Q1 2022 Zendesk Inc Earnings Call
Initial measures for prior periods in the earnings press releases for such prior periods all of which are available on our Investor Relations website.
With this brief introduction I'd like to turn the call over to Mikkel for opening comments.
Thanks, so much Jason and.
Good afternoon, everybody and welcome to our Q1 2022 earnings call.
We had record first quarter revenue of $388 million growing 30% year over year, and adding over $90 million of revenue compared to last year, our largest ever one year increase for the first quarter.
This also marked the fourth consecutive quarter that we have grown our book of business by more than 30%.
And we also delivered another quarter of record low churn and contraction, which allowed us to deliver a net expansion rate of 121%.
Our strong performance can be attributed to get another great quarter of momentum with enterprise customers and continued growth of the suite.
Our enterprise success as highlighted by our 140 customers with more than $1 million in annual recurring revenue let.
Let me take this opportunity to welcome some of these great new brands to sandisk, including the worlds largest online dating technology company match group also the largest clothing retailer in the U K FTSE 100 company next and each of them the second large.
This financial institution in that in America welcome.
Turning to suite now Zenner suite has helped reduce the friction of selling to customers and it provides a future proof solution right out of the box. Our first cohort of suite customers just pass that one year anniversary and the initial data confirms our assumption and reinforces our confidence that suite.
<unk> is the mainstream choice for businesses to date.
Suite customers are expanding at a much faster rate than our non suite customers. They are faster at adopting modern digital channels and expanding their use of sandisk within their organizations.
That leads to stronger expansion, better retention and longer contract terms and lower churn and contraction.
We are confident that suite is enhancing the sustainable long term growth trajectory of the company.
Now, let me talk to you about our upcoming relate event. After almost four years is back and we are so excited for everyone to hear directly from our customers about how they've been able to engage and service their customers better with sandisk.
And we will showcase our new products new features lot of exciting stuff I hope you all be able to tune into the virtual event on may 11th and we will have knife in person events in San Francisco and in London and in locations around the World. Following May 11, we're excited to finally bring.
People together in person, it's back to business and we have limited availability for these in person events, but I'm pretty sure that your friendly investor relationship team here may be able to set you up with a ticket.
As we look ahead to release.
Helping our customers get back to what they do best as we emerge from the pandemic.
We are aware that this gradual return to normalcy is happening against the backdrop of the ongoing war in Ukraine.
While we don't have any employees offices in the region. Our employees have family members and have friends, there and our team in Poland is acutely feeling the warrants impact.
The Center's Foundation has donated to the international Rescue Committee and the World Central kitchen to support efforts in the region. We have suspended all sales activities in Russia and Belarus.
And we are providing relief to our customers in Ukraine.
Finally, let me take this opportunity to address the timing of our annual shareholder meeting.
We expect to hold this meeting in Q3, and our board will determine and announce the specific date and time in due course.
I'll close by reiterating that this was another strong quarter, we grew our head count by 39% compared to the first quarter of last year positioning us to deliver deliver even stronger results for 2022 and beyond.
Our team our business our customer relationships remain strong and we are excited about the opportunities ahead.
And with that now let me turn the call over to Sheila to further discuss our financial results Sheila Please take it away.
Great. Thank you Michael and thank you everyone for your time today as Nicole mentioned, we generated $388 million in revenue this quarter for 38% year over year growth, which was ahead of our expectations. We're pleased with the progress with upmarket customers as long as the initial data we are seeing from snake.
Customers, we've had conversations with many of our investors recently and one of them must requested items with more data ramp up these points. So I'll share some of that information with you today.
Customers with more than 250000, and <unk>, our enterprise proxy now account for 39% of our total <unk> up from 34% during the first quarter of 2021.
And the number of customer accounts, and if category grew 41% year over year over.
Over the past six months, we have increased the number of customers that are generating more than $1 million <unk> from 111 at the end of Q3 2021 240 at the end of the first quarter up 26% in just two quarters and 65% year over year. It is our <unk>.
Tension to continue to evolve the metrics, we share to better reflect our long term growth and business strategy. In addition to our enterprise are our metric. We now intend to regularly disclose the number of customers that we have with greater than a $1000 in.
A segment, we are referring to is growth customers. Since this segment accounts for approximately 99% of our total air and is directly correlated with future growth. We have consistently grown this cohort for the past five years.
During the first quarter the number of customers in this segment increased by about 1400 compared to the fourth quarter and by 5700 customers compared to the first quarter last year, we are confident that our land and expand strategy will continue to drive long term growth for our business.
And this new metric is better aligned with the strategic direction of our business turning to suite and expanding on what nickel shared earlier. It now accounts for 40% of our total air are up from 35% in the fourth quarter. We continue to see the majority of bookings in the quarter.
Including our new customers on a suite.
Based on the initial data from customers that adopted suite in the first quarter of 2021 suite customers have superior performance on all metrics. They have higher gross expansion lower churning contraction and higher net expansion than monthly customers.
Additionally, suite customers average contract terms are meaningfully longer than our fleet customers and on average suite customers are more engaged and use more products and features after upgrading compared to their pre upgrade bayside.
At 40% Sweet has far exceeded our expectations with respect to adoption as new customers overwhelmingly prefer suite and a significant number of existing customers have already chosen to upgrade we can see that once our customers on suite there remains ample opportunity for further growth.
Two higher expansion rates at higher dollar amount as Michael mentioned this will drive sustainable long term growth for the company.
We expect weak expand suite expansion to become the largest growth driver and we expect the pace in which we transition existing non suite customers onto suite will be more moderate as we move into our second year. We expect suite will continue to increase as a percentage of error and that the rate of adoption.
The option will be similar to what we observed in this first quarter.
Finally, we believe that the strong ongoing adoption of suites helped to support our net expansion rate, which was at 121% for the quarter. The majority of our net expansion in the quarter came from seat expansion. While we also achieved another record low in turning contraction. This supports our continued belief that our.
Long term net expansion rate will be between 110% to 120% range.
Turning to margins, our first quarter non-GAAP gross margin was $82 six up 80 basis points year over year.
Gross margin has continued to improve over time, driven largely by revenue scale and efficiencies in our hosting infrastructure.
For the quarter, we reported $20 million and non-GAAP operating income this was within our guidance range, but at the low end due to continued investment in our people.
During the first quarter as a result of successful recruiting and employee improved employee retention from trends we experienced in the second half of 2021, we've absorbed a higher percentage of expected expense for incremental head count than we had initially anticipated.
We believe these Q1 efforts will support our long term growth of our business, but they were approximately 135 basis points of headwind to operating income relative to our initial expectation.
Additionally, we had a onetime tax items that were another 25 basis points of headwind adjusting for these two items, we would have been at the high end of our operating income range.
We continue to expect success in recruiting and our ability to retain employees that were resolved in a 235 basis point of additional expense in Q2, which is embedded in our Q2 operating income guidance.
We are pleased with our ability to onboard and retain talent, which will drive our growth plan as we fully onboard these new employees and scale our business. We remain confident committed with a clear line of sight to seven 5% non-GAAP operating margin, which is the guidance that.
We had originally introduced in the November Investor meeting.
Turning to free cash flow I shared on our Q4 earnings call that we expected free cash flow to be slightly negative in Q1, primarily due to anticipated $14 million to $17 million of acquisition related expenses. We outperformed this initial expectation and generated a million dollars and positive free cash.
Cash flow during the quarter inclusive of $13 million in vendor payments related to the terminated acquisition.
Lee Let me cover our guidance for the second quarter of 2022, we expect revenue to be in the range of 402 million to $408 million, we expect non-GAAP operating income of 18 million to $24 million.
The full year 2022, we are increasing our revenue guidance to 1.685 billion to $1 $71 billion in light of our strong first quarter performance, we are maintaining our non-GAAP operating margin guidance of seven 5% with a range of 100.
$17 million to 135 $37 million.
We're increasing our full year free cash flow range to 175 million to $190 million as Michael mentioned, we have suspended all of our activities and Russia, and Belarus, and we are providing assistance to our customers in Ukraine by waiving charges for a six month period.
In total we have approximately $7 million in annual recurring revenue exposure between Belarus, Ukraine, and Russia, all of which have been factored into our forward looking guidance with that let me turn it over to Jason for Q&A Jason.
Thank you Sheila.
The first question will be coming from origin at William Blair Arjun. Please turn on your camera and on mute your line. Please.
Hello.
Okay.
You're very faint.
Is that better yes, hello, Okay, I'm trying to start my video here, Okay, it's not letting me.
But thanks.
Thanks for taking my question and congrats on a good quarter.
Starting with sweet.
I wanted to.
Get an understanding for perhaps how much of your suite traction or perhaps how much suite is.
Attractive element for new customers that are coming to <unk> versus how much of it is existing customers that are migrating up and then on the existing customer migration path how much room do you get a sense for there being left in the existing customer base to still adopt suite and how much runway is there.
Within that existing base.
Yes. Thank you and you will also find additional materials on this in our shareholder letter.
Got it.
Sweet.
Choice for almost all our new customers.
And.
And.
And we are of course still expanding are moving a lot of existing customers from.
Non suite to suite during the quarter, an increasing amount of kind of the sweet growth as a percentage of our recurring revenue is coming from expansion of that cohort. So as we said now we have the first answer anniversary first cohort.
That has reached the one year anniversary.
And we can see from that cohort, but they are expanding at a much much faster rate and that seems to be the trend. So far in cohort two so some of our assumptions for the suite has been verified, but what we can see longer contract lengths the increased adoption.
The high expansion rate and the lower churn and contraction rates. So we can also see that we have still a lot of we still have a big part of our customer base that we can still migrate to Sweden, we continue to see that as a double accelerating effort as the upgrade to suite.
<unk> opportunity in that context, but also once they as we have customers that use much more of the product and expense much faster with a cost.
With the product so it's kind of a flywheel effect getting the customers on suite as it will continue to provide expansion bookings to our business.
Because that makes sense, yes very helpful. Thank you.
Sheila I wonder if I can for you.
I think fully appreciate the call out on the exposure to Ukraine, Russia Belarus.
One thing we've heard from some other companies.
Earnings cycle is just maybe slightly down.
Elevated hesitancy in the rest of Europe with some companies calling out deal slippage I'm curious if that's something that you're seeing at all at this point in time, and if you're adjusting for that and guidance, maybe it would be a little bit more conservative, but would just love any color you have on that front, yes, certainly.
There's no doubt and Nicole mentioned at the beginning we've got employees that are.
Close you have family members that are.
Impacted and then we've got our Poland employees. So we know just even from our own company. How this is taking a hit so there is no doubt that theres, probably some headwinds that are happening across Europe .
We have left a range a little bit wider than we otherwise might have done and it's exactly for that point. Our gen. We know theres a lot of headwinds out there. We don't have a specific insight into those headwinds, but we just know there's a lot of uncertainty specifically in EMEA with our EMEA.
Colleagues dealing with quite a bit so we did impact to think about that when we left the range a bit larger than we might normally have done at this point.
Okay understood very helpful. Thank you. Thank you Ireland. Thanks, Roger has the next question comes from Jeff Van <unk> Craig Hallum.
Which are under Kamran.
It's just I can't start the video just a host to stop it. So I'll just go with the audio can you hear me.
So a couple from me first I, just very interested in the suite.
I didn't.
The percentage of the base that will buy the suite is there a Max I know you said some customers are clearer wont buy do you have any enhanced thoughts on that and particularly within the suite and it sounds like you just get great visibility on what's being used Jim maybe just expand on it a second what's being used within the suite that might be surprising you.
Yeah.
Well.
Wouldn't characterize it as surprises leasehold padova assumptions for building the suite.
We can see that customers are adopting more channels.
Especially leaning in on the more kind of modern digital channels like chat and messaging channels.
In general and get much more wider adoption of the entire product in their organization. So these are two assumptions we have around the product like the simplified pricing across the entire product.
I would encourage everybody to use a lot more of the product because they have full access to the product. So that we feel very excited about.
Yes.
There will there will definitely be use cases in some use cases, where maybe the suite is less relevant but even if we look at our growth customer segment that represents 99% of our revenue.
I think ultimately this week makes sense for everybody.
Let's say you would like the adoption as we as Sheila said, many many many times now, but a lot faster than recently.
Originally predicted so so so let's see where this takes us.
Sure on the on the hiring.
You mentioned on the operating side and the expenses you've got people in the door faster, specifically, which departmental which rolls did you see the accelerated hiring ahead of plan.
Well it was broad company based.
And so I think the hiring environment has changed a bit and I'm sure. Many are seeing that between Q4 and Q1 and clear.
Clearly Zen desk is I think.
Very attractive company for so we've had a lot of success in our recruiting and then early recruiting for Q2 was also very successful too. So theres still thoughts we're still we're still recruiting we're not done yet but.
Have seen demonstrable change in sort of our ability to successfully recruit versus what we saw in the second half of last year. Okay. One very quick one for Michael on the vote and the magnitude of the Novo.
As you come out of that how does it change how you're thinking operators of the business.
Well, we have we had grand plans Grand visions for what we can do with the momentum acquisition, that's not that's not.
That's not going to.
Materialized. So we are that we are focusing on our cooperating plan that we had even before announcing the acquisition and executing on that.
And that's really that's really our focus.
Okay. Thanks for taking my questions guys.
Thanks, Jeff next question comes from Ryan Macwilliams over Barclays, Hey, Ryan can you Amit Your line incorrectly there you go.
Thanks, Jason Hey, guys, so really strong growth in customers with greater than $1 million in IRR anything in particular to call out there beyond maybe suite adoption like is it more seats of adding more products like what has contributed to the growth in that customer cohort.
High level I would characterize it as a result of audits price investments both on the product side.
Enterprise customers have much more kind of advance.
<unk> needs for customization integrations.
Extending.
Our platform investments in making these platform.
Capabilities much easier accessible.
We see that works with customers. We also see an overall trend with businesses today, where they.
I appreciate kind of the fast time to results the kind of.
No no hassle implementation.
The ease of use in asthma.
Powerful.
Capabilities of the platform that are available, even though they're very easy to implement so we see that as a mega trend that businesses up.
David definitely gravitating to those kind of attributes.
We see that as a long term kind of accelerate out of our business.
I appreciate that.
As long as we can kind of clear up some of the things that we've been hearing R&R side right.
A press article that.
There was a banker being higher by Zen does not obviously not confirmed by you guys, but with an annual meeting kind of later than usual.
Just talk about kind of the path forward here and you know just in line with some of the things that we've been hearing.
Around them.
Well I think the board has taken its time to kind of regroup after the acquisition after the tail acquisition here.
So they are taking a little longer to kind of determine.
Get ready for our annual meeting.
We're now ready for it here in Q3, and they are going to announce the exact date when they are ready with that.
But beyond that they are very much focused on.
As is the management team on executing on our operating plan and we're very excited about our ability and our success there.
Good luck guys. Thank you.
Thanks Rod next question comes from Derrick Wood over at Cowen Hey, Derik.
Hey, guys. Thanks.
Michael given the change in strategy away from momentum.
Are there new growth initiatives that you are looking to invest in over the course of the year outside of the core.
And customer service.
Have you had any thought about reviving the focus on cell and the sales automation market.
Yes.
Ton of things that we're investing in and we have a bunch of very interesting announcements coming up at the related including some new.
Capabilities for our sales product.
We are very much we have very much the strategy around focusing on our enterprise execution in that we're very focused on that and then seeing the seeing the returns on that strategy and it gives us a lot of.
Runway over the next two or three years, focusing on our enterprise business. We are still very much focusing also on our customer's customer intelligence strategy, it's not going to be with our friends from momentum, but we are going to still going to focus on how can we help our customers gain more insights about their business of other products.
Bob themselves from using customer service data combined with other data and we are still executing on that.
Okay Sheila.
Maybe one for you I mean, it sounds like Youre pretty encouraged about that.
Net revenue retention rate out of the suite customers, even after they see that 20% uplift when they move.
And if youre seeing more of the base have that kind of a healthier net revenue retention rate.
That make you think about the long term targets of the 110 to 120 in a different light it seems like that could put upward pressure on that number. So how are you thinking about that potential for that being a stronger long term targets.
I think.
Obviously, it's still early days on Sweet as Mikkel said, we just anniversaried two months of customers. So we're really encouraged by that and we're really look forward to next call we'll have more fulsome data.
The results of those customers are very strong and that gives us a lot of gives us a lot of conviction because we had we had those hypothesis. So it gives us a lot of conviction about the value in a sustained growth I think it's too early to say whether that changes the entire.
Ray.
Range of the 110 to the 120.
But that's certainly something that we'd be looking at there for sure.
Understood. Thanks.
Thanks.
Our next question comes from Parker at Stifel.
Yeah, Hi, thanks for taking the question.
Nick I'm wondering if you could comment on the development of the partner channel I know you've made some investments there a few years ago and it's been something you've been emphasizing here what role are they playing in some of the largest deals presented today and how much work is there remaining ticket that partner channel.
All the operational and driving new deal.
Okay.
We have we are partners alongside the.
Number of different I mentioned, we have a lot of great technology partners and we are really investing in doing to do more together with our technology partners. We have a lot of companies coming to us and want to work with us and we see increasingly an opportunity to do more there.
Working also for reaching sort of a reseller partners that also plays a part of our future growth.
And then we of course have local system integrators and global the global integrators to work with and we are increasingly seeing benefits they have.
And regions of the World, we almost have partners with all of our deals we also have.
We're working with <unk> Big GSI is around some of the big <unk> around the world, we're doing increasingly amount of business there, but it's still it's like we can do a lot more and we can make it much more predictable for our business and that's a big focus area for the business, where we still have a lot of a lot of work to do there.
Yeah understood and then on the sweet side of the equation here lapping the one year Mark in the case of customers that have not chosen to migrate to the suite yet what are the most common reasons. They are citing for your sales team is at a pricing situation or they are not finding a use case for some of the functionality, what's going to move them across the goal line here.
As you go past the ear market.
Well, Sheila you can maybe add a little bit more color, but like honestly at all none of these things also has to do with the renewal cycle and when we have the right time to engage with them at the right kind of reasons to engage with them and kind of help them through the process and understand the process et cetera, et cetera and help them.
Kind of help us we help them understand the business case for using the suite capabilities or there may be just like the right.
When it's the right moment in time for them to think about new channels and then they realize that this is a much better way of doing it. So I would say these are some of the locations too.
That plays into when they move to the suite Sheila I.
I would agree I think.
Over time, we see and I mean, that's what's been so exciting about it we see customers of all sizes. The suite is the.
Preferred solution to them. So I think a lot of it does have to do with anniversary dates which will be coming up on more anniversary dates as we go through the year and there may be some customers that have some particular used case that it's not suited for and certainly well.
We support them on whatever if they just want the support product.
We'd.
Happily do that but I do think the timing for renewal is probably the most.
Lee interception point to move over to suite.
Yeah makes sense alright, I appreciate it.
Thanks Parker next question comes from some odd somewhat over Jefferies.
Hi, there good evening, thanks for taking my questions.
Maybe first one for.
Sheila I know that the company, mostly prices in U S. Dollars. So FX is an issue, but I am curious with the strength of the dollar how do you guys think about pricing strategy for your international customers just given the high mix.
Or is that something that the company has thought about just the dollar has continued to get stronger.
So we haven't we don't have we don't have like a CPI or an insulator that moves up and down that is not written into our contracts.
We haven't found it to be an issue the the pricing of our products. We think we've got.
I think Jeff of recalls that we price for value and the customers see great value in it. So we haven't we haven't seen that.
The push on any change in pricing with some of the insulators going on and then I would say just in terms of us Manny managing our risk we do hedge so I feel like we don't have a lot of risk.
Ex risk in how we run the company.
Great and then just as I think about the.
From the shareholder the shareholder letter the impact of freight as the initial impact of.
20%, plus but then you talked about the additional uplift I'm curious when you think about the ongoing tailwind is that more a function of new users being added to those customers is it more about.
And even additional products within the suite are upgrading to a higher tier just how should we think about what that additional tailwind you guys touch on beyond that first 20% bump.
Sure I mean, I think the main growth as I kind of mentioned in my prepared remarks that we're seeing is it really that continued seat expansion.
Think about.
Our model has always been a land and expand so that could be expanding.
Expanding in in.
In the part of the business, we're in or expanding into another division or another use case inside the company. So I think that's that's all available and obviously.
Moving from Sweet non suite to suite, there's a 20% upsell and then that pricing persists for the for the seats in terms of.
Additional usage, we're seeing actually it's been really interesting much higher usage of features.
Then the pre upgrade and we think actually that's really going to be beneficial for turning contraction.
It's the product.
In higher usage.
More valuable if you will to the to the customers that are using it so they're gonna Wanna be staying.
Staying with <unk> until we see that as being beneficial for that.
Great. Thank you so much thanks.
Months.
Thanks next.
Question comes from Brent Brakeman, O'brien Piper Jaffray, Hey, Brent can.
Can you kind of camera.
Good afternoon, and good to see the team here I wanted to go back maybe for your medical and talk a little bit about some of the investor concerns going into the year more broadly we're tied to these changing global risk factors.
But what we saw on Q1 from from Microsoft They actually have much stronger large enterprise momentum in the March quarter service now your million dollar cohorts up 65% year over year.
A little bit of a contrast or kind of what we were thinking going into the year from a risk standpoint. So can you talk about.
Why or what what's resonating with these large enterprise customers is it just older systems that they feel they have to.
Upgrade and modernize is it just a mix shift to direct to consumer and Thats whats driving some of these large enterprise wins for you just trying to figure out and understand the rest have changed but it looks like large enterprise deals continue to be strong so little bit of a disconnect. There I'd love to hear what you're hearing from large customers.
Well im not sure I understand the disconnect, but I can say is that we of course dealing with mega trends that are moving kind of that.
Rapidly increasing the amount of customer engagement that every business has to deal with.
And businesses are looking for Mod on modern agile solutions that can deal with these new channels and making capable obligation with our customers.
So they don't want to thing about it is big massive projects that won't be agility to be customer focused and meet the customers where the customers on that is what we do for them. So our ability to sell into those segments. It's something that's been a long journey for us becoming increasingly better added working more and more with partners as you heard before there was a question about partners.
Our positive revenue is growing like a 100% since.
Since last year. So we are really really pushing on all the kind of our enterprise go to market motions and.
Also delivering a lot of the capabilities that our enterprise model around the world around.
Regulatory staff and data privacy issues and all these things.
Top of mind for enterprise today, we want to make those table stakes. So they can just focus on executing on on the customer strategy and that is what we're doing.
So it sounds like a lot of investments that you've been making for the last year couple of years or contemplate paying off here I guess Sheila for you just a quick follow up on Europe . It is 29% of the business as you look at the pipeline maybe split it between transactional and enterprise are you seeing any one of those areas, maybe a little more weaker I.
The wider range of guidance in the quarter, but just as you think about pipelines specifically in Europe .
Comment a little bit on what you are seeing either enterprise or transactional trends. So far yeah, I don't know if we have.
Certainly it.
There's a lot of uncertainty for customers I think we've witnessed thanks for taking a bit longer.
And then some hesitancy on customers I mean, I think that's very natural.
I don't know if I would say it was more than one one segment than the other I think.
Kind of there is sort of a universal headwind.
That the region is facing but we tried to factor that into our forecast and gave that broader range just because we know that there is that uncertainty.
Helpful color. Thank you.
Thanks, Brent. The next question comes from Adam over Bofa, Adam. Please go ahead.
Hey, Thanks, guys.
Hi, Kevin Industries travel Rideshare hospitality, we're seeing a lot of headlines about these categories coming Roaring back I know you guys had some exposure to them.
During the start of Covid.
Is it fair to say that a lot of these kind of headwinds.
<unk> spend from those categories have kind of come back.
Yeah, I think we I think we had even said at some point in late.
2021 that sort of that that contraction that we saw we thought we felt like we've kind of worked through that.
Hospitality was really had airlines were really had sort of all of those really hard hit industries.
They've come back.
Or are they had already kind of kind of come back in 2021.
Got it so then.
I guess next question to the extent that you guys have visibility into this can you compare and contrast kind of what youre seeing.
Queen the up market enterprise customers versus the small business customers just in terms of appetite.
Mr spend on software.
I don't think we have.
I don't think we have good data to provide you with that Adam.
So Sheila I don't think I don't have anything I can provide you.
Yeah, I don't I don't have a unique insight into.
Obviously, we have different plans that appeal to different size customers. So we try to have our plans right sized by where the customer is.
Okay, so pretty consistent across.
Our cost per customer segment, yeah cool. Thank you.
You.
Thanks, Aaron next question comes from D J Heritage Vijay.
Hey, guys good to see everyone.
How are you thinking about M&A now as you pursue that kind of evolution towards customer intelligence platform. Like are you out there actively looking for assets that would improve that data strategy going forward is this stuff you're going to do organically.
Sir.
We're not going to announce anything big in Crazy right now that's for sure.
But like how.
Our investment in customer intelligence is really about leveraging the data sets that we have and hopefully applying more data that can access anchors.
Mike.
Elevate the data and make it much more actionable.
We.
We can work with our customers about getting that data together with the customer service data and therefore, a lot of our customers.
So long way makes a big.
Big stocks of that journey.
But we are definitely also working with partners.
Looking at what technologies out there that can help us on that path. So we keep open through like we have our own roadmap. We keep open to working with partners looking at opportunities of working with our customers of executing on that vision.
Yes, Okay makes sense.
Follow up for you just any operating history on that growth customer count metric, you're now sharing I think you said 1400 was a net ads.
In the quarter, Yeah, we provided D. J in the shareholder letter, we actually provided the history along with the logo.
Provided that.
So you can actually see where we've been.
And we our intention is to buy it provide that over time I think as a part of a lot of the investor outreach.
This is an area that people want and more visibility into <unk>.
So we've tried to provide that for sure yeah perfect.
That data out thank you.
Okay, great. Thanks T J.
Next question comes from Karen Mcginnis over UBS to it.
Yeah, Hi, everyone. Thanks for asking answering my question. So if I look at the <unk>.
On the high end of the guide in <unk>, It's roughly 1 million, but you raised the full year guide by $5 million. So can you just talk a little bit about what's driving that and what's giving you confidence.
With growth for the rest of the year, just particularly in light of some of the comments you made around customer uncertainty and the Europe exposure.
Yes, so Tyler I think it's kind of two parts. So if you think back we had a really strong Q4.
If you remember back so we finished the year really strong at 32% growth.
Thank you know as all of us centered.
A 2022 there is uncertainty.
It's always important for us to start the year strong that gives us a lot of confidence about the year. So I think as I shared when we reiterated the November investor guidance in the Q4, meaning we're really looking to Q Q1 to help build our confidence for the year. So that's really that's what you're just seeing us move through we feel we had a very strong Q.
Four we built confidence in Q1, and that's giving us the confidence for the full year.
Perfect. Thank thanks Taylor.
Our next question comes from Elizabeth quarter over at Morgan Stanley Elizabeth We should under Cameroon.
Thank you hi.
Hi, Thank you so much for the question.
Can we can encourage you to see the NRI above that target range, but I just wanted to.
I'll ask on the modest downtick from the prior two quarters, just given the new low levels of churn.
The drivers of that downtick in any impact we should be thinking about an anniversarying. This suite launch and how that impacts the go forward in Iraq.
Elizabeth.
Thanks for the question a lot of some of these effects are just the other side of Covid. So I think that the slight downtick I would say, we're kind of lapping some of those.
Downturn from covered to that's part of what's happening and then in terms of.
Our strength that we're seeing in the suite and sort of those early trends I mean that will be something that we'll be looking at.
Does the move to suite actually give us a different sense of what that normal range would be overtime.
Got it and then.
On the customer.
Gross customer logos.
The 1400 added.
This quarter and then last year it was about 1800.
Should we just think about last year as being one of those more COVID-19 impacted quarters.
And as the run rate of customers, we can kind of going forward in this 1400 range or could we get back to that first half of calendar 'twenty one right.
Well theres sort of two components as we think about these customers. Some is new customers coming to us and then the other component is some of the customers in the lower price bands actually moving up and we saw some.
Additional activity you're right that was COVID-19 related and then we saw some additional activity in suite. We think that this is a this is a very.
Strong.
A trend that we have and there may be just some some perturbations as we might have some uplift to some of the customers below 1000, moving up and some of that isn't just us that's their own business creation that they have more agents and they want to move to a bigger plan with us.
Got it. Thank you so much. Thanks right next question comes from Ryan Krueger over at Wolf right.
Hey, guys. Thanks for taking the questions Sheila just two quick ones for you.
Can you talk a little bit about the investment priorities for the remainder of the year I know you laid them out at the analyst day about where six months removed from that so any changes there and then just going back to the FX point given the hedging is it fair to say that there was no FX impact in <unk> and then no FX embedded in the guidance yes.
The second question first and then we'll go to the first one correct. That's a correct assessment that you have on the second question on the.
The first one as we laid out in November and.
There were as Mikkel said, we're really focused on this it's really building out that enterprise capability I would say that's our foundational.
Investment area and there's many different facets to that that certainly building out our our sales capability and then the.
The support of the sales capability, but its certainly building out product features that enterprises are looking for as they have.
Requirements.
Nicole talked about compliance requirements things like that and they just have higher requirements. So we're rolling out our product capability to be able to serve those customers and then we're also building out as Michael talked about the partner network. So we're still early days, even though we doubled.
With our partners year over year, and we're still early days in that and we have a lot of enthusiasm excitement from the partners, but we have to really built that practice. So.
That's the other part of it.
We think continuing to build out our messaging that's been a big investment area for US I think we'll talk a lot of debate about that share some of that conversation on CRM and we think that's one of the important.
Modalities that is going to be important customer service, we've been building that out. So I'd say those are kind of our top investment areas awesome. Thank you. So much thanks for the question.
Thanks, Ryan and our last question comes from Pat Walraven. So we're JMP hit that go ahead. Please.
Oh, great. Thank you.
So I'll make I'll, even without momentum Im still im sure Youre still survey your customers employees a lot.
What do you survey your employees, what do they say that the one Zen desk to do better.
So top free.
Employee requests Ping Pong tables.
Food and bigger.
The inventory that's kind of the three took free requests right now everybody is super focused on getting back to the office is getting back to the team back with teams again, we have a ton of upsides.
Meetings now.
Exciting to have like we hosted our first live.
Q&A yesterday, not done with some of our team that amount in the region. So like.
A lot of people are focused on getting back together, we have a lot of people in this company that never met a colleague or.
They're very excited about getting back together.
There is a lot of energy coming from that that we're very excited about.
Okay.
I was just looking at the Glassdoor reviews, I never know how accurate that is but I mean as compensation something that is coming up a lot and as the company is growing it seems like there is mixed results about some people say there is too much structure and other people say it too bureaucratic. So I was just kind of wondering on those two topics with what you would say we are an excellent reflection of.
Obviously, it's a america in that regard.
Alright. Thank you. Thank you.
Great I think that's all our questions for today, we thank everybody for joining our call and we look forward to seeing you at the various conferences that will be up this quarter.
Thank you.
Yeah.
Yeah.