Q2 2022 ON24 Inc Earnings Call
Okay.
[music].
Yes.
Good afternoon for Inc's second quarter 2022.
Financial results conference call.
Please be advised today's conference is being recorded and a replay right relations website.
I would now like to hand, the conference over to Lori Parker Investor Relations. Please go ahead.
Thank you Hello, and good afternoon, everyone welcome to on 24.
Oh sure sure on cocoa.
Sure and Steve <unk> Chief.
Chief Financial Officer, before we begin I would like to remind us.
During this call will include forward.
Okay, that's good financial performance.
Quarter and full fiscal year 'twenty two.
'twenty two.
These forward looking statements are subject to known.
On 24.
Cautions that these statements are not.
The guarantees of future performance all forward looking statements made today reflect our.
To reflect the events that occur after.
Refer to the company's periodic SEC filings in today's financial press release for factors that could cause our actual results to differ materially.
We'd also like to point out that on.
In today's call we will part.
Okay.
We use these non-GAAP .
Ongoing operations and through our internal planning and forecasting purposes non-GAAP .
Financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP.
Please see the reconciliation.
Please note that these non-GAAP financial measures. Please refer to today's financial press release, I will now turn the call over to Sharon.
Thank you.
Welcome everyone to all 20 fours.
In quarter 2020 financial results Conference call. We appreciate you joining us.
On today's call I will review, our Q2 results.
Provide a progress update on our fiscal 2022 priorities and share how we believe we are positioned to return to growth in 2023.
First for those of you who are new to 144, I would like to spend a few minutes.
Greg who we are and how our platform is a must have for BW businesses to drive revenue growth.
124 is a digital engagement platform purpose built for <unk> sales and marketing.
We enabled thousands of businesses to convert millions of their prospects into customers and some of the world's largest and most recognized businesses as our customers, including three of the five largest global technology companies.
The sixth largest U S banks.
The largest global healthcare companies.
Three of five largest global industrial and manufacturing companies.
We have a very large tenant that we currently estimate to be over $44 billion worldwide and expect this market opportunity to grow as the move to digital continues to accelerate.
According to Gartner, 80% of VW sales interactions with happened through digital channels by 2025, which has the potential to provide significant tailwind to 124.
We enable companies to digitally transform their sales and marketing by providing a single digital engagement platform for several go to market functions across the enterprise from demand generation to customer marketing partner enablement.
Our platform powers, a suite of seven different experience products.
Our customers use these products to engage with millions of prospects at scale.
We take the audience engagement from these products and convert that into first party data and insights.
Which are made actionable through our deep integrations with our customer sales and marketing ecosystems to drive revenue growth.
Turning to Q2 results.
Total revenue was $48 2 million exceeding the high end of our guidance subscription another platform revenue was $43 $1 million and professional services revenue was $5 2 million.
We posted a non-GAAP operating loss of $6 2 million also ahead of our guidance, we continue to remain well capitalized with approximately $345 million in cash and marketable securities.
Ending AOR was $167 8 million.
Representing an increase of 2% year over year and in line with our expectation of very modest IRR growth.
As we all know the global macroeconomic environment continues to remain volatile.
Like others, we also experience longer sales cycles, and greater deal scrutiny, particularly with new business adds in over 100 K thresholds.
We also saw some customers rationalized their spent upon renewal as they faced budgetary pressure.
While our total customer count declined sequentially, the number of customers contributing greater than $50000.
<unk> was roughly flat sequentially and represents the vast majority of our IRR, which is consistent with prior quarters.
With a more uncertain economic market.
We pivoted to focus on our existing customers and we had a strong quarter on the expansion front.
Which included closing the largest deal in our history.
A number of our top customers are making increased investments with 144 as we deliver cost effective fast ROI and continue to be a critical component of their go to market Tech stack.
New products in our portfolio, our resume our customer base, and adding multiple products and making multiyear commitments to Ontario.
Let me share some color on these expansion plans.
A longtime top 120 per customer, which is one of the world's largest technology companies expanded with a seven figure deal growing their total spend with <unk> by over 100%.
For the past several years and help our customers global demand generation engine.
During Q2, a significant division of this organization consolidated the global part of Enablement program on the on <unk> platform.
They will all deliver training enablement and certification thousands of worldwide partners and system integrators using onshore for.
In Q2.
We signed the largest deal in our history.
This is a multiyear commitment, including our newest products.
This existing customer is a leading learning platform company, who helps upskill their workforce.
<unk> of enterprises.
After seeing the power of our two newest live experience products $120 forums and go live there decided to expand their use of our platform and enhance their digital engagement strategy.
As a result, we increased this customers' total spend by 30% and solidified our long term strategic partnership.
Finally, one of the world's largest software companies increase the investment in our platform and commitment to our partnership because of our successful track record of delivering cost effective ROI with a multiyear seven figure deal.
Our first party engagement data plays a central role in their go to market execution strategy, achieving meaningful results, such as significantly increasing marketing pipeline and increasing their average deal size.
Now taking a step back.
More than 20 years ago I co founded on 24 and has navigated the company through several challenging economic cycles.
Historically.
<unk> has done well during uncertain times.
Our solutions help companies drive topline results with a cost effective sales and marketing digital engagement solution.
We believe many customers are prioritizing fast rois solutions like 124, and I'm looking to consolidate their point solutions onto a single platform for better economies of scale.
While we remain optimistic on our long term market opportunity.
Taken a hard look across our business operations and made the decision to better align our cost structure with the realities of the current environment and customer demand to secure long term growth with an improved business model.
The cost reduction plan includes reducing head count by approximately 5% from mid Q2 levels and is expected to be substantially completed by the end of Q3.
This was a difficult decision and I want to express my sincere gratitude to Doe.
Those that believe in us.
Shifting gears, let me provide a progress update on our four strategic priorities for 2022.
First we have made substantial headway on our aggressive product roadmap.
Last year, our customer conversations highlighted persistent knee performance solution consolidation.
They wanted to expand the first party engagement data they get from 124 to more of their experiences beyond traditional demand Gen webinars.
Virtual events.
Turning the Parker Crane round tables executive briefing centers and so on into our data driven strategy.
Once our customers start using our platform and have 121st party data integrated with their systems.
Easier to adopt more of our experienced products and keep their first party engagement data unified and generated from one plant.
So as we look at the future of our platform.
Our innovation agenda will be focused on enhancing the engagement.
First party engagement.
And deep integrations, we can provide to our customers.
After launching this past April once when they put for US has been well received by our prospects and existing customer base.
One of our new logos in Q2 was a leading American auto parts distributor that purchase forums.
After struggling to scale their program with a collaboration tool the purchase for us.
And certify the resale of partners and technicians in the field.
Important to this customer was our first party data and flexible API, which makes it possible for them to automatically track and certify course completion.
As an aside.
While you likely have seen onshore power. Many earnings webcast. This is a minor part of our legacy business that we will be winding down.
Moving to our other priorities.
Within our enterprise go to market, we have seen steady growth in the number of multi product deals and building C level relationships for large complex transactions.
In Q2.
The percentage of customers with two or more products reached another record high.
One of the new Q2, multi product deals I'll highlight was with a multinational insurance form from EMEA.
They came to us with multiple use cases to address across the go to market execution, including demand generation customer market.
Enablement and internal employee engagement.
The key to our win was the ability to provide seamless integrations with their tech stack and provide a 360 degree view of all their first party engagement data across every on 24 experienced something collaboration tools were not able to do.
Now they are using us to create a full ecosystem of experiences powered by <unk> elite breakouts target engagement hub.
We are seeing similar success selling multi product deals with our existing customer base.
One of our long term customers is one of the largest multinational banks.
The corporate banking group needed a way to engage the employees of the enterprise clients and provide financial wellness education as an HR benefit.
While tracking the performance of the program and reporting value back to their EHR clients.
Through the combination of onshore elite target and engagement hub the gain a powerful digital channel to connect with corporate employees drive them to take an action and provide a robust set of analytics back to their employers intelligence that we believe they will not get.
With any other solution.
Next on the customer success front, we have seen positive signals from the investments we have made with gross dollar retention improving quarter over quarter.
We've also heard great feedback from customers on our revamped Onboarding program.
Lastly, we continue to see steady revenue contribution from our partner ecosystem.
The percentage of partner influenced deals in Q2, Cros double digits and the number of partner influenced opportunities added to our pipeline has more than doubled year over year.
An example of our Q2 partner strategy execution is a win with a leading global biopharmaceutical company.
I wanted to consolidate their external digital engagement onto one platform to make it easier for health care providers and patients to engage with the consistent connected experience and streamline their own team's ability to execute.
Our deep data integration with Veeva.
In partnership with the regional system integrator gave us a competitive edge.
In conclusion, while the economic backdrop that continues to be prevalent.
Im confident in our strategy and long term market opportunity.
We have managed through these cycles before and a number of our top customers are increasing their investments of the Antoni for.
Even more importantly, our traction on new products is gone and our product enhancements excitement for the future.
With the organizations under mounting pressure to deliver more with less we are well positioned to help them consolidate point solutions onto a single platform for digital engagement.
Given these factors Im optimistic that we will return to growth in 2023 with an improved business model.
With that I'll hand, it over to our CFO , Steve <unk> to walk you through Q2 results in more detail and provide our outlook.
Thank you slot.
Everyone I'm going to start with our second quarter 2022 result will then discuss our outlook for the third quarter and full year 2022.
Total revenue for the second quarter was $48 2 million.
Presenting a decrease of 7% year over year.
Subscription and other platform revenue was $42 1 million a decrease of 3% year over year.
This concludes overages, which were under 2% of revenue in Q2 of this year compared to 3% of revenue in Q2 of the prior year.
Professional services revenue was $5 2 million a decrease of 33% year over year, representing approximately 11% of total revenue compared to 15% a year ago period.
This decrease is aligned with our expectations, we provided last quarter.
Moving on to <unk>.
<unk> represents the annualized value of all subscription contracts at the end of the period excludes professional services and Overages.
<unk> was $167 8 million, an increase of 2% year over year, which is in line with expectations the macro environment remains challenging.
Longer sales cycles with more approvals needed for business App.
On over the 100 take threshold.
Despite these challenges we have is.
Strong quarter for substantial and close the largest deal in our history.
Customers are continuing to increase the multiyear commitments with us the percentage of our IRR and multiyear agreements increasing from the prior quarter to the highest ever.
Also I am pleased to see the precise with customers with two or more products reached record levels and our new customer ASP was over 30% higher than any of the prior four quarters.
Turning to customer metrics.
Total customer accounts increased by 1% from Q2 last year to 2101 customers.
<unk> a sequential decrease in total customer count, which was driven by lower commercial logo acquisition and SMB logos Sean.
The number of customers contributing.
Teekay and above is roughly flat from the prior quarter.
Presents the vast majority of our IRR, which is consistent with prior quarters.
We ended the quarter with 349 customers contributing a one.
100, K R Moore, representing an increase of 1% year over year.
Although the number of 100, K plus customers decreased sequentially.
Our contribution from the 100, K plus customer cohort was consistent with the previous quarter and represents approximately two thirds of our total AOR.
Before turning to expense items and profitability I would like to point out that I will be discussing non-GAAP results going forward.
Our non-GAAP results exclude stock based compensation as well as other certain items.
Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results can be found within our earnings release.
Gross profit in the quarter was $35 $9 million.
Starting a gross margin of 74%, which is a four point decrease in our gross margin percentage year over year.
We are investing in our public cloud infrastructure capabilities have grown our customer success teams over the past year to drive improved retention.
Now turning to operating expenses.
Sales and marketing expense in Q2 was $25 2 million compared to $23 9 million in Q2 last year. This represents 52% of total revenue compared to 46% in the same period last year.
While we have made targeted investments in our go to market functions over this past year, we are tightening our sales and marketing spend given the current macroeconomic environment.
R&D expense in Q2 was $8 9 million compared to $7 3 million in Q2 last year.
This represents 18% of total revenue compared to 14% in the same period last year we.
We increased our R&D spend this past year as we brought new products to the market and expanded our platform and for the remainder of this year, we expect any R&D spending increases to the <unk>.
Relatively moderate.
G&A expense in Q2 was $8 1 million compared to $7 million in Q2 last year.
This represents 17% of total revenue compared to 13% in the same period last year.
Our G&A expenses have increased this past year due to the costs associated with being a publicly traded company.
G&A expense increases have moderated sequentially this year.
And as our G&A function matures, we expect G&A expense to scale and decrease as a percentage of revenue over time.
Operating loss for Q2 was $6 2 million or a negative 13% operating margin compared to operating income of $2 5 million and an operating margin of 5% in the same period last year.
Net loss in Q2 was $6 4 million or <unk> 14 per share based on approximately $47 2 million basic and diluted shares outstanding.
Compares to net income of $2 5 million.
<unk> per diluted share in Q2 last year, using approximately 55 million diluted shares outstanding.
Turning to the balance sheet and cash flow.
We ended the quarter with $344 9 million in cash cash equivalents and marketable securities.
Our capital position is advantageous in a challenging macroeconomic environment of uncertain duration.
We also believe it will allow us to be nimble in our decision, making with regard to organic and inorganic investments.
We'll be disciplined in our approach with a focus on maximizing every dollar of our shareholders' capital.
Turning to our use of cash in the quarter.
Cash used in operations in Q2 was $2 7 million compared to cash flow from operations of $6 9 million in Q2 last year.
Free cash flow was negative $3 4 million in Q2 compared to positive $5 7 million in Q2 last year.
Free cash flow margin was negative 7% in Q2 compared to positive 11% in Q2 last year.
In Q2, we repurchased 566000 shares at a weighted average price of $13 27 per share utilizing $7 5 million.
As of the end of Q2, we have utilized $29 million under the share repurchase program with $21 million remaining out of the $50 million authorized under the share repurchase program.
Before providing our outlook I'd like to make an observation.
In 2020, we experienced explosive growth growing at a 100% year over year and we continue to experience high growth in the first half of 2021, but our Q2 2021 platform revenue growing 64% year over year.
Coming off such rapid growth, we believe we will get back to growth in 2020 is great.
Now turning to guidance.
We are reiterating our 2022 ammo revenue guidance at the same time as Rob mentioned, we are reducing our cost structure and improving non-GAAP operating loss guidance for 2022.
For the full year.
Revenue in the range of 191 to 195 billion.
Professional services revenue is expected to be low double digits as a percentage of total revenue.
Presenting a year over year percentage decline of low to mid twenties.
I'd like to provide some additional context on our revenue guidance in 2021 professional services revenue was 14% of our total revenue.
And this year our current guidance.
For that to decrease to low double digits as a percentage of our revenue, which is largely driven by more of our customers electing to be self service.
In addition, as we discussed on our call in March.
<unk> are trending lower this year as more customers are adding capacity into the contracts at the time of renewal and not mature.
Overages.
While neither of these items are part of our IRR.
These items Aqua has been approximately 4% headwind for full year revenue growth rate in 2022.
The global macroeconomic environment remains volatile and we believe that we may continue to see longer sales cycles and greater scrutiny for larger deals.
Given this backdrop, we believe it's prudent to assume that net additions will be roughly flat for the second half of the year.
We are improving our previous 2022 annual bottom line guidance.
A non-GAAP operating loss in the range of $27 5 million to $24 5 million and a non-GAAP net loss per share of 57 to <unk> 51 per share using $48 1 million basic and diluted shares outstanding.
These estimates include the impact of our cost reduction activities, partially offset by the impact of inflation on compensation and other variable costs.
Our cost reduction activity, including a 5% reduction in our head count this quarter compared to where we stood in mid Q2 of this year.
The head count reduction will be substantially implemented by the end of Q3.
Our Q3, we expect total revenue in the range of 47 million to $48 million.
Professional services is expected to represent approximately 10% to 11% of total revenue representing.
Representing a year over year percentage decline in the low to mid teens.
We expect a non-GAAP operating loss in the range of $8 million 7 million and a non-GAAP net loss per share of <unk> 15 per share based on $47 4 million basic and diluted shares outstanding.
We expect a restructuring charge of one 3 million related to our cost reduction plan.
This restructuring charge is excluded from the non-GAAP amounts provided above.
In conclusion, we are.
<unk> and our ability to navigate through this volatile macro period, and we believe we are well positioned to return to topline growth in 2023 with an improved cash flow profile.
We will also lap the difficult Comparables from services and Overages, starting early next year with that.
That trial will open the call up for questions operator.
Thank you.
Ask a question please signal by pressing star one on your telephone keypad, if youre using a speakerphone. Please make sure that your mute function is turned out to like your signal to reach our equipment. Once again that is star one if you would like to ask a question.
We'll take our first question from Arjun Beta with William Blair. Please go ahead.
Thanks, guys. Thanks.
Thanks for taking the question.
Just on the macro front.
Can you talk a little bit about where in terms of from an industry perspective, where youre seeing more weakness versus.
Where there is strength and where youre still seeing expansion opportunities and then for Steve.
Is flat <unk> growth.
Do you think thats achievable in light of the macro uncertainty plus some of the SMB churn and rationalization that you're still seeing in this environment.
John Let me, let me take that in MST.
Ken can jump in I think the first question those macros and so let me take that first.
And as you talked about.
We are seeing some macro uncertainty now we've managed through this before and so one of the things in Q2, when we had when we started seeing this we've delivered to our customer base more.
And a number of our top customers are.
Increasing their investments in the 124, we talked about we closed the largest deal in our history.
<unk> seven figure deals with a multi multi year deal with a learning technology platform. We also another large customer we doubled our spend.
We saw challenges was wasn't the new business side, we really saw sales cycles.
Lengthened for large deals greater than $100000.
At the same time our ESP.
Was the highest by 30% in the last four quarters, we saw some challenges in the commercial logo space space because.
While in commercial logos were remote challenging we saw headwinds in EMEA. They continued.
From a vertical point that your life Sciences and financial services were okay. When you saw challenges in technology and manufacturing I mean, what we also saw overall that our customers are eager to consolidate their sales and marketing engagement platform to get to one vendor and especially on 24, where you provide cost effects.
Rois solutions and allow them to consolidate demand generation partner field.
The reason we saw that as an example in EMEA, we talked about that in the prepared remarks, a six figure multi year deal theyre that ensure insurance company, bringing together and demand generation partner customer marketing et cetera.
On your second question, let me start that and Steve can jump in.
We are being prudent about about fuel.
The second half.
<unk>.
Q3 is generally more challenging.
Because its a seasonally softer.
I think Q4, we have a little reduced visibility, but based on the some of the work that we are seeing in our installed base from an expansion point of view.
Also some of the progress that we're making on churn. We believe then we shouldnt be able to deliver that again Q3 is seasonally softer.
Yes, if I could just jumped in and add on to withdraw with same.
First of all we are pleased to be able to reiterate our annual guidance in the current environment.
And in terms of Q3.
We do have that.
Better near term visibility for Q3, and Q4 as Sean mentioned and while we are seeing a little bit of weakness in the lower end of the market we are seeing.
Some good results with our installed base, Sean gave up some of the impressive wins that we had this quarter and the percentage of our revenue in multiyear deals.
The highest ever and the percentage of our customers with two or more products.
Is the highest ever so that gives us confidence in our ability even in this challenging environment to it.
Least deliver relatively flat second half of the year.
Okay.
Okay got it that's very helpful.
And then I know you're taking some steps here to improve profitability, we have the cost reduction plan.
The restructuring and it sounds like you are being more prudent with sales and marketing spend.
But how should we think about the.
The timeline towards.
You get to sustained profitability as that.
2023 story is that still further out.
More of a long term dynamic.
Yes, let me let me go ahead and take that one.
We are adjusting our cost structure to lower our costs going into 2023.
We are happy to provide improved bottom line guidance as we mentioned, we did reduce our head count by 5%.
From mid Q2.
They were not expecting to see improved bottom line performance in 2023, as we drive growth with an improved business model.
We're always balancing profitability and growth and our goal is to return to growth in 2023 with an improved cost structure that shows an improving bottom line.
We really won't see the full impact of our cost reductions until Q4, but going into Q2 thousand 23, we do look to have an improved cost profile and we're always going to monitor our spending and we'll make adjustments in the future as we need the as we look to continually improve the bottom line here.
Alright got it thanks for taking my questions.
Thank you we'll take our next question from Scott Berg with Needham.
Sure Steve Thanks for taking my questions.
And I guess, just got a couple here.
Yes, Thanks, I guess a couple of years.
You talked about some rationalizations in the quarter should we think about those as being separate or in addition to the ones that you've spoken about in the last couple of quarters.
I think Scott what we discussed in Q1, where we saw.
From handful of customers pretty significant rationalizations, which really impacted their down sell from those particular customers.
The rationalizations that we are.
What we're really talking about is then.
In the new business, we saw sales cycle lengthened for large deals over $100000.
Just kind of mentioned all of those.
The sales cycle I think overall from our installed base, we really saw we didnt saw issued with the rationalization of our down. So this quarter I think I think we have that under control what do we really saw that a lot of.
A number of our large customers really double down and increase the investment on <unk> for that those are the examples.
I gave you I think what we saw some strong performance on the expansion side also on the churn of our prospect sites.
We made progress from from Q2 levels.
I expect that our churn is going to continue to increase into 2023, and we feel we've got line of sight.
Back to pre Covid levels.
Also.
Got it that's helpful. And then I wanted to just talk about the growth opportunity for next year. Thank you. Both commented that you expect to return to revenue growth next year, but if we think about <unk> being flat here in the second half versus where you ended up in second quarter.
But I guess my math would tell me that subscription revenues are probably flattish or so.
Q1, and Q2 next year I guess, how should we think about your confidence or visibility you are.
Your opportunity to return to growth.
Assumes some positive bookings probably entering next year.
Which is a little bit different than what your guidance. Thank you.
Yes, so first of all Scott one of the things that we're doing right now.
Because our visibility in Q4 as limited that's why we are guiding towards flattish growth Prs book for the second half of the year, but let me let me provide you a context on how we are looking at 'twenty two 'twenty three growth.
First of all we expect to return to growth in 2023.
And the pre COVID-19 levels over time, and let me break it down to the three core components to build that up like most companies we break it down between gross retention.
Net retention and new business so on.
On the gross retention side, we are making progress Google is better and we expected better next year.
And I talked about we believe we've got line of sight to get back to pre pandemic levels of retention in time.
Net retention, which is our expansion.
The thing we had a strong results in Q2.
And our customers are buying more products, we have more products the percentage of our customers buying two or more products has increased.
Was the highest ever.
In Q2, so we believe we are going to continue to make progress on debt reduction.
New business is where the macro will be the macro, but we provide an efficient and effective way for companies to drive revenue through an engagement Marathon first party data and insights so.
I think as I look at it yes.
<unk> share or maybe Q1 will have some.
Some impact, but we believe that we will start making progress.
Our.
Starting early next early next year and that will have an impact.
And the quarters after that.
And additionally sharply.
One other thing I'd like to point out 2021, our service revenue was 14% of our.
Total revenue in this year for that to be in the low double digits. So that is a bit of a headwind this year and that headwind will be.
Gone largely entering 2023 and in addition, we had a bit of a headwind this year from service I'm, sorry from Overages as those normalized you're hopefully here and that headwind will be gone next year as well.
Great very helpful. Thanks for taking my questions.
Thank you and then take the next question is from Noah <unk> with J P. Morgan.
Hi, guys. Thanks for taking my questions.
Going forward, how should we think about how much you will lean more into the direct sales motion maybe versus the partner network or the channel and then given the guidance provided are you assuming any kind of deteriorate deteriorating environment from a macro standpoint from here. Thanks.
Okay.
Yes.
No.
I think.
First question was direct sales <unk> partner. So let me tell you a little about and then I'll then I'll come to the macro.
And violent.
More so.
The partner Channel is one of our top priorities. We are still mainly our direct force focus on an enterprise and commercial segments, but it does the department building a partner channel is clearly one of our top priorities in Q2.
Our partner influence.
Business that would be closed for new business, while it came close to double digit levels ended the highest ever and for many of them. Many of you will get on the call for the last four quarters. We are looking at being able to bring that from low single digits close to double digits.
So it will be there so we are doing well there.
The partner influenced pipeline has also doubled in one year. Some of that has been good and our goal is to get it over 20% overtime and we focus on three kind of partners agencies competing technology partners and system integrators. So I still believe that we are going to for the most part focus on our direct motion.
But we are making significant traction on.
The on the on the partner network side.
Now talking about.
Macro environment and did you do anything on a macro and potentially up.
So.
I think one of the things I want to mention that we had.
Managed through economic cycles before.
And we know how to manage through that I mean, right now our visibility is what it is that's why you're probably going to become a front and talk about the second half.
But.
Just to provide you a perspective in the last recession, which was prior to our IPO and that was some time ago and we were.
Our smaller company, but on 24 performed well.
We generally have done well in uncertain times because in such times.
And our companies are looking for a cost effective sale.
Cost effective solutions to engage with their prospects and convert them to customers and we see that across the verticals technology pharmaceutical financial services.
In a way the way we see it we believe we have the perfect product for the times, especially as people wanted to do more with less.
Got it thank you so much.
And then move on to the next question from Arun Molina with Piper Sandler.
Hi, This is Mario just jumping on for Brent here, Thanks for taking our questions.
Just two from US really so I just kind of wanted to double click on EMEA. If we can obviously, we've seen a lot of companies reporting seeing some challenges there here in Q2.
So any anything in particular, you can speak to regarding challenges there, maybe specifically with regards to certain verticals or customer sizes that we should be thinking about I think you mentioned manufacturing and.
In the past and then as a follow on to that any impact from FX on our full year guide that we should be thinking about.
Yes, let me this is Steve let me go ahead and.
I'll talk about where we landed on EMEA relative to our expectations and then I'll take the FX question, and then ill, let Shawn talk a little bit about the general market environment and.
So on the it came in about where we thought it was this quarter in the last call. We set expectations that we expected to see some macro headwinds in EMEA given the state of things.
World and EMEA in particular.
In 2021 at Neal was 18% of our.
Revenue in Q1 last quarter it was 17%.
Suggested we expect it to drop a couple of points as a percentage of our revenue this year and in Q2. It was 16% of our revenue which was up year over year. The decline of our revenue from EMEA was about 15%, which was about what we expected and in line with that guidance.
Accordance with how we guided.
Now in terms of FX. The vast majority of our revenue is billed in U S dollars. So the impact of FX.
FX on our top line was limited in the first six months of 2022, 13% of our revenue was from foreign currencies. So we are seeing some impact, but it is a little bit limited and any FX impact.
Some has been incorporated into our guidance.
Yes.
Let me just add what Steve said on and give you a little more qualitative thing.
Sorry.
On the <unk>.
EMEA from a vertical point of view of course manufacturing within the core vertical there is still challenged but I also look at it from the point of view of threshold of deals continue.
Continued.
Elongated sales cycles and deals that are 100 gig and above we continue to be seen that even though we did have some good wins.
There I think the commercial business also because a lot of these companies are private.
<unk> tends to be a little more challenged.
We did see good performance.
And in categories like life Sciences and pharmaceuticals.
We saw that across the board, but also also in EMEA, so hopefully that helps.
Yes, absolutely. Thank you for that and then just one more from us.
I think you've talked in the past about a certain customer profile that really isn't sort of your ideal customer that you're targeting maybe a little bit smaller.
Smaller SMB side.
How close are you to kind of getting the size of that SMB cohort to where you would want it.
And kind of as a follow on to that what is the ideal mix of SMB business.
And your overall customer base.
Up.
So when.
When you look at the we've got three core segments.
We bought the enterprise business that has 2000 employees and above.
Our commercial business under 2000 employees and I think the SMB kind of items to be up about somewhere around 50 to 52 under something around there thats the SMB cohort, but if you look overall the SMB cohort is about 10% of our revenue.
But.
From a logo point of view of the logos, maybe about maybe even more about a third or others. So we generally see more challenges in logo churn in the SMB.
But from our point of view I think we have it pretty low size.
But from a logo churn.
It does show.
So show some challenges, especially in these environments, but let me also go back to your question about ideal customer profile, even in the SMB, We really love data driven marketers people, who have a data driven agenda because.
Over food cards off our IRR is integrated in the company's sales and marketing ecosystem. So all the first party data and insight that our engagement platform provides.
Is that the fingertips of the sales and marketing people through deep integrations.
We're an SMB company and you're integrating into your platform, we see much much lower churn. There. So that continues to be a good area of focus for us.
A key part of the qualifier feel really Bryan Bryan pipeline, our some of our core use cases, and you integrate that into your sales and marketing ecosystem. So hopefully that helps.
Absolutely. Thank you very much.
Thank you and with no additional questions in the queue I'd now like to turn the conference Mr. Scherr for any additional or closing remarks.
Thank you.
As you heard today, a number of our top customers are increasing their investments with 124.
In today's economic environment beyond 'twenty Pro platform is well positioned with our portfolio of experienced products' first party data and insights to drive revenue growth for our customers efficiently and effectively.
We have a proven track record of navigating through challenging cycles, and I am confident we will emerge stronger from this current cycle.
And the progress we have made on our priorities and our adjustments to our cost structure sets the stage for us to return to topline growth in 2023 with an improved business model.
Thank you everyone for being on the call today.
And that does conclude today's conference. We do thank you all for your participation you may now disconnect.
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Yes.