Q1 2022 Kinaxis Inc Earnings Call
Good morning, ladies and gentlemen, welcome to the can access Inc. Fiscal 2022 first quarter results conference call.
Currently all participants are in a listen only mode.
Following the presentation, we will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions I'd like to remind everyone. This call is being recorded today Friday may six 2022.
Now I'll turn the call over to Rick Wadsworth, Vice President of Investor Relations at Codexis, Inc. Please go ahead Mr. Wadsworth.
Okay.
Thanks, operator, good morning, and welcome to the snack this earnings call today, we will be discussing our first quarter results, which we issued after close of markets yesterday with me on the call are Johnson card, our President and Chief Executive Officer, and Brian Fitzgerald, Our Chief Financial Officer.
Before we get started I want to emphasize that some of the information discussed on this call is based on information as of today may six 2022.
Contains forward looking statements that involve risks and uncertainties.
Actual results may differ materially from those set forth in such statements for a discussion of these risks and uncertainties you should review the forward looking statements disclosure in the earnings press release as well as in <unk> SEDAR filings.
During this call we will discuss <unk> results and non <unk> financial measures a reconciliation between <unk> results and non <unk> financial measures is available in our earnings press release and in our MD&A both of which can be found on the IR section of our website access dot com and on SEDAR.
Vince are advised that the webcast is live and is also being recorded for playback purposes, an archive of the webcast will be made available on the Investor Relations section of our website.
This call excuse me, nor the webcast archive may be rerecorded or otherwise reproduced or distributed without prior written permission from connections.
To begin our call John will discuss the highlights of our quarter as well as recent business developments, followed by Glenn who will review our financial results and outlook finally, John will make some closing statements before opening the line for questions.
We have a presentation to accompany today's call, which can be downloaded from the investor relations homepage of our website connect to stock hub. We will let you know when the change slides I will now turn the call over to John .
Thank you Rick good morning, everyone and thank you for joining us today I'll be starting on slide four.
I'm pleased to report that can access had a very strong start to our fiscal year, both in our financial results and key operating metrics.
For Q1, we achieved SaaS revenue growth of 22% to $49 3 million.
Total revenue growth of 70% to $98 1 million.
And adjusted EBITDA margin of 34% Blaine will provide all the specific details momentarily.
Moving to slide five.
Momentum in winning new customers continues to accelerate as more companies consider replacing and flexible legacy cascaded planning techniques in favor of a more agile concurrent planning approach.
In Q1, we matched our all time record.
For new customer wins that we said in the previous quarter. This is particularly noteworthy.
As the last quarter of any year is typically the strongest for connected so matching that performance means. This was an all time record for any Q1 in our history.
And serves to boost our confidence in what is to come for the remainder of 2022.
We are honored to be selected by a growing number of global companies that put their trust and confidence in can access and rapid response to bring about transformative improvement and supply chain planning performance for example.
Leading health science companies like Siemens Health care.
And Bayer crop science.
And the consumer product sector, we added the iconic brands Kimberly Clark.
Carlsberg.
And we secured another major expansion with one of our many flagship customers in the automotive sector.
Complementing our ongoing success with large enterprise companies like these.
We continue to see success in the mid market with over 35% of our new customer wins in the first quarter coming from this category.
We are thrilled with our ability to serve such a broad universe of companies and verticals with a single SaaS offering.
It is a testament to the universal value of concurrent planning and validation of the strategic product decisions. We've made in the past.
Record breaking new customer wins in Q1, coupled with expansion from our installed base has resulted in continued growth in our annual recurring revenue.
At March 31st our <unk> grew a healthy 24% year over year to $236 million in constant currency.
Behind that.
Our four quarter Rolling pipeline continues to grow stronger still.
It shows a healthy balance across all key geographies and vertical markets.
In Q1, we experienced a sharp growth in the number of unsolicited inbound leads in fact, an all time historical high.
Which in turn helped to support at all time record number of direct prospect engagements for the quarter.
These are distinct signs of momentum in the business.
Together these leading indicators provide us with the confidence to grow SaaS revenue by 23% to 25% this year and to increase other aspects of our annual guidance.
Now ask Blaine to discuss the results for the first quarter and share more details about our improvements in guidance for 2022.
Yeah.
Thank you John and good morning.
As a reminder, unless noted otherwise all figures reported on today's call are in U S dollars under <unk>.
Let's move to slide six.
Revenue in the first quarter was up 70% to $98 $1 million, reflecting strong SaaS revenue growth.
Pretty strong subscription term license revenue.
At a high level of professional services activity.
<unk> revenue grew 22% to $49 $3 million driven by record new customer wins in recent quarters and expansion of existing customer subscriptions.
Subscription term license revenue was $23 5 million versus $2 1 million in Q1 of 2021.
Fluctuations in this revenue item are generally tied to the normal renewal cycle of our customer hosted software subscription.
And what Barry period to period as a result.
Q1, 2022 represents the peak of that cycle.
Our professional services that can be withdrawn again.
Resulting in $21 $5 million in revenue or.
Or 78% growth over the corresponding quarter of 2021.
The rapid growth reflects accelerating new customer wins in recent periods higher professional services capacity and utilization.
And expansion of our service offerings.
Generally.
This revenue item varies from quarter to quarter based on the number size and timing of customer projects underway as well.
Well as the portion of work assumed by partners.
Maintenance and support revenue for the quarter was $3 9 million.
26% from Q1, 2021.
Reflecting overall growth in the subscription business with a small group of customers, who have chosen to deploy rapid response on premise or who maintain the option to do so.
We continue to be pleased with the diversity and strength of our total revenue base.
For the quarter, our 10 largest customers accounted for 40% of our total revenue compared to 27% in the comparative period.
As I just mentioned.
The higher proportion is an outcome of being at the peak of our normal subscription term license revenue cycle.
The value of one side on premise subscription renewal was large enough to account for more than 10% of total revenues.
Now if you go back to Q1 2019.
At the same stage of our approximately three year renewal cycle.
See the same pattern occurred.
First quarter gross profit increased by 87% to $69 6 million.
As a result of revenue growth gross.
Gross margin in the quarter was 71%.
Baird to 64% in Q1 2021.
Largely reflecting a greater proportion of high gross margin subscription term license revenue in the mix and.
And a very strong 20% gross margin on professional services revenue due to high utilization of the team.
Adjusted EBITDA was up 267% to $33 1 million for a margin of 34% compared to 16% in the first quarter of last year.
Our profit in the quarter was $12 5 million.
Compared to a loss of $1 5 million in Q1 of 2021.
The significantly higher revenue and gross margin, resulting in greater profitability. Despite increased investments in key operating areas.
Q1 cash flow from operating activities was up 7% from the comparable period at $22 million.
At March 31, 2000, thank you.
Cash cash equivalents and.
Short term investments totaled $252 2 million compared to $233 $4 million at the end of 2021.
We remain pleased with our outstanding track record of cash generation.
Let's move on to slide seven.
Turning to some key metrics our annual recurring revenue.
Grew $42 million or 22% year over year to $232 million.
Currency effects.
But currency movements master, even stronger underlying growth.
In constant currency or <unk> grew 24% year over year to $236 million.
This improvement reflects the unprecedented strength, we have recently experienced winning new accounts and have success, winning incremental business from our installed base.
I'll remind you that the growth rate for the SaaS portion of <unk> is.
Is higher than for total error.
Moving on to slide eight.
Our remaining performance obligation remained strong at $479 1 million up.
25% from March 31, 2021.
Of that total $445 2 million relates to SaaS business, which is up 22% year over year.
Further details on our <unk> can be found in our revenue to our financials.
Recall that growth in RVO electric both incremental business, one and renewals of existing subscription amounts, which are subject to the normal schedule of existing customer contract renewals and the duration.
<unk> only reflects incremental changes up or down in new or existing customer.
In amount.
And as such is a better indicator of future revenue growth.
On to slide nine.
With respect to our outlook, we are pleased to be able to provide you with increased guidance for fiscal 2019.
We now expect total revenue for 2020 to be between 345 and $355 million.
So as revenue is still expected to grow between 23% and 25% over our 2021 level.
We now expect subscription subscription term license revenue.
To be between 32% and $34 million.
The balance of the incremental increase in total revenue guidance will come largely from professional services.
Finally, we now expect our adjusted EBITDA margin to be between 16 and 19%.
Overall, our results for the first quarter was strong and the key metrics, we watch as indicators of future business growth are trending very positively.
We are thrilled to be investing in this exciting and developing opportunity.
With that I will turn the call back over to John .
Thank you Blayne.
Over a month ago I celebrated 28 years it can access.
I can honestly say that I have never been more energized about the future than I am now.
We are at this very moment experiencing what I call the supply chain Renaissance the generational shift in how supply chains will operate for decades to come and setting a new foundation for future generations of supply chain practitioners.
We're moving away from legacy cascaded, lethargic, and Siloed planning techniques and moving towards modern hyper agile immersive inclusive concurrent planning techniques and I believe can access is uniquely qualified to accelerate that reality.
And finally, a quick commercial about our upcoming customer conference I'm thrilled to share that we were having.
Is sold out in person event happening next week in San Diego.
In fact, I'm told it's significantly oversubscribed at the moment. The good news is that we are going to simultaneously stream virtual content through the connections 2022 event I encourage you all to participate virtually.
In our Premier Global conference for supply chain planners innovators and thought leaders you can register under the financial analyst category for the virtual event track at connections Dot com.
During the conference you will have the opportunity to hear from supply chain executive practitioners and experts from leading companies such as Amgen Honeywell PQ Corp's.
Qualcomm to name a few on how they are meeting today's challenges and building their roadmaps for the future.
Certain sessions that arent initially available virtually will be made available later on demand.
As always thank you all for taking the time to join US on the call with that I'll turn the line over to the operator for Q&A.
Okay.
Yes. Thank you as I mentioned, we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
This time, we will pause momentarily to assemble the roster.
And this morning's first question comes from Richard Tse with National Bank financial markets.
Thank you and congrats on a really big quarter here guys.
Listen it sounds like the pipeline is getting a lot bigger can you maybe talk about how much of that due to your marketing investments in recent years or the expanded partners or just the broad market tailwind is trying to get a feel for where that's coming from.
Yeah, Richard It's a great question I think.
You know I, probably had 90 conversations now at least 91 on one conversations in the last 15 months or so with chief supply chain officers in the narrative as.
It's really unified every board is asking every CEO what will you do next time, there's an appreciation that.
You know the uncertainty is the only constant and.
Agility is becoming the new competence that people are looking for and and so the pipeline continues to grow.
You know quite.
Quite strongly I will say.
Order over quarter more importantly, you know I mentioned earlier, the unsolicited inbound leads which saw a very sharp increase quarter over quarter I think it's a reflection.
Oh.
What I'll call an appreciation that we're at a crossroads in this craft and this discipline.
That incremental lithium is dead.
You know there has to be a fundamental shift in how supply chains are governed.
And so I think you know this.
This is with this global pandemic has done is created an opportunity.
For the practice not just for companies, but for the practice of supply chain to reflect on.
<unk>.
What matters most going forward.
And so there was a time, Richard where we would be competing with CRM.
<unk> are competing with MRP upgrade projects those were I would say very strategic not anymore. A supply chain I think is probably it might well at least in my estimation the most strategic endeavor.
I think it will last for the next five to 10 years.
Okay.
As a related question here if you look at the landscape certainly been fairly active in the past years from an acquisition standpoint, Blue Yonder and now you've got an implant like I'm not going to ask whether you guys are a potential target as well, but how has the competitive landscape changing in the midst of those acquisitions or is it sort of strengthening your position.
And as those companies regroup or what do you think about that.
No theres been no meaningful change honestly in the competitive landscape for us.
You mentioned and a plan there I think they are predominantly focused on the.
The office of finance coming into the Cfo's office.
Apply chain is altogether are completely different.
Function and significantly more complex I would say.
So we very very rarely will.
Bump into them I can't remember the last time, frankly, and so it continues to be SAP is the predominant incumbent.
We will bump into Blue Yonder no nine.
From time to time.
You know as is typical.
And honestly I would point you back to the the Gartner Magic quadrant.
Which I recognize is the old one.
I would encourage you to keep an eye out for the next one which.
I think we'll be imminent.
And I think they really get it right you know I have a lot of respect for the process. They put everyone through it is very very detailed.
And I think they really get the competitive landscape right.
And so you know maybe the the next week or two will will tell us the story.
Okay, and then last one for me you know that.
This number is actually you know.
It continues to be quite robust here can you maybe just update us on the nature of the services versus the ones that you hand over to your partners.
So yes.
We've been looking at that we were anticipating getting this type of a question.
These last two quarters in fact, I I want to say five or six quarters in a row, we have been experiencing record breaking net new wins and so as a side effect of.
Bringing on that number of customers. It's a natural side effect that we would be starting more projects that said.
We are doing fewer projects the fewer projects fewer engagements directly like where we're the lead.
First is when our partners are leap, we're still seeing you know the vast majority of of deployment.
That are that are occurring today.
Our partners are taking the lead we might have a secondary role.
But we are you are taking on to the minority.
<unk> lead.
What I'll say the professional services lead position for net deployments so.
So I think what we're seeing is.
As a side effect.
A very rapid successful net new customer acquisition.
Acquisition.
Over over a very short period of time, you know the last two quarters.
We announced in Q Q4.
A record number of net new accounts in the history of can access.
In Q4, being typically the strongest quarter of the year as long as I've been here and then replicating that yet again in Q1.
Which you know I think as a sign of momentum in the market. So I don't see this as a systemic situation.
It's really just a side effect of our recent acceleration of net new accounts you asked about the type of service.
That hasn't really changed either the deployment services whether it's.
Starting with rapid start and expanding from there or I did mention.
As a result of our acquisition in India, we are doing some sustainment services.
For some of our largest customers, but overall, we haven't seen a real shift in the type of service that we're offering.
Okay. That's great. Thank you.
Yeah.
Thank you and that's why she comes from Howard Smith shortfall this with BMO capital markets.
Hi, good morning.
John I remember at the time of your IPO at the time, you'd said that the biggest constraint to growth with customers needing to realize they need software like this.
Alluded to currently that's not the case anymore or are they all kind of get it.
So at this point what would be the constraint to growth I mean, you're obviously, putting up very strong growth, but in terms of accelerating beyond that is there a constraint in terms of sales and marketing capacity or in terms of plenty of capacity or what's the dynamic there.
Yeah. It's a great question and there is something that keeps me up at night, obviously that you know we think about as we absorb success.
You know, obviously, where there isn't a day, we're not hiring across the board ourselves as a company, but more importantly.
There isn't a day, where we're not recruiting partners and system integrators.
I believe we added another 15 or so in Q1 were up over 90.
Signing agreements with with partners not all of them system integrators of course, some of them are solution extension partners some of them are.
Our vars that all said, we are investing quite heavily right now in the Onboarding and.
The training.
Required to make sure we can accelerate the readiness of our partners.
So we are.
We're obviously looking as I said to these leading indicators I've talked a lot about this in past earnings calls about unsolicited inbound leads which is essentially when somebody rings. Your doorbell with they come to your store without any solicitation. They just come to you.
So we monitor that very very closely as a leading indicator.
And that has us working very very diligently with our partner network to certify as many third parties as we possibly can so that we can be ready to absorb.
The momentum and the success, we see in front of us.
Yeah.
Great.
Kind of partner related question I think in the past you've alluded to the opportunity of leveraging resellers to perhaps tackle a market segment in a bit smaller than mid markets.
Is it very early days on that front or anything new to report.
I'm happy to report that we actually had our first successful bar sale.
Initiative isn't very old quaint in its nascent state, but we have signed.
Many bars already I don't know the exact count because.
You know it.
I believe we're up to over 20th year over 20 virus and one of them has successfully closed a deal on their own well with our support obviously, but.
We're thrilled with that you mentioned that the mid market.
And I talked about this in the in the opening remarks that we're thrilled to be able to satisfy the needs of such a broad.
Spectrum of customer sizes and verticals.
Our smallest customer does under $100 million in revenue.
Under $100 million and they're using exactly the same.
Software is companies that are over 150 billion. So it is a it is a testament as they said a testament of the power of concurrent planning as technique.
And obviously our bar program right now is really focused on.
Expanding our sales footprint outside of the geographies that we're already in and certainly tackling a much broader.
A much broader pipeline potential I think we used to talk about targeting 3000 on previous 3000 accounts in previous earnings call calls, we've talked about that growing to six or 7000 I can tell you today.
With the bar engagement that we have are probably closer to 20000.
That's great and just a quick one for Blaine is it safe to assume that the 23% to 25% SaaS revenue growth would be a couple of points higher in constant currency.
Okay.
It's a great observation and a great question.
I will say that our numbers are being held back a little bit from because of FX issues.
I'm looking forward to the euro and Japanese yen.
British pound all of it to make a recovery during the year and I'll say I'm very confident in the 23% to 25%.
But I'll also say that FX is part of the reason that.
That we're in that range right now.
Okay, Great I'll pass along thanks.
Thank you and our next question comes from Daniel Chan with TD Securities.
Hi, Good morning, another question on the guidance it seems to be coming from pro serv.
I mean, you guys are talking about a lot of net new customers coming in so I'm. Just wondering why this increase pro serv outlook doesn't correspond with a substantial increase in software guidance, whether that's from term license or SaaS I know you've increased the term license guidance, but that seems it could be mostly relate to strength from this current quarter.
Well, maybe I'll start with professional services and why we're seeing the increases.
A number of number of reasons, but the biggest reason that goes back to again the customers that we're seeing coming in and out.
As you can imagine the professional services revenue comes in at the outlook.
Right.
For any of our software agreements that we have in place and so that that revenue is.
It's right now hitting the upfront of that ramp that we're going to have with <unk>.
The subscription amount that kind of like coming over a longer period of time.
We are in a position that.
We're very fortunate to have very.
Very big numbers that are coming from professional services, but we are working very diligently to make sure that.
Our partners are getting the bigger bulk or the bigger piece of the pie. When we are when you do those that work. So this is just a.
Symptom of the fact that.
This is the upfront fee that a lot of.
Customers would take on to deploy our software into their environment.
Is it fair to say that the professional services that you're deploying this year than in the upside that you've guided to is it fair to say that that maybe some of the software revenue youre going to see would fall into 'twenty three.
Yes, definitely our software revenue, we generally have contracts between three and five years, so other than subscription term license revenue, which.
The majority of its recognized upfront our SaaS revenues will be recognized over a three year three to five year period, So and we do have some ramping deals that are in place as well. So we do have some committed <unk>.
We'll be landing over the next two to three years.
Okay.
Okay. Thanks.
Then just another question on pro Serv strength.
You mentioned.
But your engagements with our with the partners hasn't changed just wondering to what extent.
Your move into the mid market is driving strong demand for pro serve as well considering some of these smaller customers may not have the resources to put into themselves and they want to leverage your services.
Well, yeah, absolutely as I as I mentioned you know.
Just the sharp.
Increase in net new customer wins in a very tight window translates to a sharp number of.
Project starts you know Oh, all at the same time.
Now I will say, obviously mid market.
Mid market companies will tend to have smaller overall projects.
And then.
You know our enterprise class.
Customers, but there's there's definitely foundational work there.
So that comes back to you know working very very diligently with our system integrators to make sure that they're they're well prepared.
To absorb those projects alongside those net new wins, but again I wouldn't classify them as being a substantive lee different they might be smaller in scope, but not different from enterprise class.
Counts.
Great. Thank you.
Thank you and next question comes from Robert Young with Canaccord.
Hi, Good morning, I'm, just looking back over the years. It struck me that you haven't really raised guidance in the first quarter very often I'm certainly not the quantum you're doing.
With this quarter and so.
Even though a lot of that is coming from professional services as others have pointed out I'm just curious.
Is there an implication there of rounds.
The <unk>.
Speed of growth here at the beginning of the year faster than other years.
Is there anything that's.
Creating a dynamic where you're trying you see a higher level of professional services here in the short run.
Yeah.
Yes, I'll answer that.
We are in a fortunate position out and see that things are ramping really quickly in professional services arguably the first group that are going to be.
You touched by this rapid growth that we're seeing.
Hmm.
And you're right. We generally haven't we've been pretty accurate in terms of understanding what our opening year.
Forecast our guidance would look like I think we're in a situation where.
We're in a fortunate situation, where things are happening faster than we anticipated and professional services that the first area that we're seeing that increasing a lot quicker than we expected.
We're also seeing on the retention periods like our customers are extremely happy with us and so some of the reasons why you're seeing this increase in guidance is that we've got into a position with a lot of our renewals that we are foreseeing for the rest of the year.
Are looking really really good at this stage I mean, I would say.
On a retention perspective, especially on gross retention.
This will be one of the the milestone year as that any company out there we'd ever had so we're very very fortunate to be in that position at this stage.
Right.
We're in one of those situations that I think every CFO wants to be and where thing.
Things are rolling in our favor and a lot of different respects.
And we're able to increase the guidance at this stage and we'll keep you up to date for the rest of the year.
Yeah, just to be clear on the comment on gross retention is that or is that expansion that you are trying to highlight there which is the high level of expansion you expect these drags the gross retention.
Good comment so when I talk about gross retention I talked about.
Our customer retention.
We've always talked about that were in the mid.
The mid Ninety's to high <unk> I think we're closer to the later at this stage for 2022.
Net retention has continued to be over 100%, we're still very very happy with the expansion that we've seen on are our current customers and what we're doing right. Now is we are in the process of with every new customer we bring in.
More powder to be able to allow us to expand that revenue over time, so where are we.
We're situated pretty well on both of that retention figures.
Okay.
The comment made on unaided inbounds, I'm curious, how you're handling those.
As I understand youre not covering all of the vertical out there as yet and so are you seeing a lot of inbound outside of your target market target geographies and how do you handle those.
Most of these going to your partners I mean, maybe if you could talk about that and how it informs your.
Are you planning.
Yeah, absolutely Rob So we're we're certainly seeing inbound leads from.
From mid market accelerate as we as we show them.
Evidence of success.
In supporting that that sector.
And certainly across all the geographies and of course, we're taking inbound leads and geographies, where we're not necessarily.
Directly present and with a growing <unk>.
<unk> of Vars that.
That gives us an opportunity to.
No to make allocations if you will.
On those opportunities and so so that is continuing.
As we go.
Of course that is fueling as I said in the earlier comments.
You know, it's one thing to have somebody ringing the doorbell and and just be browsing. It's another when they say no no no I I have a project I'm you know I have a process I'd like you to go through and that is.
Fueling not only the pipeline, but active engagements and for.
For me these are leading indicators.
You know the other thing I can tell you.
I think maybe you and I have known each other a long time, Rob and Ive always said our cycle times tend to be on average 18 months well you know I've been monitoring that very very very closely and that is now there is evidence to suggest that's closer to 12 to 15 now.
And I'm I'm confident enough to say that that I think that will that will sustain for some time because this is becoming so crucial.
For so many companies.
To tackle.
So so we're we're obviously thrilled with that momentum.
And you know the bets we made.
You know on our global Alliance.
Issue dividend and growing that team.
A really really paying off.
Hum.
Cycle time at the whole Cana, where I hope others expand on more but the what's the key drivers.
The value of the ship to mid market.
Customers pushing you to go faster through the sales process.
If there's one or two key drivers in the call.
Question about sales cycle.
Would it be.
Yeah.
Yeah, I'll tell you that based on my conversations that if I had to pick the number one it's I describe it this way when I'm talking to chief supply chain officer. They tell me I have a 100 for fever.
I like the symptoms are so horrible.
And so theyre looking for.
Really rapid prescription.
Can you lower my fever, and then we can talk about transforming for the future and I think that is the the one catalyst that is really driving this the other.
I think I've mentioned this before that.
Boards are are all over this topic.
The supply chain isn't something that's tactical are cost centers, an absolute strategic weapon, even just recently I want to say yesterday.
This might be the first time, this happened where cardinal health Spa.
Specifically mentioned can access as a as a partner in their press release and their earnings call script.
And so this is this is becoming more and more typical where supply chain is becoming hyper strategic and the need to transform away from the legacy lethargic approach the cascade.
Approach to one that is hyper agile is becoming urgent.
Those would be the two things I would come I would I would say robin.
Okay. Thank you.
Okay.
Thank you and the next question comes from Stephanie price with CIBC.
Yeah.
Hi, good morning.
Following up on that conversation now can you just talk a bit about the teeth.
If it starts up.
Michael and confections made them on all that.
Yeah.
Yes, definitely I can certainly speak to that I.
You know in fact rapid start was very much borne out of many conversations I was having with chief supply chain officers that told me exactly that.
You need to deal with symptoms first before I can deal with cure.
I need to be strong enough. If I can use that analogy and rapid start you know continues to be what I believe unmatched in the market the ability.
Shake hands and go live inside of a 12 week period in fact, you know.
But one recent life science customer rate I want to say it was six to eight weeks.
To their initial go live which I think is revolutionary right. There right. There we are seeing continuation of a pick up on that theme.
Although.
Depending on the size, it's not uncommon for an enterprise class customer just to say look I I love. This rapid start I need to go live as fast as possible, but I need to embellish the starting point just a bit.
So are we.
We might see something in the sort of four month time horizon for that.
For that initial go lives.
It continues to be very very strategic to us, it's something that we lead with.
And and obviously for mid market.
It is extremely well received.
Great. Thank you and then one for Blaine just from that Q1 margins, you're obviously very strong.
Can you talk about the decision.
Today's margin guidance for the full year by 10 basis points and investments that you're looking at.
Yes.
Sure Yeah.
They actually came down just math at the end of the day.
Going from 15% to 18% to 16 to 19.
A slight increase in subscription term license, which generally brings to us a 100% margin, but as you can imagine with professional services also.
Part of the increase in total revenue.
It has less of an impact on the margin that's about the bottom line it.
It does have obviously, a dollar or a big dollar impact for us, but the percentage impact is less so because what we expect and we came in around 20% of professional services.
At the end of Q1, we expect we're going to be somewhere in that 10% to 20% range for professional services.
One of the things that we're noticing is that the utilization of our team is extremely high and we want to manage that utilization.
Throughout the rest of the year, so we're going to ensure that although we see revenues continue to ramp.
Try and ensure that we have enough resources to support.
Slightly lower utilization, which would then mean a slightly lower gross margin, but we're pretty happy with.
With that Martin in any case and so.
At the end of day, its a spreadsheet math math formula It works out to 2019, So we're happy there.
Your second part of the question was asking where do we see.
Investment in our biggest investments is gonna be head count and dealing with the increase we're seeing.
We will have to add people on the professional services side.
<unk> continued to look at the sales side to try and meet the demand that we're seeing.
The fact that we have this.
Great inbound funnel that's coming in.
Is amazing, but we also need to make sure that we're.
We're finding all of those.
Those potential customers that haven't picked up the phone and it hasnt email list and so we're in a position right now where we know there's a lot of.
Open field and we're doing our best to get as much of that to continue to ramp our revenue overtime and.
Right now.
Should expect from us as well.
Wrapping revenue for the next little while.
Yeah.
Great. Thank you.
Yeah.
Thank you and our next question comes from Paul Cheever with RBC capital markets.
Thanks, So much and good morning, I just wanted to focus on scalability, you know longer term in big picture.
You mentioned that the gating factor on it.
Carrying partners.
And also the capacity.
Robert start.
And I know, it's speeding time to market, but then also does it accelerate or improve scalability in terms of where do you see some of those constraints in terms of professional services like north of a third party is the attach rate lower.
Allison's question deploy but.
But it's when it when do you start gaining factor.
That is a wonderful question, Paul and in various student and that it does actually it was very much designed to us it's a prescription.
Behind the prescription is that it's the same medicine for everybody.
And the thesis there is that we can teach.
We can teach our partners had too.
You know how to administer that very same prescription because it's the same for everybody. It's the same starting point.
And so this comes back to the training and Onboarding.
And readiness of our Vars and our system integrators for that matter to be able to to rapidly deploy and replicate rapid start.
As a starting point for every customer.
That's that's definitely the thesis and it is it is working in our in our favor, especially in the bar area where.
You know, we're seeing more mid market activity than enterprise class activity.
And so absolutely the answer is yes, we do see rapid start as being a vehicle.
To reduce the friction if you will of getting <unk> started and successful and deploying rapid response.
And taking that and looking at and sort of extending rapid start can you move them ultimately.
The possibility of moving more towards something that's more self service and maybe even along the lines of the multi tenant from an architectural point of view.
Partners is much more in our hands screaming for them to deploy it with customers or eventually get to the point that customers can just deploy it themselves.
Yes.
The part of the beauty of rapid start as it uses a prescribed set of data that is very very typical and I.
Would say uniform.
Across our across the customers that we serve there may be some industry specific nuance.
Between say.
High Tech electronics in life Sciences, and CPG there'll be some certain data elements that exist in one market vertical but does not exist in the other.
But those are completely encapsulated in the what I'll call the dosage of a rapid start.
In terms of self serve I would say the systems that incorporate all of you.
No.
Our customers <unk>.
<unk> data.
You know, it's typically not a what I would say walk up and used there's typically some.
You know I'd say, some some work that still has to happen to integrate the datasets between.
Even a mid market player and our.
Our cloud platform.
So you know, obviously I I would love to see a you know.
Pressed hard bottom copies yours.
Log in and use your credit card.
Kind of.
Our process, maybe we'll get there someday I will tell you that you know.
Supply chains are kind of like people almost all the same but just different enough to be meaningful.
And so for the time being I think we're going to we're still going to have some need.
You know to have human beings involved in the deployment that said, we are seeing a continuous reduction.
And the amount of effort. It takes to go live I mean, there was no. Many I will tell you conversations I have with executives and I said no no no you can be live in 12 weeks, there's absolute disbelief.
Until we prove it.
I've always said it.
You can only earn someone's respect after doing what you promise.
And so we promise and.
And so I think we're going to continue to continue to improve on that.
I'm not sure that we'll end up with a walk up and use anytime soon.
Yeah.
That's helpful and just one last one just in terms of the momentum of new wins mentioned that mid market is 35%. If you exclude mid market. How would you characterize the momentum in large enterprise are you are you also hitting record highs of quarterly highs in terms of large enterprise wins.
Okay.
I don't know that I've actually measured it that way, but you know.
My intuition tells me that the answer is yes.
In fact conversations we've had recently and the management team at it felt like Q1 was.
A return of enterprise class customers coming back slower boats to turn in.
We're looking at.
We're looking at a pipeline and we're seeing very very very healthy activity in the enterprise class, obviously, we're thrilled with.
You know being able to announce a bayer at Siemens and obviously Kimberly Clark.
Carlsberg and you know these are all very very large enterprise class accounts youre going to see a continuation of those.
Just on what I see in the pipeline.
But at the same time with our adoption of leveraging bars.
Going to continue to see success in the mid market as well.
Alright, I'll pass the line.
Thank you.
Thank you and the next question comes from Ross <unk> with eight capital.
Hey, good morning, all thanks for taking my questions congratulations on the quarter.
Can you comment on how the disconnect between private and public multiples.
It's affecting your M&A pipeline on if you had any conversations with potential targets.
Well I think as I said earlier on earlier calls anyway, we're being a lot more thoughtful when it comes to M&A, we concluded a very small.
Very small tuck in in Q1.
And you know obviously our pipeline we continue to look at.
Our pipeline of M&A potential.
And it is motivated.
Round filling white space in our technology, they can accelerating white space in our technology, it's not so much.
You know looking to buy revenue, but looking to accelerate.
A white space and technology.
You know I would say that there may be some other potentials throughout the year as we go through that process, we're exceptionally diligence.
To ensure that anything that we look at is technically accretive that anything we look at has strong use case fit for the markets. We currently serve.
And so stay tuned I would say on progress there.
You know that's that's I guess my commentary on the M&A front.
Right. Thanks.
<unk> has on boarding.
<unk> customer last quarter helped us extra with any conversations in that vertical and other wins, the similarly, greenfield or more competitive displacements.
Well, it's a great observation in fact you.
You know that.
That we that we were able to pick up V. P E U.
Oil and gas sector I'm not the first not the only you know there are some that we have not announced.
And obviously.
Very very complex.
Supply chain is in that space very complex.
And of course can access does complex really really.
It really really well so you know I would.
Say that were.
At a stage, where we would announce that vertical as you know one of our primary ones.
I think I've said this on previous calls while we are we announced seven that were actively engaged and we certainly have customers in many more than that.
It's really one of you know an area of focus for us with that.
We tend to be guided by them, but we are really happy with our progress not only with B P. But in that sector. So stay tuned for more news as things progress.
Okay.
Okay very good and the next question comes from Mark tire with ATB capital markets.
Good morning, everyone. Congrats on a great quarter.
We'd like to talk about what needs to happen for EBITDA margins to move into the Twenty's and then higher.
When I strip out scripts subscription term licenses.
It looks like you are pretty close okay.
And you can talk about that.
Yeah.
Sure.
Ben.
So first of all I'll, just say that.
It's one of those situations, where you have a company that like like ourselves.
We believe we're very very balanced in terms of growth as well as profitability.
A lot of you're obviously aware of the rule of 40, and he's trying to invent a real a 100 bps. This quarter. So we're we're pretty happy with the direction has gone in and what we've done on the profitability side as we've been.
Cognizant of the fact that there is a lot of growth still in front of us and so we're trying to manage them.
That growth with accelerating revenue streams that we're seeing right in front of us right now.
And so <unk>.
Lastly, I think I said at the last the last call. If we wanted to be we could continue to be at.
30% to 35% adjusted EBITDA margin.
Margin company right now we are consciously making a decision to.
To stick in that range of right.
Right now, we're saying 16 to 19, we wanted to be over 20%, we could we could easily do that this year.
I think we are going to be very very close to that range.
Obviously, if 19, there is not too far away.
But we also don't want to Underinvest.
For the opportunity that's in front of us because we do think that there's an accelerating revenue stream in.
I wanted to come back to you one day and say again, Hey guess, what the second time, we've had a rule 100.
And that's that.
It could be in our future.
Yeah.
Yeah.
That's great. Thanks, so much.
The rapid start.
Cohort of customers.
Still fairly new just wondering how can you talk about the success you've had growing with those customers.
Or are these juncture.
Yeah, absolutely we've exactly as the thesis had.
Predicted.
You know lowering somebody's fever, and making them feel stronger leads to them.
Doing more.
Adding more value. So expansion is a very natural side effect I would say.
Of getting to that getting to that stage and so we have already seen significant expansions across multiple accounts that have already started with.
With rapid start it's worthy start it's definitely not where we expect and in their transformation journey. So it's been very very successful we're thrilled with with the initiative.
Great Thanks, John and can.
Can you say that your pipeline is still growing faster than <unk>.
Yes.
To start with it yes, it's our pipeline is growing faster than revenue, it's growing faster in the air.
So it's given us the confidence to.
Be very very very confident in this this call because we see the projections and where our conversion rates are.
<unk> pipeline growing faster than revenue or <unk> is a good time.
That's a great answer thanks, so much guys and last one for San Diego is that run rate.
[laughter] via there.
Thank you. The next question comes from Joe to answer Tomorrow with Stifel, Canada.
Thanks, guys.
Congrats on a strong quarter.
One question I had left.
Here was was more on the rapid start versus Robert rapid response piece.
Kind of curious what considerations are enterprise customers.
Making today when they go with <unk>.
<unk> flagship rapid response platform versus the.
The rapid start a program and a go to market benefits that that brings.
Today.
Sure. It's a great question first of all I'll, just clarify that rapid start thinking of rapid start as being a a blueprint.
And prescription of the rapid response platform, there's nothing the software itself isn't different it's not different at all it's the configuration. The starting point the starting configuration that is different but it's not a watered down version of rapid response at all it has all the full power and potent.
C and concurrent planning and end to end transparency, it's fully immersive and inclusive.
From tip to tell you know in terms of the software platform itself is zero difference zero.
The only difference with rapid start as we're coming in with our 25 year plus experience and saying this is the starting blueprint that we can leverage to get you live to get your concurrent to start adding value.
Inside of a three month horizon and from that point forward, we can grow the configuration to become more what I'll say is tailored to your own specific use cases.
And so that's why this has been so powerful.
We've been at this for so long that.
Our customers are relying on our own intellect and our own experiences.
To blueprint.
Very.
<unk> starting points and that's what rapid start is it's a blueprint.
Prescription.
It's a starting point.
And from that point onwards, well then they tailor it to their own specific use cases and expand it from that from that point.
Got you okay.
Just a follow up on that John .
John .
The customers better.
They're comfortable with making that kind of that full blown purchase decision with rapid response.
Are they looking for an expanded set of capabilities right out of the gate.
Or are there other sort of the decision factors that are influencing that.
Yeah, absolutely we've encountered.
Even recently some very large enterprise accounts that I absolutely appreciate the rapid start approach.
And they start there with some embellishments.
Well I'll use that word but did you say, okay, we want rapid start plus.
You know I don't constrained planning could you add that one feature on top of that prescription and that might extend that.
Starting point by by a few weeks.
But that is that's that would be say more typical in the enterprise class.
Mid market.
But I think the philosophy of start of <unk>.
Getting a very rapid go lives is.
Uniform between mid market and enterprise. The only difference is sometimes the starting point has some additional complexities in it that will extend.
Might extend to go live by a few weeks, but it will hit a very urgent need of that particular account.
Gotcha, Okay, great great.
And then one last one for me just on kind of the.
Just kind of looking ahead here and I'm looking at the <unk>.
Macro backdrop.
Do you see any any sort of change in the mix or the mix of adoption between Rafa started kind of a response.
In response platform <unk>.
Potential uncertainty in the macro backdrop, where athletes have always been a factor given that that supply chain.
And Colombia growing into strategic imperative here for the company working with.
Yes, I think that supply chain is going to be a growing imperative for many years to come.
I fundamentally believe that I really think this is becoming an urgent.
They say necessity is the mother of invention and.
It might've started with weather events.
The evergreen being ever stuck in the Suez Port strikes and then the pandemic hit.
And then there is war.
And then there is fluid inflation challenges.
Hitting different parts of the world and recovering at different rates.
This is really informing.
Our management teams all over the world and a recognition that if we're going to absorb this level.
Volatility they say is the ferocity of volatility than something needs to change the need to become more agile and I think that is what's really fueling our momentum.
Momentum begets momentum and we're experiencing it we're experiencing it right now here at Codexis.
Thank you for taking my questions guys.
Thank you. This concludes the question and answer session I would like to turn the call over crosswords for any closing comments.
Thanks, operator, and thank you everyone for participating on today's call. We certainly appreciate your questions as always and your ongoing interest and support can act as.
We look forward to speaking with you again, when we report our second quarter results Bye for now.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Yes.