Q1 2022 Kaltura Inc Earnings Call
Good morning, everyone and welcome to catch here at first quarter 2022 earnings call all material contained in the web cast and sole property and copyright of couch area with all rights reserved for opening remarks and introductions I.
I'll now turn the call over to Erica.
Minion.
Sapphire Investor Relations. Please go ahead.
Thank you and good morning with me today from Couch or are Ron you could tell co founder Chairman and Chief Executive Officer, and you round Demaci Chief Financial Officer.
Ron will begin with a summary of the results for the first quarter ended March 31st 2022, and the trends and areas of focus that are expected to impact 2022.
Ron will then review in greater detail the financial results for the first quarter, followed by the company's outlook for the second quarter and full year of 2022, we will then open the call for questions.
Please note that this call will include forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding <unk> expected future financial results and management's expectations and plans for the business.
These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here important factors that could cause actual results to differ from forward looking statements can be found in the risk factors section of <unk> annual report on Form 10-K for the fiscal.
Year end December 31st 2021, and other periodic SEC filings, including the quarterly report on Form 10-Q for the quarterly period ended March 31, 2022 to be filed with the SEC.
Any forward looking statements made in this conference call, including responses to your questions are based on current expectations as of today and <unk> assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.
Please note we will be discussing a non-GAAP financial measure adjusted EBITDA. During this call for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP metric. Please refer to our earnings release, which is available on our website at www dot investors Dot <unk> dot com.
Now I'd like to turn the call over to Ron.
Thank you Erika and thanks to everyone for joining us on the call. This morning.
We reported today that our total revenue for the first quarter of 2022, <unk> was $41 7 million up 11% year over year.
Our adjusted EBITDA for the quarter was negative $8 4 million.
<unk> results exceeded the high end of our guidance range.
As we stated on our last earning call the growth headwinds that we encountered in the second half of 'twenty 'twenty. One continued into the first quarter of 2022, we.
We estimated them well.
Continue to believe now that we will increase our revenue growth rates in the second half of this year.
I would like to briefly recap what we stated in our last earning call where the three main driving forces behind the headwind as.
As well as the three main growth engine. So we believe would reaccelerate our growth towards the second half of this year.
The six factors remain very relevant.
We said on our last earnings call that the headwinds were driven first by lower than planned E&P booking caused by lengthening sales cycles and a slower than planned sales force ramp.
Second by a reduced need for our professional services caused by a continued shift towards lower touch and self serve offerings.
And third one of our major customers, reducing part of their business and revenue with us.
We further said that we expect our growth to be refueled.
First by the evolution of our virtual event offering from catering exclusively to large flagship event.
Typically requires significant event services.
<unk> platform the caters to events of all sizes and that is managed by the customers independently with minimal event services required if any.
Second.
The launch of additional low touch and self serve products and go to market vehicles for both E N E and M P.
And third are the <unk>.
Then you would ramp up our sales force.
I'd like to give you an update on these six factors starting with our E&P related product services themselves cycles.
In the first quarter, we continued to sell our virtual events are offering for flagship events, we're still benefiting from the significant professional services revenues that are attached to these deals.
Is are now set on our upcoming cross enterprise platform deals.
Power centrally all events of all sizes across the organization.
So there will be less if any professional service revenues from these deals there are many more such deals to be had and they command higher subscription revenues and greater stickiness.
So that and we have a growing sales pipeline of existing customers and new prospects that are evaluating a new platform, including fortune 105 hundred companies.
They come from a diverse array of industries, including Tech financial services Health care professional services and education, they're looking to use our platform for tens hundreds sometimes even thousands of events every year.
During both two customer and partner events internal events and in many cases also to their signature flagship events.
But the first quarter, we launched new innovative features advancing our platform and we continue to believe that this new product will contribute to the acceleration of our revenue growth in the second half of this year.
We also continued selling in the first quarter, our core content management products to customers, including Fortune 105 hundred companies. They use it externally for marketing and community engagement and internally for knowledge sharing learning and development.
With that and we're continuing to see increased demand for a unified platform that can address both internal and external use cases.
They are both content management independence.
This is a strong and unique selling point for computer. So we believe we're very well positioned to capitalize on this market consolidation.
Moving onto our low touch and self serve products and go to market vehicles.
I wanted the initial release of our self serve virtual classroom webinar and media services offerings.
We continue to optimize and scale, our digital operations and ramp up our inside sales team to cater to transactional sales.
Our dementing our main sales team that is focused solely on larger customers and deals.
We believe that several upcoming product enhancements will further drive growth coming from these initiatives in the second half of the year, especially from Webinars.
Our offering is expected to provide unique attributes and value around user experience branding liked on demand flow and integrations.
And I'm in to you, we're continuing to expand our markets from large telcos to midsized media companies, where we enjoy faster sales and deployment cycles by providing an easy to deploy end to end streaming platform that includes a front end user experience and monetization tools.
During the first quarter, we partnered with several technology providers.
Quantitate, such an end to end offering and augment that with the marketplace. The value added services and we believe it will also help to fuel our future growth.
Regarding the major customer that reduced part of their business with us.
As previously mentioned they have since renewed various existing projects and have partnered with us the new ones in the first quarter.
So the impact of the reduction it most strongly in the fourth quarter of 2021, and the first quarter of 2022 are.
Our business with this customer is picking up again, and we believe that will remain a major customer this year.
And regarding our sales force ramp in.
In the first quarter of 2022.
Had over 30% more ramped enterprise sales reps and over 15% more account managers as compared to the first quarter of 2021.
So in summary.
After certain headwinds, including those related to post COVID-19 shifts brought about close to flat revenues in the fourth quarter of 2021.
And a reduction in revenue in the first quarter of 2022.
The headwinds are starting to be offset by our growth engines.
Our guidance reflects an expected turnaround in the sequential quarterly growth trend line and the upcoming second quarter of 2022.
As well as an increase in our year over year revenue growth rates in the second half of this year.
With that.
I'll turn it over to your own our CFO to discuss our financial results in more detail.
We're wrong.
Thank you Ron and good morning, everyone.
As they review the first quarter results today. Please note that they would do the same to a non-GAAP metric adjusted EBITDA.
Installation of the GAAP to non-GAAP financial including thing today I think it was released which is developing novel website at.
W. W. W. Ducting Digital's doctors do a vertical.
Total revenue for the first quarter ended March 31st 2022 was 41 seven.
11%.
Stimpson Liberty was $57 million up 14% globally.
Services contributed $47 million down 14%.
The remaining performance obligations were $171 2 million up 17% in yogurt in the U S, which we expect to recognize a 16, 1% as revenue over the next 12 months.
So we're kind of living was 147 7 million.
Up 15% year over year.
Sure.
Revenue growth continued to benefit for net dollar retention rate, which was one of the seven 7% in the first quarter compared to 116% in Q1 2021.
No. This quarter net dollar retention metric also incorporates the impact of the large customer that is mentioned in our last earnings call reduced animal feeds business, we've actually in the fourth quarter of 'twenty, what do you want.
These customer it seems for you, but obviously you've seen project and it's been talking with the glass or the new ones.
We all E&P segment total revenue for the first quarter was $29 7 million up 9%.
Description revenue was 27 6 million up 15% yoga.
While professional services revenue contributed $2 1 million down 37% all very good.
We'd be no M. P segment total revenue for the first quarter was 12.
Up 15% year over year subscription revenue was $9 4 million up 12%.
While professional services revenue contributed $2 6 million up to 27% year over year.
GAAP gross profit for the quarter was 26 3 million, representing a gross margin of 63% up from 50.
9% gross margin in Q1, 2021.
We've been now in these segments gross bookings for the first quarter was $20 8 million, representing a gross margin of 70% up from 61% gross margin in Q1, 2021.
Within our energy segment gross booking for the first quarter was five 5 million representing a gross margin of 46% up from 33% gross margin in Q1, 2021.
R&D expenses for the first quarter were $14 9 million or 36% of revenue compared to 28, 9% in Q1 'twenty 'twenty. One the increase was driven by additional headcount and payroll expenses as we continue to invest in technology and innovation.
Marketing expenses for the first quarter were $14 6 million or 35% of revenue compared to 27% in Q1 2021.
This increase was driven by additional sales and marketing investment, including headcount and personnel related expenses.
G&A expenses for the first quarter were $11 4 million or 27% of revenue compared to 21% in Q1 2021.
The increase was driven by additional public company head count and third party related expenses.
GAAP net loss in the quarter was $16 9 million or one free.
Sure.
Adjusted EBITDA was a negative $8 4 million for a negative $1 3 million in Q1, 2021.
Adult is in line with our plan to include those things in order to further fuel our growth as discussed earlier.
Turning to the balance sheet and cash flow, we ended the quarter with $119 5 million in cash and short term investment medications breaking a PTT was $19 6 million during the quarter.
Six boutiques, beginning in Q1 2021.
I would now like to turn to our outlook for the second quarter of 2022 and for the fiscal year ending December 31st 2022 in the second quarter, we expect subscription revenue to grow by one 3% and between $36 8 million $57 6 million.
And then sometimes ranking them to grow by zero to 2% to between 41 6 million and 42 point full meal.
We expected a negative adjusted EBITDA to be between $8 5 million and 11 five medium.
For the fully it will continue to expect subscription revenue to grow by 10% to 15% between $159 5 million and $163 8 million in total revenue to grow by five 8% to between $173 3 million in one second.
The $8 to them with you.
Continue to expect the full year negative adjusted EBITDA to be between 27 million and 72 million.
In summary, as Ron mentioned, our outlook reflects the expected.
<unk> quarterly growth rates for the upcoming second quarter, and we continue to believe that our new product and largest says votes will enable us to increase our.
Revenue growth.
In the second half of 'twenty one.
We will open the call for questions operator.
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Our first question is from Gabriela Borges with Goldman Sachs. Please proceed.
Hi, Good morning, good afternoon, and thank you for taking my question, maybe if he is a friend or a little bit more about what you saw smoke we're about three months 12 months.
Walk up plus more.
Perfect.
What are you where I'm coming from pulling back on some of the questions.
A powerful Russell technological also possible, where I'm hot or those kind of a person who talks about.
Yeah.
Thank you Gabriel and thank everybody else for joining us.
So we are seeing continued interest in our core products of the company if you're asking if this is like the cool that days, it's not exactly like to go over dues. The cycles there were extremely short.
Half or a third of the typical cycles and a lot of folks had also acquired just usage traditional.
Usage of the system. So here, we're seeing more interest in additional product as opposed to increasing their usage and the number one product in the enterprise side is as you know is our event platform.
And there was a lot of interest there that pipeline has been growing I think the bigger issue was our availability of this product which started at the beginning of the year and that was built since then we've seen an increase in the pipeline in that period compared to the beginning of the period, where we were fresh and new without product I think generally what we're seeing is that people are looking.
Les to solve their problem for tomorrow morning, and more to address the sustainable issue of using video to improve productivity efficiency yourselves marketing training learning and so they're taking a more thoughtful approach on how to apply this across their entire organization, which works well towards our enterprise platform.
And in all events not just the large events.
That's helpful color.
Hi, never come on a little bit on Hollywood unit economics of all of them I'll kick it off I think rollout and more light type small seven scatter market alongside the classic kind of market.
How does the LTV to CAC and Paul.
Muscle mass.
Yeah.
Yeah, obviously, we are not sharing specific numbers along the LTV to CAC to each we showed before the IPO, but a few comments that they can say first of all definitely we are not in the numbers that we are doing in coffee.
And which picked up significantly and also because of the fact that children with sunken in terms of investments in marketing and sales and marketing.
[laughter] much faster booking pace where customers.
I can tell you that the gross churn numbers didn't change it.
The bookings in terms of closing being a slower so it put some pressure on the LTV to CAC. Obviously, we did mentioned that we have continued to increase our investment in sales and marketing, which also put some pressure on LTV to CAC.
But to make a long story short we are not in the numbers that we had.
During Covid and we believe that the short term and also in the meantime, it's probably going to go to the same number around the same numbers that we had before COVID-19.
I'll add one more point about the self serve question because obviously, that's one of the important moves that we're making and I want to distinguish between the lower upstream Seltzer. We've already started at the beginning of the year with her E. P product even from product to cater to more low touch environments, where its self operated by the customers as opposed to using.
Our professional services, but.
It is still sold with outside salespeople and not with a credit card and on the website. We haven't started launching the first versions of a complete self serve during the beginning of the year well, we've always said that the impact of Salzburg. So it will be more in the second half of the year and that remains the theory. So we have more releases to come in the next few months.
I mentioned, just a bit earlier that the webinar product of webcasting product is expected to continue to get extremely stronger throughout the next few months. So we expect to start seeing a lot more change and impact on LTV to CAC in the months ahead, and we will share as soon as we have complete information about that.
Thanks for the color.
Thank you Gabriel.
Our next question is from Matt <unk> with Deutsche Bank. Please proceed.
Hey, guys. Thank you for taking the questions just two if I could first on the subscription revenue guide. So I think it's fairly clear you've messaged sort of flattish to subscription revenue I'm. Just wondering how confident are you in the implied revenue ramp in three Q4, Q and is that I know you talked about some of the.
You are our product offerings and I'm. Just wondering is some of that ramp up tied to hiring that's already occurred or are there other factors are.
Driving this and then maybe secondarily.
Tied to that I think in the past you talked about a little bit of a slower ramp in terms of sales force hiring any updates you can share there in terms of where you're at.
Today. Thanks.
Yeah, Yeah. Thank you for the question regarding the guidance for the subscription revenue first of all we will try to do it very thoughtful process right now in terms of guidance for the rest of the year.
Especially around my point in time, the macro environment around us post COVID-19 situation et cetera, but are the situation is that first of all as you.
You can see there is a nice improvement in the sequential growth of both the overall revenue and the subscription revenue is one important point.
In terms of the subscription revenue going forward.
One other important point is that obviously, we mentioned before that we we we are going to have some less professional services revenue and more subscription revenue in the short term we saw a trend that some of the virtual event, the big virtual event still being signing.
And therefore, we get them all.
Professional services than we expected, but still the professional service fees declined compared to last year, but.
It's more than what we expected and regarding the overall development of the subscription revenue.
I believe that the numbers that we put in place and which are basically the same numbers that we gave.
Before for the full year I was showing a nice sequential growth for the subscription revenue in Q2 going to feel free in Q4 by the way mostly in Q3 Q4. If you do the maths you will see that the numbers. If we gave for Q2, if you take the balance you'll see a very nice sequential growth.
We moved it down and when you see in subscription revenue and then the overall revenue.
And at this point, we believe that these are the realistic number for the year, but hopefully we work very hard to beat the numbers.
Thanks for the question and then I'll answer the second one and secondly, just on the subscription side.
A we are larger stronger pipeline. So it's not that we're waiting for additional sales force to come in we're seeing the continued move of the deals in the pipeline and expect the impact to continue to be able to affect the second half of the year to remind you. Our thesis was that the second half of the year is the expected growth and so a lot of it is bottom up based on.
The actual pipeline of deals. The second is that we do have some things that were already closed and are expected to contribute on the second half of the year. So that's backlog, especially on the media and telecom side of the business, where some of the deals when we set up for a while we're gonna impact only on the second half of the year. So some of the growth that we're seeing there is not based on future bookings.
Already boost on Paas bookings.
But without just to add to what Ya Rona stated about professional services, while we were cautious and said the professional services will go down and they have year over year have come down they are coming down a bit less than what we had forecasted theres still flagship events that are taking place and so the blend between the two.
Calling a nonrecurring.
Bill.
Somewhat shifting and we expect more and more of a recurring to come whether it'd be with even a platform in the second half of your question on the ramp in sales force as I mentioned, we have a 30% year over year growth in sales rep.
15% plus year over year growth in systems, we feel that at this point.
This is a decent contribution to what we need for the year a lot of what's going to happen over the next few quarters is going to be more impactful for the follow on year in the first year. So I don't think that coming into the second quarter there'll be a significant change as to the number of people that are going to come in so far as the impact out of here and we feel that we have what we need.
In order to obtain the numbers that we've communicated.
That's great. Thank you both.
Thank you Matt.
Our next question is from George <unk> with Oppenheimer and company. Please proceed.
Thank you for taking my question Ron just following up on that your sales comments recently can you give us some perspective on the 30% hiring over the last year and how you're seeing sales productivity ramp as those are sales people start to get out and talk to customers.
Sure first of all from a media and telecom is generally a funky business. So it's hard to say from one quarter or another because these are relatively larger deals that are coming in and out.
They're lessor immediately impactful just as I mentioned in the second half of this year, we're gonna be benefiting some deals that came from a deep into last year and before.
So I'm going to put that aside most significant change there from a sales rep productivity on the E&P side of the business.
It's still as we said the somewhat lower like it was in Q4, and so far as elongated sales cycles, but the pipeline is picking up and especially for our platinum products. There's a lot in some of them are P. P. O C. Some of them have already.
Told us what they've chosen culture. So it is moving forward so to the best of our forecast going forward on the remaining of the year is going to become increasingly stronger Oh, that's where the new people that come in historically its taken six months for an outside salespeople a person to be fully ramped given the somewhat elongated sales cycles now.
It's probably a bit longer. So my comments are not so much on people that have joined over the last couple of months.
More to the people that were here earlier and have been already contributing I E. Six months plus in the company.
And following up on your pipeline comments, so it sounds like that the customer generation was healthy but are you seeing any change in the type of conversations you're having from a given the macro pressures or from a regional perspective, let's say has anything changed in Europe .
Yeah.
Not significantly.
It's hard to decipher how much of it would have changed because of the macroeconomic conditions and how much of it is the post COVID-19 and how much of it is the issue of the shifting demand from the defense General event for flagship to these impossible, but I can say that the degree of interests that we find this very significant it's been building up.
We are just to give you examples advanced stages with multiple large tech companies financial institutions professional services. We are a tech company that has been the top clinical care customer for more than 10 years and they awarded US their event business for tier two and tier three events for many many events were working with one of the largest professional services' networks in the world to stand.
<unk> is a global event and they've indicated that they want to go ahead and conclude with US we have one of our top customers, which is a fortune 100 financial institution that is an existing customer again, it's planning to expand the usage into the platform on top U S health care provider, which has been with us for years, that's converting into using our events are fortunate.
Plunger Global financial institution. So the list is long and it seems to be rolling forward and we're not hearing from them.
They're holding off because there's some sort of economic slowdown or a macro condition issue again, I think that the mission criticality that we're discussing here is significant enough organization, especially as we continue to work remotely that organizations are going to require this kansas.
And a certain good piece of our business is recession proof. If you look at how people are going into universities in recessions are watching more TV. So I think generally I.
I think we're gonna be unreasonable, but I will say.
That we're monitoring everything our ears and eyes are open and we'll adjust our plans accordingly, and I've stated, we're a bit more slow and cautious as it pertains to additional spend on the sales and marketing side. So we're definitely listening, but from the pipeline generation it seems to be advancing nicely forward.
Thank you.
Our next question is from James Cory with Bank of America. Please proceed.
Yes, Thanks for taking my questions and this is James I'll get more from Mike woke up yesterday.
So I know you talked a little bit about you know your demand across verticals and things like that but hmm.
It would've been about have you seen any specific.
Specific areas of weaknesses or strengths with the notebook demand across your verticals.
Yeah happy to provide a bit of angle.
Angle here, so first of all the new book.
New booking contribution has been from all segments. The only one actually in the first quarter that did not contribute because our tech OEM segment, which is where we enable third party companies to build products using cultura.
So that's been a bit of luster.
But otherwise, they're all contributing and growing.
Again from a product perspective, a lot of the interest in deals are around meeting related activities from a geo perspective, it's quite similar the majority of the E. N. T bookings are still in North America, followed by Europe , and then APAC from an MLP perspective, but still outside of the U S. Like channel Wise, we're still.
Generating quite similar deals from a booking perspective.
Still single digits at the high end, we expect that to gradually change as we become more and more low touch himself Serge.
Like I said from a demand for our services.
Tentage of service out of ideas at the bid jumped back up compared to Q4 for my note about additional flagship deals we do expect the quarter over quarter reduction in this by the way on the revenue basis.
It's somewhat ahead of what's going to happen on the booking side.
But generally speaking it's still remaining strong and there is an interest for that so.
So that's a bit more color, but all segments are contributing.
Got you. Thank you for that I do appreciate it.
Our next question is from Patrick Wall Ravens with JMP Securities. Please proceed.
Oh, great. Thank you and you know Ron congrats on doing better than our than people thought.
But look so and and you're on if I get this wrong tell me, but you guys had 120 million in cash.
$38 million of debt.
So you have 82 million that you burned 22 in Q1.
Why not why not Derisked this cut the burn like why why continue.
To why continue on this plan you know your stock is trading at.
Our love of where it's you know people don't believe it anyway, so why not Derisking I'm sure you talked about it a lot, but just share your thinking with us.
Yeah, probably thank you for the question. It's a great question and we are putting a lot of folks buying gate, then we actually probably be taking the action and based on.
And wound area that you are discussing right now first of all the fact that Q1, we've done so much cash.
A lot of it is related to seasonality that we have in our cash collection, we have a very strong Q2 and Q3, when the universities and some of our major customers paying us.
In advance when it's comedy we also at the these are short term slowdown with a specific customer, which we mentioned last quarter, which is already behind us now and we think the volume of business we got.
But to do your overall comment and yes. We are taking all of these actions we are definitely not going to be a bump in the numbers that we presented in web even mentioned it before but some of you guys.
And we are already considering some significant action the rest of them in order to take it to a better place in terms of our cash flow and I'll, let adjusted EBITDA.
But at this point for the short term, we didn't want to slow down.
The Midtown into the long term, we are not changing our plan and we are going to get the company to a breakeven situation much much before we get to the lowest possible power cushman.
So we totally being that.
Yeah.
Okay. Okay, that's good to hear and so I.
The follow up to that and I understand you hope to beat this but.
What does this you know negative 27 negative 32, EBITDA imply for actual free cash flow.
Like how much in this plan how much do you expect to burn this year.
Yeah, and we are not providing specific kind of specific numbers is it's going to be a little bit more than the adjusted EBITDA.
And because of some of the deferral of expenses like the 606 impact et cetera.
But it's not going to be significantly involved in this for the for the year.
And by the way.
We and the most important policies that we are building go in Midtown and long term.
The situation that we don't need to raise additional cash.
So it definitely it claims that we had to balance the company Daniel D C, which in the last call. We mentioned that we are going to do it next to extend the plan and we are going to accelerate the plan in order to get to a better place.
But the second part is for you I can tell you it's going to be any more.
Did you see in terms of there now and I'll stay negative cash flow.
Going to balance it tends to one did you.
The overall number that we discussed before he's not going to be way above the adjusted EBITDA number and.
We are going to work out to beat the numbers that we provided for the adjusted EBITDA. If you will you do see in the first quarter, we need to do better than the 92 that we mentioned they actually it was a painful.
Okay. Thank you.
Our next question is from DJ Hynes with Canaccord. Please proceed.
Hey, thanks for taking the questions guys.
So Ron I'm I'm, just trying to put into perspective, the sequential decline in <unk>. So my understanding was that the large customer attrition.
It happened in Q4, so I guess two questions. There like one have you had additional meaningful revenue turnover our loss in Q1, and then second how much of an IRR headwind was the large customer loss that you talked about.
Sure. Thank a teacher, so well I think first I want to remind everybody because errors reported differently for different companies.
The way our ear Archie works is that it is pretty much similar to our subscription revenue for the quarter times four the all these fixed there is for term licenses.
It would be that are addressed differently with ASC 606. So that's the only difference. So it's not a run rate that's not a Sierra are it's not a function of new bookings that happened in the quarter is just the recurring revenue. That's the one thing I wanted to be clear, it's always been like that.
Within that when we had the incident in Q4, we knew that it was impacting Q1 theres nothing new here, we said that it's going to hit Q4, we said, it's going to hit Q1 and that the hit later will be smaller it's obviously a reduction in recurring revenue. So it doesn't disappear, but it doesn't continue to go down further.
And hopefully it starts to build up given the additional sale and so the reduction that was there in Q1 was already considered in our forecast and as you've seen we've built these forecasts. So nothing was surprising here pre your question about gross retention as you run. It earlier stated our gross retention remains strong it's out.
<unk> better than last quarter of course from a perception of perspective of not losing this large customer but on an ongoing basis, it's better than the run rate of last year. So we do not have any additional losses of customers that are material above our ongoing rate and I've mentioned in the past. It is a strong good rates of growth.
Redemption, so we're not seeing additional pressure.
So I'll just say that on the air or it's just a reflection of the loss you had asked about the size of the loss again, it's a large customer we've lost part of their business.
Was there kind of a multimillion dollar impact on the year at the high level.
But not but still the great majority of that customer's continuing forward and theyre coming back to be a very significant customer.
Perfect Yeah I appreciate it.
But they are also moving yeah, they're not just with you. Please vessel downtime with some significant new business, we must have the same customer.
Got it got it.
And then the second question just what what are you seeing in terms of retention of sales reps.
You know I think we were up 40% in and ramped reps in Q4, 30% this quarter.
And then the follow up to that would be like.
Last quarter, you talked about still we're on this path to 40% growth in sales capacity. This year I understand you have what you need to hit this year's targets.
In your answer to Pat's quite last question. It seems like maybe you're reevaluating plans to kind of lower cash burn are we still on this aggressive like half the 40% ramp in sales capacity this year.
That's a great question P. J and these things are indeed connected and we are worth enough sales force to be able to address what we plan for this year and we believe given the amounts that we have and the productivity that are expected to come back up to where we want them should be enough to generate some nice growth into next year, but yes, we are keeping our eye.
On the overall macro situation in our cash position and are delaying the rapid growth in the South County. So if your question is do we still think we're gonna grow yet again by 40% this year not necessarily it might be lower it should not impact this year and next year, we should still be very good to go so it really depends but we will give you.
An update on this year advances and as we look into both our cash position and productivity is deals that are closing trends of the recurring revenue as mentioned, we're thoughtful given the situations in the markets in our particular situations.
Understood. Thank you guys.
Thank you.
Yeah.
Our next question is from Karen <unk> with Wells Fargo. Please proceed.
Hey, guys. This is Austin Williams on for for Michaels Irons extra taking the question I just wanted to touch on net dollar retention rate it looks like that ticked down pretty meaningfully to one seven in the quarter. I know there was the one customer that was called out but could you give us any color on anything else that that drove that expansion activity and any thoughts on where that could go over the next.
Here in the longer term.
Yes, Thank you Mike.
So speaking for.
Yeah. So.
Yeah, Let me react to these first of all Youre right. Some of the impact of painful this specific customer, which has a meaningful impact on Q4 and Q1.
And they did put some pressure on the NATO long tension right. One thing that is very important and growing all of you mentioned the gross churn is definitely at this point is not that ratio.
If we are thinking out of the equation. These specific customers. So we don't see any trend that really put significant pressure on any pressure don't even there was some improvement in the grocery gross churn this quarter.
The overall gross junk. So this will not put pressure on the short term, but as you know the fact that we are comparing now.
The net dollar retention calculation.
Post COVID-19 situation for post Covid definitely.
And we see the pressure on them and they don't all retention rate and we believe that it will get back to something that is more closer to the rates that we had before COVID-19.
Which was still strong so the customers are still growing very nicely.
And even if you take if you take out of that.
Asia and the impact of these cuts them out probably the number would be but a few points.
It bothered the number that we have right now and if we consider whats going to happen in the next quarter and going into the rest of the deal.
Probably going to continue to go down to the land around the level that we had before COVID-19 and you use the numbers.
But we don't believe that the we bought if would take us out of the equation. This specific customer is going to be much below this number because the net impact of the gross churn.
It didn't change actually is very strong.
And by the way we May see also some bad news and some deals that are signing with all new cars with our customers and long day D. D D.
Got home.
So it also can improve the number going forward one thing to remember is that the gross retention numbers, but more important the net dollar retention in the sense that it looks what's happening right now in the quarter net dollar retention looks at the cumulative impact from a year back now as mentioned for a certain period. There was a whole cover it up but then after that there was also a.
Particular change again without customer I will say that.
While the majority of the recurring revenue had come down already from this change the net dollar retention is a lag. So if you take for example next quarter, it's going to compare Q2 versus Q2 last year. So a big portion of that analysis wouldnt be what's happening now between this quarter to next or what happened to you.
A year ago between Q1 Q2, so if we indeed grew a lot last year, which we bid it will put downward pressure on our M. D. R. As we move into next quarter not because of anything that happened right now, but because of something that happened a year ago. So the net net as I said, we are coming down to a more pre COVID-19 levels, we expect in the midterm that it will.
<unk> be honest with additional product upsells.
But from a gross churn which is the most important one we continue to be strong.
Yeah understood understood I just had one follow up on a R. P O in the backlog it looks like RPM was down sequentially.
Mid to mid to high single digits on on both RPM and current Rps.
Is there anything else besides that large customer that you would point to you that that's driving the backlog down as well.
No no and three points the major customer we discussed so I won't go too deep in the region of seasonality in terms of bookings.
When you in some of our previous year.
Which take place in Q2 and Q3. So we just took some short term ratio in Q1.
Other than that in some cases, and we discussed it before there was a slower pace of closing days and in the last couple of quarters, which we hope that it's going to change it nicely based on the development of the pipeline, but compared to last quarter I don't see a major change at the same facts.
Those did impact previous quarters, I was feeling here and the only thing that I can say that there is some improvement some nice improvement even in the pipeline, which we hope that this will enable us.
To put that much swung the numbers in terms of crop yield going forward, especially in the second part of the deal.
Thank you.
As a reminder, it is star one on your telephone keypad, if he would like to ask a question. Our next question is from Ryan Koontz with Needham and company. Please proceed.
Thanks for the question.
Most of them have been answered but wanted to ask are you seeing much customer interest in moving from your high touch product to your newer low touch products can itself with retention you know expansion of existing accounts and then what are the economics for you in that if it's possible apart from lower professional services revenue.
Yeah, Thanks, Brian Yeah.
Yeah, we are seeing folks that have looked or physically taken from us the events solution for the flagship events looking out the holistic solution for the entire company in fact, even the newer ones that are coming around and are starting off with one or two events are already considering a tough.
And looking into addressing what's called their tier two and tier three events not just their tier one event. So there's definitely an opportunity to do that but that being said I think that the bigger opportunity here is not to replace existing low Dutch but to come on top and in addition to that because most of our business historically have been video.
Management right up until a year and a half ago. Most of what we did was internal learning and development collaboration communication. Some external use cases, but now most of what we come and support our external use cases for marketing and sales, albeit some of the events are also internal.
But the bigger opportunity. That's here is to materially increase the upsell opportunity to increase the average of our to increase the average our pool and that would drive off net dollar retention because they will fuel up the size of the customers by and large if you look at COVID-19 being an opportunity and a lot of the growth was usage based universe.
Cities that needed more storage delivery.
Corporates had needed to increase their licenses.
Now given the new product basis that we are discussing a lot of it could be product up sell which is more strategic and enables us to be stickier. It puts us in a better competitive advantage given that we're a horizontal platform that addresses multiple things and if we're talking about the signs of slowing down of the market. It is a more cost effective solution. So the fact that.
We're consolidating multiple solutions into one vendor enables us to offer a cheaper more affordable solution for our customers. So for multiple reasons that should be interesting to the market and this should enable us to improve our net dollar retention.
Thank you.
We have reached the end of our question and answer session I would like to turn the conference back over to Ron for closing comments.
Yeah I want to thank you all for your time, everybody that's been listening and in addition to the great questions and I know some of us are.
Still impacted by the virus, so I hope that everyone. Good L b.
Thank you.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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