Q1 2022 Freshworks Inc Earnings Call
[music].
Good day and thank you for standing by welcome to the fresh <unk> first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
I ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference may be recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your host today. Jim. Please go ahead.
Thank you good afternoon, and welcome to <unk> first quarter 2022 earnings Conference call. Joining me today are duration lots of wisdom Fresh works, Chief Executive Officer, and Tyler Sloat.
Fresh works Chief Financial Officer.
Today's call is to provide you with information regarding our first quarter 2022 performance. Thanks.
Our second quarter and full year two.
All of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 95.
These forward looking statements are based on <unk> current expectations estimates business industry managements beliefs, and certain assumptions made by the company.
All of which are subject to change.
These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements.
A discussion of material risks and other important factors that could affect our results. Please refer to today's earnings release.
Most recently filed Form 10-K, and our other periodic filings with efficacy first.
<unk> assumes no obligation to update any forward looking statements in order to reflect events or circumstances.
Right. After the date of this presentation, except as required by law.
During the course of today's call, we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, which is available on our Investor Relations website at IR Dot <unk> Dot com I encourage you to visit our Investor Relations site to access our earnings release periodic SEC reports.
Today's call or to learn more about pressure and with that let me turn it over to you rich.
Thank you John Good afternoon, everyone and welcome to fresh with Q1 earnings call.
We delivered a really good quarter of results in Q1.
<unk> grew 42%.
$214 6 million.
non-GAAP operating margin was nearly breakeven and well ahead of expectations.
And we continue to drive the business, but efficient growth by generating positive operating cash flow in the quarter.
In Q1.
Continue to witness strong demand for our products.
Adding more than 2100 new customers.
We ended the quarter with more than 58100 customers, including brands like all months, California afternoon, Julien to give network in phoenixville.
Our net dollar retention increased to 15% aided.
Aided by ongoing improvements both in multi product adoption and Chuck.
This led to another good quarter for customer expansion in our business.
Yes.
The last earnings call.
I talked about the changing trends and customer experience in Seattle.
Have any consumer facing business is looking to engage with customers across the preferred mobile social and online channels.
We are prioritizing our product investments and all of these trends.
And in Q1, we released new capabilities in a conversational engagement product.
Messaging.
It offers sensitive is bought and conversational agent experiences over more digital channels.
We added text messaging at the new channels and enhanced capabilities for Whatsapp conversation.
These new capabilities.
<unk> businesses.
<unk> experience to their customers and automate support or text messaging and Whatsapp. In addition to existing channels that we support like Apple business chat and Facebook messenger.
One example is.
As a publicly traded retail company based in South Africa.
With over $1 billion in annual gaming.
The company uses are pretty bought and messaging.
On whatsapp to automate customer support.
<unk> customers track that augers surgical products.
We have base towards.
The retail giant.
As automated 30% of their support liquidity without chatbot solutions.
If customers need more help with Congress is Jason <unk>.
Grizzly handover to a human support each.
So when you have a global customer base bought talking to your customers and the language EBIT and this helps improve the customer experience.
We have now added support for 10 additional languages in a multilingual box product. So our box can now engage with users in 50 different languages.
I am excited to share that we recently launched artificial lift CRM for e-commerce.
This is a unified CRM combined marketing automation conversational support hence sales powered by our unified customer.
Let me share the story of the lip Balm company.
Our popular <unk> cosmetics brand.
Over.
100 products sold online.
They use the built in chocolate Big campaign.
CRM products.
<unk> revenue by dining personalized marketing campaigns on whatsapp to bring back customers, who have abandoned their shopping carts.
Their support team also had frequent inquiries from customers calling in to check the status of the auditors and now that is fully automated with RV small box purpose built for Shopify. This book is shortfall from Edison.
How 'bout agents are now freed up to perform more complex tasks.
Next to consumer brands and e-commerce companies.
Can now offer a personalized experience for buyers on modern messaging channels without new CRM offerings.
We're excited that fresh look see Adam for ecommerce is now available on the Shopify App store with the potential to reach over 1 billion storefronts.
We plan to extend integrations to other market, leading e-commerce platform in the future.
Turning to pursue as we continue to make progress in the mid market.
The German industrial global manufacturer of Google.
$3 billion in annual revenue to us for service to simplify it support for this 14000 employees.
And for service.
No one has visibility into its technology assets to give leadership a quick view of ITT performance.
We also added new enterprise grade it service management capabilities to pre service.
Through an expanded partnership with <unk> funding.
The new product integration and joined the support with <unk> 42.
<unk> provides our customers more visibility into their hardware and software.
Improving debt asset management capabilities.
You talked about expanding use cases for pre service previously so let me highlight a couple of examples of customers leveraging free service for Enterprise service management.
Our U S based multibillion dollar scientific instrumentation and software company.
Sure, Chris Steward to automate that internal sales processes.
The ability to integrate the custom built applications directly into precision.
Can more quickly receive email requests reagent order and close.
So it has been faster.
And then you had some use case is all but the.
The global sustainable footwear, and apparel company implemented for service to manage the entire employee Mexican.
I'd to facilities and HR, the company's employee facing team and automate and customize processes features falls into those gaslog to meet the needs of their departments and employee DSO.
We are really excited about the potential for service.
Any internal teams relate that in place.
On the partner front.
We and our partner summit virtually.
Asthma.
We rolled out the new tiered program and certification framework for our partners.
I mean, I think popular Dcs announced successful completion of 150 customer projects on the <unk> platform.
In addition to the debates provided to you.
Also announced partnerships with good data and yes for enterprise grade analytics and such.
To date.
<unk> partner program includes more than 500 partners in over 50 countries.
Overall Q1 was a really good quarter of customer and revenue growth combined with continued business efficiency.
Looking ahead, there is some market uncertainty with the changing macro environment and the ongoing one in eastern Europe .
While we have limited exposure to Russia, and Ukraine, Turkey.
Can you talk to the European market for any potential impact.
More importantly.
We understand that some of you may have family members of our presence in the region, who may be impacted.
I'll start with them and the people of Green tree.
As we move forward with the business, we will continue to focus on efforts on executing across sales marketing product and engineering to achieve our 2000 going into both.
I am excited about the tremendous opportunity across all three markets we operate.
Our experienced sales and marketing and <unk>.
As we continue to build the business.
Mix of sustainable growth and profitability.
I'll now turn it over to our CFO Tyler.
Further details about our financial business.
Thanks Chi.
And thanks to all of you joining on the call and via webcast.
Despite the volatile markets, we got off to a really good start for the year with another solid quarter of financial results in Q1.
We're seeing healthy market traction for our products as we execute on our priorities for fiscal 2022.
For our call today I will cover the financial results from our first quarter <unk>.
While providing some background on the key drivers and trends, we're seeing in the business.
Later, I will close with our forward looking commentary and expectations for Q2 and full year 2020.
As a reminder.
For our financial results I will focus most of my discussion around non-GAAP numbers.
These non-GAAP numbers exclude the impact of stock based compensation and related expenses.
Taxes on employee stock transactions.
<unk> acquired intangibles and other adjustments.
Starting with the income statement.
Revenue in Q1 grew 42% to $114 6 million, which.
Which includes a negative impact of a little over 1% due to FX.
We saw healthy expansion activity in the quarter and the largest driver continues to be seat or agent additions. As this is the simplest and most natural path for increasing usage of our products.
<unk> mentioned earlier, our multi product adoption continues to make incremental improvements as customers are using multiple products, especially in our fresh desk product line with the adoption of Omnichannel, where the combination of support desk and messaging.
Our ACSF product or service continues to be a big growth driver is mid market customers are finding tremendous value at our right sized solutions.
In Q1, we maintained a healthy non-GAAP gross margin of 82, 2%.
This was down slightly from the prior quarter as we had a higher contribution from our lower margin product that includes pass through costs from an outside provider.
Our non-GAAP operating expenses were $94 8 million for Q1, an improvement of $3 $4 million compared to Q4.
Most of this improvement came from non-GAAP G&A expenses as this decreased $5 million compared to the prior quarter. As Q4 included higher costs related to a litigation matter that was settled in Q4.
non-GAAP R&D expenses increased by $1 $4 million quarter over quarter as we continue to invest in our product and technology efforts.
We also invested in our go to market efforts.
non-GAAP sales and marketing expenses were relatively flat compared to the prior quarter. As Q4 expenses included costs from our refreshed conference were not included in Q1.
Our revenue outperformance combined with expense improvements led to a non-GAAP operating loss of <unk> six.
$6 million for the quarter.
Resulting in a nearly breakeven operating margin on a non-GAAP basis.
We believe this clearly highlights our ability to drive business efficiencies as we continue to scale and grow the business.
Turning to our operating metrics, our net dollar retention rate increased 1% to 115% from the prior quarter.
Constant currency basis. This figure was 116%.
This number not only reflects the robust expansion activity from our customers, but also the incremental improvements we're seeing in multi product adoption and churn in the overall business.
As we've said before we.
We expect this metric to naturally land and 110 plus to low teens range for the business for the foreseeable future. So we're pleased with this performance.
Our second operating metric of customers contributing more than $5000 and <unk> grew 27% in Q1, ending at 15639 customers and now represents 86% of our era.
Our larger customers contributing more than $50000 there are.
This customer count grew 54% ending at 1547 customers and represents 42% of our IRR.
Our total customer count grew 15% to over 15100 customers as we added over 2100 customers in the quarter, reflecting the highest net adds since Q3 of 2020.
Similar to prior quarters. The average revenue per account continues to increase and contribute to our revenue growth as customers are expanding on our products as we engage in larger deals.
Now turning to billings and the balance sheet items.
Q1, calculated billings was $128 $9 million.
Reflecting 32% growth year over year.
As you know the billings growth rate can fluctuate from quarter to quarter based on a number of factors specific items in Q1 include approximate impacts.
Billings duration mix a negative 2%.
Early renewals and FX movements each negative 1%.
And reserve activity of positive one 5%.
Normalizing for these factors calculated billings growth would be approximately 35%.
From a new business perspective, billings growth was impacted by a lower number of large deals closed in the quarter.
While we added a healthy number of new customers in Q1.
The average customer size was smaller compared to prior quarters as our fuel operations continued to build out and ramp up productivity for the mid market and larger customers.
We're also seeing a very competitive hiring environment on the go to market side, especially in Europe .
So this has impacted our sales realization in that region.
While we don't manage the business to our calculated billings metric due to the overall uncertainty around European market and the time. It takes to build up go to market operations, we expect the calculated billings growth to moderate in Q2.
Moving to our balance sheet, we ended Q1 with cash and cash equivalents of approximately $1 2 billion.
Down from the prior quarter as we used approximately $120 million.
To net settle vested equity amounts and meeting tax requirements, which we noted on our prior call.
We plan to continue to net settle shares they expect to use approximately $25 million.
In Q2.
Nearly all of the net settle activity amount was captured in our cash flow from financing.
So this will reduce our cash balance and as a reminder, does not impact free cash flow.
In Q1, our operating cash flow was $1 $4 million, which further underscores the efficiency of our business model, even as we invest for growth.
Free cash flow, which includes the impact of Capex and capitalized software was negative $1 $4 million and ahead of expectations as we realized savings in the quarter and also have some payments shift to later in the year.
As a result.
We expect free cash flow for the full year to improve by $5 million to negative $20 million with Q2, and Q3 estimated to be negative $10 million each.
For Q4, we expect to be slightly positive and positive thereafter.
Given the volatile economic environment I am pleased with our ability to manage through these times and do it prudently.
In terms of share count we.
We had approximately 317 million shares outstanding on a fully diluted basis using the treasury method as of March 31 2022.
A few items to note as we move to our expectations for Q2 and the full year.
First on revenue.
Our revenue guidance estimates are based on the currency rates as of the end of Q1.
Consistent with our normal financial planning processes.
Using currency rates as of the end of Q1, we're expecting FX to have an approximately a negative one 5% to 2% impact to Q2 and a negative one five impact for full year 2020 growth rates.
Thus far in Q2, we're seeing increasing strength of the U S. Dollar and if this trend holds would result in additional negative FX impacts to our results, which is not included in our guidance.
Also related to revenue, we've made improvements to our financial operations in areas of collections in reserves, which we've called out previously.
These improvements have created slight benefits to our revenue the past couple of quarters, but we do not expect that to continue going forward as we are nearing optimal levels.
And third as a reminder from our prior call Q2 expenses include the impact of our annual merit cycle and other related costs, leading to increased expense this quarter over quarter.
In addition, we have timing impact of certain Q1 projects and investments shifted to Q2 and later in the year.
We have factored these impacts into our estimates going forward.
So for the second quarter of 2022, we expect.
Revenue to be in the range of $117 million to $119 million.
non-GAAP loss from operations to be in the range of $18 5 million to $16 $5 million.
And non-GAAP net loss per share in a range of eight to six.
Assuming weighted average shares outstanding of approximately $284 4 million.
For the full year 2022, we expect revenue to be in the range of $495 5 million to $501 $5 million.
non-GAAP loss from operations to be in the range of $43 5 million to $37 5 million.
And non-GAAP net loss per share to be in the range of 18 to 16 pets.
Assuming weighted average shares outstanding of approximately $284 4 million.
Let me close by saying that we are off to a good start to the year.
And with that let's take your questions operator.
Okay.
If you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And our first question comes from the line of Scott Berg with Needham. Your line is open. Please go ahead.
Yes.
Hi, Duane congrats on the quarter and thanks for taking my questions here.
I guess a couple of <unk>.
I want to start with the net revenue retention, so pretty pleased with cross selling additional modules or at least seeing some additional traction there.
Should we think about the typical customer today in terms of what they are landing with or what they are buying is there a pattern that's kind of emerging that maybe easy to repeat or is it just general customer satisfaction product up leading them to buy more.
Thanks for the question Scott.
Our multi product reduction first of all I would say we are happy with the way net dollar retention has been tracking, particularly driven by multi product adoption.
Churn improvement this quarter.
So the <unk>.
We have told that we expect to be a 110 to mid teens kind of double redemption, but.
Some currency basis 2016, so we're obviously happy with that.
Our multi product adoption numbers also improve like last quarter I think we mentioned that it was 21% Debbie.
A slide.
No we've done them, but is that 22%.
For Florida customers using modelo especial explode it what is primarily driving this fuel.
Are you seeing one.
Omnichannel.
Chris desk customers, who.
By the Omnichannel products. So that is one we also see customers using a fish test product to refresh the messaging product that is in line with the trends that youre seeing in businesses adopting conversational engagement.
To kind of engage with customers on digital channels. So that is available but it would be.
<unk>, which we expect moving forward.
Sure.
Last week, we also announced our.
Unified CRM for e-commerce, so the weekend actually.
It's too early but can become basically a total year.
The unified see Adam can actually help us multi persona beads that customers can land, but.
Like all you say, it's only support marketing and then kind of add on upgrades to our.
The full suite, so I think we have.
But as of now primarily drivers of Omnichannel.
This can conversational messaging, we also have customers within first half comparison, probably the top two drivers.
Drivers.
Thanks to you that's Super helpful. And then Taylor from a follow up perspective, I wanted to delve into the European hiring.
We get those I guess the companies having their I guess two part question. One can you quantify maybe how far behind you are on your hiring plans there and then secondly, how do you correct that going forward at this point outside of just throwing more cash it's somewhat I don't know if you're changing how you're recruiting over there to maybe try to get caught up.
That's all I have thank you.
Yes, you bet.
Thanks for the question Scott.
Actually the hiring.
The impact is mainly from attrition we saw last year.
Actually.
Have hired back and that started to catch up in the field and well continue to hire in the field in almost all areas.
And we've also seen attrition get better this quarter than what we saw last year and I think last year was.
Probably part of the great resignation that we talked about that we were not immune to it. So I think we experienced what a lot of other companies experience as.
As we rehired those folks take time to ramp.
And as they are ramping there getting to know refresh works and getting productive and so we.
Felix we're starting to get back on track, but.
But again, it's not that I can.
Not an ongoing thing I think it was mainly from impact of towards the tail end of last year as we're coming back into it in terms of overall philosophy, we're doing a lot of what I guess a lot of other companies are doing as not just yield or anything else. It's about making sure. Our employees are just having an incredible experience working on fresh works, but also making sure they're fairly common.
David It's one of the thing Thats driving our expense that's coming up in Q2, because our entire focal process actually kicked in on April 1st which it typically does that's one of the things that is raising the cost for.
For Q2, compared to Q1, which is those compensation adjustments.
Got it helpful. Thanks, again, and congrats on the quarters results.
Thanks Scott.
Thank you and our next question comes from the line of Brad Sills with Bank of America. Your line is open. Please go ahead.
Oh, great. Thanks, guys for taking my questions.
Just one to start please on the the traction youre seeing in that customer segment greater than 5000.
Real nice results here, 27% year over year growth holding with that high 20 as you saw last quarter, you mentioned some deal size coming down there a little bit should we take that to mean theres potential upsell opportunity maybe some of these enterprise customers are starting with a smaller footprint <unk> got a lot of new product out here that youre seeing some good traction cross sell could there be a cohort of customers.
There that we might see.
The opportunity to up sell more so than in the past.
Yes, thanks for the question Brad.
So overall I would start by saying we had we are pleased with how we did from a customer growth standpoint. This quarter, we as we mentioned in the call.
Added 2100.
Tumors and that does.
The highest.
Out of customers.
Since Q3 of 2020 so.
Clearly a lot of those custom.
Customers came from smaller D. So rich.
Also we saw an.
The increase in customers of the <unk> items. So these are.
Positive things.
<unk> mentioned in the script so.
In Europe , particularly we did close a few larger beef, but we see that as an opportunity given our multi product play we see that and we don't specifically I just would like to remind.
Everyone here.
Chris Phillips, we don't listen to the held for Deere in Rabbit focused squarely on Midmarket and SMB customers. So a lot of times when we land large basically managing to a greater than 50, K remember so so that they.
I would like to be.
Content that <unk> give us the opportunity to expand into larger deals over time.
Excellent great to hear thanks, so much and with the launch of the.
E Commerce solution.
Does this mean for your kind of overall footprint in the front office with <unk> got sales CRM now you've got E. Commerce really rounding out that suite do you think that customers might land with ecommerce and then add CRM sales.
Vice versa is this more of an up sell opportunity just any expectations in the near term for that thank you so much.
Yes.
The way to look at.
Specialty item for E. Commerce is more like a vertical solution for DTC brands and consumer facing.
Our.
E Commerce companies, which want to engage with customers on digital channels. So what do you really.
Launched.
Given the.
The opposite would be for DTC brands e-commerce been really good.
A full.
360 view of their customers.
By combining data from the Shopify.
Orders the lifetime value of the customers in conjunction with <unk>.
That is C of conversations that the business has had with the customer and also have visibility into the marketing campaign for the customers responded too so that kind of visibility was not available too.
E Commerce companies and sellers.
For them to understand.
Notable debt buyer, so thats, what we have launched and we will continue bringing the power of.
Unified customer recording.
Because over time.
Thanks Girish.
Thank you.
Thank you and our next question comes from the line of Ryan Macwilliams with Barclays. Your line is open. Please go ahead.
Thanks for taking the question sales and marketing as a percentage of revenues came in nicely below our expectations for the quarter Todd.
Tyler maybe just besides the refreshed conference what were some of the puts and takes that led to this lower spend maybe versus oxide emissions.
In general it was mainly the refreshed conference from last year. We also had some other events that we were spending money on.
In Q1, we had things like our scale, which was originally going to be a person that had been a virtual event, we ended up saving some money there.
We did hire.
Pretty aggressively and we continue to do so and we're going to work.
Going to continue to do that was adding some.
Some incredible talent.
Across our marketing to sales organization, so we're pretty optimistic about that.
And then I mentioned.
Optics for Q2, and what we expect is that a lot of the compensation adjustments that are normal it's part of our normal focal process those kick in in Q2 and some of those are effectively noncash because things like adjusting our.
Vacation balances and whatnot that just hit your P&L, but theyre not necessarily the cash into a onetime adjustment.
But the refresh event and some other kind of one offs or really the differences between the Q4 and Q1, even though head count went up.
I appreciate that and just on your comment for calculated billings growth to moderate in second quarter do you mean on a normalized basis as well and then can you just kind of elaborate maybe on some of the macro challenges that you highlighted impacting how you are thinking about.
Growth there over the next few quarters. Thanks.
Yes.
We're essentially looking at billings growth number and again, we don't manage to billings billings is a lot of nuances to it so we kind of call. It as we see it we can make some estimates but.
Billings come in as new deals closed right, they're going to have different mixes in terms of whether they are paid annually or whatnot. Our expansion motion is actually pretty unpredictable as how it relates to billings because as you can imagine that if a customer is expanding in there on an annual deal that often results in a stub.
Not a full annual payment.
So we kind of we look at it we can kind of estimate and based on what we see we are a little bit cautious just based on the macroeconomic environment in Europe .
I don't know if anybody knows what's really going to happen and we are a little bit more cautious where tentative.
We're growing and where it feels like we have folks that are ramping up there.
Coming into their own in terms of.
As they ramp getting productive, but that being said we are cautious on the whole macroeconomic environment in general.
And through the more appreciate the color guys.
Thank you and our next question comes from the line of Mark Murphy with Jpmorgan. Your line is open. Please go ahead.
Thank you.
How much difference in business confidence or deal pipeline.
Bookings growth do you see if you try to compare right now.
Especially between North America and.
And EMEA I think I think specifically.
We're mostly wondering just how is the tone of business in Europe .
If you think of it kind of outside of your own sales ramping in productivity.
What is the tone coming from customers I guess, considering the proximity to the war there.
Yes.
Thanks for the question Mark.
First off let me start by acknowledging what we already said that.
We have seen.
Some softness in Europe , primarily because we didn't close enough large deep. It also has to deal with some seasonality in Q1 that we see compared to Q4.
As you know a lot of mid market deals closed, but on the macro itself.
Specifically to the ongoing war.
Okay. So I think.
We are consciously observing what's happening we don't have we.
We have limited exposure to Russia.
<unk> and <unk>.
It is currently less than 1% of our revenue from that region. So.
We're not necessarily seeing a slowdown from a macro standpoint.
In Europe so.
And we are working to fix our execution challenges in terms of ramping up of the.
GPM folks hiding beat us investing in.
Enablement.
But when you look at all the product investments that we're making we are confident that.
While being cautious about the macro the confidence that our big markets give us the ability to keep.
Executing and put in a long time.
Okay.
And then Tyler just a quick follow up for you when the comment on the Q2 billings.
You grew billings, 35% normalized in Q1 I understand you don't.
Really manage to billings, but I'm, just curious because I think youre, saying it'll slow in Q2.
Census already has it slowing in Q2 I believe if I wrote it down right.
Something like 27%, 28%.
And I think possibly even slower in Q3, so I guess I'm just trying to understand are you expecting us to hear that comment and <unk>.
And actually kind of reduce it further or do you think I mean, if we're already kind of contemplating.
Is something like seven or eight point do you sell in Q2 do you think that that's sufficient.
Im Mark a more speaking to the quarter over quarter.
Parison from Q1 going into Q2.
Okay. So the sequential comparison.
It may be that we expect it to moderate from Q1.
Growth rates.
The sequential billings growth rate.
That's sort of comparing to what consensus is out there, but where I'm more speaking to our growth rate in Q1, we would expect it to moderate a little bit in Q2.
Okay, so kind of less than like a less than a 5% sequential just to be clear on that.
Well, Mark we're not guiding to a number I'm, just saying that we would expect it to be a little bit less growth rate than we had in Q1.
Okay got it thank you.
Thank you and our next question comes from the line of Ryan <unk> with Morgan Stanley . Your line is open. Please go ahead.
Hi, Thanks for taking my question maybe.
Maybe go back into some of the broader product conversations around e-commerce, and how it is and maybe the sales and marketing push and even longer term fresh team I'm just kind of wondering what the status is on that and how can fit in the portfolio longer term.
I'm, sorry, I couldn't hear the question can you please repeat.
Okay.
Sure.
Wanting to see if you could talk a little bit more about how fresh sales of fresh market are doing and maybe looking out a few quarters.
Our fresh team within the product portfolio and kind of how that is.
<unk>.
Sure so.
So actually.
Said like fresh sales the newly launched <unk>.
CRM for E Commerce product is a combination of <unk> fresh market at in conversational engagement. So this is the first.
Unified CRM product that we have launched based on their use.
You see identified customer record that's built on the new platform. So we are very encouraged by the early results that we're seeing we called out the use case of the mid bump company, which is one of our early customers.
On the broader prestige.
Product, we are seeing that business, even though it's early days growing nicely in terms of.
Both in the.
Sales CRM market as well as the marketing automation <unk>.
I would say, it's still an incubation.
It's too early to comment on our plans for <unk>. So.
Sure.
Talk to you about the admin, it's more meaningful in terms of contribution.
Got it thank you.
Thank you and our next question comes from the line of Brian Schwartz with Oppenheimer. Your line is open. Please go ahead.
Hi, This is theater tune on for Brian Schwartz. Thank you for taking my question.
I had a question on your go to market motion and specifically your partner ecosystem. So.
Fresh service and fresh deaths, continuing to move up market and with the strong momentum that you're seeing.
And the largest customers can.
Can you walk us through again, how you think about the partner ecosystem and maybe also how we should think about the interest of larger partners, helping your ambitions to move upmarket further and then I have a second question for Tyler.
Sure.
Okay.
First off let me start by telling you that we're not necessarily targeting a move into the larger enterprise that is not part of our go to market motion.
While our focus is still SMB and mid market, we do have.
Dean from larger companies coming to us.
Specifically when they.
They are looking at is to replace let's say an enterprise solution makes sense, though our sales force. So we have had been.
So our partners, specifically <unk> and <unk>.
The single and multiple dimension I would say is stocked with the Si partners.
Poke about Tcs, which is the large tier one site, but they have a special group for us maybe understand that fresh looks products actually do not require the traditional 12 months.
18 months implementation cycle. So at the high velocity model that they have actually completed 150 projects, mostly mid market companies, but.
Our product can be taken later in the eight to 10 weeks. So they say companies are adopting newer velocity model to be able to bring us to market. So that is working for us in terms of how we drive customization and integration needs of mid market company. So we use our app marketplace that <unk>.
<unk> can build custom apps.
Which are required by mid market companies, so kind of integrated into their systems in house systems.
Deep darkness actually build apps to make that happen. We also have so Dave you have more than 500 channel partners and more than 50 countries that they source leads.
In terms of bringing new business.
The official.
Our customer base.
Got it. Thank you that's very helpful.
And if I can ask the second question.
Tyler so on your international exposure.
Given that 85% of your head count is located abroad.
I think less than half of your revenue is derived from outside of North America could there be a larger FX impact your expense line that provides a tailwind to margins or.
Is the dollar amount affected by FX somewhat balanced between revenue and expense.
Any color would be helpful on that.
Sure.
And thank you for the question.
The majority of our head count are in India and the <unk>.
<unk> has in general how it up against the USD.
That being said it is starting to move a little bit.
About 10%, but it definitely hasn't moved as much as the pound and euro. So our revenue exposure has been greater than our expense exposure.
So they haven't quite been lining up.
Been able to run the business really efficiently and did really well financially in Q1.
Even with the topline FX exposure.
Exposure, but but theyre not quite matched up.
Okay, great. Thanks for taking my question.
Thank you and our next question comes from the line of Shneur <unk> with Baird. Your line is open. Please go ahead.
Hey, Thanks, Scott <unk> on for Rob.
Just a quick follow up on the lowered therefore portion of the revenues.
Due to the lower number of large deals.
Closing of the quarter, mostly Europe related if I got that right and the average customer size of those like smaller compared to prior quarters. If you can provide some color on.
Like what you saw.
In terms of like the mix of deals I think you mentioned.
The annual versus monthly.
If the deals are shifting in any meaningful there.
The monthly versus annual mix I know it has been kind of pretty steady or growing the annual mix was about 62% last year.
You mentioned, so just kind of wanted to get a sense of the shift happening within the within the customer base within the mix.
Yeah, Hey, this is Tyler.
First of all in general.
Really pleased with revenue performance in the quarter and overall financial performance. The commentary was mainly around billings and when we look at billings. We said we didn't close as many large deals when we kind of called out.
Specifically Europe and teams still ramping out there.
On the flip side, we also said that we closed.
New more customers than we have in the last year and a half and that's a really positive sign with over 2100, new customers. So clearly a lot of those customers are smaller.
In fact, our CRM product, our new CRM products driving a lot of those adds which we're super optimistic about even though it's too early to talk about the contributions from that there was no meaningful shift in billing terms for new customers.
I did mention when we have expansion, which was still healthy.
Which is also reflected our net dollar retention number that's an unpredictable number windows expansion comes through because as customers expand that could be paying stub stub periods. So if they're on an annual deal in there.
Expanding with just four months left in there do oftentimes that theyre just paying for a four month stuff as opposed to a new annual deal.
That expansion motion is a little bit less predictable as it relates to billings, but in general no meaningful shift in billings duration.
Got it got it thanks for the clarification I appreciate your color and just one for Gary ratio.
I know you kind of briefly mentioned about the E Commerce plans.
Forget the comment on the Shopify partnership specifically.
How is that shaping up.
Kind of when do you expect in terms of the timeline like rough timelines.
Scott kind of momentum to pick up.
How do you analysts and visit stack.
Okay.
Sure sure.
So.
What we have.
Launch to date.
Yes.
Our CRM product that is tightly integrated with the chocolate ecosystem. We are listed on the shopify marketplace. So for the first time thoughts Shopify sellers, we have brought together capability that helps them drive personalized marketing campaigns.
Self service automation through bots.
And conversational agent experience through life support agents and the agents as well as the marketing campaigns can now work across whatsapp across text messaging or any of the other modern digital channels.
The plan is to expand beyond <unk> and go into other ecommerce platforms like commerce image into coming later this year.
So.
We are.
Excited with the early traction that we are seeing we have closed a few customers and we will share more but.
Maybe in the coming quarters, we will share.
More stories of customers and what we're hearing from the market.
Got it alright, thanks, a lot I appreciate it thanks.
Thank you and our next question comes from the line of Brian Peterson with Raymond James Your line is open. Please go ahead.
Hi, gentlemen, thanks for taking the question. So I wanted to follow up on the Parker developments can.
Can you maybe talk about like how much of the revenue or new bookings is coming from the partnership channel today as we see that growing.
Does that mix increase and what are the longer term ramifications from kind of a LTV to CAC perspective.
Yes, so Brian I'll start with that so partners are.
Really important part of our go to market motion right now, it's about 15% to 20%.
R R.
Our business is coming from our partner channel now the partners. It is a mix where we are.
Partners or <unk>.
Working kind of solely in some areas that we don't have natural language capabilities.
Also partnering with partners.
In Geos in North America, and Europe , where we have field presence.
The compensation mix actually is different as well in some of those cases, right, where we're compensating partners differently based on what they're doing with US I don't think it'll have a meaningful impact to our LTV to CAC over time, except for the fact that when as that increases.
We should be able to drive efficiencies from from that channel.
Understood in Tyler I wanted to follow up and I don't want to belabor. The point here on billings, because I know you guys don't manage to it but when you are talking about the moderation in the second quarter versus the first quarter I just want to be clear is that versus the 32% reported or the 35% adjusted when you were making that comment thanks, Scott Yeah.
Yes, that's against that 32% reported.
Understood. Thanks, a lot.
Yes.
Thank you and our next question comes from the line of Mario Molina with Piper Sandler. Your line is open. Please go ahead.
Hi, This is Mario just taking that just asking question on behalf of Brent. So as we think about the size of the different customers you serve.
It would be helpful to get some color on what proportion of the customers in the <unk> or the <unk> cohorts are customers that sort of graduated into that scale of spend.
Customers kind of starting out smaller or are they sort of already at that level of spend when they first sign on.
Yes.
Tyler, we actually haven't broken out.
Yeah.
The makeup of those of that <unk> base and the customers in that area based on where they came from a healthy mix of both read our expansion both really strong and so we do have customers, who graduate up and if you go back to our kind of like our IPO presentation. We demonstrated customers, we landed really small and then.
Now considerable multiples of what they landed with us on but.
But we are also landing with larger customers as well.
The lands with larger customers is not as often.
<unk>.
Not uncommon to land above 50 K.
Especially with our desk and service offerings. So it is a healthy mix of both we just haven't broken it out yet.
Got it got it. Thank you and then just one more from us in terms of adoption momentum, where there any products that kind of surprised you or otherwise stood out from a demand perspective during this quarter.
And if not maybe any any verticals, where you're seeing more success, our outsized success driving adoption.
I can take that model.
So we continue to see healthy demand for DSM product or service.
Today, the most capable on Connecticut. So there's no we continue to win against them and replace them.
In both cases.
<unk>.
Our CRM.
We are really excited about what we are hearing because this unified solution.
Is being appreciated by customers for the value that we're bringing visibility into their customers that uses that we are bringing and of course.
The CX business.
Conversational support and Bob This is.
Attend but every consumer facing businesses wanting to add on the ability to engage with their customers on digital channels and we are seeing.
Like the early signs of good traction there as well.
Got it that's helpful. Thank you.
Thank you and our next our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open. Please go ahead.
Hey, guys. This is Ryan Krieger on for Alex. Thanks for taking the question just a quick one on inflation I'm sure you guys are seeing that impact cost to some extent. So I'm just wondering how youre thinking about potential pricing changes to compensate or how do you manage pricing or think about that dynamic going forward.
Yes. Thanks, Ryan this is Tyler.
On costs for sure and we've seen it, especially mainly on compensation right.
And I think everybody has seen it and so we're obviously doing the right thing by our customers.
We don't have a like a price increase strategy has really never been part of the company.
And I can't say, we have a structured play to go out and systematically tried to increase prices across the base for our customers clearly we would want our customers to pay for the value that they're receiving.
But I can't say, it's part of our our strategy to just wholeheartedly just go do that.
Alright, thank you.
Thank you and our next question comes from the line of Brent Thill with Jefferies. Your line is open. Please go ahead.
Hey, Tyler good profitability in the quarter, but youre not guiding to any improvements.
Maybe if you could just talk through if growth continues to slow and I think the.
The broader concern at the macro.
Had a little south and in the interim our you can either any spend through it or be do you feel like youll put more of their brakes on expenses and show a little more leverage how do you think about that if we continue on the pace that we're on we're continuing on the macro side.
Yeah.
So Brian I mean for growth like what we guide to what we see right. We are cautious because again Europe I don't know if anybody really understands what's going to happen and so we are cautious in what we see there.
In general, though I think we've already demonstrated that we are running a really efficient business right.
We did really well in Q1 against R. R.
Our loss number and our cash flow number and we kind of look at the whole year now and we're able to talk about improvements we're going to make throughout the whole year, we brought our burn number down and our operating loss number down pretty considerably and so nothing has changed there and we have kind of been running this model that we.
Like we like to spend after we achieve certain numbers.
We are still investing.
Heavily in go to market side, though and we are going to continue to do that because we see traction and we have all these different levers right. We've got.
Inbound motions and our field presence.
And across multiple geographies and multiple products and so we've talked about some of these products that we're actually really excited about.
And if there are certain areas that we don't see the traction we still spend but we don't we don't try to spend out out of it.
We will go deploy capital in other areas that we think we can get a better return.
Thank you.
Thank you and our next question comes from the line of David Hynes with Canaccord. Your line is open. Please go ahead.
Hey, this is Luke on for DJ Thanks for taking the question.
I was wondering if you could refresh us sort of on the vision and strategy for <unk> sales in the market and the reason I ask is because when I think of Zen desk, they sort of had a hard time breaking into the CRM market and the same could be.
<unk> argued for hotspot breaking into service.
So I guess the Genesis of my question really is why do you think others have been slow to bridge that gap and what are you doing differently.
Do you think to achieve a better result.
Yeah. Thanks for the question Luca.
See our strategy for <unk>.
Not just for sales, but the broader CRM market is how do we solve for todays biggest problem in the Seattle market, which is data that is siloed between marketing teams sales teams and support teams not to mention the other teams like customer success.
That's the core of our.
Religion, but we want to bring in out of the box product experience farsi atom by combining all of this data into a unified customer record. So.
What you saw that on spent last week was.
As we move one step closer to unlocking distribution of a unified customer ricard today, we have done that for E. Commerce sellers, but we are able to combine data across marketing call additional support self service bots SLS.
Sales into a single unified customer to call, we are making progress to bring.
This product on to the unified customer record and we truly believe that company.
Companies of the future, which do not have a legacy of.
Existing sales see Adam.
Marketing clubs are companies that want to breakdown, the silos will be able to adopt.
A.
A single customer cloud as opposed to these siloed, so that TV and we are making good progress and the share more details in the coming quarters.
Excellent that's it for me thanks.
Thank you.
Thank you and our last question comes from the line of Pat <unk> with <unk>.
A&P Securities. Your line is open. Please go ahead.
Oh, great. Thank you.
So just just very big picture here, because we've been talking about it a lot.
You guys beat on revenue, but you missed on billings and the tone is kind of cautious so just so investors understand.
Were you happy with the performance of the sales organization in the quarter did did Jose actually hit a number or was it a bit soft.
Yes.
So thanks for the question So let me start by saying.
But we really feel good about Q1, how we performed and we exceeded revenue expectations and.
We.
Yeah.
We continue.
Continue to see.
Efficiency in that.
Business. So we're happy with how we came in from the operating margin and net dollar retention.
So one of the things that we kind of and you'll notice that we don't manage to really large customer sites or we don't.
To hit.
<unk> had a number of large customer need so that is kind of a realization that happened we did not close enough large logos.
<unk> the Big D.
But.
When I look at all the product investments in the roadmap and it's paying off the investment in <unk> being up so broadly we've ever had.
We are happy with our performance in Q1.
So we beat revenue and we did significantly.
Operating.
So we are pleased with the quarter.
<unk>.
Moving forward on specifically on the softness I think.
It is an internal.
Execution.
On the <unk> side that we are still dealing with the ramping reps who have to kind of.
Close more deals and we will we are.
Made the investments.
Content that will pay off in the coming months and quarters.
Alright, great. Thank you very much.
Thanks.
Thank you and this does conclude our question and answer session and I would like to turn the conference back over to the company for any further remarks.
Great. Thanks, everybody for joining the call. Please let us know if you have any questions and we look forward the thing in touch throughout the quarter.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
[music].
[music].
[music].
Good day and thank you for standing by welcome to the fresh <unk> first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need a press star one on your telephone please be advised that today's conference maybe recorded.
Or require any further assistance. Please press star then zero I would now like to hand, the conference over to your host today, Jim <unk>. Please go ahead.
Thank you good afternoon, and welcome to fresh for its first quarter of 2022 earnings Conference call. Joining me today are duration.
<unk>, Chief Executive Officer, and other slope fresh wharf Chief Financial Officer.
The primary purpose of todays call is to provide you with information regarding our first quarter 2022 performance and our financial outlook for our second quarter and full year 2022.
All of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 95.
These forward looking statements are based on <unk> current expectations estimates about business and industry managements beliefs, and certain assumptions made by the company.
All of which are subject to change.
These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements.
For a discussion of material risks and other important factors that could affect our results. Please refer to today's earnings release, our most recently filed Form 10-K, and our other periodic filings with FC fresh.
Freshwater assumes no obligation to update any forward looking statements in order to reflect events or circumstances that may arise.
Right. After the date of this presentation.
As required by law.
During the course of today's call, we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, which is available on our Investor Relations website at IR Dot <unk> Dot com I encourage you to visit our Investor Relations site to access our earnings release periodic SEC reports.
Today's call or to learn more about pressures and with that let me turn it over to you rich.
Thank you John .
Afternoon, everyone and welcome to the fresh look Q1 earnings call.
We delivered a really good quarter of results in Q1.
Revenue grew 42%.
$214 6 million.
non-GAAP operating margin was nearly breakeven and well ahead of expectations.
And we continue to drive the business, but efficient growth by generating positive operating cash flow in the quarter.
In Q1.
Continue to witness strong demand for our products, adding more than 2100 new customers.
We ended the quarter with more than 58100 customers, including brands like all Bugs, California, Julian to gift network in Phoenixville.
Our net dollar retention increased to 115% aided.
<unk> aided by ongoing improvements both in multi product adoption and Chuck.
This led to another good quarter for customer expansion in our business.
In the last earnings call.
I talked about the changing trends and customer experience in Seattle.
Have any consumer facing business is looking to engage with customers across their preferred mobile social and online channels.
We are prioritizing our product investments and all of these trends.
And in Q1.
We released new capabilities in a conversational engagement product.
Messaging.
And our first self service bots and conversational agent experiences over more digitally.
We added text messaging as a new channel and enhanced capabilities for Whatsapp monetization.
These new capabilities.
<unk> businesses.
<unk> added a column positioned experience to their customers and automate support or text messaging and Whatsapp. In addition to existing channels that we support like Apple business chat and Facebook messenger.
One example is.
As a publicly traded retail company based in South Africa.
With over $1 billion in annual revenue.
The company uses already bought and messaging on whatsapp to automate customer support.
Our Apis customers trying that augers surgical products and locate nearby stores.
Retail giant.
<unk> automated 30% of their support liquidity without chatbot solutions.
If customers need more help with Congress is Keith <unk>.
Gracefully handle or to a human support each.
So when you have a global customer base, a box is talking to your customers and the language. They best understand helps improve the customer experience.
We have now added support for 10 additional languages and a multilingual box product so our box and now engage with users in 50 different languages.
I am excited to share that with you.
Recently launched artificial lift CRM for e-commerce.
This is a unified CRM combined marketing automation conversational support and sales powered by our unified customer.
Let me share the story of the lip Balm company.
Couple of DTC cosmetic brand with over 100 products sold online.
They use the built in chocolate campaign makes in our CRM products to grant revenue by lending personalized marketing campaigns on whatsapp to bring back customers will abandon their shopping carts.
Their support team also had frequent inquiries from customers calling in to check the status of their auditors and now that is fully automated with our risk more bulk purpose built for shopify. This.
As part of our medicine.
How 'bout agents are now freed up to perform more complex tasks.
Next to consumer brands and E. Commerce companies can now offer a personalized experience for buyers on modern messaging channels without new CRM offering.
We are excited and fresh look Seattle for E. Commerce is now available on the Shopify App store with the potential to reach over 1 million storefronts.
Planned to extend integrations to other market, leading e-commerce platform in the future.
Turning to <unk> service, we continue to make progress in the mid market.
The German industrial robot manufacturers cookout with $3 billion in annual revenue to us for service to simplify it support.
14000 employees.
<unk> now has visibility into its technology assets to.
<unk> leadership.
View of Itt's performance.
We also added new enterprise grade it service management capabilities to pre service.
Through an expanded partnership with device project.
The new product integration and joined to support 42 provides our customers more visibility into their hardware and software.
Improving that IP asset management capability.
We talked about expanding use cases for service previously so let me highlight a couple of examples of customers leveraging for service for Enterprise service management needs.
U S based multibillion dollar scientific instrumentation and software company.
Chris Steward to automate their internal sales processes.
And the ability to integrate the custom built applications directly into precision.
The company can more quickly receive email requests create an order and so.
So it will be faster.
And then ASM use case is all but.
The global sustainable footwear, and apparel company implemented for service to manage the entire employee lifecycle.
From <unk> to <unk> and Hedgehog, the company's employee facing team and automate and customize processes.
Features farm since those catalog to meet the needs of their department and employee of DSO.
We are really excited about the potential of our service to help many internal teams like that in place.
On the partner front.
We held our partner summit virtually.
Last month that we rolled out the new tiered program and certification framework for our partners.
Alright, thank Barclays Dcs.
Successful completion of a 150 customer projects on the <unk> platform.
In addition to the debates provided to you also announced partnerships with good data and yet.
For enterprise grade analytics and search.
Hey, Chris.
<unk> partner program includes more than 500 partners in over 50 countries.
Overall Q1 was a really good quarter of customer and revenue growth combined with continued business efficiency.
Looking ahead, there is some market uncertainty with the changing macro environment and the ongoing one in eastern Europe .
While we have limited exposure to Russia, and Ukraine, Turkey hunting.
Continue to track the European market for any potential impact to the business.
More importantly.
We understand that some of you may have family members our presence in the region, who may be impacted our thoughts are with them and the people of claims rate.
As we move forward with the business, we will continue to focus our efforts on executing across sales marketing product and engineering to achieve our 2022.
I'm excited about the tremendous opportunity across all three markets we operate.
Customer experience sales and marketing as we continue to believe the business mix of sustainable growth and profitability.
I'll now turn it over to our CFO Tyler to share further details about our financial business.
Thanks, Jay and thanks to all of you joining on the call and via webcast.
Despite the volatile markets, we got off to a really good start for the year with another solid quarter of financial results in Q1.
We're seeing healthy market traction for our products as we execute on our priorities for fiscal 2022.
Our call today I will cover the financial results from our first quarter.
While providing some background on the key drivers and trends, we're seeing in the business.
Later, I will close with our forward looking commentary and expectations for Q2 and full year 2020.
As a reminder.
For our financial results I'll focus most of my discussion around non-GAAP numbers.
These non-GAAP numbers exclude the impact of stock based compensation and related expenses.
Whole taxes on employee stock transactions.
Amortization of acquired intangibles and other adjustments.
Starting with the income statement revenue.
Revenue in Q1 grew 42% to $114 $6 million, which includes a negative impact of a little over 1% due to FX.
We saw healthy expansion activity in the quarter and the largest driver continues to be seat or agent additions. As this is the simplest are more natural path for increasing usage of our products.
As gene mentioned earlier.
Multi product adoption continues to make incremental improvements as customers are using multiple products, especially in our fresh desk product line with the adoption of Omnichannel with a combination of support desk and messaging.
Our Ics and product or service continues to be a big growth driver is mid market customers are finding tremendous value and are right sized solutions.
In Q1, we maintained a healthy non-GAAP gross margin of 82, 2%.
This was down slightly from the prior quarter as we had a higher contribution from our lower margin product that includes pass through costs from an outside provider.
Our non-GAAP operating expenses were $94 8 million for Q1, an improvement of $3 $4 million compared to Q4.
Most of this improvement came from non-GAAP G&A expenses as this decreased $5 million compared to the prior quarter. As Q4 included higher costs related to a litigation matter that was settled in Q4.
non-GAAP R&D expenses increased by $1 $4 million quarter over quarter, as we continued to invest in our product and technology efforts.
We also invested in our go to market efforts.
non-GAAP sales and marketing expenses were relatively flat compared to the prior quarter. As Q4 expenses included cost from our refreshed Congress that were not included in Q1.
Our revenue outperformance combined with expense improvements led to a non-GAAP operating loss of $6 million for the quarter.
Resulting in a nearly breakeven operating margin on a non-GAAP basis.
We believe this clearly highlights our ability to drive business efficiency as we continue to scale and grow the business.
Turning to our operating metrics, our net dollar retention rate increased 1% to 115% from the prior quarter.
Constant currency basis. This figure was 116%.
This number not only reflects the robust expansion activity from our customers, but also the incremental improvements we're seeing in multi product adoption and churn in the overall business.
As we've said before.
We expect this metric to naturally land and 110 plus to low teens range for the business for the foreseeable future. So we're pleased with this performance.
Our second operating metric of customers contributing more than $5000 and <unk> grew 27% in Q1, ending at 15639 customers and now represents 86% of our era.
For larger customers contributing more than $50000 there are.
This customer count grew 54%.
At 1547 customers and represents 42% of our IRR.
Our total customer count grew 15% to over 58100 customers as we added over 2100 customers in the quarter, reflecting the highest net adds since Q3 of 2020.
Similar to prior quarters. The average revenue per account continues to increase and contribute to our revenue growth as customers are expanding on our products as we engage in larger deals.
Now turning to billings and the balance sheet items.
Our Q1 calculated billings was $128 9 million.
The 32% growth year over year.
As you know the billings growth rate can fluctuate from quarter to quarter based on a number of factors specific items in Q1 include approximate impacts.
Billing duration mix a negative 2%.
Early renewals and FX movements each negative 1%.
And reserve activity of positive one 5%.
Normalizing for these factors calculated billings growth will be approximately 35%.
From a new business perspective, billings growth was impacted by a lower number of large deals closed in the quarter.
We added a healthy number of new customers in Q1.
The average customer size was smaller compared to prior quarters as our fuel operations continued to build out and ramp up productivity for the mid market and larger customers.
We're also seeing a very competitive hiring environment on the go to market side, especially in Europe .
So this has impacted our sales realization in that region.
While we don't manage the business to our calculated billings metric due to the overall uncertainty around European market and the time it takes to build a go to market operations.
Expect the calculated billings growth to moderate in Q2.
Moving to our balance sheet.
We ended Q1 with cash and cash equivalents of approximately $1 2 billion.
Down from the prior quarter as we used approximately $120 million.
To net settle vested equity amounts and meeting tax requirements, which we noted on our prior call.
We plan to continue to net settle shares they expect to use approximately $25 million.
In Q2.
Nearly all of the net settle activity amount was captured in our cash flow from financing. So this will reduce our cash balance, but as a reminder, did not impact free cash flow.
In Q1, our operating cash flow was $1 $4 million, which further underscores the efficiency of our business model, even as we invest for growth.
Free cash flow, which includes the impact of Capex and capitalized software was negative $1 4 million.
And ahead of expectations as we realized savings in the quarter and also have some payments ship till later in the year.
As a result.
We expect free cash flow for the full year to improve by $5 million to negative $20 million with Q2, and Q3 estimated to be negative $10 million each.
For Q4, we expect to be slightly positive and positive thereafter.
Given the volatile economic environment I am pleased with our ability to manage through these times and do it prudently.
In terms of share count we.
We had approximately 317 million shares outstanding on a fully diluted basis using the treasury method as of March 31 2022.
A few items to note as we move to our expectations for Q2 and the full year.
First on revenue.
Our revenue guidance estimates are based on currency rates as of the end of Q1.
Consistent with our normal financial planning processes.
Using currency rates as of the end of Q1, we're expecting FX to have an approximately a negative one 5% to 2% impact to Q2, and a negative $1 five impact for full year 2022 growth rates.
Thus far in Q2, we're seeing increasing strength of the U S. Dollar and if this trend holds would result in additional negative FX impacts to our results, which is not included in our guidance.
Also related to revenue, we've made improvements to our financial operations in areas of collections in reserves, which we've called out previously.
These improvements have created slight benefits to our revenue the past couple of quarters, but we do not expect that to continue going forward as we are nearing optimal levels.
And third as a reminder from our prior call Q2 expenses include the impact of our annual merit cycle and other related costs, leading to increased expense this quarter over quarter.
In addition, we have timing impacts as certain <unk> projects and investments shifted to Q2 and later in the year.
We have factored these impacts into our estimates going forward.
So for the second quarter of 2022, we expect.
Revenue to be in the range of $117 million to $119 million.
non-GAAP loss from operations to be in the range of $18 5 million to $16 $5 million.
And non-GAAP net loss per share to be in a range of eight to six.
Assuming weighted average shares outstanding of approximately $284 4 million.
For the full year 2022, we expect revenue to be in the range of $495 5 million to $501 $5 million.
non-GAAP loss from operations to be in the range of $43 5 million to $37 5 million.
And non-GAAP net loss per share to be in the range of 18 to 16 tests.
Assuming weighted average shares outstanding of approximately $284 4 million.
Let me close by saying that we're off to a good start to the year.
And with that let us take your questions operator.
Okay.
If you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
And our first question comes from the line of Scott Berg with Needham. Your line is open. Please go ahead.
Yes.
Hi, good morning, congrats on the quarter and thanks for taking my questions here.
I guess a couple.
I want to start with the net revenue retention, so I'm pretty pleased with cross selling additional modules or at least seeing some additional traction there.
Should we think about the typical customer today in terms of what they are landing what they are what they are buying is there a pattern that's kind of emerging that maybe easy to repeat or is it just general customer satisfaction product, that's leading them to maybe buy more.
Thanks for the question Scott.
Our multi product reduction first of all I would say we are happy with the way our net dollar retention that's been tracking specifically driven by multi product adoption.
Churn improvement this quarter.
So the <unk>.
In the past we have told that we expect to be a 110 to mid teens kind of dull retention, but on a constant currency basis 2016. So we're obviously happy with that.
Our multi product adoption numbers also improve like last quarter I think we mentioned that it was 21% Debbie.
Slide.
No we've been in but is that 22%.
For Florida customers using Modelo especial explode it what is primarily driving this.
Have you seen one.
Is that Omnichannel.
First desk customers, who.
By the Omnichannel products. So that is one we also see customers using a finished product to refresh the messaging product that is in line with the trends that youre seeing in businesses adopting conversational engagement.
To kind of engage with customers on digital channels, so that is available but.
But it would be <unk> 10, which we expect moving forward.
Last week, we also announced our.
Unified CRM for e-commerce, so the weekend actually.
Too early but did that can become basically a total year.
The unified C item can actually help us multi persona that needs that customers can land with.
Like only sales only support marketing and then kind of add on upgrades to.
The full suite. So I think we have multiple vendors, but as of now primarily drivers omnichannel.
This can call additional messaging. We also have customers. We think there is just 1%.
And adoption.
Sure.
Thanks to you that's Super helpful. And then Tyler from a follow up perspective, I wanted to delve into the European hiring.
We just as I guess the companies having their I guess two part question. One can you quantify maybe how far behind you are on your hiring plans there and then secondly, how do you correct that going forward at this point outside of just throwing more cash it's somewhat I don't know if youre changing how you're recruiting over there to maybe try to get caught up.
Thank you.
Yes, you bet.
Thanks for the question Scott.
Actually the hiring.
The impact is mainly from attrition we saw last year.
We're actually.
Have hired back and that started to catch up.
And we'll continue to hire in the field in almost all areas.
And we've also seen attrition get better this quarter than what we saw last year and I think last year was.
Late part of the great resignation that we talked about that we were not immune to it. So I think we experienced what a lot of other companies experience as.
As we rehired those folks take time to ramp.
And as they are ramping there getting to know refresh works and getting them productive and so we feel like we're starting to get back on track but.
But again, it's not that I can.
It's not an ongoing thing I think it was mainly from impact of towards the tail end of last year as we're coming back into it in terms of overall philosophy, we're doing a lot of what I guess a lot of other companies are doing as not just yield or anything else. It's about making sure. Our employees are just having an incredible experience working at fresh works, but also making sure they are fair.
Compensated I.
I think thats driving our expense that's coming up in Q2, because our entire focal process actually kicked in on April 1st which it typically does.
That's why the things that is raising the costs for for Q2 compared to Q1, which is those compensation adjustments.
Got it helpful. Thanks, guys congrats on the quarters results.
Thanks Scott.
Thank you and our next question comes from the line of Brad Sills with Bank of America. Your line is open. Please go ahead.
Oh, great. Thanks, guys for taking my questions.
Just one to start please on the the traction youre seeing in that customer segment greater than 5000.
Real nice results here, 27% year over year growth holding with that high 20 as you saw last quarter, you mentioned some deal size coming down there a little bit should we take that to mean theres potential upsell opportunity maybe some of these enterprise customers are starting with a smaller footprint <unk> got a lot of new product out here that youre seeing some good traction cross sell could there be a cohort of customers.
There that we might see.
The opportunity to up sell more so than in the past.
Okay, Yeah. Thanks for the question Brad.
So overall I would start by saying we had we are pleased with how we did from a customer growth standpoint. This quarter, we as we mentioned in the call.
Added 2100.
Tumors and that does.
The highest.
Out of customers.
Since Q3 of 2020 so.
Clearly a lot of those custom.
Customers came from smaller D. So rich.
Also we saw an increase in customers are the key items. So these are.
Positive things.
As Taylor mentioned in the script, so weak in Europe , particularly we did close a few larger beef, but we see that as an opportunity given our multi product play we see that and we don't specifically I just would like to remind.
Everyone here at.
Chris Phillips, we don't unfold elephants, we held for Deere in rabbits, we are focused squarely on midmarket and SMB customers. So a lot of times when we land large basically managing to a greater than 50 K number so.
I would like to.
We are confident that that will give us the opportunity to expand into larger deals over time.
Excellent great to hear thanks, so much and with the launch of the.
E Commerce solution, what does this mean for your kind of overall footprint in the front office with <unk> got sales CRM now you've got e-commerce really rounding out that suite.
You think that customers might land with ecommerce and then add CRM sales.
Vice versa is this more of an upsell opportunity just any expectations in the near term for that thank you so much.
Yes, so the way to look at.
First of all it's the item for E. Commerce is more like a vertical solution for our D to C brands and consumer facing.
E Commerce companies, which want to engage with customers on digital channels. So what do you really.
Given the.
The opportunity for DTC brands e-commerce beds, so really good.
The full 360 view of their customers.
By combining data from the Shopify.
Others, the lifetime value of the customers in conjunction with that history of conversations that the business has had with the customer and also have visibility into the marketing campaign for the customers responded to.
That kind of visibility was not available too.
Ecommerce companies.
Yes.
For them to understand.
Multiple that by us so thats, what we have launched and we will continue bringing the power of <unk>.
Unified customer record into other verticals over time.
Thanks Krish.
Thank you.
Thank you and our next question comes from the line of Ryan Macwilliams with Barclays. Your line is open. Please go ahead.
Thanks for taking the question sales and marketing as a percentage of revenues came in nicely below our expectations for the quarter.
Maybe just besides the refreshed conference what were some of the puts and takes that led to lower spend maybe versus RCC patients.
In general it was.
Mainly the refresh conference from last year. We also had some other events that we were spending money on.
In Q1, we had things like our scale, which was originally going to be a person that had been a virtual event, we ended up saving some money there.
We did hire.
Pretty aggressively and we continue to do so and we're going to work.
To continue to do that was adding some.
Some incredible talent.
Across our marketing to sales organization, so we're pretty optimistic about that.
And then I mentioned one of them.
<unk> for Q2, and what we expect is that a lot of the compensation adjustments that are normal part of our normal focal process those kick in in Q2 on some of those are effectively noncash because things like adjusting our vacation balances and whatnot that just hit your P&L, but theyre not necessarily cash into a onetime adjustment.
So, but the refresh event and some other kind of one offs or are really the differences between the Q4 and Q1, even though head count went up.
I appreciate that and just on your comment for calculated billings growth to moderate in second quarter do you mean on a normalized basis as well and then can you just kind of elaborate maybe on some of the macro challenges that you highlighted impacting how you're thinking about.
The growth there over the next few quarters. Thanks.
Yes, we're essentially looking at billings growth number and again, we don't manage to billings billings is a lot of nuances to it so we kind of call. It as we see it we can make some estimates but.
As billings come in as new deals closed right, they're going to have different mixes in terms of whether they are paid annually or whatnot. Our expansion motion is actually pretty unpredictable as how it relates to billings because as you can imagine that if a customer is expanding in there on an annual deal that often results in a stub payment not a full annual payment.
So we kind of we look at it we can kind of estimate and based on what we see we are a little bit cautious just based on the macroeconomic environment in Europe .
I don't know if anybody knows what's really going to happen and we are a little bit more cautious where tentative.
We're growing and where it feels like we have folks that are ramping up there.
Coming into their own in terms of.
As they ramp getting productive, but that being said we are cautious on the whole macroeconomic environment in general.
And through the more appreciate the color guys.
Thank you and our next question comes from the line of Mark Murphy with Jpmorgan. Your line is open. Please go ahead.
Thank you.
How much difference in business confidence or deal pipeline.
Or bookings growth do you see if you try to compare right now.
Especially between North America and.
And EMEA I think I think specifically.
We're mostly wondering just how is the tone of business in Europe .
If you think of it kind of outside of your own sales ramping in productivity.
What is the tone coming from customers I guess, considering the proximity to the war there.
Yes.
Thanks for the question Mark.
First off let me start by acknowledging what.
<unk> said that.
We have seen.
Some softness in Europe , primarily because we didn't close enough large D. It also had to deal with some seasonality in Q1 that we see compared to Q4.
As you know a lot of mid market deals closed, but on the macro itself.
Specifically to the ongoing.
<unk>.
Okay. So I think.
We are consciously observing what's happening we don't have.
We have limited exposure to.
And in Russia.
It is currently less than 1% of our revenue from that region. So.
We're not necessarily seeing a slowdown from a macro standpoint.
In Europe so.
And we are working to fix our execution challenges in terms of ramping up of the.
GPM folks hiding beat us investing in.
Sales enablement.
But when you look at all the product investments that we're making we are confident that.
While being cautious about the macro the confident that.
Markets give us the ability to keep.
Executing and put in a long time.
Okay.
And then Tyler just a quick follow up for you win.
Comment on the Q2 billings.
You grew billings, 35% normalized in Q1 I understand you don't.
Really manage to billings, but I'm, just curious because I think youre, saying it will slow in Q2.
Census already has it slowing in Q2 I believe if I wrote it down right.
27%, 28% and I think possibly even slower in Q3, so I guess I'm just trying to understand are you expecting us to hear that comment and <unk>.
And actually kind of reduce it further or do you think I mean, if we're already kind of contemplating.
It is something like seven or eight point do you sell in Q2 do you think that that's sufficient.
Im Mark a more speaking to the quarter over quarter.
Parison from Q1 going into Q2.
Okay. So the sequential comparison.
It may be that we expect it to moderate from Q1.
Growth rates.
The sequential billings growth rate.
That's sort of comparing to what consensus is out there, but where I'm more speaking to our growth rate in Q1, we would expect that to moderate a little bit in Q2.
Uh huh.
Okay, so kind of less than <unk>.
Less than a 5% sequential just to be clear on that.
Well, Mark we're not guiding to that Rob just saying that we would expect it to be a little bit less growth rate than we had in Q1.
Okay got it thank you.
Thank you and our next question comes from the line of Ryan <unk> with Morgan Stanley . Your line is open. Please go ahead.
Hi, Thanks for taking my question.
Maybe go back into some of the broader product conversations around e-commerce, and how this and maybe the sales and marketing push and even longer term fresh team I'm just kind of wondering what the status is on that and how can fit in the portfolio longer term.
I'm, sorry, I couldn't hear the question can you please repeat.
Okay.
Sure.
Wanting to see if you could talk a little bit more about how fresh sales of fresh market are doing and maybe looking out a few quarters.
We're fresh team within the product portfolio.
How that division.
Sure.
No.
So actually.
You said like fresh sales.
Early launch to D to C.
CRM for E Commerce product is a combination of <unk> fresh market at in conversational engagement. So this is the first.
Unified CRM product that we have launched based on this.
Youll see identified customer record that's built on the new platform. So we are very encouraged by the early results that we're seeing we called out the use case of the lip Balm company, which is one of our early customers.
On the broader fresh sales.
Broadly we are seeing that business, even though it's early days growing nicely in terms of.
Our book in the.
Sales CRM market as well as the marketing automation space.
I would say it's still in integration.
It's too early to comment on our plans for <unk>. So.
Good.
Talk to you about had been it's more meaningful in terms of contribution.
Got it thank you.
Thank you and our next question comes from the line of Brian Schwartz with Oppenheimer. Your line is open. Please go ahead.
Hi, This is <unk> on for Brian Schwartz. Thank you for taking my question.
I had a question on your go to market motion and specifically your partner ecosystem.
Fresh service and fresh deaths, continuing to move upmarket and with the strong momentum that you're seeing.
The largest customers can.
Can you walk us through again, how you think about the partner ecosystem and maybe also how we should think about the interest of larger partners, helping your ambitions to move upmarket further and then I have a second question for Tyler.
Sure.
Okay.
First off let me start by telling you that we're not necessarily targeting a move into the larger enterprise that is not part of our go to market motion.
While our focus is still SMB and mid market, we do have.
Dean from larger companies coming to us.
Specifically when they.
They are looking at is to replace let's say an enterprise solution makes sense, though our sales force. So we have had been.
So our partners, specifically <unk> and <unk>.
The single and multiple dimension I would say is stocked with the Si partners so to speak.
Poke about Tcs, which is the large tier one site, but they have a special group for us they understand that fresh looks products actually do not require the traditional 12 months 18 months implementation cycle. So it's a high velocity model, where they have actually completed 150 projects, mostly mid market comps.
But.
Our product can be taken later than eight to 10 weeks so.
Companies are adopting the newer velocity model to be able to bring us to market. So that is working for us in terms of how we drive customization.
And integration needs of mid market company. So we use our app marketplace that augurs can build custom apps.
John required by mid market companies, so kind of integrated into their systems in house systems.
The partners actually build apps to make that happen. We also have John So Dave you have more than 500 channel partners and more than 50 countries that they source leads.
In terms of bringing new business.
To.
The official.
Our customer base.
Yeah.
Got it. Thank you that's very helpful and if I can ask the second question for.
Tyler so on your international exposure.
Given that 85% of your head count is located abroad.
I think less than half of your revenues derived from outside of North America could there be a larger FX impact your expense line that provides a tailwind to margins or.
Is the dollar amount affected by FX somewhat balanced between revenue and expense so any color would be helpful on that.
Sure.
Thank you for the question.
The majority of our head count are in India, and the INR is has in general held up against the USD.
That being said it is starting to move a little bit I think about 10%, but it definitely hasn't moved as much as the pound and euro. So our revenue exposure has been greater than our expense exposure.
So they haven't quite been lining up.
We've been able to run the business really efficiently and did really well financially in Q1.
Even with the topline FX exposure.
Exposure, but but theyre not quite matched up.
Okay, great. Thanks for taking my question.
Thank you and our next question comes from the line of Shneur <unk> with Baird. Your line is open. Please go ahead.
Hey, Thanks, Scott <unk> on for Rob.
Just a quick follow up on the lower kind of tougher portion of the revenues.
It's due to the lower number of large deals.
Towards the end of the quarter, mostly Europe related if I got that Brian and Andy.
Average customer sizes like smaller compared to prior quarters. If we can provide some color on.
Like what you saw.
In terms of like the mix of deals I think you mentioned.
The annual versus monthly.
If the deals that are shifting in any meaningful there literally monthly versus annual mix I know it has been kind of pretty steady or growing the annual mix was about 62% last year.
You mentioned, so just kind of wanted to get a sense of that.
Shift happening within the within the customer base without in the mix.
Yeah, Hey, this is Tyler.
First of all in general.
Really pleased with revenue performance in the quarter and overall financial performance. The commentary was mainly around billings and when we looked at that and as we said we didn't close as many large deals when you kind of called out.
Specifically Europe and the team is still ramping up there.
On the flip side, we also said that we closed.
New more customers than we have in the last year and a half and that's a really positive sign with over 2100, new customers. So clearly a lot of those customers are smaller.
In fact, our CRM product new CRM products is driving a lot of those adds which we're super optimistic about even though it's too early to talk about the contributions from that there was no meaningful shift in billing terms for new customers.
I did mention when we have expansion.
It was still healthy.
Which is also reflected our net dollar retention number that's an unpredictable number windows expansion comes through because as customers expand their could be paying stub stub periods. So if they're on an annual deal and they're expanding with just four months left in there do oftentimes that theyre just paying for a four month stub as opposed to a new annual deal.
And so that expansion motion is a little bit less predictable as it relates to billings, but in general no meaningful shift in billings duration.
Got it got it thanks for the clarification I appreciate your color and just one for Gil ratio.
I know you kind of briefly mentioned about the E Commerce plans.
If you can comment on the Shopify partnership specifically.
How is that shaping up.
Kind of when do you expect in terms of the timeline like rough timelines.
Scott kind of momentum to pick up and how do you analysts and does it stack.
Okay.
Sure.
So what we have.
Launch today is.
Our CRM product that is tightly integrated with the shock with the ecosystem. We are listed on the shop, if a marketplace. So for the first time for Shopify sellers.
<unk> brought together capability that helps them drive personalized marketing campaigns.
Self service automation through bots, and conversational agent experience through life support agents and the box agents as well as the marketing campaigns can now work across whatsapp across text messaging.
Are any of the other modern digital channels.
The plan is to expand beyond Shopify and go into other ecommerce platforms like Commerce imaging coming later this year.
<unk>.
We are.
Excited with the early traction that we are seeing we have closed a few customers and we will share more but.
Yep.
Maybe in the coming quarters, we will share.
More stories of customers and what we're hearing from the market.
Got it alright, thanks, a lot I appreciate it thanks.
Thank you and our next question comes from the line of Brian Peterson with Raymond James Your line is open. Please go ahead.
Hi, gentlemen, thanks for taking the question. So I wanted to follow up on the partner developments can.
Can you maybe talk about like how much of the revenue or new bookings is coming from the partnership channel today as we see that growing.
Does that mix increase and what are the longer term ramifications from kind of a LTV to CAC perspective.
Yes, so Brian I'll start with that so partners are.
Really important part of our go to market motion right now, it's about 15% to 20%.
Our.
Our business is coming from our partner channel now the partners. It is a mix, where we have partners where.
Working kind of solely in some areas that we don't have natural language capabilities.
We're also partnering with partners.
Ngls in North America, and Europe , where we have field presence.
So the compensation mix actually is different as well in some of those cases, right, where we're compensating partners differently based on what they're doing with us I don't think.
It will have a meaningful impact to our LTV to CAC over time, except for the fact that.
And as that increases.
We should be able to drive efficiencies from from that channel.
Understood and Tyler I wanted to follow up and I don't want to belabor. The point here on billings, because I know you guys don't manage to it but when youre talking about the moderation in the second quarter versus the first quarter I just wanted to be clear is that versus that 32% reported or the 35%. Adjusted when you were making that comment thanks guys yeah.
That's against a 32% reported.
Understood. Thanks, a lot.
You bet.
Thank you and our next question comes from the line of Mario Molina with Piper Sandler. Your line is open. Please go ahead.
Hi, This is Mario just taking at just asking a question on behalf of Brent.
As we think about the size of the different customers you serve it.
It would be helpful to get some color on what proportion of the customers in the <unk> or the <unk> cohorts are customers that sort of graduated into that scale of spend are most customers kind of starting out smaller or were they sort of already at that level of spend when they first sign off.
Yeah. This is Tyler we actually haven't broken out.
The makeup of those of that <unk> base and the customers in that area based on where they came from it was a healthy mix of both read our expansion program and really strong and so we do have customers, who graduate up and if you go back to our kind of like our IPO presentation. We demonstrated customers, we landed really small and then.
Now considerable multiples of what they landed with us on but we are also landing with larger customers as well.
Lands with larger customers is not as often.
But.
It's not uncommon to land above 50 K.
Especially with our desk and service offerings. So it is a healthy mix of both of them just haven't broken it out yet.
Got it got it. Thank you and then just one more from us in terms of adoption momentum, where there any products that kind of surprised you or otherwise stood out from a demand perspective during this quarter.
And if not maybe any any verticals, where you're seeing more success or outside success driving adoption.
I think that model.
So we continue to see healthy demand for our <unk> product or service.
Today, the most capable large negative so there's no we continue to win against them and replace them.
Both cases have happened or.
Adam.
Really excited about what we are hearing because this unified solution.
Being appreciated by customers for the value that we're bringing visibility into their customers that uses that we are bringing and of course in.
The CX business the conversational.
And Bob this is.
Attend every consumer facing businesses wanting to add on that.
<unk> to engage with their customers on digital channels and we are seeing.
Like the early signs of good traction there as well.
Got it that's helpful. Thank you.
Thank you and our next our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open. Please go ahead.
Hey, guys. This is Ryan Krieger on for Alex. Thanks for taking the question just a quick one on the inflation I'm sure you guys are seeing that impact cost to some extent. So I'm just wondering how youre thinking about potential pricing changes to compensate or how do you manage pricing or think about that dynamic going forward.
Yeah. Thanks, Brian This is Tyler.
On costs for sure and we've seen it.
And especially mainly on compensation right.
And I think everybody has seen it and so we're obviously doing the right thing by our customers.
We don't have a like a price increase strategy has really never been part of the company.
And I can't say, we have a structured play to go out and systematically tried to increase prices across the base for our customers clearly we would want our customers to pay for the value that they're receiving.
But I can't say, it's part of our our strategy to just wholeheartedly just go do that.
Alright, thank you.
Thank you and our next question comes from the line of Brent Thill with Jefferies. Your line is open. Please go ahead.
Hey, Tyler good profitably in the quarter, but youre not guiding to any improvements. So maybe if you could just talk through if growth continues to slow and I think the.
The broader concern at the macro.
<unk> has a little south and in the interim our you can either any spend through it or do you feel like Youll youll put more of their brakes on expenses and show a little more leverage how do you think about that if we continue on the pace that we're on we're continuing on the macro side.
Yeah.
So no Brad I mean for growth like what we guide to what we see right. We are cautious because again Europe I don't know if anybody really understands what's going to happen and so we are cautious in what we see there.
In general, though I think we've already demonstrated that we're running a really efficient business right.
We did really well in Q1 against R.
Our loss number and our cash flow number and we kind of look at the whole year now and we're able to talk about improvements we're going to make throughout the whole year, we brought our burn number down and our operating loss number down pretty considerably and so nothing has changed there.
We have kind of been running this model that we use.
Like we like to spend after we achieve certain numbers.
We are still investing.
Pretty heavily on the go to market side, though and we are going to continue to do that because we see traction and we have all these different levers right. We've got.
Inbound motions and our field presence.
And across <unk>.
Multiple geographies and multiple products and so and we've talked about some of these products that we're actually really excited about.
And if there are certain areas that we don't see the traction then we still spend but we don't we don't try to spend.
Out of it we will go deploy capital in other areas that we think we can get a better return.
Thank you.
Thank you and our next question comes from the line of David Hynes with Canaccord. Your line is open. Please go ahead.
Hey, this is Luke on for DJ Thanks for taking the question.
I was wondering if you could refresh us sort of on the vision and strategy for <unk> sales in the market and the reason I ask is because when I think of Zen desk based startup had a hard time breaking into the CRM market.
And the same could be argued for hotspot breaking into service.
So I guess the Genesis of my question really is why do you think others have been slow to bridge that gap and what are you doing differently.
Do you think to achieve a better result.
Yeah. Thanks for the question look.
CR strategy for.
Not just for sales, but the broader CRM market is how do we solve for todays biggest problem in the Seattle market, which is data that is siloed between marketing teams and sales teams and support teams not to mentioned that it seems like customer success.
That's the core of our.
Religion, whether we want to bring in out of the box product experience for Seattle by combining all of this data into a unified customer record. So.
What you saw that on spend last week was.
As we move one step closer to unlocking distribution of a unified customer ricard today, we have done that for E Commerce sellers.
Bill to combine data across marketing conversational self service bots as well as sales into a single unified customer to call, we are making progress to bring.
This product on to the unified customer recording we truly believe that company.
Companies of the future, which do not have a legacy of.
Existing sales see Adam.
Getting close are companies that want to breakdown, the silos will be able to adopt.
A.
A single customer cloud as opposed to these siloed. So thats, our vision and we are making good progress and the share more details in the coming quarters.
Excellent that's it for me thanks.
Thank you.
Thank you and our last question comes from the line of Pat <unk>.
Ravens list.
JMP Securities. Your line is open. Please go ahead.
Oh, great. Thank you.
So just just very big picture here, because we've been talking about it a lot.
You guys beat on revenue, but you missed on billings and the tone is kind of cautious so just so investors understand.
Were you happy with the performance of the sales organization in the quarter did did Jose actually hit his number or was it a bit soft.
So thanks for the question So let me start by saying.
Like immediately be good about Q1, how we performed and we exceeded revenue expectations and.
We.
[laughter].
We continue to see.
Efficiencies in our business. So we are happy with how we came in from the operating margin and net dollar retention.
So one of the things that we kind of and you know that we don't manage to really large customers say until we don't try to hit a.
The number of large customer leads so that is kind of a realization that happened we did not close enough large logos.
And the Big D.
But.
When I look at all the product investments in the roadmap and it's paying off the investment in <unk> is paying off so broadly we were happy that we are happy with our product.
In Q1.
So we beat revenue and we did significantly.
Operating.
Margin. So we are pleased with the quarter.
<unk>.
Moving forward on specifically on the softness I think.
It is an internal.
Execution.
On the <unk> side that you're still dealing with the ramping reps who have to kind of.
Close more deals and we will.
Made the investments.
Confident that it will pay off in the coming months and quarters.
Alright, great. Thank you very much.
Thanks.
Thank you and this does conclude our question and answer session and I would like to turn the conference back over to the company for any further remarks.
Great. Thanks, everybody for joining the call. Please let us know if you have any questions and we look forward to staying in touch throughout the quarter.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.