Adjusted EBITDA was $54 million on a pro forma basis, the adjusted EBITDA margin increased to 36% for the fourth quarter of fiscal 'twenty, two as compared to EBITDA margin of 33% during the fourth quarter fiscal 'twenty, one on a pro forma basis.
These periods do not include the full cadence of expenses, we expect to incur during fiscal 'twenty three as we turn to more normal levels of travel in person marketing events and office tenants.
Now I'll recap our full fiscal year 2020 results again, focusing on non-GAAP results. We generated total revenue in the fiscal year 'twenty two of $479 million, reflecting a total organic revenue growth rate of 11, 1% on a pro forma basis and $4 million better.
And then the midpoint of our revised guidance for the year.
Broken down by reporting category subscription revenue was $389 million, reflecting an organic subscription revenue growth rate of nine 8% on a pro forma basis.
<unk> services and other revenue was $90 million, reflecting a growth rate of over 17% on a pro forma basis.
The increase in services revenue for the year reflects a return to normal for our services business during the year.
As compared to fiscal 2021, which was impacted by delayed delivery of services due to the COVID-19 pandemic, especially early in fiscal 2021.
Gross profit was 344 million rising 13, 8% year over year, and representing a 71, 8% gross margin.
Our adjusted EBITDA was up 13, 1% to $163 million compared to $144 million.
In the prior fiscal year on a pro forma basis and ending the year with a 33, 9% adjusted EBITDA margin.
This quarter and in response to Investor feedback. We've included several new measures, including Unlevered free cash flow and adjusted earnings per share to provide further clarity and transparency to our financial performance.
We have also provided historical information on revenue from our recent acquisitions to assist in the understanding of our pro forma organic growth calculations as well as metrics for our trailing 12 months gross and net subscription retention rates.
We measure our unlevered free cash flow utilizing adjusted EBITDA less normalized capex to remove the M&A related activity within each component of free cash flow.
For the year, we generated $132 6 million and Unlevered free cash flow, which represents nearly 82% flow through of EBITDA to cash flow on a normalized unlevered basis.
We measure our adjusted EPS, starting with adjusted EBITDA, and then subtracting normal depreciation and interest expenses, our normalized income tax expense, we compute EPS utilizing an adjusted basic shares outstanding.
For the fourth quarter and fiscal year 2022, we reported adjusted earnings per share of <unk> 24 per share respectively.
This adjusted earnings per share equates to our as reported figures does not include pro forma profitability from many acquisitions.
Yes.
As of February 28, 2022, Peter opens trailing 12 months gross subscription retention rate was 95%.
And the trailing 12 month net subscription retention rate was 108%.
Just as a reminder, our net subscription retention rate includes upsells renewals and price increases as well as down sales in China.
Yeah.
Earlier this calendar year, we announced a share buyback program authorizing us to repurchase up to 100 million in our class a common stock.
And earlier this month, we announced an expansion of our existing terminal.
These actions along with our natural operating cash provides us with significant flexibility as we think about our capital allocation for the balance of the year.
We have the liquidity to fund the remaining purchase price payments of logistics, but 100% cash if we so choose.
We also have the ability with our balance sheet cash and cash that we will generate this year to execute our repurchase of outstanding securities given our current share price, which we intended to pursue in the coming months.
Now I'd like to finish by providing you with our guidance for the fiscal year, we just entered.
Fiscal year 2023.
We expect our GAAP subscription revenue for the fiscal year to range from 545 million to 553 billion, representing an 11, 4% organic growth rate.
Right.
For the full fiscal year of 2023, we expect total GAAP revenue to range from 681 million to 689 million, representing an 11, 2% organic growth rate at the midpoint.
As noted earlier, we expect subscription revenue to grow slightly faster than total revenue as our services revenue will grow more slowly as we increase our channel focus we began to see this in our most recent fiscal fourth quarter.
non-GAAP gross profit margin is expected to be in the range of <unk>, 69% to 71% of GAAP revenue.
Adjusted EBITDA is expected to be between $237 million to 243 million or <unk>, 35% to 36% of GAAP revenue prior to the strategic investments, we're making in sales and marketing.
Without this strategic investment we would be expanding our EBITDA margins from the 33, 9% reported for fiscal 'twenty, 2% to 35% to 36% for fiscal 'twenty three continuing the expansion of our margin as we grow and as we have experienced with our past performance.
Adjusted EBITDA, including this $20 million investment is expected to be between $217 million and 223 billion.
Or 32, 1% of GAAP revenue at the midpoint of this range.
Finally quarterly GAAP subscription revenue for the fiscal first quarter 2023 is expected to range from 129 million to $131 million growing 11, 1% for the quarter on a pro forma basis.
Yeah.
Allow me to underscore what we have mentioned in the past due to seasonality and timing of larger contracts, our quarterly year on year growth rate often varies from quarter to quarter and to illustrate a $1 million change in subscription revenue in a given quarter is approximately 75 basis points of growth in that given quarter.
We have 90 plus percent visibility into our subscription revenue, which is already contracted for fiscal 'twenty, three and have great confidence in our guidance for the coming year.
We have included in the earnings presentation, a bridge highlighting the components of our adjusted EBITDA guidance for the current fiscal year.
To recap and starting with our fiscal 'twenty two reported EBITDA, we will pick up approximately $35 million and expanded EBITDA from having a full year of bluejay and logistics and our reported fiscal 'twenty three results.
Our revenue growth net of incremental costs to support this revenue and which also includes the headwinds related to retirement of travel in person marketing.
Events and offices translate to a 25% margin on the incremental revenue, which is dilutive rather than expensive due to these headwinds.
We will earn an additional $25 million in synergies between both bluejay and logistics in fiscal 'twenty three.
Together and this gets us to a 35% EBITDA margin with $240 million and adjusted EBITDA.
The strategic investments in sales and marketing as noted of $20 million brings us to a projected as reported EBITDA of 220 million or 32, 1%, which is our guidance for the full year earnings in.
In summary, Peter open posted its fifth consecutive strong quarter as a public company.
Demand continues to grow for our solutions and we remain focused on executing our growth strategies to capitalize on the multibillion dollar market opportunity that lies in front of us with that we would now like to take your questions. Adam we're ready to begin the Q&A session. After a brief pause.
Yeah.
Thanks Jerry.
Give us a moment Turner cameras on and get situated and as a reminder, if you have a question to ask.
These chat me directly to be placed into the queue or use the raise hand function.
Yeah.
Our first question today will come from David Ridley Lane of Bofa.
Go ahead David.
Sure Good morning, Eric.
Good afternoon, I should say I understand the need to invest into the market demand here, but.
But how should investors judge the progress on returns.
This is geared more towards new logos the immediate benefit may not be as apparent in revenue.
The metrics that Youre looking at and what should investors expect.
Yes, what you can expect from.
Going forward is.
Greater bookings for us and pipeline build over the coming year and that will support expanding expanding our growth rate into 24, So we have to.
Through the <unk>.
Time between investment and then revenue flow through given our model. So we have long sales cycles, and then we have bookings that translate into revenue.
After that so you should see us expanding our revenue into 'twenty four.
Because of this investment.
Got it and then.
Interesting observation about KPMG starting to open practice.
And your and your commentary around services right are you starting to see that broader partner ecosystem contribute more and is that influencing sort.
The investment there how's the landscape changing for you.
Considerably.
As we noted our subscription revenue growth for 'twenty three is growing considerably faster than services and that's a that's a function of getting more subscription revenue through partners and through the ecosystem. So that starting and we frankly expect that to happen later in the cycle.
As we've talked about we invested in the channel.
Really starting the second half of last year.
<unk> made some really strong investments there it's coming through faster.
We expect that to continue and it's not just KPMG. We have several more that were talking to them. As we go forward. So we expect this to be a significant driver of subscription growth over the next three to five years, Yes, David I would I would think about it to add to that point as first the ecosystem starts to build their own profession.
<unk> services practice around our product.
And then as that matures, they start actually bringing to us new.
New subscription new product new penetration within those customer basis, but it typically starts with them participating in our services projects.
Learn our product offering.
And then subsequently the flow through on a pull through of of actual subscription software contracts.
Okay. Thank you very much thank you.
All right next question will come from Taylor Mcginnis of UBS.
Yeah.
Go ahead David.
Hey, Tyler how are you doing.
Yeah, Hey, Tim Thanks, so much for taking the question. So I wanted to touch on the <unk>.
Subscription retention.
And a person can you maybe provide one more contacts there is that for both EQM opened an blue Jay Z.
<unk> was in the business at the start and then secondly, if I look back I think metric was 107, which was basically in line with the total organic growth.
So because this year growth was closer to 10% on the subscription line and above that 100 binney. It seems that some of the new logo efforts you've done. This past year are materializing. So can you touch on that and how we should think about this metric as well as the mix of expansion and new evolve over time, given some of the best.
One is that you are making sure I wanted to chat.
About the.
Including Bluejay were not in a second but let's talk a little bit about the new logo sales as we've mentioned before a new logo for us comes in it.
A nice amount of around three to $400000, but we expect that new logo.
$3 million to $4 million 5 million clients and three to five years. So we see expansion with a new client base. So to answer. Your question. We can we started a new logo sales team beginning of last year and as we said that had materialize into revenue much more quickly. So to answer your second question, yes, it's because our new live has been more successful with the importance.
The new logos has a lot more to do with building and compounding our business overtime and just the revenue flow through.
Current year and Jonathan you can touch on the.
One of the metrics, yes, absolutely Taylor, we did go in and adjust to get to a like for like full year TTM measure. So it includes blue Jay for the full year. The other way I think about it as our growth rates ticking up our net retention ticking up the new logo bookings, we've seen tick up.
But the Rev. Rec around the new logo bookings is somewhat late in terms of how it impacts the revenue growth rate. So I think over time Youll see us continue to move as the cross sell upsell opportunity expands as we get farther away from the more time on target with the bluejay customers Youll see the 100.
We tick up and then you also see the growth rate tick up driven by even though small in relative nature. The revenue from the new logos that we signed this year will be more significant next year than they were last year, if that makes sense.
All right, yes that makes a lot of sense and maybe building on that so you talked about some of these key metrics right picking up but if we look at the full year subscription revenue guide and as well as the <unk> Guide. It's in line with what you guys have done the last two quarters. So can you maybe just talk about when you think about it.
When you just raised the long term growth guidance to 12% plus and I believe bluejay and logistics were growing at a similar level to eat you up in prior to their acquisition.
You know when Youre starting to think about when some of these cross sell synergies and that potential can really start materializing.
Yes.
So when we when we laid out at first comment the first quarter, we got visibility into good visibility, what we're going to do and.
It's very dependent as I noted in the in the call on the timing of when things renew and when things were signed and.
And those can have meaningful impacts on the growth rate in a given quarter, one way or another number one number two I think as we've as we've laid out in the past we are going to put out guidance that we feel very comfortable that we can meet and achieve.
And so we're not going to go to the very edge of what we think might be possible and then miss if.
If that helps kind of understand.
The more recent quarters versus our full year and Q1.
Got it that's really helpful. Thank you.
Our next question comes from Nick Mariachi from Craig Hallum.
Go ahead, Nick I hope answered your last name correctly.
How you're doing it.
Hey, I think it's Chad actually.
Got it Adam.
Maybe Nick Nick Ben it's easier to.
Anyway so.
Hey, guys.
Good to see.
So I'm sure we can back into this Gary but just.
Can you.
Can you give us an idea of what you're baking in into fiscal year 'twenty three guide for logistics and maybe even more specifically on the service and subscription revenue segments.
Yes, so we disclosed when we bought the business in March but it is growing we expect that to grow about in line with us at 10% plus 11% whatever you want to use in your model will be pretty materially close their prior year was <unk>.
$40 million in total revenue.
Some of which was.
Historic license sales for legacy products that similar with what we acquired with Blue Jay We will cease.
Doing those kind of bookings.
And Thats, where we derive.
And consistent growth rate that we're seeing in our business for the coming year. So if you think about that $44 $45 million revenue contribution.
Their services component is similar to ours, maybe a little bit more.
Slightly more on the services side than on the software side.
But not not drastically different okay got it that helps thank you and then.
Maybe for Michael So.
No.
Some players in your ecosystem have reported in the last week.
Notably Manhattan last night, or yesterday, and I mean.
<unk> bullish on the supply chain demand environment.
New logo activity very strong or at least they stated it was and it looked like in the metrics.
Talking about.
EMEA being strong.
U S being strong and kind of modernization of supply chain, and it's really happening and so forth and certainly your new logo bookings looked strong again this quarter.
Had SAP, which ironically talked very aggressively towards supply chain demand last Friday I guess.
I assume we should imply youre seem to see things from a demand signal standpoint in.
No.
Is there.
Whats the limiting factor for you guys from a from a growth acceleration standpoint.
Yes. This is one of the strongest environments I've seen and I've been in this particular market for essentially my entire career.
The reality is as companies have a lot of siloed applications that are on premise.
That sub optimize their entire supply chain.
They are changing and they're changing more rapidly. So this is a very strong environment as well in terms of limiting factors.
It's just when you have to put yourself in the shoes of our client base, which is very very large scale companies.
They know they recognize that when they install our software subscription with us.
Likelihood of 10 to 20 year investment of 10 to 20 year decision. So the nature of our sales cycles are long and oftentimes are booking start.
Once it is a bunch of years prior to when we sign them. So we're moving factor for US is on more starts and we in fact for US is getting more.
Pull through from the ecosystem as John mentioned.
And getting more partners kind of contributing to our overall revenue.
Really the reason for this strategic investment is to accelerate our growth faster than we are today. So we're seeing nice growth acceleration and we think we can do more and we're leaning into that growth yes.
And if I just maybe one last one for me if I look at the chart you put up.
Which which you kind of.
We're three timeline I don't either.
And then three kind of revenue subscription growth and net retention.
Items on there and.
You talked about at IPO fiscal year 'twenty three in the future.
And if I look at it and I understand conservative nature, but if I look at kind of new logo contribution and I understand the timing of revenue rec there.
And in the net retention expansion that Youre talking about go going forward.
And I don't want to kind of get ahead of you, but it is.
It seems like.
With 30%.
Bookings from new logos kind of roughly a third of the growth rate potentially from them that.
Let's just say, 110% net retention and only 12% subscription growth.
Seems pretty conservative.
And are you seeing timing and whatnot, but if that.
That timing.
Eventually kind of catches up right or in license.
I mean I focus on the plus.
Okay.
Andrew.
Yes, Chad we were we Werent doing no new logos before we were doing 15%. So it's a.
It's not a full 30% that's brand new from a growth rate perspective. So we were close to 10 with 15% coming from new logo, we uptick that to 30% from new logo and go into 12 I think it.
I think we see upside in the market to go beyond 12 and to make that investment.
I guess just kind of to my point, if we're flipping the script in subscription has been a really drives the growth acceleration.
The 11, 4% organic this year.
I mean 100 bps annually of acceleration there seems like.
Yeah.
A conservative way of looking at the growth rate of the business overall.
Yes, I think I would say that.
As it really public company. The most important thing for US is to set targets, we can hit and make sure. We can hit those targets we've done that now.
We're in a row.
And we've raised guidance and we've exceeded that as we win so.
We see a robust environment for demand, we have a very competitive advantage in our product.
600 of the world's best companies that we can do a lot more with a $1 billion.
The open Tam white space within the client base.
So yes, we think we can accelerate our growth as we get bigger for a long time to come and we think we can.
Inflect that growth curve upwards by making this investment and that's why we're doing it because we see such strength in the marketplace.
Of the 12% plus in the future.
I would say if I focus on the plants and then as we develop our next level information, we'll certainly update everybody as we go right now.
Great it's great to see the acceleration in all the metrics nice job. Thanks. Thanks.
Thanks, Ken.
Okay.
Final question comes from Mark Chapelle of loop capital.
Hey, Mark good Mark How're, you doing Mark Hey, guys. Thanks for thanks for taking my question.
No problem with the hearing for your voice.
Did we lose mark.
Okay.
He is coming back.
That better can you hear me, Hey, Mark Hey, guys. Thanks for taking my question.
And just with respect to the the ocean booking platform.
Osha booking platform have you seen any slowdown in that business given the recent port delays and congestion for building up around China.
We do we do see that we saw the uptick.
In September after Covid pretty dramatically and you really since the.
I'd say the December kind of timeframe, we've seen that kind of taper off.
Part of that is demand is definitely not as strong as it was overall so that's normalizing back almost to where it was pre pandemic and then certainly.
The lockdowns are in helping and obviously, what's happening in Ukraine isn't helping either so yes, we see that probably sooner than anybody and we're seeing it flow through on our daily bookings I'm, just just one comment on that though.
That has no influence on our revenue since we're not we don't have a volumetric component from the revenue side, so whether that goes up or down.
Our revenue has a business thing.
Okay. Great. Thanks, that's helpful and then on a similar vein given the trade disruptions related to the sanctions.
Russia have you seen an uptick at all alright productivity uptick in your global trade management business with GM.
Yes and also.
We have seen also an uptick not just for that but also because of the acquisition of Blue Jay and that those two solutions go hand in hand, if you go back to our overall strategy markets. We look for complementary solutions that add value to things, we have and we add value to the things we add to our platform and is a great exam.
Because we could ship something you have to kind of no you are allowed to ship. It there. So those two things gives us a very differentiated product, but in terms of sanctions I'll give you some examples.
These sanctions are changing daily and our clients rely on us to update that and update our software. So give you. The example every day, we make changes to that global trade platform.
<unk> put through to our client software version without them doing anything or not even knowing about it. So every day. We are updating the sanctions are that's one of the value we drive to our customers is to make sure that they know that they are in compliance just by operating our software. So it has been an uptick in also in terms of the valuable for our.
Yes.
Great very helpful. Thank you that's all for me. Thank you Mark.
Mark.
That concludes our call. This afternoon. Thanks, everyone for attending thank you.
Everybody.
Okay.